Business

Excerpted from Doug Noland's Credit Bubble Bulletin,

While there are numerous and often conflicting opinions about the underlying causes that lead up to the Great Financial Crisis, most agree that the proximal catalyst which finally exposed all the overvalued, illiquid "cockroaches" and confirmed that subprime "is not contained" in the process unleashing the chain of events that culminated with the collapse of Bear, Lehman and AIG, was the failure of one of Bear Stearn's credit-focused hedge funds in the early summer of 2007.

Here is how the conventional wisdom recalls this development:

Every year, roughly $1 trillion flows illegally out of developing and emerging economies due to crime, corruption, and tax evasion. This amount is more than these countries receive in foreign direct investment and foreign aid combined.

Submitted by David Stockman via Contra Corner blog,

The graph below belongs in the “what were they thinking category”.

After Tuesday’s dividend massacre, it’s plain as day that Kinder Morgan (KMI) wasn’t the greatest thing since slice bread after all. That is, a “growth” business paying rich dividends out of rock solid profit margins and flourishing cash flow.

In fact, it was just a momo stock on a borrowing spree.

One week ago, we explained what happened to both the US economy and the stock market the last time the Fed tightened financial conditions back in 1936 when it, like now, erroneously thought the economy was strong enough to sustain it:

"The Fed exit strategy completely failed as the money supply immediately contracted; Fed tightening in H1’37 was followed in H2’37 by a severe recession and a 49% collapse in the Dow Jones."

This is what it looked like courtesy of BofA strategist Michael Hartnett: