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

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Christopher Sidor
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Christopher Sidor » 20 Aug 2013 16:36

SwamyG wrote:Some of the posts lead me to believe that the World as we now know it is going to end next year....economic collapse again in USA, Europe etc. Real Estate prices are starting to go up in USA, and things are not so much of Doom & Gloom. So why is the D&G being predicted? Any pointers or simple explanation to understand what the gurus are seeing.


This doom and gloom is for us not for US or EU/Euro-zone or for some other region, it is for us. We should have grabbed this crisis with both the hands and used it as an opportunity. But what happened was that we hid behind the ramblings of some politicians, like how India's fundamentals were strong or how the long-term growth story of India is intact or how we are the most attractive market and so on. We forgot that these platitudes did not save us in 2008, they will not save us now.

Frankly we had our wasted decade. Yes we became a 2 trillion USD economy. Yes Sensex came close to being a 1 trillion USD cap market, but that is all. We have regressed in most of the basic human development indexes. Our people eat less than what they used to do in 1960s and 1970s. We have a generation which has seen only falling value of rupee over 50% fall in a period of 5 years. Do I think I am better off than I was in 1990. Nah.

US and Euro-zone will survive. They survived the great depression. And they came out stronger. They demitted their colonies and yet they came out stronger. What happened to us?

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby SwamyG » 20 Aug 2013 19:45

During the initial shock waves, India seemed to be stable and weather the global economic crisis. So where did India go wrong?

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby panduranghari » 20 Aug 2013 22:08

SwamyG wrote:During the initial shock waves, India seemed to be stable and weather the global economic crisis. So where did India go wrong?


Blaming Congress for all the ills is an easy way out. Yes they could have done things better which would have meant the lean times would not be as bad. The ant- grasshopper analogy is good. However, the good thing is aam abdul does not trust the govt to do anything for him. So he quietly buys gold. He knows gold will tide him over the troubled time. And it will be the same this time.

The problem is not because of our government. the problem is due to the systemic issues.

Using debt to store wealth and then selling debt to each other is like passing the parcel with a time bomb. The bomb has to explode but no one knows when. It will explode thats given. Not on my watch is the mantra for the US government. It does not matter which country of the world has issues with economy, every thing is connected to US$.

I will leave it there.

More here

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Theo_Fidel » 20 Aug 2013 22:25

Christopher Sidor wrote: Frankly we had our wasted decade. Yes we became a 2 trillion USD economy. Yes Sensex came close to being a 1 trillion USD cap market, but that is all. We have regressed in most of the basic human development indexes. Our people eat less than what they used to do in 1960s and 1970s. We have a generation which has seen only falling value of rupee over 50% fall in a period of 5 years. Do I think I am better off than I was in 1990. Nah.


That’s a bit strong.

1991 Literacy rate 52%
2011 Literacy rate 73%

This business of our people eat less is also wrong.

The 3 states with lowest calorie intake are TN, GJ & MH. Calorie intake of somewhere around 1900 kcal per day while Bihar has a robust intake of 2400 kcal per day. So are you telling me that Bihari’s are better off. The percentiles also show that the greatest declines in calorie intake has come from the 30% richest of India. A decline from 3500 kcal per day to around 2800 kcal per IIRC. There is no shortage of food and desperate hunger as used to be quite common in rural areas in 1991 has largely disappeared. The trend lines show that cereal consumption has come down while, fruits, pulses, milk, meat, etc are up strongly.

The real mystery, if there is one, is to explain why well off folks in India are living on 2800 kcal per day while well off folks in USA live on 4000 kcal per day. And why a state with less than 2% hunger rate like TN also manages to do it on 1900 kcal per day.

BTW this is one reason I'm strongly attacking the FSB. Because the problems in India all have to do with non-food expenditures. If the government gave a cash voucher to every family to use for education or healthcare it would be a far better use of resources.

Also there has never been a generation that has seen a rising rupee. Back in 1991 some of us saw the rupee decline by 200% in 18 months!
----------------------------------------

There is a case to be made for why a new government can have better policies but AFAIK those policies have not been listed. Yes we are all disenchanted with the C party but the opposition has not shown any new ideas either. So far all we have seen is random attacks on the c-party and horrific infighting with major partners mindlessly ejected. What sort of coalition building is this.
------------------------------------------------

BTW Wall Street journal is reporting that the end of the USA bond buying is what is destroying the value of the Rupee. For a long time folks here were making fun of the USA for its easy money policies, now that the USA is ending it, it is India that is being damaged. Talk about deliberate foot shooting.....
--------------------------------------

Also while we are at it whyfor the attacks on NRI for investing in India. We are the only group investing in India no matter what. It is these sorts of rotten attitudes that drive CEO types away from investing in India as well. At least show some gratitude.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Abhijeet » 21 Aug 2013 03:22

I don't get this food consumption issue. Can someone give a clear explanation for why per-capita calorie intake has come down when the economy has grown so much in the last couple of decades? Everything I've seen is some confused mess of "the measurements are wrong" or "the rich are grabbing all the benefits of growth."

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby kumarn » 21 Aug 2013 09:40

Just look at the plate of a poor laborer. Anywhere in India you can find them at construction sites - Biharis, bengalis, odiyas...And then compare with your plate. You will see the reason why.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Abhijeet » 21 Aug 2013 10:23

What does that mean? That has nothing to do whether their relative situation is better or worse than it was two decades ago. Given the growth in the economy since then, it should be better, but the numbers somehow do not reflect it. Why is this?

This has nothing to do with whether I (or any other well fed poster on BR) eats better than a poor laborer from Bihar.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby member_27444 » 21 Aug 2013 23:40

If the denominator grows fater than the numerator it will fall.

Per Capita

population growth has outpaced the food consumtion growth...


with Onions at rs 80 per Kg equals to rice per Kg then forget onion sambar or pyas do bindi

Like last time import from Pakistan

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby TSJones » 22 Aug 2013 01:54

Subsistence agriculture is a death trap. At first it appears to be cruel when people are driven fom the land by circumstances beyond their control but in the long run it is a blessing. (Keynes said "in the long run we are all dead".) :)

In the US in 1920's and 30's people were driven from the land by poverty and hunger and economic circumstances beyond their control. Many books and novels were written about this such as the "Grapes of Wrath", etc. But a modern economy should rely less and less on agricultural employment. In the US, agricultural employment is tiny but the products produced are enormous. American agricultural is hugely efficient and productive. But it wasn't done easy or without a lot of pain.

Most Indians seem to say but "we are different onlee", we can't do this to the poor people and deprive them of their subsistent agricultural and anyway there are too many of us.

All I can say is that it has to start somewhere. Subsistence agriculture won't do the job. The Chinese seem to be doing it(getting away from subsistence agriculture). But they have a top down hierachial society and government. :(

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby ramana » 22 Aug 2013 02:48


panduranghari
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby panduranghari » 22 Aug 2013 03:09

ramana wrote:http://finance.yahoo.com/blogs/breakout/stagflation-fed-succeeds-inflationary-target-rosenberg-115130445.html

Hat tip to umrao jaan


David Rosenberg wrote:"My sense is that once this consumer deleveraging cycle is over, and there are signs that it is coming to an end if it hasn't ended already, you're going to see the velocity of money start to rise, against the backdrop of double-digit growth of the monetary base, and that is going to lead to inflation down the road."


He is joking.

Image

Image

Comparing that to this- exchange rate USD/INR from 1960 to 2013

Image

Positively hyperinflation territory.

:eek:

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby TSJones » 22 Aug 2013 06:02

^^^^Yeah, and it took over fify years. :roll:

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby panduranghari » 22 Aug 2013 11:12

TSJones wrote:^^^^Yeah, and it took over fify years. :roll:


Different sized economies with different resources.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Atri » 22 Aug 2013 12:09

SwamyG wrote:During the initial shock waves, India seemed to be stable and weather the global economic crisis. So where did India go wrong?


As far as I understood, we took lot of short term loans with higher interest rates which kept us going until 2011ish. Since they were short term loans, we could not invest them in any basic infrastructural projects which would have greatly helped India. If only upa1 and 2 had completed the highway project and river linking project the whole point of Nrega and FSB would have been rendered redundant.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby SwamyG » 22 Aug 2013 17:59

Atri wrote:
SwamyG wrote:During the initial shock waves, India seemed to be stable and weather the global economic crisis. So where did India go wrong?


As far as I understood, we took lot of short term loans with higher interest rates which kept us going until 2011ish. Since they were short term loans, we could not invest them in any basic infrastructural projects which would have greatly helped India. If only upa1 and 2 had completed the highway project and river linking project the whole point of Nrega and FSB would have been rendered redundant.

There was one school of thought, to which I subscribed too, was that after the liberalization in the 90s and Y2K boom period the Indian domestic market had began to chum along well. With a massive middle class growth, India had enough market and demand for products and services. The challenges before India were that of resources - Africa was being eyed by India; and the talks were India and China racing in Africa and these countries were called the new Colonialists exploiting African resources. Then we had the regular problems that plague India - corruption, infrastructure, environment degradation etc.

My major concern was environmental degradation owing to unchecked development, lax laws and regulations. I believed growth causing further demand would push the government to build infrastructure. I saw massive infrastructure upheaval in Bangalore, Hyderabad and Madras personally. e-Governance and other advances were rapidly reducing corruption; villages and towns were getting electronically connected. It was rosy.

I had also believed that Indian growth story, was not dependent on the IT based economics though it was an initial cause. Somebody had to apply brakes to stop this massive engine from gaining further speed. It looked unstoppable, and someone easily stopped it without batting an eyelid.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Christopher Sidor » 22 Aug 2013 18:31

Theo_Fidel wrote:
Christopher Sidor wrote: Frankly we had our wasted decade. Yes we became a 2 trillion USD economy. Yes Sensex came close to being a 1 trillion USD cap market, but that is all. We have regressed in most of the basic human development indexes. Our people eat less than what they used to do in 1960s and 1970s. We have a generation which has seen only falling value of rupee over 50% fall in a period of 5 years. Do I think I am better off than I was in 1990. Nah.


That’s a bit strong.

1991 Literacy rate 52%
2011 Literacy rate 73%

This business of our people eat less is also wrong.

The 3 states with lowest calorie intake are TN, GJ & MH. Calorie intake of somewhere around 1900 kcal per day while Bihar has a
robust intake of 2400 kcal per day. So are you telling me that Bihari’s are better off.

I was referring to the nutritional value. Now according to GoI for medium to heavy labour the food consumption ought to be 2700 calories or higher. That is not happening even after 8% of growth.

Theo_Fidel wrote:The percentiles also show that the greatest declines in calorie intake has come from the 30% richest of India. A decline from 3500 kcal per day to around 2800 kcal per IIRC. There is no shortage of food and desperate hunger as used to be quite common in rural areas in 1991 has largely disappeared.

The trend lines show that cereal consumption has come down while, fruits, pulses, milk, meat, etc are up strongly.

There is no shortage of food, but food has been priced out of the market. Not many people can afford a packet of Dahi every day. Not every household can have eggs or fruits. The question being raised is not about scarcity. It is about what people can afford. Another way of looking at Food Security Bill is the acknowledgement by GoI that the food grains currently in the market are so high priced that BPL and most of APL (i.e. non Lower/Middle/Upper Income Group) just cannot afford it.

Theo_Fidel wrote:The real mystery, if there is one, is to explain why well off folks in India are living on 2800 kcal per day while well off folks in USA live on 4000 kcal per day. And why a state with less than 2% hunger rate like TN also manages to do it on 1900 kcal per day.

It is not mystery, it is a fact driven by Government policies. A US diet is very heavy in colas and other fast foods. This adds up the calories. Whether those calories are actually beneficial is debatable.

Theo_Fidel wrote:BTW this is one reason I'm strongly attacking the FSB. Because the problems in India all have to do with non-food expenditures. If the government gave a cash voucher to every family to use for education or healthcare it would be a far better use of resources.

FSB is not the problem. The problem is the nutritional value of the food that Indians are having. That is pathetic. That is why we have swollen bellies in many of our rural population. And FSB is better than cash dole outs which will be worse. The problem with cash dole outs is that a person will misuse the money for alcohol or narcotics or gambling or any of any other vices that one can think about. It will do nothing to strike at the root cause. On the other hands giving out grains, which is essentially rotting away or is being fed to rats and other rodents, makes sure that we raise the health of our citizens. This is the reason why mid-day meal is better than any direct cash transfer program. Because mothers send their children to school once they know that they will be fed there. And once the child comes to school he gets to learn. Transfer cash to the same mother and see how so little of it goes towards food and education.


Theo_Fidel wrote:Also there has never been a generation that has seen a rising rupee. Back in 1991 some of us saw the rupee decline by 200% in 18 months!

My point exactly. What we have seen over the generations has lead to a generational habit of getting goods which retain value like Gold and Real Estate. It is not that buying Gold and Real Estate is the cause of our CAD rather it is the other way around. Fix the currency and see how much of gold people buy. But since we have seen over 60 years of falling rupee, we will need to see another 50 years of stable or rising rupee to reverse the trend.

Theo_Fidel wrote:There is a case to be made for why a new government can have better policies but AFAIK those policies have not been listed. Yes we are all disenchanted with the C party but the opposition has not shown any new ideas either. So far all we have seen is random attacks on the c-party and horrific infighting with major partners mindlessly ejected. What sort of coalition building is this.

Again beg to differ. The policies have been listed many a times in this forum and in other forums too. But this is a coalition of direct cash transfers to the partners and doing nothing. Everybody in India is comparing the decade long economic rule of UPA with the decade long rule of Modi. Everybody notices that Modi has not asked for any package for Gujarat. Yet Nitish Kumar has asked for a special package that too after continuous 8% growth. So it makes one wonder whether all the growth questionable or on paper.

Theo_Fidel wrote:BTW Wall Street journal is reporting that the end of the USA bond buying is what is destroying the value of the Rupee. For a long time folks here were making fun of the USA for its easy money policies, now that the USA is ending it, it is India that is being damaged. Talk about deliberate foot shooting.....

This is another evidence in the support of our my argument. We have become so much addicted to cheap foreign inflows that our entire well being is now in the hands of people in New York or London or Tokyo. That is the most sad. We have political independence. We have food independence. But what we lack is the financial independence. The Great saint had said, "Let a thousand strong winds blow through my house and I will not be swept off my feet." 60 years we have still not been able to get that thing done. A simple word by some central banker somewhere can cause our rupee to fall. Are we the masters of our own fate? No we are not? Have we benefited from it? A small minority may have, but the vast majority have not. We sought to unleash a tiger in 1990-1, what we have done is that we have made this tiger so weak internally that it cannot even walk.

Theo_Fidel wrote:Also while we are at it whyfor the attacks on NRI for investing in India. We are the only group investing in India no matter what. It is these sorts of rotten attitudes that drive CEO types away from investing in India as well. At least show some gratitude.

Gratitude is not shown for gross incompetence bordering on insanity. It is not shown for sitting hand over fists and doing nothing since Lehman Collapse, when it became clear that we had to reform and change path.
It is better that these COE go away and not invest in India. Because when they were coming in they were hiding all our flaws. I do not want COE who believe that they can buy Indian assets and not pay any Tax to GoI. Hell I want similar treatment. I do not want any COE to believe that they can utilitze tax advantage and mint money. These COE have come to India to take advantage of its market. If they find some other market somewhere better suited they are most welcome to leave.
They are beholden to us and not the other way round.

These are not harsh words. These is the country that we live in.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Austin » 23 Aug 2013 17:25

Brazil central bank commits $60bn to prop up currency

Brazil's central bank has announced a $60bn plan to prop up the value of the national currency.

It comes as the Brazilian real nears a five-year low against the US dollar.

The real and other emerging market currencies have fallen steadily over the last three months on speculation of higher US interest rates.

The central bank said it would spend $500m a day on Mondays to Thursdays and $1bn on Fridays buying reais in the currency markets.

The Monday-to-Thursday interventions will target currency swap markets - financial derivatives used by companies and investors to hedge their currency exposure - while on Fridays, the central bank will buy the national currency directly in return for US dollars.

The interventions will run up until December.

"This shows the firm determination of monetary authorities to keep the exchange rate from slipping further," said Andre Perfeito, chief economist at Gradual Investments in Sao Paulo.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby panduranghari » 23 Aug 2013 21:58

Atri wrote:As far as I understood, we took lot of short term loans with higher interest rates which kept us going until 2011ish. Since they were short term loans, we could not invest them in any basic infrastructural projects which would have greatly helped India. If only upa1 and 2 had completed the highway project and river linking project the whole point of Nrega and FSB would have been rendered redundant.


I did a lot of digging and I think your assumption that- we took lot of short term loans with higher interest rates which kept us going until 2011ish.- doesnot hold ground.

Central banks don't take short term loans. And any if at all are guaranteed by derivatives.

Derivatives are also insured against losses.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Austin » 23 Aug 2013 23:17

Foreign Investment Rises 32 Percent, Net Outflow Remains

Foreign investment into Russia in the first half of 2013 was $99 billion, a 32 percent rise from the same period a year ago, according to the State Statistics Service.

Of this, $12 billion was direct foreign investment, Prime reported.

However, Russian investment abroad increased by 80 percent to $126 billion, resulting in a net outflow of $27 billion during the period.

"As at June 30, 2013, there was $370 billion of accumulated foreign capital in the Russian economy, 11 percent more than at the end of the same period last year," the State Statistics Service said.


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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Austin » 25 Aug 2013 11:06

List of countries by Budget Deficit

http://en.wikipedia.org/wiki/List_of_go ... by_country

Percentage wise we seem to be on par with US when it comes to budget deficit , spending more then we earn. Pakistan also has high budget deficit


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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby TSJones » 25 Aug 2013 13:35

That may not be accurate information for the US since the sequester was enacted in March of this year. Revenue growth has also increased. The federal fiscal year ends 09/30 and it looks like the deficit will come in at around 650 billion not 900 billion.

Congress is indicating a shut down, at least 80 of the teaparty members are talking shut down, so that would further reduce our deficit while revenue still rolls in. It's a stupid way to do it but we've got a stupid congress. The sequester is still law regardless so that continues with more slashing while revenue growth is still increasing so we could be looking at a balanced budget in few years. Don't laugh we were close about 14 or 15 years ago so it could happen again.

I'm hoping for a continuing resolution instead of a shut down but the tea party must satisfy its base. :(

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Austin » 25 Aug 2013 15:59

Thought the Budget Deficit is decreasing which is good news since US Budget were in Trillion $ before , More revenue and less spending is good but US will have to do this over few year to bring its budget deficit to manageable limits something its too early to predict but this year looks good better then expected.

Another concern is the rising debt and sometime in September they would have to raise the debt limit , That is where the challange would arise and we have to see how the present administration will cope up with the challenge , I heard a Rep guy in CNN stating he would like to do away with Obama care for good and he has many followers. Interesting times ahead.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby V_Raman » 26 Aug 2013 01:14

interesting perspective on the effect of western monetary policies

http://finance.yahoo.com/news/emerging- ... 55166.html

capital controls are coming in India...

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby SwamyG » 26 Aug 2013 10:47

Panduranghari, x-posting your post from the NaMo dhaaga.
panduranghari wrote:
Singha wrote:there are a lot of indian people who settled here but with foreign passports. for them the temptation was always there to move back easily. I suspect most of these people will also leave.


West is in doldrums and the level 5 hurricane will hit very soon. West may not hold enough allure as it did or even does right now. You got to make a decision now. Before the currency crisis hits. After that, not only will it be difficult due to expected capital controls like 1970, it may be difficult if you have nothing concrete lined up.


Can you elaborate on the currency crisis and capital controls you are talking about?

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Vayutuvan » 26 Aug 2013 21:16

Austin wrote:The key is to pick up the right companies that can assure reasonable growth and assuming you have to stomach to keep the money that long.

How about "dogs of DJI" like strategy? Is it possible to beat DJI/Sensex using this?

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby ramana » 27 Aug 2013 01:37

Bloomberg had and article this morning about requests from economists to keep the emerging markets in mind while deciding on tapering of the bond buying schemes. And the Feds response to it. Tough luck.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Suraj » 27 Aug 2013 12:04

Nothing wrong with that. I read that article too, and it sounded normal. The Fed only has a mandate to manage US policy, not look out for the rest of the world.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby svinayak » 27 Aug 2013 20:56

Suraj wrote: The Fed only has a mandate to manage US policy, not look out for the rest of the world.

Only that the dollar is being used by the rest of the world as a default currency for trading and reserve currency

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Austin » 27 Aug 2013 21:53

Japan to spend record $257bn to service debt next fiscal year

Japan expects to spend a record $257 billion to service its debt in the fiscal year beginning April 1, 2014, according to a document obtained by Reuters on Tuesday. Japan’s Finance Ministry will request 25.3 trillion yen ($257 billion) in debt-servicing funds in the budget, up 13.7 percent from the current fiscal year.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Suraj » 27 Aug 2013 21:53

So ? It's a currency risk everyone willingly takes, because the benefits outweigh the risks for them. The risks come in the form of the current capital flow activity driven by the treasury yield spike.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Austin » 28 Aug 2013 15:22

Russia's gold reserves rose in July to 1,002.8 tonnes

MOSCOW, August 28. / ITAR-TASS /. Russia's gold reserves increased in July by 6.3 metric tons to 1,002.8 tons, the highest level since 1993, according to the IMF website.

Rosstat reported on August 19 that the extraction of gold in Russia for 7 months in 2013 increased compared to the same period in 2012 by 9.6%, production of raw gold bullion rose by 15.4%. At the same time, gold mining in July 2013 increased compared to the previous month by 8.2% and by 6.8% compared to July 2012. The annual growth in mining and production of gold in Russia there since 2008.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby TSJones » 28 Aug 2013 19:18

The BRIC economies benefited from the cheap US dollar/reserve currency. Now that the currency is going to get more expensive the penduleum will swing the other way. There is a cycle to these things. The BRIC economists know this. It's not a secret.

The mission of the the Federal Reserve is basically two fold, 1. Assure the vitality of the US banking system and 2. Promote employment in the US economy. Sometimes the Fed doesn't do a very good job on these missions but it is what it's supposed to do. The US Congress is the boss and can change the Federal Reserve in a heart beat if it needs too. There is nothing constitutional about it. It is congressional perogative. Period.

And yes, sometimes in the interests of global peace and order, the Fed will do currency swaps with different countries and also support the IMF, but it must be careful to not anger congress. And I will all so point out that what the Fed says and what the Fed does is sometimes two different things. Why? To discourage speculators and to baffle congress. *All* central banks talk gobbledy gook. They have to in order to survive.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Austin » 28 Aug 2013 22:55

Foreign investment in Russia halved compared to pre-crisis period - report ( RT )

The ratio of direct foreign investment into Russia to the country’s GDP has halved since before the 2008 crisis. Analysts from the Russian Higher School of Economics say the share of foreign investment to total investment also fell from 10 to 5 percent during the last five years. The analysts say many foreign investors, which are actually Russian companies registered abroad, started to offer the money as loans, rather than become stockholders. Direct investment as opposed to portfolio investment, means directly financing production or a business. Portfolio, or passive, investment means a purchase of securities.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby Austin » 28 Aug 2013 23:08

BRICS countries come close to establishing reserve bank

The BRICS member-countries have come close to establishing a reserve bank which will operate as a stabilization fund, Chinese Finance Minister Chen Zhu Guangyao said. Should such a fund be set up, it will prove helpful in restricting the dollar’s influence on the developing countries’ economies, experts say.

Brazil came up with the initiative to set up a reserve bank in 2012. A relevant agreement was signed in March this year. The joint fund of the BRICS member-states is meant for offering support to the countries united in the BRICS Group in case their economic indices start to deteriorate. Such help would be welcome now more than ever. After the reports of the US Federal Reserve System about a possible reduction of the quantitative easing (QE) programme, the fall of the developing countries’ national currencies started. Since May this year the gold and hard currency reserves of the developing countries have decreased by more than 80 billion dollars. This forced the central banks of the BRICS member-states to work out programmes aimed at saving national currencies. Brazil alone has allocated 60 billion dollars for hard currency interventions in support of its national currency – the real. Uniting their efforts, the BRICS nations will be able to help their national currencies to become less dependent on the dollar, Deputy Director of the "Centre of Development" Institute (the Higher School of Economics) Valery Mironov says:

"The fall of the developing countries’ national currencies, including the BRICS member-states, has become a serious problem for the majority of them. The idea of establishing a reserve fund by the BRICS nations is in harmony with the agreements which were reached this spring. It was exactly at that time that the initiative to create a certain alternative to the World Bank (WB) and to the International Monetary Fund (IMF) was discussed. It is a good idea, taking into account that a new wave of currency instability on the developing countries' markets is inevitable".

The BRICS nations have agreed to create a reserve fund worth 100 billion dollars. China will allocate 41 billion dollars, Russia, India and Brazil – 18 billion dollars each, and South Africa - another 5 billion dollars. This money will be used for crediting countries, which need financial help, which, in its turn, will enable them to improve their macroeconomic indices. Another goal here is to carry out the financing of investment, innovative and infrastructure projects. And one more circumstance of importance here : finances will be offered not only to the BRICS member-states but will also be used to offer support to projects in the other developing countries. Now the BRICS Business Council is working out normative documents and relevant mechanisms. Russia’s Finance Ministry believes that the drafting of these documents will require another six months. And the ratification will also take time. The reserve bank will be able to select and to finance its first project only in 2015. Besides, the BRICS countries will have to reach agreement involving decision making and the size of financial help, President of the Association of Russian Banks Garegin Tosunyan says:

"The reserve bank of the BRICS member - countries will operate like similar international agencies. The new bank will be regarded as a response to the position taken by the US Federal Reserve System and the European Central Bank (ECB), which have refused to take on a responsibility for non-residents, which are using both the dollar and the euro".

In the future the reserve bank will be open to other participants, including new countries and international financial agencies. Very soon the BRICS Group will pass from the current development model based on the inflow of investments to the development model based on the boost of technologies. And the reserve bank is expected to be of help here. Besides, as a result, investors will have more trust in the developing economies, and the influence of the developing countries on world economy will grow.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby TSJones » 29 Aug 2013 19:52

US investigation of JP Morgan's China hiring practices is making waves among other firms:

http://finance.yahoo.com/news/jpmorgan- ... 11109.html

Poor JP Morgan, already getting a $6 billion dollar whammy over the 2008 mortgage scandal from the Fed, now it is getting another show of special luvin' from the US Foreign Corrupt Practices Act. So sad! :((

I love it when bankers get their 'nads in a wringer. :)
Last edited by TSJones on 29 Aug 2013 20:02, edited 1 time in total.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby TSJones » 29 Aug 2013 19:57

Another reason why the Fed QE3 taper is coming soon:

http://finance.yahoo.com/news/u-gdp-acc ... 48367.html

The U.S. economy accelerated more quickly than expected in the second quarter thanks to a surge in exports, bolstering the case for the Federal Reserve to wind down a major economic stimulus program.

Other economic data on Thursday showed the number of Americans filing new claims for jobless benefits fell last week, a potential sign of faster hiring in August.

U.S. gross domestic product grew at a 2.5 percent annual rate in the April-June period, according to revised estimates released by the Commerce Department. That was more than double the pace clocked in the prior three months.


.....and so a new cycle gets well on its way. :)

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby ramana » 30 Aug 2013 06:17

Bloomberg had anews item that the legal fees for banks since 2008 are about $120B. Of this the big three JPM Chase, BoA and Citi account for 75% of the fees. More to come from Eric Holder's findings this year.

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Re: Perspectives on the global economic meltdown- (Nov 28 20

Postby TSJones » 30 Aug 2013 13:36

...and Switzerland gets some luv and attention from the US government......

http://finance.yahoo.com/news/u-switzer ... 02587.html

The U.S. Justice Department has signed an agreement with the Swiss government to allow some Swiss banks to pay penalties to avoid or defer prosecution stemming from a long-running probe of tax dodging by Americans using Swiss bank accounts.

The settlement program will apply to about 100 second-tier Swiss banks, provided they agree to disclose certain previous hidden assets of U.S. customers. It will be open only to banks not already under U.S. criminal investigation.


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