We live in a strange world now. A world in which Western democracies are broke and totalitarian regimes are flooded with cash. Examples of people with cash, the Saudis, the Chinese, the Russians. Example of people without cash. The Americans. So how can we make the people with cash give to the people without cash without dealing with their totalitarian regimes? Well USA has been doing a lot of that already by selling them US government debt. But these are desperate times. USA now needs another $700bn to shore up its financial institutions. How could it possibly get this money. Now here is an idea. USA should give nationality to those who invest over $1 million in equity in US real estate.
We know that most wealthy people in China live double lives. On one side praising their government and on the other side worrying that one day privileged lives will end. And same is true with oligarchs in Russia, and wealthy people in Iran, princes in Saudi Arabia. I am not saying they live in fear everyday but if US offered a passport to be used in case of need I think millions around the world would pay for the insurance. Let´s remember that there are 6.5bn people in the planet and 6.3bn are not American and tens of millions of those are pretty well off. At the same time we all know that USA real estate prices are on a free fall and that is the reason why mortgages are defaulting. So how about combining greed and fear in one package that gives foreigners first access to US real estate at bargain prices and secondly the US nationality?
To me the math is compelling. If one million foreigners invest one million dollars that is the trillion that America needs. Moreover America will not need the trillion because real estate prices will go up and mortgages will be backed. And if eventually those million very rich people end up moving to America more investment will follow. There are already many countries that give you residence and eventually nationality if you invest with them. I think it´s time for USA to do the same.
Spanish banks are now among the most valuable banks in the world. Santander and BBVA have market caps simiar to those of Bank of America and Citigroup. Telefonica in the meantime has valuations similar to those of AT&T or Verizon. What is so wrong with America? Or is Spain living in a fantasy and stocks will collapse here as well?
How can the Republicans be so much better than the Dems at managing their communications? Yesterdays Dems voted for the bail out bill, Republicans voted against it defying their own President, their own administration, and still McCain gets away with blaming Pelosi for the defeat. Either Republicans are communication geniuses or Dems are communications morons.
Why doesn´t Obama speak more as a representative of the Democratic Party and not as himself? Why didn´t he in the whole debate with McCain speak of what the Dems did for America in the 90s and what the Republicans did to screw America in the 00s? Doesn´t he understand that on a one to one with McCain on experience he loses? He has to stop the me, me, me rethoric and go for the us in the democratic party rethoric.
Is the Paulson plan the best plan to stop US banks from disappearing? Wouldn´t it be better to have a plan by which the US government inject equity in the banks like Buffet did with GS?
How can the Republicans, who inherit the country with a budget surplus and are leaving it with a financial black hole campaign on Reagan Bush Bush platform that the problems should not be fixed by the government but that government is the problem? How can a huge part of the American electorate believe this and not go for the more responsible public/private mix that Dems are proposing? We now know that the only formula that works for modern democracies is a balanced mix of government, NGOs, independant universities, private enterprise. Why can´t the Dems sell this message in the face of the obvious collapse of the unregulated markets doctrine?
Is there a possibility that the world is not as globalized as we all think and that while all markets fall these months USA falls more and harder? For example yesterday US stocks went down a $1.2 trillion in value but Asian and European stocks are flat today. This means that in one day the relative market caps of the Asian, European and American markets have shifted tremendously against the US markets. This has already happened with the collapsing dollar. When the dollar went from $1 equal 1 euros to $1.43 to the euro in dollar terms Europe´s GDP grew proportionately. So if we measure global gdp in dollars the proportion that USA represents has been shrinking as well even if euro economies grew slightly slower than USA´s economy in this decade. So my view is that we had the Latin American crisis in the 80s, the Asian crisis in the 90s and this is the decade of the American crisis.
What is going to happen next in this crisis? Will the Fed ease credit? Will the Fed take failing banks over? If the Fed keeps giving bad banks to better banks, will they all become bad banks? Will the Senate send a bill to the President? Will the Representatives reconsider the bill they just voted against as the markets keep falling? Will the markets keep falling?
Is this a buy or a sell opportunity? Like the Apple meltdown of yesterday. Apple went from $200 to $100 a share in less than a year while all of us in technology know that more and more people are using iPhones and Macs. Are the markets over reacting or are they predicting a severe recession? Are we losing the opportunity of a decade not to buy shares now?
Should we all take our life savings away from banks? I did. I took all my money away from banks in Europe and USA last week and put them into government bonds of different governments. I know this is almost paranoiac but then these are my life savings. How can I trust banks these days when I am only insured by the FDIC or euro equivalents for a tiny portion of my funds? But following the Categorical Imperative I know that I can´t wish for everyone else to do what I did because banks would disappear. But it doesn´t cost anything to move your funds from bank deposits to bonds that the banks cannot lend. Why not do it in this chaos? I think these days they only safe thing to own is stocks, bonds, and real estate all unleveraged so your net worth goes up or down 10%, 20% but not 50%, or 100% and you are wiped out.
How can the militaristic rethoric of McCain still sell in America? Are Americans so out of it? Don´t they see that what happened to the soviets is happening to them? That they are spending their way to oblivion? Why do they need to spend half of what the whole world spends in the military? How can McCain go to Columbia University and say that the military should be allowed to recruit on campus and think he can win votes saying that? Why do Americans mistrust so many people around the world they could work with? If America pulled out of Iraq it could save $10 billion per month. America simply needs the money. What America should do is protect itself from terrorism in collaboration with other nations, not try to run the Middle East nor the world.
Former communist nations pile up cash. USA bleeds cash. China owns so many US securities that they alone could do the $700bn bail out and end up owning all the biggest American banks. How long will the “i own your debt but keep my mouth shut as to how you run your country” policy go on? Don´t the Americans know that security starts with financial security? They Chinese learned their lessons and started piling up cash not debt. America has do delever big time to continue to be a super power.
When is America going to realize that high oil prices are actually good for America because it will force conservation, resizing of the transportation fleet, investment in alternative energy… America does not have oil period. Why be so resistant to change? Why have the Europeans adapt, the Japanese adapt and the “US Americans” haven´t? An American who changes an SUV for a Prius will cut its gasoline consumption by 70% more than making up for the gas price increases. Many started doing that but now that oil prices are collapsing its the time to tax gasoline so habit changes continue.
Well that´s all folks….
Pity the Germans. They did everything right vis a vis finance and things went wrong. They did not go into consumer debt like the Americans, they did not have a real estate boom and bust like the Americans, unlike the Americans, their savings rate was high…but the problem is that, as a result, German banks piled money and did not know what to do with it. So they lent it to Americans. So eager in fact were they to lend money to US institutions that, even when Lehman was under, they sent Lehman 300 million euros. And the paradox is that if Paulson can´t get a package through to save US banks, I can´t imagine he will get a package to save German banks. So German banks will have to be helped by the German taxpayer who….did everything right. This, btw, is a prelude to what could happen in a much bigger scale to the Chinese, who are now the biggest creditors of the US government. If Americans don´t learn to live within their means, the next ones to be stuck with huge amount of worthless paper will be the hard working Chinese. But then, who said life was fair?
Reading this article from Bloomberg you can see that it makes sense to cap the compensation of the people who work for banks whose bad loans get bought by the US taxpayer.
The five biggest — Goldman, Morgan Stanley, Merrill, Lehman Brothers Holdings Inc. and Bear Stearns — paid their 185,687 employees $66 billion in 2007, as problems with subprime mortgages mounted, including about $39 billion in bonuses. That amounts to average pay of $353,089 per employee, including an average bonus of $211,849. The five firms had combined net income of $93 billion during the five years through 2007.
Rural China Education Foundation works in a small number of sites to experiment in-depth with innovative models of rural education. They focus on developing teaching methods that make rural education more relevant to rural students’ lives.
Ceres is a network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change.
Clinton Global Initiative started this year with CGI Exchange, a forum for members to showcase their projects and accomplishments at the Annual Meeting.
I will publish some short interviews to people in the different stands that explain what these organizations do. The first interview is on Agahozo Shalom Youth Village, a project which aims to create a safe and structured residential community for orphaned children in Rwanda.
No. The title is misleading. It´s not what you are thinking. I am not saying that Paulson should bail out hedge funds. I understand that that would offend you. I am actually saying the opposite. I am recommending that Secretary Paulson invite large hedge funds to coinvest with him in the $700bn package that is the largest bailout in history. Why? First because if he does get some hedge funds to coinvest with him when he buys bad loans the American taxpayer will realize that at least there are some other investors out there who are willing to buy those loans as well. That those $700bn are an investment and not an expenditure per se. That it may actually not be such a bad business for the American taxpayer to buy mortgages at a discount and so much so that hedge funds are willing to go along. That there is value to what the US government is buying. Secondly because hedge funds are already buying up these loans, crowding them out does not make much sense. And thirdly because working with hedge funds may actually reduce the size of the government intervention overall. In a sense Warren Buffet has already started operating in this direction as I am sure Paulson was very happy to see him choose to invest $5bn in Goldman Sachs. What Paulson needs now is cooperation with all financial players. Even hedge funds.
In some way, Curriki is very similar to Educ.ar, the foundation I started in Argentina (to which I donated 11.2 million dollars) to help improve education in my country of origin. Curriki is a community of educators, learners and committed education experts who are working together to create quality materials that will benefit teachers and students around the world. It is an online environment created to support the development and free distribution of world-class educational materials to anyone who needs them.
Curriki, as FON, is based on an open source platform.