Boy oh boy do I ever disagree with you (no offense, though).

First, free markets only exists in the speeches of politicians and the minds of pseudo-economists - so anyone and everyone should argue against that fraud concept.

Second, Stiglitz is consistently wrong about everything! He was a supporter of NAFTA when he was affiliated with the Clinton Administration, and there was that Bretton Woods Committee letter floating around on the Web awhile back - it was the one that killed the "Buy American" clause in the federal stimulus package (which encouraged another round of jobs offshoring, and funneled the stimulus funds to multinationals - which could purchase products overseas and not in America) - and Stiglitz was one of the signers of that letter.

Stiglitz is, like almost every recipient of the Nobel Prize for Economics, a complete clown (possible exception: Mancur Olsen).

Real progressive economists: Prof. James Galbraith, Prof. Ravi Batra, and my personal favorites, Prof. Michael Hudson and F. William Engdahl.

I am trying to find a formal study but here are CR links:

1)GDP, Residential Investment and Savings

2)What is "Residential Investment"?

3)Housing Bottoms:Residential Investment vs. Existing Home Prices

If the multiplier effect is huge than that is where the "drag" will occur. Residential investment won't help with the "recovery" because it is extremely weak.

I think CR has been saying that when residential investment improves then growth will improve which implies that residential investment multiplier is large.

Housing starts is an indication of residential investment.

He still disagrees, but notes CR is highly analytic, he respects these other bloggers, says so in the post, so he wasn't putting down CR, but the MSM.

7 reasaons why housing isn't bottoming.

But I don't think he's quite separated out housing starts from prices.

I also don't get why housing starts would be a drag on GDP as CR claims. It would not add to GDP but to see housing overall be > 3% of GDP means we won't be seeing real estate contributing much anytime soon. I think that was a wording issue, trying to imply housing won't add to the dramatic GDP decline.

But Ritholtz points on unemployment, wages, foreclosures is one of my own. 3.2M properties on the market due to foreclosure, I don't see how a bottom could be called with that level of additional inventory.

earlier New York Times did a graphic with all of the private banking connections to the Obama administration. Doing one just for GS across administrations would be interesting.

Fed is a "bank" and a horrible regulator. This would truly be "fox guarding the hen house". Many of the financial oligarchy serve on the board of directors in the Regional Federal Reserve Banks particularly New York Federal Reserve Bank.

We have three very dangerous situations that may converge which will be a really big black swan event:

1) CIT bankruptcy
2) Commercial real estate tanking
3) Consumer credit quality worsening (because of unemployment)

The worst is not over.

I have to agree with PIMCO (I know, I know) about the "new normal" - 2% growth for next several years.

I kept researching the topic and found a couple applicable articles. I thought I would share them.

Remember how North Korea was counterfeiting dollars?

Two years ago, as he was ratcheting up a campaign to isolate and cripple North Korea's dictatorship financially, President Bush accused the communist regime there of printing phony U.S. currency.
...
However, a 10-month McClatchy investigation on three continents has found that the evidence to support Bush's charges against North Korea is uncertain at best and that the claims of the North Korean defectors cited in news accounts are dubious and perhaps bogus. One key law enforcement agency, the Swiss federal criminal police, has publicly questioned whether North Korea is even capable of producing "supernotes," counterfeit $100 bills that are nearly perfect except for some practically invisible additions.

Many of those alleged counterfeit notes wound up in Banco Delta Asia, the bank in question. Thus was this bank actually laundering money?

The second article is also informative for a entirely different reason.

A tiny bank in Macau that was at the center of stalled talks over North Korea’s nuclear program will be quietly returned to its former owner Saturday, a move that seems to clear him of charges that he helped Pyongyang launder counterfeit U.S. cash.

In a one-paragraph statement, the government in Macau, a former Portuguese colony that's a burgeoning gambling haven, said Banco Delta Asia had shown “remarkable improvement” during two years of government oversight.
...
It said that Stanley Au, a former gold dealer who ceded control of the bank in September 2005, would be put in charge of the bank again Saturday.

The bank issued a statement quoting Au saying that its return “reflected the exoneration of the bank and clearance of its name as well as its staff from taking part in any illicit activities.”
...
The Bush administration continues to list the bank as a “primary money laundering concern,” and the Treasury Department didn't immediately respond Friday to questions about why concerns over the bank’s alleged past activities may have dissipated.

When the Treasury Department first fingered the bank in 2005, Macau authorities froze some $25 million in North Korean-linked money in some 50 accounts.

In a complex, U.S.-brokered deal in June that was intended to get the nuclear talks back on track, the frozen assets reportedly were transferred to the New York Federal Reserve, then to the Russian central bank and finally to a private Russian bank where North Korea has an account.

At this point the story appears to be dead, but extremely suspicious.
I'm not sure what to do with this information, but I get the feeling that it might be useful to hand onto.

Wow, we're getting some plain talk coming out of the woodwork as of late.

The Joy of Sachs :

Over the past generation — ever since the banking deregulation of the Reagan years — the U.S. economy has been “financialized.” The business of moving money around, of slicing, dicing and repackaging financial claims, has soared in importance compared with the actual production of useful stuff. The sector officially labeled “securities, commodity contracts and investments” has grown especially fast, from only 0.3 percent of G.D.P. in the late 1970s to 1.7 percent of G.D.P. in 2007.

Such growth would be fine if financialization really delivered on its promises — if financial firms made money by directing capital to its most productive uses, by developing innovative ways to spread and reduce risk. But can anyone, at this point, make those claims with a straight face? Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers.

Goldman’s role in the financialization of America was similar to that of other players, except for one thing: Goldman didn’t believe its own hype.

i.e. "rigged game" but more importantly, by turning the U.S. economy into a glorified gambling casino, Krugman is saying the U.S. is still vulnerable to another implosion.