Business and Law Advocates

The concern, uncertainty and confusion is already installed in all areas related to financial and economic world. The strong cohesion between global markets means that a crisis in any part of the planet to have immediate influence the economy of any country, first by the financial side and then part of the real economy of all individuals within it.

This article seeks to interpret the origin and effect of this financial crisis, which should be vigilant, since everything is indicating that we are only the tip of an iceberg and probably we find a larger crisis in history. Some people compare it to the depression of 29 ‘and others going further.

Much has been said of China and India entering the global market, as large holders of the progress of the global economy. Structural changes in world trade mutated, causing the relative prices of goods related to technology access and descend by the impact of production mainly China, which led to a great mass of consumers enter the market annually to conform increasingly larger. Read the rest of this entry »

Since long before the crisis erupted was discussed among economists whether the growth cycle of the U.S. economy would end with a landing “soft” or “hard.” Today this discussion behind us, no doubt that the landing will be (is) hard, the discussions now are different.

What questions will the breadth and depth? Will it affect the real economy or be encapsulated in the financial sector? Is the U.S. economy will slow down or go into recession? Is there any possibility of decoupling, ie there are countries that are independent of the crisis? How can impact in Latin America?

There is an immediate conclusion: no more cheap money and credit crunch could mean a strong hiatus for the U.S. economy because of its strong propensity to consume can affect the productive sector (so-called real economy) and bring to a recession, with the foreseeable impact on the global economy. Hence the world’s leading banks leave to inject liquidity into the markets for amounts actually amazing.

So far the official indicators do not allow talk of recession, but have lost thousands of jobs in construction and industry side, it is estimated that 100,000 jobs lost, and the estimates assume zero growth for U.S. economy in the current year , while the European Union considers that it will reduce its growth rate, already weak.

The thesis of decoupling in the recent past and in time with the deepening of the different voices have trumpeting the decoupling thesis. That is, the possibility of countries and entire regions have isolated form of global impact.
For it is argued that the crisis will be encapsulated in the financial sector, China’s economy has enough force to compensate for falling U.S. and several Latin American countries including Argentina, have achieved a kind of armor, a result of the bulky level of reserves and the commercial and financial surplus achieved, so be marginalized.
However, these theses have begun to weaken a little knowledge of recent IMF estimates about the cost of the crisis. Their calculations, although the IMF is an institution and very discredited and unreliable-show computations of the order of 945 billion dollars of these mortgage loans 545 000. The figure becomes relevant not only for its colossal size, but because until not long ago was estimated at half that figure. This week has seen the Bank of England decide a historic bailout of 100,000 million dollars to recreate the trust bank, which could be double. It seems fair to expect further turmoil or impressionist and bailouts.

It is inevitable that the crisis result in a reduction or loss of profits, that should be covered in more capital contributions, if this were not enough there will be massive bankruptcies. But by the time the crash does not occur, and it is doubtful that finally takes shape, the coordinated international intervention seems to give some results. It is worth asking: where have been the neoliberal postulates that rejected outright any government intervention?

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In general our country has undervalued exchange rates to improve its international competitiveness, with exceptions such as Brazil and Mexico have greatly appreciated their currencies and have other financial mechanisms to promote their exports.

But this growth cycle is at the expense of primarization economies, a weak industrial growth, the levy of natural resources and environmental degradation. And especially the maintenance of deep social inequalities, these are noted in access to housing, health, education, land and communications.

Today in Latin America is considered poor, 38.5% of the population (205 million), 53 million go hungry and 16% of those already suffering from chronic malnutrition. The richest 10% 48.6% appropriates the wealth produced by working alone, while the poorest 10% receives only 1.6%. The gap is 30 times. (Another digression: in our country are about 11.5 million poor people, and more than 3 million homeless and the gap is 31 times higher than in the crisis of 2001).

But the extraordinary low interest rates in the U.S., three years at 1% per year, less than inflation and the lowest in at least the past 50 years, created a highly liquid, a plethora of financial capital is the origin of the housing bubble that burst in the middle of last year.

“Subprime mortgages”, “credit markets,” financial derivatives “,” investment funds “,” complex structured investments “that were supposed distributing the risk and capital more efficiently and not involved only banks but other institutions were created for the purpose, are all without any state control instruments and violating the most elementary rules created to provide financial affairs on the basis of an enormous mass of virtual capital. That’s why there was talk of an expansive cycle lying about finances. Read the rest of this entry »

Eduardo Lucita
I thank the organizers for kindly inviting me to be here tonight with you and exchange ideas on the global crisis and its possible impact in Latin America, an international crisis has one dimension whose range and depth are still unknown, daily, new data and evidence that is the most serious crisis of the capitalist system as such since the 30s.
In what follows I will try, as succinctly as possible, give an idea of ??its origins, evolution until today and what their consequences might split our region.

I do not I locate the origin of the crisis in the real estate bubble burst in the U.S., there is much evidence that conditions of crisis of U.S. capitalism is being prepared since long before, however, even though conditions are dragged from long ago , but at this juncture could locate, a little provocatively, in the attack on the Twin Towers in 2001, because this attack allowed the Bush administration to take a series of political and economic measures that drove the U.S. economy from a very low growth and recession that will show in the period 2000 / 2003.

The September 2001 attack on the Bush administration can unify the domestic public opinion regarding military intervention in Afghanistan and Iraq. This redeployment of militarism was accompanied by a sharp drop in interest rates and tax cuts to big business and the sectors with the greatest ability to pay.

You have to take into account the importance of military-industrial complex has for the American economy, there are estimates showing that every dollar that comes from the complex is transformed after a year in four in GDP – which combined with low interest rates and lower tax burden pushed up domestic consumption.
The U.S. consumes more than they produce, and the gap between consumption and production are met by imports, the result is the extraordinary trade deficit that became the order of 6.5% of GDP.

Now this economy also saves less than it invests, this bump is covered by foreign investment, that more tax cuts and credits to finance the war in Iraq and Afghanistan invasions brought the fiscal deficit to 6% of GDP. (Please note that the Clinton administration withdrew, leaving a fiscal surplus of around 200,000 million dollars).
That’s why we talk about the twin deficits. Trade and finance.

In short, the economy began to recover due to strong domestic consumption were five years of growth that impacted positively on the global economy. You must know that, at least so far, 60% of global economic growth is explained by the U.S. Consumer (A digression if I may and we’ll see a little more detail in the seminar we will do Friday and Saturday, but the world economy begins to recover in the 2nd. quarter of 2003, Argentina’s economy began to emerge from the crisis in the 2nd. quarter of 2002, a year earlier. I mean who advanced to the cycle world was better prepared to receive the momentum of global growth.)

In parallel with the recovery there is a significant change to what is known as the international terms of trade. If what was characteristic in the last 40 or 50 years that the Third World countries should continuously enhance its exports of raw materials to offset the increased value of manufactured goods they imported, which was called the “unequal exchange” now is the reverse.

You could say we are going through a period of relative overproduction of manufactured goods, and therefore low prices, and relative scarcity of raw materials, grains, minerals, metals, and energy, and therefore higher prices.
This change in the terms of trade have favored the recovery of Latin America. Virtually all countries in the region grow, some at rates very important as Argentina, Venezuela and Nicaragua, but overall on average grow faster than the world average. “In every country there is a recovery of international reserves, almost all have fiscal and trade surpluses, foreign debts are less burdensome in terms of GDP than in the 90s, in several countries, industrial sector recovery (case Argentina).

The restriction on credit, higher oil prices and strong adjustment in the construction sector have led to the current economic crisis, with serious economic slowdown, inflation and alarming growth of unemployment.

The U.S. economic crisis had its origins in subprime mortgages, which are those that were granted to customers with poor credit or with little guarantee that they could afford to pay their dues. In a globalized world we live in, the subprime virus born in the U.S. and its consequences have found the perfect way to get create a serious infection of the entire global financial system. The banks that promoted subprime mortgages, they needed more money to continue offering this kind of mortgage loans. To this end, introducing structured products sold to other financial institutions and thus obtained new liquidity with which they could continue with their activities and giving new subprime mortgages. The subprime virus has gotten sick the global financial system and cause an international economic crisis of catastrophic consequences.

As discussed, these mortgages in a globalized world, proved unable to financial institutions around the world. The banks lend money to each other in the so-called interbank market and banks have come to have a deep mistrust between them, because they think of each other, which can be infected by subprime mortgages. Crashes and the circulation of money. The money does not flow and this leads to a weakened economy, because if the banks have no liquidity, can not give, or families, or businesses, the appropriations necessary to carry out their projects.

The Spanish economy, as European countries, also suffers from the dramatic situation of economic and financial crisis. Spain has suffered a series of impacts that have seriously damaged its economy and succeeded in converting a high GDP, low growth, going from a good few years to reduce unemployment, increased concern about this, and a low and stable inflation bordering on a known price stability , (as desired by the European Central Bank (ECB), and defined as an annual rate of price change close to but below 2%) to inflation overwhelmed and exceeded 5%; September but closed at 4.5% by the fall in oil and in October stood at 3.6%. In the following months continued a downward path and soon it went from high inflation to come on the scene the ghost of deflation. Read the rest of this entry »

Buy spot
The first tips is to always buy in cash, never credit a few exceptions such as when you want to buy our house or invest.

Buy credit not only enormously expensive product to permeate our personal finances, but ultimately can bring big financial problems are unable to repay debts.

We must acquire the habit of buying after getting the money, not buy and then get it, if we can not buy something simply should not buy it.

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The tax increase is already a reality. The select group of people who can devote a percentage of their income to savings, you’ll see your gains are worth less thanks to increases in taxes on capital gain taxed at 20% instead of the current 18%.

Economists say this will increase the state tax rate savings of 1000 million euros. Thus, while the returns are dwindling now also taxes the investment will rent alone.

A measure that is not a real solution to the deficit assumed by the state and which is intended to ensure that consumers become savers again to increase demand and borrowing and thus solve the problems without carrying out measures for production sustainable and a strong labor market.

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Many people are terrified by the current economic crisis, especially people who are least able to cope with problems like we are living. For many these are uncharted waters so you do not know how to handle a situation. In many situations and make mistakes led by uncertainty.

However the fact that many will this go badly does not mean that you are going to go anyway unless they commit the same mistakes as these people.

The following is a list of major financial mistakes that are committed because of the uncertainty of the current situation.

1. Listen to the advice of “experts.” Many people who have lost much of their retirement money have done so because they put in the hands of “financial experts” on its destination.

Many of these financial advisors see the profession as a business and create more value for their customers.

In fact most are sellers who live on the commission that we pay for advice. Of course the products that give higher commissions are the most recommended.

2. Do not look for opportunities. The best time to find an opportunity is when markets are falling and everyone is fleeing in fear. Read the rest of this entry »