Friday, July 15, 2011



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Troy said...
2006 is irrelevant to the bubble, too.
The market topped in 2Q06:
2006-07-01 206.52
but had reached 95% of peak by 3Q05.
i.e., 2004 & 2005 was when the market went over 20% pa appreciation:
it was all downhill from 4Q05.
Krupskaya said...

While Baker's analysis is worth reading, his achievement is to complicate rather than flat out refute the Morgenson/Will narrative.
Baker notes -- correctly-- that lots of private actors decided to take big risks that turned out badly. But he fails to grapple with the key question: why? All Baker can muster by way of explanation is "the private financial sector went nuts." Morgenson/Will and others, though, are trying to dig deeper, and figure out why private firms thought their dumb bets were sure to pay off. One highly plausible story is that the strong commitment to expanding home ownership shared by both major political parties (and yes, rooted in compassion for low and moderate income families) convinced players that all manner of generous government support would continue to flow to the housing markets.
denim said...
Well even a layman as I am can easily figure out how the dominoes fell and which one was the trigger.
Move job to offshore. 1st domino
Eliminate job income to mortgage holder. 2nd domino
Foreclose on the mortgage making surplus house. 3rd domino
Bundle high risk mortgages into derivatives as insurance against that risk. 4th domino
Fake the reserves to back the derivatives. 5th domino
When "critical mass is reached", i.e. enough job losses, Fake insurers fail. 6th domino
Paulson begs on knee for bailout during Bush admin. 7th domino
Wealth restored to the failure class. 8th domino
Crumbs for main street insufficient to increase aggregate demand. 9th domino
Second Great Recession begins as the blind lead the blind into the ditch. 10th domino (the sequel)
TT said...
The problem is that a George Will column is already halfway around the world before the truth puts on its shoes.
urban legend said...
George Will does not give a crap whether he is regurgitating certifiable nonsense, and neither does his editorial staff. I guess the management doesn't either. They have other, higher purposes, and cannot let facts get in the way. The Washington Post is an utter disgrace. You wonder how people there who went into journalism with high ideals can look themselves in the mirror.
Don Ottavio said...
Here ( is data in a nice graphic, via Krugman ( and Thoma, that damns the Republican talking point as a lie and damned lie. A damned, damned lie.

denim said...
Back in WWII, aircraft had a special transmitter/receiver mounted in the tail, I think. It was called identification friend or foe, IFF for short. When the anti-aircraft on the ground or other planes broadcast a coded signal, the IFF device would receive it and transmit its very special code back. Some called it squawking. But if it squawked the wrong code, you knew who you we going to have to deal with.
Peter K. said in reply to Krupskaya...
Baker does say that Fannie and Freddie should have seen the bubble and spoken up. Baker writes "Housing is all they do, how could they have totally missed the largest housing bubble in the history of the world?"
As should have Greenspan and the Federal Reserve. As should have other regulators. Which of the two parties are more anti-government and anti-regulation? The Republicans of course. As are conservatives like Will, something he won't face up to.
gman said...
As a current colleague and Bear Stearns alum always says "at that time we would securatise anything..ANYTHING WITH AN INCOME STREAM".. he talks about the great bonuses and NEVER about "the government making him do it"
gman said...
Morgenson, the Judith Miller of the financial crisis.
Why is surprising or difficult to understand? Successful political movements repeat successful tactics. Conservatives have learned that their followers will believe obvious lies. Confident repetition trumps simple and factual rebuttals.
The lies have become larger and bolder, building on them foundation of previous lies. The cumulative effect makes the truth difficult for believers to see. This the tangible face of social decay.
At some point you should move beyond rebuttals to diagnosis of the underlying problem. These rebuttals are not even keeping up with the flow of new lies.

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