Global Economy
Re: GLOBAL ECONOMY
Is Citi really headed to dissolution? The stock action today sure seems to suggest it.
Re: GLOBAL ECONOMY
Per Goldman forecast: unemployment in US will be 9%+ by 2009 - 4Q. Will inch up in 2010 as well.
The Indian pop here in US has mostly gotten off the boat in the last 15 - 20 years. Back in India we do not see recessions and upswings. Moreover most of us have not seen the recession in the 1977 - 82 period when unemployment was 10% and inflation at 16%.
This recession will be completely unlike anything we have seen in our lifetimes. Reading through history books - the roaring 90s now look very similar to the 1920s in the runup to the depression.
The Indian pop here in US has mostly gotten off the boat in the last 15 - 20 years. Back in India we do not see recessions and upswings. Moreover most of us have not seen the recession in the 1977 - 82 period when unemployment was 10% and inflation at 16%.
This recession will be completely unlike anything we have seen in our lifetimes. Reading through history books - the roaring 90s now look very similar to the 1920s in the runup to the depression.
Re: GLOBAL ECONOMY
LKA on India's opportunities in the present crisis
Crisis presents a unique opportunity for India to take a big leap forward India needs a strong leadership and a strong government which has both the capacity to overcome the current crisis and also a clear vision to resolutely pursue long-term goals. I say so because I believe that the current crisis, hurting though it is, presents a unique opportunity for India to take a big leap forward. We can achieve India’s renaissance in the backdrop of the extraordinary changes taking place in the global economic and political order. It falls upon the present generation of leadership and our civil society to offer an intellectual and strategic template for the nation to move forward, one that is consistent with the self-image of a proud and ancient nation and one that serves the socio-economic aspirations of the majority of Indians.
The western monopoly over global economic processes, one that has lasted for over two centuries and which gave the West a dominant position as the principal arbiter for the international community, has now most certainly run its course. No statistic demonstrates this more succinctly than the fact that India’s foreign exchange reserves are greater than the IMF’s current reserve balance. I urge all my fellow Indians to appreciate the gigantic forces of history at play. For the first time since the early 1800s, India along with China and other non-European nations are on the cusp of achieving a dignified position in the international political economy. When compared to the excesses of the western world, Asian frugality stands in sharp contrast. In fact, it is precisely this aspect ? the surplus of Asian savings ? that has sustained the debt-ridden lifestyle of the average American household. China’s $1 trillion plus foreign exchange reserves denominated in US government bonds exemplify this fact. The fact that the emerging world has emerged as the principal creditor for the international economy is one of ironies of the last decade. It is also a manifestation of the relative decline of the industrialized economies. The ongoing credit crisis is the final culmination of this global imbalance ? America’s quest to live beyond its means. Thus, rather than calling for a restoration of this unhealthy economic relationship between Asia and the West ? whereby the latter continues to draw upon the savings of Asian households to finance their exorbitant lifestyles ?, and rather than being worried about the de-industrialization of the West, it is incumbent for the emerging economies such as India to begin massively re-industrializing at home. And for this to become a reality, the rejuvenation of rural India, driven into penury and indebtedness by the neglect of the past years ? the kind of debt-induced distress that has caused thousands of farmers to commit suicide ? ought to be the starting point for a new economic philosophy by the next Government. It will indeed be the starting point, if the NDA gets the mandate to form the next Government.
Re: GLOBAL ECONOMY
Found in a chat
I work for CITI and two days ago they called my entire department into a room and told all of us they were sending the department to India. Its pathetic the gov should have never given any money to the financial industry because all the entire industry will do is this very thing invest in cheaper labor taking the Employment rate down even further dragging the economy down even further and still there will be no sign of relief and they did all that with money from the same people they screwin over.
Re: GLOBAL ECONOMY
Won't be long before aspersions are also cast on Vikram Pandit's origins.Acharya wrote:Found in a chat
I work for CITI and two days ago they called my entire department into a room and told all of us they were sending the department to India. Its pathetic the gov should have never given any money to the financial industry because all the entire industry will do is this very thing invest in cheaper labor taking the Employment rate down even further dragging the economy down even further and still there will be no sign of relief and they did all that with money from the same people they screwin over.
India gaining a high profile as job-stealer is no good. At least all mags so far have highlighted that Indian economy too is reeling from credit crunch etc. We don't want to be mentioned in the same breath as China everytime and be setup for scapegoating down the line.
Re: GLOBAL ECONOMY
Get in on the newest growth industry: the layoff business
Friday November 21, 8:46 am ET
By Stanley Bing, columnist
The mood is as black and sour as a canned olive. Flat is the new up. Every industry is either in the tank or circling the bowl. But wait! Not every one. There is, ladies and gentlemen, one area of vigor in this challenging environment, and those of us who are smart, savvy, and bent on survival would be well advised to jump on board.
ADVERTISEMENT
It's the layoff business. Let's look at some of the available postings in this terrific new sector of corporate enterprise.
Associate Layoff Coordinator. This is nothing more than a glorified assistant post, but it comes with the knowledge that while times are bad, the last department to suffer layoffs is the Layoff Department. Pay grade: $35K and up.
Director of Layoff Services. This is perhaps the hardest job in the hierarchy, because here is where the rubber meets the road that leads straight off the cliff. This is the guy who has to talk to the guys who need to be talked to. It's a dog's job, but history shows that the ability to actually execute the tough stuff is what marks a person for future positions of power and influence. Guys who aren't willing to kill people simply don't do as well. Pay grade: $75K to $125K - not too bad for those who enjoy their work.
Vice President, Layoff Operations. A far less tedious and more conceptual post. The Vice President must plan the large-scale moves that are dictated from above. It's not all gravy, though. The VP is the one who's required to listen to the whining of middle managers when they are informed that a certain percentage of their headcount must be rendered into chicken fat. Pay grade: $125K to $225K, based on years of service and the amount of fear you can engender in every phone call.
Executive Vice President, Layoff Administration. Now we're in the first layer of the stratosphere, an altitudinous position most often occupied by a person who used to have a legitimate financial function when there were beans to be counted. Now that there are almost no beans, he counts heads. This is the individual who looks at the entire org chart and asks, "Why can't we simply eliminate the whole right side of this thing and have the left side do it?" Pay grade: $250K to $500K, plus a potential slice of what you help to save.
President, Layoffs Division. Here is possibly the saddest person in the entire layoff business. Seeing it all. Knowing that among the many people who must be asked to leave there will be a significant layer of high-middle managers who once were his friends. Ironically, most of the people on the Layoff team are actually oblivious to the fact that they work there. They believe they are still in Accounting, or Law, or Public Relations, or Finance, and are just on temporary Layoff duty. This guy knows he's in it until the last buzzard falls off its perch in Death Valley. Pay grade: $1 million? Two?
Chairman and Chief Executive Layoff-icer. "A single death is a tragedy. A million deaths is a statistic," Josef Stalin observed. He spoke for the kind of farseeing leader who, at the nosebleed level, sleeps well every night after issuing the orders to do what must be done and leaving the details to others. That's not all the chief must accomplish, of course. He or she must also sell the appropriate statistics to the bloodthirsty Street. And the Street is buying. In fact, at this juncture, excellence in the Layoff game may be the very best product a corporation can sell the guys in charge of the really big picture. Pay grade: $5 million per year, unless he has the good fortune to be fired.
These are just a few of the niches you could find your notch in. Whatever you do, it pays to get a toehold and stay put. It's the only place today where you can be safe while practicing the Golden Rule of business. You know the one. Do unto others before they do it to you?
Re: GLOBAL ECONOMY
Guys and Gals who came to US from 1998 onwards to rake in minimum of 65K plus salaries with Indian (BSc, BE degrees) fresh off the college and boat have not seen how nasty things get in massa land when things are really bad ( in terms economy). Couple days I had posted that PIO in US must get into low profiles in their subdivisions with Ford or GM car in the drive way parking lot of appts instead of Toyota, Mbenz, BMW Lexus etc.
Re: GLOBAL ECONOMY
The Big three need no mercy, recall that they were pushing Hummer, as H2O as recently as May, June in the 1980s (late) GM started the Saturn Plant in TN to make Fuel efficient small cars (non unionesd) gradually they turned on the Saturn SUVs (Vue) and all kinds of garbage for short term gains, they opposed new technologies, fuel efciency standards, loobied against Hybrid cars and landed everybody in this bloody mess, no tax money periodramana wrote:X-posted..
I dont understand Paulson strategy. he was authorised $700b for bailout.he spends $300b and says he is saving for next admin. Then why did he ask for $700B? is there another shoe to drop?
And whats with the refusal to bailout the big three automakers? Is it to get the Unions to make concessions? The bankruptcy of the big three will be like Lehman Bros. They are intertwined to so many upstream and downstream enterprises, it will lock and seize the economy. Why are they refusing to extend the loans? Unlike the bailout of the banks its not an investment but a loan.
Or is this a plan for new economy post Unions et al?
Pffft
No fear.vsudhir wrote:India gaining a high profile as job-stealer is no good.
- US tries to restrict outsourcing to India, their companies become uncompetetive compared to other sharks in the 'free world'. Very short term, they'll save jobs. In a few years, they will lose entire corporations. They die.
- US tries to impose trade policies that go beyond restricting outsourcing of white collar work. Their entire economic and political world order collapses. They die.
For sure messiah Hussein has to posture and present himself in favourable light to public. If he acts out on any populist trade restricition fantasies he will only serve to bring the end closer. Bring it on.
Re: GLOBAL ECONOMY
Linkvsudhir wrote:Won't be long before aspersions are also cast on Vikram Pandit's origins.Acharya wrote:Found in a chat
Citigroup may replace Vikram Pandit as CEO
PTI
New York, November 22, 2008
Citigroup's Board is considering firing its Chief Executive Vikram Pandit, who was appointed as CEO late last year to infuse confidence, as the banking giant finds itself searching for hope all over again.
Replacing Pandit - an enthusiastic defender of the company's existing mix of businesses - is one of the options being considered by Citi executives, along side selling all or part of the company, a public endorsement from the government or a new financial lifeline to stabilise the banking behemoth, after its shares took a sharp plunge this week.
In a series of tense meetings and telephone calls, the executives weighed several options, including whether to replace Citigroup's chief executive Vikram S Pandit or to sell all or part of the company, the New York Times reported.
The paper reported that the company's executives on Friday entered into talks with federal officials about how to stabilise the struggling financial giant.
The report came amidst some analysts saying that infusion of $50 to $100 billion might be needed to bail out the bank.
The course of action, however, remained uncertain on Friday night, the people involved in talks were quoted as saying, and other options may yet emerge. But after a year of gaping losses and an accelerating decline in share price, Citigroup, which has $2 trillion in assets and operations in scores of countries, is running out of time, analysts were quoted by The New York Times as saying.
The paper said, Citigroup's management and some board members held several calls with Henry M Paulson Jr, the Treasury secretary, and with the president of the Federal Reserve of Bank of New York, Timothy E Geithner, who later emerged as President-elect Barack Obama's choice to be Treasury secretary.
Re: GLOBAL ECONOMY
velociraptors will cannibalize their own if there arent smaller mammals to prey on.
its in their genes.
changing pandit will have about as much effect on citi's fortunes (up or down) as a paki climbing the minaret and railing against the sun.
its in their genes.
changing pandit will have about as much effect on citi's fortunes (up or down) as a paki climbing the minaret and railing against the sun.
Re: GLOBAL ECONOMY
Singha, and others in India, how are depositors in India responding to Citibank? Are they still sanguine about the safety of their deposits?
Re: GLOBAL ECONOMY
Citi being a foreign bank is under rules that allow only a limited
number of branches until 2009 when these rules will expire and they
can setup as many branches just like local banks.
due to limited branches I think they are more into salary accounts,
NRIs, business accounts in CBD type areas...the low level trooper like me is not in their malign orbit.
number of branches until 2009 when these rules will expire and they
can setup as many branches just like local banks.
due to limited branches I think they are more into salary accounts,
NRIs, business accounts in CBD type areas...the low level trooper like me is not in their malign orbit.
Re: GLOBAL ECONOMY
The crisis of confidence in Citi stems from the premise that the market does not believe that Citi management has a handle on the the bank's asset quality. However, as opposed to what happened to Lehman, as of date all banks and most other financial/quasi financial institutions in the US have multiple direct borrowing facilities with the Fed so Citi should always be able to replace dodgy assets on its balance sheet with US Treasuries via a Fed swap. The decline in its share price is IMO due to the fact that in the recent past, whever the Fed/Treasury has stepped in with a rescue package for any financial institution, the common shareholders have been massacred. The precipitous decline in Citi's share price is market apprehension that Citi common shareholders will suffer the same fate.
Re: GLOBAL ECONOMY
"SEEN THIS MOVIE BEFORE"
Financial markets are waiting for some sort of Citigroup announcement this weekend, and if nothing happens, the bank's stock is likely to plunge further on Monday, analysts said.
Citigroup's stock dropped to a low of $3.05 on Friday, a level not seen for about 16 years, spurring the bank's management to talk to the U.S. Treasury and the Federal Reserve about its options.
The bank is not in danger of near-term collapse, people close to Citigroup said on Friday. Depositors are sticking with the bank, as are trading counterparties. The capital ratio that regulators look at most carefully, namely the tier-one capital ratio, is well above minimum required levels.
But a rapid decline in share price can make customers skittish and cut into a bank's business, wrote analysts at independent research boutique CreditSights on Saturday.
"Unfortunately, we feel like we have seen this movie before," they added. Lehman Brothers Holdings Inc (nyse: LEHMQ - news - people ) and Washington Mutual Inc (nyse: WM - news - people ) both experienced major declines in their shares, followed by an exodus of customers. Lehman filed for bankruptcy, while regulators took over Washington Mutual.
According to the Wall Street Journal report, a newly created "bad bank" structure might take on some of Citigroup's more than $1.23 trillion of off-balance sheet assets. Citigroup might bear the initial losses on the assets, and the government might cover losses beyond a particular threshold, the newspaper reported, citing people familiar with the matter.
http://www.forbes.com/reuters/feeds/reu ... IX-TV.html
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Satya_anveshi
- BRF Oldie
- Posts: 3532
- Joined: 08 Jan 2007 02:37
Re: GLOBAL ECONOMY
Sorry for the oneliner: I suspect that the GS merger "feeler" that was sent earlier is not at all a feeler. Let's see another week or two and something along this should comeout.
Re: GLOBAL ECONOMY
Citi buyout could boost Goldman, Morgan Stanley: CreditSights.
NEW YORK: CreditSights said an acquisition of Citigroup Inc by Goldman Sachs or Morgan Stanley would significantly add to earnings, if Citi's bad assets were absorbed by the U.S. government.
"A potential acquisition of Citigroup would be significantly accretive to Goldman and Morgan Stanley's earnings as the potential buyer would be acquiring a significant future earnings stream for a relatively low price," said analyst David Hendler, in a research note.
"However, the potential need for mark-to-market adjustment on Citi's $2 trillion balance sheet would likely cause capital adequacy concerns for most buyers sans a government backstop," said Hendler, in the note dated Nov. 22. Citigroup's shares fell 60 percent last week to $3.77. Citigroup's executives last week debated options as the company's share price sank, including merging with another bank or selling off businesses.
Citigroup also spoke to the Federal Reserve and the U.S. Treasury last week about the government making a public statement of support and perhaps even putting additional funds into the bank.
NEW YORK: CreditSights said an acquisition of Citigroup Inc by Goldman Sachs or Morgan Stanley would significantly add to earnings, if Citi's bad assets were absorbed by the U.S. government.
"A potential acquisition of Citigroup would be significantly accretive to Goldman and Morgan Stanley's earnings as the potential buyer would be acquiring a significant future earnings stream for a relatively low price," said analyst David Hendler, in a research note.
"However, the potential need for mark-to-market adjustment on Citi's $2 trillion balance sheet would likely cause capital adequacy concerns for most buyers sans a government backstop," said Hendler, in the note dated Nov. 22. Citigroup's shares fell 60 percent last week to $3.77. Citigroup's executives last week debated options as the company's share price sank, including merging with another bank or selling off businesses.
Citigroup also spoke to the Federal Reserve and the U.S. Treasury last week about the government making a public statement of support and perhaps even putting additional funds into the bank.
Re: GLOBAL ECONOMY
LPO's legal process outsourcing cos in India are seeing a boom in work
starting from the lehman collapse onward - TOI
starting from the lehman collapse onward - TOI
Re: GLOBAL ECONOMY
definition of a lawyer :LPO's legal process outsourcing
A lawyer is a person who profits by creating confusion. Or when that is impossible, he profits by the confusion created by others. In either case, confusion is his stock in trade. The greater the division between form and substance, between legal technicality and the attainment of justice, between gobbledygook and common intelligibility, the more the lawyer profits. The wider the gap a lawyer can create between the person who ostensibly owns property and he who claims its economic worth, the more money winds up in his pocket.
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Satya_anveshi
- BRF Oldie
- Posts: 3532
- Joined: 08 Jan 2007 02:37
Re: GLOBAL ECONOMY
There is one area that Indian companies can / must do now is to buy out accounting firms (either significant stakes or complete wholesale). Recent changes in US to adhere to international standards and the notorious derivative accounting and and resulting confusion is a HUGE opportunity for perpetual business, high margin billing, and business in area where you get to know sizes of the private parts of companies.
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Satya_anveshi
- BRF Oldie
- Posts: 3532
- Joined: 08 Jan 2007 02:37
Re: GLOBAL ECONOMY
That is what I was suspecting. It looks like a done deal. Vikram Pandit will make way for Llyod Blankenfien in the merged company.
Re: GLOBAL ECONOMY
US agrees to another bailout for Citigroup. They get another $20 billion.
http://online.wsj.com/article/SB122747680752551447.html
The federal government agreed Sunday night to rescue Citigroup Inc. by helping to absorb potentially hundreds of billions of dollars in losses on toxic assets on its balance sheet and injecting fresh capital into the troubled financial giant.
The agreement marks a new phase in government efforts to stabilize U.S. banks and securities firms. After injecting $306 billion of capital into financial institutions, federal officials now appear to be willing to help shoulder bad assets, on a targeted basis, from specific institutions.
Citigroup is one of the world's best-known banking brands, with more than 200 million customer accounts in 106 countries. Its plunging stock price threatened to spook customers and imperil the bank.
If the government's rescue plan is a success, it could help bring stability to the entire financial system. If it doesn't, even deeper doubts about the industry's future could spread.
After a weekend of marathon talks between Citigroup executives and top federal officials, the parties late Sunday night nailed down a package in which the government will help protect the company from its riskiest assets.
Under the plan, Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses in that portfolio. After that, three government agencies -- the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. -- will take on any additional losses, though Citigroup could have to share a small portion of additional losses.
The plan would essentially put the government in the position of insuring a slice of Citigroup's balance sheet. That means taxpayers will be on the hook if Citigroup's massive portfolios of mortgage, credit cards, commercial real-estate and big corporate loans continue to sour.
In exchange for that protection, Citigroup will give the government warrants to buy shares in the company.
In addition, the Treasury Department also will inject $20 billion of fresh capital into Citigroup. That comes on top of the $25 billion infusion that Citigroup recently received as part of the the broader U.S. banking-industry bailout.
The government and Citigroup had hoped to unveil the plan early Sunday evening, but negotiations dragged on longer than expected. Treasury Secretary Henry Paulson began briefing Congressional leaders about the plan later in the evening.
Asian markets were mostly lower in early Monday trading as news of the discussions surfaced. Japan's markets were closed for a holiday.
The sweeping rescue plan underscores how concerned the government had become about letting Citigroup's fortunes continue to deteriorate. The company has been pounded by mortgage-related losses and is on track to suffer further from the weakening economies in the U.S. and around the world.
Last week, with Wall Street rapidly losing confidence in the company, its shares tumbled 60% to a 16-year low. Still, Citigroup Chief Executive Vikram Pandit and other top executives insisted last week that the company remained on solid financial footing.
While Citigroup's recent woes don't appear to be as severe as the problems that ultimately felled Bear Stearns Cos. and Lehman Brothers Holdings Inc., the U.S. government seems to have decided it can't afford to gamble on whether Citigroup will weather the storm.
At the same time, the Treasury Department is already facing a political backlash over the use of taxpayer funds to stabilize the banking sector, and has nearly exhausted the $350 billion that Congress allotted to the first phase of the industry rescue.
The planned arrangement with Citigroup appears to be an attempt to thread that needle by giving the company some breathing room until markets calm.
In addition to $2 trillion in assets Citigroup has on its balance sheet, it has another $1.23 trillion in entities that aren't reflected there. Some of those assets are tied to mortgages, and investors have worried they could cause heavy losses if they are brought back on the company's books.
Even as they assured employees and investors last week that the company was on sound financial footing, Citigroup executives and directors knew they needed to do something fast to stabilize their company. Top government officials, including the heads of the Treasury Department and the Fed, also started scrambling to draw up contingency plans in case Citigroup's troubles intensified.
The assets affected under the government plan are largely loans and securities backed by residential and commercial real estate. Such assets have been devastated by the meltdown of the housing markets and have started coming under even greater strain in recent weeks as the U.S. economy slows.
"With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy," the Treasury Department, Fed and FDIC said in a joint statement issued late Sunday.
Even as they assured employees and investors last week that the company was on sound financial footing, Citigroup executives and directors knew they needed to do something fast to stabilize their company. By Friday, bank officials were hoping for a public expression of confidence from the government, believing that would help reassure clients and customers.
Top government officials, including the heads of the Treasury Department and the Fed, also started scrambling to draw up contingency plans in case Citigroup's troubles intensified.
On Sunday evening, government officials were locked in meetings to hammer out the final terms of an arrangement that will leave the government deeply enmeshed in the inner workings of one of the world's largest financial institutions.
The government didn't require Citigroup to make changes to its executive ranks or its board in return for government assistance. However, Citigroup agreed to "comply with enhanced executive compensation restrictions," the government said Sunday, and also will implement a government-backed plan to modify distressed mortgages that is designed to curb foreclosures.
Despite the unprecedented scope of the rescue plan, it's not clear whether it will be enough to stabilize Citigroup. The roughly $300 billion pool of assets that are included in the rescue plan represent only a sliver of the company's more than $3 trillion in assets, including its holdings in off-balance-sheet entities.
Jitters about such "hidden" assets helped trigger the nose-dive in Citigroup's stock last week. Among the off-balance-sheet assets are $667 billion in mortgage-related securities.
Citigroup has tried repeatedly to rid itself of its exposure to those assets -- and nearly hammered out a similar arrangement with the government nearly two months ago.
In late September, the company reached an agreement for a government-financed acquisition of Wachovia Corp. Under that planned deal, Citigroup and the government were going to divvy up the losses on $312 billion of assets, with Citigroup absorbing the first $30 billion in losses and the government shouldering the remainder.
Citigroup described that arrangement as intended to insulate it from Wachovia's risky mortgage assets. But Citigroup also would have been able to unload some of its own assets, according to people familiar with the matter.
That deal unraveled in less than a week, after Wells Fargo & Co. emerged with a higher bid that didn't require direct government backing. That deprived Citigroup not only of a way to dump its risky assets but also of a deep pool of deposits, which would have substantially strengthened its access to stable low-cost funding.
Shortly after the Wachovia deal fell apart, Citigroup pitched the idea to the government of it helping to protect the company against some of its losses. Citigroup executives argued that the government should help the company after Wachovia slipped away, according to a person familiar with the matter. But federal officials balked at the idea.
As recently as one month ago, Citigroup had hoped to be able to unload some of those assets to the U.S. government through its Troubled Asset Relief Program, according to people familiar with the bank's plans. But when Treasury Secretary Paulson earlier this month shelved plans to use TARP to purchase banks' bad assets, that option vanished.
Last Monday, Mr. Pandit said in a meeting with employees that Citigroup was scrapping plans to try to sell about $80 billion in risky assets. Investors and analysts interpreted the move as a sign that Citigroup either was unable to sell the assets, or would have had to incur hefty losses in the process.
Two days later, Citigroup announced it was buying $17.4 billion in assets from its structured-investment vehicles -- complex entities whose holdings included risky mortgage-linked securities -- and faced a $1.1 billion loss due to their diminished values.
The back-to-back moves, coupled with existing fears about Citigroup's massive off-balance-sheet holdings, stoked investor fears that Citigroup could be swamped by toxic assets flooding back onto its books. That helped ignite the current panic, which was exacerbated by a drumbeat of bleak economic news.
Government officials could face requests from other banks for similar help shoring up their balance sheets. Banks, hedge funds, and private equity firms have urged Capitol Hill and government officials to restart the asset-purchase program in recent weeks.
"The problem is that other banks would want to get in line" for such government support, says Thomas B. Michaud, a vice chairman of investment bank Keefe, Bruyette & Woods Inc. "Is there enough money to do that?"
http://online.wsj.com/article/SB122747680752551447.html
The federal government agreed Sunday night to rescue Citigroup Inc. by helping to absorb potentially hundreds of billions of dollars in losses on toxic assets on its balance sheet and injecting fresh capital into the troubled financial giant.
The agreement marks a new phase in government efforts to stabilize U.S. banks and securities firms. After injecting $306 billion of capital into financial institutions, federal officials now appear to be willing to help shoulder bad assets, on a targeted basis, from specific institutions.
Citigroup is one of the world's best-known banking brands, with more than 200 million customer accounts in 106 countries. Its plunging stock price threatened to spook customers and imperil the bank.
If the government's rescue plan is a success, it could help bring stability to the entire financial system. If it doesn't, even deeper doubts about the industry's future could spread.
After a weekend of marathon talks between Citigroup executives and top federal officials, the parties late Sunday night nailed down a package in which the government will help protect the company from its riskiest assets.
Under the plan, Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses in that portfolio. After that, three government agencies -- the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. -- will take on any additional losses, though Citigroup could have to share a small portion of additional losses.
The plan would essentially put the government in the position of insuring a slice of Citigroup's balance sheet. That means taxpayers will be on the hook if Citigroup's massive portfolios of mortgage, credit cards, commercial real-estate and big corporate loans continue to sour.
In exchange for that protection, Citigroup will give the government warrants to buy shares in the company.
In addition, the Treasury Department also will inject $20 billion of fresh capital into Citigroup. That comes on top of the $25 billion infusion that Citigroup recently received as part of the the broader U.S. banking-industry bailout.
The government and Citigroup had hoped to unveil the plan early Sunday evening, but negotiations dragged on longer than expected. Treasury Secretary Henry Paulson began briefing Congressional leaders about the plan later in the evening.
Asian markets were mostly lower in early Monday trading as news of the discussions surfaced. Japan's markets were closed for a holiday.
The sweeping rescue plan underscores how concerned the government had become about letting Citigroup's fortunes continue to deteriorate. The company has been pounded by mortgage-related losses and is on track to suffer further from the weakening economies in the U.S. and around the world.
Last week, with Wall Street rapidly losing confidence in the company, its shares tumbled 60% to a 16-year low. Still, Citigroup Chief Executive Vikram Pandit and other top executives insisted last week that the company remained on solid financial footing.
While Citigroup's recent woes don't appear to be as severe as the problems that ultimately felled Bear Stearns Cos. and Lehman Brothers Holdings Inc., the U.S. government seems to have decided it can't afford to gamble on whether Citigroup will weather the storm.
At the same time, the Treasury Department is already facing a political backlash over the use of taxpayer funds to stabilize the banking sector, and has nearly exhausted the $350 billion that Congress allotted to the first phase of the industry rescue.
The planned arrangement with Citigroup appears to be an attempt to thread that needle by giving the company some breathing room until markets calm.
In addition to $2 trillion in assets Citigroup has on its balance sheet, it has another $1.23 trillion in entities that aren't reflected there. Some of those assets are tied to mortgages, and investors have worried they could cause heavy losses if they are brought back on the company's books.
Even as they assured employees and investors last week that the company was on sound financial footing, Citigroup executives and directors knew they needed to do something fast to stabilize their company. Top government officials, including the heads of the Treasury Department and the Fed, also started scrambling to draw up contingency plans in case Citigroup's troubles intensified.
The assets affected under the government plan are largely loans and securities backed by residential and commercial real estate. Such assets have been devastated by the meltdown of the housing markets and have started coming under even greater strain in recent weeks as the U.S. economy slows.
"With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy," the Treasury Department, Fed and FDIC said in a joint statement issued late Sunday.
Even as they assured employees and investors last week that the company was on sound financial footing, Citigroup executives and directors knew they needed to do something fast to stabilize their company. By Friday, bank officials were hoping for a public expression of confidence from the government, believing that would help reassure clients and customers.
Top government officials, including the heads of the Treasury Department and the Fed, also started scrambling to draw up contingency plans in case Citigroup's troubles intensified.
On Sunday evening, government officials were locked in meetings to hammer out the final terms of an arrangement that will leave the government deeply enmeshed in the inner workings of one of the world's largest financial institutions.
The government didn't require Citigroup to make changes to its executive ranks or its board in return for government assistance. However, Citigroup agreed to "comply with enhanced executive compensation restrictions," the government said Sunday, and also will implement a government-backed plan to modify distressed mortgages that is designed to curb foreclosures.
Despite the unprecedented scope of the rescue plan, it's not clear whether it will be enough to stabilize Citigroup. The roughly $300 billion pool of assets that are included in the rescue plan represent only a sliver of the company's more than $3 trillion in assets, including its holdings in off-balance-sheet entities.
Jitters about such "hidden" assets helped trigger the nose-dive in Citigroup's stock last week. Among the off-balance-sheet assets are $667 billion in mortgage-related securities.
Citigroup has tried repeatedly to rid itself of its exposure to those assets -- and nearly hammered out a similar arrangement with the government nearly two months ago.
In late September, the company reached an agreement for a government-financed acquisition of Wachovia Corp. Under that planned deal, Citigroup and the government were going to divvy up the losses on $312 billion of assets, with Citigroup absorbing the first $30 billion in losses and the government shouldering the remainder.
Citigroup described that arrangement as intended to insulate it from Wachovia's risky mortgage assets. But Citigroup also would have been able to unload some of its own assets, according to people familiar with the matter.
That deal unraveled in less than a week, after Wells Fargo & Co. emerged with a higher bid that didn't require direct government backing. That deprived Citigroup not only of a way to dump its risky assets but also of a deep pool of deposits, which would have substantially strengthened its access to stable low-cost funding.
Shortly after the Wachovia deal fell apart, Citigroup pitched the idea to the government of it helping to protect the company against some of its losses. Citigroup executives argued that the government should help the company after Wachovia slipped away, according to a person familiar with the matter. But federal officials balked at the idea.
As recently as one month ago, Citigroup had hoped to be able to unload some of those assets to the U.S. government through its Troubled Asset Relief Program, according to people familiar with the bank's plans. But when Treasury Secretary Paulson earlier this month shelved plans to use TARP to purchase banks' bad assets, that option vanished.
Last Monday, Mr. Pandit said in a meeting with employees that Citigroup was scrapping plans to try to sell about $80 billion in risky assets. Investors and analysts interpreted the move as a sign that Citigroup either was unable to sell the assets, or would have had to incur hefty losses in the process.
Two days later, Citigroup announced it was buying $17.4 billion in assets from its structured-investment vehicles -- complex entities whose holdings included risky mortgage-linked securities -- and faced a $1.1 billion loss due to their diminished values.
The back-to-back moves, coupled with existing fears about Citigroup's massive off-balance-sheet holdings, stoked investor fears that Citigroup could be swamped by toxic assets flooding back onto its books. That helped ignite the current panic, which was exacerbated by a drumbeat of bleak economic news.
Government officials could face requests from other banks for similar help shoring up their balance sheets. Banks, hedge funds, and private equity firms have urged Capitol Hill and government officials to restart the asset-purchase program in recent weeks.
"The problem is that other banks would want to get in line" for such government support, says Thomas B. Michaud, a vice chairman of investment bank Keefe, Bruyette & Woods Inc. "Is there enough money to do that?"
Re: GLOBAL ECONOMY
my friend was speculating that US Govt might at some point default on
redemption of its maturing T-bills held in huge nos by the arabs and east asians.
you just cannot keep on printing fake $$ and racking up public debt with
these trillion dollar packages.
perhaps the dollar falling off its perch is going to be triggered by some
social or security crisis in east asia.
for dollar earning NRI's I would think opening a euro or swiss franc
account with a MNC bank would be a prudent thing...
redemption of its maturing T-bills held in huge nos by the arabs and east asians.
you just cannot keep on printing fake $$ and racking up public debt with
these trillion dollar packages.
perhaps the dollar falling off its perch is going to be triggered by some
social or security crisis in east asia.
for dollar earning NRI's I would think opening a euro or swiss franc
account with a MNC bank would be a prudent thing...
Re: GLOBAL ECONOMY
Listen to the wisdom of our ansestors who regarded physical gold and silver as the only form of real money. We have all been tricked into working for stuff the powers that be can render worthless with a stroke of a pen.for dollar earning NRI's I would think opening a euro or swiss franc
account with a MNC bank would be a prudent thing...
Gold and silver are the only way to prevent the reallocation of wealth from people who have worked & saved to corporations and crooks by govts.
Its either that or we all gotta take our payments in herds of cows.
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Arya Sumantra
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Re: GLOBAL ECONOMY
^^^^^ The book- The demise of the dollar... and Why it's great for your investments by Addison Wiggin gives some good insight in this regard. Your belief in ancestral wisdom of buying gold and silver is sure to be revived upon reading it. Gold is the REAL money.
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pradeepe
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Re: GLOBAL ECONOMY
The day that happens is the day we can officially declare the most prudent investment to be a shotgun and a couple of crates of ammo.Singha wrote:my friend was speculating that US Govt might at some point default on
redemption of its maturing T-bills held in huge nos by the arabs and east asians.
T-bills are increasingly being held by the aam janta.
Land...folks...land...land and more land. It should be a part of ones primary investment for all times. We spring forth from it and return to it...we can learn to live off it as well.
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Arya Sumantra
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Re: GLOBAL ECONOMY
FIGHTING THE GLOBAL FINANCIAL SLUMP
Less Is Dangerous
By Peter Coy
Amid a debt-deflation spiral, the governments' greatest risk is enacting stimulus measures that are too little to fight the slump.
For more than six decades, through oil shocks and terrorist attacks, the world's advanced economies have managed to expand their collective output at least a little bit each year. But that long lucky streak is probably about to end, a victim of the severe global credit crunch. The International Monetary Fund is now projecting that 2009 will bring the first aggregate decline in economic output in advanced economies since at least World War II.
The IMF still expects China and other developing nations to grow next year as a group, but it warns that "downside risks to growth, even for the emerging economies, remain significant." Some economists are even gloomier. "There is a very severe deleveraging which you can't stop," says Anders Aslund, senior fellow at the Peterson Institute for International Economics in Washington. "My guess is that (even) if we have good economic policies, the world will see a (gross domestic product) fall of 10 percent... . This is global, and it's fierce."
Even if things don't get that bad, it's clear that we're deep in uncharted territory -- or at least territory that hasn't been explored since the Great Depression. Economists and policymakers are floundering. Since they don't know how severe the recession will be, they don't know how extreme their measures to combat the downturn should be. US Treasury Secretary Henry Paulson, who has struggled to find a path for American policy, defended himself in a Nov. 18 op-ed article in The New York Times, saying: "There is no playbook for responding to turmoil we have never faced."
The greatest risk at the moment is that governments will do too little to fight the slide. BusinessWeek estimates that governments around the world have committed more than $2.6 trillion for bank bailouts and other efforts to spur growth. But even that may not be enough. Germany, the powerhouse of Europe, has moved only haltingly to stimulate its economy, fearing that aggressive steps might cause inflation. Holger Schmieding, chief European economist at Bank of America in London, says Germany's tax-cut plan "is so small, I wouldn't even count it." Japan, once again in recession, remains unable to muster the energy to break out of an off-and-on performance that dates back to 1990. Britain, Ireland, and other nations with big government deficits are reluctant to spend too much on stimulus for fear it could invite a speculative attack on their currencies.
"Promiscuous" with Debt
The US, where the crisis originated, may also be moving too slowly given the depth of the slump, many economists say. Washington is unlikely to pass a substantial stimulus package until after the new Congress and President take office in January. On Nov. 18, Treasury's Paulson clashed with lawmakers who want him to spend some of the $700 billion Troubled Asset Relief Program on aid to homeowners. Paulson said TARP is supposed to bolster financial institutions and "was not intended to be an economic stimulus or an economic recovery package."
The problem with slow or tentative measures is that they could allow the worldwide downturn to gain a momentum that would be even harder to reverse later. The lack of quick and massive intervention may have been one of the reasons why the Great Depression, which began in 1929, lingered until the outbreak of World War II revved up the war machines.
An unprecedented debt overhang is what makes this downturn both severe and hard to forecast. Consumers, particularly in the US, overborrowed to buy houses, cars, toys, and vacations. The bubble in housing prices misled lenders into thinking the loans were well collateralized. A similar dynamic was at work in other kinds of secured lending. Now the spiral has reversed. The declining value of collateral is causing lenders to withdraw credit. That forces borrowers to sell assets to raise cash, pushing prices down further in a vicious cycle.
Hardest hit are small, open economies such as Ireland, Iceland, and Taiwan (all island nations) that were exemplars of globalization and financial innovation just a few years ago. They relied even more than the US on free flows of trade and investment. But big European countries such as Britain, France, and Italy also feel their ability to stimulate is limited. "The British government has been wildly promiscuous with public debt over the last 10 years," says Geoffrey Wood, an economist at Cass Business School of City University London. He says British public debt "will inevitably take its toll on the pound. There's no logical floor for how long it could go against the dollar."
Rates Can't Be Cut Below Zero
Least affected are several big countries, such as China, that are beginning to switch from export-driven growth to domestic demand. The IMF expects China's economy to expand 8.5 percent in 2009 -- not bad, albeit the country's first year of single-digit growth since 2002. Beijing announced plans for $586 billion in stimulus over two years to keep things humming. Indonesia, surprisingly, chugged ahead at a 6.4 percent rate in the third quarter, driven by domestic demand. And sub-Saharan Africa is also likely to be spared, if only because much of it is desperately poor and barely tied to the global economy.
The world economy's ordinary shock absorbers are inadequate for a crisis of this scale. Central bank reductions in interest rates are becoming less effective because people are afraid to borrow no matter how low the rate. And of course, rates can't be cut below zero.
As a result, governments are being forced to turn to spending programs that are not part of their usual recession-fighting arsenal. In addition to the usual tax breaks and rebate checks, they are resorting to government loans and investments in financial institutions, as well as debt guarantees aimed at restarting private lending. Many countries are pursuing all three.
The bad news is that government responses do not yet match the scale of the crisis. The good news, on the other hand, is that governments have more elbow room than usual to borrow and spend because, with the plunge in commodity prices and slack in labor markets, inflation is no longer an immediate threat. On Nov. 19 the US Bureau of Labor Statistics reported a 1 percent drop in consumer prices in October—the biggest monthly decline since the bureau began tracking those figures in 1947.
Recognizing the risks of a debt-deflation spiral, aides to President-elect Barack Obama are working on plans to ask Congress to spend up to $500 billion more. Other countries may have to follow suit. In the end, a synchronized recession will require synchronized stimuli.
Coy is BusinessWeek's Economics editor
With Jason Bush in Moscow, Mark Scott in London, and Carol Matlack in Paris
Less Is Dangerous
By Peter Coy
Amid a debt-deflation spiral, the governments' greatest risk is enacting stimulus measures that are too little to fight the slump.
For more than six decades, through oil shocks and terrorist attacks, the world's advanced economies have managed to expand their collective output at least a little bit each year. But that long lucky streak is probably about to end, a victim of the severe global credit crunch. The International Monetary Fund is now projecting that 2009 will bring the first aggregate decline in economic output in advanced economies since at least World War II.
The IMF still expects China and other developing nations to grow next year as a group, but it warns that "downside risks to growth, even for the emerging economies, remain significant." Some economists are even gloomier. "There is a very severe deleveraging which you can't stop," says Anders Aslund, senior fellow at the Peterson Institute for International Economics in Washington. "My guess is that (even) if we have good economic policies, the world will see a (gross domestic product) fall of 10 percent... . This is global, and it's fierce."
Even if things don't get that bad, it's clear that we're deep in uncharted territory -- or at least territory that hasn't been explored since the Great Depression. Economists and policymakers are floundering. Since they don't know how severe the recession will be, they don't know how extreme their measures to combat the downturn should be. US Treasury Secretary Henry Paulson, who has struggled to find a path for American policy, defended himself in a Nov. 18 op-ed article in The New York Times, saying: "There is no playbook for responding to turmoil we have never faced."
The greatest risk at the moment is that governments will do too little to fight the slide. BusinessWeek estimates that governments around the world have committed more than $2.6 trillion for bank bailouts and other efforts to spur growth. But even that may not be enough. Germany, the powerhouse of Europe, has moved only haltingly to stimulate its economy, fearing that aggressive steps might cause inflation. Holger Schmieding, chief European economist at Bank of America in London, says Germany's tax-cut plan "is so small, I wouldn't even count it." Japan, once again in recession, remains unable to muster the energy to break out of an off-and-on performance that dates back to 1990. Britain, Ireland, and other nations with big government deficits are reluctant to spend too much on stimulus for fear it could invite a speculative attack on their currencies.
"Promiscuous" with Debt
The US, where the crisis originated, may also be moving too slowly given the depth of the slump, many economists say. Washington is unlikely to pass a substantial stimulus package until after the new Congress and President take office in January. On Nov. 18, Treasury's Paulson clashed with lawmakers who want him to spend some of the $700 billion Troubled Asset Relief Program on aid to homeowners. Paulson said TARP is supposed to bolster financial institutions and "was not intended to be an economic stimulus or an economic recovery package."
The problem with slow or tentative measures is that they could allow the worldwide downturn to gain a momentum that would be even harder to reverse later. The lack of quick and massive intervention may have been one of the reasons why the Great Depression, which began in 1929, lingered until the outbreak of World War II revved up the war machines.
An unprecedented debt overhang is what makes this downturn both severe and hard to forecast. Consumers, particularly in the US, overborrowed to buy houses, cars, toys, and vacations. The bubble in housing prices misled lenders into thinking the loans were well collateralized. A similar dynamic was at work in other kinds of secured lending. Now the spiral has reversed. The declining value of collateral is causing lenders to withdraw credit. That forces borrowers to sell assets to raise cash, pushing prices down further in a vicious cycle.
Hardest hit are small, open economies such as Ireland, Iceland, and Taiwan (all island nations) that were exemplars of globalization and financial innovation just a few years ago. They relied even more than the US on free flows of trade and investment. But big European countries such as Britain, France, and Italy also feel their ability to stimulate is limited. "The British government has been wildly promiscuous with public debt over the last 10 years," says Geoffrey Wood, an economist at Cass Business School of City University London. He says British public debt "will inevitably take its toll on the pound. There's no logical floor for how long it could go against the dollar."
Rates Can't Be Cut Below Zero
Least affected are several big countries, such as China, that are beginning to switch from export-driven growth to domestic demand. The IMF expects China's economy to expand 8.5 percent in 2009 -- not bad, albeit the country's first year of single-digit growth since 2002. Beijing announced plans for $586 billion in stimulus over two years to keep things humming. Indonesia, surprisingly, chugged ahead at a 6.4 percent rate in the third quarter, driven by domestic demand. And sub-Saharan Africa is also likely to be spared, if only because much of it is desperately poor and barely tied to the global economy.
The world economy's ordinary shock absorbers are inadequate for a crisis of this scale. Central bank reductions in interest rates are becoming less effective because people are afraid to borrow no matter how low the rate. And of course, rates can't be cut below zero.
As a result, governments are being forced to turn to spending programs that are not part of their usual recession-fighting arsenal. In addition to the usual tax breaks and rebate checks, they are resorting to government loans and investments in financial institutions, as well as debt guarantees aimed at restarting private lending. Many countries are pursuing all three.
The bad news is that government responses do not yet match the scale of the crisis. The good news, on the other hand, is that governments have more elbow room than usual to borrow and spend because, with the plunge in commodity prices and slack in labor markets, inflation is no longer an immediate threat. On Nov. 19 the US Bureau of Labor Statistics reported a 1 percent drop in consumer prices in October—the biggest monthly decline since the bureau began tracking those figures in 1947.
Recognizing the risks of a debt-deflation spiral, aides to President-elect Barack Obama are working on plans to ask Congress to spend up to $500 billion more. Other countries may have to follow suit. In the end, a synchronized recession will require synchronized stimuli.
Coy is BusinessWeek's Economics editor
With Jason Bush in Moscow, Mark Scott in London, and Carol Matlack in Paris
Re: GLOBAL ECONOMY
New investment guru: The local psychic
Yup, more III world SDRE traits showing up amongst former TFTA stiff upper lips onlee.Psychics say their business is robust, as do astrologers and people who channel spirits, read palms and otherwise predict the future (albeit not the winning lottery numbers). Their clients, who include a growing number of men, are often professional advice-givers themselves, in fields like real estate and investments, and they typically hand over anywhere from $75 to $1,000 an hour for this form of insight.
Re: GLOBAL ECONOMY
Land is that its taxable and immovable. You cannot pack up and run off with land. If you stop paying your taxes, you'll soon find out who really owns all land.Land...folks...land...land and more land. It should be a part of ones primary investment for all times. We spring forth from it and return to it...we can learn to live off it as well.
Re: GLOBAL ECONOMY
Russian analyst predicts decline and breakup of U.S
MOSCOW, November 24 (RIA Novosti) - A leading Russian political analyst has said the economic turmoil in the United States has confirmed his long-held view that the country is heading for collapse, and will divide into separate parts.
Professor Igor Panarin said in an interview with the respected daily Izvestia published on Monday: "The dollar is not secured by anything. The country's foreign debt has grown like an avalanche, even though in the early 1980s there was no debt. By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than 11 trillion. This is a pyramid that can only collapse."
The paper said Panarin's dire predictions for the U.S. economy, initially made at an international conference in Australia 10 years ago at a time when the economy appeared strong, have been given more credence by this year's events.
When asked when the U.S. economy would collapse, Panarin said: "It is already collapsing. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale: America will no longer be the world's financial regulator."
When asked who would replace the U.S. in regulating world markets, he said: "Two countries could assume this role: China, with its vast reserves, and Russia, which could play the role of a regulator in Eurasia."
Asked why he expected the U.S. to break up into separate parts, he said: "A whole range of reasons. Firstly, the financial problems in the U.S. will get worse. Millions of citizens there have lost their savings. Prices and unemployment are on the rise. General Motors and Ford are on the verge of collapse, and this means that whole cities will be left without work. Governors are already insistently demanding money from the federal center. Dissatisfaction is growing, and at the moment it is only being held back by the elections and the hope that Obama can work miracles. But by spring, it will be clear that there are no miracles."
He also cited the "vulnerable political setup", "lack of unified national laws", and "divisions among the elite, which have become clear in these crisis conditions."
He predicted that the U.S. will break up into six parts - the Pacific coast, with its growing Chinese population; the South, with its Hispanics; Texas, where independence movements are on the rise; the Atlantic coast, with its distinct and separate mentality; five of the poorer central states with their large Native American populations; and the northern states, where the influence from Canada is strong.
He even suggested that "we could claim Alaska - it was only granted on lease, after all."
On the fate of the U.S. dollar, he said: "In 2006 a secret agreement was reached between Canada, Mexico and the U.S. on a common Amero currency as a new monetary unit. This could signal preparations to replace the dollar. The one-hundred dollar bills that have flooded the world could be simply frozen. Under the pretext, let's say, that terrorists are forging them and they need to be checked."
When asked how Russia should react to his vision of the future, Panarin said: "Develop the ruble as a regional currency. Create a fully functioning oil exchange, trading in rubles... We must break the strings tying us to the financial Titanic, which in my view will soon sink."
Panarin, 60, is a professor at the Diplomatic Academy of the Russian Ministry for Foreign Affairs, and has authored several books on information warfare.
MOSCOW, November 24 (RIA Novosti) - A leading Russian political analyst has said the economic turmoil in the United States has confirmed his long-held view that the country is heading for collapse, and will divide into separate parts.
Professor Igor Panarin said in an interview with the respected daily Izvestia published on Monday: "The dollar is not secured by anything. The country's foreign debt has grown like an avalanche, even though in the early 1980s there was no debt. By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than 11 trillion. This is a pyramid that can only collapse."
The paper said Panarin's dire predictions for the U.S. economy, initially made at an international conference in Australia 10 years ago at a time when the economy appeared strong, have been given more credence by this year's events.
When asked when the U.S. economy would collapse, Panarin said: "It is already collapsing. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale: America will no longer be the world's financial regulator."
When asked who would replace the U.S. in regulating world markets, he said: "Two countries could assume this role: China, with its vast reserves, and Russia, which could play the role of a regulator in Eurasia."
Asked why he expected the U.S. to break up into separate parts, he said: "A whole range of reasons. Firstly, the financial problems in the U.S. will get worse. Millions of citizens there have lost their savings. Prices and unemployment are on the rise. General Motors and Ford are on the verge of collapse, and this means that whole cities will be left without work. Governors are already insistently demanding money from the federal center. Dissatisfaction is growing, and at the moment it is only being held back by the elections and the hope that Obama can work miracles. But by spring, it will be clear that there are no miracles."
He also cited the "vulnerable political setup", "lack of unified national laws", and "divisions among the elite, which have become clear in these crisis conditions."
He predicted that the U.S. will break up into six parts - the Pacific coast, with its growing Chinese population; the South, with its Hispanics; Texas, where independence movements are on the rise; the Atlantic coast, with its distinct and separate mentality; five of the poorer central states with their large Native American populations; and the northern states, where the influence from Canada is strong.
He even suggested that "we could claim Alaska - it was only granted on lease, after all."
On the fate of the U.S. dollar, he said: "In 2006 a secret agreement was reached between Canada, Mexico and the U.S. on a common Amero currency as a new monetary unit. This could signal preparations to replace the dollar. The one-hundred dollar bills that have flooded the world could be simply frozen. Under the pretext, let's say, that terrorists are forging them and they need to be checked."
When asked how Russia should react to his vision of the future, Panarin said: "Develop the ruble as a regional currency. Create a fully functioning oil exchange, trading in rubles... We must break the strings tying us to the financial Titanic, which in my view will soon sink."
Panarin, 60, is a professor at the Diplomatic Academy of the Russian Ministry for Foreign Affairs, and has authored several books on information warfare.
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Arya Sumantra
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Re: GLOBAL ECONOMY
You can print money, but not confidencehttp://www.timesonline.co.uk/tol/commen ... 218264.ece
A £100 billion deficit that damages the Government's credit will leave it unable to offer more support to the banks
William Rees-Mogg
Irving Fisher (1867-1947) was probably the greatest economist the United States has produced. He developed, though he did not invent, the equation of exchange; he was, so far as I can trace, the first economist to describe the “tipping point”, when natural equilibrium turns to inevitable disequilibrium; he formulated in the early 1930s a policy for reflation that would now be called “Keynesian”; he developed the “debt-deflation” theory of the Great Depression, in which the repayment of outstanding debt causes further falls in asset values; he advised President Roosevelt that deflation could not cure the slump.
He has been much mocked for his forecast, on October 23, 1929, that “we shall not see very much further, if any, recession in the stock market”. He published his book on Booms and Depressions, Some First Principles in 1932. I find his writings essential reading in trying to understand the crisis of 2008. He still has insights that spring to life as each new stage of the crisis is reached.
Today's debate in the House of Commons can be best understood in terms of Fisher's work; indeed, a sentence of Fisher's describes what Alistair Darling is trying to achieve. “The chief purpose of the correction must be to secure the future, so that things can go on.”
He argued that the economy should be “first corrected by reflation and thenceforward safeguarded”.
“Reflate and then stabilise” is an attractive policy. Yet there was considerable resistance to Fisher's ideas as there was to the similar policies advocated by Keynes. Some of the most interesting criticisms come from quantity theory monetarists of the 1930s, who might have been expected to support Fisher.
Professor E.W. Kemmerer was an economist who also based his analysis on the quantity theory of money. In 1932 Kemmerer and Fisher gave evidence to the House committee on banking and currency. Fisher argued for reflation; according to William Barber, who edited the relevant volume of his works, “as Kemmerer read the situation, little could be accomplished by increasing the money supply or by pressing the central bank to expand the lending capacity of banks still further. Attention should instead be directed towards creating conditions conducive to stimulating the velocity of monetary circulation. The basic requirement, in Kemmerer's view was the restoration of confidence.”
Fisher listed the underlying causes of depression in his own order of significance. Overindebtedness comes first, the volume of currency second, the price level third, net worth fourth, profits fifth, employment sixth, optimism and pessimism seventh and the velocity of circulation eighth. The difference between Fisher and Kemmerer seems to come down to different ratings of two of the eight causes of depression.
Kemmerer would have put expectation - that is optimism and pessimism - very high. Managing the psychology of the marketplace is of crucial importance for him. He would also put the velocity of circulation very high, probably above the volume of currency.
Today the Government will argue for monetary reflation more or less in Fisher's terms; the Conservatives will be arguing for stabilisation with the emphasis, as with Kemmerer, on confidence. Fisher's own figures do lend support to Kemmerer's view of the importance of the velocity with which money circulates. Reductions in the velocity of circulation had a more damaging effect in the crucial period of the early years of the Great Depression. Fisher gives the figures from October 1929 to March 1932 for the New York member banks of the Federal Reserve system.
In that period the volume of money in circulation in New York fell by 13 per cent, from $5.8 billion to $5 billion. The velocity fell by 72 per cent. The monetary crisis that was the primary cause of the Great Depression was one of falling velocity rather than of falling volume.
Fisher understood this: “Suppose, for instance, that the currency, beside being contracted 50 per cent is slowed another 50. This means that there is only half the currency moving half as fast. Therefore the currency as a whole will do only a quarter of its former work.”
In 1929-32 the currency in the New York banking system lost 76 per cent of its efficiency in these terms. The trouble is that governments, which can increase the quantity of money - if necessary by printing - have only psychological means to encourage the increase in the velocity of circulation.
Fisher saw the need to restore the morale of the banking system; the Great Depression, like the 2008 crisis, began as a crisis of the banks. “In a depression the banks themselves are as badly scared as the public, and only the government is strong enough to handle such a scare.”
This brings the argument to its crucial point. The creditworthiness that must be protected at all costs is the creditworthiness of the government. Any government's credit is bound to depend on its own financial strength. The credit of the British Government will now be prejudiced by the prospect of a deficit expected to run at £100 billion a year. Such a deficit would undermine confidence in its ability to give further support to its banks. If confidence in the Government's credit is damaged that will also reduce confidence in British banks.
A government trying to prevent a recession turning into a depression must support its banking system to help to reflate the economy. That will require cash. But these reflationary policies must be balanced against the overriding need to protect the national credit, on which banking credit ultimately depends. Anything that weakens national credit should, therefore, be avoided. We have seen the pound lose a quarter of its value in terms of the dollar as a response to a large cut in interest rates. To restart the engine of credit, confidence will matter most. Governments can print money, but they cannot print the increased velocity of circulation that only confidence will produce.
A £100 billion deficit that damages the Government's credit will leave it unable to offer more support to the banks
William Rees-Mogg
Irving Fisher (1867-1947) was probably the greatest economist the United States has produced. He developed, though he did not invent, the equation of exchange; he was, so far as I can trace, the first economist to describe the “tipping point”, when natural equilibrium turns to inevitable disequilibrium; he formulated in the early 1930s a policy for reflation that would now be called “Keynesian”; he developed the “debt-deflation” theory of the Great Depression, in which the repayment of outstanding debt causes further falls in asset values; he advised President Roosevelt that deflation could not cure the slump.
He has been much mocked for his forecast, on October 23, 1929, that “we shall not see very much further, if any, recession in the stock market”. He published his book on Booms and Depressions, Some First Principles in 1932. I find his writings essential reading in trying to understand the crisis of 2008. He still has insights that spring to life as each new stage of the crisis is reached.
Today's debate in the House of Commons can be best understood in terms of Fisher's work; indeed, a sentence of Fisher's describes what Alistair Darling is trying to achieve. “The chief purpose of the correction must be to secure the future, so that things can go on.”
He argued that the economy should be “first corrected by reflation and thenceforward safeguarded”.
“Reflate and then stabilise” is an attractive policy. Yet there was considerable resistance to Fisher's ideas as there was to the similar policies advocated by Keynes. Some of the most interesting criticisms come from quantity theory monetarists of the 1930s, who might have been expected to support Fisher.
Professor E.W. Kemmerer was an economist who also based his analysis on the quantity theory of money. In 1932 Kemmerer and Fisher gave evidence to the House committee on banking and currency. Fisher argued for reflation; according to William Barber, who edited the relevant volume of his works, “as Kemmerer read the situation, little could be accomplished by increasing the money supply or by pressing the central bank to expand the lending capacity of banks still further. Attention should instead be directed towards creating conditions conducive to stimulating the velocity of monetary circulation. The basic requirement, in Kemmerer's view was the restoration of confidence.”
Fisher listed the underlying causes of depression in his own order of significance. Overindebtedness comes first, the volume of currency second, the price level third, net worth fourth, profits fifth, employment sixth, optimism and pessimism seventh and the velocity of circulation eighth. The difference between Fisher and Kemmerer seems to come down to different ratings of two of the eight causes of depression.
Kemmerer would have put expectation - that is optimism and pessimism - very high. Managing the psychology of the marketplace is of crucial importance for him. He would also put the velocity of circulation very high, probably above the volume of currency.
Today the Government will argue for monetary reflation more or less in Fisher's terms; the Conservatives will be arguing for stabilisation with the emphasis, as with Kemmerer, on confidence. Fisher's own figures do lend support to Kemmerer's view of the importance of the velocity with which money circulates. Reductions in the velocity of circulation had a more damaging effect in the crucial period of the early years of the Great Depression. Fisher gives the figures from October 1929 to March 1932 for the New York member banks of the Federal Reserve system.
In that period the volume of money in circulation in New York fell by 13 per cent, from $5.8 billion to $5 billion. The velocity fell by 72 per cent. The monetary crisis that was the primary cause of the Great Depression was one of falling velocity rather than of falling volume.
Fisher understood this: “Suppose, for instance, that the currency, beside being contracted 50 per cent is slowed another 50. This means that there is only half the currency moving half as fast. Therefore the currency as a whole will do only a quarter of its former work.”
In 1929-32 the currency in the New York banking system lost 76 per cent of its efficiency in these terms. The trouble is that governments, which can increase the quantity of money - if necessary by printing - have only psychological means to encourage the increase in the velocity of circulation.
Fisher saw the need to restore the morale of the banking system; the Great Depression, like the 2008 crisis, began as a crisis of the banks. “In a depression the banks themselves are as badly scared as the public, and only the government is strong enough to handle such a scare.”
This brings the argument to its crucial point. The creditworthiness that must be protected at all costs is the creditworthiness of the government. Any government's credit is bound to depend on its own financial strength. The credit of the British Government will now be prejudiced by the prospect of a deficit expected to run at £100 billion a year. Such a deficit would undermine confidence in its ability to give further support to its banks. If confidence in the Government's credit is damaged that will also reduce confidence in British banks.
A government trying to prevent a recession turning into a depression must support its banking system to help to reflate the economy. That will require cash. But these reflationary policies must be balanced against the overriding need to protect the national credit, on which banking credit ultimately depends. Anything that weakens national credit should, therefore, be avoided. We have seen the pound lose a quarter of its value in terms of the dollar as a response to a large cut in interest rates. To restart the engine of credit, confidence will matter most. Governments can print money, but they cannot print the increased velocity of circulation that only confidence will produce.
Re: GLOBAL ECONOMY
Hospitals X-Ray Patient Credit Scores
In the comments section, this caught moi eye
A wise friend once told me, long back when I was a wide-eyed FOB here that the US is a great place to live and work in but not to grow old in , fall sick in or die in..... There it becomes very expensive onlee.The procedure, which is not understood by most patients or even many doctors, generally doesn't come into play when there is an emergency. But it has raised eyebrows for several reasons: Hospital administrators are looking at patient data—credit scores, credit-card limits, and 401(k) balances—not usually associated with treatment decisions.
Patients are surprised to learn that they're being subjected to the analysis, especially so in the case of nonprofit hospitals that historically have been magnanimous with charity care. And some health experts fear that hospitals will use techniques borrowed from the mortgage and car-loan industries to deny treatment to consumers with little or no health insurance.
"The hospitals are trying to balance their mission with the financial realities of the market," says Aaron Katz, a lecturer on health policy at the University of Washington in Seattle. "That has led to certain decisions, such as a wallet biopsy, that could affect [a patient's] access to care."
In the comments section, this caught moi eye
So now, hospitals can financially engineer their treatments AND that treatment's PRICING. Sounds like healthcare is emulating Wall Street, trying to learn how much they can gouge one for treatment, and, giving you 'things' you never encountered before; MSRA, Staph...pick you poison.
Re: GLOBAL ECONOMY
U.S. financial bailout bill tops 50% of GDP.
http://www.bloomberg.com/apps/news?pid= ... 3k2rZMNgDw
http://www.bloomberg.com/apps/news?pid= ... 3k2rZMNgDw
Re: GLOBAL ECONOMY
Boom turns to gloom as crisis hits Dubai
24 Nov 2008, 0200 hrs IST, REUTERS
http://economictimes.indiatimes.com/Boo ... 746936.cms
DUBAI: The seaside emirate of Dubai shifted into crisis mode this week as its breakneck building boom stalled, its lending bonanza evaporated and
the government pondered wider steps to rescue banks.
Dubai - self-styled bling capital of the Middle East, nightclub hotspot for the teetotalling Gulf and home to the world's tallest building and biggest mall - has gone pear-shaped.
"It's gotten pretty ugly out there," analysts at Nomura Investment Banking wrote in a note this week, describing Dubai's property market as "a full-scale frenzy in which speculation went largely unchecked until it was very late."
The result may be a new business model for the emirate, one based less on debt and speculation.
Dubai's response is now being hammered out by a committee of business and government leaders charged with steering the emirate through the crisis and perhaps throwing its high-debt business model out the window.
Big developers have started firing staff and paring projects, banks like Emirates NBD ENBD.DU have blocked consumer credit to employees of companies at risk, and at least one major mortgage company has stopped lending altogether.
"Lenders blinded by rising oil prices and borrowers spellbound by easy returns have helped build a mountain of private sector debt in parts of the region that has generated an illusion of excess and abundance," Nomura said.
Now, investors fear that individuals and corporations alike will have trouble paying back Dubai's non-bank foreign currency debt estimated at just under $70 billion, according to estimates by ratings agency Fitch.
Shares in the region have lost around $1 trillion since the beginning of the year as investors fled. The UAE finance ministry said last month it would inject 70 billion dirhams ($19 billion) into the banking system, and is already looking at doing more to keep interbank liquidity flowing.
Many had hoped that the six countries of the Gulf Cooperation Council (GCC) would escape the crisis due to their massive current account surpluses from energy exports.
"Dubai is the most vulnerable, as it has little oil and has been booming on the oil surpluses from the GCC, Iran and Russia," said analysts at Citibank this week.
Dubai Inc
Dubai Inc - the name applied to the emirate because it is run more as a business than a state - now faces a major overhaul and has taken on teams of consultants to advise on how it might reshape itself in an era of weaker credit, rising competition, falling speculation and narrower profit margins.
With barely any oil to call its own within the loose UAE confederation, Dubai made its bid for fame by housing banks, retail, media, shipping and logistics enterprises and by billing itself as a safe haven in a volatile region for investors.
Post-crisis, banks and property firms are likely to merge, developers retrench, and the wild culture of speculation grow tame.
In addition, some suggest that the monetary regimes in the Gulf - all, except Kuwait, which peg their currencies to the dollar - may need to restructure as floating regimes instead, a move likely to spur decades-old goals of monetary union.
Few anticipate default given the widespread view that Dubai is too big to fail and the implicit support provided by its neighbor Abu Dhabi - home to the largest sovereign wealth fund in the world, ADIA.
"We believe Dubai will pull through with some help," Citibank said.
But with the cost of credit for the Gulf's top 22 financial firms rising from 30 basis points over LIBOR in early 2007 to around 200 now, many expect Dubai's spree to halt, plans to be swept from the drawing board, and existing projects to struggle.
The result, in the end, may be the sustainable growth model that Dubai has sought all along.
24 Nov 2008, 0200 hrs IST, REUTERS
http://economictimes.indiatimes.com/Boo ... 746936.cms
DUBAI: The seaside emirate of Dubai shifted into crisis mode this week as its breakneck building boom stalled, its lending bonanza evaporated and
the government pondered wider steps to rescue banks.
Dubai - self-styled bling capital of the Middle East, nightclub hotspot for the teetotalling Gulf and home to the world's tallest building and biggest mall - has gone pear-shaped.
"It's gotten pretty ugly out there," analysts at Nomura Investment Banking wrote in a note this week, describing Dubai's property market as "a full-scale frenzy in which speculation went largely unchecked until it was very late."
The result may be a new business model for the emirate, one based less on debt and speculation.
Dubai's response is now being hammered out by a committee of business and government leaders charged with steering the emirate through the crisis and perhaps throwing its high-debt business model out the window.
Big developers have started firing staff and paring projects, banks like Emirates NBD ENBD.DU have blocked consumer credit to employees of companies at risk, and at least one major mortgage company has stopped lending altogether.
"Lenders blinded by rising oil prices and borrowers spellbound by easy returns have helped build a mountain of private sector debt in parts of the region that has generated an illusion of excess and abundance," Nomura said.
Now, investors fear that individuals and corporations alike will have trouble paying back Dubai's non-bank foreign currency debt estimated at just under $70 billion, according to estimates by ratings agency Fitch.
Shares in the region have lost around $1 trillion since the beginning of the year as investors fled. The UAE finance ministry said last month it would inject 70 billion dirhams ($19 billion) into the banking system, and is already looking at doing more to keep interbank liquidity flowing.
Many had hoped that the six countries of the Gulf Cooperation Council (GCC) would escape the crisis due to their massive current account surpluses from energy exports.
"Dubai is the most vulnerable, as it has little oil and has been booming on the oil surpluses from the GCC, Iran and Russia," said analysts at Citibank this week.
Dubai Inc
Dubai Inc - the name applied to the emirate because it is run more as a business than a state - now faces a major overhaul and has taken on teams of consultants to advise on how it might reshape itself in an era of weaker credit, rising competition, falling speculation and narrower profit margins.
With barely any oil to call its own within the loose UAE confederation, Dubai made its bid for fame by housing banks, retail, media, shipping and logistics enterprises and by billing itself as a safe haven in a volatile region for investors.
Post-crisis, banks and property firms are likely to merge, developers retrench, and the wild culture of speculation grow tame.
In addition, some suggest that the monetary regimes in the Gulf - all, except Kuwait, which peg their currencies to the dollar - may need to restructure as floating regimes instead, a move likely to spur decades-old goals of monetary union.
Few anticipate default given the widespread view that Dubai is too big to fail and the implicit support provided by its neighbor Abu Dhabi - home to the largest sovereign wealth fund in the world, ADIA.
"We believe Dubai will pull through with some help," Citibank said.
But with the cost of credit for the Gulf's top 22 financial firms rising from 30 basis points over LIBOR in early 2007 to around 200 now, many expect Dubai's spree to halt, plans to be swept from the drawing board, and existing projects to struggle.
The result, in the end, may be the sustainable growth model that Dubai has sought all along.
Re: GLOBAL ECONOMY
Looks like they are trying to bring the stocks and market down so that the Fed and US govt getsSatya_anveshi wrote:That is what I was suspecting. It looks like a done deal. Vikram Pandit will make way for Llyod Blankenfien in the merged company.
public support to fund and recapitalize these banks.
Re: GLOBAL ECONOMY
I read an article that there is a frenzy of US lawyers applying for jobs in
japan, hk and dubai. well well scratch dubai off that list.
I am not sure why US lawyers need to be paid $300k in dubai to do the
stuff a Indian lawyer would do for $100k. and he will get a better lawyer for the price.
japan, hk and dubai. well well scratch dubai off that list.
I am not sure why US lawyers need to be paid $300k in dubai to do the
stuff a Indian lawyer would do for $100k. and he will get a better lawyer for the price.
-
Satya_anveshi
- BRF Oldie
- Posts: 3532
- Joined: 08 Jan 2007 02:37
Re: GLOBAL ECONOMY
So far no article has used "controlled demolition" in regard to financial crisis to earn more sympathy/loyalty and it is amusing.Acharya wrote:Satya_anveshi wrote:
- APEC has met and along with a lot of hu ha, declared that they will not impose trade barriers
- China and India are doing everything they can to sooth US that they are doing everything within their power to "restore confidence" (euphenism to we are not doing anything adventurous)
- Sarkozy quickly took position that gives him "leadership" role and "control" the dissenters agenda
So, the charade continues for some more time.
However, even the common man has understood US's modus-operandi wrt managing their economy and the health (or lack) of it so this has to come to end soon. Unlike military abuse, where the victims are localized, financial abuse leaves vistims across vast locale. So, resentment is that much more / spread out. When and how this change will happen..remains to be seen.
Last edited by Satya_anveshi on 25 Nov 2008 08:12, edited 1 time in total.
Re: GLOBAL ECONOMY
Acharya wrote:
Acharya Garu>> Fantastic work, the bar graph you created gives a picture perfect view of the state of Banks in USA. By the way looks like, your work has been appropriated by AP.
Is there away you can claim rights to it?
Remind them it is not correct on their part not to acknowledge the source as "Acharya".
Re: GLOBAL ECONOMY
Vice president at a company I know was given the axe after working there for years. The fund which had bought out the company perhaps felt they could do without him so they gave him the pink slip.
He got furious and refused to leave the premise! They called the cops and sent him packing.
Take nothing for granted. One day you could be employed, next day they could be kicking your arse out the door regardless of what you have sacrificed for the company. I have zero loyalty to any company I work for.
He got furious and refused to leave the premise! They called the cops and sent him packing.
Take nothing for granted. One day you could be employed, next day they could be kicking your arse out the door regardless of what you have sacrificed for the company. I have zero loyalty to any company I work for.