Global Investing

Watch the bezzle

January 14, 2009
  Who is next? After the Madoff and Satyam scandals, rattled investors are looking anxiously over their shoulders for the next big financial fraud.   It is generally assumed that the downturn will expose more wrongdoings - but that doesn’t mean people become more dishonest when the economy is sick. In fact, quite the opposite, according to John Kenneth Galbraith’s definitive 1954 work “The Great Crash, 1929.”   When it comes to embezzlement, it’s all a question of how visible the “bezzle” is, he argues.   Galbraith’s 200-page history of the world’s biggest boom-and-bust has stormed back into the bestseller lists in recent months, giving modern-day readers a glimpse of how speculative markets became divorced from reality 80 years ago and the hazards this created.   His words are as relevant as ever:   At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country’s businesses and banks. This inventory – it should perhaps be called the bezzle – amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.   (Reuters photo: Disgraced financier Bernard Madoff is escorted by police as he departs U.S. Federal Court after a hearing in New York, January 5, 2009)

from Africa News blog:

Forgiveness in paradise?

January 10, 2009

If you lived on an archipelago that defined paradise with palm-fringed white sand beaches and emerald green waters, you would expect a relaxed, lazy pace of life.

from MacroScope:

Sssh. Don’t say stimulus

December 15, 2008

William Safire, the language maven whose musings on how we use words have graced The New York Times and other newspapers for decades, has discovered something about the current crisis. Not for the first time, politicians are scrambling to avoid using common words that might get too close to the truth.

Robin Hood in reverse?

December 1, 2008

Thirty-first U.S. President Herbert Clark Hoover once said: “Blessed are the young, for they shall inherit the national debt.”

To spend, or not to spend?

November 25, 2008

A day after Britain unveiled a multi-billion-pound fiscal stimulus package to spend its way out of recession, market analysts have been busy figuring out what it all means, in the context of a sharply slowing economy.

Are you revolted yet?

November 20, 2008

Financial markets might be in distress and stocks are falling through the floor, but according to James Montier, global strategist at Societe Generale, we are not in the final stage of bubble burst yet. For one thing, the Financial Times is still too big.

At a fund managers conference in London today, Montier — a renowned bear — noted a thesis by economists Hyman Minsky and Charles Kindleberger that bubbles go through five stages — displacement, credit creation, euphoria, critical stage/financial distress and revulsion.

from Pakistan: Now or Never?:

“Plan C” – Pakistan turns to the IMF.

November 16, 2008

Pakistan has agreed with the International Monetary Fund (IMF) on a $7.6 billion emergency loan to stave off a balance of payments crisis. 

A riot of a recession

November 7, 2008

Every month, the financial services company State Street studies the trillions of dollars in institutional investor money it looks after as custodian and tries to gauge where things stand. Over the years, it has come up with a map consisting of five different regimes, or moods, to reflect this. They range from the bullish “Liquidity Abounds” in which investors buy equities and focus on growth, to the uber-risk averse “Riot Point”.

Some shock, horror numbers from global stocks

October 20, 2008

Some mind-boggling numbers from the MSCI all-country world stock index, which is one of the broadest measures of how equity markets are doing and is a benchmark for many institutional investors. The index has some 2,500 companies in it from 48 developed and emerging economies.

Tick, tock to global recession?

October 16, 2008

Every month, Merrill Lynch asks a few hundred fund managers around the world what they think of the state of things. Not surprisingly, this month’s survey is probably the gloomiest yet. Everyone, says Gary Baker, the strategist charged with explaining the poll, is a macro bear suffering from hyper risk-aversion.