Signs of a bottom?

Awesome... so just 2 more years for a bottom in Manhattan!

Could they not invent a more attractive phase than "seeds of a bottoming?"

My kids are not so old that I have forgotten the sensory experience of changing diapers after the child has consumed a pint of blueberries. Or would that be a "bottoming of seeds?"

Tina
(Brooklyn broker)

I had forgotten. It is rushing back to me.

I had a snort out loud moment when I checked Bloomberg this afternoon and the headline was "stocks rally on ..." Greenspan's pronouncement. Can't he move to the country and tend to some mustard plants? Alan, it's time, you've done enough here for two, no twenty, men.

I think Greenspan might possibly be the man most responsible in the history of the planet for economic loss (i.e. at the "buck stops here" level, he's to blame for the entire mess more than anyone else).

Yeah. It all comes down to one guy and his decisions. Wall St. scions, the President, etc....no. It was greenspan.

how can we be sure that greenspan has his"model" correct on this? didn't he recently tell us some of his other models were wrong?

Greenspam denied there was a housing bubble.... but suddenly he's the expert on calling a bottom?

"Could they not invent a more attractive phase than "seeds of a bottoming?""

Classic Greenspan.

Shortly after he left the fed chairman position, he was pretty vocal about the economy going into a collapse.
Like all economist, they get some right...and they get some wrong. The important thing is, they have access to data that most of us don't.

Time for Alan to take a bath and call it a day. The constant concern over his legacy is exhausting me. Here, I'll finish it. You did it Alan, no one else. You couldn't stand the idea that anyone would miss a day at the mall on your watch so you found a way to sheild us from the consequences of the tech bubble only to form a worthless RE bubble that will cost this country it's ultimate position as a world leader. What is it that our new leader says? "Alan, you big douchebag, you very rucky I cant get my hands around your neck." You screwed the pooch (no offence Andrea Mitchel).

kylewest: sorry, my English isn't so good. I didn't realize that "most" had the same definition as "only".

touche, my friend.

greenspan was the first enabler. the tech bubble fallout was the second. greenspan was the third. 9/11 was the fourth. greenspan was the fifth. the administration's determination to thwart all SEC (and other financial regulatory) enforcement and to divert all FBI attention to Homeland "Security" was the sixth, and then greenspan was the seventh. whether or not there has been or it appears that there will be an eigth is still questionable.

of course, throughout all this you have the banks who used these enablers to write and securitize huge amounts of shit.

but greenspan does seem, to me at least, to score highest. the children will always do what you let them do as alan (hopefully soon to become gardiner and maybe Hank G. could join him) has ruefully admitted.

to be fair you cannot leave clinton, rubin and summers out of this.

You mean Bush...the credit bubble really took off on his watch.

Don't pretend for a second that if Obama were President for the last 8 years that the bubble would not have happened. At most you may have had marginally more regulation on the banks. The worldwide savings glut causing the credit/housing bubble still happens.

interesting point....would regulation of derivatives have saved us? who knows?

i don't. well, maybe we can have a discussion about clinton, but i won't go into it here. what i am saying is that you needed enabling. the enabling that occurred during clinton's time was basically the Fed. grounds were laid for more enabling, but those grounds didn't CREATE the disaster, they made it possible if other conditions existed. was it foolish to end G-S, yes. why he did so i have no idea. support (from the banks, and perhaps moderate republicans) for the democrats in the upcoming election? an honest belief that it would be beneficial? this is the one thing i have the hardest time coming to terms with.

but the bottom line is that the bubble as we know it actually didn't blossom until 2003ish, and the cynic in me thinks it was encouraged to froth on its merry way. with proper regulation and oversight it could have, at the very least, been greatly minimized.

fair point...whatever its roots, you're completely right.

crescent, except for emerging countries, parse out the savings glut. where did the excess money come from? where was it taken from?

> interesting point....would regulation of derivatives have saved us? who knows?

Unlikely there would have been outright limits on it to the extent that it would have stopped AIG.

> crescent, except for emerging countries, parse out the savings glut. where did the excess money come from? where was it taken from?

China and India. Mostly the former entering the global economy with a 40% savings rate. It was big enough combined with higher velocity from a monolithically good global economy to cause spreads to go to historic lows.

I know its fashionable now to criticize ending Glass Steagall, but I have not heard anything convincing as to why this was such a factor. I believe we had too much deregulation but breaking down arbitrary walls between banking and securities was not one of the primary causes of the bubble.

not a primary cause but an early indicator. derivatives and leverage....that's what really killed us. and the associated idea (now ridiculous) that risk had been eliminated through math.

i'm not sure I agree with you entirely. i think that even after historic wealth deflation, there are those sitting on huge amounts of cash. i posted a graph some time ago that showed that GDP would have been mostly negative to zero for a number of years (most of 2004-08) but for HELOC withdrawals. And that's only one form of credit. Those monies went forward and multiplied, so to speak. Without the US GDP falsely generated growth, I hardly think that the emerging markets could have accounted for the bubble. Most of the savings (although not all, the Chinese did enjoy themselves a big equities bubble themselves) remain saved in China, not spent. Which doesn't please us.

You can't leave out Barney Frank, either, or any of the other Senators and/or Congressmen who ran interference for Fanny and Freddie while they had whistle blowers jumping up and down on table tops screaming about the risks they were taking.

But there still has to be someone who is "most". (hey, look at some big corporations: the "largest shareholder" owns 3%).

yep...chuck and chris for sure

malthus, i agree. it will be hard to determine how the elimination of g-s might have worked in a properly regulated environment. in hindsight, it is easy to blame it as a cause. but i think it did create the "too big to fail" model that is epitomized at 2 or 3 of our 4 largest banks.

aboutready, I think too big to fail is more a result of the bubble rather than a cause. In any event, I think the bigger issue was regulatory overlap and confusion. Noboby had authority. I think Ibanks going public, for example, was a much bigger factor in inflating the bubble -- the classic separation of ownership and control writ large and dangerous.

i think we missed each other here, malthus. i agree. i think the too big too fail occurred along the path, but would have been much harder without the demise of g-s. i used to do conflicts analyses at the law firm where i worked, i can't tell you how more difficult they became.

citi's corporate structure was a friggin' nightmare.

> GDP would have been mostly negative to zero for a number of years (most of 2004-08) but for HELOC withdrawals

The question is how did that HELOC withdrawal surge happen? Greenspan helped with low Fed rates, but mortgage rates are Treasury + spread, and the spread going to a new low also because too much savings were sloshing around the globe and Treasuries went to ridiculous lows (relative to inflation) also.

I think China was a lot - it went from 1/4 the size of Canada, our largest trading partner in 2000 to the same size in 2008. Their tying their currency to us more or less required them to buy Treasuries (leading to the above).

crescent, i think we're talking chicken and egg here. i'm also a bit of a doomsday person when it comes to China.

but my point still stands, much of China's excess savings was also fueled by US consumption caused by low interest rates and poor underwriting standards. China owes us, but I'd doubt they view it that way.