Perspectives on the global economic meltdown

vsudhir
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Re: Perspectives on the global economic meltdown

Postby vsudhir » 05 Feb 2009 22:24

Thx Raghav fopr posting that Paul Keating interview. The link to it doesn't seem to work though.

Keating nails it bulls eye.

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.


These are seriously scary times. And we have some seriously clueless netas at the helm. Our babus are competent, sure, but they are there to manage, not to lead. The decision making ultimately falls to the neta class. And therein lies our barfren cupboard. :((

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Re: Perspectives on the global economic meltdown

Postby Raghav K » 05 Feb 2009 23:25

"vsudhir" Thx Raghav fopr posting that Paul Keating interview. The link to it doesn't seem to work though.


You are welcom vsudhir. Yes it appears the link is broken.

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 05 Feb 2009 23:28

Don't worry.. the hubris of the chinese and white countries is enough to make sure that they end up choking each other.

Hubris is what ultimately destroys people and nations, from the dawn of civilization to the end of time.

we need to make deft moves to widen the cleavage between chinese ambition and US/EU hidden-racism and vanity to breaking points.

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Re: Perspectives on the global economic meltdown

Postby John Snow » 05 Feb 2009 23:42

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


I had mentioned this in the cycle of near future

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

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

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Re: Perspectives on the global economic meltdown

Postby Singha » 05 Feb 2009 23:47

what kind of investment avenues for resident yindoos would be the safest to um escape Unkils flaming downward spiral ?

I have been asked for financial advise by several colleagues due to my
scholarly looks and branding efforts but it helps if I have a freaking clue
about what advise I ladle out :mrgreen:

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 06 Feb 2009 04:02

History repeats till it does not (underlying circumstances change beyond system tolerances). 3] would cause social problems of the likes that you have not seen before. 4] would be catastrophic to almost everyone and the Federal reserve knows that.

However, if the resolve the CDS and other financial BS quickly, you could go from 2] to a mild version of 4]

I had mentioned this in the cycle of near future

1)recession 2)contraction 3)stagflation and 4)Hyper inflation.
1 and 2 have already happening.
The printing and borrowing by unkil will lead to 3
which will lead to 4.


Probably T-Bills. At this moment you do not want to loose money. Though the US economy is bad, others (europe, asia) are worse. While there could be a T-bill bubble right now, there will be bigger problems than your investment if the US defaults on T-Bills issued to private citizens.

what kind of investment avenues for resident yindoos would be the safest to um escape Unkils flaming downward spiral ?

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Re: Perspectives on the global economic meltdown

Postby Vick » 06 Feb 2009 07:04

Any comments on this article that presents a very contrarian view (on this forum) that states the financial crises have helped instead of harmed the dominant economies over the long term?

Only Makes You Stronger

The financial panic simply brought all that simmering anxiety to a boil, and the consensus now seems to be that the United States isn't just in danger of decline, but in the full throes of it--the beginning of a "post-American" world.

Perhaps--but the long history of capitalism suggests another possibility. After all, capitalism has seen a steady procession of economic crises and panics, from the seventeenth-century Tulip Bubble in the Netherlands and the Stop of the Exchequer under Charles II in England through the Mississippi and South Sea bubbles of the early eighteenth century, on through the crises associated with the Napoleonic wars and the spectacular economic crashes that repeatedly wrought havoc and devastation to millions throughout the nineteenth century. The panics of 1837, 1857, 1873, 1893, and 1907 were especially severe, culminating in the Great Crash of 1929, which set off a depression that would not end until World War II. The series of crises continued after the war, and the last generation has seen the Penn Central bankruptcy in 1970, the first Arab oil crisis of 1973, the Third World debt crisis of 1982, the S&L crisis, the Asian crisis of 1997, the bursting of the dot-com bubble in 2001, and today's global financial meltdown.

And yet, this relentless series of crises has not disrupted the rise of a global capitalist system, centered first on the power of the United Kingdom and then, since World War II, on the power of the United States.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 06 Feb 2009 07:26

Nietzsche once said:

What doesn't kill you only makes you stronger


And the supposition is that since the series of past crises hadn't killed capitalism, it survived to achieve evermore dominance. Maybe. But the supposition also is that principals remained the same. Not too sure about that. Tables tend to turn every few centuries. When the tables turned on the Brits and the yanks took over, did the brits continue to remain principals? Maybe, maybe not.

After this crisis, will US monopoly on financial power weaken? Possible. The capitalist system of resource organization will likely survive, the principals may change and that is of interest, IMVHO.

Time will tell where this crisis is leading us to. India isn;t out to dominate anybody, rather it aims to not be dominated ever again (not after 1947). Our aims are rather modest and hence achievable, IMHO. This crisis is an opportunity to get closer to that moving target is all.

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Re: Perspectives on the global economic meltdown

Postby Vick » 06 Feb 2009 07:40

It wasn't just a couple of financial crises that pushed Britain from its perch. It was also two cataclysmic wars in quick succession that played important roles as well. As severe as this situation might be, from what I've read in this article and many others, I don't believe it will bring about the tipping point where US domination of the economic system comes to an end. This crisis might actually act to serve to separate the wheat from the chaff and totally waylay some of the weaker, unprepared economies and push them back decades and increase the gap between the haves and have-nots. The US economy makes up roughly 20% of the global GDP, the sheer mass is a guarantee against rapid decline, IMO. Then again, if 20% of the world's GDP decides to pack it in and go down the pooper, it most likely will have a bearing on the rest 80%.

Added later: In the long run, we're all dead anyway...
Last edited by Vick on 06 Feb 2009 07:52, edited 1 time in total.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 06 Feb 2009 07:51

Vick, I agree.

Nobody anywhere suggests the US is about to lose its numero uno position anytime soon. That said, the dollar losing say half its current value in 5-10 yrs can have pretty dramatic effects on relative US leverage (both literally in the debt sense and figuratively in the geopolitical influence sense) 10 yrs hence.

What's interesting to watch is the jostling for advantage a generation down the line, the seeds of which can and should be sown now.

Anyway, no fundamental disagreements with that. Twas WWI that essentially bankrupted the Brit empire and sowed the seeds of WWII to follow and physically liquidate empire pretensions. The current crisis is a precursor to what, who knows? I hope its manageble and will pass away. Question is what if it doesn't go in an orderly fashion? A disorderly untangling of the global economy is a major worry IMO.
Last edited by vsudhir on 06 Feb 2009 08:03, edited 1 time in total.

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Re: Perspectives on the global economic meltdown

Postby Vick » 06 Feb 2009 07:56

vsudhir wrote:A disorderly untangling of the global economy is a major worry IMO.

That is also IMO the biggest risk to India's growth story and India's long term potential. We already are starting to see the edges fray around India's neighborhood. India is pretty much the only island, nay continent, of stability for miles around.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 06 Feb 2009 08:00

'The game is up'

DUBLIN — At 2 a.m., with time for compromise running out, the Irish prime minister finally presented his emergency plan for the floundering economy to the country’s trade union leaders.

He proposed an average 7 percent reduction in gross pay for bureaucrats, teachers, police, firefighters, road cleaners and everyone else on the public payroll, in the form of a levy to finance their pensions.

He made clear that without an agreement the government would do it anyway.

Inevitably the union leaders said “No.” They couldn't sell it to their members.

The country’s trade union leaders will meet in the coming weeks to decide whether they will follow French trade unionists and organize strikes.

David Begg, the Irish Congress of Trade Unions general, warned of a “revolution” from lower-paid public workers.

With calls for everyone — including those financially well off — to share the pain, highly-paid broadcasters on RTE, the government-subsidised TV and radio station, volunteered to take a 10 percent pay cut.

The ramifications of the economic crisis are being felt across Irish society: In the private sector there are now 300,000 unemployed. Some 10,000 people are losing their jobs every month and unemployment is predicted to rise from 6 percent to 10 percent this year.


First Iceland, now Ireland? Well, Calif is certainly determined to walk off the cliff, seems like.

Schwarzenegger Plan for Furloughs Upheld by Judge

California Governor Arnold Schwarzenegger can order thousands of state workers to take two unpaid days off a month to cut $1.4 billion from the budget, a judge ruled.

Superior Court Judge Patrick Marlette in Sacramento, California, today ruled in favor of Schwarzenegger in a lawsuit brought by employee unions seeking to block the furloughs. Schwarzenegger said yesterday that he would lay off workers to achieve the savings if he lost in court.

“I cannot help but recognize the huge impact this will have on state workers,” Marlette said at a hearing today in Sacramento. “My job is not to rule if this is the right solution but whether his action is authorized by law.”


And

Counties threaten tax revolt against California budget

California counties are throwing another wrinkle into the state's cash crisis as Gov. Arnold Schwarzenegger and legislative leaders try to agree on a way to erase a $42 billion budget deficit.

Several counties are considering some form of tax revolt—either filing lawsuits or delaying tax payments to the state—because the governor has proposed withholding payments to them for as long as seven months in a move to preserve cash.

Local governments already are missing out because the state has imposed a 30-day payment delay to counties. That was part of a move by the state controller to delay refunds to taxpayers, money for college tuition-assistance programs and payments to state vendors.


Like Buffet is once reported to have said:
Its only when the tide recedes that you get to see who's been swimming naked all along


Meanwhile, the much brandished stiff upper lip seems to be giving way in UKstan....
Link
Spreading strikes, reduced workweeks and tens of thousands of job cuts are throwing British Prime Minister Gordon Brown back to the 1970s.

With 16 months before he has to call an election, Brown is facing the toughest test of a Labour premier since James Callaghan’s so-called Winter of Discontent in 1979, after which the party was cast out of office for almost two decades.

“They’ve sold us down the river,” said Charles Hilton, 61, an electrician from Hull in northern England who was out on strike yesterday with local oil-refinery workers. “We’re going to see civil unrest in this country. It’s already started. It will grow unless things are sorted.”

Matthew Worley, a history lecturer at Reading University and author of a book on the Labour Party in the 1920s and 30s, sees a parallel to Depression-era politics.

“There was a big fear of unemployment; a lot of people saw themselves as skilled people yet they were being undermined not by better labor, but by cheaper labor,” Worley said. “And you see again the idea that what happens somewhere else today will happen to us next.”

Also reminiscent of the 1930s is the growing presence of a nationalist party. The anti-immigrant British National Party has had representatives at all of the demonstrations at refineries and plants, said Simon Darby, its deputy leader.


Well, econ bloguru Mish shedlock sums it up best:

Unions and government workers are resisting pay cuts in California, Ireland, and the UK. However, concession have to be made, and so they will. Obama might foolishly grant California a temporary reprieve with emergency funding, but that will only delay the inevitable. Realistically speaking, the game is up.

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Re: Perspectives on the global economic meltdown

Postby Singha » 06 Feb 2009 08:37

bankrupt states borrow from a bankrupt center.

http://online.wsj.com/article/SB123384067190252139.html

By VALERIE BAUERLEIN

A growing number of states are running out of cash to pay unemployment benefits, a sign of how far social-welfare systems are being stretched by the swelling ranks of the jobless in the deteriorating U.S. economy.

Unemployment filings have soared so high in recent months that seven states have already emptied their unemployment-insurance trust funds, which were supposed to see them through recessionary periods. Another 11 states are in jeopardy of depleting reserves by year's end, according to the National Conference of State Legislatures, which published a January report entitled "The Crisis in State Unemployment Trust Funds." So far, states have borrowed more than $2.3 billion in emergency funds from the federal government, money they are required to pay back.

The national unemployment rate is expected to hit 7.5% when January job data are released Friday, and rates are approaching double digits in some hard-hit industrial states. Nearly 4.8 million people collected unemployment insurance last week, the most since federal officials began tracking such data 40 years ago.

New York has already borrowed more than $330 million to pay unemployment claims, according to the U.S. Department of Labor. In the past, New Jersey borrowed from its trust fund to pay for other expenses, and now it has only a few months of payments in reserve.

Even states with relatively flush trust funds such as Tennessee are warning that they could go broke in the next year if unemployment levels stay high. Although West Virginia has relatively high reserves, business leaders already warn they will push for cuts in unemployment benefits to forestall tax increases. Some states like Kentucky have automatic triggers raising employer contributions when the insurance fund falls, but many states do not.

The crisis is most stark in South Carolina, where unemployment has approached 20% in some poor counties, and where the state of the unemployment trust fund, little noticed in boom times, has sparked a standoff involving the governor.

At the same time, proposals to raise payroll taxes to alleviate the crisis are going over like a lead balloon in state legislative sessions that started last month. While the economic-stimulus package being debated in Congress would pump billions of dollars into the unemployment system, it would also increase the amount of benefits paid. It wouldn't solve the core problem of the state trust funds' depleted reserves and balances outstanding.

"You collect money when times are good and pay it out when times are bad, but no one anticipated such bad times," said Diana Hinton Noel, labor analyst for the National Conference of State Legislatures.

Employers argue that raising payroll taxes isn't an option, as they cannot afford to pay more taxes in the midst of an economic crisis. Worker advocates worry that officials will impose some type of shared-sacrifice solution, in which benefits for the unemployed could be cut to lessen a payroll-tax increase.

Like many other states, South Carolina's unemployment trust fund was flush a decade ago. In what was deemed a tax break for businesses, the state lowered the rate that employers paid in payroll taxes for unemployment insurance.

In 2001, the fund had a balance of more than $600 million, according to the governor's office. But the fund balance began to drop precipitously three years ago, as the state began paying out more for jobless benefits. The trust fund went broke last fall.

At the request of the state's Employment Security Commission, Gov. Mark Sanford sought an emergency loan in September from the federal government. But Mr. Sanford balked at signing a second request in December, demanding that the state agency agree to an outside audit and prove the authenticity of its data, which he routinely questions. He relented hours before the New Year's Eve deadline in what became a well-publicized standoff.


"You got 77,000 individuals out of work, and the unemployment check is the only lifeline they have," said Roosevelt T. Halley, executive director of the state agency. "There was this mental anguish that there wouldn't be a check for them."

Gov. Sanford said he is using the only leverage he has to make the agency and its legislatively appointed leaders better stewards of public money. "Who held the unemployed of South Carolina hostage? The agency," he said. "If you watch $600 million disappear over six years, and you have zero elbow room except to ask for an emergency loan, you put them as hostages."

So far, the state has borrowed more than $110 million in emergency funds from the federal government, according to the Department of Labor. But unemployment filings are rising so rapidly that the amount requested just weeks ago for this quarter won't meet the growing need, Mr. Halley said. The amount the state paid in benefits per week reached $20 million in January, compared with $14 million in December, Mr. Halley said.

The impasse continues as Gov. Sanford threatens to fire agency officials unless they provide data by Feb. 9 proving the legitimacy of each unemployment filing, and more details about employers.

While the proposed U.S. stimulus package will likely bulk up unemployment benefits, the focus is on extending benefits to the long-term unemployed and expanding jobless insurance to part-time employees. The package is likely to extend the grace period for interest on federal money loaned to states like South Carolina, but they would probably need to pay it back.

Options include raising the payroll tax, pulling money from other state funds or potentially restricting eligibility, said Ms. Noel of the National Conference of State Legislatures, adding, "Unfortunately, they're all difficult choices to make."

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 06 Feb 2009 17:32

In times of crisis, Parisians take to scavenging

PARIS (Reuters Life!) - It's closing time at a market in Belleville, a working-class neighborhood in Paris, and a young woman in a black parka and white cap is rummaging through the abandoned crates.

After a thorough inspection, she slips a cauliflower and some slightly squashed oranges into her shopping bag.

"That's going to be my dinner," says the woman, who will only give her name as Yng.

Nearby, an old man with a black beret selects two mangoes from the bottom of a battered cardboard box. He earlier bought a bag of apples, then filled his basket with discarded fruit and vegetables.

"Glanage," or gleaning, is a French tradition that reaches back to the Middle Ages, when people would go over the fields after the harvest and gather any crops that remained.

But today, the practice is becoming more widespread in cities, in what charity workers and social activists describe as a sign of growing economic despair.


Huh? Hard to believe its that bad so soon into the crisis. See, this is what happenes when dork edia picks up a few isolated incidents and blows it up reeeal big. Thx to the UKstanis, now with halfhe world believing that India is a giant slum populated by slumdawgs, reuters plays up a new one on how old rival Fwance is fast sliding down the drain onlee.

Perfidity, thy name is UKstan! Er, ok. maybe not (yet). We'll see what brit propagandu organs are upto this time....

On closer inspection, turns out those doing the chee chee scavenging are minority groups and immigrants.....whew, whatta relief for the fashionable french....
At the market in Belleville, three women curse each other in French and Arabic as they fight over a bag of leeks.

"Those are mine, I picked them up," one of them says, pressing the bulging bag to her chest.

"Thief!" another one shouts at her.

Around them, more than 10 other people of all ages gather as much as they can before the cleaning crew arrives. Some of the traders encourage them.

"It's a gift, a gift," says Ali, a stall owner who declines to give his second name. "I give it away, otherwise it would just be discarded anyway," he adds, as two women hastily fill their blue plastic bags before hurrying away.

"It's difficult for me, I have six children and my husband is dead," says a woman in a black headscarf. Like the other foragers, she prefers to remain anonymous.

Fields and markets are no longer the only hunting grounds of thrifty "glaneurs." Every evening, people collect fruit, eggs and yoghurts past their expiry date from containers behind the big supermarkets.

Christophe Auxerre, national secretary of Secours Populaire, a charity, sees the revival in foraging as a symbol of growing social problems.

"There are people who go hungry in our country. On the 15th of every month, there's no money left to fill the plates," he said. "There are shop owners who deliberately put the eggs on top in the rubbish bin so that people can pick them up."

His charity has helped two million people in 2008, compared with 1.5 million in 2007.


As usual, admist all this gloom, only the socialist-leftist path shines and glitters with promiseof happiness, justice, equality, liberty, fraternutty, utopia and peace for all time to come.....

For a small group of scavengers, gathering discarded food is also a way of protesting against a consumerist society and its wastefulness, and against the rising cost of living in France.

Left-wing activists have been organizing "wild picnics" in supermarkets for the past few months, taking products off the shelves and offering them to customers for free -- a creative interpretation of a French law that gives customers the right to taste certain products before buying them.

"We do that at the end of each month, when the pockets are empty. It allows us to pass on a message: everything is going up, except salaries," said Victor Porcel, a member of l'Appel et la Pioche, a left-wing movement.


Shux. Maybe its a one sided persp but things appear to be seriously heading down the drain very fast onlee. Always helps to keep perspective by remembering the motto of the first Russian revolution....
Land, Bread and Peace!

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 06 Feb 2009 19:27

One wag has it that there's only two kinds of economies in the world today that count - the emerging set and the submerging set. What is clear is that the former hasn't the buoyancy to bailout the latter and the latter, thx to globalization is inextricably linked to the former. So once the latter goes down, the former wont have much choice but to go down with it....

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Re: Perspectives on the global economic meltdown

Postby abhischekcc » 06 Feb 2009 19:44

vsudhir wrote:On closer inspection, turns out those doing the chee chee scavenging are minority groups and immigrants.....whew, whatta relief for the fashionable french....


If they have not bread, let them have asylum.

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Re: Perspectives on the global economic meltdown

Postby Raghav K » 06 Feb 2009 20:41

Equity strategist Albert Edwards at Societe General said on Bloomberg now that the U.S stocks will need to fall another 40% :eek:

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Re: Perspectives on the global economic meltdown

Postby Singha » 06 Feb 2009 21:37

=> 201k will become like 101k. people are going to be in dire straits. working until 70 is feasible in a society with generally good levels of health and health care, but working until 80 is a bit over the top...in effect people would need to work till they drop dead.

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Re: Perspectives on the global economic meltdown

Postby svinayak » 06 Feb 2009 22:03

Bloomberg.com

Geithner's Window to Halt Flight of Capital From U.S. Banks May Soon Close Treasury Secretary Timothy
Geithner must use his Feb. 9 speech to lure private investment to U.S. banks or risk an accelerating flight of capital that would result in creeping nationalization, analysts and investors said.

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Re: Perspectives on the global economic meltdown

Postby svinayak » 06 Feb 2009 22:29

http://www.bloomberg.com/apps/news?pid= ... DRCVPz0sxU


Clock Ticks for U.S. Economy as CEOs Run Wild: Margaret Carlson


Commentary by Margaret Carlson

Feb. 5 (Bloomberg) -- The Super Bowl is one of the last events that Americans all come together for. It tells us a lot about where we are. Corporations spend millions to have their commercials attuned to the zeitgeist. Steve Jobs famously introduced his first Mac personal computer there in 1984.

This year was no different. Discount broker E*Trade gave its stock market-loving, talking baby a little black friend. Three other ads bespoke harsh economic times. A Budweiser ad lamented doing away with free beer at meetings to cut costs. There was the sad sight of Ed McMahon, whose California house recently came close to foreclosure, pitching Cash4Gold to those selling their jewelry for its “melt value.”

Then for the estimated half-million people losing jobs every month, there was Monster.com, the employment-search site. Its ad showed an executive in a book-lined office with a moose head on the wall. On the other side of the wall labored one of the little people with the less-desirable part of the animal smack in his face.

That’s one steep descent from trumpeting the dawn of a new computer age, as Jobs did, to a pawn shop and the hindquarters of a moose, but the public knows this is where we are now, even if the ruling class doesn’t. Those who once turned a blind eye to the tawdry excess of chief executive officers are done rewarding the guilty.

The excuse for letting CEOs run wild in the initial bailout is that the Treasury couldn’t attach strings for fear the bankers would reject the money needed to thaw frozen credit markets. Let’s see how many have the nerve to do that to their shareholders.
I bet a moose head there won’t be many.

The Super Bowl may be best remembered for its half-time shows. In the past, they’ve often succumbed to vulgarity (Janet Jackson) and mediocrity (Justin Timberlake). This year, it was a high-voltage blur of communal bliss, courtesy of one of the few highly regarded bosses left in America, Bruce Springsteen, exhorting viewers “to put the chicken fingers down” and “turn the television all the way up.”

While Jennifer Hudson lip-synched, Springsteen risked going live, a howling 59-year-old, breathless after taking a slide on his knees across the stage. The stadium roared for the New Jersey guy who sang anthems to the working man who’s just figuring out that he’s been robbed much of his life.

He altered the lyrics of “Glory Days” to plead for a Hail Mary pass. There wasn’t enough time on the clock for the Arizona Cardinals. Maybe there will be for the country.

Raju

Re: Perspectives on the global economic meltdown

Postby Raju » 06 Feb 2009 22:29

looks like once this period of "recession" is over what will emerge will not be the usual boom phase but the "new world order". Some mahdi or not dissimilar character should make his presence felt before this "new order" can take deep roots.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 06 Feb 2009 22:31

Very interesting (if disturbing blog post onlee)

Willem Buiter: The US and UK as Banana Republics

Although the Journal does not draw this comparison, the US is in very much the same boat as Thailand and Indonesia in 1997, during the emerging markets crisis. And although the US arguably has a more diverse economy, the main things that differentiate us from them is the dollar's reserve currency status (which means if we implode we do a great deal of collateral damage) and our nukes. We also like to think that because the US has been the biggest buyer of global exports, we are effectively too big for our cash rich trading partners to allow us to fail. Even if they accept that proposition (not clear, BTW), it's not obvious in practical terms how they might act on it.


based on this must-read article folks (hajaar highly recommended, janta!) ...

Fiscal expansions in submerging markets; the case of the USA and the UK

Lemme try posting excerpts - a tough task coz the whole article needs to be posted almost...

On a number of occasions I have cautioned against deficit-financed fiscal stimuli in countries whose governments have weak fiscal credibility, that is, countries where current tax cuts or public spending increases cannot be credibly matched by commitments to future public spending cuts and tax increases of equal present discounted value. I believe that both the US and the UK fall into this category.


Bulls eye. The bottom line is (as Paul Keating mentioned previously) the deficit driven debt risks becoming way too large to ever be repaid, period. Even if by some stretch the ability to repay were to exist, the willingness to do so (and the credibility such willingness brings) is almost certainly nonexistent.

There was a steady erosion in business ethics and moral standards in commerce and trade. Regulatory capture and corruption, from petty corruption to grand corruption to state capture, became common place. Truth-telling and trust became increasingly scarce commodities in politics and in business life. The choice between telling the truth (the whole truth and nothing but the truth) and telling a deliberate lie or half-truth became a tactical option. Combined with increasing myopia, this meant that even reputational considerations no longer acted as a constraint on deliberate deception and the use of lies as a policy instrument.

As part of this widespread erosion of social capital, both citizens and markets lost faith in the ability of governments to commit themselves to any future course of action that was not validated, at each future point in time, as the most opportunistic course of action at that future point in time - what macroeconomists call time-consistent policies and game theorists call ’subgame-perfect’ strategies.


Brilliantly worded. The failure of regulatory agencies, mechanisms, triggers, systems etc in the wall-street context is too profound to be brushed under some committee, counteraccusation or court carpet. The system perhaps got too successful, enriched an elite that was able to rig it up and thereby sowed the seeds of its own destruction back in the 80s itself.

This morality tale has important consequences for a government’s ability to conduct effective countercyclical policy. For a fiscal stimulus (current tax cut or public spending increase) to boost demand, it is necessary that the markets and the public at large believe that sooner or later, measures will be taken to reverse the tax cut or spending increase in present value terms. If markets and the public at large no longer believe that the authorities will assure fiscal sustainability by raising future taxes or cutting future public expenditure by the necessary amounts, they will conclude that the government plans either to permanently monetise the increased amounts of public debt resulting from the fiscal stimulus, or that it will default on its debt obligations. Permanent monetisation of the kind of government deficits anticipated for the next few years in the US and the UK would, sooner or later be highly inflationary. This would raise long-term nominal interest rates and probably give risk to inflation risk premia on public and private debt instruments as well. Default would build default risk premia into sovereign interest rates, and act as a break on demand.


Watch the bond markets! The bond markets I say.... they alone, to a large extent reflect the will and voice of the willingness of the creditors and indirectly tell about the credibility left for the anglosaxonian financial system in the eyes of the rest of the world.

Beacause I believe that neither the US nor the UK authorities have the political credibility to commit themselves to future tax increases and public spending cuts commensurate with the up-front tax cuts and spending increases they are contemplating, I believe that neither the US nor the UK should engage in any significant discretionary cyclical fiscal stimulus, whether through higher public spending (consumption or investment) or through tax cuts or increased transfer payments.


Read it all.

Wow. Just noticed, Yves smith summarizes Buiter's column excellently onlee.

What is noteworthy is that Buiter discusses in some detail how corruption, both in the government and society, limits policy choices. Put simply, diseased leadership has trouble pulling a country out of a debt crisis because no one trusts that they will do the right thing (and frankly, why should they?).

Buiter makes a compelling case that lack of credibility has real costs, and uses it to bolster his argument that the US and UK should not go on the kind of whole hog spending spree that most orthodox ecconomists are demanding right now. He thinks a currency collapse, a scenario that most would dismiss as impossible for the dollar, is in fact probable at higher deficit levels in part because creditors and investors know the US and UK lack the discipline to trim the sails soon enough.

While Buiter does not frame it this way, in effect he is saying that the downside of doing too little (deep recession and/or very sluggish growth) is preferable to doing too much (high inflation and the risk of collapses in major currencies.

But the most important aspect of the post is not the policy implications, but the fact that a Serious Economist has finally said that the lack of scruples in America and Britain has gone beyond the tipping point, and is going to exact high societal costs. The parasites are eating the host. I hope someone out there is taking notice.

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Re: Perspectives on the global economic meltdown

Postby Singha » 06 Feb 2009 23:02

so it seems PRC cannot really threaten amir-e-khan with bond redemptions....coz Unkil is just going to wheel out his printing machine and pay them off on the spot ? :lol:

the "redeemable" value of all those T-bill does look less and less.

amir-e-khan lived large at the worlds expense for 25 years and is
now saying we will take everyone down should you let us go down,
we are too big to be allowed to fail.

where have I heard this before....*think think* - ah pakistan!! :mrgreen:

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Re: Perspectives on the global economic meltdown

Postby Raghav K » 06 Feb 2009 23:19

GE chief warns on US depression threat

http://www.ft.com/cms/s/0/9cdf7854-f3b6 ... ck_check=1

The US economy is suffering its steepest downturn since at least the 1970s and could descend into a depression, Jeff Immelt, General Electric’s chief executive, warned on Thursday.


US Inflation Could Hit 200%: Dr. Doom

http://www.cnbc.com/id/29047443

The US risks being hit by Zimbabwe-style hyperinflation and there are signs that the world's biggest economy risks turning into a banana republic, Marc Faber, author of the Gloom, Doom & Boom report, told CNBC's "Asia Squawk Box."

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Re: Perspectives on the global economic meltdown

Postby ramana » 07 Feb 2009 00:16

When gora expert say the Emperor has no clothes people go wah! wah!
When our own R Vaidya, who is Prof in that subject , we go unrealistic jingo! :eek:

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 07 Feb 2009 01:25

ramana wrote:When gora expert say the Emperor has no clothes people go wah! wah!
When our own R Vaidya, who is Prof in that subject , we go unrealistic jingo! :eek:


I also noticed the rather visible trend.

Easy to criticise one of our own, perhaps*.

Whats is currently happening is likely unprecedented. Will take time and patience to understand and let it sink in. Most (including me) are hoping that by the time we realize the full import of the value destruction we are seeing, the worst will prolly be over. I hope so but the chances are slim.

*Which is why goras shower awards on the likes of ARoy and Adiga - browns who can criticise our way of life (literally and figuratively) while posing as 'insiders' to our tent. Being an insider helps build credibility, initially at least.

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 07 Feb 2009 03:34

Why do you listen to them? Why do you treat them as authority figures? Ignore them.. and look at the world objectively!

I have to say that one way to improve indian self confidence would be to hang everyone (in india) who justifies things based on 'spirituality' and 'tradition'. The vast majority of ancient indian philosophy is essentially agnostic or atheist (and based on reason). But looking at India today, you would not know that...

Which is why goras shower awards on the likes of ARoy and Adiga - browns who can criticise our way of life (literally and figuratively) while posing as 'insiders' to our tent. Being an insider helps build credibility, initially at least.
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Re: Perspectives on the global economic meltdown

Postby Arya Sumantra » 07 Feb 2009 03:36

IMHO Only those countries whose trade is largely with countries outside West, East and Gulf will come out with lesser damage. This means trading with South America, Africa, Central Asian Republics, Eastern Europe, Parts of S-E Asia for maximum insulation. Although some of these nations may not be rich in $ but we can trade in mineral ores with them and encourage Rupee trade. After all upto 1960s Dubai used Indian rupee too.

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 07 Feb 2009 03:49

A bit OT but somewhat relevant to the current direction of this thread...

1. Look at the world objectively. It is not pretty, but it is easier to understand.

2. Don't do things based on tradition. Do them because they are rational and justifiable.

3. Do not take c**p from others. Remember that the person on the other end is also mortal.

4. Do not accept teachings without evidence, irrespective of the "teachers" reputation.

5. The most dangerous sentences in english start with " I am sure.." or some variant thereof. We know much less than we would like to believe, ALL of us.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 07 Feb 2009 07:38

Fed Calls Emergency Consultants To Untangle AIG
“I don’t think the Fed has seen anything like this,” former New York Fed general counsel and AIG executive Ernest Patrikis said in an interview. “AIG just got so complex in terms of private corporate matters that you just need that outside expertise.” Patrikis is now with the law firm of White & Case in New York.

In addition to hiring consultants, the Fed and the Treasury have retained Wall Street firms to help manage more than $2 trillion in bailout and emergency-loan programs.

Pacific Investment Management Co. runs a $259 billion program to backstop the commercial-paper market. BlackRock Inc., Goldman Sachs Asset Management, Pimco and Wellington Management Co. are managing the Fed’s purchases of up to $500 billion of mortgage-backed securities. JPMorgan Chase & Co. oversees a separate program under which the Fed may lend up to $540 billion to support money market mutual funds.

Last month, the House passed conditions for releasing the remaining $350 billion of financial-rescue funds, including a requirement that the Fed give details of the contracts and selection process for the mortgage-backed securities purchase program’s managers. The Senate isn’t planning to take up the legislation.

BlackRock is also managing and selling assets acquired in the Fed’s $29 billion rescue of Bear Stearns Cos., as well as securities called collateralized debt obligations the central bank purchased in the bailout of AIG, the largest U.S. insurer by assets.

Staff Overwhelmed

Such contracts show how the Fed’s in-house staff has been overwhelmed by new responsibilities that the central bank has taken on in handling the crisis.

“Once the government starts getting into the business of restructuring companies, there are competency deficits,” said Phillip Phan, professor of management at the Johns Hopkins Carey Business School in Baltimore. “It’s inevitable they’ll go back to Wall Street for advice.”

Still, he said, “the man in the street would say, ‘We’re paying to fix somebody else’s mistake by paying the very people who are part of the system that produced the mistake.’”


Quick points of note:
1. AIG's derivatives are so complex, US govt people admit 'competency deficits' in addressing their understanding and disentangling the same.
2. To cover the competency deficit, sarkar calls upon the services of (drumroll plz) Wall st experts! The same crowd that perhaps designed and suckered investors with derivatives like these. Set a thief to catch a thief, anyone? Maybe, seems like there's no honor among Deewar gali thieves these days, though.....

Meanwhile, down under, liquidation starts at aonce respectable multi billion dollar firm...
Babcock Shareholders Wiped Out as Banks Force Sales.
Babcock & Brown Ltd. will be forced by creditors to sell all its assets to repay debt, wiping out shareholders after its strategy of buying ports and property on credit imploded as the global financial crisis deepened.

Chief Executive Officer Michael Larkin will lead the sale process and hand the proceeds to banks over the next two to three years, Sydney-based Babcock said in a statement today. The listed company, which had a peak market value of $7.8 billion, may be placed in administration and removed from the exchange, it said.

“There was too much greed and arrogance and not enough transparency,” said Tim Morris, an analyst at Sydney-based investment advisory Wise-Owl.com, the only researcher to rate Babcock’s shares a “sell” at the start of 2008. “The core of the problem was when they started repackaging assets and the only people making money was themselves. When you start burning people, it’s only a matter of time before the fire catches up with you.”

Babcock, an owner of property, ports and power stations around the world, becomes the biggest Australian casualty of the global credit crisis, topping a list that includes Allco Finance Group Ltd. and Centro Properties Group. Like Centro, Babcock averted liquidation because falling asset prices and scarce buyers makes this an unattractive option for creditors.

Babcock’s holdings “across all asset classes” will be sold, with all proceeds over the amount needed to continue operating the business used to reduce debt, the company said. Creditors have agreed to a restructure of existing debt facilities, with all interest payments and approximately A$2.12 billion of principal repayments to be on a “Pay If You Can” basis.

Babcock shares, down 99 percent in 2008, have been suspended since Jan. 7 at the company’s request and last traded at 32.5 cents. The shares peaked at A$34.78 in June 2007, when the company had a market value of about A$12 billion. There will be “no value” for equity holders and “negligible or no value” for note holders after its survival plan, Babcock said in a statement on Jan. 23.


Oh, which reminds me, AIG shares were trading at $1.01 yesterday. Should they fall below 100 cents, they get automatically delisted onlee.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 07 Feb 2009 07:47

Major :(( :(( about having to move to the unwashed III world onlee, at *local* wages, or risk losing jawb entirely.

IBM Offshoring Its North American Employees

IBM employees being laid off in North America now have an alternative to joining the growing ranks of the unemployed - work for the company abroad.

Big Blue is offering its outgoing workers in the United States and Canada a chance to take an IBM job in India, Nigeria, Russia or other countries.

Through a program dubbed Project Match, IBM will help interested workers whose jobs are on the chopping block to "identify potential opportunities in growth markets and facilitate consideration by hiring managers in those markets," according to an internal company document obtained by CNN.

The company also will help with moving costs and provide visa assistance, it says.


Other countries with IBM opportunities include Argentina, Brazil, China, Czech Republic, Hungary, Mexico, Poland, Romania, Slovakia, Slovenia, South Africa, Turkey, and United Arab Emirates, according to the document.

Only "satisfactory performers" who are "willing to work on local terms and conditions" should pursue the jobs, the document says.

The reactions are predictably acerbic.

Apparently America is not becoming a banana republic quickly enough to suit some big US companies.

I heard last week that a friend's sister, 57 years old and a very long standing IBM employee, had been offered the choice of either losing her job, or being sent to India or Latin America. In the old days, an offshore posting was a perk, or at least not a bad thing financially, since the employer would provide various expat subsidies to make up for meaningful additional costs (such as filing extra tax returns, higher housing costs when applicable, etc.),. The general intent was to make them whole (and some used the subsidies as a way to sweeten the pot, since that sort of move is disruptive personally, particularly for employees with school-age children).

Clearly, those perks don't apply here. A CNN article describes that the jobs on offer are in third world countries, at local wages. IBM is proving only some assistance with moving and visas. Given the cost of hiring and getting new workers up to speed, IBM probably comes out ahead on those few who decide to participate.


Yup, like I said... more :(( :((

Interesting dose of wisdom from one commentator, dunno how realistic though...

If we close the gates now, we will be locking ourselve in, rather than locking them out.


Welcome, to ze brave new world.

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Re: Perspectives on the global economic meltdown

Postby Singha » 07 Feb 2009 09:07


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Re: Perspectives on the global economic meltdown

Postby Singha » 07 Feb 2009 09:12

bw

Satyam Scandal Takes Toll on Hyderabad
Bangalore's rival city for Indian IT outsourcing is under the microscope in the wake of last month's fraud revelations at Satyam

By Manjeet Kripalani

The collapse of Satyam Computer Services (SAY) on Jan. 7 touched off a flurry of anxious investor conference calls set up by bankers and analysts. Rajeev Chandrasekhar, a member of Parliament and president of the Federation of Indian Chambers of Commerce & Industry, sat in on one—and was startled by what he heard. How, asked one foreign investor, does one spot the next Satyam?

In particular, the callers homed in on the similarities between Satyam and other companies based in its hometown of Hyderabad. Like Satyam, many of these outfits are managed by their founders, enjoy strong links to local politicians, and have built up big land holdings—even when their core businesses have nothing to do with real estate or development. "There is a lot of pressure on Hyderabad companies to prove they are not like Satyam," says Chandrasekhar.
Effect on Stock Prices

It has been a dramatic fall from grace for Hyderabad, the southern Indian city that had emerged as a viable competitor to Bangalore as the public face of the new India. Giants such as Microsoft (MSFT), Dell (DELL), Oracle (ORCL), and Google (GOOG) have opened offices there. But Satyam was also among the city's leading lights, and Hyderabad today is rife with tales of murky land dealings, companies that cook their books, and owners who siphon off cash.

Now investors are talking about a "Hyderabad discount" for companies based there. Even before the scandal, Satyam's stock typically had about two-thirds the price-earnings ratio of market leaders such as Infosys Technologies (INFY) and Wipro (WIT). The reason: Satyam did relatively simple work, and investors fretted about Chairman Ramalinga Raju's political connections.

Satyam's fall seemed to validate those latent fears. Since Jan. 7 stock prices for the top 50 listed companies from Hyderabad, mostly managed by their founders, have fallen by an average of 23% (not including Satyam's near-total collapse), vs. an 11% fall for the Bombay Stock Exchange's benchmark index. In contrast, the top 50 companies in Bangalore have fallen by 14%. "Hyderabad developed as a low-cost option to Bangalore," says Ravi Raheja, chief executive of Mumbai developer K. Raheja & Sons, which has built offices for many tech companies in Hyderabad. "Now we are back to square one."
A Different Path to Growth

Some blame history for Hyderabad's problems. As recently as the late 1940s the region was feudal and largely poor, with little industry and virtually no middle class, though many farmers had extensive land holdings. When Hyderabad became the capital of Andhra Pradesh state in 1956, the rich farmers got into the construction business. Major infrastructure projects were launched and local companies with little experience—but strong political ties—emerged to win government contracts.

Neighboring Bangalore, in contrast, was a military station during the British Raj, so it was apolitical, well run, and orderly, known for its pleasant climate and lush gardens. In 1947 newly independent India made it a center of scientific and industrial research and built major universities there.

The city's IT industry was born from those institutions, independent of political ties. "Bangalore has deep professional roots," says Mohandas Pai, director at Infosys, the city's leading IT player.

A young chief minister of Andhra Pradesh, Chandrababu Naidu, concluded that information technology was the key to changing the destiny of his impoverished state. By 2000, Naidu had dubbed his new vision "Cyberabad," and placed his hopes in tech entrepreneurs such as Raju. Farmers-turned-builders got fat state contracts to build highways and develop IT parks. In two years, Hyderabad was in full competition with Bangalore for the IT and biotech pie. As Bangalore choked on its own growth, companies gratefully shifted to Hyderabad.

One of those was Alliance Global Services, a $50 million provider of software services based near Philadelphia. Unable to find affordable talent in Bangalore, it moved its 40-man operation to Hyderabad, where it now has 300 employees. Though the company intends to stay in Hyderabad, in the wake of the Satyam scandal Alliance is worried about its reputation. Alliance Chief Executive John Castleman says that while U.S. customers may not be aware of the location of the Indian companies they hire, "maybe they should be, given the potential for local politics to play a role in corporate governance in India."
"Crony Capitalism"

Hyderabad's dodgy reputation extends to its professional class. Accounting firm KPMG runs a busy practice in India that helps companies spot fake degrees and exaggerations of job experience. While Hyderabad isn't alone in this sort of activity, it's the embellished-résumé capital of India, says Garuav Taneja, who runs the KPMG operation. In the city's Ameerpet neighborhood, a fresh college grad with no experience can better his job prospects with a $200 set of fake documents. "It's a highly lucrative and openly run business in Hyderabad," says Taneja.

Some in Andhra Pradesh are trying to change the system. EAS Sarma, a former top economist in the Finance Ministry in New Delhi, now lives near Hyderabad. He's battling to reverse Satyam's December purchase of 50 acres of state property along an endangered coastline. Satyam bought the land for what Sarma says was just 10% of its market value, resulting in a loss of at least $52 million for the state. He is also demanding details of property sales to 14 Hyderabad companies that he says are closely connected to the state government. "It's crony capitalism," Sarma says. "Giving away cheap land is not promoting industrialization; creating a corruption-free environment and simplified procedures is." A government spokesman declined to comment on the matter.

The biggest beneficiary of Hyderabad's distress may be its rival to the south. Infrastructure bottlenecks in Bangalore have been a boon for Hyderabad in recent years. But now, Bangalore is in the process of building new roads and even a subway. And to ensure transparency, the government is providing citizens a quarterly update on the progress of development projects. "Here, business and political interests don't converge," says Manish Sabbarwal, who runs TeamLease, India's largest temp agency, based in the city. In Bangalore, "they occupy powerful but separate and parallel universes."

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Re: Perspectives on the global economic meltdown

Postby Singha » 07 Feb 2009 09:15

about blr being politically clean -- :rotfl:

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Re: Perspectives on the global economic meltdown

Postby Singha » 07 Feb 2009 14:55

moral compass of western world collapsing at the slightest economic pressure. it will be interesting to see what UK would do if their per capita got reduced to indian level for a week.

http://www.businessweek.com/magazine/co ... _companies

There's no polite way of saying this: In bleak times, people are more likely to rip off their employers. According to a Deloitte survey, two-thirds of executives expect insider crime to rise in the next two years. Corporate grifters seem to be getting nervier. Recently, a Maryland man swiped 32 laptops from his nonprofit health-care employer and put them on eBay (EBAY). A chief financial officer changed the color of the type on some spreadsheet data from black to white so as to render the fake numbers invisible while juicing the totals—and his bonus. One regional vice-president for sales billed his corporate card $4,000 for Victoria's Secret lingerie—and not for his wife, either.

That these schemers are getting caught is a testament to the strides made by the corporate fraud police. Sleuthing technologies are light-years beyond where they were in the last recession, of 2001. And with most companies looking to cut costs, managers are eager to crack down on insider malfeasance, which on average equals 7% of revenues, says the Association of Certified Fraud Examiners. "You can think of us as the electronic cop looking for good and bad behavior," says Ralph Baxter, CEO of ClusterSeven, which sells monitoring software to the likes of Dresdner Kleinwort and Mitsubishi.

After the September 11 attacks, companies stepped up physical security. The Sarbanes-Oxley Act then forced them to increase internal controls, which translated into continuous monitoring and surveillance of electronic records. "Every time someone sends a file, whether over e-mail or a Web site, or transfers data onto a cell phone or a thumb drive, it can be monitored," says Gunter Ollmann, IBM's (IBM) Internet security czar.

Increasingly, information is the fraudster's currency. Just before Christmas, a prized employee at a software company resigned, citing family problems. When he turned in his documents and cell phone, he reported his laptop stolen. Something didn't sit right. So the boss asked the IT guys to trace the employee's laptop. Using the Web, they tracked it to the man's house. "He'd been poached by one of our competitors and was using our methodology, system design, and technology to cement him in his new role," says the company boss.

T&E ABUSES

Technology is helping companies fight theft right down to the rank and file. The restaurant industry has long battled such scourges as buddy punching (clocking in for a friend) and lollygagging (doing anything but work). At Valenti Management, which owns and runs 117 Wendy's and 17 Chili's franchises, IT chief Pachy Torresola was looking for "as foolproof a method as we could find" to tie all actions at the cash register to individuals. The answer: installing fingerprinting scanners on Chili's cash registers. Torresola says workers would say things like, "Umm, gee, that wasn't me." But he says the company hasn't heard such excuses since getting the scanners. Valenti will soon install them at its Wendy's operations.

Fudging travel and entertainment is not new. But in times like these some employees figure: "I could get laid off anyway, so I might as well dip while the getting's good." In recent months, Nakia Williams, an accounts payable boss at Carl Zeiss Vision, has been extra zealous about this kind of abuse. Like many companies, Carl Zeiss uses Concur Technologies' (CNQR) expense report software. It can scour T&Es for fishy activity: rounded-up numbers, unauthorized travel upgrades, the same meal expensed by two colleagues. Recently, Williams nailed employees who were amping up car mileage, inflating tips, and submitting duplicate reports. Says Williams: "Employees didn't know we were checking their reports."
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Re: Perspectives on the global economic meltdown

Postby Singha » 07 Feb 2009 15:40


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Re: Perspectives on the global economic meltdown

Postby Singha » 07 Feb 2009 16:03

WSJ

The Harvard endowment, stung by declines of more than 20% in recent months, says it will eliminate a quarter of its staff, or about 50 jobs, this year.

The largest college endowment in the U.S., Harvard finished its June 2008 fiscal year with a chart-topping 8.6% gain, bringing total assets to $36.9 billion. But like most endowments, it has stumbled badly in the months since. The university has said it is bracing for a 30% decline for the fiscal year ending June 2009.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 07 Feb 2009 18:38

x-post
Yugandhar wrote:Talk by Shiv Shankar Menon
http://www.outlookindia.com/full.asp?fodname=20090205&fname=Shivshankar+Menon&sid=1

At their most general, the goals of India's foreign policy are no different from those of other countries – we seek peace and prosperity, or security and development. Our foreign policy seeks to encourage and create an external environment that furthers these goals.


Today, it seems that we may be on the cusp of a historic and fundamental change in the nature of the world situation. Looking at the world from India, it often seems that we are witness to the collapse of the Westphalian state system and a redistribution in the global balance of power, leading to the rise of major new powers and forces. The twin processes of the world economic crisis and economic inter-dependence have resulted in a situation where no power is insulated from global developments


Uncertainty in the international system has grown exponentially and rapidly. The only certainty is that the global landscape that emerges from the economic and financial crisis will be vastly different from what obtains today.

b]The economic crisis itself is a consequence of unsustainable imbalances in the global economy, of prolonged fiscal and trade deficits in certain countries matched by fiscal surpluses and astronomical foreign exchange surpluses in other countries. As of now it is impossible to say that these imbalances will indeed be corrected, or that the underlying pattern of savings and consumption which led to the crisis will be successfully altered. Ironically, stimulus packages will actually push economies away from the direction of basic adjustment required though they may be a temporary palliative. Exchange rate adjustments, (a higher Yuan or a lower dollar), would devalue assets and reserves that are needed to overcome the crisis A successful readjustment of the fundamentals of the global economy would require an unprecedented level of coordination and understanding between several major powers that has never been achieved before in history, except when the balance of power was totally skewed by the effects of a twenty year crisis followed by a world war.[[/b]

It seems likely that the present economic crisis will result in a much flatter distribution of power, or a more even balance of power, among the major actors on the global stage. Interdependence brought about by globalization imposes limits beyond which tensions among the major powers cannot escalate. As uncertainty in the system rises, each of the major powers is now following hedging strategies abroad while attempting to minimize the effects of the crisis on its own economy.

Equally, no one power can hope to solve issues by itself, no matter how powerful it is. What is in fact happening, (politically in Iraq, Afghanistan and elsewhere, and economically in the meetings of G-20 leaders and the G-8 plus G-5), is that major powers are coming together to form coalitions to deal with issues where they have a convergence of interests, despite differences on other issues or in broader approach. In other words, what we see is the emergence of a global order marked by the preponderance of several major powers where both cooperation and competition among them are intense. The result is a de-hyphenation of relationships with each other, of each major power engaging with and competing with all the others, in a situation that affords the powers increased strategic space but lessened capacity to create outcomes.


For India the most graphic recent instances were the bombing of our Embassy in Kabul on July 7, 2008 and the Mumbai attacks of 26 November 2008. In each case the perpetrators planned, trained and launched their attacks from Pakistan, and the organizers were and remain clients and creations of the ISI. Two months after the Mumbai attacks, and one month after we presented a dossier of evidence linking the attacks to elements in Pakistan, we still await a response from the Pakistani authorities, and prevarication continues.


Good to see SS Menon show clear and confident (though couched in diplomatese) enunciation of not just the danger part but also the opportunity part that might arise. I hope the thinking pervades the top echelons of neta-babu circles.

Diving further into what he says, Menon indicates:
1.
we may be on the cusp of a historic and fundamental change in the nature of the world situation
{Awesome. Think abt it. How historic and how fundamental?}
2.
Equally, no one power can hope to solve issues by itself, no matter how powerful it is.
{i.e. either India be accommodated at high table else world'll wallow in ineffectiveness onlee}
3. Last but not least,
In other words, what we see is the emergence of a global order

vsudhir
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Location: Dark side of the moon

Re: Perspectives on the global economic meltdown

Postby vsudhir » 07 Feb 2009 19:13

it will be interesting to see what UK would do if their per capita got reduced to indian level for a week.


And there's actually positive chance we might see it happen in our lifetimes onlee.... AoA onlee.

Wouldn't want to be around anywhere near UKstan to see the pakiness that comes with bad karma should GDII wallop UKstan.....

vsudhir
BRF Oldie
Posts: 2173
Joined: 19 Jan 2006 03:44
Location: Dark side of the moon

Re: Perspectives on the global economic meltdown

Postby vsudhir » 07 Feb 2009 22:36

Another thread prediction getting support from high places onlee....

Bank nationalization is the 'only answer', Joe Stiglitz says


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