February 5th, 2009
As a consequence of the world economical crisis “Iceland” has gone bankrupt. This small island which used to be known as a rich country in Europe, is now towards a country broke. Iceland’s exchange market has lost over 80% of its value within a day! Its international debt is almost 8 times bigger than the country’s GNP. Over 80% of the countries debts goes to its foreign business parties. Investors can’t withdraw the savings from banks due to the nationalization policy taken after this crisis.
Now the question is: Considering that the global crisis initiated in US and the fact that the US debt is now over $10 thousands billion, would possibly the USA collapse?
When there is a Budget deficit, usually there come solutions to overcome the situation and disburse the deficit.
1. Increase the money stock through publishing paper notes (which would have damaging consequences on inflation rate and increases it if the volume of money stock exceeds the increase rate in GNP) Iran’s inflation is a result of this policy taken by the CBI the government over the last couple of years. Although the CBI should use the monetary tools to control inflation.
2. Treasury bills/notes/bonds which in fact is the most proper way to provide the sufficient required fund from the right sources (people). This might be difficult to be done in a country like Iran as the economical situation would not allow the governments selling the long-term bonds. These bonds are usually long term securities and the treasury tools in Iran are mostly short and medium term coupons / securities.
3. If the government faces to the international trade deficit as well, they would have no choice but to loan from international banks. To secure the risks, the international banks usually demand higher rates of interests. I would say that Iran probably won’t need the international loans due its oil revenue.
The US government budget deficit for the fiscal year 2008 is now is estimated over $500 billion and it is predicted to exceed $ 700 billion during the year 2009. To sort this issue out, the US Government would start to sell treasury bonds to the financial institutions ruled by US government. As we know, the biggest buyer of US treasury bonds is the Federal Reserve itself which decides how much to buy the bonds according to its policy. Federal Reserve guarantees to provide the government with required money/funds. China and Japan also own bonds priced for around $600 billion. In fact, the biggest portion of monetary reserve of the world is the US debt to the foreign countries. Now let me get back to the above question and see if the US economy will collapse considering the fact that the global financial and economical crisis initiated in US and the total amount of US debt is now over $10 thousands billion. I would say: No and have my own reason to this answer:
1. The first and most reliable solution to challenge the global economical crisis is to purchase bonds from wealthiest economies of the world as purchasing the bonds from unreliable small countries like Iceland is a total risk decision.
2. The US government has guaranteed the investments over $250 thousands. Banks even guarantee the huge investments over a certain period. This eventually would encourage investors to withdraw their funds from banks and purchase treasury bills/bonds. This has caused a drastic decline in bank short term interest rates. In other words, the value of treasury bills has increased over a short period. It means that the US government probably won’t suffer from the lack of investment nor a budget deficit by taking this decision.
3. Since the US debts to the foreign countries/companies is to be paid in dollars, the most handy way is to publish paper notes and pay all debts off, although it would cause inflation but guarantees a payoff of nominal debt. Nevertheless, I don’t believe that the US government would choose the second option.
Posted in Politics | No Comments »
December 7th, 2008
Posted in Educational | No Comments »
November 30th, 2008
Tue Nov 25 2008 09:04:22 ET
A leading Russian political analyst has said the economic turmoil in the United States has confirmed his long-held view that the country is heading for collapse, and will divide into separate parts.
Professor Igor Panarin said in an interview with the respected daily IZVESTIA published on Monday: “The dollar is not secured by anything. The country’s foreign debt has grown like an avalanche, even though in the early 1980s there was no debt. By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than 11 trillion. This is a pyramid that can only collapse.”
The paper said Panarin’s dire predictions for the U.S. economy, initially made at an international conference in Australia 10 years ago at a time when the economy appeared strong, have been given more credence by this year’s events.
When asked when the U.S. economy would collapse, Panarin said: “It is already collapsing. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale: America will no longer be the world’s financial regulator.”
When asked who would replace the U.S. in regulating world markets, he said: “Two countries could assume this role: China, with its vast reserves, and Russia, which could play the role of a regulator in Eurasia.”
Asked why he expected the U.S. to break up into separate parts, he said: “A whole range of reasons. Firstly, the financial problems in the U.S. will get worse. Millions of citizens there have lost their savings. Prices and unemployment are on the rise. General Motors and Ford are on the verge of collapse, and this means that whole cities will be left without work. Governors are already insistently demanding money from the federal center. Dissatisfaction is growing, and at the moment it is only being held back by the elections and the hope that Obama can work miracles. But by spring, it will be clear that there are no miracles.”
He also cited the “vulnerable political setup”, “lack of unified national laws”, and “divisions among the elite, which have become clear in these crisis conditions.”
He predicted that the U.S. will break up into six parts - the Pacific coast, with its growing Chinese population; the South, with its Hispanics; Texas, where independence movements are on the rise; the Atlantic coast, with its distinct and separate mentality; five of the poorer central states with their large Native American populations; and the northern states, where the influence from Canada is strong.
He even suggested that “we could claim Alaska - it was only granted on lease, after all.” Panarin, 60, is a professor at the Diplomatic Academy of the Russian Ministry of Foreign Affairs, and has authored several books on information warfare.
Posted in Politics | 2 Comments »
November 29th, 2008
I just brought up an insurance case at www.linkedin.com and got 5 valuable e-mails back so far. I’d like to share with you the answers as below:
We are about to outsource a part of our “Logistics and Distribution Services“ to 3PL Provider. To secure liabilities and minimize the risks, I have asked them to provide us with a “Bank Guarantee” for which they have refused due to several reasons such as Costs and Political situations. They have offered a liability insurance policy draft to cover the risks (although it can’t be substitute by BG at any circumstances)…..does anyone have an idea on how to move one step forward from current situation? How can I make sure to cover the risks if they don’t provide the Bank Guarantee?
————————————————————–
From: Koen Dauw
Date: November 26, 2008
To: Ali Aliakbari
An insurance can never replace a bank guarantee. Simply because an insurance company will always try to find reasons to avoid paying while a bank guarantee is at first demand, unconditional and irrevocable.
You could try to build in some “conditions” in the bankwarrantee to give some assurance to the emitor.
You could also try a standby Letter of credit in stead of a bankguarantee. ( same usage and comparable costs ) If the costs for maintaining the guarantee are an issue, you could negotiate that you will bear the maintaining costs in return for something else. I see your company is located in Iran. Perhaps the geopolitical situation in Iran is an issue for your supplier. Perhaps if the beneficiary of the guarantee would be your mother company ( located in aonther country ) that this is more acceptable to them.
Other possibility, but not much supplier will accept this is to work with a retention. E.g. if your bankwarrantee is 10% of the total amount than you deduct ( retain ) 10% of each payment untill the end of the guarantee period. Perhaps your banker can suggest some more possibilties ( blocked bank account ) ?
From: Kenneth Splidsboel Hemstedt
Date: November 26, 2008
To: Ali Aliakbari
Oh this is so typical! The Bank guaranty is a lot more expensive for them. Therefore they have a “company-policy” not to do Bank Guaranties. The political reasons? Country or company? And - you are right. Bank Guarantee is the only fully valid option for total coverage. The normal angle, as I have seen it tried before, is that they will try to persvade you into the standard policy. Don’t!! A standard Liability Insurance Policy will not do. Go after getting an Extended, if any chance. Make sure that the insurance covers the issues of risk identyfied from your agreed Scope Of Work /Statement Of Work. But all-in-all I think you should stay persistent a bit longer. THEY must convince you that they can cover your liability (risk)
From: Jeff Moore
Date: November 26, 2008
To: Ali Aliakbari
I must say that I am unfamiliar with this approach to 3PL risk management. What risks are you trying to mitigate by means of this guarantee ? Perhaps the use of a performance bond (insurance) would be appropriate to move your negotiations forward. This third party instrument should be able to be structured in such a way as to cover whatever risks you feel potentially require such remediation. The costs will vary depending on the type and level of coverage you require. Be aware that these costs will ultimately be borne by you through implicit or explicit incorporation in your 3PL provider’s pricing.
From: Srikanth Srinivas
Date: November 27, 2008
To: Ali Aliakbari
Dear Ali……….it is slightly confusing due to paucity of details given. First let me understand as to what are the risks and liabilities u want to cover or want the 3PL service provider stand guarantee to. Pl remember that 3PL service provider is your business partner however, it doesn’t absolve the company of its basic liabilities. For e.g. the materials are owned by u and not 3PL LSP. Hence the owner company only can take the insurance cover for the materials. Ditto with Transit insurance. Here, ofcourse, some LSPs can help in coordinating with insurance agencies for obtaining the same, but the onus is that of the company’s.
Bank guarantees, generally goes towards performance of a project and becomes null & void once the satisfactory commissioning of the project is signed-off. Other operational performances are established and monitored thro’ SLAs (Service Level Agreements) wherein the metrics for various poor/ good performance are stipulated and penalties/ bonuses are agreed to. This forms the part of regular monthly billling.
From: José Carvalho
Date: November 27, 2008
To: Ali Aliakbari
Depend on Insurance Company, liability insurance can be (or not) more apropriatte for your needs. If it substitute BG, depends on policy/Insurance Company. Nevertheless you shall compare their proposal with new ones you shall request to a insurance dealer as a proposal (everybody now kill for a business), and show them where they can get a guarantee accordingly your major needs.
Posted in Business | No Comments »
November 22nd, 2008
I got an e-mail from “Geoff” willing to know more on how Iranians think about global issues and the US presidential election. Below you will find a part of my response to him which reflects my ideas on some issue. I am publishing it as it looks more a general view of mine about the current issues like “World economical crisis” and “Iran-US Political relationship”.
I responded him on Oct. 27th:
Thank you for the kind email and I am really sorry that I’ve not been able to drop you a line for long. I’ve neither been able to update my website now for some time. …….My son is learning much about the US culture and people. They admire the way American people have built their society and their country. The civilized democratic society who has very well learnt and practiced to tolerate each other and respect ideas. This is what I always have admired about the US society.
The business here also has gone down since many months. Although Iran’s economy looks closed to the world market yet it is very much under the influence of Oil prices as it is the only source of budgeting in Iran. We are very much dependant on Oil market and any changes in Oil market and price would have great impact on Iran’s economical situation. It has affected our business as well and the Sales have gone quite low now for many months. We have keeping to been downsize the company since last year. We unfortunately have fired almost 100 people and now we have another plan to downsize it to half again soon. We would have only 50 people working as the company now has an annual business turnover of $ 50 Million. This can show the situation if you know that we had a successful business turnover of $ 250 Million in 2006. In my opinion, this is a result of many factors (internal and external). We are now challenging very tough economical situation and that has had great impact on our business. The purchasing power of the most people has come lower and lower and we have lost the market as they prefer to use the old handsets instead of buying new cell phones. People here have to manage their budget and that prevents them to buy new model cell phones nowadays. On one hand, inflation and the economical situation along-with the high customs duty for cell phone importers have brought the demand lower than what we have been even very pessimistically forecasting. This has decreased the demand for our product drastically and should be considered as a result of wrong decision making of government to support the local production. Whereas there is no infrastructure and encouragement to invest for local Mobile phone production, they still have kept the customs duty high. Let’s say the Iranian investors prefer not to invest their money in high risk situation of Iranian business nowadays. This is what the foreign investors have done since Ahmadinejad came into the power (since the last 3 years). I know many European companies who pulled-out their investments from Iran. On the other hand, the UN security resolutions have brought more difficulties for business people in Iran. I wonder it would become worse if the world society insist on the sanctions. As I have already mentioned, poor people would suffer more from the international sanctions implementation.
Going back to your question, I do believe that (and almost all educated Iranian people in Iran believe that) the US foreign policy won’t have a big change whoever becomes the next president of United Sates. Although it seems that there are some groups in who might not recognize Iranian regime as the true representative of Iranian People yet in my opinion, there won’t be a big change in US policy in respect of Iran. A direct negotiation may help to melt the frozen relationship …….. Iranian people never feel and never think that the US government is the enemy of Iran. Even the Vietnamese nowadays do not consider US as an enemy. There is no permanent enemy in foreign policy. If so UK has to be considered as the enemy of Iran due to the historical background. I never remember the US foreign policy not being aligned with Iran’s benefits but the coup of 1953 against Mossadegh. Hopefully the Iranian people would be able to forget the US aid in that year coup against the national government of Mossadegh which postponed democracy in Iran so far. In my opinion, either Obama or McCain won’t have a change in respect of the US-Iran relationship unless a big change happens in relationship approach.
……….and it won’t happen in US policy unless they wish to change it whether democrats or republicans……
Posted in Personal | No Comments »
