PAUL VOLKER: "The American political process is about as broken as the financial system." "The Treasury is an outstanding example of a broken system, but it's not the only one." "Slow is too fast a word to describe what's going on." "I wish the Administration would pay more attention to what's needed to improve the ordinary functioning of government" CLICK HERE TO READ >>> Paul Volcker: The Lion Lets Loose Charlie Rose talks financial reform with former Federal Reserve Chairman Paul Volcker HEADLINES    <<<<<O>>>>>   TITULARES Tumultuous economy enters new decade Fed official: We're still learning from crisis Stocks: Good year, bad decade Few called market turn, fewer predict it will last AUSTRALIA: Financial crisis may yet have a sting in its tail >>> 2009 was not as bad as feared but 2010 may be worse MAYLASIA: Rebuilding the world after the twin crises 2010 'key year' for China to overcome economic crisis Para China 2010 es "clave" El sector financiero español afronta 10 grandes retos en el 2010 Con dudas e incertidumbre, el mundo recibió la nueva década Los argentinos ya tienen bajo el colchón US$ 131.000 millones, US$ 22.000 más que en diciembre de 2006, antes del comienzo de la crisis financiera global. PERU: La Bolsa de Valores de Lima registró en 2009 una ganancia del 101% apoyada en la fuerte subida de los precios internacionales de los minerales y el desempeño de la economía peruana frente a la crisis A Sad but True Editorial Comment A decade of decline Barbarians inside the gates in 2000-2009 By Jeffrey T. Kuhner America is going the way of ancient Rome. The past decade will be remembered as the pivotal tipping point where the United States ceased to be a superpower. Like the Roman Empire in its later stages, America's imperial grandeur masked moral rot and economic decay. The beginning of the 21st century promised continued U.S. global dominance. Our economic might seemed unrivaled; the dot-com boom had not yet gone bust. Washington was still basking in the warm glow of its victory in the Cold War. America bestrode the world like a military and economic colossus. The Sept. 11, 2001, attacks changed everything. Like Rome and Imperial Britain, the United States embarked upon costly, prolonged wars in far-away countries. The result is that America remains mired in Iraq and Afghanistan. The two wars have cost more than 5,200 dead and $1 trillion with no victory or end in sight. The fundamental mistake was made by President Bush. Contrary to popular myth, Mr. Bush was not a unilateralist conservative traditionalist; rather, he was a Great Society Republican who championed nation-building abroad and Big Government corporatism at home. Our goal should have been to smash the forces of global jihad through a strategy of total victory through total war - just as in World War II, when every domestic priority was subordinated to defeating the Axis Powers. Instead, Mr. Bush tried to plant democracy in the sands of Mesopotamia and the stony soil of Afghanistan. He followed a foolish - and ultimately, destructive - policy of seeking to implement social engineering, nation-building projects. The result was imperial overstretch. Moreover, he also stressed that America could have both guns and butter. There was no need to choose. Tax cuts, federalizing education, a massive Medicare prescription drug plan, runaway government spending, soaring deficits, huge bank bailouts and expensive stimulus programs - Mr. Bush's brand of corporatist Keynesianism paved the way for socialism and reckless spending. President Obama is making the same mistake. He is not the antithesis of Mr. Bush, but his culmination. Mr. Obama represents Bushism on steroids. He is seeking to erect a European-style social democracy characterized by a bloated public sector, a burdensome welfare state, economic sclerosis and foreign policy impotence. Mr. Obama is slowly pushing America toward financial ruin. His $787 billion stimulus failed to regenerate the economy. His health care reform bill will cost taxpayers nearly $2.5 trillion. He has effectively nationalized the automakers, the financial sector and the banking system. His environmental regulations will stifle industry and manufacturing. Unemployment is high. The housing market continues to sag. Inflation is increasing. The dollar is plummeting. The nation's infrastructure is crumbling. The budget deficit for 2009 was over $1.4 trillion. It is scheduled to be $1.5 trillion in 2010. Under his administration, the national debt is projected to explode by more than $10 trillion in 10 years. He is burying America under a mountain of debt. We are becoming the United States of Argentina. Mr. Obama's decision to surge 30,000 additional troops into Afghanistan is a dangerous - and reckless - escalation of the war. It will only deepen our military quagmire, draining America of further blood and treasure. Repeating the tragic mistakes of Vietnam, Mr. Obama is sending U.S. troops to die without a clear strategy for victory. Yet, as Americans are being bled white in the caves and mountains of Afghanistan, terrorists are penetrating our homeland defenses. The United States is increasingly vulnerable to Islamist attacks: Hezbollah is crossing our porous southern border, the Fort Hood massacre and the attempted suicide bombing of Northwest Airlines flight 253. Similar to Rome in its final days, America is no longer feared or respected. Instead, we are being invaded - and slowly conquered - by barbarians. Rome collapsed due to moral decline, pervasive corruption and a loss of will. The Roman Empire became plagued by crushing taxation, a ubiquitous bureaucracy, economic stagnation, political factionalism, military adventurism and a lack of civic virtue. Its culture had become so decadent - with its glorification of homosexuality, infanticide, sexual permissiveness and constant entertainment (such as circuses and games in the Coliseum) - that Rome was not only scorned but reviled. America is repeating the same tragic mistakes. Our sexualized, celebrity-obsessed, libertine culture is despised around the world. Power trumps patriotism. Washington no longer embodies democratic virtue. If America does not veer course quickly, we, too, like the Romans, will squander our glorious heritage. Jeffrey T. Kuhner is a columnist at The Washington Times and president of the Edmund Burke Institute, a Washington think tank. GO TO ORIGINAL EDITORIAL 2000-2009  a lost decade for U.S. economy, workers GRAPHIC Percent change in total non-farm payroll employment Article from The Washington Post For most of the past 70 years, the U.S. economy has grown at a steady clip, generating perpetually higher incomes and wealth for American households. But since 2000, the story is starkly different.... The first decade of the new century was an experiment in what happens when an economy comes to rely heavily on borrowed money... The past decade was the worst for the U.S. economy in modern times, a sharp reversal from a long period of prosperity that is leading economists and policymakers to fundamentally rethink the underpinnings of the nation's growth. It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism -- there was a current of thought among economists in 1999 that recessions were a thing of the past... ...There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well. Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 -- and the number is sure to have declined further during a difficult 2009... And the net worth of American households -- the value of their houses, retirement funds and other assets minus debts -- has also declined when adjusted for inflation, compared with sharp gains in every previous decade since data were initially collected in the 1950s. Global Economic Crisis Abated, But Effects Linger ... In January 2009, global unemployment was soaring, the international financial system was in near-meltdown, world trade was in free fall, and economists were warning that a turnaround was not in sight. Governments faced the prospect of widespread social instability and popular unrest, and historians were recalling that the Great Depression set the stage for World War II. In February, the director of national intelligence, Dennis Blair, told the U.S. Congress that the global economic crisis had replaced terrorism as "the primary near-term security concern of the United States." Since then, international stock markets have rebounded, unemployment rates have leveled off, world trade has picked up and the global economy is growing again. ... Economic recovery, however, has been anemic in many countries, and the global recession has had repercussions that are likely to be felt for a long time... ..The big winner in 2009 was clearly China, with its global economic position actually strengthening as a result of the crisis.... ..Brazil has also become a superstar performer, with stock values there surging more than 80 percent in 2009. European countries, meanwhile, have lagged far behind..... ...while the global financial crisis has abated, new economic challenges are still emerging. One concern is the growing seriousness of sovereign debt, which is debt owed by governments rather than private companies or financial institutions.  READ FULL ARTICLE Chinese banks find their credit in high demand China's state-owned banks have become a main engine of the global recovery, financing the construction of copper mines, purchase of airplanes, expansion of retail stores and other projects even as their U.S. and European counterparts scale back lending. The surge in Chinese lending, triple the 2008 rate, has provided a lifeline to international corporations during the worst recession in decades, and it reflects a diversification in China's global economic role beyond its holdings of vast amounts of U.S. government debt. Over the first nine months of 2009, new lending by Chinese banks has injected $1.3 trillion into the world economy... READ FULL ARTICLE

	A religious response to the financial crisis: We need a values recovery Clearly, the financial crisis is a structural meltdown that calls for increased government regulation of banks and other financial players. Members of faith communities, such as those who joined me in front of the Treasury building, are helping to push for this sort of reform. But at its core, this is also a spiritual crisis. More and more people are coming to understand that underlying the economic crisis is a values crisis, and that any economic recovery must be accompanied by a moral recovery. We have been asking the wrong question: When will the financial crisis end? The right question is: How will it change us? This could be a moment to reexamine the ways we measure success, do business and live our lives; a time to renew spiritual values and practices such as simplicity, patience, modesty, family, friendship, rest and Sabbath. Faith communities can help lead the way, challenging the idols of the market and reminding us who is God and who is not. "The Earth is the Lord's and the fullness thereof, the world, and they that dwell therein," say both Christianity and Judaism; the Earth does not belong to the market. Human beings are stewards of God's creation and should preside over the market -- not the other way around. We must replace the market's false promise of limitless growth and consumption with an acknowledgment of human finitude, with a little more humility and with some moral limits. And the market's first commandment, "There is never enough," must be replaced by the dictums of God's economy -- namely, there is enough, if we share it. Many of our religious teachings, from our many traditions, offer useful correctives to the practices that brought us to this sad place. Jesus's Sermon on the Mount instructs us not to be "anxious" about material things, a notion that runs directly counter to the frenzied pressure of modern consumer culture. Judaism teaches us to leave the edges of the fields for the poor to "glean" and to welcome those in need to our tables. And Islam prohibits the practice of usury. (Muslim-owned financial institutions that charge fees for service rather than interest have done amazingly well during this crisis; their practices offer some interesting models.) We need nothing less than a pastoral strategy for the financial crisis; we must use these religious teachings to develop Christian, Jewish and Islamic responses to it. Go to article U.S. FINANCIAL CRISIS Goldman Sachs offshore deals deepened global financial crisis Previously undisclosed documents show that a new breed of offshore securities that hinged on risky home loans were far riskier than investors knew. BY GREG GORDON MCCLATCHY NEWS SERVICE NEW YORK -- When financial titan Goldman Sachs joined some of its Wall Street rivals in late 2005 in secretly packaging a new breed of offshore securities, it gave prospective investors little hint that many of the deals were so risky that they could end up losing hundreds of millions of dollars on them. McClatchy News Service has obtained previously undisclosed documents that provide a closer look at the shadowy $1.3 trillion market since 2002 for complex offshore deals, which Chicago financial consultant and frequent Goldman critic Janet Tavakoli said at times met ``every definition of a Ponzi scheme.'' The documents include the offering circulars for 40 of Goldman's estimated 148 deals in the Cayman Islands over a seven-year period, including a dozen of its more exotic transactions tied to mortgages and consumer loans that it marketed in 2006 and 2007, at the crest of the booming market for subprime mortgages to marginally qualified borrowers. In some of these transactions, investors not only bought shaky securities backed by residential mortgages, but also took on the role of insurers by agreeing to pay Goldman and others massive sums if risky home loans nose-dived in value -- as Goldman was effectively betting they would. Some of the investors, including foreign banks and even Wall Street giant Merrill Lynch, may have been comforted by the high grades Wall Street ratings agencies had assigned to many of the securities. However, some of the buyers apparently agreed to insure Goldman well after the performance of many offshore deals weakened significantly beginning in June 2006. Goldman said those investors were fully informed of the risks they were taking. These Cayman Islands deals, which Goldman assembled through the British territory in the Caribbean, a haven from U.S. taxes and regulation, became key links in a chain of exotic insurance-like bets called credit-default swaps that worsened the global economic collapse by enabling major financial institutions to take bigger and bigger risks without counting them on their balance sheets. The full cost of the deals, some of which could still blow up on investors, may never be known. Before the subprime crisis, the U.S. financial system had used securities for 40 years to generate $12 trillion to help Americans finance their houses, cars and college educations, said Gary Kopff, a financial services consultant and the president of Everest Management Inc. in Washington. While Goldman wasn't alone in the offshore deal making, it was the only big Wall Street investment bank to exit the subprime mortgage market safely, and it played a pivotal role, hedging its bets earlier and with more parties than any of its rivals did. McClatchy reported on Nov. 1 that in 2006 and 2007, Goldman peddled more than $40 billion in U.S.-registered securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting. Many of those bets were made in the Caymans deals. At the time, Goldman's chief spokesman, Lucas van Praag, dismissed as ``untrue'' any suggestion that the firm had misled the pension funds, insurers, foreign banks and other investors that bought those bonds. Two weeks later, however, Chairman and Chief Executive Lloyd Blankfein publicly apologized -- without elaborating -- for Goldman's role in the subprime debacle. Goldman's wagers against mortgage securities similar to those it was selling to its clients are now the subject of an inquiry by the Securities and Exchange Commission, according to two people familiar with the matter who declined to be identified because of its sensitivity. Spokesmen for Goldman and the SEC declined to comment on the inquiry. Goldman's defenders argue that the legendary firm's relatively unscathed escape from the housing collapse is further evidence that it's smarter and quicker than its competitors. Its critics, however, say that the firm's behavior in recent years shows that it has slipped its ethical moorings; that Wall Street has degenerated into a casino in which the house constantly invents new games to ensure that its profits keep growing; and that it's high time for tougher federal regulations. In 2006 and 2007, as the housing market peaked, Goldman underwrote $51 billion of deals in what mushroomed into an under-the-radar, $500 billion offshore frenzy, according to data from the financial services firm Dealogic. Goldman's activities in the Caymans helped it unload some of its subprime-related risks on others and also amass tens of billions of dollars in protection against a U.S. housing crash that ultimately occurred. These deals have accounted for a sizeable share of the firm's $103 billion in revenues and more than $25 billion in profits since Jan. 1, 2007. At the end of 2009, Goldman had set aside more than $16 billion in cash and stock bonuses for its employees. Many of Goldman's winning bets with other large U.S. banks raised the price tags of 2008's government bailouts of Citigroup, Bank of America, Morgan Stanley and others by sums that no one has yet determined because the contracts are private, according to people familiar with some of the transactions. However, one billion-dollar transaction that Goldman assembled in early 2006 is illustrative. It called for the firm to receive as much as $720 million from Merrill Lynch and other investors if defaults surged in a pool of dicey U.S. residential mortgages, according to documents in a court dispute among the parties. Securities experts said that deal is headed for a crash that's likely to cause serious losses for Merrill Lynch, which Bank of America acquired a year ago in a $50 billion government-arranged rescue. Taxpayers got hit for tens of billions of dollars in the Caymans deals because Goldman and others bought up to $80 billion in insurance from American International Group on the risky home mortgage securities underlying the deals. Go to original article in the Miami Herald Free trade isn't so free L. Ronald Scheman Two recent reports from China point to one of the major challenges facing the Obama administration in formulating trade policy. First the Chinese National Bureau of Statistics revised Chinese growth projections for 2010 to 9.6 percent. Then Chinese Premier Wen Jiabao strongly rejected pressures to allow its currency to be guided by market forces, purporting that demands to allow the renminbi to appreciate "were an effort to contain the country's development." While China's determination to promote development is its internal matter, policies that spill over its borders are the concern of all. Policies that foster almost 10 percent growth in the midst of world economies that are gasping for air expose a fundamental systemic problem that must be addressed. The commitment to free trade that has dominated U.S. policy since World War II has produced enormous benefits to a growing global population. It has helped to increase production, lower prices and bring millions of people out of poverty. However a substantial question remains as to whether trade is really free if the currencies that set prices are not. The complex issues of free international trade have one simple truth at their core. The value of products traded across borders is determined by the currency in which the trade takes place. Purported "free" trade without freely traded currencies is a charade. Currency values affect the end price of products the same way as tariffs over which much wrangling takes place at the World Trade Organization. A product manufactured in China for 680 renminbi would be imported into the United States for $100 at the current exchange rate of 6.8 renminbi to $1. If the exchange rate were 5/$1, the product would sell for $136. Ironically, the Chinese today are joining the chorus blaming the excesses of the U.S. consumer and a liberal U.S. financial market for the current financial crisis. This perception blatantly overlooks a crucial factor. The U.S. consumer was responding to the value equation in the internal U.S. market. Chinese control of the renminbi kept their goods cheap in comparison to U.S. goods. Currency distortions also made investment in Chinese manufacturing profitable and investment in U.S. manufacturing costly. Economists the world over emphasize that rebalancing aggregate global demand to raise consumption in the surplus economies is basic to the long-term sustainability of the international economy. In this context pricing, resulting from currency exchange rates, is a major influence on consumer behavior. Two other implications, however, have equally serious consequences. First, as the dollar declines against other currencies but remains tied to the Renminbi, the Renminbi is effectively accompanying the dollar in devaluingagainst those currencies. This makes Chinese goods even cheaper in other countries, especially other developing countries. Second, China's ballooning trade surplus produces commodity buying in the West that spurs the same commodity bubbles that ignited the recent financial imbalances. In the developing countries this imbalance has been devastating. Chinese exports to these countries have risen dramatically since the dollar began to weaken. China's policy may help create jobs in China but it is a "beggar thy neighbor" policy in regard to the poorer countries, decimating local industry. The well-known fury of anti-globalization activists is attributable far more to job loss from undervalued Chinese goods than to any policies of other developed countries. While we have little power to induce the Chinese to revalue their currency there are other alternatives to redress the current estimates of an approximate 25 percent undervaluation of the renminbi. Commensurate tariffs on Chinese goods is the logical instrument. Such overriding tariffs should be accepted as fair global policy when faced with controlled currencies that have fallen dramatically out of alignment. We should also be attentive to more profound implications of Chinese policy. Chinese strategic literature emphasizes that other instruments, not military ones, will be determinative for China's role in the world. The reality of today's exchange rate policies is that China is gradually draining the industrial strength of the West just as surely as if they were bombing its factories. As they well know, currency manipulation is a stealth instrument of economic competition. Economists are almost unanimous in their assessment that a balanced global economy requires a shift in consumption to the currency surplus countries. The easiest and least painful way to do this is for all major actors in global trade to play by the same rules in regard to currencies. If the Chinese are unwilling or unable to do this on their own, it is time to consider policies that do it for them. L. Ronald Scheman, author of "Greater America" (New York University Press, 2003) is former United States executive director of the Inter-American Development Bank. Click here to go to the OpEd The coming Great Inflation, real or imagined By Pedro Nicolaci da Costa  - A historic economic crisis has left Americans with plenty of things to worry about. But is inflation one of them? And is there a risk that fretting over higher prices may actually bring them about? The answers to these questions will help define the timing of the Federal Reserve's pullback from an unprecedented level of monetary stimulus, deployed to combat the worst financial panic since the Great Depression. In justifying its pledge to leave interest rates near zero for the foreseeable future, the Fed takes comfort in inflation expectations, which policymakers deem comfortably restrained. On the surface, that appears true. The most recent Reuters/University of Michigan consumer survey showed a 0.2 percentage point decline in expected inflation one-year out, to 2.5 percent. Market-based barometers have fluttered higher, though not alarmingly so. Yet beneath the weak economic backdrop keeping prices in check, economists and consumers are increasingly uneasy about the prospect of a continuous loss of purchasing power -- the very definition of inflation. "We have the most potentially inflationary policy I have ever observed in a developed country," said Alan Meltzer, a Fed historian and professor of political economy at the Carnegie Mellon Tepper School of Business in Pittsburgh. According to widely used economic models, the way consumers perceive the prospect of future inflation has clear implications for prices themselves. Once higher costs are taken for granted, they are more easily tolerated. Several indicators are already hinting at that possibility . The price of gold, often viewed as a hedge against inflation, has set record after record, peaking above $1,200 an ounce earlier this month before retreating to below $1,100. A recent JPMorgan survey of clients found that 61 percent expected U.S. inflation to be "above target" between 2011 and 2014. Another consumer confidence survey, published by The Conference Board, showed Americans expect prices to climb a troubling 5.1 percent over the next 12 months. And Google Trends, a websearch database, shows a sharp spike in the number of U.S. users looking up the word "hyperinflation" in late 2008 and early 2009. "There is a real risk that inflation expectations will rise above a certain threshold that suggests a loss of credibility of the Fed," said Laurence Meyer, a former Fed governor now at Macroeconomic Advisers in Washington, DC. MIND OVER MATTERS That may seem surprising considering the world has faced a crippling financial crisis that many economists warned might lead to deflation. But it makes sense in the context of the extraordinary measures taken to halt the meltdown. Experts who have studied bouts of inflation, most common in poor or developing countries, say the makings of an inflationary psychology are already in place in the United States. It begins, they say, when unfathomably large figures are bandied about as if they were mere change. A cascading series of government bailouts certainly fits into that category. The Treasury spent nearly $800 billion on a stimulus package that has helped ease the pace of job losses but not yet begun to reverse them. The Fed committed to buy more than $1.7 trillion in Treasury and mortgage bonds and expanded credit in the banking system to over $2.2 trillion. "There is an unprecedented amount of latent inflation represented by the $2 trillion monetary base," said Michael Pento, senior market strategist at Delta Global Advisors. "Unless the Fed can sell those holdings and raise interest rates in a timely manner, intractable inflation will be in our future." ENTER THE SLACKERS Another camp of economists say all the hand-wringing is overdone. They point to the labor market, in its worst shape since the 1980s, as a sure sign that the economy is sufficiently weak to keep price pressures at bay. Japan provides the most obvious model for how such "slack" can affect prices. As bubbles popped in the housing and stock markets, the Japanese economy was stuck in a deflationary rut for the better part of two decades, despite heavy government spending. During America's last run-in with inflation in the 1970s, wages were a key channel for price increases. Stronger unions meant workers could demand cost-of-living increases to keep up with the ever-rising consumer price index. With that dynamic largely absent today, say skeptics, inflation fears are misplaced. So far, the hard figures corroborate their view. Consumer prices rose just 1.8 percent in the year through November, and were up 1.7 percent, excluding food and energy, well beneath the recent yearly average. Such tame readings notwithstanding, anxiety about the longer-term outlook is rising and has been reinforced by the resilience of energy costs in the face of a global recession. "We will emerge from the crisis with an excess money supply because, despite their independence, central bankers are still feeling the pressure from finance ministers to allow slightly higher inflation in order to be able to service large public debts more easily," said Jorg Kramer, chief economist at Commerzbank. Go to original article

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	Ponzi nation _The FBI opened more than 2,100 securities fraud investigations in 2009, up from 1,750 in 2008. The FBI also had 651 agents working in 2009 on high-yield investment fraud cases, which include Ponzis, compared with 429 last year. _The SEC this year issued 82 percent more restraining orders against Ponzi schemes and other securities fraud cases this year than in 2008, and it opened about 6 percent more investigations. Ponzi scheme investigations now make up 21 percent of the SEC's enforcement workload, compared with 17 percent in 2008 and 9 percent in 2005. _The Commodity Futures Trading Commission filed 31 civil actions in Ponzi cases this year, more than twice the 2008 amount. Many of the 2009 cases have yet to head to trial. In its tally, the AP counted schemes in which prosecutions were initiated or in which regulators filed civil cases in 2008 and 2009.

	HEADLINES  +++ TITULARES STEALTH STIMULUS >>> Newly House passed "Wall Street Reform and Consumer Protection Act" (H.R. 4173) hides in its 1279 pages authorization of Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes How Commercial Real Estate Could Trigger a Double-Dip Treasury Debt Sales Top $2.1 Trillion for Year More Than in Previous Two Years Combined The Great Recession: A Hidden Depression? U.S. financial scandals seen sparking 2010 zeal >>> The year of the Ponzi scheme will be followed by heightened regulation and more aggressive prosecutions, experts say, as U.S. officials respond to past failures Former Soviet Nations Arent Banking on the Dollar >>> Local currency or euro viewed as most profitable U.S. lenders involved in risky mortgage lending that contributed to the 2007 financial crisis were also some of the fiercest financial lobbyists, according to a report by International Monetary Fund economists. WHODUNNIT? A Fistful of Dollars: Lobbying and the Financial Crisis† Abstract Has lobbying by financial institutions contributed to the financial crisis? This paper uses detailed information on financial institutions’ lobbying and their mortgage lending activities to answer this question. We find that, during 2000-07, lenders lobbying more intensively on specific issues related to mortgage lending (such as consumer protection laws) and securitization (i) originated mortgages with higher loan-to-income ratios, (ii) securitized a faster growing proportion of their loans, and (iii) had faster growing loan portfolios. Ex-post, delinquency rates are higher in areas where lobbying lenders’ mortgage lending grew faster. These lenders also experienced negative abnormal stock returns during key events of the crisis. The findings are robust to (i) falsification tests using information on lobbying activities on financial sector issues unrelated to mortgage lending, (ii) instrumental variables strategies, and (iii) a difference-in-difference approach based on state-level lending laws. These results suggest that lobbying may be linked to lenders expecting special treatments from policymakers, allowing them to engage in riskier lending behavior.   Available in PDF format: Read the full IMF paper Get presentation PowerPoints Get all IMF Conference "Financial Frictions and Macroeconomic Adjustment" Papers Fed proposes term deposits to drain reserves, avoid hyperinflation Financial crisis: Economics emerges from the rubble in fragile state This was a crisis economists said couldn't happen an era when macro-economic problems were supposed to have been solved 2009: A Roller-Coaster Year For The Dollar Hiring, Business Investment and Other Big Variables That Will Drive 2010 Economy Prepare for a Keynesian Hangover Our government's spending orgy will haunt us in 2010 Measuring the Rebound in 2009 >>> The U.S. Economy Gained 13% Since January Obama's First Year: Progress, but a Long, Hard Road Remains Financial Crisis Was Too Short to Teach Us Lessons After the Bailouts, Washington's the Boss BOOK REVIEW: The Best Is Yet to Come Cast off gloom: The full benefits of globalization are on their way Los economistas indicaron que sus estudios mostraron que los prestamistas que tomaron los mayores riesgos fueron además los más activos en usar su influencia para evitar la aprobación de proyectos de ley contrarios al sector y de regulaciones relativas al crédito hipotecario La nueva dirección del FMI >>> se evitó un desastre de las proporciones de la Gran Depresión, gracias a una coordinación de las políticas económicas sin precedentes por parte de los gobiernos de todo el mundo . La caída del Dow Jones en la última década es más pronunciada si se ajusta a la inflación Los efectos de la intervención, según Larry Summers El futuro del capitalismo, según Raghuram Rajan Tras los rescates, el Estado es el nuevo protagonista del capitalismo Tres claves que determinarán el desempeño de la economía de EE.UU. durante 2010 . How Misleading Economic Data Increase Investor Risks BY CHARLES HUGH SMITH Most investors heaved a sigh of relief when the nation's gross domestic product, a broad measure of economic activity, rose 3.5% in the third quarter, signaling that the recession had ended. But the Bureau of Labor Statistics (BLS) later revised it downward to 2.8%, and on Dec. 22, GDP was lowered again -- to 2.2%. This 37% reduction in GDP certainly calls the entire data collection process -- and the value of these "headline" numbers -- into question. Webmaster's Note: In my opinion, we have now entered the  DISINFORMATION AGE...this article, included in its entirety because of its importance, reflects one of many areas where vital information is not reliable, notwithstanding it is being used for important decision-making. In the cases related here the disinformation may result from difficulties in gathering the right data or human failures, weaknesses or errors, BUT today's information is also subject to flagrant, wilfully and deceptively creative...modification, duplication, spinning, exageration, distortion, fabrication and outright falsification,                                                                                     Who will audit the veracity and reliability of verbal, digital and written information in the new decade?...JW Statisticians acknowledge that the collection process overstates both GDP and productivity. Because investors, companies and the government all rely on such statistics, flawed data could result in poor investment and business decisions. Susan Houseman, senior economist at the W.E. Upjohn Institute for Employment Research, was a participant in a recent conference on the problem. "We don't have the data-collection structure to capture what's happening in a real-time way, or what's being traded and how it's affecting workers," Houseman says. "We have no idea how to measure the occupations being off-shored or what's being in-shored." Houseman's paper Offshoring Bias: The Effect of Import Price Mismeasurement on Manufacturing Productivity highlights holes in the valuation of imported goods. As the data are now collected now, a $50 imported auto part may be valued at the $100 price of the American-made part it replaces, and the difference gets attributed to rising productivity of American workers. That official statistics can't capture the actual value of imported parts is bad enough. But to suggest that that these supposedly $100 parts are now being produced by fewer American workers, is a grave miscalculation of the fundamentals of economic activity that the GDP is supposed to measure. "What we are measuring as productivity gains may in fact be changes in trade," says William Alterman, assistant commissioner for international prices at the BLS. Granted, the heavily globalized $14 trillion U.S. economy has a lot of moving parts, and no collection system can track every one of them. But the inability to truly reflect imported goods and worker productivity overstates GDP, which sets up a potentially misleading confidence in a mirage of rising GDP and worker productivity. That's not the only serious statistical flaw in the GDP. BusinessWeek recently reported that by overlooking cuts in research and development, GDP probably overstates the economy's strength by at least one percentage point. The gap between the data and reality arises from the U.S.'s classification of "tangible" investments, like machinery and buildings, and "intangible" investments, like worker training and R&D. As the U.S. economy has geared up to compete in an increasingly global economy, these intangible investments have come to exceed the value of tangible investments: $1.6 trillion to $1.2 trillion in 2007.  The problem is that U.S. companies alike have slashed intangible investments in the recession. Since R&D isn't fully reflected in the GDP, the net result is that the GDP overstates the strength of the recovery and grossly understates the long-term damage wrought by the reduction of future product development and the reduction of worker training. In the long term, Corporate America appears to have boosted its short-term profits by slashing investments in the foundation of future earnings: new and improved products and highly trained employees. Thus, even the revised 2.2% increase in third-quarter GDP may well be mostly illusory -- a false gain created by cheaper imported goods and the reduction of R&D staffing, a move that could significantly lower future real growth and productivity. Not fully reflecting intangible investments creates misleading data in both recession and times of high growth. In periods of rising intangible investments, then the GDP as it's now measured will understate real growth -- a gap between data and reality just as misleading as the one that has probably overstated real GDP in the third quarter. READ THE ENTIRE ARTICLE AND COMMENTS BY OTHER READERS

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	OMINOUS PREDICTIONS BY THE "EXPERTS" ...the economy will recover the jobs wiped out by the recession by 2013 or 2014 but...the unemployment rate will stay high....the healing economy will cause more people to stream back into the labor force, vying for too-few jobs... Intelligent Investing Panel >>> 2010 Will Be Fine...Experts gathered by the Intelligent Investing team express their confidence in the economy's growth. Click here. ...high unemployment for the next 10 years... ...average pay will dwindle, along with consumer prices... ...harder for households to pay down debt...   ...the mother of all jobless recoveries...   ...a continued hollowing-out of the middle class...   ...the “New Abnormal...”  A decade of high unemployment is looming ‘New abnormal:’ Some think 10 years won’t be enough to replace losses The decade ahead could be a brutal one for America's unemployed — and for people with jobs hoping for pay raises. At best, it could take until the middle of the decade for the nation to generate enough jobs to drive down the unemployment rate to a normal 5 or 6 percent and keep it there. At worst, that won't happen until much later — perhaps not until the next decade... ...Most economists say it could take at least until 2015 for the unemployment rate to drop down to a historically more normal 5.5 percent. And with the job market likely to stay weak, some also foresee another decade of wage stagnation. Even though the economy will likely keep growing, the pace is expected to be plodding. That will make employers reluctant to hire. Further contributing to high unemployment is the likelihood of more people competing for jobs, baby boomers delaying retirement and interest rates edging higher. READ FULL ARTICLE Economists warn of jobless recovery, long-term malaise   • Unemployment will remain chronically high, averaging 8 percent nationally. • Pay raises will dwindle and perhaps vanish. • Consumer price inflation will fade away. • Household debt service, including mortgage payments, will worsen, and mortgage defaults will get much worse. • Private credit extension will remain stunted. • Prices of real estate, stocks and other assets will remain in long-term declines except for Treasury bonds and some top-quality corporate bonds. • Severe public dissatisfaction with the economy will lead to political upheaval and scapegoating, which will also be engaged in by leaders, who in turn will struggle with international relations. • Federal budget deficits will continue to run high. The expansion seen in the third quarter was well below what it had seemed at first take. Gross domestic product rose 2.2 percent. That was down from the 2.8 percent estimate of a month ago and down from the initial estimate of 3.5 percent two months ago. David Levy and S Jay Levy noted that net private investment has ceased, that corporate profits of the S&P 500 fell below zero for the first time ever, and that household wealth as a percentage of disposable personal income is the lowest of the postwar era. READ MORE Unemployment Below 9 Percent Considering where unemployment's been over the past two years, and where we feared it might be headed, sub-9 percent unemployment should be seen as a success 12 months from now, and is certainly attainable. From end to end, this recession cost us 7.2 million jobs, and essentially doubled the unemployment rate, from 4.9 percent in December 2007 to our current 10 percent. Give or take a month or two, that took two years. So shedding one point in 12 months, a 10 percent change, shouldn't be a problem. We're already headed in the right direction, having fallen from 10.2 percent to 10 percent from October to November. Since we usually add jobs in December, if only temporary ones, by early 2010 we'll likely be looking at an unemployment rate in the high 9 percent range. And don't forget: unemployment is a lagging indicator. So the economic growth that began last summer and that most economists think will continue through next year, should be more than enough to pull unemployment below 9 percent, especially with Congress's new job-creation package. Now, that's not to say that it won't spike back above 10 percent in 2011. State budgets are still a huge mess, and with no stimulus cash to bridge deficits next time around, there could be a wave of laid-off cops and teachers and firemen coming down the line. But again, unemployment's lagging, so that probably won't hit, if it does at all, until 2011; just in time for the president to start campaigning again.  READ NEWSWEEK'S BUSINESS PREDICTIONS FOR 2010 A Contained Depression The economy may be turning the corner, but it's going to take a very long time to return to normal.   If you're breathing a little easier because the Great Recession seems to be ending, consider this: the U.S. economy may remain in a "contained depression" for months or years to come. That warning comes from economist David Levy, chairman of the Jerome Levy Forecasting Center, an economic research and consulting firm... We're in for a much longer period of contained depression [than we saw in the 1990s]. The single most overlooked observation about the U.S. economy in the postwar period is that balance sheets grew faster than incomes, decade after decade, both assets and liabilities. The problem is that asset values have to be justified by returns they can earn — or by expectations of future capital gains, and that's where you get into bubbles. What went on in the postwar period couldn't go on indefinitely. We were able to make it go on longer by dropping interest rates in the last two recessions, but we can't do that anymore. We have to shrink the value of assets on balance sheets and shrink liabilities. And that makes it very difficult for the economy to operate. In fact, without the government sector, the economy would collapse. If you look at the second and third quarters of this year and analyze the sources of profits in the economy — and if you take government out of the picture — everything added up to a net loss, for the first time since the 1930s. But because we had an enormous injection of monetary wealth into the economy by the federal government, we were able to pump up profits and help them climb back to a much better level than they were at during the worst of the recession. Fortunately, we're not going to have the 1930s all over again, although unemployment will be very high. The banking system will continue to function. The government at times may try to reduce the deficit, as the Japanese government has tried to do as they have been dealing with their own kind of contained depression. But every time you do it, profits are undermined, things get worse, and the deficit widens anyway — and then you feel pressure to do something to stimulate the economy. It's very hard not to run very large deficits. READ IT ALL FORBES Seven Looming Financial Bubbles Investors were burned by three bubbles this decade. Here are more to watch out for. Despite academic theories that claim markets assign assets the prices that they deserve, Wall Street has a troubling habit of inflating investment values until they pop. Long-term investors would do themselves a favor by steering clear of potential bubbles that could burst in the next decade. One likely candidate is gold. The precious metal's recent run--up nearly 300% since 2000--has brought with it a boom of pitchmen, ranging from Glenn Beck to late-night infomercial hosts, who play off fears of everything from the dollar's collapse to rampant inflation to all-around financial Armageddon. In the end, their hype tends to boil down to the same thing: Gold is the best hedge against disaster.... China may be another bubble worth avoiding. As Forbes' Gady Epstein recently reported, the Chinese government is responsible for debt equal to over 70% of the country's gross domestic product (the U.S. government, meanwhile, is responsible for debt equal to 50% of GDP.) China's growing boom looks suspiciously like the booms that preceded market crashes in Japan and in the U.S.--big developers are highly leveraged and dependent on the shaky notion that prices will rise and interest rates remain low in perpetuity. What are the seven bubbles to watch out for in the 2010? Check out this slide show to find out HEADLINES - TITULARES Premier chino subraya confianza, responsabilidad y cooperación en lucha contra crisis financiera China Charts Its Own Path >>> China is heading into 2010 with a full head of political and economic steam. While America dithers, the Chinese set up a currency reserve fund against -- U.S. crashes. Chinese Economist: Expect China's real estate bubble to burst in 2 years Wen: Chinese stimulus package effective, room for improvement Europe set for uneven economic recovery-IMF FHA: New Subprime Crisis? As if the first subprime crisis wasn’t damaging enough to the economy, U.S. government policy now seems geared toward producing a second act. There is one key difference this time however – taxpayers are directly on the hook and the federal government will have to bail itself out. The center of this new impending subprime crisis is the FHA (Federal Housing Administration). The FHA insures mortgages that have less than a 20% down payment. It is currently insuring four times as many mortgages daily as it did in 2006 at the height of housing bubble. It now has 5.4 million loans on its books and has become a dominant factor propping up the housing industry. A prominent congresswoman recently stated, "Without the FHA there would be no mortgage market". In congressional testimony from a few months ago, the head of this government agency claimed that the FHA's finances were sound. Oh really? The FHA currently has $30 billion in cash reserves on the books. How long will that last considering that there are $675 billion in loans and of those 24% of the loans from 2007 are troubled and 20% of the 2008 loans are troubled (these numbers can rise further)? Even a higher percentage of loans from 2009 could wind up troubled. Under the best of circumstances, if more than 4.4% of the loans insured by the FHA default, it will be out of money. How is it possible that there are an increasing number of problem loans on the FHA books? This is happening because the FHA is picking up the business that subprime brokers used to handle. All you need in order to get this insurance is a 3.5% down payment. A spotty employment record doesn't disqualify you, nor does having filed for bankruptcy in the past. Most outrageous of all is that having a previous mortgage default on your record does not keep you from getting a new loan insured by the FHA! The FHA business model is roughly equivalent to a company offering $100,000 life insurance policies for $100 to hospital patients who are on life support. Yet, the head of the agency claims that their finances are in good shape.  The FHA is only one of many new bailouts coming. A number of state and local governments are falling deeper into the red. Tax receipts are coming in at even lower levels than anything previously thought possible (chalk this down to another mystery of the supposedly recovering economy). Small and midsized U.S. banks are failing at the fastest clip since the Savings and Loan Crisis. The FDIC insurance fund is insolvent and was only saved at the last minute by having its insured banks prepay three years of insurance premiums. It looks like the Credit Crisis is by no means over, but we have simply finished phase one and at some point will be entering phase two. Article by Daryl Montgomery The Inflation Bomb Hiding On The Fed's Balance Sheeet Housing, HousingCrisis  ...there ...THEREisT...HERE THERE IS  good reason to worry about the ability of the Federal Reserve to prevent the massive build up of the monetary base from resulting in out of control inflation. One of the sources of the growth of the monetary base has been the $1 trillion of purchases of mortgage backed securities by the Fed. Much of that hasn’t yet made its way into the broader economy, and instead sits on bank balance sheets. Actually, much of it is on deposit with the Fed itself, where banks can earn risk-free interest instead of lending it to home buyers at risk of losing their jobs or businesses still suffering from diminished consumer demand. When the economy begins to recover, the Fed will need to reduce the monetary base to prevent all those dollars from flooding the market and triggering hyper-inflation. For some sources of monetary expansion this is relatively straight forward—the Fed can simply shut down various monetary easing facilities that operate like loans to banks. Banks will have to hand dollars over in exchange for the collateral they posted to participate in the lending facilities. But things are not as easy when it comes to the mortgage backed securities the Fed purchased this year. These purchases increased the monetary base, which means they will have an inflationary effect when bank lending loosens. In order for the Fed to start sucking back these funds, it will have to sell these into the market. Unlike the repo and lending programs, however, the Fed cannot simply order the banks to repurchase the mortgage backed securities. It will have to sell them at market prices. The market’s knowledge that the Fed has become a seller rather than a buyer for mortgage backed securities will likely result in the pricing of these securities falling. In order to bring the yield of these securities up to a level acceptable to the market, they will have to be sold at a discount. This discounting means that the Fed will not be able to withdraw as much liquidity as it added, leaving some portion of that $1 trillion (plus its multiplier effect) in the economy to create inflation. READ THE FULL ARTICLE OTHER SIMILAR ARTICLES: How The Fed’s Mortgage Subsidy Creates Inflation -[12/21/2009 - Clusterstock] How The Fed’s Mortgage Subsidy Creates Inflation -[12/21/2009 - Business Insider] Sorry Folks: The Fed's Mortgage Program Is Infl... -[12/21/2009 - Clusterstock] Sorry Folks: The Fed's Mortgage Program Is Infl... -[12/21/2009 - Business Insider] Why the Fed Will Be Sidelined in 2010 - [12/21/2009 - Market Oracle] Government by Stealth: the GSE affair continues The U.S. Treasury said it would provide capital as needed to Fannie Mae and Freddie Mac over the next three years, effectively opening its checkbook to the government-controlled companies in a bid to reassure investors in their debt.... This item was released after the closure of the healthcare debate and after the extension of the debt limit passed and after the president left for his Hawaii trip. Sent out on Thursday afternoon, Christmas Eve, the press release outlines the many changes that Treasury is making because of the worsening conditions of Fannie and Freddie. And it paves the way for the recognition of losses in the hundreds of billions in the GSE mortgage pools where the face amounts of the mortgages exceed the property market values or foreclosure amounts. This action also moves things one step closer to full nationalization of the GSEs and full specific guarantee of the GSE debt by the US Treasury. That would put official GSE debt on the US government’s sovereign debt balance sheet.... We believe this action confirms the seriousness of the GSE problem and is another reason why the Fed must stay on hold with low interest rates for an ”extended period” and why there may even be an extension and enlargement of the Fed’s holdings of GSE paper. If markets do NOT reprice GSE debt at very tight spreads to Treasury debt, the home mortgage interest rate in the US will rise and the nascent housing recovery will be choked off. The Fed knows this and is watching these spreads closely. READ THE FULL ARTICLE

	GEORGE SOROS:  Futura recaída en la recesión ...la creencia cada vez más afianzada de que el sistema financiero mundial se ha librado del desplome y de que estamos volviendo lentamente a la actividad normal es una interpretación gravemente equivocada de la situación actual. La globalización de los mercados financieros que se produjo desde el decenio de 1980 permitió al capital financiero moverse en libertad por el mundo, con lo que resultaba difícil aplicarle impuestos o regularlo. Con ello, el capital financiero se encontró en una situación privilegiada: los gobiernos tenían que prestar más atención a las necesidades del capital internacional que a las aspiraciones de sus propios ciudadanos. A los países les resultó difícil ofrecer resistencia. Pero el sistema financiero mundial resultante era fundamentalmente inestable, porque estaba basado en la falsa premisa de que se puede dejar con seguridad que los mercados financieros actúen por su cuenta. Ésa es la razón por la que falló y por la que no se puede volver a recomponer. LEER TODO EL ARTICULO Storm clouds ahead for America Rise of China, India could cause headaches for superpower Robert Pape, a political scientist at the University of Chicago, estimates between 2000 and 2008 the U.S. share of the world's GDP fell by 32%, while that of China rose by 144%. "America is in unprecedented decline," he says. "The self-inflicted wounds of the Iraq War, growing government debt, increasingly negative current-account balances and other internal economic weaknesses have cost the United States real power in today's world of rapidly spreading knowledge and technology. If present trends continue, we will look back at the Bush administration years as the death knell of American hegemony." The United States has experienced the most significant decline of any state, except the Soviet Union, since the mid-19th century, says Prof. Pape, adding: "Something fundamental has changed."...The U.S. will face increasing competition from rising powers like China and India in the coming years. "We are now at the start of what may become the most dramatic change in international order in several centuries, the biggest shift since European nations were first shuffled into a sovereign order by the peace of Westphalia in 1648," writes Joshua Cooper Ramo in his book The Age of the Unthinkable. "What we face," he says, "isn't one single shift or revolution, like the end of World War Two or the collapse of the Soviet Union or a financial crisis, so much as an avalanche of ceaseless change. "We are entering a revolutionary age." READ TO ENTIRE ARTICLE THE DEBT LIMIT: When Is Enough Enough? by heritage.org Fact Sheet #48 Why the Debt and the Debt Limit Matter $12,000,000,000,000: The total federal debt has reached a whopping $12 trillion. About $7.6 trillion is debt held by the public, which has been borrowed from citizens and foreign countries, and $4.4 trillion is debt held by the government, which has been borrowed primarily from the Social Security trust fund. Debt Is Earning Interest That Taxpayers Must Pay: Public debt holders are paid annual interest from the federal budget, which must be paid with taxpayer dollars. In 2009 interest payments amounted to $209 billion. Too Much Debt Will Slow the Economy: Government borrowing reduces resources available for private investment, leading to lower productivity, wages, and economic growth. Only Getting Worse: The recession and excessive spending have caused the debt held by the public to grow sharply to 56% of the economy, topping the historical average of 36%. To make matters worse, entitlement programs will double in size over the next few decades and cause the national debt to reach 320% of the economy. Raising the Debt Limit: Congress will vote to determine the limit for the federal debt, which currently stands at $12.1 trillion. Since the national debt has hit $12 trillion, Congress plans to raise the debt limit. Congress Plans to Quietly Raise the Debt Limit Congress Hopes Americans and Credit Markets Don't Notice: To avoid scrutiny, congressional leadership will likely try to sneak the debt limit increase into a "must-pass" measure, such as the defense appropriations bill. Doing so would limit necessary debate on the debt in the hopes that taxpayers and creditors would not respond. Increase Would Be Largest in History: Because this will be a difficult vote, the majority's leadership has suggested raising the limit enough to avoid another vote on the debt limit before the November 2010 elections. The estimated $1.8 trillion increase would be the single-greatest increase of the debt limit in history. Time to Take the Debt Seriously In Order to Reign in the Debt, Tackle Entitlements: To avoid perpetual trillion-dollar debt limit increases, Members of Congress should finally address the long-term budget problems posed by Social Security, Medicare, and Medicaid. Create a Bipartisan Commission: A growing number in Congress--led by Senators Kent Conrad (D-ND) and Judd Gregg (R-NH) and Representatives Frank Wolf (R-VA) and Jim Cooper (D-TN)--want to tie a vote on the debt limit to the creation of a bipartisan commission that would recommend real reforms to get the nation's debt under control. A Debt Commission Would Be a Step in the Right Direction: A commission would make it politically and procedurally possible for Congress to move on such a difficult issue. An effective commission would put entitlement spending on long-term budgets, which would prevent the debt from growing on autopilot. It would also make Congress think about the long-term obligations posed by entitlements, which now equal $44 trillion. If Not Now, When?: Failure to act now will guarantee that future Congresses will have to raise the debt limit many more times and that future generations will pay the price. Congress must prove it is up to the task by debating the issue on its own merit and taking this hard vote without the subterfuge of burying it in "must-pass" legislation. Geithner Sees No ‘Second Wave’ Financial Crisis In wake of the worst economic crisis since the Great Depression, Treasury secretary Timothy Geithner has stated that the Obama administration will prevent another financial collapse like the one that occurred last year. In an interview on Tuesday with National Public Radio, he said the administration “cannot afford to let the country live again with a risk that we are going to have another series of events like we had last year. That is not something that is acceptable.” Timothy Geithner Slow But Stable Recovery Geithner was against the notion that the commercial real estate problems and a weakening dollar could trigger another crisis again. He did however state (in a different interview) that it would take several months for the economy to experience positive growth. With respects to the current crisis, he believes that large bank have “a long way to go” to earn the trust of the consumers again. READ THE FULL ATTICLE

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Top business story: Recovery from Great Recession

Fed's approach to regulation left banks exposed to crisis >>> The Fed's failure to foresee the crisis or to require adequate safeguards happened in part because it did not understand the risks that banks were taking, according to documents and interviews with more than three dozen current and former government officials, bank executives and regulatory experts

The U.S. dollar will continue to depreciate over the long term and the world's largest economy is expected to remain sluggish for a long time - Fan Gang, adviser to the Chinese central bank.

Are Americans currently living in another depression?

Policy makers and leaders of financial institutions are now turning their attention more to a set of interrelated issues that caused the economic meltdown while the world is beginning to emerge from the global financial crisis - Karim Pakravan, Associate Professor of Finance at DePaul University, Chicago

Year's best business books to make sense of financial crisis

Con más influencia y esperanza, América Latina recibe nueva década ¡Cuánto puede cambiar en solo una década! Hace diez años, América Latina y el Caribe recibieron el nuevo siglo en medio de una profunda incertidumbre

La crisis financiera y los derivados OTC

China hace gran aportación a recuperación económica gradual del mundo

Cuba admite que la crisis le ahoga El Gobierno reconoce que las predicciones para 2010 son mucho peores de lo que se esperaba.- Raúl Castro acusa a Obama de tener un doble juego hacia la isla

READ FULL ARTICLE FROM SHANGHAI DAILY

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Exclusive Interview: Nouriel Roubini on Latin America's 2010 Outlook

December 18, 2009

"These countries have shown their own resilience. Their economic policies have been sound and they’ve been able to conduct countercyclical policies."

Chairman of Roubini Global Economic and New York University Professor of Economics Nouriel Roubini joined AS/COA Online's Carin Zissis for an exclusive interview regarding Latin America's economic outlook. Roubini forecasts and regional growth rate of 3.8 percent for 2010. He also offered his outlook for specific countries, including Brazil, Mexico, and Venezuela.

CLICK HERE TO READ ROUBINI INTERVIEW

CLICK HERE TO VIEW >>> Video: Nouriel Roubini on the Global Economic Outlook

THE GLASS-STEAGALL ACT WAS ENACTED AFTER THE GREAT DEPRESSION TO AVOID ANOTHER SUCH FIASCO >>> "Congress ignored history in 1999 when it repealed the Glass-Steagall Act,"...CLICK HERE TO READ MORE

Time magazine has named Ben Bernanke its 2009 Person of the Year. The magazine said the Federal Reserve chairman's foresight and success at preventing a second Great Depression -- the history that wasn't made this year -- drove its choice.

"We've rarely had such a perfect revision of the cliché that those who do not learn from history are doomed to repeat it," Richard Stengel, Time's managing editor,writes in an introduction to this week's issue. "Bernanke didn't just learn from history; he wrote it himself and was damned if he was going to repeat it. Bernanke decided to do the opposite of what the Fed did back in the '30s: he would loosen the money supply as far as it would go, he would save as many banks as he could, and he wasn't going to hector the American public about pulling up their socks."

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From Time:

"Professor Bernanke of Princeton was a leading scholar of the Great Depression. He knew how the passive Fed of the 1930s helped create the calamity — through its stubborn refusal to expand the money supply and its tragic lack of imagination and experimentation. Chairman Bernanke of Washington was determined not to be the Fed chairman who presided over Depression 2.0. So when turbulence in U.S. housing markets metastasized into the worst global financial crisis in more than 75 years, he conjured up trillions of new dollars and blasted them into the economy; engineered massive public rescues of failing private companies; ratcheted down interest rates to zero; lent to mutual funds, hedge funds, foreign banks, investment banks, manufacturers, insurers and other borrowers who had never dreamed of receiving Fed cash; jump-started stalled credit markets in everything from car loans to corporate paper; revolutionized housing finance with a breathtaking shopping spree for mortgage bonds; blew up the Fed's balance sheet to three times its previous size; and generally transformed the staid arena of central banking into a stage for desperate improvisation. He didn't just reshape U.S. monetary policy; he led an effort to save the world economy."

GO TO TIME MAGAZINE ARTICLES & PHOTOS OF ITS PERSON OF THE YEAR 2009

	RISING              INK RED   BREAKING NEWS >>>   U.S. National Debt Tops Debt Limit   (AP)                   The latest calculation of the National Debt as posted by the Treasury Department   has - at least numerically - exceeded the statutory Debt Limit approved by Congress last February as part of the Recovery Act stimulus bill.  The ceiling was set at $12.104 trillion dollars. The latest posting by Treasury shows the National Debt at nearly $12.135 trillion.  A senior Treasury official told CBS News that the department has some "extraordinary accounting tools" it can use to give the government breathing room in the range of $150-billion when the Debt exceeds the Debt Ceiling.  Were it not for those "tools," the U.S. Government would not have the statutory authority to borrow any more money. It might block issuance of Social Security checks and require a shutdown of some parts of the federal government.  READ FULL ARTICLE ???????? "extraordinary accounting tools" ??????????? A Call to Action to Stem the Mounting Federal Debt The Peterson-Pew Commission on Budget Reform Executive Summary A call to action Over the past year alone, the public debt of the United States rose sharply from 41 to 53 percent of gross domestic product (GDP). Under reasonable assumptions, the debt is projected to grow steadily, reaching 85 percent of GDP by 2018, 100 percent by 2022, and 200 percent in 2038. However, before the debt reached such high levels, the United States would almost certainly experience a debtdriven crisis—something previously viewed as almost unfathomable in the world’s largest economy. The crisis could unfold gradually or it could happen suddenly, but with great costs either way. The tipping point is impossible to predict, but the United States is already hearing concerns about its fiscal management from some of its largest creditors, and the country is uncomfortably vulnerable to shifts in confidence around the world. The Peterson-Pew Commission on Budget Reform is calling for Congress and the White House to take immediate action to stem the growing federal debt. Our proposal is crafted both to accommodate the needs of the still-recovering economy, and reflect the tremendous risks posed by the large and expanding debt burden. We recommend that Congress and the White House formulate a fiscal framework that includes: • A commitment to stabilize the public debt over the medium term; • Specific policies to stabilize the debt; • Annual debt targets with an automatic enforcement mechanism to ensure targets are met; and • A commitment to reduce further the debt level over the longer term. The looming fiscal crisis The economic crisis that the United States just experienced resulted in the deterioration of the country’s fiscal metrics as revenue plummeted and spending soared due to the recession’s effects and the government’s response. The 2009 budget deficit was $1.4 trillion, almost 10 percent of GDP. The public debt grew 31 percent from $5.8 trillion to $7.6 trillion. And the total debt, which includes what the government has borrowed from itself, grew from almost $10 trillion to $11.9 trillion. However, even after the recession abates, its lingering effect, the extension of a number of deficit-financed policies, demographic changes, and growing health care costs will all create an unsustainable fiscal situation where the debt will continue to grow as a share of the economy. Under the Commission’s “fiscal baseline” , which assumes the extension of many of the 2001 and 2003 tax cuts and other expiring policies, lower war costs, and discretionary spending that keeps pace with the economy, the United States would see: • Total government spending—driven by an aging population and rising health care costs—rise from 25 percent of GDP today to 36 percent in 2038. • Revenue—which fell to below 15 percent of GDP during the recession—grow gradually to 18.5 percent in 2018, surpassing historical averages, but not by nearly enough to keep pace with spending. • Deficits slip from their current level of 10 percent of GDP to below 6 percent over the next five years but rise to above 16 percent in 2038. Without a dramatic shift in course, the debt will grow to unprecedented levels, breaking the 200 percent mark in 2038. Well before the debt approaches such startling heights, fears of inflation and a prospective decline in the value of the dollar would cause investors to demand higher interest rates and shift out of U.S. Treasury securities. The excessive debt would also affect citizens in their everyday lives by harming the American standard of living through slower economic growth and dampening wages, and shrinking the government’s ability to reduce taxes, invest,  or provide a safety net. Stabilizing the debt The Peterson-Pew Commission on Budget Reform knows that fiscal problems of this size cannot be fixed overnight or even in a year. Indeed, rushing the process could harm the economy, choking off the budding recovery. But to buy some breathing room, the United States must show its creditors that it is serious about stabilizing the federal debt over a reasonable timeframe. Both spending cuts and tax increases will be necessary. The Commission recommends that Congress and the White House follow a six-step plan: Step 1: Commit immediately to stabilize the debt at 60 percent of GDP by 2018; Step 2: Develop a specific and credible debt stabilization package in 2010; Step 3: Begin to phase in policy changes in 2012; Step 4: Review progress annually and implement an enforcement regime to stay on track; Step 5: Stabilize the debt by 2018; and Step 6: Continue to reduce the debt as a share of the economy over the longer term.   1. Commit immediately to stabilize the debt at 60 percent of GDP by 2018. Congress and the White House should immediately commit to stabilizing the public debt at a reasonable level over a reasonable timeframe: we recommend 60 percent of GDP by 2018. Waiting too long could fail to reassure creditors—one of the primary objectives of acting quickly. The “announcement effect” of such a commitment, if credible, can have positive economic effects by signaling that the United States is serious about reducing its debt. We believe that the 60 percent goal is the most ambitious yet realistic goal that can be achieved in this timeframe. The 60 percent debt threshold is now an international standard—regularly identified by the European Union (EU) and the International Monetary Fund (IMF) as a reasonable debt target. A more ambitious target could easily prove to be such a heavy political lift that lawmakers would not embrace it or it would not be credible. Given the significant risks of high U.S. debt, however, a less aggressive target might be insufficient to reassure markets. While cutting government spending or raising taxes too early could slow or reverse the economic recovery, other countries have shown that a credible commitment to reducing the debt prior to actual policy changes can improve creditors’ expectations and diminish the risks of a debtdriven crisis. A number of advanced countries including Canada and Sweden offer fiscal success stories. 2. Develop a specific and credible debt stabilization package in 2010. A glide path for getting from today to 2018 is critical. So are the specific policies. Congress and the White House must agree on the necessary reforms and the timing for implementing them. We do not recommend a specific mix but believe that both spending cuts and tax increases will be necessary. Under the Commission’s fiscal baseline, average annual deficits are projected to be about 6 percent of GDP. To meet the proposed goal, the average deficit would need to shrink to about 2 percent. For illustrative purposes, we propose a glide path that starts gradually with a deficit of 5 percent in 2012 and that requires a deficit of less than 1 percent by 2018. We allow seven years for the plan so that the impact of policy changes made in any single year is not drastic and does not stall the recovery of the economy. The magnitude of deficit reduction needed to reach the 60 percent goal depends on the level of debt when policymakers start. If no new deficit-financed policies were added to the budget and any extensions of expiring policies were paid for, deficits would average around 3 percent of GDP, instead of 6 percent, and would only need to shrink to around 2 percent to meet the Commission’s goal—clearly a more manageable scenario. 3. Begin to phase in policy changes in 2012. Given current economic conditions, we recommend waiting to implement the policy changes until 2012. Clearly, policymakers need to closely monitor economic conditions between now and then, but making aggressive changes any earlier could harm the economic recovery, particularly with unemployment reaching a 25-year high in 2009. However, waiting any longer could undermine the plan’s credibility and leave the country reliant on excessively high borrowing for too long with no plan in place to change course. Some policymakers will no doubt try to use the struggling economy as an excuse for delay. Keep in mind however, that not putting a plan in place could derail the economic recovery. 4. Review progress annually and implement an enforcement regime to stay on track. Once a plan is adopted, it will be critical to have a mechanism to ensure that it stays on track. We suggest a broadbased companion enforcement mechanism, or a “debt trigger.” The trigger would take effect if an annual debt target were missed. Any breach of the target would be offset through automatic spending reductions and tax increases. The Commission recommends that the trigger apply equally to spending and revenue. There would be a broadbased surtax, and all programs, projects, and activities would be subject to this trigger. The trigger should be punitive enough to cause lawmakers to act but realistic enough that it can be pulled as a last resort if policymakers fail to act or select policies that fall short of the goal. 5. Stabilize the debt by 2018. Reducing the debt to 60 percent of GDP will be no small feat. It will require small changes in the first year from the projected level of 69 percent to 68 percent but, more significantly, will require a dramatic deviation from the current debt path. Preventing that projected path is critical for the United States if it is to avoid the economic risks associated with excessive debt. But hitting a 60 percent target is, in and of itself, not a sufficient goal. What matters just as much—if not more—is that the debt does not continue to grow as a share of the economy thereafter. This makes deriving a package of revenue increases and spending cuts to bring the debt down to 60 percent even more difficult. It would be easier if policymakers could implement temporary measures, timing shifts, and short-term policies that did not address the major drivers of the budget’s growth. This shortsightedness, however, would leave the debt on track to grow again after the medium-term goal was achieved. To be effective over the longer term, a stabilization package will have to include permanent changes to current policies and must be weighted to control the budget’s most problematic areas. We believe the problem is so large that nearly all areas of the budget will be affected, and certainly both spending and taxes will have to be part of the ultimate package. Reforms in programs that are growing faster than the economy—notably Medicare, Medicaid, Social Security, and certain tax policies—afford the best opportunities for savings and will provide the greatest benefits to longer term debt stability. 6. Continue to reduce the debt as a share of the economy over the longer term. Though preventing the debt from expanding again over the coming decades will be quite challenging given the demographic and health care cost pressures, we believe that policymakers must, over time, bring the debt down beyond the initial 60 percent target to something closer to the U.S. historical fifty-year average of below 40 percent. Fiscally-responsible federal policies are necessary so that the government has the fiscal flexibility to respond to crises. Even though the United States had budget deficits when the recent economic and financial crises hit, the relatively low level of debt as a share of the economy gave policymakers the ability to respond quickly and borrow large amounts to respond to those crises without worrying about the federal government’s ability to borrow. If the debt level had been at its current level, or where it is projected to grow to, responding to the economic crisis would have been much more challenging. Implementing reforms that slow the growth of government spending, keep revenue apace with spending, and are conducive to economic growth will be critical to bringing down the debt levels further. Ultimately, this task will almost certainly require more than one package of debt reduction. The Commission hopes that policymakers will monitor the debt to ensure that it stays at a manageable level and does not grow faster than the economy. Ensuring the future fiscal health of the country depends on it. CLICK HERE TO READ THE FULL << RED INK RISING >> REPORT OF THE PETERSON - PEW COMMISSION ON BUDGET REFORM (pdf, 36 pp.) The difference between the deficit and debt The deficit is the difference in a given fiscal year between federal revenue, and spending. The government can have either a deficit or a surplus. In order to finance operations when there is a deficit, the government borrows money by issuing government securities to cover the deficit. The debt is the amount owed to creditors who have financed the government’s borrowing. It does not increase by the exact amount of the deficit, but deficits are the primary factor. The debt can also rise or fall because of changes in the Treasury’s operating cash balance, the exercise of sovereign monetary power, federal credit financing, and federal financial stabilization activities. The deficit and debt can be expressed both in dollars and as a percentage of GDP. The debt-to-GDP ratio and the debt path, or debt trends over time, are key measures of the debt in comparison to the nation’s total economy, and reflect the nation’s ability to manage its debt. For this analysis, the Commission uses publicly-held debt, as opposed to gross debt, which includes federal debt held internally by government trust funds to redeem future commitments.

HEADLINES President Obama: Federal Government 'Will Go Bankrupt' if Health Care Costs Are Not Reined In Runaway Debt Must Be Stopped Now Greenspan: United States must quickly begin to erase red ink to avert possible disaster. Obama administration launches Financial Fraud Task Force to investigate issues related to the economic crisis. FedEx sees strong demand in Asia and Latin America leading the way to global economic recovery Economic reports point to gradual recovery U.S. inflation rises more than expected Gulf closer to single currency "I can't say this enough: The state has run out of money," New York Governor Paterson SUMMERS: EVERYBODY AGREES RECESSION IS OVER ROMER