22.01.2009

Politics & the Nation

• US Presidential inauguration
• While we have missed out on our notings yesterday, the taking of oath by Obama is one major event that we couldn't miss.  There was a media blitzkrieg covering it.
• Now that he is saddled in power, what are the options that are before him to put US economy in order?
• Creating a 'bad' bank or banks to hold hundreds of billions of dollars worth of “toxic” mortgage-based and other hard-to-sell assets acquired from commercial banks. The ‘bad’ banks could be leveraged up with private money. Obama’s team could also place the bad assets with existing, specialised private fund managers. But funding such an operation will need huge sums. 
  
• Provide more guarantees for the risky assets held by some of the biggest US banks. However, setting up these loan guarantees on a case-by-case basis may be more complicated than establishing a bad bank. Some economists also say new loss guarantees might be less effective in terms of convincing investors that radical action is being taken to tackle the root of the crisis. 
• Infuse more capital into banks.  Many banks, battered by losses and plunging share prices, have had to turn to the US government as their investor of last resort. 
• Nationalizing the banks.  The US government is already a big shareholder in some leading banks, including Citigroup, but few investors think it is likely to take them over completely and will effectively nationalise their bad loans instead. However, Obama’s team is likely to use its influence as a powerful shareholder in banks to press them to lend more and clamp down on huge pay and bonus packages to top executives.
• The state of our politics
• One ET editorial of today says that our politics remains the same old shoddy matrix of personal ambition, family inheritance and petty caste and individual intrigues.  Can't agree more.

Finance & Economics

• Blistering pace in telecom connectivity
• India's telecom story is a compelling read.  Highlights:
• No. of mobile users as at the end of December, 2008: 346.89 mn.
• Total no. of telephone connections (mobile and landline): 385 mn.
• Currently about 10 mn mobile customers are being added per month; this figure is likely to touch 12 mn in the second half of 2009.
• Chief Statistician of India & news about deflation
• Pronab Sen
• He is quoted as saying that India may experience a brief period of deflation - a decline in general price levels, as opposed to inflation — between March and June, till the economic stimulus packages announced by the government revive demand in the economy.
• I think many of us will be looking forward to experience this.
• But bond market analysts are writing this off as nothing more than a statistical effect and predict that it will not last more than two months.  This view is predicated on the absence of an inverted yield curve — where long-term bond yields are lower than short-term bond yields — that usually precedes recession and deflation.
  
• What are MGCs?  Mortgage Guarantee Companies.
• Mortgage insurance products are insurance tools that help an individual to buy a house with a low down payment, less than the prescribed average of 20%. The products are purchased by the lenders and paid for by the borrowers. 
• If, for any reason, the borrower stops making payments, mortgage insurance protects the lender from financial loss. As lenders have the protection, they are able to offer more mortgage loans with lower down payments. 

International

• Barack Obama temprarily halts Guantanamo trials
• The very first act of the newly elected President of the US is calling for a halt to the the Guantanamo Bay prison trials.
• This is where some 250 inmates accused of having links to terrorism remain and 21 cases are pending.
• The legal process has been widely criticised because the US military acts as jailer, judge and jury.
  
• Ever heard of Minerva?
• That's the nom-de-plume of Park Dae-sung of South Korea.  He is an avid blogger in economics and finance.
• As his opinions have started affecting the money markets in South Korea, the government there thought it fit to try him and put him behind bars.  
• Toyota is world's No. 1 car maker
• Toyota Motor Corp ended General Motors Corp’s 77-year reign as the world’s largest automaker after avoiding the worst of the meltdown in global auto demand. GM’s 2008 sales fell more than 11% to 8.35 million vehicles. Toyota posted a 4% drop to 8.92 million. 
  

Language lessons

• nom de plume: pen name