Global Economy

[svinayak]

Op-Ed Columnist
Revenge of the Glut
By Paul Krugman
Published: March 1, 2009
http://www.nytimes.com/2009/03/02/opini ... an.html?em

Remember the good old days, when we used to talk about the “subprime crisis” — and some even thought that this crisis could be “contained”? Oh, the nostalgia!
Fred R. Conrad/The New York Times

Paul Krugman

Today we know that subprime lending was only a small fraction of the problem. Even bad home loans in general were only part of what went wrong. We’re living in a world of troubled borrowers, ranging from shopping mall developers to European “miracle” economies. And new kinds of debt trouble just keep emerging.

How did this global debt crisis happen? Why is it so widespread? The answer, I’d suggest, can be found in a speech Ben Bernanke, the Federal Reserve chairman, gave four years ago. At the time, Mr. Bernanke was trying to be reassuring. But what he said then nonetheless foreshadowed the bust to come.

The speech, titled “The Global Saving Glut and the U.S. Current Account Deficit,” offered a novel explanation for the rapid rise of the U.S. trade deficit in the early 21st century. The causes, argued Mr. Bernanke, lay not in America but in Asia.

In the mid-1990s, he pointed out, the emerging economies of Asia had been major importers of capital, borrowing abroad to finance their development. But after the Asian financial crisis of 1997-98 (which seemed like a big deal at the time but looks trivial compared with what’s happening now), these countries began protecting themselves by amassing huge war chests of foreign assets, in effect exporting capital to the rest of the world.

The result was a world awash in cheap money, looking for somewhere to go.

Most of that money went to the United States — hence our giant trade deficit, because a trade deficit is the flip side of capital inflows. But as Mr. Bernanke correctly pointed out, money surged into other nations as well. In particular, a number of smaller European economies experienced capital inflows that, while much smaller in dollar terms than the flows into the United States, were much larger compared with the size of their economies.

Still, much of the global saving glut did end up in America. Why?

Mr. Bernanke cited “the depth and sophistication of the country’s financial markets (which, among other things, have allowed households easy access to housing wealth).” Depth, yes. But sophistication? Well, you could say that American bankers, empowered by a quarter-century of deregulatory zeal, led the world in finding sophisticated ways to enrich themselves by hiding risk and fooling investors.

And wide-open, loosely regulated financial systems characterized many of the other recipients of large capital inflows. This may explain the almost eerie correlation between conservative praise two or three years ago and economic disaster today. “Reforms have made Iceland a Nordic tiger,” declared a paper from the Cato Institute. “How Ireland Became the Celtic Tiger” was the title of one Heritage Foundation article; “The Estonian Economic Miracle” was the title of another. All three nations are in deep crisis now.

For a while, the inrush of capital created the illusion of wealth in these countries, just as it did for American homeowners: asset prices were rising, currencies were strong, and everything looked fine. But bubbles always burst sooner or later, and yesterday’s miracle economies have become today’s basket cases, nations whose assets have evaporated but whose debts remain all too real. And these debts are an especially heavy burden because most of the loans were denominated in other countries’ currencies.

Nor is the damage confined to the original borrowers. In America, the housing bubble mainly took place along the coasts, but when the bubble burst, demand for manufactured goods, especially cars, collapsed — and that has taken a terrible toll on the industrial heartland. Similarly, Europe’s bubbles were mainly around the continent’s periphery, yet industrial production in Germany — which never had a financial bubble but is Europe’s manufacturing core — is falling rapidly, thanks to a plunge in exports.

If you want to know where the global crisis came from, then, think of it this way: we’re looking at the revenge of the glut.

And the saving glut is still out there. In fact, it’s bigger than ever, now that suddenly impoverished consumers have rediscovered the virtues of thrift and the worldwide property boom, which provided an outlet for all those excess savings, has turned into a worldwide bust.

One way to look at the international situation right now is that we’re suffering from a global paradox of thrift: around the world, desired saving exceeds the amount businesses are willing to invest. And the result is a global slump that leaves everyone worse off.

So that’s how we got into this mess. And we’re still looking for the way out.

[Ameet]

cross posting from another thread:

The most powerless powerful man on wall street.

How Citi CEO Vikram Pandit finally reached the top— just in time to see the financial system, Citigroup, and all his dreams come crashing down.

http://nymag.com/news/businessfinance/55035/

[svinayak]

* FEBRUARY 26, 2009, 11:48 A.M. ET

Pandit's Puzzle: How to Fix Citigroup
CEO Criticized for Being Too Slow to Recognize Severity of Bank's Problems
http://online.wsj.com/article/SB1232073 ... pics_obama
By DAVID ENRICH

For his doctoral thesis at Columbia University in the 1980s, Vikram Pandit tackled a complex economic problem involving asset pricing. His academic advisers worried it would be impossible to unravel.

They were right. He never solved the problem.

Mr. Pandit faces a similar quandary at Citigroup Inc., which is likely to announce Friday an operating loss of at least $10 billion for the fourth quarter, according to people familiar with the situation. Net losses reported since the 52-year-old Mr. Pandit took over as chief executive in December 2007 are likely to surpass $25 billion.
[Vikram Pandit]

Vikram Pandit

Citigroup also is expected to detail the downsizing strategy aimed at dismantling pieces of the financial supermarket that Mr. Pandit repeatedly defended even as the credit crisis and recession overwhelmed his efforts to tackle problems haunting the company long before he arrived.

Mr. Pandit hasn't said publicly what changed his mind. But he will face pressure to shed unwanted businesses in a market with few buyers and shore up eroding confidence in his management. Mr. Pandit and a Citigroup spokeswoman declined to comment for this article.

In 4 p.m. New York Stock Exchange composite trading Thursday, Citigroup's shares fell 15%, or 70 cents, to $3.83. The stock is down 35% in the past two days.

Even Citigroup's sharpest critics don't blame him for causing the mess, which includes inefficiency and a balance sheet brimming with toxic assets. But his deliberative, academic style has fueled criticism that he was too slow to recognize the severity of Citigroup's problems.

By not moving to shrink the company before it needed $45 billion in capital infusions from the federal government, Mr. Pandit's push to dump about a third of Citigroup's assets "could be too little too late," said one person who helped hash out the plan.

Mr. Pandit has been on the defensive, critics said, since concerns about Citigroup's exposure to billions of dollars in losses led investors to pummel its stock last fall. By mid-November, the stock was trading for less than $10 for the first time in more than 15 years.

On Nov. 17, Mr. Pandit touted the company's prospects in an employee meeting. That evening, he boarded a Citigroup jet for a one-day trip to Brazil. Some employees were surprised that he didn't cancel the trip.

"A lot of people thought [it] was really a lack of judgment to leave New York during a time of so much pressure on the bank," a Citigroup executive in Brazil said.

At a meeting in São Paulo, an employee asked Mr. Pandit whether the U.S. government might have to intervene to prevent Citigroup from unraveling. Mr. Pandit said no. "The brokerages are ahead of us" in terms of needing federal aid, he said, referring to Goldman Sachs Group Inc. and Morgan Stanley, according to a person at the meeting.

Some Citigroup executives said they felt helpless. Later that week, they held informal talks with rival banks about a merger or sale of a major business line, according to people familiar with the matter. The discussions went nowhere, partly because Citigroup executives realized they didn't have time to pull off a complicated deal, these people said.

Citigroup's directors called an emergency board meeting to weigh the company's options. "All hell is breaking loose at the company," one director said at the time.

The next day, Mr. Pandit held a conference call with about 3,000 executives. He lashed out at "fear-mongering" by short sellers and rivals. But he defended the company's health and structure. "This is a fantastic business model," Mr. Pandit said.

After a weekend of talks with federal officials, the U.S. government announced it would inject $20 billion into Citigroup and shield the company against certain losses. The deal left the government with a 7.8% stake in Citigroup.

The rescue didn't shake Mr. Pandit's confidence in his strategy. He framed the chaotic week as a reflection of the overall financial industry, not Citigroup. "He had a spring in his step," said a Wall Street veteran who met with Mr. Pandit on Nov. 25. "You could not tell that he is a CEO that's under this kind of pressure."

But top officials with the Federal Reserve and the Office of the Comptroller of the Currency, Citigroup's two primary regulators, warned executives not to come back for more financial aid without making unspecified, drastic changes. Mr. Pandit's inner circle realized that meant Washington likely would insist on installing a new management team, according to people familiar with the matter.

Government officials, including OCC chief John Dugan and Fed governor Kevin Warsh, instructed Citigroup to devise an accelerated strategy to steady the company and urged executives to improve communications with Wall Street, said people familiar with the situation.

By mid-December, Mr. Pandit and his team realized the company was heading for a big fourth-quarter loss, according to people familiar with the matter. Over the course of a week of meetings, it dawned on them that they needed to at least symbolically break with Mr. Pandit's past insistence on preserving Citigroup's business model, these people said.

Before Mr. Pandit departed for a weeklong family vacation to his native India, the executives had settled on the new strategy. They started negotiating to spin off the Smith Barney retail brokerage into a joint venture with Morgan Stanley.

As word of the looming fourth-quarter loss surfaced earlier this month, Citigroup's shares tumbled to their November lows. Colleagues said Mr. Pandit remained in high spirits, pressing his lieutenants to remain focused on their work.
—Damian Paletta contributed to this article.

[vina]

Some one was speculating here that the "who benefits" (applying infallible Paki Logic), from all the bailouts, esp , of AIG was Goldman.

Why speculate? . It is in the EDITORIAL of the NY Times , no less, the pillar of the NY establishment. If AIG goes under, Goldman goes under and with that, the entire brit and oirepoean, esp Swiss Insurerers and banks. Nice that their collective Musharrafs are in the dock and exposed and getting whipped mercilessly .

The New York Times
Printer Friendly Format Sponsored By

March 3, 2009
Editorial
The Never-Ending Bailout

Americans awoke to the news on Monday that federal officials had spent yet another feverish weekend concocting yet another bailout. This time, the Obama Treasury Department — sounding a lot like the Bush Treasury Department — promised another $30 billion to the American International Group, the giant insurer.

It was the fourth time since September that taxpayers have been called upon to rescue A.I.G. from collapse. It brings the bailout commitment for that one company to some $160 billion.

In a joint statement with the Federal Reserve on Monday, the Treasury justified the move, saying that “the potential cost to the economy and the taxpayer of government inaction would be extremely high.”

That’s a textbook rationale for any bailout. What no one is saying — the Bush folks wouldn’t, and the Obama team seems to have taken the same vow of Wall Street omertà — is which firms would be most threatened by an A.I.G. collapse. The Treasury and the Federal Reserve noted in their statement that A.I.G. is a “significant counterparty to a number of major financial institutions.”

That means that by enabling A.I.G. to avert bankruptcy proceedings, the taxpayer is also bailing out — whom exactly?

Not knowing is not acceptable. At this stage of a deepening crisis, no one is arguing that the government should let A.I.G. collapse into a disorderly bankruptcy. It is too interconnected. During the housing bubble, it used unregulated derivatives to insure mortgage securities that turned out to be toxic — without putting aside reserves in case it had to pay up. If it now went under, there could be a chain of catastrophic defaults among banks that hold the securities and related investments.

The A.I.G. bailouts fail the basic test of transparency: Who ends up with the money? Major financial institutions are not innocent victims of A.I.G.’s demise. They are sophisticated investors, and they should have known the risks being taken — and who profited mightily from the relationship before it all came crashing down.

Whomever the recipients are, they should be investigated for their roles in the crash and, to the extent possible, be made to pay for the bailouts.

The serial A.I.G. bailouts are especially problematic for their connection to the Wall Street bank Goldman Sachs. At the time of the first A.I.G. rescue last fall, it was reported by Gretchen Morgenson in The Times that Goldman was A.I.G.’s largest trading partner, with some $20 billion of business tied into the insurer. Goldman has said that its exposure to risk from A.I.G. was offset, or hedged, by other investments.

What is certain is that Goldman has lots of friends in high places — yet one more reason why this bailout has to be as transparent as possible. Lloyd Blankfein, Goldman’s chief executive, was the only Wall Street executive at a September meeting at the New York Federal Reserve to discuss the initial A.I.G. bailout. Also involved in the discussion was the then head of the New York Fed, Timothy Geithner, who is now President Obama’s Treasury secretary.

It is also painfully clear that more of the same black-hole bailouts are failing to restore stability or confidence. Stock markets worldwide tanked on Monday. A growing chorus of economists and commentators — including this page — are urging the Obama administration to adopt a more comprehensive solution: a government-run restructuring, or nationalization.

The government would not only take an ownership stake in firms that require extensive and ongoing bailouts — as it has done with A.I.G. and Citigroup — but also direct control of the weakest ones. It would get a realistic assessment of the assets crippling them and revamp their finances before returning them to the private sector, where they would be smaller and healthier and could start lending again.

We know that many Americans are uncomfortable with the word nationalization — politicians even more so. But each new bailout of old losers only feeds mistrust of the government and weakens public support for the even tougher decisions to come.

[shaardula]

yesterday on npr, somebody was asking if this is all a reflection on the rating agencies.

brown pitching the america and europe's level of transparency around the world!!!

ulTa chor ko DaanTe types.

[Singha]

"developed , efficient, transparent, sophisticated, business-friendly, no red tape" come to the City of London they said.

[svinayak]

Celente Predicts Revolution, Food Riots, Tax Rebellions By 2012
http://www.prisonplanet.com/celente-pre ... -2012.html

Trend forecaster, renowned for being accurate in the past, says that America will cease to be a developed nation within 4 years, crisis will be “worse than the great depression”

Celente Predicts Revolution, Food Riots, Tax Rebellions By 2012

Paul Joseph Watson
Prison Planet.com
Thursday, November 13, 2008

The man who predicted the 1987 stock market crash and the fall of the Soviet Union is now forecasting revolution in America, food riots and tax rebellions - all within four years, while cautioning that putting food on the table will be a more pressing concern than buying Christmas gifts by 2012.

Gerald Celente, the CEO of Trends Research Institute, is renowned for his accuracy in predicting future world and economic events, which will send a chill down your spine considering what he told Fox News this week.

Celente says that by 2012 America will become an undeveloped nation, that there will be a revolution marked by food riots, squatter rebellions, tax revolts and job marches, and that holidays will be more about obtaining food, not gifts.

(ARTICLE CONTINUES BELOW)

Celente Predicts Revolution, Food Riots, Tax Rebellions By 2012 131108banner2

“We’re going to see the end of the retail Christmas….we’re going to see a fundamental shift take place….putting food on the table is going to be more important that putting gifts under the Christmas tree,” said Celente, adding that the situation would be “worse than the great depression”.

“America’s going to go through a transition the likes of which no one is prepared for,” said Celente, noting that people’s refusal to acknowledge that America was even in a recession highlights how big a problem denial is in being ready for the true scale of the crisis.

Watch the clip.

Celente, who successfully predicted the 1997 Asian Currency Crisis, the subprime mortgage collapse and the massive devaluation of the U.S. dollar, told UPI in November last year that the following year would be known as “The Panic of 2008,” adding that “giants (would) tumble to their deaths,” which is exactly what we have witnessed with the collapse of Lehman Brothers, Bear Stearns and others. He also said that the dollar would eventually be devalued by as much as 90 per cent.

The consequence of what we have seen unfold this year would lead to a lowering in living standards, Celente predicted a year ago, which is also being borne out by plummeting retail sales figures.

The prospect of revolution was a concept echoed by a British Ministry of Defence report last year, which predicted that within 30 years, the growing gap between the super rich and the middle class, along with an urban underclass threatening social order would mean, “The world’s middle classes might unite, using access to knowledge, resources and skills to shape transnational processes in their own class interest,” and that, “The middle classes could become a revolutionary class.”

In a separate recent interview, Celente went further on the subject of revolution in America.

“There will be a revolution in this country,” he said. “It’s not going to come yet, but it’s going to come down the line and we’re going to see a third party and this was the catalyst for it: the takeover of Washington, D. C., in broad daylight by Wall Street in this bloodless coup. And it will happen as conditions continue to worsen.”

“The first thing to do is organize with tax revolts. That’s going to be the big one because people can’t afford to pay more school tax, property tax, any kind of tax. You’re going to start seeing those kinds of protests start to develop.”

“It’s going to be very bleak. Very sad. And there is going to be a lot of homeless, the likes of which we have never seen before. Tent cities are already sprouting up around the country and we’re going to see many more.”

“We’re going to start seeing huge areas of vacant real estate and squatters living in them as well. It’s going to be a picture the likes of which Americans are not going to be used to. It’s going to come as a shock and with it, there’s going to be a lot of crime. And the crime is going to be a lot worse than it was before because in the last 1929 Depression, people’s minds weren’t wrecked on all these modern drugs – over-the-counter drugs, or crystal meth or whatever it might be. So, you have a huge underclass of very desperate people with their minds chemically blown beyond anybody’s comprehension.”

[ramana]

it will start first in California where the taxes are very high and the polticians on a drunken spree of spending.

[svinayak]

http://kylekeeton.com/2009/02/russia-to ... lente.html

I prey for the same thing but I know as now that he is correct. I felt this coming several years ago and that was one of my reasons that I left the USA. The chances are going to get slim to be able to escape America in a few years.

I read a government report. That only 10% of Americans have a passport. (America has programed her people to be scared of the world and want to stay home and safe.)

The 10% passport holders are made up as such: 75% rich, 20% missionaries and the rest 5%.

The 10% of the population with passports is considered by government officials to be excessive and the government is looking at ways to decrease the issue of passports to foreign countries.

This number is starting to rise now at an alarming rate and the USA government has taken notice. They say that more passports have been issued in the month of January 2009 than in the last previous 6 months. The increase has caused and promoted the new controversial Passport Card, “a low cost, limited use (land and sea only) alternative to the Passport Book designed for those living along the border.” They call that a passport. I myself do not think that will pass in Russia as a passport.

There are a lot of articles about that 10% number and people are trying to play games with the passport issue but the fact remains, unless like you yourself know, people have to get a passport for overseas work, nobody is pushed to get one. What they are being pushed to is that new card...

ABOUT WHTI

The Western Hemisphere Travel Initiative is a result of the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA), requiring all travelers to present a passport or other document that denotes identity and citizenship when entering the U.S.

The goal of the initiative is to strengthen U.S. border security while facilitating entry for U.S. citizens and legitimate foreign visitors by providing standardized documentation that enables the Department of Homeland Security to quickly and reliably identify a traveler.

The people in the USA are being pushed to this new card that I just mentioned: The Passport Card: Passport card applications are currently being accepted in anticipation of land border travel document requirements. Based on current projections, we expect the passport card to be in full production beginning in July 2008. We will provide additional updates as available. Once in production, the passport card it will only be valid for land and sea travel between the U.S. and Canada, Mexico, the Caribbean region, and Bermuda. That is international travel?

[Singha]

that terrorist chavez and the hizbollah lebanon could pay for this.

[pradeepe]

check the gold reserves of various countries:
http://en.wikipedia.org/wiki/Official_gold_reserves

india is down the list at 14th place.

Gold and official estimates in India cant go together.

Look at the former gold coast countries of Gabon, Chad, Nigeria, Ivory coast, .. stripped bare by the "enlightened" oiropeans. Thugs of the first order.... oiropes list of crimes against humanity know no bounds. They need to be made to pay one day...

[Singha]

Ghana was also a gold rich civilization.

the pink dolphin is a 'sign'..mothers will clutch their babies close to
them as dark wolves with glowing fur howl and run through the streets.
people will report rivers turning odd colours too...

its starting...

[R Vaidya]

Time to Get Back Black money in Swiss accounts


http://www.dnaindia.com/report.asp?news ... 5&pageid=0



R Vaidya

[Singha]

good writeup.

[Satya_anveshi]

Time to Get Back Black money in Swiss accounts
http://www.dnaindia.com/report.asp?news ... 5&pageid=0
R Vaidya

Sir, can you please also translate this and get it published into vernacular press? It will have better effect.
Glad to see IIM profs activiism. You may know the other active Prof (RG), who has political ambitions . Met him a couple times and he has great ideas and is a promising leader. Hope he succeeds.

[SK Mody]

That is really so sweet of them. I'm sure they will get lots of replies from rice workers, which they can then publish as authentic and unbiased information emanating from their vast network of reporters in venezuela.

Atlanticists despise Latin American socialists, but eagerly embrace socialist firebrands in Asia. My theory is that Europeans fear Asian business interests can challenge European economic power, but meanwhile they want to protect Latin America's European-dominated business community and European-instilled religious institutions like the Roman Catholic Church from being targeted by socialist political forces.

A shrewd observation. When business forces become too threatening for their comfort, go with the socialist firebrigands. When socialists become too powerful, support business interests. Keep them fighting while simultaneously administering constant dose of Greco-Roman / Judeo-Christian (GRJC) sensibilities and propaganda that will seem like the solution to all the difficulties. Constantly bombard the public with predictions, backed by "research", about where India is going to be in the next 40 years making sure that your predictions coincide with where you want it to go. If it is not going where you want it to go, take measures to correct the trajectory or decrease the step size. If it is still not going where you want it to go, then go with the flow and make your predictions coincide with where it is going - that way you seem like you are always right.

A full fledged bottom up thought process and discussion carried out by Indians to unify the different strands of Indian culture is what is most threatening to them as that will undermine the GRJC "solution". Any youth displaying too much originality of thought is conveniently distracted by nauseating love songs, other excruciatingly loud music, and/or horrifyingly graphic Hollywood movies. Bollywood has chosen to compete with this by turning up the volume even louder, hum bhi batayenge, (though I say better Bollywood than Hollywood), although they figure that imitating the graphic stuff won't get them past the censors. Ensure that a small minority retain sufficient sanity by identifying talented but somewhat conformist students at the school level and admitting them to the best GRJC schools. Send them for "leadership" conferences to prepare them to be strongly placed to accept important posts in government and industry.

Continue until GRJC is accepted by all major groups. Mission was already accomplished in Latin America - the challenge is to preserve it there. In India the job is unfinished.

Given the current economic collapse however, they are not in a position to go overboard with the finances. However this is a game that is played to a large extent using educational institutions and the media. In particular the latter is comparatively inexpensive. So, in the absence of financial wherewithal, one can expect carpet bombing from media institutions as we go into the future. We already see delightful articles written about India and its malcontents - almost like they were penned by RAPE next door. When the current furore about the economy dies down and people get used to their new life one can expect fresh gutter inspections and moral posturing from media institutions. The more hallowed the institution the greater will be the intensity of bombardment - a dose of bankruptcy does wonders for the moral fibre.

Interesting times ahead.

[ramana]

The back story ...by James Lieber...an article every one should read.
http://www.villagevoice.com/content/printVersion/850296
What Cooked the World's Economy?

[SK Mody]

According to the above article

But it wasn't magic. It amounted to the return of the age-old scam called "bucket shops." Also sometimes known as "boiler rooms," bucket shops emerged after the Civil War. Usually, they were storefronts where people came to bet on stocks without owning them. Unlike their customers, the shops actually owned blocks of stock. If customers were betting that a stock would go up, the shops would sell it and the price would plunge; if bettors were bearish, the shops would buy. In this way, they cleaned out their customers. Frenetic bucket-shop activity caused the Panic of 1907. By 1909, New York had banned bucket shops, and every other state soon followed.
...
About $2 trillion in credit derivatives in 1989 jumped to $8 trillion in 1994 and skyrocketed to $100 trillion in 2002. Last year, the Bank for International Settlements, a consortium of the world's central banks based in Basel (the Fed chair, Ben Bernanke, sits on its board), reported the gross value of these commitments at $596 trillion. Some are due, and some will mature soon. Typically, they involve contracts of five years or less.
...
Both are right. At almost $600 trillion, over-the-counter (OTC) derivatives dwarf the value of publicly traded equities on world exchanges, which totaled $62.5 trillion in the fall of 2007 and fell to $36.6 trillion a year later.
...
The bottom line in this scandal is that fantastically wealthy entities positioned themselves to make unfathomable fortunes by betting that average Americans—Joe Six-Packs and hockey moms—would fail.

Of course, this is the village voice so add some salt.
Who are the entities that hold this 600 trillion . What does it really mean. (about 15 years worth of world gdp)

Two articles that have been posted earlier but could be read along with the above.
http://www.wired.com/techbiz/it/magazine/17-03/wp_quant
http://nymag.com/news/businessfinance/55035/index3.html

[SK Mody]

By the way, this is a time to observe which entities cooperate with each other. It is in a time of _real_ crisis that those with common interests come together. Observe this carefully to see past the Republican/Democrat or other facades.

[svinayak]

By the way, this is a time to observe which entities cooperate with each other. It is in a time of _real_ crisis that those with common interests come together. Observe this carefully to see past the Republican/Democrat or other facades.

You are getting the drift!

[Vipul]

What is the white collar sociopathy at Archer Daniels Midland the author is refering to? Why is ADM being clubbed with Enron and Worldcom?

[suryag]

I had been thinking about the effects of the recession on US economy and psyche. This recession is different from the great depression atleast in the population aspect. Population during the great depression was 120 million and the population now is 306 million, that is a three-fold increase. So is the following possible

1. Stimulus doesnt work and recession continues.
2. Rampant unemployment
3. Situation becomes more like India of 80s except that three would be no food shortage.
4. Govt steps in and starts nationalising banks/ institutions like citibank is being done right now.
5. With increased bureaucracy and lesser resources there would be more competition for jobs and consequently corruption will increase.
6. Unemployment leads to more violence.
7. Defence spending takes a hit and defence preparedness decreases. A number of technologies have been offshoots of defence research programs and emergence of newer technologies will dry up.
8. Universities will get lesser grants for research(it is already happening now) consequently lesser number of phds and lesser cutting edge research is done.
9. Since most of the high tech workers are immigrants they would probably goto where there are jobs.
10. With lesser tax collection lesser amount will be spent on infrastructure and the one last thing that attracts immigrants to us the quality of life wont be available any longer.

[vsudhir]

surya g ji

Things are seldom that simple. Linear extrapolations of complex systems have already led the conomics profession to grief.

IMHO, khanistan won't sit idle and let things get shot to hell. The alternative is to raise firestorms such that homeland appears like an island of tranquility and the only safe harbor for all that is scarce in the world - capital, talent, commodities. Power is after all, relative. Like one yankistani poster mentioned a few days ago

In the knigdom of the blind, the one eyed man is king

We've seen chaps who diss BRF in blawgs elsewhere, and speculate on how cheap life is in India compared to the comfort and sekurity of khanland. Its entirely possible the khans think likewise and may raise the game. IMO, the challenge for everyone now is to survive without getting blinded onlee.

I for one admire many things about unkil-land. Would rather not see the ordinary folks, colleagues at work and at school etc come to grief in any way. This storm has become very dangerous and unpredictable onlee. A back to the basics approach and protect your backside - economically and otherwise - is the onlee sensible thing to do, IMHO.

[Singha]

great khan will use approach of ensuring there is more economic chaos abroad and projecting itself as relatively better. ratings agencies are acting on it already, reducing everyone to junk while great khan printing press is AAA onree.

meantime, The Messiah is showing signs of graying

http://graphics8.nytimes.com/images/200 ... ay_600.JPG

http://www.nytimes.com/2009/03/05/us/po ... ml?_r=1&hp

[Sanjay M]

Asian Economic Oases Vulnerable to Downturn

http://www.iht.com/articles/2009/03/05/ ... gapore.php

[Singha]

they have multiple facilities in blr and seem to be funding more (like beside intel on ORR).

[svinayak]

GE is getting hammered...because of its finance arm...can you believe it? a solid engineering company being dragged by its finance arm?

Honeywell seems to be well positioned....mad man crammer was interviewing his neighbor and ceo of honeywell. overall bullish because of their products positioned in the energy efficiency market as well as small jet engines. They also showed a portable mini-helo intended for army surveillance use. can fly for 45 mins.

Is it a good buy at $6

[markos]

GE is getting hammered...because of its finance arm...can you believe it? a solid engineering company being dragged by its finance arm?

Honeywell seems to be well positioned....mad man crammer was interviewing his neighbor and ceo of honeywell. overall bullish because of their products positioned in the energy efficiency market as well as small jet engines. They also showed a portable mini-helo intended for army surveillance use. can fly for 45 mins.

GE is no longer an engineering/manufacturing company. Jack Welch probably knew more about finance since he went to management. So he converted GE to a financial services company.

An old BW article worth reading
http://www.businessweek.com/magazine/co ... 777047.htm

No question, GE Capital Corp., the financial arm of General Electric Co. (GE ), is a global market powerhouse. Its assets alone make it the fourth-largest U.S. financier, just behind Bank of America (BAC ). It operates a mixture of consumer and commercial finance, insurance, and leasing businesses around the world.

But GE Capital has a privilege granted to few financial companies: It enjoys a AAA credit rating from Standard & Poor's (or an Aaa from Moody's), thanks to its diversified, industrial parent, which guarantees its debts. GE Chief Executive Jeffrey R. Immelt has often said few things are more important to GE than maintaining its top-graded debt--both for GE itself and the finance unit.

It's easy to see why. Keeping GE Capital's AAA rating is essential for GE, which gets 40% of its earnings from the unit. A high grade keeps borrowing costs down. With a AA rating, interest on its long-term debt alone would annually be between $100 million and $200 million more. And almost all of GE's debt is lodged in GE Capital
....
Moreover, on many measures, Citigroup is a better performer. The bank's return on assets is 1.43% vs. GE Capital's 1.36%. Citi is also less leveraged: its debt-to-capital ratio is about 82%, vs. 88% for GE Capital. And as a retail bank, Citi has a cheap, secure source of funding: $57 billion in deposits

Once that AAA rating is cut, I wouldn't be surprised if GE goes the Citi way, eating from the tax-payer trough. If Citi was a better performer six years back, I wonder how should GE be rated now. If Citi is at $1, should GE be any more than $2?

GE Money is a big sub-prime lender, part of GE capital. This was one credit card company that I heard penalised someone for making an early payment!!


In future, business schools will be teaching
- how neutron Jack nuked GE, the company founded by Thomas Edison
- How sandy vile and his protege Chuck Prince destroyed Citi
- How Ken Lewis screwed BofA

[ravi_s]

Hey guys..

i need some information on some of the banks in the west coast..

California Bank and Trust
City National
Wedbush Morgan Securities Inc
Downey Financial Corp
Capital Group
Dimensional Fund Advisors, Inc

I need information like vendor competition and some info about BI systems/Reconcilation systems.

Can anybody guide me as to where i can get these information

Ravi

[abhischekcc]

Ravi,

Are you looking for free info?

[Singha]

http://spectrum.ieee.org/mar09/7897

In his 14-year career as an industrial and electrical engineer, Carlos Founaud has worked or done business in Austria, Switzerland, Ireland, Portugal, Germany, Britain, Australia, and Italy before returning to his native Spain.

“I called myself a multicultural interface,” he laughs. “If something broke down, the Spanish way was to focus on the problem—let’s have a look, make a decision, and do it. The Austrian way was to find out who’s guilty. The British way was to open the manuals and find the different procedures for fixing it—and afterward go to the pub.”

(liar liar - the spanish/italian way is to have a good meal and siesta...)

[Nandu]

Downey Financial Corp

I had my accounts with Downey. Still have, but they don't really exist any more. Downey Financial filed for chapter 7 liquidation in November of last year and the banking operations were handed over to US Bancorp by the FDIC.

[ramana]

if GE cuts its finance arm its a good thing. There is an article in Fortune Dec 2008 on GE.

[Ameet]

Median price of home in Detroit now $7,500

http://www.chicagotribune.com/news/nati ... 5392.story

[John Snow]

Dont Buy yet GE, wait for the Obama plan to get into action, then GE will Nuke power plant business. Then Buy IMO

[negi]

InshaAllah ... your wish be granted Spinster maharaj, its better all the projects go to AREVA.

[Singha]

wow...I never imagined Detroit was that hard up. it has a swish airport with 100 gates though, with a indoor monorail. very H&D enforcing building.

$7500k - some 20x10 slum huts in mumbai cost more than that if you want to buy it off the slum lord.

equal-equal is becoming a reality it seems.

interesting thing is - how much can Obama get away by cutting defence budget. defence has powerful backers on all sides and creates local jobs,
and its a no-no to be seen as less of a worldwide superdog.

[Arya Sumantra]

Economists React: ‘Staring Into the Abyss’
http://blogs.wsj.com/economics/2009/03/ ... /comments/

One commenter says:
I worked for aig for 3 years. it was the worst 3 years of my life.
a recent former high level manger just committed suicide. -yeah, thats how bad it is. their bad management goes all the way down to the bottom level. its horrible. they need to go bankrupt. they dont deserve to be in business anymore. It is a very close kept secret too that they are directly responsibly intertwined with congressional pensions. The politicians will let the country die before AIG goes down. It’s a very bad situation. There are conflicts of interest everywhere.

[John Snow]

Amen to that.
Worked on my last Assignment as independent consultant billing good dollars for good work. But alas it was useless to excel where none can admire .

Its just like or even worse than the TV show Office in its working where colleguse spend more time romancing (the stone)

[Singha]

the core GE will never be allowed to fail. its a crown jewel and per a BW link I posted recently, they have a very large hoard of cash and increasing it.

cos like GE, LM, Raytheon, Unitech tech, DuPont, 3M, caterpillar, general dynamics will never be allowed to fail....stock prices might reach rock bottom
but as a business they will kept alive at all costs.