Thursday, May 20, 2010

Links 5/20/2010

1. Merkel to The Banks and Hedge Funds: Sprechen Sie Deutsche? Then Droppen Sie Dead - Jesse

Merkel says ban short sales and screw CDSs.

2. Should We Ban Naked CDSs?, by Brad DeLong

Brad says, “I say, narrowly, no--that if we can get proper clearing, transparency, and capital adequacy requirements in place banning naked CDOs would not do any good and would do a little bit of harm. But it is a close call….”  [Could you mince a little bit more, Professor?]

Could the lameness of the American economics mainstream be any more transparent?


3. Shadow inventory sales for years to come – 1.6 million distress sales in 2010, 1.6 million in 2011, and 1.5 million in 2012. By summer of 2011 REO pipeline will rise to 536,000. –

Remember that a huge wave of exotic mortgage rate resets hits in second half 2010 and first half 2011 (reference).  So even though the yield curve is not inverted and no “recession” is in sight over the next 12 months, growth can be expected to be very slow as the deflationary collapse gains momentum, the tipping point to come in about three years, by my best estimation, when there will be an epochal collapse of confidence in Western democratic systems.

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