Perspectives on the global economic meltdown

vsudhir · Post by **vsudhir** » 31 Jan 2009 18:10

PBS FRONTLINE is airing a documentary on Feb 17 called "Inside the Meltdown". Here's a 2 min preview:

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

Its promises to be slick, crisp and fast-paced, beating any Hollywood thriller you can think of, coz, well, sometimes truth amazes more than fiction.

Also, incidentally, lends credence to Ramana's conjecture that there seems to be a method to the meltdown madness, that it looks almost 'triggered' - semi-planned out, sorts.

vsudhir · Post by **vsudhir** » 31 Jan 2009 21:55

No news is good news I guess. Which is why PRC so manages to impress the casual observer with its unity, discipline and jehad in the way of Mao. But still, some cracks appear that paper smiles aren;t papering over so well anymore....

China fears riots will spread as boom goes sour

Today millions will leave the cities to return to their rural family homes for the new year celebrations. But this year Beijing hopes the newly jobless revellers will stay there - to prevent a fresh wave of unrest in the cities.

They surged into the grimy streets around the factory: first scores, then hundreds, then more than a thousand, as word spread and tension loaded the stale, grey air. The boldest overturned a police van and smashed up motorcycles, then tore through the building destroying computers and equipment. The mood was exhilarated, angry and frightened.

"It happened so quickly ... There were maybe 500 involved and another 1,000 watching them. People were yelling: 'It's good to smash'," said a witness.

But the riot late last year at the Kai Da factory in Dongguan, amid the grim industrial sprawl of the Pearl River Delta, was not an isolated incident. It was one of tens of thousands of protests, many erupting from the same mixture of economic grievances, resentment of police and swirling rumour.

Its from Al guardian so kindly take with salt onlee.

vsudhir · Post by **vsudhir** » 01 Feb 2009 08:12

Resdient alarmist Ambrose-Prichard at it again in today's Telegraph.

US-China currency war eclipses Davos, and threatens the world

Seems Geithner can speak mandafrin AND japanese!

Mr Geithner - the first US Treasury chief who can actually speak Chinese, and Japanese, nota bene - is clearly operating under instructions from President Barack Obama. If his resolve fails, Hillary Clinton is there at Foggy Bottom (State Department) to renew the broadside against Beijing - at least judging by her Sinophobe reflexes in the campaign.

This has the makings of an almighty superpower bust-up. It is fast becoming the theme of Davos 2009. It may soon be the burning issue of our times. We will all learn how to pronounce Renminbi.

Several things seem off.

First, is Hillary sinophobic? really? Bill wasn;t when indulging china in the 90s, now. And those campaign funds have chini sources, don;t they??

And no. There'll be no superpower bustup. Doubt either prc or usa want to slug it out just yet.

vsudhir · Post by **vsudhir** » 01 Feb 2009 17:24

Unrest in China worse than reported

Bankruptcies, unemployment and social unrest are spreading more widely in China than officially reported, according to independent research that paints an ominous picture for the world economy.

The research was conducted for The Sunday Times over the last two months in three provinces vital to Chinese trade – Guangdong, Zhejiang and Jiangsu. It found that the global economic crisis has scythed through exports and set off dozens of protests that are never mentioned by the state media.

No doubt there will be unrest but am not sure the authorities will let these carry on or link up. In any case, too much unrest could lead to military adventurism by the PLA, I worry.

However, a growing number of economists say the unrest proves that it is not the exchange rate but years of sweatshop wages and income inequality in China that have distorted global competition and stifled domestic demand. The influential Far Eastern Economic Review headlined its latest issue “The coming crack-up of the China Model”.

Yasheng Huang, a professor at the Massachusetts Institute of Technology, said corruption and a deeply flawed model of economic reform had led to a collapse in personal income growth and a wealth gap that could leave China looking like a Latin American economy.

Richard Duncan, a partner at Blackhorse Asset Management in Singapore, has argued that the only way to create consumers is to raise wages to a legal minimum of $5 (£3.50) a day across Asia – a “trickle up” theory.

Dunno what to make of the 'trickle up theory'. It would certainly serve to make Asia less competitive than the west in manufacturing, perhaps. Like some columnists in NYT have repeatedly trumpeted, some countries are so poor that 'sweatshop jobs seem nice because there's a roof over the head' types (N Kristoff writing abt Cambodia, IIRC). We've anyway seen non-tariff barriers like 'environment standards' in addition to 'labor standards' come into play often before. Protectionism by another name and this crisis may revive those old games.

Even security guards and teachers have staged protests as disorder sweeps through the industrial zones that were built on cheap manufacturing for multinational companies. Worker dormitory suburbs already resemble ghost towns...

The Communist party is so concerned to buy off trouble that in one case, confirmed by a local government official in Foshan, armed police forced a factory owner to withdraw cash from the bank to pay his workers.

“Hundreds of workers protested outside the city government so we ordered the boss to settle the back pay and sent police armed with machine-guns to take him to the bank and deliver the money to his workforce that very night,” the official said.

On January 15 there were pitched battles at a textile factory in the nearby city of Dongguan between striking workers and security guards.

On January 16, about 100 auxiliary security officers, known in Chinese as Bao An, staged a street protest after they were sacked by a state-owned firm in Shenzhen, a boom town adjoining Hong Kong.

About 1,000 teachers confronted police on the streets of Yangjiang on January 5, demanding their wages from the local authorities.

In one sample week in late December, 2,000 workers at a Singapore-owned firm in Shanghai held a wage protest and thousands of farmers staged 12 days of mass demonstrations over economic problems outside the city.

All along the coast, angry workers besieged labour offices and government buildings after dozens of factories closed their doors without paying wages and their owners went back to Hong Kong, Taiwan or South Korea.

In southern China, hundreds of workers blocked a highway to protest against pay cuts imposed by managers. At several factories, there were scenes of chaos as police were called to stop creditors breaking in to seize equipment in lieu of debts.

In northern China, television journalists were punished after they prepared a story on the occupation of a textile mill by 6,000 workers. Furious local leaders in the city of Linfen said the news item would “destroy social stability” and banned it.

At textile companies in Suzhou, historic centre of the silk trade, sales managers told of a collapse in export orders. “This time last year our monthly output to Britain and other markets was 60,000 metres of cloth. This month it’s 3,000 metres,” said one.

She said companies dared not accept orders in pounds or euros for fear of wild currency fluctuations. Trade finance has all but ceased. Some 40% of the workforce had been laid off, she added.

Nearby, in the industrial hub of Changshu, all the talk was of Singapore-listed Ferro China, which exported steel products to customers in Britain, Germany, Korea and Japan. Last October its shares were suspended.

The company is reported to have been weighed down by $800m in debts and, according to the specialist business magazine Caijing, has started a court-or-dered restructuring.

A researcher found the gates closed and under tight guard, 2,000 employees out of work and witnesses who told of company vehicles being seized by impatient creditors. Holders of Ferro China debt include Credit Suisse and Citi-group.

Even in the city regarded as the most entrepreneurial in China, Wenzhou, the business community is reeling. “We estimate that foreign companies have defaulted on payments for 20 billion yuan (£20 billion) owed to Wenzhou firms,” said Zhou Dewen, chairman of the city’s association for small and medium-sized businesses.

The picture painted is stark. But PRC is a huge country and 100s of minor protests keep happening. As long as they don;t link up, no sweat up Beijing's musharraf.

Singha · Post by **Singha** » 02 Feb 2009 10:50

oink oink the pigs are still feeding...
http://www.usatoday.com/travel/news/200 ... fect_N.htm

'AIG effect' tones down lavish business events

By Barbara De Lollis, USA TODAY

In past years, partners of global executive search firm Stanton Chase conducted business meetings in South Africa during a long trip with their families that included a safari. They also enjoyed Sydney during a gathering at the Australian city's Ritz-Carlton.

But next month, the firm's partners will huddle at a Marriott in the suburbs of Nashville, chosen partly for its access to low-cost Southwest Airlines, says Mickey Matthews, a Stanton Chase executive. The firm is also overlapping meetings to avoid the expense of flying people out twice.

Today, "practical" has replaced "memorable" as the buzzword in high-end business circles. Companies are canceling splashy events and lavish business dinners or revamping the way they plan them. The new mood means drastic changes for employees who've come to expect five-star treatment, as well as hoteliers and travel planners who base their businesses on such meetings and incentive travel trips.

They've even coined a new phrase for the trend: "the AIG effect."

It comes from the embarrassing disclosure last fall that struggling insurance giant American International Group had spent about $400,000 on a retreat at a luxurious St. Regis resort and spa after taking an $85 billion federal bailout. After that, hoteliers saw mass cancellations or postponements of previously booked upscale trips and meetings.

Businesses usually cut back on luxury travel spending in tough times, but new image concerns raise additional worries, says Bjorn Hanson of New York University.

"There's not many companies out there that want to see their name on the reader board in a four-, five-star hotel nowadays," he says.

Smaller checks at dinner

The mood is evident even at business dinners. At Morton's in Midtown Manhattan, where a steak typically costs $50, the average check for business meetings and dinners is getting smaller, says Barbara Rodriguez, the restaurant's sales manager. People are scheduling early dinners or lunches instead of four-course meals, she says.

"They're taking into consideration that they don't have those larger expense accounts anymore," she says.

The incentive travel industry is also being squeezed because the trips — usually held in exotic locales to motivate sales forces — now seem splashy. Brenda Anderson, CEO of the Society of Incentive & Travel Executives, says companies are wary about programs that could invite scrutiny because, "The spotlight is still on looking for examples of how this greed got out of control."

How companies are handling "the AIG effect":

•Choosing lesser-known hotels. Independent luxury hotels such as Boston's Liberty Hotel are gaining business from their big-name rivals. "If you're submitting an expense account, and you get a big Ritz-Carlton or a Four Seasons plastered across the folio, it's going to raise some eyebrows," says Jim Treadway, the hotel's managing director.

One group last month called The James hotel in downtown Chicago to book an $80,000 meeting in February after canceling at an upscale hotel in Las Vegas, says Patrick Hatton, the hotel's general manager. "They didn't want the image of having their meeting in Las Vegas," he says.

•Avoiding waterfront. Miami's high-end waterfront resorts are having a tougher time than inland ones booking groups, says William Talbert III, CEO of the Greater Miami Convention & Visitors Bureau. "Whether it's the Four Seasons, Conrad or Mandarin Oriental, there's a drop-off on booked business," he says.

•Downplaying golf. The upscale Jekyll Island Club resort in coastal Georgia is receiving extra corporate business from groups that want to avoid top-priced golf resorts. The hotel, which charges $200 to $250 a night, has three public golf courses nearby.

"Nobody's going to get in trouble bringing their company here," says Kevin Runner, the hotel's general manager.

•Picking cheaper wines. The James hotel's restaurant, David Burke's Primehouse, now stocks fewer $250 bottles of wine and is replacing some pricey picks with cheaper ones. For example, pinot noir fans will now find a $110 Coho Pinot Noir Stanly Ranch Carneros instead of a $175 Hirsch Vineyards Pinot Noir Sonoma Coast. "People aren't spending on the big wines," Hatton says.

•Staying closer to home. Joyce Landry of Miami-based Landry & Kling Cruise Event Services says she expects companies will choose closer cruise options, such as the Caribbean instead of the Mediterranean: "They're not stopping, but they're being more frugal and careful."

David Ellis, a consultant for a major information technology company, says his company canceled an annual six-day conference this year at the Rio casino and hotel in Las Vegas for the first time in his eight years. Though it wasn't extravagant, many people — including his wife — enjoyed going, he says.

"Most of us looked forward to it for reconnecting to friends, networking (and) getting to know management," Ellis says. In the end, he wasn't shocked, given the economy.

Expectations also evolved at Stanton Chase.

"People have come down a little bit in their expectations," Matthews says. "People recognize that that stuff was outstanding, but it was maybe a little once-in-a-lifetime."

vsudhir · Post by **vsudhir** » 02 Feb 2009 17:37

More global meltdown roundup from Bloomberg.

South Korea’s January Exports Decline by Record 32.8%

South Korea’s exports tumbled by a record 32.8 percent in January, foreshadowing a deepening slump in Asia’s export-driven economies.

Shipments fell by the most since figures were first compiled in 1957, and at almost twice the pace of December’s 17.9 percent decline, the Ministry of Knowledge Economy said in Gwacheon today. The trade report is among the region’s first economic releases for January.

“An outright recession is inevitable,” said Kwon Young Sun, an economist at Nomura International Ltd. in Hong Kong. “This is an early indicator for the region, and the drop suggests exports in Asia won’t be good.”

South Korea’s economy shrank 5.6 percent last quarter from the previous three months, the biggest drop since 1998. Exports are equivalent to 50 percent of gross domestic product.

“Things are getting worse as the global recession spills over to China and other emerging economies,” said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul.

Exports to China, the nation’s biggest overseas market, tumbled 32.2 percent during the first 20 days of January, today’s report showed. Shipments to the U.S. declined 21.5 percent, exports to the Europe Union plunged 46.9 percent and sales to Latin America dropped 36 percent. Exports to the Middle East fell 7.5 percent.

My $0.02: SoKo, arguably the most 'westernized' Asian Tiger, is different from the rest of us SDREs in other ways too, apparently. Household debt in Soko is 150% of GDP, higher than even in America. Korean banks were hardest hit when the crisis hit the fan last october because they'd borrowed heavily in forex to service ballooning loan demand back home, a lot of which right now are sure to sour.

Australia Manufacturing Shrinks 8th Straight Month

About Ozzieland, less said the better. Seems Rudd has been busy blaming the 'neo-liberal' aka free market policies for the meltdown and he now envisions a grand returning to the founding principles of 'social democracy' and the ascendancy of the state. No doubt reds and pinkos everywhere are salivating at the prospect onlee.

Japanese Companies Cry out for Yen Intervention

Japanese companies are “crying out” for the government to sell the yen, whose strength is deepening the worst recession since 1945, an official at the nation’s largest business lobby said.

“The yen is the most critical problem for exporters,” Masakazu Kubota, a managing director at Keidanren, said in an interview in Tokyo on Jan. 30. “Whether the government does it alone or in cooperation with others, they should do something about the yen,” he said. “Industry is crying out for it.”

Apparently, Japanese Industry wants Japan to do a PRC - artificially manage currency. Demand is the problem, exchange rates rank lower.

Chinese Manufacturing Shrinks After Exports Collapse

China’s manufacturing contracted for a sixth month in January as the global recession sent growth sliding in Asia’s export-driven economies.

China is considering extra measures to boost growth, Wen said in an interview with the Financial Times, published today. While declining to explicitly rule out a devaluation of the yuan, he said that the government intended to keep the currency stable at a balanced and reasonable level.

Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, has cut capacity because of waning demand and China International Marine Containers Co., the world’s largest maker of boxes for freight, said profit has tumbled because of the global crisis.

Competitive devaluations specter haunts the horizon. At a time of global contraction, import tariffs never appeared more likely with the Obama admin already ratcheting up the rhetoric war.

vsudhir · Post by **vsudhir** » 02 Feb 2009 18:59

Just how toxic are 'em toxic ass-ets on which the entire bailout plans n hopes, dreams n schemes of the 'western' fin system so rely on?

Risks are vast in revaluing tainted assets

The wild variations on the value of many bad bank assets can be seen by looking at one mortgage-backed bond recently analyzed by a division of Standard & Poor’s, the credit rating agency.

The financial institution that owns the bond calculates the value at 97 cents on the dollar, or a mere 3 percent loss. But S.& P. estimates it is worth 87 cents, based on the current loan-default rate, and could be worth 53 cents under a bleaker situation that contemplates a doubling of defaults. But even that might be optimistic, because the bond traded recently for just 38 cents on the dollar, reflecting the even gloomier outlook of investors.
...
The bond is backed by 9,000 second mortgages used by borrowers who put down little or no money to buy homes. Nearly a quarter of the loans are delinquent, and losses on defaulted mortgages are averaging 40 percent. The security once had a top rating, triple-A.

The rating agencies were a total fraud and scandal. Even junior traders knew these AAA ratings on so many bonds were doubtful at best and yet there was no collectuive incentive to act against the situ when something meaningful could've been done.

This is what uber econ blogger CR writes on the above article:

To be worth even 38 cents on the dollar, this must be a senior tranche. The lower tranches have absorbed most of the losses so far, and that is why S&P is currently valuing the bond at 87 cents on the dollar, but any higher default assumptions, and the value of this bond will plummet. I'm amazed, given that these are no money down 2nds that the loss severity is only 40 percent.

But this illustrates the problem. If the bank marks the bond to market (38 cents), they will have to take huge losses. But if the government even pays the current S&P estimated value, the bank will have to write the bond down further, and the taxpayers will probably take huge losses too. Unless a bank has been very aggressive with their write downs, buying the toxic assets doesn't help - or is a gift from taxpayers to shareholders.

The article is excellent and covers several other related topics.

Link

vsudhir · Post by **vsudhir** » 02 Feb 2009 19:06

Depression Economics: four options (Brad DeLong)

Recommended read for the brevity, simplicity, clarity and non-jargonized exposition it contains.

And yes, certainly lends perspective to where we are, were and are heading towards.

Ensoi.

Raghav K · Post by **Raghav K** » 02 Feb 2009 22:17

Now its the turn of Japan and the Yen.

http://www.nakedcapitalism.com/2009/02/ ... abyss.html

IT’S A DEPRESSION IN JAPAN – ALREADY – PURE AND SIMPLE.

THERE HAS NEVER BEEN DATA THIS BAD FOR ANY MAJOR ECONOMY – EVEN IN THE GREAT DEPRESSION. December industrial production came in down 9.6%, worse than the METI forecast. It is now down almost 21% year over year. METI forecasts a further 4.7% decline in February. The inventory to production ratio soared again. Maybe METI will be correct.

Singha · Post by **Singha** » 02 Feb 2009 22:50

http://www.pressdemocrat.com/article/20 ... _workforce

another old Tellabs is slowly slipping away...vital signs not good.

vsudhir · Post by **vsudhir** » 03 Feb 2009 07:37

Among Asia Times writers, I particularly like Chan Akya and Spengler, even though I don;t always agree with them.

Keynesian bomb is ticking (Chan Akya)

Chan argues that an inflationary spiral looms and goes dramatically against what other meltdown pundits see as deflation flat and stable for yrs to come (e.g., Mish Shedlock, CR etc). Perhaps the US will be spared high inflation despite printing enough money to beat all previous bailouts put together but countries cared for by lesser g0ds won't be as lucky.

Even as the scale of this loss appears overwhelming, it stands at a mere 4% when considered against the total debt figure quoted in the previous paragraph. To paraphrase the old joke about Russian communists [1], surely the world economy cannot have stopped spinning just because banks lost 4% of their assets? The answer is most certainly that the actual scale of losses is more likely to be in the region of 30-40%. Not to put too fine a point to the proceedings, this is the developed world bankrupt many times over, but that statement has an implicit assumption on the maintenance of purchasing power on the part of the US dollar or indeed other "hard" currencies such as the euro and yen.

Governments ranging from those in Britain and Germany all the way to the US have already injected hundreds of billions into their banking systems; guaranteeing capital positions and even asset quality in the process; all this in reaction to these institutions wiping out barely 2% of their total assets. To say that their ability to take further losses is fairly limited would be the exaggeration of the day. Much like the understated losses of insurance companies
and pension funds, the rest of the system will also have to absorb the losses of the "zombie" companies and individuals in one fashion or another.

The honest way to do this would be to write off the debt and the capital of all financial companies and start all over again with vastly shrunk monetary bases: however no liberal democracy - much less autocratic dictators - can withstand wave upon wave of deflation that this entails. The opposite therefore must be true: a burst of inflation that helps to reduce the purchasing power of money while effectively reducing the difficulty associated with servicing mountains of debt. This is all good for the people who have to repay their borrowings, but what about those who own the assets, that is, the lenders?

Which brings him to his favorite line (and one I agree with for the most part, btw)

The "cure" of inflation would be a whole lot worse than the "disease" of the credit crunch as far as Asian savers are concerned. It is well nigh time to junk all financial assets belonging to the Group of Seven leading industrialized countries and re-embrace the historic investment of choice for the region: gold.

vsudhir · Post by **vsudhir** » 03 Feb 2009 16:27

x-post

R Vaidya wrote:-- End of west –Asia as New Power

http://www.dnaindia.com/report.asp?newsid=1227165

Rvaidya

Whether or not one agrees with the implied linear extrapolations w.r.t. population figures, the following are of note and mention-worthy.

The ageing of the developed countries, coupled with a desire of the labour class, including white collar workers, to work for lesser hours, is creating a catastrophe.
This is the nature of the crisis. The labour force will be extremely scarce and expensive in the developed world. The elderly will also demand better protection, and the state will spend all its money to become the new caring "child" for these old people.

Since societal norms (in terms of caring for the elderly by the off-springs, etc) have gone for a toss, the aged are the responsibility of the state, and this implies more taxes and a lesser amount available for other activities of the state. Hence, there is a massive crisis in "social security" funds in Europe and the US.

Hence, the pension funds and other funds were looking for larger return in emerging markets. In other words they have to earn for the elderly in the developed world and also attempt to reduce risk. Hence they were creating products which were "supposed" to reduce risk by diversification and also create institutions that provide one-stop solutions or what could be called womb-to-tomb solutions. Only, these are not solutions as much as problems.

And finally, an interesting if unlikely possibility:

In that context, the growth rates of India and China are like dream rates. Both have a huge domestic market and both have ancient civilisations favouring families and trust. It is imperative that civilisations such as India (12th largest economy), China (third largest) and Japan (second largest) should come together to set up a new world order which is non-Abrahamic in nature and which is focused on conflict avoidance and conflict resolution when the clash of civilisation is taking place among the others.

The Indian, Chinese and Japanese civilisations do not have words like jihad or crusade or heathen or kafir or pagans, which are used to essentially communicate a world view of "My way or highway."

The economic axis has shifted to Asia and it is important that Asia seizes the initiative to steer the world towards a new economic order based on family values, savings and inter-temporal equity. The new economic architecture should be evolved in New Delhi, Tokyo and Beijing.

vsudhir · Post by **vsudhir** » 03 Feb 2009 23:28

x-post

Good summary.

For argument's sake, lemme stake a contrarian position.

Why is the Demographic theory false?

Its not definitively clear that it is false.

What the population projections do show, regardless of whether next gen jobs will be age-neutral, is that dependency ratios change - the number of vey elderly folks who'll need to be supported either by their (declining numbers of) children (don't count on that happening in the G7) or by the nanny state (Aha!).

And even though age-profiles may not matter greatly to employment, they do to consumption patterns. Families with young children traditionally spend the most. And since their productive lives are just beginning, they borrow from the savers (the retired set) to finance their consumption but are then able to repay in sue course. The problem with dependency ratios shifting is that there're too many in the old age bracket, historically a rare if not unprecedented occurrence. (IOW, wouldn't count too much on history to guide us to the future here).

Also, IIRC many first world countries have been busy giving all sorts tax breaks, longer maternity leaves and even direct cash transfers etc to encourage their people to breed. Sounds suspiciously like they've gotten too successful at controlling their numbers downwards, perhaps.

We are not going to get prosperous working long hours for low wages.

True.
But that would depend on what 'low' means, no?

Fact that someone is doing a job that you or I might consider low paying and long-hours means that person's 'outside options' in the employment scene weren't more attractive, IMHO.

And yes, even the genteel first world endured low n long type work for decades before they made their way to prosperity. Not sure how we can skip that part (where the extant population finds improving employment opportunities, even if those opps aren't what the upper middle class would consider grand jobs) and arrive at first world status. Note, I don't suggest that we can't shorten the interval or otherwise improvise, just that we can't skip this phase entirely.

BTW, here's from Spengler, writing cheekily in atimes - perfectly suited for this discussion:

Dear Spengler,
I am the leader of the world's most populous country. The export-driven model that has driven our economy is in trouble due to a sharp contraction in other countries. We are investing a great deal in domestic economic stimulus, but I am not sure it will do the trick. What else can we do?
Baffled in Beijing

Dear Baffled,
For one thing, you could rescind the one-child policy. That will produce an immediate economic boom. Your people save about half their income, more than anyone else in the world. They need financial assets because they will have no children to care for them in old age. With unemployment rising, pre-cautionary saving will increase. Now that world trade is shrinking, your people should be saving less and spending more. No amount of government spending can replace voluntary spending by individuals, as your counterpart in Washington
is about to find out. Family formation is the wellspring of demand. It is also the wellspring of human happiness. It is cruel and oppressive to stop your people from bringing children into the world, quite apart from the harmful economic consequences, and restoring freedom to families will do wonders for political stability.

A life-cycle malfunction
Dear Spengler,
Recently, I became the chief executive of the world's only hyperpower, and inherited a terrible economic recession
from my predecessor. My advisors tell me to spend a trillion dollars on public works and other government programs, and another trillion or two bailing out financial institutions. They tell me that I have to do this to stop home prices from crashing. Will this get the economy moving in time to get me re-elected four years from now? And if not, what else should I do?
Worried in Washington

Dear Worried,
You're in more trouble than you think, but there's a silver lining: the crash of home prices is the best thing that could happen to your country. Let me explain.

This is not a business cycle, but a life-cycle malfunction. The baby boomers imagined that home prices would keep doubling every 10 years, and that one day, each of them would sell his house to his neighbor and retire. This silly idea contributed to a bubble in home prices. America's personal savings rate was zero for the past 10 years, because as long as home prices were rising Americans did not think they needed to save. Now that home prices have collapsed, the boomers are short 10 years' worth of savings and are desperate to catch up. If everyone saves rather than spends at the same time, of course, the economy will shut down. As I warned your opposite number in Beijing (see above), no amount of government spending can replace voluntary spending by households.

Your problem is that nervous retirees are making most of the decisions, rather than young families. The trouble is that America is getting grayer. People with young children are spenders rather than savers. Young people take risks, and old people buy insurance. Your country needs more children. Demographic dearth is the root cause of the economic crisis. Too many aging people tried to accumulate too many assets, and created the biggest asset bubble of all time.

Lower home prices make it easier for people to start families. The housing price crash transfers wealth from old people to young people. That's exactly what you want to happen.

Rather than spend a trillion dollars to keep overpaid construction-union members busy in infrastructure projects, offer enormous tax cuts and subsidies to young families. Increase the per-child deduction to $20,000, and let low-income taxpayers deduct it against payroll taxes. Subsidize mortgages for families with children.

And if you really want to send a message to America, propose a constitutional amendment to reverse Roe versus Wade. Making sex a contact sport rather than a part of life that includes marriage and babies was the beginning of the problem. It's not enough to tinker with tax incentives, although that surely will help. Americans need to change their own outlook about life. A pro-life Democratic president with a family friendly economic recovery plan would be unbeatable.

OK. Again, not looking for simplistic answers and quite realize that the truth likely lies somewhere in between. But yes, wouldn't rush to condemn other, complex ideas out there as definitively false or demonstratively unsound (sans any demonstration) etc.

Singha · Post by **Singha** » 03 Feb 2009 23:34

Motorola has reported a $4.3b loss and CFO is quitting. more cost cutting has
been promised. it seems they have around 8 OSes for their cellphones but will
stop everything else and focus on android platform only.

Vick · Post by **Vick** » 04 Feb 2009 06:25

Only Makes You Stronger

Indeed, many critics of both capitalism and the "Anglo-Saxons" who practice it so aggressively have pointed to what seems to be a perverse relationship between such crises and the consolidation of the "core" capitalist economies against the impoverished periphery. Marx noted that financial crises remorselessly crushed weaker companies, allowing the most successful and ruthless capitalists to cement their domination of the system. For dependency theorists like Raul Prebisch, crises served a similar function in the international system, helping stronger countries marginalize and impoverish developing ones.

Singha · Post by **Singha** » 04 Feb 2009 16:12

fascinating details here:
http://www.nytimes.com/2009/02/03/busin ... anted=1&em

Wall St., a Financial Epithet, Stirs Outrage

By DAVID SEGAL
Published: February 2, 2009

Monday was the last day of Iris Chau’s 11-year career at JPMorgan Chase and she says there’s a lot she’ll miss about the job, including her colleagues, her paycheck and her role managing a technical support team. But one thing she won’t miss about JPMorgan: telling people that she works there.

Emanuel Pleitez previously worked for Goldman Sachs and is now running for Congress in Los Angeles.

“For a long time, it was kind of glamorous and I had friends who’d ask me ‘Can you get me a job there?’ ” says Ms. Chau, 35, who was part of a recent round of layoffs at the firm’s Manhattan headquarters. A few weeks ago, she mentioned her work to a photographer she’d met through a friend. “And he looks at me and says, ‘Oh, you’re one of them.’ ”

Nobody in the investment banking world is expecting pity, or even a sympathetic ear, these days. But while the rest of the country fumes over the billions spent on government bailouts and year-end bonuses, the financial industry is focused on its new role as national pariah and its own lengthy list of anxieties.

There are the endless rounds of corporate implosions to sweat. There is the widespread sense of being unfairly singled out for vilification in a crisis that a host of players helped create — among them homeowners, who were only too happy to feast on the bounty that Wall Street helped cater in the flush years.

On top of all that, there is a lot of wincing about the profession’s catastrophic loss of cultural cachet. Wall Street has become a target of populist rage, raw material for talk-show tirades, the occasional street protest and a lot of punch lines.

A recent political cartoon in The Record, a newspaper in Hackensack, N.J., shows rats fleeing a sinking ship, labeled “Wall Street,” with treasure chests held aloft tagged “CEO” and “Bonus.” There are “I Hate Investment Banking” T-shirts for sale online. Last week on “The Daily Show,” Jon Stewart rolled a clip of John A. Thain, Merrill Lynch’s chief executive, defending bonuses as a way to keep “your best people.”

“You don’t have ‘best people’!” Mr. Stewart shouted. “You lost $27 billion! Do you live in Bizarro World?”

All of this has taken a toll on the few industry veterans willing to discuss the subject.

“I’d almost rather say I’m a *****,” said a retired Wall Street executive who, for self-evident reasons, asked not to be identified. “At least that’s a business that people understand.”

Financiers tell their not-for-attribution account of the mortgage crisis like this: Americans undersaved and overspent for decades, relying on rising property values to bankroll their lifestyles. But nobody on Wall Street forced United States homeowners to take out loans on houses they couldn’t afford, or refinance mortgages to spend money on cars they shouldn’t have bought.

The esoteric securities underneath the current mess are, to the people who invented and marketed them, analogous to pharmaceutical drugs. Used correctly, they can enhance your life. Abused, they are lethal.

Of course, mistakes were made on Wall Street, says Emanuel Pleitez, a 26-year-old former Goldman Sachs employee who resigned from his job a few months ago to run for Congress in his hometown, Los Angeles. But to a great extent, he says, those mistakes were born of misplaced trust.

“Look, you can talk about collateralized debt obligations all day long,” he said, referring to a type of asset-backed security that has turned famously toxic. “But there were ratings agencies that were supposed to tell us how risky these securities were. We essentially closed our eyes and said, ‘O.K., you say this is rated triple-A, fine, I believe you.’ ” In hindsight, he said, “Everyone should have been more skeptical.”

You hear a lot about the failure of regulators, too. But it’s difficult to find anyone in the financial trenches who thinks the problem is Wall Street itself. Difficult, but not impossible.

“People say ‘Well, the Fed is to blame because there was all this loose money,’ ” said Luis E. Rinaldini, a former partner at the investment banking firm Lazard Frères, now at the merchant bank Groton Partners. “But guys who run banks are paid to be cautious when there’s loose money around.”

“I mean, if you had a bus driver who went 100 miles an hour on an icy road, you’d think he was crazy,” he adds. “But if his boss said, ‘It’s our policy to drive faster as the roads get icier,’ you wouldn’t be surprised if the boss ended up in jail.”

By historical standards, this is not Wall Street’s worst bout of infamy, though it might come pretty close. Last week, President Obama branded Wall Street bankers “shameful” for giving themselves nearly $20 billion in bonuses, even though the average bonus, $112,000, was down by 36.7 percent from the prior year.

That criticism isn’t quite the buggy whippings that Franklin Delano Roosevelt routinely gave “unscrupulous money changers.” And the recent rallies in front of the New York Stock Exchange — with chants of “You bought it, you broke it” — are downright peaceful compared to the 1920 bombing of J.P. Morgan’s offices, which killed more than 30 people

Still, if your business card bears the name of an investment bank — or did before you were laid off — odds are good you’ve endured some very awkward moments of late. Stephen Chen, a former vice president in equity research at Bear Stearns, heard a lot of sarcastic comments when he went home to the Bronx for Christmas, where his family of 36 gather each year. When the story of another bank closing was broadcast on a TV, a cousin muttered, “Good riddance.”

“A lot of my family are small-businessmen who own restaurants and Laundromats,” Mr. Chen said. “They just see Wall Street as overpaid and they don’t have a very clear idea of what it does. I try to explain that there’s this intimate connection between Main Street and Wall Street, that banks were created to provide liquidity for small businesses, so they can expand.” His relatives listen, but seem unconvinced, Mr. Chen said. “It’s kind of tiring having the same conversation over and over again.”

The irony is that despite public perceptions, the outcry over Wall Street greed is happening just as the firms are getting stingy. At JPMorgan, Ms. Chau said, management clamped down on office supplies to the point where employees now need to ask a secretary for the key to the supply room for pens.

At the San Francisco branch of Goldman Sachs, the days of free soy milk and Diet Cokes are over, and one day, the water cooler was wheeled right out of the office. “Word went around pretty quickly,” says Mr. Pleitez. “Bring your own water.”

And for all the talk about taxpayer-financed bonuses, a lot of junior and midlevel executives have been told that they shouldn’t expect anything but their salaries this year. In a business where your bonus is often five times your base pay, that’s devastating news. And we’re talking about a line of work in which virtually all satisfaction is paycheck-dependent.

“Fact is that this is a terrible way to make a living — except for the money,” Ken Miller, a former vice chairman at Credit Suisse First Boston and now a private investor, said. “The lifestyle is terrible — the hours, the sucking up. These guys must feel like they’re the victims of a capricious god.”

That’s especially galling to the many in investment banks who had nothing to do with the mortgage end of their company’s business. Maria Anguiano, who works in Barclays’ municipal finance department, has yet to hear if she is getting a bonus this year, but she thinks she deserves one, given the millions her department earned.

“If you just take your base home, the question becomes, why not just work at a nonprofit from 8 to 4 instead of a bank where you’re expected to work weekends and every night till 10 or 11?” (yeah why not punk?) she said.

Ms. Anguiano isn’t the only one asking that question. As money and prestige drain out of Wall Street, and as layoffs mount, other careers are starting to seem more appealing. Mr. Chen has helped start a retail company, GreenSoul Shoes, that sells sandals made by Cambodian villagers out of discarded rubber tires. He calls it a for-profit business with a social mission.

Ms. Chau, a friend, is going to be joining him soon.

To some longtimers in the industry, this reordering of priorities is overdue. Robert J. Birnbaum, the former president of the New York Stock Exchange, sees an upside to Wall Street’s diminished reputation.

“It’s taken a hit, but so what?” he said. “We don’t need all the bright people going to Wall Street, chasing money. There’s a lot of things bright people can do. Like find a cure for cancer.”

Singha · Post by **Singha** » 04 Feb 2009 17:26

panasonic to reduce by 15k i.e. 5%
http://www.nytimes.com/2009/02/05/techn ... ic.html?hp

Singha · Post by **Singha** » 04 Feb 2009 17:27

angels flee from tech startups
http://www.nytimes.com/2009/02/03/techn ... el.html?em

vsudhir · Post by **vsudhir** » 05 Feb 2009 02:02

Am sure its old news by now, but for the record, Toyota, Ford and GM announce 30, 40 and 50% drops in Jan'09 auto sales. The good news is that they're now likely closer to the bottom than to the 'normal' sales level.

The dealerships will face major turbulence, IMO. Many may have to close impacting local economies esp in smaller towns around cities hard. Not festive times at the balloon-decorated dealerships these days.

BTW, the largest component of US consumer price inflation (CPI) index i.e. Ownership eqvt rent dropped to -5% in Dec'08 indicating that in the coming months the CPI itself may turn negative onlee.

CS-CPI Sinks To Negative 5 percent

This is what one blogosphere guru (Mish Shedlock) says:

OER is a process in which the BEA estimates what it would cost if owners were to rent the homes they own from themselves. OER is not a valid pricing barometer.

By ignoring housing prices, CPI massively understated inflation for years. The CPI is massively overstating inflation now.

Real interest are very high even at zero percent!

ss_roy · Post by **ss_roy** » 05 Feb 2009 02:15

Nice to see that reality is catching up with my predictions.. but wait.. the ride has only just begun.

vsudhir · Post by **vsudhir** » 05 Feb 2009 03:55

ss_roy wrote:Nice to see that reality is catching up with my predictions.. but wait.. the ride has only just begun.

Welcome back.

Looking fwd to some more predictions from you - good, bad or ugly - abt where things are headed and why.

Raghav K · Post by **Raghav K** » 05 Feb 2009 04:10

California's credit rating cut to lowest of all 50 states
http://latimesblogs.latimes.com/money_c ... -cred.html

California today was branded the worst credit risk of all 50 states, after Standard & Poor’s cut its rating on the state’s debt because of the budget impasse.

S&P lowered its rating on the state’s $46 billion in general obligation bonds to "A" from "A-plus," citing "the state's inability to reach an agreement on a mid-year budget revision and its rapidly eroding cash position."

Until now, California and Louisiana had been tied for last place, at "A-plus," on S&P’s state ratings list. Most states are rated either "AA" or "AAA."

John Snow · Post by **John Snow** » 05 Feb 2009 04:29

About two and half months I predicted economic contraction and Dow hovering around 8000, sorry to report its below 8000.

ss_roy · Post by **ss_roy** » 05 Feb 2009 04:55

I took a little hiatus from this thread because I was tired of arguing with people who think that everything in the west is good and everything in India is bad (and always will be bad). The reality is much more complicated.

One should not argue with fools as the audience might not be able to tell the difference. An observation- indian and puki muslims are most likely to be pessimistic about the abilities of indians. I wonder why... *S* (projection?)

Having said that..

1. The world has entered what I consider to a depression-like situation. This situation is unlike GD1 and is therefore not GD2. I prefer to see this event, like some others, as "The Great Unwinding 1.0".

2. The events of the last month (jan 09) have almost sealed the fate of the worlds economy, and now I have little doubt that we will have an economic collapse (followed by an rearrangement).

3. While the collapse of the present system is certain, the shape and form of its replacement is less clear. If Indians wanted to, they could shape the emerging system to their advantage.

4. UK is toast! It will have a much reduced role in any new system. UK, after WW2,was always a minor player who was given too much deference by Indians.

5. China will have to spend more time controlling its own citizens than expanding its sphere of influence. I had always said that unless china expanded its own consumer class rapidly, it would not end well for them. Do not be surprised if there is a 40% drop in their industrial output and 40-50 million unemployed people within 8 months. Without an established social safety net, it will get ugly!

6. Do not be surprised, if the internal situation in TSP, deteriorates to the extent that a few loose nukes end up in indian cities. I hope it does not happen, but the chances are quite high (especially after 6-7 months of economic chaos).

If India was run by "adults", it could exploit this situation quite well. But the reality is.. you know. I have a feeling that only a rude awakening by some external disturbance will make Indians change their ways of thinking.

I will write more about the nature of money in the modern world, and it's link to wealth, belief, authority, attitudes and consumption.

vsudhir · Post by **vsudhir** » 05 Feb 2009 07:39

Interesting.

I think the next big question now is that when (and if) will the bond market freeze up?

The fact that banker bandits have decamped with bonuses and compensation outta bailout money at the earliest available opportunity (end 2008) despite nearly all banks and fin firms going deep into the red suggests nobody among insiders believes its worthwhile staying on into 2009?

NYC restaurants stop playing hard to get

Well, its always good to wake up and smell the coffee. And yup, the speed of the response/ change in attitudes and exclusivity is indeed laudable. Expect more wake up calls and attendant changes in attitude happening the world over including in India. Just keep the government out of it, that will never change.

arnab · Post by **arnab** » 05 Feb 2009 07:52

Please read

http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/88735.pdf

RBI Governor's address - nice summing up (though still a bit vague about the impact on India). Though don't know whether the G is an 'adult' or 'believer in India'

Some excerpts:

Emerging economies may be the sole contributors to global growth in 2009, but they too are hit
hard by the crisis. Ironically, even as late as six months ago, it was intellectually fashionable to
subscribe to the 'decoupling theory'– that even if advanced countries went into a downturn,
emerging economies will at worst be affected only marginally, and can largely steam ahead on
their own. In a rapidly globalising world, the decoupling theory was never totally persuasive; given
the evidence of the last few months - capital flow reversals, sharp widening of spreads on
sovereign and corporate debt, and abrupt currency depreciations - the decoupling theory has
almost completely lost credibility. Growth prospects of emerging economies have most definitively
been undermined by the ongoing crisis with, of course, considerable variations across countries.

****

India too is having to weather the negative impact of the crisis. Even as consumption and
domestic investment continue to be the key drivers of our growth, India's integration into the world
has been on the increase. Going by the common measure of globalisation, India's two way trade
(merchandise exports plus imports), as a proportion of GDP, grew from 21.2 per cent in 1997/98,
the year of the Asian crisis, to 34.7 per cent in 2007/08. If we take an expanded measure of
globalisation, that is the ratio of gross current account and gross capital flows to GDP, this ratio
has increased from 46.8 per cent in 1997/98 to 117.0 per cent in 2007/08. These numbers are
clear evidence of India's increasing integration into the world economy over the last 10 years.

****

The Indian banking system is not directly exposed to the sub-prime mortgage assets. It has very
limited indirect exposure to the US mortgage market, or to the failed institutions or stressed assets.
Indian banks, both in the public sector and in the private sector, are financially sound, well
capitalised and well regulated. Even so, India is experiencing the knock-on effects of the global
crisis, through the monetary, financial and real channels. Our financial markets – equity markets,
money markets, forex markets and credit markets – have all come under pressure mainly because
of what we have begun to call 'the substitution effect'. As credit lines and credit channels overseas
went dry, some of the credit demand earlier met by overseas financing is shifting to the domestic
credit sector, putting pressure on domestic resources. The reversal of capital flows taking place
as part of the global de-leveraging process has put pressure on our forex mar

*****

The outlook for India, going forward, is mixed. There is evidence of economic activity slowing
down. At the same time, headline inflation, as measured by the wholesale price index, has fallen
sharply, and the decline has been sustained for the past three weeks, pointing to a faster than
expected reduction in inflation.

*****

Following the Asian crisis, East Asian countries built up huge
reserves as a deliberate policy of self insurance. China and India too built up reserves, with an
important difference though. China's reserves derive from current account surpluses and are
therefore an unencumbered asset, whereas India's reserves have been built up from capital flows,
and are therefore encumbered by liabilities.

****

Satya_anveshi · Post by **Satya_anveshi** » 05 Feb 2009 08:54

Obama Pushes Congress to Complete Stimulus Package

“Let’s not make the perfect the enemy of the essential,” Obama said while acknowledging criticisms of the plan. “A failure to act and to act now will turn crisis into catastrophe and guarantee a longer recession.”

when did we hear that before?....yes, when Herr Paulson made a complete fool of the US congress and got almost dictatorial powers for himself on the $350 billion loot

His comment came as the administration announced plans to require some financial companies that get government aid to cap future compensation of top officials at $500,000 a year.

This is a great step and I recommend that it be extended to all institutions (financial or otherwise) that take *any* aid under bailout program. This single measure will have profound effect on a community that has loads of bright & smart people with financial prowess but just couldn't get to reach the top. Now they can

and yes, they don't mind meager $500K per year package

“It’s not enough to say these bonuses are wrong -- they must be paid back,” Wyden said.

==

ss_roy · Post by **ss_roy** » 05 Feb 2009 12:41

Sorry to disappoint you, but China cannot be paid of without a combination of sovereign default + loan "readjustments" + inflation. India on the other hand... can be paid off..

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

Following the Asian crisis, East Asian countries built up huge
reserves as a deliberate policy of self insurance. China and India too built up reserves, with an
important difference though. China's reserves derive from current account surpluses and are
therefore an unencumbered asset, whereas India's reserves have been built up from capital flows,
and are therefore encumbered by liabilities.
-----------------------------------------

vina · Post by **vina** » 05 Feb 2009 13:30

Yup agree SS Roy. The Chinese are going to be screwed anyway when the US inflates its way out of the trouble by printing paper dollahs and dropping the value of the currency.

The way to prevent that and cover the Mushrraf is to go and buy REAL assets in US with all the paper IOUs they have with the US. The Chinese should go and buy up the top companies in the US that are available at distressed prices RIGHT NOW. Go buy out the oil companies, the Alcans, many utilities, pipeline companies etc. etc. Buy up GM and Ford , rather than pour money and try to build Chery and Geelly and other rubbish. You get access to real huge billions of cash flow and use the paper Wampum to buy out all the union contracts and health care liabilities and turn around the company.

Yeah, the math will work out fine, especially when you know that you are going to suffer massive losses in value on your paper currency. The secret is to turn wampum in to real assets like those shrewd Hong Kongers who are right now turning their " Hong Kong Dollah" into gold bars! Forget about what folks like wrdos and others say . Look at what the smart guys with insider info are doing on the ground.

It will be win win for both. Massa's "asset price deflation" "problem" will be taken care of and Chinese get to preserve the value of atleast some of their "Wam Pum".

Now the JNU ding dongs can come on board and answer questions on why should the average chinese abduls blood, sweat and toil and tremendous sacrifice should go to buy America Wampum? .

The Wall St guys will be salivating at the though of $1T worth of M&A. But such is life. No other way out for the Chinese. OH, they can buy the best assets anywhere from any fool willing to exchange real assets for dollah wampum. The Australians come right to my mind. Buy the iron ore and coal mines in Australia and give them Sheep Shearers and Ex Convicts 'Murican Wampum

Singha · Post by **Singha** » 05 Feb 2009 14:02

aint gonna happen. Congress will block it. they have even unofficially blocked huawei from buying part of nortel which is a canadian co. dubai port trust was not allowed to take over ports.

the chicoms have done enough to leave a deeply paranoid scar on the
american psyche. so gaining that level of trust to safekeep the family jewels is possible no more.

they can buy land in north dakota or nebraska but it wont do them good. massa has no lack of cheap land that never needs to be used.

vsudhir · Post by **vsudhir** » 05 Feb 2009 16:03

Assets in Eurozone are pretty much deeply distressed too. Gordown Brown was a case-study in fawning and chaaploosi when Senor Wen Jiabao came visiting 2 days back and a shoe nearly missed the wannabe deal leadel.

Seem to me the same UKstan that's currently desperatel;y flailing around for cash, and afew months back quietly sold away legal claims to tibet to PRC in exchange for a song would be more than willing to let go of its prime assets now...wouldn't it

I suspect PRC can start by buying up prime EU assets starting with UKstani ones - Rolls Royce with its high tech, HSBC with its global footprint, Unilever corp as well maybe (?) and who knows - British Aerospace and British Airways too, eh?

Watch this space!

vsudhir · Post by **vsudhir** » 05 Feb 2009 17:24

Alrite, janta....brace up onlee....

The Treasury said it would sell $67bn (£46bn) in new securities next week, the largest ever quarterly refunding, beating the last peak in August 2003. It may also start monthly sales of all its benchmark Treasury securities. At the end of February, the Treasury will start selling seven-year notes every month for the first time since the issue was discontinued in 1993. Sales of 30-year bonds will double to eight times a year and the Treasury will say in May whether the bond will be sold every month.

For Barack Obama’s administration, the step-up in borrowing costs comes as it is fighting to secure an $800bn-plus fiscal stimulus, and is likely to need many hundreds of billions more to fund a banking sector clean-up. The Treasury Borrowing Advisory Committee expressed concern on Wednesday over the sharp jump in net borrowing needs – which market analysts estimate could reach $1,500bn to $2,500bn for the 2009 financial year.
...
Traders are particularly concerned about the appetite for Treasuries among foreign investors, who hold more than half the outstanding $5,500bn in Treasury debt.

In recent years, demand for US government debt has been stoked by developing countries running huge trade surpluses with the US and recycling dollars by buying Treasuries. However, many are facing growing pressure to stimulate their own economies and are seeing their current account surpluses decline as global demand diminishes.

Link

The great bond mkt shakedown moi feared creeps ever closer. Of course it may yet take a while or may not happen at all (lez hope!) but the signs are ominous. Consider this factoid:

The 30yr yield increased from 2.83 on Jan 02 to 3.65 on Feb 4 - that is almost +30% in a month

Now linear projections with economic quantioties in interesting times is fraught with risks but the direction if not the trend seems clear onlee...

abhischekcc · Post by **abhischekcc** » 05 Feb 2009 17:35

China has too many dollars that the US refuses to be used to buy American property.

OTOH, the US has a lot of property that is in need of purchase.

A classic case of politics interfering with business.

-----------------------
PS. I just wonder when the US is going to default

ss_roy · Post by **ss_roy** » 05 Feb 2009 18:59

They are unlikely to default in a conventional way.. think debt monetization and backroom agreements for debt "adjustment". Outright default is the last option. But they will have to do something about the debt, as it cannot be paid back!

India can benefit from this situation by buying agricultural companies + medium size tech companies (preferably through carefully concocted US-Indian business entities). They might not sell their jewels right now, so start with a foothold

PS. I just wonder when the US is going to default

ss_roy · Post by **ss_roy** » 05 Feb 2009 19:35

An interesting and relevant blog (wrt asian economies)

http://blogs.cfr.org/setser/

Singha · Post by **Singha** » 05 Feb 2009 19:48

"the Day of the Dog" will come. all hell will break loose for a while after that inflexion point as people run around trying to find both their heads and backsides and separate the two

those who manage the chaos & violence better will emerge as the world powers of the new 'System' to replace the ruins of the old.

those who spend too much cycles in moralpolitik, self-deceit and delusions about the world at large will slip into the darkness for hundreds more years and crumble...

abhischekcc · Post by **abhischekcc** » 05 Feb 2009 20:00

Singha wrote:"the Day of the Dog" will come. all hell will break loose for a while after that inflexion point as people run around trying to find both their heads and backsides and separate the two

those who manage the chaos & violence better will emerge as the world powers of the new 'System' to replace the ruins of the old.

those who spend too much cycles in moralpolitik, self-deceit and delusions about the world at large will slip into the darkness for hundreds more years and crumble...

And now this takes place

Security Council reform talks to start in February

I wonder how long the old alignments are going to hold

The west is losing financial as well as political power simultaneously.

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

Mr. ss_roy,
I understand that an outright default is highly unlikely, given that US has more to lose from such a situation.

However, I was thinking that US will try to solve its twin problems of pension obligations and national debt through this crisis.

That's just my opinion. Don't hang me for it

ss_roy · Post by **ss_roy** » 05 Feb 2009 20:10

They cannot get out of the problems caused by pension obligations, national debt and personal debt even if they default on soverign debt. It would, infact, make it worser as their existence is based on the ability to borrow from the rest of the world.

However, I was thinking that US will try to solve its twin problems of pension obligations and national debt through this crisis. That's just my opinion. Don't hang me for it

Raghav K · Post by **Raghav K** » 05 Feb 2009 21:30

Former Prime minister of Australia speaks out.(Nice one as he talks about India and China in NWO)

http://www.abc.net.au/lateline/conte...8/s2480345.htm

TONY JONES, PRESENTER: Joining us now in the studio is the former Prime Minister Paul Keating. Thanks for being here.

PAUL KEATING, FORMER PRIME MINISTER: Tony.

TONY JONES, PRESENTER: Now let's start with a very big picture, if we can, does this global financial crisis look to you like a two year crisis, a five year crisis, or something much worse, and much more prolonged?

PAUL KEATING, FORMER PRIME MINISTER: Well, it's a catastrophe, its way worse than it appears. We have had an expansion of credit running for 60 years from 1947 to 2007. This is the first time, 2008, and now 09, where we have had a contraction of credit.

The top 200 financial institutions in the world have suffered an average loss of value of 74 per cent. The top 200, average loss of 74 per cent. We have gone through a bull market which began in 1982, went for 25 years, a bull market in the stock market to 2007.

What we need is a completely new global political and economic settlement. We need to get rid of the old G7. We have to be rid of the old IMF (International Monetary Fund), we've got to bring the surplus countries into the, into the political framework.

You see, the G7 is made of debtor countries, countries like the United States, Britain, France, Italy, these are all borrowers, there's no surplus countries in that. And if you look at the structure of the IMF, the Chinese get 3.7 per cent of the vote, the Indians get 1.9, the Europeans and Americans get 51 per cent.

And there's just no way the Chinese Communist Party is going to hand over control of their currency and their political fortunes to a Washington based US Treasury run institution. So unless there's going to be a complete resettlement.

TONY JONES, PRESENTER: You talk about a new Bretton Woods agreement?

PAUL KEATING, FORMER PRIME MINISTER: A totally new Bretton Woods agreement. We're not going to get out of this. I mean this is the United States Budget cannot reflate the world.

We've always lived in a position where the United States Budget could reflate the world this is not going to happen now. The Budget this year was going to be $850-billion, now look President Obama is talking about another trillion, so $1.8-trillion, their GDP is 13-trillion, so they'll be running a Budget deficit this year of 15 per cent of GDP, they'll have to do this for three or four years.

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.

And you'll start to see in the price of gold, if this goes on for a couple more years, the real serious question of an American default, a default by the United States Treasury. So this is what we are dealing with now.

TONY JONES, PRESENTER: Just to add to that point, I mean already in Europe there's a serious fear of sovereign risk, that is-

PAUL KEATING, FORMER PRIME MINISTER: Sure.

TONY JONES, PRESENTER: That is the bank guarantees that some of those countries have made, may not be met.

PAUL KEATING, FORMER PRIME MINISTER: May not be met. Well that's right. Look at the G7 you've got Germany, France and Italy, all three countries belong to the same currency unit, the euro.

So why are the three of them there? Italy has got a national debt of the 110 per cent of GDP. They're not going to be any help to anybody. Yet I notice at Davos, Tim Geithner the new US Treasury Secretary hopped into the Chinese about the manipulation of their currency, and of course Wen Jiabao, the Chinese Premier batted that back, the Chinese are not about to deliver themselves into the hands of the IMF or Tim Geithner or any such American officer.

So, but they're expected to continue participating in the US Treasury bond tenders. Now, until we get a settlement, a true settlement where the great states like India and China and their big economies and the surplus countries like Russia, the oil states of the Middle East, get a greater say, in other words until we get to a representative world structure of power, that is global political power and global financial power, then that's the only way now I think confidence will really return to this. This can't be done by the Americans.

Singha · Post by **Singha** » 05 Feb 2009 21:54

the PRC is going to be least interested in equitably share the spoils as the Old Republic collapses and the New Order takes it place. instead, with its collection of mercantile allies in east asia (trade federation), criminals moons and pirates of the outer rim (the islamist bloc) it is going to be putting forth a strong plan to make itself the Big Dog.

we need to make deft moves to widen the cleavage between chinese ambition and US/EU hidden-racism and vanity to breaking points. then
move in to make sure all outdated talking shops including the P5 council is disbanded and done for. and I want to see the nukular deal
torn up formally infront of south bloc, burnt and the US ambassador
ordered to make himself available at 5:00am in the PMO to take back
our re-written version of the deal. we must not honour agreements signed when we were weak/when we were tricked/threatened.

I wish Rao sir were alive. of all past PM's only he had the right mindset for this kind of work. and where on apt leader sits, many able followers would have gathered...

kinda doubtful if the UPA which is scared for Baba's future if Pranabda is named #2 for even two weeks has the cajones to play at the big table. most of their ministers are in late 60s and into 70s.