Perspectives on the global economic meltdown

shyam
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Re: Perspectives on the global economic meltdown

Postby shyam » 22 Aug 2009 13:25

Peter schiff again...


Heard that he is planning to run for the senate seat.


Hari Seldon
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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 22 Aug 2009 21:10



In DC too? Oh, the irony. Word is that only the gubmint is creating jobs right now. I'd think DC would be thronging with job melas.

More seriously, the bell will toll pretty soon. Cannot forever putoff the inevitable. Protectionism will return with a bang-ing. Globalization may have made the elites and corporates money but its costing the mass base jobs. Something will have to give. And i suspect it will be the elites ability to move capital around across borders as easily as they have gotten used to.

Turns out the top tax rate in the US before 1980 was over 70%! Then the Reagan revolution happened and its now 35% and Sri Obama is proposing making it 39%. I mean, do it already, like yesterday. Income inequality has widened obscenely only. The top 1% take home 23.5% of the nation's gross income. The wealthy have had their time. Their wealth now tumbles fast. Deflation looms. Tax havens crumble under $$-hunger brought about by necessity in G7 treasuries. Watch this space.

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Re: Perspectives on the global economic meltdown

Postby Chinmayanand » 23 Aug 2009 06:40

Andy Xie: New Bubble Threatens a V-Shaped Rebound

The United States is beginning to report data showing strong economic growth. Analysts are upgrading their outlooks for the U.S. economy, which is expected to grow at an annualized pace of 3 to 4 percent. And even before the U.S. revival emerged in the third quarter, China’s data pointed toward a quick rebound in the second quarter.

Is the global economy staging a V-shaped bounce? The buoyant financial market had been expecting a rebound for months. Was the market right?

At the end of last year, I said I expected global stock markets to stage a big bounce in spring 2009, and the global economy to rebound in the second half. I also expected analysts to upgrade outlooks by this time. I warned that the economic pickup was due to inventory cycle and stimulus, and that the global economy would experience a second dip in 2010.

In a normal economic cycle, an inventory-led recovery would be followed by corporate capital expenditure, leading to employment expansion. Rising employment leads to consumption growth, which expands profitability and more capex. Why won’t it work this time? The reason, as I have argued before, is that a big bubble distorted the global economic structure. Re-matching supply and demand will take a long time.

The process is called Schumpeterian creative destruction. Keynesian thinking ignores structural imbalance and focuses only on aggregate demand. In normal situations, Keynesian thinking is fine. However, when a recession is caused by the bursting of a big bubble, Keynesian thinking no longer works.

Many policymakers actually don’t think along the line of Keynes versus Schumpeter. They think in terms of creating another bubble to fight the recessionary impact of a bubble burst. This type of thinking is especially popular in China and on Wall Street. Central banks around the world, although they haven’t done so deliberately, have created another liquidity bubble. It manifested itself first in surging commodity prices, next in stock markets, and lately in some property markets. Will this strategy succeed? I don’t think so.

The lifespan of a bubble depends on how it affects demand. The longest-lasting are property and technology bubbles. The multiplier effect of a property bubble is multifaceted, stimulating investment and consumption in the short term. The supply chain it impacts is very long. From commodity producers to real estate agents, it could stimulate more than one-fifth of an economy on the supply side. On the demand side, it stimulates credit growth and financial sector earnings, and often boosts consumption through the wealth effect. Because a property bubble is so powerful, the negative effects of a bursting are great. Excess supply created during a bubble’s lifespan takes time to consume. And a bust destroys the credit system.

A technology bubble occurs when investors exaggerate a new technology’s impact on corporate earnings. A breakthrough such as the Internet improves productivity enormously. However, consumers receive most of the benefits. Competition eventually shifts temporarily high corporate profitability toward lower consumer prices. Because the emergence of an important technology brings down consumer prices, central banks often release too much money, which flows into asset markets and creates bubbles. While an underlying technology leads to an economic boom, the bubble feels real. More capital pours into the technology. That leads to overcapacity and destruction of profitability. The bubble bursts when speculators finally realize that corporate earnings won’t rise after all.

The cost of a technology bubble is essentially equal to the amount of over-investment involved. Because a technological breakthrough expands the economic pie, the costs of a technology bubble are easy to absorb. An economy can recover relatively quickly.

A pure bubble tied to excess liquidity that affects one or many financial assets cannot last long. Its multiplier effect on the broad economy is limited. It could have a limited impact on consumption due to the wealth effect. As it neither stimulates the supply side nor boosts productivity, whatever story it is based on will have holes that become apparent to speculators. It doesn’t take long for them to flee. Furthermore, a pure liquidity bubble without support from productivity can easily lead to inflation, which causes tightening expectations that trigger a bubble’s burst.

What we are seeing now in the global economy is a pure liquidity bubble. It’s been manifested in several asset classes. The most prominent are commodities, stocks and government bonds. The story that supports this bubble is that fiscal stimulus would lead to quick economic recovery, and the output gap could keep inflation down. Hence, central banks can keep interest rates low for a couple more years. And following this story line, investors can look forward to strong corporate earnings and low interest rates at the same time, a sort of a goldilocks scenario for the stock market.

What occurred in China in the second quarter and started happening in the United States in the third quarter seems to lend support to this view. I think the market is being misled. The driving forces for the current bounce are inventory cycle and government stimulus. The follow-through from corporate capex and consumption are severely constrained by structural challenges. These challenges have origins in the bubble that led to a misallocation of resources. After the bubble burst, a mismatch of supply and demand limited the effectiveness of either stimulus or a bubble in creating demand.

The structural challenges arise from global imbalance and industries that over-expanded due to exaggerated demand supported in the past by cheap credit and high asset prices. At the global level, the imbalance is between deficit-bound Anglo-Saxon economies (Australia, Britain and the United States) and surplus emerging economies (mainly China and oil exporters). The imbalance was roughly equal to US$ 1 trillion, or 2 percent of global GDP. The imbalance was supported by: 1) the willingness of central banks in surplus, emerging economies to hold down exchange rates and recycle their surpluses into the deficit economies by buying government bonds; 2) the willingness of consumers in deficit countries to buy with borrowed money; and 3) Wall Street’s ability to dress up high-risk consumer loans as low-risk derivative products. I am describing these factors to underscore that central banks are unlikely to bring back yesterday’s equilibrium.

Recent data point to a sharp increase in the household savings rate in the United States. Over two years, it rose above 5 percent from minus 2 percent. The current level is still below the historical average 8 percent. If normalization remains on track, it should rise above 8 percent, and probably reach above 10 percent, to bring debt levels down to the historical average.

Some argue that, if low interest rates revive the property market, American households may be willing to borrow and spend again. This scenario is possible but not likely. The United States has not experienced serious property bubbles in the past because land is privately owned and plentiful. A supply overhang from one bubble takes a long time to digest. And American culture tends to swing to frugality after a bubble. One’s outlook either for a normal recovery or a bubble-inspired boom depends on the outlook for the U.S. household savings rate. Unless the U.S. household sector is willing to borrow and spend again, emerging economies will not be able to revive the export-led growth model.

If one accepts that the U.S. household savings rate will continue to rise, emerging economies must decrease their savings rates, increase investment, or decrease production. The best choice is to decrease savings rates. But savings rates are hard to change. They depend mainly on demographics and wealth levels. The quickest possible way out would involve creating an asset bubble that inflates household wealth and decreases savings. Many advocates of inflated property and stock markets in China have this effect in mind. Japan’s bubble after the Plaza Accord in 1985 had its origin in the same dilemma. This approach, if it works, has catastrophic long-term consequences. Japan remains mired in stagnation two decades after its bubble began to burst.

Some analysts are expecting China to repeat Japan’s bubble experience, which occurred in the late 1980s. At that time, Japan’s export-led growth model was stymied by a doubling of its currency value after the Plaza Accord. It tolerated a massive asset bubble to stimulate domestic demand and stabilize its economy. China’s export-led model is facing a rising savings rate and declining U.S. demand for its exports. Asset inflation could be a way out in the short term.

China doesn’t need to repeat Japan’s experience. One reason is that the circumstances are not the same. First, Japan was a developed country when its bubble started getting out of control in 1985. It couldn’t divert its vast savings into infrastructure investment. But today, China’s national urbanization project still has up to 30 percentage points to go. If the right mechanism can be implemented, China could divert more savings into urbanization.

Second, China can decrease its savings rate substantially through structural reforms. Half of China’s gross savings are in the public sector. The government and state-owned enterprises should decrease revenue-raising and increase borrowing to finance investments. For example, China’s high property prices are based on the investment-fund revenue needs of local governments. If China’s property prices were cut by one-third, the national savings rate could decrease by two to three percentage points.

Third, the Chinese government could give its shares in listed state-owned enterprises to the household sector. The subsequent increase in household wealth could lower the national savings rate by three to four percentage points.

China’s exports are down by roughly one-fifth. It needs the national savings rate to fall by about six percentage points for the economy to function normally. Otherwise, the economy will experience either a recession or a bubble. And the purpose of a bubble, as mentioned, would be to temporarily decrease the savings rate.

This discussion may seem to digress from the analysis of sustainability in the current economic recovery. But it brings out two points: The old equilibrium cannot be restored, and many structural barriers stand in the way of a new equilibrium. The current recovery is based on a temporary and unstable equilibrium in which the United States slows the rise of its national savings rate by increasing the fiscal deficit, and China lowers its savings surplus by boosting government spending and inflating an assets bubble.

This temporary equilibrium depends on government action. It does not have a market foundation that would support sustained and rapid growth. Nevertheless, improving economic data will excite financial markets.

China’s stock market is cooling because the Chinese government is jawboning it down, based on fears of a big bubble downside. And the economy is beginning to slow. Markets outside China will likely do well for the next two months; diverging trends reflect that China’s market recovered four months before others, and adjusts before others as well.

Financial markets will turn down again when investors realize that the global economy will have a second dip in 2010, and that the U.S. Federal Reserve will raise interest rates soon. The turning point may well come sometime in the fourth quarter. By then, it would become apparent that China has slowed. U.S. unemployment will not have improved and, hence, its consumption will remain stagnant. And production data that’s pushing expectations now will cool after the inventory cycle runs its course.

Most analysts would argue that central banks won’t raise interest rates before the recovery is on solid ground. The problem, though, is that fiscal stimulus can’t resolve structural problems blocking a sustained recovery. Liquidity is the wrong medicine for the global economy right now. Overusing it encourages its side effect — inflation.

Conventional wisdom says inflation will not occur in a weak economy: The capacity utilization rate is low in a weak economy and, hence, businesses cannot raise prices. This one-dimensional thinking does not apply when there are structural imbalances. Bottlenecks could first appear in a few areas. Excess liquidity tends to flow toward shortages, and prices in those target areas could surge, raising inflation expectations and triggering general inflation. Another possibility is that expectations alone would be sufficient to bring about general inflation.

Oil is the most likely commodity to lead an inflationary trend. Its price has doubled from a March low, despite declining demand. The driving force behind higher oil prices is liquidity. Financial markets are so developed now that retail investors can respond to inflation fears by buying exchange traded funds individually or in baskets of commodities.

Oil is uniquely suited as an inflation hedging device. Its supply response is very low. More than 80 percent of global oil reserves are held by sovereign governments that don’t respond to rising prices by producing more. Indeed, once their budgetary needs are met, high prices may decrease their desire to increase production. Neither does demand fall quickly against rising prices. Oil is essential for routine economic activities, and its reduced consumption has a large multiplier effect. As its price sensitivities are low on demand and supply sides, it is uniquely suited to absorb excess liquidity and reflect inflation expectations ahead of other commodities.

If central banks continue refusing to raise interest rates during these weak economic times, oil prices may double from their current levels. So I think central banks, especially the Fed, will begin raising interest rates early next year or even late this year. I don’t think it would raise rates willingly but wants to cool inflation expectations by showing an interest in inflation. Hence, the Fed will raise interest rates slowly, deliberately behind the curve. As a consequence, inflation could rise faster than interest rates, which is what the indebted U.S. household sector needs.

This fool-the-market strategy may work temporarily. Its effectiveness must be reflected in oil prices; the Fed needs to target oil prices in its interest rate policy. If oil prices run from current levels, it means the market doesn’t believe the Fed. That would force the Fed to raise interest rates quickly which, unfortunately, would trigger another deep recession.

Instead of a V-shaped recovery, we may instead get a W curve. A dip next year, although perhaps not statistically deep, could deliver a profound psychological shock. Financial markets are buoyant now because they believe in the government. The second dip would demonstrate the limits of government power. The second dip could send asset prices down — and keep them down for a long time.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 23 Aug 2009 19:17

Image

Neshant
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Re: Perspectives on the global economic meltdown

Postby Neshant » 24 Aug 2009 00:14

Swiss banks want to continue their parasitic existance by draining funds from the poor of the world even as they get their rear ends kicked by the US. IMO swiss banks should be kicked out of India as they are merely draining wealth from the country.

I don't expect much to happen while the Congress is in power however having let in parasites like UBS to begin with.

-------------------
Don't come fishing for account details: Swiss banks to India

http://www.hindustantimes.com/Don-t-com ... 46219.aspx

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Re: Perspectives on the global economic meltdown

Postby svinayak » 24 Aug 2009 03:11

http://www.reuters.com/article/newsOne/ ... 9R20090823

Roubini sees "big risk" of double-dip recession: report

Sun Aug 23, 2009 5:32pm EDT

NEW YORK (Reuters) - Nouriel Roubini, one of the few economists who accurately predicted the magnitude of the world's recent financial troubles, sees a "big risk" of a double-dip recession, according to an opinion piece posted on the Financial Times' website on Sunday.

Roubini, a professor at New York University's Stern School of Business, said it appears the global economy will bottom out in the second half of this year, and that U.S. and western European economies will likely experience "anemic" and "below trend" growth for at least a couple of years.

Yet he warned that policymakers face a "damned if they do and damned if they don't" conundrum in trying to unwind their massive fiscal and monetary stimuli to keep the global economy from toppling into a depression.

He said that if policymakers try to fight rising budget deficits by raising taxes and cutting spending, they could undermine any recovery.

On the other hand, he said if they maintain large deficits, worries about excessive inflation will grow, causing bond yields and borrowing rates to rise and perhaps choking off economic growth.

Roubini said another reason to worry is that energy, food and oil prices are rising faster than fundamentals warrant, and could be driven higher by speculation or if excessive liquidity creates artificially high demand.

He said the global economy "could not withstand another contractionary shock" if speculation drives oil rapidly toward $100 per barrel. U.S. crude oil futures traded Friday at about $73.83.

Roubini said the anemic growth he expects would follow a couple of quarters of rapid growth, as inventories and production levels recover from near-depression levels.

(Reporting by Jonathan Stempel; Editing by Diane Craft)



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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 24 Aug 2009 06:37


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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 24 Aug 2009 13:59

Annie Leibovitz, photographer of stars, faces ruin

Annie Leibovitz is as famous as the people she photographs but now the genius behind the lens is close to financial ruin -- a victim, some say, of her own relentless artistic ambition.

Among the qualities making Leibovitz, 59, the most sought after portrait photographer in the world are legendary perfectionism and the pouring of resources into lavish sets.

Over the course of her long career, nothing has been too extreme in Leibovitz's pursuit of the perfect picture.


Yesterday moi saw the story of John McAffee, the AV founder auctioning away his last McMansion in a distress sale. Expect more stories about the formerly rich to slowly tumble out, I guess.

Delving a little more in to the article, a classic imperial spend-to-ruin pattern emerges only.

That kind of imagination, and the stylized, hyper-realistic portraits she produced, had a long line of celebrities, from Hollywood stars to Britain's Queen Elizabeth II, beating a path to Leibovitz's door.

Yet behind a facade of unlimited financial means, Leibovitz was spending her way into nightmare.

In what now appears as a disastrous decision to raise funds, Leibovitz took a 24-million-dollar loan from Art Capital Group (ACG) -- in effect a high-end pawn broker -- in December 2008 using her own photographs as collateral.

That debt is due September 8 and if she can't pay up, she could lose her life's work.

ACG, which specializes in making loans to owners of high value art works, is unlikely to adopt a soft line.

Leibovitz must "comply with the sales agreement she signed authorizing Art Capital to sell the fine art and real estate assets and to pay the invoices that are due," ACG spokesman Montieth Illingworth said in a statement.

The over-leveraged photographer not only risks losing her photo archives, which The New York Times estimates could be worth 50 million dollars, but also her house in the trendy Greenwich Village district of Manhattan and a second home outside the city.

If she is forced to declare bankruptcy, it will then be up to the courts to decide how to distribute the assets.

Banking giant Goldman Sachs entered the fray this week with a claim to own part of Leibovitz's debt.

ACG disputes that, but says Goldman Sachs could be invited to bid for the loan.
{Is nowhere on Earth safe from Goldman?}


Despite moving in such glamorous circles, Leibovitz has never been known for having a knack for finance. Duh.

When she was hired to shoot ads for American Express in the 1980s, it emerged she had been previously turned down by the company when applying for a credit card.

New York's chattering classes are aghast at the renowned photographer's downfall, making her the latest spectacular victim of the bad debt crisis and nationwide recession.

The weekly New York Magazine published a lengthy article recounting her perfectionism at work and her lavish personal taste, including an apartment on the banks of the Seine in Paris to please her lover, writer Susan Sontag, who died in 2004.

Anna Wintour, the equally famous editor of Vogue magazine, said in a documentary that Leibovitz was priceless.

"Budget is not something that enters into her consciousness, but it is worth it because at the end of the day, she gives you an image that nobody else can," said Wintour.
{Yup. To have to not worry about budgets is true luxury I guess. Anyways, precious few are blessed with financial sense. Gravity ultimately wins, I guess. }

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Re: Perspectives on the global economic meltdown

Postby Neshant » 24 Aug 2009 22:53

nothing will happen while Congress is in power.

too many politicians have skeletons in the swiss bank closet.

-----

Govt will talk to Swiss banks on disclosing details: Pranab

http://timesofindia.indiatimes.com/news ... 928503.cms

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Re: Perspectives on the global economic meltdown

Postby Sanjay M » 25 Aug 2009 05:06

Goldman Sachs wants ex-employee Sergey Aleynikov prosecuted for allegedly swiping some code "which could be used to unfairly manipulate stock prices"

http://www.nytimes.com/2009/08/24/busin ... ading.html

So how is it that Goldman Sachs are themselves allowed to be in possession of code that can do this?

:P

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Re: Perspectives on the global economic meltdown

Postby vera_k » 25 Aug 2009 06:01


Satya_anveshi
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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 25 Aug 2009 08:41

Neshant wrote:nothing will happen while Congress is in power.


IMO, the most effective way to stop this practice is a message from people of the affected nations such as India to the people of Swizerland and other developed nations where these institutions exist.

A full page ad in NYT, WSJ, WashPost, Swiss and other European National papers, depicting poverty, health, malnutrion etc can be showcased and ask the nations under the censure to stop evil practices. If corrupt means are reduced there will be one (biggest) less incentive for the politicians to be corrupt.

Some non-profit should lead this initiative. GOI action must run parallel to this and deal directly with the institutions.

Can anyone identify any non-profit that is in position to do this? We can certainly help in raising funds required for this campaign. I am willing to volunteer in such a case.

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Re: Perspectives on the global economic meltdown

Postby Sanjay M » 25 Aug 2009 09:12

No, you need real leverage, and not just hollering.

India should get together with other emerging BRIC-type nations, and make a joint demand to the Swiss.

The Chinese are very big on anti-corruption drives, even executing high-ranking officials over it.
We could forge a common platform with the Chinese govt, in strong-arming the Swiss into giving us the same treatment they give to the US on tracing hawala money.

As the Chinese economy cools, and their population gets restless, China's leaders will be hard-pressed to show their discontented masses that the rulers aren't corrupt. We should take advantage of this, and steer Beijing into a joint campaign to pry open the Swiss skeletal-closets.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 25 Aug 2009 09:51

Yes begging & pleading won't work, only a strong arm tactic will work. Getting other developing nations onboard via NAM is a good first step. Banning all Swiss banks and companies funded by Swiss banks from India would be another good step. But with Congress in power, I doubt anything will get done.

I don't get the reason behind allowing Swiss banks to operate in India. Its surely the stupidest idea ever considering Swiss bankers in recent times have been caught in America encouraging & facilitating wealthy individuals in tax fraud/evasion. Imagine what they would be doing in India.

Swiss government probably sees India as some banana republic ripe for the looting.

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Re: Perspectives on the global economic meltdown

Postby viveks » 25 Aug 2009 11:31

I think bigots created this recession. They should not be allowed to do this in future. It violates the spirit of nations.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 25 Aug 2009 11:45

viveks wrote:I think bigots created this recession. They should not be allowed to do this in future. It violates the spirit of nations.


Kindly elaborate. TIA.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 25 Aug 2009 13:26

Karl Denninger's excitable and laymanesque expositions are a pleasure to peruse, most days. Today's no different, it appears.

Here he rips apart the lie that the stock markets are being driven by volumes and are riven with liquidity. Demonstrates how a 1000 shares under high freq trading between two colluding trading desks can give the volume appearance of a million shares transacted within seconds.

And thereby fool retail and institutional investors.

The Lie Of "High Frequency Trading" Liquidity

Let's postulate two HFT computers passing 1,000 share orders for the mythical Frobozz (FBOZ) back and forth between each other. There's a scadload of volume generated by these transactions, and an outside observer, who is unaware that the 1 million shares are in fact 1,000 transactions of the same 1,000 shares being passed back and forth between the same two guys, might assume that there's a lot of liquidity that has been added.

But this is in fact misleading, as the following example will demonstrate.

Let's say you see these 1 million shares transact over the space of an hour, and as such you come to the assumption that this issue is very "liquid." This is good, because you, as an institutional (read: Mutual Fund) manager want to buy 20,000 shares of Frobozz for your fund. 20,000 is a small percentage of the 1 million shares that traded in the last hour, so you believe this is a very liquid issue and you should have no problem getting a decent price.

But there is really only one 1,000 share lot that has generated all these trades and volume that these guys are passing back and forth between themselves!

So when you put in your "buy" order the HFT guys jump with glee, because they just screwed you - their pumped price gets "sold to you", but worse, the offer suddenly disappears, because there was in fact only 1,000 shares out there - all the other "offers" and "bids" were REFLECTIONS that the computer can cancel faster than you can hit them, and they DO! As the offer collapses the price skyrockets, and the rest of your order executes at a very nasty price indeed.


Read it all.

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Re: Perspectives on the global economic meltdown

Postby Tanaji » 25 Aug 2009 13:32

Satya_anveshi wrote:
Neshant wrote:nothing will happen while Congress is in power.


IMO, the most effective way to stop this practice is a message from people of the affected nations such as India to the people of Swizerland and other developed nations where these institutions exist.

A full page ad in NYT, WSJ, WashPost, Swiss and other European National papers, depicting poverty, health, malnutrion etc can be showcased and ask the nations under the censure to stop evil practices. If corrupt means are reduced there will be one (biggest) less incentive for the politicians to be corrupt.

Some non-profit should lead this initiative. GOI action must run parallel to this and deal directly with the institutions.

Can anyone identify any non-profit that is in position to do this? We can certainly help in raising funds required for this campaign. I am willing to volunteer in such a case.


I am not so sure its the Swiss to blame. Please read this:

http://business.rediff.com/slide-show/2 ... -wrong.htm

The Indian Government doesnt seem to have a great track record in this matter.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 25 Aug 2009 13:35

At a time when financial firms and wall street have become synonymous with greed, corruption, ethical wizardry and moral hazardry, at least one company emerges as a clean, competitive, competent, ethical and profitable business - GS. Praise the Lord indeed.

GS doesn't cheat

Goldman Sachs Group Inc. research analyst Marc Irizarry's published rating on mutual-fund manager Janus Capital Group Inc. was a lackluster "neutral" in early April 2008. But at an internal meeting that month, the analyst told dozens of Goldman's traders the stock was likely to head higher, company documents show.


Securities laws require firms like Goldman to engage in "fair dealing with customers," and prohibit analysts from issuing opinions that are at odds with their true beliefs about a stock. Steven Strongin, Goldman's stock research chief, says no one gains an unfair advantage from its trading huddles, and that the short-term-trading ideas are not contrary to the longer-term stock forecasts in its written research.


The tips usually go to top clients who have expressed interest in having the information and have short-term investment horizons, he says. Goldman doesn't want to overload other clients with information that isn't relevant to them, he says. "We are not in the business of serving thousands of retail customers," he says.


Research-department employees prepare telephone scripts, then call top clients, typically several hours after the meeting has ended. Goldman says its in-house traders are prohibited from trading on the tips until after they've been relayed to clients.

Documents reviewed by the Journal indicate that anywhere from six to 60 clients are contacted, depending on the investment.


And if that doesn't convince GS's jealous rivals and loser critics, nothing ever will.

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Re: Perspectives on the global economic meltdown

Postby paramu » 26 Aug 2009 00:52


Hari Seldon
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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 26 Aug 2009 05:12


Neshant
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Re: Perspectives on the global economic meltdown

Postby Neshant » 26 Aug 2009 13:44

some pretty frightning stuff here

-----

The Shell Game - How the Federal Reserve is Monetizing Debt

http://www.chrismartenson.com/blog/shel ... debt/25806

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Re: Perspectives on the global economic meltdown

Postby Singha » 26 Aug 2009 14:45

reading it makes me want to pay the penalty and do a early withdrawal of the paltry $6k in my 401k account :((

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 26 Aug 2009 14:55

An unscientific survey here.

34 Percent of Workers Have One Week or Less of Savings

Over a one week period beginning July 6 and running through July 13, more than 16,000 visitors to Monster.com participated in the Monster Meter Poll question “If you were laid off without severance, how long would your savings cover your living expenses?”

* One Week or Less: 34%
* 2-4 Weeks: 16%
* 1-2 Months: 16%
* 3-5 Months: 14%
* 6 Months or Longer: 20%


Creating three broad groups, 50% have less than a month of savings, while only 20% have 6 months or more. The remaining 30% are in between.


One blogger opines:
Many people are living paycheck to paycheck, on the edge of disaster. Although the Monster Poll is not scientific, I cannot help thinking it is reasonably accurate.

The implications on the savings rate are obvious: It will continue to rise.

The jobs picture is grim, unemployment is likely to rise through 2010, and up to 1.5 million workers are expected to lose unemployment benefits by the end of the year. I expect unemployment benefits will be extended a third time, but living on unemployment benefits is far different than living on a normal paycheck. Moreover, many jobs are gone and will never come back. Few are prepared for that grim likelihood.

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Re: Perspectives on the global economic meltdown

Postby amol.p » 26 Aug 2009 15:19

US Postal Service seeks 30,000 job cuts via buyouts

The US Postal Service, the nation's second-largest employer, offered buyouts on Tuesday to quickly slash up to 30,000 jobs as it grapples with declining mail volume and embraces more automation.{ The us postal service needs to take lessons from Indian Postal which is having record cash position by operating numerous money saving schemes}


http://economictimes.indiatimes.com/Int ... 935951.cms

amol.p
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Re: Perspectives on the global economic meltdown

Postby amol.p » 26 Aug 2009 15:22

Toyota to cut capacity globally to match sales

http://economictimes.indiatimes.com/Int ... 936124.cms


this means toyota doesnt see any early re-boud in global market.

Hari Seldon
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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 26 Aug 2009 16:51

Downturn Dims Prospects Even at Top Law Schools

Hard to feel sorry for lawyers, but maybe its ok to do so for wannabe-lawyers?

Ignore their smart suits, sharp tongues, bushy tails for a second will ya....and focus on generating some compassion.

These hapless youths will graduate with stars in their eyes and a crushing debt burden.

Story repeats across streams. Only medicine maybe immune (esp psychiatry). ANd of course the evergreen job-guaranteed military academies.

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Re: Perspectives on the global economic meltdown

Postby Singha » 26 Aug 2009 18:57

psychiatry and medical treatment of nervous/depressive ailments looks like a growth area.

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Re: Perspectives on the global economic meltdown

Postby Dilbu » 26 Aug 2009 19:07

Sanjay M wrote:Goldman Sachs wants ex-employee Sergey Aleynikov prosecuted for allegedly swiping some code "which could be used to unfairly manipulate stock prices"

http://www.nytimes.com/2009/08/24/busin ... ading.html

So how is it that Goldman Sachs are themselves allowed to be in possession of code that can do this?

:P

This can be a con job cover up story. Now if and when the market manipulation pakistaniyat hits the fan, we know who the fall guys will be. Stay away from the stock market. Period.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 27 Aug 2009 11:08

The world's best-paid cities

http://ca.finance.yahoo.com/personal-fi ... aid-cities

Working life in Mumbai marks the other end of the spectrum. Because of its US$1.20 average hourly wage, the impoverished urban center trails the list of 73 cities compiled in the Prices and Earnings report, released by UBS every three years.

Switzerland specifically fared well because of its strong financial services sector and small size.

"Industry obviously influences what the overall compensation will be," says Michael Ryan, chief investment strategist for Swiss bank UBS' wealth management unit, which produced the report. "Switzerland tends to have very specialized products, and financial services." (more like specialized in promoting tax fraud).

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Re: Perspectives on the global economic meltdown

Postby shyam » 27 Aug 2009 12:31


Neshant
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Re: Perspectives on the global economic meltdown

Postby Neshant » 27 Aug 2009 13:32

one can only imagine what horrors might be uncovered.

---------

Tim Geithner Video: Auditing the Federal Reserve "is a Line That We Don't Want to Cross"

In an interview released today by Digg and the Wall Street Journal, Treasury Secretary Timothy Geithner was pressured about the growing popular movement to Audit the Fed spearheaded by Texas Congressman Ron Paul. A visibly uncomfortable Geithner attempts to dismiss the question by stating "I'm sure people understand that you want to keep politics out of monetary policy." When Geithner is again pressed on the issue, he makes the stunning assertion that conducting an audit of the Federal Reserve—something never before done in its 96 year history—is a "line that we don't want to cross," proclaiming that such a move would be "problematic for the country."

http://www.fundmymutualfund.com/2009/08 ... deral.html

Singha
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Re: Perspectives on the global economic meltdown

Postby Singha » 27 Aug 2009 17:39

someone was asking for the gold stockpile allegedly in fort knox and new york
to be audited.

I am guessing physical wealth is a lot less than is made out, hence the smoke and
mirrors and veils.

in old times usually a gruff new barbarian power stepped forward, called the bluff,
sacked the city and became the new emir.

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Re: Perspectives on the global economic meltdown

Postby Singha » 27 Aug 2009 19:49

newsweek :rotfl:

Bernanke Victimized by Identity Fraud Ring

Exclusive: According to court documents, the Fed chairman and his wife were swindled in 2008 by a skilled team of crooks.
By Michael Isikoff | Newsweek Web Exclusive
Aug 25, 2009


If ever there were living proof that identity theft can strike the mighty and powerful as well as hapless consumers, look no further than the nation's chief banker: Ben Bernanke. The Federal Reserve Board chairman was one of hundreds of victims of an elaborate identity-fraud ring, headed by a convicted scam artist known as "Big Head," that stole more than $2.1 million from unsuspecting consumers and at least 10 financial institutions around the country, according to recently filed court records reviewed by NEWSWEEK.

Last summer, just as he was dealing with the first rumblings of the financial crisis on Wall Street, Bernanke learned that a thief had swiped his wife's purse—including the couple's joint check book. Days later, someone started cashing checks on the Bernanke family bank account, the documents show. "It's fair to say he was not pleased," said one close associate of Bernanke, who asked not to be identified discussing what the Fed chairman considers a private matter.


The theft of the Bernanke check book—never publicly revealed until now—soon became part of a wide-ranging (and previously underway) identity-theft investigation by the Secret Service and the U.S. Postal Inspection Service. The probe culminated in recent months with a series of arrests, criminal complaints, and indictments brought by federal prosecutors in Alexandria, Va. The targets: members of a nationwide ring that used an inventive combination of old-fashioned thievery and high-tech fraud to loot the bank accounts of unsuspecting victims.

"Identity theft is a serious crime that affects millions of Americans each year," Bernanke said in a statement provided to NEWSWEEK. "Our family was but one of 500 separate instances traced to one crime ring. I am grateful for the law enforcement officers who patiently and diligently work to solve and prevent these financial crimes."

Identity theft is commonly associated with the heists of consumers' credit-card information and other personal data by cybercriminals. But Bernanke appears to have been swept up in the case only by chance—and through the most ancient of street crimes.

On Aug. 7, 2008, the Fed chairman's wife, Anna Bernanke, was at a Starbucks, not far from the couple's Capitol Hill home, when her purse was snatched off the back of a chair, according to Washington, D.C., court records. Among its contents: her driver's license, Social Security card, four credit cards, and a book of Wachovia bank checks from the couple's joint checking account. Printed on each check were the Bernankes' bank-account number, home address, and telephone number. Anna Bernanke reported the missing purse that day to the D.C. police.

But as it turned out, the perpetrator was no ordinary thief: he was working for a sophisticated crime ring that federal agents and the police in several states had been investigating for months. In the Chicago area, where some members were based, the ring went by the street name of "Cannon to the Wiz." (The term "cannon" is slang for pickpocket.)

One of the group's ringleaders, Clyde Austin Gray Jr. of Waldorf, Md., pleaded guilty to conspiracy to commit bank fraud in federal court in Alexandria, Va., just last month. Gray (who was known to members of his ring as Big Head) employed an army of pickpockets, mail thieves, and office workers to swipe checks, credit cards, military IDs, and other personal records, according to his plea agreement and other court records filed in his case.

One member of the ring had infiltrated an office of the Combined Federal Campaign, the official U.S. government-sponsored charity, and supplied the crime ring with stacks of checks mailed in by federal workers, the records show. Another worked in a Washington, D.C., doctor's office, with access to patients' records and their bank-account information.

The group's members also often traveled around the country targeting sporting events, such as this year's NCAA basketball Final Four tournament in Detroit, according to Donna Pendergast, an assistant Michigan attorney general who had her wallet swiped by a member of the ring after attending one of the games. Pendergast, who wrote an account of being victimized by the group last April on a blog called Women in Crime, told NEWSWEEK that the robber was so adroit he managed to lift the wallet from her purse without her even knowing it. "They took it right out of my purse while it was on my shoulder," she said. "I didn't feel a thing,"

After obtaining drivers' licenses and military IDs, the thieves took bundles of their freshly pilfered loot wrapped in rubber bands to cars parked on the street. Other members of the group waiting in the cars—equipped with laptop computers, scanners, and printers—then quickly reproduced phony new driver's licenses and IDs using the names of the victims, but substituting the victims' photos with those of Cannon to the Wiz members.

There is no evidence that the group reproduced a fraudulent driver's license in Anna Bernanke's name. But one of its members did allegedly put the Bernankes' joint checkbook to illicit use in a complex financial fraud that federal prosecutors described as a "split deposit" transaction.

Six days after the Starbucks snatch of Bernanke's purse, an alleged member of the ring named George Lee Reid walked into a Bank of America branch in suburban Prince George's County and posed as another identity-theft victim, identified in a federal affidavit as "K.N." (The person had reported his wallet stolen a few days earlier, court records show.)

Reid deposited two fraudulent $900 checks into K.N.'s bank account—one of them from the Wachovia account of "Ben S. Bernanke and Anna Bernanke." Having inflated K.N.'s account with the fraudulent check from the Bernankes, Reid simultaneously cashed two other fraudulent $4,500 checks that were made out to K.N. from a third victim, according to federal prosecutors. When all was done, he appears to have walked out of the bank with $9,000. (The Fed chairman had alerted Wachovia after the theft of his wife's purse and suffered no financial loss in the transaction, the Bernanke associate said.)

When federal agents busted the identity-theft ring earlier this summer, Reid was named as a co-conspirator in a 22-page affidavit signed by a U.S. postal inspector. But the names of the victims, including Bernanke, were concealed; the complaint referred to the victims only by their initials, referring, for example, to one of Reid's victims as "B.B."

However, a separate criminal complaint against Reid filed last fall in D.C. Superior Court (and overlooked until now) spelled out the full name of the Fed chairman: Ben S. Bernanke.

Reid's lawyer in the D.C. case, where the charges were ultimately dropped, did not return a phone call seeking comment. But a federal law-enforcement official—who asked not to be identified discussing an ongoing case—says there is now an outstanding arrest warrant for the man who allegedly scammed the Fed chairman and used his checkbook. "We're looking for him," said the official.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 27 Aug 2009 21:54

Overmighty finance levies a tithe on growth

The crucial role of the financial system in a mostly free-enterprise economy is to allocate capital investment towards the most productive applications...

If a new fertiliser offers a farmer the prospect of a higher crop yield but its price and the cost of transporting and spreading it exceeds what the additional produce will bring at market, it is a bad deal for the farmer. A financial system, which allocates scarce investment capital, is no different.

The discussion of the costs associated with our financial system has mostly focused on the paper value of its recent mistakes...The estimated $4,000bn of losses in US mortgage-related securities are just the surface of the story. Beneath those losses are real economic costs due to wasted resources: mortgage mis-pricing led the US to build far too many houses. Similar pricing errors in the telecoms bubble a decade ago led to millions of miles of unused fibre-optic cable being laid.

The misused resources and the output foregone due to the recession are still part of the calculation of how (in)efficient our financial system is. What has somehow escaped attention is the cost of running the system.....

For years, much of the best young talent in the western world has gone to private financial firms. At Harvard more than a quarter of our recent graduates who have taken jobs have headed into finance.... we are wasting one of our most precious resources.....much of their activity adds no economic value.

Perversely, the largest individual returns seem to flow to those whose job is to ensure that microscopically small deviations from observable regularities in asset price relationships persist for only one millisecond instead of three...

In the US, both the share of all wages and salaries paid by the financial firms and those firms’ share of all profits earned have risen sharply in recent decades. In the early 1950s, the “finance” sector (not counting insurance and real estate) accounted for 3 per cent of all US wages and salaries; in the current decade that share is 7 per cent. From the 1950s to the 1980s, the finance sector accounted for 10 per cent of all profits earned by US corporations; in the first half of this decade it reached 34 per cent... :eek:

What makes a more efficient financial system worthwhile is not just that it allows us to achieve greater production and economic growth, but that the rest of the economy benefits. The more the financial system costs to run, the higher the hurdle...

Economic decisions are supposed to turn on weighing costs and benefits. It is time for some serious discussion of what our financial system is actually delivering to our economy and what it costs to do that.


wah wah.

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Re: Perspectives on the global economic meltdown

Postby Gus » 28 Aug 2009 06:50

Singha wrote:someone was asking for the gold stockpile allegedly in fort knox and new york
to be audited.

I am guessing physical wealth is a lot less than is made out, hence the smoke and
mirrors and veils.


As soon as the govt figured they don't have gold reserves for the paper they are printing, and this knowledge would devalue the dollar value, they passed a law that the gold reserves are not to be declared. I don't think anybody is going to get that information any soon.

Hari Seldon
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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 28 Aug 2009 21:05

blogpost from the controversial and fast-rising zerohedge

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

And so the guns come out blazing. The Clearing House Association, another name for all the banks that were bailed out over the past year with the generous contributions from all of you, dear taxpayers, are now threatening with another instance of complete systemic collapse if Bloomberg's lawsuit is allowed to proceed unchallenged, let alone if any of the "Audit The Fed" measures are actually implemented.

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.


Read it all. Here is a link to the full deposition made by the clearing house assoc.

Hari Seldon
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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 29 Aug 2009 11:06

Wall Street back to its old highly levered ways.

Can someone say Moral hazard on steroids? Why bother with risks blowing up if the taxpayer is on the hook for more bailouts? The bailed out banks that were too big to fail back in late 2008 have only gotten bigger since, having gobbled up smaller not big enough banks.

Banks are increasing lending to buyers of high-yield company loans and mortgage bonds at what may be the fastest pace since the credit-market debacle began in 2007.

Credit Suisse Group AG and Scotia Capital, a unit of Canada’s third-largest bank, said they’re offering credit to investors who want to purchase loans. SunTrust Banks Inc., which left the business last year, is “reaching out to clients” to provide financing, said Michael McCoy, a spokesman for the Atlanta-based bank. JPMorgan Chase & Co. and Citigroup Inc. are doing the same for loans and mortgage-backed securities, said people familiar with the situation.

“I am surprised by how quickly the market has become receptive to leverage again,” said Bob Franz, the co-head of syndicated loans in New York at Credit Suisse. The Swiss bank has seen increasing investor demand for financing to buy loans in the past two months, he said.

Federal Reserve data show the 18 primary dealers required to bid at Treasury auctions held $27.6 billion of securities as collateral for financings lasting more than one day as of Aug. 12, up 75 percent from May 6.

The increase suggests money is being used for riskier home- loan, corporate and asset-backed securities because it excludes Treasuries, agency debt and mortgage bonds guaranteed by Washington-based Fannie Mae and Freddie Mac of McLean, Virginia or Ginnie Mae in Washington. Broader data on loans for investments isn’t available.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 30 Aug 2009 07:45

At 58, a Life Story in Need of a Rewrite

MICHAEL BLATTMAN, 58, took a prudent path to a successful business career.

From 2001 to 2008 he was a senior vice president for a private student-loan company and at his high point earned $225,000 a year in salary and bonuses, he says.

But soon after, in January 2008, he lost his job. “I thought I’d find another job quickly, and actually wind up ahead.”

After his layoff, he bought two suits, “to be prepared for the glut of interviews.” He’s never worn them. Mr. Blattman has been out of work ever since, 18 months.

He let his online dating membership lapse because, he says, once women figured out he was unemployed, it killed things.

http://www.nytimes.com/2009/08/30/fashi ... 8046-VV1MJ


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