Perspectives on the global economic changes

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VKumar
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Re: Perspectives on the global economic changes

Post by VKumar »

Estimated Public Sector NPA are about 25% of all outstanding loans and add another 10% already settled, the thing to watch out is how banks can recover most of these huge assets through collateral, personal guarantees, sale of promoter shares pledged. There will be a domino effect if recoveries are pursued aggressively.
Austin
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Re: Perspectives on the global economic changes

Post by Austin »

panduranghari wrote:And I find Stockman still does not say allocate more to gold. He calls it insurance. But later he says why- he is calling for deflation. Stockman is a DEFLATIONIST.
Deflationist or not , Stockman analysis is more thorough and robust compared to say Peter Schiff or other folks , though I tend to listen to all of them and have respect for them
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Re: Perspectives on the global economic changes

Post by Gyan »

VKumar wrote:Estimated Public Sector NPA are about 25% of all outstanding loans and add another 10% already settled, the thing to watch out is how banks can recover most of these huge assets through collateral, personal guarantees, sale of promoter shares pledged. There will be a domino effect if recoveries are pursued aggressively.
Aggressive Recovery Action destroys industry if the failure is due to recession. In fact,in such times, the industry needs support. Aggressive action is warranted only when there is issues of fraud and malfeasance.

Read these articles to look at problems of aggressive recovery:-

http://www.tribuneindia.com/news/commen ... 94032.html

http://purtimarwahagupta.com/blog/bankr ... ptcy-code/

http://www.businesstoday.in/magazine/co ... 21604.html

These Articles show that recovery rate falls to less than 2% of the defaulted debt when aggressive recovery is pursued
SriKumar
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Re: Perspectives on the global economic changes

Post by SriKumar »

Austin wrote:
panduranghari wrote:And I find Stockman still does not say allocate more to gold. He calls it insurance. But later he says why- he is calling for deflation. Stockman is a DEFLATIONIST.
Deflationist or not , Stockman analysis is more thorough and robust compared to say Peter Schiff or other folks , though I tend to listen to all of them and have respect for them
So Austin mian, after listening to them over what is your perspective? I did watch the Stockman video and I've heard from other sources what Schiff tends to suggest might happen given all the QE that happened. Do you agree with them that there is a major issue coming down the pike?
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Re: Perspectives on the global economic changes

Post by Neshant »

Gyan wrote:
These Articles show that recovery rate falls to less than 2% of the defaulted debt when aggressive recovery is pursued
That is because inflating aka destroying the value of the currency erodes away their debt.

Put another way, their debt is transferred as a loss to savers, wage earners, pensioners and taxpayers.

There is also the time value of money.

When you get a margin call after betting and losing on stocks, you have to pay immediately. There is no wait. Your other stock positions will be immediately sold off to cover the loss if you don't pay up.
Austin
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Re: Perspectives on the global economic changes

Post by Austin »

SriKumar wrote:So Austin mian, after listening to them over what is your perspective? I did watch the Stockman video and I've heard from other sources what Schiff tends to suggest might happen given all the QE that happened. Do you agree with them that there is a major issue coming down the pike?
My Prespective is Time Will Tell.

I can just be better prepared by investing at-least 30-40 % of asset in Physical Gold
Austin
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Re: Perspectives on the global economic changes

Post by Austin »

Some how World Bank does not show M2 data as % of GDP for India

http://data.worldbank.org/indicator/FM.LBL.MQMY.GD.ZS

Added later: Found it by end of 2014 it was ~ 77 % of GDP , Lacks latest 2015 figure though

http://www.tradingeconomics.com/india/m ... -data.html

for China the same data is 193 % of GDP

http://www.tradingeconomics.com/china/m ... -data.html


BTW is larger M2 as % of GDP is good or bad for Economy ?
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Re: Perspectives on the global economic changes

Post by Austin »

The world economy is shaky and ‘funny money’ won’t fix it

http://www.telegraph.co.uk/finance/comm ... ix-it.html
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Re: Perspectives on the global economic changes

Post by chanakyaa »

Hope the following is not a duplicate. The discussion on 'negative interest rate' has moved from fantasy to potential implementation. Please check out the IMF paper, setting the stage for one of the possible forms of implementation.

Breaking Through the Zero Lower Bound

Abstract
There has been much discussion about eliminating the “zero lower bound” by eliminating paper currency. But such a radical and difficult approach as eliminating paper currency is not necessary. Much as during the Great Depression—when countries were able to revive their economies by going off the gold standard—all that is needed to empower monetary policy to cut interest rates as much as needed for economic stimulus now is to change from a paper standard to an electronic money standard, and to be willing to have paper currency go away from par. This paper develops the idea further and shows how such a mechanism can be implemented in a minimalist way by using a time-varying paper currency deposit fee between private banks and the central bank. This allows the central bank to create a crawling-peg exchange rate between paper currency and electronic money; the paper currency interest rate can be either lowered below zero or raised above zero. Such an ability to vary the paper currency interest rate along with other key interest rates, makes it possible to stimulate investment and net exports as much as needed to revive the economy, even when inflation, interest rates, and economic activity are quite low, as they are currently in many countries. The paper also examines different options available to the central bank to return to par when negative interest rates are no longer needed, and the associated implications for the financial sector and debt contracts. Finally, the paper discusses various legal, political, and economic challenges of putting in place such a framework and how policymakers could address them.
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Re: Perspectives on the global economic changes

Post by Satya_anveshi »

EC President Donald Tusk warns British exit has reached 'critical moment' -Feb 16, 2016
Donald TuskVerified account
‏@eucopresident
This is a critical moment. Risk of break-up is real as #UKinEU negotiations very fragile. Handle with care. What is broken cannot be mended
9:21 AM - 15 Feb 2016
Suraj
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Re: Perspectives on the global economic changes

Post by Suraj »

The ECB and Italians are doing exactly what banks did during the US subprime mortgage crisis:
Italy is facing a full-blown banking crisis
Italy, the eurozone's third-largest economy, is in a full-blown banking crisis. Four small banks were rescued late last year. The big ones are teetering. Their stocks have crashed. They're saddled with nonperforming loans (defined as in default or approaching default). We're not sure that the full extent of these NPLs is even known.

The number officially tossed around is 201 billion euros. But even the ECB seems to doubt that number. Its new bank regulator, the Single Supervisory Mechanism, is now seeking additional information about NPLs to get a handle on them.

Other numbers tossed around are over 300 billion euros, or 18% of total loans outstanding.

The International Monetary Fund shed an even harsher light on this fiasco. It reported last year that over 80% of the NPLs were corporate loans. Of all corporate loans, 30% were nonperforming, with large regional differences, ranging from 17% in some of the northern regions to over 50% in some of the southern regions. The report:

High corporate NPLs reflect both weak profitability in a severe recession as well the heavy indebtedness of many Italian firms, especially SMEs, which are among the highest in the Euro Area. This picture is consistent with corporate survey data which shows nearly 30% of corporate debt is owed by firms whose earnings (before interest and taxes) are insufficient to cover their interest payments.

These NPLs piled up over the years because banks have been slow to, or have refused to, write them off or sell them to third parties at market rates. Recognizing the losses would have eaten up the banks' scarce capital. Reality would have been too ugly to behold.

The study found that the average time for writing off bad loans has jumped to over six years by 2014. And this:

In 2013, on average less than 10% of bad debt, despite already being in a state of insolvency, was written off or sold. The bad debt write-off rate varies significantly across the major banks, with banks with the highest NPL ratios featuring the lowest write-off rates. The slow pace of write-offs is an important factor in the rapid buildup of NPLs.

Now, to keep the banks from toppling, the ECB has an ingenious plan: It will buy these toxic assets or accept them as collateral in return for cash.

That's what the Italian Treasury told reporters, according to Reuters. Oh, but the ECB is not going to buy them directly. That would violate the rules; it can only buy assets that sport a relatively high credit rating. And this stuff is toxic.

So these loans will get bundled into structured Asset Backed Securities, or ABS, and sliced into different tranches. The top tranches will be the last ones to absorb losses. A high credit rating will then be stamped on these senior tranches to make them eligible for ECB purchases, though they're still backed by the same toxic loans, most of which won't ever be repaid.
Austin
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Re: Perspectives on the global economic changes

Post by Austin »

David Stockman The Global Economy Has Entered The Crack Up Phase

Austin
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Re: Perspectives on the global economic changes

Post by Austin »

Check Q&A with David Stockman before they remove this evening

http://research.agorafinancial.com/rese ... osion_0216
Neshant
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Re: Perspectives on the global economic changes

Post by Neshant »

^^

why do I feel like I just sat through an infomercial
Austin
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Re: Perspectives on the global economic changes

Post by Austin »

Neshant wrote:^^

why do I feel like I just sat through an infomercial
Sort off but I could not go through the entire video , I would like to see the Q&A session
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Re: Perspectives on the global economic changes

Post by Austin »

German finance minister sees ‘foundation of next crisis’ in expansive policies

Germany’s Minister of Finance Wolfgang Schaeuble warned on Friday that the expansive fiscal and monetary policies implemented by governments to spur growth might have laid the foundation of the next economic crisis. Debt-financed fiscal policies and accommodative monetary policies had been only moderately successful in promoting growth, Reuters quoted Schaeuble as saying. “If you want the real economy to grow there are no shortcuts which avoid reforms,” Schaeuble said, adding that talking about further stimulus just distracts from the real tasks at hand. “We, therefore, do not agree on a G20 fiscal stimulus package as some argue in case outlook risks materialize,” the minister said.
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Re: Perspectives on the global economic changes

Post by panduranghari »

G20 Central bankers meeting FEB 2015

Image

G20 Central Bankers meeting FEB 2016

Image

The historians were able to pinpoint the exact moment Janet snapped.

Speech by Dr Jens Weidmann, President of the Deutsche Bundesbank and Chairman of the Board of Directors of the Bank for International Settlements, at the press conference for the Annual Report 2015, Frankfurt am Main, 24 February 2016.
Ladies and gentlemen, the current monetary policy environment is fuelling the imagination of some academics with regard to how the "leg room" of monetary policy could be increased. Their proposal is to do away with cash entirely.

The interest rate policy currently pursued by the Eurosystem, and also by the other European central banks, shows that the zero lower bound is not a fixed floor for central bank interest rates. That said, there is no disputing the possibility of a "flight to cash" if interest rates venture too far below zero. If cash were to be abolished, central banks would be able to broadly enforce negative interest rates.

But as I see things, that would be wrong and an entirely disproportionate response to the monetary policy challenges close to the zero lower bound. I believe that the right approach is more a question of strengthening the growth forces in the euro area, thereby a return to higher nominal interest rates.

A clear distinction should, however, be made between the discussion motivated by monetary policy about abolishing cash and the current debate about imposing restrictions on cash usage. Both the proposal to impose caps on cash transactions as well as the initiative to do away with the €500 banknote would, it is claimed, help to combat terrorist financing and money laundering.

The aims pursued by these measures are certainly worthy of support. I, however, am doubtful as to whether terrorists or criminals can really be deterred from illegal activities by imposing a cap on cash transactions or doing away with large-denomination banknotes - just take the calls now being raised in some quarters of the USA to abolish the USD100 note because it is still considered to be "too big".

The Bundesbank takes a neutral stance with regard to the various forms of payment. It sees its role in assisting and supporting the general public in using those payment methods which they wish to use. To this end, we have made it our job to ensure that the cash in circulation maintains its high quality and that the supply is sufficient. At the same time, the TARGET system that we operate is pivotal to the handling of cashless payment transactions.

German citizens value cash very highly, and that's quite simply a fact. For them, it offers a whole range of advantages. These merits, alongside many other interesting findings, are described in detail in an article in the Annual Report. On balance, cash is still the most popular means of payment in Germany, with just under 80% of all transactions at the point of sale being settled using cash.

A study conducted by the Bundesbank shows that Germany, together with Austria, are at the vanguard by international standards when it comes to paying by cash.5 Incidentally, we will also be publishing a research newsletter on this study today. These research newsletters are a new series of publications by the Bundesbank, which, in future, will present important research findings, at regular intervals, to a specialist audience in a brief and concise manner.

Although the significance of cash payments has decreased in recent years, payment behaviour itself is only changing gradually. Payments by card or by smartphone, as well as online purchases appeal to the young, technology-savvy generation in particular. These means of payments are on the increase, but they are by no means undergoing rapid growth.

One factor that probably plays a role here is that, in contrast to what some believe, cash is not a particularly expensive means of payment. In terms of costs per transaction, cash payments are much cheaper than both debit card and credit card payments. As for costs in relation to the transaction amount, which generally tends to be higher when making payments by card, cash is admittedly more expensive than debit card payments, but is still cheaper than making payments by credit card.

As you can see, there are a number of strong arguments that speak in favour of cash. It is hardly surprising, then, that surveys show that more than three-quarters of the population - or even more - state that they could not do without cash. Bearing that in mind, I would consider it disastrous if the general public were to be given the impression that the mooted abolition of the €500 note and imposition of caps on cash usage were the first steps towards abolishing cash entirely.

All eyes may be on cash right now, but it would be unwise to ignore the far-reaching changes that may well transform the area of cashless payment systems at some point in the future.

Blockchain technology is seen as the key innovation in this regard, allowing as it does values to be transferred cheaply and comparatively anonymously, while bypassing centralised authorities such as banks, card companies and clearing houses.

Similarly, I can also well imagine that it will soon be possible to use digital currencies, such as bitcoins, which are based on this technology, to trade in financial products, such as shares, bonds or derivatives in decentralised systems. This would, of course, present a challenge for the existing payment and settlement systems.

It therefore stands to reason that not only financial service providers, but also central banks are investigating whether this very interesting technology is actually suitable for mass use. This is why the Bundesbank is, inter alia, also a member of a working group on this topic at the Bank for International Settlements in Basel.
No cash will be banned as proposed by Larry Summers. Even if US UK do it, most countries wont follow suit.
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Re: Perspectives on the global economic changes

Post by Gyan »

Can somebody point towards a link/data which will give us data on What is Total "Dollar, Euro" Reserves held by the Central Banks of the world? That will give us an idea of whether dollar/Euro reserves are increasing or deceasing in last two years with massive fall of commodity prices. If the "Total dollar/Euro" Reserves are falling, then it may indicate a Asset price fall after Commodity price fall.
Gyan
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Re: Perspectives on the global economic changes

Post by Gyan »

Answering my own question:- It seems that fall in World Central Reserves is still minor

http://www.yardeni.com/pub/peacockfedecbassets.pdf

http://www.bloomberg.com/news/articles/ ... -shrinking
The decade-long surge in foreign-currency reserves held by the world’s central banks is coming to an end.

Global reserves declined to $11.6 trillion in March from a record $12.03 trillion in August 2014, halting a five-fold increase that began in 2004, according to data compiled by Bloomberg. While the drop may be overstated because the strengthening dollar reduced the value of other reserve currencies such as the euro, it still underlines a shift after central banks -- with most of them located in developing nations like China and Russia -- added an average $824 billion to reserves each year over the past decade.
Beyond being emblematic of the dollar’s return to its role as the world’s undisputed dominant currency, the drop in reserves has several potential implications for global markets. It could make it harder for emerging-market countries to boost their money supply and shore up faltering economic growth; it could add to declines in the euro; and it could damp demand for U.S. Treasury bonds.

“It’s a big challenge for emerging markets,” Stephen Jen, a former International Monetary Fund economist who’s co-founder of SLJ Macro Partners LLP in London, said by phone. They “now need more stimulus. The seed has been sowed for future volatility,” he said.

Stripping out the effect from foreign-exchange fluctuations, Credit Suisse Group AG estimates that developing countries, which hold about two-thirds of global reserves, spent a net $54 billion of this stash in the fourth quarter, the most since the global financial crisis in 2008.

China, the world’s largest reserve holder, together with commodity producers contributed to most of the declines, as central banks sold dollars to offset capital outflows and shore up their currencies. A Bloomberg gauge of emerging-market currencies has lost 15 percent against the dollar over the past year.

China cut its stockpile to $3.8 trillion in December from a peak of $4 trillion in June, central bank data show. Russia’s supply tumbled 25 percent over the past year to $361 billion in March, while Saudi Arabia, the third-largest holder after China and Japan, has burned through $10 billion in reserves since August to $721 billion.

Euro’s Decline

The trend is likely to continue as oil prices stay low and growth in emerging markets remains weak, reducing the dollar inflows that central banks used to build reserves, according to Deutsche Bank AG.

Such a development is detrimental to the euro, which had benefited from purchases in recent years by central banks seeking to diversify their reserves, according to George Saravelos, co-head of foreign-exchange research at Deutsche Bank.
The euro’s share of global reserves dropped to 22 percent in 2014, the lowest since 2002, while the dollar’s rose to a five-year high of 63 percent, the International Monetary Fund reported March 31.

“The Middle East and China stand out as two regions that are likely to face ongoing pressures to run down reserves over the next few years,” Saravelos wrote in a note. The central banks there “need to sell euros,” he said.

The euro has declined against 29 of 31 major currencies this year as the European Central Bank stepped up monetary stimulus to avert deflation. The currency tumbled to a 12-year low of $1.0458 on March 16, before rebounding to $1.0922 in New York Monday.
Growth Slows

Central banks in emerging nations started to build up reserves in the wake of the Asian financial crisis in the late 1990s to safeguard their markets for periods when access to foreign capital dries up. They also bought dollars to limit appreciation in their own exchange rates, quadrupling reserves from 2003 and boosting their holdings of U.S. Treasuries to $4.1 trillion from $934 billion, data compiled by Bloomberg show.
Note:- Just look at the data, The article in itself is pimping for more stimulus.
Neshant
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Re: Perspectives on the global economic changes

Post by Neshant »

The Road to Roota !

Everyone is trying to guess how a collapse will play out and the theories get crazier and crazier.



Austin
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Re: Perspectives on the global economic changes

Post by Austin »

Russian Economy – Its Disease Is Liberal, Not Dutch

http://russia-insider.com/en/business/r ... al/ri13153
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Re: Perspectives on the global economic changes

Post by Neshant »

I see bubbles bursting everywhere: Top academic



Vikram Mansharamani, a lecturer at Yale University, speaking on CNBC.
chanakyaa
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Re: Perspectives on the global economic changes

Post by chanakyaa »

He makes some interesting points, but nothing new. Debt and leverage based bubbles have been used historically to take the possession of foreign assets. Whether it is Australia, South Africa, or Brazil, dollar debt burden in an inflationary asset price environment is death trap. I was shocked to hear that some Russians had borrowed in dollars for mortgage loans. Now Ruble at all times lows against dollar, these people are asking for a handout from the government because they are struggling to repay in dollars. Bunch of idiots..actually it is the lack of financial knowledge that is the problem.

On a separate note, from Vikram Mansharamani's blog

China’s Trillion Dollar Silk Road
Two weeks ago, a 32-container train from Wuyi, China arrived in Tehran, Iran. You might think the arrival of cargo by rail would be no big deal, but in this case you’d be wrong. This was the first journey of its kind between the two cities, and it shortened the typical (ship-based) travel time separating them by 30 days. This new connection is among the first visible signs of a massive trade network that China is currently constructing across Eurasia. The Silk Route is being rebuilt.....
Modi’s Manufacturing Mantra May Mean Malaise for Millions
Indian Prime Minister Narendra Modi is spending this week promoting his “Make In India” campaign, an ambitious program designed to turn the subcontinent into a “global manufacturing hub.” Modi’s vision is grand: he hopes to create 100 million manufacturing jobs in the next 6 years and spur the development of a middle class that will power the Indian economy for years to come

....

It’s hard to imagine that anyone – in India or elsewhere – will succeed at putting the productivity genie back in the bottle. But focusing on what worked in China is a recipe for disappointment. It’s time to rethink the Make In India campaign, and it’s best to do so soon. Without a new strategy, Modi’s manufacturing mantra may mean malaise for millions. And worse, it may mean India never emerges into a developed nation.
Austin
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Re: Perspectives on the global economic changes

Post by Austin »

Neshant wrote:I see bubbles bursting everywhere: Top academic



Vikram Mansharamani, a lecturer at Yale University, speaking on CNBC.
I saw a ticker in that video "mansharmamani huge flaws in modi economic plan" and googles and came across this article on why he feels so

Modi’s mega “Make in India” will bring in lots of money but not enough jobs

http://qz.com/620145/modis-mega-make-in ... ough-jobs/
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Re: Perspectives on the global economic changes

Post by Neshant »

Who ends up eating the loss when the real estate pyramid scheme in all these countries blow up?
Is the bill just sent to the taxpayer?
If so, why wouldn't everyone and his dog participate in flipping houses (buying and selling for profit) if the taxpayer ends up being the one holding the bag?
I note there are real estate bubbles brewing all over the western world.

Neshant
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Re: Perspectives on the global economic changes

Post by Neshant »

Totally idiotic. Only confirms that the so called recovery is bogus.
Since 2008 the only thing going on is a running up of debt and a subsequent transfer of that money to banking crooks.
Other than that, its zero real growth and this is proof of it.
Vlog by Paul Sandhu :

Canada looking at going to negative interest rates

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Re: Perspectives on the global economic changes

Post by Austin »

Behind the Facade: America, The Bankrupt Hegemon

Fantasy and fairy tales can go only so far when it comes to the true condition of anything or anyone. Sooner or later the truth must out. This is very much the case when looking at the true condition of the nation the Chinese call, The Hegemon, the not-anymore-so-United States of America. The official Obama Administration economic statistics have declared to the world for more than six years that the world’s largest paper economy was in a marvelous recovery and that unemployment was a mere 5%. Now, with the most severe collapse of oil prices in 13 years, the last remaining job-creating sector of the economy, the oil and gas industry, is rapidly becoming the domino that threatens to topple a mountain of dicey credits and threaten many banks. Only this time, unlike in 2009, the Federal Reserve is in a real pickle, and the Federal debt has doubled to $18 trillion since the beginning of the financial crisis in 2007.
Leading US economists, including Noble Economics Prize winning Paul Krugman, claim that debt in an economy, especially the world’s most debt-bloated economy, the United States “doesn’t matter.” Just keep the borrowing cycle growing and all will be fine. Krugman argued in his New York Times column, “…this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; US debt is, to a large extent, money we owe to ourselves.”

Debt doesn’t matter?

Come again, my ever-so-learned professor? There is a sly rhetorical trick in your language and dishonesty in your argument: “We owe to ourselves?” Does that mean I and my creditor bank are just part of the same happy family? Is “ourselves” the Peoples’ Bank of China to whom “we” American taxpayers, through our government in Washington, owe trillions in debt? Or the Japanese Central Bank?

Are you telling me that it doesn’t matter if I run up so much credit card debt charging 25% annual interest to pay my monthly living costs as millions of Americans are forced to do? It doesn’t matter if I borrow $100,000 from my bank to finance a college education so I can get a job that doesn’t anymore exist in the USA because so many companies have out-sourced to Asia? It doesn’t matter if I incur mortgage debt on a home I bought in 2006 at the peak of the sub-prime real estate bubble? It doesn’t matter that I got the loan by lying to my local bank about my ability to pay the huge mortgage because he didn’t care so long as he could turn around and sell that worthless mortgage risk to Goldman Sachs or another Wall Street bank that “bundled” my high-risk home mortgage with hundreds of other mortgages around the country, creating what the bankers call collateralized mortgage obligations?

Debt implosion of 2007

In the summer of 2007, the more that $4 trillion debt pyramid in the US real estate mortgage-backed securities sector began to implode. That implosion triggered the largest collapse of credit in world history, a collapse which has left the economies of the USA and of the European Union in their worst condition since the creation of the dollar system at Bretton Woods, New Hampshire in 1944.

On July 29, 2007 the head of the German banking regulator, Bafin, and the German Minister of Finance, Peer Steinbrück, held a press conference to announce that the German State, together with leading private and public banks, was organizing an emergency rescue of Germany’s IKB Deutsche Industriebank. IKB was a bank originally set up in 1924 to facilitate payment of German industrial war reparations under the Dawes Plan.

That 2007 crisis marked the second time in its history that the IKB played an historic role in the context of unsound American banking practices. IKB had been convinced by Deutsche Bank head, Josef Ackermann, to buy new, exotic high-yielding securities issued by New York banks, securities known as sub-prime mortgage-backed securities. Sub-prime as in high-risk. Ackermann openly admitted he knew about the IKB problem because his own Deutsche Bank had unloaded the high-risk US bonds onto a naive, incompetent management at IKB. That event, the collapse of IKB, triggered a global financial Tsunami that weighs the world economy to the present.

What is debt or money?

Ultimately money, especially in a world where money is a pure paper commodity—fiat money so-called as it is not tied to gold or silver or other tangible values like land—is a question of “confidence.” The confidence in this case is ultimately in the “full faith and credit of the Government of the United States of America.” And that confidence has been backed always, ultimately, by military power, political power, power to buy or control the lawmakers and administrators—Presidents, Congressmen, judges.


Today, in the first months of 2016, the US is almost nine years into that debt implosion process with no end in sight. The Federal Reserve, the privately owned watchdog for the large Wall Street banks, timidly raised key US bank interest rates from zero by a mere 0.25% on December 15, 2015. They did so after months of cat-and-mouse games with financial markets, hinting that things were returning to “normal.” A month later, that same Fed indicated it had miscalculated. Today the US financial economy is going into a new downward spiral led by debt.

US Oil Junk Bond Crisis

The implosion of the US debt pyramid today is led by energy companies facing impossible conditions in a market where oil and gas prices are lowest in 13 years with no recovery in sight. On February 25, Bloomberg reported that the US oil bust could claim two of its biggest victims yet. Energy XXI Ltd. and SandRidge Energy Inc., oil and gas drillers with a combined $7.6 billion of debt, could not pay interest on their bond debts.

If we listen to Paul Krugman, that doesn’t matter because “we owe the debts to ourselves.” They have until the middle of next month to either pay the interest, work out a deal with their creditors or face a default that could tip them into bankruptcy.

The US shale oil companies over the past seven years became the new “saviors” of Wall Street banks desperate to find new areas of profit in a collapsing economy. They literally threw money at the booming US shale oil industry. Much of the debt the shale companies took on was what is known in Wall Street as “junk bonds.” The term is a reference to the fact that if the borrower company, say SandRidge Energy, goes bankrupt, the holders of their junk bonds are holding just that–junk.

The nearly four million barrels a day rise in USA oil production since 2009 came overwhelmingly from unconventional, high-cost shale oil ‘fracking.’ It has been held up until now by Wall Street bankers willing to keep adding new credit to the distressed companies, hoping against hope for a rise in oil prices. Since June, 2014, however, US oil prices have gone from $103 a barrel to around $30 today. Most shale companies need at least $60 a barrel to break even. Now the day of reckoning is fast approaching as the Wall Street banks, led by JP Morgan Chase, are deciding to cut credits, to stop throwing good money after bad as the saying goes.

Since the deal between the foolish US Secretary of State John Kerry and Saudi King Abdullah in September, 2014 to flood the world with cheap Saudi oil to create a crisis in the Russian ruble amid US sanctions, the worst hit in the unfolding crisis has been the US oil and gas industry, mainly unconventional, costly shale oil and gas. They have sold off hundreds of oil fields, eliminated an estimated two hundred fifty thousand jobs and slashed billions of dollars from capital spending and stock dividends.

As more shale energy companies go bankrupt in coming weeks, there will be no new lending for unconventional oil for decades. Oil Price.com, a trade newsletter notes, “JP Morgan was first to finally get defensive and is ready to start serious oil credit redeterminations, without waiting for the traditional examination period in April. The banks are finally feeling the risks of unrestricted lending to the shale…The US shale industry is changing forever and there won’t be this kind of “free money.”

The collapse of the US energy junk bond market is spreading like a cancerous metastasis to the entire US junk bond market that includes borrowers like Toys R’ Us to high-tech IT borrowers. US companies have a total of $1.32 trillion in junk debt maturing between now and 2020, according to Standard & Poor’s. That includes $92.3 billion coming due this year, followed by $160.9 billion in 2017 and $272.5 billion in 2018, according to a report in the Wall Street Journal of February 21.

Consumers of debt…


A further indicator of the true state of the US debt-bloated economy is the fact that the world’s largest retail group, WalMart, just announced it will close 154 of its giant stores that sell everything from food to garden equipment to toys. Over the past two years hundreds of America’s giant shopping malls have been abandoned as store chains like J.C. Penney, Kmart, Radio Shack and Sears close thousands of outlets.

Indebted American consumers are the main reason. A recent study showed that in 2015 the average American household had $129,579 in debt — $15,355 of it on high-interest credit cards. Just because the Federal Reserve has a zero interest rate policy doesn’t mean Chase or other Visa card issuers charge zero. They still charge from 13% to 25% depending on the credit history.

Total consumer debt today is a staggering $11.91 trillion, almost 70% of GDP. It is even worse than the bare statistics. The American household is forced into debt increasingly because the rise in the cost of living has exceeded income growth over the past 12 years. Median household income has grown 26% since 2003, but household expenses have outpaced it significantly — with medical costs growing by 51% and food and beverage prices increasing by 37% in that same span. The average US household pays a total of $6,658 in interest cost on home, cars, credit card debt per year, 9% of the average household income of $75,591. That is being spent on interest alone, not on new shoes for the kids or dining out with the family. This is the real reason the Federal Reserve is in a gigantic pickle regarding raising interest rates to “normal”—it would blow up the near $12 trillion consumer pyramid of debt along with corporate debt.

‘Students of debt’

With jobs in the oil and gas sector vanishing, companies going bankrupt, households choking in debt, real unemployment not the mythical 5% declared by the US Labor Department but more like 23% according to John Williams’ Shadow Government Statistics, another source of debt is assuming alarming dimension. That is student debt, a new factor that 25 years ago was almost negligible. Today students must borrow to finance college.

Today total outstanding student loan debt in the US is $1.2 trillion. Only home mortgage debt is higher. About 40 million Americans hold student loans and about 70% of bachelor’s degree recipients graduate with debt. Those who graduated in 2015 left college holding an average of $35,051 before earning their first paycheck to pay that debt off. One in four student loan borrowers are either in delinquency or default

Are we still to believe that such debt doesn’t matter because “we owe it to ourselves” Professor Krugman. With such professors claiming to teach economics, it is no wonder that the American Hegemon is going bankrupt. Debt is a strategic factor in the existence of any national economy, and has historically been the factor that ruins nations, the United States included.

F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook”.
habal
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Re: Perspectives on the global economic changes

Post by habal »

news not covered by mainstream media

http://www.activistpost.com/2016/03/rot ... tment.html

Rothschild Bank Now Under Criminal Investigation After Baron David De Rothschild Indictment

Last year, Baron David de Rothschild was indicted by the French government after he was accused of fraud in a scheme that allegedly embezzled large sums of money from British pensioners.

It has taken many years to bring this case against Rothschild and his company the Rothschild Financial Services Group, which trapped hundreds of pensioners in a bogus loan scheme between the years of 2005 and 2008.

One by one the pensioners lost their money and pressed charges against the notorious banker, beginning a case that would take many years to get even an indictment.
Neshant
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Re: Perspectives on the global economic changes

Post by Neshant »

I wonder if Foreign govts or central banks are facilitating such theft.

If so trust in digital representation of currency and stuff like LIBOR, SWIFT ..etc has sunk to a new low.

----

"Where's Our $100 Million?" - Furious Bangladesh Holds Fed Responsible For Historic Theft :shock:

http://www.zerohedge.com/news/2016-03-0 ... oric-theft
Austin
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Re: Perspectives on the global economic changes

Post by Austin »

When countries buy these US Bonds , do they get that in Electronic Format or Paper , Do these government keep these treasuries with themself like in a Safe Deposit or just keep that with Fed ?

Can Fed Refuse to not pay for these bonds say of US Governement tells them to do that ?
TSJones
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Post by TSJones »

they are stored electronically and have a registered number called "cusip". the secondary market for them is world wide practically 24 x 7. I've never heard of a marketable US treasury not paying. that would be an interesting concept. :D but seriously, there is reason why the market is so huge for them. that is say their world wide marketability.

Safekeeping and Transfer of Securities
Recordkeeping for Treasury securities is done in one
of two ways. In one system, ownership and legal
interests are recorded electronically, in a series of
book-entry records on the books of the Federal
Reserve Banks and depository institutions: The Federal
Reserve manages the National Book-Entry System
(NBES), which maintains records for depository
institutions; depository institutions, in turn, maintain
records for their customers. Alternatively, an investor
can maintain a book-entry securities account directly
with the Treasury through the Treasury Direct system.
The securities held in Treasury Direct are purchased
when originally issued and are typically held
to maturity.
Through the NBES, depository institutions can
electronically transfer Treasury securities among
themselves to settle their trades and the trades of their
customers. Most of these trades are settled on a
delivery-versus-payment basis whereby the securities
are electronically deposited in the receiving institution’s
account and the corresponding payment is
simultaneously electronically deposited in the sending
institution’s account at the Federal Reserve. The
depository institutions, in turn, adjust their customers’
records to reflect the transfer.
..............................................................................................
To facilitate the settlement process, the Federal
Reserve grants finality when securities transfers are
completed over the NBES—that is, the payments
associated with these transactions are final and irrevocable.

..............................................................................................
In addition, the Federal Reserve, for a fee,
provides intraday credit, commonly called daylight
overdrafts, to financially healthy depository institutions.
To limit the credit risk arising from such credit
extensions, the Federal Reserve imposes limits, based
on several factors, on depository institutions’ daylight
overdraft capacity. The Federal Reserve requires
that depository institutions cover their daylight overdrafts
by the end of the day. If a depository institution
ends the day with a negative account balance, the
institution incurs an overnight overdraft, which carries
a much higher fee than a daylight overdraft.
Because only depository institutions have access to
the NBES, other buyers and sellers of government
securities must use a depository institution as an
intermediary.17 Settlement activity is highly concentrated
in a few depository institutions known as clearing
banks. Clearing banks tend to be very large
organizations because sizable investments in computer
hardware and software are necessary to handle
the large flow of transactions. These banks also
extend intraday credit to their customers, allowing
them to overdraw their money accounts to pay for
securities. To finance their intraday lending to customers,
clearing banks rely on daylight overdraft
credit from the Federal Reserve. The charges for
daylight credit are then typically passed on by the
clearing banks to their customers.
THE DEMAND FOR TREASURY SECURITIES
The supply of Treasury securities, as noted earlier, is wagga, wagga, wagga....................................
TSJones
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Post by TSJones »

but what if a "member institution" does business with say.....Iran during the US government embargo?

it's simple, the member institution gets smashed by the US banking system (pay billions in fines). if its bad enough they could get kicked out........I don't know if this has ever happened or not.......
TSJones
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Post by TSJones »

...now it all comes out about the Bangledesh hack,,,,,,,

http://www.nbcnews.com/tech/tech-news/h ... st-n536526

Hacker's Typo Tipped Off Authorities on Billion-Dollar Heist
by REUTERS

A spelling mistake in an online bank transfer instruction helped prevent a nearly $1 billion heist last month involving the Bangladesh central bank and the New York Federal Reserve, banking officials said.

Unknown hackers still managed to get away with about $80 million, one of the largest known bank thefts in history.

The hackers breached Bangladesh Bank's systems and stole its credentials for payment transfers, two senior officials at the bank said. They then bombarded the Federal Reserve Bank of New York with nearly three dozen requests to move money from the Bangladesh Bank's account there to entities in the Philippines and Sri Lanka, the officials said.

Four requests to transfer a total of about $81 million to the Philippines went through, but a fifth, for $20 million, to a Sri Lankan non-profit organization was held up because the hackers misspelled the name of the NGO, Shalika Foundation.

Hackers misspelled "foundation" in the NGO's name as "fandation", prompting a routing bank, Deutsche Bank, to seek clarification from the Bangladesh central bank, which stopped the transaction, one of the officials said.

There is no NGO under the name of Shalika Foundation in the list of registered Sri Lankan non-profits. Reuters could not immediately find contact information for the organization.

Deutsche Bank declined to comment.

At the same time, the unusually large number of payment instructions and the transfer requests to private entities - as opposed to other banks - raised suspicions at the Fed, which also alerted the Bangladeshis, the officials said.

The details of how the hacking came to light and was stopped before it did more damage have not been previously reported. Bangladesh Bank has billions of dollars in a current account with the Fed, which it uses for international settlements.

The transactions that were stopped totaled $850-$870 million, one of the officials said.

Last year, Russian computer security company Kaspersky Lab said a multinational gang of cyber criminals had stolen as much as $1 billion from as many as 100 financial institutions around the world in about two years.

Iraqi dictator Saddam Hussein's son Qusay took $1 billion from Iraq's central bank on the orders of his father on the day before coalition forces began bombing the country in 2003, American and Iraqi officials have said. In 2007, guards at the Dar Es Salaam bank in Baghdad made off with $282 million.

Bangladesh Bank has said it has recovered some of the money that was stolen, and is working with anti-money laundering authorities in the Philippines to try to recover the rest.

A bank spokesman could not be reached for comment late on Thursday.

The recovered funds refer to the Sri Lanka transfer, which was stopped, one of the officials said.

Initially, the Sri Lankan transaction reached Pan Asia Banking Corp , which went back to Deutsche Bank for more verification because of the unusually large size of the payment, a Pan Asia official said. "The transaction was too large for a country like us," the official said. "Then (Deutsche) came back and said it was a suspect transaction." A Pan Asia spokesman could not immediately be reached for comment.

The dizzying, global reach of the heist underscores the growing threat of cyber crime and how hackers can find weak links in even the most secure computer networks.

More than a month after the attack, Bangladeshi officials are scrambling to trace the money, shore up security and identify weaknesses in their systems. They said there is little hope of ever catching the hackers, and it could take months before the money is recovered, if at all.

FireEye Inc's Mandiant forensics division is helping investigate the heist, people familiar with the matter told Reuters on Thursday.

The sources said Silicon Valley-based FireEye, which has investigated some of the biggest cyber thefts on record, was brought in by World Informatix, a smaller firm that is advising Bangladesh Bank on the investigation.

Security experts said the perpetrators had deep knowledge of the Bangladeshi institution's internal workings, likely gained by spying on bank workers.

The Bangladesh government, meanwhile, is blaming the Fed for not stopping the transactions earlier. Finance Minister Abul Maal Abdul Muhith told reporters on Tuesday that the country may resort to suing the Fed to recover the money.

"The Fed must take responsibility," he said.

The New York Fed has said its systems were not breached, and it has been working with the Bangladesh central bank since the incident occurred.

The hacking of Bangladesh Bank happened sometime between Feb. 4-5, over the Bangladeshi weekend, which falls on a Friday, the officials said. The bank's offices were shut.

Initially, the central bank was not sure if its system had been breached, but cyber security experts brought in to investigate found hacker "footprints" that suggested the system had been compromised, the officials said.

These experts could also tell that the attack originated from outside Bangladesh, they said, adding the bank is looking into how they got into the system and an internal investigation is ongoing.

The bank suspects money sent to the Philippines was further diverted to casinos there, the officials said.

The Philippine Amusement and Gaming Corp, which oversees the gaming industry, said it has launched an investigation. The country's anti-money laundering authority is also working on the case.
Austin
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Post by Austin »

Thanks TSJ

Fed Hoping to Will Recession Away With False Optimism

chanakyaa
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Re: Perspectives on the global economic changes

Post by chanakyaa »

TSJones wrote:...now it all comes out about the Bangledesh hack,,,,,,,

http://www.nbcnews.com/tech/tech-news/h ... st-n536526

....
A spelling mistake in an online bank transfer instruction helped prevent a nearly $1 billion heist last month involving the Bangladesh central bank and the New York Federal Reserve, banking officials said.

....
The hackers breached Bangladesh Bank's systems and stole its credentials for payment transfers, two senior officials at the bank said. They then bombarded the Federal Reserve Bank of New York with nearly three dozen requests to move money from the Bangladesh Bank's account there to entities in the Philippines and Sri Lanka, the officials said.

Four requests to transfer a total of about $81 million to the Philippines went through, but a fifth, for $20 million, to a Sri Lankan non-profit organization was held up because the hackers misspelled the name of the NGO, Shalika Foundation.

Hackers misspelled "foundation" in the NGO's name as "fandation", prompting a routing bank, Deutsche Bank, to seek clarification from the Bangladesh central bank, which stopped the transaction, one of the officials said.

There is no NGO under the name of Shalika Foundation in the list of registered Sri Lankan non-profits. Reuters could not immediately find contact information for the organization.

Deutsche Bank declined to comment.
....
Hackers, allegedly who did this, are so sophisticated in technology that they managed to hack into BD's computers and steal information but clumsy enough to mistype spelling of word to miss $20 million payoff. Doesn't make sense. "Shilka" means lightly armored Soviet self-propelled, radar guided anti-aircraft weapon system. Strange. How do they know that it was an NGO? And, if they got the account number right, what is the point of entering wrong name? Good news is that BD need not worry. These days money is just a number in a computer.
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Re: Perspectives on the global economic changes

Post by Singha »

what we already know - rich urban people with farmlands are laundering income as agri income

http://www.deccanherald.com/content/534 ... delhi.html
Austin
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Re: Perspectives on the global economic changes

Post by Austin »

another nice short interview with David

TSJones
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Post by TSJones »

Bangladesh central bank director resigns over cyber hack........

http://finance.yahoo.com/news/banglades ... 28998.html

DHAKA/MANILA (Reuters) - Bangladesh’s central bank governor resigned on Tuesday over the theft of $81 million from the bank’s U.S. account, as details emerged in the Philippines that $30 million of the money was delivered in cash to a casino junket operator in Manila.

The rest of the money hackers stole from the Bangladesh Bank’s account at the New York Federal Reserve, one of the largest cyber heists in history, went to two casinos, officials told a Philippines Senate hearing into the scandal.

They said a mix of dollars and Philippine pesos was sent by a foreign exchange broker to the ethnic Chinese junket operator over several days, a haul that would have been made up of at least 780,000 banknotes.

Unknown hackers last month breached the computer systems of Bangladesh Bank and attempted to steal $951 million from its Fed account, which it uses for international settlements. They managed to transfer $81 million to entities in the Philippines.

Bangladesh Bank officials have said there is little hope of apprehending the perpetrators and recovering the money would be difficult and could take months.

In Dhaka, central bank governor Atiur Rahman said he had resigned to set an example in a country where there is little precedence of accountability and to uphold the image of the institution.

The government also fired two deputy governors of the bank, Finance Minister Abul Maal Abdul Muhith said, days after blaming it for keeping the government in the dark about the theft.

Rahman’s exit could be a blow to Bangladesh, a South Asian nation of 160 million. The country has been aspiring to reach middle-income status, and Rahman was seen as one of the driving forces helping Dhaka towards that goal.

Under the former development economics professor, the country’s foreign exchange reserves have increased four-fold to $28 billion and he also sought to ensure farmers and women entrepreneurs had better access to banking services and credit.

Rahman defended his record at the central bank, saying he was proud of his achievements there.

He described the heist as an “earthquake” and said the bank had promptly informed intelligence agencies in Bangladesh and abroad and also brought in international experts to investigate.

FireEye Inc’s Mandiant forensics division is helping investigate the cyber heist. The bank has also been in touch with the Fed and other U.S. authorities, including the Federal Bureau of Investigation (FBI) and Department of Justice.

TRAIL ENDS AT CASINOS

Bangladesh Bank is also working with anti-money laundering authorities in the Philippines, where it suspects the stolen $81 million arrived in four tranches.

The Philippines’ Rizal Commercial Banking Corp (RCBC) said last week it was investigating deposits amounting to just that sum, which were made at one of its branches.

Teofisto Guingona, head of the Philippines Senate’s anti-corruption committee, told Reuters the transfers into RCBC were subsequently consolidated into one account and some of the money was converted to pesos.

CCTV cameras at the branch were not functioning when the money was withdrawn, RCBC’s anti-money laundering head, Laurinda Rogero, told the Senate hearing.

The president of a foreign exchange broker called Philrem Service Corp, Salud Bautista, told the Senate that her firm was instructed by the bank branch to transfer the funds to a man named Weikang Xu and two casinos.

She said that $30 million went to Xu in cash. Guingona has said Xu was ethnic Chinese and a foreigner, but he was not sure if he was a Chinese national.

A tranche of $29 million ended up in an account of Solaire, a casino resort owned and operated by Bloomberry Resorts Corp. Bloomberry is controlled by Enrique Razon, the Philippines’ fifth-richest man in 2015, according to Forbes.

Silverio Benny Tan, corporate secretary of Bloomberry Resorts, told the hearing that the $29 million was transferred into a casino account under Xu’s name in exchange for ‘dead chips’ that can only be cashed in from winnings.

Bautista said a further $21 million went to an account of Eastern Hawaii Leisure Co., a gaming firm in northern Philippines. Reuters tried several phone numbers to seek comment from Eastern Hawaii officials but was unable to reach any.

“Our money trail ended up at the casinos,” Julia Bacay Abad, executive director of the Anti-Money Laundering Council, told the open hearing.

She said her agency had frozen 44 accounts connected to the case and had requested assistance from the FBI.

Senator Guingona said that because casinos are not covered by the country’s anti-money laundering laws it was not clear if the stolen funds could ever be recovered.

“The paper trail ends there. That is the problem,” he said. “Right now we are at a dead end.”
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Re: Perspectives on the global economic changes

Post by Suraj »

To nobody's complete surprise, Fed decides no rate hikes now, and probably 'only 2 this year, not 4'.
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