Since Bernanke started talking about “tapering off” Quantitative Easing, the bond markets have freaked out. This is a very logical reaction once you understand how liquidity traps operate.
Read more...It’s conventional to deem local journalism to be dead, but Josh Salman at the Sarasota Herald-Tribune has written well-researched investigative story on bank bidding at foreclosures in his neck of the woods, Big lenders bidding to keep homes, that has national implications.
Read more...Michael Hudson looks at the implications of ending QE in the context of the past 30 years of bubble blowing.
Read more...So this week I got an education in the mentality of “official” Washington.
Last week I was asked by a DC-based publication to give a comment on Corker-Warner, the flavor-of-the-month proposal to abolish Fannie and Freddie and reform mortgage finance. I basically take the same position as Yves on this issue: all of these GSE 2.0 plans assume a private label MBS market the way the proverbial economist on a desert island assumes a can opener.
Read more...Ooh, here we thought bank reform was dead, and an unexpected front opens up.
Read more...Yves here. So what is the Fed going to do, now that it has delivered a big blow to the nascent housing recovery? Risk its credibility by beating a serious retreat on taper talk, or keep whistling in the dark and wait and see what happens to July and August home sales (and remember, most housing market data is reported with a nearly two month lag…)?
Read more...As readers of the financial press may recall, there was a kerfluffle over the fact that Greece had used a currency trades designed by Goldman in 2001 to mask the level of its indebtedness and secure Eurozone entry. A much bigger and more costly shoe of the same type has dropped in Italy and it directly implicates the current ECB chief, Mario Draghi.
Read more...As regular readers know, your humble blogger, along with a lot of investors, was taken by surprise when the typically dovish Bernanke not only started using the taper word a month ago, but then made the demise of Fed heroics sound even more imminent by talking about higher unemployment “thresholds,” namely 7%, than had been voiced previously. And the reading of Fedwatchers like Tim Duy and (even before the FOMC statement) James Aitken is that the central bank wants out of the QE business sooner rather than later.
The impact on mortgage rates already looks very likely to throw a big bowl of cold water on the housing party.
Read more...If anyone doubted that Ben Benanke’s “we’re convinced the economy is getting better, so take your lumps” press conference after the FOMC statement last week was awfully reminiscent of 1937, the newly-released Bank of International Settlements annual report is tantamount to a kick to the groin. And to change metaphors, if the Fed’s sudden hawkish posture is playing Russian roulette with the real economy, the BIS just voted loudly for putting a couple more bullets in the cylinder.
Read more...It sometimes feels like a Sisyphean task to keep discussing how Americans were thrown under the bus in the various mortgage settlements reached in 2011 and 2012. Needless to say, whistleblowers continue to come forward and describe widespread abuse even though the officialdom would have you believe otherwise.
Read more...Yves here. Warren Mosler, who is one of the leading writers on Modern Monetary Theory, circulated an e-mail with his assessment of the state of the economy and the impact of quantitative easing and agreed to letting me publish it.
Read more...The Chinese central bank is playing very high stakes poker. China’s interbank markets have been highly stressed for the last two days. An effort by the central bank to tighten in order to put a crimp on shadow banking activities looks to be spiraling out of control as one-week repo rates hit nearly 8.3% up 144 basis points in a day, and one-week Shibor has risen from its June 5 level of 4.8% to just shy of 8.1% today.
Read more...Jefferson County’s sewer system train wreck is now looking an awful lot like the periphery country in Europe mess.
Read more...Yves here. Steve Keen sent this note along with his post:
The journalist David Hirst was both one of the few to warn of the crisis, and someone who became a good friend. He died last week, as a long term consequence of internal injuries sustained about ten years ago in the USA, when he tried to stop a woman being bashed.
His spouse asked me to see if I could get the attached published on NC, which was one of his favourite sites.
If you know David’s writing, you’ll understand what a loss this is. And if you missed his prescient and incisive commentary before and during the crisis, I hope you’ll sample his work below and get a sense of what a talent he was. Either way, I trust you’ll join me in sending condolences to David’s widow and his family, as well as to Steve.
Read more...We’ve suggested that the Fed has drunken a bit too much of its own confidence Kool-Aid to be talking about tapering QE. The problem now, as we’ve stressed, is that the effect of QE may prove to be asymmetrical.
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