Perspectives on the global economic meltdown


ramana
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Re: Perspectives on the global economic meltdown

Postby ramana » 14 Jan 2010 22:26

Suraj wrote:Did US innovation during the 50s and 60s come from small entrepreneural entities, or from large government or corporate ones ? The 50s-70s were the time when a slew of heavily funded goverment-backed organizations like RAND, NSF, DARPA etc were created. It was also the heyday of the powerful autonomous corporate research laboratories, like AT&T Bell Labs, Sarnoff Labs, Xerox PARC, IBM TJ Watson and others. I don't know about the former, but the latter would be anachronistic today, since companies have not shown any dedication towards generous funding of massive research labs anymore.


Most of the innovation was due to commercialising the research made during WWII. Many technological companies were launhed to turn the basic researchinto commerical products. Read the bio of Tex Thronton, the founder of Litton Industries which spawned, Teledyne, TRW and a host of other techno giants. GE became huge by commercialising the wartime R&D. Also the tax policy in those days was not to tax R&D expenditure. Somehow the policy changed in 70s & 80s due to budget deficits. This accounts for the lack of enthusiaism for R&D expenditure by corporates.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 14 Jan 2010 22:44

The creation of Suburbs was a major factor in heralding several innovation in the early/mid 20th century America. Companies benefited from the "engineering" of the American society.

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Re: Perspectives on the global economic meltdown

Postby svinayak » 14 Jan 2010 23:21

SwamyG wrote:The creation of Suburbs was a major factor in heralding several innovation in the early/mid 20th century America. Companies benefited from the "engineering" of the American society.

This "engineering" was done to counter the global communist propaganda which was started after 1930s.

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Re: Perspectives on the global economic meltdown

Postby ramana » 15 Jan 2010 01:16

prad, One remark I heard was that US didnt raise taxes to fund the Vietnam war spending and all the money trickling back helped inflation leading to the economic side of the problems in 70s. The double whammy of retreat in Vietnam (malaise) and high oil prices just tanked the compact.


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Re: Perspectives on the global economic meltdown

Postby amol.p » 15 Jan 2010 13:09

In a Surprise, Retail Sales Fell in December

From supermarkets to department stores, sales fell 0.3 percent from November, a decline that economists attributed to a bleak jobs market and a reluctance by consumers to spend freely. Analysts, encouraged by signs that consumers were regaining confidence, had expected sales to rise 0.5 percent.

At department stores, for instance, the latest government data showed that sales fell 1.2 percent compared with December 2008.

http://www.nytimes.com/2010/01/15/busin ... f=business

If California Owes You, It Would Like to Pay You

Across the state, 89,000 residents and businesses — including 2,315 here in San Francisco alone — are sitting on some $50 million in uncashed i.o.u.’s from the state, a souvenir of California’s most recent, but by no means its last, budget crisis.
The state issued about 450,000 i.o.u.’s valued at more than $2.6 billion to taxpayers, vendors and contractors in July after it failed to close a budget gap on time and started to run out of money.

A report on Thursday found that some 630,000 homes went into foreclosure in California in 2009, more than in any other state in the nation, according to RealtyTrac, an online real estate company that specializes in foreclosures.
.....if we consider 3 members against each home then total homeless people or people who lost homes only in california will be astonishing 18,90,000 people
http://www.nytimes.com/2010/01/15/us/15 ... f=business

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Re: Perspectives on the global economic meltdown

Postby Singha » 15 Jan 2010 13:21

hopefully US will impose a 35% tax on automobiles than 5% now.

be fun to see maruti800 sized fuel sippers holding newly slimmed down khans putt putting down
big expressways.

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Re: Perspectives on the global economic meltdown

Postby amol.p » 15 Jan 2010 14:45



Analysts give 20 pct chance Greece will need bailout
......means 20% of investors are going to go short on greece....
Analysts see a one in five chance that Greece will seek a financial bailout and say Ireland, Spain and Portugal are the economies most likely to suffer a similar setback in investor confidence.Greece debt estimated at more than 120 percent of gross domestic product (GDP), despite plans to cut expenditure and hike taxes.

http://www.reuters.com/article/idAFTRE60D43720100114

S&P cuts Jamaica, says debt exchange a default

Standard & Poor's on Thursday cut Jamaica's credit ratings, saying a domestic bond exchange proposed by the government constitute a debt default.
S&P downgraded Jamaica's foreign- and local-currency sovereign credit ratings to SD, or selective default, from CCC/C.

At the same time, the ratings agency revised the ratings on the bonds that are included in the proposed exchange to D. Government securities that are not included in the deal remain rated CCC. The recovery rating remains at 4.

http://www.reuters.com/article/idUSN1415791720100114

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Re: Perspectives on the global economic meltdown

Postby amol.p » 15 Jan 2010 14:57

Sovereign defaults top 2010 risk hitlist for WEF

The risk that deteriorating government finances could push economies into full-fledged debt crises tops a list of threats facing the world in 2010, according to a report by the World Economic Forum.

"Governments, in trying to stimulate their economies, in fighting the recession, are (building) unprecedented levels of debt and therefore there is a rising risk of sovereign defaults," said John Drzik, Chief Executive of management consultancy Oliver Wyman, which was one of the contributors to the WEF report.

Greater life expectancy and unhealthy lifestyles would lead to a soaring financial cost from chronic disease, they said, which must be addressed by both developing and developed nations such as through prevention campaigns promoting healthier living.
............... :eek: .......Can people interpret meaning of this sentence..????? does he mean to say higher life expentancy is bad for economy...????


http://www.reuters.com/article/idUSTRE60D24X20100114

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Re: Perspectives on the global economic meltdown

Postby ramana » 15 Jan 2010 22:45

The advice from the Prof to walk away from underwater mortgages is making the rounds a lot. Even Comedy Channel's Colbert had a segment on that. The spoof was on "honor and duty" to pay the mortage while the banks were raking in bailout money.

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Re: Perspectives on the global economic meltdown

Postby Chinmayanand » 16 Jan 2010 00:25

US Debt: Look At It This Way

Seven ways to put the United States' national debt into perspective...
The SHEER SIZE of the US government's debt hasn't put off new bond buyers so far in 2010.

You've got to wonder what kind of news – or debt – it might take to deter them.

In just two days this week, the Treasury issued $61 billion in new debt – twice as much money as Japanese households put into their domestic equity funds during all of 2009, itself a 50% jump from 2008.

Yet one "big bidder" still opted to lend the federal government one fifth of that sum, according to bond analysts speaking to the Financial Times at least. And overall, the government's creditors offered to lend Washington three times the money it sought.

Now, if the Treasury didn't need that $61,000,000,000 to cover 6.3 days of spending, the money raised in new bonds between Tuesday and Wednesday this week could cover 12 days of interest due on the outstanding debt, already running above $12.3 trillion and outweighing the market value of every company listed on the New York Stock Exchange.

Put another way, the United States national debt is greater than the GDP forecast this year for Japan, China, Brazil and Canada added together. (That's excluding the $107 trillion of unfunded liabilities yet to come, of course.) If today's lenders ever see their money again, they could just about buy all the gold ever mined in history – all 165,500 tonnes of the stuff – twice over at today's prices.

Or they could simply pay twice today's gold price, of course.

Repaying the US national debt looks a struggle, however. Settling $1 per second – rather than racking up an extra $37,132 every second, as the federal government's scheduled to do in 2010 – would take until the start of February A.D. 392,372. Settled for cash, and piled up in $1 bills, the current US debt would reach to the moon...and back...and back to the moon again...and then round the moon's equator ten or perhaps 20 times, depending on how much you squashed them.

Or to put the US national debt into historical perspective – a very historical perspective – the US government has borrowed the equivalent of $2.46 each and every day since the beginning of time...last computed to have occurred some 12.7 billion years ago, back when $2.46 really meant something.

For creationists sticking with Archbishop Ussher, that's $2 billion per year since God said "Let there be light"...back when fiat really meant something, too.

And lo! The bond market still kept on buying.

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Re: Perspectives on the global economic meltdown

Postby Chinmayanand » 16 Jan 2010 00:38

The Next Stage of the Credit Crisis

The next stage of the credit crisis is approaching. The first stage of the credit crisis was characterized by subprime borrowers defaulting on their mortgages. These borrowers were the weakest link in the lengthy chain of credit. Following the subprime fiasco, stronger links in the chain, including credit-worthy consumers and corporations, had difficulty obtaining credit. The inability to access credit led to bankruptcy, bailout and/or nationalization of many financial firms by governments around the world. At the time, even though governments were compromising their own balance sheets by bailing out insolvent companies, government bonds were seen as a safe haven and were hoarded by investors. The strength seen in government bond prices during the credit freeze was instrumental in enabling governments to actively bail-out borrowers and initiate economic stimulus programs.

Government intervention resulted in a tremendous rebound in financial markets in 2009, and today, markets and investors appear to believe that the worst of the financial crisis is over. However, with governments borrowing more money than they can repay, the financial crisis has only just begun. In the summer of 2007, many investors overlooked the deteriorating credit quality of subprime mortgages and the collapse of the Bear Stearns’ subprime funds, as demonstrated by stocks hitting new highs in October, 2007. In similar fashion, stocks are continuing to hit new highs as many governments’ credit ratings are downgraded and/or put on negative watch by the rating agencies.

The deteriorating credit worthiness of governments around the globe has now become pervasive as can be seen in the list we have compiled of excerpts from news articles on the topic. While this list is not comprehensive, the large number of countries included overwhelmingly supports our belief that we are on the cusp of the next stage of the ongoing credit crisis.

Portugal – Financial Times - January 10, 2010

“If Portugal wants to avoid a downgrade, it is going to have to take meaningful, credible steps to get the deficit under control,” said Anthony Thomas, a senior sovereign risk analyst with Moody’s credit rating agency. Moody’s and Fitch both placed Portugal’s sovereign debt rating on a negative outlook in the autumn, a measure that implies a probable downgrade within 12 to 18 months.

Iceland – The Telegraph - January 6, 2010

Standard & Poor's, the credit rating agency, has put Icelandic debt under negative credit watch, a day after Iceland's president blocked a bill of compensation for the failure of Icesave bank. The agency said that "as a result, we could lower our ratings on Iceland by one to two notches within a month". The decision by S&P came after the Fitch credit rating agency had downgraded Iceland's long-term debt rating from BBB- to BB+ late on Tuesday, citing a "renewed wave of domestic political, economic and financial uncertainty." It (S&P) said: "The Creditwatch placement indicates the likelihood of a downgrade if political uncertainty grows and external liquidity pressures persist in the wake of President Olafur Ragnar Grimsson's veto of the 'Icesave Act'."

France and United Kingdom – Telegraph - December 22, 2009

Fitch Ratings has given its bluntest warning to date that Britain and France risk losing their AAA status unless they map out a clear path to budget discipline over the next year.

Mexico – Reuters - December 14, 2009

Standard & Poor's trimmed Mexico's credit rating one notch to BBB from BBB-plus, citing fiscal challenges it expects will persist "over the coming years," but at the same time lifted them to a stable from negative credit outlook. The move by S&P was widely expected and comes after Fitch cut the country's credit rating one notch to BBB and gave a stable outlook on Mexico three weeks ago. This was Mexico's first downgrade in over 10 years.

Dubai – Reuters - December 10, 2009

Moody's said that the rating downgrades reflect the weakening in Dubai's economy and the repercussions on the banks' asset quality and earning power. Exposure concentrations to the construction and property sector, as well as Dubai government-related entities, are significant and could entail material losses. The direct exposures to Dubai World are manageable given high capitalization levels. However, the rating agency notes that the negative investment sentiment that has been sparked by the restructuring could have longer-lasting effects on Dubai's economy and could constrain the banks' ability to access debt capital markets in a cost-effective manner for longer than was previously expected.

Spain - BBC News - December 9, 2009

Spain has had its credit outlook cut to negative from stable by the ratings agency Standard & Poor's. The agency said Spain faced a deeper deterioration in public finances and a longer period of economic weakness than it had previously expected. "Reducing Spain's sizable fiscal and economic imbalances requires strong policy actions, which have not yet materialised," Standard & Poor's said in a statement.

Greece – Wall Street Journal Online - December 8, 2009

Ratings agency Fitch downgraded Greece on Tuesday to BBB+, outlook negative. Fitch said its move was due to “concerns over the medium-term outlook for public finances given the weak credibility of fiscal institutions and the policy framework in Greece.”

United Kingdom and United States - Bloomberg - December 8, 2009

Moody’s Investors Service said the top debt ratings on the U.S. and the U.K. may “test the Aaa boundaries” because public finances are worsening in the wake of the global financial crisis.

“The deterioration has been pretty severe,” said Pierre Cailleteau, managing director of sovereign risk at Moody’s, in a Bloomberg Television interview in London. “We expect a pretty strong policy response in the next couple of years in order to keep the debt in the Aaa range. We expect them to bend but not to break.”

The U.S. and U.K. have “resilient” Aaa ratings, as opposed to the “resistant” top ratings of Canada, Germany and France, Moody’s analysts led by Cailleteau said in a report today. None of the top-rated countries is “vulnerable,” or have public finances that are “stretched beyond the point of ‘no return’ to the Aaa category,” New York-based Moody’s said.

Vietnam – Wall Street Journal Online - November 26, 2009

Vietnam devalued its currency, the dong, by roughly 5% against the U.S. dollar, while also increasing interest rates in a bid to damp rising inflation. The country's central bank raised its benchmark interest rate by one percentage point to 8%, effective Dec. 1.Wednesday's devaluation -- Vietnam's third since June 2008 -- reflects strains on the economy caused in part by aggressive stimulus spending and low foreign reserves. It also highlights differences between Vietnam and its regional neighbors. Vietnam is one of the only economies in Asia with both a fiscal budget deficit and a current-account deficit, a combination that puts pressure on the dong to weaken.

Japan – Reuters - May 18, 2009

Moody's Investors Service stripped the Japanese government of its last triple-A foreign currency credit rating on Monday in a move that could revive market speculation about the creditworthiness of other rich nations, especially the United States. The two-notch downgrade to Aa2 from Aaa was a token censure for Japan which has almost no foreign currency debt exposure. Moody's upgraded Tokyo's local currency rating to Aa2 from Aa3 saying the domestic bond market was able to cope with government plans for new borrowing. The agency described the move as a largely technical one but also said Japan was in a worse situation than many other governments in its top ratings bracket.

Ukraine – Bloomberg - February 25, 2009

Ukraine’s credit rating was cut two levels by Standard & Poor’s to the lowest in Europe, a day after Latvia was downgraded to junk, as eastern Europe’s most debt- laden economies lurch closer to default. Ukraine’s long-term foreign currency rating was lowered to CCC+, seven levels below investment grade, the rating company said in an e-mailed statement today, saying political turmoil poses growing risks to the country’s International Monetary Fund loan. The rating is on a par with Pakistan and S&P left the outlook negative, indicating a possible further cut.

United States – Reuters - September 17, 2008

Pressure is building on the pristine "AAA" rating of the United States after a federal bailout of American International Group Inc, the chairman of Standard & Poor's sovereign ratings committee said on Wednesday.

The $85 billion bailout of AIG on Tuesday by the U.S. Federal Reserve "has weakened the fiscal profile of the United States," S&P's John Chambers told Reuters in an interview.

"Lack of a pro-active stance could have resulted in further financial stress and put pressure on the U.S. triple-A rating," Chambers said. "There's no God-given gift of a 'AAA' rating, and the U.S. has to earn it like everyone else."

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Re: Perspectives on the global economic meltdown

Postby ramana » 16 Jan 2010 00:44

amol.p wrote:Sovereign defaults top 2010 risk hitlist for WEF

The risk that deteriorating government finances could push economies into full-fledged debt crises tops a list of threats facing the world in 2010, according to a report by the World Economic Forum.

"Governments, in trying to stimulate their economies, in fighting the recession, are (building) unprecedented levels of debt and therefore there is a rising risk of sovereign defaults," said John Drzik, Chief Executive of management consultancy Oliver Wyman, which was one of the contributors to the WEF report.

Greater life expectancy and unhealthy lifestyles would lead to a soaring financial cost from chronic disease, they said, which must be addressed by both developing and developed nations such as through prevention campaigns promoting healthier living.
............... :eek: .......Can people interpret meaning of this sentence..????? does he mean to say higher life expentancy is bad for economy...????


http://www.reuters.com/article/idUSTRE60D24X20100114


Yes. What he is saying is people with chronic disease live longer they will cost the system a lot more which is bad for overall economy. He advocates a healthy life style to avoid chronic diseases.

In the early 1970s there was Hollywood movie called "Logan's Run" where in a futuristic world a computer decides, who dies by age ~30, as the world was running out of resources. The theme was the struggle of the young protogonist to destroy the computer so people have free choice. It was supposed to be a reflection of Soviet Union and its inhuman governing practices. Looks like as the cartoon said "We looked hard at the enemy and found they were us!"

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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 16 Jan 2010 10:12

Racketeering 102: Fed's Lacker Threatens With Mutually Assured Destruction If Fed Audited

It is fitting that as attempts to expose the Fed's shady practices accelerate on all fronts, and include direct legal approaches as well as subpoena demands by various politicians, that a Fed President would once again come out today, and recap the good old Mutual Assured Destruction treatise that both Wall and Main Street have gotten used to since the beginning of the bailouts. Somehow financial M.A.D. makes an appearance every time the bankers demand something and have no other rational justifications. So why not just feed the stupid plebs something about the Apocalypse that is certain to transpire should the financial oligarchs not get their way. Today was no exception.


The biggest problem with the Fed is its continuous insistence that the kleptocratic oligarchy always knows not only what is in everyone's best interest, but is so much smarter than all, that stupid peasants getting advance knowledge of just how impaired the major TBTF institutions are, would immediately risk bank runs. Once again, it never dawns upon these enlightened gentlemen, that such rumor-based "bank runs" are merely a byproduct of never having the sufficient information to make informed decisions about these very companies in real time. And when the shit does hit the fan (as it always eventually does under the Fed's "aegis") the outpouring of panic is enough to bring the system down in a matter of hours as September 18, 2008 demonstrated.

==

Racketeering 101: Bailed Out Banks Threaten Systemic Collapse If Fed Discloses Information

As a reminder, The Clearing House Association consists of ABN Amro, Bank Of America, The Bank Of New York, Deutsche Bank, HSBC, JP Morgan Chase, US Bank and Wells Fargo.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 16 Jan 2010 22:51

There's no God-given gift of a 'AAA' rating, and the U.S. has to earn it like everyone else."


Rating agencies are a fraud as the massive and criminal sub-prime morgage fiasco revealed.

They merely pretend to be independant. But really they are an arm of the government that created them to raise the cost of borrowing with fake ratings for others but not their host country.

Do your own due diligence when lending out your money.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 18 Jan 2010 13:37

buffett the great invester?

more like the great scammer. his profits come from hollering for bailouts and then making money on it.

Image

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Re: Perspectives on the global economic meltdown

Postby Chinmayanand » 18 Jan 2010 18:19

ECB prepares legal ground for euro rupture as Greek crisis escalates

Fears of a euro break-up have reached the point where the European Central Bank feels compelled to issue a legal analysis of what would happen if a country tried to leave monetary union.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 19 Jan 2010 08:47

Paper gold is a worthless investment.

Who are the so called 'custodians' holding/auditing the gold? Unless it is the Indian government itself which holds the gold, all claims are suspect. For all you know, scamsters are selling paper promises with no physical gold in their vaults to back it up.

Stay away from it and buy only physical gold. If you don't hold it, you don't own it.

-----------

WGC to launch new paper gold in India

http://www.commodityonline.com/news/WGC ... 2-3-1.html

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Re: Perspectives on the global economic meltdown

Postby amol.p » 19 Jan 2010 11:49

Neshant wrote:Paper gold is a worthless investment.

Who are the so called 'custodians' holding/auditing the gold? Unless it is the Indian government itself which holds the gold, all claims are suspect. For all you know, scamsters are selling paper promises with no physical gold in their vaults to back it up.

Stay away from it and buy only physical gold. If you don't hold it, you don't own it.

-----------

WGC to launch new paper gold in India

http://www.commodityonline.com/news/WGC ... 2-3-1.html



Hi Neshant.....this is excatly what I was told by many local jewellers here not to buy paper gold when i was looking for investment. They say in time of crisis that paper will turn junk.

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Re: Perspectives on the global economic meltdown

Postby Rampy » 19 Jan 2010 12:19

A good article by Micheal Lewis

http://www.nytimes.com/2009/01/04/opini ... .html?_r=1

This is one reason the collapse of our financial system has inspired not merely a national but a global crisis of confidence. Good God, the world seems to be saying, if they don’t know what they are doing with money, who does?

Incredibly, intelligent people the world over remain willing to lend us money and even listen to our advice; they appear not to have realized the full extent of our madness. We have at least a brief chance to cure ourselves. But first we need to ask: of what?


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Re: Perspectives on the global economic meltdown

Postby Chinmayanand » 20 Jan 2010 02:25

Hari Seldon garu, where are you ? i miss your post-mortem of the articles you post ...and i guess there are many like me who eagerly await your posts and comments...long time , no see... :(

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Re: Perspectives on the global economic meltdown

Postby RamaY » 20 Jan 2010 04:40

Neshant wrote:Paper gold is a worthless investment.

Who are the so called 'custodians' holding/auditing the gold? Unless it is the Indian government itself which holds the gold, all claims are suspect. For all you know, scamsters are selling paper promises with no physical gold in their vaults to back it up.

Stay away from it and buy only physical gold. If you don't hold it, you don't own it.

-----------

WGC to launch new paper gold in India

http://www.commodityonline.com/news/WGC ... 2-3-1.html


A Jeweler in New Jersey who offered paper-gold bonds, recently committed suicide and (his family) went bankrupt (in that order) causing $M losses to many desi families.

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Re: Perspectives on the global economic meltdown

Postby Singha » 20 Jan 2010 06:51

so the suspect category would include gold ETFs too right?

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 20 Jan 2010 09:36

Durgesh dada, aami aabo...aabo aami....a tad caught up with pending stuff is all. Also was in namma bengaluru for Sankranti - visiting some friends and all. Good fun overall.

achcha, back to the thread basics: here's a gr8 resource for the time constrained (and I am aajkal):
http://twitter.com/AutomaticEarth
Pls to follow if on twitter.

Some recent tweets from the good folk over at Automatic earth.
# TAE Today: Harvard lost $11BN from its endowment last year, + $2BN by gambling with operating cash & $1BN in bad bets on interest rates. about 14 hours ago from TweetDeck


# TAE Today: More than 140,000 UK companies were dragged into financial difficulties in the last quarter about 14 hours ago from TweetDeck

# TAE Today, McKinsey estimates gross level of British private and public debt is now 449% of GDP – up from 350% at the start of the decade about 14 hours ago from TweetDeck

# TAE Today: American banks and credit card companies are making huge profits,around $250 million a year,off of people's charitable donations about 14 hours ago from TweetDeck

# Deutsche Bank Said to Plan Salary Increases of Up to 30% as Bonuses Shrink - http://bit.ly/4vHaIL about 14 hours ago from TweetDeck

# How inept is Citi? With all that Govt support and bailouts it still posts a $7.6 Bn loss? - http://bit.ly/83K3zd about 14 hours ago from TweetDeck

# New Post Up: Jan 18 2010, Where does your donation go? - http://bit.ly/6EnjGS about 22 hours ago from TweetDeck

# “When the rich wage war, it's the poor who die.” - Jean-Paul Sartre 12:02 PM Jan 18th from TweetDeck

# Banks have to refinance $2 Trillion of debt due this year,sold $100 Bn in debt this month - http://bit.ly/6CsX7P (Credit mkts tightening) 6:52 AM Jan 18th from TweetDeck

# Our Basic Human Pleasures: Food, Sex and Giving - http://bit.ly/4KqoLQ 6:27 AM Jan 18th

# Jamie Dimon, CEO JP Morgan in response to analyst's question: “Well, Mike, we don’t know when the recovery is.” (so much 4 the recovery...) 6:21 AM Jan 18th from TweetDeck

# ECB prepares legal ground for euro rupture as Greek crisis escalates - http://bit.ly/5zrr33, unemployment to reach 22%, Debt too high. 5:57 AM Jan 18th from TweetDeck

# Why Many Investors Keep Fooling Themselves - http://bit.ly/4KCpxy (All dreaming of excessive returns while these are historically rare) 5:40 AM Jan 18th from TweetDeck

# Abu Dhabi's Dubai aid shrinks to $5 billion - http://bit.ly/6CRFH1, Some Dubai World creditors may offload loans - http://bit.ly/6CRFH1 5:17 AM Jan 18th from TweetDeck

# IMF Chief Strauss-Kahn: "Recovery in advanced economies has been sluggish,","We have to be cautious because the recovery has been fragile." 5:16 AM Jan 18th from TweetDeck

# There were 3 bank failures on Friday, the FDIC party cost about $296.3 Mn 3:30 PM Jan 17th from TweetDeck

# New Post Up: Jan 15 2010 - Of Trojan thoroughbreds, http://bit.ly/6rY4WA, Ilargi talks about Europe, Greece & Trojan scale toxic assets.


Of course, lots of this must have been covered on our merry thread onlee, more of a recap samjho.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 20 Jan 2010 09:42

Meanwhile, here's the daily D&G dose:

After every financial crisis there's a sovereign debt crisis, Marc Faber says. Countries that borrowed too much during the boom times start struggling to pay their competitors back, and eventually some of them default.

The countries most likely to blow up this time around are the "PIIGS": Portugal, Ireland, Italy, Greece, and Spain. One ore more of them, Faber says, will likely default in the next couple of years. And, that could result in the death of the Euro currency.

Longer-term, Faber says, Japan and the US are in line for the same fate.


To which Mish adds:

I like that timeframe. People expecting the US$ to implode right here right now are simply too early in my estimation. As for five years from now, I will reassess later. There are too many things happening right here right now to worry about 5-10 years from now.

Certainly the PIIGS are near the top of today's list of worries. Moreover, we can easily have a crisis in places eyes are not focused such as Mexico. Is anyone even looking at Mexico or what a housing crash might mean to Canada or Australia?

Let's not forget that Japan's rapidly aging demographics suggests that Japan crisis will hit before the US. Japan's debt is approaching 200% of GDP, Japan is mired in deflation, and its aging workforce now needs to draw down on savings, in retirement. The belief that "Japan is a nation of savers and the US is a nation of spenders" is about to be shattered. Secular spending trends in both countries have peaked, in opposite directions.

Finally, the love affair with China is way overdone. The amount of fiscal stimulus and monetary printing is off the charts. China is a bubble waiting to burst. I am in the camp, and have been for years, that if China floated the RMB it might crash, not soar.


400% agree with the bolded part above.

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Re: Perspectives on the global economic meltdown

Postby amol.p » 20 Jan 2010 09:46

Dubai's debt could be as much as $170 billion: Report

The total debt of cash-strapped Dubai could be as much as $170 billion, much higher than earlier reported, according to a report by EFG-Hermes regional investment bank.

The total debt held by Dubai Inc could well be in the range of 130-170 billion dollars," the bank said in its 2010 UAE Yearbook.Meanwhile, EFG-Hermes said voluntary restructurings of Dubai Inc's debt are likely, as around 75 percent of Dubai Inc's debt, which falls due in 2010-2011, is from syndicated loans.

http://economictimes.indiatimes.com/new ... 477972.cms

Vietnam May Pay a Point More Than Indonesia on Debt

.....the race to sale the debt has started...let see how much Uk & USA are ready to hike...also seems that vietnam is going through bad times.

“The Vietnamese authorities have at present a difficult task in addressing mounting inflationary pressures and external balances.Vietnam’s government is struggling to balance policies that spur growth with efforts to ensure its economy remains stable, Moody’s Investors Service said Jan. 15. The nation is rated Ba3 by Moody’s, three levels below investment grade, with a negative outlook.

http://www.bloomberg.com/apps/news?pid= ... Z6K0&pos=7

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 20 Jan 2010 09:55

And here's aaj ka pre-post mortem: (Yup, beating an old well-beaten drum - the sad state of the states, but WTH aaj ke liye itna chalega)

Illinois Careens Toward Bankruptcy

The latest count puts Illinois’ unpaid bills at around $5 billion – a contentious fact among the state’s gubernatorial hopefuls. The question is: what can Illinois do about its near-bankrupt status? Answer: not much.

Federal bankruptcy protection doesn’t apply to states, so there's no way for Illinois to hide from its creditors. And none of Illinois politicians are willing to make the tough choices needed to close the budget gap, like raising taxes or cutting spending, Crain’s notes.

Indeed, Illinois is not taking in cash, its liquid assets have dipped below $1 million at times, Comptroller Dan Hynes said, and the state is supposed to pay $5.4 billion into its pension fund next year and $10 billion the year after that. And that's just the beginning.

"The crisis will come when you see state institutions shutting down because they can't pay their employees," David Merriman, head of the economics department at the University of Illinois at Chicago told the publication.


Well, Sri Merriman should know. Rumors are rife that the Univ of Illinois is already behind on staff salries only (reminds me of Laloo's broke Bihar where gubmint teachers' tankhas weren't paid for months on end).

A record $5.1 billion in state bills was past due at yearend, almost doubling to 92 days from 48 days a year earlier the average amount of time it takes the state to pay vendors such as doctors, hospitals, non-profit service providers and other contractors.

The $5.1-billion backlog of unpaid bills doesn't include $1.4 billion in Medicaid and group health bills that haven't been processed, plus $2.25 billion in short-term borrowing that must be repaid soon.

Cash on hand varies from day to day, sometimes dipping below $1 million, says a spokeswoman for Illinois Comptroller Dan Hynes.


Re the bolded part above, now moi wouldn't be so uncharitable and quite go so far as to say the land of Lincoln is kinda, sorta slipping into a hand-to-mouth existence w.r.t. its creditors but sure looks like it, don't it. New definitions emerge for pay-as-you-go, seems like. Anyone wanna take wagers on what's gonna happen to Illinois state and municipal bond yields?

"Bah!" you croon dismissively. "Calif is worse off and is the real koylakhana canary. Fed'll never allow states to go bankrupt anyway", you aver. Sure, read on:

While California has an even bigger budget hole to fill, Illinois ranks dead last among the states in terms of negative net worth compared with total expenditures. The state's liabilities, including future pension payments, exceed its unrestricted assets by $39 billion, more than 72% of its total expenditures as of mid-2008, according to Richard Ciccarone, managing director and chief research officer at McDonnell Investment Management LLC, an Oak Brook money manager that invests in bonds. "It's probably higher now," he adds.

Unfunded liabilities and pension debt are projected to reach $95 billion by June 30. The state must contribute $5.4 billion to the pension funds next year, and more than $10 billion a year in the future. Required contributions will soon start increasing dramatically because the state has repeatedly pushed back a payment schedule enacted in 1995 to set aside enough to cover 90% of its pension obligations by 2045, up from 43% today, one of the worst unfunded liabilities in the nation.

The sharp rise in pension payments is the biggest factor pushing Illinois toward what a legislative task force last November called "a 'tipping point' beyond which it will be impossible to reverse the fiscal slide into bankruptcy." The little-noticed report on the state's pension problems warned that "the radical cost-cutting and huge tax increases necessary to pay all the deferred costs from the past would become so large that many businesses and individuals would be driven out of Illinois, thereby magnifying the vicious cycle of contracting state services, increasing taxes, and loss of the state's tax base."


Aaha, you start to see the (head)light of the oncoming freight train at the other end of the tunnel. "But but but", you persist,"perhaps even blue-blooded lawmakers in deep blue Illinois will have to face reality and will will revoke pension promises to grannies and granpaas everywhere", you reason. Sure, I would agree but for the fact that such common sense as living within one's means and not promising what cannot be paid goes against the Illinois constitution....

While the Illinois Constitution protects vested pension benefits, that promise, like all the state's obligations, is only as good as its ability to pay. The Civic Federation warned lawmakers last fall that "there is mounting evidence that a judge could find the state is already insolvent.

If the state is found to be insolvent under the classical cash-flow definition of insolvency, which is 'the inability to pay debts as they come due,' it is not only the pension rights of non-vested employees that will be in jeopardy. All the obligations of the state, whether vested or not, will be competing for funding with the other essential responsibilities of state government. Even vested pension rights are jeopardized when a government is insolvent."


Yeah, I know. Moi boor head's spinning out of control already. Will stop for moi own sake. Sake and sushi. Ensoi.

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Re: Perspectives on the global economic meltdown

Postby amol.p » 20 Jan 2010 12:06

One in 7 U.S. mortgages foreclosing or delinquent

some brief points......

1] U.S. mortgage delinquency rates and the percentage of loans that entered the foreclosure process also jumped to records from July to September.

2] Housing and related business account for about 20 percent of the economy and recovery is essential to bring unemployment down

3]Foreclosures will be worse in the first part of 2010 and we do not see a peak in foreclosures until the middle of next year

4]prime fixed-rate loans often sold to homebuyers with the highest credit ratings continued to represent the largest share of foreclosures started and were the biggest driver of the increase in foreclosures

5] The delinquency rate broke the record set last quarter, based on MBA data going back to 1972.

6] 33 percent of foreclosures started in the third quarter were on prime fixed-rate loans and those loans were 44 percent of the quarterly increase in foreclosures.

7] First, it is unlikely the employment picture will get better until sometime next year and even then jobs will increase at a very slow pace

http://www.reuters.com/article/idUSN1937065020091119

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Re: Perspectives on the global economic meltdown

Postby Singha » 20 Jan 2010 13:08

generally its the thin starving unglamourous sher khan states who probably manage their
finances well. they dont have much in the best of times and are not centers of politics, industry or finance. they eat plain bread and soup for dinner, while fat cats gorge on artisanal breads, cheeses, wines, acorn fed bacon imported from spain, capers from portugal sprinkled on grilled mahi mahi.

the heavyweights like california, ny, illinois, florida, texas, maryland, virginia will probably be the first to squeal and ask for help under the premise "we are too big to be allowed to fail" , "could have negative impact on investor sentiment", "could cause run on US dollar" :mrgreen:

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 20 Jan 2010 22:13

Was this posted here or elsewhere @ BRF?
Societe Generale Ordered to Stop Derivatives Trades in India
A blog opines thus about the news
Both China and India are very annoyed with the Derivatives Beast and the international bankers seeking places to destroy. So they are being rational: locking the door to keep out irresponsible banking. Wish the US did this long ago. Alas.
blog

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Re: Perspectives on the global economic meltdown

Postby paramu » 21 Jan 2010 00:10

Oracle of Omaha uvacha:
Buffett Opposes Obama Bank Fee, Likens Plan to Taxing Congress

He is only trying to protect his wealth. Taxing the banks would bring down their profits, thereby their stock prices. Comparing bank bail out to Fannie/Freddy is not correct; they have practically been nationalized but banks are not.

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Re: Perspectives on the global economic meltdown

Postby ramana » 21 Jan 2010 00:43

Is Google biting off more than it can chew? I mean with its spat with PRC over hacking etc.,, is it creating a new proxy trade war? Markets are tanking on news that PRC wants to curb its growth/spending.

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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 21 Jan 2010 04:26

Senate discussing a raise in national debt ceiling to above $14 trillion

The Senate opened debate Wednesday on a plan to raise the nation's debt limit by $1.9 trillion, a move that Democrats hope will see the Treasury through this fall's congressional elections.

The record increase would raise the Treasury's legal ceiling for borrowing to $14.3 trillion -- about the size of the nation's overall economy.

Treasury expects to exceed the current debt limit of $12.4 trillion as soon as next month. Much of that borrowing is between government agencies; borrowing from foreign governments and other private investors stands at about $7.8 trillion, or around 54 percent of the nation's gross domestic product, a level that has been rising rapidly in the aftermath of the deepest recession in a generation.


Tentative debt ceiling deal reached
President Barack Obama is expected to appoint a special deficit reduction commission as part of a tentative agreement between Democrats and the White House—each trying to find the votes to raise the federal debt ceiling in the coming weeks.

At least half of the immediate debt increase facing Congress is owed to policies or economic conditions that Obama inherited—in part from years of Republican control of the government. Creating a deficit commission, by itself, does very little. But it could open the door to a larger discussion of this structural deficit that hangs over the government and could lead to action in the next Congress on the long term financing of benefit programs like Social Security.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 21 Jan 2010 06:13

More TAE tweets...bestest and briefest overview of the global ekhanomy aajkal, IMVVHO.

RecoveryLESS watch: Housing starts came in at 557,000, prior was 574,000. Expected was 579,000. Peak was at 1,600,000.

10 reasons Obama is failing 95 million investors: Why his fat-cat bankers are destroying capitalism and democracy - http://bit.ly/8gYarn

jobLOSS RecoveryLESS watch - Boeing looking to cut 2,000 jobs this year in commercial aviation - http://bit.ly/7ssJta


Above is D&G standard dose. Pls ignore if uncomfortable. ThanQ ThanQ only.

Dubai's debt could be as much as $170 billion: Report - http://bit.ly/4Fs43H (That's more than double what was previously reported)


Heh. Expect more such shocking revelations from every crisis laden shining emerged mkt to ooze out sooner or later. Anyone recall Greece 'reported' its deficit last yr as 3.5% of GDP, close to Euro norms, but later 'revised' the actuals to 12.5% of GDP?? Yup, it happened. Expect also the BL:S mandarins to show revisions in the unemp actuals soon.

Big bonuses at #Citigroup despite huge losses - http://bit.ly/4IfBXx, so Q4 loss was $7.6Bn but #bonus pool is $25Bn. The perverts.

Wow. The nerve.
And Sri Prince Ahlaweed was lecturing Vikram pandit on 'shape up or else' recently. LOL. Is Sri Ahlaweed's on weed, one might wonder. The mgmt has taken over the firm 400%. Agency theory go to hell. Dividends are zero but bonus payouts far exceed the annual loss?? Wow again.

UK: Half of young black people out of work - http://bit.ly/7753Zp (20% for young white people between 16-24)

Hmmm. No wonder the ekhanomist rag was crooning 'social unrest' in an elaborate CYA op a few moons ago. Shame if social unrest and racial trouble brew in UK-stan's fat musharraf. Couldn't happen to a nicer country, of course. More's the pity.

Merkel: record debt prevented Germany "falling into abyss" - http://bit.ly/5EaCSX (Extend and pretend, taking on more debt is not solution)


Err, Frau Merkel surely knows that debt taken today must be serviced and eventually repaid down the line, I hope? Which is why its called 'borrowing from future generations' coz they'll have to unwittingly bear the cross of debt repayment down the line. No skin off the present gen netaship's ars, of course.

Japanese debt fears could spark global sovereign debt meltdown - http://bit.ly/80ipZa

Ya think? A Jap default (no longer unthinkable, I must add) will be the next big one to watch for, IMO.

China Asks Some Banks to Limit Lending as Loans Surge - http://bit.ly/4vyvEB (Intending to restrict lending to a $1.1 Trillion...)


Gee, what's itching PRC's musharraf, one wonders. Ain't the glolious peepal's lepublic on a forever-growth path? How can one overheat when growth rates are not merely unwilling but actually unable, to fall below 8%, eh?

Interesting tmes indeed. And scary times too. Say your prayers, stay liquid and alert. God, guns and gold - back to the basic era might soon be upon us. Who knows?

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Re: Perspectives on the global economic meltdown

Postby amol.p » 21 Jan 2010 12:48

Greece widens funding search, euro takes fright
.....seems few days are left for Greece in EU............

Greece said on Wednesday it might sell bonds directly to the public to fund its bloated budget deficit but markets responded by sending Greek borrowing costs sharply higher and putting fresh pressure on the euro.Greece's deteriorating public finances have prompted one of the worst crises in the euro zone since the single currency was introduced as the country attempts to cut its budget deficit, which hit 12.7 percent of gross domestic product in 2009.

The cost of insuring against Greek sovereign debt default rose to a new record high of 345,500 euros per 10 million euros.Greece's troubles also helped push the euro to a five-month low against the dollar on Wednesday, as it highlighted concerns about the fiscal health of members of the 16-member euro zone.

If (Greece) does not manage to get its budget problems under control, the discussion about a European bail-out will grow in vehemence and take on its own dynamic," Bundesbank board member Hans Georg Fabritius said, according to a text of a speech.

"But the precedent which would result would hurt the credibility of the euro in the remaining countries and shake the foundations of the currency union,"

http://www.moneycontrol.com/news/world- ... 095-1.html

Harvard Economist warns of a second slowdown in US

He feels the Obama administration is not doing anything to deal with the fundamental problems of small and regional banks, availability of credit, and potential defaults on mortgages and on commercial real estate. "There is too much focus instead on health legislation and not enough on real problems."

http://www.moneycontrol.com/news/econom ... 063-0.html

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Re: Perspectives on the global economic meltdown

Postby Singha » 21 Jan 2010 15:00

if the borrowing costs of these deeply indebted countries rose to be at par with third world basket cases like india or brazil, has anyone estimated the fall in living standards and govt spending on social services?

am I living in my shanty town on ORR , catching fish in the local drain living better than my tfta grecian and irish brothers?

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 21 Jan 2010 17:23

In moi above post, I mentioned:
Ya think? A Jap default (no longer unthinkable, I must add) will be the next big one to watch for, IMO.


And true to form we have:No Way Out For Japan
The descriptor reads:
The Business Insider has a fantastic Interview With Hayman Capital Founder Kyle Bass. Bass testified at the crisis hearings in Washington, about Fannie Mae, Freddie Mac, bank capital, bank leverage and derivatives. He discussed those issues with CNBC's David Faber along with his forecast for Japan.


Meaty one, lemme say. Here is a partial transcript.
Kyle Bass: .... China and Japan own a lot of Fannie and Freddie Debt. I think we are more sensitive to them losing money than we are to the US taxpayer losing money and I think that has to change. ... Fannie and Freddie have paid $200 million into campaigns of 354 politicians over the last 10 years. This is an organization created by the lawmakers. Why are they paying the lawmakers? Let's get rid of this structure and just have the government make mortgage loans. ...

Wow, eh? More's coming...
Kyle Bass: I think the big canary in the coalmine is Japan. When you see how Japan has lost 20 years of their prosperity from 1990 to today, you see what happens when a government steps in and runs giant deficits to make up for the private market place pulling back and attempting to deleverage.

So what we've seen around the globe in the developed world, bad private assets are moving onto public balance sheets. Sovereign balance sheets have expanded 86% from pre-crisis levels of debt. If you extrapolate that from the beginning levels of debt, many of these countries around the world won't be able to service their debt. So I think in the next 2-3-4 years you start to see significant defaults.


Re bolded part above, this is exactly what's been happening thru'out. Pvt liabilities going public. Won't end well I reckon but hey, kindly don't stop partying due to some fevered D&G pronouncements. Its not as if the sky's falling tomorrow. Day after tomorrow's too far away besides....

Kyle Bass: I do not think Japan has a way out of this.

David Faber: Why Not?

Kyle Bass: You have a secular decline in population, and you have a huge funding structure at below market rates. So Japan's weighted cost of capital is only 1.4% and their sovereign balance sheet is much worse than the rest of the developed world. If their cost of capital goes up 250 basis points, their interest expenses of the government will exceed their total government revenue, and it can't even get there [that high].


Aha. You might say, but Japan's debt, like Aamchi Yindia's is mostly internal. No? Well yes. But event hat doesn't help this time. Here's why:
In the United States about 57% of our debt is held externally. In Japan 6% of their debt is held externally. 94% is held by the people, the pensions, and the life [insurance] companies. What's happening now with the population decline, all the buyers of their debt are turning to sellers. And the largest pension fund in the world in Japan told the Ministry of Finance in May that they are going to be a net seller from now on. So their buyer's base is disappearing and if they have to go to the international capital markets to raise money, they can't exist. It's an awful social problem for Japan.


Read that bolded part again. And be wary. The amount of money gubmints (esp emerged tfta ones) need to raise this year is way beyond interesting. Its interest-ing onlee.

David Faber: These things always seem to be years away and they never seem to happen.

Aha...hainjee? Takhta palate deyr nahin lagti.... phase transition onlee...

Kyle Bass: If you put pen to paper, and you understand the problems that some of the larger nations have, the good news is the United States is a good 10 to 12 years away from this. The silver lining is, we can see what happens when a country decides to spend its way into a huge deficit and have nowhere to turn.


Scary boss. I may be a D&Ger but am not morbid or ghoulish. The khanomic cadavers that will tumble outta multiple emerged mkt closets in the coming yrs will raise high stink, I fear.

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Re: Perspectives on the global economic meltdown

Postby vina » 21 Jan 2010 18:45

Singha wrote:am I living in my shanty town on ORR , catching fish in the local drain living better than my tfta grecian and irish brothers?

Already moved in ?. Do you have any neighbors from the NCOs/ JCOs and other ranks in the shanty or are the only neighors the the few TFTA Jarnails and Karnails who have moved into the Afsar's accomidations?

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 21 Jan 2010 20:20

Home run post by Ilargi there on what else but our koylakhana canary - Japan..... this is commentary gold, folx.

Shux am likely gonna endup quoting, nay bolding, the entire post only. Recommended read pls!

The bankruptcy filing of the Japanese -formerly national- airline JAL gets surprisingly little press beyond a litany of numbers.

This may not be so wise.

Since the fact that the Japanese government lets the carrier go down is not exactly without meaning.

Tokyo sends a message.

And while that can vary from a strong message (we won't pay anymore) to a weak one (we can't pay anymore), there can be little doubt that the intended signal is that Japanese industries, even those too big or too beautiful to fail, may find themselves all alone when they get into trouble. And that is not what they've gotten used to over the past 20 years.

The message may, however, not -only- be for the companies. The liabilities that brought down JAL are to a large extent related to pensions. A slew of respective Japanese administrations has managed to keep the ship afloat and the country quiet by making sure that unemployment rates remained 'passable' and pension obligations stayed intact, if only in name.

When JAL could not renegotiate its obligations with retirees (present employees had already accepted huge cuts -some reports claim as much as 50%-), Tokyo said simply: domo origato, but we will not make up the difference.


So it begins....or what?

The first impression is that Japan simply can't pay. Or perhaps that can't and won't are closer than you might think. The country is, according to many reports, headed for a cliff. It’s had three finance ministers in a matter of months. The first died, and the cause was never clarified. The second left weeks ago, after mere weeks of service, because of stress and blood pressure issues. Maybe they know what's coming. And maybe all of Japan should too, when they take a good look at what happened with JAL. Which will continue to fly in a business as usual mode, by the way. Just with less or no debt to shareholders, bondholders and pensioners, and with a massive injection of taxpayers' money.

There's something in that picture that looks frighteningly similar to the US. Remember, Japan kept its head above water for 2 decades on borrowing and public funds, and it now has debts piled up sky high everywhere you look. But it achieved all this against a backdrop of a explosion of cheap credit among its customers, which allowed carmakers and electronics giants to exponentially grow their exports, which in turn poured badly needed tax revenues into public coffers.

That is one thing the US will not have going for it. Or the EU. Or anyone else for that matter. Everybody dreams of financing their deficits with more exports. Everybody dreams that hopefully China will be that next market that will pick up the slack left by the usual clientèle. But make no mistake.


OMG. Read it all.....

America has run into overwhelming trouble for the simple reason that it has become a land of people who consume but don't produce. China, on the other hand, is a land of people who produce but don't consume. Neither is a viable concept in the medium- to long term. If you can't pay, you can't consume, and if you can't sell, it's no use producing. The one positive thing to take away from this for the Chinese is that they have a much less steep fall ahead of them. They remember where they came from.


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