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Within minutes of the SNB's decision to lift the cap on the euro the Swiss Franc surged 30% against the euro and 18% against the dollar. FXCM, retail currency broker, suffered severe losses and the company needed a $300 million investment from Leucadia National Corp. to survive. Citigroup and Deutsche Bank AG each had losses of $150 million. Hedge Funds Discovery and Comac also suffered losses. FXCM losses stem from use by FXCM clients of borrowed money, along with higher leverage the company also has lower margin requirements. Interestingly FXCM fought CFTC efforts under Dodd-Frank legislation to limit leverage to 10 to 1- saying "it would have a devastating impact and drive it overseas." The limit finally set at 50 to 1, meant that an investor could borrow $50 for every dollar he put in of his own. The leverage meant large losses for inexperienced investors and threatened the survival of FXCM in a matter of minutes.

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A former treasury secretary, and economist at Bradesco Management, Joaquim Levy, is appointed central bank chief for the second term of president Dilma Rousseff. During Rousseff's first term Brazil's currency lost a third of its value and the economy faces low growth and high inflation. Financial markets expect the new central bank chief to pursue conservative policies to keep Brazil's investment grade ratings. Levy has been in this kind of environment before. In Lula Silva's first term the economy faced many problems with high debt, prospect of default, declining currency, and lack of confidence in financial markets. Levy took over at Treasury during 2003-2006, when he pursued debt reduction and improved confidence. He is a University of Chicago trained economist and former IMF official.

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Andy Kessler says this is sucker's rally that took Citi from $1 share to $4 a share, and helped financial stocks. He says its not only ajobless recovery but also a recovery wothout profits. He gives four reasons. Armageddon is off the table but the problems remain of toxic assets and undercapitalized banks no matter what the stress test are saying (more negotiated Ok's than tests), zero yields with interest on savings at 0.2%, Bernanke's printing press with the Fed going all out to get money to the economy fast announcement of inention to purchase $300 billion of longterm bonds, and $750 billion of mortgage backed securities. He says he is not disagreeing with the Fed's policies considering the crisis, but he says he knows a sucker's rally when he sees one.

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Former World Bank chief Zoellick says the U.S. should provide leadership with economic and trade policies that revive growth in the global economy.

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India had 11 interest rate increases in 18 months, but this has not slowed the rise of inflation. The Wholesale Price Index is around 10%. Inflation expectations as measured by the Reserve Bank of India are around 12% in mid-2011.

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Banco Santander took a large charge of 3.18 billion euros in 4th quarter 2012 provisioning for real estate losses and Portugal. Profit for the quarter fell to 47 million euros as a result of this. The provisioning for real estate losses in Spain was 1.81 billion euros, and for Portugal 600 million euros. Profits for 2011 went down by 35% to 5.35 billion euros. Profits from Latin America exceeded profits from the rest of the world for the first time reaching 51%. This is part of the trend with Spanish banks to shore up their capital base in 2011-2012 as the Rajoy administration moves to address the problems of Spain's banking sector.

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China's central bank PBOC reduces interest rates to reduce borrowing costs of heavily indebted households. Households in China carry more debt than households in the US. Mortgage costs are a key part of the debt for households in China. It points to slowing of the economy in 2023.

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The New York Times editorial page on the day following the passage of the second bailout or rescue plan of $700 billion in the Senate after it was voted down in the House of Representatives. It points out that the bailout bill does little to prevent a wave of foreclosures which the NYT estimates at six million people expected to default in the rest of this year and 2009. It faults lenders unwillingness to reduce the loan balances amount. At a Congressional hearing for the Hope for Homeowners program in which the governmet wold insure upto $300 bilonin new affordable loans for troubled borrowers if the lenders voluntarily refinance delinquent mortgages by reducing loan balances to 90% of the homes' current market value, lending banks were lukewarm about taking these losses in exchange for bigger losses in foreclosures. These lenders include Wels Fargo, Chase, Bank of America and Citigroup. The FDIC's Sheila Barr has also advocated reducing loan balances in her proposal for tackling the housing crisis presented after the Bear Stearns crisis. She is taking this approach to banks that like IndyMac were taken over by FDIC. But the numbers are not large letters were sent to 28,000 delinquent borrowers of IndyMac recently to reduce loan balances. This is a serious problem and either Congress and Treasury are leaving this problem to the next administration taking office 3 months from now as there is no real consensus on this issue even today or they are missing the impact this has in dropping home price values even further in neigborhoods across the nation as foreclosures drive prices down even further compounding the problem. For the financial institutions it would appear that they are letting this drag out because their capital is at frighteningly low levels and taking losses at one time is harder than taking the foreclosure losses dragged out over 1-3 years and they are also looking for a way in which they can let the government bear the burden of losses as the crisis intensifies which can make sense from the point of view of each institution. According to a report in the Wall Street Journal on September 29, 2008, Sheila Barr told Congress this month that in recent years troubled loan portfolios have yielded about 32% of book value, compared with more than 87% for loans in which the borrower is current. These are strong statistics in favor of lenders taking an informed decision to lower loan balances voluntarily with some government help along the way but the fact that this is not happening leads one to think that something is falling between the cracks, initial lender reluctance to take losses through voluntary balance reduction at the time of Bear Stearns crisis given taxpayer reluctance and lack of government initiative to help lenders in doing this, sort of what Martin Feldstein suggested in a series of articles during the time before and after the Bear Steans crisis. And then as the credit crisis worsened with collapse of Lehman, WaMu, Freddie, Fannie and Wachovia in September 2008 fear gripping the markets and LIBOR interbank lending rate at close to 8%, banks gripped by the fear prevailing in the market, frozen practically about any steps other than preserving their hammered capital, and reluctant to take losses which would further impair their capital. Also in the WSJ Sept 8, on help for homeowners, Deutsche Bank estimates 40% of homeowners or about 20 million households will owe more than their home is worth by the time the housing market stabilizes. This will lead to some homeowners making the rational decision as Martin Feldstein argued to walk away from their homes, leading to more foreclosure losses for th banks. This article Rescue Includes Steps to Help Borrowers Keep Homes by Ruth Simon also has some information that confirms the NYT editorial. An analysis it says of 144 mortgage modifications by the Massachusetts Attorney General's office found that none reduced mortgage balances and onoly a handful reduced monthly payments. Even with interest rate reductions, the study showed borrrowers wound up paying more because of missed paymmets penalties and fees. Another study by Credit Suisse mentioned in the same article points out that the percentage of borrowers who were behind 6 months after loan modifications dropped to 17% when lenders reduced the loan balances and 13% when mortgage companies froze the interest rate of adjustable rate mortgages. A bigger problem is the effect on consumption, if 40% of homeowners end up owing more to the bank than their home is worth as Deutsche Bank estimates, combined with higher unemployment and higher parttime employment, by the time things stabilize. And this is the big looming problem for a new administration in January even if the bailout plan passes Congress this week after revisions and eases the crisis in the credit markets. ...

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India's Modi government is introducing a new plan to reduce rural poverty. It is implementing Universal Basic Income by depositing Rs 6000 or $84 directly to bank accounts of farmers with less than 5 acres. This helps 120 million poor farming families meet basic living needs in India, where rural poor often make less than a dollar a day. The cost of the program is $10.5 billion a year. The opposition Congress Party also has a plan for Guaranteed Minimum Income. India has national elections in May, and the government plan is also designed to fulfill promises of improving quality of living of Indians with the programs for Clean India, toilets and electricity for all Indians, bank accounts for all Indians, and series of other programs.  The advantage of the program as shown in a government paper in 2017 is that money goes directly to bank accounts avoiding corrupt middlemen or bureaucrats, and that it is possible in India to accomplish a lot by spending a relatively small amount to realize immense benefits. The Budget deficit for the year ending March 2019 will go up from 3.3% to 3.4%, and for year ending March 2020 go up from 3.1% to 3.4%- small increases relative to the immense difference in the lives of rural Indian families as a result. A series of programs for universal access to electricity, health care, toilets and clean sanitation, bank accounts and basic income, are designed to bring forth a New India different from the past. These programs are being implemented or put forward in the first term, with the Modi government looking for voter approval to push forward further development in a second term. The government paper on UBI in 2017 showed that in a country like India a small amount goes a long way in reducing poverty. By providing income of just above $100 a year to around 75%  of Indians, poverty can be cut from 15% to 1%. The paper shows cost at 5% of GDP which can be partially offset by reducing other government  subsidies. ...

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S&P said it will maintain India's credit rating of triple B minus, the lowest investment grade rating, yet it may downgrade it to "junk status" in the next 2 years. S&P said this could happen "if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting. India's growth rate declined to 6.9% in the year ending March 31, 2012, down from 8.4% the prior year. The problem is that India's current account deficit is growing rapidly with the high import bill for energy supplies. The current account deficit is now at 4% of GDP. The trade deficit increased to $185 billion in this fiscal year, up 56% over the prior year. Additional problems are finding ways to finance the deficit with foreign capital, as European banks are pulling back during the current eurozone crisis. Commerce Secretary Rahul Khullar says this could be a big problem. Net foreign capital investment is declining rapidly from $72 billion in February 2012 to $387 million in March, with a net outflow of $27 million in the April 1-25 period. The budget deficit, which has drawn the attention of the RBI, India's central bank, and of S&P, is at 5.9% of GDP for fiscal year ending March 31, 2012. This is larger than the government target of 4.6%. The government has set a deficit target of 5.1% of GDP for the fiscal year ending March 31, 2013....