Hump-day topics and reading list

This morning I watched this excellent panel discussion with Nouriel Roubini, Brad Setser and Benn Steil. A can’t miss macro-discussion of the current meltdown from all angles, the discussion covers mortgage securitization, credit default swaps, the current account deficit, the national debt and the future of the dollar. Although a bit wonkish, the discussion remains thoroughly comprehensible.

Is the Treasury preparing to reverse course on the bailout? Following this afternoon’s pronoucement by Henry Paulson that the bailout bill provides him the authority to inject capital directly into banks (in exchange for equity stakes), the NY Times is reporting the logical extension of the Treasury Secretary’s announcements; the Treasury is considering nationalization. That the Secretary has yet to publicly consider any nationalization scheme, despite a consensus from a variety of economists that nationalization is a favorable course of intervention compared with the purchase of illiquid assets, is a bit of a mystery. Mish at global economic trend analysis has an entertaining and informative critique here.

Not to be left out, the Fed continues to ‘innovative’ in its own right, first with this tuesday move, an additional 37.8B loan to AIG and culminating in today’s coordinated rate cut. I won’t comment on how many fingers the Fed now has in the dike, except to say that the law of diminishing returns is clearly in effect. Perhaps another coordinated cut to shock the patient this Friday?

Finally, Naked Capitalism has a very interesting story about a research piece on the likely direction of oil prices in the face of global recession and the role of speculation in the recent run up of oil prices to an all time high of $148 per barrel. The piece contains some stunning facts. According to the report, greater than 25% of OPEC revenue over the last five years have been a result of excessive speculation, and the revenue stream over that same period ($3.5 trillion), is more than fifteen times the amount OPEC brought in over the previous fifteen year period. Not surprisingly, the major investment banks played a key role in this speculation, by both forcasting higher prices and acting as the “largest oil traders as brokers and principals, dealers in financial derivatives, clearing houses for other traders and owners of energy assets”.