slashingtongue» debts http://slashingtongue.com Wed, 28 Jul 2010 11:16:04 +0000 http://wordpress.org/?v=2.9.2 en hourly 1 Hidden Confidence in US shown in Euro debts saga http://slashingtongue.com/politics/hidden-confidence-in-us-shown-in-euro-debts-saga/ http://slashingtongue.com/politics/hidden-confidence-in-us-shown-in-euro-debts-saga/#comments Tue, 09 Feb 2010 18:09:53 +0000 Kali http://slashingtongue.com/?p=1175 Worries about the ability of the Portuguese, Spanish and Greek government’s ability to repay their debts sent Indexes around the world tumbling. Dow Jones Index went below the 10 000 mark for the first time in months.

The markets, as of now are reacting well to news that European government’s would be helping Greece out of her mayhem. So the fear is somewhat lifted, but the scars are there to be seen. Even the Chinese and the Indians were not spared regarding this.

One thing this shows us is the increased effects of globalization. When Dubai announce that they had debt trouble, the world reacted negatively. Now this. What is shocking is that if this were to happen 10 years ago, the world probably would not be bothered, bar the neighbors of the country in trouble. Trade has truly been interlinked. Some more than others.

Now, there is also some light in all this. Look, Greece, Spain, Portugal, Ukraine may be in debt, but they are small economically compared to that of our economy. Yet, when they are experiencing problems right now, the world is sweating.

So, if the debts of the US were really that bad, how do you think the world would react? There would be catastrophic market plunges and millions of people would lose their jobs. But is there the scare amongst foreign investors right now? No.

Why? Well for one, America is not alone. Even a country like India, who is experiencing huge economic boom, has got a worse public debt than the United States. And not only is she surviving, she is actually prospering. So it is a problem that is not unique to America.

Secondly, and more importantly, we have lowered our debt before. We have had years where there was actually a budget surplus. And the world is confident enough in us that we can do it again! Remember those (President) Clinton years?

Though it is a mammoth of a problem, we can still solve this problem. How? It is awfully simple without the details, but something that is very hard to carry out in politics. We have got to increase taxes AND cut spending. We cannot have one, which is what our 2 political parties are fighting for.

Maths do not lie, neither does history. If we are going to cut taxes like crazy the manner President Reagan and President George W Bush did, we are going to balloon our debts the manner the national debt ballooned in both their terms. If we allow spending to shoot up like it was during the last administration, we are in trouble.

What is sad is that President Obama is doing both to score political votes. He is cutting taxes for the middle class and small businesses. His budgets are very generous; though to be fair, it is not chopped up yet in the Senate. He is doing all this hoping to win elections.

I am going to preempt the notion of, “ If you want to pay higher taxes, you pay it. Leave me alone.” or “If you want to cut benefits, you lose yours, I do not want to lose mine.” To these people, I would like to state that if it is possible, nobody wants to pay ANY taxes and EVERYBODY would want a $1million handout from the government. But that cannot be done. It is not realistic. It is also not realistic that our debt is not going to blow up in our face if we do not increase taxes and cut spending.

Lastly, we got to solve problems that needed fixing years ago. We need to revamp our education system , solve our health care and social security headaches. These are also issues that are a ticking time bomb waiting to explode.



]]> http://slashingtongue.com/politics/hidden-confidence-in-us-shown-in-euro-debts-saga/feed/ 0 Debt watch : Study United Kingdom http://slashingtongue.com/politics/debt-watch-study-united-kingdom/ http://slashingtongue.com/politics/debt-watch-study-united-kingdom/#comments Tue, 01 Dec 2009 18:02:53 +0000 PreetSG http://slashingtongue.com/?p=1019 If America wants to know what is the best method to deal with our debts tomorrow, we should watch with eagerness what is happening in Britain today. Many experts have come out saying that the British has accumulated too much debt in the past 24 months, and there may be consequences.

Experts like Morgan Stanley have suggested that the UK has spent too much in the past couple of years in trying to prop up the economy. It has a tremendous amount of debt; its debt vs GDP ratio is much higher than ours here in the US.

Most experts still agree that the UK would not crash as yet; but an outcome would be that her currency , the Pound Sterling, would have to be weakened . While there would be many businesses that rejoice at that news, it is not all that rosy.

For one, a weakening of the pound would mean a rise in inflation for the local Brits. Imported goods would cost more. Most of the products made in the United Kingdom are, like most countries, made in China. So there would be a rise in prices in Chinese products.

We here, across the Atlantic should take note. While our debt vs GDP is not as bad as it is for Japan, India, Italy or the United Kingdom, we still have more debt than all of them put together. We still have got issues to sort out, like our lack of tax income and our terrible health care problem. We are still borrowing more and more money from the Chinese. A few bad moves in the next few years might make us experience the bad outcome before the United Kingdom.

Of course there are advantages with our system. For one, if we want to, we can virtually produce everything in America. That is something that the United Kingdom can only dream of. Technically speaking, if we lower the value of our dollar, companies would be more interested in opening factories and production centers in America. We have the resources as our country is huge, the United Kingdom does not. Also with full employment as the result of the factories, there would come the demand which would strengthen the dollar back to what it is supposed to be in the long run. We do have a juggernaut of an economy that is much larger than the Brits’.

That being said,football games are not won on paper. We need to play the game well to win. In this case, anything could go wrong; from bad leadership to counter measures by the Chinese. There are lots of things that could happen.

So it is very essential that we sit back and watch how the British handle their debt problem. If they do it well, we should model ours based on their techniques. If they screw up, we should learn from their mistakes and avoid making them. It is something that is very important for the future of our nation.

We should do our part as a people and read up on the situation. We should be keen about what is going on over there. In that manner, we can vote the person with the right solution into power.

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]]> http://slashingtongue.com/politics/debt-watch-study-united-kingdom/feed/ 0 Dubai expose : Lessons still not learned http://slashingtongue.com/politics/dubai-expose-lessons-still-not-learned/ http://slashingtongue.com/politics/dubai-expose-lessons-still-not-learned/#comments Sat, 28 Nov 2009 18:19:25 +0000 PreetSG http://slashingtongue.com/?p=1006 $60 billion. That is a drop in the bucket as compared to the $10 trillion we have. Yet the doom of Dubai, seemed to have echoed around that world and got the markets panicking. What we can tell you is that we have not learned our lessons yet and this demonstrates the power house economy that US really is.

$60 billion. That is more than you and I would ever make in our lifetimes. But as a corporation, it really is not that much. Microsoft is worth more than $200 billion, Apple are Google, each, are worth more than $150 billion; so how is it that a city state that owes the world $60 billion could shake the world like it did?

The answer : silly risk taking. What caused creditors to be so afraid was that lots of the debts that we see today would be increased many times over due to the manipulation of risk. Let me give you a very much simplified example.

Lets say Company A had some formula to turn water to Gold. Company A goes to Bank A to get a loan, and Bank A approved a loan of $10 million. Bank B does not believe that Company A’s plan. So it does something called a Credit Default Swap. They would give Bank A the money for the loan. Should Company A default on her payments to Bank A, Bank A would pay Bank B $100 million.

The example that I gave above is what I call a 10:1 (100 million to 10 million) bet scenario. There are other examples in real life with methods ranging from short selling to derivatives which have a 30 : 1 bet ratio. Now that is what the EU terms as casino banking.

The same thing happened with Dubai. Should Dubai not be able to pay her debts off, the amount lost by her creditors would not be $60 billion, but in the trillions. That is what the entire pandemonium and panic is all about.

When are we going to learn our lessons? Why can’t we go back to the tried and tested system of a bank putting in capital should they believe in the business plan that they receive. Why must there be what I call sucker capitalism? When are we going to end such practices? Would the next attack be too late to save America? America and the world must wake up to this problem or we would face lots of problems in the future.

Dubai goes $60 billion in the red, and the world panics. Does anybody realize that the world is not that bothered with the trillions of dollars worth of debt when it came to the debt of countries like US, Japan and the UK? This is because the world, as of today, is still very confident in these economies.

I really hope that Dubai bring back the attention of bad banking, as what the economic crash did. It is essential that we get this back in order…

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