Global Economy

vsudhir · Post by **vsudhir** » 21 Jun 2008 06:47

U.S. steel industry wins trade case against China, clearing the way for penalty tariffs

So it begins. Protectionists of the world unite!

Would be nice if the protectionists also built up kinda an 'alliance of democracies' when it came to trade barriers....

Neshant · Post by **Neshant** » 21 Jun 2008 10:40

Inspite of all the money printing going on, the US housing prices continue to decline.

Banks are not eager to lend money to home buyers. The banks know they will be repaid in dollars which will be worth less than today.

Nobody knows when the housing market will bottom out. Japan's bubble burst back in 1990 started a decline in home prices that lasted all the way to 2007! One can only imagine the horror if that would happen to the US housing market.

If you are thinking of buying a house in the US soon, DON'T. Wait for another 6 months when the federal reserve finally runs out of money to keep holding up the markets up artificially. Then all hell will break loose.

Prepare yourself.

pradeepe · Post by **pradeepe** » 21 Jun 2008 15:12

paramu wrote:you still have to stretch your wallet to make payments every month, which just goes into the drain, continue paying tax and insurance at its original price. .

I assume you mean property taxes. I think you can get these re-assessed with the county of residence to whatever it is. Its not done by default, but you can make a fair case for it.

darshan · Post by **darshan** » 21 Jun 2008 21:37

Not easy now a days. Counties know that and denying like never before.
My county thinks my house value went up by at least 5% with at least 10 houses in foreclosure within 1 mile.

pradeepe · Post by **pradeepe** » 21 Jun 2008 22:33

darshan wrote:Not easy now a days. Counties know that and denying like never before.
My county thinks my house value went up by at least 5% with at least 10 houses in foreclosure within 1 mile.

Ok. I dont know anyone who has done it. But I think I read it somewhere that you could do it. ANyway, looks like you should have your county treasurer talk to your mortgage person:).

John Snow · Post by **John Snow** » 21 Jun 2008 23:15

I always cite this example, If Indian Railways increases the price of ticket will it motivate the free loaders to buy tickets?
As you cant tax the free loader, only those who obey the law are penalised!

So if the prices drop because of fore closures and vacant homes and one buys a home, the thing thats happens is the town ship raises the taxes because the tax base has been reduced!

by the time consumer revolt comes on the township starts thinking of reducing the services, libraries, schools fire men, police troops etc....

its a cycle of doom. the fat gets fast into the system cutting is slow

krishnasr · Post by **krishnasr** » 21 Jun 2008 23:42

I know few people who took quite a bit of loans for home improvement, instead diverted the money, and foreclosed and just vanished off the records, got themselves deported, and had a clever transfer of money to their ports of entry. I am not sure, how did they get to do such things, but sure can't get back legally into mainstream economy.

My point is, when people find ways to make their own ways, no matter what system you employ, things will not work. Disciplinary action on whom? a non-existing entity. We have tons of people on these lines alone. The INR free birds are a subclass of these inheritance.

Again, heck with the system. Why would not have such things? the capitalistic setups are taking a big hit.. so are other democratic setups including those of India's. Democracy comes with responsibilities., and citizens fails to understand, then we have more such free birds, who thinks thats freedom., ie. escaping the law., per them its having a system to defect is in itself a legal hole, hence living in that is heaven as well, hence they achieve their goals.

Chinese and Russian models are good from enforcement perspective.. Indian model fails on many aspects, but we cover up everything in the name of better side of things. We have demoralized human behavior. In the Indian policing world, we can not see decent behavior., that treats ordinary persons and criminals alike due to fundamentals? Its like a madrassa system, asking them to understand math and science.

Grass roots level change is required.. and this will happen only everyone is on the same definitions page, and follow the implementation as responsible person. We have in-equalities at all levels.

John Snow · Post by **John Snow** » 22 Jun 2008 03:03

during dot com bust cars were also left in air port parking lot, things are different after 911, remeber spitzer saga, US consulate in India can track them down if they are busy issuing visas and inytrogating grandmas for issuing tourist visa

darshan · Post by **darshan** » 22 Jun 2008 03:43

pradeepe wrote: Ok. I dont know anyone who has done it. But I think I read it somewhere that you could do it. ANyway, looks like you should have your county treasurer talk to your mortgage person:).

According to law, you can certainly protest your appraisal but again it is turning out to be just the protest especially when County is running out of tax money. County would get you in for hearing and deny your request for lowering house value by saying that everyone around you is also valued similarly. County simply ignores on going sale prices of pre owned homes. Only thing as a homeowner you can do is to go to a district court. So now, you have to make decision whether you want lawyer to take money or county.

krishnasr · Post by **krishnasr** » 22 Jun 2008 04:04

You can protest for not having to pay higher taxes as well on appraisals leading to increase in the property value. Counties administration would be extremely happy to get more taxes, hence higher appraisal values. Of course, they have limitations and regulations that can't be over ridden. BTW, every law has loop holes.

svinayak · Post by **svinayak** » 24 Jun 2008 23:13

ECONOMIC REPORT
Four years of gains in home prices wiped out
Case-Shiller: Prices fall in all 20 cities in past year; slimmer OFHEO decline
By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) -- Home prices across 20 major U.S. cities have dropped a record 15.3% in the past year and are now back to where they were in the summer of 2004, according to the Case-Shiller home price index released Tuesday by Standard & Poor's.
Prices in the 20 cities are now down 17.8% from the peak two years ago.
Las Vegas, Miami and Phoenix saw the biggest declines, with prices falling by 25% or more in the past year. Prices in 10 cities have fallen by more than 10%.
Home prices in Charlotte, N.C., which was the last holdout, have now slipped 0.1% in the past year.
Prices were down a record 16.3% on a year-over-year basis in a smaller subset of 10 metropolitan areas that have been tracked over a longer period.

With so many homes on the market and foreclosures rising, prices are likely to keep falling, said Patrick Newport, an economist with Global Insight. He foresees prices dropping a further 10%.

Here's the city-by-city breakdown in the Case-Shiller index:
Las Vegas, down 26.8% in the past year; Miami, down 26.7%; Phoenix, down 25%; Los Angeles, down 23.1%; San Diego, down 22.4%; San Francisco, down 22.1%; Tampa, down 20.4%; Detroit, down 18%; Minneapolis, down 15.5%; Washington, down 14.8%; Chicago, down 9.3%; New York, down 8.4%; Atlanta, down 7.5%; Cleveland, down 6.8%; Boston, down 6.4%; Seattle, down 4.9%; Denver and Portland, both down 4.7%; Dallas, down 3.4%; and Charlotte, down 0.1%.

In the OFHEO index, here's the regional breakdown:
Pacific, down 15% in the past year; Mountain, down 4.9%; South Atlantic, down 4.8%; New England, down 4.6%; East North Central, down 3.8%; Middle Atlantic, down 3.3%; West North Central, down 2.4%; East South Central, up 0.1%; West South Central, up 1.9%.
After accounting for 4.5% inflation over the past year, real home prices are down in every region. End of Story

Kakkaji · Post by **Kakkaji** » 25 Jun 2008 00:53

Some hope, amidst all the doom and gloom scenarios:

On the path to a housing rebound

Ananth · Post by **Ananth** » 25 Jun 2008 22:13

Emerging Multinationals: Manufacturing In a Rapidly Changing Global Landscape; How Powerhouses from Emerging Markets are Reshaping Global Manufacturing; Capgemini/IfM report

John Snow · Post by **John Snow** » 25 Jun 2008 22:41

Some hope, amidst all the doom and gloom scenarios:

On the path to a housing rebound
Some hope, amidst all the doom and gloom scenarios:

On the path to a housing rebound

[url= Some hope, amidst all the doom and gloom scenarios:

On the path to a housing rebound
Some hope, amidst all the doom and gloom scenarios:

Not so fast

svinayak · Post by **svinayak** » 26 Jun 2008 00:48

Country Discussion
Indian businesses have traditionally been run by families.
Even as they have grown into substantial businesses, and in
some cases turned into public companies, control has been
kept by the family, usually represented by a dominant
family member with a very large personal stake in the
business (the promoter). Although the degree to which
family issues may interfere with the business may vary,
genealogy remains a major factor and can lead to “wobbles”
when one generation passes over the reins to another.
Traditional Indian businesses have typically started as traders of
one form or another, and expansion into manufacturing
has been a means to expand the business. As a result,
business decisions seem to be highly pragmatic. Longerterm

Longerterm
strategies are becoming more evident as the government
opens up the economy and local companies have to
compete with global competitors and attract investments.
Some of these businesses benefited in their formative years
from protectionist policies and later from the divestment of
publicly owned companies by the Indian state, but now
there is little state interference with company policies;
hence, one tends not to see the “grand gesture” investments
seen in other emerging countries such as China.
The early expansion of a few Indian businesses was to
escape restrictions on growth at home. Alternative
motivations were to exploit the advantages offered by
India’s cheap skilled labour. However, of late some of these
companies have begun to emerge as global players looking
for scale in an increasingly globalised marketplace.
The recent trends have been driven by more enlightened
economic policies, which have both encouraged investments
in India and also relaxed restrictions on Indian companies
investing abroad. The recent government emphasis of
manufacturing as a means to promote growth and provide
employment will most likely accelerate this trend. Although
both case study companies emerged as international players
well before the norm, both made substantial overseas
investments since 2005 when the government relaxed the
US$100 million cap on annual foreign investment by Indian
companies. Both companies have used M&A as a means of
rapid expansion, although not exclusively.
Although it is now firmly established in service and retail
operations in the segments we have already discussed,
Aditya Birla seems to regard itself as a manufacturing
company, and its early expansion ventures have led to a
wide manufacturing footprint centred on East Asia. However,
as the company has grown and rationalised, there have
been investments that fit in with the more usually cited
motives for international manufacturing such as securing
resources (copper ore in Australia or wood pulp in Canada
and Laos) and downstream vertical integration to capture
value (fatty-acid production in Malaysia and Philippines,
and more spectacularly the acquisition of Novelis). By
contrast, although Ranbaxy manufactures in 11 countries
and some of the locations in low-cost countries have been
driven by considerations of supply chain efficiency, it seems
that most of these operations have been acquired through
M&As aimed at securing brands and/or routes to market.

svinayak · Post by **svinayak** » 26 Jun 2008 06:23

CalvinH · Post by **CalvinH** » 27 Jun 2008 02:40

Dow took a beating of 350+ Points today finishing at a 2 year low. GM shares hit a 53 year low.

abhischekcc · Post by **abhischekcc** » 27 Jun 2008 23:24

Economists and lay people will find this PDF very useful in understanding the internal dynamics which led to the creation of the Mortage Asset Bubble.

http://www.princeton.edu/~hsshin/www/ye ... slides.pdf

Paul · Post by **Paul** » 28 Jun 2008 00:35

The money I put into Oilfield services stock has paid off handsomely. Howeve I also put money into Citigroup and Tata motors...these two are down 50% now.

If I can sell of the oilfield stock at it's peak and then wait for the economy to come back on track, I should have made good money.

svinayak · Post by **svinayak** » 28 Jun 2008 04:46

June 26, 2008, 11:12 am
Oil Shock: Analyst Predicts $7 Gas, “Mass Exodus” of U.S. Cars
Posted by Keith Johnson

Oil at $135? That was just the opening skirmish in the “peak oil” wars. The latest smart money? $200 oil in 2010, with gasoline at $7 a gallon. And that is going to turn Americans into car-shunning Europeans once and for all—poor Americans, at least.

That’s the latest gloomy forecast from Jeff Rubin at Canadian brokerage CIBC World Markets, who just a few months ago figured $200 oil would be a thing of the distant future—like 2012.

Mr. Rubin laughs off recent attempts to take the steam out of global oil markets. Saudi production promises of 200,000 barrels a day doesn’t dent the 4 million barrel-per-day decline from aging fields every year, for starters. And it will just be “gobbled up” by increasing domestic consumption in Saudi Arabia, like other oil-producing countries that subsidize fuel.

So what about China’s flirtation with market reality by unwinding some fuel subsidies? No luck in curbing demand or prices, either. Not only does China’s recent move translate into $3.25 a gallon gas—still a steal, relatively speaking—it’s given fresh legs to beleaguered Chinese refiners who’ve been operating in the red, thanks to Chinese price controls. So now they are producing even more gasoline and fueling even more cars than they were before. The upshot?

Over the next four years, we are likely to witness the greatest mass exodus of vehicles off America’s highways in history. By 2012, there should be some 10 million fewer vehicles on American roadways than there are today—a decline that dwarfs all previous adjustments including those during the two OPEC oil shocks.

And who will be parking their cars? The 57 million American households that have both cars and access to something resembling public transit. Gasoline at $7 begins to approach prices Europeans have paid for years, meaning that chunk of America “will start to act more and more like Europeans,” Mr. Rubin says. Not soccer moms in a minivan—soccer fans, searching for tokens:

Our analysis suggests that about half of the number of cars coming off the road in the next four years will be from low income households who have access to public transit. At their current driving habits, filling up the tank will have risen from about 7% of their income to 20%, an increase that will see many start taking the bus.

Gas prices already appear to be reshaping suburbia. But what Mr. Rubin is predicting is a far bigger shock to the American system. Europe has had decades to develop a society based on expensive energy. What will happen if Americans suddenly are forced to shoulder European-style energy prices — but without the European-style society to cope with them?
--

www.donotfillgastoday.com

Contrary to what US Energy Secretary Samuel Bodman says I don’t think supply and demand are really causing the problem. There are to many other factors at play here. Too many middle men skimming profits. Too much manipulation of supplies and inventories. The price of oil nearly doubled and gas went up a third in just one year and yet figures are coming out that indicate we are using less gas, not more, probably because people are cutting back on gas. That clearly means supply and demand have nothing to do with these prices. Speculation is driving prices !!! Lawmakers blame loopholes in commodities trading like the Swaps loophole or Enron Loophole. Whatever you want to call it, It’s a get rich quick scheme and not much less obvious than a pyramid scheme. There is no way supply is causing this gas crisis. I put the full blame on speculators and commodities traders and I am sick of the smoke and mirrors. The meeting in Saudi Arabia hasn’t achieved any substantial results from what I can see. The price of oil is still going up. There must be something else that’s driving prices up and I think I know what it is. Although il appears to be a good hedge against inflation, a lower dollar and a low oil supply, in reality nothing could be farther from the truth. The main thing driving inflation is oil prices and as inflation goes higher investors buy more oil driving inflation higher again. Some experts predict this will trigger the worldwide recession. This will result in lower gas consumption and it will free up more gas supplies.. I am no expert but even I can see the writing on the wall. Investors are going to loose their shirts on oil. We may be looking at another ENRON. Hedge funds will topple leaving old age pensioners with nothing. The government won’t be able to bail them out this time because the cost would be far to great. The CFTC and ICE will be too slow to react to the cracks forming in commodities trading so the govenment will finally step in. By that time it will probably be too late. www.nbtv.ca
Comment by Ted McKeown - June 26, 2008 at 11:24 am

Ted, The US is not the only country that uses oil. You must account for the whole world when determining demand and supply. The US has for many years lived beyond its means; several developing countries beneath theirs. Also, productivity in the developing countries has been increasing rapidly. It is not surprising that, say, China can more competitively bid against us for oil and other commodities.
Comment by Joe - June 26, 2008 at 11:55 am

Any idea how much excess capacity remains in Chinese refineries? One can’t expect China to suddenly drop all subsidies at once. At some point the Chinese refineries will get close to capacity and (if the Chinese government continues to ease subsidies, big if) the consumption increase will slightly level off.
Comment by Chris - June 26, 2008 at 11:55 am

Hate to rain on your parade, but it is more supply/demand than speculation. The USA is no longer the driving force on oil & gasoline pricing. We are truly in a global economy (the world is flat). For every one driver in the US that cuts back there are 20 in India, China, Brazil & Russia that are waiting to take their place as the middle classes in these countries develop. Americans must wake up and realize that the USA does not control the global economy like it has in the past. A bitter pill to swallow but it is the truth. As you can see, I am in the energy business and personally agree that high oil prices are not good for the USA or the energy industry. However, higher taxes are not the answer. More domestic drilling and alternative energy are the only things that will save us. We should have addressed this 25 years ago but Congress was not brave enough to do it. Even though it will take 5-10 years to see significant domestic increase with government encouragement, it is better late than never. Have to start sometime.
Comment by G R Talley - June 26, 2008 at 12:03 pm

Unfortunately, the US is not the only country that uses oil. China and India are rapidly expanding their use of oil which in turn caused the price of oil to increase. The fact that it has happened so recently is due to the fact that crude oil production has remained, for the most part, flat for the past few years. That indicates either a huge conspiracy by all of the oil producing countries (doubtful) or problems in producing more (likely).
Comment by Jerry L Wilkens - June 26, 2008 at 12:06 pm
http://blogs.wsj.com/environmentalcapit ... =fpa_blogs

Neshant · Post by **Neshant** » 29 Jun 2008 01:31

the solution is simple, get smaller cars.

there is no sense in driving a gas guzzling 2 ton batmobile.

Multatuli · Post by **Multatuli** » 30 Jun 2008 15:58

FT Global 500 2008
Market values and prices at 31 March 2008

http://media.ft.com/cms/889d77f0-4142-1 ... 9fd2ac.pdf

Reliance Industries is the largest Indian company ( 80th position ).

Singha · Post by **Singha** » 30 Jun 2008 17:50

http://www.rediff.com/money/2008/jun/30mrv.htm

The real reason why stock markets are crashing

Singha · Post by **Singha** » 01 Jul 2008 09:13

WSJ

Bank for International Settlements
Sees Economy Near 'Tipping Point'
By PAUL HANNON and NINA KOEPPEN
June 30, 2008 6:21 a.m.

BASEL, Switzerland -- The global economy may be close to a "tipping point" that could see it enter a slowdown so severe that it transforms the current period of rising inflation into a period of falling prices, the Bank for International Settlements said Monday.

In its annual report, the central bank for central banks said the impact of rising food and energy prices on consumers' incomes, combined with heavy household debts and a pullback in bank lending, may lead to a slowdown in global growth that "could prove to be much greater and longer-lasting than would be required to keep inflation under control."

"Over time, this could potentially even lead to deflation," it said.

For central bankers from around the world gathered in Basel for the BIS annual meeting Sunday and Monday, the report made for chastening reading. Not only does it highlight the difficulty of the dilemma facing central banks confronted with slowing growth at a time when inflationary pressures are rising, it also lays much of the blame for their predicament at the feet of the central banks themselves.

The BIS said that in the early part of this decade, central banks had failed to set interest rates high enough to restrain an unsustainable credit boom.

It added that if a repeat of the current financial crisis is to be avoided in the future, central banks must be prepared to keep interest rates high even when there are no obvious signs that inflation rates are about to pick up. It also suggested that regulators make banks set aside more capital during boom times -- an approach that could curb their risk-taking and lessen their need to pull back on lending during busts.

"By using macroprudential regulatory instruments as well as monetary tightening to lean against the upturn, the worst excesses could be avoided," the BIS said.

To be sure, the BIS regards a slide into deflation as an unlikely outcome, and for now rising inflation is a more imminent danger than a severe slowdown. "These threats differ in their immediacy, in that inflation is actually rising, while significantly slower growth remains only a possibility in many parts of the world," the BIS said. The BIS said that although rising energy and food prices have been at the heart of the pickup in inflation rates, "inflationary pressures are now being seen across a broader front."

It therefore urged most central banks to raise their key interest rates. "With inflation a clear and present threat, and with real policy rates in most countries very low by historical standards, a global bias towards monetary tightening would seem appropriate," the BIS said, but advised against a "one size fits all" response.

While a severe slowdown is not inevitable, the BIS believes that the risks of a sharp downturn are very real, and centered on the financial system. It warned that the process of cutting back on borrowing after many years of accumulating debt could lead to "much slower growth than is generally expected."

Within the financial sector, the BIS said the reduced availability of credit could force some institutions to sell assets at a time when buyers are hard to find -- an outcome that could lead to another round of price declines and losses at banks. "The impact of such fire sales on prices, and on the capital of financial institutions, could be substantial," it said.

Tighter credit conditions could also hit non-financial companies and households hard, increasing defaults on bank loans and placing financial institutions in even greater difficulty.

The BIS said the U.S. economy is most at risk from problems in the financial system. But it added that there are "suspicions that a number of other countries with low household savings rates might be similarly, if less significantly, affected."

And it warned that while the U.S. dollar's depreciation against other major currencies has so far been "remarkably orderly," that might not continue to be the case. "Foreign investors in U.S. dollar assets have seen big losses," it said. "While unlikely ... a sudden rush for the exits cannot be ruled out completely."

pradeepe · Post by **pradeepe** » 01 Jul 2008 10:06

Neshant wrote:the solution is simple, get smaller cars.

there is no sense in driving a gas guzzling 2 ton batmobile.

That would be a good beginning, but the next step has to be living closer to work.
No more 30 mile joy rides from acred woods to the work place every day.

Expect suburbs to go drop down faster in worth while those areas closer to down-town to be bouyed by the increasing demand to be closer to mainstreet. This positive bouyancy might not be enough to actually lift prices, but will likely temper the real estate drop in these central areas.

Sanjay M · Post by **Sanjay M** » 02 Jul 2008 07:41

Microfinance

http://www.economist.com/opinion/displa ... d=11622469

http://www.economist.com/opinion/displa ... readBottom

Singha · Post by **Singha** » 02 Jul 2008 10:16

Starbucks to shutter 600 stores and rif 12k employees.

I have always maintained $4 grande latte's and expensive cookies/biscotti
were easily beaten by dunkin donuts simple coffee and a plain unfrosted donut.
vanilla chai for the occasional sweet tooth.

but news from underworld is Dunkin donuts is struggling too

svinayak · Post by **svinayak** » 06 Jul 2008 22:14

http://biz.yahoo.com/ap/080706/dollar_doldrums.html

The buck doesn't stop here; it just keeps falling

Paul Volcker, who headed the Federal Reserve from 1979-87, warned in April that the nation was in a dollar crisis, and that what is happening now reminds him of the early 1970s, when serious inflation erupted as economic growth stagnated.

Then, as now, a weak economy limited the Fed's options. The result was a spiral of rising prices and wages -- until the Fed, led by Volcker, suppressed double-digit inflation with huge interest rate increases that pushed the economy into a steep recession in 1982. He recently criticized the current Fed as defending the economy and the market, instead of defending the dollar. Volcker said that will make defending the greenback much harder later.

Energy consultant Yergin, chairman of Cambridge Energy Research Associates, recently told the House-Senate Joint Economic Committee that oil had become "the new gold."

"Oil has become a storehouse of value -- reflecting broad global economic trends and imbalances. At the same time, oil is increasingly seen as an asset by financial investors, an uncorrelated alternative to equities, bonds, and real estate," he said.

When the credit crisis broke last summer, the result was a sharp reduction in interest rates by the Fed. That, in turn, accelerated the fall of the dollar.

"Instead of the traditional `flight to the dollar' during a time of instability, there has been a `flight to commodities' in search of stability during a time of currency instability and a falling dollar," Yergin said. "There's a painful irony here: The crisis that started in the subprime market in the United States has traveled around the world and, through the medium of a weaker dollar, has come back home to Americans in terms of higher prices at the pump."

Neshant · Post by **Neshant** » 06 Jul 2008 22:49

The more they keep talking about a 'strong dollar policy', the more people begin to wonder if the dollar is in real trouble.

If they really backed a strong dollar policy, interest rates would move up quickly to 7%.

----

Bush says backs strong dollar policy

TOYAKO, Japan (Reuters) - President George W. Bush said on Sunday the American economy was not growing as quickly as he would like and that his administration supported a strong dollar policy.

Shankk · Post by **Shankk** » 07 Jul 2008 01:55

Beware of Crumbling BRICs

The "I" Is Being Incinerated

The "I" in BRIC, India has been one of the emerging world's most popular markets in the last few years. But now the country faces a big reversal of its recent fortune.

For starters, the Indian stock market, bond market, and currency are all getting incinerated as inflation soars, and investors lose confidence in the economy.

Wholesale price inflation is running at 11% in India - the highest level in 13 years and climbing. The Reserve Bank of India responded by raising interest rates, but it may be too little too late.

Investors are scared that a combination of accelerating inflation and more rate hikes could derail India's record 8.8% annual growth.

Overseas investors are pulling money out of India at a record pace now. Investors sold a net US$6.2 billion worth of Indian shares so far this year, sending its benchmark stock index plunging 30% in value.

Bond prices and India's currency, the rupee, have also come under intense selling pressure. The rupee, which had been one of the world's strongest currencies, retreated 8% in value this year. That's its worst performance since 1993.

svinayak · Post by **svinayak** » 07 Jul 2008 08:24

Because of the 1971 deal Kissinger made with them.

We promised to protect any OPEC nation that sold oil in dollars (only Iraq and Iran didn't agree) and then would loan the excess profits back to the U.S. to fund our deficit spending. If they get "mad," all they have to do is stop selling in dollars and not only will the dollar collapse but the loans we depend on will stop.

We can't survive without OPEC loans from Saudi Arabia. The rest of the loans from other nations are important too. Any reduction in countries loaning back trade surpluses will cripple us. We are a debt based nation that has to keep the loans coming or the government won't be able to even keep the promises it has made to its citizens.

vina · Post by **vina** » 11 Jul 2008 11:29

Cross Posting.

If Fannie Mae and Freddie Mac go down, it will be an apocalypse . The clock is ticking. Time for the US govt to extend full soverign guarantee to these govt owned companies. There is no other way out. . The entire world will be singed and the damage to world economy, including India's will be massive.

The New York Times
Printer Friendly Format Sponsored By

July 11, 2008
A Trickle That Turned Into a Torrent
By CHARLES DUHIGG

The word began spreading across Wall Street trading desks on Monday morning: Fannie Mae and Freddie Mac, the giant companies at the heart of the nation’s housing market, might be in trouble.

The tumult, which continued on Thursday, started with a cautionary analyst’s report, one that might have caused few ripples in normal times. But these are not normal times. Within minutes, the price of the companies’ shares was plunging, sending shock waves through the financial markets, the economy and Washington.

Fannie Mae and Freddie Mac are so big — they own or guarantee roughly half of the nation’s $12 trillion mortgage market — that the thought that they might falter once seemed unimaginable. But now a trickle of worries about the companies, which has been slowly building for years, has suddenly become a torrent.

Virtually every home mortgage lender, from giants like Citigroup to the smallest local banks, relies on Fannie Mae and Freddie Mac to grease the wheels of the mortgage market. Virtually every Wall Street bank does business with them. And investors around the world own $5.2 trillion of the debt securities backed by the companies.

Even as senior Washington officials struggled on Thursday to reassure worried investors and discussed a government intervention that could cost taxpayers billions of dollars, the companies’ stock prices plummeted again in a rush of selling, this time to their lowest level in 17 years. Freddie Mac closed down 22 percent, at $8, and Fannie Mae fell 13.8 percent, to $13.20.

“There is a real panic about these companies on Wall Street right now, and sometimes a blaze like that grows almost without reason,” said Tom Lawler, an economist who worked at Fannie Mae for over two decades before leaving in 2006 to become a consultant. “There wasn’t really any new news to set off this crisis. The stocks just started falling, and didn’t stop.”

What set off this storm, and what happens next?

The cause of this week’s huge declines remains somewhat unclear. Though each rumor and concern about the company was batted down as it arose, their overall volume was amplified by Fannie’s and Freddie’s enormous obligations.

On Monday, when the analyst report from Lehman Brothers hit the market, Fannie Mae plunged 16 percent. More than 68 million shares changed hands that day — three times as much as average. Volume jumped again on Tuesday, as the stock stabilized, and then exploded on Thursday, to 134 million, as the shares plunged once again.

Perhaps the biggest single risk facing Fannie Mae and Freddie Mac, and with them financial companies and taxpayers, is that investors might simply lose confidence in the companies, leaving them unable to pursue their core businesses — buying home loans from banks and repackaging them for sale to investors.

That buying and repackaging is the lifeblood of the American housing economy, because it provides the capital that banks and other financial institutions use to write new loans.

As long as investors are confident that Fannie Mae and Freddie Mac are relatively financially healthy, then companies, banks and other institutions will continue lending them billions of dollars each week.

But, as the companies’ stock prices decline, wary investors have begun charging higher premiums for those loans. Since January, that premium, measured by the difference between what the companies pay for debt and what the United States government pays, has more than doubled, to nearly nine-tenths of a percentage point for Fannie Mae. Spread over billions of dollars in borrowing, that increase will cost the companies dearly.

If that spread ever became too pronounced, Fannie and Freddie could end up in the disastrous situation of paying so much for loans that it would become unprofitable for them to borrow. It has happened before: as interest rates soared in the 1980s, Fannie Mae’s borrowing costs rose above what it was earning on its mortgages, and the company lost $1 million a day before it was able to right itself.

Should that happen again, Fannie and Freddie could suspend buying some loans — which could bring much of the American housing economy to a standstill. Or the companies could continue doing business, but losing money on many of their deals, which would continue to undermine investors’ confidence in the stocks.

Another risk is that, as investors lose confidence in Fannie and Freddie, buyers will begin demanding discounts on the repackaged loans the companies sell. Those repackaged loans, known as mortgage backed securities, are guaranteed by Fannie and Freddie. As the companies’ stock prices fall and their financial health declines, investors may become worried that Fannie and Freddie cannot honor those guarantees.

Investors might therefore demand prices that are too low for Fannie, Freddie and banks to make any money on the deals. In which case, banks may simply stop creating new loans.

“If people lose faith in Fannie and Freddie, then the whole system freezes up, and nobody can buy a house, and the entire housing market can crash,” said Paul Miller of the Friedman, Billings, Ramsey Group in Arlington, Va. “There’s a fine line between having faith and losing it, and sometimes it’s unclear when it has disappeared. But when investors cross that line, bad things happen very quickly.”

No one is suggesting that line has been crossed yet. Freddie Mac and Fannie Mae can still borrow at relatively low rates. And even though the companies’ stocks continue to decline, there is no evidence that the mortgage backed securities guaranteed by the firms are selling at discounted rates.

But nervousness is still rippling through the economy.

For homeowners and home buyers, it is likely that the decline in Fannie’s and Freddie’s stocks will result in higher interest rates on all kinds of loans.

“As it gets harder for Fannie and Freddie to borrow money, it’s going to push up mortgage interest rates,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, a consulting company. “And this general gloom will prolong the credit crisis, which means it’s harder to get student loans, auto loans and basically any type of borrowing.”

Moreover, a shaky Fannie and Freddie could increase the volatility in housing prices.

“This is the last thing we need right now,” said Brett Barry, an agent at Realty Executives in Phoenix. “The market is like an elevator with the cable cut lose. It is accelerating downward.”

For Wall Street and the nation’s banks, the declines in the stock prices of Freddie and Fannie pose more dangerous risks.

Although banks are typically prohibited from concentrating their money in the stock or bonds of any one company, those regulations create an exemption for debt issued by Fannie Mae and Freddie Mac, which have long been considered the safest of investments.

As Fannie’s and Freddie’s stock prices decline and they are forced to issue new bonds at higher interest rates, their old bonds become worth less. And as Fannie’s and Freddie’s old bonds decline in value, the many small and regional banks holding the bonds will likely be forced to declare losses.

Moreover, because Fannie’s and Freddie’s older bonds are so widely held, as those bonds decline in value, many people will see their portfolios decline.

“Fannie and Freddie’s counterparties are global,” said Steve Persky, chief executive at Dalton Investments, a $1 billion fund in Los Angeles. “People said Bear Stearns was too large to fail. But Fannie and Freddie are exponentially larger.”

Finally, for taxpayers and the United States government, the risks posed by Fannie’s and Freddie’s declining share prices are potentially overwhelming.

As government officials discuss various rescue plans — including taking over either or both companies in a conservatorship, others are pushing for more immediate action.

“We are potentially looking a crisis in the face, and we must not allow this to happen,” said William Poole, who retired in March as president of the St. Louis Federal Reserve. “The government must intervene.”

If a bailout were to occur, it would most likely make it more expensive for the United States government to borrow money in the future, since the government’s potential obligations, which currently stand at about $9 trillion, would rise by an additional $5 trillion.

Moreover, such a bailout would potentially put taxpayers on the hook for billions to offset Fannie’s and Freddie’s losses.

“The major banks are taking write-downs of 20 percent to 50 percent of their assets,” said Sean Egan, managing director of Egan-Jones Ratings, an independent credit ratings firm. Just a 10 percent write-down in the value of Fannie Mae’s assets would be “a loss of $150 billion that taxpayers would need to offset. So you’re talking about the cost of another Iraq war.”

Fannie Mae and Freddie Mac, for their parts, say such talk is dangerous. Both companies say they have capital on hand that exceeds what is required by their regulator.

But people are still worried.

“I don’t think anything has happened in the last week to warrant the kind of anxiety we’re seeing,” said Senator Mel Martinez, Republican of Florida and a former secretary of housing and urban development.

“But the market does what it wants,” he added. “All we can do sometimes is grab on and hope we don’t get thrown off the ride.”

Eric Dash contributed reporting.

Singha · Post by **Singha** » 12 Jul 2008 23:57

NYT

The Fannie and Freddie Fallout

By GRETCHEN MORGENSON
Published: July 13, 2008

IT’S dispiriting indeed to watch the United States financial system, supposedly the envy of the world, being taken to its knees. But that’s the show we’re watching, brought to you by somnambulant regulators, greedy bank executives and incompetent corporate directors.

This wasn’t the way the “ownership society” was supposed to work. Investors weren’t supposed to watch their financial stocks plummet more than 70 percent in less than a year. And taxpayers weren’t supposed to be left holding defaulted mortgages and abandoned homes while executives who presided over balance sheet implosions walked away with millions.

Over the course of this 18-month financial crisis, we have lurched from land mine to land mine. Last week’s was all about Fannie Mae and Freddie Mac, the giant government-sponsored enterprises set up to provide affordable housing across the nation. By issuing debt, these shareholder-owned companies guarantee or own more than $5 trillion in home mortgages. Got that? $5 trillion.

Because the federal government established the companies, investors view them as backed, at least implicitly, by taxpayers. And that implied guarantee is what drove Fannie and Freddie’s business models.

The advantages the companies gained from this unique arrangement were huge. They had to keep less cash on hand than traditional lenders, for example. They also made more money on their mortgages than lenders because they paid less to borrow money in the bond market. These profits enriched Fannie and Freddie shareholders over the years and bestowed significant wealth on the companies’ executives.

Now it looks as if the bill for that largess is coming due. Of course, it will be borne by the usual bagholders: United States taxpayers. You and me.

For years, anyone warning that Fannie and Freddie should beef up their financial positions was ridiculed or run over by the lobbying machines these companies kept oiled and close at hand. So their lucrative arrangement remained the same: business as usual, with all its riches, was the goal. After all, wasting money by inflating their cash cushions would just crimp their style.

Suddenly, Fannie and Freddie’s relatively anemic capital supply is a concern. Last week, Fannie’s stock plummeted to $10.25, down 74 percent in 2008. Freddie’s shares also dived, closing at $7.75, a loss of 77 percent this year.

Even as investors were stampeding out of these stocks, the claque in Washington rushed to reassure them. Both Ben S. Bernanke, the Federal Reserve Board chairman, and Henry M. Paulson Jr., the Treasury secretary, said the mortgage giants’ regulators confirmed that the companies were “adequately capitalized.”

THAT was supposed to signal that the companies wouldn’t have to raise capital immediately because regulators had the problem firmly in hand. But investors have good reason to be skeptical. In the first half of 2007, both Mr. Bernanke and Mr. Paulson sang a similar tune when they opined that problems in the mortgage market were “contained” to subprime loans.

Talk of adequate capital also brings to mind comments made last March, when Bear Stearns was on the ropes, by Christopher Cox, the chairman of the Securities and Exchange Commission. He tried to calm investors by telling them that Bear Stearns passed financial muster. Days later, the firm was toe-tagged.

Which brings us to the main problem: credibility. Wall Street and our senior regulators seem to be running out of that precious commodity almost as quickly as cash.

It wasn’t as if this problem came out of left field. Fears that Fannie and Freddie were getting too big have been a recurring theme in recent years. And Congress has had ample opportunity to create a new regulator that would be vigilant about ensuring the safety and soundness of both companies.

But even after both companies were found to have accounted for their results improperly, Freddie Mac in 2003 and Fannie Mae in 2004, Congress failed to act. As a result, Fannie and Freddie were allowed to become high-growth companies and stock market darlings.

“These companies would have been fine had they been forced to be the cyclical utilities they were intended to be,” said Josh Rosner, an analyst at Graham-Fisher, an independent research firm in New York. “They would be healthy and able to help the markets in this time of illiquidity.”

Instead, they are in trouble and their woes are infecting the entire stock market.

The surprise is not that Fannie and Freddie grew too large for the taxpayers’ good. That was to be expected among companies run by executives whose pay is based on profit growth.

Rather it is that Congress and the various financial regulators, especially the Fed and the Office of Federal Housing Enterprise Oversight, did little to keep the companies from getting out of control.

MAYBE the loans held or backed by Fannie and Freddie will turn out to be better performers than those held by other lenders. That would mean fewer losses than investors seem to be anticipating now and would still the cries for fresh capital.

But if their losses follow the patterns seen at other lenders, some sort of regulatory takeover may occur. That would mean a lot of pain for a lot of folks — especially both companies’ stockholders and the broader community of people depending on a secure, smoothly functioning mortgage market.

“The real outrage is that none of this had to happen,” said William A. Fleckenstein, co-author of “Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve” and president of Fleckenstein Capital in Issaquah, Wash. “We did not have to ruin the financial system and ruin the financial lives of a huge chunk of the middle class in the United States.”

“It is crystal clear that the Fed not only made mistakes, they had the pompoms out, cheering for deregulation,” he adds. “Until people recognize why we are in this mess, I don’t see how we get out of this thing.”

A week ago, Bridgewater Associates, a research firm, estimated that losses from the credit crisis we’re now mired in might amount to $1.6 trillion when all is said and done.

We’ll have to wait years to see if this is accurate. But whatever the number is, it will also represent, in stunning red ink, the cost to society of financiers who are shortsighted and greedy and regulators who don’t regulate.

John Snow · Post by **John Snow** » 13 Jul 2008 02:23

I repeat one more time
'You ain't seen nothin yet'
Remember Darlinton Pair?
'When a transistor FU$%# another transistor you get Beta times beta output.

This investment banking gimmicks coupled with federal reserves gimmicks and federal goverments runaway monitization of debt are nothing but dasisy chaining of darlington pairs......

***********************

IndyMac Bank, F.S.B., Pasadena, CA, was closed today by the Office of Thrift Supervision. The Federal Deposit Insurance Corporation (FDIC) was named conservator. The FDIC will transfer insured deposits and substantially all the assets of IndyMac Bank, F.S.B., Pasadena, CA, to IndyMac Federal Bank, FSB. Brokered deposits will be held by the FDIC and those insured deposits will be paid off when the insurance determination is complete. IndyMac Bank, FSB had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, 2008. As conservator, the FDIC will operate IndyMac Federal Bank, FSB to maximize the value of the institution for a future sale and to maintain banking services in the communities formerly served by IndyMac Bank, F.S.B.

Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks in the same manner as before. Depositors of IndyMac Federal Bank, FSB will have no access to on-line and phone banking services this weekend. These services will be operational again on Monday. Loan customers should continue making loan payments as usual.

Beginning on Monday, July 14, IndyMac Federal Bank, FSB's 33 branches will observe normal operating hours and will continue to offer full banking services, including on-line banking. For additional information, the FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919 and will operate today from 3:00 p.m. to 9:00 p.m. (PDT), and then daily from 8:00 a.m. to 8:00 p.m. thereafter, except Sunday, July 13, when the hours will be 8:00 a.m. to 6:00 p.m. Customers also may visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/IndyMac.html for further information.

At the time of closing, IndyMac Bank, F.S.B. had about $1 billion of potentially uninsured deposits held by approximately 10,000 depositors. The FDIC will begin contacting customers with uninsured deposits to arrange an appointment with an FDIC claims agent by Monday. Customers can contact the FDIC for an appointment using the toll-free number above. The FDIC will pay uninsured depositors an advance dividend equal to 50 percent of the uninsured amount.

Based on preliminary analysis, the estimated cost of the resolution to the Deposit Insurance Fund is between $4 and $8 billion. IndyMac Bank, F.S.B. is the fifth FDIC-insured failure of the year. The last FDIC-insured failure in California was the Southern Pacific Bank, Torrance, on February 7, 2003.

Paul · Post by **Paul** » 14 Jul 2008 23:26

I was at Costco this weekend. The crowds appear to be thinning here as well. Found parking spot right near the entrance. Never seen this happen in the 8+ years I have been shopping here.

Expected people to stack up wholesale but such is not the case. Recession seems to be biting hard.

Singha · Post by **Singha** » 15 Jul 2008 00:15

a colleague in SJ who sprained his back trying to paint the white picket fence says he went
to Home Depot and found many contractor types waiting there looking for work. the collapse
of the home building & remodelling sector must have hit people like carpenters, plumbers,
electricians, roofers, carpet layers, landscape people very hard- esp in CA, AZ, NV, FL....

I think recession means people will buy in smaller rather than larger lots seen in costco,
sams, BJ wherein u pay more and buy in bulk. these stores better have a new plan or
who's going to buy a 10 liter jerrican of tomato sauce or a sack of 200 toilet rolls?

Kakkaji · Post by **Kakkaji** » 15 Jul 2008 02:09

The new new world order

Skyrocketing oil prices. Double-digit inflation. Is the great global economic boom finally coming to an end?

There are no signs of a global slowdown in these aisles. Carrefour's sales in China were up 25% in the first quarter of this year. Sales in places like Brazil and Romania jumped more than 50%. Poland is hot. So are Argentina, Turkey, and Colombia.

But the picture isn't the same in Carrefour's home country: France grew an anemic 2.6% last year. "If you're a consumer sitting in Paris and you're reading newspapers or watching TV, it looks like the world is coming to an end," says Carrefour executive David Shriver. "But consumers in places like China and Brazil simply don't see it that way."

Welcome to the new, precariously bipolar world.

While gross domestic product growth is cooling a bit in emerging markets, the results are still tremendous compared with the U.S. and much of Western Europe. The 54 developing markets surveyed by Global Insight will post a 6.7% jump in real GDP this year, down from 7.5% last year. The 31 developed countries will grow an estimated 1.6%.

The difference in growth rates represents the largest spread between developed and developing markets in the 37-year history of the survey. "The fact that the U.S. is no longer the locomotive of growth it was a few years ago," says Nariman Behravesh, Global Insight's chief economist, "doesn't seem to be that important anymore."

Put another way, the American consumer is still hungry, but the world consumer is voracious.

Consider the growing middle class in China, which is expected to multiply sevenfold by 2020, to 700 million people, according to Euromonitor, and India, where the number of middle-income folks will grow more than tenfold, to 583 million, says consultancy McKinsey & Co. First they want new homes with electricity - witness the quadrupling prices since 2000 of steel, oil, and copper. Then, as incomes rise, so does demand for everything from toothpaste to telephones, from automobiles to airplanes.

At first blush this sounds like great news for Global 500 companies: Chinese and Indian consumers essentially offsetting belt-tightening by Americans and Western Europeans. And indeed, overseas growth has been a bright spot - so far - for many of the world's largest corporations. Wal-Mart's (WMT, Fortune 500) international sales grew 17.5% this year - triple what it saw Stateside - and now constitute 24% of the company's total revenue, up from 8.9% a decade ago. Roughly half of GE's (GE, Fortune 500) gas turbines produced in Greenville, S.C., end up in Saudi Arabia, which is building four new cities; rival Abu Dhabi is spending $200 billion on attractions, including a Guggenheim museum.

"There is still a lot of double-digit growth out there," says John Rice, GE's vice chairman. "The clearly tougher financial markets in the U.S. don't appear to be impacting global demand for everything."

But double-digit growth is also creating double-digit inflation. Americans whine about $4 gasoline and $5 Cheerios, but elsewhere in the world the reaction is much more serious. Truckers in South Korea, France, and Spain have blocked highways to protest high fuel prices, and angry Egyptians barricaded roads after a cut in flour subsidies. In India inflation rose to above 8% in May from below 4% last August. Chinese inflation was 7.7% in May, up from 1% in early 2006.

It's worse in the smaller markets: Inflation now exceeds 30% in Ukraine and Venezuela and 25% in Vietnam. This translates into some pretty jaw-dropping price increases: Rents are up 82% in Dubai in 12 months, and rice prices in India have nearly tripled since January. Such rapid inflation can stifle growing economies, and many analysts think the great global boom eventually will flame out - or at least dramatically slow.

And let's not forget that many of the countries experiencing strong growth today depend on exports to the U.S. to keep their economies humming; a slowdown in U.S. spending surely will have ripple effects in places like India, China, Vietnam, and Mexico.

The problem is how to fix it. Most experts believe that to break the back of double-digit inflation, central bankers have to raise interest rates dramatically, which can result in higher fuel prices, rising unemployment, and eventually a recession.

"This kind of situation always ends in tears," says Global Insight's Behravesh. "If you let inflation get out of control, it hurts. If you try to clamp down, it hurts."

For the rest of the planet, a slowdown in the emerging world would be a double-edged sword: Once-hot markets for, say, L'Oréal lipstick or Tide detergent would cool, hurting corporate growth prospects. A less ravenous China or India, though, would surely lead to a drop in the price of many commodities, including oil, offering much-needed relief to pocketbooks worldwide.

What is the CEO of a Global 500 company to do? Listen to the doom-and-gloom economists and act cautiously, or keep pushing into fast-growing but fragile economies?

Smart executives are doing a bit of both, seeking new growth markets with the full understanding that their plans will be shaped and changed by global forces.

Robert McDonald, Procter & Gamble's (PG, Fortune 500) chief operating officer, has borrowed a military term to describe this new business world order: "It's a VUCA world," he says - volatile, uncertain, complex, and ambiguous. "The idea that a butterfly flaps its wings in Africa and an earthquake occurs somewhere else in the world is our reality. It's no longer just a nice book that Thomas Friedman wrote," he adds, referring to the New York Times columnist's book on globalization. "It's my life."

Katare · Post by **Katare** » 15 Jul 2008 09:58

rice prices in India have nearly tripled since January.

Market is flooded with rice and prices are stable.

SwamyG · Post by **SwamyG** » 15 Jul 2008 20:45

And, we have the Big Oil companies advertising in TV - how they are trying to change, how they are using modern technologies, environment friendly yada yada - one ad from ExxonMobil had a scientist saying how much he liked his job.

Now, when was it that a customer was impressed by all these ads (they are nicely made, though - the best money can buy) and said 'Ok, I will shop at BP, because.....'. I think these ads are psy-ops to keep people not get so agitated when the Big Oils make those huge profits. Now why would you riot, if you know they are pumping all those profits to make the earth just a better place. Come on.....

The entire planet is like the guy who cut his goose laying golden eggs.... eswaro rakshathu!

Singha · Post by **Singha** » 16 Jul 2008 17:54

NYT

St. Louis Journal
Anger and Dismay at the Sale of a City Treasure
Jeff Roberson/Associated Press

By DIRK JOHNSON
Published: July 16, 2008

ST. LOUIS — With the shades inside a tavern on Pestalozzi Street drawn to block the early morning sun, Dave Liszewski, a third-shift worker at Anheuser-Busch, nursed a bottle of Bud Light and a hollowed sense of pride.
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Dilip Vishwanat for The New York Times

“It took everybody by surprise,” Dave Liszewski, a 30-year employee who operates a machine that puts labels on bottles, said of the takeover deal. “They promised us this wouldn’t happen.”

“We were betrayed,” said Mr. Liszewski, who was still not sure he could believe the news that the company had agreed to be sold. “The good Lord was sold out for 30 pieces of silver. We were sold out for $70 a share.”

August A. Busch IV, the scion who runs the family brewery that makes Budweiser and Michelob and dates to before the Civil War, had vowed that there would be no sale on his watch. But in the end, sentiment and tradition were no match for a $52 billion offer from the Belgian beer giant InBev.

All around this old Midwestern city famous for its brew, heads have been shaking in disbelief. Budweiser, the king of American beers, will belong to Europe.

“It took everybody by surprise,” said Mr. Liszewski, a member of the Teamsters union who followed his uncle into the brewery 30 years ago. “They promised us this wouldn’t happen.”

An American flag snaps high above the belching stacks of the brewery, a red-brick and wrought-iron fortress in the historic Soulard neighborhood, where the air is tinged with the smell of yeast.

The Anheuser-Busch dynasty is so ingrained in the identity of St. Louis that people here talk about the Busch family as if they are both royalty and relatives, making references to “Gussie” (August A. Busch Jr.) and “Augie” (August A. Busch III).

In a city that does not do much bragging, the mighty brewery has long been a reason to boast.

“St. Louis has a terrible inferiority complex,” said Susan Manlin Katman, sitting in the shade at an outdoor cafe in the trendy Central West End neighborhood. “We’re not North or South, East or West. So we tend to dwell on what we’re lacking, instead of what we have.”

Downtown St. Louis has witnessed a striking resurgence in recent years, with the opening of stylish pubs and restaurants and the refurbishing of residential lofts. With its French and German influences, St. Louis has a rich cultural history and an architectural flourish. It has exulted in the glories of Cardinal baseball heroes, from Stan Musial to Albert Pujols. The city also claims Forest Park, an urban nature preserve near downtown that is bigger than Central Park.

But for all that, its national acclaim is tied mostly to the brewery — it brings the tourists to town, along with the Gateway Arch. Almost anywhere in the world that residents of St. Louis travel, they are asked about the King of Beers and, of course, the Clydesdales, the mascots of the brewery.

InBev has pledged not to shut down any of Anheuser-Busch’s 12 breweries in the United States. But many here still feel here as if a treasure is endangered.

As Opal Henderson, a 78-year-old auto salvage yard owner, put it, “Why can’t those foreigners just stay at home and leave us what we have?”

Mayor Francis G. Slay has a different view. “One of my first goals,” he said in a statement, “will be to try to convince InBev, which loves to cut costs, to move to St. Louis, where pretty much everything is cheaper than in Belgium.”

That is not likely to happen. Among the 6,000 St. Louis-area workers employed at A-B, as it is known here, the worry is that the new owner will try to cut jobs or wages.

Mr. Liszewski, who operates a machine that puts labels on bottles of Bud Light, earns $27 an hour. He is a blue-collar man in work boots who has been able to pay off his house and buy land in Southern Illinois where he can hunt for deer. “It’s not just been a good life,” he said. “It’s been an excellent life.”

At the St. Louis Galleria, Alexis Littlejohn, a bank worker, said she believed that the new owners think they have a way to squeeze more profits out of the brewery. “If it didn’t make economic sense,” she said, “they wouldn’t be doing it.”

In the bars around the brewery district, there is a mixture of anger and fear, even among those who do not work for Anheuser-Busch.

Loyalty runs deep for the brewery and its workers. If you order a beer at Crabby’s saloon, it had better be an Anheuser-Busch product. They do not carry anything else.

The owner, Stephanie Hafertebe, certainly does not stock any Stella Artois, a beer made by InBev.

“Not so many years ago, union workers would walk out of a place if you served anything that wasn’t Anheuser-Busch,” Ms. Hafertebe said.

A couple of patrons were shooting pool. A cocker spaniel was crawling around the floor. On the jukebox, Frank Sinatra crooned, “I get no kick from Champagne.”

Tom Lucas, a 51-year-old auto mechanic with oil-stained fingers, sat on a barstool and drew hard on a cigarette.

St. Louis is a place where people can still smoke in taverns. But everything else seems to be changing. The idea of the brewery belonging to foreigners seemed unfathomable to many. People like Mr. Lucas may have to get used to it. But he does not have to like it.

“It stinks,” Mr. Lucas said. “Augie would be rolling in his grave if he knew about this.