International ("external") events are sooooo reassuring....

Fun to think how wonderfully stabilized things are now that the S&P 500 has surpassed 900!

1. U.S. Replaces Commander in Afghanistan in War Overhaul
   By ELISABETH BUMILLER 3:49 PM ET
   The replacement of Gen. David McKiernan less than a year after he took over marks a major change in military leadership in a worsening war
2. A struggle to survive in Pakistan
3. Running out of ideas
4. Dirty Wars: A Primer
5. Unresolved Kashmir dispute is breeding terrorism in region
6. Pakistan on the brink
7. A Nuclear Power Is About to Fall to Islamists

Think the markets have priced this in??

<>

But, in the meantime, for some real fun, here's this:

1. Girls Don't Like George Soros Like They Do Roubini

Morons at CNBC, giggling

As per usual, of course.

But this time they're mocking Roubini in every which way, which is so beyond shameless as to be shameful. But CNBC cannot admit to shame. Not in the genes. Not on Wall St, nor on CNBC, Wall St's megaphone (thank you GE)

To wit: there's a brand-new supposedly funny but actually pathetic little bit they run mocking Roubini's bearish - and absolutely correct - calls over the past 3 years

If you can't beat them, mock them, in jockish lockeroom fashion. Melissa Lee bending over for the soap.....

Indeed

Shift From Spending to Saving May Be Slump’s Lasting Impact

Quick thoughts on recent events

1. The bondholder revolt at Chrysler is as phony as phony can be, and the 'threats' supposedly issued by the Obama team never happened. What's happening here is vulture capitalists getting pissed off that their large bets on America's failure are not gonna pay out
2. The upcoming GM bankruptcy will be very ugly and very prolonged, and will be a huge drag on the 'recovery'.
3. The global stock market rally is fools gold, short term profits nothwithstanding. All it means (if it's real) is that US debt will be ever less attractive to investors, at precisely the moment when the US must raise like $3Trillion in the bond market.
4. Consumers will not/cannot spend like they have in the past 30 years. Thus, presumptions of robust inventory levels etc are way premature, if not totally inaccurate

Obama and American engagement

An intelligent, educated, pragmatic and engaged American President who gets it? Very hard to imagine, but it is indeed real, and is indeed the most hopeful thing about the past 100 days...

Behold:

1. US, Karzai seek to mend fraying relationship at summit
2. Obama Begins Middle East Focus With Israeli President Meeting ...
3. The Mellow Doctrine

That last thing - "The Mellow Doctrine" by Roger Cohen - really nails it. Excerpt:

Call it the mellow doctrine. Neither idealistic nor classic realpolitik, it involves finding strength through unconventional means: acknowledgment of the limits of American power; frankness about U.S. failings; careful listening; fear reduction; adroit deployment of the wide appeal of brand Barack Hussein Obama; and jujitsu engagement.

Already the mellow doctrine has brought some remarkable shifts, even if more time is needed to see its results.

The Castro brothers in Cuba are squabbling over the meaning of Obama’s overtures. Venezuela’s Hugo Chávez has gone gooey-eyed over the Yanqui president. Turkey relented on a major NATO dispute, persuaded of the importance of Obama’s conciliatory message to Muslims.

From Damascus to Tehran, new debate rages over possible rapprochement with Washington. In Israel, I understand Prime Minister Benjamin Netanyahu is about to drag his Likud party kicking and screaming to acceptance of the idea of a two-state solution because he knows the cost of an early confrontation with Obama.

Not bad for 105 days.

Indeed

1990's Japan? Mark Thoma muses

If the Geithner toxic-asset-removal plan doesn't work as intended -- and there's no guarantee that private-sector participants will step forward in sufficient numbers -- or if the stress tests were not strict enough, missed essential risks, etc., and some of the banks are in much worse shape than we thought, will policymakers be willing to change course? Or will they continue to avoid the more costly but arguably more effective solution of nationalization, cite the stress tests as evidence that banks are relatively healthy and continue to string banks along through a series of capital injections in the hopes that the PPIP will eventually work?

It's been convenient for all involved to say that the legal authority for putting these banks through bankruptcy (nationalization) does not exist, so we have little choice but to stick with the PPIP and hope it eventually works, but Congress could change the law quickly to grant the necessary authority if it really wanted to. But it prefers to avoid the more costly, yet more certain, step and invest in hope instead.

Policymakers have a lot of time and effort and their own reputations wrapped up in the PPIP program, and they do not want to pursue costly solutions given the state of the federal budget. So they will not abandon the current course easily, something that today's testimony made clear.

For that reason, I hope I am wrong about the stress tests and they really do tell us about the health of banks instead of mainly providing political cover, and that the PPIP works better than we could have hoped. Because if it doesn't, we won't save a thing by following in Japan's footsteps and sticking with programs that only prolong the inevitable.

-- Mark Thoma is an economist at the University of Oregon and blogs daily at Economist's View.

Brad DeLong is properly skeptical

About the bank stress tests, 'results' of which have been endlessly leaked and/or trial balooned for a good week now:

Ummm... This Should Not Be Happening
Francesco Guerrera and Sarah O’Connor in the FT:

Bank objections delay stress tests: US regulators will delay the release of stress test results for the country’s 19 biggest banks until next Thursday, after some lenders, including Citigroup and Bank of America, objected to government demands that they needed to raise billions in fresh capital. Citi, one of the biggest victims of the crisis that has already been bailed out three times by the government, is believed to have been told by regulators that it needs more than $5bn in fresh capital, while BofA might need to convert $45bn in government preferred shares into common equity...

The banks should not be negotiating with the government over this.
There comes a point when the right thing to do will be to set up a Maggie Sue--a manufacturing, transportation, services, and other business loan-guarantee authority owned by the government, a financial GSE alongside Fannie, Freddie, and Ginnie--to guarantee "conforming" loans to operating companies, and let the major banks wither.

Remember: the purpose of a financial system is to make new loans so that operating firms can obtain financing on reasonable terms. We don't care what happens to the value of old loans or to current-bank stakeholders as long as companies going forward can get new loans.