Perspectives on the global economic meltdown (Jan 26 2010)

Dileep · Post by **Dileep** » 11 Mar 2010 17:16

Banks sell gold alright, but mark it up like 10%, and give a discount of 4%. I got duped by ICICI folk on that. The bank will not buy it back. You have to sell it to a jeweller onlee. I asked the jeweller. He did the math, by converting it to 22 ct and using that days gold price and told me.

Do you remember the scene where Tom (of Tom & Jerry) looks at the mirror and sees the reflection of a jackass? I felt the same way then.

The good old Bhima Bhattar sells 8 gram 22 ct gold sovereigns at today's gold price plus tax (if you insist on bill). He will buy it back any day at that days gold price as well.

shyamd · Post by **shyamd** » 11 Mar 2010 20:07

Folks, will gold prices really shoot up if there is a share index collapse this year as well as deflation? Me thinking its gonna go down. Everyone will just jump on the dollar because there is no prominent currency like the USD although we know how messed up it is. EUR, GBP is in doldrums. Whats left? Its the dollar that everyone will want. Me was thinking Gold is gonna come down in the short run.

SwamyG · Post by **SwamyG** » 11 Mar 2010 22:50

I am slowly coming round to the view that the world is saved. Slowly but surely the world will find a way. Hasn't it always?

There was never a doubt about that. The important issue was to find out which countries rose to stand up after taking the hit. How quickly they regained their stance and who were the new entrants was few things we seek to find out. And last but not the least what would desh do - was a question.

There are a few blessed (destined countries) out there. And desh might be one of them

Sanku · Post by **Sanku** » 11 Mar 2010 23:51

Dileep wrote:Banks sell gold alright, but mark it up like 10%, and give a discount of 4%. I got duped by ICICI folk on that. The bank will not buy it back. You have to sell it to a jeweller onlee. I asked the jeweller. He did the math, by converting it to 22 ct and using that days gold price and told me..

Hmm, my own data points were fairly different, but in any case bullion is being purchased in form of coins etc as well quite a bit, and your own experience seems to back that up as well.

Meanwhile yes, every individual should do his/her own math on gold price vis a vis others and check for the best bet.

Hari Seldon · Post by **Hari Seldon** » 12 Mar 2010 05:11

shyamd wrote:Folks, will gold prices really shoot up if there is a share index collapse this year as well as deflation? Me thinking its gonna go down. Everyone will just jump on the dollar because there is no prominent currency like the USD although we know how messed up it is. EUR, GBP is in doldrums. Whats left? Its the dollar that everyone will want. Me was thinking Gold is gonna come down in the short run.

Good point. In a deflationary play, Au might hold or even dip, for a while.

The reason goldbugs chant the gold mantra is a tad different though.

Its clear as day that central banks and sovereign gubmints the world over are all actively engaged in a currency debasement play. Its the only real way, short of outright default or debt jubilee, to whittle down the debt problem.

And when fiat currencies all want to not-rise, and will find a way to make that happen, the only play left in town are commodities and precious metals. IMVVHO, of course. In the short term, price fluctations up and down will happen anyway. Which is why Faber says, regardless of the gold price on that day, buy a little bit every month.

Prem · Post by **Prem** » 12 Mar 2010 05:22

SwamyG wrote:
I am slowly coming round to the view that the world is saved. Slowly but surely the world will find a way. Hasn't it always?
There was never a doubt about that. The important issue was to find out which countries rose to stand up after taking the hit. How quickly they regained their stance and who were the new entrants was few things we seek to find out. And last but not the least what would desh do - was a question.

There are a few blessed (destined countries) out there. And desh might be one of them

IMHO, stars are getting aliigned favorably and Indoos are gonna be bolt out of heaven for many .

Neshant · Post by **Neshant** » 12 Mar 2010 06:57

Dileep wrote: The good old Bhima Bhattar sells 8 gram 22 ct gold sovereigns at today's gold price plus tax (if you insist on bill). He will buy it back any day at that days gold price as well.

I never buy 22K gold. Its hard to verify if a 22K gold coin is real or a fake. Sovereigns are the most counterfeited gold coins around.

Stick only to 24K , 1 oz govt issued gold coins which are widely recognized. I avoid buying bullion bars even though there are 24K bars out there. The non-satandard shape again makes it hard to verify as unadulterated gold. I also don't buy from anywhere other than big name reputed places to be certain the sh&t is not counterfeit.

As for whether gold is set to fall, I have no idea. There are awful lot of guys in high places with great expertise in ripping off the producers of society.

Dileep · Post by **Dileep** » 12 Mar 2010 10:02

Neshant wrote: I never buy 22K gold. Its hard to verify if a 22K gold coin is real or a fake. Sovereigns are the most counterfeited gold coins around.

Well, it doesn't matter, because the jewellers buy them on face value as well.

Stick only to 24K , 1 oz govt issued gold coins which are widely recognized. I avoid buying bullion bars even though there are 24K bars out there. The non-satandard shape again makes it hard to verify as unadulterated gold. I also don't buy from anywhere other than big name reputed places to be certain the sh&t is not counterfeit.

The only problem I see is the ridiculous markups for them.

shyam · Post by **shyam** » 12 Mar 2010 12:31

TIFWIW
The Drive to Eliminate Social Security in America

Hari Seldon · Post by **Hari Seldon** » 12 Mar 2010 15:23

Changing times also seem to change attitudes.....is this premature, a fluke, a joke or could it be (gasp) the new Yindia??

x-posting:

SSridhar wrote:India rejects social clauses in the under-discussion FTA
India has rejected the European Union's demand on including social clauses such as labour and environmental standards in the proposed Free Trade Agreement (FTA), saying there are other forums to discuss these issues.

Responding to the EU Trade Commissioner, Mr Karel De Gucht's recent statement that he was hopeful of addressing social issues in the FTA with India through “appropriate language,” the Commerce Secretary, Dr Rahul Khullar said, “There are certain non-negotiables for us. If they (EU) don't accept FTAs without social clauses, then I'd say tough luck.”

“If you (the EU) want to do a bilateral trade deal, it comes on terms which are acceptable to both, otherwise it doesn't come,” Dr Khullar told Business Line.

He said at present the proposed India-EU pact is not even called an FTA, adding, “It is only called a broad-based bilateral trade and investment agreement.”

This implies that New Delhi will go in a phased manner to liberalise its trade in goods and services with 27 member countries of the EU. On full implementation, FTA entails barrier-free flow of goods between the signatories.

Mr De Gucht had said the inclusion of labour and environment issues in the pact is not specific to India as the EU has these it in all its FTAs.

“The European Parliament won't agree to a deal that's silent on these,” he had said.

Dr Khullar said India will not allow backdoor entry of non-trade related issues in its FTAs and this was made clear to the EU in the recent discussions too.

“Whether these issues go under the guise of sustainable development or whether they come in the form of labour or environmental standards, our answer is a simple ‘no',” he said.

He said allowing such non-trade issues in the FTA may lead to the talks getting diverted to issues like human rights, minority rights and animal welfare.

“Is the FTA about trade or politics, the EU should make up its mind,” he said.

There are forums other than bilateral and multi-lateral trade negotiations where the EU can raise these issues, Dr Khullar said.
For the first time, I have seen a tough-talking Indian negotiator.

Neshant · Post by **Neshant** » 12 Mar 2010 15:27

lets pray Jairam Ramesh does not enter the negotiations and muck things up.

paramu · Post by **paramu** » 13 Mar 2010 02:41

It may be relevant here:

IBM stops disclosing U.S. headcount data

Ameet · Post by **Ameet** » 13 Mar 2010 03:37

China assesses its gold strategy

http://www.atimes.com/atimes/China_Busi ... 1Cb01.html

Chinese leaders convening in Beijing for the annual plenary session of the National People's Congress (NPC) - China's ceremonial legislature - this week will, among other things, hammer out a blueprint for the ascendancy of the country's currency, the yuan (or renminbi).

2009 China reportedly bought 454.1 tons of gold from its domestic market, which is equivalent to nearly 50% of the total purchases of 890 tons of gold made by the world's central banks last year.

.........China increased its gold reserves by 76% in six years (2003) to 1,054 tons in 2009.

China's present gold holdings make up about 1.2% of its total forex reserves, according to Market Watch.

US gold reserves totaled 8,133.5 tons in September 2008, accounting for 76.5% of its total forex reserves. Japan's 765.2 tons accounted for 1.9% of its forex reserves. The Guangzhou Daily reported in 2008 that China's central bank was considering raising its gold reserve by 4,000 metric tons from the then 600 tons to diversify its forex risks.A China News report last year, citing Ji Xiaonan, the chair of the supervisory board for big state-owned companies under the Chinese State Council's state assets commission, said that "China's gold reserves should reach 6,000 tons in the next three to five years and perhaps 10,000 tons in eight to 10 years".

A senior official from the People's Bank of China (PBoC) suggested, "China should formulate a long-term plan and constantly and secretly increase its gold holdings, claiming that at present the percentage of gold in China's total reserve was too low ... PBoC should try to buy as much gold as possible from China's annual gold output of almost 300 tons, while the gold needed by industries and residents could be imported."

Suraj · Post by **Suraj** » 13 Mar 2010 03:49

In other words, gold prices will go up as measured in fiat currencies.

Neshant · Post by **Neshant** » 13 Mar 2010 15:13

US gold reserves totaled 8,133.5 tons in September 2008

.. or so they claim.

Gold reserves half of which are supposedly held at Fort Knox have never been audited since the 1950s. The official reason given for not conducting an audit now believe it or not is : "it would be too expensive to conduct an audit".

One has to read between the lines of that quote to find the irony if indeed the vaults are empty.

Hari Seldon · Post by **Hari Seldon** » 14 Mar 2010 06:32

Quick The Automatic Earth (or TAE) tweet roundup:
http://twitter.com/AutomaticEarth

Massa news:

Reuters/UoM Consumer sentiment index declined to 72.5 in March from 73.6 in February. Economists surprised (as usual), expected a 74. Heh

5 Mn to 7 Mn properties are potentially eligible for foreclosure but have not yet been repossessed & put up for sale! http://bit.ly/aP5QNQ More bank failure fridays can be expected, IOW

1 Bank closure on Mar 11, 3 bank closures so far today. DIF hit so far has been $208.2 Mn. Sheila Bair's Friday bash is in full swing!

TAE Post: Bank credit is contracting at an unprecedented 15% annual rate so far this year as lenders sit on a record $1.3 trillion of cash If this ain't deflation, what is?

TAE Post: The fiscal year is a mere five months’ old and already we have seen Washington rack up $652 billion of red ink

TAE Post:In one month, the US government turned in a deficit that in other times was incurred in a full year(90,91,92,93,02,03,04,05 for eg) Wow. Just wow.

TAE Post: US Treasury will have to refinance $5 trillion worth of short-term debt between now and 2015. #fail Nah. Unkil will find a way. Never underestimate khan ingenuity when rubber meets road

TAE Post: Oil Imports fell 1.7 percent as Americans imported the lowest amount of oil in more than a decade. (Oil prices are too bubbly!) No wonder the milk-sheikhs are worried

Int'l and PRC news:

TAE Post: German exports plunge 6.3% in January, while Chinese exports rose 46% (fudged Chinese data IMO, as imports by US & EU declined) cheeni fudging is becoming accepted mainstream without quotes only. Jai hu, jai hu

China May Face ‘Massive’ Bank Bailouts After Stimulus Program, http://bit.ly/b1fmw5 (A possible $350 Bn bailout?) $350 bn is small change for the mighty dlagon, no?Oops, its actually a full one sixth of the famed $2 trill reserves only! Uh-oh

Japan:Bank lending in Feb,excluding that by Shinkin(credit-union banks) dropped 1.6% from a yr earlier,according to BOJ data released Monday

TAE Post: According to the Bank for International Settlements, cross-border lending contracted by $3 trillion (£2 trillion) last year!! Again, predicted right here on this dhaga - global trade will fall, global trade war potential will rise, protectionism both subtle and crude will return, yada yada

On the emerging Lehmann mess:

Lehman report may point way for criminal charges - http://bit.ly/bUMisV (Oh wait, so NOW they realize the extent of the fraud, deception??)

Lehman balance sheet massaging (fraud IMO and gross negligence) may not be unusual, http://bit.ly/9DkbjF (Banks cheat? really? Oh my!)

Etc.

Neshant · Post by **Neshant** » 14 Mar 2010 15:30

The only thing this is going to unlock is a hoard of imported crap from China by Walmart and allow them to squeeze the profit margin of producers in India.

If it has any potential, it should be demonstrated in a joint venture which Walmart already has with Bharati. Why the need for promoting a Walmart monopoly which as demonstrated in the US has massively hollowed out their manufacturing, textile and soon agriculture base.

--------------
Unlocking retail's potential

US ambassador wants India to open up the retail trade

http://www.business-standard.com/india/ ... al/387742/

Hari Seldon · Post by **Hari Seldon** » 14 Mar 2010 18:30

You've heard of Repo 105 by now, if you're been paying even passing attn to financistan (i.e. planet wall st).

Here it is explained so neatly and nicely only.

This vid is a *must watch*.

A few minutes of your precious time folks, explained so simply that even joe 6 pack wouldn't have trouble understanding the criminality involved, that will make clear the extent of the rot in the heart of the financistan @ Wall st right under the NY Fed's nose, which then was led by none other than Sri Geithner.

Ratigan And Spitzer Discuss Repo 105, Conclude "Civil Cases Will Be Brought"

Watch and then tell me you're still feeling fine....Me? I'm still not done ROFLing only.

kmkraoind · Post by **kmkraoind** » 14 Mar 2010 18:52

Wen Rebuffs Yuan Calls, Is ‘Worried’ About Dollar

Interesting days ahead. US wants to remedy the situation to its advantage and China wants to retain status quo position to retain its advantage.

“I don’t think the yuan is undervalued,” Wen said at a press conference in Beijing marking the end of China’s annual parliamentary meetings. Dollar volatility is a “big” concern and “I’m still worried” about China’s U.S. currency holdings, he said.

Wen urged America to “take concrete steps to reassure investors” about the safety of dollar assets, repeating concerns that he expressed a year ago, sparked by a growing U.S. fiscal deficit. Treasury Department figures show China’s holdings of Treasury securities dropped for a second month in December to $894.8 billion.

Hari Seldon · Post by **Hari Seldon** » 14 Mar 2010 21:39

OKie, quickie break from the ipl....chargers put 190 on the board (go chargers!)

Here's stuff spilling outta watertight conspiracy theories on the Lehmann demise.
Lehman file rocks Wall Street
"we will, we will rock you! (And sock you with the bill)"

Findings on Lehman Take Even Experts by Surprise
Hmmm. you mean the same experts who couldn't smell trouble in Madoff's eerily pretty returns numbers (same as PRC's aajkal), or in Enron's meteoric rise to infamy or next in Lehman's fireworks?

And then for the 'Duh' moment
Repos Played a Key Role in Lehman's Demise
No kiddin' sherlock, thats like saying a bullet played a key role in Lincoln's demise. The truth is it was the mindset behind the mind behind the finger behind the trigger that's of more interest and import, no? Similarly, twas the naked fraudgiri, naked myopia, naked cover-ups, naked greed in giving oneself bonuses for faking accounting.....IOW, naked pakiness only that lies behind Lehman's demise.

But forget all that, here's the reeeal shocka...... yUKstan is involved. No sh1t, really it is. Here's the naked proof only....
British law firm cleared way for Lehman cover-up

Linklaters, one of Britain’s leading law firms, approved controversial accounting practices that allowed Lehman Brothers to shift billions of dollars of debt off its balance sheet and mask the perilous state of the bank’s finances before its catastrophic collapse in 2008. A 2,200-page report into the collapse of the 158-year old institution has uncovered evidence that Lehman used "balance sheet manipulation" in the form of an accounting practice known as "Repo 105" without telling investors or regulators that made the business appear healthier.

Anyone wanna check if Linklators has also been 'advising' other Bshitish banking interests from RBS to HSBC to Northern Rock to (gasp!) the BoE itself?? Nah, don;t count on it but would be fun nevertheless, no?

Neshant · Post by **Neshant** » 15 Mar 2010 01:36

Germany: pool EU gold reserves in new monetary fund

http://www.iii.co.uk/shares/?type=news& ... on=article

BERLIN, March 13 (Reuters) - Germany is considering the possibility of euro zone countries using their central banks' gold reserves to back a European Monetary Fund, German magazine Focus reported on Saturday.

The German Finance Ministry declined to comment on the report by Focus, which did not specify its sources.

"A proposal from the finance ministry suggests pooling the gold reserves of the former central banks of euro zone countries in a stabilisation fund," Focus wrote.

According to Focus, Greece still has around 112 tonnes of gold, while the German Bundesbank has 3,407 tonnes with a market value of around 90 billion euros.

German Finance Minister Wolfgang Schaeuble on Friday repeated his call for a fund which could, as a last resort, offer help to euro zone states facing bankruptcy.

Greece is battling a debt crisis and EU policymakers have been debating ways of providing support for it and other troubled euro zone members. (Reporting by Stefanie Huber, Writing by Sarah Marsh; editing by Patrick Graham)

shyam · Post by **shyam** » 15 Mar 2010 01:44

Neshant wrote:Unlocking retail's potential

US ambassador wants India to open up the retail trade

http://www.business-standard.com/india/ ... al/387742/

Most likely reason is that retail in US falling and many big stores are likely to collapse due to debts they have. Only way they can justify their valuations is by claiming expansion overseas. They need access to Indian market for their own survival.

Neshant · Post by **Neshant** » 15 Mar 2010 01:57

Without control over Germany's gold, it would make the bundesbank nothing more than a paper printing operation. Hence the reason they don't want it taken from their control and put under some pan-eurozone authority.

Bundesbank opposes backing EMF with gold

BERLIN (Reuters) - Germany's Bundesbank would oppose any government initiative to use its gold reserves as backing for a European Monetary Fund (EMF), a spokeswoman said.

A spokeswoman for Germany's central bank said she was not aware of any such plans but the Bundesbank would resist them.

She added that it was up to the Bundesbank to decide autonomously about the use of its gold reserves and not the government or the European Central Bank.

The German Finance Ministry declined to comment on the report by Focus.

"A proposal from the finance ministry suggests pooling the gold reserves of the former central banks of euro zone countries in a stabilisation fund," Focus said.

German Finance Minister Wolfgang Schaeuble on Friday repeated his call for a fund which could, as a last resort, offer help to euro zone states facing bankruptcy.

http://uk.reuters.com/article/idUKTRE62D0YF20100314

Ameet · Post by **Ameet** » 15 Mar 2010 02:20

Greek crisis is over, rest of region is safe

http://www.bloomberg.com/apps/news?pid= ... .0YlJlQEMU

Neshant · Post by **Neshant** » 15 Mar 2010 04:05

Greek crisis is over, rest of region is safe

They want to make it seem that way so the market stops speculating on Greece's potential for default and capital flight from Greece.

The reality is Germany is banking on Greek austerity measures to plug their huge debt without actually giving Greece any money. But if the speculation continues and Greece falls further through the hole, the Germans will have to dig into their pockets to pay for 'lazy' and dishonest southern europeans living on their dime.

All moves so far - putting American rating agencies under the gun to 'fix' their ratings on Greece, propaganda in the news about bailouts for Greece without anything concrete, wide publicity for Greek budget cuts..etc is all designed to stop the digging for more corpses in the EU just in case more skeletons fall out of the closet.

Hari Seldon · Post by **Hari Seldon** » 15 Mar 2010 12:13

AEP on a roll here. Ensoi.

Is China's Politburo spoiling for a showdown with America?

More a rehash of known stuff but its perspective laden when spilling outta AEP's pen.

Is the Politiburo smoking weed? {errrrr, when did they stop only? South of the Himalaya we've always known, the world's all Maya only. }

....

We have talked ourselves into believing that China is already a hyper-power. It may become one: it is not one yet. {No sh1t, Sherlock!}

China is ringed by states - Japan, Korea, Vietnam, India - that are American allies when push comes to shove. {Pushing and shoving hasn't helped getting more NATO help for Afgn though. I'm guessing PRC is a different level of threat and shove altogether}

It faces a prickly Russia on its 4,000km border, where Chinese migrants are itching for Lebensraum across the Amur. {An irreversible and irretrievable process, IMHO. Just like the Han colonization of Tibet and xinjiang}

Emerging Asia, Brazil, Egypt, and Europe are all irked by China's yuan-rigged export dumping. {And what have they done about it so far? Precisely my point.}
...
The reserves cannot be used internally to support China's economy. They are dead weight, beyond any level needed for macro-credibility. Indeed, they are the ultimate indictment of China's dysfunctional strategy, which is to buy $30bn to $40bn of foreign bonds every month to hold down the yuan, refusing to let the economy adjust to trade realities. The result is over-investment in plant, flooding the world with goods at wafer-thin export margins. China's over-capacity in steel is now greater than Europe's output.
{Uh, ok.}
As America's creditor - owner of some $1.4bn of US Treasuries, agency bonds, and US instruments - China can exert leverage. But this is not what it seems. If the Politburo deploys its illusiory power, Washington can pull the plug on China's export economy instantly by shutting markets. Who holds whom to ransom? {Aha. when the G2 play chicken, eh?}

Any attempt to retaliate by triggering a US bond crisis would rebound against China, and could be stopped - in extremis - by capital controls. {I'd prematurely predicted this and waited for it long before giving up. Looks like gonna need to dust up more predictions from the past onlee}
Roosevelt changed the rules in 1933. Such things happen. The China-US relationship is no doubt symbiotic, but a clash would not be `mutual assured destruction' as often claimed. Washington would win.

Contrary to myth, the slide to protectionism after the 1930 Smoot-Hawley Tariff Act did not cause the Depression. Trade contracted more slowly in the 1930s than this time. The Smoot-Hawley lesson is that tariffs have asymmetrical effects. They devastate surplus countries: then America. Deficit Britain did well by retreating into Imperial Preference.

INteresting times indeed.

vina · Post by **vina** » 15 Mar 2010 13:34

Oh well. The Chinese Premier Wen Jiao Bao's recent "fantastic" quote of "Shanghai Statistics" to affirm that the Chinese currency is "correctly valued" and everything else can mean only one of two things. 1) The Chinese are posturing and unleashing rhetoric (or to use the words of our esteemed Chinese friends here, being "boasters") , before the ultimate cave in , put tail between their legs and do championship down hill skiing like their esteemed "taller than the mountains " brothers in the southwest the Pakis. or 2. They have become so caught in their own voices and rhetorics that they have become dumb enough to take on the entire world and suffer one of their great 'humiliations' at the hands of the white, brown, black , yellow and blue "barbarians" .

Somehow I think they will turn tail and slink. If the Chinese Commies want to rachet up nationalism and get into a fight, the consequences of punitive tarriffs on their "expolts" and physical block of their external trade will be devastating and will be borne solely and absolutely by them.

The excesses of the recent past in the name of the stimulus will come home to roost and can absolutely NEVER be inflated away /be subsumed by growth in such a scenario.

With the party apparatchicks deeply involved in the mercantile and commercial aspects of this gaint ponzi scheme, there will be immense pressure on the Chinese leadership to cave in and do the "right thing" , even to the extent of a possible putsch if needed (money talks after all , no one wants to end up from being a multi millionaire to being a pauper from the foolish actions of some old dinosaurs at the top).

Despite all that the Chinese are hell bent on a confrontation (stupid things do happen... like the militarist pre WWII regime in Japan for instance, PRC resembles that regime the most IMHO.. talk about ending resembling the monster you purport to hate the most) then all hell will break loose.

If it is that scenario no 2) that comes to pass, China will be totally isolated and the only "friend" will be the loser "Tarrel than Mountain friends", the Pakis. The urge to hurt US and the rest of the world strategically will force these two together even closer. Expect more, nuke and missile , weapons transfers to Pakiland and Iran from China and the temptation to Pakiland in a a desparate effort to untangle itself from Unkil's squeeze by embracing China very tightly..

Alright.. All right. The operative word for India from the AEP article is this.

Handle with care

But who am I to say so (after all, as they say in Hindi, What goes my fathers?... Or in Inglees, No Skin off my nose). But if the Chinese let the Paki's embrace them so closely it will be embrace of a desparte man in deep waters who cant swim. After great turmoil, China will realize, that they have to cut the Paki embrace or the Pakis will drag them down with them.

All in all. Jai Mao, Jai Hu and Jai Wen. Interesting times indeed.

Hari Seldon · Post by **Hari Seldon** » 15 Mar 2010 15:49

The rating agencies, regardless of market moodiness, continue to cover themselves in evermore glory. From the inimitable zerohedge.

More Empty Posturing Out Of Moody's - Rating Agency Once Again Threatens With US Downgrade

The man has a way with words, gotta admit....

The rating agency, whose "objectivity" was recently fully exposed after it has been persistently the one rater who refuses to downgrade Greece, even after its peers S&P and Fitch have made Greek bond eligibility for ECB collateral contingent purely on Moody's lack of conscience, is pretending that it has some credibility after all, by doing a little extra posturing, and grumbling that if things get much worse, it may, just may, consider dropping the US AAA rating.
{Yup, and I got the Taj Mahal to sell on a 60% off sale no sell}

This, of course, despite Tim Geithner's promise that the US would only be downgraded over his dead body, or something like that.

Furthermore, as we have recently learned, the FRBNY has a "proactive" influence in rating agency decisions. To assume that Mr. Brian Peters of the New York Fed would return a Moody's call and say "yes, we agree with your assumption that the US is not really AAA-worthy, please go ahead and downgrade us" requires copious amount of prior consumption of LSD and other hallucinogenics.

Yet for those who still care about what output Moody's produces, here is the full relevant text discussing the outlook for the United States.

Now if Moody's thick skin is also admitting to the possibility that people everywhere think its ratings are junk, then one surefire way to doublequick return-to-credibility would be to go out on a limb and showcase the true position of the UKstani ekhanomy.
I double dare Moody to do that now...

Ensoi.

Neshant · Post by **Neshant** » 15 Mar 2010 19:23

max keiser on iceland debt situation

Turns out the icelandic bankers ran off to the UK with their bonuses just before Britain declared Iceland a terrorist country to freeze its assets in the UK. Now if Iceland is a terrorist country, it follows that the bankers hiding out in the UK are terrorist. The proposal to extradite these terrorists in London back to Iceland along with their assets has been put forward - but no takers in Britain.

Let us be clear on one thing - the Indian govt will never assume the debts of private companies/banks in India.

part 2 : http://www.youtube.com/watch?v=du8DZ2snSgs

part 3 : http://www.youtube.com/watch?v=esUPdgHbm4U

SwamyG · Post by **SwamyG** » 15 Mar 2010 20:34

Europe's woes are WWII hangover
The article uses Ambrose Evans-Pritchard's thoughts on the current European financial scenario. Ambrose wages his own war at EU again. The author summarizes Ambrose

The irony should not be lost on us. A monetary mechanism developed to enhance the prospect of peace in Europe may in the end contribute to its disintegration. Evans-Pritchard says he does not sense that Americans recognize the gravity of the situation.

"Governments have shot all their bullets. They used all their powder. There's nothing left," he concludes. "Now money supply is contracting, credit is contracting, and the velocity of activity has collapsed. The recovery has tipped over. This is a major new phase of the crisis."

SwamyG · Post by **SwamyG** » 15 Mar 2010 21:56

When the two pretend elephants stomp the ground and trumpet to scare each other into the corner; I hope the real elephant just stands quietly and charts its way to progress. India's mantra should be: be dharmic, be militarily and economically mighty, keep growing and take care of its citizens.

Ameet · Post by **Ameet** » 15 Mar 2010 22:19

Pound Bears Bet More Than When George Soros Beat BOE

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

Futures traders are more bearish than ever on sterling amid concern that the currency’s worst annual start in 13 years will continue as the U.K.’s budget deficit approaches the Greek shortfall that roiled the euro.

Wagers on the pound weakening against the dollar outnumber futures that profit on a rise by eight times more than when George Soros made $1 billion betting against the currency in 1992, the year Prime Minister John Major’s Conservative government was forced to withdraw from the European Exchange Rate Mechanism. Sterling fell 19 percent that year.

The pound has lost 6.9 percent in 2010 on speculation a budget gap will skewer the currency: Either record borrowing will push debt costs higher and force policy makers to print more money to buy bonds, or lawmakers will cut spending too fast and trigger a new recession. Prime Minister Gordon Brown’s government estimates the deficit will hit 12.6 percent of gross domestic product, almost as high as the 12.7 percent in Greece that drove European leaders to consider a bailout.

“The risk of a U.K. double dip is substantial,” said Hans-Guenter Redeker, London-based head of foreign-exchange strategy at BNP Paribas SA, which predicts an additional 13 percent drop to $1.31 by the end of 2010. “Sterling is increasingly trading like an emerging-market currency with rising bond yields no longer working in favor of the currency.”

Suraj · Post by **Suraj** » 15 Mar 2010 22:51

A recent copy of either Businessweek or Fortune has a very nice graph listing several western countries along with some developing ones, including India, on a 2D graph with debt/GDP on X-axis and sovereign debt rating on Y axis. That graph clearly shows the whole charade of the ratings agencies, where the likes of Greece, with higher debt/GDP and higher external debt/total debt have significantly better ratings than India.

Neshant · Post by **Neshant** » 16 Mar 2010 07:55

on a 2D graph with debt/GDP on X-axis

Now if they are lieing on their debt (the numerator), any reason to believe they are not over stating their GDP (the denominator)?

A lot of accounting gimmickry is going to be exposed in the next few years and quickly buried under a mountain of behind-the-scenes money printing.

Singha · Post by **Singha** » 16 Mar 2010 08:44

yahoo news.....and it begins the great drawdown....

Social Security to start cashing Uncle Sam's IOUs
AP

By STEPHEN OHLEMACHER, Associated Press Writer Stephen Ohlemacher, Associated Press Writer – Mon Mar 15, 5:09 pm ET

PARKERSBURG, W.Va. – The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.

It's time to start cashing them in.

For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.

Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg's municipal offices.

Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs

, and the timing couldn't be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.

Social Security's shortfall will not affect current benefits. As long as the IOUs last, benefits will keep flowing. But experts say it is a warning sign that the program's finances are deteriorating. Social Security is projected to drain its trust funds by 2037 unless Congress acts, and there's concern that the looming crisis will lead to reduced benefits.

"This is not just a wake-up call, this is it. We're here," said Mary Johnson, a policy analyst with The Senior Citizens League, an advocacy group. "We are not going to be able to put it off any more."

For more than two decades, regardless of which political party was in power, Congress has been accused of raiding the Social Security trust funds to pay for other programs, masking the size of the budget deficit.

Remember Al Gore's "lockbox," the one he was going to use to protect Social Security? The former vice president talked about it so much during the 2000 presidential campaign that he was parodied on "Saturday Night Live."

Gore lost the election and never got his lockbox. But to illustrate the government's commitment to repaying Social Security, the Treasury Department has been issuing special bonds that earn interest for the retirement program. The bonds are unique because they are actually printed on paper, while other government bonds exist only in electronic form.

They are stored in a three-ring binder, locked in the bottom drawer of a white metal filing cabinet in the Parkersburg offices of Bureau of Public Debt. The agency, which is part of the Treasury Department, opened offices in Parkersburg in the 1950s as part of a plan to locate important government functions away from Washington, D.C., in case of an attack during the Cold War.

One bond is worth a little more than $15.1 billion and another is valued at just under $10.7 billion. In all, the agency has about $2.5 trillion in bonds, all backed by the full faith and credit of the U.S. government. But don't bother trying to steal them; they're nonnegotiable, which means they are worthless on the open market.

More than 52 million people receive old age or disability benefits from Social Security. The average benefit for retirees is a little under $1,200 a month. Disabled workers get an average of $1,100 a month.

Social Security is financed by payroll taxes — employers and employees must each pay a 6.2 percent tax on workers' earnings up to $106,800. Retirees can start getting early, reduced benefits at age 62. They get full benefits if they wait until they turn 66. Those born after 1960 will have to wait until they turn 67.

Social Security's financial problems have been looming for years as the nation's 78 million baby boomers approached retirement age. The oldest are already there. As that huge group of people starts collecting benefits — and stops paying payroll taxes — Social Security's trust funds will shrink, running out of money by 2037, according to the latest projection from the trustees who oversee the program.

The recession is making things worse, at least in the short term. Tax receipts are down from the loss of more than 8 million jobs, and applications for early retirement benefits have spiked from older workers who were laid off and forced to retire.

Stephen C. Goss, chief actuary for the Social Security Administration, says the crisis has been years in the making. "If this helps get people to look more seriously at that in the nearer term, that's probably a good thing. But it's only really a punctuation mark on the fact that we have longer-term financial issues that need to be addressed."

In the short term, the nonpartisan Congressional Budget Office projects that Social Security will continue to pay out more in benefits than it collects in taxes for the next three years. It is projected to post small surpluses of $6 billion each in 2014 and 2015, before returning to indefinite deficits in 2016.

For the budget year that ends in September, Social Security is projected to collect $677 billion in taxes and spend $706 billion on benefits and expenses.

Social Security will also collect about $120 billion in interest on the trust funds, according to the CBO projections, meaning its overall balance sheet will continue to grow. The interest, however, is paid by the government, adding even more to the budget deficit.

While Congress must shore up the program, action is unlikely this year, said Rep. Earl Pomeroy, D-N.D., who just took over last week as chairman of the House subcommittee that oversees Social Security.

"The issues required to address the long-term solvency needs of Social Security can be done in a careful, thoughtful and orderly way and they don't need to be done in the next few months," Pomeroy said.

The national debt — the amount of money the government owes its creditors — is about $12.5 trillion, or nearly $42,000 for every man, woman and child in the country. About $8 trillion has been borrowed in public debt markets, much of it from foreign creditors. The rest came from various government trust funds, including retirement funds for civil servants and the military. About $2.5 trillion is owed to Social Security.

Good luck to the politician who reneges on that debt, said Barbara Kennelly, a former Democratic congresswoman from Connecticut who is now president of the National Committee to Preserve Social Security and Medicare.

"Those bonds are protected by the full faith and credit of the United States of America," Kennelly said. "They're as solid as what we owe China and Japan."

Singha · Post by **Singha** » 16 Mar 2010 08:49

the "hyper power" economy seems increasingly like a "ponzi scheme" - borrowing to fund even essential stuff that should be funded via current real cash inflows only.

as for Moodys and their ilk, remember the days in mid 1990s when talk of a ratings team from this sorry band visiting Delhi sent ripples through the town and they could get audiences with the high and mighty and "prescribe" stuff if we didnt want a downgrade? wooo I am so scared now.....they'd be lucky to get kicked like footballs by the PMO security detail all the way down race course road should they dare to even enter lutyens dilli.

remember the days when ex-enron ceo rebecca mark threatened the GOI directly
that she would use her "carpet burn" connextions with the clubby old set back in
D.C. to punish the yindoo?

Hari Seldon · Post by **Hari Seldon** » 16 Mar 2010 15:04

Events have been fast paced though seemingly in slow motion. Risk is missing the wood for the trees etc. Hence, the appreciation for summary type articles that bring together events in terms of an underlying storyline.

Have one such by Sprott which IMHO is about as good as it gets in laying out the storyline. Hat tip ZH.

Entire article is a must read IMO. Still, for the time constrained in the IPL era, here're some previews and excerpts:

If you’re of a certain age, chances are you remember exactly where you were when JFK was assassinated....{I can see where you're going with this}
We wonder, however, if any of you recall where you were on September 18th, 2008? Do you remember that day? We can’t seem to recall it either, which is strange, because it was one of the most important days of the decade. October 7, 2008 is another day that should stick out in our memories, but we’re sure you don’t remember that day either – and we’re in the same boat.

How is it, then, that we can’t recall where we were or what we were doing on the two days the entire financial system almost collapsed?!? It boggles our mind.

Awrite. Sprott then recounts a brief walkthrough the story buildup. Read it all. I'll only post a sentence or 2.

The seeds of the financial mess we are currently experiencing began in the mid-to-late nineties.
...
Alan Greenspan first uttered his now famous "irrational exuberance" warning in December 1996 when describing stock valuations at the time.
...
The Fed actually raised rates six times between June 1999 and January 2000 in an attempt to cool an already overheated economy. The dot-com euphoria burst on March 10, 2000, when the NASDAQ peaked at 5,132, representing more than double its value from only a year before.
...
This collapse compelled Alan Greenspan and the Federal Reserve to embark on the largest rate cuts in US history in an effort to soften its impact.
...
The key point to emphasize here is that the Federal Reserve lowered interest rates thirteen times between January 3, 2001 and June 25, 2003 in order to cushion the economy. These rate cuts allowed for increasingly easy access to credit on a worldwide scale.
...
The financial sector became the US economy’s central economic driver, generating up to 41% of all corporate profits and making it the fastest growing sector of the economy.{wow. no wonder sh1t happened}
...
But the meltdown happened so fast that it never seemed to burn into our collective memory. Everyone remembers that we went into a severe recession in late 2008, but do they know the details of what actually transpired?

And that sets the stage for the deconstruction of the current crisis. Masterful, is the word. Read it all, re-recommended onlee.

It was the Lehman Brothers bankruptcy on Sept. 15th that set everything in motion. Most market participants will remember that date - Bank of America bought Merrill Lynch the very same day, so it was certainly memorable.
...
US money market funds, began to hemorrhage money as investors redeemed in panic.
...
Almost $173 billion was pulled from such funds over the next two days, threatening to collapse the entire US financial system.
...
on Thursday, September 18th, the US financial system almost completely collapsed. The details of that day remain frustratingly murky. The imminence of complete disorder seemed to scare Congress into action, but we can only piece the story together through random anecdotes that have been partially revealed through subsequent interviews.

And here, things get even more interesting. How TARP was really pushed through and all that. As high-stakes a game of chicken as it got in that time.

In what has been dubbed ‘the Kanjorski meme’, Congressman Paul Kanjorski recounts a meeting that was held between Ben Bernanke, Henry Paulson and certain members of Congress where the conception of the "Troubled Asset Relief Program" (TARP) supposedly took place. To stem the flow of money out of US-based money market funds, Paulson had to provide an almost instant guarantee on all money market funds held within the US.

Kanjorski recounts, "If they had not done that, their estimation was that by 2pm that afternoon (September 18th), $5.5 trillion would have been drawn out of the money market system of the United States, [which] would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed. We talked at that time about what would happen if that happened. It would have been the end of our economic system and our political system as we know it."

Further details of these meetings have been provided by Senator James Inhofe, who recounted that Paulson had warned of martial law and civil unrest if the TARP bill failed.

It is interesting to note that while Henry Paulson mentions several meetings that took place on September 19th in his book, the discussion of ‘imminent financial collapse’ and ‘martial law’ was noticeably absent.
...
a research report issued by the Joint Economic Committee [states] "On Thursday September 18, 2008, institutional money managers sought to redeem another $500 billion, but Secretary Paulson intervened directly with these managers to dissuade them from demanding redemptions. Nevertheless, investors still redeemed another $105 billion. If the federal government were not to act decisively to check this incipient panic, the results for the entire U.S. economy would be disastrous."
...
Between the official record and the statements by members of congress and the senate, we can piece together an almost system-wide collapse that was potentially hours away.

And what about that other date - 7 Oct 2008?

The second fateful date to remember was October 7, 2008, when the UK almost collapsed. Bank of England Governor, Mervyn King, describes the situation: "Two of our major banks which had had difficulty in obtaining funding could raise money only for one week then only for one day, and then on that Monday and Tuesday it was not possible even for those two banks really to be confident they could get to the end of the day."10

This was the justification given for the Bank of England to provide secret loans of £61.6 billion to The Royal Bank of Scotland and HBOS to maintain solvency.11 Amazingly, news of these loans was never revealed until November 24, 2009, more than one year later. Recalling that fateful day, David Soanes, Managing Director of UBS Bank, and part of the group assembled to assist with the UK government’s crisis response, stated, "We only really knew by probably about seven o’clock at night (October 7, 2008), that we, that everyone was going to get through to the next day."12

These revelations raise new questions about the true scope of bailouts undertaken by the major governments at the time.

Lord Myners, the UK Financial Services Secretary, alluded to similar covert banking operations conducted by the European Central Bank and the US Federal Reserve.13 We have no idea what he is referring to, but we would certainly be interested to learn more.{you bet. But then again, be careful what you wish for....}

This type of activity by the leaders of our financial system certainly helps to explain why those two dates are not more ingrained in our collective memory – strong efforts were obviously made to hide their severity. {Duh}
...
It also seems incredible that the best we can do to understand those fateful days is to cobble together comments made after the fact.

It serves to be reminded that the events of September and October 2008 had previously been considered unthinkable, and we must never forget that the ‘unthinkable’ can happen again.

A complete banking collapse would not be pleasant – and it’s certainly not an experience we would ever wish upon ourselves, but it must be remembered that WE ALMOST WENT THERE.

And here the emoticons fail us. There's no way this one here

or this one

or even this one

can do justice to the way on which the powers that be have chosen to head.

So where does this leave us for the decade ahead? In bad fiscal shape. It seems as if we’re just making the same mistakes over again, and on a far larger scale.

We have passed the debt obligations of the financial system onto the governments. We have liquefied the system beyond any rational explanation, more than doubling the monetary base since the collapse of Lehman Brothers. Social Security, which was in balance in year 2000, is now underfunded by $15 trillion dollars. Total unfunded obligations of the US Government are now $104 trillion.

If we add the $6 trillion of outstanding Fannie Mae and Freddie Mac debt and the $12 trillion of outstanding national debt, we arrive at a total US government debt obligation of $122 trillion.

It’s a truly preposterous amount of money that will never be paid off in today’s dollars. As we wrote in our October 2009 article entitled "Dead Government Walking", the US Government is on a trajectory to default on their obligations, and the same can realistically be said for the UK and Japan.

The answer put forward by the US, UK and Japanese governments? Quantitative Easing and 0% interest rates. Have they learned nothing from the past decade?!

Read it all, if you wanna.

SwamyG · Post by **SwamyG** » 17 Mar 2010 01:20

Hari garu: Simple question. Are Sprott & Co benefiting with a continued bearish economy? They talk about bear funds, so I am wondering if they stand to benefit from and D&G they spread.

Hari Seldon · Post by **Hari Seldon** » 17 Mar 2010 05:36

SwamyG wrote:Hari garu: Simple question. Are Sprott & Co benefiting with a continued bearish economy? They talk about bear funds, so I am wondering if they stand to benefit from and D&G they spread.

Good point swamy garu, but IMO the questions sorta puts the cart before the horse. Sprott & co are an investment and asset mgmt firm. They can do bull plays as well as bear plays. They are doing a bear play because they see a bear mkt, not because they can *create* a bear mkt to suit their pre-existing bets.

As for D&G spreading, well, that was their newsletter to their clients, so they very well can propagandize all they want. Fact remains that the khanomy is levitating only. The entire mainstream media as well as gubmint statistics are adamant in whitewashing and downplaying the crisis. No meaningful reform or even serious discussion of the 'root causes' has happened in Congress, IMHO. No prosecution for established fraud has happened or is even on the horizon. None.

Its all a dog and pony show without dogs or ponies, done around a ponzi system. Doesn't matter either way.

I'm all praise to the sane, cautious D&Gers who have this big advantage over their green-shooter counterparts - the D&Gers can very much live with being wrong in their assumptions and predictions because that is upside only. The greenshooters, not so much.

SwamyG · Post by **SwamyG** » 17 Mar 2010 06:27

Agreed, they really can not create the wide spread panic. And probably they don't have the power the other political and financial crooks possess. I play the stock markets - always long, no margins, no shorting. I am quite wary of the institutional players. They are the traders who sway the markets. Amerikhans are plagued with the disease called "prosperity".