Posts Tagged ‘Ben Bernanke’

Boozed British journalism cant see straight

September 12, 2010 Leave a comment
Why compare Japan with Latam and Zimbabwe? Why not with USA, China and Germany which is more like in Japanese class! (Cartoonist - Clay Bennett,  from Clay Bennett's Editorial Cartoons; courtesy - Click for larger image.

Why compare Japan with Lat-Am and Zimbabwe? Why not with USA, China and Germany which is more like in Japanese class! (Cartoonist - Clay Bennett, from Clay Bennett's Editorial Cartoons; courtesy - Click for larger image.

An Indian problem

Now one of the problems of India, having English as an important language, is the amount of swill, garbage and propaganda that we are subjected to.

In spite of being less than anybody, British media can be pretty biased.

One example was a post by Ian Campbell on Japan’s economic problems. He says,

Japan has … has the worst debt to GDP ratio among major economies … But the interest yield on Japanese government bonds is … not much more than 1 per cent, so the debt is not yet so problematic – and might not seem an obstacle to still more spending. … In just five years, even assuming the economy grows, debt might climb to 230 per cent of GDP …  the hideously large debt would finally drive the fiscal deficit far higher and become intolerable.

Japan’s only route then would be drastic fiscal reform or, more probably, huge resort to the printing press, as Latin America did in the old days and Zimbabwe in more recent times. (via Nokia’s billion-dollar man).

British media needs to talk less about other economies - and look at problems in their own backyard. (Cartoon By Brian Adcock, The Scotland - 1/20/2008 12.00.00 AM Cartoon courtesy -; ©Copyright 2008  Brian Adcock - All Rights Reserved.). Click for larger image

British media needs to talk less about other economies - and look at problems in their own backyard. (Cartoon By Brian Adcock, The Scotland - 1/20/2008 12.00.00 AM Cartoon courtesy -; ©Copyright 2008 Brian Adcock - All Rights Reserved.). Click for larger image

Sad Brits …

Campbell, a British journalist, compares Japan with Latin American and African Governments who have printed a lot of money.

But surely he knows that Western Governments – under the leadership of Ben Bernanke printed much more than Africa and Lat-Am could and did! Why is Campbell not talking of British, European and American printing presses?

Is there a racial smell and smear somewhere? Did I hear him say ‘These irresponsible Blacks, Latinas, Browns, Yellows …’

Japan’s problems

Now Japan’s problems are minor – because they have solid, well run, high tech companies, whose products are in demand all over the world.

Off their peaks, these Japanese firms still have  mean clout in business world. Japanese interest rates being so low will not change Governmental economics by much. So, why compare Japan with Latin America or Zimbabwe?

Of course, you cannot compare Japan to Spain – where prostitution is a national industry.  Or Ireland, or Greece, which have lived on handouts for the last 100 years.

Maybe you should look at British debt my dear sir!

Wishful thinking?

Is it wishful thinking Mr.Campbell? Balanced your judgment is not. Or is it just plain malarkey? Methinks, it is ‘White’ noise!

Ian Campbell, who has “recently returned to the UK, where he is writing a book on rural Mexico.” could utilize his time much better writing about rural Britain, which depends on huge subsidies from a nation groaning under 500% Gross-National-Debt (GND-that is Govt.+Corporate+household).

Now British GND (no hindi puns intended) is a much-more-hideous. Than Japanese at 500%. We both know that British exports  are going nowhere!

Is it not time to focus on Britain itself? Japan will do very well, without your attention. (Cartoonist Jeff Danziger; courtesy -

Cartoon Text - "Austerity? But late squire ... she has been dead these fifty years." 2ndlook says - Is it not time to focus on Britain itself? Japan will do very well, without British attention. (Cartoonist Jeff Danziger; courtesy -

Let us look at British economy

First the biggest sector of British corporate sector is about digging, extracting and selling natural resources.

A historical legacy – with little value-addition. Royal Dutch Shell, BP, North Sea Oil, XStrata, Anglo American, Rio Tinto Group,  BHP Billiton, BG Group, National Grid, Scottish and Southern Energy, Centrica. That is 10 of the top 30 British companies. These companies mostly have their assets abroad – and if push comes to shove, you know these companies will go where their bread is buttered.

The second leg on which British industry stands today is cracked leg of banking and insurance – HSBC, HBOS, RBS, Lloyd’s TSB, Barclays, Standard Chartered, Aviva and Prudential. The British part of the business of these 8 financial firms is in mess. The international business is subsidizing the British business. How long do you think this will last?

The third wobbly leg is pharmaceuticals made up of two companies. Glaxo-Smithkline-and Astra Zeneca. Both are in doldrums due to competition from generic Indian companies – and may look good to beery British journalists boozed in a pub. Now these are the three legs of British economy. We know that three legged stools are always prone to topple over.

That was lesson No.1 for you Campbell.

Is this how British journalism lifts its spirits? (By Paresh Nath, The Khaleej Times, UAE - 5/19/2010 12.00.00 AM)

Is this how British journalism lifts its spirits? (By Paresh Nath, The Khaleej Times, UAE - 5/19/2010 12.00.00 AM)

Lallu has a few things to say here

Lesson No.2 is what our colourful former Railway Minister said, “इस हमाम में सब नंगे हैं” (meaning “everyone in this bathhouse is naked”).

No offense to colour black, but then black pots must not call yellow kettles names.

It is plain bad journalism!

RBI to buy 200 tonnes of IMF gold

November 3, 2009 1 comment

RBI to buy 200 tonnes of IMF gold

RBI’s decision to shore up its gold reserves needs to be seen in the context of other central banks across the globe increasing their gold reserves. Among them are the central banks of China, Russia and a few countries in the European Union.

In the last one year, China has increased its gold holdings, by weight, by 75.69%, Russia by 18.78%, the Philippines by 18.50% and Mexico by 108.91%.

Compared with this, India’s central bank did not add anything to its gold reserves in the last one year, according to Bloomberg data. (via RBI to buy 200 tonnes of IMF gold – Home –

Two years ago …

2ndlook had estimated that the Chinese could possibly (and they have)  increase their monetary gold reserves. On April 24th, 2009, Bloomberg reported that China had increased

its (gold) reserves by 454 tons to 1,054 tons through domestic purchases and refining scrap metal, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in an interview with the Xinhua News Agency today. China, the world’s biggest gold producer, has increased its holdings before, Hu said in the interview carried on the administration Web Site. They rose from 394 tons to 500 tons in 2001 and to 600 tons in 2003. The U.S. has the world’s biggest gold holdings at 8,134 tons, followed by Germany with 3,413 tons, World Gold Council data show. France has 2,487 tons and Italy 2,452 tons, while the IMF has 3,217 tons, according to the council.

Another report, from Market Watch, a WSJ web publication added,

The increase makes China the world’s fifth-largest holder of gold, just ahead of Switzerland, and among the six nations plus the International Monetary Fund that have reserves of more than 1,000 metric tons. Although Hu did not elaborate on where China had sourced the additional bullion, her comments were interpreted as meaning they came from domestic sources and may included refining of scrap metal.  Traders also say the gold was accumulated systematically over a number of years. Last year China ranked as the world’s largest gold producer with 12.2% of world output, equivalent to 288 metric tons. The U.S. ranked second with a 9.9% share, or 234 metric tons.2008 - Sensex VS Gold

What are the future plans of the Chinese? A report quotes an analyst

China should increase its gold reserve from 600 tons to about 2,500 tons in a short term and to 3,000 tons in a long term to cope with the versatile exchange rate risks, said Teng Tai, an economist of China Galaxy Securities Company.

Exactly …

This really does not mean much – except that it may keep gold prices on boil. Whether a currency is backed by 5% or a 10% gold reserve makes no material difference, especially in this era of rampant use of (not just by the US of A) “a technology, called a printing press” as an economic tool. For long term economic stability, gold needs to be in the hands of individuals – and not Governments.

Why India

Since China is a significant gold producer by itself, it may not get a shot at buying IMF gold. India has negligible domestic gold production -and was possibly therefore given preference by the IMF. Of course, preference may have been given to RBI’s purchase, given its ‘responsible’ and ‘mature’ behaviour during the current Great Recession.

What does RBI’s gold purchase mean

RBI’s gold purchase means two things.

The Indian Government which has had a rather low percentage of gold holdings as their currency reserves will now bolster these reserves. Even after this purchase, Indian official reserves, will only be the ninth largest in the world in absolute terms.

On average, countries hold about 12.6% of their reserves in gold, up from 9.9% a year ago. Some of this represents an increase in gold holdings, but another driver of the increased proportion is the rise in the value of gold. (from India propels gold to new high.)

The overhanging threat of open market sales by the IMF, speculated by many and discounted by 2ndlook, now stands neutralized. This will be a kicker to gold prices in the short term.

The ideal thing …

Sell gold to individuals. Governments should not have such large holdings of gold. Gold in the hands of Governments is the prime cause of war. Gold holding should be widely dispersed, as widely as possible, amongst individuals – like the Indian gold possession model. No national government, in the new financial architecture should be allowed to have more than 250 tons of gold – to progressively reduce to 50 tons.

Ben Bernanke’s version of history blames the victims

But for Bernanke...

For Bernanke, central bankers were the heroes. In the face of irrational hordes, they offered liquidity and a host of innovative policies, ensuring that financial panic did not lead to a new Great Depression. In Bernanke’s word, “the outcome could have been decidedly worse”.

His assessment isn’t exactly wrong. But as a historical record it is incomplete and far too generous to central bankers. (via Ben Bernanke’s version of history is incomplete – Telegraph).

Blame the Chinese!

Blame the Chinese!

It ain’t the first time

Helicopter Ben has a way with history. Earlier he created the concept of ‘savings glut’ – thinly blaming China ( and others) for saving money! He explained how,

“a significant increase in the global supply of saving–a global saving glut–which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today.”

This time around he was congratulating Central Bankers and policymakers

“in the United States and around the globe responded with speed and force to arrest a rapidly deteriorating and dangerous situation.”

Awesome! The man is so brazen! He has no shame!!

Of course, he makes no mention how the current Great Recession first came about by printing too much money – and then keeping interests low. Edward Hadas is right in one thing at least! He says, “Those who spread kerosene should not take too much credit for putting out fires.”

Benny Boy – That is good advice. Take it.

G8 is dead, long live G14 – Europe – World – NEWS – The Times of India

July 12, 2009 1 comment

The intimation of G8’s impending demise came from the host of the summit, Italian President Silvio Berlusconi. “We saw that G8 is no longer a suitable format to show a global economic way of doing. Instead, a consolidated G14 representing 80% of the world economy could help create a real dialogue. We want to see if the G14 is the best solution for debates which will bring to us unique results.”

Berlusconi was merely echoing the creeping realisation among the G8 countries that the steady decline of the developed nations, coupled with the rapid rise of developing countries like India and China, had rendered the rich club irrelevant. (via G8 is dead, long live G14 – Europe – World – NEWS – The Times of India).

Western Clubs

On 5th November 2008, Raghuram Raman was appointed as by the GOI as advisor to the Indian PM – to advise the Indian PM about the forth coming G-20 meetings. As ex-IMF man, if he is the ‘expert’ that he is touted as, by this time Raghuram Rajan should know that the IMF and World Bank are international only in name. They are Western Clubs – meant for the benefit of the West.

Sinking .. or saving ...

Sinking .. or saving ...

All G20 members were ‘invited’ to join another Western Club – the FSF. The Financial Stability Forum, another club, with the same G7 members. Just why does India join these rubber stamp bodies – and lend sanctity to the exploitative agenda of the sponsors. Does the world need another body, with the same Central Bank members, addressing the same monetary issues problems, with the same agenda?

G7 and OECD countries have created a club for themselves, by giving each other unlimited line of credit – while the developing world gets credit based on fast-depreciating dollar/euro foreign exchange reserves. Maybe this needs an inversion. The OECD and G7 should be asked to pay their purchases. In a new global reserve currency. And the BRICS need to start working on that.

Many of the regulatory bodies are actually a US-Euro Clubs – to fool the world, with token actions and steps to demonstrate inclusion and fairness of the developing world.

My feeling …

The BRIC leaders know well enough that the West will not let go of the IMF and the UN. The charade of UN /IMF /World Bank Reform is possibly required – and they are going through it.

Could you be loved ...?

Could you be loved ...?

Between ASEAN and IBSA, India needs to take Third World groupings from talk-fests to action-teams. Western clubs like UN, IMF, World Bank, G-7, P-5, etc are all heavily weighted against ‘outsiders’ like developing nations.

Join the gang

Thanks for the offer, but no thanks. And I will tell you why!

Trying to clean these Augean sales is a waste. India should engage with the BRICS countries – and focus on creating another institution without the West to start with.

Safe, Steady and Sure

We can keep banging our head against these Western altars, for another 60 years. It won’t work. We need to move – not necessarily fast, but surely and steadily. The Developing World (and India) can continue to knock at the doors of these Western clubs – and yet why would the West dilute their power and influence? And allow the Rest to take advantage of structures that the West has created for its own benefit?

Just why?

What is on the table

Bankrupt welfare state

Bankrupt welfare state

2 out of the G-7 countries are bankrupt – US and Britain. Their industrial base was supported by raw materials and captive markets – acquired by genocide, and the loot of centuries.

France, Germany Canada and Australia (not in G7) and Italy are tethering on the brink – under the weight of their social security system, and most of their business in the public sector. A geriatric Japan is dependent almost entirely on these declining seven. Japan’s investment in India and China has been negligible.

What Do We Bring To The Table

India, China and South Africa on the other hand, bring growing economies, young populations, lower welfare state burdens, expanding industrial base – and above all, a record of non-aggressive history.

These dubious clubs depend on victims to approve and finance their own slaughter – and these memberships don’t appeal to India.

G7, you are welcome to join us at our terms. We dont want to be a part of your ‘blood soaked history.’

BRIC demands more clout, steers clear of dollar talk – Yahoo! Philippines News

June 18, 2009 2 comments

Change is indeed on its way

Change is indeed on its way

“The summit of the so-called BRIC nations of Brazil, Russia, India and China ended with a short statement by Russian President Dmitry Medvedev and a communique that demanded more power for developing nations in international financial institutions and the United Nations.

‘We are committed to advance the reform of international financial institutions, so as to reflect changes in the world economy,’ the BRIC countries said in a joint communique.

‘The emerging and developing economies must have a greater voice and representation in international financial institutions,’ it said. ‘We also believe that there is a strong need for a stable, predictable and more diversified international monetary system.’

“We will not do without additional reserve currencies,” he said, adding that a new supranational reserve currency was also an option as the IMF’s SDRs gained a bigger role.

The initial response from the developed world to Russia’s initiative came from Japan, where Finance Minister Kaoru Yosano reiterated his view that the dollar will remain the world’s key reserve currency. (via BRIC demands more clout, steers clear of dollar talk – Yahoo! Philippines News).

This was predictable

The 2ndlook posts and the Quicktakes on the events in the unfolding global financial crisis have been pre-casting these developments. This meeting was good news. This meeting could not have happened earlier – with elections in India being the delaying proposition.

The meeting has happened. Some old and tired cliches have been shopped out for waiting media. Greater role for BRIC in UN and IMF … is not even old wine (turned vinegar) in a old cracked bottle.

What’s gonna happen

The Chinese and Russian decision to increase holdings of their each others currencies was good development. The greater role for ‘IMF-SDR’ is eye wash. The BRIC leaders know well enough that the West will not let go of the IMF and the UN. But the charade is possibly required – and they are going through it.

The real developments will happen more quietly. After all, the final outcome is something that they, The BRIC nations would like to reveal with fanfare and celebration.

We live in exciting time … or is this a dangerous time?

The China Syndrome – The Times of India

Wall Street mayhem

Wall Street mayhem

post-reform the US will retain its de facto veto power with a 17 per cent share and the US, EU and Japan will together still control 53 per cent of IMF shares. Individually, the shares of US, Japan, UK and France will still be larger than China’s share of under 4 per cent. Impatient with these little handouts, China has launched a multi-pronged campaign to claim a seat at the head of the table.

Shortly before the G20 summit, Zhou Xiaochuan, governor of the Chinese central bank, suggested that the dollar should be replaced by SDRs as the new reserve currency. The huge dollar reserves held by central banks and other global investors would be severely eroded if the dollar were to suddenly depreciate. Yet, these investors cannot easily diversify away from the dollar since this itself would trigger dollar depreciation. The Chinese are particularly concerned: an estimated $1 trillion out of their total reserves of around $2 trillion are held in dollar assets. The SDR exchange rate is a weighted average of exchange rates of the major convertible currencies. Accordingly, under Zhou’s proposal, China and other countries could convert their reserves from dollars to SDRs at current exchange rates without any erosion in their value. via TOP ARTICLE | The China Syndrome – Editorial – Opinion – The Times of India).

Rather a good summary of the flux in global currency system – for someone who wants to understand the situation today. The last paragraph will be of interest to everyone – especially Indians.

The relative roles of different Asian currencies in this fund are yet to be determined, but clearly the Chinese yuan has arrived and the meltdown of the dollar as a reserve currency has begun. The US-led western alliance has two options before it. It can give China a leading role in the G7-dominated financial architecture or face an alternative architecture led by China. Heads i win, tails you lose. Meanwhile, India is yet to find a role for itself in this new great game.

‘Frothy’ Alan and ‘Helicopter’ Ben

The Great Recession – The Start, The Beginning, The Blame and The Game.

Helicopter Ben just wont stop ...

Helicopter Ben just wont stop ...

Running and hiding …

In the last 5 years, more than US$10 trillion (lowest estimate) were printed and pumped into the world economy. Now the world is awash with dollars.

Where did this money go? How was this used?

Lendings by US commercial banks in the period 2000 to 2004 soared by altogether USD 1,500bn to USD 6,750bn. In the European Monetary Union lending to the private sector by monetary financial institutions (MFI) climbed from roughly EUR 6,200bn end-1999 to not quite EUR 8,700bn at the end of last year.” – Allianz Report, Dresdner Bank. (Links mine)

The recipients of this largesse, mainly Western banks made (it was whispered) bad loans worth 300-400 billion dollars.

Actual figures coming out now are about 20 times as much.

Much higher.

The Other Story

The loans story does not end there. These loans were in turn sold and re-sold, then packaged and mortgaged, derived and contrived – finally ballooning into the sub-prime’ crisis.

Are these welfare payouts by another name?  US Consumers are not repaying their housing loans.

Who will pay for this “lending”? Some one has to!

Back to basics

And that is the root of the problem.

The West is trying to make Asians pay! And people like Ben Bernanke, Alan Greenspan et al are paid hacks to create a logic by which the West will try and make the poor pay.

Nothing less!

As I noted on this page in December 2007, the presumptive cause of the world-wide decline in long-term rates was the tectonic shift in the early 1990s by much of the developing world from heavy emphasis on central planning to increasingly dynamic, export-led market competition. The result was a surge in growth in China and a large number of other emerging market economies that led to an excess of global intended savings relative to intended capital investment. That ex ante excess of savings propelled global long-term interest rates progressively lower between early 2000 and 2005. (via Alan Greenspan Says the Federal Reserve Didn’t Cause the Housing Bubble –

Poor Al! Credited - and then blamed for almost all things good and then bad with American economy. |  Book cover; source & courtesy -  |  Click for larger image.

Poor Al! Credited - and then blamed for almost all things good and then bad with American economy. | Book cover; source & courtesy - | Click for larger image.

Nobel prize … slipping away

Poor Al!

He can see the Nobel Prize slipping away from him. What can he do?

Blaming Asians is good start point.

Alan Greenspan is not below using Ben Bernanke’s rubbish ‘theories’ to save his sagging hide. So … Who really is responsible for this Great Recession?

The truth? You want the truth?

The Real Culprits … mea culpa

…the true culprits lie halfway around the world. High-saving Asian households and dollar-hoarding foreign central banks produced a global savings “glut,” which pushed real interest rates into negative territory, in turn stoking the US housing bubble while sending financiers on ever-riskier ventures with borrowed money. Macroeconomic policymakers could have gotten their act together and acted in time to unwind those large and unsustainable current-account imbalances. Then there would not have been so much liquidity sloshing around waiting for an accident to happen. (Dani Rodrik: Who killed Wall Street?).

Ben Bernanke or his printing press and helicopters are not mentioned. Even once. The evasion of Federal Reserve on M3 figures is not mentioned. At all. China which funded the US to the extent of US$2 trillion is not mentioned. Not once. Japan which funded the US to the extent of US$1 trillion is ignored. Alan Greenspan is mentioned once.

But Asians countries who are facing a meltdown in forex reserves, due to dollar depreciation, are instead mentioned as culprits. A new level in being brazen.

Wow.  Keep it up Dani boy.

Blame Bush, Greenspan, Bernanke

Looked at with 20:20 hindsight, this crisis originated in a macro sense with the US Federal Reserve and the Bush administration. Since the bubble burst in 2000, and in the aftermath of 9/11/01, the Bush administration ran unprecedented fiscal and current account deficits to finance: bizarre wars, tax cuts and egregious public over-consumption, all fuelled by debt bought by the rest of the world. Such insane profligacy was financed by a massive Fed-blown bubble of liquidity. Estimates of the cumulative excess liquidity bubble blown by the Fed to finance these and other private follies range from $8 trillion to $12 trillion. The US Congress was equally culpable, for letting government borrowing limits expand so elastically. So one should be sceptical of the righteous indignation of posturing politicians. The US administration, Congress and Fed were the three main macro-culprits in blowing the money bubble.(via Percy S Mistry: Blame Bush and Greenspan, not just the bankers).

Percy! If you can see this far …

Percy Mistry, a veteran of the Wall Street and the Western financial system, analysed this rather well. Yet, he cant go further than analysis. His prescriptions have been to say the least disappointing.

Percy, what stops you you from taking that leap of imagination! Why not be bold enough to start working on a non-Western model of global financial structure. Why do you persist with the insane desire that developing world (especially India) should dive headlong into this Dollar-Euro cesspool, which is designed basically to suck out wealth from the poor countries of the world.

Does it matter ... what pricked the balloon ...

Does it matter ... what pricked the balloon ...

Hide the Big Truth

One man whose voice is heard much, on the subject of Great Recession, is Stiglitz.

Joseph Stiglitz. Ex-chief economist of the World Bank, (96-99), who resigned one month before his term expired.

Stiglitz published his resignation in the New Republic, portraying himself as a dissident,  the champion of the Third World, anti-World Bank crusader, etc, etc.

Stiglitz portrays himself as a giant, against whom Lawrence Summers and Wolfenson conspired, as he chose “not to circumscribe my thoughts. So I chose to resign.”

How brave!

His targets were (as he chose to describe)third-rank students from first-rate universities.” Stiglitz knows his media. Too well, some would say.

His article in New Republic, his interview in Financial Express were all excellent ploys to build his reputation. And after all this media management, he did get a Nobel Prize. And after gaining our confidence, he slips in the Big Lie!

Pushing the case for the Big Stimulus, Stiglitz claims that the Big Stimulus

Is being paid for by the American taxpayer (Godzilla-Sized lie)

Is something that Big Business in America desperately needs to survive (small truth)

The Chinese and Japanese are footing this bill (The Big Truth)

As also are Russians, Indians and ASEAN countries (medium-to-big-truth).

To his credit, what Stiglitz has done is, tell us. A lot of little things.

Little known and little truths about little things.

When economists talk ...

When economists talk ...

We have been told the truth …

Two more people have told us the ‘truth.’ Ben Bernanke and Lawrence Summers.

Ben Bernanke announced to the world, before the National Economists Club, Washington, D.C. November 21, 2002, that he would print money.

In March 23, 2006, Ben Bernanke further decided not to tell the world how much money he was printing.

Thus Spake Ben Bernanke

Remarks by Governor Ben S. Bernanke, before the National Economists Club, Washington, D.C. November 21, 2002 (ellipsis mine)

U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press … that allows it to produce as many U.S. dollars as it wishes at essentially no cost. … …the Fed could find other ways of injecting money into the system–for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities … If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

A terse announcement by the Federal Reserve Board said,

On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Board will continue to publish institutional money market mutual funds as a memorandum item in this release.

Al ... going from from respect ... to infamy

Al ... going from from respect ... to infamy

On November 10, 2006 Ben Bernanke justified,

As I have already suggested, the rapid pace of financial innovation in the United States has been an important reason for the instability of the relationships between monetary aggregates and other macroeconomic variables.

Ben Bernanke has given ample (and more) indications about what he will do. In fact, more than indications, he was brazen enough to say, what exactly he would do!

How can the world blame Ben Bernanke now?

And then came the coup de grace. He went right ahead exploded a propaganda bomb. He decided to inform the world that the cause of the global financial crisis was the Asian ‘savings glut.’

Bindaas. No hesitation. They let it all hang out.

Chiming in

Lawrence Summers described this situation to the RBI, correctly, as “balance of financial terror.” In a speech on March 23, 2004, at the Institute for International Economics, Lawrence Summers described the US strategy as a “balance of financial terror”. Again on March 24, 2006, at the Reserve Bank of India lecture, he repeated his message.

These two, Ben Bernanke and Lawrence Summers, threw down the gauntlet, and challenged central bankers of the world. Seemingly saying, “We are doing this! Stop us if you can! Let us see what you can do about this.” And the central bankers decided to do nothing.

Except whine, beg, plead and cry.

Terrified Al ... might miss out on his Nobel for Economics

Terrified Al ... might miss out on his Nobel for Economics

What does this mean

An Indian economist explained this rather well.

Suman Bery, writing for a direction towards Toward a robust globalisation, explained,

In a famous speech exactly four years ago, Fed Chairman Bernanke represented the US as responding passively and benignly to the global “savings glut” which had developed following the East Asian crisis of 1997-98.

Even though most closely associated with Chairman Bernanke, this formulation is widely shared by respectable economists and commentators, such as Martin Wolf of the Financial Times, Professor Richard Portes of the London Business School and the Centre for Economic Policy Research, and Professor Max Corden of the University of Melbourne. The task of recycling these imbalances fell on the sophisticated financial systems of the advanced countries. In the event, for a variety of reasons, even they proved unequal to the burden placed upon them.

The trigger ...

The trigger ...

The Asian savings glut was the problem …

Ben Bernanke joins a long list of Western propagandists, who find ‘specious’ ways to blame others for Western problems. His most recent propaganda gem was to blame Asia for a savings glut.’

a satisfying explanation of the recent upward climb of the U.S. current account deficit requires a global perspective that more fully takes into account events outside the United States. To be more specific, I will argue that over the past decade a combination of diverse forces has created a significant increase in the global supply of saving–a global saving glut–which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today.

After Ben Bernanke opened the flood gates of such logic with ‘helicopter drop of dollars’ and ‘printing press technology’, and now the ‘savings glut.’

Others such ‘economists’ have rushed in, to do another tom-tom dance around this logic.

Americans are saints because they are shopping ...

Americans are saints because they are shopping ...

Eureka! It works …

The US and the World economy is suffering from a surfeit of printed money which was channeled into ’supply side’ economics. The model worked exactly as it should have!

The Chinese ‘worker’ and Indian ‘coolie’ worked his backside off. The American ‘consumer’ bloated up debt – and bought all the goodies. The debt mountain became just way too-oooo wobbly.

It crashed.

The Chinese (and Japanese, Indians and the Russians) have been left holding these pieces of paper, called American dollars.

The US has been evading transparency by not revealing M3 figures (on dubious grounds), printing money 24 x 7 x 365 and creating toxic assets. Now when the muck has hit the fan, they are acting coy.

China was right that the US is now looking after its own – and not bothered about the problems the US has created for other countries. Like this news article shows, India is unlikely to get seriously affected – which is possibly creating complacency in India about what needs to be done.

Kojak - we will all need to take a 'haircut'.

Kojak - we will all need to take a 'haircut'.

India – Poised for stagflation(from InfoChange India News & Features development news).

Why has the dollar been falling steadily? Quite simply, because US-based firms have less and less to sell to the world, though the world has a lot to sell to American consumers. America has lost competitiveness in recent decades, largely to China and East Asia. This growing imbalance in world trade (present for over two decades now) has meant a ballooning trade deficit (excess of imports over exports) for the US. It has paid for this by selling US Treasury Bonds (perhaps the most sovereign, reliable financial asset hitherto) to foreigners. Increasingly, however, the realisation has grown that the US is not in a position to redeem its $10 trillion external debt. This is almost tantamount to saying that in order to pay for goods produced by China the US has merely been printing the required quantity of dollars. Clearly, this is not a sustainable state of affairs.

The World Full Of Kojaks

The 10 trillion dollar external debt is most likely a conservative figure. It is possibly two-or three times that much. Internal debt is of course another matter. The cost of re-floating the US financial system is another US$5 trillion. So, what figure are we talking about?

US$50 trillion? Take that and try digesting it.

The only way, this can happen if the world is asked to take a massive haircut. In fact, we may have to become Kojaks for the next 20-30 years.

For the truth shall set you free …

The current crisis happened for one simple reason.

The US printed too much money, during Alan Greenspan’s tenure – and later Ben Bernanke started hiding these figures. That is all. The Emperor has no clothes at all. The US is bankrupt.

Effete, decadent and declining. Finito. Completo. Terminato. Endlich. Eindig. ändlig.

The (Western) Need For Vengeance

They hadn’t suffered yet but were preparing to, and they were perplexed by their inability to figure out who had the idea for this game. “If I knew more I could find someone to blame,” said Linda Burke, a 57-year-old service consultant at AT&T Inc. in Atlanta, speaking, no doubt, for the American people. (via Let’s start by finding some people to behead – Money Matters –

During the tech meltdown, it was Bernie Ebers (Worldcom) and the Enron guys who were made the fall guys. In 1989, it was Mike Millken. How about indicting Alan Greenspan and Ben Bernake?

These ‘incidents’ also talk about the a Western need for vengeance.

“The scale of this problem has been unprecedented and I expect the response will be, too,” said Robert Mintz, a former federal prosecutor and now a partner at the law firm McCarter and English. Someone is going to have to pay for sending the financial world into a panic and wiping out the savings of millions. (The hunt begins to punish the culprits – Times Online).

Or am I reading too much into these posts!

%d bloggers like this: