A year ago, Bear Stearns was trading around $150 a share. At Friday's close, Bear Stearns's stock market value was about $3.54 billion, at $30 a share. This weekend, J.P. Morgan bought the shop for $2 a share in a stock-swap transaction, (TWO DOLLARS!), which values Bear Stearns at just $236 million. The fed announced emergency rate cuts. On Sunday night. When was the last time you recall a rate cut on a Sunday.
Iraq war 'caused slowdown in the US' | The Australian
Topic: Markets & Investing
1:20 pm EST, Feb 28, 2008
THE Iraq war has cost the US 50-60 times more than the Bush administration predicted and was a central cause of the sub-prime banking crisis threatening the world economy, according to Nobel Prize-winning economist Joseph Stiglitz....
The spending on Iraq was a hidden cause of the current credit crunch because the US central bank responded to the massive financial drain of the war by flooding the American economy with cheap credit.
"The regulators were looking the other way and money was being lent to anybody this side of a life-support system," he said.
That led to a housing bubble and a consumption boom, and the fallout was plunging the US economy into recession and saddling the next US president with the biggest budget deficit in history, he said.
This site has some awesome housing bubble charts. Think there is no bubble in Atlanta or Nashville? Well, its certainly not as bad as a lot of areas in the country, such as Northern California:
Graphs from around the country look similar. Here is an example of cities with no bubble:
FT.com / Comment & analysis / Comment - Stop behaving as whiner of first resort
Topic: Markets & Investing
11:32 am EST, Jan 31, 2008
The same voices that supported tough macroeconomic policies to deal with the excesses of spending and borrowing in east Asia, Russia and Latin America are today pushing for a significant relaxation in the US to deal with the so-called subprime crisis...
Main Street consumers have overspent and over-borrowed and are unable to meet their obligations...
Consumption has been above sustainable levels and needs to adjust down, whatever view one has about the responsibility of adults over their financial decisions.
The adjustment of private consumption to sustainable levels is necessary, but is likely to have a negative influence in the short run on the growth of aggregate demand... put downward pressure on world growth.
Sustainable growth is not the consequence of an unsustainable consumption boom but of the progress and diffusion of science, technology and innovation...
An efficient adjustment to the US over-consumption imbalance (and Chinese under-consumption) in a way that does not hurt longer-term growth should be based on compensating for the decline of US consumption with an increase in domestic investment and in consumption abroad. It should not be based on giving the US consumer more rope with which to hang himself... giving US households a $1,000 cheque by April, a trick that no macroeconomic textbook would argue is particularly effective...
This essay is extremely clear and paints a stark picture.
Its time to bid a not-so-fond adieu to the New York Times columns of Ben Stein.
No, he is not leaving the paper. Rather, we've reached the point where Stein's commentary has become detached from reality, so ridiculously fabricated, that it can no longer be read....
The final straw as far as I am concerned came this past weekend.
Rather than admit his error, Stein went a completely different way: He blamed the sell off on traders. (Can Their Wish Be the Market’s Command?) It was the last bit of idiocy from him anyone should tolerate.
Chinese leaders have deliberately held down living standards for their own people and propped them up in the United States. This is the real meaning of the vast trade surplus—$1.4 trillion and counting, going up by about $1 billion per day—that the Chinese government has mostly parked in U.S. Treasury notes. In effect, every person in the (rich) United States has over the past 10 years or so borrowed about $4,000 from someone in the (poor) People’s Republic of China.
This is a good article. Fortunately, this relationship looks likely to continue for the time being, and it is the reason the present economic problems haven't turned into an all out catastrophy... The Chinese are literally bailing out our banks.
FT.com / World - Moody’s says spending threatens US rating
Topic: Markets & Investing
1:06 pm EST, Jan 22, 2008
The US is at risk of losing its top-notch triple-A credit rating within a decade unless it takes radical action to curb soaring healthcare and social security spending, Moody’s, the credit rating agency, said on Thursday.
The warning over the future of the triple-A rating – granted to US government debt since it was first assessed in 1917 – reflects growing concerns over the country’s ability to retain its financial and economic supremacy.
Crisis may make 1929 look a 'walk in the park' - Telegraph
Topic: Markets & Investing
12:10 am EST, Dec 26, 2007
York professor Peter Spencer, chief economist for the ITEM Club, says the global authorities have just weeks to get this right, or trigger disaster.advertisement"The central banks are rapidly losing control. By not cutting interest rates nearly far enough or fast enough, they are allowing the money markets to dictate policy. We are long past worrying about moral hazard," he says.
