Prieur’s readings (April 21, 2010)

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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.

• Caroline Baum (Bloomberg): U.S. Economy needs more compost, fewer chemicals, April 20, 2010.
Inflation or deflation? A V-shaped recovery or something indistinguishable from recession? Enough new hiring to reduce unemployment or another jobless recovery? Predicting the future is always a crap shoot, no matter how hard economic modelers try to convince you otherwise. Getting a grasp on the here and now is generally easier. Not this time. Rarely have so many observers looked at the U.S. economy and come to such diametrically opposed conclusions. We’re either entering the Promised Land or staring into an abyss.

• Bill Fleckenstein (MSN Money): The “easy mortgage” era won’t last, April 16, 2010.
The real-estate market will soon see banks take a much more aggressive approach to foreclosures. It will be interesting to see how the economy is affected as rates are ratcheted up in earnest.

• Gretchen Morgenson (The New York Times): This bailout is a bargain? Think again, April 16, 2010.
It’s way too early to tally the costs of the government’s various efforts to help our nation’s financial institutions survive the credit debacle. But that hasn’t stopped anonymous Treasury officials from claiming in recent days that their Armageddon-avoidance will wind up costing far less than many feared. It is understandable, of course, that Treasury might want to transmit good news about bailouts the same week Americans were rushing to meet the I.R.S.’s tax deadline.

• Roger Altman (Financial Times): America’s disastrous debt is Obama’s biggest test, April 20, 2010.
The global financial system is again transfixed by sovereign debt risks. This evokes bad memories of defaults and near-defaults among emerging nations such as Argentina, Russia and Mexico. But the real issue is not whether Greece or another small country might fail. Instead, it is whether the credit standing and currency stability of the world’s biggest borrower, the US, will be jeopardised by its disastrous outlook on deficits and debt.

• Paul Farrell (MarketWatch): Clash of the titans – Obama vs. Goldman’s Reaganomics, April 20, 2010.
Ancient stories oft retold: Blame the mythic gods for today’s political crisis, for Wall Street’s 2008 meltdown, America’s $23.7 trillion new debt, for Beck, Palin, the Tea party, and now for Goldman and the resurgence of Reaganomics … Yes, the Kraken was released, ravaging American politics.

• David Weidner (MarketWatch): Goldman can beat the SEC, April 20, 2010.
Let me begin by saying that in the way the Securities and Exchange Commission laid out the case, what Goldman Sachs Group Inc. did was troubling and not too far from morally reprehensible, unethical, slimy, devious and unjustifiable. Goldman, in packaging a collateralized debt obligation in which parts were hand-picked by the hedge fund Paulson & Co. and not disclosing that firm’s role to long investors, apparently used the vagaries of derivative market rules to cater to a client who would bring in fees, not only on this deal, but on deals down the road. Maybe this is what Lloyd Blankfein, Goldman’s chief executive, meant by saying clients come first at Goldman: investors were first to lose money, and favored hedge funds were the first to make it.

• William Cohan (The New York Times): You’re welcome, Wall Street, April 19, 2010.
In a 1964 concurring opinion deciding Jacobellis v. Ohio, Associate Supreme Court Justice Potter Stewart wrote about “hard-core pornography” and his struggle to define it: “Perhaps I could never succeed in intelligibly doing so. But I know it when I see it.” Using Potter’s indisputable logic, it’s hard not to see something obscene in how Wall Street reaped massive profits and bonuses in 2009.

• Andrew Ross Sorkin (The New York Times): When Wall Street deals resemble casino wagers, April 19, 2010.
The government’s civil fraud case against Goldman Sachs raises so many provocative questions. Did the firm deliberately mislead its clients who bought a mortgage-related investment without the knowledge that it was devised to fail? Was it fair that a bearish hedge fund manager helped to pick the parts of an investment marketed as bullish, so that he could bask in the winnings? Who besides the vice president named in the lawsuit knew details of the deal in question? Were there other deals like this one?

• Ambrose Evans-Pritchard (Telegraph): Must Germany bail out Portugal too? April 18, 2010.
Portugal, not Greece, poses the greater existential threat to Europe’s monetary union.

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