Perspectives on the global economic meltdown (Jan 26 2010)

[Neshant]

It won't be easy (to say the least to go back to gold standard or silver standard) because it will wipe out 1.4 quadrillion dollars of derivatives market around the world. You think governments around the world will agree to that? The economy operated fine during the barter system too. So eventually then, we should go to bartering..

Its headed for collapse one way or another. The evil of the fiat system is that others are made to bare the consequence of the collapse instead of the gamblers.

All trade is essentially barter involving 2 parties. The fiat system introduces a 3rd party - a middle man which contributes nothing but skims & scams from each transaction. It stands to reason that if you remove the middle man, the cost of doing business comes down.

Anytime you have some 3rd party middleman inserting himself between the fruits of your labor and your paycheck, bewarned! A robbery is in progress.

Gold is subject to speculation too. And I don't understand people's obsession with gold. Why should it be used as a currency anyway? ..

Probably because its the only thing I can think of that has stood the test of time as honest money. All other paper currencies, and there are 3000 of them or more, have gone extinct. Average time of survival for each fiat currency is I believe 60+ years.

Gold is not a good choice for a country that does not have much of it. The ideal choice would be a controlled amount of fiat by an honest custodian. However its been established beyond a doubt that any system with a human hand in it ends up being abused and turned into a racket. Inevitably, the 'honest custodian' ends up doing favors for those who set it up and sustain it through influence, favors, propaganda..etc and its ceases to be honest.

[aqkhan]

It won't be easy (to say the least to go back to gold standard or silver standard) because it will wipe out 1.4 quadrillion dollars of derivatives market around the world. You think governments around the world will agree to that? The economy operated fine during the barter system too. So eventually then, we should go to bartering..

Its headed for collapse one way or another. The evil of the fiat system is that others are made to bare the consequence of the collapse instead of the gamblers.

Fiat system doesn't force other to bear the consequences, government policies do.

All trade is essentially barter involving 2 parties. The fiat system introduces a 3rd party - a middle man which contributes nothing but skims & scams from each transaction. It stands to reason that if you remove the middle man, the cost of doing business comes down.

The middle man doesn't have to skim and scam. Also, the gold standard made banks rich too, albeit it was not explosive. Your premise that gold will introduce some sort of self-regulation is flawed. UK went bankrupt when there was a gold standard.

Anytime you have some 3rd party middleman inserting himself between the fruits of your labor and your paycheck, bewarned! A robbery is in progress.

Robbery has been in progress since the evolution of commerce. But that is the cost of growth. If everybody had to save up to buy, growth would be slow. Moreover, innovation would get stifled, because people would be more averse to take risks in a strict monetary regime like islamic banking.

Gold is subject to speculation too. And I don't understand people's obsession with gold. Why should it be used as a currency anyway? ..

Probably because its the only thing I can think of that has stood the test of time as honest money. All other paper currencies, and there are 3000 of them or more, have gone extinct. Average time of survival for each fiat currency is I believe 60+ years.

Gold is not a good choice for a country that does not have much of it. The ideal choice would be a controlled amount of fiat by an honest custodian. However its been established beyond a doubt that any system with a human hand in it ends up being abused and turned into a racket. Inevitably, the 'honest custodian' ends up doing favors for those who set it up and sustain it through influence, favors, propaganda..etc and its ceases to be honest.

Like I said, Gold standard didn't prevent UK to go bankrupt. No major economist worth his salt would agree or recommend going back to gold standard because its too restrictive and stifles growth, even if we all agree to wipe out a quadrillion dollars in derivatives and equity. Fiat is going to stay. The corruption in fiat money can be removed simply by auditing. However, I sense a huge conspiracy that the Rothchilds will not let that happen, simply because they will lose their capability to manipulate the world based on economics. And that will eventually lead to collapse.

[Neshant]

Robert Prechter on the coming massive deflation :

http://www.financialsensenewshour.com/b ... 0619-2.mp3

[Neshant]

Fiat system doesn't force other to bear the consequences, government policies do.

I'm afraid most of the time, the reason for introducing the fiat system is to perpetuate a fraud. Even when it starts off with nobel intentions, the end result is fraud.

Some means are needed to enforce discipline as humans are inherently corruptable. The only one that has stood the test of time is gold.

Robbery has been in progress since the evolution of commerce. But that is the cost of growth.

Sorry but I disagree. Fraud does not expedite growth any more than running up your credit card and defaulting on it expedites growth. Picking winners and losers is bad.

Like I said, Gold standard didn't prevent UK to go bankrupt..

Which means what to me if saving in gold? It means I will get a higher interest on lending the fruits of my labor assuming I choose to lend it. Sounds good to me. Gold is not a cure for wrecklessness or stupidity of men. But it does exact a just price for it.

As for economists, the field of economics is looking more and more like sourcery these days. Spreading confusion is their stock in trade. Most economists have it in their interest to keep the fiat system going.

[aqkhan]

Fiat system doesn't force other to bear the consequences, government policies do.

I'm afraid most of the time, the reason for introducing the fiat system is to perpetuate a fraud. Even when it starts off with nobel intentions, the end result is fraud.

Some means are needed to enforce discipline as humans are inherently corruptable. The only one that has stood the test of time is gold.

For the nth time, gold has not prevent people from committing banking fraud. The way to avoid fraud is audits irrespective of the monetary system in place. That regulation in the old days was done by the kings and his advisors. Fraud committed by bankers was low because they feared their life. In stark contrast today, the fed is getting away from having any audits just by instilling fear in the government.

Robbery has been in progress since the evolution of commerce. But that is the cost of growth.

Sorry but I disagree. Fraud does not expedite growth any more than running up your credit card and defaulting on it expedites growth. Picking winners and losers is bad.

I think I didn't convey my thoughts here. Fraud has always existed in banking. The only difference between then and now is the amount of fraud and overspeculation by markets and allowing trading of equities and derivatives. Virtual money being legalized is the biggest fraud that led to the trouble we are in today. It has nothing to do with gold. Gold is as worthless as dollar. Someday, when we have perfected the monetary system, we will laugh at humanity's fascination of gold. Gold as commodity has value, not as a monetary system.

Like I said, Gold standard didn't prevent UK to go bankrupt..

Which means what to me if saving in gold? It means I will get a higher interest on lending the fruits of my labor assuming I choose to lend it. Sounds good to me. Gold is not a cure for wrecklessness or stupidity of men. But it does exact a just price for it.

But you don't get paid in gold. You get paid in fiat money. Having convert it to gold and then conducting commerce would not decouple you from the trouble.

[Neshant]

For the nth time, gold has not prevent people from committing banking fraud. .

With gold no bank is needed. A person with gold is his own central banker. Just collect the gold and keep it. If you read my earlier messages, I've already pointed out that the entire banking & financing casino industry will be obsolete once honest money gets going. The technology already exist to make direct loans to worthy borrowers should a saver choose to part with his hard earned honest money. A burdensome middle man commercial banking 'industry' skimming money is not needed with or without audits.

The way to avoid fraud is audits irrespective of the monetary system in place. .

Audits will do nothing because corruption inevitably seeps in as it has, decision makers are bought as they have and the audits are a farce as they are.

But you don't get paid in gold. You get paid in fiat money. Having convert it to gold and then conducting commerce would not decouple you from the trouble.

I don't know what you are talking about but on a gold standard, I'd be keeping the vast majority of my savings in physical gold, not toilet paper representations of it. And it would not be in a bank because banks would not exist.

BTW, why do you have the name of Xerox khan as your name on BR?

[aqkhan]

With gold no bank is needed. A person with gold is his own central banker. Just collect the gold and keep it. If you read my earlier messages, I've already pointed out that the entire banking & financing casino industry will be obsolete once honest money gets going. The technology already exist to make direct loans to worthy borrowers should a saver choose to part with his hard earned honest money. A burdensome middle man commercial banking 'industry' skimming money is not needed with or without audits.

LOL. Collect the gold and keep it where? In your house? What is to prevent people from looting it if everyone starts keeping their life savings in gold in their house? Moreover, how will there be any growth if everyone hoards money by converting it into gold? Will you lend gold to others? Will you pay in gold in your daily life? The technology exists because of fiat money. If the government takes the decision to convert all dollars to gold, every country will lose 80-90% of their wealth. That will cause havoc on everyone, not just the banks. It will bring industrial production to a standstill.

Audits will do nothing because corruption inevitably seeps in as it has, decision makers are bought as they have and the audits are a farce as they are.

Audits on federal deficit are what caused the alarm since 2007. I don't know about India, but in US, GAO has done a fantastic job in the past.

I don't know what you are talking about but on a gold standard, I'd be keeping the vast majority of my savings in physical gold, not toilet paper representations of it. And it would not be in a bank because banks would not exist.

LOL. Good luck with that. You sound more and more ridiculous defending gold. Gold is not the answer. In that case mafias would create a new world order.

BTW, why do you have the name of Xerox khan as your name on BR?

AQKhan doesn't mean Abdul Qadeer Khan.

[Prem]

July 02, 2010

Mr Perkins explains
Mr. Perkins had just returned from a liquor-soaked golf weekend with colleagues in June of last year when he sat down in front of his laptop at his home east of London and started to place bets on Brent crude futures, according to a report by the Financial Services Authority. He continued to drink and place bets through the night, and by the morning of June 30, Mr. Perkins had placed more than $520 million worth of trades, at one point pushing the price of oil to $73.05, an eight-month high. The trades by Mr. Perkins were the main reason the price gained about $1.65 a barrel in just over two hours in the middle of the night, according to the report.
“Mr. Perkins’s explanation for his trading on 29 and 30 June is that he was drunk,” the F.S.A. said. “He claims to have limited recollection of events on Monday and claims to have been in an alcohol-induced blackout at the time he traded.”
When the government says we have to crash the economy to earn the respect and good opinion of the markets, they mean people like Mr Perkins, amongst others

http://bloodandtreasure.typepad.com/blo ... lains.html

[Neshant]

Moreover, how will there be any growth if everyone hoards money by converting it into gold?

Growth arises when people see something worthwhile investing in and then they invest. Growth does not come from some joker sitting at the top fiddling around with interest rates, counterfeiting money or getting people to spend wastefully. Wake up and clue in, that's what caused the crisis.

If the government takes the decision to convert all dollars to gold, every country will lose 80-90% of their wealth.

Debt masquerading as wealth is not wealth. Its debt.

Audits on federal deficit are what caused the alarm since 2007. I don't know about India, but in US, GAO has done a fantastic job in the past.

Some fantastic stuff happening here :

http://www.youtube.com/watch?v=PXlxBeAvsB8

Like every other fiat paper scam, the unfolding of the ponzi scheme due to the 2008 crash is what caused the alarm. Audits did nothing and continue to do nothing.

LOL. Good luck with that. You sound more and more ridiculous defending gold. Gold is not the answer. In that case mafias would create a new world order..

You mean like the toilet paper printing mafia which throughout history has left savers with toilet paper for money?

AQKhan doesn't mean Abdul Qadeer Khan.

For a minute, I thought you were promoting the interest of Xerox with this incessant paper pushing.

[aqkhan]

Growth arises when people see something worthwhile investing in and then they invest. Growth does not come from some joker sitting at the top fiddling around with interest rates, counterfeiting money or getting people to spend wastefully. Wake up and clue in, that's what caused the crisis.

All the above are valid. However, growth doesn't come from gold speculation either. Gold as money is as stupid as fiat money. Just because something worked in the past, doesn't mean it will work in the future. The requirements of today's economy is different. Gold doesn't meet that requirement.

Debt masquerading as wealth is not wealth. Its debt.

Gold is not wealth either! Gold only has value as long as people think it has value. That doesn't make the de-facto monetary base.

Some fantastic stuff happening here :

http://www.youtube.com/watch?v=PXlxBeAvsB8

Like every other fiat paper scam, the unfolding of the ponzi scheme due to the 2008 crash is what caused the alarm. Audits did nothing and continue to do nothing.

Nope, there was alarm since 2006. You just woke up in 2008. GAO reports on deficits have been alarming since 2001.

You mean like the toilet paper printing mafia which throughout history has left savers with toilet paper for money?

Cute. The toilet paper printing mafia are still better than the thugs you will encounter if you stuff gold in your mattress.

[Sanjay M]

Cute. The toilet paper printing mafia are still better than the thugs you will encounter if you stuff gold in your mattress.

Nothing has to be stuffed into a mattress - it just has to be kept safe.

LOL. Collect the gold and keep it where? In your house? What is to prevent people from looting it if everyone starts keeping their life savings in gold in their house? Moreover, how will there be any growth if everyone hoards money by converting it into gold? Will you lend gold to others? Will you pay in gold in your daily life? The technology exists because of fiat money. If the government takes the decision to convert all dollars to gold, every country will lose 80-90% of their wealth. That will cause havoc on everyone, not just the banks. It will bring industrial production to a standstill.

Sure, you can pay with gold in your daily life, by using electronic transactions. The gold can actually be safely with the right kind of bank or lending institution. It's not like the economy can't use gold electronically - it's merely about securitized currency.

[svinayak]

Economists Rethink Free Trade
It's no wholesale repudiation, to be sure, but something momentous is happening as doubts begin to creep in
http://www.businessweek.com/magazine/co ... pDiscussed
by Jane Sasseen

BW MAGAZINE



Many ordinary Americans have long been suspicious of free trade, seeing it as a destroyer of good-paying jobs. American economists, though, have told a different story. For them, free trade has been the great unmitigated good, the force that drives a country to shed unproductive industries, focus on what it does best, and create new, higher-skilled jobs that offer better pay than those that are lost. This support of free trade by the academic Establishment is a big reason why Presidents, be they Democrat or Republican, have for years pursued a free-trade agenda. The experts they consult have always told them that free trade was the best route to ever higher living standards.

But something momentous is happening inside the church of free trade: Doubts are creeping in. We're not talking wholesale, dramatic repudiation of the theory. Economists are, however, noting that their ideas can't explain the disturbing stagnation in income that much of the middle class is experiencing. They also fear a protectionist backlash unless more is done to help those who are losing out. "Previously, you just had extremists making extravagant claims against trade," says Gary C. Hufbauer, a senior fellow at the Peterson Institute for International Economics. "Now there are broader questions being raised that would not have been asked 10 or 15 years ago."

So the next President may be consulting on trade with experts who feel a lot less confident of the old certainties than they did just a few years ago. From Alan S. Blinder, a former vice-chairman of the Federal Reserve and member of the Council of Economic Advisers in the Clinton Administration, to Dartmouth's Matthew J. Slaughter, an international economist who served on President George W. Bush's CEA, many in the profession are reevaluating the impact of globalization. They have studied the growth of low-wage work abroad and seen how high-speed telecommunications make it possible to handle more jobs offshore. Now they fear these factors are more menacing than they first thought.

GAINS ONLY FOR A TINY SLICE
No one is suggesting that trade is bad for the U.S. overall. According to estimates by the Peterson Institute and others, trade and investment liberalization over the past decades have added $500 billion to $1 trillion to annual income in the U.S.

Yet concern is rising that the gains from free trade may increasingly be going to a small group at the top. For the vast majority of Americans, Dartmouth's Slaughter points out, income growth has all but disappeared in recent years. And it's not just the low-skilled who are getting slammed. Inflation-adjusted earnings have fallen in every educational category other than the 4% who hold doctorates or professional degrees. Such numbers, Slaughter argues, suggest the share of Americans who aren't included in the gains from trade may be very big. "[That's] a very important change from earlier generations, and it should give pause to people who say they know what's going on," he says.

Blinder warns the pain may just be starting. He estimates that eventually up to 40 million service jobs in the U.S. could face competition from workers in India and other low-wage nations. That's more than a quarter of the 140 million employed in the U.S. today. Many of the newly vulnerable will be in skilled fields, such as accounting or research—jobs U.S. companies will be able to move offshore in ever greater numbers. "It will be a messy process of adjustment, with a lot of victims along the way," Blinder says.

The rumble of academic debate is already having an effect on the Presidential campaign. In an interview with the Financial Times late last year, Hillary Clinton agreed with economist Paul A. Samuelson's argument that traditional notions of comparative advantage may no longer apply. "The question of whether spreading globalization and information technology are strengthening or hollowing out our middle class may be the most paramount economic issue of our time," her chief economic adviser, Gene Sperling, recently wrote. Barack Obama's adviser, the University of Chicago's Austan D. Goolsbee, is not convinced free trade is the culprit behind the squeeze on incomes. But he believes many U.S. workers aren't sharing in the gains from open markets and fears a political blowback unless something is done.

A CALL TO ACTION
What to do? Blinder argues for a big expansion of unemployment insurance and a major overhaul of the poorly performing Trade Adjustment Assistance program (TAA), which retrains manufacturing workers whose jobs disappeared. More vocational training and wage insurance, which would partially reimburse displaced workers who take new jobs at lower pay, also figure in his proposals. Both Clinton and Obama—and even Republican Senator John McCain—have similar ideas.

That's not enough, says Slaughter. He sees a need for some form of income redistribution to spread the gains from free trade to more workers. In a controversial article Slaughter co-wrote last summer for Foreign Affairs, he proposed "A New Deal for Globalization" in which payroll taxes for all workers earning below the national median income level would be eliminated. Slaughter has talked with campaign advisers in both parties. So far, he has no takers. But it's one more sign of how far the trade debate has moved.

Sasseen is Washington bureau chief for BusinessWeek.

[Neshant]

Just because something worked in the past, doesn't mean it will work in the future. The requirements of today's economy is different. Gold doesn't meet that requirement..

Being scammed in a ponzi scheme is not a requirement.

Gold is not wealth either! Gold only has value as long as people think it has value. That doesn't make the de-facto monetary base...

4000 years of history says gold holds its value as money. 4000 years of history also says paper ends up being worthless 100% of the time.

Nope, there was alarm since 2006. You just woke up in 2008. GAO reports on deficits have been alarming since 2001.

One does not need the GAO to know there is a deficit. If it did anything, the ponzi scheme would not have unfolded. Auditing has done nothing and will do nothing.

Cute. The toilet paper printing mafia are still better than the thugs you will encounter if you stuff gold in your mattress.

"As gold is honest money, it is generally disliked by dishonest men."

[paramu]

Gold as money is as stupid as fiat money. Just because something worked in the past, doesn't mean it will work in the future.
...
Gold is not wealth either! Gold only has value as long as people think it has value. That doesn't make the de-facto monetary base.

Gold is considered as wealth because of the properties it has. It doesn't perish or lose quality if you hold it for any length of time. Others can't create it arbitrarily. You can easily exchange gold for other goods and services.

Whereas in the case of fiat currency, someone like Bernake can get up one morning and change few numbers in the computer to alter the fiat currency supply. He can spend unlimited amount of dollars, but not gold.

[James B]

Paul Krugman on Unemployment benefits

http://www.colbertnation.com/the-colber ... share_copy

[Pranav]

Sure, you can pay with gold in your daily life, by using electronic transactions. The gold can actually be safely with the right kind of bank or lending institution. It's not like the economy can't use gold electronically - it's merely about securitized currency.

Which will lead to counterfeiting - look up the long history of medieval bank runs.

Also, as pointed out earlier - the gold standard does nothing to prevent orchestrated boom-bust cycles and wealth transfers. It's happened many times before.

[Pranav]

there is debate now as to how long the money printing and useless spending scams can go on

Actually, if you print money (within reason, so as to not cause too much inflation), and spend it on highly productive purposes (such as setting up the internet or railways or highways), that is actually a valid way to pull oneself out of a depression.

But it is easier to make it work in a less mature economy, where there is a lot of room for growth and removing inefficiencies. That said, even in the US, there are big inefficiencies in education, transportation and healthcare. If the US were looking to boost growth, high speed internet for everybody plus high quality distance education in virtual classrooms would be good things to do.

The problem in the US is not fiat currency per se - the problem is the private ownership of the Fed, which means that monetary policy can be manipulated for the benefit of its owners.

[svinayak]

'The west re-examines the rat race' By Gideon Rachman.
Image by Ingram Pinn http://tinyurl.com/335ynab

[Singha]

very nice 4 page article on london financial types fleeing to switzerland and what they find there....piskology in full on page3 and 4.
UK has just slapped a 50% income tax on the really high earners. I wonder if people like mittal sir will suddenly discover a new love for india.

http://business.timesonline.co.uk/tol/b ... 986976.ece

[pgbhat]

very nice 4 page article on london financial types fleeing to switzerland and what they find there....piskology in full on page3 and 4.
UK has just slapped a 50% income tax on the really high earners. I wonder if people like mittal sir will suddenly discover a new love for india.

http://business.timesonline.co.uk/tol/b ... 986976.ece

Excellent read.

More worrying were Manpreet’s comments about Swiss society. She is Asian, from Birmingham, and is married to a Frenchman. She found it impossible to get an apartment because of her Asian name until she went to meet the estate agent with her white husband. “The Swiss are quite racist,” she says. “Rich white foreigners fit in fine, but I had an Asian friend who was stopped every time he came into Switzerland from France.”

Getting non-white and non-European technical staff into the country, and finding them somewhere to live, is “a challenge”, she says. Maybe that is why no major bank has yet moved.

[shyamd]

I think everyone is trying to de-leverage by increasing the amount of equity. So you are seeing a lot of IPO's occurring. IPO's will reduce tremendously once the crash sets in. I get the feeling that everyone is cashing out by doing IPO's, reducing exposures. Usually at an end of a cycle you get govt's and ordinary investors who get trapped, so I think we are heading for massive problems worldwide exc india. Expect problems perhaps by the end of the year or definitely next year.

[Neshant]

eventually all the paper scheming & scamming is going the way of the dinosaur.

-------------------
The Wall Street Journal reported that the BIS entered into gold swaps with central banks for as much as 349 metric tons of gold since December, the largest in history. The swaps worked by allowing the banks to exchange physical gold for loans; the banks can repurchase the gold at a later date. In all, the swaps allowed the banks to raise $14 billion, the newspaper said.

The WSJ story suggested that the BIS might be forced to sell the gold if the banks can’t make good on its loans weighed on gold prices. But that might not be the case, said Dennis Gartman in his daily newsletter, The Gartman Letter.

“Our old and very good friend, Mr. Andy Smith of Bache Commodities Ltd. said of the transaction that …A gold swap… would satisfy the letter of the Lisbon Treaty’s ‘no bail out’ clause because repayment would be in full at maturity, and it would have the added attraction of being under the radar. If Andy’s assessment is correct, and certainly it has the look of being exactly as he’s suggested, then long feared IMF/BIS/central bank gold sales have been avoided, with gold used instead as collateral for a loan from the BIS,” Gartman said.

Gartman said if this is the case, then selling gold for this reason is “ill advised. Gold’s been ‘swapped.’ A loan’s been made. Nothing less, but certainly nothing more,” he said

While the market might have had a knee-jerk reaction to the BIS news, Gero said it does make gold-market watchers take pause when considering the coming September gold sales by the European Central Bank under the Washington agreement. “We won’t know what will be done until September, which member banks might have sold. Last year they didn’t sell all the gold they could,” Gero said.
........ He sees August Comex gold staying in the $1,147-$1,250 range it has held in lately.

While the BIS news may have pressured gold prices, Patrick Lafferty, analyst at MF Global, said that technical charts had just as much significance, especially since many large gold traders and funds that trade gold use technical charts to guide their decisions. The break from the all-time high “set in motion a correction,” he said, with the $1,177 area 50% of the retracement from the recent rally.

http://www.mineweb.com/mineweb/view/min ... &sn=Detail

[derkonig]

Ah, the markets rally while the BDI collapses....global wreckovery is truly on...
http://www.marketwatch.com/story/asia-s ... 2010-07-07

Jai ho to O-bum-a...

[svinayak]

The personal consumption is main driver, and that driver is leveraged by credit. Personal consumption can be forecast based on age, as spending rises during our late 20s through late 40s, more or less in line with the years we spend raising children. After that, there is a clear shift to savings mode. Our economy was full of "spenders" as the boomers raised their children (1982-2008, roughly). After that, our forecast is that this large group will focus on paying down debt and saving, which is deflationary.

This forecast of growth from the 80s through 2008-2009 has been the forecast of HS Dent since Harry Dent's first book in 1989. Every single book had the same forecast of growth up until the end of the 00s.

[Neshant]

I don't put too much stock in these gurus.

His prediction was the DOW at 30 to 40 thousand ! which he made in 2000 in his book entitled the next boom or some name like that! It shows that even these gurus get suckered in by the hype of the markets thinking stocks will go up forever like it did during the 90s.

[svinayak]

I don't put too much stock in these gurus.

His prediction was the DOW at 30 to 40 thousand ! which he made in 2000 in his book entitled the next boom or some name like that! It shows that even these gurus get suckered in by the hype of the markets thinking stocks will go up forever like it did during the 90s.

That is a mistake he admits but his reasoning is sound.

[Neshant]

That is a mistake he admits but his reasoning is sound.

Now if he can make that kind of mistake....

I can buy his story about demographics but all the charting and line drawing sounds like astrology or tarot card reading. Its on par with Bernanke fiddling around with interest rates based on a false belief he knows what's going on.

[svinayak]

I can buy his story about demographics but all the charting and line drawing sounds like astrology or tarot card reading. Its on par with Bernanke fiddling around with interest rates based on a false belief he knows what's going on.

Show us where. His forecast about consumption following the demographics is the 70% of the economy. What is else is there and even if there are some errors it will be off by some amount.

[Neshant]

Mid of last year he was saying short the stock market, its going to fall to record lows.

He even had the clip up on his website and youtube.

When the stock market kept rallying, he pulled the clip off the website and youtube never to be seen again and issued a new clip saying don't short.

He always claims "we said back in <insert month> to do such and such", but really if you have been following him, you'd find he said no such thing or gave a mixed signal.

I do think his demographic theory holds some water. But you gotta be careful of blind guru worship.

Blindly worshipping some guru eventually results in a Bernanke or Greenspan type of position where everybody thinks the guy knows what he's talking about and come to find out in the end, he is just as clueless as everyone else!

[ramana]

Uty of Chicago's Raghu Rajan's Blog

http://blogs.chicagobooth.edu/faultlines

[Carl_T]

Neshant - you could just ignore short term directional predictions of the market. Cannot predict those.

[svinayak]

http://www.thehindu.com/opinion/op-ed/article507803.ece

Biggest defaulters on mortgages are the rich

No need for tears, but the well-off are losing their master suites and saying goodbye to their wine cellars.

The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

In Las Vegas, Ken Lowman, a long-time agent for luxury properties, said four of the 11 sales he brokered in June were distressed properties.

“I've never seen the wealthy hit like this before,” said Mr. Lowman. “They made their plans based on the best of all possible scenarios — that their incomes would continue to grow, that real estate would never drop. Not many had a plan B.” The defaulting owners, he said, often remained as long as they could. “They're in denial,” he said.

Here in Los Altos, where the median home price of $1.5 million makes it one of the most exclusive towns in the country, several houses scheduled for auction were still occupied this week. The people who answered the door were reluctant to explain their circumstances in any detail.

At one house, where the lender was owed $1.3 million, there was a couch out front wrapped in plastic. A woman said she and her husband had lost their jobs and were moving in with relatives. At another house, the family described itself as renters. A third family, whose mortgage is $1.6 million, said it would be moving this weekend.

At a vacant house with a pool, where the lender was seeking $1.27 million, a raft and a water gun lay abandoned on the entryway floor.

WALKING AWAY

Lenders are fearful that many of the 11 million or so homeowners who owe more than their houses are worth will walk away from them, especially if the real estate market begins to weaken again. The so-called strategic defaults have become a matter of intense debate in recent months.

The delinquency rate on investment homes where the original mortgage was more than $1 million is now 23 per cent. For cheaper investment homes, it is about 10 per cent.

[svinayak]

Bloomberg
Euro Breakup Would Unleash GDP Growth, Capital Economics Says
July 11, 2010, 12:12 AM EDT
MORE FROM BUSINESSWEEK
http://www.businessweek.com/news/2010-0 ... -says.html
By Jeffrey Donovan
July 11 (Bloomberg) -- The breakup of the euro area would save the 16-nation region from years of economic stagnation by boosting weaker members’ competitiveness as well as domestic demand in Germany to spark growth, Capital Economics said.
“The threatened breakup of the euro zone, which many see as a potential disaster, would actually open the door to renewed economic growth, not just for weaker members of the zone, but for Europe as a whole,” Capital Economics analysts including Roger Bootle in London said in a report released today.
Greece’s debt crisis has driven down the euro and forced governments from Spain to Italy to embrace austerity measures and cut their deficits, clouding the outlook for recovery from the worst recession in six decades. The International Monetary Fund on July 8 kept its forecast for 1 percent growth this year in the region, which expanded 0.2 percent in the first quarter.

[Neshant]

Slowly nations are coming to their senses. Unfortunately paper scammers have staffed all levels of govt with their ex-employees and paid huge lobby fees to crooked politicians to successfully push their losses onto the taxpayer already.

The so called `industry`of banking & financing and the federal reserve which is just acting in their interest needs to be shut down. Neither produces anything of value but they do drain an enormous amount of money from the real economy.

---------

In the U.S. and the U.K. in particular, there’s a sense that overreliance on dodgy financial services is no way to create decent jobs for the masses or to build a more stable economy. In these and many other countries, like France and Germany, influential voices are calling for a return to the business of producing real goods.

http://www.newsweek.com/2010/07/10/how- ... again.html

[SriKumar]

The so called `industry`of banking & financing and the federal reserve which is just acting in their interest needs to be shut down. Neither produces anything of value but they do drain an enormous amount of money from the re

Neshant,
I've been reading your posts for a while now, especially your stance above. I have a question: could one argue that the financial 'industry' performs atleast one 'service' where they look at various markets and technologies (worldwide) that have potential for large expansion, and invest in those markets; and hence, they serve as a vehicle to quicken the expansion of some markets/technologies and potentially even save some that might die out were it not for the aggressive search/analyze approach of the financial companies (perhaps I am mixing Venture Capitalism and Financial Investment here?). (Of course, it is a different debate whether financial gurus are qualified to make such judgments over everything under the sun and bet money on it)

[vijayk]

Slowly nations are coming to their senses. Unfortunately paper scammers have staffed all levels of govt with their ex-employees and paid huge lobby fees to crooked politicians to successfully push their losses onto the taxpayer already.

The so called `industry`of banking & financing and the federal reserve which is just acting in their interest needs to be shut down. Neither produces anything of value but they do drain an enormous amount of money from the real economy.

---------

In the U.S. and the U.K. in particular, there’s a sense that overreliance on dodgy financial services is no way to create decent jobs for the masses or to build a more stable economy. In these and many other countries, like France and Germany, influential voices are calling for a return to the business of producing real goods.

http://www.newsweek.com/2010/07/10/how- ... again.html

http://www.bloomberg.com/news/2010-07-0 ... grove.html

As time passed, wages and health-care costs rose in the U.S., and China opened up. American companies discovered they could have their manufacturing and even their engineering done cheaper overseas. When they did so, margins improved. Management was happy, and so were stockholders. Growth continued, even more profitably. But the job machine began sputtering.

U.S. Versus China

Today, manufacturing employment in the U.S. computer industry is about 166,000 -- lower than it was before the first personal computer, the MITS Altair 2800, was assembled in 1975. Meanwhile, a very effective computer-manufacturing industry has emerged in Asia, employing about 1.5 million workers -- factory employees, engineers and managers.

The largest of these companies is Hon Hai Precision Industry Co., also known as Foxconn. The company has grown at an astounding rate, first in Taiwan and later in China. Its revenue last year was $62 billion, larger than Apple Inc., Microsoft Corp., Dell Inc. or Intel. Foxconn employs more than 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard Co., Intel and Sony Corp.

10-to-1 Ratio

Until a recent spate of suicides at Foxconn’s giant factory complex in Shenzhen, China, few Americans had heard of the company. But most know the products it makes: computers for Dell and HP, Nokia Oyj cell phones, Microsoft Xbox 360 consoles, Intel motherboards, and countless other familiar gadgets. Some 250,000 Foxconn employees in southern China produce Apple’s products. Apple, meanwhile, has about 25,000 employees in the U.S. -- that means for every Apple worker in the U.S. there are 10 people in China working on iMacs, iPods and iPhones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology, and other U.S. tech compan

Tragic Mistake

Should we wait and not act on the basis of early indicators? I think that would be a tragic mistake because the only chance we have to reverse the deterioration is if we act early and decisively.

Already the decline has been marked. It may be measured by way of a simple calculation: an estimate of the employment cost- effectiveness of a company. First, take the initial investment plus the investment during a company’s IPO. Then divide that by the number of employees working in that company 10 years later. For Intel, this worked out to be about $650 per job -- $3,600 adjusted for inflation. National Semiconductor Corp., another chip company, was even more efficient at $2,000 per job.

Making the same calculations for a number of Silicon Valley companies shows that the cost of creating U.S. jobs grew from a few thousand dollars per position in the early years to $100,000 today. The obvious reason: Companies simply hire fewer employees as more work is done by outside contractors, usually in Asia.

Offshore Production

Consider this passage by Princeton University economist Alan S. Blinder: “The TV manufacturing industry really started here, and at one point employed many workers. But as TV sets became ‘just a commodity,’ their production moved offshore to locations with much lower wages. And nowadays the number of television sets manufactured in the U.S. is zero. A failure? No, a success.”

I disagree. Not only did we lose an untold number of jobs, we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today’s “commodity” manufacturing can lock you out of tomorrow’s emerging industry.

Our fundamental economic beliefs, which we have elevated from a conviction based on observation to an unquestioned truism, is that the free market is the best economic system -- the freer, the better. Our generation has seen the decisive victory of free-market principles over planned economies. So we stick with this belief, largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better.

[abhishek_sharma]

Fareed Zakaria interviews the U.K.'s new Chancellor of the Exchequer on his country's new budget.

http://www.cnn.com/video/#/video/podcas ... t.7.11.cnn

[amol.p]

Crisis Awaits World’s Banks as Trillions Come Due

Banks worldwide owe nearly $5 trillion to bondholders and other creditors that will come due through 2012, according to estimates by the Bank for International Settlements. About $2.6 trillion of the liabilities are in Europe.

U.S. banks must refinance about $1.3 trillion through 2012. While that sum is nothing to scoff at, analysts seem most concerned about Europe because the banking system there is already weighed down by the sovereign debt crisis.

http://www.nytimes.com/2010/07/12/busin ... f=business

End of Census, and for Many, End of Job

When the Census Bureau hired upward of 700,000 Americans over the last two years — most in the last six months — it landed more experienced workers with more sophisticated skills than any time in recent memory.
Now, its decennial work largely done, the Census Bureau is shedding hundreds of thousands of workers — about 225,000 in just the last few weeks, enough to account for a jot or two in the unemployment rate, say federal economists. Most of those remaining will be gone by August; a few will last into September.

http://www.nytimes.com/2010/07/12/busin ... f=business

[svinayak]

http://globaleconomicanalysis.blogspot. ... n-way.html



Where are JOBS?

http://globaleconomicanalysis.blogspot. ... s-and.html

http://www.nakedcapitalism.com/2010/07/ ... italism%29


Risk of Soverign Funds default ( INDIA NOT even listed!)

http://www.calculatedriskblog.com/2010/ ... ed+Risk%29

http://www.nakedcapitalism.com/2010/07/ ... imism.html


DEFLATION more likely!

http://www.calculatedriskblog.com/2010/ ... ed+Risk%29


http://www.calculatedriskblog.com/2010/ ... ed+Risk%29

http://www.debtdeflation.com/blogs/2010 ... sky-model/


BANKS on thin ICE!

http://www.calculatedriskblog.com/2010/ ... ed+Risk%29

[RamaY]

I bought that D.S Dent book this weekend. Will go thru and summarize interesting points for review/analysis.