Financial Follies: How To Guard The Guardians

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Apropos the Satyam case in India, fund manager Atim Kabra of Frontline Strategy writes: 

“We would be erring if to the cast of Raju brothers, their ‘independent directors’, the infamous auditors, the bestowers of corporate governance awards, we forget to add the collective conscience of the ‘fund managers and brokers’ who, in my opinion, had a fair inking of not all being well at Satyam. Any broker or fund manager worth his salt would have heard not only of the huge real estate parcels said to be owned by the Rajus but also of their extremely close political connections. They would have known of the phoenix like rise of Maytas and the lucrative contracts housed in these ‘Satyam Group Companies’. They would have had an understanding of the nature of real estate transactions in

India and the significant cash component which accompanies these transactions. Yet, they chose to turn a blind eye to the shenanigan, invested and traded in Satyam Computers, contributed to the enhancement of its market capitalization and ironically now profess shock at the lack of corporate governance at Satyam. While the financial community needs to introspect at its own doing and the propensity to turn a blind eye to the going ons in Corporate India, I believe that collectively, the financial community can be one of the most significant agents of change.  However, I worry that by the time change is implemented and percolates down the system, the same Satyam story might have been repeated in many companies in India and Satyam most certainly would not the last one to hit the can due to accounting fraud….”

Atim Kabra, with a blueprint for how to improve corporate governance. 

American Food Crisis Or Sustainable Farming?

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“The proposals we’re discussing would increase employment opportunities in agriculture — sustainable farming will require more “eyes per acre,” and replacing fossil-fuel energy with human energy and ecological knowledge makes good economic sense. With the reduced need for the hoe or plow, and land management relying more on fire and grazing, we draw on the naturalist instinct in nearly all of us, rather than presenting farm work as nothing but the “sweat of the brow” amid “thistles and thorns.” This will be necessary to counter the longstanding denigration of the countryside and rural communities, which has been a feature of our so-called cosmopolitan culture.We’re seeing that on a small scale now, with more young farmers staying on the land, with creative new endeavors in community-supported agriculture. People recognize that life is more than working in a small cubicle and consuming in a big-box store. People are hungry for good food, and they’re also hungry for a good life. People are ready to explore what it would mean to come home, not to a romanticized vision of the past but to a sustainable future….”

Robert Jensen, “Is America on the Brink of a Food Crisis?” at Alternet

Global Games: The Shine Is Off the Shining

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“The British economy will shrink by 2.8 per cent this year, says the IMF, with dire implications for jobs, house prices and the public finances. As recently as November, the IMF forecast a relatively mild downturn of 1.3 per cent in the UK.

In its latest World Economic Outlook, the IMF now sees economic activity contracting by around 1.5 per cent in the US, 2 per cent in the eurozone, and 2.5 per cent in Japan. Two of the brightest stars in the economic firmament, China and India, have seen their growth forecasts slashed, to 6.75 per cent and 5 per cent respectively. The global economy as a whole is perilously near to shrinking, with a mere 0.5 per cent growth predicted – the lowest since the 1940s. “We now expect the global economy to come to a virtual halt,” said Olivier Blanchard, the IMF’s chief economist.

The International Labour Organisation said global unemployment and poverty are set for a “dramatic increase” in the coming year. The UN agency added that in a worst-case scenario, recorded unemployment could rise by more than 50 million from the 2007 level to a total of 230 million, or 7.1 per cent of the world’s labour force, by the end of 2009.

The scale of economic decline forecast for Britain by the IMF suggests that the jobless figure would exceed three million within a year, surpassing peaks last experienced in the 1980s.

Yesterday, the Institute for Fiscal Studies said Britain faces a £20bn-a-year “double whammy” of tax rises and spending cuts to restore public finances to order – it will take until 2029 for government debt to recede to levels seen before the credit crunch. It warned taxes would rise and spending would be cut whoever wins the next election….”

And very significantly:

“The IMF says tax cuts and public spending and borrowing boosts all over the world will be useless unless the financial system is rebooted.

Its managing director, Dominique Strauss-Kahn, warned: “If there’s not a restructuring of the banking system, all the money you can put into [monetary and fiscal] stimulus will just go into a black hole.”

More at The Independent.

Comment:

So, think about the dollar’s future prospects this way: sure it’s on the road to hell. But it’s not a one-way road. Not when the euro and the pound are in such bad shape. As for those figures from China and India, after the Satyam fiasco (in which one of India’s most touted and best regarded companies confessed it had been running an Enron type scheme with faked cash flow —  I blogged earlier) do you really think the shine in “Indian Shining” is all that shiny?

Another New Deal?

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“In most discussions of the Great Depression, the macroeconomic profile of the subject is portrayed as follows: steep continuous decline from
1929 to 1933, sharp recovery from 1933 to 1937, severe but short “depression” from 1937 to 1938, and renewed rapid recovery from
1938 onward, with the economy having fully recovered by 1940 or, at latest, 1941. With regard to hours worked, the profile looks somewhat different.
Total hours worked fell substantially from 1929 to 1932. Then, unlike the standard depiction of the economy’s course, they hit bottom and stayed put in a virtually flat-bottomed trough for three years, 1932, 1933, and 1934. They then rose substantially until 1937, dropped by 7 percent in 1938, then rose again thereafter. However, even as late as 1940, total hours remained below the 1929 level by 6 percent, and only in 1941, with the population vigorously engaged in mobilization for war, did total hours exceed the 1929 value, by 3 percent. Meanwhile, of course, the population and the potential labor force had grown substantially, the former by 11.6 million persons, so simply getting back to the 1929 level of hours worked represented something less than a complete triumph.

As the table shows, military employment remained quite low and did not vary substantially from 1929 to 1939. Similarly, farm hours worked varied little, although after remaining fairly steady from 1929 to 1933, they dropped in 1934 and never regained their previous level. This abrupt one-shot drop to a lower level probably represents the effects of the New Deal’s agricultural relief programs, some of which created incentives for farmers to reduce the amount of labor, especially sharecroppers’ labor, they used in their operations. [Update: Note comment below challenging this interpretation and attributing drop in farm hours worked in 1934 to the exodus]

(Whatley 1983).

Because neither military nor farm hours varied much between 1929 and 1939, the changes in total hours worked in that period are attributable
almost entirely to changes in civilian government hours and private nonfarm hours…”

Robert Higgs in Libertarian Papers, Volume I, A Revealing Window On the US Economy In Depression and War: Hours Worked, 1929-1950

Sometimes, It’s NOT the Economy…..

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 “Obama in talking about the Middle East–the Palestine question and beyond–suffers from an acute case of “economism” or economic reductionism. He has the tendency to reduce all Arab and Muslim issues to job and medical care. It is NOT only the economy–stupid. It is also about pride and dignity and Palestine AND about freedom from the severe oppression that people suffer under governments that are coddled and armed by the very same US of A. So the words fall hollow here….”

From the Angry Arab

Timothy Geithner’s Confirmation Hearings

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Questions from the Senate Finance Committee to Timothy Geithner, chief of the New York Federal Reserve and newly appointed Treasury Secretary under President Obama: http://www.cumber.com/special/geithnerquestions2009.pdf.

Good questioning, evasive or uninformative answers, and no mention of the biggest problem of all. Why put the very folks who fell down on the job back in charge? Geithner had supervisory responsibility for the failure of Citigroup – why should he be in this spot to begin with? 

Washington: Where Principles Die

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“Obama’s order to close Guantanamo Prison means very little. Essentially, Obama’s order is a public relations event. The tribunal process had already been shut down by US courts and by military lawyers, who refused to prosecute the fabricated cases. The vast majority of the prisoners were hapless individuals captured by Afghan warlords and sold for money to the stupid Americans as “terrorists.” Most of the prisoners, people the Bush regime told us were “the most dangerous people alive,” have already been released.

Obama’s order said nothing about closing the CIA’s secret prisons or halting the illegal practice of rendition in which the CIA kidnaps people and sends them to third world countries, such as Egypt, to be tortured.

Obama would have to take risks that opportunistic politicians never take in order for the US to become a nation of law instead of a nation in which the agendas of special interests override the law.

Truth cannot be spoken in America. It cannot be spoken in universities. It cannot be spoken in the media. It cannot be spoken in courts, which is why defendants and defense attorneys have given up on trials and cop pleas to lesser offenses that never occurred.

Truth is never spoken by government. As Jonathan Turley said recently, Washington “is where principles go to die.”

Paul Craig Roberts in Counterpunch

Wired And Watched In America

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“When asked the scope of the information collected on Americans by the NSA, he said “the parameters that were set for how to filter it … were things like … if a terrorist would normally only make a phone call for 1 or 2 minutes, then you look for communications that are only 1 or 2 minutes long. Now that could also be someone ordering a pizza, and asking their significant other what sort of toppings they wanted on their pizza.”

When asked how the NSA would handle questions asked by congressional committees, Tice claimed: “the NSA would tailor some of their briefings to try to be deceptive, for whether it be a congressional committee or someone they really didn’t want to know exactly what was going on. There would be a lot of bells and whistles in a briefing and quite often the meat of the briefing was deceptive.”

When asked in a second interview by MSNBC if the information collected stopped at phone and email info, Tice responded: “as far as the wiretap information that made it to NSA, there was also data mining involved. At some point information from credit card records and financial records was married in with that information.”

As a result of the NSA program, uncounted thousands of Americans may have had their privacy compromised and are thus victims of an illegal spying regime. Says Tice: “the lucky U.S. citizens, tens of thousands of whom, that are now on digital databases at NSA that have no idea of this, also have that information included on those digital files that have been warehoused.”

More at Wired.

 Comment:

The US Government spied on everyone

The Mind-Control Weapon In Your Living Room

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One of Britain’s leading authority’s on children’s speech development, she completed a ten year study which showed that the background noise in the average two year olds day can delay his or her acquisition of a language by up to a year. Almost invariably the background noise came from television.
Amongst other things she found that:
· Children learn to speak from their parents and parents don’t play or talk enough with their children when the TV is on.

· Background noise from TV or radio, confuses infants. In response they learn to ignore all noise and then they ignore speech.

· Children of two years or older should not be exposed to more than two hours of TV a day.

· Children of one year old or younger should not be exposed to television at all.
Sally Ward is currently preparing to focus on television and the way it affects our attention. In particular she will be looking at Attention Deficit and Hyperactivity Disorder (ADHD). “. . . a lot of people think it’s chemical,” she says, but in her view . . . “it’s very peculiar that at the onset of children’s television it got a lot more prevalent, and at the onset of children’s video’s it got a lot more prevalent.”
Her concern is being reiterated in America where child psychologist John Rosemond has stirred some controversy by suggesting that ADHD is environmentally created; a suggestion that is completely at odds with the pharmaceutical industry, which maintains that the disorder is genetically inherited and makes considerable profit as a result.
“Ritalin may work, temporarily,” says Rosemond, “But pharmaceutical intervention won’t change behavioural and motivational problems.” And these he blames on television – “the endlessly changing images, flickering like the attention spans of ADHD children.”

“Television: The Hidden Picture” – Rixon Stewart, via Handmaiden’s Kitchen

Financial Follies: Dollar Uptrend

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From a trader whose predictions I’ve liked, Nadeem Walayat: 

“U.S. Dollar Forecast 2009

TREND ANALYSIS – The correction following the November peak was more severe than expected this implies a weakness, however the US Dollar did hold above the previous low of 75 before resuming the up trend. Immediate resistance lies at 88, given the violence of the correction this implies choppy volatile trading in the region of between 80 and 90, this is inline with the conclusion of October 2008 with regards trend expectations for 2009.

PRICE TARGETS – The upside price target for USD remains at 90 and then 92. The USD has significant resistance above USD 92 and therefore suggests the USD will find it tough to sustain a breakout above USD 93. This suggests a trading range with an upward bias. The key here is for the USD to continue making higher lows, with the last low being 77.7.

MACD – The MACD was extremely oversold and has helped contribute to the U.S. Dollar turnaround, how-ever the MACD has some way to go before it reaches what could be termed as an overbought state and therefore implies more immediate term U.S. Dollar strength.

SEASONAL TREND – The USD Rally into January is inline with the seasonal tendency, which suggests a corrective February.

ELLIOTT WAVE THEORY – Octobers elliott wave analysis proved accurate, given the power of the corrective wave, this suggests a more complex sideways elliott wave pattern during 2009 rather than a breakout higher.