Perspectives on the global economic meltdown

vsudhir
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Re: Perspectives on the global economic meltdown

Postby vsudhir » 07 Feb 2009 23:11

No kament onlee

Read and worry.

Am reminded of the opening lines in the LOTR movie spoken by Galadriel

The world is changed. I feel it in the water. I feel it in the earth. I smell it in the air. Much that once was is lost, for none now live who remember it. It began with the forging of the .....

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Re: Perspectives on the global economic meltdown

Postby ramana » 07 Feb 2009 23:17

When I started this thread I wanted it to be thinking thread and not just a collection of doom and gloom thread. Yes collecting doom stores is needed but one should not be overwhelmed. Look at S.S. Menon's interview. The guy is on the job thinking of how to get ahead for India.

Let me tell an anecdote. In 1981 after Reagan got elected the whole econmy had already tanked under Jimmy Carter and the media since it was a liberal holdout was puting out only D&G stories unmindful of the fundamental shift that was going on in US from industrial to service economy. Only desis who spotted the trend benefitted and prospered to become the largest per captia income ethnic group in twenty years in US! The clout they have with both political parties is due to that shift.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 08 Feb 2009 00:10

Ramana Garu,

Good point.

D&G stuff apart, this thread serves to collect in precious little bits and pieces of informed as well as speculative info about the coming shift in economic (and thereby social & geopolitical) ordering as well. The changes underway reveal their hand in the symptoms visible on the surface. The symptoms of course show up as D&G onlee.

So far, what has definitely become clear is that the service sector gamble undertaken after Reagan gained power was overplayed. The limits of stretching intangibles like services while suckering gullibility out of savers using a borrowing and credit pyramid are becoming apparent. The flattening of the world via the info superhigh ways revolution took everyone by surprise, perhaps. Where things will settle and what will be the new 'normal' remains to be seen.

Peace.

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Re: Perspectives on the global economic meltdown

Postby Najunamar » 08 Feb 2009 00:23

Another key role of this thread is also to document (for posterity) the small actions taken by individual players that either exacerbates or alleviates (or at times both!) the situation.

Ramana Garu - good point about the Indian expat community taking advantage of the fundamental shift in the US economy in the 80s. But, then as well as now, such a shift is preceived and acted upon early only at an Individual level - the institutions/administrations are necessarily laggards when it comes to shifting either their investments or planning strategies.

On the other hand, India has not already revealed its hand, having a vast amount of Gold in private hands as opposed to the "paper tiger economies" that relied on reserves composed solely of fiat currency - interesting times ahead, perhaps can purchase a lot of assets using a very valuable commodity Gold!

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Re: Perspectives on the global economic meltdown

Postby KarthikSan » 08 Feb 2009 06:53

And now a musical perspective of the global economic meltdown :rotfl:

Economic downturn gets a soundtrack

Johannes Kreidler generated the unusual melodies by closely following global shares and stock market indexes.

He then fed the data from indices such as the Nikkei through the Microsoft Music programme, SongSmith.

Speaking from his home in Germany, the 29-year-old experimental musician told the BBC World Service that SongSmith had provided the composition tool, but the markets had done the rest.

"I took these graphs and marked a series of points following the edges. I then turned these points into pitches," he explained.

"I arranged the resulting music with different styles of easy listening music for example with a samba or a foxtrot."

"As far as I know I am the first person to turn data from volatile markets into music."


Enjoy!!!


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Re: Perspectives on the global economic meltdown

Postby Singha » 08 Feb 2009 08:13

speaking of gold, I noticed the Gold ETF sold by Benchmark funds in India had
risen by 50% in last calender year.

is the gold story played out, or there is still room to go in preparation for more D&G to come ?

the only other option seems to be bank FD (ppf limit is a paltry 70k/annum)

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Re: Perspectives on the global economic meltdown

Postby Raghav K » 08 Feb 2009 23:33

What actually happened on Sept 15 2008. (Atleast according to this lawmaker) He explains starting from around 2:15 in the video.

http://www.youtube.com/watch?v=m_atOvrT ... re=related

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Re: Perspectives on the global economic meltdown

Postby Raghav K » 08 Feb 2009 23:41

Meanwhile another Ponzi Scheme comes to Light.

Nicholas Cosmo, Financier, Arrested In Purported $400 Million Ponzi Scheme

HICKSVILLE, N.Y. — The owner of a Long Island investment firm accused of cheating people out of more than $100 million is expected to appear in court Tuesday.

FBI spokesman Jim Margolin says Nicholas Cosmo surrendered at a U.S. Postal Inspection Service office in Hicksville on Monday night.

Cosmo runs Agape World Inc. in Hauppauge (HAW'-pawg). He's accused of taking in $300 million from investors and cheating them out of about $140 million.

A letter hanging in Cosmo's office window denies there was any Ponzi scheme, the type of fraud Bernard Madoff (MAY'-dawf) is accused of committing. A Ponzi, or pyramid, scheme promises unusually high returns and pays early investors with money from later investors.

Defense attorneys at the Herrick Feinstein law firm haven't returned telephone calls seeking comment.



http://www.huffingtonpost.com/2009/01/2 ... 61112.html

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 09 Feb 2009 00:14

Supra-Meltdown perspectives of Aussie economist Steve Keen (link from Yves' blog).

* Interestingly, seems to me its non-yankee economists who're coming out bold and clear with statements about the realities emnating frm the meltdown (Keen, Buiter, Keating to name just a few I've recorded on this thread). Either the yank conomists are unwilling to speak out likewise (too much D&G to handle professionally) or unable to (again, too much risk of D&G going mainstream to handle in an orderly fashion).

The roving cavaliers of credit

Long but very worthwhile read, IMHO.

I'll attempt a short summary with excerpts:

1. The movers and shakers or shovelers of credit in the industrial economy weild power way disproportionate to their means, morals or brains.

“Talk about centralisation! The credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner— and this gang knows nothing about production and has nothing to do with it.” -Karl Marx, 1857.


[Marx] got it wrong on some other issues,[2] but his analysis of money and credit, and how the credit system can bring an otherwise well-functioning market economy to its knees, was spot on. His observations on the financial crisis of 1857 still ring true today:

“A high rate of interest can also indicate, as it did in 1857, that the country is undermined by the roving cavaliers of credit who can afford to pay a high interest because they pay it out of other people’s pockets (whereby, however, they help to determine the rate of interest for all), and meanwhile they live in grand style on anticipated profits.

Simultaneously, precisely this can incidentally provide a very profitable business for manufacturers and others. Returns become wholly deceptive as a result of the loan system…”[1]


One and a half centuries after Marx falsely predicted the demise of capitalism, the people most likely to bring it about are not working class revolutionaries, but the “Roving Cavaliers of Credit”, against whom Marx quite justly railed.


2. The conventional model of how money and credit are created is demonstrably wrong. Its been the tail (credit creation) wagging the dog (money supply) all along rather than the other way round and that lays to rest fancy hopes that central bankers control money supply finely indeed.

Two hypotheses about the nature of money can be derived from the money multiplier model:

1. The creation of credit money should happen after the creation of government money. In the model, the banking system can’t create credit until it receives new deposits from the public (that in turn originate from the government) and therefore finds itself with excess reserves that it can lend out. Since the lending, depositing and relending process takes time, there should be a substantial time lag between an injection of new government-created money and the growth of credit money.

2. The amount of money in the economy should exceed the amount of debt, with the difference representing the government’s initial creation of money. In the example above, the total of all bank deposits tapers towards $10,000, the total of loans converges to $9,000, and the difference is $1,000, which is the amount of initial government money injected into the system. Therefore the ratio of Debt to Money should be less than one, and close to (1-Reserve Ratio): in the example above, D/M=0.9, which is 1 minus the reserve ratio of 10% or 0.1.

Both these hypotheses are strongly contradicted by the data.


Their empirical conclusion was just the opposite: rather than fiat money being created first and credit money following with a lag, the sequence was reversed: credit money was created first, and fiat money was then created about a year later:

“There is no evidence that either the monetary base or M1 leads the cycle, although some economists still believe this monetary myth. Both the monetary base and M1 series are generally procyclical and, if anything, the monetary base lags the cycle slightly. (p. 11)

The difference in the behavior of M1 and M2 suggests that the difference of these aggregates (M2 minus M1) should be considered… The difference of M2 - M1 leads the cycle by even more than M2, with the lead being about three quarters.” (p. 12)

Thus rather than credit money being created with a lag after government money, the data shows that credit money is created first, up to a year before there are changes in base money. This contradicts the money multiplier model of how credit and debt are created: rather than fiat money being needed to “seed” the credit creation process, credit is created first and then after that, base money changes.


Academic economics responded to these empirical challenges to its accepted
theory in the time-honoured way: it ignored them.


I know. At first glance, its shocking. Can the tail really be wagging the dog? Well, here's a simpler explanation:

If a firm accesses its line of credit to, for example, buy a new piece of machinery, then its debt to the bank rises by the price of the machine, and the deposit account of the machine’s manufacturer rises by the same amount. If the bank that issued the line of credit was already at its own limit in terms of its reserve requirements, then it will borrow that amount, either from the Federal Reserve or from other sources.

If the entire banking system is at its reserve requirement limit, then the Federal Reserve has three choices:

refuse to issue new reserves and cause a credit crunch;
create new reserves; or
relax the reserve ratio.
Since the main role of the Federal Reserve is to try to ensure the smooth functioning of the credit system, option one is out—so it either adds Base Money to the system, or relaxes the reserve requirements, or both.

Thus causation in money creation runs in the opposite direction to that of the money multiplier model: the credit money dog wags the fiat money tail. Both the actual level of money in the system, and the component of it that is created by the government, are controlled by the commercial system itself, and not by the Federal Reserve.


And do central banks know about this? You bet.

Central Banks around the world learnt this lesson the hard way in the 1970s and 1980s when they attempted to control the money supply, following neoclassical economist Milton Friedman’s theory of “monetarism” that blamed inflation on increases in the money supply. Friedman argued that Central Banks should keep the reserve requirement constant, and increase Base Money at about 5% per annum; this would, he asserted cause inflation to fall as people’s expectations adjusted, with only a minor (if any) impact on real economic activity.

Though inflation was ultimately suppressed by a severe recession, the monetarist experiment overall was an abject failure. Central Banks would set targets for the growth in the money supply and miss them completely—the money supply would grow two to three times faster than the targets they set.

Ultimately, Central Banks abandoned monetary targetting, and moved on to the modern approach of targetting the overnight interest rate as a way to control inflation.[


And where does that bring us to w.r.t. current situation? Seems the Fed is trying to inflate its way out of deflation back to a mildly inflationary biz as usual mode. Tough luck this time with that working, though

However, neoclassical economic theory never caught up with either the data, or the actual practices of Central Banks—and Ben Bernanke, a leading neoclassical theoretician, and unabashed fan of Milton Friedman, is now in control of the Federal Reserve. He is therefore trying to resolve the financial crisis and prevent deflation in a neoclassical manner: by increasing the Base Money supply.

Give Bernanke credit for trying here: the rate at which he is increasing Base Money is unprecedented. Base Money doubled between 1994 and 2008; Bernanke has doubled it again in just the last 4 months.

If neoclassical theory was correct, this increase in the money supply would cause a bout of inflation, which would end bring the current deflationary period to a halt, and we could all go back to “business as usual”. That is clearly what Bernanke is banking on.

However, from the point of view of the empirical record, and the rival theory of endogenous money, this will fail on at least four fronts:

1. Banks won’t create more credit money as a result of the injections of Base Money. Instead, inactive reserves will rise;

2. Creating more credit money requires a matching increase in debt—even if the money multiplier model were correct, what would the odds be of the private sector taking on an additional US$7 trillion in debt in addition to the current US$42 trillion it already owes?;

3. Deflation will continue because the motive force behind it will still be there—distress selling by retailers and wholesalers who are desperately trying to avoid going bankrupt; and

4. The macroeconomic process of deleveraging will reduce real demand no matter what is done.


Steve Ballmer put it best, apparently:

Microsoft CEO Steve Ballmer recently noted: “We’re certainly in the midst of a once-in-a-lifetime set of economic conditions. The perspective I would bring is not one of recession. Rather, the economy is resetting to lower level of business and consumer spending based largely on the reduced leverage in economy”.


So bottomline is that:

The only way that Bernanke’s “printing press example” would work to cause inflation in our current debt-laden would be if simply Zimbabwean levels of money were printed—so that fiat money could substantially repay outstanding debt and effectively supplant credit-based money.

Measured on this scale, Bernanke’s increase in Base Money goes from being heroic to trivial. Not only does the scale of credit-created money greatly exceed government-created money, but debt in turn greatly exceeds even the broadest measure of the money stock—the M3 series that the Fed some years ago decided to discontinue.


And here's another view of how deep the hole really is:

Bernanke’s expansion of M0 in the last four months of 2008 has merely reduced the debt to M0 ratio from 47:1 to 36:1 (the debt data is quarterly whole money stock data is monthly, so the fall in the ratio is more than shown here given the lag in reporting of debt).

To make a serious dent in debt levels, and thus enable the increase in base money to affect the aggregate money stock and hence cause inflation, Bernanke would need to not merely double M0, but to increase it by a factor of, say, 25 from pre-intervention levels. That US$20 trillion truckload of greenbacks might enable Americans to repay, say, one quarter of outstanding debt with one half—thus reducing the debt to GDP ratio about 200% (roughly what it was during the DotCom bubble and, coincidentally, 1931)—and get back to some serious inflationary spending with the other (of course, in the context of a seriously depreciating currency). But with anything less than that, his attempts to reflate the American economy will sink in the ocean of debt created by America’s modern-day “Roving Cavaliers of Credit”.


To cut short a long story - point is we live not in a fiat money by govt system but in a credit money system. What does that mean? well, here's something to chew on.

If this market produces too much money (which it can do in a fractional banking system because the government determines the supply of base money and the reserve requirement) then there can be inflation of the money prices of commodities. Equally if the money market suddenly contracts, then there can be deflation. It’s fairly easy to situate Bernanke’s dramatic increase in Base Money within this view of the world.

If only it were the world in which we live. Instead, we live in a credit economy, in which intrinsically useless pieces of paper—or even simple transfers of electronic records of numbers—are happily accepted in return for real, hard commodities. This in itself is not incompatible with a fractional banking model, but the empirical data tells us that credit money is created independently of fiat money: credit money rules the roost. So our fundamental understanding of a monetary economy should proceed from a model in which credit is intrinsic, and government money is tacked on later—and not the other way round.

Our starting point for analysing the economy should therefore be a “pure credit” economy, in which there are privately issued bank notes, but no government sector and no fiat money. Yet this has to be an economy in which intrinsically useless items are accepted as payment for intrinsically useful ones—you can’t eat a bank note, but you can eat a pig.

So how can that be done without corrupting the entire system. Someone has to have the right to produce the bank notes; how can this system be the basis of exchange, without the person who has that right abusing it?


And from this point on, things get wacky to weird onlee.

Would welcome perspectives from gurus and garus on what this means now...

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Re: Perspectives on the global economic meltdown

Postby mnag » 09 Feb 2009 01:43

After subprime destroyed the housing market, alt-A will be the next disaster waiting to hit the real estate in USA.

alt-A was offered to borrowers sandwiched between subprime and prime. This market was trumpeted as a means of extending home ownership to those, such as the self-employed, with a reasonable credit standing but unsteady income. Its practitioners specialised in loans with scant documentation and exotica such as negative-amortisation mortgages, which allow borrowers to pay less than the accrued interest, with the difference added to the loan balance

While politicians will find a reason to sympathise with the subprime borrowers that these people were duped, it will be hard to justify alt-A borrowing where the borrower fully knew that the amount they owe will increase overtime and once the loan to principal increases to 115-120%, they willl need to sell or refinance.

Some key excerpts from this recent article from economist
http://www.economist.com/finance/displa ... d=13062194

That Alt-A has troubles comes as no surprise. Last summer, for instance, it helped to bring down IndyMac, a Californian bank. But the speed with which loans have soured in recent months, and the reaction of rating agencies, have been startling. Delinquencies rocketed in the final months of 2008. They even rose sharply for loans made in 2005, before underwriting turned really sloppy

Moody’s, which last summer had issued a sanguine outlook for Alt-A, recently quadrupled its loss projections on bonds backed by such loans. A steady flow of downgrades has turned into a flood in recent weeks, with thousands of Alt-A tranches taking the plunge. The falls have been unusually steep: of the $59 billion of AAA-rated securities that Moody’s cut between January 29th and February 2nd, an astonishing 91% went straight to junk, according to Laurie Goodman of Amherst Securities. In ratings terms, Alt-A is doing worse than subprime.

Moody’s calls this “unprecedented”. That is putting it mildly. It now expects losses for 2006-07 Alt-A securitisations to top 20%, compared with an historical average of well under 1%. In an ugly echo of the fiasco over collateralised-debt obligations, holders lower down the structure can expect total write-offs, while the vast majority of senior holders will not be spared substantial losses.

The sums involved are depressingly large. In the worst case, losses on the $600 billion of securitised Alt-A debt outstanding—roughly the same as the stock of subprime securities—could reach $150 billion, reckons David Watts of CreditSights, a research firm. Analysts at Goldman Sachs put possible write-downs on the $1.3 trillion of total Alt-A debt—including both securitised and unsecuritised loans—at $600 billion, almost as much as expected subprime losses. Add in option ARMs, a particularly virulent type of adjustable-rate loan, many of which are essentially the same as Alt-A, and the potential hit climbs towards $1 trillion.

Part of the problem is that much of the Alt-A lending came at the tail-end of the credit boom in late 2006 and early 2007. By then, subprime was already getting a bad name. So Wall Street hit on a ruse: it took borrowers who in normal times would have been subprime and dressed them up as “mid-prime”. Many of these loans were doomed from the start. According to the Bank for International Settlements, a staggering 40% of American mortgages originated in the first quarter of 2007 were interest-only or negative-amortisation loans.


So in 2009, we're still looking at

real estate crisis alt-A resets
commercial real estate problems
lots of continued job losses

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Re: Perspectives on the global economic meltdown

Postby Najunamar » 09 Feb 2009 03:56

http://finance.yahoo.com/news/25-People ... 64821.html

This article is important more for its omission of names - apart from ECB's Trichet there is absolutely no mention of other important economies and the relevant players. This I believe is the Achilles heel of the US' thinking - they still do not get the fact that there has been a tectonic power shift and things will never be the same again for a long time.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 09 Feb 2009 04:16

Well, lookie what we have here....

Margareta Pagano: This time we must listen to the black swan (The Independent)

Black swan terminology going mainstream onlee.

A Rallying Cry to Claw Back Bonuses (NY Times)

Good luck with that. I'll seriously applaud and drink to that happening!

Make Bankers Accountable - A "J'accuse" by Roubini and Taleb

Dr Doom teaming up with the black swan? aha. More D&G must be on the way onlee...

Could we insert the meme into this debate that balkanising TSP will improve the chances of a 2009 recovery? Hey, whackier ideas have gotten straight-face receptions in this milieu....

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Re: Perspectives on the global economic meltdown

Postby mnag » 09 Feb 2009 04:41

this article is a joke. why would people like jim cramer, maria bartiromo, larry kudlow, neil cavuto etc who are reporters in news channel become key players


Najunamar wrote:http://finance.yahoo.com/news/25-People-Who-Will-Affect-usnews-14264821.html

This article is important more for its omission of names - apart from ECB's Trichet there is absolutely no mention of other important economies and the relevant players. This I believe is the Achilles heel of the US' thinking - they still do not get the fact that there has been a tectonic power shift and things will never be the same again for a long time.

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Re: Perspectives on the global economic meltdown

Postby ArmenT » 09 Feb 2009 05:06

vsudhir wrote:Oh, which reminds me, AIG shares were trading at $1.01 yesterday. Should they fall below 100 cents, they get automatically delisted onlee.

Actually NYSE rules have two conditions, either of which is grounds for delisting:
1. Market cap cannot be < $15 mil. over consecutive 30 trading day period (used to be $25 mil limit, but they lowered the limit recently back to pre-2004 levels, due to falling economy.)
2. Share price cannot be < $1 over consecutive 30 trading day period.

Rule #1 is more rigid -- fall below the limit for 30 straight trading days and you're out of the NYSE, no ifs or buts. Rule #2 is easier to work around. For one, companies can make special appeals to extend the grace period past 30 days (upto around 6 months or so). Secondly, they can do a reverse split, so that the share price goes > $1.

NASDAQ also has similar rules. Company I used to work for in the early 2000s had stock price go below < $1 for a while and they did the appeal thing followed by the reverse-split trick (5 to 1 ratio, if I remember correctly) when delisting seemed imminent.

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Re: Perspectives on the global economic meltdown

Postby Singha » 09 Feb 2009 11:45

http://www.nytimes.com/2009/02/09/busin ... f=business

Hedge Fund Lets Investors Withdraw What Is Left

By ZACHERY KOUWE
Published: February 9, 2009

In a move that could force similar changes at other money-losing hedge funds, the well-known fund manager William A. Ackman is cutting his fees and allowing investors to take what is left of their money from one of the funds he manages.

Mr. Ackman, who runs Pershing Square Capital Management, is suffering huge losses on a fund he started nearly two years ago to bet solely on the rise of the stock of the discount retailer Target Corporation.

The fund, called Pershing Square IV, is down nearly 90 percent this year, and Mr. Ackman has been feeling pressure from investors who want to take their money out. In an effort to mollify those investors, Mr. Ackman apologized for the losses in a letter sent on Sunday. He personally committed $25 million to the fund to help pay investors.

“Bottom line, PSIV has been one of the greatest disappointments of my career to date,” Mr. Ackman said in the letter. “That said, we continue to believe that we will ultimately be successful in our investment in Target.”

Those who want to withdraw what is left of their capital from the fund will be paid in March, Mr. Ackman said. About 90 percent of the investors in the Target fund are also investors in Pershing’s other hedge funds, which were down 11 percent to 13 percent at the end of last year.

For those investors, Mr. Ackman has agreed to forgo any performance fees on the other funds until he makes up for the current losses in the Target fund, according to the letter. The concessions could spur other hedge fund managers to cut their fees and increase the amount that investors can withdraw. Hedge funds typically charge customers yearly fees of 2 percent of total assets managed plus 20 percent of any profits.

Several large hedge funds, including Citadel Investment Group and Farallon Capital Management, have halted investor redemptions in certain funds after having huge losses last year.


Mr. Ackman said in the letter that he was disappointed by the fund’s “dreadful performance,” adding, “I apologize profusely for the fund’s results to date.”

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Re: Perspectives on the global economic meltdown

Postby Singha » 09 Feb 2009 14:50

D&G chronicles: Nissan - 20K.

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Re: Perspectives on the global economic meltdown

Postby Singha » 09 Feb 2009 14:57

thestaesman.com

many of us did time on powerquicc. sad to see the co in this shape.

--
Freescale CEO warns that job cuts could deepen
Company might eliminate up to 20% of its worldwide work force by fall

By Kirk Ladendorf
AMERICAN-STATESMAN STAFF
Friday, January 30, 2009

Top executives at Freescale Semiconductor said Thursday that the company's ongoing restructuring could result in a 20 percent drop in its worldwide employment, rather than the 10 percent the company projected in late October.

That could mean the chipmaker will cut up to 4,800 jobs worldwide by this fall, rather than the 2,400 it originally estimated.

Like other chipmakers, Freescale is under pressure from a global recession that has sent semiconductor sales plummeting. Chief executive Rich Beyer said deteriorating business conditions in the fourth quarter forced the decision to consider deeper job cuts.

Freescale has cut 228 jobs in Austin, where it has about 5,000 employees, as part of the 10 percent cutback.

Part of those new job cuts, Beyer said, could come because the prospects for selling all of the company's cell-phone-related business have weakened. Freescale said in October that it would either sell or close its cell phone business because it no longer had the sales to support its heavy research and development costs.

The new higher job loss estimate also includes the closure of the company's factory in East Kilbride, Scotland, which is expected to eliminate 900 jobs by midyear. The global economic slump that has ravaged Freescale's sales also has caused some potential buyers of its wireless chip business to back away from a deal.

The company is continuing discussions with some potential buyers about selling pieces of the business, Beyer said, but he did not describe what such a partial sale might look like.

"Some of the potential buyers are now saying they can't do it at this time," Beyer said, adding that the company expects to resolve the fate of that business before the end of March.

Beyer's comments came after Freescale reported sharply lower fourth-quarter sales because of the slumping economy and the end of its chip supply agreement with cell phone maker Motorola Inc.

Freescale reported $940 million in sales revenue for the quarter, down 39 percent from the fourth quarter of 2007. For all of 2008, the company had $5.2 billion in revenue, down from $5.7 billion in 2007.

Beyer said the auto industry slump continues to hurt industry sales, as Freescale is the world's largest supplier of chips to the car industry. Cellular chip sales plummeted about 80 percent in the fourth quarter.

The company reported a net loss of $4.2 billion for the fourth quarter, which included a noncash charge of $3.6 billion to reflect reduced asset values.

Freescale ended the quarter with $1.4 billion in cash and short-term investments, which Chief Financial Officer Alan Campbell said provides a cushion to weather the economy and to invest in promising future product lines.

Campbell said revenue could drop another 15 percent in the first quarter as the economy remains weak.

Beyer noted that some of the austerity measures the company announced last week will remain in effect for the entire year.

Those measures include reduced executive pay and a cessation of the company's match for employee retirement fund contributions.

But the CEO said he hopes one austerity measure — forcing workers to take one week per quarter in unpaid time off — can be discontinued in the second half of the year.

Beyer also noted that he is concerned because Freescale's factories are running at very low, inefficient production levels because of the business slump. If those levels last for long, the company might have to take a new look on how many factories it needs, he said.

"We are doing a lot of praying these days," he said. "This is a good company with good customers and good people and good products. We will weather this storm."

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Re: Perspectives on the global economic meltdown

Postby abhischekcc » 09 Feb 2009 15:34

Singha wrote:http://www.nytimes.com/2009/02/09/business/09hedge.html?ref=business

Hedge Fund Lets Investors Withdraw What Is Left

Mr. Ackman said in the letter that he was disappointed by the fund’s “dreadful performance,” adding, “I apologize profusely for the fund’s results to date.”


BIll Ackman is the same guy who became famous for shorting the real estate market IIRC.

At least he has honor enough to say sorry, unlike some gold loo users.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 09 Feb 2009 16:56

Swiss banks to announce massive losses

Now even the indifferent have to know this is no 'ordinary' recession, eh?

And its coming right when the world's biggest, busiest and bribiest poll season is coming up in Bharatvarsha. The Irony....

Meanwhile countdown to global trade war begins as:

China Institute Proposes Weaker Yuan to Boost Growth

So it begins...

Meanwhile, my favorite alarmist D&G topic also gets mention....chilling is the word.

Bond investors call Fed's bluff

The bond markets, I tell you....watch the bond markets. Watch the yields and the spreads. Guess how the already low appetite for more commercial paper amongst buyers squares up with the need amongst gub-mints (forget private debt issuance from like corporates) for offloading ever more bonds to meet short term obligations ....

Shux, I propose doing away with the word 'gub-mint' and directly using 'mint' only, in the interest if brevity, wit and probity onlee.

Oh, D&G! :((

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Re: Perspectives on the global economic meltdown

Postby Singha » 09 Feb 2009 17:05

a bizarre article that tries to justify the high salaries of the fat cats just so
they can maintain their costly lifestyles and look good.

http://www.nytimes.com/2009/02/08/fashi ... ll.html?em

have them put in low income flats in edison, rahway, patterson and newark.
that will "ground" their kids in "strong son-of-soil values" and help in bringing
the real america into their privileged lives.

slay the fat cats!

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 09 Feb 2009 17:44

Now now, when the resident alarmist at the UKstani Telegraph and D&G high priest Shri Ambrose Evans Pritchard writes a piece, can't do without slicing, dicing and serving it up -especially when the alrmist seems to be on the money so far in his many predictions.

Arrite, fasten your seatbelts, this could be 1 rough ride....

Bond market calls Fed's bluff as global economy falls apart

The "real" cost of capital is rising as the slump deepens. This is textbook debt deflation. It was not supposed to happen. The Bernanke doctrine assumes that the Fed can bring down the whole structure of interest costs, first by slashing the Fed Funds rate to zero, and then by making a "credible threat" to buy Treasuries outright with printed money.

Mr Bernanke has been repeating this threat since early December. But talk is cheap. As the Fed hesitates, real yields climb ever higher. Plainly, the markets do not regard Fed rhetoric as "credible" at all.

Who can blame bond vigilantes for going on strike? Nobody wants to be left holding the bag if and when the global monetary blitz succeeds in stoking inflation. Governments are borrowing frantically to fund their bail-outs and cover a collapse in tax revenue. The US Treasury alone needs to raise $2 trillion in 2009.

Where is the money to come from?


Good question. Consider this:

China, the Pacific tigers and the commodity powers are no longer amassing foreign reserves ($7.6 trillion). Their exports have collapsed. Instead of buying a trillion dollars of extra bonds each year, they have become net sellers. In aggregate, they dumped $190bn over the last fifteen weeks.

The Fed has stepped into the breach, up to a point. It has bought $350bn of commercial paper, and begun to buy $600bn of mortgage bonds. That helps. But still it recoils from buying Treasuries, perhaps fearing that any move to "monetise" Washington's deficit starts a slippery slope towards an Argentine fate.


But surely that is too alarmist and unlikely...no? Maybe. Sample this news frm the rest of the G8:

As they dither, the world is falling apart. Events in Japan have turned deeply alarming. Exports fell 35pc in December. Industrial output fell 9.6pc. The economy is contracting at an annual rate of 12pc. "Falling exports are triggering a downward spiral of production, incomes and spending. It is important to prepare for swift policy steps, including those usually regarded as unusual," said the Bank of Japan's Atsushi Mizuno. "We are facing hyper-deflation, so we need a policy to create hyper-inflation,"


Spain's unemployment has jumped to 3.3m – or 14.4pc – and will hit 19pc next year, on Brussels data. The labour minister said yesterday that Spain's economy could not "tolerate" immigrants any longer after suffering "hurricane devastation". You can see where this is going. {Moi sure can}


Spain apart, the old story gets a repeat that the celtic tiger roars no more...
Ireland lost 36,500 jobs in January – equal to a monthly loss of 2.3m in the US. As the budget deficit surges to 12pc of GDP, Dublin is cutting wages, disguised as a pension levy. It has announced "Rooseveltian measures" to rescue the foundering companies.


The ECB's obduracy [in cutting iterest rates further] has nothing to do with economics. It fears zero rates as a vampire fears daylight, because that brings the purchase of eurozone bonds ever closer into play. Any such action would usher in an EMU "debt union" by the back door, leaving Germany's taxpayers on the hook for Club Med liabilties. This is Europe's taboo.


Aha. Cat's outta the bag or what. Again, watch the bond mkts. Gub-mints, come what may, will *not* allow bondholders to take a haircut. Doing so will open the floodgates to the slippery slope to anarchy.

Meanwhile, truly apalling data for Eastern Europe. This is what blight feels like, I guess...

Meanwhile, Eastern Europe is imploding. Industrial output fell 27pc in Ukraine and 10pc in Russia in December. Latvia's GDP contracted at a 29pc annual rate in the fourth quarter. Polish homeowners have had the shock from Hell. Some 60pc of mortgages are in Swiss francs. The zloty has halved against the franc since July.

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Re: Perspectives on the global economic meltdown

Postby Singha » 09 Feb 2009 18:07

seems to me 99.99% of people are not fully educated enough about the dangers we are in...even in br. the media is being controlled by levers to put a lid on the overall picture in favour of diverting public anger into a few well chosen wall street cats. better well controlled anger than fear in pov of powers that be.

mass hysteria, rise of religious fanaticism, anti-immigrant pograms, run on banks in unimaginable scale, epidemic of suicides could well be the future....

Obama & co must be piling sandbags at every white house window with a batallion of FBI HRT on standby to repel boarders.

the EU will based on historical precedent not use the "soft hands" the US
has been using in terms of HS/BCIS raids and "paper checks" -- they will
give a wink and the hounds of hell (blackshirts, brownshirts, neo nazis,
religious orders,anarchists,yobs,mental types,unemployed factory workers)
will fall upon the immigrants and let loose a reign of terror to shake and
hound out huge numbers. look for this to start first in eastern europe and
the balkans before speading to southern europe.

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Re: Perspectives on the global economic meltdown

Postby Neela » 09 Feb 2009 19:08

In the race where no one wants to participate, Iceland is first!

Downfall of a foolish nation


Gurus correct me if I am wrong here:

Ayn Rand said that the role of governments in capitalism should be to protect human rights only..no interference in economics.
And there are avowed followers of Ayn Rand today in the global economic spectrum.

Clearly , after having read the article linked above,it is a slap in the face . Especially this:

The political and financial worlds in Reykjavik are intertwined – it is said in Iceland that by the age of 50 you will have met half of the 320,000-strong population. When the three main banks were privatised in 2002, the business elite assumed control, turning them from sober institutions into aggressive vehicles for venture capitalism. The banks were used to financing foreign acquisitions and the domestic companies of their main shareholders. Iceland's financial supervisory system was primitive and the media silent – most of it having been bought up by the Vikings. No one asked where the money was coming from. The seemingly unlimited amounts of cash led to suggestions that they were drawing on "funny money" from Russia. The allegations, so far, have not been substantiated.



vsudhir, can you provide some insight?

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 09 Feb 2009 19:47

seems to me 99.99% of people are not fully educated enough about the dangers we are in...even in br.


No doubt.

And we few thread regulars ought to expect our valiant efforts here at under-standing the storm to be under-appreciated, perhaps permanently.

From the outside, we no doubt look like whacky D&G ayatollahs doing a seance in here.... :twisted:

Neela,

far be it that moi claim grand gyan or insight into these complex things but what has become clear is the underlying theme - of privatizing the upside (risky lending -> credit creation -> fatter asset books -> some short term profits -> rapidly accumulating risks -> crash) whilst socializing the downside (net liabilities exceeding not just the banks asset base but that of the gub-mints to repay -> sovreign default -> Icelandic story; or losses -> systemic shocks -> bailouts -> rising int rates on bonds etc - story in the G8)

P.S.
Point being that such risks were taken because a bailout was anticipated i.e. 'downsides all covered' was anticipated. Witness how stunned poor Dick Fuld was upon realizing Lehmann wouldn't be bailed out? That was breach-of-trust; breaking covenant level angst.

And why would gubmints bailout 'em bankers and socialize their losses? Because the bankers and the gubmint were sleeping together all along. They're part of the same cabal. Witness the fact that both the Bush and the Obama team are full of wall st insiders called upon to firefight the fires their gangs lit. :evil:

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Re: Perspectives on the global economic meltdown

Postby Tanaji » 09 Feb 2009 22:09

For the D&G mullahs here:

http://www.youtube.com/watch?hl=en-GB&v ... Mkvo&gl=GB

Its an hour long, but interesting. Interviews with Soros and others...

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Re: Perspectives on the global economic meltdown

Postby ramana » 10 Feb 2009 01:29

One problem is US politicians have no idea about the size of the US economy. They act like its a small chotu economy. They dont realize what a great fall it had in Sept Oct 2008.

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Re: Perspectives on the global economic meltdown

Postby svinayak » 10 Feb 2009 01:53

Neela wrote:In the race where no one wants to participate, Iceland is first!

Downfall of a foolish nation


Ayn Rand said that the role of governments in capitalism should be to protect human rights only..no interference in economics.
And there are avowed followers of Ayn Rand today in the global economic spectrum.

http://www.youtube.com/watch?v=oTf6NK0wsiA
http://www.youtube.com/watch?v=7ukJiBZ8_4k


In this engaging 1959 interview, her first on television, Ayn Rand capsulizes her philosophy for CBS's Mike Wallace. The discussion ranges from the nature of morality to the economic and historical...
In this engaging 1959 interview, her first on television, Ayn Rand capsulizes her philosophy for CBS's Mike Wallace. The discussion ranges from the nature of morality to the economic and historical distortions disseminated about the "robber barons." She also comments on her relationship with Frank O'Connor, provides some autobiographical information and gives her perspective on the future of America.

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Re: Perspectives on the global economic meltdown

Postby Nandu » 10 Feb 2009 04:03

One more data point on how this crisis will be an opportunity for India:
Crosspost from Indian Econ. thread. KPMG survey on global capital flow intentions.
http://www.kpmg.com/Global/PressRoom/Pr ... urvey.aspx

In terms of influence, India is expected to achieve the remarkable feat of overtaking Japan, France, Russia and Brazil in the ranks of the most influential countries, with a rising influence in all sectors, particularly business and consumer services, IT/telecoms and manufacturing.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 10 Feb 2009 06:14

Economist Marc Faber hyperventilates away....take with a pinch of salt...but still worth a read. Pity, the guy's ideas had a chance of being taken seriously if he sobered up a bit.

The US risks being hit by Zimbabwe-style hyperinflation and there are signs that the world’s biggest economy risks turning into a banana republic, Marc Faber, author of the Gloom, Doom & Boom report, told CNBC’s “Asia Squawk Box.”
“In the US, we have a totally new school, and it’s called the Zimbabwe school,” Faber said. “And it’s founded by one of the great leaders of this world, Mr Robert Mugabe, that has managed to totally impoverish his own country. And that is the monetary policy the US is pursuing.”
Asked whether the US risked being faced with 200 percent inflation, Faber answered: “Well, not yet. Not yet. But I think eventually. If I look at government debt in the US, and debt in general, I think the only way they will not default physically on their debt is to inflate.”
The Federal Reserve’s policy of printing unlimited money undermines the US’s economic and political clout, Faber warned. The US government should be junk,” Faber said, adding: “I don’t pay much attention to rating agencies. The rating agencies have totally failed over the last 3-4 years to identify sick companies.”

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Re: Perspectives on the global economic meltdown

Postby Singha » 10 Feb 2009 07:20

In the US, we have a totally new school, and it’s called the Zimbabwe school,

AoA, a worthy successor to friedman's chicago school

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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 10 Feb 2009 11:32

I am sure most of you have read this article from WSJ a couple days ago. If not, here it is:

Why 'Stimulus' Will Mean Inflation: In a global downturn the Fed will have to print money to meet our obligations. By GEORGE MELLOAN

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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 10 Feb 2009 11:50



A great article - the one that uses "vikings" terminology. A bunch of nomads and fishermen with absolutely no hope start to go on borrowing spree, build HUGE homes, get vehicles, stoke things and then the $hits declare bankrupt and go back to fishing, who the F has lost? Chinese, Russians, and Indians.

Funny thing is UK calling Iceland "little foolish nation" :rotfl: It's like a guy looking into the mirror and calling the guy in the mirror a fool. :lol:

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Re: Perspectives on the global economic meltdown

Postby joshvajohn » 10 Feb 2009 14:52

Not to break the thread....

I recommend that those fellows who caused this meltdown happen should also be held responsible. Particularly those Petrol Companies who made a huge profit by raising the oil prices to the sky level should not be allowed to get away with this. So those private companies should pay huge amounts of fines to the government. Also those fellows who became Billionaires from the suddenly raised industries gambling in the market should also be held responsbile for this meltdown. In simple terms it is better to tax heavily on those who made huge profit or making huge profit at the time of recession and share it with the social security systems.

The supermarket chains are making a huge profit out of the artificial food prices nowadays. They should be told not to make benefit out of people's troubles. This is where the governments should keep an eye on those who tend to make claims of huge profits at times which are made at the cost of recession and people's troubles.

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Re: Perspectives on the global economic meltdown

Postby Neela » 10 Feb 2009 17:19

Gurus and ramana,

With uncertainty looming large everywhere, here are some thoughts that has been going on in my mind.

US - stuck with the financial mess
Europe - lesser troubles but with EU, things could be long drawn out!
Asia - China entwined with the US. India slowly chugging, Far East export economies in deeper trouble due to troubles in Europe and US.
S.America - no clue
Africa ????????


From a geo-political scenario after this fallout, I somehow feel very uncomfortable about what could befall Africa.

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Re: Perspectives on the global economic meltdown

Postby abhischekcc » 10 Feb 2009 17:27

Neela wrote:From a geo-political scenario after this fallout, I somehow feel very uncomfortable about what could befall Africa.


Africa may actually do well, IF nothing goes too wrong.

They are isolated from the gas bags of wall street, have ample natural resources per capita, and have tremendous growth potential since infrastructure is not built in most of the continent. They may actually come out smelling like roses, IF they have good leadership.

Oh, they might have a genocide here or a massacre there. But the rest should do just fine.

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Re: Perspectives on the global economic meltdown

Postby Nandu » 10 Feb 2009 17:45

vsudhir wrote:Well, lookie what we have here....

Margareta Pagano: This time we must listen to the black swan (The Independent)

Black swan terminology going mainstream onlee.
....
Make Bankers Accountable - A "J'accuse" by Roubini and Taleb

Dr Doom teaming up with the black swan? aha. More D&G must be on the way onlee...


Yes, the black swan meme is getting wide dispersal and attendance. Last week's time magazine article about "why your bank is insolvent" suggested "severl black swans occuring simultaneously".

The problem with this terminology is that now people are coming to accept that the crisis was unforeseeable, since it was a black swan after all, and so there is no point blaming the bankers or the policy makers. The fact is, the crisis was not only foreseeable, but inevitable, given the rapidity and the size of the boom, and the leverage that banks were indulging in. It is not something that came out of nowhere and hit you in the head.

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Re: Perspectives on the global economic meltdown

Postby Nandu » 10 Feb 2009 17:50

Link, for completeness.
Why Your Bank Is Broke

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Re: Perspectives on the global economic meltdown

Postby ramana » 11 Feb 2009 01:33

nandu wrote:

Yes, the black swan meme is getting wide dispersal and attendance. Last week's time magazine article about "why your bank is insolvent" suggested "severl black swans occuring simultaneously".

The problem with this terminology is that now people are coming to accept that the crisis was unforeseeable, since it was a black swan after all, and so there is no point blaming the bankers or the policy makers. The fact is, the crisis was not only foreseeable, but inevitable, given the rapidity and the size of the boom, and the leverage that banks were indulging in. It is not something that came out of nowhere and hit you in the head.



Yes all kind of charlatans who pooh-poohed Taleb are using his jargon. Thats a clear case of evading responsibility. The regulatory mechanism failed thats the root cause - Asleep at the wheel. The Credit Default Swaps were allowed to balloon with out any oversight. All were busy counting unhatched chicken and when the coop got blown away they are wringing their hands.

Soon they will start blaming karma and kismet.
-------------
Also do we need to gather some links so folks can get an understanding of Econ and Busness 101?

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Re: Perspectives on the global economic meltdown

Postby ramana » 11 Feb 2009 01:34

SwamyG wrote:USA was 3 hrs away from Economic, Political Collapse in September 2008
This is a DailyKos blog talking about what Rep. Paul Kanjorski (D) (PA-11) said. There is CSPAN video of the interview with Paul. There is a partial transcript too.

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Re: Perspectives on the global economic meltdown

Postby vsudhir » 11 Feb 2009 06:52

ramana wrote:
SwamyG wrote:USA was 3 hrs away from Economic, Political Collapse in September 2008
This is a DailyKos blog talking about what Rep. Paul Kanjorski (D) (PA-11) said. There is CSPAN video of the interview with Paul. There is a partial transcript too.


Interesting. Fits well with a few alternative explanations fo subsequent actions.

Was the 'attack' coordinated and largescale? Seems so, by 1st person accounts.

Who could've done it? State or nonstate actors? Some combo of the 2 is more likely for sheer scale + gumption. Among them - PRC and KSA stand out in having used nonstate proxies in the past. Sure, nonstate dragons have felled minnow countries by playing their currencies - the thai baht that setoff the Asian contagion in 1997 is a good example but to try to play a run against the USD itself....wow, what level of suicidal madness needed that.

verily is it said:
Don't wound what you cannot kill

And whoever played this game either sink the US economy (unlikely as the US behemoth regains balance after taking the surprise punch full in the face) better watch out. They had one chance at a knockout shot and they lost it.

Unkil retaliates by playing 'mkt forces' in commodities, merchandise exports and oil way downwards causing immense grief in Russia and OPEC and squeezing demand for PRC exports.

When everything suggests don't go fight trade wars, Obama admin hits out against PRC 'currency manipulation'. Why and why now? Tons of ink ordered to print notes send clear signal that we'll eventually inflate our way out of this mess.

All in all, interesting times. wait n see.....


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