Perspectives on the global economic meltdown

Virupaksha · Post by **Virupaksha** » 15 May 2009 00:47

vsudhir wrote:
Well, yes. Tourism is a big draw indeed. But why is the prospective tourist any different from the typical consumer? He/she will prefer to wait for the dollar exschange rate to be a bit more realistic and favorable first, no? Once inflation sets in thx to the trillions pumped into the system (assuming the fed is unable to suck them out of the system fast enough - a reasonable assumption, IMHO), the exchg rate fluctuations would be interesting to watch.

tourism? they ask for more than 6 hrs of standing under the sun for visa. Who will come for normal tourism there?

AnimeshP · Post by **AnimeshP** » 15 May 2009 00:49

ravi_ku wrote:
vsudhir wrote:
Well, yes. Tourism is a big draw indeed. But why is the prospective tourist any different from the typical consumer? He/she will prefer to wait for the dollar exschange rate to be a bit more realistic and favorable first, no? Once inflation sets in thx to the trillions pumped into the system (assuming the fed is unable to suck them out of the system fast enough - a reasonable assumption, IMHO), the exchg rate fluctuations would be interesting to watch.
tourism? they ask for more than 6 hrs of standing under the sun for visa. Who will come for normal tourism there?

add to that the finger-printing when you do get the visa and land at a port of entry ...

svinayak · Post by **svinayak** » 15 May 2009 01:02

Krugman Says World Faces Japanese-Style ‘Lost Decade’ (Update1)
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http://bloomberg.com/apps/news?pid=2060 ... refer=home

By Tim Culpan

May 14 (Bloomberg) -- The world economy may face near- stagnation for 10 years similar to Japan’s “lost decade” in the 1990s, Nobel Prize-winning economist Paul Krugman said.

“The world as a whole looks quite a lot like Japan during its lost decade,” Krugman, 56, said at a forum today in Taipei. “I am very optimistic about the world in, let’s say, 2030; it’s the next ten years or so that have me worried.”

While the odds of a repeat of the Great Depression of the 1930s have fallen, the global economy faces weak private demand and persistent high unemployment in the U.S. and Europe, Krugman said. His prediction of a protracted slowdown echoes comments by Citigroup Inc.’s James Wolfensohn, who’s a former World Bank president, and fellow Nobel laureate Joseph Stiglitz.

Asian stocks fell today and commodities dropped amid concern that a recovery from the global recession will falter. Bank of England Governor Mervyn King predicted yesterday “a relatively slow and protracted recovery” for the U.K.

“The odds of a full repeat of the Great Depression have, in my mind, fallen from maybe 20 percent a couple of months ago to maybe 5 percent now,” said Krugman, a Princeton University professor.

Similarities with Japan’s past problems included a troubled financial system, weak demand and “helpful but limited fiscal support,” he said.

Deep Initial Slump

In some ways, the global recession is “worse than Japan in its lost decade” because the initial slump was deeper and, unlike Japan, the world can’t trade its way out, Krugman said. “If the world as a whole is going to run a large trade surplus, we have to find another planet to trade with.”

Krugman won the Nobel Prize in 2008 for his work on trade theory.

Eisuke Sakakibara, Japan’s former top currency official, added to the warnings today, saying in a speech in Manila that gains in stock prices are a “bear-market rally” and the global recession may be “deep and prolonged.”

Krugman’s fellow laureate Stiglitz said yesterday that the world economy may “bottom soon.”

“We are at the end of the beginning, rather than the beginning of the end,” Stiglitz said at a forum in Beijing. “The global economy may be declining at a slower rate and we may see a bottom soon, but it doesn’t mean a full recovery.”

Wolfensohn, chairman of Citigroup’s international advisory board, sees “no quick fix.”

“The debate will continue on whether it’s going to be a V, U or L-shaped recession,” he said at a forum in Shanghai yesterday evening. “My own judgment is that it’s more likely the latter.”

To contact the reporter on this story: Tim Culpan in Taipei at [email protected].

vsudhir · Post by **vsudhir** » 15 May 2009 03:06

US health lobby: reform could make us as bad as the NHS

The powerful US med lobby feeling the first tremors of a grand quake. I do seriously hope the US goes the canadian/UKstan way of nationalized healthcare. Good for theoir people and good for the rest of us coz their ability to wantonly finance unrest in our backyard reduces correspondingly, perhaps over a few yrs or decades but eventually, for sure.

Also, looks like its good business for desi hospital chains catering to med tourism. NHS is offering its long waiting list India options, last I heard, for some surgical procedures.

vsudhir · Post by **vsudhir** » 15 May 2009 03:31

Conomist columist Buttonwood writes a short, beautiful piece explaining global trade and finance in terms of their yin and yang forces - the eternal tension between creditor and debtor, (just like between the mgmt and the marxist worker), just like between the indian and the porki....

Link

The post-Bretton Woods system worked well, engendering the long period of low inflation and steady growth known as the Great Moderation. But one of the reasons for its apparent success—the growth of India and China—may have sparked its demise. The addition of these two great nations to the international financial system was a supply shock that put downward pressure on inflation rates.

Now it seems to be recognised that inflation targeting is not enough. Given the explicit government guarantee behind the banking system, central banks need to monitor both financial stability and asset prices. At the same time, some central banks have adopted (via quantitative easing) a policy of creating money to boost markets that also has the convenient side-effect of funding budget deficits. That is just what opponents of fiat money feared would happen in the long run.

The same old dilemma will eventually occur. Having spent a fortune bailing out their banks, Western governments will have to pay a price in terms of higher taxes to meet the interest on that debt. In the case of countries (like Britain and America) that have trade as well as budget deficits, those higher taxes will be needed to meet the claims of foreign creditors. Given the political implications of such austerity, the temptation will be to default by stealth, by letting their currencies depreciate. Investors are increasingly alive to this danger; ten-year Treasury bond yields are around a percentage point higher than they were at the start of the year.

Of course, the conomist aukaat shines through and the critter pretends all this $hit fell out of the sky onlee, just happened to happen onlee. Arsole skirts around the role played by the G7 in fashioning and peddling the system as it stands today.

Creditor nations tend to set the rules and the new global monetary system will be unable to operate without the approval of China, a creditor country that has capital controls and a managed currency. It has been assumed that China will have to move towards the Western model. But why not the other way round? Western countries adopted free capital markets, as the British adopted free trade in the 19th century, because it suited them. Will China now be able to call the shots? Uncomfortable as it might be for the West, the next monetary order is more likely to be made in Beijing than in New Hampshire.

Yup. My heartfelt sympathies, chum.

vsudhir · Post by **vsudhir** » 15 May 2009 03:48

A look at social class and out-of-wedlock births in america.

Link

The illegitimacy ratio for the white underclass is probably now in the region of 70 percent. I think that the proportion for the white working class may be above 40 percent. The white middle class is approaching 20 percent—a scarily high figure when you think about all the ways that the middle class has been the spine of the nation.

The white overclass? They’re still living in the 1950s—their ratio is probably about 4 or 5 percent tops.

The family structure breakdown IMHO can potentially doom the west. With a possible great depression II looming on the horizon, the family - that institution of first and last support in a typical individual's life - is now mired in serial divorces/marriages, step children and step-nephews/nieces onlee. Also, demographic trends in the G7 are alarming, if nothing. Of course, wiser souls here can always claim my demographic concerns are oversimplifications onlee coz this time too, its not different from previous crises we've had.

Which brings me to my favorite country - UKstan. Another classic case of a high-mighty world-conquering culture now reducing to accommodating packees and raising a nation of b@sturds. They have my cheering support as they speed down this road.

Ameet · Post by **Ameet** » 15 May 2009 05:04

Behind Mittal's Wrenching Cuts
As it forces the steel industry to idle plants worldwide, giant ArcelorMittal is streamlining itself for the future

http://www.businessweek.com/magazine/co ... l+business

While Mittal isn't exactly happy about the turmoil, the past few months have played out according to the script he had in mind when he engineered the takeover of Luxembourg-based Arcelor in 2006. Consolidation of the industry, he thought, would leave a handful of companies to follow his lead when it came time to cut production again.

shynee · Post by **shynee** » 16 May 2009 20:00

Credit Card Defaults At Record Highs But Worst Is Yet To Come

U.S. credit card defaults rose in April to record highs, with Citigroup and Wells Fargo posting double digit loss rates, as the recession slashed more than 2 million jobs since the beginning of the year.

Citigroup (C) a big issuer of MasterCard cards—reported its annualized charge-off rate rose to 10.21 percent in April from 9.66 percent in March.

Wells Fargo (WFC) ]said its charge-off rate increased to 10.03 percent from 9.68 percent, while JPMorgan Chase (JPM) a big issuer of Visa (V) cards reported its charge-off rate rose to 8.07 percent from 7.13 percent in the previous month.

Discover Financial Services (DFS), the U.S. fourth-largest credit card network, said its default rate rose to 8.26 percent in April from 7.39 percent in March.

Credit card lenders are trying to protect themselves by tightening credit limits, raising standards and closing accounts. They have also been slashing rewards, increasing interest rates and boosting fees to cushion against further losses.

Chinmayanand · Post by **Chinmayanand** » 17 May 2009 03:57

vsudhir wrote:Which brings me to my favorite country - UKstan. Another classic case of a high-mighty world-conquering culture now reducing to accommodating packees and raising a nation of b@sturds. They have my cheering support as they speed down this road.

It would be better if you cheered your support by actively propping up some b@asturds in UKsthan.

vsudhir · Post by **vsudhir** » 17 May 2009 06:08

Comment frm another forum:

These US car manufacturers [GM and Chrysler] traded mechanical engineering for financial engineering when they made more of their money as finance companies than they did as car companies. There finance companies crashed and burned with the rest of the FIRE economy. It doesn't matter how many or how few dealerships there are left, selling most of the models that Chrysler and GM make would be a tough task at half price in this depression economy.

The new car dealership used to be a vehicle for printing money. The owner of the dealership was the big man in any small town. Small towns losing these dealerships will be crushed. The center of some West Texas towns I've driven through consist of little more than a GMC dealership and a Sonic Drive-in. These towns could become dust in the wind.

Rings true. US media is all about bondholder hurt (retirees and the like who invested family savings into GM bonds). Wahan, firms want to close down the dealerships by withdrawing sales and service support even though many if not most represent little cost to the firms themselves.

vsudhir · Post by **vsudhir** » 17 May 2009 16:47

Lessons the Teacher Forgot

American banking executives spoke paternalistically of their Chinese counterparts. Yes, China’s banking system was laced with corruption, but the American banks would bring their culture of modern finance and teach their new charges how to lend with a dispassionate eye on the bottom line.

“We see value in combining their local knowledge and distribution with our product expertise, technology and experience with size and scale,” Bank of America’s chief executive, Ken Lewis, said as he consummated the deal to purchase a piece of Construction Bank in June 2005.

Chinese leaders spoke of their great fortune in gaining Wall Street’s tutelage. “We have much to learn from our partner in serving customers and creating shareholder value,” said Construction Bank’s chairman, Guo Shuqing.

These days, of course, talk of Bank of America and shareholder value centers on how much of the company its newest shareholder — Uncle Sam — is destined to own, and whether the bank’s shares retain any value. Bank of America’s expertise with size and scale has expanded to encompass the management of $45 billion in bailout funds.

In China, ventures may be spectacularly unprofitable, yet enrich everyone lucky enough to get a piece. Developers, for example, construct vacant office buildings as an excuse to borrow from state banks. They rake off a cut for themselves, pay bribes to the party officials who deliver the land and reward bank functionaries with sumptuous banquets and trips to Macao. Soon enough, the trophy skyscraper descends into financial disaster, but the developers, bankers and party officials have already extracted their riches, and for long afterward they will still enjoy them.

Much the same can be said of Countrywide, the mortgage lender that sold itself to Bank of America last year in a fire sale, after many of its loans went bad. Shareholders were mostly wiped out. Homeowners suffered foreclosure. But the company’s executives made out brilliantly, cashing stock options amassed during the real estate boom, when Countrywide’s share price soared along with its loan volume. Ditto the Wall Street bankers who enabled Countrywide to lend with abandon by selling their mortgages to investors.

Now the easy money is gone. Wall Street’s financial alchemy has broken down, and bankers are freshly concerned about the creditworthiness of their borrowers. Bank of America is in such a fix that the investment it once portrayed as a helping hand to the primitive Chinese banking system must be sold off in haste just to stay alive.

Shorn of their auras as global paragons of excellence, American banks are even facing pressure to act more like the Chinese banks they were supposed to reform -- by lending in support of politically necessary projects.

The biggest criticism of Chinese banks has been that they lend not on the financial merits but in adherence to the wishes of party leaders. Fearful that a large state company may fail and disgorge angry, unemployed peasants onto the streets, local party officials pressure state banks to keep the credit flowing and spare the jobs.

In recent months, the center of the American financial system has effectively shifted from New York toward Washington, as taxpayer funds keep many institutions in business. Lawmakers and Treasury officials now implore the banks to use their bailout funds to increase lending, even as the banks themselves worry about the merits of making loans in a weak economy — the very conundrum Chinese bankers understand all too well.

Sanjay M · Post by **Sanjay M** » 17 May 2009 22:55

Europe in deepest recession since War as Germany suffers
German economic policy is "bankrupt", economists have said.

vsudhir · Post by **vsudhir** » 17 May 2009 23:13

Sanjay M wrote:Europe in deepest recession since War as Germany suffers
German economic policy is "bankrupt", economists have said.

You beat me to it. I was about to post this.

German doctrinal obduracy to combating the great recession with monetary tools will see its first causalities in the North Mediterranean rim. Whether the euro project itself survives this is a related question (it probably will muddle through, but can't say for sure).

Sanjay M · Post by **Sanjay M** » 18 May 2009 00:29

It's not mere doctrinal obduracy, it was a policy originally created to ensure EU cohesion and German primacy within it.

The fact is that Germany's economic strength is not enough to carry the entire union, or to offset the recessionary effects of the giant US economy, let alone the broader global economy.

The EU is built on the false premise of a central core German economic powerhouse to act as its engine.
As we can see, that engine doesn't have the power to push everyone else in Europe along, and now it's burning out.

The deeper impact of a German economic burnout could be a return to the old populism of previous eras.
German-French partnership could be the first casualty.

vsudhir · Post by **vsudhir** » 18 May 2009 01:22

Healthcare reality in America

Near-universal healthcare will require higher taxes. The administration said so in its budget, setting aside a “downpayment” of $600bn over 10 years. Most analysts think that comprehensive reform will cost $1,500bn or more. Even without healthcare reform, Mr Obama’s long-term budget does not balance. So count on it: US taxes are going up.

A simple way to raise a lot of money would be a value added tax, which I have advocated for the US before. But at a recent congressional roundtable, health-policy scholars representing a wide range of opinion mostly preferred a different approach. They wanted to eliminate, or at least cap, the income tax exemption for employer-provided health insurance.

This would raise surprisingly large sums. Eliminating the tax break altogether would yield some $250bn a year, Jonathan Gruber of the Massachusetts Institute of Technology told the roundtable. Even capping the exemption at quite a high level – denying the tax break to insurance plans costing more than a certain amount – could go a long way to meeting the cost of wider coverage. Most of the other economists giving evidence agreed. But in a rare show of comity, the Senate finance committee’s most senior Democrat and Republican were united against. This was not going to happen.

By itself, this would leave the old and the sick at a disadvantage: losing their group coverage, they might find insurance unaffordable or unavailable. But as long as they were guaranteed affordable coverage – through subsidies, community rating, government plans or other means – breaking the link between employers and health insurance would make excellent sense. This link is, among other things, a principal cause of economic insecurity in the US: if you lose your job, you face the risk of a health-related financial catastrophe.

The standard counter-argument concerns the division of spoils between capital and labour: if an employer drops its health insurance, income is surely transferred from workers to the company. Not so. This is a fallacy, and there is plenty of evidence to prove it. What counts is total labour costs: wages plus benefits. If companies save money by dropping insurance, the labour market will clear with higher wages.

vsudhir · Post by **vsudhir** » 18 May 2009 05:09

From the web....ok, discount the rhetoric, appreciate the sentiment...

I am astonished how quickly our once great republic is descending into a banana republic.

We have Obama and his thugs threatening Chrysler bondholders into accepting a deal that abrogates their contractual rights.

We have Hank Paulson threatening the CEO of Bank of America into bailing out Merrill Lynch (this CEO was replaced after he went public with this information).

We have the president threatening the State of California that it will lose its share of the stimulus money if it cuts the pay of union workers in order to help balance its budget.

Now that the banks and carmakers are controlled by the federal government, and the states basically are too because of federal power to withhold funds...Obama now wants to take over our medical industry as well?

Where is the outrage, people? Are we just going to sit here like sheep and watch our great country that our forefathers risked their lives for go down in flames?

As Jews, we learned the hard way that sitting passively while tyranny grows does not result in security or liberty. I fear that Americans are about to learn the same lesson.

Yes, Sri Obama is remaking yamerica in his own image. The great recession all around is but a backdrop and an occasional prop in his grand scheme of a kinder, gentler, more equitable, more (dare I say it) 'socialistic' USA. I wish him luck and genuinely wish his project well.

The world can indeed do with a more inward-looking, self-involved USA. AoA and Jai Ho..

vsudhir · Post by **vsudhir** » 18 May 2009 06:56

Faith based economics

By John Maudlin. Must read, IMHO.

The typical pundit keeps telling us unemployment is a lagging indicator, and that the recovery will be well under way before it shows up in the job numbers. Therefore, you should buy what they are selling, because the recovery is on its way. But that may not be the case this time. One of my favorite reads, when I get to see it, is the economic analysis from Bridgewater. They are among the best thinkers anywhere, and everyone who follows them gives them a great deal of credence. This is what they wrote about unemployment being a lagging indicator last month:

"Normally, labor markets lag the economy because incremental spending transactions are financed via debt, stimulated by interest rate cuts. But as long as credit remains frozen, spending will require income, and income comes from jobs. And debt service payments are made out of income. Therefore, in a deleveraging environment job growth becomes an important leading, causal indicator of demand and other economic conditions.

"... The bounce in the economy and the stabilization in markets reflect government actions that are big enough to impact near-term growth rates, but are not sufficiently directed at the root problem of excessive indebtedness to produce permanent healing. The deterioration in employment markets will continue because companies' profit margins are so deeply damaged that a little bounce in growth won't do much to alter their need to cut costs. This deterioration in labor markets will undermine demand and continue to pressure loan losses, which will keep the pressure on the banks and elevate the cost of capital for tentative borrowers, inhibiting credit expansion."

This again illustrates the problem of using past performance to project future results. You have to look at the underlying conditions in order to get a real comparison, and we have not seen a deleveraging recession in the US for 80 years. Using the past data in today's world is statistical masturbation: it may make you feel good, but it is not producing anything really useful, and may be harmful to your portfolio.

OK. The guy's got panache. Says it better than most (and most certainly better than moi)

This week, the federal government published two important reports on long-term budgetary trends. They both show that we are on an unsustainable path that will almost certainly result in massively higher taxes. By 2016 we will have to fund Social Security out of general revenues, as the surplus we now have will be gone. And there are no trust funds. They are a myth. It as if I wrote myself a check for $2 trillion and then declared I was worth $2 trillion. The money is just not there. Social Security makes Bernie Madoff look like a small-time crook.

And Medicare is in far worse shape. For those with the stomach, you can read Bruce Bartlett’s analysis at http://www.forbes.com/2009/05/14/taxes- ... icare.html . He estimates that taxes will have to go up by 81% if we are to pay the obligations as they now stand.

And since there's no way taxes will rise 81%, breaking of contracted obligations is 100% guaranteed. The social safety net is insolvent and American netagan have embarked on an unprecedented scheme to expand govt, welfare handouts and bailout unsecured private lenders. Doesn't compute onlee.

vsudhir · Post by **vsudhir** » 18 May 2009 07:11

More must-watchs:

http://www.slate.com/id/2216238/

An interactive map of employmt losses in massaland.

vsudhir · Post by **vsudhir** » 18 May 2009 07:24

OMG.

Feel oh-so-tempted to put here the whole darned article. Every line is wisdom gold. Course wont do that to keep at bay copyright drone-ullahs.

The following headline caught my eye: “Obama Says US Long-Term Debt Load
is ‘Unsustainable.’” Yet they announced a $1.8 trillion deficit, which is really going to be
at least $2 trillion, and are getting ready to pass health-care programs that will mean at
least a trillion in deficits for as long as one can project.

How will they pay for it? Even getting rid of the Bush tax cuts will only produce a
few hundred billion a year, which is nowhere near enough. They project much lower
medical costs in the future, because they assume they are going to figure out ways to cut
costs and make medical care more efficient. As if no one has ever tried that.

Yes, there are some savings on the margin; but the only way you really cut costs
is to ration health care, especially health care in the last year of life, which is about 30%
of health-care expenses. That is going to be very tough in the US. But when faced with a
real budget crisis, the choices are going to be stark. And that crisis is coming if we do not
control spending.

You cannot propose massive increases in spending without either creating
crushing debt that the markets will simply not allow, pushing interest rates much higher
and really slowing growth and hurting the economy. It is a simple fact that you cannot
increase the debt-to-GDP ratio without limit.

We found the limit on personal and corporate debt this past year. We pushed the
limits until the system crashed. And now the US government wants to basically do the
same thing. They are planning to see where the limits on government debt-to-GDP will
be. Unless cooler and more rational heads in the Democratic Party prevail, this is not
going to be pretty. Sometime in the middle of the next decade we will hit the wall, and it
will make the current crisis pale in comparison.

Brilliantly articulated, in ways even a kindergartner can understand.

John Snow · Post by **John Snow** » 18 May 2009 07:24

Please read

http://www.motherjones.com/politics/200 ... safety-net

vsudhir · Post by **vsudhir** » 18 May 2009 08:17

Snow garu,

John Snow wrote:Please read

http://www.motherjones.com/politics/200 ... safety-net

Touching. BEautifully written. Not much to argue with here. Ties back to the breakdown in family systems thing. That, alas, seems irreversible. One can maybe correct broken pension and retirement systems, perhaps even broken welfare, healthcare and govt systems. But the move from joint fmly -> nuclear fmly -> subnuclear fmly (in the west at least) has so far nowhere been reversed. The demographic disaster it implies will be felt well within our lifetimes onlee.

SwamyG · Post by **SwamyG** » 18 May 2009 09:11

Sudhir: Recently I had drawn this picture about the State vs Family vs Individual. It is my opinion that in the West the individual relationship with each other in family is weakening and the State relationship with the individual is strengthening. For example the State's say over an individual is more than the say by a family member. The strong lines from the State suggest the "hold" over the individual is increasing. The amusing thing is this is all happening where democracies flourish.

Ameet · Post by **Ameet** » 18 May 2009 11:50

My Personal Credit Crisis

http://www.nytimes.com/2009/05/17/magaz ... ml?_r=1&hp

If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.

But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds.

..............................Eight months after my last payment to the bank, I am still waiting for the ax to fall.

ArmenT · Post by **ArmenT** » 18 May 2009 12:20

Acclaimed economist says the recession is over

Short excerpt:

The source is Robert J. Gordon, an acclaimed macroeconomist and professor at Northwestern University. It’s surprising to learn he thinks the recession is over, because he is one of seven members of the elite Business Cycle Dating Committee of the National Bureau of Economic Analysis . These are the people who decide officially, for the record books, when recessions begin and end—usually many months after the fact, when the decision is really obvious. I’m unaware of any previous case in which a member of this Committee has ever stepped forward and declared the end of a recession in real time.

Gordon bases his gutsy call on an indicator that he says the Committee never even looks at: claims for unemployment benefits.

Raja Bose · Post by **Raja Bose** » 18 May 2009 12:39

Ameet, Nice article.

Basically underlining to young mujahids like moi not to live beyond our means

However the author of the article has wisely chosen one of the best get-rich-quick schemes in Amirkhan namely, "write a book about your sob story"!

vsudhir · Post by **vsudhir** » 18 May 2009 15:05

SwamyG:

I agree. It is but a natural consequence to the individual rights movement that paradoxically puts so much power in the hands of a status quo-ist state that real change becomes all but impossible. Dunno who said this but have heard it on quite a few occasions:

A state that can give you everything you want can also take away everything you have.

In urban middle class India also, one can discern the steady movement towards DINK and maybe soon sub-nuclear families also, who knows.

But the demographic decline (a natural consequence of the breakdown in the fmly structure) is not restricted only to gora democracies. It is also happening in the ex-commie countries of eastern europe and russia. Trend started way back, before they became democratic and has only accelerated since.

vsudhir · Post by **vsudhir** » 18 May 2009 18:01

Has the Bankruptcy law failed?

Failure can be a beautiful thing. Maybe not if you work for General Motors (GM), which seems to be stumbling toward bankruptcy. But for the U.S. economy as a whole, the swift and clean disposition of weak companies is an essential part of the formula for getting growth back on track. {Couldn't agree more. How does India fare on this parameter? IIRC, closing a business n India is much more messy and difficult than in the west}

However, for this cleansing to occur, the U.S. needs a well-functioning Chapter 11, the part of the U.S. Bankruptcy Code that determines whether failed businesses can be revived, in full or in part, or need to be dismantled. Last year, 30,000 troubled businesses took the Chapter 11 route, and the number should soar this year as the recession grinds on.

Lately, though, this crucial tool for coping with failure has...failed. Some weak, mismanaged companies are being propped up longer than they should because they're considered too big to fail. Meanwhile, potentially viable companies are being thrown too quickly onto the refuse heap, victims of misguided changes in bankruptcy law and financing practices. Perhaps most worrisome, derivatives--those complicated securities that helped cause the financial crisis--are giving some banks and other creditors the perverse incentive to kill companies that ordinarily they would want to save. The implications: more job losses than necessary, coupled with a slower recovery and a less vibrant economy.

The failure of failure became starkly evident last year when Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke stood by as Lehman Brothers went bankrupt. Although they said afterward that they lacked the authority to save the investment bank, the truth is that many people at the time thought letting Lehman go into Chapter 11 bankruptcy was the right thing to do. In theory, the Bankruptcy Code had all the tools to allow a bankruptcy judge to sort out the bank's affairs cleanly and fairly. Meanwhile, a signal would be sent to other financial institutions that they would pay a heavy price for mismanagement.

Chinmayanand · Post by **Chinmayanand** » 18 May 2009 18:07

The World's Biggest Debtor Nations

15. United States - 95.09% External debt (as % of GDP): 95.09%

14. Norway - 114% External debt (as % of GDP): 114%

13. Finland - 116% External debt (as % of GDP): 116%

12. Sweden - 129% External debt (as % of GDP): 129%

T-10. Spain - 137.5% External debt (as % of GDP): 137.5%

T-10. Germany - 137.5% External debt (as % of GDP): 137.5%

9. Denmark - 159% External debt (as % of GDP): 159%

8. France - 168% External debt (as % of GDP): 168%

7. Austria - 191% External debt (as % of GDP): 191%

6. Switzerland - 264% External debt (as % of GDP): 264%

5. Netherlands - 268% External debt (as % of GDP): 268%

4. Hong Kong - 295% External debt (as % of GDP): 295%

3. Belgium - 327% External Debt (as % of GDP): 327%

2. United Kingdom - 336% External debt (as % of GDP): 336%

1. Ireland - 811% External debt (as % of GDP): 811%

AnimeshP · Post by **AnimeshP** » 18 May 2009 19:54

durgesh wrote:The World's Biggest Debtor Nations

15. United States - 95.09% External debt (as % of GDP): 95.09%

14. Norway - 114% External debt (as % of GDP): 114%

13. Finland - 116% External debt (as % of GDP): 116%

12. Sweden - 129% External debt (as % of GDP): 129%

T-10. Spain - 137.5% External debt (as % of GDP): 137.5%

T-10. Germany - 137.5% External debt (as % of GDP): 137.5%

9. Denmark - 159% External debt (as % of GDP): 159%

8. France - 168% External debt (as % of GDP): 168%

7. Austria - 191% External debt (as % of GDP): 191%

6. Switzerland - 264% External debt (as % of GDP): 264%

5. Netherlands - 268% External debt (as % of GDP): 268%

4. Hong Kong - 295% External debt (as % of GDP): 295%

3. Belgium - 327% External Debt (as % of GDP): 327%

2. United Kingdom - 336% External debt (as % of GDP): 336%

1. Ireland - 811% External debt (as % of GDP): 811%

Well ... that explains the "prosperity" of the so-called First World Nations ...

hshukla · Post by **hshukla** » 18 May 2009 20:05

Where's Iceland in this list....its like 1200% for these guys

Singha · Post by **Singha** » 18 May 2009 21:10

so their future high std of living is based around 'control' of the system, ratings agencies
who are owned by them, continued pretence that they are 'hard currencies' and we should
accept toilet paper in exchange for material goods or services rendered by us.

they better have something nice and physical to sell, 'financial engineering services'
and 'high priced consultants' who take TA and DA for jamavar @ leela are not to be
entertained.

I suppose some of them atleast can sell food products and some can sell manufactured
good.

am however at a loss to explain what is UK's USP and niche in the scheme of things?

AnimeshP · Post by **AnimeshP** » 18 May 2009 21:21

Singha wrote:so their future high std of living is based around 'control' of the system, ratings agencies
who are owned by them, continued pretence that they are 'hard currencies' and we should
accept toilet paper in exchange for material goods or services rendered by us.

they better have something nice and physical to sell, 'financial engineering services'
and 'high priced consultants' who take TA and DA for jamavar @ leela are not to be
entertained.

I suppose some of them atleast can sell food products and some can sell manufactured
good.

am however at a loss to explain what is UK's USP and niche in the scheme of things?

Can someone let me know where I can find some details on the ratings of these esteemed countries ?

Dilbu · Post by **Dilbu** » 19 May 2009 00:04

Where does dhoti clad SDRE stand when compared to these TFTA nations? I do hope it is a yindoo rate of external debt onree.

ChandraS · Post by **ChandraS** » 19 May 2009 01:17

^ The TFTA heights are truly impressive and unattainable for the unwashed. The SDRE will not hold a candle to the TFTA ones. What else do you expect from banias saving upto 35-40% and hoarding gold like it was oxygen onree.

RamaY · Post by **RamaY** » 19 May 2009 01:53

Dilbu wrote:Where does dhoti clad SDRE stand when compared to these TFTA nations? I do hope it is a yindoo rate of external debt onree.

23rd from bottom. Works out to be 5% of GDP (~150B) and per capita external debt is $130.

James B · Post by **James B** » 19 May 2009 02:49

According to CIA world fact book,public debt of India is 78% of GDP. It is placed at 15th position from top.

https://www.cia.gov/library/publication ... 6rank.html

My question is, does the debt that is given on cnbc website includes both private and public or just public?. Something is amiss here.

vsudhir · Post by **vsudhir** » 19 May 2009 05:00

Aha...there we see it....

Cities Ask Treasury for $5 Billion to Fund Public Bond Insurer

The National League of Cities says it will ask the U.S. Treasury today for a $5 billion interest-free loan to capitalize a new municipal bond insurer it plans to create.

The Issuers Mutual Bond Assurance Co. would be the first publicly owned U.S. financial guarantor. The $5 billion capitalization would make it the biggest in the industry, eclipsing MBIA Inc.’s capital base of $3.8 billion and the $1.1 billion of current market leader Assured Guaranty Inc.

The company will apply to the Treasury for a ruling that its income be tax-exempt, said Cathy Spain, director of the League of Cities’ Center for Member Programs.

“Fifteen shareholder-owned municipal bond insurers have failed because of the intense pressure to produce 15 percent to 25 percent annual returns for their shareholders,” according to a copy of the preliminary business plan the League submitted to Treasury.

In response to the collapse of the bond insurers, a number of would-be replacements said they would enter the field. Rep. Barney Frank of Massachusetts, the Democratic chairman of the House Financial Services Committee, said in February that the federal government should enter the business.

IMBAC, as the new insurer would be known, is asking Treasury for $3 billion in cash upfront. It said it would seek to insure only general obligation and essential-purpose revenue bonds. In its cash-flow projections, the firm said it would charge premiums equal to about 70 basis points on a 25-year bond.

IMBAC said it would insure $20 billion in bonds during its first year in operation, $40.8 billion in the second year and $108 billion by the fifth year. The firm’s plan estimates that the business would require a staff of at least 30.

Sarkar knows best how to price risk I guess. Besides, why shouldn't municipal bonds get some bailout relief now, eh?

ChandraS · Post by **ChandraS** » 19 May 2009 05:20

raghunath wrote:According to CIA world fact book,public debt of India is 78% of GDP. It is placed at 15th position from top.

https://www.cia.gov/library/publication ... 6rank.html

My question is, does the debt that is given on cnbc website includes both private and public or just public?. Something is amiss here.

The CNBC website gives the total debt (public + private). Indians may not have much private debt given our tendency to save. I will post more from home once I can get some more numbers, have restricted net access at work.

vsudhir · Post by **vsudhir** » 19 May 2009 05:43

More a socio-economic perspective than a purely economic one, but here goes.

A New Trend in Motherhood

A report released last week by the Centers for Disease Control and Prevention found that the percentage of children born to unmarried women is rising sharply. In 2007, nearly 40 percent of births in the U.S. were to unmarried women, up from 34 percent in 2002.

Hmmm. Must e those hormones run wild perhaps, you say? But turns out teen births are down and more deliberate sub-nuclear families are on the rise.

More women in their 20s and 30s are opting to have children outside of marriage. Teenage birthrates, however, are declining, making up only 23 percent of nonmarital births in 2007, down from 50 percent in 1970.

Of the 14 developed countries surveyed, the highest unwed birth rates were among the Scandinavian nations (66 percent in Iceland, 55 percent in Sweden, 54 percent in Norway and 46 percent in Denmark). The report didn’t look at cohabitation rates.

vsudhir · Post by **vsudhir** » 19 May 2009 08:03

Brazil and China eye plan to axe dollar

Brazil and China will work towards using their own currencies in trade transactions rather than the US dollar, according to Brazil’s central bank and aides to Luiz Inácio Lula da Silva, Brazil’s president.

The move follows recent Chinese challenges to the status of the dollar as the world’s leading international currency.

Mr Lula da Silva, who is visiting Beijing this week, and Hu Jintao, China’s president, first discussed the idea of replacing the dollar with the renminbi and the real as trade currencies when they met at the G20 summit in London last month.

An official at Brazil’s central bank stressed that talks were at an early stage. He also said that what was under discussion was not a currency swap of the kind China recently agreed with Argentina and which the US had agreed with several countries, including Brazil.

“Currency swaps are not necessarily trade related,” the official said. “The funds can be drawn down for any use. What we are talking about now is Brazil paying for Chinese goods with reals and China paying for Brazilian goods with renminbi.”

Take with salt onlee. PRC and Brasilia don't have the conomic wherewithal to take on the USD just yet, IMVHO.

But this is interesting nevertheless.

In September, Brazil and Argentina signed an agreement under which importers and exporters in the two countries may make and receive payments in pesos and reals, although they may also continue to use the US dollar if they prefer.

An aide to Mr Lula da Silva on his visit to Beijing said the political will to enact a similar deal with China was clearly present. “Something that would have been unthinkable 10 years ago is a real possibility today,” he said. “Strong currencies like the real and the renminbi are perfectly capable of being used as trade currencies, as is the case between Brazil and Argentina.”

In what was interpreted as a sign of Chinese concern about the future of the dollar, the governor of China’s central bank proposed in March that the US dollar be replaced as the world’s de-facto reserve currency.