America's socialism for the rich

hi, if you find this massage is interesting, share with your friends America's socialism for the rich 31 Aug 2009, 0124 hrs IST, Joseph E Stiglitz, With all the talk of “green shoots” of economic recovery, America’s banks are pushing back on efforts to regulate them. While politicians talk about their commitment to regulatory reform to prevent a recurrence of the crisis, this is one area where the devil really is in the details — and the banks will muster what muscle they have left to ensure that they have ample room to continue as they have in the past. The old system worked well for the banks (if not for their shareholders), so why should they embrace change? Indeed, the efforts to rescue them devoted so little thought to the kind of post-crisis financial system we want that we will end up with a banking system that is less competitive, with the large banks that were too big to fail even larger. It has long been recognised that those America’s banks that are too big to fail are also too big to be managed. That is one reason that the performance of several of them has been so dismal. When they fail, the government engineers a financial restructuring and provides deposit insurance, gaining a stake in their future. Officials know that if they wait too long, zombie or near zombie banks — with little or no net worth, but treated as if they were viable institutions — are likely to “gamble on resurrection.” If they take big bets and win, they walk away with the proceeds, if they fail, the government picks up the tab. This is not just theory; it is a lesson we learned, at great expense, during the Savings & Loan crisis of the 1980s. When the ATM machine says, “insufficient funds,” the government doesn’t want this to mean that the bank, rather than your account, is out of money, so it intervenes before the till is empty. In a financial restructuring, shareholders typically get wiped out, and bondholders become the new shareholders. Sometimes, the government must provide additional funds, or a new investor must be willing to take over the failed bank. The Obama administration has, however, introduced a new concept: too big to be financially restructured. The administration argues that all hell would break loose if we tried to play by the usual rules with these big banks. Markets would panic. So, not only can’t we touch the bondholders, we can’t even touch the shareholders — even if most of the shares’ existing value merely reflects a bet on a government bailout. I think this judgement is wrong. I think the Obama administration has succumbed to political pressure and scare-mongering by the big banks. As a result, the administration has confused bailing out the bankers and their shareholders with bailing out the banks.

The risk of a double-dip recession is rising

hi, if you find this massage is interesting, share with your friends The risk of a double-dip recession is rising Posted by Philip Dru on 8/24/09 • Categorized as Economy T? he global economy is starting to bottom out from the worst recession and financial crisis since the Great Depression. In the fourth quarter of 2008 and first quarter of 2009 the rate at which most advanced economies were contracting was similar to the gross domestic product free-fall in the early stage of the Depression. Then, late last year, policymakers who had been behind the curve finally started to use most of the weapons in their arsenal. That effort worked and the free-fall of economic activity eased. There are three open questions now on the outlook. When will the global recession be over? What will be the shape of the economic recovery? Are there risks of a relapse? On the first question it looks like the global economy will bottom out in the second half of 2009. In many advanced economies (the US, UK, Spain, Italy and other eurozone members) and some emerging market economies (mostly in Europe) the recession will not be formally over before the end of the year, as green shoots are still mixed with weeds. In some other advanced economies (Australia, Germany, France and Japan) and most emerging markets (China, India, Brazil and other parts of Asia and Latin America) the recovery has already started. On the second issue the debate is between those – most of the economic consensus – who expect a V-shaped recovery with a rapid return to growth and those – like myself – who believe it will be U-shaped, anaemic and below trend for at least a couple of years, after a couple of quarters of rapid growth driven by the restocking of inventories and a recovery of production from near Depression levels. There are several arguments for a weak U-shaped recovery . Employment is still falling sharply in the US and elsewhere – in advanced economies, unemployment will be above 10 per cent by 2010. This is bad news for demand and bank losses, but also for workers’ skills, a key factor behind long-term labour productivity growth. Second, this is a crisis of solvency, not just liquidity, but true deleveraging has not begun yet because the losses of financial institutions have been socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest. Third, in countries running current account deficits, consumers need to cut spending and save much more, yet debt-burdened consumers face a wealth shock from falling home prices and stock markets and shrinking incomes and employment. Fourth, the financial system – despite the policy support – is still severely damaged. Most of the shadow banking system has disappeared, and traditional banks are saddled with trillions of dollars in expected losses on loans and securities while still being seriously undercapitalised. Fifth, weak profitability – owing to high debts and default risks, low growth and persistent deflationary pressures on corporate margins – will constrain companies’ willingness to produce, hire workers and invest. Sixth, the releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending. The effects of the policy stimulus, moreover, will fizzle out by early next year, requiring greater private demand to support continued growth. Seventh, the reduction of global imbalances implies that the current account deficits of profligate economies, such as the US, will narrow the surpluses of countries that over-save (China and other emerging markets, Germany and Japan). But if domestic demand does not grow fast enough in surplus countries, this will lead to a weaker recovery in global growth. There are also now two reasons why there is a rising risk of a double-dip W-shaped recession. For a start, there are risks associated with exit strategies from the massive monetary and fiscal easing: policymakers are damned if they do and damned if they don’t. If they take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into stag-deflation (recession and deflation). But if they maintain large budget deficits, bond market vigilantes will punish policymakers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation. Another reason to fear a double-dip recession is that oil, energy and food prices are now rising faster than economic fundamentals warrant, and could be driven higher by excessive liquidity chasing assets and by speculative demand. Last year, oil at $145 a barrel was a tipping point for the global economy, as it created negative terms of trade and a disposable income shock for oil importing economies. The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly towards $100 a barrel. In summary, the recovery is likely to be anaemic and below trend in advanced economies and there is a big risk of a double-dip recession.

Analyst Bove sees 150-200 more U.S. bank failures

hi, if you find this massage is interesting, share with your friends Analyst Bove sees 150-200 more U.S. bank failures Posted by Philip Dru on 8/24/09 • Categorized as Economy NEW YORK (Reuters) – A prominent banking analyst said on Sunday that 150 to 200 more U.S. banks will fail in the current banking crisis, and the industry’s payments to keep the Federal Deposit Insurance Corp afloat could eat up 25 percent of pretax income in 2010. Richard Bove of Rochdale Securities said this will likely force the FDIC, which insures deposits, to turn increasingly to non-U.S. banks and private equity funds to shore up the banking system. "The difficulty at the moment is finding enough healthy banks to buy the failing banks," Bove wrote. The FDIC is expected on August 26 to vote on relaxed guidelines for private equity firms to invest in failed banks, after critics said previously proposed rules were too harsh and would actually dissuade firms from making investments. Bove said "perhaps another 150 to 200 banks will fail," on top of 81 so far in 2009, adding stress to the FDIC’s deposit insurance fund. Three large failures this year — BankUnited Financial Corp in May, and Colonial BancGroup Inc, Guaranty Financial Group Inc in August — collectively cost the fund roughly $10.7 billion. The fund had $13 billion at the end of March. Regulators closed Guaranty’s banking unit on Friday and sold assets of the Texas-based lender to Banco Bilbao Vizcaya Argentaria SA. The FDIC agreed to share in losses with the Spanish bank. Bove said the FDIC will likely levy special assessments against banks in the fourth quarter of this year and second quarter of 2010. He said these assessments could total $11 billion in 2010, on top of the same amount of regular assessments. "FDIC premiums could be 25 percent of the industry’s pretax income," he wrote. (Reporting by Jonathan Stempel; editing by Gunna Dickson)

Do You Make These 7 Body Language Mistakes?3

hi, if you find this massage is interesting, share with your friends * of them plus the ones above to find which one(s) fit you the best. 7. Holding yourself back. So, let’s say you know most of the things above already. It isn’t exactly rocket science. So why are you still not using those tips - or tips from somewhere else - to change and experiment with how you communicate? One big reason may be that you are holding yourself back. You may hold yourself back from becoming more expressive over all or, for instance, with your hands. Or you may hold yourself back completely from taking up more space or making more eye-contact. Holding yourself back may be because of a few different reasons. The most common one is probably the one already described in the previous mistake: a fear of what others may think, say or do. Yes, people may react negatively. And yes, you might exaggerate your body language a bit too much at first by for instance sitting with your legs almost ridiculously far apart. However, people aren’t looking at you as much as you may think. They are like you. They have their own stuff to think and worry about. If you experiment with your body language, then sure, you might seem a little strange sometimes. But most of the time people will probably not even notice that you have changed something. They aren’t standing around watching your every move all day long. Also, keep in mind that if you for example are normally not that expressive then what might feel weird to you isn’t necessarily that weird to others. It’s just you comparing the old way to the new way in your own head. It’s just you getting used to being more expressive. If you change your body language for the better, most people will only react in a more positive way towards you. Because as mentioned in mistake #1, how you live your life and how you feel comes through in your body language. And if you feel great then that comes through. And emotions are contagious. So now, people you interact with feel better too. And just about everyone wants to feel positive emotions. So, yeah, you may look like fool a few times if want to change. But that’s OK. It’s a lot better than going around all of your life and holding yourself back. And if you don’t take yourself and life too seriously – mistake #3 – then your fear of looking like a fool and being rejected in some way will decrease.