More here.Asking to delay repayment on your debt - or defaulting, as the world’s press is carefully not calling it - has turned out not to be a good way for Dubai’s Sheikh Makhtoum to win friends and influence lenders to Nakheel, the property arm of the state-owned conglomerate Dubai World. Markets have tumbled worldwide; investors, reminded that governments can be subprime too, have dumped the debt of other dodgy-looking economies (including Greece); and in Dubai… everyone is on holiday.
What is surprising here is not that Dubai is on the verge of default. It is that anyone was willing to lend them ludicrous sums of money in the first place. Calculated Risk points out that Sir Win Bischoff, then at the (US) state-controlled Citi and now, appropriately enough, at the (British) state-controlled Lloyds Banking Group, was raving about raising $8bn of loans for Dubai last year and as recently as December chose to go public with a “positive outlook on Dubai”. Another non-surprise: state-controlled Royal Bank of Scotland was Dubai World’s biggest loan arranger. In the UK, Dubai World has been buying up a long list of property, according to Anita Likus at The Source; the assumption is it will shortly be selling.
Twenty years ago, on the night of November 9, 1989, following weeks of pro-democracy protests, East German authorities suddenly opened their border to West Germany. After 28 years as prisoners of their own country, euphoric East Germans streamed to checkpoints and rushed past bewildered guards, many falling tearfully into the arms of West Germans welcoming them on the other side. Thousands of Germans and world leaders gathered in Berlin yesterday to celebrate the "Mauerfall" - the dismantling of the Berlin Wall and German reunification - and to remember the approximately 100-200 who died attempting to cross the border over the years. Collected here are photographs both historic and recent, from the fall of the Berlin Wall. Be sure to pause on photos 12 - 15, and click them to see a fade effect from before to after. (38 photos total)
Now to the regional takeaway from our trip
We believe that few trust the United States. This is obvious in private conversation. And it is clear to all that confidence in the dollar is low. This is mostly mentioned only in private.
In public there is quiet response when the Treasury Secretary of the United States utters words about a strong dollar. Asians have heard that for years and with the many different accents of the various Treasury Secretaries. Geithner would serve the country better by ceasing to mouth the same words that his predecessor Snow and others used. He is not believed. Frankly, in some circles he is actually seen as an incompetent political hack. He is blamed by some for the insufficiency of the New York Fed under his presidency to supervise the primary dealers that failed – Countrywide, Bear Stearns, and Lehman. And the ethics issues surrounding the NY Fed under his tenure are viewed as appalling; this continues to surface in private conversations. Some folks are puzzled about why Obama maintains his support for Geithner. Some just attribute it to the President’s inexperience as a leader.
My takeaway is that our present Secretary of the Treasury is seriously and sustainably injuring the image of the United States. He has lost credibility. His actions are real and they impact markets. My conversations with those who are attempting to market GSE securities to Asians and getting rebuffed are validation enough for me on this point. When the Fed stops buying GSE mortgage backed securities, this reality will hit the markets in a re-pricing of that asset class. Spreads are going to widen.
The American federal budget deficits are worrisome everywhere. Policy promises from Washington to reduce them are greeted with great skepticism. Often they are privately described as American arrogance. Publicly, Asians are very polite and do not often subject their guests to embarrassing criticism. Privately they are quite candid. In my view they are correct: America is arrogant and seems to pretend that it is still the best and most trustworthy financial and capital market in the world. There is no basis for the US to have such a view of itself. We have squandered our reputational capital as a financial center leader.
A friend sends along the following chart. It examines the prior private sector experience of the cabinet officials since 1900 that one might expect a president to turn to in seeking advice about helping the economy. It includes Secretaries of State; Commerce; Treasury; Agriculture; Interior; Labor; Transportation; Energy; and Housing & Urban Development and excludes Postmaster General; Navy; War; Health, Education & Welfare; Veterans Affairs; and Homeland Security — 432 cabinet members in all.
Tim O'Reilly:On Friday, my latest tweet was automatically posted to my Facebook news feed, as always. But this time, Tom Scoville noticed a difference: the link in the posting was no longer active.
It turns out that a lot of other people had noticed this too. Mashable wrote about the problem on Saturday morning: Facebook Unlinks Your Twitter Links.if you're posting web links (Bit.ly, TinyURL) to your Twitter feed and using the Twitter Facebook app to share those updates on Facebook too, none of those links are hyperlinked. Your friends will need to copy and paste the links into a browser to make them work.As it turns out, it wasn't just links imported from Twitter. All outbound links were temporarily disabled, unless users explicitly added them as links via an "attach" dialogue. I went to Facebook, and tried posting a link to this blog directly in my status feed, and saw the same behavior: links were no longer automatically made clickable. You can see that in the image that is the destination of the first link in this piece.
If this is a design decision on Facebook's part, it's an extremely odd one: we'd like to think it's an inconvenient bug, and we have a mail in to Facebook to check. Suffice to say, the issue is site-wide: it's not just you.
The problem was quickly fixed, with URLs in status updates automatically now linkified again. The consensus was that it was in fact a bug, but it's little surprise that people suspected otherwise, given the increasing amount of effort Facebook puts into warning people that they are leaving Facebook for the big bad unsafe Internet:
What is so important about H.R. 1207: the Federal Reserve Transparency Act of 2009 aka the ‘Audit the Fed’ bill? This bill “To amend title 31, United States Code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported, and for other purposes.” may not sound terribly exciting, but in addition to making the Fed accountable for its quasi-fiscal activities, it could well set an important precedent for the enhanced accountability of operationally independent central banks everywhere.
The Finance Committee of the US House of Representatives has just passed this bill, which is an amendment sponsored by Representatives Ron Paul (Republican) and Alan Grayson (Democrat) to Representative Barney Frank’s HR 3996, the “Financial Stability Improvement Act of 2009″. The amendment allows the US Government Accountability Office to conduct a wide-ranging audit of the financial activities of the Federal Reserve Board. Specifically (and quoting from the RonPaul.com website):
The Paul/Grayson amendment:
As credit card companies face rising public anger, new regulation from Washington and staggering new rates of default and bankruptcy, FRONTLINE correspondent Lowell Bergman investigates the future of the massive consumer loan industry and its impact on a fragile national economy.
In The Card Game, a follow-up to the Secret History of the Credit Card and a joint project with The New York Times, Bergman and the Times talk to industry insiders, lobbyists, politicians and consumer advocates as they square off over attempts to reform the way the industry has done business for decades.
"The card issuers could do anything they want," Robert McKinley, CEO of CardWeb.com, tells FRONTLINE of the industry's unchecked power over consumers. "They could change your interest rate. They could impose an annual fee. They could close your account." High interest rates along with more and more penalty fees drove up profits for the industry, Bergman finds, as the banks followed the lead of an aggressive upstart: Providian Bank. In an exclusive interview with FRONTLINE, former Providian CEO Shailesh Mehta tells Bergman how his company successfully targeted vulnerable low-income customers whom Providian called "the unbanked."
"They're lower-income people-bad credits, bankrupts, young credits, no credits," Mehta says. Providian also innovated by offering "free" credit cards that carried heavy hidden fees. "I used to use the word 'penalty pricing' or 'stealth pricing,'" Mehta tells FRONTLINE. "When people make the buying decision, they don't look at the penalty fees because they never believe they'll be late. They never believe they'll be over limit, right? ... Our business took off. ... We were making a billion dollars a year."
Chef Dominique Crenn was raised in Versailles, France. She now makes an incredible Thanksgiving dinner, but when she first came to the U.S., the entire holiday threw her off.
She sat down with NPR's Steve Inskeep to discuss how she cooks for Thanksgiving.
"I was a little bit lost when I came here," she told Inskeep. "I had no idea what Thanksgiving was about."
In France, turkey is eaten at Christmas. So the American phenomenon of Thanksgiving turkey and dressing mystified her.
"Oh, a month before Christmas, we're gonna eat Turkey?"
But now, she's hooked. Crenn has been celebrating Thanksgiving for about 20 years. "This is a pretty cool holiday," she said.
As US President Barack Obama glided through China, a chorus erupted in New York and Washington: the problem with the global economy is China's exchange-rate policy, and Obama's No 1 job is to slay it. It's sad that these people actually believe what they are saying: the same "logic" got the world into the current mess. In the feverish hallucination of salvation, they think that moving China's currency policy would right all wrongs.
The US Federal Reserve is the biggest currency manipulator in the world. Not only does it keep the short-term interest rate at zero through its vast purchase programme for mortgage-backed securities, it also keeps credit spreads and bond yields artificially low. Its manipulation stops money, bond and credit markets from pricing either the Fed's policy or the US economic plight. All the firepower is packed into the currency market, giving speculators a sure bet on a weaker dollar and everything else rising. Here comes the biggest carry trade ever: the Fed is promising no downside for shorting the dollar.
The US Treasury writes an annual report, judging if other countries are manipulating their exchange rates. It should look in the mirror. Even though the Fed is not directly intervening in the currency market per se, its manipulation is equivalent to pushing down the dollar by non-market means.
As US President Barack Obama glided through China, a chorus erupted in New York and Washington: the problem with the global economy is China's exchange-rate policy, and Obama's No 1 job is to slay it. It's sad that these people actually believe what they are saying: the same "logic" got the world into the current mess. In the feverish hallucination of salvation, they think that moving China's currency policy would right all wrongs.
The US Federal Reserve is the biggest currency manipulator in the world. Not only does it keep the short-term interest rate at zero through its vast purchase programme for mortgage-backed securities, it also keeps credit spreads and bond yields artificially low. Its manipulation stops money, bond and credit markets from pricing either the Fed's policy or the US economic plight. All the firepower is packed into the currency market, giving speculators a sure bet on a weaker dollar and everything else rising. Here comes the biggest carry trade ever: the Fed is promising no downside for shorting the dollar.
The US Treasury writes an annual report, judging if other countries are manipulating their exchange rates. It should look in the mirror. Even though the Fed is not directly intervening in the currency market per se, its manipulation is equivalent to pushing down the dollar by non-market means.
Goldman Sachs apologised for its role in the financial crisis on Tuesday and pledged $500m over five years – or about 2.3 per cent of its estimated bonus and salary pool for 2009 – to help 10,000 US small businesses recover from the recession. The moves come as the bank tries to defuse a political and public backlash over its plans to share billions of dollars among top dealmakers after rebounding sharply from the turmoil and earning record profits in the first nine months of the year.
Lloyd Blankfein, Goldman’s chief executive, told a corporate conference in New York that the bank regretted taking part in the cheap credit boom that had fuelled the pre-crisis bubble. “We participated in things that were clearly wrong and have reason to regret,” said Mr Blankfein. “We apologise.”
Mr Blankfein also told the conference he wished he had not told the UK’s Sunday Times newspaper that Goldman did “God’s work” – a remark that was seized upon by the bank’s critics – and said it had been meant as a joke.
Mr Blankfein spoke hours before Goldman revealed plans to invest $500m over five years in business education, technical assistance and venture capital to help 10,000 small businesses across the US. The yearly amount of about $100m to be spent on the initiative – which will be overseen by a panel co-chaired by Warren Buffett, a Goldman investor – is equivalent to a good trading day at Goldman. In the third quarter, the bank had 36 days in which traders made more than $100m.
Mr Buffett told the Financial Times that the small business programme was not a response by the bank to recent criticism. “This is a big initiative,” he said. “This is not a one-day or one-year wonder. It’s a continuous programme.”
The financial crisis hasn't been kind to General Electric Co. Its stock has lost almost half its value, the government has stepped in to prop up its enormous financial arm, and sales have slumped in core industrial businesses.
But Chief Executive Jeffrey Immelt now has his eye on a huge new pool of potential revenue: Uncle Sam's stimulus dollars. Mr. Immelt, a registered Republican, quips about the shift in thinking in the nation's corner offices: "We're all Democrats now."
GE has high hopes for the strategy. It says that over the next three years or so it could bring in as much as $192 billion from projects funded by governments around the globe, such as electric-grid modernization, renewable-energy generation and health-care technology upgrades.
The company is just starting to see a payoff. Last month, for example, President Barack Obama announced $3.4 billion in government-stimulus grants for power-grid projects. About one-third of the recipients are GE customers. GE expects them to use a good chunk of that money to buy its equipment.
The government has taken on a giant role in the U.S. economy over the past year, penetrating further into the private sector than anytime since the 1930s. Some companies are treating the government's growing reach -- and ample purse -- as a giant opportunity, and are tailoring their strategies accordingly. For GE, once a symbol of boom-time capitalism, the changed landscape has left it trawling for government dollars on four continents.
The scene is Detroit, a training room at the headquarters of one of the three great US car companies. A group of corporate vice-presidents is attending a course being given by a distinguished management thinker.
“What you are telling us is great,” the VPs say, “but you are talking to the wrong level. You should be speaking to the next tier up.” The next week, working with more senior managers, he hears the same thing. “This is great, but you are talking to the wrong level. You should be speaking with the chief executive.”
The week after that, our thinker finally gets in to see the boss. “This is great,” the CEO says, “but you should be speaking with my subordinates – I’d need their support in order to do it.”
This is a true story, as told by Russ Ackoff, the management thinker in question, who died a few days ago, aged 90. Two key Ackoffian ideas emerge from this tale. First, do not wait for others in the business to start changing things. Go and do it yourself. But second, and more important: never forget that everyone in the business is interconnected, that they are all operating as part of a system, that tinkering with one part of the company is never really enough, and may even make things worse. You need to see the business as a whole, as a complete system, if you want to make lasting improvements to it.
Too much debt got us into this mess, and too much debt will see us out of it. Socialize the risk of a new cycle of open-throttle lending and cling to the monetary system that assures a repeat crisis. Such, approximately, is the global policy-making consensus. Central bankers and finance ministers have achieved an uncommon meeting of the minds. The cure for what ails us is the hair of the dog that bit us, they prescribe, though not in exactly those words.It's no small thing that China is especially enamored of the shot-and-a-beer-for-breakfast approach. Nothing about China is small or insignificant nowadays, since the Chinese economy is actually growing. It might, indeed, account for 74% of worldwide GDP growth in the three years to 2010, the International Monetary Fund estimates. Since 2005, China has generated 73% of the global growth in oil consumption and 77% of the global growth in coal consumption. By the looks of things, it accounts for a fair share of the growth in worldwide luxury-car consumption, too:
When I was 14, Warren Buffett wrote me a letter.
It was a response to one I’d sent him, pitching an investment idea. For a kid interested in learning stocks, Buffett was a great role model. His investing style — diligent security analysis, finding competent management, patience — was immediately appealing.
Buffett was kind enough to respond to my letter, thanking me for it and inviting me to his company’s annual meeting. I was hooked. Today, Buffett remains famous for investing The Right Way. He even has a television cartoon in the works, which will groom the next generation of acolytes.
But it turns out much of the story is fiction. A good chunk of his fortune is dependent on taxpayer largess. Were it not for government bailouts, for which Buffett lobbied hard, many of his company’s stock holdings would have been wiped out.
Berkshire Hathaway, in which Buffett owns 27 percent, according to a recent proxy filing, has more than $26 billion invested in eight financial companies that have received bailout money. The TARP at one point had nearly $100 billion invested in these companies and, according to new data released by Thomson Reuters, FDIC backs more than $130 billion of their debt.
To put that in perspective, 75 percent of the debt these companies have issued since late November has come with a federal guarantee. (Click chart to enlarge in new window)
Twenty-years after the fall of the Berlin Wall, German Chancellor Angela Merkel addressed a joint meeting of Congress to discuss issues around the world including Afghanistan, climate change and int'l financial regulation.
