Perspectives on the global economic meltdown

Hari Seldon
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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 16 Aug 2009 16:02

My personal view is the next great robbery is the promotion of "paper gold" aka gold ETFs in India to absorb/divert demand for physical gold.


Mighty difficult to fool the yindian when he/she is out to buy gold. You claim tosell gold and hand them paper and think they'll accept that? The etf scheme is not likely to fly for very long, imho. Besides, wealth across generations is stored and exchanged in gold - try doing that with etf certis.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 16 Aug 2009 19:01

Last year's x'mas retail season was the worst in decades. This year's promises to be worser still. Here's news from the other reliable retail season - back-to-school - from the khanate.

Retailers See Back-to-School Sales Slowing

Halfway through the back-to-school shopping season, retail professionals are predicting the worst performance for stores in more than a decade, yet another sign that consumers are clinging to every dollar.

Stock analysts at Citigroup are predicting a decline in back-to-school sales for the first time since they began tracking the figures in 1995. They estimate August and September sales at stores open for at least a year — known as same-store sales — will fall 3 to 4 percent, compared with an increase of nearly 1 percent in the same period last year.

The National Retail Federation, an industry group, expects the average family with school-age children to spend nearly 8 percent less this year than last. And ShopperTrak, a research company, predicted customer traffic would be down 10 percent from a year ago.

“This is going to be the worst back-to-school season in many, many years,” said Craig F. Johnson, president of Customer Growth Partners, a retailing consultant firm.

This year’s frugality may hark back to an earlier age, but consumers are using up-to-the-minute tools in their determination to save money. They are scouring the Internet for coupons. They are planning their shopping trips around e-mail alerts that tip them to bargains.


Retail sales of all hues will bomb. No relief in employment scenario anywhere on the horizon. Pvt credit collapses and gubmint debt expands in order to save the khanomy a depression. There is zimbly no way the khans will repay the debt they have piled on the honest way. 2 choices arise - (i) default on the debt, or (i) inflate it away by devaluing the USD. The Fed is trying hard for the latter. All manner of printing happening and all the printed monies finding their way into bank reserves which are then being used for speculation in the equity, debt and commodities markets. The banks are reluctant to lend just as the pvt sector is reluctant to borrow from banks.

But hey, corporate debt issuance has spiked. what gives? turns out, the corpos have figured out that its easier to issue bonds now. How will they repay this debt? Why, they don't really have to as the gubmint will have to bail them out, they figure! The execs at the corps will meanwhile leave by the time the debt comes due with multi million $ packages only. Sweet gig, eh?

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Re: Perspectives on the global economic meltdown

Postby Dileep » 16 Aug 2009 19:02

Neshant wrote:My personal view is the next great robbery is the promotion of "paper gold" aka gold ETFs in India to absorb/divert demand for physical gold.

Try to sell that to your SHQ!!!

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Re: Perspectives on the global economic meltdown

Postby Muppalla » 16 Aug 2009 19:10

Singha wrote:Snowji pls save some of those $10 trillion dollar notes. should be collectors items on the
market in a few years


I have such collection items from Yeltsin's Russia during 1995. 5,000 and 10,000 rubble notes. That was during my first consulting trip from desh to some foreign country. Russia recovered with vengence from those SU days.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 16 Aug 2009 19:41

A tad dated (2-Aug-09) but relevant.

Prolonged Aid to Unemployed Is Running Out (NYT)
Over the coming months, as many as 1.5 million jobless Americans will exhaust their unemployment insurance benefits, ending what for some has been a last bulwark against foreclosures and destitution.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 16 Aug 2009 21:43

Old China hand Arthur Kroeber on the innate, almost spiritual and inevitable greatness of the China model, in an ft article:

China’s ability to maintain economic growth of around 8 per cent despite the global shock took many by surprise. But this ability has nothing to do with systemic advantages, a distinct “China model” of growth, or skill in macroeconomic management.

Still less has it anything to do with the reasons cited by the People’s Daily editorial [Note: this is in reference to an especially silly editorial you can find here]. China’s present economic vitality results from a Great Wall all right – a Great Wall of borrowed cash. There is nothing remarkable or spiritual about an economy growing at 8 per cent when credit is allowed to expand by 34 per cent.

The fact becomes even less remarkable when we recognise that nominal GDP (the appropriate comparator for nominal credit growth) grew just 3.8 per cent in the first half. {Huh? How can nominal gdp growth be 3.8% and end-year gdp growth be 8% in real terms unless you have negative inflation of 4.2%, eh?}

In other words, 10 dollars of new loans were required to generate just one dollar of economic growth.

In fact China’s first-half growth shows one thing and one thing only: the existence of a powerful state with the ability to commandeer its citizens’ wealth and plough it into more buildings, bridges and roads, with no regard for the return those investments will bring.
{Returns lie in the eyes of the beholder, nobel saar. In PRC's case, the shock and awe of urban landscaping itself is reward enough, I reckon. Its too much for the mere producers of said capital to have a say in its utilization, after all. No? How do you say "Arbeit macht frei" in mandarin again? }


link

Old china hand Prof. Michael Pettis too seems to have taken a dim view to prospects of the PRC khanomy going fwd.
link

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 16 Aug 2009 21:57

Moi favorite resident alarmist and infotaining financial journo is back....

Ambrose E Pritchard in the telegraf on the threat of deflation.....recommended read.

Too many steel mills have been built, too many plants making cars, computer chips or solar panels, too many ships, too many houses. They have outstripped the spending power of those supposed to buy the products. This is more or less what happened in the 1920s when electrification and Ford’s assembly line methods lifted output faster than wages. It is a key reason why the Slump proved so intractable, though debt then was far lower than today.

Thankfully, leaders in the US and Europe have this time prevented an implosion of the money supply and domino bank failures. But they have not resolved the elemental causes of our (misnamed) Credit Crisis; nor can they.

Excess plant will hang over us like an oppressive fog until cleared by liquidation, or incomes slowly catch up, or both....

Justin Lin, the World Bank’s chief economist, warned last month that half-empty factories risk setting off a “deflationary spiral”. We are moving into a phase where the “real economy crisis” bites deeper – meaning mass lay-offs and drastic falls in investment as firms retrench. “Unless we deal with excess capacity, it will wreak havoc on all countries,” he said.

Mr Lin said capacity use had fallen to 72pc in Germany, 69pc in the US, 65pc in Japan, and near 50pc in some poorer countries. These are post-War lows. Fresh data from the Federal Reserve is actually worse. Capacity use in US manufacturing fell to 65.4pc in July.

My discovery as a journalist is that deflation is a taboo subject. Those who came of age in the 1970s mostly refuse to accept that such an outcome is remotely possible, and that includes a few regional Fed governors and the German-led core of the European Central Bank.

As a matter of strict fact, two- thirds of the global economy is already in “deflation-lite”. US prices fell 2.1pc in July year-on-year, the steepest drop since 1950. Import prices are down 7.3pc, even after stripping out energy. ...

Elsewhere, the CPI figures are: Ireland (-5.9), Thailand (-4.4), Taiwan (-2.3), Japan (-1.8), China (-1.8), Belgium (-1.7), Spain (-1.4), Malaysia (-1.4), Switzerland (-1.2), France (-0.7), Germany (-0.6), Canada (-0.3).

Even countries such as France and Germany eking out slight recoveries are seeing a contraction in “nominal” GDP...

Global prices will rebound later this year as commodity costs feed through – though that may not last once China pricks its credit bubble after the 60th anniversary of the revolution in October...

The sugar rush of fiscal stimulus in the West will subside within a few months. Those “cash-for-clunkers” schemes that have lifted France and Germany out of recession – just – change nothing. They draw forward spending, leading to a cliff-edge fall later. (This is not a criticism. Governments did the right thing given the emergency). The thaw in trade finance has led to a V-shaped rebound in East Asia as pent up exports are shipped. But again, nothing fundamental has change....People talk too much about “liquidity” – a slippery term – and not enough about concrete demand.

Professor James Livingston at Rutgers University says we have been blinded by Milton Friedman, who convinced our economic elites and above all Fed chair Ben Bernanke that the Depression was a “credit event” that could have been avoided by a monetary blast (helicopters/QE). Under that schema, we should be safely clear of trouble before long this time.

Mr Livingston’s “Left-Keynesian” view is that a widening gap between rich and poor in the 1920s incubated the Slump. The profit share of GDP grew: the wage share fell – just as now, in today’s case because globalisation lets business exploit “labour arbitrage” by playing off Western workers against the Asian wages. The rich do not spend (much), they accumulate capital. Hence the investment bubble of the 1920s, even as consumption stagnated.

I reserve judgment on this thesis, which amounts to an indictment of our economic model. But whether we like it or not, Left or Right, we may have to pay more attention to such thinking if Bernanke’s credit fix fails to do the job. Back to socialism anybody?


Link


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Re: Perspectives on the global economic meltdown

Postby Singha » 17 Aug 2009 19:56

BBC


US banknotes show cocaine traces
The US capital has the highest level of banknotes that have traces of cocaine

The largest study of banknotes has found that 95% of dollar bills in Washington DC bear traces of the illegal drug cocaine.

The figure for the US capital is up 20% over two years.

Researchers at the University of Massachusetts in Dartmouth tested notes from more than 30 cities worldwide.

They say the rise observed in the US may be due to increased drug use caused by higher stress levels linked to the global economic downturn.

Bank notes can pick up traces of cocaine directly from users snorting it through rolled up bills or when cash is stacked together.

Stress factor?

Besides Washington, other big US cities such as Baltimore, Boston and Detroit had the highest average cocaine levels on their dollar bills.

Dr Yuegang Zuo, who led the research, said: "To my surprise, we're finding more and more cocaine in banknotes.

"I'm not sure why we've seen this apparent increase, but it could be related to the economic downturn, with stressed people turning to cocaine."

Other countries where notes were tested were Canada, Brazil, China and Japan.

China had the lowest rates, with only 12% of its bills contaminated.

In the US the cleanest bills were collected from Salt Lake City, home of the religious group, the Mormons. 8)

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 17 Aug 2009 20:51

This item is simply heartbreaking only. Brace up....

Thick Fashion Magazines Are So Last Year

Fashion magazines' September issues are usually nice and fat, bursting with new looks for cold weather. This year, some are almost as skinny as the models inside.

Behind the relatively svelte issues are newly frugal fashion advertisers, slashing their budgets in the recession and experimenting with putting more ad dollars to use on the Web.

High-end fashion brands such as Louis Vuitton, Gucci, Emporio Armani, Dolce & Gabbana and Prada are still buying ads in the glossy pages of Condé Nast's Vogue and W, Hachette Filipacchi's Elle, Time Warner's InStyle and Hearst's Harper's Bazaar. But most of the September issues, which started showing up on newsstands last week, are almost a third slimmer than last year's batch.

Ad pages in Vogue tumbled 36%, to 429. That's a far cry from 2007, when Vogue trumpeted its September issue as a record-setter among monthly consumer magazines, with a total of 840 pages -- 727 of them ads -- and weighing in at 4 pounds, 9 ounces.

As they spend less on magazines, the fashion companies are gingerly testing a range of lower-cost, often more measurable outlets. These include social messaging site Twitter, Google's video site YouTube, fashion and culture email newsletter DailyCandy.com and Glam Media, an Internet property targeted at women.{So, am guessing BRF wouldn't count, eh?} They are reallocating some of their marketing dollars to buy space in new features on magazine Web sites, such as a shopping tool on Condé Nast's Style.com that will launch during New York Fashion Week in September.


:(( :((

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Re: Perspectives on the global economic meltdown

Postby Ashwin B » 17 Aug 2009 21:33

Been expecting this for quite some time, but am seeing this in the news only now (At least I am).

"BofA, Capital One US Credit Card Defaults Rise in July"
http://www.cnbc.com/id/32443772

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Re: Perspectives on the global economic meltdown

Postby Ashwin B » 17 Aug 2009 22:43

The same link now points to a new article titled:
"US Credit-Card Defaults Show Signs of Stabilizing"

Unbelievable!

Ashwin B wrote:Been expecting this for quite some time, but am seeing this in the news only now (At least I am).

"BofA, Capital One US Credit Card Defaults Rise in July"
http://www.cnbc.com/id/32443772

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 18 Aug 2009 08:20

The same link now points to a new article titled:
"US Credit-Card Defaults Show Signs of Stabilizing"

Unbelievable!


All too believable, unfortunately. The standard media algo for p1mping and pumping a particular spin/slant/agenda has become all too apparent on multiple occasions in multiple countries in the past few yrs. There may be 2 sides to every coin but if you let through only one side as news and the other as nonexistent, pretty soon you stumble upon the media's worst kept secret. Coverage of everything from elections to financial markets to foreign deals to defence preparedness follows the same pattern in the west and in western-inspired media in India.

Meanwhile, hats off to US marketing ingenuity....

California resort offers $19 'survivor' package
SAN DIEGO (Reuters) – For their one-and-only family getaway this year, the Billingtons checked in to an upscale San Diego resort on Sunday with many of the usual vacation accessories -- bathing suits, board games and golf clubs.

But they also brought flashlights, sleeping bags and an inflatable mattress because the pool-side room they booked for just $19 comes with a tent where the beds normally would be. They even had to pack their own toilet paper.

While many of Southern California's luxury hotels are battling a severe slump in business by offering extra services and more amenities, the Rancho Bernardo Inn is luring guests with the exact opposite -- no frills and barely any basics.

Called the "Survivor Package," the hotel's deeply discounted promotion lets patrons trim its standard $219-per-night rate on a sliding scale of deprivation, lowering charges with each amenity stripped from the room.


Wow, eh? :lol:

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 18 Aug 2009 14:38

Ashwin, more ont he coming wave of credit card defaults

Reuters reports that a number of credit card issuers reported modest improvement in their chargeoff rates for July. While any improvement is good news, it is way too early to break out the champagne. First, some of the improvement may be related to tax refunds being used to pay down debt, a strictly seasonal affair. Second, the chargeoff rates are so elevated and the reduction so mild that the fundamentals still look pretty bad. The one bit of supposed cheer is that American Express posted a second month of improvement and contended that the result was not seasonal. However, readers have also told me that Amex is offering very hefty balance reductions (20%) to business accounts who pay off balances early on credit line products that Amex has discontinued. Being willing to take a 20% loss (with guaranteed adverse selection' the best credit quality customers will take up this offer, leaving Amex with weaker credits on balance) is not a sign of optimism, at least as far as those accounts are concerned.


link

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 18 Aug 2009 15:25

More support for the obvious. Now Sri Paul Krugman inserts himself into the merry US healthcare debate. On the side of govt run healthcare, of course. Every right minded Indian should also support the same. US spends on healthcare take away US spends on phoren shores, including US spends in South Asia. And the way US $$$s are propping up rogue regimes like TSP, I'd say we're all better off with a somewhat more limited US role here.

The Swiss Menace: Paul Krugman in the NYT

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Re: Perspectives on the global economic meltdown

Postby Chinmayanand » 18 Aug 2009 17:08

Gerald Celente on King World News ( WE ARE HEADING TOWARDS WAR ) 14 Aug 2009

http://www.youtube.com/watch?v=23fdvk3_NxQ

http://www.youtube.com/watch?v=20yCg40ObVs

http://www.youtube.com/watch?v=tay9r5FV9Dk

http://www.youtube.com/watch?v=vHHIW2zw334

After Armageddon , its now Obamageddon ... :mrgreen:

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Re: Perspectives on the global economic meltdown

Postby Ashwin B » 18 Aug 2009 19:59

More on the real unemployment numbers and its ripple effect on the deepening real estate crisis and general sense of added D&G.

"Lies, Damn Lies, and the Real Estate Recovery"
http://www.minyanville.com/articles/print.php?a=24076

PS: I didn't see this posted earlier. Apologies if this is a re-post.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 19 Aug 2009 04:53

Nice post Ashwin. Thx.

Meanwhile, some disclosures are slowly trickling in (before the flood to come?). Chances are these disclosures/confessionals etc are forced more by the inability to pretend all is well than any great spike in honesty sentiment.

CalPERS Actuary Says "Pension Costs Unsustainable"

The CalPERS chief actuary says pension costs are "unsustainable," and the giant public employee pension system plans to meet with stakeholders to discuss the issue.

"I don't want to sugarcoat anything,"
Ron Seeling, the CalPERS chief actuary said as he neared the end of his comments. "We are facing decades without significant turnarounds in assets, decades of -- what I, my personal words, nobody else's -- unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) ... unsustainable pension costs. We've got to find some other solutions."

Dwight Stenbakken of the League of California Cities told the seminar that pension benefits are "just unsustainable" in their current form and difficult to defend politically.

"I think it's incumbent upon labor and management to get together and solve this problem before it gets on the ballot," he said.

{but but count on those on the losing side to hold on to current benefits all the way till the system breaks and they endup with nothing instead of something should realism prevail....read on}

"I actually think it is sustainable," said Terry Brennand of the Service Employees International Union. He said the basic problem is investment losses, not high benefit levels.

"What is sustainable?" said Lou Paulson of the California Professional Firefighters. He said proposals to extend the retirement age for firefighters from 50 to 55 would result in more injuries with advancing age, driving up workers' compensation costs.


Pensions are in trouble all over the G7. No doubt about it. The amounts implicitly committed far far exceeds any notional ability to pay except in zimbabwe dollars. Retirement systems everywhere in emerged markets seem broken - condemning increasing throngs of elderly to work until they literally drop, in the process driving down wages and taking jobs away from the other end of the spectrum - high school passouts and college fresh grads in an era of rising unemployment and falling job creation.

Whichever way one looks at it, doesn't seem pretty.

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Re: Perspectives on the global economic meltdown

Postby Singha » 19 Aug 2009 07:28

a partial way out seems to retire in lower cost nations tropical like panama and costa rica, something a section of americans were already doing.

within large communities they might not feel so cut off from home. there are enough latin american nations who would be willing to host them and make profit off the services like township mgmt, healthcare...

and its close enough for relatives to fly in occasionally and them to fly back for family reunions.

for europeans they might want to look at morocco, algeria, libya, egypt along the coast
and perhaps greece, ukraine, georgia and portugal...

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 19 Aug 2009 10:13

x-post from the PRC conomy thread

The chini juggernaut rolls on

Expansive China faces grass-roots resentment (Reuters)

From Africa to Europe, the Middle East and the United States, China's drive to project its economic might abroad can sometimes breed fear and resentment. The risks are likely to grow as Beijing channels more of its foreign exchange reserves, which stood at $2.13 trillion at the end of June, into foreign investments. From having a handful of tiny investments abroad less than two decades ago, China has grown to the world's sixth-biggest foreign investor and overtook the United States as Africa's top trading partner last year. That breath-taking rise has brought problems: allegations from emerging countries that China is stripping them of resources and suspicions in the developed world that obscure state interests lurk behind Chinese investments.

Where governments welcome Chinese investments for the boost they bring to their economies, a widely perceived Chinese tendency for Chinese firms to import their own workers has created tensions with job-seekers.


people in many places welcome the benefits from Chinese investment. Those can include aid with few strings attached, capital for infrastructure that Western donors will not fund and competition that drives down prices. Despite the clashes in Algeria's capital this month, its government welcomes Chinese investment. A $9 billion minerals-for-infrastructure deal is presented by Congolese President Joseph Kabila as a cornerstone of his plan to rebuild the Democratic Republic of Congo after years of war.

China will build roads, schools and hospitals in exchange for mining rights.
{Too bad Afg'n has no minig rights to offer Indian monies doing similar service in that desolate wasteland, eh?}

In Guinea's capital, Conakry, the Chinese government is building a 50,000-seat sports stadium as a gift. "We are very satisfied with our cooperation with China," said Denis Sassou-Nguesso, the president of Congo Republic on a visit to a hydro-electric dam being built by Chinese contractors. "Contrary to certain assertions, it's not just Chinese on the various construction sites, there are also numerous Congolese workers," he said.


And then there's the Demographic invasion of the Russian far east, less graphic than the BD one of Asom though.

But in some countries, it is the sheer size of the Chinese presence that causes tension. Russian officials estimated that last year there were 350,000 Chinese migrants living in the country's far eastern regions, many illegally. The native population, in an area almost 10 times the size of France, is just over 7 million. Asked if the numbers of Chinese migrants jeopardized Moscow's control there, a senior Russian migration official said: "There is a threat. It should not be overstated but there is a threat," said the official, who did not want to be identified because of the sensitivity of the subject.


Well, whuddathunkit, eh? A Tibet-xinjiang policy applied to the Russian far east? I heard first hand from a kazakh national of Russian origin that Kazakhastan too is chock full of Chini migrants.

Elsewhere, the fact that the lion's share of Chinese investments are from the state itself or state-controlled companies, is the source of friction. One of the best-known cases of thwarted Chinese expansion was when U.S. lawmakers blocked the sale of oil company Unocal to China's CNOOC Ltd. in 2005. One senator said the deal would effectively give the Chinese Communist Party control over a strategic U.S. resource. In Sudan, rebels accuse Beijing of supporting Khartoum in the six-year-old conflict in Darfur -- and they see Chinese companies as the embodiment of that policy.

"Their only interest in Sudan is their own economic benefit," said Al-Tahir al-Feki, a spokesman for Sudan's rebel Justice and Equality Movement. "As soon as that benefit is gone they will disappear, leaving so many things destroyed behind them."

Another accusation leveled at Chinese investors is that they cut corners. Five Zambians were shot and wounded in 2005 in a riot over pay and safety standards at a Chinese-owned mine, and a year later 52 Zambians were killed in an explosion at a Chinese firm manufacturing explosives for mining. In January, Chinese traders in Guinea closed their shops for several days for fear of reprisals after the authorities found Chinese-made fake medicines. "A part of the population attacked the Chinese expatriates, whom they associated with the offenders. We ... had to intervene to calm the situation," said a military source who was speaking on condition of anonymity because he was not authorized to speak to the media.


Read it all.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 19 Aug 2009 10:23

Restating the obvious but anyway, here goes...

"Shame gene" has disappeared from financial system (FT)

When Lazard Brothers, the London arm of the Lazard banking empire, was brought to its knees by a rogue trader in 1931, the miscreant made a confession and shot himself. Nowadays it is only a mild exaggeration to say that European rogue traders serve relatively short jail sentences before taking to the lecture circuit to explain that the damage they wrought was largely the fault of stupid directors. That, and the return of a "business as usual" ethos in relation to bank bonuses, suggests that the shame gene has gone missing in the financial system. Bankers’ lack of sensitivity to the wider concerns of society is also symptomatic of a culture that has become heavily transactional to the point of being blinkered.
{You can say that again. The culture that mass produced the character and integrity required to nation-build and progress to great power is woefully in short supply amongst the elite producing banking machine}

The recent results of the big banks have shown once again that bank profits are increasingly driven by proprietary trading. And ethical niceties rarely rank high on the traders’ agenda. As Roger Bootle of Capital Economics points out, a curious and possibly unique feature of the financial business is that traders are often applauded by bosses and colleagues for eviscerating their clients. A similar ethical deficit has been evident in the subprime mortgage market where big bonuses were earned for extending loans to people with no prospect of being able to service or repay the debt.


One may then wonder ok, is its all that open and clear then why isn't the gubmint cracking down and prosecuting these scamsters? Thgats where regulatory capture and state capture come into play.

In such markets trust is in short supply. Much has been written about how perverse incentives have encouraged bankers to put the whole system at risk. Less often observed is that when incentives are pushing people in a direction that is at odds with ethical behaviour, customers will be ripped off and conflicts of interest abused. In a financial world where trust is lacking, the only way to prevent bad behaviour is tough regulation. The scale of the financial debacle is such that it would be natural to expect a hefty regulatory response on these behavioural issues as well as on systemic risk. Yet the current controversy about bonuses on both sides of the Atlantic raises questions as to whether regulators have the stomach for the fight.

In the UK, ministers have also been seduced by the argument that Britain’s competitive advantage in financial services must not be jeopardised by an over-draconian regulatory response to the crisis. They are therefore relaxed about keeping a universal banking model that permits big risk-taking with complex financial instruments. They are also relaxed about moral hazard and reluctant to shrink banks that are too big to fail. None of this bodes well for our ability to avoid further bubbles and busts. Nor does it reflect well on those central bankers who argued that because it was too hard to identify bubbles and too dangerous anyway to prick them, the right policy was simply to clear up afterwards.

The mess is too great. And the clean-up seems unlikely to address adequately such problems as excessive and morally hazardous concentration in banking and a reward system that generously remunerates successful punting but imposes no penalty for loss-making bets. Some central bankers, like rogue traders, lack a shame gene.
{Amen}


Read it all.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 19 Aug 2009 19:49

Under Agreement, UBS to Give Up Over 4,000 Names

U.S. regulators will receive the names as part of an investigation of Americans avoiding taxes through the use of offshore accounts.


All hail Swiss secrecy! Heh heh. Time for Panda to open Macau as a competing destination for G7 tax evader monies.....

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Re: Perspectives on the global economic meltdown

Postby Singha » 19 Aug 2009 20:18

Phalcon1 to strike leader : Labuan island in Malaysia - bears some study

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Re: Perspectives on the global economic meltdown

Postby Neshant » 19 Aug 2009 22:45

India should be wary of these rating agencies (S&P, Moodies..etc). Yet they carry on business as usual as if nothing happened.

http://www.youtube.com/watch?v=qmZPkIIz ... annel_page

http://www.youtube.com/watch?v=xgSFpQ0q ... annel_page

shyam
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Re: Perspectives on the global economic meltdown

Postby shyam » 19 Aug 2009 23:42

Oracle of Omaha sayth:

Buffett: We're Going to Be Crushed Under Mountain of Debt
Last year, Warren Buffett says, we were justified in using any means necessary to stave off another Great Depression. Now that the economy is beginning to recover, however, we need to curtail our out-of-control spending, or we'll destroy the value of the dollar and many Americans' life savings.

Some not-so-fun facts from Buffett's editorial today in the New York Times:

•Congress is now spending 185% of what it takes in
•Our deficit is a post WWII record of 13% of GDP
•Our debt is growing by 1% a month
•We are borrowing $1.8 trillion a year
$1.8 trillion is a lot of money. Even if the Chinese lend us $400 billion a year and Americans save a remarkable $500 billion and lend it to the government, we'll still need another $900 billion.

So, where's it going to come from? Most likely the printing press. And, ultimately, Buffett says, that will destroy the value of the dollar.

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Re: Perspectives on the global economic meltdown

Postby AnimeshP » 20 Aug 2009 00:04

shyam wrote:Oracle of Omaha sayth:

Buffett: We're Going to Be Crushed Under Mountain of Debt
Last year, Warren Buffett says, we were justified in using any means necessary to stave off another Great Depression. Now that the economy is beginning to recover, however, we need to curtail our out-of-control spending, or we'll destroy the value of the dollar and many Americans' life savings.

Some not-so-fun facts from Buffett's editorial today in the New York Times:

•Congress is now spending 185% of what it takes in
•Our deficit is a post WWII record of 13% of GDP
•Our debt is growing by 1% a month
•We are borrowing $1.8 trillion a year
$1.8 trillion is a lot of money. Even if the Chinese lend us $400 billion a year and Americans save a remarkable $500 billion and lend it to the government, we'll still need another $900 billion.

So, where's it going to come from? Most likely the printing press. And, ultimately, Buffett says, that will destroy the value of the dollar.


But wasn't the "Oracle of Omaha" calling for a second stimulus package just a couple of months back ... wonder what made him change his tune ..
Buffett Says U.S. May Need a Second Stimulus Package
Excerpts from his previous interview ...
“It looks like we’re going to need more medicine, not less,” Buffett said today in a Bloomberg Television interview. “We’re going to have more unemployment. The recovery really hasn’t got going.” Buffett is chairman and chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc.

Buffett praised Bernanke’s handling of the slide in confidence that caused banks to curb lending after the bankruptcy of Lehman Brothers Holdings Inc. in September. Bernanke is “the right man” to lead the central bank and should be given a second term, Buffett said. :rotfl:

John Snow
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Re: Perspectives on the global economic meltdown

Postby John Snow » 20 Aug 2009 00:48

5000 have voluntered to disclose the swiss miss accounts to uncle sam. Seeking amnesty.

What about Inida? we had our own VD :mrgreen: (voluntery disclosure scheme no?)

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 20 Aug 2009 04:41

decline of final salary pension scheme set to accelerate (FT)

Half of UK companies whose defined benefit pension schemes are still open to existing members expect to have closed them to all employees by 2012, according to a survey by pension consultants Watson Wyatt.

If companies act on those intentions, it would leave only about 1m employees in schemes that in their heyday had at least 6m active members.

Rash Bhabra, head of corporate consulting at Watson Wyatt, said there was now "a sense of inevitability" that "the nuclear option" of closing schemes to all members was starting to become the norm.

A number of companies, including Fujitsu, IBM and Interserve, have recently announced consultations about or plans to close their UK final salary schemes to existing members.

But the survey shows that other companies "who were delaying a decision on closing their schemes to existing members until others who had stuck their heads above the parapet are now ready to act," Mr Bhabra said.


Of course, the unions have expectedly displayed enormous fortitude and forbearance while receiving such ill news.

Unite, the UK's largest union, said staff were increasingly angry that IBM was sticking to plans to close its final salary pension plan. IBM is also altering its early retirement scheme.

IBM should "brace itself for a backlash from thousands of employees", the union said, after hundreds more IBM workers are understood to have joined up. Union meeting have been "packed to overflowing", it said.

Around 5,600 staff are expected to be affected by the IBM changes, which will only see them receive what has been "accrued" so far, based on years of service and level of pay.

Unite said that typically people in their mid 50's could lose up to £200,000 as a result of the changes. It also expects between 700 and 1000 people to opt for early retirement before April 2010 when new early retirement provisions apply.

Peter Skyte, national officer at Unite, said the pension changes represented an "unacceptable attack" on staff. He added: "These highly skilled and experienced staff were key to the company's survival and they view the company's proposals as a kick in the teeth."

IBM has large offices in London, Portsmouth, Winchester, Warwick, Greenock, and the North West.

The changes there follow a similar step taken by Fujitsu in May, after that company's scheme hit a £1 billion deficit.


IMO, the pension obligations/liabilities made in another era under a whole old set of assumptions etc are woefully unrealistic. The companies' pension schemes are insolvent. Better to let aam janta know so that they can prepare as best they can when there may still be time for a good number of them rather than one fine day sink with everybody on board.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 20 Aug 2009 04:48

OK, looks like this congressman is speaking out of turn or what? Whatever happened to the "discuss good news only" directive?

Rep. Bachus: "Social Security Could Face Default Within Two Years"

“Social Security could face default within two years,” U.S. Rep. Spencer Bachus predicted here Tuesday. “The situation is much worse than people realize, especially because of the problems brought on by the recession, near depression. What this recession has done to Social Security is pretty alarming."

“We’ve known for 15 years that we were going to have to make adjustment to Social Security, but we still through that was seven or eight years down the road,” he said. “But if things don’t improve very quickly, we’re going to be dealing with that problem before we know it.”

“We could raise the retirement age, or in the worst case, cut back on some benefits,” he said. “But that is something we are just now beginning to get a handle on.”


One blogger opines:
By the way, there is no Social Security fund and there is no trust either.

All that exists of Social Security is a bunch of IOUs and unpaid promises that most believe cannot possibly be met.

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Re: Perspectives on the global economic meltdown

Postby viveks » 20 Aug 2009 11:25

I think the way the economic crises came about in the US....I think some people decided to loose all positivity about life & challenges.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 20 Aug 2009 12:40

So much for his investing skills.

As I recall, he bought $5 billion of preferred shares in Goldman Sachs and began lobbying hard for a bailout. After the first attempt to pass the bailout bill failed, he was in a panic.

----

Buffett’s Betrayal

Were it not for government bailouts, for which Buffett lobbied hard, many of his company’s stock holdings would have been wiped out.

Berkshire Hathaway, in which Buffett owns 27 percent, according to a recent proxy filing, has more than $26 billion invested in eight financial companies that have received bailout money. The TARP at one point had nearly $100 billion invested in these companies and, according to new data released by Thomson Reuters, FDIC backs more than $130 billion of their debt.

To put that in perspective, 75 percent of the debt these companies have issued since late November has come with a federal guarantee.

http://seekingalpha.com/article/154016- ... s-betrayal

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 20 Aug 2009 13:37

viveks wrote:I think the way the economic crises came about in the US....I think some people decided to loose all positivity about life & challenges.


Fair enough.

Minor nitpick though.

Its not the "way in which the economic crises came about" that is the source of D&G. It is IMHO more about how the crises were mishandled, likely deliberately by the cream of elected authority, to favor/reward/empower and further enrich the very same circles that brought about economic misery, debt slavery and ruin to the vast majority of the voting public.

/OK, if that sounds overly doomy, maybe it is. I suspect most D&Gers would be happy to be proved wrong on this one.

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Re: Perspectives on the global economic meltdown

Postby vishwakarmaa » 20 Aug 2009 21:22

This economic crisis and accounting frauds by top American banks, companies and Federal Reserve has shown one thing to us that American corporates beats even Indian politicians in corruption and greed.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 20 Aug 2009 22:26

New jobless claims rise unexpectedly to 576K

http://news.yahoo.com/s/ap/20090820/ap_ ... us_economy

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Re: Perspectives on the global economic meltdown

Postby ramana » 20 Aug 2009 23:51

Geopolitically what this crisis does is reduce the US operating space. They had piled up this CDS scam to boost the economy, which made them on paper much larger than they really were, and were proactive everywhere. To make matters worse the US beleived this Kool aid (sugar rush) was amrit / Getafix's potion and gave them immortality. When they created the Georgian crisis during the Democratic convention and BO countered with Biden as VP, things were getting out of hand. Someone pulled the plug with Lehman Bros and gave it as fait accompli to McCain on is nomination convention.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 21 Aug 2009 07:46

ramana wrote:Geopolitically what this crisis does is reduce the US operating space. They had piled up this CDS scam to boost the economy, which made them on paper much larger than they really were, and were proactive everywhere. To make matters worse the US beleived this Kool aid (sugar rush) was amrit / Getafix's potion and gave them immortality. When they created the Georgian crisis during the Democratic convention and BO countered with Biden as VP, things were getting out of hand. Someone pulled the plug with Lehman Bros and gave it as fait accompli to McCain on is nomination convention


And that is an interesting reading of events. Though, in all fairness, the 'recession' actually began in oct 2007. ANd home price medians had peaked in 2006 itself. The crash was coming. the powers that be likely influenced timing but the sheer size and direction (hence momentum) of khanomic events was way too large to be controllable or managable in any coherent fashion, IMHO. The depre/rece-ssion was coming anyway. IMVVHO.

Anyway, here's an interesting column:

Deng Xiaoping decided to turn the whole country in the direction of capitalism. At first, this was thought to be a great boon to the West. We had won! And suddenly, there were a billion more consumers in the world economy. Company executives went to sleep with sweet dreams: ‘If we can sell one refrigerator to just one out of every 1,000 Chinese…’

The dreams became nightmares. Instead of selling American-made refrigerators to the Chinese, the Chinese sold Chinese-made refrigerators…and toaster ovens…and tables…and every gadget, gizmo and whatchamacallit known to man…to Americans. Instead of being a consumer…China became a manufacturer – taking the ‘export route’ to prosperity, pioneered by Japan in the ’60s and ’70s…and perfected later by Korea and Taiwan. Instead of adding to the world’s demand for products made by the developed countries, China became the biggest supplier of stuff on the planet.

China made…China sold…China took its money, bought US Treasury paper, thereby helping to keep lending rates low in the United States, and made some more. It worked beautifully as long as Americans were willing and able to continue spending. But no camel’s back is infinitely strong. The final straw came in 2007 – with total debt equal to 370% of GDP.

And now the jig is up. The old formula won’t work – neither for Americans nor for the Chinese. Despite the urging of their government, Americans cannot be expected to take on more debt in order to continue consuming more stuff from China. Nor can the Chinese reasonably expect to work themselves out of an overcapacity problem by creating more of it.

But the officials in both countries seem equally benighted. They don’t seem to think very deeply, no matter what language they think in. On one side of the Pacific, the Americans think they can bring a recovery by encouraging consumers to borrow and consume more stuff. On the other, officials offer credit to entrepreneurs and industrialists – encouraging them to build more factories and add more capacity so they can make more stuff. Neither seems to realize that the real problem is THAT THE WORLD HAS TOO MUCH STUFF ALREADY.


link

Of course, long experience teaches me to be careful writing off either the great khan or the great Han. Time will tell where this is going. As of now, these 2 greats seem to have dug themselves into a hole and show no signs of stopping digging.

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Re: Perspectives on the global economic meltdown

Postby viveks » 21 Aug 2009 18:43

Pursuit of happiness. :D :D
Last edited by viveks on 22 Aug 2009 10:39, edited 1 time in total.

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Re: Perspectives on the global economic meltdown

Postby shyam » 21 Aug 2009 23:42

Following news may not be important here, but the quoted paragraph is:
RF startup Sequoia Communications shuts down
...
Some believe that venture capital—long a vital component to the semiconductor business—is leaving silicon startups never to return because the costs of bringing a new processor or system-on-chip to market are becoming prohibitive.

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Re: Perspectives on the global economic meltdown

Postby Chinmayanand » 22 Aug 2009 05:11

China needs consumers and amrika needs producers.Keeping the govt&policies constant, these two should swap their population.Amrika will get people who do some productive work rather than rating and selling paper. China will get consumers , who just consume on credit and get obese. Problem solved. :P

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Re: Perspectives on the global economic meltdown

Postby shyam » 22 Aug 2009 05:32

Rise of the Super-Rich Hits a Sobering Wall
...The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels of wealth and income anytime soon.

For every investment banker whose pay has recovered to its prerecession levels, there are several who have lost their jobs — as well as many wealthy investors who have lost millions. As a result, economists and other analysts say, a 30-year period in which the super-rich became both wealthier and more numerous may now be ending.
...
In one stark example, John McAfee, an entrepreneur who founded the antivirus software company that bears his name, is now worth about $4 million, from a peak of more than $100 million :shock: . Mr. McAfee will soon auction off his last big property because he needs cash to pay his bills after having been caught off guard by the simultaneous crash in real estate and stocks.

“I had no clue,” he said, “that there would be this tandem collapse.” {Can somebody tell him to read BRF economic threads regularly}
...
Any major shift in the financial status of the rich could have big implications. A drop in their income and wealth would complicate life for elite universities, museums and other institutions that received lavish donations in recent decades. Governments — federal and state — could struggle, too, because they rely heavily on the taxes paid by the affluent.
...
One of the starkest patterns in the data on inequality is the extent to which the incomes of the very rich are tied to the stock market. They have risen most rapidly during the biggest bull markets: in the 1920s and the 20 years starting in 1987.

We are coming from an abnormal period where a tremendous amount of wealth was created largely by selling assets back and forth,” said Mohamed A. El-Erian, chief executive of Pimco, one of the country’s largest bond traders, and the former manager of Harvard’s endowment.

Some of this wealth was based on real economic gains, like those from the computer revolution. But much of it was not, Mr. El-Erian said. “You had wealth creation that could not be tied to the underlying economy,” he added, “and the benefits were very skewed: they went to the assets of the rich. It was financial engineering.”




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