Category: International Commerce

Iceland,Ukraine, Hungary to get IMF’d

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Icelnad has gotten a deal for a $2 billion loan from the IMF. That’s about $6250.00 for every man, woman, and child on the island. They could not cut a deal with the Russians who, my wild-assed guess here, wanted some naval basing consideratins.

There are conditions, such as, “Iceland said it would use the funds to reintroduce a flexible interest rate regime and revise its financial regulation, particularly insolvency laws.”

What does that mean, for a start it means that Iceland’s central bank just raised rates to 18%.

As to the insolvency laws, my guess is that they were told to change the laws so that foreign investors are at the front of the line, and that those debts could not be discharged at all.

Iceland has just become 320,000 people working for foreign masters.

Ukraine is well along the way to the same fate, with the IMF demanding budget cuts in the middle of an economic downturn.

This is the sort of policies that created the Great Depression following the stock market crash.

There has also been a deal cut between the IMF and Hungary, but I don’t have details.

As I’ve said before, let’s see how free market fundamentalist the IMF goes on white people. I think that it will be far more gentle than it would be if the people were black, brown, or yellow.

Morgan Stanley Is Not Dead.

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Kind of like that old man in Monty Python and the Holy Grail.

We had Moody’s looking at downgrading Morgan Stanley’s debt, followed by their stock tanking, so their Mitsubishi UFJ was demanding more favorable terms to make a capital infusion, which led to
the Treasury department offering a promise protection to the Japanese investors, which means that group of government acronyms was just about ready to seize them.

After much hand wringing, and many attempts to make a buck off the situation by people not directly involved in the deal, they sealed the deal today.

One of the consequences of the collapse of the Japanese financial markets in the 1990s is that many of the companies are cash rich. They had to be to survive 15 years of very tight credit.

We may see a lot more of this for Japanese entities as a result.

What Do You Call This?

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The punch line is the same as for the joke that starts, “What do you call 100 lawyers at the bottom of the ocean?” (Answer at bottom of post)

The head of the Indian operations of Graziano Transmissioni, Lalit Kishore Choudhary, was beaten to death by employees he had sacked.

I have said on a number of occasions that if you want to go postal, go after upper management first, and it seems that these employees were of a like mind.

The quotes regarding this, show just how callous people are:

A spokesman for the Federation of Indian Chambers of Commerce and Industry said: “Such a heinous act is bound to sully India’s image among overseas investors.”

That is an unbelievably cold statement. Some dude got beaten to death, and the only comment is, “It’s bad for business.”

Of course, being the Times of London, they are wringing their hands over this, and note the violence at the location selected by Tata for a factory to manufacture its ultra cheap Nano, but refuse to mention the fact that the land in question was stolen from the peasant farmers who had worked it for hundreds of years.

Meanwhile India’s Labor Minister has apologized for saying that the murder of Choudhary should, “serve as a warning” to managers to treat workers compassionately.”

He was right the first time.

If you want to read a more full throated, and more eloquent endorsement of actions that might make senior executives think twice, you need to go no further than Exiled Online

Live by heartless officialese, die by heartless officialese plus a hammer upside the skull. Nothing could be fairer than that. Proceed with the mob beatifications as soon as we get their names. And somebody find that f@#$-you-Mr.-Cheney guy’s name too while you’re at it. Something about the politeness of the “Mr.” right after the “f@#$ you” really enchants us. This is a guy who understands the importance of human dignity. No doubt, with a little encouragement, he could put together a nice mob.

Damn good writing, and you should read the rest right now.

In conclusion, the philosophical foundation driving our current system is that the “entrepreneurial class” should be able to operate without any external limits on their behavior, and that they should operate without conscience or empathy, and this is a psychotic world view.

As to the riddle at the beginning of the page? The answer, of course, is “A Good Start.”

Our Third World Export Economy

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When we talk about how the falling dollar has increased exports, they rarely note what it is that the US actually exports.

We are exporting, “decidedly low-luster commodities like corn, wheat, ore and scrap metal. Commodities are 42% of export increase in the first half of 2008, and manufactured goods, only 12% (Note that this is only the percentage of the delta, percentage of the whole is 26% commodities and 40% manufactured goods).

Part of the reason for this is that much of the manufacturing capability of the US no longer exists. It has been shut down and either shipped overseas or sold as scrap, so there are very real limits to the degree that US manufacturing can take advantage of the dollar in the short term.

Economics Update

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The U.S. trade deficit unexpectedly fell in June, though I wonder how much of that will go away now that the dollar is about 6% stronger than it was that month.

I just wonder when people are going to start noticing that the Fed is printing money like a SOB with it’s aid to the financial industry.

Today’s bit of additional money comes to $25 billion with their financial toxic waste for cash exchange program, better known as the, “discount window borrowing facility”.

The dollar is down a bit today, but I see it as profit taking, as opposed to the realization that we in the US print more money than toilet paper though.

In energy, oil is down, even though BP closed its Georgia pipeline as a precaution.

Gasoline is down tow, by about $0.30 from peak.

Real estate, on the other hand, is beginning to look grim, with people finally noticing that prime mortgages are defaulting at higher rates too.

It explains why JP Morgan lost $1.5 billion on mortgage backed securities in July.

Boeing No-Bid On Tanker?

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There are a number of possibilities as to Boeing’s response to the new RFP, but the possibility that Boeing would refuse to submit a proposal to the RFP.

While I don’t think that Boeing would be serious about a no-bid, it would be an interesting ploy to either get the terms and conditions reset to something more favorable, get a split order, or to get the Congress to give them the contract through legislation.

I actually think that this strategy is only marginally less likely than Boeing submitting a shortened 777, because I don’t think that they could meet a timetable for the bids or delivery with that.

H/T The DEW Line

Oil Companies May `Panic’ on Tanker-Rate Outlook: Chart of Day

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It appears that oil tanker companies may direct their captains to slow down to save fuel, which would cause a shortage in the supply of tankers, and higher rental rates.

They are looking at a slowdown to 12 knots from 15 knots, which would save about 20 grand a day in fuel costs.

I would imagine that we would see a similar process unfolding with container ships, and this may contribute to increased costs for non-petroleum imports too.

WTO Talks are Done, for Now at Least

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Issues between the US and India and China over farm exports killed the deal.

Not surprising. As Krugman notes, trade deals are not about real free trade, but rather “enlightened mercantilism”, so he doesn’t see it as the end of the world.

I am actually far less of a free trader than he is, and I see the current deals as damaging people far more than it helps people, so I think that some changes, including more transparency in adjudication bodies and the elimination of the idea that regulation is a taking, should be a core value to proceed.

Economics Update

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Wekk, retail gasoline has finally dropped below $4.00 per gallon, the first time in almost two months, oil moved very little, depending on grade, somewhere between ±$0.15/bbl.

Meanwhile, Nouriel Roubini is arguing that foreign central banks and sovereign wealth funds are increasingly less willing to take huge losses in order to bail the USA’s financial system out, and that this will lead to a systemic collapse, with, “ensuing fall of the U.S. will make this fire sale of the best U.S. private asset a true bargain basement deal: with the dollar price of these assets now imploding and with the U.S. dollar now in free fall non-residents will be able to buy most of U.S. Inc. for the cheapest bargain.”

One final note, and some information that shocked me, is the amount which short sales decreased in financial stocks as a result of the new SEC rules banning “naked” short selling: 98%.

S3 Matching Technologies is reporting that short sales in the newly regulated stocks fell by a factor of 50, which is far more than I would have expected.

Even if some of the decline in short sales was investors who were spooked by the new rules, it’s clear that the overwhelming number of short sellers are engaging in “naked” shorting.

767 for Tanker Rebid

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It’s not surprising that Boeing will stick with the 767 for the rebid of the tanker program. They have only a few months to respond, and going with, for example, a shortened 777 would be a very difficult thing.

The problem is that the A330 is a better plain, and the A330 MRTT, which is the airframe that Airbus is using, is flying now, even while Boeing is struggling to deliver its 767 tanker to Italy, which is not the same airframe as is proposed for the US tanker.

Airbus is clearly the better choice, even the GAO review said that while faulting the selection process, but politics being what it is, I would give Airbus a no better than 50/50 chance of winning this if it ends up a soul source bid.

Economics Update

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Well, it appears that it’s been an unsettled day, likely because of concerns about the GSE(s), which will get its own post, and as a result, oil hit a new intra day high, $47.50/bbl, before settling to $143.84/bbl.

Note that in addition to uncertainty in Iran and Nigeria, there is now a possibility of a strike in Brazil.

Gasoline prices fell though, finishing below $4.10/gal for the first time in a week.

In currency, uncertainty has driven the dollar down, but there is a bit of a bright side to all of this, because the falling dollar is pushing the trade deficit down.

The problem is that once the dollar settles down to a more sustainable level, there will be a high inflation interregnum where imports prices will go up, but there will be no domestic businesses to pick up the slack.

Nothing on US real estate today, but in the UK, their housing crash is the worst since the Great Depression.

Additionally, we have a monetary picture that appears to point toward a vicious deflationary recession spiral.

Chart pr0n:

Crap. John McCain is Telling the Truth

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OK, now we have Obama “Puzzled” by blip flop charges, because he has completely reversed himself on FISA, and now he’s saying that in order for “mental distress” to be used to justify a late term abortion, it must be a formal psychiatric disorder out of the DSM IV.*

So, he’s selling the constitution out privacy, he’s reversed himself on free trade agreements, and now he is suggesting a heightened standard for late term abortion (while using the right wing’s language of “Partial Birth Abortion”).

John McCain can call him a flip flopper on the issues because Barack Obama is a flip flopper on the issues.

His only saving grace is the John Sidney McCain is a bigger flip flopper.

I guess that we’ll get the president we deserve.

*The 4th and most recent release of the Diagnostic and Statistical Manual of Mental Disorders.