Perspectives on the global economic meltdown (Jan 26 2010)

Gerard · Post by **Gerard** » 02 May 2010 17:14

Greece erupts as men from IMF prepare to wield axe

They and other public sector workers are virtually unsackable, can retire as early as 45 and get bonuses for using a computer, speaking a foreign language and arriving at work on time. Some of them get as many as four extra months’ salary a year, compared with the 14 months that are paid to other Greek workers. One of the most generous bonuses is paid to unmarried daughters of dead employees in state-controlled banks: they can inherit their parents’ pensions.

kmkraoind · Post by **kmkraoind** » 02 May 2010 17:34

Australia Plans to Impose 40% Tax on Resource Profits

Hari Seldon · Post by **Hari Seldon** » 02 May 2010 20:35

Folx,

If anybody can find a Kandle icon, kindly light one in this dhaga as a mark of solidarity with the Greek people. (I know they'd prefer liquid-ity but solid-air-ity is all we can offer at the moment

)

We're told the average greek babu makes 14 months wortha pay, officially, in a yr and the more mediocre ones make like 18 months wortha pay. And then retire at 45. wow. Greece is a beacon of calm, of peace and inspirational aspiration to the perspirational reality of most of the rest of us. We (should) all aspire to the Greek condition on employment terms (pre-2010, that is).

But that bad, bad imf threatens this tranquil ocean of bliss and joy.

Cursed they be!

The new colonism sought to be imposed by the likes of the IMF must be resisted at all costs. Honest citizenry must unite! Apparently 'honest citizenry' doesn't translate into 'honest taxpayers' in greece but never mind.

[Put WKKandle icon here]

(signed)
Hari Seldonaiah

Jai Ho.

Sanjay M · Post by **Sanjay M** » 02 May 2010 22:12

Well, Greece is supposed to be the cradle of European democracy - which might explain why they're lying around sucking their thumbs all day.

But the claim is being put forth that Germans would actually make money off the bailout, just as the US govt made money off TARP and the previous S&L bailout:

http://www.csmonitor.com/Money/Stefan-K ... om-bailout

shyamd · Post by **shyamd** » 02 May 2010 23:07

IMO I think they will save Greece (small economy about 3% of EU), we all know Spain and Portugal are next. Read an article saying that IMF could only just about afford to bail out Greece. I think one of these 2 will be allowed to fail(default) just like Lehmann. The motto is switching as I said earlier to too big to bail rather than too big to fail as it was last year. The Euro's are gonna run out of money when Portugal and Spain come cap in hand to Germany, France. So they will allow one of these to fail, at least one of them will fail maybe even both!. There is no money to bail out both.

Be prepared for riots like we saw yesterday in Greece, in the PIIGS too.

This suggests that we are heading for a period of deflation and a whole round of bad debts for banks again. Perhaps towards the end of the year or September time?

Sanjay M · Post by **Sanjay M** » 03 May 2010 00:51

Details on the GUBO - Greece Up and Bend Over:

http://www.reuters.com/article/idUSTRE6411WS20100502

Oh my, what "pain"

They're getting off pretty lightly. Imagine what would have been required of a developing country with less pull.

svinayak · Post by **svinayak** » 03 May 2010 01:04

Interview: Raghuram Rajan
As the Greek economy threatens to spin out of control, the former chief economist of the International Monetary Fund discusses the roots of the crisis, and what it means for the future of the European Union.
http://www.foreignpolicy.com/articles/2 ... uram_rajan

Interview by DAVID KENNER | APRIL 29, 2010

Dr. Raghuram Rajan is used to being ahead of the curve. He was the youngest person to be appointed as the International Monetary Fund's chief economist in 2003, at age 40. In August 2005, he was among the first to raise concerns about the risky financial innovations that had revolutionized the global economic system. Before a crowd gathered to celebrate the tenure of retiring Federal Reserve Chairman Alan Greenspan, he predicted that these new methods could wreak havoc on the world economy. His warnings were dismissed at the time -- but proved prescient when the Great Recession hit in 2007. Rajan's upcoming book, Fault Lines, explores the global imbalances that lie at the root of the financial crisis.

As the Greek economy enters what the Deutsche Bank chief economist Thomas Mayer referred to as a "death spiral of government insolvency," Foreign Policy spoke with Rajan about Greece's options for getting out from under this crisis and what it means for the future of the European Union. Excerpts:

Foreign Policy: Why has Greece been hit so hard by the financial crisis?

Raghuram Rajan: The Greek problem is not one that began yesterday. It has been happening for the last 10 to 15 years. Having gotten access to the Euro, the incentive to stay disciplined has been relatively muted -- and Greece has historically not been well disciplined on the fiscal side. The ability to borrow provided by being [a member of] the Euro area allowed them to stretch more than they would have been able to stretch had they been on their own.

Sanjay M · Post by **Sanjay M** » 03 May 2010 01:43

Remember Martin Luther and the Protestant Revolution. There is going to be a local German taxpayer revolt against the Church of EU and its tithe. Local Germans will launch a fiscal puritan movement to throw off the shackles of a crooked Euro-aristocracy which engage in closed-door deal-making and backroom romps with each other, under the blessings of an academically-disguised Euro-clergy that rubber-stamps everything automatically.

I wonder how the Brits now view their decision to go it alone with the pound.

Perhaps the independent Sterling will free them to sail the global seas in pursuit of far-flung profits, while the rest of the European mainland remains stuck in their local monetary mess.

svinayak · Post by **svinayak** » 03 May 2010 02:53

Who knew bankruptcy paid so well?
BY NELSON D. SCHWARTZ AND JULIE CRESWELL
NEW YORK TIMES
05/02/2010
http://www.stltoday.com/stltoday/news/s ... enDocument

More than $263,000 for photocopies in four months. Over $2,100 in limousine rides by one partner in one month. And $48 just to leave a message. Explanations for these charges? Priceless.

The lawyers, accountants and restructuring experts overseeing the remains of Lehman Brothers have already racked up more than $730 million in fees and expenses, with no end in sight. Anyone wondering why total fees doled out in the Lehman bankruptcy alone could easily touch the $1 billion mark merely has to look at the bills buried among the blizzard of court documents filed in the case.

Like an endless expense report, they're a Baedeker to the continuing bankruptcy bonanza, a window onto a world where the meter is always running — sometimes literally: In the months after Lehman's collapse in September 2008, the New York law firm Weil, Gotshal & Manges paid one car service company alone more than $500 a day as limo drivers cooled their heels waiting for meetings to break (and this in a city overflowing with taxis).

While most of corporate America may be just emerging from the Great Recession, bankruptcy specialists have spent the last two years enjoying an unprecedented boom. Ten of the 20 largest corporate bankruptcies in recent decades have occurred over the last three years, according to BankruptcyData.com, with Lehman snaring honors as the biggest corporate belly-flop in American history.

These megacases -- Lehman, General Motors, Chrysler and Washington Mutual, to name a few -- are orders of magnitude larger than most bankruptcies in the past, and their size and complexity have created a feeding frenzy of sorts for those asked to sort them out. To date, Weill, the lead law firm representing Lehman, has billed the Lehman estate for more than $164 million in fees in that case alone.

Analysts, lawyers and others involved in the larger bankruptcy boom say that some fees are legitimate -- and that others are, at a minimum, highly questionable.

Neshant · Post by **Neshant** » 03 May 2010 09:27

Moral Relativism?
http://www.youtube.com/watch?v=aA11Mb37ZZk

vina · Post by **vina** » 03 May 2010 10:50

Now Marc Faber of "Gloom, Boom and Doom" fame, joins in on the chorus.
China May Crash in Next 9 to 12 Months.

It aint gonna be pretty folks. And when the Evil Queen asks

Millol Millol on the warr, who is the the failest of 'em arr?

and it answers, Yindia my queen, it ain't gonna be pleasant. Keep the gun powder dry, the arms oiled and serviced and the troops well trained and drilled. It is gonna get rocky ahead.

svinayak · Post by **svinayak** » 03 May 2010 12:13

As Nobel Price winner Paul Robin Krugman once famously said: "If you want a simple model for predicting the date of a future market crash in the United States, here it is: It will be when Greenspan wants it to be, the way Greenspan wants it to be, where Greenspan wants it to be, plus or minus a random error reflecting the fact that he is not quite God." Let it be

http://www.youtube.com/watch?v=eJylrGomAIo

Carl_T · Post by **Carl_T** » 03 May 2010 21:26

Potential stock candidate for further research: ISNS

Look what they do, look at their financials....

Neshant · Post by **Neshant** » 03 May 2010 22:42

Acharya wrote:As Nobel Price winner Paul Robin Krugman once famously said: "If you want a simple model for predicting the date of a future market crash in the United States, here it is: It will be when Greenspan wants it to be, the way Greenspan wants it to be, where Greenspan wants it to be, plus or minus a random error reflecting the fact that he is not quite God."

proving yet again economists don't have a clue what they are talking about.

Sanjay M · Post by **Sanjay M** » 04 May 2010 01:48

Acharya wrote:As Nobel Price winner Paul Robin Krugman once famously said: "If you want a simple model for predicting the date of a future market crash in the United States, here it is: It will be when Greenspan wants it to be, the way Greenspan wants it to be, where Greenspan wants it to be, plus or minus a random error reflecting the fact that he is not quite God." Let it be

http://www.youtube.com/watch?v=eJylrGomAIo

I find Krugman to be a hypocrite. He's absolutely adamant on having govt intervention, but always curses the man doing it. He keeps defending the idea of the benevolent dictator, but keeps insisting that it's failed so far because there's nobody noble enough to fill the role.

He got his Nobel the same way that Obama got his - for being anti-Bush, and not for any substantial brainpower. Or like how Amartya Sen got his Nobel after Pokhran-2.

The Nobel Prize is just a bunch of self-serving garbage, along with the Norwegian worldview. Let's see how long the Nobel Committee will continue liking Krugman as he attacks the foundation for the European Monetary Union.

Carl_T · Post by **Carl_T** » 04 May 2010 02:08

Sanjay M wrote:
He got his Nobel the same way that Obama got his - for being anti-Bush, and not for any substantial brainpower. Or like how Amartya Sen got his Nobel after Pokhran-2.

While I have my political disagreements with Krugman, that is simply not true, Krugman was a very deserving winner who was going to win eventually anyways. Sen was also a worthy winner.

And the Nobel Econ prize is the last one that should be accused of having any leftist bias.

Neshant · Post by **Neshant** » 04 May 2010 07:43

Sanjay M wrote: I find Krugman to be a hypocrite. He's absolutely adamant on having govt intervention,

Keynesian economics is in the midst of being exposed as little more than a money printing racket. It works to the benefit of a select few gaming the system. These folks are always adamant on keeping the scam going as long as possible and keeping the masses ignorant/confused about how the system works.

I think deep down they know its a fraud but can't believe they are getting away with it.

What really do most of these financial companies do that is of any value to society? They are just middle men skimming money here and there from the real economy (which produces valuable goods & services unlike them) and needlessly raising the cost of doing business in the real economy.

Nandu · Post by **Nandu** » 04 May 2010 14:45

There is no Nobel Prize in Economics.

derkonig · Post by **derkonig** » 04 May 2010 19:56

EU seems to be realizing the futility of bailing out Greece, Dow falls below 11k, God only knows how much longer before PRC implodes.
Is this the beginning of the double dip?
http://finance.yahoo.com/news/Stocks-sl ... et=&ccode=

Chinmayanand · Post by **Chinmayanand** » 04 May 2010 21:06

Trichet May Rewrite ECB Rule Book to Tame Greek Risk

Trichet yesterday diluted rules for the second time in a month to guarantee the ECB will keep taking Greek government bonds as collateral for loans. The central bank may have to extend that to other nations, renew a program of lending unlimited cash to banks for a year, and even start buying government debt if the 110 billion-euro ($146 billion) bailout plan for Greece fails to stem the euro’s slide, economists said.

“Rather you break the rule book than the euro area,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “We’re far from being out of the woods. There is now a real opportunity for the ECB to take the lead.”

Suraj · Post by **Suraj** » 04 May 2010 21:15

The Sept 2008 crash was driven by a market breakdown. The current volatility is driven by the European debt restructuring issues. I expect the market to remain choppy, but not to crash like in 2008. VIX (http://finance.yahoo.com/echarts?s=^VIX) is still only at ~22-25, as opposed to 80+ in late 2008. Some of the market pricing moves are bizarre . Some emerging market ETFs (e.g. EEM) took a 4% haircut this morning, even though its holding are almost entirely Asia-Pac, and not Europe.

It seems markets are playing the same game of running to the 'safety' of USD again. Emerging market equities are getting hit because of a perceived higher risk of emerging market debt, causing money to move into that debt (which provides high but more stable returns) as opposed to equities, as well as into USD and and USD-denominated equities.

ramana · Post by **ramana** » 04 May 2010 22:00

I was talking to an insider in the CRE business. He says Greek/Veeks, PIGS/WIGS are diversions. The real secondary is the US CRE about to collapse give or take two to three months. The primary was the housing market collapse still going on. The folks in his business are saying its complete reset going on. Big banks (Chase/Vase) are squeezing the housing market yokels to shore up for coming blowup even after getting bailouts, low prime rate, and tax write-offs.

2010 is 2012 for them. So stay solvent this year for that is all that matters.

derkonig · Post by **derkonig** » 04 May 2010 22:11

ramana wrote:I was talking to an insider in the CRE business. He says Greek/Veeks, PIGS/WIGS are diversions. The real secondary is the US CRE about to collapse give or take two to three months. The primary was the housing market collapse still going on. The folks in his business are saying its complete reset going on. Big banks (Chase/Vase) are squeezing the housing market yokels to shore up for coming blowup even after getting bailouts, low prime rate, and tax write-offs.

2010 is 2012 for them. So stay solvent this year for that is all that matters.

RamanaJi, the imminent collapse of the CRE has been doing rounds ever since the subprime began. It is highly unlikely that Hussain & the Commies will let CRE collapse given that the elections are just round the corner. So if the CRE market rumbles, trust DC to sanction another TARP like measure and issue guarantees to these assets.

OTOH, PRC CRE is something that needs to be looked at. All those ghost towns and ghost towers are ripe for a massive shakedown in valuation.

shyamd · Post by **shyamd** » 05 May 2010 01:10

ramana wrote:I was talking to an insider in the CRE business. He says Greek/Veeks, PIGS/WIGS are diversions. The real secondary is the US CRE about to collapse give or take two to three months. The primary was the housing market collapse still going on. The folks in his business are saying its complete reset going on. Big banks (Chase/Vase) are squeezing the housing market yokels to shore up for coming blowup even after getting bailouts, low prime rate, and tax write-offs.

2010 is 2012 for them. So stay solvent this year for that is all that matters.

Pictured above is a graph of mortgage resets. In simple terms, a mortgage reset is when a mortgage comes due. In normal times, refinancing was a simple process…but these are not normal times.

Oh and dont forget LBO debt coming up for refinancing too.

Prem · Post by **Prem** » 05 May 2010 02:48

CRE loans are undre a Trillion mark so it wont have any huge impact like Housing market collapse . Unlike average householder, CRE guys tend to have reserve as well advance business planning . The Banks, flushed with cash ( Total Bank deposits have increased quite a bit) have actually again started extending credit and with so much unstability in old Europe, every one gonna rush to US with their money . We should see more cheap capital $ inflow to US, China and India . Today's correction in the market is actually good and set the stage for another high. No meltdown but only economic reaalignment and readjustment on global scale. Haaathi NIkal Gya abb Poonch hi baaki Hai.

shyamd · Post by **shyamd** » 05 May 2010 05:19

Prem, no one is lending in the UK. I can tell you that for sure.

Sanjay M · Post by **Sanjay M** » 05 May 2010 05:33

But UK isn't part of the EMU, which makes me wonder whether the Brits aren't feeling a bit pleased that they kept the pound Sterling?

If they were hesitant on the Euro before, it seems that they'll be all the more unwilling now to go for it. I bet the Euro-lackeys at The Economist are turning purple right now. They'll be wondering if those Euro-stuffed envelopes slipped to them by Brussels will be worth anything in a year's time.

Sanjay M · Post by **Sanjay M** » 05 May 2010 09:24

Neshant wrote:Keynesian economics is in the midst of being exposed as little more than a money printing racket. It works to the benefit of a select few gaming the system. These folks are always adamant on keeping the scam going as long as possible and keeping the masses ignorant/confused about how the system works.

I think deep down they know its a fraud but can't believe they are getting away with it.

What really do most of these financial companies do that is of any value to society? They are just middle men skimming money here and there from the real economy (which produces valuable goods & services unlike them) and needlessly raising the cost of doing business in the real economy.

And now watch Obama bring on more Keynesians:

http://www.businessweek.com/news/2010-0 ... hlaes.html

Meanwhile, all this loose monetary behavior will only accelerate the Chinese bubble, to make a more powerful explosion.
In the back of my mind, I'm worried that it's India which would bear the ultimate cost of a Chinese economic crash - because there's nothing like a nice border war to rally the public and distract them from the problems at home. Look at North Korea's latest torpedo stunt, made at a time when their regime is fragile.

Chinmayanand · Post by **Chinmayanand** » 05 May 2010 16:40

Fed Privately Lobbying Against Audit, Documents Show

The Federal Reserve is privately lobbying against a bipartisan Senate amendment that would open the central bank to an audit by the Government Accountability Office…the documents reveal a very specific hand-to-hand style of combat being engaged in as the vote on the amendment draws near…

Chinmayanand · Post by **Chinmayanand** » 05 May 2010 16:50

Bill Drops Fund to Shut Failed Banks

Leaders of the Senate Banking Committee said Tuesday that they had reached an agreement to limit the likelihood that big banks would be bailed out by taxpayers.

But liberal Democrats said they also would push aggressively for an array of proposals that could force some of the nation’s biggest banks to reduce their size…

Aides to the committee chairman, Christopher J. Dodd, Democrat of Connecticut, and the panel’s senior Republican, Richard C. Shelby of Alabama, said the two senators had agreed to scuttle a $50 billion fund proposed by Democrats…

Under the deal, the Federal Deposit Insurance Corporation would finance the liquidation of failed financial companies, using a new credit line with the Treasury Department backed by the failed company’s assets. The money would be recouped later through the sale of assets, with shareholders and creditors forced to take losses…

Some Republicans had objected to the creation of a new $50 billion fund; Mr. Shelby, for instance, repeatedly derided as a “honey pot” that might get misappropriated for other purposes…

shravan · Post by **shravan** » 05 May 2010 19:13

Greeks Protests Leave 3 Dead, Buildings Burning (Update1)

May 5 (Bloomberg) -- Greek demonstrations against government austerity measures turned deadly when three people were killed after protesters set fire to a bank in central Athens.

Suraj · Post by **Suraj** » 05 May 2010 19:58

Some thoughts regarding the Greek economic crisis: neither the current (US) nor rising (BRIC etc) great powers want the Eurozone to become an overly dominant economic zone. In particular, a weak Euro lacking sufficient street cred is a beneficial thing. The current situation clearly underlines the problems with that extranational currency regime. It is therefore in no one's interest, but that of the EU itself, to let this play out nicely. The market volatility just comprises a buying opportunity for those with cash on hand. It wouldn't be surprising if others are gently rocking the EU boat a little, while buying low.

Satya_anveshi · Post by **Satya_anveshi** » 06 May 2010 01:31

So, folks, take note - the "bailouts" are banned now.

U.S. Senate Approves Anti-Bailout Amendment to Financial Bill

Lawmakers voted 96-1 for an amendment offered by Senator Barbara Boxer, a California Democrat, to bar use of government funds to rescue failing financial companies.

Republicans have argued that the bill contains loopholes that would permit future bailouts, focusing their opposition on a provision giving the government authority to liquidate failing financial firms whose collapse would roil the economy.

SwamyG · Post by **SwamyG** » 06 May 2010 03:35

We don't watch China closely in this thread; a recent news item caught my eyes.

Beijing unveils tough measures to curb housing price rises

Beijing banned all families from buying more than one home Friday, in a tough set of restrictions designed to curb speculation and soaring home prices.

SwamyG · Post by **SwamyG** » 06 May 2010 03:44

Greece's debt woes test EU unity

BRFites had long ago given up on the credibility of these rating agencies.

To continue the planetary analogy, on what orb has Standard & Poor's been conducting its business? Only now has the ratings agency seen fit to cut Greece's debt rating all the way to junk, before downgrading that of Portugal and Spain a few days later?

(How the ratings agencies have any credibility, after missing the housing bubble, is beyond me, but that is another story.)

Paul · Post by **Paul** » 06 May 2010 04:18

Suraj wrote:Some thoughts regarding the Greek economic crisis: neither the current (US) nor rising (BRIC etc) great powers want the Eurozone to become an overly dominant economic zone. In particular, a weak Euro lacking sufficient street cred is a beneficial thing. The current situation clearly underlines the problems with that extranational currency regime. It is therefore in no one's interest, but that of the EU itself, to let this play out nicely. The market volatility just comprises a buying opportunity for those with cash on hand. It wouldn't be surprising if others are gently rocking the EU boat a little, while buying low.

Agreed. It also doesn't hurt to pressurize Iran and it's basket currency while it tries to diversify oil trade away from the dollar.

Sanjay M · Post by **Sanjay M** » 06 May 2010 04:54

Stratfor analysis on FOX:

Bharath.Subramanyam · Post by **Bharath.Subramanyam** » 06 May 2010 07:01

A question to gurus:

India has huge NRI population and their remittances make up for the BOP being negative on goods. If the USD & Euro falls drastically will it not affect ouf BOP ?

In what currency should NRIs hold their money? I felt Japanese Yen is decent bet as it is a savings economy or may be in gold.

Carl_T · Post by **Carl_T** » 06 May 2010 07:55

I'm afraid that is impossible to predict! You cannot determine which currency will crash, but a hedge would be gold or silver.

Suraj · Post by **Suraj** » 06 May 2010 08:56

Bharath.Subramanyam wrote:India has huge NRI population and their remittances make up for the BOP being negative on goods. If the USD & Euro falls drastically will it not affect ouf BOP ?

"If the USD & Euro falls drastically" our import bill effectively falls...