Then again, if you read Frank Rich, tonight (in Sunday's NY Times, linked and blockquoted at the end of this post), a strong argument may be made that many of those quoted herein are all saying the same thing

Simon Johnson, over at Baseline Scenario, has informed us, in the past day, that the Eurozone economic crisis has just gone off the deep end, bigtime, in: "French Connection: The Eurozone Crisis Worsens Sharply." (Johnson's known for his experience in global economics.)

A lede in Saturday's Wall Street Journal is telling us of a potentially massive new sales slump (buyer demand in some markets may drop--and, in fact, is dropping--as much as another 25%-30%, and that's quantitatively based upon downright paltry sales results in May) in the U.S. housing market, precipitated by the expiration of the homebuyer tax credit at the end of April, in: "Drop in Home Sales in Wake of Tax Credit Tops Forecasts." Then again, we were warned of this, weren't we?

Occasional Democrat and billionaire Warren Buffett is now warning us of a significant upheaval in state and municipal finances--something myself and many others have been posting diaries about for...years--which he's referencing as a "terrible problem," in: "Buffett Expects `Terrible Problem' for Municipal Debt (Update1)." Ultimately, hundreds of thousands of state employees will lose their jobs; come to think of it, as Mark Thoma pointed out over the past 24 hours, they already have, in: "State and Local Governments Continuing to Lose Jobs."

Then there's John Mauldin's compelling letter, this weekend, contemplating the possibility that the U.S. may return to negative growth (i.e.: negative G.D.P.) between now and Election Day, in: "There's A Slow Train Coming."

And, what whirlwind tour of harsh economic realities--which some around here reference as "gloom and doom"--would be complete without at least one link to the Friday job report story, in: The Employment Report."

(Yes, a very, very BIG h/t this week to University of Oregon economist Mark Thoma!)

(h/t to Naked Capitalism Publisher Yves Smith)





"The Time We Have Is Growing Short"

New York Review of Books

Paul Volcker

June 24, 2010 Some five years ago...I lamented that "the growing imbalances, disequilibria, risks" were giving rise to "circumstances as dangerous and intractable" as any I could recall--intractable not just because of the combination of complicated issues, but because there seemed to be "so little willingness or capacity to do much about it..." --SNIP-- ...At the time, I suggested that the most likely result would not be well- thought-out and complementary policy actions. Rather, sooner or later, the necessary changes would be forced by a financial crisis... --SNIP-- ...The sense of mutual trust upon which operating financial markets depend was lost. ...Now we know that trillions of dollars of official funds came to the rescue of the broken system in the form of loans, capital, and guarantees. Flows of finance have been restored, albeit with large areas of continuing public support. The residential mortgage market in the United States--by far the largest sector of our capital market for the time being--remains almost wholly a ward of the government. Now, another range of uncertainty has arisen. Sovereign credits have come into question, most pointedly in the Eurozone but potentially of concern among some of our own states. Any thoughts--any longings--that participants in the financial community might have had that conditions were returning to normal (implicitly promising the return of high compensation) should by now be shattered. We are left with some very large questions: questions of understanding what happened, questions of what to do about it, and ultimately, questions of political possibilities. The way those questions are answered will determine whether, in the end, the financial crisis has, in fact, forced the changes in thinking and in policies needed to restore a well-functioning financial system and better-balanced growing economies... --SNIP-- ...None of these reforms will assure crisis-free financial markets in the years ahead... --SNIP-- As we well know, the critical policy issues we face go way beyond the ... regulation of financial markets. There is growing awareness of historically large and persistent fiscal deficits in a number of well-developed economies ... If we need any further illustration of the potential threats ... we have only to look to ... Europe ... In an uncertain world, our currency and credit are well established. But there are serious questions ... about the sustainability of our commitment to growing entitlement programs. Looking only a little further ahead, there are even larger questions of critical importance for those of less advanced age than I. The need ... for effective action against global warming, for energy independence, and for protecting the environment is not going to go away. Are we really prepared to meet those problems, and the related fiscal implications? If not, today's concerns may soon become tomorrow's existential crises... --SNIP-- ...the time we have is growing short.



This brings us to the financial regulatory reform legislation which is about to be reconciled between the House and the Senate in coming days. In a word, it SUCKS. Then again, don't take my word for it:

"A Dubious Way to Prevent Fiscal Crisis" (New York Times, Joe Nocera, June 5th, 2010)



...In the first place, there is nothing even remotely radical about anything in these bills. Nobody is suggesting setting up a new Securities and Exchange Commission, which reshaped Wall Street regulation when it was formed in 1934. Nobody is talking about breaking up banks the way they did in the 1930s with the passage of the Glass-Steagall Act. Nobody is even talking about a wholesale revamping of a regulatory system that so clearly failed in this crisis. "They are trying to attack the symptoms, instead of the basic issues," said Christopher Whalen, managing director of the Institutional Risk Analyst. There is something oh-so-reasonable about these bills, as if Congress was worried that they might do something that would -- heaven forbid! -- upset the banking industry...



"Financial Re-Regulation and Democracy" (ProjectSyndicate.org, Joseph E. Stiglitz, June 4th, 2010)



It has taken ... more than three years since the beginning of the global recession brought on by the financial sector's misdeeds for the United States and Europe finally to reform financial regulation. Perhaps we should celebrate the regulatory victories in both Europe and the United States ... But the battle - and even the victory - has left a bitter taste... ..Banks that wreaked havoc on the global economy have resisted doing what needs to be done. Worse still, they have received support from the Fed, which ... reflects the interests of the banks that it was supposed to regulate... This is important not just as a matter of history and accountability: much is being left up to regulators. And that leaves open the question: can we trust them? To me, the answer is an unambiguous no, which is why we need to "hard-wire" more of the regulatory framework. The usual approach - delegating responsibility to regulators to work out the details - will not suffice. And that raises another question: whom can we trust? On complex economic matters, trust had been vested in bankers ... and in regulators... But the events of recent years have shown that bankers can make megabucks, even as they undermine the economy and impose massive losses on their own firms. Bankers have also shown themselves to be "ethically challenged" ...



"3,000 Pages of Financial Reform, but Still Not Enough" (New York Times, Gretchen Morgenson, May 28th, 2010)



...Finally, lawmakers who are charged with consolidating the two bills are talking about eliminating language that would bar derivatives facilities from receiving taxpayer bailouts if they get into trouble. That means a federal rescue of an imperiled derivatives trading facility could occur. (Again, think A.I.G.) Surely, we beleaguered taxpayers do not need to backstop any more institutions than we do now. According to Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, Va., only 18 percent of the nation's financial sector was covered by implied federal guarantees in 1999. By the end of 2008, his bank's research shows, the federal safety net covered 59 percent of the financial sector. IN a speech last week, Mr. Lacker said that he feared we were going to perpetuate the cycle of financial crises followed by taxpayer bailouts, in spite of Congressional reform efforts. "Arguably, we will not break the cycle of regulation, bypass, crisis and rescue," Mr. Lacker said, "until we are willing to clarify the limits to government support, and incur the short-term costs of confirming those limits, in the interest of building a stronger and durable foundation for our financial system. Measured against this gauge, my early assessment is that progress thus far has been negligible."



"Shorting Reform" (New York Times, Michael Lewis, May 28th, 2010)



Our earnings are robust, our compensation has returned to its naturally high levels and, as a result, we have very nearly regained our grip on the imaginations of the most ambitious students at the finest universities -- and from that single fact many desirable outcomes follow. Thus, we have almost fully recovered from what we have agreed to call The Great Misfortune... --SNIP-- ...ill-informed senators will meet with ill-paid representatives to reconcile their ill-conceived financial reform bills. This process cannot and should not be stopped. The American people require at least the illusion of change. But it can be rendered harmless to our interests. To this point, we have succeeded in keeping the public focused on the single issue that will have very little effect on how we do business: the quest to prevent taxpayer money from ever again being used to (as they put it) "bail out Wall Street." As we know, we never needed their money in the first place, and by the time we need it again, we'll be long gone. If we can keep the public, and its putative representatives, fixated on the question of whether their bill does, or does not, ensure there will be no more bailouts, we may entirely avoid a discussion of our relationship to the broader society.



Next to last, but definitely not least, I'll leave you with this link from Matt Taibbi, appearing in the Rolling Stone edition dated for this upcoming week: "Wall Street's War." (Rolling Stone, Matt Taibbi, May 26, 2010.) I strongly encourage you to read it.

Finally, I wanted to mention a very powerful column in Sunday's NY Times by Frank Rich. A lot of people in this community aren't going to like it. But, IMHO, it's a strong dose of reality for those that are interested in that type of thing. Here's the money quote from: "Don't Get Mad, Mr. President. Get Even."



Don't Get Mad, Mr. President. Get Even

New York Times

FRANK RICH

June 5, 2010 ...BP's recklessness is just the latest variation on a story we know by heart. The company's heedless disregard of risk and lack of safeguards at Deepwater Horizon are all too reminiscent of the failures at Lehman Brothers, Citigroup and A.I.G., where the richly rewarded top executives often didn't even understand the toxic financial products that would pollute and nearly topple the nation's economy. BP's reliance on bought-off politicians and lax, industry-captured regulators at the M.M.S. mirrors Wall Street's cozy relationship with its indulgent overseers at the S.E.C., Federal Reserve and New York Fed -- not to mention Massey Energy's dependence on somnolent supervision from the Mine Safety and Health Administration. Given Toyota's recent game of Russian roulette with Americans' safety and Anthem Blue Cross's unconscionable insurance-rate increases in California, Obama shouldn't have any problem riveting the country's attention to this sorry saga. He has the field to himself, thanks to a political opposition whose hottest new star, Rand Paul, and most beloved gulf-state governor, Haley Barbour of Mississippi, both leapt to BP's defense right after the rig exploded. The Wall Street Journal editorial page perfectly set forth the conservative establishment's party line on May 26: "There is zero evidence so far that this blowout resulted from lax regulation or shoddy practices." Or as BP's Hayward asked indignantly, "What the hell did we do to deserve this?" If Obama is to have a truly transformative presidency, there could be no better catalyst than oil. Standard Oil jump-started Progressive Era trust-busting. Sinclair Oil's kickback-induced leases of Wyoming's Teapot Dome oilfields in the 1920s led to the first conviction and imprisonment of a presidential cabinet member (Harding's interior secretary) for a crime committed while in the cabinet. The Arab oil embargo of the early 1970s and the Exxon Valdez spill of 1989 sped the conservation movement and search for alternative fuels. The Enron scandal prompted accounting reforms and (short-lived) scrutiny of corporate Ponzi schemes. This all adds up to a Teddy Roosevelt pivot-point for Obama, who shares many of that president's moral and intellectual convictions. But Obama can't embrace his inner T.R. as long as he's too in thrall to the supposed wisdom of the nation's meritocracy, too willing to settle for incremental pragmatism as a goal, and too inhibited by the fine points of Washington policy debates to embrace bold words and bold action. If he is to wield the big stick of reform against BP and the other powerful interests that have ripped us off, he will have to tell the big story with no holds barred....



IMHO, Rich brings Volcker's commentary, at the top of this diary, full circle. The truth is, whether it's about BP, AIG, or Goldman Sachs, the story's the same, and it's only the names that change. On many fronts, the reality is that the time we have (to do something constructive about that) IS growing short. Or (as Frank Rich just pointed it out) not.

As for me, it's a late ending to a very humid Saturday here in the metro New York City area, and I'm going to take another sip of my (now half-empty) double Tanqueray and tonic (with extra lime, of course).

What's in your half-filled glass?