EconoMonitor

Nouriel Roubini's Global EconoMonitor

Eastern European Tinderbox: How Explosive Could It Get?

The Central and Eastern Europe (CEE) region is the sick man of emerging markets. While the global crisis means few, if any, bright spots worldwide, the situation in the CEE area is particularly bleak.  After almost a decade of outpacing worldwide growth, the region looks set to contract in 2009, with almost every country either in or on the verge of recession.  The once high-flying Baltics (Estonia, Latvia, Lithuania) look headed for double-digit contractions, while countries relatively less affected by the crisis (i.e. Czech Republic, Slovakia and Slovenia) will have a hard time posting even positive growth.  Meanwhile, Hungary and Latvia’s economies already deteriorated to the point where IMF help was needed late last year.

The CEE’s ill health is primarily driven by two factors – collapsing exports and the drying-up of capital inflows.  Exports were key to the region’s economic success, accounting for a significant 80-90% of GDP in the Czech Republic, Hungary and Slovakia. By far the biggest market for CEE goods is the Eurozone, which is now in recession.  Meanwhile, the global credit crunch has dried up capital inflows to the region.  An easy flow of credit fueled Eastern Europe’s boom in recent years, but the good times are gone.  According to the Institute of International Finance, net private capital flows to Emerging Europe are projected to fall from an estimated $254 billion in 2008 to $30 billion in 2009.  Whether or not this is formally considered a ‘sudden stop’ of capital, it will necessitate a very painful adjustment process.

Classic Emerging Markets Crisis In The Works?

What is especially worrisome is that the days of easy credit flows were accompanied by rising external imbalances that rival or even exceed the build-up of imbalances in pre-crisis Asia – e.g. current account deficits in Southeast Asia from 1995-97 fell within the 3.0-8.5% of GDP range, while those in CEE were in the double-digits in Romania, Bulgaria and the Baltics in 2008.  As examined in a recent RGE analysis piece, the vulnerabilities in many CEE countries – high foreign currency borrowing, hefty levels of external debt and massive current-account deficits – suggest the classic makings of a capital account crisis a la Asia in the late 1990s.

Spillover Effects To Rest Of World

Like the Asia crisis of 1997-98, a regional crisis in Eastern Europe would have far-reaching effects.  As Harvard professor Kenneth Rogoff noted in a recent New York Times article: “There’s a domino effect.  International credit markets are linked, and so a snowballing credit crisis in Eastern Europe and the Baltic countries could cause New York municipal bonds to fall.”  Western Europe looks set to be particularly impacted via its strong trade and financial linkages.  Of particular concern is the strong presence of Western European banks (via subsidiaries) in the CEE, where they hold 60-90% market share depending on the country, which paves the way for contagion.

So is this the making of a cross-border banking crisis?  It could be.  Given the sharp contraction in Eastern Europe’s economies, combined with high foreign currency-denominated lending (particularly in Croatia, Hungary and Romania), weakening currencies and heavy reliance on non-deposit external financing, Eastern Europe’s banks will likely see a large spike in non-performing loans.  Banking systems in the region are likely only as strong as their weakest link – or in this case, weakest country.  That’s because of the ‘common lender’ phenomenon.  As many CEE countries share foreign parent bank(s) in common, this paves the way for problems in just one of these countries to have ripple effects into other CEE countries.  So even a relatively healthy economy/banking system like the Czech Republic’s – with a reasonable loan-to-deposit ratio and scant fx-denominated lending to households – is still vulnerable.

The CEE has borrowed $1.4 trillion from BIS reporting banks abroad and most of it from Western European banks (USD 1.3 trillion).  Austria is far and away the Western European country most heavily exposed to the CEE region (via Austrian-based banks like Raiffeisen and Erste Bank).  These banks’ collective exposure to the region amounts to over 70% of Austria’s GDP.  Notably, however, other Western European countries’ total exposure is far less.  Belgium and Sweden are the next in line after Austria; their lenders’ total exposure to the region amounts to a still significant 20-25% of GDP.  Some fear that parent banks, if they get into trouble, could either fire-sell subsidiaries or simply walk away. Another concern is Europe’s fragmented regulatory system, which means that if a cross-border bank needs to be unwound, the process is likely to be extremely messy.

Policymakers In Virtual Straitjackets

CEE policymakers have fairly limited tools to cope with the crisis.  Fiscal policy is constrained by the fact that belt-tightening is required to restore order to the balance of payments in some countries (i.e. Hungary, Romania, Ukraine, and the Baltics), while euro adoption ambitions limit the fiscal response in others (i.e. Poland).  Meanwhile, monetary policy easing is constrained in countries with heavy foreign currency-denominated lending, like Hungary and Romania, where a weakening of the local currency could potentially trigger defaults, thereby impacting financial stability.  In others (i.e. Bulgaria, Estonia, Latvia and Lithuania), monetary policy is not an available tool due to fixed exchange rates.

Due to limited fiscal and monetary policy options, other CEE countries might need to follow in the footsteps of Latvia and Hungary and call on IMF help.  In a nod to the difficult situation of many CEE countries, EU leaders called last week for IMF resources to be doubled to $500 billion to help head off new problems in crisis-hit countries.  It remains to be seen, however, whether IMF help will be enough to return financial stability to the region.

In a recent research report, economists from Danske Bank point to the increasing concern of spill-back from problems in Eastern Europe to the Eurozone.  Polish authorities and commentators, such as Wolfgang Munchau, recently made the point that East European countries should be given a shortcut to join the euro and access to its safety and stability net.  However, current problems faced by some EMU members show that EMU membership alone is no panacea.  Moreover, previous experience shows that currency pegs can be double-edged swords that often end in capitulation.  The current test case for the entire region is Latvia, whose currency peg looks increasingly fragile even after its IMF-led EUR 7.5 billion bailout package.  Devaluation with its ripple effects through the region would be devastating for the mostly foreign-owned banks in the region.

Unlike EMU member countries, EU countries that have not yet adopted the euro have access to the ‘medium-term financial assistance’ facility worth EUR 25 billion, of which EUR 10 billion in loans have already been extended to Latvia and Hungary. Additional assistance to the region will have to come from a revamped IMF, as noted before and the EBRD is also providing funds to banks in the region. Despite a 20% funding boost, however, its resources are much smaller.

Spotlight On Ukraine

European banks are also exposed to vulnerable economies outside of the EU.  Russia is the second largest borrower from EU banks and it has over $100 billion of debt that must be financed this year. However, it is the Ukraine that may pose the biggest contagion risk, particularly if the next tranche of IMF funding continues to be deferred.  Austrian, French, Swedish, Italian and German banks have a collective exposure of around EUR 30 billion to the Ukraine.  Ukraine has $46 billion in foreign debt obligations falling due in 2009 and the swift plunge of the Hyrvnia has boosted the cost of servicing these debts even as corporate debts are on the rise.  Ukraine’s political divisions and economic contraction of at least 6% suggest further sovereign and corporate ratings downgrades are on the way.  Ukraine may thus be forced to make the budget cuts required by the IMF, but it is also reaching out to the U.S., Russia, China, Japan and the EU for additional funds.

Government Collapse in Latvia: More Yet To Come?

 

The series of riots that erupted in Bulgaria, Lithuania and Latvia in January, followed by Latvia’s government collapse last week, raise concerns that Eastern European countries may experience a period of deep destabilization and social strife as the economic crisis deepens and unemployment rates soar. The recent wave of popular unrest was not isolated to Eastern Europe.  Ireland, Iceland, France, the UK and Greece also experienced street protests, but many Eastern European governments seem more vulnerable as they have limited policy options to address the crisis and little or no room for fiscal stimulus due to budgetary or financing constrains.  Deeply unpopular austerity measures including slashed public wages, tax hikes and curbs on social spending will keep fanning public discontent in the Baltic states, Hungary and Romania.  Dissatisfaction linked to the economic woes will be amplified in the countries where governments have been weakened by high-profile corruption and fraud scandals (Latvia, Lithuania, Hungary, Romania and Bulgaria).  The political forces most likely to benefit from public disaffection are those running on the populist platforms, which could disrupt efforts to battle the effects of the economic crisis.  Latvia could be a case in point, as there are growing concerns that the coming election campaign might suspend the fiscal austerity measures required by the IMF bail-out package.  Two other political hotspots that are at risk of early elections are Romania and Estonia, while Bulgarian national elections are due in mid-2009.

EU’s Free Market Rules Under Pressure: Eastern Disillusionment and Western Protectionism

Overall, a big rise in support for populist and radical parties in the region could put social, structural and environmental reforms on hold in the region and could even call into question the economic and political model Eastern European countries have followed since the 1990s.  The eastern EU member states’ decisions to open their markets and move toward greater integration with the EU are now being second-guessed by some.  Moreover, the protectionist measures implemented in some western EU states in support of their automotive and financial sectors are threatening the EU’s single market rules and could particularly hurt Eastern European economies.  Meanwhile, a backlash over immigrant labor is likely.  With the 2009 unemployment rate set to rise to 8.75% in the EU27, according to the European Commission, member states are tempted to interpret the laws in a way more favorable to their nationals.  This suggests that migration trends will reverse and the eastward flow of remittances will dwindle.  The return of Eastern European migrant workers, in turn, may add to social discontent in their countries of origin.

Growing East/West Divide in the EU?

The financial crisis has exacerbated the East/West divide within the EU illustrated by the persistent bickering between the Czech Republic, the current holder of the EU presidency and France over trade and protectionist bail out packages that hurt automotive industries in Poland, Czech Republic, Slovakia and Hungary.  So far, the EU has helped economically troubled Latvia, Poland and Hungary with swap lines and loans and called for the resources of the IMF to double in order to help the countries facing the crisis.  Yet, there have been a growing number of calls for EU-led coordinated support to the Eastern European economies (recently echoed by the World Bank).  If there is a perceived lack of help, the financial crisis could deepen the divide between so called “Old Europe” and “New Europe” and bring structural changes to the political landscape in Eastern Europe, such as strengthening the nationalist, euro-skeptic voices in Central Europe (Czech Republic, Poland) and the pro-Russian parties in the Baltic states.

86 Responses to “Eastern European Tinderbox: How Explosive Could It Get?”

AntonFebruary 25th, 2009 at 10:00 am

Interesting array of data in this article. However, no conclusion…What is that we can expect? Who will suffer the most? RGE reading public would have to understand that people in Central and Eastern European countries have mastered lifestyles of poverty or on the brink of it. All these nations are masters of adaptation to any economic conditions that they might be brought into. We would have to understand the relationship among local political elites, foreing businesses and entities and disenfranchised populus. One have to understand the fact that high systemic coruption is something that all these stakeholders in these countries may have as adhesive element. Regular citizens are indiferent to all of this. The Argentinian scenario. Why not, it will wipe off lots of shady businesses and corupted politicians. The only worry might be that bogus part of Bosnia and Herzegovina, “Republika Srpska”- a fruit of the Serbian genocidal affair in Bosnia and Herzegovina. Serbian politicians in Bosnia might try to pull out some dirty tricks and stir up some trouble,,,,

AnonymousFebruary 25th, 2009 at 10:51 pm

“… a fruit of the Serbian genocidal affair in Bosnia and Herzegovina…”Oh boy, how brainwashed you really are!

AntonFebruary 26th, 2009 at 9:24 am

Brainwashed? How about all those statements of Bosnian Serb leaders in the Hague. Perhaps, Biljana Plavsic’s apologies for the crimes commited by Serbs to all Bosnian peoples at court of law in the Hague speaks very profoundly in a favor of my statement. You, Mr. or Mrs. Anonymous, have a problem with facts not me. Mayne there is another alternative to your remark; then explain to me why so many Bosnian refugees around the world….Why they are here? They love traveling? However, this discusion should not be a part of RGE Monitor.

World politics, blahFebruary 28th, 2009 at 9:16 am

njah, the fact is that the western media is just one-sided in their reporting of the issue.Serbs are made to be the main culprit because they were the main allies of Russians in the region. The problem is aggravated by the fact that this type of political decisions are sold to the public by making them moral decisions. They are made moral decisions by bringing up the atrocities of one of the parties while sweeping the atrocities of the other parties under the carpet: thus it becomes an issue between polarized innocent and evil.

seeking the factsFebruary 28th, 2009 at 10:45 am

very astute and helpful comment, World politics. it would be great if you could recommend a journalist or site that provides an unbiased look at the true details of that conflict. know of any good overviews that don’t take a month to read?

GuestFebruary 28th, 2009 at 11:20 am

Great example of why America is in so much trouble, everyone has an opinion and even a consensus on any issue will be disputed by someone. You say find and unbiased journalist, is there one alive? Everyone is biased in his or her own way, only the conceded would say otherwise. Every comment made here and in every blog, newspaper, magazine is biased to some degree by the writer. I agree with some here and disagree with some here just as many of you do. Pure facts are even manipulated to some degree, Confusion is growing in this country and around the world on every topic, I stated once before, this must have been what it sounded and looked like during the building of the tower of Babel. The professor gives us his opinion based on facts and his understanding of them, and I believe he is in large part correct and that is why I come here.

AnonymousMarch 1st, 2009 at 8:03 pm

You, the one that reads the NYT, listens to the CNN, steer away from the government outlets (supposedly independent media). Follow the history timeline. Go back 20 to 30 years (and more), see how it all started. Hint: 1989 fall of Berlin Wall, disintegration of SSSR, vacuum in East Europe being filled (by whom and why), ratification of NATO treaties (a need for client states poor to defend themselves against the aggressor). Why is it so hard for you to see what the rest of the world has already seen. Korea, Vietnam, Iran/Iraq, Yugoslavia, Iraq, Afganistan. Serbs fought evil for centuries and were always on the right side, their population decimated over the years, because they wanted to be free and independent. You are ignorant, self-centered, manipulated, Hollywood-brainwashed, “democratic” individual, and you must read, read, and read. You have to study, educate yourself, learn about others, acknowledge and respect their cultures.

Leo70February 28th, 2009 at 9:45 pm

Actually it’s the Northern European countries, but everyone knows that Republicans don’t know geography.

GuestFebruary 28th, 2009 at 9:59 pm

and you don’t know how to read the person’s post. are you illiterate? the guy wrote “Central and Eastern European countries” with reason. why think he meant “Northern European countries”?

Chief of StuffMarch 1st, 2009 at 2:20 am

Because what Leo70 meant, I believe, is “Most Democrats want to model the USA after the Northern European countries”, which would certainly seem to be a much more likely statement than the previous post by Guest. Wouldn’t you agree after re-reading?

cdulanFebruary 25th, 2009 at 10:32 am

I think a common thread around the world is that if you have an export based economy, you are going to get crushed over the next couple of years.The x factor is the threat of militarism in times of economic stress. It looks really unlikely now, but could become a bigger factor later in the down cycle.I really wish a member of the EU would step up and lead a policy response in this region. But we don’t see any with the will or the vision.

Jelena Vukotic/Mary StokesFebruary 27th, 2009 at 1:16 pm

Correction to last paragraph: “So far, the EU has helped economically troubled Latvia, Poland and Hungary with swap lines and loans…”This should read: “So far, the EU has helped economically troubled Latvia and Hungary with swap lines and loans…”

jay deeFebruary 28th, 2009 at 6:05 pm

Hi Correction to yout correction. ECB helped Poland by siginig agreement on SWAP line 2 monts ago. Poland does not use it – but the agreement is signed.

GloomyFebruary 28th, 2009 at 9:55 am

From Maudlin’s latest:”Based on 2008 as-reported earnings, the S&P 500, which closed at 735 today, has a trailing P/E of 52. The forward P/E, based on 2009 projected earnings, is 22.7. But the trailing 12-month P/E for the end of the second quarter, based on the last half of 2008 and projections for 2009, is a nosebleed 51.2. (The combination of actual and projected earnings is $14.36 per share.) Mind you, that is after a rather healthy drop in the price of the index!”Dow 3000, here we come!!

MorbidFebruary 28th, 2009 at 10:29 am

Do you really want a JUBILEE?There is a heavy price to pay first before a JUBILEE can be celebrated. The Jews had to wander in the desert for 40 years first.Well, I guess that is where we are heading – into the desert of a global depression that may last 40 years.

GuestFebruary 28th, 2009 at 11:59 am

Wall Street is in the oval office. Michelle, says Wall Street, you can buy whatever you want for the White House. Obama, you can pick out whatever tie you want, choose singers for the inauguration, ride around and go wherever you want. All we want is to keep control of the currency.Axelrod’s quasi multi-trillion dollar budget isn’t even Keynesian, it’s Stalinean. Government is the answer for everything.Well, it didn’t work for Stalin and it isn’t going to work for the Obamaneans. They can’t pay for it and the people won’t support it. At least Stalin held his hopes down to a Five-Year-Plan, not a Ten-Year-Plan.The budget is just quasi, iffy nonsense. It’s a quasi with lots of paper numbers that can’t take affect until “recovery.” It’s iffy — if they can get the ag subsidies cut, if they can get the cap gains tax raised to 20%, if they can get the deductions taken out for couples earning over $250,000, if they can get the military cut way back, if they can reduce government’s share of Medicare… Then, they can build their 10-year, $634 billion “down payment” for health care reform — by raising the $5000-$6000 payment elderly retired couples now pay for their “free” worker-subsidized, government medical and pharmaceutical care. Then, the government can put more of its majority minorities on zero-pay Medicaid.The key is, at what point will this economy be when the congressional campaigns start in January or February of 2010 for the November elections? The nonsense is that in the midst of recession and rising unemployment, with Sears Q4 profit down 48%, with the list of bad news growing daily, Axelrod wants to make government bigger, to let Pelosi and Reid write more pork, to bail out the homeowners, to make the financial institutions whole so they can loan. This is no time, Alexrod’s spokesman tells us, to be worrying about deficits: no, we must spend our way to prosperity..Then, he says, we can rebuild. And who’s going to rebuild? Why, the government is. The government is going to rebuild — bigger and bigger government.

GuestFebruary 28th, 2009 at 12:13 pm

Buffett Says Economy Will Be ‘In Shambles’ for 2009Feb. 28 (Bloomberg) — Billionaire Warren Buffett said the economy will be “in shambles” for the rest of this year as financial firms take losses tied to reckless loans made during the housing boom.The Standard & Poor’s 500 Index will probably gain in three-quarters of the next 44 years, just as it did in the period since Buffett took over Berkshire Hathaway Inc. in 1965, he said today in his annual letter to the company’s shareholdersWhile Buffett and business partner Charlie Munger can’t predict how stocks will perform in 2009, they’re certain “that the economy will be in shambles throughout 2009 – and, for that matter, probably well beyond,” he wrote.Gross domestic product shrank at a 6.2 percent annual pace from October through December, the most since 1982, the Commerce Department said yesterday in Washington. Buffett said the consequences of the U.S. housing bubble are now “reverberating through every corner of our economy.”Home purchases should involve an “honest-to-God down payment of at least 10 percent,” Buffett said. “Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective…”Buffett’s letter accompanied the release of Berkshire’s fourth-quarter results, in which net income fell 96 percent to $117 million on losses from derivative bets tied to stock markets. Berkshire shares have fallen 44 percent in the past year as the value of the firm’s top stock holdings dropped and losses increased on the derivatives.By the fourth quarter of last year, “the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country,” Buffett said. “A freefall in business activity ensued, accelerating at a pace that I have never before witnessed. The U.S. – and much of the world – became trapped in a vicious negative-feedback cycle. Fear led to business contraction, and that in turn led to even greater fear.”http://www.bloomberg.com/apps/news?pid=20601087&sid=a1L50vuf_HiM&refer=home

PeteCAFebruary 28th, 2009 at 12:26 pm

But he did get it wrong, didn’t he? It wasn’t that long ago (maybe 6 months) that Buffet was telling Americans that it was time to invest in the markets because they had reached a low. In retrospect, it looks like his advice was either dead wrong … or perhaps self-serving.PeteCA

P1AQLMarch 1st, 2009 at 8:20 am

PeteCA, I can only humbly say what his teacher might say: Preferreds of a strong company are better than even seniors of the weak company.Time will tell whether his preferred will serve him well or not. GS is exceptional.Maybe even he won’t dabble in WMD’s whatever little test Kool Aid he might have drunk.It’s back to safety of principle first even in equities (just like credit!!!)Best,P1AQL

GuestFebruary 28th, 2009 at 12:26 pm

If you just “don’t get it,” you will after you read this!”Obama Puts the Economic Cart Before the Horse” by Peter SchiffFebruary 28, 2009 — In his first televised speech before Congress, President Obama asserted that prosperity will return once the government restores the flow of credit in the economy. It may come as a surprise to him, but an economy cannot run on consumer loans. Furthermore, credit stopped flowing in the U.S. for a very good reason: there was no more savings left to loan. Government efforts to simply make credit available, without rebuilding productive capacity or increasing savings, are doomed to destroy what’s left of our economy.The central tenets of Obamanomics appear to be that access to credit will enable people to borrow money to buy stuff, the spending will spur production and employment, and thus the economy will grow. It’s a neat and simple picture, but it has nothing whatsoever to do with how an economy works. The President does not understand that consumption is made possible by production and that credit is made possible by savings. The size and complexity of modern economies has obscured these simple concepts, but reducing the picture to a small scale can help clear away the fog.Suppose there is a very small barter-based economy consisting of only three individuals, a butcher, a baker, and a candlestick maker. If the candlestick maker wants bread or steak, he makes candles and trades. The candlestick maker always wants food, but his demand can only be satisfied if he makes candles, without which he goes hungry. The mere fact that he desires bread and steak is meaningless.Enter the magic wand of credit, which many now assume can take the place of production. Suppose the butcher has managed to produce an excess amount of steak and has more than he needs on a daily basis. Knowing this, the candlestick maker asks to borrow a steak from the butcher to trade to the baker for bread. For this transaction to take place the butcher must first have produced steaks which he did not consume (savings). He then loans his savings to the candlestick maker, who issues the butcher a note promising to repay his debt in candlesticks.In this instance, it was the butcher’s production of steak that enabled the candlestick maker to buy bread, which also had to be produced. The fact that the candlestick maker had access to credit did not increase demand or bolster the economy. In fact, by using credit to buy instead of candles, the economy now has fewer candles, and the butcher now has fewer steaks with which to buy bread himself.What has happened is that through savings, the butcher has loaned his purchasing power, created by his production, to the candlestick maker, who used it to buy bread.Similarly, the candlestick maker could have offered “IOU candlesticks” directly to the baker. Again, the transaction could only be successful if the baker actually baked bread that he did not consume himself and was therefore able to loan his savings to the candlestick maker. Since he loaned his bread to the candlestick maker, he no longer has that bread himself to trade for steak.The existence of credit in no way increases aggregate consumption within this community, it merely temporarily alters the way consumption is distributed. The only way for aggregate consumption to increase is for the production of candlesticks, steak, and bread to increase.One way credit could be used to grow this economy would be for the candlestick maker to borrow bread and steak for sustenance while he improves the productive capacity of his candlestick-making equipment. If successful, he could repay his loans with interest out of his increased production, and all would benefit from greater productivity. In this case the under-consumption of the butcher and baker led to the accumulation of savings, which were then loaned to the candlestick maker to finance capital investments. Had the butcher and baker consumed all their production, no savings would have been accumulated, and no credit would have been available to the candlestick maker, depriving society of the increased productivity that would have followed.On the other hand, had the candlestick maker merely borrowed bread and steak to sustain himself while taking a vacation from candlestick making, society would gain nothing, and there would be a good chance the candlestick maker would default on the loan. In this case, the extension of consumer credit squanders savings which are now no longer available to finance other capital investments.What would happen if a natural disaster destroyed all the equipment used to make candlesticks, bread and steak? Confronted with dangerous shortages of food and lighting, Barack Obama would offer to stimulate the economy by handing out pieces of paper called money and guaranteeing loans to whomever wants to consume. What good would the money do? Would these pieces of paper or loans make goods magically appear?The mere introduction of paper money into this economy only increases the ability of the butcher, baker, and candlestick maker to bid up prices (measured in money, not trade goods) once goods are actually produced again. The only way to restore actual prosperity is to repair the destroyed equipment and start producing again.The sad truth is that the productive capacity of the American economy is now largely in tatters. Our industrial economy has been replaced by a reliance on health care, financial services and government spending. Introducing freer-flowing credit and more printed money into such a system will do nothing except spark inflation. We need to get back to the basics of production. It won’t be easy, but it will work.President Obama would have us believe that we can all spend the day relaxing in a tub while his printing press does all the work for us. The problem comes when you get out of the tub to go to dinner and the only thing on your plate is an IOU for steak.http://www.lewrockwell.com/orig9/schiff5.html

did you see the transparent fish head? how cool is that!February 28th, 2009 at 1:22 pm

g,which is only going to become possible if we experience alot of deflation, making production”affordable”. financially rewarding to the producer.but.. this will make the existing national deficit very difficult to service, pay, or pay down.the grand rock and hard place.

hagelsteinMarch 2nd, 2009 at 7:14 am

@DYSTTFHIf your deflationary observation is accurate, expect wages — the ultimate driver of consumption — to drop, and layoffs to rise, in order to keep the current producers competitive and/or in business. Then there will be less consumption, and your observation will moot.

PeteCAFebruary 28th, 2009 at 12:30 pm

Some comments from Richard Greene at this link …http://www.financialsense.com/fsu/editorials/greene/2009/0227.html—————————“So what was it that compelled supposedly the best of breed financial officers [in America] to act like total nincompoops? Well, if you had tomorrow’s sports pages you might be willing to bet a little more heavily on the horse races today if you believed you already knew the outcome. When you view the landscape and try to make sense of how these financial institutions could possibly have allowed themselves to get to such extreme levels of leverage, common sense leads one to believe that the only thing that could compel such reckless behavior was that the parties involved believed they already knew the outcome of such bets. This goes beyond arrogance; it involves cheating, rigged markets, and total disregard of unintended consequences. So, if it follows that no one in their right mind would get this leveraged without knowing the outcome beforehand, then you should be able to deduce that these bankers and brokers have been purposely stealing from the rest of us who enter trades under the assumption of free markets. “And again …”The quickest way to get back on a recovery path is to end sending billions, and eventually trillions if this is not stopped, to failed organizations. Guess what, the world will not come to an end if Citigroup, Bank of America, and JP Morgan are allowed to fail. It will only end the gravy train for the top officers that feel they are in a privileged class. “———————Well said, Mr Greene.PeteCA

GuestFebruary 28th, 2009 at 3:07 pm

Dear WAWAWAMichael Hudson is a true intellectual! If you are a fast reader please copy these 335 pages and read it in one sitting! The true intellectuals don’t get on television. Only the intellectuals who have sold their souls for think tanks and university fellowships.http://www.michael-hudson.com/books/superimperialism.pdfI will give you a quick summary. The United States has pulled the Greatest Jiu Jitsu reversal in the history of debt. They have managed to create a system where the other central bankswill buy treasuries to finance out deficits outof fear that if they try to set up a New International Architecture all hell will breaklose. It is the military principle of Mutually Assured Destruction in Economics. This was notthe case when the United States was the paramountcreditor after WWI and WWII. We forced the Europeans to pay their war debts even if theyhad to impose austerity on their populationsafter WWI. This created instability and eventuallyWWII. We were a little more enlightened after WWII, and we created global institutions to helpthe financing of the war debt and created the Marshall Plan to have the Europeans buy our products. We got in trouble after Korea and Vietnam and we went from creditor to debtor.We were able to cut a deal with oil producersto price oil in dollars at a higher price aslong as they invested the money in treasuries.These type of deals were made with other mineral producers and we began our journey to BENIGN NEGLECT THAT CARRIES ON TO TODAY.The United States has flooded the world withTreasury Bonds dollars that have an effectivenegative interest return when you compute thedollar loss of value since 1982. When the Europeans and the Asians complain, the Americanspretty much go Dirty Harry on them. “You want anew Financial Architecture.” “You feel lucky.””Make our day.” The Asian and European elite don’t like to make waves. The Euro is not setup to replace the dollar, and neither is anyother currency. So they bite their tongues andwait for some miracle. The present situationwhere America has created an elaborate schemeto draw benefit from debt is not perpetuallysustainable, and will eventually explode.

GuestFebruary 28th, 2009 at 5:05 pm

Yes Michael Hudson is a genius who deserves all the praise we can muster up, an intellectual with a conscience and very few peers, thank goodness for people like him!

GuestFebruary 28th, 2009 at 7:00 pm

Great article. So America holds the cards in this financial conflict we are being blamed for, The rest of the world buys and holds our treasury bonds dollars in large quantity’s not willing to call America out as it would mean certain financial destruction for them, in a quiet way of course. America also has a large military stick with many hidden barbs and no one really wants to be hit with it. So we are able to continue at will printing money and issuing more treasury bonds and dollars to the world and they will continue to take them, That’s a great plan, who wants to pick a fight with America on any front. Play for keeps and play to win, If we want to be the best service economy in the world then this is the way it has to be. Great article and it makes America the best place to live for now, Scaling back our military is probably not what we would want to do as we do need the biggest stick possible for intimidation.

blindmanFebruary 28th, 2009 at 7:32 pm

g,from above..”..they will continue to take them,..”maybe not. they might choose to invest otherwise,in spite of the “intimidation”. is the world basedon people investing in and supporting those whointimidate them? this sounds unsustainable if it isso.actually, i think this dynamic usually ends very badly forfor everyone.

jugglingcdosFebruary 28th, 2009 at 8:51 pm

heheheheyoure funny, so if EU and Asia suddenly stop buying UST or using USD the ole good US of A will get trigger happy and “suggest” launching it’s Thermo Nuke-MIRV ICBM’s and SLBM.Do you think China and Russia even EU will just bend their knees, kissing their asses goodbye without doing nothing??the thing is, even if its heart-sickening to see what they are doing (buying stocks, PPT etc etc)they are actually trying to avoid the unimaginable, of course safeguarding their power at same time.I predict the system will eventually fail and even the “mightiest” (lost in vietnam, got whacked by Iraqi’s, got wacked by Taliban’s)army in the world will not be able to fight the tide,if there’s a military confrontation, US might win the war, but at what price?? remember, we are living in a world with nuclear, biological, chemical weapons… will there be an everlasting peace afterwards (50-100 years of peace is good enough)

GuestFebruary 28th, 2009 at 9:23 pm

I agree, my point in fun was to twist one of the ridiculous points of view we find ourselves today. Many reasons why we are here and many as to how we will recover from it. Michael Hudson’s article was good though.

did you see the transparent fish head? how cool is that!February 28th, 2009 at 3:53 pm

G,if you are truly the bravest will you submitto a test of your honor?

did you see the transparent fish head? how cool is that!February 28th, 2009 at 6:35 pm

g,for your honor… as a test of your bravery…tell me what you think when you look into theeyes of Macropinna microstoma, at frame approx. 36?.http://www.youtube.com/watch?v=RM9o4VnfHJU.ps. if you find the exercise intolerable, trivial,or ridiculous , please know i do not questionyour bravery or honor. the “yes” responsewas enough.!

GuestFebruary 28th, 2009 at 9:56 pm

Perhaps we should no longer consult the Oracle of Omaha. Perhaps we should now consult the Oracle of the Deep.

GuestMarch 1st, 2009 at 4:28 am

so i stole. but when i looked into the eyes of that fish i saw myself brave enough to put honor aside and claim a bit of food

PeterJBFebruary 28th, 2009 at 4:35 pm

“so, where to now? ps, the links here don’t work for me. the one from the prior thread did.??@ did you see the transparent fish head? how cool is that! on 2009-02-28 09:43:58Yes I did blindman so think the process of resonance – and BTW what test of honour do you have in mind? The sword=intelligence or heart=intellect?Ho hum

blind o rama.February 28th, 2009 at 6:54 pm

pjb,its stuff like this, “heart=intellect”,that keeps me hanging on.thanks.ps. resonance. feedback?i still struggle with the annihilation of the vacuum concept. and wonder if space time and mass aren’t all simultaneously evolved, birthed ..no vacuum. no space time without mass.?anyway…”what does that have to do with theprice of tea in china?” :-(….peas.

GuestFebruary 28th, 2009 at 11:08 pm

No no intellect is not heart, intellect can be led by the heart or it can be led by the mind, obviously led by the heart is the everybody wins approach.

just married!March 1st, 2009 at 12:48 am

g,everybody wins approach sounds like intellect, perhaps superior intellect. maybe better than intelligence? we will see.it is the self. that is the question and the answer.where does it begin and where does it end? when you know thatyou know all you need to know concerning intelligence, intellect,heart, mind, money, winning and losing..and here, as i may have no future opportunity, i quote …” i was without work, there being little enough of it inTansmania then and even less now. Perhaps my mind was more susceptible to miracles than it might otherwise have been. Perhapsas a poor Portuguese peasant girl sees the Madonna because shedoesn’t wish to see anything else, i too longed to be blind. Perhapsif Tasmania had been a normal place where you had a proper job,spent hours in traffic in order to spend more hours in a normalcrush of anxienties waiting to return to a normal confinement,and where no-one ever dreamt what it was like to be a sea horse,abnormal things like becoming a fish wouldn’t happen to you.i say perhaps, but frankly i am not sure.”..from Gould’s Book of Fish, richard flanagan.ps.only you know.!

CheersFebruary 28th, 2009 at 4:41 pm

This Block For Rent, $1.00 fee per 3-line post, no profanity.Make checks payable to your favorite food or clean water project, domestic or international.Ready? Begin.

Mother of GodMarch 1st, 2009 at 9:37 am

I love blindman, but I want to have Michael Hudson’s babies.There. One dollar more to my local foodbank.

PterJBFebruary 28th, 2009 at 6:35 pm

“Moral Hazard” – a game the whole family plays; a trait which we all share and the Prime Fundamental of socio-economics.Ho diddly hum

PeterJBFebruary 28th, 2009 at 6:42 pm

a href”http://blogs.news.com.au/heraldsun/andrewbolt/index.php/heraldsun/comments/bottom_reached#49803″> Talking about Australians and their preference for major Political Hot Air contributions to ‘global warming’>/a>KRUDD Alert – The Prime Minister of Australia is scheduled to visit with President Obama in the USA – why?A. It helps with the BookHo hum

GSMFebruary 28th, 2009 at 10:23 pm

PeterJB,It would be funny, if it wasn’t so sad. Obama’s biggest psychophant is headed for DC. No doubt he will come back with even new and better ways to spend taxpayer money, socially engineer Australia and re-distribute the wealth.

GuestFebruary 28th, 2009 at 7:16 pm

The so called greatest economic boom in history, which supposedly took place in the United States from the end of the early 1980’s recession to 2007, was nothing but an exercise in inflation and voodoo finance. It was a smoke and mirrors bull market based on Alice in Wonderland economics. The air is now being let out of the balloon as the man behind the curtain, the Fed Chairmen of that era, mainly ardent Illuminist Paul Volcker, and especially Mr. Bubbles, bonehead Alan Greenspan, are now being revealed to us as the Great Oz, who in the fairytale movie turned out to be a carnival barker and balloon rider from Kansas. How utterly appropriate. So, how low will we now go? Will it be all the way down to the Dow 1,000 of the early 1970’s? Will we ride our way down to the Dow 2,000 of the late 1980’s? Or will it be down to the Dow 3,000 of the early 1990’s? Already, the past 12 years of gains has gone up in smoke, and this is just the beginning.http://www.theinternationalforecaster.com/International_Forecaster_Weekly/Nothing_More_Than_Inflation_Voodoo_Finance_And_Smoke_And_Mirrors

HayesFebruary 28th, 2009 at 8:26 pm

via David Fryan excellent Bloomberg article on Turbohttp://www.bloomberg.com/apps/news?pid=20601109&sid=aLhs5Byln00k&refer=home

ALAFebruary 28th, 2009 at 10:11 pm

Drive thru credit has now vanished, no more pulling up to the local bank and asking for the go large number 1 credit combo, hold the credit check and add a no recourse clause to go please, and by the way are you all hiring. As ridiculous as that sounds we are now allowed to return our order to the same drive thru window. America will be no place for cry babies if this stimulus package doesn’t work. The mall cruising kids of today Mufaleta along with brother Buffy will starve to death in short order.

GuestFebruary 28th, 2009 at 10:30 pm

Faber Says Financial Industry to Contract ‘Much More’Buy a farm and let your girlfriend work on the farmhttp://www.bloomberg.com/apps/news?pid=20601080&sid=aa4KTmib46Uw&refer=asia

GuestFebruary 28th, 2009 at 11:32 pm

Obama and democrat will punish hard working & live with their mean Americans and reward short-cut taking, subprime borrowers, and live beyond their mean Americans. Obama and democrats policy will discourage hard-working and productivity and destroy USA.

GuestMarch 1st, 2009 at 6:48 am

Yes he will take from the rich and give to the poor so everyone gets a fair chance- I know that’s so un-american like.

GuestMarch 1st, 2009 at 1:33 am

I have been fairly critical of Obama myself. It is not to doubt his intellectual capacity, it is just about him taking a stand and going thru with it. Throwing money around wouldn’t solve all the problems and a large-scale misallocation of capital would imply that the economy wouldn’t perform to its potential for years and years to come. To be fair it has just been a month for Obama in the office and he has a lot of time to revise his policies. I don’t mind goverment spending to create jobs, but with the bail-out packages he should be careful about where the money is going, and whether it is ever going to be eventually productive. He should simply nationalize, break up the monsters into smaller pieces, and save capitalism.Peter Schiff’s article above makes very solid points, but by keeping inflation America is able to make other countries do the job of production and steal there labor so to speak. It is economic hegemony (dollar’s reserve currency status) and I guess Schiff ultimately admits that no-one’s there to redraw the world’s financial and economic architecture so it will remain this way. The spread (2-3 percent) between treasuries (say 3 percent) and inflation (say 5-6 percent)implies that the value of debt is a decreasing function and as the 2-3 percent spread compounds every year, in many years the real worth of the debt tends toward 0 (I guess which is why Bernanke and others tremble at the idea of deflation as during the depression America was the debtor nation whereas right now it is the creditor nation). Schiff is very logical to say as so in barter system, but foreign exchange exists, and so does dollar’s hegemony and inflation.

MorbidMarch 1st, 2009 at 6:02 am

Life At The End Of Empire

A middle class white guy comes to grips with Peak Oil, Climate Change, Mass Extinction, Population Overshoot and the demise of the American Lifestyle.

Watched this 2007 documentary recently – the ultimate in DOOM – but it has a tremendous ring of truth. Wait until the end and notice how your psychology is reacting. Let it marinate for a few days. Then make decisions.What A Way To Go: Life At The End Of Empire

Jason BMarch 1st, 2009 at 7:20 am

I had the privelege of meeting a WWII veteran and talking to him about his life. He lived through the depression, and then was Marine in the pacific during WWII, includign Iwo Jima. He came back and built his own home. Including digging the foundation hole by hand and laying the block with the help of another veteran, a one legged mason. We have no concept of the hardship these people faced, hardship that is much more a part of the human condition than the ease and comfort we have enjoyed for the past 50 years. He had two memorable quotes:-“Making predictions about the future is easy. Being right is hard.”-He was very knowledgable about our economic situation, and we discussed it at length. He very pessimistic about the outcome. He did say, “I have always been a doom and gloomer. And I have always been wrong.”

HubbsMarch 1st, 2009 at 7:30 am

To this add the corollary:When I am right, no one remembers.When I am wrong, no one forgets.

GuestMarch 1st, 2009 at 9:26 am

Have no fear the earth will provide for you… well at least as long as we provide for the earth.

GuestMarch 1st, 2009 at 9:31 am

Despite Layoffs, Bailed-Out Banks Hire Contractors on VisasThe Banks’ War on WorkersBy MISCHA GAUSAs hundreds of billions of taxpayer dollars flow into rickety U.S. banks, public outrage has followed revelations that executives planned to spend the money on Vegas getaways, $35,000 toilets, and fat bonuses.Less attention has been paid to how these bailed-out banks are driving down tech workers’ wages–and stoking anti-immigrant hostilities—while laying off tens of thousands of workers.Banks that took public money sought about 4,200 visas for skilled workers from abroad in the 2008 fiscal year, according to an Associated Press investigation. In response, Senators Bernie Sanders and Charles Grassley attached to the latest round of bailout funds a requirement that banks must try to find U.S. workers first, and not displace them three months before or after taking public funds.Unions trying to organize the notoriously fragmented technical workforce hailed the restrictions. They note a government study which found that 21 percent of the applications employers filed for work visas were fraudulent or contained violations. More than one-quarter of these employer violators failed to pay prevailing wages to foreign-born workers.“In a situation where U.S. taxpayers are funding the rescue of U.S. banks, nothing could be more appropriate than to protect against having federal money foster these abuses,” said Paul Almeida, the president of the AFL-CIO’s Department for Professional Employees.The top five banks receiving bailout funds have announced 131,700 layoffs since last summer, with thousands more expected. Unemployment among college graduates over 25 years old rose markedly in recent months, according to the Department of Labor. About 1.9 million educated workers were out of work in January, an increase of 800,000 in six months’ time.GILDED CAGESBut workers in the tech industry and researchers who track the work visa program say the Sanders amendment affects only a small fraction of visa-holders who end up working for banks in the U.S.The major abuse of the program occurs through “bodyshops,” consulting firms that secure thousands of the 85,000 skilled visas available each year and then contract visa-holders to the banks, said Ron Hira, an outsourcing expert at the Rochester Institute of Technology.“The banks are major clients of these offshore outsourcing companies, which then exploit the loopholes,” he said. The DHS report says bodyshops often force visa-holders to repay thousands of dollars in fees.In Charlotte, North Carolina, a senior software engineer at Wachovia—recently purchased by Wells Fargo—said his company is replacing entire departments of local engineers through consultancies that bring in foreign-born workers.He said they tolerate lower wages and live four to an apartment, but don’t complain much because the pay is slightly better than in their home countries.“The visa is meant to bring in somebody with talent to augment a U.S. business,” said the engineer, a foreign-born worker who requested anonymity for fear of blacklisting. “It’s not intended to replace an entire local industry, which is exactly what’s happening in Charlotte.”Computer engineers across the country say visa-holders are forced to knuckle under at work because their legal residency here is tied to their employer.“They tell them to work on Sundays and they do it, because they work or they go back to India. It’s indentured servitude,” said Kim Berry, a Sacramento software developer and head of the Programmers Guild, a professional association.Among tech workers, open prejudice against foreign-born colleagues is common. But some point out that visa-holders have no bargaining power–and that it’s banks and big corporations, worming through the visa system’s loopholes, that are coming out ahead. The median wage for visa-holders in computing professions who entered the U.S. in 2005 was $50,000, according to Hira’s research—not even close to the $100,000 wage Microsoft’s Bill Gates touts in testimony—and less than entry-level wages for others in the industry.Steve Mount, a software engineer at GE Healthcare and a supporter of WashTech, a Communications Workers local organizing tech workers, said the banks’ acceptance of public money should force regulators take a hard look at the their employment practices. “The financial industry operates in a realm above the rest of us, in a place where the only thing bigger than the salaries are the bonuses,” he said. “Now that these companies are relying on our money, we have a vested interest that it doesn’t drive down our living standards.”

GuestMarch 1st, 2009 at 9:48 am

“They (tyrants) use their power against the people in three manners. The first is, that they strive that those under their mastery be ever ignorant and timorous, because, when they be such, they may not be bold to rise against them, nor to resist their wills; and the second is, that their victims be not kindly and united among themselves, in such wise that they trust not one another. …and the third way is, that they strive to make them poor, and to put them upon great undertakings, which they can never finish, whereby they may have so much harm that it may never come into their hearts to devise anything against their ruler.”-Alfonso X 1226 – 1284

GuestMarch 1st, 2009 at 12:52 pm

You need a college degree before we’ll pay you any money no no wait that won’t work what you need now is a technical or scientific degree before we’ll pay you, no no wait what you really need is a masters degree based in science/tech before we can pay you, oh no sorry actually you’re going to need a phd with 5 years work experience before we can pay you, oh wait I’m sorry you’re too old now we’re looking for someone younger.

GuestMarch 1st, 2009 at 9:33 am

In a morbid kind of way I’m glad these white collar workers and high tech workers are losing their jobs and wages because these are the very same people who turned against the factory workers the past 20 years. What comes around goes around!

GuestMarch 1st, 2009 at 9:49 am

“The vested interests – if we explain the situation by their influence – can only get the public to act as they wish by manipulating public opinion, by playing either upon the public’s indifference, confusions, prejudices, pugnacities or fears. And the only way in which the power of the interests can be undermined and their maneuvers defeated is by bringing home to the public the danger of its indifference, the absurdity of its prejudices, or the hollowness of its fears; by showing that it is indifferent to danger where real danger exists; frightened by dangers which are nonexistent.”-Sir Norman Angell 1872 – 1967

GuestMarch 1st, 2009 at 9:36 am

Nothin in America is real!Rick Santelli’s Planted Rant ?http://www.ritholtz.com/blog/2009/02/rick-santellis-faux-rant/Ex: In PR terms, his February 19th call for a “Chicago Tea Party” was the launch event of a carefully organized and sophisticated PR campaign, one in which Santelli served as a frontman, using the CNBC airwaves for publicity, for the some of the craziest and sleaziest rightwing oligarch clans this country has ever produced. Namely, the Koch family, the multibilllionaire owners of the largest private corporation in America, and funders of scores of rightwing thinktanks and advocacy groups, from the Cato Institute and Reason Magazine to FreedomWorks. The scion of the Koch family, Fred Koch, was a co-founder of the notorious extremist-rightwing John Birch Society.

MM CAMarch 1st, 2009 at 9:43 am

More than 40 nationwide ‘Chicago Tea Parties’ protest against Obama’s bailout planhttp://blogs.telegraph.co.uk/milo_yiannopoulos/blog/2009/02/27/more_than_40_nationwide_chicago_tea_parties_protest_against_obamas_bailout_planprotests and unrest starting to occur…. people are more informed than ever and become informed very fast, like a speeding bullet… just like this economic downfall which is happeneing at break neck speed… Just like the internet helped get Obama elected it could bring him down just as fast…. he of all people hsould understand the internet…. look at all the people jsut on this blog who can read and understand balance sheets, 10k’s, 8k’s… unemployment data, etc…. i’ll give th gov’t credit for still posting data at various gov’t web sites, but for how much longer? when you see that access tod ata go away, you will know something bad is coming our way

GuestMarch 1st, 2009 at 12:44 pm

Bailing out the banks is political suicide for all the current politicians including Obama, people are ready to take to the streets, their day of reckoning is coming.

YankeeMarch 1st, 2009 at 4:17 pm

With all due respect, you are kidding. right? The numbers the government posts are so goosed and massaged as to be somewhat meaningless. Unfortunately, one must try to piece together info to get the full story to the best of one’s ability. And John Willams of Shadowstats does an excellent job considering nothing is transparent anymore.Yankee

GuestMarch 1st, 2009 at 10:16 am

Nouriel articel about Wells… sounds like Time mag screwed upIn a comment on Seeking Alpha Nouriel Roubini says that, contrary to my assertion, he did not screw up his loss estimate for Wells Fargo. Here’s what he has to say, in full:Sir, your attack it totally misplaced. I never made any prediction about credit losses in individual US banks. I only used macro variable to forecast average losses on tranches of different types of loans and securities for the AGGREGATE of US banks; this is the same approach used by the IMF and Goldman Sachs to derive estimate of aggregate expected credit losses for all US banks, not for individual institutions. It was Time magazine that used my macro estimates of average losses to then make inferences and estimates about individual US banks. When you go to the individual bank level you of course need to take into account individual bank’s provisioning and other details to infer capital losses. So you may or may not be right about what is happening at Well Fargo; but the comments you make have NOTHING to do with what I have written. So you should correct the record on this. I never wrote that Well Fargo has an additional $117 billion of losses. I have provided an estimate of aggregate credit losses for all US financial institutions based on standard estimated of average losses from macro assumptions.This is the opposite of convincing. First, I don’t recall seeing Roubini’s letter to Time urging it to “correct the record” on the $117 billion loss estimate for Wells it published based on his macro projections. I assume Stephen Gandel ran his loss numbers on individual banks by Roubini before he posted them on February 19, and would be shocked if he didn’t. I may be wrong. Perhaps Roubini might clarify this point. Regardless, if Roubini is suddenly so hopped up about a $117 billion loss estimate for Wells that he’s associated with, I don’t get why he’s only getting around to disowning it now, since it’s been out there for over a week. Actually, I do get why. I think Roubini is being disingenuous.And Roubini is definitely being disingenuous when he writes that I “may or may not be right about what’s happening at Wells Fargo.” Less than a week ago, recall, he was unequivocal that the company was a goner. Here is what he told the Wall Street Journal in an interview published on Saturday:Wells Fargo took over Wachovia. It doesn’t work! You can’t take two zombie banks, put them together, and make a strong bank. It’s like having two drunks trying to keep each other standing.So six days ago, Wells Fargo was a “zombie bank.” Now, Roubini only deals in “macro variables.”Meanwhile, Roubini fails to address my main objection to his antics, that he insists on blabbing publicly on the solvency of individual federally guaranteed institutions, a topic he now admits he knows nothing about. Unfortunately, prophecies about highly levered institutions sometimes become self-fulfilling, especially when they come from “sagelike” commentators like Nouriel Roubini. Now that Roubini has come clean that, when it comes to individual banks, he’s basically full of it, one would hope he’d have the good sense to keep his lip buttoned.There’s no doubt Nourel Roubini has gotten the macro picture exactly right so far. That’s to his credit. My suggestion to him is that he stick with the macro calls.

AnonymousMarch 1st, 2009 at 5:03 pm

I live in Poland. There is alot of talk of a crisis but life seems normal and as an example, the shopping centers are still very busy. It seems to me that Poland has a built-in stimulus package coming in the form of the EU structural funds, the infrastructure that is being built to host the EURO 2012 games not to mention the already partially state-owned banks as well as very low inventories of new housing (ie no Miami) or office space (2% vacancy), etc. Poland seems to be ok at the moment and while we all anticipate its going to have a bumpy ride for a while, no one here seems to concerned. What are we missing?

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