Krugman

• Federal Reserve urged to act on economy (FT)
• Weil: Foreclosure Fiasco’s Trail Leads to Washington (Bloomberg)
• Few Ready For Currency War (JAD)
• ECB's Trichet Rejects Weber's Call to End Bond Purchase Program (Bloomberg)
• Banks Face Mortgage Scrutiny as $49 Billion in Value Vanishes (Bloomberg)
• Homeowners in Limbo - Mortgage Mess Means Delays for Those Facing Foreclosure (WSJ)
• BOE Will Expand Stimulus by 100 Billion Pounds, CEBR Predicts (Bloomberg)
• The Recklessness of Quantitative Easing (Hussman)
• Why a Foreclosure Moratorium Is a Bad Idea (WSJ)
• Fast Yuan Rise Will Be Short-Lived (Reuters)
• Investors Bet Fed Action Will Bring Inflation (FT)
• Hedge Funds Succumbing to Mutual Funds’ Mediocrity (Bloomberg)
• Germany Bows to Call for Political Sway Over Euro Sanctions (Bloomberg)
• Income Inequality: Too Big to Ignore (NYT)
• U.K. Readies Cuts in Defense Outlays (WSJ)

Krugman weighs in on the side of the rule of law in the mortgage crisis

The chart pretty much speaks for itself. Voodoo economics at its best. Speaking of, where's Krugman?

• Foreclosure Freeze May Slow U.S. Homebuyers on Legal Worry (Bloomberg, WSJ)
• Currency Rift With China Exposes Shifting Clout (NYT)
• Obama has the book thrown at him: Moment a missile narrowly misses U.S. President's head (and what's with the naked man?) (Daily Mail)
• No Margin of Safety, No Room for Error (Hussman)
• Greece to be bankrupt longer than expected as IMF to extend loans (Bloomberg) even despite Germany's ongoing protests (Bloomberg)
• Here comes the $100 porterhouse (Bloomberg)
• Currency wars are necessary if all else fails (Telegraph)
• Even $21 Billion Won't Get You a Greek Island Amid Red Tape (Bloomberg)
• Goldman director's wild parties riles co-op board (NYPost)

A couple trillion here, a couple trillion there adds up to real money ...

With today being yet another POMO day, it is only fitting to do the definitive summary of how the Fed's Open Markets Group distorts various asset classes with its liquidity ramps. So all those who doubt thet Fed has an impact on stocks, please look at the chart below. Incidentally, today is the day the Fed will likely overtake Japan as the second largest holder of US Treasurys. Recall that Japanese holdings of US paper were $821 billion as of July. Well, as of September 30, the Fed held $811.7 billion in Treasurys, and in the days following, there were two POMOs: one for $5.2 billion and one for $2.2 billion, bringing its total to $819.1 billion. Which means that if today's POMO operation, which launches imminently, is larger than $2 billion, the Fed will become the second largest holder of US paper in the world. And it won't stop there: China is merely $25 billion away. At a run rate of $10 billion in POMO purchases per week, the Fed will be the largest holder of US Treasuries in the world before the midterm elections.

Unfortunately, this is a perfect summary of our daily financial lives.

Some rather scary predictions out of Paul Farrell today: "It’s inevitable: Wall Street banks control the Federal Reserve system,
it’s their personal piggy bank. They’ve already done so much damage, yet
have more control than ever.Warning: That’s a set-up. They will eventually destroy capitalism,
democracy, and the dollar’s global reserve-currency status. They will
self-destruct before 2035 … maybe as early as 2012 … most likely by
2020. Last week we cheered the Tea Party for starting the countdown to the
Second American Revolution. Our timeline is crucial to understanding the
historic implications of Taleb’s prediction that the Fed is dying, that
it’s only a matter of time before a revolution triggers class warfare
forcing America to dump capitalism, eliminate our corrupt system of
lobbying, come up with a new workable form of government, and create a
new economy without a banking system ruled by Wall Street." And just like in the Hangover, where the guy is funny because he's fat, Farrell is scary cause he is spot on correct.

Another day another falling dollar.

Good thing too or we'd be heading for the toilet this morning.

A round up of views on the currency wars ...

Poor Larry the Looter ...

• Anglo Irish Cost May Exceed 35 Billion Euros, S&P Says (Bloomberg)
• Ireland, Portugal Stir European Fears (WSJ)
• Mundell Says U.S. Action on Yuan Rate Would Be a 'Disaster' (Bloomberg)
• Ambrose Evans-Pritchard: Shut Down the Fed, Part II (Telegraph)
• Is the Fed Mulling 'Qualitative' Easing? (Barrons)
• Have no fear - the next leg up in US GDP and the stock market comes in June 2011: Apple May Unveil Next iPad by June 2011, Goldman Says (Bloomberg), in other news, Apple fanatics may delay purchase by a few weeks to get next, next iPad
• China, Japan Take New Jabs at Each Other (WSJ)
• Medvedev Fires Moscow Mayor, icon Yuri Luzhkov (WSJ)
• Kan Asks to Meet Wen in Belgium to Repair Strained China Ties (Bloomberg) Kyodo denies
• Kudlow: TARP II: Banks and Business Don't Want It (RCM)

Barry Ritholtz is once again in Zero Hedge-marketing mode, which is probably not too surprising: this marks only the second time in under a week in which Mr. Ritholtz has exhibited a fascination with Zero Hedge, previously demonstrating a borderline obsession by actually scouring through tweet mentions of our humble blog. And humble we are - we have paid Barry exactly zero for this ongoing free advertising fest. That said, we are confident Barry will be happy with us reposting his entire post for our readers because he does bring up some valid questions, to which we provide our own brief perspective.

Easy Al Greenspan created the Mother of All Bubbles by keeping interest rates at 1% for a prolonged period of time while encouraging everyone to take out adjustable rate mortgages. His unshakeable faith in the free market policing itself allowed Wall Street criminals, knaves and dirtbags to create fraudulent mortgage products which were then marketed to willing dupes and “retired” internet day traders. Al’s easy money policies and disinterest in enforcing existing banking regulations also birthed the ugly stepsister of the Mother of All Bubbles. Her name is the Consumer Debt Bubble. The chart below is hauntingly similar to the home price chart above. The consumer will be deleveraging for the next ten years. The numbskulls on CNBC and the other mainstream media have been falsely reporting for months that consumers were deleveraging when it was really just debt being written off by banks. Baby Boomers are not prepared for retirement and will be shifting dramatically from consuming to saving. As consumer expenditures decline from 70% of GDP back to 65% of GDP, consumer debt will resemble the home price chart to the downside.

For nearly twenty years, we haven’t flinched from our prediction that the massive debt build-up of the last generation would precipitate out as a deflationary bust. That is what we still expect, although we now believe there is likely to be a hyperinflationary phase at some point as the financial system implodes. But the bottom line is that no matter how things play out, America’s standard of living will fall more steeply than at any other time since the Great Depression.