Comments

Where 140 characters (@michaeljung) are not enough
and a blog post (michaeljung.wordpress.com) would be a waste.

http://www.michaeljung.co.uk


[ECB] Trichet explains why they buy know bonds (monetization).

They observed ‘hampering of transmission of monetary policy.’ Markets currently don’t function normally.

The best is when he gets out of himself speaking about the stability and growth pact and the time around 2004/2005. The countries he didn’t want to name was Germany and France. Both countries wanted to water down the pact and go above the 3% new debt to budget line.


By listening to each other, we have been able to partner with each other. […] Knowledge is the currency of the 21st century. […]

[Entrepreneurship is an] area where we can learn from each other. It empowers the innovator and inventor. Where men and women can take chance on a dream. Taking an idea, which starts around a kitchen table or in a garage, and turning it into a new business and even new industries which can change the world.

[T]he market has been throughout history the most powerful force the world has ever known for creating opportunity and lifting people up out of poverty. Entrepreneurship is in our mutual economic interest.

Barack Obama (video)


The Undressing of Alan Greenspan

If the Brookings Institute graded papers, Greenspan deserved the dunce cap. Exhibit 18 conforms to his claim. The chart shows adjustable-rate mortgages peaking at a volume of $250 billion per quarter in early 2004 (data from the Mortgage Bankers Association). It does not show, nor does the Old Pretender mention, that in today’s Dust Bowl sections of the country, the volume of adjustable-rate mortgages climbed after 2004. ARMs rose from 2% of mortgages in California in 2002 to 47% in 2004 to 61% in 2005.

It was Greenspan’s speech on February 23, 2004, that stripped him of trustworthiness when discussing housing. On that date, he sounded like a shill for the National Association of Homebuilders when he claimed “[m]any homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages over the past decade.”

The reason adjustable-rate mortgage growth slowed in 2005 was a matter of affordability. By 2005, over 20% of Californians who bought houses in the previous two years had devoted over one half of their earnings to mortgage payments. Adjustable rates no longer affordable, the interest-only (IO) and negative amortization (NegAm) share of total U.S. mortgage originations rose from 6% in 2003 to 29% in 2005. (Negative amortization mortgages allow the borrower to decide whether or not to make a payment each month. If no payment is made, the principal rises.) Exhibit 18 does not show IOs or NegAms (the line would have looked like a rocket launch), nor, are the terms “interest-only” or “negative amortization” used in the 48-page paper.

Not that Greenspan was unaware of them. Adjustable-rate mortgages in decline, Greenspan pitched these new innovations in a September 2005 speech before the American Bankers Association Annual Convention: “The menu [!!! - Editor’s note], as you know, now features a long list of novel mortgage products, not only interest-only mortgages but also mortgages with forty-year amortization schedules and option ARMs, which allow for a limited amount of negative amortization.” The consequences of Alan Greenspan cling to us like barnyard odor: $134 billion of Greenspan-sanctioned NegAm loans will be reset this year, and 93% of NegAm borrowers have only made the “minimum payment,” meaning, the mortgages will be reset at higher than 100% of the original principal. (Standard & Poor’s Research, November 2009). (via aucontrarian)

Read more here from Frederick Sheehan, author of Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill, 2009).


Strikes paralyse Athens and Lisbon

Transport strikes paralyse parts of Portugal and Greece as public sector workers protest against government austerity measures.


5 recent Economic Papers I liked. (via ssrn.com)


Jayati Ghosh (Prof of Economics) and book author concludes —- there is no Indian miracle. 110 million living well, hundreds of millions in abject poverty who make growth possible.

There are people benefiting of the expansion (Software Industry) which relies on below subsistence wages on the micro level.




Growth is not always good, says Edward Hess of the University of Virginia’s Darden School of Business. (via businessinsider)