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Commentary: 'Flat beats panic' in 2009

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With markets going quiet, it is time to look back on 2009. One year ago, the terrible market panic post-Lehman had begun to abate, and all mice in the mortgage house eagerly awaited the Fed's purchases of mortgages. The economy itself was still in a freefall that was not to slow until spring, and tentative recovery in early summer flattened in the fall. However, flat beats panic. By a lot. Most citizens still grope for a handle on the crisis. What had happened that made us so vulnerable? Four years ago, housing began to burst its bubble. Two-and-a-half years ago, in summer 2007, bad mortgage assets undercut the whole, immense pile of bad IOUs from here to Europe, fire sales and credit collapse fed on each other, and financial assets throughout the West began abrupt decline. That was and is "asset deflation" -- not monetary or Consumer Price Index CPI deflation, just assets. The Fed prevented the mistakes of the 1930s: the banking system did not close, no deposit...