Thursday, 18 Nov 2010 | 10:59 AM ET

Robert Shiller: The Austerity Crowd is All Wrong, Government Should be Borrowing More Now

Posted By: John Carney

In a piece that is sure to rile up the critics of government spending and borrowing, Yale professor Robert Shiller argues that governments should be taking advantage of historic lows in real long term interest rates by massively increasing borrowing and spending.


From Shiller :

"[L]ow long-term real interest rates appear to reflect a general failure by governments over the years to use the borrowing opportunities that the inflation-indexed markets present to them. This implies an arbitrage opportunity for governments: borrow massively at these low \(or even negative\) real interest rates, and invest the proceeds in positive-returning projects, such as infrastructure or education.

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  Thursday, 18 Nov 2010 | 10:50 AM ET

The Problem With Muni Bonds

Posted By: John Carney

The situation in the municipal bond market turned seriously ugly. Muni bond ETFs and muni bond funds have taken a beating. And, if Meredith Whitney is to be believed, it's going to get far worse as cash-strapped cities and towns start defaulting on their debt.

Matthias Tunger | Digital Vision | Getty Images

It may be hard to believe, but not that long ago some of the smartest market watchers were actually claiming that muni bonds were relatively risk free—because the bonds have a long history of low default rates.

Felix Salmon, the Reuters blogger who once won an award from the American Statistical Society for "Excellence in Statistical Reporting," joined with investigative reporter Jesse Eisinger in early 2008 to complain that muni bonds were being rated too low by credit ratings agencies. Their idea was that ratings agencies were purposefully over-stating the risk of muni bonds in collusion with monoline bond insurers in order to force cities and towns to pay for bond insurance to get better ratings.

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  Thursday, 18 Nov 2010 | 10:35 AM ET

China's Treadmill to Hell Goes Into Overdrive

Posted By: John Carney

Perhaps the biggest irony in global economics right now is the double-standard applied to economic planning.

Flag of the People's Republic of China
Kick Images | Photodisc | Getty Images
Flag of the People's Republic of China

When the Federal Reserve in the United States tries to ease our economic slump through quantitative easing, we hear cavils about debasing the money supply and distorting the economy. But when the Chinese government, which has inflated its money supply far faster than the US, endorses price controls on consumer goods to tame inflation it gets praised for its action.

Earlier this week, China's State Council announced that it may impose price caps on "important daily necessities ." This is a quite typical reaction of a government that has adopted an inflationary monetary policy but wants to avoid the unavoidable consequence of higher prices.

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  Thursday, 18 Nov 2010 | 8:46 AM ET

Two New Arrests Made in Madoff Case; New Lawsuits Filed by Trustee

Posted By: Ash Bennington

Ireland Seems Likely to Receive Assistance from EU & IMF (Financial Times) "The EU-IMF technical mission is expected to examine the books of Ireland’s main banks to assess what scale of financial assistance might be required. One senior banker said he expected this work to be concluded by the end of the weekend. EU financial officials said the conditions of the bail-out package would be outlined sometime next week."

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  Wednesday, 17 Nov 2010 | 5:27 PM ET

Fed Announces New Stress Tests for Biggest Banks

Posted By: John Carney

The Federal Reserve just issued notice that the 19 banks that were subject to stress tests in May of 2009 will have to perform another round of stress testing.

Officially, the new stress tests are only mandatory for banks that plan to increase their dividend or conduct stock repurchases. But the Fed makes it pretty clear that all 19 banks should submit “comprehensive capital plans” by January 7 of next year.

“SCAP BHCs are encouraged to have their capital plans filed by January 7, 2011, irrespective of whether they intend to undertake any capital distributions,” the Fed writes.

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  Wednesday, 17 Nov 2010 | 5:23 PM ET

The Most Complicated Mortgage Chart You've Ever Seen

Posted By: Ash Bennington

Where Will the Mortgage Rate Spike End? (CNBC) CNBC's Diana Olick takes a look at the causes and effects of rising mortgage rates. As she points out: "With 7 million borrowers either facing or already in foreclosure, big banks facing whippings in Congress and many-fold investigations over foreclosure practices, and home prices taking a turn for the worse, rising mortgage rates will only put another barrier in front of would-be buyers."

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  Wednesday, 17 Nov 2010 | 5:22 PM ET

Did You Hear the One About Quantitative Easing?

Posted By: Julia La Roche

Apparently it is possible to turn the recession, quantitative easing and the euro zone debt crisis into a laughing matter.

Federal Reserve Bank Chairman Ben Bernanke
Getty Images
Federal Reserve Bank Chairman Ben Bernanke

About ten financial professionals from investment banks, private equity firms and hedge funds participated in the first annual comedy competition for Wall Street Tuesday night sponsored by the Gotham Comedy Club in conjunction with Thomson Reuters.

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  Wednesday, 17 Nov 2010 | 5:03 PM ET

If I Were Queen

Posted By: Nicole Lapin

This morning, a day after the world went gaga over a Royal engagment, my producing team for Worldwide Exchange in London thought it would be funny to have a split screen of me and the future queen of England .

Lapin Middleton
Lapin Middleton

Beyond any momentary laughter at a trivial stretch of a psychical resemblence, it got me thinking about the fiscal power this young woman could have to change a storied \(and currently broke\) nation—known for being home to The Beatles and Shakespeare but more recently austerity measures \($128 billion over 4 years\) and deficit woes \(10 percent of 2010-2011 GDP\).

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  Wednesday, 17 Nov 2010 | 4:56 PM ET

Layoff Rumor Spooking Barclays Capital

Posted By: John Carney

Barclays Capital has been quietly laying off employees since this summer. Now, however, the firm is swarming with rumors that big layoffs could be coming in the next few weeks.

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  Wednesday, 17 Nov 2010 | 4:47 PM ET

Group Calls For Citizens Arrest Of John Paulson

Posted By: Ash Bennington

A group of corporate pranksters called The Yes Men is pranking again: This time, one of their targets is hedge fund manager John Paulson. The group is calling for a citizen's arrest of Paulson, based on his large holdings of AngloAshnati Gold stock—as pointed out by Lawrence Delevingne in his article today for Absolute Return + Alpha.

John Alfred Paulson, president of Paulson & Co., Inc, listens during the House Oversight and Government Reform Committee November 13, 2008 in Washington, DC.
Tim Sloan | AFP | Getty Images
John Alfred Paulson, president of Paulson & Co., Inc, listens during the House Oversight and Government Reform Committee November 13, 2008 in Washington, DC.

But, so far, the Yes Men fingerprints are hard to find. What there is this website . The website is a spoof—and impressive factual imitation—of the official Apple website . (Even the URLs look similar.)

The general idea seems to be this: Apple's iPhone contains minerals that are sometimes mined in conflict zones. In the words of the spoof website, "…[T]he minerals that are used in the production of various software products have largely been extracted from mines in Africa, especially the Congo. For the most part this mining has gone unchecked and therefore companies have been unable to tell whether or not the mines they source their materials from have been mines under the control of rebel groups further fueling a conflict that has killed more than 5,000, 000 civilians."

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    Lawrence Delevingne is the ‘Big Money’ enterprise reporter for CNBC.com and NetNet.

  • Stephanie Landsman is one of the producers of "Fast Money."

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