RefBan

Referral Banners

Yashi

Saturday, September 10, 2011

The Big Picture

The Big Picture

Link to The Big Picture

The $ Cost of 9/11

Posted: 10 Sep 2011 12:00 PM PDT

I try to avoid getting caught up in the 9/11 retrospective hype. I’ve already had my say (A Personal Recollection From a Day of Horror (September 12th, 2001).

Meanwhile, here is the NYT’s infographic of the numbers:

Al Qaeda spent roughly half a million dollars to destroy the World Trade Center and cripple the Pentagon. What has been the cost to the United States? In a survey of estimates by The New York Times, the answer is $3.3 trillion, or about $7 million for every dollar Al Qaeda spent planning and executing the attacks. While not all of the costs have been borne by the government — and some are still to come — this total equals one-fifth of the current national debt.

>

Click for interactive data:

Source: 9/11 : The Reckoning
NYT, September 8, 2011

>

Previously:
A Personal Recollection From a Day of Horror (September 12th, 2001)

Postscript (September 16th, 2001)

Feedback from around the World (September 19th, 2001)

9/11 Reflections (September 11th, 2010)


Why Start Ups Fail to Scale

Posted: 10 Sep 2011 10:00 AM PDT

click for ginormous graphic
http://dl.dropbox.com/u/1604665/infographic_premature_scaling.jpg
By StartupGenome


Preparing for a Credit Crisis

Posted: 10 Sep 2011 09:45 AM PDT

Preparing for a Credit Crisis
By John Mauldin
September 10, 2011

The Consequences of Austerity
Euro Break-Up – The Consequences
Welcome to the Hotel California
The Slow March to Recession in the US
Preparing for a Credit Crisis
What Can You Do About the Weather?
Europe, Houston, New York, and South Africa

>

"I am sure the Euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created."

- Romano Prodi, EU Commission President, December 2001

Prodi and the other leaders who forged the euro knew what they were doing. They knew a crisis would develop, as Milton Friedman and many others had predicted. They accepted that as the price of European unity. But now the payment is coming due, and it is far larger than they probably thought.

This week we turn our eyes first to Europe and then the US, and ask about the possibility of a yet another credit crisis along the lines of late 2008. I then outline a few steps you might want to consider now rather than waiting until the middle of a crisis. It is possible we can avoid one but, as I admit, whether we do (and the extent of such a crisis) depends on the political leaders of the developed world (the US, Europe, and Japan) making the difficult choices and doing what is necessary. And in either case, there are some areas of investing you clearly want to avoid. Finally, I turn to that watering-hole favorite, the weather, and offer you a window into the coming seasons. Can we catch a break here? There is a lot to cover, so we will jump right in.

The Consequences of Austerity

The markets are pricing in an almost 100% certainty of a Greek default (OK, actually 91%), and the rumors in trading circles of a default this weekend by Greece are rampant. Bloomberg (and everyone else) reported that Germany is making contingency plans for the default. Of course, Greece has issued three denials today that I can count. I am reminded of that splendid quote from the British '80s sitcom, Yes, Prime Minister: "Never believe anything until it's been officially denied."

Germany is assuming a 50% loss for their banks and insurance companies. Sean Egan (head of very reliable bond-analyst firm Egan-Jones) thinks the ultimate haircut will be closer to 90%. And that is just for Greece. More on the contagion factor below.

"The existence of a 'Plan B' underscores German concerns that Greece's failure to stick to budget-cutting targets threatens European efforts to tame the debt crisis rattling the euro. German lawmakers stepped up their criticism of Greece this week, threatening to withhold aid unless it meets the terms of its austerity package, after an international mission to Athens suspended its report on the country's progress.

" 'Greece is "on a knife's edge,"' German Finance Minister Wolfgang Schaeuble told lawmakers at a closed-door meeting in Berlin on Sept. 7, a report in parliament's bulletin showed yesterday. If the government can't meet the aid terms, 'it's up to Greece to figure out how to get financing without the euro zone's help,' he later said in a speech to parliament.

"Schaeuble travelled to a meeting of central bankers and finance ministers from the Group of Seven nations in Marseille, France, today as they face calls to boost growth amid increasing threats from Europe's debt crisis and a slowing global recovery." (Bloomberg: see http://www.bloomberg.com/news/2011-09-09/germany-said-to-prepare-plan-to-aid-country-s-banks-should-greece-default.html)

(There is an over/under betting pool in Europe on whether Schaeuble remains as Finance Minister much longer after this weekend's G-7 meeting, given his clear disagreement with Merkel. I think I take the under. Merkel is tough. Or maybe he decides to play nice. His press doesn't make him sound like that type, though. They are playing high-level hardball in Germany.)

Anyone reading my letter for the last three years cannot be surprised that Greece will default. It is elementary school arithmetic. The Greek debt-to-GDP is currently at 140%. It will be close to 180% by year's end (assuming someone gives them the money). The deficit is north of 15%. They simply cannot afford to make the interest payments. True market (not Eurozone-subsidized) interest rates on Greek short-term debt are close to 100%, as I read the press. Their long-term debt simply cannot be refinanced without Eurozone bailouts.

Was anyone surprised that the Greeks announced a state fiscal deficit of €15.5 billion for the first six months of 2011, vs. €12.5 billion during the same period last year? What else would you expect from increased austerity? If you reduce GDP by as much as Greece attempted to do, OF COURSE you get less GDP and thus lower tax revenues. You can't do it at 5% a year, as I have pointed out time and time again. These are the consequences of allowing debt to get too high. It is the Endgame.

[Quick sidebar: If (when) the US goes into recession, have you thought about what the result will be? A recession of course means lower GDP, which will mean higher unemployment. That will increase costs due to increased unemployment and other government aid, and of course lower revenues as tax receipts (revenues) go down. Given the projections and path we are currently on, that means even higher deficits than we have now. If Obama has his plan enacted, and if we go into a recession, we will see record-level deficits. Certainly over $1.5 trillion, and depending on the level of the recession, we could scare $2 trillion. Think the Tea Party will like that? Governments have less control than they think over these things. Ask Greece or any other country in a debt crisis how well they predicted their budgets.]

The Greeks were off by over 25%. And they are being asked to further cut their deficit by 4% or so every year for the next 3-4 years. That guarantees a full-blown depression. And it also means lower revenues and higher deficits, even at the reduced budget levels, which means they get further away from their goal, no matter how fast they run. They are now in a debt death spiral. There is no way out, short of Europe simply bailing them out for nothing, which is not likely.

Europe is going to deal with this Greek crisis. The problem is that this is the beginning of a string of crises and not the end. They do not appear, at least in public, to want to deal with the systemic problem of too much debt in all the peripheral countries.

Without ECB support, the interest rates that Italy and Spain would be paying would not be sustainable. I can see a path for Italy (not a pretty one, but a path nonetheless) but Spain is more difficult, given the weakness of its banks and massive private debt. These are economies that matter.

How do they get out of this without a debt crisis on the scale of 2008? By coming to grips with the problem. Germany is apparently doing that this weekend, by preparing to use the money it was going to pour into Greece to shore up its own banks. That is a much better plan. But as a well-researched report (by Stephane Deo, Paul Donovan, and Larry Hathaway in the London office – kudos, guys!) from UBS shows, solving the problem will be very costly. The next few paragraphs are from their introduction.

Euro Break-Up – The Consequences

"The Euro should not exist (like this)

"Under the current structure and with the current membership, the Euro does not work. Either the current structure will have to change, or the current membership will have to change.

"Fiscal confederation, not break-up

"Our base case with an overwhelming probability is that the Euro moves slowly (and painfully) towards some kind of fiscal integration. The risk case, of break-up, is considerably more costly and close to zero probability. Countries cannot be expelled, but sovereign states could choose to secede. However, popular discussion of the break-up option considerably underestimates the consequences of such a move.

"The economic cost (part 1)

"The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak Euro country leaving the Euro would incur a cost of around €9,500 to €11,500 per person in the exiting country during the first year. That cost would then probably amount to €3,000 to €4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.

"The economic cost (part 2)

"Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalization of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around €6,000 to €8,000 for every German adult and child in the first year, and a range of €3,500 to €4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. In comparison, the cost of bailing out Greece, Ireland and Portugal entirely in the wake of the default of those countries would be a little over €1,000 per person, in a single hit.

"The political cost

"The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the Euro would incur political costs. Europe's 'soft power' influence internationally would cease (as the concept of 'Europe' as an integrated polity becomes meaningless). It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war."

Welcome to the Hotel California

Welcome to the Hotel California
Such a lovely place
Such a lovely face
They livin' it up at the Hotel California
What a nice surprise, bring your alibis

Last thing I remember, I was running for the door
I had to find the passage back to the place I was before
"Relax," said the night man, "We are programmed to receive.
You can check out any time you like, but you can never leave!"

- The Eagles, 1977

You can disagree with the UBS analysis in various particulars, but what it shows is that there is no free lunch. It is not a matter of pain or no pain, but of how much pain and how is it shared. And to make it more difficult, breaking up may cost more than to stay and suffer, for both weak and strong countries. There are no easy choices, no simple answers. Like the Hotel California, you can check in but you can't leave! There are simply no provisions for doing so, or even for expelling a member.

The costs of leaving for Greece would be horrendous. But then so are the costs of staying. Choose wisely. Quoting again from the UBS report:

"… the only way for a country to leave the EMU in a legal manner is to negotiate an amendment of the treaty that creates an opt-out clause. Having negotiated the right to exit, the Member State could then, and only then, exercise its newly granted right. While this superficially seems a viable exit process, there are in fact some major obstacles.

About Human Resources: Find Out About Jury Duty Leave: New Policy

If you can't see this email, click here

About.com

Human Resources

Employ People

Manage People

Succeed at Work



From Susan M. Heathfield, your Guide to Human Resources

Vol. 12 No. 121 - ISSN: 1533-3698 September 10, 2011

Dear People:

My email has brought me a disturbing trend recently. Some employers are asking prospective employees for their passwords to social media sites in which they might participate such as Twitter, MySpace, and Facebook. I'm not talking about the public, professional profile the potential employee may have carefully developed on sites such as LinkedIn. LinkedIn is a professional networking site where potential employees want you to look and read about their accomplishments and connections.

I'm talking about the social media sites where some prospective employees lock their tweets and set up privacy filters on their Facebook pages because they want only friends and family to share. What do you do in your workplace? Do you snoop online to learn more about your prospective employees? Vote in my poll, too, as you read more about employers and online media.

Do you know that I write a new blog post every day? Check out the blog in the center column on my home page.

Comments, questions, suggestions? Email Me.

Please forward this newsletter, in its entirety, to your colleagues, coworkers and friends, because you want to add value to their work and lives.

Regards and wishing you and yours the best this weekend,

Susan


Find Out About Jury Duty Leave: New Policy

Did you know that the average percentage of employees who receive paid leave for jury duty across all industries, except for the Federal government and private households, is 72%? The average percentage of managers who receive paid leave for jury duty ranges from 82-85%. Find all of the ins and outs of jury duty.

See More About:  jury duty  paid leave  paid time off

Nix Political Discussion at Work

In a workplace that honors diversity, every person's politics, religious beliefs, sexual activities, and opinions about non-work issues, should, for the most part, stay home. Unless you work in a setting that is dependent on a particular set of beliefs, such as a Republican Party field office, an environmental lobby group or a church, you risk much more than you can hope to gain when you raise sensitive issues at work. Read more...


How to Be the Person Others Follow

Leaders are hard to find. They exhibit a unique blend of charisma, vision and character traits that attract people to follow them. They exhibit these nine characteristics... Read more...


Most Employees Come to Work

In organizations, people have a tendency to write policies to punish and control the behavior of the few gamers. Let's talk about recognizing employees who come to work as much as you deal with absenteeism and gamers. The reality is that most employees are at work most of the time - and that's a good thing. Read more...


 


Human Resources Ads
Featured Articles
How to Change Your Culture
A Magical Team Building Activity
Adding Tasks for Front Desk Staff Who Are Used to Free Time?
Top 10 Ideas About What Employees Want From Work
Celebrate Life: Workplace Remembrance
The Truth Will Serve Your Job Search

 

More from About.com

Favorite Summer Frozen Drinks
Blended with ice or chock full of fresh fruit, these yummy drinks will liven up any warm-weather gathering. More>



Best Frozen Summer Desserts
Ten easy, delicious, make-ahead desserts that will cool you down on the hottest of summer days. More>




This newsletter is written by:
Susan M. Heathfield
Human Resources Guide
Email Me | My Blog | My Forum
 
Sign up for more free newsletters on your favorite topics
You are receiving this newsletter because you subscribed to the About Human Resources newsletter. If you wish to change your email address or unsubscribe, please click here.

About respects your privacy: Our Privacy Policy

Contact Information:
249 West 17th Street
New York, NY, 10011

© 2011 About.com
 


Must Reads
Human Resources Basics, Careers, Jobs
Free Human Resources Policies, Samples
Human Resources: Job Interview Tips
Human Resources Job Descriptions
Top 10 Human Resources Tough Questions

Advertisement

Yashi

Chitika