Perspectives on the global economic meltdown

[vsudhir]

Well said SK Mody. Even if all of it is not propagandu, a good part of it is psy-opsish onlee.

Where from these sthink-tanks, rights groups and NGOs sprout wearing a neutral halo but dripping agenda all over is a mystery onlee. How they manage prominent prime-time mainstream media coverage is curioser still.

Now we on BRF could also have our own Bharat Research Foundation (B.R.F) which regularly issues out rankings, surveys and opionated expert analyses on geopolitical, human-rights and development issues but would it find place in mainstream desi outlets anywhere?

khair, thats an OT debate to this thread perhaps.

[vsudhir]

Former Chinese Central Bank Advisor Questions Geithner's Math, Calls Federal Reserve Assets "Rubbish"

Paraphrased title, that.

Another global financial crisis triggered by a loss of confidence in the dollar may be inevitable unless the U.S. saves more, said Yu Yongding, a former Chinese central bank adviser.

It’s “very natural” for the world to be concerned about the U.S. government’s spending and planned record fiscal deficit, Yu said in e-mailed comments yesterday relating to a visit to Beijing by U.S. Treasury Secretary Timothy Geithner.

The Obama administration aims to reduce the fiscal deficit to “roughly” 3 percent of gross domestic product from a projected 12.9 percent this year, Geithner reaffirmed today. The treasury secretary added that China’s investments in U.S. financial assets are very safe, and that the Obama administration is committed to a strong dollar.

It may be helpful if “Geithner can show us some arithmetic,” said Yu. “We need to know how the U.S. government can achieve this objective.”

The deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion shortfall, according to the Congressional Budget Office.

The U.S. needs a higher savings rate and a smaller deficit on the current account, which is the broadest measure of trade, or “another financial crisis triggered by a dollar crisis could be inevitable,” the Chinese academic said.

Referring to the Federal Reserve “as the world’s biggest junk investor,” {ouch} and to Chairman Ben S. Bernanke as “helicopter Ben,” Yu said the Fed has dropped “tons of money from the sky since the subprime crisis.”

“The balance sheet of the Federal Reserve not only has expanded like mad but is also ridden with ‘rubbish’ assets,” he said

PRC has unkil over a barrel, it would seem like. But unkil always has an ace up the ase, IMHO. Would be too early to rule out anything at this stage. Panga is there are no good options for any of the big players anymore, forget us bit players (yup, our tiny share in world trade says it all, actually). Am hoping we bit players who didn't gorge on enormous debt (unlike east Europe, say) and who don't have a free capital flow regime (unlike, say, HK or UK) can come out relatively intact. The codeword is 'relatively'.

[vsudhir]

As a profession, economics not only has nothing to say about what caused the world to come to the brink of financial collapse last autumn, but also a supreme lack of interest in it. If, for example, you scroll down the list of papers scheduled for publication by the Review of Economic Studies, one of the prestigious UK journals, there is not the slightest sense that the world of general equilibrium and real business cycle models has been turned upside down in the past two years. There is, on the other hand a paper on "Generalised non-parametric deconvolution with an application to earnings dynamics", which includes the insight that "Monte Carlo simulations show good finite-sample performance, less so if distributions are skewed or ­leptokurtic". Got that? And that's just the abstract. The full article is even more fun – if you get your kicks from fantasy economics divorced from reality.

The big divide in economics is not between Keynesians and Hayekians, but between those who are interested in looking at the world as it is and those who are interested in how it would be if it conformed to the dictates of their mathematical models. The insights that Smith, Marx and Keynes brought to economics came not from differential calculus but from an attempt to understand what was happening during the early stages of the Industrial Revolution, the expansion of the mid-19th century and the Great Slump.

Link

[ramana]

A commodities expert David Rose from Des Moines Iowa was on radio and said commodities ahve racked up a steady increase since 7 months. The increase is due to $ devaluation, PRC buying up to hedge for future price rise in soybeans, oil and copper. He sounded very scholarly but is a down in the tar pits trader.

[mnag]

Very funny. It reminds me of George Fernandes' reply "before 9/11, no one knew that New York was the worlds most dangerous place" when someone in US commented that Kashmir is the most dangerous place in the world and unkil should mediate

but hey, with each passing day, I don't even know what to believe anymore.

Just received this hilarious piece of propaganda in my email:
8 Indian cities in global 25 risky offshoring places

Bangalore: Eight Indian cities are listed among the world's 25 riskiest places for offshoring, mainly on concerns like terrorism, pollution and geopolitical issues in the country, says a study by U.S. based Brown-Wilson Group. Of all the cities, the national capital region (NCR) comprising Delhi, Gurgaon and Noida has earned the dubious distinction of being the worst offshoring destination within the country, according to the survey published in the annual Black Book of Outsourcing, a publication considered as a major independent analysis and advisory research for the outsourcing players and investors globally.

The NCR is followed by Mumbai as the second riskiest offshoring hub within India, while Kolkata has been ranked as least risky in the country. The other domestic cities included in the list are Bangalore, Hyderabad, Chennai, Pune and Chandigarh. In the overall global list, NCR has been ranked as sixth most riskiest, Mumbai ninth, Chandigarh 15th, Pune 20th, Chennai 21st, Bangalore 23rd, Hyderabad 24th and Kolkata the 25th most riskiest in the world.

No Indian city could find a place on a separate list of 25 safest offshoring destinations. Both the lists have been published in the 2009 edition of the Black Book of Outsourcing, brought out every year by U.S.-based Brown-Wilson Group.

The rankings of safest and riskiest places are based on factors like high terrorist or rebel target threats, uncontrolled environment waste and pollution, corruption and organized crime, unstable currency, geopolitical conditions and unsecured networks and technology. In terms of terrorism threats, Mumbai has been put on top, followed by Delhi NCR and Jerusalem in Israel. Further, Delhi NCR has been ranked as the riskiest place when it comes to heightening trans-national and geopolitical concerns. Bangalore, another leading outsourcing destination in the country has been ranked as the riskiest place in terms of uncontrolled environmental waste and pollution.

[John Snow]

ramana garu et al>>>

I had been predicting PRC buying up commodities, natural resources and also indulge in barter or trade in Yuan instead of Dollars. It might even dump products in all the third world countries of Africa, including armaments where ever needed. It keeps their Industries churning away the goods keeps social unrest and un employment at low level as hedge against social unrest.

Also recall that I was saying as often as I could that not a single penny has been made by any MNC in PRC selling to local consumers while all the talking heads and CNBC BW Fortune mag wags were talking of a billion consumers to buy western products, as usual they are late and only resemble beeves & butt heads!

Read the following in the current isuue of Time. (unlike acharya ji I do give url )

http://www.time.com/time/magazine/artic ... 66,00.html

In May 2005, when the corporate world's enthusiasm for China was at its peak, I spent a few days in Beijing in the company of a bunch of top business executives from the U.S. and Europe. The occasion was a conference sponsored by my then employer, Fortune, and as I sat through the speeches and panels and dinners, I was repeatedly struck by the almost puppy-like devotion to the Middle Kingdom voiced by Western CEOs.


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The End of the Big Business-China Love Affair
By Justin Fox Monday, Jun. 08, 200

This can't possibly last, I remember thinking. I had no real idea how it would end, though, just a vague sense that the Chinese mix of economic freedom and political repression might eventually prove combustible. Well, we're still waiting on the combustion — China is already motoring out of the global economic downturn, and its government seems as cohesive and entrenched as ever. But the economic romance between the world's most populous nation and the biggest multinational corporations is nonetheless on the rocks. (Watch TIME's video of Peter Schiff trash-talking the markets.)

The Chinese government has begun turning a cold shoulder to Western corporations hoping to cash in on its consumers. Meanwhile, corporations are paying much closer attention to the risks and hidden costs of supplying their home markets with stuff made thousands of miles away in China. None of this necessarily means an end to the extraordinarily co-dependent economic relationship that China and the U.S. in particular have built up over the past decade. But it does mean big changes.

To understand why, let's go back to May 2005. Back then, CEOs loved China because it had become the world's low-cost, increasingly high-quality manufacturing hub. They loved its vast and growing ranks of middle-class consumers. Most of all, the capitalist bosses loved working with officials of the nominally communist Chinese government, who were far easier to deal with than the politicians back home. And why not? On one side, you had autocrats who feared losing their grip on power if the economy didn't keep growing; on the other were autocrats who feared losing their grip on power if profits didn't keep growing. They had a lot in common. (See 25 people to blame for the financial crisis.)

Over the past couple of years, though, the China equation got unbalanced. First came a spike in shipping costs that led manufacturers in the West to take a closer look at all the costs — time to market, quality control, etc. — of stringing their supply chains across oceans. While shipping rates have since subsided, the shift in mind-set among executives has stuck, says John Ferreira, head of the manufacturing practice at Archstone Consulting. No longer is there a herd mentality pushing them to China and other faraway places, he says. When Ferreira surveyed U.S. and European manufacturing execs late last year, almost 90% said they were contemplating bringing some operations home or at least closer.

The sharp downturn in global trade has delayed action on those ideas. So far the only evidence of the shift is in consultant surveys like Ferreira's. In Beijing, though, the downturn has brought its own attitude adjustment. "The Chinese response is 'We are too coupled to the American economy,'" says Ian Bremmer, president of the Eurasia Group, a political-risk consulting firm. That has led to more domestic spending by the government and attempts to boost Chinese consumers' spending. True, neither is necessarily bad news for foreign firms. It has, however, also meant an increasing reluctance to let U.S. companies call the shots in China. The most visible evidence of this was the denial in March of Coca-Cola's bid to buy juicemaker Huiyuan, but Bremmer says that's just the tip of the iceberg. "The ability of Western companies to do effective business in China over the next five years is going to be increasingly limited," he says.

To some extent, this is the inevitable cooling down of an overly intense relationship. But in economics as in love, breaking up is hard to do. Bremmer recently co-authored the book The Fat Tail, which details the political risks facing the global economy. (Major, unlikely events that are difficult to fit into statistical models are known as fat tails.) He counts the U.S. relationship with China among the fattest of fat tails. American corporations may come to see China as a rival — meaning they'll be less likely to fight congressional crackdowns on trade. The U.S. investment banks that have been China's biggest boosters are not the powers they were two years ago. And in China, the troubles of the U.S. financial system have led to a growing mistrust of U.S. intentions and the American form of capitalism. The love affair was strange and overdone. The aftermath could be ugly.


****
BRF where tomorrow comes today for other..... (..... part will print at dawn )

[Ameet]

Bond Vigilantes Confront Obama as Housing Falters

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

The 1.4-percentage-point rise in 10-year Treasury yields this year pushed interest rates on 30-year fixed mortgages to above 5 percent for the first time since before Bernanke announced on March 18 that the central bank would start printing money to buy financial assets. Treasuries have lost 5.1 percent in their worst annual start since Merrill Lynch & Co. began its Treasury Master Index in 1977.

“The bond-market vigilantes are up in arms over the outlook for the federal deficit,” said Edward Yardeni, who coined the term in 1984 to describe investors who protest monetary or fiscal policies they consider inflationary by selling bonds.

“Ten trillion dollars over the next 10 years is just an indication that Washington is really out of control and that there is no fiscal discipline whatsoever.”


Bill Gross, the co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co. and manager of the world’s largest bond fund, said all the cash flooding into the economy means inflation may accelerate to 3 percent to 4 percent in three years. The Fed’s preferred range is 1.7 percent to 2 percent

[vsudhir]

The CA-nary in the coalmine has started to sing.

Schwarzenegger declares 'day of reckoning'

Declaring that "California's day of reckoning is here," Gov. Arnold Schwarzenegger said today the state should turn its dire budget straits into an opportunity to make government more efficient.

Speaking to a relatively unusual joint session of the Legislature and other constitutional officers, Schwarzenegger acknowledged the billions of dollars in spending cuts he has proposed to close a $24.3 billion hole in the budget will be devastating to millions of Californians.

"People come up to me all the time, pleading 'governor, please don't cut my program,'" he said. "They tell me how the cuts will affect them and their loved ones. I see the pain in their eyes and hear the fear in their voice. It's an awful feeling. But we have no choice.

"Our wallet is empty. Our bank is closed. Our credit is dried up."
{Quote of the decade. Should be plated, framd and strung up on all sarkari office walls like gandhi potraits do in our daftars.}

The short-term problem faced by lawmakers is closing the budget gap in time for state officials to go the private investment markets and borrow billions of dollars to get the state through the first months of the fiscal year that starts July 1.

{And where from will repayment come from? at what interest rates will a tired pvt mkt, already expected to cough up $trillions in sovereign lending, lend to California?}

State Controller John Chiang has warned that without such loans, the state's coffers will run dry by the end of July. Chiang said last week that as a practical matter, the budget must be patched up by mid-June in order to give officials time to borrow the money.

To do that, Schwarzenegger has proposed a plan that relies partially on accounting maneuvers and borrowing funds from coming fiscal years, but mainly on deep cuts in nearly every program funded by state government.

Those range from cutting spending on K-12 schools, community colleges, the University of California; releasing some non-violent prisoners a year early; closing 80 percent of the state's parks, and wiping out or paring back on health and social service programs for California's neediest residents.

[amol.p]

US business bankruptcies rise 40 per cent in May---is this what we call green shots in economy.......?????


http://economictimes.indiatimes.com/art ... 611259.cms

NEW YORK: US business bankruptcy filings jumped 40 percent in May from a year ago as the sluggish US economy pushed more businesses into the red, a
bankruptcy data provider said on Tuesday.

There were 7,514 commercial bankruptcy filings for the month, compared with just 5,354 during the same month a year ago, according to Automated Access to Court Electronic Records (AACER), a database of U.S. bankruptcy statistics used by attorneys and lenders.

In just two years, the number of businesses filing for bankruptcy in May has more doubled. Last month brought the bankruptcies of yellow pages telephone directory publisher RH Donnelley Corp, auto parts maker Visteon Corp and apparel retailer Anchor Blue Retail Group Inc.

Per day, 376 companies sought protection from creditors in bankruptcy court.

"The average filing amount per day is actually the highest since the bankruptcy law changed in October of 2005," said Mike Bickford, president of AACER.

The figures do not include Chrysler, which filed for bankruptcy in April or General Motors, which filed on June 1.

U.S. bankruptcy laws changed in 2005. AACER's count of commercial cases includes bankruptcy filings from companies, as well as individuals who say they are running a business.

There are many more bankruptcy filings to come, Bickford said.

"I would see continued filings throughout 2009 and well into 2010," he said, citing data trends.

[Singha]

releasing some non-violent prisoners a year early; closing 80 percent of the state's parks

AoA. the released individuals could take shelter in such parks and
run their own shantytown slumlord ops.

[vsudhir]

Fiscal options for the UK: sovereign insolvency, inflation or serious fiscal pain

William Buiter in FT. Decent read.

But even without the input from the rating agencies, it would have been clear that the UK is about to exit its AAA status. It shares this fate with most of the other G7 countries. In two or three years, Canada may be the only G7 country left to have an AAA rating. France could conceivably join Canada. There is nothing too shocking about this. Not that long ago, Japan’s sovereign rating was on a par with Botswana’s (I thought that was rather unfair on Botswana).

I will expand on the case of the UK in what follows, saving a more detailed consideration of the US fiscal predicament (which is much worse than that of the UK) for a future post.

UK state debt is expected to rise from just over 50 percent of annual GDP today to over 100 percent of GDP in four or five years time. With deficits of 12 percent of GDP or higher very likely during the next couple of years, there needs to be a decent recovery by the end of the 2010 for the debt burden not to rise even faster. Net interest payments on the public debt (currently a low 1.83 percent of GDP - an average effective interest rate of 3.6 percent) will double even if interest rates remain at their extremely low current levels, something I consider unlikely.

During the decade preceding the crisis, tax revenues were flattered increasingly by the unsustainable housing boom and the profit and income explosion in the financial sector. Such easy revenue pickings are unlikely to be forthcoming in the future, even if the economy recovers as hoped by all and expected by a few.

It is likely that the path of potential output in the UK will turn out to be lower because of the crisis. The UK Treasury estimates that a combination of a permanently higher cost of capital and a reduction in the effective supply of labour (due to lower net immigration and hysteresis’ effects from higher unemployment) will knock five percent off the level of the path of potential output.

Let’s assume, conservatively, that a doubling of the debt-to-GDP ratio from 50 to 100 percent raises the required real rate of interest by one percentage point.

The permanent primary surplus (as a share of GDP), p, the permanent seigniorage (as a share of GDP), s, the state debt (as a share of GDP), b, the long-term real interest rate, r, and the long-term growth rate of real GDP, g) can be used to write the solvency constraint of the state as follows:

p + s ≥ (r - g)b (1)

Permanent means roughly ‘long-run future average’. UK long-term real sovereign interest rates (20 years maturity or over yields on index-linked debt) are around one percent today. The long-run growth rate of real GDP is probably somewhere between 2.25 percent and 2.50 percent per annum. Bingo! The UK government lives in Ponzi land: with the growth rate of GDP (roughly the growth rate of the tax base) higher than the interest rate on the public debt forever, the government can always service its outstanding debt by issuing more debt. Primary surpluses, or monetary financing are never required. Bernie Madoff, come home, all is forgiven.

Devastating clarity onlee. Real danger for 'em elitemen if hajaar commons start to understand th emperor is naked onlee and reject debt-driven serfdom...

Read it all, janta.

[Rahul Mehta]

Fiscal options for the UK: sovereign insolvency, inflation or serious fiscal pain

William Buiter in FT. Decent read.

But even without the input from the rating agencies, it would have been clear that the UK is about to exit its AAA status. It shares this fate with most of the other G7 countries. In two or three years, Canada may be the only G7 country left to have an AAA rating. France could conceivably join Canada. There is nothing too shocking about this. Not that long ago, Japan’s sovereign rating was on a par with Botswana’s (I thought that was rather unfair on Botswana).

.......
Devastating clarity onlee. Real danger for 'em elitemen if hajaar commons start to understand th emperor is naked onlee and reject debt-driven serfdom...

Read it all, janta.

Pls send Rs 20 as royalty money .

[Bade]

Mr. Araya, 38 years old, lost his job in 2007 as a crude oil trader on the New York Mercantile Exchange. After visiting dozens of headhunters with no luck, he applied in August 2008 to be a host at the Palm to support his wife, two young daughters and mortgage payments. His salary has plunged from $200,000 to $25,000.

From Ordering Steak and Lobster, to Serving It

The excesses from believing in ones own Cool-aid, ensures the downfall. If only people saved for the hard times when the going was good.

[vsudhir]

Well known here but still WTH

In Search of Jobs, MBAs Take Off the Gloves

A dismal job market has MBA students, graduates, and alumni competing like never before. The only rule: There are no rules

[John Snow]

where is Johaan when we need him to tell us the state of HM treasury?

Paging Sir Johaan !!!

[vsudhir]

Meanwhile the protectionist tendencies are baring teeth and expect them to snowball into a storm mighty soon...

Work Visa Bill Threatens Outsourcers

A controversial "50/50" provision in the Durbin-Grassley visa reform bill could hurt Indian outsourcers. Advocates say it will save U.S. jobs

Underlying problem is that US jobs are zimbly not cost competitive anymore. Don't see how these bills will do anything to address that issue. Few new jobs will strike roots in even emerged (from musharraf) markets and 'developed' lands if the burden of legacy costs and public debt servicing remains as high as in the unglisaxon world.

Sure, the canada model offers a way out - mildly socialist, mildly protectionist and mildly competitive - but it doesn't quite pay to field power projection capabilities 10,000 miles away from home or finance unrest in distant lands.

Letzsee where things go next.

[Raja Bose]

Mr. Araya, 38 years old, lost his job in 2007 as a crude oil trader on the New York Mercantile Exchange. After visiting dozens of headhunters with no luck, he applied in August 2008 to be a host at the Palm to support his wife, two young daughters and mortgage payments. His salary has plunged from $200,000 to $25,000.

From Ordering Steak and Lobster, to Serving It

The excesses from believing in ones own Cool-aid, ensures the downfall. If only people saved for the hard times when the going was good.

It seems the guy saved a bit but just not enough...I mean a Battery City Park condo @ $200K salary in NYC is living way beyond your means when times are tough. Now it has become an albatross around his neck.

[Kakkaji]

Upstarts ready to rule world's economy

We may not like to admit it, but it's time to get used to this fact: emerging markets such as China and India are quickly becoming the world's new economic powerhouses.

In fact, according to a report from a leading economic research group released earlier this week, emerging market economies may overtake the U.S. and the rest of the Western world this year.

The Centre for Economics and Business Research (CEBR), a London-based economic consulting firm, predicted that the United States, Canada and Europe will contribute 49.4% to the world's total gross domestic product in 2009.

According to the CEBR, this will be the first time since the beginning of the Industrial Revolution in the mid-19th century that non-Western economies produced more than half of the world's GDP.

[vsudhir]

OK, I'm done with being Nice.

Denninger blog. The guy really lets roll.

Ensoi.

[Kakkaji]

Even Tim Geithner can't sell his house

[Raja Bose]

Well, living beyond one's means would probably have been described as being very "un-Indian-like" 2 decades back, but that has changed even back in Yindia with ITvity abduls spending their cash like a jazzed-up Paki Jernail on Amirkhani dole and thinking nothing of buying a fancy Rs.10K phone on a whim.

[ramana]

Upstarts ready to rule world's economy

We may not like to admit it, but it's time to get used to this fact: emerging markets such as China and India are quickly becoming the world's new economic powerhouses.

In fact, according to a report from a leading economic research group released earlier this week, emerging market economies may overtake the U.S. and the rest of the Western world this year.

The Centre for Economics and Business Research (CEBR), a London-based economic consulting firm, predicted that the United States, Canada and Europe will contribute 49.4% to the world's total gross domestic product in 2009.

According to the CEBR, this will be the first time since the beginning of the Industrial Revolution in the mid-19th century that non-Western economies produced more than half of the world's GDP.[/quote]

I have heard of innovative second tier self starting business people from India, without sarkari connections, making quite a few moves. Nothing big but in $100m range deals. But then Lakshmi Mittal also started small.

For instance an acqauintance had a Auto wheels plant in India and opened a couple of them in PRC to get costs down. But then GM bankruptcy cheated him quite few dollars. But he is not downcast but raring to go ahead with other plans.

[vsudhir]

The fin-econ-trading blogs are abuzz. Something's heating up in the great cold nord.

Apparently, Latvia held a bond auction and there were no bids. NO BIDS.

Not good.

Sweden and Switz lent heavily to the baltics and east europe and sure enough, both the kronor and the swiss franc got clobbered today.

Meanwhile, seems like Germany is saying (indirectly for now) that it wants its Gold back that is currently held in US vaults.

[vsudhir]

Meanwhile, a blog about life in Iceland post the sovereign default.

Link

...Food prices have raised by such amounts that it is hard to imagine what to eat through the week, and it was difficult before. This is really bad .. very bad. I am the type of a person that would do anything to help others, and so it hurts me to not being able to. I have been asked for food and money, I have nothing to spare. I have given away what I had, but only to leave me in even worse situation. But this is nowhere close to being over yet. As they said on the news this tax raise was only to cover one fortieth of what has to be done to cover up the deficit. If things get forty times worse than they are ............

I know things can get worse for a long time, and can always be worse than they are but this is just absurd. This is literally surreal.

I can not afford to go to the store, I can not afford to eat 2 times a day, I hardly ever turn on a light, I do not do anything that could eventually cost me money and frankly, I wish I could figure out a way to not get my clothes dirty. Thankfully the hot water here is geothermal, not heated, so there is no electric bill for taking a shower. I wonder what more measures I could take to reduce the cost of living, except quit eating.

I am really not looking forward to much anymore, I was looking forward for the summer and seeing what it would bring but as it seems .. it will only bring more problems that are impossible to solve. I am thankful for the pure water from the tap, which is my favorite drink, and I am thankful for that the grass is getting greener and the birds seem to be having a great season.

Not pretty. Am now reeeeeally starting to wonder, after the expected pipsqieaks go down (read east european chutkus), which major conomy will be the first to default. The wait for that happening can likely be measured in weeks now. And yes, should that sublime honor befall UKstan, expect no copious tears from moi onlee.

[vsudhir]

OK, links have come in....

Latvian bond failure begins

The failure to attract offers for the paper came as the Latvian market remained frozen due to worries about the currency, which some fear faces a devaluation, and amid central bank buying of the lat to keep it within its peg to the euro.

The reaction in the forex markets has been pretty severe. {ya think?}

[vsudhir]

OK, dunno what to make of it ut have come across hearsay references for the Plunge Protection Team (PPT) on numerous occasions.

Bob Chapman describes the story:

This past week the Fed and the Treasury via the “Working Group on Financial Markets,” struggled to hold the stock market up, along with the bond market and to continue to suppress gold and silver. The group was created in August 1988, under Executive Order 12631. It was later nicknamed the “Plunge Protection Team” by the Washington Post. The group was the answer to the plunge in the stock market in late October 1987. Incidentally, the Fed and the Treasury both illegally interceded in that market chaos arresting the collapse. They gave banks and brokerage firms unlimited amounts of money to stop the free falling market. The group is supposed to promote the integrity, effectiveness, regularity and competitiveness of our markets, to maintain the confidence of investors. The group produces no reports, the public knows nothing about it, nor does 80% of Wall Street, there are no minutes of their meetings, and everything is done in secret. We have witnessed hosts on CNBC deny that it even exists, when they know it manipulates markets worldwide 24/7. The members of the president’s group are the Chairman of the Federal Reserve, the head of the New York Fed, the Secretary of the Treasury, the Chairman of the SEC and the head of the CFTC, the Commodity Futures Trading Cooperation. The original intention of the order has been badly distorted and a good example of that was the termination of reporting on M3 in March 2006. The influence on all these entities cannot be underestimated. Since 1988 Goldman Sachs, Citigroup and JP Morgan have run them. They have been able to manipulate markets with abandon. As you can see their leadership has not led to healthy, free financial markets. Their greed has again destroyed our markets as they have over the past 96 years for the Fed and last 20 years for the group. Over these years a number of indicators, such as M3 have been discontinued so that professionals and others could follow the flow of credit and money creation and its affect on the dollar. The Fed and the Treasury do not want you to know what they are doing. Their attitude is that you don’t have a need to know. As a result of professionals, Congress and individual Americans are not paying attention, as the international monetary system is collapsing.

Without sources and backup, its mere conspiracy theory so far.

[vsudhir]

OKie, from the horse's mouth folks..... its official now, sort of.

Frontpage top story at FT today:

Bernanke warns on deficit

With a supplementary headline that reads:

Fed chief says US could face debt trap

[vsudhir]

OK, never had a healthy respect for PIMCO's Bill Gross but he's the navigator of the gorilla among bond investors, so it pays to see what he's saying.

To zero in on the U.S. of A., its annual deficit of nearly $1.5 trillion is 10% of GDP alone, a number never approached since the 1930s Depression. While policymakers, including the President and Treasury Secretary Geithner, assure voters and financial markets alike that such a path is unsustainable and that a return to fiscal conservatism is just around the recovery’s corner, it is hard to comprehend exactly how that more balanced rabbit can be pulled out of Washington’s hat. Private sector deleveraging, reregulation and reduced consumption all argue for a real growth rate in the U.S. that requires a government checkbook for years to come just to keep its head above the 1% required to stabilize unemployment. Five more years of those 10% of GDP deficits will quickly raise America’s debt to GDP level to over 100%, a level that the rating services – and more importantly the markets – recognize as a point of no return. At 100% debt to GDP, the interest on the debt might amount to 5% or 6% of annual output alone, and it quickly compounds as the interest upon interest becomes as heavy as those “sixteen tons” in Tennessee Ernie Ford’s famous song of a West Virginia coal miner. “You load sixteen tons and whattaya get? Another day older and deeper in debt.” Pretty soon you need 17, 18, 19 tons just to stay even and that describes the potential fate of the United States as the deficits string out into the Obama and other future Administrations.

Good explanation for the debt trap situ Bernake talks about above.

The obvious solution to both dollar weakness and higher yields is to move quickly towards a more balanced budget once a sustained recovery is assured, but don’t count on the former or the latter. It is probable that trillion-dollar deficits are here to stay because any recovery is likely to reflect “new normal” GDP growth rates of 1%-2% not 3%+ as we used to have.

link

[John Snow]

Dont know about Finland atleast Norway has North sea oil and revenue (in the kitty) to count.

I think the rot started with Nixon and Regan accelarated it trickle down economics ( aka Voodo economics) and the era of cutting taxes building huge deficts with massive programs like B1 bomber, star wars etc etc. He converted the Amirkhans and republicans to wroship his idol and everybody in republican party started to mimick him and sold the mantra of low taxes more spending on defence cutting education you name it they did it.

Now statues of Regan are being builts a la Lenin and Stalin

Smart very smart (Magna vox add even for this Icredit the source )

[Singha]

would be funny if a real inventory were done in Fort Knox to see if the german gold is still there.

type for Merkel to use the boot and get the gold back.

[amol.p]

California will run out of cash in 14 days

The state wallet is empty. The bank closed. Credit has dried up, Gov. Arnold Schwarzenegger told lawmakers in a special Tuesday morning address at the Capitol.
“California’s day of reckoning is here,” he said. With no action, the state will run out of cash in 14 days. Three months after the state budget was approved, California faces a $24 billion deficit.

Schwarzenegger has already proposed massive cuts to education, health care and prisons. Now he’s looking for structural reform to make government more efficient and stretch taxpayer dollars.

He’s asked the State Board of Education, for example, to make textbooks available in digital formats — a move that could save millions.

In 2004, the governor talked about blowing up boxes and consolidating agencies, but the initiatives never gained traction.

They’re back.
Schwarzenegger is proposing once again to eliminate and consolidate more than a dozen state departments, boards and commissions. This includes the Waste Management Board, the Court Reporters Board, the Department of Boating and Waterways and the Inspection and Maintenance Review Committee.

Earlier this year, the state began consolidating information technology departments.

Now Schwarzenegger wants to consolidate departments that oversee financial institutions and merge tax collection operations. In July, state leaders will receive recommendations on how to modernize the tax code.

“This will be a tremendous opportunity to make our revenues more reliable and less volatile and help the state avoid the boom and bust budgets that have brought us here today,” Schwarzenegger told lawmakers.

It’s not going to happen in 14 days, he said. But it could happen before the Legislature adjourns for summer recess on July 17.

http://www.bizjournals.com/pacific/stor ... ily23.html

[Singha]

imo some cheap cutbacks would be to "let go" of all community parks, conservation areas and wild reserves with their miles of trails etc. let the forest creep back and reclaim its own.

also public school parents be asked to pay more for the schooling on a break-even basis. they want the fancy stuff, they gotta pay for it.

AoA, more I think about it, CA is becoming a glorified version of BLR with worse food, worse traffic and more gang activity

welcome to yindia biraders....

[amol.p]

State's unemployment fund short by billions

http://www.sfgate.com/cgi-bin/article.c ... 17UR5H.DTL

California is paying out so much for jobless benefits and collecting so little in payroll taxes that its unemployment insurance fund could be $17.8 billion in debt by the end of 2010, according to a new report from the state Employment Development Department


The situation of CA sounds like bihar demanding emergency funds & central govt denying it....bcoz they all know the reason........!!!!!!!!!!!
Question to gurus can India buy california and bailout the state...?????

[Chinmayanand]

Bill Gross understands money as few other men do. The two pieces below are well worth studying --

June 3 (Bloomberg) -- Bill Gross, founder of Pacific Investment Management Co., advised holders of U.S. dollars to diversify before central banks and sovereign wealth funds ultimately do the same amid concern about surging deficits.
The U.S.’s “fortune-producing capabilities seem to be declining, which might suggest that its relative standard of living is doing so as well,” Gross wrote in his June investment outlook posted today on the Newport Beach, California-based firm’s Web site. “If so, the implications are serious.”
Gross, manager of the world’s biggest bond fund, said on May 21 that the U.S. will “eventually” lose its AAA credit rating after Standard & Poor’s lowered its outlook on the U.K.’s AAA to “negative” from “stable” amid an escalating ratio of debt-to-gross domestic product. While U.S. marketable debt is at about 45 percent of GDP, annual deficits of 10 percent will push the amount to 100 percent within five years, a level that rating companies and markets view as a “point of no return,” he said.
Government spending will push the budget deficit to $1.75 trillion in the year ending Sept. 30, according to the Congressional Budget Office’s forecast. The gap will be narrowed to “roughly” 3 percent of GDP from a projected 12.9 percent this year, Treasury Secretary Timothy Geithner said June 1.

The U.S. growth rate “requires a government checkbook for years to come,” Gross said. Coupled with Medicare and Social Security entitlements, government borrowing could reach 300 percent of GDP, meaning “the Chinese and other surplus nations cannot fund the deficit even if they were fully on board,” he wrote.

China, the largest U.S. creditor, with $767.9 billion of debt, has shifted purchases of Treasuries into shorter-maturity securities amid concern about unprecedented debt sales.
Geithner, speaking yesterday in an interview in Beijing with Chinese state media outlets, said he has “found a lot of confidence” in the U.S. economy during his trip to China.

Investors should position themselves in the front end of the yield curve as long-term Treasury yields likely move higher, steepening the so-called yield curve, Gross wrote.

[Singha]

indeed. I have read how the man works...he is a sharp guy and has the pulse reading correctly.

this is about the time, when people with loot to spare might want to
diversify and invest in Yindia esp flats in BLR

[svinayak]

http://online.wsj.com/article/SB124407155034283023.html

Many of Mr. Obama's supporters surely thought this young, dynamic generation of public leaders would elevate the hip, cutting edge of the U.S. economy -- nanotechnology, genomics, robotics, even health and medicine technology. Instead, we've gotten the Old Economy on dialysis. General Motors has been commanded to restart aging UAW factories to output product on behalf of the administration's hybrid-car obsession. Where's the New Economy in any of this?

Or ObamaCare. How will a build-out of Medicare (b. 1965) to cover everyone and costing $1.2 trillion over 10 years not kill innovation in medical and health technology by siphoning away growth capital and its potential financial rewards?

All of this seems so out of sync with the persona and promise Barack Obama conveyed in the campaign. A lot of his Web-based supporters probably thought Mr. Obama was going to be about promoting young guns with new ideas seeking risk capital for the next big thing. Instead, it looks as if the Obama years will be about managing soft landings for mature industries and old unions in the American autumn.

[vsudhir]

As economic conditions deteriorate and unemployment continues to soar, one in nine Americans are now on food stamps. Moreover, a staggering one of every six dollars of Americans' income is now coming in the form of a federal or state check or voucher.

Link

Reminds me of Europe's gripe with yankee GDP accounting practices - more spending on courts, cops and prisons == higher GDP since US has almost 1%+ of its pop incarcerated or recently so, nowhere comparable to EU's tiny numbers.

Now, it seems puting folks on dole can boost 'em numbers, eh? More on how serious the numbers are:

One in nine Americans on food stamps

One in nine Americans are using federal food stamps to help buy groceries as the country's deep recession forced another 591,000 people onto the federal anti-hunger program at latest count.

Enrollment jumped 2 percent to 33.2 million people in March, the fourth consecutive month that rolls hit a record, said the Agriculture Department. The average monthly benefit was $113.87 per person.

"It's tough out there for struggling families and will be for many months to come," Jim Weill, president of the Food Research and Action Center, said. In 20 states, as many as one in eight are on the food stamp program, according to the Food Research Center.

Benefit spending soars to new high

The recession is driving the safety net of government benefits to a historic high, as one of every six dollars of Americans' income is now coming in the form of a federal or state check or voucher.

Benefits, such as Social Security, food stamps, unemployment insurance and health care, accounted for 16.2% of personal income in the first quarter of 2009, the Bureau of Economic Analysis reports. That's the highest percentage since the government began compiling records in 1929.

In all, government spending on benefits will top $2 trillion in 2009 — an average of $17,000 provided to each U.S. household, federal data show. Benefits rose at a 19% annual rate in the first quarter compared to the last three months of 2008.

The recession caused about half of the increase, according to the report. Unemployment insurance nearly tripled in the past year. The other half is the result of policies enacted during President George W. Bush's first term.

"The increase in social spending is still relatively modest given the severity of the downturn," says economist Dean Baker of the liberal Center for Economic and Policy Research. "We're not France."

Adam Lerrick, economist at the conservative American Enterprise Institute, says the benefits' explosion will eventually lead to an economic crisis. "We've seen this movie before in many countries. It always has the same ending," he says.

Nevada, Michigan and California had the biggest per-capita increase in bankruptcy filings in May, according to AACER.

[Anujan]

Remember all that Psy-ops about the financial companies "not knowing the problem" and "caught unawares" and "fooled by the wizadry of complicated math" ?

Well the dirty news is begining to tumble out.

Mortgage Pioneer Accused Of Fraud: Former Countrywide CEO Sued by SEC Over Risky Lending

The Securities and Exchange Commission yesterday charged former Countrywide chief Angelo R. Mozilo, who ran the nation's largest subprime mortgage lender, with fraud

The SEC charged that the company's riskier behavior veered into deception and fraud as the housing bubble inflated...The SEC, in filing civil charges, also accused Mozilo of trading Countrywide's stock based on insider information for nearly $140 million in profit..Through a special "VIP" program, he offered below-market loans to the rich and powerful, including a number of senators.

In an April 17, 2006, e-mail to Sambol about subprime loans that didn't require a down payment, Mozilo wrote, "In all my years in the business I have never seen a more toxic product."

In a Sept. 26, 2006 e-mail, addressing a particularly risky type of adjustable-rate mortgage, Mozilo said, "We have no way, with any reasonable certainty, to assess the real risk of holding these loans on our balance sheet."

[Singha]

the avg US household income is said to be $50K. subtracting the $17K paid for by printing
dollar notes, would bring to $33K probably in range of tier2 euro nations like greece and hungary.

when the worlds starts buying US t-bills less and less, I wonder how they will fund these
supportive spending ?

looking forward to days of Yindia style $5/gallon of oil

[amol.p]

'US years away from full recovery'

http://business.rediff.com/slide-show/2 ... -years.htm

One of America's most authoritative bankers has said that a full economic recovery is still years away, adding that by the time it ends, this recession could be the deepest and longest to hit the United States since the 1940s.

81-year-old Paul A Volcker, chair of US President Barack Obama's Economic Recovery Advisory Board, spoke to nearly 500 Brooklyn Law School graduates on Thursday, for the school's annual commencement address.His words were foreboding.

Of the current recession, which began in December 2007, he said, '[it] is bound to be the longest recession since World War-II and could turn out to be the deepest as well.' He added, "In my view, as joined by many others, sweeping reforms are truly necessary, in banking, in markets, and in our regulatory institutions. Never again in my lifetime -- and much more relevant, in your lifetime -- should we permit financial excesses to wreak so much havoc on the American and world economy