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

[Neshant]

A very subversive (from the POV of the permanent establishment) idea slowly gaining ground among the more thoughtful yanquis in khanland is that of declaring banking as a utility as regulating it like one. In one fell swoop, much of the muck and the incentive structures driving it would be brought to heel. Moi 400% support only...

Way to many lobbyists stuffing pockets for that to happen. We'll sooner see the collapse of the productive economy before we see banking & financing cut down to size. Its utterly astonishing to me how the government has been co-opted into offloading gambling losses of the useless middleman industry onto suckers and covering up/ignoring their criminal activities.

I notice even the media coverage of the elections are carefully being scripted to exclude any reporting on Ron Paul and portray stooges like Perry or Romney as front runners.

The useless middleman industry has corrupted capitalism to a huge degree in the west.

India should be careful to ban or severly limit all forms of lobbying as its just a front for bribery & corruption. Above all, the cure for this is honest money where the power of money resides with he who earned it rather than he who's counterfeiting it on a printing press for his cronies.

[Neshant]

Banking crooks are now trying to offload the gambling losses of FOREIGN banks onto the people. These fools sold credit default swap insurance on foreign debt which is about to go boom and now want the people to shore up those potentially huge losses. The conduit for it is the IMF - which is why those European countries were fighting so hard to put their stooge Lagarde in power.

See if you can match event A to event B below :

a) The IMF credit line has been increased from 50 billion to 500 billion overnight signalling something wicked comes this way on the Europe front (yet again).

b) The US has almost by coincidence also increased its debt cealing (much debated about earlier) by an additional 500 billion without so much as a murmur.

Conclusion : 500 billion US debt limit increase = 500 billion IMF credit increase ?

This means Greece is about to default real soon. Praise the Lord, and pass the money.
----------------------

IMF has fired up its lines of credit

http://www.zerohedge.com/news/here-come ... mber-three

[vishvak]

Editorial Se 04 Organiser, Criminal UPA profligacy, Squandering national wealth to earn personal goodwill

THE UPA government has gifted away Rs 9003 crore ($ two billion) of the tax payers’ money to foot the bills of the European countries. The money is being given to New Arrangement to Borrow (NAB) fund of the International Monetary Fund, set up in March this year to bailout the European Union economies

The government needed the Parliament’s consent to make this generous gift. And it adopted a mean device. It included this amount as one of the items in the table of the supplementary demands of the general budget. The move was introduced on August 2 and was probably cleared the same day. No case study, no debate, no explanation. Not one party or MP, including the leftists, raised any question, though the report appeared in a small section of the media. At least the enormity of the amount involved should have made them wary.

The money was given without any pre-conditions. Whenever the IMF or the World Bank had given loans to the developing countries, severe restrictions and conditions that squeezed the borrowing countries dry were imposed. Even today, India is repaying in millions of dollars every year, the loan it took from these international financial institutions.

In the credit ratings of international agencies, India has a status of BBB– along with Portugal and Iceland, whereas most European countries even in their pauper situation enjoy better rankings. It makes no logic for UPA to rob our piggy bank savings to give money to the richer nations. Either India’s credit ratings have to go up or theirs should come down for a transaction like this.

It may be recalled that the US was in a financial crisis in July, unable to pay bills without extending the debt ceiling. Which the US Congress allowed after much trouble, keeping the government in suspense. The US House and Senate allowed this only after the government committed to reduce spending by $900 billion over a decade. This extension only means that the Americans can continue to spend and borrow and live on potential future income until the collective debt of the nation reaches an estimated $20.1 trillion (which is 85 per cent of its GDP) by the year 2020.

Some of the tax havens where black money from India has been stashed away are in Europe. India could well use this occasion to bargain for the return of the booty.

Any any idea how this NAB fund is profitable? Nothing is mentioned about profits in this IMF document-IMF Standing Borrowing Arrangements. An IMF loan without clearly mentioning this means that IMF is not living upto its reputation.

Any idea if the interest on NAB is more or == or less than usual IMF loan and how is that made to look good please?

[Neshant]

Any any idea how this NAB fund is profitable? Nothing is mentioned about it in this IMF document about profitability

Europe was eager to put its stooge Christine Lagarde on the IMF to pass on losses to suckers like India contributing to the IMF. Meanwhile the EU member countries are promised the assets of Greece & PIGS for their loans.

The plan here is to have Greece take those IMF loans and repay the French & German banks. Later Greece will default against the IMF loans leaving suckers like India holding the losses. A transfer of losses in other words from German & French banks to suckers like India funding the IMF. As I've said before, suckers are in high demand by the useless middleman industry.

Finland recently demanded collateral from Greece prior to giving it an EU bailout package. They want something for their money. India too should demand the EU PIGS countries give it collateral for the money its putting in. After all, Britain demanded our gold reserves be flown to England when we needed a loan from them in the 90s.

Otherwise, that stooge Lagarade will take us for a ride and leave us the bill.

Lagarde can't be trusted to look after the best interest of other (non-western) IMF nations. The reason she was put there was to cater to the interests of Europe and that can only come at the expense of others.

[vishvak]

Any any idea how this NAB fund is profitable? Nothing is mentioned about it in this IMF document about profitability

Europe was eager to put its stooge Christine Lagarde on the IMF to pass on losses to suckers like India contributing to the IMF. Meanwhile the EU member countries are promised the assets of Greece & PIGS for their loans.

The plan here is to have Greece take those IMF loans and repay the French & German banks. Later Greece will default against the IMF loans leaving suckers like India holding the losses. A transfer of losses in other words from German & French banks to suckers like India funding the IMF.

And people think that Europeans are perfectly civilized.

[Neshant]

its got nothing to do with civilized or uncivilized.

We are stupid for putting money into the IMF thinking we will get assets on the cheap as western nations have from developing countries in debt. Rather the plan now is to trick developing countries into putting money into the IMF (make them think they are getting a bigger share of the pie) and then pass on losses of indebted western countries to them. A bait and switch.

Why else do you think Europe was so desperate to put their stooge Lagarde at the IMF.

Start demanding collateral or ask for the money back.

[Satya_anveshi]

Folks,

It is clear that Euro is under survival crisis for much of its own making but thanks also to the powerful onslaught by the USD defenders. For continued survival, EU faces only two choices - either changing membership (which will include throwing out some members and bring in a few others) or going double down by making member countries lose their so-virginity even further - wholesale outsourcing of governance and not just monetary outsourcing. Chances of both materializing don't look good. I am convinced that the coming weeks (or couple months tops) are going to be worse than previous crisis (2nd half of 2008 leading upto March 2009).

However,my question to forumites is this:

Which option is beneficial for India and how we might facilitate the outcome:

1. survival of Euro in some form to make it viable alternate global currency (at least one of the alternate if not th ONLY alternative to USD).

2. let EU fail by either doing nothing or even facilitating its demise; this will definitely make it extermely difficult for other alternative to arise in future.

Thoughts?

IMO we should do EVERYTHING we can (even if we take some losses) in our power to ENSURE that global field remains conducive and supportive of our objectives. The field and rules should make it possible for our assent in medium and long term even if our current situation make it hard to play our cards.

[Neshant]

Even Europeans are now afraid of the euro being dissolved so how can others hold it as a reserve. Only the Chinese who have wracked up more export surplus than they know what to do with using mercantilist trading practices would invest in the euro.

I wonder if its in the interest of the US to actually see the euro go down the toilet. It would leave the USD as the only game in town... other than gold that is. I'm probably missing something with that simplistic line of reasoning.

[vera_k]

It is clear that Euro is under survival crisis for much of its own making but thanks also to the powerful onslaught by the USD defenders. For continued survival, EU faces only two choices - either changing membership (which will include throwing out some members and bring in a few others) or going double down by making member countries lose their so-virginity even further - wholesale outsourcing of governance and not just monetary outsourcing.

Option A is for Europe to continue down the Pakistan/Kashmir path. Scream loud and hard about "autonomy", "sovereignity" and what not, in order to protect local chieftains.

Option B is to model itself on the Indian federation wholesale.

From an Indian perspective, its better if Europe chooses Option A. One less power for India to contend with.

[Satya_anveshi]

Option A - changing membership

Not sure how the structure of exits will work out but obvious candidates for exit are Greece, Ireland, Spain, Italy and Portugal. Note that some of these members (or is it all?) have been supported by the men doing "Gods work" like Goldman Sucks and Rothchilds. Greece from the very beginning was helped by Goldman by cooking books to get it in Euro as trojen horse to even right now. Talk of Ireland receiving mighty help from Rothchilds of London. Similar stories with Spain and Italy.

The few members that could join and strengthen Euro are Switzerland, Norway, and remote, remote possibility of Russia (but has many other implications far wider than financial - hint hint status of NATO will come into question). However, if these countries did not join when all the going *apparently* was good, why will they join now? That's why this measure needs to be backed by not so subtle muscle power without jeopardizing the entire structural integrity of future state.

Yes, this option while providing short term remedy might be useful to keep the door open for future fissures. Instead of having a few good players going down the tube along with meek ones, we may as well have all good men going down all at once albeit not in the short term.


Option B

I would not call that Indian model - will not bring India at all in those comparisions. That will be the model based on USA. IMO that option isn't bad one either. Even as the EU intergrates further, we will still have BRIC countries as is as future candidates ready to break in. Status quo as it exists today will continue to be challenged, the scenario in which we will have opportunities. This is also not so bad option.

Note that this option B will also entail changes in memberships as not everyone will agree to both further integration as well as to not aiding a competing non-anglo saxon alternative to USD (UK, Ireland will opt out).

But the question still remains, which one is better of the two and how we might facilitate it? A few days ago when I read India providing some funds for bailing out EU, my thought was that someone, somewhere is thinking along these lines and if so, no reason for whining (beyond obvious shedding crocodile tears and keeping the system in check) if we make some moves towards this.

[vera_k]

Status quo is better at the moment, since it prolongs the eventual reckoning and keeps the EU off balance. Also allows India to suck from the EU teat, while the US markets recover.

[Satya_anveshi]

Status quo is better at the moment, since it prolongs the eventual reckoning and keeps the EU off balance. Also allows India to suck from the EU teat, while the US markets recover.

there is a relationship (and dependency) between the turmoil in Europe and downturn in US (and continued health of US economy). The strength of US partly lies in USD being global reserve currency and its ability to fund growth via debt as the only means which is fast deteriorating (it will strengthen again if euro fails).

Any which way you look at it..US is doing all it can to change the status quo in favor of itself (USD being sole name in the game); Europe is resisting it and is reacting - it is unable to preserve status quo in its persent form and is presented with the two options discussed above;

So, *status quo as it exists today* is dead already.

[vera_k]

No. The creation of the Euro is upsetting the status quo of the USD being the top dog. The status quo is an Europe that spends its time on local issues, and turns to the USA for any significant challenge.

[Airavat]

gold bull market may eventually end as a bubble

[Neshant]

^^ A largely pointless read as anyone can tell you something will end in a bubble eventually. Without predictions of dates, there's nothing to hold the author to.

If govts are eventually forced to back their currencies with gold to prevent total collapse of investor confidence, it will be paper money that ends in a bubble.

I don't know which way this tree is going to fall but I'm holding physical gold as insurance against the evil doers of the useless middleman industry. Having a hoard of paper money and thinking your hard earned wealth is secure is downright crazy in these times.

[Neshant]

don't know if this is an accurate depiction of US finances :

U.S. Tax revenue: $2,170,000,000,000
Fed budget: $3,820,000,000,000
New debt: $ 1,650,000,000,000
National debt: $14,271,000,000,000
Recent budget cut: $ 38,500,000,000

Let's remove 8 zeros and pretend it's a household budget:

Annual family income: $21,700.
Money the family spent: $38,200.
New debt on the credit card: $16,500.
Outstanding balance on the credit card: $142,710
Total budget cuts: $385.

Its shocking when seen from that prespective. But i guess one difference is that the US prints its own money and the interest rate on the credit card is 0% for now.... at least until creditors & savers revolt. It also ignores US assets like its almost 7000 tons of gold reserves, its natural resources and capital infrastructure which surely must be worth something to someone..etc.

[Airavat]

Italy asks China to buy its bonds

[Airavat]

"Baby boomers around the world, and all the developed countries - Europe, North America, Australia - they have peaked in their spending cycles...they`ve been driving up real estates prices and stock prices and the economy for decades, and now they`re going to be saving and not borrowing," Dent said.

Accentuating the problem is the deleveraging of US private debt, which has doubled to USD 42 trillion from USD 20 trillion in the last eight years, according to Dent, and is now valued at three times the size of the nation`s public debt. "That debt is deleveraging, and that's actually causing deflationary trends. It won`t matter how much stimulus the government throws at the system, because baby boomers with their already huge debt burdens will not want to borrow money and spend more," said Dent.

The only solution to the crisis, Dent offers, is for policy-makers to intervene and write down debt. "You can`t deal with this crisis without dealing with the debt first because the demographics are not in your favor. So it`s the only thing you can do, by writing down debt, you free up cash flow for consumers and businesses. It`s the only thing you can do in a crisis like this after such a major debt and credit bubble."

Avoid gold, silver; buy dollars

Contrary to what most analysts are recommending, Dent advises staying cautious on gold and silver and stocking up on US dollars. "I think gold and silver are a bubble. It`s the most dangerous place to be," Dent said. "Gold`s kind of a wild card, but what we notice it`s gone parabolic. We've been telling people... to get out of gold at USD 2,000."

He thinks silver has peaked at USD 50. "The last time silver went to USD 50, it crashed back to USD 4 within two years."

As the deleveraging process takes place and most asset classes fall, Dent says the one asset that will return to its safe haven status will be the greenback. "Debts get written off. That destroys dollars. It makes the dollars more scarce. It restores its value."

Harry Dent author of upcoming book "The Great Crash Ahead"

[Hari Seldon]

When Beijing overtakes London (in GDP)

The McKinsey boys hv come up with some interesting stuff here. Of course questionable loads of assumptions baked in, questionable projections faked in and all that jazz. Still, worth a look. There's a map out there that is of interest too. Shows only 2 of our cities (Dilli, Mumbai) making the top 50 urban clusters by GDP list. Bangalore and Chennai very much deserve to be in there, IMVHO.

More than 20 of the world’s top 50 cities ranked by GDP will be located in Asia by the year 2025, up from 8 in 2007. During that same time period, our research suggests, more than half of Europe’s top 50 cities will drop off the list, as will 3 in North America. In this new landscape of urban economic power, Shanghai and Beijing will outrank Los Angeles and London, while Mumbai and Doha will surpass Munich and Denver. The implications—for companies’ growth priorities, countries’ economic relationships, and the world’s sustainability strategy—are profound.

Let the dhoti shivering begin, I guess. Or is it chaddi shivering when the TFTA west does it?

Ensoi.

[Singha]

someone was saying its not that american cos are not growing or not healthy. its just that most of their incremental growth is coming outside america so naturally they will hire more abroad to service these markets.

[Hari Seldon]

^^^And as a natural consequence, power shifts within corporations too to where the better part of growth, revenues, recruitment, empire-building possibilities etc abound.

In 10 yrs, expect the emerging world to have much greater pull within the TNCs that now straddle the globe than the emerged TFTA ones do currently. As such it accentuates the de-racination of these mighty engines of resource-to-products-to-profits-to-power transformation. Such is life. Jai Hor and all that.

[Satya_anveshi]

No. The creation of the Euro is upsetting the status quo of the USD being the top dog. The status quo is an Europe that spends its time on local issues, and turns to the USA for any significant challenge.

IMO we were talking past each other. You seem to hold an opinion that status quo is that USD is sole reserve currency. My opinion is EURO is/was already an alternative, of which the status is in doubt going forward and is fighting to retain that status quo.

[Singha]

I am already seeing power shifts within my own employer - local VPs , local directors, every function being replicated ..... not some fat gora sent in from singapore or london on a 'hardship posting' or managing the 'india operations' from a base in the fullerton hotel in SG or even better the mandarin oriental in hong kong.
the deep penetration of Indics in high levels of every tech MNC and their comfort factor with expanding indic ops and some of them returning to carve their new empires here is helping.

getting the feeling in 10 yrs my co would only have two main dev & mkting centers left - blr and sfo.

a lot of hitherto powerful directors and VPs in my old den (a non SFO site in US) have just faded out of the scene as their groups were not allowed to grow and infact shrunk and reorged slowly over the years.

[VikramS]

Pre-Euro currencies like the DM, French Franc, Dutch Guilder etc were all currencies which could be kept in reserve. However since the size of each economy was significantly smaller than the US, the US as the top dog. What the Euro did, is to provide the size of the European continent to back the Euro.

The problem is that though it included the Germans, it also included the Club Med. So the size and depth it offered was fake. That is now coming home to roost since the Euro got the credibility of the DM which it did not deserve; that credibility is now eroded.

The Chinese want the Euro to remain strong because:
-> It keeps the USD weaker and keeps the currency hawks within the US in control
-> It makes the USD weaker which in turn weakens US's TFTAness
-> It keeps Europe out of recession/depression which would be a disaster for the PRC since the Eurozone is PRC's largest trading partner.

So it is a plethora of goals and objectives. It is clear that the current Euro is not a replacement for the DM and the market is going to recognize that sooner than later. So the USD will continue to be the reserve and this will in turn make recovery harder in the US leading to more QEs. This will not end till the Euro is split into Euro-North and Euro-Med; any patchwork fix will not restore the credibility of the Euro.

[Ashwin B]

don't know if this is an accurate depiction of US finances :

U.S. Tax revenue: $2,170,000,000,000
Fed budget: $3,820,000,000,000
New debt: $ 1,650,000,000,000
<snipped>
natural resources and capital infrastructure which surely must be worth something to someone..etc.

Nishant: Would like to send this analogy to a few friends (with your disclaimer in the first sentence). Going to copy it verbatim, hope it's ok.

[Hari Seldon]

The Economics and Law of Sovereign Debt and Defaul

A scholarly paper, PDF download. Fantastic is an understatement.

[Hari Seldon]

More doomy chatter. Take with salt. Or not.

Merkel Will Press Obama And The Fed To Help Bail Out The Eurozone

In the days leading up to the collapse of Lehman Brothers, then French Finance Minister (now IMF Managing Director) Chistine Lagarde told then-Treasury Secretary Hank Paulson that he could not allow Lehman to fail. The ramifications would be catastrophic, she said. She was mostly right.

Three years later, it will be Angela Merkel talking to President Obama,Treasury Secretary Geithner and Federal Reserve Bank Chairman Ben Bernanke with exactly the same message. The United States government and the Federal Reserve must come to the rescue of the Eurozone or the ramifications will be catastrophic. And she will say that she needs roughly $1 trillion in financial guarantees and liquidity support. That's the number that will calm the markets.

She will do this publicly (it will be leaked to the FT or the NYT) because (a) she wants to maximize the pressure on the US to ride to the rescue and (b) she wants the blame to fall elsewhere in the event that the "situation" goes haywire. And there will follow perhaps the defining moment of the Obama Presidency.

If Obama goes forward and provides all or part of the $1 trillion guarantee, he will likely cut his own political throat in so doing.

If Obama declines to go forward and provide all or part of the $1 trillion guarantee, he will likely preside over the second massively destabilizing financial panic in four years, thus insuring a second Great Recession, thus cutting his own political throat.

Wow. How theefs fall apart. Our own desi netas with booty stashed away in 'em TFTA tax havens better rethink the risk-reward calculations. The liquidity crunch must have already made it quite difficult to move around black money easily at will (shows up in some of our prominent netas and netis disappearing for weeks on end on private 'medical' trips only).

And who better than TAE's Ilargi to say it like it is and then some...

In a broader sense, this does not look like such a far-fetched scenario. When everyone ducks for cover, who'll be left standing without his musical chair, new clothes around his ankles, holding a big smelly empty bag?

Damned if you do, doomed if you don't. Don't know if it's any consolation for him, but Obama won't be alone. We'll see a many a political career come to an unglamorous end. Some through hollow rumors, some through hard facts.

[nelson]

^ And what an appropriate time for Govt to mull amnesty of this sort...

http://www.thehindu.com/news/national/a ... 452848.ece

[Singha]

some of the loot might sail to indic shores despite best effort of goi. all we need is a couple of euro sacrifical goats for qurbani to panic the herd lol

[gakakkad]

..the amnesty scheme will be OK if political class is excluded and the beneficiaries of the amnesty are made to compulsorily invest the remaining amount in India ... Problem is that even a completely illegally made money will be legitimized by the scheme... even dawood can seek the amnesty by this ... also the each and every person should go through a thorough background check to prevent people like Hasan ali who are merely helping politicians to hide their assets in their name..

I read somewhere that gov't had a list of 2 dozen odd people who collectively hid 40 crore abroad...nonsense... the amount is peanuts.. I mean per head it comes to 1.5 crore... Who hides such a paltry amount in Lichtenstein? I mean even if 1 person had 40 crore black it is not worth the trouble to go all the way to switzerland... those accounts are meant for people with huge illegally earned assets...

[Hari Seldon]

Poverty Rate Highest Since 1993; Median Income Reveals Lost Decade and a Half

The amerikhan dream's souring. Not for long, am sure but right now it is. Bigtime. And no, healthy hiring in some boutique IT firms on the west coast doesn't quite make much of a dent in the pall of descending gloom in the boondocks.

Both official data and numerous news stories confirm how badly average citizens have fared in the wake of the global financial crisis. Food stamp use has fallen only a tad from record high levels. WalMart has reinstituted layaway. The average home with a mortgage has no equity in it.

Further confirmation comes via the Census Bureau release that showed the US poverty rate has risen a full percent in the last year to 15.1%, a level not seen since 1993, the end of a short but nasty downturn. And 1/4 of American children are living in poverty.

OK, selected numbers taken together paint matters worse than they are. Saliency effect or something. Anyway, if things stay down another 5 yrs, we're talking 20% BPL in the land of plenty. Not a happy sign, perhaps.

[ramana]

NYT:

Three years later, tale of two banks

[Prem]

http://timesofindia.indiatimes.com/arti ... 986670.cms
Pressure on BRICS to help out Europe

NEW DELHI: Pressure is mounting on the so-called BRIC countries (Brazil, Russia, India and China) to help out crisis ridden European countries such as Greece and Italy. This is likely to be discussed on the sidelines of the IMF-World Bank meeting in Washington next week. Finance minister Pranab Mukherjee will represent India at the Fund-Bank discussion. Economic affairs secretary R Gopalan has said the BRIC countries are likely to discuss what could be done to help crisis ridden countries in Europe. India has already committed to help through the New Arrangements to Borrow -- an interim system after the IMF quotas were increased -- to the IMF for indigent countries. India maintains about 20% of its foreign exchange reserves (about $320 billion) in euro debt, and that's not unlikely to change either. A senior finance ministry official confirmed that India's commitments would be met, but there is scepticism that India would spend its reserves on risky debt. The BRIC countries came in the limelight after Brazil declared that this group could consider helping out European debt. Reports quoted Brazilian officials as saying they could expose Brazil's $9 billion sovereign debt fund for the purpose. But the amount is tiny compared to what would be needed to bail out these countries. China is being courted by Greece and Italy to buy their bonds and even take strategic stakes in their energy assets in return for some much needed cash. China, according to sources, is considering the bait, but is not biting yet. Europe is China's largest trading partner, so there is an interest in helping them out. Besides, a large majority of China's $3.2 trillion reserves are estimated to be in euro denominated bonds. The decision will be political, because China can plant a deeper presence in Europe and influence them to concede some of China's top interests -- these could be anything from a declaration of China as a market economy to lifting the arms embargo against China. A recent poll among European countries said they were still far away from lifting the arms embargo, but officials monitoring European behaviour say this position may not continue if Europe desperately needs a Chinese bailout. In Dalian on Wednesday, Chinese premier Wen Jiabao said, "The governments of all countries must truly shoulder their responsibilities and deal properly with their own affairs." Reports said Chinese central bank had also cautioned against rushing in to bailout the crisis ridden countries.

Talking to Italian newspaper La Stampa, IMF chief Christine Lagarde pressed countries to invest in Europe. "This interest of the BRICS is an interesting development, but if it is limited to German or British (bonds), they will not take on big risks," Lagarde said in the newspaper. The west is pressing home the point that if the world does not help the Europeans, it could lead to a bigger global financial crisis.

[Satya_anveshi]

Euro zone needs a plan before Russia can help

[vina]

+1 - while savings banks and FDs are useful, I am yet to see a compelling use to humanity of the tribe of "investhment bankers" and "hedge fund operators" and "high frequency traders(HFT)" other than skimming milk off the pan

Ouch.. Wait till I return fire at all the YinJinEars and the IT/Vity Munnas!

[Neshant]

Pressure is mounting on the so-called BRIC countries (Brazil, Russia, India and China) to help out crisis ridden European countries such as Greece and Italy.

The money to help Greece won't be going to Greece but to German & French banks which made stupid decisions to leverage up.

A case of the poor subsidizing the rich packaged in the all too familiar hype of too-big-to-fail.

[Singha]

>> Ouch.. Wait till I return fire at all the YinJinEars and the IT/Vity Munnas!

spoken like a well heeled consulting kat sire I am sure Mckinsey can if they choose make a compelling case for the merger of Agilent, Nestle and Sandvik to unleash synergies in market adjacencies, leverage global competencies, break silos and unlock hidden value in the stock

[vic]

I am economic illiterate but I believe that massive fall in overleveraged commodity prices and property prices cannot destroy "real economy". First let the prices fall and then pump in money into manufactering sector support. Presently all the money is going to banking sharks. Recession will come if we don't act after the fall. If we act after the fall, then rebound will happen quickly and will be more fair to middle/poor class rather trying to subsidise the rich by inflation.

[abhischekcc]

vic, business confidence is effected by the uncertainties caused by too much volatility. Moreover, if the financial system freezes up, it can damage trade finance as well, effecting 'real' economy.

The money that was pumped into the financial system by USG to 'support' the banks, was all pumped into the commodity sector, and not in the real economy. So, if the commodity prices fall, it would recreate the situation of 2009, wherein the creditworthiness of the banks will be in question.

Ben Bernanke has only siphoned the money of the last bubble/crash (RE) to flow into another bubble (commodities), there is no solution in sight. Wait for this bubble to be pricked. I wonder what the next bubble might be, I might be able to get in the basement . Perhaps it will be US treasuries again.

[Singha]

speaking of siphoning, UBS announces a loss of 2b on 'rogue trading'

UBS discovers unauthorised trading
Lightning strikes UBS (file photo August 2011) UBS shares opened sharply lower after the announcement

Swiss bank UBS says unauthorised trading by a member of staff at its investment bank has resulted in a loss worth an estimated $2bn (£1.3bn).

The bank said it was still investigating the matter, so the value could change.

This could lead to a loss for the third quarter of 2011, it said in an official statement.

No customer accounts were affected, the Zurich and Basel-based banking group added.

Its shares opened 7% lower shortly after the announcement was made.

The bank said in a statement: "The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of $2bn.

"It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected," UBS said.

ZKB trading analyst Claude Zehnder said the news would damage confidence in UBS. "They obviously have a problem with risk management.

"With this they are losing a lot of credit that they had regained with effort."

UBS was rescued by the Swiss state in 2008 following huge losses on toxic assets held by its investment bank. Last month the bank announced 3,500 jobs cuts.