Perspectives on the global economic meltdown (Jan 26 2010)

[Hari Seldon]

Tyler mava is on a roll today, seems like....

What People Were Saying In Real Time As Debt And Currency Crises Played Out

From the unthinkable, to the possible, the unavoidable, the actual and finally, the patently obvious.

Here's the money quote:

"I kept thinking about prior sovereign events I lived and invested through, and how the “unthinkable” eventually became the “possible”, the “unavoidable”, the “actual” and finally, the “patently obvious”. This week's Sovereign Default Time Capsule shows what people were thinking and saying in real time as sovereign debt and currency crises played out. This is not meant to say that Greece is Argentina; there’s a big difference between Mercosur and the European Union, and it looks like the First Act of the EMU drama will be a bailout for Greece. But it’s instructive to remember how politicians, markets, investors and analysts can underestimate the depths of a problem".
- Michael Cembalest, CIO, JP Morgan, Global Wealth Management

[shravan]

http://www.morganstanley.com/views/gef/ ... 3666c24817
Debating Debtflation
March 05, 2010

By Spyros Andreopoulos, Joachim Fels & Manoj Pradhan | London

[shravan]

Clashes in Athens as Greek parliament approves austerity plan

Riot police in Athens used tear gas on rioters while others chased ceremonial guards in 19th-century kilts and tasseled garters away from the Tomb of the Unknown Soldier outside parliament. It was the biggest outburst of violence since the rioting that gripped Greek cities in 2008.

Police say they arrested 6 people, while bystanders said at least two officers were badly beaten.

More than 7,000 demonstrators gathered to protest the euro4.8 billion ($6.5 billion) austerity package, which will hike consumer taxes and slash public sector workers' pay by up to 8 percent

.

[ramana]

Hari, Can you make this TFTA and throw in quotes from Martin Wolf and the BRIC story for larger audiences? You do explain things in SDRE speak.

Thanks

PS: Might mail it to former Dy Gov RBI!

[Neshant]

Geithner is coming to India

few possiibilities spring to mind, none of which are pleasant :

1) He wants to push an international currency agenda

2) He wants India to allow in more goldman sachs type financial / insurance scammers to ripoff/game the people the way they do in the US.

3) Buy more T-bills (no thanks)

4) Keep printing money (more bad economic advice)

5) Please don't buy more IMF gold lest it lead to price discovery in the market

[shyam]

I think there were a lot of posts between Ramana's and Neshant's, including SwamiG's offer for proof reading. What happened to them?

Added later:
Looks like a lot of posts made yesterday are lost.

[Neshant]

you go to a restaurant
you order a meal
you eat it
but when the bill comes
you refuse to pay..

-----------------------
Icelanders reject deal to repay British and Dutch

http://ca.news.finance.yahoo.com/s/0603 ... dutch.html

[svinayak]

The Simple Dollar
http://www.csmonitor.com/Money/The-Simp ... -to-follow

US may be headed for long decline. You don't have to follow.
Americans can avoid income decline by spending less and earning more. Here's how.
A climber stands atop the summit of Beomia in Valencia, Spain.
Newscom
Enlarge
By Trent Hamm Guest blogger / March 5, 2010

On the conference call I had last night with Vicki Robin, one of the listeners (I believe his name was Crispin) brought up an interesting topic of conversation. In a world where globalization is a fact and many jobs can easily be moved anywhere in the world thanks to the power of the internet and the information economy, we’re gradually going to see a global marketplace. In other words, all of the nations of the world will gradually see their average standard of living even out, as many of the workers are competing for jobs with everyone else in the world.

Skip to next paragraph
Trent Hamm
The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds – we just want simple ways to manage our finances and save a little money.

My belief is that, for the most part, the standards of living everywhere else in the world will rise rapidly to meet the standard of living in the United States. However, I also feel that our standard of living here will probably never grow at the same rate as it did in the twentieth century. In short, I think our growth rate will be much lower than that of the rest of the world and may in fact be a slow reduction over a long period of time.

I don’t really think it’s anything to panic about, though. This decline has been happening already for a long time, starting in roughly 1970. Real wages – meaning the amount that people get paid when you get rid of inflation – have essentially remained unchanged since then.

The real change in our financial lives has been the big increase in costs. There are countless services we have today that many of us consider essential – and that we pay for every month like clockwork – that simply didn’t exist thirty five years ago. Cell phones. Home computers. VCRs and DVD players. The energy required to run all of these devices. Internet access. Non-extortionary long distance telephone access. The vast majority of Americans consider these expenses a requirement – and they didn’t exist in 1970.

[vera_k]

Icelanders reject deal to repay British and Dutch

http://ca.news.finance.yahoo.com/s/0603 ... dutch.html

Maybe India can offer to finance the $1.8 billion in return for Iceland joining SAARC instead of EU. For that matter China could do that too for the SCO.

[shyam]

We don't hear much from France. Here is something from tech world.
Worker strife dogs tech firms in France

[shravan]

National debt to be higher than White House forecast, CBO says

[Neshant]

CLSA's Chris Wood "In Five Years The US Dollar Paper Standard Will Collapse"

http://www.zerohedge.com/article/clsas- ... taxpayer-f

[Hari Seldon]

Crashing Towards a New World Social Order 2012

Entertaining read.

If one studies the collapse of civilizations, one learns that failure-to-adapt is fatal. Continuing on the path of pursuing growth would be such a failure to adapt. And if one reads the financial pages these days, one finds that it is full of doomsayers. We read that the Eurozone is doomed, and Greece is just the first casualty. We read that stimulus packages are not working, unemployment is increasing, the dollar is in deep trouble, growth continues to stagnate, business real estate will be the next bubble to burst, etc. It is easy to get the impression that capitalism is failing to adapt, and that our societies are in danger of collapsing into chaos.

Such an impression would be partly right and partly wrong. In order to understand the real situation we need to make a clear distinction between the capitalist elite and capitalism itself. Capitalism is an economic system driven by growth; the capitalist elite are the folks who have managed to gain control of the Western world while capitalism has operated over the past two centuries. The capitalist system is past its sell-by date, the banking elite are well aware of that fact – and they are adapting.

Capitalism is a vehicle that helped bring the bankers to absolute power, but they have no more loyalty to that system than they have to place, or to anything or anyone else. As mentioned earlier, they think on a global scale, with nations and populations as pawns. They define what money is and they issue it, just like the banker in a game of Monopoly. They can also make up a new game with a new kind of money. They have long outgrown any need to rely on any particular economic system in order to maintain their power. Capitalism was handy in an era of rapid growth. For an era of non-growth, a different game is being prepared.

Thus, capitalism has not been allowed to die a natural death. First it was put on a life-support system, as mentioned above, with globalization, privatization, derivative markets, etc. Then it was injected with a euthanasia death-drug, in the form of toxic derivatives. And when the planned collapse occurred, rather than industrial capitalism being bailed out, the elite bankers were bailed out. It's not that the banks were too big to fail, rather the bankers were too politically powerful to fail. They made governments an offer they couldn't refuse.

The outcome of the trillion-dollar bailouts was easily predictable, although you wouldn't know that from reading the financial pages. National budgets were already stretched, and they certainly did not have reserves available to service the bailouts. Thus the bailouts amounted to nothing more than the taking on of immense new debts by governments. In order to fulfill the bailout commitments, the money would need to be borrowed from the same financial institutions that were being bailed out.

[shravan]

If Greece falls, euro is pointless: Sarkozy

"If we created the euro, we cannot let a country fall that is in the euro zone. Otherwise, there was no point in creating the euro," Sarkozy said during a meeting with farmers.

"We (must) support Greece because they are making an effort, or else there will be no more euro," he added.

Greek Prime Minister George Papandreou is due in Paris on Sunday to meet Sarkozy as part of a tour of capitals seeking backing for his debt-riddled nation.

He received political support, but no promise of financial aid, at talks in Berlin with Chancellor Angela Merkel on Friday.

French officials have said there is no need for aid at present, but Sarkozy made clear that Paris would be ready to help if Athens faced a budget meltdown.

"The euro has no sense if there is no solidarity between ourselves," he said, telling the farmers that Greece was the number one importer of French beef.

"I will fight with the same ferocious energy to defend the (European) common agriculture policy," Sarkozy added, referring to EU aid for its farm sector.

[Hari Seldon]

The working class, the former middle class is square in the gunsights now. Their jobs are on the line to balance budgets. Why not bailout states and local gubmints like DC bailed out the banks, eh? What's a few more electronic zeroes for Sri Bernake, eh?

Toledo mayor: I'll start laying off everybody

Toledo Mayor Mike Bell revealed last night at a citizens' forum his "backup plan" for closing the city's $48 million budget hole, should City Council fail to get onboard his current proposal: He'll start laying off everybody. "Depending on how large [the deficit] gets, the only thing left for us to do, after this, are major cuts in our staffing," Mr. Bell told an audience of more than 60 in the cafeteria at Waite High School. "And whatever number we don't have is how far we'll cut." The mayor added: "And everybody - everybody - is inclusive in those cuts."

Basically he's saying the only way he sees around watertight public union contracts is firing everybody and rehiring at much lower wages. A nutshell view of what's been happening in America. Outsourced jobs aren't coming back just like that. Commensurate fall in living wages and living standards also happens.

[Hari Seldon]

We don't hear much from France. Here is something from tech world.
Worker strife dogs tech firms in France

Well, then this is timely...

French debt coming under investor scrutiny

French debt looks set to come under pressure in the near future with investors battered by the Greek crisis arguing it is pricey and does not reflect France's growing indebtedness. As a result, other euro zone paper, including Germany's and -- perhaps surprisingly -- Italy's, could be in for a filip. The gist is not that France's economy is under any immediate Greece-like default stress, but the cost of its bonds -- and the cost of insuring them -- does not properly reflect what stress is actually there.

That's how it usually begins. UKstani ekhanomy was at this 'investor skepticism' stage 2 yrs ago just prior to the Lehman meltdown.Sample this sweet quote below

"France has been lumped as a core euro zone economy. To our mind the budgetary situation is not as good as the pricing suggests," said Richard Batty, an investment director at Britain's Standard Life Investments. "It is being priced as though there isn't a budget problem," he said.

But France wasn't prone to anglo-saxonian excesses now, was it, you ask. How could things get so bad there? Can we have some figs pls?

The French deficit is set to climb to 8.2 percent of gross domestic product this year, the highest for at least half a century. Its debt is projected to jump to 83.2 percent of GDP -- up 20 percentage points in just two years.

Despite being widely treated as a core euro zone economy, France ranked 6th out of the 21, coming in as less risky than only Ireland, Greece, Portugal, Britain and Italy. Its 10-year bond yield, however, offers a relatively tight spread of only around 30 basis points over benchmark German Bunds. The cost of insuring French debt through credit default swaps, meanwhile, is around 43,400 euros per 10 million euros of exposure, less than 10,000 euros more than for German debt and cheaper than The Netherlands, according to CMA DataVision.

[Hari Seldon]

Meanwhile news from shitistan oops Britistan entertains, as always...
Britain Grapples With Debt of Greek Proportions
Okie nothing new here, but some recounting is in order.

Since the Labour government’s intense fiscal intervention in 2008 and 2009, yields on British government debt have soared to among the highest in Europe.

And on a broader scale, which includes the borrowing of households and companies, the overall level of debt in Britain is the second-largest in the world, after Japan’s, at 380 percent of the country’s gross domestic product, according to a recent report by the consulting company McKinsey.

...

That means the government and its citizens have been able to continue to borrow at interest rates that do not reflect their true financial situation. Indeed, the increase in private and government debt here contrasts sharply with the deleveraging that has been going on in the United States. British household debt is now 170 percent of overall annual income, compared with 130 percent in the United States. In an echo of the United States’ rush into subprime mortgages with low teaser rates, millions of homeowners in Britain have piled into variable-rate mortgages that are linked to the rock-bottom base rate.
...

As for the British government, it has been able to finance a budget deficit of 12.5 percent of G.D.P. — equal to Greece’s — at an interest rate more than two full percentage points lower only because the Bank of England bought the majority of the bonds it issued last year.
{Aha....critical point onlee milord....note kiya jaye!}

"It’s not just ‘basket cases’ like Greece that can be considered candidates for sovereign crises," said Simon White of Variant Perception, a research house in London that caters to hedge funds and wealthy individuals. "Gilts and sterling will continue to come under pressure as scrutiny of the U.K. fiscal situation intensifies."
...
For the time being, at least, the British government faces no such threat.
{Awwww}
Despite its borrowing and spending excesses, Britain still maintains a triple-A credit rating and much of its debt is long term.
{Aaalll ijjj welllll o bhaiya, kindly re-elect Sri Brown and Sri Miliband only!}

But with 29 percent of British bonds held by foreigners, Britain, like Greece, remains highly vulnerable to the vicissitudes of outside investors. Since early this year, foreign holdings of British bonds have fallen from 35 percent, a trend that has tracked the pound’s decline and contributed to the increase in the yield on its 10-year gilts.

[Prem]

Any one knows what is Ravi Batra writting now a days!!

[Hari Seldon]

Ohhhhh Chyena!!!

China to Nullify Financing Guarantees by Local Governments (Bloomberg)

China plans to nullify all guarantees local governments have provided for loans taken by their financing vehicles as concerns about credit risks on such debt surges.

The Ministry of Finance will also ban all future guarantees by local governments and legislatures in rules that may be issued as soon as this month, Yan Qingmin, head of the banking regulator’s Shanghai branch, said in an interview. The ministry held meetings on the rules on Feb. 25 with regulators including the China Banking Regulatory Commission and the People’s Bank of China, Yan said March 5.

China’s local governments are raising funds through investment vehicles to circumvent regulations that prevent them from borrowing directly.

A crackdown on local- government borrowing, estimated at about 24 trillion yuan ($3.5 trillion) by Northwestern University Professor Victor Shih, could trigger a “gigantic wave” of bad loans as projects are left without funding, Shih said this month.

Wow. This is the opposite of the Fannie Freddie debacle of sorts. Gotus took the latter into receivership whereas PRC is disowning debt local gubmints are taking on as being not backed by the full faith and credit of the PRC.

A few cities and counties may face very large repayment pressure in coming years because of debt ratios already exceeding 400 percent, a person with knowledge of the matter said in January. The ratio is of year-end outstanding debt to annual disposable fiscal income.

The financing vehicles of large coastal cities are well-funded as most have publicly traded subsidiaries that can raise capital from the markets and rely less on bank loans. Entities in northern and western China are of particular concern, the banking regulator’s Yan said while attending the parliamentary meetings.

The 1998 collapse of Guangdong International Trust & Investment Corp., which borrowed domestically and overseas on behalf of southern China’s Guangdong province, left creditors including Dresdner Bank AG of Germany and Bank One Corp. in the U.S. with $3 billion of unpaid bonds. It marked the first time that Chinese authorities failed to bail out one of the nation’s state-owned trusts.

And expectedly, whatever bad happens is the fault of hyenas outside chyena. The peepull's lepubric cannot be at fault, by definition.

"[bT]he responsibility does not lie with China[/b]," said Yang, speaking at a news conference on the sidelines of the annual session of China's parliament.

Beijing and Washington have recently gone through a rough patch, with quarrels in January and February over Chinese Internet censorship, trade disputes, U.S. arms sales to Taiwan, and President Barack Obama's meeting with the Dalai Lama, the exiled Tibetan leader.

The United States "must respect China's core interests" on Taiwan and Tibet, Yang added. "I believe the United States understands very well China's core interests and major concerns.

Jai hu, Jai hu.

[Neshant]

guy goes to the Emergency Room, gets a $1600 bill for getting a few antacid (gas) tablets from a doctor. Medical in the US is a big ripoff.

------
$1,600 Maalox Hospital Bill

http://www.youtube.com/watch?v=kacxxV2RUhI&feature=sub

[Neshant]

A quote :

"Wife got a bad headache and took too many Tylenol... Made her sick... We went to the emergency room... they gave her an IV saline solution and a bed to rest in for 3 hours..... $8800 later they sent her home... I have no medical insurance and an $8800 bill.... Now I have a headache...."

[Neshant]

Impressive description from an American in China.

if its true, India is way behind China economically

http://www.youtube.com/watch?v=k8TiqgN6GxY&feature=sub

[Hari Seldon]

^^^ We are way behind the PRC economically. We accept it and move on.

[Hari Seldon]

Icelandic news has been reported on the thread but lemme sketch out some more detail here re particular issues at stake.

First the source newsitem:
Iceland Rejects Icesave Depositors Bill in Referendum (Bloomberg)

March 7 (Bloomberg) -- Icelanders rejected by a massive majority a bill that would saddle each citizen with $16,400 of debt in protest at U.K. and Dutch demands that they cover losses triggered by the failure of a private bank.

Ninety-three percent voted against the so-called Icesave bill, according to preliminary results on national broadcaster RUV. Final results will be published today.

The bill would have obliged the island to take on $5.3 billion, or 45 percent of last year’s economic output, in loans from the U.K. and the Netherlands to compensate the two countries for depositor losses stemming from the collapse of Landsbanki Islands hf more than a year ago.

The island’s political leaders say they’ve already moved on to talks over a new accord.

“The government’s survival doesn’t rest with this Icesave vote,” Prime Minister Johanna Sigurdardottir told RUV after the preliminary count was announced. “The government coalition remains solid,” Finance Minister Steingrimur Sigfusson told RUV.

Failure to reach an agreement on the bill has left Iceland’s International Monetary Fund-led loan in limbo and prompted Fitch Ratings to cut its credit grade to junk. Moody’s Investors Service and Standard & Poor’s have signaled they may follow suit if no settlement is reached.

‘Obsolete’

Iceland’s leaders are trying to negotiate a new deal with the U.K. and the Dutch that focuses on the interest rate payable on the loan, making the bill in yesterday’s vote “obsolete,” Sigurdardottir said on March 4.

Dutch Finance Minister Jan Kees de Jager in a statement posted on the Internet last night said he is “disappointed” the agreement hasn’t yet come into effect. The U.K. was “obviously disappointed,” while “not surprised,” said a Treasury official who declined to be identified in line with departmental policy.

Iceland’s government pointed to “steady progress toward a settlement” in the past three weeks in a statement.

Wow. 93% of the people vote 'No' yet the guibmint moves to make obselete the verdict? I mean, really? If this can happen in as educated, enlightened, homogeneous, harmonious and close knit a society as Iceland's, imagine the fate of bigger hence looser hence loser countries, eh?

Jesse says it straight:

It is interesting that the government of Iceland had already declared the vote of the people as 'obsolete.' One has to wonder when the voters will declare their current government and their representatives as obsolete. One would give them credit for at least allowing a vote on a referendum.
...
In the States, the Congress and the President have just ignored the massive protests against their own bank bailouts. The US was able to cloak its own debt assumptions through accounting frauds, claiming that the bailouts were repaid by the banks. The bailouts are wrapped in AIG, Fannie and Freddie, and the Federal Reserve. This is the advantage of owning the currency, the IMF and ratings agencies. And of course your media.

Although Europeans and the markets are looking at the 'PIGS' for the next serious default as the economic hitmen are moving from Iceland to Greece, the real test of globalization in financial markets and the dominant control of the private banks will come in the UK, a sovereign people too proud and strong to go down into feudal servitude and the rule of tyrants easily. Or at least one would hope.

Jai ho

[Hari Seldon]

More on shady accounting practices that have helped mask massive debt by parking them in off-balance sheet dark places.

International finance-industry estimates have Dubai's sovereign debt load, thanks to the off-balance-sheet debt, exploding to nearly four times its originally reported $80 billion, as other government-backed projects have gone bad after Dubai World's default in late November.

....

This is how the Greek debt has grown 12 times over the initial numbers it had on the books with the European Union. Iceland and Dubai are the test studies for how the Europeans may deal with the idea of socializing private debt through public funding.

....

"I am seeing many sovereign defaults for the PIIGS as well as in Eastern Europe and the former Soviet satellite countries running into 2011," Chapman added.

link

Yup, and these worthies have been oh-so-keen on inspections and audits and the like, eh? One wonders whether they'll send a PWC to 'audit' the nuke material stores for the reprocessing thing, eh?

[shyam]

A friend of mine says that even during this bad economic times, a lot of manufacturing is still moving to China. Interesting thing he said was that some of the Japanese executives he interacted with, complained that Japanese companese are not getting many contracts and pricing is not really the reason for that.

We have to expect China to continue to grow while Japanese economy rolls under Toyota wheels.

[ramana]

Hari, CSPAn show Book Tv had a talk by Ian Mitroff on "Dirty Rotten Strategies"

http://mitroff.net/

How we trick ourselves into solving wrong problems

Take a look at it.

[Hari Seldon]

^^^Will do, Ramana garu.

BTW, what is unfolding in Iceland is a high stakes game indeed.

The people have spoken. And have roundly and soundly rejected bankster gangsterism. Now the consequences follow. Hope and pray for the Icelandics, folks (the 'little people' in this big fight)

To scale, Argentina after its default offered its int'l creditors 30 cents to the dollah, or nothing. The smarter creditors took the offer. And both Argentina and the smart creditors are better off for it. There's no way Argentina could have pulled off a decent std of living now w/o defaulting back then.

Moral; of the story is it is time to reset. To default en masse on the debt and start afresh. To stick the banksters and not the lay public with the bill. Jai ho.

[Hari Seldon]

Sri Krugman, chasing after his favorite political dreams and demons, gets some things right here. Too little and late maybe but still that's something.

http://tinyurl.com/ybrklxj

What really mattered was free-market fundamentalism. This is what led Ronald Reagan to declare that deregulation would solve the problems of thrift institutions — the actual result was huge losses, followed by a gigantic taxpayer bailout — and Alan Greenspan to insist that the proliferation of derivatives had actually strengthened the financial system. It was largely thanks to this ideology that regulators ignored the mounting risks.

So what can we learn from the way Ireland had a U.S.-type financial crisis with very different institutions? Mainly, that we have to focus as much on the regulators as on the regulations. By all means, let’s limit both leverage and the use of securitization — which were part of what Canada did right. But such measures won’t matter unless they’re enforced by people who see it as their duty to say no to powerful bankers.

That’s why we need an independent agency protecting financial consumers — again, something Canada did right — rather than leaving the job to agencies that have other priorities. And beyond that, we need a sea change in attitudes, a recognition that letting bankers do what they want is a recipe for disaster. If that doesn’t happen, we will have failed to learn from recent history — and we’ll be doomed to repeat it.

Its not that its very difficult to see what needs to be done to avoid repeats of the past crisis. But even that isn't being done. Eliz Warren has repeatedly mentioned this. What gives?

[paramu]

We have to expect China to continue to grow while Japanese economy rolls under Toyota wheels.

Does it mean tha that uncle has decided to dump Japan and court PRC seriously? If true, it will certainly have some geopolitical implications.

[Neshant]

Tax soda, pizza to cut obesity, researchers say

http://news.yahoo.com/s/nm/20100308/hl_nm/us_food_tax


18% tax on pizza and pop will cut weight by 2kg.

[Hari Seldon]

When all else fails, blame the speculators and the shorts. True to form....
Papandreou Warns Crisis Could Spread Unless Speculation Curbed
Oh, don't gemme wrong. Its not as if the speculls and the shorties are all blameless anyways.

Greek Prime Minister George Papandreou said his country’s fiscal crisis could spread beyond Europe unless “unprincipled speculators” and “ill- regulated” financial markets are reined in.

“Europe and America must say ‘enough is enough’ to those speculators who only place value on immediate returns, with utter disregard for the consequences on the larger economic system,” he said in a speech text today in Washington. “An ongoing euro crisis could cause a domino effect, driving up borrowing costs for other countries with large deficits and causing volatility in bond and currency rates across the world.”

Papandreou called the market for credit-default swaps a “scourge” that “haunts Greece and all of us.” U.S. and European regulators need to bolster regulations to curtain such activities, he said, or “a small problem could be the tipping point in an already volatile system.”

Without identifying any firms, Papandreou said “the same financial institutions that were bailed out with taxpayers’ money are now making a fortune from Greece’s misfortune” and “unprincipled speculators are making billions every day by betting on a Greek default.’

“If the European crisis metastasizes, it could create a new global financial crisis with implications as grave as the U.S.-originated crisis two years ago,” he said.

wah wah. Would've been hilarious if it weren't so serious. So Sri papapm of greece wraps himself in the US-Europe world flag and dances a jig.

True to form, others with much to hide in their own khanomies rise to the bait.
Sarkozy Says EU Must Back Greece or Jeopardize Euro

French President Nicolas Sarkozy said the European Union must support Greece or risk destroying the euro as Prime Minister George Papandreou heads for Paris to lobby support for the debt-laden country.

“If we created the euro, we cannot let a country fall that is in the eurozone,” said Sarkozy yesterday before a meeting with Papandreou in Paris today. “Otherwise there was no point in creating the euro. We must support Greece because they are making an effort.”

German Chancellor Angela Merkel is rebuffing any talk of a rescue even as EU nations are said to be working on a contingency bailout plan for Greece to be funded by member governments. Her finance minister, Wolfgang Schaeuble, told Welt am Sonntag today that officials should work on creating a European organization similar to the International Monetary Fund to prevent a repeat of the crisis.

Papandreou is indicating that Greece may still need financial support and is prepared to turn to the IMF if necessary, calling it a “final resort” on March 3.

That prompted a rebuff from European Central Bank President Jean-Claude Trichet a day later because finance officials fret such a move would signal the EU isn’t capable of solving its own problems. Italian Finance Minister Giulio Tremonti is nevertheless refusing to rule out a role for the IMF in any aid package.

“The IMF should act as a bank” in any rescue, he told reporters in Venice yesterday. “We finance the IMF so it can use the funds around the world. Why not use that capital with the IMF acting as a bank with its know-how?”

As Greece calls for more help, Merkel on March 5 turned her focus to restricting the use of derivatives to halt “speculators” from exploiting countries’ budget deficits.

The Greek prime minister said he will fight to ensure speculators don’t undermine his push to restore order to the country’s economy. It’s unjust and undemocratic that his efforts are being undermined “by some ‘kids’ in New York and elsewhere sitting in front of a computer,” he said yesterday.

Anyway, read it all.

[Muppalla]

It’s unjust and undemocratic that his efforts are being undermined “by some ‘kids’ in New York and elsewhere sitting in front of a computer,” he said yesterday.

The Kids include Hari Seldon from Hyderabad India Why just Ny onlee...

[Neshant]

FDIC Urges Pensions to Invest in Failed Banks

March 8 (Reuters) - U.S. regulators are encouraging public pension funds that control more than $2 trillion to inject capital directly into the banking system by buying failed lenders , Bloomberg said, citing people briefed on the matter.

The Federal Deposit Insurance Corp (FDIC) is trying to attract pension funds that want to buy stakes or assets of distressed bank holding companies, Bloomberg said.

Direct investments may allow public retirement funds to reduce fees for private equity managers (by passing the pension portfolio onto clueless equity managers of these failed banks?) and FDIC to get better prices for distressed assets, according to the report on the website.

FDIC was not immediately reachable for a comment outside regular U.S. business hours. (Reporting by Amulya Nagaraj in Bangalore; Editing by Lincoln Feast)

http://www.reuters.com/article/idUSSGE62709220100308

[Hari Seldon]

No, Muppala garu, boor moi is no financial speculator or hedge fund vulture or some such econovampire in the classic sense of the term that is feeding on Greek blood....

All of us on this thread speculate about future events but let us be 400% clear that we have zero influence on the shape and size of actual events outside. We are just observers and commentators, nothing more.

BTW, found an interesting comment from a wag on the web. Kinda says it all nicely:

More information is coming out from Europe that the national debts are much, much bigger than first believed. Governments such as Greece have Off Balance Sheet debts that are not being counted. Money Week last Friday had an article on the subject. The Euro could have a ways to fall. The Greek leader has reason of lash out, he is scared, scared that their real books will come to light. Are the rest of the PIGS hiding debts as well? Spain and Italy in particular?

Another:

The OTC derivatives market is the elephant in the room. CDS's in particular. Sarkozy and the rest of them know this. They are trapped. It ensures QE as the response to these problems as there are no other practical ways to contain the fallout of these financial WMD's.

This has been true for a few years now. After seeing how much this cost the U.S. because of AIG, one would think that politicians in Europe and the U.S. would be closing down this market as these CDS contracts have expiration dates. What are they waiting for? Or are all their "balance sheets" holding these instruments?

As long as these betting slips exist, you are correct in predicting continued QE by all.

Again, hey, TIFWIW onlee.

But I do tend to agree with these opinions on the web fringe simply because mainstream newsmedia has failed utterly to be credible in reading, reporting and analyzing economic signals anymore.

More web-wag D&G this time on our favorite country, the TSP of the western world - (Drumroll please!) UKstan!

The City of London [i.e. the big UK banks] is experiencing a flight of capital as foreigners are losing faith in their deposits in UK banks. Fear of more pound weakness and a belief that the UK government will not control their budget has spooked depositors in the UK's major banks.

Something like 2 trillion ponds has already fled Britain. {Errr, source please?!}

This causes more pound weakness that fuels the fear of investors that the UK is unsound and it's currency is headed even lower.

Government gridlock coming up will throw gas on the fire and push the pound lower as well. However you look at it, capital flight is not a good sign for the UK's financial future.

Well, I would dismiss that comment with some salt until I realized, hey, didn't the UKstani treasury start issuing USD denominated debt recently?? Now we know why that might be, eh? What else are they hiding?
Again, we return to the same old slogan that worked in the past - Dollahoakbar!

[Hari Seldon]

Oooh, things are heating up in eurozone. beware the Ides of March or what?

[url=ttp://news.yahoo.com/s/nm/20100308/ts_nm/us_eurozone_3]Portugal follows Greece down austerity path[/url]

By Sergio Goncalves and Marcin Grajewski – 56 mins ago

LISBON/BRUSSELS (Reuters) – Portugal became the latest euro zone country to announce austerity measures to rein in a ballooning budget deficit on Monday as debt-stricken Greece urged global action to curb speculation in credit default swaps.
....

Portugal announced plans to cut its deficit to 2.8 percent of gross domestic product in 2013 from 8.3 percent this year by trimming spending on civil servants and public investment, and raising taxes on high incomes and stock market gains.

The program is seen as the key to convincing markets that Portugal will tackle its high deficit and debt after coming under scrutiny by investors fearing it may be next in line to have Greek-style fiscal problems.

Under the plan, Portugal's public debt would peak at 90.1 percent of GDP in 2012 and fall thereafter. Greece's debt is set to reach 125 percent of GDP this year.

"This is a bet on reducing the weight of the state in the economy and the weight of public spending," Portuguese Finance Minister Fernandio Teixeira dos Santos said.

[Neshant]

I find it hard to believe this guy only just woke up to the idea that the fiscal path may be unsustainable. Yet the massive spending continues unabated.

It would appear there is no intention to pay off the debt with the present purchasing power of the dollar but to somehow roll the debt over and over. Why else would the spending continue unabated. Someone wealth is going to have to be destroyed to pay for all this debt. Any volunteers.

-----------

US Fiscal Path Unsustainable: Senior Budget Analyst
Published: Monday, 8 Mar 2010 | 10:17 AM ET Text Size By: Reuters

U.S. fiscal policy is on an unsustainable path that cannot be rectified by minor tinkering, a senior budget policy analyst said Monday.

In the past several decades, the United States has paid for increases in retirement and health care programs through cuts in defense spending, Congressional Budget Office Director Douglas Elmendorf told the National Association of Business Economists.

That approach is not feasible in the future, and significant tax increases or spending cuts would be necessary, he said

[Hari Seldon]

Ilargi over at the automatic earth declares that the oirozone crisis is over. Well argued piece.

link

Greece is saved, the Euro will be fine, so will the eurozone, it was all a storm in a teacup. Even Paul Volcker sounds less negative about the Euro than about America’s own finances. Maybe that should tell us something. There will be a European monetary fund down the line (perhaps many years), but since the power structure in the EU is overly clear, it doesn’t really matter. German influence in the union, both economical and political, will increase, but the Germans know very well what their limits are, so maybe that's not such a bad thing. Greece will certainly benefit from better accounting practices.

And then they’ll have to adapt to what is now called austerity, which is in reality nothing but a misnomer for what will befall us all, as it becomes everyday life in the 21st century. And not just for the Greeks, Portuguese, Irish and Icelanders, either, but for all everyday people all over the world. If they are among the lucky ones.

So what was all the fuss about, one may ask..

consolation for Germany is that the crisis will give them increased leverage to pressure southern Europe to buy more German instead of Asian products.

And that was why they all entered the European Union to begin with. Germany and Holland needed markets for their products, so they built them in their own backyards. Buy more German may sound like protectionism, but when your currency is 20-25% overvalued, the global playing ground is not exactly level to start with. And then you try to make it level. We've just seen part 1 of that film. America wants to China to to raise its currency, Europe wants America to do the same. beggar they neighbor.

OK. But what if Greece is unwilling or unable to implement said auterity, eh? What if Greece heads for Argentine style default?

This would have been the question foremost in my mind but now that question has receded. Greece last week had a 3 billion euro bond auction oversubscribed. The tide has indeed turned, it might seem. Lets wait n watch a few more days before pronouncing judegment.

It was no secret that all the EU wallahs were glad to see the Euro fall against everybody else thx to the greek crisis. Helped exports and all. Meanwhile, EU's fears also arise due to the same argument:

Germany’s main fear today may be that California, Illinois, New York and New Jersey (just to name a few) will crumble before Portugal and Spain do, which will make it that much harder to bring the Euro back to par with the dollar. Some relief could be provided by the currencies that have nowhere to go but up from where they presently are, the yen, yuan and pound sterling. Devaluing your currency can be a beneficial target, as the US shows, but if you let the process run too far too fast, a whole new slew of issues creeps in, and you're looking at a de facto crippled coin. Britain and Japan have no room left to move when it comes to their interest rates, at the very moment they may need -or at least want- it most.

Brilliantly summarized a host of complex issues there.

As for yUKstan:

The British commentariat can’t stop waxing about how great it is to control one's own currency (if you do, you can play rate games, which in modern economics means you’re saved no matter what), but they miss out on the fact that Euro is at the same time a bastion of support for all its users, while the pound stands alone. 60 million Britons, 300 million Americans, 330 million Eurozone inhabitants (the EU has over 500 million). It may be nice to have your own currency, but is it really the best option when that currency is comparatively tiny?
{Size does matter. Which is why ultimately all the small lands in the IOR will ultimately have to rely on the one strong natural leader, anchor, engine there....Yindia, my Yindia....}

Do the pundits over there ever wonder why the Euro is so strong in the first place? Could it be because the same markets that are set to pounce the pound any day now have strong confidence in it, and have come to realize that they can’t go after the Eurozone anymore then they can go after the US as a whole? Who would rule out that possibility?

It's all about one question after all now, isn’t it? Who is the weakest link on the globe today that's worth going after? Like a pride of lionesses watching a herd of wildebeest, gazing through the long tall grass, patiently - but increasingly hungry- looking for the proper prey. The least risk and energy, for the most meat.

As you know, for me, Greece never fit that description to begin with. Neither does Portugal, too small. Spain and Italy have strengths that will keep them standing for a while longer.{Primarily, like India, they have a vibrant informal sector that is not subject to austerities, banksterism, gubmint grab and formal sector credit freezes}

Moreover, Europe has indicated it will protect its weakest for now, and nobody in their right mind places best against Germany, France or Holland. At least for now. I'd look outside of continental Europe for minimum the next half year.

yUKstan, next? Who knows......

[shravan]

Can't make your mortgage? Get an emergency loan

The Pennsylvania Housing Finance Agency offers the jobless and those suffering financial hardship loans of up to $60,000 for as long as three years to cover their monthly payments or take care of their arrears.
-----------

[Hari Seldon]

Chalo baba, aaj ka roundup. ow better than posting selected TAE tweets.
http://twitter.com/AutomaticEarth

Bankers Blow $20 Billion Faster Than Gamblers (Sovereign wealth funds have seen huge losses on their bank investments), http://bit.ly/daYEjx
{Jai ho, Vina ji is indeed a seer....to have forecast the 20/20 obvious back when it wasn't yet obvious only}

Video of the day: Goldman Sucks, http://bit.ly/dm7JQI {self explanatory, or what?}

Unemployment friday madness is on, so 36,000 jobs were lost in February, U3 at 9.7% and U6 at 16.8%. Meanwhile, Non Seasonally adjusted U3 was at 10.4% and U6 at 17.9% respectively.Ppl working part-time involuntarily rose by 500k to 8.8Mn.

FDIC May Invite Pension Funds to Buy Stakes in U.S. Banks Facing Seizure, http://bit.ly/9c0WXE {wow. so the powers that be think they haven't yet screwed poor pension funds and working class retirements and savings enough, yet??}

Dubai World to Seek Loan Delay in Talks, Bankers Say, http://bit.ly/aAKCEA ($26Bn at stake)

Anti-EU fire spreads in Iceland, http://bit.ly/cC9ugP (See EU as the problem, not the solution)

State Tax Revenues Plummet By $87 Bn, Biggest Year Over Year Decline In History; Record State Tax Hikes In Progress, http://bit.ly/chXRVy
{moi shudders onlee. This won't be pretty, bhai log}

Almost 39 million Americans received food stamps in December, the most ever. Expected to rise to 43.3 Mn next year.
{Think of how many more could get help if the aid being wasted in TSP could be diverted home? Would be nice if such ads were run on cable tv}

Japan's debt interest payments and refinancing costs account for over 20% of its annual spending! http://bit.ly/dkxGlr (The sun is setting)
{Sayonara japan. Was nice knowing you. G'bye.}

In the last 9 months the U.S. long-term fiscal deficit has soared 21% to $76 trillion, http://bit.ly/9B6Rz9

Eh? Obama Admin's new Program Will Pay Homeowners to Sell at a Loss, http://nyti.ms/9jQH6l (Banks get $1,000 and homeowners will get $1,500)

Chalo, aaj ke liye itna bas.