Perspectives on the global economic meltdown (Jan 26 2010)

Chinmayanand · Post by **Chinmayanand** » 14 Feb 2010 02:26

These laid off and about to be laid off employees should join Blackwater/Xe and get employed in Iraq and Afghanistan. US govt has big military budget.

Neshant · Post by **Neshant** » 14 Feb 2010 04:39

http://www.timesonline.co.uk/tol/news/p ... 025833.ece

New tax bombshell: 20% VAT

Roland Watson, Suzy Jagger and Rachel Sylvester

A rise in VAT is looming whichever party wins the general election, as Labour and the Conservatives draw up plans to balance Britain’s books.

Alistair Darling and George Osborne, the Shadow Chancellor, are both considering raising VAT to as high as 20 per cent — the European average — from the current rate of 17.5 per cent, The Times has learnt.

Doing so would raise an extra £13 billion a year at a time when financial markets are searching for signs that whoever takes power is serious about tackling Britain’s £178 billion deficit.

Hari Seldon · Post by **Hari Seldon** » 14 Feb 2010 07:59

Hugh Hendry on PRC. As always, Hendry's a breeze to read. Ensoi.

Investors' infatuation with China is misguided

Some spicy excerpts:

the composition of China's growth has undergone a potentially treacherous change: in the absence of expanding foreign demand for its exports, it has instead come to rely on a massive surge in domestic bank lending to fuel its growth rate.

Indeed, when measured relative to the size of its economy, the 27pc point jump in bank loans to GDP is unprecedented; at no point in history has a nation ever attempted such an incredible increase in state-directed bank lending. What a turnaround: from an export juggernaut to a credit addict.

Its no secret that PRC's stimulus is the largest %GDP one on the planet. What's not clear is how far the dragonflies can sustain the juggernaut zimbly coz PRC's accounting and stuff isn't normal, the control its gubmint weilds over its economy is non-normal too. Heck, PRC could simply wipe out all the bad debts its banks have built with t he stroke of a pen, why not? Eh? I Know it can't go on forever, what I'm looking for is the trigger for collapse, I guess.

BTW, amazing how everything came together for c-hyena in 2001, eh?

Who would have thought it necessary back in 2001, the year everything all started to work out for China? That was the year the Chinese gained entry into the World Trade Organisation. The ascension to the WTO also coincided with the American Federal Reserve's loose monetary policy response in the aftermath of the NASDAQ crash. Exports surged, especially to the US, and China's current account surplus increased from a modest 2pc of its economy to a monumental 11pc, all by 2007.

This appetite for cheap Chinese exports, which had at one point seemed insatiable, means that we in the West have come to owe our largest Asian trading partner quite a hefty sum of money. China has become the world's biggest creditor, after amassing nearly $2.3 trillion of foreign exchange claims on us.

Rumor is that cheeni spies infiltrated the Clintoon campaign with hefty donations - an investment that paid off spectacularly, IMHO. From WTO entry to W88 sharing.... wah wah.

Anyway, here things turn a tad ominous only. Sri Hendry draws some scary parallels.

However, the spectre of a creditor nation running persistent trade surpluses has ominous historical portents. It has happened only twice before, with the US economy in the Twenties and with the Japanese economy in the Eighties.

Aha. There you have it. Eh? None can deny that massive asset bubbles are bloating up everywhere in PRC, that overcapacity on a scale hitherto unknown is being added to as we speak....

The ancient ethical system of Confucius is silent on the subject of modernisation. There is no proverb counselling that "wise men not invest in over-capacity". Perhaps there should be: in China, investment spending has tripled since 2001 and the consequences are staggering. A country that represents just 7pc of global GDP is now responsible for 30pc of global aluminum consumption, 47pc of global steel consumption and 40pc of global copper consumption. The overriding problem is that the Chinese model leads to a deflationary spiral that is perpetual in nature. Domestic consumption never grows fast enough to absorb the supply, prompting the planners to commit to ever-higher levels of investment. Over-capacity inevitably plagues many sectors of the economy and Chinese profitability is already low.

Here's a proverbial gem of quote- something that wouldn't likely even occur to any ekhanomist, however nobel.

Remember, it is one thing to create economic growth, but it is another thing to truly create wealth.
...
Power without profit can prove ephemeral. This is an axiom the Japanese are all too familiar with. We cannot say we have not been warned.

read it all only.

Neshant · Post by **Neshant** » 14 Feb 2010 08:43

Mish Shedlock on China Bubble

http://www.youtube.com/watch?v=UbZ3k8phxn8

Neshant · Post by **Neshant** » 14 Feb 2010 08:59

CEO of TrimTabs Investment Research Speculates That FED is Manipulating Stock Market

http://www.chrismartenson.com/forum/ceo ... rket/35282

Hari Seldon · Post by **Hari Seldon** » 14 Feb 2010 09:23

Now Sri Niall Ferguson has to come out of the woodwork to claim gleatness in understanding the genesis of the current crisis and implications therefrom...

A Greek crisis is coming to America (FT)

It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate...

Yet the idiosyncrasies of the eurozone should not distract us from the general nature of the fiscal crisis that is now afflicting most western economies. Call it the fractal geometry of debt: the problem is essentially the same from Iceland to Ireland to Britain to the US. It just comes in widely differing sizes.

Wow, so aajkal even self-glorified historians are passing fractals in their wisdom droppings. wah wah onlee.

For the world's biggest economy, the US, the day of reckoning still seems reassuringly remote.

{Relatively speaking, it is remote, IMVVHO. Relatively speaking of course. A blowup can happen well in our lifetimes. Perhaps.}

The worse things get in the eurozone, the more the US dollar rallies as nervous investors park their cash in the "safe haven" of American government debt. This effect may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008.{TINA, eh? Save for Gold, of course.}

Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase "safe haven". US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941. {Aah, the historian in Ferguson speaketh now, or what?}

Even according to the White House's new budget projections, the gross federal debt in public hands will exceed 100 per cent of GDP in just two years' time. This year, like last year, the federal deficit will be around 10 per cent of GDP. The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That's right, never.

Ok. So bloody what? Its not like the saintly investors have got a surfeit of options around, now, eh? Hmmmph.

The International Monetary Fund recently published estimates of the fiscal adjustments developed economies would need to make to restore fiscal stability over the decade ahead. Worst were Japan and the UK (a fiscal tightening of 13 per cent of GDP). Then came Ireland, Spain and Greece (9 per cent). And in sixth place? Step forward America, which would need to tighten fiscal policy by 8.8 per cent of GDP to satisfy the IMF.

More BS. Like the IMF (or the credit rating agencies for that matter) dare cast a realistic eye on the state of the khanate's treasury.

My question is this: If everybody, and I mean everybody, wants to continue playing pretend for the rest of all time, why exactly would any collapse come about? I know, I know but I still can't figure out how the collapse, if ever, can be triggered.....totally mystified onlee.

VikramS · Post by **VikramS** » 14 Feb 2010 09:53

The good thing about the US is that the tax rates are much lower than Europe and there is room to raise them. Further if the MA senate election is any indication, even the bluest of blues are having second thoughts about the spend, spend, spend philosophy.

At the end of the day when it comes to reserver currencies, what matters is the size of the economy, and military might. The US has it. There is no one else to challenge them, and not enough gold to go back to the gold standard. So dollar is king.

The Chinese could try to emerge as the other real alternative. But a currency which is not even free floating, and whose direction is controlled by the CCP hardly deserves to be a reserve currency. Further China is tied to much to the hip with the First World with its export driven growth model; sooner or later protectionism is going to bite the Chinese hard.

It might sound surprising, but as long as India can continue along the current economic growth path and avoid any major military conflict, the INR might be on its way to becoming a mini-reserve currency a decade from now. Balanced growth and a docile democracy are likely to breed greater confidence in the Indian system. And a decade of steady growth will do wonders to the size of the Indian economy, a necessary requirement for a reserve currency.

Neshant · Post by **Neshant** » 14 Feb 2010 10:03

Ponzi Scheme
by Puru Saxena
Editor, Money Matters
February 11, 2010

Let’s face it, the government-bond market in the West is a gigantic Ponzi scheme. Most governments in the ‘developed’ world are drowning in debt, they are running mind-boggling budget deficits and printing money like there is no tomorrow. Furthermore, under the guise of quantitative easing, their central banks are buying their own newly issued debt!

It is our contention that similar to Mr. Madoff’s hedge fund, the sovereign debt markets in the West have now become gigantic scams. Only this time around, the players have changed and the sums involved are significantly larger.

http://www.financialsense.com/editorial ... /0211.html

Neshant · Post by **Neshant** » 14 Feb 2010 10:06

Sri Niall Ferguson has to come out of the woodwork to claim gleatness in understanding the genesis of the current crisis and implications therefrom

The guy sets off my bullsh&t detector everytime i hear him.

Neshant · Post by **Neshant** » 14 Feb 2010 16:48

BIFLATION:

Biflation is a state of the economy where the processes of inflation and deflation occur simultaneously.[1] The term was first introduced by Dr. F. Osborne Brown, a Senior Financial Analyst for the Phoenix Investment Group.[2] During Biflation, there's a rise in the price of commodity/earnings-based assets (inflation) and a simultaneous fall in the price of debt-based assets (deflation).

The price of all assets are based on the demand for them versus the volume of money in circulation to buy them.

With Biflation on the one hand, the economy is fueled by an over-abundance of money injected into the economy by central banks. Since most essential commodity-based assets (food, energy, clothing, precious metals) remain in high demand, the price for them rises due to the increased volume of money chasing them. The increasing costs to purchase these essential assets is the price-inflationary arm of Biflation.[3]

With Biflation on the other hand, the economy is tempered by increasing unemployment and decreasing purchasing power. As a result, a greater amount of money is directed toward buying essential items and directed away from buying non-essential items. Debt-based assets (mega-houses, high-end automobiles, stocks and bonds) become less essential and increasingly fall into lower demand. As a result, the prices for them fall due to the decreased volume of money chasing them. The decreasing costs to purchase these non-essential assets is the price-deflationary arm of Biflation.

- Wiki

Chinmayanand · Post by **Chinmayanand** » 14 Feb 2010 17:01

Investments:Where is the Money in 2010 – What are the Risks?

Faber, taleb, chanos in russia for spec forum...--- This is v. v. v. interesting discussion

markos · Post by **markos** » 14 Feb 2010 21:03

Neshant wrote:
a retired teacher who contributed $62,000 in total toward her pension who would be expected to receive $1.4 million in pension payments and $215,000 in medical benefits over the rest of her life.
Public sector ripoffs have reached such an extent that not only are these parasites demanding higher and higher wages even in a recession, they want gold plated pension plans AND they want the private sector worker to pay for any investment losses incurred by their pension plans! (they'll keep the profits thanks). They even want the government to gurantee 100% inflation protection. It won't be long before they start demanding a Jag with leather interior to go with the job.

The best thing that could happen is if the state governments went bankrupt and the entire public sector ended up being privatized.

The retired teacher probably made a lot less during his tenure than a private sector employee with similar qualification (which explains the reason for lower contributions to the pension fund) in exchange for a security at retirement. What has happened over time is that corporations screwed their (private sector) employees by taking away the retirement benefits one by one confining everything to 401(k) - i.e. at the mercy of wallstreet robbers. Moreover the wages and benefits in private sector has been stagnant in the last 20-30 years, as a matter of fact, real wages have gone down. Add offshoring, outsourcing etc. to the mix and actually the private sector employee was royally screwed (while foolishly holding onto the "conservative" ideology of Raygun and Bush that continued to inflated the size of the government through unnecessary military spending and wars)

Now repubs like Chris Christie are trying to find a target for the public anger and it looks like they found one against those evil public sector employees. The contracts with public sector employees should be ripped off while shady contracts written by AIG should be considered sacrosanct. The real anger should be focused at out of control military spending(whether under democrats or republicans). The teacher salaries and benefits are peanuts compared to the amount of waste in the system for military. Compared to the military, the teacher spent his life performing a very useful duty to the society. As a matter of fact, long-term costs of the military is far higher than the benefits paid to public sector employees - think about all the trillions that need to be spent for caring for the veterans who are coming back injured from all the needless wars.

On the poster predicting the demise of liberalism, the real cause of current mess is the relentless application of the conservative ideology for the last 30 years (under Raygun and Bush with Raygun increasing the social security taxes and then raiding the fund to waste it on military). But usually public has very short attention span and fail to recognize this. Now within a few years people are going to recognize that conservatives/repubs have no real solution to these problems.

Also individualism is embraced by conservatives(esp. libertarians) as much as liberals, at least in US.

Hari Seldon · Post by **Hari Seldon** » 14 Feb 2010 21:31

^^^Interesting blame-gaming exercise there.

IMHO, my views on both the parties (Dem and GOP) and both the -isms (Conservatism and liberalism) in US polity have changed quite a bit since the crisis unfolded in sept/08. The actions of actors across the partisan divide with both parties amply represented in the White house and wall street goons over-represented in both cases tells me that it don't matter anymore which of the 2 parties takes power, period.

The elites, wall street or Penn ave variety have (expectedly) gotten too clever by half. Successful (and smart) parasites are those that least harm their hosts. The elitist loot has gotten to malignant tumor proportions. The elites have shot themselves in the foot several times over. The system whose elite they were may no longer survive their elitehood. Expect upheaval only.

Hari Seldon · Post by **Hari Seldon** » 14 Feb 2010 21:39

Somehow, am not surprised at all, only. From who else but the incisive folks over at zero hedge.

Exclusive: The Bank Of England Engaged In Flagrant Gold Manipulation In The Interwar Period Via The New York Fed; Does History Repeat Itself?

Summary?

An article written by University of Tennessee professor John R Garrett, "Monetary Policy and Expectations: Market-Control Techniques and the Bank of England, 1925-1931" which describes in exquisite detail the gold falsification measures undertaken by the Bank of England in the interwar period in order to impact interest rates in a favorable direction, performed with the full criminal complicity of the Federal Reserve Bank of New York, may mean paranoid "gold bugs" could soon be forever absolved of their "tin hat" wearing status as outright gold, and other data, manipulation by a major central bank is now proven beyond doubt. The implications regarding the possibility of comparable deceitful and treasonous acts by modern central bankers are staggering.

Again, caveat emptor. ZH like the other ZH can be a tad excitable at times. Judge each story on its merits only.

Personally, am not at all surprised that the high priests of the fiat money universe (a.k.a. central bankers) fear and loathe that "barbaric relic" - gold. Am not surprised to hear, they manipulated its price desperately back when tings were on the gold standard.

yogi · Post by **yogi** » 15 Feb 2010 06:03

Acharya wrote:You will love this........ .....

It is the month of August, on the shores of the Black Sea . It is raining, and the little town looks totally deserted. It is tough times, Everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town.

He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to choose one.

The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.
The butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.
The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel.
The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute that in these hard times, gave her services on credit.

The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.At that moment, the tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.... . And that, ladies and gentlemen, is how the world is doing business today.

Actually that is how the world is "supposed" to work (in a balanced trade scenario). What if you take the prostitute out of the picture? Then the 100 Euro note remains with the Pig owner, and does not come back to the hotel owner. So in this scenario, the hotel owner is US, and the tourist is China. So in this scenario, it eventually comes down to who has the bigger gun - the hotel owner, or the tourist. THAT is how today's world is working

Moral of the story: US needs a prostitute, who can satisfy China. And who/what would that be, is the Trillion Dollar Question

Chinmayanand · Post by **Chinmayanand** » 15 Feb 2010 06:08

And who/what would that be, is the Trillion Dollar Question

EU !!!

Chinmayanand · Post by **Chinmayanand** » 15 Feb 2010 06:13

US debt will keep growing even with recovery

Chinmayanand · Post by **Chinmayanand** » 15 Feb 2010 06:15

Germans say euro zone may have to expel Greece: Poll

Greece should go the paki way. Everyone will rush to bail it out.

Chinmayanand · Post by **Chinmayanand** » 15 Feb 2010 06:19

Wall St to blame for Europe's mess

ATHENS: Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.

The bankers, led by Goldman’s president, Gary D Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.

It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions of dollars, people familiar with the transaction said. That deal, hidden from public view because it was treated as currency trade rather than a loan, helped Athens to meet Europe’s deficit rules, while continuing to spend beyond its means.

Athens passed on the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbours vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.

As in the US subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.

In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come.

Critics said such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country’s liabilities. Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds.

The crisis in Greece poses the most significant challenge yet to Europe’s common currency, the euro, and the Continent’s goal of economic unity. The country is, in the argot of banking, too big to be allowed to fail. Greece owes the world $300 billion, and major banks are on the hook for much of that debt.

A default would reverberate around the globe. A spokesperson for the Greek finance ministry said the government had met with many banks in recent months and had not committed to any bank’s offers. All debt financings “are conducted in an effort of transparency”, she said. Goldman and JPMorgan declined to comment.

While Wall Street’s handiwork in Europe has received little attention on this side of the Atlantic, it has been sharply criticised in Greece and in magazines like Der Spiegel, the German newsweekly.

yogi · Post by **yogi** » 15 Feb 2010 06:50

durgesh wrote:
And who/what would that be, is the Trillion Dollar Question
EU !!!

Actually, in the long term strategic sense, it could be Japan and Taiwan.

Neshant · Post by **Neshant** » 15 Feb 2010 08:02

The retired teacher probably made a lot less during his tenure than a private sector employee with similar qualification

If indeed the private sector pays more, then by all means privatize the public sector. By your logic they should be making a lot more!

The reality is nobody with those qualifications in the private sector is getting that kind of salary nor is there a 1.4 million dollar pension backstopped against investment losses, inflation protected and paid for by some other sucker for doing a regular job.

Their counterparts in the private sector are flipping burgers and make LESS if they can even find employment, have no pensions, face un/under employment, no job security due to out-sourcing & cost cutting and no unions picking the taxpayer's pockets except maybe the auto and banking sector which want big bucks for work any guy off the street can do. Their counterparts can't save a dime for their own retirement while being forced to fund the retirement of the public sector. Why do you think public sector is so eager to keep things the way they are and keep on leeching.

Public sector is one of the many things that's going to have to be axed down fast before it sinks the real (read productive) economy. Way too many leeches are sucking the life out of the host.

-----------------
Income angst? Not for public employees

Public-employee unions fiercely defend their pay and pensions, but even union-friendly Democrats are starting to acknowledge the inevitable. “The deal used to be that civil servants were paid less than private sector workers in exchange for an understanding that they had job security for life,’’ former San Francisco mayor and California Assembly speaker Willie Brown recently wrote in the San Francisco Chronicle. “But we politicians, pushed by our friends in labor, gradually expanded pay and benefits . . . while keeping the job protections and layering on incredibly generous retirement packages . . . Talking about this is politically unpopular . . . But at some point, someone is going to have to get honest about the fact.’’

Since December 2007, when the current downturn began, the ranks of federal employees earning $100,000 and up has skyrocketed. According to a recent analysis by USA Today, federal workers making six-figure salaries - not including overtime and bonuses - “jumped from 14 percent to 19 percent of civil servants during the recession’s first 18 months.’’ The surge has been especially pronounced among the highest-paid employees. At the Defense Department, for example, the number of civilian workers making $150,000 or more quintupled from 1,868 to 10,100. At the recession’s start, the Transportation Department was paying only one person a salary of $170,000. Eighteen months later, 1,690 employees were drawing paychecks that size.

All the while, the federal government has been adding jobs at a 10,000-a-month clip. Between December 2007 and June 2009, federal payrolls exploded by nearly 10 percent. “Federal workers are enjoying an extraordinary boom time in pay and hiring,’’ USA Today observes, “during a recession that has cost 7.3 million jobs in the private sector.’’ And to add public-sector insult to private-sector injury, data from the Office of Personnel Management show the average federal salary is now roughly $71,000 - about 76 percent higher than the average private salary.

Moreover, government retirees in Ohio enjoy taxpayer-provided health care, and in many cases can retire at 48.

http://boston.com/bostonglobe/editorial ... employees/

Hari Seldon · Post by **Hari Seldon** » 15 Feb 2010 08:28

Awrite, something big's creeping up in the khanate (I know, these days words like 'b(ig' etc have lost meaning, relativistically speaking) only.

Here's a quickie background, from Reuters:
Harrisburg PA to default on bond payments?

Harrisburg, Pennsylvania, moved a step closer to defaulting on a bond payment when its city council passed a 2010 budget that does not include $68 million in debt repayments on an incinerator.

Without the debt provision in the $65 million budget, the state capital may miss a March 1 payment of $2.072 million, a rarity for a municipal bond issuer.

Joyce Davis, a spokeswoman for Mayor Linda Thompson, confirmed the council's decision -- taken at a special session on Saturday -- and said the mayor is not commenting for now on the implications of exclusion of the debt payments from the budget.

The $2.072 million payment is the latest installment on a $300 million bond owed on the construction of the incinerator. An additional $637,000 is due on April 1.

City Controller Dan Miller said last year's payments on the incinerator were made from a debt service reserve fund that is now depleted.

Miller said on Feb. 9 he would "not be surprised" if Harrisburg fails to meet the March 1 payment.

The tax-exempt municipal bond market, which states, cities and municipalities use to raise the funds to build roads, schools and hospitals, is viewed as very safe with a far lower default rate than the corporate bond market.

Just 54 municipal bond issuers rated by Moody's Investors Service defaulted on their debt between 1970 and 2009, the agency said on Thursday. The average five-year historical cumulative default rate for investment-grade municipal debt was 0.03 percent in the period, compared with 0.97 percent for corporate issuers

Zero hedge opionates:

A week ago we asked whether Harrisburg is a "doomed city." Today, the city itself answered the question, after passing a 2010 budget which excludes debt payments. In essence, the city anticipates defaulting. The catalyst will be a $2 million missed interest payment on an incinerator due March 1. As Reuters points out laconically, this is "a rarity for a municipal bond issuer." The outcome: official muni default.

"Asked whether the city may file Chapter 9 bankruptcy as a way to get its debts under control, [City controller] Miller said that was a "possibility."

Will this be the catalyst that sets the muni bond market ablaze? Remember that March is when Quantitative Easing officially ends. And everyone knows what is happening in Europe. Will the next 20 days set the preamble for the next major leg down in the ongoing Great Recession?

Neshant · Post by **Neshant** » 15 Feb 2010 10:57

"recovery"

i'm beginning to get sick of that word with wall street snake oil salesman repeating it over and over while milking money out of the system.

As soon as it all tanks, these roaches will re-invent themselves claiming they saw the crisis all along.

shravan · Post by **shravan** » 15 Feb 2010 11:19

The National Employment Law Project (NELP) released a new report last week showing that ...

1.2 million jobless workers will become ineligible for federal unemployment benefits in March unless Congress extends the unemployment safety net programs from the American Recovery and Reinvestment Act (ARRA). By June, this number will swell to nearly 5 million unemployed workers nationally who will be left without any jobless benefits.
...
Currently, 5.6 million people are accessing one of the federal extensions (34-53 weeks of Emergency Unemployment Compensation; 13-20 weeks of Extended Benefits, a program normally funded 50 percent by the states).

Pattom · Post by **Pattom** » 15 Feb 2010 11:29

Even if someone posted this earlier, I thought it's worth posting again for those who missed reading it the last time:

Rolling Stone's Matt Taibbi's indictment of Goldman Sachs: Inside The Great American Bubble Machine

Utterly depressing!

Hari Seldon · Post by **Hari Seldon** » 15 Feb 2010 13:10

Re pattom's link, yup was posted and dissected quite a bit, IMO. Tabibi's on a roll agianst Goldman and surprisingly, has retained life, limb and liberty despite his righteous crusade.

More on GS shenanigans from Simon Johnson here:
Goldman Faces Special Audit and Possible Ban in Europe

excerpted heavily but the juicy bits are all in here:

"...We now learn – from Der Spiegel last week and today’s NYT – that Goldman Sachs has not only helped or encouraged some European governments to hide a large part of their debts, but it also endeavored to do so for Greece as recently as last November.
{Audacity of hope ka toh pata nahin, 'audacity' part is easy to see though }
These actions are fundamentally destabilizing to the global financial system, as they undermine: the eurozone area; all attempts to bring greater transparency to government accounting; and the most basic principles that underlie well-functioning markets. When the data are all lies, the outcomes are all bad – see the subprime mortgage crisis for further detail.

A single rogue trader can bring down a bank – remember the case of Barings. But a single rogue bank can bring down the world’s financial system.

Goldman will dismiss this as “business as usual” and, to be sure, a few phone calls around Washington will help ensure that Goldman’s primary supervisor – now the Fed – looks the other way.

But the affair is now out of Ben Bernanke’s hands, and quite far from people who are easily swayed by the White House. It goes immediately to the European Commission, which has jurisdiction over eurozone budget issues. Faced with enormous pressure from those eurozone countries now on the hook for saving Greece, the Commission will surely launch a special audit of Goldman and all its European clients...

...Goldman will probably be blacklisted from working with eurozone governments for the foreseeable future; as was the case with Salomon Brothers 20 years ago, Goldman may be on its way to be banned from some government securities markets altogether. If it is to be allowed back into this arena, it will have to address the inherent conflicts of interest between advising a government on how to put (deceptive levels of) lipstick on a pig and cajoling investors into buying livestock at inflated prices.

And the US government, at the highest levels, has to ask a fundamental question: For how long does it wish to be intimately associated with Goldman Sachs and this kind of destabilizing action? What is the priority here - a sustainable recovery and a viable financial system, or one particular set of investment bankers?

To preserve Goldman, on incredibly generous terms, in the name of saving the financial system was and is hard to defend – but that is where we are. To allow the current government-backed (massive) Goldman to behave recklessly and with complete disregard to the basic tenets of international financial stability is utterly indefensible.

The credibility of the Federal Reserve, already at an all-time low, has just suffered another crippling blow; the ECB is also now in the line of fire. Goldman Sachs has a lot to answer for."

Jesse opines:

the American Wall Street banks have become dominated by a culture of compulsive sociopaths who are incapable of reforming or restraining their greed. Like all addicts, they push the envelope, emboldened by each successful scam, the weakness of regulators, and the craven support of politicians, going further and further until at long last they go one step too far, with spectacularly destructive results.

Goldman Sachs may have reached that point. And as also suggested here, the rebuke may be coming from foreign nations who become weary of the extra-legal antics of the rogue American banks.

There is a case to be made that the money center banks, in particular Goldman and JPM, are sometimes acting as instruments of US foreign policy.

Hari Seldon · Post by **Hari Seldon** » 15 Feb 2010 13:14

Was watching DLF pitching IPL hajaar and the hockey olympics being advertised too ever so often on desi tv. Contrast that with ricvh world por sports teams, clubs and entire leagues buried in mountains of debt that is slowly but steadily coming due.

Sample this piece, for instance:
Falk Says N.B.A. and Players Headed for Trouble

A year ago, during a wide-ranging interview to promote his book, Falk — the N.B.A.’s first superagent and a longtime confidant of Michael Jordan’s — warned that the league was in economic distress, that the owners would be seeking huge concessions from players and that a lockout was possible, perhaps even likely.

Falk predicted then that the N.B.A. would seek a hard salary cap, shorter contracts, a higher minimum age for incoming players, elimination of the midlevel cap exception and an overall reduction in the players’ percentage of revenue.

When the N.B.A. and the players union opened negotiations this weekend in Dallas, every item on Falk’s list was in play, as part of the league’s initial proposal.

Billy Hunter, the union’s executive director, called the proposal oppressive Friday, after a 90-minute negotiating session that he described as contentious. Predictions of a lockout are common among players and owners.

the signs are troubling, and the sides have rarely seemed so far apart. About half of the league’s 30 franchises are losing money, according to some estimates. Owners want a radical restructuring of the economic system, starting with a hard salary cap to replace the current soft-cap system. The union is in favor of maintaining the status quo.

Falk has been a player agent for 36 years, but he shares the view of league officials that the N.B.A.’s economic system is broken.

abhishek_sharma · Post by **abhishek_sharma** » 15 Feb 2010 13:21

Fareed Zakaria interviews Paul Volcker on America's economic problems

http://www.cnn.com/video/#/video/podcas ... .02.14.cnn

Chinmayanand · Post by **Chinmayanand** » 15 Feb 2010 13:41

Hari Guru , bliss to send some advice as how to keep this Goldman away from India .. it has some stake in some Indian exchanges , just like pakis are always plotting terror attacks on innocent , same way this Goldman scum may also be planning something on Indian bourses ... bliss to throw your advice at GoI

How to save India from the evil " Goldman "

Chinmayanand · Post by **Chinmayanand** » 15 Feb 2010 14:06

DOW 1000 is not a silly number

A small nugget :

Neshant · Post by **Neshant** » 15 Feb 2010 14:15

Re-nationalise the stock market. Just tell GS there's been a change of rules.

Who are the idiots who let Goldman Sachs take a 10% stake on the bourse anyway. It must be the Indian MBA city slickers who got conned by the preaching of false economic theories coming from western banks & GS itself.

Its like Walmart which sends out envoys to 'educate' mayors on why a Walmart store is not a black hole sucking capital out of their community - when in fact it is exactly that.

Hari Seldon · Post by **Hari Seldon** » 15 Feb 2010 16:01

^ Durgesh bhai, far be it moi entertain notions of advising GoI on what to do. What I do know quite well is that GS, just like Pakistan, is unadulterated bad news. And its no big secret any longer. Our babus aren't so dense as to not see the obvious.

Now, hopes are high that GS will meet karmic consequences sooner rather than later.

For one, GoI looks to the west for precedent and wisdom, quite by instinct. So when the oiropean commission acts against GS by effectively banning it from the EMU, Dilli can be emboldened to cite precedent.

Further, there's the even more shiny example of PRC showing GS the finger and stating flat out that it will not intervene if chinese entities with whom GS had business refuse to honor derivative contracts GS had with them.

More precedence in the making. Things have come a long way since a mere few yrs ago. GS's name is mud. Nobody associates honesty, integrity or fairplay with GS anymore (nor should they). Desi biz entities aren't dumb. GS's record is simply way too egregious for anyone, and I mean anyone, to want to do biz with them for fear of getting burnt only. Witness the (alleged) way GS's proprietary trading desks shorted the stocks their investment arm was advising clients to buy. Only. Chweet, no? Such tricks no longer count as admirably clever or smart. They count as cheating, which is what they really are.

As things deteriorate in the khanate - more jobless, more deflation, more debt and more misery - more bad blood, bad press and bad karma pile up for the erstwhile big banking interests with GS square in the center. Dilli can get ever more emboldened in telling the likes of GS where to get off.

Wait and watch only.

Jai Ho.

Chinmayanand · Post by **Chinmayanand** » 15 Feb 2010 17:13

China: Hugh Hendry warns investors' infatution is misguided

shyamd · Post by **shyamd** » 15 Feb 2010 17:49

at GS! I did warn that GS is gonna face a lot of trouble back in November. Anyways, has the special audit thing been widely reported in mainstream media?? I couldnt find any links.

Eurogroup to push Greek reforms, not prepare bailout

Here we have it, bailout will be hammered in last resort within 30 mins, but NO bailout coming up for now.

Chinmayanand · Post by **Chinmayanand** » 15 Feb 2010 17:51

No love lost between Dubai World, bankers on deal talk

According to the report, Dubai World will offer creditors either 60 percent repayment over seven years and a government guarantee, or full repayment with a debt for equity swap for property assets of Nakheel and no guarantee.

Neither option is palatable to bankers and the government was quick to distance itself from the report by Dow Jones. "If anything is a surprise, it's in the figures," said a banker at a large international bank. "I thought they would have proposed a little better than 60 percent. This doesn't look promising." Aside from the steep 40 percent haircut, creditors are unlikely to welcome getting assets in Nakheel, the developer behind man-made islands shaped like palms and a map of the world.

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

3000 DOW prediction

http://www.huffingtonpost.com/dan-dorfm ... 60156.html

Hari Seldon · Post by **Hari Seldon** » 16 Feb 2010 19:28

Now here's the kinda disruptive shocka that could roil mkts and lay waste linear extrapolations of current doomsday trends. More power to them if they can save the world, I say.....

Algae to solve the Pentagon's jet fuel problem

The brains trust of the Pentagon says it is just months away from producing a jet fuel from algae for the same cost as its fossil-fuel equivalent.

The claim, which comes from the Defense Advanced Research Projects Agency (Darpa) that helped to develop the internet and satellite navigation systems, has taken industry insiders by surprise. A cheap, low-carbon fuel would not only help the US military, the nation's single largest consumer of energy, to wean itself off its oil addiction, but would also hold the promise of low-carbon driving and flying for all.

Darpa's research projects have already extracted oil from algal ponds at a cost of $2 per gallon. It is now on track to begin large-scale refining of that oil into jet fuel, at a cost of less than $3 a gallon, according to Barbara McQuiston, special assistant for energy at Darpa. That could turn a promising technology into a market-ready one. Researchers have cracked the problem of turning pond scum and seaweed into fuel, but finding a cost-effective method of mass production could be a game-changer. "Everyone is well aware that a lot of things were started in the military," McQuiston said.

wow bloody wow. Bring it on, I say. In 10 yrs if this thing can be sufficiently scaled up (unlikely, but lez at least hope) then the world's dependence on the cute KSA regime and its sponsoring of worldwide jeehard can count its numbered days....

"Darpa has achieved the base goal to date," she said. "Oil from algae is projected at $2 per gallon, headed towards $1 per gallon."

McQuiston said a larger-scale refining operation, producing 50 million gallons a year, would come on line in 2011 and she was hopeful the costs would drop still further – ensuring that the algae-based fuel would be competitive with fossil fuels. She said the projects, run by private firms SAIC and General Atomics, expected to yield 1,000 gallons of oil per acre from the algal farm.

McQuiston's projections took several industry insiders by surprise. "It's a little farther out in time," said Mary Rosenthal, director of the Algal Biomass Association. "I am not saying it is going to happen in the next three months, but it could happen in the next two years."

But the possibilities have set off a scramble to discover the cheapest way of mass-producing an algae-based fuel. Even Exxon – which once notoriously dismissed biofuels as moonshine – invested $600m in research last July.

Wow. such a game changer and unkil allowed its news release just like that? Something ain't right, seems like.

Unlike corn-based ethanol, algal farms do not threaten food supplies. Some strains are being grown on household waste and in brackish water. Algae draw carbon dioxide from the atmosphere when growing; when the derived fuel is burned, the same CO2 is released, making the fuel theoretically zero-carbon, although processing and transporting the fuel requires some energy.

How about algal farms on sea water, eh? Now howz that for an idea?

The US Air Force wants its entire fleet of jet fighters and transport aircraft to test-fly a 50-50 blend of petroleum-based fuel and other sources – including algae – by next year.

The switch is partly driven by cost, but military commanders in Afghanistan and Iraq are also anxious to create a lighter, more fuel-efficient force that is less dependent on supply convoys, which are vulnerable to attack from insurgents. Give the military the capability of creating jet fuel in the field, and you would eliminate that danger, McQuiston said. "In Afghanistan, if you could be able to create jet fuel from indigenous sources and rely on that, you'd not only be able to source energy for the military, but you'd also be able to leave an infrastructure that would be more sustainable."

Read it all.`

abhischekcc · Post by **abhischekcc** » 16 Feb 2010 20:30

US DOD has always been a pioneer in alt-fuels, since they know how crazy the world van become as compared to the worthies in foggy bottom.

USAF has plans to replace a substantial portion of jet fuel with blended jet fuel - mix of normal ATF with fuel extracted from coal/others.

The cost has always been an issue though. Most syn-fuels are economically unviable below $35/bbl, and they need at least $50/bbl to attract investors.

The numbers these guys are talking about look revolutionary, or they may just be more snake oil. Take with pinch of NaCl onlee.

Nandu · Post by **Nandu** » 16 Feb 2010 20:35

China orders retreat from risky assets

China has ordered managers of its vast currency reserves to withdraw from risky dollar assets and retreat to core debt guaranteed by the US government, a clear sign that Beijing is battening down the hatches for fresh trouble on global markets.

svinayak · Post by **svinayak** » 16 Feb 2010 23:36

Protect Yourself from the Giant NewDeficit -How to Keep the Scary U.S. Debt From Eating Up Your Assets

http://online.wsj.com/article/SB2000142 ... 94120.html