Perspectives on the global economic meltdown (Jan 26 2010)

vera_k · Post by **vera_k** » 02 Apr 2010 21:44

US economic growth gauge rises to 10-week high-ECRI

"With the WLI holding near January's all-time high, the ongoing U.S. economic revival will prove resilient in the months ahead," said Lakshman Achuthan, managing director of ECRI.

svinayak · Post by **svinayak** » 03 Apr 2010 00:01

Wall Street
WEDNESDAY, MAR 31, 2010 06:32 EDT
We should be policing Wall Street
We don't need to wait for financial reform to start busting some fraudsters
BY ROBERT REICH
http://www.salon.com/news/opinion/featu ... index.html

The Securities and Exchange Commission announced Monday it had begun an inquiry into two dozen financial companies to determine whether they followed accounting practices similar to those recently disclosed in an investigation of Lehman Brothers.

Where on earth has the SEC been?

It’s now clear Lehman Brothers’ balance sheet was bogus before the bank collapsed in 2008, catapulting the Street and the world into the worse financial crisis since 1929. The Lehman bankruptcy examiner’s recent report details what just about everyone on the Street has known since the firm imploded -- that Lehman defrauded its investors. Even Hank Paulson, in his recent memoir, referred to Lehman’s balance sheet as bogus.

In order to look like it could borrow $30 for every dollar of its own money, Lehman shifted liabilities off its books at the end of each quarter. Its CPA, Ernst and Young, approved of this fraud against the advice of a whistle-blower, who was fired by Lehman after alerting Ernst and Young.

Lehman's practices couldn’t have been all that different from those of every other big bank on the Street. After all, they were all competing for the same business, and using many of the same techniques. Lehman was just the first to go under, causing a financial run that led George W. Bush to warn "this sucker could go down" unless the federal government came up with hundreds of billions to bail out the others.

In other words, the TARP covered the other bankers' assets and asses.

We now know, for example, Goldman Sachs helped Greece hide its public debt and then placed financial bets that Greece would default, using credit-default swaps to avoid risking its own capital. It's the same tactic Goldman used for (and against) American International Group (AIG): Hide the ball, and then bet against the ball and fob off the risk to investors and taxpayers, using derivatives to remove the risky tactics from the balance sheets. Even today no one knows the fair value of the complex derivatives underlying these and related maneuvers, which is exactly the point.

Congress is now struggling to come up with legislation to stop this from happening again. And the Street is struggling to stop Congress. As of now, the Street's political payoffs seem to be working. Proposed legislation still allows secret derivative trading in foreign-exchange swaps (similar to what Goldman used to help Greece hide its debt) and in transactions between big banks and many of their corporate clients (as with AIG).

But wait. We already have a law designed to stop this sort of fraud. It’s called the Sarbanes-Oxley Act of 2002.

Think back to the corporate looting scandals that came to light almost a decade ago when the balance sheets of Enron, WorldCom, and others were shown to be fake, causing their investors to lose their shirts. Nearly every major investment bank played a part in the fraud -- not only advising the companies but also urging investors to buy their stocks when the banks’ own analysts privately described them as junk.

Sarbanes-Oxley -- Sarbox, as it’s come to be known -- was designed to stop this. It requires CEOs and other senior executives to take personal responsibility for the accuracy and completeness of their companies’ financial reports and to set up internal controls to assure the accuracy and completeness of the reports. If they don’t, they’re subject to fines and criminal penalties.

Sarbox is directly relevant to the off-the-balance-sheet derivative games the Street played and continues to play. No bank CEO can faithfully attest to the accuracy and completeness of its financial reports when derivatives guarantee that the reports are incomplete and deceptive.

So where has the SEC been?

I was on a panel a few weeks ago with a former chair of the Securities and Exchange Commission who was asked why the commission has so far failed to enforce Sarbox against Wall Street. He had no response except to mumble that legislation is meaningless unless adequately enforced. Exactly.

Bottom line: While financial reform is needed, there’s no reason to wait for it. Sarbox is already there. And even if financial reform is enacted without loopholes, there’s no reason to think it will be enforced if laws already on the books, such as Sarbox, aren't.

This article was adapted from my column in The American Prospect.

Neshant · Post by **Neshant** » 03 Apr 2010 02:43

SwamyG wrote:So another 25+ months to reach the pre-recession job market levels?

Based on hiring from which industry?

Currently the employment numbers in the US are being held up by maximum stimulus financed by debt. Instead of cutting, govt is adding jobs to its payrolls. Any opportunity to add to its payrolls is seen as good news. The census will create 200000 temporary jobs till June and that is seen as good news.

No questions are asked about whether this is productive usage of funds or merely spending to keep asset and employment numbers up.

Neshant · Post by **Neshant** » 03 Apr 2010 02:56

Pay Garnishments Rise as Debtors Fall Behind

PHOENIX — When the bank sued Leann Weaver for not paying her credit card balance, her reaction was typical for someone in that situation. Personal and financial setbacks weighed her down, and she knew she owed the $2,470. So she never went to court to defend herself.

She was startled by what happened next. When she swiped her debit card at the grocery store, it was declined. It turned out Capital One Bank had taken $224.25 from her paycheck, a quarter of her wages for two weeks of work at a retail chain, and her bank account was overdrawn.

http://www.nytimes.com/2010/04/02/busin ... f=business

Hari Seldon · Post by **Hari Seldon** » 03 Apr 2010 04:53

Regarding those unemp numbers, here's the latest from Ilargi.

As always, TIFWIW onlee.

Salient excerpts:

OK, so the BLS Establishment Survey Data say that in March, nonfarm payroll employment rose by 162,000 (quite a bit less than the consensus among "experts"). Not a terribly reliable or important number, if you ask me, but of course people will milk it for what they can. What strikes me is a number in the Household Survey Data:

The number of long-term unemployed (those jobless for 27 weeks and over) increased by 414,000 over the month to 6.5 million.
That's almost 7% in one month, and that is downright scary.

Of course, we've talked about this till the cows were home, fed, bathed, and left the barn again, {And so have we on this dhaga} but it still bears repeating that discussing US employment, for instance the initial jobless claims data, has become a futile exercise, if not an outright affront to the people, if the EUC (Emergency Unemployment Compensation) numbers are not included.

It may make for a nice feel-good story to claim that less people have jumped onto the front of the wagon, but it's simply deceitful not to mention the number that have fallen off the back. Over 44% of jobless Americans are now unemployed for more than 27 weeks.
...
And this whole focus on short term versus long term is increasingly becoming an issue in the overall economy, as well as, obviously, its data sets.

OK. So what's the contention here? IMO its how come the BLS shows a rise in jobs when the pvt sector has lost jobs.

We’ll have to see if the 162,000 jobs the BLS Establishment Survey Data is real, and how real it is. Note, for instance, that the ADP reported a loss of 23,000 jobs in the private sector just a few days ago. The gain may therefore stem from government jobs alone, most of which would be temp Census ones.
...
An increase of close to 7% in long-term unemployment is far scarier than a bunch of temp jobs is reason to cheer, that much should be clear.

Amen. Jobs *are* the core issue. And US joblosses through the past few recessions have been structural, not cyclical. Creating new jobs would require a 'structural' response, i.e. changing the struc of the khanomic system as it stands currently. And that implies, countering mercantilism from abroad with protectionism and mercantilism of one's own.

And there are probably millions of additional people who fall outside the scope of even these numbers. After all, don’t let's forget the difference between U3 (steady at 9.7%), U6 (rose to 16.9%) or even John Williams' SGS Alternate, which presumable has stayed near 22%. + 162,000 may be the best number in three years, but what's it mean when you know that fudging is the name of the game?

Still, its good to see some positive numbers for a change. Manufacturing growth reported in Asia, eurostan as well. Good sign. I don't want to see a collapse of the global khanomic system any more than the next guy - the dislocation incvolved can be terrible indeed.

Ilargi then reels off the crisis situ (and it is one) in the US housing sector. Read it all.

Lemme just conclude with Ilargi's excellent summary of the snafu thus far:

We are engaged in a futile attempt to return to a situation that no longer exists, and that was made possible by enormous amounts of cheap empty credit to begin with. Unless we will, and we want to for that matter, restart the money-for-nothing paradigm, which incidentally got us where we are now, home prices will have to come down substantially. Think 50% for starters. That would return some sort of health to the entire system. At those price levels, also, people wouldn't have to make all that much money to be able to afford their homes.

AMEN!
Its no secret that the real median wage has continually fallen since the early 70s at least. Households have been effectively worse off in terms of purchasing power (sans debt) for the really important things in life - housing, healthcare, college edu etc. Meanwhile, as if to divert people's attn away from that inescapable fact of falling real wages, it's become deceptively easier to buy trinkets and gizmos from PRC onlee.

Alas, we are caught in the bind of what once was, all government policy is based on the past, even if that past was clearly a bubble to which no-one should want to return.
{Amen. Awesomely articulated onlee.}

So why do we do it? Because the banking system took all those mortgages for homes at hugely inflated prices, and leveraged them to the hilt in order to issue securities and other derivatives. If we would acknowledge that that game is over, and get back to more sane levels of both wages and home prices, the banks would collapse.

And by now, you are just about 100% responsible for all the banks' losses. So be careful what you wish for.

Re that last bolded sentence, the transfer of risk, debt and loss from the private elite to the public laity is now effectively complete. Watch now for the rats to leave the sinking shop of the big banks. Already the obnoxious bonuses from the big houses (some in excess of the total annual profits for 2009) point to that eventuality.

Read it all.

SwamyG · Post by **SwamyG** » 03 Apr 2010 04:59

Neshant wrote:
SwamyG wrote:So another 25+ months to reach the pre-recession job market levels?
Based on hiring from which industry?

Ha ha....good one. I was just giving an optimistic guess based on the past performance.

SwamyG · Post by **SwamyG** » 03 Apr 2010 05:01

>>>>Over 44% of jobless Americans are now unemployed for more than 27 weeks.
Hari garu: I heard it is the highest since WWII.

Hari Seldon · Post by **Hari Seldon** » 03 Apr 2010 05:43

^^ O yes, swmaygal, jobs are the core issue and I don;t see improvements in khanomic jobscene sans a major re-organization of the globalized patterns in goods, labor and capital flows we have come to know and love so much till recently. A full eighth of the global cargo shipping fleet is idling this year, fall in trade has been that precipitous onlee.

Anyway, harsh D&G alert for what's coming next (you've been warned):
http://twitter.com/AutomaticEarth

TAE 2/4: 28pc of UK public spending going to welfare payments. Britain risks losing AAA status within 12 months.

Yawn. I've heard this story once too often now. Wake me up when UQ (deservedly?) gets downgraded below AAA.

TAE 2/4: Chinese infrastructure investment drove 90% of 09 GDP growth and 70-80% of this was down to insolvent Local Govt Financing Vehicles

Yves has the story here on her site. China’s Debt Bubble: When Will the Ponzi Unravel? And the short answer to that question is 'nobody knows. Possibly the ponzi will never unravel'. Onlee.

TAE 2/4: BNP Paribas, Credit Agricole, and SocGen: have assets accounting for 237% of French GDP. Have $781 Bn exposure to PIIGS. #fail

TAE 2/4: Compared to Europe, the US had a conservative mortgage market,chart: http://bit.ly/c4Ukbh. Good thing Oz/NZ aren't in that graph...

History repeating itself onlee. Never fail to learn do we? And I thought that was a character flaw peculiar to SDREs onlee.

TAE 2/4: Most of the loans modified in the first quarter of 2009 had gone bad again within nine months—52% were more than 60 days delinquent.

TAE 4/2: Number of long-term unemployed (those jobless for 27 weeks and over) increased by 414,000 over the month to 6.5 million.

TAE 2/4: Serious delinquency rate at Fannie climbed to 5.52% in January (most recent data), doubling from the 2.77% rate in January 2009.

TAE 2/4:state & local govts spend an avg of $39.60 in wages & benefits per hr worked on employees,versus an avg $27.42 for private employers.

It will go on till it can't anymore. The mortgage madness in the tfta lands will take us all down with it, I fear.

TAE 2/4: A Greek default would be twice the size of the two largest defaults in history put together - Argentina & Russia — €300bn nominally

Yawn again. Wake moi up when it actually happens I say.

Jai ho.

Hari Seldon · Post by **Hari Seldon** » 03 Apr 2010 08:33

NJ Guv Christie's speech to NJ mayors on NJ public TV

Mish calls it one for the ages. Can't help but admire the US system which is sending up steel to the surface in response to acute crisis.

Partial transcript from Mish's site:

In the time we got here, of the approximately $29 billion budget there was only $14 billion left. Of the $14 billion, $8 billion could not be touched because of contracts with public worker unions, because of bond covenants, because of commitments we made accepting stimulus money. So we had to find a way to save $2.3 billion in a $6 billion pool of money.

When I went into the treasurer's off in the first two weeks of my term, there was no happy meetings. They presented me with 378 possible freezes and lapses to be able to balance the budget. I accepted 375 of them.

There is a great deal of discussion about me doing that by executive action. Every day that went by was a day where money was going out the door such that the $6 billion pool was getting less and less. So something needed to be done.

People did not send me here to talk, the people sent me here to do. So we took the executive action we did to stop the bleeding.

As we move forward, and we evaluate what we need to do three weeks from now in our fiscal year 2011 budget address, you all need to understand the context from which we operate.

Our citizens are already the most overtaxed in America. US mayors hear it all the time. You know that the public appetite for ever increasing taxes has reached an end.

So when we freeze $475 million in school aid, I am hearing the reverberations from school boards saying now you are just going to force us to raise taxes.

Well there is a 4% cap in place as you all know, yet school boards continue to give out raises which exceed that cap, just on salary. Not to mention the fact that most of them get no contribution towards the spiraling increase in health care benefits.

Now, we are going to reduce spending at the state level. And we are going to continue to reduce it because we have no choice but to do so. Our obligation to you is twofold. One, is to let you know that. So I'm' letting you know that.

Second to work with the legislature to give you the tools helping you to reduce spending at the municipal level. Now the pension and benefit reform package that was passed unanimously in the senate this week begins to give you some of those tools.

But it is only a beginning.

Do we need to change some of the rules of arbitration to level the playing field to allow municipalities and school boards to have a more level sense of collective bargaining?

I think the evidence of ever increasing raises being given to public sector workers as a result of the arbitration system tells us that we do. [Applause From Mayors]

But you have to stand up and give the support to the legislators in this building to get them to do that. I can guarantee you this, that more pension and benefit reforms which I will consider arbitration reform to be one of them, are things that when they come to my desk, they will be signed. [Applause From Mayors]

Because we can no longer continue on a path where we say we are going to reduce spending at the state level but we are not going to give you any tools to do that at the municipal level and the school board level.

By the same token I am tired of hearing school superintendents and school board members complain that there are no other options than raising property taxes. There are other options.

You know, Marlboro, after a two year negotiation, they give a five year contract giving 4.5% annual salary increases to the teachers, with no contribution, zero contribution to health care benefits.

But I am sure there are people in Marlboro who have lost their jobs, who have had their homes foreclosed on, and who cannot keep a roof over their family's head there is something wrong.

You know, at some point there has to be parity. There has to be parity between what is happening in the real world, and what is happening in the public sector world. The money does not grow on trees outside this building or outside your municipal building. It comes from the hard working people of our communities who are suffering and are hurting right now.

I heard someone in the legislature say two days ago that they wanted no fare hike in New Jersey Transit, no cuts in service, and no cuts in subsidy. And I was thinking to myself, man I should have made this guy treasurer. [Laughter] Because if you can pull that one off, you're obviously magic.

This is the type of awful political rhetoric that people sent me to this city to stop.

I would love to be able to do that, but I can't. I would love to tell you that municipal aid will stay level, but it's not. And it's not because we don't have the money. So you need to prepare. You need to prepare for what's coming down the line because we have no choice but to do these things.

And so we need to get honest with each other. In this instance, the political class,for which unfortunately all of us are a member of, the political class is lagging behind the public on this. The public is ready to hear that tough choices have to be made. They're not going to like it. Don't confuse the two. But they are ready to hear the truth.

In fact, they find it refreshing to hear the truth.

They are tired of hearing, don't worry I can spare you from the pain, because they have been hearing that for a decade, as we have borrowed and spent and taxed our way into oblivion.

We have done every quick fix in the book that you can do. And now we are left, literally holding the bag.

Leadership should be about making tough decisions. I'm not hear to tell you that anything you are going to have to do as mayors, council people will be easy. But I firmly believe after spending the last year traveling around the state of New Jersey, talking to regular citizens, that this is what they are expecting us to do.

They are also expecting us to ferret out waste and abuse. But they also know that old song that waste and abuse is going to balance the budget is an old and tired one, and it's not going to.

Now we are going to have a fight about COAH. And I have engaged in that fight and I have engaged in it directly. Not only will I be fighting COAH, I will be fighting the courts too. [Applause From Mayors]

That's OK.

We need to understand we are all in this together. And you know, all of you know in your heart, what I am saying is true. You all know that these raises that are being given to public employees of all stripes, we cannot afford. You all know the state cannot continue to spend money it does not have. And you all know that the appetite for tax increases among our constituents has come to an end.

And so the path to reform and success is clear. We know what it is. We just have to have the courage to go there. What we are doing is showing people that government can work again for them, not for us. Government has worked for the political class for much too long.

There's no time left. We have no room left to borrow. We have no room left to tax. So we merely have room left now, to do this. We are all reaching the edge of a cliff. And it reminds me a bit of that part of Butch Cassidy and the Sundance Kid where the had a seminal decision to make. So what did they do? They held hands and they jumped off the cliff.

We have to hold hands at every level of government, state county, municipal, school board. We have to hold hands and jump off the cliff.

I firmly believe we will land and we will be fine. It does not mean it will not be a scary ride on the way down. And it does not mean there won't be moments of fear and moments of apprehension.

But for certain, the troops of the decades of overspending and overborrowing and overtaxing have gained on us. So the ruination of New Jersey's economy, and of the quality of life we want all our citizens to have, is certain if we do not take this course.

It's time for us to hold hands and jump off the cliff. It's time for us to do the difficult things that need to be done and to stop playing the petty politics of yesterday, of lying to the people telling them they do not have to pay for it because someone else will.

We are going to make the leap because that's what people elected me to do. We are going to make the leap because it is the responsible thing to do. We are going to make the leap and we are going to do it together because that is what leadership demands for us. That is what the responsibility of the offices we hold requires of us.

Forget about the next election. Forget about the next editorial in the newspaper, and forget about the next angry letter or phone call you are going to get from someone who wants something for nothing.
{whoa! WHOA! WHOA!}

One thing is certain. The alternative will lead to certain defeat. And so it is time for us to show courage, and resolve. And we can do it because we are from New Jersey. And I have never, in all my travels around the country, met a group of tougher people than we all have the opportunity to lead.

Watch in full. Some 25 min speech there.

svinayak · Post by **svinayak** » 03 Apr 2010 12:15

http://www.csmonitor.com/Money/2010/040 ... US-economy

"We're cutting down a lot.... [The recession] taught us we need to save more for times like this," says Husain, who lives in Westborough, Mass., with her husband and two sons. "Even saving $20 or $30 a month can add up to a lot." And with a third boy on the way she says, "I'm sure we'll have to tighten our budget long-term."

The recession has brought about a seismic shift in Americans' financial habits, coaxing scores of former spendthrifts to save.

Roughly 6 in 10 Americans now say they prefer saving to spending, according to a recent Gallup poll. And although Americans still have one of the lowest savings rates in the world, they are saving more: Americans saved 5.4 percent of disposable income in the second quarter of 2009, when the recession was near its peak.

By contrast, the savings rate was less than 2 percent in all of 2005 when access to easy credit, sophisticated marketing campaigns, and a culture of consumption lured many Americans to the malls.

Based on conventional wisdom, Americans' newfound penchant for thrift is good for them but bad for the economy. But some economists assert saving more can actually improve the economy in the long run.

Whenever the economy goes sour, consumers are often bombarded with messages to spend, spend, spend, to stimulate the economy.

"If you can afford it, then this is exactly the moment to redo your kitchen or buy a car," wrote Harvard economics professor Edward Glaeser in a 2009 New York Times article titled "If you got money, it's time to spend some." "Not only will you be able to get a good deal, but your spending will help revive the economy."

And on more than one occasion, former President George W. Bush encouraged Americans to shop to spur the economy. It's a familiar refrain throughout history, says Lauren Weber, author of "In Cheap We Trust."

"Everyone's telling us we're doomed unless consumers start spending," says Ms. Weber. "American history is filled with these times when [saving] is demonized and those who do are told they are endangering the American way of life."

Consumption-mongers may be right, to a point.

In a consumer-driven economy like the US, consumption typically makes up 70 percent of gross domestic product (GDP). But as consumers slashed spending and boosted savings during the recession, consumption as a percentage of GDP began dropping. It will be 65 percent of GDP by 2015, according to some reports – and that has some people worried.

It's a problem known as the paradox of thrift, the theory that individual thrift leads to collective misfortune, an idea first proposed by English economist John Maynard Keynes.

One person's spending is another person's income, the theory goes, so if everyone decides to save money by, say, eating out less, someone else loses that income (like restaurants).

Multiplied across the economy, less spending and more saving will slow economic growth. In other words, according to Mr. Keynes, Husain is contributing to a downturn by saving for her sons' college educations.

Ameet · Post by **Ameet** » 04 Apr 2010 01:30

U.S. to Delay Chinese Currency Report

http://www.nytimes.com/2010/04/04/business/04yuan.html

shyam · Post by **shyam** » 04 Apr 2010 05:14

MATT TAIBBI in Rolling stone again...
This time about scam at Jefferson County, Alabama.

Looting Main Street

Hari Seldon · Post by **Hari Seldon** » 04 Apr 2010 13:09

chan akya in atimes. Keeps dreaming about pan-asian co-operation in not getting ripped off by the paper-tiger western bloc.
Who rates the raters?

Mighty good read. This in particular caught my eye.

Whatever has passed so far is far from comforting for future bond investors. While it could just be that government officials are too busy to have noticed the rating agencies, another factor could also be at play. Clearly, what has passed as financial market regulation for the rating agencies has been tempered by the need for the very same governments in the bond markets to continue their borrowings.

In other words, there is a conflict of interest in the US and highly indebted European governments being in charge of reforming the credit rating agencies in the first place, given their own borrowing needs, which would be adversely affected by potential rating downgrades should the demands for "truth" in credit ratings become too onerous or even inflexible.

Rating agency perfidity and malfeasance has been beaten to death several times on this dhaga, nothing new. Also, was always knows that the 'independent' rating agencies and western gubmints were *always* joined at the hip.

If ever there was an issue for Asian countries to take a lead on, this is it. Given the vast holdings of US and European government debt that is held by Japan, China, South Korea, India and other Asian countries, it is time that they bandied about and created their own assessment of what the true creditworthiness of Western nations really was. In the process, whatever new rating agency that is created could well turn out to be an effective replacement of the existing three agencies.

Very good idea, but the west has too many cat's paws within asia to abort such a move way before it gets anywhere, IMHO.

Heck, even in india, seems we've ended up allowing phoren i-banks no less to buy up stake in our own crisil and ICRA, no less. There's no alternative, IMHO, to a public sector rating agency in this country, perhaps.

If and when these companies pass away into the financial history books, there probably won't be too many tears shed in Asia.

Amen. We can drink to that.

Jai ho.

Neshant · Post by **Neshant** » 04 Apr 2010 13:26

CFTC is a Big Story
http://www.youtube.com/watch?v=6L5OqrzNNQg

Its about what whistleblower Andrew Maguire revealed regarding the gold/silver market manipulation by JPMorgan. If indeed gold trades at a 1:100 ratio, India's purcahse of 200 tons must have blown a big hole in someone's balance sheet.

Singha · Post by **Singha** » 04 Apr 2010 19:55

WSJ

The Age of Frugality takes a holiday: James Saft
Thu Apr 1, 2010 10:49pm IST

(James Saft is a Reuters columnist. The opinions expressed are his own)

By Jim Saft

HUNTSVILLE, Ala. (Reuters) - That whole Age of Frugality thing didn't last long, did it?

U.S. real personal consumption grew in February at a respectable 0.3 percent clip, the fifth straight such monthly rise, a fact widely greeted as news that the recovery is on course. The fly in this tasty soup, however, is income, which in real terms didn't increase at all, not even by one tenth of a percent.

American's did this neat trick -- spending more while earning the same -- the old fashioned way: they cut back on luxuries ... like saving.

Savings as a percentage of disposable personal income fell to 3.1 percent from 3.4 percent the month before and down from a recent peak of 6.4 percent in May 2009. In fact, the last time the savings rate was lower was October 2008 when a market maelstrom was convincing so many people, apparently falsely, that something rather dangerous and important was wrong with the economy. In real terms, consumption is only very slightly below where it peaked in 2007.

Astounding.

What happened? Well, from a certain point of view the medicine of reflation worked. Low rates punished savings and also drove the stock market and other risk assets higher. The fall in housing prices abated, leaving many personal balance sheets in better shape. Given the shape of the job market, I think we have an answer to the question of whether asset price inflation drives spending. It did during the boom and it is again now.

Government transfers helped too. They hit $2 trillion for only the second time in history, as payments from the common coffers such as social security and unemployment insurance now comprise more than 18 percent of income.

Singha · Post by **Singha** » 04 Apr 2010 19:56

above figures indicate on the average the american population has not changed their lifestyle to save more and instead gone back to their old ways soon as the "all clear" bell sounded on the economic crisis.

biswas · Post by **biswas** » 04 Apr 2010 21:29

Singha wrote:above figures indicate on the average the american population has not changed their lifestyle to save more and instead gone back to their old ways soon as the "all clear" bell sounded on the economic crisis.

Over here, increased consumer consumption is used as a get outta jail free card from a trough.

svinayak · Post by **svinayak** » 05 Apr 2010 07:30

South Korea's industrial giants
Return of the overlord
A tycoon comes back as the saviour of Samsung Electronics, leader of South Korea’s remarkable business success. But where’s the crisis?
http://www.economist.com/world/asia/dis ... d=15816702

Mar 31st 2010 | SEOUL | From The Economist print edition

LEE KUN-HEE is a man of few words. So when the 68-year-old decided to come out of court-induced purgatory this month to retake the helm of Samsung Electronics, now the world’s biggest technology company, it was appropriate that he chose Twitter, a keep-it-brief social-networking site, to spread the news.

Mr Lee’s message was not just for employees of Samsung Electronics, by far the biggest part of his empire, but also those of the other 64 firms within the conglomerate that he controls. It was delivered with the sort of attention-grabbing hyperbole that any tweeter would be proud of: “It’s a real crisis now. First-class global companies are collapsing. No one knows what will become of Samsung. Most of Samsung’s flagship businesses and products will become obsolete within ten years. We must begin anew. We must only look forward.”

It did not quite have the pithiness of Mr Lee’s rhetoric in 1993 when he said Samsung was a second-rate company and that its employees should “change everything except your wife and children.” But his words had the same urgent ring of truth about them.

How can that be? It is a question that could be asked by anyone who has recently turned on a flat-screen television, bought a mobile phone, stored masses of data on a flash memory or watched Chelsea’s footballers in shirts sporting Samsung’s name. Far from being a disaster in the making, Samsung Electronics has become one of the world’s strongest brands, known for sleek design, razor-sharp technology and good value.

Think of anything with a screen, from a few centimetres square on a mobile phone, to a laptop, a wide liquid-crystal display or a giant 3D television, and Samsung Electronics will be one of the top two firms in the world making it—or at least the memory chips inside it (see chart). The company’s global market shares are staggering: more than 40% of the flash memory used in sophisticated electronics like the Apple iPhone, almost one in five of the world’s mobile phones and one in six of its television sets. It even makes screens for Sony’s TVs.

Having invested aggressively in new products in 2008, Samsung Electronics sailed through the global financial crisis, almost doubling its operating profit in 2009. This year analysts expect it to generate record profits of over $10 billion. Sales are forecast to be about $130 billion, which is likely to confirm its lead over America’s Hewlett-Packard as the world’s biggest technology company by revenue. Not to be outdone, other parts of the Samsung group have notched up successes. The construction division recently completed the tallest building in the world in Dubai and Samsung Heavy Industries is flush with shipbuilding orders.

svinayak · Post by **svinayak** » 05 Apr 2010 07:39

http://www.nakedcapitalism.com/2010/04/ ... etend.html

Guest Post: What Do We Have to Show After a Year of “Extend and Pretend”?

So on April 2, 2009, a key FASB rule was suspended: Specifically, rule 157 was suspended, related to the marking of assets to market value—the so-called “mark to market” rule.

Essentially, the mark-to-market rule means marking an asset to the value it can fetch in the open market at the date of the accounting period. If I own a share of XYZ stock which I purchased at $100, but today it’s quoted at $60, I mark it on my books at today’s market price—$60—not at the purchase price—$100. The reason is obvious: By marking the asset to market value, I’m giving a realistic picture of the financial shape of my company or bank.

However, ever since April 2, 2009, when the FASB rules were suspended, the American banking system has been floating on nothing by air. By suspending rule 157, none of the banks have had to admit that they’re insolvent. With the suspension of mark-to-market, accounting rules are now basically mark-to-make-believe.

Why was FASB rule 157 suspended?

Geitner, Bernanke and Summers seem to have been trying to duplicate what Volcker did so successfully in 1982. This period since March 15, 2009, when the suspension of the rule went into effect, has been called “extend and pretend”.

Has it worked?

Prima facie, it would seem so. The banks seem to be stable, and have been raking in the big bucks ever since the rule was suspended. The markets—from their March ’09 lows—have rocketed onward and upward. In fact, Citigroup stock has quadrupled, Goldman Sachs has doubled—everything is wonderful! Nothing hurts!

However, the basic problems in the banking system remain: The banks are still broke, because of the same reason—the toxic assets on their books.

The banks have taken “extend and pretend” to heart—they have lobbied to extend the suspension of FASB, while they have pretended to repair their balance sheets, when in fact, they have not.

In fact, compared to the write-off mania of ’08, the banks have not written off any of these non-performing assets. They sit like dead weight on the balance sheets of the banks—we still do not have a clear grasp of even how much of this garbage is still lurking out there, like turds in the Venice canals, because of the obfuscation of the basic accounting rules—an obfuscation which the banks insist on perpetuating.

The banks still have the holes in their balance sheets which caused the crisis in 2008.

But then, how have the banks made such staggering profits during the last year?

By trading. Instead of being banks, since March of ’09, the Big Six US banks have effectively become hedge funds. They have been trading themselves into profitability. Worst of all, these banks qua hedge funds have been making money by trading with each other. Price-to-earnings ratios bear this out—their general upward trend, across sectors and industries, even as the economy has been severely weakened, is indicative of a speculative bubble. A massive bubble—the kind that makes the Hindenburg look puny.

All of the markets have risen from their March ’09 lows because of what I would term musical chair trading—everyone makes money so long as the music doesn’t stop. The “music” of this metaphor is a combination of Uncle Ben’s easy money, relative calm in the world, and good ol’ “extend and pretend”, courtesy of FASB.

But when the music does stop, the banks are going to realize that it’s not that there’s one less chair in the circle. There are no chairs left.

That when the next crisis will hit—when the music stops, and everyone rushes to get out of their musical chair trading positions.

To continue with the analogy, when will the music stop? When will everyone rush to find a seat—and find that there are none left? My guess is, it will be something from left field, something in-and-of itself not particularly earthshattering: A punitive Israeli airstrike against Iran, say, or Somali pirates sinking a big oil tanker. A lousy consumer sentiment number, or a surprise burst of unemployment.

Why hasn’t Team Obama’s version of the Volcker Call worked? Simple—because Paul Volcker made it clear to the banks in ’82 that he would declare them insolvent, if they didn’t repair their balance sheets. Volcker scared the bankers, scared them enough to make then do what was necessary—which was to clean up their balance sheets.

What did Team Obama do 27 years later? Did they twist bankers’ arms, and force them to write off the garbage on their balance sheets?

No they did not. Instead, they bowed and scraped at the banksters, as if they were truly Masters of the Universe, instead of what they really are—scum of the earth dressed up in really nice suits.

In 1982—unlike 2009—the banks had a reason to try to renegotiate and write off the bad Latin American loans: Volcker was breathing down their collective necks, and the banks were scared of him. Volcker had a credibility then that Team Obama today does not have now—Volcker showed himself willing to bring the entire US economy to a halt, in order to purge inflation. What was putting a few big banks out of business, compared to that? Nothing—catnip for Volcker.

But Geitner, Bernanke and Summers have shown themselves willing to do anything for the banks—they’ve become twisted around, and come to think of the banks as ends-in-themselves, rather than means-to-ends, within the economy.

What should have happened starting in March of ’09 was for the banks to take the suspension of mark-to-market and used it to purge their balance sheets of all the crap they are still carrying.

But they did not. Nor will they. Because no one is forcing them to. No one forced them in April of ’09, no one is forcing them now in April of ’10.

Therefore, once the era of Musical Chair Trading ends with some ridiculous non-event that will send everyone panicking, the banking sector will be right back where it was on Septmber 18, 2008—the only difference, of course, being that Bernanke has already shot his wad, and politically, it will be impossible to pass another TARP.

That’s when the world ends—the second crisis will be loads worse than the one in the fall of ’08. Loads worse, even, than ’29.

http://www.marketoracle.co.uk/index.php ... &sid=18356

This is excerpt for article entitle; “Timothy Geithner is a Sniveling Scamster”, by Mike Whitney.

“being that Bernanke has already shot his wad, and politically, it will be impossible to pass another TARP.”

The backdoor:
Subprime-mortgage securities are rising at an accelerating pace as the U.S. begins to encourage reductions to homeowners’ balances, which may lead to fewer foreclosures and a quicker end to the housing slump….Senior-ranked bonds tied to borrowers with poor credit will mostly benefit after the Treasury Department said for the first time it would seek to cut the size of mortgages, reducing the likelihood that loan modifications will fail, according to JPMorgan Chase & Co., Morgan Stanley and Barclays Plc. (Bloomberg)

What does it mean? It means that Obama’s mortgage modification extravaganza has touched-off a gold rush in toxic paper. Subprime securitizations, which had been worth next to nothing, are now the hottest trade on Wall Street. It’s a subprime bonanza! The investment sharpies are scarfing up all the crummy MBS they can get their hands on, because they know they can trade it in for Triple A FHA-backed loans when the program get’s going. It’s another swindle cooked up by Treasury Secretary Timothy Geithner to keep the brokerage clan in the clover. Here’s how a Wall Street veteran explained it to me:

“It looks like the investors in securitizations will be swapping underwater real estate for govt-insured paper… I think the scam here is just to provide some cover so the hedge funds and other high net worth individuals can trade their low grade paper for Triple AAA mortgages insured by the FHA at the taxpayer expense.”

That’s it, in a nutshell. The faux-foreclosure prevention program has nothing to do with helping homeowners. That’s just diversionary gibberish to confuse the public. The real objective is to create a government landfill (aka–FHA) where the banks and other financial institutions can dump their toxic MBS-sludge and walk away with gov-backed loans. Get a load of this:
(Bloomberg) — The Federal Reserve’s completion this week of its program to buy $1.25 trillion in mortgage bonds probably won’t mean significantly higher U.S. home loan rates as investors return to the market, replacing the Fed…

“What we are seeing is an effective handoff occurring between the Fed and industry buyers such as banks and pension funds,” said Christopher Sebald, chief investment officer for Advantus Capital Management in St. Paul, Minnesota..”

wlin · Post by **wlin** » 06 Apr 2010 01:19

I think the difference is how you define de-link. You may see the de-link as currency peg. Chinese leader may view de-link the other way.

First about the currency peg, as I said in the other thread, China may already floating its currency without Obama called for it. There is huge debate in China about floating currency, and late last year the view that prefer floating currency already won the debate. Then came out the Obama thing and it got delayed. Now it becomes political. China can not back down at this moment. Now US delay the date. If I predict, I would say US will never name China as so called currency manipulator. China will start floating currency some time later this year. RMB will rise 5 -10% percent, no more than 15% percent.

In fact the three new member of China central bank’s currency policy committee all favors floating RMB. Name them means China already made her mind.

Then let us talk about the Chinese leader’s version about de-link. That is much boarder than currency de-link. It means change the economic development course. It may not be compared to 1978 but much more important than China enters WTO. If you read Chinese media, there is a lot coverage about it. I said they are very serious. The first reason is I have never seen central committee acts like this in 20 years. Second is they not only say what they want to do, they present an outline about how to do it and who to do it. They are not only words.

I will skip the how to do it part because I do not want to translate the whole thing. About who to do it, if you watch Chinese media, you will know who handle the economic affair right now. Wen already become a ceremonial figure. He will give out BS talk right now just like elected politician. Li, KeQiang took charge of economic affair right now. Based on these facts, I say they are serious.

vina wrote:
China is very serious about de-linking with Uncle
Nope. It is not. It is joined at the hip with a fixed exchange rate peg to the USD.

Ask anyone who knows even a smattering of economics, why even in "prestigious" places like "JNU" (where they know about everything) , or some Economics Academy of "Science" somewhere in China (hint.. the word science will mean that it is "rational" not "superstitious" and hence approved as good by the CPC and the other commies and the global left intelligentia and riff raff like N. Ram) and they will confirm this.

When you have a fixed peg with another currency, YOU EFFECTIVELY DO NOT HAVE A MONETARY POLICY
Much as you like to pretend other wise, China's (and all other countries with a fixed peg to USD like nearly all the Middle Eastern countries and others like Hong Kong) monetary policy is not decided by their respectiven central banks but by the Federal Reserve.

China's money supply is not decided by the Governor of the PBoC but by Ben Bernanke

paramu · Post by **paramu** » 06 Apr 2010 01:44

Meet The 26 Members Of George Soros's Secret Team To Rewrite Economics

George Soros has brought together a crack team of the world's top economists and financial thinkers.

Its aim: To remake the world's economy as they see fit.

The New Institute of Economic Thinking is to be centered in London, but also fund programs around the world, the first of which will be in Oxford.

In order to reinvent economic thinking, he's brought together a crack team of top economic minds.

They're a "Justice League" if you will.

The Mother Teresa of Economics: Amartya Sen

The Civil Servant: Dr. Yaga Venugopal Reddy

svinayak · Post by **svinayak** » 06 Apr 2010 02:33

http://www.youtube.com/watch?v=7clzvockigw
April 5 (Bloomberg) -- Nicholas Lardy, senior fellow at the Peterson Institute for International Economics, talks with Bloomberg's Margaret Brennan about Treasury Secretary Timothy Geithner's move to delay a report on global currency policies. In an April 3 statement, Geithner announced the delay of the report, scheduled for April 15, and urged China to move toward a more flexible currency. (Source: Bloomberg)

paramu · Post by **paramu** » 06 Apr 2010 04:35

China, U.S. work on currency deal

The U.S. is delaying a report that might have branded China a currency manipulator. The two nations have been in behind-the-scenes discussions about China's currency.

James Cockburn · Post by **James Cockburn** » 06 Apr 2010 13:28

American economy is driven by consumption, chinese economy by driving America to consume more (aka export more). This will drive in the short run the currency manipulation by china to keep ist currency artificially low in exchange. Besides if the US dollar weakens it will only erode the Chinese holdings.

The equilibrium will arrive when PRC internal consumption starts to grow at a rapid rate and the revnues are internally generated (growth propelled by internal consumption) , then PRC will automatically strengthen its currency vis vis against dollar, so that its imports are cheaper and exports are costlier. Plus as long as PRC imports raw material and commodities it is better not to weaken the USD as most of the world trade is dollar denominated. A point the n comes when law of diminishing returns kicks in and a switch will have to happen, how well it is controlled and how well the smooth landing happens and with face saving is what we need to see and talk about.

All these have t

Chinmayanand · Post by **Chinmayanand** » 07 Apr 2010 14:29

Hari guru , can you shed some light on Geithner's visit to India... what crap and bs did he spread here ..?

Neshant · Post by **Neshant** » 07 Apr 2010 19:39

Volcker: Taxes likely to rise eventually to tame deficit

The United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax, White House adviser Paul Volcker said on Tuesday.

Volcker, answering a question from the audience at a New York Historical Society event, said the value-added tax "was not as toxic an idea" as it has been in the past and also said a carbon or other energy-related tax may become necessary.

Though he acknowledged that both were still unpopular ideas, he said getting entitlement costs and the U.S. budget deficit under control may require such moves. "If at the end of the day we need to raise taxes, we should raise taxes," he said.

http://www.reuters.com/article/idUSTRE6355N520100406

------

That what you get for having stooges from Goldman Sachs and the Federal Reserve running the economy. I still think its a bluff. The US will default on its debt by printing. This may be just some psy-ops to keep suckers around the world holding dollars till it falls off a cliff.

Neshant · Post by **Neshant** » 07 Apr 2010 20:04

Greenspan is like pooh bear hunting in circles his own footprints dreaming up ever more grand ideas of the terrible beast that must have caused such a thing. Does he even realise how big of a role he played in the mess.

Interest rates should be set by the market, not by some guy rolling dice in an ivory tower.

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

Greenspan: don't blame crisis on mortgages for poor

Making it easier for poorer Americans to get mortgages didn't push the country into crisis

http://www.reuters.com/article/idUSTRE6362KM20100407

ldev · Post by **ldev** » 07 Apr 2010 21:33

The US seems to be at last doing what I had discussed here a few months ago i.e. the only way to confront China on its currency/trade policies is for the G20 to present a united front. This would have certainly been on his agenda in Delhi.

Geithner Tests G-20 Power With Push for Firmer Yuan

April 7 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner is putting the Group of 20’s enhanced power to the test as he tries to prod China into revaluing the yuan.

Seven months after the G-20 replaced the G-7 as the steering committee to rebalance the world economy, Geithner is calling such bodies “the best avenue for advancing U.S. interests” on China’s currency. G-20 finance chiefs gather in Washington in two weeks and Geithner will meet Chinese Vice Premier Wang Qishan tomorrow in Beijing.

The tactical shift away from bilateral campaigning forces exchange-rate policy onto the G-20’s agenda for the first time since its leaders began meeting in November 2008. Success or failure may determine whether the forum can make the global economy more crisis-proof, with splits over bank regulation already suggesting it is too unwieldy to achieve consensus.

“If all these countries come together in the context of the G-20, I think that will be hard for China to ignore,” Arvind Subramanian, senior fellow at the Peterson Institute for International Economics in Washington, told Bloomberg Television yesterday. “If the U.S. beats up on China, China can say ‘the U.S. is a bully.’ But if the U.S. assembles a broader coalition, that’s going to be more difficult for China to fend off.”

paramu · Post by **paramu** » 07 Apr 2010 23:24

X-post

paramu wrote:India should say that to consider his argument, US should first stop printing and exporting dollars and let the world audit the Fed.

Hari Seldon · Post by **Hari Seldon** » 08 Apr 2010 09:14

Chin,

Haven't been following the visit too closely, admittedly. Aside from the usual bromides, can only hope no 'concessions' from Dilli emerge from the visit. RBI's said a firm 'No' to more banking licenses to MNC banks, more branch licenses to MNC banks, more fredom to phoren fin firms, etc. Good.

Will go with Idev's take on this - could be a mission to collect commitments to go to trade war if push comes to shove with the currency manipulation lot, perhaps.

Anyway, the free marketer in Mike Shedlock breaks the locks, seems like. Godo summary here:

Major Global Problems

* Trade Imbalances
* Massive consumer debt and leverage especially in the Western world
* Huge wage differentials between developing and developed countries
* Public unions contribute to wage imbalances and savings internally
* Unfunded liabilities such as Social Security
* Unsustainable pension promises in the US, Europe, and Canada.
* High US unemployment
* Commercial Real Estate Bubble in the US
* Real estate bubbles in China, Canada, Australia, and the UK that have not popped but most assuredly will
* Demographic nightmare in Japan
* Interest rates artificially low in the US, UK, and EU
* The PIIGS
* Stock market bubbles reinflated
* Carry trade speculation

I am certainly in favor of letting the free market solve all of those. Indeed many of them are so intertwined, that only the free market has a chance in hell of solving them.

And the (idealist) solution:

Things That Need To Happen

* China needs to float the RMB.
* The US and the rest of the world need to let the market set interest rates.
* Globally, bad banks need to fail instead of being propped up.
* Housing prices need to fall to the point where they are affordable.
* The US needs to encourage savings.
* China and the US need to stop insane levels of fiscal stimulus
* The US needs to stop being the worlds policeman.

Alas, its not an ideal world. But hey, I can drink with Mish on each of those points there.

Ameet · Post by **Ameet** » 08 Apr 2010 12:19

Destitute and desperate, Icelanders opt for exile

http://news.yahoo.com/s/afp/20100407/lf ... 0407153600

Emigration has rapidly picked up speed since the Atlantic island nation's economy crumbled in late 2008, dragged down by the collapse of its major banks. Last year it marked the largest exodus from the country since 1887.

In 2009, more than 10,600 people left the country of fewer than 320,000 inhabitants, according to official statistics, with 4,835 more people moving away than immigrating.

Like many other Icelanders who have seen their worlds collapse since the financial turmoil began, Bjoernsdottir's predicament stems from the decision, on advice from her banker, to take up a loan in foreign currency. Repayments on her loan, in yens and Swiss francs, became insurmountable after the Icelandic krona nose-dived following the banking sector implosion.

"I don't want my daughter to have to pay for this," she said. "I just have such a bad feeling about what's happening here."

Chinmayanand · Post by **Chinmayanand** » 08 Apr 2010 18:13

IMF can’t afford to be ‘Mr Nice Guy’ if EU states go bust

Hari Seldon · Post by **Hari Seldon** » 08 Apr 2010 21:45

Ilargi holds fort on the possibility, nay inevitability, of intergenerational conflict in his latest piece here. Good read, IMHO.

The age of entitlement is over

Salient excerpts:

There will come a point in time, and in all likelihood it's already here, when wages for the working, and services for the community, will have to be drastically cut, not just because tax revenues plunge or because the overall economy is limping along, no, solely to pay out pensions to those who no longer work.
....

Already, in Britain, those working in the private sector pay more towards pension systems for public sector workers than they pay towards their own retirement funds.

But surely the netaship is on the case. No? Surely they'll think of something. Maybe cutting some pension benefits here and there can help?

That is where the essence of the problem lies, and nobody volunteers anything even close to a solution. The best they can do is proposing "pension reform" that would give future employees less benefits. But that's not going to work. The problems have already grown beyond any such "solution".

Grown 'beyond' such a solution? Not yet, IMHO. There's still time to perhaps manage a smooth or at least orderly devolution, IMHO. Or so I hope for all our sakes.

To sum:

To summarize, unless we see our economies produce record growth levels over the next ten years (they won't), we will live in a world where parents are pitted against their children, and neighbors versus neighbors. To understand that, look at the present funding gaps in all the pension systems, and combine that with the rate at which pay-outs increase, as well as the rate at which that rate increases.

It will become clear to the working population that the soon unprecedented amounts and percentages of their wages that will go towards pension plans, will not be used for their own retirement, but are needed for that of the generation before them. And that will happen at a time when downward pressure on wages by unemployment will be massive.

The only solution would be for the baby-boomer generation to voluntarily cut their own pensions by 50% or more, and return the remainder to the funds. That will not happen. Neither will there be politicians brave -let alone numerous- enough to force such cuts in any meaningful sense, not until the baby boomers are no longer the largest voting block in our societies, and rest assured, by then it will be way too late.

Bah. More abstract yap yap only. Tell me what it means in, like, concrete terms, will ya?

For those of you who are already retired or will soon do so, your pensions will be cut drastically within probably 5 years, and certainly 10 years. Think a 75% cut.

For those of you under the age of 50, assuming you'd retire at 65, and this is something I’ve said many times before, there will be no pensions, period.

On the cheerful note, lessay my pensions too are coming as surely as Deccan Chargers will win IPL3....

Neshant · Post by **Neshant** » 08 Apr 2010 21:58

Greece having problems getting investors to buy its debt bonds
http://tinyurl.com/yznwxve

Investers are demanding higher interest rates to buy those bonds

Ashwin B · Post by **Ashwin B** » 09 Apr 2010 02:07

I have a very naive pooch to the financial gurus here.
After the recent purchase of 200 tons (or somewhere in that region) of gold from the IMF, how will India take the delivery of this shiny stuff? Will it be a physical delivery or a paper entry?

I'm curious after reading all the news about market manipulation in precious metals, and trading quantities being way higher than the actual physical quantities held etc etc.

Andy Hoffman from Lemet Tonite….sums it up

Ashwin B · Post by **Ashwin B** » 09 Apr 2010 02:13

Found a nugget here:

Almost all the way at the bottom of the article:

Personally, I don’t believe the gold exists, and that the other 212 tonnes bought late last year by India, Sri Lanka, and Mauritius amounted to nothing more than an accounting book entry. But even if it does exist (a piddling $6 billion worth, by the way, as much debt as the U.S. incurs in a few hours), it obviously won’t be sold at these prices

Can someone kindly confirm?

Thanks!
AShwin.

ldev · Post by **ldev** » 09 Apr 2010 08:58

Ashwin B wrote:Found a nugget here:

Almost all the way at the bottom of the article:
Personally, I don’t believe the gold exists, and that the other 212 tonnes bought late last year by India, Sri Lanka, and Mauritius amounted to nothing more than an accounting book entry. But even if it does exist (a piddling $6 billion worth, by the way, as much debt as the U.S. incurs in a few hours), it obviously won’t be sold at these prices
Can someone kindly confirm?

Thanks!
AShwin.

Reserve Bank of India Act 1934 (as modified)

(5) Of the gold coin and gold bullion held as assets, not less than seventeen-twentieths shall be held in 3[India], and all gold coin and gold bullion held as assets shall be held in the custody of the Bank or its agencies;
Provided that gold belonging to the Bank which is in any other bank or in any mint or treasury or in transit may be reckoned as part of the assets.

If after the recent gold purchase India has about 560 tons (?) of gold, then according to the RBI Act at least 17/20th of that must be held in India. You can do the math.

Neshant · Post by **Neshant** » 09 Apr 2010 20:59

there is no way India would be leaving its gold in some scamming place like London or Switzerland or some sanction prone place like the US or any of its allies.

100% of the gold will be in India.

Hong Kong (China) pulled its gold investments out of London in 2008 and UAE did so in 2009. No country trusts any other country as when the time comes, they will just shut the doors, cite emergency measures and keep the gold.

Neither should you be letting anyone else hang onto your gold. Take physical possession of it. Don't buy gold ETF and other so called paper gold investments as there is no gold and only a littany of accounting gimmicks backing it. Banks have been caught selling gold certificates against gold which they claim to hold for you in the vaults - come to find out they were just issuing certiticates against an empty vault.

You got banks and ETFs writing in the fine print that the fine print that what backs your ETF/gold certificate is not gold but the assets of the bank. Now if the bank lands itself in a financial mess, you will be last in a line of claims on the bank assets.

Almost always you will find the so called vaults located in a place like London or Switzerland where the govt there promotes banking fraud behind an iron curtain of secrecy where it can continue without ever being audited.

Advise everyone you know against investing in paper gold/gold ETF scams.

Ashwin B · Post by **Ashwin B** » 10 Apr 2010 01:14

I really really really hope that India takes physical possession of the gold.

It's just that we don't hear of the physical movement in the news (for the safety of the gold, I presume).
When it does get moved, how do they transport it? Secure/secret vans going to secure areas in airport, then board secret flights? I'm imagining some action movie with armored cars and all

And I presume (hope) the bars undergo very tight scrutiny to make sure they aren't adulterated with Tungsten/Osmium etc??

Ameet · Post by **Ameet** » 10 Apr 2010 02:11

33 states out of money to fund jobless benefits

http://money.cnn.com/2010/04/08/news/ec ... n&hpt=Sbin

With unemployment still at a severe high, a majority of states have drained their jobless benefit funds, forcing them to borrow billions from the federal government to help out-of-work Americans.

A total of 33 states and the Virgin Islands have depleted their funds and borrowed more than $38.7 billion to provide a safety net, according to a report released Thursday by the National Employment Law Project. Four others are at the brink of insolvency.