Links, Independence Day edition

July 4, 2009

Happy 4th everyone.  (Reader note: I haven’t yet figured out how to check work e-mail at home so best to continue sending links, pics, vids to optionarmageddon at gmail.com)

How hedge fund wives are learning to cope (Times UK)  A couple weeks old, but pure gold: “I didn’t get married for this,” [wimpers one hedge fund wife], adding ruefully, “Do you know I have to take the subway now?”

It’s the De-leveraging stupid (Steve Keen)  We’re SO not out of the woods yet.  Here, economist Keen discusses fundamental flaws with neo-classical solutions to the financial crisis.  If short on time, skip ahead to the section that reads “Deleveraging and economic breakdown.”

Sweden cuts deposit rate to NEGATIVE 0.25% (Mish)  Looks like one central bank has taken Greg Mankiw’s foolish advice.  In order to fight, the “paradox of thrift,” economists are dreaming up all sorts of dumb ideas to force people to spend more money.  But the problem isn’t that folks aren’t spending enough today, it’s that they spent way too much yesterday. To put the economy on sound long-term footing requires LESS spending and MORE saving.  Unfortunately, there’s no painless way to get from here to there.  By the way, I doubt negative deposit rates will encourage folks to spend more.  It’ll probably just make mattresses more popular depositories.  Mankiw anticipates this and proposes outright confiscation, a tax on holding cash, as a way to fight saving.

China’s growing credit bubble (Michael Pettis)  Really fantastic stuff.  This piece is long and Pettis tends to ramble a bit, but stick with him.  He’s the smartest, most thoughtful analyst following China that I’ve read.  Basically China appears to be inflating a massive credit bubble in order to fight the recession.  And risk management at Chinese banks is very much inferior to Western banks, if you can believe it.  Hyman Minsky told us all about this kind of thing.  There has never been a political or economic system in history that has been able to avoid the consequences of excessive liquidity within the banking system. Even the Romans learned this, and they learned it the hard way, as we always do.” I’m a believer that China can emerge as a major economic superpower to rival the U.S., but not soon.  There’s too much mess in their own economy that needs cleaning.  (ht Paul M.)

Six failed IL banks controlled by single family (CNN Money)  FDIC closed 6 banks in The Land of Lincoln Thursday night.  According to FDIC, “all six banks were controlled by one family and followed a similar business model that ‘created concentrated exposure in each institution.’” Hat tip to multiple readers who passed along this article.

Psst!  Wanna own a bit of a failed bank (CNN Money)  Another good one from CNN.  This article notes that FDIC had $16 billion worth of received assets from failed banks as of March 31st.  Having closed a couple dozen banks since then, the number is now higher, which means a large chunk of FDIC’s so-called “reserves” are now invested in less liquid assets that may be subject to writedown risk.  Once upon a time two years ago, all of its reserves were invested in Treasurys.

Sarah Palin: Time out or flame out (Chicago Trib)  Readers interested in a quick diversion to politics should check out this analysis of Sarah Palin’s resignation.  “You call press conferences to answer questions, not raise new ones…”

Raging Bulls (Wall Street Blips)  The story of laid off Wall Streeters living it up in Buenos Aires.

Self help “makes you feel worse” (BBC)

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