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THE world will face a "1930s moment" of the kind that brought on the Great Depression unless money can quickly be found to support nations such as Italy and Spain, the International Monetary Fund says.
Before releasing dramatically downgraded economic forecasts early this morning Australian time the IMF chief, Christine Lagarde, told an audience in Berlin $1 trillion would be needed to support ailing governments and stave off a deeper crisis - half of which would have to come from Fund backers such as Australia.
The Treasurer, Wayne Swan, backed Ms Lagarde, saying without "larger firewalls" to protect embattled European nations the global economy was at risk.
But the shadow treasurer, Joe Hockey, questioned whether such payments were in Australia's national interest.
The IMF has shaved three quarters of 1 per cent off its previous global growth forecast, issued in September. It expects the world economy to grow by 3.25 per cent this year and advanced economies 1.2 per cent. China would grow 8.2 per cent, down from 9.2 per cent. The euro zone would shrink 0.5 per cent before growing weakly next year.
But Ms Lagarde said the world was facing "a 1930s moment, in which inaction, insularity and rigid ideology combine to cause a collapse in global demand".
"This is a defining moment," she said. "It is not about saving any one country or region. It is about saving the world from a downward economic spiral."
The IMF economic update warns of "adverse feedback loops" in which countries that have trouble paying debts cut spending further, depressing their economies even more, making it harder to repay their debts and imperilling financial institutions worldwide.
In Berlin Ms Lagarde attacked the "worrisome tendency to view fiscal policy as a morality play between profligacy and responsibility".
Read more: http://www.smh.com.au/business/world-business/imf-seeks-1-trillion-to-stave-off-1930s-moment-20120125-1qg7z.html#ixzz1kQN0KHW1
Greek Economy on Track to Implode: Hanke
Whether or not Greece is able to reach an agreement on the restructuring of its debt, the country is set to “implode” as the economy contracts, according to Johns Hopkins University’s Steve Hanke.
“The game is completely over,” Hanke, professor of applied economics, said at the Bloomberg Sovereign Debt Crisis Conference in New York hosted by Bloomberg Link. “All the calculations are nonsense and have been since day one. Since the crisis began the money supply has been shrinking and the economy is going to implode, no matter what they do in the short run.”
Money supply is shrinking at an annual rate of about 16 percent in Greece, meaning there won’t be growth needed to support debt payments, Hanke said. Greece is pursuing talks on a debt swap with private creditors that would lower Greece’s debt to 120 percent of gross domestic product by 2020. European governments have sought to fill a deeper-than-expected gap in Greece’s finances by having investors accept a lower interest rate on exchanged bonds.
The International Monetary Fund cut its forecast for global growth today and warned that the European debt crisis threatens to derail the world economy. The fund, in an update of its World Economic Outlook report, lowered its estimate for global growth this year to 3.3 percent from a September forecast of 4 percent.
Regional Bailouts
To avoid a 1930s-style worldwide depression, IMF Fund Managing Director Christine Lagarde yesterday called on other countries to play their part. The IMF, which co-finances loans to Greece, Ireland and Portugal, identified a potential global financing need of $1 trillion in coming years and is seeking $500 billion in new lending resources from its member countries to address potential loan demand.
Apple Profit More Than Doubles on IPhone Demand
Apple Inc. (AAPL) reported quarterly profit that more than doubled as holiday purchases of the iPhone catapulted sales to a record and helped the company steer clear of the consumer-spending slump that has hurt rival companies.
Fiscal first-quarter profit surged to $13.1 billion, or $13.87 a share, Apple said today in a statement. Sales rose 73 percent to $46.3 billion. Analysts surveyed by Bloomberg on average estimated profit of $10.14 a share on sales of $39 billion. Per-share profit for the quarter was more than the company earned in any fiscal year before 2010.
Apple sold 37 million iPhones, up from the previous record of 20.34 million. Customers snapped up the 4S model that went on sale in October, a week after the death of co-founder Steve Jobs. The results mark the first time the company’s quarterly revenue topped Hewlett-Packard Co. (HPQ)’s, underscoring how its focus on sleek touch-screen mobile devices has reshuffled leadership in the industry.
“Those numbers are just unimaginable,” said Michael Obuchowski, chief investment officer at First Empire Asset Management, which has $4 billion under management, including Apple shares. “It’s still an extremely well-managed company and they are showing that the product pipeline is sufficient even now to generate growth rates that are unrivaled.”
Apple shares soared as much as 12 percent to $468.95 in extended trading, surpassing their record closing price of $429.11 on Jan. 18. The stock, up 25 percent in the past 12 months, had closed at $420.41 in New York today before the report.
Higher Forecasts
BofA: Investment Bankers Face 25% Pay Cut
Bank of America Corp., the second- biggest U.S. lender by assets, told its investment bankers to expect compensation packages that average 25 percent less than last year, said two people with knowledge of the discussions.
Executives gave the guidance this month ahead of formal 2011 pay discussions scheduled for this week, said the people, who declined to be identified because the talks are private. The compensation cut includes salary and bonus, the people said. Jessica Oppenheim, a spokeswoman for the Charlotte, North Carolina-based company, said she couldn’t comment.
“Until things really come back, no one should be expecting compensation like they got in the past,” said Jeanne Branthover, a managing director at Boyden Global Executive Search Ltd. in New York. “There are going to be very strong people who will not be compensated as they expected, and they will keep their ears open to move for more money.”
Wall Street firms are curbing pay for investment bankers and traders as the companies succumb to revenue and regulatory pressures. Bank of America Chief Executive Officer Brian T. Moynihan, 52, is scouring the global banking and markets unit for expenses to cut after a 58 percent stock plunge last year.
21 comments:
I know all the issues we made about Apple yesterday, but right now for selfish reasons I would rather be working for Apple than BAC.
TommyJr is helping me with a new computer...as he said when I sent him the article..so, the IMF gets a trillion...then what! Good one TommyJr!
BTW, TommyJR has turned out to be a a great trader! It has been a lot of fun having a real person in OZ to bounce ideas off of...ironically he and my son are both in ADL ( until my son moves to Hong Kong post CX ( Cathay Pacific) systems training on jets) So, hopefully i will get to meet him when I am in ADL around March! LOL
Shaza thank you for the article on the IMF. Now what will happen?
"THE world will face a "1930s moment" of the kind that brought on the Great Depression unless money can quickly be found to support nations such as Italy and Spain, the IMFund says."
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Sure it will...right.
A few years ago, didn't US Treasury Secretary Hank Paulson also threaten impending DOOM if we didn't give a Trillion dollars to the bankers?
We got NO improvement from that money. Also, a Trillion $$$ doesn't even buy what it did just a few years ago. Ha!
I don't care how much money you give to Greece as it will just be lost money to the banks who will loan to the government who will give it away as entitlements and then we will be right back where we started. No offense to the Greeks, but in the US we flushed 1.5 trillion down the crapper by giving it to these TBTF banks. Now they are blowing smoke up are butt that the economy is getting better. Better for whom?
I think GAW said it best that soon being known as a bankster/Wall Street gambler will be looked upon with disdain. They will need to sneak out the back door in bulletproof limos and live in gated communities with lots of armed guards. Of course most of them already do.
Somehow in the US and all over the world we keep pumping out enough sociopaths to fill those jobs. My company just bought out another one so they have about 1-2 years left and they will all get the boot.
Yet, Queen, we still keep advising kids to go into 'business' in college. Heck, we still keep advising them to go to college (and taking out those LOANS)!
In my opinion, few 18-yr.-olds REALLY know what they want to do in life. I say they should WORK for a spell in the real world. Now, that can be volunteering, going into the service (military, religious, Peace Corp, whatever) and THEN go to school. More and more I see these kids as 'professional students'--no common sense, no real skills, just 'book' learning.
I well remember book learning. That's when they 'teach you how to teach' which gives you know clue when you face 30 little faces eager to throw erasers at your back! I was in 'Communications'--the most worthless degree one can get. I did do one smart thing by working for FREE to get journalism experience at a weekly paper with hubby. We covered band concerts and non-important events. BUT we learned. Eventually, after getting hired we understood HOW to cover town business meetings and what questions to ask.
I swear I CRINGE when watching morning shows and seeing the 'hard-hitting' interviews. These people wouldn't know hard-hitting if it bit them below. It's sad. Yesterday a friend said she was talking to the 'kids' (ages 24-30) and they didn't know what the Northern Lights were. Even my granddaughters are being taught for tests. 3rd grade you have to SAY 40 multiplication problems in a minute. 4th it's 120 in 2 minutes. I understand memorization but they don't teach CONCEPTS or logic. And reading? Don't get me started.
I have a book handed down from my grandmother to my mother to me. It is called THE PILGRIM'S PROGRESS TO CULTURE copyright 1938. Chapters include-The Study of Biography. Books that must be read; The Readings in History; The Advantages of Travel; The Art of Conversation; etc.
Would that our schools used THIS to teach!
chicken little - great comment in the last thread.
I do think you are being a little harsh on George Soros, he is one of the few 'elites' who has publicly recognized the dimensions of the financial crisis and spoken about it without trying to spin it for the Banksters benefit. He has been frank and factual, which is far more than most of the rest of his class are, with a few rare exceptions. And he does donate a lot to charities.
He is far more preferable to me than say Jamie Dimon, your typical Bankster who refuses to acknowledge any wrong doing whatsoever and try to maintain the fiction that somehow the present crisis had nothing to do with the actions of Banksters. Or politicians who do anything to bail out Banksters to keep the bribe money flowing, or the ultra-rich like Warren Buffet, who as owner of Wells Fargo will admit nothing any Bank has done is in any way illegal or immoral etc. And all those who try to maintain we are in 'recovery', denying the gravity of the present situation.
From some of the recent interviews, Soros talks more like a commenter here than one of the 'elite', and he has said things I have heard very few of his fellow rich say. He does recognize the 'elites' only maintain their present position by the tacit agreement of the rest of society, which is another thing very few will even address.
As to his book, I don't have a problem with him doing interviews to publicize his book, as he is not really out to make his money on a book, it would be an intellectual pursuit. When you are his age, your legacy and how history will view you become more important to you than just making more money.
When he does speak without spin about the crisis, it makes the MSM, unlike you or me, and a lot of people will listen to him. He may not be the finest human, but he is far from the worst, these days.
Yes, I work with many 20-somethings, and they are pretty much clueless about anything beyond their narrow little world. If I mention any of the topics we discuss here to them at work, they look at me with total non-comprehension.
If it can't be fitted into a text message, they aren't interested. They complain about the economy in vague terms ("hard to find a good job") but really have no clue about why this is so, or what can be done about it.
Being that age, you would think they might support OWS, but they are apathetic, with few exceptions, they have little interest in any protest or trying to make a better world.
I blame TV, our poor education system, and slack parents.
OTOH this is all good news for older workers, who can get the job done, which the younger ones aren't very good at, unless it is a very simple task.
"Fed sees low interest rates till late 2014"
LOL - why not make that 2018 or 2024 or 2028, or maybe 2100....
Low interest rates did nothing for Japan for 20 + years, and they have done nothing towards reviving the US or any other economy in the last few years.
So of course, they must be maintained, forever, as failure is always to be emulated. Face palm.
Of course Banana Ben can't admit the truth, that if he dared raise interest rates a quarter per cent the whole debt laden economy would implode.
Central Banksters are trapped in a prison of their own making now, the "usual" policy, of throwing low interest rates and bailout money at the problem, has done nothing at all - but slow the pace of deflation from fast collapse to slow implosion. And along the way they have blown so much printed money that now their ability to do any more is seriously in doubt.
If Ben tries to print massed amounts now, the Tea Party types will have him fired - so there is pretty much nothing he can do, at a time of crisis. Good work Ben.
http://marketmontage.com/2012/01/25/federal-reserve-pushes-out-likely-interest-rate-hike-from-mid-2013-to-late-2014/
"On first listen this is the only major change I heard from the Fed statement just announced. I am wondering at this point if we're going to get an interest rate hike in my lifetime.
Not that the Fed has good economic modeling based on the past half decade, but this level of accomodation means they don't buy into any of the recent economic strength.
This will of course create some massive dislocations down the road. Savers continue to be punished….debtors and speculators applauded."
Ben will take any kind of "economic activity" these days, speculators who want to see oil at $150, or whatever, keep those stock markets floating on a bubble - any fiction to maintain the illusion that he is "in control" and "we are on the road to recovery".
http://globaleconomicanalysis.blogspot.com/2012/01/my-horrific-experiences-with-sony.html
Mish has a typical experience dealing with a very large corporation - bad to worse. Almost farcial in fact, if you aren't the one with the issue. Hard to believe "customer service" is that bad, but it indeed is.
A textbook case study summary of what is wrong with the way most large companies do "business" these days.
The worst part is that these companies actually think they are "doing a good job". Not so much.
We have really "advanced" a lot in the business world - cough.
Bernanke sends gold and silver flying. MANIPULATION
http://mpettis.com/2012/01/building-debt/
"Little by little the claim repeated by so many China bulls – that you can never spend too much on infrastructure – is being eroded. It is possible, it turns out, to waste a lot of money even on infrastructure, and if debt-fueled investment is being wasted in China, as I have been arguing for over half a decade, then without doubt debt must be rising at an unsustainable pace. Last week Bloomberg had this article, which suggests that even the official numbers, which show debt soaring, may be understating the reality...
What really matters is whether all the various projects in the aggregate are generating greater returns than the debt servicing cost, adjusting of course for all hidden and explicit subsidies. If not, then debt levels must be rising faster than the economy’s ability to service the debt."
As i have said many times, China will not escape the consequences of it's uncontrolled and mis-allocated expansion. Central Planning is inefficient and incentivizes the wrong things to excess.
Read the whole post there, it is long and states Pettis thesis very clearly.
Metals OpEx Friday AFAIK, so I would not read too much into today's price action.
If it keeps up well into next week that would be Bullish longer term.
I should go on the goldbug websites and complain about the evil manipulators pushing the price up for their own nefarious reasons, how dare they. LOL.
Even in Engineering school (at least, in the mid-1990's), they taught for tests in some courses.
And then you graduate, get an Engineering job and have to solve REAL problems.
Like, how to shore up a building in danger of falling down, and fix holes in the roof which are big enough to throw a piano through - while on a limited budget.
Thanks GAW for the comment of AFAIK as I looked and was stunned. I don't remember a move like that is a while to the upside. Benton Resources was at the top of my watch list and of course I haven't bought any closing up 18.46%. I like Soros too and he is a straight shooter. He has so much money that anything he makes from the book will go to charity.
As for customer service there simply is none. It is like the commercials about the Russian guy "Peggy." They just kill me. I talk to an American usually at first and next thing you know I am transferred to India. Jamie Dimon is the worst kind of bankster. It will be a good day when he is hanging from a light pole outside of JPM.
The miners jumped today and I am hoping for a 4-5% bump. Still a long way to go, but we were right on the money that they are really cheap. I am so pessimistic that I believe that the market will take it all back tomorrow.
My gold miner MF's did move up 5% and a bit more. Still it was nothing compared to what Benton Resources did today. Good call GAW.
Mammoth you might like this and all I can say is Wow! The will be using these at NFL games soon.
http://vimeo.com/35432485
Queenbee they will be using these to spy on you and me soon...
I think they can already read the time on your watch from satellites in space. I wonder how much noise they make.
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