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UK loses top AAA credit rating

February 23, 2013 1 comment

British Economy: What solution? Import another 100-Lakshmi Mittals+Ratan Tatas..

British companies are making third-grade acquisitions abroad - which is not helping British industry to stay the course  |  Cartoon on Jan  15  2013  by Randy Bish  via Cagle.com

British companies are making third-grade acquisitions abroad – which is not helping British industry to stay the course | Cartoon on Jan 15 2013 by Randy Bish via Cagle.com

T

he combined debt of the UK economy – State, Corporate and household debt is at a staggering 500% of the GDP. This is the debt that the UK economy has to support. Assuming weighted average interest rates on this debt is at a low 5%, it means that the UK economy is spending 25% of its production on interest payments.

Since the savings rate of the UK is low-to-negative, it means that the UK economy will borrow more – just to make interest payments.

What could be a solution?

Massive inflation to get this debt down quickly.

Or slowly ratchet down the debt, and write-offs, low-inflation,  and desperate prayers that the economy:

  1. Hits another North Sea oil
  2. Builds another 1000 ARM-chips kinds of company
  3. Imports another 100-Lakshmi Mittals+Ratan Tatas.

How likely is any of this?

The UK has lost its top AAA credit rating for the first time since 1978 on expectations that growth will “remain sluggish over the next few years”.

The ratings agency Moody’s became the first to cut the UK from its highest rating, to Aa1.

Moody’s said that the government’s debt reduction programme faced significant “challenges” ahead.

The UK has had a top AAA credit rating since 1978 from both Moody’s and S&P.It added that the UK’s huge debts were unlikely to reverse until 2016.The UK’s net sovereign debt was the equivalent of 68% of the country’s annual economic output, or GDP, at the end of last year.All three major credit agencies last year put the UK on “negative outlook”, meaning they could downgrade its rating if performance deteriorates.Germany and Canada are the only major economies to currently have a top AAA rating – as much of the world has been shaken by the financial crisis of 2008 and its subsequent debt crises.

via BBC News – UK loses top AAA credit rating for first time since 1978.

US$ 150 Billion FII Inflows: India’s Next 10,000 Businesses

November 2, 2012 2 comments

In the last twenty years some ten thousand Indian business attracted US$150 billion investments. What is India doing to grow the next ten thousand businesses?

Creating the next 10,000 small businesses will secure India's economic future.  |  Cartoon titled Big Bad WalMart By J.D. Crowe, Mobile Register - 12/6/2005 12:00:00 AM; via PoliticalCartoons.com Cartoon.

Creating the next 10,000 small businesses will secure India’s economic future. | Cartoon titled Big Bad WalMart By J.D. Crowe, Mobile Register – 12/6/2005 12:00:00 AM; via PoliticalCartoons.com Cartoon.

India’s total forex reserves are now around US$300 billion. Simplistically, one could claim that half of this was contributed by investments in Indian businesses by foreign investors who seeks to share profits – without aiming for control.

Even as foreign institutional investors (FIIs) have crossed the $150-billion mark in net investments in Indian stocks over the past two decades, domestic investors are concerned about the markets’ dependence on foreign money.

According to the data published by capital markets regulator Securities and Exchange Board of India (Sebi), FIIs have had a net investment of $152 billion till October 30. In October alone, FIIs put in $3.5 billion, which took the total value above the $150-billion mark.

Sebi’s data since November 1992 show FIIs have made $119.6 billion of net investment in equity and $32.4 billion in debt through stock exchanges, primary investments or other routes.

According to the regulator’s records, there are 1,751 registered FIIs in India. Sensex, the benchmark index of the Bombay Stock Exchange, has risen to 18,415 from 2,929 in this period.

via FII inflows top the $150-bn mark in India – (Links supplied).

Small business - over-regulated and underfunded. |  Cartoon source and credit embedded

Small business – over-regulated and underfunded. | Cartoon source and credit embedded

Between Foreign Direct Investment (FDI), which is usually accompanied by case-specific exemptions, permissions, policies, rebates, FII seeks simpler systemic and transparent exemptions, permissions, policies, rebates. Indian businesses have attracted FII flows rather easily – and India has always been a laggard in FDI inflows.

Between 1970-1990, India created many small business that needed some capital to become world class. It is mostly these companies that got the US$150 billion. These are about 10,000 companies – mostly listed on the stock exchanges.

India’s main issue is that today the next 10,000 companies that can attract US$150 billion are nowhere in sight.

The Indian Government is busy protecting and fixing older businesses – while next-generation of 10,000 businesses are on no one’s radar.


The World’s Most Reputable Companies

May 23, 2009 2 comments
Is that what reputations can be built upon?

Is that what reputations can be built upon?

Reputation Institute collected survey data on 600 companies globally. Only people in a company’s home country and familiar with the company could rate it. So Americans could only rate American companies they knew about. It seems they don’t like their companies as much as Brazilians do.

Brazil had the second highest percentage of its participating companies ranked above the global average–76%–while 62% of American companies received pulse scores above the average. However it’s the people of India who love their companies the best. Of India’s 27 corporations ranked by the institute, 24 (89%) placed above the average. Seventeen of them landed in the top third of the list. (via The World’s Most Reputable Companies – Forbes.com).

What does one make of this

This is interesting? How is this data to be read?

Is this a Indic pattern where people are not imprisoned in large numbers, where people with criminal records get elected to the Parliament – and companies are trusted to such a significant extent!

The real pandemic – Sunita Narain

May 23, 2009 2 comments
Indus Valley seal showing domestic animals

Indus Valley seal showing domestic animals

Take swine flu — now renamed. We know it started in La Gloria, a little town in Mexico. We know a young boy suffering from fever in March became the first confirmed victim of the current outbreak, which, even as I write, has reached India. What is not said is this ill-fated town is right next to one of Mexico’s biggest hog factories, owned by the world’s largest pig processor, Smithfield Foods. What is also not said is that people in this town have repeatedly protested against the food giant for water pollution, terrible stench and waste dumping. (via Sunita Narain: The real pandemic).

This will jolt you upright

There were two things about this post which made me sit up.

annual-world-wheat-production

Annual World Wheat Production

One – The real story behind the ‘probable’ pandemic. This is something that most mainstream media writers do not tell. Take official Government press releases, (sometimes) change the language and call it news. Sometimes, they help in the cover up. If this story does not become well-known enough, Mexico and its poor will be blamed for the starting this pandemic – by the West.

Two – the fragile state of US agriculture, specifically, and the West in general.

About 46,000 ‘corporate’ farmers, account for nearly 50% of US farm output – and most of the US$20 billion in subsidy. The US Government prints vast amounts of currency notes or issues US Treasury Bonds, which are lapped up (earlier by the Middle East Oil Potentates, and the Chinese these days). This money is then handed over to these ‘American farmers’.

The US agricultural system

An interesting situation exists in the food sector – especially in the US. Giant food corporations, killed buying competition with high prices (to farmers), direct buying from farmers (at higher prices), monoclonal seeds that destroy bio-diversity. And the US consumers are not getting the lower food prices that are being promised in India.

Industrial crops will create a foodgrain crisis

Industrial crops will create a food-grain crisis

Farmers became dependent on corporate supplies of seeds (at high prices) and corporate purchases by the same corporations (at low prices). Today, an ‘efficient’ and ‘hi-tech’ agricultural farm sector in the US needs more than US$ 20 billion (conservative estimates are US$12 billion) of subsidies to survive.

The US-EPA says, “By 1997, a mere 46,000 of the two million farms in this country (America), accounted for 50% of sales of agricultural products (USDA, 1997 Census of Agriculture data) (bold letters supplied) – and gobble up most of this huge subsidy that lowers Third World agricultural prices. These lower agricultural prices devastate agriculture in Third World countries, creating man-made famines. These man-made famines, of course, gives the West a false sense of superiority.

A study in contrast

The Indian agricultural system, with nil subsidies, working with cost disadvantages, does not have giant buying corporations and monoclonal seed stock, is holding its own against subsidized agricultural systems of the West. And paid hacks of these Western corporations are trying to tell Indian consumers and policy makers that these giant corporations will cut food costs in India.

Economic crisis

Economic crisis

These giant corporations are aiming for entry into India – promising ‘efficiencies’ in buying (which will give consumers a better price), and higher prices for farmers (which will increase farm incomes). Of course, this will last as long as there is competition.

Once, these giant corporations, fueled by huge amounts of debt and equity, drive out competition, they will lower the boom on the consumers and the farmer – like in the USA.

Stuffed and starved

Raj Patel, in his book, Stuffed and Starved, demonstrates how global food corporations are behind global food habits, imbalance traditional diets, creating disease epidemics (like diabetes) – and how India needs to be careful before crafting industrial policies that encourage these global corporations to destroy Indian agriculture. A book review extracts some key points as follows,

Polluter cleans up principle ought to apply (Carton by David Horsey; courtesy - indianinthemachine.wordpress.com). Click for larger image.

Polluter cleans up principle ought to apply (Carton by David Horsey; courtesy - indianinthemachine.wordpress.com). Click for larger image.

What we think are our choices, says Patel, are really the choices of giant food production companies. Millions of farmers grow food, six billion people consume it. But in between them are a handful of corporations creating what Patel calls “an hourglass” model of food distribution. One Unilever controls more than 90% of the tea market. Six companies control 70% of the wheat trade. Meanwhile, farmers across the world are pitted against each other, trying to sell these gatekeeper companies their produce. And if you think the consumer comes out on top because of all this competition, think again.

The End of Bretton Woods

With the collapse of Bretton Woods, this will become increasingly difficult. Where will US agriculture be without subsidies – in a massively high costs zone. US food exports will shrivel and global agricultural prices will reach (at least) 200 year highs (my estimate). And that will be the golden hour for Indian agriculture. What is the only dark cloud in this scenario – GM seeds which the West is pushing down the reluctant Indian agriculturists’ throat. With significant help from the Indian Government.

Bank Regulators Clash Over U.S. Stress-Tests Endgame (Update1) – Bloomberg.com

April 25, 2009 2 comments

Stress Test

The U.S. Treasury and financial regulators are clashing with each other over how to disclose results from the stress tests of 19 U.S. banks, with some officials concerned at potential damage to weaker institutions. (via Bank Regulators Clash Over U.S. Stress-Tests Endgame (Update1) – Bloomberg.com).

What are banking insiders saying?

Banking insiders think that all these banks are practically insolvent. How does Obama and his cohorts deal with? Mega mergers? More cash infusions. Or will the US banking also finally end up with the Big 3?

Did the stress crack them up?

Did the stress crack them up?

Public sector or oblivion

During the Great Depression, more than 19 auto companies (similar to the number of banks today) were folded into the Big 3. The Big 3 lived to fight for another 70 years. In their death throes, the US Big Auto is likely to go the way European auto sector has gone – public sector or oblivion.

Saddam lives (through his words)

The way it looks, it will mean the Mother Of All Mergers. At which point, there is no team of accountants in the world who can figure out what is where, or what condition what is in? And then the evasions, the lies the obfuscation can continue for some more decades?

Real low … real truth (seen an oxymoron like that?)

The real question – who will pay for it?

Not the Americans! No siree. Definitely not.

Will the Lilliputs manage a soft landing?

Will the Lilliputs manage a soft landing?

Neither the American super-rich or the American welfare-poor? Not the American tax payers or the American tax evaders? Not the American Whites or the American Blacks?

It is the Chinese, the Russians, Indians, Brazilians and above all the Africans will pay for this! They have done, what bankers call non-recourse lending! The Chinese, Russians, Indians, Brazilians and the Africans, have no recourse. Who will the Chinese go to, for redeeming their US$2 trillion?

The bankrupt US of A? Welcome to the real world.

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