Bankrupt States - Iceland, Pakistan, Hungary, Argentina - who next ?

Iceland has agreed a bail out package with the IMF. Now its Pakistan. Who'se next, and how long before the IMF needs a bail out?


Pakistan asks IMF for bail-out (Breaking News . ie)

Pakistan has asked the International Monetary Fund for help to avoid a looming financial crisis.

High oil prices and dwindling investment from overseas have triggered a balance of payments crisis that is undermining the Pakistani rupee.

It also raises the prospect that the country could default on its foreign debts.

The IMF said in a statement today that the amount to be given to the country has yet to be determined.

Surprised America isn't stepping in with some direct funding - would be a good diplomatic move on their part. That said, they tend to avoid all the obvious decisions which could be to their diplomatic advantage and make all the ones which are to their disadvantage.

As per Bloomberg's main page this afternoon, they report that Argentina has taken control of all its pension plans from private hands. There is speculation it may take money from the pension funds to pay the interest on govt bonds.

On the one hand they will claim they have taken control of the nation's pensions to wrest control from the greedy gringo financiers (a couple of the pension funds are adminstered by US and UK banks), but on the other hand Argentina set up these funds in order to be invested in the Argentinian stock and bond markets. Bloomberg reports that the volume on the Argentinian stock bourse has quadrupled since the introduction of the private pension plans.

No doubt that Argentina isn't the most stable economy in the world. However, I see the move more in light of what I'm beginning to call Command Capitalism. This is where countries, such as China, realise that their financial strength can be used to control internal and external markets to the favour of the nation or a particular industry. I'd argue that the US's hegemony through the use of petro-dollars amounts to the same thing.

rockyracoon wrote:

As per Bloomberg's main page this afternoon, they report that Argentina has taken control of all its pension plans from private hands. There is speculation it may take money from the pension funds to pay the interest on govt bonds.

On the one hand they will claim they have taken control of the nation's pensions to wrest control from the greedy gringo financiers (a couple of the pension funds are adminstered by US and UK banks), but on the other hand Argentina set up these funds in order to be invested in the Argentinian stock and bond markets. Bloomberg reports that the volume on the Argentinian stock bourse has quadrupled since the introduction of the private pension plans.

No doubt that Argentina isn't the most stable economy in the world. However, I see the move more in light of what I'm beginning to call Command Capitalism. This is where countries, such as China, realise that their financial strength can be used to control internal and external markets to the favour of the nation or a particular industry. I'd argue that the US's hegemony through the use of petro-dollars amounts to the same thing.

That's very interesting rockyracoon - may the strongest currency win? Is this a kind of hidden protectionism? I'm only just thanks to Aragon's thread on economics learning what a petro dollar or euro dollar or even a euro euro is.

cactus flower wrote:

rockyracoon wrote:

As per Bloomberg's main page this afternoon, they report that Argentina has taken control of all its pension plans from private hands. There is speculation it may take money from the pension funds to pay the interest on govt bonds.

On the one hand they will claim they have taken control of the nation's pensions to wrest control from the greedy gringo financiers (a couple of the pension funds are adminstered by US and UK banks), but on the other hand Argentina set up these funds in order to be invested in the Argentinian stock and bond markets. Bloomberg reports that the volume on the Argentinian stock bourse has quadrupled since the introduction of the private pension plans.

No doubt that Argentina isn't the most stable economy in the world. However, I see the move more in light of what I'm beginning to call Command Capitalism. This is where countries, such as China, realise that their financial strength can be used to control internal and external markets to the favour of the nation or a particular industry. I'd argue that the US's hegemony through the use of petro-dollars amounts to the same thing.

That's very interesting rockyracoon - may the strongest currency win? Is this a kind of hidden protectionism? I'm only just thanks to Aragon's thread on economics learning what a petro dollar or euro dollar or even a euro euro is.

The French (who else) have already publised their wish for a tripartate world currency carve up that will result in currency sphere domination. The Euro for Europe/Mid East (?), the dollar for N. American and the establishment of a dominant Eastern currency. The new series of meetings to held next year on global financial matters will be interesting. There is a main new blog on www.nakedcapitalism.com/ today which dicusses the demise of Bretton Woods II. Fairly short and throught provoking.

This part caught my attention, because it focuses on the big elephant in the room, the US trade deficit with China

" In retrospect, Bretton Woods 2 depended on two things: ongoing flows from the emerging world’s governments to the US Treasury and Agency market, and the ongoing ability of the US financial system (broadly defined to include the dollar-based “shadow” financial system operating in London and other offshore centers) to transform these flows into loans to ever-more indebted US households. US investors** effectively sold their holdings of Treasuries and Agencies to the world’s central banks, and then redeployed their funds into private-label mortgage-backed securities. Between the end of 2003 and q2 2007 (three and a half years), the stock of mortgages held by private issuers of asset-backed securities rose from about $1 trillion to around $3 trillion. That demand meant that credit was available to any household that wanted it – even those without much ability to pay if the housing market ever turned.

Or, to put it more succinctly, Bretton Woods 2, as it evolved, hinged both on the willingness of foreign central banks to take the currency risk associated with lending to the US at low rates in dollars despite the United States large current account deficit AND the willingness of private financial intermediaries to take the credit risk associated with lending at low rates to highly-indebted US households.

The second leg of the chain collapsed before the first. And it collapse looks set to deliver a nasty shock to everyone – including the countries that supply the US with vendor financing. In some sense, the vendor finance analogy never really worked. The “vendor” financers didn’t actually lend directly to the US households that were buying their goods. The big emerging market central banks were willing to take on currency risk associated with lending to the US but not the credit risk associated with lending to US households.

That didn’t matter so long as US financial institutions were willing to take the credit risk. But now US financial institutions are neither willing nor able to take on the risk of lending even more to US households....

In retrospect, the fact that (reported) bank profits didn’t fall as the Fed raised rates should have been a clue that risks were building. An inverted yield curve isn’t good for institutions that borrow short and lend long – but it initially didn’t seem to have an impact on financial sector profitability. It is now clear how the financial sector kept profits up: it took on more risk...

Many have highlighted the role that loose US monetary policy played in supporting the housing boom. And there is no doubt much truth in this story: pushing rates down to help “clean” up the bursting of the .com bubble and holding them down for several years certainly helped induce the rise in home prices and the housing boom. At the same time, this story leaves out what to me is a crucial part of the story: the housing boom didn’t end when the Fed reversed course and raised long-term rates. The really risky loans were made in late 2005, 2006 and early 2007 – after policy rates had increased..."
Would it be oversimplifying to say that a large amount of the value produced by China in its last ten years of development has been channelled into mortgage lending to Americans who can't afford to repay it. Americans are going to be a lot poorer as the banks don't want to lend to them any more."
?
How would Sarko's plan help that ?

2005 seems to have been a kind of tipping point - that is when things went from dodgy to very bad.

cactus flower wrote:

How would Sarko's plan help that ?

It's my belief that the French/German initiative will be along the lines of establishing the Euro on the same par with the Dollar and then they fight who gets to dominate the world's resources in a given currency. Iran already denominates its oil sales in Euros. Yesterday I heard on the news that Iran, Russian and Qatar have signed an accord to establish common policy on energy sales along the lines that OPEC now employs.

Back on the French Farm, Sarkozy, via an item I read on Yahoo today, wants the European continent to set up a Sovereign fund(s) (same as a unit trusts except a Sovereign funds buys shares and bonds in the interest of a country's strategic financial/economic aims). This is why I'm beginning to think that Command Capitalism will come to the forefront. The various instruments of so-called free markets will now be used by specific countries and regions to further their geo-political aims.

Of course the flies in the whole future equation are China and India. Japan seems to have married itself economically to China from what I'm reading. In China we have what I choose to call Totalitarian Capitalism and in the European sphere there seems to be a real push towards Command Capitalism; the only difference being that Europe will allow the pretence of democracy to prevail while the economic strings are further controlled by a corporate and govt elite.

The US, barring some fantastic and unforeseeable recovery and debt write-down, will have to give up dollar denomination. Politically, they seem to be facturing unless they can find a new formula for their political structures. The McCain/Palin campaign has been highly divisive in trying to fragment the electorate into "real" Americans and those others. Equaly worring, imo, is the call by some democrats to establish an elite brain-trust to rule the country. I foresee some real problems for the US in the very near future.

rockyracoon wrote:

cactus flower wrote:

How would Sarko's plan help that ?

It's my belief that the French/German initiative will be along the lines of establishing the Euro on the same par with the Dollar and then they fight who gets to dominate the world's resources in a given currency. Iran already denominates its oil sales in Euros. Yesterday I heard on the news that Iran, Russian and Qatar have signed an accord to establish common policy on energy sales along the lines that OPEC now employs.

Back on the French Farm, Sarkozy, via an item I read on Yahoo today, wants the European continent to set up a Sovereign fund(s) (same as a unit trusts except a Sovereign funds buys shares and bonds in the interest of a country's strategic financial/economic aims). This is why I'm beginning to think that Command Capitalism will come to the forefront. The various instruments of so-called free markets will now be used by specific countries and regions to further their geo-political aims.

Of course the flies in the whole future equation are China and India. Japan seems to have married itself economically to China from what I'm reading. In China we have what I choose to call Totalitarian Capitalism and in the European sphere there seems to be a real push towards Command Capitalism; the only difference being that Europe will allow the pretence of democracy to prevail while the economic strings are further controlled by a corporate and govt elite.

The US, barring some fantastic and unforeseeable recovery and debt write-down, will have to give up dollar denomination. Politically, they seem to be facturing unless they can find a new formula for their political structures. The McCain/Palin campaign has been highly divisive in trying to fragment the electorate into "real" Americans and those others. Equaly worring, imo, is the call by some democrats to establish an elite brain-trust to rule the country. I foresee some real problems for the US in the very near future.

Is what you call "Command Capitalism" the same as Corporatism ? The pretence of democracy will last I suppose as longas there isn't flat out resistance - just watching the workers soviets of 1921 Ireland in action on TG4. The Free State army knocked it back.

What's the brains' trust thing? What I find outrageous, as I posted yesterday is Bush's move to head up the Global economic summits after the election.

rockyracoon wrote:

In China we have what I choose to call Totalitarian Capitalism and in the European sphere there seems to be a real push towards Command Capitalism; the only difference being that Europe will allow the pretence of democracy to prevail while the economic strings are further controlled by a corporate and govt elite.

The US, barring some fantastic and unforeseeable recovery and debt write-down, will have to give up dollar denomination. Politically, they seem to be facturing unless they can find a new formula for their political structures. The McCain/Palin campaign has been highly divisive in trying to fragment the electorate into "real" Americans and those others. Equaly worring, imo, is the call by some democrats to establish an elite brain-trust to rule the country. I foresee some real problems for the US in the very near future.

I agree totally with this and it worries me a lot. Europe should stand shouldr to shoulder with America in asserting freedom and democracy (i know it sounds so corny), but if you talk to many europeans they seem to more sympathetic to the Chinese. Europe is now ideologically in teh middle between America and China, although America itself is not exactly a shining example of freedom. Nevertheless the EU is taking a worrying path towards more authoritarian rule. For now it seems that power is merely subcontracted out to states, while the real power is concentrated in the centre. Ordinary eureopeans are going to become essentially as powerles as ordinary Chinese.

cactus flower wrote:

. . .Is what you call "Command Capitalism" the same as Corporatism ? The pretence of democracy will last I suppose as longas there isn't flat out resistance - just watching the workers soviets of 1921 Ireland in action on TG4. The Free State army knocked it back.

What's the brains' trust thing? What I find outrageous, as I posted yesterday is Bush's move to head up the Global economic summits after the election.

This is, as I'm sure you're well aware CF, all in the realm of pure conjecture. However, the meetings regarding the Bretton Woods and the players involved are nearly established. One of the biggest problems that us outsiders will have in digesting this game as it plays out is that linear and possibly even lateral thinking will not be a framework in which to examine the possible reprecussions. A + B + C doesn't necessarily lead to D. That is, a logical domino sequence of events whereby one action must lead to another action or reaction may not apply to all possible outcomes. Knocking over one domino that knocks over another domino may indeed lead to the establishment of another domino in a different location whose affect on the game will not have been anticipated and whose affect on the previous decisions cannot be contemplated as the new domino doesn't exist as yet. Yikes.

However, we know that certain frameworks regarding global financial regulation, currency dominance, and the affects these factors will have on resource allocation of all commodities. External factors on the players will be their desire to achieve the best possible economic and financial advantage for their respective countries or regions;the particular philosophies of individual participants and of course their political perspectives.

When I refer to Comman Capitalism I'm borrowing a phrase right out of the Soviet style of production of goods and service. However, whereas the soviets commanded that x number of cars should be produced as per command production, the Capitalist Command structure decrees that certain functions of the financial and market society should be manipulated to confer advantages to the commander in various markets. Therefore, France might set up a Sovereign fund whose charter states that they must invest in French auto producers. Given the amount of shares they own, they might be in a position to not only manipulate the share price but to direct always scarce resources into the auto industry. Of course, the aurgument to date is that the number of market participants and their various wealth commitments make it impossible for one player, even if that player is a govt, to manipulate the market to their advantage. Only when enough wealth is sequestered and able for command can the market be manipulated in the commanders favour. Given the current suggestion for essentially carving the world into currency spheres of influence, we might just see where each region of the globe starts to pool financial resources to their advantage in order to manipulate certain markets. This is might be especially true for certain scarce commodities.

The brain trust thing is just noise I'm hearing from certain individuals in the US. While I'm sure the call for a brain trust is well intentioned and being touted something along the lines of a Congress of highly qualified individuals in their given fields who will govern the nation, it still doesn't take into account that a highly qualified economics professor doesn't carry around personal economic biases or that even a cabal of intellectuals will make correct decisions.

Bush = void of intellectualism. . .the anti-christ of intellectualism. . .the antithesis of thought . . . the darth vadar of enlightenment . . .

What you're describing is at one time a form of fiancial protectionism - it was the end of the WTO agreements this year then? If three big blocs form, it sounds to me like a precursor to war, if it is let run its course there will be territorial grabs and conflict over resouces. There is still talk going on about keeping trade open and global, but with defaults, nationalisations (Argentina Pension Funds) and dumping of anti-monopoly restraints, how long can that last?

The Iran-Russia-Quatar arrangement - is that a consequence of the Georgia adventure - it sounds like a big deal to me. Johnfás (I think) started a thread on that today I think.

I don't see it as Chinese vs Americans vs Europeans, Respvblica. There's good and bad, rich and poor everywhere.

According to RTE News this evening, Hungary looks like being the next to bust.

A Hungarian politician compared their situation with the gazelle at the back of the herd, brought down by the lion. Who will be next?

cactus flower wrote:

A Hungarian politician compared their situation with the gazelle at the back of the herd, brought down by the lion. Who will be next?

The Baltic States look like their economies could easily implode over the next two years. Astonishing considering their 8-10% economic growth rates of just a year and a half ago.

Ard-Taoiseach wrote:

cactus flower wrote:

A Hungarian politician compared their situation with the gazelle at the back of the herd, brought down by the lion. Who will be next?

The Baltic States look like their economies could easily implode over the next two years. Astonishing considering their 8-10% economic growth rates of just a year and a half ago.

A lot of the 'growth' of the last seven years was speculation, fictitious paper expansion. In the meantime, there was that enormous productive expansion in China, that gutted out industry across the world and squeezed profit rates right down. The reality now is that if we want to sell goods, we have to work for the same wages as people in China. That has been masked over by credit.

cactus flower wrote:

Ard-Taoiseach wrote:

cactus flower wrote:

A Hungarian politician compared their situation with the gazelle at the back of the herd, brought down by the lion. Who will be next?

The Baltic States look like their economies could easily implode over the next two years. Astonishing considering their 8-10% economic growth rates of just a year and a half ago.

A lot of the 'growth' of the last seven years was speculation, fictitious paper expansion. In the meantime, there was that enormous productive expansion in China, that gutted out industry across the world and squeezed profit rates right down. The reality now is that if we want to sell goods, we have to work for the same wages as people in China. That has been masked over by credit.

I wouldn't entirely agree. We all don't have to work for the same wages as China.

Ard-Taoiseach wrote:

cactus flower wrote:

Ard-Taoiseach wrote:

cactus flower wrote:

A Hungarian politician compared their situation with the gazelle at the back of the herd, brought down by the lion. Who will be next?

The Baltic States look like their economies could easily implode over the next two years. Astonishing considering their 8-10% economic growth rates of just a year and a half ago.

A lot of the 'growth' of the last seven years was speculation, fictitious paper expansion. In the meantime, there was that enormous productive expansion in China, that gutted out industry across the world and squeezed profit rates right down. The reality now is that if we want to sell goods, we have to work for the same wages as people in China. That has been masked over by credit.

I wouldn't entirely agree. We all don't have to work for the same wages as China.

If our workers in productive industry are on those wages who woud pay teachers or solicitors to live in "the style in which they are accustomed?

Ya can't be productive without solicitors . We've (potentially We've, currently They've ) constructed society such that you can't do much without our (potentially our, currently their ) help!

Long may it continue I say - come on give johnfás a chance .

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