Perspectives on the global economic meltdown- (Nov 28 2010)

devesh · Post by **devesh** » 23 Aug 2012 05:40

Theo,

nothing against the general argument you are making, but the graph above is a very poor evidence of "debt reduction" in the non-govt sector. I carefully looked at the bars of all the categories, they've either gone up (in case of federal debt) or stayed the same. there simply is no meaningful or significant enough reduction in non-govt sector debt to back up your argument.

edit: on a further note, I took another look and the graph doesn't make much sense. the "Federal Govt" bar is around 4-5 Trillion as per the graph. and the Business sector is huge. I don't think I got the colors wrong. the Business sector is highlighted, as per the legend, with the darker shade of blue...

Theo_Fidel · Post by **Theo_Fidel** » 23 Aug 2012 06:38

Its not that difficult. Take a look at the federal reserves latest data.

http://www.federalreserve.gov/releases/ ... ent/z1.pdf

Household : -1.5%
Mortgage : -2.3%
Corporate : +4.5% (after 3 years of zero to -ive)
State/local g: -1.9%
Dom fin : -3.2%
GOTUS : +11.4%

Many of these sectors have been negative for 2008,2009,2010,2011 and are still -ive in 2012.

When you consider the economy is growing at 1.5-2% the decline WRT to GDP % is quite substantial.

svinayak · Post by **svinayak** » 23 Aug 2012 07:17

http://www.theatlantic.com/business/arc ... picks=true

Bye-Bye, Boomers: This Is the Age of the Baby Bust-ers
By Derek Thompson
inShare.0Aug 22 2012, 11:41 AM ET 94

Demographics are economics.
One way to think about the Great Recession is like a great pause button.

In normal times, millions of people get married in their mid-to-late 20s. They spend lots of money on a wedding. They buy a car, often with a loan. They buy a house, always with a loan. They buy new furniture and appliances. With their time and money coupled, expenses that were once extraneous now feel reasonable. Maybe he was individually satisfied with sports bars and she with Netflix, but as a couple, it makes more sense to watch live sports and TV shows on their new couch, and so they buy cable. They have a kid, or more than a few. You know how the story goes.

DELAY, DELAY, DELAY

Before the Great Recession, young people were already saving many of these activities for later in their lives. The share of young adults (18-29) who were married fell from 59% to 20% between 1960 and 2010. These couples bought houses later, too. "A decline in the incidence of marriage mechanically lowers home ownership," Martin Gervais and Jonas D.M. Fisher wrote in their paper "Why Has Home Ownership Fallen Among the Young?"

In the last few years, young people have even more reason to delay the costly trappings of adulthood. Pinned between rising student debt behind them and scant job opportunities before them, 34% moved back home for a period of time. With access to their parents' garage, they needed (and could afford) fewer cars of their own. Young people now account for a smaller share of total auto purchases than they did just a few years ago.

It all leads to babies. Or, more specifically, not babies. In February this year, a Pew survey found that more than one-in-five young adults between 18 and 34 have delayed having a kid because of the economy -- roughly the same proportion that postponed marriage. "Americans have had fewer babies each year since 2008, Bloomberg News reported yesterday. "Births [fell] to a 12-year low in 2011," leading to the smallest population gain since World War II.

For a couple, pushing the pause button on weddings, houses, cars, and children is utterly sensible. (Look at the economy, after all.) But for the economy, itself, it's disastrous. Household formation multiplies consumer spending. Cars and houses determine recoveries: These two industries accounted for 30% of the 1980s recovery and barely 10% of this one.

Babies aren't often lumped into the same category as autos and homes, but as a driver of spending, they're nearly as important. The annual cost of having a child in the northeast with a household income between $70,000 and $100,000 is about $17,000 a year, according to the U.S. government. That makes the typical child and the median monthly mortgage payments basically the same.

krisna · Post by **krisna** » 30 Aug 2012 07:37

portugal shows how the outside world is turning upside down

The free movement of workers inside Europe certainly helps, but that’s not all that’s going on. There’s also the fact that the economy is under severe pressure. Portugal has the lowest GDP per capita in Western Europe, and the sovereign debt crisis has been kicking the nation in its soft parts for a long time now.

potuguese workers finding work -- like turd world country.

shyam · Post by **shyam** » 30 Aug 2012 08:57

TIFWIW

Whispers on Wall Street: Major Financial House Is Going to Implode… Could It Be Morgan Stanley?

Jim Willie: Morgan Stanley Faces IMMINENT FAILURE & RUIN, May See 1st Private Stock Account Thefts

Singha · Post by **Singha** » 30 Aug 2012 10:25

some nations like portugal and greece are lucky enough to be in vicinity of rich, peaceful and high tech nations with both lots of investible surplus and lots of tourists.
same goes for what china was vs taiwan/SK/Japan.

India got the short straw of short straws in being stuck with a bunch of basket cases except SL. and to help matters SL also went suicidal.

shyam · Post by **shyam** » 30 Aug 2012 11:14

Major Corporations Are Adjusting For The 'Pauperization Of Europe'

The British–Dutch consumer products company, third largest in the world, was adjusting its commercial strategy to this new reality, he said, by redeploying to Europe what worked in poor countries of the developing world.
....

“If Spaniards are down to spending on average €17 per shopping trip, I can’t sell him detergent for half of his budget,” Zijderveld explained. “In Indonesia we sell individual packages of shampoo for 2 to 3 cents and still earn a fair amount.”
....

By looking at Europe, particularly Southern Europe, as a market with the characteristics of developing countries, Unilever has transitioned from seeing the debt crisis as a temporary event to seeing it as a trend to which it had to adjust its strategies. So now in Spain, it sells its “Surf” detergent in packages that are good for five loads. In Greece, it sells mashed potatoes and mayonnaise in small packages. And in Great Britain (!), it’s implementing the same strategy. Because people are running out of money. And it’s been successful. Since they started this in 2011, sales have stopped falling; and in the first half of the year, they edged up 1.1%. But higher input prices have exerted pressures on margins and profits.
...

In Europe, governments and banks are like “a couple of drunks standing on the street corner holding each other up,” said Doug Casey, chairman of Casey Research. It’s “highly regulated, highly taxed, and much more socially unstable,” and it’s going to be “the epicenter of the coming storm.”

Singha · Post by **Singha** » 30 Aug 2012 11:35

vishvak · Post by **vishvak** » 30 Aug 2012 18:23

A queue of 'regions' in Spain for bailouts, though Spain itself may be in queue for international bailout
Spain's regions line up for central government bailout

Much of the €18bn (£14.2bn) on offer will end up on Spain's eastern Mediterranean coast, with Catalonia, Valencia and Murcia at the front of the queue.
..
several other regions may follow suit, with Castilla La Mancha – which posted the worst regional deficit
..
Regions that take bailout money but fail to meet a strict central government deficit target of 1.5% this year can have their finances taken over by the so-called "men in black" – finance ministry officials from Madrid.
..

First world financial discipline from Spain, the country that was once the biggest colonial power, what to do. There is not much mentioned of the regions past the front of bailout queue though! Men in black - from finance ministry of Spain, will do their job as per bailouts perhaps and per numbers to balance the books.

However the recession is deepening (link) while deposits are moving away.(link).

ramana · Post by **ramana** » 30 Aug 2012 21:05

In US already over last three years the packages are shrinking bu price is what it was before the crash.

Desi stores in California have caught on and sell dal etc in 4 lb packets instead of 5 lbs for same price!

Paul · Post by **Paul** » 31 Aug 2012 18:50

Most of the Toor dal sold in CA comes from east Africa.

Singha · Post by **Singha** » 31 Aug 2012 23:05

spain was a economic failure even when looting gold, silver and tin from the New World hand over fist.
its just that all that gold & loot kept them up for a while, and the presence of successful economies nearby like italy and france...euro biraderi and all that.
fundamentally they are not as high end a economy as these other two.

Theo_Fidel · Post by **Theo_Fidel** » 01 Sep 2012 01:15

It was actually the other way around. Spain was industrializing nicely and developing a skilled middle class when suddenly they struck Gold. Over the next century that easy gold triggered runaway inflation and destroyed the incentive for society to save and invest while at the same time creating a fabulously wealth, primitive and narcissistic predatory elite.

Spain was the first KSA, with easy money propagating its particularly vicious brand of colonial Christ warriors. Europe barely survived. South/Central America did not.

sanjaykumar · Post by **sanjaykumar** » 01 Sep 2012 21:38

The Dutch disease is partial to no one-Britain certainly, as predicted by Churchil, turned into a third rate power with the loss of resourses and the easy, enforced markets of India.

India got the short straw of short straws in being stuck with a bunch of basket cases except SL. and to help matters SL also went suicidal.

I am not sure about this anymore. It may, much as I hate to admit this, be cultural. The culture of East Asia is practical and mercantile to the extent of being mercenary. (My Korean girlfriend knows the price of everything).

vishvak · Post by **vishvak** » 01 Sep 2012 23:51

Looks like uk crushed Spain in race to imperial plunder (Summary) and then France too. (Imperial Spain)

pentaiah · Post by **pentaiah** » 02 Sep 2012 06:48

yes ramana ji
When I first came to US all Desi stores had 5 pound packages of all dals etc
Now all of them are 4 pounds and priced higher, the Diwali sale etc is also hog wash these days.

using 1 Pound as .450 gms the 5 pound bags were roughly 2.25 Kg
Now its just 4 pounds just 1.8 Kgs.

once upon a time in Sabzi mandis of AP
Big Hundred meant 132
Small Hundred meant 108
those days are gone now
100 means 98 if you are not watchful

****
Talking of Spain read the Book Ascent of Money By Nial Ferguson

How Spain squandered it all ( also not my constant refrain about wars and taxes is intertwined in the fate of nations)

you can watch here as well

http://www.pbs.org/wnet/ascentofmoney/f ... ubbles/44/

shyam · Post by **shyam** » 02 Sep 2012 07:49

One more evidence of how Wall Street offloads stock losses on the public

Public pension funds stung by Facebook's falling stock

Singha · Post by **Singha** » 02 Sep 2012 10:54

on top of that it seems goat and sheep herding in spain devastated the interior of spain leading to the loss of precious topsoil and eventually desertification...those sergio leone westerns shot in spanish desert ... that desert happened in the middle ages.

the pakis too are well on their way to converting their precious arable land into arid desert with mismanagement at many levels....perhaps that will align them more closely with their desertified overlords.

in India, parts of TN are pretty poor territory as well....the stretch from chennai to mamallapuram looks bone dry and hard to take anything off the soil

shyam · Post by **shyam** » 02 Sep 2012 12:31

In the first ~5 minutes of the video, Dan Collin argues that US GDP is not what it is reported to be. Rest of the video about PRC is also worth watching.

svinayak · Post by **svinayak** » 02 Sep 2012 20:45

There was a suspicion about this GDP numbers.

the GDP number in 2000 was $12T for US and EU had $13T.

The GDP number now for US is still around $14T and some of the article even show $16T

Is US GDP has shown only around 20%growth in the last 12 years how is that China is showing 10% consistant growth in the last 10 years every year.

kmkraoind · Post by **kmkraoind** » 04 Sep 2012 11:45

^^ Greece is not leaving Euro, because.
1. Just before US elections, the power lobbies in US does not want an economic crisis to alter voting patterns.
2. China with its trillion$ reserves may end by buying strategic assets and companies, making a gateway in EU, just to increase their leveraging for greater market access, which in turn undermines western companies.

So expecting an economic collapse or crisis due to Greece or any EU nation is a remote possibility.

pentaiah · Post by **pentaiah** » 04 Sep 2012 13:13

kmkraoind wrote:^^ Greece is not leaving Euro, because.
1. Just before US elections, the power lobbies in US does not want an economic crisis to alter voting patterns.
2. China with its trillion$ reserves may end by buying strategic assets and companies, making a gateway in EU, just to increase their leveraging for greater market access, which in turn undermines western companies.

So expecting an economic collapse or crisis due to Greece or any EU nation is a remote possibility.

1) True not before election only in Jan 2013 probably after inauguration

2) China will not out right bailout EU it will make US bail out by funding US to do so only to an extent

3) China will invest its Dollars before they devalue in Africa and build assets there and a consumer base. Its actually happening as we speak. Import minerals commodities and develop exports

4) Oil prices will aggressively go down a Ombaba or Minty Romney both want OIL exploration in US and Off shore actually BP again is drilling as we speak and in addition shale oil

sp KSA Iran Russia watch out of course Hugo Chavis as well

Paul · Post by **Paul** » 04 Sep 2012 18:53

Gold prices may also take a dip as a brief lull to enable the powers that be to exit from wall st and start looking into these precious metals.

pentaiah · Post by **pentaiah** » 05 Sep 2012 00:18

Paul wrote:Gold prices may also take a dip as a brief lull to enable the powers that be to exit from wall st and start looking into these precious metals.

On the contrary Gold will go up till US economy picks up

If Euro goes al
All currency adjustments have to be made based on base line value of gold holdings SDRs and dollar reserves

One can not understand how Euro to USD is at constant $1,26 to $1.29

It shows unkil is also smart currency manipulator

RamaY · Post by **RamaY** » 05 Sep 2012 02:26

Thinking loud...

My source* too told me that there is a run on Greece banks last year, perhaps ~7% of their GDP in 2011-12 alone. Assuming that the trend continues (what about swiss banks with all the around-the-world demands to name the names?) this will affect only certain EU zones.

This doesn't mean the money is disappearing. The money moves to safer places, most probably within the western-lands. There is no need for China to step in, unless it wants to buy Greek (nowadays its other name is toxic) assets. And there always is the sovereign default clause and China can do ziltch if and when Greeks decided to show their you know what to China, if it buys their assets...

If we look at this whole thing from say 32,000 ft (we better not get any close to this toxic continent), then any reasonably valuable and profit making company/entity in Greece can still generate funds from their European financial institutions, albeit at higher interests (and that will be part of their operational expenses - like in india @13-15%)

The only issue is with the funds the Greek govt need to raise to support their governance expenditure. We all know what happens when the state becomes bankrupt. If Greece were to be located physically next to some of the EU powers then the centrifugal forces would make some of the pieces accessible to others. But this cannot happen given the geography and neighbors of Greece.

So Greece will become a 2nd rung EU nation, until it will be blessed by the fleeing muslim immigrants from surrounding regions. Lets see how it pans..

China
W.r.t China, I honestly think the $1+T reserves are over rated. Let us look at some numbers...
1. China Trade numbers
2. Nominal GDP by country

* China's trade balance in 2010 is said to be ~$183B. In that year the US/EU combined GDP is ~$32T. So the annual China trade balance amounts to be a mere o.5% of US/EU GDP. I seriously doubt if China can help EU/US in any significant way, other than buying hing brand-value and strategic companies, that too after approval from concerned govts.

* China;s trade balance amounts to hardly 2.5% of its own GDP. I leave it to readers to decide how much of it is required to ensure that China's 10% GDP growth rate drama to be continued.

*google leading to Paki sources

Virupaksha · Post by **Virupaksha** » 05 Sep 2012 02:50

Ramay garu,

You are looking at them combined. Look at them piece meal. Can that kind of money buy influence in say Greece/ Spain. Hell yeah. Also usually even those failed spectacularly can garner 60-80% resources internally. Additional moolah is required only to cross the "hump".

You are looking at chanakya's chapati and thinking it needs to be eaten whole.

ramana · Post by **ramana** » 05 Sep 2012 03:36

PRC cant do anything if Spain or Greece defaults with their money. So they wont invest there.

Virupaksha · Post by **Virupaksha** » 05 Sep 2012 04:01

ramana wrote:PRC cant do anything if Spain or Greece defaults with their money. So they wont invest there.

An old saying: When there is blood on street, thats the time to buy land.

pentaiah · Post by **pentaiah** » 05 Sep 2012 04:44

Virupaksha wrote:
ramana wrote:PRC cant do anything if Spain or Greece defaults with their money. So they wont invest there.
An old saying: When there is blood on street, thats the time to buy land.

Normally true, but PRC is smart enough to make its money flow through Uncle, after all they are dollars and US will always be capitalistic and yes instead of nationalization of assets it freezes assets which amounts to the same but in a polished way.
So the risk/threat to investment thru US is far less than directly into EU PIGIS ( Portugal Ireland Greece Italy Spain)

By funneling through US USD PRC ensures there is defacto collateral, (aka small time Credit derivative

)

EU nations are like PRC they can nationalize in a jiffy

Hari Seldon · Post by **Hari Seldon** » 05 Sep 2012 08:44

RT interview video of one Richard Duncan

Interesting, to put it mildly.

hanumadu · Post by **hanumadu** » 05 Sep 2012 11:50

pandyan wrote:My secret sources* tell me that US Banks are conducting exercises on greece exiting euro zone.

What is going with Euro and Greece? Based on various assessments I have heard, it will devastate Greek economy and give huge blow to euro countries. Scenario heard is Greeks will start withdrawing all their deposits creating a huge liquidity crisis for the big banks.

* = ya-hoo

So why would Greece exit euro if it will devastate its economy? YVReddy in an interview to moneycontrol told that in his meetings with the powers that be, they told him that they will save the euro. But till the elections in EU are over, there will only be band aids to fix the economy. He said any permanent fix will only be after 2012. Are any more EU countries going to the elections between now and end of the year?

kmkraoind · Post by **kmkraoind** » 05 Sep 2012 18:25

ECB Plan Said to Pledge Unlimited, Sterilized Bond-Buying - Bloomberg

Under the blueprint, which may be called “Monetary Outright Transactions,” the ECB would refrain from setting a public cap on yields, according to the people, and a third official, who spoke on condition of anonymity. The plan will only focus on government bonds rather than a broader range of assets and will target short-dated maturities of up to about three years, two of the people said.

It means instead of quoting fanciful Trillion numbers, they will do it in spreadful fashion. IMO, there may be 10-20% ups and downs in stock market, but it will not be allowed towards a major catastrophe.

The biggest question, when will this end, the answer is till that time Chinese trillions are exhausted or China is balkanised or till that time China is a pariah nation (due to Indo-China sea hostilities).

At best the treatment can be described as palliative, not a curative.

Regarding gold, it will be in 1600-1900 range, so that there will be no panic. I will be not surprised if Western countries manipulate Chinese people to create a chaos so that they will trust more on yellow metal than PRC for their savings.

pentaiah · Post by **pentaiah** » 06 Sep 2012 03:15

Gold will soar to 2500 by 2014

ramana · Post by **ramana** » 06 Sep 2012 05:58

So can you recall the ten(?) step process that was posted earlier?

Christopher Sidor · Post by **Christopher Sidor** » 06 Sep 2012 20:50

The ECB president has declared his intention to buy unlimited sovereign bonds, which will be known as OMT, Outright Monetary Transactions i.e. a variant of QE and bond buying programs of Bank of England.

Technical features of Outright Monetary Transactions

Salient points are

Unlimited amount of Bonds will be bought
Shorter maturity bonds will be bought. So expect the ECB to buy anything less than 3 years.
Only the bonds of the country which adheres to the strict conditions of ESM/EFSF will be bought.
The bonds purchase will be sterilized. i.e. ECB will drain an equivalent quantity of euros from circulation.

This is more like an enducement for financially troubled countries to undertake the tough conditions imposed by ESM/EFSF. This is extremely short of what Draghi said a few moons ago, "What it takes" and "It will be enough". It appears that there has been some compromise in what was sought to be targeted and what certain Euro countries were willing to permit the ECB to undertake.

Christopher Sidor · Post by **Christopher Sidor** » 06 Sep 2012 21:08

^^^
Continuing from above the below is the link
Draghi's opening comment at press conference

Some notable points

Hence, under appropriate conditions, [with OMT]we will have a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability in the euro area. Let me repeat what I said last month: we act strictly within our mandate to maintain price stability over the medium term

In order to restore confidence, policy-makers in the euro area need to push ahead with great determination with fiscal consolidation, structural reforms to enhance competitiveness and European institution-building.
....
....
The soundness of banks’ balance sheets will be a key factor in facilitating both an appropriate provision of credit to the economy and the normalisation of all funding channels.

So basically Draghi is saying that ECB will assist in ESM/EFSF in their task by carrying out OMT. The OMT press release does not say whether it will run parallel to efforts of ESM/EFSF or there will be a lag before ECB kicks in. And pay attention to what the president of ECB had to say to those who seek help from ESM/EFSF, follow through the tough austerity measures and fiscal consolidation. Also Draghi is alluding to zombie banks.

Also in his remarks he said

Growth in Q1 in Euro zone was 0%. In Q2 there was a contraction of 0.2%
The Sept-2012 forecast of ECB for Euro-Zone, not Europe, is to have a real GDP growth in a range between - 0.6% and -0.2% for 2012 . Again emphasis that these figures are for Euro-Zone and the growth figures are not for nominal growth but real growth.
Real Growth for 2013 will be between -0.4% and 1.4% again for Euro-Zone and not for Europe as a whole.
Inflation Targeting of 2% or below for the Euro-Zone in medium term.
Inflation for 2012 in Euro-Zone might be higher than 2%. The inflation forecast for Euro-Zone is 2.4% and 2.6% for 2012 and between 1.3% and 2.5% for 2013. Note again this is for Euro-Zone and not for Europe as a whole.
The annual growth rate of M3 increased to 3.8% in July 2012, up from 3.2% in June

ramana · Post by **ramana** » 07 Sep 2012 00:21

So this means that all the money since 2008 just evaporated like water being thrown on a raging fire. No wonder there is low inflation right now.

pentaiah · Post by **pentaiah** » 07 Sep 2012 06:42

Ramana ji asset deflation has taken care of the most of the money that evaporated

svinayak · Post by **svinayak** » 07 Sep 2012 10:41

This news was in almost every newspaper in this country. Ron Paul got his HR Res through that just a week ago allowed for the first audit of the Federal Reserve in its over 90 yr history AMONG the things they found out THUS FAR is the reason for the collapse and bailouts of '08 is because we had to pay China in excess of $15 billion dollars (or the Fed did) bc during that housing crisis, China bought a mega load of US failing mortgages. The bailout crap was the story we were to be fed instead.

svinayak · Post by **svinayak** » 07 Sep 2012 10:54

http://www.youtube.com/watch?v=8943PPVd-_s

The U.S. Dollar to Collapse just like the Euro:
http://www.swissamerica.com/tracker.php ... v-InflatBk

In today's video, Christopher Greene illustrates why the U.S. Dollar will ultimately lose up to 90% of its value and
http://www.greenewave.com/