Perspectives on the global economic meltdown

[Satya_anveshi]

I would be wary of making this slow motion meltdown some partisan or personality issue.

VSudhir Garu,

I agree with your assessment as to what Obama *should* have done after he took office but one has to realize that it would have been a very, very tall order for a new leader (black leader on top of it) to take a decision that is tantamount to changing the identity of the nation. He would not have envisioned, nor even in his wildest imaginations, this kind of "change."

One the one hand you have "unchartered teritory" and the other worse situation but a known teritory. The choice is obvious for a new leader of the most powerful (yet pauper) nation on earth.

Timing, actors, beneficiaries are vital information in fixing this mess.

[svinayak]

Not a single special prosecuter appointed to investigate even one of the many banks and their CXO banking personalities who half-wittingly engineered the crash, not a single chargesheet filed, no attempt even at forcing accountability and transparency out of the Fed Reserve, none.

You need to understand the system and political economy to understand what is happening.
This is an oligarchy which protects each other. Obama is also a product of the oligarchy and he is an agent of change which they are anyway going to do to survive.
This senate and congress hearing are just part of the process which is a show between the oligarchy to keep one another in check but continue the oligarchy. They are working on changing the system they use for the new world.

[shravan]

U.S. States Push More Gambling to Help Replace Declining Taxes

July 20 (Bloomberg) -- Three U.S. states are pushing plans for video poker and slot machines as their legislators hope gambling income will compensate for declines in taxes.

[Satya_anveshi]

"The Fed Will Be a Less Powerful Institution," Rep. Barney Frank Says

Ben Bernanke delivers his semi-annual report on the economy Tuesday in an atmosphere of intense political debate over the fate of the central bank.
One man at the center of the discussion, Congressman Barney Frank, chairman of the House Financial Services Committee, is an advocate of less power for the Fed, not more.

"The Fed will be a less powerful institution" when all is said and done, Frank says in the accompanying video exclusive, taped last week in Washington D.C.

Specifically, Frank supports:

*The creation of a new consumer protection agency, which would strip the Fed of some current responsibilities. The Fed is the "biggest loser" if the agency comes to be, which Frank thinks it will despite still opposition from the banking lobby.
*Ron Paul's effort to audit the Fed.
*Eliminating Depression-era regulations that allow the Fed to lend to just about any distressed institution without needing Congressional approval.
*Given the Fed more power to regulate leverage but doing the same for other agencies and not making the central bank the exclusive "systemic risk" regulator.

[Satya_anveshi]

OT (pure speculation) here but market will tank tomorrow big time.

There has been some love fest that was going on between Barney Frank and CNBC: http://www.youtube.com/watch?v=lsANExdIdGg and when tomorrow Barney Frank puts his report, wallstreet will "convey" its reaction.

Disclaimer: don't take any investment decision based on this post.

[Neshant]

Barney Frank

A wolf in sheep's clothing if you ask me.

Claims to be fighting for transparency and accountability but is just trying to water down any attempt at regulating the federal reserve or banks/financials.

Small time stock holders invested via a mutual fund in a company have no say in how the company is run and no way to prevent the CEOs from ripping off the company and destroying it. His 'solution' is a bunch of smoke and mirrors designed to give the illusion that he's done something to regulate the risk when in fact nothing is different.

If he jumps in with his 2 cents on how HR1207 : Audit the Fed bill should be modified, the bill is as good as toilet paper.

[vsudhir]

Agree with Neshant here. Barney Frank preaching accountability and public interest is like Musharraf's Musharraf preaching enlightened moderation.

[vsudhir]

Philadelphia Halts Payments in Crunch

The government of the nation's sixth most-populous city has stopped paying its vendors and suppliers, citing a cash crisis.

Philadelphia Mayor Michael Nutter on Friday blamed the drastic move on the failure of the Pennsylvania legislature to act on his request for authorization to raise the city sales tax and change the formula for the city's contribution to its employee pension plan. Mr. Nutter said these items are necessary to help close a projected city budget deficit of $1.4 billion over the next five years.

The city has about $197 million in funds, and with the suspension of vendor payments that money should last through the end of September.

Calif is already paying its creditors (vendors who did business with the state) in IOUs that are not redeemed 100 cents to the dollar in open exchange. Now Philly follows suit in suspending creditor payments.

Blogger Mish shedlock opines:

The solution is lower benefits, the immediate termination of all defined benefit pension plans for all future government employees, a renegotiation of the pension contracts for existing workers, and the canceling of needless government programs.

Raising taxes for the benefit of overpaid government bureaucrats is exactly the wrong thing to do. If unions disagree, then a Philadelphia bankruptcy is the best option for Philadelphia taxpayers. Obviously the same applies to numerous cities in California and across the nation as well.

link

[Nandu]

Cali just reached a budget agreement, so the IOUs will be paid in full.

http://news.yahoo.com/s/nm/20090721/pl_ ... lifornia_6

Of course, it might turn that they just kicked the problem to next year.

[ramana]

What is the talk of second stimulus pkg? What do forex futures say about value of $ in coming 3, 6, 9 months?

The 2nd stimulus package is being pushed by acadhimmic charlatans who have quite eloquently covered their bases. It is right now in its 'trial balloon' stage. (Much like the trial balloons US inspired intellectuals keep pimping in south asia over cashmere).

As usual, there will be multiple voices speaking in slightly different directions to keep the issue vaguely in the media before it can be slipped in.

Compare that with the cap and trade bill which OTOH was slipped thru in an unseemly haste in the dark of the night at the opportune moment - M Jackson's death knowing the media will be busy there for a while.

Vsudhir, What if there was a need? I would like us to look at fundas and see if there is any merit to the suggestion. An idea, even if brought forward by charltans, should be looked at without prejudging due to messenger.

[vsudhir]

Vsudhir, What if there was a need? I would like us to look at fundas and see if there is any merit to the suggestion. An idea, even if brought forward by charltans, should be looked at without prejudging due to messenger.

Fair enough. Proof of the pudding is in the eating. The first stimulus package itself is yet to be fully spent. Its effects have to be measured against expectations and recalibrated before a second could go on-stream. However, it has become abundantly clear that the first stimulus has failed to stimulate job creation.

In any case, while stimulus packages could be a short term band-aid, the fundamental problems remain. I am in agreement with the econ-bloggers who aver that deleveraging process *must* complete, market bottoms out after proper price discovery on its own, and then from the ashes a genuine recovery (that is not smoke-and-mirrors as in accounting fraud led, or debt driven i.e. borrowed from future consumption, or cheap credit due to trade imbalances driven, etc).

Attempting to *solve* the problem with stimuli is pointless. Just as paracetamol can't cure a broken leg. To ease the pain, to mitigate the disruption, to make more orderly the necessary deleveraging are more worthwhile stimuli goals, perhaps. But that is not how the charlatans spin it. They are bellowing recovery tunes and green shoots at every corner while predicating its imminent arrival on more keynsian stimuli only. Patently dishonest, IMVHO.

Meanwhile in other news, things must be really bad if....
States close rest areas in bid to stave off shortfalls: Travel expert warns safety could suffer (USA Today)

[satya]

Random thoughts : the debate /nervousness about 2nd stimulus is not whether its required or not , its required & will happen . Question is when's the right time that will be determined by the focus of 2nd stimulus funds . Nervousness comes from the part that are Financial still on the edge ? If yes then 2nd stimulus will be primarily focussed on financial sector if that happens there's not much left to stimulate the real economy via clean energy solutions thingie or infra spending . It also spooks the market participants for one of their assumption that financials coming out of wood ain't true at all won't be easy to keep it in wraps . Couple this with increasing noises about economic data reliability becoming more frequent in media tells itself the story of how scary it is with market makers who had known it for too long & are almost giving up not knowing what's real worth of any of these financial derivatives . No one's sure how deep it goes .

On other hand if 2nd stimulus takes a risky position by going boldly with focus on real economy then either financials have to kept in ICU for prolonged period of time ( who will play their role then ? debate on ) & need to radically change US Social Security System more in line with that of Europeans but then where's the money gonna come from . It was one thing in past to let Fed's offshore corps handling discreet matters of liquidity supply & propping up Bond mkts now & then but u can't do on scale of trillion $ that's needed. Neither Europeans nor Wealth Vault in Alps of any help that includes petro dollars as well . Japan is the wild card , need to see how much it can absorb . PRC can park only what it earns by selling but whom to sell ?

[John Snow]

As indicated my previous posts on this thread

The first stimulus package was not stimulus to the economy on the main street but to the wall street owned investment banking system. I had been writing about the US banks surviving on credit card interest rates and student loan gouging ( even though the interest rates of federal funds for that purpose was at the Beta rate, the banks marked them to near credit card rates) , all this to keep the books black ( the banks I am talking are not investment banks obviously).

The fact that federal agencies who dispensed the the bail out money themselves are not sure where the money went. . This is simple to understand all that money was used up to fix the books and shore up assets and write off bad assets ( such as combinations of sub prime etc etc.). The siphoning of money was from both stimulus money given to AIG and as well as banks , this is nothing but INCEST period in terms of Banking , Insurance and Investment instruments of investment banks (arms).

So this brings us to why second stimulus is needed, now the question is how much?

The presidents date of expiry is set after 4 years unless he chants Mrutunjaya stotatram ( Om triyambakum...) and gete elected for second term, that is 8 years from now.

So shri Obama garu needs to expedite the money into common mans hand beating the lag of macro economics, so he wants easy home loans easy car buying by subsidizing the GM Hummer GMC ( which I own giving 15 MPG) Expedition V8s ect. Cash fro clunkers ( so called), so GM & Chrysler can stop "CRYslering".

We need stimulus that can reach main street yesterday, so that sales tax revenue, real estate taxes, Gas taxes fill up the coffers of state govt, all this activity should normaqlly mean jobs , in addition to infrastruture activity pick ups.

But Macro econ works in its own pace,

the rate at which the second stimulus is pushed will directly impinge upon inflation unless the production picks up (in massa land)

[Neshant]

Very interesting grilling of Bernanke. He has fear in his voice and looks nervous.

Note his answer to the question of whether the currency swaps of 500 billion with certain other countries had anything to do with the 20% rise in the US dollar value. You can tell he's thinking hard about what to reveal and what not to say.

I think deep down he's fearful that Obama might blame him for the crisis and replace him as fed chairman when his renewal term comes up soon.

http://market-ticker.denninger.net/arch ... ey-Go.html

[Gerard]

Fiscal ruin of the Western world beckons

For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state.

[Purush]

http://www.vanityfair.com/politics/feat ... 00908?fark
Rich Harvard, Poor Harvard

Only a year ago, Harvard had a $36.9 billion endowment, the largest in academia. Now that endowment has imploded, and the university faces the worst financial crisis in its 373-year history.

And how much of the turmoil is the fault of former Harvard president Larry Summers, now a top economic adviser to President Obama?

Sitting casually on a desk, wearing jeans and a short-sleeved polo shirt, Smith, a professor of engineering and applied sciences, and a former competitive swimmer, looked more like an athlete than an administrator. He got straight to the point: his division—which includes Harvard College, the Graduate School of Arts and Sciences, and the School of Engineering and Applied Sciences—was facing a budget deficit of $220 million.

Smith’s audience listened intensely. Already, they had seen evidence of the cutbacks Smith was alluding to. All across campus, as a preliminary measure, thermostats had been lowered during the winter months, from 72 degrees to 68 degrees. Students and faculty were no longer entitled to free coffee at the university’s Barker Center. The Quad Express, which shuttles students between the Radcliffe Quadrangle and Memorial Hall, would soon be running every 20 minutes, not every 10 minutes. More recently, despite loud protests from Harvard’s athletes, among others, it was announced that hot breakfasts would no longer be served on weekdays at undergraduate residential houses. Instead of bacon, poached eggs, and waffles, students would have to get by on cold ham, cottage cheese, cereal, and fruit.

[Singha]

but generally the families who sent UG to Hvd are from rich class.
they can buy their own hot breakfast sometimes - there's plenty of nice options in the area.

as for the lavish buildings, famous professors, infra and labs...thats where the real impact might be felt in a few years. Univs were competing to attract top$$$ students by building new luxe residences with floor to ceiling glass, pvt suites and inhouse jacuzzis (some concerned moms asked if the jacuzzis would be co-ed and were assured would not)

even small tier-3 univs have the kind of gym and sports infra that
would put any campus in India to grave shame. and they are usually located either in diverse urban areas or charming rural towns with leafy streets or water bodies close by - not 'hardship postings' like warangal or kanpur.

[ramana]

Warangal toughens you to face adversity. After Warangal you laugh at govt hardship posting. The seven seas hold no terror after surviving the Warangal course.

[Singha]

that is true, but many get changed for life one way or another. it affects their outlook on life, ethics, romantic, family issues... 'soldiers' who sometimes never adjust back to the civilian world...those who never return in the mind.

I have seen similar adjustment problems among packs of young iit grad men working now in cos but living in same city. their wives are not exactly pleased at the boyish hostel behaviour they still carry on with.

a true warrior knows when to adapt, change form and present no clear target.

rigidity and dogma about who is best, which branch is best, which college is best, which programming language is best are enemies of victory.

tomorrow's war is won on tomorrow's fighting , not on the flags of past victories.

[Nandu]

Looks like we are still D&G over here while the stock markets are making steady gains everywhere. And stocks are supposed to be a leading indicator of the economy....

Is BR behind the curve? That rarely happens.

[SwamyG]

Nandu: The analysts expectations are already way too low; some of the companies are just bearly managing to meet or beat it while others are losing grounds. Golum Sachs & others are still pulling out huge bonuses - showing that one can still get away with such obnoxious behavior. The D&G does not predict a particular date for the Western Civilization collapse We are tracking the damanage unsustainable lifestyle/economics wreak on the planet.

It is like watching Unkil push himself more and more towards the edge of the cliff. Now the Unkil is drunk with vast prosperity and power; and his legs are wobbly and we are watching where he is going to put his next step. Will he sober up and withdraw or just take another sip from his bottle?

[vsudhir]

The now infamous lead editorial in the ekhanomist needs little introduction:


But this take on it seemed interesting.

The July 18th issue of The Economist is focused on the economic crisis and the economic theory that failed to prevent or, for most, even foresee the crisis. The cover is telling--a book labelled "Modern Economic Theory" that is melting away, with the words "Where it went wrong-and how the crisis is changing it" beneath. That sounds like the magazine intends to investigate the sources of the crisis in modern economic theory. But does it? Only in a sort of halfway approach. There's a lead-in on "what went wrong with economics" (page 11). It claims that economics as a discipline "deserves a robust defence" and that "so does the free-market paradigm."

There is, to be quite clear, very little real justification for those statements. Both, in my view, have failed us, in that the free-market paradigm does not work--without substantial state processes and institutions that impose restrictions on free markets--such as regulatory agencies looking out for consumers, anti-trust enforcement preventing singular companies from growing so large that they can have a systemic effect on the system--we will have skullduggery llike the Madoff ponzi scheme and market control such as that exerted by the several large banks who have essentially set anti-consumer/pro-rent policies in lockstep over the last few years, while engaging in speculative behavior and abetting tax avoidance in many cases like UBS's that are bad for the system and bad for ordinary Americans but good for greedy bankers.

What does the lead-in admit to, then (if it still thinks economic and free market theory are worth defending)? It acknowledgs that the discipline is subject to three critiques:

1) it helped cause the current economic crisis

2) It failed to see it coming

3) It doesn't know how to fix it.


In my book, that doesn't leave much out. A theory that actively causes harm, can't prevent it, and can't cure it is not much of a theory.

Return to the good old sensible days of the political economy are in order. Economix divorced from politics or state based on a now failed self-regulating, efficient, omiscient 'free market' orthodoxy may finally meet its end. Sad in many ways coz it helped many, do well and rise up the living standards ladder. Of course, the gang on top (the anglosaxons, winners of the last great war) as with all victors sought to use whatever seemed to work (in this case the stateless capitalist/free market paradigm) to maintain and further their dominant position but many other countries - from Taiwan to India - have realised gains in the process.

[vsudhir]

Looks like we are still D&G over here while the stock markets are making steady gains everywhere. And stocks are supposed to be a leading indicator of the economy....

Is BR behind the curve? That rarely happens.

Anything is possible, including a long, secular bull run. However, what is possible isn't always == to what is likely. Like one wise guru once said:

Debt is fact. Equity is opinion.

The state of consumer and gubmint debt in khanomies the world over leave very little justification for the miraculous earnings growth the mkt seems to be pricing into equity valuations currently. And yup, that doesn't even begin to address the fundamental problem of the total lack of job drivers in the G7 short of value destroying protectionism.

So yes, while it is certainly possible that BR is behind the curve on this one, is it likely to be the case? Time will tell.

[vsudhir]

The Dow is up some +188 now? Groiwth expectations must have smacked double digits or what? Based on some green shoots formulations no doubt.

Two interesting (though biased coz they serve to make a point I've been hammering at) comments found floating on the web.

Pool Corp. said Thursday its fourth-quarter loss widened to $11.6 million, or 24 cents a share. In the same period a year ago, Pool Corp. lost $5 million, or 10 cents a share. Sales fell 6% to $300.8 million. The swimming-pool company blamed falling home prices and slowing constuction for the loss.

That didn't matter today. The stock ramped 27% today.

and a plausible explanation for behavior such as that:

It's all about bubbles; figure out the new one and ride along.

The "new one" is government debt.

Spend your way to prosperity take two!

Only this time it's not personal wealth through debt; it government wealth through debt.

The Obama admin summed up the plan a while back "We have no choice but to spend our way out of the economic mess".

Don't underestimate the government ability to drive the economy with play money; sure the trick won't work forever, but that's what bubbles are all about.

[vsudhir]

Meanwhile, don't give up hope. Miracles do happen after all. Consider this:
Accountants Gain Courage to Stand Up to Bankers: Jonathan Weil

July 23 (Bloomberg) -- Turns out America’s accounting poobahs have some fight in them after all.

Call them crazy, or maybe just brave. The Financial Accounting Standards Board is girding for another brawl with the banking industry over mark-to-market accounting. And this time, it’s the FASB that has come out swinging.

It was only last April that the FASB caved to congressional pressure by passing emergency rule changes so that banks and insurance companies could keep long-term losses from crummy debt securities off their income statements.

Now the FASB says it may expand the use of fair-market values on corporate income statements and balance sheets in ways it never has before. Even loans would have to be carried on the balance sheet at fair value, under a preliminary decision reached July 15. The board might decide whether to issue a formal proposal on the matter as soon as next month.
...
The scope of the FASB’s initiative, which has received almost no attention in the press, is massive. All financial assets would have to be recorded at fair value on the balance sheet each quarter, under the board’s tentative plan.

This would mean an end to asset classifications such as held for investment, held to maturity and held for sale, along with their differing balance-sheet treatments. Most loans, for example, probably would be presented on the balance sheet at cost, with a line item below showing accumulated change in fair value, and then a net fair-value figure below that. For lenders, rule changes could mean faster recognition of loan losses, resulting in lower earnings and book values.

OMG! Dya realize what this means...... its like forcing TSP to take the world into confidence regarding all the ISI's activities by throwing open its books to the sunlight.

One commentator brings the here and now to the situ:

FASB has acquired brass balls. Don't board any aircraft with FASB members on-board. They will not be allowed to reveal that the emporer has no clothes.

[vera_k]

Over time I have built a fairly large position in ETFC. The stock has been hammered due to home loan losses, but things have been turning around since March. Delinquencies are down and the company expects that net realized losses (not allowances) have peaked at this point in time.

Meanwhile people are heading back to the markets and trading like crazy if their revenue gains are any indication.

[darshan]

Guaranty Financial in Talks for Recapitalization: Source
BANKS, GUARANTY FINANCIAL, TEXAS, BANKRUPT,
Reuters
| 24 Jul 2009 | 04:52 PM ET

Guaranty Financial Group, the second-largest publicly traded bank in Texas, is in talks with at least one investor group for a possible recapitalization, a source familiar with the matter said Friday.

Earlier Friday, the bank said it will probably fail after loan losses and write-downs left it "critically" short of capital.

The Austin-based lender has about $16 billion of assets and more than 150 branches in Texas and California, according to its Web site.


Copyright 2009 Reuters. Click for restrictions.

[Neshant]

that doesn't even begin to address the fundamental problem of the total lack of job drivers in the G7 short of value destroying protectionism.

There's nothing i can see either which addresses the fundamental issue of real job growth.

But there sure are a ton of economists with theories on fiddling with interest rates and diverting wealth from the real economy into banks & financials.

[vsudhir]

Neshant,

Agree 400%.

Vera

Meanwhile people are heading back to the markets and trading like crazy if their revenue gains are any indication.

More power and good luck to them. Lets hope this recession is over and recovery real. I don't expect that to be buit hey, hope and change are in the air, after all.

Even back in GD I, there were close to a dozen stock rallies of >10%, each a false dawn. Like Neshant says, equity investors are being fattened for halal by the shorters. Where's the next round of "trading profits" for GS and JPM gonna emerge from if not the musharrafs of retail investors and overlarge institutional funds (pension funds, mutual funds etc).

Last but not least, am reminded of another great guru/garu wise saying....

The market can stay irrational longer than you can stay solvent.....

[Singha]

this week there has been a vertical surge in realty ads on TOI - big , splashy and full page. the go-go days of 2007 and 4500/sq ft onree for a shack are back?

Mantri whose Flora-2 in sarjapur rd junction lies abandoned after being
structurally complete is advertizing its Espana super luxury proj with flats upto 10,000 sq ft size opp Intel which is also nearing completion.

* Flora-2 was allegedly a service apt project, then became a 2bhk proj,
then found no/few takers.

[svinayak]

this week there has been a vertical surge in realty ads on TOI - big , splashy and full page. the go-go days of 2007 and 4500/sq ft onree for a shack are back?

Mantri whose Flora-2 in sarjapur rd junction lies abandoned after being
structurally complete is advertizing its Espana super luxury proj with flats upto 10,000 sq ft size opp Intel which is also nearing completion.

* Flora-2 was allegedly a service apt project, then became a 2bhk proj,
then found no/few takers.

How is the mantri in banashankari. Has its value dropped in the last 2-3 years

[vina]

this week there has been a vertical surge in realty ads on TOI - big , splashy and full page. the go-go days of 2007 and 4500/sq ft onree for a shack are back?

Yup. I noticed that. What takes the cake was something about a "Villa with Golf Course" from some Chartered or some guy. A big flashy ad, and obviously no reference to location, but there was just the website mentioned. Well, I did go to the website and first thing I clicked was the location.

I literally fell off the chair laughing. It is in the friggin middle of nowhere. It is actually near Bangarpet /KGF on the Blr-Madras via Chittoor highway and some good way of that. Google maps shows nothing close by!.

It is basically developers trying their luck again. Why , it is the old saying, there is a sucker born every minute !. Well, if you want to be a sucker and hope to get a "villa" with an 18 hole golf course, and think you will have neighbors who actually live there some 40 kms south of Bangarpet, good luck!. You are a fool and like the old saying , a fool and his money are soon parted, you deserve it!.

The speculators are out. Genuine buyers are not around largely. Liquidity is no existent. It is only liquidity in the market that will allow you to quickly enter and exit by flipping properties. No sir.

Mantri whose Flora-2 in sarjapur rd junction lies abandoned after being
structurally complete is advertizing its Espana super luxury proj with flats upto 10,000 sq ft size opp Intel which is also nearing completion.

. Mantri has been flogging this Espana rubbish for close to 3 1/2 years now. I am not sure if there is even a brick in place at the site. Anyone who puts his/her money into it is going to wait for an extraordinarily long time to see anything at all. Dunno what Mantri thinks if you go ask them for penalties for delays or your money back. I suspect they would have a very dim view of it.

Mantri at Banashankari

EVERY property , EVERY where , EVERY price range has taken big big hits. I know lots of chi-chi places, where a year and half ago, the starting price was 2.5 crores!. Those guys were in the stratosphere and wouldn't even look at you. Now I am flooded with offers from exactly the same guys at some 1.5crores or less. I still think it is overpriced and has some way down to go.

For eg, at Singhaji's "Strategic IT/Vity Cross Roads", Rawalpindi, "Navy Colony" , I know folks who got villas at the contracted price of Rs 1.8cr hoping to flip it at higher prices. Well, builder did gradually raise the price and if you ask the "official" price is close to 4 cr. If you are a sucker and pay those prices, good luck. Problem is that there are close to no suckers around. Builder is unwilling to drop prices back to the 1.3 cr or so where it would make sense . Builder cannot drop prices cos, the guys whom he conned into buying at fancy prices will scr*w him and as for the "hope to flip types", well, they are willing to sell out at just below the builder's prices, but cant sell at those prices anyway!. Meanwhile, interest gets paid, costs mount and the problem of holding gets more financially painful and distressed.

Oh, with speculative / black money out, now you can't flip it so easily as well. The "suitacases" are out and along with that the huge tax evasion. Now the problem with selling to end users is you pay the 20% capital gains tax on the who deal, which tends to be 100% white! . And that too after holding for 3 years. Earlier , some 60% of the value of such property was "suitcase" and you could flip it anytime and get away literally with murder.

Ah well, there is some justice in the world after all. All the suitcase types and big money speculators with excess cash are now getting squeezed and no way of getting out. Hence glitzy "espana type ads". One set of crooks trying to "out crook" another. Ah well.

Singhaji. What happened to moving close by to , now that the Eastern Roman empire has been fully consolidated into Constantinople?. Has anyone moved into those 2 towers which seem complete , atleast structurally ?

[shyam]

Looks like we are still D&G over here while the stock markets are making steady gains everywhere. And stocks are supposed to be a leading indicator of the economy....

Somebody had suspected this as market manipulation.

[Singha]

to me espana looks to be nearing completion. around 15 storeys, visible from
the road and next to sobha iris opp Intel. the style is vaguely european.

wrt navynagar - genuine buyers are living there, flippers are stuck and those
who bought hoping to rent are fishing for people willing to live there at present (lot of dust, no shops nearby etc).

I find lot of rich people from tamil nadu (coimbatore, chennai types), kerala
and even mumbai purchased costly flats in blr just for renting out or flipping later.

they have found some new cash in april onward and apartment work on 3rd tower has restarted.

the villas-ph-2 doesnt seem to witness lot of activity, but then its hard to
know from far away...its a gated community afterall and only chi chi bay area director/VP types are allowed to step inside.

I heard lot of palm meadows folks with extra cash bought into villas ph1
at the start for around 80-90L starting. but I hardly thing 10-15 villas of 150 are occupied. rest are complete but sitting idle. No dollar paid expats and gullible r2i types to hoodwink at present with 1L/month rents.

[vsudhir]

Why Japan's darkest days lie ahead

Recommended and saddening read. Always admired Japanese economic rise.

BTW, any visitors to Japan can vouch for shocking accounts such as this?

Japan isn’t like the outside world imagines. There are tent cities set up throughout Osaka, the industrial capitol. Thousands live in makeshift huts under bridges in western Japan. This despite the fact that, contrary to popular belief, rents in cities like Kyoto are cheaper than in American equivalents like Boston (Tokyo is another world). And despite the fact Japan has low unemployment (5.2%). Japan is sick.

The IMF recently projected Japan’s GDP to sink 6% this year. Instead, Japan’s GDP shrank at a 14.2% annual rate in the first quarter of 2009.

[Neshant]

US wants China to save less and spend more of its reserves. Maybe goldman sachs can help this process along by starting a sub-prime morgage crisis there.

----------
Clinton and Geithner renewed US calls for China to open up its financial sector and to ween itself off its dependence on exports by spurring domestic demand in the world's most populous nation.

"Raising personal incomes and strengthening the social safety net to address the reasons why Chinese feel compelled to save so much would provide a powerful boost to Chinese domestic demand and global growth," they said.

http://www.bloomberg.com/apps/news?pid= ... ut726AJAJI

[svinayak]

Looks like we are still D&G over here while the stock markets are making steady gains everywhere. And stocks are supposed to be a leading indicator of the economy....

This is wrong assumption.
Stocks under such a market condition with distorted information and global scenario cannot be taken as an indicator for anything.

[svinayak]

From another forum

Those who lost their IT jobs are diversifying rather than waiting for the recession to end is quite correct. The current recession turn around is difficult to predict as the real reasons for the sudden collapse itself is not clearly understood.

According to my evaluation, greedy Real Estate business severely derailed the financial fundamentals of investment and healthy gains. The astronomical profits churned out in this unregulated sector world wide acted like a lever disproportionately fuelling all other sectors of economy world wide from 2001 to 2007(period of coincidence of explosion in Real Estate Business). Mobile revolution acted as the catalyst and all sectors boomed on account of the easy liquidity flow generated. The biggest gainer in the chain was crude Oil which hit a record $147.5 a barrel before slumping nearly to $34 a barrel within 3 to 4 months. The saturation of Real Estate business and slump in Oil prices put an end to easy liquidity world wide. Absence of good returns ended re-cycling of money (liquidity crunch) and profits generated found their way to Secret Banks to have a nice rest! Now, there is a vicious deadlock between Oil prices and economic recovery where the rise of one contribute to the fall of the other and vice versa. The complacent economies of Oil dependent nations are in doldrums which compels them to sit tight and raise prices at slightest rise in economic activity.

Most of the countries have not understood the nature of the slump. The treatment of infusing the economic systems with easy liquidity by allowing high fiscal deficits is fraught with danger. The long term effects of abnormally large fiscal deficits are no different from easy profits generated in Real Estate business. Both derail fundamentals of financial principles. Therefore, one bad imbalance happened cannot be corrected by another equally bad imbalance of the same in nature. The amazing part of this is that the excesses played out in Real Estate has practically forced fiscal indiscipline as it alone has the capability to counter the slump in the short term paying the way for devastating long term damage. The current green shoots seen in the economy is only due to the easy liquidity that is infused in to circulation. Once, it is absorbed, the withdrawal symptoms may be even more harsh.

The realistic way of avoiding the pains of recession is to collectively devalue the cost of Goods and Services to a realistic level taking extreme care to balance out the purchasing power of all sections of society. This will forcibly restore the derailment and distortions that have developed on account of the greedy business and its eventual plunge. Oil rich nations must be helped and cajoled to diversify their economic activities seriously rather than allowing them to sit tight and depend heavily on one God given resource for livelihood. It is a job to be done by collective will of all Governments world wide. It is logistically a huge task and very difficult to implement. Governments must wake up come down heavily on businesses that churn out easy profits irrespective of the nature of business. The days that demand and supply dictate business have gone. Uncontrolled human greed can subvert this principle in short term and inflict deadly long term damage before the demand supply equation can detect the mischief! For example, once close to bankruptcy Goldman Sachs Bank in US has shown unbelievable profits of nearly $3.4 billions for Apr-Jun 2009 quarter. It is being hailed as a remarkable turn around in US is indicative of the fact that they have not any learnt any lesson from the current slump. It is definitely some kind of greedy or tricky money earned and it must be looked with suspicion as most of the Banks are still incurring losses. It looks like they are armed with some kind of Super Computer technology and software that can fire millions of orders within seconds to generate incremental profits in trading. Hence, profits generated is nothing but technological robbery of the stock market! They are out to ruin the Stock Market business itself seem to be no ones concern. It is a patented example of US progress as well as its fall!

There is one more possible way. The world must take a collective decision to declare secret Bank business as financial terrorism and force them to return all the money to the depositors. There is no need to ask any questions. Just direct the local banks to offer low interest rates for large deposits. Then, it is as good as bringing most of this astronomical sum forcibly back into business. As this was once accounted money stashed away, fiscal imbalance is naturally avoided. Well, all are theoretical and difficult to implement? Then, there is no way other than facing a prolonged recession.

It is my sincere evaluation that unless the damage inflicted by Real Estate sector and high Oil prices is reversed or absorbed, economic recovery is difficult. Study of their dynamic interplay with other sectors throws the light to understand the slump. Whether it is true or farfetched, time alone will decide conclusively.

[shyam]

For example, once close to bankruptcy Goldman Sachs Bank in US has shown unbelievable profits of nearly $3.4 billions for Apr-Jun 2009 quarter. It is being hailed as a remarkable turn around in US is indicative of the fact that they have not any learnt any lesson from the current slump. It is definitely some kind of greedy or tricky money earned and it must be looked with suspicion as most of the Banks are still incurring losses. It looks like they are armed with some kind of Super Computer technology and software that can fire millions of orders within seconds to generate incremental profits in trading. Hence, profits generated is nothing but technological robbery of the stock market! They are out to ruin the Stock Market business itself seem to be no ones concern. It is a patented example of US progress as well as its fall!

[vsudhir]

Eliot Spitzer, the former governor and attorney-general of New York says Federal Reserve is ‘a Ponzi scheme, an inside job’.