The Mess That Greenspan Made - Part 416

Friday Morning Links

Job growth grinds to a halt in August – Reuters
ECB’s Coene says crisis heading to 2008/9 level – Bloomberg
U.S. Is Set to Sue a Dozen Big Banks Over Mortgages – NY Times
Bank of America puts Countrywide lending unit up for sale – LA Times
China central banker warns global economic risks increasing – Reuters
Uncaged Inflation Is a Beast That’s Hard to Control – Bloomberg
Wall Street cash shifts to Romney from Obama – Reuters
Buffett Is Buying Banks? Five Burning Questions – WSJ
Fed asks BofA to list contingency plan: report – Reuters
When debt levels turn cancerous – Telegraph
Gold Standard Comeback Enjoys Support – CNBC

Oil falls to near $88 ahead of key US jobs report – AP
Gold up on safe haven buying ahead of U.S. payrolls – Reuters
As massive debt maturities loom, U.S. needs to extend – Reuters
India’s need for gold in September undiminished by high prices – Mineweb
China’s main precious metals bourse welcomes Barclays – Reuters
Gold sales would not solve Europe’s debt troubles – Reuters
Critical Imbalances in Our Stock Market – HuffPost
Gold Prices Pop Amid Panic Over Jobs – The Street

Global slowdown alerts… – FT Alphaville
What Does ‘Economic Growth’ Mean for Americans? -NY Times
Long-Term Unemployment Casts Doubt on Fed’s Ability to Help – WSJ
Merkel Brings Debt Crisis to Party Campaign – Bloomberg
UK construction new orders suffer biggest fall since 1980 – Guardian
Economists Call on ECB to Cut Rates – Bloomberg
Australia’s property values continue to decline – SMH
Dim Hope for Obama Housing Efforts – National Journal
Duke: U.S. Should Promote Foreclosed Home Rentals – Bloomberg
Banks Overwhelmed by Mortgage Refinancing Boom – Bloomberg
Jedi Kocherlakota on the ways of the FOMC force – FT Alphaville
The Last QE – The Big Picture


Affirming the Credibility of Baghdad Bob

[Here's another one from August of 2008 when the housing bubble was in full-burst mode but the wheels had not yet fallen off the global financial system. In this item that originally appeared on August 13, 2008, the National Association of Realtors sought to affirm their credibility after being the subject of ridicule for contributing to the housing market excess. I wonder what David Lereah is doing these days. The last time I heard anything about him he was trying to get a consulting business off the ground. It looks like even the David Lereah Watch blog has lost interest and - ouch! - this is entry #4 on a Google search. (BTW - If you're reading this, it means we're having a pretty good time in Glacier National Park, this post being prepared in the event that we stay longer than even our most optimistic plan.)]


It’s probably fair to say that, if you have to devote a full page to “affirming your credibility” in your new promotional campaign material, you’ve got a pretty serious credibility problem.

Such was the case with the recently released Surround Sound Campaign from the realtors’ trade group the National Association of Realtors (NAR).

It’s also probably fair to say that, when your former chief economist has a reference to Baghdad Bob in the opening paragraph of his entry on Wikipedia, you likely have an enormous credibility problem (the image of former NAR chief economist David Lereah in Baghdad Bob attire appears courtesy of the Marin Real Estate Bubble blog).

Apparently this image is still fresh in the minds of those who put the latest campaign material together:

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The Age of Ignorance and Froth

[Here's a look at what people were thinking about in early-August of 2008, that is, before the s#!t began to hit the fan later in the month and then again in September and October. At this point, everybody new that we were in deep trouble, it was just a matter of degree. We didn't know it at the time, but a recession had officially started in December of 2007 and shortly thereafter, former Fed Chairman Alan Greenspan released his autobiography, right around the time that a lot of people started to figure out that he was one of its architects. This story originally appeared on August 11, 2008 and there appears to be a growing realism about how bad the housing market would be, someone in yesterday's post from 2007 saying that foreclosures could remain high for "the next year" while below the phrase "for another decade or so" is the guess on a home price rebound.]


With time comes perspective, or so they say, and despite a staunch and ongoing defense of his long tenure as CEO of the world’s most important economy, former Fed Chairman Alan Greenspan just can’t seem to tamp down the growing realization that he played a key role in creating the mess in which Americans now find themselves.

To some, this has been obvious for years now and the fact that so many continue to hold the man and his record in such high regard is one of the more disturbing developments of recent years, boding ill for a timely and long-lasting recovery.

Not long ago, Peter Schiff famously called “The Maestro” the “Ace of Spades” in an Iraq War-style deck of playing cards that had, as its purpose, identifying the most important and dastardly members of the Iraqi government.

Long-time critic Bill Fleckenstein re-named the former Fed chairman’s book The Age of Ignorance when writing Greenspan’s Bubbles.


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[Skipping ahead to August 2007 when we were also on vacation during the second half of the month and, hence, could find no Jackson Hole material to replay last week, it quickly became clear when looking through the old posts that the housing market  was in very serious trouble, the mainstream media really picking up on the whole idea that maybe the bubbly prices of real estate wouldn't stay elevated forever and that maybe things were going to get ugly out there. First published on August 2, 2007, the story below reminds us all what it was like before things really went south beginning in 2008 -  back in 2007 when everyone's fate had already been determined and the only variable was the timing.]


You don’t truly understand the psychology behind the housing bubble until you see how dopey some of the participants are and, more surprisingly, how willing they are to share their stories with millions of people.

It’s one thing to lose your shirt, it’s another to tell your story on national TV.

Admittedly, Casey Serin of the now defunct has set the bar quite high, but Bruce Helmprobst turned in a stellar performance on last night’s ABC Evening News, providing another sad example of what happens when our “fifteen minutes of fame” culture in the YouTube era meets up with the latest financial bubble.

Charles Gibson: One reason for the volatility in the market these days are the concerns about the mortgage market. Home foreclosure notices were filed against 573,000 homes in the first half of the year, an increase of 58 percent over last year – devastating for some, opportunity for others. ABC’s Miguel Marquez takes a closer look.

Miquel Marquez: In a sign of how low the housing market here has sunk, Joyce Essex used to make most of her money selling homes. Now, 90 percent of her business comes from handling foreclosures.

Joyce Essex (Realtor, Coldwell Banker): Basically, up to this point, the banks have been able to sell the properties for real retail prices, but just recently, they’re starting to get so many properties that they have to get them off their books.

Marquez: All of last year, Essex handled 16 foreclosures, now she handles one a day.


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