Perspectives on the global economic meltdown

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Re: Perspectives on the global economic meltdown

Postby svinayak » 21 Apr 2009 13:32

http://www.chinadaily.com.cn/opinion/20 ... 693696.htm


A global economy that goes beyond the dollar

By Zhang Monan (China Daily)
Updated: 2009-04-20 07:45

The G20 Summit has left behind a raft of unresolved problems amid worldwide efforts to cure the sickened global economy. The London meeting of the heads of the world's 20 leading economies early this month failed to prescribe an immediate panacea to haul the world's ailing economy out of a recession.

Despite some noteworthy achievements, the meeting was still far from working out a feasible formula to curb the unchecked issuance of the dollar, the cause of the ongoing global financial crisis. This will not only let slip the best chance for the world to tackle the crisis, it will also worsen the global economy.

Any misjudgment of the once-in-a-century financial crisis, such as ways to leverage or create liquidity excess to spur economic recovery, will possibly add to the current economic predicament.

It is known that the United States has long been adept at employing an egoistic financial policy to serve its economy. The US Federal Reserve recently adopted a quantitative easing of monetary policy to buffer the impact of the global financial crisis. Excessively issuing the dollar and raising national debt has long served as two major engines of US economic growth. As the world's largest debtor, the US now views the inflation and devaluation of the dollar as a secret weapon to curtail its mammoth foreign debt. Also, the dollar's status as the global reserve currency has easily enabled the world's largest economy to shift part of the price it should shoulder for inflation to other countries.

Experience indicates that the US usually capitalizes on the devaluation of the dollar to eradicate part of its huge foreign debt.
A depreciating dollar has in fact helped the US move in this direction in recent years. The dollar's devaluation in the past six years has caused the dollar-denominated assets by other countries to dwindle drastically. Due to dollar devaluation, a total of $3.58 trillion evaporated from 2002 to 2004.

By the end of last year, the total national debt owed by the US government, its social security system, enterprises, individuals and non-profit organizations, was eight times of the country's GDP. With the launch of large-scale economy aid, the US fiscal deficit this year is likely to reach $1.186 trillion, or 8.3 percent of its GDP. Next year's budgetary deficit is expected to hit as high as $1.75 trillion, about 12 percent of its GDP.

A global economy that goes beyond the dollar

By adopting a quantitative easing of monetary policy, the Federal Reserve's real intention is to expand the balance sheet of the monetary authority in an effort to offset part of its foreign debt. Thus, the US does not worry about inflation in the future. On the contrary, it may possibly become the largest beneficiary of the latest global financial crisis through a series of monetary and financial policies. Such a move is likely to shift financial and economic risks to its creditors and some emerging economies, before pushing them to the front of sustaining inflation and disorderly devaluation of their local currencies. Japan has embraced the same monetary policy over the past decade, inflicting huge damage on some developing countries.

It is known that after Japan's adoption of such a relaxed monetary policy in the 1990s, a large volume of its yen spread to the world, at a more than 15 percent leakage rate. As the world's dominant currency, the dollar's leakage rate would be higher than the yen's if a quantitative easing of monetary policy is adopted. The policy is expected to result in an outflow of the dollar across the world, inevitably causing severe impact on other financial markets and monetary systems.

Judging from past financial crises, a fluidity excess is not good enough to rescue a global economic crisis. On the contrary, it will possibly obstruct economic recovery, as proven by the Great Depression in the 1930s. During that global economic slump, the Federal Reserve employed a relaxed monetary policy to contain deflation. The Fed increased the issuance of a monetary base on the one hand, lowering federal interest rates on the other. However, the 20 percent increase of the monetary base from 1929-33 resulted in an inflation of up to 10 percent in 1934.

Currently, a continuous increase of a global monetary base is now brewing a new round of vicious inflation. A large rebound being experienced in the price of gold, the CRB index as well as stock markets in the US and some emerging economies has signaled a new round of inflation emerging. In particular, the adoption of fiscal deficit by a number of countries, their relaxing of credit and creation of a huge liquidity - believed to protect local trade, promote monetary security and resist deflation - will inevitably spark larger-scale inflation across the world.

The global economy will not move out of a prolonged turbulence and imbalance if it remains linked to the dollar. A stable and self-initiated financial policy in China will also play an irreplaceable part in helping to stabilize the world's financial system.

The country should try to use its yuan to coordinate regional economic development, as well as set up closer economic zones and cooperation with Asian countries. The establishment of a full-fledged regional financial market supported by the alliance of local currencies will contribute to the coordinated development of the world's economy.

The writer is an economics researcher with the State Information Center.

(China Daily 04/20/2009 page4)


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Re: Perspectives on the global economic meltdown

Postby vsudhir » 22 Apr 2009 03:05

Hajaar D&G flooded in today.... From Bloomberg.

IMF: Global Losses may hit $4.1 Trillion
Worldwide losses tied to rotten loans and securitized assets may reach $4.1 trillion by the end of 2010 as the recession and credit crisis exact a higher toll on financial institutions, the International Monetary Fund said.

Banks will shoulder about 61 percent of the writedowns, with insurers, pension funds and other nonbanks assuming the rest ... The fund projected losses of $2.7 trillion at U.S. financial institutions, an increase from its estimates of $2.2 trillion in
January and $1.4 trillion in October.

The $4.1 trillion estimate is the first by the IMF to include loans and securities originating in Europe and Japan. ...

The report said U.S. bank losses at the end last year totaled $510 billion. Additional writedowns of $550 billion are expected through 2010. The projections exclude government-sponsored enterprises.


lookie, what do we have here....
Pandit Says He’ll Repay ‘Every Dollar’ of TARP Funds

Citigroup Inc. Chief Executive Officer Vikram Pandit, speaking at the company’s annual shareholder meeting, said he will repay “every dollar with interest” of funds received


Meanwhile, if residential real estate was the primary trigger for the teraton boom around the world, wait for the commercial realty boom to come....

Malls shedding stores at record pace

Strip malls, neighborhood centers and regional malls are losing stores at the fastest pace in at least a decade, as a spending slump forces retailers to trim down to stay afloat, according to a real estate industry report.

In just the first quarter of 2009, retail tenants at these centers have vacated 8.7 million square feet of commercial space, according to the latest report from New York-based real estate research firm Reis.

That number exceeds the 8.6 million square feet of retail space that was vacated in all of 2008.

Reis' report shows that store vacancy rates at malls rose 9.5% in the first quarter, outpacing the 8.9% vacancy rate registered in all of 2008, and marking the largest single-quarter jump in vacancies since Reis began publishing quarterly figures in 1999.


A lot of the damage has already been done but more won't help any.

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Re: Perspectives on the global economic meltdown

Postby Nayak » 22 Apr 2009 09:32

What is D & G ?

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Re: Perspectives on the global economic meltdown

Postby Sriman » 22 Apr 2009 09:36

Doom and Gloom

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Re: Perspectives on the global economic meltdown

Postby sivabala » 22 Apr 2009 10:08

Is it all bcos' some stupid bankers played with the Oil price, some 2 yrs ago.

I just can't imagine, how come just one commodity could trigger the collapse of the entire world's economy.

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Re: Perspectives on the global economic meltdown

Postby Sriman » 22 Apr 2009 10:16

sivabala wrote:Is it all bcos' some stupid bankers played with the Oil price, some 2 yrs ago.

I just can't imagine, how come just one commodity could trigger the collapse of the entire world's economy.

Can you elaborate?

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Re: Perspectives on the global economic meltdown

Postby Manu » 22 Apr 2009 18:52

Freddie Mac CFO has committed suicide.

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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 22 Apr 2009 21:38

CFO Death Only Clouds Freddie Mac & Fannie Mae Further (FRE, FNM)

If you thought that things could not get much stranger at Freddie Mac (NYSE: FRE) or at Fannie Mae (NYSE: FNM), they may have taken an even stranger turn than most could imagine. David Kellerman, the acting Chief Financial Officer and Senior VP at Freddie Mac, was found dead from an apparent suicide at his home in Virginia early this morning.

A report from WUSA TV in Washington D.C. said that police officers responded to his home around 5:00 AM after being alerted by his wife. He was the acting CFO since September, but had been with Freddie Mac for about 16 years.

Then this morning came reports from the WSJ that the SEC had been questioning Freddie Mac executives on possible accounting violations. That part is of no surprise when you consider what has occurred there and at Fannie Mae and we’d be shocked if those “questioning” comments were not up and down just about the entire gamut of these government sponsored entities.
We have been under the opinion that many scandals and future management issues will be front and center at these two GSE’s because of the rubber stamp policies and loose accounting issues. It is sad when you see news of this sort, and unfortunately it only rings a bit of the same tune as the suicide of John Baxter during the Enron scandal. Many executives can arguably claim that they were never aware of the financial side of the business, but the buck just about always stops with the CFO as that position is supposed to know the status of the books better than any other person inside or outside of the company.


Here is the CNN news item

"His extraordinary work ethic and integrity inspired all who worked with him :twisted: . But he will be most remembered for his affability, his personal warmth, his sense of humor and his quick wit."

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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 22 Apr 2009 22:00

ha ha ha..Bloomberg is reporting that many may link the investigations to the suicide, exactly as I mentioned above, and to whitewash that, comes up with a good story - David Kellerman had $63,000 worth of stock and the value of stock declined due to the crisis and might have been the reason for his committing suicide. :lol:

With these stupid stories, are they confirming that there was indeed a link between the investigation and his suicide?

It will be interesting to know his links with Bush/Paulson/Cheney et al. There couldbe similarties with Kenneth Lay(of Enron), who was close to Bush and his cronies.

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Re: Perspectives on the global economic meltdown

Postby Ameet » 23 Apr 2009 02:06

Japan pays foreign workers to go home - forever.

http://www.nytimes.com/2009/04/23/busin ... ml?_r=1&hp

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Re: Perspectives on the global economic meltdown

Postby Najunamar » 23 Apr 2009 04:32

http://finance.yahoo.com/news/Sources-G ... et=&ccode=
GM to close plants for up to 9 weeks facing slumping demand. :eek: A lot of desis working for the automakers in the tri-county area.

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Re: Perspectives on the global economic meltdown

Postby Singha » 23 Apr 2009 07:47

well a lot of IT cos have expanded their notion of year end shutdown to a mid year shutdown also
and mandatatory PTO to free up cash kept on the books. Netapps is doing it in july. more will follow.

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Re: Perspectives on the global economic meltdown

Postby amol.p » 23 Apr 2009 09:55

Freddie Mac CFO in apparent suicide: police source--smells something fishy...!!!!

RESTON, Virginia (Reuters) - The finance chief of troubled U.S. mortgage giant Freddie Mac, David Kellermann, was found dead on Wednesday after apparently committing suicide, a police source said.

Kellermann, promoted to acting chief financial officer last September after the government took control of the company, was found hanging in the basement of his home in an affluent Washington suburb at around 5 a.m. (0900 GMT).

There was no immediate indication what would have driven 41-year-old Kellermann, who was married and had a young daughter, to kill himself.

Kellermann, a 16-year veteran of Freddie Mac, had played a key role in helping it to navigate past accounting scandals and answer questions from regulators and investors who put the company under intense scrutiny as a five-year U.S. housing market boom ended in 2006.
Last year's government takeover of Freddie Mac and its sibling mortgage agency Fannie Mae came as the companies, known as government enterprises, faced deep losses and the effects of the housing crash engulfed other financial institutions.

Freddie Mac is currently being investigated by the Securities and Exchange Commission. It has provided documents and made employees available for interview in the case but neither the company nor the SEC have given details.

"Freddie Mac knows of no connections between this terrible personal tragedy and the ongoing regulatory inquiries discussed in our SEC filings," said Freddie Mac spokesman David Palombi.

The current probe is far less intense than the grilling several years ago after accounting and political fundraising scandals, several Freddie Mac employees said.

"Back then, investigators took everything. You'd be lucky if they left your kids' pictures," said one long-time employee............ :rotfl:


http://www.reuters.com/article/newsOne/ ... IB20090422

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Re: Perspectives on the global economic meltdown

Postby Nayak » 23 Apr 2009 14:27

Swimming Without a Suit


Article Tools Sponsored By
By THOMAS L. FRIEDMAN
Published: April 21, 2009

Speaking of financial crises and how they can expose weak companies and weak countries, Warren Buffett once famously quipped that “only when the tide goes out do you find out who is not wearing a bathing suit.” So true. But what’s really unnerving is that America appears to be one of those countries that has been swimming buck naked — in more ways than one.



Credit bubbles are like the tide. They can cover up a lot of rot. In our case, the excess consumer demand and jobs created by our credit and housing bubbles have masked not only our weaknesses in manufacturing and other economic fundamentals, but something worse: how far we have fallen behind in K-12 education and how much it is now costing us. That is the conclusion I drew from a new study by the consulting firm McKinsey, entitled “The Economic Impact of the Achievement Gap in America’s Schools.”

Just a quick review: In the 1950s and 1960s, the U.S. dominated the world in K-12 education. We also dominated economically. In the 1970s and 1980s, we still had a lead, albeit smaller, in educating our population through secondary school, and America continued to lead the world economically, albeit with other big economies, like China, closing in. Today, we have fallen behind in both per capita high school graduates and their quality. Consequences to follow.

For instance, in the 2006 Program for International Student Assessment that measured the applied learning and problem-solving skills of 15-year-olds in 30 industrialized countries, the U.S. ranked 25th out of the 30 in math and 24th in science. That put our average youth on par with those from Portugal and the Slovak Republic, “rather than with students in countries that are more relevant competitors for service-sector and high-value jobs, like Canada, the Netherlands, Korea, and Australia,” McKinsey noted.

Actually, our fourth-graders compare well on such global tests with, say, Singapore. But our high school kids really lag, which means that “the longer American children are in school, the worse they perform compared to their international peers,” said McKinsey.

There are millions of kids who are in modern suburban schools “who don’t realize how far behind they are,” said Matt Miller, one of the authors. “They are being prepared for $12-an-hour jobs — not $40 to $50 an hour.”

It is not that we are failing across the board. There are huge numbers of exciting education innovations in America today — from new modes of teacher compensation to charter schools to school districts scattered around the country that are showing real improvements based on better methods, better principals and higher standards. The problem is that they are too scattered — leaving all kinds of achievement gaps between whites, African-Americans, Latinos and different income levels.

Using an economic model created for this study, McKinsey showed how much those gaps are costing us. Suppose, it noted, “that in the 15 years after the 1983 report ‘A Nation at Risk’ sounded the alarm about the ‘rising tide of mediocrity’ in American education,” the U.S. had lifted lagging student achievement to higher benchmarks of performance? What would have happened?

The answer, says McKinsey: If America had closed the international achievement gap between 1983 and 1998 and had raised its performance to the level of such nations as Finland and South Korea, United States G.D.P. in 2008 would have been between $1.3 trillion and $2.3 trillion higher. If we had closed the racial achievement gap and black and Latino student performance had caught up with that of white students by 1998, G.D.P. in 2008 would have been between $310 billion and $525 billion higher. If the gap between low-income students and the rest had been narrowed, G.D.P. in 2008 would have been $400 billion to $670 billion higher.

There are some hopeful signs. President Obama recognizes that we urgently need to invest the money and energy to take those schools and best practices that are working from islands of excellence to a new national norm. But we need to do it with the sense of urgency and follow-through that the economic and moral stakes demand.

With Wall Street’s decline, though, many more educated and idealistic youth want to try teaching. Wendy Kopp, the founder of Teach for America, called the other day with these statistics about college graduates signing up to join her organization to teach in some of our neediest schools next year: “Our total applications are up 40 percent. Eleven percent of all Ivy League seniors applied, 16 percent of Yale’s senior class, 15 percent of Princeton’s, 25 percent of Spellman’s and 35 percent of the African-American seniors at Harvard. In 130 colleges, between 5 and 15 percent of the senior class applied.”

Part of it, said Kopp, is a lack of jobs elsewhere. But part of it is “students responding to the call that this is a problem our generation can solve.” May it be so, because today, educationally, we are not a nation at risk. We are a nation in decline, and our nakedness is really showing.

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Re: Perspectives on the global economic meltdown

Postby Ameet » 23 Apr 2009 22:43

10 countries in deep trouble - Mexico, Pakistan, Ukraine, Venezuela, Argentina, Latvia, Croatia, Kazakhstan, Vietnam, Belarus.

http://finance.yahoo.com/news/10-Countr ... eal-estate

Pakistan. The country has already almost gone bankrupt once in the past six months. In October, only an emergency $10 billion in support from the World Bank, the Asian Development Bank, and others prevented Pakistan from defaulting on its debt. During that crisis, the cost of insurance on Pakistan's debt exploded. Even though the situation has calmed since then, investors are not getting comfortable with Pakistan. It still costs $2.2 million a year to insure $10 million of Pakistan's sovereign bonds. :rotfl:

The economic situation isn't all bad. The Asia Development Bank recently predicted that Pakistan's economy will grow 4 percent in the next fiscal year beginning in July, compared to 2.5 percent growth estimated this year. But the wild card that could change everything is the country's political situation. Pakistan is one of the most unstable countries in the world. On April 13, White House counterterrorism consultant David Kilcullen said that a political collapse in Pakistan could come within months. A 2008 report from the U.S. Joint Forces Command identified Pakistan as a country at risk of a "rapid and sudden collapse," one that would create a devastating security problem for the world. The report says that "the collapse of a state usually comes as a surprise." Anyone banking their money on Pakistan's economic growth might not know what hit them.

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Re: Perspectives on the global economic meltdown

Postby svinayak » 24 Apr 2009 23:04

http://www.atimes.com/atimes/Global_Eco ... 5Dj03.html

Apr 25, 2009


G-8's first bankruptcy
By Chan Akya


I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. That key is Russian national interest.
- Winston Churchill, October 1939.

It is ironic that from a strictly economic point of view, the United Kingdom today appears more akin to the Russia of Joseph Stalin that was described by British statesman Winston Churchill in his memorable quote in 1939. Its economy is in the throes of its greatest financial crisis in over two generations, yet the UK shows unmatchable resolve in trying to crash and burn itself faster and with greater impact than any other political economy appears to be even contemplating.

From the beginning of the current financial crisis in mid-2007, the UK has been in the forefront of disclosing poor performance from its financial institutions, admitting to significant policy errors, and embarking on reckless monetary expansion.

Even forgetting the factors that led the economy into the crisis, it is the combination of factors being put into place today that will ensure that the economy stays down and finally lead to a sovereign bankruptcy; in most likelihood the first one of the Group of Eight countries. Russia brought the number in this select club of so-called leading industrialized nations up to eight when it joined the Group of Seven - the others being the US, Japan, Germany, the UK, France, Italy and Canada.

The UK has a higher chance of busting through its debt financing requirements, and so being rejected by the international financial community, than any other G-8 nation.


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Re: Perspectives on the global economic meltdown

Postby vsudhir » 24 Apr 2009 23:18

The UK has a higher chance of busting through its debt financing requirements, and so being rejected by the international financial community, than any other G-8 nation.


AoA.

Too premature to speculate on when and how that might happen, if it happens.

But should it happen, always remember, couldn't happen to nicer people onlee. Expect more slumdawgs from the scumdawgs, more 'yindian men find condoms too large' kinda sick stunts to appear ever more frequently on UKstani media sites just so the those jolly good fellas can feel better knowing the yindians are worse off than them...hah!

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Re: Perspectives on the global economic meltdown

Postby Ameet » 24 Apr 2009 23:33

Chrysler plan to file bankruptcy next week

http://online.wsj.com/article/SB1240524 ... ts_news_us

Chrysler LLC is preparing to file for Chapter 11 bankruptcy protection as soon as next week, whether or not it reaches a deal with its lenders or forges an alliance with Fiat SpA, said several people familiar with the matter.

If an agreement with the car maker's lenders can be reached, Chrysler would file for bankruptcy protection to rid itself of some liabilities. That would let Fiat pick and choose which operations it wants, these people said. The U.S. government would provide bankruptcy financing while the reorganization plays out.

The United Auto Workers union is on board with the plan.


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Re: Perspectives on the global economic meltdown

Postby Ameet » 25 Apr 2009 23:05

Italy's Mafia thrive in global financial meltdown

http://news.yahoo.com/s/ap/20090425/ap_ ... den_moment

The Rome-based Eurispes think tank has estimated that in 2008, "Mafia Inc." earned euro130 billion (then $167 billion), or about 8 percent of Italy's GDP, from its criminal activities, nearly half of that from drug trafficking.

Eurispes, which analyzes social, economic and criminal trends, said loansharking brought in an estimated euro12.6 billion ($17 billion) of that income. It calculated that some 180,000 merchants and other businessmen got their loans, directly or indirectly, through organized crime in Italy.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 26 Apr 2009 04:48

pictures speak a 1000 words.....

Image

The pensions empire is naked onlee...

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 26 Apr 2009 07:49

Let the Criminal Indictments Begin: Paulson, Bernanke, Lewis

Fat chance. But at least folks are talking about it, a refreshing change from what is the norm in most other places - including great $hitstain.

New York State Attorney General Andrew Cuomo's letter to the SEC and Senate Banking Committee on the Bank of America, Merrill Lynch Merger provides strong evidence of coercion to commit securities fraud by former Treasury Secretary Paulson and Fed Chairman Ben Bernanke, and actual securities fraud by Bank of America CEO Kenneth D. Lewis.

At issue is Lewis's decision to back away from the merger deal with Merrill Lynch on a MAC (material adverse change) clause because of rapidly deteriorating conditions at Merrill Lynch. Here are a few pertinent snips from Cuomo's letter.
...
It's crystal clear from the letter that a strong case can be made that Paulson and Bernanke coerced Lewis to carry out a merger agreement that was not in Bank of America's shareholders best interest. Lewis arguably did so only to save his own job and the board.


Read it all.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 26 Apr 2009 08:06

x-post

G-8's first bankruptcy?

Chan Akya in Asia Times. Prone to some spicing up, I;d have said in saner times. Times are far from normal though.

Folks have remarked on the T&EC forum abt how UKstani credit rating magically continues its AAA march whilst maudy's downgraded the outlook on India's. Turns out UKstan is in some semi-serious dudu indeed.

Gilts prices fell for a second day in a row on Thursday amid increasing alarm over the country's rising debt levels. Investors took fright after the government's annual Budget on Wednesday revealed borrowing would soar to levels not seen since the second world war, with a debt to gross domestic product ratio rising close to 80% from today's 50% .

Investors also questioned the credibility of the UK government's growth forecasts, which are far more optimistic than International Monetary Fund estimates. Benchmark 10-year gilt yields, which have an inverse relationship with prices, have risen about a quarter of a point since Alistair Darling, the UK chancellor, unveiled the annual Budget on Wednesday.

Ten-year gilt yields rose to 3.51% at the London close - up from 3.31% at the market close on Tuesday - as fears have risen that investors may start to sell because they believe the UK economy is likely to deteriorate further. Rising debt levels and a record amount of government bond issuance at ฃ220 billion this financial year - a 50% increase on last year - have also sparked fears the UK could lose its prized triple A credit status.

If this were to happen, it would represent a disaster for the gilts market that needs the top-notch rating to attract international investors and domestic pension funds.


Well, well....I won't be surprised if Maudy's maintains AAA rating even after a sovereign default onlee ..."hiccup, ahem, cough".

But yes, turns out UKstani conomy does have surprising resilience and internal strengths that shall yet again prove critics wrong. ("yay!")

[Ukstan]was among the first to have a failed bank, Northern Rock collapsing just a few weeks after Germany's IKB Deutsche and Saschen LB in the late summer of 2007 (see Rocking the land of Poppins, Asia Times Online, September 22, 2007) and the first economy to go into an actual recession in this cycle. Its central bank was the first to directly support banks' interbank borrowings, the country was the first to aggressively cut rates and, lastly, it was the first country to go in for quantitative easing (QE). Not being composed of complete imbeciles, the UK government also recognizes that its actions will cause significant financial hardship. Additional borrowing that doubles last year's total will fill the gaping hole of 220 billion pounds (US$323 billion) in this year's budget. Mind you, this from a country that has already had the ignominy of a failed bond auction, and perhaps a whole lot more to come its way once the rating downgrades are baked into the cake.

How does it choose to counter the costs of bailing out: does it suggest a means of wiping out government waste (if you will pardon the tautology) or does it plan to provide greater incentives for savings? Neither, as it turns out: the government's magic bullet is to increase the top tax rate in the country from 40% to 50% in a move designed to raise a further 6 billion pounds in taxes (a piffling 3% of the government deficit).

So let me get this right. You are the finance minister of a country where the number of people making a decent disposable income, say over US$100,000 per year, has sharply declined over the past year. You have already spent hundreds of billions on bailing out your sick banks and even sicker industrial companies. Now, facing a deep recession, you choose to further reduce the disposable income of your most productive citizens to drive home a political point?


x-posting from the T&EC phorum.
If (and its an IF after all) UKstani conomy gets flushed down the tubes, just remember that it couldn't have happened to nicer beebal onlee.

And all this while the one clear, pure solution to all of UKstan's conomic (and social and spiritiual, I must add) problems has never been clearer.......Import more Bakis!
On that note, lez all raise a prayer......AoA indeed.

Update:
Might as well clarify, lest moi be accused of victimization-driven revenge-mongering fantasia.....!!!

British economy shrinks at fastest pace for 30 years during first quarter of 2009
Gross domestic product (GDP) fell by 1.9pc in the first quarter ... a sharper decline than the 1.6pc fall in the final quarter of 2008 when Britain officially entered recession.

It was the sharpest quarterly fall in GDP since 1979, when it fell by 2.4pc in the third quarter.


Yawn, you might say, 1.9% ain't too bad. Waz the big freakin' deal, eh?

Well, here's the thing....

In the U.S. the headline GDP number is the real (inflation adjusted) quarterly change, seasonally adjusted at an annual rate (SAAR). In Britain and the EU, the headline GDP number is the real quarterly change, but it is not the annual rate. So a 1.9% decline in the U.K. is about the same as a 7.6% decline (SAAR) in the U.S.


Ouch onlee indeed.

More. An excellent read from Will Buiter. Folks'll do well to take this guy seriously. He's classically understated, unlike an Ambrose Evans blowhard and he knows his stuff.

Darlin's doing his best to clean up Brown's mess

A brown pants mess, u mean?

Mr Darling is doing his best to clean up the mess left by his predecessor, Gordon Brown. The fiscal profligacy of Mr Brown, now prime minister, after New Labour’s first term and his leadership since 1997 in the global financial regulatory race to the bottom have left the UK suffering from multiple imbalances. It is in its worst fiscal shape ever in peacetime - in the G8, only the US and Italy come close. It has a bloated financial sector, including a banking sector that is too large to save unless state support is restricted to the UK high street banking bits of UK-based global banking groups. It has a distorted and moribund housing sector and excessively indebted households.


During the next couple of years the UK will run public sector deficits of 12 per cent of gross domestic product or over - figures historically associated in peacetime only with developing countries or emerging markets en route to an International Monetary Fund programme. {AoA $hitain finally facing turd world descriptors? Someone wake up the haughty conomist rag, the telegraph and the FT plz.... :mrgreen: } Large deficits will persist into the second half of the next decade. The structural deficit for the next few years is at least 7 per cent of GDP. Not counting the fiscal cost of the banking sector rescue, public debt will reach 80 percent of GDP two years from now.


12% on-balance-sheet deficits? Does Moody know?? And what happens to those rising bond (or gilt==govt bonds in UKstani parlance) yields when even Moody's AAA goody's can't sustain much longer eh?

Public debt in excess of 100 per cent of GDP is therefore likely, even if we do not add the capitalised value of Britain’s unfunded public sector pension commitments, which are effectively contractual obligations.


Seriously, Gordon Brown-pants is the best thing to have happened to UKstan in a while. Moi only hopes he attempts to shore up his Baki vote support by going more ballistic over kashmir than even milipede had gone. That way at least, Dilli and India will know the real nature of the $hitish establishment.

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Re: Perspectives on the global economic meltdown

Postby Singha » 26 Apr 2009 08:43

http://www.businessweek.com/magazine/co ... 634340.htm

An Indian Outsourcing Hotspot Chills Out
Gurgaon, a suburb of Delhi, is suffering from a wave of layoffs as Western companies retrench

By Mehul Srivastava
BW Magazine

May 4, 2009

A commercial real estate boom has turned into a glut, with vacancy rates of 28% Michael Rubenstein/Redux

Gurgaon, India - The terrace at the Hao Shi Nian Nian ("Here's to the Good Life") restaurant in Gurgaon's Central Plaza Mall offers a good sense of the city. A short drive from glass-fronted buildings that house Nestlé (NSRYG), American Express (AXP), and other multinationals, the Chinese restaurant is among the top lunch destinations in this suburb of Delhi, India's capital.

But on a recent weekday, the place has few customers. After the dumplings arrive, the manager declines to talk about his sales, but a waiter pouring water whispers bravely: "It's bad. No customers. No tips. I should get a new job." In the parking lot, used-car salesman Sachin Kulkarni displays late-model sedans, including a one-year-old Honda (HMC) Civic sold by a couple who both lost their jobs. "People just look," Kulkarni says. "They don't buy."

Gurgaon's problem is that its economy has become intertwined with America's. A decade ago, Gurgaon was little more than a farming community. Then outsourcing boomed, and the town became a preferred location for companies that answer phones, create PowerPoint presentations, and do other business tasks for U.S. clients. As outsourcers added thousands of workers every month, developers rushed in and built offices and apartment towers.

The once-bucolic community has become a city of nearly 1 million and a nightmarish version of what India aspires to be—a destination for global investment—with water shortages, iffy electricity, and horrific traffic jams. "As things have slowed, Gurgaon's mentality has been affected. People are more conservative," says Nitin Aggarwal, director of research at Pipal Research, an outsourcing company that grew from five employees in 2002 to over 300 by last December, but which has put further expansion on hold.

Gurgaon is especially vulnerable because of the nature of the work it does. Higher-end jobs such as writing computer code typically go to Bangalore and elsewhere in the south because of that region's top-notch schools. Gurgaon is mostly lower level: call centers and business process outsourcers. With less work, these shops are starting to close, says Sukant Srivastava, country chief for Convergys (CVG), a Cincinnati-based outsourcer with 12,000 workers in India, about a third of them in Gurgaon. "The effects of the slowdown are beginning to show," he says.

Gurgaon isn't a ghost town. There's still enough traffic to make commuting unpleasant, for instance. But while India's economy may expand by 5% this year, the 9%-plus growth of recent times is gone and Gurgaon is feeling that decline more than most other places. In the second half of 2008, as American and European clients hit the skids, India's outsourcing industry saw contracts shrivel by 22%, its worst performance in a decade, according to research firm Technology Partners International. "We haven't seen large-scale layoffs," says Sid Pai, TPI's India director. Then he corrects himself: "We haven't seen large-scale layoffs as yet."

Nobody in India collects layoff data, but every day papers carry dire news: 200 workers cut from an American Express call center, 300 from Boston-based Sapient (SAPE), 80 or so at Motorola (MOT). At a café, young engineers huddle over a laptop, dissecting an online rumor that Wipro Technologies, India's No. 3 IT provider, might lay off 5,000. (Wipro denied the report.)

DEVELOPMENT ON HOLD

The economic woe is taking its toll on the developers that built Gurgaon. As demand has eased, some 28% of commercial real estate here is vacant, compared with shortages a year ago. Office rents have dropped 25% and will continue to fall, says Sanjay Verma, South Asia head for real estate consultancy Cushman & Wakefield. "People are just waiting and watching before making any commitments," he says.

That's easy to see as you head toward the heart of Gurgaon from the Central Plaza Mall. On Golf Course Road, a few workers mill around half-completed buildings. At the Narsi office complex, huge signs advertise deep discounts. "I can give you a great deal, no rent for the first two months," says a real estate broker. "Just don't tell anybody." At the Sahara mall, a bored clerk points to a rack of men's clothing. "Eight suits for the price of three," he says. Still, he hasn't sold one in three weeks.

The bad news has the city fathers fretting that their revenues will plummet. In a dingy tax office the electricity is out, the telephone rings constantly, and an ancient computer is covered with a cloth. A disheveled clerk shows reams of printouts to A.K. Singh, a local tax commissioner. "Collection is down, certainly, this year," Singh says, marking the pages with a red pen. "Wait until June, when the final numbers come in. It will be drastic."

The new buzzword in Gurgaon is consolidation. Larger companies hope they have the cash to hold on while the global economy recovers, perhaps even enough to buy a rival or two. "Clients just aren't moving on proposals," says Ashish Gupta, chief operating officer of Evalueserve, an outsourcer with 2,400 employees, 2,000 of them in Gurgaon. "Smaller players are struggling. ... Many of these guys could get wiped out."

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 26 Apr 2009 17:56

Image

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Re: Perspectives on the global economic meltdown

Postby SRoy » 26 Apr 2009 19:25

Singha wrote:http://www.businessweek.com/magazine/content/09_18/b4129059634340.htm

An Indian Outsourcing Hotspot Chills Out
Gurgaon, a suburb of Delhi, is suffering from a wave of layoffs as Western companies retrench
...
Gurgaon is especially vulnerable because of the nature of the work it does. Higher-end jobs such as writing computer code typically go to Bangalore and elsewhere in the south because of that region's top-notch schools. Gurgaon is mostly lower level: call centers and business process outsourcers. With less work, these shops are starting to close, says Sukant Srivastava, country chief for Convergys (CVG), a Cincinnati-based outsourcer with 12,000 workers in India, about a third of them in Gurgaon. "The effects of the slowdown are beginning to show," he says.


Crap. No research has been done. DDM as usual.

Someone tell the reporter that Gurgaon hosts large no. of S/W facilities as well, beside BPO. It is not the BPO's, but the usual IT S/W abduls that contributed to the real estate boom in the last decade.

And IT folks have cut down on spending and are not taking property prices at face value as earlier. Simple. Real estate sharks are yet to change their habits.

Good things have happended to the BPO's. In our office building, few floors are taken up by a BPO. We used to see new crowd every 3-4 months....but....for the past 4-5 months (observation based on our cigarette breaks downstairs...where one shares lights and strikes up conversations.) the BPO kids have seemed to settle down with the office. It will do good to the BPO.

Another segment in the scene is the R2I and NRI's that have been relieved of their wallets by the downturn.

What has happened is very good. A year ago, we were mulling over plans to increase team sizes in Kolkata and Chennai with corresponding ramp down in Gurgaon. So, if the current trend holds a bit, NCR folks will breathe a sigh of relief.

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Re: Perspectives on the global economic meltdown

Postby svinayak » 26 Apr 2009 19:27

The Mkts have zoomed up in 6 weeks 20-30% from it's low in spite of deteriorating FUNDAMENTALS in all aspect of Global Economy. This is one of the worst GOVT manipulated Market where late comers will stand holding the bag when the tide receds! The Insiders are Selling just like in Oct '07. (this week's Barrons).

http://online.barrons.com/article/SB124 ... 54673.html

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 26 Apr 2009 22:17



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Re: Perspectives on the global economic meltdown

Postby vsudhir » 26 Apr 2009 23:29

AEP at it again...
The capital well is running dry and some economies will wither

The world is running out of capital. We cannot take it for granted that the global bond markets will prove deep enough to fund the $6 trillion or so needed for the Obama fiscal package, US-European bank bail-outs, and ballooning deficits almost everywhere.


Unless this capital is forthcoming, a clutch of countries will prove unable to roll over their debts at a bearable cost. Those that cannot print money to tide them through, either because they no longer have a national currency (Ireland, Club Med), or because they borrowed abroad (East Europe), run the biggest risk of default.


Yup. And the Washington consensus' hypocrisy continues unabated. While turd world is asked to bear debt-deflationary pain, the rich world is merrily trying to print its way out of the problem, and still keep ratings and access to capital intact. Its another matter they wont likely be able to eat their cake and have it too.

More on Ukstan...

Commerzbank said every European bond auction is turning into an "event risk". Britain too finds itself some way down the AAA pecking order as it tries to sell £220bn of Gilts this year to irascible investors, astonished by 5pc deficits into the middle of the next decade.

US hedge fund Hayman Advisers is betting on the biggest wave of state bankruptcies and restructurings since 1934. The worst profiles are almost all in Europe – the epicentre of leverage, and denial. As the IMF said last week, Europe's banks have written down 17pc of their losses – American banks have swallowed half.


And here, he makes a wonderful argument...something I have been trying to tell those who wave away talk of demographic deficits and disasters as 'linear oversimplification', 'Mark Steynesque thinking' and the like.

The National Institute for Economic and Social Research (NIESR) said last week that since UK debt topped 200pc of GDP after the Second World War, we can comfortably manage the debt-load in this debacle (80pc to 100pc). Variants of this argument are often made for the rest of the OECD club.
But our world is nothing like the late 1940s, when large families were rearing the workforce that would master the debt. Today we face demographic retreat. West and East are both tipping into old-aged atrophy (though the US is in best shape, nota bene).


Yup. So what if a mere 3% of the popn is Baki, eh? Well, 10% of those under 5 are paki too, turns out.

Oh, I am a fearmongering D&G wallah onlee, eh? Read on, the canary in this demographic coalmine has already started to sing...Japan!

Japan's $1.5 trillion state pension fund – the world's biggest – dropped a bombshell this month. It will start selling holdings of Japanese state bonds this year to cover a $40bn shortfall on its books. So how is the Ministry of Finance going to fund a sovereign debt expected to reach 200pc of GDP by 2010 – also the world's biggest – even assuming that Japan's industry recovers from its 38pc crash?

Japan is the first country to face a shrinking workforce in absolute terms, crossing the dreaded line in 2005. Its army of pensioners is dipping into the collective coffers. Japan's savings rate has fallen from 14pc of GDP to 2pc since 1990. Such a fate looms for Germany, Italy, Korea, Eastern Europe, and eventually China as well.

So where is the $6 trillion going to come from this year, and beyond? For now we must fall back on the Fed, the Bank of England, and fellow central banks, relying on QE (printing money) to pay for our schools, roads, and administration. It is necessary, alas, to stave off debt deflation. But it is also a slippery slope, as Fed hawks keep reminding their chairman Ben Bernanke.


Finally, taking a historical perspective....
Great bankruptcies change the world. Spain's defaults under Philip II ruined the Catholic banking dynasties of Italy and south Germany, shifting the locus of financial power to Amsterdam. Anglo-Dutch forces were able to halt the Counter-Reformation, free northern Europe from absolutism, and break into North America.

Who knows what revolution may come from this crisis if it ever reaches defaults. My hunch is that it would expose Europe's deep fatigue – brutally so – reducing the Old World to a backwater. Whether US hegemony remains intact is an open question. I would bet on US-China condominium for a quarter century, or just G2 for short.


ss_roy, where art thou?

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Re: Perspectives on the global economic meltdown

Postby Nayak » 27 Apr 2009 08:22

Sriman wrote:Doom and Gloom

Thanks mate.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 27 Apr 2009 21:17

Expose on Geithner.
Member and Overseer of the Finance Club

Last June, with a financial hurricane gathering force, Treasury Secretary Henry M. Paulson Jr. convened the nation’s economic stewards for a brainstorming session. What emergency powers might the government want at its disposal to confront the crisis? he asked.

Timothy F. Geithner, who as president of the New York Federal Reserve Bank oversaw many of the nation’s most powerful financial institutions, stunned the group with the audacity of his answer. He proposed asking Congress to give the president broad power to guarantee all the debt in the banking system, according to two participants, including Michele A. Smith, then an assistant Treasury secretary.

The proposal quickly died amid protests that it was politically untenable because it could put taxpayers on the hook for trillions of dollars.....


Very interesting blogpost follows:

Are the Knives are Coming Out for Geithner?

The clout of the press has decayed enormously over the last 40 years. The fourth estate was feared, resented, and begrudgingly respected in the corridors of power. But rule by beancounters, savvy media spin, and access journalism (journalists who write pointed stories get frozen out) have largely leashed and collared the press. Indeed, a friend who grew up in Eastern Europe when it was Communist said as of roughly 2000 that the news felt controlled.

So to see a front page, and super long story in the New York Times honing in on Geithner's close, as in overly close, relationship with Wall Street executives, is a stunner. In the old days, a report critical of a prominent public official would be a leading indicator that they were at least facing headwinds, perhaps in bona fide trouble. But given the new rules of the game, one has to assume a story of this sort is a lagging indicator, that Geithner is perceived to be sufficiently at risk to be fair game.



Read it all.

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Re: Perspectives on the global economic meltdown

Postby maberbach » 28 Apr 2009 02:04

[Edited]
Last edited by ramana on 28 Apr 2009 04:20, edited 1 time in total.
Reason: Edited ramana

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Re: Perspectives on the global economic meltdown

Postby ramana » 28 Apr 2009 03:03

Acharya wrote:The Mkts have zoomed up in 6 weeks 20-30% from it's low in spite of deteriorating FUNDAMENTALS in all aspect of Global Economy. This is one of the worst GOVT manipulated Market where late comers will stand holding the bag when the tide receds! The Insiders are Selling just like in Oct '07. (this week's Barrons).

http://online.barrons.com/article/SB124 ... 54673.html



viangaru hd warned us of the false spring when the market will rise a little and the insiders will dump on the newbies. So more confirmation of this from Barrons!

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 28 Apr 2009 03:14

Thain Fires Back at BofA

Oh, ghor kalyug onlee.... such paragons of virtue as Sri sri John Thain sahib are now forced to defend their pristine unimpeachable record....tch, tch... :mrgreen:

Former Merrill chief John Thain is striking back at Bank of America. He claims the bank lied about its role in the giant bonuses and losses at Merrill that cost Thain his job.


Where are the freakin' indictments? Show these arsoles the jail door!

I recall an impassioned argument I had a few yrs back with a desi GC holder in massa who'd gone native, or MUTU... he was like, US is the best corp governance model not coz scams don't happen here but coz they get busted and eventually even powerful people (like Martha Stewart and Ken Lay) endup behind bars. Where else dya see powerful ppl like that actually goto jail.

I couldn't quite rebut him then, actually agreed and allquite a lot somewhat. Now, am not so sure.

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Re: Perspectives on the global economic meltdown

Postby svinayak » 28 Apr 2009 09:29

As per most estimates, India had 25% of world GDP just before the Europeans arrived in India. According to economic historian Angus Maddison in his book 'The World Economy: A Millennial Perspective', India had the world's largest economy from the 1st century to 11th century, with a 32.9% share of world GDP in the 1st century to 28.9% in 1000 CE. As per Jawaharlal Nehru, in his book 'Glimpses of World History', the Czar of Russia, Peter the Great wrote in his will in the 18th century, that the country that will rule India, will be the sovereign of the world (click here to read his will.).


http://www.antipas.org/magazine/article ... great.html

he Will of Peter The Great


In which he prescribes to his successors the course which they ought to follow,
in order to acquire universal dominion.

Taken From: The Herald of the Kingdom and Age to Come, Vol. 1, page 224

9. Do all in your power in approach closely Constantinople and India. Remember that he who rules over these countries is the real sovereign of the world. Keep up continued wars with Turkey and with Persia [modern day Iran]. Establish dockyards in the Black Sea. Gradually obtain the command of this sea, as well as of the Baltic. This is necessary for the entire success of our projects. Hasten the fall of Persia. Open for yourselves a route towards the Persian Gulf. Re-establish, as much as possible, by means of Syria, the ancient commerce of the Levant, and thus advance towards India. Once there, you will not require English gold.

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 28 Apr 2009 11:11

I told you so.. It is about to get a whole lot worser when the average person in the west has to face the truth..

It will be interesting to see how they react when they cannot ignore the fact- a lot of what they believed was a lie... a pleasant delusion.

ss_roy, where art thou?

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 28 Apr 2009 16:39

ss_roy,

Nice to know you are still around lurking here.

Do post here at least once in a while. Would be happy to know your take on PRC, the middle east, south america, south africa, central asia and the various indian states.

Meanwhile

Dumped pets pay price of recession
:((

Comfortably socialist Citizenry in many of the non-US G7 are also pets of the state with the vote onlee.... :mrgreen:

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 28 Apr 2009 16:51

China Faces a Grad Glut After Boom at Colleges (wsj)

Unemployed university graduates used to be rare in China. But now their ranks are ballooning to critical levels just as the country suffers its worst economic slump in two decades. Up to one-third of last year's 5.6 million university graduates are still looking for work, and this year will see another 6.1 million hit the labor market. {OMG!} Finding jobs for graduates is suddenly a national priority: Earlier this month, the central government ordered local governments and state enterprises to hire more graduates to maintain China's "general stability." {Hmmm, loan melas for college grads}

China is suffering from a higher-education equivalent of the global credit bubble.


So is the US, btw. Particularly the B-school sector where, thx to the disappearance of the finance sector (which used to hire upto 40% of the class at the top 30-40 B-schools) from job mkt entirely, ROI calculations are hard hit. How can US B-schools continue to charge the fees they currently do (rule of thumb is that total tuition == about 9-10 months of the mean gross pay after placements at that school) when placements and average pay will both drop like a stone?

Wonder where India's edu sector is these days. Heard from folks in India that second rung schools like ICFAI etc are still doiong OK and able to place people. Thats a relief to know!

On government orders, China's universities -- most of which are state-controlled -- boosted enrollment by up to 30% a year, year after year for most of this decade, and built vast new campuses. {GoI forced IIMs similarly, didn't they?} Financing was considered a cinch: New students would mean more tuition to pay off the loans that funded the expansion. But those plans were wildly optimistic, leaving hundreds of universities across China crippled by debt.

More serious for China's long-term prospects is that the expansion was so fast, and the pressures to pay off the debts so intense, that many of the schools turned into diploma mills, churning out poorly qualified students. Mr. Zhang got his degree from a school of traditional Chinese medicine with no history of teaching computer sciences. He looks back ruefully, recalling overcrowded classrooms and a lack of materials: "I wonder if this education was of any value?"


Read it all.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 28 Apr 2009 18:33

Row with emerging nations threatens IMF's cash call

Russians warn that the IMF must deliver on its power-sharing commitments


A row over giving more say in the running of the International Monetary Fund to countries such as China threatens to jeopardise the lender's bid to raise an additional $500bn to deal with the global economic crisis.

The IMF spent much of its annual summit in Washington, which ended last night, discussing how it will raise the new funds, but the developing countries on which it is depending for much of the money repeatedly warned that they would not contribute more without being given greater control of the organisation.


And what did the G7 expect? That the rest of the G20 would hand over monies to their care for nothing in return? Someone remind these clowns that the days of colonial exploitation ended long ago - no longer can a great $hitstain plunder Indian gold reserves, yindian currency reserves and yindian sweat and blood into its coolie service and give BS in return for its debt obligations :x .

Time for the third (class) world to drive hard bargain and pile it on ever harder with each passing month.


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