Perspectives on the global economic meltdown (Jan 26 2010)

amol.p · Post by **amol.p** » 25 Aug 2010 14:49

Plunging US home sales spark fears of slower recovery

Existing home sales sank 27.2 percent in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units, the National Association of Realtor said Tuesday, the lowest level since the industry group started its tally in 1999.Much of that drop is attributed to the end of the $8,000 home buyer tax credit.
---anything that is artificially supported will not sustain.

http://economictimes.indiatimes.com/new ... 431153.cms

Bank default swaps rise on US housing slowdown

Foreclosures and weak jobs growth are hurting the American housing market with sales of existing homes dropping in July to the lowest level since March 2009."High excess supply, high unemployment and rising delinquencies all make for an explosive mix, powerful enough to tip the U.S. economy back into recession.The conditions could create a "negative feedback loop,".

http://economictimes.indiatimes.com/new ... 429681.cms

Steel glut to hit demand for raw materials: BHP

BHP Billiton, the world's biggest miner, on Wednesday signalled a looming slowdown in global steel-making raw materials markets due to overproduction of steel. "With global steel production running ahead of real demand in the quarter ended June 2010, we expect output to soften from the record highs achieved in April this year," BHP

http://economictimes.indiatimes.com/new ... 432080.cms

Nikkei hits 16-mth low

http://economictimes.indiatimes.com/mar ... 431268.cms

Hari Seldon · Post by **Hari Seldon** » 25 Aug 2010 15:08

^^^ Next big thingie is fusion power. My 2 cents and all that.

enqyoob · Post by **enqyoob** » 25 Aug 2010 15:22

it will take decades of laws and efforts to reverse the Mcsuburia concept

Ah! You mean to have any hope of approaching the heavenly ambience of Mumbai or Ernakulam? Especially given 250 years of sustained effort to develop distributed access to power, communications, straight, broad and flat (i.e., not cratered) roads, running water, sewer lines and all the other things that are generally absent outside (and inside) the desi metro-houristans?

As for Fusion Power, has anyone considered how this is really going to avoid the radiation hazards and low-level, long-term toxic waste of fission plants? Or the extreme costs of putting up these monstrosities with the super-high capacity grids to take the power out of them? And the SAM batteries required to protect them?

Far better salvation for the Energy Crisis is the concept being developed in desh - burn pakistan. I mean pakistan, not Pakistan, of course.

Tanaji · Post by **Tanaji** » 25 Aug 2010 15:31

vina wrote:

Problem is that kind of monopoly behavior makes you ignore the fundamental distruptions that get invented in your own labs. For eg stuff like Unix, Laser and CellPhones and DSL and everything were invented at Bell Labs. But Bell Labs made close to zero money out of it. Much of that can be traced back to the fear that those could kill the existing $$$$$$Billions of cash flow. Same with IBM. They invented RISC, they invented most of networking, they invented relational databases, memory, disk storage, parallel computing, anything you can think of had an IBM patent long ago. They wanted to kill RISC and mini computers because they would threaten mainframes, didn't want to do relational databases because it would kill their bread and butter hierarchcical databases.

...........

Point is, we have to realize that the disruputions spawned in those labs have fundamentally altered the industry structures and made the world a better place for everyone by increasing competitive intensity. Now in a highly competitive market , you cannot do blue sky research. At best you can do near term applied research. Blue Sky kind of research gets kicked out to the public sector/govt univs which have to have the kind of funding to do it. Industry cannot sustain such things any more. Managers recognize it. That is a cold hard fact. If the experience of Bell Labs , IBM, Kodak, Xerox, GE etc is anything to go by and their inability to monetize it that is the way to go.

Er, the pharma industry does not conform to this.

The thing is that "ground shaking" inventions are far and few in between, especially in the telecom space. Most innovations are gradual, someone builds a 10 Gb fibre, others bump it to 40 Gb and yet others to 100 Gb. It is not as if companies dissuade researchers, ultimately companies want to sell and make profit. Customers will buy huge gobs of expensive equipment only if they have a smooth upgrade path, and hence development will be focused on these incremental paths.
So you are hardly going to see the equivalent of a cell phone that is as disruptive being developed these days. Look at how the disruptive satellite phone went: arguably better technically, but Iridium folded and now its a niche product. It doesnt mean innovations are dead, far from it, but they are gradual and happen nevertheless. What product class shows the phenomenal leaps that has been seen in the microprocessor space where Moore's law has been adhered to for the past decades?

ShivaS is correct IMHO. Finance/MBA types whose bonuses are linked to quarterly profits have more to do with the current scenario rather than "inability to monetize".

abhischekcc · Post by **abhischekcc** » 25 Aug 2010 16:12

If you Dilbert, and even if you listen to ppl going

on the net, you will find that this is correct - R&D is first to get shafted even though it does its job properly. And marketing is last to gets shafted although they are the ones that create most of the problems.

I remember one induhvidual (engineer) in the Dilbert newsletter going

that a router they had developed 4 times faster than anything on the market was deliberately slowed down so that the firm could make money on 'upgrades'.

The company was bankrupt in few years. I wonder how that happened.

ShivaS · Post by **ShivaS** » 25 Aug 2010 21:03

Yes make that Cold Fusion please, no Tokamak

A 'tokamak' is a machine producing a toroidal (doughnut-shaped) magnetic field for confining a plasma. It is one of several types of magnetic confinement devices and the leading candidate for producing fusion energy.
The term 'Tokamak' is a transliteration of the Russian word 'Токамак' which itself comes from the Russian words: "'то'роидальная 'ка'мера в 'ма'гнитных 'к'атушках" ('''to'roidal'naya 'ka'mera v 'ma'gnitnykh 'k'atushkakh'') — 'to'roidal 'cha'mber in 'ma'gnetic 'c'oils ('Tochamac')). It was invented in the 1950s by Soviet physicists Igor Yevgenyevich Tamm and Andrei Sakharov (who were in turn inspired by an original idea of Oleg Lavrentyev).
The tokamak is characterized by azimuthal (rotational) symmetry and the use of the plasma current to generate the helical component of the magnetic field necessary for stable equilibrium. This can be contrasted to another toroidal magnetic confinement device, the stellarator, which has a discrete (e.g. five-fold) rotational symmetry and in which all of the confining magnetic fields are produced by external coils with a negligible current flowing through the plasma.

Cold Fusion

The early problem of poor reproducibility has been avoided in studies carried out by Drs. Arata and Zhang at Osaka University in Japan. These pioneering studies used palladium catalyst coated with adsorbed water. Further progress has been made by using fine powders of palladium embedded in zirconium oxide crystal. A technique developed by Arata and Zhang for selecting candidate catalytic powder suggests that nickel can likely be substituted for palladium.

These technical developments suggest that cold fusion energy can play a major role in reducing the world's dependence on fossil fuel. The applicable theory is consistent with the treatment of atomic orbitals and chemical bonds as practiced by today's chemists. The correct theory is compatible with an improved interpretation of quantum mechanics, as taught in English mathematician Roger Penrose's recent book "The Road to Reality". Students studying this website will be able to understand how cold fusion works, and its prospects for providing safe home heaters purchased with an internally contained lifetime supply of heavy hydrogen fuel.

ramana · Post by **ramana** » 25 Aug 2010 21:33

I second N^3's observations on R&D and IRAD scam.

ShivaS wrote:yes change the genetics of Americans to like Chinese to work like the slaves in Roman ships with oars to the tune of the drum.

ShivaS, Can you use better language to convey the essence pof your post to preclude complaints? For eg. you can say "use social engineering to change American work habits to be more like Chinese workers!"

Thanks, ramana

Bade · Post by **Bade** » 25 Aug 2010 22:40

Inverse relation to the double-dip ... so we see the second 'hump' with a sharp rise as signs. Home Sales Plunge, Prices to Follow and post 2012, would be a nice time to upgrade to a McMansion for retirement with grand kids in another two decades. Sometimes, bad news is good news for others.

Singha · Post by **Singha** » 25 Aug 2010 22:58

the heating, taxes and cooling bills of mcmansions would be higher wouldnt they? think of opex not just capex. a Mig21 comes cheap on ebay but keeping it flying is tough.

svinayak · Post by **svinayak** » 25 Aug 2010 23:36

On or about the 25th day of every month the National Association of Realtors (NAR) releases the existing sales number. This number is the amount of previously owned condos, co-ops, and single-family homes that are sold each month. NAR then reports what the annual rate would be if the relative pace for that month were maintained for 12 consecutive months.

On Tuesday, August 24, 2010, NAR reported a number that was far worse than analysts expected. The consensus number expected for July was a drop in sales of 12% from the June figure, which would have brought the annual expected rate of 4.7 million sales. Instead, a 27% drop was reported, bringing the annual rate to 3.83 million units.

This is the lowest pace of sales in 15 years! This is an ominous sign for the economy.

According to NAR, historically home sales in April through July outpace the balance of the year. Not only was this terrible number within one of the four the busiest months for home sales but mortgage rates were under 5%, which is a historical low.

The stock market took a hit on this number, with the S&P 500 dropping 1.45% and the Dow Jones Industrial Average dipping under 10,000 intraday. July's horrendous existing homes sales data predict fewer purchases of housing-related consumer products. A weak housing market also points to a higher personal savings rate, which is a big negative for an economy where 70% GDP is consumer related.

ShivaS · Post by **ShivaS** » 25 Aug 2010 23:42

ramana noted and will be more circumspect in speaking truth.
Slap on the wrist gladly taken.

Magic Jack blocked by GOI, experinced in BSNL and Tata Photon too.
Hands tied down...

Bade · Post by **Bade** » 25 Aug 2010 23:55

Singha wrote:the heating, taxes and cooling bills of mcmansions would be higher wouldnt they? think of opex not just capex. a Mig21 comes cheap on ebay but keeping it flying is tough.

McMansions will get used for multi-family housing, more efficient when three generations will live under one roof in hard times. Just like in the old days in the 19th century America and as recent as few decades ago in India. Not a bad deal.

Imagine who would take to this idea faster. More recent immigrants of all color.

ramana · Post by **ramana** » 26 Aug 2010 00:05

ShivaS, Ok. However dont confuse pat with slap. I wish forum software shows those signed, in reports to avoid breaper image.

enqyoob · Post by **enqyoob** » 26 Aug 2010 02:54

Look on the bright side: Retail Solar panels at Amazon.com have come down from > $8/watt installed, to <$5, and maybe $4 per watt. Still pretty hefty for a solar airconditioner, but with the 30% BO Rebate, it's beginning to look interesting.

If it gets down to $3/watt or lower, even ppl like me will consider installing (I mean on my pennies, not someone else's).

The interesting part of the ominous slowdown in the "Don't worry B Happy" e-Khanomy is that this may force some real forward-thinking action from both guvrmand and industry, in things like switching out of the petro-e-Khanomy at a very rapid pace. The printing of dollars may be done using solar-powered presses, for instance.

abhishek_sharma · Post by **abhishek_sharma** » 26 Aug 2010 07:44

Global imbalance redux

http://shadow.foreignpolicy.com/posts/2 ... ance_redux

abhischekcc · Post by **abhischekcc** » 26 Aug 2010 09:32

The problem with renewable energy sources is that they remain overpriced when compared to coal and oil, esp coal. For eg. t he much touted tar sands/shale oil break even at $30-40 per barrel equivalent. Synthetic petrol is viable only at $70-80 per barrel equivalent.

If you assume that energy prices need to stay high for the long term, then also consider that a major proce component in manufacture of solar cells is energy, which means that even after writing off the R&D costs of such cells, the cost of production will remain high.

Carl_T · Post by **Carl_T** » 26 Aug 2010 09:34

Anyone understand the relationship between the tbill rate and the federal funds rate? As in, why is the tbill rate proxy for the "real interest rate"?

vina · Post by **vina** » 26 Aug 2010 10:00

Anyone understand the relationship between the tbill rate and the federal funds rate? As in, why is the tbill rate proxy for the "real interest rate"?

Fed funds rate is the target rate which gets announced. Now it is difficult to exactly hit it. So what the Fed does is buy and sell T-bills in the open market (FOMC open market operations) such that the Fed Funds rate hits the target.

Tbills are the proxy for not "real interest rate" but rather "risk free" interest rate, with the assumption being that Unkil Sam can never go bankrupt like the Banana Islamic Republic of Pakistan and that good American Citizens can be taxed to pay good on the promise to the bond holders.

Now there is something called the discount rate , which basically means that you go hat in hand to the Fed and say, a thousand pardons huzoor, but I cannot meet my reserve requirements, so can you please lend me Baksheesh!. If that happens, Fed comes on you like a ton of bricks and goes through your accounts with a fine tooth comb and you get subject to minute searches in all your cavities.

Mechanism largely similar to the SLR and CRR and Repo rate and reverse repo rate in India. The Fed as a rule almost always never fiddles with the Reserve Ratio, because that will hit the bank profits in the gonads , but rather controls money demand by interest rates.

sugriva · Post by **sugriva** » 26 Aug 2010 10:59

Saar, the powerhouse R&D that you mentioned earlier like Bell Labs, IBM TJW , RCA Sarnoff, Xerox etc , Kodak, GE etc can be done only in an environment where you have natural entry barriers (scale, industry structure, technological barriers etc. etc) or the industry is a natural monopoly and in such an environment, it makes huge sense for the incumbents to pour R&D money into making the best products . They were the only ones who could afford it and did.

Saar, monopoly was the consequence and not the cause of R&D efforts no? Also earlier companies were allowed to capitalize their R&D expenses. Now no more. All of it is an expense onlee...

arnab · Post by **arnab** » 26 Aug 2010 11:14

vina wrote: Fed funds rate is the target rate which gets announced. Now it is difficult to exactly hit it. So what the Fed does is buy and sell T-bills in the open market (FOMC open market operations) such that the Fed Funds rate hits the target.

Tbills are the proxy for not "real interest rate" but rather "risk free" interest rate, with the assumption being that Unkil Sam can never go bankrupt like the Banana Islamic Republic of Pakistan and that good American Citizens can be taxed to pay good on the promise to the bond holders.

Now there is something called the discount rate , which basically means that you go hat in hand to the Fed and say, a thousand pardons huzoor, but I cannot meet my reserve requirements, so can you please lend me Baksheesh!. If that happens, Fed comes on you like a ton of bricks and goes through your accounts with a fine tooth comb and you get subject to minute searches in all your cavities.

Mechanism largely similar to the SLR and CRR and Repo rate and reverse repo rate in India. The Fed as a rule almost always never fiddles with the Reserve Ratio, because that will hit the bank profits in the gonads , but rather controls money demand by interest rates.

I don't think the discount rate implies that. T bills are sold at a 'discount' in open market auction. So for e.g a bidder would buy a $100 face value (T-bill) payable after 1 year, at $97 today. This imples a 3.1% discount rate.
Open market operations (buying and selling of T-bills) are 'indirect' ways of controlling the money supply. SLR (statuory liquidity ratio) and CRR (Cash reserve ratio) are 'direct' instruments used by the RBI to control money supply. So if RBI says banks are 'statutorily' required to now hold 25% of their deposits in reserve up from say 22 % (rather than lend it out), that increses the 'competition' for funds - leading to rise in interest rates.

vina · Post by **vina** » 26 Aug 2010 11:51

arnab wrote:I don't think the discount rate implies that. T bills are sold at a 'discount' in open market auction. So for e.g a bidder would buy a $100 face value (T-bill) payable after 1 year, at $97 today. This imples a 3.1% discount rate.

What you wrote is issuing a bond at a discount (sort of like a zero coupon bond). In the US Fed context ,"discount rate" is exactly what I wrote. It is an emergency lending facility if you get into trouble with reserve requirements.

Open market operations (buying and selling of T-bills) are 'indirect' ways of controlling the money supply. SLR (statuory liquidity ratio) and CRR (Cash reserve ratio) are 'direct' instruments used by the RBI to control money supply. So if RBI says banks are 'statutorily' required to now hold 25% of their deposits in reserve up from say 22 % (rather than lend it out), that increses the 'competition' for funds - leading to rise in interest rates.

Yes and No. Even with SLR and CRR kind of "ukase" from RBI, you cannot exactly calculate the effect of a saying if CRR is x% and SLR is y%, then the interest rate will be z%. Even the RBI would need to do open market operations to reach an exact targeted z% by buying and selling G-Secs. What the Fed does is target the Fed Funds rate (all other rates are derived as a spread from that rate) and that is what they look to achieve by open market operations.

CRR /SLR is a blunt instrument. It basically kicks the bank's ability to lend in the nuts and the profitability will take a direct route to Pakistan and the US doesn't use it / abuse it like the India/Chinese and other "Command and Control" economy hang overs do.

Frankly, this CRR and SLR (I think this SLR gives govt the first bite on the bank deposits for it's borrowing program) goes far beyond measures to insure stability of banking system. In India, it becomes a cheap means of funds for the Govt. In the US, the govt actually competes with the private sector for funds. For eg , in normal times, beyond the reserve ratio /capital adequacy requirement, you can and will go for other bond types (based on risk/reward) if the govt is not competitive. Caveat though.. the Fed still will require the Prime Brokerages to participate in the Treasury auctions and underwrite, or they can be punished by leaving them out of future auctions/loss of prime status. Yeah, still lot freer than India and no automatic access to deposits in banking system for Netas and Babus to splurge on.

enqyoob · Post by **enqyoob** » 26 Aug 2010 14:47

This is better than signing up for Econ/Mgmt classes.

So under what circumstances would a T-bill be bought/sold at > face value? Like, u have to pay $107 today to buy a $100 T-bill due next Aug. 27?

Also, the underlying assumption of Zerrow default risk, appears to be the one under relentless attack in this whole dhaga, hain? A 3.1% rate implies <3.1% inflation, and total confidence in the dollar, so it seems the ultimate indicator of happiness? Why else would I pay $96.9 for the promise to get $100 in a year, given zero chance of getting MORE than $100 in a year?

Why is default risk of Amir Khanomy today any less than, say, that of Somalia which at least has a viable international balance of payments surplus courtesy of the (low-tech) pirates?

What is the going discount rate of Greek and Icelandand Spain Guvrmand T-Bills? How about a Top 10 FSL nation like Pakistan?

Have there been situations where the market price of T-bills goes to, say, $50 or less for a $100 face value with a 1-year maturity term?

ShivaS · Post by **ShivaS** » 26 Aug 2010 15:33

If you buy $100 T Bill 1 yr for say $95 of today and you redeem it for $100 at the end of the year. Technically you have earned $5 investing 95 dollars roughly 5.27 % ( annulized).
Now if you factor inflation at 3.00% (annulized) your true earnings are 5.27 - 2.85., you net true earnings on $95 investment was 2.42 cents (ah better than Savings account) mind you this is taxable too!

Some times Nominal value term is used to denote $100, the actual cost (for a value 100 in future) is what you paid. THe annulized yield is 5 nominal, the real yield adjusted to inflation is $2.42 net after tax assuming 33% bracket is $1.6. for $100 for 1 year.

The price you paid for 100 with 95 is the discounted price of T bill.

The interest rates and the T bill or Bond values are inversely related Simple.

Assume with the above example, If half way through the year govt says interest rates are going up that means cost of borrowing goes up and savings interest rates will also go up to a lesser extent. Now what happens is your yield no longer ( 5.27 is attractive as somebody can open CD for $100 at say 7.00%, the opportunity cost for him to go with 5.27 is no longer attractive, so he will say I will buy the T bill nominal 100 at (say) $92 and you may sell( at that point because you being BRF member and master of economics

) the long term trend is more interest rate hikes I am stuck with 5% yield I better get out , also in an inflationary economy money erodes in value and commodities (like Gold) go up. So you will cash out and invest where money grows at double the rate of inflation. (interest rates are hiked to control growth and economy heating up, slow down the circulation of money as more money is chasing fewer goods)
hope this explains...
( I have avioded complications in this example, like fixed cupon/rates...) the above example is zero cupon Bond.
T bill is more secure than a Bond issued James & co as the risk of Fed default is highly unlikely..
T bills Often considered as baseline (Beta) all others bonds interest rates are based on Beta + risk + spread (commision/targeted rate of return of the company issuing bond or individual credit history) alladjusted by actuaries who underwrite the issuence ..

ShivaS · Post by **ShivaS** » 26 Aug 2010 15:50

You have very specific questions that can answered for a small fees only,
this is just like Nachiketa asking Yama is there life after life...( very well depicted in KathaKali dance of pujya Guru Gopal nath.)
Last question first

3)

Have there been situations where the market price of T-bills goes to, say, $50 or less for a $100 face value with a 1-year maturity term?

No because in spite of wars US economy is not that risky where discount due to risk is that drastic. Yest cost of borrowing will gradually go up as deficits soar.. but remember The world trade is conducted in $s and Feds can print fiat money unlike greece. SOmalia may print like mugabe of Zimbabwe, but people will say thanks but no thanks we will dela in Dollars.

2)

What is the going discount rate of Greek and Icelandand Spain Guvrmand T-Bills? How about a Top 10 FSL nation like Pakistan?

I dont know the exact rates but surely they are underrated.

the whole name of the game is to cripple countries and loot them but not allow them to collapse, why do you think Russia was bailed out under Boris Yelsten why is Putin still smarting for thoes events...

1)

A 3.1% rate implies <3.1% inflation, and total confidence in the dollar, so it seems the ultimate indicator of happiness? Why else would I pay $96.9 for the promise to get $100 in a year, given zero chance of getting MORE than $100 in a year?

Refer to answer 2 . TINA factor (largest addicted consumers are to be encouraged like hopelessly addicted client but dont let him die of over dose bad example but you get my (de)scent

ramana · Post by **ramana** » 26 Aug 2010 21:41

Now even I can understand that....
x-post

ManjaM wrote:http://finance.yahoo.com/news/Lack-of-s ... 7.html?x=0

This is very true. Yahoo has it right for a change.
The current gen of massa youths largely lack the skills and education, but more importantly lack the desire to work in a factory setup. Retail jobs are easier by 100% and pay enough to afford lattes and the latest apple gadgetry. A friend of my ex gave up a nice paying factory job at Boeing to go back to his old job at Starbucks because he felt the factory work not what he expected.

abhishek_sharma · Post by **abhishek_sharma** » 27 Aug 2010 08:23

France to press G20 to curb currency swings -Sarkozy

http://www.reuters.com/article/idUSPISPJE63820100825

arnab · Post by **arnab** » 27 Aug 2010 09:15

enqyoob wrote: So under what circumstances would a T-bill be bought/sold at > face value? Like, u have to pay $107 today to buy a $100 T-bill due next Aug. 27?

Also, the underlying assumption of Zerrow default risk, appears to be the one under relentless attack in this whole dhaga, hain? A 3.1% rate implies <3.1% inflation, and total confidence in the dollar, so it seems the ultimate indicator of happiness? Why else would I pay $96.9 for the promise to get $100 in a year, given zero chance of getting MORE than $100 in a year?

Why is default risk of Amir Khanomy today any less than, say, that of Somalia which at least has a viable international balance of payments surplus courtesy of the (low-tech) pirates?

What is the going discount rate of Greek and Icelandand Spain Guvrmand T-Bills? How about a Top 10 FSL nation like Pakistan?

Well in 'nominal' terms nobody would pay $107 today to get $100 1 year later. You would rather spend it, right? OTOH in 'real terms' (i.e after adjusting for inflation), you might be getting less without realising it - this is termed 'money illusion'. So for instance, if you paid $97 for a $100 face value TB redeemable in one year, but the inflation was say 8 per cent p.a, that $100 at the end of the year would actually be worth only $95 in terms of purchasing power. But you might still undertake this action if you suffered from the illusion.

Re pakistan's discount rate ( The equivalent US T-bill rate is about 0.2 per cent)

The State Bank of Pakistan will offer benchmark six-month treasury bills at 12.35 percent, according to the median forecast of eight money-market dealers and one economist. It sold similar-maturity notes at 12.30 percent in the previous auction on June 16. The monetary authority will sell three-month paper at 12.14 percent, compared with 12.10 percent, and one- year notes at 12.45 percent, compared with 12.41 percent.

Paradoxically, the US is able to borrow at very low rates because everyone is looking for 'safe' options. As ShivaS remarked the TINA factor. Recall, at the hight of the US financial crisis - the US $ appreciated !! Same reason.

Suraj · Post by **Suraj** » 27 Aug 2010 09:36

The TINA factor is more hilariously quoted by the talking heads as the 'flight to safety'

arnab · Post by **arnab** » 27 Aug 2010 09:40

Suraj wrote:The TINA factor is more hilariously quoted by the talking heads as the 'flight to safety'

Yes - the light at the end of the tunnel is that of an approaching train

Neshant · Post by **Neshant** » 27 Aug 2010 12:37

Reason #6: Chips don’t pay interest. Part of the plan of the ruling illuminati is to completely control currency. They have to convince the peons that inhabit the land and toil to produce an economy that they should use and rely on a currency supplied by the illuminati. The Federal Reserve has managed to eliminate the US currency and replace it with ‘Federal Reserve Notes’. In essence, they have reproduced a Las Vegas gambling type of environment where the peons surrender their money at the door in exchange for chips. The chips are the only ‘currency’ allowed in the casino. The chips are of course pieces of plastic (probably manufactured in China) and they are in reality, worthless. They have an illusional value in that they are assigned a value by the casino operator. This has several purposes. First, the chip for money exchange serves to psychologically separate the peon from the value of his money. Chips can be leveraged and credit in chips does not hold the same importance as credit in real money.

Read it all :

http://www.marketoracle.co.uk/Article22161.html

Neshant · Post by **Neshant** » 27 Aug 2010 12:40

abhishek_sharma wrote:France to press G20 to curb currency swings -Sarkozy

After printing sh&tloads of euros and putting a wrecking ball through the value of the currency to pay off greek debt by passing the loss onto euro holders, the guy is now talking curbs on currency swings.

Hello, how about curbs on money printing and wreckless spending which is the cause of currency swings.

enqyoob · Post by **enqyoob** » 27 Aug 2010 16:57

Thx to the experts here for that fine lesson. NOW I am expert too.

The State Bank of Pakistan will offer benchmark six-month treasury bills at 12.35 percent, according to the median forecast of eight money-market dealers and one economist. It sold similar-maturity notes at 12.30 percent in the previous auction on June 16. The monetary authority will sell three-month paper at 12.14 percent, compared with 12.10 percent, and one- year notes at 12.45 percent, compared with 12.41 percent.

AWESOME! So let's say I have this 100 dollars I borrowed from my cousin Rafeek, of course paying no interest since that would be haraam.

Should I
a) Invest it in US stocks, so that in 6 months they are likely to be worth $50 per this dhaga?
b) Buy a square centimeter of a flat in Mumbai reasoning that next year it will be worth $200 unless the bubble bursts and the flat comes down with the next demolition of illegal shanties?
c) Invest it in the Indian stock market which is at record levels today, so it should be even more record levels in 6 months since the usual rules of Price/Value, P/E don't hold in the New Economic SuperPower stock market?
d) Be "safe" and buy US Treasury bill for $ 98.9, and keep the remaining $1 in my pocket (0.1 went as baksheesh-e-commishun) reasoning that someone will pay me $100 in money that is really worth only $20 (per this dhaga) in 6 months?

or..DRUMROLL...

e) Borrow $3 more from my cousin, and buy a $100 Bill Guaranteed By the Islamic Republic Of Pakistan, at 12.3 percent interest for 6 months, so that I will get back $106 in 6 months? (Of course I will have to pay a $3 baksheesh to be able to buy these fantastic bills from Zardari T-Bills LLC!)

Since the US, India and Israel will have collapsed, I am sure of being able to sell that bill for AT LEAST $300 at that time to Saudis and Greeks desperate to find a really safe investment.

Q.E.D. A total no-brainer.

derkonig · Post by **derkonig** » 27 Aug 2010 17:33

For option e) you need not borrow anything, jest pay (100 - yield) which would mean around paki rupee 94 & then you reap paki rupee 100 on maturity i.e. a gain of 6. Joo may however sell it to al-saud, tallar mountane, al-andalus for 400% more.

enqyoob · Post by **enqyoob** » 28 Aug 2010 04:32

BUY GERMANIUM!

{ I wonder where I have read the same supercilious Hitler-Jugend screech tone b4}

Jeff Nielson
08/26/10 - 10:39 AM EDT
Most market reporters, commentators and politicians continue to rely upon nothing but the same short-term "snapshots" which have caused them to be "surprised" by everything. However, it is a safe conclusion that even such rampant incompetence (combined with a strong "herd mentality"), could not and does not mean that the entire U.S. government remains in an oblivious state of ignorance regarding this re-acceleration of the collapse of the U.S. economy.

This begs an obvious question. Given that at least some elements of the U.S. government have known all along that the U.S. economy was not recovering and could not recover, why is it that only now are we hearing of tentative, new plans of more "life support" for the dying U.S. economy?

The answer is also obvious. As I pointed out when I originally denounced the Obama stimulus package, it was never anything more than a bad joke. The combination of the collapse of the U.S. housing sector, massive unemployment, and the largest credit-contraction in the history of the U.S. economy had combined to subtract approximately $2 trillion per year in consumer spending from this consumer economy.

The response of the Obama regime to this scenario was a one-time injection of $780 in stimulus, spread out over more than a year. Obviously, you can't replace $2 trillion with less than $800 billion and call it stimulus.

This brings us to the present dilemma of the U.S. government. The U.S. economy is much sicker than it was when Obama ascended the throne. Wall Street has continued to ruthlessly choke off all credit to the U.S. economy, meaning that tens of millions of American households and tens of thousands of businesses are much closer to the breaking point than they were in January of 2009.

The entire U.S. retail sector is in a terminal death-spiral, and its only response is to eliminate vast numbers of retail outlets, and herd consumers into more online retailing. While this cuts costs for these companies, most of those cuts will be reduced employment -- fueling the next leg lower for consumer demand, resulting in even more store closures, etc.

This means that the trivial "band-aids" being mused-about by government talking-heads are utterly meaningless. Simply, the Obama regime has to "go big, or go home." It must either engage in massive (genuine) stimulus of the U.S. economy -- meaning a multi-trillion dollar commitment, or simply allow the collapse to proceed (and feed upon itself). ....

.... Allow another sickening plunge in the U.S. dollar, and that will drive away the last, few chumps still insane enough to buy grossly over-priced U.S. Treasuries. This is the road that leads to hyperinflation.

If this was not bad enough, the Obama regime has continued to be successful in duping both the vast majority of sheep in the U.S. electorate, as well as Republican knuckle-draggers that the U.S. economy was "strong enough" to begin to curtail runaway spending. This pool of chumps is looking for spending cuts, not a multi-trillion spending spree.

Thus, the U.S. government is facing exactly the same scenario today as the Bush regime faced in the summer of 2008. In hindsight, we all know what choice the previous government made. Lehman Brothers was "assassinated" -- as the first step in a concerted effort to destroy commodities markets. The collapse in these vital markets, combined with the collusion among Western bankers to choke off all credit to credit-based Western economies achieved its desired objective: a global "economic collapse," and the expected panic which such an artificial crisis would naturally produce.

It was only through this panic that frightened sheep (i.e. U.S. citizens and government "leaders") meekly submitted to the largest "bail-out" in history for Wall Street: a combination of hand-outs, loans, and guarantees which exceeded every other corporate bailout in every country on Earth, throughout history, combined. The last estimate I heard of the nominal value of this bailout was approximately $14 trillion, matching "official" U.S. GDP. The number will continue to increase (even without any new bailouts), as all of the 0% money being "loaned" to Wall Street banks is yet another taxpayer subsidy (since even the U.S. government can't borrow at 0%).

Given the current circumstances of the U.S. government, and past history, the "plan" is clear: do nothing long enough for the U.S. propaganda-machine to whip-up public fear into another frenzy, and then (and only then) will it "act decisively" to address this new "crisis." There is a second audience at which this clumsy charade is aimed: the governments of other nations.

While we must presume that a small number of these other governments understand the true state of the U.S. economy (China leaps to mind), most of these governments have been quite content to "drink the Kool-aid" being dispensed by the U.S. government. Should the Obama regime simply announce ("out of the blue") a multi-trillion dollar spending package, these willing dupes would be forced to confront reality: that the U.S. government has clearly embarked upon the road to hyperinflation.

However, create a "crisis" first, and we can expect these "leaders" to instantly transform into a flock of Chicken-Littles -- desperate for some massive prop, to prevent the sky from falling upon them. Understand that for the ivory-tower leaders of our governments that a crisis means nothing more to them personally than being thrown out of their pampered, government posts -- and being forced to survive upon the extremely generous public-pensions they award themselves.

It is such "me-first" selfishness {as opposed to the selflessness of gold speculators} which inspires the most blind-panic in any crisis, and the U.S. government is clearly relying upon such a reaction. They can announce their multi-trillion rescue of the global economy, and maybe, just maybe the self-absorbed leaders of other countries will blind themselves to the hyperinflationary consequences of more print-and-spend insanity. There is no more money for the U.S. government to borrow, thus every penny used as a response to this pending crisis will be newly-printed Bernanke bills.

This sets the stage for another chaotic autumn for the global economy -- and even more chaos for markets. While I have outlined what I consider the most likely scenario, we are so close to the true collapse of the sickest economies that there are many dire scenarios possible.

The one scenario which I totally reject is another commodities meltdown which would come anywhere close to 2008. {Oh no! there is no propaganda for commodities-speculation here!!! } There are two reasons why this part of the pattern cannot repeat itself. To begin with, there is only a tiny amount of the "leverage" which existed in the rabidly bullish commodity markets of 2008. Secondly, the hyperinflationary consequences of more banker money-printing (and debt) are far more obvious today -- after two years of massive, deficit-spending have been factored into fiscal parameters.

The U.S. economy lurches closer and closer to the "hyperinflationary depression" which John Williams (Shadowstats.com ) first predicted in 2003. The precise effect of this collapse on the global economy cannot be predicted -- only its eventual result. We are heading toward a Great Divide: a division of the global economy into winners and losers.

This is not a new phenomenon. What is new is that most of the losers will come from the "Old Guard" economies (i.e. the U.S. and Western Europe). The citizens of these "loser economies" must act now to shield their diminishing wealth from the death of Western banker-paper which is almost upon us. As always, I remind investors that (for hundreds of years) precious metals have represented the best "insurance" against the depravity of bankers (and their servants in government).

Sanjay M · Post by **Sanjay M** » 28 Aug 2010 06:33

Recession may have pushed US birth rate to new low

The U.S. birth rate has fallen to its lowest level in at least a century as many people apparently decided they couldn't afford more mouths to feed.

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No economic boom, no baby boom

Hari Seldon · Post by **Hari Seldon** » 28 Aug 2010 07:05

^^^Wonder when the wise and peaceful Pakistanis will reach a similar conclusion....

Hari Seldon · Post by **Hari Seldon** » 28 Aug 2010 07:40

TAE tweets (d&g warning)
https://twitter.com/AutomaticEarth

UK: Net lending by the major banks fell to £2bn in July, its second lowest level since February 2001 http://bit.ly/9kx4cK

Yawn. So what, eh?

Well, lending plunge -> credit squeeze -> consumption squeeze for households and working capital dire straits for businesses -> further hit on the emerged tfta khanomies that largely comprise consumption only. INteresting consumption comrpises over 50% of our sdre ecoNOmy as well, unlike the typical sdre khanomic profile.

Of course, don't expect anything dramatic in the emerged world. The gubmint will massage figs to make them look less bad than they are only to revise them down the line quietly. Things will worsen on the ground but the media will successfully confuse the issue enough for no concentrated anger to form and organize anywhere - like the 300000000 protests in PRC that are all isolated events and represent no larger threat to the system.

The number of cable subscribers dropped by 711,000, according to SNL Kagan (First time industry has recorded a drop) http://bit.ly/cEBNkq

Now you know consumption is really dropping if folx are cutting back on cable and dish tv!

Banks can't claim credit for this year's profits, says S&P http://bit.ly/9gkmFQ Only Government stimulus, subsidies and bailouts counted

Of course. The banks are flat broke. Having arm twisted accounting standards to suit their survival, and squeezed gubmint bailouts and continued transfer of wealth from the taxpaying midle class (in the form of the interest differential they're currently skimming off) etc.

But of course that doesn't stop the banks from...

Despite Reform, Banks Have Room for Risky Deals (loopholes, loopholes, loopholes!) http://nyti.ms/971n6o
5:09 AM Aug 27th via TweetDeck

Calls for radical rethink of derivatives body (The #ISDA) http://bit.ly/b5ywLU

Or sri bernake from...

Bernanke's top tool now may be power of persuasion http://yhoo.it/czSmgV Jawboning!

A slowdown in U.S. business investment may soon hit the job market http://bit.ly/aml30d D'oh!!! Why would you hire in this environment?

Yawn. So what's new. There's folks saying unemployment problem is structural (I agree) and won't recover significantly for at least a decade (I hope it will be sooner, though).

VIDEO: S&P Heading to 950: Stick With Bonds, Gold + Cash, Says "Very Concerned" John Roque http://yhoo.it/dtOBog
5:20 AM Aug 27th via TweetDeck

How Much Is Left? The Limits of Earth's Resources, Made Interactive http://bit.ly/cznax1 (Very cool!)

Chalo, enough for today. bye all.

abhischekcc · Post by **abhischekcc** » 28 Aug 2010 08:20

I had said over an year ago in my blog that US will engage in hyperinflation as that will impact its two main liabilities - external borrowings and pension liabilities to its own people.

Hari Seldon · Post by **Hari Seldon** » 28 Aug 2010 08:41

abhischekcc wrote:I had said over an year ago in my blog that US will engage in hyperinflation as that will impact its two main liabilities - external borrowings and pension liabilities to its own people.

Yup, but then why the 10 yr bond yield is at an all time low, I wonder. Hyperinflation implies rising interest rates as well, something that will break the backs of several businesses, citizens and local gubmints.

Inflating away pension obligations is fine in a defined contribution scenario, not the gold plated defined-benefit packages enjoyed by the public sector unionized millionaires.

Besides, wanting something is not the same thing as getting it to happen.

For the dollah to sink, something else will have to rise - none of the fiats will want to rise either and will actively work towards debasing itself.

The only alternative is gold but the world's central banks are eager to manipulate gold prices, seems like and prevent too rapid and vapid, a rise.

Its a double bind. Killing the dollah (via hyperinflation) has its own issues. Time will tell how this will unfold.

Neshant · Post by **Neshant** » 28 Aug 2010 08:42

The only congressman who talks any sense. He does however have tons of enemies among banking & bailout hounds looking to offload their losses on suckers.

All the money printing, interest rate fiddling, refinancing, interest on excess reserves that never existed to begin with, the swapping and other gobbly goop is just an attempt to brew a storm of confusion while money is siphoned off from those who earned it to those who gambled and lost. The picking of winners and losers by an entity that never did an ounce of real work in all its existance.

However as we are finding out, the base is slowly giving way. Things are coming to a head within the next 3 to 5 years and it will be interesting to watch who's going to be left holding the bag.

Personally I believe the federal reserve will be abolished within the next 5 to 7 years once it comes to light that keynesian economics is little more than a money printing racket.

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Ron Paul : Stop Meddling with the Housing Market!

http://www.youtube.com/watch?v=mCA4N3XqfsM