Perspectives on the global economic meltdown

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Re: Perspectives on the global economic meltdown

Postby arnab » 22 Oct 2009 06:45

prad wrote:
there isn't much attention being paid to this coming population crisis. .


I don't think this is correct - demographic issues have been clearly identified as the most pressing policy issues in all OECD countries.

For USA:

http://www.census.gov/Press-Release/www ... index.html

Also read the migration impact from 'South asia' in response to ageing population

http://www.oecd.org/dataoecd/3/38/43484309.pdf

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 22 Oct 2009 07:16

Goldman Sachs is sometimes called as Gollum Sachs.

SEC Hires Goldman Sachs executive :oops: There are 2 more blogs by the same author ripping Gollum Sachs. Sad thing is these bankers can take everybody down with them.

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Re: Perspectives on the global economic meltdown

Postby Chinmayanand » 22 Oct 2009 16:25

Dollar hegemony for another century


Dollar hegemony for another century
By Ambrose Evans-Pritchard Economics Last updated: October 21st, 2009
Let me stick my neck out.
The dollar will still be the world’s dominant reserve currency in 2030, sharing a degree of leadership in uneasy condominium with the Chinese yuan. It will then regain much of its hegemonic status as the 21st century unfolds. It may indeed end the century even stronger than it was at the start.
The aging crisis in Asia — and indeed the outright demographic implosion in Japan and China, not to mention China’s water crisis — will soon be obvious to everybody. Talk of Oriental supremacy will start to sound overblown at first, and then preposterous.
Japan is about to go bankrupt. It is on the cusp of a fiscal crisis that will change perceptions of Asia dramatically. The IMF says gross public debt will reach 218pc of GDP this year. This is compounding very fast. It will be 246pc in 2014.
The Hatoyama government is spending as if there is no tomorrow. It plans to issue ¥50 trillion or $550bn in fresh bonds. I have no idea when this will spiral out of control. It could take another two or three years. It could start next week. Yes, I know that Japan has been borrowing merrily at ever lower rates for 20 years without the sky falling. The 10-year yield is 1.3pc. What happens when it rises to global levels of 3pc to 4pc? People made the same sort of arguments about the global boom before it suddenly tipped over.
This blog does not attempt market timing, nor does it offer investment advice. But I am absolutely certain that pundits consigning the dollar to its death have missed an even more dramatic currency and debt story in Japan. The yen will top ¥200 to the dollar before this is over. Jim O’Neill from Goldman Sachs has already begun to hint at this.
Apologies to readers who feel confused about my view on the dollar. I have written a string of NEWS pieces over recent weeks quoting the currency experts and Asian officials slamming America, or exploring the dollar demise thesis.
People assume that I share these views. I do not. Furthermore, I suspect that at least some of China’s grumbling about the dollar slide over recent months has been a ruse to lower the yuan (pegged to the dollar of course) against the euro, yen, and even sterling. The goal is to protect export margins. (Surely premier Wen Jiabao knows that China’s $1.6 trillion or so invested in US bonds is a sunk cost. Forget about it. The holdings are the consequence of their own currency manipulation in the first place.)
The fact that Asian central banks are accumulating $600bn or more a year in reserves by running huge trade surpluses is proof enough that their (mostly rigged) currencies are undervalued by 30pc to 40pc against the West. To that extent, I agree entirely with HSBC currency guru David Bloom that this is untenable. If these countries continue to resist currency appreciation they will overheat and succumb to asset bubbles — if they haven’t already in China.
Where I am less sure is that this will necessarily be resolved by a falling dollar. The evidence so far is that Asia will put off the day of adjustment as long as possible because they are addicted to mercantilist export strategies — and export oligarchs control the political systems (bar Japan). In which case they will lose competitive edge the old-fashioned way, by wage inflation for year after year until the world comes back into alignment. If so, the dollar will not fall at all. It may rise.
Nor do I really agree that this is in essence a story of the two sick sisters: Britain and the US.
They are certainly sick. But as readers know, I think much of Europe is equally sick — Spain, Italy, Greece, Ireland, the Baltics, are even sicker — even if the lag-times are longer. The IMF keeps telling us that Europe has failed to come clean on its bank losses. Germany’s BaFin regulator says the same thing. Are they wrong?
It all has echoes of the early 1930s when the Anglo-Saxons were crushed in the first two to three years, and the French bloc was crushed over the subsequent three years. What goes around, comes around.
Charles Dumas from Lombard Street Research says Washington must be chuckling as the weak dollar gives it time to rebuild America’s industrial core. The “inflationistas” — ie, those convinced that the dollar is being debauched despite the fact that core inflation in the US is falling and that the M3 money supply is contracting — are playing straight into the hands of the United States.
Nobel Laureate Gary Becker told me a few weeks ago that America’ spectacular gains in productivity – growing at a trend rate of 2.25pc to 2.5pc — is laying the foundation for a much stronger US recovery in the long-term than most people seem to realize. Compare that with 0pc to 1pc for the eurozone. In Italy it is negative.
The UN expects America to add roughly 100m people by 2050, keeping its age balance in relatively good shape through a mix of immigration and a healthy fertility rate — now 2.12 live births per woman, still above replacement level. This compares to: Taiwan (1.13), Korea (1.2), Japan (1.22), Ukraine (1.25), Poland (1.27), Spain (1.3), Italy (1.3), Russia (1.4), Germany (1.41), China (1.77), Britain (1.96), and France (1.98). Some of this data may be slightly out of date, but the picture remains valid.
Professor Becker said a collapsing birth rate is extremely hard to reverse, and the cultural effects are insidious. Old societies are status quo. They are slow to embrace new technologies. Young minds are the source of hi-tech invention.
The EU is fully aware of the danger. “What is at risk in the medium to long run is nothing less than the sustainability of the society Europe has built and the viability of its civilisation,” said an EU report (initially suppressed) by former Dutch premier Wim Kok as long ago as 2004. Nothing has been done since despite endless warnings from the Commission.
China’s work force will peak in absolute terms in six years, and then go into sharp decline. I have no idea how people square this with claims that China will soon replace the US as world hegemon. The stark reality is that China will hit a Japanese-style demographic crunch before it becomes rich. Sheer size will give it weight. But mastery?
Of course, if the US were stupid enough to enact the 10-year spending plans projected by the White House — with a deficit of $1.9 trillion in 2019 on Congressional Budget Office estimates — the country will be ruined. I do not think America has so far lost its senses that it will commit suicide in this fashion. In any case, the bond markets will react long before we get there. They will force a change in policy. That change will imply higher US savings, and less import growth. The export surplus powers that live off America’s market are going to take it on the chin.
At the end of the day, America is a unified nation forged by wars, under the rule of law, with a (largely) unifying language and patriotic creed, and one of the oldest and most deeply-rooted democracies in the world. As the Supreme Court demonstrated during Watergate, it can break presidents who violate the law.
It is often stated that a currency reflects the strength of an economy over time. Actually, it reflects the strength of a society. Who really thinks that Europe’s old-aged home is a better bet than America, even if they can hold the euro together as the gap widens further between Germania and Club Med? Or thinks that China’s half-reformed Communist regime is ready for global leadership. Remember the little girl in a red dress with pigtails who `lip-synched’ the opening ceremony of the Beijing Olympics? Believe what you will.

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Re: Perspectives on the global economic meltdown

Postby Chinmayanand » 22 Oct 2009 16:35

Goldman should be allowed to fail { Tathashtu , Evamastu }

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 22 Oct 2009 17:16

^^ Good stuff from AEP. Good counterpoint and view.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 22 Oct 2009 18:26

India should be very careful that the banking & bullshi&&ing "industry" does not hijack the real economy and start living like a parasite off it. There is nothing this so called industry produces other than scams.

This is the inevitable consequence of the fiat system which is based on fraud. Its designed to separate a person from the fruits of his labor by having someone else control the fruits by proxy and appropriate it to themselves.

--------------

Inequality is good, says Goldman chief, echoing Gordon Gekko as he defends huge bank bonuses

http://www.dailymail.co.uk/news/article ... z0Ud4yQhO2

The vice-chairman of Goldman Sachs has launched an astonishing defence of bumper bonuses just a year after bankers brought the world's economy to the brink of collapse.

In a speech likely to recall fictional banker Gordon Gekko in the film Wall Street - whose mantra 'greed is good' came to sum up the excesses of the 1980s - Lord Griffiths claimed taxpayers should 'tolerate the inequality'.

And he insisted that banks should not be ashamed of rewarding staff.

Last week, Goldman Sachs provoked anger after revealing that it planned to lavish a record £13.4billion in pay and bonuses on its staff.

Around 5,500 of its employees work in London and are in line to pocket an average of £440,000 each after the bank revealed a sharp rise in profits.

Lord Griffiths, who was speaking at a debate on ethics held at St Paul's Cathedral, said: 'We have to accept that inequality is a way of achieving greater opportunity and prosperity for all.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 22 Oct 2009 18:35

Hari Seldon wrote:^^ Good stuff from AEP. Good counterpoint and view.

Emmandi ila chepathaaru? For him Asia means - China and Japan. Not one word about the other 1.2billion pound Gorilla in the region. No doubt all these experts keep missing the bus.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 22 Oct 2009 18:42

Neshant wrote:India should be very careful that the banking & bullshi&&ing "industry" does not hijack the real economy and start living like a parasite off it. There is nothing this so called industry produces other than scams.

Neshant: You da man. You said it best. I so often see people talk about economy and they are really referring to the stock market. Stock market might be an indicator, but people get so caught up in the hype they miss what is in the books - the difference between business cycle and market cycle. Instead of saving institutions we need to save the people; especially when some of these institutions act like parasite.

Instead of the economy working for people, it is people who are working to keep the economy moving.

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Re: Perspectives on the global economic meltdown

Postby svinayak » 22 Oct 2009 19:02

http://www.ritholtz.com/blog/2009/10/ni ... he-dollar/

Niall Ferguson: China Is Already Dumping the Dollar

Wake Up Washington! China Is Already Dumping the Dollar, Niall Ferguson

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Re: Perspectives on the global economic meltdown

Postby svinayak » 22 Oct 2009 19:05

durgesh wrote:Goldman should be allowed to fail { Tathashtu , Evamastu }

http://www.ritholtz.com/blog/2009/10/fr ... e-warning/


In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation’s worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

“I didn’t know Brooksley Born,” says former SEC Chairman Arthur Levitt, a member of President Clinton’s powerful Working Group on Financial Markets. “I was told that she was irascible, difficult, stubborn, unreasonable.” Levitt explains how the other principals of the Working Group — former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin — convinced him that Born’s attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was “clearly a mistake.”

Born’s battle behind closed doors was epic, Kirk finds. The members of the President’s Working Group vehemently opposed regulation — especially when proposed by a Washington outsider like Born.

“I walk into Brooksley’s office one day; the blood has drained from her face,” says Michael Greenberger, a former top official at the CFTC who worked closely with Born. “She’s hanging up the telephone; she says to me: ‘That was [former Assistant Treasury Secretary] Larry Summers. He says, “You’re going to cause the worst financial crisis since the end of World War II.”… [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.’

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. “Born faced a formidable struggle pushing for regulation at a time when the stock market was booming,” Kirk says. “Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves.”

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

“It’ll happen again if we don’t take the appropriate steps,” Born warns. “There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience.”

Now we are getting down to the nitty gritty. That nauseating feeling that the US government is a branch of the financial heirarcy has been overcoming me lately. It will be good to see the who sewed the seeds of this mess we used to be proud of.
We must first reshuffle the deck by firing those that screwed up the worlds economy , they must go.

My call to all is : Fire The”BEST AND BRIGHTEST” Now!”



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Re: Perspectives on the global economic meltdown

Postby svinayak » 22 Oct 2009 19:30

Greenspan believed in Ayn Rand (Separation of Govt and economy).

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 22 Oct 2009 20:37

^^^
No he is not.

He talks about aging crisis, China's water crisis, Japanese spending, Asian banks accumulating reserves in dollar, he refers to two sisters USA and UK ( a parallel to China and Japan), 1930s politics, American population {he even talks about population of several other countries}, birth rate, China's workforce peaking, America as an unified nation {is he saying something about China here?}.

India is #5 w.r.t foreign currency holding, though very low compared to China(#1) and Japan (#2). The only other Asian country ahead of India is Taiwan. The other country ahead of India is Russia. China's reserves are almost 10 times that of Indias's reserves.

Don't tell me India's growing economy, however far it is right now from the leaders, its growing population, large workforce (English speaking) have zero impact on these big players.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 22 Oct 2009 21:10

Niall Ferguson:


Niall ferguson is a fraud. He was pumping bailouts, shilling for banks & cheer leading the federal reserve, bonuses...etc just a while back. Now he's singing a different song. Sounds to me like he's sees what's coming both to the economy and his reputation and is playing the other side of the isle. The guy has zero credibility.

He pumps his Harvard university credentials except the eggheads managing Harvard U's funds have lost hundreds of millions in bad investments. His book entitled "The Ascent of Money" should be entitled "The Descent of Harvard".

No doubt these slimeballs will slime their way into decision making circles after the collapse has occured to a) claim that they predicted it all along and b) resurrect the same fradulent system with a bunch of fancy jargon designed to promote obscurity.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 22 Oct 2009 21:19

SwamyG wrote:Emmandi ila chepathaaru? For him Asia means - China and Japan. Not one word about the other 1.2billion pound Gorilla in the region. No doubt all these experts keep missing the bus.


Ille SwamyG aiya. Appidi illai. The story of booms, bubbles and busts clearly shows that not only do herd investors jump onto bubbles at their peak, they also tend to miss the next big things zimbly because they haven't learnt to see well enough at new things.

I'd rather such assperts miss the India story developing. It gives us boor SDREs a chance to invest our monies and watch it grow before a global deluge raises everything and inflation to crazy levels.

Besides, there's another gr8 reason for AEP to ignore yindia in that piece, in particular. The potshots he takes at prc and japan zimbly fail to apply against yindia. In fact he'd be hard to come up with a good reason to spoil yindia's party short of the slumdawg-$2/day line, IMHO.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 22 Oct 2009 21:22

Atlana? You make some good points on why it is nice that he missed out India. You are a shrewd thinker.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 22 Oct 2009 21:29

Some propaganda cartoons :

Why you need to pay your Taxes :
http://www.youtube.com/watch?v=dfwZNomxsNg

Why you should love Capitalism :
http://nationaljuggernaut.blogspot.com/ ... -1948.html

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Re: Perspectives on the global economic meltdown

Postby svinayak » 22 Oct 2009 21:51

Neshant wrote:

Niall ferguson is a fraud.

He is a economic hitman from britain

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Re: Perspectives on the global economic meltdown

Postby vera_k » 22 Oct 2009 22:15

I have a bad feeling that the decline in economies worldwide is going to be a disaster for India. One of the commonly trumpeted headlines has been how GDP growth of 8% was needed to reduce poverty in India. Unfortunately, now for 2 years the economy has grown below 7%. Which likely means that as an aggregate, poverty reduction is getting delayed in the best case or getting reversed in the worst case.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 22 Oct 2009 22:22

^^^
Which likely means that as an aggregate, poverty reduction is getting delayed in the best case or getting reversed in the worst case.

If one looks at the Indian Economy thread, it is difficult to believe your above line. So can you elaborate and give your thoughts on why that is happening? TIA.

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Re: Perspectives on the global economic meltdown

Postby svinayak » 22 Oct 2009 22:30

vera_k wrote:I have a bad feeling that the decline in economies worldwide is going to be a disaster for India. One of the commonly trumpeted headlines has been how GDP growth of 8% was needed to reduce poverty in India. Unfortunately, now for 2 years the economy has grown below 7%. Which likely means that as an aggregate, poverty reduction is getting delayed in the best case or getting reversed in the worst case.

You are right mostly.
External trade will stagnate and global economy will fragment into blocks after 2015
India will have trade only with smaller nations.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 22 Oct 2009 22:58

External trade will stagnate and global economy will fragment into blocks after 2015


Expect the rise of protectionism too either overt or covert ("climate change"..etc).

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Re: Perspectives on the global economic meltdown

Postby vera_k » 22 Oct 2009 23:51

SwamyG wrote:If one looks at the Indian Economy thread, it is difficult to believe your above line. So can you elaborate and give your thoughts on why that is happening? TIA.


As this article claims, 8% growth is necessary for poverty reduction. I used to be skeptical of this assertion, but if we see what happened back then, the economy grew, but not by enough to satisfy most people. The government of the day was eventually voted out. And before then, there was a period of political instability in the 1990s when the economy again did not grow by 8%.

Flash forward to 2009, and we have statements from the present government about how they are focused on growing the economy faster, even at the cost of tolerating inflation. The ony way this makes any sense is if the existing 6-7% growth rates are not seen to be enough to improve things for the people of the country.

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Re: Perspectives on the global economic meltdown

Postby svinayak » 23 Oct 2009 01:02

Dont quote BBC articles. They are outright liars and they misrepresent India always.

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 23 Oct 2009 01:27

Let us leave out the governments of the past and present, as politicking will cloud the issue. India was growing at about 3% for several decades, then 1991 happened and after a decade or so we started to move fast; and now after this meltdown we seem to have settled down around 6.5 to 7.5%. As mentioned by several people, we see progress/development at the village, town and city level.

IMF continues to seek privatization of government enterprises. I don't see why government enterprises that are making money and sustaining themselves should be privatized. As long as they are competitive with the private entities, they act as a good balance. Gurus here will tell us how not to trust IMF. They have very little credibility because of their double-standards. I think Hari had posted couple of links before on IMF and ithiyadi.

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Re: Perspectives on the global economic meltdown

Postby Suraj » 23 Oct 2009 01:31

The article in question describes the issue in a very crude manner. To be clearer, a few important metrics are the rate of annual potential workforce growth, i.e. number of people who are now of employable age, with utilizable skills, and on the other hand, the rate at which employment grows to accomodate them in the workforce. For the sake of brevity, this has been reported as 'must grow at 8% to reduce poverty', with the implication being that the 8% growth rate provides sufficient rate of job creation to absorb the growing workforce. However, it doesn't directly mean that without 8% growth, India will be poorer, and I don't think 6-7% growth under the current circumstances will be a disaster.

Ideally you want the fastest possible level of sustainable growth. GoI could theoretically raise growth through even more massive deficit spending, but that would not be sustainable. Under the circumstances, I think our economy has been quite resilient. Q2 economic performance has been possible from all indicators, except for falling exports. The only way to support exports is to diversify our export basket further, and keep the Rupee stable so that exporters do not have to face too much volatility; more than a strong currency, it is a volatile currency that imposes costs.

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Re: Perspectives on the global economic meltdown

Postby Katare » 23 Oct 2009 01:42

X-post
China's 3Q growth accelerates to 8.9 percent pace

"I never trusted what the economists were saying on TV about the recovery until our orders doubled last month. Now I'm convinced," said Zhang Yizheng, general manager of Shanghai Rising, a trading company that deals in plastic pipes used mainly in vehicles.

"Our orders from car makers, electric equipment makers and construction companies tell me that their business is returning to normal, too."


Leading indicators signal growth, but jobs scarce

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Re: Perspectives on the global economic meltdown

Postby SwamyG » 23 Oct 2009 01:49

Uh ho...vera look what you did. You brought gurus like Suraj and Katare into this thread. :rotfl:

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Re: Perspectives on the global economic meltdown

Postby Neshant » 23 Oct 2009 08:28

the good news is that goldman sachs employees can retire wealthy.

----

October 22, 2009

Survey: Lengthy recovery results in pessimism

The stock market's moving up and some economists are declaring an end to the recession. So, why are people still so pessimistic?

A new national survey says the reality has sunk in that true financial recovery for most people won't come soon. As a result, consumers aren't very interested in spending money, they've concluded retirement is even further away and they're increasingly skeptical that Social Security will be there when they need it.

The survey by Sun Life Financial Inc. shows 77 percent of adults between 18 and 66 say they're cutting spending, that's a 10 percent increase from a similar survey completed earlier this year.

Of those cutting spending, nearly eight in ten are spending less on entertainment and eating out, and more than half have put off a home improvement project or buying a car.

What's more, the bad news for retailers is that 60 percent said they will spend less on holiday shopping.

"Americans are looking at all different aspects of their lives and trying to figure out how they can secure a financial future given the economic factors that they're living with," says Julie DiCarlo, a Sun Life Financial spokeswoman.

The survey results are supported by report from the Bureau of Economic Analysis released on Friday that showed the personal savings rate in the second quarter increased to 4.9 percent, up from 3.7 percent in the first quarter.

The recession and stock market collapse of the past year, and its impact on retirement savings has translated into a strikingly more pessimistic mindset.

More than half of those surveyed — 55 percent — said they will still be working at age 67, that's up from 52 percent a year ago. In the recent survey 28 percent said they expect to work full-time past age 67, up from 19 percent a year ago.

And Americans don't have much confidence that the government's going to be there to help. Some 58 percent said they don't believe Social Security will be available when they retire, up from 47 percent in last year's survey.

How much longer do people think they'll have to work? A year ago barely half said they'd have to work at least a year past 67. That rose to 65 percent this year. And more people now predict they'll have to work at least five more years — until at least age 72. With 27 percent saying that now, compared with 24 percent a year ago.

The random telephone survey of 1,451 people between the ages of 18 and 66 was conducted between Aug. 14 and Sept. 14. It has a statistical margin of error of plus or minus 2.5 percent.

http://www.google.com/hostednews/ap/art ... gD9BG7HS80

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 23 Oct 2009 08:32

Gollum sachs (LOL, witty!) and JPM could well overplay their hand, IMO. Not just yet but down the line as U6 touches 30% and U3 breaches 15%.

They forget that the most successful parasites are those that least harm the host.

"Killing the goose that lays golden eggs", anybody?

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Re: Perspectives on the global economic meltdown

Postby Neshant » 23 Oct 2009 08:53

Image

Something is wrong. Stock market is grossly over valued.

Two indicators point to this :

1) Price to Earnings (P/E) ratio is out of wack
2) Average dividend payout on stocks are at extreme lows.

This tends to signal an impending correction or crash (all things being equal).

http://finance.yahoo.com/news/Bulls-or- ... -insurance

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 23 Oct 2009 09:59

I have no doubt that the stock mkt is way overvalued. But seeing the relentless lift equities have gotten, admittedly even moi began to wonder.... I think Jessie says it best

Do not underestimate the power of the Fed when they are monetizing, and especially in a quantitative easing environment. The Adjusted Monetary Base was expanded in a way not seen since the aftermath of the Crash of 1929, and it did temporarily rally the nation out of the early stages of the Great Depression for a time.

The market can go higher if they keep printing at their current rate, unless something happens to break the spell. But for now, they are buying the bond and indirectly stocks, toxic debt from the banks, and whoring the dollar.

However, our portfolios here at the Cafe are on watch for a sharp correction that could be a precursor of a greater decline in November. Cash feels nice, with a few hedged longs.

This does not mean that we would be getting out in front of a rally fueled by a monetizing Fed. We learned that lesson in 2005. We underestimated the power of the yen carry trade. A useful pivot might be 1060 on the SP December futures


Meanwhile, the khanate awaits a resurrection of Andrew Jackson in the 21st century perhaps...... The uber redneck 19th century swashbuckling Southern prez who singlehandedly took on the eastern elites, the european interests, the banking cartels and the whole lot of them...

"Mischief springs from the power which the monied interest derives from a paper currency which they are able to control, and from the multitude of corporations with exclusive privileges...which are employed for their benefit."
-Andrew Jackson


Of course, his support to slavery has what has permanently sullied his image.

Image
Democratic cartoon shows Jackson fighting the monster Bank. "The Bank," Jackson told Martin Van Buren, "is trying to kill me, but I will kill it!"

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 23 Oct 2009 10:11

Jesse recounts PRC's spectacular (peaceful?) rise from the US POV...

It may be hard to remember from the current lofty heights of the 'China miracle' but their economy was a train wreck in the latter part of the 20th century. Prior to 1980 the state owned People's Bank controlled all the financial resources of the command driven economy. The government created State Chartered Banks (SCB's) in the 1980's, but their business activities were still driven by state policy initiatives, and they quickly became burdened by bad debts. A speculative push and some tax breaks for foreign direct investment helped to further distort the economy, which led to a severe domestic slump, with banks burdened by Non-Performing Loans. But it was still a centralized economic regime, with a reminder served by the brutal suppression of the student demonstrations in Tiananmen Square in 1989.

In 1994 China tried to cure the serious problems in their domestic economy by devaluing the yuan from 5 to 8.3 to the US dollar in order to facilitate an export driven recovery. That is a 40% devaluation! All your costs were just marked down 40% relative to the competition.

China was able to make key investments in the 1996 Democratic party campaign, and Bill Clinton championed China's favored nation status in 1998, smoothing the way for China's admission into the World Trade Organization in 2000, while still maintaining a deeply devalued currency that was 'pegged' to the US dollar.

As a general note, a country does not engage in unrestricted trade with another country that maintains a currency peg after a devaluation, unless there is some significant ulterior motive. The rational economic response is to first maintain trade tariffs to control the flow of goods and the de facto subsidies and barriers imposed by an artificially manipulated currency. Whenever anyone says that a currency that is 'pegged' and subject to tight exchange controls is not manipulated, except in highly unusual circumstances such as a gold standard, the people in the room just should laugh them on their way out the door.


Pegging the yuan to the dollar helped to encourage foreign direct investment, and helped to stabilize the artificially low prices that US importers could achieve, most notably the Arkansas based WalMart.

Those are the roots of the China bubble: cheap money. It used to be said that the Japan Miracle was a result of their real estate price explosion, the 'monetization of the land.' This is a bit of an oversimplification since was a bubble fueled by government industrial policy known as mercantilism. But using this analogy, China was monetizing the cheap labor of its people, as a means to provide cheap goods to the West, and allow business to erode the wage gains which labor had achieved through the worker's union movements of 1930 to 1970. And if one looks at the progress of the US median wage from 1980 to 2009, it worked. The US middle class is flat on its back.

All that history aside, what is going to happen now with China? It was important to take some time to establish the roots of its current bubble, because people have become wide-eyed and accepting of the miracle. Yes, cheap labor helps, but there are plenty of countries around the world that have cheap labor. It tends to get less cheap when the country develops, and when the domestic economy and education and infrastructure improves, while the government can continue to provide subsidies via tax breaks and cheap currency and subsidized debt from banks that are still controlled by the State.

The trade surpluses that have created China's enormous two trillion dollar reserves are a direct result and indicator of the China bubble formulated by Western banks and a domestic government made increasingly nervous by popular unrest due to their economic blundering. Those surpluses in turn have fueled a monumental asset bubble in China that they must handle with care.


It is in the nature of bubbles to burst and in the nature of free markets+human psychology to create bubbles. The best way out is to have bubbles burst regularly when small and not grow to overlarge sizes that threaten depressionary calamity on the wider economy.

In some dimensions, China is more like the US in 1929 than the US itself resembles that paradigm today. This would imply that China is more likely to experience the kind of devastating crash and long economic Depression if world trade collapses. As you may recall, the US was a heavy net exporter and an economic miracle itself in the 1920s having largely escaped the economic devastation of the first World War.

Perhaps this is a long way of saying that the outcome for China is hardly pre-determined, but it is not nearly so rosy as the believers in the miracle might think. They will have a choice, but that choice is going to lead them to a crossroads quickly, between becoming a free nation with a burgeoning middle class that is increasingly free to make its own choices, or a military dictatorship that seeks to establish client states to provide raw materials and receive its manufactured goods in return.


OK, the bolded part sounds corny but IMO rings true. Going by past record, with stylized clients like noko and tsp showing the way, (and now nepal too perhaps?) it is becoming clear that prc has chosen the seconde option primarily coz the first requires the CPC to loosen its iron grip on absolute power within the land. Something they are *not* amenable to. Period.

So, in summary, there is a great deal of facade around the China miracle that is of recent and somewhat shaky construction than most people realize. The Chinese economy is still highly artificial and centrally controlled, with enormous rot underneath that shiny facade in the form of bad debts, malinvestment and over capacity in some areas with insufficient development in others.

China will continue on, as well as the US. The question is really about how and what they will become, and what investment opportunities and perils they represent to the individual.


link

Good read. Read it all, IMO.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 23 Oct 2009 12:22

Some claims here (and a bnch of links) that even enlightened moderate and democrateric gubmints are deploying tools, agents and asssets to monitor, shape and herd social media such as blawgs, tweets and such.

Herding the sheep?

William K. Black – professor of economics and law, and the senior regulator during the S & L crisis – says that that the government’s entire strategy now – as during the S&L crisis – is to cover up how bad things are (”the entire strategy is to keep people from getting the facts”).

Admittedly, 7 out of the 8 giant, money center banks went bankrupt in the 1980’s during the “Latin American Crisis”, and the government’s response was to cover up their insolvency.

It’s true that Business Week wrote on May 23, 2006:

President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations.


I can’t deny that the Tarp Inspector General said that Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not.


And the whole word propaganda is a Nazi, communist kind of thing which has no place in the same sentence as America. Right?

Granted, famed Watergate reporter Carl Bernstein says the CIA has already bought and paid for many successful journalists.

And sure, the New York Times discusses in a matter-of-fact way the use of mainstream writers by the CIA to spread messages.

True, a 4-part BBC documentary called the “Century of the Self” shows that an American – Freud’s nephew, Edward Bernays – created the modern field of manipulation of public perceptions, and the U.S. government has extensively used his techniques (but the BBC isn’t American, so it doesn’t count).

True, the Independent discusses allegations of American propaganda (but that’s a British paper, doesn’t count).

And (ho hum) one of the premier writers on journalism says the U.S. has used widespread propaganda.

And (are we still talking about this?) an expert on propaganda testified under oath during trial that the CIA employs THOUSANDS of reporters and OWNS its own media organizations (the expert has an impressive background).

And (I can’t believe we’re still talking about this) while the U.S. government has repeatedly claimed that it was launching propaganda programs solely at foreign enemies, it has actually used them against American citizens.


And (when’s the next episode of American Idol on?) CENTCOM announced in 2008 that a team of employees would be “[engaging] bloggers who are posting inaccurate or untrue information, as well as bloggers who are posting incomplete information.”
...
And (did you see that crazy photo?) it is well known that certain governments use software to automatically vote stories questioning their interests down and to send letters favorable to their view to politicians and media (see – as just one example – this, this, this, this and this). The U.S. government is very large and well-funded, and could substantially influence voting on social news sites with very little effort, if it wished.


Read it all. And comments too. Am sure sanjaychoudhary saab among other psy-ops thread veterans will not find any of this even remotely surprising. Its the extent of the penetration of mass-opinion manipulation that has become staggering only.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 23 Oct 2009 17:38

Perhaps realising their days are numbered, the federal reserve has begun inventing a new line of work for itself - "pay regulator". No doubt once it gets Obama to approve this new role, they will try to extend it to become "market regulator".

Lost in the chaos is the fact that they are hand in glove with their cronies the banks & fianancials which caused the problem in the first place. I'm sure the banks are eager to have "their man on the inside" masquerading as a market regulator as the one thing he won't be doing is cracking down on them.

Meanwhile, the Federal Reserve unveiled a proposal Thursday that would police banks' pay policies to ensure they don't encourage employees to take reckless gambles like those that contributed to the financial crisis.

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 23 Oct 2009 20:02

I am thinking of cross posting it to the psyops thread.

____________________________________________
Herding the Sheep
http://www.washingtonsblog.com/2009/10/herding-sheep.html

Financial insider and commentator Yves Smith wrote an essay last week entitled "MSM Reporting as Propaganda" arguing that the government has been using propaganda to make people think that things are getting better, no one is angry, and - therefore - no one should get upset:

The message, quite overtly, is: if you are pissed, you are in a minority. The country has moved on. Things are getting better, get with the program...

Per the social psychology research, this “you are in a minority, you are wrong” message DOES dissuade a lot of people. It is remarkably poisonous. And it discourages people from taking concrete action.

Is Smith right? And even if she is, isn't "propaganda" too strong a word?

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Re: Perspectives on the global economic meltdown

Postby ss_roy » 23 Oct 2009 20:05

The article that started it all...kinda.
______________________________
MSM Reporting as Propaganda (No One Minds Our New Financial Masters Edition)
http://www.nakedcapitalism.com/2009/10/ ... ition.html

FRIDAY, OCTOBER 16, 2009

I’m of two minds about taking up this theme, since stating what ought to be obvious but is nevertheless unpleasant and inconvenient is apt to get one branded as lunatic fringe.

Access journalism has created what is in many respects a controlled press. And that matters because people are far more suggestible than most of us wants to admit to ourselves. Let us start with the cheerleading in the media over Wall Street, and in particular, Goldman earnings. Matt Taibbi, in “Good News on Wall Street Means… What Exactly?,” tells us why this is so distorted:

It’s literally amazing to me that our press corps hasn’t yet managed to draw a distinction between good news on Wall Street for companies like Goldman, and good news in reality. I watched carefully the reporting of the Dow breaking 10,000 the other day and not anywhere did I see a major news organization include a paragraph of the “On the other hand, so ****** what?” sort, one that might point out that unemployment is still at a staggering high, foreclosures are racing along at a terrifying clip, and real people are struggling more than ever. In fact the dichotomy between the economic health of ordinary people and the traditional “market indicators” is not merely a non-story, it is a sort of taboo — unmentionable in major news coverage.

The press has been on a downslope for at least a decade, as a result of strained budgets and vastly more effective government and business spin control (and it was already pretty good at that, see the BBC series, The Century of the Self, via Google video, for a real eye-opener). I met a reporter who had been overseas for six years, opening an important foreign office for the Wall Street Journal. He was stunned when he came back in 1999 to see how much reporting had changed in his absence. He said it was impossible to get to the bottom of most stories in a normal news cycle because companies had become very sophisticated in controlling their message and access.

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Re: Perspectives on the global economic meltdown

Postby rohiths » 23 Oct 2009 20:07

Paul Krugman on the Chinese currency manipulation
http://www.nytimes.com/2009/10/23/opini ... ef=opinion

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 23 Oct 2009 22:26

welcome back ss_roy jee.

Longtime no see on these pages.... yup, things have been moving at breakneck speed on some fronts. Collapse of global trade/fiat regimes/ the old world order looms as near or as far as it did this time last year, wouldn't you say?

Would be gr8 to get your take on this mess.

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Re: Perspectives on the global economic meltdown

Postby nithish » 23 Oct 2009 23:25

x-post

Record recession for UK economy

The UK economy unexpectedly contracted by 0.4% between July and September, according to official figures, meaning the country is still in recession.
It is the first time UK gross domestic product (GDP) has contracted for six consecutive quarters, since quarterly figures were first recorded in 1955.
-----
Quarterly growth of 0.2% had been expected in the figures from the Office for National Statistics (ONS), although expectations had been tempered by recent figures showing no growth in retail sales in September, and a 2.5% decline in industrial output in August.
The unexpected decline in the services sector was the key factor behind the drop, with the distribution, catering and hotels sector performing particularly badly.
The UK economy's reliance on the service sector, and financial services in particular, may be the reason why it is still in recession when partners such as France and Germany exited in the second quarter of this year.
-----
The worse-than-expected GDP figures are likely to make the Bank of England consider extending its policy of quantitative easing.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 24 Oct 2009 06:11

The UK economy unexpectedly contracted by 0.4% between July and September, according to official figures, meaning the country is still in recession.
It is the first time UK gross domestic product (GDP) has contracted for six consecutive quarters, since quarterly figures were first recorded in 1955.


I suspect its worse than that and things will get much worse before they get better (i.e. they're nowhere near the bottom yet).

Central bankers, other bankers, business media, industry titans, gubmint elites, legislative bodies - all have convergent interests in spinning the recession as less bad than it really is. Call it a 'happy conspiracy' only (i.e. happy coincident+incidental conspiracy).

Reams have been written on how the establishments in the US are trying to spin public opinion into 1 direction, not another. Lookup ss_roy's link up there.


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