Nouriel Roubini's Global EconoMonitor

Roubini and El Said: The Transmission of the Financial Crisis to Emerging Markets

The following is an excerpt from the paper written by Nouriel Roubini and Ayah El Said examining the ways in which the global financial crisis has been transmitted to emerging market economies. The paper also looks at domestic and international policy responses once these economies started to show signs of distress. This paper is published as part of the World Economic Forum’s “Financial Development Report 2009.”

In 2008 there was a lot of talk about emerging market economies being able to decouple from the US recession and financial crisis. But, in spite of these arguments, first financial re-coupling and then real economic re-coupling took place once the advanced economies’ financial tsunami became global after the summer and fall of 2008. This led to a severe contagion in emerging market economies. It is often said that “when the United States sneezes, the rest of the world catches the cold”; this time around, the United States was not sneezing but rather had caught a severe case of chronic pneumonia; thus the financial contagion, followed by the real contagion, became virulent even in emerging markets.

Read Full Analysis


Rights and Permissions: This content is offered for the exclusive use of RGE’s paid clients. No forwarding, reprinting, republication or any other redistribution of this content is permissible without expressed consent of RGE.

64 Responses to “Roubini and El Said: The Transmission of the Financial Crisis to Emerging Markets”

Tantric CougarOctober 9th, 2009 at 7:45 pm

Dear Alarmist, NOT!It’s a spiritual hability!I have it! You don’t!I judge about that thing!And I said: Bob is the FIRST, the LAST and even the MIDDLE (sic)!Then Alarmist, “Thanks for your cooperation” – the brillant quote from The 5th Element.Don’t use it without a profund meditation and, sure, my autorization!Mis besos

The AlarmistOctober 12th, 2009 at 2:08 am

As Lennon said, “Possession is nine-tenths of the problem.”Meilleures Salutations, ma chérie

The AlarmistOctober 9th, 2009 at 4:33 pm

What if the US sneezed and nobody else caught pneumonia? That was what decoupling was all about, and it might have actually worked if the masters of sales hadn’t offloaded a boatload of toxic debt on the rest of the world. The old paradigm was that the US consumer was keeping things going, and the decoupling theory suggested that was history. Now that we have the toxic debt stuff behind us (Ha ha, I know, but humor me), do we now see if de-coupling really is the case?

PeteCAOctober 9th, 2009 at 6:03 pm

I used to think that de-coupling was a legitimate possibility, but for it to succeed it depends upon a key assumtpion … that another class of global consumers can pick up where the US consumer leaves off. For example, can Chinese consumers subsititute for American consumers – if the Chinese households stop saving as much and start spending a lot more? The answer that I discovered is NO … they can’t. The difference in the GDP levels for the 2 countries makes it practically impossible. Therefore, while it is helpful if the Chinese consumer becomes a new “buying engine”, it does not compensate for the huge loss in US consumption levels. Bottom line – is that it’s quite difficult for the world to switch tracks, re-align excess industrial capacity, and develop a new broad cross-section of global consumers. Quite difficult indeed. This is one reason why I think that the future possibilities for a double-dip recession – or an outright depression – are still quite viable.PeteCA

economicminorOctober 11th, 2009 at 8:39 am

Not being a paid subscriber, I can only surmise that when the US expands its debt while the Chinese continue to link their currency to ours, what they are doing is importing our inflation. Because the entire world economy runs on US$ and commodities are priced in US$ and most world trade is done in US$, the entire world is tied to what happens with US fiscal policy. As we expand our debts, the entire world is inflated.As our inflationary monetary policies cause commodities to stay high or even go up in US$ terms, anyone buying those commodities is pushing inflation into the system of pricing and profits. Either forcing the end pricing up or profits down or both. The US is squeezing the profits of the emerging markets while at the same time the US consumer pulls back because they are being squeezed. Thus, no de-coupling!Because the cost of goods remains high while incomes deteriorate we are in a negative feed back loop. Trying to fix this is worse than trying to push on a string. It is more like trying to keep a very large balloon inflated that has a million pin holes. The internal pressure is causing the holes to get bigger yet the solution to prevent collapse is to pump in more air. Yet the more air you pump in, the less ability we have to continue to pump… Depleting resources or in this case credibility. Add to this scenario that the entire fabric of life as we know it is being supported by this balloon full of holes and you can understand the desperation of everyone. If the balloon deflates, we are all in deep do do.If the Chinese de-link, but still have to purchase commodities in US$, they are no better off, unless they find others to consume their products. I’ve been over this before. The US consumer is unique. Or has been. They have generally lots of space to put things. Good access to power to run them. Fairly good security to store them and a culture of one upping the neighbors. Plus until recently, good paying jobs and access to as much credit as they could stomach. Or carry… Unique in the world.When the US got sick, the whole world got sick. The US is not well by any estimation and the recovery is a paper one, not a real one. Then add demographics, human nature and cycles and everything has changed for the world. And will continue to change for some time. Until a NEW balance is found.It would seem logical to me that balloon will deflate to a point where the holes can be patched no matter what anyone does. IMHO it is just a matter of time, How this happens and how it affects each of us is another matter.

Pecos BankerOctober 12th, 2009 at 1:20 am

Always enjoy your posts, economicminor. However, I’m not understanding how you can simply state that the entire world economy runs on US$. The eurozone, for example runs on the euro, and I believe this is collectively the largest economy in the world, beating the US. I would think that in terms of commodities being priced in $, adjustments in currency exchange rates would compensate for those increases in the dollar price. A simple example is gold, which has barely moved at all in euros but has increased 10% in dollars since August. I’m sure a similar argument could be made concerning oil. Forgive my economic illiteracy, if that’s what is behind my not following your argument, but perhaps you could explain why the entire world economy runs on dollars.Incidently, in terms of economics education, I have had to learn the little that I know from the internet, as I’m sure must be the case with many others who post here. However, I have my doubts about economics as a science and wonder whether it would even be worthwhile to invest the time in absorbing economic theory, if such a thing even exists. For instance, I understand most of it is based on the idea of the equilibrium of supply and demand and assumes that all purchasers and sellers act rationally. Furthermore, there is no room for nonlinear dynamics that result from feedback loops. For instance, most buyers and sellers look at the “market” to determine whether to buy or sell, so giant feedback loops (resonance) are created which lead to parabolic rises and sudden crashes. With all of this left out of the economics equation, it would seem to be fairly useless as a science. More on the order of “methinks the elephant is like a fan” said the blindman (not our esteemed blindman of course) touching the elephant’s ear. Not quite as sloppy as psychology but following the same GDT (general direction of travel, ie, following the same tiretracks in the Libyan desert). Just my rapidly depreciating 2 cents.

The AlarmistOctober 12th, 2009 at 2:15 am

The world has been gradually de-linking over the past decade or two, but this has taken on a new sense of urgency as the US has tripled its deficits and doubled its debts in the last few years.Can you say “Paradigm Shift?”

MorbidOctober 9th, 2009 at 5:54 pm

Outbreaks Raise H1N1 Re-Infection Concerns

The above comments describe two major flu outbreaks at schools in the Buffalo, NY area. This area had widespread confirmed cases in the spring, and raise concerns that those infected in the spring are being re-infected in the fall. These protection failures raise concerns that the vaccine directed against spring sequences will fail to protect against re-infection.…reports described a second wave in Mexico in regions which were impacted in the spring, and anecdotal reports describe the same individuals infected in the spring and fall or twice in the fall.Although re-infections have been noted in immune-compromised patients, the re-infections in areas like Buffalo appear to involve previously healthy individuals.The re-infections could be linked to weak immune-responses to earlier infections, which may have been influenced by anti-viral treatment. However, this does not appear to be the case in patients infected with milder course that do not involve fever, because most do not believe they are infected with swine flu and the recover without treatment.These re-infections may be linked to antigenic drift, which may be enhanced by infections with multiple sub-clades, either via mixtures within an infectious dose, or multiple infections due to high levels of circulating virus and efficient transmission.School outbreaks have been widespread, and closing of entire school districts in select states like TX, TN, KY have highlighted the rapid spread of H1N1 leading to double digit absenteeism rates such as those described above.These re-infections raise concerns because of increased drift, as seen in the latest CDC report on an H1N1 with a reduced titer, as well as the increasing detection of H1N1 with H274Y, conferring oseltamivir resistance, or PB2 E627K favoring growth at a lower temperature.

The Swine flu does not seem very deadly – except to young children.CDC: 76 children dead of swine flu as cases rise

Health officials said Friday that 76 children have died of swine flu, including 16 new reports in the past week—more evidence the new virus is unusually dangerous in kids.The regular flu kills between 46 and 88 children a year, according to Centers for Disease Control and Prevention data.With swine flu cases increasing throughout most of the country, more deaths are likely, Dr. Anne Schuchat said at a press conference Friday.

PeteCAOctober 9th, 2009 at 6:05 pm

In the UK – it hit teenagers very bad. The issue is not just mortality for H1N1. It is that somewhere around 10-15% of patients develop severe respiratory symptoms and need hospitalization for recovery. That strains the emergency room network very badly.PeteCA

tonywOctober 13th, 2009 at 8:54 am

Vitamin D is implicated in the immune response, note that the incidence of flu significantly increases in the winter when there is less sunlight and the weather is colder so detering people from going outside. It is the incidence of sunlight on our skin that creates Vitamin D in our bodies. Blood tests show that Vitamin D is much lower in the winter. Some reports also show that sugar reduces our immunity.So a Vitamin D3 (not D2) supplement may help. It is possible to overdoce but extremely high doses are required so unlikely.If interested you can Google this for more information.

PeterJBOctober 9th, 2009 at 6:36 pm

H1N1:It is my unprofessional (read: I am not medically trained or qualified) but experienced opinion that commercial aircraft act as incubators and transmutors of virus and other such emergent bacterial phenomena particularly when accountants dictate aircraft atmospheric policies designed to economize on fuel costs at any cost.My message: Stay away from commercial airlines while virus warnings indicate mutational activity.Saying that, it also appears to me that those airlines on International routes are more exposed to the mutation effects – as opposed to domestic routes. I think I could put an argument up for this fairly easily as to why.Ho hum

jemOctober 10th, 2009 at 4:55 am

PJBI am in the business and what you say is not right. The flu virus mutates slowly. Once a year in the flu season (autumn/winter) the virus will have mutated a little, but not enough to reinfect most people who got it the previous season. The story above about reinfection of the same people in the same year is doubtful. I would treat it more seriously if the CDC were reporting it.

MorbidOctober 10th, 2009 at 6:30 am

Can any government agency be trusted? Do you really think the CDC is going to admit that the fall Swine flu shot is going to be ineffective? They may – well after the event passes – but they will not do it upfront in order to avoid panic.We are dancing with the Devil when it comes to trying to outsmart Mother Nature for She is immensely cunning.

Tantric CougarOctober 9th, 2009 at 7:59 pm

And I say: game of words it’s not the same then analysis! But the power of the analysis can appear in a game of words! What do we have? Neither one and another! All but the USA economy is in the epicenter of this global crisis! And the USA economy is bad, and becaming worse at each day. S&P is a ficton, we know! The midia is a fantasy! All the markets are impregnated by the excess of liquidity forced in by Central Banks and Governments! But the absolute limit are arriving faster and, I think, iirrevocably!The best of the lines of the Roubini’s argumentation is that of “if they do, crisis, if they don’t, crisis”. Professor may stay in this power position; but he, sometimes, seem to slide to the the weak oponent position! I don’t understand.OBS 1: Leading indicator is a mistification, we know well! Puplava’s demonstration is cathegoric, I think.OBS 2: Excuse my very poor Airport English

FEDupOctober 9th, 2009 at 8:35 pm

DON’T MISS THIS: Bill Moyers interviews Simon Johnson and another guest about the entire financial crisis and they speak very openly about all the misconduct that is going on. They give answers to questions that even NR hasn’t addressed.

Little SaverOctober 10th, 2009 at 4:34 am

BILL MOYERS: Let’s look at this story that I just read from the Associated Press this week about how Treasury Secretary Geithner is on the phone several times a day with a select group of very powerful Wall Street bankers, especially Citigroup, J.P. Morgan, Goldman Sachs. He will talk to them when Members of Congress have to leave a message on the answering machine. And these are the bankers who helped bring on this calamity and who are now benefiting from it. What does that say to you?MARCY KAPTUR: That says to me that Wall Street and Washington is a circuit. And because Mr.Geithner headed the New York Fed that that historic relationship, unfortunately, continues. And it gives them special access and special power to influence policy.SIMON JOHNSON: Well, I think it really tells you how the system works. The system is based on access and is based on what on Wall Street shaping Washington’s view of what’s important.My suggestion: the ignobel price for economics for those who endorse this system. The nobel price for those who incorporate the effects of this system in new theoretic models of economics.

Little SaverOctober 10th, 2009 at 5:48 am

SIMON JOHNSON: Well Rubin’s a fascinating character. He ran Goldman Sachs, he went into the Clinton White House, then he became Secretary of the Treasury, and it was on his watch that, first of all, Glass-Steagall began to really seriously crumble, and then it was completely swept away- replaced, abolished, really. And then, of course, Rubin goes on after he leaves Treasury, to be the senior guru type figure at Citigroup. And Citigroup is absolutely epicenter of everything that’s gone wrong with our financial system.BILL MOYERS: And wasn’t it Robert Rubin the mentor, the guru to both Tim Geithner and Larry Summers?SIMON JOHNSON: Absolutely. Both Geithner and Summers advanced to senior positions in the Treasury under Rubin was instrumental in bringing Larry Summers to be President of Harvard, after the Clinton Administration. And according to published new report, he was absolutely key person in making sure that Tim Geithner first went to a senior job at the IMF, and then became President of the New York Fed. And there are unconfirmed reports that Robert Rubin was an essential advisor to then candidate Obama in fall of last year, with regard to who he should bring on board as the leadership team on the economic side.MARCY KAPTUR: And you know, looking at it from the heartland, when I look at Wall Street and all their connections into Washington, and I’ve been at it a while now, it’s very disheartening to me, because I know they don’t care about us out there. We’re flyover country for them. And they’re just out to make money.My diagnosis: compulsive value seekers, which in their case narrows to money seekers, sort of fetishism (the displacement of desire and fantasy onto alternative objects).

MorbidOctober 11th, 2009 at 7:20 am

I watched this interview last night. A truly devastating comment on the lust for POWER and an obsession for an endless supply of wealth. And to what end? Can you take it with you? Whatever happened to the belief that one should also store up riches in Heaven? A nation founded on a belief in God has become Godless. A nation founded on the equality of all has become beholden to the few. This psychic contagion has been exported by our country. I am ashamed to be a citizen of this country. It is not my country anymore even though I will live out my days in it. What is happening is such a betrayal of our Constitution to say nothing of the betrayal of core moral values. I guess in the aftermath all one can say is, “The Devil Made Me Do It.”Well, this legion of lost souls is certainly no role model for me. I’m sticking with my core beliefs that moderation in everything (balance) is a good general principle to follow. But in these times such an outlook is like a “voice” crying out in the wilderness.I guess it is evidence for the coming Ordeal of the Apocalypse (The Greater Depression outer event and the resulting effect that will have on one’s inner world) if Simon Johnson’s prediction of such an economic outcome comes true between 2016-2023.Look out below.

Little SaverOctober 11th, 2009 at 8:21 am

Systems lacking moderation (balance) tend to collapse sooner or later. We recently had such a collapse, but the system’s proponents managed to divert attention from the underlaying causes and to let bystanders cover its losses, avoiding the installment of checks and balances. Up to the next crisis, I guess. There’s so little we can do, outpowered as we are.

economicminorOctober 11th, 2009 at 11:08 am

I suggest that NR watch the Bill Moyers piece on how corrupted the system is. It is not possible for a system so out of balance to have a vibrant economy.If the tire on your car gets out of balance and you don’t go to a tire shop and have it re-balanced, then it just gets worse and worse. After a while, it gets to bouncing so badly that it damages the shock absorber and makes control of the car difficult. At that point the only option is to stop and change the tire. If you don’t the you’ll have a wreck. Either by losing control from the bouncing or have a blow out.Our economy is a stolen car with an out of balance tires. Those who are driving are in such a hurry to get it to *their* garage, that they are going to try and drive it faster. The idea of going to a tire shop to them is ludicrous as that would mean taking a chance of getting caught stealing. Besides they are in a huge rush to steal all the cars and have then all for their own. Even though they can only drive one at a time…Insanity, YES! But also human nature. A wreck is the only one of the outcomes. The other is that TPTB have all the cars but all of them have out of balance tires, all the tire shops have closed and none of their acquisitions will get them anywhere without an army to protect them. In the end they may have it all but it will be meaningless.

The AlarmistOctober 12th, 2009 at 2:10 am

I guess I should watch this since he obviously knows that of which he speaks.Moyers is a classic case of the pot calling the kettle black, as he has been feeding very lavishly at the PBS trough for decades.

GuestOctober 12th, 2009 at 10:27 am

Alarmist, it’s always the same with you- enough with your cheap shots!We already know that you hate Lefties!Stick to the message. Know the differences: Message; Messenger!Partisan political crap is just that, it’s crap! By spouting like this all you do is muddy the waters, distract from the facts.

The AlarmistOctober 13th, 2009 at 2:11 am

At least I have the nerve to use a unique moniker and not hide behind ‘Guest,’ which is as gutless as signing anonymous. I’m sure there are a million great minds behind all the ‘Guest’ tags, but you all sound surprisingly the same, as if you are reading the same set of talking points rather than thinking for yourselves.

tonywOctober 13th, 2009 at 9:08 am

Take a look at this article in the UK’s Observer from 2001 shows how the IMF are also corrupt.

wdm223October 9th, 2009 at 10:10 pm

I wonder if the talk and perhaps substance of a move from the dollar is related to the contagion issue?wdm223

blindman dwellerOctober 9th, 2009 at 10:26 pm

THE SUPPLY OF OXEN AT THE IMFAntal E. FeketeProfessor of Money and BankingSan Francisco School of…..”— as it most certainly will in this century, probably duringthe next decade. When that happens, the paper tower of Babel will come crashing down. All paperfortunes will be wiped out. The world will stand denuded of its capital. It will be unable to pay wagesto the workers, to say nothing about paying pensions to the retired segment of the population. We shallwitness the greatest change of guards ever. Bankers will deny their profession and will, like John Lawof Lauriston fleeing from Paris, put on female garments and leave town under the cover of the night.Only those with….”

blindman dwellerOctober 10th, 2009 at 7:34 am VACCINES: ARE THEY EFFECTIVE AND SAFE?Richard Gale and Gary Null, PhD.September 28, 2009…..”In conclusion, we should ask for national public debates between those who advocate for vaccines and those who challenge them. We believe it is imperative to have this dialogue so we can enable the public to decide for themselves as to whether or not they approve of the new experimental H1N1 vaccine, and all vaccines collectively. Then let the public decide. In a real democracy, an informed patient should have freedom of choice in health decisions. Today, there is no honest debate, no informed consent, no real science, no transparency of vaccine research, and no accurate statistics. Instead, we have federal health agencies, such as the CDC, on its own website, making false claims by misinterpreting pneumonia as influenza. Obviously, this is surely not the case. Finally, it is worse that the power of federal and state governments are being used to mandate the enforcement of a scientifically unproven vaccine, namely the H1N1 swine flu vaccine, in a totalitarian manner upon its citizens. This is not democracy, this is medical tyranny.”

jemOctober 10th, 2009 at 3:16 pm

1. Gary Null’s “PhD” is of dubious origins according to the wikipedia entry.2. Flu vaccine science is well established and has a very good risk profile. Millions of people take flu jabs every year and dont die of flu because of it.3. As far as I know nobody is forced to take a jab. If you dont want one dont get one. medical tyranny? get real

blindman dwellerOctober 10th, 2009 at 6:50 pm

jem,real is real. in new york health care providers are being requiredto take a jab or lose their job. law suits have been filed..” Workers in New York State say they will fight a mandate that health care professionals be vaccinated against influenza, both seasonal and the swine flu, by November 30th.In August, the New York Department of Health decided that vaccination was mandatory for doctors, nurses, or health care providers, or they would be fired. The requirement applies to all workers who “could potentially expose patients” to influenza.”….i know, it is unbelievable, unreal but for g.n.’s phd and its credibility i do not care, when heproduces something or says something, i ask does it makesense? is he for real? answer is yes.and the point about the efficacy of the vaccination paradigmhe addresses convincingly, clearly and at length. many writings, interviews and citations. the reading list is longer than my life expectancy, as are the interviews, explanations etc..the main point is in a real world, a free world, no oneshould be required to be a guinea pig for the pharmaceuticalindustry or a public health department. yes, it is all aboutmoney and not about public health and, no, these officialsdo not have the science or societal circumstances arisingto justify their recklessness and tyranny. imo.perhaps all part of the same inferiority/insecurity complexthat drives authority in fear to regress intellectually,and otherwise, and then embrace ideology, fraud and institutionalpower and money?taking a jab can be referred to casually but it shouldnot be mandatory casual. there are neuron death,myelin sheath damage or destruction, alzheimers and autismout there for worry worms like me. time will tell…gulf war syndrome… real.? vaccine related?

blindman dwellerOctober 10th, 2009 at 9:17 pm

ps.the new insurance / pharma / wall street Hippocratic oath.” first make the money, then if you did any harm,make some more money. then, try not to do anymore harm if there is no more money to be “made”.”.just a joke, but, damn it anyhow. it is not the entiremedical, insurance, pharma, wall street, government”thing” that i despise, just the criminal, myopic,arrogant, fraudulent, and ignorant lock step majority.this is where “leadership” would step in and makeinsightful reassignments. but , i guess we have morepressing thing is that there seems to bea principle of momentum at play that prohibits correction,innovation, creativity and intelligence from operating.especially acute is the suppression in a deflationaryasset correction as authority/power desperately triesto reflate assets which stifles the incentives in themarket to innovate, ties up liquidity, resources,materials and space itself (physical as well asmental etc.?). the system has to reset/correct. change is in order. desperately seeking growth, interior insight…..will the system and relative balances that just failedmiserably be able to continue as they were and now thistime with more of the same? it will be a great success? huh.the problem is the banks etc. can’t take the hit / end the best they can do for themselves is control the what are they waiting for? gaming and controllingrelative advantage. everyone else waits for them as wedon’t really know what to do or what is happening?maybe when all states and municipalities fail financiallythe big banks will finance at 20 percent the entire economy?public and private? some states might have a problem doctor i see, or, my doctor who has treated me once in25 years, is different. he is a great man as heunderstands his calling. that is something doctors need todo. it is casual but also serious. it is like businessbut not like a fast food business or wholesale liquidators,or home depot or a card game at the madoff’s. it isdifferent than that yet there is insurance involved butreally no drugs/pharma. all i can say is everyone shouldhave the privilege of seeing my doctor once every 25 years.people should know that they heal and destroy themselvesregularly, that is the nature of this life. very excitingstuff. it involves suffering but it is manageable andand instructive for those so inclined to learn that is a question of having the wisdom to know when and whereto and when and where not to intervene and it has to dowith learning from suffering and detoxifying from theexperience.this, my doctor knows. i think.pss. have you noticed that the truth of people, theirtrue natures, is becoming obvious. they, we, arejust out there now. transparency is kicking in! me thinks,regardless of any intent to the contrary? perhaps thequality of light has improved? beautiful light expandingconsciousness. ?

GuestOctober 10th, 2009 at 7:57 am guy is a moron. sometime he gets right, but most time he gets wrong. you know which market is overdue for knifing? Treasury market (short/5yrs/10yrs/30yrs), toxic agency market, muni. these market doesnt even have PE multiple to speak of to pay investor back the principal. oh yeah, except Treasury market is backed by the print press, which explained dollar’s fall.

MM CAOctober 10th, 2009 at 11:07 am

The new normal… People will look upon the past year as the good times in years to come…The World’s 8th Largest Economy Warns ‘We’re Not Out Of The Woods Yet’The Pragmatic Capitalist|Oct. 10, 2009, 10:09 AMDespite signs of an economic recovery, the state of California remains in a deep fiscal mess and recession. The state has been a particularly good proxy of the overall state of the economy due to their high leverage to the real estate market – the crux of our issues. According to the State Controller the economy continued to deteriorate in September, but is showing some signs of stability. The recent report said:The State’s General Fund continued to deteriorate in September. Year to date, both corporate and personal income tax revenues were down by double-digit percentages over last year (13% and 16%, respectively). Additionally, the numbers indicate that Californians are still feeling the pinch of this recession in a very real way. For example, withholdings on personal income are down by 7.1% this year. Estimated tax payments for both personal income and corporations are down even more sharply, falling by 34.9% and 11.0%, respectively, compared to last year.Californians have lost nearly 1 million jobs and the Franchise Tax Board now says that tax delinquencies are up 28% over the last 2 years.

MorbidOctober 10th, 2009 at 2:46 pm

California Budget Is Already in the Red 10 Weeks After Passage

The latest figures show that California is facing resurgent fiscal strains brought on by the U.S. recession. Since February, Schwarzenegger and lawmakers have cut $32 billion from spending, raised taxes by $12.5 billion and covered $6 billion more with accounting gimmicks and borrowing. Even with those actions, state budget officials predict an additional $38 billion in deficits in the next three fiscal years combined, including $7.4 billion in the year starting July 1.

PeteCAOctober 10th, 2009 at 3:25 pm

Briam at C.I. has been making a pretty strong case lately that with these types of budget problems hitting states (esp. places like CA) there is no way that local and state governments can avoid more significant layoffs. All of which contributes to the on-going unemployment picture, and certainly argues that we are not even at peak unemployment yet.It’s one thing for the market to beleive that unemployment is a “lagging indicator”. But it’s another thing when we haven’t even reached peak unemployment levels yet.. I’m still going with a double-dip recession as a probable option (and that possibility does not rule out an eventual hyperinflationary depression in the US).PeteCA

The AlarmistOctober 12th, 2009 at 8:32 am

But, but, but … According to Larry Summers, government spending is the booster stage that will get us to escape velocity. If the States are starting to fail, does that not mean we are doomed to a sub-orbital splash?Seriously, California is TBTF. You are about to witness a complete re-structuring of the US consitutional system in the name of saving us from certain doom.

blindman dwellerOctober 10th, 2009 at 9:28 pm

m,thank you for your posts.the best investment is in people, the closer the better.a thought to think on.?

PeterJBOctober 11th, 2009 at 5:52 am

@ blindman”Hippocratic oath”Please correct me if I am wrong but I don’t believe that medical graduates are required to undertake the Hippocratic Oath any more; since about 30 years or so?Ho hum

blindmanOctober 11th, 2009 at 8:56 am

The Hippocratic Oath: Modern Version swear to fulfill, to the best of my ability and judgment, this covenant:I will respect the hard-won scientific gains of those physicians in whose steps I walk, and gladly share such knowledge as is mine with those who are to follow.I will apply, for the benefit of the sick, all measures [that] are required, avoiding those twin traps of overtreatment and therapeutic nihilism.I will remember that there is art to medicine as well as science, and that warmth, sympathy, and understanding may outweigh the surgeon’s knife or the chemist’s drug…, the older version…Modern translation of the English:[5]“ I swear by Apollo Physician and Asclepius and Hygieia and Panaceia and all the gods, and goddesses, making them my witnesses, that I will fulfil according to my ability and judgment this oath and this covenant:To hold him who has taught me this art as equal to my parents and to live my life in partnership with him, and if he is in need of money to give him a share of mine, and to regard his offspring as equal to my brothers in male lineage and to teach them this art–if they desire to learn it–without fee and covenant; to give a share of precepts and oral instruction and all the other learning to my sons and to the sons of him who has instructed me and to pupils who have signed the covenant and have taken the oath according to medical law, but to no one else.I will apply dietic measures for the benefit of the sick according to my ability and judgment; I will keep them from harm and injustice.I will neither give a deadly drug to anybody if asked for it, nor will I make a suggestion to this effect. Similarly I will not give to a woman an abortive remedy. In purity and holiness I will guard my life and my art.I will not use the knife, not even on sufferers from stone, but will withdraw in favor of such men as are engaged in this work.Whatever houses I may visit, I will come for the benefit of the sick, remaining free of all intentional injustice, of all mischief and in particular of sexual relations with both female and male persons, be they free or slaves.What I may see or hear in the course of treatment or even outside of the treatment in regard to the life of men, which on no account one must spread abroad, I will keep myself holding such things shameful to be spoken about.If I fulfil this oath and do not violate it, may it be granted to me to enjoy life and art, being honored with fame among all men for all time to come; if I transgress it and swear falsely, may the opposite of all this be my lot.”Louis Lasagna.A widely used modern version of the traditional oath was penned by Dr. Louis Lasagna, former Principal of the Sackler School of Graduate Biomedical Sciences of Tufts University.[6]In the 1970s, many American medical schools chose to abandon the Hippocratic Oath as part of graduation ceremonies, usually substituting a version modified to something considered more politically and medically correct, or an alternate pledge like the Oath or Prayer of Maimonides.The Hippocratic Oath has been updated by the Declaration of Geneva. In the United Kingdom, the General Medical Council provides clear modern guidance in the form of its Duties of a Doctor[7] and Good Medical Practice[8] statements.[edit] Modern relevanceThe original text of the Hippocratic Oath is usually interpreted as one of the first statements of a moral of conduct to be used by physicians, assuming the respect for all human life, even unborn. Most Christian tradition interprets the original Hippocratic Oath as a condemnation of abortion and infanticide.According to Margaret Mead : “For the first time in our tradition there was a complete separation between killing and curing. Throughout the primitive world, the doctor and the sorcerer tended to be the same person. He with the power to kill had power to cure, including specially the undoing of his own killing activities. He who had the power to cure would necessarily also be able to kill… With the Greeks the distinction was made clear. One profession, the followers of Asclepius, were to be dedicated completely to life under all circumstances, regardless of rank, age or intellect – the life of a slave, the life of the Emperor, the life of a foreign man, the life of a defective child…” [1]…….it seems lou lasagna has penned a modern version thatmay be an optional recitation upon graduation..The phrase “first, do no harm” is often, incorrectly, attributed to the oath. Although mostly of historical and traditional value, the oath is considered a rite of passage for practitioners of medicine, although nowadays the modernized version of the text varies among the but of course the plot thickens and descends into chaos as evidencedby this link.. Modern Oath of HippocratesWe owe the American Medical Association our profound and sincere apology. The so-called Modern Oath of Hippocrates which had previously been on this site is incorrect. Although we received the “Modern Oath” from a reliable medical doctor, unfortunately that oath did not originate from the AMA.The AMA has been kind enough to do some in-house research to determine if the Modern Oath on this site had somehow originated from the AMA. It had not. The AMA has a code of ethics, but there is, in fact, no version of the Hippocratic Oath that the AMA espouses or promotes. This is the information we have received from the AMA’s Ethics Division.Our own research on the Hippocratic Oath, inspired by the discovery that our posting of the Modern Oath did not originate from the AMA, has been most interesting. While it is common knowledge among both doctors and the lay public that doctors take an oath that says, “Never do harm,” the fact is that not all medical schools require their graduating doctors take the Hippocratic Oath. In addition, Medicine’s use of the Oath changes over time. Here are some items for your consideration, the results of a study by Robert Orr, M.D. and Norman Pang, M.D., in which 157 deans of allopathic and osteopathic schools of medicine in Canada and the United States were surveyed regarding the use of the Hippocratic Oath:1. In 1993, 98% of schools administered some form of the Oath.2. In 1928, only 26% of schools administered some form of the Oath.3. Only 1 school used the original Hippocratic Oath.4. 68 schools used versions of the original Hippocratic Oath.5. 100% of current Oaths pledge a commitment to patients.6. Only 43% vow to be accountable for their actions.7. 14% include a prohibition against euthanasia.8. Only 11% invoke a diety.9. 8% prohibit abortion.10. Only 3% prohibit sexual contact with patients… seems to be in flux, that is why i will assume thatthe one i offered , “first make the money..leave the gungrab the canolis ..etc.” is the actual modus operandi.again, a joke. sort of.

economicminorOctober 11th, 2009 at 2:30 pm

State governments are reactionary. They will react to this but as California is finding out, late and short of what needs to be done. So they borrow from TPTB for their interim funding needs, putting the states and counties further behind… just like what happened to the consumers.

Octavio RichettaOctober 11th, 2009 at 5:21 pm

Ok, here I come again. IMHO, the ECRI guys have got it right: Leading Index growth at new record highReutersOctober 09, 2009(Reuters) – NEW YORK, – With the economy still mired in a rut and consumer confidence struggling to rebound, the words “record high” are not something we hear very often (unless, perhaps, in reference to the job market). Which makes the surge in the growth rate of the Economic Cycle Research Institute’s Weekly Leading Indicator, the WLI, all the more impressive. “Rocketing is the word,” said Achuthan in an email.Contrarian calls are nothing new for ECRI. Back in late 2000, when most Wall Street economists were looking for continued growth in the coming year, ECRI was a lone voice in predicting an imminent recession. Time proved them correct. In a recent presentation, managing editor Lakshman Achuthan makes a pretty convincing case for his firm’s recent forecasting record.Now, with many economists saying a “new normal” of weak consumption and tepid growth is upon us, the folks are ECRI say wrong again:“Given the growing strength in ECRI’s objective leading indexes, the odds are rising that at least the early stage of this economic recovery will be the strongest since the early 1980s.”Needless to say, the group does not believe a double-dip is in the cards.Have a look> Diz can save/make U a few bucks:

HayesOctober 11th, 2009 at 6:51 pm

“strongest since the early 1980’s” – I dug out one of my history books and there in bold print the word Inflation. Notwithstanding, it occurred to me (I likely read or watched somewhere) that this rally has been almost entirely driven by liquidity. Apart from that a question might be: Are the ECRI numbers already reflected in the current equity prices?Heard an interview on Bloomberg on the whole inflation and currency issues here is the link Bloomberg – Sinclair on Inflation Also some good commentary from Rosenberg (visit Gluskin Sheff to register for his free daily news letters – he’s a big time deflationist) and some recent interviews with Julian Robertson who would be best characterized as an opportunist who expects inflation.Another issue that is gaining visibility relates to the USD carry trade, the main beneficiaries being those who have access to zero percent borrowing costs. And related to that the impact on exporting nations and ultimately the market for US Treasuries in terms of a weaker US currency.ECRI has been very accurate but I cannot help but think that there is still a very large economic and social price to be paid for the recent crisis and excesses.In the blogoshphere there is a character at the Wall Street Bear who goes by the name of Rasputin – very entertaining and insightful posts.

JasaOctober 11th, 2009 at 9:38 pm

Octavio,what about the ECRI call of signs of increasing inflation? In their words: “have become fairly pronounced, pervasive and persistent. Thus, while this is not yet a significant policy concern, U.S. inflation is on the cusp of a cyclical upswing”. What do you think? If the growth is coming, apparently strong at the beginning, but then will flatten soon (as Roubini seems to predict), are we heading for stagflation?

Octavio RichettaOctober 12th, 2009 at 5:42 pm

Hayes and Jasa:IMO, you cannot beat ECRI forecasting at turning points. I agree with them that the recovery will be very strong initially. Their call is good for the next six months. To look beyond that you need to look at “expert” forecasts, such as the professor’s, to help you shape your own forecast.Yeah, their FIG numbers raise a red flag for inflation so one needs to act accordingly. I am still 0% gold. I sold first time it hovered around 1000. I think it was March-April 2008 around the time of the BS mess. Check my old posts.

HayesOctober 11th, 2009 at 9:19 pm

via ZH – a seminar with Taleb circa 2008

Pecos BankerOctober 12th, 2009 at 2:06 am

Reality check time, folks. Whereas, (by the way where is SWK?) the US congress is solidly in the pockets of Wall St and the lobbyists on K Street and there being no possibility that they will ever wean themselves from this teat–rather like a tattoed and pierced adolescant at his mother’s breast–we the people must form our own K Street lobbying firm and outbid Wall St for favors from our esteemed representatives. While this idea may seem fecetious (meaning, full of feces) it provides two advantages: A) we could actually outbid Wall St and end up getting the government we covet and B) this would send a message loud and clear to ourselves that the system is corrupt (Congress already knows this, having already extensively probed and tested this possibility). I would gladly spearhead this lobbying organisation. Send your contributions to–on second thought, forget that, I might just run for congress instead.By the way, where’s Obama?