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

Satya_anveshi · Post by **Satya_anveshi** » 09 Apr 2011 09:26

Thanks Abhishek. I actually meant to post yesterday's interview but didn't think there was an older too. I wached it on TV.

shyam · Post by **shyam** » 10 Apr 2011 10:54

Arjun wrote:Also Sokol cannot be compared to Rajaratnam. Even if Sokol's behavior is somewhat shady, at best it is a one-off incident - whereas the charge against Raj is that he built an entire business around it.

How can you assert this without the government conducting an enquiry? Details will come out only after a proper enquiry is conducted.

It is not just Sokol, he let the cat of Charlie Munger too.

Forget David Sokol, Is The SEC About To Tell Charlie Munger To "Suck It In"?

I don’t believe I did anything wrong. Charlie Munger owned 3% of BYD before he asked me to go look at it.

It appears that Warren Buffet's empire is built around such schemes (not just Rajaratnam's).

If Martha Steward could end up in jail, so should those two guys.

Hari Seldon · Post by **Hari Seldon** » 10 Apr 2011 17:09

To Contain Future Budget, US Must Raise Taxes By 35%, Cut Entitlements 35% (WSJ)

Don't count on it ahppening anytime soon. Things have to get a lot worse before such drastic change can be sold to the so-called middle class and its aspirants - the would be worst hit as a result of such schemes to further and seal the transfer of wealth and real power from the many to the select few.

To restrain the U.S.’s future budget crisis, the federal government must raise taxes by at least 35% and cut entitlements such as health care and Social Security by 35%, International Monetary Fund economists warned Monday in a new working paper.

While the projected ballooning of future costs of entitlements as the so-called baby boomer generation enters old age isn’t new, the IMF paper’s quantifying just how much the federal government will have trim its balance sheets sheds fresh light on the political hurdles ahead. Raising taxes and cutting spending on health care, Social Security, Medicare and Medicaid are some of the most sensitive issues for voters.

However, like some wiseguy said, 'what can't go on forever, won't'. Watch this space and all that, in the medium term defined as 5-15 yrs in my book.

The IMF paper, written by Nicoletta Batini, Giovanni Callegari and Julia Guerreiro, shows that if the government doesn’t cut entitlements, it will have to raise taxes by 88% to pay for their costs. Since the federal government has historically collected around 18% of gross domestic product in taxes, the mandatory entitlement programs may absorb all federal revenues as early as 2026, when the cost of servicing the debt is included in the calculation, the economists say.

And so on and on.

Hari Seldon · Post by **Hari Seldon** » 10 Apr 2011 17:20

Harvard economystic Ken Rogoff is a good read usually. And again, here too, he doesn't disappoint. Like the other Harvardi Niall Ferguson, he tends to take a long (i.e. historical) view but is much more nuanced and balanced and realistic than Niall, IMVHO.

History will rue US and Europe debt woes (FT)

Will 23rd-century historians look back on today’s fiscal follies with the same mixture of bemusement and disdain with which we now view the financial affairs of 18th-century French kings? ...
Normalising fiscal policy in the long aftermath of a deep financial crisis is a delicate task. The key is to see the bigger picture. Even if today’s government bonds seem pristine by the standards of pre-revolutionary France, future scholars will see our tax systems as Byzantine labyrinths funnelling money to powerful interests, creating staggering inefficiencies. They will surely be incredulous to see pensions and health insurance financed via Ponzi schemes as transparently unsustainable as the 1700s South Sea bubble. And will they believe that, back in the 21st century, there was no mechanism for putting insolvent financial institutions into bankruptcy?

Too true only.

The man puts into plain language the crux of reams of inscrutable research reports only....sample this:

According to my recent research with Carmen Reinhart, debt-to-income ratios are already at, or near, postwar highs across advanced economies. Many are close to the roughly 90 per cent debt-to-income threshold which, historically, begins to be associated with lower growth.

And this does not account for the adverse demographic trends or hidden debts that inevitably jump on to the books when a crisis unfolds.

Unusually low interest rates currently keep the carrying costs of these debts modest, and make it seem as if the day of reckoning is far off.

Sadly, debt can be worked off only slowly, while rates can rise suddenly.

Such a rise, if sustained, would be extremely painful for the national budgets of many countries, including those struggling in Europe.

Research on sovereign default shows that markets also seldom anticipate problems in advance. By the time they lose confidence, it is too late: the option to tighten from a position of strength has evaporated.

Well articulated or what? Sure, one can always say its D&G scaremongering and for all our sakes, we should think it is. But the nagging fear never really goes away - what if it ain't scaremongering, eh?

Those who would be blasé about government debt must remember that the world is complex and unpredictable. Consider the tragedy that has befallen Japan, whose long-term debt trajectory was already dubious, even before the tsunami. True, spreads on eurozone periphery bonds are already high. But this is because it is clear that there will have to be some large and significant debt restructurings, even if eurozone officials prefer to insist default is unthinkable. And as yet, the markets have not even begun to think about what might, and could, happen elsewhere – even in the US.

Seen from the future, this lack of caution will look foolish. How could they think themselves advanced economies, the future student will ask, when their governments kept such opaque accounts, and gave only minimal co-operation to international agencies attempting to review them?

Aha.

And unlike ordinary D&G ayatollahs, sri Rogoff actually has +ve suggestions to deal with this condition. Again, taking the long historical view only.

Simplifying tax systems, stripping away tax expenditures (a device the French kings would have admired), and lowering marginal rates are vital. Entitlement growth must be contained.
...
At the core of contemporary financial crises, however, are financial systems that remain primitive relative to classroom constructs of perfect markets.
The lesson from the financial crisis is that we must become less reliant on crude, non-indexed debt. More sophisticated instruments indexed to measures of economic performance (such as those proposed by Yale’s Robert Shiller) are an idea, though these may also need strong independent fiscal councils to monitor government data claims.

Nature is again ahead of manmade laws and systems though. In a globalized world, attempting to 'rationalize' and simplify tax systems to place a higher burden to those accumulating most wealth leads to capital flight only. Heck, the data the gubmint collects and sishes out is itself archaic. The way inflation and unemployment are measured reflects the total breakdown in this system only.

Anyway, more for another day perhaps.

devesh · Post by **devesh** » 10 Apr 2011 22:45

^^^
Republicans are trying very hard to include all cuts in welfare only. they are testing the waters to see if public accepts a radical cut in welfare programs while keeping the budget that sustains the empire (DoD, DoS, CIA, NSA, NSC, + myriad of agencies and departments) in tact.

it is now up to the Democrats to come up with an alternative proposal which distributes deficit reduction among 3 aspects: Welfare cuts, Empire cuts, tax increases.

the Paul Ryan proposal is an attempt to prevent the rollback of the American empire.

Singha · Post by **Singha** » 10 Apr 2011 23:42

uk and netherland to sue iceland
http://www.bbc.co.uk/news/business-13029210

akashganga · Post by **akashganga** » 12 Apr 2011 08:51

http://financialsense.com/contributors/ ... us-history

If this is true then a major pull back will happen sometime in not too distant future.

shyam · Post by **shyam** » 12 Apr 2011 12:16

More skeletons from Warren Buffet's closet. Why no government enquiry is being ordered?

More Lies At Berkshire: Revised Proxy Reveals Previously Undisclosed Contact Between Sokol And Lubrizol Bankers Ahead Of Stock Purchase

abhishek_sharma · Post by **abhishek_sharma** » 12 Apr 2011 13:34

This is for Economics-majors only: Martin Wolf and Larry Summers

http://economistsview.typepad.com/econo ... mmers.html

Hari Seldon · Post by **Hari Seldon** » 12 Apr 2011 16:34

abhishek_sharma wrote:This is for Economics-majors only: Martin Wolf and Larry Summers

http://economistsview.typepad.com/econo ... mmers.html

Nice. Tks for posting.

Chinmayanand · Post by **Chinmayanand** » 13 Apr 2011 08:46

BRICS to use own currencies for credit, grants

In a first-of- its-kind step, Brazil, Russia, India, China and South Africa (BRICS) will be signing an agreement on Thursday under which they would be able to give credit and grants to each other in their own currency instead of dollars.

kmkraoind · Post by **kmkraoind** » 13 Apr 2011 09:47

While China want to make Yuan as a global currency making dollar ineffective, west is making moves making China ineffective (moving jobs out of China). Slowly daggers are being drawn out.

Apple iPhone-Maker Foxconn Ponders Big Brazil Move

ramana · Post by **ramana** » 13 Apr 2011 22:29

Chinmayanand wrote:BRICS to use own currencies for credit, grants

In a first-of- its-kind step, Brazil, Russia, India, China and South Africa (BRICS) will be signing an agreement on Thursday under which they would be able to give credit and grants to each other in their own currency instead of dollars.

Can the BRICs deal with other countries who want to trade in the BRICs currency? For example if Ecuador wants to deal with India can they do so in rupees? Or is it limited to with the BRICs themselves?

Suraj · Post by **Suraj** » 13 Apr 2011 23:50

Only if the nations in question see enough trade linkages between them that they think using their currency as a medium of trade is worth it. The strength of the dollar lies in its ubiquity and liquidity - global merchandise and hydrocarbon trade is denominated in it. For Equador to buy using Rupees, they need to export us something to earn it. If they don't export enough to us, they won't have enough Rupees to buy what they want. We can accord them a line of credit so as to defer their exports over a longer time, but they would still be constrained. On the other hand, they don't have to sell anything to the US directly to get their hands on dollars. Over the long term, progressively denominating trade transactions in the currencies of the participants holds the key to eliminating the USD's role as the global reserve currency. The BRIC initiative sounds like an interesting start, but I'd like to know about its modalities. I see no benefit to us if it just replaces USD with CNY.

somnath · Post by **somnath** » 14 Apr 2011 07:50

ramana wrote:Can the BRICs deal with other countries who want to trade in the BRICs currency? For example if Ecuador wants to deal with India can they do so in rupees? Or is it limited to with the BRICs themselves

Its not about trade at all...Only credit/grants lines to each other...None of the countries in BRIC have any large credit/grant lines to each other - so its largely optical...

Chinmayanand · Post by **Chinmayanand** » 14 Apr 2011 11:00

Global recovery at risk from banks' 'wall of debt', IMF warns

The "most pressing" challenge facing the global recovery is funding banks and governments, according to the International Monetary Fund (IMF), which warned that a major hurdle was looming.

The world's banks face a $3.6 trillion (£2.2 trillion) "wall of maturing debt" in the next two years alone, but must compete against governments to secure new financing, the fund said.

"These bank funding needs coincide with higher sovereign refinancing requirements, heightening competition for scarce funding resources," the latest global financial stability report from the IMF warned.

Irish and German banks faced the most "acute" need to rollover their debt, with as much as half of all their outstanding debt due in the next two years, said the IMF, which saw Europe's banks as posing a particular threat to the financial system.
"Many institutions – particularly weaker European banks – are caught in a maelstrom of inter-linked pressures that are intensifying risks for the system as a whole," it said.

With a number of European banks – "nearly all" of those in Greece, Ireland and Portugal, as well as some in Spain and Germany – now priced out on of the wholesale funding markets, there is a risk that negative news could see more institutions join them, said the IMF.

Hari Seldon · Post by **Hari Seldon** » 14 Apr 2011 16:44

This can't be happening.....from twitter @zerohedge

Chinese Real Estate Bubble Pops: Beijing Real Estate Prices Plunge 27% In One Month http://is.gd/GGMwkJ

ramana · Post by **ramana** » 14 Apr 2011 21:56

Meanwhile

Inflation is being under-reported by any measure

svinayak · Post by **svinayak** » 14 Apr 2011 22:51

ramana wrote:
In a first-of- its-kind step, Brazil, Russia, India, China and South Africa (BRICS) will be signing an agreement on Thursday under which they would be able to give credit and grants to each other in their own currency instead of dollars.
Can the BRICs deal with other countries who want to trade in the BRICs currency? For example if Ecuador wants to deal with India can they do so in rupees? Or is it limited to with the BRICs themselves?

First there has to be critical non US trade and then there should be non dollar trade. After that these things can take shape. It will take several decades to over come US based monopoly

amol.p · Post by **amol.p** » 15 Apr 2011 18:14

Morgan Stanley fund fails to repay $3.3 bn debt on Tokyo property
............Against much joy of global recovery

http://economictimes.indiatimes.com/new ... 989277.cms

VikramS · Post by **VikramS** » 16 Apr 2011 01:45

amol.p:

These funds are fee generating machines for the big-banks. Even in this particular case, they got more than a 100% unleveraged return when they refinanced; if they had put 30% down, their return would have been 300%!

The people who are left holding the bag are the folks who purchased the debt (like Blackrock) after the refinancing. The way these deals are structured in spite of the big names, the only recourse the debt-holder has to take control of the property. MS is in no way liable for anything. Simon Properties (SPG) one of the highest flying REIT, itself defaulted on a few loans. All the note holder gets are the keys to the mall; they do not have any claim against SPG, the parent company.

shyam · Post by **shyam** » 16 Apr 2011 09:49

Mike Maloney again...

$10 Oil Follow Up - The Case For Short Term Deflation - Mike Maloney of Gold & Silver Inc

svinayak · Post by **svinayak** » 17 Apr 2011 10:38

U.S. NEWSAPRIL 16, 2011
The Confessions of an Inside Trader
http://online.wsj.com/article/SB1000142 ... ts_news_us

LONG BEACH, N.Y.—Kenneth T. Robinson knew he should walk away. But in an interview with The Wall Street Journal, he says he just couldn't stop trafficking in insider-trading tips.

It was September 2009—a full 15 years after he'd first gotten involved in an alleged multimillion-dollar fraud that ranks among the longest-running insider-trading cases in U.S. history. The scheme was showing serious cracks: One of Mr. Robinson's two partners in the alleged crime, his close friend Garrett Bauer, had started throwing around big money—buying fancy homes in Manhattan and Florida and paying with millions in cash.

"I told Garrett it was stupid," Mr. Robinson said in the interview. He urged Mr. Bauer that they all stop before the cops caught on.

But Mr. Robinson, flipping burgers one recent afternoon in his backyard on Long Island, said he failed to take his own advice. Within just a few weeks, he resumed trying to profit from inside information. "I didn't think anyone would notice," he said.

ArmenT · Post by **ArmenT** » 17 Apr 2011 11:15

Big news: BRICS sign agreement to use their own local currencies instead of US dollar in issuing grants or credits to each other.
BRICS credit: Local currencies to replace dollar

svinayak · Post by **svinayak** » 18 Apr 2011 04:27

Can somebody decipher this

http://2ndlook.wordpress.com/2008/08/13 ... f-english/

The Bretton Woods system worked for 20 years because Indians were not allowed to buy gold. During that crucial post-colonial period, Morarji Desai, India’s finance minster (allegedly on CIA payroll during Lyndon Johnson’s Presidency 1963-1968), presented a record 10 budgets, between February 1958, up to 1967. His break with Indira Gandhi began when the Finance portfolio was taken away from him. Morarji Desai’s ban on gold imports into India, allowed the sham of Bretton Woods to continue for 20 years. His adamant attitude on gold cost the government popularity and electoral losses – and the Indian economy and Indians much more.

kmkraoind · Post by **kmkraoind** » 18 Apr 2011 19:29

Acharya wrote:http://2ndlook.wordpress.com/2008/08/13 ... f-english/

Acharyagaru, great link, there are plenty of good articles about India. Thanks for the posting.

paramu · Post by **paramu** » 18 Apr 2011 22:07

Is this beginning of firework or just dramabazi?

Standard & Poor’s Puts ‘Negative’ Outlook on U.S. AAA

svinayak · Post by **svinayak** » 19 Apr 2011 00:25

kmkraoind wrote:
Acharya wrote:http://2ndlook.wordpress.com/2008/08/13 ... f-english/
Acharyagaru, great link, there are plenty of good articles about India. Thanks for the posting.

We need to analyse content and do some digging

Chinmayanand · Post by **Chinmayanand** » 19 Apr 2011 11:16

paramu wrote:Is this beginning of firework or just dramabazi?

Standard & Poor’s Puts ‘Negative’ Outlook on U.S. AAA

Sucks like saas-bahu serials. Never ending storyline. Too much overacting.

Chinmayanand · Post by **Chinmayanand** » 19 Apr 2011 11:19

Greece Default Drive Risks Reviving Contagion as Bonds Plunge

European investors and politicians prodding Greece to restructure its debt may end up wishing they hadn’t.

Talk of restructuring spurred by Germany risks re-igniting Europe’s debt crisis, enveloping Spain just weeks after European leaders said bailouts of Greece, Ireland and Portugal ended contagion. Under a Greek default, Europe’s financial system would strain as banks in and outside Greece and holders of Greek bonds, such as the European Central Bank and domestic pension funds, tally losses.

“By restructuring Greek debt you also may precipitate a crisis in Spain,” David Watts, a strategist at CreditSights Inc. in London, said in a telephone interview. “At that point it doesn’t matter how much you’ve saved by restructuring Greece, the fallout from Spain is much greater. The issue comes back to not knowing the ultimate cost.”

Speculation by German officials that Greece may run out of alternatives to restructuring underscores their reluctance to spend more on bailouts, while ignoring precedent. Sovereign financial crises usually don’t come in isolation. Thailand’s 1997 devaluation triggered the Asian crisis, Russia’s 1998 default set off a global financial pandemic and Latin America required the U.S. to develop Brady bonds as a virtual guarantee.

shyam · Post by **shyam** » 20 Apr 2011 10:56

Hotspots with Max Keiser - Ireland (2 part video)

Hari Seldon · Post by **Hari Seldon** » 20 Apr 2011 11:01

Chinmayanand wrote:Sucks like saas-bahu serials. Never ending storyline. Too much overacting.

ROFL. Apt indeed.

Meanwhile, more overacting and expectation mgmt by the genocide-assenter economissed rag:
What EU woes say about America

Yawn. Complete hyperventilatory hyperbole. PTV level drivel. But interesting that such sags are playing themselves out now. Hmmm...

shyam · Post by **shyam** » 20 Apr 2011 11:03

Shareholder sues Berkshire, when will SEC start enquiry against the accused?

Shareholder Sues Berkshire, Buffett And Sokol (And Munger) Over Alleged Lubrizol Frontrunning

ramana · Post by **ramana** » 20 Apr 2011 22:32

Brown Uty study on the 2008 Financial meltdown

An autopsy of the US financial system: accident, suicide, or negligent homicide

svinayak · Post by **svinayak** » 20 Apr 2011 23:39

^^^
After 2003 they knew the writing on the wall. They could not continue their global financial dominance.
They just shorted it themselves without announcing it and watched the changes ripple through.

SEC neutered its ability to conduct consolidated supervision of major
investment banks. With the elimination of the net capital rule and the added
complexity of consolidated supervision, the SEC’s head of market regulation, Annette
Nazareth, promised to hire high-skilled supervisors to assess the riskiness of
investment banking activities. But, the SEC did not. In fact, the SEC had only seven
people to examine the parent companies of the investment banks, which controlled
over $4 trillion in assets. Under Christopher Cox, who became chairman in 2005, the
SEC eliminated the risk management office and failed to complete a single inspection of
a major investment bank in the year and a half before the collapse of those banks
(Labaton, 2008a). Cox also weakened the Enforcement Division’s freedom to impose
fines on financial firms under its jurisdiction.

SwamyG · Post by **SwamyG** » 21 Apr 2011 00:50

So what is the definition of takleef? Read this article A Gathering of BRICS

So are these current “emerging nations” a real gang of five, or just a list of nations with no common agenda other than a shared resentment of the United States — albeit for sometimes contradictory reasons — that want to devise an antidote to Western power? Does this group have any credibility other than as a source of rhetoric and photo opportunities?

The truth is that the interests of “emerging forces” are far more comprehensively represented by their members in the Group of 20 than by the BRICS. This was a summit meeting the emerging world does not need.

SwamyG · Post by **SwamyG** » 21 Apr 2011 00:51

x-posting:

SwamyG wrote:Case for rupee trade with Dhaka

When India’s commerce minister Anand Sharma calls on Bangladesh Prime Minister Sheikh Hasina next week to discuss a new trade deal, he won’t be talking about the possibility of trading in rupees.

However, many Indian and Bangladeshi businessmen would welcome trade in the rupee instead of the volatile dollar with its attendant exchange risks.

India sells some $2.5 billion of merchandise annually to Bangladesh and buys about one-tenth of that from its eastern neighbour, a trade imbalance which Sharma will try to address during his visit with promises of opening up to more duty free imports

Ambar · Post by **Ambar** » 21 Apr 2011 06:58

shyam wrote:Mike Maloney again...

$10 Oil Follow Up - The Case For Short Term Deflation - Mike Maloney of Gold & Silver Inc

With his sedative speech , i fell asleep after the first 10 mins. The prophets of gloom-doom ridiculousness is directly proportional to S&P 500's performance. With OPEC nations lying through their nose about having bottomless resources of oil but yet struggling to increase production, oil is headed in just one direction - up.

The current price of exploration,production,refining and transportation of oil is estimated to be close to 20$/barrel and going up. With a burgeoning population, and insatiable demand for oil by emerging economies and drying resources, there is no ways oil will trade half its production cost!

His other statement is about 'stratospheric' P/E ratio. I would love to know which market in this world has a average dividend yield of 8% with a P/E of 6 ? Financial pessimism p0rn truly seems to have overtaken the regular one! SPY has a p/e of 14 and an average dividend yield of 1+ %. BSE has a p/e of around 24 with a dividend yield of 2+%. Not even close to being overvalued.

I would probably take these youtube experts a bit more seriously if they would not plug in their "buy our silver-gold" line in their videos.They ust make it too obvious.

SwamyG · Post by **SwamyG** » 22 Apr 2011 02:40

News from the future for maasa folks

This news is dated April 22nd. I point that out because I wanted to squeeze the words "future" into my post. Australia is seeing the writing on the wall.

Asia's where the action is, so wake up, Australia

Read more: http://www.smh.com.au/business/asias-wh ... z1KCE9NInA

teaser

America and Britain accounted for only about 10 per cent of Australia's exports last year, down from 18 per cent in 2003. By comparison four Asian countries - China, Japan, India and South Korea - received nearly 55 per cent of Australia's exports. The value of Australia's merchandise exports to India alone outstripped those to the entire European Union in 2009-10.

Given the importance of Asian economies to Australia you would expect analysis of data from that region to be of top quality. But scrutiny of Asian economic data is often superficial, especially compared with analysis of economic events in the US and Europe

But it is time we heard more about what is produced in China's 32 administrative divisions and the 28 states of India.

svinayak · Post by **svinayak** » 22 Apr 2011 21:27

SwamyG wrote:
But it is time we heard more about what is produced in China's 32 administrative divisions and the 28 states of India.

What is the need for the comparison. What is the compulsion. Why dont they compare representative form of govt and political freedom.