Perspectives on the global economic meltdown (Jan 26 2010)

ShivaS · Post by **ShivaS** » 08 Oct 2010 11:49

K economic models dont work when Kmart & Walmart operate.
Also K economic theory will not work only financial costs are considered including opportunity costs.
The correct way is include social costs in the model.

The shifting of costs method of generating financial profits alone is not going to help to revitalize the economy through stimulus.
Hence I was suggesting changing the paradigm to high speed rail more manufacturing and less oil imports. Take advantage of the social costs to change attitudes of using public transport, while India & PRC get addicted inefficent private transports of staying hrs in idling in trafic jams.

nandakumar · Post by **nandakumar** » 08 Oct 2010 13:24

Hari Seldon wrote:^ paramu saar,

We have to develop our debt markets with depth ourselves. Phoren capital is welcome, on our terms, to play by our rules and regulations. And these should be strict to weed out speculative hot money.

Sure, it would always help to have better public infrastructure and less corruption and all that. But given that all Indian firms face roughly similar levels of these obstacles, what they have done so far is awesome. Nothing less. Sure, we can all always do better. So let us.

Again, inchoate thoughts. Still evolving. Critiques and additions welcome. Jai ho.

I think, the primary reason why our corporate debt market hasn't developed with any degree of depth is because of the rigid institutional mechanism that we have created for pooling household savings. The household savings comprise largely of those of the salaried income earners although the statistics in this regard capture surpluses of unincorporated enterprises, as well. No doubt, households do manage to put by close to 25 per cent of their annual incomes by way of savings.
But it would be unrealistic to expect that they would be comfortable with the idea of the entire amount being frozen, in the sense of not being available to them, for extended periods of time. At the most you can assume that about half of this can be locked up for long duration while there must be some liquididty available to them from the balance of such savings. The residual savings can only go into such avenues as bank deposits which clearly offer the advantage of high liquidity.
That is where the catch is. That portion of savings which could be made available for long gestation projects are already impounded under provident fund contributions of salaried income earners. But the investment guidelines for these funds monies require that that they be invested only in government securities. In other words, projects in social and economic infrastructure that require Government funding. A similar prescription is applicable for investments routed through life insurance policies.
In other words the households are already stretched in the sense that a substantial chunk of regular savings already stand impounded through the PF/life insurance investment guidelines on long gestation public projects. Unless institutional investors have freedom to look beyond Government securities, i can't see how the debt market can begin to acquire depth. Without such depth being created what little chance there exists for private discretionary savings to go into these instruments will simply evaporate.
Whether provident fund accumulations should be permitted to be deployed in private long-gestation infrastructure projects with its attendant business risks is not without its moral dilemma. The other philosophical question would be one where in a resource scarce economy such as ours and compounded by poor social indicators of devlopment (health, primary education etc.) what projects have the first claim on resources- social projects of the Government or private projects in economic infrasructure roads/bridges etc.? A tough question to answer.

Ambar · Post by **Ambar** » 08 Oct 2010 15:21

Hari Seldon wrote:x-posting from Ind Econ dhaga.

Hari Seldon wrote:^ paramu saar,

+1 only. 'scarcity' was the human condition for over 99% of its existence on the planet. And except for the past few decades of post-modern neoclassical/monetarist economics when money could be created out of nothing, it was the defining paradigm. I do get the sense that the old, 'real' market forces are back.
Awrite, been thinking this thing through a bit and time to flesh the inchoate thoughts out a little more perhaps.

What we call capital is the lifeblood of business. Sure, no disputing that. Working capital often takes the form of Credit. Terms of credit and thereby availability of capital is crucial to the birth, survival and health of businesses. In some sense. Now let's take a look at the conditions governing capital formation contrasted with capital availability for businesses including startups and SMEs in Desh.

In the rurals, the do-gooder samaritan microfinance guys charge 24-30% p.a. interest. Fact. Boink. Local moneylenders start at 36% and reports suggest go all the way to 60%. In the urbans, those with access to bank credit start off somewhere at 12% for risky business startup loans and 18% is like, more typical, am told for certain forms of emergency credit extension facilities.

Even half this level would be considered usurious in most of the tfta emerged khanomic world. ZIRP is the mantra there because their current debt levels, already unrepayable in full will simply go belly up should rates move up by even a few 100 basis points. The farthest extreme case is that of Japan, that paragon of JIT-efficiency-physical infrastructure, which as a nation with 190% debt/GDP will see almost 60% of its tax revenue go into interest payments should rates rise even 100 basis points. Digest that a sec. 60% of its tax revenues. Any wonder they're sh1t scared at the prospect of any rise in rates? They're stubbornly hugging 0% as far as can be conceived only.

Western rating agencies despite India's stellar repayment record rated us below greece and Ireland all this while. It pushed up our borrowing costs. But thanks to robust savings -> capital formation within the country, we managed somehow. Now, we don't need the rating agencies and their fancy ratings so much anymore so much, do we? LOL. We have to develop our debt markets with depth ourselves. Phoren capital is welcome, on our terms, to play by our rules and regulations. And these should be strict to weed out speculative hot money.

Now Desi entrepreneurs who had access to certain community forms of lending and credit - think of the marwari business community that provided credit access at very attractive rates within the community - did exceedingly well as is known. Others however, and there're 10s of millions of small businesses - from daily wage labor to artisans and craftsmen to small shopkeepers and so on supporting families with their businesses for whom capital and credit have been hard to come by. That they have evolved, after the weakest died off, to survive and thrive in the current competitive Indian market is tribute to robustness.

Sure, it would always help to have better public infrastructure and less corruption and all that. But given that all Indian firms face roughly similar levels of these obstacles, what they have done so far is awesome. Nothing less. Sure, we can all always do better. So let us.

Again, inchoate thoughts. Still evolving. Critiques and additions welcome. Jai ho.

I agree with most part except for the fact that private credit in tfta countries is nowhere available at near 0%.Yes,the banks tap into such low interest rates, but a regular joe like me would probably be looking in the range of 4-5% interest on loan towards capital investment.Rotational credit for most individuals run anywhere from 10-25%,so tfta mards and motorarmas aren't exactly cushioned compared to their desi counterparts.

For whatever the reason,i cannot help but reason and contest this attribution of entrepreneurial agility and robustness to structural obstacles . IMVVHO, going by that yardstick would it be fair to say that Paki entrepreneurs are more agile and robust because they have far greater challenges? Besides, in economies such as ours there are many "intangibles" that aid these entrepreneurs to swim to the top and not just their business acumen.

About the rating agencies, yes, we all now know how those primates rate, but aren't political stability,security ityaadi a factor in rating?

vina · Post by **vina** » 08 Oct 2010 15:52

Hari Seldon wrote:^ paramu saar,

We have to develop our debt markets with depth ourselves. Phoren capital is welcome, on our terms, to play by our rules and regulations. And these should be strict to weed out speculative hot money.

Yawnn... Pigs will fly before that. The Gubmint doesn't give a rat's backside on whether a decent bond market that can serve the need of corporates on a long term basis develops or not. On the contrary, the gubmint has a vested interest (along with the Sarkari banks) to make sure that it doesn't develop.

nandakumar wrote: Sure, it would always help to have better public infrastructure and less corruption and all that. But given that all Indian firms face roughly similar levels of these obstacles, what they have done so far is awesome. Nothing less. Sure, we can all always do better. So let us.

Not ALL indian firms, but only PRIVATE indian firms. gubmint firms dont face any problems at all. Anyways, if you are private, you aren't really indian. Gubmint is the big enchilada, desh ki seva and all that.

I think, the primary reason why our corporate debt market hasn't developed with any degree of depth is because of the rigid institutional mechanism that we have created for pooling household savings. The household savings comprise largely of those of the salaried income earners although the statistics in this regard capture surpluses of unincorporated enterprises, as well. No doubt, households do manage to put by close to 25 per cent of their annual incomes by way of savings.

Yawnnnnnnnnnn.. Well, well, there is something called SLR which is a very "Indian thing" that goes beyond the reserve ratio in any civilized society. What the SLR means is that the banks have to by LAW hold a certain portion of their deposits in "approved" securities. Hint. Hint.. "Approved" means.., yeah, bingo, govt securities!. The RBI says , max can be 49% and min 25%. So as of now per my edumajicashun, banks hold 25% onree. So that is the hafta the govt gets out of your deposits.

Just like al-dus percenti gobbles up dus percent of all deposits in Poakland, our won pachees percentis, get to keep pachees percent of all deposits and pay some piddly rates in return which anyway is tax free.

Now on top of the SLR, you do have the CRR (which is exactly what does the solvency), the SLR business is really to feed the trough of the Govt pig in the hope that something of value comes out in the other end.

scarce economy such as ours and compounded by poor social indicators of development (health, primary education etc.) what projects have the first claim on resources- social projects of the Government or private projects in economic infrasructure roads/bridges etc.? A tough question to answer.

Scarcity is created, as always.

Ah.. The roads/bridges etc are what is supposed to come out of the other end of the govt pig feeding in the trough. Well, there is the small matter of something called the very aptly named "Commonwealth" games. That is the sort of stuff that comes out of the other end of the govt!.

To keep the Govt of the Dilli Billis, For the Dilli Billis and By the Dilli Billis well fed and hogging , the private sector has to be crowded out. And that is where come in different taxation laws and stuff like usurious stamp duty ityadi come in. So the big guys give up and don't bother issuing bonds anymore ( I do remember my folks in the old days buying debentures of companies like Reliance ityadi in the early 80s) and given the high cost of finance in India, they go abroad to raise bonds , leaving the govt to pig out to it's heart's content.

So why bother at all. Govt is happy, the the govt owned banks are happy and the politicos are happy becuase by doing "priority sector lending", they can do loan melas etc to fetch votes, Soniaji is happy, Sheila Aunty is happy , Kalmadiji is happy running the Games, Rahul Baba is happy with an expanded NREGA, so in short all the people that matter are happy.

You say, err. . what about the depositors who would like to have higher returns but not the risks of equity markets and the smaller corporates who cant raise money by external commercial borrowings ?. There , there mister. Who do you think you are. Who are the depositors ? Who are the corporates? Are they bigger than the Govt, Soniaji and Rahul Baba and all the Dilli Billis ? What is their "aukaat" I ask you . So think before asking such kweschuns.

Anyway what goes my father's? I am doing al-vida, au revior, good bye to BR . Too many things on hand, need to launch my bijness, baby due soon and hyper sensitive admins don't like bad things to be said about Dilli Billis and the assorted scum bags.

Have a nice day. Jai Hu and all that. Peace.

Hari Seldon · Post by **Hari Seldon** » 08 Oct 2010 16:10

Anyway what goes my father's? I am doing al-vida, au revior, good bye to BR . Too many things on hand, need to launch my bijness, baby due soon and hyper sensitive admins don't like bad things to be said about Dilli Billis and the assorted scum bags.

Congratulations on the baby due. And good luck on the entrepreneurial venture. But your departure announcement, sir, would be a great loss. This dhaga would certainly feel it. Kindly feel free to keep visiting here only and contributing more gyan.

vina · Post by **vina** » 08 Oct 2010 16:19

Hari Seldon wrote:Congratulations on the baby due. And good luck on the entrepreneurial venture.

Thanks. And I need all the luck too.

But your departure announcement, sir, would be a great loss. This dhaga would certainly feel it. Kindly feel free to keep visiting here only and contributing more gyan.

Will do, but I doubt I really will have the time to give mucho gyan. It was nice being here. However, definitely will browse this dhaaga every now and then (it is good to know the top of the mind e-Con stuff and where better to look all the happening things in one easy place).

manish · Post by **manish** » 08 Oct 2010 17:07

vina wrote:
Hari Seldon wrote:Congratulations on the baby due. And good luck on the entrepreneurial venture.
Thanks. And I need all the luck too.

But your departure announcement, sir, would be a great loss. This dhaga would certainly feel it. Kindly feel free to keep visiting here only and contributing more gyan.
Will do, but I doubt I really will have the time to give mucho gyan. It was nice being here. However, definitely will browse this dhaaga every now and then (it is good to know the top of the mind e-Con stuff and where better to look all the happening things in one easy place).

Congrats and all the best vina saar.

You will be missed.

Take care.

Carl_T · Post by **Carl_T** » 08 Oct 2010 18:13

What biz are you starting?

So who is going to win Econ Prize on Monday?

ramana · Post by **ramana** » 08 Oct 2010 20:57

Vina, Congrats on both counts: new baby and business enterprise! All the best and keep your chin up.

Things will turn around.

Raja Bose · Post by **Raja Bose** » 08 Oct 2010 21:08

vina wrote:Anyway what goes my father's? I am doing al-vida, au revior, good bye to BR . Too many things on hand, need to launch my bijness, baby due soon and hyper sensitive admins don't like bad things to be said about Dilli Billis and the assorted scum bags.

Have a nice day. Jai Hu and all that. Peace.

Congratulations for the nanha! And good luck on the new nukkad-ki-dukaan/startup venture - when you reach the stage for an IPO, let us in on it.

Hari Seldon · Post by **Hari Seldon** » 08 Oct 2010 21:12

Hi Ambar

I agree with most part except for the fact that private credit in tfta countries is nowhere available at near 0%.Yes,the banks tap into such low interest rates, but a regular joe like me would probably be looking in the range of 4-5% interest on loan towards capital investment.Rotational credit for most individuals run anywhere from 10-25%,so tfta mards and motorarmas aren't exactly cushioned compared to their desi counterparts.

Point note kiya jaye. Which is partly why small businesses are in the doldrums in the tfta west. The other part is the lack of demand, of course. As long as the credit tap flowed, a vendor financing model (a la Lucent) helped grow sales (but not profits discounting assets receivable) by dumping ever more materialism onto indebted households and nominal-asset-rich businesses. When that tap stopped - when banks which now control almost all lending that occurs in the khanate stopped lending for want of creditworthy borrowers- the game stopped.

For whatever the reason,i cannot help but reason and contest this attribution of entrepreneurial agility and robustness to structural obstacles . IMVVHO, going by that yardstick would it be fair to say that Paki entrepreneurs are more agile and robust because they have far greater challenges? Besides, in economies such as ours there are many "intangibles" that aid these entrepreneurs to swim to the top and not just their business acumen.

Aha. Trick question or what. I doubt paki entrepreneuters, such as they are, are thriving. Surviving, maybe - woh bhi doubt hai. The intangibles you talk of are precisely the product of hard wrought immunity to periodic complexity-reduction in complex systems. Hard wrought because we've seen it all - decline, destruction, deprivation and devastation in recent centuries of our history. It has evolved a system of credit, community loyalties, communication channels, currency substitutes, customization, collaboration & co-creation, scale, and all those things for which yum-bee-yays invent fancy jargon that is *robust* to medium and occasionally even large-scale disruption.

I recall listening to this guy talk who lived through the Russian collapse of 1995-98. Says things went back to barter then. They could because the economy was still primitive and people hadn't forgotten the simpler systems that pre-date the 'modern' complex ones.

About the rating agencies, yes, we all now know how those primates rate, but aren't political stability,security ityaadi a factor in rating?

political stability and security, eh? My point exactly. The tfta west ignores a fundamental source of stability in our sdre economy and a fundamental source of risk in their emerged-evolved ones. Namely, the far lower threshold of the risk of black/grey swan disruption to complex systems of economic organization.

OK, admittedly, maybe I'm jumping the gun here. Heck, the US can always go back to the self-sustaining county level of organization. The Amish can teach a lot, am sure. Heck, Utah was built from scratch by one such community.

Nandu · Post by **Nandu** » 08 Oct 2010 23:08

ramana wrote: -
Also CATO has a handbook on Social Scurity which shows what a scam it is for the workers.

If born before 1955 one has to live ~89 years to recover what one puts in. If one retires at 65 they live 82 to 86 based on male or female. For those born later its even worse!

SS can also be considered welfare for the well off paid for by the poor (I am avoiding the racial divisions here, but it should be obvious), since the former live much longer beyond the retirement age and thus collect much more in SS benefits than the latter, while paying in about the same.

Tell that to the tea-partyers.

Nandu · Post by **Nandu** » 08 Oct 2010 23:34

I didn't see any discussion here on all the recent foreclosure suspension brouhaha. My apologies if I missed it, since I don't frequent this dhaga.

Anyways, what do the learned mullahs here make of all this?

JP Morgan freezes foreclosures in "half the country" because of flawed paperwork. http://www.washingtonpost.com/wp-dyn/co ... 07798.html
Obama vetoes bill that would lower paperwork standards required for foreclosure. http://dealbook.blogs.nytimes.com/2010/ ... sure-bill/
Bank of America suspends foreclosures in all 50 states. http://dealbook.blogs.nytimes.com/2010/ ... sure-sales

Satya_anveshi · Post by **Satya_anveshi** » 09 Oct 2010 00:36

Stopping foreclosures is a clever ploy by the banks. But it is amusing how all institutions (legal, gov, and banks) making a mockery of the people.

Current foreclosures (including those waiting to be) are a water under the bridge. If they foreclose on all those, then valuations will come down and may lead to more foreclosures.

So, what do they do? - Take a legal cover, stop foreclosure, and continue with the market manipulation. Those who have homes will continue to live under illusion that things have stopped going downhill/things will improve; those already stopped payments will continue to live free but will never get their current home or another one back for some time. They will enjoy the free ride till they can - hope they are saving cash somewhere (not under the bed).

Govt, meanwhile, per the design, will spend their way to **** tapping into their akshaya patram, i.e., bottomless source of money, that is Fed. That's their part of the deal with Fed engagement.

Not learned but a dehati IMO.

ramana · Post by **ramana** » 09 Oct 2010 01:47

True assessment. Its related to the election fever and to appear to keep the economy floating.

nandu, I would suggest you read the origins of Social Security and what it was supposed to be and what it became.

For starters it was a measure to help transform the agricultural society to an industrial society. It was to be a safety net for the elderly and later disabled workers as old family structures were breaking down, pensions were inadequate or in the red. The graet depression highlighted all these issues. Its a PAy as you go system ie the retirees benefits are paid by workers taxes. It was the single major measure that lifted millions above the poverty line.
The big problem is demographics. In 1946 there were 5 workers to one retiree. By 1980s, it reduced to 3.2 workers to one retiree. By 2040 its projected to be 2.1 per one retiree. In the 80s disabled workers were given employment training as part of reforms. To add to the woes the frequent recessions since 1980s have reduced worker contributions.

Hari Seldon · Post by **Hari Seldon** » 09 Oct 2010 03:09

Projected sources of world growth. self-explanatory and all that:

Here's the story itself:Chart: The IMF’s New Growth Projections (WSJ)

ramana · Post by **ramana** » 09 Oct 2010 03:09

Isnt it way past bedtime or is it early rising?

Hari Seldon · Post by **Hari Seldon** » 09 Oct 2010 03:13

Oh, interim break onlee..... you see, ekhanomic troubles the world over have left me all sleepless onlee...... /LOL

akashganga · Post by **akashganga** » 09 Oct 2010 03:20

http://financialsense.com/contributors/ ... -hail-mary

In the end, our bubble economy will not just deflate, it will burst. The dollar will collapse, consumer prices will skyrocket, real credit will completely evaporate, millions more will lose their jobs, and our economy will change in ways few of us can imagine. Our standard of living will plummet and legions of middle- and upper-class Americans will be impoverished. It is not a pretty picture, but unfortunately, it's the one our government is painting. Unfortunately, we are running out of time to change artists.

Hari Seldon · Post by **Hari Seldon** » 09 Oct 2010 03:24

Nassim Taleb Says Dubai More Robust Than U.S.

Nassim Nicholas Taleb, whose book “The Black Swan” described how unforeseen events can roil global markets, said Dubai’s economy is more robust than that of the U.S. as its debt problem can be “controlled.”

“Even if you take perhaps the worst of emerging markets, a place like Dubai, you realize Dubai is more robust than the United States,” Taleb said at a mutual funds conference in Manama, Bahrain today. “Dubai has been borrowing to put buildings on postcards. It can stop that, but America needs to borrow just to open the doors in the morning. That’s why I’m not comfortable with the United States.”

...

“Dubai, they’re not depending on debt, it’s not a chronic debt, it’s not like the American person who has this dependency on debt and has been building it since the 80s,” Taleb, a former derivatives trader, said. “It’s not a great model but it’s more robust than the United States, simply because their debt situation can be controlled a lot better than the U.S.”

well, well... robustness is the new noun to get its 15 secs of fame, perhaps.

P.S.
chalo, g'nite people.

shyam · Post by **shyam** » 09 Oct 2010 04:19

Check Out Chris Whalen's Terrifying Presentation On The 2011 Foreclosure Crisis

Here is an interesting CNBC interview of Chris Whalen

Singha · Post by **Singha** » 09 Oct 2010 08:56

this should be a interesting movie on the meltdown and heist.

trailers here
http://movies.nytimes.com/movie/462064/ ... b/trailers

ShivaS · Post by **ShivaS** » 09 Oct 2010 09:59

Is Vina saar hiring?

Singha · Post by **Singha** » 09 Oct 2010 10:45

the inevitable silicon valley question!

shyam · Post by **shyam** » 09 Oct 2010 22:33

Old Silicon Valley question but new Wall Street question.

Neshant · Post by **Neshant** » 10 Oct 2010 06:02

Neshant · Post by **Neshant** » 10 Oct 2010 06:47

a good presentation, but the guy misunderstands Austrian economics IMO.

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

Debunking Money (#1) : Money, Myth, and Machiavelli

http://www.youtube.com/watch?v=3uWCOvnOtTI

Neshant · Post by **Neshant** » 10 Oct 2010 06:59

Renaissance 2.0: Lesson 1 - Revisiting American History - Financial Empire

http://www.youtube.com/watch?v=l37RhdFGVsM

Neshant · Post by **Neshant** » 10 Oct 2010 07:47

After the mid-term elections, taxes are going to be raised to pay for the banker's bailouts.

Maybe the US govt could get Disney to create a modern version of this WWII propaganda cartoon to get people to gladly pay their taxes :

The spirit of 43 (WWII)
http://www.youtube.com/watch?v=rQsOOfU59SM

Carl_T · Post by **Carl_T** » 10 Oct 2010 08:14

Why do they need to pay for the bailout?

Ambar · Post by **Ambar** » 10 Oct 2010 08:49

The govt's been chest thumping for an year now about how they are profiting from the TARP, so why raise taxes to pay for the bailout?
Personally, i think taxes should be raised for those making over 250K but this needs to go along with massive cuts in government spending.

ramana · Post by **ramana** » 10 Oct 2010 09:10

Ambar, In 1936 the Great Depression worsened when the Social Security taxes removed $2B from the economy. Deeper and broader than after the Great Crash. Quite a significant chunk in those days. It was right program but wrong timing.

Taxing those making $250k will rake in $700 B which might not all go to consumption but is close to the stimulus of ~ $850B. So it will have large impact. A better was to say the tax cuts will be restored in future when the economy recovers.

Neshant · Post by **Neshant** » 10 Oct 2010 09:54

Ambar wrote:The govt's been chest thumping for an year now about how they are profiting from the TARP, so why raise taxes to pay for the bailout?

Printing money, 'loaning' it to banks at 0% and letting them deposit it back at the federal reserve for interest - that kind of profit comes at the expense of the real economy. So taxation via printing to keep this fraudulent "industry" around is already underway.

Its just a rip off of the productive economy.

However even more wealth extraction is needed so direct taxation will go up after the mid term election.

One good things about the crash is that it exposes the largely parasitic role of the federal reserve and the private banking cartel behind it. I'm seeing more and more people waking up but not nearly enough.

Ambar · Post by **Ambar** » 10 Oct 2010 10:00

With all this talk about money printing,shouldn't M3 be expanding rather than shrinking?

Neshant · Post by **Neshant** » 10 Oct 2010 10:23

Not if debt is defaulting at a faster rate.

Anyway who knows wtf is going on. The federal reserve does not publish M3 numbers for public viewing anymore and even if they did, the statistics could well be as bogus as fake CPI inflation numbers being put out.

Manu · Post by **Manu** » 10 Oct 2010 15:51

Hari Seldon wrote:Again, inchoate thoughts. Still evolving. Critiques and additions welcome. Jai ho.

This is true for the unorganized sector only (where cash flow is unreliable at best).

Indian Corporate Houses can get Working Capital Loans for as low as 70-80 basis points above LIBOR (which itself has been falling).

Infact, all the IT-Vity Guys who hoard Cash on their balance Sheet deserve to be slapped for it. It's not like their Treasury teams are putting the cash to great use anyway.

There is more liquidity crunch (as in lack of cheap credit) for US Corporate Houses compared to their Indian Counterparts.

Neshant · Post by **Neshant** » 10 Oct 2010 18:03

With every attempt to introduce another layer of beaurocracy to "fix" distortions in the market caused by previous layers, keynesian economics begins to look downright silly. Now an unelected body is supposed to decide how the global market is to operate.

There's no such thing as 'excess reserves' any more than there are excess brain cells.

---------

US Treasury Secretary: IMF Must Strengthen Forex Surveillance

WASHINGTON -(Dow Jones)- U.S. Treasury Secretary Timothy Geithner Saturday called for the International Monetary Fund to strengthen its surveillance of exchange rate and reserve accumulation policies.

In a clear reference to China, the secretary said precautionary reserve build-up is appropriate "to a point," Geithner told the IMF's advisory body, the International Monetary and Financial Committee, in prepared remarks.

"However, excess reserve accumulation on a global scale is leading to serious distortions in the international monetary and financial system, and is inhibiting the international adjustment process," he said.

There's growing frustration in the U.S., Japan and Europe that Beijing is move too slow in its planned currency reform, a politically fractious issue taking center stage at the annual IMF and World Bank annual meetings this weekend and exacerbated by a rising risk of a subsequent barrage of competitive devaluations across the globe.

"The IMF must increase the candor of its surveillance," he said, referring to chagrin over soft rhetoric the IMF has used in reports describing the currency problems.

The U.S. has tried soft diplomacy, tough rhetoric and the House of Representatives has even passed legislation that would slap tariffs on imports from countries, such as China, that undervalue their currency. But Wednesday, the Treasury secretary said it was counterproductive for the U.S. to bear the diplomatic burden alone, and urged international support through multilateral organizations such as the IMF.

IMF Chief Dominique Strauss-Kahn said Thursday that the fund needed to launch a "systemic stability initiative" that would strengthen surveillance.

Geithner said in his remarks, "An upgrade of the analytical tools for evaluating reserve holdings is long overdue."

In a separate matter, Geithner said international governments must continue to work together to protect the financial system against fraud and terrorist financing, in particular highlighting Iran.

"Maintaining the integrity of the international financial system requires all of us to work together to rigorously implement these countermeasures against Iran," he said.

http://online.wsj.com/article/BT-CO-201 ... 00781.html

Neshant · Post by **Neshant** » 10 Oct 2010 21:10

Ducktales Cartoon Teaches Monetary Inflation

http://www.youtube.com/watch?v=XBSY3S0Dpd0

Scrooge McDuck teaches the principle of monetary inflation and the dramatic effect it can have on our economy.

His 3 young nephews Heuy, Dewy and Louie discover a machine that can duplicate things. Well pretty soon they use it to duplicate a coin they have (aka printing money). You see the consequences of that.

shyam · Post by **shyam** » 10 Oct 2010 22:54

Manu wrote:There is more liquidity crunch (as in lack of cheap credit) for US Corporate Houses compared to their Indian Counterparts.

How come liquidity crunch is not causing interest rates to go up?

shyam · Post by **shyam** » 10 Oct 2010 23:36

Neshant wrote:Not if debt is defaulting at a faster rate.

And if people are not borrowing as they were used to...