Perspectives on the global economic meltdown (Jan 26 2010)

Neshant · Post by **Neshant** » 06 May 2010 09:32

Jim Rickards on market volatility
http://www.cnbc.com/id/15840232?video=1485831315&play=1

vina · Post by **vina** » 06 May 2010 10:55

"If the USD & Euro falls drastically" our import bill effectively falls...

Needs to be qualified.

If USD & Euro fall drastically against RUPEE then yes, import bill effectively falls.

However if USD & Euro have a generalized fall, I think that will set up repricing of commodities (rush towards commodities as a safe heaven) and will INCREASE India's import bill I think. INR will closely track USD/Euro and don't think it will strengthen against the trends like AusD or Brazil Real or Middle Eastern currencies (which because of peg will not be allowed to appreciate, but will result in local inflation because of flood of dollars and Euros.)

shyam · Post by **shyam** » 06 May 2010 11:18

It should reduce import bill as a share of GDP, but may not as a share of forex reserve.

However I will expect import bill to go up in terms of dollars as Indians will find imports cheaper than local products. Since rupee is not a reserve currency, we will have to work hard to increase exports to ensure availability of sufficient forex reserve.

In the grand scheme of things, the consumption patterns should adjust to even out the side effects of exchange rate.

Hari Seldon · Post by **Hari Seldon** » 06 May 2010 17:03

^^ I doubt INR will rise by much. Our ballooning fiscal deficits can always balloon some more should that threaten to happen. And RBI doesn't wanna see INR rise too far too fast either.

Meanwhile, slow news day in euroland, seems like.

World stock markets tumble on Europe debt woes

World stocks plunged Thursday as fears Greece's debt crisis will spread to other European countries and undermine the global recovery continued to rattle markets. Investors are questioning whether a $142 billion aid package for Greece will be adequate to keep debt problems from engulfing other European nations with weak government finances.

Analysts said some European countries may have to cut government spending to calm jittery markets, which could undermine economic growth and demand for exports. "On any further deterioration in this situation, emerging markets will be hit via rising risk aversion, weaker trade flows and falling commodity prices," Citigroup said in a report.

The weaker euro hurt Japanese companies who do significant business in Europe. Canon Inc. was down 3.3 percent, and rival camera maker Nikon Corp. fell 3.1 percent. Financial issues declined across Asia, with Japan's Sumitomo Mitsui Financial Group Inc. down 4.3 percent and South Korea's KB Financial Group Inc. tumbling 4.6 percent.

All this is a storm in a teacup. Nothng material will happen, the crisis will be 'managed', IMO.

derkonig · Post by **derkonig** » 06 May 2010 17:44

^^^^
No sirji. Deutscheland will rue the day they agreed to the bailout package. There should be no bailout for the PIGS, they must be allowed to default. Saving them (if that is possible at all) will only mean delaying their default.

shyamd · Post by **shyamd** » 06 May 2010 19:58

Moody’s Says Contagion May Threaten Portugal, Spain, Italy Banks

Suraj · Post by **Suraj** » 06 May 2010 20:11

Most commodities themselves are denominated or traded primarily in USD, and to a lesser extent, in Euros. What important commodity (from our perspective) is traded in a stable currency against which the USD and Euro may fall in relative exchange value ?

Hari Seldon · Post by **Hari Seldon** » 06 May 2010 20:39

TAE blog post - gloomy only, read with caution.
May 4 2010: Budgets full of pain

What the Greek drama brings home is our very own personal reality. Or where do you think California's 30% drop in state revenues will lead? Do you really believe with numbers like that the state will be spared what’s coming to Hellas?

Uh-oh. But lemme say out loud what I do believe a lot of us must be thinking. Calif is in the US of A. Not effnig Greece. No way it can get that bad in manifested destiny. But lookie over here, at what's happening in Fresno, CA. It ain;t pretty but odds are its a 1-off thing and the contagion won't spread across local gubmints and municip bonds around the country.

The mayor of Fresno puts on the bravest face she could find in her Halloween closet to declare that the city of Fresno will be well positioned to come out of this economic storm.

Only, to get there, she's "responded with a budget that's filled with pain": she’ll fire hundreds of city workers, and outsource those services to the private sector (where, she claims, the just-fired workers could find jobs. Yay!!). One in 12 city workers will be laid off. Oh, yeah, and she declared a fiscal emergency in between firings. And so she'll use emergency funds to keep afloat both the city and her political career. Until those are gone too.

I don’t have the numbers handy right now, and I don’t really need to, do I, to show that the already gravely battered Austrian Terminator, who now appears to run on ultra-low battery power, did not base his budget for the present fiscal year on a 30% plunge in revenue. And that budget, we all remember well, already cut whatever could be cut and then some. Califoohhrniah, get ready for another cut, by about a third. And this one will hurt for real, trust me.

I know what yer thinking. By now, I too am like,now how many times have I heard this D&G before. The states seem to be managing just fine, no? They only have to extend this state of status quo perennially. They've pulled it off thus far against thick and thin, why not then, by induction, to perpetuity??

Obviously, the privatizing and outsourcing is straight out of 1950's IMF manuals, the ones that seduced such fine characters as Pinochet and Yeltsin. Bad for the people of Greece, real bad, and sure to lead to increased street battles and toppled governments, either tomorrow or 5-10 years from now.

Yeah, whatever. Time I took a stand here and differed from TAE. See, these things keep happening in other countries but they perfroce cannot happen in umrika. Its like us BRFites waiting forever for TSP to collapse but it never does due to unkil life support. Similarly, things will never crash beneath a level in the khanate due to Fed support. And the Fed'll create trillions of legal tender USD out of thin air if necessary to do what is needed. IMVHO, of course.

Meanwhile, what *exactly* is the IMF asking greece to do ki sala the greeks have gone so berserk, eh?

take a look at the terms Greece has accepted (well, on paper), to get its €110 billion EU and IMF loans.

* Cut budget deficit by 11% of GDP by 2013, through spending cuts valued at 7% of GDP and revenue increases valued at 4% of GDP.
* Reduce budget deficit to 'well below' 3% of GDP by 2014.
* Reduce debt-to-GDP ratio from 2013, with primary budget surpluses of at least 5% of GDP up to 2020.
* Cut public-sector pay and pensions.
* Raise average retirement age.
* Increase value-added taxes and excise duties.
* Deregulate the labor market and industries.
* Privatize some state industries.
* Cut public investment.
* Crack down on tax evasion.

Nothing unsurprising, you may say. Certainly nothing earth shaking there, eh?
Well, Greece is just a few steps away from becoming Latvia, basically.

If you dare look a little deeper into your own future, though, try Latvia. It laid off one in 3 of its government workers (remember, it was "only" one in 12 in Fresno), and whoever was lucky enough to keep their jobs saw their pay cut by 25%. Private sector wages are down 30%, and unemployment stands at 23%. I would venture that the Latvians understand by now that there's no guarantee whatever that this is as bad as it will get. And neither should any of us who happen not to be proud citizens or Riga.
...
Still, so, yes, that’s your foreland, wherever you live in the western world. And it could, and very probably will, get much worse.

TAE exaggeration, IMHO. Take with some salt. But continue reading for a case well built, albeit gloomy.

News from UK-stan:

Britain has a major election on Thursday, and for some reason (turn chaos into profit?) the bonds and sterling futures markets have decided to open at 1.00am local time. If the election results are too confusing for pundits to explain, expect a deep, low and loud sucking sound just off Blackfriars Bridge.

We'll see when rubber meets road. Not that far off, am told. Do they have 'em EVMs in gleat bitten??

Gloomy bottomline:

Today’s stock and forex exchange markets may be an aberration, or an anomaly, or anything you wish to call them. Still, the overall tendency stands, and while you wouldn’t be able to recognize it from watching Wall Street, a good albeit brief look at Sacramento, Fresno, Athens, London and Riga, Latvia should tell you all you need to know. It’s getting ever harder for incumbent power to keep pressure levels high enough to fool enough people into thinking the boat's not sinking. The credit crunch is a global phenomenon, always was.

I used the term "Beggar thy currency" a while ago, talking about Angela Merkel trying to bring down the Euro vs the USD. And as I said, she gets what she wants: a better exports position. But Chris Whalen today comes with one that fits government (and IMF) policy around the globe even much better: "Beggar thy citizen".

And to quote the Fresno mayor once again: what we will increasingly see are "budgets filled with pain". Please don’t be caught blindsided.

[/quote]

Again, std disclaimers stand. Am now coming round to the view that perhaps the worst of the crisis in the US and Asia is over. Europe I care about as much as they care about sdre people like me - zero, that is. Chalo, we'll see. Time'll tell. Always does.

Hari Seldon · Post by **Hari Seldon** » 06 May 2010 20:45

UK faces run on pound within hours of election as futures exchange opens early

Britain could be battered by speculators on the international money markets within hours of the election result as the futures market in bonds and sterling has agreed to open for the first time at 1am on Friday. The City is concerned that a hung parliament could mean Britain is unable to take rapid action to cut its budget deficit and force a similar battle with bond dealers that the one that forced Greece to resort to €110bn (£95bn) a bailout package put together by the eurozone countries and the International Monetary Fund.

Usually bond dealers would have to wait until the markets opened on the morning after an election to begin trading but the futures market in gilts – UK government bonds – is opening only three hours after the polls close and seven hours earlier than usual. The futures markets play a key role in determining how much interest the government pays on its debts and traders will be able to buy and sell futures contracts as constituency results are announced and the balance of power shifts between the three main parties.

Euronext Liffe, which runs the gilts futures exchange, said it was the first time technology had allowed the market to open early. A spokesman for Liffe said traders would also be allowed to bet on a collapse in sterling, which the shadow chancellor, George Osborne, has warned is likely if the outcome of the election is a hung parliament. Hundreds of millions of pounds could be won or lost during Friday morning as bond traders and foreign exchange dealers attempt to second guess the election.

Bond fund managers have called for steep cuts in welfare spending by highly indebted European countries to avoid a repeat of the Greek crisis. Spain, Portugal and Ireland have already been targeted by speculators. Some economists have included Britain and Italy in the European "circle of doom" countries that ring the more financially secure nations of France and Germany. World stock markets remain jittery, with almost $1tn (£650bn) of worldwide equity value erased last week on concern that debt will spur defaults.

And on and on.
Am keeping fingers crossed on this one. ore than meets the eye, there is. The gleat blitones will default, am sure. The only question is when and how. Watch this space, sorts.

Chinmayanand · Post by **Chinmayanand** » 06 May 2010 23:26

Pound falling almost 900 pips against yen in a single day .....

looks like we are back in 2008.

Suraj · Post by **Suraj** » 06 May 2010 23:51

The markets look like downtown Mogadishu today.

Prem · Post by **Prem** » 07 May 2010 00:46

prad wrote:Dow Jones is swinging around like a baseball batter on steroids today. around 30 minutes ago, it was down more than 1000 points!!!!!! right now, it's down 390 points.

May 2010 == Sept. 2008

No , its a great oppertunity to buy, last 30 minutes are the most intersting minutes of whole day trading.

SwamyG · Post by **SwamyG** » 07 May 2010 00:47

May 10th, 2053 AD. {A class room in India}

Teacher: What were Greeks known for?
Student: The Western Culture derives significantly from the Greeks.
Teacher: Sabash beta, Aur Kooch?
Student: Around 2010, the Greeks were attributed in bringing down the Western Culture.

Suraj · Post by **Suraj** » 07 May 2010 01:08

It was a great buying opportunity during those few minutes when Dow stalwarts well 10% or more.

bhavani · Post by **bhavani** » 07 May 2010 01:29

But the shares traded so slow only for a few seconds a minute at most. Like Apple Spent a few seconds at 199 and then it was back up at 240's.

Only people who traded with big amounts and automatic buy sell triggers would have been able to pick some thing during this time. iNfact i was watching AAPL and buy the time i finished placing a buy order it was already up to 240. I was trying to buy at 220 and it did not get executed.

I think these wallstreet big sharks have huge automated systems which are responsible for the instant bounce back.

I wonder how the markets will behave if Greece really defaults.

Carl_T · Post by **Carl_T** » 07 May 2010 01:31

bhavani wrote:I wonder how the markets will behave if Greece really defaults.

And Portugal and Spain...

To those in the know...how did the markets react after Russia defaulted?

paramu · Post by **paramu** » 07 May 2010 01:39

What was US' exposure to Russian market when Russia defaulted?

ramana · Post by **ramana** » 07 May 2010 01:46

Not much in US but Germany had some hiccups.

It must be RB that brought Apple stock up!

Suraj · Post by **Suraj** » 07 May 2010 01:49

The Russian default led to the collapse of LTCM, which led to a massive bailout from the US Federal Reserve. Some big EU bank(s) may be critically wounded by an actual PIIGS default.

Chinmayanand · Post by **Chinmayanand** » 07 May 2010 02:01

Accenture PLC traded from 42$ to 1cent and back to 40$ ... what pakiness was that

ramana · Post by **ramana** » 07 May 2010 02:24

prad, Look at the range for today!

http://money.cnn.com/quote/quote.html?symb=ACN

and this chart:

http://www.google.com/finance?q=ACN

http://www.zdnet.com/blog/btl/as-wall-s ... unce/34155

SwamyG · Post by **SwamyG** » 07 May 2010 02:41

I had a market order for one of my solar stocks, and it got rejected by "market" that is what TD Ameritrade claimed. I first set a limit order, then seeing things go down, changed it to market order; but the market order did not get executed. I knew there was something going on @ the broker.

CNBC reports say there was some kind of glitch. Heard the name of Proctor & Gamble thrown around, I am not sure if their stock was the cause or if they were affected.

amdavadi · Post by **amdavadi** » 07 May 2010 03:20

What a day trading day!!! Dont worry, we will see repeat of today few more times before month ends..I am going to
stop watching CNBC for three months...see you at Dow 8K

paramu · Post by **paramu** » 07 May 2010 03:20

ramana wrote:prad, Look at the range for today!

http://money.cnn.com/quote/quote.html?symb=ACN

and this chart:

http://www.google.com/finance?q=ACN

http://www.zdnet.com/blog/btl/as-wall-s ... unce/34155

This must be a glitch. Trade volume did not go up when the stock went down to $0.01 and back up.

RamaY · Post by **RamaY** » 07 May 2010 04:23

Chinmayanand wrote:Accenture PLC traded from 42$ to 1cent and back to 40$ ... what pakiness was that

WTF

I have a jinx on my work exp. The companies I work for and leave tend to tank after 5 years. The next is due in 2010. If that happens then Accenture's turn will be in 2013

I plan to negotiate with my current company if 2010 prediction comes true

Hari Seldon · Post by **Hari Seldon** » 07 May 2010 06:52

Yup, O whatta trading day. But, nothing earth shaking, IMHO. Stuff happens when computers fight computers in trading competitions.
Electronic Trading to Blame for Plunge

Computerized trades sent to electronic networks turned an orderly stock market decline into a rout today, according to Larry Leibowitz, the chief operating officer of NYSE Euronext.

While the first half of the Dow Jones Industrial Average’s 998.5-point plunge probably reflected normal trading, the selloff snowballed because of orders sent to venues with no investors willing to match them, Leibowitz said in an interview on Bloomberg Television.

Stock plunge raises alarm on algo trading

A spine-chilling slide of nearly 1,000 points in the Dow Jones Industrial Average, its biggest intraday points drop ever, led to heightened calls for a crackdown on computer-driven high-frequency trading.

The slide, which in one 10-minute stretch knocked the index down nearly 700 points, may have been triggered by a trading error. Major stock indexes eventually recovered from their 9 percent drops to close down a little more than 3 percent.

But the follow-through selling that pushed stocks of some highly regarded companies into tailspins exacerbated concerns that regulators can quickly lose control of the markets in a world of algorithmic trading.

"The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today," Senator Edward Kaufman said in a statement.

"The battle of the algorithms -- not understood by nor even remotely transparent to the Securities and Exchange Commission -- simply must be carefully reviewed and placed within a meaningful regulatory framework soon."

Mish asserts:

In essence computers trading against computers decided at some point today to throw in the towel and not bid.

At some point (manual intervention?) they all decided to bid again, driving stock prices back up. This is what our stock market casino has become.

Lovely, isn't it?

I have been waiting for this to happen and today it did. Supposedly, computer trading lowers volatility and bid/ask spreads for traders. Today we see that works until it doesn't.

Most of the day Citigroup was erroneously blamed for the plunge. Citigroup was not to blame, flash-trading computers vs. computers with fake orders appears to be the culprit.

Who benefits from that? In general, Goldman Sachs. Perhaps I am wrong but I bet they had a great day.
...
By the way, this was not really a "black-swan" event. This was perfectly predictable although timing it was not. I have been discussing this scenario with a few friends for months.

I have one question for the computers: Did someone manually intervene triggering your huge afternoon buy program or did you simply figure out on your own accord there were no more stops to run?

Regardless, a whole bunch of people with "far away" sell stops got taken to the cleaners today.

Hari Seldon · Post by **Hari Seldon** » 07 May 2010 07:14

Meanwhile, underneath the trading swings and all, the likely direction, drivers and consequences for common folk still remain.
Batten down the hatches for decade of austerity

Greece's debt crunch, for all its peculiarly domestic and euro zone ingredients, should be an ear-splitting alarm call for Western governments faced with one of the biggest fiscal hangovers in history.

The scale of the task facing governments in the United States, Europe and Japan to return debt burdens to pre-crisis levels of 2007 could, by some estimates, usher in a decade of severe austerity through the teen years of the new century. For sure, the impact of this latest episode both for Greece itself and Europe's single currency will be profound. The budget squeeze needed to secure the 110 billion euro (94 billion pounds) bailout from its neighbours and the International Monetary Fund will inevitably shrink Greeks' standard of living and sorely test the social contract with their government. For the euro zone, the lack of a fiscal backstop for its one-size-fits-all monetary policy has been badly exposed and the delays in agreeing the rescue merely intensified the crisis. But while euro-sceptic voices may justifiably shout "I told you so", this is hardly the time for "schadenfreude".

OK. But I'll believe it when I see it. And the way I see it, a decline in living standards (short of one forced by natural resource crunch, and no, fiat and credit are not quite 'natural' resources) in western democracies will force overthrow of gubmints-> serial debt defaults (a big default event like, say, the UK-stan, can harmoniously be followed by hajaar small ones) --> system reset.

Here's the scale of the challenge ahead:

Any market doubt about debt "sustainability" could see funding costs soar and trigger what some have termed a "death spiral" that feeds off itself.{Yup, just ask Greece...}

But convincing creditors of debt "sustainability" is like convincing them you will survive a leap from a first floor window -- you might do, but no one's quite sure until you try. "After the recent collapse in fiscal positions, simply stabilising debt levels relative to GDP may not be enough to placate markets," JPMorgan economists told clients last week. "Perhaps a more reasonable path to 'sustainability' would be to reduce the levels of debt back to their pre-crisis levels over 10 years."
{For gubmints currently running deficits, getting back to primary budget surpluses is a double whammy}
...
The upshot was the United States needed a sustained primary surplus of nearly 4 percent of GDP for 10 years to reduce a 2013 debt ratio of 101 percent back to 2007 levels of 62 percent. That compares to an estimated 2010 U.S. primary deficit of some 7 percent of GDP.
{Yup, good luck with that. And unkil'll need all the luck it can get to manage a smooth transition to an austerity no generation but the died-out WWII generation has really seen in the land of milk and honey}

To put it in some context, it would exceed the massive U.S. budgetary correction after World War Two when, according to IMF data, it took 17 years to 1963 get a bloated U.S. debt-to-GDP ratio of 108 percent back down to 1941 levels of 42 percent.

Ilargi at TAE is distinctly gloomy about the prospects for the world as a whole. I tend to disagree with the extent but not the direction of his predictions.

What we see today, in Greece and on Wall Street, is that the picture we have painted for a long time is ever more becoming a picture of people's daily life. More so right now for readers in Riga and Piraeus, granted, but they are just the front lines for what is going on all around us everywhere, and what will shape all of our lives.

There's no pitchforks or nooses that will prevent us from going down severely in living standards. All we have left when it comes to dealing with all this is grace. Which happens to be increasingly hard to find. Maybe someone will find a way to make money on that too: long pitchforks, short grace.

We’re never going to come back to where we once were. We’ll be forever much poorer than we were way back when. And we will have to figure out a way to deal with that, or we will be figured out for what we really are. And left to regret it.

Let us hope this storm passes without uprooting everything in its path. For all our sakes.

abhischekcc · Post by **abhischekcc** » 07 May 2010 09:11

RamaY wrote:
Chinmayanand wrote:Accenture PLC traded from 42$ to 1cent and back to 40$ ... what pakiness was that
WTF

I have a jinx on my work exp. The companies I work for and leave tend to tank after 5 years. The next is due in 2010. If that happens then Accenture's turn will be in 2013

I plan to negotiate with my current company if 2010 prediction comes true

The companies I work in either close down or undergo M&A within six months of my joining or leaving.

I had a lot of closures early in my career. Fortunately, the recent companies have been M&A types.

Suraj wrote:The Russian default led to the collapse of LTCM, which led to a massive bailout from the US Federal Reserve. Some big EU bank(s) may be critically wounded by an actual PIIGS default.

US Fed organized the bailout, which was actually done by big investment banks. Incidently, Bear Sterns did not participate in that bailout.

Satya_anveshi · Post by **Satya_anveshi** » 07 May 2010 09:16

This could possibly explain today's "technical glitch." Blame it on Greece all the way.

Senate Rejects Brown-Kaufman Proposal To Break Up Largest Banks

Hari Seldon · Post by **Hari Seldon** » 07 May 2010 09:40

On the eve of a fateful brit election and all, sri AEP hasn't given up sowing FUD against and punching away at the EMU project, perhaps in some fond hope that oirope's travails will lead to a flight to safety to UK-stan and give the island's finances a desperate breather?

Time for capital controls in Europe?

EU well-wisher AEP (like Yindia well-wisher Musharraf) prescribing a capital-controls tonic for EU, eh? Wah re duniya.

Greek contagion has become dangerous. If Greece is Europe’s Bear Stearns, we risk a rapid escalation to Europe’s Lehman in the rest of Club Med — or the GIPS as they are now called by Morgan Stanley (PIGS are banned) There is a big difference with Bear Stearns/Lehman. Europe’s banks shared much of the damage from the American property crash, leaving them with waifer-thin capital ratios and a large book of losses yet to be disclosed. Some Landesbanken still hold Icelandic debt at face-value.

These banks now face a second hit from Greece and Southern Europe. They are on their own. The US banks have minimal exposure to this EMU mess. Let me be clear, the sky will not fall — unless the EU authorities let it fall.
...
blah blah blah
....
There is a second option that almost nobody has talked about yet to my knowledge: capital and exchange controls. The longer this crisis drags out, the more likely it becomes. This is not a prediction that the EU will slam on controls, or a claim that they have any plan to do so. I have no such information. But what I do know is that such options were studied earlier this decade, just in case. This document is sitting in a drawer at the Directorate of Economic and Monetary Affairs in Brussels. It was written by a small cellule of EU officials in 2003 or 2004 (If I remember correctly) under prodding from Paris. It explores the legal basis for measures to stabilise the euro and EMU.

After combing through the EU treaties and court judgments, it concluded that Brussels may impose “quantitative restrictions” on capital inflows. Free movement of capital in the EU is not an “absolute freedom” and could be limited in an emergency. “Should extremely disturbing capital movements endanger the operation of economic and monetary union, Article 59 EC (Maastricht) provides for the possibility to adopt restrictive measures for a period not exceeding six months,” it says. It would be renewable every six months. Any decision would be taken by EU finance ministers under qualified majority voting, so no country could veto it.

Aha. Eh? AEP is cleverly sowing seeds for what will soon become a raging demand - impose capital controls, can trade protectionism be far behind? AEP is a tru-blue briton. This smells like an anglo-american plot to bury the upstart euro permanently while appearing saintly and concerned onlee. Hey, entirely guesswork and my 2 paise onlee. Jai Ho.

Neshant · Post by **Neshant** » 07 May 2010 10:08

Traders Jump from Windows; Market Rebounds Before They Hit Ground

Satya_anveshi · Post by **Satya_anveshi** » 07 May 2010 11:26

SEC Said to Probe Causes, Exploitation of Stock-Market Turmoil

The Securities and Exchange Commission aims to determine if market participants accidentally or maliciously entered orders that derailed normal trading, the people said, declining to be identified because the inquiry isn’t public. The agency will also examine if controls to prevent the rout from snowballing weren’t in place at exchanges and firms

"We will make public the findings of our review along with recommendations for appropriate action,” they said

90% Plunge
Accenture Plc, Exelon Corp. and Philip Morris International Inc. were among 27 U.S. stocks with at least $50 million in market value that dropped more than 90 percent as U.S. equities tumbled, before recovering by the close, according to Bloomberg data excluding exchange-traded funds.

The exchange had no problems with its computer systems, spokesman Robert Madden said in a statement.

U.S. Representative Paul Kanjorski, a Pennsylvania Democrat, set a May 11 hearing to examine what caused stocks to plunge. He also sent a letter to SEC Chairman Mary Schapiro seeking the agency’s views on the incident, and asked what authority the SEC has to prevent futures crashes.

svinayak · Post by **svinayak** » 07 May 2010 12:58

Hari Seldon wrote:On the eve of a fateful brit election and all, sri AEP hasn't given up sowing FUD against and punching away at the EMU project, perhaps in some fond hope that oirope's travails will lead to a flight to safety to UK-stan and give the island's finances a desperate breather?

It is the uncertainty in the London govt which is creating the uncertainty of the major markets linked to London financial center.
London sets the stds for global financial links going back to 200-250 years ago. When it gets confused all the rest get confused

Carl_T · Post by **Carl_T** » 07 May 2010 13:22

That's what the Brits want you to think. Nooh Yoak is the standard setter in most ways.

The markets are on edge right now and desperately searching for good news, I predict a recovery when rumours of a bailout for Greece start coming out, and then another swift decline when problems in Spain and Portugal come to the fore.

As a caveat - FYI I've been consistently wrong in my predictions on the market without fail.

SwamyG · Post by **SwamyG** » 07 May 2010 16:20

amdavadi wrote:What a day trading day!!! Dont worry, we will see repeat of today few more times before month ends..I am going to
stop watching CNBC for three months...see you at Dow 8K

I had stopped watching CNBC for sometime now. There were news reports about CNBC reports

. I could not take the crooks err sorry the anchors on CNBC anymore, I had switched over to Bloomberg. I should have cashed out when my portfolio turned green :-(

My real concern is I am starting to hear how USA is lot like Greece. It is not Spain, not Portugal, but good old America some eggsperts are talking about. Unfortunately when it comes to America, there is lot of smoke because of the partisan political stage in America. I think the next time there is a small bull rally, it would not be bad to convert stocks into cash. Oh well, if dollah falls nothing much can be done.

The international debt is huge, let us leave the big daddy for a minute and just look at the PIGS..... {courtesy: New York Times}. Spain and Portugal are joined at the hip so to speak; one goes down it impacts the other like hell. Mama mia, look at Spain, if Spain takes a hit the s*it really hits the ceiling for Italy. And French birathers will immediately have some takleef.

No doubt there is a race to stop the first domino from falling in Europe. Iceland and Greece are nothing. There is still a whole big pile of s*it to hit the fan. Can a 100 tonne dome be put on this pile to cap it, is the question Germany and France are thinking about - to save themselves.

I am surprised France is acting so 'kewl', while Germany is the pulling all the Euro wagons for now. Germany will end up getting the label of 'big bad brother', while France might continue to bask in the works of Germany in tightening the Euro-zone.

Hari Seldon · Post by **Hari Seldon** » 07 May 2010 16:48

My real concern is I am starting to hear how USA is lot like Greece. It is not Spain, not Portugal, but good old America some eggsperts are talking about. Unfortunately when it comes to America, there is lot of smoke because of the partisan political stage in America.

Nah, the khanate is nothing like Greece. Neither, sadly, is the UK. The difference (big one too) is that these nations owe debt in the same currency they print. They simply cannot be pushed into overt default. Only.

Here's Marshal Auerback clearing many myths about the greece, us ==.
Auerback: Yes, Virginia. There is a Difference Between Greece and the US

Many market analysts, commentators and economists claim to be having a hard time finding a metric in which the US is in better financial shape than Greece. Ken Rogoff, for example, recently warned that a Greek default would usher in a series of sovereign defaults, and suggested recently on NPR that the crisis also had implications for the US. The historian Niall Ferguson made a similar claim a few months ago in the Financial Times. The cries of the deficit hawks grow louder: Repent all ye fiscal profligates, before the “day of reckoning” comes.

Let’s dial down the Biblical hysteria a wee bit while there’s still time for rational debate. The market’s recent response to the intensifying pressures in the euro zone suggests that investors are beginning to differentiate between countries that are sovereign issuers of currency, such as the US or Japan, and non-sovereign issuers, such as Greece or any other nations in the euro zone. The US dollar is rising in value, notwithstanding the federal deficit, while debt distress in the so-called “PIIGS” countries, especially Greece, are intensifying, thereby driving down the euro to fresh 12 month lows against the dollar.

The relative performance of various currencies against the US dollar is highly instructive in this regard. Over the past 3 months, the Australian, New Zealand and Canadian dollars have all registered gains of some 4% against the greenback. The worst performer? Not surprisingly, the euro, down 6.3% over that period. Whether consciously or not, the markets are demonstrating that they understand the distinctions between users of currencies (who face an external funding constraint), and those nations that face no constraint in their deficit spending activities because they are creators of currency.

That the US has the reserve currency is an irrelevant consideration here. The key distinction remains user vs. creator. The euro zone nations are part of the former; Canada, Australia, the UK, Japan and the US are representatives of the latter.

Bottomline?

Fiscal sustainability has no relevance in a system where there are no operational constraints on the ability of a government to spend. US Social Security checks will not bounce. Nor will the Canadian or Japanese equivalents. Similarly, their bonds will always be able to pay out interest.

Well, then. why worry, have curry. No? What's all this nonsense talk about recession and recovery at all then if the said sovereigns have the keys to kamadhenu itself? No?

Note that this doesn’t mean that there are no real resource constraints on government spending. Let’s be clear: anyone who advances the use of fiscal policy as an effective counter-stabilization tool is always careful to point out that these interventions can come at a cost. That cost could well be inflation if, as a result of the fiscal expansion, we reach full employment, resource constraints begin to appear, but the government continues to spend. But if the economy recovers, tax revenues will increase and safety net spending will fall. In the US, that means we will likely be back to “normal,” with deficits around 2-4% depending on the state of the economy, which is where we’ve been for the past 30 years aside from 1998-2001.
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It’s axiomatic that the faster the economy grows, the smaller the deficit becomes, unless the government continues to spend recklessly–which we certainly do not advocate.

Sleep easy, birader. It will be managed. A scare is necessary to force concessions outta public sector unions and the like, perhaps. But no, unkil ain't lost control just yet. Jai ho.

SwamyG · Post by **SwamyG** » 07 May 2010 18:11

Sleep easy, birader. It will be managed. A scare is necessary to force concessions outta public sector unions and the like, perhaps. But no, unkil ain't lost control just yet. Jai ho.

Managed. That is the key here. How many falls are orchestrated? Empires and powerful people (like the syndicate in the new world dhaaga) began to believe they can control things well. We have read about the life cycle of Empires (civilizations); when does self-confidence change into arrogance and complacency?

SwamyG · Post by **SwamyG** » 07 May 2010 22:47

do you see the commmon man in US thumping his chest, and being arrogant about himself?

Look at the context. I talked about Empires and powerful entities.

What part of the US response to the crisis was complacent?

You are looking at just the current crisis. Life cycle of Empire's span across crises.

Lessons learnt? Not so fast. Personal Savings are already starting to fall again. Why? The jobs market have not improved, the economy though technically out of recession still has a long way to go. Look at this: Relapse into bad habits. But there is a valid reason for the savings rate to trend down. Here is good read: Transfer payments and income - effect on savings rate

It is like a patient comes out of a triple bypass surgery and heads straight out to McDonalds.

Look at this now Americans Save Less in Weak Economy

The portion of adults who lack non-retirement savings has increased from 63% in 2007 to 67% in 2010. However, 30% -- the statistical equivalent of more than 68 million people -- have no savings. Only 24% are saving more now than they did a year ago because of the weak economy. Nearly 39% Generation Y adults, more than any other age group, reported having no savings. Of those with no savings, one in four say that if faced with an emergency, they would charge that expense to a credit card or take out a loan.

One-third of adults, approximately 75 million people, don't put any household income toward retirement. That's a 5% increase from the 2008 survey, but unchanged from 2009.

This trend in society should make one uncomfortable. But the economy relies heavily on consumption. Consumption is good - it is means to live on this earth. But unwise consumption is unsustainable. And bad things can happen to lot of people very quickly.

The man on the streets might not be arrogant; but both the economy and man are high now. They did not get high in one or two decades, it took multiple decades for them to get where they are now.

RamaY · Post by **RamaY** » 07 May 2010 23:13

SwamyG wrote: http://graphics8.nytimes.com/images/201 ... ustom1.jpg

This means a total of ~$2T loss to France+Germany+Britain if PIIGS go down.

How much these guys owe others, PRC and KSA etc.,

ramana · Post by **ramana** » 07 May 2010 23:59

NPR was saying yesterday, EU is 26% of World Economy and 50% of US S&P 500 companies. So one can deduce the impact on Khanomy