Perspectives on the global economic meltdown (Jan 26 2010)

arnab · Post by **arnab** » 14 Sep 2010 11:12

Neshant wrote:A tale can be spun to justify any ripoff under the keynesian economic system as being in the interest of the boarder segment of society. Probably with 10 trillion was handed out to banking crooks and the economy fell even further down the hole, it would be deemed as being in the interest of the broader segment of society.

The con artistry of keynesian economics is to rip a person off and tell him it was in his interest. The good news is the people are catching onto this scam.

You are free to hire a plumber costing less. Sadly I'm not free to not pay for the the gambling losses of banking crooks. Secondly the plumber has a productive role in society. Scamming banks, beyond a marginal utility role, have little productive value. But they sure talk up a storm of BS when it comes to justifying their parasitic existance.

But sir you are the one spinning a tale. I have asked a very simple question – can you give me a quantifiable value of the rip-off? If the economy is growing in real-terms, doesn’t it mean that there is no destruction of ‘value’? All we get from you are vigorous hand-waving and grim foreboding tales of –ripoffs, Keynesian scams and a future bill (shades of – ‘trust me Iraq has WMDs?)

Re plumbers – I’m afraid I cannot hire a cheaper plumber. I am forced to endure this scam of paying ridiculously inflated price because I cannot get my cheap and good Indian plumber to move to US because the government has restricted the free movement of labour supply and has given such people an unfair advantage. Hence I’m forced to go along with this scam (At least in the Banks, I have the option of keeping my money under a pillow and avoiding fees). But if the value of my money would go down by keeping them under a pillow, then they are protecting the real value of my money and therefore providing a real service

I’m forced to ask a higher salary to pay for such inflated plumbing scams which a closed labour market allows to rip me off

Banking is global – specially with the advent of technology. I can send money online to India and save money there (and prevent getting ripped off in the US). But what do I do about my plumbing?

arnab · Post by **arnab** » 14 Sep 2010 11:28

Hari Seldon wrote: To clarify once again - I emphatically do not anticipate inflationary pressures until the second half of this decade. As I've repeatedly emphasized, the primary driver of inflation - historically and across countries - has been growth in government spending for purposes that do not expand the productive capacity of the economy.

Well, if only Hussman would expand on what he means by 'productive economy' only...."sigh"

[/quote]

He says - growth in govt spending historically has been for purposes that do not expand the productive capacity of the economy (incidentally not productivity or productive sectors)

aka 'infrastructure spending'. But more to point - has government spending destroyed productive capacity? Let us for the moment accept his questionable claim that historically inflation has been primarily due to govt spending has been for non-productive purposes - commonly classified as defence, interest payments and administrative expenses

Neshant · Post by **Neshant** » 14 Sep 2010 11:30

If the economy is growing in real-terms, doesn’t it mean that there is no destruction of ‘value’

Nothing is growing in real terms except debt and the public sector. GDP increases are as bogus as the fake valuation of houses back in 2007 - and it will disappear just as fast. Was the economy growing from 2006 to 2007 or was it just setting itself up for massive wealth destruction and debt accumulation.

Common sense says if the private sector is going downhill and the public sector is expanding along with govt debt, there can be no good outcome.

Re plumbers – I’m afraid I cannot hire a cheaper plumber.

Sure you can. Home maintainence/renovation business has fallen off a cliff along with housing. Now if its still too much, blame money printing for inflating the cost of living. Some sucker is needed to carry the losses of banking crooks. I mean how could banking survive without suckers, come on.

At least in the Banks, I have the option of keeping my money under a pillow and avoiding fees.

Nah the money is robbed via printing and the fees come in the form of taxes, don't kid yourself.

arnab · Post by **arnab** » 14 Sep 2010 11:44

Neshant wrote: Nothing is growing in real terms except debt and the public sector. GDP increases are as bogus as the fake valuation of houses back in 2007 - and it will disappear just as fast. Was the economy growing from 2006 to 2007 or was it just setting itself up for massive wealth destruction and debt accumulation.

Common sense says if the private sector is going downhill and the public sector is expanding along with govt debt, there can be no good outcome.

Sure you can. Home maintainence/renovation business has fallen off a cliff along with housing. Now if its still too much, blame money printing for inflating the cost of living. Some sucker is needed to carry the losses of banking crooks. I mean how could banking survive without suckers, come on.

Nah the money is robbed via printing and the fees come in the form of taxes, don't kid yourself.

Well if GDP increases are fake - I suppose this is a 'feeling' rather than backed by proof, how can we accept that pvt sector contributes to real growth? Why isn't it a ponzi scheme which is dependent on an ever increasing markets and consumers buying goods they do not need due to the power of marketing? I mean it is just a belief system rather than backed by evidence, right?

How can inflation be blamed for the plumbing rip-off when we agree that there is no inflation currently? We are worrying about deflation. So why should the plumber blame the banks for his high prices?

I'm confused. The govt is robbing your money by printing more money? So what is an appropriate level of money supply? The supply which existed in 1940? 1950? 1971? What is the benchmark? What do you mean by 'fees come in the form of taxes'?

shyam · Post by **shyam** » 14 Sep 2010 12:09

One question Arnab-da:

Are you arguing because you seriously believe in what you say or you just want to corner Neshant?

Hari Seldon · Post by **Hari Seldon** » 14 Sep 2010 12:11

shyam wrote:One question Arnab-da:

Are you arguing because you seriously believe in what you say or you just want to corner Neshant?

+1.

Though both have made good points on occasion and contributed much to the dhaga on those occasions.

ShivaS · Post by **ShivaS** » 14 Sep 2010 12:33

Hari Seldon wrote:
To clarify once again - I emphatically do not anticipate inflationary pressures until the second half of this decade. As I've repeatedly emphasized, the primary driver of inflation - historically and across countries - has been growth in government spending for purposes that do not expand the productive capacity of the economy.

Absolutely on dot.

Deficit per se is not a problem but for what purpose deficit is incured matters......

Also in nature all sytems tend to come to equilibrium as quickly as they can. Not a static only equilibrium but could be dynamic equilibrium, hence all things in nature obey gyroscopic law... that is they tend to undo the external stimuli that tries to change the equilibrium....

Only decay and growth truely follow exponential curve to point after which they are asymptotic, before becoming asymptotic they will intersect to reach equilibrium, other wise it would be run away like Taking Pelham 123 (old or newer movie) or thermal run away in transistors or governor in diesel engine.

ShivaS · Post by **ShivaS** » 14 Sep 2010 12:36

productive economy is that which generates goods and services that all populace would aspire to aquire and is with in reach for them. More over such an economy importantly provides them tangible feeling of owners of wealth and or wellness.

Hari Seldon · Post by **Hari Seldon** » 14 Sep 2010 13:22

Mish has a rather poignant post at his site:
How Student Debt Wrecks Marriages, Inhibits Family Formation, and Delays the Housing Recovery
Like I said, poignant only. Recommended read, folks. Still, can't resist but excerpt and insert my own commentary only

Its based on this NYT article:
How Debt Can Destroy a Budding Relationship

Nobody likes unpleasant surprises, but when Allison Brooke Eastman’s fiancé found out four months ago just how high her student loan debt was, he had a particularly strong reaction: he broke off the engagement within three days.

Ms. Eastman said she had told him early on in their relationship that she had over $100,000 of debt. But as the couple got closer to their wedding day, she took out all the paperwork and it became clear that her total debt was actually about $170,000. “He accused me of lying,” said Ms. Eastman, 31, a San Francisco X-ray technician and part-time photographer who had run up much of the balance studying for a bachelor’s degree in photography. “But if I was lying, I was lying to myself, not to him. I didn’t really want to know the full amount.”

Still, if she and Mr. Kogler are going to move in together and get engaged, she wants their financial arrangements to be clear and fair. But how do you define fair when you’re bringing a quarter of a million dollars in debt to a relationship?

All of this raises the question: At what point do you have a moral obligation to disclose your indebtedness during courtship? On the eighth date? When you get to third base? In your eHarmony online dating profile?

Ms. Eastman in San Francisco says she knows that now. “What would I have done differently, besides bringing a copy of my credit report on the first date?” she said, with a rueful chuckle. “I would have been more responsible.”

Seems like L&M dhaga material but hold on, it has implications at the macro level for the US khanomy. Mish explains:

Housing typically leads the economy out of recession. If couples put off marriage, or never get engaged in the first place, that obviously hinders family formation.

In turn, that hinders the demand for houses and related goods and services, not to mention the goods and services required to have kids.

Moreover, student debt contributes to the problem of unloading a massive inventory of homes and a massive shadow inventory of homes on top of that. Many students are so deep in debt and without a job that not only have they delayed marriage, they have moved back home and are not even renting apartments.

Banks sitting on foreclosures thinking that a housing recovery is around the corner, have another thing coming. These structural problems, including boomers headed into retirement wanting to downsize their homes (with no one to sell to), puts additional pressure on home prices.

Ironically, falling prices is the cure for this mess, not the problem that politicians see and attempt to fight. Home prices need to drop to affordable levels where there is genuine demand to clear housing inventory.

Because of all these factors, I expect housing prices to remain weak for a decade, even after prices bottom.

That bottom in housing prices may still be a couple years away (or longer), and the more the Fed and Congress tries to prop up prices, the longer away the bottom is likely to be. Although some localities my be in the process of bottoming now, there is simply no economic reason to rush into buying a house today. Other reasons may prevail.

Suraj · Post by **Suraj** » 14 Sep 2010 13:22

Neshant/enqyoob: Please keep it friendly and civil. Thanks.

Hari Seldon · Post by **Hari Seldon** » 14 Sep 2010 13:46

Last-Minute State Aid Helps Harrisburg, Pennsylvania, Make Debt Payment

The embattled government of Harrisburg, Pennsylvania's capital, will avoid default on a $3.3 million bond payment this week because of $4.4 million in last-minute state aid. Of the last-minute state aid, half a million dollars are considered a loan and must be repaid.

With Harrisburg's city council scheduled to meet Tuesday to explore filing for bankruptcy, Gov. Ed Rendell announced Sunday that he was speeding up state funds and grants to the financially-strapped capital.

"I see this as Wall Street versus Main Street," said city councilman Brad Koplinski. "The bondholders are not willing to budge and they expect us to completely take care of this on the backs of our city's taxpayers."

Newly elected Mayor Linda Thompson, who has feuded with the city council she once headed, opposes a municipal bankruptcy filing. "It's the very last option after everything else has failed," she said.

Harrisburg already has skipped millions of dollars in payments on bonds it backed for the costly renovation of a trash incinerator, which dates back to the 1970s. The incinerator is up and running but doesn't generate enough revenue to cover debt that has reached $288 million. This year, the city owes incinerator debt payments of $68 million, an amount that surpasses its annual budget.

What a joke! The mayor is sending the state's money straight into the pockets of 'em bondholders only. Like Mish says, one has to wondner what connection the Hon. guv'ner has with the bondholders here. Better it would be if the state decided to declare bankruptcy and dealt with the bondholders in court which they will anyway have to do despite this 'aid'.

See here:

"If we are the first domino to fall, I know there are cities that are watching us and the bond market is watching, because if they make a deal with us, they'll have to make a deal with every other municipality that's having trouble right now," Koplinski said.

Aha. Eh?

Well, who might these other cities be? Well, here's a quick n dirty profile...

In Alabama's most populous county, Jefferson, the government is saddled with about $5 billion in debt stemming from the overhaul of its sewer system in the mid-1990s. Merit increases for county workers have been frozen, building and road repairs halted. A brand new jail is vacant because there are no funds to hire workers or pay utilities. As in Harrisburg, officials are exploring bankruptcy.

In the impoverished town of Central Falls, Rhode Island, near Providence, officials recently agreed for a receiver to take control of local finances and consider the rewriting of contracts and cutting of pension benefits. A city of 19,000, Central Falls has a budget of about $18 million and projects a $3 million deficit this year and a $5 million gap in fiscal 2011. The city also has $4 million in a pension fund that has $35 million in unfunded liabilities.

ShivaS · Post by **ShivaS** » 14 Sep 2010 13:52

With all humility I had said about three years ago the banks are solvent because of
Cerdit Cards and Student loans.

The Beta was hovering at about 1.8 to 2% and the student lonas were underwritten by Federal govt and yet the banks were charging 10+ percent interest. The credit card rates were more than 25% for paying minimum and carrying balance, while if you borrow cash at ATM on credit card, the upfront fee plus interest rate was any where between 40 to 60 % based on individual credit rating and defaults

ShivaS · Post by **ShivaS** » 14 Sep 2010 17:40

paging doubting thomas "enqyoob" its no ROCK IT Science
http://business.blogs.cnn.com/2010/09/1 ... so-strong/

Japan’s a mess – so why is the yen so strong?
A towering national debt, a revolving door of prime ministers and an export-driven economy limping slowly from its worst economic slump since World War II – Japan’s got it bad.

So why is the yen trading at 15-year record highs?

A number of factors have combined to pump the yen up to 83.36 per dollar on Tuesday, the highest since May 1995.

reading maketh a man arguing maketh a complete rocket man.
All you have to do is yen for knowledge

Chinmayanand · Post by **Chinmayanand** » 14 Sep 2010 18:18

Market Still Deluding Itself That It Can Escape The Inevitable Dénouement : By Albert Edwards

SwamyG · Post by **SwamyG** » 14 Sep 2010 19:05

A series of small-questions to the gurus. When the economic meltdown began, India like the World suffered, albeit moderately. All big countries fell from their respective ivory pedestals. As usual all of them dusted their behinds and moved forward. India was able to do this faster than others and has clocked good growth rate. I am almost tempted to write a book "India: In spite of Economic Meltdown". Experts are talking about Indian economy heating ityadi. Now to my question, say the World economy recovered, say in the next 6-12 months, and within a year from recovery, because of selective amnesia the global economy becomes sooper-di-looper again clocking pre-2007 or pre-2001 growth rates and hype, now what will happen to India?

Looks like coupling or decoupling, India is chugging along well. What do the economic experts, in BRF, see in their crystal ball w.r.t India? Will the growth rate hover around 10-12% or will it shoot up way beyond imagination. The words over-heating does not conjure pleasant thoughts. So will RBI and powers-to-be step in to keep the growth around manageable levels? India has experience managing the economy and the country rattling at 8-10% growth rate.

Or do you feel it really does not matter what happens to the rest of the World, Indian growth wheels have enough domestic traction to speed along and so its growth is more hinged on what happens in India?

Please to check with your crystal ball and forecast India's growth when the World economy is healthy.

warning: If you answer, you might get more questions your way

Neshant · Post by **Neshant** » 14 Sep 2010 20:32

arnab wrote:how can we accept that pvt sector contributes to real growth?

The private sector pays the bills of govt & govt employees. Show me it isn't the engine of the majority of real growth in the economy.

How can inflation be blamed for the plumbing rip-off when we agree that there is no inflation currently?

Inflation has been growing since 1913 from the time the federal reserve was setup. Did his prices shoot from $1 to $200 just recently?

The govt is robbing your money by printing more money?

Counterfeiting is robbery. If its good, shouldn't we all do it?

arnab · Post by **arnab** » 15 Sep 2010 07:12

Neshant wrote:
The private sector pays the bills of govt & govt employees. Show me it isn't the engine of the majority of real growth in the economy.

Inflation has been growing since 1913 from the time the federal reserve was setup. Did his prices shoot from $1 to $200 just recently?

Well a quick data analysis of 'contribution to GDP' from the BEA website shows me that from 1947 (this is the time from which data is available) till 2010, of the 252 quarters for which data is provided; the 'private sector investment's' contribution to GDP growth was higher than 'Government expenditure's' contribution on 130 occasions (or 52 % of the time) - hardly a ringing endorsement for the pvt sector

http://www.bea.gov/national/nipaweb/Tab ... 0&Freq=Qtr

Re inflation commencing with the establishment of the Fed. Have a look at inflation rates during the civil war

Fed hasn't done too bad has it? compared to this?

© Copyright 2010 InflationData.com
@ Shyam and Hari - I like clarity of arguments, I have no leanings either ways. Neshant's 'arguments' strike me as particularly opaque.

Neshant · Post by **Neshant** » 15 Sep 2010 09:23

arnab wrote:Well a quick data analysis of 'contribution to GDP' from the BEA website shows me that from 1947 (this is the time from which data is available) till 2010, of the 252 quarters for which data is provided; the 'private sector investment's' contribution to GDP growth was higher than 'Government.

I don't see any proof there which shows me the private sector which pays the bill of govt expenditure by and large would not be better off investing the money itself. Any so called addition to GDP claimed since 2008 has only been at the expense of the productive economy with govt employees & debt growing while the revenue & private sector is shrinking. No coincidence.

Another thing is the bogus GDP valuations. Was Greece's GDP growing or shrinking since 2001 and how is that in light of the 300 billion+ euro debt it has currently today? Anyone can run up a credit card and claim their standard of living is rising... till the bill comes due.

Finally if GDP is rising due to more govt employees and more debt, why not double the number of govt employees and debt. Surely that should double GDP growth and the country will be out of recession in no time.

arnab wrote:Re inflation commencing with the establishment of the Fed.

95% of the dollar's value has been destroyed since the federal reserve came into existance. So even their stated objective of 'price stability' is a lie. Passing on losses to suckers - that should be the motto in latin under their emblem.

BTW this is the govt's own statistics. Even based on their bogus CPI inflation numbers, the dollar has lost value and this is inspite of massive economic output due to winning 3 wars (WWI, WWII, Cold War), huge technological advancement, global hegemony and population power. With hardly any of that good stuff happening in these times, one wonders where the keynesian printing racket will take the dollar in the next 5 years.

arnab · Post by **arnab** » 15 Sep 2010 09:48

Neshant wrote:
I don't see any proof there which shows me the private sector which pays the bill of govt expenditure by and large would not be better off investing the money itself. Any so called addition to GDP claimed since 2008 has only been at the expense of the productive economy with govt employees & debt growing while the revenue & private sector is shrinking. No coincidence.

95% of the dollar's value has been destroyed since the federal reserve came into existance. So even their stated objective of 'price stability' is a lie. Passing on losses to suckers - that should be the motto in latin under their emblem.

BTW this is the govt's own statistics. Even based on their bogus CPI inflation numbers, the dollar has lost value and this is inspite of massive economic output due to winning 3 wars (WWI, WWII, Cold War), huge technological advancement, global hegemony and population power. With hardly any of that good stuff happening in these times, one wonders where the keynesian printing racket will take the dollar in the next 5 years.

I wish you would make up your mind - is the govt 'printing' money for itself or is it taxing the pvt sector. The govt taxing the pvt sector is for providing services that the pvt sector cannot and will not provide. The govt is not obliged to provide any 'returns' to the pvt sector. If the pvt sector does not like the tax policy it can shut its shop. The tax also has an 'equity' component - for redistribution. I just showed you that pvt sector investment has no more contributed to GDP growth than govt expenditure has (you are free to disbelieve data but I wish you would provide some other credible data which we can analyse).

I don't particularly understand what you want to show through that chart. You seem to be arguing that had the fed not been around, what $1 was worth in 1913 would have have been worth $1 in 2010! Isn't that a ridiculous asertion to make? Do you use the same basket of goods in 2010 that someone would have used in 1913? So why compare apples with oranges? Your main point was that inflation started with the commencement of the fed. I just showed you what inflation was in the 1860s without the establishment of the fed.

Second, why blame the fed? I'm sure if you ask any grandfather in any country - he would tell you that what Rs1 / $1 would have bought him in 1913, would not buy you anything in 2010. But then your quality of life is still better as long as your income would have risen faster than the reduction in the value of the dollar (or inflation). So why look at reduction in the value of dollar without looking at the avergae rise in income levels?

Singha · Post by **Singha** » 15 Sep 2010 10:03

from cnbc

EXCLUSIVE: Outlook Gloomy at Secret Billionaire Meeting
Published: Friday, 10 Sep 2010 | 2:02 PM ET
By: John Melloy
Executive Producer, Fast Money

Beyond the money

For 25 years, legendary Wall Street strategist Byron Wien, now with The Blackstone Group, has held summer meetings with high net worth individuals to get their outlook on the global economy and investing. This year’s group, totaling fifty individuals and including more than 10 billionaires, was decidedly pessimistic on the U.S. economy, investment opportunities and the Obama administration.

“They saw the United States in a long-term slow growth environment with the near-term risk of recession quite real,” said Wien, in a commentary to Blackstone clients. “The Obama administration was viewed as hostile to business and that discouraged both hiring and investment. Companies and entrepreneurs were reluctant to add workers because they didn’t know what their healthcare costs or taxes were going to be.”

The strategist, whose “Ten Surprises” predictions for the New Year became required reading on Wall Street when he was at Morgan Stanley, declined to name the participants in this year’s two so-called benchmark lunches. However, the gatherings, which typically take place out on the eastern end of Long Island, have included in the past such investing legends as George Soros, Julian Roberson, and James Chanos, according to an account of one such lunch in 2007 by The Financial Times.

“The economic pessimism expressed by the wealthy is completely understandable,” said Jim Iuorio, a trader with TJM Institutional Services. “From the start of the campaign that led up to the ‘08 election, the wealthy have been depicted as villains by the Democratic party. Even though the political tide seems to be turning, real change is months or years away.”

Stocks are off their August lows this month and many traders, including Iuorio, attribute some of those gains to this changing political tide. Still, President Obama re-emphasized in a press conference today that extending the Bush-era tax cuts for the wealthy was not in his stimulus plans.

A massive reduction in the consumer debt load, a workforce without the right skills for the jobs of tomorrow, and too high labor costs relative to other countries “are not problems that are likely to be solved any time soon,” wrote Wien of the attitude of the people at the lunches, which took place in two groups on successive Fridays last month. “Only a few investors thought the Standard & Poor’s could reach 1200 next year.”

So what are the billionaires buying if this environment continues? Wien said “vacant office building,” “farmland” and “Africa” were some of the ideas thrown out. Not too many things for the regular investor.

“Billionaires have little in common with the retail investor in terms of investment options,” said Stephen Weiss of Short Hills Capital. “They don’t rely on mutual funds or stock/bond picking for return unless it is very concentrated. Their investments are generally more strategic and negotiated in businesses or other assets such as commercial real estate.”

To be sure, the folks at Wien’s lunches certainly have the most money at stake, but that hasn’t meant they were always correct. As The Financial Times chronicled in August 2007, only George Soros and one other big investor believed the economy was headed into a recession or a bear market. Now, we know those two men, not the consensus, were correct.

The scary part this time is that it seems from reading Wien’s commentary that there were not many dissenters.

“The lunches were over about three-fifteen,” wrote Wien to end the piece. “I didn’t get the feeling anyone there was rushing out to place an order before the close based on what was said.”

For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC.

Neshant · Post by **Neshant** » 15 Sep 2010 10:19

arnab wrote:Is the govt 'printing' money for itself or is it taxing the pvt sector.

Printing money to keep banking crooks afloat and taxing the private sector to do so. Its not either-or.

arnab wrote:The govt taxing the pvt sector is for providing services that the pvt sector cannot and will not provide.

Keeping banking crooks afloat is not a service. Its a burden.

arnab wrote:I just showed you that pvt sector investment has no more contributed to GDP growth than govt expenditure has.

I did not see any proof and its sounds like you are just making up stuff. Govt would not exist without the private sector because there would be no tax revenues to keep any govt employee on the payroll.

arnab wrote:I don't particularly understand what you want to show through that chart. You seem to be arguing that had the fed not been around, what $1 was worth in 1913 would have have been worth $1 in 2010! Isn't that a ridiculous asertion to make?.

I don't see why its ridiculous. With technological innovation, productivity growth, global hegemony and the world's reserve currency, the value of the dollar should have been stable or increasing. Where have these gains gone? What is ridiculous is $1 being worth $0.05. What will be even more ridiculous is when the dollar is worth $0 despite a century of advancement.

Also I don't understand : If counterfeiting money is good, shouldn't it be done by all people?

Neshant · Post by **Neshant** » 15 Sep 2010 10:30

usually on these shows, the person being interviewed can hardly get in a word.

just the opposite in this case leaving the host pissed.

---------

Erin Burnette gets her knickers in a knot

http://www.youtube.com/watch?v=0QNHaF3VfSE

shyam · Post by **shyam** » 15 Sep 2010 10:31

Head Of NJ Teachers' Union Makes $550,000 A Year--2X As Much As The Governor And 10X The Average American

arnab · Post by **arnab** » 15 Sep 2010 10:32

Neshant wrote:
Printing money to keep banking crooks afloat and taxing the private sector to do so. Its not either-or.

Keeping banking crooks afloat is not a service. Its a burden.

I did not see any proof and its sounds like you are just making up stuff. Govt would not exist without the private sector because there would be no tax revenues to keep any govt employee on the payroll.

I don't see why its ridiculous. With technological innovation, productivity growth, global hegemony and the world's reserve currency, the value of the dollar should have been stable or increasing. Where have these gains gone? What is ridiculous is $1 being worth $0.05. What will be even more ridiculous is when the dollar is worth $0 despite a century of advancement.

Well the banking crooks also belong to the same private sector (just like the automobile crooks). To me it is simply a question of time when someone in the pvt sector asks for subsidies or protection or a bailout. The govt obliges for the 'greater good of the economy'. Today the banks are bailed out - tomorrow it might be your sector. But they are all in it for private profits.

Well I provided you the link to the BEA site. you can look it up. It has the private sector's contribution and the govt. contribution to GDP since 1947 for every quarter. If you have any other data I will be happy to take a look.

Why should technology and productivity (which is in the real world) have to do anything with the value of money (which is a tool of exchange)? The question to ask is not that whether $1 in 1913 is worth $1 in 2010 (which is meaning less), the question that policy makers ask is - whether the people in 2010 are better off than they were in 1913.

ShivaS · Post by **ShivaS** » 15 Sep 2010 11:03

The curve is misleading just like J Lopez derriere or Jenifer Anistons mamory who knows what it is padded with?

The curve does not mention true value of Dollar with respect to what?

If it is implied in relative terms to the year 1913 then its a measure of Inflation, actually if you go back to dollar in the year of 1776 (independence) then todays dollar value might even be negative.

hence
Valuations are all relative and are based on perception hence continous marketing boost is needed...

The curve is more represenative of Inflation which like entropy will ever increase, therefore the dollar value in relative terms will decline, which it is true to curve unlike the stars I mentioned.

ShivaS · Post by **ShivaS** » 15 Sep 2010 11:43

swamy G ji>> Here is what my Crystal balls say (keynesian and monetarist balls)

1) The US economy never grew beyond 3.4% to 3.5 % feds usually intervene to keep it in that range because of inflationary growth (so called over heating) and near full employment rate. The unemployment rate of 4.7% is considered as full employment and fall in that rate can cause hyper inflation as the Inflation/GDP curve and the unemployment rate curve (a straight line perpendicular to x axis and parallel to y axis.
2) Remember that for a trillion(s) of dollar economy 3.4 to 3.5 % in absolute terms is huge (just like 10% of population growth in 1.2 Billion Indians means 120 Million which is 1/3 of US population)
3) A growth rate of 10% above is always likely to inject higher inflation rate unless
a) The price of goods (consumer goods and food like basic necessities) are heavily subsidized like MGR Rs 1 per Kg of Rice NTR followed it so did many others even went to 1 Kw is Rs 1 (what?? Said the engineers and accountants)
b) In the above model the sarkar accumulates deficits which it can sustain for a while, but it indirectly contributes to inflation in the medium to long run as Sarkar crowds the borrowers market.
c) The other way to control is to raise the interest rates so as to slow down the velocity of money circulation. Its like putting a high value 100 M ohms in the power supply in series to restrict the current drawn. This what Fed does every time it sense inflation it increase the rates…. Making borrowing more expensive for one and all and increasing the opportunity cost of spending especially on borrowed money aka incentive to save….
d) So RBI keeps tinkering with over night borrowing rates for banks, (analogues to LIBOR London Inter Bank Offered Rate which is also factored in calculating the home mortgage rates for individuals in Khanland)
e) The RBI can regulate the Reserve Ratio, which is like a sledge hammer to drive a nail (instead of a ball peen hammer you will know if you are mechanical engineer else ask Google mama or Bing mami). PRC often resorts to this trick to regulate inflation in addition to fixing exchange rates for Yuan and Dollar like India did till 1991 1992, when dollar in open market was Rs 37+ where as GOI rate was around 19 to 21 Rs)
f) The RBI can also raise interest rates like Fed does and it does often to control inflation.
g) If the supply of money is restricted to privileged groups and these groups do not spend the money in the country but stash it away in Swiss Miss vaults with deep cleavage to hide the money, then inflation will not be caused. So most of netas babus filmi stars industrialists are doing national duty of controlling the inflation, while uneducated NRIs send money to India to drive up the flats prices, auto prices food prices and gold prices,on this count NRIs should be banished to foreign countries.. 
h) If on the other hand the people of India achieve real productivity, growth in products & services increase their real wages then they will cause inflation hence should be treated as anti nationals. Just like some environ Mentalist said if everybody can afford a Nano How can I drive M Benz or BMW wher can I park my BMW, how can the roads take the weight of so many Nanos driven by Nanis? Like GW said the food prices are increasing because more Indians are able to eat!

Neshant · Post by **Neshant** » 15 Sep 2010 12:03

arnab wrote:To me it is simply a question of time when someone in the pvt sector asks for subsidies or protection or a bailout.

If that was the case there would be no bankruptcies. But there are. Banking crooks and unions want to be immune from that. It can only come at the expense of the productive sector of the economy.

It has the private sector's contribution and the govt. contribution to GDP

I don't see any proof which shows money taken from the private sector is better spent by anyone other than the ones making the profits.

Why should technology and productivity (which is in the real world) have to do anything with the value of money (which is a tool of exchange)?

Money is supposed to represent value. What do you propose it represent : non-value? Which leads to the question you still haven't answered : If money printing is good, why don't we all do it?

Neshant · Post by **Neshant** » 15 Sep 2010 12:10

Robert Prechter is a super bear and its hard to even imagine some of his predictions. His predictions could not be any gloomier than if an asteroid his the earth. Don't know how seriously to take this guy but for what its worth :

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Prechter: Go To Cash or You're Dead
http://www.youtube.com/watch?v=OWpl0vuU44A

ShivaS · Post by **ShivaS** » 15 Sep 2010 12:18

Prechter: Go To Cash or You're Dead

one of the reasons dollar becomes stronger again no Rock it sign

Neshant · Post by **Neshant** » 15 Sep 2010 12:49

New career options are opening up for laid off bankers.

Stimulus money being used to scrub the balls of Africans.

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Feds Spent $823,200 of Economic Stimulus on African Genital-Washing Program

http://cnsnews.com/news/article/75198

Chinmayanand · Post by **Chinmayanand** » 15 Sep 2010 13:36

IMF fears 'social explosion' from world jobs crisis

America and Europe face the worst jobs crisis since the 1930s and risk "an explosion of social unrest unless they tread carefully, the International Monetary Fund has warned.

ShivaS · Post by **ShivaS** » 15 Sep 2010 13:37

thats money spent in black and white

Chinmayanand · Post by **Chinmayanand** » 15 Sep 2010 13:55

For years we have noted that the US Treasury has regularly issued much more debt than the stated official US deficit in a given year. Our conclusion was and remains that the real US deficit is the amount of new debt issuance adjusted for cash on hand. And because cash on hand at the Treasury has been declining, the real deficit has been and continues to dwarf the stated budget deficit.

Others are catching on to the scheme.

Zero Hedge: Today, the US Treasury department disclosed that its August deficit was a slightly better than expected $90.5 billion, compared to $103.6 billion in the year prior. What received less fanfare was that the comparable increase in debt in the month of August 2010 was $212 billion, compared to $143.6 billion a year earlier. In other words, more than twice the deficit had to be issued in the month of August…As we highlighted in May, the US Treasury department continues to issue debt well in excess of the monthly deficit.

http://www.zerohedge.com/article/us-deb ... -needed-fu

SwamyG · Post by **SwamyG** » 15 Sep 2010 19:32

Neshant wrote: Erin Burnette gets her knickers in a knot

http://www.youtube.com/watch?v=0QNHaF3VfSE

She is just a eye-candy for CNBC which in itself is a Corporate shill, buffoons like Kudlow and Cramer prowl the air waves. Alas there are only three channels for me - CNBC, Fox Business (ewwwwwwwww) and Bloomberg. So most of the time, I have to stick with Bloomberg, their coverage of the globe is far better than the other two. The hostesses of CNBC have a such a air of arrogance. Karen Finerman does not even know the respect she does not have

One gets far better advice on Yahoo finance boards (btw that sucks).

SwamyG · Post by **SwamyG** » 15 Sep 2010 19:43

Shiva garu: chaala thanksandi.

You describe actions that RBI could take. So does it mean, you predict India can grow more than 10% if say World economy improves? And you feel RBI will step in to keep the growth around 10% and not let it grow more than that? I like to understand what will happen to India's growth under a healthy world economic news.

Would Indians benefit from say a 16-18% growth? Would we be able to lift many poor above BPL? Would we be able to provide the essentials faster? Or are such fast paced growth unsustainable and will it bring the country back to its knees? So if we are "resigned" for a 10% growth then it is going to take "n" years to help the poor, can that "n" years be reduced by increasing the growth - or will the overheating cause immense takleef?

More gyaan appreciated.

Sanjay M · Post by **Sanjay M** » 15 Sep 2010 21:30

I think that people will increasingly hedge against uncertainty arising from fiscal irresponsibility by going more heavily into commodities. The finiteness of commodities and the steady rise of quasi-alternatives to the US means that

Immediate collapse of the US into recession is forestalled by its steady slide into populist political spending and bailout culture. But how far can the US political slide into blind populism and redistributionism? There are limits to what the politically predominant American middle class will tolerate.

Arguably, the Obama Whitehouse itself represents a form of bubble, in a political sense. The Obama Whitehouse is the product of a Left-wing overexpansion that is about to recede due to a growing American backlash against it.

This looming political shift is what will bring the cold waters of reality flooding in, for a major market correction. What's that going to be like? Look to the UK for a clue. The next US govt is going to do a lot of what David Cameron is doing now, to the horrified shock of the Left.

But obviously it's not just the populist spending US Left that's going to feel the pain. It's all the exporters worldwide who export to the US who will feel it.

The Republicans have in the past shown their willingness to pursue a "Starve the Beast" strategy, to cut the funding to the welfare state programs that fuel the constituencies that donate to the Left.
Similarly, by abandoning "quantitative easing" and Fed intervention to shore up US markets, the Republicans could simultaneously allow the dollar to drop and sour US debt so that foreign buyers of it would be deterred from making further acquisitions. This would help to protect American sovereignty and stymie others from continuing their creeping takeover of the US economy.

ramana · Post by **ramana** » 15 Sep 2010 23:30

Newsweek article on Lehman's Clear lesson

...
A big contributor to Lehman's demise was a lack of information available to interested parties - whether investors, counterparties, regulators or top executives. No one seemed to know how much capital Lehman needed, how much exposure to toxic real-estate assets it had or how much time was left on the clock to figure it all out.

A key finding by bankruptcy examiner Anton Valukas showed that everyone from managers to regulators to auditors missed an accounting tactic Lehman had been heavily reliant upon to prop up its balance sheet in what he called a "materially misleading" manner.

Valukas uncovered a gimmick called "Repo 105," in which loans are moved into off-balance sheet vehicles for a short period of time and booked as sales. The practice is common in the financial services industry. But while the Fed, Treasury and SEC have been scrutinizing and stress-testing banks' books since the collapse of Bear Stearns in March 2008, none of them seemed to know about Repo 105 until it was brought to their attention by Valukas.

..
It's not to say that banks are being fraudulent in their accounting practices - they don't have to. The FASB's rules are apparently so full of holes that banks can drive a big heap of CDOs straight through them. Both Fuld and an FASB representative pointed out in April that Repo 105 is a legit practice under the Generally Accepted Accounting Principles, or GAAP, which banks must adhere to.

Very worrisome

Neshant · Post by **Neshant** » 16 Sep 2010 09:09

deflation my azz
printing is destroying the purchasing power of the people.
the only thing deflating are wages and over priced real estate.

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CRB Spot Indices (1967=100) - Sep 15, 2010 (1 year change %)

Metals +160.03%
Textiles +48.92%
Raw Industrials +73.61%
Foodstuffs +104.43%
Fats & Oils +107.85%
Livestock +103.54%
CRB Spot Index +89.29%

http://www.crbtrader.com/crbindex/data.asp

Neshant · Post by **Neshant** » 16 Sep 2010 09:26

mr. magoo is back to giving predictions on the economy... telling us stuff we already know.

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Greenspan: Fiscal Stimulus Worked Far Less Than Expected

The former head of the Federal Reserve said fiscal stimulus efforts have fallen far short of expectations, and the government now needs to get out of the way and allow businesses and markets to power the recovery. (translation - we f-ed up everything, ran up the debt, and now we're clueless)

“We have to find a way to simmer down the extent of activism that is going on” with government stimulus spending “and allow the economy to heal” itself, former Fed Chairman Alan Greenspan told a gathering held at the Council on Foreign Relations in New York on Wednesday.

At this point, “we’d probably be better off doing less than more” because “you’d be far better off to allow the normal market forces to operate here,” Greenspan said. That’s largely because stimulus spending is not proving as effective as many had hoped. “To the extent the evidence suggests very large deficits concurrently crowd out capital investment, there is a debit to the stimulus program that is somewhere between a third and a half of what the gross stimulus is,” he said.

The former central banker noted that gold, the price of which has been surging, still represents the “ultimate means of payment.” What is happening in that market “is a signal there is a problem with respect to currency markets.” He reckons the problem is not a large one, but the jump in gold prices could be “the canary in the coal mine to keep an eye on.”

Greenspan, while worried about the outlook and what is happening with the housing market, said when it comes to a double-dip recession, “the probability of that is going down.”

http://blogs.wsj.com/economics/2010/09/ ... -expected/

Neshant · Post by **Neshant** » 16 Sep 2010 10:00

Watch out, here comes an attempt by the US to setup a quazi-international currency. It will give the US a chance to transfer China & Japan's dollar denominated debt into SDRs and give the federal reserve a free hand in devaluing the dollar. This will be at the expense of any person in or out of the US who has saved his money in dollar fiat.

Federal reserve banking crooks want to make their shareholder banks solvent with the resulting inflation - at the expense of the financially responsible people. Bunch of crooks!

For now, the move to give a bigger share of the pie at the IMF to China is being held up in squabbles between US and Europe. Europe is over-represented and US wants it to give up part of its voting share to China. Europe meanwhile is trying to turn the tables on the US demanding it give up its veto as well. All this is supposed to be in time for the next G-20 meeting.

The aim of all this sh*t is to take the central banking scam one step higher as locals in the US are catching on. The scam needs to be moved to a position where voters are not able to demand an end to the racket as they have no say at the international level.

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Movement on the IMF

http://bosco.foreignpolicy.com/posts/20 ... on_the_imf

Quote:
The slow-moving standoff between the United States and Europe regarding the composition of the International Monetary Fund's board (see here) shows some signs of coming unstuck. Germany has signaled that the EU is moving toward acceptance of thinner representation on the IMF board:

"We agree in principle that there has to be some sort of reshuffle of the executive directors that allows for a better representation of the dynamic, developing nations but we see this in a slightly bigger framework."

That "slightly bigger framework" might include a firm agreement to keep the existing 24-member board and, perhaps, a U.S. willingness to forfeit the effective veto power it now has over major Fund decisions (these require 85 percent of votes, and the U.S. has about a 17 percent voting share). No word yet from Washington on whether that would ever be considered. For the major developing countries, the sight of Washington and Brussels bidding against each other to loosen the Western grip on the institution must be enjoyable.