For OpEdNews: David Fiderer – Writer

John Paulson was dissatisfied. The marketplace had not satiated his appetite for placing bets against subprime mortgage securities. So he cooked up a scheme to issue billions more in new securities designed by him to fail. The scheme worked, and his hedge fund earned billions.

The most interesting part of The Greatest Trade Ever, by Wall Street Journalreporter Gregory Zuckerman, describes Paulson’s plan to give irrational exuberance an extra boost. It’s one thing to trade against the value of securities that have already been issued. That’s what the free market is all about. But it’s quite another thing to direct your banks to originate new securitizations for no legitimate business purpose. No wonder Paulson slammed the book for “numerous inaccuracies”without citing specifics.
http://www.opednews.com/articles/The-Moral-Compass-Missing-by-David-Fiderer-091116-965.html

http://beta.thehindu.com/opinion/columns/Chandrasekhar/article47005.ece

Advocates of the mortgage-interest deduction, for instance, claim that it increases homeownership rates. But it doesn’t: in countries where mortgage deductions have been eliminated, homeownership rates haven’t dropped. Instead, the deduction simply inflates house prices.

This is what I have argued for a long time. Inflated house prices means more expensive mortgages and higher interest rate payments. It basically is more cash in the pockets of the lenders who are, as we all know, bankers. I’ll bet they even dreamed up the scheme

Barry should go a la Mish on Peter Schiff last year and call a spade a spade. Kass called the bottom, but has been ever so wrong since. And then he bitches and tries to justify why the market is not doing what he thought it would.

http://www.theonion.com/content/news/area_man_passionate_defender_of?utm_source=onion_rss_daily

http://www.thestreet.com/story/10627106/1/kass-what-recovery.html

For years now, I have been focused on the macro theme of the credit cycle in all its wonderful glory quite intently. For those reading the discussions over the years, you’d probably characterize it as focused “to a fault.” Again and again during the current decade I asked, is it a business cycle or a credit cycle? Of course after the events of the last few years, it sure seems that question has been answered in spades. At the moment, this little credit cycle obsession is still the key focal point for what may lie ahead in terms of real economy and financial market outcomes. In this discussion let’s have a brief look at components of credit cycle character that as of today simply have no precedent over the last six decades of recorded Fed data. After looking at these data points, I suggest you ask yourself, should we really be expecting a “typical” economic recovery? Secondly, I want to briefly have a look at historical patterns of consumption in prior recessionary cycles and what experience of the moment may be telling us relative to behavioral patterns of the past. Let’s get right to it.

When it comes to the macro credit and conjoined economic cycle, an important item to keep in mind is that historically, US economic recoveries of the last half-century have had similar “fingerprints.” Those being pent up demand for auto’s, housing and accelerating credit usage by the private sector. Every single one. They all look the same. But what we are seeing at the current time that is completely different than anything seen over the last six decades is net private sector credit contraction. The following chart could not be more clear on the issue. Remember, the private sector is made up of households and corporations (including the financial sector).
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Let’s step out of the Fed numbers for just a second and have a little walk down memory lane. Memory lane of personal consumption expenditures. This is the natural counterpart to what we see playing out in the FOF numbers. If households are paying debt down, then something has to be given up for that balance sheet reconciliation decision. And the give up is consumption. Although you may not realize this, and this is clearly one of the key reasons why the long tenured Street truism suggests no one bet against the US consumer, personal consumption in nominal dollars has actually increased during each and every recession of the last six decades (at least). Each and every recession until the present, that is. The following table documents the increase in nominal personal consumption expenditures during each recession since 1960. Of course in the table we are assuming the current recession ended 6/09, given the perceptually positive 3Q GDP number.
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Of course we also need to remember that ours has been the longest official recessionary period on record since the Depression. So everything you see in the tables above for prior cycles happened over a much more compressed space of time. In other words, we have had much more time in the current cycle for personal consumption to pick up, but it has not. Lastly, it’s also important perspective to remember that in our current circumstances, households have been treated to some of the lowest interest rates of a lifetime and consumer product price weakness has been pronounced. Yet still zip in terms of consumption gains 19 months into official recession territory.

http://www.financialsense.com/Market/wrapup.htm

http://www.npr.org/templates/story/story.php?storyId=120405700