Perspectives on the global economic meltdown

[amol.p]

National Irish moves to cashless banking

IT MIGHT sound like a contradiction in terms, but for the first time one of the main Irish consumer banks is moving to cashless banking in all its branches.

National Irish Bank has written to thousands of its customers this month informing them of a “new style of banking” in which branches will not handle over-the-counter cash transactions.

The letter says branches will no longer handle cash withdrawals and lodgements, night safe lodgements and foreign currency cash. Branches will continue to lodge cheques, drafts and postal orders and issue drafts.

Customers are advised to obtain cash from “ATMs nationwide” or to seek “cash-back” on their debit cards.

“These branches provide better security for staff and allow us to spend more time, in a better setting, with our customers . . . Customers like them, as our staff have more time to discuss customers’ overall needs..............

The Irish Banking Federation said it was not aware of any other main banks introducing cashless banking at this stage, though a spokesman added that “they would all love to”............

http://www.irishtimes.com/newspaper/ire ... 08475.html

[Hari Seldon]

Opinion: Australians are now the biggest borrowers in the world

Australians now owe $56000 per head, compared to $44,000 for Americans.

It is not clear whether the same dollah (USD) is being used to make the comparison.

But in any case, the ozzies should know better. This debt driven boom story seldom ends well. Especially after the most spectacular debt driven crash in decades, ignorance is no defence.

[Hari Seldon]

JP Morgan may scrap £1.5bn London HQ plan over Labour's attacks on City

JP Morgan, the giant US investment bank, has warned the Chancellor it may scrap plans to build a £1.5bn flagship European headquarters in Canary Wharf if politicians don't rein in their attacks on the City.

'attacks on the city'? whats that, I wondered....turns out its Sri Gordon Brown's budgetary woes dictating insane taxation policy on holy banker bonuses (to the tune of 50% no less) only.

Jamie Dimon, chief executive, made the coded warning to Alistair Darling in an angry phone call after the Government revealed its 50pc super-tax on bonuses in the pre-Budget report. Although Mr Dimon did not explicitly threaten to can the 1.9m square foot Docklands development, he pointedly used it to demonstrate the bank's commitment to London.

When JP Morgan bought the land for £237m in November last year, it wrote into its contract with Songbird Estates, the owner of Canary Wharf, an option to pull out. A decision has to be made before the option expires by the end of 2010.

Banks versus gubmints. Who will win? Hard to say. Regulatory and state capture in the states appears to be complete, by one reckoning. About UK-stan, deeper in crisis and more dependent on big finance, who can say? Time will tell. Let's see.

Meanwhile, banks have kept up their own psy-ops mixing truth with propagandu.
Pound could soon be worth less than euro, warns CEBR

The parlous state of Britain's finances and the uncertainty over UK fiscal policy could push the pound below parity with the euro in the next few months, a report by the Centre for Economics and Business Research (CEBR) has claimed.

[shyamd]

2010: The Best of Times or the Worst?

Is the recession over? Are happy days really here again? Paraphrasing Dickens, my answer is, “For people who are prepared, 2010 will be the best of times. For many, 2010 will be the worst of times.”

The following are a few of my predictions and reasons behind them…

Prediction #1: The real estate market will crash again.


Pictured above is a graph of mortgage resets. In simple terms, a mortgage reset is when a mortgage comes due. In normal times, refinancing was a simple process…but these are not normal times. Some points of interest:

1. In September 2008, the mortgage resets hit $35 billion that month. That was the exact time the financial crisis hit. When people could not afford to refinance and began to default, the stock market and banking industry crashed.

2. The eye of the storm: In the summer of 2009 mortgage resets were low -- around $15 billion a month. This is when optimists began to see “green shoots” in the economy. The green shoots were the eye of the storm. In 2010, as I see it, the second half of the financial hurricane hits. By late 2011, the resets climb to nearly $40 billion a month. The storm will not end until 2012.

3. The first half of the storm was primarily due to subprime defaults. The second half of the storm will hit more solid homeowners. The question is, can they weather the storm? Will Mac Mansion foreclosures be next?

4. In America, there are over 40 million people who own more than two homes. Can they afford to carry and refinance two or more mortgages?

5. Since home values have gone down, many homeowners will find they owe more than their home(s) are worth. Will the bank be kind to them?

6. The time for using your home as an ATM is over. This is crushing retailers and retail real estate. Shopping centers are in trouble. Strip malls are empyting as shopkeepers close -- permanently. This will lead to the crash of the office, warehouse, and other commercial properties.

My prediction: Obviously these are the best of times if you are a buyer of distressed properties and the worst of times if you are a seller.

Other things I am watching for in 2010:

1. Will China crash? America’s crash has hit China in the gut. The Chinese are laying off millions of workers. Only massive government bailout is keeping the economy afloat. The Chinese boom will eventually go bust…but will it bust in 2010? Only time will tell.

2. When America stopped importing from China, China stopped importing from the rest of the world. This affects Asian countries as well as Australia, Brazil, and other suppliers of raw materials.

3. Fed Chairman Ben Bernanke is replacing toxic debt with new debt. By protecting his friends in the mega-banks, he is turning the U.S. into a zombie nation. The recession is over, but America is entering an era we will be calling The New Depression, a period when the rich become extremely rich but everyone else becomes poorer. Taxes will kill anyone working for a paycheck.

4. The U.S. dollar will grow weaker. If the dollar strengthens, we will have more unemployment because our goods become too expensive and we will export less.

5. The deficit will increase. The bailouts for the rich are killing the economy.
Chart6.gif

6. Israel may attack Iran. Israel will not tolerate Iran developing nuclear power, even if Iran claims it is for peaceful purposes. If there is an attack, oil prices will go through the roof.

7. Dead cat bounce. The current stock market rally will probably turn into a dead cat bounce. If the Dow drops below 6500, 5,000 may be the next stop.

The Best of Times

I know I sound painfully pessimistic. I know my predictions are bad news for most people. Yet, for others, bad news is good news.

The following are the bright spots for people who are prepared.

Prediction #2: Gold, silver, and oil will continue to be safe investments in 2010.

The following recaps the year-end prices of gold and silver:

YEAR GOLD SILVER
2000 $ 273 $ 4.57
2001 $ 279 $ 4.57
2002 $ 348 $ 4.78
2003 $ 416 $ 5.92
2004 $ 438 $ 6.79
2005 $ 518 $ 8.80
2006 $ 638 $12.78
2007 $ 838 $14.77
2008 $ 882 $11.33
2009 $1100 (approx) $17.50 (approx)

In 2009, the Dow rose approximately 18%. Gold rose approximately 25%. Silver rose approximately 50%.

By the end of 2010, I predict gold will be at $1,775 an ounce, silver at $24 an ounce, and oil at $85 a barrel. If Israel attacks Iran, these predictions will be blown away.

Prediction #3: The next market to crash will be commercial real estate.

Cash flow positive real estate will be even more affordable. 2010 through 2012 will be a real estate buffet for those with cash and access to credit.

My Personal Investments

As I stated in 2002, “You have up to the year 2010 to become prepared.”

The following are things I have done to prepare myself:

1. I started The Rich Dad Company in 1997 because I saw this crisis coming. For the past three years, I have tightened internal controls and prepared for global expansion via a franchise distribution system. The company is debt free with strong income.

2. 2009 was my best real estate year to date. With the Fed handing out large sums of money and pension funds looking for projects to invest in, my real estate holding company has acquired tens of millions of dollars for acquisition of bankrupt properties and development projects. Development projects are affordable again, as labor, material, and land costs are low and the government is generous with 40-year, low interest, non-recourse loans. People still need a roof over their heads.

3. My oil development projects have done well. We drilled three wells and hit oil on two of them. Government tax breaks for oil exploration remain generous, even for dry holes. Even if the economy crashes, we will still burn oil.

4. I took 90% of my money out of the stock market in 2007. If the Fed raises interest rates, the stock market and real estate market will collapse.

5. I loaded up on gold and silver between 1996 and 2004.

6. With the Fed printing trillions of dollars, cash is trash and savers are losers. As soon as I have excess cash I invest in oil, real estate, gold, and silver.

7. In a zero-interest-rate environment, debtors are winners…but only if you have good debt…debt that’s paid by tenants.

In Conclusion

A few years ago, Japan was ‘King of the Financial World.’ Japan’s economy was the world’s second largest economy -- till the bubble burst in 1990. Japan’s budget went into deficit in 1993. Since then, the deficit has averaged 5.4 percent of GDP per year. As a result, Japanese government debt is now 200 percentof GDP today. The U.S. is following Japan, and China will follow the U.S.

We will not see much inflation because the Fed is not able to print enough money to replace the losses from the burst of the credit bubble. Also, factories have too much excess capacity due to lack of demand, which means prices for consumer goods will remain low and unemployment will remain high. Instead, we will see inflation in gold, silver, oil, some stocks, some real estate sectors, and food -- not because values are going up but because the dollar is going down.

Welcome to The New Depression. And may these times be the best of times for you.

[Hari Seldon]

Excellent piece by Greg mankiw. Seems he too has kinda moved to the deflationary camp. Welcome, professor!

The Monetary Base is exploding. So what?

[svinayak]

http://globaleconomicanalysis.blogspot. ... igher.html

"
So overvalued, check. Overbought, check. Overbullish, check. Upward pressure on yields, check. Market internals? – certainly mixed, but not bad – and there's the wild card.

the probabilities look something like this:

* 20% chance of a durable rally
* 20% chance the market meanders nowhere for as long as 5 years
* 30% chance of of a hard 25-30% correction
* 30% chance the bottom is not even in
====================================

[svinayak]

Afternoon Vid: Paul Krugman Gets Grim on Economy
By HEATHER HORN on December 28, 2009 2:40pm
Decorated Princeton economist Paul Krugman appears to be giving so-called "Dr. Doom" Nouriel Roubini a run for his money in the pessimism department. In a video that's getting a lot of buzz in the blogosphere, Krugman is seen on This Week predicting economic contraction in 2010, agreeing with fellow Nobel laureate Joseph Stiglitz. In particular, Krugman says he's "really worried about the second half" of 2010, in which he thinks there's a "reasonably high chance" that the economy will shrink.

http://www.theatlanticwire.com/opinions ... onomy-2038

[Sanjay M]

Afternoon Vid: Paul Krugman Gets Grim on Economy
By HEATHER HORN on December 28, 2009 2:40pm
Decorated Princeton economist Paul Krugman appears to be giving so-called "Dr. Doom" Nouriel Roubini a run for his money in the pessimism department. In a video that's getting a lot of buzz in the blogosphere, Krugman is seen on This Week predicting economic contraction in 2010, agreeing with fellow Nobel laureate Joseph Stiglitz. In particular, Krugman says he's "really worried about the second half" of 2010, in which he thinks there's a "reasonably high chance" that the economy will shrink.

http://www.theatlanticwire.com/opinions ... onomy-2038

Again, I'm worried that Krugman is more influenced by his political agenda than by real economics. To me, it looks like he's one of the hard-left who are revolting against Obama's centrist half-measures, as opposed to the New Deal hardline that Krugman favours.

[Hari Seldon]

More from the folk over at the automatic earth:
Eyes wide open and pedal to the metal
Heck, its so lucid, well-argued and in line with my khanomic concerns that I can scarcely think of commentary to add here. But add I do.

China, Japan, have increasing doubts about amassing USD denominated paper including Treasuries, Japan also plans to be as aggressive a seller as the US. And of course there are many other countries who desperately need to sell sovereign bonds in order to pay for get their often already accepted and implemented budgets. And that's just the nation states. Corporations and lower levels of governments, in every nook and cranny of the planet, wants to sell you their debt. Badly.

400% true.

Obviously, this will drive up interest rates on all this debt. It's impossible to foresee at this point how high the rates my rise, but it looks to be painfully obvious that there will be a lot of pain involved. You can bet that many if not most of the managers and budgeteers involved have done their clever calculations based on low interest rates. And they won't get those. Which will lead to new deficits, new budget cuts, new job losses etc.

We know what optimistic forecasts ('black swan chances are negligible') did to the highly levered bets wall st banks undertook from 2004-2008. How many firms and people today are willing and able to foresee the impact of a high interest rate regime?

But in case you were starting to think that we bring only sorrowful tidings, here's a ray of light for you. For Wall Street, things may not be all that bad. Not at all. The major US banks, as their European counterparts, have access to enormous amounts of funds (yours) at ultralow interest rates. All they need to do is borrow at one of the Fed windows, walk across the street (I know they don’t have to do that, but I'm going for the George Bailey era image here) and buy themselves some Treasuries.

In practical terms, say Bank (of) A borrows $1 billion at 0.25% from the Fed, and buys Treasuries that pay 5.25% (oh yes, we’ll get there, and beyond). All a banker needs to do is sit back, or play golf, and make 5%, or $50 million, on that $1 billion. Since it’s that easy, why not borrow, say, $200 billion, leverage that 10-fold, buy the $2 trillion in Treasuries, and make $100 billion just for sitting still?

Would work like a charm. The debt gets sold, the White House and the media can convince everybody this means that the economy is doing great, and the only sucker in all of it is the taxpayer who’s losing $100 billion a year while the principal of his debt keeps growing, sort of like in a non-amortization loan. Or if the banker doesn’t like the sitting still part, (s)he can use the Treasuries as collateral for more loans (covered by the full faith and credit of the American taxpayer), and go play in the derivatives casino down the street.

Now all we need to do is find a buyer for the trillions in mortgage backed securities the country's choking on.

Spot on. Many have commented on how and how much the likes of GS and JPM are profiting from the low interest rate implied by a sovereign US backstop/bailout on their downsides in their trades. In turn these worthies have been siphoning those profits into bank bonuses while they still can.

Reality for the non-banking part of the population is starting to become clearly visible in for instance Japan's falling prices, and in Ireland, where government salaries across the board are cut by 10-20%. It would be wise for most workers and their unions to look very closely at what happens in Eire, since it is their foreland.

Unfortunately, everyone today is firmly stuck clinging to the official global party line that promises a return to prosperity and growth, and no-one sees a need to temper demands. Workers' organizations should be calling for their members to accept voluntary pay-cuts in exchange for watertight employment contracts for the next 10-20 years. But they don't, it's not palatable in the face of what the federal government and the media report on the recovering economy and the risk of inflation.

Boy oh boy, are we ever going to drive into that wall with our eyes wide open and our pedal to the metal! If nothing else, it'll sure be spectacular.

We’ll show 'em yet we know how to do a climax better than anyone.

Sad but true, IMHO.

[Hari Seldon]

Why 2010 Looks So Dicey (Businessweek)

Dave Rosenberg is a guy I would listen to. And here, he writes soberly as always the same things others say in more excited tones.

The defining characteristic of this asset and credit collapse has been the implosion of the largest balance sheet in the world: the U.S. household sector. Even with the equities rally and the tenuous recovery in housing in 2009, the reality remains that household net worth has contracted nearly 20% over the past year and a half. That's an epic $12 trillion of lost net worth, a degree of trauma never seen before. As households assess the damage, the impact of this shocking loss of wealth on spending patterns is likely to be enormous. Frugality is more than just the new fashion; attitudes towards discretionary spending, home ownership, and credit have undergone a secular shift toward prudence and conservatism.

That's a generational shift we are seeing - a 'permanent' reset of sorts, IMHO. Sure, one can always dispute that and kindly feel free to do so.

They're certainly not banking on the current bear market rally, which is being driven by investors purchasing stock to cover their short positions and hedge funds, the only two major sources of equity buying power this year.

What can I say? Don't regret that you missed out on a glorious stock rally, jump right in only.

People have understandable concerns about inflation right now, but the history of post-bubble credit collapses shows that even with massive stimulus, deflation pressures can dominate for years. This was certainly the case in the U.S. in the 1930s and in Japan from the 1990s until today. All the talk right now is about efforts by central banks to create inflation. The facts on the ground, however, show that the inflation rate for both U.S. consumers and producers has turned negative for the first time in six decades. To protect a portfolio in this deflationary landscape, a pervasive focus on capital preservation and income orientation—whether in bonds, hybrids, or an emphasis on consistent dividend growth and yield—would seem to be in order.

I got asked to make my posts more 'believable' by a kind passer-by gent. Believable to whom, I wonder? Believe what you will, sir. The basis and the numbers underlying my belief in a system reset (as opposed to your belief in a return to normality) is laid out in plain sight only. I would rather be wrong on this one but I fear the facts on the ground indicate otherwise. Just because a stock rally happened and the khanomy hasn't revolted yet doesn't settle a thing, yet. Time will tell who was closer to the mark.

It's becoming clear that the government's attitude to the beleaguered greenback can only be described as benign neglect. With midterm elections in 2010, the Obama Administration will do everything it can to tack every last possible basis point onto gross domestic product growth and to prevent the unemployment rate, the most emotionally charged statistic of all, from reaching new highs. The decisions to give 57 million Social Security recipients an additional $250, and not only to extend the tax credit for first-time home buyers but to expand the subsidy to higher-income, trade-up buyers, smacks of a populism that will stop at nothing to generate growth, even with the deficit-to-GDP ratio already at a record of more than 10%.

That's precisely what is happening. Remove the gubmint stimukus and ask yourself how much growth would have happened in the khanomy? Would it breach positive territory at all? OK, even with the stimulus past, what are the odds that a sustainable recovery has been ignited going fwd? One's answers to these questions alone will mirror one's cherished beliefs, I suspect.

While I believe a sustainable return to inflation is a long way off, there is little doubt we will see continuous efforts at reflation, which means the U.S. money supply will continue to expand rapidly, a positive for commodities, which are after all priced in U.S. dollars. And it appears that strong Asian growth—in China and India in particular—has been a key reason why the Canadian stock market, with its resource exposure, has continued to do well compared with U.S. markets, especially in light of the strengthening Canadian dollar. I expect commodities to continue to outperform. Typical of a post-bubble credit collapse, I see the range of possible outcomes in the markets and the economy to be extremely wide. That's why defensive strategies that minimize volatility and downside risks are the right course.

And so on and on.

[jerry]

The basis and the numbers underlying my belief in a system reset (as opposed to your belief in a return to normality) is laid out in plain sight only. I would rather be wrong on this one but I fear the facts on the ground indicate otherwise. Just because a stock rally happened and the khanomy hasn't revolted yet doesn't settle a thing, yet. Time will tell who was closer to the mark.

HS

Can you elaborate the big picture in a concise article how the us economy will reset in say one two years down the line will we come back to the gold standard or will they come out with a new currency? Surely the us will not allow a situation which affects them and their supremacy in the long run.

[Hari Seldon]

Can you elaborate the big picture in a concise article how the us economy will reset in say one two years down the line will we come back to the gold standard or will they come out with a new currency? Surely the us will not allow a situation which affects them and their supremacy in the long run.

Very briefly. My JMTs only:
1. The gold standard is not in the reckoning. Too many central bankers are swimming naked w.r.t. their doomed attempts to control gold vis-a-vis fiat money and their declared versus actual gold stocks. Nobody wants a gold based standard back anymore.
2. An IMF backed SDR becoming the new de facto international reserve pricing mechanism cannot be ruled out and in fact looks likelier by the day. The US will agree to it reluctantly and only because the PRC will be forced off its USD peg thereby. If course the USD will be amongst the largest components of the SDR basket.
3. The khanomic reset will involve a consumer bailout (a few trillions only to wipe away credit card and short term debt for households and small businesses), the continuing housing bailout (via unlimited backtop of fannie and freddie, already in progress), and massive draw-downs on off-balance sheet obligations, principally pension obligations that are woefully underfunded, employment contracts for public sector workers across different gubmint levels (expect unrest here - union layoffs, cutbacks and worse among gubmint employees), increased tax rates (duh), other spending cuts (will have to be forced at the point of bankruptcy for many gubmint levels, won't happen voluntarily) heightened tariff barriers (+trade wars) and incentives to indigenize manufacturing once again. There's plenty of debt and excess capacity to be extinguished and it won't go away smoothly unless gubmint agrees on a debt jubilee and trade barriers.

Bottomline: a significantly reduced standard of earning and living for the mango amrikhan, significantly reduced retirement and interest rate security for the aam yankistani, significantly enhanced inflation in essential commodities (in everything but housing), higher commodity prices across the board pretty much, significant savings channeled towards fixed income assets (USTs will rule again), reduction of international commitments across the board (dunno how much the pentagon will allow, but something has to give, somewhere). The direction is pretty much set. Its downhill from here for quite a while till the debt overhang of the past few decades is cleared out in a gut wrenching deflationary spiral. Then genuine growth can re-emerge from the ashes.

Again, JMTs only. Don;t take my word for anything - totally reserve the right to revise and update opinion as new data flows in

[Hari Seldon]

FOlks,

its been a great wild ride on BRF. Tomorrow on, I plan to perforce cut down bigtime on all web activity (New year resolution). I won't disappear entirely, of course, but my own system reset is set now.

Wouldn't want this fine thread to fade away due to neglect.

Request/impassioned appeal to thread regulars - Neshant, prad, durgesh, amol, Sanjay and others to kindly continue contributing.

Ciao and have a nice day, nay year, nay decade, all!

Hari Om Radheshyam

[Neshant]

Don't go dude. I've been learning lots by reading your messages.

Cut down on all other web activity but keep the time in this thread halal. We got to have a small mass of people who have their ear to the ground who have not been dazzled by financing & banking bullsh*tters to piece together the puzzle. Some group of people in the next 1 to 5 years are going to be left holding the bag as governments of debt ladened economies defraud their way out of this.

Its important that we have some clue as to what's about to go down as the system will always seek to disasvantage the clueless.

Excellent predictions on gold/essential consumer commodities, the creation of (an equally worthless) international currency and The Great RESET that's coming down the pike. Agree with all 3 points 100%.

Only thing that might make me change my mind is the emergence of some great job generating or productivity enhancing industry. E..g some great genetic discovery that allows you to stay young for years or even something more reachable like organ cloning or some technological breakthrough like real artificial intelligence, the discovery of anti-gravity.. etc. Its got to be earth shattering. Handing out money to wall street scammers won't do anything although I really admire how well they have managed to milk the system ahead of The Great Reset.

[amol.p]

FOlks,

its been a great wild ride on BRF. Tomorrow on, I plan to perforce cut down bigtime on all web activity (New year resolution). I won't disappear entirely, of course, but my own system reset is set now.

Wouldn't want this fine thread to fade away due to neglect.

Request/impassioned appeal to thread regulars - Neshant, prad, durgesh, amol, Sanjay and others to kindly continue contributing.

Ciao and have a nice day, nay year, nay decade, all!

Hari Om Radheshyam

Hi Hari....2010 is more important year for D&G than 2009 was......here is a piece of it....I hope u dont wanna miss it...

Mortgage Bond Rally May End, Rates Rise as Fed Stops Purchases

Analysts at BNP Paribas SA, Credit Suisse Group AG and JPMorgan Chase & Co. say the extra yield over benchmark rates that investors demand to hold the securities will widen as much as half a percentage point as the Fed stops purchasing

Rising yields mean loan rates are likely to end 2010 almost 0.75 percentage point higher than they are currently, based on forecasts for government bonds and spreads, adding to challenges for a housing market struggling to recover from its worst slump since the 1930s

While the S&P/Case-Shiller index shows home values are rising after a record 33 percent drop from 2006, Pacific Investment Management Co. mortgage-bond head Scott Simon said such data is misleading because of a temporary curb on home seizures tied to government anti-foreclosure efforts that will reverse next year.

http://www.bloomberg.com/apps/news?pid= ... 6x3w&pos=3

[amol.p]

Ha.....with all global equity markets at there highest level since Oct-2008...still many are funds houses are shutting down....

Fund, Backed By Prominent Financiers, Winds Down

Portland Capital, a real-estate investment fund backed by some of the U.K.'s most prominent financiers, is winding down its business after substantial losses, blaming increased volatility in the listed-property markets for the decision.

Portland Capital's accounts suggest that since it launched, the company's losses have outweighed any profits

The company that managed the fund was set up in 2006 by backers including Ronald Cohen and Jacob Rothschild. They hired prominent fund managers to run a global real-estate securities fund, and hoped the business would raise over $1 billion from investors.

The fund has already liquidated its positions, the spokesman said, realizing a loss of 33% since its launch in June 2006. The loss compares with a 46% drop in the global listed-property market over the same period, according to the company. It only managed the one fund, and the company is in the process of winding down, he said. Lord Rothschild couldn't be reached for comment.

The company originally hired George Kountouris, a former head of Deutsche Bank AG's real-estate private-equity group, and Nigel King, who was head of European real-estate finance at Salomon Brothers, to co-manage the fund.....{bankers again}

http://online.wsj.com/article/SB1000142 ... 48104.html

China Property Bubble May Lead to U.S.-Style Real Estate Slump

Millions of Chinese are pursuing property with a zeal once typical of house-happy Americans. Some Chinese are plunking down wads of cash for homes. Others are taking out mortgages at record levels. Developers are snapping up land for luxury high- rises and villas, and the banks are eagerly funding them. Some local officials are even building towns from scratch in the desert, certain that demand won’t flag. And if families can swing it, they buy two apartments: one to live in, one to flip when prices jump further.......{havent we heard this before........aka apna DUBAI}

And jump they have. In Shanghai, prices for high-end real estate were up 54 percent through September, to $500 per square foot. In November alone, housing prices in 70 major cities rose 5.7 percent, while housing starts nationwide rose a staggering 194 percent. The real estate rush is fueling fears of a bubble that could burst later in 2010, devastating homeowners, banks, developers, stock markets, and local governments.

“Once the bubble pops, our economic growth will stop,” warns Yi Xianrong, a researcher at the Chinese Academy of Social Sciences’ Finance Research Center. On Dec. 27, China Premier Wen Jiabao told news agency Xinhua that “property prices have risen too quickly

In Beijing’s Chaoyang district, which represents a third of all residential property deals in the capital, homes now sell for an average of almost $300 per square foot. That means a typical 1,000-square-foot apartment costs about 80 times the average annual income of the city’s residents

read all.....

http://www.bloomberg.com/apps/news?pid= ... p0XyPoRxW0

[amol.p]

160 firms exit from Tokyo, Osaka stock exchanges in 2009

The greater number of delistings stemmed from bankruptcies of companies that took blows from the anemic economy

In addition, some companies unified venues of their stock listing into the TSE by removing their stocks from the OSE to save costs in keeping their shares traded there, the officials said.

"Many companies would find it difficult to raise funds if trading on the Tokyo Stock Exchange is paralyzed as a result of a natural disaster and other factors."

But the trend of delistings appears to be growing. The total of companies that delisted their stocks from the TSE's First and Second sections and its Mothers market for start-up firms in 2009 came to 78, close to reaching the level of 2002, when 82 firms withdrew their stocks from the bourse, the second-largest delisting number on record.

http://economictimes.indiatimes.com/mar ... 395908.cms

[AnimeshP]

Well ... the Icelanders are being screwed over again by their european cousins led by the ever friendly British ....

Iceland approves new Icesave deal

Iceland's parliament has approved plans to repay 3.8bn euros (£3.4bn) to savers in the UK and the Netherlands.

....
More than 320,000 savers lost out when the bank collapsed in 2008.
....

A bill on the measure, narrowly approved against strong opposition, was seen as crucial to Iceland's bid to join the EU and rebuild its economy.

Hmmm ... so it seems a direct 1:1 relationship ... 320K Icelanders paying to 320K English & Dutch

But the bill's opponents argue ordinary Icelanders should not have to pay and say the compensation amounts to some 12,000 euros for each citizen on the island nation of 320,000.

Ah ... great to see European version of democracy in action ....

A poll taken in August suggests that 70% of Icelanders were against the Icesave deal.

Edited:
Looks like this is still a developing story ... latest news
Iceland President did not sign Icesave into Law this Morning

[ArmenT]

Top A.I.G. Executive Quits Over Pay Limits

A top executive at the American International Group has resigned because of salary limits imposed by the Obama administration’s compensation overseer, the company said on Wednesday.
....
This month, Mr. Feinberg set the compensation structures for the 26th through 100th highest-paid employees at four firms, including A.I.G., limiting most cash salaries to $500,000.

[Neshant]

2010: The Best of Times or the Worst?

I started The Rich Dad Company in 1997 because I saw this crisis coming.

Robert Kiyosaki is a get-rich-quick con artist. His only business is selling get-rich-quick courses & books on TV to the gullible.

Back in 2006/7, he was pumping real estate investing as the road to easy riches on his infomercials claiming he was buying lots of real estate. Then he claimed he was ploughing more and more money into the stock market in *early* 2008 as it went lower.

In 2008 he saw precious metals rising and started peddling that line claiming he saw it coming from years ago. Now he claims he saw the real estate crash from way back in 1997.

Too many scammers have jumped into the picture claiming they foretold it all when in fact they are just bullsh*tters. If tommorrow an asteroid were to fall from the sky, I'm sure he claimed he predicted that 10 years ago. It annoys me that these assh*les have positioned themselves as prophets when in fact they are just out to make a quick buck.

If you do the research, you'll see that hardly anyone predicted of the scale of the crisis and that includes the clueless federal reserve chairman. Perhaps only Nuriel Rubini and maybe Peter Schiff and Robert Prechter were the only ones to have predicted a crash of this magnitude although Peter Schiff has been wrong plenty since then and Prechter has been a bear since 1987!

[amol.p]

U.S. Treasuries Post Worst Performance Among Sovereign Markets

Treasuries were the worst performing sovereign debt market in 2009 as the U.S. sold $2.1 trillion of notes and bonds to fund extraordinary efforts to bolster the economy and financial markets.......{earlier approved debt limit was $1.8 trillion already they are 15% up than the limit}

The 10-year Treasury yield reached its highest level in six months yesterday before a Labor Department report next week forecast to show payrolls were unchanged in December.

“The financial system has survived,” said Ray Remy, head of fixed income in New York at Daiwa Securities America Inc., one of 18 primary dealers that trade directly with the Federal Reserve.......{ but at what cost and whoz paying for that..???}

I expect Treasury yields to rise 30 to 40 basis points across the curve in the first half of next year,” said David Keeble, head of fixed-income strategy at Calyon in London. “The end of the of the Fed’s quantitative easing program will hurt the market. We also have to cope with a lot of supply. It doesn’t get smaller.The 10-year yield will rise to 4.01 percent at the end of 2010, according to the median of 60 economists surveyed by Bloomberg News.

President Barack Obama is borrowing unprecedented amounts for spending programs. U.S. marketable debt increased to a record $7.17 trillion in November from $5.80 trillion at the end of last year.

“This is the year of the big gamble,” said Michael Cheah, who manages $2 billion in bonds at SunAmerica Asset Management in Jersey City, New Jersey. “It’s about restoring confidence. Nobody knows whether confidence is enough by itself. But we have seen how a lack of confidence has allowed the Japanese economy to be uninteresting for two decades.”


http://www.bloomberg.com/apps/news?pid= ... PK2k&pos=4

[jerry]

Almost every analyst is predicting gold to touch usd 1800 by next year and 3000 in 2 to 3 years
anybody have any thoughts on that.(gold is soo imp. for us sdres)

[amol.p]

Almost every analyst is predicting gold to touch usd 1800 by next year and 3000 in 2 to 3 years
anybody have any thoughts on that.(gold is soo imp. for us sdres)

Immediate target for gold in INR is RS 20000/- till Mar-10.....$1800 to $3000 an ounce are taking into consideration rapid de-valuation of dollar. But the same will take another 4-6 yrs, when the debt taken comes for payment between 2013-2015.

[Chinmayanand]

Almost every analyst is predicting gold to touch usd 1800 by next year and 3000 in 2 to 3 years
anybody have any thoughts on that.(gold is soo imp. for us sdres)

I think gold may touch around 1450 and drop back to 1000 . 2010 may see the return of the greenback.New lows for Dow and S&P.Nifty may top out around 5320 and drop back minimum to 3600 .Rupee may hit 55/57 against the $.These are just my views for 2010.

[Chinmayanand]

Eurozone credit contraction accelerates

Bank loans and the M3 money supply in the eurozone contracted at an accelerating pace in November, raising the risk that a lending squeeze will choke the region's fragile recovery next year.

The European Central Bank said that loans to companies fell by a record 1.9pc from a year earlier. The broad M3 money supply – watched closely as a leading indicator for the economy a year ahead – fell by 0.2pc and has now been shrinking for several months.

Julian Callow from Barclays Capital said the decline in lending was steeper than expected and will cause the ECB to move with great care before withdrawing emergency stimulus. "This is the weakest data since the statistics began in 1970 and probably in the post-war era. It is a message about what is happening to the banking system, which is the lending nexus for the eurozone economy," he said.

Hans-Peter Keitel, head of Germany's industry federation (BDI), said there was a danger of a credit crunch next year as banks take fright at the ugly state of corporate balance sheets. He accused lenders of returning to their gambling habits – in some cases with state money – while refusing to roll over loans for companies with a good track record that have run into short-term problems.

The Bundesbank is bracing for a second wave of the credit crisis as corporate downgrades by rating agencies forces lenders to set aside more money. Big companies in the eurozone have been able to tap the bond and equity markets, raising €130bn of fresh money in the first 10 months of the year. However, smaller Mittelstand firms that form the backbone of Germany's export industry are often shut out of the credit system.

Banks have chosen to restrict lending as they struggle to meet tougher capital rules rather than dilute shares by raising fresh equity or accepting the onerous terms of state support schemes. This has prompted harsh criticism from finance ministers, but Professor Tim Congdon from International Monetary Research said the authorities themselves are to blame.

"This is becoming ridiculous. How can banks raise capital asset ratios and lend more at the same time? These people are barmy," he said, comparing the new rules with policy mistakes in the early 1930s. .

The ECB has played down the decline in M3, believing that it reflects portfolio shifts by investors. But the longer this trend continues, the greater the concern.

Mr Congdon said Club Med states will suffer the brunt of the ECB's restrictive policies . "Business surveys in these countries are getting worse, and so are property markets. Fractures in the euro system are becoming clearer by the day."

[Chinmayanand]

Fed Discusses Limited Bond Sales to Withdraw Stimulus

Federal Reserve officials are considering a proposal to schedule limited sales of bonds from the central bank’s $2.2 trillion balance sheet as part of a range of tools for withdrawing record monetary stimulus.

Without first reducing or locking up the $1 trillion Bernanke pumped into financial markets, policy makers may raise their target for the benchmark interest rate only to watch it trade below that level. The Fed cut the main rate, the federal funds rate, to between zero and 0.25 percent in December 2008 and kept it there at the last FOMC gathering on Dec. 15-16.

“Here is the worry: What if they try to tighten and they lose control of the federal funds rate?” said Mark Spindel, chief investment officer of Potomac River Capital LLC in Washington, which specializes in inflation-linked bonds. “The challenge they have is to articulate how they are going to tighten and make sure all these tools work together.”

The federal funds market underscores how the Fed may need to use several tools to hit its interest-rate target. While the Fed promises to pay banks 0.25 percent to keep excess funds on deposit at the central bank, the so-called effective rate, or market rate, has averaged 0.12 basis points this month.

Fannie Mae and other government-sponsored enterprises that are ineligible to deposit money at the Fed “have pulled down” the fed funds rate by selling funds in the market, New York Fed researchers said in a paper this month.

Fed officials must be cautious in how they manage reserves and raise interest rates, economists said. Even small amounts of bond sales could nudge up the cost of home loans.

Freddie Mac, the McLean, Virginia-based mortgage company, said that the average 30-year fixed rate rose to 5.14 percent for the week ended today, the highest since August. A rise in short-term rates would boost the cost on floating-rate loans for consumers and businesses.

“If they get this wrong, volatility is going to be through the roof,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. LLC in New York. “Investors are over- discounting the difficulty that is coming our way when the Fed begins the process of raising interest rates.”

The Fed will increase the benchmark rate in the third quarter of 2010, according to the median forecast of economists surveyed by Bloomberg News this month. Vice Chairman Donald Kohn is among officials who have said the recovery needs to be self- sustaining, with the unemployment rate declining, before the Fed tightens. The rate will probably stay at 10 percent in December, according to the median estimate in a separate Bloomberg survey of economists before a Labor Department report on Jan. 8. Unemployment soared to a 26-year high of 10.2 percent in October.

Fed officials are considering the sequence for using their various tools for withdrawing monetary stimulus. They may start by raising the interest on reserves rate and draining reserves, followed by asset sales, Meyer said in a Dec. 15 research note.

A second possible sequence would be first draining off excess reserves, then raising the interest on reserves rate later, followed by asset sales, he said.

“They are going to have to sell assets” to maintain control over the benchmark lending rate, said Brian Yelvington, director of fixed income strategy at bond broker Knight Libertas LLC in Greenwich, Connecticut. “The volatility of the effective federal funds rate around the target is probably going to be a lot greater than it has been in the past.”

[Chinmayanand]

Bullet point summary

* Incompetence
* Resign
* Shut down
* Bond bubbles
* Beenanke idiot
* Geithner been wrong 15 years in a row
* You're bad for my nervous system
* Would you lend us govt money at 4 pc for 30 years in usd?
* Ohhh purlease maria
* You should be a farmer
* Learn to drive a tractor

[Singha]

seems the unemployment rate in Spain for people below 35 is 42%

[Hari Seldon]

PRC's yuan peg will end-up becoming everyone's favorite target very soon. The late Paul Samuelson, who practically invented modern economix himself said (paraphrasing)

The core arguments for free trade (comparative advantage for one) all go out of the window when a country is faced with high unemployment.... The rules change

Here's what is happening of once mighty export powerhouse Japan's jobless masses...
For Some in Japan, Home Is a Tiny Plastic Bunk

For Atsushi Nakanishi, jobless since Christmas, home is a cubicle barely bigger than a coffin — one of dozens of berths stacked two units high in one of central Tokyo’s decrepit “capsule” hotels.
...
When Capsule Hotel Shinjuku 510 opened nearly two decades ago, Japan was just beginning to pull back from its bubble economy, and the hotel’s tiny plastic cubicles offered a night’s refuge to salarymen who had missed the last train home.

Now, Hotel Shinjuku 510’s capsules, no larger than 6 1/2 feet long by 5 feet wide, and not tall enough to stand up in, have become an affordable option for some people with nowhere else to go as Japan endures its worst recession since World War II.

Once-booming exporters laid off workers en masse in 2009 as the global economic crisis pushed down demand. Many of the newly unemployed, forced from their company-sponsored housing or unable to make rent, have become homeless.

The country’s woes have led the government to open emergency shelters over the New Year holiday in a nationwide drive to help the homeless. The Democratic Party, which swept to power in September, wants to avoid the fate of the previous pro-business government, which was caught off-guard when unemployed workers pitched tents near public offices last year to call attention to their plight.

“In this bitter-cold New Year’s season, the government intends to do all it can to help those who face hardship,” Prime Minister Yukio Hatoyama said in a video posted Dec. 26 on YouTube. “You are not alone.”

If Sri Wen Jiabao's high quality weed is getting him to make pissy statements like "cheena rejects any external pressure on its currency...blah blah", he ain't seen nothing yet.
Krugman says it well that it would be quite easy to call PRC's bluff - that it could collapse the USd by dumping all its UST holdings. DC should dare Beijing to do that - would lead to a USD weakening - something DC would thank Beijing for.

[Hari Seldon]

OK. Last 1 to wrap the week with - an excellent summary of the lessons leant the hard way. By Prof Joe Stiglitz.

Harsh lessons we may need to learn again

Worth every para. Recommended read. In full.

[Chinmayanand]

X posting :

Fall of The Republic

Birathers, this is a superb documentary, an eye opener.If you have time,do watch it, though its a bit long about 2hrs but it's worth it.

[Neshant]

They are lucky they are a white nation with fast track EU entry.

Were they not, their nation would have been destroyed by sanctions and reduced to starvation like African debtors for even suggesting they won't pay their debts.

----------------------

Icelanders petition president to veto Icesave bill

REYKJAVIK (Reuters) - Nearly a quarter of Icelandic voters have signed a petition asking their president to veto a bill on repaying $5 billion lost by British and Dutch savers when the island's banks collapsed, organizers said on Saturday.

The petition also called on President Olaf Ragnar Grimsson to call a referendum on an issue which has aroused resentment that taxpayers are being left to pay for banks' mistakes.

Earlier this week parliament approved the amended bill to reimburse Britain and the Netherlands for the amount, which was lost by savers in both countries in 2008 who deposited funds in high-interest "Icesave" online savings accounts.

But the president has yet to sign the bill into law and 56,089 people, who represent 23 percent of the island nation's electorate, have signed the petition, the organizers said.

"I consider it to be a reasonable demand that the economic burden placed on the current and future generations of Icelanders, in the form of a state guarantee for Icesave payments to the UK and Dutch governments, be subject to a national referendum," the text of the petition read.

InDefence, the group responsible for gathering the signatures, said the Icesave legislation represented a "huge risk" for Iceland's economic future.

"All projections based on realistic assumptions ... showed without doubt that Iceland would be unable to meet the payments stipulated by the Icesave loan agreements as set out in the disputed legislation," it said in a statement.

Passing the Icesave legislation would boost Iceland's hopes of swift entry into the European Union, but the deal is deeply unpopular with the Icelandic population.

Parliament approved the bill by a slim margin -- 33 members voted in favor, with 30 voting against -- and one junior government minister has resigned over the dispute.

The longstanding dispute has held up payment of some aid funds from international lenders, made it difficult to relax capital controls imposed at the height of the financial crisis, and clouded Reykjavik's chances of joining the EU.

http://ca.news.yahoo.com/s/reuters/1001 ... d_petition

[Singha]

you know, window dressing aside, here is the brutal fact:

http://www.nytimes.com/2010/01/03/us/03 ... ps.html?hp

One in eight Americans now receives food stamps, including one in four children.

--
psyops media is very fond of tom tomming X% of yindu children are malnourished
or Y% of yindu mothers are anemic.

but it seems the worlds richest and most powerful country has reduced
12% of its total pop and 25% of its kids into a polished version of "beggary"
-- the aid donor being the state itself rather than individuals.

[vera_k]

^^^

The thing is that these poor people will not be malnourished and the kids will keep going to school. The criticism about India is due to the fact that Indian poor people could have similar outcomes if the government programs and institutions worked as desired and if enough money was spent on those institutions.

[Sanjay M]

The problem is that the people are corrupt at the grassroots level. Instead of promoting work ethic and meritocracy, there is only the advocacy of welfare-statism and handouts in all situations. Everyone demands to their their "fair share" of economic growth, as if they were a Tata or Wipro engineer personally contributing to that economic growth. Sorry, but if some students in the classroom are getting A's, you cannot be lazing around and asking for your "fair share" of their grades. People need to respect the private property and earnings of others, and need to see the necessity of upgrading their own offerings to others, rather than irrationally demanding a piece of something they've not contributed towards making happen.

[Dileep]

Hmm, stand near the checkout line of the grocery store and see the recepients of the food stamps. A great majority of them are obese. First hand experience onlee.

There is no comparison between the 'poor' in massa and the poor here.

[vera_k]

That may be true, but plenty of regular people who have fallen on hard times make use of these programs as well. I know of two cases one in India and one in the USA of people who started businesses that failed. The Indian fellow was reduced to running a pushcart and he has not managed to recover. The American on the other hand was able to get some training for a new line of work and find a new job. These types of safety nets allow the enrepreneurial types to try new things without risking irreparable harm to their families.

[Singha]

I dont disagree. all I was providing was ammo for "torn shirt open fly" arguments against media psyops.

[Chinmayanand]

Global bear rally of 2009 will end as Japan's hyperinflation rips economy to pieces

Milton Keynes will be vindicated. Lord Keynes will lose some of his new-found gloss. The Krugman doctrine that we should all spend our way back to health by pushing deficits to the brink of a debt spiral – or beyond the brink – will be seen as dangerous.

The contraction of M3 money in the US and Europe over the last six months will slowly puncture economic recovery as 2010 unfolds, with the time-honoured lag of a year or so. Ben Bernanke will be caught off guard, just as he was in mid-2008 when the Fed drove straight through a red warning light with talk of imminent rate rises – the final error that triggered the implosion of Lehman, AIG, and the Western banking system.

As the great bear rally of 2009 runs into the greater Chinese Wall of excess global capacity, it will become clear that we are in the grip of a 21st Century Depression – more akin to Japan's Lost Decade than the 1840s or 1930s, but nothing like the normal cycles of the post-War era. The surplus regions (China, Japan, Germania, Gulf ) have not increased demand enough to compensate for belt-tightening in the deficit bloc (Anglo-sphere, Club Med, East Europe), and fiscal adrenalin is already fading in Europe. The vast East-West imbalances that caused the credit crisis are no better a year later, and perhaps worse. Household debt as a share of GDP sits near record levels in two-fifths of the world economy. Our long purge has barely begun. That is the elephant in the global tent.

We will be reminded too that the West's fiscal blitz – while vital to halt a self-feeding crash last year – has merely shifted the debt burden onto sovereign shoulders, where it may do more harm in the end if handled with the sort of insouciance now on display in Britain.

Yields on AAA German, French, US, and Canadian bonds will slither back down for a while in a fresh deflation scare. Exit strategies will go back into the deep freeze. Far from ending QE, the Fed will step up bond purchases. Bernanke will get religion again and ram down 10-year Treasury yields, quietly targeting 2.5pc. The funds will try to play the liquidity game yet again, piling into crude, gold, and Russian equities, but this time returns will be meagre. They will learn to respect secular deflation.

Weak sovereigns will buckle. The shocker will be Japan, our Weimar-in-waiting. This is the year when Tokyo finds it can no longer borrow at 1pc from a captive bond market, and when it must foot the bill for all those fiscal packages that seemed such a good idea at the time. Every auction of JGBs will be a news event as the public debt punches above 225pc of GDP. Finance Minister Hirohisa Fujii will become as familiar as a rock star.

Once the dam breaks, debt service costs will tear the budget to pieces. The Bank of Japan will pull the emergency lever on QE. The country will flip from deflation to incipient hyperinflation. The yen will fall out of bed, outdoing China's yuan in the beggar-thy-neighbour race to the bottom. By then China too will be in a quandary. Wild credit growth can mask the weakness of its mercantilist export model for a while, but only at the price of an asset bubble. Beijing must hit the brakes this year, or store up serious trouble. It will make as big a hash of this as Western central banks did in 2007-2008.
The European Central Bank will stick to its Wagnerian course, standing aloof as ugly loan books set off wave two of Europe's banking woes. The Bundesbank will veto proper QE until it is too late, deeming it an implicit German bail-out for Club Med.
More hedge funds will join the EMU divergence play, betting that the North-South split has gone beyond the point of no return for a currency union. This will enrage the Eurogroup. Brussels will dust down its paper exploring the legal basis for capital controls. Italy's Giulio Tremonti will suggest using EU terror legislation against "speculators".
Wage cuts will prove a self-defeating policy for Club Med, trapping them in textbook debt-deflation. The victims will start to notice this. Articles will appear in the Greek, Spanish, and Portuguese press airing doubts about EMU. Eurosceptic professors will be ungagged. Heresy will spread into mainstream parties.

Greece's Prime Minister Papandréou will balk at EMU immolation . The Hellenic Socialists will call Europe's bluff, extracting loans that gain time but solve nothing. Berlin will climb down and pay, but only once: thereafter, Zum Teufel.
In the end, the Euro's fate will be decided by strikes, street protest, and car bombs as the primacy of politics returns. I doubt that 2010 will see the denouement, but the mood music will be bad enough to knock the euro off its stilts.
The dollar rally will gather pace. America's economy – though sick – will shine within the even sicker OECD club. The British will need the shock of a gilts crisis to shatter their complacency. In time, the Dunkirk spirit will rise again. Mervyn King's pre-emptive QE and timely devaluation will bear fruit this year, sparing us the worst.
By mid to late 2010, we will have lanced the biggest boils of the global system. Only then, amid fear and investor revulsion, will we touch bottom. That will be the buying opportunity of our lives.

[Tanaji]

Hmm, stand near the checkout line of the grocery store and see the recepients of the food stamps. A great majority of them are obese. First hand experience onlee.

There is no comparison between the 'poor' in massa and the poor here.

There is an argument that the obesity is due to being poor. The poor cant afford stuff like meat and vegetables, hence are reduced to eating highly processed food either from the grocery store or from the fast food chains. This food is empty calories and not nutritive and hence they get obesity.

Not sure if this is scientifically right.