» Posted by Martin Weil on January 30, 2008

Central bankers believe that securitization is not coming back in any meaningful way in the foreseeable future, and banks will therefore have to roll up their sleeves and do old-fashioned lending in much greater volumes than before.

That may seem like a very bland statement, but it is tantamount to saying that a comet has wiped out most of the mammals and the dinosaurs will rise again.

Naked Capitalism examines structural changes in lending as a result of the credit meltdown, referencing John Dizard's article in the Financial Times

» Posted by Martin Weil on January 21, 2008

For much of the world, the United States is now on sale at discount prices. With credit tight, unemployment growing and worries mounting about a potential recession, American business and government leaders are courting foreign money to keep the economy growing. Foreign investors are buying aggressively, taking advantage of American duress and a weak dollar to snap up what many see as bargains, while making inroads to the world's largest market.

So write Peter Goodman and Louise Story in a good article on foreign investment in the US - both private and public - in Sunday's NYT

» Posted by Martin Weil on January 07, 2008

A private banker told me last year about a New York real-estate magnate who asked his 11-year-old daughter what she wanted for her birthday.

Her answer: a ride on an American Airlines plane.

"But we have our own jet," the magnate replied.

"I know, but I want to ride on a big plane with other people," she said. "I want to see what an airport looks like on the inside."

From The Wealth Report

» Posted by Martin Weil on January 04, 2008

From a UC Santa Cruz study

» Posted by Martin Weil on January 03, 2008

Yet, on closer inspection, we are indeed living through a global shift in the balance of power very similar to that which occurred in the 1870s. This is the story of how an over-extended empire sought to cope with an external debt crisis by selling off revenue streams to foreign investors. The empire that suffered these setbacks in the 1870s was the Ottoman empire. Today it is the US.

So writes historian Ferguson in the FT, "An Ottoman Warning for America." Ferguson's thesis echoes that of earlier historian Paul Kennedy in The Rise and Fall of the Great Powers. Many will argue that the extraordinary financial strength of the US will enable us to overcome the as-extraordinary mountain of indebtedness that has been amassed in the past years. However, the historical record, Kennedy demonstrates, is not highly encouraging.

» Posted by Martin Weil on January 03, 2008

The combination - increasingly opaque financial markets and increasingly transparent monetary policy - has created a dangerous brew of financial excesses. Unless both trends are reversed, financial stability will remain elusive.

Kaufman, chief strategist at Solomon Brothers during the 1980's when that firm ruled the bond markets, takes the Fed and the regulatory system to task in this WSJ Commentary (subscription required). Kaufman continues

Briefly stated, this is the now-prevailing view that monetary authorities do not know when a full-blown credit bubble is upon us, but that they do know what to do once a bubble bursts. I have long argued this approach condones excessive credit growth. Massive infusion of new funds following a major market collapse can provide temporary relief, but it does not repair the long-term political, social and economic damage caused by the meltdown. How can this monetary approach not reduce market discipline before the collapse, or incite a quick return to speculative activities after the Fed rescue?

Kaufman prescribes requiring much greater disclosure from banks and non-bank financial entities as to the nature and extent of their risk-taking activities. The current system has failed to keep pace with financial innovation (Kaufman takes a swipe at the Libertarian Alan Greenspan), and has fueled an environment of excessive risk "where profits are privatized and losses are socialized" (e.g. heads I win, tails you lose).

Thanks to Naked Capitalism for the tip.