Little Girl's HAPPINESS!!!

When a little girl in a candy shop ran out of her pocket money, she innocently asked her daddy "Daddy, why can't we buy more money?"

Well, the little girl should rather have asked "Daddy, why can't we print more money when the central bankers are doing it all the time?"

Do Mr. Bernanke or Mr. King have any answers to this little girl's question?

When the average salary of Goldman Sach's employee was more than half a million dollars, we knew there would a run on the leveraged banks. Then instead of reigning in the greedy wonkers, the politicians and media were extolling the genius of leverage.

When finally there was a run on the banks, George Bush appoints the biggest crook of all, the then CEO of Goldman Sachs, Hank Paulson as his Treasury Secretary. Paulson naturally protects the interests of his pay-masters and pours billions of tax-payers money in saving the same banks all in the name of "saving the economy from Armageddon". Very neatly he converts the 'banking crisis' into 'sovergein crisis'

Now, enter the Act II players like Mr. Ben Bernanke and Mr. Mervyn King. All in the name of saving the economy they open up the printing presses. We hear terms in QE1, QE2, QE3, Bond Purchase etc., thereby laying the platform for the next mutation of the crisis which is the beast called Inflation.

Well, if the hell of inflation is the final destination for all of us, then why not make the little girl happy and let her dad print money?

Kind Regards,

Pradeep Kabra

Anatomy of a Modern Trader

Since you can't 'beat' market, why not 'cheat' market!!!

As the Wall Street Journal reported today, the cheating is done via a technique called 'layering'

Step 1 - Register the trading firm in tax-haven to avoid paying taxes in a 'legal' way ofcourse.

Step 2 - Get some high-speed computers and hire traders in far-flung parts of the world from China to Romania.

Step 3 - Make them work across the time zones aligning with New York / London / Tokyo

Step 4 - Play the game as follows:
a trader might buy a small number of shares at $ 10 and place an order to sell them for $ 10.10 on an alternative trading venue, such as a dark pool. He also places a series of large orders to buy this same stock on an exchange for higher prices—$ 10.20, $ 10.30 and $ 10.40—“layering” on orders that create an impression of strong demand.
When this apparent demand prompts other market participants to raise their “buy” orders to $ 10.10, the trader’s “sell” order is executed and he instantly cancels his large buy orders, pocketing a 10- cent- a-share profit.
The trader also may do the opposite— placing a small buy order at $ 9.90 and simultaneously several large sell orders at lower prices that will draw the market price downward, the direction the trader now wants it to go.

Step 5 - When caught, pay the fine without admitting or denying the charge after dragging it in courts for few months against regulators.

Step 6 - Disband the company and go back to Step 1 with another name.

Regards,

Pradeep Kabra

Re: A canny way to revive our moribund housing sector

Dear Sir,

M/s Besley and Leunig give some good suggestions on finance and supply side of housing market.

However, it will not solve the first-time buyers conundrum. The problem is not shortage of properties. The population of UK has not exploded in the last 50 years that the houses are short.

The problem is the available homes are allowed to be taken up by the non-resident foreigners who not just take up the properties meant for locals but also inflate the price in the process thus creating a shortage of properties and rendering the surrounding properties out of reach of the first-time buyers.

The second problem is easy finance available to privileged few to gobble up multiple properties thereby locking up the properties creating artificial shortfalls for first-time buyers.

The solutions are as follows:

On the finance side, the properties should be available on mortgate to foreigners only if they are resident in the country. Also, the deposit rate for more than one house owners should be atleast 50% of the value of property.

On the supply side, the planning regime is robust and decentralised enough.

It is not the planning authorities who are at fault as the authors suggest. It is thanks to the planning restrictions that UK didn't go the Spainish way where there are more than 700,000 new finished unsold homes which distorted the Spanish economy beyond means and is the root cause of their financial downfall.

The fact is many commentators in the past and present have used first-time buyers as a front-end to fulfil their or their masters (read banks, construction firms) needs.

Kind regards,

Pradeep Kabra


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A canny way to revive our moribund housing sector

By Tim Besley and Tim Leunig in Financial Times on 12-Jun-2012

The construction industry has ground to a halt. The Office for National Statistics reports that house building in the first quarter was 20 per cent down on a year ago, 50 per cent down on 2005, and 80 per cent down from levels that prevailed in the late 1960s. This is bad for growth and bad for employment.

There are two problems. First, the need to rebuild balance sheets means that lenders are not offering mortgages in reasonable quantities, particularly to first-time buyers. Second, the planning system inhibits the availability of land even when people are willing and able to cover construction costs. The result is high land prices and high house prices.


Both problems need to be addressed simultaneously. If we sort out finance but not supply, house prices will rise. If we sort out supply but not finance, no one will be able to buy the newly built houses.

As regards finance, we propose that government should give the best housing associations a new role. They would issue bonds – underwritten by government – at low interest rates, secured on their (new) income stream. These bonds should appeal to pension funds who want long-term secure assets and would generally offer fixed rates of interest. Such bonds may be acceptable to the Bank of England were it to widen the scope of quantitative easing.

Housing associations would then contract with developers to build houses and flats, which the association would sell or rent in the open market. Crucially, it would also offer mortgages on the properties it sells. The interest rates would be low, reflecting the association’s low cost of capital and not-for-profit status. The private rented market is relatively buoyant, so the housing associations can build safe in the knowledge that they will be able to sell or rent the completed properties.

Housing associations would have conservative lending criteria in line with their not-for-profit status, but they would offer long-term, fixed-rate, low-start mortgages. The fixed rate means borrowers will not face large rises in monthly payments when interest rates increase from their current low levels. Low-start mortgages would have monthly payments with an optional 2 per cent per year rise, so payments increase roughly in line with inflation. The initial payment would be calibrated so that, if the borrower always accepts the rise, they will own the property after 25 years. If they never accept the rise, then they will own half the property after 25 years, at which point the mortgage can be extended, or they can be moved on to a part-own, part-rent model. Housing associations are experienced in this.

Housing associations would be able to buy land with planning permission from developers. To ease supply constraints, we propose allowing councils to offer farmers £75,000 a hectare for their land – and then to grant themselves planning permission before selling the land on to developers, including the housing associations. Important amenity land, including the greenbelt, would remain protected. Admittedly, £75,000 is far less than farmers would get were they to receive planning permission by conventional means – but far more than the land is worth for agriculture. This scheme would therefore appeal to farmers who did not expect to receive permission conventionally. The council, of course, stands to make money. This could pay for new services or lower council tax and would help persuade local residents to support rather than oppose development in their area. In order to prevent the land being banked, the planning permissions would require the purchaser to develop the site within three years.

This is not a strategy for the long term. In the long run, we need well-capitalised banks able to lend to credible borrowers, to buy houses built by commercial developers who can obtain land in a timely manner.

Today, however, we are in a deep recession of uncertain duration, and that calls for unconventional measures. Governments can and sometimes should underwrite markets and create institutions that can reduce risks by internalising them. In this case, and for two or three years only, housing associations, underwritten by government, get the housing sector moving again. This will increase employment, and growth, and allow more people to be housed decently than are now.

The writers are a professor at the LSE and chief economist at the CentreForum think-tank respectively

We're All In It Together - ARE WE???

It's been 4 years since the financial crisis started as soon as Lehman Brothers went under. Still there is no light at the end of the tunnell. While the unelected central bankers are printing loads of money without any thought for the hardworking strivers and savers, the blame game goes on...

While The Bankers blame everybody (regulators, politicians, central banks low interest rate policy, greed of people, rating agencies) EXCEPT THEMSELVES.
The Regulators blame everybody (bankers greed, meddling politicians, central banks low interest rate policy, lack of resources, audit firms) EXCEPT THEMSELVES.
The Politicians blame everybody (greedy bankers, party in power, care-free independent central bankers, rating agencies, audit firms) EXCEPT THEMSELVES.
While the 'unelected-unaccountable' Central Bankers don't care to blame anybody, at the end of the day, it is the hardworking strivers and savers whose money these market-players are devaluing.

Welcome to the today's capitalist world of 'privatised profits and socialised risks' where 'the hardworking strivers and savers are punished while the free-wheeling risk-takers on other people's money are rewarded'

And then having the nerve to say 'We're All In It Together'!!!

Regards,

Pradeep

Re: Halt the Silicon Valley histrionics

Dear Mr. Gapper,

Thank you for the article on piracy in the FT on 19-Jan-2012.

The point missing from your article is 'what you sow is what you reap' - meaning, you never mention the copyright protection which used to be less than 20 years is now ridiculous to more than 100 years. How can the artists and industry claim to lose out when they are extending the copyright from 20 to 100 years?

The fact is when the industry/artists got greedy, silicon valley came as a boon to the consumers to check the industry's greed using technology.

In the end, what one sows, is what one reaps."

Regards,

Pradeep
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I entirely agree with that - I think it was a fundamental error for corporations to extend copyright protection in that way - not only because it is unjustified but because it clearly divorced the interests of creators from corporations. I've written that in the past.

John G.
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anuary 18, 2012 8:07 pm
Halt the Silicon Valley histrionics
by John Gapper in Financial Times

The internet industry scored a tactical victory this week with Wednesday’s blackout of sites such as Wikipedia and Reddit, and the White House’s decision to oppose parts of two bills intended to curb the file-sharing of films and copyrighted material. “Piracy rules,” tweeted Rupert Murdoch angrily.

I hope not, because Silicon Valley damages itself with its persistent scaremongering over efforts to crack down on piracy. By refusing to engage in a serious effort to prevent it – instead of equating copyright enforcement with censorship, or with “breaking the internet” – it undermines its credibility.

The Digital Millennium Copyright Act of 1998, which it now holds up as a model, was awfully dangerous back then; music companies were stupid to “sue their customers”; governments that halt internet access to persistent file-sharers are breaching their human rights. And now the Stop Online Piracy Act (Sopa) merits a blackout by websites that it isn’t meant to affect.

“Don’t limit your opinion to what’s the wrong thing to do; ask yourself what’s right,” the White House’s internet advisers warned on Monday. So far the industry has ducked that challenge, preferring to stick to its trusty, empty talking point: “Piracy is bad but [fill in the blank] is the wrong solution.”

There are exceptions. Google, despite using its US homepage in protest at Sopa and the Senate’s Protect IP Act – and Mr Murdoch’s tweet that it is a “piracy leader” – has a serious position. It believes that rogue sites should be starved of payments and advertisements.

Mostly, however, the industry’s stance is exemplified by Union Square Ventures, the New York-based venture capital group, which plastered “Stop Censorship” over its logo. Fred Wilson, a partner, argues for ditching Sopa altogether and sticking with the DMCA because internet start-ups “are the golden goose of the economy and we cannot kill the golden goose to protect industries in decline”.

The logical flaw here is that the DMCA is a domestic law that does nothing to halt the abuse targeted by Sopa and Protect IP – mass piracy through foreign rogue sites. From a tactical point of view, Silicon Valley has done a fine job of conflating the two but that is misleading.

Indeed, it is because the DMCA has been effective in limiting the copyright abuse that was once rampant on sites such as Google’s YouTube that pirates have moved offshore. From cyberspace – out of reach of the DMCA or domestic enforcement – torrent sites provide free downloads of others’ films and music, making money through subscriptions and advertising.

Not only is this wrong but it is a scourge on investment in creative work. I don’t trust the statistics thrown around by either side about how precious they are – does the US really lose $58bn in economic output annually from piracy, as the Motion Picture Association of America claims? – but authors, songwriters and film-makers clearly suffer.

Writers and publishers such as Cory Doctorow and Tim O’Reilly argue that they benefit from free distribution of their work as a form of free marketing. That suits them but it should be an individual choice – copyright has existed in the US since 1790 for good reason.

When Maria Pallante, the US register of copyrights, tells Congress that if it does not address offshore piracy “the US copyright system will ultimately fail”, she ought to be taken seriously. It is inadequate for Silicon Valley to dismiss it as the whining of a rival industry, although there is some of that.

Silicon Valley’s biggest rallying cry was that Sopa included (until the provision was withdrawn last week) court-ordered blocking of rogue sites by internet service providers. Civil rights activists such as Rebecca MacKinnon, a New America Foundation fellow, compare this to censorship in China and others claim it would “break” the architecture of the web.

If so, the internet is already broken in the UK, which has blocked child pornography sites through ISPs since 1996. Following a high court ruling last year, Cleanfeed site-blocking technology will be used against foreign pirate sites by BT and other British ISPs.

Indeed, plenty of search engine links are removed and sites blocked in the US, both under the DMCA and anti-counterfeiting and prescription drugs legislation. Go Daddy, a domain name registrar that initially supported Sopa but then retreated, suspended 150,000 sites for illegal or malicious activity in 2010.

The question is not the nature of the technology but whether its use is merited for copyright infringement. That is a fair debate but the UK judge who examined the issue of the right to free speech versus the right to intellectual property protection on the web under the European Convention on Human Rights came down in favour of blocking.

Blocking now appears to have been stripped from Sopa, which leaves other mechanisms such as cutting off payments to rogue sites through credit card companies, and removing US advertisements. If the internet industry wants to demonstrate good faith, it should suggest what might work, not endlessly protest.

Ms MacKinnon rightly points out that overzealous enforcement can harm other liberties – any regime must be balanced. But the absolutist Silicon Valley line that its rights override Hollywood’s – “intellectual property is theft”, tweeted John Perry Barlow of the Electronic Frontier Foundation – is wrong.

The blackouts were a dramatic gesture but curbing piracy does not “destroy the internet as we know it”. It would be wiser for Silicon Valley to cut the histrionics and help to fashion a decent law.

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