Category: Economy

Economy

Plan for Sound Banking – Conservative White Paper | analysis

Colin Henderson

Here is more on the Tory plan for banking outlined in the attached White Paper [57 pages]. Politics aside, lets take a look at the merits of this proposal and how it aligns with the problems I have perceived within banking and that are exacerbated over the last 2 years. The core issues I have seen are these: banks have become high dividend paying conduits due to protective regulation and tight association with Central Banks the regulatory protection produced a ‘cannot fail’ mentality about banks’ and .. this in turn resulted in no perceived need for a strong capital base, … Continue reading Plan for Sound Banking – Conservative White Paper | analysis

Economy, US3 Comments

China and America economic future – Ferguson/ Fallows debate

Colin Henderson

A summary in NYT of the fascinating Ferguson/ Fallows debate at Aspen on the economic relationship between China and US. Ferguson: US and China are divorcing economically.  China will focus on internal consumption, not exports.  “Depreciation (of US $) is inevitable and the Chinese are working to end the dollar’s role as the world’s reserve currency.” Fallows: “…  doesn’t know what the future will hold, but he believes that Chinese officials still see the dollar as their least risky investment. Domestically, China will not turn democratic, but individual liberties will expand. He agreed that China and the U.S. will dominate … Continue reading China and America economic future – Ferguson/ Fallows debate

Economy, Innovation

Bank deposits – the hidden risk associated with government guaranteed deposits

Colin Henderson

The focus on bank financial strength is generally on the lending side of the business and the potential for bad debts.  Here is another view, and something that drives some banks to make ever riskier loans to produce enough revenue to pay for their deposits. For Banks, Wads of Cash and Loads of Trouble | NY Times The 79 banks that have failed in the United States over the last two years had an average load of brokered deposits four times the national norm … But the hot money also came with a high cost. To lure the money from … Continue reading Bank deposits – the hidden risk associated with government guaranteed deposits

Economy

Future for many banks remains grim | Roubini

Colin Henderson

This interview with Roubini, on a visit to China, is wide ranging, and provides a good assessment of where we are in the economic cycle, why we got here, and importantly what to expect next.  In particular this assessment on US banks is sobering.  That aside, it is a worthwhile read. Dr. Doom Has Some Good News The first involved banks. Like Paul Krugman and others, Roubini had been warning that many banks were weaker than they seemed. Rather than trying to nurse them along, he said, the government should move straightaway to nationalization: “I’m concerned that we’re not going … Continue reading Future for many banks remains grim | Roubini

Economy1 Comment

“The Fourth Turning” | demographics and predictable change

Colin Henderson

Demographics is an interesting science, and one that has real impacts on society over time that are really only apparent after the fact.  Mauldin recounts a conversation with Strauss and Howe on their book, “The Fourth Turning“.  The premise is that the US and the western world move in 80 year cycles, with four ‘seasons’ within each cycle.  As historians, they have looked back in time, and concluded the cycles are quite consistent. Whether you buy that or not, the four cycles noted do describe the 20th century well, and place us firmly in the latter part of the third, … Continue reading “The Fourth Turning” | demographics and predictable change

Economy

OECD forecast revised upward, but underlying economic forecast conditions remain unchanged

Colin Henderson

The OECD today produced a report that is sure to be controversial. They are upgrading all their forecasts both for 2009, and 2010, but that FT headline mask the real underlying situation as it applies to consumers and businesses which I see as relatively no change from other forecasts. OECD sees strongest outlook since 2007 | FT Country Forecast for 2009 Forecast for 2010 Current Previous Current Previous US -2.8% -4.0% +0.9% 0% China +7.7% +6.3% +9.3% +8.5% Japan -6.8% -6.6% +0.7% -0.5% Eurozone -4.8% -4.1% 0% -0.3% Source: OECD The report notes that the unemployment rates and slackness in … Continue reading OECD forecast revised upward, but underlying economic forecast conditions remain unchanged

Canada, Economy, US3 Comments

Consumer mindsets in North America have shifted permanently with regard to finances

Colin Henderson

After my last post, I thought it better to follow up with some facts to support my contention that this economic recovery is L shaped in Canada and US.  This is not meant to be an economic projection, and I leave that to the professional economists.  However in terms of planning, banks ought to consider the high probability of a scenario where the reduction in economic activity will level off but hardly see growth in the near future.  This will be driven by consumer confidence and frankly their financial circumstances. If we go back to the root cause of the … Continue reading Consumer mindsets in North America have shifted permanently with regard to finances

Economy

World Bank GDF highlights growing risks to economic forecasts

Colin Henderson

When thinking about the future and the economic position of countries that banks must consider, I listen far less to politicians and more to IMF and World bank forecasts. The use (misuse) of the term recovery fails to acknowledge what the circumstances for people and businesses will be on the other side of the recession. Here is a new report from World Bank that looks to the future with more pragmatism, although they still use the word recovery.  Note their focus is skewed by their mandate for developing countries, however they have to look at the entire economic picture to … Continue reading World Bank GDF highlights growing risks to economic forecasts

Economy1 Comment

Canadian Residential Mortgage Market – Boring but Effective | IMF

Colin Henderson

A new working paper from the IMF reviews the Canadian mortgage market, and compares to the US.  There are striking differences, which they characterise as ‘boring but effective’. Canadian Residential Mortgage Market | IMF working Paper {pdf – 18 pages] Mortgage securitization is not as pervasive in Canada as in the United States, despite the shift toward bank origination and stronger government presence in the market. Only $267 billion (29 percent) of loans have been securitized, compared to about 60 percent of U.S. residential mortgages. $245 billion of these securitized mortgages are held by special purpose vehicles that issue mortgage-backed … Continue reading Canadian Residential Mortgage Market – Boring but Effective | IMF

Economy

Economic forecasts for Canada – latest June 2009

Colin Henderson

Here is a quick summary GDP forecasts for North American planners. Courtesy of CBC here is the summary of the banks and Bank of Canada GDP forecasts for 2009 and 2010.  For me the open question remains to what extent 2010 is wishful thinking.  The other and related problem with the graph is that GDP growth is calculated on a moving base. So the other way to read this is that even if the 2010 forecasts are correct, the absolute dollar GDP at December 2010 will not have achieved the level of Dec 2008, or 2 years previous. The IMF … Continue reading Economic forecasts for Canada – latest June 2009