Tuesday, January 20, 2009

Obama or Nobama? The markets puke.

From an email I sent this past Sunday:

Larry Summers is directly at odds with two of TTB's predictions and surprises for 2009 (this problem isn't and can't be contained, though it could be shifted to a massive inflation and unemployment will near 10% in 09).

I still think I'll be right, though he has more influence on how unemployment is measured than I do and, of course, they can claim victory on containment at any time.

Dangerous word, "contain".

Last time a prominent administration official claimed containment, it didn't quite work out so well (both in the Spring of 07, otherwise known as the 3rd inning, if we calibrate to Jamie Dimon's call that Spring 2008 "75 or 80%" through the crisis: oops again!). However, if we calibrate to reality, which is that we're probably now in about the 5th inning, then we were really in the 1st inning when Bernanke and Paulson proclaimed the economic equivalent of Mission Accomplished. Ah, the bliss of no accountability!

See here for Sec. Paulson's boo boo:

See here for Helicopter Ben's boo boo:

Here's the language from the pertinent paragraph for Bernanke from March 07. Doh:

Although the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear. The ongoing tightening of lending standards, although an appropriate market response, will reduce somewhat the effective demand for housing, and foreclosed properties will add to the inventories of unsold homes. At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.

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