Perspectives on the global economic meltdown

SwamyG
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Re: Perspectives on the global economic meltdown

Postby SwamyG » 28 Oct 2009 05:37

While generally people are quick to recognize the problems that plague India, why are they not ready to see the problems that the West is plagued with too? Clearly in the last 200-300 years India was not in the economic limelight - the West was ascending economic and military ladder. Some of us are saying the Western Empire has taken a hit, and unless great scientific breakthroughs are made they are in an unsustainable lifestyle mode. If the Alpha male of a group is injured in a fight, vultures roam high in the skies and other males can fight out for the role. I don't think anybody is predicting India is going to be the next Alpha male.

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 28 Oct 2009 05:47

SwamyG,

There is something to be said about being asurvivor. Often the future is decided not by who scores big, but by who does not get killed.

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 28 Oct 2009 05:48

arnab,

If people in India spent less time screwing over each other, almost nobody would vote with their feet.

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Re: Perspectives on the global economic meltdown

Postby arnab » 28 Oct 2009 05:50

SwamyG wrote:While generally people are quick to recognize the problems that plague India, why are they not ready to see the problems that the West is plagued with too? Clearly in the last 200-300 years India was not in the economic limelight - the West was ascending economic and military ladder. Some of us are saying the Western Empire has taken a hit, and unless great scientific breakthroughs are made they are in an unsustainable lifestyle mode. If the Alpha male of a group is injured in a fight, vultures roam high in the skies and other males can fight out for the role. I don't think anybody is predicting India is going to be the next Alpha male.


Hmm - because the forum topic says 'perspectives on the global economic meltdown'; yet the posts have primarily focused on the impact on the west. Why would people want to exclude India from the global stage? Aren't we taking this 'torn shirt, open fly' argument too far on BRF?

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Re: Perspectives on the global economic meltdown

Postby arnab » 28 Oct 2009 06:08

ss_roy wrote:arnab,

If people in India spent less time screwing over each other, almost nobody would vote with their feet.


Sure, so do you see this stopping anytime soon? Even if you somehow got rid of the babus, judges and politicos? Do you think the 'screwing each other' is a 'cause' or 'effect' of limited resources and limited institutional capability? or is this part of our genetic code?

At the risk of sounding like Rahul Mehta - what are you going to do about it? :) In my case (or in the GOI's case), I would have to play with the hand I have been dealt and not what 'could have been'.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 28 Oct 2009 06:17

Ameet wrote:Thousands protest bailout bonuses at Chicago bank meeting

http://news.yahoo.com/s/afp/20091027/ts ... nceprotest

Organizers said the American Bankers Association and six top banks have spent 35 million dollars fighting financial reforms after accepting 17.8 trillion dollars in taxpayer bailouts and backstops.


Wow. Talk about ROI eh? For once N^3's figures would quite literally be true....what's this like some 500000000% ROI? :rotfl:

but not sure how any of this is germane to the issue at hand.


Oh, completely germane, noble saar. The system of money creation, more appropriately debt creation since almost all new money created is in the form of credit has everything but everything to do with the current doo-doo.

Under the Fractional Reserve Banking (FRB) system, regular pvt banks and not central banks were the ones minting credit that looks like money and injecting untold loads into the system. The Fed stopping M3 publishing data now seems more like a ploy to hide the extent of pvt credit led money in the system that anything else.

The problem with money as debt that must be repaid with positive interest is that the system is essentially rigged to fail and every few decades or generations, it spectacularly does. N the past this was masked by productivity gains, booming demographics leading to demand for more production, rising living stds, infectious optimism, colonial loot and the like.

What we are likely now witnessing is another slow motion trainwreck - another gigantic scale system failure is approaching.

Hope is the system will reset fast, with minimal disruption ('declare a jubiliee worldwide, then dismantle existing banks, void existing derivative contracts and start with a citizens money scheme that is not debt based'.....much like how the Weimar ended its runaway hyperinflation in 6 months in 1923-24 with its introduction of the Rentenmark).

Fear is it won't. In fact it will drag the world and all its people into a torrid time of unpredictable length.

Hope that clarifies.

BTW, why focus so much on the west? Ummm, because they are half the world's economic output at <25% of its population? So what they do and what happens there disproportionately affects the rest of the world? And the fact that the meltdown has started and spread fastest there, so far?
Last edited by Hari Seldon on 28 Oct 2009 06:45, edited 1 time in total.

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Re: Perspectives on the global economic meltdown

Postby Rahul Mehta » 28 Oct 2009 06:24

arnab wrote: At the risk of sounding like Rahul Mehta - what are you going to do about it? :)


:rotfl: :mrgreen:

The exact words are "What solution do you propose?" And another one is : "What solution do you propose? Pls provide the DRAFTS of the laws you propose."

So like AWMTA :) , let me propose a new BR-acronym,

WSDYP = What solution do you propose?
WSDYP-PPD = What solution do you propose? Please provide the DRAFTS

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Re: Perspectives on the global economic meltdown

Postby arnab » 28 Oct 2009 06:49

Oh, completely germane, noble saar. The system of money creation, more appropriately debt creation since almost all new money created is in the form of credit has everything but everything to do with the current doo-doo.

Under the Fractional Reserve Banking (FRB) system, regular pvt banks and not central banks were the ones minting credit that looks like money and injecting untold loads into the system. The Fed stopping M3 publishing data now seems more like a ploy to hide the extent of pvt credit led money in the system that anything else.


Ok simply put - all you are saying is that it was a bad idea for people in the west to have huge credit card limits with which they used to buy chinese produced plasma TVs and it was a bad idea for banks to have given easy credit to home owners to take-up loans. That scheme became spectacularly unhinged. So US had to rush out a $ 1 trillion line of credit to save the system.

All fine so far - the question now is have the banks learnt their lesson? have lending rules or investment rules etc been tightened or is it in the process of being tightened? Possibly yes.

Second, is that $1 trillion bail out a problem? Yes if you consider it in a 'moral hazard' sense, but this can be managed. Is it a problem in terms of inflationary impact? Obviously no - the US is currently worried about deflation.

The problem with money as debt that must be repaid with positive interest is that the system is essentially rigged to fail and every few decades or generations, it spectacularly does.


But saar - this is the 'problem' the world over. When GOI gives you a pension and gratuity or PF at the end of your retirement it is creating a debt in a 'pay as you go' world, in the fond hope that the next generation will inherit your debt. Would you go out and say look this is a problem, GOI should give me my PF only if it has a 'surplus'? Same for the non-GOI folks who invest in NSCs and PPFs etc.

What we are witnessing is another slow motion trainwreck - another gigantic scale system failure is approaching.

Hope is the system will reset fast, with minimal disruption ('declare a jubiliee worldwide, then dismantle existing banks, void existing derivative contracts and start with a citizens money scheme that is not debt based'.....much like how the Weimar ended its runaway hyperinflation in 6 months in 1923-24 with its introduction of the Rentenmark).

Fear is it won't. In fact it will drag the world and all its people into a torrid time of unpredictable length.

Hope that clarifies.


No it won't reset because this is a classic free rider problem. I am happy for you to accept lower returns on investment but not for myself.

BTW, why focus so much on the west? Ummm, because they are half the world's economic output at <25% of its population? So what they do and what happens there disproportionately affects the rest of the world? And the fact that the meltdown has started and spread fastest there, so far?


But the posts here have hardly analysed the impact on the rest of the world.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 28 Oct 2009 06:57

Arnab,

Good post, good discussion topics. Will respond later, gotta run now.

Suffice it is to say in brief that the pensions system is now well known to be a ponzi scheme and if you're under 35 (I am) then I wouldn't count on fond hopes of a pension system, any pension system, surviving that long. So yes, it is a worldwide problem and cannot forever be brushed under some rug or can-kicked down the road again.

BTW, thats another good reason to study the problem, its evolution and the response to it in the west. The west + Jap[an wis where the storm will first break. The intellectual and practical tools for dealing this crisis will first be developed and used in the west, makes sense to study it. No?

Secondly, impact on the rest of the world will become known in good time I guess. At present, way I see it, thread is more focused on understanding what is unraveling in the west first.

Thirdly, banks, bankers and gubmints seem to have learnt no lessons. Period. IMVVHO, of course. Any reform the crisis has forced so far has been more cosmetic than biting. Like ss_roy says, the powers battling this one are entrenched. Nobody will give up or in w/0 a full fight. Lez wait n see.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 28 Oct 2009 07:05

arnab wrote:Hmm - because the forum topic says 'perspectives on the global economic meltdown'; yet the posts have primarily focused on the impact on the west. Why would people want to exclude India from the global stage? Aren't we taking this 'torn shirt, open fly' argument too far on BRF?


Hmm - Who has climbed the highest? And if who falls it is going to hurt the most? The guy at the top of the ladder or the guy somewhere in the middle to bottom?

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Re: Perspectives on the global economic meltdown

Postby arnab » 28 Oct 2009 07:06

Hari Seldon wrote:Arnab,

Good post, good discussion topics. Will respond later, gotta run now.

Suffice it is to say in brief that the pensions system is now well known to be a ponzi scheme and if you're under 35 (I am) then I wouldn't count on fond hopes of a pension system, any pension system, surviving that long. So yes, it is a worldwide problem and cannot forever be brushed under some rug or can-kicked down the road again.

BTW, thats another good reason to study the problem, its evolution and the response to it in the west. The west + Jap[an wis where the storm will first break. The intellectual and practical tools for dealing this crisis will first be developed and used in the west, makes sense to study it. No?

Secondly, impact on the rest of the world will become known in good time I guess. At present, way I see it, thread is more focused on understanding what is unraveling in the west first.

Thirdly, banks, bankers and gubmints seem to have learnt no lessons. Period. IMVVHO, of course. Any reform the crisis has forced so far has been more cosmetic than biting. Like ss_roy says, the powers battling this one are entrenched. Nobody will give up or in w/0 a full fight. Lez wait n see.


Cool - keep posting though - I enjoy your posts and insights.

cheers

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 28 Oct 2009 07:09

prad wrote:empires wither away because they no more have the resources to sustain that empire. Britain after WWII is a good example. US, Washington Consensus, etc etc is not an empire. it is more of an ideology based on capitalism, freedom/liberty, etc. we are heading toward a multipolar world, of that there is no doubt. but to say that America is declining is a flawed argument.

It does not matter what an Empire is based upon. It is an Empire. Don't you think coming down from an uni-polar world to multi-polar world in itself is a decline from the American perspective? It will no longer have the same clout it is used to having.

ps: http://en.wikipedia.org/wiki/American_Empire

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Re: Perspectives on the global economic meltdown

Postby Umrao Das » 28 Oct 2009 08:19

Anrab saar everything you say should normally be fine and of no consequence to the world except repeat except that world trade is in US dollars.

Defaltion of assets is happening because the purchasing power of the aam janta (and coupled with savings) has declined because of wage stagnation of middle class and also depletion of middle class.

Now having been the leading consumer if not avericious consumers, the exporting countries of world now have to deflate even further to compete for what ever consumption is sustained in US. In the process they get a dollar which is intrensically lower in value because of fresh printing by Feds. In a way the rest of the world is subsidizing the consumer of US, which is what happens when PRC employs slave labour to make it cheap and thats the concept of out sourcing manufacturing be it in Mexico or PRC.
If dollar was not the defacto currency the world would refuse to play game in dollars its a little better than Argentina in 1980s or Zimbabwae now.

Ok here is a fact
MY friend who is going back to India after staying US for about 16 years ( he is VP in pharmaceutical company in Mumbai now) is on last visit to close his home(selling) came with his teenage daughters for the last trip (at least for now because they the girls are citizens boen in US). He came Jet Airway via Brussels and he carried dollars to buy coffee candy water etc during lay over. To his surprise the vendors at the airport refused to take dollars saying only Euros or Credit cards no dollar bills period. This was unheard in my long stay in US and travel all over the world.

Does that say something?

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 28 Oct 2009 09:14

Britain handed over the baton, so to speak, to USA afer WWII.

Can you cite references on how America has realized whatever you say it has realized? Also it will be helpful to the discussions if you can post how it has adjusted its priorties and dealings with countries?

The only major difference I see in USA is the savings rate going up; and the consumption going down - well if one does not have the money then one can not really spend it.

Yes since the Empire has not withered away, American actions will not appear as an defeated Empire. It has been said here and elsewhere, America is in a similar position to that of Britain in the 1900s. Only time will tell how America will handle the situation.

New normal? You mean the one where Apple still continues to sell its gadets and make money :-) I wonder where people get the money for such expensive products.

Am I to gather from your posts, that you don't believe in things that go up will come down - not to where it was in the begining but definitely to some extent?
Last edited by SwamyG on 28 Oct 2009 10:18, edited 1 time in total.

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Re: Perspectives on the global economic meltdown

Postby arnab » 28 Oct 2009 10:06

Umrao Das wrote:Anrab saar everything you say should normally be fine and of no consequence to the world except repeat except that world trade is in US dollars.

Defaltion of assets is happening because the purchasing power of the aam janta (and coupled with savings) has declined because of wage stagnation of middle class and also depletion of middle class.

Now having been the leading consumer if not avericious consumers, the exporting countries of world now have to deflate even further to compete for what ever consumption is sustained in US. In the process they get a dollar which is intrensically lower in value because of fresh printing by Feds. In a way the rest of the world is subsidizing the consumer of US, which is what happens when PRC employs slave labour to make it cheap and thats the concept of out sourcing manufacturing be it in Mexico or PRC.
If dollar was not the defacto currency the world would refuse to play game in dollars its a little better than Argentina in 1980s or Zimbabwae now.



Ok Umrao ji, Here is how I understand it. The issue of 'decline of dollar' has two components. One is the strength(weakness) of $ in terms of exchange rate (or wumpums as vina evocatively calls it) and second is the strength (weakness) of $ in terms of acceptability as a global currency.

The third issue of decline in value of US domestic assets(which are not nomally traded for e.g properties) is probably not germane for most US citizens (It is probably germane for your friend who wants to sell his house and probably finds that not only are asset prices in the US low, the US $ has weakened vis a vis the Rs, which is giving him a lower bang for his buck, but for most people (apart from the idiotic speculators) low price levels and low inflation is a good thing if you have a job - which is about 88 per cent of the labour force at least) .

Going back to the earlier two issues - If $ is weak it is good for the US because their exports become more competitive and hopefully the trade balance improves. Of course China here is spoiling the party for the US by keepine the remnibi artificially even lower :) So will the US take recouse to 'non tariff barriers' to improve her trade balance? let us see - we live in interesting times. She has already imposed duties on chinese tyres.

Re US $ global acceptability - US needs someone to hold US $ / treasury bonds as she tries to adjust her consumption behaviour. The question then for the rest of the world is - if not US $, which currency would replace the $?. Euro? Pound? Remnibi? Yen? SDR? wumpum? Please recall that in the hight of the crisis, the US$ actually appreciated !! because the US$ was perceived to be king. Is it still the case? I don't kniow. but what I do know is that there does not seem to be any crown prince in waiting :) yes Russia / china etc may cut some currency deals here and there but the bulk of the trade continues to be in USD.
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Re: Perspectives on the global economic meltdown

Postby ramana » 28 Oct 2009 10:12

SwamyG, US took the baton from UK's hands in 1943. That was when WC realized that the US had more troops and resources and thus he was in secondary position in the war in Europe.

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Re: Perspectives on the global economic meltdown

Postby arnab » 28 Oct 2009 10:58

SwamyG wrote:
arnab wrote:Hmm - because the forum topic says 'perspectives on the global economic meltdown'; yet the posts have primarily focused on the impact on the west. Why would people want to exclude India from the global stage? Aren't we taking this 'torn shirt, open fly' argument too far on BRF?


Hmm - Who has climbed the highest? And if who falls it is going to hurt the most? The guy at the top of the ladder or the guy somewhere in the middle to bottom?


Sorry missed this. I guess this depends on how much the 'fall' is. Is the person on the top of the ladder going to fall to the ground? i.e. reach a 'level' lower than the person occupying the bottom of the ladder? or is he going to fall on the person at the bottom of the ladder and crush him?

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Re: Perspectives on the global economic meltdown

Postby Abhijeet » 28 Oct 2009 18:01

Even given the gleefully D&G nature of this thread, this point deserves to be refuted:

ss_roy wrote:There has been no real growth in the west for over 30 years, just fancy accounting and confidence scams.


So the personal computer revolution, the Internet and cell phones (to name just three things) have not made any difference to productivity? That's hard to believe. What data do you have to back that up?

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 28 Oct 2009 19:59

arnab,

Systems do not evolve because people suddenly achieve enlightenment. They evolve because the only other option is death.

Every country, including India, requires such crisis to evolve. They will destroy nations that either chose not to evolve, or are too dysfunctional. Let me be blunt about it- such systems deserve to die.

The neta-babu-jati system in India (even after the 1990s) is not functional. Neither is the level of apathy or mercantile mindset. I cannot say that the white-worshipping, dysfunctional BS that goes for 'intellegensia' in India is a good thing either. The current government+ administrative system (national, state, local) is the biggest obstacle to progress In India.

Progress never comes from 20 year timelines, as no plan of a duration over 4 years can satisfy its original objective or even work. Whether it is military projects, infrastructure, reform etc.. no project (in recent human history- last 200 yrs) that took more than 4 years to execute has ever lived up to it's original expectations. Blaming poverty and the system for long timelines is a surefire method to fail. Either you give it enough resources and hire competent people or it won't work.

The problems with India always come down to:

1. Indians believe they cannot do it, are not worthy or seek permission. (much more so with geriatric leaderships- public or private).
2. Indians are averse to calculated risk taking (especially the older ones) and want everything to just work.
3. Indians are averse to spending money. They believe money is some finite zero sum thing, but in a world of fiat currency and high productivity- it is not. (again the older ones are more affected by this mindset)
4. Mercantile behavior, not unique to Indians, is a big problem. If you believe the world is zero sum, your best option is to screw over someone else rather than cooperate.

I have no illusions about people changing their ways other than through partial, or almost complete, system failure.

The real question then is, who can actually get up after that hit? Countries with an adverse demographic profile may not be ever able to reach anything close to their old positions in the future.

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 28 Oct 2009 20:04

Abhijeet,

You are confusing technological progress with economic growth, they often occur together- but are not the same.

Technological progress = using an iPhone to search for local restaurant listings.
Economic growth= being able to eat more often at more expensive restaurants.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 28 Oct 2009 20:21

Prad:
Naval Power: It has two components defense and offense. From a defense perspective it surely does help. From the offens perspective it does not add much if there are no groud troops or personnel. After a naval victory, the victor has to use the vanquished land/people in some way. It requires smaller territories that can be easily controlled or massive foot-soldiers. Britain used its Navy effectively; it went about conquering Kingdoms and territories piece b piece. In the contemporary World, one can have all the Air or Naval power one wants, but for long term objectives, one needs hard presence. This requires money. Currently Unkil finances it using his debt. When the credit runs outs, then it can not do much. A country might have the latest and greatest carriers and destroyers. It would not matter much.

Forget the experts and doom-n-gloom sayers; tell me how long can people and a country keep taking loans. As I said, the saving grace is the savings rate - which has gone up. Unkil continues to be controlled by Corporates.

Just because bullies will make treaties does not make them any less.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 28 Oct 2009 20:28

Arnab: Yes a lot depends on the fall. How much it is? What angle? Who does it take along with? Ithiyadi! In the globalized world, Deshbhoomi and Pandaland will definitely be impacted if Unkil takes a hit. That is simple arithmetic. Based on reports, so far, Desh has handled it well as it is not exports-based economy/country unlike Pandaland.

If the guy on the lower rung sees the guy falling from above, he can evade or duck. While nobody is under illusion that big countries will emerge unscathed, but it is interesting that we are so often reminded that everything is hunky dory in the Unkilland - as if Unkil can not make mistakes and only desh can make mistakes.

My thought process is very simple. Countries (call it Empires or civilization) will go up and down. There is no reason to believe India will stay at the bottom or middle all the time, and the West will continue to be at the top all the time.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 28 Oct 2009 20:43

>>>Even given the gleefully D&G nature of this thread, this point deserves to be refuted:

<rant>
I don't think most of us are gleeful in the D&G. It is more like "yeah it was bound to happen"; and tracking the 'happenings' as they unravel - because they have global implications. I don't revel when innocents get hurt anywhere - be it Pakistan or China. And since I live in Unkilland, and I have a sense on how aam Joe and Jane think; there is no glee. In fact I am one of the guys who put 20% down payment on my home, and have paid additional principal than just the mortgage; yet got affected because of bumbling idiots in the system. So I start with 20% equity in my house, and now it is less than that. My bankers suggested that I was eligible for an astronomical loan. I am happy to state, I bought a house well well well below that number.
</rant>

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Re: Perspectives on the global economic meltdown

Postby ramana » 28 Oct 2009 21:30

There are always some who read selectively and take pot shots to assuage their complex. Dont mind them.

ss-roy, Am going to x-post your post in Indian strategic leadership thread for wider coverage.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 28 Oct 2009 21:50

So why did it go to those places! Let us leave that as a rhetoric, as there are countless theories. Theories are theories, the fact is 'The Eagle landed'.One thing is clear is that country is running huge debts to finance its wars. It does not matter if a country is the best at what it is doing, if it continues to lose money doing that. Ultimately what is the RoI? Short war, medium war or long war all require money. Period. Where does it come from?

What do you think will be the impact of a Conventional Warfare if for theory sake we consider on between Eagle & Panda or Eagle & Tiger. Defeat by either one of them will reel the entire World.

I did not say Capitalists, did I? I said Corporate. If one can not discern nuance there, easwaro Rakshathu. Nobody had a problem, because nobody saw it coming (except few gurus here and there).

Can you point out the worst crisis Unkil faced, and how they were able to come out of them? It will be useful to the discussion. Else, all I can see is total positivism from you, while I am erring on the side of being cautioius or neutral. The World is not same as it was in the 60s or 70s. The conditions that exist now are different from the conditions that existed in the 1930s. 1930s gave the country lot of scope for growth and opportunity. Unless great scientific discoveries are made it looks like Unkil is eyeballing some kind of growth plateau.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 28 Oct 2009 22:28

Prad:
A suggestion: Please don't quote the entire post unless you have a very good reason.

Agreed, that short term money supply does not hint at long term money supply. But what makes you think that the current situatation is going to change? How and why?

We can not compare European countries with China or India. However war happens, it requires money and the backing of population (in democracies). Eagle will not get them both to hit Tiger or Panda. Unkil had to go through tremendous churning to get the nod for 1991 and 2001/2003. You think the aam Joes and Janes are so gullible that Unkil will be able to make a case to hit Panda; let alone hit Tiger.

I make no case of scientific or technical/innovative backbone being broken. Ok more Robots. Good lord. So what are the humans going to do then? And you say more immigration is possible. Are they all going to be top-notch scientists making break-throughs? I am not belittling robots, and I don't want to hurt the feelings of Google or Yahoo's botnets that constantly prowl the forums; I plan to buy a small robot-kit for my son. So you see I am kewl onlee. So everybody is going to be building more robots, and robots will do all the work. Good lord, there are 310 million people, and people need jobs.

Life requires a balance. And nothing that you say so far tells me that life is going to see it more in Unkil land. Unkil needs to get back Manufacturing and Services. Then balance it out with the Agriculture production. Then spend less and ask its Consumers...er sorry citizens to spend judiouciously.

I like your positive attitude, but aren't you going overboard? Looks like you are not ready to accept that mighty countries can topple. Let us focus on the following questions for a moment:
1) Do you think a country, an Empire or an idea will always stay at the top for ever? And vice versa.
2) Do you think the current lifestyle in Unkil land is sustainable for a long time?

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Re: Perspectives on the global economic meltdown

Postby AkshayM » 28 Oct 2009 22:53

Hari Seldon wrote:Under the Fractional Reserve Banking (FRB) system, regular pvt banks and not central banks were the ones minting credit that looks like money and injecting untold loads into the system.


At the most fundamental level, private banks have the deposits to lend and create credit. The only other way is they borrow from central bank. So indirectly central banks are still involved, isn't it?

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Re: Perspectives on the global economic meltdown

Postby AkshayM » 28 Oct 2009 23:03

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a7T5HaOgYHpE

New York Fed’s Secret Choice to Pay for Swaps Hits Taxpayers

Tax payers getting shafted. Nothing new. Pure simple bailout.

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Re: Perspectives on the global economic meltdown

Postby ramana » 28 Oct 2009 23:21

AkshayM wrote:http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a7T5HaOgYHpE

New York Fed’s Secret Choice to Pay for Swaps Hits Taxpayers

Tax payers getting shafted. Nothing new. Pure simple bailout.


The whole thing looks like a restructuring of Wall Street to favor Goldman Sachs.
Must be some deep links to why GS should get shafted.

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Re: Perspectives on the global economic meltdown

Postby kmkraoind » 28 Oct 2009 23:53

AIG Dismantled By Non-U.S. Buyers as Dollar Falls

Despite pumping trillion dollars, US still heading towards deflation, with falling dollar, decreased revenues, US is in deep shit. The best bet for US to come out this mess is by creating a global scale opponent and fighting. Historically, US shined always when there is a strong opponent to it, either it is Third Teich or Soviet. Who will be worthy opponent this time? lethal China or cancerous middle east, to that US can gather energy and bounce back strongly to fight its enemy.

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Re: Perspectives on the global economic meltdown

Postby Najunamar » 29 Oct 2009 00:30


ramana
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Re: Perspectives on the global economic meltdown

Postby ramana » 29 Oct 2009 01:00

kmkraoind wrote:AIG Dismantled By Non-U.S. Buyers as Dollar Falls

Despite pumping trillion dollars, US still heading towards deflation, with falling dollar, decreased revenues, US is in deep shit. The best bet for US to come out this mess is by creating a global scale opponent and fighting. Historically, US shined always when there is a strong opponent to it, either it is Third Teich or Soviet. Who will be worthy opponent this time? lethal China or cancerous middle east, to that US can gather energy and bounce back strongly to fight its enemy.


The problem is huge. The Feds want to back the fake debt to full value. Read the AIG saga. Lehman at its heigth had $Ts in CDS.

The alternate is the MMS way and not fight. This prevents the rallying behind the flag.

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Re: Perspectives on the global economic meltdown

Postby KarthikSan » 29 Oct 2009 01:35

Very interesting discussions going on here. I hope no one would take offense if I play the devil's advocate here and ask a rhetorical question. If all the No-bell laureates and Ekhanomic pundits were wrong about the impending doom what makes the armchair jingoistic nerd sitting behind a computer in some corner of the world right?

I see the validity in the arguments for and against the impending fall of the West being posted. But all the posters have completely ignored or discounted the resilience and resourcefulness of the peoples of the West ( or the USA since most of our focus has been on the States). There's been a lot said and written about "jugaad" in the Indian context but you have to live in the USA to see for yourself "jugaad" in America. It does not matter if the robber barons of Wall St. and the political rats in DC learn a lesson but the people have and they are learning fast. Nobody seems to account for that.

I want India to rise to it's old glory. To hope for that is one thing but I will not write off the West so fast. Only time will tell. In the words of Benjamin Graham, "It's nothing but a fool's enterprise to try and predict the market (in this context, the future)".

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 29 Oct 2009 01:54

KarthikSan,

Big innovation can only work if the system is fundamentally open or unstructured.. currently the west is neither.

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Re: Perspectives on the global economic meltdown

Postby ramana » 29 Oct 2009 01:56

Even Harvard is mulling over things!

LINK

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Re: Perspectives on the global economic meltdown

Postby KarthikSan » 29 Oct 2009 02:04

ss_roy wrote:KarthikSan,

Big innovation can only work if the system is fundamentally open or unstructured.. currently the west is neither.


I'm not talking about big innovation. I'm talking about the resourcefulness of even the lowest rung to survive and grow. How many know that even middle class Americans barter goods and services? I'm talking about basic stuff like that.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 29 Oct 2009 02:14

Karthik:
Very good question. I am an armchair commentator but not a jingoistic nerd :-) And I admit I don't have crystal balls just theories.
Some good reads:
How did so many experts get their forecasts so wrong?
Behavioral Finance and economics is a vast subject area.
Be a Better Investor article weaves some of the terms. A nice read.

I do account for the activities of people. People everywhere are bound to the systems and culture they create - be it India or America. And, I don't think there is any prediction that America will reel in poverty and that America is consigned to the history bin. UK after the two WWs is still out in the front, albeit as a second fiddle to USA. It will be a mistake to write off America.

I keep going back to the 1900s; conditions are similar to those days. The next couple of decades are interesting. The only joy I get in all this is seeing an opportunity for Desh in the same period to get back among big players.

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Re: Perspectives on the global economic meltdown

Postby KarthikSan » 29 Oct 2009 02:50

SwamyG:

Quote from the title of the first link you posted:

Difficulty, missed signs and lingering boom-time euphoria all contributed to inaccurate predictions


Hindsight as they say is always 20-20. Would I be wrong to say 10 years from now if things change for the better, "Difficulty, missed signs and lingering doom-time fear mongering all contributed to inaccurate predictions" ?

This thread started with the prediction of the downfall of the economic systems of the West and China and how India is in a great position to take advantage of this situation to take it's rightful place among the powers of the world. I'm not a trained economist. I'm just a lowly electrical engineer that is trying to learn how India could use this situation to it's advantage. But the experts here on BRF seem to be happier than ever to predict and rejoice in the fall of the West than strategies to help India. Sort of like, " I lost both my eyes but my enemy lost one of his!"

There are a lot of learned people here who can provide more insight than just empty predictions. Please take the discussion to the next level. How do we use the learning from this meltdown to improve Indian economic systems?

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 29 Oct 2009 03:07

KarthikSan,

Start with your attitude.. It is not about the west failing. It is about BS, lies and scams reaching their deserved resting places.

Any system that becomes delusional, sclerotic and filled with too many vested interests will collapse. The real question is when and how quickly.. There is never a smooth transition from one way to another, even if the result was better than the original.

As far India is concerned, there is a lot of potential but not much hope till the type of people who are elected or run institutions changes. My prediction is that it will not happen willingly- but due to a pretty nasty series of external and internal events. The key difference between India and the west then is the ability and demography to rebuild.

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Re: Perspectives on the global economic meltdown

Postby KarthikSan » 29 Oct 2009 03:19

ss_roy wrote:KarthikSan,

Start with your attitude.. It is not about the west failing. It is about BS, lies and scams reaching their deserved resting places.

Any system that becomes delusional, sclerotic and filled with too many vested interests will collapse. The real question is when and how quickly.. There is never a smooth transition from one way to another, even if the result was better than the original.

As far India is concerned, there is a lot of potential but not much hope till the type of people who are elected or run institutions changes. My prediction is that it will not happen willingly- but due to a pretty nasty series of external and internal events. The key difference between India and the west then is the ability and demography to rebuild.


Please explain what is wrong with my attitude. This is the post that Ramana started this thread with. See what I mean:

ss_roy wrote:I am not sure that most of you comprehend the full extent of this self-inflicted disaster. If you do, I am sorry for repeating it.

The facts-

1] The entire western banking system is insolvent- not illiquid, just plain insolvent. Extensive governement intervention is the only reason banks are still operating in the western world.

2] The mechanisms of self-regulation and credit rating has been shown to be fraudulent. Many financial sectors like IBs, Hedge Funds and even plain insurance companies are f**ked. Inter-institution trust has collapsed. Banks are hoarding money and the effects of credit contraction on non-financial businesses are starting to get ugly.

3] The financial system in the west will never be the same again. To date they have lost 4 times the amount of inflation adjusted money they have made since 1400 AD . The 600 year old business model of western banks is therefore essentially dead. Lots of reasons. The reincarnated version of western banks will look a lot like nationalized banks in India.

4] This collapse has destroyed trillions of notional wealth and will destroy trillions more. Pensions in the western world are DOA. Many professions like doctors, lawyers are starting to realize that they will never make the same amount of money again.

5] The financial shell games and ponzi schemes of the last 30 years have come back to haunt them- all at once!The demographic profile of the west is not good. They have too many baby boomers who had hoped to retire but now find themselves unable to retire.

6] Don't believe westerners who say "it will come back". That is PR and wishful thinking. Read more about the real causes of this crisis and why it will essentially end the dominance of the west.

7] The west has not yet officially capitulated, but it will have to..

What it means for India.

1] China is toast! Unless they pull a rabbit out their behinds, their progress will start to unwind. They built an economy that was too dependent on exports, and they discouraged their citizens from consuming their own stuff. The debt based export market has collapsed, and local consumption has not yet caught up with production. Expect massive job losses and widespread civil unrest.

2] Pakistan is DOA. Hopefully they (fundies) will pull of a stupid stunt with loose nukes in the west. It would be very desirable if the US nuked them in retaliation.

3] The main leverage of the west over 'colored' countries like India is gone! They need you much more than you need them. But you guys have to realize that and take advantage of this calamity. Expect them to line up and sell you high tech stuff- nuclear reactors, missiles, avionics, aircrafts, technology- anything you desire. Their socioeconomic system requires new consumers, they are old and tapped out- you are not.

3] If India plays it's cards right, it could position itself as the biggest growth market in the world. We still have well run and transparent banks and people who do not save too much like the chinese or too little like the americans.

4] I hope that any new government in India (2009?) will not be full of geriatrics. Hopefully, they will also stop being obstructionist, petty and let people become rich. I have always believed that politicians and bureaucrats in India conspire to hinder progress and keep people poor.

I could write in much greater detail, but it might make it harder to grasp the big picture.

If could post links to blogs that have been following this story for the last 3 years, if you want..


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