Boomerang
The Republican victory in Massachusetts was the death knell for the President's health care reform.
The Supreme Court added insult to democratic angst in its 5-4 decision removing campaign finance caps for businesses under a novel interpretation of protected free speech and "censorship."
The knee and the jerk, and not in that particular order, was an economic response by the President's economic team to attack the structure, size, and activity of banks able to take leveraged risks today with shareholder and depositor money because the Clinton Administration repealed the Glass Steagall Act in 1999
GS separated banking and investment banking functions since the Crash of 1929 because banks proved incapable of housing both functions under one roof, or management, without running the economy over the cliff.
The unfortunate and next financial step will be the contraction of equity markets around the world in the short term, financial institutions comprise roughly 15% of the global market capitalization.
And in the longer term it will be difficult for governments to borrow money to maintain even scaled down stimulus packages because that borrowing relies on banks ability to maintain the price of already scorched assets on their balance sheets.
The natural political reaction is to throw out the incumbents facing mid term elections in ten months financed by a better heeled opposition with newly christened free speech protections for campaign contribution largess.
BBC News - US Supreme Court overturns campaign spending limit
Thursday, January 21, 2010
Wednesday, January 6, 2010
Idiot Savant
The Fin Min will take offsite inspiration from the producer and star of a movie, Three Idiots, who is feuding with the author of the book on which the film is based over plagiarism. To demonstrate social responsibility and sensitivity to the government austerity plan staff will be bussed to Faridabad for three days of events that will include yoga, reflection, and, well, idiots.
The producer to his credit will not charge for his efforts though he may consider a donation considering the ample subject matter for satire provided by government machinations daily. Though restricting the invitation to the Fin Min seems frugal.
Why not extend the experience to the Planning Commission, which applied for twice as much funding in this years budget than last exhausting the five year plan in three. Or Air India which cant pay salaries but pays Accenture 25 lacs a month to undo the integration plan, for which it already paid $2 million, and intends to hire McKinsey for $3 million to be advised that paying 10 million euros, already committed, to join Star Alliance may not be sensible if Frankfurt will no longer be a hub.
Three may be a gentle underestimate of the idiot quotient available.
Finance ministry seeks Idiot's tip to tackle Budget blues
The producer to his credit will not charge for his efforts though he may consider a donation considering the ample subject matter for satire provided by government machinations daily. Though restricting the invitation to the Fin Min seems frugal.
Why not extend the experience to the Planning Commission, which applied for twice as much funding in this years budget than last exhausting the five year plan in three. Or Air India which cant pay salaries but pays Accenture 25 lacs a month to undo the integration plan, for which it already paid $2 million, and intends to hire McKinsey for $3 million to be advised that paying 10 million euros, already committed, to join Star Alliance may not be sensible if Frankfurt will no longer be a hub.
Three may be a gentle underestimate of the idiot quotient available.
Finance ministry seeks Idiot's tip to tackle Budget blues
Saturday, January 2, 2010
Praying for Rain
The PMO has found utility for an IMF trained economist in divining the future of the Indian economy. Soothsayer.
One of the few numbers released by the Indian government relied on by the markets is the food inflation number because it can be independently confirmed by the vegetable cart that arrives at each home in the country early every morning.
Food inflation in India is running at an annual rate of 20%. The RBI is in the business of fighting inflation and encouraging economic growth by controlling the price and quantity of money. An increase in the price of money, interest rates, to reduce actual and expected inflation tends to make mortgages and car loans more expensive reducing economic growth. Potato prices double and the RBI has to turn off the tap.
The RBI lowered short term rates by almost 4% in early 2009 to insure lots of cheap money to support the economy and increase the value of bonds held by banks to dress up balance sheets. The RBI declared its intent to increase the price of money in 2010, before the inflation numbers went from benign to bombastic, but that message apparently did not reached the PMO.
The Chief Economic Advisor believes that growth will be 8% in 2010 because the monsoon will be normal, +1% of GDP, and by 2012 growth will be 9% because the global economy will recover. The monsoon bet is interesting because last years monsoon was the worst in 37 years and from biblical times these cycles tend to last more than one year in a stretch.
3% of Indian growth in 2009 was provided by the government. Strip it out and the number is under 5% for the year, with inflation over 8%.
Future global economic growth is a function of rescuing 15 million US mortage holders from the negative equity on their loans for which the Treasury Secretary admits the solution is difficult without a second and unaffordable trip down Troubled Asset Relief.
The net claim number on India's foreing exchange reserves has doubled to $100 billion from $50 billion before calculation of the oild and fertilizer subsidies which happen off the balannce sheet.
The World Bank invested $4 billion to recapitalize Indian PSU banks, $1.5 billion in the infrastructure term lender IIFCL, and varied State government initiatives predicated on growth and close to the vest financial covenants from the government.
Praying for rain and the continuation of cheap money may be the only economic solution
ndia economy to grow 8 pct in FY '11, adviser sa ays-report- Hindustan Times
One of the few numbers released by the Indian government relied on by the markets is the food inflation number because it can be independently confirmed by the vegetable cart that arrives at each home in the country early every morning.
Food inflation in India is running at an annual rate of 20%. The RBI is in the business of fighting inflation and encouraging economic growth by controlling the price and quantity of money. An increase in the price of money, interest rates, to reduce actual and expected inflation tends to make mortgages and car loans more expensive reducing economic growth. Potato prices double and the RBI has to turn off the tap.
The RBI lowered short term rates by almost 4% in early 2009 to insure lots of cheap money to support the economy and increase the value of bonds held by banks to dress up balance sheets. The RBI declared its intent to increase the price of money in 2010, before the inflation numbers went from benign to bombastic, but that message apparently did not reached the PMO.
The Chief Economic Advisor believes that growth will be 8% in 2010 because the monsoon will be normal, +1% of GDP, and by 2012 growth will be 9% because the global economy will recover. The monsoon bet is interesting because last years monsoon was the worst in 37 years and from biblical times these cycles tend to last more than one year in a stretch.
3% of Indian growth in 2009 was provided by the government. Strip it out and the number is under 5% for the year, with inflation over 8%.
Future global economic growth is a function of rescuing 15 million US mortage holders from the negative equity on their loans for which the Treasury Secretary admits the solution is difficult without a second and unaffordable trip down Troubled Asset Relief.
The net claim number on India's foreing exchange reserves has doubled to $100 billion from $50 billion before calculation of the oild and fertilizer subsidies which happen off the balannce sheet.
The World Bank invested $4 billion to recapitalize Indian PSU banks, $1.5 billion in the infrastructure term lender IIFCL, and varied State government initiatives predicated on growth and close to the vest financial covenants from the government.
Praying for rain and the continuation of cheap money may be the only economic solution
ndia economy to grow 8 pct in FY '11, adviser sa ays-report- Hindustan Times
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