Prieur’s readings (October 27, 2009)

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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): Rumors of the death of the credit crisis are greatly exaggerated, October 26, 2009.
In recent months, I’ve strongly rejected the notion that the credit crisis has been conveniently placed behind us and that the U.S. is now in a typical post-war economic recovery (and can be approached as such from an investment perspective). This view continues to strike me as dangerous and even naïve.

• Dave Nadig (IndexUniverse.com): Nouriel Roubini – big crash coming, October 23, 2009.
Roubini will be the keynote speaker at IndexUniverse’s upcoming “Inside Commodities” conference on November 4 at the New York Stock Exchange. IndexUniverse sat down with Dr. Roubini ahead of the conference to take his temperature on global markets, the role of oil and gold, and the impact of regulation.

• David Roche (Financial Times): Why sovereign bond yields will explode, October 26, 2009.
For nearly two decades, every credit crisis has been palliated with a further wave of leverage, kicking off a new economic cycle. Can this work again? I think not. In this post-credit crisis world, some things will be permanently different. It will not be business as usual for government bond prices. That is because current bond yields and the increasing insolvency of our rulers are the biggest disconnect in financial markets today. This comes from two factors: quantitative easing by central banks and the collapse of credit demand by the private sector. Neither are permanent features of the economic landscape.

• Irwin Stelzer (The Weekly Standard): The dethroning of king dollar? October 23, 2009.
“Dollar murdered. Drowned in red ink. Clues point to the White House.” So might a tabloid headline read as the angry mourners gathered to affix blame for the end of the era in which the dollar served as the currency in which the world does business — its reserve currency, to use the economists’ jargon. But if such a funeral ever takes place, the mourners should remember that right now they aren’t too happy with the existing system.

• Bill Fleckenstein (MSN Money): Obama team ignores Volcker at its peril, October 26, 2009.
The former Fed chairman has terrific advice about reining in risky bank practices to prevent another financial meltdown. But the administration apparently isn’t listening.

• Jim Jubak (MSN Money): Why big banks hate banking, October 27, 2009.
The stage is set for too-big-to-fail banks such as Citigroup and Bank of America to take on greater risks in pursuit of profits, counting on taxpayers to make good their losses.

Darrell Delamaide (FinReg21): Bank bailout made matters worse if no reform is enacted, Treasury aide says, October 22, 2009.
Unless substantial regulatory reforms are now enacted, the government’s bailout of large financial institutions last year will have made the too-big-to-fail problem worse by creating a “classic moral hazard,” a top Treasury official said.

• Mark Thoma (Economist’s View): “The roots of protectionism in the Great Depression”, October 25, 2009.
Lessons from the Great Depression via Laurent Belsie, NBER reporter.

• Ambrose Evans-Pritchard (Telegraph): Food will never be so cheap again, October 25, 2009.
Biofuel refineries in the US have set fresh records for grain use every month since May. Almost a third of the US corn harvest will be diverted into ethanol for motors this year, or 12% of the global crop.

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