This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• George Soros (Financial Times): Do not ignore the need for financial reform, October 25, 2009. It is not the right time to enact permanent reforms. The financial system is far from equilibrium. The short-term needs are the opposite of what is needed in the long term.

• Paul Sandison: The two main threats to democracy and modern capitalism, October 20, 2009. In the present burgeoning economic crisis, already well over a hundred million people across the globe have been thrown into poverty, despair, sickness and are struggling to avoid a premature death. Billions of people abroad are vowing never to allow the United States and the United Kingdom to do this to them again. The remaining question is whether the

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• John Hussman (Hussman Funds): We’re speaking Japanese without knowing it, September 28, 2009. After the bubble burst in Japan in 1990, Japanese banks were not compelled to properly disclose their losses either. The predictable result is that the problems resurfaced later, but worse, because they had not been addressed.

• John Authers (Financial Times): A risky revival, September 25, 2009. The speed of the rally is itself cause for concern. Historically, big sell-offs have typically been followed by big bounces. But as measured by the S&P 500, the current rally is stronger after six months than any predecessor, including those that followed the lowest points of the market in 1932, 1974 and 1982.

• Tom Petruno (Los Angeles

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy. Please also add the links to any other thought-provoking articles you would like to share to the comments section.

• Paul Krugman (The New York Times): Averting the worst, August 9, 2009. So it seems that we aren’t going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government.

• Niall Ferguson (Financial Times): A runaway deficit may soon test Obama’s luck, August 10, 2009. Six months in, “Felix the Prez” still has the look of a lucky, two-term president. But that could change if voters become even more disenchanted with the legislative branch and start blaming the president for the looming fiscal train-wreck.

• Simon Johnson (The Baseline Scenario):

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This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find of interest.

• Barry Eichengreen and Kevin O’Rourke: A tale of two depressions, June 4, 2009. This is an update of the authors’ 6 April 2009 column comparing today’s global crisis to the Great Depression. World industrial production, trade, and stock markets are diving faster now than during 1929-30. Fortunately, the policy response to date is much better. The update shows that trade and stock markets have shown some improvement without reversing the overall conclusion - today’s crisis is at least as bad as the Great Depression.

• Martin Wolf (Financial Times): Reform of regulation has to start by altering incentives, June 24, 2009. Bubbles and crises cannot be eliminated from capitalism. Yet it is hard to believe

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I am still worried about what banks aren’t telling us.  Why?  Total Reserves in the banking system have increased by $857.8 billion over the twelve month period ending in May 2009. Excess reserves in the banking system have increased by $842.1 billion in the same time period.  The Federal Reserve System has overseen a 1,900% increase in total reserve in the banking system, year-over-year, for the year ending May 2009, and banks have chosen to sit on the injection almost dollar-for-dollar!

These figures come from the Federal Reserve statistical release H.3 “Aggregate Reserves of Depository Institutions and the Monetary Base.” I have used the “not seasonally adjusted” data.

This is unheard of! In May 2008, excess reserves were $2.0 billion and stood at 4.5% of the total reserves in the banking system. In May 2009, excess reserves totaled 93.7% of the total reserves in the banking system.

Unless

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The following are some interesting articles I have read over the past few days that readers may also like to have a look at:

• Jo Becker and Gretchen Morgenson: (The New York Times): Geithner, as Member and Overseer, Forged Ties to Finance Club, April 26. 2009. One year and two administrations into the bailout, Mr. Geithner is perhaps the single person most identified with the enormous checks the government has written. At every turn, he is being second-guessed about the rescues’ costs and results. But he remains firm in his belief that failure to act would have been much more costly. “All financial crises are a fight over how much losses the government ultimately takes on,” he said. And every decision “requires we balance how to achieve the most benefits in terms of improving confidence and the flow of credit at the least

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CVC To Keep Staff At BGI?

In this column by Kathleen Pender of the San Francisco Chronicle, Barclays Global Investors' impending deal with European private equity player CVC Capital Partners is reviewed. BGI insists that the new parent won't slash current staffing levels. 

But others aren't so sure, figuring that CVC will streamline operations and unload it during the next bull market. Just a thought ... what if that turns out to be fairly soon? Private equity firms can move fast ... but later this year or even next would seem awfully fast, even for the most optimistic and aggressive speculator. 

You can read the column here.

 

Bogle Takes On Institutional Money Managers

Vanguard founder John Bogle is raising an interesting point these days.

As noted in this New York Times column by Gretchen Morgenson, the indexing pioneer is pointing out that much of Wall Street's excesses resulting

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We are now suffering the consequences of one of the most spectacular financial miscalculations in history, after investors around the world discovered that trillions of dollars invested in securities derived from U.S. home mortgages were far riskier than they had originally believed.

Part of this miscalculation can be attributed to misguided quantitative models that were used to assess those risks. The key inputs for those models were assumptions about underlying default rates and their correlations across different borrowers. Default rates and correlations were quite low up until 2005, because rising home prices made default a decidedly inferior option to refinancing for even the least credit-worthy borrower. But the rising home prices were themselves caused by the huge flow of capital for lending to this market, sucked in by the illusion of safety. When the flow of credit stopped and house prices began to fall, the

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The ground is giving way beneath our feet: Sell the dollar…Sell Treasuries.   People still stand their ground…they do not panic. They do the right thing. But then, they go into work – but find they have no jobs. They look at their pension account – wisely invested in a diversified portfolio – and find that it has lost half its value. And their houses lose 20% of their value. In places such as San Diego, Las Vegas and Miami, the losses are more like 30%- 40%. The ground gives way…and they find themselves in Hell.

Friday, the Dow registered a 61 point improvement, after much disappointment the day before. Is the rally on or off? We don’t know…

But what MUST happen, WILL happen. Fish gotta swim. Birds gotta fly. And bubbles gotta pop. The bubble in private debt has popped already. And now, the bubble in public debt has to

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