Perspectives on the global economic meltdown (Jan 26 2010)

Neshant · Post by **Neshant** » 22 Sep 2010 12:36

US never had 20,000 tons ever. The world's central banks have about 35,000 tons in total.

Currently US claims to have about 8000 tons which is the largest tockpile of any central bank includuing the IMF. But since those reserves are not openly audited, who knows what they have.

India's private hoard of gold however dwarfs that amount.

Neshant · Post by **Neshant** » 22 Sep 2010 12:56

Things are getting rough out there.

An old guy at my workplace got the boot recently. I suspect they booted him because of his age. Reward for years of loyal service.

---------------

For the Unemployed Over 50, Fears of Never Working Again

http://finance.yahoo.com/focus-retireme ... -container

Ambar · Post by **Ambar** » 22 Sep 2010 14:12

Neshant, the 50+ crowd are usually the first ones to go either voluntarily or involuntarily because of the stress they put on healthcare costs. Many of them volunteer to leave the company as their years of service entitles them to hefty payouts. The worst hit are not those who work for big firms with benefits,plans etc but those who work for small businesses. Once they are let go,with little or no savings and no service based payout plans,these guys are condemned to work long hours driving cabs or packing groceries..

Hari Seldon · Post by **Hari Seldon** » 22 Sep 2010 16:13

^^Retirements all over the rich world are in shambles. Folks are quite simply living longer than the systems were designed for.

I expect there to be, at some point, some sort of healthcare rationing etc to happen as costs skyrocket in the terminal year or two. How will this be managed, what compromises will be hammered, how the whole thing will be spun, packaged (securitized??) and sold, who will get thrown under the bus etc remain to be seen.

This process in functioning democracies is all-important. Holds portends and precedents for us in India a generation or 2 down the line.

Hard to say who will hit the water first though - the anglo-saxon countries, the oiro ones or Japan.

I'd say buy stock in emerging world hospital chains who provide relatively low-cost care. Already the NHS has started what may soon become a flood. Watch this space.

Hari Seldon · Post by **Hari Seldon** » 22 Sep 2010 20:57

Martin wolf in FT on PRC's economy

Must read, IMHO. Particularly the summing up of sri Mike Pettis' views. Nicely articulated a complex set of ideas into simple, understandable morsels.

SwamyG · Post by **SwamyG** » 22 Sep 2010 21:15

Hari Seldon wrote: oh, swamygal, try reading this subsequent post from Mish in full. Esp Janet Tavakoli's response.

The days when elitist BS could be swept under the carpet and into the memory hole are passing. Good. Where are the pitchforks?

The moment Munger said "there comes a place where if you just start bailing out all the individuals instead of telling them to adapt, the culture dies.”; I lost interest

Where are the pitchforks? Well it is in the South India history thread

SwamyG · Post by **SwamyG** » 22 Sep 2010 21:27

Ambar wrote:Once they are let go,with little or no savings and no service based payout plans,these guys are condemned to work long hours driving cabs or packing groceries..

Hari Garu wrote:^^Retirements all over the rich world are in shambles. Folks are quite simply living longer than the systems were designed for.

Humans, if only we did not have real human beings, how good the economic machine will run. Societies have to answer what it is going to do with elders. With increased life expectancy, the elders have to be cared for. The options are the following:
1) Elders take care of themselves.
2) Somebody else takes care of the Elders.

#1 can be done in the following ways:
1) They continue to work till they die {like what people did thousands of years ago when they hunted and gathered}
2) Or, they have enough savings to last their life time. {with the rampant consumerism that hinges upon waves upon waves of mindless spending without paying heed to the rainy day, savings are meager}

#2 has the following components
1) Family takes care of them. {it means the family members should have good savings or keep working}
2) Society takes care of them. {ie. the government steps in with various programs, call the program whatever we want, but the government will have to provide for them}

Be it self, family or government; all three need money. If there is not enough money, then the lifestyle should change to reflect the reduce money. As Munger would say the society better suck it up and adapt. Either way the culture will change.

Neshant · Post by **Neshant** » 23 Sep 2010 07:08

Looking up the biography of munger, he never really worked a real job in his life (previous job being a lawyer). Its a waste of time listening to such jokers.

If he had to survive out in the real economy today and his wealth was taken away from him, he'd be dead.

Too many banking & financing morons running around and not enough steve wozniaks and bill gates.

Neshant · Post by **Neshant** » 23 Sep 2010 07:28

Ron Paul on the bogus Consumer Financial Protection Bureau being setup to fool the public
http://www.youtube.com/watch?v=7RIi0o4jxL0

What I find silly is the Consumer Financial Protection Bureau is being put under the federal reserve.

Now what possible consumer protection will it conduct if its under the control of a private banking cartel who's revenues come from scamming consumers.

Hari Seldon · Post by **Hari Seldon** » 23 Sep 2010 07:31

^^^IIRC, ROn Paul has actually supported the move in the only way in which it matters - by his vote in Congress.

Neshant · Post by **Neshant** » 23 Sep 2010 07:36

Ron Paul may run for 2012 presidency
http://www.youtube.com/watch?v=O5spJqCGTAE

Neshant · Post by **Neshant** » 23 Sep 2010 07:39

Hari Seldon wrote:^^^IIRC, ROn Paul has actually supported the move in the only way in which it matters - by his vote in Congress.

His vote was No on H.R. 3126 (Consumer Financial Protection Bill). Though its not for reasons of not wanting the consumer protected. Its for reasons of opposing a bogus agency setup under the federal reserve to fool the public into thinking there is an independant agency protecting their interest.

Its like Madoff setting up an SEC.

Carl_T · Post by **Carl_T** » 23 Sep 2010 08:15

Neshant wrote:Ron Paul may run for 2012 presidency

The audacity of hope indeed.

Ambar · Post by **Ambar** » 23 Sep 2010 09:19

Carl_T wrote:
Neshant wrote:Ron Paul may run for 2012 presidency
The audacity of hope indeed.

Indeed. He turns 77 in 2012, a bit too old to be the president of the world's lone superpower IMHO.Besides, Ron Paul has gained a lot of popularity among 20-40 conservative 'internet savvy' crowd. If the current recession subsides by 2012,so will his popularity,not to mention many among the GOP voters consider him an extreme rightwinger who will probably end up doing more harm to GOP than good. His son Rand Paul comes across as a pretentious,style-less teabagger.

shyam · Post by **shyam** » 23 Sep 2010 09:29

TIFWIW

Sanjay M · Post by **Sanjay M** » 23 Sep 2010 10:16

Nah, look at how McCain ran at the age of 72. Ron Paul is only a few years older.
Reagan retired at 77, and Ron Paul today is much more articulate than Reagan ever was.
Even as a one-term president, Ron Paul could do much.

Carl_T · Post by **Carl_T** » 23 Sep 2010 10:38

If Ron Paul is a candidate then Obama may as well walk straight into the white house. Paul is someone who has a lot of support among conservative libertarians but will never translate that into support from the broader american public.

His opposition to abortion, isolationism, opposition to backing Israel, his absurd opposition to fiat money and the Fed put him so far out of the mainstream he will never gain support among the moderates. That and he simply does not have that charisma needed to win in the US.

Pulikeshi · Post by **Pulikeshi** » 23 Sep 2010 11:36

abhishek_sharma wrote:Why Is Paul Krugman Blaming Foreigners for the Financial Crisis?
BY RAGHURAM G. RAJAN

http://www.foreignpolicy.com/articles/2 ... ial_crisis

Carl_T wrote:Good post, looks like Raghu Rajan is Chicago School to the core.

As always Rajan is spot on

His book Saving Capitalism from the Capitalists should be a must read for everyone who posts on this thread

Here are couple of other interesting interviews:

Rational Irrationality

Predicting the Financial Crisis: A Q&A

India's 'fault lines'

Hari Seldon · Post by **Hari Seldon** » 23 Sep 2010 14:46

Carl_T wrote:If Ron Paul is a candidate then Obama may as well walk straight into the white house. Paul is someone who has a lot of support among conservative libertarians but will never translate that into support from the broader american public.

There are people who run - like sri obama - and then there are those who influence positions, events and things just by threatening to run - like sri Ron Paul.

By presenting the extreme view on one end of the spectrum and going by the increasing traction it seems to be getting inch by inch among the internet opinionati (only in the economic sphere, mind you, not in his other social causes), he is de facto pulling other, more 'viable' candidates ever so slightly towards his position only. IMVVHO, of course.

nandakumar · Post by **nandakumar** » 23 Sep 2010 15:03

An interesting article on the Greek economy in a website devoted to discussing the world and how nations govern themselves.
The key point the author makes is that Greeks have organised themselves around small businesses and small nuclear family structures for everything. In the author's opinion the institutional arrangements that Greece has chosen hinders capital accumulation in large volumes so essential for development of large industries, investments in research and technology etc. The decisions of higher education are also not dictated by signals emanating from the job market but influenced more by family situations. The similarity with India perhaps lies (other than corruption, of course) in the predominant role that small businesses and self-employed enterpreuners play in the over all economy. The link here below
http://www.opendemocracy.net/aristos-do ... portunists

Neshant · Post by **Neshant** » 23 Sep 2010 15:53

RP is the only candidate out there who can stand up and talk economics & sense in a debate and hold his own. Almost no other candidate can do that. Either they are reading a teleprompter with someone else having filled them in on what to say or they are totally clueless on economic issues.

What I like about RP is that his words & ideas are his own and not coming from a third party. He's widely regarded as incorruptable even among his opponents.

Finally he's single handedly put the federal reserve on the defensive exposing their sole purpose of transferring losses of a private banking cartel onto the backs of the public. The only response they have to his attempts at freedom of information is demanding ever more secrecy to spend the peoples' money. All efforts are going into lobbying corrupt politicians to prevent any legislation that reveals what's going on behind the curtains lest skeletons start falling out of the cupboard.

If RP does not become president and shut down the federal reserve & fiat money racket, he sure as heck started the movement which will.

SwamyG · Post by **SwamyG** » 23 Sep 2010 18:27

Libertarian, like Buddhism, is all nice and dandy on the text books; and is good for minuscule states.

Now can we get back to regular programming instead of the speculations on American politics?

Hari Seldon · Post by **Hari Seldon** » 23 Sep 2010 18:32

^^swamygal, it ain't called the 'political economy' for nothing.

Discussing political positions of massive economic import is one thing, getting caught up in partisan one-upmanship is quite another.

SwamyG · Post by **SwamyG** » 23 Sep 2010 20:40

^^^
I agree economics is intertwined with politics; it is good to discuss the evils of capitalism, socialism, libertarianism and the merits of dharmic-economic model (i gotta plug in dharmam, no); but we have nice thread going on for centuries. If introduce American elections, then it is time to get the lungis into a knot & post IBFTL

Hari Seldon · Post by **Hari Seldon** » 23 Sep 2010 21:13

An email from Janety Tavakoli (again!) on Mish's site
Worthwhile read, IMHO. Lays bare the extent of the fraud that was going on. Heck, managed to shock even moi glazed self only.

Bankers have an enormous, unjustified, sense of entitlement. These people work for failed institutions, yet they feel they are entitled to bonuses that far exceed those of bankers and investment bankers of one or two decades ago.

Note that Berkshire Hathaway owns a big chunk of Wells Fargo, which bought Wachovia, which in turn bought Golden West, the very seat of a lot of fraudulent lending.

Of course, we bailed out Wells Fargo and relaxed accounting rules, so no one knows the true size of the hole in that balance sheet. Charles Munger's remarks are all the more bizarre in this context.

Here in Illinois, people were lied to and deceived with phony docs. Among many other frauds, people would show up at a closing for a fixed rate loan and be presented with docs for an option ARM. All sorts of variations occurred.

Lisa Madigan, the Illinois Attorney General was first to file the suit against Countrywide, and beat California by minutes. Countrywide settled for $8+ billion on the combined suits, but that was way too low. Madigan publicly stated: "Borrowers didn't break the law; Countrywide broke the law."

Of course, some borrowers committed fraud, overreached, or got in over their heads, and there are certainly cases of irresponsibility. However, the reality of the mortgage lending market is that it was rife with fraud by mortgage lenders--from even before the first huge Ameriquest fraud.

Wow. You'd think exposing this VS would merit all the pulitzers in the world put together, no?
No.

I was on CNBC a few months ago and Kudlow, Santelli, and others shouted me down when I brought up predatory lending. Columbia Journalism Review and others took CNBC to task. Widespread predatory lending is well documented. This isn't a matter of opinion, it's a matter of fact.

You'd think Munger had been living under a rock. Yet, he hasn't been, and I believe he knows better. Buffett knows better, too. Unfortunately, instead of using their positions to tell the truth, they are using their positions to propagate what Elizabeth Warren calls "the myth of the amoral debtor."

I'm no bleeding heart; I'm all about the cash flows.

Investment banks knew the cash flows from these loans wouldn't be there, but they went ahead anyway. Thus, they are responsible for widespread securities fraud. To keep it going, they created more complex securitizations and got more people involved to cover up the mounting losses that were coming down the pike. This was all known and knowable in advance.

I didn't "forsee" anything. I have no psychic ability. I'm not prescient. I am, however, an analyst, and I know my stuff. So did they. It was fraud.

So, just what sort of "civilization" is Munger trying to preserve?

Warren Buffett has made statements that he doesn't see the purpose of going after people. That's ridiculous.

I am in complete agreement with William K. Black that thorough investigations are long overdue. The crimes aren't in doubt, but one has to go through the arduous task of collecting evidence even though delays have made the trail cold. That was deliberate.

Best,

Janet

Wow. You go girl!

Carl_T · Post by **Carl_T** » 23 Sep 2010 21:14

Libertarianism as a philosophy has its merits, but some of it is extreme, as economies do need some degree of regulation to protect citizens from externalities and address asymmetric information in markets. Government should not be involved in making business decisions where profit making private businesses are able to operate.

Thankfully things like fiat money and Federal reserve will not go away regardless of how much RP

.

Neshant · Post by **Neshant** » 23 Sep 2010 21:57

Two prior federal reserves existed in the US and both of those bit the dust.

The fate of the present third federal reserve will be no different. Its already apparent that the only way this private banking cartel can exist is by promoting secrecy and backroom dealing with politicians to prevent the public from knowing where their money is going.

Their only supporters are banking & financing crooks who benefit from the scam since no real work is required to earn a paycheck. Plus they get to offload their gambling losses on suckers.

The sad reality however is that the final push to shut it down won`t come until they wreck the real economy.

ramana · Post by **ramana** » 23 Sep 2010 22:37

Meanwhile Bloomberg reports:
Commercial property losses mount

paramu · Post by **paramu** » 23 Sep 2010 22:40

Carl_T wrote:Government should not be involved in making business decisions where profit making private businesses are able to operate.

Well said... And when those private businesses make loss, Govt. should interfere and bail them out.

ramana · Post by **ramana** » 23 Sep 2010 22:52

A friend of mine who lost his home said Chase bought WAMU for $0.10 on the dollar - i.e his loan of $750K was bought for $75K. Yet Chase won't loan mod him citing the fall in appraisal. So he went for foreclosure. He said whats amoral about that when banks are resorting to usury. The bank wants the full loan amount ie 10 times its investment.

The big mistake in 2008 was when Treasury forced the banks to be bought they should have put a clause to refinance the mortgages. Another was that the home owner should have the right of first refusal for the second loans when they were charged off at 5 to 10 cents/ dollar. That way they might be able to payoff the 2nd. Its the second loans that are casusing the underwater issue.

This bailout process was a way to allow the banks and investors to go after the home owners and reap profits. They use Fed bailout money to buy the loans at a discount and go after the home owners at full value. And jokers like Buffet who bleated for bailout have the guts to talk about amoral debtor! How about usurious bankers and scavanger/vulture investors?

The situation is not like earlier recessions. In 2008 both Wall street and Main street had tanked along with countryside. No jobs, no 401ks, no homes.

Anyway he is happy now and looks forward to life without lawn movers and banks. They won't give him a loan for atleast 7 years by which time he won't be here anymore.

SwamyG · Post by **SwamyG** » 23 Sep 2010 23:17

Carl: Welcome back to this thread....now can you answer this question please?

SwamyG wrote:
Carl_T wrote:The US should just engage in where its competitive advantage lies. So not propping up manufacturing or auto industries, but IMO rather focus on educating and retraining workers laid off.
To do what? I have heard this innovation, re-training ityadi several times on the radio, tv and internet. But there has been no convincing specificity.

Carl_T · Post by **Carl_T** » 23 Sep 2010 23:25

Sure. That is for the workers to decide.

SwamyG · Post by **SwamyG** » 23 Sep 2010 23:28

^^^
A great reply. I think I will x-post it in the collection of good posts thread.

Carl_T · Post by **Carl_T** » 23 Sep 2010 23:29

No problem, glad to satisfy your curiosity.

paramu · Post by **paramu** » 23 Sep 2010 23:41

Financial parrots!

svinayak · Post by **svinayak** » 24 Sep 2010 01:42

ramana wrote:A friend of mine who lost his home said Chase bought WAMU for $0.10 on the dollar - i.e his loan of $750K was bought for $75K. Yet Chase won't loan mod him citing the fall in appraisal. So he went for foreclosure. He said whats amoral about that when banks are resorting to usury. The bank wants the full loan amount ie 10 times its investment.

The big mistake in 2008 was when Treasury forced the banks to be bought they should have put a clause to refinance the mortgages. Another was that the home owner should have the right of first refusal for the second loans when they were charged off at 5 to 10 cents/ dollar. That way they might be able to payoff the 2nd. Its the second loans that are casusing the underwater issue.

This bailout process was a way to allow the banks and investors to go after the home owners and reap profits. They use Fed bailout money to buy the loans at a discount and go after the home owners at full value. And jokers like Buffet who bleated for bailout have the guts to talk about amoral debtor! How about usurious bankers and scavanger/vulture investors?

The situation is not like earlier recessions. In 2008 both Wall street and Main street had tanked along with countryside. No jobs, no 401ks, no homes.

Anyway he is happy now and looks forward to life without lawn movers and banks. They won't give him a loan for atleast 7 years by which time he won't be here anymore.

There is a vietnamese guy in the local area who is going to each bank with cash and negotiating with the bank and buying their prpoerties for 10-20% OF THEIR VALUE in cash. He spends 10k in fixing it and then sells it twice the amount

paramu · Post by **paramu** » 24 Sep 2010 02:07

Census Bureau Poverty Rate Drastically Undercounts Severity of Poverty in America
In their most recent survey, this number exploded to a mind-shattering 77 percent. Yes, 77 percent of Americans are now living paycheck to paycheck. This means in our nation of 310 million citizens, 239 million Americans are one setback away from economic ruin.

SwamyG · Post by **SwamyG** » 24 Sep 2010 02:50

^^^^
The below article offers a (counter) interesting perspective on the poverty. As usual watch the comments. The comments for this article are counter to the article. There seems to be a disconnect between the commentators and the experts.

http://www.csmonitor.com/Business/new-e ... an-in-1960

SwamyG · Post by **SwamyG** » 24 Sep 2010 02:58

Guru log:
The disconnect between aam admi versus the experts (academics, analysts & other experts) if continue to grow would be devastating. My first question to you folks: Do you perceive that aam admi and experts are not on the same page? Are the experts not able to fully comprehend what the common people are facing?

I work in the IT area, and being a desi immigrant my circle is filled with what I call the upper middle class and desi folks. Living in a suburb I see all the soccer, baseball and football practices going on well. Nobody is complaining. Traffic signals are working, roads are repaired, schools run, teachers teach, no shortage of food, entertainment etc etc.

So who is suffering?

ramana · Post by **ramana** » 24 Sep 2010 03:01

So who is suffering?

Its those folks in areas where the real estate has collapsed due to loss of mfg jobs: California, Florida, Arizona etc.