Tuesday, February 24, 2009

Big Trouble in Eastern Europe!

While all eyes are focussed on the problems in USA, big trouble is brewing in Eastern Europe. There appear to be a currency crisis similar to the Asian crisis in the making in these economies. What is worrying is these Eastern European economies borrowed plenty from the already sinking banks in Europe and may prove the final nail in the coffin.

The more you examine this crisis, the more you realise the scale is much larger than you imagined. Yesterday, CNBC reported that AIG lost US$60B in a single quarter and needs more govt aid.

This mess is not going to end so easily.


Anonymous said...

Today Straits Times has an article that say the US economy will recover in the second half and so Singapore economy will follow suit. So how true?

LuckySingaporean said...

I really can't say. Even if the economy upticks is it going to last? The Chinese economy showed some signs of recovery due to the stimulus package there but they had to put in a train of stimuli to keep propping it up.

LuckySingaporean said...

I really can't say. Even if the economy upticks is it going to last? The Chinese economy showed some signs of recovery due to the stimulus package there but they had to put in a train of stimuli to keep propping it up.

Anonymous said...

they're solution is to make you spend. LOL.

a kind of chicken said...

hey lucky. I have a qn. Its not totally my question, but I have consolidated the opinions from a few sources.

The fighting of the recession, seems to be done by stimultaing demand and there is an endless debate on how many zeros should be on the said stimulus. Idea of stimulus is that this will create a virtuous cycle, where the workers get paid more and can consume more and the economy will grow. So far, so good.

Problem is that a lot of the stimulus is in America. While the factories are in China. Getting the chinese factories to produce more will not increase american's spending power. Hence, no virtuous cycle.

The chinese will not spend more (not only because they are chinese) but also because they are simply not paid enough to spend more.

Hence, unless we address the wealth distribution, more stimulous packages will not create any virtious cycle.

But there is virtually no debate on how to address the real issues (as I see them). Instead we focus on the number of zeros in stimulus.

Is my analysis right and every one is mad? Or did I miss something. I would appreciate your opinion.


Onlooker said...

Their problem is they can't agree to a method without stepping on their own self interest.
It may seem (from the youtube video) like Berlin is behaving selfishly but part of that is due to France President Nicholas Sarkozy and Brit PM Gordon Brown being not diplomatic enough.
Now that Berlin has agree to a stimulus, They can pull through if
they remember why they started the EU in the first place.To boost their economic prowess as a group.

(sac)Or they could use our ultra Elite, efficient, Clean ,"send ah kong to JB" and "Anonymity is illusion" $$$million$$$ Dollar Ministar. LOL. Who only know the standard answers , Yes, to every policies.

Chicken: Bingo, You see the crux of the issue for China.

bbqchickenwings said...

lucky, this is fear-mongering. you are giving me nightmares. is there anywhere I can put my money and know its still of value 2 years from now? Can the Sing dollar be still as strong? Should I buy gold, is there a possibility the price of gold will collapse too?

Anonymous said...

The papers in USA are running stories on blocks of empty condos and office buildings in Beijing due to the property boom.

We have the Dubai on the verge of collapse. Singapore Air flies there regularly, huh :-)

Singapore Strait Times is just parroting what the PAP dogs, still reeling from the confusion, are cooking up to brainwash the people.
First, Golden period, then Recovery.

So, where is the SHIT in between? They want to distract people from their million dollar salary.

Anonymous said...

" a kind of chicken" above asked a very good question, which perhaps may be summed up "Is it all about pumping money into the markets?"

I think fundamentally it is about preserving the "eco-system" of society.

For this reason, I think banks should not be allowed to collapse. Instead they should be saved but nationalized as per PM Gordon Brown proposal which was taken up by EU and apparently also by the US.

For the same reason of saving this "eco-system", retrenchments should also be closely monitored and strictly controlled by governments. But ironically in Singapore the government bank DBS was the first bank to start retrenching and many people at that.

Excess llike multi $million dollar salaries and bonuses for bankers (and politicians as in Singapore) should also be done away with. Lack on the other hand should be forbidden and this requires a social safety net represented traditionally by state welfare.

Although in Singapore, the government thought it has created a better alternative to state welfare through the CPF system, it now turns out that the money had been squandered by the government through all kinds of stupid investments. An estimated S$100 billions or more of the reserves - which made up largely of CPF savings - had gone down the drain in 1 short year. How is the future of the people going to be assured? Only by reinstating state welfare.

If the eco-system of society is preserved, the lack of money is secondary. This is because the real value lies in a developed eco-system, the developed market.

It is like if you are healthy and skilled, you should'nt worry too much you don't have much money because you can still go out and earn them.

Money is an artificial thing created by humans to represent value. But real value lies in skills, infrastructure, industries, even family cohesion, peaceful co-existence among races, law and order.

Governments just need to curb excess (greed) and lack among the people that may wreck up the eco-system.

For now it is only right governments provide as much money as they can to failing banks and major industries caused by the liquidity problem.

This begs he question why Lehman Brothers was allowed to collapse and caused by a fellow bank JP Morgan as reported in this Bloomberg article.

Furthermore the state of other big banks like Citibank, Merrill Lynch, UBS and Barclay - which incidentally the PAP has invested more than S$40 billions into and now worth only a fraction of their value 1 year back - are also on the verge of total collapse..

The US govt should see to it that this does not happen, even though their bankruptcy can result in writing off for good $trillions of derivatives that other nations have bought up with their trade surplus. Obama should not allow the banking power brokers behind to orchestrate all this.

Anonymous said...

sounds like whitewashing to me. LOL

Taishan said...

There's loads of shit in the banking system and economy. Probably about 31 trillion in the US alone. And probably even more in the EU zone.
Until most of these get flushed out it's going to be a long, slow ride to hell.

Anonymous said...

"The chinese will not spend more (not only because they are chinese) but also because they are simply not paid enough to spend more."

You think we are paid enough to spend more? For that matter, you think the rests of the world are paid enough to spend more?

What we are seeing her is that...people are getting smarter with their money!!

They are beginning to realize they don't command leader's salary but they too want financial security when they age or be ABLE to retire( not necessarily completely retire).

On that note, what do you think will happen to the local economy and the world with this mindset?

Anonymous said...

Pumping more fiat/debt-created money into the financial system will only prolong the inevitable. Demand has collapsed, deflation is next, asset value must be written down, currency value will drop. Growth thru endless resource consumption has to burst at some point, and this point was reached in the early 2000s. The world has not woken up to a fundamental economic praradign shift - sustainability.

Anonymous said...

To add, growth thru sustainability will come from technological leaps. And tech leaps will come from engineers and scientists. Spore is right to pump money into R&D. Invest in finance is a mistake, which is at most a support industry. The US and Japan will emerge to drive the new growth paradigm, because their democratic political systems and openness is conducive to innovations.

Anonymous said...

2007 GDP 'Million
1 United States 13,811,200
2 Japan 4,376,705
3 Germany 3,297,233
4 China (PRC) 3,280,053

China's GDP need to increase by 42% in order to replace a 10% drop in USA's GDP. There is no way that China can save the world even if want to. That is why when USA sneezes, the world catch a cold.

Anonymous said...

Is the huge debt problems of the US an issue that suddenly pops up of nowhere?

The fact is that it has been there for more than a decade at least. It had been building up but the masters do not mind because with a stroke they can write it off ... just like any other countries that kept defaulting on loans from IMF and World Bank.

US is a hyper consumerist society encouraged by rampant credit card usage and over-consumption in general.

Every country wants to sell to the US. Then "bang" everything fell flat, hah. But not that the masters are surprised at all.

Surely they know about the so-called "problems" about the financial system all along. They kept it this way ... by design lah :-).

On such structural problems, one stockbroker who wrote about the 1987 stock market crash wryly said: "Before the crash people were happily investing in the stock market ; but when it crashes, people change their thinking completely, saying stocks are oversold, fundamentals are lacking ...blah, blah."

Well come to think of it even the general economy is a very flimsy thing. Many companies are just operating on credit; this is one reason why they like to expand their business so that their cash flow arising from more suppliers' goods sold on credit would increased.

It's all based very much on credit. Suppliers or their bank just have to pull their credit or OD and many companies will collapse.

Bad economic system? Sure, but unfortunately or fortunately that's how the market economy really operates all along, leh.