Worthwhile Reading - May 30

The big inflation scare. Paul Krugman, NYT.
read it all, but key excerpt:
First things first. It’s important to realize that there’s no hint of inflationary pressures in the economy right now. Consumer prices are lower now than they were a year ago, and wage increases have stalled in the face of high unemployment. Deflation, not inflation, is the clear and present danger.
So if prices aren’t rising, why the inflation worries? Some claim that the Federal Reserve is printing lots of money, which must be inflationary, while others claim that budget deficits will eventually force the U.S. government to inflate away its debt.
The first story is just wrong. The second could be right, but isn’t.
Now, it’s true that the Fed has taken unprecedented actions lately. More specifically, it has been buying lots of debt both from the government and from the private sector, and paying for these purchases by crediting banks with extra reserves. And in ordinary times, this would be highly inflationary: banks, flush with reserves, would increase loans, which would drive up demand, which would push up prices.
But these aren’t ordinary times. Banks aren’t lending out their extra reserves. They’re just sitting on them — in effect, they’re sending the money right back to the Fed. So the Fed isn’t really printing money after all.

Mortgage markets lock up. Mish.

Understanding inflation-indexed bond markets. John Campbell, Robert Shiller, Luis Viceira; NBER.

A return to a nasty external dynamic. Tim Duy.

Troubled bank loans hit a record high. Floyd Norris, NYT.

First-ever global housing-led recession. Dr. Housing Bubble.
subtitle: One out of Eight American Mortgage Holders either Late or in Foreclosure on their Mortgage: 66 Percent of Mortgages Prime but what does that mean if Prime is now Defaulting at High Rates?

May economic summary in graphs. Calculated Risk.

*** The shadow banking system and Hyman Minsky's economic journey. Paul McCulley, PIMCO.
note: very good overview of Minskian theory as it played out in real-time; but, taking it a little easy on the Fed and now-colleague big Al, aren't you, Paul? no criticism of low rates for too long, or of Al's refusing to heed his own colleague's advice about mortgage lending standards, although a bit of veiled criticism, couched more as regret, that regulators drank the same Kool-Aid as did the investors and the rating agencies

Even Bloomberg openly ridiculing Tim Geithner now. and Bloomberg's vendetta with Geithner/TALF continues. Zero Hedge.
gotta check out the Bloomberg panels!

Taking responsibility. Gregory Knox, via The Big Picture.
note: I never worked in the auto industry, but I did work in a couple unionized environments; what Knox says about electricians acting all high-and-mighty, and about guys working slow during the week so as to get into weekend double-pay overtime hours, and about telling the newbies to slow down so they don't show up the old farts all ring very true for me in my past experiences working both in a pulp-and-paper mill and in a municipal hydro line crew.