Vegetable oil tested on NZ flight BBC
Fannie, Freddie, Bear & Hard Times: Wall Street’s Collapse, Told in Rhymes Wall Street Journal
Falling House Prices: It’s Worse Than It Looks Dean Baker
The Scariest Housing-Related Chart Ever Mr. Mortgage
Is Buying Bonds Really a Good Idea? Felix Salmon
A Renter’s Market for Manhattan Offices New York Times
German minister warns of “growth bubble” Sydney Morning Herald (hat tip reader Glen)
Another Big Bank Failure: More Likely Than Not to Occur Reggie Middleton, Seeking Alpha
Money flows out of hedge funds at record rate Financial Times. Note that December is expected to be the highest redemption month yet, and by a considerable margin.
Seems right to me: China has losts its appetite for risky assets Brad Setser
Antidote du jour:
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Love the Reggie Middleton article, “We don’t know what the leverage ratio is for these banks. Although many (example Goldman and Citi) have taken their leverage down considerably – we really don’t know from what level it is truly coming from. Almost all of the off balance sheet vehicle, specifically the SIV’s, use significant leverage.”
yup.
and Goldman Sachs in the thick of it…who was run by our current Treasury Secretary
YS:
I read Felix Salmon’s comment. I could have written it!
Fannie holding IndyMac deal hostage:
http://www.housingwire.com/2008/12/30/fannie-mae-holding-indymac-deal-hostage-sources-say/
We’re going to see a lot more of this sort of thing.
On one hand, I can sympathize with Fannie if IndyMac made fraudulent representations.
On the other hand, the US gov’t effectively owns Fannie. If the sale of IndyMac is in the best interest of the banking system, then it needs to be pushed through.
Treasury’s injection of capital through preferred shares with no voting rights is setting the stage for all sorts of future battles between the various institutions that are ostensibly owned by the federal government, for the benefit of a small number of corporate insiders.
ruetheday said, “Treasury’s injection of capital through preferred shares with no voting rights is setting the stage for all sorts of future battles between the various institutions that are ostensibly owned by the federal government, for the benefit of a small number of corporate insiders.”
If the financial system becomes like the military industrial complex that has ruled for the past 50 years what will America become?
Yves,
An interesting research by Rogoff and Reinhart on the aftermath of financial and housing crisis:
http://ws1.ad.economics.harvard.edu/faculty/rogoff/files/Aftermath.pdf
Recovery seems to be far away.
Happy New Year!
koteli
One could say that much of the Treasury’s “policy,” if it can be called policy, of the last six months has been about keeping Goldman, Welfare Queen, and Sachs and Citibank (professional courtesy toward Rubin I suppose) and their respective management teams afloat (and enjoying their perqs, pay, dividends, and bonuses). I am afraid that with the Geitner and Summers team coming on board, this part of the story will not change and we will not move to the Swedish model, but will continue to scandal of crony capitalisn/socialism (private profits, social losses) where institutions that would not exist but for taxpayer funding continue to be managed privately for very private and select interests (not even their shareholders or bondholders really benefiting).
Regarding the Mr. Mortgage story, I actually haven’t seen any of those supposed discounts in my area. (Westside Los Angeles)
A very affordable home in the high desert where there few private-sector jobs with salaries that make home ownership possible is a paradox.
I know that West L.A. is just one area, but I think a better statistic would have been factoring in density. Then I think the data would clearly show the in-demand places around the City of L.A., S.F. would show at most maybe 10%-20% decline averages.
To the American people
A confession: We purposely used your healthy economic compost as a latrine.
You get to sort it out –it was a lot of fun. like never having to leave the frat house party.
Happy New Year 2009…the Bush administration animals.
Catch us if you can.
Off Topic: Dungeons and Dragons and Derivatives and DOOM by Dan W
Very interesting theory about how gamers grew up to become economic gamers and created their own virtual (but real and parallel) economy that cannot be reconciled with the real economy.
http://ashizashiz.blogspot.com/2008/12/dungeons-and-dragons-and-derivatives.html
Any decent game design studio could come up with a system less easily exploitable than our current financial tarrasque. If there was any reason to do such a thing, that is.
asphaltjesus, the S&P CS index decline in SF metro is 31% year-over-year. LA metro is "only" 28% (though 35%ish from the peak in 2007). The median price is clearly reflecting a change in the sales mix (high REOs). It may be reasonable that median price declines will moderate, while the broader market will continue to drop, as reflected by the CS index. California's still got a ways to go.
There are always claims that, "my business is safe in a recession because of X," or, "My house won't drop in value because of Y." X and Y may be true, but it's important to recognize that the number of recession-hedged homes and businesses is in fact very small. X and Y need to be evaluated in that light: do these factors really put one's house, or one's business, in the, say, 5% that will ride through with no difficulties?
“S.F. would show at most maybe 10%-20% decline averages.”
On a two million dollar home their goes the down payment, plenty of those in many SF neighborhood’s. The other issue with high tier neighborhood is the lack of buyers! Lots of stranded Bay Area high tier homeowners going back to the dot.com property rush days.
Happy New Year Yves,
Your column (I won’t reduce it to the crudity of that bloggy stuff) is my #1 since the advent of the internet.
BB…
“Steinbrueck went as far as to dub the British government’s use of heavy borrowing to boost its economy as “breathtaking” and “crass Keynesianism,” referring to 20th century British economist John Maynard Keynes who advocated governments should spend their way out of recession.”
Maybe Germany isn’t so wrong. I never thought they would buy into the trade bubble and allow the platform corporations to invade from their Asian contract manufacturing bases. Is Keynes’ theory applicable to the US with an unsustainable trade deficit and a continuing tax budget deficit created by massive tax cuts ? Or are we kicking the can down the road to future generations as Steinbruek suggests.
The supply side policies of the last thirty years leave us little choice in the short run, I don’t see an alternative. Hopefully, we can move back toward political, fiscal, monetary, and trade sanity over the next 10 years. Debt is not the long run answer.
9;39 AM,
given the long-run interpenetration of nominally national economies neither keynes nor post-keynesian’ theory is particularly functional but illusions.