2008 Economic Debacle Let’s start with the fact that the median US income last year was $50,233 dollars. Now lets add to the fact that the plan of Treasury Secretary Henry Paulson's $700 billion dollar to stabilize the banking system, that every man, woman and child in the U.S. would be owing more than $37,000 each.
This puts the situation in simple context.
Let’s put it another way, approximately 73% of the median income will be needed for this plan. It is beyond obvious that we are going to be paying this off for a long time, and quite obviously our grandchildren.
Henry Paulson’s plan may push the national debt to the highest level since 1954 and possibly causing a diminished demand from foreigners for U.S. bonds as well as potentially other assets. Why would foreigners still be attracted to U.S. assets? How about a worse question will US investors still be attracted to US assets?
Again it seems pretty clear that this $700 billion dollar plan can cause a jump in interest rates prompted by the glut of additional Treasuries needed to finance the plan. Needless to say the dollar has been weakening against the euro and many other currencies.
How can this be a good way to get out of our current economic debacle!
Let’s put it yet another way, Paulson’s plan could drive the debt above 70 percent of gross domestic product and the annual budget gap to an all-time high, possibly exceeding $1 trillion next year. The US is not the only one in this party, just look at several other developed nations have debt levels far higher than that of the U.S such as Japan at 196 percent of GDP and Italy at 104 percent of GDP. Can you imagine if we ran our personal businesses this way…or ran our households in this manner?
The irony is that Paulson said it is ``Difficult to determine'' what the ultimate cost of the plan would be, though he said the objective is to minimize the cost to taxpayers.
Supposedly the money for the Paulson plan will go to buy assets at prices that are depressed. It is unknown what prices the Treasury would pay for them.
Is it possible that these assets could increase in value when the credit crisis ends??
Can the Fed make money doing this? Will the taxpayer ultimately profit?
Your guess is as good as mine- but a point in history was the bailout of Chrysler Corp the taxpayer did profit
Andrew Abraham
My Investors Place
www.myinvestorsplace.com
Tuesday, February 17, 2009
Economic crisis will affect telecommunications sector
The economic crisis is inevitably affecting the global telecommunications sector. Continuous strain in the credit market has a big effect on investments and the reduction in consumption is changing the adoption and acceptance of new services.
During these difficult times, companies will need to implement an open and shared innovation model to stay afloat.
“The telecommunications sector will likely be hit by the recession in two main ways,” says Frost & Sullivan ICT analyst Saverio Romeo. “First, due to the lack of credit in the global economy, investments will fall in the beginning of 2009. Investments related to costly projects such as acquisitions, will feel this drop intensely. Second, consumption will fall as people move away from wants and focus on their needs. This will reduce the uptake of innovative services.”
Service providers are already trimming down their operations. Since November 2008, Vodafone and Telecom Italia announced mid-term cost reductions of £1billion and €2billion respectively. BT and Virgin Media have both announced job cuts, the former relieving 10,000 employees, while the latter reduced its workforce by 2,200.
“Optimisation of organisational resources and processes as well as promoting business innovation will be key success factors in this environment,” Romeo observes. “This means being able to design lower cost and disruptive business models as an effective way to attract consumers. Disruptive business models here refer to combining existing technologies with new business models to create low cost products and services (i.e. the combination of mobile content with forms of marketing and advertising).”
This will require partnering with players of different expertise. This type of collaboration can reduce costs, advance the quality of service, and offer more attractive packages to the customer.
An example of optimising resources in a positive way is mobile network management sharing. The innovation process, as it is opened to different players, could prove to be the lynchpin to surviving the crisis.
Encouragingly for the industry, many national governments and super-national organisations have come to view the telecommunications sector as a critical means to overcome the crisis. For example, the European Economic Recovery Plan places a huge amount of importance on broadband infrastructure, ICT services and sustainable telecommunications.
Even the European Union has committed to an immediate investment of €200bn to implement ‘public-friendly’ legislation. From 2009-2010, the EU plans to invest €1bn for the development of “high-speed Internet for all” with the aim of achieving 100% broadband coverage across the EU by the end of 2010.
These types of actions, from a governmental perspective prove not only the importance of telecommunications to the economy, but also help protect this sector from drastic decline.
Yet even with this support, major mobile network operators have declared processes of strategic and operational adjustments in order to face the tough economy in 2009. Of the plethora of rescue plans presented, two trends stood out.
One clear strategy is to pull the purse strings tight through cutting costs, reducing investments, monitoring consumption through pricing and reigning in cash flows. Supporters of this strategy hope to minimise the short term damages of the recession. The other major trend is to identify and act upon the need to use this time to build opportunities out of the recession.
“Frost & Sullivan believes that innovation should remain at the core of economic and industrial policies,” says Romeo “We also believe that the same networks that are spreading the crisis can also be the ones to promote innovation in a collaborative and open manner, stimulating economic growth.”
During these difficult times, companies will need to implement an open and shared innovation model to stay afloat.
“The telecommunications sector will likely be hit by the recession in two main ways,” says Frost & Sullivan ICT analyst Saverio Romeo. “First, due to the lack of credit in the global economy, investments will fall in the beginning of 2009. Investments related to costly projects such as acquisitions, will feel this drop intensely. Second, consumption will fall as people move away from wants and focus on their needs. This will reduce the uptake of innovative services.”
Service providers are already trimming down their operations. Since November 2008, Vodafone and Telecom Italia announced mid-term cost reductions of £1billion and €2billion respectively. BT and Virgin Media have both announced job cuts, the former relieving 10,000 employees, while the latter reduced its workforce by 2,200.
“Optimisation of organisational resources and processes as well as promoting business innovation will be key success factors in this environment,” Romeo observes. “This means being able to design lower cost and disruptive business models as an effective way to attract consumers. Disruptive business models here refer to combining existing technologies with new business models to create low cost products and services (i.e. the combination of mobile content with forms of marketing and advertising).”
This will require partnering with players of different expertise. This type of collaboration can reduce costs, advance the quality of service, and offer more attractive packages to the customer.
An example of optimising resources in a positive way is mobile network management sharing. The innovation process, as it is opened to different players, could prove to be the lynchpin to surviving the crisis.
Encouragingly for the industry, many national governments and super-national organisations have come to view the telecommunications sector as a critical means to overcome the crisis. For example, the European Economic Recovery Plan places a huge amount of importance on broadband infrastructure, ICT services and sustainable telecommunications.
Even the European Union has committed to an immediate investment of €200bn to implement ‘public-friendly’ legislation. From 2009-2010, the EU plans to invest €1bn for the development of “high-speed Internet for all” with the aim of achieving 100% broadband coverage across the EU by the end of 2010.
These types of actions, from a governmental perspective prove not only the importance of telecommunications to the economy, but also help protect this sector from drastic decline.
Yet even with this support, major mobile network operators have declared processes of strategic and operational adjustments in order to face the tough economy in 2009. Of the plethora of rescue plans presented, two trends stood out.
One clear strategy is to pull the purse strings tight through cutting costs, reducing investments, monitoring consumption through pricing and reigning in cash flows. Supporters of this strategy hope to minimise the short term damages of the recession. The other major trend is to identify and act upon the need to use this time to build opportunities out of the recession.
“Frost & Sullivan believes that innovation should remain at the core of economic and industrial policies,” says Romeo “We also believe that the same networks that are spreading the crisis can also be the ones to promote innovation in a collaborative and open manner, stimulating economic growth.”
Economic crisis could provide opportunities for ICT businesses
NEW YORK: The global financial crisis could provide entrepreneurial opportunities for
budding information and communication technology (ICT)
businesses which, in turn,
can power economic recovery, a new United Nations report says.
The report highlights some harsh realities for the industry and explains how it can position itself for recovery in the future.
"Despite difficult times, there are reasons to be optimistic," said Hamadoun Touré, Secretary-General of the UN International Telecommunication Union.
Speaking at the Mobile World Congress in Barcelona, Touré said that innovation is the key to recovery, stressing that "having contributed consistently as a high-growth sector in its own right, ICTs can now power economic recovery across all sectors.
"Along with stimulus packages put together by Governments, the ICT industry must continue to invest in infrastructure and the roll out of cost-effective services, such as next- generation networks (NGNs)."
The report "Confronting the Crisis: Its Impact on the ICT Industry" notes that although credit is now more difficult to come by and more expensive, with financing costs on average 3 to 4 per cent higher year-on-year, savvy businesses can take advantage of the economic turmoil to reposition their services for the upturn.
Funding is still available for firms with sound business models, established demand and early projected cash flows, the report says. But it stressed that alternative sources of financing are now needed, with a growing role for government and economic stimulus packages.
Responding to the financial pressure facing the private sector, some Governments have stepped in to diminish the impact on the transition to NGNs, which can carry voice, data and media services simultaneously.
Several administrations have also announced commitments to invest in their national infrastructure, while others, such as the European Union, have included the roll-out of broadband networks in their economic stimulus packages.
The report highlighted the soaring growth in the mobile telephone business in developing countries, especially in large emerging markets, including Brazil, India and Nigeria, which registered record additional subscribers in September and October 2008, as an example of opportunity for growth.
budding information and communication technology (ICT)
businesses which, in turn,
can power economic recovery, a new United Nations report says.
The report highlights some harsh realities for the industry and explains how it can position itself for recovery in the future.
"Despite difficult times, there are reasons to be optimistic," said Hamadoun Touré, Secretary-General of the UN International Telecommunication Union.
Speaking at the Mobile World Congress in Barcelona, Touré said that innovation is the key to recovery, stressing that "having contributed consistently as a high-growth sector in its own right, ICTs can now power economic recovery across all sectors.
"Along with stimulus packages put together by Governments, the ICT industry must continue to invest in infrastructure and the roll out of cost-effective services, such as next- generation networks (NGNs)."
The report "Confronting the Crisis: Its Impact on the ICT Industry" notes that although credit is now more difficult to come by and more expensive, with financing costs on average 3 to 4 per cent higher year-on-year, savvy businesses can take advantage of the economic turmoil to reposition their services for the upturn.
Funding is still available for firms with sound business models, established demand and early projected cash flows, the report says. But it stressed that alternative sources of financing are now needed, with a growing role for government and economic stimulus packages.
Responding to the financial pressure facing the private sector, some Governments have stepped in to diminish the impact on the transition to NGNs, which can carry voice, data and media services simultaneously.
Several administrations have also announced commitments to invest in their national infrastructure, while others, such as the European Union, have included the roll-out of broadband networks in their economic stimulus packages.
The report highlighted the soaring growth in the mobile telephone business in developing countries, especially in large emerging markets, including Brazil, India and Nigeria, which registered record additional subscribers in September and October 2008, as an example of opportunity for growth.
Thursday, January 22, 2009
THE ECONOMIC TIMES
The current financial turmoil is rooted to the sub prime crisis. During boom years, mortgage brokers enticed by the lure of big commissions, talked buyers with poor credit into accepting housing mortgages with little or no down payment and without credit checks.
Banks and financial institutions often repackaged these debts with other high-risk debts and sold them to world-wide investors creating financial instruments called CDOs or collateralised debt obligations. The serious sub prime mortgage crisis began in June of 2007 when two Bear Stearns hedge funds collapsed.
Federal Reserve Bank and European Central Bank dumped $100-billion in liquidity into the system that calmed the market down for a short period. However the sub prime crisis continued to be solid as long as the housing market continued to escalate and interest rates didn’t go up.
BOUNCED CHEQUES
Lehman Brothers Lehman’s slow collapse began as the mortgage market crisis unfolded during the summer of 2007. Its stock began a steady fall from a peak of $82 a share. The fears were based on the fact that the firm was a major player in the market for sub prime and prime mortgages.
Lehman managed to avoid the fate of Bear Stearns, the other of Wall Street’s small fries, which was bought by JP Morgan Chase at a bargain basement price under the threat of bankruptcy.
Lehman and Bear Stearns had a number of similarities. Both had relatively small balance sheets, they were heavily dependent on the mortgage market, and they relied heavily on the “repo” or repurchase market, most often used as a short-term financing tool.
On June 9, 2008, Lehman announced a second-quarter loss of $2.8 billion, far higher than analysts had expected. The situation became worse after the government on announced on September 8 a take-over of Fannie Mae and Freddie Mac. Lehman’s stock plunged as the markets wondered whether the move to save those mortgage giants made it less likely that Lehman might be bailed out.
Treasury Secretary Henry M. Paulson Jr. and Federal Reserve officials did encourage other financial institutions to buy Lehman, but by the end of the weekend the two main suitors, Barclay’s and Bank of American, had both said no. Lehman had reached the end of the line.
AIG Investment banking is an intrinsically cyclical business, but Wall Street’s greedy-and-aggressive top management forgot about that as they chased profits and bonuses during a stretch in which money was always easy to obtain.
AIG shouldn’t have had problems as it’s primarily an insurance company. However, when you look at AIG’s balance sheet, it has also made a speciality of speculative trading in derivatives. That was an attractive business for many years but like other businesses has recently run into trouble, it also followed suit.
Merrill Lynch Shortly after Lehman Brothers filed for bankruptcy, Merrill Lynch complained of suffering from a similar disease, and before the effects could become devastating, it cut a deal with the Bank of America for $50b, far below its value.
IMPACT IN INDIA
IT Cos: With nearly half of their revenues coming from banking and financial services segments, India’s top software exporters are closely monitoring the financial crisis spreading across markets.
The IT giants which had all these investment banks as their clients are TCS, Wipro, Satyam and Infosys Technologies. HCL seems to have escaped the loss as neither Lehman nor ML were their clients.
Banks: The government is worried the ongoing crisis would have an adverse impact on Indian banks. Lehman Brothers and Merrill Lynch had invested substantially in the stocks of Indian banks. The banks, in turn, have invested in derivatives, which might have exposure to these investment bankers.
PSU banks like Bank of India, Bank of Baroda have exposure towards derivatives. ICICI bank is the worst hit as of now. With Lehman Brothers filing for bankruptcy in the US, the country’s largest private bank ICICI Bank is expected to lose approximately $80 million (Rs 375 cr), invested in Lehman’s bonds through the bank’s UK subsidiary. The meltdown is also expected to hit Axis bank but the impact is not clear yet.
Real estate: Lehman Brothers Real Estate Partners had given Rs 740 crore to Unitech Ltd, for its mixed-use development project in Santa Cruz. Lehman had also signed a MoU with Peninsula Land Ltd-a Ashok Piramal real estate company-to fund the latter’s projects to the tune of Rs 576 crore. Another major real estate organisation whose valuations are affected by this meltdown is DLF Assets in which it had invested $200 million.
Bailout Package
The White House gave a package of over $500 bn which came as a lifeline to sinking equity markets around the world. US President George W Bush said the administration’s new rescue plan to revive the credit markets and restore market liquidity will ease pressure on the balance sheets of banks and other financial institutions. He said that America’s economy was facing unprecedented challenges, and they were responding with unprecedented action.
Meanwhile in India, finance minister P Chidambaram assured that PSU banks had virtually no exposure to Lehman Brothers. Although the credit crunch globally will impact credit availability in the Indian market, there is no cause for any alarm that any Indian bank is vulnerable, the FM said.
Banks and financial institutions often repackaged these debts with other high-risk debts and sold them to world-wide investors creating financial instruments called CDOs or collateralised debt obligations. The serious sub prime mortgage crisis began in June of 2007 when two Bear Stearns hedge funds collapsed.
Federal Reserve Bank and European Central Bank dumped $100-billion in liquidity into the system that calmed the market down for a short period. However the sub prime crisis continued to be solid as long as the housing market continued to escalate and interest rates didn’t go up.
BOUNCED CHEQUES
Lehman Brothers Lehman’s slow collapse began as the mortgage market crisis unfolded during the summer of 2007. Its stock began a steady fall from a peak of $82 a share. The fears were based on the fact that the firm was a major player in the market for sub prime and prime mortgages.
Lehman managed to avoid the fate of Bear Stearns, the other of Wall Street’s small fries, which was bought by JP Morgan Chase at a bargain basement price under the threat of bankruptcy.
Lehman and Bear Stearns had a number of similarities. Both had relatively small balance sheets, they were heavily dependent on the mortgage market, and they relied heavily on the “repo” or repurchase market, most often used as a short-term financing tool.
On June 9, 2008, Lehman announced a second-quarter loss of $2.8 billion, far higher than analysts had expected. The situation became worse after the government on announced on September 8 a take-over of Fannie Mae and Freddie Mac. Lehman’s stock plunged as the markets wondered whether the move to save those mortgage giants made it less likely that Lehman might be bailed out.
Treasury Secretary Henry M. Paulson Jr. and Federal Reserve officials did encourage other financial institutions to buy Lehman, but by the end of the weekend the two main suitors, Barclay’s and Bank of American, had both said no. Lehman had reached the end of the line.
AIG Investment banking is an intrinsically cyclical business, but Wall Street’s greedy-and-aggressive top management forgot about that as they chased profits and bonuses during a stretch in which money was always easy to obtain.
AIG shouldn’t have had problems as it’s primarily an insurance company. However, when you look at AIG’s balance sheet, it has also made a speciality of speculative trading in derivatives. That was an attractive business for many years but like other businesses has recently run into trouble, it also followed suit.
Merrill Lynch Shortly after Lehman Brothers filed for bankruptcy, Merrill Lynch complained of suffering from a similar disease, and before the effects could become devastating, it cut a deal with the Bank of America for $50b, far below its value.
IMPACT IN INDIA
IT Cos: With nearly half of their revenues coming from banking and financial services segments, India’s top software exporters are closely monitoring the financial crisis spreading across markets.
The IT giants which had all these investment banks as their clients are TCS, Wipro, Satyam and Infosys Technologies. HCL seems to have escaped the loss as neither Lehman nor ML were their clients.
Banks: The government is worried the ongoing crisis would have an adverse impact on Indian banks. Lehman Brothers and Merrill Lynch had invested substantially in the stocks of Indian banks. The banks, in turn, have invested in derivatives, which might have exposure to these investment bankers.
PSU banks like Bank of India, Bank of Baroda have exposure towards derivatives. ICICI bank is the worst hit as of now. With Lehman Brothers filing for bankruptcy in the US, the country’s largest private bank ICICI Bank is expected to lose approximately $80 million (Rs 375 cr), invested in Lehman’s bonds through the bank’s UK subsidiary. The meltdown is also expected to hit Axis bank but the impact is not clear yet.
Real estate: Lehman Brothers Real Estate Partners had given Rs 740 crore to Unitech Ltd, for its mixed-use development project in Santa Cruz. Lehman had also signed a MoU with Peninsula Land Ltd-a Ashok Piramal real estate company-to fund the latter’s projects to the tune of Rs 576 crore. Another major real estate organisation whose valuations are affected by this meltdown is DLF Assets in which it had invested $200 million.
Bailout Package
The White House gave a package of over $500 bn which came as a lifeline to sinking equity markets around the world. US President George W Bush said the administration’s new rescue plan to revive the credit markets and restore market liquidity will ease pressure on the balance sheets of banks and other financial institutions. He said that America’s economy was facing unprecedented challenges, and they were responding with unprecedented action.
Meanwhile in India, finance minister P Chidambaram assured that PSU banks had virtually no exposure to Lehman Brothers. Although the credit crunch globally will impact credit availability in the Indian market, there is no cause for any alarm that any Indian bank is vulnerable, the FM said.
Wednesday, January 7, 2009
What Caused The Financial Crisis Of 2008?
I think we can sum up the cause of our current economic crisis in one word — GREED. Over the years, mortgage lenders were happy to lend money to people who couldn’t afford their mortgages. But they did it anyway because there was nothing to lose. These lenders were able to charge higher interest rates and make more money on sub-prime loans. If the borrowers default, they simply seized the house and put it back on the market. On top of that, they were able to pass the risk off to mortgage insurer or package these mortgages as mortgage-backed securities. Easy money!
My Greedy Real Estate Agent
My own experience with these greedy lenders and real estate agents happened about two years ago. My wife and I were thinking about upgrading our home to something slightly bigger, and in a better neighborhood. As we go through the process, we resolved not to do it because it would double our monthly mortgage payment and add another 20 years to our mortgage term.
When I told the real estate agent I couldn’t afford the monthly payment, he said I could go for a 40 years mortgage with 5% down payment, and apply for more than what I needed so that I’ll have an emergency fund. Basically, he advised me to decimate my cash flow and savings so that I can pay mortgage into my 70s. And while I am at it, I should pay private mortgage insurance (PMI) for a couple of years. Now, that’s irresponsible and greedy.
The sad thing about the scenario above is that I am certain there are borrowers who didn’t know any better and went along with a similar plan.
What Went Wrong With Our Financial System?
The whole thing was one big scheme. Everything was great when houses were selling like hot cakes and their values go up every month. Lenders made it easier to borrow money, and the higher demand drove up house values. Higher house values means that lenders could lend out even bigger mortgages, and it also gave lenders some protection against foreclosures. All of this translates into more money for the lenders, insurers, and investors.
Unfortunately, many borrowers got slammed when their adjustable mortgage finally adjusted. When too many of them couldn’t afford to make their payments, it causes these lenders to suffer from liquidity issue and to sit on more foreclosures than they could sell. Mortgage-backed securities became more risky and worth less causing investment firms like Lehman Brothers to suffer. Moreover, insurers like AIG who insured these bad mortgages also got in trouble.
The scheme worked well, but it reverses course and is now coming back to hurt everyone with a vengeance.
The Bailout And Who Should Pay
I don’t like the idea of government bailout, because the government is using my money to help out greedy bankers. Unfortunately, it may be the only option we have right now, but I hope these greedy lenders won’t get away scot-free. Somebody made a lot of money leading up to this crisis and they should pay for it — at least the government should make them.
In my opinion, the government should force conversion of bad mortgages into 30 years fixed rate mortgages. The interest rate on these converted mortgages could be higher than normal. This way it’s more affordable to more borrowers resulting in a lower default rate. Yes the lenders will make less money, but in my opinion, they already made too much. By the way, the borrowers aren’t completely innocent either, that’s why they should pay a little more as well.
My Greedy Real Estate Agent
My own experience with these greedy lenders and real estate agents happened about two years ago. My wife and I were thinking about upgrading our home to something slightly bigger, and in a better neighborhood. As we go through the process, we resolved not to do it because it would double our monthly mortgage payment and add another 20 years to our mortgage term.
When I told the real estate agent I couldn’t afford the monthly payment, he said I could go for a 40 years mortgage with 5% down payment, and apply for more than what I needed so that I’ll have an emergency fund. Basically, he advised me to decimate my cash flow and savings so that I can pay mortgage into my 70s. And while I am at it, I should pay private mortgage insurance (PMI) for a couple of years. Now, that’s irresponsible and greedy.
The sad thing about the scenario above is that I am certain there are borrowers who didn’t know any better and went along with a similar plan.
What Went Wrong With Our Financial System?
The whole thing was one big scheme. Everything was great when houses were selling like hot cakes and their values go up every month. Lenders made it easier to borrow money, and the higher demand drove up house values. Higher house values means that lenders could lend out even bigger mortgages, and it also gave lenders some protection against foreclosures. All of this translates into more money for the lenders, insurers, and investors.
Unfortunately, many borrowers got slammed when their adjustable mortgage finally adjusted. When too many of them couldn’t afford to make their payments, it causes these lenders to suffer from liquidity issue and to sit on more foreclosures than they could sell. Mortgage-backed securities became more risky and worth less causing investment firms like Lehman Brothers to suffer. Moreover, insurers like AIG who insured these bad mortgages also got in trouble.
The scheme worked well, but it reverses course and is now coming back to hurt everyone with a vengeance.
The Bailout And Who Should Pay
I don’t like the idea of government bailout, because the government is using my money to help out greedy bankers. Unfortunately, it may be the only option we have right now, but I hope these greedy lenders won’t get away scot-free. Somebody made a lot of money leading up to this crisis and they should pay for it — at least the government should make them.
In my opinion, the government should force conversion of bad mortgages into 30 years fixed rate mortgages. The interest rate on these converted mortgages could be higher than normal. This way it’s more affordable to more borrowers resulting in a lower default rate. Yes the lenders will make less money, but in my opinion, they already made too much. By the way, the borrowers aren’t completely innocent either, that’s why they should pay a little more as well.
Since it was fine from them to play with our economy and our lives, I think this is the least that they could do to take part in the recovery effort. Why should my tax dollars go toward helping these greedy bankers who already made billions out of the scheme? I am sure no one will come to my rescue if I my greed got me in trouble
Thanks http://www.moolanomy.com
Wednesday, December 31, 2008
FROM YAHOO ANSWERS
who else thinks that we seem to be heading towards another depression?
with the gas prices going up at a steady pace, products are going to become more expensive and people are going to start buying less putting us into another economic crisis.
am i the only person thats worried about this?
Best Answer - Chosen by Voters
We're not going into a depression. Nor are we for sure in a recession. There is debate over whether we are or not. Even if we are it doesn't mean that we'll be in a depression. Things will get better. I heard a few projections that said that we'll bounce back by end of year.
http://money.cnn.com/2008/05/16/news/eco...
I think that we'll bounce back. If I'm wrong I'm sorry. But I have hope. The US has been through worse and bounced back. I think it can get back again
ANSWER2
In order to have a true depression. People would have to loose their faith in the economic system and in their currency. Only then people would avoid investing their money for business. And business, including employment would decline a lot as a result.
This is what happened in 1930's. People didn't trust the banks. A lot of people tried to convert their paper money into gold. And very few people were willing to risk their savings for business.
The same may happen again. But it won't happen on its own. It will depend on how the government reacts to the current economic crisis.
You should be scared. What people don't know is that every 75 years the U.s goes into a depression. Last time was 1930 so were basically in it right now.In 1970 nixon changed our gold standard to currency so that we can buil up debt wen we need to. Because of the war we are in debt because of debt are value of the dollar fell faster than imagined. Never in the history of the world has a currency ever survived in a economy the differece is that when we changed into a currency we convinced the whole world so if we fall as a nation the rest of the world will.If the U.s dollar keeps falling as it is now and gold reaches 1200 an ounce; we will be in a currency crisis which mean today a soda could be 1.50 2mmor it could be hundreads, thoudsands, millions and even billions of dollars (happened to germany in the 1930's) we are very close to the point of no return.
Thats y u see all those commercials about trade ur gold jewlry for cash; They are making millions
congress and wall street doenst see that because if the value of oil goes up then they invest in that and make millions. Thats why they dont see a recession. Thats why there are more bllionaires than ever. The middle class in the U.S will eventually be wiped out.
What you should do is invest in Gold.sliver.copper.oil
Peple need to get it inthier minds that our dollar is not money its a currency. Gold.sliver etc is money.
I too join you in your worry. It is going to be a very tough fall and winter. We are beginning to purchase extra flour, corn meal and such and keeping it in the freezer to extend it s shelf life.....by winter will be down to eating beans and hot dogs. I also had to tell the orthodontist today that there was just no way that we could afford putting braces on our child at this time, because of the future economy.....I mean $5,000 can buy a great deal of food. Maybe when the government see's all the people and children who will be starving, and dying this winter, maybe then someone will have the balls to say enough is enough and finally do something about it......we may be one of the wealthiest nations...but that is our government.....not its people.....the poor and the elderly will suffer and many will die this winter.
with the gas prices going up at a steady pace, products are going to become more expensive and people are going to start buying less putting us into another economic crisis.
am i the only person thats worried about this?
Best Answer - Chosen by Voters
We're not going into a depression. Nor are we for sure in a recession. There is debate over whether we are or not. Even if we are it doesn't mean that we'll be in a depression. Things will get better. I heard a few projections that said that we'll bounce back by end of year.
http://money.cnn.com/2008/05/16/news/eco...
I think that we'll bounce back. If I'm wrong I'm sorry. But I have hope. The US has been through worse and bounced back. I think it can get back again
ANSWER2
In order to have a true depression. People would have to loose their faith in the economic system and in their currency. Only then people would avoid investing their money for business. And business, including employment would decline a lot as a result.
This is what happened in 1930's. People didn't trust the banks. A lot of people tried to convert their paper money into gold. And very few people were willing to risk their savings for business.
The same may happen again. But it won't happen on its own. It will depend on how the government reacts to the current economic crisis.
If the government tries to confiscate the purchasing power of people who have money by keeping the interest rate far below the inflation rate. Then these people will react the same way people reacted in 1930's. They will try to get out of paper money and go into gold and/or foreign currencies. And none of this money will be used productively for business and commerce.
You should be scared. What people don't know is that every 75 years the U.s goes into a depression. Last time was 1930 so were basically in it right now.In 1970 nixon changed our gold standard to currency so that we can buil up debt wen we need to. Because of the war we are in debt because of debt are value of the dollar fell faster than imagined. Never in the history of the world has a currency ever survived in a economy the differece is that when we changed into a currency we convinced the whole world so if we fall as a nation the rest of the world will.If the U.s dollar keeps falling as it is now and gold reaches 1200 an ounce; we will be in a currency crisis which mean today a soda could be 1.50 2mmor it could be hundreads, thoudsands, millions and even billions of dollars (happened to germany in the 1930's) we are very close to the point of no return.
Thats y u see all those commercials about trade ur gold jewlry for cash; They are making millions
congress and wall street doenst see that because if the value of oil goes up then they invest in that and make millions. Thats why they dont see a recession. Thats why there are more bllionaires than ever. The middle class in the U.S will eventually be wiped out.
What you should do is invest in Gold.sliver.copper.oil
Peple need to get it inthier minds that our dollar is not money its a currency. Gold.sliver etc is money.
Will america bounce back? Possibly but we have to do it now or there is no chance
I too join you in your worry. It is going to be a very tough fall and winter. We are beginning to purchase extra flour, corn meal and such and keeping it in the freezer to extend it s shelf life.....by winter will be down to eating beans and hot dogs. I also had to tell the orthodontist today that there was just no way that we could afford putting braces on our child at this time, because of the future economy.....I mean $5,000 can buy a great deal of food. Maybe when the government see's all the people and children who will be starving, and dying this winter, maybe then someone will have the balls to say enough is enough and finally do something about it......we may be one of the wealthiest nations...but that is our government.....not its people.....the poor and the elderly will suffer and many will die this winter.
Tuesday, December 30, 2008
Economic crisis? India's tide has turned
Economic crisis? India's tide has turned
T N Ninan
When the really bad news dominates the headlines, as the western financial crisis has done these past many weeks, the good news tends not to get noticed. We forget that, three months ago, the over-riding economic problem in India was inflation. So the good news is that the tide has turned. Not just because the weekly wholesale price index now reflects 11.99 per cent inflation (down only modestly from a peak of over 13 per cent), but because global prices are falling. Oil has been dipping steadily for weeks, and is now in the mid-90s when it comes to dollars per barrel. Almost all other commodities too have been slipping -- whether metals like steel and aluminium, or agri-commodities like rubber and palm oil. The prominent exception is gold, but that comes in a separate category.
To the extent that domestic inflation in 2008 has been driven primarily by imported inflation, this means that the government spokesmen who have been forecasting a drop in the inflation rate by the end of the year are probably right. And when one looks at the domestic supply scene, the fact that the 2008 monsoon has been a good one augurs well for inflation control in the coming months. To be sure, one man's inflation is the next man's income, so there will be producers who will look askance at this new trend. Steel companies, for instance, will have to prepare for a new revenue scenario. But in terms of the overall impact on the economy, this is good news that will now stay with us for some months.
The second bit of good news is how well the economy has held up in the wake of the storms that have been blowing around us. Whether it is the export numbers for August (up 27 per cent), or industrial growth in July (up 7.1 per cent), or even advance collection of corporate taxes (up a handsome 34.5 per cent till September), the signs point to an economy that has surprising momentum. To be sure, the stock market has taken a beating and has dropped lower than its index level two years ago; but it was only to be expected that the price bubbles in stocks and real estate would be pricked. Meanwhile, the fact that the rupee has dipped quite sharply against the dollar (by 15 per cent in the last 12 months) means that all those who worried about what an expensive rupee would do to exports can now quit worrying --exporters have a new price incentive, since the currency movement has helped them.
The third bit of good news is that the system has plenty of defences available, should the financial crisis hit India's shores. The Reserve Bank has far more dollar reserves than the total foreign portfolio holdings in the Indian stock market as well as short-term overseas debt combined, so no one need fear a currency crisis. There could be a domestic liquidity problem if foreign institutional investors flee en masse and want to take out dollars in exchange for rupees, but the market stabilisation bonds that the RBI had issued can be bought back in order to pump rupees into the system. In addition, the fact that India's banks are so well-capitalised, in comparison with both American and European banks, imparts its own stability to the system.For many commentators (yours truly among them!) who had predicted dire times for the economy because of the multiple problems coming together, all this has come as a pleasant surprise. What one can hope as the second quarter corporate results start trickling in, is that the system continues to surprise us on the upside.
T N Ninan
When the really bad news dominates the headlines, as the western financial crisis has done these past many weeks, the good news tends not to get noticed. We forget that, three months ago, the over-riding economic problem in India was inflation. So the good news is that the tide has turned. Not just because the weekly wholesale price index now reflects 11.99 per cent inflation (down only modestly from a peak of over 13 per cent), but because global prices are falling. Oil has been dipping steadily for weeks, and is now in the mid-90s when it comes to dollars per barrel. Almost all other commodities too have been slipping -- whether metals like steel and aluminium, or agri-commodities like rubber and palm oil. The prominent exception is gold, but that comes in a separate category.
To the extent that domestic inflation in 2008 has been driven primarily by imported inflation, this means that the government spokesmen who have been forecasting a drop in the inflation rate by the end of the year are probably right. And when one looks at the domestic supply scene, the fact that the 2008 monsoon has been a good one augurs well for inflation control in the coming months. To be sure, one man's inflation is the next man's income, so there will be producers who will look askance at this new trend. Steel companies, for instance, will have to prepare for a new revenue scenario. But in terms of the overall impact on the economy, this is good news that will now stay with us for some months.
The second bit of good news is how well the economy has held up in the wake of the storms that have been blowing around us. Whether it is the export numbers for August (up 27 per cent), or industrial growth in July (up 7.1 per cent), or even advance collection of corporate taxes (up a handsome 34.5 per cent till September), the signs point to an economy that has surprising momentum. To be sure, the stock market has taken a beating and has dropped lower than its index level two years ago; but it was only to be expected that the price bubbles in stocks and real estate would be pricked. Meanwhile, the fact that the rupee has dipped quite sharply against the dollar (by 15 per cent in the last 12 months) means that all those who worried about what an expensive rupee would do to exports can now quit worrying --exporters have a new price incentive, since the currency movement has helped them.
The third bit of good news is that the system has plenty of defences available, should the financial crisis hit India's shores. The Reserve Bank has far more dollar reserves than the total foreign portfolio holdings in the Indian stock market as well as short-term overseas debt combined, so no one need fear a currency crisis. There could be a domestic liquidity problem if foreign institutional investors flee en masse and want to take out dollars in exchange for rupees, but the market stabilisation bonds that the RBI had issued can be bought back in order to pump rupees into the system. In addition, the fact that India's banks are so well-capitalised, in comparison with both American and European banks, imparts its own stability to the system.For many commentators (yours truly among them!) who had predicted dire times for the economy because of the multiple problems coming together, all this has come as a pleasant surprise. What one can hope as the second quarter corporate results start trickling in, is that the system continues to surprise us on the upside.
Subscribe to:
Posts (Atom)
Posts
