My morning reading material:

• Flash-Crash Story Looks More Like a Fairy Tale (Bloomberg)
• Consumers Are Borrowing Again, Is it Here to Stay? (Northern Trust)
• Chen Exposes the Communist Goliath (The Diplomat)
• Austerity Faces Sharper Debate After European Elections (NYT) see also Merkel Is Cast as Thatcher’s Austerity Goddess (Bloomberg)
• WTF?!? Twelve “Facts” That May Surprise You About the Housing Bust (Developments)
• 19 solar, wind and biofuel stocks to watch (Market Watch)
• Billion-Dollar Traders Quit Wall Street for Hedge Funds (Bloomberg) see also Wall Street Banks Depressed in Shift Defying Blankfein (Bloomberg)
• Mexican Drug Lord Officially Thanks American Lawmakers for Keeping Drugs Illegal (Huff Post)
• Japan’s Leaders, Pressed by Public, Fret as Nuclear Shutdown Nears (NYT)
• James Q Wilson Has Much to Answer For (Boston Review)

What are you reading?

Invest in stocks? Small players still smarting

Source: USA Today

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

28 Responses to “10 Tuesday AM Reads”

  1. willid3 says:

    so why is austerity so unpopular?

    maybe it has some thing to do with the fact that it will take 5 years to actually recover from a recession? or maybe it has to do with the almost guaranteed increase in unemployment? of the loss of incomes? and thats just a 1% of GDP cut in government spending? while might not like this, but the austerity history shows them to be teh case.

    Specifically, an austerity program that curbs the deficit by 1 percent of GDP reduces real incomes by about 0.6 percent and raises unemployment by almost 0.5 percentage points. What’s more, the IMF found, the losses are twice as big when the central bank can’t or won’t cut interest rates (that’s a good description of what Europe’s central bank is doing right now). Income and employment don’t fully recover even five years after the austerity program is enacted:

    are there other choices?

    1) More inflation from the European Central Bank. More economic growth would make Europe’s problems a lot easier to handle. If Spain and Italy were growing at a healthy clip, their deficits would naturally shrink. One institution that could, potentially, help the euro zone grow faster is the European Central Bank. Here’s Paul Krugman: “The Continent needs more expansionary monetary policies, in the form of a willingness — an announced willingness — on the part of the European Central Bank to accept somewhat higher inflation.” More inflation would help uncompetitive countries like Spain bring down their costs more quickly, and it would potentially spur more spending and growth.
    drawback to inflation without income growth is easy to see.but i doubt that would be the plan some one would actually want. plus the other downside is in a globalized world, its really hard to raise incomes. and standard of livings are dependent on incomes rising, otherwise it will fall.

    2) More stimulus from euro zone countries that are in sound budget shape. It would be hard for countries like Greece or Spain to borrow money now and spend it on stimulus projects, with the promise of cutting spending later once the economy’s improved. As Joe Gagnon told me a while back, there’s no way to make that promise of future austerity credible — unlike in the United States, where there’s lots of policy inertia, future European parliaments can easily undo past pledges. Lenders would likely balk.

    But just because Greece, Italy, Spain, Portugal and others have to rein in their budgets doesn’t mean everyone in the euro zone necessarily has to follow suit. Joseph Stiglitz, for one, has called on wealthier countries such as Germany to invest more in infrastructure and technology to stimulate Europe’s economy. “I hope,” Stiglitz said, “the debate will be what are the things we can do to promote growth rather than how do we strangle each other together.”

    3) Open the bailout fund for bigger countries. Right now, Europe’s wealthy countries have bailed out smaller peripheral countries such as Ireland, Portugal and Greece. But some commentators think the bailout fund may need to get even bigger — and extend to countries that threaten to haul down the whole euro zone, like Spain.

    4) Eurobonds. Many individual members of the euro zone have large budget deficits. Spain’s is 8.5 percent. Ireland’s is 13.1 percent. But if you look at the euro zone as a single entity, things look better. Last year, the euro zone’s deficit was just 4.1 percent of GDP — less than half of the United States’. In theory, Europe should be able to borrow money at fairly cheap rates if it could issue a single bond for the entire continent. And that would give the euro zone some breathing room to deal with its current woes. Many Europeans, from politicians like Hollande to commentators like Gavyn Davies, have called for just such a “eurobond.”

    5) More fiscal integration. The euro zone, as we’ve seen, is made up of a bunch of wildly disparate countries. German workers are much more productive than Spanish workers, for instance. And that makes it hard for Spain to compete as long as it’s using a currency, the euro, that’s better-suited for more productive workers in Germany.

    One idea, then, has been for the euro zone to do what the United States does and redistribute resources from rich to poor. As James Galbraith explained here, the U.S. has long used programs such as Social Security or unemployment insurance or the TVA to lift up the poorer regions and make sure that states don’t implode when they fall into recession. Hollande, for one, has suggested that Europe move in this direction, with wealthier states funding a bigger European Investment Bank that can bankroll industrial projects in poorer countries.

    But is that enough? One problem is that thorough fiscal integration could involve some truly colossal sums. Remember, West Germany spent $1.9 trillion over 20 years in an attempt to modernize East Germany. And, because there were no language barriers, millions of East Germans could simply migrate West. Greek and Portuguese workers would have a tougher time doing that.

    6) Countries could just start leaving the euro zone. Of course, it’s possible that none of the above ideas would work. Germany doesn’t exactly sound thrilled with the idea of expending further vast resources to prop up countries like Italy and Spain and Greece.

    and we actually ran a tiny budget surplus for the first time since 2008?

    and if the middle class doesn’t recover again (it didn’t from the 2001 recession. and it didn’t recover much from the 1990-1991 either!

    if it doesn’t recover. what does that do to the economy and the standard of living?

  2. SOP says:

    Re. Merkel Is Cast as Thatcher’s Austerity Goddess

    Apples and oranges – Are the authors focused on an elephant using a telescope?

    Germany now and England then are Two “structurally” different times and places.

    Angela Merkel does – not – have the Ace-in-the-Hole that Thatcher had.

    hilarious understatement in the article:
    Glassman says. “The thinking is, when the economy comes back, everything will be fine. There’s a resistance to looking at fundamental structural problems,” …

  3. willid3 says:

    a different threat to the EU? don’t get results from austerity? dont get reelected, and endanger the EU

  4. Moe says:

    I read recently where Hedge funds will be allowed to start advertising to Jane and John Doe.

    Does anyone see this as a “game-changer” or just a “meh”….?

  5. willid3 says:

    austerity isn’t very popular. cause its not working. and taking 5 years to actually accomplish some thing that impacts people’s live so drastically seems to be unacceptable for some reasons. some thing about needing to eat and have roof over ones head while waiting for the recovery 5 years out. doesn’t seem real appealing for most, but guess it works for banks

  6. willid3 says:

    a mild start to reigning in CEO pay?

    seems to be working better in the UK than it is here.

  7. DSS10 says:

    An interesting read, having seen the company grow from a small shop to a real multinational over a relatively short period…

  8. norcal_steve says:

    I understand why the Boston and Atlanta fed bozos would want to come up with something as stupid as the ’12 facts about the mortgage crisis’ article, and why the WSJ would pick that up and love it, but why oh why are you linking to it? Did you read it and did it fail to raise your BP? “it was all just a speculative bubble that everybody unfortunately believed in, no institutional failure here’ kind of total mind rot.

    Barry you know this is a lot of horse shit, why did you pass this on? The article makes believe that the pull of securitization of fraudulently AAA rated CDO’s was not a if not the major reason that more and more loans were given to anybody who could breath so the loan originators and the securitizer and their salesmen could make billions in sales commissions on the instruments that blew up the financial systems world wide BECAUSE nobody involved cared about default risk. They were making billions off this systemic fraud, bankrupting their own companies and nobody gave a shit because they were drowning in gravy while the losses just down the road were not their concern – it wasn’t their money.

    Your book, Econned, Griftopia, etc document this well. Hell, you ‘wrote the book’, how could you recommend this horse shit from fed morons to your readers?


    BR: I read it and was annoyed by it. I posted it even though I disagreed with it — I am planning a full analysis of it when I get back home.

    My assumption is that readers are not idiot ditto heads and can figure things out for themselves. Perhaps I should have put a WTF? before it

  9. norcal_steve says:

    BTW, don’t expect me to waste my time checking out your links if you are going to link to horse shit articles which are only going to raise my BP and inform me only that there are a lot of douche bag ‘economists’, ‘analysts’ working at the Feb. We already knew that!!!


    BR: Just so people understand, the reads are what I am reading or think is interesting. Thats it! Try npot to read any deep philosophical meaning into them

  10. willid3 says:

    social security still provides more than 40% of retirees incomes. and will for the foreseeable future

    seem that the new replacements (401k, IRAs,etc) are barely providing more than 10% of income. at best.
    the only other major source if retirement income? pensions. but those are going away. and being replaced by nothing at all

  11. dougc says:

    euro bonds are the answer? They create problems, how many bonds would Greece be alllowed to issue, would it be a % of GDP or related to the amount deficit, would they be allowed to issue EURO bonds and retire their greek bonds, who would pay the interest, how would the interest be paid out to EUR members on a GDP ratio or reimbursed to those members that issued the bonds? EURO bonds would end up being debt that is guaranteed by Germany.

    Inflation is the answer? The type of inflation caused by the Fed or Euro LTRO is asset and commodity inflation, this reduces the physical amount of goods that individuals can buy, unless wage inflation is greater. This is impossible to accomplish when there is an excess of labor and “free trade’.

    Inflation will help governments by reducing the value of debt, really investors will buy bonds yielding 2% when the inflation rate is 4_5 %. Our budget deficit is almost 9 % this year and our total government debt is > 100%. Of course if the fed buys all of the debt they can keep the interest rates where they want. Don’t see any problems there?

  12. Greg0658 says:

    good segment on CNBC SquawkBox with:
    xSenator xPOTUScandidate “Bill Bradley, We Can All Do Better author, shares his take on the 2012 presidential election, highlighting that America should focus less on money and more on bipartisan politics.”

    He add ideas on tax policy that is worth a 2nd pass.

    “what do you do today? today, what i would do is i would pass a law that gave any company that hired an additional worker and didn’t lay another one off a 30% tax credit up to $25,000 per worker. if we did that, and i’d limit it to $50 billion. if we did that, we’ employere responding because they were going tho to have to pay 70%, but the government paid 30% and not o dollar would be spent of federal money unless a job was created. that’s what i think we should do now”
    (complete with dragonspeak misdiagnosed words :-)

  13. gman says:

    “Your book, Econned, Griftopia, etc document this well. Hell, you ‘wrote the book’, how could you recommend this horse shit from fed morons to your readers?”

    I notice more of this recently on this blog. Stuff that Barry has recently repeatedly and forcefully refuted is getting back to us. WSJ article on “how progressive” the tax code really is was linked to twice in a week! Yeah is is progressive if you ignore, cap gains, carried interest, offshoring, and state and local taxes.

    Places that were once considered ” pure propaganda shops” must have made an offer Barry could not refuse.


    BR: You are an ass

  14. willid3 says:

    not sure that BR isn’t just trying to provoke thinking. cause he normally doesn’t say much about what he is reading. or maybe he was just pointing out that some are still shuffling out the same non sense?

  15. AHodge says:

    all hell is breaking out with B of A and others doing this scam
    and threatening foreclosure of you dont pay
    have to laugh they finally say they are going to completely fix this
    the B of A ombudsdman Bob Putman was practically groveling apologizing and said they would fix all
    this was the guy supposed to call me a year ago to confirm the agreememt the lying sacks of shit said i had.
    ritholtzians may remember the 3 flame letters to B of A also posted here. Now i REALLY AM coming for you Moynihan!!!!

  16. AHodge says:

    as the article outlines this is banks playing stupid about coverage i alread y had
    and sticking me with involuntary captive bozo name insurance
    which i just learn is called “forced placed insurance” and tthreatening foreclosure if you dont pay

    this scam is widespread
    and a product yall are going to hear more about

  17. DeDude says:

    Speaking about austerity. If US had not had such harsh austerity and government cuts in employment we would not have had such a slow recovery. And they are not even trying to include the secondary effects that someone losing their government jobs will spend a lot less.

  18. willid3 says:

    to cut the budget lets make it so we know even less about what is happening in the economy

    that way when the next bubble is blown up

    every body can claim they didn’t see it coming

  19. I like to be very organic and unselfconscious about I link to here. Its simply what I am reading, looking at, or think is interesting or provocative.

    I refuse to let the hacks and trolls get into my head. When junk like this surfaces, it has a “work the refs” feel to it. So I end up over -compensating. Expect to see lots of thing gman is going to hate over the next few days.

  20. AHodge says:

    so i was wrong about B of A fully settling with me
    their customer service obudsman ” I represent you” bob putnam
    looks like trying still to charge me $1300
    he rebates me $2000 but then says april $3400 is in arrears
    slimy bastard,
    but the biggest joke is the ombudsman has no contacts
    no phone no email
    i talk to customer service dufus who says he will call you????

  21. AHodge says:

    i think some folks here like gman and norcal steve
    with their heart in the right place are dissappointed by expecting too much
    BR is not godlike just the best in the bus
    this is not physics its all guesswork and tentative
    in any case its his show, play or go home.
    that might mean having a good laugh at the funniest 0f the twelve pillars of wisdom

    too much testosterone makes even the pack turn on each other….
    id lighten your meds y all

  22. AHodge says:

    we are all fighting mad and dont want to take it any more
    lets point the righteous wrath at the right target