Category: Economy

Economy, Uncategorized

Global Risks 2011 report issued by World Economic Forum

Colin Henderson

The World Economic Forum which has their annual meting later this month have released their Global Risk 2011 report.  Here is he summary from the report, and the full report is a free download here. Most likely and largest risks are those in the upper right as most likely and largest financial impact: Fiscal crises economic disparity energy price volatility global governance failure and climate change as most likely and largest financial impact This extract from the report is interesting view of the world and nicely summarises the risks. Three important risks in focus Beyond these two cross-cutting global risks, three important … Continue reading Global Risks 2011 report issued by World Economic Forum

Economy1 Comment

The real reason for maintaining artificially low interest rates – and what banks can do

Colin Henderson

A remarkable (if hard to read) piece from Martin Wolf highlights the underlying reason that artificially low interest rates are essential to prevent “uncontrolled collapse .. mass bankruptcy” Why we have to live with low interest rates | ft.com – Martin Wolf The deepest question is whether current policy risks generating huge disturbances in future. As both Ms Altmann and Mr Smithers note, encouraging spending by raising asset prices evidently risks creating another round of what Austrian economists label “malinvestment”. Credit may also surge, once more, generating another round of irresponsible behaviour in the financial sector and ultimately another wave … Continue reading The real reason for maintaining artificially low interest rates – and what banks can do

Economy2 Comments

BMO relies on rising stock prices to cover over the risk inherent in increasing debt

Colin Henderson

I really have to call out BMO for irresponsible commentary in this report on Canadian debt.  Basically the report says that despite even faster increases in debt of Canadians, that increases in the stock market cover the increase so overall its ok. Does anyone at BMO really believe that]? Family debt rising but financial health improving | BMO “Balance sheet repair is quietly underway among Canadian households thanks to a slight rise in savings and firmer equity markets, while debt growth is poised to slow amid the clear cooling in the housing market,” the report said. “A singular focus on … Continue reading BMO relies on rising stock prices to cover over the risk inherent in increasing debt

Economy, Profitability, regulation1 Comment

The fragility of the banking system – the final 2 days in the life of Wachovia in 2008

Colin Henderson

There is a statement today … Statement of John Corston, Acting Deputy Director, Complex Financial Institution Branch, Division of Supervision and Consumer Protection, Federal Deposit Insurance Corporation on Systemically Important Institutions and the Issue of "Too Big To Fail" that contains some very interesting facts, and side from he bureaucratic commentary there is a real sense of incredulity that this is how big banks are managed. The overall message is excruciating detail is one of rationalising insufficient regulatory oversight existed to permit the FDIC to adequately monitor the situation.  It describes the nature of onsite examiners at FI’s with greater … Continue reading The fragility of the banking system – the final 2 days in the life of Wachovia in 2008

Business Models, Economy

Mortgage regulation in US has worked judging by dramatic impact on brokers

Colin Henderson

Here is one set of regulation that seems to have worked. The article recounts one broker who is down from 85 on staff to 3. What is intriguing is that the bankrate article seems to suggest this is a bad thing. The reasons provided in the quote below just sound like back to basics banking process that provides lenders and customers protection. In fact it suggests brokers can only operate in a loose credit/ no diligence environment. I do not believe that and surely there is a model for brokers that involves lending discipline. http://www.usatoday.com/money/economy/housing/2010-08-28-mortgage-brokers_N.htm Credit histories must be dutifully … Continue reading Mortgage regulation in US has worked judging by dramatic impact on brokers

Economy

Latest World Bank Quarterly update on China suggests the machine will continue

Colin Henderson

The statistics in this review are quite staggering when we consider in the context of the problems we see in western economies.  The growth and accumulation of reserves are the antithesis of what we see. China_Quarterly_June10 Key takeaways I got were: real estate increases are significant and in bubble territory, but little concern for inflation, however (my observation) the degree of state-owned enterprises (SOEs) is significant and could herald unintended consequential problems Continue reading Latest World Bank Quarterly update on China suggests the machine will continue

Economy1 Comment

The World Development Indicators 2010 | World Bank

Colin Henderson

For economists and data geeks, the World Bank is today releasing an impressive document containing a host of statistics and economic facts covering all the worlds economies and showing shifts in key areas as noted below. World Development Indicators 2010 | World Bank WASHINGTON, April 20, 2010 — The World Development Indicators (WDI) 2010, released today, gives a statistical progress toward achieving the Millennium Development Goals (MDGs). The WDI database, launched along with the World Bank’s Open Data initiative to provide free data to all users, includes more than 900 indicators documenting the state of all the world’s economies. The WDI covers education, … Continue reading The World Development Indicators 2010 | World Bank

Economy, US

Review of the US economy – Federal Reserve Bank of San Francisco

Colin Henderson

The shifts that must be made before recovery is accepted are nicely summarised here including the required reduction in debt.  Interestingly this comes after a few introductory cheerleading paragraphs suggesting recovery is already here. At the Federal Reserve Bank of San Francisco Community Leaders Luncheon, San Francisco, California As I have been emphasizing, the transition to full employment and the emergence of this new configuration of spending and production, and borrowing and saving, will take time. This rebalancing involves repairs to balance sheets, the movement of capital and labor across sectors of the economy, and shifts in the global pattern … Continue reading Review of the US economy – Federal Reserve Bank of San Francisco

Economy

US households have borrowed an entire year’s worth of the production of the entire economy

Colin Henderson

The video and the pdf record the discussion moderated by McKinsey.  This quote summarises for me and the longstanding position of this blog that Government is wrong to speak about recovery.  While the debate is US centric, the characteristics broadly apply to US, Canada, UK, and Euro countries such as Spain.  Brian is the General Counsel of the SEC.  The Future of Capitalism, Credit and Leverage | McKinsey Brian Cartwright: When you look at the leveraged nature of, let’s say, the consumer, it’s about 70 percent of the economy. So, if we’re going to have an economic recovery—and I would … Continue reading US households have borrowed an entire year’s worth of the production of the entire economy

Economy, EU, US

Signs of trouble in the western economies remain for banks

Colin Henderson

Whether its Greece, Portugal and the EU financial issues, or the ongoing housing saga in the US, we are clearly not yet out of the woods relative to the 2008 banking crisis. U.S. Plans to Expand Aid to Troubled Homeowners | NYT The Obama administration will announce on Friday a broad new initiative to help troubled homeowners, potentially refinancing several million of them into fresh government-backed mortgages with lower payments. Technorati Tags: economy,banks,Greece,Portugal,US housing,economic crisis,banking crisis Continue reading Signs of trouble in the western economies remain for banks