Economic / Business News Update : 11-Nov-09

1. China's Record Debt has Economists Worried

"... China's total lending reached 140% of GDP at midyear."

" ... the loans are creating huge amounts of manufacturing capacity -- which is unneeded in the bears' view. China's spare capacity in the cement industry, for example, equals the total annual consumption in the U.S., Japan, and India combined."

2. Greenspan Says Stock Market Rally ‘Re-liquifying’ U.S. Economy

WAHAAT does he mean ? "..“We have been very fortunate that the stock markets moved back” and are “re-liquifying the whole process,” Greenspan said".

What Lessons have been learnt from the collapse of Lehman brothers ?

How much have leaders of financial institutions (aka "banks") and monetary policy makers learnt from the collapse of Lehman brothers and the subsequent fallout ?

Here's a Bloomberg article on the subject.

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HyperInflation in USA ?

Marc Faber believes that USA may suffer HyperInflation in the near future. That it will be a Zimbabwe.

USSA

Is USA becoming USSA (*), ever more by the day ?

President Obama and his team keep using words like "shameful" that bonuses are being paid and "will do everything we can to get the money back".

However, this raises many questions :

1. Surely, in a Capitalist Democracy Model, the Rule of Law is paramount. What happens to the validity of contracts ? How enforceable are they if the "Rules of the Game" can be changed ? Is that why the US Congress is changing the law to levy heavy taxes on bonuses ?).

2. Would foreign nationals, organisations, corporations and governments think twice or more than twice before entering into a contract with a US entity -- even one that is not, for the present, today, "assisted" by the US Government ?

3. How will these organisations retain talent ? What happens to the morale of the employees ? Are these employees critical to the organisation returning to a sound footing and the U.S. Government receiving it's money back ? What is the legal and financial position if such employees quit (whether out of disgust or personal stress) ? Or are appeals to "patriotism" going to be made very soon ?

* :  United States of Socialist America  

The Meltdown Continues

Citigroup's stock has fallen below $1.50.

Think of what this is doing to the morale of employess there. This in addition to the 75,000 layoff/downsize figures (whether actually exited or in a business unit that is sold) last year.

It isn't just Citi that has "got the new reality". It is all manner of people who invest money, trade money or save money. We wouldn't be returning to the era of "money creates money without effort" jobs and organisations. Hard work and productivity measured by material output and/or real customer support (in services industries) will mean much more than amounts adjusted by derivatives whose pricing has, at the most, been nebulous.

"Older" Workers, Knowledge and "Institutional Memory"

In these time of recession when "turfing" thousands of employees is announced without any feeling of guilt, we must remember that older workers have Knowledge and Institutional Memory, both of which are lost when they are fired.

Michael Hiltzik's column in the L.A. Times reminds us of this.

This should remind CEOs about the Knowledge and Institutional Memory that older workers carry. This experience is irreplaceable and a policy that treats humans as "resources" equal to furniture and fixtures or equipment or building isn't very good for the organisation and is certainly not one that will endear the corporation to it's employees.