Weekend Economists--The Where's Demeter? Edition December 12-14, 2008

[Hugin]

Well, I can't answer that... Although, Demeter did mention some computer problems earlier in the week.

So, it appears, I'll be a vastly inferior stand-in this Weekend. :7

Inferior due to my lack of Demeter's magic in-box which contains the economical works of thousands of geniuses
spread widely across our fair Nation and the Globe. So, while I may start the thread, I'll have to rely heavily
on contributions from the usual group of finance wonks and wonkettes. (You know who you are. ;) )




What a week it has been... Republican Senators blocking bailouts, Ponzi schemes un-ponzied, and the largest
official job losses reported in years. Heck, even a chain of toy stores went little-red-wagon-up.

Oh, and Demeter :toast: Have a good weekend. :)

[DemReadingDU]

1. Thanks for kicking off the weekend!

I'll be back tomorrow with an article or two.

[Hugin]

2. Thanks!

I'm going to scrounge up what I can.

I'm looking forward to what you have! :)

[ozymandius]

7. ditto here

My sympathies to Demeter. Having computer problems sucks.

[Hugin]

8. Thanks for the updates Ozy.

This Big 3 bailout action is going to be the biggest and fastest moving issue of the weekend. (and rightly so... IMHO)

It's too bad Demeter isn't around, as being a resident of "The People's Republic of Ann Arbor" is right at the epicenter
of this thing... Outside of D.C., that is.

[Hugin]

3. The Pecos County Bank Acquires All the Deposits of Sanderson State Bank, Sanderson, Texas

FOR IMMEDIATE RELEASE
December 12, 2008


Sanderson State Bank, Sanderson, Texas, was closed today by the Texas Department of Banking, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with The Pecos County State Bank, Fort Stockton, Texas, to assume all of Sanderson State Bank's deposits, including those that exceeded the deposit insurance limit.

Sanderson State Bank's sole office will reopen on Monday as a branch of The Pecos County State Bank. All depositors of the failed bank will automatically become depositors of The Pecos County State Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their existing banking relationship to retain their deposit insurance coverage. Customers of the failed bank should continue to use the same banking location until they receive further information from The Pecos County State Bank.

Over the weekend, depositors of Sanderson State Bank will have access to all of their money by writing checks or using ATMs or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of December 3, 2008, Sanderson State Bank had total assets of $37 million and total deposits of $27.9 million. The Pecos County State Bank agreed to assume all of the deposits for a .55 percent premium. In addition to assuming all of the failed bank's deposits, The Pecos County State Bank will purchase approximately $3.8 million of assets, and have the option to purchase owned premises and equipment. The FDIC will retain the remaining assets for later disposition.

http://www.fdic.gov/news/news/press/2008/pr08135.html

____________________________________________________________________________________

I'd swear this happened earlier, but, it has today's date.

Same for the next post.

[Hugin]

4. BB&T Company Acquires All the Deposits of Haven Trust Bank, Duluth, Georgia

FOR IMMEDIATE RELEASE
December 12, 2008


Haven Trust Bank, Duluth, Georgia, was closed today by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Branch Banking & Trust (BB&T), Winston-Salem, NC, to assume all of Haven Trust's deposits, including those that exceeded the insurance limit.

The four branches of Haven Trust will reopen on Monday as branches of BB&T. All the depositors of Haven Trust will automatically become depositors of BB&T. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their existing banking relationship to retain their deposit insurance coverage. Customers of the failed bank should continue to use their existing branches until they receive further information from BB&T.

Over the weekend, depositors of Haven Trust can access all their money by writing checks or using ATMs or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of December 8, 2008, Haven Trust had total assets of $572 million and total deposits of $515 million. BB&T agreed to assume all of the deposits for $112,000. In addition to assuming all of the failed bank's deposits, BB&T will purchase approximately $55 million of the failed bank's assets. The FDIC will retain the remaining assets for later disposition.

http://www.fdic.gov/news/news/press/2008/pr08134.html

[Hugin]

5. Madoff Scandal: 'Biggest Story of the Year'

According to RealMoney.com columnist Doug Kass, general partner and investment manager of hedge fund Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd., today's late-breaking report of an alleged massive fraud at a well known investment firm could be "the biggest story of the year." In his view,

it is bigger than Enron, bigger than Boesky and bigger than Tyco.
It attacks at the core of investor confidence -- because, if true, and this could happen ... investors might think that almost anything imaginable could happen to the money they have entrusted to their fudiciaries.

Here are some excerpts from the Bloomberg report, entitled "Madoff Charged in $50 Billion Fraud at Advisory Firm":

Bernard Madoff, founder and president of Bernard Madoff Investment Securities, a market-maker for hedge funds and banks, was charged by federal prosecutors in a $50 billion fraud at his advisory business.

Madoff, 70, was arrested today at 8:30 a.m. by the FBI and appeared before U.S. Magistrate Judge Douglas Eaton in Manhattan federal court. Charged in a criminal complaint with a single count of securities fraud, he was granted release on a $10 million bond guaranteed by his wife and secured by his apartment. Madoff’s wife was present in the courtroom.

"It’s all just one big lie," Madoff told his employees on Dec. 10, according to a statement by prosecutors. The firm, Madoff allegedly said, is "basically, a giant Ponzi scheme." He was also sued by the Securities and Exchange Commission.

Madoff’s New York-based firm was the 23rd largest market maker on Nasdaq in October, handling a daily average of about 50 million shares a day, exchange data show. The firm specialized in handling orders from online brokers in some of the largest U.S. companies, including General Electric Co (GE). and Citigroup Inc

http://seekingalpha.com/article/110402-madoff-scandal-biggest-story-of-the-year

____________________________________________________________________________________________________

Hat-tip to Ghost Dog for this good link summarizing the impact of the Madoff Scandal.

[Pale Blue Dot]

10. I Knew Bernie Madoff Was Cheating, That's Why I Invested with Him

Interesting tidbits coming in about Bernie Madoff (read indictment here).

Specifically, we're hearing that the smart money KNEW Bernie had to be cheating, because the returns he was generating were impossibly good. Many Wall Streeters suspected the wrong rigged game, though: They thought it was insider trading, not a Ponzi scheme. And here's the best part: That's why they invested with him.

For years and years I've heard people say that investment performance was too good to be true. The returns were too steady -- like GE earnings under Welch -- and too high given the supposed strategy.

One Madoff investor, himself a legend, told me that Madoff's performance "just doesn't make sense. The numbers can't be straight." Another sophisticated Madoff investor actually went through trade confirms in order to reverse-engineer the strategy and said, "it doesn't add up."

So why did these smart and skeptical investors keep investing? They, like many Madoff investors, assumed Madoff was somehow illegally trading on information from his market-making business for their benefit. They didn't consider the possibility that he was clean on that score but running a good old-fashioned Ponzi scheme.

And another from Whitney Tilson:

One friend who saw this coming said Madoff had his own broker-dealer and a relative as his finance guy; another friend said he was suspicious because of the 1-2%/month returns with never a down month (much less quarter or year), combined with never showing a a down month (much less quarter or year), combined with never showing anyone his portfolio. 99% of the time, if it sounds too good to be true, IT IS!

http://finance.yahoo.com/tech-ticker/article/yftt_145115/I-Knew-Bernie-Madoff-Was-Cheating,-That%27s-Why-I-Invested-with-Him?tickers=^dji,&gspc,^ixic

[Tansy_Gold]

11. It's all a ponzi scheme

We've known that for a long time. Madoff was just more blatant about it -- he cut out all the middle layers, the other investment bankers and brokers and fund managers. He just took it in from one source, kept a bunch for himself, and handed the remains back to someone else.

When you have an economy that's based on this kind of wealth redistribution, depression and deflation can't be far behind.


Tansy Gold

[Demeter]

30. Anybody Who Got Involved With a Hedge Fund Got "Clipped"!

They'll have to invent a more innocuous name next go-around.

[ozymandius]

6. Wagoner Said to Confer With Paulson, Bolten on Rescue

General Motors Corp. Chief Executive Officer Rick Wagoner spoke today with White House Chief of Staff Joshua Bolten and Treasury Secretary Henry Paulson about a short-term rescue plan to keep the automaker solvent ... The talks, conducted by telephone, focused on details including the amount and source of funding.

GM Chief Financial Officer Ray Young and other executives probably will work on the details with administration staffers this weekend, although any agreement isn’t likely until next week at the earliest ... Stephen Feinberg, founder of Chrysler owner Cerberus Capital Management LP, was also in talks with administration officials today.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aJ5ckc2seT.g

[Demeter]

31. It'sIronic That Bush Ended Up With the Buck Stopping On His Little Desk

so he decides to escape to Iraq and get pelted by the natives rather than stay home and do the work he's paid for. The GOP is dead, it just doesn't know it yet. This whole jobs thing is the end for them.

It serves him right having to pay for Detroit out of his little slush fund for cronies. I hope his arm breaks from the strain.

[Pale Blue Dot]

9. Things Are Tough All Over, But Really 'Horrific' in New York

The U.S. economy is in a recession. There's no denying that. But Diane Garnick, investment strategist at Invesco, who spends most of her time on the road, says people are feeling the downturn differently in different parts of the country.

Here's a sample of observations from her recent travels:

* San Francisco: The economy is slowing but at a very slow pace relative to other regions.
* Chicago: Being hit by by woes in both the auto industry and financial services.
* Midwest: Farmers are very worried because food prices have come down sharply from their record highs.
* The Carolinas/Georgia: The pace of the slowdown is starting to picking up.

"But no city is as bad as New York," says Garnick.

Given the destruction on Wall Street this year, that's certainly understandable. But "the really bad part" is people are leaving New York because they can't afford it anymore and "they're bringing the horrific message about what's happening in New York back to their hometowns," which isn't helping anyone's mindset, she says.

http://finance.yahoo.com/tech-ticker/article/yftt_145507/Things-Are-Tough-All-Over,-But-Really-%27Horrific%27-in-New-York?tickers=GM,C,JPM,BAC,F,FXI,^DJI

[Tansy_Gold]

12. Red State Senators Give Black Auto Workers Pink Slips

http://firedoglake.com/2008/12/12/red-state-senators-give-black-auto-workers-pink-slips-while-white-collar-aig-execs-get-the-gold/


"In scuttling the Detroit automakers, the Red State Senators got a twofer -- they got to strike a blow against the union, but they also get the chance take good jobs away from African American autoworkers."

and

"Meanwhile, AIG is going to pay 168 of its top employees "retention bonuses" of between $96,000 and $4 million this year, yet there were no impassioned speeches by Richard Shelby in the Senate Press Gallery seething with moral indignation."


and


"Richard Shelby hates the Detroit automakers. He tries to dress his contempt up as concern for "fiscal responsibility" but that's just Southern code for "you didn't stand up to the unions, and you pay black people too much money."

"His "fiscal responsibility" was nowhere to be found during George Bush's 8 year budget bust-out. It doesn't take too much imagination to figure out what he really means."



Yes, AnneD, the Civil War is still being fought, at least by certain Republican elites in the South. Northern Aggression is still being resisted. And them uppity you-know-whats has got to be put back in their place.



Tansy Gold, who would very much like to see some good ol' rich boys put in THEIR place (behind bars)

[Tansy_Gold]

13. After aid bill fails, the North fights back

http://www.freep.com/article/20081213/BUSINESS01/812130355


Southern hospitality?

Metro Detroiters weren't feeling that genteel spirit Friday after the U.S. Senate -- led by a contingent of opponents from the South -- refused to approve federal loans for the Detroit Three automakers.

Michiganders' ire was focused sharply on the land of Dixie.


Southern (un)comfortable

"These Southern senators, it's all about protecting their own interests. This anti-Detroit thing," said Keith Kapera, a Compuware employee who was sitting down to eat lunch Friday at Au Bon Pain in downtown's Campus Martius Park.

Kapera, 55, of Walled Lake said he was angry about the opposition from Tennessee Sen. Bob Corker and Alabama Sen. Richard Shelby.

"I'm not happy with any politician ... but especially Shelby. For them to lecture the Big Three and try to kick Wagoner out?" Kapera asked incredulously. "We need the manufacturing base in this country. We can't let the Big Three go into bankruptcy."


Nothing nice to say

Traitors. Sellouts. Out of touch.

Talking about the senators from the South left a bad taste in Ford worker Tom Ibersen's mouth.

"I don't think those people have any idea of what they are throwing away," said Ibersen, 45, of Madison Heights.

Ibersen, who has been an electrician with Ford for 13 years, said he's tired of the lies -- like $73-an-hour wages for UAW workers. He makes a little over $30 an hour and said some of that includes his benefits.


Alabama slam

Joe Babiasz, 58, of Huntington Woods said he has nothing against the good people of Alabama -- just their choice in congressional leaders. And Shelby doesn't know what he's done to hurt his state, said Babiasz, a retired GM engineer who launched the Web site www.boycottalabamanow.com on Monday.

On Wednesday and Thursday, his site got 57,000 hits, and he had already received 2,400 e-mails. People told him they are canceling trips to Alabama, and one e-mailer even said he will drive around the state on his next trip to Florida.

"Mr. Shelby clearly doesn't understand the impact of his decision," said Babiasz, who retired in 2002.


High Anxiety

Lisa Gubachy, a financial analyst for GM -- hired in September -- sighed heavily when asked about senators like Shelby.

"Part of it is politics," said Gubachy, who also serves on the Redford Union school board. "They're hoping that President Bush takes it up. ... I'm not angry, just hopeful."

But she is anxious. The 43-year-old waved her arm around the downtown streets Friday afternoon, wondering how many other businesses might shutter if the auto companies fail.

"What wouldn't be open if the companies aren't here? ... So many jobs are tied to it," she said.


No sunshine

His hood tied tightly against the cold, Chester Adams' mood matched the gloomy skies.

"I was heartbroken," Adams said about the failure of the Senate to provide aid.

Adams, who works for Detroit's water department, said he can't understand why congressional leaders don't see this as an American issue -- and not just a Detroit one.

"They need to be more focused on helping America ... they seem self-serving ... blind to what's going on," Adams said. "The whole U.S., we are all in this together."


Lost vote

Russell Peake, 59, of Taylor said, too, he was dismayed about the Senate rejecting assistance for Detroit.

"I don't think I'll ever vote Republican again," said Peake, a Ford shareholder who has watched the value of his holdings plummet.

Contact MARY FRANCIS MASSON at 313-222-6159 or [e-mail]. Staff writer Nick Meyer contributed to this report.

[Dr.Phool]

14. Good morning folks.

Just popping in with my morning coffee. It doesn't look like there's much happening out in open sight right now. Lots of distractions.

You know something is up when Dead-eye Dick has to tell Senate repukes that they're going to ruin the party's reputation. And this coming from a guy with a 13% approval rating.

I've just had this feeling all week, the shit was just about to hit the fan, and it just doesn't quite happen. Like being stalked by a leopard.

But, so much for doom and gloom. I'm heading over to the park to visit the dogs. Maybe later, I can find something to post.

In the mean time, I'll buy the donuts. Enjoy!

[Pale Blue Dot]

15. Job openings rapidly dwindle as unemployment pushes upward

The Bureau of Labor Statistics has released the October Job Openings and Labor Turnover Survey (JOLTS) data, which indicates that there were only 3.1 million job openings in the economy, down nearly 25% from the start of the recession in December 2007.



While that's bad, what makes matters worse is that this rapid decline in job openings has been accompanied by a sharp increase in unemployment. In October 2008 the number of job seekers topped 10 million, more than three times the number of jobs available. The acceleration has been startling: the number of job seekers per opening has skyrocketed from 1.9 at the beginning of this recession to 3.3 less than a year later in October 2008. The rapid increase in this ratio clearly indicates the weakness of the current labor market and the difficulty that workers are having finding jobs. Unfortunately, this ratio will likely continue to worsen for the forseeable future, given that in November unemployment increased by another 250,000 jobs.

http://www.epi.org/content.cfm/webfeatures_snapshots_20081210

[TalkingDog]

16. Hi Prag!

I was just skimming through and caught the sub. line.

I'll offer up a tidbit.

http://www.fdic.gov/bank/statistical/stats/2008jun/fdic.html

While the early 90's look dire in terms of closing #s, the percentages are actually more favorable in the early 90's, (san calculator or math brain) with the intervening years being better still. (number crunchers welcome)

What is scary is the overall reduction in #s of seperate insitutions due to mergers, takeovers, etc. The conglomeration of wealth and services into so few organizations leaves them, us and our money by extension, vulnerable in pretty obvious (even to me) ways.

[Hugin]

18. Hi TalkingDog!

:hi:

And on top of everything else, I'm working this weekend. :/

Thanks for the offering. :)

[libnnc]

17. kick

you marketeers and economic wizards are the best part of DU

:hi:

[Hugin]

19. Thanks libnnc!

:hi:

[Demeter]

32. Thank You Prag for Taking Up The Challenge!

I'd send you my email inbox, but you'd probably kill me.

Next week for sure--I can't live without the Web!

[Hugin]

20. Madoff Victims’ ‘Tragedy’ Said to Have Escaped Scrutiny by SEC (Bloomberg)

By David Scheer and Jesse Westbrook

Dec. 14 (Bloomberg) -- Bernard Madoff’s investment advisory business, alleged to be a Ponzi scheme that cost investors $50 billion, was never inspected by U.S. regulators after he subjected it to oversight two years ago, people familiar with the case said.

The Securities and Exchange Commission hasn’t examined Madoff’s books since he registered the unit with the agency in September 2006, two people said, declining to be identified because the reviews aren’t public. The SEC tries to inspect advisers at least every five years and to scrutinize newly registered firms in their first year, former agency officials and securities lawyers said.

Madoff, 70, who had advised the SEC how to regulate markets and donated regularly to politicians, was arrested Dec. 11 and charged with operating what he told his sons was a long-running Ponzi scheme in the New York-based firm’s business advising rich people, hedge funds and institutions. His ability to avoid detection may fuel debate about the SEC’s effectiveness and the adequacy of its resources for policing money managers.

“Given what the SEC claims is the magnitude of the fraud, this is something you would hope an inspection would have uncovered,” said Mercer Bullard, a University of Mississippi law professor and former mutual-fund attorney at the SEC. “It’s hard to imagine a fraud of this alleged size not being accompanied by significant and pervasive compliance problems.”

Much more here... http://www.bloomberg.com/apps/news?pid=20601087&sid=aVzCdm.m0txc&refer=home

____________________________________________________________________________

Whaaat? (Re: My bold text above.)

[Hugin]

21. On those 'Campaign Contributions' by Madoff...

A search of Newsmeat reveals that Bernard Madoff donated approx $125,000 to the DEMOCRATIC SENATORIAL CAMPAIGN COMMITTEE (D)
during the last cycle. ('06 - '08)

Granted, a non-trivial amount, but nowhere near warranting a 'donated regularly to politicians' citation when compared
to the Republican Pioneers etc. Heck, Palin blew more than that on make-up and sundries in two months.

http://www.newsmeat.com/fec/bystate_detail.php?zip=10022&last=MADOFF&first=BERNARD

[DemReadingDU]

22. Debt Rattle, December 11 2008: The Great Fall of China

12/11/08 Ilargi writes the intro for Thursday's http://theautomaticearth.blogspot.com/

Ilargi: Yes, I will admit it. No, wait, I’ll admit two things. First, that I have to write this in record time. And second, that despite all the warnings I've given here about China in the past year, and there's been many, even I am soundly surprised to see the speed with which it unravels. I see 5% GDP growth numbers for the country now, even from "official" sources, and as I've said before, that means chaos, unrest and mother Mary knows what else is soon to come. I'm thinking Greece times 1000. China needs to grow at 8% or more, or the machine comes to a halt. From where I’m standing, I would venture there's a real chance China won't grow at all in 2009. And if I had had the time, I might have inserted the lyrics for the Stones' Street Fighting Men here.

Let's do some numbers first from yesterday's trade report. In November 2007, China had -according to its own report- a 19.2% rise in exports. November 2008 shows a 2.2% drop. The November 2008 imports are down 17.9%. Exports to the US fell 6.1% in the year, with predictions for 2009 indicating another drop of up to 20%. Exports to ASEAN countries, on the heels of a 21.5% rise in October, fell by 2.4%. Perspective: in the 1990s China’s exports grew at a yearly average of 12.9%; from 2000 to 2006 that rose to 21.1% per year. Once again: it shrank 2.2% in November. Perspective. And there's no-one, not even in the Beijing hierarchy itself, who will claim these numbers won't drop even more in 2009.

Ironically, the fact that imports are down more than exports means China's budget surplus is rising. But that's no reason to throw a party in the Forbidden City. China loses billions of dollars because of the multiple self-feeding crunches in sectors such as steel products, electrical machinery, electronics and shipping. We're not talking Wal-Mart trinkets here, these are core industries. And the plunge in imports can undoubtedly be found largely here, in commodities, pointing to a further export drop right around the corner.

The numbers might lead you to believe that China has simply focused its economic activity towards the domestic markets, with Chinese people buying the products that would otherwise have gone to the US and Europe, which might cause much less need for imports. But stories from the street don't exactly support that nice theory. They speak of millions of newly unemployed. And besides, China may have a lot of people, but not that many are rich enough to buy anything but basic necessities.

Since much of the production capacity is geared towards luxury articles that we westerners buy, there's little reason to presume all the bling and games are now ending up in Chinese hands. Today, over 40% of China’s GDP comes from exports. For the US, the number is 11%. Needless to say that falling worldwide demand -and trade- will hit China much harder than the US. China mostly still produces goods for foreign markets, and its own 1 billion remaining peasants have little use for $150 Nike’s or $1000 plasma screens.

So you have the huge surge towards cities, and towards increasing wealth. And that is going to stop, or you could say it already has. The image I see is that it’s like trying to stop a high-speed train, or an ocean-liner, on a dime. Mayhem guaranteed.

One of the biggest issues in the Chinese economy will be the bad loans that are on the books of all the banks. As long as growth continues, there'll be enough good loans to make up for the losses on the bad ones. But halt the growth, and you have panic and an insolvent domestic financial system. And let's be honest: anything that grows at a 10% or 20% rate is like a cancer, nothing healthy about it. Whether you look at US and UK home prices, or at the Chinese economy: whatever it is, healthy it ain't.

And I see reports on how great it is that the Chinese inflation rate is down, but I don't buy into that greatness: it simply means that the country has hit deflation, just like the rest of the world. And if you want to know what that means, think for a moment about China's place in global trade, and how much it resembles where the US was in 1930. Got it? Then take the next step: what happened in America in the 1930’s.

Some 150-200 million Chinese have moved to the cities to partake in the new-found riches, the largest mass-migration in the history of mankind. A similar number is -or should I say used to be- expected to follow their example. Now, many are moving back to the family "farm", only to find the countryside massively polluted, with black stinking water, not enough land to feed themselves, and heads full of broken promises.

How long will it take till the Army takes over? And who will the generals support? The Hu's and Wi's who have brought the country into this mess? I would not bet on that.

The US is about to lose the largest buyer bar none of its debt, its Treasuries, all of its toilet paper. The people in power in China will now have to turn their attention to staying in power. One more game over, one more wall to fall.

click for articles and comments
http://theautomaticearth.blogspot.com/2008/12/debt-rattle-december-11-2008-great-fall.html

This intro was also posted at DailyKos
http://www.dailykos.com/story/2008/12/12/65230/754/68/672171

[DemReadingDU]

23. MSNBC: U.S. recession jolts China

12/12/08 Trouble in Toyland: U.S. recession jolts China
Dwindling demand hastens closure of at least 3,600 factories, stirs unrest

Laid-off factory workers smash an office during a protest at a Kaida toy factory in Dongguan, Guangdong province, in China on Nov. 25 after the company indicated it would not pay them full compensation.

But wrapped up with those cheap toys are ominous economic omens for both sides of the Pacific. The rock-bottom prices show how desperate U.S. retailers are to plump up weak consumer demand — a symptom of the ailing U.S. economy and a serious problem for China, which makes nine of every 10 toys sold in American stores.

Declining U.S. orders already have contributed to the closure of at least 3,600 toy factories since the beginning of 2008, according to the Chinese government, leaving hundreds of thousands of Chinese workers suddenly out of work in this sector alone. Some of the shutdowns have triggered violent protests, a situation that could worsen if the Western recession drags on through 2009, as many economists are predicting.

full article...
http://www.msnbc.msn.com/id/28037960/

video about protests and unemployment in China
http://www.msnbc.msn.com/id/21134540/vp/28100442#28100442

slideshow 7 pictures
http://www.msnbc.msn.com/id/28145769/displaymode/1107/s/2/

[Hugin]

26. I found those images in the slideshow very troubling on a personal level.

Can't quite put my finger on it yet, tho.

(Note: Many of the slides were a little more than a year old.)

[DemReadingDU]

27. I noticed the date too

China, in calmer times?

There does seem to be some turmoil in China with factories closing down, and people unemployed. Doesn't forebode well.

[DemReadingDU]

24. China: The Power Behind the $700 Billion Bailout

December 10, 2008, 11:31 am
China: The Power Behind the $700 Billion Bailout
Posted by Heidi N. Moore

As Congress prepares to gift $15 billion to the three U.S. auto makers, there remains the mystery behind this year’s $8.5 trillion bailout cycle: where is all the money coming from?

The usual answer is “taxpayers,” but the real answer is a bit more complicated. Yes, taxes will pay part of the bill. But the rest will be piled onto the national debt, which will be financed by selling Treasury bonds to other countries. Primarily, these days, that means China and the countries of the Middle East. Chinese money, in fact, was one of the few things that kept Fannie Mae and Freddie Mac going as long as they did before a government takeover. It doesn’t take a geopolitical genius to figure out that situation will lead to awkward diplomacy.

China isn’t ignorant of this power. This month, veteran journalist James Fallows interviewed Gao Xiqing, the man who oversees $200 billion of China’s $2 trillion in dollar holdings for China Investment Corp., or CIC. CIC is China’s sovereign-wealth fund and owns stakes in Blackstone Group and Morgan Stanley. The interview in this month’s edition of The Atlantic is forebodingly titled “Be Nice to the Countries That Lend You Money,” which is Mr. Gao’s primary advice.

One of Mr. Gao’s thoughts illuminates his take on how we got into a mess that needed an $8.5 trillion cleanup. In his vision, Main Street and Wall Street share equal blame, and, like the chubby, infantilized citizens in “Wall-E,” are shunting off their problems on other countries and perhaps, soon, other planets. Here is what Mr. Gao tells Mr. Fallows:

Think about the way we’ve been living the past 30 years. Thirty years ago, the leverage of the investment banks was like 4-to-1, 5-to-1. Today, it’s 30-to-1. This is not just a change of numbers. This is a change of fundamental thinking.

People, especially Americans, started believing that they can live on other people’s money. And more and more so. First other people’s money in your own country. And then the savings rate comes down, and you start living on other people’s money from outside. At first it was the Japanese. Now the Chinese and the Middle Easterners.

We—the Chinese, the Middle Easterners, the Japanese—we can see this too. Okay, we’d love to support you guys—if it’s sustainable. But if it’s not, why should we be doing this? After we are gone, you cannot just go to the moon to get more money. So, forget it. Let’s change the way of living.

Compare that to the take of New Yorker columnist James Surowiecki:

Last year, Asian countries invested almost four hundred billion dollars in the United States, mostly in government bonds. China is effectively taking most of its excess national savings and lending it to the United States. The Japanese, who despite their creaking economy remain flush with savings, bought a quarter trillion dollars of American debt last year, even though the interest is lousy and the assets themselves are losing value. More than any other nation in history, the United States depends, economically, on the kindness of strangers. Right now, Asian investors appear very kind.

Mr. Surowiecki wrote that, by the way, in April 2005. Other publications were sending up warning signals about the portion of national debt in foreign hands soon after.

The problem, of course, is that depending on the kindness of strangers is not, by most accounts, sound economic policy.

The bailout has revealed the ignorance of many Americans about the the financial food chain. Just like consumers who believe beef comes from shrink-wrapped packages in the supermarket rather than actual cows, many Americans have long acted as though money comes from ATM machines and plastic cards. The credit crisis, with its top-to-bottom ravaging of the financial system, made that naivete impossible to maintain: the average citizen’s borrowed money comes from banks, and those banks borrow from Wall Street investment banks, and Wall Street investment banks borrow from the government, and the government borrows from China, Japan and the Middle East. A flat-screen TV bought in Dubuque is financed with part of the life savings of a salaryman in Tokyo.

Mr. Gao’s comments also reveal a bailout paradox: the more America bails its companies out, the more they will need bailing out. That is because other countries–including, yes, China–don’t have any guidelines about how TARP is being deployed. That prohibits their investment. CIC said it doesn’t “have the courage” to invest in Western banks because the fund doesn’t know how bad things will get. The U.S. government’s bailout efforts may be, despite the best intentions, hindering the recovery.

As the bailout inevitably heads into the second phase of its deployment–criticisms of misuse, and later, perhaps, villainy and indictments–the government surely will look to impose laws to ensure such a financial crisis isn’t repeated. But if Mr. Gao is right, it isn’t new laws that are needed, but a new appreciation of where our money comes from, and who we will owe in the end.

http://blogs.wsj.com/deals/2008/12/10/china-the-power-behind-the-700-billion-bailout/

[Hugin]

25. "anything that grows at a 10% or 20% rate is like a cancer, nothing healthy about it. "

Couldn't have said it better myself. :scared:

[Demeter]

33. Then China Is Going To Have to Do What All Viable Countries Do

and take care of its internal needs first. As is the US.

[Joe Chi Minh]

28. I particularly like this paragraph in Will Hutton's article in the Guardian, today:

"Germany possesses the most innovative, dynamic and powerful industrial economy in Europe, and, wisely, thought becoming a larger version of Iceland a strategic mistake it would leave to Britain. ThyssenKrupp, Siemens and BMW were better economic building blocks, it believed, than Northern Rock, HBOS or Richard Branson's latest wheeze. I have always agreed. Germany regarded its approach to the economy - to training, technological development, to the banking system's support for long-term investment, and to its cultural belief in the value of industry - as a better long-term bet, even if dull."

http://www.guardian.co.uk/business/2008/dec/14/keynesian-economic-recovery-brown-germany

[Demeter]

29. Where's Demeter?

If you scan this intricately detailed drawing, you will see in the corner of the local library a blonde in a dweebish, gray and cranberry Lapplander earwarmer hat, trying to see if her bank account has any money for a new computer so she can go home and catch up on email and blogging and such. It could be a new Waldo phenomenon!

There's only one thing wrong with online banking....

Actually, a good friend of mine told me today how she paid her mortgage with Chase, but they didn't process it, so she paid it again, and then they decided to draw both payments within hours of each other, and now she's overdrawn, but Chase can't just give her back her payment without tons of paperwork and weeks of delay....that was the one time she didn't record the confirmation number, because for years she's never had a problem with it.

And pity my sister and several million people in New England, freezing in the dark due to ice storms...if I can reach her, I'll invite her for Xmas here. The weather is still below normal, but there is heat and light!

And how about them GOP Southern Senators! They make the Detroit Lions look like talented players.

I'm having a GREAT weekend. My car now has a new alternator and battery (no more embarrassing jumpstarts), my daughter can legally live in her own home again, and I actually mended something! And there's still money for a new machine. In fact, lately I've had work crawling out of everywhere. It was hard getting enough time to get the car serviced!

This evening is our Xmas choral concert--where a month of recovery from influenza will test to the limit my ability to follow the score, hit something like the right pitch, or give a care. Merry Christmas to all, and to all a Good Night!

[DemReadingDU]

34. That's great news!

and enjoy the concert!