Sunday, July 12, 2009

Green Shoots may be turning brown

Geithner Pushes Derivatives Plan
Treasury Secretary Timothy F. Geithner urged lawmakers yesterday to pass the Obama administration's plan to regulate derivatives, the exotic financial instruments that exacerbated the financial crisis.

My Notes: A curb on derivatives in the USA will reduce the flow of hot money to emerging markets including India. This will happen because the restrictions will reduce the leverage that derivatives traders enjoy.

China Panic!
Black Swain Capital says that China relies exclusively on exports to sustain its economy and exports keep falling. the Government is trying to keep the economy afloat by flooding the economy with massive amounts of capital, suppressing all dissent, propping the stock market. But these efforts will not succeed until the American consumer starts buying again.

My Notes:Better minds are working on this question "Is China leading a recovery?". So, I will try to work out the asnwer because I really do not know. I use the HangSeng Index to track what China may do. The chart suggests that the Index is topping out with a triple top (three drives) pattern with final support around 17400. If this breakdown actually takes place, then we are looking at major declines in China also. So watch this level.

When Will The Recovery Begin? Never.
This startling title belongs to a blog post by Robert Reich , former labor secretary. He says "The so-called "green shoots" of recovery are turning brown in the scorching summer sun."

Why? " In a recession this deep, recovery doesn't depend on investors. It depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery, V or U shaped."

What does he say about the future? "My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained."

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