Perspectives on the global economic meltdown

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Re: Perspectives on the global economic meltdown

Postby abhischekcc » 23 Jan 2009 14:57

ramana wrote:BTW has anyone coaught on to the transformation of the imagination of the West? The popularity of Harry Potter and LOTR genre etc. I think they are reaching deep into the pagan past as their mythology is non-existent in the post christian/post englightnement/Post modern society. A society without myhology will cease to continue.


ramana, neela, others,

may I suggest a book called Black Mass (link Amazon )
Gives the background to modern politics, enlightenment, Nazism, etc etc
neo-cons and their agenda.

Will be helpful in adding to understanding of how things came to be the way they are today.
Last edited by abhischekcc on 23 Jan 2009 15:18, edited 1 time in total.

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Re: Perspectives on the global economic meltdown

Postby abhischekcc » 23 Jan 2009 14:58

SwamyG wrote:I don't know there is somewhere a lesson in that, I wish I can figure it out what it is :-)


Suddenly, I crave door knobs plated with gold f :mrgreen:

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Re: Perspectives on the global economic meltdown

Postby Singha » 23 Jan 2009 15:58

as mentioned, the Day of the Dog draws near...

http://www.nytimes.com/2009/01/23/us/23 ... ml?_r=1&hp

Juarez has been torn apart by the drug cartels...

Tijuana could be a good target next.

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Re: Perspectives on the global economic meltdown

Postby brihaspati » 23 Jan 2009 18:48

The bank loan losses seem to be a different thing though, and it is not supremely clear as to how the loss of a house value influences inflation (or deflation). Of course, a bad loan, in and of itself, only means that money goes from one entity (bank making the loan) to another e.g. in the case of a person buying a car- to the car dealer to the car manufacturer and everyone in that chain; and therefore is still in the economy.

The mechanism is through deflation of value and propensity to invest in something else. The cash that is exchanged is no longer exchangeable for the deflated-vlaue original object, and therefore is likely to look for another object of value - increasing the price of that in the market. This is one of the mechanisms for stagflation.

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Re: Perspectives on the global economic meltdown

Postby John Snow » 23 Jan 2009 22:00

The key word in inflation is disposable income, not disposable credit ( which has now happened, with federal bail out :mrgreen: )

The money supply should exceed the supply of goods, then inflation will occur.
The only difference between Zimbabawe and Unkil is Unkil can print money and get away with it, because others are seeking Dollah all the time (ie demand), if Euro is sought after Dollah will have the same fate as Zimbabwae.

IOW 1 US$ = 1Z$.


The first Zimbabwean dollar was introduced in 1980 and replaced the Rhodesian dollar at par. The initial ISO 4217 code was ZWD. At the time of its introduction, the Zimbabwean dollar was worth more than the U.S. dollar, with ZWD 1 = USD 1.47. However, the currency's value eroded rapidly over the years. On 26 July 2006, the parallel market value of the Zimbabwean dollar fell to one million to the British pound




Image

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Re: Perspectives on the global economic meltdown

Postby Singha » 23 Jan 2009 22:15

these notes are collectible items. buy them on ebay if possible and laminate.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 23 Jan 2009 23:25

Suraj thanks for all the info. So what I gather is this:
After the crash, we are going to stand up quick and probably will be the first to do so. But then we have to make use of that opportunity - when we are the few to get up; else others will stand up and make use of the opportunity.

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Re: Perspectives on the global economic meltdown

Postby ramana » 23 Jan 2009 23:27

And worse beat you up to prevent your rise.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 23 Jan 2009 23:36

Ramana: If one goes purely based on economic theories, resources or human behavior; then based on the statistics like we have more work force, we have more kids with greater IQ than populations of the other countries, we have large domestic market (potential), lots of resources ithyadi it means we have the capability to rise up and move. The matter remains to be seen if we are going to sprint fast - that depends on the different policies and execution efficiencies.

So, the only way others can slow us down - both while getting up and moving - is by waging proxy war. The proxy war could be economic, diplomatic etc (non-violent) or violent (terrorist attacks, border skirmishes etc)

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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 24 Jan 2009 00:40

Crybabies :(( . So, the rhetoric has started and hope it reaches logical conclusion. I will renew my costco membership and buy a 47'' and a large pack of popcorn
:rotfl:
Geithner signals tougher stance on China

Geithner says Obama believes China manipulating its currency, a tougher stance than Bush took

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 24 Jan 2009 00:44

Today's grumpy econ headlines....

It's official - Britain is in recession

Britain is in the grip of its sharpest recession for three decades, grim official figures confirmed today ... The economy suffered a brutal 1.5 per cent drop in Gross Domestic Product (GDP) during the past three months, shrinking at its fastest quarterly pace since 1980.

Coming on the heels of an already steep 0.6 per cent plunge in GDP in the third quarter of last year, the news means that the widely accepted definition of recession as two consecutive quarters of falling output has finally been met.


UKstan in recession....Cry me a bucket...hey, mebbe James Bond can help...after all twas the bond bubble that went bust, no?

Meanwhile, Roubini estimates that measured qtr-by-qtr, PRC in Q4, 2008 would've had 0% growth, maybe even negative growth onlee.

The Chinese came out today with their 6.8% estimate of Q4 2008 growth. China publishes its quarterly GDP figure on a year over year basis, differently from the U.S. and most other countries that publish their GDP growth figure on a quarter on quarter annualized seasonally adjusted (SAAR) basis.

When growth is slowing down sharply the Chinese way to measure GDP is highly misleading as quarter on quarter growth may be negative while the year over year figure is positive and high because of the momentum of the previous quarters’ positive growth.

Indeed if one were to convert the 6.8% y-o-y figure in the more standard quarter over quarter annualized figure Chinese growth in Q4 would be close to zero if not negative.


Link

After Microsoft, the bu-est of blue chips too facing storm winds. GE admits that "2009 will be extremely difficult".
General Electric's Net Slides 44%

Also, it appears that many of teh US's smaller and regional banks whilst avoiding the competitive credit card and home mortgage mkts, invested heavily in commercial realty which is falling even more sharply than the residential realty sector. In plainspeak, expect mouting losses to cause many small banks to either fold or merge or something, who likely wouldn't have DC based godfathers.

Smaller Banks’ Losses Expected to Bring Mergers

Most of these banks were never big players in credit cards, subprime mortgages or credit-default swaps. But they were major lenders to commercial real estate developers, home builders and small corporations. As the recession tightens, losses have started to surge.

“There will not be the shock and awe factor” of the big bank losses, said Nancy A. Bush, a longtime banking analyst. But “small and midsize banks are up to their eyeballs in commercial real estate related to residential development and business loans. We are going to see a reckoning with how bad that got” in 2009.


Meanwhile, more columnists and talking heads are finding voice to express outrage at the debt situ. Here's John Kemp at the Guardian.

US and UK are at the brink of debt disaster

Some of the data presented are interesting and startling onlee. The major portion of debt in the anglosphere is held not by govt but by the pvt sector. Letting inflation rise to make the debt-GDP ratio more manageable is the most likely way out, seems like. Recall that pvt sector debt mounting cannot be washed off by the countries concerned - think Russia, Hungary, the Baltics, Ukraine and of course, Iceland. The pvt players will drain the forex reserves to attempt to payoff the debt (Russian reserves fell by a qtr in a week last yr before forex controls were bandied about. The fall in oil prices didn;t help at all). PRC and USA are opposite sides of this pole. US can print its way out since its forex reserves are theoretically limitless, and there's not much evidence of 'pvt debt in PRC' - most debt there is from PSU banks to the pvt sector and is not denominated in forex. Indian industry too has by and large dodged this bullet, IMHO.

Image

Despite acres of newsprint devoted to the federal budget deficit over the last thirty years, public debt at all levels has risen only 11.5 times since 1975. This is slightly faster than the eight-fold increase in nominal GDP over the same period, but government debt has still only risen from 37 percent of GDP to 52 percent.
Instead, the real debt explosion has come from the private sector.

Private debt outstanding has risen an enormous 22 times, three times faster than the economy as a whole, and fast enough to take the ratio of private debt to GDP from 117 percent to 303 percent in a little over thirty years.

The charts strongly suggest the necessary condition for resolving the debt crisis is a reduction in the outstanding volume of debt, an increase in nominal GDP, or some combination of the two, to reduce the debt-to-GDP ratio to a more sustainable level.

From this perspective, it is clear many of the existing policies being pursued in the United States and the United Kingdom will not resolve the crisis because they do not lower the debt ratio.


Dassall for now. Back later with more horror stories.

I now really have to wnder what our babooze and mantris will do. The fin min went back to MMS hands after chidu moved to the MHA. And with MMS now likely out of action for 4 weeks, who will steer this critical mantralay at this critical juncture?

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Re: Perspectives on the global economic meltdown

Postby Singha » 24 Jan 2009 01:50

pranabda will have signing authority, but really the finmin top bureaucrats and PC will have to run the farm.

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Re: Perspectives on the global economic meltdown

Postby ramana » 24 Jan 2009 03:04

Vsudhir wrote:
Some of the data presented are interesting and startling onlee. The major portion of debt in the anglosphere is held not by govt but by the pvt sector. Letting inflation rise to make the debt-GDP ratio more manageable is the most likely way out, seems like.


One of the reasons inflation goes up after a debacle!

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Re: Perspectives on the global economic meltdown

Postby Raghav K » 24 Jan 2009 07:05

Britain on the brink of an economic depression, say experts

http://www.telegraph.co.uk/finance/fina ... perts.html


European leaders fear civil unrest over economic woes


http://www.ottawacitizen.com/European+l ... story.html

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Re: Perspectives on the global economic meltdown

Postby Raghav K » 24 Jan 2009 07:38

Talking about social unrests, now from China and Russia.

Chinese government worries about social unrest
Senior official says mass unemployment poses challenge for government

http://www.marketwatch.com/news/story/c ... aspx?guid={863612D2-07DE-473D-962E-CEE5965FCEAB}&dist=morenews_ts


Sliding ruble revives fears of unrest


http://www.theglobeandmail.com/servlet/ ... y/Business

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Re: Perspectives on the global economic meltdown

Postby Suraj » 24 Jan 2009 08:12

ramana wrote:One of the reasons inflation goes up after a debacle!

A protracted spell of moderate and managed inflationary conditions may be good to corrode the value of outstanding debt, but the hyperinflationary spikes that might follow after the current deflationary situation are unlikely to be anywhere as useful. Rather, they would result in enormous social unrest. The US has never had hyperinflation, only deflation during in the 1930s Depression era. For real hyperinflation, see Weimar Germany in the 1920s, Hungary after WW2 and Serbia in the mid 1990s, and of course Zimbabwe today.

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Re: Perspectives on the global economic meltdown

Postby Singha » 24 Jan 2009 14:50

BBC

so Tijuana has also gone the Juarez way...day of the dog -II

Mexico man 'dissolved 300 bodies'
Santiago Meza Lopez

Mr Meza says he "didn't feel anything" when getting rid of the bodies

A man arrested by Mexican police says he disposed of 300 bodies for a drugs gang over the past decade by dissolving them in chemicals.

Santiago Meza, called the "stew maker", said he was paid $600 (£440) a week to dissolve the bodies of murdered rival gang members in caustic soda.

He was presented to the media by the Mexican army after being arrested on Thursday near the city of Tijuana.

Over 700 people died in the US border city last year in an ongoing drugs war.

The Mexican army says it believes Mr Meza's claims are true.

"They brought me the bodies and I just got rid of them," Mr Meza told journalists at a construction site where he disposed of the bodies over a 10-year period. "I didn't feel anything."

The 300 corpses were said to belong to murdered rivals of Mexican drug kingpin Teodoro Garcia Simental, who is battling for control over drug trafficking routes through Tijuana, after defecting from the powerful Arellano Felix cartel.

Mr Meza was quoted by AP news agency as saying that he "would apologise" if he could speak to relatives of the victims.

Mexico's drug violence has surged and grown more gruesome in recent years, particularly in the northern border cities of Tijuana and Ciudad Juarez.

Also on Friday, two human heads were found inside coolers near police stations in the central Guanajuato state, officials said. The heads were accompanied by a note threatening allies of the "La Familia" drug cartel.

Drug-related violence claimed 5,700 lives across Mexico last year, more than double the number of victims in 2007.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 24 Jan 2009 18:03

This 1 chart from JPM says it better than a 1000 words.

Notice the huge loss in M-cap for the biggies - citi, hsbc, bankAm. In the EU, UBS, deutsch etc weren't that big to start with but the proportion of loss remains the same. Citi's proportional drop is highest, in keeping with its risk appetite previously, IMO.

Link

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Re: Perspectives on the global economic meltdown

Postby Singha » 24 Jan 2009 18:26

reason for the anger in Greece seems to be even though everyone uses the Euro now, the cost of borrowing is based on the credit worthiness of each individual govt and not a universal eurozone rate!

so spain, portugal, ireland and greece after ratings downgrades have a higher interest rate compare to uk/france/germany.

the spread between greece and germany is said to be 3%

and due to EU membership govts have some restrictions on doing what they
want to counter problems.

the "high growth" types like spain and ireland splurged on easy credit and are
now held back from aggressive responses by the more cautious but heavy
weight of germany and there's no currency to devalue or such due to euro :mrgreen:

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Re: Perspectives on the global economic meltdown

Postby sum » 24 Jan 2009 22:08

Wont this deep recession affect all our defence purchases and spending?
Our govt anyway never needs two invitations to cut defence spending even in the best of times!!! :x

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 24 Jan 2009 23:18

Seems banks are now not lending to charities....

Last summer, New York City committed to provide $2 million more to the organization to underwrite additional amenities at the site, but the bank’s risk managers turned down its request to increase the loan by that amount because Whedco did not yet have the money in hand.

................

“They were essentially challenging the full faith and credit of New York City,” Ms. Biberman said.


Link

Meanwhile, Roubini seems to be turning optimistic with a vengeance.

'The UK is NOT Iceland'

Hard to say whether or not Roubini is right about this one. He again analyzes public debt-to-GDP ratio and claims sovereign default is unlikely. Maybe, maybe not. The way long term bond yields have surged in the past few days is remarkable, though.

Meanwhile, let it not be forgotten that UKstan seized Iceland's overseas assets after Rekjavik defaulted on its debt.

IMO, UKstan's corporate ass-ets should be available dirt cheap very soon.... Sadly, not enough hard cash would likely be floating around for these to be easily acquired.

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Re: Perspectives on the global economic meltdown

Postby pradeepe » 24 Jan 2009 23:44

IMO, the US will deal with a bad bout of inflation. But no hyperinflation. Some joke about economists being laid end to end not withstanding, the regulatory system in spite of its flaws is quite robust to deal with such a problem if it were to rear its head. Of all the systems in the world massa land still has the most above the ground network when it comes to money supply and distribution. I would worry more about the parasites and poodles that have been hanging off it.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 25 Jan 2009 02:53

Note it is not a prediction done years or decades ago. Some economists predicted it this "weeks ago" and they are already set to revise it. It is evident that nobody exactly knows what is happening, because wouldn't they have accounted for this "weeks ago". It is understandable if somebody predicted it say 5 years ago and feels the need to revise or things go differently than prediction. But if somebody predicts it "weeks ago" and things turn out differently it only means the data was wrong or the analysis was wrong.

The world economy is deteriorating more quickly than leading economists predicted
only weeks ago, with Britain yesterday becoming the latest nation to surprise analysts with the depth of its economic pain.


http://www.washingtonpost.com/wp-dyn/co ... 04172.html

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Re: Perspectives on the global economic meltdown

Postby svinayak » 25 Jan 2009 07:37

The Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash, Manias, Panics, and

Crashes: A History of Financial Crises (Wiley Investment Classics),

The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It.

Fixing Global Finance (Forum on Constructive Capitalism) (Hardcover)
by Martin Wolf (Author)

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 26 Jan 2009 00:11

Bad times spur a flight to jobs viewd as 'safe'

Trucker and welder are hardly glamorous careers to most Americans. But there is a new allure developing around jobs likely to keep a person employed, at reasonable pay, through a prolonged downturn. Government employment once offered that promise, certainly in the Great Depression. But government hiring is less than robust now, at 181,000 additions over the last year, mostly at the state and local level. That is far from offsetting the 2.5 million jobs lost in the 13 months of recession.
...
With employers shedding half a million jobs a month, some economists, like Nancy Folbre of the University of Massachusetts in Amherst, liken safe jobs to high ground amid the turbulent flood waters of lost employment.

“There is a danger in using the term ‘safe jobs’ for this perch,” Ms. Folbre said. “That makes them sound like sinecures, and they are not.”


And this is a worldwide phenomenon.

A rebooting of the matrix is under progress. The old matrix (pre-sept 2008) like the golden age in every culture's legends, is now gone. Henceforth, all expectations and perspectives w.r.t socioeconomic mobility might well have to be drastically rewritten.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 26 Jan 2009 05:09

Lessons from India

Whilst we desis bemoan our govrernance standards whilst expressing admiration for western ones, some yamriki bloggers are doing the reverse with admittedly incomplete understanding of the political undertones in the satyam case.

Certainly, we will need to see whether all these initial efforts are followed through, and India's extensive government corruption is well documented, so this may all still come to nothing.

That said, the Indian government's rapid and comprehensive response, including the arrest and criminal charges for the perpetrators of the fraud, the sacking and reconstitution of the company's board with truly independent and activist members (despite Satyam being a fully private company), and the investigation of the largest companies and those that might be most suspicious in the eyes of investors will do a great deal to restore the Indian people's confidence in their private markets. Furthermore, it stands in stark contrast to the kid gloves with which we have treated our own fraudsters

Why is Dick Fuld still roaming the streets after making false statements about Lehman's health right up until its implosion? How about Angelo Mozilo? And why haven't the incompetent boards of such companies as Citi been dismissed? And would things have been better if after the implosion of Bear Sterns, the SEC ordered a "peer review" of all major investment and commercial banks so that it could deal with problems before they blew up into Lehman and Citi sized disasters?

While skeptics often dismiss "socialist" countries like India for confiscatory taxation and state-sponsored market manipulation, it is ironic to note that India at least, appears to be taking comprehensive steps to ensure the integrity of its free markets while not (yet) spending a dime of public money bailing out its bad apples. The U.S., in contrast appears to be doing the exact opposite...

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 26 Jan 2009 07:52

More 'startling' revelations tumble outta brit cupboards.

Revealed: Day the banks were just three hours from collapse

Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.

City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse.

The Mail on Sunday has been told that the Treasury was preparing for the banks to shut their doors to all customers, terminate electronic transfers and even block hole-in-the-wall cash withdrawals.

Only frantic behind-the-scenes efforts averted financial meltdown.

If the moves had failed, Mr Brown would have been forced to announce that the Government was nationalising the entire financial system and guaranteeing all deposits.

But 60-year-old Lord Myners was accused last night of being 'completely irresponsible' for admitting the scale of the crisis while the recession was still deepening and major institutions such as Barclays remain under intense pressure.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 26 Jan 2009 16:55

more from the resident alarmist at the Telegraph.

Bad news: we're back to 1931, Good news: it isn't 1933 yet

Barack Obama inherits an economy already contracting at an annual rate of 6pc, much like the mid-Depression year of 1931 (-6.4pc), writes Ambrose Evans-Pritchard. This may beat Germany (-7pc) Japan (-12pc) and Korea (-22pc) {-22%! I mean, really??!! If that ain't depression territory, what is??} over the fourth quarter. But that merely underlines the dangers ahead as the collapse of global trade chokes the mini-boom in US exports, setting off another stage of the crisis.

The US is losing 500,000 jobs a month. Brazil lost 650,000 in December. Beijing says 10m Chinese have lost their jobs since the crunch began. Japan's exports fell 35pc last month, year-on-year. The central bank is printing money furiously, buying bonds to prevent a relapse into deflation.

So yes, it is like early 1931. Citigroup and Bank of America have more or less disintegrated. JP Morgan's health is failing fast. General Motors and Chrysler survive only on life-support from the US taxpayer.

But it is not yet like 1933. That second leg down was the result of "liquidation" policies by a Dickensian leadership blind to the dangers of debt deflation. By then the Gold Standard had degenerated into an instrument of torture. It forced the Fed to raise rates from 1.5pc to 3.5pc in October 1931 to stem gold loss, with predictable results for shattered banks.


The article is worth a read with a pinch or more of salt. Some graphic depictions, since forgotten or whitewashed, of how desperate times were in 1933 does manage to startle, IMHO.

But then the world seemed benign enough in early 1931. It is the second phase of depression that does terrible things.

Roosevelt took over a country where the economic machinery had completely broken down. The New York Stock Exchange and the Chicago Board of Trade had closed. Thirty-two states had shut their banks. Texas had restricted withdrawals to $10 a day.

Few states could borrow on the bond markets. Illinois and much of the South had stopped paying teachers. Schools closed for months. An army of 25,000 famished war veterans squatting in view of Congress had been charged by troopers of the 3rd US cavalry with naked sabres – led by a Major George Patton.

Armed farmers threatening revolution had laid siege to a string of Prairie cities. A mob had stormed the Nebraska Capitol. Minnesota's governor was recruiting Communists only for the state militia. Lawyers attempting to enforce foreclosures were shot. More than 100,000 New Yorkers applied to go to the Soviet Union when Moscow advertised for 6,000 skilled workers.

We forget how close America came to open revolt. Eleanor Roosevelt feared the country was beyond saving. Her husband kept the faith. He channelled the anger against Wall Street, diffusing it. "The practices of the unscrupulous money-changers stand indicted in the court of public opinion," he began his presidency.

The Fed was an ideological deadweight. Bowing to pressure from Congress it began to purchase bonds in mid-1932 to boost the money supply, but then recoiled, before retreating into pitiful self-justification. A third of the rescue funds in Hoover's Reconstruction Finance Corporation had been embezzled.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 26 Jan 2009 22:05

Jim Jubak concludes:
After gobbling up the questionable collateral of the financial giants, the central bank's vaults are filled with paper assets that likely aren't worth what they once were.


Fed looks like one more shaky bank

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Re: Perspectives on the global economic meltdown

Postby sanjaykumar » 26 Jan 2009 23:29

Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.


I am eagerly awaiting Standard and Poor's and Moodys ratings updates for Britain. Perhaps they will do the honest thing and create a Z minus category.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 26 Jan 2009 23:33

Global economic meltdown causes Iceland’s Government to Collapse

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Re: Perspectives on the global economic meltdown

Postby ramana » 26 Jan 2009 23:44

vsudhir wrote:This 1 chart from JPM says it better than a 1000 words.

Notice the huge loss in M-cap for the biggies - citi, hsbc, bankAm. In the EU, UBS, deutsch etc weren't that big to start with but the proportion of loss remains the same. Citi's proportional drop is highest, in keeping with its risk appetite previously, IMO.

Link



Can we have an equivalent chart for the major Indian banks to get a prespective?

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Re: Perspectives on the global economic meltdown

Postby Ameet » 27 Jan 2009 00:54

Peter Schiff still grim on economic future

http://finance.yahoo.com/news/Financial ... 37624.html

CHICAGO (AP) -- People aren't laughing any more at the way-out-there predictions of Peter Schiff, whose long-standing pessimism about the economy and stock market has been largely borne out.

Schiff heads Euro Pacific Capital, a brokerage in Darien, Conn. with more than $1 billion in assets under management. He has silenced critics because he predicted the collapse of the housing market, the subprime crisis and the soaring of oil prices in his market commentaries before they came to pass.

A YouTube video called "Peter Schiff Was Right" shows him being repeatedly mocked when he went on TV stock shows to make those ultimately correct calls in 2006 and 2007, including forecasting a recession 2 1/2 years ago.

Now, in the midst of what's already the biggest financial crisis in decades, the prominent purveyor of gloom and doom still sees far tougher times ahead -- including a depression and a bear market he thinks will last another five years or more.

In a telephone interview with The Associated Press, Schiff outlined views that remain on the far side of gloomy compared with virtually all other pundits but still envision some buying opportunities for investors. He foresees grimmer prospects in the U.S. than elsewhere, perhaps a reflection of the fact his firm focuses more on international investments than domestic ones:

Q: What sectors of the economy do you expect to do well in 2009?

A: I don't know if any sector will do well. But ultimately, whether it's going to be 2009 or whenever the turnaround is going to be, I think the only sectors of the U.S. economy that are going to improve are going to be those that are related to exports -- manufacturing, mining, energy, agriculture, commodities-related businesses. I think the slowdown in the global economy will be short-lived. But I think the U.S. depression is going to be with us for a long time.

Q: How bad do you think things will get?

A: Tens of millions of people unemployed, inflation spiraling out of control, the government instituting price controls that result in shortages and blackouts and long lines for things. I think things are going to get very bad.

From an investment point of view, investors need to stay clear, because they need to realize that it's not just U.S. stocks and real estate that are going to lose value, but U.S. bonds. This is the last bubble yet to burst. I think we're going to see a collapse of the bond market sometime during Obama's first term, and interest rates are going to spiral out of control, and the dollar is going to just be destroyed.

Q: Why do you oppose bailouts of troubled companies?

A: Nobody should be bailed out. Failure is supposed to be punished and success is supposed to be rewarded, not the opposite. When companies fail, their resources, their assets, get redistributed. What happens is people who are incompetent lose their assets and people who are competent buy them, and they reorganize them. The government is propping up and rewarding bad behavior.

Q: But wouldn't letting the auto industry fail have huge negative consequences for the economy, just as Lehman Brothers' bankruptcy had major ripple effects?

A: Look, the only thing that the U.S. government did right was to let Lehman Brothers fail. Everything else they did wrong.

If Ford and General Motors are allowed to go bankrupt, there will be adverse consequences, no doubt. But there's going to be more adverse consequences by bailing them out. So the lesser of the evils is to let them fail.

Ultimately, I don't think it's going to be the end of the automobile industry in this country, I think it's going to be the beginning of a better automobile industry. I think the new people who buy up the General Motors plants and can find a way to employ all those skilled workers in Detroit to make cars profitably. Obviously the management of GM is incapable of doing it. Look at these guys. These guys are paying themselves $20 million, $25 million salaries to run these companies into the ground.

Q: Where should investors have their money in 2009?

A: In international. You need to be in stocks that are going to benefit from this change in global leadership as the American economy collapses and the American consumer no longer reigns supreme. ... So the key is to buy value around the world. Buy these viable companies that still have good businesses, good balance sheets, good income potentials. A lot of U.S. stocks are down a lot, but they're going to keep falling. A lot of foreign stocks are down a lot but they represent good buying opportunities because they're not going to keep falling, they're going to snap back. And especially once the dollar turns around, then these foreign investments are really going to look good.

Q: What do you see happening with oil prices now that they've fallen $100 a barrel from their peak last July to under $50?

A: This pullback is an incredible buying opportunity for oil company stocks. Oil prices are going to be much, much higher as a result of this huge plunge, because this big drop is going to put on the back burner for years any alternative plans, any big exploration plans. Because when oil is back above $100 a barrel next year, nobody is going to want to spend any money on oil exploration because they're all going to be afraid of another major collapse. That'll give OPEC another three or four years of $150, $200-a-barrel oil where no one is doing anything about it. OPEC is probably loving this price decline, because they know it's laying the foundation for a bigger price increase down the line.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 27 Jan 2009 04:27

From another forum, the number of big company job losses announced in one day, on 26-Jan-09 alone.

Lets do the math-

Pfizer- 26,000
Cat- 20,000
Sprint- 8,000
Wolseley- 7,500
Home Depot- 7,000
ING- 7,000
Philips 6,000
Corus Steel- 3,500
Texas Instruments- 3,400
GM- 2,000
_________
90,4000


Add spillovers and secondary job losses and the numbers climb into stratos territory. Jan 2009 has so far claimed close to a quarter of a million jobs, IIRC.

I'm regretting why I didn't take up a sarkari job or something when I had the chance.... :((

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 27 Jan 2009 05:06

Fannie to Seek Up to $16 Billion in Emergency Treasury Aid to Stay Afloat

Goes to reinforce that the housing bubble burst remains the primary symptom behind the consumer driven supereconomy's current blues.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 27 Jan 2009 07:12

Here's one reason why this recession is qualitatively different from previous cyclical downturns.

Shipping rates hit zero as trade sinks

Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October.

Trade data from Asia's export tigers has been disastrous over recent weeks, reflecting the collapse in US, UK and European markets. Korea's exports fell 30pc in January compared to a year earlier. Exports have slumped 42pc in Taiwan and 27pc in Japan, according to the most recent monthly data. Even China has now started to see an outright contraction in shipments, led by steel, electronics and textiles.

A report by ING yesterday said shipping activity at US ports has suddenly dived. Outbound traffic from Long Beach and Los Angeles, America's two top ports, has fallen by 18pc year-on-year, a far more serious decline than anything seen in recent recessions. "This is no regular cycle slowdown, but a complete collapse in foreign demand," said Lindsay Coburn, ING's trade consultant.

Idle ships are now stretched in rows outside Singapore's harbour, creating an eerie silhouette like a vast naval fleet at anchor. Shipping experts note the number of vessels moving around seem unusually high in the water, indicating low cargoes.

It became difficult for the shippers to obtain routine letters of credit at the height of financial crisis over the autumn, causing goods to pile up at ports even though there was a willing buyer at the other end. Analysts say this problem has been resolved, but the shipping industry has since been swamped by the global trade contraction.


Well at least its clear that the credit crunch for trade has come down a bit if LoCs are available again. The fuindamental problem afflicting global trade now isn;t credit availability but lack of demand. And short of direct cash infusions (such as tax reductions) to consumers, govt stimuli programs typically only indirectly address this 'root' cause.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 27 Jan 2009 07:54

The ponzi scam artists bailed out by TARP monies are at it again....

JUST PLANE DESPICABLE - 'RESCUED' CITI BUYING $50M JET

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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 27 Jan 2009 07:57

vsudhir wrote:Here's one reason why this recession is qualitatively different from previous cyclical downturns.


Certainly the sound bytes seem very ominous but let me tell you something. Today I had this 1:1 with this guy who sits on a $20B cash (managing it ofcourse :) ). Other than general issues concerning with lower demand due to contraction (natural that we have some years of expansion), I did not see any level of panic or major worry from this guy. He is still able to raise capital whenever he wants, paying up advance if it made sense etc. Essentially not overly concerned about the state of the economy (at least as much as we seem to project here).

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 27 Jan 2009 08:02

Satya,

That is heartening to know and I do hope he is right unlike the boatloads of experts and others who didn't foresee this black swan coming and have cost their clients their shirts.

For the record, a 'disorderly' untangling of G7 economies will have massive, negative ripple effects on the rest of us SDRE third worlders. There's enough misery piled up already without more coming in.

/That said, moi also finds myself somehow unable to mourn UKstan's economy going into deep freeze. In moi books, UKstan comes just after Papistan in perfidity and bad karma. JM2Ps onlee.

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Re: Perspectives on the global economic meltdown

Postby Harshad » 27 Jan 2009 08:07

vsudhir wrote:Fannie to Seek Up to $16 Billion in Emergency Treasury Aid to Stay Afloat

Goes to reinforce that the housing bubble burst remains the primary symptom behind the consumer driven supereconomy's current blues.


I wonder why havent the Freddie and Fannie duo gotten delisted. I havent seen their stock go beyond the dollar mark since Dec 08


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