Perspectives on the global economic meltdown

[munna]

Vsudhir^^

Was there at the Spring Meetings, actually the Bretton Woods twin WB is more sanguine about power sharing with emerging countries and I guess that has to do with American control. IMF on the other hand is under European influence and I guess they fear losing their influence and relevance in the world.

[Bade]

Even top-tier schools like the Indian School of Business in Hyderabad have extended their job placement season indefinitely because only 57% of students have found jobs, according to an Apr. 2 report in the Business Standard, one of India's leading business newspapers. The school has not yet released its official placement numbers, according to the MBA Universe report. A spokeswoman from the Indian School of Business did not return several e-mails seeking comment about placement results.

Complicating matters, "the picture is dull" for students looking to land jobs outside of India, according to the report. The best international offer at any of the IIMs came from the Indian Institute of Management Calcutta, where the highest salary topped out at $86,785. At the Indian Institute of Management Ahmedabad, the highest international offer was $83,000, down from last year's peak of $280,000 to $360,000. Meanwhile, schools outside the top 20 are facing an even harder time placing students, Kumar said.

India's MBAs Face Dismal Job Market

Only about two-thirds of the class has found jobs so far, but the career office is optimistic the school will be successful in helping students find employment, he said.

"We're going to keep trying until the last student is placed," he said.

You get a fancy degree and need to be placed. What a mockery. Seems like a reservation system onlee In the real world people are asked to go find a job and establish themselves to prove their merit. Yum-Bea systems looks like the biggest reservation scam ever in the educational-business nexus.

[Mort Walker]

Badeji,

As a phyjicyst and injeeniar we must prove our mettle. Business schools world wide find placement for their graduates, since they are the ones that will later provide endowment for the institution, and hence treat their students better. I don't see anything wrong with it and would hope engineering graduate colleges would do the same for their graduates, but that is not the tradition, and in fact for the sciences you find a good post-doc opportunity where you see a high probability of getting papers published.

However, I will say that business schools, and to some extent medical schools in the US, do operate on a buddy-buddy system for placement.

[Singha]

down from last year's peak of $280,000 to $360,000.

I wonder how the students placed on these salaries last year are doing?
if similar people are being offered 4X less this year, would the co still pay high to last
years batch?

[vsudhir]

down from last year's peak of $280,000 to $360,000.

I wonder how the students placed on these salaries last year are doing?
if similar people are being offered 4X less this year, would the co still pay high to last
years batch?

Most of them would be lucky to last a full year at those pay levels. From my time on campus, I remember folks graduating a yr before me into the dotcom boom bagged those fancy sals and by the time my class graduated into the meltdown, we were hearing all our previous year's high fliers had already been locked out of their offices in massaland.

[Singha]

hmm so I guess no more $1000 bottle of wine and table service in 'tony' london restaurants.

[Raja Bose]

Complicating matters, "the picture is dull" for students looking to land jobs outside of India, according to the report. The best international offer at any of the IIMs came from the Indian Institute of Management Calcutta, where the highest salary topped out at $86,785. At the Indian Institute of Management Ahmedabad, the highest international offer was $83,000, down from last year's peak of $280,000 to $360,000. Meanwhile, schools outside the top 20 are facing an even harder time placing students, Kumar said.

$83K was the top offer for an international placement??? I must be reading this wrong Did they mean that the top offer has dropped from $360K to $280K (i.e. drop is $80K) or is the actual salary $83K for an IIM Yum Bee Aye top-dawg?!

[Singha]

80-100k is the starting salary in international FIs for mba?

[amol.p]

Complicating matters, "the picture is dull" for students looking to land jobs outside of India, according to the report. The best international offer at any of the IIMs came from the Indian Institute of Management Calcutta, where the highest salary topped out at $86,785. At the Indian Institute of Management Ahmedabad, the highest international offer was $83,000, down from last year's peak of $280,000 to $360,000. Meanwhile, schools outside the top 20 are facing an even harder time placing students, Kumar said.

$83K was the top offer for an international placement??? I must be reading this wrong Did they mean that the top offer has dropped from $360K to $280K (i.e. drop is $80K) or is the actual salary $83K for an IIM Yum Bee Aye top-dawg?!

The same is true. the situation in other B-schools is worst. Symboysis pune last year highest package was 15 lacs this year highest down to 4 lacs(standard fees 8 lacs). Insurance comapnies are recruting MBA guys at paltry salary of 8-9k per month. All these people have paid 5 lacs to get there fancy MBA degree.
Small s/w firms are recruting s/w engineers at 5k per month.

Situation is much worst in the market for B-school graduates

[amol.p]

More D&G in India

The india bulls mega-mart has closed all it outlets...but no media coverage for same. All outlets in Maharashtra closed from last week and people laid off. Approximate layoff is between 1-2K people

Spinach retail dept stores have closed all outlets in MH excluding Mumbai & some in Pune. In all some 34 outlets have been closed. Numbers of layoffs not available.

All outlets of Famous designer Ritu Beri closed in Pune.

[AjayKK]

Dear gurujans, kweshun for you all.

Germany is the country which leads the list of countries by exports.

http://en.wikipedia.org/wiki/List_of_co ... by_exports

In China and US, the countries which follow Germany, the GEM- global economic meltdown has caused mayhem on the streets with employment levels falling and companies retrenching or packing up.

Germany, which goes to the polls September, has been affected by the same with 6 % GDP contraction, its largest since ww-2. Merkel's coalition announced two "stimulus packages".

http://www.bloomberg.com/apps/news?pid= ... er=germany

There has been talk of job losses with auto and other industries forecasting X number of losses due to GEM. However, has the situation been "under control" till now, as in there is no major job losses in the market (not counting the forecast losses) ? Thanku.

[Neela]

Dear gurujans, kweshun for you all.

Germany is the country which leads the list of countries by exports.

http://en.wikipedia.org/wiki/List_of_co ... by_exports

In China and US, the countries which follow Germany, the GEM- global economic meltdown has caused mayhem on the streets with employment levels falling and companies retrenching or packing up.

Germany, which goes to the polls September, has been affected by the same with 6 % GDP contraction, its largest since ww-2. Merkel's coalition announced two "stimulus packages".

http://www.bloomberg.com/apps/news?pid= ... er=germany

There has been talk of job losses with auto and other industries forecasting X number of losses due to GEM. However, has the situation been "under control" till now, as in there is no major job losses in the market (not counting the forecast losses) ? Thanku.

The germans are trying hard to keep the auto companies afloat. Instead of handing out billions to the companies, workers are being paid for 2 days of the week by the government while the company pays for 3 days.

Plus, anyone buying a new car in exchange for a old one gets 2500 Euros as a subsidy!There are some additional conditions though.

Major impact is being felt by the ancillary units. They are dropping out like flies as companies try to do more inhouse saving costs.

[AjayKK]

So the gov. with a good delivery channel for direct aid is keeping the workers up.
A good strategy to cut middlemen (NREGS type) and will be sustained at least till end of the year elections. After auto sector, they have the machinery and chemical sector ( BASF, BAYER, n patents onlee) which contribute to the exports. And the domestic sectors - financial and telecom are also not immune to the slowdown. Tough time for Merkel or others who comeback in Oct'09.

(OT, but any comparison with Germany gets a mention of a certain modi. Similar direct pay out of aid at 2500/ Rs per month was to be provided to diamond workers in Guj for a maximum of 4 months while they were to be trained for other activities.
15000 workers were to be trained.
12 crore were sanctioned by Guj. govt.
But the EC stopped this implementation till elections are done with.)

[Ameet]

Neel Kashkari calling it a day at the Treasury

http://www.washingtonpost.com/wp-dyn/co ... s_business

[ramana]

Neel Kashkari calling it a day at the Treasury

http://www.washingtonpost.com/wp-dyn/co ... s_business

Lets thank him for the job welldone and keeping up the Indian American image alive and in the drawing rooms of American homes.

depite all the naysayers he was the boy who stood on the burning deck whence all but he had fled and unlike the in the poem he did put out the fire!

Kuchinich is turkey for berating him in public and praising him in private and all this despite the good IA support he got for his abortive Presidential campaings in 2004 and 2008.

[vsudhir]

Bill Buiter uvacha on world econ direction.

Link

On the emerging world in general.....

The prospects of the emerging markets depend, first, on their dependence on external demand, second, on their dependence on external finance and, third, on the scope for expansionary domestic demand management and the ability of the authorities to use it intelligently and flexibly.

No emerging markets suffered the destruction of their banking systems prior to going into recession. Their contractions are the result of the external transmission of the north-Atlantic financial crisis and contraction, through trade linkages, through deteriorating terms of trade (especially for commodity producers), through falling remittances, through the financial markets and through the parent banks of foreign-owned local subsidiaries and branches restricting the availability of re-financing and new funding to their local subsidiaries and branches.

The emerging markets that are best poised to enjoy a speedy recovery (following a V-shaped recession) are those that do not depend excessively on external finance and on external demand.

On the emerged world ...

In Europe, the UK is in many ways the US with a half-year lag. The size of its banking sector relative to the economy and to the fiscal capacity of the government and the absence of global reserve currency status for sterling makes the UK more vulnerable than the US to a triple crisis - banking, exchange rate and sovereign debt. The ability of the UK authorities to raise future taxes or slash public spending is, however, likely to be greater than that of the US, whose political system is polarised to the point of paralysis. The US, like the UK, is therefore at risk of a ‘sudden stop’ (an unwillingness of anyone to fund the sovereign and an unwillingness of the rest of the world to fund either the private or public sectors of the US), as long as US political infantilism, especially in the US Congress, guarantees a veto for any sensible (or even just arithmetically feasible) proposal for solving the scary fiscal unsustainability problem of the US.

The rest of Western Europe is dead in the water. The ECB is paralysed, partly by fear of the zero lower bound on interest rates among some of its Governing Council, partly because of the absence of a ‘fiscal Europe’, capable of recapitalising the ECB/Eurosystem should it suffer a serious capital loss as a result of private sector credit exposure incurred as a result of its monetary, liquidity enhancing and credit enhancing operations. Countries that have fiscal credibility and could do more as regards Keynesian fiscal stimuli, like Germany and France, refuse to do so. The recession in Western Europe started about a year after that in the US. It will last at least as much longer. The banking system of Western Europe (ex-UK) has been even more reluctant than that of the US and the UK in owning up to the disastrous state of its balance sheet. At least €500bn additional capital will be required to keep the continental West-European banking system on its feet. More will be required if it is to actually start lending in earnest again.

On PRC

China is missing a huge opportunity. Its short-run imperative (boost demand through a fiscal stimulus) coincide with its long-run imperative (reduce the national saving rate and the external current account surplus). This stands in sharp contrast to the US and the UK, where the short-run imperative (boost demand through a fiscal stimulus) conflicts 180 degrees with its long-run imperative (save more and reduce the external current account deficit). China saves too much in the household sector, the corporate sector (especially the state enterprises) and the public sector. It badly needs an unfunded pay-as-you go social security retirement scheme to boost consumption by the old. China’s fiscal position is such that the country could introduce the benefit (pension) part of the social security scheme for a number of years without having the social security tax in place!

China’s rapidly greying population and the one-child policy mean that, without a credible, universal, publicly funded social security retirement scheme, it is individually rational to save like crazy, because neither the state nor your children will be able to look after you in old age.

Another way to boost public consumption (and reduce household saving), is to guarantee decent quality medical care for all regardless of ability to pay. Saving to pay for private tuition for one’s (only) child is another important driver of private saving in China. Providing better quality public education could free private resources for consumption.

But a boost to consumption demand (private and public) of this nature requires a matching change in the structure of production towards consumer goods and services and away from heavy industry. China hasn’t even begun to address this shift of demand towards non-traded goods and imports and of production towards consumer goods and services. Even if its ultra-old-school demand stimulus does not get killed (yet) by environmental constraints (clean fresh water, clean air, clean soil etc.), it will certainly be killed by mismatch constraints as the country adds massively to its capacity to supply goods nobody wants.

The green shoots we may be seeing in China will therefore not endure unless the country manages, very rapidly, a radical change in the composition of its production and consumption. That is possible, but not likely.

On Yindia...

A country like India - much less dependent than China on external demand but rather more dependent on external finance - could also recover rather soon, and in a more sustainable way, especially if it finds a way to further stimulate domestic saving. But its weight in the world economy is slight - not enough to be a locomotive, not even the little engine that could.

Of course Buiter birader, takes Atlas a while to recover from having pulled your $hitsh nuts out of the fire time and again through bankruptcies and wars from WW1 to WW2 now, doesn't it?

[arnab]

I think AS gets it - though Dani Rodrik fears that the developing world will again miss the bus.

Arvind Subramanian: Coupled economies, decoupled debates


Rich and poor countries are asking different questions in this crisis.

In the industrial countries, and the United States in particular, the current financial crisis has raised fundamental questions about capitalism and the so-called Anglo-Saxon version of it that had elevated the status and role of finance. The London-based Financial Times ran a series on the future of capitalism over several months and many of the world’s leading economists and other intellectuals weighed in on this topic. The global conference/seminar circuits are teeming with crisis-induced introspection and prognostication. Radical reform of the international monetary and financial system has been set in motion. All in all, it is difficult to escape the sense that the crisis represents a rupture, a discontinuity that will make the future less recognisable from the past.

Surprisingly, in the emerging markets, including India, there has been no such existential angst about capitalism, no serious questioning of the role of the market. It is not that these countries have not been affected by the crisis. Indeed, all countries—rich and poor—have found themselves in the same financial maelstrom, if not in the same boat, and the effects have been substantial. There has also been serious discussion and action on the appropriate short-term responses to the crisis. But, there have been no serious calls or indeed actions to roll back capitalism, to erect protectionist barriers, or to re-nationalise the economy. Most surprising, there has not even been a pitch to restrict inflows of fickle foreign capital that were arguably at the centre of this crisis for many emerging markets. The crisis may have exposed the claim of a decoupled world economy, but it seems to have emphasised the decoupling in policy debate and long-term policy choices.

What explains this decoupling? First, the crisis originated in the US and to a lesser extent in Europe. The rest of the world has been affected, and in some cases, seriously. But it remains true that the original sin was committed in the “core” not in the periphery, which has therefore had less reason to turn inward. And many emerging market countries, especially in Asia and parts of Latin America (Brazil and Chile, for example), as a consequence of prudent economic management, have been less affected by the crisis (see my calculations of the relative growth impact of the crisis based on the IMF’s latest forecasts at http://www.iie.com/realtime/?p=633) and managed to mitigate its worst impacts. So, what should we be introspecting about, they are entitled to ask?

Second, one contentious aspect of the debate has been new to the United States but less so for developing countries. The crisis has been a kind of intellectual wake-up call or a revelation for the United States in one sense: it has been forced to recognise that sordid political economy applies not just to those poor countries out there but also back at home.

Until this crisis hit, the discourse surrounding finance, as it witnessed securitisation and the creation of new and incomprehensible instruments such as collateralised debt obligations and other exotic mutants, had always been more technical than political. But recent contributions have changed that.

Simon Johnson of MIT has written of a financial oligarchy stymieing the implementation of sensible solutions in this crisis. This echoes the concerns expressed by Jagdish Bhagwati a decade ago that the so-called Wall Street-Treasury complex was pushing for capital account liberalisation in developing countries. Dani Rodrik of Harvard University has questioned the role of intellectuals in creating a system of beliefs that oversold the role of finance. Devesh Kapur of the University of Pennsylvania has pushed this further, arguing that academics are themselves compromised by their links with the financial sector. All these contributions are pushing popular opinion in the United States to accept that this crisis was not just a case of honest but unavoidable mistakes on the part of policymakers.

There is a gradual realisation that the diagnostic spotlight must shine on the revolving door between Wall Street and government, on the power and influence of the financial sector, and on the imperfect workings of a much-vaunted democracy that is unable to do what evidently needs to be done to fix its financial sector. Developing countries have, for long, lived with crony capitalism as a fact of life, almost as a defining condition of their under-development. Might the US too, in this respect, be a developing country is a question that can no longer be dismissed as outrageous.

The third decoupling relates to another big question thrown up by the crisis in the core countries: the role of the state and the appropriate demarcation between state and markets, especially in the financial sector. In the emerging markets, particularly in the more successful ones such as China and India, this is simply not an issue. The line still favours state over markets and in the financial sector heavily so: in both these countries, most of the banking system assets and liabilities are still controlled by the government. The issue is not how to claw back the role of the state so much as how to continue reducing its role in the gradual and pragmatic manner that these countries have been doing over the last two decades. In India, for example, the only bank threatened by the crisis was a private one that chose to deal in the toxic assets that wreaked havoc in western financial markets, resulting in a flight of deposits to the safety of public sector banks. Yet, it is remarkable that the debate on finance in India has not lurched in the direction of triumphalism about the public sector model of finance and the need to ensure its permanence.

Perhaps the most important reason for the decoupled debate phenomenon is that the big development challenge in the developing world is not the state-market boundary but the more mundane yet fiendishly difficult question of how to improve the state and its basic capacity to deliver law and order, security and other essential services such as health, water, sanitation and education. That was so before the crisis. That will remain true in its aftermath.

The author is Senior Fellow, Peterson Institute for International Economics and Center for Global Development, and Senior Research Professor, Johns Hopkins University

[vsudhir]

UK wages collapse at fastest rate in 60 years

All the makings of a classic debt deflation spiral.

And yes, some 'green shoots of recovery' can alsways be discerned by those determined to find them.

[IndraD]

Return of the public sector

This year the number of aspirants for UPSC rose by 42%. My family member in civil sevices who was planning to jump bandwagon of MBA has decided to stay in same service all his life

Sorry if I sound naive, but when will this economic melt down end.. would India be one of the first countries to reover?

[vsudhir]

Sorry if I sound naive, but when will this economic melt down end..

Exactly my sentiments, Indra.

Likely scenario is that there will be no return to the excesses of the 2004-2007 era.

That craziness is dead and gone. Of the I-banks on wall street, there's no last man standing - something that didn't happen even in GD I.

would India be one of the first countries to reover?

Perhaps. Who knows? Who can say? Will become increasingly hard to trust any numbers going fwd here on. Shanghai statistics will be the next big wave all over the G8 as each emerged conomy tries to hide its nudity as the tide withdraws ever more....

But you know 400% we can never be the 'first' to recover. TSP will revise its numbers ex post facto to make it look like TSP recovered before us...just like they 'celebrate' I-day on 14-aug every year.

[Bade]

Another way to look at the last year is that, there was no 'melt down'. It was only a resetting to the ground level brick+mortar economy. So henceforth, growth will be normal...the hindu rate of growth.

Personally have started to max up my contribution to 401k since March. I had earlier not done a full blown retirement plan. I had called the bottom for the market at 7000(DJIA) levels....using 1995 as baseline...before the dot-com e-bubble started blowing. Surely we, as in the whole world is not going to levels of living of the 1950's or before. Not yet at least...till some bigger natural calamity strikes. This is just a reset button to saner levels.

Added later: Forgot the disclaimer....all my analysis is based on voodoo alternative economics. so advisory is not a guarantee to future performance or earnings.

[Singha]

desi ceo's like mittal of bharti and someone from infy were saying in public that indian eco would recover in 2nd half of this financial year. both bharti and rcom have turned in good results.

[Ameet]

China Banks Surge to World’s Biggest May Be Too Good to Be True

http://www.bloomberg.com/apps/news?pid= ... refer=home

“We suspect some of the banks may have compromised their risk-management and risk-aversion attitude to meet targets and government expectations,” said Wen Chunling, a Beijing-based analyst at Fitch Ratings. “That will lead to a rebound in non- performing loans in the next few years.”

[John Snow]

Sorry if I sound naive, but when will this economic melt down end.. would India be one of the first countries to reover?

Boss log, remember the eutectic point in Phase diagram ( not electrical, but mettalurgy/chemistry where all phases of Gas, solids and liquids meet?)

The eutectic point of Iceland was boom (solid) to Bust Vapour
The eutectic point of Ireland is boom depression vapour
The Eutectic point of Britain is boom (aka Loot) depression not yet bust as the Bank of England is busting its A$$ to mint money.
The Eutectic point of PRC is Boom to Vapour if Uncle continues to print dollars the average (cost) Value of PRC dollar holding will be near zero, hence the ranting.

The Eutectic point of Uncle solid as is he is the Printers devil.

Remember the Macro economic factors always lag (aids Virus), while micro economics factors are like financial contagions.

("Financial contagion refers to the transmission of a financial shock in one entity to other interdependent entities.")


The melting point is close by are a litte far depending on the eutectricks


Financial Modeling bassed on Eutectics all rights reserved by Spinster

[vsudhir]

Banking Fortunes – From “Catastrophic!” to “Just Awful”!

Its not as bad as it looked like, seems to be the magic message. For the sake of the world, lez hope its true.

A more orderly transition to a better, multipolar world (where Asia gets its due in power sharing and decision making), given that such a transition now cannot be stopped or reversed by normal means by the G7, should be welcome.

[vsudhir]

The big drop: Trade and the Great Recession

Global trade plummeted in the last months of 2008. Indeed, world trade volumes fell 14% from December 2008 to February 2009. (This is somewhat better than the November-January drop of 18%, in part reflecting a 0.8% rise in February.) In the three months ending in February, Japanese exports were down 29%. EU15 exports were up 0.3% in February over January levels, after falling 2.3% in December and 5.3% in January (CPB World Trade Monitor, 21 April 2009). The projections for the full year 2009 offer little comfort. The WTO has forecast a 9% decline in global export volumes for 2009.

[Singha]

BW

Should You Move to India for a Job?
More than 60% of companies in India are hiring and its economy remains the world's second-fastest growing. Work abroad, anyone?

By Aseem Prakash

If the U.S. were a business, bankers would have liquidated it a long time ago—except now the bankers themselves are bankrupt. As the U.S. and other countries around the world have allocated massive amounts of money for stimulus spending, people everywhere are hoping that the global economy will soon turn around and show signs of promise. However, the reality is that no one really knows how long it will take or how many jobs will be created.

In the past, it was mostly low-end work that went abroad. This time, however, the jobs are not going overseas; they are simply disappearing from the companies. And, in order to survive the economic crisis, businesses are not just cutting jobs, they are rethinking fundamental assumptions: Do we need an engineer to run our Web site? How do we redistribute the work of laid-off workers among the remaining staff? What do we do to retrain people on the payroll?

Whenever the economy improves, jobs that existed in the past may never come back. Also, even though trillions of dollars are being used to prime economies around the world, most of that investment is going to projects that make no sense for a vast majority of white-collar workers. For example, what can a laid-off Wall Street banker do to rebuild roads and bridges? Surely, you don't expect him or her to get a degree in civil engineering, do you? Do you trust the banker to manage the project finances?

Similarly, there are hundreds of thousands of fresh graduates facing a bleak future. Their debt is mountain high and their dreams are shattered. So, what to do now? For sure, a lot of people are planning to start their own businesses or thinking of going back to school.

Another option: Move to India. Standard & Poor's (MHP) says that India's economy will grow by 5.8% in 2009, while the Indian government is predicting 7%. Even at 5.8%, India would be the world's second-fastest growing economy—provided China can grow at 8% as its government is proclaiming—and that's exponentially better than the negative growth predicted for the U.S., Europe, and Japan.

Even though India shed more than 500,000 jobs between October and December last year and the export sectors are likely to suffer more massive job losses, a recent survey by Hewitt Associates (HEW) shows that more than 60% of companies in India are still hiring. The same survey also shows that salaries in India will grow by 8.2% this year, the best in Asia-Pacific. While that is a pittance for Indians used to 15% to 20% growth, it is music to workers' ears at a time when employers elsewhere are freezing salaries, asking staff to take pay cuts, and forcing workers to go on unpaid vacation time.

It is no wonder then that urban Indians are not slowing down. A 14-city survey finds the mood in India "positive." While the anxiety level remains high, 1 in 3 Indians is "not worried about the economy at all."

Many companies around the world are not slowing down in India either. PepsiCo (PEP) plans to spend $500 million. Universal Success Enterprises, a Singapore-based company, is injecting $17.5 billion in infrastructure projects such as a thermal power plant. Norway's Telenor (TEL.BE) is investing $3.2 billion in Indian telecom. Over the next four years, Marriott International (MAR) plans to build 24 new hotels in India. Panasonic (PC) is growing from 48 company-owned stores to 100.

It is not just the foreign corporations that are spending money in India. One of India's largest business groups, Reliance ADA Group, is investing more than $2 billion in infrastructure projects in the Western state of Gujarat. Bharti Airtel (BRTI.BO), the biggest wireless player in the country, is adding 17,000 rural outlets.

While there are no doubt plenty of very smart locals with relevant experience who are willing to work these days for up to 50% less pay than before, the market for the right talent remains buoyant. All kinds of outsourcing firms are looking to India for growth. Indian Overseas Bank (IOBK.BO) will be recruiting 1,200 people. Bartronics India (BARI.BO), a technology firm, is setting up kiosks in New Delhi and has 6,000 positions. Insurance company LIC (LICH.BO) is planning to hire 45,000. South Indian Bank (SIBK.BO) is opening 40 new branches and looking to hire 3,000.

If you speak English, can take a risk, and would like to be part of the new 21st century in the making, perhaps there is a job for you, too, in India. Indeed, catching a plane and starting a new life on the other side of the planet in an unfamiliar culture is not easy. But, then, what's left that's easy anywhere anymore?

Aseem Prakash is the former CEO of I Media Corp. Ltd. in India and the author of a forthcoming book, Midnight Economy: The New Business Order Emerging from the Shadows. He has worked and lived in India, Western Europe, and Asia, and now lives in Canada.

[vsudhir]

O Boy, that Aseem Prakash article will attract ,major vitriol from chini drones and paki trolls, both under western names.

Heh heh.

[Ameet]

The next housing bust - WSJ OP-Ed

http://online.wsj.com/article/SB124139474675481713.html

Everyone knows how loose mortgage underwriting led to the go-go days of multitrillion-dollar subprime lending. What isn't well known is that a parallel subprime market has emerged over the past year -- all made possible by the Federal Housing Administration. This also won't end happily for taxpayers or the housing market.

Last year banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100% taxpayer guarantee. Many of these have the same characteristics as subprime loans: low downpayment requirements, high-risk borrowers, and in many cases shady mortgage originators. FHA now insures nearly one of every three new mortgages, up from 2% in 2006.

The financial results so far are not as dire as those created by the subprime frenzy of 2004-2007, but taxpayer losses are mounting on its $562 billion portfolio. According to Mortgage Bankers Association data, more than one in eight FHA loans is now delinquent -- nearly triple the rate on conventional, nonsubprime loan portfolios. Another 7.5% of recent FHA loans are in "serious delinquency," which means at least three months overdue.

The FHA is almost certainly going to need a taxpayer bailout in the months ahead. The only debate is how much it will cost. By law FHA must carry a 2% reserve (or a 50 to 1 leverage rate), and it is now 3% and falling. Some experts see bailout costs from $50 billion to $100 billion or more, depending on how long the recession lasts.

How did this happen? The FHA was created during the Depression to help moderate-income and first time homebuyers obtain a mortgage. However, as subprime lending took off, banks fled from the FHA and its business fell by almost 80%. Under the Bush Administration, the FHA then began a bizarre initiative to "regain its market share." And beginning in 2007, the Bush FHA, Congress, the homebuilders and Realtors teamed up to expand the agency's role.

The bill that passed last summer more than doubled the maximum loan amount that FHA can insure -- to $719,000 from $362,500 in high-priced markets. Congress evidently believes that a moderate-income buyer can afford a $700,000 house. This increase in the loan amount was supposed to boost the housing market as subprime crashed and demand for homes plummeted. But FHA's expansion has hardly arrested the housing market decline. The higher FHA loan ceiling was also supposed to be temporary, but this year Congress made it permanent.

Even more foolish has been the campaign to lower FHA downpayment requirements. When FHA opened in the 1930s, the downpayment minimum was 20%; it fell to 10% in the 1960s, and then 3% in 1978. Last year the Senate wisely insisted on raising the downpayment to 3.5%, but that is still far too low to reduce delinquencies in a falling market.

Because FHA also allows borrowers to finance closing costs and other fees as part of the mortgage, the purchaser's equity can be very close to zero. With even a small drop in prices, many homeowners soon have mortgages larger than their home's value -- which is one reason FHA's defaults are rising. Every study shows that by far the best way to reduce defaults and foreclosures is to increase downpayments. Banks know this and have returned to a 10% minimum downpayment on their non-FHA loans.

In a rational world, Congress and the White House would tighten FHA underwriting standards, in particular by eliminating the 100% guarantee. That guarantee means banks and mortgage lenders have no skin in the game; lenders collect the 2% to 3% origination fees on as many FHA loans as they can push out the door regardless of whether the borrower has a likelihood of repaying the mortgage. The Washington Post reported in March a near-tripling in the past year in the number of loans in which a borrower failed to make more than a single payment. One Florida bank, Great Country Mortgage of Coral Gables, had a 64% default rate on its FHA properties.

The Veterans Affairs housing program has a default rate about half that of FHA loans, mainly because the VA provides only a 50% maximum guarantee. If banks won't take half the risk of nonpayment, this is a market test that the loan shouldn't be made.

These reforms have long been blocked by the powerful housing lobby -- Realtors, homebuilders and mortgage bankers, backed by their friends in Congress. They claim FHA makes money for taxpayers through the premiums it collects from homebuyers. But keep in mind these are the same folks who said taxpayers weren't at risk with Fannie Mae and Freddie Mac.

A major lesson of Fan and Fred and the subprime fiasco is that no one benefits when we push families into homes they can't afford. Yet that's what Congress is doing once again as it relentlessly expands FHA lending with minimal oversight or taxpayer safeguards.

[vsudhir]

Onion spoof. So, take it easy....

Nation Ready To Be Lied To About Economy Again

WASHINGTON—After nearly four months of frank, honest, and open dialogue about the failing economy, a weary U.S. populace announced this week that it is once again ready to be lied to about the current state of the financial system.

Tired of hearing the grim truth about their economic future, Americans demanded that the bald-faced lies resume immediately, particularly whenever politicians feel the need to divulge another terrifying problem with Wall Street, the housing market, or any one of a hundred other ticking time bombs everyone was better off not knowing about.

In addition, citizens are requesting that the phrase, "It will only get worse before it gets better," be permanently replaced with, "Things are going great. Enjoy yourselves."

"I thought I wanted a new era of transparency and accountability, but honestly, I just can't handle it," Ohio resident Nathan Pletcher said. "All I ever hear about now is how my retirement has been pushed back 15 years and how I won't be able to afford my daughter's tuition when she grows up."

"From now on, just tell me the bullshit I want to hear," Pletcher added. "Tell me my savings are okay, everybody has a job, and we're No. 1 again. Please, just lie to my face."

Onion spoofs have actually fooled people... Just hope folks in Congress and the WH are brighter than them.

According to a CBS News/New York Times poll, 98 percent of Americans no longer appreciate President Barack Obama's attempts to break down the economic crisis into simple terms they can understand. Instead, many say the president should have the decency to insult their intelligence by using complex jargon to confuse and deceive them, perhaps even implying that the subprime mortgage fallout was just a big misunderstanding that resulted from a clerical error.
"I know when he's telling the truth, and it bothers me," recently laid-off schoolteacher Mary Hanover said of Obama. "He gets this serious expression on his face and says things like, 'This is the worst economic crisis since the Great Depression.' Who needs to hear that? For Christ's sake, smile a bit and say we just found a diamond mine under Montana that's going to pay for everything. I'll believe you."

"Please, treat me like a child. Treat me like a five-year-old," Sacramento resident David Cooke, 64, wrote in a letter to Congress. "I lost everything when the Dow tanked, and I'm too old to start working again, so why punish me further by explaining in detail the clever ways these investment firms ripped me off and how they're all going to get away with it?"

[Bade]

Number cruncher who foresaw financial crash

"Following the formulas was like relying on your seatbelt to drive crazily: it's not going to save your life. People in risk management don't know a fraction of what they should; they're not sceptical, they haven't tested the data or used their imagination to find solutions."

"Governments know nothing of this subject, they spent two minutes thinking about it, without considering the consequences or getting [advice from] consultants," Wilmott says. "They're like rabbits caught in headlights. They are only talking to the bankers who got us into this mess, or lords or ladies who know nothing. They should be getting advice from people like me, who saw this coming."

According to Wilmott, the Financial Services Authority isn't much better. "They can't afford to pay the best people; we should send regulators to derivatives courses so they could ask questions to the banks."

Most of the stuff is like a personal advertisement...still thought to post it

[vsudhir]

Ron Paul explains Why We Can’t Reinflate The Bubble

Transcript of the opening statement....worth a read, then a re-read onlee....

We have to come to the realization that there is a sea change in what’s happening. This is an end of an era and that we can’t re-inflate the bubble, just as we devised a new system of Bretton Woods in ‘44 which was doomed to fail. It failed in ‘71 and then we came up with the dollar reserve standard which was a paper standard; it was doomed to fail and we have to recognize that it has failed. And if we think we can re-inflate the bubble by artificially creating credit out of thin air and calling it capital; believe me, we don’t have a prayer of solving these problems. We have a total misunderstanding of what credit is vs. capital. Capital can’t come from the thin air creation by the Federal Reserve System; capital has to come from savings. We have to work hard, produce, live within our means and what is left over is called capital. This whole idea that we can re-capitalize markets by merely turning on the printing presses and increasing credit is a total fallacy; so the sooner we wake up to realize that a new system has to be devised, the better.

Right now I think the Central Bankers of the world realize exactly what I’m talking about and they’re planning, but they’re planning another system that goes one step further to internationalize regulations, internationalize the printing press. Give up on the dollar standard, but we have to be very much aware that that system will be no more viable. We have to have a system which encourages people to work and to save. What do we do now? We’re telling consumers to spend and continue the old process; it won’t work.

simply bl00dy wow. This guy should've won at least the GOP vice-presidency...

[vsudhir]

UKstani system under pressure to.... you guessed it! Print more banknotes to bankroll the banking sector along with the rest of the conomy......

Bank under pressure as gilt yields surge

The Bank of England was under growing pressure on Thursday to step up its quantitative easing programme as gilt yields surged through levels not seen since the central bank announced plans two months ago to buy up to £75bn of UK government bonds.

Benchmark 10-year gilt yields – which have an inverse relationship with prices – soared to 3.76 per cent, breaking through the 3.64 per cent level recorded at the close on March 4 – the day before the QE programme was launched.

Thursday’s sell-off in UK government bond prices, which saw yields rise by 15 basis points, puts more pressure on the Bank of England to increase its QE plans, as lower gilt yields are seen as essential by some analysts to boost the wider economy.

UKstan shall rise again......mark my wise words....

[vsudhir]

Asia breaks free

...the Asian Development Bank Fund was a clear sign that Asia was cutting loose from the west and looking to take care of things domestically.
...
A quick re-cap then? In 1997, Asia blew up. The IMF got involved. At the time, Tim Geithner and Larry Summers had prominent roles in making sure it was the IMF and not the ADB which was central to the process. Now, in 2009, it is the U.S. which has blown up spectacularly and the U.S., with Geithner and Summers again in positions of authority, is in no position to dictate terms. Hence the ADB monies. The U.S. may have forgotten the Asian Crisis, but the Asians have not.

My view here is this: the Great Unravelling has been a blow to every nation in the global economy. The U.S., Europe, Africa, Asia, Latin America, Canada, they have all suffered. But, Asia is de-coupling. Mind you, I am not saying they are literally about to separate from the West and embark on their own growth path. No, the ties are too strong. Nevertheless, the West is weak, particularly the United States. No one from the IMF is dictating terms in Asia today. Nor will they for the foreseeable future. The die is cast. The United States badly overplayed its hand in the 1990s. Asia senses it is weak, overburdened with debt and depression. This is therefore their opportunity to break free and I believe Asia will use it.

[Chinmayanand]

Got in mail, too many assumptions there but nontheless , interesting,

It is August. In a small town on the South Coast of France, holiday season is in full swing, but it is raining so there is not too much business happening. Everyone is heavily in debt.

Luckily, a rich Russian tourist arrives in the foyer of the small local hotel. He asks for a room and puts a Euro100 note on the reception counter, takes a key and goes to inspect the room located up the stairs on the third floor.

The hotel owner takes the banknote in hurry and rushes to his meat supplier to whom he owes E100.
The butcher takes the money and races to his supplier to pay his debt.
The wholesaler rushes to the farmer to pay E100 for pigs he purchased some time ago.
The farmer triumphantly gives the E100 note to a local prostitute who gave him her services on credit.

The prostitute goes quickly to the hotel, as she owed the hotel for her hourly room use to entertain clients.
At that moment, the rich Russian is coming down to reception and informs the hotel owner that the proposed room is unsatisfactory and takes his E100 back and departs.

There was no profit or income. But everyone no longer has any debt and the small town people look optimistically towards their future.

COULD THIS BE THE SOLUTION TO THE Global Financial Crisis? Or, is there a catch here?

[vina]

How so ?. Basic accouting saar. The hotel had a payable (short term debt of Euro 100). After Russian departs with his 100 Euro, the hotel's cash is down Euro 100, with his Euro 100 A/C Payable paid out . So that is all. And all that is sunnah onree. It is the same as the hotel using it's cash to pay his vendor , irrespective of the Russian appearing or not !.

Well, the "solution" is real, if the hotel had Euro 100 in cash to pay back the Russian when he wanted it back. If didn't, it was bankrupt! . Instead of bankrupting to the supplier, it bankrupts to the Russian, that is the only difference.

Remember, lack of cash is the definition of Bankruptcy!. You can bleed as much as you want in losses. As long as you have cash to pay your creditors you are not bankrupt, but solvent!

[vsudhir]

Global Crisis ‘Vastly Worse’ Than 1930s, Taleb Says

Taleb is no conomist, has a trading background and hence a particular vantage point on the gen conomy. But still, given how conomists have done so far, he can't be that much more likely to be wrong.

May 7 (Bloomberg) -- The current global crisis is “vastly worse” than the 1930s because financial systems and economies worldwide have become more interdependent, “Black Swan” author Nassim Nicholas Taleb said.

“This is the most difficult period of humanity that we’re going through today because governments have no control,” Taleb, 49, told a conference in Singapore today. “Navigating the world is much harder than in the 1930s.”

The International Monetary Fund last month slashed its world economic growth forecasts and said the global recession will be deeper than previously predicted as financial markets take longer to stabilize. Nouriel Roubini, 51, the New York University professor who predicted the crisis, told Bloomberg News yesterday that analysts expecting the U.S. economy to rebound in the third and fourth quarter were “too optimistic.”

[Bade]

But whatever Talebji is saying has always been true, right ? So what is new about it. This whole economy business is a massive ponzi scheme which only works when more and more players come to the table. Some take their winnings and hope the cash value does not get diluted before they die.There was and will be more losers than winners always. If there is no hope for the losers, then everything will come to a standstill. So what does Talebji actually want ?

[g.sarkar]

The farmer triumphantly gives the E100 note to a local prostitute who gave him her services on credit.
The prostitute goes quickly to the hotel, as she owed the hotel for her hourly room use to entertain clients.

Sirji,
Take this from me, this part is not true. It was cash only!
Gautam

[Nandu]

New York Fed chairman resigns over conflict of interest with Goldman Sachs
http://www.washingtonpost.com/wp-dyn/co ... 04276.html

This highlights the continued corruption at the very top levels of the US financial system.