93% of 2006 AAA-rated subprime mortgage-backed securities now rated junk

It seems that businesses are just running on an outdated model developed when information sharing was a lot harder, so only condensed forms like quarterly reports and press releases were feasible. But now that information sharing is a lot easier, shareholders should be demanding more openness from businesses -- yes, today a lot of that information is considered to be a trade secret, but at the same time shareholders need to stop allowing businesses to get away with what's equivalent to deceit through "creative" accounting (e.g. apportioning profits/debts amongst subsidiaries). That's just a textbook example of exploiting information asymmetry. Shareholders should expect more information about the business' books and transactions. There must be some natural equilibrium between being open about transactions and protecting strategic advantages, but right now we have the functional equivalent to price fixing, er, information fixing -- companies don't release relevant information because "no other company does" and shareholders don't expect real operating information either because that's not part of the status quo.

Wouldn't an investment bank that was so confident in the principles behind its analysis that it was willing to list all its transactions in a continuously-updated XML file, despite the risk of copy-cats, seem like a pretty damn good investment? They wouldn't have to divulge their proprietary methods of analysis, just make their holdings public. This would greatly improve the efficiency of markets as investors could use their own proprietary methods to estimate the risk of an entity's portfolio management strategy when deciding whether to invest in it.

And there's definitely historical precedent for this -- the fabled value investor Benjamin Graham didn't go to great lengths to hide his trades, instead he'd use them as examples in his classes, and yeah, people copied him. And he still made boatloads of money.

The problem with complete openness is that it encourages short-termism. You see this even with quarterly results, companies that have recently gone public (and thus have minimal reputation) manage from quarter to quarter to quarter and are hugely volatile. Imagine working for a manager who only cares about the share price tomorrow.

The risk of your XML file is not copycats, it's front-running.

Original quote: "The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

Here Krugman basically quotes another source. The way I interpret this quote (and article) is not cheerleading for lower interest rates. The message to me is that whole system is unsustainable and that only move that will be able to perpetuate the lie is to replace one bubble with the next.

In this context Krugman's vision has proven prophetic.

The whole notion, nothing personal - I have noticed it more than once, that Krugman somehow argued that replacing one bubble with another is good for economy somehow is ridiculous.