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

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

Post by Hari Seldon »

TAE tweets for todin.
https://twitter.com/#!/AutomaticEarth
The Federal Reserve Is Causing Turmoil Abroad http://j.mp/hEOzDT Stinging criticism in the Wall Street Journal, linking QE2 & turmoil
Quelle surprised, anyone? Commodities were always gonna spike as more merry printing continued, well, merrily. Why print even more debt in a debt-constipated khanomy, one may ask. Well, IMHO 'twas was designed to, temporarily, hold up big-bank balance sheets amid a deleveraging economy and a contracting credit system. But, unsurprisingly, while big Ben and his big banks perfectly controlled the printing taps, they had little control over where the liquidity would eventually go to and it ended up levitating not just stock prices (desirable) but commodity prices as well (stagflationary, potentially).
Fed's Hoenig Says U.S. Should Break Up Largest Financial Firms http://j.mp/dDXN5y Says risk is now higher.

“I am convinced that the existence of too-big-to-fail financial institutions poses the greatest risk to the U.S. economy,” Thomas Hoenig.
OK, agreed. However, I wouldn't advise anyone to hold their breath waiting for the obviously right things to happen.

More Hoenig:
And Wow: Fed's Hoenig Says United States Has "Deeply Undermined Free-Market Capitalism" http://j.mp/edV6yc via @ZeroHedge Incredible!
Heh heh. Try selling this line to the finuancial and economystic community, saar....
Return to the Drachma? Economists Warn Greece May Have to Quit Euro http://j.mp/fJEzq5 Either that or more austerity.
Jai ho....jai ho... jai ho... jai ho....
Pensions and health care pledges put UK at 'extreme risk' of another economic crisis http://j.mp/f0bGHP
You mean the last one got decisively and derisively over, eh?
Nearly half of older Americans receive no income from assets such as stocks & savings. 25pc get less than $2,000 a year http://j.mp/eqpKfL
Neshant does have a point regarding big ben machinations fleecing and scamming savers outta desperately needed investment and savings returns. Only.
Uh oh, Thousands protest against high food prices in Delhi, India http://j.mp/frmnyP food makes up close to 50pc of household budgets
Uh-oh. DOn;t be surp[rised if none and I mean NONE of our desi dhimmedia news outlets (tv+print) reported this anywhere. BBC picked it up but not ndtv or TOI. The level of collusion among media outlets on blackouts and strategic silence over inconvenient issues is truly, unsurprisingly staggering only, sometimes.
When Pretending Fails to Hide US Bankruptcy: Laurence Kotlikoff http://j.mp/hu89Rw The math is ugly. Really ugly.
extreme D&G alert.

chalo, 'nuff for now. Have a nice day, all.
svinayak
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by svinayak »

http://www.rediff.com/business/slide-sh ... 110223.htm

25 nations where high food prices could crush governments
21. India

Inflation has been a major thorn in the UPA government's side, even as it struggles to steer the country towards a high growth trajectory, but most of all higher prices of edibles ranging from egg to milk and fruits to onions ruined even the most unrefined palate.

Fuelled by high wages, rising property and food prices, food inflation in India is at an almost unsustainable 11 per cent level.

The severity of inflation could be gauged only when the prices of onion, which shot up to Rs 70-80 a kg, is juxtaposed with the average daily wages of India's nearly 300 million informal sector workers -- Rs 100.

GDP per capita: $1,017

Food as a percentage of total household consumption: 49.5%

Net food exports (as percentage of GDP): 0.3%
VikramS
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by VikramS »

Neshant:

You are making very sweeping statements and really tenuous connections without any justification. Why do we need a truly once in a generation kind of discovery to have an economic recovery?

The Wright Brothers flew the first airplane in 1903 but it did not become a true transformer till a couple of decades later. How long it take to get electricity to all homes in the US after the discovery of electrical generation principles and the invention of light bulbs and motors?

Similarly the internet came out to the general population in the early 90s but it takes a lot of time for a new technology to make become ubiquitous and pervasive enough to make a transforming impact. In fact truly mass-scale impact only happens when the technology becomes almost like a utility, something which forms the basis of a lot of other much better things to happen. That commoditization is necessary to bring costs down to a level which can spur mass adoption. Read Crossing the Chasm which has very interesting discussion on the life-cycle of new technologies and products.

There are real technological advances happening. It is true that they may not be as dramatic as the invention of the transistor but their impact in furthering higher productivity can not be ignored. Most of gains in profitability come because people discover better ways of doing what they were doing in the past. In fact many of the truly revolutionary ideas happen with not so insignificant stutters and failures; that is prime a reason why companies have the "build vs buy" dilemma often confronting them.

And regarding banks. Most if not all banks have paid back the TARP money. And the US Treasury has reaped generous returns on most of its investments from TARP. The one place where the common man is unlikely to get back the principal is the investment in GM! But going by your definition, GM is the only company doing productive work. Though I agree with you with the moral hazard of nationalizing losses, desperate times called for desperate measures; there was no point letting the banking system just collapse into oblivion.

PS: You could not be more wrong about my background ;). BTW how old are you; from some of your posts (e.g. BP related) you sounded quite young; but some of the D&G and cynicism is not characteristic of young people?
Virupaksha
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Virupaksha »

VikramS,

How much of the AIG money has been paid back? How much of the actual risk premiums of federal insurance covering entire deposits has been paid? How much of the money sunk into the two big govt housing loan givers which have been holding the housing prices got returned?

The ghosts of the bailout are everywhere. Those banks returning TARP money is just for show so that the US govt can give the exact same statement "the banks have returned the money and are earning profits on that money". The money has been given in indirect ways, these indirect calculations will ofcourse never come out.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by shyam »

VikramS wrote:Similarly the internet came out to the general population in the early 90s but it takes a lot of time for a new technology to make become ubiquitous and pervasive enough to make a transforming impact.
Most of the basic inventions related to Computer Science and Internet occured way back in 1960s. What we saw in 1990s is the commercial adaptation of those inventions.

Banks make profit because of QE. They make this money by lending the money they got from Fed to treasury. Basically tax payers are paying the profits these banks make through interest from treasury.
Neshant
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Neshant »

Why do we need a truly once in a generation kind of discovery to have an economic recovery?


I really think you need to read the book How an Economy Grows and Why it Crashes.

To put it simply, the economy crashed after a massive ponzi scam was exposed in 2008. From 2000 onwards, I could not understand how the economy continued to post gains year after year. There wasn't a single productive industry creating jobs on a mass scale that I could identify. I did not consider real estate or banking productive so I regarded its growth as the end result of some productive industry powering the economy. Yet I could not identify WHAT this productive industry was and meanwhile the economic numbers just kept getting better. For a while I thought *I* had misunderstood economics!

Then the crash came and it all made sense. There was no economic growth, it was all bogus. What was powering the economy was a massive rise in debt and fraud just like a Bernard Madoff scheme.

Believe me when I say there is no recovering from anything unless there exists/emerges a productive new industry/invention that powers the recovery. Unless you can identify WHAT that productive new industry/invention is that's creating well paying jobs on a mass scale, do not believe any talk of recovery. You really need to understand this because if you just buy into the recovery propaganda without asking these simple questions, you will be creamed in the upcoming mega-crash.
There are real technological advances happening.
Could you identify WHAT this technological advance is. I'm not talking about useless marketing buzzwords like cloud computing, extreme programming and other BS. I'm asking you to identify a real invention in the productive economy which is creating well paying jobs on a vast scale. I can't identify a single one. Don't say "green jobs" because that's a load of bullocks that drains taxpayers and costs more than it delivers. I certainly cannot see any - other than perhaps genetics which is a future productive industry undoubtedly but is currently still in incubation and not ready to hatch yet. To summarize, there is none.
And regarding banks. Most if not all banks have paid back the TARP money. And the US Treasury has reaped generous returns on most of its investments from TARP.
Use some common sense my man. The economy fell off a cliff in 2008 when a massive ponzi scam was exposed. A load of money printing, running up the debt, stock market rigging and other scams have run their course since then. Do you think an economy that's losing millions of jobs despite all pumping can have over-leveraged, insolvent financial companies upto their eyeballs in bad real estate investments turn a profit out of thin air? These profits are all bogus. Its just a ripoff of the productive economy. Handing out money at near 0% interest rates to these companies and them buying govt bonds at a higher % while inflating to ripoff savers and those who made the right decision by not participating in the mania is nothing more than a scam. For every scam like that which is pulled, its a robbery from the productive which WEAKENS not strengthens the economy that much more.

Do not believe in BS paper shuffling. Paper shuffling cannot and does not produce profits out of thin air on a national basis. Financial companies & banks research nothing, develop nothing, manufacture nothing and market/export nothing (except scams). They live off the productive economy as a parasite would and that is their ONLY source of profit. This is going to end very badly once these parasites have had their fill of the host which is getting drained.
But going by your definition, GM is the only company doing productive work
I'm afraid you still don't understand the meaning of a productive industry. A productive industry is not one that's merely producing goods but producing goods profitably without relying on handouts from the productive economy. If GM is making cars but draining money from the taxpayer to do so, it is not productive. Its destructive. If Goldman Sachs produces nothing but relies on gaming the system for its profits, its not productive. Its destructive.
You could not be more wrong about my background
What is your background? I can't believe you have a tech background because you seem unable to distinguish hype from substance. Plus you fall quite easily for marketting buzzwords and spin. For all I know, if I told you I had invented "5th dimentional computing" you'd want a 50% stake in my startup company without knowing a thing about it.
Hari Seldon
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Hari Seldon »

Now if you,like me, have been wondering what exactly is it that prevents the mighty US of A, that colossus in material, intellectual and self-interest terms from dispassionately charting a route to genuine repair, recovery and growth - you know the kind that made them numero uno between 1880 and 1920 - and you think you can vaguely see it, well fret no more. Sri Jesse articulates, brilliantly lemme add, the crux of the problem..... He calls it the 'credibility trap'.

Here, ensoi....Taibbi: Why Wall Street Isn't In Jail - Video Interview

Some excerpts, anyway:
The US government cannot effectively deal with the financial crisis and the required credible reforms because in fixing the problems they would necessarily expose the underlying fraud, and endanger the very powerful status quo that funds them and their political campaigns.

This is more difficult to manage than a liquidity trap because the very means of remedy have been co-opted.

The doctors caused the illness, and cannot pursue a cure without admitting their malpractice, which may not have been done in simple error but with complicity.
Bingo! Wow or wow or what?!? This lays out exactly the heart of the problem.

So, well, what now, you may ask? Jesse has some predictions laid out too, somewhat unsavory though, I might add....
So this malaise and period of selective recovery will continue until there is a another, more destructive crisis that finally clears away the fog of corruption.

{Awrite, that's the unsavory part. Mango folk have suffered a lot already for the mistakes of banksters and financial elitemen. Enough already.}

Or there is some exogenous event to distract the people to some other problem, to change their focus. 'Never waste a crisis' as they say in the Washington Beltway.
Yup, re that last bolded part, what better distraction than all-out war? No not against 'terrorism' or drugs or malaria but against other crisis ridden countries. Let all prosper post-war, I guess.
ramana
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by ramana »

hari Seldon, There is an Oscar nominated documentary on the financial meltdown. It also aks why are the bankers in jail for fraud. The guy says all Dodd-Frank is a joke. He thinks the problems will persist for there is no political resolve to fix the problems unlike in 1933.
Muppalla
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Muppalla »

x-posting from westasia thread.

A lot of links and a perspective.

Middle East Chaos: What To Learn And What To Expect - Submitted by Giordano Bruno of Neithercorp Press
There are many different kinds of revolution; some more effective than others. Telling the difference between a successful revolution and a failed revolution can be tricky. Often, on the surface, they look exactly the same. The secret is to set aside what we would “like” to see, and be brutally honest about what was actually accomplished in the course of the dissenting action. Has power been fully rescinded by the offending government or regime to the people, or, to yet another corrupt bureaucracy with a slightly different face? Have the puppet strings of corporate globalists been severed from your country, or do they remain strong as ever? Has ANY corrupt official actually been punished for the crimes that led to the insurgency in the first place, or, did they fly off scot-free to their million dollar villas in Ecuador, drinking mojitos in wicker recliners and watching the disaster they created unfold on CNN? Who ultimately benefited from the event?

Today, the entire Middle East is on the verge of complete destabilization and possibly civil war. Tunisia, Egypt, Libya, Bahrain, Yemen, and other nations are experiencing a shockwave of unrest not seen since the 1970’s. Western media sources are calling it a “people’s revolt”, one which the Obama administration is heartily embracing like an old relative. But are we witnessing the democratization of the cradle of civilization, or something else entirely? How will we be affected by this tide of confusion? Instead of falling into panic and fear over the growing chaos, what can discerning Americans learn from a social implosion on the other side of the world that will help us to survive a similar occurrence here? Let’s examine some of the distinct moments that have characterized the Middle East debacle, the underlying and corrupt influences that surround them, as well as certain historical facts of the region that globalist engineers would rather we forget…

Molding The Arab World

Are globalist interests involved in the breakdown of the Middle East? Most certainly. However, this much widespread resentment and pent-up collective rage is not something that can be easily fabricated. It is far more likely that anger over the feudal governing tactics of dictators in the Arab world (many of which were installed or supported by U.S. and European interests) is very real, and has been building for quite some time. So then, why are Western governments applauding the overthrow of despots they themselves placed in power?

The Mubarak regime was the second largest recipient of U.S. financial and military aid in the world. One third of ALL publicly reported U.S. foreign aid goes to Egypt and Israel:

http://www.vaughns-1-pagers.com/politic ... gn-aid.htm

Without this vast military aid from the U.S., Mubarak would not have been able to maintain his 30 year reign. This is a cold hard fact. So then, why go against a leader you already have firmly in your grasp?

When the Shah of Iran (a violent madman we anointed) was overthrown by popular revolt in 1979, the U.S. government responded with vitriol and saber rattling. When Hosni Mubarak (a violent madman we anointed) was overthrown this past month, the U.S. government responded with cheers and warm regards. What was the difference between the revolution in Iran, and the revolutions all over the Middle East today? Insurance…

Like most puppet leaders and figureheads, Mubarak was an errand boy, a conduit for implementing globalist policies in Egypt. His relinquishment of power was in reality nothing of the kind, because the power was never his to give back. It is important to take note that Mubarak’s cabinet and most of the existing government and military structure remains firmly entrenched:

http://www.haaretz.com/news/internation ... s-1.345069

Field Marshal Mohamed Hussein Tantawi, who leads the ruling military council and has been defense minister for about 20 years, took “temporary” control of Egypt after Mubarak ceded authority. Tantawi retains very strong ties to Washington D.C. and an unerring loyalty to Mubarak’s policies, which is perhaps why Barack Obama seemed so jubilant about Mubarak’s departure. In the recent and controversial Wikileaks release of private diplomatic cables, Tantawi is famously referred to as “Mubarak’s Poodle”:

http://www.cbsnews.com/stories/2011/02/ ... 2166.shtml

The key here is that globalist circles support the change in Egypt exactly because nothing will change for the citizenry. The Egyptian people will not gain true influence in the politics of their own country, and they may have even less influence over their own lives if a military infrastructure remains embedded within their government. Their entire rebellion was diluted and redirected, because they naively focused on Mubarak as the source of all their ills, instead of the corrupt system he was a mere front-man for.

What about Libya? Muammar Gaddafi, the crazy bag lady of third world dictators, was the darling of the UN in 2009 when he was nominated the head of the African Union. He was just as much a monster then as he is today, and as far as I know his human rights record has remained dismal, but then again, he was helping the globalists by paying the AU dues of numerous countries with Libyan oil money and luring them towards centralization:

http://www.saiia.org.za/diplomatic-pouc ... rence.html

Apparently, Gaddafi has outlived his usefulness as international bodies now fully support the rebellion in Libya.

Remember Tunisia? That fight for freedom that the mainstream media essentially ignored until it was almost over and the two decade rule of Zine al-Abidine Ben Ali (another despot with a history of human rights violations who was also installed with the help of Western interests, primarily Italy) was finally overthrown? Well, now globalist proponents suddenly “love” Tunisia and are promoting it as a “model revolution”. Why? Maybe because the dastardly duo of McCain and Lieberman are in town to offer the new Tunisian government “training from the U.S. to help Tunisia’s military provide security”:

http://www.reuters.com/article/2011/02/ ... YE20110221

Yikes. These are the same guys who drafted the ‘Enemy Belligerents Act’ which would allow the U.S. government to treat any American citizen as an “enemy combatant”, removing Habeas Corpus and all Constitutional rights to a fair trial. I guess the lesson to Americans and most importantly the Liberty Movement is that if they can’t beat you, they’ll try to join you, and then co-opt you. My hope is that the Tunisians will turn down the Trojan Horse offerings of sewer rats like McCain and Lieberman, but if they do, I imagine the globalists will not be quite so friendly anymore.

What is happening in the Middle East is a perfect example of the manipulation of existing dissent towards establishment ends. The surface trigger for these events is obviously the doubling of food prices across the world in the past two years (you can thank the orchestrated devaluation of western currencies for a large part of this). People have a bad tendency to weather all kinds of atrocities as long as they are fed, but once certain necessities are taken from the masses, they WILL act, usually in a violent and unfocused manner. These revolutions are, for the most part, legitimate when they begin, but are co-opted as they progress, chiefly because the cultures involved do not understand where the real threat is coming from. Is centralization of the Middle East through catastrophe the goal? Perhaps, though, when all is said and done, I think the upheaval in the Middle East is much more about the U.S., than the Muslim world…

Déjà Vu All Over Again…

For those who really want a comprehensive sense of what is happening in the Middle East and why, I suggest a look into the last major Egyptian revolution of 1952. At that time, Britain was still the preeminent western power in the Arab world, and its control of the oil supply was absolute, much like the stranglehold the U.S. has enjoyed for many decades. Oil was pegged to the British sterling and any trade in crude required a conversion to the British currency. In fact, it was often said that the British Empire’s power after World War II was entirely dependent on its reserve currency status in oil markets. Any of this beginning to sound familiar?

In 1952, a revolution against the Egyptian puppet monarchy and its British overseers burst seemingly from nowhere, led by a group called the “Free Officers Movement”. In reality, the insurrection, fed by years of corrupt Aristocratic rule, was initiated and in some cases funded by both U.S. and Soviet agencies in tandem! In 1951-1952, nationalist police officers backed by the U.S. and Russia began supporting fedayeen terrorist groups using false flag attacks to weaken the region (is this sounding even more familiar?). Interestingly, this era was the birth of the so called “Muslim Brotherhood”, a group which has suddenly resurfaced in media discussion today.

Riots spread through Cairo, King Farouk was overthrown, the British were eventually run out, and their control of the Suez Canal was lost. But the story doesn’t end there…

The British and the French wanted the Suez back (at least that’s what they claimed), for control of the Suez meant control of Middle East oil markets. A plan was initiated by the two European powers to take back the canal using an Israeli invasion of the Gaza Strip as a spring board. This time, Israeli agents were used by the British to conduct false flag attacks, which were presented as a pretext for Israel to move against Egypt. The British and French followed by landing troops near Cyprus and Algeria.

The plan would have worked, except for one thing, the British were financially weak after two world wars and were completely dependent on American investment in their treasury debt. In response to the British action, the U.S. along with the UN threatened to halt investment in British debt and to stop price support of the Pound Sterling. This led to the eventual fall of the pound as the world reserve currency, and the rise of the dollar.

Official history portrays this move by the U.S., Russia, and the UN, as an attempt to undermine the long reach of the English. It is rather convenient however that the pound was dethroned just as plans for the European Union were beginning to be implemented in the early 1950’s. It seems to me that the British elites were fully aware that their futile attempts to hold onto the Middle East would result in the fall of the Pound; it was simply the British people’s turn to be taken down a few notches, and centralized. The similarities between the British Empire’s decline over Middle East oil in the 1950’s and our decline over Middle East oil today, are startling.

If history was to repeat itself, I would guess that the U.S. will soon be embroiled in political or even military operations to control the Suez, and retain its dollar peg to oil, which will illicit a negative response by international investment, causing central banks to dump their U.S. treasury investments and the dollar as a reserve currency.

Think of it as a grand theater meant to amuse only global bankers…

Energy Crisis To Strike The U.S. And Protect Globalists

An unstable Middle East benefits very few people, and that, I suppose, is the point. As we have covered here in a multitude of articles, the U.S. is on the verge of engineered economic collapse, driven mainly by the steady and purposeful devaluation of the dollar and our quickly expanding national debt. If you are a corporate central banking group seeking the death of the greenback as the world reserve currency, you face the very serious problem of avoiding immediate blame or retribution for your actions. What better way to escape the torches and pitchforks of the furious populace than to find a scapegoat, or a distraction even more terrifying than poverty?

Middle East turbulence provides the perfect smokescreen for the inflationary destruction of the dollar.

First and foremost, it hides the already skyrocketing price of energy, which was inevitable due to our devaluing currency (oil is traded primarily in dollars), but can now be blamed entirely on “Middle Eastern instability”. Already, the cost of crude has spiked to $100 a barrel, with no sign of relenting. Certainly, many Americans will now blame Egypt or Libya for their empty wallets, instead of global banks.

To add to the confusion, various agencies are feeding the MSM with a rainbow of mixed messages, which leave Americans vulnerable to uncertainty, making them far more malleable. For instance, the IMF has recently stated that the world can easily withstand $100 oil (a lie), while the International Energy Agency has stated that $100 oil would be “very very bad”, leading to a complete derailment of the global economy (which was going to occur anyway):

http://www.bloomberg.com/news/2011-02-2 ... -says.html

http://www.cnbc.com//id/41714336

Social and economic disaster ANYWHERE in the world today will invariably cut the thin threads of psychological faith in our so called recovery. The system was a sham to begin with, and the quantitative easing methods of the Federal Reserve were never intended to actually “save” our financial house from collapsing, just prolong the event until they were ready to sweep away the ailing remains and offer us an IMF controlled replacement. It is designed to fail, and fail spectacularly. However, these facts will sink into the fog of history if Americans are suckered into fixating on a single area of the planet as the sole source of economic catastrophe.

Finally, if the tension spreads to other nations such as Saudi Arabia and triggers violent in-fighting, or Israel is tapped as an asset to instigate wider conflict, we could be looking at all out war on an incredible scale. This would be the distraction to top all distractions.

Is American Upheaval Next?

If crude oil continues to climb above $100 for more than a couple months, the negative effects will be undeniable. If you thought we had inflation before, just wait until gas hits $5 to $6 a gallon, and shipping costs for goods explode. This doesn’t even take into account the very real possibility that once the Middle East is fully destabilized, and certain political influences are dissolved, OPEC will completely de-peg oil from the dollar. From there, the sky is the limit on gasoline values. Already, Mohamed El-Erian, chief executive officer at Pacific Investment Management Co. (PIMCO) is calling for a “stagflationary” market reaction to the turmoil in Libya:

http://www.bloomberg.com/news/2011-01-1 ... -says.html

What will be the U.S. government response to a crashing currency and climbing costs? Austerity! Although, they will probably use different terminology to describe it. The onset of cost cutting measures is becoming more visible, especially within the states, where municipal bond investment has run screaming off a cliff. Large scale protests are erupting in Wisconsin and Ohio due to state cuts designed to help them stay financially afloat:

http://www.reuters.com/article/2011/02/ ... SR20110222

The debate here becomes two sided; do state workers deserve to have their wages or benefits cut because state governments were fiscally irresponsible? Should states continue to run up incredible deficits just to appease state workers (who many consider overpaid) in the short term? They are both meaningful positions that need to be considered, however, these two sides miss the full picture.

The fact is, state governments are beyond broke, and eventually, they will have to nix spending and entitlement programs regardless of how anyone is affected, especially in the face of unchecked inflation. State employees and all people dependent on welfare are not necessarily the culprits behind financial clear-cutting either. The argument cannot be allowed to devolve into a mindless cage match over who deserves the money, because, first, there is no money, and second, this distracts from the original cause of the distress; the corporate banking elites who instigated the disaster in the first place. Already, I can see a certain subsection of the populace lashing out wildly at figureheads and opposition parties, just like in Egypt, instead of the corrupt system and the banking moguls who built it.

If an Egyptian or Libyan style revolt, driven by blind mob mentality, takes place in the U.S., we can expect several things to occur. Normal means of communication will be disrupted; both Egypt and Libya responded to protests by shutting down all internet and cell phone traffic. Martial Law will be enacted, and Constitutional rights suspended; continuity of government programs are already in place to legally bind states into bowing to DHS and FEMA authority in the event of any “national disaster”, including a dissenting citizenry. Immediate bank closures will follow, just as occurred in Egypt, causing a lack of liquidity in local markets and panic among those who were financially unprepared. Violence will unavoidably result, giving the Department of Homeland Security the perfect excuse to implement even more controls, all for our own “safety” of course.

Some may welcome such bedlam as a sign of change. I don’t see it that way. Revolution without direction, without a plan, and without a clear understanding of the source of the problem, is meaningless. We can allow ourselves to be herded by our own rage into even more pronounced tyranny, or we can stay focused, collected, and act with purpose by organizing our communities with the objective of self sufficiency and self protection. We can work with state legislators to bring support to Tenth Amendment issues, giving them the strength to withstand an economic collapse and the ability to turn down DHS or FEMA’s “help” when the time comes. We can organize intelligently, without centralized control, or we can hand over our destinies to yet another elite group of unaccountable autocrats. As impossible as it might seem, the choice really is up to us. How we act and react in the coming months will mean the difference between a free and prosperous America, or a scorch mark in the annals of history.
Hari Seldon
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Hari Seldon »

Are you referring to the 'Inside job' Ramana garu? Have heard rave reviews but am yet to get hold of a copy of that film.

Meanwhile, chan akya at asia times has a crazy theory that seems vaguely plausible only because it is so crazy only.

The gist is that the gracious oiropean hosts of deposed arab autocrats will gently persuade said ex-dictators to buy oiropean bonds with their decamped loot in return for shelter and all that. Neat, eh? Ek teer se do nishan and all that....

akya's US unemployment tackling theory is a tad too far-fetched even by his standards, admittedly only.
Perhaps there is a version of Baldrick's cunning plan that goes into effect as follows (and stay with me here):
1. Arab potentates across the Middle East decamp with their money to Europe. No scratch that: they just decamp to Europe where their money already is hidden in various money laundering havens.
2. As a condition for tolerating the presence of these geriatric autocrats and their forbiddingly fundamentalist entourage, European governments require them to purchase a bunch of assets - nothing dangerous you understand, just a bunch of European government bonds selected at "random"; so let's say Ireland, Greece, Portugal shall we. "Would the emir like some Spain with that?"
3. A wholesale departure of rulers from the Middle East of course pushes up oil prices dramatically, so America immediately enlists a million unemployed folks and flies them down to man the oil pipelines from refineries like Al-Khobar to the nearest ports. Whatever happens to the rest of these countries is of course no one's specific concern.
4. The Arab masses in places like Libya, Syria, Jordan etc all decide that with their rulers gone far away, there isn't much point to protesting and so go back to lounging around street corners.

And so the headlines all improve:
A. Stability in the Middle East
B. European debt crisis is over
C. America shows strong jobs growth
D. Oil prices fall

Or something like that.
Aha, eh?
link
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by shyam »

Hari Seldon wrote:The doctors caused the illness, and cannot pursue a cure without admitting their malpractice, which may not have been done in simple error but with complicity.
If one were to borrow Neshant's definition, it is not that lack of admission of malpractice by doctors, but the lack of admission that the doctors were quacks. :twisted:
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Neshant »

The scenario this guy comes up with makes many SHTF (sh&t hit the fan) scenarios look like a walk in the park.

------------
"Credit is not cash, and creating credit is not the same as printing cash. Shoveling $1 trillion in zero-interest credit into the banking system does not necessarily mean that $1 trillion flows into the real economy--that can only happen if someone or some entity borrows the credit.

This is why some claim that hyperinflation has never occurred in a credit-based system; it can only arise in a monetary system in which cash itself is printed (i.e. Zimbabwe et al.)

I am not making any such broad claim, but to identify the two as identical seems to me to be a profound confusion."

From:
http://www.financialsense.com/contribut ... -2011-2016
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by RamaY »

Just an economic perspective after the meltdown.

Someone said in West-Asia thread after KSA's $37B sops to avoid few hundred protesters coming on to streets in the capital that "Bad Economics is good for Politics". That is >$100K a pop for a 300k mob...


Bad Economics is good for Politics - We have seen this phenomenon in the entire spectrum of politics and governance; starting from the greatest market economy USA to democracies like India (hello MMS) to communist govt like PRC to dictators to islamic kingdoms like KSA (is this halal? by the way?)

That brings a question; if bad-economics is good for governance (key outcome of politics - good or bad) then why care for economic theories at all.

I noticed a trend in this thread. While analyzing and criticizing the western economic principles (of course few applications of it); people are using various economic measures that they are criticizing; is more national savings, GDP growth, Maximized capital investments etc good or bad for an economy? At what point they become bad?

Yesterday I was watching a comparative study of Indian and PRC railway systems. Under the innovative management of Lalloo and Mamta Benarji (By the way which dumb head decided to put such an important ministry under coalition quota? - if Telecom can be taken out, why not IR?) Indian railways are traveling backward; where as PRC railway network is getting modernized and increased (I understand the quality issues and bad economic principles). Where would I rather spend $50B loss India accrued due in 2G; on corrupt politicians or low quality railways?

All is maaya onlee...
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by ramana »

Hari Seldon, Yes that the documentary "Inside Job".

I think the net effect of Arab freedom will be to reduce the Clash of Civlizations that Huntington alluded to.

PRC is running around like it lost its nuts doesnt know what hit them. I am not saying the West triggered this but that will be end effect.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by ramana »

Hari Seldon, A D&G

Market Crash by Dec 2011

He is being contrarian. Don't know his track record.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by svinayak »

http://www.ritholtz.com/blog/2011/02/ho ... tal-flaws/
How the Servant Became a Predator: Finance’s Five Fatal Flaws
By Guest Author - February 24th, 2011, 7:30AM
Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He is a white-collar criminologist who has spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.


~~~

What exactly is the function of the financial sector in our society? Simply this: Its sole function is supplying capital efficiently to aid the real economy. The financial sector is a tool to help those that make real tools, not an end in itself. But five fatal flaws in the financial sector’s current structure have created a monster that drains the real economy, promotes fraud and corruption, threatens democracy, and causes recurrent, intensifying crises.

1. The financial sector harms the real economy.

Even when not in crisis, the financial sector harms the real economy. First, it is vastly too large. The finance sector is an intermediary — essentially a “middleman”. Like all middlemen, it should be as small as possible, while still being capable of accomplishing its mission. Otherwise it is inherently parasitical. Unfortunately, it is now vastly larger than necessary, dwarfing the real economy it is supposed to serve. Forty years ago, our real economy grew better with a financial sector that received one-twentieth as large a percentage of total profits (2%) than does the current financial sector (40%). The minimum measure of how much damage the bloated, grossly over-compensated finance sector causes to the real economy is this massive increase in the share of total national income wasted through the finance sector’s parasitism.

Second, the finance sector is worse than parasitic. In the title of his recent book, The Predator Statehttp://books.simonandschuster.com/Predator-State/James-Galbraith/9781416566830, James Galbraith aptly names the problem. The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy in order to reward already-rich financial elites harming the nation. The facts are alarming:
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Neshant »

Bill Black : Even when not in crisis, the financial sector harms the real economy. First, it is vastly too large. The finance sector is an intermediary — essentially a “middleman”. Like all middlemen, it should be as small as possible, while still being capable of accomplishing its mission. Otherwise it is inherently parasitical.
Hey this guy sounds like me. Has he been reading my posts?

I have a patent on the phrase I invented : "the useless middleman industry".
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by shyam »

I was thinking about this for some time and finally decided to post here. It may not be directly related to this thread but I think it is more relevant in this one.

Democracy is a corrupt form of government. For democracy to survive, corruption has to be accepted by people in one form or other.

Let me explain this in simple terms. Democracy requires elections; elections need campaigns; campaigns need money and services of other people. These are not going to come free. When one takes such services, he needs to return the favor when he gets elected. This is done by giving them plum posts, government contracts and also by other means. Some countries have created a mechanism for political campaign contributions. Even there, politicians who get electied have to return the favors to their prime donors. We have seen lobby groups who channel political contributions get their pound of flesh extracted. Essentially, democracy has corruption built into it. No matter how clean a person wants to be, he will have to return favor to the people who worked for him. Otherwise, he won't have anybody to campaign for him next time. This is avoidable when democracy is practiced in a small area, like village or university. There campaign expenses are very limited and it is possible do that without taking others' money.

One may wonder how did democracy get established in its current form that in too in such a large scale? IMO, there are two reasons.
1. In earlier practice, democratic election existed only among rich elites.
2. When democracy became a mass phenomenon, in addition to earlier mentioned form of corruptions, the economic ponzi scheme allowed people not to be aware of the inherent corruption.

Actually, this underlying requirement may explain why democracy was practiced in different parts in India in ancient times but never became a mass phenomenon. Extrapolating this, I would say that we should expect demise of democracy in the world when people revert to gold standard or when fiat currency based economic ponzi schemes are stopped.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Ambar »

ramana wrote:Hari Seldon, A D&G

Market Crash by Dec 2011

He is being contrarian. Don't know his track record.
Ramanaji, they said the same thing many a times in late 2009, and then again in 2010 with it being an election year etc. Healthy markets have corrections, maybe S&P will correct upto 20% (most asian markets have already corrected 15-20% from their 2010 highs). But i don't see another crash in the horizon. And we'll certainly not revisit the 666 lows of Mar 09.

Markets as they are today have priced in most factors except alien invasion: EU debt crisis, drop in housing prices and delinquencies, 100$+ oil prices, ME unrest and a split house in the congress. Purely in nominal terms,i don't see S&P hitting 1000 again - atleast not in near future.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Arya Sumantra »

shyam wrote:Democracy is a corrupt form of government. For democracy to survive, corruption has to be accepted by people in one form or other. Let me explain this in simple terms. Democracy requires elections; elections need campaigns; campaigns need money and services of other people. These are not going to come free.
Like that, ANY form of non-hereditary govt(not ruled by Kings and queens) is a corrupt form of govt as far as rising to power is concerned. You think one could rise in CCP without giving petis to power brokers for support? System of governance cannot be a foolproof bypass to Individual morality (of those wielding power).
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by shyam »

You answered the puzzle in your first sentence. I started getting convinced that that is the true form of governance. Anyway, more discussions about this will be OT.

I was trying to show how democracy, corruption and ponzi schemes appear to be linked.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Neshant »

Healthy markets have corrections
its not a healthy market, its a rigged market.

there will be a second crash and it will be worse than 2008.

This second time however, everyone will know there is no scope for govt taking on more debt to prop up the stock market bubble as is currently occuring.

the only way i see the stock market staying at its current grossly over-priced levels is if savers of USD continue to be ripped off via money printing and/or devaluation. i.e. devaluation of the USD which is to say a destruction of living standards.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Hari Seldon »

^^^I agree.

Making mkt level predictions in a transparently not-unrigged mkt as currently dances around emerged tfta bourses is a job best left to professional predictors like sri jim cramer.

My focus isn't so much about what'll happen to stock prices. Rather, its more of 'Are meaningful steps being taken or not to stem the rot rather than merely stem the riot? Are the bare-basic conditions for genuine repair and recovery being acknowledged at least?'

So far, I don't see much happening in that direction. I see 1 step fwd and 2 steps back, in fact, going by sri Obama's budgetary assumptions and proposals.

Meanwhile while taxpayers face rising squeezes down the road, turns out many top corporations have s\figured out how to stop paying tax altogether.
From TAE on twitter:
Nearly two-thirds of US corporations and 68% of foreign firms operating in the US pay no income tax http://bit.ly/gnQ9eC

Rich Take From Poor as U.S. Subsidy Law Funds Luxury Hotels http://bloom.bg/e7nnJ3 JP Morgan, Goldman beneficiaries of subsidies for poor

Fannie Mae, Freddie Mac Seek (steal) $3.1 Billion From taxpayers to prop up banks & unaffordable home prices http://bloom.bg/ikypdV

So the CEO of Anglo Irish Bank paid 0.1pc tax on his €10 Mn income while the Irish taxpayer coughed up €12.3 Billion for losses, so far. Ugh

LOL, UK economy contracts faster than expected for Q4 2010 by 0.6pc. They'd better learn figure management perception from US or China soon

Lloyds Tumbles as Rising Funding Costs Threaten 2011 Profit http://bloom.bg/fzhycP Feel that margin squeeze.
And so on.

Again, I don;t expect bangs and revolutions in the emerged tfta world or anything. If anything, this sure looks like a slow, long whimpering road than a bang-bangy one.

Finally:
Analysts Say A Government Shutdown Is No Joke http://n.pr/hPww00
Agreed. When everything is a joke, nothing is.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Hari Seldon »

Another more-whimper-than-bang event manifested itself, expectedly :

World's Biggest Pension Fund May Sell Japan Bonds (Bloom-ice-berg)
Japan’s public pension fund, the world’s largest, said it may become a net seller of bonds to cover payments in the world’s most rapidly aging society.

The Government Pension Investment Fund, which oversees 117.6 trillion yen ($1.4 trillion), in September forecast that it would sell 4 trillion yen in assets in the business year ending March 31 to fund payouts. Sales may be less than that in the year starting April as bonds reach maturity, said Takahiro Mitani, president of the fund, known as GPIF.

“We will likely be a net seller in the market,” Mitani, a former executive director at the Bank of Japan, said in an interview in Tokyo yesterday. “We certainly have to come up with an adequate amount” to pay pensions, he said, declining to elaborate on the amount.

Sales by the fund, which helps oversee public pension funds for Japan’s 37 million retirees, come as the first of Japan’s baby boomers is set to turn 65 in 2012, making them eligible for pension payments.

The GPIF, historically one of the biggest buyers of Japanese debt, held 82.4 trillion yen in domestic bonds, or 70 percent of its assets, as of September, according to the fund’s latest quarterly financial statement. That compares with 12.6 trillion yen in Japanese stocks, or 10.7 percent, 9.6 trillion yen, or 8.2 percent, in foreign bonds and 11.5 trillion yen, or 9.7 percent, in overseas stocks, the report shows.

GPIF doesn’t plan to start investing in so-called alternative assets such as commodities, real estate, infrastructure, private equity or hedge funds because the risks don’t suit its strategy, Mitani said.

...

Japan’s 10-year bond yield is the lowest in the world, data compiled by Bloomberg show. Japan’s gross domestic product shrank an annualized 1.1 percent in the three months ended Dec. 31, the Cabinet Office said on Feb. 14, and China’s economy overtook Japan’s as the world’s second largest for 2010.

People aged 65 or older will account for 29 percent of the country’s population in 2020 and almost 40 percent in 2050, according to the statistics bureau. They accounted for 23 percent population at the end of 2010, the highest among the Group of Seven countries, data compiled by Bloomberg show. That compares with 12 percent in 1990.

Japanese pension funds posted the lowest annualized growth among 12 countries between 2004 and 2009, at 2 percent in U.S. dollar terms and unchanged in yen terms, according to the survey. Brazil reported the highest growth, 24 percent in dollars, the report showed.
OK, so what? Wasn't this expected all along? Haven't mkts, gubmints, policy wonks and maybe even mango citizenry already 'factored this into' their calculations, eh? Well, maybe but somehow am not sanguine about the public and its representatives doing a thorough job of this one....
Japan's government pledged to balance the nation's main budget over the coming decade under its first fiscal-overhaul plan, approved Tuesday, laying the groundwork for the daunting task of tackling the country's massive debt.

Highlighting the challenge of such an undertaking, the government estimated that if growth remains modest, it may have to fill an annual budgetary gap of about 22 trillion Japanese yen (US$242 billion) by the fiscal year ending March 2021. If Tokyo were to raise that amount only by increasing the 5% consumption tax—one gauge being used—it would need to increase the tax nearly threefold.
...
The debt amount is estimated the same as in the current fiscal year that started in April. Tokyo also promised to make "utmost efforts" to lower the amount in the following years....how Mr. Kan's economic team intends to lower the nation's public-debt level, which at nearly twice Japan's yearly economic output is the worst among advanced economies.
...
But questions linger about feasibility of the framework. Absent from the blueprint are detailed spending-cut plans, such as how much to scale back individual budget categories like defense and education. There also aren't timetables for specific tax increases despite Mr. Kan's calls for doubling Japan's consumption tax in the coming years.

"The government has yet to provide details of how it can achieve the goal," said Masashi Shimominami, a bond-market analyst at Mizuho Securities. Some investors also remain skeptical over whether Mr. Kan will rally enough political support for heavier taxes on consumption, Mr. Shimominami said.

The release of the plan comes as Japanese officials shift their policy focus to fixing budgetary woes after receiving a wake-up call from Europe's deepening debt crisis. "We must make sure we avoid a situation where we lose trust in the government bond markets just like Greece and, as a result, interest rates rise sharply, putting our finances in a state of default," the guidelines said.
With their existing debt burden, even a few basis points rise in bond yields will prove tremendous only. And if the captive domestic bond buyers are now turning net sellers, where from will Tokyo raise the funding in the years ahead? Again, expect whimpers not bangs but the direction and tone are set for downhill only. Sri Kan's belated actions in doing something or rather, wanting to be seen as doing something are all because of the expected kick in the butt by the global bond mkt which must be approached sooner or later by Tokyo only.

Here's Mish's thoughts:
As in the US, there is no political will for budget cuts. The best the government could come up with was a plan to freeze spending for 3-years. Whoop-to-do. Bear in mind that an aging demographic will require more health care.

Will growth be sufficient to make a long-term dent in Japan's debt? I scoff at the notion. Moreover, rising energy prices will take a big bite of of Japan's trade surplus.

By the way, in case you missed it, Japan's trade surplus went negative last month. Supposedly it's a one-time thing
Uh-oh. Japan in trouble only. Recent FTA with Yindia will hopefully facilitate transfer of capital, FDI, tech etc between the 2 countries to mutual benefit. Every little bit will help. And as Yindia becomes the 'skilled labor in services' capital of the world, hopefully, desi nursing and healthcare industry can benefit from Japan's coming surge in ageing related healthcare demand. Maybe.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by VikramS »

Neshant:

I am EE from an IIT. Went to the grad school rated #1 in the year I graduated, and had the highest score in my PhD qual exam (decided to leave). Went to Wall St after a decade in the valley, just when everything was unraveling. Was too late to profit from the party but had a seat on the desk which had just entered the single biggest losing trade in the history of Wall St.

I disagree with you when it comes to the links you make between asset prices and productive jobs. Asset prices move because of money flow. And money flow happens because of a gazillion things, including the printing of money.

The link you make between US jobs and profits are essentially useless for investment purposes. In a closed system yes, but not in a global system. For every job lost in the US ten others have been added in the emerging economies. Most of the profit growth in the US companies is coming from outside the US.

Yes, all markets are rigged in one form or other. Our job as investors is to find a way to profit from them.
Last edited by VikramS on 27 Feb 2011 08:45, edited 1 time in total.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Hari Seldon »

The rot in the Academic economics profession has been laid bare in several commentaries on the subject - recently, notably in the 'Inside Job' documentary as well I hear.

Fortunately, the Acad econ profession across the Atlantic retains some of its sanity and (dare I say it) integrity. Maybe its proximity (both literally & figuratively) to Austria and the Austrian school or maybe its because the ECB's ways and means of influencing, nay, controlling academic discourse in economics is nowhere near the Fed's sophistry-cation in doing so.

Anyway, here's from Germany:
German academics push for EU sovereign default plan
Almost 200 German economics professors have signed a declaration rejecting current proposals to resolve the eurozone debt crisis, instead calling for a way for distressed countries to declare bankruptcy.

More than 200 professors were invited to sign the document, and 189 did so, including prominent figures such as Manfred Neumann of the University of Bonn and Justus Haucap of the University of Duesseldorf, both in western Germany.

Instead of the collective support mechanism set up last year that could be made permanent in a modified form from 2013, the economists argued it would be better to let countries restructure their debts.

"Restructuring allows the countries concerned to reduce their debt and start over," said the economists.

The solution being mulled at present and likely to be approved by European leaders next month would amount to "a permanent guarantee" of some countries' debt, with "very serious consequences," they added.

The signatories also doubted the effectiveness of measures to reinforce the competitiveness of weaker eurozone countries and control members' public finances owing to the European Union's "limited firepower."

The document was published as lawmakers from Chancellor Angela Merkel's ruling coalition sent her a clear message ahead of negotiations on a permanent EU rescue plan to take place in Brussels.
Bravo. More power to sanity and plainspeak, I say.

The debt levels at present simply cannot be repaid only. Better to acknowledge the problem before solutioneering can come in, IMVHO.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by VikramS »

shyam wrote:
VikramS wrote:Similarly the internet came out to the general population in the early 90s but it takes a lot of time for a new technology to make become ubiquitous and pervasive enough to make a transforming impact.
Most of the basic inventions related to Computer Science and Internet occured way back in 1960s. What we saw in 1990s is the commercial adaptation of those inventions.
Yup. It takes a lot of time for inventions to come out of the labs, to the early adopter (US military), and then the general population. The true impact of the invention is truly felt when it touches each and every facet of human activity; i.e. it is cheap enough to become a utility. This is what is happening right now as we speak. The fact that a rickshaw driver in the poorest parts can now benefit from the IT revolution means that it has now reached that point where it is all pervasive. Its impact will continue to be felt as more people make use of it to make their lives better.

And all these have an effect on productivity and equity prices; even the rickshaw driver using a cell phone.
Banks make profit because of QE. They make this money by lending the money they got from Fed to treasury. Basically tax payers are paying the profits these banks make through interest from treasury.
Yup. The Fed exists to serve the banks. And the banks are so integral to the US' way of life that it is not an easy decision to let them go. One Lehman led to a 50% haircut in equity prices.
-----------------------------------------------------------------------------------------

BTW, I in no way am defending the Fed's policies. All I am thinking of how to profit from them. I like many was caught in the D&G for sometime. Maybe the D&G will come true. But in the meantime there are a lot of traders who have profited handsomely from what the Fed is doing. I am just trying to learn from them.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by shyam »

VikramS wrote:BTW, I in no way am defending the Fed's policies. All I am thinking of how to profit from them. I like many was caught in the D&G for sometime. Maybe the D&G will come true. But in the meantime there are a lot of traders who have profited handsomely from what the Fed is doing. I am just trying to learn from them.
True wall street spirit :)

While it is good to make money from every opportunity, I think many people in this forum are looking at things differently. I feel that there is some realization among people that something is really wrong with the way economy is run. While some people profit heavily from it, many get thrown out of their homes, and many more are falling into poverty. Recently we started seeing revolutions happening in many countries. We also see that many facts that caused financial crisis are hidden from public and many things are getting covered up by misrepresenting data.

From BR perspective, IMVHO, we need to understand what really caused these, instead of just accepting that these are mere business cycles. There is more to it than what we see. We need to figure out what needs to be done to help humanity to get out of the current crisis and, particularly for India, should do to avoid getting into such crises in future . Unfortunately, after scruitinizing available data, many see only D&G for a long time to come. This churning process is supposed go on for a long time instead believing that stock market is up and everything is going to be okay.

BTW, didn't you attend one of the Bay Area BR meets?
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by VikramS »

shyam:
Yes, I did attend one a few years ago, when life was simpler (smaller family...)

What is wrong is obvious: There are strong global imbalances thanks to China's rise as a mercantile nation, and the greed of the Western establishment. The West underestimated China's resolve and deep-seated resentment against it. It though that the West will import a lot of low-value trinkets but export a lot of high value items. The Chinese though never let the export leg take off in any meaningful way. As a result the West has been left holding the bag. They have lost their manufacturing base, while the technology gap is shrinking rapidly.

The QE programs have a dual mandate. They are not only designed to act as an internal stimulus when the political climate will not allow to Congress to do one, but also as a way of devaluing the USD, and forcing the emerging economies to act in a manner which fixes the global imbalances. The emerging economies suffer a lot more than the US when it comes to the impact of commodity inflation. For the sake of internal stability, the emerging currencies will be forced to decouple from the USD, sooner or later.

Clearly the underpinning of the current system are on shaky legs. India luckily has followed a policy of organic growth and limited financial integration with the world, which served it well during the bust. I think they should continue on this path of selective integration till the global imbalances are resolved; or at least the path to a sustainable system is clear.

My personal template is following the 1960s to 1970s model, which had the boom-bust-boom-bust cycles in equity markets: Two higher highs interleaved with three lower lows (the final low coming after the oil-shock), followed by a mega bull lasting almost two decades after Volker broke the back of inflation. Following that template we are in the third leg higher, which will eventually collapse hopefully resulting in the cleansing of the system and a return to a more balanced global regime.

Over the longer term, though I continue to be bullish about the US since it has the best of many worlds: A lot of untapped natural resources, a very advanced tertiary economy, demographic flexibility, geographic security, and a very powerful military. Where asset prices go and what the USD does during this period is anyone's guess. But once the dust clears, the US will be one of the last men standing
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Arjun »

shyam wrote:We need to figure out what needs to be done to help humanity to get out of the current crisis and, particularly for India, should do to avoid getting into such crises in future .
Business and market cycles are fine as long as there is an underlying longer term uptrend in market / developmental indicators. Are there any parameters you are tracking that would lead you to believe that the US is worse off than say in 2003 when the last boom period began?
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by shyam »

Best thing is to understand what caused the boom after 2003? How did the economy take off after that and what brought it down again.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Arjun »

shyam wrote:Best thing is to understand what caused the boom after 2003? How did the economy take off after that and what brought it down again.
That is true. My point is also that if the same policy resulted in 2 steps forward in the period '03 - '07 and 1 step backward in '08 - '09...maybe it wasn't so bad. I am just speculating on 2 and 1, so along with the policies that caused both the boom and bust, we need some defining parameters that quantify these phases so as to put in the right context.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by VikramS »

shyam:

Business Cycles are very important. As is the return on the huge investment made in IT near the Y2K time period.
Also note that this was the period where the Asian economies truly emerged and their contribution to global GDP growth started becoming truly meaningful.

The 2000 recession was a result of over investment by corporations, and problems with corporate balance sheets. That bubble was a result of Greenspan's easy money policies prior to Y2K bug, and the once in a life-time wholesale replacement of IT systems, which got turbo-charged as the internet went mainstream. Corporations by their structure can recover quickly if the their markets are doing OK. Post 9/11 the flood of liquidity open by the Fed also helped. The market took off the day the second Gulf War started; a classic case of buy the rumor, sell the news in reverse.

Then of course the real-estate mania took over. More than the easy Fed policy, it was the billions of bonds being recycled back in to the US economy by the Asian exporters. They kept interest rates artificially low and once a bubble starts rolling it is very hard psychologically to stop it. The construction jobs added took the unemployment rate to historic lows, even below what economist consider full employment (around 5% unemployment).

There is a tendency to blame Wall-St. for the real estate bubble, but a lot of dirty work was being done in the trenches. The suits in Wall St. had some but not a lot of idea of what was truly going on. The fraud in their Manhattan condo, Jersey and Connecticut estates world was minimal. If they knew what was going on, they would not have literally bet the house as they did. Read the "Big Short" to get an idea of for how long the banks were clueless. There is also the other side: all the investors who bought the toxic waste being repackaged. Why did they not do any due diligence. That sir is a definition of a bubble. Most, if not all of it, is purely psychological. Greed and Fear.

BTW, I do not subscribe to Neshant's thesis of requiring a new invention every ten years to keep the wheels churning. The way to measure the economic impact of an invention is to see how much and for how long will it continue to contribute to the growth of productivity. Over the past two decades, the global integration has meant that old inventions, even inventions which happened 50 years ago, are still making a positive impact in increasing global productivity. Just like a bridge in an area with no bridges has a huge impact on marginal productivity and economic growth (compared to another bridge in an area which already has 10).

FWIW, the earnings of S&P500 are now at the same level as the peak earnings level while the index is well below the peak. So far wage and capacity pressures are minimal but commodity prices are going to be start hurting the bottom-line. Further there is a risk that pricing power is going to diminish further. The interesting thing about the US is that it also potentially a big exporter of stuff (coal, food etc.) apart from high-tech goods and services. This means that going forward it will increasingly be a stock pickers market. There are some sectors which will benefit from rising inflation, and others which will suffer.
Neshant
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Neshant »

VikramS wrote:I disagree with you when it comes to the links you make between asset prices and productive jobs. Asset prices move because of money flow. And money flow happens because of a gazillion things, including the printing of money.
You have got lost in the financing & high rolling jive talk just as you have with the clever marketting buzzwords in the tech industry. This is why I recommend setting your mind straight with the book "How an Economy Grows and Why it Crashes".

Put simply, doing nothing productive & just printing money/running up debt is a recepie for disaster.

Money flowing without any productive industry powering it (as it is today) will end up exactly how the real estate bust landed up - in a gigantic mess the consequences which will soon be felt. Anytime you see no productive work being done and money being spent - its only a matter of time before a big disaster unfolds. Its just a question of which sucker is left holding the bag.

It does not matter if its Greece, Iceland, US real estate, Ireland..etc we are talking about. The end result is always the same.

So be warned, you are listening the same high flying fools, money managers, investment managers..etc who in 2007 were flipping houses. The unfortunate thing however is the Federal Reserve is a criminal organization which is trying to pass on the losses of those fools to the rest of productive society. However their game too will end soon but not before taking hoards of savers & responsible productive people along with (hopefully) the useless middleman economy to the cleaners.
Last edited by Neshant on 28 Feb 2011 04:30, edited 1 time in total.
Hari Seldon
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Hari Seldon »

The system is broken. Unless repaired, somehow hoping things will improve on their own is pointless, even self-defeating. This is exactly what the politicians of all shades now have to offer in the west - hope when they actually know better.

Folks talk of stock prices. Based on what? The accounting profession itself has been co-opted (corrupted?). Who knows what a particular corporations true earnings and true liabilities are anymore? And even if they knew, how long into the future are they projecting the same? Based on what exactly? How is valuation done anymore only, one has to wonder.

The same goes for collectors of gubmint statistics. How many have full faith and trust in BLS numbers today, for instance? Do you? Tell me political pressures have no influence at all on it? The CBO figures too turn out to be wonderfully optimistic, even if they appeared reasonable at first glance a mere 2 yrs ago. And so on.

Folks like a Bill Black, a Liz Warren and perhaps a Simon Johnson are the last of the old-style economically enlightened patriots left in America who understand that parasitism of the sort wall st represents isn't progress, that unless conditions materially improve for the bottom half of the population (i.e. rising median wage and more affordability in the essentials of life - food, healthcare, education, housing), baki sab hawa hai, handwaving hai. Only.

OK, not to sound overly doomy or all that. Am sure, the US will pull itself out of this hole. Long term, it does have un-mistake-able advantages only. Etc etc.

jai ho n all that.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Neshant »

Suckers are needed in vast numbers. Its a shame that the profession of economics has turned into little more than a Bernard Madoff ponzi scheme ripping off the hard working, productive people of society.

Someone remind me again why the productive economy needs a con man like Bernanke or the Federal Reserve. I just love hearing people explain away the finer points of financing, easing this and loosening that, tightning this, money printing jive talk..etc.

----------------------
Pimco’s Bill Gross: USA is Giant ‘Ponzi’ Scheme

US authorities are operating a “brazen” Ponzi scheme in government debt by buying trillions of dollars of bonds to stimulate the economy, according to Bill Gross, managing director of Pimco, the world’s biggest bond house.

Mr Gross said more QE is a huge gamble, but necessary because the US is “in a ‘liquidity trap’

In a bid to restart the stalling recovery, the US Federal Reserve is next week expected to unveil a second round of quantitative easing (QE) of as much as $500bn, on top of the $1.2 trillion already completed.

In typically robust comments, Mr Gross said the Fed had run out of other options but warned that more QE would in the long-term mean “picking the creditor’s pocket via inflation and negative real interest rates”.

“[Cheque] writing in the trillions is not a bondholder’s friend; it is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme,” he wrote on his investment outlook, arguing that creditors have always expected to be paid out of future growth.

“Now, with growth in doubt, it seems the Fed has taken Ponzi one step further,” he said. “The Fed has joined the party itself. Has there ever been a Ponzi scheme so brazen? There has not.”

http://www.midasletter.com/index.php/un ... zi-scheme/
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Neshant »

Looks like speculation that the Egyptian Central Bank's gold stash may have been just modestly plundered is starting to play out. According to Reuters. "Egypt has issued a ministerial decree immediately banning the export of gold in all its forms, including jewellery and ornaments, until June 30, the official news agency MENA said on Sunday. "This decision, which comes in light of the exceptional circumstances the country is passing through ..., is to preserve the country's wealth until the situation stabilises," MENA said. Egypt's currency has come under pressure after some of the country's main sources of foreign currency, including tourism and foreign investment, collapsed after the protests that ousted President Hosni Mubarak erupted on Jan. 25."

Obviously, this "emergency" step would not be required if the E(gyptian)CB was still in full possession of its purported stash of the inedible metal. Whether the decline is due to alleged Mubarak sequestering of the shiny metal, or by other members of the former ruling regime is unclear, but one thing is certain: the WGC is long overdue in adjusting the Egyptian gold holdings from 75.6 tonnes to their real current value... far lower. As for Egyptian fiat: that is as freely exportable now as ever. If only anyone wanted it. But yes, somehow emerging markets are manipulating their currencies lower than fair value, the conventional wisdom claims.

http://www.businessinsider.com/egypt-ba ... orm-2011-2
VikramS
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by VikramS »

Neshant:

As I have alluded to multiple times, your definition of productive industry is too narrow and does not recognize economic reality. Specifically, it ignores the impact of the huge emerging economies which still have multiple decades of growth ahead, simply to catch up with the developed world; and their size dwarfs anything in developed world. It also ignores the life-cycle impact of any new invention. In a closed system what you wrote may make sense. But in a system where hundreds of millions of new consumers are rising above basic subsistence level, the model completely breaks down.

To give a real life example, till a few years ago, electronics were often disposable. After three years, a piece of electronic will sell for pocket change. These days a 3 year old iPhone or an iPod touch still has a significant market value. What changed you might ask? One big change was the re-sale industry. There is a huge demand for these devices in the emerging countries and the re-sale market is hot. No wonder even mainstream US retail companies are now offering a buy-back guarantee program; a way for them to make money in re-selling used products.

One big take-away is that there are people who are going to be getting their first smart-phone at a price they can afford who will now be more productive than they were before. So while there is no new major invention, the inventions which occurred years ago, are still making an impact in improving productivity.

And it is improvements in productivity which leads to economic growth. That improvement can come from some brand new invention; it can also come from growth in markets which was not a factor before.

Let us call it a truce. You refuse to answer specific questions about your hypothesis, make tenuous connections without any rational explanation, and ignore any real life examples I provide. It is hard to have a meaningful discussion in that environment.

You feel that we should build an underground bunker for the day the sky falls, and lock ourselves up in it.

I feel that while having an underground bunker is nice to have as protection, I am not going to lock myself up in it, simply because the sky may fall.
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Re: Perspectives on the global economic meltdown- (Nov 28 20

Post by Hari Seldon »

Well, well, well.... can't say this was unexpected in the least only....
Ireland's new government on a collision course with EU
Ireland's new government is headed for confrontation with Brussels after the country's ruling party was wiped out on Saturday by voters in a huge popular backlash against a European-IMF austerity programme.
Anybody surprised? Anybody??
The unprecedented and historic defeat, Fianna Fail's worst result in 85 years, makes the Irish government the first eurozone administration to be punished by voters in the aftermath of the EU's debt crisis. Voter turn-out was exceptionally high at more than 70 per cent, indicating public anger at the government and the EU.

Late last year, Ireland was forced to accept a £72 billion EU-IMF bailout to cover huge public debts that were ran up to save failed Irish banks.

The bail-out was designed to prevent financial contagion that threatened the existence of the euro, but according to economic forecasts, the cost of servicing Irish bank debt and the EU-IMF bank loans will consume 85 per cent of Ireland's income tax revenue by 2012, a burden that a majority of voters find intolerable.
So there you have it. Irish voters were stuck with the tab of a bankster binge party only. Sure, many voters rode the property bubble themselves (which was thrice America's bubble size as a % of GDP) and to pay for their sins, they should have had to file for bankruptcy leading to default . Logically. No? However, this was precisely the course of recourse the sham EU-IMF bailout was designed to stifle.

And boy, were the people angry...
In Dublin, Fianna Fail won just eight per cent of the vote in an electoral decimation that called into question the future of previously unassailable...

"However bad people thought it would get for Fianna Fail, nobody thought it would get this bad," said Michael Marsh, professor of political politics at Trinity College Dublin. "That is highly significant."
...
"The political landscape of Ireland is completely and utterly redrawn," said Roger Jupp, the chairman of the Millward Brown Lansdowne pollsters which conducted the exit polls for RTE.
It's critically important to ensure that the enemy (i.e. the globalized bankster-financier lobby) doesn't get to the winning parties now to seduce/bribe/browbeat/bludgeon them into becoming another fianna fail, a scene that has already happened in the US where both parties are handmaidens of the permanent financial-elitist establishment, seems like. Bill Buiter, who once talked of 'regulatory capture' by the rigged market forces later coined the term 'state capture' to describe the unbelievable non-response within the highest levels of gubmint in the aftermath of the 2008 crash. Anyway, I digress.

Meanwhile, in case you're wondering who's calling the shots after the country itself has been mortgaged by the exiting fianna fail 'leaders'...
At a summit of centre-right EU leaders in Helsinki next Friday, Mr Kenny will use his position as Ireland's new Prime Minister to beg the German Chancellor, Angela Merkel, and French President, Nicolas Sarkozy, for concessions ahead of an emergency March 11 Brussels summit to restructure the euro zone.

But neither the two European leaders nor the European Central Bank or EU will permit any substantial changes, despite the huge popular Irish revolt against the bailout.

Chancellor Merkel will tell Mr Kenny that if he wants to reduce the high, punitive 5.8 per cent interest rate charged on EU loans then Ireland will have to give up its low corporate tax rates - a measure regarded as vital to Ireland's recovery and one of the few economic policies it has not yet handed over to Brussels or Frankfurt.
IOW, extortionary exhortations are acceptable in public discourse now.

Well, well...what next I wonder. Markel-Sarkozy might as well redraft imperial preference trade rules rather than beat around the bush, at this rate. Sure, he who pays the piper calls the tune. But I can only hope the new Irish gubmint gathers the will to outright default on its predecessor's mindless sellout only.

Besides, Denninger puts it nicely re EU's options should Ireland go the Iceland way...
What are they going to do? Invade? I doubt it.

This isn't about "permission." It's about sovereignty.
Interesting how begging and soviriginity are so deeply intertwined only. Pak redux. Now all Ireland has to do is develop nooks and go around yelling jeehard to be bailed out on much softer terms.

Meanwhile, here's the real meat and the real leverage IReland has....
The new Irish premier will also be warned that there is no question of forcing privately-owned financial institutions to assume Ireland's £85 billion bank debts because the resulting market panic would spread to Germany and France, tearing the euro single currency apart.
Aha. The equivalent of packee loose nooks are there, right there, in Dublin's lap. Only. Use it. Esp since the EU has shown itself to be real gentlemanly about the whole thing.

Of course, the drama with threats and baseball bats waving around are all there in diplo-speak....
A European diplomat, from a large eurozone country, told The Sunday Telegraph that "the more the Irish make a big deal about renegotiation in public, the more attitudes will harden".
...
"It is not even take it or leave it. It's done. Ireland's only role in this now is to implement the programme agreed with the EU, IMF and European Central Bank. Irish voters are not a party in this process, whatever they have been told," said the diplomat.
Well, well....I'm with the mango people on this one. Screw the big-bankster financial elitemen I say. Setoff the default domino, breakup the oiro (but only after the chinese have sunk in some 100s of billions of USD into oiro bonds), I say! Jeehaaaaard!!!

oh, and ja ho n all that.
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