Does Asia’s Economic Rebound Signal the Return to Stellar Growth?

Today we present a preview from our global economic outlook for Q4, which will be released to RGE clients later this month. The full version of the outlook includes a more in-depth version of the following analysis as well as RGE’s country-by-country projections for economic growth.

Asian economies rebounded in Q2 2009 as aggressive monetary and fiscal stimuli cushioned domestic demand and quick inventory adjustment eased the downturn in industrial production. Capital inflows have buoyed the asset markets and net exports have contributed to GDP growth as imports have contracted faster than exports.

However, policy measures are inadequate to close the output gap emanating from sluggish private demand and sharp export contraction. All Asian economies will slow sharply in 2009 and grow below potential in 2010. RGE forecasts Asia to grow a mere 2.6 % in 2009 and 5.4% in 2010. Asia ex-Japan (AXJ) will grow 4.9% in 2009 and 6.6% in 2010. As the impact of policy measures fade in 2010, the pace of Asia’s recovery will hinge on the recovery of global export demand and continued risk appetite. RGE projects that Japan will contract sharply in 2009 and grow below 1.0% in 2010. Fiscal stimulus will push China’s growth to over 8.0% during 2009 and 2010. India will grow less than 6.0% in 2009 and below potential in 2010. The Asian Tigers (Singapore, Taiwan and Hong Kong), Thailand, Malaysia and New Zealand will contract in 2009 while the contraction in South Korea will be mild and Australia will barely grow. The Philippines, Indonesia, Vietnam, Pakistan and Sri Lanka will slow sharply in 2009.

Unlike 1997 or 2001, Asia cannot employ an export-led strategy to drive the economic recovery. As consumers in the advanced economies deleverage over the next few years and foreign direct investment (FDI) recovers slowly, attaining the pre-crisis GDP growth rates in Asian countries will largely depend on the governments’ ability to rebalance growth towards domestic demand and accelerate structural reforms. Government and private consumption and investment should be moved away from the export sectors. Reforms should increase government spending on safety nets and public services, move workers to the service sector, improve financial sector intermediation and diversify exports towards emerging markets. Since these reforms will take a few years, Asia’s growth in the short-term will remain tied to the U.S. economy via trade and financial linkages.

Under RGE’s baseline scenario, the U.S. economy will have a U-shaped recovery with anemic GDP growth and consumer deleveraging over the next few years. In that case, Asia, too, will have a U-shaped recovery. While Asia might have a stronger rebound compared to other regions, the strength of the recovery will vary across countries. Economies highly dependent on exports, such as Japan, the Asian Tigers and Malaysia, might witness a slower recovery and will take longer to go back to the pre-crisis growth rates. Countries with larger domestic demand, attractive asset markets, greater policy space and/or faster reforms, such as China, India, Indonesia, Vietnam and the Philippines, might witness a stronger recovery.

Export and Manufacturing Activity to Recover Sluggishly

Exports in most countries are rising on a month-on-month basis. Global inventory restocking and high base effects of 2008 will boost exports during H2 2009 and early 2010. Chinese commodity stockpiling and infrastructure spending, despite slowing from the recent highs, will benefit countries like Australia, Indonesia, Vietnam and India. Inventory restocking in China, the U.S. and EU will boost the exports of the Asian Tigers, plus Thailand and Malaysia. Exports of these countries might benefit somewhat if the Chinese fiscal stimulus boosts domestic consumption and import demand during 2010. A sustained improvement in Asian exports, however, will depend on the demand recovery in the U.S. and EU, and the revival of the global electronics cycle.

Fiscal stimulus, faster inventory adjustment and/or domestic demand recovery has revived manufacturing activity in China, India and Vietnam. Inventory restocking will boost industrial production in the export-dependent economies during H2 2009 and H1 2010, particularly in the technology sector. But the sustainability of manufacturing activity in these countries will depend on the strength of export recovery.

Domestic Demand Picking Up Slowly

Fiscal and monetary stimuli have improved mortgage conditions and retail and auto sales while the asset market rally has created some wealth. The job losses have slowed but weak hiring and wage pressures will lead to a slow recovery in consumption.

The export downturn, excess capacity and tight (albeit improving) credit conditions will keep investment sluggish until 2010, though government-led investment will pick up. Initial Public Offerings (IPOs) and M&A activity have picked up in many countries. But bank credit in emerging Asia (ex-China) is extremely sluggish, foreign bank lending is down sharply, and FDI is falling or slowing in many countries. Sluggish recovery in exports and global credit conditions will keep FDI inflows modest during 2010.

Policy Measures Will Remain Supportive

Inflation is picking up in many countries on a month-on-month basis. Most countries will exit deflation during Q4 2009 and Q1 2010 as the base effects of 2008 fade. Inflationary pressures will escalate in 2010, particularly in China, India, Indonesia and Vietnam, with the recovery in domestic demand, the closing of output gaps and low base effects of 2009.

Most central banks in the region will keep interest rates on hold through 2009 due to the fragile economic recovery and subdued core inflation. If continued capital inflows fuel asset bubbles and raise domestic liquidity, central banks will raise the bank reserve requirements, conduct open market operations and implement measures directly targeting the asset markets during H2 2009 and early
2010, before they start hiking interest rates. Countries witnessing faster economic recovery and/or vulnerable to asset bubbles and commodity prices, such as South Korea, China, India, Vietnam and Indonesia, will start raising rates in H1 2010. Countries experiencing a weaker recovery and larger output gaps, such as Malaysia, Singapore, New Zealand and Taiwan, will delay rate hikes until H2 2010.

Fiscal stimulus will be a major driver of growth in Asia, supporting consumer spending, slowing the pace of job losses and improving credit access for firms, especially the small and medium enterprises and exporters. But fiscal policy will be inadequate to close the output gap and will become a drag on growth in most countries over the course of 2010, especially if private demand is slow to recover. Fiscal concerns and inflation risk will constrain most governments from expanding the stimulus. High spending and waning tax and commodity revenues will erode the fiscal health of several countries, including Japan, India, Vietnam, Thailand and Malaysia, and cause the debt-to-GDP ratios to surge.

Sustainability of Asset Market Rally Depends on Risk Appetite

A quick economic rebound, capital inflows and better-than-expected corporate earnings have buoyed the Asian equity markets. Valuations have risen steadily though they remain below the peak levels of the boom years. The surge in markets like India, China, Sri Lanka, Vietnam and Indonesia has raised concerns that the rally might be getting ahead of fundamentals.

Asian currencies will continue to appreciate as global risk appetite buoys the asset markets, the trade balances are cushioned and the U.S. dollar remains weak. But central banks’ aggressive intervention in the foreign exchange market will limit currency gains until exports recover. In 2010, countries like India, Indonesia, Singapore and South Korea might allow currency appreciation to control headline inflation.

The real estate sector, especially housing, has picked up since Q2 2009 in countries like China, Hong Kong, Singapore, Vietnam and South Korea due to attractive prices, favorable borrowing conditions under stimulus measures, and speculative activity fueled by capital inflows and liquidity. However, slow improvement in labor market conditions, any slowdown in risk appetite and government measures to curb speculation will negatively impact the real estate sector and prolong its recovery.

0 Responses to "Does Asia’s Economic Rebound Signal the Return to Stellar Growth?"

  1. Guest   October 7, 2009 at 2:54 pm

    first

  2. Gloomy   October 7, 2009 at 3:01 pm

    Hi folks. Just wanted to let you know that I keep adding to my leap S&P 500 put pile as the market marches inevitably higher. Yes, I have incurred significant loses this year, but I am still miles in the black since I started this process in fall 2007 and I am licking my chops as the inevitable economic catastrophe will happen over the next couple of years (God knows when!!)

    • Gloomy   October 7, 2009 at 3:04 pm

      P.S.-What is really inevitable is that PE multiples will trend into the single digits, at least cutting the market in half and eventually down to my long term prediction of Dow 3000 (as many on this blog have similarly predicted). Ain’t modern capitalism a marvel!!

      • Guest   October 7, 2009 at 3:27 pm

        moron

      • Guest   October 7, 2009 at 3:28 pm

        you are pathetic.

        • Gloomy   October 7, 2009 at 4:15 pm

          Yeah, you’re right, markets can only go up….until they don’t.

    • Capone   October 7, 2009 at 11:09 pm

      hey Gloomy, for the $.02 it is worth – you have the right idea and probably do not need that much time IMHO… hopefully you have had some gold and silver in your back pocket as well…

      • Michelle   October 7, 2009 at 11:22 pm

        Gloomy,For all of our sakes I hope you’re wrong on your prediction of Dow 3000 and I’m struggling with the fact you seem happy about that happening!

        • Guest42   October 8, 2009 at 10:50 am

          I completely understand his attitude.It’s not happiness. It’s a fervent desire for truth to finally prevail, in spite of all machinations to subdue, subvert, and suppress it. A body can never heal from a wound if it remains filthy and germ-ridden.

    • The Alarmist   October 8, 2009 at 2:09 am

      You know the old Keynesian line about markets being irrational longer than you can stay liquid, right?You can count on US interest rates staying at the least past the mid-term elections, and a lot of people are watching the equity markets climb while they earn nothing on their ‘safe’ T-investments. I think I will wait to buy my puts, and then I might go for an Ultra-short when the time looks right.No point being a permabear … didn’t you read the news? Happy days are here again, Olympics or not.

    • RED   October 8, 2009 at 7:01 am

      Simple, it will happen when the Chinese remove the Yuan peg, they exhaust their USD reserves and the Fed raises interest rates.Until that process starts, you’re better off in gold.

  3. PeteCA   October 7, 2009 at 3:18 pm

    Repeating ending posts from last thread …———————Lost In A WonderlandTo me, it seems that there’s not much news these days. Sure, zombies walk the streets at night, but they’re well behaved zombies, and they hide themselves as much as they can.Perhaps I was was spoiled by the big fall, where every day was a mother of grand disasters and catastrophes. Now things just limp along in an ambiguous manner that can be interpreted by both optimists and pessimists as supporting their respective positions. Is a big move (either up or down) possible?On the up side, the Western economy is under a life support system and is kept alive with a mechanical heart and oxygen. The possibility that the patient will jump up and start running record miles any time soon seems very remote to me. Also, time does not seem to be on the side of the Western uppers, as the maintenance costs of life support are high and not indefinitely sustainable. There is therefor much pressure that the economy show some reasonable and unambiguous improvement in the near term.On the down side, things are a little more interesting. There are many downside senarios (involving such things as a dollar bust, gold, oil, a new order run by Asian powers, etc.) that sound very possible if not plausable. But political power and tradition are on the side of the Western uppers, and they are also are very good at propaganda, market manipulation, political intrigue, etc. So there is no certainly that another big fall is inevitable, or even likely.So what if the big news is that there will be no big news for two or three years? That is, conditions will continue worsening, but very slowly, and driven by such factors as population growth, dispersal of many peoples life savings, etc.. As the great poet T. S. Eliot said:”The world will not end with a bang, but with a whimper.”———————————-I suppose it depends upon which measures you use to determine whether there is a recovery. If it’s the Dow, then optimists conclude the market is showing signs of an imminent recovery. But if it’s unemployment, then pressimists conclude that the worst is not yet over (and that unemployment is more sginficant than just being a lagging indicator).Brian at ContraryInvestor has been building a pretty good case for the argument that productivity increases in the USA can only come about at the expense of wage growth. And since households are strapped for credit, and wages are not recovering, that puts any real GDP recovery in serious doubt. Looking at things from the point of view of the US consumer, yes the future does look anemic.But to Brian’s comments I would add the following … what if there is a transition and workers do experience real wage growth in other parts of the world? What if there is a pick-up in consumption by other global consumers? That, after all, is probably the key question. Can the world transition from the US consumer as the “engine for product consumption” to a different class of global consumers? The answer is unknown … but really is the key to an effective transition away from a US-dominated global economy. If the transition is rough – then we’re at least in for a double-dip recession. If the transtion gets bogged down – then we’re looking at a depression.There is too much excess industrial capacity (in places like China) that needs to be re-aligned, and too little potential for credit growth in the current class of world consumers (US consumers). This is also why the policies for the central banks are not effective – they are not promoting a real and effective economic transition.PeteCA—————————If there is a pick up in real wage growth in other parts of the world I doubt that there would be the US style consumer culture to go with it. With extra money they would perhaps look to spend it on education, health…Reply to this comment By jem on 2009-10-07 14:59:06———————————–Interesting response. So the question is – will there ever be anyone else who loves going to the mall to spend money … as much as the US consumer? Let’s hope the answer is YES – somewhere out there.PeteCA

    • Softwarengineer   October 7, 2009 at 5:33 pm

      I was blogging with the Seattle Bubble gang on somewhat the same subject; like why do they predict the current re(de?)pre(ce?)ssion bottoming out this summer with severe underemployment of about 1/5th of America’s workers getting worse to 1/4th?Let’s face it, about 50% of Seattle’s households make more than $50K/yr and expecting the top half of households to suddenly swoop down to Macy’s to fill their closets or go buy that new Prius to bail out the economy in these stressful times, is totally ludicrous.But they can always hope….LOLOur local housing markets are still tied to the deteriorating average household wages, i.e., employment levels; and the top 50% thanking their lucky stars to just have jobs, aren’t in the spending mood…..especially for high cost houses.

  4. Gloomy   October 7, 2009 at 3:29 pm

    Art Cashin from a couple of days ago:“Also, the amount of cash on hand at mutual funds is at the lowest it’s been since the high of the market in ’07.”

    • The Alarmist   October 8, 2009 at 2:11 am

      Doesn’t matter. TPTB have already demonstrated they can rig the markets to send the right message

  5. Guest   October 7, 2009 at 3:32 pm

    http://www.ft.com/cms/s/3/4a184a8a-b349-11de-ac13-00144feab49a.html?nclick_check=1so many moronic investors piling into muni. OMG.

  6. Gloomy   October 7, 2009 at 3:34 pm

    For you Pete CA:Oct. 7 (Bloomberg) — California raised the yields it may offer on part of a $4.5 billion bond offering after getting a weaker response than at a sale of short-term notes two weeks ago as investors balk at lower payouts for longer-term maturities.

  7. guest   October 7, 2009 at 7:16 pm

    Debt-Market Paralysis Deepens Credit DroughtTony Cenicola/The New York TimesJENNY ANDERSONPublished: October 6, 2009A year after Washington rescued the big names of American finance, it’s still hard to get a loan. But the problem isn’t just tight-fisted banks.Tightening the Credit StringsTimes Topics: Federal Reserve SystemThe continued disarray in debt-securitization markets, which in recent years were the source of roughly 60 percent of all credit in the United States, is making loans scarce and threatening to slow the economic recovery. Many of these markets are operating only because the government is propping them up.But now the Federal Reserve has put these markets on notice that it plans to withdraw its support for them. Policy makers hope private investors will return to the markets, which imploded during the financial crisis.The exit will require a delicate balancing act, government officials said.“You do it incrementally, where and when you think you can, and not sooner,” said Lee Sachs, a counselor to the Treasury secretary, Timothy F. Geithner.The debt-securitization markets finance corporate loans, home mortgages, student loans and more. In good times, they enabled banks to package their loans into securities and resell them to investors. That process, known as securitization, freed banks to lend even more money.Many investors have lost trust in securitization after losing huge sums on packages of subprime mortgages that had high default rates. The government has since spent more than $1 trillion trying to restore the markets, with mixed success.Until more of the securitization market revives, or some new form of financing takes its place, a wide range of loans needed to secure a lasting economic recovery will remain elusive, experts said.“Given the imperative for securitization markets to fuel bank lending, we won’t have meaningful economic growth until securitization markets are re-established,” said Joseph R. Mason, a professor of banking at Louisiana State University. Mr. Sachs agrees: “It’s very important these markets come back to get credit to businesses and families who need it, and also as a sign of confidence.”Enormous swaths of this so-called shadow banking system remain paralyzed. Depending on the type of loan, certain securitization markets have fallen 40 to 100 percent.A once-thriving private market in securities backed by home mortgages has collapsed, from $744 billion in 2005, at the peak of the housing boom, to $8 billion during the first half of this year.The market for securities backed by commercial real estate loans is in worse shape. No new securities of this type have been issued in two years.“The securitization markets are dead,” said Robert J. Shiller, the Yale University economist and housing expert who predicted the subprime collapse. The government is supporting them, he said, but it’s unclear what will happen when it extricates itself. “We’re stuck,” he said.Despite the running problems, federal officials hope to start weaning the securitization markets off government support next spring. The Federal Reserve has spent about $905 billion buying government-guaranteed mortgages in an effort to keep mortgage rates low. It will continue buying until it reaches its target of $1.25 trillion.Complicating the Fed’s plan, banks — the other source of credit next to the securitization markets — continue to rein in lending, according to data from the Federal Reserve. And next year, banks face accounting rule changes and capital requirements that could further restrict their ability to make loans.To be sure, certain corners of the securitization market are percolating again, thanks to the government’s Term Asset-Backed Securities Loan Facility, or TALF, which provides attractive financing for investors who buy the securities.Bonds backed by consumer debt — credit card debt, auto loans and some student loans — are being issued at costs close to those before the financial crisis, an indication that the market is functioning again.But the program applies only to borrowers with stellar credit. It does not cover credit card debt or auto loans for people with blemished credit histories.“The market is coming back, but a lot of it is because of TALF,” said Hyun Song Shin, a Princeton economist who studies securitization. “The big question is, Will the private issuance market stand on its own two feet without TALF, or has there been a fundamental change in the market that it is somehow hobbled permanently?”That question is hard to answer as long as the government is dominating certain securitization markets. So far, the Fed has been most aggressive in supporting the market for mortgage-backed securities, which plays a crucial role in housing finance. The Fed is virtually the only buyer for these instruments, purchasing about $905 billion worth of government-guaranteed mortgage-backed securities through mid-September. Industry analysts estimate that is about 80 to 85 percent of the market.“This is public support,” said George Miller, executive director for the American Securitization Forum, which represents the industry. “At the end of the day, the mortgage risk is held by the taxpayer.”Investors are particularly concerned about the commercial real estate market. A big worry is that $50 billion of securitized commercial property loans are due to be refinanced in the next year. If that can’t be done, a toxic mix of declining property prices and maturing loans could lead to fresh losses at many banks.“If there’s no mechanism, those properties will default,” said Arnold Phillips, who oversees mortgages and structured securities for the $50 billion in fixed-income investments managed by the California Public Employees’ Retirement System.As long as the market remains closed, banks will be reluctant to make loans for commercial real estate, since they would have to hold on to them, rather than package them into securities.Meanwhile, the programs the government has started have not changed securitization practices that many investors say were a cause of the financial crisis. Lawmakers remain concerned that when securitization comes back, it does so in a way that doesn’t put the financial system at risk.“Our challenge is to have a robust securitization process that adds value to the economy and doesn’t undermine it,” said Senator Jack Reed, Democrat of Rhode Island and chairman of the Banking Subcommittee on Securities, Insurance and Investment. He plans to hold a hearing on securitization next month to find out why consumers and businesses are still having so much trouble getting loans.

    • The Alarmist   October 8, 2009 at 2:12 am

      Doesn’t matter. TPTB have already demonstrated they can rig the markets to send the right message

    • Softwarengineer   October 8, 2009 at 2:06 pm

      We Don’t Need No Foreign WorkersDuring my parents’ era there was 1.2 worker per household [now its like 1.4]; and we made our house, almost everything in the house and the car in the driveway too….with far less workers/household than today. My dad and all the other households too, had plenty of vacation time to take us kids to Disneyland in the ’63 Polara too. America’s population was about 150M-200M back then; about half of today’s population. And we need more overpopulation today?I’d add too, a stay at home parent watching the kids [could be mom or dad] generally makes today’s daycares a complete joke, quality-wise too. Ask any family socialogist or psychologist; they’ll totally agree with me.Its in China’s, Europe’s, Japan’s, S. Korea’s, etc., best interest that America start making about half their stuff [50% maufactured $ items used in America] again. We’ve reached the last chapter and page of debt; with phony glue board housing as a subpar manufacturing replacement. We can’t buy anything from them, without a domestic wage tax base that isn’t based on debt.If these foreign countries have a brain, they’ll totally agree with me.Also, under the Obama/Bush plans; the American industrial base is just suppose to appear out of nowhere, as alleged bright technicals/businessmen start hiring for new ventures. LOL, the money’s tight and there’s no way we can compete on WTO rules with livable wages, let alone bringing in foreigners to overpopulate America and more RE price collapse.Answer: start federal contracts with Buy American provisions for “American Manufacturing” ASAP and its much better federal money spent, than giving it away to the banksters….each theroretical American industrial base job creates 3 more Buy American jobs for material/services and all the federal tax costs for the contract(s) get repaid almost immediately and its slam dunk too :-)Let the WTO eat cake, RE: concurrent restrictions we may likely need to implement to prevent world slave labor competition killing this American domestic stimulus plan to simultaneously revive the rest of the world’s economy too.

      • The Alarmist   October 9, 2009 at 2:22 am

        Well, I could argue with some of your points since I engage in international trade every day and am pointed to by those around me as a foreigner taking a good job and money from the locals. What goes around comes around, so to say. But a few of your points are headed in the right direction.It is shameless that there is even a concept of “Jobs Americans won’t do.” Some of the blame for that shameful state of affairs can be laid squarely on the minimum wage, which has driven a vast majority of the bottom level (dare I say ‘starter jobs’?) underground and has therefore contributed significantly to a youth unemployment rate in excess of 25% … but hey, don’t we feel better for taking that necessary first step toward guaranteeing those poor people whom might still find an unskilled job a living wage? Yeah, right, think of that when some gang banger jacks you for your Escapade.As for taxes, face it. You are now a serf. One of my US colleagues was surprised to hear that the US has one of the highest corporate tax rates in the developed world. He was further surprised to hear that when everything (income, social taxes, health, etc.) is taken into account, I now pay a smaller tax burden in a social-welfare European state than I did living in New York.And my wages have been increasing relative to my peers in New York as the relative growth of GDP in my corner of Europe now increases faster than that of the US. Now that is a spooky concept.You have a lot to worry about, but it is misguided to think that simply producing things is the way out. The answer is to produce things that people want, and that starts with quality and value. Until the US worker regains that sense of pride in the work they do, and until crap stops rolling off US assembly lines, you can make all the stuff you want, consume it all at home, and at the end of the day have an OK living, but it is international trade and comparative advantage that helps you continue to grow the pie. I would rather live a little on the edge in a growing economy than to live comfortably in a backwater has-been economy.Our government has also gone out of its way to kill a number of growth industries with senseless regulations. My favorite is flight training, which, because of 19 zealots from an ally nonetheless, is now a dying industry because Americans are afraid now to teach the tens of thousands who flew there because the US has the best developed air transport system in the world and is dollar for euro or rupee the best value in training dollars spent in the world. And now our government levies a “Mickey Mouse” tax on incoming arrivals in the further name of security. No wonder my colleagues would rather go to Spain.Finally, they may be working for what seems to be slave wages, but they are up and coming and they are tomorrow’s consumers of their own stuff as well as that coming from the US. If you screw them out of developing now, you’ve killed one of your natural markets for the future. But hey, you will feel good about living your nice little life behind the cages you put on the windows because the gang bangers in an increasingly moribund economy have nothing better to do than to loot from those less armed and less interested in being a free people.

  8. Guest   October 7, 2009 at 7:17 pm

    the only reason there is any growth in china and asian markets is because of their own stimulus injections. take that away from china and they would have negative GDP.

    • Guest   October 7, 2009 at 7:37 pm

      Exactly! It’s all smoke and mirrors! And the IMF is forecasting 4.1% growth for 2010- HA HA!

    • Guest   October 7, 2009 at 8:17 pm

      And consider:China Auto Sales Growth May Slow in 2010, Tong Says

      China’s auto market will grow at a slower pace next year after expanding almost 40 percent in 2009 to become the world’s biggest, said Shiping Tong, chief executive officer of China Auto Logistics Inc.[…]Chinese auto sales will be bolstered this year by the nation’s economic recovery and government stimulus spending.“That kind of growth isn’t very healthy,” Tong said. “I don’t expect it to grow at the same rate. A growth rate of 15 percent is healthy.”

      Take a look at the picture in the article and tell me if you think 15% would be healthy! NOTE: that translates to a doubling of automobile production in just a bit over 4.5 years! The Clowns are loose!And the IMF is forecasting 4.1% world GDP growth for 2010! HA HA!

  9. Guest   October 7, 2009 at 7:29 pm

    Two walking dead companies… What shame… everyone lied to and misled by some stupid progam with a stupid name… Cash for clunkers… how about a we have a Presdident and congress who are a bunch of clunkers.By SHARON TERLEP WSJDETROIT–General Motors Co. hasn’t met several significant goals it planned to achieve by year’s end, including work- force reductions and the sale of failing brands, Chief Executive Frederick “Fritz” Henderson told reporters and analysts Wednesday.Mr. Henderson outlined progress made by GM in the 90 days since it emerged from bankruptcy protection. He also announced that Mark LaNeve, GM’s sales chief and longtime executive, is leaving for a job at an unidentified company. Mr. LaNeve headed sales and marketing until Mr. Henderson restructured the management team and put former product head Bob Lutz in charge of marketing.Mr. Henderson said GM is on track to meet cash flow and cost-reduction targets, though he didn’t elaborate. GM will release financial results for the third quarter in mid-November, he said. Also on schedule are plans to shrink GM’s U.S. dealership network.The company has reduced North American production to what Mr. Henderson said is an acceptable level. GM’s global market share rose slightly in the third quarter compared to the first half of this year, he said, though the figure is still below last year’s.However, GM has about 10,000 more U.S. workers than it planned to have by the end of 2009 after buyout programs for hourly and salaried programs fell short. GM aimed to have 64,000 workers.GM also missed a Sept. 30 goal of finalizing a deal to sell the Hummer truck brand to a Chinese manufacturer. And a plan to sell Saturn to Penske Automotive Group fell through after Penske failed to find a company to build the vehicles once GM stops making them, though Mr. Henderson said the development won’t hurt GM’s restructuring.Meantime, the company’s sales have suffered amid a global sales slump, and GM lost two percentage points of market share in the critical U.S. market. Mr. Henderson said the company’s market share remains slightly ahead of the conservative estimates the company made early this year when laying out its restructuring plan.”We are knocking some of these things off and staying focused on getting the rest of these matters behind us before the end of the year,” Mr. Henderson said. “We are quite confident we will come out of this with a competitive cost structure.”Mr. Henderson faces intense pressure from GM’s new chairman and the U.S. government–the company’s new majority owner–to stem the sales slide and improve GM’s financial performance.The move to publicize its restructuring moves contrast with the more buttoned-up strategy of Chrysler Group of Chrysler Group LLC.Chrysler, which also reorganized in bankruptcy court and like GM is partly owned by the U.S. government, has said little about its recovery efforts.However, Chrysler CEO Sergio Marchionne CEO Sergio Marchionne on Wednesday said he will publicly release details of his five-year revival plan for the company on Nov. 4. The briefing, to be held at Chrysler’s headquarters in Auburn Hills, Mich., will outline product plans and the new image focus for the Chrysler, Jeep and Dodge brands.

  10. Guest   October 7, 2009 at 7:32 pm

    Fuck you Wells Fargo…!!!! You will be gone in a less than year…Wells Fargo Ups Credit Card Fees At Last Minute (WFC)Lawrence Delevingne|Oct. 7, 2009, 2:58 PMNew rules to protect credit card users from high and deceptive charges likely won’t be in effect to until December 1st.For some banks, that means a window of opportunity to get rates up while they can.Bloomberg: Wells Fargo & Co. (WFC) plans to raise interest rates on a majority of credit-card customers by 3 percentage points before new rules limiting such increases take effect, according to a company executive.Wells Fargo’s new new commericial says, “we’re with you…together, we’ll go far.” Really?

    • Guest   October 7, 2009 at 7:34 pm

      That Sucking Sound we all hear Is All The Buying Power Leaving Consumers’ PocketsJoe WeisenthalPrintTags: Consumer, Debt, Credit CrisisIt’s really hard to imagine the consumer bouncing back, with credit continuing to shrink violently, which is exactly what’s going on.The Fed’s latest stats on August are ugly. Total credit was down 5.8% (year-over-year), while revolving credit was down over 13%.

    • Guest   October 7, 2009 at 7:51 pm

      Does Buffett still own a bunch of Wells? If so, then you can rest assured (or not as the case may be) that this sucking entity will continue to suck…

    • PeteCA   October 7, 2009 at 8:40 pm

      In retrospect, they made a huge mistake by taking on Wachovia. They had enough to deal with … in terms of the fallout from the alt-A loans they made in CA. The losses fro, Wachovia are probably tipping them deep into the red.PeteCA

    • The Alarmist   October 8, 2009 at 2:13 am

      Well, if you are really in such a bind that you need to rely on your credit cards, you can go to Detroit and line up to apply for some of the good Obama stimulus money they’ve been handing out.

  11. Guest   October 7, 2009 at 7:36 pm

    October 7, 2009, 3:30 PM ET Paul Krugman: In Trade, ‘It’s Not the Great Depression — It’s Worse’WSJ @ World Business ForumNews and notes from the World Business ForumBy Kelly EvansPrinceton University economist, author and New York Times columnist Paul Krugman won the Nobel Prize in economics last year for his work on international trade — so the guy knows what he’s talking about when it comes to this subject. And he’s worried.Paul Krugman.First, he offered a few comments about the U.S. economy:1 – Based on GDP, “the recession is over, we’re back to a world of growth”2 – But, “the jobs picture is continuing to deteriorate. The recession may be over, but the bad times are nowhere near over.”3 – “This could be bad. Financial crises tend to produce prolonged hits to growth…and this is the mother of all synchronized financial crises so we almost certainly have a long, long slog before we’re fully recovered.”Then, he turned to the topic of world trade. And the picture he painted was not a pretty one.“When it comes to international trade, actually it’s not the Great Depression, it’s worse,” he said, presenting charts showing the decline in global trade activity falling much more steeply in the current downturn than during the Depression.“The scale of the collapse of world trade has been so large that it has produced a degree of international linkage that surpasses what even the pessimists imagined,” he said. “World trade acted as a transmission mechanism,” spreading economic distress “even to those countries that had relatively healthy financial systems,” such as Germany.“We really are one world economy in a way that has never been true before,” he said.Despite the collapse in trade, Krugman downplayed concerns about protectionism.The Obama administration’s move last month to impose tariffs on certain imports of Chinese tires raised much concern that nations are leaning towards protectionism — a move some economists say worsened and prolonged the Great Depression.But Krugman isn’t convinced. First, he said, protectionism was an effect –– not a cause — of the Great Depression — a frequent misconception among economists, he said. And despite “incidents” it hasn’t really been a factor in the current downturn.He added that as for the tire tariffs, they “aren’t really a big deal,” because they are “part of the rules” under world trade agreements and are temporary — rather than permanent — in nature.He added these two zingers in a question-and-answer session on-stage with Financial Times writer Gillian Tett:Perhaps trade with China in recent years hasn’t been so unfair to the U.S., he joked: “They send us poisoned toys and tainted seafood and we send them toxic securities.”On the need for regulation: “Ground beef is like asset-backed securities — you really don’t know what’s in that burger.”

    • Guest   October 7, 2009 at 7:53 pm

      Krugman is an idiot! Read Paul Craig Robert’s comments about him (see posting below).

    • The Alarmist   October 8, 2009 at 2:15 am

      No, a job-losing recovery sounds just like the game plan the Dems want. Lot’s of free labour to build those modern-day pyramids and monuments to their achievements.

      • Guest   October 8, 2009 at 7:15 pm

        Enough of your partisan BS!The fact that you can’t see that the GOP also has f8cked us shows me how myopic you really are!

    • Softwarengineer   October 8, 2009 at 11:43 am

      Recession Over Per Krugman?Let’s look at the 9/30/09 Q3 BEA Data in part:”Advance Estimate Second Estimate Third Estimate(Percent change from preceding quarter)Real GDP…………………………… -1.0 -1.0 -0.7″The rest of the BEA URL:http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htmGee, if the recession is over, how come the GDP is still negatively contracting, especially after the horrifying Q1 contractions [we’d need some real big positive 2009 GDP growth, not Q2/Q3 contractions, to make up for the lost Q1 ground, IMO]?It seems a lot you economists have a variety of 2009 “recession’s over” negative GDP rationales that contradict the one’s you had before…LOLThe recession is obviously alive and kicking IMO. The recession over fairy tale is clear mathematical fiction.

      • Guest   October 8, 2009 at 7:16 pm

        Let’s just all click our heals together now… one, two, three…

  12. Guest   October 7, 2009 at 7:56 pm

    Paul Craig Robert’s latest piece:Marx and Lenin Reconsidered

    If Karl Marx and V. I. Lenin were alive today, they would be leading contenders for the Nobel Prize in economics.Marx predicted the growing misery of working people, and Lenin foresaw the subordination of the production of goods to financial capital’s accumulation of profits based on the purchase and sale of paper instruments. Their predictions are far superior to the “risk models” for which the Nobel Prize has been given and are closer to the money than the predictions of Federal Reserve chairmen, US Treasury secretaries, and Nobel economists, such as Paul Krugman, who believe that more credit and more debt are the solution to the economic crisis.In this first decade of the 21st century there has been no increase in the real incomes of working Americans. There has been a sharp decline in their wealth. In the 21st century Americans have suffered two major stock market crashes and the destruction of their real estate wealth.

  13. Guest   October 8, 2009 at 12:12 am

    How is it that Bill Bonner (in this piece below) can state things so clearly, yet others (Roubini included) can’t?Yes, it’s going to take at LEAST 7 to 13 years IF things are left to resolve themselves, longer (perhaps MUCH so) if meddled with.The Eternal Depression

    How long will it be before this economy can walk without the feds clutching both arms? A few months ago, we wondered how long it would take consumers to put their finances back in order. Five years? Ten years? There are so many assumptions required that the numbers barely make sense. Still, if you think the total debt burden is headed back to under 200% of GDP, where it was for most of the last century, that would require the elimination of debt equal to about 160% of GDP…or more than $20 trillion worth. How do you eliminate debt? Well, some of it simply disappears…through defaults, foreclosures and bankruptcies. The rest is paid off. How? By saving. Now, imagine that the United States could put an amount equal to 15% of GDP to work paying down its debts. That’s savings and capital formation of all types – corporate as well as individual. It ignores government, which is going in the other direction. At 15% of GDP per year, paying America’s private debt down to under 2 times annual output is still about a 7-year project.So, prepare for a long dry spell. In the best of cases, the American public has to stay on the frugality wagon for 7 to 13 years.And in the worst of cases? Oh, well…that’s a different matter. The aforementioned US government is desperate to short-circuit the process of balance sheet repair. It is propping up the old tree every way it can. Thus, the whole period of adjustment may take much, much longer than it should. Instead of coming down with a crash, the limbs fall off one at a time. At this rate, the whole process could take nearly forever.As the private sector eliminates debt, for example, the feds add it. The deficits are scheduled – by the Congressional Budget Office – to be monstrous, but controllable. Cash for clunkers, cash for houses, cash for jobs – it adds up. But the CBO projections are based on very optimistic assumptions, in which the economy ‘recovers’ quickly and grows strongly. They do not take into account the real nature of the slump. It is not a pause…it is a permanent change. The Obama administration cannot, ultimately, prevent change. But it can slow down the process so much that the depression begins to seem eternal.

    • The Alarmist   October 8, 2009 at 2:20 am

      No, a job-losing recovery sounds just like the game plan the Dems want. Lot’s of free labour to build those modern-day pyramids and monuments to their achievements.You forgot to mention that you can also eliminate debt by monetising it. Inflation is the key, my friends. You will think you are richer because you might be paid more paper, but you will find you are increasingly poorer as your purchasing power is slowly stolen away to pay down the politico’s debt to their special interest friends.

      • Guest   October 8, 2009 at 7:17 pm

        I didn’t forget anything, I was presenting an article, you screaming simpleton! Now go blow some GOPers!

    • Little Saver   October 8, 2009 at 3:59 am

      7 years of 15% inflation, and problems are gone. Hypocrites (politicians, economists, bankers) are counting on it while not saying so. Play it safe, suckers, buy them 10 year treasuries and don’t sue us, for it is perfectly legal for us to destroy their value. You lose, we are paid fat checks all those years creating, trading, handling, promoting, selling debt.Bubbles up, enjoy the show.

      • Guest   October 8, 2009 at 7:19 am

        the only loser is China and Japan, two huge USA debt holder. if interest rate goes up 15%, then PAIN PAIN PAIN for all those Treasury holders. Those Treasury holders deserve all the PAIN for their stupidity.

        • Jason B   October 8, 2009 at 7:30 am

          When they depeg the RMB from the dollar, what they lose in purchasing power from dollar devaluation they gain in higher valuation from the RMB.

    • FEDup   October 8, 2009 at 6:36 am

      agree with all of the above. The basic necessities of life (food, electricity, etc) have steadily been increasing not to mention taxes and fees for everything they can dream up. One way or another, the debt will be shouldered by the middle class who again fall victim to the evil devices of the elite. Perhaps removing their power and influence via a barter system is the only way out for the continual pick pocketing of Americans.

      • Guest   October 8, 2009 at 7:18 pm

        Yup, that’s it! Decentralization of power: so the stupid Dems and the hate-infested GOPers don’t have control!

  14. blindman   October 8, 2009 at 7:34 am

    just to be clear and overt.wiki.. sorry for length of post.advertisement.. awakeinthedream … sweet.”Inside the caveSocrates begins by describing a scenario in which what people take to be real would in fact be an illusion. He asks Glaucon to imagine a cave inhabited by prisoners who have been chained and held immobile since childhood: not only are their arms and legs held in place, but their heads are also fixed, compelled to gaze at a wall in front of them. Behind the prisoners is an enormous fire, and between the fire and the prisoners is a raised walkway, along which people walk carrying things on their heads “including figures of men and animals made of wood, stone and other materials” The prisoners can only watch the shadows cast by the men, not knowing they are shadows. There are also echoes off the wall from the noise produced from the walkway.Socrates asks if it is not reasonable that the prisoners would take the shadows to be real things and the echoes to be real sounds, not just reflections of reality, since they are all they had ever seen or heard. Wouldn’t they praise as clever whoever could best guess which shadow would come next, as someone who understood the nature of the world? And wouldn’t the whole of their society depend on the shadows on the wall?Release from the caveSocrates next introduces something new to this scenario. Suppose that a prisoner is freed and permitted to stand up. If someone were to show him the things that had cast the shadows, he would not recognize them for what they were and could not name them; he would believe the shadows on the wall to be more real than what he sees.”Suppose further,” Socrates says, “that the man was compelled to look at the fire: wouldn’t he be struck blind and try to turn his gaze back toward the shadows, as toward what he can see clearly and hold to be real? What if someone forcibly dragged such a man upward, out of the cave: wouldn’t the man be angry at the one doing this to him? And if dragged all the way out into the sunlight, wouldn’t he be distressed and unable to see “even one of the things now said to be true,” viz. the shadows on the wall (516a)?After some time on the surface, however, Socrates suggests that the freed prisoner would acclimate. He would see more and more things around him, until he could look upon the Sun. He would understand that the Sun is the “source of the seasons and the years, and is the steward of all things in the visible place, and is in a certain way the cause of all those things he and his companions had been seeing” (516b–c).”.but the question of time remains unexplored /answered.observation, reflected light resonates withconsciousness in the moment yet the source ofthat light, or impulse, may be felt first, physically. apprehended visually via reflection andresonance later, depending on distance. so….in the case of visible light, earthly “visible” apprehension of solar emanations occurs a number of times but mainly twice, i.e. earthly reflection and lunar reflection with a discernible delay of an original and distinct pulse of light from the sun, the natureof the reflective surface also having its influence,contributing information.the same pulse of light is visible twice and thetemporal difference is directly related to the phasesof the moon. call me a lunatic. or solartic? i carenot. warning: “leading” members of our species have embraced fetish of all mannerincluding genocide and other forms of demon worship/complex fixation,rendering their evaluations, determinations,considerations and “world view”quite suspect. we may have to be sacrificed fortheir idea of “greater” good. uh oh!.ps. as a hobo, as it were, recently queried of me…”are you a seer?”i said “no”.he said “me neither, i’m just a dweller, i’m nota prophet”.i gave him 5 dollars for that and for being hungry.he said he was thinking about some ribs to eat buthe turned away from the pig roast tables probablyheaded for the heroin connection that every highschool student has access to courtesy of our warin Afghanistan. post debt clock here!notice, every street person immediately informsyou when bumming a smoke or asking for food moneythat they have a girl friend that is “good”.this is heroin from Afghanistan. post debtclock here!?ps. there is not enough crime scene tape in theworld to preserve the evidence of this “transferof wealth” / fraud, however, morality is buta relative and political nuisance today asfault and consequence can easily be diverted toother innocent and ignorant parties. who wouldknow or care? the dead? ridiculous.”thou shalt not kill”.seems simple and important enough as guidingprinciples go. no?our top advisers are currently instructing ourleader how to address this facile morality questionin terms of public rhetoric as to assuage thelatent “sentiments” and “empathetic” concerns of thefew interested civilians..as hobos offer heroin connections termed “good”girlfriend or “beautiful” woman so the term “economy”has become shorthand for legitimized fraud,hierarchic and arbitrary social domination, genocideand injustice, the real economy, aka, humanity’sweapon or tool of choice. the instrument of massdestruction.our shadows in the moonlight….or something like that…psss. tell me plato’s allegory didn’t foreshadowtelevision or the p.c. and associated “interweb”…. or “first do no harm”.. sound principle.http://www.garynull.org/wp-content/uploads/2009/10/GaryNullShow100709.mp3. g. null, g. celente. “your dr. has more respect for a dog than “he” doesfor your child.” or you..here, more lies leading to more war.more money for more war for more money. thanks for playing..http://archive.wbai.org/files/mp3/091006_170001taim.MP3. taking aim ralph s. and mya s.iran..

  15. PeterJB   October 8, 2009 at 7:52 am

    A trend which I just cannot enjoy:Well U-tube and video interviews and all the best interviews appear to be trending to video presentations but hej:I live in Australia where we have in my experience, the worst and most expensive Internet services of any country in the World (about 50th. in speed and 1st. in cost (averaged) of all countries) and I just cannot view video or U-tube, etc, and whatever – and this really annoys me.Besides this and Australia’s woeful infrastructure design (sic) and its’ ruling operators webgate in the USA (San Francisco) so that nothing gets in “FOC” (god forbid) and the Prime Minister’s ruling mandate (read: communist/fascist fetish/manifesto)to ‘Chine Blue Net’ (Censorship a la China) the Internet from opposing political interests, er, etc, etc, and er, etc, where porno and child abuse is optional and not prioritized – which all means that nothing much gets seen here in Oz – but it costs a lot – while the gov’ment approves so that taxation revenue collections can be maintained uninterrupted and in disguise. Just another form of taxation while after a long period of spruiking by the government to buy houses at inflated (by the gov’ment)prices = quick-draw Stevens (Head of RBA) has decided to increase interest rates and screw those suckers (and the rest) = “gotcha”!And, recently almost all the ‘isp’ and ‘telcons’ have been skimming, scamming and scalping every bodies accounts ’cause they know that nobody checks their accounts and would never suspect that a state of “Caveat Emptor” now exists in the land of OZ. Why even the governments is in on the game…So where all you people that still have Internet, I urge you to consider just how lucky you are – and desist in putting everything on video… for us unfortunatesI repeat – this is a “leadership” crisis – that is to say – “they” are all morons.Ho hum

    • Guest o   October 8, 2009 at 8:17 am

      streamed audio a problem too?

      • blindman dweller   October 8, 2009 at 4:03 pm

        pjb,out of great respect for you i will refrainfrom posting video content links but youcannot urge the elimination of audio/radiostreaming. some of these interviews have noavailable transcript and doing so would requireunrealistic dedication. but ..is progressive radio also outlawed in your country?no public radio? what is going on down there?i thought you people were way smarter than weare? seriously, what is the real problem?sounds criminal!.ps. here is an idea. how about you mail mea laptop with a huge hard drive. forget that.i’ll provide a hard drive. this is sick.you order the downloads of video / audioyou want on it and i mail the hard drive toyou once a month/week?how many laws does that break? would it work?is it legal? is it that bad down there / overhere?of course, you pay the bill.?

  16. Michelle   October 8, 2009 at 8:36 am

    This post is for GratefulGuest, all others need not reply.Do some research on the top 25 of these companies, some have quite a lot of upside left.http://www.nna100.com/stock_ranking.php?sortby=10&rev=-1&market=NYSEFWIW, I own #1 and #16 and adding on dips.

    • Michelle   October 8, 2009 at 9:59 am

      P.S.#16 changed. General Growth Properties.

      • Bob   October 8, 2009 at 10:31 am

        Didn’t General Growth Properties file BK?

        • Michelle   October 8, 2009 at 10:49 am

          YesireeBob!BK companies require a ton of research and doesn’t always mean shareholders get wiped out. Perform your own due diligence as I have.

          • Bob   October 8, 2009 at 10:52 am

            Are you saying common shareholders won’t get wipped out in this BK?

          • Michelle   October 8, 2009 at 11:00 am

            I don’t believe so, maybe some dilution, but not wiped out. I recommend you spend 4 hours minimum researching this company before deciding on whether it’s right for your investing goals.

          • Bob   October 8, 2009 at 12:50 pm

            Can you name another publicly traded company where this has occured?

          • Michelle   October 8, 2009 at 1:07 pm

            I can, but then you aren’t doing your own homework, are you? That 4+ hours of DD should point you to those other BK companies where the shareholders were left whole. I can’t make it too easy otherwise you won’t learn anything.

  17. The Alarmist   October 8, 2009 at 8:49 am

    Initial Jobless Claims in U.S. Decrease 33,000 to 10-Month Low of 521,000 — Bloomberg 8 October 2009 —Yep, we have really turned a corner …. a ‘job-losing’ recovery.I think one can call this grasping at straws if this is indeed supposed to be positive news. How’s that Hopey-Changey thing working out for you, America?

    • Guest   October 8, 2009 at 7:21 pm

      Broken record!

  18. MM CA   October 8, 2009 at 9:05 am

    The Banks are INSOLVENT! Wake up America!Video: Dylan Ratigan On Corporate Communism: “$24 Trillion Of National Capital Is Being Sucked Into A Broken Banking System At Our Expense”Another home run from Ratigan. We will complete the post later, but the clip is too important to wait until we had the time to do a write-up. So just enjoy. Runs 5 minutes. First 30 seconds are health care, then it’s banking and the bail outs.”The beneficiaries of an ongoing $24 trillion taxpayer-funded bailout…$24 trillion dollars.””That is national capital that is being sucked into a broken banking system at the expense of the rest of our country. They continue to use “Too Big To Fail” as blackmail to the taxpayer in order to get us to provide capital to them.””It is a system that takes resources from the citizenry and redistributes it to a tiny elite.””A handful of weak, un-competitive, outdated companies and industries are purchasing control of the American political system in order to stay in business using their cronyism.”It is coming at the direct expense of the rest of us in this nation. And it’s a total betrayal of everything that represents America.”http://dailybail.com/home/video-dylan-ratigan-on-corporate-communism-24-trillion-of-na.html

    • The Alarmist   October 8, 2009 at 11:51 am

      just to be clear, that’s not communism … that sort of kleptocracy is the hallmark of fascism.

    • Capone   October 8, 2009 at 1:29 pm

      thanks for the link!

    • Guest   October 8, 2009 at 4:46 pm

      Go Dylan Ratigan! And I agree with Alarmist – this is kleptocracy / oligarchy and hallmark of fascism.Thanks for the link.Watch Ratigan call-out insurance lobbyist “Are you in favor of perpetuating the monopoly for health insurance, the anti-trust exemption?”http://www.huffingtonpost.com/2009/09/29/dylan-ratigan-rips-health_n_303127.html

  19. Guest   October 8, 2009 at 10:46 am

    JUST REMEMBER THIS -> NO EXIT STRATEGY FOR A LONG LONG TIME or MAY BE FOREVERnow you know how you should invest.

  20. Pecos Banker   October 8, 2009 at 12:25 pm

    Rumblings of a trade war with China? Found the following very informative post on the issue of Obama wishing to impose tariffs on Chinese pipes over on ZH–really characterizes the diplomacy from the US side (pardon the French):”That’s right China! Fuck you, tariff the dog crap out of you we will. You will pay through the nose to lay your pipe on US. (Whispering…now in a low voice) Oh and pretty please show up to our Treasury auctions next week, we have some 7, 10 and 30 year bills we need to lay on you. Gosh darn thanks for buying our craptastic debt, without your money we are doomed. Your friends, USA.”

    • Guest   October 8, 2009 at 1:26 pm

      yeah, that is exact Obama message to China, FUCK YOU BUT PLZ BUY OUR TREASURY on weekly auction. We have couple hundred worth of treasury to auction off each week.

      • Guest   October 8, 2009 at 1:27 pm

        coupld hundred BILLIONS of Treasury.

  21. ChrisL   October 8, 2009 at 12:58 pm

    a strong dollar is in the interest of the United StatesGeithner said it last saturday.Trichet said today he thought it was very important that Geithner said it.But wait, Rubin also said the same thing in the second half of the 90s. And Snow and Paulson repeated the same thing during the last decade.In the mean time, the dollar has lost more than 40% of its value against most of the other major currencies and Gold.So who can believe that any of these treasury secretaries was credible when they said it ?Robert Triffin predicted in 1960 that the world’s international reserve currency would over the long term, loose its value as the nation issuing it would always be compelled to run ever increasing current account deficits.The interesting thing about Robert Triffin’s predictions is that the very concept of a world’s international reserve currency is flawed : it confers the nation that is issuing it an “exorbitant priviledge” (as French President Valery Giscard-d’Estaing explained in 1974) for a long period of time, but it eventually turns aginst it and becomes a fabulous peril which eventually destroys the empire.In other words, this explains why something that seems quite intuitive, is true :issuing the world’s main reserve currency confers an empire such privileges that it slowly becomes fat and lazy and eventually loses its dominationI encourage any of you to read more about “triffin’s dilemma” as the fundamental source of the global imbalances that have become so obvious today :http://blogs.reuters.com/great-debate/2009/01/13/global-imbalances-and-the-triffin-dilemma/http://www.aier.org/research/commentaries/975-triffins-dilemma-reserve-currencies-and-goldSo let’s ask the question : is a strong dollar really in the interest of the United States ? Is this obvious ? What do you think ?

    • Guest   October 8, 2009 at 1:24 pm

      forget it, let dollar fall or let 10/30 yrs yield go up. forget it, just let dollar fall.

    • PeteCA   October 8, 2009 at 1:32 pm

      ChrisUS leaders will continue to parrot the phrase “A strong dollar is in the interest of the United States” until the cows come home. Meanwhile, they are actively working to achieve a progessive devaluation of the US dollar. That is Bernanke’s Great Plan – to accomplish this transition through a steady devaluation of the dollar. The main thing he wants to avoid is a dollar crisis – or a major global currency crisis – where the dollar crashes or goes into freefall.There are many things, however, that are biting the Fed in the proverbial butt. One of them is US unemployment – which is not recovering even though the dollar is going down. Bernanke is hoping for a growth in US exports as America becomes more “competitive” due to currency devaluation, but export growth is not providing the new jobs (at least not in appreciable numbers). This is not surprising, given that the yuan is still pegged to the dollar. As the prices for US exports go down, the prices for Chinese exports go down proportionately. No leeway there.The big thing that will bite Bernanke in the rear end … is the price of oil. Now going over $70/BL. America is losing its control of the old “petrodollar empire” and we will lose the ability to gain special pricing power for oil. The end result is a big OUCH for our economy as oil heads back to $80/BL, $90/BL and even $100/BL. That is, if the world does not go into a depression (still one possible option), then that’s what we’re looking at. This is where America slams its head into the brick wall. We needed a major change in our energy policies – and we needed that revolution 15-20 years ago. Just so it could be effective today. At this stage what we’re gonna’ need is a dose of extra-strength Tylenol.PeteCA

      • Guest   October 8, 2009 at 7:24 pm

        Exactly, Pete!They’re working for the corporations, and corporations want to export! Follow the money!That stated, it IS the only real way out, to export more than you import. But it just ain’t going to happen, and in the process they will make sure that the rich corporate owners will make their money while the rest continue to get screwed: that’s how capitalism works- promises rewards in the future, but that future never really comes (because the capital is already in the hands of the few who aren’t giving it away!).

  22. Guest   October 8, 2009 at 1:22 pm

    http://finance.yahoo.com/news/With-Senate-panel-vote-apf-1452935263.html?x=0&.v=19&sec=topStories&pos=1&asset=&ccode=Democrats scumbag.

  23. slf   October 8, 2009 at 2:07 pm

    Who Launched A Sneak Attack on the U.S. Dollar?Not a single word about the Fed.I am so shocked. [/sarcasm]

  24. Guest   October 8, 2009 at 3:39 pm

    Here we go again!From my inbox”Refi Plus™ Program: Refinance up to 125% of property value”http://www.patriciasgonzalez.com/Entry level home prices in San Diego continue to go up.hlowe

    • Guest   October 8, 2009 at 4:41 pm

      wuaHAHA, QE pumping at 0% rate forever, Obama and everyone is happy!!

      • Guest   October 8, 2009 at 4:43 pm

        happy party time forever. Punch Bowl stay and refilling forever, wuaHAHA, lets QE PARTY!!!

  25. PeterJB   October 8, 2009 at 5:19 pm

    New ThreadHo hum

  26. Regan Lin   October 14, 2009 at 11:15 pm

    Asia will grow below potential for 2009 and 2010To me growing below potential is not a bad occurrence for the economy as assets are terminated and/or possibly redeployed to other sectors of the economy. Before, when the world economy was growing above its potential, many unprofitable assets were utilized to meet demand. It was greatly inefficient for the economy to take on those less productive assets. So as the world economy comes out of the recession, it will be leaner and healthier. So I believe beyond 2010, the world economy will witness higher return on asset which translates into higher profit.This asset deployment argument can be also applied to China’s argument to shift asset away from the tradable industry and into the non-tradable industry. But the thinking that as the Asian countries start to consume domestically more, it will lessen the dependence on the US and EU recovery, is too superficial. The fact of the matter is that Asia has the highest concentration of factories that manufacture non-durable to durable goods. As a result, US or EU import goods from Asia and process it then resell it back to Asia or the rest of the world. But most of the goods imported from Asia are consumed by the US and EU which made created external trade imbalances. And I attribute this phenomenon to culture.It is in the nature of Asians collectively to spend within their means, unlike American and European who are willing to spend beyond its means. Their cultural dichotomy can not be absolve in a short period of time. It is a product of history.But I believe Asian’s export-led strategy is still intact and not broken. With Intel’s number coming better than expected, Asian’s heavy dependency of electronic industry will rise along with it. When the water floats, it floats all boat. There will also be demand for supply chain specification in our economy. Asia’s export-led strategy is essentially focusing on the front end of the supply chain which is hard to be replicated. But until the US and the rest of the world starts to consume at a lower equilibrium, the government of Asian countries will still be committed to support the slowing economy.