Perspectives on the global economic meltdown

[Neshant]

If this job number doesn't get revised downward and sustains at these levels for coming weeks you have an economy that's creating jobs......end of D&G may be nearer than I thought

Its precisely when the market felt that the worst was over in the early part of the Great Depression and stocks rebounded 50+% that the worst came.

An interview on financialsense radio from some of the prominent deflationist including Robert Prechter. Forward to about 5 minutes in :

http://feedproxy.google.com/~r/feedburn ... 1224-1.mp3

[Sanjay M]

Japan continues to experience deflation.

But meanwhile, the big news over today was the Obama administration's decision to uncap liability coverage for Fannie Mae and Freddie Mac. Hmm, I don't know if US bond investors will find such carte blanche commitments reassuring. The bond markets will probably be taking a hit anyway, as climbing stocks attract investment dollars away from debt instruments.

[Hari Seldon]

Deflation is my pick for 2010. Fears of inflation are warranted but look unlikely to pan out in 2010 across the major economies in which debt worldwide is held - US, EU, Japan and UK stan.

Speaking of UK-stan, something seems to be preparing to hit the fan.

Gilts (UK bonds) sell-off as Britain joins Italy in debt house

The cost of borrowing for the British Government has surged to within a whisker of Italian levels as global markets issue their punishing verdict on the Government’s spending plans. The yield on 10-year gilts spiked Wednesday to 3.97pc, 46 basis points higher than costs on French bonds. Britain and France were neck and neck as recently as last month, before Labour’s pre-Budget report raised deep concerns among Chinese, Arab, and Russian investors about the credibility of British state.

But Jale pe namak is the neck and neck embrace with the world-famous Italian bond.

But what has caught market attention is the narrowing gap with Italian bonds, once mocked as the symbol of an ill-governed nation in thrall to the Dolce Vita.

Yields on 10-Italian treasuries have been hovering just above 4pc despite the eurozone’s Greek crisis, dropping as low as 3.98pc earlier this week. Julian Callow, Europe economist at Barclays Capital, said Britain is nearing the eye of the storm as the Bank of England starts to unwind quantitative easing. "The Bank has bought more gilts over the last nine months than the Government has issued. It has magically eradicated the cost of financing the deficits, but this is going to twist dramatically the other way in early 2010. Markets know this. They are demanding a risk premium on sterling{As well they should.}."
...
Italy’s household debt was 34pc of GDP in 2007, compared to 100pc in the UK. "If you look at private and public debt together, they are in better shape," said Marc Ostwald from Monument Securities. "Unless our Government gets a grip soon we're going to see Gilt spreads widen to 120 basis points over Bunds, with the risk of 150 if there is no clear winner in the election," he said. For Italy, this may just be the calm before the storm. Markets assume that Germany will ultimately bail out Greece if necessary, preventing contagion to the rest of the Club Med bloc.

German Bunds are currently at 3.25% (as compared to the UST baseline rate of 3.75%). So a 120bp jump over the bund takes gilt yields to 4.45% with 4.75% spectre not impossible.

More unhappiness to emnate from UK-stan should the following happen:

"On top of this you have all the uncertainty over the election. We have the highest deficit in the EU as a share of GDP after Latvia and Ireland. It is not clear whether the next government will have the nerve to push through the tremendous fiscal tightening we need," he said. Britain is vulnerable to a "gilts strike" because foreign investors own £217bn of UK debt, or 28pc of the total. These are footloose funds and likely to sell large holdings if Britain loses its AAA rating. They have other tempting places to park their money, such as Turkey, Brazil, or India, where demography is healthy and growth prospects are better. Chile has already undercut British debt yields on some maturities.{As well it should}

Meretricious bond funds buying sdre Yindian paper over tfta Uk-stani one? Whuddathunkit onlee.

Simon Derrick, currency chief at the Bank of New York Mellon, said global markets are unimpressed by the pre-Budget report and do not believe the UK Treasury forecast for 3.5pc growth in 2011. "The Government will have borrowed an extra £700bn by 2014. And the national debt will reach £1.5 trillion, which is equal £48,000 per head of the working population. The market response is entirely rational{as well it should be}," he said Italy has its own problems, of course. Public debt was much higher before the crisis began. The IMF expects it to reach 120pc of GDP next year. However, this debt is mostly owned by high-saving Italians, who are less fickle than foreign funds{matlab kya? Even the Italians are better placed than the UK-stanis or what??}.

Read it all.

[shyamd]

A dose of double-digit inflation might be wishful thinking

Throughout this crisis, one simple refrain has kept echoing again and again in my head: they’ll inflate it all away.

When you consider the size of the debt the Government is faced with, and the fact that historically governments have often chosen to debauch their currency rather than directly defaulting, it is tempting to conclude that, in a few years’ time, we will face a massive dose of purposefully-generated inflation as the Government tries to reduce debts rather than taking the slightly more painful route of cutting spending and raising taxes. It’s probably fair to say from having read your comments that most of you think likewise.

But can they actually manage it? This was the question I tried to tackle in my column this week. My feeling is that if the Government felt it could get away with it, it would generate bumper inflation – double digits if necessary. The problem, I discovered, is that the way its UK liabilities have evolved means that whereas this might have worked at eroding away the debt in the 1970s, it would not today: four-fifths of the UK Government liabilities (on and off balance sheet) are inflation-proof. I don’t know whether people, in the market or even the Government, fully appreciate this.

Now, such an obstacle could be overcome, but only by rewriting various contracts. In rising order of difficulty, you’d have to remove the inflation-link built into the state pension (or, more feasibly, raise the retirement age faster and so erode the eventual liabilities). You could cut public sector pension payouts for existing state workers. You could rip up the terms on the private finance initiative so they are not inflation-protected. You could do the same with index-linked gilts. Another possibility suggested by my colleague Jeremy Warner is that perhaps the Bank of England could simply cancel the gilts sitting in its vaults as a result of quantitative easing – outright monetisation of the deficit.

The problem is that doing all of this is significantly closer to outright default than the rather more subtle, insidious method of just inflating away the debt itself.

I should add that none of the above is something I would recommend – in fact some of it is outright horrifying. However, we ought, pragmatically, to be aware of the restraints facing the Government, and try to anticipate the ways that it might try to tackle the deficit, if it is too cowardly to slash the deficit Ireland-style. To my mind, fiscal consolidation (alongside relatively loose monetary policy) is the answer. But the Government should be getting on with it quicker or else we will have to face the unholy trinity of rising interest rates, rising taxes and falling spending all at once.

PS I know that some of you have, to put it lightly, disagreed with the policy of quantitative easing, a policy I’ve been supportive of right from the start. Contrary to some other commentators, I don’t believe that QE, as it has been carried out so far, has been covertly designed to try to generate the kind of debt-destructive inflation I’ve talked about above. Insofar as it has had an inflationary effect, it has only counteracted the immense deflation generated by the worldwide economic crisis.

This is very similar to what happened in the 1930s. America deflated (facing the depression as it stuck within the gold standard); Britain inflated. Except that this wasn’t 70s style inflation, it was merely the avoidance of an outright debt deflation spiral. This is a critical difference.

But supporting the policy so far doesn’t imply supporting it until kingdom come. The moment there is any hint that the Government is attempting outright to monetise the deficit (Mugabe-style), be assured we will be on it like a nasty rash.

[Hari Seldon]

The existence of the plunge protection team, infer-able daily in the stock mkt uplift, now tumbles outta the closet.

Are Big Banks Pumping Up Stock Prices?
On mainstream yahoo no less. Some select excerpts:

Real estate prices are still falling, unemployment is sky-high, consumer spending is down and corporate profits are nowhere near to last year's levels. The only thing that provides comfort for the masses is rising stock prices. The S&P 500, Dow Jones and Nasdaq have gained in excess of 65% in less than ten months against a backdrop of continuously less than stellar news. The government, banks and other financial institutions have a vested interest in rising stock prices.

Things would look grim if it wasn't for the hope provided by the Dow and S&P's of the world. But more than hope is at stake. Another drop in investor's perception would send real estate and equity prices tumbling. It could also push many financial institutions to the brink of ruin and discredit all government efforts.
{Hmmmm. Eh?}
Looking at what's at stake and the motivations involved, could it be that some of the big players are manipulating the market to keep prices artificially afloat?

OK, so that is the question, quite valid IMHO, even to the cynical eye.

Don't you hate it when juicy news is making its rounds but you are kept out of the loop? Welcome to the club. Already back in 1988, Ronald Reagan signed an executive order to establish a specific committee designed to prevent major market collapses.
{The Plunge protection team! A.k.a. PPT.}
As per this order, the Secretary of the Treasury, the chairman of the Federal Reserve, the chairman of the SEC and the chairman of the commodity futures trading commission make up the core of this team. By extension, major financial institutions like JP Morgan Chase and Goldman Sachs are used to execute their orders.

The existence of this team is said to have been confirmed by former Clinton advisor George Stephanopoulos on Good Morning America. Last year, former Treasury Secretary Hank Paulson called for this 'financial fraternity' to meet with greater frequency and set up a command center at the U.S. Treasury designed to track global markets and serve as headquarter for the next crisis. There is much more to this unique arrangement designed to keep a lid an potential market meltdowns and use major Wall Street firms as marionettes to accomplish this goal. A detailed report about this secret team is available in the most recent issue of the ETF Profit Strategy Newsletter.

Aha, you say? Join the club.
As to the precise mechanics of how the PPT allegedly works, here goes:

Supply and demand drives prices. Where the demand comes from does not matter. In emergency situations, the Federal Reserve is said to lend money to major banks, which serve as surrogates who will take the money and buy markets, predominantly futures, through large unknown accounts. The timing of those buys will be such that those shorting the market will be forced to buy back shares. In theory, this eliminates the most pessimistic investors and causes others to buy. Soon sideline money from mutual and hedge funds comes in and the rally gathers a life of its own.

Wow. Emergency situations, eh? Everyday's an emergency aajkal. A mkt dip can self-deflate into a crash. The PPT has its plate full, mussay. That the futures mkt was the instrument of effecting plunge protection was not unknown, I must add. Several gyanis have speculated on this happening.

One of the obvious suspects to serve as surrogate and carry out the government's plan would be Goldman Sachs. For years, the ties between the U.S. government and Sachs have been too close for comfort.

How close, you wonder? Well documented actually but fresh revelations are always pouring in.

The Financial Times reported that Goldman Sachs suffered only one losing day during the 65 business days of the third quarter. On 36 separate days during the quarter, the firm's trades netted more than $100 million. In addition, Bloomberg reported that Goldman Sachs' effective income tax rate for 2008 was 1%. In dollars, Goldman's tax liability was $14 million. For the same year, Goldman reported a $2.3 billion profit and paid out $10.9 billion in bonuses. One could argue that a record of 90%+ winning trades and a 1% tax rate could only be accomplished with certain connections to high-ranking government personnel.

Well, with the PPT in place, is all well? Can we finally breath easy on the state of the khanomy?

The notion that prices can be inflated artificially makes sense and sounds good in theory. Based on the evidence, this kind of maneuvering even seems to be more common than we think. But a simple look at the chart shows that even the government and big banks do not have superhuman powers, at least not unconditionally. In 2000, 2002, 2008 and 2009, the major indexes a la S&P 500, Dow Jones and Nasdaq declined 30% or more. It is now known, as it was back then, that the nation's most powerful financiers got together on October 24, 1929 to prevent a major meltdown. Their plan succeeded on that very day which came to be known as Black Thursday. The recovery on Black Thursday was as remarkable as the selling that made it so Black.

On Friday, the Times reported that the financial community felt 'secure in the knowledge that the most powerful banks in the country stood ready to prevent a recurrence of panic.' In a concerted advertising campaign in Monday's papers, stock market firms urged to pick stocks at bargain prices. The rest is history and the Great Depression unfolded in all its cruel ways. One of the flaws of artificial buying is that all the money used to buy stocks will eventually have to be taken out. As we know, banks are not immune to greed and once prices start declining, banks are likely to be the first to cut their losses and flee the sinking ship.

Read it all.

[Hari Seldon]

Saving Mexico (WSJ)

States are under khanomic pressure to pare deficits and one big tempting target will have to be prison sizes. Decriminalize a variety of crimes (e.g. drug possession) and let free several jailees now on gubmint dole while in prison. Also, deal a blow to the cartels whilst doing so.

To weaken the cartels, some argue the U.S. should legalize marijuana, let cocaine pass through the Caribbean and take the profit motive out of the drug trade

Select excerpts from the article:

Growing numbers of Mexican and U.S. officials say—at least privately—that the biggest step in hurting the business operations of Mexican cartels would be simply to legalize their main product: marijuana. Long the world's most popular illegal drug, marijuana accounts for more than half the revenues of Mexican cartels.

"Economically, there is no argument or solution other than legalization, at least of marijuana," said the top Mexican official matter-of-factly. The official said such a move would likely shift marijuana production entirely to places like California, where the drug can be grown more efficiently and closer to consumers. "Mexico's objective should be to make the U.S. self-sufficient in marijuana," he added with a grin.

If the war on drugs has failed, analysts say it is partly because it has been waged almost entirely as a la w-and-order issue, without understanding of how cartels work as a business.

For instance, U.S. anti-drug policy inadvertently helped Mexican gangs gain power. In the late 1980s and early 1990s, the U.S. government cracked down on the transport of cocaine from Colombia to U.S. shores through the Caribbean, the lowest-cost supply route. But that simply diverted the flow to the next lowest-cost route: through Mexico. In 1991, 50% of the U.S.-bound cocaine came through Mexico. By 2004, 90% did. Mexico became the FedEx of the cocaine business.

That change in the supply chain came as Colombia waged a successful war to break up the country's Cali and Medellin cartels into dozens of smaller suppliers. Both moves helped the Mexican gangs, who gained pricing power in the market. Before, the Colombian cartels told Mexicans what price they would pay for wholesale cocaine. Now, Mexican gangs play smaller Colombian suppliers off of each other to get the best price. Mexican gangs are "price setters" instead of "price takers."

Some Mexican officials say privately that the U.S. should seriously consider allowing cocaine to pass more easily through the Caribbean again in order to squeeze Mexican gangs. "Would you rather destabilize small countries in the Caribbean or Mexico, which shares a 2,000-mile border with the U.S., is your third-biggest trading partner and has 100 million people?" one official said.

Ah, the same question that Dilli should be asking DC - choose to let TSP fail in order to let Dilli help Kabul heal the entire region.

[shyamd]

The existence of the plunge protection team, infer-able daily in the stock mkt uplift, now tumbles outta the closet.

Are Big Banks Pumping Up Stock Prices?
On mainstream yahoo no less. Some select excerpts:

One of the obvious suspects to serve as surrogate and carry out the government's plan would be Goldman Sachs. For years, the ties between the U.S. government and Sachs have been too close for comfort.

How close, you wonder? Well documented actually but fresh revelations are always pouring in.

Check out what I said in November about Goldman.

As the bear market creeps in, Goldman is going get a lot of un wanted attention about its past activities that it only just escaped in many insider trading cases. This bear market coming up could see the end of Goldman and have them exposed. As I said in Nov, keep an eye out for them, they are going to receive special treatment.

[svinayak]

Christmas Gift from Prez,and Congress(Repocrats) for Savers and prudent Investors!

“What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” said [Bill Gross of PIMCO] ... Mr. Gross said he read his monthly portfolio statement twice because he could not believe that the line “Yield on cash” was 0.01 percent. At that rate, he said, it would take him 6,932 years to double his money.


http://www.nytimes.com/2009/12/26/your- ... .html?_r=1

The expense for most of money market mutual fund is over 0.2%! So your net worth will be NEGATIVE!

[svinayak]

Maymin: So we are technically bankrupt?

Williams: Yes, and when countries are in that state, what they usually do is rev up the printing presses and print the money they need to meet their obligations. And that creates inflation, hyperinflation, and makes the currency worthless.



Obama says America will go bankrupt if Congress doesn't pass the health care bill.

Well, it's going to go bankrupt if they do pass the health care bill, too, but at least he's thinking about it. He talks about it publicly, which is one thing prior administrations refused to do. Give him credit for that. But what he's setting up with this health care system will just accelerate the process.



Where are we right now?

In terms of the GDP, we are about halfway to depression level. If you look at retail sales, industrial production, we are already well into depressionary. If you look at things such as the housing industry, the new orders for durable goods we are in Great Depression territory. If we have hyperinflation, which I see coming not too far down the road, that would be so disruptive to our system that it would result in the cessation of many levels of normal economic commerce, and that would throw us into a great depression, and one worse than was seen in the 1930s.



What kind of hyperinflation are we talking about?

I am talking something like you saw with the Weimar Republic of the 1930s. There the currency became worthless enough that people used it actually as toilet paper or wallpaper. You could go to a fine restaurant and have an expensive dinner and order an expensive bottle of wine. The next morning that empty bottle of wine is worth more as scrap glass than it had been the night before filled with expensive wine.

We just saw an extreme example in Zimbabwe. ... Probably the most extreme hyperinflation that anyone has ever seen. At the same time, you still had a functioning, albeit troubled, Zimbabwe economy. How could that be? They had a workable backup system of a black market in U.S. dollars. We don't have a backup system of anything. Our system, with its heavy dependence on electronic currency, in a hyperinflation would not do well. It would probably cease to function very quickly. You could have disruptions in supply chains to food stores. The economy would devolve into something like a barter system until they came up with a replacement global currency.



What can we do to avoid hyperinflation? What if we just shut down the Fed or something like that?

We can't. The actions have already been taken to put us in it. It's beyond control. The government does put out financial statements usually in December using generally accepted accounting principles, where unfunded liabilities like Medicare and Social Security are included in the same way as corporations account for their employee pension liabilities. And in 2008, for example, the one-year deficit was $5.1 trillion dollars. And that's instead of the $450 billion, plus or minus, that was officially reported.



Wow.

These numbers are beyond containment. Even the 2008 numbers, you can take 100 percent of people's income and corporate profit and you'd still be in deficit. There's no way you can raise enough money in taxes.



What about spending?

If you eliminated all federal expenditures except for Medicare and Social Security, you'd still be in deficit. You have to slash Social Security and Medicare. But I don't see any political will to rein in the costs the way they have to be reined in. There's just no way it can be contained. The total federal debt and net present value of the unfunded liabilities right now totals about $75 trillion. That's five times the level of GDP.



What can we, the people, do to stop the government from, you know, taking all our money?

We should have acted 20 years ago. There's not much you can do at this point to prevent the eventual debasement of the dollar. This involves both sides of the political spectrum. It's not limited to the Republicans or the Democrats. They've both been very active in setting this up.



What can individuals do?

The only thing individuals can do now is look to protect themselves. I wish I could see a way, but shy of severe slashing of the social programs that is so politically reprehensible and would create such problems and social unrest, I don't see that as a practical solution.

http://www.fairfieldweekly.com/article.cfm?aid=16014

[svinayak]

Posted by Pedro on 12.25.09 at 13.47
You USians are like kids learning to walk. You have no idea of how to deal with high inflation as we South Americans have.

First of all the going advice is "get out of debt" /// What for? if the dollar tanks you will be paying your debts with a cigarette pack. In South America for a long time the trick was to borrow so that inflation took care of the debt. Don’t walk out of the house and leave it.. just stay till you are kicked out. Maybe pay once in a while a bit (about the rent you would pay in some other place) If things happen like John William says debtors will capitalize themselves and settle their debts with peanuts. I repeat, this was the going game in many countries of South America

Second, if you want to hurt the ruling elite STOP BANKING AND USING BANKS. Turn your money into cash as soon as it is credited and boycott the banks. Pay cash. Junk your credit cards and do not consume with them, much less finance yourself with them as they charge outrageous rates... that is unless you plan to stick them with the unpaid balance. This way you will turn the fractional reserve banking trick against them as one dollar out of the system means 9 dollars that are called back in form the system.

Third, barter using your own skills and trade even if it means using the worthless money as a reference for short periods of time. This means do not bill your goods or work. Request cash. This is called underground economy. They want to steal your money from you for their convenience. Learn how to keep it to yourselves. South Americans use this a constantly.

It is not a sin to avoid paying dues to the government mobsters.

The government-critters are playing the game for themselves and their minions. Do you want to keep feeding them? If everybody does it they do not have the means to control and coerce.

Keeping alive and well means you will be able to fight the battle and be there alive and kicking and when the recovery time comes you will be positive for it.. If you follow their system you will be in misery soon and worthless. Pull others into this club.

[Satya_anveshi]

Berkshire Eliminates 21,000 Jobs as Manufacturing, Retail Slump

“We will be adding people at some point, but we won’t do it until we see the demand come back,” Buffett said in a September interview conducted by the CEO of Business Wire, the Berkshire unit that posts corporate press releases. “It’ll be a little slow because we don’t want to go through what we did before. Although, I will guarantee you that three years from now, our brick companies, our carpet company, and our insulation company will all be employing far more people than now.”

[Sanjay M]

Posted by Pedro on 12.25.09 at 13.47
You USians are like kids learning to walk. You have no idea of how to deal with high inflation as we South Americans have.

First of all the going advice is "get out of debt" /// What for? if the dollar tanks you will be paying your debts with a cigarette pack. In South America for a long time the trick was to borrow so that inflation took care of the debt. Don’t walk out of the house and leave it.. just stay till you are kicked out. Maybe pay once in a while a bit (about the rent you would pay in some other place) If things happen like John William says debtors will capitalize themselves and settle their debts with peanuts. I repeat, this was the going game in many countries of South America

Second, if you want to hurt the ruling elite STOP BANKING AND USING BANKS. Turn your money into cash as soon as it is credited and boycott the banks. Pay cash. Junk your credit cards and do not consume with them, much less finance yourself with them as they charge outrageous rates... that is unless you plan to stick them with the unpaid balance. This way you will turn the fractional reserve banking trick against them as one dollar out of the system means 9 dollars that are called back in form the system.

Third, barter using your own skills and trade even if it means using the worthless money as a reference for short periods of time. This means do not bill your goods or work. Request cash. This is called underground economy. They want to steal your money from you for their convenience. Learn how to keep it to yourselves. South Americans use this a constantly.

It is not a sin to avoid paying dues to the government mobsters.

The government-critters are playing the game for themselves and their minions. Do you want to keep feeding them? If everybody does it they do not have the means to control and coerce.

Keeping alive and well means you will be able to fight the battle and be there alive and kicking and when the recovery time comes you will be positive for it.. If you follow their system you will be in misery soon and worthless. Pull others into this club.

Interesting - you always hear similar advice being bandied about by anti-govt, anti-taxation types in the US. I wonder - are barter dollars/points taxable? If such people were to successfully engineer a tax revolt by creating a parallel economy through barter, then how would the govt tax it? Tax-revolters could perhaps create websites or peer-to-peer software that would allow them to adopt tactics similar to internet movie piracy, to conduct their own underground network of transactions that would be outside of the govt's tax net.

[manju]

What is the forecast for the value of the dollar for the next 6m - 2 yrs. Any info will be helpful. This will help to time the transfer of rupiya to india.

[g.sarkar]

Oh Happy days are here again! It is going to be budget time in Kalifornia once again.
1."Round 3 of California's never-ending budget bout looms"
http://www.sacbee.com/budget/story/2409679.html

2. "Governor's deficit cure: Layoffs, furlough extensions, program cuts"
That is more of the same from our own Governator. If it did not hurt me personally, I could have a good laugh!
http://www.sacbee.com/budget/story/2418 ... d_articles
Gautam

[Hari Seldon]

From the wonderful folk over at the Automatic Earth, an article I had previously overlooked.

Why China won't succeed America

Recommended read. Typical with TAE articles I guess. Some excerpts:

There are many voices out there who claim that China will be the next world power, as a kind of natural successor to America. I think not.

China has no domestic energy sources it can readily and swiftly put to use. It has to import all of its energy except for coal and a small amount of uranium. That's not a recipe for developing an empire. China has no domestic customer base....Meanwhile, its foreign customer base is rapidly shrinking. China has risen over the past decades to where it is today because it could export its industrial output to relatively affluent societies in Europe and North America. These export targets are now dwindling and may well soon practically disappear altogether. The human talent to screw up fantastically in the face of free gifts has led them to implode simply and only due to the fact that not even the power of 800 men is forever satisfactory for one man, we always want more, and it was too tempting to borrow from the future. That's our present credit crisis in a nutshell. And China will dwindle right along with them, left with a hundred thousand factories designed to produce articles its own citizens don't want or need or can't afford.

China's recent rise has been that of a parasite, fully dependent on its hosts for survival while achieving its present state. There are no other hosts in sight, which means its people will be lucky if it would just retreat into hibernation. Alternatively, it may try to expand in the face of a world in general contraction, in which the last remaining weapons of mayhem, provided by a century of super-abundant cheap energy and dreams of a never ending growth of empire and domination, augment the overall chaos and deterioration. 1.3 billion pieces of cannon fodder may well seem too formidable an opportunity to not at least try for dominance. But a force the scale of the 20th century US it will never be, or at least not for a very long time

Read it all.

[Hari Seldon]

Heavy D&G outta zero hedge stables. Durden claims US fixed income supply will rise 11-fold in 2010 w.r.t. 2009 levels and demand is not going to rise even by 2x as compared to 2009. Jai Ho.

Brace For Impact: In 2010, Demand For US Fixed Income Has To Increase Elevenfold... Or Else

Here is the only math you need to know as we all look at 2010: in 2009 US Dollar denominated fixed income supply, net of the Fed's Quantitative Easing operations, was $190 billion. In 2010 it will be $2,060 billion, an eleven fold increase. The Fed has three choices: 1) a QE 2 announcement soon, causing a plunge in already low Democrat popularity ahead of the mid-term elections; 2) interest rates skyrocketing, throwing the economy into a true tailspin; 3) the mother of all engineered equity crashes to return capital flow to risk-free assets. None of the three is a pleasant choice, however the Fed could only delay the inevitable hangover from the biggest private-to-public risk transfer in history for so long.

TIFWIW.

[ramana]

Hari Drop me an e-mail.

[Sanjay M]

WSJ article suggesting better govt spending projects to stimulate the economy:

http://online.wsj.com/article/SB1000142 ... 52344.html

[Hari Seldon]

Do We Need a New Reserve Currency? (Martin Wolf)

The above article itself is a worthwhile read but IMHO Jesse's commentary even more so.

The deterioration of the dollar reserve currency regime is obvious.

If we have forecasted correctly, the world will look to some variation of the IMF's Special Drawing Rights as an eventual replacement for the US dollar. Therefore, the recomposition of the SDR next year will become a lightning rod for the global stresses created by an increasingly unstable and impractical system of global trade.

As you may recall, Russia and China have called for the inclusion of more currencies such as the rouble, the yuan, the Aussie and Canadian dollars, and gold and possibly silver into the mix. The BRIC's seem determined to break the western dominance of global monetary policy.

This may also explain some of the highly emotional,and we would say nonsensical, arguments attacking gold and silver by some of the house economists for the western Banks, and their camp followers and hand puppets in the universities, of late.

The bankers are appalled at the prospect of the new SDR including gold or silver in its new composition to be set in 2010. And so they are jawboning ahead of it. Any country can build its gold and silver reserves in the open market, and the big central bankers find it difficult to manipulate their supplies to their own advantage, despite years of desperate efforts to substitute paper for metal.

Bad enough that the basket may include currencies of non-G7 countries. As you will recall, the G7 was formed when Canada joined the Group of Six: US, Great Britain, France, Germany, Japan, and Italy. The power balances of the post World War II era are changing, and the shifts in trade and financial power reflect this.

In the interim, there will be regional currency arrangements and trading blocs as in the past. The strength and suitability of the new SDR regime will help to determine the disposition of these regional arrangements.

'Free trade' without a floating monetary exchange system is not possible. Otherwise there will be artificial subsidies and penalties among nations, as in all systems of price control. These lead inevitably to imbalances, bubbles, and crises.

The adjustments that are overdue for the dollar and renminbi in particular will make political progress difficult. But the greatest impediment to progress will be the Anglo-American banking cartel, which seeks to control the issue of money as a means of implementing policy and distributing wealth, especially with regard to the natural resources and labor of the developing nations.

Read it all.

[Hari Seldon]

In case it hasn't been dinned into sceptical heads already that the current global crisis is a classic debt-deflation spiral unwinding, Ireland's case specifics more or less seal the deal, IMHO.

Celtic Tiger finished off by debunked ‘miracle’ (Times UK)

Some excerpts:

It is an extraordinary reversal of fortunes. As recently as 2007, a Bank of Ireland report smugly described a country that was home to 33,000 millionaires and €800 billion of domestic wealth.

Credit to the Irish private sector nearly doubled between 2002 and 2007, by which time the country’s houses were the most overvalued in the Western world and construction accounted for one fifth of national output. Losing sight of the origins of its recent fortune — a low-cost but highly educated English-speaking workforce — the price of goods soared to 27 per cent higher than the average for the European Union. Gross wages were 40 per cent more generous.

Now output is 7.3 per cent lower than it was a year ago. The inflation rate has fallen as low as minus 3 per cent and the fiscal deficit has exploded to 12 per cent of output. Ingmar Kiang and Darina Roche-Kiang believe that they are a near-perfect case study of Ireland’s helter-skelter ride. "We saw the Eighties as well, when you took the first boat to London or plane to New York after college, but this is far worse," Ms Roche-Kiang said from her magnificent home in the desirable Dublin commuter town of Greystones. "I’m embarrassed to be Irish at this stage."

The change is gut-wrenching. My full sympathies and best wishes with the Irish people in this hour of extraordinary trial. It is pointless blaming one set of people ('regulators') or the other ('bankers') for what is essentially a failure of collective and institutional memory - of the mechanics of the last great depression which has parallels all over the place with this one.

The Irish taxpayer is funding the clean-up of €77 billion of toxic loans by Ireland’s main financial institutions to the tune of €54 billion.

The trappings of wealth — fine wines, luxury cars and country houses — are all being sold off by liquidators. The number of insolvencies in Ireland has more than doubled to 1,209 this year. House prices have fallen by 26.7 per cent since February 2007 and now stand at October 2003 levels.

"We are all to blame, really," Ms Roche-Kiang said. "All I saw around me was one hell of a party. People went bonkers. Property was an obsession. It was all people talked about. "But reckless lending played its part. We all knew that houses were too expensive. We are an insanely corrupt country, worse than Greece or Italy. Who would want to live here now?"

A quick glance at how the crisis unfolded through 2009, having already erupted in 2008:

Beyond the pale: Ireland in 2009

* January Government nationalises Anglo-Irish Bank, the Republic’s third-largest lender, amid the collapse of its share price and reports of large-scale deposit withdrawals. The move was prompted by fears that the bank could be declared insolvent, which would trigger a state guarantee and leave the Government responsible for nearly €100 billion of liabilities
* February Credit default swaps spreads, which measure risk involved in investing in Irish government bonds, peak, hitting 400 basis points
* April Government forced to resort to emergency Budget with a €3 billion package of tax rises and spending cuts. Ireland reels in the face of soaring unemployment, a housing market crash and a collapse of consumer spending by a fifth
* September Legislation to create the National Asset Management Agency (Nama) is passed by the Dáil. The State agrees to pay €54 billion for €77 billion of assets — toxic debt in the form of loans to purchase land and property — from the main banks
* October Mary Harney, the Health Minister, warns that Ireland could be forced to go to the International Monetary Fund for help if the country cannot implement the necessary cuts in the December Budget. Voters approve Lisbon Treaty in reversal of their decision in May last year
* November Patrick Honohan, a professor, is appointed Central Bank Governor, the first non-civil servant to be given the role, a sign that the Government is serious about cleaning up its banking sector. The European Commission confirms that it will give Dublin a one-year extension to its 2013 target to restore stability to the public finances
* December Brian Lenihan, the Finance Minister, announces the harshest Budget in the history of the Republic. Stripped of profits made by US companies in Ireland, gross national product declined by 1.4 per cent, leaving the economy 11.3 per cent smaller than a year earlier

[Hari Seldon]

What is the forecast for the value of the dollar for the next 6m - 2 yrs.

And why would anyone believe anything anyone else (esp policymakers and central bankers) says? These things are inherently dicey to predict but some broad trends can perhaps be gauged.

IMVVHO, the first 3 qtrs of 2010 will see deflation advance and by Q4 the inflationary demons everyone has been warning about will attempt a comeback, IMHO.

There is significant chance of rise in interest rates within the US itself in 2010 in long-bonds (looking at 5.5% territory from the current 3.75%).

Again, strictly tea-leaf reading. No gyan/foresight claimed or implied.

[Hari Seldon]

To be fair, not all is D&G. Here's some green shoot. Enjoy!
Corporate optimism highest in six years
Yay!

[Hari Seldon]

As Slump Hits Home, Cities Downsize Their Ambitions

Devastating look at the state of local gubmints going into 2010 in the khanate.

In the decade through 2008, municipal tax revenues grew at a rate of 6.5% a year, faster than the overall economy's 5.1%, unadjusted for inflation.{A lot of this was property taxes on soaring property values right through end-2007}
Those revenues have started to slip. A national tally isn't yet available, but state tax collections fell 11% across 44 states in the third quarter of 2009, from the same period a year ago... In a recent survey by the National League of Cities, 88% of city budget officers said they were less able to meet their financial needs than they were a year ago.

The specter of lean budgets for years ahead has some of the nation's 89,000 local governments rethinking what services to provide and how to pay for them. From Mesa to Philadelphia, this means some combination of higher taxes and fewer services. ...

These cuts matter greatly to the economy at large. Local government spending accounts for 8.8% of the nation's total output, including everything from employee salaries to snowplows. The sector employs one in nine workers -- 14.5 million in all, or about 8 million in education and 6.5 million elsewhere. More Americans work for cities, counties and school boards than in all of manufacturing.

More likely to be union members, government workers tend to be better paid and have greater job security than many of the taxpayers who pay their salaries. Benefits are often better, too. Virtually all full-time state and local workers have access to retirement benefits; in the private sector, about 76% of full-time employees had retirement benefits. Employment in local government peaked in August 2008 and has fallen by 117,000 since then, or less than 1%, compared with a 6.3% fall in private employment from its December 2007 peak.

About one third of the federal $787 billion fiscal stimulus was aimed at state and local government. The money has helped some local governments keep police and school teachers on the job, and has gone toward building new firehouses and police stations. Another stimulus program subsidizes municipal borrowing by paying 35% of local government's interest cost on borrowing for infrastructure. But some cities have complained that too much of the stimulus was absorbed at the state level. President Barack Obama is promising to do more, calling in a recent speech for more "relief to states and localities to prevent layoffs."

Read it all.

[Hari Seldon]

OK, here's an excellent idea that could be more applicable in the emerging mkts than in the emerged ones simply because the prospect of low to no growth (in real terms) is the dominant one in the latter going fwd into the next decade.

A Way to Share in a Nation’s Growth (By Robert Shiller)

Corporations raise money by issuing both debt and equity, the latter giving investors an implicit share in future profits. Governments should do something like this, too, and not just rely on debt. Borrowing a concept from corporate finance, governments could sell a new type of security that commits them to paying shares in national "profit," as measured by gross domestic product.
...
In a recent pair of papers, my Canadian colleague Mark Kamstra at York University and I have proposed a solution. We’d like our countries to issue securities that we call "trills," short for trillionths. Let me explain: Each trill would represent one-trillionth of the country’s G.D.P. And each would pay in perpetuity, and in domestic currency, a quarterly dividend equal to a trillionth of the nation’s quarterly nominal G.D.P.

If substantial markets could be established for them, trills would be a major new source of government funding. Trills would be issued with the full faith and credit of the respective governments. That means investors could trust that governments would pay out shares of G.D.P. as promised, or buy back the trills at market prices.

If trills were issued by Canada, for example, they would pay about 1.50 Canadian dollars in dividends this year, one trillionth of the annual cash flow. The value of the security is derived from the dividend, and might be priced very highly in the market — perhaps at around 150 Canadian dollars — given that country’s strong prospects for growth. Trills issued by the United States Treasury would pay about $14 in dividends this year and might fetch $1,400 a trill or more.

Very interesting indeed. Of course, the author ignores what might happen in the event of no or negative GDP growth.

[Sanjay M]

OK, here's an excellent idea that could be more applicable in the emerging mkts than in the emerged ones simply because the prospect of low to no growth (in real terms) is the dominant one in the latter going fwd into the next decade.

A Way to Share in a Nation’s Growth (By Robert Shiller)

Corporations raise money by issuing both debt and equity, the latter giving investors an implicit share in future profits. Governments should do something like this, too, and not just rely on debt. Borrowing a concept from corporate finance, governments could sell a new type of security that commits them to paying shares in national "profit," as measured by gross domestic product.
...
In a recent pair of papers, my Canadian colleague Mark Kamstra at York University and I have proposed a solution. We’d like our countries to issue securities that we call "trills," short for trillionths. Let me explain: Each trill would represent one-trillionth of the country’s G.D.P. And each would pay in perpetuity, and in domestic currency, a quarterly dividend equal to a trillionth of the nation’s quarterly nominal G.D.P.

If substantial markets could be established for them, trills would be a major new source of government funding. Trills would be issued with the full faith and credit of the respective governments. That means investors could trust that governments would pay out shares of G.D.P. as promised, or buy back the trills at market prices.

If trills were issued by Canada, for example, they would pay about 1.50 Canadian dollars in dividends this year, one trillionth of the annual cash flow. The value of the security is derived from the dividend, and might be priced very highly in the market — perhaps at around 150 Canadian dollars — given that country’s strong prospects for growth. Trills issued by the United States Treasury would pay about $14 in dividends this year and might fetch $1,400 a trill or more.

Very interesting indeed. Of course, the author ignores what might happen in the event of no or negative GDP growth.

Well, what you have to consider is the impact on democracy and public policy - ie. owning shares in your govt/country/state represents an extra form of voting power. If a company pursues bad policies that displease shareholders, they express their displeasure by selling their shares, which then impacts the company's stock price and capital, which can then put pressure on that company's decisions. So likewise, if displeased shareholders expressed their unhappiness with their govt's policies in the same way, then the govt would come under similar pressure. Suppose some people - very rich people - bought a huge amount of trills, and used their equity ownership to exert disproportionate influence upon the govt's decision-making? You might end up with a plutocracy that favours the rich, rather than a democracy.

Anyway, it's an idea worth considering - and critiquing.

[Hari Seldon]

Asian nations will launch currency swap facility in May 2010 (WSJ)

Asean and its three regional partners will launch a $120 billion currency swap facility on March 24 that aims to ensure sufficient U.S. dollar liquidity in the event of a financial crisis.

The new pact is an upgrade of the existing Chiang Mai Initiative, which was launched in 2000 by the Association of Southeast Asian Nations plus Japan, China and South Korea. That came after regional countries experienced a severe capital flight in the wake of the 1997-1998 Asian financial crisis.
...
apan, China and South Korea will be able to tap up to $19.2 billion each from the pool, while some of the other countries can borrow as much as five times their contributions, according to the Korean statement.

Any participating country that wants to use the pool can borrow up to 20% of the funds allowed for it under non-crisis conditions. The remaining 80% can be tapped only when conditions have become so grave that the country asks for an International Monetary Fund bailout, said Ahn Buyng-chan, a director-general at the Bank of Korea.

To further bolster regional financial stability, the participating nations also will set up a regional surveillance unit and a facility to provide credit guarantees on bonds issued in the region, the statement said.

—In-Soo Nam in Seoul and Li Liu in Beijing contributed to this article.

Of course, as expected Yindia is conspicuous by its absence.

[Neshant]

More likely to be union members, government workers tend to be better paid and have greater job security than many of the taxpayers who pay their salaries.

Its not just salaries, benefits and job security. Public sector pensions are the biggest boondoggle. A teacher draws a pension of 42K/year in some states. That requires a portfolio of a little under a couple million! A private sector worker who cannot fund his own retirement is being made to pay for the retirement benefits of the public sector.

This is the danger of getting government involved in anything. Prices end up being many orders of magnitude higher.

Obama, being from an over-paid profession (lawyer) himself may not understand this. If fact none of the jokers around him are from the real economy (Geithner, Bernanke, Biden..etc). All are either from the overpaid and largely useless finance "industry" or career politicians.

[Hari Seldon]

Green-shooter in chief Sri Sri Paul Krugman garu uvacha:
'Reasonably High Chance' the Economy Will Contract

The link has a shirt video from ABC.

Well, if Sri Krugman is saying 'reasonably high chance', I take that to mean 'reasonably certain' only. Outside the gubmint itself (that includes paragons of probity like Sri Larry Summers and honest taxpayer Sri Tim Geithner), Krugman has been a consistent champion of the green shoots camp. Roubini was initially a D&Ger and then miraculuously changed his tune (rather unconvincingly, must add).

Some of the more rowdy-ish comments say:

Just more ass covering from Krugman. Economically, the man's ass is the size of Texas.

Is he still arguing that in order to fix the economy, we need moar stimulus?

Read it all, anyhow.

[Sanjay M]

Krugman's opinions have become contaminated and highly suspect due to the fact of his intense political activism, which obviously colour his pronouncements. He's another Nobel Prize winner, just like Obama - a favorite of the Norwegian Left, selected mainly because he loudly opposed Bush, and not because of actual merit.

[Katare]

There you go Hari....
If this job number doesn't get revised downward and sustains at these levels for coming weeks you have an economy that's creating jobs......end of D&G may be nearer than I thought

Sure, katare san.
Let us celebrate together the dodging of a bullet only.

BTW, small nitpick, the jobs number doesn't correspond exactly to the unemployment number because the working popn is still increasing and retirements (subtractions from the labor pool) have lagged estimates because boomer retirements are mostly bust. IN fact, the slide in the unemp rate (U3) by the BLS from 10.2% to 10% shown a moon ago by the GOTUS is sheer chicanery. They did so by deflating the size of the labor pool, with no explanation for why. I fully expect an upward revision at a politically less damaging time.

Stocks rise on upbeat jobs, factory order reports

And new found double-digit savings of Americans are a good thing that Obama is again and again reminding that Americans need to preserve that habit. He doesn't want to go back to borrow and spend economy of Republicans. In a few years US might have good chunk of domestically saved of capital for investment in it's crumbling infra...

Huh? The bad bad Rethuglicans are borrow and spend whereas Sri Obama and the hallowed Dems are lily white only? I mean, seriously?!?

Last I recall, the deficit (which is in effect borrowing by the gubmint from the future only) has ballooned fourfold from the big bad GOP days. Sri Krugman who took serious umbrage at the Dubya deficvit of $400bn now cheerleads the Obama avg deficit of $1.4trillion every year over the next decade. I mean, really.

As for pvt and household sector savings, I wouldn't be surprised one whit. Having saved nothing and becoming so neck-deep in debt that they had no servicing capacity left for additional debt, savings was like the duh option, I would think. Would have happened regardless of which set of partisan jokers ran COTUS or White house, IMO.

USofA would not just disappear in couple of years. It'll take several of these blows and comeback to fight again. Eventually China (or the underdog India) may become the numero uno economic power but it's not happening in our lifetime. Empires are built over decades they rule for centuries and decline over decades........

Multiple strawmen detected only. Dunno what gave you the impression that anyone on this thread has been championing unkil's disappearance, like, tomorrow. 'As for not in our lifetimes', sure I agree if one is 60+. For those in their 20s, the scary spectre of cheena overtaqking the khanate in size terms in this janam remains a distinct possibility. Strictly IMHO.

In the end it's in India and world's interest that USofA's economy doesn't collapse because if it does entire world will suffer unimaginable damages and hardship for years. What is needed or will happen is that China, India etc will walk faster and get ahead of USA. But if USA starts walking backwards it'll force everyone to stall or move backward.

More strawmen jumping on the camel's back. And some of it decidedly unfair, IMHO.

I'd rather sceptics of the thread credit us thread regulars with some basic good sense and decency. We have freinds and families invested in the current economic system powered by the almighty dollah and do *not* want to see ekahnomic armageddon. Repeat, we are not D&G cheerleaders - we are merely D&G ayatollahs. We study and speculate, primarily.

Sure, I'll admit, I won;t mind seeing UK-stan enter rough seas. But the khanate, oh no, better the known globocop than the untested dlagon, I say.

Hari,
Its not a question of congratulatory lungi dance or world is coming to an end yesterday. The reality lies somewhere in the middle, the problem of world are real and difficult but they'll always will be there for world to manage. The opportunities are also real for instance we may have just seen the biggest stock market rally of our lifetime.

The starwmen that I am beating up are more of Frankenstein monsters built by you one straw at a time that make it appear like world is coming to an end and west will collapse yesterday. I suggest you balance your D&G instincts with some positivity and boring reality to make them little more believable.

You appeared a bit ticked off; rest assured that was not my intention. Also I personally think you have been a very valuable addition to BRF in recent time. You take your time in digging and posting valuable information with proper quotes and commentary and you have basically provided leadership for this thread. So thanks for that!
I think you have very strong views that make you more of an “activist poster” than a balanced commentator which means you would be confronted on your views and you'll have to take those counter arguments in positive spirit.

[Hari Seldon]

^^^Katare san,

Good points and points taken.

BTW chances are 2010 will see much less participation (and even less activism) from moi on the forum. Has to do with an epic struggle between (and SHQ inspired) new-year-resolution to kick the BRF habit and my longtime brf-addiction.

Even otherwise, shall have a ton of work coming up in 2010, will have to move to lurk mode more often than not, I fear.

The starwmen that I am beating up are more of Frankenstein monsters built by you one straw at a time that make it appear like world is coming to an end and west will collapse yesterday. I suggest you balance your D&G instincts with some positivity and boring reality to make them little more believable.

Fair enough. I respect your POV though won't subscribe to it in this instance. IMO, a 'phase transition' is fast approaching precipitated by unprecedented peacetime debt levels that suggest a major system reset somewhere down the line. 'Business as usual' is a possibility but no longer an inevitability (or even the more likely scenario) going fwd.

Now, don't get me wrong, a system reset doesn't have to involve violent dislocation. A debt jubilee for instance would take care of a lot of consumer and small biz debt that is most problematic for the small taxpayer who is least able to bear the enormous burdens gubmints have been implicitly or otherwise saddling him with. Again, JMTs.

So yes, let us see. Will the future be as boring and mundane as I hope and you predict it should be? Time will tell. 2010 itself may reveal a few sovereign bankruptices and trade wars coming up. Or not.

[ramana]

Katare I urge you to use the ignore button. I dont want posters browbeaten to conformist dogma as in other threads. You have the ability to not read the posts.

I think you have very strong views that make you more of an “activist poster” than a balanced commentator which means you would be confronted on your views and you'll have to take those counter arguments in positive spirit.

You kidding right?

[Hari Seldon]

Morgan Stanley Sees 5.5% Note as U.S. Faces Deficits

If Morgan Stanley is right, the best sale of U.S. Treasuries for 2010 may be the short sale.

Yields on benchmark 10-year notes will climb about 40 percent to 5.5 percent, the biggest annual increase since 1999, according to David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. The surge will push interest rates on 30-year fixed mortgages to 7.5 percent to 8 percent, almost the highest in a decade, Greenlaw said.

When you take these kinds of aggressive policy actions to prevent a depression, you have to clean up after yourself,” Greenlaw said in a telephone interview. “Market signals will ultimately spur some policy action but I’m not naive enough to think it will be a very pleasant environment.”

Speculators, including hedge-fund managers, increased bets that 10-year note futures would decline more than fivefold in the week ending Dec. 15, according to U.S. Commodity Futures Trading Commission data. Speculative short positions, or bets prices will fall, outnumbered long positions by 52,781 contracts on the Chicago Board of Trade. It was the biggest increase since October 2008.

Edward McKelvey, senior economist in New York at Goldman Sachs Group Inc., the top-ranked U.S. economic forecasters in 2009, according to data compiled by Bloomberg, expects yields to drop to 3.25 percent. Goldman Sachs says unemployment will average 10.3 percent in 2010, hindering the recovery.

“This is the re-emergence of the bond market vigilantes,” said Mitchell Stapley, the Grand Rapids, Michigan-based chief fixed-income officer for Fifth Third Asset Management, who oversees $22 billion. “The vigilantes are saying, OK guys you want to do this, you’re going to pay a higher price for it.”

The so-called bond-mkt vigilantes have been beaten to death, IMHO. They no longer exist, seems like. So I would take their appearances with a bit of salt. The sceptic in me now says - "walk the talk first".

BTW, should 10 yr yields really soar 40%, then the aftermath won't be pretty. Deflation camp is rooting for rate between 3 and 4% for 2010. Time will tell, I guess.

[Hari Seldon]

2010 could be a year that sparks unrest (Economist)

IF THE world appears to have escaped relatively unscathed by social unrest in 2009, despite suffering the worst recession since the 1930s, it might just prove the lull before the storm. Despite a tentative global recovery, for many people around the world economic and social conditions will continue to deteriorate in 2010. An estimated 60m people worldwide will lose their jobs. Poverty rates will continue to rise, with 200m people at risk of joining the ranks of those living on less than $2 a day. But poverty alone does not spark unrest—exaggerated income inequalities, poor governance, lack of social provision and ethnic tensions are all elements of the brew that foments unrest.

Hasn't gone w/o notice that PRC is rated riskier than Desh and UK-stan is rated as risky as Desh only. Less said about TSP the better. Somalia is lily white only, seems like.

Oh, and take it FWIW onlee.
On a separate note, kindly note that I'm *not* saying one shouldn't profit from the current stock 'rally' in the khanate. Pls do if that suits you. Just that I don't believe it is genuine as in based on khanomic fundamentals (esp after FASB changed its accounting rules and allowed mark-to-myth on corporate America's books).

[Hari Seldon]

Was the Fin crisis caused by mathematical error?

By Steve Keen of debtwatch. Among the handful of economists to have gotten the diagnosis and the prescription right, early and consistently since.

Recommended read.

[ArmenT]

Hasn't gone w/o notice that PRC is rated riskier than Desh and UK-stan is rated as risky as Desh only. Less said about TSP the better. Somalia is lily white only, seems like.

PRC does have large number of protests and riot police need to be sent in to quell them, but as far as the reports go, the average Chinese protester isn't prone to launch large scale IED mubaraks targeted at their own public facilities. Same with Desh and UK. Occasionally a bus or two may be burned, but nothing along the scale of what happens in Pakistan, where every time there is some social discontent, an oil pipeline gets blown up and a section of the bazaar gets burned to the ground.

[vera_k]

Morgan Stanley Sees 5.5% Note as U.S. Faces Deficits

Wouldn't this trigger another leg down for real estate prices and therefore financials that hold real estate debt? Is there any data on how many people continue to hold ARMs, especially of the more exotic variety?

[Hari Seldon]

Lungi-dance warning....highbrows, pls to ignore. TIA.

At a time when news channels are breathless with recaps of 'the year that was' and some with 'the decade that was', excitability does tend to overtake caution. Sample this, for instance:

It is the decade of the fastest rate of economic growth and the biggest jump in per capita income. These were the best ten years for tax revenues, government spending, savings and investments, all of which lifted the economy's size to above $1 trillion.

Now some highbrows may admonish such 'triumphant lungi-dances'. Take their feigned takleef with a pinch of salt, I'd say. Success creates momentum - and it is important to celebrate achievement in order to re-evaluate benchmarks, update expectations and hunger for more. Strictly IMHO, of course.

Anyway, back to the topic of excitability: Take with salt some of the headier stuff you will see down below. But, good fun read overall. Jai Ho.

60 Years to $1 trillion, 10 Years to $3 trillion (Business Today)

Some quotable quotes:

The reversal of fortune was explained best by Kumar Mangalam Birla, Chairman, The Aditya Birla Group, at the India Today Conclave in 2005 when he said: "Our companies used to be market-driven, (today) they are driving markets."

"We believe that growth is the best antidote to poverty," former Finance Minister P. Chidambaram told a gathering in Harvard in 2007. "Without growth, India will remain a poor, rich nation." Statements like these should one day soon settle the age-old debate between "the size of the cake and slice of the cake"—that is, whether economic policies should focus more on wealth creation or on wealth distribution.

Hear, hear!

But there is one factor that deserves special mention and explanation — productivity growth. Since 1980, nearly 60 per cent of India's growth has come from the rise in what is called the total factor productivity. That is, from using men and machines more efficiently—from using our resources more efficiently. The contribution of productivity to growth in India is close to the highest in the world over this period. That augurs very well for the coming decade when India will have more resources.

The ratio of non-working population to working population will fall from 0.62 to 0.48 over the next 20 years in India. Not only will this mean more potential labour, but also if this labour is fully used, it will mean more savings—by one count an additional savings rate of 14 per cent of GDP over the next 20 years.

Add to it the capital India is already beginning to attract from abroad as it becomes a more attractive investment destination and as foreign aging populations save for retirement. Clearly, neither labour nor capital should be a constraint in future.{if all goes well, that is. I wouldn't count on all going well, though}

Of course, for balance reasons, the caveats are aplenty and shouldn't be lost sight of:

Our trillion-dollar economy still has some 100 million families without water at home, over 150 million households without electricity and 40 per cent of its villages without road connectivity. The economy loses roughly Rs 30,000 crore annually because our roads don't allow commercial vehicles to cover more than 250-300 km a day, compared to 500-600 km a day in developed economies. These are serious challenges, and unless these are addressed even the anticipated higher-than-the-past-decade-growth will look hollow.

and

If growth is a marathon, then India has just finished one lap. Others are well into the race, but India is young, and has fresh legs. We should be proud of the past decade's achievements, but not satisfied. As Raghuram Rajan, Professor of Finance at University of Chicago's Booth School of Business and Honorary Economic Adviser to the Prime Minister once said: "If India has to take its rightful place among nations, every sixth CEO of a Fortune 500 firm should be an Indian. Every sixth Nobel Prize winner should be an Indian. There should be food on every table in the land. Only then we can afford to pause and say, with justification, mera bharat mahan."

Amen to that.

[amol.p]

Was the Fin crisis caused by mathematical error?

By Steve Keen of debtwatch. Among the handful of economists to have gotten the diagnosis and the prescription right, early and consistently since.

Recommended read.

Fin crisis was nothing but a calculated Fraud......

[amol.p]

Trucking company shutdown leaves drivers stranded around U.S.

Dallas location for Arrow Trucking. Employees of the Tulsa-based company are scratching their heads and trying to figure out what's next after Arrow's sudden shutdown on Tuesday.

"We were basically told to get our personal stuff and leave, we are no longer in business," said one woman to Dallas affiliate WFAA.

With the nationwide company collapse, Arrow truckers have found themselves with gas cards that no longer work and no way home for the holidays

http://www.kvia.com/Global/story.asp?S=11728194