Perspectives on the global economic meltdown- (Nov 28 2010)

panduranghari · Post by **panduranghari** » 23 Jul 2013 14:50

Adrija wrote:Apologies if posted already

http://goo.gl/PyhWx

What happens to things like the Wimbledon, the US masters golf and similar high profile sport events when the prize money is very reduced?

Adrija · Post by **Adrija** » 23 Jul 2013 16:25

What happens to things like the Wimbledon, the US masters golf and similar high profile sport events when the prize money is very reduced?

I think sports can be classified under culture and so the prize money should be kept same or even increased

panduranghari · Post by **panduranghari** » 23 Jul 2013 17:23

Adrija wrote:
I think sports can be classified under culture and so the prize money should be kept same or even increased

The tongue in cheek comment aside

, its a very interesting issue to discuss.

My take is this. The middle Eastern countries who are oil rich thus cash rich will take over these big sporting events. Initially by backing it financially then buying the brand outright and then moving it to their home turf. A recently move to play FIFA world cup in Qatar in 2022 in Nov-Dec was met with a lot of European opposition. Blatter did not wink and i think the future world cups will move to Asia-Pacific. This is clearly a massive change brought about changing Global economy. Until 2008 the cricketing power brokers knew the future of the sport was Asia, India specifically. but until after 2008 economic down turn, it wasn't openly acknowledged. This I believe will be replicated in other sports. JMT.

TSJones · Post by **TSJones** » 24 Jul 2013 04:11

Indian economists get snippy

http://ideas.foreignpolicy.com/posts/20 ... get_snippy

...and go public. Interesting

ramana · Post by **ramana** » 24 Jul 2013 04:50

TSJones wrote:Indian economists get snippy

http://ideas.foreignpolicy.com/posts/20 ... get_snippy

...and go public. Interesting

Both are in US and with in 300 miles of each other!

Adrija · Post by **Adrija** » 24 Jul 2013 13:41

My take is this. The middle Eastern countries who are oil rich thus cash rich will take over these big sporting events. Initially by backing it financially then buying the brand outright and then moving it to their home turf...........This is clearly a massive change brought about changing Global economy. Until 2008 the cricketing power brokers knew the future of the sport was Asia, India specifically. but until after 2008 economic down turn, it wasn't openly acknowledged. This I believe will be replicated in other sports. JMT.

Yes, some of that has already happened- a lot of shareholding and some of the cultural/ sports events have moved to the ME in some form or fashion, but personally I am not very sure how sustainable it is.

The argument of this whole shift east has two parts- one is the short term one evidenced by ME oil wealth, and the other abut China becoming # 1 power and all that blah.........supposedly "hastened" by the economic crisis

For the ME oil wealth- we have been seeing commodity inflation, most visible in oil given overt or covert QE for the last 10 years now. But not sure how long that is sustainable given multiple factors- QE will wind down some day (perhaps another 2-3 years), and then (or perhaps even before that) commodities will bear the brunt of the crash as the underling lack of growth will manifest itself most starkly

For the second part, there is enough split opinion on this whole shift east but at least I do think that sustainable wealth creation is driven from innovation + institutions, and frankly I am not sure how these "eastern" giants stack up on that count......no country can export its way to superpowerdom......nothing comes close to the US on that fundamental account IMVVHO.

Sure, after 1991, the US is in "relative" decline, but anything after that unipolar moment would count as a relative decline.........but it retains enough of the innovation ecosystem to start outpacing the rest of the world in productivity and hence wealth generation once it is able to shake off its financial excesses....I am not sure if we will see the US being eclipsed anytime in our lifetimes....and if so, it will ensure that its "Judeo-Christian civilizational brothers (ie Europe) retain enough wealth so as to ensure that the overall balance of power remains with the West...

My 2 cents and all that

Austin · Post by **Austin** » 25 Jul 2013 10:07

'Bank of England is behaving like the Taliban': Vince Cable claims draconian rules on lenders is stifling growth

Business Secretary warns bank restrictions are holding back the recovery
Bank of England told lenders to build up large cash reserves
But lending to small firms wanting to expand and hire staff has stalled
Latest GDP figures tomorrow expected to show 0.6% growth

Furious Vince Cable has accused the Bank of England of behaving like the ‘Taliban’ in imposing strict lending rules which have held back the economy.

The Business Secretary said tough restrictions imposed on banks to build up stock piles of money was choking off lending to small firms.In a further escalation of the row between the government and the Bank of England, a Treasury source slammed the ‘jihadist’ tendency in Threadneedle Street towards the banks.

Mr Cable’s outspoken intervention comes ahead of figures tomorrow which are expected to show a sharp return to economic growth by up to 0.6 per cent for the last quarter.

But the minister suggested the recovery could have come sooner if the Bank of England had encouraged more lending to businesses to help them expand and hire more staff.

Mr Cable said: ‘One of the anxieties in the business community is that the so called “capital Taliban” in the Bank of England are imposing restrictions which at this delicate stage of recovery actually make it more difficult for companies to operate and expand.

‘It is clear that the main banks are failing to support good British companies in key areas like exporting and innovation,’ he told the Financial Times.

Mr Cable has expressed similar views before, but the strong language of his latest intervention comes less than a month into the tenure of new Bank governor Mark Carney.

Austin · Post by **Austin** » 25 Jul 2013 18:45

Britain on the mend': GDP grows 0.6 percent

The UK’s economy expanded by 0.6 percent during the second quarter of 2013, according to estimates by the Office for National Statistics.

Year-on-year, gross national product was 1.4 percent higher in Q2 2013, and met most analysts’ expectations for growth.

Prime Minister David Cameron hailed the data as "encouraging" and signaled that the UK is on the ‘right track’ to economic recovery.

"Today's economic growth figures are encouraging. We are on the right track - building an economy for hardworking people,” Cameron posted on his Twitter.

The UK economy hit a pre-recession peak in the first quarter of 2008, and has since shrunk by more than 7 percent.

Austin · Post by **Austin** » 25 Jul 2013 18:50

Looking at wiki , UK economy is on a Gross External Debt of more than $9 trillion a Public Debt of 75 % of GDP , Barely growing at less then 1 % but yet it manages to get AA+ and AA1 rating but there are so many economies who are doing far better then UK , like that of China , India and Russia yet they do get a single A rating.

Why do UK or for that matter EU country get those A plus rating ?

http://en.wikipedia.org/wiki/Economy_of ... ed_Kingdom

TSJones · Post by **TSJones** » 25 Jul 2013 19:51

^^^^Too many restrictions on their economies. lack of convertibility of currency, central banks not separated from executive branch of the government, etc., etc. It all adds up.

member_27444 · Post by **member_27444** » 25 Jul 2013 19:54

whats the big deal about "and going public"
same difference

Neshant · Post by **Neshant** » 26 Jul 2013 07:13

The UK’s economy expanded by 0.6 percent during the second quarter of 2013, according to estimates by the Office for National Statistics.

I bet its a complete lie.

The only thing that expanded is money printing and bogus statistics including fake inflation numbers.

When the 2008 bubble imploded, all that leveraged financial junk must have blown up and since their economy is nothing but paper peddling, I don't see how all banks in Britain are not insolvent at this point. They are definitely hiding all this stuff off-balance sheet.

Its all going to come out in the wash eventually.

vic · Post by **vic** » 26 Jul 2013 09:47

Anybody has idea about real inflation numbers in western world?

Singha · Post by **Singha** » 26 Jul 2013 11:34

whatever be under the bedsheet, it is true that in per capita terms food is really cheap in the western economies. food prices impact is not possible to hide under statistics. its felt everyday.

in india essential things like dal, milk products, green vegetables, fish, meat are very costly to buy for lower middle and poor class. even rice has gone up around 30-50% in just one year. why? Dal has nearly gone up 100% over the last 5 yrs. why? fruit and nuts are also costly.
all the stuff that makes strong children and mothers is costly. eggs cost Rs 5 a piece in blr stores.

congis want to keep everyone in a bedridden coma with lowest grade Rs 1 rice and wheat...rather than fix supply side and transport issues.

with our fertile lands and climate we should be producing and exporting mountains of food. look at similar latitude in brazil...they are the worlds largest exporter of vegetables and high in agri products. even vietnam, cambodia,thailand export a lot of rice and fish.

Austin · Post by **Austin** » 26 Jul 2013 15:48

Moscow, Beijing taking on the dollar

Russia and China have united their efforts in the fight against the dollar as the main reserve currency, an influential American trader, Russ Winter, said. The expert says that Moscow and Beijing have been putting into practice, for a long time now, the first part of their plan aimed against the hegemony of the dollar on the world markets. Really, Russia and China have decided to give up the dollar in most cases involving international payments and to strengthen their own currencies through buying up gold.

Moscow is actively encouraging trans-border rouble remittances and restricts foreign currency remittances. For its part, Beijing is gradually introducing direct exchanges between the Chinese yuan and the euro, and also the pound sterling and the yen . Parallel with this, China has increased the import of gold considerably and is now buying much more of it than it produces. The higher the backing of the yuan by gold, the weaker the positions of the dollar as the main reserve currency become.

However, analysts say that this is only the consequence, and that the real reason is a drop in the dollar solvency, and a slowdown in the US economic activity as a result. Because of the growth of the money mass, the US currency may devalue twice in the coming three years. Beijing and Moscow have to protect their currencies against an undesirable turn of events, and therefore, they are converting their reserves into gold.

Russ Winters says that the two allies have a very simple plan : to gradually raise the convertibility of both the rouble and the yuan and to increase their role in international trade, which in time will make it possible to present them as reserve currencies. The USA, where the level of the state debt is approaching 110 per cent of the Gross Domestic Product (GDP), will simply not be able to respond to this challenge. Of course, it takes time to score a victory over the dollar, the euro and the pound. A reserve currency should meet certain demands, Head of the Trustee Management Department at Absolyut Bank Ivan Fomenko says.

“ First, the full openness of the currency market and the convertibility of this currency. Second - the reliability and openness of the financial institutions of countries which would like their currencies to heave a reserve currency status. Third – the consistency of actions of the monetary authorities. And fourth, which is the main thing here - the willingness of the companies to sign agreements with the yuan as the basic currency” .

Analyzing the conduct of Moscow and Beijing in recent years, one can say that the American trader is right. In 2009, China said that the domination of one currency in the world may cause the spread of a crisis. Russia also came out for an increase in the number of reserve currencies and even proposed the rouble as a reserve currency. Russia, Iran, Angola, Sudan, and Venezuela agreed to carry out payments for oil supplies in the yuan. The yuans are used to pay for 5 million barrels of oil per day. In the middle of July, it became clear that the volume of direct trading between the yen and the yuan had doubled only one year after the launching of such operations. On July 4th, Singapore began to offer clearing services in operations involving the yuan. And as regards Moscow, there is no information about its agreements with Beijing on the support of the yuan. And still, steps taken by it offer proof that it is supporting the Chinese course, an expert from the Higher School of Economoics, Alexei Maslov, says.

“Russia’s role is mainly technical. There is no direct agreement between China and Russia over the blockade of the dollar. And, as it seems to me, Russia is only one of the players in China’s big plan. However, from the tactical point of view, it is benficial for it. And from the strategic point of view, the strengthening of China may cause concern”.

Russ Winter says that another step – buying up the gold - resembles an attempt to kick out a stool under the seat of the United States. For this Russia and China must ensure the gold backing for their currencies, which they are already doing, as was mentioned before. The majority of analysts believe that this stool is very strong, and that at least from 5 to 10 years will be needed to make it rickety.

TSJones · Post by **TSJones** » 26 Jul 2013 16:30

^^^^

If I may fearfully ask, what does "buying up gold" do for a command driven economy's currency? And what mechanism does one assume that the gold will be used to "back up the currency" in a country that does not rely upon the market place to make adjustments to the value of their currency?

Sometimes this Russian propaganda is just too, too, sweet.

I wholeheartedly look forward to Russia and China making their currencies fully convertible, just like Japan.

Then, we'll let the marketplace decide if their currencies are "backed up" by gold enough.

Austin · Post by **Austin** » 26 Jul 2013 17:23

US blows out $16.7 trillion debt limit

Austin · Post by **Austin** » 26 Jul 2013 17:28

The original article seems here

CHINA MANEUVERS TO TAKE AWAY US’ DOMINANT RESERVE CURRENCY STATUS

Austin · Post by **Austin** » 26 Jul 2013 17:37

I doubt the Russian would make Rouble fully convertible any time soon nor it is being mentioned at official level , at best they would strive to make Rouble as the currency for Eurasian Union this decade.

China would be interesting to watch out for since they have made known their intention to make Yuan fully convertible by next year , that is where the fun would start but it would still take some time for Yuan to gain reserve currency status .... with US and Europen economy still plagued by massive debt that keep rising and economy itself not showing any major turn around , Yuan status might grow much earlier then expected.

At best we can expect Countries to go for mix basket currency so that they are not hostage to any single currency as reserve status.

Austin · Post by **Austin** » 26 Jul 2013 21:26

EU debt reaches all-time high of $11.4 trillion

vishvak · Post by **vishvak** » 26 Jul 2013 22:21

The way Russians and Chinese are using currency for benefit, Indians should do the same for say Venezuela for oil for export market.

There is huge amount of dollars in the market and hard dollar cash is transported even in presence of electronic transfer; after some amount of hard cash was stolen from an airport this came out. More and more convertible currencies won't help huge amount of dollars perhaps.

link

has never been more American currency in circulation, and the amount keeps growing. And that cash moves around frequently, often carried discreetly in the belly of commercial airliners

Austin · Post by **Austin** » 26 Jul 2013 23:06

vishvak wrote:The way Russians and Chinese are using currency for benefit, Indians should do the same for say Venezuela for oil for export market.

We are already doing that with Iranian Oil Payment

Austin · Post by **Austin** » 26 Jul 2013 23:24

Russia, Kazakhstan Boost Gold Reserves as Turkey Cuts, IMF Says

Russia and Kazakhstan expanded their gold reserves for a ninth straight month in June as purchases slowed amid a price slump.

Russian holdings, the seventh-largest by country, climbed 0.3 metric tons to 996.4 tons, the smallest gain since reserves started to increase in October, International Monetary Fund data show. Kazakhstan’s hoard grew 1.4 tons to 130.9 tons, the smallest expansion since March, data on the website showed. Turkey’s holdings fell for the first time in a year.

Neshant · Post by **Neshant** » 27 Jul 2013 10:12

vic wrote:Anybody has idea about real inflation numbers in western world?

The purchasing power of cash holders should have risen 3 or 4 fold post-2008.

Those gains have been stolen from cash holders via private banking crooks who control the printing press.

Banks made bad bets on a whole lot of junk with leverage pre-2008.

They are attempting to use the printing press to transfer the losses from their bad gambling bets onto the backs of others.

Its nothing more than crony capitalism.

Inflation CPI numbers (bogus as they are) do not capture the robbery of gains in purchasing power that has/is occuring.

TSJones · Post by **TSJones** » 27 Jul 2013 11:21

Money is like manure, it works best when you spread it around.

Austin · Post by **Austin** » 27 Jul 2013 14:23

Neshant wrote:
vic wrote:Its nothing more than crony capitalism.

Inflation CPI numbers (bogus as they are) do not capture the robbery of gains in purchasing power that has/is occuring.

If this is as bad then how will it collapse or if it will ever ?

Coz all you need to do is print money notwithstanding UK $9 trillion debt same goes for US with $16 plus trillion debt.

Austin · Post by **Austin** » 27 Jul 2013 21:08

Some statistics to chew over , India at 30 % and Brazil at 16 % Savings

Gross National Savings (% of GDP) Data for All Countries

vishvak · Post by **vishvak** » 27 Jul 2013 21:25

So how does UK with GDP of 2.5 trillion$ going to handle debt of 9 trillion$? By arms exports?

RamaY · Post by **RamaY** » 27 Jul 2013 22:31

Austin wrote:Some statistics to chew over , India at 30 % and Brazil at 16 % Savings

Gross National Savings (% of GDP) Data for All Countries

Perhaps the more advanced the economy (per-capita income and healthy Gini index) is the less the national savings as % of GDP for the social security is built-in. Relatively poorer societies save more because they feel less secure due to lack of social security?

Imagine a hypothetical scenario. All India's are offered a reasonable pension system (say Rs 5-10,000 per month inflation adjusted). Then would indians save as much as they do now? Or do they tend to spend more on education and other civic amenities.

So does it make more sense to tax people (SS tax) that would offer money to nation's exchequer to invest in technology, industry and infrastructure?

What is the right mix?

Austin · Post by **Austin** » 27 Jul 2013 23:05

May be Gelf countries can afford to save more because their economy is already developed and all things are taken care off with low population base and fairly decent infrastructure with high oil prices they dont need to spend much.

Other could be culture as well , Western population believes more on spending then on saving as they think government would take care of their basic needs and even their government might be encouraging to spend through their policies.

India and China could also be culture related where saving money for future is a favorite hobby.

RamaY · Post by **RamaY** » 27 Jul 2013 23:24

Is saving beyond a healthy ratio (10-15% per year) after a comfortable and hygienic lifestyle desired? Assuming after all costs, a 10-15% wealth creation (savings after all expenses is wealth right?) should be good enough right?

member_27444 · Post by **member_27444** » 27 Jul 2013 23:36

Its an asset (or Liability)

Austin · Post by **Austin** » 27 Jul 2013 23:47

The Chinese , Saudis , Kuwaites and countries with high figure might disagree on whats good enough ........may be another version is these countries are export led economies so money earned is far more then can spend or are willing to spend ........saving it for rainy day perhaps .....these countries have reserve funds , welfare fund and what not beyond their normal Forex Reserves.

Though I am not an economist even by a mile but I think Saving even 15 % is far better then Spending when you are on more than 100 % debt expecting future generations will slog their arse out.

Suraj · Post by **Suraj** » 27 Jul 2013 23:52

High levels of savings are essential to a developing nation to generate enough capital internally to invest in development. 30% for India is actually a decadal low, since the number was >35% at the peak a few years ago. High savings generate high investment/GDP, which in turn yields high growth.

The bane of most of India's economic history was a very low savings/GDP rate of barely 20%, which in turn meant little to invest and thus low growth. That changed around 2002-03, since when savings/GDP has never fallen below 25%, and the period has also been the one of fastest sustained economic growth in the country's history. Ideally we want savings/GDP higher than 35% for a decade or more, to generate sustained high GDP growth.

Investing in a social safety net at this point is not an effective or productive investment. We have the youngest population of any major economy, and our emphasis ought to be in utilizing that youth bulge by investing in enhancing their labour output. Growing old before we grow rich means we miss that once in a millenium opportunity.

RamaY · Post by **RamaY** » 28 Jul 2013 00:15

^ agree. I was just wondering if a lower savings rate in advanced countries is not a bad thing at all. And the savings rates of various nations indicate the respective internal social security and safety nets than a national ethos or any good/bad practices.

TSJones · Post by **TSJones** » 28 Jul 2013 00:57

....why we spend, why they save......

http://www.nytimes.com/2011/11/25/opini ... .html?_r=0

Over the past three decades, Germany, France, Austria and Belgium have maintained household saving rates between 10 and 13 percent, and rates in Sweden recently soared to 13 percent. By contrast, saving rates in the United States dropped to nearly zero by 2005; they rose above 5 percent after the 2008 crisis but have recently fallen below 4 percent.

My personal example is out of my pay, 7.65% to social security, 6.5% to employee retiremnt plan and 10% to savings. Of course Social Security and employee retiement receive matching employer contributions, but reaching a steady 10% savings rate has taken me years and years to do. It ain't easy.

Suraj · Post by **Suraj** » 28 Jul 2013 01:54

The savings/GDP situation in advanced countries is not pertinent to India's case at all. They have already built up infrastructure and facilities, and social support and education services upto a standard we are far from accomplishing.

TSJones · Post by **TSJones** » 28 Jul 2013 09:44

the power of cloud technology by Louis CK

http://www.youtube.com/watch?v=bJ-FWG0GRzw

Austin · Post by **Austin** » 28 Jul 2013 12:58

vishvak wrote:So how does UK with GDP of 2.5 trillion$ going to handle debt of 9 trillion$? By arms exports?

The $9 Trillion refers to Government and Private sector debt that needs to be repaid , As far as Government Debt goes it is around 90 % of GDP.

Although if you look at the list of coutries by Gross Debt then its around ~400 % of UK GDP
https://en.wikipedia.org/wiki/List_of_c ... ernal_debt

Check out the list of illustrious nation in that list.

As to how they will solve it , The Taliban.....opps Bank of England has to come up with creative accounting where they can divide the 9 trillion USD figure by 10

It is all the decades of policy of living beyond your means and building a financial bubble that eventually collapses.

May be this has some answers

UK External Debt and Assets

Theo_Fidel · Post by **Theo_Fidel** » 28 Jul 2013 20:48

The reason for savings decline is our PSU situation. I have been pointing out that PSU performance has been declining for some time and the fact that they have monopoly control over so many chunks of our economy paralyzes everything. This is also the key difference between China & India, somehow the PSU's in China, called SOE have been able to perform far better than ours. Classic case is how BHEL equipment costs 40% more than imported Chinese equipment. Deregulating and getting the GOI out of the business of business will make a dramatic difference.