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abhischekcc wrote:vic, business confidence is effected by the uncertainties caused by too much volatility. Moreover, if the financial system freezes up, it can damage trade finance as well, effecting 'real' economy.
Its not uncertainty nor certainty but the LACK of any new productive industry that has emerged since 2000 that can provide jobs on a large scale. That is THE CENTRAL problem plagueing the economy of the US and why people remain blind to it is beyond me.
The second problem is the useless middleman industry known as finance & banking has hijacked govt, offloaded its gambling losses onto the productive in society and is draining the life out of the real economy with scams. These con artists need to be shut down and they need to get real jobs.
The utility role of this "industry" is marginal at best but its parasitic role is tremendous especially in perpetuating the existance of the fiat money counterfeiting racket known as the Federal Reserve.
Quite frankly, the best thing that could happen is if a whole lot of these Goldman Sachs type companies went under and honest money is introduced.
To resolve a crisis in which the impossible becomes possible it is necessary to think about the unthinkable. To start with, it is imperative to prepare for the possibility of default and defection from the eurozone in the case of Greece, Portugal, and perhaps Ireland.
To prevent a financial meltdown, four sets of measures would have to be taken.
First, bank deposits have to be protected. If a euro deposited in a Greek bank would be lost to the depositor, a euro deposited in an Italian bank would then be worth less than one in a German or Dutch bank and there would be a run on the banks of other deficit countries.
Second, some banks in the defaulting countries have to be kept functioning in order to keep the economy from breaking down.
Third, the European banking system would have to be recapitalized and put under European, as distinct from national, supervision.
Fourth, the government bonds of the other deficit countries would have to be protected from contagion. The last two requirements would apply even if no country defaults.
Singha wrote:speaking of siphoning, UBS announces a loss of 2b on 'rogue trading'
UBS discovers unauthorised trading
Lightning strikes UBS (file photo August 2011) UBS shares opened sharply lower after the announcement
Swiss bank UBS says unauthorised trading by a member of staff at its investment bank has resulted in a loss worth an estimated $2bn (£1.3bn).
The bank said it was still investigating the matter, so the value could change.
This could lead to a loss for the third quarter of 2011, it said in an official statement.
No customer accounts were affected, the Zurich and Basel-based banking group added.
IIRC this is the bank which was in the black-money and scam spotlight for having been granted a licence to operate in India. So if Vishwabandhu Gupta's rants seem to have some antikythera mechanism effect, then it would seem that black money hidden in export figures is not the only way in which it might return back to desh.
Neshant wrote:Its not uncertainty nor certainty but the LACK of any new productive industry that has emerged since 2000 that can provide jobs on a large scale. That is THE CENTRAL problem plagueing the economy of the US and why people remain blind to it is beyond me.
In fact, we lived in a bubble economy for too long and started believing that that is the new normal. This bubble has to deflate and people have to live in a realistic economy where growth without debt is very mediocre. People are not able to adjust to this reality and this causes the uncertainty. People who realize this earlier and makes appropriate adjustments will be better off.
Singha wrote:you mean money is r2ing now through over-invoicing of exports?
Singha ji, all of this reminds me of Kaiser Soze putting on an expert limp to fool honest beings, like a permanently imprinted first and last impression.
Trying to suggest that over-invoicing is perhaps just one of the methods being used.
While any attempt to put out the European debt fire storm is welcome, please note the subtext. The european banks are being lent Dollars and not Euros. It cannot be stressed enough.
The European Central Bank said it would coordinate with the U.S. Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank to ensure banks unlimited dollar funding through the end of the year.
Even after the 2008 crisis, even after US Debt reaching 100% of its GDP, the day debt ceiling was raised, even then it is dollar that is considered the safest currency and the safe haven. And why do the european banks need dollars, even though euro is present, well the answer is
European banks need U.S. currency to fund loans they have made in dollars to companies and consumers around the world, and securities they hold that are denominated on dollars. They have tended to tap short-term markets, including money-market mutual funds, for the dollars they lend out, and need to frequently repay or roll over those borrowings. They would turn to the ECB for help only if they were unable to raise the funds elsewhere.
Even after having euro, they denominate their holdings in dollars and not euro. Once again the above article says, that the european banks will first approach short-term markets, including money-market funds and if they fail in raising money then only they will turn to the ECB for help.
Though markets rose Thursday, analysts warned that the measures would do little to resolve the deeper challenges facing the region. "This will not change the root of the problems with banks, which is the debt crisis," said Marco Valli, economist at lender UniCredit. "That requires a political solution."
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In a sign of ongoing stress, euro-zone banks borrowed €3.4 billion from the ECB's emergency window Wednesday, the highest level in more than one month. Overnight deposits parked at the ECB also grew, suggesting banks aren't willing to lend to each other.
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The Fed plays a central role in the decision to make dollar funding more widely available to banks overseas. Under an arrangement that was established during the financial crisis, the Fed makes the dollars available to the other central banks—for repayment with interest at slightly above-market rates—which in turn lend the money to banks under their jurisdiction.
This is just looking like a rerun of the lehman disaster. Then also US Fed open the spigots of liquidity. Then also US Treasury secretary said that he need more than half a trillion dollar bazooka to silence the coming storm. We know what happened even after all that. Insanity is defined as doing the same thing over and over again, but expecting a different outcome every time. Just as these methods failed and Lehman went under, the fear is that we see the fall of some critical banks somewhere in the core economy, i.e. France+Germany, of the Euro Zone. The Credit-Anstalt moment.
^^^Saar, whilst I agree with most of your gist, must also be pointed out that ECB is not the Fed and EU is not the US. So, unlimited 'printing' of euros via QE for instance, wherein EU floats eurobonds that ECB starts buying en masse, is not on the anvil. USD has several advantages and all that but its biggest advantage is the TINA factor. I wouldn't over-stress world reliance on USD as signs of confident confidence (for lack of a better term) quite so fast.
Swiss drug giant Roche Holding AG has stopped delivering its drugs for cancer and other diseases to some state-funded hospitals in Greece that haven't paid their bills, and may take similar steps elsewhere, a stark example of how the European debt crisis that has jolted global financial markets is having a direct effect on consumers.
In Greece, Roche is boosting deliveries to pharmacies, which have paid their bills more reliably, Chief Executive Severin Schwan said in an interview on Friday. Patients at some hospitals now must take their prescriptions to a local pharmacy, and, in the case of intravenous or injected cancer drugs, bring them back to the hospital to be administered, he said.
Mr. Schwan said patients haven't been deprived of their medication as a result of the new measures, which he said Roche may need to adopt in Spain, as well. Some state-funded hospitals in Portugal and Italy have also fallen far behind on payments, he said.
There are hospitals "who haven't paid their bills in three or four years," Mr. Schwan said. "There comes a point where the business is not sustainable anymore."
Europe's efforts to prevent a Greek default have become politically fraught as economically stronger nations face popular resistance to additional contributions. Many are proceeding with budget cutting plans despite weakening economies. On Friday, U.S. Treasury Secretary Timothy Geithner urged the continent to increase the size of a bailout fund.
Roche isn't the first pharmaceutical company to stop supplies to some Greek buyers. Denmark's Novo Nordisk S/A last year stopped shipping certain brands of insulin after Greece said it would cut the prices by more than a quarter. The cutoff lasted a few weeks, until Greece agreed to less onerous price reductions. Novo Nordisk continued shipping low-cost generic insulin throughout, but it was sharply criticized by diabetes groups and others for halting supplies of the more expensive products.
And companies in other industries are also worried. VeriFone Systems Inc., which sells payment-processing systems, said that so far customers have been paying on time. But CEO Doug Bergeron said the company is monitoring clients closely, and if conditions worsen, it will require buyers to obtain letters of credit before making purchases.
Greek hospitals have large debts to many drug companies, according to the Hellenic Association of Pharmaceutical Companies, or SFEE. As of June 30 this year, Greek's state-financed hospitals had paid for just 37% of the €1.9 billion ($2.62 billion) worth of drugs delivered by SFEE member companies in the 18 months to June, 2011, the organization said in a recent report.
Greece's health-care system is ailing in part because of budget cuts the country has instituted to try to bring order to its weak finances and stave off a default on its debt. Additionally, critics of the health-care system say it is bogged down in waste. The country's health ministry couldn't be reached to comment on Friday.
Europeans have been reluctant to offer additional assistance to a country they view as spending far beyond its means. Finland, for example, has insisted that Greece put up collateral in exchange for further rescue aid.
Early this year, Greece tried to clear some of its pharmaceutical debts by giving companies government bonds. "We didn't have a choice. Everybody got government bonds. The question was, you got nothing or you got government bonds," Mr. Schwan said, adding that Roche sold the bonds immediately.
He said he isn't aware of any Greek patient complaints about Roche's decision to cut off certain hospitals, but that he can imagine hospital administrators "didn't like it." A representative of the Greek Cancer Society said no one was available to comment Friday.
Roche started cutting off certain Greek hospitals this year, Mr. Schwan said. A Roche spokeswoman declined to name the hospitals involved, but said the company began warning them last summer, in an effort to give them as much time as possible to make their payments.
Greek hospitals and pharmacies generally pay Roche directly for drugs, and then seek reimbursement from the taxpayer-funded health-care system, she said. Pharmacies are perhaps more prompt in paying Roche because they are privately owned and run for a profit, giving them better cash flow to cover their bills, she said.
Mr. Schwan said state-funded hospitals, which are nonprofit, "had this habit of not paying the pharma industry." Some have become better at paying since Roche has cut them off, because they realize their reputation with patients is at stake, he said.
Should Greece's financial situation deteriorate further, Roche could "have even more troubles to collect," he said.
—Dana Mattioli contributed to this article.
The company bought patents for "Imitamib mesylate" from a university quite cheaply .. Indian manufacturers started manufacturing the same drug ...
Roche's drug cost 1.2 lakh per month.. while the Indian drug cost only 1000 per month...
They filed a suit in Delhi HC claiming IPR infringement ... The HC gave ruling that people cannot afford the drugs at 1.2L /month so we cannot take your case..
They started with the nonsense of WTO rules.. They argued that they spent money for R&D .. Blatant lies ... buying IPR is not doing research yourself... Needless to say they lost the case...
They started playing dirty in the EU...
A shipment of medicine from Dr. Reddy iirc destined for brazil was seized at somewhere in EU... The reason that was given is that the shipment contained "illegal drugs"... That forced indian companies to take alternate routes..
Only 5-10% of the drugs that have come up in the last 5-10 years are truly useful ...The pace of medical research is slowing down...
Meanwhile, tough luck to phoren pharma majors seeking to force their IPR BS onto India. In real democracies, such measures don;t just happen and get rolled back even if by mistake they do.
Also, a good piece from Al guardian on the crisis in capitalism. Alarming read. As usual.
We are living through the most dangerous confluence of economic circumstances in modern times. Trying to pretend the interdependencies do not exist or that the collapse of the euro is the answer can only make matters worse. It is a straight choice: we do all we can to help each other or risk going down in what could be the worst economic contraction for a century.
Amen to that. However, aren't we overplaying the doomery a bit. Nothing will happen only, don;t worry have curry...
on a similar note a friend few times had to ship hazardous chemicals to a brazilian unit of her co . it had to be packed in a certain way and only certain airlines and shippers would do it. it used to go via london as no direct india-brazil flights exist and perhaps no SA-brazil either.
its time we cut the EU out of the south-south action. since our AI is in zombie state its upto KF/Jet/Spicejet to expand and the gulf airlines like emirates and etihad to service this new line of movement. south america is hardly on anyone's itinerary from india , even mauritius wont be getting too many indics, forget madagascar or SA.
we need to expand our mindshare and footprint to the western rim just as we have done in ASEAN.
The reason why the built up to Lehman fiasco is so similar to the Euro Sovereign Debt crisis are the stark parallels between then and now.
1) European Financial Stability Facility (EFSF). Recall the bazooka which the Former US Treasury Secretary requested from US Congress ? IT failed to reassure investors and prevent the carnage. EFSF might help Greece, Ireland, Iceland and probably Portugal too. But for Italy it is way to small.
2) Then also the responsibility to save the US financial sector fell on US Fed due to political differences in US Congress. In Euro Zone, i.e. countries which have Euro as their currency, the difference of opinion between different countries is forcing the onus onto the European Central Bank to prop up the European Banking Sector and indirectly the Euro.
3) Short sellers drove the prices of various banking and financial stocks to rock bottom. Citigroup become less worthy, in market capitalization terms, compared to State Bank Of India for a brief period of time. In Europe too the banking stocks were hammered to such an extent that France, Spain, Italy and Belgium took the unprecedented step of banning short selling.
Many a times, we have heard that the 2008-9 financial crisis was not about liquidity. It was about solvency. It was about bad debts which financial companies and banks took onto their balance sheets. In Europe this is also about bad debt. Not the mortgage type variety but about sovereign variety. Basically countries which have debts in excess of their earnings or possible future earnings. But at the end of the day, it is still about bad debt, clogging the system. The difference is that in case of 2008-9 financial crisis, it was not about the Tier-I capital, but in case of European banks it is about their Tier-I capital.
What the Fed did was inject liquidity into the financial system. That was because banks and financial systems stopped lending to one another, post Lehman in the belief that their counter parts might not survive and they might be left holding worthless piece of toilet tissue paper. It was about lack of confidence in their counterparts. And "once when confidence goes, it goes." Right now too, we see that funds parked with European central bank by European Banks is peaking. It does appear that European banks and not eager to lend to one another. Now also steps are being taken to ease liquidity by setting up the special lending facility of US Fed. But is liquidity the root cause of this problem? Or is the bad PIIGS debt that is being held by banks that is the problem.
One should be careful, US Fed is not doing charity by agreeing to this lending facility. It is lending money to European Central banks at interest rates higher than what market is offering. US Fed is not going to be on the hook in case this money is lost, rather it is going to be European Central banks which will be on the line.
Ideally this problem can be resolved by setting up a SPV, onto which European banks can offload the bad sovereign debt. They will be given Euro in return for these sovereign bonds. But there are two problems with this. One is moral hazard. i.e. we are socalizing the losses and privatizing the profits. Second is who is going to hold onto this SPV? Who will be on the hook for this SPV? I do not forsee a private institution being on the hook for these bad bonds. Getting the ECB to be on the hook is non starter, as the Germans and Danes and others will not allow it to be. They want a stronger Euro and a ECB whose balance sheet is not corroded by such toxic assets.
Next option is Euro Bonds, where all the countries which make up the Euro zone jointly are held accountable for bonds which are issued. That means that the Germany, France, Norway, etc or other disciplined countries will be on hook for the prolifically tendencies of southern European countries. Again a non starter.
The last option is default. French Banks will be burnt alive by a partial default. Germany and other countries will also be hurt badly as their banks will be affected. German banks may not be exposed to PIIGS debt that much, but they are exposed to French Banks. If few French Banks go under, they will be impacted. The same is applicable for other Euro Zone countries like the northern European countries. Ditto for the banks of low lying countries.
One aspect of Lehman failure has not been appreciated fully. It was not Lehman failure which lead to seizure across the financial system. Nah. Banks and Financial institutions fail all the time. Lehman's commercial paper was insured by insurance companies. Primarily by AIG. When Lehman tanked, people began calling on these insurance. AIG realized that it did not have money to pay for all these claims and people realized that AIG was having issues in paying the claims. If AIG was having difficulties in paying claims related to Lehman, how would it and other insurance companies pay up in case of any other financial institution or bank failure? In other words the insurance was worthless. That is why US Fed gave some 85 Billion USD to AIG, so that it could pay its obligations related to Lehman paper. It was this failure of AIG to pay the claims in time, which caused the market to freeze up.
Fast forward today. If say a particular bank in France Tanks, due to some sovereign default, then insurance related to its commercial paper, would also be called. If it is a big bank, then the amount would also be big. Will insurance companies be able to pay for it?
It does not stop there also. If the French bank goes under, it will pull all lines of credit that it has given till date and that which is outstanding. Imagine what will happen then? A reminder French economy grew by 0% in the 2nd quarter of 2011.
gakakkad wrote:Only 5-10% of the drugs that have come up in the last 5-10 years are truly useful ...The pace of medical research is slowing down...
In my opinion, its become way too expensive to get any drug through the FDA beaurocracy. It takes 10 years and a billion dollars to get a drug approved. With that kind of price tag and time frame, companies are better off not investing in drug research.
Also the life span of the average person is not increasing with these new drugs. It remains in the mid 70s. So we've hit a plateau with drugs as far as life span goes, maybe life quality is improved but even that may be selective. The big breakthrough of anti-biotics and vaccines that greatly extended life spans were made back in the late 40s.
What's needed is a new angle of research that's genetics based or based on re-creating replacable body parts. A lot of buzz is going on with regenerative medicine, stem cells..etc but how much of it is actually set to bare fruit and how much it is hype i don't have a clue. Something like that would against greatly boost life spans.
The FDA beaurocracy really needs to be slimmed down and made more efficient cost wise and especially time wise or else it will finish off the entire medical R&D industry. Nobody is going to spend 1 billion and wait around for 10 years.
I agree. the costs involved effectively means only 500 mil out of 7 bil in the world can ever afford the new drugs.
if someone could come up with therapies to seamlessly repair damaged hearts, livers, kidneys, pancreas, joints, teeth, eyes or even grow such replacement organs seeded with the patients own blood and dna in the lab on-demand, we could see the next big jump in AVERAGE lifespans from mid 70s to maybe 120-150 range.....tiny "sentient creatures" that swim inside the blood vessels chewing up bad fat deposits before finally being triggered to self destruct and pass away in stool is another good area.
ways to prevent the modern env from causing cancer in humans , to weed out these mutations and organ damage are also welcome.
I don't think the FDA process is fully at fault. The main problem is that new molecules are ever more hard to prove as having any effect at all. For instance some of the new Statin drugs have a NNT (numbers needed to treat) of 3-4. This means that 100 people have to take the drug for 3 or 4 people to benefit. for the remaining 96 people it is nothing more than an expensive placebo. Against that has to be weighed the possible side effects and other complications.
The benefits are just not there anymore. I agree with G, that we have hit a plateau with molecule based drugs.
IMHO more than gene therapy or organ replacement, a great advance would be the full development of stem cell lines for in-situ organ repair. Another fabulous advance would full protein synthesis. A vast class of diseases would be eliminated if we had the ability to syntheses the correctly folded proteins needed by the body. This would also allow us to directly attack viral and bacterial disease invasions as it is proteins that create the molecular keys that allow them to attack our body. We could create specific proteins to directly attack them without the use of powerful and sometime dangerous drugs.
European finance ministers ended a two-day meeting here Saturday without making substantial progress toward solving the region’s debt crisis, or any pledge to recapitalize Europe’s banks.
Mr. Geithner’s rejection Friday of a European idea for a global tax on financial transactions prompted a debate about whether Europe should go ahead on its own.
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Mr. Borg ruled out Swedish participation. “We have substantial experience in Sweden,” he said. “Basically most of our derivative and bond trading went to London during the years we had a financial transaction tax, so if you don’t get a solution that is universal, it is very likely to be detrimental for European financial markets.”
A European tax on global village that basically goes to Thames? Where did I read such a thing before?
Meanwhile, with an October deadline looming for international lenders to agree to the release of around 8 billion euros, or $11 billion, of aid to Greece, without which it could default on its debt,
“We really need to see some more political leadership,” he said, citing a “clear need for bank recapitalization.”
I am sure he is very experienced to say all this first hand.
Almost two months after a deal was struck on a second bailout of Greece, Finland is holding up its implementation by requesting collateral for new loans — a demand that has complicated the negotiations.
Meanwhile, the Greek government must still convince international lenders that it has done enough to justify the release of the next round of aid.
Many poor families in America have air-conditioning, microwaves, cable or satellite TV, etc. However, measured on the basis of their access to three critical requirements of life—food, education and healthcare—their pain becomes palpable. One in six Americans does not have enough food to eat, and lives on food stamps. Fifty million Americans do not have any health insurance. For such people, a single incidence of major illness could easily wreck their finances. Privately run schools, colleges and universities in America are the envy of the world. However, they are so expensive that poor students cannot even dream of going to these institutions. Scholarships are getting harder to get.
“We should go back to Mother Nature and learn from her rhythms. We should hug the trees. We should do more of home-grown stuff.
Theo raised some important points.. especially of NNT... Will explain the con-cept someday..
Actually the actual R&D costs incurred by the Pharma company are greatly over-imagined by people ...the advantage is obvious ... they have an excuse for taking the kind of money they take ...
They spend a whole lot more in marketing , lobbying and bribing.
I am presently on the oversight team of 2 clinical trials . A lot of things they do are purely wasteful .
As far as FDA is concerned , it is in complete collusion with the Pharma giants.. If they truly want to get a drug approved FDA is not going to stop them . The giants have cleverly manipulated FDA to wipe out competition.. As a result you see far fewer brands of a drug in the American market than in India or elsewhere. In India you might even find 100+ brands of the same drug.. Such a competition keeps the prices low..
They lack creativity w.r.t research . These days the trend is for mono-clonal antibodies.. Due to the "deciphering" of the genome project several genes were found that were believed to play a role in the pathogenesis of the disease... So they started making monoclonal antibodies to knock out these responsible proteins.. The approach was successful in Chronic myeloid leukemia (CML).. I mentioned the drug imitinib mesylate above.. It is an antibody against a receptor protein that is overexpressed in CML. The same approach was successful in a few other cases.. But than they started coming up with monoclonal antibodies against any molecule they could find.. 100+ drugs of this type are in trial stage.. Many are useless or too dangerous to use...Several innovative ideas by researchers have been rejected or funding blocked ...Many more things are possible ,but may be they don't see it as profitable .
The most important advances that have come in the last decade or so have been in radiology and various procedural branches... That is mainly due to availability of better instuments (in surgery) and computers (for radiology ..better image acquisition protocols etc)...In some cases lifespan has increased due to these.. For example better stents and angioplasty technique have reduced periprocedure mortality ... Sometimes they have reduced the invasiveness ..for instance Cleveland clinic in Ohio is working in non surgical (interventional way ) of replacing heart valves... These branches are also the most lucrative ones.. I also find that the companies involved with these to be more honest and receptive to hakeems and researchers suggestion ...One might criticise these things for adding costs a lot more than increasing lives..though I would not, since I am a procedural doc and these techniques will make me a rich man...To be honest they have increased the quality of life in a great way... In a manner that cannot be quantified..
As far a genetic research is concerned ,its practical applications are still more hype than reality... Growing organs etc is still in the "fringe science" stage.. It might decades or possibly even 50 years before it might become a reality...Research is hampered by the IPR nonsense...And there are lots of fraud claims ..One might recall the south Korean researcher Hwang Woo-suk.. He made fraud claims ..was caught and kicked out...But at a late stage ...I don't believe the co-workers were not aware from the beginning.
There is one guy J Craig Venter ... A former boss of nih.. A despicable character...does not know a things .. But very powerful politically ..And popular with discovery channel and news agencies... Very arrogant with docs and scientists... Very insulting character ... He tried to patent gene's .. What happened is that in the last decade and a half various techniques of gene sequencing were discovered .(contributory research from the world over including Yindia)... This guy started sequencing genes (no big deal, the process was already devised by others) and started filing patents for nucleotide sequences ..Now genes are something found in your body ..you can't patent them ...
Commercially usable research has been hampered by pharma companies ... Basic research is way ahead of what has been used commercially ... You need real good connections to get your work funded..
Last edited by gakakkad on 19 Sep 2011 22:57, edited 2 times in total.
Lest we forget Italy is too big to save. And has all the dominant properties of the EU periphery - massive debt, massive deficits requiring market financing, structurally metastasized unemployment, bleak growth or even stagnation prospects, pathetic demographic trajectory, zero political will or even basic seriousness etc etc. A few % points jump in their bond auctions in the coming months can cripple them as with any bloated oirostani state. Jai hor. But hey, nothing to get unduly alarmed alla-Ram-ed about. It'll all be smoothly managed. Just wait and see. Don't effing worry, have cucumber curry!
Italy’s credit rating was cut by Standard & Poor’s on concern that weakening economic growth and a “fragile” government mean the nation won’t be able to reduce the euro-region’s second-largest debt burden.
The rating was lowered to A from A+, with a negative outlook, S&P said in a statement. The company said Italy’s net general government debt is the highest among A-rated sovereigns, and now expects it to peak later and at a higher level than it previously anticipated.
S&P also said it lowered its outlook for Italy’s annual average growth to 0.7 percent for 2011 to 2014, from a prior projection of 1.3 percent. “We believe the reduced pace of Italy’s economic activity to date will make the government’s revised fiscal targets difficult to achieve,” it said.
“Italy’s economic growth prospects are weakening and we expect that Italy’s fragile governing coalition and policy differences within parliament will continue to limit the government’s ability to respond decisively to domestic and external macroeconomic challenges,” S&P said.
Italy’s downgrade may aggravate a volatile political situation -- Berlusconi faces four trials -- after a decade with virtually no economic growth that has undermined debt reduction. Its government debt was 119 percent of gross domestic product last year, more than any euro country after Greece.
Like I said, yawn. Except that the Italy does have the heft within the EU, G7 and therefore the world to secure 'IMF' funding/emergency lending etc that essentially represents a transfer of wealth from the rest of us to their unrepayably sorry arses.
all these PIIGS should be culled from the herd. we must not bear the expense of funding their lifestyle based on easy credit and no hope of repayment.
for 30-40 yrs a lot of nations "plugged into" the western system have enjoyed a overly high std of living (and sneered at us turd world types) without truly producing anything to deserve it.
whatever olives or wine or clothes or leather or cheese these nations like italy, spain or greece produce, I am sure brazil and india can find ways and places internally to do it given the intent. as it is, a lot of raw materials like leather and textiles are sourced from india anyway.
austria is another country, whose immense prosperity as seen in vienna I cannot explain clearly.....is it all the tail effect of hapsburgian accumulated wealth, zero pop growth or some high value niche they occupy in the world economy or simply being there and plugged into german and french markets?
the swiss model of being custodian of the worlds black money for 95%, and selling tourism, chocolates, pharma and watches on the side for rest 5% is better understood.
I think the real fun and games can begin once the western nations draw down to dangerous levels the corpus of looted wealth accumulated over the past few 100 yrs to fund their benefit systems.
this is what enables them to sneer at us, take it easy, enjoy "gap years" touring the world, work 35 hrs a week , have generous unemployment benefits instead of the life-n-death struggle to put food in the pot that tens of millions of our countrymen are forced to endure every day 365x24x7.
once that money is gone and with poor demographics to drive their future growth, everyone is as nook-nood as india and china and may the best brawlers win.
once the swagger of being well fed and looked after just for being born in a 'rich' country is gone, we shall see who hits harder and bites deeper.
austria is another country, whose immense prosperity as seen in vienna I cannot explain clearly.....is it all the tail effect of hapsburgian accumulated wealth, zero pop growth or some high value niche they occupy in the world economy or simply being there and plugged into german and french markets?
Austria - From knowing a few Austrians, Tourism is the mainstay, along with being "nearly Germany" (Hitler's Anschluss went off without a whimper for very good reasons) and free movement of goods,services , people etc between Germany, Austria and Switzerland. A fair sprinkling of cutting edge tech industries, pretty innovative (they were the guys who invented the BOF furnace for steel making and revolutionized the 20th century steel industry).
So yeah, it is culturally N. Europe and falls in the "Germanic" zone along with Scandinavia , so economically sound and not to mention dour, while the free living happy go lucky "Romance" countries in the south (club Med), live it up and go Kaboom economically.
“So just like QE1 didn’t work, QE2, QE2-and-a-half is not going to work,” Stiglitz said in an interview with Bloomberg HT television in Istanbul yesterday. “If we’re going to get out of the current mess it will take fiscal policy.”
What Stiglitz is effectively saying that Fed has no more or very little bullets left to fire. It is now upto the US congress and also the European political class to get its act together. The political class cannot outsource its role to the central bankers and expect the economy to be pulled out of the mess.
The elected representatives of North Atlantic region now have to take steps to pull us out of the log-jam that we find ourselves. Yes we in India are in the same boat. If there is a double dip recession or worse stagflation then rest assured we in India will be hit badly.
If the elected representatives under take austerity measures, then they hurt future growth prospectus and ability to bring the deficit under control. If they undertake more stimulus policies, then their debt burden escalates, leading to a down grade or worse.
On a related note, it does seem that Germany has rejected calls by US to increase the size of the the euro-area rescue fund’s firepower. Source is a Bloomberg story dated 19-Sept-2011. One of the options being considered is swapping of greece and other troubled bonds of shorter maturity (1 or 2 years bond) with longer maturity bonds(say about 10 years). But it seems that lenders are not willing to accept long term Greek bonds.
Instead of political leadership to recapitalize banks and offer more loans, there should be UN leadership to make Greece, Italy, et. all. to adhere to the IMF mandates and reducing money-sinks. If that happens, the next load of recapitalization can be more smooth and inspiring to others too.
I do not understand how Greece, Italy, et. all. are throwing tantrums to implement all these restrictions. Even third world countries have to. There is no scope of financial issue then. But if Greeks complain that the wealth-sinks are going to be present, later on no one can complain of a situation where such money-sinks are not given free monies now on are kind of out of the loop of financial liquidity.
A wonderful article which examines the prospect of Greece exiting the Euro Zone and its implications as far its debt are concerned. If Greece leaves EURO then will its creditors be paid in EURO or its new currency? And if it is in new currency, which will have to be devalued, then what will the private creditors get ? Worse if Greece can exit than what about other PIIIGS countries, including Italy notice the extra I.
Some amazing facts from the article.
Greece Debt is 350 billion Euro. Out of which 200 billion Euro is owed to IMF, ECB and Euro-zone nations. The German government's council of economic advisers estimates that Greece needs its debt cut in half to be sustainable, i.e. 175 billion Euro.
If Greece exits, then don't worry about what'll happen next. I predict a free for all, rush for the exits stampede with every man/woman/paki for him/her/it-self respectively after that.
French, German and UKstani banks that hold greek debt would need massive infusions of capital which nobody including their sovereign gubmints will be willing/able to provide. The Fed's open swaplines might be the only game in town then, perhaps. Anyway, domino fires will rage as the Portuguese, irish and spanish suspend payments until greece is 'resolved'. The less said about Italy the better.
Singha wrote:I think the real fun and games can begin once the western nations draw down to dangerous levels the corpus of looted wealth accumulated over the past few 100 yrs to fund their benefit systems.
Singha, that loot is already gone. Britain lost most of the loot in creating and then fighting Hitler. Then it went back to its original home industry - piracy - an oil well here, an iron mine there, etc. It sought and got US support for most of its piracy initiatives.
US of course behaved like the top bully in a world filled with them, so they robbed the most. But as India and China opened its economies, people in our countries began to demand and get better access to resources. These resources are no longer available to the west, hence the economic crises.
Western economic model, since the times of ancient greece and rome, is based on exploitation of slave labor. The populations of greece and rome were 90% slaves. And even today, there economies are based on the importation of goods and services at less than fair market price. That is why there are such large factories in China and call centers in India and US military bases in oil producing regions. That is why the policy of a strong dollar.
All that is vaporising in front of our eyes. The only thing from the old model is the sense of entitlement of the western elite/banksters. They still think that they have the first claim on the world's resources. This is the only source of conflict left to be neutralized.
abhischekcc wrote:They still think that they have the first claim on the world's resources. This is the only source of conflict left to be neutralized.
I think India should make the bazaar for limited Thorium club, the way UK/USA has monopoly on oil business, or n-member nuke fuel club, etc. Or would rather head a Thorium cartel ASAP the way oil cartel.
Greece is so much in debt that it cannot pay off its creditors. So to solve the problem, basically we are giving Greece money so that it can pay its creditors. Or the money is being giving to Greece so that it can continue running its government and also pay off its creditors. For example let us assume that Greece is given 100 euros. Greece uses say 50 euro for paying of its previous debt and 50 euro for keeping its government functioning. But Greece is not being giving charity or interest-free loans or grants. Rather it is being burdened with more debt. It is basically like saying, to cure a drug addict we are giving him more dosage of the drug.
It is important before we proceed forward to add a disclaimer. Greece is not in any way a drug addict. Nor is its dependency on credit equal or similar to a drug addiction. Not by any long yardstick. I am just drawing a parallel, so as to highlight a point, "The cure is worse than the disease."
Greece's debt to GDP ratio is greater than 150%. And if this continues, it just might doom generations of Greece citizens to debt servicing. Add to this the austerity package which is being enforced on Greece. It is being said by IMF, ECB and Germany that unless Greece shows progress on its austerity program, the money due in Oct, which will give Greece government money to survive financially till end of 2011, will not be disbursed.
There is a fundamental flaw in the above reasoning. The above analysis works under the assumption, "Greece cannot repay back its debt." This assumption is based on another fact. Greece is being forced to under go gut wrenching austerity measures. Measures which will reduce its growth. Greece economy has continued to shrink. It is one of the few economies which is shrinking. Even America grew at 1.8%. Though this growth rate of US is not capable of making a serious dent in the unemployment rate of 10% is another matter. Growth in France was flat last quarter, i.e. Q2-2011. But hell the French economy did not contract. So coming back to Greece, due to austerity measures being imposed on Greece, its growth prospectus is being reduced and its ability to pay its debt is also being reduced.
So can we say for argument sake, that along with increasing Greece's debt burden, its growth prospect should have been enhanced and not reduced by enforcing austerity?
Christopher Sidor wrote:
So can we say for argument sake, that along with increasing Greece's debt burden, its growth prospect should have been enhanced and not reduced by enforcing austerity?
I am sure Greece has some resources it can sell for some time. Otherwise this assumption that only more debt that can fuel growth at the cost of more debt that the growth can't repay, is perhaps pointing to a fact that the usual growth is debt driven. As an example:
From Encyclopedia of the Nations » Europe » Greece
The mining industry is small but significant because of Greece's vast mineral resources. Lignite, which is used for making energy in Greece, and bauxite, the raw material needed for aluminum production, are 2 minerals that are found abundantly in Greece. Other mineral deposits include ferronickel ores, magnesite, mixed sulfurous ores, ferrochrome ores, kaolin, asbestos, and marble. Mining accounts for only 1% of the GDP. Mining of metallic ores is concentrated in the hands of a few private companies. Quarry production is divided among many small companies. In 2000 mining output rose significantly, in contrast to its negative performance of the previous 2 years.
..But the hotels and supermarket chains often paid late. They gave small suppliers such as Mr. Petrakis postdated checks that couldn't be cashed until months later.
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Small businesses had little choice but to accept payment this way. In doing so, they were in effect acting as banks, lending to their own customers for several months for no interest.
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To get money quickly, he took his customers' postdated checks to banks and sold them at a discount.
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after Greece's debt bubble burst, these postdated checks started bouncing...
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When Mr. Petrakis asked the customers to pay up after their checks bounced, they refused or made him wait longer, often bluntly telling him it was his problem
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In desperation, Mr. Petrakis turned to a harebrained scam. In spring 2010, he obtained a fake postdated check in the name of an Athens company with which he had no dealings. He tried to sell it to a bank at a discount in the usual way.
Mr. Petrakis knew the check would bounce when it matured in the fall, and the bank would come to him wanting its money back, but he hoped by then to have money to repay the bank
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Is this post-dated cheques from International AAA rated agencies, dealing only in international currencies, already making way to small & medium size businesses in India too?
Norway is demanding collateral for its loans to Greece. Given that India is putting money into the IMF, what collateral is being promised to India in the event of a Greek default.
Its all the more dubious when one considers that Europeans eagerly installed their own stooge as chief at the IMF.
