Month / July 2011

by Shama-e Zaheer

US Debt Brinkmanship – The Global Financial/ Political Chicken Game

The Republican-controlled US Congress, the Democrat-controlled US Senate and the US President Barack Obama are playing a deadly “chicken” game with the issues regarding the US debt ceiling increase, tax raises and spending cuts.

The Republicans want to force the Democrats’ hands in not letting taxes be increased while initiating spending cuts; meanwhile the Democrats have declared dead-in-the-water any proposal that does exactly that. Neither House Speaker John Boehner (Rep) nor President Obama (Dem) has yet managed to find a middle ground acceptable to all parties.

With the August 2 deadline for raising the US debt ceiling or risking credit default looming, either party has to “swerve” or crash horribly into each other. This would have catastrophic consequences for both the US and the global economy.

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by Shama-e Zaheer

Aliyun OS – New Kid on the OS Block

Global e-commerce giant Alibaba has just unveiled its new mobile device operating system – Aliyun OS. It has been developed by Alibaba Cloud Computing, a subsidiary of the Alibaba Group. It has been introduced as a cloud-based operating system, featuring cloud services including e-mail, Internet search, weather updates, mapping & GPS navigation tools.

The cloud OS provides support for web-based apps as well, offering users an Internet-like experience that do not require the user to download or install application software on their mobile devices. Cloud OS users will be able to synchronize, store and back-up data such as contact information, call logs, text messages, notes and photos to the cloud and also access & update this data across all their PC and mobile devices.

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by Shama-e Zaheer

The Big Mac Index gets Garnished

The Economist just released an updated version of their Big Mac Index, having run a “best fit” regression line against GDP per person (the line does visibly appear to be a significant fit). A nice, novel metric, based on a measure referencing a good that may not be in the typical consumption basket across all economies.

“Currency Comparisons, To Go” from The Economist

by Shama-e Zaheer

Euro-Zone Bail-out: Media & Market Reactions

Greece has been bailed out. A number of steps have been initiated by the leaders in Europe. A modicum of stability has returned to the Euro-zone financial (and political) system.

Specific to Greece, euro-zone official lenders’ debts have been restructured in the forms of lowering interest rates from 5.5% to approx. 3.5% and extension of term from7.5 years to 15 or even 30 years. These have been backed by €109 billion bail-out money, an additional €20 billion for Greek bond buyback and €35 billion ECB collateral for Greek banks. Private creditors, officially recognized as Private-Sector Involvement (PSI) have been given a choice of either of three options – rollover of maturing bonds, swap with longer maturities (both backed by AAA  -rated collateral) or secondary market bond buybacks. However, the PSI has been defined to include only ‘voluntary’ and ‘substantial’ creditors, which would lead to a number of lenders being short-changed.

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by Shama-e Zaheer

Well, It IS Friday! (Shrug)

All the stars have aligned. It’s Friday, Rebekah Brooks, the Murdochs and News Corp are all over the news AND Rebecca Black has released a new video! So here goes a brilliant mash-up of Rebekah Brooks’ resignation and Rebeccas Black’s YouTube hit song ‘Friday’.

 

In case, you live under a rock, here’s the original (not the “original”, though). And No, I am not going to link the funny and the not-so-bright parodies floating around the Web.

Okay, maybe one :)

by Shama-e Zaheer

US Default: Impending Doom or Market Resolution

A good read of an article that discusses the possibility and impacts of a US debt default, brought about by Congress not increasing the US debt limit. The piece goes on to talk about (albeit briefly) about the global repercussions of such an event. Also, it touches on the likelihood of market movements forcing the govt’s hand.

The graph (not from the article), interestingly, paints a thousand words as it depicts the Lehman bankruptcy and the resultant cost of debt rise followed by the forced TARP announcement, resulting in some relief. Expect to see such curves just around the corner!

I am inclined to believe that the market will force some resolution to the current impasse between the Republicans and Obama’s policies. Irrespective of the outcome, the markets will suffer – default would set off a string of indices, ratings and prices fall, while resolution-imposed austerity measures will also have negative consequences, although not as profound nor catastrophic.

“US Default would Likely Cause …” from The Huffington Post