Perspectives on the global economic meltdown

Chinmayanand · Post by **Chinmayanand** » 19 May 2009 15:56

Richard Russell , the famous Dow Theorist Uvacha :

On another subject, The US national debt was $9.364 a year ago. Today it is $11.256 trillion. That means that over the last 12 months we've added $1.89 trillion to the national debt. I figure that over the next two fiscal years the US national debt should rise by $3 trillion from the current $11.256 trillion to around $14 to 15 trillion. I figures the average interest on the national debt is around 4%. Well, 4% of $14 trillion is over half a trillion dollars a year. How in God's name is the US going to attract over half a trillion dollars every year to carry our national debt? My answer -- higher taxes and inflation. When you think about it, this is one major reason why the government doesn't want gold to sky-rocket. An exploding price for gold tells the world that the US and its financing is backed against the wall, and that inflation plus higher taxes are the only ways out.

Of course, there is one other area that can help.-- cutting government expenses to the bone. The US has over one hundred military and air force bases around the planet. My guess -- within a decade they'll be gone -- we can't afford them. The world's greatest creditor can not be the world's dominant military power. Rome tried it; they failed. "Britannia rules the waves," while the sun never set on the British Empire. What part of the earth does England rule today?

Singha · Post by **Singha** » 19 May 2009 19:11

eager young tyros like yindia and china will be glad to occupy these vacated but well built and useable US facilities around the world.

they need to be punished for sustaining a gigantic military on the back of printed jaali notes.

John_H · Post by **John_H** » 19 May 2009 19:38

Fascinating read.

http://www.nytimes.com/2009/05/17/magaz ... wanted=all

My Personal Credit Crisis

Article Tools Sponsored By
By EDMUND L. ANDREWS
Published: May 14, 2009

If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.

I was actually beginning to feel sorry for Chase. It seemed to be so flooded with defaulting borrowers that it didn’t have time to foreclose on my house. Eight months after my last payment to the bank, I am still waiting for the ax to fall.

Edmund L. Andrews is an economics reporter for The Times and the author of “Busted: Life Inside the Great Mortgage Meltdown,” which will be published next month by W.W. Norton and from which this article is adapted.

Click on the link to read the full article.

svinayak · Post by **svinayak** » 19 May 2009 21:03

Very fascinating reading. The std of living is above their means and they had become used to it

SK Mody · Post by **SK Mody** » 19 May 2009 23:39

John Snow wrote:Please read

http://www.motherjones.com/politics/200 ... safety-net

Plain English article - read second part too on origin of 401(k).

vsudhir · Post by **vsudhir** » 20 May 2009 04:55

Rumors are agog that its gubmint intervention that is keeping mkts up and bond yields down. And trickle by trickle evidence gathers....

The 2year/5 year/30 year spread has narrowed to 90 basis points from 92 basis points in the late trading. I have noted in this space that 90 basis points has been support for that spread since the Open Market Desk proclaimed the policy of QE in March.

The price action in the Treasury market is quite disturbing. Before the last round of supply caused upheaval and surging rates,the 10 year note had found support just behind 3 percent at the 3.05 level. In this market iteration we only touched the 3.08 percent level before breaking down.

Similarly, in the turmoil following the failed bond auction the 2year/10 year spread reached 237 basis points. We have nearly returned to that level as we open this morning at 233. The disturbing aspect of this move is that it has happened before the supply has even been announced. The announcement will come on Thursday at which time there will be around $ 101 billion of government bonds seeking buyers.

This says it best.

If something looks like bait and smells like bait, it probably has a hook in it".
"The notion of trading in markets against market makers and insiders trading for their own trading profits heavily equipped with zero cost government funds and advantageous inside information would be almost laughable if it was not such a tragic abuse of productive capitalism and free markets"
"Wall-Street has a few IPOs it wishes to bring out this week to test the waters for a larger IPO from AIG of one of it's units. And of course the banks continue to sell secondary offerings".

All told, the above makes a good case for some to work hard to pump the market up at the right time. No one can argue that this rally has not had some legs that are hard to account for. A bear market rally, yes, easy to explain. The depth of this rally? Maybe that needs a bit of pump priming?
Given that we have reached some very ugly levels already without supply,I think that the market will breakdown and trade to new lows. There are just no buyers of Treasuries and the supply demand technicals are about to shift from sanguine to melancholy

Link

And more...

The flagrantly visible hand

Something strange happened during the last 7 or 8 weeks...there was a power underneath the market that kept holding it up and trading the futures. I watch the futures every day and every tick, and a tremendous amount of volume came in a several points during the last few weeks, when the market was just about ready to break and shot right up again. Usually toward the end of the day – it happened a week ago Friday, at 7 minutes to 4 o’clock, almost 100,000 S&P futures contracts were traded, and then in the last 5 minutes, up to 4 o’clock, another 100,000 contracts were traded, and lifted the Dow from being down 18 to up over 44 or 50 points in 7 minutes. That is 10 to 20 billion dollars to be able to move the market in such a way. Who has that kind of money to move this market?

On top of that, the market has rallied up during the stress test uncertainty and moved the bank stocks up, and the bank stocks issues secondary – they issues stock – they raised capital into this rally. It was perfect text book setup of controlling the markets – now that the stock has been issued.

Sanjay M · Post by **Sanjay M** » 20 May 2009 07:29

Japan’s Economy Shrank Record 15.2% Last Quarter

vsudhir · Post by **vsudhir** » 20 May 2009 14:27

The pensions quagmire is beginning to bite. Over $40 bn in unfunded pension promises by big auto have surfaced. Their retirees will have to take cuts.

Pension Benefit Guaranty’s Deficit Triples to $33.5 Billion

Pension Benefit Guaranty Corp.’s deficit tripled to $33.5 billion in the past six months as more companies canceled retirement plans amid the U.S. recession, according to the head of the government-owned corporation.

The PBGC, set up to protect the employee pensions of bankrupt companies, will tell Congress that its financial condition may worsen amid the likelihood for more pension plan failures. In the first half of the fiscal year that began in October, the PBGC took on almost four times the number of participants as it did in all of 2008.

The potential for General Motors Corp. and Chrysler LLC to end their plans has left the PBGC facing the prospect of adding 900,000 current and future beneficiaries. The PBGC, which pays retirement income to almost 44 million Americans, estimates that $77 billion of the automotive industry’s pensions are underfunded, with about $42 billion of that not funded at all.

The PBGC’s board approved in February 2008 a new investment strategy to shift more money from safer Treasury securities to stocks, real-estate and private-equity with the potential for greater returns. The change was pushed by former Director Charles E.F. Millard, who is now under congressional investigation for his ties to Wall Street.

“Millard’s actions were questionable and should be investigated further, but our main concern is that they are symptomatic of a much bigger problem,” Senator Herb Kohl, a Wisconsin Democrat and chairman of the Special Committee on Aging, said in a statement. “PBGC oversight structure is obviously inadequate if one person’s authority goes unchecked. At a time when we need PBGC more than ever, we have got to take concrete steps to strengthen the agency.”

These lessons in checks and balances, oversight etc should be learned by our isntitutions in yindia without making such mistakes ourselves first, I hope.

But what is clearly unmistakeble is the desperate barrel-bottom-scraping by pension funds all over the G7 in search of returns. If it hasn't happened already, trust it will happen very soon. Expect a flood of desp monies looking for any outlet promising half-decent growth.

Pension insurer shifted to stocks

Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds.

The agency refused to say how much of the new investment strategy has been implemented or how the fund has fared during the downturn.

"The truth is, this could be huge," said Zvi Bodie, a Boston University finance professor who in 2002 advised the agency to rely almost entirely on bonds. "This has the potential to be another several hundred billion dollars. If the auto companies go under, they have huge unfunded liabilities" in pension plans that would be passed on to the agency.

As for big auto, its curtains for overgenerous retirement systems I guess. The measures will soon start to bite retrospectively.

GM retirees facing cuts in pensions

Workers and retirees are bracing for what might be $16 billion in pension losses if the Pension Benefit Guaranty Corp. has to take over the plans, according to the agency.

As many as half of GM's 670,000 pension-plan participants might see their benefits trimmed if that happened, an actuary familiar with the company's retirement programs estimates.

Measured by participants, GM's pension plan would be the largest taken over by the Pension Benefit Guaranty, a quasi-government corporation created by Congress in 1974 to protect pension programs of bankrupt companies.

Dealing with pensions could be a thorny issue facing President Barack Obama in a GM bankruptcy. Unions including the United Auto Workers rallied behind his candidacy, spending $52 million to help elect him last year, according to Washington-based OpenSecrets.org, which tracks campaign spending.

GM's pension system had a $20 billion shortfall as of Nov. 30, based on numbers the company provided, said Jeffrey Speicher, a Pension Benefit Guaranty spokesman. By law, the agency would be able to make up only $4 billion of that, he said.

"The rest would be lost," Speicher said.

Current and future retirees of Chrysler LLC, the other U.S. automaker on life support, would forgo $7.1 billion, Speicher said. Chrysler's plan is underfunded by $9.3 billion, and the agency would cover $2.2 billion, he said.

vsudhir · Post by **vsudhir** » 20 May 2009 22:00

ramana · Post by **ramana** » 20 May 2009 23:37

So this round of Swineflu breakout happened in Mexico and immediate neighbor US are the most affected regions. All other are minor cases.

vsudhir · Post by **vsudhir** » 21 May 2009 07:17

Huge Deficit Stuns Cincinnati

A struggling economy and a forecast of income tax revenues that was far off the mark has Cincinnati City Council staring at a $40 million budget deficit through 2010 - sparking talk of layoffs and cuts in service in the year to come.

Council's finance committee received a report from the city's finance department Monday saying the city was already $7.7 million behind its revenue forecast by the end of April. And, if the trend continues, the city could face a deficit of about $40 million through next year.

"Hell would have to freeze over for us to get out of this," said Council member Leslie Ghiz. "There will be layoffs. There will be cuts. And it will be painful."

For the short term, City Manager Milton Dohoney has called for a five percent cut in 2009 spending from all city departments; and ordered department heads to submit plans to him by the end of the week on how they will do that.

The signs of a gathering storm are ominous. You won't hear much abt it from either the media or DC though. Not just yet anyway. Crisis has to explode and force its way into the debate before real change can happen - only as an imperative, not as a choice.

Muppalla · Post by **Muppalla** » 21 May 2009 07:59

ramana wrote:So this round of Swineflu breakout happened in Mexico and immediate neighbor US are the most affected regions. All other are minor cases.

I heard this morning on NPR that there is a possibility of a mutant that is more poerful than this version could be coming out. Imagine the coming time is monsoon season in India and some mutant that has powerful spread being released.

Raghav K · Post by **Raghav K** » 21 May 2009 08:48

Muppalla wrote: I heard this morning on NPR that there is a possibility of a mutant that is more poerful than this version could be coming out. Imagine the coming time is monsoon season in India and some mutant that has powerful spread being released.

I think it is going to be Avian Flu H5N1 that will be more potent in the coming months as the strain is more dangerous.

svinayak · Post by **svinayak** » 21 May 2009 08:52

http://globaleconomicanalysis.blogspot. ... ng-on.html

'Think the US stock market is going to come roaring back if consumer deleveraging plays out as it must? Think again.

Expect another "Lost Decade" when it comes to housing and the stock market. It's the deflationary payback for the greatest credit binge in world history."

Effect of Household Deleveraging on Housing, Consumption and the Stock Market

Inquiring minds are investigating the Federal Reserve Bank of San Francisco report on Household Deleveraging and Future Consumption Growth.

U.S. household leverage, as measured by the ratio of debt to personal disposable income, increased modestly from 55% in 1960 to 65% by the mid-1980s. Then, over the next two decades, leverage proceeded to more than double, reaching an all-time high of 133% in 2007. That dramatic rise in debt was accompanied by a steady decline in the personal saving rate. The combination of higher debt and lower saving enabled personal consumption expenditures to grow faster than disposable income, providing a significant boost to U.S. economic growth over the period.

In the long-run, however, consumption cannot grow faster than income because there is an upper limit to how much debt households can service, based on their incomes. For many U.S. households, current debt levels appear too high, as evidenced by the sharp rise in delinquencies and foreclosures in recent years. To achieve a sustainable level of debt relative to income, households may need to undergo a prolonged period of deleveraging, whereby debt is reduced and saving is increased.

Peak Credit and her twin sister Peak Earnings have arrived. Here is a snip from the former.

... That final wave of consumer recklessness created the exact conditions required for its own destruction. The housing bubble orgy was the last hurrah. It is not coming back and there will be no bigger bubble to replace it. Consumers and banks have both been burnt, and attitudes have changed.

It took nearly 80 years for people to get as reckless as they did in 1929. 80 years! Few are still alive that went through the great depression. No one listened to them. That is the nature of the game. The odds of a significant bout of inflation now are about the same as they were in 1929. Next to none.

Children whose parents are being destroyed by debt now, will keep those memories for a long time.

svinayak · Post by **svinayak** » 21 May 2009 09:07

Excerpts:

......... "our economy will not come back until at least 2012, in our opinion (mark these words). And that's because of commercial real estate, mounting foreclosures, higher unemployment figures, and more pain in residential real estate. . .

Commercial Real Estate Problems: "Have the Potential to Intensify"

Even as banks deal with rising foreclosures and defaults, lenders have something else to worry about — quick rising tides of potential losses from commercial real estate. These losses could easily stretech into the billions, as delinquencies and defaults on office buildings, retail buildings, and hotels have more than doubled in just six months.

Says the Associated Press, "While homeowners are defaulting at almost four times the rate of commercial landlords, the sudden spike in late payments has many industry insiders worried about the collateral threat to the economy and financial sytem. Nearly $73 billion worth of commercial real estate loans are in some level of financial distress, according to Real Capital Analytics."

And its risk to the greater economy is largely unknown, but it'll be bad. . . real bad. Frighteningly, its impact is likely underestimated in the government's bogus stress test.

Worse, about $271 billion worth of commercial real estate loans are coming due this year alone. That's part of the reason why General Growth Properties dug itself an early grave.

...... vacancies in commercial properties are skyrocketing, and millions of square feet of commercial real estate are currently under construction and ready to flood the market. About $171 billion in loans backed by offices, shopping centers, hotels, and other buildings are coming due this year, according to Union Tribune. Experts are fearful there may not be enough "credit capacity in the system to refinance them"..........

(contd)

http://www.wealthdaily.com/articles/200 ... tions/1820

svinayak · Post by **svinayak** » 21 May 2009 09:30

http://watchingamerica.com/News/27026/a ... shrinkage/

If the 19th century belonged to Great Britain and the 20th belonged to America, clearly now there is a displacement of economic power in Asia's direction. While the U.S. has set the stage to have the largest deficit in recent history in 2010, China will accumulate more than $2 trillion in reserves (after 30 years, they haven't reached $170 million --- 0.0000000085 percent of the current total).

What's more: While advanced economies will sink this year and probably a little more next year, too, China should grow afterward. In 2007, emerging economies (with China at the forefront) accounted for half of the economic growth worldwide. This year, China's piece will be the largest, growing even bigger in 2010.

So, what does this change? A lot.

It doesn't seem strange, after the crisis is over, that the world's reserve currency would stop being the dollar and would become the Chinese yuan (or renminbi). In their trades, various countries already agreed with China to accept a direct exchange between their currency and the yuan without going through the dollar.

If China continues growing as it has been for years, and the U.S. continues to struggle with its problems, this could be a matter of years, not decades.

Another crucial point: The most recent initiative of the White House, asking Congress for a new and complete regulation of the derivatives market (tools that denote a crisis), seems absolutely necessary. However, it would also be a hard blow for North America's economic power.

Derivatives are complex, financial tools that allow banks to pack hundreds of debts in other securities to be sold there or to create mechanisms like the "credit default swaps" (a type of security against losses). The problem is that today no authority supervises this, and it grew to $680 trillion (53 U.S. GDPs!) in 2008.

Singha · Post by **Singha** » 21 May 2009 13:54

http://bwnt.businessweek.com/interactiv ... /index.asp

looking at above list of 50 most desired employers in a college survey , I counted 18 as being govt orgs, NGO, financial munna's , defence contractor munna's and oil industry cheney buddies.

thats nearly 40% of most desired employers being "sarkari naukri" in the supposedly the most entrepreneurial and hyper capitalist/anti-PSU major nation

and ofcourse google tops the list

a great free lunch does go a long way...

Chinmayanand · Post by **Chinmayanand** » 21 May 2009 15:41

U.K. May Lose AAA Rating at S&P as Finances Weaken

The outlook was lowered to “negative” from “stable” because of the nation’s increasing “debt burden,” S&P said in a statement today.
Britain would become the fifth western European Union nation to lose its rating because of the economic slump, following Ireland, Greece, Portugal and Spain.
The deficit this year will reach 175 billion pounds, or 12.4 percent of gross domestic product, Chancellor of the Exchequer Alistair Darling said on April 22.
The difference in yield, or spread, between U.K. 10-year bonds and equivalent German securities widened nine basis points to 24 basis points following the statement.

Tanaji · Post by **Tanaji** » 21 May 2009 16:35

durgesh wrote::
U.K. May Lose AAA Rating at S&P as Finances Weaken

Is there even any point in these rating agencies any more? Who would really trust them now after this fiasco?

vsudhir · Post by **vsudhir** » 21 May 2009 16:45

Tanaji wrote:
durgesh wrote::
U.K. May Lose AAA Rating at S&P as Finances Weaken
Is there even any point in these rating agencies any more? Who would really trust them now after this fiasco?

AoA....even poor reality had no option but to intervene in Ukstan's case you think? Think again. The same S&P rates India at the lowest level investment grade whereas Moody's has us pegged below investment grade. While I don't particularly care abt rating agency credibility, what it does is make drive up our bond yields.

Better to follow the money and the big money in big trouble (pension mega funds, primarily)have really little choice in their ever more desperate clutching at growth shoots in the emerged world..... they have to go emerging and India almost leads that pack, IMVHO.

vsudhir · Post by **vsudhir** » 21 May 2009 17:11

Obama admin arm-twisted corporate bondholders in the Chryslaer and GM cases to take the hit of the bankruptcy while protecting trade union concerns. Now, the backlash begins. Nobody's willing to lend anymore to unionized firms for fear of getting shafted in a bankruptcy scenario.

Fund Managers Burned by Obama Now Say They Are Wary

May 20 (Bloomberg) -- Hedge fund manager George Schultze says he may avoid lending to any more unionized companies after being burned by President Barack Obama in Chrysler LLC’s bankruptcy.

Obama put Chrysler under court protection on April 30 after lenders balked at a proposal giving them about 29 cents on the dollar for their $6.9 billion in debt. The investors said the president’s plan favored a union retiree medical fund whose claims ranked behind them for repayment. It was offered a 55 percent equity stake in the automaker.

“Lenders will have to figure out how to price this risk,” Schultze, 39, said in a telephone interview from his office in Purchase, New York. “The obvious one is: Don’t lend to a company with big legacy liabilities or demand a much higher rate of interest because you may be leapfrogged in a bankruptcy.”

As you sow....

vsudhir · Post by **vsudhir** » 21 May 2009 21:33

OK. Japan just lost its AAA rating.

Link

Of course, UKstan is anyday more productive, confidence-inspiring and zimbly 'better' than Japan onlee. hence they hang on to their AAA anyhow.

And all this just when China Grows More Picky About Debt

Ameet · Post by **Ameet** » 21 May 2009 22:15

Grads going global - survey asks American and foreign grads which country they would like to start their careers. India stands at fifth for foreign grads. Does not figure in the top 10 for Americans.

http://andrewsullivan.theatlantic.com/t ... .html#more

sanjaykumar · Post by **sanjaykumar** » 22 May 2009 03:30

Britain would become the fifth western European Union nation to lose its rating because of the economic slump, following Ireland, Greece, Portugal and Spain.

At least it is in august company.

PS The UK economy inflated 50% in seven years from 2002. S&P's aren't the only statisticians smoking dope.

SwamyG · Post by **SwamyG** » 22 May 2009 05:12

A 7 minute clip on Trade deficit killing empires. Accompanying blog: http://emsnews.wordpress.com/2009/05/18 ... l-empires/

Nandu · Post by **Nandu** » 22 May 2009 05:36

Neither that video nor the blog entry actually has any supporting evidence for the statement that "trade deficits kill empires". All it shows is that US has massive trade deficits. We already knew that.

Singha · Post by **Singha** » 22 May 2009 06:55

with a US-friendly govt in power, we can expect a procession of bhookha nanga western FIIs and banks to be
making a beeline for "growth shoots in emerging india" (as a poster here aptly put it).

as a co-incidence the ban on foreign retail banks from opening beyond a limited number of branches is set to
expire this year. people like citibank, abn amro, anz, hsbc might expand their network in and out of the metros now.

hdfc and icici need to pull their socks up and better train their staff and improve their web/phone interfaces.

SBI will steam ahead uncaring as usual, like a 50,000 ironclad battleship sailing through a fleet of sailing boats.
their snarling, grumpy middle aged uncle/auntie's who slap a form down and ask "come back after 10 days" to
any request for service are not going to change. I even came across a sweet lady who was kinda on maun vrat
day - all answers were by shake of head and smiles...atleast she promptly did my work.

vsudhir · Post by **vsudhir** » 22 May 2009 06:59

Word on the street is that the Dow, bonds and the USD all got hammered today. And gold rose. So did a few other shiny metals.

Not good, IMHO, for GOTUS. Could actually signal real flight of capital to *really* safe destinations, which apparently, GOTUS reassurances no longer are.

Meanwhile...

Britain's debt outlook lowered to negative

LONDON (AP) -- Britain faces the unsettling possibility of seeing its debt rating downgraded, after credit ratings firm Standard & Poor's said Thursday it has revised the country's outlook to negative from stable.

Though the ratings agency reaffirmed the country's long-term triple-A credit rating -- reserved for the least risky bond issuers -- it said the outlook had deteriorated because of massive borrowing to deal with the recession and the banking crisis.

The outlook revision does not trigger a formal re-evaluation of Britain's rating -- unlike being put on credit watch -- but does mean that policy makers have to be aware that a downgrade may happen if public finances do not improve.

The pound slumped by over 2 U.S. cents to just below $1.56 after the news, but recovered most of its ground to trade around $1.57.

Meanwhile the FTSE share index fell nearly 140 points, or around 2.8 percent, though like other markets around the world it was facing selling pressure after the U.S. Federal Reserve warned that the U.S. economy would shrink by more than anticipated this year.

Maybe it is true. UKstan is immune to Karmic consequences. Who knows,there's always a first time after all....

Singha · Post by **Singha** » 22 May 2009 07:06

having all three ratings agencies as 'kept dogs' also helps.

the rules are written by those who write them

its time for yindu to conclude currency swap aggreements with willing partners wherever they are found.

its time to kill the fake perception of dallah and euro/swiss/pound being "hard currencies" backed by
rich govt and centuries of wealth looted from all over the earth.

its time for change...

vsudhir · Post by **vsudhir** » 22 May 2009 07:25

its time to kill the fake perception of dallah and euro/swiss/pound being "hard currencies" backed by
rich govt and centuries of wealth looted from all over the earth.

its time for change...

Amen.

PRC is already showing the way with its currency swap agreements. Given that we already have or are close to concluding FTA agreements with countries such as SL and Thailand, they should be first invited to consider a rupee swap option for bilateral trade.

Meanwhile, in the land of the phree and the home of the close-shave.....

Standard & Poor's on Thursday lowered its credit outlook on the U.K. to negative from stable for the first time ever in view of the country's swelling debt, which may expand even as the economy recovers.

The move by Standard & Poor's raises the prospect not only of a credit-rating downgrade in Britain but a lowering of the outlook in the U.S., which has taken a similar path of big spending and quantitative easing to escape the credit-led recession.

"I think there will be a downgrade on the U.K. and I think there will be a downgrade on the U.S. outlook from one of the Big Three" credit-rating firms, said Stephen Gallo, head of market analysis at Schneider Foreign Exchange.

link

AoA. Mebbe there ij a gawd after all....

vsudhir · Post by **vsudhir** » 22 May 2009 07:33

The 100 Trillion Zimbabwean dollar banknote available on sale for 6 USD.

Link

On a side note, only payments in ZMB dollahs can satisfy TSPA demands and egos.

vsudhir · Post by **vsudhir** » 22 May 2009 07:38

OMG, the confirmatory news started as a trickle and is now a flood... its a tsunami that will be felt around the world.

Treasuries Fall After Fed’s Purchase of Debt as Supply Looms

Treasuries also fell, along with the U.S. dollar and the Standard & Poor’s 500 Index, after Standard & Poor’s lowered its outlook on the U.K.’s AAA credit rating today to “negative” from “stable,” raising concern that the same may happen to the U.S.

The U.S. will issue a record $3.25 trillion of debt in the fiscal year ending Sept. 30 to pay for a growing budget deficit, according to Goldman Sachs Group Inc., one of the 16 primary dealers that are obligated to participate in Treasury auctions.

“The markets are beginning to anticipate the possibility of” a downgrade to the U.S.’s top rating, though “it’s certainly nothing that’s going to happen overnight,” Bill Gross, the co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., said in an interview today on Bloomberg Television. The firm manages the world’s biggest bond fund, the $150 billion Pimco Total Return Fund.

The Treasury announced it will auction $40 billion in two- year notes on May 26, $35 billion in five-year notes on May 27 and $26 billion in seven-year notes on May 28.

“With the supply this market is facing, it has to go to higher yields to attract capital,” said Charles Comiskey, head of U.S. Treasury trading in New York at HSBC Securities USA Inc., another primary dealer.

You have to wonder.... what were they thinking?

Aside: massa based desis, anyone planning to transfer USD savings to INR??

vsudhir · Post by **vsudhir** » 22 May 2009 07:52

Amid all this D&G, who else but Sri Ambrose evans blowhard to ride tot he rescue of the beleagured west?

Asia will author its own destruction if it triggers a crisis over US bonds

Et tu Tokyo? If Washington is counting on Japan to act as last-resort buyer of US dollar bonds, it may have to think again. Masaharu Nakagawa, finance chief of the Democratic Party of Japan (DPJ), told the BBC that his country should not purchase any more US debt unless issued in yen as "Samurai" bonds, akin to "Carter bonds" in 1978.
This is the sort of petulance that tends to emerge in the late phase of slumps (1840s, early 1930s) when mass lay-offs provoke a populist backlash and hotheads run away with the agenda. Mr Nakagawa later played down the comments, calling them private thoughts, but the genie is out of the bottle....
Japan beware, crashes have a habit of bringing regime change

China and Japan together hold 23pc of America's $6,369bn federal debt. This has caused alarm on the US talk radio circuit, but fears of imminent "dollardämmerung" and a collapse of American economic power may prove far off the mark. Who ultimately holds a gun to the head of whom? {Time will tell I guess. Moi for one wouldn't mind both the G7 and the super-saving export powerhouses like PRC, SoKo, Taiwan etc sharing the neg fallout in equal measure}

If Asia's leaders give free rein to frustrations and crater the US bond market, they will ensure their own political destruction. Japan already risks descent into demographic death, deflation, and debt atrophy (its public debt is nearing 200pc of GDP). China's regime depends on perma-boom for post-Maoist legitimacy. Could it survive the wrath of jobless graduates and rural migrants if it provokes America into erecting trade barriers, killing the globalisation goose that lays the golden egg?

{See. this is what happens when gora TFTAs start to lose. Sore losers who'll rake up every slumdawg meme they can find to sledge you out of the game. Recall Ponting's grace and magnanimity when his mighty team started to totter and fall before our SDRE vanguard in ozland?}

American can if necessary retreat into its vast home market and rebuild its industrial base, well-armed with 12 aircraft carrier battle groups.

{Pakiness dazzles onlee. Unkil will do a commodore Perry II or what on a reluctant savings-heavy asia?}

The last 12 months should be lesson enough that Asia cannot yet stand on its own two feet. Its mercantilist export model remains a "high-beta" play on the West, to use trader parlance. {Yada yada }

Sanjay M · Post by **Sanjay M** » 22 May 2009 08:23

US to Steer GM into Bankruptcy:

http://www.washingtonpost.com/wp-dyn/co ... 04467.html

Singha · Post by **Singha** » 22 May 2009 08:31

US does have a vast home market - but too much of that consumption is based on purchases not really needed (needless upgrades, eating out, whim buying, depression buying etc) and also based
on credit.

if US consumers started behaving like EU consumers and eating/buying at more optimum levels
and US credit houses tightened their norms (as opposed to letting people pile up debt), the
US internal market for a lot of goods will probably drop 50% like a stone.

take a car like civic or corolla - perfectly useable for 10 yrs at minimal pain. but a student who
gets a job wants a direct upg to a passat/bmw3 instantly and 5 yrs later when marrying wants to
add a volvo/grand caravan/honda pilot to the mix.

secondly how can US people sustain their lifestyles if shirts and shoes cost $50 each with the
"proudly made in USA" tag ?

they need a underclass to brutally exploit and doing so domestically is politically risky - mexico is not really too cheap anymore and the latin american basket cases like honduras, el salvador and haiti have too little people.

that is where PRC fills the niche

Sanjay M · Post by **Sanjay M** » 22 May 2009 08:31

Polish Migrant Workers Heading Home from UK

http://www.businessweek.com/globalbiz/c ... 590141.htm

amol.p · Post by **amol.p** » 22 May 2009 10:09

Over half of listed shipping companies may go bust...as per bloomerg

MORE than half of the shipping companies with stock exchange listings could slide into bankruptcy or administration proceedings in the next year as their cash drains away, a senior industry figure has warned.
The grim assessment was issued by Paul Slater, chairman and chief executive of First International

Virupaksha · Post by **Virupaksha** » 22 May 2009 10:39

That means china is in for a really rough ride.

mnag · Post by **mnag** » 22 May 2009 10:41

largest bank failure this year in US

http://online.wsj.com/article/SB124294168567644901.html

Excerpt
Federal regulators seized Florida's BankUnited FSB on Thursday, the biggest bank failure this year, one that the Federal Deposit Insurance Corp. estimates will cost its weakened insurance fund $4.9 billion.

BankUnited, which was owned by holding company BankUnited Financial Corp., is the second-costliest bank failure of the financial crisis, trumped only by IndyMac Bank, which failed in July at an estimated cost to the FDIC of about $11 billion.

svinayak · Post by **svinayak** » 22 May 2009 13:39

All this talk of China being the preeminant economy is nonsense. China is seriously overbuilt for it`s 250 mil middle class now, and is on it`s way to being ludicrously overbuilt in the future. A family becomes middle class in China on an income of about 10k USD. They have one child, and spend most of their energy in assuring that child of education and inheritance. Women retire at 50, men at 60. They save to fund their own retirement or 25-35 years. Chinese social security is a pittance. They will NEVER consume like the 200 mil middle class Americans. Most of the 100k+ USD apartments being built will be selling for 30-40k in a few years. 800 mil chinese live on a pittance, they will never consume much in their or their childrens lives. They are right now building the infrastructure for 400 mil middle class. It won`t happen. China will try to export deflation(overcapacity) for the forseeable future. They have no other choice. That is not the road to prosperity.

The Chinese position is ludicrous

Step 1. Build an economy based on exports
Step 2. Artificially keep the Yuan down to sustain export growth.
Step 3. Balance the books by buying overvalued dollar assets with your undervalued Yuan assets.
Step 4 Express shock and horror at the thought that the dollar might end up falling anyway.

What the Chinese are doing is just as unsustainable as when the Bank of England blew its reserves trying to stay in the ERM, only the other way round (trying to keep its currency down). It will end the same way.

the East has been absorbing the worlds money making activities leaving the west as jobless purchasers, it is not the reason for the crash.

The rise of eastern industrialisation has been over some 4 decades starting in Japan and is now very active in China, Malaya and India.

Of these only Japan has a fully developed home market but even so is dependant on the export business. I believe that the UK under Atlee suffered so much longer than even Germany because this very activity was put into place as the method of recovery but had a debilitating effect on the country -- even to this day!

The savings habit of the countries quoted could well be the cause of the bankers becoming irresposible gamblers but I don't think so. The international communications improvements signalled not only the ability to see and hear what was going on elsewhere but enabled "fiddling" with markets in many ways in order to trigger runs or crashes. It also enabled debt bonds to be dressed up long enough to off load them but that could not be sustainable -- just another asset stripping scam -- the Hanson effect!

While all this simmers, Mr Putin is getting ready to grab back the Russias and is probably just itching to get even for having his sword blunted by what he sees as a US led crash engineered to bring down fuel (his export led riches) prices.

Almost 4 decades ago Galbraith pointed out that the US had such a strong internal market that it could withstand assault from anywhere and allow devaluation of the dollar to a point where only the predaters lost. At that time it was the Arab oil states ( exporters) who were the rogues ripping off the world.

The EC sprang from the same thinking and so far has proved it's robustness despite the many frantic predictions to the contrary. GB has tried to be clever in the game but currently finds itself without either the protection of numbers, common currency or industrial viability whilst "led" by a venal and incompetent government, banking and industrial system.