rajesh purohit / blog

One day I was having discussion with my colleague during lunch time about the impact of 2012 Olympics in London on City's economy. Specially, the East London. The discussion wasn't finished as neither of us had empirical data readily available at that moment to see if Olympic organisations had any Positive impact on the organising city if at all. So here are few links I googled to get to know if there were any positive impacts on host city's economy based on previous Olympic events. The discussion on this blog on New York Times suggests negative impact. Montreal's Olympic [1976] debt of $2.7 Billion was paid in 2005. Barcelona [1992] was neither in profit nor in loss but public debt went up to $ 6.1 billion. Same history was repeated at Sydney, Athens Olympics too. However, in case of Barcelona, Olympic helped the city to register the city on world tourist map. Moreover, Olympic event can be beneficial for the host cities on investments in terms of new Roads, Bridges ...

Barclays selling trouble making assets? Not really. Here it is Barclays is spinning off $12.3bn (£7.47bn) of troublesome assets to a fund based in the Cayman Islands and run by two senior former employees of its Barclays Capital investment management arm. The bank is lending Protium, the newly created fund, $12.6bn to finance the deal, which is also being financed with $450m from the fund's partners. Loss making assets are sold to ex-employees. This is great news. But lending to same people for these troubled assets isn’t this investing in troubled assets? What Barclays want to achieve here? Are they trying to save some bucks over tax or trying to offload their own bed assets but in turn gaining “new” business by lending money to its bed asset buyers? Such types of banking tactics made me thing that economy is far from recovery…

The problem of banks buying the assets from themselves.

With reports that GM might go bankrupt, study by Center for Automotive Research predicts that the failure of GM in an event where the company stops production would cost 2.5 million jobs in the U.S. in the first year. Some lobbyist are working for bailout package for auto industries like banking/finance sector but unlike Banks, these are Manufacturing industries and will have to produce and sell. If know one is willing to or able to buy their product how can they survive? GM can’t even file for Chapter 11 Reorganization. First, the cost of running GM is 11 billion $ per month. Second, selling some of it’s portfolio to rival is not possible because in these credit crunch no auto firm will have guts to buy out GM (may be in parts). Filing Chapter 7 Liquidation seems the only option… Newspapers, magazines, broadcast television and radio are already feeling heat of the downturn in auto industry. In the first quarter alone, the auto industry spent $414 million less on advertising than in ...

We are already in recession... Nov. 14 (Bloomberg) -- Sun Microsystems Inc., the world’s fourth-largest maker of server computers, plans to cut as many as 6,000 workers amid the global credit crisis. Royal Bank of Scotland will cut around 3,000 jobs worldwide over the next several weeks to reduce costs amid the global financial crisis, according to British media reports. 13 Nov 08 : Telecoms giant BT says it expects to have cut 10,000 jobs by the end of the financial year. The cuts will mainly affect agency and contract staff and offshore workers, the company said. The company said it had already cut 4,000 jobs, leaving a further 6,000 to go by the end of March. BT has a global workforce of 160,000. 12 Nov 08 : Chip manufacturing equipment company Applied Materials plans to reduce its global workforce by about 12 percent, or 1,800 workers, in a move to cut costs and streamline its business, the company announced Wednesday 11 Nov 08 : Yell plans 1300 job cuts in £100m costs drive Nort...

The bail out plan declared last week by UK Prime minister and Chancellor saw today nationalisation of three of major banks (okay only Barclays and HSBC is left now). Taxpayers will pay 37 billion £ for majority stack in the banks. RBS is to raise £20bn, £17bn will be put into HBOS and Lloyds TSB. Barclays intends to raise £6.5bn without government help. There are no free lunches now.. HBOS, Lloyd TSB and RBS will not pay cash bonuses this year and all future bonuses will be paid in stocks. This will prevent bankers to take short term goals and high risks.

The current credit crunch was result of excessive lending by naive bankers. The last thing which is required to correct this mess is to lower interest rates. When people are not saving enough, how can bank going to lend more and that too with low interest rates? The solution for all this mess is to increase interest rates, ask people to save more ask United States to cut spending on War and defense expenses This will result in lower spending in America and lower export for China, India or other countries and in turn will fuel recession. But all this is necessary to curb the problem before it result in world war III. Before lending to US, IMF or Asian banks should demand less spending on defense. Commodity speculations should be brought under control by banning all financial derivatives i.e. future contracts which does not result in physical delivery of commodity… This will keep investment bankers and gamblers out of commodity market and will result in fair price calculation of commodit...

Western developed countries were advocates of ‘free market’ and had forced some of asian economies to open their market for global firms. Now in their own backyard one of the ‘globalized’ firm has gone burst and they are now planning to ‘sue’ the country who now owned the global firm. The country in question is United Kingdom and it’s Prime Minister is furious that Icelandic bank operated in UK, which accepted deposits from UK nationals, invested in UK economy by providing loans to/buying stacks in major retailers, and when it goes burst couldn’t honour their debt. First of all why UK government councils didn’t keep their money in UK banks rather than ‘investing’ taxpayer’s money to foreign banks? What was the reason is it because of ‘greed’ or they didn’t have faith in UK banks? Councils kept millions of £ as investment in banks and kept raising council tax year after year. Now if councils couldn’t recover that money from Icelandic banks they will be forced to increase council tax aga...

We have heard of n number of investment banks, retail banks and few insurance firms going down the drain because of ‘credit crunch’. Now it’s turn for few countries for a change. Reports are Iceland and Pakistan is near collapse if they do not act quickly.  To start with Pakistan is near defaulting its debt. Pakistan 's credit rating was cut by Standard & Poor's, which cited doubts about the country's ability to meet $3 billion in debt-servicing costs in the coming year. Rumours are that Pakistan 's President Asif Ali Zardari is seeking $100 billion to overcome the nation's economic crisis. And I wonder where from he will get that amount of money when US congress itself is unpleased of giving 700billion$ to their own banks and insurance firms. The nation is running short of money to repay state debt. Pakistan 's foreign exchange reserves fell to $8.14 billion as of Sept. 27 from $8.80 billion a week earlier, central bank data show. That is less than ha...