As the mortgage and financial crisis continues to notch more victims, the question on many economists' minds is not whether a recession will happen, but how deep it will get and how long it will last. But one prominent voice thinks the high-flying finance industry isn't going to bounce back -- and that we'll need to look elsewhere to set the U.S. economy back on firm footing.
Eric Janszen is an angel investor and founder of the contrarian market website iTulip.com, which The New York Times credited with "accurately predicting that the [internet] bubble would pop." Now Janszen believes the American economy needs a fundamental restructuring away from its foundations in finance, insurance and real estate. His prescription: a new bubble based on green technologies.
In a widely discussed Harper's article in February, "The Next Bubble: Priming the Markets for Tomorrow's Crash," Janszen argued that clean tech is the only sector that could create enough "fictitious value" to replace the losses from the housing bubble, if only temporarily. ... more »
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Wednesday, June 4
Investor: Clean Tech Is Only Hope for the Collapsing Economy
by
ronjon
on June 4, 2008 02:00AM (PDT)
Monday, May 19
The Old Titans All Collapsed. Is the U.S. Next? - Washington Post
by
ronjon
on May 19, 2008 01:56PM (PDT)
... Here, then, is the unnerving possibility: that another, imminent global crisis could make the half-century between the 1970s and the 2020s the equivalent for the United States of what the half-century before 1950 was for Britain. This may well be the Big One: the multi-decade endgame of U.S. ascendancy. The chronology makes historical sense -- four decades of premature jitters segueing into unhappy reality.
The most chilling parallel with the failures of the old powers is the United States' unhealthy reliance on the financial sector as the engine of its growth. In the 18th century, the Dutch thought they could replace their declining industry and physical commerce with grand money-lending schemes to foreign nations and princes. But a series of crashes and bankruptcies in the 1760s and 1770s crippled Holland's economy. In the early 1900s, one apprehensive minister argued that Britain could not thrive as a "hoarder of invested securities" because "banking is not the creator of our prosperity but the creation of it." By the late 1940s, the debt loads of two world wars proved the point, and British global economic leadership became history. ... With the help of the overgrown U.S. financial sector, the United States of 2008 is the world's leading debtor, has by far the largest current-account deficit and is the leading importer, at great expense, of both manufactured goods and oil. The potential damage if the world soon undergoes the greatest financial crisis since the 1930s is incalculable. The loss of global economic leadership that overtook Britain and Holland seems to be looming on our own horizon. ... more » Thursday, May 15
The Reason Behind High Oil Prices
by
ronjon
on May 15, 2008 02:00AM (PDT)
...Commodities have often been the refuge for investors who have lost money on equities or fixed-income investments. Moreover, the commodities rush today is not limited to oil; now we also have runaway food and feed prices. Could it be that all the financial losses on subprime mortgages, plus the anticipation that the option ARM mortgages about to reset could be an even bigger problem, combined with the huge losses in securities last year, are why investment money today is flooding into often unregulated commodities, where the demand pricing of the final goods is inelastic?
Consider this: You may not buy gasoline or even eat today, but by next Monday you'll probably have to do both, no matter what it costs. Basically, besides enabling the Fed to bail out Wall Street and our banks again, every time you gas up or eat you may be paying investors to cover other financial losses. We know that investors can't control their losses on mortgages, securities, or bad loans. But, demonstrably, if not restrained they can drive up the price of goods that we can't get out of buying. Odds are, that's what's really been going on. ... more »
Monday, May 12
Happy Days Are Here Again - Not!
by
ronjon
on May 12, 2008 02:00AM (PDT)
...The risk analyst Sayajit Das has had the most insight into the financial markets dimension of this meltdown. Well before the credit crunch hit, he was warning that it was coming and what would bring it on. So what's his take now? That what's happened so far is only phase one in a massive deleveraging of a world addicted to debt. ...
It's a classic asset price cycle. Look at just about every boom and bust cycle in history, and you'll find it was built on cheap credit, easy lending and lax underwriting standards. And this boom was the biggest. The legacy is a burden of household debt without precedent. As real estate prices boomed, households felt wealthier and borrowed against their (inflated) assets. As the price of property soared way beyond the growth in wages, people borrowed more and more to break into the market, running up debts on credit cards to make ends meet. In countries such as the US, where wages were stagnant or falling in real terms, people borrowed against property to maintain their lifestyles. Now the easy finance is drying up. If there's a serious global downturn that pushes up unemployment rates, it could get ugly, as people unable to service their debts are forced to sell assets causing a further downward spiral. Default rates will rise and financial institutions will suffer further losses. Beyond the household sector, there's the vast army of self-employed workers who set up small businesses after the corporate downsizing cycle of the 1990s. Many borrowed against their homes to do so, and have survived on thin margins during good economic times. In any downturn, they'll be the first to go. ... more » Sunday, May 11
Effects of the US recession on Asian growth, by Nouriel Roubini
by
ronjon
on May 11, 2008 02:00AM (PDT)
In early 2006, economist Nouriel Roubini broke rank from the prevailing consensus opinion and blew the whistle on the US housing bubble and held out grim warnings of a US ‘recession’. That contrarian bearish outlook has been proved spectacularly right two years later, and Roubini, a former White House aide and chairman of the Roubini Global Economics Monitor, is justifiably credited with having first ‘called’ the sub-prime crisis. Here are his latest forecasts:
"In the last few day I have been at the Asian Development Bank meetings in Madrid and then visited Hong Kong and China. I have presented my view on the severity of the US recession and its potential effects on economic growth in China and Asia. Will this region decouple from the US economic contraction? more »
The answer depends on the severity of this recession. If the US recession is short and shallow (a V-shaped recession lasting six months) then there is enough of a domestic growth dynamics in the rest of the world and in Asia that the global economic slowdown would be very modest. But if the recession is more severe (a U-shaped recession lasting 12 to 18 months) then that US contraction, together with the sharp slowdown in the other G3 economies (a good fraction of the EU could be soon in a recession - specifically UK, Spain, Ireland, Italy and Portugal - and the rest of the EU is sharply slowing down; while Japan is also headed towards a recession) will negatively affect growth in China and Asia, much more than currently expected by macro analysts and markets. Direct and indirect trade channels, financial channels, credit crunch channels, dollar weakness channels and confidence channels would lead to a signifcant slowdown of growth in Asia. ..." Tuesday, April 22
Anatomy of an Economic Collapse (NYT Sunday Book Review)
by
ronjon
on April 22, 2008 11:19AM (PDT)
 ...In his brief but brilliant book, “The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash,” [Charles R.] Morris describes how we got into the mess we are in, with bankers making loans that they expected to sell to investors through ever more complex securities... One of the most important aspects of the financial architecture that is now collapsing was the way it allowed investors to believe they could make perfectly safe investments when they financed very risky loans. Or, as Morris puts it, “Highly rated bonds magically materialize out of a witches’ soup of very smoky stuff.” He adds, “Very big, very complex, very opaque structures built on extremely rickety foundations are a recipe for collapse.” The collapse is now under way. In recent years Wall Street profits were built on leverage and on taking risks that were obscure both to regulators and even to the top managements of the banks themselves. Every three months now, we see banks disclosing huge losses from risks that they had never admitted they were taking. No one — not investors, not managers, not regulators — is sure when this process will end. And that uncertainty has created a credit freeze, with lenders reluctant to lend both because they do not know whom they can trust and because they fear they may need the money to cover losses that are yet to materialize. As the recession gathers steam, there are likely to be more corporate failures than there need to be, because credit has gone from virtually free to all but unavailable. ... more » Friday, March 21
$516 Trillion Deriviatives Bubble a Disaster Waiting to Happen
by
ronjon
on March 21, 2008 01:35PM (PDT)
...a massive new derivatives bubble is driving the domestic and global economies, a bubble that continues growing today parallel with the subprime-credit meltdown triggering a bear-recession...
To grasp how significant this five-fold bubble increase is, let's put that $516 trillion in the context of some other domestic and international monetary data: • U.S. annual gross domestic product is about $15 trillion • U.S. money supply is also about $15 trillion • Current proposed U.S. federal budget is $3 trillion • U.S. government's maximum legal debt is $9 trillion • U.S. mutual fund companies manage about $12 trillion • World's GDPs for all nations is approximately $50 trillion more » Tuesday, January 29
U.S. Economy: New-Home Sales Drop to 12-Year Low
by
ronjon
on January 29, 2008 02:00AM (PST)
Jan. 28 (Bloomberg) -- Purchases of new homes in the U.S. unexpectedly fell to a 12-year low in December, ending the worst sales year since records began in 1963 and signaling little prospect for a recovery...
The median price of an existing single-family home dropped 1.8 percent in 2007, the first decline since records began four decades ago and probably the first since the Great Depression in the 1930's, the Realtors group said. ... more » Friday, January 18
Catastrophe insurance industry losses reach $75 billion in 2007
by
ronjon
on January 18, 2008 02:00AM (PST)
The insurance industry faced $75 billion of losses from natural catastrophes during 2007, up 50% from last year despite a lack of "megacatastrophes," German reinsurer Munich Re said Thursday.
The losses rose from $50 billion in 2006, though this was still well short of the $220 billion reached in 2005 when Hurricane Katrina ravaged New Orleans and the U.S. Gulf Coast. Still, the number of natural catastrophes tallied 950 this year, up from 850 in 2006 and the highest figure since 1974, when Munich Re began tabulating such events. ... more » Tuesday, October 2
Universities moving to endorse Apple exclusively?
by
ronjon
on October 2, 2007 03:43PM (PDT)
For the past while, evidence has been popping up hither and thither that Mac usage at universities and college campuses is starting to snowball; a recent image from the University of Missouri’s school of journalism shows an astounding number of students with Macs. With safety and ease of use becoming of paramount importance to university network security, could it be that colleges will move to endorse Apple products exclusively?
Past evidence suggests that graduate schools have seen the most vivid change from Windows-centric machines to Macs, but University of Missouri’s School of Journalism computing page reveals some very interesting facts: “Students are encouraged to acquire wireless laptop technology from Apple, which the School has designated as its preferred provider, but students also will have a choice of a Windows-based alternative. Last year, 99.5 percent of incoming students chose the Apple option.” ... more » Wednesday, August 15
TAI Alert! - Global Financial Meltdown?
by
ronjon
on August 15, 2007 07:56AM (PDT)
TAI Alert! By John L. Petersen. -- It appears that we may be at the beginning of a major, historical disruption of the world’s financial system. Here’s what it looks like from here...
At the beginning of the sub-prime disintegration analysts discounted the potential impact of the trend, reminding all that would listen that sub-prime mortgages represented only some 4% of the total mortgages (or something like that). It was impossible that those failures would really be significant. What they all missed was the systems nature of the problem. Narrowly focused on a few fund meltdowns they didn’t take into consideration the interconnections and dependencies of a number of tightly coupled variables that make up the system. I’m certainly not an economist or financial analyst, but I’d guess that it is fundamentally a non-linear system, subject to vagaries that are not deterministic and predictable . . . it therefore it is predictable that the system could (or would) exhibit significant shifts in behavior passing certain unanticipated tipping points. There are quite a few dependent variables in this system. Personal credit card debt and the Basel II accords mandating international banking changes, as well as hedge funds, and China are important players. Here’s something about hedge funds from my friends at the Asymmetric Threats Contingency Alliance in London. ... more » Wednesday, July 18
Apple tops Business Week's list of World's 50 Most Innovative Companies
by
ronjon
on July 18, 2007 09:54AM (PDT)
Not so long ago, no conversation about innovation would be complete without the story of 3M inventor Art Fry’s eureka moment that led to the Post-it Note. Today, that tale, which verges on cliche, has been almost universally replaced by the story of the iPod, Apple’s omnipresent icon of design.
It should come as little surprise, then, that Apple tops the BusinessWeek-Boston Consulting Group’s list of the World’s Most Innovative Companies for the third year in a row. That sort of staying power speaks volumes about the sort of innovation that matters today. Unlike the Post-it Note, which proves the value of lone inventors, the iPod epitomizes today’s innovation sensibilities. These include the ascendance of design, the focus on the user’s experience, and the power of ecosystems: The iPod is a hit because it works so seamlessly with the iTunes software. The company’s much-anticipated iPhone, which launches in June, will likely keep Apple high on our list next year too. ... more » Wednesday, January 31
Clean air or TV: Where will Asia find more energy?
by
ronjon
on January 31, 2007 02:50PM (PST)
A toxic purple haze of diesel exhaust hangs over the rice and jute fields here in northeastern India, and bird songs are frequently drowned out by the chug-a-chug-a-chug of diesel generators. — Across the developing world, cheap diesel generators from China have become a favorite way to provide electricity. — They power everything from irrigation pumps to television sets, allowing growing numbers of rural villages in many poor countries to grow more crops and connect to the wider world. — But as the demand increases for the electricity that makes those advances possible, it is often being met through the dirtiest, most inefficient means, creating pollution in many remote areas that used to have pristine air and negligible emissions of carbon dioxide and other global warming gases...
Another popular approach being tried in India and elsewhere -- using solar energy to recharge lanterns by day -- has run into difficulty even as diesel prices would seem to make it more competitive. — The problem is that prices for photovoltaic panels for solar energy have surged as governments in industrialized countries, especially Germany, have encouraged greater use of renewable energy, said Hemant Lamba, the coordinator of Aurore, a renewable energy service company in Auroville, India. — "It's harder to do any solar energy projects in India," he said. ... more »
Chennai Declaration: UN urged to help achieve hunger-free world
by
ronjon
on January 31, 2007 02:05PM (PST)
The United Nations (UN) has been recommended to set up a Statutory Body comprising G8 and G20 nations to provide political oversight to the global and national efforts to achieve the goal of a hunger-free world by 2015. — The recommendation was made in the Chennai Declaration that was adopted yesterday on the concluding day of the three-day international workshop on "Food Security: A Great Threat to Human Security" held at the MS Swaminathan Research Foundation (MSRRF) in Chennai in India.
"The goal should be eradication of hunger by 2015, and not halving the proportion or the number of the hungry in relation to any chosen base year," the declaration recommended. — It said all the member states of the UN should make the right to a balance diet, clean drinking water, environmental sanitation, primary health care and primary education a basic human right... The programme will be completed today (Thursday) through visiting Biovillage and Auroville, a MSSRF project in Pondicherry. ... more » Monday, January 29
Capitalism 3.0: Planning a Big Upgrade (WC)
by
ronjon
on January 29, 2007 03:34PM (PST)
...For those unfamiliar with the book, Barnes argues that there is private wealth and then there is common wealth—in the form of nature, structures supported by the community and society (such as parks, streets, capital markets, the internet), and cultural and intellectual wealth (the wealth of ideas). Private wealth, he argues, is produced partly by appropriating common wealth, and private profit often externalizes costs into the commons. And he proposes a solution. ... more »
Thursday, January 25
Ceres: Investors & Environmentalists for Sustainable Prosperity
by
ronjon
on January 25, 2007 05:44PM (PST)
Ceres (pronounced "series") is a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change.
Mission: Integrating sustainability into capital markets for the health of the planet and its people. About Us: At its founding 17 years ago, Ceres introduced a bold new vision to the business world. That vision is of a world in which business and capital markets promote the well being of human society and the protection of the earth's biological systems and resources. Ceres advances its vision by bringing investors, environmental groups and other stakeholders together to compel companies and capital markets to incorporate environmental and social challenges into their day-to-day decision-making. By leveraging the collective power of investors and other key stakeholders, Ceres has achieved dramatic results, among those: ... more »
Letter from Davos, Day 1 - A Tipping Point? (WorldChngking)
by
ronjon
on January 25, 2007 05:28PM (PST)
I’m a bit of an odd duck here, a public interest activist among the world’s most powerful business and political leaders. These are the people with the power to effect the critical changes needed to address climate change, the people whose hearts and minds I try to win over every day at Ceres. And now they’re all here in one place.
Immediately upon arriving at the World Economic Forum I find reason for optimism – climate change dominates the formal agenda and the hallway conversations. Did I make a wrong turn somewhere and walk into an international environmental conference? At the first plenary session, the assembled masses, mostly captains of industry, are asked if they favor mandatory caps on greenhouse gas emissions and 71% are in favor. Am I dreaming? This could be a tipping point because one year ago this would have been unthinkable. ... more » |
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