Wednesday, May 5, 2010

Today's Links

Today's Links

1--"You Would Have to Be Fool to Buy a House Now"

2--Belt-tightening program for Greece sparks street violence; three dead in gov. clash

3--Consumer spending above pre-recession level

4--Can the Euro be Saved?

Quote: "The social and economic consequences of the current arrangements should be unacceptable. Those countries whose deficits have soared as a result of the global recession should not be forced into a death spiral – as Argentina was a decade ago." Joseph Stiglitz

5--National Review debunks supply-side mythsQuote: " There is no evidence that the tax cuts on net produced more revenue than the Treasury would have realized without them."

6--Public Debt and Other Issues Henry Liu

Quote: "...the danger comes not from the size of the deficits or debt, but on how the proceeds from them are used....Far from ruining the US economy, war production financed by public debt catapulted the country into the front ranks of the world’s leading economic and financial powers, because the US homeland was not affected by war damage and civilian consumption was curbed in the name of patriotism. The national debt turned out to be a blessing, because a good supply of government securities provided for a vibrant credit market and public sector spending created the rise in demand that private companies could satisfy profitably with a guaranteed market.The truth is that the positive economic functionality of the national debt rests not so much on its level, high or low, but on how the debt is expended. When the national debt is used to expand economic production with full employment and rising wages, it will produce positive economic effects. But if the national debt is used to finance speculative profits achieved through pushing down wages via cross-border wage arbitrage, or to structure ballooning interest payments to service old debts by assuming more new debts, it will eventually drag the economy to a grinding halt by a debt implosion crisis."

7--Two Different Banking Crises - 1929 and 2007 Henry Liu---Wholesale Credit Market Failure

Yet with the benefit of deposit insurance instituted during the New Deal remaining operative, the current financial crisis that began in mid-2007 was caused not by bank runs from depositors, but by a melt down of the wholesale credit market when risk-averse sophisticated institutional investors of short-term debt instruments shied away en mass.

The wholesale credit market failure left banks in a precarious state of being unable to roll over their short-term debt to support their long-term loans. Even though the market meltdown had a liquidity dimension, the real cause of system-wide counterparty default was imminent insolvency resulting from banks holding collateral whose values fell below liability levels in a matter of days. For many large, public-listed banks, proprietary trading losses also reduced their capital to insolvency levels, causing sharp falls in their share prices.

8--Greek Default Already Decided WSJ

9--Fed Faces Deflation With Few Weapons, Rosenberg Says

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