Lawrence Jung - Bookmarks

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Lesson From a Crisis - When Trust Vanishes, Worry - NYTimes.com, 10/1/08

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“If a guy has a good investment opportunity and he can’t get the funding, he won’t do it,” Mr. Mishkin, who’s now an economics professor at Columbia, notes. “And that’s when the economy collapses.” Or, as Adam Posen, another economist, puts it, “That’s when the Depression became the Great Depression.”
Mr. Bernanke largely developed the theory that the loan officers’ lost knowledge was a crucial cause of the Depression. He referred to this lost knowledge as “informational capital.” In plain English, it means that trust vanished from the banking sector.
Banks cut back on making loans and instead poured money into Treasury bills, which paid almost no interest but also came with almost no risk. On the loans they did make, banks demanded higher interest rates. Over the past two weeks, rates have generally continued to rise — and these rates, not the stock market, are really what you should be watching.
So why aren’t some banks stepping into the void and taking advantage of the newly high interest rates to earn some profit?
There are two chief reasons. One is fairly basic: bankers are nervous that borrowers who look solid today may not turn out to be so solid. Think back to 1930, when the American economy seemed to be weathering the storm.
The second reason is a bit more complex. Banks own a lot of long-term assets (like your mortgage) and hold a lot of short-term debt (which is cheaper than long-term debt). To pay off this debt, they need to take out short-term loans.
In the current environment, bankers are nervous that other banks might shut them out, out of fear, and stop extending that short-term credit. This, in a nutshell, brought about Monday’s collapse of Wachovia and Glitnir Bank in Iceland. To avoid their fate, other banks are hoarding capital, instead of making seemingly profitable loans. And when capital is hoarded, further bank failures become all the more likely.
The crucial point is that a modern economy can’t function when people can’t easily get credit. It takes a while for this to become obvious, since most companies and households don’t take out big new loans every day. But it will eventually become obvious, and painfully so. Already, a lack of car loans has caused vehicle sales to fall further.

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Following The Future Of TV Ad ‘Futures’ Market (TV Watch, 9/19/08)

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For Buyers, Many Roadblocks - NYTimes.com

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For Buyers, Many Roadblocks - NYTimes.com

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Home prices to fall on liquidity concerns: analyst - Yahoo! News, 9/16/08

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plaudits

enthusiastic approval; "the book met with modest acclaim"; "he acknowledged the plaudits of the crowd"; "they gave him more eclat than he really deserved"

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Living In - Putnam Valley, N.Y. - The Difference a Few Miles Can Make - NYTimes.com

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Google Strikes Partnership With NBC to Expand in TV Advertising - NYTimes.com, 9/8/08

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US household incomes fail to grow (BBC, 9/5/08)

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Preoccupations - Girl Power at School, but Not at the Office - NYTimes.com

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Preoccupations - Girl Power at School, but Not at the Office - NYTimes.com

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Incomes drop sharply in July while spending slows - Yahoo! News

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The Hunt - As Priorities Change, Perseverance Pays Off - NYTimes.com

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Recession is likely by year end: Chamber of Commerce | Reuters

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How does the triangle choke work? - Yahoo! Answers

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Hobson's choice

Hobson's choice \HOB-suhnz-CHOIS\, noun:
A choice without an alternative; the thing offered or nothing.

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Who and Whom

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Dr. Doom - Profile - Nouriel Roubini - Predicting Crisis in the United States Economy - NYTimes.com

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Though he is confident that the economy will enter a technical recovery toward the end of next year, he says that job losses, corporate bankruptcies and other drags on growth will continue to take a toll for years.
For months Roubini has been arguing that the true cost of the housing crisis will not be a mere $300 billion — the amount allowed for by the housing legislation sponsored by Representative Barney Frank and Senator Christopher Dodd — but something between a trillion and a trillion and a half dollars.
But most important, in Roubini’s opinion, is to realize that the problem is deeper than the housing crisis. “Reckless people have deluded themselves that this was a subprime crisis,” he told me. “But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.”
All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. “We have a subprime financial system,” he said, “not a subprime mortgage market.”
Roubini argues that most of the losses from this bad debt have yet to be written off, and the toll from bad commercial real estate loans alone may help send hundreds of local banks into the arms of the Federal Deposit Insurance Corporation. “A good third of the regional banks won’t make it,” he predicted. In turn, these bailouts will add hundreds of billions of dollars to an already gargantuan federal debt, and someone, somewhere, is going to have to finance that debt, along with all the other debt accumulated by consumers and corporations. “Our biggest financiers are China, Russia and the gulf states,” Roubini noted. “These are rivals, not allies.”
“Once you run current-account deficits, you depend on the kindness of strangers,” he said, pausing to let out a resigned sigh. “This might be the beginning of the end of the American empire.”

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Dr. Doom - Profile - Nouriel Roubini - Predicting Crisis in the United States Economy - NYTimes.com

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Dr. Doom - Predicting Crisis in the United States Economy - NYTimes.com, 8/18/08

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Lawrence Jung's Bookmarks

Lesson From a Crisis - When Trust Vanishes, Worry - NYTimes.com, 10/1/08

Following The Future Of TV Ad ‘Futures’ Market (TV Watch, 9/19/08)

For Buyers, Many Roadblocks - NYTimes.com

For Buyers, Many Roadblocks - NYTimes.com

Home prices to fall on liquidity concerns: analyst - Yahoo! News, 9/16/08

plaudits

Living In - Putnam Valley, N.Y. - The Difference a Few Miles Can Make - NYTimes.com

Google Strikes Partnership With NBC to Expand in TV Advertising - NYTimes.com, 9/8/08

US household incomes fail to grow (BBC, 9/5/08)

Preoccupations - Girl Power at School, but Not at the Office - NYTimes.com

Preoccupations - Girl Power at School, but Not at the Office - NYTimes.com

Incomes drop sharply in July while spending slows - Yahoo! News

The Hunt - As Priorities Change, Perseverance Pays Off - NYTimes.com

Recession is likely by year end: Chamber of Commerce | Reuters

How does the triangle choke work? - Yahoo! Answers

Hobson's choice

Who and Whom

Dr. Doom - Profile - Nouriel Roubini - Predicting Crisis in the United States Economy - NYTimes.com

Dr. Doom - Profile - Nouriel Roubini - Predicting Crisis in the United States Economy - NYTimes.com

Dr. Doom - Predicting Crisis in the United States Economy - NYTimes.com, 8/18/08

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