the visible hand

it is the theory which decides what can be observed – einstein

Archive for March, 2009

Banks walking away

Posted by ecoshift on March 30, 2009

In Homeowners’ Latest Woe, Banks Are Skipping Foreclosures – NYTimes.com
By SUSAN SAULNY
Published: March 29, 2009

SOUTH BEND, Ind. — Mercy James thought she had lost her rental property here to foreclosure. A date for a sheriff’s sale had been set, and notices about the foreclosure process were piling up in her mailbox.

Ms. James had the tenants move out, and soon her white house at the corner of Thomas and Maple Streets fell into the hands of looters and vandals, and then, into disrepair. Dejected and broke, Ms. James said she salvaged but a lesson from her loss.

So imagine her surprise when the City of South Bend contacted her recently, demanding that she resume maintenance on the property. The sheriff’s sale had been canceled at the last minute, leaving the property title — and a world of trouble — in her name.

“I thought, ‘What kind of game is this?’ ” Ms. James, 41, said while picking at trash at the house, now so worthless the city plans to demolish it — another bill for which she will be liable.

City officials and housing advocates here and in cities as varied as Buffalo, Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate.

The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan. The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure.

In Ms. James’s case, the company that was most recently servicing her loan is now defunct. Its parent company filed for bankruptcy and dissolved. And the original bank that sold her the loan said it could not find a record of it.

“It is what some of us think is the next wave of the crisis,” said Kermit Lind, a clinical professor at the Cleveland-Marshall College of Law and an expert on foreclosure law.

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democracy now: korten’s agenda for a new economy

Posted by ecoshift on March 29, 2009

Message to David Korten:
Your basic thesis makes sense. I agree with many points in your deconstruction of the current system.

And many, many people are struggling to implement localized sustainable business enterprises: farmers markets etc. Yet competing with purveyors of “phantom wealth” remains difficult if not impossible.

The neoliberal washington consensus has delivered an acknowledged and spectacular failure of unregulated markets.

Someone needs to articulate recommendations for specific policy frameworks that enable sustainable business models to compete effectively in well regulated markets that more closely reflect Adam Smith’s original vision.

If you want to be taken seriously, this is the moment: make specific policy recommendations that can be implemented today — in the current political and economic context.

Please. More detail.

~e


Democracy Now! | David Korten:
“Agenda for a New Economy: From Phantom Wealth to Real Wealth”

As President Barack Obama reveals more details of his $825 billion economic stimulus plan, we turn to David Korten of YES! Magazine. In his new book, Korten argues that the nation faces a monumental economic challenge that goes far beyond anything being discussed in Congress. He writes that now is an opportune moment to move forward an agenda to replace the failed money-serving institutions of our present economy with the institutions of a new economy dedicated to serving life.

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Moyers interviews Greider

Posted by ecoshift on March 29, 2009

What do we do now…
Bill Moyers Journal. Watch & Listen | PBS
March 27, 2009

For years best-selling author William Greider sounded the alarm about Washington’s unholy alliance with Wall Street and the failure of the Federal Reserve and other regulators to take preventive measures to avoid disaster. Now, he offers some suggestions to the question everyone is asking: “What do we do now?”

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China calls for new reserve currency

Posted by ecoshift on March 24, 2009

FT.com / Asia-Pacific –
China calls for new reserve currency
By Jamil Anderlini in Beijing
Published: March 23 2009 12:16 | Last updated: March 24 2009 00:06

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.

Although Mr Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.

“The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,” Mr Zhou wrote.

China has little choice but to hold the bulk of its $2,000bn of foreign exchange reserves in US dollars, and this is unlikely to change in the near future.

To replace the current system, Mr Zhou suggested expanding the role of special drawing rights, which were introduced by the IMF in 1969 to support the Bretton Woods fixed exchange rate regime but became less relevant once that collapsed in the 1970s.

Falling greenback fuels BRIC dollar reserve rethink
| Special Coverage | Reuters

Chinese central bank chief Zhou Xiaochuan said the SDRs, created by the IMF as international reserve assets in 1965, could be used as a super-sovereign reserve currency, eventually displacing the dollar.

His comments come a week after Russia said it would put forward a proposal for the creation of a new reserve currency issued by international financial institutions at the G20 meeting in April.

Russia said it had the broad support of its fellow BRIC countries — Brazil, India and China — as well as South Korea and South Africa for its proposal.

The push underscores growing concerns among emerging-market leaders about the long-term value of the dollar.

The dollar saw its biggest weekly slide since 1985 .DXY last week after the Federal Reserve’s decision to buy long-term government debt raised the specter of oversupply in dollars.

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China inoculates itself against dollar collapse

Posted by ecoshift on March 17, 2009

This is worth a read. While there was much talk of decoupling at the beginning of the global crisis that thought, as CR, Setser and Roubini consistently pointed out, was so much wishful thinking. But, articles like the one below and the earlier post from the NYT indicate that decoupling may now begin in earnest. With little real evidence of a recovery in the real US economy, and the benefits of remaining tightly linked to US currency and US markets in decline, now is the time that holders of current account surpluses can take specific steps to reduce dependence on US markets and investments in US dollar denominated assets.

The dollar is starting to decline from recent highs. Articles such as the one below indicate the decline may be just beginning.


Asia Times Online :: China News, China Business News, Taiwan and Hong Kong News and Business.
China inoculates itself against dollar collapse
By W Joseph Stroupe

There is mounting evidence that China’s central bank is undertaking the process of divesting itself of longer-dated US Treasuries in favor of shorter-dated ones.

There is also mounting evidence that China’s increasingly energetic new campaign of capitalizing on the global crisis by making resource buys across the globe may be (1) helping its central bank to decrease exposure to the dollar, while (2) simultaneously positioning China to make much greater profit on its investment of its reserves into hard assets whose prices are now greatly beaten down, while (3) also affording it greatly increased control of strategic resources and the geopolitical clout that goes with it. This is turning out to be a win-win-win situation for China as it capitalizes upon the important opportunities afforded it by the present global crisis.

The exact size and the precise composition of China’s huge forex reserves, the exact degree of China’s exposure to the dollar and its viable options, if any, in decreasing that exposure are matters of intense interest, because China’s policies in this regard could have gargantuan implications for the US and the global financial systems and for the dollar.

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Tarp nation

Posted by ecoshift on March 17, 2009

Tarp Nation — High Country News

“There are many names for this fledgling city, where Old Glory flies from improvised flagpoles and trash heaps rise and fall with the wavering population. To some it’s Little Tijuana, but most people call it Taco Flat.

Just to the south, under a freeway overpass, there’s another camp of roughly equal size called New Jack City where most of the residents are black. Even more dwellings are scattered throughout the neighborhood nearby, appended to the walls of industrial buildings and rising up the flanks of freeway spurs.

Fresno, which the Brookings Institution ranked in 2005 as the American city with the greatest concentration of poverty, is far from the only place where people are resorting to life in makeshift abodes. Similar encampments are proliferating throughout the West, everywhere from the industrial hub of Ontario, Calif., to the struggling casino district of Reno, Nev., and the upscale suburbs of Washington state.

In any other country, these threadbare villages would be called slums, but in the U.S., the preferred term is tent city, a label that implies that they are just a temporary phenomenon. Many journalists, eager to prove that the country is entering the next Great Depression, blame the emergence of these shantytowns on the economic downturn, calling them products of foreclosures and layoffs.

While there’s some truth to this notion, the fact is that these roving, ramshackle neighborhoods were part of the American cityscape long before the stock market nosedived, and they are unlikely to disappear when prosperity returns. The recent decades of real estate speculation and tough-love social policies have cut thousands of people out of the mainstream markets for work and housing, and the existing network of homeless shelters is overburdened and outdated.

People such as the Caros are part of a vanguard that has been in crisis for years, building squatter settlements as a do-or-die alternative to the places that rejected them. This parallel nation, with a population now numbering in the thousands in Fresno alone, was born during the boom times, and it is bound to flourish as the economy falters.

“The chickens are coming home to roost,” said Larry Haynes, the executive director of Mercy House, a homeless outreach organization based in Southern California. “What this speaks of is an absolute crisis of affordability and accessibility.”

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China’s Stimulus Spending

Posted by ecoshift on March 17, 2009

Decoupling, the idea that the global economy could remain strong despite a US recession, has proven false as economies around the globe melted down in unison. Yet in the wake of the meltdown a realignment of economic power may emerge. If China is successful in building its own domestic demand, can US domestic manufacturing and service industries compete in global markets?

Time will tell…


In China’s Stimulus Spending, Seeds of a Surge – NYTimes.com

By KEITH BRADSHER
Published: March 16, 2009

GUANGZHOU, China — The global economic downturn, and efforts to reverse it, will probably make China an even stronger economic competitor than it was before the crisis.

China, the world’s third-largest economy behind the United States and Japan, had already become more assertive; now it is exploiting its unusual position as a country with piles of cash and a strong banking system, at a time when many countries have neither, to acquire natural resources and make new friends.

Last week, China’s prime minister, Wen Jiabao, even reminded Washington that as one of the United States’ biggest creditors, China expects Washington to safeguard its investment.

China’s leaders are turning economic crisis to competitive advantage, said economic analysts.

The country is using its nearly $600 billion economic stimulus package to make its companies better able to compete in markets at home and abroad, to retrain migrant workers on an immense scale and to rapidly expand subsidies for research and development. Construction has already begun on new highways and rail lines that are likely to permanently reduce transportation costs.

And while American leaders struggle to revive lending — in the latest effort with a $15 billion program to help small businesses — Chinese banks lent more in the last three months than in the preceding 12 months.

“The recent tweaks to the stimulus package indicate a sharper focus on the long-term competitiveness of Chinese industry,” said Eswar S. Prasad, a former China division chief at the International Monetary Fund. “Higher expenditures on education and research and development, along with amounts already committed to infrastructure investment, will boost the economy’s productivity.”

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China seeks export carbon relief

Posted by ecoshift on March 16, 2009

BBC NEWS | Science & Environment |
China seeks export carbon relief

China has proposed that importers of Chinese-made goods should be responsible for the carbon dioxide emitted during their manufacture.

China’s top climate change negotiator, Li Gao, said his country should not pay for cutting emissions caused by the high demands of other countries…

Fair deal?

China’s latest suggestion would see its own huge export sector be exempted from any new treaty.

Beijing argues that rich nations buying Chinese goods bear responsibility for the estimated 15-25% of China’s carbon emissions that are created by its production of exports.

“It is a very important item to make a fair agreement,” Mr Li said in Washington.

He argued that it was unfair to put the highest burden on China.

“We are at the low end of the production line for the global economy,” he said.

“We produce products and these products are consumed by other countries, especially the developed countries. This share of emissions should be taken by the consumers but not the producers,” he said.

Mr Li also criticised proposals by the US to place carbon tariffs on goods imported from countries that do not limit those gases blamed for a rises in global temperatures.

“If developed countries set a barrier in the name of climate change for trade, I think it is a disaster,” Mr Li said.

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