Random Links XX

Risk mismanagement:

http://bits.blogs.nytimes.com/2008/09/18/how-wall-streets-quants-lied-to-their-computers/

Bread & Circuses, Housing Edition:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aB_rf1rurtio&refer=home

Derivatives Regulation:

http://www.marginalrevolution.com/marginalrevolution/2008/09/the-regulation.html

Bank Writedowns Explained:

http://www.hussmanfunds.com/wmc/wmc080929.htm

Lehman & AIG Bailouts Explained:

http://freakonomics.blogs.nytimes.com/2008/09/18/diamond-and-kashyap-on-the-recent-financial-upheavals/

Cheap Housing:

http://www.cnn.com/2008/LIVING/wayoflife/09/24/container.homes.ap/index.html

http://www.sfgate.com/cgi-bin/article.cgi?f=/gate/archive/2007/04/27/carollloyd.DTL

You know, these could also make good starter homes for singletons looking to save money.

Uninsured Depositors:

http://www.portfolio.com/views/blogs/market-movers/2008/07/14/the-astonishing-growth-of-bank-deposits

Importance of Financial Intermediation:

http://economistsview.typepad.com/economistsview/2008/10/failure-to-pass.html

http://economistsview.typepad.com/economistsview/2008/10/credit-markets.html

Shorter title:  why a functioning financial system is necessary for the economy.

Financial Crisis & Main Street Impact:

http://www.voxeu.org/index.php?q=node/2603

The Coming (Smaller) Bank Failures:

http://www.bloomberg.com/apps/news?pid=20601103&sid=amZxIbcjZISU&refer=us

http://www.calculatedriskblog.com/2008/07/coming-bank-failures.html

HELOCs:  http://www.calculatedriskblog.com/2008/06/financial-times-helocs-and-regional.html

Alt-A:  http://www.calculatedriskblog.com/2008/07/coming-bank-failures.html

The New Deal, Debated:

http://online.wsj.com/public/article/SB117034177446995000-0pHsIVA4MSp8gD_pAaeW88DHwWI_20070213.html

Chinese Economy:

http://www.economist.com/books/displaystory.cfm?story_id=12333103

Socialism with Chinese characteristics?

Money Market Fund Reform:

http://alephblog.com/2008/10/04/a-proposal-for-money-market-funds-and-more/

Chinese Air Pollution:

http://web.mit.edu/newsoffice/2008/china-energy-1006.html

CDS Clearinghouse:

http://www.ft.com/cms/s/0/7a268486-93cd-11dd-9a63-0000779fd18c.html

http://econlog.econlib.org/archives/2008/10/derivative_exch.html

http://accruedint.blogspot.com/2008/06/credit-default-swaps-all-craft-retreat.html

http://accruedint.blogspot.com/2008/10/cds-could-be-fair-and-simple.html

Deflation Cometh:

http://clausvistesen.squarespace.com/alphasources-blog/2008/10/2/the-global-economy-and-her-financial-markets-is-deflation-th.html

http://www.forbes.com/home/2008/10/29/stagnation-recession-deflation-oped-cx_nr_1030roubini.html

China’s Coming Crisis?:

http://www.feer.com/economics/2008/october/The-Great-Crash-of-China

Goldman Sachs:

http://www.bloomberg.com/apps/news?pid=20601109&sid=aA_lSAQLywYs&refer=home

Foreign Capital Imports & Credit Crisis:

http://blogs.cfr.org/setser/2008/10/21/the-end-of-bretton-woods-2/

http://blogs.cfr.org/setser/2008/12/01/bretton-woods-2-and-the-current-crisis-any-link/

How foreign capital inflows helped fuel the US housing bubble.  Synopsis:

1.  Massive foreign capital inflows reduce long-term interest rates on the Treasuries & Agencies US financial institutions had historically invested in when borrowing short & lending long.

2.  As short-term interest rates rise, while long-term ones stay low, domestic financial institutions no longer find it profitable to invest in Treasuries & Agencies (owing to the depression of such securities’ rates arising from massive foreign purchases thereof).

3.  Instead, US financial institutions invest massively in more risky instruments, e.g., subprime MBS, CDOs, CMOs, etc., thus supplying the capital that fuels the massive lending that fuels the housing boom.

4.  Ergo, foreign capital does indeed fuel the housing bubble, but only indirectly.  It “crowds out” private lending to safe financial assets (i.e., Treasuries & Agencies), with the result that such lending instead finances more risky ventures.