Perspectives on the global economic meltdown

amol.p · Post by **amol.p** » 05 Jun 2009 20:40

U.S. unemployment hits 9.4%

http://www.reuters.com/article/ousiv/id ... 6U20090605

WASHINGTON (Reuters) - U.S. employers cut 345,000 jobs last month, the fewest since September and far less than forecast, according to a government report on Friday that was the most definitive evidence the economy's severe weakness was diminishing.

However, the Labor Department said the unemployment rate raced to 9.4 percent, the highest since a matching rate in July 1983, from 8.9 percent in April. This reading beat the peak in the jobless rate during the 1973-1975 recession that lasted 16 months.

Ameet · Post by **Ameet** » 05 Jun 2009 23:38

Who's winning the Paul Krugman / Niall Ferguson bond fight?

http://www.slate.com/id/2219769/

vsudhir · Post by **vsudhir** » 06 Jun 2009 15:48

More D&G. This time Parag Khanna at the phoren policy magazine conjures visions of medieval horrors (such as debt-indenture) that lie ahead. A tad alarmist as of now but in a few yrs, who can say if it will still seem far fetched?

The Next Big Thing: Neomedievalism

The world is fragmenting, badly. Gird yourself for a new Dark Age.

Yup, and am sure the same Atlanticist/EU establishment Sri Parag amrikhan-na admires sooo much will be the beacon of light and hope in the dark times ahead.

And yes, the man contibues to dump on yindia rather severely. Not sure where such love and well-wishes spring from for Yindia in Sri AmriKhan-na onlee.

The state isn’t a universally representative phenomenon today, if it ever was. Already, billions of people live in imperial conglomerates such as the European Union, the Greater Chinese Co-Prosperity Sphere, and the emerging North American Union, where state capitalism has become the norm. But at least half the United Nations’ membership, about 100 countries, can hardly be considered responsible sovereigns. Billions live unsure of who their true rulers are, whether local feudal lords or distant corporate executives. In Egypt and India, democratic elections have devolved into auctions..

{Odious comparison. Egypt hasn't changed its leadership its decades. Their 'elections' are as democratic as the packee ones next door.}

Delivering security and providing welfare aren’t just campaign promises; they are the campaign. The fragmentation of societies from within is clear: From Bogotá to Bangalore, gated communities with private security are on the rise.

{Hmmm. Dunno much about Bogota but am sure B'lore carries within it much more ambition, hope and upward mobility for all tiers of society than the semi-failed states Sri AmriKhan-na parades around as the base case for yindia onlee}

Read and despair.

This diffuse, fractured world will be run more by cities and city-states than countries. Once, Venice and Bruges formed an axis that spurred commercial expansion across Eurasia. Today, just 40 city-regions account for two thirds of the world economy and 90 percent of its innovation.

{Is Sri amikhan-na pulling these numbers out of his musharraf like Sri holbrooke is increasingly tending to do? Or is that only white collar innovations such as the 'financial product innovations' dreamed up by wall st whizkids count for more? The small innovations made by desis - farmers, doctors, teachers and others working in our villages - which touch so many lives should also count, no?}

The mighty Hanseatic League, a constellation of well-armed North and Baltic Sea trading hubs in the late Middle Ages, will be reborn as cities such as Hamburg and Dubai form commercial alliances and operate “free zones” across Africa like the ones Dubai Ports World is building. Add in sovereign wealth funds and private military contractors, and you have the agile geopolitical units of a neomedieval world. Even during this global financial crisis, multinational corporations heavily populate the list of the world’s largest economic entities; the commercial diplomacy of emerging-market firms such as China’s Haier and Mexico’s Cemex has already turned North-South relations inside out faster than the nonaligned movement ever did.

Maybe but this cross-border corp power is way overestimated, IMVHO. Globalization and free capital flows have peaked, IMHO. And with it the power to move capital and talent at will for the TNCs.

Debt has crippled many, destroyed demand, exposed overcapacity and killed recovery hopes for yrs to come.

I will reserve judgement for until unkil formally ackowledges defeat in the face of revolting corporations against its tax laws that tax phoren earnings and are targeting tax havens. The TNCs may just have overplayed their hand.

When push comes to shove (as it eventually will), the state can and will hunt down and clamp down on

Singha · Post by **Singha** » 06 Jun 2009 16:00

its ok. from our pov, we small cunning "mammals" dont want the dinosaurs troupe to know of the
conditions er ..changing until the water boils too hot to escape or until we are already in the
noah cave and the approaching meteor has hove to over the horizon.

soothe them , praise them, use their own vanity and ego against themselves, let them drown
in the mess of their own making while we contemptuously wipe our chappals clean of the
green goo and move along.

SriniY · Post by **SriniY** » 07 Jun 2009 03:42

Water is the new gold, and a few savvy countries and companies are already banking on it.

http://www.foreignpolicy.com/story/cms. ... ry_id=4853

As food prices skyrocketed over the last two years, countries and state-sponsored companies were quietly snapping up land around the world. Few noticed when South Korea began investing in farms in Madagascar, or when China, Japan, Libya, Egypt, and Persian Gulf countries acquired farmland in Laos, Cambodia, Burma, Mozambique, Uganda, Ethiopia, Brazil, Pakistan, Central Asia, and Russia. From what little has emerged publicly, the total land purchased since early 2007 adds up to at least twice the cereal cropland of Germany.

The purchases weren’t about land, but water. For with the land comes the right to withdraw the water linked to it, in most countries essentially a freebie that increasingly could be the most valuable part of the deal. Estimated on the basis of one crop per year, the land purchased represents 55 to 65 cubic kilometers of embedded freshwater, an amount equal to roughly 1½ times the water held by the Hoover Dam. And, because this water has no price, the investors can take it over virtually free. It’s not quite a scenario from a James Bond movie, but the rush to lock up scarce water resources in agricultural belts is nonetheless disturbing. It suggests another food crisis might not be too far away.

....

Singha · Post by **Singha** » 07 Jun 2009 12:50

http://www.nytimes.com/2009/06/07/nyreg ... =1&_r=1&hp

an article on the difficulties of the big law firms in america

-----
on another note, I think 30-50% of managers in IT sector I have come across are a totally useless
and act more like a boat anchor and morale reducer than a +ve influence. their tasks in no particular order seems to be

- survive only due to a network of other managers and buttkissed bosses who will cover their incompetence and failures from the troops (the troops find out anyway and laugh quietly)
- keep people in tension about their annual reports
- never praise people too much for a outstanding job, just induce some more fear by saying the bar is constantly rising
- attend "manager meetings" all day but neglect team meetings (i.e. plan world conquest but starve your own family)
- dial into late night conf calls where there is no need for them to attend, just to suck up to gora overlords
- depend on senior team people on technical side to give presentations, pickup some jargon and ideas from there and impress other equally clueless managers with that
- show some "sharpness" but asking "probing questions" at presentations though such queries and suggestions are really vacuous and useless
- interview candidates and pick just the wrong ones
- delay purchases and mess up the delivery
- cut off the team from other parts of co and act as a sole conduit for sending up the real status
in the frontlines (i.e. say all is well even if a SS panzer div is all over the trenches)
- act sulky and petulant when team members ignore / fight back
- make big ppts for visiting directors about "skill building" and "built a world class team"

the real cost cutting is not reducing tea, coffee or biskoot but culling these specimens ruthlessly
and thinning the managerial ranks of the FOREST of dead wood skimming free money from the coffers. getting rid of one would buy enough biskoot to feed a big team for a year.

vsudhir · Post by **vsudhir** » 07 Jun 2009 15:11

the real cost cutting is not reducing tea, coffee or biskoot but culling these specimens ruthlessly
and thinning the managerial ranks of the FOREST of dead wood skimming free money from the coffers. getting rid of one would buy enough biskoot to feed a big team for a year.

Did these deadwood mgrs rise from within the ranks (i.e. were themselves programmers once?) or did they magically drop outta the sky (i.e. are the yumbeeyay types?) onlee?

vsudhir · Post by **vsudhir** » 07 Jun 2009 15:25

Folks getting angry at the BLS for systematically under-reporting (and now, outrightly fabricating) unemployment numbers. This could also mislead an effective policy response, among other issues.

U.S. Jobs Propaganda Gets More Desperate

Similarly, the propagandists have frequently reported that the weekly lay-offs statistic is “improving”. Yet every one of these “improvements" occurs only because the previous week's “final estimate” is always revised higher – since the original number is always a “low-ball” estimate of the real weekly lay-offs. Thus, despite all these “improvements" in the weekly lay-off figures, there has been no statistically significant improvement – at all.

Today, the Bureau of Labor Statistics is expected to pretend that the net job-losses for May will be slightly over 500,000. This doesn't even qualify as an estimate, since it is a complete fabrication. I have dealt with this issue previously (see “U.S. economy to lose 20 MILLION jobs this year”). However, with the propagandists continuing to produce these outrageous lies every month, it is sadly necessary for me to repeat my denunciation of these ridiculous lies.

Yup, the jobs scenario is utterly bleak indeed. No prospect even pf any sector to drive the economy and jobs. No prospect of a third bubble this decade (first dotcom, second housing) to keep the party going.

Here's what anpther blogger laments:

Some realistic downside projections: U3: 17-21%; U6: 30-37%.

Best case scenario: U3: 14-17%; U6: 26-31%

And here is what Bernanke, and everyone else who wonders where we are headed, should be looking at:

"If the job market does not turn around by late summer or early fall of 2009, the projections easily exceed the Great Depression. At that point the only way to prevent catastrophic economic conditions would be through massive inflation of the US dollar achieved by either congress allowing the Federal Reserve to issue its own debt, or by accelerating the rate at which the Federal Reserve monetizes US debt while funneling the newly printed dollars into wages so that the money can circulate within the economy."
Yes, wage inflation is wonderful, however recent data indicate that just the opposite is happening, and the only people who have seen their base pay increase are, ironically, Wall Street bankers, however, at the expense of losing their bonuses. Which is why bank excess reserves are likely to continue skyrocketing as literally boxes full of cash continue gathering dust, while a deleveraging consumer spends his money on guns and ammo.

And here, for some more data on why the unemployment number, is for the most part, rubbish.

vsudhir · Post by **vsudhir** » 07 Jun 2009 15:36

Continuing from the previous post, here's an example of how the airheads in the mainstream press are spinning BS.

Surge in Labor Force Shows U.S. Workers Gaining Confidence (Bloomberg)

to which one blogger responds:

"I can't believe their conclusions, and the inferences they draw from this stat. It's absolutely mind-boggling."

1. Did they not consider that perhaps people are becoming so desperate, they may need a job just to put food on the table or to afford some sort of meager shelter?

2. Did they consider any demographic factors that may be involved?

3. Did they read the BLS report this morning that showed incomes dropping among those who are working, perhaps driving their stay-at-home spouses into the labor pool?

4. What evidence do they have that people who quit looking are now reentering the labor pool because they are "gaining confidence their search will pay off"?

5. Did they not factor in that unemployment insurance lasts longer now, so people who ordinarily would drop off the rolls sooner are now included for a longer period of time?

6. Did they even consider that maybe, just maybe, millions of retirees who have lost their life savings have HAD to reenter the labor force to support themselves?

vsudhir · Post by **vsudhir** » 07 Jun 2009 16:12

The latest from Ambrose Evans Pritchard.

Link

Trade data from Asia are flashing warning signals again. Korea's exports were down 28.3pc in May, reversing the April rebound. Malaysia has slipped to -26pc, and India has touched a new low of -33pc.

Stephen Roach, Morgan Stanley's Far East chief, fears an "Asian Relapse", saying the region is prisoner to its fatal dependency on exports to the West. The export share of GDP has risen from 36pc to 47pc across developing Asia over the last decade.

"China's incipient rebound relies on a time-worn stimulus formula: upping the ante on infrastructure spending in anticipation of an eventual rebound of global demand," he said. The strategy cannot work this time because Americans have exhausted their credit, and their desire to borrow. Consumption will fall from its peak of 72pc of GDP to the "pre-bubble norm" of 67pc, if not more.

David Rosenberg from Gluskins Sheff expects Americans to retrench ferociously as 78m baby boomers face the looming threat of penury in old age. "The big story is that the personal savings rate hit a 15-year high of 5.7pc in April. I believe it could test the post-War peak of 15pc. Too many pundits are still living in the old paradigm of Americans shopping till they drop," he said.

If he is right, this will shatter the surplus economies of China, Japan, and Germany, unless they adjust fast to the new world order.

Read it all.

Singha · Post by **Singha** » 07 Jun 2009 16:43

>> Did these deadwood mgrs rise from within the ranks

'rise' is a relatively word. one must understand they operate as a linked network of people. vp pulls the director pulls the senior mgr who pulls the junior mgr who pulls his chamchas up. its a 'tree' of lota patronage like in a political formation. thats one reason why you never really see managers seek internal transfers within a co unless circumstances force it.

vsudhir · Post by **vsudhir** » 07 Jun 2009 17:14

SAN FRANCISCO -- Like most San Franciscans, Charles Pitts is wired. Mr. Pitts, who is 37 years old, has accounts on Facebook, MySpace and Twitter. He runs an Internet forum on Yahoo, reads news online and keeps in touch with friends via email. The tough part is managing this digital lifestyle from his residence under a highway bridge.

Link

John Snow · Post by **John Snow** » 07 Jun 2009 20:51

Singha ji is absolutely on the dot, 85% of the IT managers are BSers, who brown nose and get ahead I have seen this in Pharma Industry, the Business people themselves are clueless about business

, the less we say about AIG like firms the better. GM is the worst culprit, I have been predicting the demise of BIG three for about a decade now. Theonly exception is Ford which thanks to Tata's got the best deal JLR and sitting pretty on cash. All dumb ideas of defeating CAFE standards rather than think where the Co is going or where the market trends are heading. Just like SD and GOTUS very very short term thinking ( about suport to TSP) Interestingly atlast some people like Bill Maher are questioning the Regan golden era "so called"

Chinmayanand · Post by **Chinmayanand** » 07 Jun 2009 20:56

sanjaykumar · Post by **sanjaykumar** » 07 Jun 2009 22:46

It should go to me-I pulled out of the market in March 2008.

Anujan · Post by **Anujan** » 08 Jun 2009 02:05

Fed hiring veteran lobbyist: source

The U.S. Federal Reserve is on track to hire a veteran lobbyist to help manage its relations with Congress at a time of heightened attention to its role in national affairs, a source familiar with the situation said on Friday. The Fed plans to hire Linda Robertson, who previously worked for now-defunct energy company Enron, as well as the Clinton administration.

Singha · Post by **Singha** » 08 Jun 2009 09:10

iphone apps for the fashionably destitute

http://www.nytimes.com/interactive/2009 ... opart.html

Raja Bose · Post by **Raja Bose** » 08 Jun 2009 13:03

vsudhir wrote:
SAN FRANCISCO -- Like most San Franciscans, Charles Pitts is wired. Mr. Pitts, who is 37 years old, has accounts on Facebook, MySpace and Twitter. He runs an Internet forum on Yahoo, reads news online and keeps in touch with friends via email. The tough part is managing this digital lifestyle from his residence under a highway bridge.
Link

Before the Dalai Lama visited a soup kitchen here a month ago, Mr. Pitts researched the Buddhist leader on Wikipedia and copied the text onto his iPod

The Bay area destitute seem to be truly a breed apart. Guy doesn't have a place to stay and lives off scraps yet has his own iPod!

Chinmayanand · Post by **Chinmayanand** » 08 Jun 2009 14:29

The Economy Is Still at the Brink

The Economy Is Still at the Brink
By SANDY B. LEWIS and WILLIAM D. COHAN
WHETHER at a fund-raising dinner for wealthy supporters in Beverly Hills, or at an Air Force base in Nevada, or at Charlie Rose’s table in New York City, President Obama is conducting an all-out campaign to try to make us feel a whole lot better about the economy as quickly as possible. “It’s safe to say we have stepped back from the brink, that there is some calm that didn’t exist before,” he told donors at the Beverly Hilton Hotel late last month.
Mr. Obama thinks that the way to revive the economy is to restore confidence in it. If the mood is right, the capital will flow. But this belief is dangerously misguided. We are sympathetic to the extraordinary challenge the president faces, but if we’ve learned anything at all two years into the worst financial crisis of our lifetimes, it is that a capital-markets system this dependent on public confidence is a shockingly inadequate foundation upon which to rest our economy.
We have both spent large chunks of our lives working on Wall Street, absorbing its ethic and mores. We’re concerned that nothing has really been fixed. We’re doubly concerned that people appear to feel the worst of the storm is over — and in this, they are aided and abetted by a hugely popular and charismatic president and by the fact that the Dow has increased by 35 percent or so since Mr. Obama started to lay out his economic plans in March. But wishing for improvement and managing by the Dow’s swings are a fool’s game. (Disclosure: One of us, Mr. Lewis, was convicted on federal charges of stock manipulation in 1989, pardoned by President Bill Clinton in 2001 and had his lifetime trading ban overturned by the Securities and Exchange Commission in 2006; documents relating to the case can be found at sblewis.net.)
The storm is not over, not by a long shot. Huge structural flaws remain in the architecture of our financial system, and many of the fixes that the Obama administration has proposed will do little to address them and may make them worse. At another fund-raising event, for Senator Harry Reid, President Obama said: “We didn’t ask for the challenges that we face. But we are determined to answer the call to meet those challenges, to cast aside the old arguments and overcome the stubborn divisions and move forward as one people and one nation .... It will take time but I promise you, I promise you, I’ll always tell you the truth about the challenges we face.”
Keeping that statement in mind — as well as an abiding faith in the importance of properly functioning capital markets — we have come up with a set of questions meant to challenge a popular president, with vast majorities in Congress, to find the flaws in the system, to figure out what’s being done to fix them and to get to the truth about the difficulties we face as we set out to restore the proper functioning of our markets and our standing in the world.
•
Six months ago, nobody believed that our banking system was well designed, functioning smoothly or properly regulated — so why then are we so desperately anxious to restore that model as the status quo? Nearly every new program emanating these days from the Treasury Department — the Term Asset-Backed Securities Loan Facility, the Public Private Investment Program, the “stress tests” of major banks — appears to have been designed to either paper over or to prop up a system that has clearly failed.
Instead of hauling out the new drywall to cover up the existing studs, let’s seriously consider ripping down the entire structure, dynamiting the foundation and building a new system that rewards taking prudent risks, allocates capital where it is needed, allows all investors to get accurate and timely financial information and increases value to shareholders and creditors.
As a start, the best-compensated executives at the top of these big banks, hedge funds and private-equity firms should be treated like general partners of yore. If a firm takes prudent risks that pay off, this top layer of management should be well compensated. But if the risks these people take are imprudent and the losses grave, they should expect to lose their jobs. Instead of getting guaranteed salaries or huge bonuses, they should have the bulk of their net worth completely at risk for a long stretch of time — 10 years come to mind — for the decisions they make while in charge. This would go a long way toward re-aligning the interests of these firms with those of their shareholders and clients and the American people, who have been saddled with their risks and mistakes.
•
Why is so much effort being put into propping up those at the top of the economic pyramid — the money-center banks, the insurance companies, the hedge funds and so forth — when during a period of deflation like the one we are in, any recovery will come only by restoring the confidence of the people down at the bottom of the pyramid?
Confidence will return only when jobs can be found and mortgage payments are made. Even if Mr. Obama’s claim is true that his $780 billion stimulus package “saved or created” some 150,000 jobs, we seem a long way away from the point where those struggling to get by will feel like spending again. What happens when people buy a car once every 10 years instead of once every two or three, especially now that we taxpayers own such a big percentage of the American auto industry?
•
Instead of promising the imminent return of good times, why isn’t Mr. Obama talking more about the importance of living within our means and not spending money we don’t have on things we don’t need? We used to be a frugal nation. The president should be talking about kicking our addictions to easy credit, to quick fixes and to a culture of more is better (and Congress’s new credit-card legislation, while perhaps eliminating some of the worst aspects of that industry, certainly didn’t send the right message about personal finance).
Gas-guzzling S.U.V.’s, cigarette boats, no-income mortgages and private jets should be relegated to the junk heaps of history, or better yet, put in a museum dedicated to never forgetting the greed and avarice that led us so far astray.
•
Why is the morphine drip still in the veins of the financial system? These trillions in profligate federal spending are intended to make us feel better again even though feeling pain, and dealing with it responsibly, would be healthier in the long run. It is time to stop rescuing the banks that got us into this mess. If that means more bank failures on a grander scale or the dismemberment of Citigroup, so be it. Depositors will be protected — up to $250,000 per account — but shareholders, creditors and, sadly, many employees will, for the long-term health of the system, need to feel the market’s wrath.
•
Is there to be any limit on bailouts? We have now thrown money at the big banks, any number of regional ones, insurance companies, General Motors, Chrysler and state and local governments. Will we soon be bailing out Dartmouth, which just lost its AAA bond rating? Is there no room left for what the Austrian economist Joseph Schumpeter termed “creative destruction”? And what is the plan to get the American people out of all these equity stakes we now own and don’t want?
Furthermore, for government leaders to decide who shall live and who shall die in an economic sense opens them up to legitimate charges of crony capitalism and favoritism. We will benefit in the long run from a return to market discipline.
•
Why has Mr. Obama surrounded himself largely with economic advisers who are theoreticians and academics — distinguished though they may be — but not those who have sat on a trading desk, made a market, managed a portfolio or set a spread?
In our view, one of the ways out of this economic conundrum is to have experienced traders — not hothouse flowers — design incentives that will encourage the market to have buyers and sellers meet anew around the proper valuations of assets, not some artificial construct of a market propped up by a pliant Financial Accounting Standards Board or government-sponsored programs that appear to be virtually giving money away to hedge funds and private-equity firms so that they will buy assets they would not ordinarily buy. We’re not talking about putting the fox in charge of the henhouse, just putting people who know how markets function in the real world into the important seats in Washington.
•
Why isn’t the Obama administration working night and day to give the public a vastly increased amount of detailed information about what happens in financial markets? Ever since traders started disappearing from the floor of the New York Stock Exchange in the last decade of the 20th century, there has been less and less transparency about the price and volume of trades. The New York Stock Exchange really exists in name only, as computers execute a very large percentage of all trades, far away from any exchange.
As a result, there is little flow of information, and small investors are paying the price. The beneficiaries, no surprise, are the remains of the old Wall Street broker-dealers — now bank-holding companies like Goldman Sachs and Morgan Stanley — that can see in advance what their clients are interested in buying, and might trade the same stocks for their own accounts. Incredibly, despite the events of last fall, nearly every one of Wall Street’s proprietary trading desks can still take huge risks and then, if they get into trouble, head to the Federal Reserve for short-term rescue financing.
Here’s something that should change in terms of transparency. The most recent price that any stock traded for should be published online in real time for all to see. And the public should have access to a new type of electronic ticker that provides market information in language that all can understand, not just the insiders.
As for those impossibly complex securities that caused so much of the trouble — among them derivatives, credit-default swaps and asset-backed securities — the S.E.C. should have the power to make public all the documentation surrounding these weapons of mass financial destruction, including all data about the current costs of buying and selling them and the cash flow underlying them. We also need widely accessible, real-time reporting of all trades in the bond market. We bet Mike Bloomberg’s company could help design such a system for our benefit.
•
Why is the government still complicit in making the system ever less transparent, even when it comes to what should clearly be considered public information? For instance, it took more than a year for the Federal Reserve to disclose that it had agreed to pay BlackRock — the huge money manager that is 45 percent owned by Bank of America — and others $71 million in a no-bid contract to manage the $30 billion of toxic assets that JPMorgan did not want when it bought Bear Stearns in March 2008. And that is only one of the five contracts BlackRock has with the government as a result of this crisis — the nature of the other contracts remains secret.
Treasury Secretary Timothy Geithner has made much of financialstability.gov, the Treasury’s new Web site dedicated to “transparency, oversight and accountability.” But look it over and try to find, for example, just one record of a bona fide credit-default swap, or the names of the hedge-fund and private-equity investors who have participated in the Term Asset-Backed Securities Loan Facility bonanza. It was only a lawsuit filed by a watchdog group that convinced the Treasury to divulge details of former Secretary Henry Paulson’s October meeting with the chief executives of the 10 largest Wall Street firms to force them to take money from the Troubled Asset Relief Program. A lawsuit filed last November by Bloomberg News to force the Federal Reserve to reveal the details on more than $2 trillion in loans that went to banks including Citigroup and Goldman Sachs is still pending in federal court.
And what has become of the S.E.C.’s year-old investigation into who made short-dated, out-of-the-money bets in March 2008 hoping Bear Stearns would fail — bets that were suddenly worth millions of dollars when the company did collapse later that month?
Why do we still not know why Mr. Paulson, Mr. Geithner and the Federal Reserve chairman, Ben Bernanke, allowed Lehman Brothers to file bankruptcy last Sept. 15 but then, a day later, saved A.I.G.? Or why last November this trio decided to absorb potential losses on $301 billion of Citigroup’s shaky assets, when conventional wisdom among insiders held that they were worth only $150 billion at best?
Also, before Dick Fuld, Lehman Brothers’ chief executive, appeared before the House Committee on Oversight and Government Reform last October, it demanded from company executives boxes of documents about what happened at Lehman and why. Where are those documents?
•
Why hasn’t President Obama insisted on public hearings over what happened during this financial crisis?
Not
a single top executive of a Wall Street securities firm responsible for causing the financial crisis has had the courage or the decency to step forward in front of the cameras and explain to the American people in his own words exactly how and why he allowed his firm to cause the crisis. Both Mr. Fuld and Alan Schwartz, the chief executive of Bear Stearns at the end, in their Congressional testimony blamed the proverbial once-in-a-century financial tsunami. Do they or any of their peers really think this is true?
There may be a way to find out. There is much talk nowadays coming from top bankers — Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JPMorganChase, John Mack of Morgan Stanley and even Ken Lewis of Bank of America — about seeing how quickly they can repay to the Treasury the TARP money Mr. Paulson forced on them. One precondition of their being allowed to repay the funds should be a requirement that each gives a public deposition and explains, under oath, what truly happened and why.
Such a public hearing would be meant only to offer a truthful assessment of the errors in judgment made at each firm and to promote understanding, so that we — somehow — can avoid repeating the same mistakes again. It would not be about indictments. These men should be offered use immunity from prosecution for their honest testimony, but only with a clear understanding that the failure to tell the truth at any point would result in serious legal consequences. The hearing could be complemented by a truth-seeking commission established to hear the accounts of several people who have departed the scene, including, among others, Mr. Paulson, former Treasury Secretary Robert Rubin and former Wall Street chiefs like Mr. Fuld, Hank Greenberg of A.I.G., Sanford Weill of Citigroup, Jimmy Cayne of Bear Stearns and Stan O’Neal of Merrill Lynch. While far removed from their positions of authority, these men have tales to tell about how this crisis got started and why.
•
Why are we not looking to change our current civil and criminal racketeering statutes, which are playing a perverse role in investigations of the crisis? Statutes meant to give prosecutors extraordinary powers of seizure before an indictment is handed up, or to impose treble damages, are appropriately used to break up rings of criminal behavior like the Mafia or drug cartels.
But
a few clever prosecutors could use such laws to bring charges against people or firms in the financial services industry whose pattern of bad behavior played important roles in the collapse. Such outright seizure of capital or assets through use of the racketeering statutes can do much harm by giving prosecutors an unnecessarily powerful role in our capital markets. There must be a way to keep what is good about the statutes and to make sure they are not used for ill in trying to get to the bottom of the financial meltdown.
We are in one of those “generational revolutions” that Jefferson said were as important as anything else to the proper functioning of our democracy. We can no longer pretend that our collective behavior as a nation for the past 25 years has been worthy of us as a people. Many of us hoped that Barack Obama’s election would redress the dire decline in our collective ethic. We are 139 days into his presidency, and while there is still plenty of hope that Mr. Obama will fulfill his mandate, his record on searching out the causes of the financial crisis has not been reassuring. He must do what is necessary to restore the American people’s — and the world’s — faith in American capitalism and in our nation. Answering our questions may help us get back on track. But time is wasting.
Sandy B. Lewis, an organic farmer, founded S B Lewis & Co., a brokerage house. William D. Cohan, a contributing editor at Fortune and former Wall Street banker, is the author of “House of Cards: A Tale of Hubris and Wretched Excess on Wall Street.”

vsudhir · Post by **vsudhir** » 08 Jun 2009 14:50

An excellent introduction in slides to Richard Koo's theory of 'balance sheet recessions'.

Link

Worthwhile read.

vsudhir · Post by **vsudhir** » 08 Jun 2009 15:06

Down and out for the long term in Germany

Confirms what we know - the export led growth model of the 3 largest surplus countries - Germany, PRC and Japan - is dead. It'll take time for their internal consumptions to reach a level that even remotely compares with that of the formerly deficit countries (US, UK and Spain) back in good times.

This time lag could span years and in this interim world trade could shrink, perhaps alarmingly.

Global current account surpluses and deficits add up to zero. So if everybody is saving more, who will be dissaving? It will have to be the corporate sector in the countries with large net exports. So if the US, the UK and Spain are heading for a more balanced current account in the future, so will the surplus countries.

The current account balance can also be expressed as the sum of the trade balance, net earnings on foreign assets, and unilateral financial transfers. In several countries, including the US and Germany, the gap between exports and imports serves as a good proxy for the current account. A fall in the trade deficit in the US, UK and Spain implies a fall in the combined trade surplus elsewhere. And as some of the shifts in the US and the UK are likely to be structural, this will have long-term effects on others. In particular, it means the export model on which Germany, China and Japan rely, could suffer a cardiac arrest.

Through what mechanism will this export-sector meltdown come about? My guess is that in Europe it will happen through a violent increase in the euro’s exchange rate against the US dollar, and possibly the pound and other free-floating currencies.

Exchange rate devaluation would greatly help the US and others to reduce their current account deficits, but it will impair the economic recovery in countries with large trade surpluses and free-floating exchange rates.
...

Neither Germany nor Japan is politically equipped to deal with an exchange rate shock. China may continue to manage its exchange rate, but the Europeans are much less likely to intervene in foreign exchange markets. For the time being, the governments of the classic export nations cling on to their export-based economic model, the model they know best. Their only strategy, if you call it that, is to hope for a miraculous bail-out from the US consumer – which is not going to happen this time.

If my predictions prove correct, Germany will be down and out for a long time with a huge and still unresolved banking crisis, an overshooting exchange rate and lower net exports, presided over by politicians who panic about domestic inflation. This will not end well.

Neela · Post by **Neela** » 08 Jun 2009 15:28

Singha wrote:http://www.nytimes.com/2009/06/07/nyreg ... =1&_r=1&hp

an article on the difficulties of the big law firms in america

-----
on another note, I think 30-50% of managers in IT sector I have come across are a totally useless
and act more like a boat anchor and morale reducer than a +ve influence. their tasks in no particular order seems to be

- survive only due to a network of other managers and buttkissed bosses who will cover their incompetence and failures from the troops (the troops find out anyway and laugh quietly)
- keep people in tension about their annual reports
- never praise people too much for a outstanding job, just induce some more fear by saying the bar is constantly rising
- attend "manager meetings" all day but neglect team meetings (i.e. plan world conquest but starve your own family)
- dial into late night conf calls where there is no need for them to attend, just to suck up to gora overlords
- depend on senior team people on technical side to give presentations, pickup some jargon and ideas from there and impress other equally clueless managers with that
- show some "sharpness" but asking "probing questions" at presentations though such queries and suggestions are really vacuous and useless
- interview candidates and pick just the wrong ones
- delay purchases and mess up the delivery
- cut off the team from other parts of co and act as a sole conduit for sending up the real status
in the frontlines (i.e. say all is well even if a SS panzer div is all over the trenches)
- act sulky and petulant when team members ignore / fight back
- make big ppts for visiting directors about "skill building" and "built a world class team"

the real cost cutting is not reducing tea, coffee or biskoot but culling these specimens ruthlessly
and thinning the managerial ranks of the FOREST of dead wood skimming free money from the coffers. getting rid of one would buy enough biskoot to feed a big team for a year.

Singhaji, those are quality observations very succinctly and clearly put. 3 year back, Intel ruthlessly pulled the plug on 2000 such managers leading to 1 manager per 150 people.
Engineering firms _do_ _not_ need managers in R&D.They need Team Leads and Staff engineers with active involvement in projects and design. Period. Its only at several levels up the hierarchy do the real need for managers arise.

Chinmayanand · Post by **Chinmayanand** » 08 Jun 2009 16:46

Check this report

Singha · Post by **Singha** » 08 Jun 2009 20:12

Neela, the data I heard on netzilla (55k people) is that 3k at director+ level. assuming 5 managers reporting on avg to one director , another 15k managers. so 55-18k = 37k is total other ranks. given the huge worldwide sales force, could easily be 20k there.

the net total in eng dev & test is unlikely to be > 15k and its been like this for a decade atleast. what has changed is the 3K + 15k managerial ranks which is bigger than most of our rivals total headcount !!

vsudhir · Post by **vsudhir** » 08 Jun 2009 21:09

Canada passes "Buy Canada" type resolution

WHISTLER, British Columbia (AP) — Canadian mayors have passed a resolution that would potentially shut out U.S. bidders from local city contracts.

The resolution is in retaliation to "Buy American" provisions in President Barack Obama's stimulus bill. Mayors voted 189-175 to approve the resolution at the Federation of Canadian Municipalities conference in Whistler, British Columbia.

The resolution says the federation should support cities that adopt policies that allow them to buy only from companies whose home countries do not impose trade restrictions against Canadian goods.

The mayors also voted to hold off on any action for 120 days while Canada is negotiating a possible compromise with the U.S. government.

Ameet · Post by **Ameet** » 08 Jun 2009 22:35

Credit card delinquency on the rise

Reporting agency says 11% increase could be an indication that tax refund checks are being used to cover daily living expenses.

http://money.cnn.com/2009/06/08/pf/cred ... 2009060810

vsudhir · Post by **vsudhir** » 09 Jun 2009 01:50

California contemplates ultimate reform - no welfare

Sensationalism apart, I'll believe it when I see it.

Could California become the first state in the nation to do away with welfare?

That doomsday scenario is on the table as lawmakers wrestle with a staggering $24.3 billion budget deficit.

County welfare directors are "in shock" at the very idea of getting rid of CalWORKs, which has been widely viewed as one of the most successful social programs in the state's history, said Bruce Wagstaff, director of the Department of Human Assistance in Sacramento.

"It's difficult to come up with the right adjective to react to this," Wagstaff said. "It would be devastating to the people we serve."

Difficult to find words to react will exactly be my reaction should this actually pass muster.

Ameet · Post by **Ameet** » 09 Jun 2009 03:40

Supreme Court delays Chrysler deal

http://money.cnn.com/2009/06/08/news/co ... 2009060816

vsudhir · Post by **vsudhir** » 09 Jun 2009 05:44

Union job pays almost $300,000 to fix trains (incl overtime). After 31 years, the pension is over $10,000 per month for life.

Link

Wow. No outsourcing competition, eh?

vsudhir · Post by **vsudhir** » 09 Jun 2009 07:28

Ten Things You Must Do

Karl Denninger's blogpost. Worthwhile read, IMHO.

The last week's wild gyrations in the bond market have made clear that Bernanke and his "pals" are quickly losing control of the bond curve. Friday's selloff in 2s was particularly ominous as that money did not go into equities or precious metals - it simply "went". The 2year is commonly thought of as the "demarcation line" between the short and long end, so when I saw 2s get sold down the antenna went up in a major way.

It is one thing for people to flee the long end of the bond curve; that's bad. Its another for people to flee Treasury bonds in general - that's an unmitigated disaster. The auctions last week showed that there is an incredible appetite from foreigners for very short term government debt - 4 week to 52 week bills - where the indirect bidder activity was at or close to double historical norms. This, in the face of the incredible amount of issuance that is occurring, tells me that they're selling something to replace it with these short-term instruments. Friday told us what the "something" was.

The risk of a "sudden stop" event where the bond market tells the government to "piss off" has never been higher. A ratcheting up of the yield curve, when the average maturation of government debt is now just under 4 years, could easily double interest expense in the budget. This would put the government in a nasty box: either curtail spending by twice that much (that is, roughly $800 billion) immediately or the addition to the deficit could force another ratchet higher in yield. This is a "death spiral" that can happen with amazing speed. If it does, everything you think the government should provide will disappear and asset prices - all of them - will collapse along with the economy.

How likely is this outcome? About 60%. Not certain - yet - but too high. A couple of years ago I would have pegged this sort of nightmare scenario in the 20% range. Back in September and October, 30-40%. In March, 50%, but driven by pension fund explosions in the large-cap space. Now that seems to be temporarily off the table due to the rally in the stock market (gee, think Bernanke saw that risk too?) but the problem wasn't resolved - they just shifted the risk once more, this time to the Treasury curve. If the government is once again forced to pull liquidity to defend the Treasury complex (and I believe they will) we will ratchet the risk higher, as the stock market will again decline precipitously but we will have cleared nothing, leaving the risks as cumulative.

How many times can we "kick the can"? An infinite number of times? Absolutely not. Each kick fills the can with more and more sand, until you stub your toe.

Read it all.

So without further adieu, here's my list of 10 things you need to be doing now:

Stop listening to those who claim that "The Market is telling you the recession is ending/over." Baloney. What was the market telling you in October of 2007 when the SPX hit 1576? That everything was great and "subprime was contained", right? Any more questions on that piece of nonsense?

Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks.

Stop spending more than you make - in fact, do the opposite - start saving. NOW. You need to be saving 10% of your gross income. Not net or "excess" - gross. These funds serve two purposes: an emergency fund (which you're likely to need) and if you have one already it will also serve as a fund to buy up assets that will be puked up when things get really bad. You don't get wealthy by selling to some other sucker - you get wealthy by buying when nobody has any money to buy - that is, by driving the hardest bargain you can imagine!

I've said it before but it bears repeating: have the ability to make it even if you lose your job. Most people say three months of reserves are necessary. I've said six months to two years, and I'll reiterate it. And reserves means cash, not credit. Parked in a credit union is ok - but be prepared to make that actual cash in a big honking hurry if you need to. How do you know if you need to? If and when the first Treasury auction fails, the market crashes below the 666 March low and/or a big bank fails, you need to.

Pull ALL of your business from ANY bank that has received federal assistance. The community banks and credit unions have been screwed by the crony government interests in two ways - first, by regulators allowing bankrupt banks to pay overly-large CD rates when they're insolvent (that's fraud on its face) and second by proposing to tax them through FDIC assessments to pay for the sins of the imprudent. Withdraw your consent and assistance - move your funds to a credit union or local community bank, but before doing so ask to see their financials and look specifically for over-leverage in commercial real estate and other development "assets". HIT THE BAD GUYS IN THE WALLET - THE ONLY PLACE THEY UNDERSTAND!

If you have assets in the stock market, and have thus enjoyed the rally off SPX 666, either sell or hedge that exposure RIGHT NOW. The upside risk is what - 10%? What's the downside risk? 50% or more. You can hedge effectively with PUTs which have gotten much cheaper as the VIX has fallen, or simply sell out and go to cash. In my opinion you're insane to play for another 10% gain when you may suffer a 50% loss, but that's my view. Just don't say you weren't warned if you do nothing and the collapse occurs!

Figure out what you're going to do if we suffer a "sudden stop" and be prepared to execute that plan. Consider what a collapse in trucking, for example, does to the food supply into major cities. This is a low-probability risk right now (perhaps 10-20%) but if it happens major cities will become free-fire zones within hours. A gun won't do you a damn bit of good when there's a potential rifle barrel sticking out of every window and the person behind it is interested in the bag of groceries you're carrying. You are not Rambo (and by the way, have you noticed that Rambo always goes after bad guys in some small, flat hellhole? Ever wonder why? With a sniper rifle poking out of every second window even John Rambo doesn't stand a chance.) Those who live on the coasts have hurricane plans. Everyone needs a "sudden stop" plan, and it must not rely on access to credit of any sort, because if "it" happens that access will disappear instantly. For people in rural America, this might not be that big of a deal. For those who live in big cities it is - and its something you probably haven't thought through to the degree you need to.

Don't count on metals. I know, I know, we're going to hyperinflate and gold is going to the moon. I have one question: Can you eat it, drink it, run your car on it, sleep under it, or screw it? No? That's a problem. A "sudden stop" is not a hyperinflationary event - it has good odds of being quite the opposite. God help you if you put your eggs in that basket and are wrong.

Acquire lawful means of self-defense. Your odds of being victimized are roughly 1 in 100 annually under normal conditions. What happens when its 1 in 5? Think it won't be? Ok, if doesn't really get bad then you spent money on something you don't need, but you still have it and can sell it (even if you take somewhat of a loss.) If you wait, and then decide you need it, what are the odds of being able to find a firearm? And by the way, weapons you don't know how to use in a competent and cool fashion if you need to are worthless or worse. This means range time and/or professional instruction, and both take time, effort and money. Again, this is called "hedging" - your life and property, this time (instead of your investment portfolio)

Figure out who your friends are - and aren't. This isn't about who you like. Its about who you can trust with your back - no questions asked. If things get bad the second-to-the-last thing you want to be is alone - right before being around anyone who is less than 100% trustworthy. Think about this point long and hard - this doesn't mean dumping acquaintences now, but it does mean knowing who you group with if you need to - and who you avoid.

svinayak · Post by **svinayak** » 09 Jun 2009 10:20

http://www.gold-eagle.com/asian_corner/kutyn111597.html

Currency Chaos and Financial Collapse

Part 1

To understand the world financial situation is to understand the difference between reality and illusions of reality. It is to understand that the basis of all financial failures is the inability to pay debt. Debt is repaid from income or profits. When income or profits are insufficient to repay debts, default occurs. Occasionally, new debts are provided to repay old debts, but this will only increase total debts and future losses.

Since 1990, the world has witnessed a large economic expansion in the U.S., and explosive growth in South East Asia and China. Within Japan, short term interest rates were decreased to 0.5% and the government initiated the largest fiscal stimulus program the world has ever seen. Has anyone questioned why the second largest economy in the world, with all of its major trading partners having sustained growth, with the lowest interest rates the world has ever seen, with the largest fiscal stimulus package the world has ever seen, has not grown and now the economy is contracting at an annual rate exceeding 11%?

John Kutyn
17 November 1997

http://www.gold-eagle.com/asian_corner/kutyn112197.html

The problems in Asia can not be solved by any government policy. Only a deflationary recession wiping out the excessive debt can correct the imbalances. It does not matter if the debt is eliminated by default or by a massive increase in the money supply. The end result is the elimination of debt and the destruction of currencies.

World wide currency values are presently extremely unstable. Fluctuations will increase until most currencies in Asia are destroyed. Will commerce then take place in U.S. dollars, or a currency backed by gold? Possibly, the financial chaos in the world will be blamed on too many unstable currencies, the only solution being a common world wide currency.

Whoever issues money has many economic and political advantages. We are presently seeing a hidden battle between gold and the U.S. dollar. This battle will continue to intensify until the crash in Asia is complete. The key to financial independence is to know who will win this battle.

Gerald Celente interview

June 08, 2009 – Comments (2) | RELATED TICKERS: MOR , AL , AW

A few snippets:

Our whole Constitution has been abrogated. The president simply writes an Executive Order to do whatever he wants. Nationalize the banks, take over the insurance industry, automobile industry, health care industry… None of it is constitutional.

We became enmeshed in foreign entanglements. We forgot the lesson of England - and how their global imperial overreach destroyed their empire.

Violence and crime will explode.

Washington has declared 'Economic Martial Law.

We predict state secessionist movements will rival the breakup of the Soviet Union.

So, it’s not that the dollar that will survive. We may not even survive. Look at the German mess after WWI. It gave rise to Fascism and WWII. The next war will be fought with weapons of mass destruction.

http://www.humanevents.com/article.php?id=32152

Anarchy coming in California

June 08, 2009 – Comments (6) | RELATED TICKERS: CA , RE , VOLT

Will California be the first state to declare martial law after its citizens revolt because of their welfare being yanked?

California contemplates ultimate reform - no welfare

http://www.mcclatchydc.com/nation/story/69467.html

Man, I'd hate to be living in CA right now.

http://www.lewrockwell.com/orig10/celente8.html

Fed Inflates 'Bailout Bubble': Economist
22 May 2009 | 08:38 AM ET
Text Size

As the Federal Reserve throws more and more money at the economic crisis and holds interest rates down at historic lows, it could be inflating a devastating ‘bailout bubble,’ Gerald Celente, director of Trends Research Institute, told CNBC.

“We’re looking at a bailout bubble that’s way bigger than the dotcom bubble before it and the real-estate bubble that we’re now getting out of, or attempting to,” Celente said.

“This is unprecedented; the economic system is being restructured,” he said.

The real-estate bubble was born out of the aftermath of the dotcom bubble because the Fed slashed interest rates and made more funds available, according to Celente.

But because the US government now has a vast equity position in financial institutions, it could mean that there is no bouncing back if a bailout-induced bubble bursts, Celente said.

“When this bubble bursts, there’s no reinflating it because of the government intervention into it so deeply,” he said.

“As you look through history, it seems like governments become emboldened by their failures,” he added.

Celente pointed out that according to the Italian fascist leader Benito Mussolini, the merger of state and corporate powers was called fascism.

“We could call this fascism lite,” he said, referring to the government involvement in free enterprise. “After these kind of catastrophic collapses, sometimes they’re followed by war.”

- Watch the full interview with Gerald Celente above.

svinayak · Post by **svinayak** » 09 Jun 2009 10:27

http://www.youtube.com/watch?v=UlDNMB6wYmI

Salbuchi - Global Financial Collapse - Part 1

An Argentine opinion on the Global Financial Crisis, describing the whole Global Financial System as one vast Ponzi Scheme. Like a pyramid, it has four sides and is a predictable model. The four sides are: (1) Artificially control the supply of public State-issued Currency, (2) Artificially impose Banking Money as the primary source of funding in the economy, (3) Promote doing everything by Debt and (4) Erect complex channels that allow privatizing profits when the Model is in expansion mode and socialize losses when the model goes into contraction mode.

ramana · Post by **ramana** » 09 Jun 2009 10:32

Sudhir, Try to read Daikonoff book "Paths of History" linked by samay in E-Books thread. It was written in 1999. And talks of post capitalist era which we are in now!

svinayak · Post by **svinayak** » 09 Jun 2009 10:56

"At this time we are not forecasting a war. However, the trends in play are ominous," Celente concluded. "While we cannot pinpoint precisely when the 'Bailout Bubble' will burst, we are certain it will. When it does, it should be understood that a major war could follow."

http://yonkerstribune.typepad.com/yonke ... ne/2009/05......

Alstry niether endorses nor refutes Mr. Celente's position. However, based on how few really understand how bad things really are.....such a conclusion is very plausible.....and much more likely than many of you could ever know.

Do you think he has been saying prepare over and over and over again just because he thought most of us are going broke? Most of us going broke would be the best of all possible outcomes....as long as there was a sufficent supply of tomato juice to make bloodys.

Once a nation loses its values and moral compass........often it loses just about everything. History is replete with examples dating back thousands of years.

There is a war going on Iraq and Afganistan.
It will be a tactical nuke war with Russia for oil. Iran will push Israel will push the button and destroy Damascus, Syria off the face on the earth. This will break supply lines to Lebanon terrorist groups. Russia will come down from north and attack Israel. Israel will launch a tactical nuke war and repel the Russians. Since it won't be on Russian soil Russia will not nuke back.

http://canadafreepress.com/index.php/article/11169

http://www.youtube.com/watch?v=L51gtfIIUos

John Snow · Post by **John Snow** » 09 Jun 2009 10:58

ramana garu , is it ok if all the BRFites read the ebook about post capitalistic, plasctic, paper and other (Mr.) Money's era?

John Snow · Post by **John Snow** » 09 Jun 2009 11:02

No nuke shall explode over Israel, for with it goes Palistine, Syria, Iran, KSA and possible Egypt.

So Nuke war as a solution to economic problems is Lunatic solution not a Kinetic (aka Dynamic thinking). There are no winners in Nuke war, the living shall lament while dead will be laughing ( a case of die laughing)

Ameet · Post by **Ameet** » 09 Jun 2009 12:01

Good news guys.......just need to hang on a little bit longer.

Krugman Sees U.S. Recession Ending Soon
http://www.bloomberg.com/apps/news?pid= ... ZaruoJGPLM

The U.S. economy probably will emerge from the recession by September, Nobel Prize-winning economist Paul Krugman said.

“I would not be surprised if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer,” he said in a lecture today at the London School of Economics. “Things seem to be getting worse more slowly. There’s some reason to think that we’re stabilizing.”

John Snow · Post by **John Snow** » 09 Jun 2009 12:35

“Things seem to be getting worse more slowly. There’s some reason to think that we’re stabilizing.”

Thats the winningest comment a Nobel could say to the Nobles in London SE.

When a submarines commander looks at the depth guage he is not happy if the needle is stuck at depths way below the rated dive depth, the needle has to go up when he says surface.

Krugman is after all pro establishment guy..

****
from his website blog

If Keynes receded in our consciousness over the past few decades, it wasn’t mainly because of uninformed criticisms from the right; it was because central bankers seemed to have everything under control. Uncle Alan and his counterparts, by controlling the money supply, could do the job of stabilizing the economy, and Keynesian fiscal policy seemed irrelevant.

Now, Keynes understood the role of monetary policy quite well, and believed that it had been effective in the past. What he argued, however, was that there were situations in which monetary policy could do no more — and that the world economy he lived in was facing such a situation:

He is going to say stimulus is needed, good, and is working. Keynesian to the core, but times have changed, pure Keynesian intervention by GOTUS will not help, because the word trade and economics is now different in dynamics and more ET ( extra terristrial in the sense that what is done in US is not impacting US alone). Canada has already retaliated by asking cities to employ only Canadian firms for contracts as a retalliation American for America, Germany has already voiced similar concerns , and our Dear Economist magazine has already devoted couple of issues to protectionism etc

SriniY · Post by **SriniY** » 09 Jun 2009 14:17

Top China banker calls for U.S. sales of yuan bonds

http://www.reuters.com/article/newsOne/ ... QK20090607

A top Chinese banker on Sunday called on the U.S. government and the World Bank to sell yuan-denominated bonds in Hong Kong and Shanghai to encourage the development of debt markets in those centers and to promote the yuan as a major international currency.

"I think the U.S. government and the World Bank can consider the possibility of issuing renminbi bonds in the Hong Kong market and the Shanghai market," said Guo Shuqing, the chairman of state-controlled China Construction Bank (CCB), the world's second-biggest bank by market value.

.....

The Chinese are considering serious measures to expand the use of yuan. Bad times ahead for the dollar.

vsudhir · Post by **vsudhir** » 09 Jun 2009 15:32

SriniY,

The chinis pushing the yuan as some sorta replacement for the USD is as far fetched as the TSP wet dream of green flags fluttering atop the red fort.

Best rebuttal to chini tactical brilliance that I can think of is from Denninger's blog from a few days ago: Link

Now the Chinese are getting desperate - their BS is becoming transparent to anyone with a brain:

NEW YORK (Reuters) - A top Chinese banker on Sunday called on the U.S. government and the World Bank to sell yuan-denominated bonds in Hong Kong and Shanghai to encourage the development of debt markets in those centers and to promote the yuan as a major international currency.

Baloney.

The intent of such a sale would be to make The United States subservient to China and its currency.

This, by the way, is how both Weimar Germany and Argentina were forced into hyperinflation.

See, if your currency declines when you have issued debt in a foreign currency then the principal value of that loan has just gone up. This in turn causes your credit rating to decline (your debt-to-income goes up) which in turn forces your currency lower, which makes the principal value go up again, which.....

Got it? Good. This is called a "death spiral" and is how you destroy a nation's economy, right before you come in and destroy its government - either politically or, in the extreme case, with guns, soldiers and, nowdays, nuclear weapons.

Gee, you don't think that a nation that is a "currency manipulator" might force such a spiral to initiate once they have suckered us into selling RMB-denominated debt, do you?

Such a step as selling RMB-denominated debt would be suicidal for The United States, and as such my answer - and that of our government - to China is and must be best and most-simply expressed in the following image: