Towards the end of last year, I wrote a number of posts about 2 possible scenarios for 2009: recession vs. recovery (although I noted that there could be a recession first, then a recovery). I used at least 4 different indicators to discuss what might happen.

Now that we are through with the first quarter of 2009, let's see what those indicators are showing.

Last week we received the last data for housing through February. New home sales as reported by both the Census Bureau and the NAR ticked up on a seasonally adjusted basis, but have not yet broken trend - a trend that would take them to zero by this time next year!
I've laid out my scenario for the housing market in transition in several posts beginning last December, on Feb. 27 for new home sales, and on March 16 for existing home sales. As of March 17, Calculated Risk adopted the virtually identical analysis.

While there are certainly other bloggers who get many more page views than I do, and there has been much commentary on the February sales data, there is a nugget of interesting information that nobody else has teased out of existing home sales.

"They lay there, clinging to one another and trying to shield the more vulnerable parts of their bodies from the blows of the nightsticks, while the police hauled them apart and dragged them bodily into waiting patrol wagons."
- NY Times, March 31, 1948

Every once in a while an underdog defeats a Titan.
This isn't one of those times.

It isn't the victory of an underdog that inspires us so much as it is the incredible courage it takes to even challenge the overwhelming champion.

Sixty-one years ago the labor movement took the fight literally to capitalism's door-step in one of the most lopsided battles in history. The name of the underdog that championed the cause was Merritt David Keefe.

As most econo-geeks know by now, the Federal Reserve is monetizing treasuries in an effort to lower interest rates, which in theory should encourage people to borrow and spend.

“The Fed’s monetization of government borrowing is in economic terms a hugely powerful liquidity tool,” said Lena Komileva, head of Group of Seven market economics in London at Tullett Prebon Plc, the world’s second-largest interdealer broker. “It also helps to address investor fears, by depressing government yields and private sector borrowing costs and signaling a firm commitment by the Fed to keep monetary liquidity flowing for a long time.”

The problem is that Treasury yields actually increased last week, despite massive purchases by the Fed.

Prof. Paul Krugman has generated some surprsing criticism from the likes of Barry Ritholtz and Bonddad for an article he posted the other day in the New York Times, entitled The Market Mystique:

Here are the crucial paragraphs:

Above all, the key promise of securitization — that it would make the financial system more robust by spreading risk more widely — turned out to be a lie. Banks used securitization to increase their risk, not reduce it, and in the process they made the economy more, not less, vulnerable to financial disruption.
....
I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.