Perspectives on the global economic meltdown (Jan 26 2010)

shyam · Post by **shyam** » 28 Jan 2010 13:22

Acharya wrote:There is a economic cold war between Japan and US. Japan products are not really welcome inside US as freely as before

Has it got anything to do with the new Government in Japan?

svinayak · Post by **svinayak** » 28 Jan 2010 13:56

shyam wrote:
Acharya wrote:There is a economic cold war between Japan and US. Japan products are not really welcome inside US as freely as before
Has it got anything to do with the new Government in Japan?

Before that. It is about Iraq after 2003.

Chinmayanand · Post by **Chinmayanand** » 28 Jan 2010 16:31

Is Davos dissing India?

Every year, by design or by accident, one nation becomes the Davos darling, the country that everyone gawks at, snapping photos with its leading politicians or gushing over its prospects in panels and speeches. Back in Jan. 2003, the one time I had occasion to make it to the sub-zero center of the universe, I watched Brazil strut around as the It Country, with President Lula, inaugurated just days earlier, starring as Davos’s undisputed head-of-state celeb.

In recent years, India has rated the Davos spotlight, with chief executives and politicians swooning over its mix of democracy, entrepreneurship and dance numbers. The 2008 Davos included panels such as “Innovative India,” and the 2009 forum elevated India in a session dubbed “China, India and Japan: Asia’s Big Three.” But judging from this year’s program, India is no longer considered the promising up-and-comer.

Instead, Delhi is being taken to the woodshed -- though, of course, in a polite Davos sort of way. Tomorrow, Davos will feature a panel titled, “Will India Meet Global Expectations?” The official description: “Multilateral trade, climate change, Millennium Development Goals and nuclear non-proliferation are just some of the items on the global agenda in which the world expects India to play an active and constructive role. What does the world expect from India and what does India expect from the international community?” Basically, Davos is saying: Congrats, India, you’ve arrived. Now it’s time to step up and help run the world with the rest of us.
It’s not the first time India is getting this lecture. Writing in the latest Foreign Policy, former New York Times Delhi correspondent Barbara Crossette is a lot less genteel: “For all its business acumen and the extraordinary creativity unleashed in the service of growth, today’s India is an international adolescent, a country of outsize ambition but anemic influence.” Ouch.

If this sort of badgering sounds familiar, it’s because back in 2005 Deputy Secretary of State Bob Zoellick basically delivered it to China, in his famous speech urging Beijing to become a “responsible stakeholder” in the international system. (It sent Chinese authorities scrambling to figure out what the world “stakeholder” really means.) But at least at Davos this year, China is getting no lectures. Instead, Thursday’s panel on “U.S.-China: Reshaping the Global Agenda” seems more of an homage to the Middle Kingdom’s place on the world stage. “China is now the principal creditor to the United States, the largest economy in the world,” the panel description says. “How will future U.S.-China relations (the G2) reshape the global agenda?”

So I guess if India wants to avoid the lectures at next year’s Davos, it should start buying some Treasury bills?

SwamyG · Post by **SwamyG** » 28 Jan 2010 20:12

Acharya wrote:There is a economic cold war between Japan and US. Japan products are not really welcome inside US as freely as before

All said and done, US appears to be better placed than Europe or Japan in terms of recovery. Vast land, large population, immigrants flowing in all the time and still has carrot on its left hand and danda on its right hand.

kmkraoind · Post by **kmkraoind** » 28 Jan 2010 21:33

S&P Says U.K. Banks Are No Longer ‘Among Most Stable’

S&P Puts U.K. Banks on Par With Chile, Austria, Portugal; Pound Cedes Gain

Probably after loosing its crown jewel India half a decade ago, it will be biggest lost for UK.

ramana · Post by **ramana** » 28 Jan 2010 22:41

Tom Clancy had a book in the 90s, in which, an auto accident due to negligence is used by a US Congressman to pass prohibitions on Japanese autos as a protection measure for Detroit.

AnimeshP · Post by **AnimeshP** » 28 Jan 2010 23:53

ramana wrote:Tom Clancy had a book in the 90s, in which, an auto accident due to negligence is used by a US Congressman to pass prohibitions on Japanese autos as a protection measure for Detroit.

Yeah .. I read that one ... its called "Debt of Honor" ... the plot also involves India teaming up with China & Japan to fight Unkil ... of course Unkil kicks everyone's ass with the help of Sri Jack Ryan who by the end of the novel ends up being the POTUS ....

.... talk about implausible plots

bart · Post by **bart** » 29 Jan 2010 00:28

AnimeshP wrote:
ramana wrote:Tom Clancy had a book in the 90s, in which, an auto accident due to negligence is used by a US Congressman to pass prohibitions on Japanese autos as a protection measure for Detroit.
Yeah .. I read that one ... its called "Debt of Honor" ... the plot also involves India teaming up with China & Japan to fight Unkil ... of course Unkil kicks everyone's ass with the help of Sri Jack Ryan who by the end of the novel ends up being the POTUS .... .... talk about implausible plots

Yes, it is implausible because such a capable person would never become POTUS.

Witness the latest, the nobel piss prize winning Barack 'Chauncey' Obama. And no need to talk about his predecessor of course. Having said that, Al Gore was VPOTUS and he did invent the Internet.

Hari Seldon · Post by **Hari Seldon** » 29 Jan 2010 06:10

More TAE tweets (can be found here: https://twitter.com/AutomaticEarth)

Ben Bernake, destroyer of worlds and banker's puppet/ garden gnome, has been reconfirmed as FED Chairman. Congratulations America

SO its done. Can't say I'm surprised, still, a tad disappointed.

Proof that regardless of how much you scroo up (lookup the record of one Sri Rupert Rubin), you can still get rewarded and hailed as a hero as a 'bonus' measure (pun intended).

Seems had I celebrated the victory of umrika's reformist impulse, common sense and Austrian economics a tad prematurely when Obama last spoke of banking reforms.

Senate Votes to Increase Federal Debt Limit by $1.9 Trillion - http://bit.ly/abVS10 (That's about $14,000 for every person working in US)

The Spending 'Freeze' That Isn't, Since 2008, the ratio of outlays-to-GDP has risen by about 14% - http://bit.ly/ba0U7t

Been posted here but worth underlining, IMHO.

US banks face risks,could spark downgrades-S&P-http://bit.ly/ctdAz2 (When economy worsens banks will need more of your money to pay bonuses)

This on the heels of the S&P courageously downgrading the UKstani banking system (and not the UKstani economy as a whole as that would've had real consequences like bond rate spikes. Can't have real consequences when playing pretend, now, can we? Eh?)

So yup, moi wonders whats up with S&Ps new found kaleja, aajkal? Wherefrom this wellfount of probity in public life, integrity in international dealings and the urge to do the (belated) right-eous thing? Has the S&P smelt the coming sh1tstorm or what?

Defaults May Return to Haunt Beleaguered Irish Mortgage Lenders - http://bit.ly/boVQMk (Irish household debt at 175% of GDP!)

Wear green in solidarity. St Patricks' day is near, I hear.

Floating-Rate Note Sales Tumble 68% on Fed Outlook - http://bit.ly/dprtsF (Market finally realizes rates will stay low for a long time!)

Welcome to the deflationist camp. Duniya will be awash in liquidity + low credit offtake. Savings are back in vogue. Japan model all the way, seems like. At least till the next election, perhaps.

Despite tough talk on clamping down on pay, banks are using other financial perks to ease the toll on employees -http://bit.ly/9RW0Ku

Aw, how caring banks have become of their 'employees' of late, makes one wonder eh? Dig a little and you find the 80-2 rule again. 80% of the bonus pool is gobbled by like the top 2%
of the bank 'employee' pool. Real whirl-pool, eh? No wonder 'em banksters have been sooo adamant about giving out bonuses to their starving 'employees' only. The unavoidable imperative to 'retain talent' and all that.

Medicare/Medicaid spending a national 'threat,' says CBO - http://bit.ly/cxbHx1 (Wow, some tough words there!)

Hmmmm. So the CBO has figured out that words are cheap and nobody cares anyway? Esp after the Paulson and Geithner testimonies its becoming amply clear that you can say anything you want and walk away. Fun, eh?

California Teachers Pension Fund $42.6 Billion Short - http://bit.ly/9JkKF2 (Time to cough up taxpayers!)

LOL

Notice this only happens when the market direction is down - http://bit.ly/bEicFV, NYSE says error delays delivery of price quote data

Yup. Sadly, the cred of many a formerly clean gubmint agency and pvt institution in massaland has been exposed as hollow only. Easy to manipulate and sing to an establishment agenda.

California: America’s First Failed State - http://bit.ly/c1Wcgr ('Nuff said, and Oh, Greek CDS spreads at record 400 - so far)

Greece CDS spreads were hot news yesterday. Was too lazy n hazy + busy to post last night. Watch this space for action, say, a month down the line.

LOL: First-time claims total 470,000 last week, confounding economists' expectations (the perennially confused bunch)

Re the bolded part above - 400% agree.

"It cannot be that...we have a multipolar world & a single world currency"Mr Sarkozy said,"We need a new Bretton Woods"-http://bit.ly/cS2bXT

Distinctly get this uncomfortable impression that maybe, perhaps, could-it-be that the superior French don't like the barbaric English speaking superpower or what??

JobLOSS RecoveryLESS watch - AstraZeneca to cut 8,000 more jobs and Toyota to cut 750 UK jobs.
...
JobLOSS RecoveryLESS watch: Verizon cutting 13,000 jobs due to losses at fixed-line phone business.

Pain continues on the jobs front.

Have a nice day, all.

Hari Seldon · Post by **Hari Seldon** » 29 Jan 2010 10:04

D&G humor....courtsey the FT.

What happens when the world defaults?

Ensoi.

Hari Seldon · Post by **Hari Seldon** » 29 Jan 2010 10:07

Have written previously also on the existence of a precious few, untainted, sane voices in the US establishment who have been just enough voice and power to maybe make a difference.

Prof Elizabeth Warren is one of them. A true American patriot. No, not a nationalist. A patriot. Hear her speak in this vid with JOhn Stewart, increasingly one of the few places on TV where spades can still be called spades, seems like.

Neshant · Post by **Neshant** » 29 Jan 2010 12:08

"Half of US Treasuries are now around 2 yrs or less. The US needs to roll over or issue an astounding $ 5 trillion of US Treasuries in the next year and a half. How will that happen??? Again, the fateful 2010 period of massive debt issuance/rollover for the US looms menacingly. 2010 is a fateful year for the US debt market. Not to mention that places like Greece and others are already just about to go belly up. Even though the USD rallies the USD is in serious trouble soon."

It will be a dark time worldwide."

Hari Seldon · Post by **Hari Seldon** » 29 Jan 2010 12:10

^^^ err, who spake those wise words, Neshant?

x-post from the prc ekhanomy thread.

From one of the foremost outsider commentators inside PRC, Michael Pettis:
Why trade war is very likely to break out this year

Good article, nothing terribly new or original, just that thoughts previously dispersed have been collected and collated in a rather readable fashion only.

Dunno about others, but I recall these past 2 yrs moi repeatedly and confidently predicting a coming trade war only to be (mercifully) proved wrong everytime. Turns out mercy stock maybe running low.

For two years some commentators have been arguing that the contraction in global demand set off by the 2008 crisis would lead almost inevitably to a trade war, following much the same path that the world took in the 1930s. With anger already being expressed over disordered currency markets by several leaders before the meeting of the Group of Seven wealthy nations in Iqaluit, Canada, next month, it is beginning to look as if 2010 will be the year that proves them right.

Uh-oh. Can't say nobody saw this coming, esp with soaring unemployment numbers in the deficit-drowning west and the relentless investment activity in the surplus-constipated east.

As long as global demand surged, this was not a problem. But the global financial crisis set off a contraction in debt and of excess demand in overconsuming countries. China, like the US in 1930, has done everything it can to maintain its ability to export excess production, but Asian trade rivals and western importers, like Europe in 1930, are having none of it. The result is that trade is increasingly the centre of conflict, as it was after 1930. Since, as in 1930, each side has misunderstood or underestimated the others’ problems, it is hard to imagine trade disputes being resolved optimally. Escalating tensions, aggressive actions and reactions and a slower global recovery are more likely.

Good == b/w west and east. Undoubtedly nobody emerges smelling sweet outta this current mess. Yindia is too small to matter here, mercifully btw. west is west and now, east is prc.

One may ask, , "OK. There'll be a trade war. So what? better than a shooting war at least. No?"
No.
Globalization downsides are showing up all warts now. Nowhere to go and going nowhere only. A trade war, like in the 30s might well be a prelude to a shooting snatch-and-grab op only. And trade disruptions severely dent sector upon export dependent sector in economy after shrinking economy only. Yindia also took a export hit post 2008 - gems, texitiles, IT, labor - all our star export sectors were hit. Mercifully, exports aren't that big a % of our GDP as that for both west and east this time. But still, trade wars hurt.

This [trade war propsect] should cause alarm. A breakdown in trade will slow the global recovery and create hostility and mistrust between major economies, making a resolution of important global problems, including the environment, terrorism and nuclear proliferation, unlikely.

But since folk have been predicting trade wars since 2008, how come they are off by a whopping 2 yrs, eh? Well, turns out, the steriod rush of emergency massive, coordinated fiscal stimuli the world over certainly helped stave off cardiac arrest.

The massive monetary expansion engineered by the world’s major economies to protect themselves from the effects of the financial crisis has temporarily reduced the economic pain, but perhaps only at the cost of exacerbating the underlying imbalances. The US and European governments have postponed the necessary rise in savings. China has pumped money into increased production or into economically unviable infrastructure investment, which, since it must be paid for by China’s long-suffering consumers, will continue to inhibit consumption growth.

So what's at the core of the current trade war scare?

Beijing needs to understand that the world cannot continue indefinitely accepting policies, such as an undervalued exchange rate and excessively low financing costs, that force China’s consumers to subsidise its exporters. Washington and Brussels must understand that China cannot possibly rebalance quickly without causing massive disruptions to its own economy. Unless they expect Beijing willingly to engineer a transition that causes domestic manufacturing to collapse and unemployment to surge, the west cannot expect a quick resolution.
...
But it is also politically unacceptable for trade-deficit countries, especially in the developed west, to accept the high unemployment consistent with leakage of demand to trade-surplus countries. With 10 per cent US unemployment – and higher in some European countries – few will see the benefits of permitting domestic demand to be absorbed abroad to maintain employment in China.

Aha. Looks suspiciously like the J&K imbroglio. There's no common ground only. Let the games continue.

Finally, in conclusion:

Things will get worse before they get better.
...
Most importantly, if deficit countries demand structural change faster than surplus countries can manage, we will almost certainly finish with a nasty trade dispute that will slow the global recovery and poison relationships for years. Our new decade should not start out so badly.

Hari Seldon · Post by **Hari Seldon** » 29 Jan 2010 20:36

By now everyone's heard of the eagerly awaited Hank Paulson memoirs where the man (surprise, surprise!) vigorously defends his every action in the events preceding and during the fall (pun intended) of 2008.

Bloomberg reports:

The Russians made a “top-level approach” to the Chinese “that together they might sell big chunks of their GSE holdings to force the U.S. to use its emergency authorities to prop up these companies,” Paulson said, referring to the acronym for government sponsored entities. The Chinese declined, he said.

Paulson learned of the “disruptive scheme” while attending the Beijing Summer Olympics, according to his new memoir, “On The Brink.”

“The report was deeply troubling -- heavy selling could create a sudden loss of confidence in the GSEs and shake the capital markets,” Paulson wrote. “I waited till I was back home and in a secure environment to inform the president.”
...

Russia sold all of its Fannie and Freddie debt in 2008, after holding $65.6 billion of the notes at the start of that year, according to central bank data. Fannie and Freddie were seized by regulators on Sept. 6, 2008, amid the worst U.S. housing slump since the Great Depression

Hmmm. interesting eh? Nothing like invoking national security calamities to get away with any scoundrel-giri.

Tyler Durden adds:

This is how the cold war will look like in the post-Lehman era (when all the debt risk is held on the public balance sheet): one country urging another to sell a third's bonds. According to Hank Paulson's soon to be released memoir, Russia had urged China to sell its GSE holdings in August 2008 "in a bid to force a bailout of the largest U.S. mortgage-finance companies." China refused... That time. Of course, what has transpired since is that China, through the Fed custodial account, has rotated a vast majority of its GSE holdings into Treasuries, in essence doing just what Pimco's Bill Gross has been doing since the beginning of 2009: offloading hundreds of billions of Fannie and Freddie bonds straight to the Federal Reserve. Alas, the Fed is 93% done with MBS QE... What happens when residual selling of bonds finally hits the public market, and the bottom falls out?

Read it all, needless to say.

paramu · Post by **paramu** » 30 Jan 2010 00:29

Looks like Russia plays high stake coordinated games. Long back USSR asked India to attack Pakistan and it would do the same from Afghanistan. India did not agree and everybody knows what happened to USSR, after that. Looks like, this time it asked PRC to join a financial warfare and it did not join. We have to wait and see how it pans out.

ramana · Post by **ramana** » 30 Jan 2010 02:50

paramu wrote:Looks like Russia plays high stake coordinated games. Long back USSR asked India to attack Pakistan and it would do the same from Afghanistan. India did not agree and everybody knows what happened to USSR, after that. Looks like, this time it asked PRC to join a financial warfare and it did not join. We have to wait and see how it pans out.

Looks like someone in London went for first strike any how.

amol.p · Post by **amol.p** » 30 Jan 2010 13:06

FDIC clocks 15 bank failures so far in 2010

The FDIC expects 2010 to be a peak for bank failures as a result of the financial crisis. Last year, 140 banks failed, compared to 25 in 2008 and three in 2007.

The FDIC has said it expects the total bill for bank failures to reach $100 billion for the period of 2009 through 2013.

http://economictimes.indiatimes.com/new ... 516095.cms

Macy's to cut 1,500 store-level jobs

The affected jobs are store-level positions, the people told the news agency. Earlier this month, Macy's said it was closing five of its namesake department stores, affecting about 307 employees, as it pares underperforming locations.

http://economictimes.indiatimes.com/New ... 508740.cms

Satya_anveshi · Post by **Satya_anveshi** » 31 Jan 2010 02:20

Continuing on the US-Japan trade war watch within limited theater of auto industry:

Our Government Declares (Economic) War On Japan? - Jan 29, 10

If this were General Motors declaring “war” on Toyota at their most vulnerable I would say go for it. I’m all about free markets and the best product usually succeeds. Hence Toyota outsells most if not all GM car models. But that is not what is happening here.

General Motors is now majority-owned by the Federal Government and Barack Obama is essentially the C.E.O. To believe that GM “CEO” Edward Whitacre Jr. didn’t get a thumbs up from President Obama on this is far beyond naive, it borders on gullible.
You don’t have to be a political wonk to know about Obama’s ties to Unions (SEIU Chairman Andy Stern visits the White House more than most cabinet members).

In a related news that reports administrative involvement (potentially engagement) in all this:

Trade War Watch 9: SECSTATE Disses Japanese C4C - Jan 13, 2010

the nerve: U.S. Secretary of State Hillary Clinton told Japanese Foreign Minister Katsuya Okada when they met – halfway in Hawaii, so that both had to travel – on Tuesday “that concerns are rising in the U.S. Congress” about Japan’s cash for clunkers incentive scheme, Reuters reports.

Under the belated Japanese C4C scheme, consumers get up to $2,800 if they trade in their 13 year or older car for new vehicle that meets the 2010 fuel economy standard of 35.5 mpg. So far, so good.

Last week, U.S. Congresswoman Betty Sutton had the nerve to introduce a resolution calling for the U.S. Trade Representative to start talks with Tokyo and urged Washington to bring a WTO case against Japan if it does not open up its program to American cars

As reported by TTAC, Ford, GM, and Chrysler had complained to U.S. Trade Representative Ron Kirk in December that Japan’s fleet renewal program effectively barred U.S. firms from participating.

The problem, in a nutshell, is that American automakers have sold a combined 7,901 vehicles in Japan this year. Because those numbers are so low, the Detroit firms are allowed to import vehicles under a program where their fuel efficiency does not have to be rated by the Japanese government. Because it doesn’t have official efficiency data on the low-volume models that use this program, the Japanese government has made them ineligible for the program. If we’re not mistaken though, this importation program isn’t mandated by the Japanese government, but automakers choose to use it anyway. Presumably, if Detroit had any models that could really compete in a 35.5 mpg market, they’d import them through normal channels. But with fewer than 8k units sold YTD, the Japanese market can’t possibly be worth the trouble.

This article from WaPo triggered alarm bells: Absence of U.S. cars from Japanese 'clunker' program irks lawmaker

Here is the Japanese perspective - Japan Avoids Trade War – Over 4,200 Cars

In 2008, 14,000 U.S. cars were imported to Japan. 30 percent via the gracious “Preferential Handling Procedure. ” That’s 4,200 cars. Does that warrant the hue and cry of Detroit? Detroit omitted that 70 percent of their imports to Japan did qualify (if they met the 35.5 mpg standard, that is) before Hillary Clinton and Betty Sutton nearly triggered another trade war about nothing. No skin off Japan’s government to open the C4C coffers to the 4200 ”Preferential Handling Procedure” cars, based on their EPA numbers. No Escalades (favored by Yakuza who can’t afford a Benz) will be supported by government money, one way or the other.

If we put all this in the context, then there is a lot of action still to come.

Satya_anveshi · Post by **Satya_anveshi** » 31 Jan 2010 02:50

Just another perspective from a former senator

Out of Afghan - Into Trade War

Washington obscures the Trade War by calling it globalization. Globalization is nothing more than a trade war with production looking for countries cheaper to produce. And U. S. production has long since learned that China and other countries are cheaper to produce. Corporate America resisted off-shoring. I worked with them for years in the United States Senate on measures to enforce our trade laws and protect their production and jobs. But when my efforts were vetoed by presidents of both parties, Corporate America learned that it couldn’t get any protection from Congress and it was forced to offshore. First, it was American textiles, electronics and communications that off-shored to China. Now it is high-tech – Intel and Microsoft. Today we have a deficit in the balance of trade in advanced technology with China. Now China alters United States' and others’ technology slightly and moves to patent it. And with this altered technology sold in China’s vast market, it will become the article of trade in the Trade War. Before long we’ll have nothing to produce.

We’ve got to come in from the cold in the Trade War and engage in globalization -- start trading, start protecting our production and economy. Congress must stop its charade of “free trade” and respond to its Constitutional charge of regulating trade under Article I, Section 8. And President Obama has to stop vacillating whether to get in or get out of the Trade War. He has no choice. The United States can’t survive with China’s trade policy of total control.

However, I found this amazingly funny in that if you switch the sides ( non US country ranting against US) it will be laughed off as commie drivel.

Why Our Economy is Collapsing

Will keep a watch on this site and appears to be a commie watering hole.

Neshant · Post by **Neshant** » 31 Jan 2010 14:03

Interesting prespective on the situation in East Africa

* IMF scamming away in Africa to keep the continent in debt slavery.

* India should really step up its efforts at gaining a naval base in East Africa to protect EU-India trade routes. It should be a joint effort between EU and India. US is building a 6 billion dollar base in Djbouti on the East African coast right next to shipping lanes. Wonder if babus are aware and do any long term planning.

http://www.youtube.com/watch?v=1IS7M-4cgQM
http://www.youtube.com/watch?v=-c4yJ_Z1LF4

shyam · Post by **shyam** » 31 Jan 2010 15:24

Paulson Says He Was Prepared to Guarantee Lehman (Update1)

The U.K. government ultimately was responsible for forcing Lehman into bankruptcy, Paulson said. Lehman executives had reached a deal to sell the bank to Barclays Plc, a British bank, on Saturday, Sept. 13.
...
The U.K. government, however, refused to waive a requirement that Barclays submit the deal to a shareholder vote, in spite of a personal plea by Paulson to Chancellor of the Exchequer Alistair Darling. Darling, Paulson wrote, was concerned that if Lehman’s bad assets hurt Barclays, it might affect the entire U.K. banking system.

“The British screwed us,” Paulson, a former chairman of Goldman Sachs, said he told the U.S. bankers the next day.
...
The former Treasury secretary said he, Geithner, and Fed Chairman Ben S. Bernanke were well aware the bankruptcy of Lehman would cause havoc in financial markets, although the consequences were much worse than they had anticipated. That was in part because Lehman’s U.K. bankruptcy receiver, PricewaterhouseCoopers, froze all of the firm’s accounts in that country, refusing to transfer collateral back to Lehman creditors, Paulson said.
...
Paulson also wrote that Chinese officials were very helpful during the crisis. He spoke often with Wang Qishan, vice premier of China’s financial and economic affairs, who pledged his country wouldn’t sell its large holdings of U.S. Treasury and agency bonds.

Russia tried to take advantage of the turmoil in U.S. markets, he wrote. While he was attending the Summer Olympic Games in Beijing in early August 2008, he learned that “top-level” Russian officials suggested to the Chinese that the two countries sell a large amount of the Fannie Mae and Freddie Mac bonds they owned in order to force the U.S. to bail out those firms. The Chinese refused, Paulson said.

Singha · Post by **Singha** » 31 Jan 2010 17:29

and the chinese would be so truthful about this russian approach.

but it sure confirms the us-china alliance, notwithstanding noises to the contrary. on
economic matters they are very much in sync.

svinayak · Post by **svinayak** » 31 Jan 2010 21:16

Singha wrote:and the chinese would be so truthful about this russian approach.

but it sure confirms the us-china alliance, notwithstanding noises to the contrary. on
economic matters they are very much in sync.

With a $400b to $500B trade between them they have to be very much in sync. Currency rates are critical to this decision.

Neshant · Post by **Neshant** » 01 Feb 2010 00:18

The ARM resetting spike is just around the corner. Many people have already stopped paying their morgage. Some have used the excuse that they want the bank to prove they are the owner of the morgage debt before paying. But since morgages had been packaged and sold all over the world so many times, the bank does not know who really owns the morgage debt downstream. It could be some pension fund in Germany, it could be some bond holder in Finland.. it could be one of their own subsidiaries - they have no clue and cannot produce the original contract in court and therefore cannot demand payment on the morgage nor forclose on the property.

Some people have stopped paying their morgage for 2 years and still have not been evicted. 2 years of living rent free!

So banks are trying to trick these folks into re-financing their morgage with the bank. That will eliminate any ambiguity about who owns the morgage debt. Then they can forclose.

Meanwhile, if you paid your morgage on time, you are a sucker.

Neshant · Post by **Neshant** » 01 Feb 2010 00:28

Nobody can figure out where the money is coming from that keeps pushing the stock market higher from March 2009. Speculation is that all the gains are due to the government juicing the markets.

Feds Juicing The Equity Market ?

http://watch.bnn.ca/trading-day/january ... clip253604

Hari Seldon · Post by **Hari Seldon** » 01 Feb 2010 04:54

Some people have stopped paying their morgage for 2 years and still have not been evicted. 2 years of living rent free!

So banks are trying to trick these folks into re-financing their morgage with the bank. That will eliminate any ambiguity about who owns the morgage debt. Then they can forclose.

Meanwhile, if you paid your morgage on time, you are a sucker.

Banks have been more careful than meets the eye in preserving their 'rights' to pursue defaulters, seems like. Sample this from bloomberg

“Banks are being very careful to preserve their rights, either outright in the short sale agreement or by using vague language that leaves that door open,” Hillard said. About 90 percent of people who do a short sale think they are “off the hook.”

King is among a rising number of borrowers who are learning that they can be on the hook for years after losing their homes. Amid a crisis that stripped $6.4 trillion, or 28 percent, from the value of U.S. residential real estate since the 2006 peak, lenders are exercising their rights to pursue unpaid mortgage balances.

To get their money, they can seize wages, tap bank accounts and put liens on other assets held by debtors.

To put this mess in better context, lemme quote sri Denninger here:

In some cases they can seize wages, tap bank account and lay liens.

This is very situational and state-specific.

GET COMPETENT LEGAL AND TAX ADVICE THAT YOU PAY FOR SEPARATELY FROM PEOPLE YOU INDEPENDENTLY SELECT BEFORE YOU CONSIDER ANY SORT OF CHANGE THAT ALLEGEDLY WILL "FREE" YOU FROM DEBT, IRRESPECTIVE OF HOW.

THE FINANCIAL INDUSTRY DOES NOT PLAY "FAIR." THEY HAVE ROBBED THE PEOPLE ON THE WAY UP AND IF THEY CAN GET THEIR CLAWS INTO YOU THEY WILL ROB YOU AGAIN ON THE WAY DOWN.

STATE LAW MAY OR MAY NOT PROTECT YOU AND YOU NEED TO UNDERSTAND EXACTLY WHAT THE CONSEQUENCES ARE OF ANY STEP YOU TAKE, EVEN WHAT LOOKS LIKE A "CLEAN" WAY OUT SUCH A SHORT SALE AGREEMENT!

PAY A COMPETENT LAWYER AND CPA!

reiterated in Bold capitals only. Sensible, I'd say.

No wonder the Brad Pitt movie 'Fight Club' appealed far beyond its narrow anarchist audience. Premise was the destruction of all debt by destroying all lending institutions only, eh? Only then could true liberty bloom and thrive.....

Hari Seldon · Post by **Hari Seldon** » 01 Feb 2010 06:03

Swiss warn that UBS could collapse (if the US pushes disclosure too far)

"The actions of UBS in the United States are very problematic. Not just because they are punishable but also because they threaten all of the bank's activities," Eveline Widmer-Schlumpf told Le Matin Dimanche newspaper.

"The Swiss economy and the job market would suffer on a major scale if UBS fails as a result of its licence being revoked in the United States," she said.

Aha.
Sure, the heart wails at the injustice to the cheese-eating alpine neutrals only.

The Swiss have been actively supporting illegal activities such as tax evasion and laundering for decades now to the detriment of the "economy and the job market" in countries around the world (including Yindia).

As the ekhanomic crisis continues to bite ever deeper into gubmint flab around the world, expect gubmints to resort to all manner of despo n dirty arm-twisting n ball-sqeezing of the likes of the thieving-scamming Swiss 'national economic model' only. Good, I say!

And why is the UBS doing any business in India at all? Just wondering. Am sure after all the countries with a spine or sufficiently encouraged by the ekhanomic meltdown are done kicking the swiss 'institutions' into place, Dilli will have to reluctantly (reluc-taintly?) follow.

Hari Seldon · Post by **Hari Seldon** » 01 Feb 2010 07:47

An Automatic earth tweet:

European states need to borrow $3.1 Trillion this year to finance deficits(crazy).The US in comparison needs an estimated $1.35 Tn

Self-explanatory, I should think.

What'll happen to bond yields, ya think? No wonder muted fire-alarms keep going on and off about places as stable as Greece, Portugal, Italy, Ireland, Spain, Belgium and (gasp!) UK stan, on a regular basis.

But, to us, the instant gratification generation, if the bond mkt doesn't explode like in the next minute, then bond mkt dislocation is too far into the longterm future only, seems like....

Neshant · Post by **Neshant** » 01 Feb 2010 08:17

lenders are exercising their rights to pursue unpaid mortgage balances.

To get their money, they can seize wages, tap bank accounts and put liens on other assets held by debtors.

I see a bright future in sending contracted goons after deadbeats and throwing them in debtor prisons.

If the original contract of your mortgage is lost in the securitization chaos and you intend to eventually walk away from your upside down mortgage, you're better off keeping it in that maze of confusion rather than refinancing.

So many good things to look forward to. Perhaps good old government will forgive & forget all your debt thereby passing on the loss to others and yielding you a free house in the process. In the mean time you can live rent free until it comes time to evict you. When it does, you offer to pay a small amount just enough to keep them hanging and prevent your eviction. Of course next month you are back to living rent free only to repeat the cycle. There's good money to be made from gaming the system like the banking "industry".

By refinancing, you have lost the protection chaos offers as then there is no doubt the bank owns your house. Its a clear cut process of booting you out, changing the locks and taking back the house.

Take advantage of the confusion. Always preserve the cut & run option on your house but in the mean time live rent free.

AnimeshP · Post by **AnimeshP** » 01 Feb 2010 09:18

paramu wrote:Looks like Russia plays high stake coordinated games. Long back USSR asked India to attack Pakistan and it would do the same from Afghanistan. India did not agree and everybody knows what happened to USSR, after that. Looks like, this time it asked PRC to join a financial warfare and it did not join. We have to wait and see how it pans out.

Looks more like Sri Paulson is trying to salvage his image by blaming the ruskies ....

Hari Seldon · Post by **Hari Seldon** » 01 Feb 2010 10:00

Local gubmint D&G watch:
Pennsylvania Capital city weighs Bankruptcy.

Harrisburg, Pennsylvania, the capital of the sixth-largest U.S. state by population, should skip a $2.2 million debt service payment due Feb. 1 and consider bankruptcy, City Controller Dan Miller said.

Harrisburg faces $68 million in payments this year in connection with a waste-to-energy incinerator and should weigh Chapter 9 protection from creditors or state oversight through a program known as Act 47, Miller said today. Chapter 9 bankruptcy allows municipalities to reorganize rather than liquidate.

The alternatives are to sell assets such as an historic downtown market; an island in the Susquehanna River that includes the city’s minor-league baseball stadium; and the city’s parking, sewer and water systems, according to a preliminary 2010 budget and an emergency financial plan submitted yesterday.

“What I’m suggesting is we stop paying the debt service until we have a plan or we decide which way to go, in bankruptcy or Act 47,” Miller, a former city council member who became controller this month, said in a telephone interview. “I think it could save our assets instead of selling them.”

Aha. The bolded part is == default only.

Some gubmint somewhere has go first and admit it's flat broke, take it on the chin in terms of indignation, opprobrium and threats. Once that's done, the stigma's washed off, the precedent is set and there'll be a veritable rush from its peers to follow in its reliving footsteps. Only:
Mish says it best:

Declaring bankruptcy is easily the best option. I commend Dan Miller for making it. But all will be wasted if Harrisburg misses the opportunity to renegotiate labor contracts (preferably void them outright), in bankruptcy court.

As soon as a couple major cities declare bankruptcy to end burdensome union contracts and ridiculous pension promises, the stigma will be off and more cities will do it. Indeed, there will be a mad rush to do so, if the first few instances work out as well as I suspect.

Cities and municipalities that get out from the grip of unions will have a huge competitive advantage over everyone else.

Go for it, Harrisburg.

Satya_anveshi · Post by **Satya_anveshi** » 01 Feb 2010 10:42

An Op-Ed by Paul Volker in the NYT
How to Reform Our Financial System - Jan 30, 10

Hari Seldon · Post by **Hari Seldon** » 01 Feb 2010 13:44

The Frog, The Scorpion, and Goldman Sachs

This piece is from James Rickards, former General Counsel of Long Term Capital Management. Well, he should know

"Now consider another example of data mining, not done by retail firms, but by giant investment banks such as Goldman Sachs. These banks have thousands of customers transacting in trillions of dollars in stocks, bonds, commodities and foreign exchange daily. By using systems with anodyne names like SecDB, Goldman not only sees the transaction flows but some of the outright positions and whether they are bullish or bearish. Data mining techniques are just as effective for this market information as they are for Google, Amazon, Wal-Mart and others. It’s not necessary to access individual accounts to be useful. The data can be aggregated so that the bank can look at positions on a portfolio basis without knowing the name of each customer.

One need not be a market expert to imagine the power of this information. You can see which way the winds are blowing before the storm hits. You get a sense of when momentum is draining out of a trade so you can get out of it before the market turns. You can see when bullish or bearish sentiment reaches extremes, suggesting it may soon turn the other way. This use of information is the ultimate type of insider trading because it does not break the law; you are not stealing the information, you own it.

So what do Goldman and others do with this mountain of market information? Do they send coupons to customers or text them with great trading ideas? A few lucky customers, usually giant hedge funds, may get a call on some insights, but this mountain of immensely valuable market information is used mainly to power their giant proprietary trading desks allowing them to rack up consistent excess returns. Economists have a name for this also. It’s called “rent seeking,” which means taking value from others without any contribution to productivity. The difference between value-added behavior and rent seeking is like the difference between Amazon trying to sell me a book or planning to steal my library. In nature, the name for a rent seeker is parasite.

The ideal existence for a parasite is symbiosis, or balance, where it offers some minimal service to the host, (some parasites devour insects which annoy the host), while extracting as much sustenance from the host as possible without killing it. But sometimes the symbiosis is disturbed and the parasite takes too much and actually destroys the host, which can end up destroying the parasite as well. This recalls the fable of the scorpion and the frog. Both are on the edge of a river looking for a way to cross. The scorpion cannot swim and asks the frog for a ride on its back. The frog at first says, “no,” for fear of being stung. But the scorpion assures the frog it will not sting him because they would both drown. The frog agrees to carry the scorpion. Once they reach the middle of the river, the scorpion stings the frog and they begin to drown. The frog cries, “why did you do that?” and the scorpion replies, “it’s my nature.”

And that is the nature of Goldman. Gather up as many customers as possible, aggregate the available information to achieve a superior market view and then relentlessly extract rents from the marketplace. Better yet, tell yourself you’re smarter than everyone else and you’ve earned the rents from the symbiosis."

My my, ain't that a scorcher now, eh? Am sure there are hajaar wall streeters eager to dance on GS' grave. Doubt they can do much but wait and hope. Hubris will lead to fall, almost always. No? Like Jesse remarks:

The financial system did not need to be saved by bailouts, it needs to be saved from itself. Their insatiable greed, monstrous appetites, and arrogant pride will take them over the cliff.

Which would not be bad in itself, if our governments had not made us hostage to their reckless schemes, and if we, in our resignation and despair, do not allow them to take us with them.

Which is what the verdict is at the end of the article:

"Worse yet, the parasite is now killing the host. The United States is drowning in debt, much of it incurred to bail out Goldman, AIG, GMAC, Fannie Mae and all of the other rent seekers. The U.S. is like the frog; well meaning but blind to nature of scorpions.

Wall Street likes to say, “what’s good for Wall Street is good for Main Street.” That’s the scorpion talking. What’s good for Wall Street is good for Wall Street. Never forget it."

Jai ho only.

Chinmayanand · Post by **Chinmayanand** » 01 Feb 2010 15:45

The Global Debt Bomb

Spending our way out of worldwide recession will take years to pay back--and create a lot of pain.

Kyle Bass has bet the house against Japan--his own house, that is. The Dallas hedge fund manager (no relation to the famous Bass family of Fort Worth) is so convinced the Japanese government's profligate spending will drive the nation to the brink of default that he financed his home with a five-year loan denominated in yen, which he hopes will be cheaper to pay back than dollars. Through his hedge fund, Hayman Advisors, Bass has also bought $6 million worth of securities that will jump in value if interest rates on ten-year Japanese government bonds, currently a minuscule 1.3%, rise to something more like ten-year Treasuries in the U.S. (a recent 3.4%). A former Bear Stearns trader, Bass turned $110 million into $700 million by betting against subprime debt in 2006. "Japan is the most asymmetric opportunity I have ever seen," he says, "way better than subprime."

Interactive: Is Your State A Debt Disaster?

Bass could be wrong on Japan. The island nation (and the world's second-largest economy) has defied skeptics for so long that experienced traders call betting against it "the widowmaker." But he may be right on the bigger picture. If 2008 was the year of the subprime meltdown, 2010, he thinks, will be the year entire nations start going broke.

The world has issued so much debt in the past two years fighting the Great Recession that paying it all back is going to be hell--for Americans, along with everybody else. Taxes will have to rise around the globe, hobbling job growth and economic recovery. Traders like Bass could make a lot of money betting against sovereign debt the way they shorted subprime loans at the peak of the housing bubble.

National governments will issue an estimated $4.5 trillion in debt this year, almost triple the average for mature economies over the preceding five years. The U.S. has allowed the total federal debt (including debt held by government agencies, like the Social Security fund) to balloon by 50% since 2006 to $12.3 trillion. The pain of repayment is not yet being felt, because interest rates are so low--close to 0% on short-term Treasury bills. Someday those rates are going to rise. Then the taxpayer will have the devil to pay.

Whether or not you believe the spending spree was morally justified, you have to be concerned about the prospect of a dismal, debt-burdened fiscal future. More debt weighs heavily on GDP, says Carmen Reinhart, a University of Maryland economist. The coauthor, with Harvard professor Kenneth Rogoff, of This Time It's Different: Eight Centuries of Financial Folly (Princeton, 2009), Reinhart has found that a 90% ratio of government debt to GDP is a tipping point in economic growth. Beyond that, developed economies have growth rates two percentage points lower, on average, than economies that have not yet crossed the line. (The danger point is lower in emerging markets.) "It's not a linear process," she says. "You increase it over and beyond a high threshold, and boom!" The U.S. government-debt-to-GDP ratio is 84%.

We've been through this scenario before. It's especially ugly because we get hit by inflation, too. In the years immediately after World War II inflation surged past 6%, while economic growth flagged and the government-debt-to-GDP level exceeded 90%, note Reinhart and Rogoff. The country worked that ratio down over the next half-century. Now the ratio is shooting up again.

America is a nation of spendthrifts, addicted to easy credit and dependent on the kindness of savers overseas to keep us comfortable. Our retail industry hangs on credit cards and our real estate on 95% financing and the tax rewards for mortgage interest. The personal savings rate has climbed from negative 0.4% in 2006 to a positive 4.5% rate now, but that is still a pathetic figure for a nation whose government is un-saving all that and more with its deficit budget. Politicians on this continent are good at compassion, whether trying to help people stay in their overpriced homes or offering health care to millions of those without it. They are not so adept at nurturing growth.

If the GDP doesn't expand at "normal" rates of 3% to 5% coming out of this recession, wrestling down the debt will be very tough, indeed--perhaps impossible without drastic cuts in spending and higher tax rates on many fronts. The Congressional Budget Office currently projects the fiscal deficit will decline from 10% of GDP next year to around 4.4% from 2013 to 2015. But that assumes economic expansion of at least 4%, not the 2% predicted in the study by Reinhart and Rogoff. You see the vicious cycle here: Debt depresses growth, and then low growth makes paying down the debt an impossible task.

U.S. corporate income tax receipts were down 55% in the year ended Sept. 30, 2009 to $138 billion. It may be a long while before these tax collections get back to where they were. As corporate profits recover, factory utilization will be up and inflation will be close behind. At that point the 0% yield on Treasury bills will be history. Rolling over the national debt will become a lot more expensive. Higher rates on Treasuries will work their way through the debt market, driving up the cost of money for homeowners, businesses and already struggling state and local governments.

"The economy over the last six months has been on a sugar high," says Benn Steil, senior fellow at the Council on Foreign Relations and author of Money, Markets and Sovereignty (Yale, 2009), a survey of the relationship between money and the state. If Congress and the Obama Administration don't trim deficits, he says, "we will get to the point where credit is much more expensive in the U.S. than it ever has been in the past."

Most states are already having trouble paying their bills and, of course, don't have printing presses with which to finance their debts. They are turning to Washington for help and may succeed in putting some of their liabilities on the federal balance sheet. With growing off-balance-sheet obligations, notably unfunded pension liabilities (see graphic in "Debt Weight Scorecore"), the states will be competing for years with the federal government for scarce taxpayer dollars.

"U.S. states are like emerging markets," says Reinhart. "They spend a lot during the boom years and then are forced to retrench during the down years." Cutting expenses sounds good theoretically, but look at California: Students (and faculty) are up in arms over proposed tuition increases and cutbacks at the state's once prestigious university system; state employees are mounting a fierce legal battle against furloughs and other wage concessions.

Mainstream credit analysts are worried. The U.S. has been able to sell vast amounts of debt because the Treasury market, with $500 billion a day in turnover, is considered safe and dwarfs all other debt markets. But Brian Coulton, head of global economics at Fitch Ratings in London, warns that once rock-solid economies like the U.S. and the U.K. could join shakier nations like Japan and Ireland in losing their aaa ratings if they don't get their bad habits under control. "While aaas can borrow in the short term, very high and rising government debt-to-GDP ratios are ultimately not consistent with aaa status," Coulton says.

Folks , read it in full. It's too long with images to post.

Chinmayanand · Post by **Chinmayanand** » 01 Feb 2010 16:48

Should Germany bail out Club Med or leave the euro altogether?

Hari Seldon · Post by **Hari Seldon** » 01 Feb 2010 21:07

durgesh wrote:Should Germany bail out Club Med or leave the euro altogether?

Aha, durgesh bhai. Should've mentioned at the outset its an Ambrose Evans Prichard article only sir..... would've garnered more attn and quotes. Lotsa quotable quotes in there, IMHO.

Meanwhile, in my last post for the day, how better than to present some more TAE tweets:

Russia's economy contracts 7.9% in 2009 - http://bit.ly/bdXSQP (By comparison through fudged stats & record borrowing,US contracted 2.4%)

-7.9%. wow. That is serious depression territory. US at -2.4% in real terms, eh? Wonder how they arrived at that fig...

The euro zone faces tough dilemmas at its core as well as its periphery - http://bit.ly/b6s6ml, huge deficits, unemployment, debt etc

Yup, thank the lawd for 'em challenges only. Euro/USD has dropped from 1.55 to 1.38 in 2 weeks only. Major relief for the euro embattled, I'd say.
That said, eurozone's much more shakier than yankistan, fisc wise. Here's why:

TAE post: European states need to borrow $3.1 Trillion this year to finance deficits(crazy).The US in comparison needs an estimated $1.35 Tn

Unkil is giving stiff competition too. None want their currencies to rise aaj ke scenario mein...

Wow, not even one week and the US estimated deficit for this year rises from $1.35 Trillion to $1.56 Trillion, beating last year's record.

TAE Latest: IATA says airlines suffered record drop in 09,passengers down 3.5% & freight down 10.1%

Airlines are like the worst industry around from an investor POV. Industry together has lost money since its inception, summing up all real returns from the last century.

Singha · Post by **Singha** » 01 Feb 2010 23:33

NASA is being given a real downsizing. ares-1, ares-5 and orion vehicle cancelled. to be replaced by talk of "work smarter not harder" techs and ppts. soon they will be more downmarket than ISRO

- shoestring budget, outsourced rus/ukr rockets and mostly remote sensing.

Obama Calls for End to NASA’s Moon Program

By KENNETH CHANG
Published: February 1, 2010

President Obama is calling on NASA to cancel the program that was to return humans to the Moon by 2020, and focus instead on radically new space technologies.

Mr. Obama’s 2010 budget proposal for NASA asks for $18 billion over five years for fueling spacecraft in orbit, new types of engines to accelerate spacecraft through space and robotic factories that could churn soil on the Moon — and eventually Mars — into rocket fuel.

Plans for a new mission to leave Earth’s orbit will probably not be spelled out for a few years, and the budget proposal makes it clear that any future exploration program will be an international collaboration, not an American one, more like the International Space Station than Apollo.

“I think this is a dramatic shift in the way we’ve gone about particularly human spaceflight over the past almost 50 years,” said John M. Logsdon, former director of the Space Policy Institute at George Washington University who was one of about a dozen people who were briefed about the NASA proposal Sunday evening.

“It is a somewhat risky proposition,” Dr. Logsdon said, “but we’ve been kind of stuck using the technologies we’ve developed in the ’50s and ’60s.”

To pay for the new technology development, the budget calls for a complete stop in NASA’s Constellation program, the rockets and spacecraft that NASA has been working on for the past four years to replace the space shuttles.

“We are proposing canceling the program, not delaying it,” Peter Orszag, director of the Office of Management and Budget, said Sunday.

The proposal would officially end aspirations to return astronauts to the Moon by 2020 — President George W. Bush’s “vision for space exploration” developed in the aftermath of the loss of the space shuttle Columbia in 2003.

In place of the Moon mission, Mr. Obama’s vision offers, at least initially, nothing in terms of human exploration of the solar system. What the administration calls a “bold new initiative” does not spell out a next destination or timetable for getting there.

In the meantime, instead of using the Constellation’s Ares I rocket and Orion crew capsule to ferry astronauts to the International Space Station, $6 billion would instead go to financing space taxi services from commercial companies.

Under the proposal, NASA’s budget would rise to $19 billion in the 2011 fiscal year from $18.7 billion. It would also get additional increases in subsequent years, reaching $21 billion in 2015. In total, NASA would receive $100 billion over the next five years.

Whether Congress agrees to the restructuring of NASA remains to be seen. As reports of the impending cancellation of Constellation leaked out last week, members of Congress, particularly in Alabama, Florida and Texas, the homes of the NASA centers most involved with Constellation, expressed concern.

“If early reports for what the White House wants to do with NASA are correct, then the president’s green-eyeshade-wearing advisers are dead wrong,” Senator Bill Nelson of Florida said in a statement last week.

Congress may also balk at the price tag. After spending $9 billion over the past four years on Constellation, canceling the contracts with Boeing, Lockheed Martin, Alliant Techsystems and other companies will cost an additional $2.5 billion, Dr. Logsdon said NASA officials had told him.

If implemented, the NASA a few years from now would be fundamentally different from NASA today. The space agency would no longer operate its own spacecraft, but essentially buy tickets for its astronauts.

Dr. Logsdon said the officials said NASA would evolve into a role more akin to the National Advisory Committee for Aeronautics, which preceded NASA. The committee did not manufacturer aircraft, but performed aeronautical research that was adopted by aircraft manufacturers.

“The assumption is that there are technological breakthroughs out there ready to be discovered and exploited,” Dr. Logsdon said. “I’m impressed and a little surprised how large the investment in new technology is planned to be. It does represent a shift away from developing systems to developing technologies before developing systems.”

If the approach succeeds, it could jumpstart a vibrant space industry, but it is also risky. By canceling Ares I, NASA would have no backup if the commercial companies were not able to deliver.

One likely competitor for the commercial crew contract is Space Exploration Technologies Corporation, or SpaceX for short. But its Falcon 9 rocket, the one that would be used to carry astronauts to the space station, has yet to have its first launching. When SpaceX, a startup led by Elon Musk, the founder of PayPal, won in 2006 a contract to carry cargo to the space station, the company said it would have six flights of the Falcon 9 by the end of 2009.

Conversely, another likely competitor, United Launch Alliance, which is a joint venture between Boeing and Lockheed Martin, has decades of experience building space hardware for NASA, and its rockets, the Delta IV and the Atlas V, have successfully carried military and commercial satellites to space. But modifications needed for carrying astronauts could be costly and the launch alliance has also experienced delays and cost overruns.

NASA has also not yet spelled out how it would go about verifying that commercial rockets are sufficiently safe for carrying astronauts. A worry is also that the decades of expertise and experience within NASA in operating spacecraft will be lost, and that the commercial companies might stumble as they learn.

A move to an international collaboration would also make future exploration programs susceptible to buffeting from diplomatic winds on Earth. For example, after Russia invaded Georgia in 2008, lawmakers questioned whether the United States should continue flying astronauts on the Russian Soyuz rockets.

While more countries would share the cost, an international collaboration would probably be more expensive and cumbersome to manage, and could be slowed down by delays of any of the partners.

“I’m optimistic this provides a path to a long term and sustainable and high quality program,” Dr. Logsdon said. “But I think there will be a lot of debate over the details over the next few months.”

SwamyG · Post by **SwamyG** » 02 Feb 2010 01:07

prad wrote:i have long since believed that Obama views the US as a declining country and wants to manage the decline than prevent it.

Your long is probably after he took over office, Jan 20th 2009. About a year. Add an year to his campaign so probably somewhere from middle of 2008.

Maybe he should have just continued to give all the money to the banks. Yea that will do the society and country good.

Let us for a moment forget what he thinks or does not think. Do you think the decline can be prevented? If yes, how?

Satya_anveshi · Post by **Satya_anveshi** » 02 Feb 2010 02:29

(potential OT but don't know where to fit this)

World has come full circle and congrats to China.

I wish to see our dear country too develop this kind of muscle. There are a lot of names in the "teach a lesson" list as singha would say.

US urges China against sanctions on US companies selling arms to Taiwan

Satya_anveshi · Post by **Satya_anveshi** » 02 Feb 2010 02:38

Satya_anveshi wrote:An Op-Ed by Paul Volker in the NYT
How to Reform Our Financial System - Jan 30, 10

Related to the above post:
Paul Volcker Has A Great Plan To Fix Wall Street ... But Where Is Tim Geithner?

The plan is a good one:

-- Prevent banks from owning hedge funds and other proprietary trading vehicles (a semi-reincarnation of the Glass Steagall Act that separated commercial banking and investment banking from the 1930s to the 1990s)

-- Give the government resolution authority to step in, liquidate, or sell any firm it deems to be in trouble (including mortgage lenders, investment banks, and insurance companies)

-- Make shareholders, management, and, yes, bondholders pay for any costs associated with this (the latter is what we refused to this time, which is the most appalling part of the current bailout policy)

If we do only these things, we will have eliminated the most insidious and problematic part of the status quo: Too Big To Fail.

One question for those concerned with the fate of Treasury Secretary Tim Geithner is why Paul Volcker is selling this plan. Shouldn't the Treasury Secretary be doing that?