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Deregulation efforts from the late 1990s were blocked

There is a lot of anecdotal fodder in support of my last post tagging deregulation as a root cause for the build up of excesses in the financial services industry. Let me give you one example from 1998.

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Was repealing Glass-Steagall the cause for the present Depression?

There is a view making the rounds now that repealing the Glass-Steagall Act of 1933 is the root cause for all of the excesses we have experienced — and by extension for the present economic Depression. Glass-Steagall was enacted in 1933 in the first Great Depression in order to prevent many of the abuses we have witnessed in the past 10 years by separating commercial banking from investment banking and securities firms. The logic here is that conflicts of interest were held in check before the Depression-era Glass-Steagall Act was repealed by the Graham-Leach-Biley Act of 1999. After Graham-Leach-Biley, the financial sector ran amok, leveraged up and generally went into irrational exuberance mode. The financial sector now lies in tatters and another global Depression has begun. Therefore, we need to re-institute Glass-Steagall, lest we suffer another Depression in the future.

I don’t buy this line of argument for a second.

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Where is the outrage?

UPDATE: 12 Jan 2010: I am re-publishing this for the third time because of the situation at AIG.

The question that Tim Iacono asked on his site a year ago in the post “Why aren’t Americans rioting?” is based on an article from Alternet. I am still scratching my head on this one. There is a deep sense of apathy in the United States regarding the massive economic implosion that remains ever more stunning with each passing day.

Last year, I said “Just yesterday, a reader sent me the following list of civil unrest due to the credit crisis and Depression. The United States is nowhere on this list.” The same is true again today.

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Do BRICs (and Germans) Eat PIGS?

Do BRICs (and Germans) Eat PIGS?

When the euro was introduced about ten years ago, the pessimists didn’t give it much chance of reaching its tenth anniversary. The euro, or so the argument went, was doomed from the outset because of the wide spread in economic performance and discipline amongst the member countries. At one end you had, and still have, the highly disciplined, but also […]

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Goldman says fund managers expect deflation

Goldman Sachs London conducted a poll of fund managers today that had interesting results. The poll demonstrated that fund managers are expecting deflation more than inflation and that they expect the U.S. or Asia to escape the downturn first (and certainly not Europe or the UK). I imagine that funds are positioned accordingly.

Here are the poll results:

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Links: 2009-02-03

Twitter, Communication, and My Intermittent Inner Luddite – naked capitalism (Yves Smith doesn’t like the always on culture. Neither do I. I use all the new media but I have similar misgivings about them) Fin24.com – SA house prices still falling FT.com – China to go on European spending spree Dublin ‘worst value’ in Europe for property investment – Independent.ie […]

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California starts issuing IOUs as bankruptcy nears

I just picked up two reports on California’s desperate situation. California, whose legislature and Governor have been hold up in around the clock negotiations, is now issuing IOU’s instead of cash. They have also been downgraded by Moody’s credit rating agency. The first story came from the well-known political site Monsters & Critics. And it demonstrates that California is on the verge of bankruptcy:

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Why are the Swiss now issuing debt in U.S. Dollars?

What are the Swiss doing selling dollars? I don’t have an answer to this question. But, I thought I would posit it because a reader tipped me off to a development via the Blog Alea:

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Links: 2009-02-02

Happy Groundhog Day. By the way, the word on the street is that Germans who came over to Pennsylvania wanted to use hedgehogs in this mythical are-we-going-to-have -six-more-weeks-of-winter ritual. But, because there are no hedgehogs, they used groundhogs. This could be totally made-up rubbish, but that’s my contribution.

By, the way Punxatawney Phil saw his damn shadow. Winter is in full effect, as Londoners will attest.

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U.S. ISM Survey shows some positive signs

U.S. ISM Survey shows some positive signs

The ISM Manufacturing Survey came out. The PMI index was 35.6, up from 32.4 in December. It was bad (50 is the tipping point between recession and growth), but it’s not all bad. There were two industries with growth: textiles and petroleum. Moreover, the declines in new orders, productions, backlogs, etc. were not accelerating the way they were last month. Perhaps a bottom is forming here – especially on pricing.

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Depression in Japan

Depression in Japan

The statistics coming out of Japan have been truly awful of late. In my last post, you saw a small video connecting reduced spending in the U.S. to Japan. However, I need to be more explicit about how things are unraveling in Japan. The industrial production number that was released this past Friday was a wake-up call that Depression has arrived, at least in Japan. Industrial production fell a stunning 9.6%, the most since statistics began in 1953. This is a figure that translates into a GDP of 10% — and this in the world’s second largest economy.

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U.S. consumer spending down 1% in December

U.S. consumer spending contracted more than anticipated in December 2008, declining by 1.0%. However, this number is a look into the past and does little to help predict how spending will trend going forward.

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