World economy talk

[tidus1203]

The bailout is a BAD IDEA that the stupid pols are trying to implement. First of all having economic contraction (aka recession) is not a BAD THING. In fact the recession is the CURE. Its painful (people losing jobs, businesses closing), but recession are there to fix the imbalances in the economy. The imbalance being people are in too much debt, spending too much money, living a lifestyle which they can't support. If we have the recession then people will go back to saving and stop the spending which the economy really needs. But stupid pols don't want to take the pain (at least in the duration of their terms) so they try to prop up these banks and automakers which are BAD BUSINESSES to begin with. Bad businesses should fail even at the cost of jobs because they just suck out good resources, the resources should be directed to GOOD BUSINESSES, businesses that have good model and is making money. These BAD BUSINESSES should go bankrupt and let the bankruptcy courts arranged how their assets be liquidated. Maybe someone will buy them up (at bankruptcy prices of course ) and have a good management and a labor expense that is manageable (so no more health benefits) to their business environment and start over again and build a healthier company.

[uls]

i'm not an economist too hehe

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The free fall cannot be stopped.

The boom years were fuelled by massive borrowing and spending.

Consumers spent without brakes

Coz consumers felt rich... the market value of their houses kept on rising, stock prices kept on rising

On paper, people's wealth kept on increasing... everyone was getting richer coz their assets kept increasing in value...

What do u do when u feel rich? You spend more diba?

And you borrow more coz u think u can pay naman e

And banks are very willing to lend.

NOW, the reverse is happening.

House prices crashed, Stock prices crashed.

Wealth is wiped out. This year alone, trillions of dollars of wealth has been wiped out.

Now people feel poor. They cut back on spending.

Banks have tightened lending.

Companies are stuck with high inventory and low sales... so they have to lay off workers.

Companies are failing.

All the US govt can do slow down the freefall.

But it cannot stop it.

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business is slow here too

kaya lagi nasa internet

hehe

[emanzano]

tidus, uls: thanks for sharing your enlightening thoughts. they are much appreciated.

I do agree with most of your points and analysis, especially on letting bad businesses run their course. The only way for them to survive long-term is to become competitive, and bailing them out is like putting band-aid on cancer. They will ultimately die anyways ('they' referring to GM and other uncompetitive businesses). But however, i do have a hard time accepting that bailing out the banks is a bad idea.

Though i'm not an economist, per se, i've interned in a UK private equity back in '00, so i'd like to think that i understand enough. On the non-technical side of things, i've gathered that corporate bankers are considered more 'prestigious', but the real money is really in the retail side, i.e., Consumer Banking, business from the regular joes. Most of those who were duped into buying these various mortgage-backed securities and other derivatives are Mutual Funds where the pool of money comes from the average american. So the way i see it, the US govt is bailing out the big banks so that they can honor their commitments to these mutual funds and their other customers. Pretending that i'm the US govt, i could probably live with GM filing bankruptcy after a century of existence. But i couldnt live with myself if i let the regular joes lose their life savings on the greediness of their portfolio manager. Hence, i bail out the banks.

Anyways, even with the bailout, i'm sure people now have cut down on their excessive spending and are living within their means.

Just wanted to say... it's so refreshing to find a thread like this, and in a CAR FORUM! It's almost as interesting as ****.

[tidus1203]

I am not an economist po just to make it clear. I am just your average investor who has some capital who wants some good returns on his money.

In the case of the banks, not all are bad banks. Some banks are still strong like JP Morgan so even in the banking space I am against bailouts. If there were no bailouts, the competents (like JP Morgan) can get the assets of the incompetents (AIG, Lehman etc...) at bargain basement bankruptcy prices and increase their market share which they deserve. But NO, the government wants the incompetents to continue fighting for market share with the competents who did a better job. And just like Frankenstien, these zombie banks need juice after they burned through their initial juice (aka bailout money). Bottomline for me, Bad business should fail and let the good businesses take over the bad businesses and thus increase the market share of the good business.

[uls]

It's almost as interesting as ****.

haha

i'm glad this thread is on the same level as ****



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I find the AIG bailout most interesting.

A number of large US and UK financial firms are counterparties of AIG in credit derivatives bets.

AIG insured more than $400B worth of bonds.

If AIG was allowed to fail, those large US and UK financial firms will have to suffer huge writedowns. (on top of the previous writedowns)

The US govt couldnt allow AIG to fail.

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A number UK banks got into trouble around same time AIG got into trouble.

the reason...

A number of UK banks had assets backed by AIG. (the value of their assets were higher than they were supposed to be due to AIG's triple A backing)

When AIG started to crumble, the value of the assets fell.

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What a mess

When AIG asks for more money, the US govt can't say no

The $85B bailout is now $150B

all because of AIG's obligations to counterparties

[tidus1203]

And in absence of free markets, all I can really say is read the thread title. And advise you to do it.

[Monseratto]

Beside the Korean plants, kasama din ata GM Opel's plants sa Europe...Will this affect the locally imported Chevy Captiva?

GM's Korean Unit Will Idle Car Plants Next Month, Union Says

Nov. 12 (Bloomberg) -- GM Daewoo Auto & Technology Co., General Motors Corp.'s South Korean unit, plans to idle factories next month as the global credit freeze cuts vehicle demand worldwide, according to the carmaker's union.

``Because of falling exports, we're discussing the schedule for factory suspensions,'' Kim Yun Bog, a spokesman for GM Daewoo's labor union said by phone today in Incheon, where the carmaker is based. ``Operations will likely be suspended from 10 days to about a month around the end of December.''

The suspension of Korean factories, the first since GM acquired bankrupt Daewoo Motor Co. in 2002, comes as the largest U.S. automaker is seeking government emergency aid. GM Daewoo, which makes about 20 percent of vehicles sold by GM worldwide, may stop building Tosca midsize sedans and Winstorm sport- utility vehicles for about a month while production of smaller cars may be halted for about 10 days, the union spokesman said.

http://www.bloomberg.com/apps/news?p...d=anJRrrXbOjCA

[Gen. Miting]

recession is good in a sense that the high prices we are experiencing today will only be temporary. even the price of burgers here in the Philippines is in danger of bubble burst, P100 na isa, burger lang yan

[tidus1203]

Errr... recessions supposedly lowers prices (not raise prices) because recessions slow down the economy, slow down consumer spending and thus lowering demand and ultimately the prices.

[Monseratto]

Is TARP working or not?

Paulson backs off asset plan; crisis cures at risk

NEW YORK (Reuters) – The U.S. Treasury backed away from using a $700 billion bailout fund to cleanse bank balance sheets of bad mortgage debt, while Europe reported more gloomy economic news, fanning fears of a worldwide recession.

Paulson's announcement added to worries stoked by dismal employment data from Britain and a World Bank warning Tuesday that global trade may contract in 2009.

The combination of tight credit conditions and a global downturn has set off what economists say has become the worst financial and economic crisis in 80 years and left investors bracing for more interest rate cuts.

Instead of buying up the banks' toxic debts, as first proposed by the rescue deal, the bail-out fund will continue to be used to buy shares in the lenders to help boost their balance sheets.

However, Mr Paulson added that the Treasury Department and the Federal Reserve would continue to monitor whether bad-debt purchases could "play a useful role" in the future.

Mr Paulson's comments did little to ease continuing investor jitters, and Wall Street's main Dow Jones index ended Wednesday trading in New York down 4.7%.

However, many analysts said he was right to backtrack on the plan to buy up the bad debts, saying it was difficult to see it being workable, and that simply buying up more banking stock was more straightforward.

"The best bet is just to give them [the banks] the capital and to let them absorb the losses anyway," said Rudy Narvas, senior analyst at 4Cast.

"That is exactly what it looks like is happening."

[number001]

If one were to divest out of US dollars, are the other currencies any better? For example, when the US dollar began its depreciation four years ago, I knew some people who started shifting their portfolio to Australian dollars. But now, I think the Aus dollar lost 35% or so of its value or something.

[Monseratto]

Forced convergence of China and US

But here's what some may see as ironic, even - in a dark way - slightly amusing.

The fundamental cause of America's woes (and ours too) is that its consumers, businesses and government all borrowed too much in the good years, especially from China.

China's semi-nationalised, heavily state-controlled economy generated huge financial surpluses through its massive trade in manufactured goods with America. And those financial surpluses were recycled back to America in the form of loans, so that US consumers and businesses could buy even more from China's factories and workshops.

These massive trade and financial imbalances were unsustainable - and are now being brought closer to equilibrium in a painful way.

Because US financial institutions both borrowed and lent too much, and because many other mighty companies took on far too much debt, they have been facing collapse. And where they are perceived as too big too fail (where the collateral damage were they to fall over would be devastating), the US government is stepping in with financial succour from taxpayers.

For years the great trend in the world was the embracement of free enterprise in China.

But now, in America's darkest hour for generations, the US is embracing a form of state-control and intervention that looks remarkably Chinese.

http://www.bbc.co.uk/blogs/thereport..._china_an.html

[tidus1203]

If one were to divest out of US dollars, are the other currencies any better? For example, when the US dollar began its depreciation four years ago, I knew some people who started shifting their portfolio to Australian dollars. But now, I think the Aus dollar lost 35% or so of its value or something.

When we say get out of the USD its not specifically to go to another paper currency. Its a general thought, maybe you could go buy land or hard assets like gold. The USD as an asset class is flawed and using the USD as a store of value is suicide.

[uls]

The USD is strong now coz the global economy is in deep sh*t.

in times of fear, people look for stability.

The US, eventhough its economy is a freaking mess, is still the world's most stable country. (having the world's reserve currency and most powerful military)

Kaya safe haven ang USD... for now.

But futher into the future, the USD will lose its status. So will the US.

The US has abused the USD.

Having the world's reserve currency allowed the US to run huge trade deficits.

It takes goods from producing countries and doesnt give goods in return.

The US just gives them paper.

The US pays them dollars, borrows back those dollars and gives them debt paper (T bills).

Wouldnt you feel screwed with that kind of transaction?

China feels screwed.

The US is really good at producing one thing -- paper money.

It knows its paper will be accepted by everyone...

USA yan e. it's the branding. Number 1 country on planet Earth. Largest economy in the world.

Well, the world is realizing the US has been screwing everyone.

Wala lang choice ang mundo coz the USD is the world's reserve currency.

But later on, after this crisis, the world will dump the USD.

[emanzano]

Forced convergence of China and US

But here's what some may see as ironic, even - in a dark way - slightly amusing.

The fundamental cause of America's woes (and ours too) is that its consumers, businesses and government all borrowed too much in the good years, especially from China.

China's semi-nationalised, heavily state-controlled economy generated huge financial surpluses through its massive trade in manufactured goods with America. And those financial surpluses were recycled back to America in the form of loans, so that US consumers and businesses could buy even more from China's factories and workshops.

These massive trade and financial imbalances were unsustainable - and are now being brought closer to equilibrium in a painful way.

Because US financial institutions both borrowed and lent too much, and because many other mighty companies took on far too much debt, they have been facing collapse. And where they are perceived as too big too fail (where the collateral damage were they to fall over would be devastating), the US government is stepping in with financial succour from taxpayers.

For years the great trend in the world was the embracement of free enterprise in China.

But now, in America's darkest hour for generations, the US is embracing a form of state-control and intervention that looks remarkably Chinese.

definitely as interesting as ****...

[uls]

Chart ****

hehe




Citigroup stock price hits single digit territory

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GE Capital gets FDIC debt guarantee

On November 12, 2008, the Federal Deposit Insurance Corporation (the “FDIC”) approved the application of General Electric Capital Corporation (“GE Capital”) for designation as an eligible entity under the FDIC’s Temporary Liquidity Guarantee Program (“debt guarantee program”). Under the FDIC’s interim rules for the debt guarantee program, issued on October 23, 2008, eligible entities include affiliates of FDIC-insured depository institutions subject to application to the FDIC. GE Money Bank (a Federal Savings Bank) and GE Capital Financial, Inc. (a Utah Industrial Bank) are subsidiary-insured depository institutions of GE Capital.

everybody gets a bailout

hehe

[uls]

Bank writedowns approaching ONE TRILLION DOLLARS

The financial sector’s total losses from the credit crisis are approaching $1,000bn after recent market turmoil triggered a further drop in the value of mortgage-backed securities and other debt securities. Writedowns by Fannie Mae and AIG have lifted total losses reported by financial institutions since the start of 2007 to $918bn, according to Bloomberg data.

While the mounting writedowns show that financial institutions are trying to tackle their problems, they also suggest that losses have deepened as a result of turmoil that followed the collapse of Lehman Brothers in September.

IMF revises estimate

Last month the IMF raised its estimate of likely total losses in the financial sector to $1,400bn, from $945bn in April. Banking analysts are predicting further pain in Q4 results, which are expected to have suffered from further falls in the price of many of the residential and commercial mortgage-backed securities they hold on their balance sheets.

In July this year, global investment manager Bridgewater Associates estimated writedowns will reach $1.6T.

Back in July, that was shocking.

Not anymore.

hehe

$700B bailout fund NOT ENOUGH

[tidus1203]

Basta ito lang masasabi ko. The US housing market is around $6 trillion worth maybe even more.

[Monseratto]

Peter Schiff -Origins and Consequences





Asia will rule!!!

[tidus1203]

Mukhang may fan club na tayo ni Peter Schiff ah