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

[Hari Seldon]

^^^ What thou leaves unsaid says for a lot, for good or ill.

It wasn't just a case of 'difficulty in credit assessment of complex securitized instruments' etc etc.

It was a case of rating agencies (raping agencies?) making 'consulting revenues' on the side advising their clients (the likes of Lehmann, Goldman, JP, BankAm and Citi - babes in the woods, basically), precisely how to structure their essentially toxic waste such that it *would* get a AAA rating and, quelle surprise, it did.

It is precisely the intent and extent of this fraud-mongering that has remained, thus far, way out of the realm of even gubmint acknowledgment much less prosecution and jail-walks that is disturbing to note.

Matt Taibbi writes:

Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What's more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even "one dollar" just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick "The Gorilla" Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.

Well, as Taibbi notes, the only ne to have actually gone to jail is one Bernie Madoff who it turns out was playing with other, rich people's money only. Oh, and Martha stewart, Raj rajaratnam or whatever on 'insider trading' charges.

[somnath]

^^^ It is a fair point on the inherent conflicts of interest..And really the instance of Ratings Agencies "consulting" companies on how to get a specific rating is actually a bit unfair...The ratings are based on a criteria..If the agency advises companies on how they can better their solvency ratios etc to improve ratings - it isnt that big a deal..

The real big deals were about banks having trading positions in markets they were advising clients to behave in an opposite fashion...About large principal investments being passed on to clients based on decidedly insider info....

the Volker Act tries to eliminate some of that..

[Neshant]

William Black on the scamming rating agencies

http://www.youtube.com/watch?v=O3JTPzW3xmg

[Neshant]

Interesting viewpoint. It was written by somone other than me but it may as well been written by me - it closely reflects my viewpoint.

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

Ben Bernanke is:

1. Bankrupting the country by paying trillions in interest to banks. The fed gives money to the big banks at 0% then the bank buys treasuries at about 2% 1 year later the fed gives them XXX billions interest (***this interest gets added to our national debt but you never hear about this back door windfall given to banks paid by taxpayers). The bank uses the interest to provide fake earnings numbers, hide toxic debt, and provide mega million dollar bonuses to their execs. Then they write articles for consumption by the naive public how the bailout worked the gov got it's money back and they show pictures of people in manhattan buying jewerly and nice things for thier wives girlfriends & mistresses and going to 1500/ticket yankee games and the headline is "American consumers spending again" lol.. (Ironically only a few big banks get this cash infusion the smaller banks like the ones closed every weekend by the feds are swallowed up by the larger banks which is exactly the wrong thing to do as it makes the lager banks too big to fail.) This also proves that most big banks are also insolvent if not helped by the taxpayer)

2. Forcing interest rates to 0%. This is crippling to savers and senior citizens forcing them into risky, overpriced stock market or loss of pricipal. If interest rates were normal, these people could spend their interest helping the economy.

3. Causing massive inflation of food and energy which hits low income people who use a larger proportion of their income for these items to suffer.

4. Contributing to world hunger by causing massive inflation in food and commodity prices in other countries making more people hate the US.

All of this is being done (in an unsuccessful) attempt to keep housing prices from falling (because the solvency of the big banks depends on house prices rising.) It is not working ironically because the common man does not have enough money to buy houses at todays prices.

If he had let market forces work, house prices would fall making them more affordable and people could buy them and have money left over to spend..

Even though this attempt at controlling market forces is failing, Bens friends the wall st execs are becoming ever wealthier on taxpaper money and will not have to suffer the severe repercussions of his actions in the future..

Your only protection if not connected with the banking cartel is to buy silver and gold as these will serve to preserve what little wealth you may have as Ben and the Feds continue to plunder the US currency into the abyss even as they urge congress to stop spending lol..

[somnath]

^^^Neshantji,

Barring your peeve against bankers (and central bankers) - a legit one in many ways - I dont see the point you are making...

The only point that I take out from your rants is that banks should not be allowed to exist..Fine, thats a POV....You might want to think how an SME would borrow money in that case...

The other take-away is that Gold should be the reserve ccy..Thats fine, but you havent yet answered basic questions on how that can be achieved, given the issues already pointe out..

[Neshant]

Your dismay on why the stock market is going higher when there is no productive industries being created, shows a strong need to rationalize market behavior based on some assumptions which may or may not be valid. Productivity is increasing and it is showing up in the balance sheets of US corporations. It may not be increasing because of some new high-funda technology but simply because of more efficient deployment of existing resources as a result of all the investment in IT and other knowledge systems which help in more efficient decision making..

The only productivity growth happening is in staff reduction, pay freezes and shipping jobs overseas. If you cannot rationalise why a stock market is headed up despite not a single new productive industry having emerged since 2000, it means something is seriously wrong.

As for investment in IT, that's already ancient history from the 90s. Can't keep repeating the same reason for the stock market going up. Making a faster processor does not translate into a more productive workforce per say - its a law of diminishing return.

Since 2000, the only new industries that came up were house flipping and banking - the former has zero productivity component and the latter was a scam. An enormous debt was run up during the 2000s and a spectacular bust has occured. Sooner or later the consequences that are currently being deferred will have to be dealt with.

That the stock market should be rising in such a scenario means its rigged and its only a matter of time before something gives. Either it will be the currency which will be devalued (as is happening now) to pay off debts, inflate, increase taxes on the working (poor) in which case people who do/did honest work and saved their money in the productive economy will be scammed YET again. Or there will be massive defaults on debt which will make 2008 look like a walk in the park.

Not all inventions have to be ground-breaking.

Can you identify a single productive industry that has emerged since 2000 that has created well paying jobs on a mass scale? Excluding house flipping and banking con jobs that is. I can't.

Personally I see a big drop in living standards coming. I attribute it directly to the disaster brought upon by pretenders like Bernanke who claim to be shepherding the economy when in fact he's clueless. The guy will go down as the last chairman of the federal reserve because in 5 to 7 years, I don't think the federal reserve will even exist. I expect before that he will try and push for some international currency so he can avert being connected to the disaster he created and instead have attention deflected to the international stage.

[Neshant]

The other take-away is that Gold should be the reserve ccy..Thats fine, but you havent yet answered basic questions on how that can be achieved, given the issues already pointe out..

I have not seen any issue pointed out, maybe you can raise them.

If anything, I've been doing the pointing out and have not got any satisfactory answers.

Perhaps you could tell me what the need is for a useless middleman industry that's draining wealth from the productive economy by the trillions. Its already been proven they have no special insight by virtue of the fact they led themselves into insolvency and are now offloading the losses on suckers. Any answers to that question which I have repeatedly raised. Anyone ?

I have half a mind to quit my job, get an Armani suite, land in some banking job and do a little paper shuffling in the office to collect nice bonuses for f-ing up the economy. Living to max, doing the secretary, driving a Jag, talking fast, loosening this and tightning that (even though I know its all BS)...etc. Life is good when you don't have to do real work like Bernanke. Just give a speech and and hit the print button.

[somnath]

I have not seen any issue pointed out, maybe you can raise them.

http://forums.bharat-rakshak.com/viewto ... &start=480

[kmkraoind]

IMO, the US is artificially inflating stock prices, because it fears Chinese buying out major US companies through funds like Black Rock if US stock prices are at rock bottom prices and Chinese having huge $$$ surpluses at hand. Till the buying value of Chinese $$$ decreases. May be US keen Chinese at bay like Northrop Grumen by citing security reasons, but not companies like GE, GM. US has to keep SM from falling. If not the US crown jewels will be in Chinese hands and US will become highly dependent on Chinese goods and money for their survival. Some sort of opium war is ongoing, where Chinese is an aggressor and west is an addictor.

[Neshant]

Or that Gold should be the reserve ccy of the world?

Essentially yes. Although I'd settle for a system of competing local currencies with legal tender status one of which would obviously be a gold backed currency to keep things honest.

The volumes in your favourite instrument (PHYS) is so insignificant - less than a million contracts a day on average.

My favourite instrument is physical as I don't trust paper gold. However PHYS is better than GLD since it explicitly has bars with serial numbers to backup its issuance of shares.

The cost of storing and stowing gold - it just cannot reach every nook and cranny of the world in an economically efficient manner.

Sure it can. Gold need not trade physically in the streets as coins of course although it would have that legal status as an extinguisher of debt. All that's needed is a currency backed by gold which is redeemable for gold on demand. Show up at a major bank branch and trade your paper in for physical gold at any time. If you could do that, nobody would doubt the value of the paper money - until bankers pull yet another con job as sure as the sun rises.

3. Qty of gold available in the world - it is a finite quantity, but the economic output of the world isnt..How does supply of gold keep pace (again in an economically efficient way)?

That's like saying there are a finite number of trees or electrons in the world.

Its totally irrelavant. Gold's price would increase if the world's economic growth was faster and decrease if it was slower. That being said, above ground gold supplies increase on average at about 2%, roughly the rate of world economic growth - not that it matters. If anything, the fact that there is a finite amount of it and its scarce gives it its value which is a GOOD thing. Stuff that's available all over the place and in the hands of crooks like Uncle Ben & gang who's value is enforced and stolen through violence by the state (taxation, confiscation, inflation..etc) is BAD.

As a policy maker determining global ccy policy, they are of paramount importance..

The only thing of paramount importance to so called policy makers (aka federal reserve) is how to preserve the monopoly of their crony banks and bribe politicians to facilitate their theft from the productive economy. Last thing on their mind is preserving your purchasing power.

Last, as before you should not let facts cloud the content of your rant, in order to preserve credibility..
http://www.federalreserve.gov/pf/pdf/pf_1.pdf
??? Why get into the most obvious ones?

Huh? You post a document written by federal reserve crooks to tell me what - that they declare themselves not to be crooks?

Please do some basic research and let not bull&hit from the fed cloud your judgement. The federal reserve is a private banking cartel who's mission is to preserve the monopoly of the commercial banks behind it. The 2008 crash amply demonstrates that fact. That the fed claims to ease this and loosen that for the real economy is nothing more than a con job. As I have pointed out, Bernanke is clueless and his main role there is to transfer the gambling losses of these banks onto the backs of suckers and ensure the survival of that monopoly. Please watch the Fed Part 1/5 documentary I posted earlier (i think I'll post it again for good measure).

Every single machine/calculator invented has collapsed, but human fingers for counting has withstood the test of 4000 years..

So why prevent the use of human fingers for counting? After all if the machine provides the same answer as counting on fingers, there should be no problem letting both systems exist side by side with legal tender status. But if that happened, we'd find the calculator short-changing the user a little too quickly...

I bet in such a world, Uncle Ben would be delivering pizza. He'd have to get a real job quick!

[Neshant]

[somnath]

All that's needed is a currency backed by gold which is redeemable for gold on demand. Show up at a major bank branch and trade your paper in for physical gold at any time. If you could do that,

Neshant-ji, this itself shows up the weakness of gold as a reserve ccy...How many bank branches in the world can afford to store and stow gold? Very very few...In fact bank branches can hardly afford to dispense more than 2-3 ccies on an average...It costs an enormous amount to store cash (ccy chests)..the cost of storing gold would be about 10-15 times higher...

[skumar]

IMO, the US is artificially inflating stock prices, because it fears Chinese buying out major US companies through funds like Black Rock if US stock prices are at rock bottom prices and Chinese having huge $$$ surpluses at hand. Till the buying value of Chinese $$$ decreases. May be US keen Chinese at bay like Northrop Grumen by citing security reasons, but not companies like GE, GM. US has to keep SM from falling. If not the US crown jewels will be in Chinese hands and US will become highly dependent on Chinese goods and money for their survival. Some sort of opium war is ongoing, where Chinese is an aggressor and west is an addictor.

The Chinese are seeing the future and want to make full use of their dollar reserves before the s... hits the fan. That is why they are going around the world spending and buying like there is no tomorrow - well, there may not be a tomorrow like today.

Neshant,

Excellent points.

After going through some of the posts made earlier, what I don't get is this - If the US has fooled the rest of the world by getting hard assets for useless Treasury Notes whose value they do not intend to keep and thereby the promise of the note, why did the other "smarter" countries not think this through earlier? If the world already has enough dollars to go around, why would anybody buy US treasury debt today? So, when and how would this currency Ponzi scheme end?

[skumar]

Acharyaji:
And guess what, after that economic order collapses (if and when), the US is still likely to emerge as the strongest player. It has land, natural resources, demographics and a political system that has survived the test of almost two centuries. As a society it is a lot more integrated than it has ever been.

And the contrast with China is striking. Would you hitch your wagon behind a society with limited natural resources and a system which is so insecure that it fields that broadcasts of the unrest in Egypt would destabilize it?

The US has got used to freeloading off the rest of us, getting tangibles for worthless paper. When the rest of us suckers know it is time, there will be a price to pay. I am not betting on that just yet but it will happen, just like the USSR collapsed suddenly one day and all the "intelligence" in the world failed to predict the moment.

The only way the US can get out of this chakravyuh is by devaluing the USD and when it does that, it will have to give shiploads of USD to get shiploads of iron ore or oil or whatever.

[shyam]

Neshant-ji, this itself shows up the weakness of gold as a reserve ccy...How many bank branches in the world can afford to store and stow gold? Very very few...In fact bank branches can hardly afford to dispense more than 2-3 ccies on an average...It costs an enormous amount to store cash (ccy chests)..the cost of storing gold would be about 10-15 times higher...

Every branch need not do that. The banks can say that currency exchage can be done at specific branches in every region. In fact, the mere promise that people can redeem without any pre-condition at few selected braches will do the magic.

[Neshant]

Neshant-ji, this itself shows up the weakness of gold as a reserve ccy...How many bank branches in the world can afford to store and stow gold? Very very few...In fact bank

I don't know what you are talking about.

Just about every bank branch where I'm at has lockers built into a vault to store valuables of customers. I don't see how the cost of storing gold is any higher than storing customer valueables. Where does a bank store its worthless fiat paper currently to prevent it from being stolen? Gold takes up very little space.

The argument makes no sense and I don't see what point you are trying to make. A few major branches in a city issuing gold coins on demand in exchange for paper is all that's needed to establish credibility. Cost of storage is irrelavant. Even if there is a tiny (and I mean very tiny) cost of storage, it can be built in as a small premium in the cost for the exchanging paper for physical.

[shyam]

While the world focuses on west asian crisis revolutions, some bank runs are happening in South Korea.

Zero hedge reported last Friday:
Bank Run In... Korea

According to JoongAng Daily, "more than a thousand customers lined up in front of the Busan II Savings Bank located in Busan yesterday as soon as the nation’s financial regulator announced a six-month business suspension of Busan Savings Bank and its affiliate Daejeon Mutual Savings Bank."

Today it reported:
As Korean Bank Run Accelerates, Financial Services Chairman Deposits $17,864 To Demonstrate All Is Well

Less than 3 days later, it has done just that. China Post reports that: "South Korea suspended operations at four more savings banks on Saturday after runs developed as customers rushed to get at their money despite official assurances the financial sector was secure."
...
Kim repeated his vow yesterday that no more savings banks would be temporarily closed in the first half of the year “if there are no excessive deposit withdrawals.”

But this failed to halt deposit withdrawals in Busan. More than 500 customers waited in line from 3 a.m. in front of Woolee Savings Bank to take out their money and the numbers grew to 1,000 by 9 a.m.

[Hari Seldon]

TAE tweet:

Iceland vetoes $5 Billion U.K., Dutch deposit deal http://j.mp/e347vN Referendum will be held instead.

Go, Iceland, go!

Now all it needs for this outbreak of sanity to take root on the oiro mainland is for the debt dominos to start to fall - first one 'senior creditor' haircut followed by one more followed by the deluge. Mango people of the world unite! Say no to neo-colonism!

[somnath]

Just about every bank branch where I'm at has lockers built into a vault to store valuables of customers. I don't see how the cost of storing gold is any higher than storing customer valueables. Where does a bank store its worthless fiat paper currently to prevent it from being stolen? Gold takes up very little space

Neshant-ji, you ,make some relly heroic assumptions - more heroic than assumptions undelrying the Modern Portfolio Theory, which is saying something

1. Very few branches offer locker services, as a % of the total # of branches, cannot be more than 5-10%...I dont know which city you live in, but in all the cities I have lived/worked in, that is the case..

2. Cost of storing and stowing gold is humungous...Physical gold is offered as a special service by some banks, in select places, and to select (mostly institutional) clients...Typical charges are between 0.25 to 0.75% per annum...If they ever tried to scale it up for the hoi polloi, the costs will shoot up manifold....A ccy that has that kind of transaction cost is dead before arrival..

3. The idea that a few branches storing gold suffices is foolish..That is like saying you can have a banking system where only a few branches dispense currency - you need th give the chap in Durgapur an similarly efficient way to acces the reserve ccy as the chap opposite Mint Street...And yes, storing ccy is expensive too, though less than gold...Which is why ccy is "stored" only in a few branches (in ccy chests), and stowed around daily (in fact more than that, sometimes afew times a day) in the others...Which is precisely why most branches dont keep more than 2-3 ccies..........And they are subsidised the cost of storage by getting reserve (CRR or equivalent) status for ccy chests...Who subsidses? Well, the central banks!

Maybe you SHOULD, as you suggeste din an earlier post, try and become a banker - you would know a bit more about the fundamentals, which can enable you make these rants with far more credibility!

[kmkraoind]

2. Cost of storing and stowing gold is humungous...Physical gold is offered as a special service by some banks, in select places, and to select (mostly institutional) clients...Typical charges are between 0.25 to 0.75% per annum...If they ever tried to scale it up for the hoi polloi, the costs will shoot up manifold....A ccy that has that kind of transaction cost is dead before arrival..

If it is in Indian contest, if its a declared money (white money), it will be unwise clients to pay for charges to store the gold in banks, when SBI is offering gold deposit scheme why bank will pay 1.00-1.50% interest and interest is paid in gold. More over the capital gains and interest earned is tax free.

[somnath]

^^^In the typical gold deposit schemes, the trick is in how "off" the conversion prices are to the market spot, in other words, the bid offer spreads...You would see very wide bid offer spreads for these schemes...It is relatively ok for retail investors making an investment, but not for an instrument looking to be used as reserve ccy....

[devesh]

as for Gold, i think there are some aspects of International Trade where Gold can play a stabilizing and positive role. Balance of trade is an example. it can be done on an annual basis where two countries in question get together and settle their difference in trade amounts with Gold. this ensures that countries have to shell out something tangible and 'hard' to settle their accounts, rather than using worthless paper which is constantly devalued, meddled with, and played around with. this has the advantage of making sure that no country has an unsustainable and irrational trade deficit like the US currently does. the deficit in trade will have to be settled with each country in terms of gold. countries with high trade deficits will automatically come to senses and restore some sanity in their economies. i think this is the way to go in the future. this step can make sure that there are no massive imbalances in world trade and economy that can jeopardize the entire global economy. in a situation where trade deficits are settled in gold, it would have been impossible for the US to perpetuate the fiat ponzi scheme, and PRC would have grown into a more balanced rising power than the Western puppet it is now.

[somnath]

^^^Deveshji,

Countries dont trade with each other..Enterprises do..BoT/BoP are simply aggregated numbers...So a Gokuldas exports will owe (say) dollars from Walmart, while NTPC will owe dollars to GE..There is no way GE, NTPC, Gokuldas and Walmart can settle it on a "net basis"..Second, even if they did, how much "gold" will they settle in? Which goes back on whether gold can be a reserve ccy - at a txnal level, too many compliaitons with that..

[Neshant]

2. Cost of storing and stowing gold is humungous...

How can it be any more humungous than storing cash - which all banks already do during operation?

3. The idea that a few branches storing gold suffices is foolish..That is like saying you can have a banking system where only a few branches dispense currency - you need th give the chap in Durgapur an similarly efficient way to acces the reserve ccy as the chap opposite Mint Street...

I don't see the problem of being able to redeem paper for gold at a few branches. I don't think you comprehend the point of having the OPTION of being able to swap paper for gold. It is not that everyone would even do it, its merely a mechanism for establishing faith in the value of the currency. So long as you can take a bus trip somewhere and swap paper for gold and gold remaiins legal tender (non-taxable), faith in worthless paper currency remains. There is no doubt as to its value.

And yes, storing ccy is expensive too, though less than gold

.

How can it be less expensive than gold? Gold takes up far less space.

Which is precisely why most branches dont keep more than 2-3 ccies..........And they are subsidised the cost of storage by getting reserve (CRR or equivalent) status for ccy chests...Who subsidses? Well, the central banks!

The central bank does not 'subsidise' anything. Its just charged to the productive economy via printing.

Maybe you SHOULD, as you suggeste din an earlier post, try and become a banker - you would know a bit more about the fundamentals, which can enable you make these rants with far more credibility!

You are talking nonsense my man. The silly excuse that gold is too expensive to store but cash isn't makes zero sense. Any bank that's storing cash now can store gold and all banks are handling cash and/or valuables everyday. Again why is it more expensive ? If you cannot answer that simple question, your entire argument has been demolished.

Come up with a better excuse - this one is as lame as lame goes !

[Neshant]

as for Gold, i think there are some aspects of International Trade where Gold can play a stabilizing and positive role. Balance of trade is an example.

Yes maintaining a trade balance is one of the benefits of a gold backed system. No country is running masssive deficits or surpluses. Once your country runs out of gold, your spending binge is stopped and you have to start exporting something to earn gold.

Don't have to wait till the end of the year to swap gold however. I'm sure the net balance can be adjusted on a more frequent basis - depending on how credit/trust worthy your trading partner feels your country is.

[VikramS]

Neshant:

You confuse productivity with job creation when they are not the same. In fact productivity which directly leads to higher profits, leads to lower number of jobs in the same sector.

In a closed system, higher productivity leads to profits, which can be reinvested to create new industries and create new jobs. However, because of the global economy, higher productivity in the US does not directly translate to jobs within the US. On the flip side the higher growth in the emerging economies also meant that the profits of major US corporations recovered much faster than the US economy did.

Purely from a valuation basis the stock market is not expensive. If there is a question mark, it is the underlying stability of the system and hence the future projections.

And you definitely need to do some more research about the growth of technology and impact on productivity. Your definition of technological advance seems to be a nuclear fusion reactors in every car; you dismiss cars like the Chevy Volt which give you the range of a gas vehicle but the fun of an electric. If you talk to engineers at Intel, the smooth migration to 22nm is a major achievement compared to what was anticipated 10 years ago. And my life is dramatically different from what it was 10 years ago. The mobile internet is a game-changer in terms of information availability on my finger-tips. It definitely improves my quality of life and productivity. Perhaps you need to get a phone with a data-plan (or leave home/office more often if you already have one).

[Neshant]

Neshant:
You confuse productivity with job creation when they are not the same.

When did I ever say productivity means job creation ?

I said there has not been a single PRODUCTIVE industry which has emerged to create jobs on a mass scale since the year 2000. There sure was a hell of a lot of bogus banking & financing jobs created during that time none of which were productive - and in fact was destructive,

Purely from a valuation basis the stock market is not expensive.

Its very expensive given the amount of money being printed, debt being run up, stock market rigging going on and total lack of transparency. Not to mention the collapsing middle class. Only way profitability is going up is through eliminating a portion of the workforce, under paying the remaining workforce and squeezing more out of them. That and outsourcing. Meanwhile the useless (non-productive) middeman economy keeps sucking more blood making the productive economy sicker.

And you definitely need to do some more research about the growth of technology and impact on productivity.

You need to do more research on the same story being peddled over and over. Once again, there has not been a single productive industry which has emerged to create jobs on a vast scale since the year 2000. More worrysome, there does not look to be anything on the horizon either. The only bright idea the chief architect of the present mess can come up with (Uncle Ben) is how to water down the currency and run up more debt which will surely end in disaster.

Your definition of technological advance seems to be a nuclear fusion reactors in every car; you dismiss cars like the Chevy Volt which give you the range of a gas vehicle but the fun of an electric.

Are you kidding, the Chevy Volt is no breakthrough and its going to bomb spectacularly.

If you talk to engineers at Intel, the smooth migration to 22nm is a major achievement

Put it this way, very few people actually benefit going from a dual core processor to a quad core processor. On net, a few servers run a little faster but that's a hill of beans. Most of the productivity gains in IT have already been realised in the 90s with the introduction of computers + Internet into the workforce. That event was a massive boost in productivity. Can't be pointing to the same song & dance as the reason for the stock market going up.

So once again, there has not been a single productive industry that has emerged since the year 2000. Meanwhile the spending and debt has done a moon shot while current stock market levels looks bogus and there has been a cancerous growth of the useless middleman economy. Massive secrecy, money printing and bailouts are being used to hide the financial mess on the books of banks even while their losses are offloaded onto suckers. Tons of (mostly unproductive) govt jobs were created and their oversized salaries and future pension liabilities have been added to the tab which is already a burden to the productive economy. Not the kind of environment that inspires confidence IMO.

[Hari Seldon]

It's getting ugly out there,says Yves smith.

Doomy read.

The Shanghai Index fell 2.6% overnight.{Yawn. So bl00dy what?!}

Italian bonds are blowing out. If sustained, this is bigger deal than the stock market swoon across Europe: CAC down 1.45%, FTSE down 1.1%, Dax off .4%. A lot of Libyan shares apparently in Italy and Libyan interests own over 7% of Unicredit, the biggest bank in Italy. Ouch.{As long as Italy doesn't collapse, and comrade Berlusconi will never allow it to, we know....all izz well.}

The euro is off but not horribly so considering all the bad news even before Libya raised the stakes. 1.36 at this hour.

The yen has strengthened (but the yen and Japanese stocks, which were off 1.7%, usually trade in opposite directions).

Brent has backed slightly from its spike to $108, gold and silver have recovered a bit after falling in a dollar rally.

US nerves clearly rattled. {And you know that how?}

S&P futures off over 17 points (it was over 19 a little while ago) and Dow futures off over 100 points.

[VikramS]

Neshant:

You dismiss a few servers running faster. Have you done any analysis of the quantum of the jump in computing power available to servers. And how that power is actually being used thanks to virtualization? Or that Microsoft is now requesting 16 core server chips to better utilize the rack-space and better power efficiency.

Do you realize that many data-centers are now power constrained; i.e. they can not pull enough power from the Grid to supply the juice to the servers. And this is when the power consumption falls with the voltage of semiconductors which continues to fall with every generation. Power efficiency is now a prime measure of server performance, and in spite of much higher power efficiency data-centers are running out of electrons. Clearly the computing power is being put to use. In fact I would argue that thanks to cloud, the CPU cycles are being utilized at a significantly higher level than ever before. Where do you think that computing power is going?

Have you ever run a small business? Do you see no value in a five person organization have access to similar productivity technology as a Fortune 500 company at much lower costs? I have been involved with multiple small businesses and there is a huge difference between what you could achieve ten years ago and what you can do now. And all those changes directly fall through to the productivity of companies and their profitability.

I do not understand your definition of productive to well, but from what infer you do believe that primary and secondary industries are the only productive occupations and most tertiary occupations are not productive.

And let me tell you how you can benefit: Yesterday I was taking some guests to the Marin highlands north of SFO. Thanks to the cloud, I could find what trails and areas of interest were open, and what was the weather going to be in the next two hours. I knew which freeway to take on the way to avoid traffic. Without real-time availability of information: I would have gone to places or trails which were closed, taken freeways which could have been jammed. I could satisfy the inquisitiveness of my son, by instantly finding information about things we were seeing. I had a much better trip then I could have had a decade ago, with very little advance planning; most of the actions were taken Just In Time. I saved time, gas and had a much more fulfilling experience. We did a lot of things spontaneously adapting to the circumstances around us in real-time, and made great use of our time.

The same tools also enable businesses to run their operations in a smarter manner, consuming less and producing more. I attend more webinars and learn a lot more about things of interest to me than I ever did before. And I do that without having to take a flight. I can work live with a person sitting in Europe or Asia without even picking a phone.


You need to go out and have some fun. Life as we know it is changing dramatically.

And why do you think the Volt will be a failure? Is gloom and pessimism completely overwhelming your thought process?

[vera_k]

RBI raises alarm as Bengal goes into severe overdraft mode

Looks like West Bengal is a couple of weeks from bankruptcy and Punjab will follow.

[manju]

as for Gold, i think there are some aspects of International Trade where Gold can play a stabilizing and positive role. Balance of trade is an example.

Yes maintaining a trade balance is one of the benefits of a gold backed system. No country is running masssive deficits or surpluses. Once your country runs out of gold, your spending binge is stopped and you have to start exporting something to earn gold.

Don't have to wait till the end of the year to swap gold however.,,,,,,,,,,,,,.

http://www.npr.org/rss/podcast/podcast_ ... d=94411890

there are good podcasts on NPR Planet Money about gold standard.. both pro and con arguments

[yogi]

Can we stop this Neshant vs World XI ?
Frankly its getting a little boring...

[Chinmayanand]

Just watched the movie " Inside Job" . A must watch for mujahids in this dhaga. Wall street jehadis have destroyed the top Universities and Business Schools too , whose deans and professors advocate deregulation for a couple thousand dollars. My first impression after seeing this film : US is doomed.

[shyam]

Can we stop this Neshant vs World XI ?
Frankly its getting a little boring...

May be I'll take the last stab

Fiat currency system is inherently inflationary. It is there by design.

When Fed issues some money, say $100, it expects that to be returned back with interest, say 10%. i.e. it expects to get back $110 for the $100 issued. How can it get that back when the system has only $100 in currency? For that Fed has to issue more money into the system, say another $100. With this additional money, Fed will get its $110, and the system has just $90. Now the system has to return $110 with this $90. Again it will issue more money. Over a period of time, this fiat money system will not be able to sustain, will collapse by its own weight, and new monetory system will be introduced.

[shyam]

Updates about the Korean bank run news posted here. http://forums.bharat-rakshak.com/viewto ... 6#p1034676

Korean Bank Run Spreading: Eighth Bank Closes Following "Massive Withdrawals"

[svinayak]

How Ireland was the trigger for the collapse of EU and also US financial fall.


Now Korea could create the fall of Japan and China. Connect the dots

€
http://www.amconmag.com/blog/wreck-of-the-irish/

By the time the banking crisis hit in September 2008, Ireland had a real estate bubble three times the relative size of America’s. Perhaps hoping to keep it afloat, that year the leaders of Fianna Fail took a bold step. On Sept. 20, Taoiseach (TEE-shak, or prime minister) Brian Cowen announced that the government would guarantee 100 percent of all bank holdings in the nation.
Not all deposits up to 100,000 euros, as the FDIC once did with dollars. Not just low-risk deposits, or 50 cents on the dollar. The government promised to back everything owed by all six Irish banks for the next two years—nine times the national debt.
The announcement shocked European leaders, concerned that their own countries’ investors would flee to Ireland. Less than a week later, the British press reported that investors were pressuring Prime Minister Gordon Brown to duplicate the Irish assurance. Brown demanded, in the words of the Daily Mail, that Ireland “stop trying to poach UK customers.”
Economists like MIT’s Simon Johnson maintain that this is when, and why, European countries began offering reckless guarantees to keep their investors home—first the UK, then Germany, the European Union itself, and finally, across the ocean, the United States. Ireland had started a stampede at a moment of crisis. No other nation completely backed all holdings as Ireland did, however, and none of those countries had such an extraordinary bubble supported only by the paychecks of a country with half the population of the Chicago area.
Last October, Financial Times columnist Wolfgang Muenchau called the Irish decision “one of the most catastrophic political decisions taken in post-war Europe.” Even as he wrote, the two-year guarantee was coming due.
The week before Thanksgiving, the Irish economy unraveled. In the wet darkness before dawn, as our double-decker bus hurtled over the winding country roads near our home, my neighbors and I listened to the news over the tinny speakers: a team of international financial advisors had flown in for an emergency government meeting, and no one knew why.
By the end of the day, it was reported that the Irish government was asking the European Union and International Monetary Fund for a bailout. The next day, Friday, we found that our bank’s value had plummeted, and we withdrew our funds to be on the safe side. Saturday more than 100,000 people took to the streets of Dublin to protest the bailout—a proportionally-sized American demonstration would comprise the entire population of Virginia.

[Neshant]

You dismiss a few servers running faster. Have you done any analysis of the quantum of the jump in computing power available to servers. Or that Microsoft is now requesting 16 core ?

None of this is adding any great leaps in productivity any more than Dunlop coming out with a new model of tyres every year is revolutionizing cars. Profitability or innovation of 99.99% of companies out there is not changed in any revolutionary way by the introduction of a faster processor.

The major leap in productivity came in the 90s when computers + internet were first introduced into the work force & home. That was a revolutionary leap as nothing comparable (like email or online commerce or computer animation..etc.) existed on a mass scale prior to that. It opened up many new industries that did not exist before it and boosted the productivityof existing industries.

Word processors & printers which replaced manual typewriters - that was revolutionary in the 80s/90s. Introducing bloatware from Microsoft in 2010 with MS Office 11 (or whatever number its up to) does not add anything revolutionary from MS Office 10, 9, 8, 7..etc. There is no great leap in productivity. If anything, there's so much bloatware, it might actually be damaging productivity. LOL!

Some new productive industry like a breakthrough in genetics or development of real artificial intelligence needs to come about in order for a revolutionary gain in productivity. e.g. if tommorrow real artificial intelligence was developed by Intel, the great recession caused by banking fools would be over. Or if tommorrow a breakthrough in genetics was announced that doubled human lifespan by slowing down the ageing process by 50%, that too would be massive. Health cost down big time, intelligent people living longer and building on + contributing their expertise to society a whopping 50% longer, bigger tax base (for govt to waste).. huge bang in productivity.

A slightly faster processor, more bloatware from MS won't cut it. At best we can say its contributing something towards incremental productivity but its certainly does not justify any so called bogus recovery. You are probably not a scientist or engineer so you perhaps get taken by buzzwords like cloud computing that marketing departments come up with to sucker the unsuspecting.

[Tanaji]

Economics is like the elephant in the tale of 4 blind men and the elephant. Everyone perceives it to be different, and all are right and wrong.

Is economics a field of study with well defined rules like maths and science? I have my reservations on that. Or is it more like a cult like scientology? Would be interesting to see the similarities and differences.

Oh well, OT

[somnath]

^^^ economicsts exist to make astrologers look good!

[Neshant]

The profession of economics has fallen into much disrepute. There isn't any science/math to it as its presently setup.

This raises the question of why the present setup even exists where private banks get to fiddle around with the money & savings of a country if they have no expertise to offer.

I came to realise that the primary reason they have inserted themselves as useless middlemen is to milk the productive economy and pass on their gambling losses to suckers. Works for them. Any fiddling around and offloading losses however is explained away with a load of lies of how it benefits the productive economy when in fact its a ripoff.