Decline in Effectiveness of Monetary Tools

RSA Animate – Smile or Die

RSA Animate – Superfreakonomics – 5 stars

U.S.’s $13 Trillion Debt Poised to Overtake GDP: Chart of Day

Source:Bloomberg

Crowding-Out Effect Inevitable

President Barack Obama is poised to increase the U.S. debt to a level that exceeds the value of the nation’s annual economic output, a step toward what Bill Gross called a “debt super cycle.”

The CHART OF THE DAY tracks U.S. gross domestic product and the government’s total debt, which rose past $13 trillion for the first time this month. The amount owed will surpass GDP in 2012, based on forecasts by the International Monetary Fund. The lower panel shows U.S. annual GDP growth as tracked by the IMF, which projects the world’s largest economy to expand at a slower pace than the 3.2 percent average during the past five decades.

“Over the long term, interest rates on government debt will likely have to rise to attract investors,” said Hiroki Shimazu, a market economist in Tokyo at Nikko Cordial Securities Inc., a unit of Japan’s third-largest publicly traded bank. “That will be a big burden on the government and the people.”

Commercial Bankruptcies Rose 52 Percent in 2009 – AP

Just as I feared, although a month-wise breakup is not available, this provides a good picture that the recovery is fragile

Commercial Bankruptcies Rose 52 Percent in 2009

Commercial bankruptcy protection filings rose by more than 50 percent last year, according to data filed Thursday, showing how the recession continued to cull businesses even as the economy stabilized.

Toward the end of the year, however, the pace of filings abated, according to the data released Thursday by credit reporting agency Equifax Inc.

Commercial filings hit 117,659 last year, up 52 percent from the 77,638 filed in 2008, Equifax reported.

That’s nearly four times the number of filings in 2006, when such bankruptcy filings hit an all-time low near 3,000.

In the October to December period of 2009, filings were up only 12 percent and by December, filings were up only 3 percent compared with the corresponding period in 2008, according to Equifax.

The bankruptcies spread across the U.S., although California was one of the most hard hit.

In the fourth quarter alone, the Los Angeles, Sacramento and Riverside, Calif. metropolitan areas led the nation in filings, as they did in the second and third quarters. Other areas with a high number of filings in the fourth quarter included Portland, Ore., Denver, New York and Chicago.

Spare-time Ideas: US Dollar Doom and Gloom

I hate to admit, I like to dedicate my idle time to odd ideas. So here is one..

If dollar collapses will the Giants survive?

Here is the crazy thought… If the Dollar collapses they will survive because they have already exchanged these then worthless paper notes for some stock or assets in foreign countries… especially emerging markets. And given the recent news flow this could be possible… just another spare-time thought… no offense. ( You May like this too)

Here is a probable support… UNCTAD keeps track of FDI Stock. So if you pull up Country Profiles of USA, Pakistan or India you will come across an interesting statistic.

Under FDI Stock you may find…

Developing economies (Dollar Millions)
Inward 4,275,982 (24.7% of GDP 2008)
Outward 2,356,649 (14% of GDP 2008)

Developed economies (Dollar Millions)
Inward 10,212,893 (25% of GDP 2008)
Outward 13,623,626 (33.6% of GDP 2008)

So in other words there has been a $3.6 trillion outflow from Developed Economies(if I am reading it right) and roughly $2 trillion inflow in Developing Countries.

But the magnitude is 25% of the total inflow so I am still thinking could it be possible.

Well for now … There you have it… Giants will survive or sort of.

IMF warns of economic riots, police ready for civil unrest

Source: Here and Here

The head of the International Monetary Fund urged governments to step up action to stem the global economic crisis or risk delaying a recovery and sparking violent unrest on the streets.

Using a speech last night in Madrid to issue his stark warning, Dominique Strauss-Kahn argued that government efforts to tackle the economic downturn so far have been uncertain and largely insufficient, which could lead to severe consequences. He singled out the eurozone nations as he attacked the inadequate global response.

His hard-hitting coments came as fears of a prolonged slumped intensified after China showed signs that its economy could be in more trouble than initially expected next year. Factory output in the rapidly growing economy registered the weakest growth in almost a decade last month.

…

Revealing his concerns of a deeper economic slowdown, he said that the IMF would probably cut world growth next year from its current forecast of 2.2%. He also predicted that China’s once red-hot economy will rapidly run out of steam.

“We started with China at 11% growth … China will probably grow at 5 or 6% [next year],” he said. “The possibility of a global recession is real. We realise something must be done.”

Reports indicate that Paulson threatened Martial Law

November 22, 2008 (LPAC) — Sen. James Inhofe (R-Ok.) said yesterday that it was Treasury Secretary Henry Paulson who personally told Congressmen that there would be martial law in America if they did not pass the bailout of the banks as demanded by the Bush Administration. On Oct. 2, Rep. Brad Sherman (D-Calif.) said on the House floor that “Many of us were told in private conversations that if we voted against this bill on Monday the sky would fall, the market would drop two or three thousand points the first day, another couple of thousand the second day, and a few members were even told that there would be martial law in America if we voted no.”

Source

Credit Crunch… the board game

Board game
Credit Crunch

Dec 18th 2008
From The Economist print edition

You will need:

The board from the centre of The Economist’s Christmas issue (or pdf version of board below)

These rules

Risk cards, currency and icons from the pdfs below (or you can use your diamond cufflinks, or any other mementos of your former wealth, to represent you on the board)

Four coins

Scissors (to cut out currency and cards)

Three or more players; probably six at most

How it works

Players start with 500m econos each. One player doubles as banker.

Players move round by throwing four coins and progressing as many squares as they throw heads. If a player throws four heads, he moves forward four spaces and has another turn; if he throws four tails, he throws again. When a player lands on a + square, he collects money from the bank; equally, when he lands on a minus square, he pays the bank.

The aim is to be the last solvent player. In order to achieve this, players try to eliminate the competition. Risk cards encourage players to pick on each other.

Players who cannot pay their fines may borrow from each other at any rate they care to settle on—for instance, 100% interest within three turns. They should negotiate with the other players to get the best rate possible. Players who cannot borrow must either go into Chapter 11 or be taken over.

Players may conceal their assets from each other.

Chapter 11

When a player gets into debt and can’t persuade anybody else to lend to him, he goes bankrupt. A player who goes bankrupt three times is eliminated.

A bankrupt player must move to the Chapter 11 cell and stay there until:

1. He uses a “Get out of Chapter 11” card

2. He rolls four heads or four tails during his turn

3. He is taken over

A player coming out of bankruptcy goes to START.

If a player cannot escape Chapter 11 for five turns he is eliminated.

Takeover

A player may be taken over either if he cannot pay his debts or if he is already in Chapter 11. The purchaser pays the purchased player’s debts. If there is a takeover battle, the aspiring purchasers must bid against each other, and the highest bidder pays his bid to the bank.

The purchaser and subsidiary then play, in effect, as a team, though the purchaser is in charge. He gets to choose the beneficiaries and victims of the risk cards his subsidiary picks and may use the subsidiary’s assets to pay his fines, or pay the subsidiary’s fines if he wishes. But he does not have to: if his subsidiary gets into debt again, he can let the subsidiary go into Chapter 11. The subsidiary is then a free agent once more, and may get out of Chapter 11 in the usual ways. But the player who has just abandoned him may not take him over during that stay in Chapter 11, although he may during a subsequent visit.

Printing money

The Bank of Econia supplies the currency for this game. To access the banks vaults, download and print the money using the currency pdfs. Money may be printed in colour or grayscale.

The econo is available in five notes: Ec 10 million (here), Ec 50 million (here), Ec 100 million (here), Ec 500 million (here) and Ec 1000 million (here). There is a pdf page for each denomination with 10 bills on each page.

The Bank encourages a print run of:

60 x Ec 10m (6 pages with 10 bills on each page)

60 x Ec 50m (6 pages with 10 bills on each page)

60 x Ec 100m (6 pages with 10 bills on each page)

20 x Ec 500m (2 pages with 10 bills on each page)

20 x Ec 1000m (2 pages with 10 bills on each page)

Use scissors to separate notes.

Printing “Financial Risk” cards

There are 30 “Financial Risk” cards contained in three pdfs (here, here and here). Print one copy of each pdf and use scissors to separate cards. Place separated cards in a pile face down during play.

Printing icons

Players may choose any item to represent them on the board. Optional icons are contained on an icon pdf (here). Print page and separate desired icons using scissors. Fold back base flaps in order to allow the icon to stand upright.

Printing game board

The game board is available for printing on two pdfs (here and here) with one half of the board on each file.

Enlarging the board is encouraged. This may require utilising larger paper or printing then assembling the board from several pages.

WAKE UP!!!

Aug. 25 (Bloomberg) — The ouster of Pakistan President Pervez Musharraf was hailed by the government as a chance to turn around a crumbling economy that has left half the 168 million population short on food. Investors aren’t convinced, and that means more declines for the rupee.

Source

Templeton Asset Management Ltd. and Aberdeen Asset Management Plc said they doubt Pakistan’s new leaders have the resolve to slash outlays or raise borrowing costs to help curb the fastest inflation in 30 years at a time when the economy is slowing. The risk of failure has prompted investors, stung by a global slump in stocks and debt markets, to shun developing economies from India to Chile that face similar dilemmas.

“Inflation can only be beat by a cut in government spending, which means turning off the currency printing press,” Mark Mobius, executive chairman of Templeton in Singapore, who has about $200 million invested in Pakistan, said in an interview. “Stop spending. Stop wasting through corruption.”

WAKE UP!!!

Aug. 25 (Bloomberg) — The ouster of Pakistan President Pervez Musharraf was hailed by the government as a chance to turn around a crumbling economy that has left half the 168 million population short on food. Investors aren’t convinced, and that means more declines for the rupee.

Source

Templeton Asset Management Ltd. and Aberdeen Asset Management Plc said they doubt Pakistan’s new leaders have the resolve to slash outlays or raise borrowing costs to help curb the fastest inflation in 30 years at a time when the economy is slowing. The risk of failure has prompted investors, stung by a global slump in stocks and debt markets, to shun developing economies from India to Chile that face similar dilemmas.

“Inflation can only be beat by a cut in government spending, which means turning off the currency printing press,” Mark Mobius, executive chairman of Templeton in Singapore, who has about $200 million invested in Pakistan, said in an interview. “Stop spending. Stop wasting through corruption.”