Financial Crisis

[churchill]

Fed Seeks End to Wall Street Lock Over OTC Derivatives Market

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By Matthew Leising

May 6 (Bloomberg) -- The Federal Reserve is planning for the first time to break Wall Street’s hammerlock on so-called over-the-counter derivatives and bring more regulation to the $684 trillion market.

The central bank will require more transparency after the unregulated market contributed to the demise of Bear Stearns Cos. and Lehman Brothers Holdings Inc. and forced the government to use $182.5 billion to bail out American International Group Inc. The world’s biggest financial companies reported more than $1.3 trillion in losses and writedowns since the start of 2007, in part from derivatives, according to data compiled by Bloomberg.

The biggest sign of the Fed’s intentions came when Theo Lubke, the Federal Reserve Bank of New York official responsible for oversight of the market, said the biggest banks shouldn’t be allowed to dominate trading of the financial contracts, which let investors hedge against losses or speculate on everything from changes in interest rates to corporate defaults.

“It is simply unacceptable in today’s environment that the design and structure of the OTC derivatives market can be controlled by a handful of large dealers,” Lubke, a senior vice president at the New York Fed, said at an International Swaps and Derivatives Association conference in Beijing on April 22.

Lubke, 42, has pushed banks to speed up confirmation of trades and use clearinghouses for credit-default swaps to reduce the risk of failed transactions. He was appointed to police OTC derivatives in 2007 by Timothy Geithner, now Treasury Secretary, when he was president of the New York Fed.

Wake-Up Call

The comments were “a wake-up type of statement,” said Bruce Weber, a professor of finance at the London Business School. Banks have resisted changes to the OTC market because they want to limit competition, he said.

The Fed regulates bank holding companies, giving it oversight for some of the largest over-the-counter derivatives dealers. Lubke’s remarks at the derivatives industry’s annual meeting were made as a representative of the New York Fed. Lubke declined to elaborate on his comments.

“There is opacity in the OTC market that doesn’t have commensurate public policy benefits,” Lubke said at the conference. “This is not something that can continue.”

Robert Pickel, chief executive officer of ISDA, which represents dealers, hedge funds and other investors in the privately negotiated derivatives industry, said all types of financial companies deserve representation in the over-the- counter market.

Lehman, AIG

“In order to ensure participants have confidence in the operation of these markets, it’s important that they have a say in market developments,” Pickel said in an e-mailed statement.

Derivatives are contracts whose values are tied to assets including stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

The U.S. government and the Fed have spent, lent or committed $12.8 trillion to stem the longest recession since the 1930s, which was triggered when credit markets froze in August 2007 after banks found they couldn’t determine the value of derivatives tied to subprime mortgages.

Over-the-counter derivatives, such as the $28 trillion credit-default swaps market, complicated U.S. and European efforts to unravel trades between banks. Bear Stearns was acquired by JPMorgan Chase & Co. last year, Lehman Brothers Holdings Inc. collapsed in the world’s biggest bankruptcy and AIG is selling assets after losses from derivatives. All are based in New York.

‘Transparent Manner’

Credit-default swaps are contracts that pay the buyer the face value of a bond or a loan in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. They are used to hedge against risks and to speculate on a company’s ability to repay debt.

“If this market is going to see its maturation into something that works for the benefit of the financial markets and participants as a whole, the arrangements of decision-making over key design elements need to be done in a more transparent manner,” Lubke told ISDA attendees. “That includes a broader range of market participants being involved in that process.”

The New York Fed got dealers to share power with investment firms by encouraging ISDA to appoint five buy-side firms including Pacific Investment Management Co. and Elliott Management Corp. to its committee that makes binding decisions on how credit-default swap contracts are settled. Previously only banks made those decisions.

Pimco is based in Newport Beach, California. ISDA and Elliott Management are based in New York.

JPMorgan Profits

New York-based JPMorgan is the largest user of over-the- counter derivatives, with $87.4 trillion in notional value last year, more than the next two largest, Bank of America Corp. and Citigroup Inc., combined, according to the Office for the Comptroller of the Currency. JPMorgan made $5 billion in profit from fixed-income over-the-counter trades last year, according to people familiar with the matter, who declined to be identified because the results aren’t public.

JPMorgan spokesman Brian Marchiony declined to discuss Lubke’s comments.

Capitalized by its members, a clearinghouse acts as the buyer to every seller and seller to every buyer, reducing the default risk between parties to a trade. It also allows regulators to assess market positions and prices.

The New York Fed pushed last month for the world’s largest banks to offer hedge funds and other clients access to clearinghouses that back trades in credit-default swaps.

Dudley, Geithner

Intercontinental Exchange Inc. was first to back trades with its credit-default swap clearinghouse, ahead of rivals CME Group Inc. and NYSE Euronext. ICE Trust has guaranteed $257 billion of the contracts since March.

The New York Fed is concerned that credit-default swap clearinghouses lack a common feature of their counterparts for futures, allowing customers to segregate their trading from bank accounts.

“Banks and buy-side firms still need to make considerable improvements to both risk management and the design of the OTC derivatives markets,” New York Fed President William Dudley said April 1 in a statement.

Geithner said in March that the U.S. would for the first time regulate the market, and that clearinghouses for standardized products such as interest-rate swaps were needed to improve transparency.

The trading data will be made public so prices are more visible and the Fed will “encourage greater use of exchange- traded instruments,” Geithner said March 26 in Congressional testimony.

To contact the reporter on this story: Matthew Leising in New York at [email protected]

http://www.bloomberg.com/apps/news?pid=206...&refer=home

[teletiger]

Am I missing something?

"Geithner said in March that the U.S. would for the first time regulate the market,"

"The central bank (a private company) will require more transparency"

'And:

"The U.S. government and the Fed have spent, lent or committed $12.8 trillion "

The US governments funds in this commitment were borrowed from the fed? 'At interest?

'And exactly who is running the US?

Regards.

[churchill]

The US Black Hole - How much can they write off ?

Chrysler won't repay bailout money

An administration official confirms that a $4 billion bridge loan and $3.2 billion in bankruptcy financing won't be paid back by Chrysler following bankruptcy.

http://money.cnn.com/2009/05/05/news/compa...loans/index.htm

[flying]

please refrain from insulting me Flying! there's nothing wrong with the girl of course but do you really think i'd build a pool with these kind of cheap tiles inside and around?

this is what my pool looks like:

Oops ok my bad

You have to understand I was distracted & did not even notice the tiles in the 1st pic.

I do see what you mean now. I like that pool of yours being indoors & could easily deal with the 40C temps with that

[flying]

And to be told "sorry you cannot have your money because it will mean that other people will loose" when YOUR OWN money is disappearing down the toilet and at the age of 69 there is no way to recover the losses by working is surely a breech of human rights?

I think it would be very telling if they had a vote & asked......How many of you investors would like your money back now even though it has shrunk???

If more than 50% said yes......You want to bet that they would still not give it back? Do they have it?

If they allow this then I can see the future quite clearly....

Future Insurance companies after a hurricane......

Well..........We would like to pay your claim but we have investors & none want to lose money. You live in your stormed out home till times are better. We think times will be better soon.

Future Banks....

Well.......We know you deposited here all your adult life but.....We cant let you pull any of your dollars now or our investors will take a hit.......We know we have investors because we will not let them have their investments back since 2008

[flying]

Icing on the Cake

Putnam’s CEO to Propose Expansion of 401(k) Retirement Plans

Reynolds also suggested ways to encourage more workers to hand over all or part of their savings at retirement in exchange for a fixed, guaranteed income stream.

http://www.bloomberg.com/apps/news?pid=206...&refer=news

Edited May 6, 2009 by flying

[Naam]

please refrain from insulting me Flying! there's nothing wrong with the girl of course but do you really think i'd build a pool with these kind of cheap tiles inside and around?

this is what my pool looks like:

Oops ok my bad

You have to understand I was distracted & did not even notice the tiles in the 1st pic.

I do see what you mean now. I like that pool of yours being indoors & could easily deal with the 40C temps with that

a valid defense. you are excused

[flying]

I saw it through a link & have no idea how accurate it is.

If it is in fact accurate it is pretty interesting to see.

http://finviz.com/insidertrading.ashx?or=-...ransactionvalue

Bezos from Amazon & Gates from MSFT had some nice sales eh?

Wonder if this is business as usual for these types or are they leaving the building?

[jdrake72]

Althogh financial data has already bottomed , the translated economy will still suffer for many months ahead.

Regarding Thailand, the worst has yet to come and it will be much worse than in most other countries.

Public debt is rising at amazing levels and the insane property prices start to desinflate of course coz nobody will buy a fuc...ing villa for 8 million USD (300K THB per square meter) in the middle of teh smog and traffic of Sukhumvit.

With interest rate going next to 1% and public debt rising , a terrible political situation (we are in a lull towards the next mess) and export nosediving (starting from middle May will drop further coz orders have been concentrated in the first part), we can except the long awaited devaluation of the THB coming behind the horizon.

I was right, THB is rising like crazy today against USD,EUR and YAP, but it is following the Singaporean dollar (1.47 for 1 USD, going up )..

THB up 3.5% against the USD after its lowest peak of few weeks ago,after dropping 3% and rising 3% since December,what I mean to say THB/USD exchange rate is NOT STABLE AT ALL, going up and down 2-3-4% in few weeks, but look at the THB vs. Singaporean Dollar exchange rate.... yes, we have solved the mystery,...

But since Thailand is not Singapore , their economies are so different , this peg cannot last forever, sooner or later the cirunstances will oblige the Central Bank to release the exchange rate and this scam of this artificial value of the THB completely out of the reality will end...like the stupid and nonsense peg of 25THB/1USD ended in 1997 miserably.

Edited May 7, 2009 by jdrake72

[churchill]

UN 'stunned' by scale of bail-out

The UN's head of environment has been left "stunned" by the billions of dollars pumped into ailing companies following the global financial crisis.

Achim Steiner told the BBC One Planet programme that he had fought for years to secure much smaller sums to tackle poverty and climate change.

"We waited perhaps a decade to get $5bn ($3.3bn) to accelerate development of renewable energy," he said.

We now see $20bn (£13.3bn) paid [to] a car company simply to keep it alive."

He said he was surprised that such huge amounts had "suddenly been found" to tackle the crisis.

http://news.bbc.co.uk/2/hi/science/nature/8036559.stm

[jcon]

I haven't replied in this thread for some time...

I was just wondering:

Is it the 3rd of the 3rd yet? Harmonica? Did you just pop in with your infinite wisdom saying you were right on all accounts and then disappear just to leave us mere mortals directionless? What a joke.

Somebody wake me up when the 3rd of 3rd of 3rd comes. Or the 4th of the 2nd. Then I'd be really interested. Not.

Until then, Summer Break!!! I'm gonna venture to guess the news will be the same old same old for a few months, so get off the chair, take your eyes away from the monitor, un-bookmark "youtube financial conspiracy theory" (yes Plarex, that was just for you , and have some summer fun...

[Chaimai]

Good to see the FOOTSIE over 4,500.

The Pimps & Whores are on their way back.

[AlexLah]

J Con (man), I am enjoying myself very much here in not Thailand.

Sorry cannot say where I am as "they" try to trace me......

What the problem?

The crisis is over didn't you noticed?

S&P on the way to 1000 and the DOW closing in on the 9000, you see?

Stress test results are all fine just need another 100 Billion USD and just only roughly 500.000 jobs were lost last month in the US.

Inflation is nowhere to be seen and deflation mainly in the house prices, nothing wrong with that.

Now, go out and start investing in the stockmarket again, it really looks very good right now, just beware the vampires that are lurking in the dark....

;-)

[midas]

The crisis is over didn't you noticed?

S&P on the way to 1000 and the DOW closing in on the 9000, you see?

Stress test results are all fine just need another 100 Billion USD and just only roughly 500.000 jobs were lost last month in the US.

Inflation is nowhere to be seen and deflation mainly in the house prices, nothing wrong with that.

Now, go out and start investing in the stockmarket again, it really looks very good right now, just beware the vampires that are lurking in the dark....

Tut tut Alex - if you carry on giving that kind of encouragement you'll be guilty of perpetrating " Pump and Dump " tactics

[Abrak]

Althogh financial data has already bottomed , the translated economy will still suffer for many months ahead.

Regarding Thailand, the worst has yet to come and it will be much worse than in most other countries.

Public debt is rising at amazing levels and the insane property prices start to desinflate of course coz nobody will buy a fuc...ing villa for 8 million USD (300K THB per square meter) in the middle of teh smog and traffic of Sukhumvit.

With interest rate going next to 1% and public debt rising , a terrible political situation (we are in a lull towards the next mess) and export nosediving (starting from middle May will drop further coz orders have been concentrated in the first part), we can except the long awaited devaluation of the THB coming behind the horizon.

I was right, THB is rising like crazy today against USD,EUR and YAP, but it is following the Singaporean dollar (1.47 for 1 USD, going up )..

THB up 3.5% against the USD after its lowest peak of few weeks ago,after dropping 3% and rising 3% since December,what I mean to say THB/USD exchange rate is NOT STABLE AT ALL, going up and down 2-3-4% in few weeks, but look at the THB vs. Singaporean Dollar exchange rate.... yes, we have solved the mystery,...

But since Thailand is not Singapore , their economies are so different , this peg cannot last forever, sooner or later the cirunstances will oblige the Central Bank to release the exchange rate and this scam of this artificial value of the THB completely out of the reality will end...like the stupid and nonsense peg of 25THB/1USD ended in 1997 miserably.

Can someone please explain this to me?

Has the BOT been artificially propping up the baht through the futures market or am I missing some kind of economic argument? I dont see any particular argument to suggest the Thai baht is particularly overvalued against the US$ but I guess the country's huge holdings of UST might suggest otherwise.

Public debt is 40% of GDP much lower than the US

There is a current account surplus unlike the US

Fiscal deficit is c.5% compared to 12% of GDP in the US

No sign of monetary debasement in M1 and M3 figures unlike US QE policy

In fact most macro numbers would indicate towards baht appreciation rather than depreciation although it is clearly in the country's best interests to have an undervalued currency.

I dont see the comparison with 1997 when interest rates were high, C/A deficit was around 8% of GDP, companies were overleveraged (350/100 debt equity), debt was mostly dollar denominated and banks L/D ratio was 125% compared to 85% now.

[bartender100]

Just did very nicely on RBS, in at 23p out at 44p, my next two Thailand trips paid for, thank you Sir Fred.

[Abrak]

Just did very nicely on RBS, in at 23p out at 44p, my next two Thailand trips paid for, thank you Sir Fred.

I am totally mystified. What is the point of this post. If Sir Fred is a member here couldnt you have simply sent him a PM?

[Naam]

The crisis is over didn't you noticed? S&P on the way to 1000 and the DOW closing in on the 9000, you see? Stress test results are all fine just need another 100 Billion USD and just only roughly 500.000 jobs were lost last month in the US. Inflation is nowhere to be seen and deflation mainly in the house prices, nothing wrong with that. Now, go out and start investing in the stockmarket again, it really looks very good right now, just beware the vampires that are lurking in the dark....

Tut tut Alex - if you carry on giving that kind of encouragement you'll be guilty of perpetrating " Pump and Dump " tactics

the careless investors who are not aware of the vampires are envying us. they bought financials beginning of march which only doubled, tripled and quadrupled in value whereas we doom-gloom-swine flu and riot fearing-investors are sitting on huge profits because we hoarded the one and only thing which has intrinsic value. and that is G O L D!

those with fiat money in their pockets are scared shitless when walking through the murderous rioting crowds although nobody is interested to rob their worthless paper. but we walk tall and fearless to the next bakery, throw a KrügerRand at the owner and tell him "pack your things. this is a friendly take-over as we throw in a silver dollar as a bonus!" then we move on to the next sheep farm, give the farmer a fistful of Maple Leaves and... bingo! we have a few thousand new girlfriends, some of them even virgins (the shepherd we fire)

[Abrak]

The crisis is over didn't you noticed? S&P on the way to 1000 and the DOW closing in on the 9000, you see? Stress test results are all fine just need another 100 Billion USD and just only roughly 500.000 jobs were lost last month in the US. Inflation is nowhere to be seen and deflation mainly in the house prices, nothing wrong with that. Now, go out and start investing in the stockmarket again, it really looks very good right now, just beware the vampires that are lurking in the dark....

Tut tut Alex - if you carry on giving that kind of encouragement you'll be guilty of perpetrating " Pump and Dump " tactics

the careless investors who are not aware of the vampires are envying us. they bought financials beginning of march which only doubled, tripled and quadrupled in value whereas we doom-gloom-swine flu and riot fearing-investors are sitting on huge profits because we hoarded the one and only thing which has intrinsic value. and that is G O L D!

those with fiat money in their pockets are scared shitless when walking through the murderous rioting crowds although nobody is interested to rob their worthless paper. but we walk tall and fearless to the next bakery, throw a KrügerRand at the owner and tell him "pack your things. this is a friendly take-over as we throw in a silver dollar as a bonus!" then we move on to the next sheep farm, give the farmer a fistful of Maple Leaves and... bingo! we have a few thousand new girlfriends, some of them even virgins (the shepherd we fire)

Nobody is sitting on gold because it has 'intrinsic value' - it doesnt. (Ok I guess it does if you use it to score a few chicks.) The reason we are sitting on gold is because it is generally regarded as a store of value and it definitely cant be printed. Its a sort of best of the worst options when it comes to cash holdings. If the Chairman of the Fed says 'The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost' (See Fed reserve website 2002 speech) how can you really justify holding dollars. If the dollar goes up you have to conclude that most investors are stupid or the Fed Chairman is a fraud and if it goes down and you still hold it you will simply feel an idiot.

[Naam]

Nobody is sitting on gold because it has 'intrinsic value' - it doesnt. (Ok I guess it does if you use it to score a few chicks.) The reason we are sitting on gold is because it is generally regarded as a store of value and it definitely cant be printed. Its a sort of best of the worst options when it comes to cash holdings. If the Chairman of the Fed says 'The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost' (See Fed reserve website 2002 speech) how can you really justify holding dollars. If the dollar goes up you have to conclude that most investors are stupid or the Fed Chairman is a fraud and if it goes down and you still hold it you will simply feel an idiot.

no disagreement Abrak. it goes without saying that investors who changed last summer EUR, Sterling, Oz- and Kiwi-Dollars into US-Dollars are all idiots because they made 15-20% profit whereas the buyers of gold have only incurred a loss of 10-15% (loss of interest on capital included). the idiots will still chase fiat money and think they are successful because some of their investments yielded more than a hundred percent within a short period.

what the idiots forget is that their wives need gold, not fiat money, when buying steaks, vegetables, drinks, toothpaste and washing powder because neither the Mom&Pop stores nor the big supermarkets accept fiat money as payment. it's common knowledge that the cashiers always demand payment in gold.

facit: the idiots will never learn although we gold-lovers (those of us who did not starve to death) are trying to educate them since decades

[flying]

the buyers of gold have only incurred a loss of 10-15%

(loss of interest on capital included)

PM's are up 16% on Gold & 20%+ on Silver since Oct 08.

(These figures include premiums paid above spot $50/oz for gold & $2/oz for Silver)

In late Oct 08 Gold was running $736. & Silver $9.45 per ounces so adjusted costs

786/oz gold & 11.45/oz silver

Today Gold is at 913 & silver just under 14 bucks...Not so bad?

A parking spot for cash at the time offered 4-5% interest as times were not too bad yet. PM's are just a percentage of most folks liquidity so most have both cash & PM's and yes many even have stocks still..... I do wish in many ways I had stayed with learning the markets....but alas I lost all faith back when the tech bubble burst in 2000. I burnt my fingers many times trying to work in that market.

For what its worth I do think that both metals have a lot more upside to come in June & we will see if & when that happens.

Looks like a smart move also would have been Platinum when it was equal in price to Gold not long ago

Last but not least I must admit PM's appeal to another part of folks too.

That being how it has its own little world going on. Once set up with most dealers folks buy & sell easily.

So it is quite liquid. With little or no implications elsewhere.

Probably one of the reasons many official types speak ill of it

Edited May 8, 2009 by flying

[flying]

Ok this is getting pretty blatant now isn't it?

http://jessescrossroadscafe.blogspot.com/2...hairman-of.html

Stephen Friedman Resigns as Chairman of the New York Fed’s Board of Directors

Oh by the way...............He was buying shares of a bank he was suppose to be regulating !!

You cannot make this stuff up.

Edited May 8, 2009 by flying

[Naam]

the buyers of gold have only incurred a loss of 10-15%

(loss of interest on capital included)

PM's are up 16% on Gold & 20%+ on Silver since Oct 08.

please use reading glasses Flying as we are not talking october 2008 but

quote: "it goes without saying that investors who changed last summer EUR, Sterling, Oz- and Kiwi-Dollars into US-Dollars are all idiots because they made 15-20% profit whereas the buyers of gold have only incurred a loss of 10-15% (loss of interest on capital included)."

however if you insist to use different periods i suggest we compare january 1980 with october 2008 and do a yield calculation. the choice is yours

[flying]

please use reading glasses Flying as we are not talking october 2008 but

last summer

however if you insist to use different periods i suggest we compare january 1980 with october 2008 and do a yield calculation. the choice is yours

Ok....... I see

But if I were using random dates like 1980 I would opt for 2000 instead

Actually the only reason I used Oct08 is because as you prob know....that is when I jumped in. I am also the first to admit it was sheer coincidence/luck & not any techno timing/reading...crystal gazing etc etc etc,,,,,,,As I hold none of those talents

Edited May 8, 2009 by flying

[midas]

1. i have no reason to doubt any published number of weapons and/or ammunition procured Flying. what i belittle are any naive insinuations that the owners these weapons bought them with the intention to overthrow the federal government or shoot the "bad Jews" who own the FED which cheats tthe living shit not only out of american citizens but out of citizens globally. the same applies to the wet dreams that states which are contemplating to secede have a better chance than a snowball in héll. some of them tried that in the 1860s and we all know the result.

You are so wrong Naam ! The process HAS ALREADY STARTED albeit in a small way but ..............!

If you dont understand what this means for the various States ( including Texas) in addition

to Montana that are introducing the same legislation - then you need to do some research.........

Watch this space.......

Montana's staunchly pro-Second Amendment Governor, Democrat Brian Schweitzer, has signed Montana HB 246, the Montana Firearms Freedom Act. The bill declares that a firearm which is manufactured in Montana, and never leaves the State of Montana, "is not subject to federal law or federal regulation, including registration, under the authority of congress to regulate interstate commerce. It is declared by the legislature that those items have not traveled in interstate commerce."

Further, "It is declared by the legislature that basic materials, such as unmachined steel and unshaped wood, are not firearms, firearms accessories, or ammunition and are not subject to congressional authority to regulate firearms, firearms accessories, and ammunition under interstate commerce as if they were actually firearms, firearms accessories, or ammunition. The authority of congress to regulate interstate commerce in basic materials does not include authority to regulate firearms, firearms accessories, and ammunition made in Montana from those materials. Firearms accessories that are imported into Montana from another state and that are subject to federal regulation as being in interstate commerce do not subject a firearm to federal regulation under interstate commerce because they are attached to or used in conjunction with a firearm in Montana."

[Naam]

Ok....... I see

But if I were using random dates like 1980 I would opt for 2000 instead

Actually the only reason I used Oct08 is because as you prob know....that is when I jumped in. I am also the first to admit it was sheer coincidence/luck & not any techno timing/reading...crystal gazing etc etc etc,,,,,,,As I hold none of those talents

i am well aware when you jumped in. but i answered Abrak and the focus was on Dollar and the potential idiots who hold Dollars.

quoting Abrak: "how can you really justify holding dollars. If the dollar goes up you have to conclude that most investors are stupid or the Fed Chairman is a fraud and if it goes down and you still hold it you will simply feel an idiot."

[12DrinkMore]

Althogh financial data has already bottomed , the translated economy will still suffer for many months ahead.

Regarding Thailand, the worst has yet to come and it will be much worse than in most other countries.

Public debt is rising at amazing levels and the insane property prices start to desinflate of course coz nobody will buy a fuc...ing villa for 8 million USD (300K THB per square meter) in the middle of teh smog and traffic of Sukhumvit.

With interest rate going next to 1% and public debt rising , a terrible political situation (we are in a lull towards the next mess) and export nosediving (starting from middle May will drop further coz orders have been concentrated in the first part), we can except the long awaited devaluation of the THB coming behind the horizon.

I was right, THB is rising like crazy today against USD,EUR and YAP, but it is following the Singaporean dollar (1.47 for 1 USD, going up )..

THB up 3.5% against the USD after its lowest peak of few weeks ago,after dropping 3% and rising 3% since December,what I mean to say THB/USD exchange rate is NOT STABLE AT ALL, going up and down 2-3-4% in few weeks, but look at the THB vs. Singaporean Dollar exchange rate.... yes, we have solved the mystery,...

But since Thailand is not Singapore , their economies are so different , this peg cannot last forever, sooner or later the cirunstances will oblige the Central Bank to release the exchange rate and this scam of this artificial value of the THB completely out of the reality will end...like the stupid and nonsense peg of 25THB/1USD ended in 1997 miserably.

Can someone please explain this to me?

These posts come along at regular intervals.

I think it is a state of denial, denial that the Asians can develop a robust and stable economy, coupled with anger due to losses when Brown devalued the GBP by 30%, dropping interest rates to zero and then running the printing presses.

There are now three major currencies entering the arena of using "unconventional economic policies"; the USD, the GBP and now, as of yesterday, the EUR, which has since lost value. Maybe jdrake could indicate against which currencies the Thais should devalue? The current policy is to maintain the value of the Baht against a basket of Asian currencies. And that is being achieved and provides stability in the region, and is the only policy which makes sense, to keep things stable.

The EUR, USD and GBP are being devalued every day now. The printing presses are running and the big joke is that the assets being purchased are not even worth the face value of the printed money that is being paid by ultimately the tax payer. Why, or indeed how, can the Asians devalue at the same rate when they have huge foreign currency reserves, are not in debt and have no reason to print money, as they can use the existing reserves to provide economic stimulus?

We are now in the volatile process of a swing in economic dominance from the West to Asia. Wages have been increasing in Asia and the price of Asian produce such as TVs, white goods, cars, mobile telephones etc has been stable or falling, and they are all now within the reach of the Asians. For example I saw today a car finance deal offering a new car for around 5,500 Baht/month. This sort of deal is going to stimulate the Asian demand and lead to more factory output, higher employment and the cycle winds its way up. So now Asians can actually AFFORD the produce they make. This is a HUGE step. Previously they could not afford the computers, telephones etc, and the production output headed off to the West. But now they are able to consume their own productive capacity.

Meandering along, take a look at the so called economic stimulus plans of Obamah and Brown. Somehow the idea is to print so much money and force feed the banks that there will be cash squirting out of the ATMs almost before you have even produced your card. And this is supposed to lead to Joe Public rushing off and borrowing even more so that he can purchase another new US or UK manufactured car (even though there are already two running cars in every family), or buy a hideously expensive house. Or buy a widget "made in Asia", so that the distributer chain makes a profit.

So here I have a big conceptual problem. The only stimulus that for me makes sense would be to stimulate the manufacturing industry in the US or UK. But the decision has already been made that it is cheaper to manufacturer in Asia because of low labour costs and fewer regulatory overhead costs. So this is not an option unless the economics of production swing back. And what will that require? Competing with the Asians....

These "stimulus" plans will surely not lead to an economic recovery in the short term, but maybe once the currencies have been devalued enough, it will once again be profitable to move manufacturing back to the West? But can anybody tell me why increasing the amount of currency by simply printing it should lead to anything but inflation and further devaluation of the currency?

Edited May 8, 2009 by 12DrinkMore

[12DrinkMore]

And here is another one of those bullshitting depressing headlines that we are likely to see more of.

"U.S. Economy: Job Losses Slow as Economy Starts to Stabilize"

Great News! You might think, but then read the article

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Payrolls fell by 539,000, after a 699,000 loss in March, while the unemployment rate rose to 8.9 percent, the highest level since 1983, the Labor Department said today in Washington. The Commerce Department separately said that wholesalers reduced their supply of unsold goods for a seventh month in March.

Today’s figures indicate a waning in the deterioration of the labor market, which has seen 5.7 million workers lose their jobs since payrolls started dropping in January of last year. At the same time, the jobless rate probably won’t start retreating until an economic recovery is secured, and the loss in wages will hold back consumer spending for months, analysts said.

“We appear to have passed the point of the most severe job losses"

So another 539,000 peeps have no work, have no income, are not buying "stuff" to support the economy.

Well, how the fukc did they manage to make it sound positive?

We appear to have passed the point of the most severe job losses

Another headline could have been

"Unemployment reaches the highest level for 26 years, and is getting worse"

Sorry about the doom and gloom, but that seems to be the realistic view, and not some bullshit "it is not getting worse as fast as last month". And certainly the 539,000 newly unemployables will not be feeling terribly pleased about the news that the rate of deterioration is less.

[cocopops]

The EUR, USD and GBP are being devalued every day now. The printing presses are running...

Everybody looks at that half of the picture. And yet it remains the case that you can by more house, more stocks or more commodities using those USD than you could a year ago. Dunno about the other two, but the dollar is not being devalued in any real way yet.

[cocopops]

Sorry about the doom and gloom, but that seems to be the realistic view, and not some bullshit "it is not getting worse as fast as last month". And certainly the 539,000 newly unemployables will not be feeling terribly pleased about the news that the rate of deterioration is less.

On the other hand, piss-up at number 539,001's house tonight!