Perspectives on the global economic meltdown

Neshant
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Re: Perspectives on the global economic meltdown

Postby Neshant » 28 Sep 2009 05:02

The documentary was made well before the present economic slide.

But its uncanny how accurate the predictions are.

Watch it when you have the time.

----
Fiat Empire

Part 1 : http://www.youtube.com/watch?v=88vUf9Kc-Go
Part 2 : http://www.youtube.com/watch?v=8cqsnxWTj0o
Part 3 : http://www.youtube.com/watch?v=uXxVS0AwaT4
Part 4 : http://www.youtube.com/watch?v=Fh5LBKnO4NE
Part 5 : http://www.youtube.com/watch?v=fiOh7r-qsIc
Part 6 : http://www.youtube.com/watch?v=i3mwp_E5cio

AnimeshP
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Re: Perspectives on the global economic meltdown

Postby AnimeshP » 28 Sep 2009 06:11

shyam wrote:Long speech. Can't believe that this guy predicted the economic catastrophies perfectly long back
Peter Schiff Mortgage Bankers Speech Nov/13/06


Shyam ... Not only did this guy predict the economic catastrophes, he was laughed at by the so-called media "experts" ...
check these out ..

http://www.youtube.com/watch?v=Z0YTY5TWtmU

http://www.youtube.com/watch?v=zdVP_sgCETo

shyam
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Re: Perspectives on the global economic meltdown

Postby shyam » 28 Sep 2009 06:26

What I'm more impressed about is that he predicted how things would unwind, and it happened exactly that way.

One thing I don't understand is that he is so bullish about China.

Neshant
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Re: Perspectives on the global economic meltdown

Postby Neshant » 28 Sep 2009 06:37

Schiff deserves credit for his prediction.

However investors who piled into his company in 2008 got burnt badly when their foreign stocks fell as hard if not harder than US stocks. Apparently the decoupling of foreign markets that he was banking on did not occur. It might be occuring now or will do so over time.

Some who put in 250K had 50K by the end of it !

PersonallY I don't like 'guru worship' because gurus can be right and wrong just like the rest of us. Listen to him and others but make up your own mind.

You got Jim Rogers who predicts India will fall apart in 30 years.

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Re: Perspectives on the global economic meltdown

Postby shyam » 28 Sep 2009 06:42

Neshant wrote:Listen to him and others but make up your own mind.

True.

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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 28 Sep 2009 08:08

Move on guys...watch for bubbles that are and will be happening shortly. Try to benefit from them if you have missed your bus last time around or to enjoy it yet again if you succeeded.

All this was yesterday news. Yes, basic fundamentals are still same (they suck) but the reality is more than that.

Anecdotally, let me say I started getting credit card offers the way I was getting in 2006-2008 Sept, still getting offers of 0 down, $400 / month for x years offers.

Keep the powder ( I mean cash) dry and yet be ready to move it around in safer places just in case.
Last edited by Satya_anveshi on 28 Sep 2009 09:11, edited 1 time in total.

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Re: Perspectives on the global economic meltdown

Postby svinayak » 28 Sep 2009 08:37

]
shyam wrote:Long speech. Can't believe that this guy predicted the economic catastrophies perfectly long back
Peter Schiff Mortgage Bankers Speech Nov/13/06


Sombody here in BRF in 2004 also said that free line of credit and housing loan in 2004 will have to change in a few years. Strict control has to be done to prevent runaway credit and non payment.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 28 Sep 2009 11:38

Marc Faber Bloomberg video.

Check out his comments on India in the video :

http://marcfaberchannel.blogspot.com/20 ... sible.html

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Re: Perspectives on the global economic meltdown

Postby Neshant » 29 Sep 2009 14:10

Federal Reserve needs to cut US Dollar in half over next 14 years

http://www.youtube.com/watch?v=0-ZZFmKFk1s

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Re: Perspectives on the global economic meltdown

Postby ramana » 29 Sep 2009 23:50

Its getting so intertwined that where does strategic end and economics take over or is it the other way around!

X-posted by Acharya

-----------------------
Quote:
http://www.latimes.com/news/opinion/com ... 5015.story

Twilight of Pax Americana
Since the end of WWII, the world has depended on the United States for stability. But with American military and economic dominance waning, capitalism and global security are threatened.

By Christopher Layne and Benjamin Schwarz
September 29, 2009

The international order that emerged after World War II has rightly been termed the Pax Americana; it's a Washington-led arrangement that has maintained political stability and promoted an open global economic system. Today, however, the Pax Americana is withering, thanks to what the National Intelligence Council in a recent report described as a "global shift in relative wealth and economic power without precedent in modern history" -- a shift that has accelerated enormously as a result of the economic crisis of 2007-2009.

At the heart of this geopolitical sea change is China's robust economic growth. Not because Beijing will necessarily threaten American interests but because a newly powerful China by necessity means a relative decline in American power, the very foundation of the postwar international order. These developments remind us that changes in the global balance of power can be sudden and discontinuous rather than gradual and evolutionary.

The Great Recession isn't the cause of Washington's ebbing relative power. But it has quickened trends that already had been eating away at the edifice of U.S. economic supremacy. Looking ahead, the health of the U.S. economy is threatened by a gathering fiscal storm: exploding federal deficits that could ignite runaway inflation and undermine the dollar. To avoid these perils, the U.S. will face wrenching choices.

The Obama administration and the Federal Reserve have adopted policies that have dramatically increased both the supply of dollars circulating in the U.S. economy and the federal budget deficit, which both the Brookings Institution and the Congressional Budget Office estimate will exceed $1 trillion every year for at least the next decade. In the short run, these policies were no doubt necessary; nevertheless, in the long term, they will almost certainly boomerang. Add that to the persistent U.S. current account deficit, the enormous unfunded liabilities for entitlement programs and the cost of two ongoing wars, and you can see that America's long-term fiscal stability is in jeopardy. As the CBO says: "Even if the recovery occurs as projected and stimulus bill is allowed to expire, the country will face the highest debt/GDP ratio in 50 years and an increasingly unsustainable and urgent fiscal problem." This spells trouble ahead for the dollar.

The financial privileges conferred on the U.S. by the dollar's unchallenged reserve currency status -- its role as the primary form of payment for international trade and financial transactions -- have underpinned the preeminent geopolitical role of the United States in international politics since the end of World War II. But already the shadow of the coming fiscal crisis has prompted its main creditors, China and Japan, to worry that in coming years the dollar will depreciate in value. China has been increasingly vocal in calling for the dollar's replacement by a new reserve currency. And Yukio Hatoyama, Japan's new prime minister, favors Asian economic integration and a single Asian currency as substitutes for eroding U.S. financial and economic power.

Going forward, to defend the dollar, Washington will need to control inflation through some combination of budget cuts, tax increases and interest rate hikes. Given that the last two options would choke off renewed growth, the least unpalatable choice is to reduce federal spending. This will mean radically scaling back defense expenditures, because discretionary nondefense spending accounts for only about 20% of annual federal outlays. This in turn will mean a radical diminution of America's overseas military commitments, transforming both geopolitics and the international economy.

Since 1945, the Pax Americana has made international economic interdependence and globalization possible. Whereas all states benefit absolutely in an open international economy, some states benefit more than others. In the normal course of world politics, the relative distribution of power, not the pursuit of absolute economic gains, is a country's principal concern, and this discourages economic interdependence. In their efforts to ensure a distribution of power in their favor and at the expense of their actual or potential rivals, states pursue autarkic policies -- those designed to maximize national self-sufficiency -- practicing capitalism only within their borders or among countries in a trading bloc.

Thus a truly global economy is extraordinarily difficult to achieve. Historically, the only way to secure international integration and interdependence has been for a dominant power to guarantee the security of other states so that they need not pursue autarkic policies or form trading blocs to improve their relative positions. This suspension of international politics through hegemony has been the fundamental aim of U.S. foreign policy since the 1940s. The U.S. has assumed the responsibility for maintaining geopolitical stability in Europe, East Asia and the Persian Gulf, and for keeping open the lines of communication through which world trade moves. Since the Cold War's end, the U.S. has sought to preserve its hegemony by possessing a margin of military superiority so vast that it can keep any would-be great power pliant and protected.

Financially, the U.S. has been responsible for managing the global economy by acting as the market and lender of last resort. But as President Obama acknowledged at the London G-20 meeting in April, the U.S. is no longer able to play this role, and the world increasingly is looking to China (and India and other emerging market states) to be the locomotives of global recovery.

Going forward, the fiscal crisis will mean that Washington cannot discharge its military functions as a hegemon either, because it can no longer maintain the power edge that has allowed it to keep the ambitions of the emerging great powers in check. The entire fabric of world order that the United States established after 1945 -- the Pax Americana -- rested on the foundation of U.S. military and economic preponderance. Remove the foundation and the structure crumbles. The decline of American power means the end of U.S. dominance in world politics and the beginning of the transition to a new constellation of world powers.

The result will be profound changes in world politics. Emerging powers will seek to establish spheres of influence, control lines of communication, engage in arms races and compete for control over key natural resources. As America's decline results in the retraction of the U.S. military role in key regions, rivalries among emerging powers are bound to heat up. Already, China and India are competing for influence in Central and Southeast Asia, the Middle East and the Indian Ocean. Even today, when the United States is still acting as East Asia's regional pacifier, the smoldering security competition between China and Japan is pushing Japan cautiously to engage in the very kind of "re-nationalization" of its security policy that the U.S. regional presence is supposed to prevent. While still wedded to its alliance with the U.S., in recent years Tokyo has become increasingly anxious that, as a Rand Corp. study put it, eventually it "might face a threat against which the United States would not prove a reliable ally." Consequently, Japan is moving toward dropping Article 9 of its American-imposed Constitution (which imposes severe constraints on Japan's military), building up its forces and quietly pondering the possibility of becoming a nuclear power.

Although the weakening of the Pax Americana will not cause international trade and capital flows to come to a grinding halt, in coming years we can expect states to adopt openly competitive economic policies as they are forced to jockey for power and advantage in an increasingly competitive security and economic environment. The world economy will thereby more closely resemble that of the 1930s than the free-trade system of the post-1945 Pax Americana. The coming end of the Pax Americana heralds a crisis for capitalism.

The coming era of de-globalization will be defined by rising nationalism and mercantilism, geopolitical instability and great power competition. In other words, having enjoyed a long holiday from history under the Pax Americana, international politics will be headed back to the future.

Christopher Layne is a professor of government at Texas A&M and a consultant to the National Intelligence Council. Benjamin Schwarz is literary and national editor of the Atlantic.
---------------------------

Neshant
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Re: Perspectives on the global economic meltdown

Postby Neshant » 30 Sep 2009 11:37

Ever notice how all Ponzi schemes which grow from "traditional ponzi" to "systemic crisis" involve some form of insurance...?

Now foreign financials are knocking on the doors of the third world wanting to introduce the natives to the miracle of insurance. You just know its all going to end in one gigantic scam when its found there's no way to payout all that has been insured.

Already financial companies are hard at work trying to brew up the another scam - securitizing life insurance policies and selling it into the market. They know insurance companies don't have the money to payout all the soon to be dead baby boomers. So they need to get these policies off their books asap.

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Re: Perspectives on the global economic meltdown

Postby shyam » 30 Sep 2009 12:29

Actually I have seen Aviva, Metlife type mutual fund based insurance schemes in India.

If I look at it, this is just another scheme to rip off locals. One thing that can happen is, FIIs could purchase Indian equities at low price and when it is the time to dump them, they could easily sell them to their Indian mutual funds and take their money out. Indian insurance policy holder will be holding the bag at the end.

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Re: Perspectives on the global economic meltdown

Postby Purush » 30 Sep 2009 17:38

http://money.cnn.com/galleries/2009/new ... index.html
5 most overpaid CEOs

The Corporate Library, a corporate governance research firm, reviewed regulatory filings from 2,000 publicly traded companies and came up with a list of five chief executives they're calling the "Highest Paid Worst Performers" of 2008.

To make the list, a CEO had to have total realized income -- including base salary, bonuses and stock -- of at least $30 million last year. At the same time, the share price of the companies they oversaw had to have underperformed rivals and the broad sampling of stocks in the S&P 500 over the last five years.


1.Michael Jeffries, Abercrombie & Fitch
http://money.cnn.com/galleries/2009/new ... index.html
Abercrombie's Michael Jeffries was awarded total compensation of $71.8 million last year, with a base salary of $1.5 million, according to the Corporate Library.

His compensation package included a $6 million "stay bonus" designed to keep him on board, despite his 17-year tenure, as well as perks such as the use of a corporate jet.
:evil:

2.James W. Stewart, BJ Services Company
http://money.cnn.com/galleries/2009/new ... EOs/2.html
The bulk of James Stewart's $34.6 million windfall came from value realized on stock options, which resulted in a $30 million jackpot, according to the Corporate Library.
:evil:

3.Brian Roberts, Comcast Corp.
http://money.cnn.com/galleries/2009/new ... EOs/3.html
Comcast CEO Brian Roberts received total compensation of $40.8 million last year, Corporate Library said. That includes a $2.7 million base salary and over $22 million in earnings related to stock options. Roberts received a relatively small "discretionary bonus" of $881,027 and a "very substantial" bonus of $7.4 million under a non-equity incentive plan, Hodgson said
:evil:

4.John Faraci, International Paper
http://money.cnn.com/galleries/2009/new ... EOs/4.html
Shares of the Memphis, Tenn-based paper company sank 63% last year, compared with a 38% drop in the S&P 500 index, according to the report.

Despite such a drubbing, the company's CEO got total compensation of $38.2 million.
:evil:

5.Eugene Isenberg, Nabors Industries
http://money.cnn.com/galleries/2009/new ... EOs/5.html
With total compensation of $79.3 million, Eugene Isenberg ranked No. 8 on the list of 10 highest paid CEOs, according to Corporate Library.
:evil:

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Re: Perspectives on the global economic meltdown

Postby Suraj » 01 Oct 2009 00:09

For all the talk of alternate reserve currencies and moving away from the dollar, the Chinese are buying more USD debt as of July 2009:
Major Foreign Holders of US Treasury Securities (USD billions)
China, Mainland 800.5
Japan 724.5
United Kingdom 2/ 220.0
Carib Bnkng Ctrs 4/ 193.2
Oil Exporters 3/ 189.2
Brazil 138.1
Russia 118.0
Hong Kong 115.3
Luxembourg 92.2
Taiwan 77.4
Switzerland 68.1
Germany 56.3
Singapore 42.4
India 38.9

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 01 Oct 2009 07:12

Suraj saar is right.

The hyper-inflationary scenario, once feared when fed printing first took to steroids, seems a distanat possibility over the next half a decade at least. Reason is that deflation is back. And how.

US T-bonds will find hajaar buyers within the khanate as savings rate inches back up. Also, should the US equities mkt stop rising, the money will rush into USTs. Besides the export-based miracle ekhanomies have little choice but to continue to munch chocolate (buy USTs) to keep from collapsing, so what if they're beyond obese already. A stroke might strike but thats some way down.

More than the khanate, am looking at the rest of the west with interest (both literally and figuratively). Interest burdens on those currencies (the pound, the krona) etc might soar, soon, impacting living standards by a lot - if they continue on thier current deficit-spend-then-print path. Their bonds have only had a few hiccups so far but strokes happen all the time to the apparently healthy.

All in all, nothing much to see in the next few yrs - except more of the same of what we saw in the last few months. New bubbles are being blown (most glaringly in US equities), the game goes on.

Jai ho.

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Re: Perspectives on the global economic meltdown

Postby ramana » 01 Oct 2009 08:18

Hari, Our new member prad and Amit Singh have been posting in the Start forum their views of PRC. Take a look.

Thanks,

ramana

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Re: Perspectives on the global economic meltdown

Postby ramana » 01 Oct 2009 08:22

X-Post...

Amit Singh wrote:
prad wrote:i personally hold a very pessimistic view of China's prospects. as i said before, any economy that needs a $600 Billion stimulus when it's growing at 7% and the stimulus only adds 1% growth to a $4 Trillion economy is an economy that has some deep problems. no economy can indefinitely keep growing at 10%. it hasn't happened before, it won't happen now or in the future. the official PRC reported data on bad loans to GDP ratio is 25%, while in reality, this ratio might be closer to 35 - 40%. the bubble that is the chinese economy is waiting to be unravelled. the financial crisis of 2008 is a step in that direction.

it is unlikely that the chinese consumer is going to start spending now when they didn't do so under good economic conditions and the US consumer won't recover to pre recession levels for at least 3 years and even after that spending might never be so high again. China is a country where internal stability is threatened in 7% GDP growth conditions (for those who have researched this, they know it's true). the divide between coastal and interior interests has always been sharp and the recession has exacerbated those tensions.

the stimulus has worked in China, but how long is the communist party going to keep giving hundreds of billions of stimulus year after year? oddly, the Politburo decided giving more free credit is the solution to the problem (banks lent 6 trillion yuan in loans in the first 6 months of 2008; i can only hazard a guess as to how much of that are performing and how many will go bad). in the short term, this might result in increased economic activity, but in the long run the bad loan problem is being exacerbated by the State itself.

China is going the same way as the US housing industry. they are bloating an already inflated bubble even more. i believe a correction is on its way and very likely to occur by 2015 if not sooner.


You underestimate the influence of stimulus package and its effects on the targeted export driven growth China is perched upon. The words thrown out of your mouth i.e. whatever "you feel" does not actually translate to reality. It would be better to wake up to the reality rather than putting your head in the sand and "believing" whatever you want to believe.

The chinese stimulus package has helped bolster their industrial growth, their infrastructural growth in a massive way, taking them back to 8.3% growth rate after a drop to 6.1% in the first quarter of 2009.

China's stimulus package boosts economy
http://www.businessweek.com/globalbiz/content/apr2009/gb20090422_793026.htm

China's stimulus package(4 trillion Yuan) breakdown:
Image

On Apr. 22, Goldman Sachs (GS) said it expects Chinese GDP growth to hit 8.3% this year, compared with an earlier forecast of 6%. Other banks have become more optimistic, too. Citing what she called "very strong stimulus-related bank-lending growth," Tao Wang, head of China economic research at UBS (UBS), last week upgraded the bank's 2009 GDP growth forecast to 7.5%, from its earlier forecast of 6.5%. "While the external outlook remains bleak, there have been signs of domestic activity picking up in China, as a result of the government's policy stimulus," she wrote.


Much of the juice is coming from state-owned banks. While the Obama Administration struggles to get U.S. banks to start lending again, Chinese banks are following government orders and flooding the country with loans. In the first three months of the year, new lending by Chinese banks grew 30%, to $676 billion. That means the banks are already more than 90% toward Beijing's target for the whole year. "It looks like the banks have fulfilled their brief with vigor and commitment," says Standard Chartered Bank's head of China research, Stephen Green.However, many believe such a lending bonanza could lead to higher levels of nonperforming loans further down the line.


While there is a possibility of non-performing loans, they will not create anything but a slight prick in the massive forex reserves of cash that PRC is sitting on.

With more than $1.95 trillion in foreign reserves, the central government can afford to open its coffers, too. Earlier this month, Beijing announced it will spend $125 billion to build hospitals across China, as well as to expand medical insurance to cover 90% of China's 1.3 billion people by 2011. The government has also announced a significant expansion of its pension program. Since the global recession is hammering China's exports (they fell 20% in the first quarter of 2009), economists say the country must rely more on consumption to drive economic growth. And to boost consumer confidence, the government needs to provide better medical care, more secure pensions, and higher-quality schools, though many say it could take a generation before the Chinese abandon their penurious ways. Consumption in China now only makes up some 37% of GDP, compared with 70% in the U.S. "The government needs to carry out reform to unleash potential demand and turn it into purchasing power," says Xu Xiaonian, a professor of economics and finance at the China Europe International Business School in Shanghai. That will "get people to spend money instead of saving it."


The chinese are very much aware of the fact that they need to change the very fabric of their society to encourage spending and if they are semi-successful in that, their population size and their burgeoning middle class will be able to sustain their growth rate in the future.

The Bharatiya industry on the other hand didn't get any concession from the budget this year in a sharp contrast.

http://www.dnaindia.com/world/report_we-have-limited-scope-for-accelerating-stimulus-package-pm_1293137
http://www.businessweek.com/globalbiz/content/dec2008/gb2008128_276382.htm?chan=top+news_top+news+index+-+temp_global+business

Under withering criticism for its handling of the country's economic slowdown and Mumbai's terrorist attacks (BusinessWeek, 12/4/08), the Indian government fought back over the weekend, announcing a coordinated, two-flanked stimulus plan that could top $8 billion. India's moribund stock market momentarily cheered, rising almost 4% by midday. But it then deflated, closing up just 1.5%, on a day when other Asian markets soared on optimism about economic recovery plans in the U.S. and China.

As the business community's less-than-enthusiastic reaction to the package sank in, New Delhi sought to reassure investors that the government of Prime Minister Manmohan Singh is not finished. More measures are on the way, Kamal Nath, the Minister for Commerce & Industry, told a group of reporters outside his New Delhi office. "There is Step One, then there is Step Two, and then there is Step Three," he said.

But with India already facing sizable budget deficits, significant inflation, and a continuing liquidity crisis, it is unclear what more the government can do, especially if it wants to hold on to its credit ratings. "Frankly, this is the most that India can afford," says Aninda Mitra, a sovereign credits analyst at Moody's (MCO) in Singapore. He estimates the cost of this package to be 0.8% of India's gross domestic product, which brings the country's budget deficit close to 10% of GDP, if one includes all government borrowings and not just those of the central government. "This is a country with very large government debt," says Mitra. "You can't start to expect China-style packages."


No economy has kept growing at the growth rate of 10%? Just look at this chart:
Image

There is a reason why the US fears China. Unlike Japan which was milked by the United States, because they were not strong militarily, China doesn't want to be subjugated in the same way and dictated by US terms and conditions. While it is bad for Bharat too, because we have border demarcation issues with China which is growing increasingly belligerent as it grows economically, USA is correct to observe that their hegemony in Asia will become a closed chapter by the middle of this century if Bharat and China sustain their growth. China is taking a state-blessed targeted growth, while Bharat is banking on its entrepreneurs' ingenuity and its massive youth population to propel itself into a nation that is capable of taking its own stand in international bodies and protect its interests globally.

It will be an interesting battle of the three nations for the gold medal, if world peace lasts that long and only a miracle can propel Bharat in front of China if the nation doesn't address its shortcomings soon to provide a competitive and fair environment, free of corruption to emerging enterprises in the country.


BTW we have our man in China and get a ground level eye view.......

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Re: Perspectives on the global economic meltdown

Postby Prem » 01 Oct 2009 08:29

ramana wrote:BTW we have our man in China and get a ground level eye view.......


Still there :shock:

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 01 Oct 2009 08:36

Thx Ramana garu,

Did read up on what was said and mussay, there are compelling points made by both posters.

The meteoric rise of the PRC has had a lot to do with an artificially depressed currency (undervalued by ~ 40%) and an entry into the WTO under an emerging economy rubric.

The conditions that propelled that rise have now changed. The challenge is to see if the PRC can make the transition to a domestic consumption led growth model from a heavily FDI-driven exports oriented one.

See the chart linked above. All the economies that seemingly outperformed India - Ireland, Singapore, Korea and Taiwan are either FDI dependent (Ireland, since crashed bigtime), or export-dependent (the rest) or bit of both.

India alone (leave PRC out for now but it won't matter even to include them) reaches where it does (and Suraj saar can attest that we deliberately understate GDP counting) riding predominantly on internal demand. A remarkable, remarkable story indeed.

So yes, I would take reports either of PRC's impending implosion or of its runaway rise to superpowerdom, with due salt.

ramana
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Re: Perspectives on the global economic meltdown

Postby ramana » 01 Oct 2009 09:23

Prem wrote:
ramana wrote:BTW we have our man in China and get a ground level eye view.......


Still there :shock:



Not that one. 8)
A differnent one. A business man so he has the pulse of the economy.

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Re: Perspectives on the global economic meltdown

Postby amol.p » 01 Oct 2009 11:24

I.M.F. Calls for Overhaul of Financial System

However, the I.M.F. did say that its estimate of total writedowns at banks and other financial institutions had declined by $600 billion, from $4 trillion six months ago to $3.4 trillion today, in part because the value of complex securities at the heart of the crisis has stabilized

Having shouldered losses of $1.3 trillion to date, the I.M.F. estimated, banks will still have to write off $1.5 trillion in bad loans or worthless securities by the end of 2010. It added that U.S. banks were about 60 percent through the process of writing off bad investments. European banks, because the economic cycle in Europe lags behind that of the United States, are about 40 percent finished, it said.

It estimated that banks in the 16-nation euro zone still needed to raise $380 billion to put their Tier 1 capital ratio, a measure of bank reserves, at 10 percent. U.S. banks, by contrast, would need about $80 billion

It estimated that banks in the 16-nation euro zone still needed to raise $380 billion to put their Tier 1 capital ratio, a measure of bank reserves, at 10 percent. U.S. banks, by contrast, would need about $80 billion

http://www.nytimes.com/2009/10/01/busin ... f=business

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Re: Perspectives on the global economic meltdown

Postby amol.p » 01 Oct 2009 11:29

GM to close Saturn as sale to Penske collapses

General Motors Co will close Saturn and wind down its dealership network after a deal to sell the faltering brand to Penske Automotive Group collapsed, the automaker said on Wednesday.

The breakdown of a deal that had been widely expected to close this week will force some 350 Saturn dealerships to shut down and could cut 13,000 U.S. jobs that would have been preserved under a plan by auto magnate Roger Penske.


http://www.reuters.com/article/newsOne/ ... 0920091001

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Re: Perspectives on the global economic meltdown

Postby amol.p » 01 Oct 2009 14:53

UK government to freeze pay, sell assets

Britain's Labour government plans to halve the national deficit through spending cuts and asset sales worth 75 billion pounds ($120billion)

Senior ministers are demanding that the pay of judges, top civil servants and National Health Service managers be frozen within weeks, the newspaper said, adding that union leaders have been privately warned that five million public sector workers can expect only minimal pay increases. It said Prime Minister Gordon Brown is looking at a "very big list" of defence procurement orders and plans to shelve or scrap capital projects to pay for new equipment for troops in Afghanistan, which is seen as a major political priority.

-----Seems trident & new aircraft carrier projects to be mothbolled before work starts on them.

http://economictimes.indiatimes.com/new ... 074289.cms

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Re: Perspectives on the global economic meltdown

Postby Paul » 01 Oct 2009 16:55

Bloodsucking Raj


Bloodsucking Raj

By Basharat Hussain Qizilbash | Published: October 1, 2009

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Almost two centuries of colonial rule has created a subcontinental mindset, which, till today, in both - India and Pakistan, enthusiastically defends the alien British rule. These apologists of the Raj are generally educated Indians and Pakistanis, the celebrated Sikh journalist, historian and a former legislator - Khushwant Singh being one of them. In Good things to the Raj times, written in the Hindustan Times some time ago, he nostalgically reminisced that "the British built us telegraph, connected our cities by roads, railways, laid networks of canal.... They started the process of industrialisation. There were fewer riots, bandhs and gheraos." Several liberal Pakistanis offer somewhat similar arguments in support of the white imperialists.
Let's be very clear about this British 'development' in India. Through a thousand threads of steel, the railway network was extended to the interior of India's peasantry in order to supply the needs of the capitalist market, particularly the growing demands of the English industry. The other objective was to fulfil their strategic military policies. Unlike America, where the railroad construction first ushered prosperity to the farmers and eventually contributed in making US a great industrial state, in India, the colonists purposely maintained feudalism to keep the peasants in feudal bondage. Instead of improvement, the plight of peasant became worse because he was forced to cultivate technical crops that were required in the market and thus had to buy even food for his family, which he formerly produced himself. How the railways failed to ameliorate the lot of the peasants can be imagined from the fact that every year the British government prosecuted 30,000 people for travelling without a ticket in the rails.

The laying down of canal network in Punjab - the agricultural heartland - was undertaken for two colonial considerations and not for the welfare of the farmers. As the population of the British industrial centres rapidly increased in the mid-nineteenth century, a need was felt for cheap food products and cotton supply. So rice and wheat were encouraged in Punjab for export to England. Similarly, due to prolonged Civil War in America (1861-65) the British factories could not obtain the American cotton. This made the imperial authority to force Indians to greatly increase the sown area of cotton. Those who boast of big industrial strides under the colonists probably don't know that India did not produce any means of production itself. The sum total of India's heavy industry included railway repair shops, a few kerosene cleaning factories, a handful of machine tool shops from the military point of view, weakly developed coalfields, a large iron and steel Tata mills at Jamshedpur and an American-owned automobile assembling plant.

Through a systematic design the development of India's local industry was held back by the banks that were almost entirely in the British hands. Instead of granting credits to Indian industrial enterprises, the banks financed those commercial ventures related to agriculture and trade, which brought quicker profits and constituted a large part of state's revenue. In plain words, the underlying principle of the entire economic policy of the imperial government with reference to India was to deepen her exploitation, increase her dependence on England and to impede her independent development.

Throughout her colonial existence, Indian exports exceeded imports. Even during the second year (1931-32) of the worldwide great economic depression, India's exports valued £120 million and imports stood at £92 million. A substantial part of her earnings was transferred back to England every year for the payment of wages of the British officers and garrison, for war materials, for pensions and leave allowances to officers of the army and the civil service. According to one conservative estimate, the total annual 'tribute' paid in this way by India to British imperialists was about £15 million in the 1890s but it gradually rose to £35 million in the 1930s. Now, who can say that the Raj was not bloodsucking?
Historically speaking, the people of the sub-continent keep gold and silver in reserve to meet financial crises within families. In the days of the great economic depression, the pound sterling collapsed. To repay the British loans to France and the US the colonial government forcibly exported Indian gold to London to the tune of 118 million dollars in 1931 and 180 million dollars in 1932. The prosperity of the colonial state chiefly rested on the labour of Indian workers, who were exploited to the hilt. No general wage level was set for the workers. Child labourers of ages 4 to 10 years were a common sight on the plantations where almost all of them suffered at one time or the other from malaria, dysentery and tuberculosis. The working day varied from ten to sixteen hours without weekly rest days and yearly holidays. The minimum wage on which a family of six persons had to survive was one rupee a day. In Madras, 25000 one-roomed dwellings sheltered 150,000 persons whereas 80 per cent of the workers used streets to supplement their sleeping accommodation. And the workers did protest against their exploitation. India was gripped by a strike wave in late 1920s and early '30s. In July of 1929, about 408,000 workers went on strike. Earlier on, in 1928, not only that 150,000 Bombay textile workers went on strike but because of 'gheraos' and 'bandhs' in Tata Steel Works, Calcutta jute mills and the Southern Indian Railway, approximately thirty-one million working days were lost in that particular year. Whereas in 1930 and '31, the workers of Bombay, Sholapur, Nagpur and Kalak fought pitched battles with the police.
Sadly, we still sing hymns in praise of the Raj.
Email: qizilbash2000@yahoo.com_________________




No wonder UKstan's is pawning it's undies and banian to keep head above water....but will keep making Bond movies to protect their H&D. Bloody scumbags!

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 01 Oct 2009 19:56

New credit squeeze could hit UK, warns IMF

A second credit squeeze and a £200bn national "funding gap" threatens to sabotage the recovery :?: in the British economy, the IMF warned yesterday.

In its latest Global Financial Stability Report, the fund said that a combination of a soaring government deficit and the borrowing needs of British companies and consumers – coupled with a still broken banking system – would leave the UK with a national "funding gap" of 15 per cent of GDP, or around £200bn next year, much higher than in either the US or the euro area.


The so-called UKstani khanomic recovery is an eyewash. Take away their QE and stimulus and see whats left. The story repeats in the rest of the west, only the labels change.

The IMF also pointed out that the UK's continuing need to borrow from abroad to plug this gap leaves the nation exposed to sharp changes in investment sentiment. Should such a change occur, says the IMF, then sterling could fall even further and interest rates would have to rise before the recovery :?: had been fully secured. UK banks are also exposed to relatively large foreign loan books.


Therein lies the rub. The khanomic muscle of countries shows up in the interest rates at which outsiders are willing to lend them money. ANd UQstan has long ensoyed quite low rates indeed. Once rates rise, disaster strikes. The debt service burden on loads of debt becomes crushing. Drastic cuts have to be made to accommodate interest payments. STory of what happened to the turd world under IMF direction during the contagion. And to boor iceland now.

BTW buried deep somewhere in the story lies the story of precisely how Sri UQstan is financing the loincloth around its musharraf.
A new scary possibility is "the Bank of England would need to continue with its programme of buying gilts to help avert such a situation. He added that Britain was likely to face "difficulties" in meeting the demand for credit."


See, gubmint raises debt by selling securities that its own BoE then buys up in return for freshly minted and printed cash. Quant easing only. Jai Ho.

Oh, there's more...this farticle is a fun read folx....

However, the fund also took the opportunity to say that the world economy had "turned a corner" and downgraded its global estimates for banking losses from $4trn to $3.4trn.


Wow. and how did the fund estimate that figure? Givent hat mark to market (read, mark to myth) FASB rules are in effect, and even the bankers don't know how deep in doodo they are, how did the bank drop this gem outta its mush?

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 02 Oct 2009 03:27

i still think spending will keep rising sluggishly throughout this year and will increase in intensity by next year but it might end up closer to the bottomed out levels of this year than to the steroid levels of pre-recession. i think this will be one of the defining features that will shape the next decade and beyond of world history when looked back onto it from the future in 50 years.


Interesting.

When you say 'spending', I presume you mean consumer spending? Or is it gubmint spending - which is already on steroids and which needs ever higher doses to get that ol' high.

IMO, what we are witnessing is a generational shift - a near permanent change in consumer attitudes towards spending. This will last a generation plus. Just like the gen that was scarred from the great depression never became spendthrifts later in life. The milleniels and gen Y now will likely never become the spenders the boomers were.

Oh, and I totally buy the prognosis in Europe. IN europe unemp ranged 8%+ even during boomtime. 10% is not too bad for them though its politically dicey in the khanate.

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Re: Perspectives on the global economic meltdown

Postby kmkraoind » 02 Oct 2009 15:40

Toyota Pres: Strong Yen To Hinder Return To Profit

The dollar slipped to an eight month low of Y88.23 on Monday and has remained below Y90 for most of the week. A strong yen reduces profits that the company earns overseas when translated into yen.


It seems Japanese are also taking a leaf from Chinese books. May be it items to expel members from WTO who manipulate their currencies to their advantage.

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Re: Perspectives on the global economic meltdown

Postby munna » 02 Oct 2009 18:30

Proverbial thing hits the fan! U.S. Employers Cut 263,000 Jobs, More Than Forecast
Bloomberg wrote:Employers cut more jobs than forecast last month and the unemployment rate rose to a 26-year high, calling into question the sustainability of the economic recovery
Payrolls were forecast to drop 175,000 in September after a 216,000 decline initially reported for August, according to the median of 84 economists surveyed by Bloomberg News. Estimates ranged from decreases of 260,000 to 100,000. Job losses peaked at 741,000 in January, the most since 1949.

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Re: Perspectives on the global economic meltdown

Postby Kakkaji » 02 Oct 2009 21:38

Detroit: Too broke to bury their dead

DETROIT (CNNMoney.com) -- At 1300 E. Warren St., you can smell the plight of Detroit.

Inside the Wayne County morgue in midtown Detroit, 67 bodies are piled up, unclaimed, in the freezing temperatures. Neither the families nor the county can afford to bury the corpses. So they stack up inside the freezer.

"It's devastating to a family not to be able to take care of their own," said Darrell. "But there's really no way to come up with that kind of cash in today's society. There's just no way."

The number of unclaimed corpses at the Wayne County morgue is at a record high, having tripled since 2000. The reason for the pile-up is twofold: One, unemployment in the area is approaching 28%, and many people, like the Vickers, can't afford last rites; two, the county's $21,000 annual budget to bury unclaimed bodies ran out in June.

"One way we look back at a culture is how they dispose of their dead," said the county's chief medical examiner, Carl Schmidt, who has been in his position for 15 years. "We see people here that society was not taking care of before they died -- and society is having difficulty taking care of them after they are dead."

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Re: Perspectives on the global economic meltdown

Postby svinayak » 02 Oct 2009 23:30

we are at an INFLECTION point re economy/Stock mkts

Fed is clueless and no bullets left! Fact check: Video from 2005-6 from Bernake is very educational

Another Crisis is Brewing

A commercial real estate crisis is brewing and Bernanke either does not see it or will not admit it. Expect to see dozens of small to mid-sized regional banks go under as a result.

Why Stop There?

There are potential financial crises related to the jobs, currencies, banks, commercial real estate, pay option ARMs, Fannie Mae, pension plans, state funding issues, global trade, protectionism, credit card defaults, deficit spending, unfunded liabilities, derivatives, and a still rising unemployment rate.

Here a the key point to remember: Neither the bailouts nor the stimulus packages solved any structural problems related to the above...

More details at:

http://globaleconomicanalysis.blogspot. ... ually.html

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Re: Perspectives on the global economic meltdown

Postby Ameet » 03 Oct 2009 04:06

September payrolls drop 263,000, more than expected

http://www.usatoday.com/money/economy/2 ... sept_N.htm

The carnage is even worse than originally believed. BLS on Friday revised downward its estimate for employment as of last March by 824,000. That means an average of an additional 69,000 jobs a month were cut in the year starting in March 2008.

"It paints an even darker picture of the recession," Ryding says.

The unemployment rate for adult men hit a record 10.3% in September while teenage unemployment was at a record 25.9%. And 5.4 million Americans, or 35.6% of those unemployed, were out of work at least six months — both records highs.

Of equal concern, the so-called underemployment rate — which includes the unemployed, people working part time even though they want full-time work, and those who stopped looking for work — also rose to a record 17%, highest since 1994.

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Re: Perspectives on the global economic meltdown

Postby Amit Singh » 03 Oct 2009 04:08

prad wrote:Amit Singh:

i underestimate nothing. US is a $14 Trillion economy. and had 786 Billion simulus. there are many who argue the effectiveness of the stimulus and i personally think that not all of the stimulus was actually stimulus (the purpose of the stimulus was to create immediate jobs and boost economic activity in the short term). regardless of the merits of the stimulus, GDP growth rate of 1st quarter and 2nd quarter clearly shows a marked improvement of the economy. Q1 contraction was 5.5% while the revised Q2 contraction was only 0.7%.

now compare that to china. not only is Chinese economy much smaller than the US, the stimulus it got was almost equal and thus much higher in terms of percentage of GDP. and yet growth didn't return to 9 - 10%. when you give a stimulus of 20% of GDP and yet can't manage to go back to normal growth levels, what does that say about the economy?

and as such, whatever the effects of the stimulus might have been, it is only in the short term. Wen Jiaobao, the premier, has already said that they will continue the stimulus effort well into 2010. without the US consumer picking the slack up again, China's massive export industry cannot go back to pre-recession levels without massive govt subsides year after year. how long will China continue this?

Prad, I'll sum up this post of yours in two words: Wishful thinking.

If you take a look at the pie-chart I posted summarizing the breakdown of PRC's stimulus budget, you'll see that not all of it is going towards stimulating the economy directly and will not see results immediately. Heck, some of them, i.e. infrastructure development and pension plans etc are more towards welfare than injecting the economy. They wanted to cash in on the term "Stimulus package" to attract more FDI, because the breakdown suggests that only 45% of the actual stiumulus money is going towards loans and tax credit.

45% of 500 billion dollars = 225 billion dollars. So, they are spending around 9% of their GDP on low interest loans and tax rebates. And with that, they bounced back by 2.2% growth of their GDP, inspite of their economy being export based. This 2.2% increase in GDP growth was totally homebrewed! Now, as soon as US gets on its feet by the end of this year, it will increase by another percent or two to finally get back in the usual 9-10% range.

Moreover, the other sectors in the pie-chart shows that the money invested in infrastructure etc will contribute to growth gradually. Consider it more like a 5-year growth package plan. The term stimulus package in PRC's case is misleading.

prad wrote:as i've already said, China is going the way of the US Housing industry. but an even better example would be Japan in the late 80's and early 90's. China's banking system is eerily similar to that of the Japanese before the stagnation (pre-1990's). Chinese economy is running on extended life support that is much more expansive than what the US is going through.


Pure Speculation.

prad wrote:and the recession has also resulted in huge internal unrest. China downplays this factor and has been largely successful in their propaganda of presenting PRC as a unified country, but it is not the truth. in the coming years the internal situation will only worsen. on the surface it might seem like a minuscule matter but the entire agenda of the communist party revolves around maintaining its power by internal stability.


If you are talking about the recent Uighur unrest, that unrest is already dead. India on the other hand has far worse problems, the naxalites and the maoists threats. And these problems have been there forever. Yet India managed to grow at an impressive 7% for the last 5 years. So your point about unrest is moot.

prad wrote:and yes no country can keep growing indefinitely at 10% growth rates, especially for a country of China's size. normally when the downturn did start, it would be a normal economic cycle of ups and downs. but in china internal stability is everything, and when the bubble bursts it will have massive consequences for the country's entire political/power structure. this is where India is a much more stable country than China.


... Look at the bar graph in my post.

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Re: Perspectives on the global economic meltdown

Postby Amit Singh » 04 Oct 2009 03:17

prad wrote:Amit Singh:

so you actually believe the PRC when it says it is spending money on pell grants, health, pensions, "healthcare for newly unemployed", "preventive care", "repair public housing and energy efficiency systems", "weatherize modest income homes" (what the heck does that mean?), etc etc???


It shows. Visit the coastal cities and you will see how China's central planning is working. It is ruthless but it is efficient and it is marvelous. They are spending a lot of money on health care too, so that doesn't surprise me at all. I'm just not happy with giving it the name stimulus package because the sole reason for that is to attract FDI and thats cheating. The rest of the money should've been in a different program (welfare) and the 250 odd billion dollars should have been the actual stimulus package.

prad wrote:i myself find it highly improbable that any of this is happening. and the reasoning is simple: China never does what it says its doing. the entire stimulus package was an exercise in maintaining the massively inefficient state industries, especially in the interior (where the Politburo can't risk any of those industries going under for the fear of stoking internal unrest), and provide some relief for the labor market by building more roads and infrastructure. and i suspect much of the rest was actually a direct subsidy to the export oriented factories and industries. saying all those mushy things about pensions and healthcare is PRC way of saying "we need to keep our people heavily insulated from global reality to keep them pacified."


Again, a classic head in sand case which a lot of jingoistic Indians have adopted. Do you have proof that China is spending billions of dollars on your so-called "exercise in maintaining massively inefficient state industries"?

Your disbelief, suspection etc are all irrelevant and will not be entertained unless you back it up.

prad wrote:there comes a point when every additional dollar/yuan spent on roads is going to start giving less and less in return, and this point too PRC will soon reach. building roads and infra is good on temporary basis, but how long will they continue that without their economy's mainstary, the export industry, being in good shape?


Sure, they are not at that point yet. They remind me of the US during the world war 2, expanding massively and investing heavily in infrastructure from the Military-Industrial complex they created during WW2 and thereafter. They already are getting a ROI on their infrastructure by attracting the most FDI than any other developing country by a huge margin. What more do they need?

prad wrote:you might call it speculation, and yes it is speculation, but a speculation based on solid facts that very likely show a growing trend. without the US consumer piling debt like he was in pre-recession times, china's export market is prone to sustain some damage. and considering US consumer is paying off debt at record levels, and Europe and Japan aren't really in a happy mood either, how the heck is China's export industry going to survive without year after year of life support. the stimulus was intended just for this: a life support system for the manufacturing industry.


Nope, no solid facts, sorry. Just wishful thinking.

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 04 Oct 2009 05:24

Amit Singh,

Quit blowing your chinese masters.

The principal defect of the east asian mind is it's inability to abandon mercantilism. Why has japan been in a domestic recession since the early 1990s? Why do Asian countries have to sell stuff to the west?

Why can they not consume what they make? Could it be because they try to accumulate money in a system where accumulating money (as opposed to spending it) creates deflationary spirals?

Their brains still work as if the world was zero-sum. The technological changes in the last 100 (especially last 60) years have made the world non zero-sum. But asians think they are soo clever.
Last edited by archan on 04 Oct 2009 20:23, edited 1 time in total.
Reason: User warned. Unaaceptable language and personal attack. Continued violations will lead to a ban.

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Re: Perspectives on the global economic meltdown

Postby Amit Singh » 04 Oct 2009 15:04

ss_roy wrote:Amit Singh,

Quit blowing your chinese masters.

The principal defect of the east asian mind is it's inability to abandon mercantilism. Why has japan been in a domestic recession since the early 1990s? Why do Asian countries have to sell stuff to the west?

Why can they not consume what they make? Could it be because they try to accumulate money in a system where accumulating money (as opposed to spending it) creates deflationary spirals?

Their brains still work as if the world was zero-sum. The technological changes in the last 100 (especially last 60) years have made the world non zero-sum. But asians think they are soo clever.


{deleted}

Japan has been in a domestic recession because it doesn't have the requisite population base to support it's industrial base. Its a simple equation really {deleted}. I have been to Japan and I have seen them spend enough on everything. Also, population decline is not helping either.

As far as the mindset of asians goes, I'm not here to debate that. I don't give a rat's ass as to how a country's population thinks and nowhere in my posts did I mention anything about it. Find someone else to talk about that. Not interested. When you are ready to talk numbers, ring me up.
Last edited by Suraj on 05 Oct 2009 09:35, edited 1 time in total.
Reason: Harsh language deleted. User warned.

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Re: Perspectives on the global economic meltdown

Postby satya » 04 Oct 2009 17:38

There was an article in WSJ last week iirc on PRC's export industry's slowdown due to lack of US consumer demand & as an alternate they are looking at local PRC market but are facing twin hurdles : One , they lose their special status when they were 100% export oriented units thereby being able to import raw material at 0% custom duty & host of other tax rebates but the moment they look at domestic market , they lose this status making them face question of price & margin viability .Not many are finding it worth going for.........
Another issue not everything they export can find market among PRC consumers so not all export oriented industries can look at PRC market as an alternate to US market for products in both markets differ .

If we consider Japanese having a huge industrial base wrt population then in a sense PRC too face this problem with its 100% export oriented industries for they have 0 domestic consumer base for their products .
Its been more than century since we started hearing the lantern/ shoe/toothbrush sale syndrome about Chinese consumer & that legendary PRC consumer still has to come out for so far its as mythical as Dragon .
Retail sales have increased owing to massive discount coupons being given & auto sales thnxx to massive Govt. procurement program specially automobiles .
They have made strides but i have yet to see the legendary Chinese consumer , ain't century + time enough for us to put at rest this ghost ?
PRC can't forever continue its forced subsidized interest rate program where it has virtually forced the PRC citizens to deposit their savings at almost no interest rate . Its an irony for when it does so domestically its socialism & when Unkil pushed it now PRC cried foul !

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 04 Oct 2009 21:27

No east-asian society will rival the west until they consume what they produce, and abandon dog-eat-dog mercantilism.

Wealth is not money, but they are conflating the two. PRC is doomed unless they can change the mercantile mindset of their population- good luck with that!

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 04 Oct 2009 21:43

Amit Singh,

Your praise of PRC has three major problems:

1. You are not displaying the same skepticism and critical analysis for PRC data as you do for Indian data.

2. You are assuming that PRC is acting in the best interest of it's people, and that they will be able to pull of a 'new deal' in a world that is quite different from the 1930s.

3. You are linearizing trends. IMHO, that is the biggest problem with your grasp of the situation.

Having said that, you could do a wonderful job of covering Indian shortcomings in Asia Times and similar newspapers/websites. They pay brown people a lot of money to write what you have written here for free. :twisted:

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Re: Perspectives on the global economic meltdown

Postby svinayak » 05 Oct 2009 00:26

http://news.yahoo.com/s/ap/20091004/ap_ ... R0aW1lZm9y

Great time for US consumers: America is on sale



By RACHEL BECK, AP Business Writer – 2 hrs 10 mins ago

NEW YORK – There has never been a better time to be a consumer. America is on sale.
The Great Recession has caused massive job losses and hardship for millions, but it has also fostered a shoppers' paradise. Anyone who still has the means to spend can find unheard of deals.
Prices on everything from clothes to coffee to cat food are dropping, some faster than they have in half a century. Items rarely discounted — like Tiffany engagements rings — are now. The two biggest purchases most people make — homes and new cars — are selling at steep price reductions.
"This is the new normal," says Donald Keprta, president of Dominick's, a supermarket chain in the Midwest, which just cut prices by as much as 30 percent on thousands of items. "We aren't going back."

Consumers like Karen Wilmes, a mother of two in Hopkinton, R.I., relish the steals. During a recent trip to Shaw's Supermarkets, she bought a basketful of goods, including Eggo waffles, Kleenex tissues and Betty Crocker cake mix. The retail price: $63.89. Wilmes paid $7.31 by buying items on sale and using coupons.
"The deals out there are unbelievable," says Wilmes, 36, who writes the Frugal Rhode Island Mama blog, which tracks local and national bargains. "We can put the money I save toward something else."
And she's doing just that, but only when she can find another deal. Wilmes and her husband recently bought a Samsung television from Best Buy's Web site for $1,299, about $300 less than she found at other stores. She also got free delivery and another $13 back from ebates.com, which receives commissions from online retailers for directing customers their way.
What's happening now has been building for years. Wal-Mart Stores Inc. introduced "every-day low prices" many years ago. Amazon.com redefined the idea of bargain prices during the late 1990s when it helped introduce online shopping. After the 2001 recession, automakers introduced zero-percent financing to boost sales. McDonald's "Dollar Meals" made fast food even cheaper.
But until the Great Recession came along, consumers hadn't seen anything yet.
Last fall's financial meltdown triggered a plunge in stock prices and home values and wiped out 11 percent — $6.6 trillion — of household wealth in six months. It also put an end to easy credit, which had fueled the consumption that powered the economy for most of the decade.
Those who still have jobs don't want to spend as they once did. There is a new societal pressure to be careful and smart when buying almost anything. From Chicago's Miracle Mile to malls around Orange County, Calif., it was once a status symbol to trot around with armloads of shopping bags with designer names on them. Now, it's considered ostentatious.
Traditionally, manufacturers and retailers lowered prices to clear inventory. Today, they're cutting prices because consumers are demanding it. If it lasts, the ramifications will be wide-ranging.
"There's almost a new morality to spending," Liz Claiborne Inc. CEO Bill McComb told an investor conference last month.
The bargains being offered at the Garden State Plaza in Paramus, N.J., make it seem the day after Christmas. But it's only a weekday in September. The deals start at 25 percent off and keep getting better. Neiman Marcus, Forever 21, Ann Taylor, Macy's, Gap — across the retailing spectrum there are promotions.
Retail sales remain sluggish, and more than half of the people surveyed recently by America's Research Group and UBS said they are shopping less. But when they do shop, most go to stores with lower prices or wait for sales before returning to their favorite retailer, according to the survey.
Dave Ratner sees this price chase first hand. His four-store chain in western Massachusetts, Dave's Soda & Pet City, has never been so focused on promotions and low prices. During the past year, customers stopped buying $50 bags of premium dog food and "special" $10 pet treats. Pet-related Halloween merchandise usually sells well, but he isn't stocking any this year because he doesn't think people will buy it. Instead, he's offering big discounts on cheaper brands of pet food.
"It's killing my profit margins, but if you don't offer specials and lots of promotions, you aren't operating in the current world," he says.
Great buys are not exclusive to retailing. The government's Cash for Clunkers program is over, but more than half of car buyers still get a cash rebate, according to J.D. Power & Associates.
Hotel rooms cost travelers nearly 20 percent less, on average, than last year, the biggest decline since Smith Travel Research began collecting data in 1987.
Home prices have dropped 30 percent, on average, from the peak in 2006. In some markets, they're down more than 50 percent. Homes in parts of Detroit are cheaper than a new car.
Overall, prices are tumbling at the fastest rate in decades. The government's Consumer Price Index, which measures the average price of goods and services purchased by households, has fallen 1.5 percent over the last 12 months. The reading for July showed a 2.1 percent annual decline, the biggest since 1950.
The largest decline has been in energy prices, but other areas have fallen, too. Among them: food, appliances, furniture, jewelry, sporting goods, audio and visual equipment and apartment rents.
People like Bruce Halkin, 64, an advertising executive in Aventura, Fla., are benefiting. He will soon close on a three-bedroom home in nearby Boca Raton on a golf course. He's paying $335,000, 8 percent below the $365,000 asking price. The sellers bought the home for $410,000 in 2006 and spent $75,000 on renovations.
Halkin's deal-chasing doesn't stop there. On a recent trip to Macy's, he picked up two pairs of Ralph Lauren Polo shorts, a Polo shirt and a hat for $50. At full price, the bill would have topped $200.
"I've learned to buy when I see deals not necessarily when I need anything," he says. "Thankfully, the bargains keep coming."
Those with goods and services to sell hope that the discounting bolsters sales, which would help get the economy chugging along again. Consumer spending accounts for 70 percent of the economy.
But ever-lower prices have risks, too. The more shoppers expect prices to fall, the less they shop until prices drop. It becomes a self-fulfilling prophecy that forces companies to keep cutting. That reduces profits, making it less likely companies will hire workers or raise wages. Economists say the worst scenario would be a deflationary spiral, which Japan has been stuck in for the last two decades.
"The Japanese government has been trying to stimulate the economy there since the 1990s," says Gary Shilling, who runs an economic consulting firm in Springfield, N.J., and has written two books on deflation.
The U.S. economy is not near such an extreme. But what's emerging is the realization that pricing is being redefined.
Dominick's supermarkets announced in late August that prices on a range of items in its 81 stores would fall by as much as a third. Included in the cuts were both private-label goods and national brands, such as Coffee Mate creamers, Bumble Bee tuna and Tombstone frozen pizza.
Profit margins at grocery stores typically are just 2 percent. Dominick's hopes the low prices will attract customers, who will also buy enough full-priced items to make up the difference.
Other companies are assessing pricing as never before. Procter & Gamble long dismissed the idea of cutting prices for its stable of well-known brands, including Tide detergent and Gillette razors.
In September, the world's largest consumer products maker relented. It announced price cuts across 10 percent of its global line and plans to increase its promotions emphasizing value.
Others are learning that aggressive price cutting can move merchandise. Sony cut prices on its PlayStation 3 video game console by $100 to about $300 in August, and sales shot up 300 percent during the following three weeks.
Dick's Sporting Goods sold boxes of a dozen Nike One golf balls for $42.99 at the start of the year. The balls are used by Tiger Woods and other professional golfers, but sales were lackluster. Now, Dick's offers two boxes for $59.
Demand has soared.


Neshant
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Posts: 4846
Joined: 01 Jan 1970 05:30

Re: Perspectives on the global economic meltdown

Postby Neshant » 05 Oct 2009 03:20

Prices on everything from clothes to coffee to cat food are dropping, some faster than they have in half a century.


Its not true. Prices are not falling except on real estate and some luxury items which were (and still are) grossly over priced to begin with.

Instead salaries are stagnating, interest on what you've saved is essentially zero after bernanke robs savers via the printing press and 0 interest rates. What's falling is purchasing power and job prospects. On top of that, more taxation under various creative schemes to disguise the fact that they are taxes are on the way.


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