Perspectives on the global economic meltdown- (Nov 28 2010)

[akashganga]

http://www.lombardidigital.com/lcpa-sep ... e=02272012

This guy is predicting major economic downturn in the next few months. He is comparing 2009-till date US stock market rise to bear market rally of 1934-37. Must watch.

[ramana]

Theodore Pelagidis, Michael Mitsopoulos, "Understanding the Crisis in Greece: From Boom to Bust"

In recent years the Greek economy has been rigorously debated in the international financial arena. This book engages with the current economic challenges facing Greece, examining how and why a previously strong economy can tether with complete collapse. The Greek economy of the 90's posed a unique international paradox. It combined strong economic performance that is rapid GDP growth and strong productivity growth, with a weak performance on many other fronts that range from poor labour market institutions and low competitiveness, to poor environmental protection and high levels of corruption.

This volume examines the working of the Greek political system and the way it relates with the Greek society, the salient aspects of the Greek Constitution and the design of the political system and, ultimately, the failing of the rule of law. It presents the facts that undermine the long term prospects of the economy and reveals the nature of the powerful redistributive rent-seeking groups that keep markets closed and distorted, vehemently resisting reforms in Greece today. This book is essential reading for all interested in Greece's economy, political economy and European economics.

Does this seem familiar to Indian situation?

[anmol]

[Yogi_G]

Theodore Pelagidis, Michael Mitsopoulos, "Understanding the Crisis in Greece: From Boom to Bust"

In recent years the Greek economy has been rigorously debated in the international financial arena. This book engages with the current economic challenges facing Greece, examining how and why a previously strong economy can tether with complete collapse. The Greek economy of the 90's posed a unique international paradox. It combined strong economic performance that is rapid GDP growth and strong productivity growth, with a weak performance on many other fronts that range from poor labour market institutions and low competitiveness, to poor environmental protection and high levels of corruption.

This volume examines the working of the Greek political system and the way it relates with the Greek society, the salient aspects of the Greek Constitution and the design of the political system and, ultimately, the failing of the rule of law. It presents the facts that undermine the long term prospects of the economy and reveals the nature of the powerful redistributive rent-seeking groups that keep markets closed and distorted, vehemently resisting reforms in Greece today. This book is essential reading for all interested in Greece's economy, political economy and European economics.

Does this seem familiar to Indian situation?

Indeed Ramana ji. In fact, we have thousands of splinter groups in India with their own agenda which is resisting reforms, some just for the sake of resisting reforms. Parliamentary form of democracy seems to be a bane for India in hindsight.

[yogi]

http://www.lombardidigital.com/lcpa-sep ... e=02272012

This guy is predicting major economic downturn in the next few months. He is comparing 2009-till date US stock market rise to bear market rally of 1934-37. Must watch.

LOL!!! 5 predictions of this guy came true. He must be a multi-billionaire then, no?
Its sad to see educated folks falling for such crap.

[yogi]

Sirjee, please do due diligence before posting videos of delusional and computer-illiterate politicians, and save all of our time. There already is no dearth of CTs propagated in this thread!

http://dailycaller.com/2012/02/25/briti ... erve-scam/

...Riyadi, as the tale continues, supposedly had 750,000 tons of gold backing the $15 trillion the United States took from him to prop up the U.S. dollar. The World Gold Council, however, estimates the only 165,000 tons of gold have been mined in the history of the world.
.
.
.
There’s a reason the bells might not have gone off in Parliament. The right honourable gentleman, as British peers are fond of calling one another, could have figured out why by spending 10 seconds with the Earl of Google. The first search result for ”Yohannes Riyadi” is, curiously enough, a Web page from the Federal Reserve Bank of New York titled “Scams Involving the Federal Reserve Name.”

[manju]

Don't setup an account with western banks which have branches in India. All your info gets shared with the govt of the country from which they originate and passed around. Only bank with the state bank (govt banks) in India.

The Indian govt won't share your info with any foreign govt.

What about private banks like HDFC and ICICI?

[anmol]

Sirjee, please do due diligence before posting videos of delusional and computer-illiterate politicians, and save all of our time. There already is no dearth of CTs propagated in this thread!

[/quote]

Sirjee, have you seen the video ? Because THAT is exactly the point this "Lord" have made in the video. That it is impossible for anyone to have either 750,000 tons of gold OR the USD 15 trillions it is backing.

TLDR of speech: USD 15 trillion (supposedly backed by 750,000 tons of gold which the "Lord", Secretary to the Treasury and Bank of Indonesia point out that it can't be true) from some Yohannes Riyadi's accounts were transfered from NY Fed through JP Morgan and RBS to HSBC. And this was apparently approved by all those bank executives and it was signed by Timothy Geithner as a witness on behalf of the International Monetary Fund.

Something is obviously wrong in here, it should be pretty easy for either NY Fed, JP Morgan, RBS, HSBC, Timothy Geither and others to explain what is happening and whether this money / transaction is real or not. Also read this in context of similar incidents involving similar amount of money. Days back few people were arrested in Italy with Six Trillion worth of US Treasury Bonds. And I remember some Japanese were also caught doing this.

So there definitely is some scam, but why would anyone want to deal with such amount of money ?

Transcript of the speech by "Lord James of Blackheath". :-

source: http://www.publications.parliament.uk/p ... 1643000172

16 Feb 2012 : Column 1016

5.20 pm

Lord James of Blackheath: My Lords, I hope the minute that that has taken has not come off my time. [..]

There are three possible conclusions which may come from it. First, there may have been a massive piece of money-laundering committed by a major Government who should know better. Effectively, it undermined the integrity of a British bank, the Royal Bank of Scotland, in doing so. The second possibility is that a major American department has an agency which has gone rogue on it because it has been wound up and has created a structure out of which it is seeking to get at least €50 billion as a pay-off. The third possibility is that this is an extraordinarily elaborate fraud, which has not been carried out, but which has been prepared to provide a threat to one Government or more if they do not make a pay-off. These three possibilities need an urgent review.

In April and May 2009, the situation started with the alleged transfer of $5 trillion to HSBC in the United Kingdom. Seven days later, another $5 trillion came to HSBC and three weeks later another $5 trillion. A total of $15 trillion is alleged to have been passed into the hands of HSBC for onward transit to the Royal Bank of Scotland. We need to look to where this came from and the history of this money. I have been trying to sort out the sequence by which this money has been created and where it has come from for a long time.

[..]

Mr Riyadi has sent me a remarkable document dated February 2006 in which the American Government have called him to a meeting with the Federal Reserve Bank of New York, which is neither the Federal Reserve nor a bank. It is a bit like "Celebrity Big Brother". It has three names to describe it and none of them is true. This astonishing document purports to have been a meeting, which was witnessed by Mr Alan Greenspan, who signed for the Federal Reserve Bank of New York of which he was chairman, as well as chairman of the real Federal Reserve in Washington. It is signed by Mr Timothy Geithner as a witness on behalf of the International Monetary Fund. The IMF sent two witnesses, the other being Mr Yusuke Horiguchi. These gentlemen have signed as witnesses to the effect.

[..]

Under the contract, the American Treasury has apparently got the Federal Reserve Bank of New York to offer to buy out the bonds issued to Mr Riyadi to replace the cash which has been taken from him over the previous 10 years. It is giving him $500 million as a cash payment to buy out worthless bonds. That is all in the agreement and it is very remarkable. Establishing whether I have a correct piece of paper is just two phone calls away-one to Mr Geithner and one to Mr Greenspan, both of whom still prosper and live. They could easily confirm whether they signed it. Mr Riyadi, by passing these bonds over, has also put at the disposal of the US Treasury the entire asset backing which he was alleged to have for the $15 trillion. I have a letter from the Bank of Indonesia which says that the whole thing was a pack of lies. He did not have the 750,000 tonnes of gold which was supposed to be backing it; he had only 700 tonnes. This is a piece of complete fabrication.

Finally, I have a letter from Mr Riyadi himself, who tells me that he was put up to do this, that none of it is true, and that he has been robbed of all his money. I am quite prepared to recognise that one of the possibilities is that Mr Riyadi is himself putting this together as a forgery in order to try to win some recovery. But it gets more complicated than that because each of the $5 trillion payments that came in has been acknowledged and receipted by senior executives at HSBC and again receipted by senior executives at the Royal Bank of Scotland. I have a set of receipts for all of this money. Why would any bank want to file $5 trillion-worth-$15 trillion in total-of receipts if the money did not exist? The money was first said to have come from the Riyadi account to the Federal Reserve Bank of New York and from there it was passed to JP MorganChase in New York for onward transit to London. The means of sending it was a SWIFT note which, if it was genuine, ought to have been registered with the Bank of England.

When this came about, I took it to my noble friend Lord Strathclyde and asked what we should do with it. He said, "Give it to Lord Sassoon. He is the Treasury". So I did, and my noble friend Lord Sassoon looked at it and said immediately, "This is rubbish. It is far too much money. It would stick out like a sore thumb and you cannot see it in the Royal Bank of Scotland accounts". He went on to say, "The gold backing it is ridiculous. Only 1,507 tonnes of gold has been mined in the history of the world, so you cannot have 750,000 tonnes". That is true. The third thing he said was, "It is a scam", and I agree with him. The problem is that at that point we stopped looking, but we should have asked what the scam was instead of just nodding it off.

[..]

I believe that this is now such an important issue that I have put everything that I have got on the subject on to a 104-megabyte memory thumb. I want the Government to take it all, put it to some suitable investigative bureau and find out the truth of what is going on here, because something is very seriously wrong. Either we have a huge amount of tax uncollected on profits made or we have a vast amount of money festering away in the European banking system which is not real money, in which case we need to take it back. I ask for an investigation and for noble Lords to support my plea.

[yogi]

Sirjee, have you seen the video ? Because THAT is exactly the point this "Lord" have made in the video.

So every time a Nigerian prince sends an email, claiming to share with you 1000 Trillion $, Lord James is going to roost in the Parliament? It is height of stupidity on the part of the Lord.

Something is obviously wrong in here, it should be pretty easy for either NY Fed, JP Morgan, RBS, HSBC, Timothy Geither and others to explain what is happening and whether this money / transaction is real or not.

Federal Reserve has put up a darn website!!! What more do you want them to do? Testify in Senate? And then people say government moves slow and is bloated...

Also read this in context of similar incidents involving similar amount of money. Days back few people were arrested in Italy with Six Trillion worth of US Treasury Bonds. And I remember some Japanese were also caught doing this.

So its proven to be a scam. People got arrested. Now move over it.

[yogi]

Don't setup an account with western banks which have branches in India. All your info gets shared with the govt of the country from which they originate and passed around. Only bank with the state bank (govt banks) in India.

The Indian govt won't share your info with any foreign govt.

What about private banks like HDFC and ICICI?

If you have no intention to commit fraud, money laundering, avoid taxes, or illegal activities, then what's the fear? OTOH if you do want to do any of the above, then there is no such thing as "Indian govt won't share your info". When times comes, you will be caught.

[Theo_Fidel]

In recent years the Greek economy has been rigorously debated in the international financial arena. This book engages with the current economic challenges facing Greece, examining how and why a previously strong economy can tether with complete collapse. The Greek economy of the 90's posed a unique international paradox. It combined strong economic performance that is rapid GDP growth and strong productivity growth, with a weak performance on many other fronts that range from poor labour market institutions and low competitiveness, to poor environmental protection and high levels of corruption.

I don't see it. #1 difference Indias savings/investment ratio is 35% of GDP. We save enough to live our lifestyle. The Greeks did/do not. Their savings rate is now about 5% of GDP. We live within our means they borrow to support their lifestyle. I was watching videos of Greek islands at a local Greek food restaurant and the images were staggering. Tiny islands with harbors filled with $200,000 fiberglass boats, not a beat up trawler in sight. Streets being remodeled every 2-3 years, Islands with stadiums, airports, fancy looking down towns resembling Monaco. It is hard to remember that 20 years ago the Greeks had a per capita under $8,000. From there it ballooned to $35,000 at the height of the craziness. Pretty much even with Germany. All funded by debt.

Truth is the Greek income can support a lifestyle of maybe $12,000 per capita income. How they get from $35,000 to $12,000 is going to be the question.

Ireland in the same time went from a per capita income of $12,000 to an incredible $60,000. Out of control.

Germany went from $26,000 to $38,000. It was heavily criticized for this cautious real growth. Sick man of Europe and all.

I don't see any similarities at all. It is one thing to be corrupt and dysfunctional when your per capita income is $1,500, it is quite another to be corrupt and venal when your income is $35,000.

[kmkraoind]

Obama, eyeing China, creates trade enforcement unit - Firstpost

[Neshant]

What about private banks like HDFC and ICICI?

I repeat,

Only
Government
Banks

Anything else and you are putting yourself at great risk.

[Neshant]

Truth is the Greek income can support a lifestyle of maybe $12,000 per capita income. How they get from $35,000 to $12,000 is going to be the question.

I don't even understand how it gets to $12,000 - especially with the debt overhang. Probably more like $4000 or something once tourism is included and debt repayment is subtracted.

Unless you got natural resources up the wazoo like Canada and Australia or corruption money rolling in like Switzerland, you can't afford to rest on your laurels and rake in 5 figure per capita incomes.

Usually when something bogus shoots sky high on a graph like Greek per capita income, it comes crashing down and dips below the floor. Let us assume that $8K is the floor... which is quite an assumption for a country producing next to nothing. Well then $4000 approx is where they are headed.

Now what happens when young Greeks begin to leave for opportunities abroad. On to who's back is the debt going to be offloaded as the work force vanishes? Remeber the central theme I've always put forward :

"SUCKERS will be needed"

Suckers are in high demand. Frankly I wish I could buy long term call options on suckers. Greece is going to need lots of young suckers working their balls off for peanuts as their wages are siphoned off to pay the slave masters in Germany.

First job will be to build a Berlin wall all around Greece so nobody of working age jumps out of the pot. Exit visas, capital controls, won't be long before they'll have to wear the mark of the beast to buy & sell food. The mark not being a physical mark but "approval" from their slave masters that their debts are not in arrears.

Greece's only hope is the euro implodes dissolving its debts with it.

[Neshant]

Timothy Geither and others to explain what is happening and whether this money / transaction is real or not.

All i know is that Geithner was/is AWFULLY eager to leave office and join a bank to collect his reward (highly paid bank job) before the whole system crumbles. The fact that he almost left his position after the debt hike was approved in 2011 shows that HE KNOWS A CRASH IS COMING SOON.

He gave the bogus excuse that the travel distance is far and he wants to be closer to his son but everyone realised the rat was leaving a sinking ship.

All prior Treasury Secretaries have been handsomely rewarded with over paid bank jobs (100s of millions) after they left office. His reward being in lieu of offloading the banks losses & labilities onto the taxpayer.

No bank will hire him or want anything to do with him if the economy crumbles and the public sees him making off like a bandit with banksters.

Paper money inevitably turns capitalism into croneyism.

[gunjur]

Spain's big fix will enrage many workers
Here what i found surprising is

Under Spain's current system, labor contracts are either negotiated on a national basis or by sector such as the automobile industry. A firm has no choice but to pay the wage increases mandated by those contracts, even if it can't afford to. The wage rises are determine by the Spanish consumer price index, which often rises faster than Europe's CPI, meaning Spanish labor is priced out of the market.

If that was not enough to anger the unions, the second proposed reform will certainly enrage them.It will end what is essentially a two-caste system of employees in Spain. One group of employees, who are dubbed permanent and have been employed longer than three years, are entitled to up to two and a half years salary as severance if they are let go . So it is prohibitively expensive for any company to fire them.

The other group, which is known as temporary workers and makes up about one-third of the workforce, gets a maximum 10 days a year severance when fired. The inevitable result is at the end of their third year, these workers are usually let go because if they work one day longer they will be entitled to 10 times the severance payments. It is this system of dual caste employees that many economists believe is responsible for Spain's very high unemployment.

[Theo_Fidel]

Looks like Greece is going down anyway. Simply don't earn enough to stay in Europe. The government still has a 14% of GDP 'real' deficit. Most of it for salaries.

http://www.bloomberg.com/news/2012-03-0 ... keene.html

Greece will probably default this year on European governments’ holdings of its sovereign debt, according to Jacob Kirkegaard of the Peterson Institute for International Economics.

The country published the formal offer last week for its agreement to exchange bonds for new securities, with private- sector investors taking a loss of 53.5 percent. While the European Central Bank won’t take direct losses from the swap agreement, the writedown may make it more politically feasible for governments to lose money on Greek debt, Kirkegaard said.
Enlarge image Greece May Default on Governments, Kirkegaard Says

“The key thing about this is it’s a political issue, and therefore sequencing matters tremendously,” Kirkegaard, a research fellow at the Peterson Institute in Washington, said today in a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. “It’s going to be essentially one government defaulting against the taxpayers of another.”

[Christopher Sidor]

Greece Ratings Cut to Lowest Level by Moody’s --- Bloomberg Dated 3-Feb-2012
Moody is saying that Greece is defaulting on its debt, due to PSI.

Greece’s long-term foreign currency debt was downgraded to C from Ca late yesterday, with Moody’s saying in a statement that investors who participate in the nation’s debt exchange will get about 70 percent less than the face value of their holdings. The deal constitutes “a distressed exchange, and hence a default,” the New York-based rating company said.

And if this is not enough this is what the other major rating agency, Fitch had to say

It also follows a two-level reduction last week by Fitch Ratings to C, which said it will further cut Greece’s rating to “Restricted Default” once the bond exchange is completed.

So once Greece completes PSI, it will labeled as a default. While it is true that due to the compulsory participation, CDS might not get triggered, this might just mean that Euro-zone nations have kicked the can down the road.

And the worst part is yet to come, according to Moody

The country faces a high risk of default even if the plan is successful, Moody’s said. It will be unlikely to be able to sell bonds to private investors once its bailout package runs out, according to the rating company.

So Greece becomes another Argentina. Barred from international credit markets. Makes one wonder, if there was going to be a "compulsory" PSI, which would imply that Greece is shut from international credit markets, why go through the gut-wrenching austerity , despite the fact that Greece economy has been shrinking for the past 4 years?


And Greece's precedence is being sought by other countries.
Jamaica Seeks Greek-Style Bailout to Aid Growth, Leader Says --- Bloomberg Dated 3-March-2012
Whether Jamaica will get such a deal, is to be seen, what is more troubling that other countries like Portugal might seek such a deal too. Till now the participants in Greek PSI, were working under assumption that Greece is going to be one-off case and this experiment will not be followed in any other case. If it becomes clear that Greece will only be one of the example, rather than the exception, how willing will be the private sector be participate in Greek PSI?

[abhischekcc]

Maybe India should also default on its debt obligations, citing western reports that says that India has more poverty than subsaharan Africa. Why restrict it to that? We can also claim damages from Britain for the 2 century long genocide and larceny they conducted here. I mean the Jews still get paid for a 12 year reign of terror by the nazis, why can't we make the claim for 2 hundred years?

[Neshant]

good old Robert Prechter & his deflation scenario
scary if you think of it really...

[Hari Seldon]

Maybe India should also default on its debt obligations, citing western reports that says that India has more poverty than subsaharan Africa. Why restrict it to that?

Most of our debt is domestically held. Defaulting on it hurts our own people and institutions. Besides, we've never defaulted in our history And the overly high interest rates charged of us helped keep overseas borrowings on the straight and narrow.

We can also claim damages from Britain for the 2 century long genocide and larceny they conducted here. I mean the Jews still get paid for a 12 year reign of terror by the nazis, why can't we make the claim for 2 hundred years?

Dunno. The briturds are broke and cannot repay. They won't even if they could, but that's another story.
I'd rather settle for a formal apology - an acknowledgement of the evils the crown and the company committed in its own name in India. Then can start a process of mental decolonization of vast swathes of our social fabric. Perhaps.

[Theo_Fidel]

If we default just foreign debt, friends of India such as Japan, Russia and Korea will get hurt disproportionately. We won't get that much of a boost as foreign debt is only about 20% of GDP.

[ramana]

John Snow urf Spinster and many other names had posted his own multi-step process towards deflation. If nny one has it please post it again. Its interesting to see experts talk about the cycle which had been earlier brought out by our members.

Here it is :

Courtsey John Snow, Umrao Jaan, Spinster:

http://forums.bharat-rakshak.com/viewto ... 67#p613267

Sixty per cent of American GDP, who is going to buy the bonds? Now every serious American policy maker knows that they are not going to be returning value, in the end they'll inflate their way out. So in other words, you'll buy American Treasury bond, but what you get back in return will be an inflated dollar, so you'll get back 50 per cent of real value, or something, in other words the debt will be so overwhelming that it cannot be repaid.

I had mentioned this in the cycle of near future

1)recession 2)contraction 3)stagflation and 4)Hyper inflation.

1 and 2 have already happening.
The printing and borrowing by unkil will lead to 3
which will lead to 4.

--------------------------

[ramana]

About two years ago I wrote:

To all the gurus and chelas, looks like world economy is coming out of the deep dive of 2008. So taking into account, Indian capabilities, resources and coming constraints like climate change controls, price of gold and oil, power dynamics (US-PRC) etc, what type of economy will emerge in India?

My thoughts are
- I dont see India becoming PRC light or medium to supply the world mfg goods.
- It will be more of the knowledge economy type.
- Not just IT/ViTy but basic research and industrial product development in lot of areas: medicines, hardware, software etc.
- Most mfg in India will be to supply its internal demand.
- A lot of urbanization of the Indian rural areas.
- Finance for secondary markets

[Neshant]

Dunno. The briturds are broke and cannot repay. They won't even if they could, but that's another story.

you can bet on that. debts accumulated by western nations are not going to be repaid.

the hope was to attack the currencies of developing nations i.e Asian Financial "crisis" circa 90s and force them to hold dollars as reserves and trade western currencies.... and later devalue those dollars. I knew and said a few times in the 90s/2000s that Asian nations foolheartedly building up vast stockpiles of USD were falling into a trap. Keep a certain amount of it for purchase of imports but don't get into the paper collection business.

Capital controls served India well during this period as no raider from abroad dare challenge a govt that can change the rules on them while they're trying to stampede and panic the market. But now we need rupee convertibility as we have reached that stage. We have to cautiously shed the capital control shield that protects us to make the rupee an international currency. Tricky business since that club is the exclusive preserve of a select few who rather not see another gate crasher.

[abhischekcc]

John Snow urf Spinster and many other names had posted his own multi-step process towards deflation. If nny one has it please post it again. Its interesting to see experts talk about the cycle which had been earlier brought out by our members.

Here it is :

Courtsey John Snow, Umrao Jaan, Spinster:

http://forums.bharat-rakshak.com/viewto ... 67#p613267

Sixty per cent of American GDP, who is going to buy the bonds? Now every serious American policy maker knows that they are not going to be returning value, in the end they'll inflate their way out. So in other words, you'll buy American Treasury bond, but what you get back in return will be an inflated dollar, so you'll get back 50 per cent of real value, or something, in other words the debt will be so overwhelming that it cannot be repaid.

I had mentioned this in the cycle of near future

1)recession 2)contraction 3)stagflation and 4)Hyper inflation.

1 and 2 have already happening.
The printing and borrowing by unkil will lead to 3
which will lead to 4.

--------------------------

Which will lead to the desired outcome - the destruction of America's USD 65 trillion worth of laibilities to outsiders and to its own pensioners.

[paramu]

Drug money saved banks in global crisis, claims UN advisor

[ArmenT]

Goldman’s Secret Greece Loan Reveals Sinners
Looks like GS took the Greeks to the cleaners here. Read all about it!

[Austin]

BRICS countries to clinch local currency deal

During the upcoming BRICS summit, Brazil, Russia, India, China and South Africa are due to sign an agreement to grant one another loans in their national currencies, The Financial Times reported on Thursday.

The move is almost certain to weaken the position of the dollar, the newspaper said.

The BRICS summit is scheduled for March 29 in New Delhi.

[Singha]

we should aim for currency deals with BRICS, south korea, japan, singapore, dubai, SAARC, australia, east africa, iran, sheikhdoms...all our biggest non-euro/non-$$ trading partners.

[ramana]

Hari Seldon for you....

Black Crow

The black crow

Mukul Pal / March 8, 2012, 0:20 IST

Call it good omen or bad, human beings have associated natural occurrences with events. Though ‘objectivists’ say human beings suffer from illusions and see what they want to, reconsideration shows there is more to illusions than just a black crow or swan.

Watching a crow perched outside your window or watching a black swan in the country side lake or on the trading screen are patterns because they repeat (even if rarely). If there was a crisis (large economic fluctuation) happening all the time we would not have connected them to ‘birds’ because there would be no precedence. Only when the passing comet coincides with a famine that we label its next visit as a bad omen. It’s the repetition (cyclicality) of a process that guides society to establish patterns (frequent or rare).

The point I am making here is that identifying an outlier (a rare crow in our case) and metaphorically connecting it to economics, sensationalising a fluctuation does not make it all objective. At the soul of every pattern is a repetition (a cycle). The pattern keeps repeating because the cycle keeps pulsating. So, if time is at the heart of every pattern, why do patterns sell more than a time cycle. Ok, patterns do offer a story and humans love stories (Shiller in Irrational Exuberance), but is there really an objective reason, which can make cycles more objective and scientific?

If we could connect an outlier with a cycle, in other words, if we could prove that outliers happen cyclically, we could time the reappearance of the crow (or swan). Before we connect the two (cycles and outliers) we need to understand the character of an outlier (an extremity). Conventionally, outliers can be defined as extreme or rare events (rare large price fluctuations). An example is the Great Depression, the 1987 crash or the recent 2008 crash. Statistically, however, data has both positive and negative outliers. And the 1985 DeBondt, Thaler paper on mean reversion and three-year worst portfolio outperforming the three-year best portfolio is statistical proof that outliers among a group reverse in performance, and this happens repeatedly (cyclically).

So, as early as 1985, the two researchers looked at outliers on a relative basis (as part of a group) and proved extremity and reversion were connected. If we could increase the duration from three years to five years or more, we should get similar reversion in outliers. Shiller’s price-earnings (PE) work assumes decade-long PE reversion. The worst valuations of a decade tended to reverse. So, if outliers were always reversing and doing so repeatedly, what stops us from timing the appearance of the black crow (a rare event)?

I think some more research and some more time would generate enough cases on outlier cyclicality i.e. today’s worst are tomorrow’s best (and vice versa). And outlier cyclicality could be used to time the next big earthquake, the next large volatility spike, the next crash, the next $10 intraday move on oil or just about anything else.

Another thing that stops us from understanding black crows is how we define market in the first place. If the market for you is the Sensex 30, the chances of your understanding the worst or the best (the outlier) are small. (‘Redefining ‘market’ in risk assessment’ June 2011). You need to extend your group to a 1,000 assets or maybe 10,000 before you are sure what is really worst (or best). And once you reach there, the only challenge would be to have the courage to buy the worst, despite the black crow or the swan.


--------------------------------------------------------------------------------



The author is CMT, and Co-Founder, Orpheus CAPITALS, a global alternative research firm

[yogi]

Massive take up of Greek Bond Offer

Greece secured an overwhelming acceptance of a bond swap offer to private creditors and beat its own most optimistic forecasts, a senior official said on Thursday after the deadline expired on a deal needed to avoid a chaotic debt default. A government official, speaking on condition of anonymity, said take-up on the offer was around 95 percent an hour before the offer closed at 2000 GMT with responses still coming in. The biggest sovereign debt restructuring in history will see bond holders accept losses of some 74 percent on the value of their investments in a deal that will cut more than 100 billion euros from Greece's crippling public debt.

[ArmenT]

From the BBC:
Greece confirms debt swap deal success

The Greek government has confirmed that it has secured sufficient backing for a debt swap deal that will enable it to avoid defaulting on its debts.

The Hellenic Republic Ministry of Finance said that 85.8% of private bondholders had agreed to the plan.
...

[Theo_Fidel]

They will be right back. They are still running a primary deficit. And need $30-$40 Billlion (10% GDP) every year just to clean the trash and pay salaries. Rinse, repeat....

[Singha]

Spain is allegedly the next greece. set of -1.5% recession and 25-30% unemployement this year.

[shyam]

Will the firework start now?

IT'S OFFICIAL: ISDA TRIGGERS GREEK CREDIT EVENT IN UNANIMOUS DECISION

Added later:
May be not. Total value of CDS is only $3B
Greece Deal Triggers $3B in Default Swaps: ISDA

[Christopher Sidor]

^^^
Hopefully not. ECB has done a massive cash injection, twice, into the EURO-Zone banking circle with a time frame of 3 years. A systematic failure on lines of Lehman and AIG is unlikely. Please note that none of these two institutions, Lehman and AIG, were banks in traditional sense. Moreover unlike Europe the unregulated financial sectors, i.e. non-banking sector, is very less compared to US. So hopefully CDS might get triggered but its effect will not be so deleterious as was the case of Lehman brothers.

That is not to say that CDS trigger would be okie. If CDS get's triggered for Greece then the southern EURO-ZONE nations might see a rise in borrowing cost.

[svinayak]

http://www.bloomberg.com/news/2012-03-1 ... nhart.html

Financial Repression Has Come Back to Stay: Carmen M. Reinhart

As they have before in the aftermath of financial crises or wars, governments and central banks are increasingly resorting to a form of “taxation” that helps liquidate the huge overhang of public and private debt and eases the burden of servicing that debt.
Such policies, known as financial repression, usually involve a strong connection between the government, the central bank and the financial sector. In the U.S., as in Europe, at present, this means consistent negative real interest rates (yielding less than the rate of inflation) that are equivalent to a tax on bondholders and, more generally, savers.
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Figure 1. Gross Central Government Debt as a Percent of GDP: 22 Advanced Economies, 1900- 2011 (unweighted averages)
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Figure 2: Real Interest Rates Frequency Distributions: Advanced Economies, 1945-2011 Treasury bill rates Sources: Reinhart and Sbrancia (2011), International Financial Statistics, International Monetary Fund, various sources listed in the Data Appendix, and authors’ calculations. Notes: The advanced economy aggregate is comprised of: Australia, Belgium, Canada, Finland, France, Germany, Greece, Ireland, Italy, Japan, New Zealand, Sweden, the United States, and the United Kingdom. Interest rates for 2011 only reflect monthly observations through February.
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Figure 3. Share of “Outside” Marketable U.S. Treasury Securities plus Government Sponsored Enterprises (GSEs) Securities: End-of-period, 1945-2010 Sources: Flow of Funds, Board of Governors of the Federal Reserve and authors’ calculations. Notes: The outstanding stock of marketable U.S. Treasury securities plus GSEs is calculated as Treasury credit market instruments plus GSE issues plus GSE-backed mortgage pools less savings bonds, less budget agency securities. “Outside” marketable securities is defined as marketable securities (as defined above) less official holdings by the rest of the world of US Treasuries and GSEs, less holdings by the Federal Reserve (monetary authority) of U.S. treasuries and GSEs.
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Figure 4. Domestic Bank Holdings of General Government Debt: Greece, Ireland, Portugal, and UK, 2008-2010, end-of-period (as a percent of gross general government debt) Sources: See Kirkegaard and Reinhart (2011) for individual country sources, International Monetary Fund, World Economic Outlook. Notes: Holdings of both general government loans and securities. Totals do not include European Central Bank (ECB) bond purchases of the three troubled sovereigns. These purchases totaling about €76 billion over May 2010- March 2011, account for about 12 percent of the combined general government debts of Greece, Ireland, and Portugal. Does not include government debt holdings by pension funds.
In the past, other measures also included directed lending to the government by captive domestic entities (such as pension funds or banks), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter coordination between governments and banks, either explicitly through public ownership of some institutions or through heavy “moral suasion” by officials.
Central banks in both developed and developing countries are being subjected to complementary pressures. Emerging markets may increasingly look to financial regulatory measures to keep international capital “out” (especially given the expansive monetary policy stance pursued by the U.S. and Europe). Meanwhile, advanced economies have incentives to keep capital “in” and create a domestic captive audience to absorb the financing for the high existing levels of public debt.
Common Cause
Concerned about potential overheating, rising inflationary pressures and the related competitiveness issues, emerging- market economies may continue to welcome changes in the regulatory landscape that keep financial flows at home. Indeed, this trend is already well under way. This concern means advanced and emerging-market economies are finding common cause in increased regulation and/or restrictions on international financial flows and, more broadly, the return to more tightly regulated domestic financial environments.
This scenario entails both a process of financial deglobalization (the reappearance of home bias in finance) and the re-emergence of more heavily regulated domestic financial markets.
-- Public and Private Debt Overhang: Elevated levels of public debt in the U.S. and elsewhere will probably be the most enduring legacy of the post-2007 financial crises. For the advanced economies, public debts had not approached these levels since the end of World War II.
Figure 1 (attached), which traces the evolution of average gross public debt for the 22 advanced economies from 1900 to 2011 demonstrates the magnitude of the policy challenges now facing many (if not most) of these countries. However, these numbers significantly understate the magnitude of the debt surge in recent years by excluding record private borrowing -- particularly by banks -- which remains a major possible contingent liability of governments.
Throughout history, debt-to-GDP ratios have been reduced in five ways: economic growth, substantive fiscal adjustment or austerity plans, explicit default or restructuring of private and/or public debt, a surprise burst in inflation, and a steady dose of financial repression that is accompanied by an equally steady dose of inflation. It is critical to note that the last two options -- inflation and financial repression -- are only viable for domestic-currency debts (the euro area is a special hybrid case).
Closed Channels
Some of these channels have been used in combination during historical episodes of debt reduction. Fiscal adjustment, however, is usually painful in the short run and politically difficult to deliver. Debt restructuring leaves a troublesome stigma and is also often associated with deep recessions. Pretending that no restructuring will be necessary doesn’t make the debt overhang disappear. For many, if not most, advanced countries, concerns about those debt burdens will shape policy choices for many years to come.
In this setting, monetary policy in the advanced economies is likely to remain “overburdened” for some time.
Complicating the situation is the fact that the debt overhang isn’t limited to the public sector, as it was immediately after World War II. There is now a high degree of leverage in the private sector, especially in the financial industry and households. In addition, the recent buildup in external leverage was greater than in past crises. This debt overhang and the financial fragility it creates are a common feature of most advanced economies, along with stubbornly high unemployment. Concerns that higher real interest rates and deflation will worsen an already precarious situation will probably impose added constraints on monetary policy.
-- Negative Real Interest Rates, 1945-1980 and Post-2008: One of the main goals of financial repression is to keep nominal interest rates lower than would otherwise prevail. This effect, other things being equal, reduces governments’ interest expenses for a given stock of debt and contributes to deficit reduction. However, when financial repression produces negative real interest rates and reduces or liquidates existing debts, it is a transfer from creditors (savers) to borrowers and, in some cases, governments.
This amounts to a tax that has interesting political- economy properties. Unlike income, consumption or sales taxes, the “repression” tax rate is determined by factors such as financial regulations and inflation performance, which are opaque -- if not invisible -- to the highly politicized realm of fiscal policy. Given that deficit reduction usually involves highly unpopular spending cuts and/or tax increases, the “stealthier” financial-repression tax may be a more politically palatable alternative.
Bretton Woods
Liberal capital-market regulations and international capital mobility had their heyday before World War I, when the gold standard was in force. However, the Great Depression, followed by World War II, put an end to laissez-faire banking. It was in this environment that the Bretton Woods arrangement of fixed exchange rates and tightly controlled domestic and international capital markets was conceived.
The result was a combination of very low nominal interest rates and inflationary spurts of varying intensities across the advanced economies. The obvious results were real interest rates -- whether for Treasury bills (see attached Figure 2), central bank discount rates, deposits or loans -- that were markedly negative from 1945 to 1946.
For the next 35 years or so, real interest rates in both advanced and emerging economies were, on average, negative. Binding interest-rate ceilings on deposits (which kept real ex- post deposit rates even more negative than real ex-post rates on Treasury bills) “induced” domestic savers to hold government bonds. In addition to the effect of capital controls, leakages by investors in search of higher yields elsewhere were limited because the incidence of negative returns on government bonds and on deposits was, more or less, a universal phenomenon at this time.
The frequency distributions of real rates for the period of financial repression (1945 to 1980) and the years following financial liberalization, shown in Figure 2, highlight the universality of lower real interest rates prior to the 1980s and the high incidence of negative real interest rates.

[Raja Bose]

Goldman’s Secret Greece Loan Reveals Sinners
Looks like GS took the Greeks to the cleaners here. Read all about it!

And here's the lady from Goldman who did it, Antigone (Addy) Loudiadis:

http://www.efinancialnews.com/story/201 ... -debt-deal

The I-banker profession seems to be headed down the same path of respectability as a car salesman.

[Neshant]

Definitely need to keep these con artists out of India. They looking to set up shop and start peddling their racket big time.


-----
Greg Smith is resigning today as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa. His resignation letter is in today's New York Times.

http://www.nytimes.com/2012/03/14/opini ... .html?_r=1

"I can honestly say that the environment now is as toxic and destructive as I have ever seen it."

".... the interests of the client continue to be sidelined in the way the firm operates and thinks about making money."

"I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work."