Author Topic: Back to the Mattress II: Now with less penny counting  (Read 111638 times)

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Offline nacho

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Re: Back to the Mattress II: Now with less penny counting
« Reply #30 on: November 16, 2007, 01:18:58 PM »
Oh-ho!  For the people I know (and there are several) who jumped ship because of Mighty China destroying the God-Fearing US of A, there's this from the Financial Times:


Quote
In a little-noticed mid-summer announcement, the Asian Development Bank presented official survey results indicating China’s economy is smaller and poorer than established estimates say. The announcement cited the first authoritative measure of China’s size using purchasing power parity methods. The results tell us that when the World Bank announces its expected PPP data revisions later this year, China’s economy will turn out to be 40 per cent smaller than previously stated.

This more accurate picture of China clarifies why Beijing concentrates so heavily on domestic priorities such as growth, public investment, pollution control and poverty reduction. The number of people in China living below the World Bank’s dollar-a-day poverty line is 300m – three times larger than currently estimated.

Why such a large revision in the estimates of China’s economic condition? Until recently, China had never participated in the careful price surveys needed to convert accurately its gross domestic product into PPP dollars.

The World Bank’s estimates based on summary data from the late 1980s probably overstated China’s PPP gross domestic product even then. Up to now, the bank has revised its estimate very little. In the meantime, China has repeatedly raised the prices of food, housing, healthcare and a range of other non-traded goods and services. These reforms should have lowered the PPP adjustment, but the bank left it basically unchanged.

Last month, Robert Zoellick, World Bank president, argued that the bank should continue to lend to countries such as China, India and Brazil because they still had large shares of the world’s poor.

The new, more accurate statistics describing a smaller, poorer China strengthen this argument. The ADB’s announcement also indicates that the number of dollar-a-day poor in India is closer to 800m than the current estimate of 400m.

These PPP adjustments affect poverty measures because the World Bank’s dollar-a-day poverty line is a PPP dollar poverty line. Reducing PPP consumption estimates drops large numbers of additional households below the poverty line.

For China, the correction needs to be made back to the 1980s and 1990s, when instead of World Bank estimates of roughly 300m people below the dollar-a-day poverty line, the number was more likely more than 500m. China has made enormous strides in lifting its population out of poverty – but the task was perhaps more gargantuan than most people thought and progress has been overstated by bank estimates.

These calculations are not just esoteric academic tweaks. Based on the old estimates, the US Government Accountability Office reported this year that China’s economy in PPP terms would be larger than the US by as early as 2012. Such reports raise alarms in security circles about China’s ability to build a defence establishment to challenge America’s.

Well-informed analysts know that PPP calculations are a poor measure of a country’s potential military base, but with the corrected China PPP statistics, the whole question is moot. China is just not that big now and will not get that big any time soon.

Given uncertainties about China’s political and security evolution, this more moderate picture of China’s economic size is reassuring. It means that the US and other developed nations have more time to engage China and interact with its fledgling institutions. There might be no better place to start than with military-to-military relations.

The immediate international interest, however, is for China to succeed in its still daunting internal development challenges. Such opportunities might be manageable if engagement focused on a needy sub-region such as Sichuan Province, where the US has a flourishing Peace Corps programme. The goal is to promote economic development conducive to political moderation.

Close contact with China’s development process on the ground might also help us understand better the lessons China’s experience might have for so many poor countries where development is stalled.

Finally, both Congress and the Treasury department should recognise the limitations and opportunities revealed by these more accurate data. For example, risks to its impoverished rural hinterland from a sudden large revaluation of its currency loom larger in Beijing’s eyes than in Washington’s. Acknowledging this could smooth negotiations.

Offline Tatertots

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Re: Back to the Mattress II: Now with less penny counting
« Reply #31 on: November 17, 2007, 03:59:42 AM »
What I wonder is how sustainable China's current practices are. Not just environmentally (that alone, I think, will fuck them hard in the coming decades), but economically.

Where's an economist when you need one?

Offline nacho

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Re: Back to the Mattress II: Now with less penny counting
« Reply #32 on: November 18, 2007, 04:01:51 PM »
Not at all sustainable.  I don't give any credit to China.  a general disruption socially (and, therefore, financially) is inevitable.  Unlike the other dragons in Asia, they aren't a capitalist democracy (or pretending to be one). 

That's just me talking, though.  The real killer is the lack of a middle class.  How much of an economic powerhouse can you possible be in the long term if you don't have a middle class with disposable income?  Right now, they thrive off of industry, and they have the workforce to do it cheaply.  But each year is closer to that workforce getting a clue and rebelling.  The fatter their economy gets, the more the people will want a piece of the pie.  In a society like ours, we're all getting some of the pie (or are under the illusion that we are), and that's how you keep us nice, passive, tax-paying, and splurging at the checkout line.

Offline RottingCorpse

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Re: Back to the Mattress II: Now with less penny counting
« Reply #33 on: December 05, 2007, 03:05:14 PM »
Here Coes Another Bubble . . . sung to the tune of "We didn't start the fire."

http://www.youtube.com/watch?v=fi4fzvQ6I-o

Offline nacho

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Re: Back to the Mattress II: Now with less penny counting
« Reply #34 on: December 06, 2007, 10:21:57 AM »
Just a bunch of lip service, or will this do something?  People are already in hot water.  Freezing rates just locks them in at a bad place, no? And having this for people who bought homes this year is stupid...they knew what was happening.  Buyer beware! 

This also stabs folks who were looking to get into home buying.


Quote
Bush plan will freeze subprime rates
The agreement will freeze certain subprime mortgages for 5 years, a compromise with the mortgage industry and banking regulators.

ASHINGTON (AP) -- The Bush administration has hammered out an agreement with industry to freeze interest rates for certain subprime mortgages for five years in an effort to combat a soaring tide of foreclosures, congressional aides said Wednesday.

These aides, who spoke on condition of anonymity because the details have not yet been released, said the five-year moratorium represented a compromise between desires by banking regulators for a longer time frame of as much as seven years and industry arguments that the freeze should only last one to two years.

Another person familiar with the matter said the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.

The administration said that President Bush will speak on the agreement at the White House on Thursday and the Treasury Department announced that Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson would hold a joint news conference Thursday afternoon with officials of the mortgage industry.

Treasury also announced that there would be a technical briefing to explain more of the details of the proposal.

Paulson, who has been leading the effort to craft a plan, said on Monday that the program would only be available for owner-occupied homes - as a way to make sure that the break is not granted to real estate speculators.

The plan emerged from talks between Paulson and other banking regulators and banks, mortgage investors and consumer groups trying to address an avalanche of foreclosures that are feared as an estimated 2 million subprime mortgages reset from lower introductory rates to higher rates.

The higher rates in many cases will boost monthly payments by as much as 30 percent, making it extremely difficult for many people to keep current with their loans.

The plan is aimed at homeowners who are making payments on time at lower introductory mortgage rates but cannot afford a higher adjusted rate.

Through October, there were about 1.8 million foreclosure filings nationwide, compared with about 1.3 million in all of 2006, according to Irvine, Calif-based RealtyTrac Inc. With home loan defaults still rising, the trend is expected to worsen next year.

The plan represents an about-face for Paulson, who until recently had insisted that the mortgage crisis could be handled on a case-by-case basis. However, he and other administration officials became convinced that the tide of foreclosures threatened by the mortgage resets represented such a severe threat that a more sweeping approach was needed along the lines of a plan put forward in October by Sheila Bair, head of the Federal Deposit Insurance Corp.

Paulson and other federal regulators began holding talks with some of the country's biggest mortgage lenders, mortgage service companies, investors who hold mortgage-backed securities and nonprofit groups that provide counseling for at-risk homeowners.

Under the typical subprime loan, those offered to borrowers with spotty credit histories, the rates for the first two years were at levels around 7 percent to 9 percent. But after two years, those rates were scheduled to reset to levels around 9 percent to 11 percent.

For a typical $1,200 monthly mortgage payment, the reset could add another $350 to the monthly payment, greatly raising the risks of loan defaults by homeowners struggling with the current payment.

The wave of mortgage foreclosures threatened to make the most severe slump in housing even worse by dumping more foreclosed properties onto an already glutted market, further depressing home prices and shaking consumer confidence.

The deepening housing slump has already roiled financial markets, starting in August, as investors grew increasingly concerned about billions of dollars of losses being suffered by banks, hedge funds and other investors.

The administration plan is designed to deal with the crisis by allowing subprime borrowers who are living in their homes and are current on their payments to avoid a costly reset for five years. The hope is that by that time the housing downturn will have stabilized, clearing out the glut of unsold homes and halting the steep slide in prices that is occurring in many parts of the country.

With sales and prices once again rising, the expectation is that homeowners will be able to renegotiate their current adjustable rate mortgages into a more affordable fixed-rate plan.

The housing crisis has become an issue in the presidential race with Democrats Hillary Rodham Clinton and John Edwards putting forward their own proposals this week that would go further than the administration.

Mark Zandi, chief economist for Moody's Economy.com, said while the administration plan is a good first step, eventually the government will have to go further because of the size of the problem and the threat to the economy.

"This is the most serious housing downturn we have seen in the post World War II period," he said. "It is a threat to the broader economy. The risks of a recession are very high." To top of page

Offline Tatertots

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Re: Back to the Mattress II: Now with less penny counting
« Reply #35 on: December 06, 2007, 12:41:40 PM »
The news of progress, at least, is sending things back into the bull market we all love. The dollar is back above the Canadian dollar too, and oil dipped some on news that OPEC would start shipping more oil. Good times? Who knows??

Offline nacho

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Re: Back to the Mattress II: Now with less penny counting
« Reply #36 on: December 06, 2007, 12:49:33 PM »
Hopefully a trend that'll keep up through Christmas for my trip!

Offline monkey!

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Re: Back to the Mattress II: Now with less penny counting
« Reply #37 on: December 06, 2007, 12:53:16 PM »
The Dollar is DEAD!

DEAD, I tells ya - DEAD!
There will come a day for every man when he will relish the prospect of eating his own shit. That day has yet to come for me.

Offline nacho

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Re: Back to the Mattress II: Now with less penny counting
« Reply #38 on: December 11, 2007, 11:25:32 AM »
So the people who call themselves experts say today that the dollar has hit bottom... Traditionally, this will be a plateau point, then we'll start to rise again.  Today's another rate cut, so we'll see what happens.

Offline Reginald McGraw

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Re: Back to the Mattress II: Now with less penny counting
« Reply #39 on: December 11, 2007, 12:41:57 PM »
Doesn't a rate cut mean the dollar would drop?  Or have I got that backwards.

Hmm...maybe they're even unrelated.

Offline nacho

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Re: Back to the Mattress II: Now with less penny counting
« Reply #40 on: December 11, 2007, 12:55:29 PM »
As I understand it (and I don't!), cutting the interest rate inspires more spending and borrowing.  But what little Keynes I've read says it's all psychological. 

It doesn't really do much for the dollar.  The dollar's problems can all be blamed on the Euro.  The only other really strong reserve currency was the Mark.  When Germany went with the Euro, they just took advantage of a larger market.  As the Euro grows, and US popularity in general flags, there's less confidence in the dollar.  It's all just an adjustment.  The Euro is going to hit the wall soon enough...some say it is in the process right now.  The US will get a new president and settle the war down.  Four years and we'll be back to a sense of false normalcy.

Offline monkey!

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Re: Back to the Mattress II: Now with less penny counting
« Reply #41 on: December 12, 2007, 10:27:18 AM »
The Euro won't so much "hit a wall" as "plateau out" at a fairly strong and solid £1:€1.30 sometime next year. That means it'll be still a lot stronger than the dollar.

And lowering the interest rates does indeed invite more spending/lending and borrowing which in turn brings more money from foreigners, as well, into the Dollar market.
There will come a day for every man when he will relish the prospect of eating his own shit. That day has yet to come for me.

Offline fajwat

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Re: Back to the Mattress II: Now with less penny counting
« Reply #42 on: December 15, 2007, 03:05:32 PM »
The obvious answer for Tyson is to siphon out his summer of love '09 money into a CD or other security with a maturity date near when he'll spend it. 

Banks used to offer custom maturity dates if you really wanted them; they'd base the rates on similar products.  You could get 4.4% APY in either a 1yr CD or "Premiere Savings" account from http://presidential.com/ and probably a few other places as well.  (I've used Prez since before it was online.)  4.4% APY isn't AAPL money, but it's roughly competitive with inflation. 

Of course, what you really want to look at if you're all abou the mulah, is muni bonds.  Cali has dozens of them I think.  Muni bonds are perfect for becoming and staying upper class rich, and $10k is an OK entry price into their world.
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Offline Tatertots

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Re: Back to the Mattress II: Now with less penny counting
« Reply #43 on: December 17, 2007, 12:45:47 AM »
Some good starting points, I believe. I'm going to talk to my broker because I'm paying god awful amounts of money to do nothing but sit on top of a pile of AAPL stock.

I'll look at some general obligation munis, because they're the safest, but I don't know if the return rate is competitive with a CD.

Offline fajwat

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Re: Back to the Mattress II: Now with less penny counting
« Reply #44 on: December 17, 2007, 10:06:29 AM »
less of a concern for your bracket I guess, but the big part of munis is the tax advantages.  And the fact that they'll never ever ever ever default, well, really almost never ever.
"If it were up to me I would close Guantánamo not tomorrow but this afternoon... Essentially, we have shaken the belief that the world had in America's justice system... and it's causing us far more damage than any good we get from it."

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