27 May 2011. Credit card companies are battering consumers across the board with monstrous fees, high interest rates and disappearing rewards. If you signed up for a credit card in the past year, the chances are - you've been ripped off. Your interest rate might have gone up, had your credit limit reduced, or your credit card issuer gutted your rewards. Analysts say: it's only going to get worse. Still, you may be able to get a good deal, as long as you don't chose these cards singled out by experts for being the world's worst credit cards.
26 May 2011. There’s a Chinese proverb that goes “If the world was fair, all my fingers would be the same length”. Work that one out. Or try working out why there is so much economic inequality, and the disparities are growing. The funny thing is, if all the money in the world was distributed equally, everyone would have $10,000 a month to live on. In this era of fast growing economic advancement and increased global wealth, why is economic inequality on the rise? Read more
25 May 2011. The Rothschilds are the most famous banking family in history. In the 19th century they lent money to Kings and Governments and funded both sides in the Napoleonic wars. They once saved the Bank of England from collapse with their own money. But how did they come to be so fabulously wealthy? In this two-part feature we first look at their rise from the ghettoes of Frankfurt, and then in part two we ask why they have been accused of everything from deliberately starting wars, to assassinating presidents and controlling the entire global financial system. Read more
24 May 2011. Despite winning 81 out of 87 seats in parliament, the PAP has recognised the need to reconnect with the local population. However, based on social media sentiments, this looks to be an increasingly hard task. Singapore is growing into a true democracy, and freedom of speech is finally here. So how will Singapore’s political system and economy change in the next five years? Read more
23 May 2011.Unacceptable unemployment figures is the top concern of EconomyWatch readers, and who’s to blame them? The US, as well as other countries hit badly by the 2008 financial crisis continue to struggle bringing unemployment levels back to pre-crisis levels. In the meantime, hundreds of thousands of people remain jobless and financially crippled with no sight of light at the end of the tunnel. However some argue, reliance on unemployment benefits is playing a role in the bills to cap benefits. Are they right? Read more
21 May 2011. In the US, consumers and households are dangerously in debt. Even after the catastrophic financial crisis in 2008, it seems in 2010 lessons from past mistakes have not been learned and taken on board. The Federal Reserve is looking at $2.4 trillion in unsecured debt. And the numbers just keep rising. Check out these dozen alarming consumer debt statistics.
20 May 2011. Unless you’ve been living under a rock for the past few days, you probably already know the tale of Dominique Strauss-Kahn (often referred to in the media as DSK), the now EX Managing Director of the IMF. By now you would have also heard about the sordid details of what allegedly happened in a New York hotel room, or about DSK’s reputation and history as a womaniser, or even about how the whole incident was a conspiracy to undermine DSK’s presidential bid in France. Here at EconomyWatch.com however, we only care about one thing – whether DSK’s scandal and subsequent resignation has had any impact on the global economy. Read more
19 May 2011. In 2008, when we were hours away from ATMs running out of money, smallbusinesses being unable to pay their staffs, and schools and hospitals closing down through lack of cash flow, it felt as if the crisis of the century was upon us. But if the world continues on its current path, the historians of the future will say that the great financial collapse of three years ago was simply the trailer for a succession of avoidable crises that eroded popular consent for globalization itself. Read more from Gordon Brown. Read more
In the wake of the recent Sony PlayStation hack, Amazon EC2 outage and Epsilon data theft, information security is once again back in the news – for all the wrong reasons. The web has become a playground for hackers and malcontents eager to phish, defraud and steal wherever and whenever they can. Policing this landscape is a logistical nightmare, and battle lines are being drawn and redrawn many thousands of times a day – which perhaps hints at why many of us are still uncomfortable with the idea of storing sensitive data in third-party environments. Read more
The United States has unquestionably been the most formidable military power in recent years. Its spending is the principle determinant of world military spending – a figure that reached $1.6 trillion in 2010. Generally, US military spending has been on the rise. Recent increases are attributed to the so-called War on Terror and the Afghanistan and Iraq invasions. Today, the US accounts for just under half of world military spending. The baseline budget, however, shows a continued increase, albeit at a seemingly lower rate. But why are the numbers for US spending so much higher than what was announced as the budget for the Department of Defense?Read more
16 May 2011. Thirty two years ago, as a nine year old boy, I said Bye Bye Basra. Now here I sit, all these years later, on the other side of the world, with Saddam dead and buried close to five years already. And yet, that old specter of fear still haunts me. I still worry. Should I really write this article? Might it come back to haunt me or – worst still – my family one day? Unless you have lived through an oppressive regime, you may never know what that fear is like. That is the real change that has taken place in the Middle East. Its citizens have broken out of the mental ghetto they have been consigned to, and the world will never be the same again.
You know, I’ve heard about personal loan offers and promotions but never looked into one. This week I wondered, what’s the difference between a personal loan, a cash loan and a plain ‘ole credit card (apart from the fact that you don’t want a cash advance at 18 percent compounding interest on your Visa thank-you-very-much). And, when should I use a personal loan over a cash loan or credit? Find out the raw deal when it comes to personal borrowing in this week's personal finance missive. Read more
12 May 2011. One of the positives of raising interest rates is that they attract foreign capital. On the surface, this makes complete sense. If U.S. rates are near zero and the European Central Bank raises its main rate to 1.25%, the current level, then anyone with a few functioning brain cells can see there is more cash to be had on European money markets than in America. In fact, after hinting at more rate hikes to come, European central banking brainiacs might have even hoped for a rise in foreign investment as a pleasant side effect of increased lending costs. That may never happen.
11 May 2011. No sooner had we breathlessly reported April’s record highs for gold and silver, at over $1500 and close to $50 per troy ounce respectively, than commodities stage a ‘flash crash’, startling investors and traders alike. Last week silver slumped to below $35 and even gold lost 3.6%. Alice Briggs, EconomyWatch Investment & Markets writer sums up the latest in commodities and the ripple effects of Osama's death.
Last month Warren Buffett invested in BYD, an electric car company in China. So does this mean we should all jump on the China tech investment bandwagon? At the end of Q1 2011, China even overtook the US in green investments. According to a study led by the Pew Charitable Trusts, Chinese investment in clean energy soared by more than 50 percent in 2009 to reach $34.6 billion, far more than any other country in the Group of 20 major economies. Franck Nazikian, the founder of CHINICT shares his thoughts on Technology and Investments in China with EconomyWatch. Read more
9 May 2011. Iraq and Afghanistan sit near the top of a list of the world’s most corrupt nations despite years of occupation by Anglo-American forces and more than $1 trillion of US taxpayers’ money having been spent on the two nations since 2001. The 2010 Corruption Perceptions Index (CPI) from the Berlin-based watchdog rated Somalia, with a score of 1.1 out of 10, as the world’s most corrupt nation, closely followed by Afghanistan and Myanmar with scores of 1.4, and Iraq on 1.5. This special report on world corruption uncovers the stories behind the most corrupt capitals of the world. Read more
6 May 2011. Afghanistan, which produces 90% of the world’s heroin, as well as the largest share of cannabis resin, could stake a claim as the “drug capital of the world”. But, in reality, there are many “drug capitals” when it comes to drug consumption and production. Naturally, most of the poison is consumed in richer nations, while it's produced in poorer countries. The picture, however, is complicated and ever-changing. Follow the drug trade around the worlds' drug capitals in this expose by EconomyWatch journalist, David Smith. Read more
In a shocking report by Frederick Kaufman that has been featured on Foreign Policy, the role of Goldman Sachs and its Wall Street cohort in creating the food crisis has been revealed. Frederick uncovers the 1991 scheme where Goldman bankers lead by Gary Cohn created a derivative that tracked 24 raw minerals; including coffee, cocoa, cattle, corn, hogs, soy and wheat, and how that scheme was then manipulated to raise food commodity prices. Each element was given a calculated investment value and is now known as the Goldman Sachs Commodity Index (GSCI). Follow the money trail and find out why your groceries are getting more expensive. Read more
4 May 2011. By clicking on this story, you may be a speculator if you thought this information might add value to your knowledge base, or your bank account. The only risk is your time. Oil and other market speculators basically act in the same way, except they are willing to take monetary chances in exchange for higher profits. For some reason, many politicians and much of the public currently despise that mentality. Betting on the future generally receives the stamp of immorality when elected officials and consumers come out on the losing end. President Barack Obama and the European Union both recently announced plans to hound evil profiteers.
3 May 2011. When Osama bin Laden and Al-Qaeda attacked the World Trade Center on 9/11 nearly ten years ago, they sought to achieve two separate effects. The first was obvious – causing the death of human lives. The second however was symbolic in nature. By attacking America’s symbol of economic might, Osama bin Laden was foreshadowing his true desires – to significantly hurt the US economy. Three years later, Osama released a videotape where he explicitly stated his intentions to bankrupt the US. “We are continuing this policy in bleeding America to the point of bankruptcy…and it all shows that the real loser is you. It is the American people and their economy. Read more
30 April 2011. No one seems to really know the real cost of Kate Middleton and Prince William’s Royal Wedding that took place in Westminster yesterday – but they’re taking a good guess. Some reports put the cost as high as £50 million, and nothing lower than £30 million. That’s still under the £70 million it cost Charles and Di to tie the knot in 1981. The extra bank holiday was expected to cost the country £5 billion in lost production according to the CBI. Read more
29 April 2011. Always wanted to blog successfully but didn't know where to start or how to really pull it off? In this five-part How-To Blog Guide, Andrea Edwards, managing director of SAJE; a Singapore-based strategic communications consultancy focused on professional writing and content development (and more) gives you inside her blogosphere and imparts her valuable knowledge, experience and tips for blogging success. Read more
28 April 2011. Since 2003 3D printers have been on the rise, and over time, their costs declined. The technology is a form of additive manufacturing where 3D objects are created – and are more affordable and user friendly than other additive manufacturing technologies. The products allow developers to print parts and assemblies made from several materials with different properties in a single process.
27 April 2011. Standard and Poors' decision to cut its outlook for US debt to “negative” came as a surprise to many market watchers. The unprecedented move has reaffirmed the role rating agencies have in determining the prospects of national economies, much to the chagrin of many politicians. One main reason the S&P's pessimism rattled markets was its novelty.
Since it began issuing reports on the outlook for US bonds in 1989, the agency had not once suggested it could lower the “AAA” rating of the world's largest economy. Now S&P warns the chances the US will lose its bulletproof credit vest are one in three over the next two years. Read more
26 April 2011. The original ‘money’, gold has always been highly valued for its brilliance, malleability and purity. King Croesus is credited with the invention of the first gold coins, which remained a primary currency across the globe right up until the beginning of the 20th century. The ancient kings succeeding him were also probably responsible for the very first cases of inflation after they began adding lead to gold coins – enhancing the royal money supply but simultaneously reducing the coins’ value. In times of war, pestilence and political instability, gold has been jealously hoarded as protection against the vicissitudes of life. Read more
25 April 2011. Iran is one of the largest economies in the world - if the G20 is made up of the top 20 world economies, then Iran should be part of the group. But even countries such as Spain and the Netherlands who are also among the top 20 economies are excluded from the group. However, unlike Iran they are nevertheless invited to G20 summits. So will Iran ever be invited to join the G20?
There is a common misconception that G-20 members should be the twenty largest economies in the world. However the composition of the group has not changed since its inception in 1999. This has attracted controversy and criticism from the international community. Read more
Are You Careless With Your Cash? You’re Not Alone. Credit: emdot
23 April 2011. Let’s face it, we all have our bad money habits that border on shameful from time to time. But would you be more shocked to find out that as you “buy now and worry later” on your credit card – hordes of others are doing the same? We’re all trying to get out of debt, but only end up burrowing deeper into it. It’s time for some eye-opening credit card and debt statistics and take stock of your finances and control of your financial destiny.
This Easter weekend, check out these 12 shocking personal finance statistics and tell us where you fit in the big picture. Read more
Michael Chan, Chairman of Fast-Food Giant Cafe de Coral: Will issue a profit warning if the hourly rate proposed by the unions became law. Credit: For91days
21 April 2011. Hong Kong's unemployment rate has fallen to an all time pre-crisis low of 3.4 per cent, the Census and Statistics Department announced this week. Critics blame Hong Kong’s first minimum wage law for job losses. "In view of the still strong economic performance and positive hiring sentiment in the corporate sector, the unemployment rate is likely to remain at low levels in the near term," said Matthew Cheung, Hong Kong's labour secretary. But he warned the city would "remain vigilant in monitoring any economic and employment implications.
Hong Kong’s US$3.61 minimum wage bill was passed amid growing concerns over the income gap – and is now being blamed for job losses among thousands of low-paid workers. Hong Kong's half elected, half appointed legislature passed the minimum-wage bill in July 2010 that will take it effect on 1 May 2011.But is minimum wage good for any economy?Read more
Fastest Euro Zone Price Rise in 3 Years Credit:jurjen_nl
20 April 2011. Are all nations in the European Union created equal? The European Central Bank seems to think so. And is hiking interest rates by a quarter of a percent signaling a “return to normal standards,” according to Ewald Nowotny, member of the ECB Governing Council and governor of the Austrian National Bank. The ECB raised interest rates this month for the first time since July 2008.
Policymaker Nout Wellink said the bank neded to remain “very alert” on inflation dangers to avoid falling behind the curve. However ECB President Jean-Claude Trichet said he does not see alarming signs of second-round inflationary effects. Read more
"It seems that the corrupt forces in the country have united to derail the process of drafting an effective anti-corruption law through the joint committee." Credit: ramesh_lalwani
19 April 2011. Anna Hazare is one of India's well-acclaimed social activists. The 73-year old fasting Gandhian was a former soldier in the Indian army. Anna is well known and respected for salvaging a hopeless village ridden by drought, alcoholism and poverty. He inspired the state government to implement the ‘Model Village’ scheme as part of its official strategy.
However while Anna Hazare’s supporters celebrate the victory of the people, we wonder; how did he prompt thousands of people to join his fight-through-fast and change the minds of local Indian government authorities against corruption? Read more
Since China's inflation is the hottest topic in the world political economy today, this seems a good time to look at the dynamics of China's luxury market. Especially so as many people other than long-time "China bust" folks are now starting to say inflation will require China's national government to slam on the brakes. Indeed, it may do so with such force, the world's strongest economy since the Black September 2008 meltdown will, finally, not just slow down, but have to swerve sharply to avoid a total crash. So this MAY be the proverbial "last irony", but, if so, at least we did it BEFORE everything in China came grinding to a halt ;-) Or not. Read more
Beat The Banks At Their Own Game Credit: reallyboring
16 April 2011. Banks and credit card issuers have long been under the spotlight for mercilessly adding unfair fees and charges to your monthly credit card statements. The fees and charges seem small and don’t bother most people: $12 cash advance fees, $20 in merchant fees and $7.95 monthly subscription.
Buried in your already maxed-out total, last year’s holiday expenses and piling interest rate charges – all you’re really hoping to do is shave the debt down. The monthly credit card repayments only ever seem to take care of the interest charges and mounting fees.
Webvan - Tech Favorite Crashed & Burned 10 Years Ago: Lesson Learned or Shape of Things To Come ??? Credit:Thomas Hawk
While Internet capital pools today are far greater than 2000, the stock market is not glutted with offerings. In 1999, there were 308 tech IPOs - in 2010, just 20. Tech start-ups today are real businesses — not just eyeballs and clicks. Facebook has fast-growing revenue and Groupon, profitable since June 2009, is on track for billions in revenue this year. In 1999, 248 million people were online, less than 5% of world’s population. Today one in three people globally equal two billion users. “In those days, you had tiny companies going public that hardly had a business plan. And now you’re talking only a few companies — that are already global with revenues.” Still, with only a few perceived “winners,” some investors must be choosing losers or paying too much: “When you see the valuations bandied about — I do think, boy, these better be really special.” Read more
13 April 2011. Well-informed sources say Israel has world's third-biggest oil shale deposits after US & China: "We estimate the equivalent of 250 billion barrels of oil. To put that in context, Saudi Arabia has proven reserves of 260 billion barrels." But oil shale mining is condemned by environmentalists as a dirty, energy- & water-intensive process. An Israeli company, IEI, believes its technique will be cleaner by separating oil from shale rock some 300m below ground. Water will be a by-product of its process, not consumed in large volumes. IEI estimates marginal cost of production will be $US35 - 40 / barrel, cheaper than ~ $US60 / barrel to extract crude from places like the Arctic -- & compares with $US 30 - 40 / barrel in deepwater oilfields off Brazil. "The Israeli deposits have been known about, but never listed, because it was assumed there was no appropriate technology." Now, there may be. Read more
12 April 2011. Last week, an arbitration tribunal indefinitely blocked a BP share-swap agreement with state-owned oil company Rosneft. The ruling indicates how seriously BP's American CEO, Robert W. Dudley misread Russian politics - despite the fact he headed a separate / private / and VERY lucrative for BP joint venture with a different group of billionaires there from 2003 - 08. Apparently they didn't like their partner canoodling with the hated state-owned competitor. So they went to an arbitration panel when the Rosneft deal was announced, saying it breached their own shareholder agreement with BP in the partnership called TNK-BP. To the surprise of few, except apparently Dudley, they won. Now the Rosneft deal is suspended, just in time for BP's annual stockholder meeting on Thursday. Fun. Read more
11 April 2011. As Wall Street successfully mobilizes its lobbying muscle with Congress and the Obama regime to fight off further "regulation" - and any real implementation of what weak rules do exist - in the UK the battle is just starting over how best to manage financial institutions considered 'too big to fail'. Today, a volley will be fired at UK's politically and economically powerful financial sector by a government-backed commission, expected to propose UK's largest banks separate trading from deposit-taking functions. That goes further than so-called / self-styled / alleged US financial "reforms", which, typically and predictably, almost totally blur the line between speculative trading and traditional banking services. At least the UK will have the US model for what not to do. Read more
8 April 2011. You can be in a relationship and still be single, financially. Couples in long term and serious relationships who put off marriage for their careers and a myriad of other reasons, don’t think twice about neglecting to discuss joint financial arrangements – or bank accounts. Even though one of the most common causes of a relationship breakdown it turns out, is: money.
So, where do you start? What are shared and joint finances in a relationship all about – and what do you need to do, and know to protect yourself? After all, you’ve worked hard to earn your money, invest it and maintain a squeeky clean credit rating and record. One wrong move, by either party could wreck both of you financially. Read more
7 April 2011. Stagflation -- paying more and getting less -- has hit the world food industry big-time. But you won't necessarily notice it. Because food companies are "hiding" it by downsizing their packages while maintaining -- or even raising -- their prices. Don't be fooled. Chips are disappearing from bags, candy from boxes and vegetables from cans. As an expected increase in the cost of raw materials looms for late summer, consumers are beginning to encounter shrinking food packages. With unemployment still high, companies in recent months have tried to camouflage price increases by selling their products in tiny and tinier packages. So far, the changes are most "visible" at the grocery store, where shoppers are paying the same amount, but getting less - but only if you look really hard to see them.
6 April 2011. The central focus of China's new 5-year economic plan is its shifting economic base away from manufactured exports toward one rooted in demand for goods and services by increasingly affluent consumers. That is crucial to Communist Party’s central aim: keeping allegiance of a society that wants a bigger share of national prosperity. Raising living standards appears to be government’s main priority, calling growth of domestic demand “a long-term strategic principle”. Environmental protection, energy conservation and technology are also allotted ambitious goals. And for the first time, government will place a cap on total energy use. Read more
5 April 2011. As the world watches in horror at the unfolding Fukushima nuclear disaster, it forces a new look at an on-going technological revolution in the least environmentally destructive fossil fuel -- natural gas. The fruits of this natural gas revolution may not be long in coming on-line, especially given the seemingly unstoppable rise in the price of oil. In many parts of the world, geologists are now testing the ground for natural gas trapped in shale (shale gas), sandstone (tight gas) or coal seams, gas that has been largely unreachable in the past. Using a technology called hydraulic fracturing, or "fracking," a sort of controlled earthquake, companies are now bringing the gas to the surface all over the globe. But the process can be ecologically brutal. Read more
4 April 2011. Although Chernobyl remains the calamity by which all subsequent nuclear accidents will be measured, the ad hoc device that avoided a meltdown - so-called core-catchers - are now a design feature of the newest reactors Russia’s state-owned nuclear power company, Rosatom, sells globally. Inventor of the "core catcher" expresses what may sound like a jarringly opportunistic sales pitch: Chernobyl was the hard-earned experience that made Russia the world’s most safety-conscious nuclear proponent: “The Japanese disaster will give the whole world a lesson. After disaster, a burst of attention to safety follows.” Opportunistic or not, in recent years, Russian nuclear industry has profited handsomely by selling reactors in emerging markets, including China & India — whose insatiable energy appetites keep them wedded to nuclear, despite vows to proceed more cautiously in light of Japan disaster. Read more
1 April 2011. General Electric reported worldwide profits of $14.2 billion in 2010, with $5.1 billion of the total from US operations. Its American tax bill? ZERO. In fact, G.E. claimed a tax benefit of $3.2 billion. Low taxes are nothing new for G.E. It's been cutting the percentage of its US profits paid to the IRS for years, resulting in a far lower rate than even other multinational companies. Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks with innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department is often referred to as the world’s best tax law firm, including former officials from not just Treasury, but also the IRS and virtually all the tax-writing committees in Congress. Read more
31 March 2011. Businesses in a number of industries are trying to adapt to a new reality. No longer can they count on reliable access to critical supplies, prompting frantic phone calls, contingency planning and product redesigns. Film and television producers, along with the companies that support them, for example, are scrambling to stock up on commercial-grade videotape. A major supplier, the Sony Corporation, closed its factories in Japan. Many studios say they face no shortage now, but there is a fear of one soon — and that is all it takes to put companies on edge. “Folks everywhere know there will be a shortage and are buying as much as they can”
Otmar Issing, Former Chief Economist, European Central Bank Credit:INSM
30 March 2011. Otmar Issing, 74, was chief economist of the European Central Bank from 1998 to 2006. Prior to his position at the ECB, Issing worked as a senior economics advisor to German Chancellor Helmut Kohl before taking a senior management position at Deutsche Bank, where he ultimately became chief economist. "As soon as public money is spent, private investors must also be involved and relinquish portions of their claims or agree to extending maturity dates. It is part of the market economy that those who buy securities and collect higher interest rates for doing so should carry part of the risk when something goes wrong. Taxpayers shouldn't always be footing the bill."
Yantian Container Port, Shenzen: Strict Radiation Screening If Anywhere Near Japan Credit: Bert van Dijk
28 March 2011. Fearing radiation's potential impact on crews, cargo and vessels worth tens of millions, some of world’s biggest container shipping lines have restricted or barred ships from ports in Tokyo Bay. China is starting to require strict radiation checks on ships arriving from Japan. In California Friday, the first ship to reach Port of Long Beach since the earthquake was boarded and scanned for radiation by Coast Guard and federal customs officials before being allowed to dock. Big southern Japanese ports, like Osaka and Kobe, are still loading and unloading cargo. But the Tokyo Bay ports of Tokyo and Yokohama are normally Japan’s two busiest, representing as much as 40 percent of its foreign container cargo. If other shipping companies join those already avoiding Tokyo Bay area, delays in getting goods in and out of Japan will only worsen. Read more
Long Hot Sweaty Summer for Japanese Workers ??? Credit:lowerincase
24 March 2011. Current capacity of Tokyo Electric Power Company [TEPCO] is less than half theoretical capacity. Because of air conditioning, peak summer electricity demand is a third higher than off-peak spring and autumn. So turn off the air-conditioning, you say? Easier said than done. When outside temperature is 35°C and humid, life in a modern office building without air-conditioning is intolerable. Plus factories producing silicon wafers and luxury cars cannot cope with wild fluctuations in temperature. Thus the Japanese consumer will be asked to sweat to keep offices purring and factories humming, since it is conceivable Japan will not have sufficient capacity to cope with peak demand for years to come. Read more
Silicon Wafers: Crucial Link in Global Hi-Tech Supply Chain Credit:pengo-au
23 March 2011. In many ways, modern global supply chains mirror complex biological systems like the human body. They can be remarkably resilient and self-healing, yet at times quite vulnerable to some specific, seemingly small weakness — as if a tiny tear in a crucial artery were to cause someone to suffer heart failure. Day in and day out, global flow of goods routinely adapts to all kinds of glitches and setbacks. A supply breakdown in one factory in one country is quickly replaced by added shipments from suppliers elsewhere in the network. Sometimes, the problems span whole regions and require emergency action for days or weeks. But the disaster in Japan presents a first-of-its-kind challenge. Read more
Toyota's Gas-Electric Hybrid Prius v: NOT Coming To A US Showroom Any Time Soon Credit:Toyota UK
21 March 2011. Since catastrophe struck Japan, car makers that rely on its factories are concluding their operations will be affected more severely — and longer — than initially hoped. “This is a serious situation, with potential to affect many markets, including the Americas,” says Nissan's US head. Of particular concern to Toyota dealers is the gas-electric hybrid Prius, assembled only in Japan, that has experienced a surge in US demand. A vehicle pricing and sales web site says uncertainty about Prius availability has already caused the average price customers are paying to soar by about $1,800 since the earthquake: “There’s so much uncertainty. The supply-chain problem is much more dramatic than automakers are portraying. Even if they were able to come online in two weeks, which I think is wishful thinking, there’s a couple hundred thousand units to make up already, and nobody knows how long this is going to last.” Read more
"Past Performance Is No Guarantee of Future Success" Credit: Euronews
21 March 2011. Assessing the impact of the current crisis in Japan proves once again that economists and other self-styled experts have not solved the “tragedy of the commons,” the quandaries that arise when many people, acting in their own self-interest, create a threat to the common good. However imperfectly, though, markets WILL pass judgment, despite an unusually uncertain outlook. Investors, like everyone else, should understand today's world is a risky place. “You need to use a whole range of approaches to understand the market in a situation like this, and you need to be humble.” And, perhaps, accept an unpleasant reality: the next -- so called / alleged / but all-too-predictable -- black swan is definitely out there somewhere.
Saudi-Led Sunni Forces Enter Bahrain on Monday Credit:bahrainmujaz
18 March 2011. Even before Saudi Arabia sent troops into Bahrain Monday to quell an uprising it fears might spill across its borders, US officials were increasingly concerned its stability could be threatened by regional unrest, succession politics and resistance to reform. So far, oil-rich Saudi Arabia has successfully stifled public protests with a combination of billions of dollars in new jobs programs and an overwhelming police presence, backed by warnings from the foreign minister to “cut any finger that crosses into the kingdom.” Monday’s action, in which more than 2,000 Saudi-led troops from gulf states crossed the narrow causeway into Bahrain, demonstrated the Saudis were willing to back their threats with firepower. The move created another quandary for the Obama administration, which obliquely criticized the Saudi action without explicitly condemning the kingdom, its most important Arab ally.
17 March 2011. Japanese insurance companies, global insurers and reinsurers, hedge funds and other investors in so-called "catastrophe bonds" are all expected to bear a portion of losses likely to exceed $100 billion. Greatest uncertainty surrounds contamination from nuclear accident prompted by earthquake and tsunami. Operators of nuclear plants in Japan are required to buy liability insurance thru Japan Atomic Energy Insurance Pool, an industry group. But they are required to buy coverage of only about $2.2 billion for liabilities, and pool does not sell coverage for earthquake damage or business interruptions, suggesting it will be up to Japanese government to bear the brunt of those costs. Stocks of some US life and health insurers with operations in Japan sank on Tuesday, responding to Prime Minister Naoto Kan’s warnings that risk of radiation exposure had worsened. “What makes today’s natural disaster so extraordinary is that 4 of the 5 costliest earthquakes and tsunamis in the past 30 years have occurred within the past 13 months” Read more
Fukushima Disaster Melting Down Public Confidence Too Credit: tula_7755
16 March 2011. After days of confusion over responsibility, constant downplaying and cover-up of danger from both Tokyo Electric Power Company and his own government, Premier Naoto Kan now wants to get things under control. But it may already be too late. Fear is mounting among Japanese, and their trust in Tokyo's announcements is dissipating quickly. The world is now seeing the Japanese habit of trying sweep accidents under the carpet -- out of shame and a sense of group loyalty or corporate spirit. "The nail that sticks out gets hammered down," is not just a Japanese proverb, but a rule the country's children learn very young. This time too, it seems, no one in power in Tokyo has had enough confidence to tell the entire truth. Read more
Tsunami Only Start of Japan's New Problems Credit: enciclopediapt
14 March 2011. Japan was probably more ready than any other society for a cascading series of inter-locking natural & man-made disasters. Yet confronted by nature's force, there was little even a well-prepared country could do. Sadly, the terrible events of last few days & those perhaps to come are likely to WORSEN chronic economic problems Japan has faced since 1989, not least due to a perverse RISE in value of the yen. In that paradox lie important lessons for the other stagnating advanced economies, the US & EU. But whether they're ready to learn those lessons remains gravely in doubt. Read more
11 March 2011. As Michael Moore recently pointed out, America is not broke, it is just that the rich are getting richer. Everyone else faces stagnating or declining incomes – if they are lucky enough to have a job. Ten to twenty percent unemployment levels have come to feel normal in many advanced economies. So, if you are wondering where all your bailout and stimulus tax dollars have gone, it is a fair bet to think that a good chunk of it has gone to the growing list of billionaires. Forbes, compilers (and cheerleaders) of the annual rich list, has announced that the number of billionaires has increased by 214 to a record 1,210. Read more
10 March 2011. Singapore is well known around the world for its efficiency, success and cleanliness. It’s a place of ongoing progress and growth in the global economic arena and a hub for multinational organizations expanding their reach to in South East Asia. But what about innovation and creativity? Read more
The Colonel: More Excuse than Cause. Credit: EnemyKe
8 March 2011. The world is entering an oil supply crunch because the demand for oil is increasing so rapidly, global oil production can't keep pace with the level of demand. As demand exceeds supply in the midst of political turmoil and crisis in oil producing countries, prices are escalating. The price of oil has risen sharply in the last few months and today Brent crude sells for just under $116 a barrel following OPECs plans to boost oil output.
5 March 2011. It was not that long ago that Turkey was the Sick Man of Europe, the ragtag remains of the Ottoman Empire struggling with inflation and military corruption, while France was a dynamic economy and one of the pillars of the global diplomatic sphere. In a way, those roles have been reversed. France’s President, Nicolas Sarkozy, went abroad not on a diplomatic mission but a domestic one. His speech in Turkey was designed to appeal to right-wing Islamophobic French voters, causing considerable offence to his hosts. The Turks, meanwhile, have got their economic house in order, and are becoming a pivotal power in the Middle East and Central Asia, leading some to call for the ‘BRIC’ countries to be renamed the ‘BRICT’.
1 March 2011. India’s 2011 Union Budget was announced yesterday by Finance Minister Pranab Muhkerjee. The good news: no big changes in headline rates of taxation. The bad news: no big changes on outstanding reforms. However, Mukherjee continues to show commitment to reforms. Indians counting on a budget rich in new opportunities were sorely disappointed, although those in corporate India may come off happy – things might not be any better, but they haven’t gotten any worse. Read more
24 February 2011. During the 5 terms John Roberts has been Chief Justice, the percentage of both business cases on Supreme Court docket and pro-corporate decisions has grown visibly. Roberts court ruled for business 61 percent of the time, compared with 46 percent in last 5 years of Rehnquist court. A key factor in pro-corporate surge has been US Chamber of Commerce. Chamber now files briefs in most major business cases. In the last term its side won 13 of 16 cases. Six of those were decided with a majority vote of five justices, of which five favored the Chamber. One was infamous Citizens United, in which Chamber successfully urged court to guarantee what it called “free corporate speech” by lifting restrictions on campaign spending. Chamber spent tens of millions in 2010 midterm elections, mostly to help Republican candidates. As head of Chamber's litigation unit puts it, “there has been a return on investment, not to sound too crass” Read more
23 February 2011. Hot growth has boosted valuations and increased competition for acquisition of Chinese companies, often not so interested in being acquired, prompting some MNCs to see joint-ventures as good way to enter China economy. Many foreign executives prefer large, well-established Chinese partners. Yet that hasn’t necessarily benefited joint ventures, typically because "partners" didn’t share strategic or commercial interests. MNCs emphasize profitability, even when growth is slow, while Chinese stress growth, even without profitability. MNCs should pair with local companies that explicitly share their strategic goals. This doesn’t eliminate large, well-established Chinese companies. But it does open the door to faster-growing, privately owned and smaller firms that bring strong commercial mind-set & tangible business assets to joint venture. Read more
22 February 2011. India's telecom scandal reveals a small group of powerful conglomerates fighting for resources and projects in mining, land, infrastructure, cellphone spectrum. Scandal shows incestuous world of journalists, corporate lobbyists and politicians, reinforcing the view of Indian economy dominated by small, tightly connected elite. Growth depends increasingly on selling whole swaths of state-directed economy to private sector, whose capital and expertise are critical as India embarks on massive infrastructure upgrade. “Even as government cedes control over large parts of economy, its graft-ridden approach to privatization will leave long-lasting scars holding India back from reaching its potential. Open corruption and rising stark disparities in wealth are volatile mix that will affect social stability if benefits of growth don’t filter down.” Asia Development Bank warns: “India could evolve toward oligarchic capitalism, in which market and political power of major corporations will slow long-term growth” Read more
21 February 2011. Former piano bar singer gained global fame by giving families of trapped Chilean miners donations of $10,000 each — before rescuers saved them. He has become the nation's most prominent philanthropist, contributing millions to help needy Chileans, earthquake victims there and Haiti. While that has endeared him to the country’s poor, public nature of gift giving and outsize personality have made him enemies among the buttoned-down Chilean elite: “Business people here don’t like me too much. I don’t think I fit in.” It does not help he is openly critical of Chile’s upper class: “The rich people in Chile are very stingy, all over South America.” So when he flirted with running for president in 2008, his populist appeal made him one of the most feared rich men in Chile. Read more
17 February 2011. Economy Watch has long been concerned with the destructive power of derivatives -- and their STILL yet-to-be-fully-felt impact on the world political economy -- ever since their explosion onto the scene during the global financial meltdown of Black September 2008. This lengthy but fast-paced story will give even those familiar with the derivatives nightmare a brutally clear idea of why we consider them so dangerous -- and also why the REALLY Too-Big-To-Fail bankers just won't let them go. If you get scared and / or disgusted reading this, don't worry -- such reactions are PERFECTLY normal.
16 February 2011. In 1998 Chinese academia produced 830,000 graduates. Last May, it was more than six million and rising. Despite robust growth, the economy doesn't generate enough good professional jobs to absorb highly educated young adults. Many bear inflated expectations of parents, who emptied bank accounts to buy them education presumed to guarantee "the good life." Supply of graduates in accounting, finance, computer programming now seems limitless, so value has plunged. Between 2003 and 2009, average starting salary for migrant laborers grew 80 percent. During same time, starting pay for college graduates was flat, though if inflation taken into account, their wages actually fell. “College essentially provided them with nothing” For government fixated on stability, situation is major cause for concern. Read more
15 February 2011. At EconomyWatch, we consider micro-credit a key issue in one of our main concerns: the impact of world political economy on ordinary people's lives. We have looked at the situation from the perspective of those promoting micro-credit for profit, the specific problems for-profit micro-finance has caused in India, and the growing resentment towards the "industry" world-wide. Here, Bangladeshi Muhammad Yunus, the "founder" of micro-credit, via his Grameen Bank, talks about the problems of micro-credit today, and the most effective means to solve them -- first and foremost, effective / intelligent / EMPATHETIC government regulation. Read more
14 February 2011. Every spring, in Serengeti National Park, two million wildebeasts, zebras and gazelles march north in search of food: the Great Migration, is one of most spectacular assemblies of animal life on earth. But Tanzania president Jakaya Kikwete plans a national highway straight through the park, bisecting the migration route and possibly sending thick streams of overloaded trucks and speeding buses through the traveling herds. Scientists and conservation groups paint a grim picture of what could happen next. But rural people "not only want the highway, we've been praying for it for years", hoping it will bring: cheaper goods; faster access to hospitals; better connection to towns; and a higher chance of someday getting electricity and cellphones. It's hard to argue with either side. Read more
10 February 2011. Foreign direct investment reflects a country’s economic muscle. The UK owned 45 percent of world FDI in 1914; US share peaked at 50 percent in 1967. Today China, including Hong Kong and Macau, has just 6 percent. Inevitably it will rise. Listed Chinese firms, largely state-controlled, already among world’s biggest, account for 10 percent of global stock market value. Huge cash reserves will spur deals too. Today it is recycled into rich countries via sovereign-wealth funds and central bank, which act as bond-buying portfolio investors. But China WILL diversify, a shift accelerated by its political aims. Yet deals are often tricky, due to cultural differences and the role of the Chinese state. There have been great successes - and disasters Read more
9 February 2011. Ten years after dot-com bust taught Wall Street and Silicon Valley investors that what goes up doesn't go up forever, a growing number of entrepreneurs and a few venture capitalists are starting to wonder if hi-tech start-ups are headed toward another bust. Chief evidence is how VCs and established companies are clamoring to give money to new firms, including those with only shred of an idea. They are piling into me-too start-ups imitating popular Web sites that already received financing. Social shopping, mobile photo sharing and new social networking "ideas" are finding it easy to attract investors because no one wants to miss the next big thing.
8 February 2011. Central Asia is an eternal hot spot of world history. 19th century Britain and Russia engaged there in the "Great Game," a bitter struggle over natural resources and strategic bases. Today's board involves 5 ex-Soviet Republics: Kyrgyzstan; Kazakhstan; Tajikistan; Uzbekistan; and Turkmenistan, all with major conflicts internally and between each other. Former players Russia and UK are joined by key new ones: US, Iran and China. The region is critical to future energy supply of Europe, China & India. While the current Game is far from over, at this point, China looks like the best bet. It isn't suspected of religious agitation, like Shiite Iran, or playing military and political power games, like US and Russia. It seems to want only to engage in trade with, and secure the resources of, this ever-vital region. Read more
7 Feb 2011. As the issue of "dignity" becomes more pronounced in the struggle now under way in Egypt, consider Niodior: an African village that exists simultaneously in Senegal, where families endure heart-rending poverty, & in southern Spain, where the sons who have somehow managed to make the perilous journey there live together in a replicated version of their home. In general, they work illegally, but the money they send home is crucial for the survival of their families. The agricultural town in which they live, Roquetas de Mar, is a laboratory for the EU's foreign, economic and development policies at one and the same time.
3 February 2011. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Of many key topics underanalyzed by so-called Financial Crisis Inquiry Commission, among the MOST significant is role of credit rating agencies, supposed guardians of financial world's integrity. We have already analyzed in depth the mysteries of & structural problems created by ratings agencies. So while no surprise, still disturbing to see how alleged protectors of global investment "honor" & safety now making three currently difficult situations worse: decades-long stagnation in Japan; financially desperate US states; & rampant socio-economic inequality fueling the people power movement sweeping the Arab world. Read more
2 February 2011. In the EU and US, coal seems past its prime, but growth and shifts in coal exports to China are rising. Seaborne trade in thermal coal rose to 690 mn tons in 2010, up from 385 in 2001. Price rose from $40 to $60 a ton 5 years ago, to high of $200 in 2008, by end 2010 selling $120 per ton. Perennial coal ex-porter til 2009, 1st year of net imports, China's total imports for 2010 expected up to 150 mn tons. Tho plentiful domestic supplies, its coal is low grade with impurities. Coal from the US tends to be low in sulfur, allowing power plants to burn more without exceeding pollution limits. China’s coal also inland, while factories are coastal, thus cheaper to ship coal from US, Canada, Australia. But conflicts between trade imperatives & environmental concerns are growing fast & nasty in all those countries. Read more
1 February 2011. The hostility toward microfinance is a sharp reversal from praise and goodwill that's been showered on it in last decade. Philanthropists and investors poured billions into non- and for-profit microlenders, one of whose goals was to reduce by half the number of people in extreme poverty. Attention helped the sector reach more than 91 million customers, mostly women, with loans totaling more than $70 billion, by the end 2009. Done right, these loans have helped some build sustainable livelihoods. But rapid growth — in India, some firms are growing at a rate between 60 - 100 percent per year — has made these loans much less effective. Most borrowers are not escaping poverty and a sizable minority are getting trapped in often deadly debt spiral. Some industry officials acknowledge the sector needs to reform itself: “We in microfinance have to make it easier for politicians to support us. Instead of unsupported claims, we need to impose on ourselves the discipline of transparency about poverty reduction.” Read more
31 January 2011. Venezuela is an immigration puzzle. While large numbers of the middle class leave, 100s of 1000s of foreign merchants and laborers arrive. Opposing tides reflect country's increasing polarization. Government of Hugo Chávez has declared “economic war” on “bourgeoisie,” expropriating more than 200 private businesses in 2010 — including banks, cattle ranches and housing developments. At other end of economic spectrum, many new immigrants arrive on tourist visas and overstay their visits, drawn by incomes higher than some of Venezuela’s neighbors and broad array of social welfare programs for poor championed by Chávez government. “One can live w a little bit of dignity here, at least enough to send money home now and again” Read more
27 January 2011. President Obama made a big deal of economic potential of solar and other clean energy in State of the Union speech. 2010 was boom year for solar industry, due largely to govt subsidies in Europe, especially Germany and Italy. But these are set to fall in 2011, so he'll need to put some muscle where his mouth is and offer help to a NEW kid on the block like solar and not just already-established corp interests, ie, Wall St / insurance / Big Pharma. His record isn't promising so far. But maybe he'll happily surprise us & bring some change in which people actually can believe. Read more
26 January 2011. Telcom giant Huawei is China’s 1st truly home-grown multinational, world’s 2nd-largest telcom equipment supplier after Sweden's Ericsson. With government backing, has sewn up major deals in Asia, Africa, Latin America. In Europe, has outmaneuvered Ericsson to supply equipment to big carriers. It has struggled, tho, to break into US, largely due to security concerns. Even hint of Huawei presence has generated reaction in DC. Its success a result of heavy R&D spending, where Chinese corporations usually weak. But Huawei has 17 global research centers, including Dallas, Moscow, Bangalore and Silicon Valley. Of company’s 96,000 employees, nearly half in R&D. Analysts say its spectacular rise is model for other Chinese companies seeking to compete globally.
25 January 2011. 27-floor tower is new family home of India’s richest person, Mukesh Ambani, son of founder of Reliance, India's biggest & most powerful company. Even in Mumbai, where residents bear daily witness to stark extremes of wealth and poverty, it is so spectacularly over the top, the city’s already elastic boundaries of excess and disparity are stretched to new dimensions. But it is only one of many high-rises insulating rich from the teeming metropolis below. “This is a gated community in the sky. It reflects how the rich are turning their faces away from the city.” Read more
24 January 2011. At 20 percent, Spain has highest unemployment rate in euro zone, with real estate prices dropping. Approximately 1.4 million Spaniards face potential foreclosure. For most of them, the fine print in deals they agreed to years ago is catching up with them. Not only are Spanish mortgage holders personally liable for full amount of loan, but throw in penalty interest charges plus tens of 1000s in court fees, and people can end up facing a mountain of debt. Bankruptcy is not an answer, as mortgage debt is specifically excluded. “Effectively, you can never get rid of this debt” Read more
20 January 2011. Too big to fail banks not only create & sell investment products, but also bet on, and often against those products, putting banks’ interests at odds with their clients. JPMorgan Chase has a deal for mutual & pension funds that oversee many Americans’ savings: Heads, we win together. Tails, you lose — alone. How? Funds lend the bank some of their stocks & bonds, in return for cash that banks then invest. If trades do well, bank takes a cut of profits. If they do poorly, the funds absorb ALL losses. This is "securities lending," a thriving practice today, even though investments linked to it were decimated in Black September 2008. Clients were not warned of risks and say banks breached their fiduciary duty. So far, several banks have lost client lawsuits. Even so, securities lending has rebounded strongly, with a combined value of $2.3 trillion now out on loan, compared with $2.5 trillion in 2007. This quick revival raises concern whether banks & their pension customers have learned ANY lessons.
19 January 2011. While companies may dream of sales to 1.3 bn Chinese, getting start-up money into China is hard. Foreign corps can't convert a single dollar into renminbi [RMB] without prior approval from local branch of Commerce Ministry. If investment is in industry prohibited for foreign investment like agriculture or publishing, no go. But if proposed investment is not restricted & < $300 million, can be approved by cities or provinces. Anything larger must go to Ministry in Beijing. Once investment approved & business license issued, company needs approval from State Administration of Foreign Exchange to convert investment into RMB. Only then can it open local bank account & start spending, which presents a Catch-22: companies need to invest RMB to get approvals, but cannot spend RMBs until they have approval to invest. There are 3 ways they might do that ... Read more
18 January 2011. India’s legal outsourcing industry has grown from experiment to mainstream part of global law business. Cash-conscious Wall St banks, mining giants, insurance firms & industrial conglomerates hiring lawyers in India for document review, due diligence, contract management etc. To win new clients & take on more sophisticated work, firms in India are actively recruiting experienced Western attorneys, who are coming as US / UK law firms contract. Legal outsourcing corps mushroomed to > 140 by end 2009 from 40 in 2005. 2010 revenue at India’s legal outsourcing firms ~ $440 mn, up 38 % from 2008, & should surpass $1 bn by 2014. “This is not a blip, this is a big historical movement” Read more
17 January 2011. Since 1968 when Dr. Shokri Ghanem took a post at Libya’s Ministry of Petroleum, he has maintained a high profile in Middle East energy scene. An economist, professor, and a veteran of both the oil industry & public sector, he currently chairs Libya’s National Oil Corporation (NOC). Director of OPEC’s research division from 1993 to 2001, Ghanem also led its secretariat for 3 years. He then returned to Libya, where he was prime minister before returning to the energy sector. In this interview, he discusses the future of energy pricing, the relation between oil and natural gas, the operation of national oil companies, and their changing relationship with the international oil majors.
13 January 2011. Strange dynamics of China property scene seen in Ordos, resource-rich city w huge reserves of coal & natural gas, a fast-growing economy & real estate market so hot virtually every house for sale is immediately bought. Just one thing missing in extravagant new central district - people. Analysts estimate could be as many as a dozen other Chinese cities just like it - sprawling ghost towns. Why? Because land auctions are vital source of income for cities & provinces. But national govt, fearing inequality & social unrest, wants to rein in soaring prices that fuel inflation, even as ambitious local officials promote new megacities. And if govt-run banks balk at loaning to developers, underground, gray-market lenders are only too happy to step in. Is a crash coming?
11 January 2011. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Monday, we called for Pres Obama to use horrible Arizona murders to claim legacy of Martin Luther King & take three steps. Most readers liked idea, but doubted anything like that would happen. Then, Tuesday, NY Times - quietly - reported he wd, in fact, do first thing we proposed: go to Tucson to meet w victims & their families at a memorial service. Will he now take next two steps: give the speech of his life, combining hope of "I Have A Dream" w incisive courage of "A Time To Break Silence" - & then use that speech as guide for sustained campaign vs hate-filled right-wing rhetoric that legitimates violence? We can only wait, watch & hope he does resurrect the best American political traditions of Lincoln, FDR & King Read more
11 January 2011. India’s rapidly growing private microcredit industry under attack, as almost all borrowers in Andhra Pradesh, one of its largest states, have stopped repayment, supported by politicians who accuse industry of earning outsize profits on backs of the poor. Indian banks put up to 80 percent of money lent & are increasingly worried about serious losses. Crisis could reverberate worldwide. Initially work of nonprofits, tiny loans to poor once seemed promising path out of poverty for millions. Foundations, venture capitalists, World Bank have used India as petri dish for FOR-profit “social enterprise” seeking to make money AND fill social need, now operating in Africa, Latin America & other parts of Asia. But for-profit microfinance has led some corps to lend at exorbitant interest rates without regard for ability to repay, doubling annual revenues, but sparking wide anger amidst reports of rising suicides
10 January 2011. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Shocking events in Arizona give Obama chance to follow path of Martin Luther King: First, being physically present at murder site, showing whole world - esp spiritual children of Reagan - he rejects openly & forthrightly violent & hate-filled rhetoric that inspired evidently disturbed young gunman. Then, he needs to give speech of his life, combining hope of "I Have A Dream" w incisive courage of April 67 "Beyond Vietnam - A Time To Break Silence" Finally, needs to make speech center of on-going campaign vs forces that have promoted this kind of hateful action. If so, has chance to break from corporate mediocrity so far & join FDR, Lincoln & King in embodying best, not worst, of American values.
4 January 2011. Consistently pro-corporate policies of both Obama admin & Congress meant unexpected 2010 growth in equity & other markets. Profits tho were pumped by job cuts & other restructuring BUT NOT revenue growth. Q3 earnings were 31% higher than 2009, but revenue up just 8%. Q1 earnings jumped 58% but revenue only 11%. Given this, 2010 will be difficult to repeat, boding ill for 2011 stocks. Profits thought to rise 13% in 2011, far lower than est 38% for 2010. Even worse, Wall Street brimming w optimism, which, in looking-glass world of investing, is often signal to sell: “Good news has been priced in & potential negatives ignored. Market will get nervous at these valuations.” Read more
21 December 2010. For last several months, China has been said to have more than 200m empty apartments. China has more living space per capita than Europe or Japan so this is not a housing shortage. Given the unprecedented amount of living space, it is hard to see how higher rents have been sticking. The huge stock of empty flats equals not just price, but quantity, bubble, which are less common & shorter than price bubbles. Unusually, China seems to be experiencing simultaneous price AND quantity bubbles. If either pops, results could be disastrous, but that outcome can be avoided. Read more
20 December 2010. The collapse of Dubai property market is now a nightmare for outside investors in one of largest property surpluses in world. Opaque laws make it virtually impossible to walk away, even as interest accumulates on loans. Apartment buyers don't know what is happening with their down payments: Bank loans on undelivered property often can't be forfeited & borrowers must pay higher interest rates, even as banks insist they hold their mortgages. “It’s really a disaster here in Dubai. It’s very difficult to exit if there’s a problem. We’ll never get our money back” says one investor. Read more
16 December 2010. Vinod Khosla, billionaire VC & Sun Microsystems co-founder, was already among world’s richest when he invested in SKS Microfinance, a lender to poor women in India. Roaring success of SKS’s IPO has enriched him by ~ $117 mn, which he says he plans to put into other ventures that fight poverty while turning a profit. Also says he wants to challenge other rich Indians to do more to help country’s poor. Plans to start venture capital fund to invest in companies focusing on poor in India, Africa etc by providing health, energy, education. By backing businesses that make education loans or distribute solar panels in villages, wants to show commercial entities can better help people in poverty than most nonprofit charitable organizations: “There needs to be more experiments in building sustainable businesses going after the market for the poor” Read more
9 December 2010. The African Decade is upon us, with Ghana expected to grow at an amazing +20 per cent rate in 2011. Of the 12 fastest growing countries in 2011. they are all from Africa, Asia and the Middle East, and all but two are small. Out of the G20, only China and India make the grade, and once again no developed country is represented. Read more
6 December 2010. Ali Allawi as the first civilian minister of defence in post-Saddam Iraq. In this fascinating interview, he says Iraq got the worst of all worlds: the destruction of whatever dysfunctional state had existed, without anything coherent replacing it. It is not that the Americans didn't spend money - on a per capita basis it has cost more than the Marshall Plan. It was just so misguided and ill-directed by people who were indifferent to the long-term evolution of the country's institutions. Allawi suggests that this 'Second Iraq State' is now having its final fling and has to prove itself to its people, or it might face disintegration. Read more
2 December 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Key aspect of involuntary, Congressionally-mandated document dump by Fed is depth & duration of direct involvement in commercial paper market, where finance sector meets "real economy" Makes clear basic "strategy" of giving TBTF banks 0% money to re-lend to actual companies didn't work during "crisis" & isn't working now, w result of no job-creation despite record corporate profits. Only way US disaster has prayer of being fixed is asserting political control over / ending govt indulgence of TBTF banks. Read ENTIRE piece until very END. Read more
1 December 2010. Until now Euro Zone has had single option vs surging budget deficits: an EU bail-out. Now it wants to create 2nd: rescheduling sovereign debt of an ailing member state, in Wall Street parlance, "taking a haircut". Countries w high debts will have significant part waived, w ALL creditors sharing burden in EQUAL measure - private investors, banks, investment funds. But orderly "haircuts" via new mechanism only possible from 2020 onwards. So risk of dis-orderly rescheduling remains, esp as Euro banks say low equity / capital ratios make them unable to handle a haircut - what banks in Japan have said since 1989 & in US since Black September 2008. Any real action thus requires re-assertion of political control over - ending govt indulgence of - TBTF finance sector. Don't expect solution to Euro area crisis anytime soon. Read more
30 November 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. While we're delighted at multi-national media experiment in government transparency, we still wonder: What has world public learned it didn't know before? Unfortunately, we don't think very much at all. If it raises sadly degraded level of public discourse everywhere, we'd be thrilled. In absence of that, we're waiting for smoking gun that, say, makes perfectly clear the duplicity of Cheney / Bush regime w world in general & American people in particular re Iraq - not for oil, but, even more scandalous, huge no-bid contracts for their past and future employers. THAT would be exciting. Read more
29 November 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Key under-appreciated factor in NE Asian drama is fear in China & S Korea that, if pushed too far, N Korea will collapse as independent state, unleashing refugee flood they, not Japan or US, wd have to deal w as immediate, multi-dimensional problem: above all economic, plus social / political / strategic. For Japan, most important is nuclear threat posed to population & industrial centers, leading to generally hard line vs North's efforts in that area, in which it is usually joined, for ideological reasons, by US. N Koreans well aware of these differences, so strategy built around exploiting them. Unless other 4 can find way to make sure they all get what they want, North Korea likely to continue setting agenda in region. Read more
25 November 2010. Two years after Black September 2008, Wall Street’s moneyed elite are breathing easier again. Goldman Sachs, Morgan Stanley, Citigroup, Bank of America & JPMorgan Chase have set aside $89.54 billion this year to pay employees. Bonuses will be up 5% across all financial services companies, w those in asset management getting 15%. So when it comes to personal indulgences, the wallets are opening up. “Wall Street is back spending as much if not more than before,” says a cosmetic plastic surgeon. Christie’s says buyers who fell out of bidding market during 2008 meltdown are “pouring” back in. Bidding for summer Hamptons rentals is "hot & heavy". Guess this is what's meant by "trickle down" economics. Read more
24 November 2010. When Indians travel to Europe, they usually go to Paris, London & Switzerland, places familiar to them via Bollywood films. Thus decision by Bollywood superstar Shah Rukh Khan to use Berlin as setting for a film could give tourism an enormous boost - or so hope city officials, who made it their mission to woo him. Film's €12 million ($16.2 million) budget includes €2 million in German funds, most from Berlin-Brandenburg Media Board & German Film Promotion Fund, which focuses significantly on promoting sites as tourist destinations, using investment as leverage. Indian travellers currently account for ~ 22,000 overnight stays in Berlin hotels. City's tourism director hopes numbers will grow 10-fold in 2 - 3 years - as soon as Indians have seen "Don 2". Khan heartily agrees. Read more
23 November 2010. Since US Transportation Security Administration began more aggressive pat-downs at security checkpoints before start of 6-week holiday travel season, beginning this week, traveler complaints have poured in. They are surprised by intimacy of physical search usually reserved for police encounters: “I didn’t really expect her to touch my vagina through my pants” Men & women seem equally bothered by searches. The disabled, parents traveling w children, victims of sexual assault & those w medical devices or health issues express concerns re how new policy affects their ability to fly: "It’s very invasive & thought of going through that every time I fly is discouraging” Which is precisely what worries airlines: prospect of ever-intrusive searches will make people reluctant to fly unless they absolutely must & there are no alternatives. Read more
22 November 2010. Wireless technologies, esp cell phones, have created advanced communications infrastructure where none existed in emerging & frontier markets, powering huge econ & social advances. But US medical researchers find signs cell phone radiation MAY link to certain cancers. No one need stop using them, but people world over shd pay more attention to "small print" warnings re radiation found in instruction manuals. Potential econ stakes for industry are huge: Americans alone talk for 2.26 trillion minutes annually, generating $109 bn. Wireless is leading element of telecom revolution in China, India etc, where today’s typical user indistinguishable from heavy user 10 years ago. Researchers say use wired headsets or speakerphone, children shd text rather than call, pregnant women shd keep phones away from abdomen, & all shd hold cell away from head or body. But one says “I do think we're looking at an epidemic in slow motion” Read more
18th November 2010. As noted in recent In the News item, copper is single most important metal for rapidly industrializing & prospering countries. Single most crucial player in global copper is China, whose continuing demand has pushed up world prices to near record high. So what does it mean when we hear copper inventories in Shanghai bonded warehouses - where traders store shipments before duties are paid - have at least doubled in past three month ?Stockpiles in those warehouses hit as much as 300,000 metric tons, 150,000 late July. Some argue “this situation temporary, as China remains net copper importer. Physical buyers will have to return to market once inventories depleted." If so, reliable indicator China in good shape. If not, MAY contemplate potentially problematic Chinese economy - bad thing for them AND rest of the world. Read more
16 November 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. As we noted yesterday, President Obama spent his 10-day Asia trip saying an export surge would reduce America’s worsening unemployment crisis. But there is little evidence - aside from misplaced faith in the dogmas of neo-classical economics - a visibly weakening dollar has or will create any US jobs. Indeed, the $ fell 31% vs basket of major currencies since 2001 & American exports increased 45%. But manufacturing employment dropped by nearly a third in that time, from 16.4 to 11.7 mn workers, demonstrating once again the "fallibility" of neo-classical analysis. Still, don't expect Americans to forsake their neo-classical "religion." Read more
15 November 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Key "take-away" from Asia trip is how clear it is issues that matter to US - & discourse in which those concerns are expressed - differ so radically from rest of the world. This doesn't imply rest of the world is "right" - especially when their logic is looked at critically. But it does mean gap btwn what's considered important in US vs. in rest of the world is large & getting bigger all the time. Just as during late 1920s & 30s, political leaderships of economically most important countries are trying desperately to satisfy domestic constituencies, w/out much thought to very real & deteriorating global system problems. Let's hope world today can avoid what followed 20s & 30s in the 40s: a cataclysmic global holocaust from which it took decades to even begin to recover.
11 November 2010. Chinese manufacturers have helped send price of conventional solar panels plunging & grabbed market share far more quickly than anticipated. California companies, once so confident they could outmaneuver the competition, are thus scrambling to retool their strategies & find niches in which they can thrive. Situation has made investors — who once saw region’s future as Solar Valley — skittish re backing capital-intensive start-ups.In Q3 2010, venture capital investment in solar companies plummeted to $144, from $451, mn in Q3 2009. Chinese solar panel makers now supply ~ 40% of California market, largest in US, & bulk of EuroZone “We grow every year w double revenue & almost double capacity. By year end, we'll have 1.8 gigawatts of capacity & 11,000 employees, from 4,000 at start of year”Read more
10 November 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. People who do have full time jobs are working harder, w longer hours, than ever. Those doing contract work, even if well-paid, comparatively speaking, live in constant state of insecurity. Given whole scene - lots of people without jobs, while those who have them, full-time or contract, are working harder than ever for same $ - there is a LOT oftension in the air, even in SF Bay Area, home of "coolness" in ALL dimensions, while NY City, never a relaxed place, is more tense than ever, w people seemingly on much more of a hair trigger than even before. Yet stagflation lurks, albeit NOT because of monetary stimulus promoted by Obama & Fed head Bernanke Read more
9 November 2010. An Irish bond market already in free fall plunged further after it announced on Thursday plans to nearly double its package of spending cuts & tax increases to try to rein in huge deficit. "Investors" took it not as a sign of resolve, but Ireland’s desperation & uncertainty about true extent of problems. Borrowing costs in Spain, Portugal & Greece also spiked up, amid concern they would be hard-pressed to bring deficits under control & avoid bond default. “The scale of the deficits are just so big. The issues are political as much as they are economic." Read more
We have sent our Chief Political Economist / Editor-in-Chief, David Caploe PhD, to US to look at that country after its November 2 election. While we get our North American operations in order, we may continue to vary slightly from our usual regular publication schedule - but don't be alarmed ;-) !!! Soon enough, all will be back to normal, so continue to keep an eye out - not least to catch up on the crucial In the News items & Features recently posted, and everything else to be following shortly. Thanks to ALL our devoted readers !!! Read more
29 October, 2010. From the Baltic states to the Balkans, Chinese companies, flush w money, are setting up bi-lingual schools, buying real estate, competing for public infrastructure contracts. They are also investing in manufacturing of products like electronics and chemicals. Why? To gain a foothold inside the EU, Europe’s expansive single market, via former Soviet bloc. Some countries, like Hungary, are extremely enthusiastic, extensively promoting Chinese presence. Others are less thrilled. But the China Wave has unmistakably arrived in Eastern, hence all of, Europe.
27 October 2010. Indian firms export many insourced services, but primary focus is domestic consumers, who demand cheap, not fancy, goods. “Frugal innovators” oblige. Tata Chemicals makes a filter needing no power that can give a family of 5 safe drinking water for 30 rupees ($0.65) a month. Researchers at the Indian Institute of Technology & Indian Institute of Science have produced prototype $35 laptop. Ayas Shilpa makes suspension bridges @ 10% price of conventional ones, a colossal boon in country where countless villages connect to the outside world only by perilous rope bridges across raging rivers. They are devising new business models too. Software firm HCL helps clients improve IT systems on the understanding they pay nothing UNLESS they reap benefits. If so, HCL takes a share: “It puts our skin in the game.” Read more
25 October 2010. Italy’s northernmost province is wealthy South Tyrol / Trentino. There is almost no unemployment in area near capital Bolzano, Bozen in the German spoken by many of its residents. It is debt-free, while Italy as a whole has highest govt debt, as %age of GDP, in entire Euro zone. Investors exploit bilingualism of many South Tyrolese to capture southern markets. Vacationers flock there. And it’s politically very stable. In last 50 years, Rome has seen 19 prime ministers. But in South Tyrol, there has been only one change at the top during same period: from "über-father" Silvius Magnago to current head Luis Durnwalder. And that’s part of the problem as it confronts the future. Read more
22 October 2010. Are banks often run as little more than a series of banana republics? Are banking elites a force whose power may put your run of the mill Caudillos to shame? Like all strongmen, it seems, bank chairmen are equally thin-skinned, combative and ready to eliminate whomever they believe threatens their reputation or their notions of “honour”. Take what happened to Richard X Bove, a bank analyst who likes to take what he calls “extreme positions.” He occasionally moves the stock market, which has earned him a certain amount of prestige and notoriety — but has also gotten him fired several times. It has now got him sued as well. Read more
19 October 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Despite India’s extended economic boom, the benefits have not been equally shared. Southern India has rocketed ahead of much of the rest of the country on virtually every score — people earn more money, are better educated, live longer lives, have fewer children. A crucial factor is collapse of the caste system over last half century, which undergirds many of the other reasons the south has prospered — more stable governments, better infrastructure & geographic position that gives it closer connections to the global economy “The breakdown of caste hierarchy has broken the traditional links between caste and profession, releasing enormous entrepreneurial energies in the south, which goes a long way to explaining why it has taken such a lead over the north in the last three decades.” Read more
19 October 2010. In Asia, it's a truism that, as Chairman Mao put it, "the wind comes from the East", at least as far the world economy is concerned. But what was so shocking about the most recent IMF meeting in Washington was the extent to which Western leaders now openly acknowledge the same reality - not just about the present, but well into the future as well. While that recognition is positive on the analytical level, it remains unclear, as this piece points out, how they are going to deal with this new situation - both as a "group" of some sort, and as individual countries. With great thanks to En Ming !!! Read more
14 October 2010. Investments in green energy make sense not just environmentally but economically, and whichever country sets up the corresponding infrastructure will be at the forefront of growth, jobs, and profits in the coming decade. While the US continues to capitulate to powerful interests and invest in trying to clean up the dirty energies of yesterday, China is taking advantage of a once in a century opportunity and is emerging as the leader in the green technologies of tomorrow. Christine Shearer analyzes the situation. Read more
7 October 2010. Companies in China’s industrial heartland are toiling to reinvent their businesses, fearing low-cost manufacturing that helped propel nation’s economic ascent fast becoming obsolete. “Many customers won’t be happy w decision to compete w them. But we have no choice” Economists consider such efforts necessary — & overdue. “It is my hope China’s comparative advantage as low-wage producer disappears — the sooner the better" says one, adding China needed to upgrade & embark on “the next stage of development” Seeking lower costs, some coastal factories relocating to poor inland regions where wages as much as 30% lower. Others moving to lower-wage countries like Bangladesh & Vietnam. But for companies that have invested bns in factories, simply packing up & pulling out not financially feasible, so many experimenting w other solutions. “We’ve decided we’re not going to be low end. A lot of companies don’t see a future here & feel pressure from govt to upgrade” If many companies reluctant to leave, local govt just as loath to lose jobs & tax revenue. “Every company now wants to be high-tech, & we want to encourage them” Read more
6 October 2010.By David Caploe PhD, Chief Political Economist, EconomyWatch.com. For long time, we have argued US enmeshed since 2000 in simultaneous crises in 6 major areas of public life: financial / economic / ideological / political / academic-intellectual / media. Thoroughgoing deterioration made clear by ugly fight between two TBTF groups: banks & insurance companies, arguing other shd pay for bad housing loans on which BOTH freely admit they consciously failed to do ANY due diligence. Even worse, each has found judges willing to buy their stories - even WITH admission of no due diligence. Story is pathetic, enraging, disgusting - & totally true. Sad indication of how once-great country has become an un-funny parody of its worst elements. Read more
5 October 2010. Despite India's rise as high-tech titan, w some of world’s best engineering minds, its full econ potential is stifled by potholed roadways, collapsing bridges, rickety railroads, & most of all, power grid so unreliable many modern office buildings run their own diesel generators to make sure lights & computers stay on. Problem is dearth of engineers — or at least civil engineers, w skill & expertise to make sure ambitious projects done on time & up to specifications. Civil engineering once elite occupation in India, during British colonial era of carving roads & laying train tracks, & long after independence as part of civil service. Today, tho, India’s best & brightest know there's more money & prestige writing software for foreign customers than building roadways for their nation. Preference 4 software over steel & concrete poses econ conundrum. Much-envied IT industry generates tens of 1000s of relatively well-paying jobs every year. But that lure heightens exodus of ppl qualified to build desperately-needed infrastructure 2 improve living conditions & bolster industries that require good highways & railroads > high-speed Internet links 2 West. One major obstacle to attracting more civil engineers is paltry entry-level pay. Read more
4 October 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Rare earth metals are key to products like high-definition televisions, cell phones, computers, guided missiles, hybrid cars, satellites, wind turbines, batteries & magnets, as well as vital component in emerging green high-tech areas & clean energy applications, like generators for large wind turbines & lightweight electric car motors. China is constantly quoted as source of 93% of global supply of these metals. Its main market for them, ironically enough, is Japan, w whom it has been engaging in a strange confrontation for several weeks, which thankfully seems to be simmering down. One aspect of this bizarre & inexplicable encounter has been an unannounced ban on rare-earth exports to Japan. It is thus ironic, to say the least, that Japan has just announced its own source of rare earths via "urban mining" - recycling of discarded electronics. Read more
30 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. For a long time, Western, esp US, media’s main “story” re Chinese economy was its “undervalued” trade-un-balancing currency – a view we have consistently rejected as naïve & irrelevant. Now it is finally understanding the REAL story re the Chinese econ: its systematic, concerted drive – at all levels of govt – to become THE global leader in clean / green / high-technology. This effort has many aspects, some seeming “unfair” to Americans, but were in fact either pioneered, or used extensively, by US during its equivalent stage of econ growth in 19th century. Lost in the complaints are two key facts: a) both the immediate & end results of this process are going to be a healthier world environment, which will benefit the US – world’s largest per capita polluter, btw – as much as anyone; & b) several companies benefiting from Chinese govt action are AMERICAN, there because they were UNABLE to get similar forward-looking help from either banks or govt at home. What follows is an extensive look at how China is attempting to pull off an amazing feat that, while it will certainly benefit itself, will be of great value to the rest of the world as well. Read more
29 September 2010. Malvinder Singh, 37, first made a fortune in 2008 selling generic-drug giant his family built, Ranbaxy Laboratories. Now he’s trying to expand Fortis Healthcare, another family company, from string of hospitals around India into a pan-Asian health care network. Fortis has grown from single hospital in northwest India into network of 48 hospitals & clinics. Last year, Indian health care market estimated at $38 bn, & given country’s fast-growing, increasingly affluent population, more Indians suffering from lifestyle diseases common to developed countries. India already has largest number of diabetics in the world after China. “The health care market in India is very fragmented. The corporatization of health care is still emerging.” While 70% of country’s hospitals government-run, private hospitals treat 70% of all patients. But Mr. Singh is after much more: not only a slice of China’s 1.3 bn & Indonesia’s 227 million, but emerging class of affluent Asian medical tourists. “There is a huge opportunity for growth in Asia for health care,” says Mr. Singh. “There are multiple markets which need investment that we would want to be a part of.” But it’s not happening yet. Read more
28 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. While we generally support China’s policies & actions, it’s hard to imagine any good outcome to their current escalation of tensions w Japan. We make no claim to understand its reasons, but whatever they are, this is a potentially explosive & destructive situation for everyone – not just China, Japan, & rest of East Asia, but entire world. Given this, we think only positive way out is for Japan to seize the opportunity to make a radical change, one that will redound to benefit of both it & the rest of region. While it won’t be easy, examples of both Germany, in one way, &, in quite a different way, China itself, show societies CAN change. While circumstances are obviously far from ideal, we think Japan should take advantage of a bad situation, & make some long overdue internal changes that will benefit not just itself & its neighbors, but the entire global political economy. We wish China weren’t putting such pressure on Japan, but since it is, we think Japan should use it as a moment that can transform not just itself, but its entire relationship w rest of East Asia & the world. Read more
27 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Brazil established as global force, one of largest economies in the world. W huge new oil discoveries & important new role providing food & raw materials to China, it is poised to surge even more. But educational shortcomings are leaving many Brazilians on the sidelines. Finding workers w adequate basic skills for even manual labor jobs is a challenge. More than 22% of ~25 million workers available to join Brazil’s work force this year were not qualified to meet demands of the labor market. “In certain cities & states we have a problem hiring workers, even though we do have employment.” Tens of 1000s of jobs went unclaimed because there weren’t enough qualified professionals to fill them. Unless that gap is filled soon, Brazil may miss its “demographic window” over next two decades in which “economically active population is at its peak,” says World Bank. Read more
23 September 2010. Major phenomenon of last decades is rise of individual investor. As US govt safety net has dissolved, individuals have poured $ into stocks w such faith that ½ country’s households now own shares directly or via mutual funds, most popular way Americans invest in stocks. But in 1st 7 months of 2010, investors withdrew a staggering $33.12 billion from equities. “At this stage in economic cycle, $10 to $20 billion would normally be flowing into domestic stocks, rather than billions flowing out. This is very unusual.” After dot-com crash of early 2000s, investors were quick to re-enter equities. But appetite for stock risk among all ages declining steadily since 2001, w change most pronounced in under-35s, & economic calamities like Great Depression affected attitudes to $ for decades. Notion stocks are safe & profitable long-term investment now appears gone, just as decline in home values & job stability seems to have undermined Americans’ sense of financial security irreversibly. Read more
22 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Current tensions between China & Japan arise from minor incident whose importance lies in where it happened: islands in East China Sea, Senkaku-Japan / Diaoyutai-China, ~ 300 km from vital natural gas fields lying directly between two countries. A thorny issue for some time, 2 sides agreed in 2008 to jointly develop deposits. Japan invests & shares in profits of existing Chinese operations in Chunxiao, Japan/Shirakaba, closer to China, while two jointly develop other fields farther out. Deal was breakthrough in Japan-China relations, as could have easily bogged down in territorial disputes. Decision to shelve conflicting claims in favor of co-operation is almost unprecedented. That progress now threatened by, literally, almost nothing, that took place in the middle of nowhere. We hope both sides calm down quickly, before totally unnecessary explosion erupts. Read more
21 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. W ~ 1.2 bn people, India is disproportionately young: ~ ½ population < 25. This is one reason some economists predict India could surpass China's economic growth rates within 5 years: it will have vast young work force, while rapidly aging China will face strain of supporting older population. But if youth is India’s advantage, sheer size of population poses pressure on resources & presents enormous challenge 4 already inefficient govt to expand schooling & other services. Projected to surpass China as world’s most populous nation, critical uncertainty is just how big it will be. Estimates range from 1.5 to 1.9 bn, & Indian leaders see these totals as too high, turning its demography from prized asset into crippling burden. So they are trying a variety of methods to get the situation under control. Read more
16 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Plunging home sales, a bleak job market & confirmation Q3 growth slowed to 1.6% has left American hopes pinned to an uncertain remedy: hoping things somehow get better. It increasingly seems policy makers attending like MDs to US econ peer into their medical kits & come up empty, their arsenal of pharmaceuticals largely exhausted, & few that remain deemed too experimental, or laden w risky side effects. The patient — who started in critical care — may have shown slight signs of improvement earlier this year, but has since deteriorated. The doctors cannot agree on a diagnosis, let alone administer an antidote w confidence. Great Recession has taken the world’s largest economy to a Great Ambiguity over what lies ahead & what can be done. Economists debate the benefits of previous policy prescriptions, but their sterile exchanges have an air of irrelevance & unreality. There is a deep intellectual void at the center of US economic policymaking. Read more
14 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. China is already developing auto & aviation industries, manufacturing high-speed trains, & building chemical factories that contest the global status of any competitors. But Beijing isn't just interested in catching up w Western companies. Instead, China's leaders want to become the world's preeminent producers of the cars of the future: hybrid & electric vehicles, which is no pipe dream because Chinese companies are already world leaders in battery technology. They want to manufacture aircraft that consume less gasoline than comparable models by Airbus, & power plants w lower CO2 emissions than those in the West. What follows is a detailed analysis of Chinese plans to move ahead in 4 key areas at the high-value-added end of the scale – solar power / automobiles, esp electric cars / low-emissions & fuel-consuming power plants / magnetic levitation high-speed trains – & how they’re using Western technology in general, & Germany’s in particular, to do it. Read more
13 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Tiny West African nation of Benin has been rare success story in continent not full of them. It has long taken pride in a stable political life, w no military in the streets, a Parliament not in the pocket of the president, & a relatively free press. It has not looked back since a popular uprising effectively overthrew a corrupt military dictatorship 20 years ago, the first such democratic rebellion in post-colonial Africa. Newspaper kiosks explode w disputatious publications, as yellow-vested drivers of motorcycle-taxis crowd them to read & argue politics. Govt, if not always clean, has at least been more or less freely elected. Though still stuck in the throes of poverty, it has kept an unusual commitment to political freedom & openness. But now its stability has been shaken, by a massive Ponzi scheme, that seems to have infiltrated almost all aspects of the society. Read more
9 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. In last 5 years, Portugal has launched a "clean energy" revolution. Nearly 45% of electricity in Portugal’s grid will come from renewable sources this year, up from 17% 2005. Land-based wind power — now “potentially competitive” w fossil fuels — has expanded 7 X in same period. In 2011, Portugal expects to become 1st to inaugurate national network of charging stations for electric cars. It required major & sustained commitment of political will & leadership to make needed changes in country’s infrastructure – a commitment not clear in places like US. There are also significant, though bearable, economic costs for citizen consumers: Portuguese have long paid ~ 2 X what Americans do for electricity & prices have risen 15% in last 5 years, no small thing for home-heating-&-cooling-dependent parts of US. But energy transformation required no rise in taxes or public debt, & once new infrastructure done, system will cost ~ 1.7 bn euros, $2.3 bn, A YEAR LESS to run than before. Even more, Portugal shows the application of intellectual resources to real-world problems – something US academia has long avoided & corporations paid them well to continue – can produce results that represent major improvement in everyone's life. This saga – & it IS a saga – is both fascinating & long, which is why it will be up thru weekend. Don’t miss this truly amazing story. Read more
8 September 2010. David Caploe PhD, Chief Political Economist, EconomyWatch.com. In stock trading, so-called “quantitatives”, or quants, were revered as the brightest minds in finance, able to outwit Wall St w their Ph.D.’s & superfast computers. But after blundering through the financial panic, losing big in 2008 & lagging badly in 2009, quantitative investment managers no longer look so genius-like. Combined assets of quant funds specializing in US stocks have plunged from $1.2 trillion in 2007 to $467 billion, a 61% decline, reflecting both bad investments & client withdrawals. One in four quant hedge funds has closed since 2007. And even though the crisis of conventional academic economics has yet to fully begin, the reasons for the fall of the “quants” on Wall Street are almost exactly the same as ITS failure to ALSO predict the disaster of Black September – & the long-range consequences may be just as bad. Read more
7 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. More than most other Western industrialized countries, Germany has tied its economic well-being to China. Indeed, trade w Beijing is most important driving force behind current German upswing. No other segment of German foreign trade is growing as quickly as Chinese market. Exports there were up by almost 60% this year. For the same reason, economists see a bright future for Germany in medium term. W its luxury cars, machine tools & power plant turbines, Germany offers precisely the products the East Asian giant desperately wants or needs. Indeed, relationship between Germany & China starting to look as important to global economic order as US & China. Despite this success, German business leaders are starting to feel uneasy about unstoppable rise of Chinese industry. And what really keeps them awake at night is fear they could eventually fall victim to Chinese power politics. Read more
6 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. For decades, moneyed interests have bankrolled India’s political parties, but nouveaux mining magnates have conflated money & politics in far more naked fashion, as thirst for iron ore in India, & more so in China, has created huge fortunes. Mining scandals have emerged in at least 5 Indian states, w > 20,000 complaints of illegal mining filed nationally in past 3 months. Politicians in several states are accused of enriching themselves or their friends, incl a former chief minister of state of Jharkhand, who is charged w extorting huge bribes in exchange for granting mining leases. In August, Indian media reported central govt would form inquiry to investigate illegal mining across the country, a move regarded as 1st step in reversing past failings in regulation. Read more
2 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Faced w steepest & longest decline in tax collections on record, state, county & city govts have resorted to major life-changing cuts in core services like education, transportation & public safety that, not too long ago, would have been unthinkable. In many areas, services will get worse before they get better. The length of downturn means many places have used up all their budget gimmicks, cut services, raised taxes, spent their stimulus money — & remain in the hole. Even w Congress possibly approving extra stimulus, states still face huge shortfalls. Around the country, there have already been drastic cuts in core services, & there are likely to be more before downturn ends. Cuts described here may seem extreme, but they reflect what is happening across America, as the lives of millions of people are disrupted, in ways large and small. Happy Labor Day. Read more
1 September 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. While not dominant in Latin America’s relations w China, a wariness is crystallizing in some countries, focusing on cheap Chinese imports & assertive efforts for exclusive access to energy reserves. But worst tensions stem from mine a Chinese company itself owns in a desolate town in Peru’s southern desert. Workers here said problems began in 90s, when the company, Shougang, slashed work force to 1,700 from 3,000 & brought in Chinese workers. Strikes soon convinced managers to return the workers to China. Resentment continued when Shougang did not invest promised $150 million in the mine & town’s infrastructure, opting to pay $14 million fine instead, & left empty blocks once occupied by workers, in town w acute housing shortage. Workers also spoke of low wages, company resistance to government-mandated raises & chemical waste dumping in ocean. The result: a revolt lasting to this day, marked by repeated strikes, clashes w police paid by Shougang, & even arson attacks vs nominally Communist bosses. “We quickly realized we were being exploited to help build the new China, but without seeing any rewards for doing so,” said one union official at mine, where workers have held three strikes this year alone, including 11-day stoppage last month. “When the Chinese arrived, they talked about things like solidarity and equality of man. If this is the brotherhood they praise, then one day sooner or later, the Chinese must be made to leave.” Read more
31 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Striking result of Eurozone crisis has been emergence of so-called “tough” Germany, creating tensions w rest of EZone. Political reasons: combination of reduced living standards in former West Germany during 20 years post unification, arousing resentment vs further “support” & 1st Chancellor NOT committed to “European Germany.” But when Q2 growth figures showed Germany @ 2.2%, “balance of power” w/in EZone shifted, as G seemed to be “right” in basic approach. Economically, domestic key: “kurzarbeit” / “short work”, workers aren’t fired by ailing companies, but kept on at reduced hours & pay til they can be re-hired full-time. Policy has enabled firms to take advantage of new opportunities as soon as they appear, without having to wait, giving G crucial advantage. External key: China exports, whose tricky dynamics we’ll fully detail next week. Overall, “crisis a wake-up call to rest of Europe that something has changed in Germany” Read more
30 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. China Banking Regulatory Commission last month issued sharp warning 2 banks & private trusts, apparently worried they've been forming secret partnerships & creating products to finance loans without calling them loans. Govt evidently suspected banks were using maneuvers to evade rules put in place to rein in rampant lending & excess credit, conditions driving rising property prices & overall inflation. Suspecting banks & trusts secretly repackaging old loans, & moving them off bank balance sheets, regulators worried China financial institutions may have engaged in same sort of shenanigans that got Western banks in trouble, which was, of course, EXACTLY what we said when we first found out about these practices. More recently, govt overseers acted again, ordering banks to move off-balance-sheet loans back onto their books & make provisions vs. rise in bad loans. Let’s just hope, for sake of not just China but whole world economy, these regulatory moves aren’t coming too late. Read more
26 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. After spending millions to lobby vs. so-called “reform”, bankers now turning to Plan B: adapting to new rules & using them to make even more money. Wall Street planning to influence regulators & invent products that bend new regulations to their advantage. Banking chiefs concede they intend to pass most costs associated w bill to customers. “If you’re a restaurant & can’t charge for soda, you charge more for the burger,” says Jamie Dimon, chair & CEO of JPMorgan Chase, which reported a $4.8 billion profit for Q2. “Over time, it will all be repriced into the business. We’ve been gearing up for this like a merger,” he says. Whether it’s checking / derivatives / proprietary trading / whatever, banking industry – above all, the now-fully-aware-they’ll-be-saved-no-matter-what-they-do Too Big To Fail, or TBTF, sector – has been planning for a long time how to make sure nothing gets in the way of profit-making. Warning: Do NOT read while drinking ANYTHING – you’re likely to splutter it all over your computer. Read more
25 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. South Korea & China likely to open free-trade talks next year, says South Korea’s ambassador. Negotiations could be 1st step toward 3-nation trade zone w Japan, which, if concluded, would rival EU & NAFTA in size. He said it would face deep skepticism from farming, fishing & forestry industries, but would be in S Korea’s long-term interests. Trade pacts centerpiece of China commerce strategy: agreements since 2007 w New Zealand, Taiwan, Singapore, Peru & ASEAN. And if S Korea & Japan ever reach accord, alliance would remove tariff barriers among 3 of 4 largest Asian economies. But there are political blockages, from both current interests & historical memories. Read more
24 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. A classic tragic battle of right vs. right: public employees dependent on private companies as ONLY source of $ to insure retirement at previously agreed-upon rate vs. public whose own economic present & futures are in grave doubt. It seems these two will pay for mistakes made by credit rating agencies / greed of TBTF banks, whose leaders often sat on boards of govt pension funds, & influenced investment decisions / & politicians, from Presidents on down, who assured everything was just fine. Since none of them seem likely to pay, it’s left to two groups – who aren’t in that different positions – to fight it out: a public rightly worried re their own economic situations, present & future, vs. public employees, who, whatever their flaws, had little say in decisions determining how they would live in retirement. Read more
23 August 2010. After years of being known for inefficiency, corruption and instability, Indonesia is emerging as Asia’s new economic golden child. Largest economy in Southeast Asia grew at annual rate of 6.2 % in Q2. Stock market has hit record highs this year, among best-performing in Asia, up > 20 % since Jan 1. Its currency, the rupiah, has appreciated nearly 5 % this year vs USD, among strongest showings in Asia besides Japanese yen. Indo on track to draw more foreign investment this year than 2008, when it lured in $14.87 billion. Significant obstacles to sustained growth surely remain. But some here cautiously say the Muslim-majority democracy & one of world’s most populous countries could soon merit attention investors now lavish on China and India. “In Asia there is a feeling that after you invest in China and India, where do you go? It’ll have to be Indonesia – it’s a natural destination” says senior analyst for a Western bank in Jakarta. Read more
19 August 2010. Western banks are increasingly focused on preserving and extending the wealth of their employees. Emerging market providers, on the other hand, are focused on unlocking access to new markets using the latest technology as enablers. This provides new services to people who may not have had access to such services before, and creates wealth for enterprises in the process. We look at two real-world examples, online/ internet/ mobile banking service Breeze by Standard Chartered, which has developed the worlds first e-cheque, and the M-Pesa platform that provides Africans with financial services using mobile phones even if they don't have a bank account. Read more
18 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. At this particular time, a great opportunity for Westerners living in Asia, or, indeed, anywhere outside the “developed” world, is the chance to see concretely the rise of what is often called “the new global middle class.” The rapidly growing ranks of middle-class consumers in more than a dozen “emerging” and “frontier” nations include almost two billion people, spending $6.9 trillion annually, a figure that should rise to $20 trillion during next decade, twice current US consumption. Given the fact that in 17 US product categories the market leader in 1925 remained the number-one or number-two player for the rest of the century, “early capture” is crucial for both local and global companies. Here’s how they might approach that vital goal. Read more
17 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Until recently, most people saw an inherent conflict between economic growth & environmental protection. But the formulation of the so-called Three Es has made clear the opposite is true: the greatest economic growth is to be found in clean / green high-technologies that not just protect but clean up the global ecology. Despite its status as the world’s largest consumer of energy AND emitter of greenhouse gases, China has been taking decisive steps at both ends of the economic / environmental spectrum: becoming a leader at the “higher value added” end, significantly outpacing the US in the process; & at the “bottom” pole, getting rid of industrial sites producing not just pollution but doing so in an energy IN-efficient way. Together, these steps may well make China the home of high-productivity “advancing sectors” that are the only sure route to sustainable, long-lasting, employment-creating economic growth. But the road along the way is not always easy. Read more
16 August 2010. Business pragmatism seems to trump political tensions between the two countries. Short term, flotilla raid has produced inevitable fallout, but so far it seems no Israeli companies are leaving Turkey. Said one, “It is business as usual & if anything, investment is growing” Israeli companies selling everything from computer software to water irrigation systems in Turkey insist they haven’t been affected by recent events. That is because they operate mostly in joint ventures w Turkish companies, making their Israeli identities invisible. Bilateral trade officially amounted to ~ $3 billion last year. But Israeli & Turkish business leaders say economic ties are actually much larger. The extensive business connections are largely camouflaged because many Israeli businesses use Turkish partner companies to sell to Arab world, while Turkish companies use Israeli partners as a gateway to US markets. One Turkish exporter said no contracts had been canceled, nor has his company shelved its plans to establish a factory in Israel. He cited many advantages to doing business w Israel, including geographic proximity & shared mentality. “All the problems are between the politicians. Israelis, hot-tempered and stubborn, are just like us Turks.” Read more
13 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Beautiful and prosperous Kashmir has long been THE flashpoint between India and Pakistan since the two countries were simultaneously created in 1947. The Indian military has been largely successful in defeating a "standard" insurgency w armed fighters supported by Pakistan. Now, however, it faces something potentially much more difficult to deal with: a stone-throwing intifada-like revolt carried out not just by young people, but their mothers & fathers, aunts & uncles, and even grandparents. Says one Kashmiri Hindu, “we need a complete revisit of what our policies in Kashmir have been. It is not about money — you have spent huge amounts of money. It is not about fair elections. It is about reaching out to a generation of Kashmiris who think India is a huge monster represented by bunkers and security forces.” Resolving this situation is critical for India not just politically, but economically as well. Ingenuity and creativity have built prosperity undreamed-of just a decade ago - those same qualities will be key for a peaceful Kashmir if India's stunning economic progress is going to continue into the future, as we sincerely hope it will. Read more
12 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Good relations between India & China are one of the most important conditions for a positive future in Asia & the world in general. Now come some disturbing reports things are heating up where the two confront each other directly: the Himalayas. In past decade, China has furiously built up military & civilian infrastructure on its side of the border. Now India is racing to match its rival for regional & global power, building / bolstering airstrips & army outposts, shoring up neglected roads & building a tunnel to bypass the deadly Rohtang Pass. While we understand India's strategic thinking for this move, we think it best accompanied by a sustained policy campaign of co-operation w China in as many areas, especially economic, as possible - since no one needs a confrontation between these two giants. Read more
11 August 2010. South Africa has long been seen as an unstable business environment with an economy overly dependent on natural resources. Now, the govt & a new breed of entrepreneurs are optimistic they can change perceptions & climb the value-added ladder. A group of companies is emerging in sectors like clean energy, aviation, engineering, military contracting and mining. The state hopes this will lead to job creation & other benefits, & playing its part in some cases by offering direct financing & other sweeteners. It has also backed new university research positions & is trying to promote centers of excellence. “We are a producer and exporter,” said Naledi Pandor, minister of science & technology. “Now we’re saying: let’s become an innovator.” Read more
09 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. In the wake of the just concluded joint conference call with the media by Ivan Seidenberg of Verizon and Eric Schmidt of Google re their proposal for a "tiered" Internet - which, significantly, would EXCLUDE any wireless communication from the "non-discrimination" part of their "plan" - it becomes even more important President Obama recently announced he would seek to nearly double the amount of wireless broadband spectrum available for commercial use over the next ten years. If both his - & the Verizon / Google - "plans" succeed, any notion of "net neutrality" in the US would be down the drain, disastrous not just from an equality and principled point of view, but also putting the US technologically & economically further behind other countries where "net neutrality" isn't an issue. It could also have crucial implications for the disastrous cycle of media advertising / political fund-raising / corporate domination of the US political process now holding America in a death grip - just by the way. Read more
08 August 2010. In honor of the 45th anniversary of the independence of Singapore, Economy Watch will be on a somewhat abbreviated publication schedule this week. Be sure to check in for both Features and In the News to keep your finger on the pulse of the world political economy. Majulah Singapura - Onward Singapore !!! Read more
5 August 2010. By David Caploe PhD. Chief Political Economist, EconomyWatch.com. We’ve often talked about our hopes for both China and India as leaders of the emerging world economy. China has followed the general post-WW II East Asian strategy of export-led growth - an approach it is now trying to circumvent by jumping to the top of the value-added spectrum in areas like high-speed rail and clean / green tech. India, conversely, has imported jobs from the West, depending on its excellent higher education system and general English language culture. So despite the problems of each, we think both countries can become central to the global economy of the future. In that context, here is a story about technological entrepreneurship at the street level in Mumbai - not Bangalore or Hyderabad, the usual centers of Indian high-technology. It's not just funny in itself, but illustrates why, despite the almost uniformly grim scene in US / EU / Japan, there are positive possibilities for the world in the years to come. Read more
4 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The current stagflation in the global shipping industry is having a huge effect on retailers. They are outbidding each other to score scarce cargo space on ships, paying 2 to 3 times last year’s freight rates — in some cases, the highest rates in 5 years. Still, many getting merchandise weeks late. Problems stem from 2009, when stores slashed inventory. With little demand for shipping, ocean carriers took ships out of service. Carriers moved to “slow steaming,” traveling at slower & more fuel-efficient speeds, while companies producing containers, the boxes in which most consumer companies ship goods, essentially stopped making them. “All my customers are having a terrible time. With increased cost & them not knowing if they’re going to get space or equipment, it’s a weekly battle.” Read more
03 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Some 150 lobbyists registered since last year used to work in the executive branch at financial agencies, from SEC lawyers to Federal Reserve bankers. Dozens of former lawyers for the government, not registered as lobbyists, now scour new financial regulations for corporate clients. Why? On a scale never before seen, government regulators will enact rules on everything from the definition of a “systemically important” mega-bank to limits on debit card fees. Federal agencies will decide the details of at least 243 financial rules & conduct 67 studies. S.E.C. alone is responsible for developing 95 rules on topics like derivatives, standards for credit rating agencies & disclosure of executive bonuses. The Commodity Futures Trading Commission must develop 61 rules, the Federal Reserve has 54, and two new agencies — Consumer Financial Protection Bureau & Financial Stability Oversight Council — have 80 rules between them. Former agency officials have a much easier time getting phone calls or e-mails returned from old colleagues, & that access extends to greater credibility in arguing their clients’ positions. That’s why. Read more
2 August 2010. Coal is the second-most important energy source worldwide, after oil. Billions of people depend on it for electricity. Experts estimate demand will increase in the next two decades for more than any other energy source but wind & solar. No other fossil fuel is available in such large quantities - current reserves will last for generations. No fossil fuel is as cheap – ~ 6 US cents to create a kilowatt-hour of electricity vs ~ 40 cents for solar – or as widely distributed. Every continent has adequate reserves and, unlike oil, most are found in relatively stable geopolitical regions. But no other raw material is as devastating to the environment. Coal is the worst climate killer in the history of humanity. "Coal is the environmental problem of the 21st century." Therein lies the tragedy. Read more
30 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. We have consistently argued the political leadership of the US & EU - in "response" to Black September 2008 & Euro-zone crisis - have been following Japan down the path of deflation and Lost Decade/S: letting Too Big To Fail Banks keep off their books their losses from derivatives, thus creating the same kind of zombie banks - effectively bankrupt, but still operating - that have bedeviled Japan since ITS political leadership allowed their banks to do the same when the Tokyo real estate market collapsed in 1989. Now James Bullard, president of the Federal Reserve Bank of St. Louis, and voting member of Fed committee that determines interest rates, has warned the Fed’s current policies were putting the US economy at risk of becoming “enmeshed in a Japanese-style deflationary outcome within the next several years.” Read more
29 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. It’s almost impossible to believe the anti-Obama rhetoric emanating out of the US “business community.” It’s unseemly in its personal animus, bordering on the racist, emboldening the more extreme and violent elements of American politics in a totally negative direction. Even more, it’s just flat out wrong. With the possible exception of the Cheney / Bush regime, Obama has consistently been one of the most pro-business Presidents in modern US history. Indeed, as we have pointed out time and again, he’s not just pro-business. He’s almost militantly pro-BIG business, notably his nearly unconditional support for the Too Big To Fail banks, the health insurance companies, and the other titans of the corporate world. Yet all he seems to get for it is a lack of respect shocking in itself, and disturbing in what it says about the continuing deterioration of public discourse in America – which is probably the most upsetting thing of all. Read more
28 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The scale of the new markets in China and India unleashed by the pace and scale of their urbanization is staggering. But businesses still need to be able to serve these markets in practical terms. The way cities are run—and the productivity that results—is a major factor for companies. Here, China is in much better shape than India. While India has barely paid attention to its urban transformation, China has developed a set of internally consistent practices across every element of the urbanization operating model: funding, governance, planning, sectoral policies, and the shape, or pattern, of urbanization, both across the nation as a whole and within cities themselves. India has underinvested in its cities; China has invested ahead of demand. But all that can change, as legendary developmental economist Arthur Lewis made clear. Read more
27 July 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Sadly for him, and the US, former Federal Reserve Chair Paul Volcker is a perfect example of how keeping your mouth shut when you know something is wrong can lead not just to disaster for your country, but a deep well of inner regret towards the end of your own life. At 82, he knows his time has passed – quite apart from what even he considers the joke of the “Volcker Rule.” Like many powerful people, he now finds himself sorry for unleashing certain forces, here those that created the catastrophe of Black September 2008. But at least he’s, finally, willing to admit publicly he consistently made huge policy mistakes – with near-apocalyptic results, whose long-term effects are far from over. Read more
26 July 2010. Countries, even whole regions, a few years ago dismissed as perilous – to both body and bourse – have now come into stock market vogue. Big investment companies have rolled out mutual funds and exchange-traded funds that put all or at least a big chunk of their money in frontier regions. The frontier pitch resonates at a time when US & EU economies are struggling and interest rates are sagging. Plus returns in several of the leading emerging stock markets, Brazil, China and Russia, have faltered this year, after surging in 2009. “We view frontier markets as attractively valued compared with emerging markets,” according to one heavily-invested executive. But frontier investing is a new-enough phenomenon that professionals don’t even agree on which countries make up the sector. Still, “they’re relatively diverse, populous and growing fast,” said another. “They’re not fully established, but people were saying the same kinds of things about emerging markets 15 years ago.” Others, however, are skeptical: “A lot of these trends are true, but you can go through periods of sharp volatility.” Read more
22 July 2010. With Build America Bonds, the federal government pays 35% of the interest costs, a huge potential saving for states, municipalities, counties etc. But questions about the multibillion-dollar program are piling up. Wall Street banks are charging larger commissions for selling them than normal municipal bonds, increasing costs to states and cities. The new bonds may also be priced too cheaply, enabling unscrupulous speculators to turn a fast profit as prices climb, while raising interest costs for taxpayers. And now Wall Street banks — which have pocketed hundreds of millions of dollars in fees from the program — are releasing research reports warning states’ financial woes may make the bonds less attractive. Read more
21 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Much of the lending through off-balance-sheet channels is fueled by trust companies, mostly privately owned, that partner w banks, & engage in complex deals that repackage loans into investment products — an informal type of securitization: the deals are essentially disguised loans, as GS did w Greece. The China Banking Regulatory Commission supposedly ordered banks to stop working with trust companies to securitize or repackage loans. But the regulator made no official announcement - eerily reminiscent of the AIG "bailout." One analyst estimated trust companies raised hundreds of billions of dollars in 2009 and first five months of 2010, partly since depositors disdained low interest rates at banks, & trust companies were willing to offer double that amount - with principal guaranteed. “There’s limited transparency, so obviously that’s a red flag.” Read more
20 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Put bluntly, the more money bankers have, the less there is for everyone else. If we don’t insist on transparency and basic justice in the banking system, we run the very real risk of creating economic systems – at both national and global levels – that reward the most cunning and devious, rather than most ingenious and inventive. That is not only tragic in itself, it also leads to precisely the kind of insane situation the world is going to confront for the next two years, as so-called leaders / bankers / regulators et al try to deal with the tsunami of “short-term” banking obligations that are about to come crashing over everyone’s heads between now and 2012. Read more
19 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The Goldman settlement — both its size and its legal implications — brought a palpable sense of relief on Wall Street. After two months of strident claims and equally strident denials, the matter was finally settled, and for a price Goldman could easily afford. The penalty amounted to about 15 days of profits – if that. And that nearly useless result seems all too typical of the way the Obama administration handles just about everything. Read more
15 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Standard economic theories – neo-classical, monetarist, and even Keynesian – have shown themselves unable to explain stagflation: a dreaded combination of slow / low / no growth AND rising prices – a situation the universally taught, but totally irrelevant, Phillips curve is SUPPOSED to “prove” is impossible. And, yet, as the King in Amadeus says, “there it is”, or WAS, at least, during the 70s – for reasons conventional economists have never been able to explain – and may be now rearing its ugly head in the UK, where a serious debate has broken out in policy and “intellectual” circles over a) whether it can actually be happening, and b) if so, why. And it’s an issue to which both the US and EU should be paying careful attention - since they too may soon experience it. Read more
14 July 2010 – Happy Bastille Day !!! Latin America, beset in the past by debt defaults, currency devaluations and the need for bailouts from rich countries, as well as consistent domination by US corporations and officials, is experiencing robust economic growth that is the envy of its northern counterparts. Strong demand in Asia for commodities like iron ore, tin and gold, combined with policies in several countries that help control deficits and keep inflation low, are encouraging investment and fueling much of the growth. The World Bank forecasts the region’s economy will grow 4.5 percent this year. And while Brazil is the current powerhouse, nations like Peru may not be far behind. Read more
13 July 2010. Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes - the type of austerity measures financial markets now pressing on most advanced industrial nations. Rather than rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus, the Irish economy shrank 7.1 percent last year and remains in recession. Joblessness is above 13 percent, and the ranks of the long-term unemployed — out of work for a year or more — have more than doubled, to 5.3 percent. Now, the Irish are being warned of more pain to come. Read more
12 July 2010. Turkey is a fast-rising economic power, with a core of internationally competitive companies turning the youthful nation into an entrepreneurial hub, tapping cash-rich export markets in Russia and the Middle East, while attracting billions of investment dollars in return. For many in aging and debt-weary Europe, which will be lucky to eke out a little more than 1 percent growth this year, Turkey’s economic renaissance — last week it reported a stunning 11.4 percent expansion for the first quarter, second only to China — poses a completely new question: who needs the other one more — Europe or Turkey? Read more
08 July 2010. By David Caploe PhD, Editor-in-Chief, EconomyWatch.com. Documents finally given to – and slowly revealed to the public by – a Congressional oversight committee make clear without doubt the AIG “bailout” was a conspiracy: organized and carried out on behalf of certain privileged banks by the New York Fed, then headed by now-Treasury Secretary Tim Geithner. This frightening account raises disturbing questions about a President who so eagerly signed on to a “Godfather”-style racket. But – given the HUGE leeway for regulators under both the health “care” and financial “reform” bills – it also raises serious red flags about the corporate-style governance the US will endure in the future. It’s long, but YOU MUST READ THIS COMPLETELY. Read more
07 July 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Manufacturing in China is about to get far more expensive. Soaring labor costs caused by worker shortages and unrest, a strengthening Chinese currency that makes exports more expensive, plus inflation and rising housing costs are all threatening to sharply increase the cost of making devices like notebook computers, digital cameras and smartphones. Desperate factory owners are already shifting production away from this country’s dominant electronics manufacturing center in Shenzhen, and toward lower-cost regions far west of here, even deep in China’s mountainous interior. Read more
06 July 2010. Oil production is among the most heavily subsidized businesses in the United States, with tax breaks available at virtually every stage of the exploration and extraction process. With federal officials now considering a new tax on petroleum production to pay for the cleanup, the industry is fighting the measure tooth-and-nail. And given the success the oil and gas industry has had in getting both Presidents and Congress to go along with their wishes, there’s no reason to assume they won’t win this time as well – Gulf oil spill or not. After all, they’ve only spent $340 million on lobbyists - since 2008 !!! Read more
5 July 2010. An information revolution is sweeping India – but has nothing to do with cell phones. It’s the far-reaching, powerful and wildly popular Right to Information law, granting 1.2 billion Indians the right to demand almost any information from the government. Passed in 2005 after more than a decade of agitation by good-government activists, the law has become embedded in Indian folklore. In its first three years, two million applications were filed, becoming part of the fabric of rural India, and clearly starting to tilt the balance of power, long favoring bureaucrats and politicians, to ordinary people, though it has by no means eliminated systematic corruption. Read more
1 July 2010. Private equity funds tie up investors’ money for 10 years. But they must invest all the money within the first 3 - 5 years of funds’ life. For giant buyout funds raised in 2006 and 2007, at the bubble's height, time is short. They must invest the money soon or return it to clients — presumably with some of the management fees they've already collected. Some firms are asking clients for more time to find companies to buy. Many more are rushing to invest the cash as quickly as possible, whatever the prices, which are rising despite general stagnation. Read more
30 June 2010. China’s move last week to make its currency, the renminbi, more flexible - and the authorities’ apparent tolerance of recent factory strikes that have led to significant wage increases - both signal that Chinese leaders are serious about re-engineering the nation’s entire economic model. The appreciation of the renminbi will make Chinese exports somewhat less competitive in the global marketplace - but strengthen the purchasing power of Chinese consumers. And government policies to encourage wage increases for an estimated 150 million poor migrant workers in cities could also spur consumption - if the pay increases outpace inflation. Read more
29 June 2010. Preliminary data indicates the US housing market began swooning immediately after the government’s $8,000 tax credit expired. In some places, sales dropped more than 20 percent from May 2009. Construction of new homes in May dropped 17.2 percent from April, significantly lower than forecast. Permits for future construction dropped 10 percent, suggesting a cruel summer. Not surprisingly, now buyers are wielding the heavy upper hand. Read more
28 June 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Think of this as the financial “reform” equivalent of the health “reform” bill: nobody really knows what’s in it, it requires a LOT of interpretation by regulators – hence opening the door for an equally huge amount of LOBBYING by the industries supposedly being regulated – and it AVOIDS, rather than solves, the two MAIN issues: breaking up the now even MORE powerful Too-Big-To-Fail [ TBTF ] banks and other financial institutions; and, of course, clamping down HARD on the real cause of Black September meltdown, DERIVATIVES. Read more
24 June 2010. As the world looks to India to compete with China as a major source of new global economic growth, this country’s weak transportation network is stalling progress. India must invest heavily in transportation to achieve a long-term annual growth rate of 10 percent, the goal recently set by the prime minister, Manmohan Singh. But whether measured by highways, airways or — particularly — far-reaching railways, India’s transportation is falling short. Read more
23 June 2010. Sponsorship of major athletic events is big business, both for the brands splashing out and sporting governing bodies cashing in – meaning that so-called "ambush marketing" has itself become a huge growth industry. "Events like the Olympics and the World Cup are hugely expensive to put on, so they need big-money sponsors, and this in turn means that the organisers must protect aggressively against ambush marketing. But this means there is potentially huge exposure for anyone who manages to outwit them." Read more
22 June 2010. Labor disputes are clearly becoming a common feature of the Chinese economic landscape, as workers are visibly more willing to defend their rights and demand higher wages - encouraged by laws initiated by the central government in 2008 to insure overall societal stability. While Chinese leaders dread even the hint of Solidarity-style labor activism, the labor laws they passed just a few years ago, have, intentionally or not, empowered workers to challenge oppressive workplace conditions - thus creating a real dilemma for the leadership as they simultaneously contend with the imperatives of an ever more demanding world political economy. Read more
21 June 2010. Wielding cellphones and keyboards, members of China’s emerging labor movement so far seem to be outwitting official censors in an effort to build broad support for what they say is a war against greedy corporations and their local government allies. And it might not be possible if the Chinese government had not made a concerted effort in the last decade to shrink the country’s digital divide by lowering the cost of mobile phone and Internet service in this country — a modernization campaign that has given China the world’s biggest Internet population of 400 million, and allowed even the poorest of the poor to log onto the Internet and air their labor grievances. Read more
17 June 2010. That’s the amount that foreign banks and other financial companies have lent to public and private institutions in Greece, Spain and Portugal, three countries so mired in economic troubles that analysts and investors assume a significant portion of that mountain of debt may never be repaid. The problem is that no one — not investors, not regulators, not even bankers themselves — knows exactly which banks are sitting on the biggest stockpiles of rotting loans within that pile. Read more
15 June 2010. By David Caploe PhD, Chief Political Economist, Economy Watch.com. Credit ratings agencies have become increasingly visible during the Euro-zone sovereign debt crisis. Despite this, they remain a relatively unknown and, as we discovered, almost impenetrable world unto themselves that, nevertheless, can have a huge impact on the financial fortunes of both countries and companies. To help make this mysterious universe a bit more accessible to our readers, we tried to do some research about them, and, despite what are clearly their best efforts to keep themselves and what they do hidden, we were able to come up with some points of interest that we'll now share with you. Hope it helps.Read more
14 June 2010. Some economists say the European Central Bank's "obsession" with inflation has blinded the bank to a potentially bigger threat: deflation. Many economists regard deflation as more dangerous than inflation, because it prompts consumers to delay purchases as they wait for lower prices, creating a downward spiral of lower demand and production. Some economists — and a few policy makers as well — are beginning to worry that a danger of deflation in Europe, similar to the one that strangled Japanese growth for most of the 1990s, is a bigger threat than inflation. But just as Japan did in the 1990s, the European Central Bank and the United States Federal Reserve have cut interest rates close to zero while pumping huge amounts of credit into their economies. That means the two central banks would have limited policy tools left with which to combat a collapse in prices and demand, while Europe’s sovereign debt problems are likely to add extra impetus downwards.Read more
11 June 2010. BIROBIDZHAN, Russia. As with many places in Siberia, it is nearly impossible to drive here. Yet just under the surface, Russian geologists say, lies enough iron ore to build hundreds of millions of cars. “I’m standing on a billion tons of iron ore,” one said he told influential Chinese visitors. They were impressed, he recalled. “They said, ‘Hurry up; we’re ready.’ ” For resource-starved China, overland transborder supply helped it surpass Germany to become Russia’s largest trading partner early last year. But price disputes are growing and have delayed a natural gas pipeline deal between China and the Russian company Gazprom. Which points to a potentially even bigger deal: a trans-Siberian oil pipeline that is scheduled to bring a million barrels a day to China by 2012 - IF they can work out the pricing.Read more
09 June 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Even with China’s continued outstanding growth, its future has been far from clear. Three broad scenarios have dominated discussion: continuation of its prosperity without any major problems; a so-called “soft landing,” in which there is a perceptible but well-managed slowdown; and the “bust” proponents, who argue China has radically overheated its economy and is going to collapse, killing global recovery for years. Yet it now appears there is a fourth possibility, one currently causing problems for factories in China, particularly foreign-owned ones. And ironically enough - since China is still formally a “Communist” country - THIS scenario might well be called “worker power”, in which a major change in both the Chinese and world economies arises as a result of the unexpected venting of anger of the "new" Chinese working class – with unexpected results all round.Read more
07 June 2010. By now, pretty much anyone reading this is aware of the destructive role played by derivatives - largely, although not exclusively purveyed by Goldman Sachs - in creating the mess in Greece now rolling through Europe under the rubric of the "Euro debt crisis". What may be a bit more shocking is that these same sort of dubious government financial practices turn out to be just as "popular" WITHIN the US as well. Municipalities such as metro Atlanta, Marietta, Birmingham Alabama, and even Emory and Georgia State Universities have all been scorched by the same sort of derivative deals that have been so prominent in Europe. At least a dozen local governments and other institutions that used derivative deals to try to lower the cost of bond issues have ended up owing as much as $394 million in fees to the Wall Street investment banks that set up the deals. That total includes at least $100 million in fees paid to firms such as Goldman Sachs, J.P. Morgan and UBS AG just to cancel the deals when they went sour. As in southern Europe, these hefty refinancings and fee payments occurred even as the city of Atlanta and other institutions were cutting budgets, laying off employees, reducing services and being downgraded by bond rating agencies because of budget shortfalls. In each case, the higher costs will likely be passed on to taxpayers or the users of the various institutions, which include the city’s water system and airport, some area hospitals and other facilities - sound familiar ???Read more
It's no secret that for some time now, China has toyed with the idea of moving away from the US dollar as its reserve currency. And that desire has probably never been stronger as China shudders at the thought of US dollar inflation which would slash the value of its 1.3 trillion in US reserves. Read more
03 June 2010. On Wednesday, St. Warrren of Buffett testified that he did not know all that much about the credit rating market, even though the holding company he controls, Berkshire Hathaway, is the largest shareholder in Moody’s Investors Service, one of the three companies that dominate the business. “I’ve never been to Moody’s. I don’t even know where they’re located. I just know that their business model is extraordinary.” Mr. Buffett’s remarks about Moody’s business, of course, could be interpreted as a rhetorical flourish meant to put distance between him and the company. He appeared before the panel under subpoena after first declining an invitation. Mr. Buffett declined several times to say that the head of Moody's should have been fired for what proved to be inaccurate ratings. He did say Moody’s was no better or worse at predicting the financial fiasco than virtually every other player on Wall Street. Mr. Buffett sounded his most sober note when asked by a panel member, Brooksley Born, the former chairwoman of the Commodity Futures Trading Commission, if the derivative market was “still a time bomb ticking away.” “I would say so,” he said. And yet he continues to pal around with the biggest derivatives players of them all - Goldman Sachs. How much longer is he going to get away with this obvious double game he keeps playing ???Read more
02 June 2010. India's economy grew at its fastest pace in six months in the quarter through March 2010, fuelled mainly by government and consumer spending. The 8.6 percent expansion in the fourth quarter of the fiscal year 2009/10 was broadly in line with a median forecast of 8.7 percent in a Reuters poll, and lifted the annual average growth rate for the full fiscal year to a slightly better-than-expected 7.4 percent. India's economy had grown 6.7 percent in 2008/09, and the Jan-March 2009/10 growth rate matches the revised data for the second quarter of 2009/10. Revival of growth in farm output after a contraction in the quarter ago underscored the broad-based recovery in Asia's third-largest economy. The arrival of fresh crops helped agriculture grow by 0.2 percent, having dropped significantly in the previous quarter of 2009-10 due to a poor monsoon. The farm sector, which forms nearly 17 percent of the economy but is dependent on monsoon rains, is expected to do well in 2011. The rapid acceleration in the world's second-fastest growing major economy after China is boosting consumer demand far ahead of what can be met by existing supply capacity, which means that inflation, as well as high-levels of domestically held debt, are serious concerns for the Indian political leadership.Read more
31 May 2010. Investors are demanding greater yields to lend to China property firms, a sign they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending. Goldman Sachs Group Inc. and Credit Suisse Group AG cut their profit estimates for Chinese real estate companies after a 12.8 percent jump in real estate prices in April from a year earlier spurred the state to increase regulation. China has added to regulations designed to cool the property market several times this year, including raising banks’ reserve requirements three times since January, restricting pre-sales by developers and curbing loans for third- home purchases. It also raised minimum mortgage rates and tightened down-payment requirements for second homes. Consequently, investors are pricing in a 50 percent chance of default. Similar contracts insuring Agile’s debt have soared 3.85 percentage points since mid-April, when China’s central bank pledged to implement new lending rules to cool real estate “madness.” At current rates investors are pricing in a 48 percent chance of default. Chinese property bonds are unlikely “to recover meaningfully anytime soon,” Amias Berman’s Chan said. “If we start to see the regulatory measures taking effect in the next few months then there may be a reversal of fortunes. But optimistically I think it’ll be the third or fourth quarter before things stabilize.”Read more
27 May 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Quite aside from the human and social justice aspects, income equality is a crucial factor in creating and continuing sustained economic growth. The fact that – as income inequality BETWEEN nations decreases, something we think is a good thing, income inequality WITHIN nations, in general, is growing. This is happening both in the major old markets of US, UK, Germany and Japan, and in the new, above all, China and India, but also other emerging markets like Brazil, Russia and Mexico. While income in-equality is problematic anywhere, it is ESPECIALLY so in the US, because, as we have said so many times, since 1947, we have had an American-centered world political economy, meaning, very simply, that countries either SELL to the US – or they SELL to countries that SELL to the US. Which means the more income in-equality WITHIN the US, the harder it's going to be for the world to pull out of the Great Recession in which so much of it finds itself mired today.Read more
25 May 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The US now starts the process of legislatively finalizing the finance “reform” bill. As this painfully slow and agonizing march proceeds, here are five “guideposts” to make the whole thing easier to understand – even if you don’t “believe” some of the things that are happening.1) Wall Street is quietly relieved. 2) It's going to be a lobbying bonanza. 3) Team Obama chose "more regulation" instead of downsizing the financial sector. 4) The Federal Reserve's power will grow. 5) Derivatives will not just remain, but it's unclear if their transparency will increase in the slightest. Don't say you haven't been warned.Read more
19 May 2010. From Der Spiegel interview with former head of the German Central Bank, SPD economic guru, Karl Otto Pöhl: The European Union should have declared half a year ago -- or even earlier -- that Greek debt needed restructuring. * But according to Chancellor Angela Merkel, that would have led to a domino effect, with repercussions for other European states facing debt crises of their own. Pöhl: I do not believe that. I think it was about something altogether different. * Such as? Pöhl: It was about protecting German banks, but especially the French banks, from debt write offs. On the day that the rescue package was agreed on, shares of French banks rose by up to 24 percent. Looking at that, you can see what this was really about -- namely, rescuing the banks and the rich Greeks ... * If you were president of the Bundesbank today, would you be ordering the printing of German marks just in case they became necessary? Pöhl: No, no, we have not gone that far quite yet. In my opinion, the euro is in no danger.Read more
17 May 2010, By David Caploe PhD, Chief Political Economist, EconomyWatch.com. We noticed a few weeks ago what seemed a most intriguing story in the New York Times that a) never seemed to get a follow up, and b) never showed up on any searches. Given the repetitive din of the global media society, this is surprising, because it concerns China’s rather blatant attempts to discover the, literal, inner workings of advanced Western military technology, and, given the Asian genius for reverse engineering, to help itself in a very direct way to the top levels of Western technique without having to spend a huge amount of time, money or energy developing it themselves. But as we worked our way through it, we began to suspect what we originally thought was an explosive story was simply Standard Operating Procedure in the world of high-tech arms trade.Read more
12 May 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The problems for banks holding government debt that can't be paid is EXACTLY the same as banks holding mortgage debt - and, even worse, derivatives supposedly BACKED by that mortgage debt - that can't be paid. In ALL of these cases, the banks that hold that debt are forcing governments NOT to force them to "mark to market" assets that were perhaps ONCE worth something, but are now relatively worthless. This is enabling those Too-Big-To-Fail banks to pretend they are still in good shape. In fact, they are in very BAD shape, but don't have to admit it, so their stock prices remain inflated - and the weakest of them avoid bankruptcy. The US chose to deal with its crisis by mimicking the Japanese response. NOW, it seems, Europe is doing the EXACT SAME THING: bailing out the banks, the TRUE beneficiaries of the so-called "Greek bailout", since THEY hold most of the Greek debt. The governments are becoming more weak and direction-less just at the moment decisive action is needed. Japan has had more than two "Lost Decades", the US is following right along in its footsteps, and if Europe is now heeding America's advice, it seems more than likely Europe will be Lost for Decades to come.Read more
7 May 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. First of all, at this time, no one has the slightest idea what happened, and it's probably likely we won't have any idea "what happened" for a while - if ever. So while the various investigations - and their associated cover-ups - go on, let's not pretend that any of the "causes" pointed to explain the reason the Dow bottomed so badly at 2:46 p.m. on Thursday, May 6. EXCEPT that - no matter where you look, with, as always, at least so far, the exception of China - THERE ARE MAJOR STRUCTURAL PROBLEMS THROUGHOUT THE ENTIRE ADVANCED WORLD, ie, US, Europe and Japan, none of which show the slightest sign of getting better in the foreseeable future. Given all this, we STILL have no idea if May 6 will end up being remembered, as Franklin Roosevelt so memorably put it, "a day that will live in infamy", at least in financial history. But we should have no illusions that, even if the markets do, in some way, recover, THE REAL ECONOMIC SITUATION THE WORLD CONFRONTS REMAINS, at best, DEEPLY UNCERTAIN, and, at worst, DOWNRIGHT DANGEROUS.Read more
5 May 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Ever since he became President, Barack Obama has displayed a disturbingly consistent pattern of behavior: ignoring the desires of the base that elected him in favor of consistently failed attempts at bi-partisan “co-operation” with Republicans and other actors definitely not part of that base, above all big corporations and industries who have made no secret of their opposition to even his weakest efforts at “change.” This was demonstrated once again on the last day of March, when Obama announced new plans for extensive offshore oil drilling, an initiative that not only came out of the blue, but put in play whole new areas previously ruled off-limits. In that context, the BP oil spill - which threatens to become the greatest ecological disaster in US history - presents him with a serious problem that underscores what we have always considered his most egregious problem: depending on middlemen, with a vested interest in the outcome, to formulate and carry out policies that are, in fact, the responsibility of the Federal government.Read more
3 May 2010By David Caploe PhD, Chief Political Economist, EconomyWatch.com. How does it all fit together – St. Warren of Buffett, the “regular guy”, homespun, Midwestern billionaire exponent of “value investing”, avowed enemy of derivatives, on the one hand - on the other, Goldman Sachs, prime user of derivatives, and the most reviled and hated of the many Wall Street firms, whose high-level employees have been raking in millions in compensation, while most of the rest of the world sits mired in The Great Recession ??? We raised this question three months ago, well before the SEC suit – long before anybody else was even thinking along these lines – wondering how these two seemingly opposite poles of the US / global financial system could fit together so seamlessly? And the events of the last few weeks have provided at least the start of an answer: in fact, it appears, all too easily.Read more
29 April 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Later this week, the independent Lisbon weekly EXPRESSO will be examining in its Economia section the current crisis in the Euro-zone, which has already embroiled Greece -- and with the downgrading of the sovereign debt of Portugal earlier in the week by Standard and Poors, has now reached that country of superb food and beautiful Atlantic beaches -- and has asked our Chief Political Economist, Dr David Caploe, to examine both the Portuguese and larger Euro-zone crisis from his unique perspective. With the agreement of our friend and colleague, Jorge Nascimento Rodrigues, long-time contributor to the Economia section, we now present an unedited and complete transcript of that interview.Read more
Every year, organizations like the Insurance Institute for Highway safety, and companies like Insure.com compile and analyze data from consumers and individual insurers around the country, in order to provide the public with information like which cars are cheapest to own, or safest to drive. ">
India could achieve 7 Per Cent GDP growth in 2009, and then return its previous 9 per cent plus showing from 2010, but only if significant financial reforms are enacted. That was the verdict of the annual India Economic Survey of 2008 - 2009.">
26 April 2010.Where do you see India 20 years from now? The emergence of a powerful middle class in India will keep the country’s economy on an upswing. It’s India’s unstoppable growth engine. In a decade, India’s economy will be bigger than the UK’s. In 20 years, bigger than Japan’s. What if economic growth in the U.S. and Europe is slow to pick up again? It’ll hurt the other BRIC countries (Russia, Brazil, and China) a lot more than it will hurt India. So where should investors look? Everybody thinks software and generic drugs when they think of India. But I like the infrastructure sector. India’s ports and railroads are getting a facelift -- An interview with Andrew Gordon, Editor of Investor's Daily Edge. Read more
The rankings of the worlds top banks has changed significantly through the Financial Crisis, with big names falling by the wayside but others rising to take their place.">
Latin American economies are now among the best run the world, and the sneering of the west is increasingly out of place. Warning: This article contains sarcasm.">
With interest rates at record lows, does it make sense for homeowners to look at home loan or mortgage refinancing? This is an updated guide to help you understand what refinance is, whether mortgage refi is for you, and how to go about finding the best refinancing package. ">
A $4.41 billion economic stimulus plan was passed late last week to help Taiwan pull through the economic crisis. The plan is part of a larger $14.69 billion package that will last four years.">
In a bold display of power, technology, and defiance, North Korea launched a rocket over the weekend. The rocket crossed over Japan, threatening stability in the region. In response, Japan has introduced new sanctions to the impoverished, isolated nation.">
China has long sought ways to bypass the US dollar and allow other countries to by their imports directly in Yuan. This new $10 billion currency swap with Argentina means that Argentina will have much-needed cash.">
A survey by the BBC World Service shows that more than 70% of 29,000 people around the world feel widespread reform in the international economic system is needed. The survey results were released on 31 March 2009 and represent people from 29 nations.">
When the Volkswagen was first launched in 1938, it was supposed to be the “people’s car”, affordable and practical for all Germans. Now India has its own version – with the exact same tag line: “The People’s Car”.">
In the second week of March, Indian inflation dropped to its lowest in 30 years – 0.27%. While this sounds good on the surface, it has little room before it goes into negative territory, creating harmful deflation.">
Today US President Barack Obama announced his plan for economic recovery. Included in this strategy includes means to create new jobs, reviving the housing market, and reestablishing liquidity in banks and getting them to resume lending.">
A recent report by the World Trade Organization (WTO) says that global trade will decline between 2% and 10% this year. Overall, global trade is expected to drop by 9%. Only two months ago, the WTO estimated global a trade drop of only 2.8%.">
22 April 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com. It's far too early to say anything definitive, of course, but we couldn't help but be struck by how quickly major structural components of our analysis of the strange aspects of the Goldman / SEC fraud case have already been confirmed by unfolding events in Washington. This unexpectedly swift validation comes in a New York Times story about a crucial vote Wednesday on DERIVATIVES in the Senate Agricultural Committee. Three key elements of our scenario - an up-for-re-election-in-November Republican joining Democrats / the Pandora's Box of a POTENTIAL real change in the key arena of derivatives / and the simultaneous reluctance of Team Obama to endorse that "change" - were ALL vividly and dramatically demonstrated on Capitol Hill yesterday. While the SEC v. Goldman era has just begun, we are certainly pleased to see our take on it so quickly and strikingly illustrated in almost exactly the way we outlined.Read more
The World Travel & Tourism Council (WTTC) recently forecast weak figures for the travel and tourism economy GDP. Expectations are that it will shrink by 3.6% this year and continue to be weak into 2010. Growth that year is only forecast to be 0.3%.">
A sustained recession, frozen banks, and rising unemployment are likely to keep the US and many other countries in recession. Dr. Roubini, also known as Dr. Doom, is the NYU professor who predicted the current crisis and he says this is probably going to last into 2010.">
The upcoming G-20 summit in London will be key to getting the global economy back on track. All participating nations agree this has to happen, but whether or not this will be done smoothly and with unified agendas is another story.">
20 April 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com.There remain at this point many more UN-answered questions than certainties about WHAT the SEC's – and Obama's – "Goldman gambit" means. It could be the beginning of a far-reaching change in the whole way Obama and the rest of official Washington deal with the key issue of Wall Street and TBTF organizations in general. But we remain dubious as long as the President retains Larry Summers and Tim Geithner as his key economic policymakers. If, on the other hand, we see them replaced by the likes of Brooksley Born or Joe Stiglitz or Paul Krugman, and there is a substantive revision in the nature of the "financial reform" being proposed, then we may start to believe there really IS going to be a change. But until then, we are not yet convinced that even the seemingly dramatic events with Goldman and the SEC are anything more than, to paraphrase Shakespeare, 'a tale full of sound and fury, signifying not too much.'Read more
Ben Bernanke thinks the recession will end this year. Or so he said on 60 Minutes, “We’ll see the recession coming to the end probably this year, obviously recovery beginning next year. This decline will begin to moderate and we'll begin to see a leveling off."">
It’s not uncommon for economists and analysts to accuse China of inflating economic figures or embellishing economic conditions. Some say the slumping Chinese economy is partly due to government exaggerations.">
Top Indian economic adviser Suresh Tendulkar recently reported that the nation’s economy could be on the path to recovery. This came with the Reserve Bank of India (RBI) cutting the reverse repurchase rate to 3.5% and the repurchase rate to 5%.">
The US auto industry has been hit hard by the recent economic crisis, and even Ford Motor Company, the only of the Big Three to not ask for federal funds, is making defensive strategic moves.">
The Bank of England slashed interest rates to an unprecedented low of 0.5% on 5 March, 2009. It also announced plans to increase the domestic money supply through quantitative easing – which is almost like printing money.">
As a disappointing February cascades into an uncertain March, I invite you to take a look at Warren Buffett, one of the world's most successful investors whose career has spanned sixty years or more.">
Author, journalist, and three-time Pulitzer Prize winner Thomas Friedman spoke with the BBC on 18 February about what he calls, “the price of oil and the pace of freedom”. This states that as oil prices increase the need for governments to act democratically decreases. He says that this is “The First Law of Petropolitics”.">
The inflation rate dropped to 4.39% the last week of January, the lowest it has been in over a year, while industrial growth has shown a rare decline, of 2%.">
Just three weeks into his presidency, Obama has made a significant victory in the passing of the Treasury Secretary Tim Geithner's $838 billion economic stimulus package. It includes “tough love” to the debt-ridden banks, whom Obama accused of looking for an “easy” way out of their financial woes.">
What was once one of the world’s most prosperous nations, Iceland is now struggling from the shocks of the financial collapse, and many are wondering how in the world this could have happened.">
Zombie banks are financial institutions that have negative balance sheets yet are still alive and operating. Like zombies, they are functioning when they shouldn’t be..">
16 April 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com. An article in today's New York Times about the emergence of the rolling Euro-zone debt crisis into Portugal illustrates the way conventional academic economic "thinking" about these situations leads not to clarity, but confusion. Soif you want to get an idea of why the world is in such a terrible mess, you could do a lot worse than looking at the supposedly distinguished campuses all over the West, but world-wide in fact, where the fraud that is the academic economics "profession" exercises such powerful sway over the minds of not just horny / party-mad undergraduates, but, it seems, correspondents for the world's most distinguished media outlet as well.Read more
The worldwide carbon market developed as a response to the threat of climate change caused by the excessive emission of greenhouse gases, and in particular carbon. Today 182 countries are working to limit carbon emissions, although the biggest polluter, the USA, has yet to ratify the accord. ">
The tightly-contested presidential race between Barack Obama and John McCain may ultimately boil down to one issue: Economic policy. The subprime mortgage crisis and the increasing cost of gasoline have contributed to the widespread escalating economic worry and fears of recession. How does each candidate address the most pressing economic issues?">
In the last decade, the world has seen tremendous growth, and in the past five years, the world GDP has outpaced inflation. Much of this can be attributed to the new global economy that allows for freer trade than ever, a vast pool of able-but-cheap labor in developing countries, unprecedented amounts of capital, and of course more advanced technology.">
If you’ve ever played the board game Monopoly you would have noticed one of the most strategic moves is to own both the utilities companies: Water Works and Electric Company. T. Boone Pickens seems to be well on his way to doing just that.">
Seemingly never-ending woes about oil, war, and inflation have had the world bracing for recessions and hard economic times in general. But the US has experienced an unexpectedly high annualized growth rate of 3.3% in Q2.">
Shanghai has built a reputation as being the busiest, most vibrant, and most cosmopolitan city in China. Beijing, however, has gained unparalleled global exposure by hosting the 2008 Summer Olympic Games. Which can emerge as China’s preeminent metropolis?
Foreign reserves in various Asian countries are enormous, and they are getting bigger. What does this mean to the rest of the world and the global economic landscape as a whole?">
The financial meltdown has hit an all-time low with Fannie May and Freddie Mac being bailed out by the government and Lehman Brothers collapsing. Who is to blame?">
No doubt the recent market swoon has unnerved a lot of people. It wouldn’t be surprising if pretty soon people started stocking up on rice and canned soup.">
Olympic excitement has worn off, and now the country is back to reality. Despite having organized the biggest, costliest, and most-publicized Olympic Games ever, with nary a hiccup, economic worries are setting in.
The recent turmoil in the markets has left investors unsure what to expect and how to react. The six points in this piece provide a rational approach to investing during such turbulent times.">
14 April 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The fact China DID run a trade deficit in March MAY indicate that, in fact, the Chinese economy IS starting to run out of steam, which is undoubtedly why those who announced it hastened to proclaim it would soon return to its 'normal' surplus. But if the trade deficits continue, then not only will arguments about currency valuations disappear into well-deserved oblivion, but we MAY be witnessing the beginning of a long-term turnaround in the fortunes of the Chinese economy – and THIS would indeed be significant, for not just China, but the entire world.Read more
Recent flooding in India has been disastrous for millions. And while this may not significantly affect the Indian economy, it is affecting the economies of hundreds of villages. Read more
China and the rest of Asia have fared remarkably well despite Monday’s Dow plummet of 777 points. Although yesterday before the markets had closed we reported that the impact on India was considerable, the Indian markets closed with gains.">
Ever since this massive financial crisis began, the Asian markets have been up and down. This volatility indicates a high degree of uncertainty – investors still aren’t sure how the recent bailout plans are going to affect them in Asia.">
The Dow, S&P, Nasdaq and even the Nikkei were all up more than 11% after losing almost as much in the past week. Investors have wagered that the markets were at their worst, right after a series of European announcements to resuscitate credit, amounting to over US $1.4 trillion.
Now we know the answer to Monday’s question: No, the markets will not hold their recovery. It seems almost futile to watch the markets on a micro level as one day they make record recoveries and another they tank.">
It is often said that when the US sneezes the rest of the world catches a cold. This three-part series looks at how India, China, and Russia have been affected by the US financial crisis.">
The Singapore Grand Prix contributed to revive tourism in the country, but more has to be done if Singapore is to sustain healthy tourism figures in the future.
In the aftermath of the Dow collapse and failure for the $700 billion bill to pass through Congress, the world is reacting differently. In this installment, we examine Russia’s condition. Read more
As economies slow worldwide, export-driven South Korea announces it is officially now one of them, reporting decreased exports and declining gross domestic product figures.">
While many of us are worried over impending recessions and uncertainty in the financial markets worldwide, we do have one thing to be happy about: Lower petrol prices.">
It’s one thing for a country’s GDP to drop – which is common enough these days – but to have the finance minister drunk at the same time, when the country needs him most, is another story. This is when the economy shrinks at 3.3%, the worst it has been in years, amid job cuts by Toyota, Toshiba, Sony, NEC and more. Read more
The outlook for Europe’s largest economy is nothing less than catastrophic. For an economy that has been historically strong, never contracting more than 1% a year since World War II, the Commerzbank forecast that it would shrink 7-9% in 2009 is not encouraging. Read more
Almost all of Europe is in a recession, with Q4 contractions and soverign downgrades abound. Even France, which initially appeared to be able to emerge unscathed, is now facing a recession. Read more
08 April 2010,By David Caploe PhD, Chief Political Economist, EconomyWatch.com. A source from within GE - one of the most allegedly respected companies in the world - supports the view put across in Roger Lowenstein's "The End of Wall Street" that, despite its reputation, GE's earnings were deliberately manipulated by guru Jack Welch, and his successor Jeffrey Immelt, in a fashion disturbingly reminiscent of the infamous Lehman Bros "Repo 105". And he claims this is / was true not simply on the corporate / GE Capital side, but on the equipment side as well, where "the company pushes product forward or holds it back, depending on which quarter they want to take the profit."Read more
It’s official: Japan is now in a recession. The world’s second-largest economy reported a .1% drop in its third quarter, after a .3% fall in its second quarter. ">
China can implement economic policy a lot easier and faster than other large economies making it easier to dictate the country’s direction in times of economic need or crisis.
It’s funny that in the midst of a financial crisis while politicians try to calm the masses and restore confidence they also make apocalyptic statements about the economy.
The global financial crisis has hit Indonesia hard, with a projected GDP growth to less than 4%, down from 2008’s 6.1%. Much of this is due to a slump in exports. Read more
Canada is taking aggressive action to revive its troubled economy. The Minister of Finance, The Honourable Jim Flaherty, recently expressed his support for Bill C-10. This new piece of legislation will give the economy much-needed immediate economic stimulus. Read more
In 1773, colonists in Boston, Massachusetts threw British tea into the Boston Harbor, protesting taxes that were not put in place by their elected representatives. Now in 2009, protestors have held modern-day tea parties around the US, objecting to high taxes.
19 October 2009.Although Sovereign Wealth Funds, or SWFs, still represent a small percentage of total world finance, with the Top 12 alone holding close to $3.2 trillion in assets they are big, and you can rest assured they plan on getting bigger. We analyze the top SWFs and what impact they are having on world finance.
With the re-election of Indonesian President Susilo Bambang Yudhoyono, the nation is watching to see if he can live up to his reform promises and continue economic growth.
A number of indicators are pointing to the fact that the global recession is ending now. If true, this marks a turning point for the world, which has suffered its worst recession since the Great Depression and World War II.
Introducing David Caploe PhD, the new Chief Political Economist of EconomyWatch.com, who will lead what has become the largest independent economics community online (with over 500,000 participants) to new heights. Dr David has studied at Harvard and Princeton, and has since taught, written and filmed around the world.
17 September, 2009By David Caploe PhD, Chief Political Economist, EconomyWatch.com The reason a problem in the money world was magnified into a Global Great Recession in the real economy was derivatives deregulation - championed under Clinton by Robert Rubin and his acolytes, now National Economic Council head Larry Summers and, as Treasury Secretary, former New York Fed head Tim Geithner. Real change would have come from putting someone like Nobel Prize Joseph Stiglitz in charge.Read more
The Beijing Olympics will be the most expensive ever hosted. After the last medals are given out and everyone goes home, what will the impact be on the Chinese economy?
Obama recently announced dramatic changes to US financial regulations in an attempt to avert future financial meltdowns. But the plan is not without its critics who fear it will introduce excessive regulation. Yet it still must include enough oversight to prevent future global crises.
By ˜free economy" we are not talking about an economic system or even Friedman's admiration for economic freedom. We are talking about gratis, on the house, free of charge.
A total solar eclipse darkened much of India, China, Iwo Jima Japan, and other parts of Asia today. Superstition and old wives’ tales seemed to prevail, and the most interesting was perhaps that India’s SESNEX would drop.
The Nabucco pipeline is supposed to free much of Europe and Central Asia from their dependency on Russia for energy, but it is also fast becoming a pivot point for negotiations in Ankara's aspirations.
Tourism makes up 6.7% of Thailand’s economy and 7% of its work force. The recent political violence and unrest is scaring off tourists, putting two million jobs at risk, and exacerbating an already-dark economic future.
Tourism makes up 6.7% of Thailand’s economy and 7% of its work force. The recent political violence and unrest is scaring off tourists, putting two million jobs at risk, and exacerbating an already-dark economic future.
The price of oil. Crude oil has dropped from its mid-July high of $147 to $123 as of 1 August 2008. Is this merely a Fibonnaci Correction on the way to ever higher prices, or has the air been let out of the oil-dot com bubble?
The latest UK economic data from the Office for National Statistics (ONS) continues to be gloomy, and points the way to a recession could kick in this year. If the economy does contract this quarter as most analysts expect, it would be the first time it has done so since 1992.
Veteran investor Jim Rogers is confident sugar trading will return some sweet profits in the coming years. Rogers knows a thing or two about profits, having founded The Quantum Fund with George Soros in 1970. But why sugar?
23 September 2009. By David Caploe PhD, Chief Political Economist. The Chinese are using a mixture of aid and trade to expand their influence internationally, sometimes in dubious ways. But before westerners get too high-and-mighty about these sort of practices, they would do well to remember that the US/ Europe/ Japan travelled this path for decades.
It's sex that creates economic peaks and troughs. The number of babies born in a certain time can largely predict economic trends with surprising accuracy. In fact, in 1999, Harry S. Dent predicted that the economy would crash in about 2009.
Internet advertising in the US adds about $300 billion to the economy, amounting to 2.1 percent of the GDP. This is good news during the worst economic recession since the 30s.
S$20.5b (US$15b) might not sound like a lot of money in these days of trillion dollar collapses, but when it represents 6% of GDP (estimated at US$227b in 2007), then it becomes one of the most aggressive stimulus plans on a per capita basis in the planet.
Mumbai, 19 May 2009.Yesterday we said 'expect to see a Sensex rally’, but even we were surprised by just how right we were. A one minute frenzy at the opening bell led the Sensex to roar, surging 17.34 per cent for its best daily showing ever.
Obama's stimulus package has been criticized for being both too small and too big, but most economists are against more such stimulus, despite the dismal economic outlook.
05 April 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Ever since the run-up to / outbreak / and aftermath of Black September 2008, we have argued the crisis in the US has SIX aspects: financial / economic / ideological / political / media / intellectual-academic. While we generally have focused on the first five aspects of this on-going mess, a substantively fabulous Op-Ed piece in the New York Times underscores at least ONE side of the intellectual / academic aspect of this crisis. The article is by professors from four different law schools around the US, and shows in chilling and convincing detail how the entire regulatory apparatus allegedly keeping an eye on banks / hedge funds / large corporations et al were actively complicit in allowing them to get away with, literally, murder, at least in the financial economic realm. Unfortunately, it's often almost impossible to tell what they're saying.Read more
Africa is quickly rising as an economic power of incredible potential. Private investment is skyrocketing. Interest rates and inflation are down. Trade is booming. The continent may see as impoverished and war-torn has benefited from its incredible commodity reserves and stable banking. But some say it’s all exploitation.Read more
Today the polls opened in the world’s largest democracy. Remarkably, it is the rural and poor areas which will both shape the outcome of the election and help to revive the nation’s struggling economy.
After the 'summer of discontent' when it seemed like President Obama's signature reform of the US Healthcare industry was on the ropes, his primetime address to both Houses today has been heralded as a pivotal victory. Obama said 'I am not the first President to take up the cause of healthcare reform, but I intend to be the last.' Early polling after the speech was delivered suggests he has the backing of the majority of Americans, and the Democrats have working majorities in both houses. Despite the legislative hurdles, we believe that Obamacare is coming - but why is it so important?
The Salaryman: This stereotypical, male-dominated breed of corporate samurai seems to be dying, along with Japan's economy. Enter the grass-eater: A 20-30 year-old Japanese male who lives with his mother, is uninterested in women, is de-motivated at work, and is an herbivore. Yes, that's right, he eats grass, but not bush.
Why was Russia so quick to attack Georgia? What will be the result of Russia bombing the BTC pipeline that runs through Georgia? And what can we learn from history if we look at Azerbaijan’s troubles in the region?
<i>Vladivostock, Russia, 8 June 2009</i>. Russia, basically, is broke. Unlike the United States, which is also broke, Russia doesn't hold a reserve currency and can't keep itself going with other people's money very long. Premium league football, tennis stars and the mafia will only take you so far as well. Either the price of oil goes up soon, or simmering social issues could explode into civil unrest.
After the break up come the recriminations. The World Trade Organization (WTO) Doha Round trade talks in Geneva had been billed as a last ditch effort to save the talks. When they failed, fingers were pointed.
China is extending its investigation into the Rio Tinto crackdown to other mining firms. Tensions rise as the nation attempts to tighten its grip on corruption and social unrest during these times of economic chaos.
With Oakland, California passing a law approving marijuana tax, opponents warn of heavier crime, more drug use, and only marginal revenues. Supporters claim it will raise much-needed funds in a city that has a massive deficit.
The glimmers of hope and green shoots of recovery may distract us from the urgent work needed to save the world economy, and ensure that this crisis - or new ones we inadvertently create - do not continue to menace global economics
It's no secret that for some time now, China has toyed with the idea of moving away from the US dollar as its reserve currency. And that desire has probably never been stronger as China shudders at the thought of US dollar inflation which would slash the value of its 1.3 trillion in US reserves.
Having just become the world's largest polluter, China has embarked on a massive stimulus-assisted program to become the leading clean tech nation globally
India's 2009-10 budget was announced yesterday which gives increases in personal tax exemption limits. It also enacts a wide rage of stimulus measures spanning a variety of industries. This is despite a growing fiscal deficit.
Geography plays a major role in the economies of countries and regions. Rivers offer irrigation and shipping, and ports give access to international trade. The US, Russia, China, and Europe all have dissimilar geographies, and thus their economic mandates and priorities are different.
October, for many investors, is the bogeyman month. It is the month when you need to be out of the market or risk losing your pants. This 'truth' is so deeply ingrained in the seasoned investor's psyche that the real truth may come as a bit of a surprise.
The global economy has been built around the US consumer since 1947. US consumers, however, won't resume buying until they have jobs and can keep them. Since US Unemployment won't drop any time soon, the world economy is still mired in difficulty.
What happens when corporations hold sway over the government agencies that are supposed to regulate them? Corruption, loss of income for Americans, and a sleazefest that reads like a script from a tv miniseries -- and one that cannot air during family viewing time.
As Goldman Sachs announces $3.4 billion in profit for the second quarter, people are wondering if it will return to its old practice of massive bonuses and huge pay, and whether or not such excesses will be at the taxpayers' expense.
President Obama's economic policies, dubbed Obamanomics, have fundamentally changed the tone of the debate in Washington, and the direction of policies in the whole country.
30 March 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Given the crisis in the Eurozone and, doctored BLS statistics aside, the on-going problems of the US, China's short-term economic profile remains key to the immediate future of the world political economy. And if the Rio Tinto case is any indication -- which it may or may not be -- then one would have to figure the Chinese leadership, at least, is confident about the country's ability to continue its remarkable growth, even within a global context of weakness at best and steep recession at worst. They could, of course, be arrogantly wrong in this assessment. But the fact they would even take such a stance -- given all the complications it will clearly bring with one of their most important private-sector partners -- is definitely a fact worth pondering. Read more
30 Septmber 2009. 400 million Indians still don't even have electricity, yet India is already the world's third largest polluter. This an environmental crisis all of its own. India's controversial answer: nuclear power on an unprecendented scale, using technology that does not even exist yet.
Both Clinton and Obama were elected with key policy plans for healthcare. Clinton's didn't work out so well. While Obama is still popular, his ratings are starting to suffer during uncertain economic times and unproven healthcare policy. Will his healthcare plans fail too?
If you are an emerging markets investor, you may be forgiven for asking 'Financial Crisis? What Financial Crisis?' - because emerging market stocks are now back at pre-crisis, pre-Lehman collapse levels. Whether this level is sustainable is an altogether different question.
As the US accuses Mexico of supplying an endless supply of drugs to its 50 states, Mexico's standard response is that the US arms these same drug dealers with its guns.
Tehran, Iran, 16 June 2009 . The world is outraged by Mahmoud Ahmadinejad's apparently rigged election victory. Recent polling indicates that the results may well be valid, however. Key to understanding what has happened are the 'Charity' economics that Ahmadinejad practices. The long term implications mean that military action is more likely, $500 a barrel oil possible and Apocalypse a desired eventuality for powerful extremists in both Iran and Israel.
The Latvian Hooker Index is not showing any signs that the economy is on a rebound. Prices still linger at around US $60, showing signs of deflation and a general slump in the Baltics.
Latin Amercian Growth Slowing – But Still a Safe Haven for Investors.Rio de Janeiro, 24 July 2008. Latin American growth is slowing thanks to rising inflation, with the causes of its economic growth over the last few years threatening to derail its efforts. It remains attractive as a region to investors, however, thanks to its positive carry trade.
There is a lot of talk of the balance of power shifting from the West to Asia, but is it really happening? According to the list of the largest companies in the world in by market capitalization in 2009 - yes it is.
Monday's landslide elections which saw the Democratic Party of Japan (DPJ) assume control after nearly 50 years of LDP rule beg one question: Will the new party be able to pull Japan out of its economic troubles?
This stereotypical, male-dominated breed of corporate samurai seems to be dying, along with Japan's economy. Enter the grass-eater: A 20-30 year-old Japanese male who lives with his mother, is uninterested in women, is de-motivated at work, and is an herbivore. Yes, that's right, he eats grass, but not bush.
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New York, US, 24 June 2009. The Market Rally that started in March may finally be over, having got ahead of itself - and the economic realities that we still face. As markets have tumbled this week, the technicals have started to come in-line with the fundamentals.
As Bernie Madoff is sentenced to 150 years in prison some think he's merely a scapegoat in what many call the end of capitalism. While his $65 billion fraud ruined the lives of thousands, Wall St titans have left all of us - and our children - with gargantuan debts.
27 March 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The real challenge China poses to the US lies not in the "lower-value-added" area where currency valuations may or may not be of importance, but in the “higher-value-added” regions of so-called “green” or “clean” technologies. The active intervention of the state in the Chinese economy has shot China to the front rank of countries where clean / green technological innovation is being militantly pursued on a variety of fronts. The most significant indication is the arrival in China of not just Applied Materials, one of Silicon Valley’s most successful and historically important companies, but also Mark Pinto, its Chief Technology Officer. In this sense, we may now be witnessing in very concrete terms the beginnings of a “reverse brain drain” from the US to China. Read more
Iraq is in the process of holding auctions for energy contracts to develop its massive oil fields, the third largest reserves in the world. The first auction was just completed, and only closed one deal. The Chinese were part of every consortium that bid and want to win even if they lose money - which is handy, because the Iraqi's don't want anyone to make too big a profit.
Traditional media's business model is dying, and their reponse to the ban on foreign journalists covering the Iranian crisis is only accelerating that process.
The Delhi metro was supposed to be the best run project in India, an example of the new modern infrastructure that would transform the country. In reality, it is an example of the corruption, greed and incompetence - the same old India but with more money.
The global economic crisis has wreaked havoc on the world's financial markets, plunging them into massive debt. Bail-outs of staggering proportions, stimulus plans of all types, enhanced unemployment benefits, and fiscal relaxation (lowering of taxes) have left most major governments with huge public debt.
Some Indians believe that India is protected from the economic hardships of the outside world, but With inflation reaching 12.44% in August 2008 India suddenly seems human.
Lima, Peru. 25 May 2009. Which market has grown 72 per cent this year? Most people know a lot more than they probably would like to about the massive destruction of wealth that occurred on a global scale in 2008. Understanding how much wealth is currently being created - or recovered - is an altogether more enjoyable learning experience.
The WTO reported that world trade will slide 10 percent in 2009, with Asia being the leader in the recovery. The WTO's June forecast was that global trade would drop only 9 percent.
Tech Mahindra Ltd. Placed the highest bid to acquire Satyam Computer Services Ltd. On 13 April 2009. This is just over four months after the massive accounting scandal was made public when the founder, Ramalinga Raju, confessed to inflating the books to over $1 billion above their worth.
Gurgaon, India. 7 May 2009. I have a confession to make. In the last few years I have changed jobs four times, working my way up as an analyst in the financial industry. Each time I switched I increased my salary by 30-50 per cent. Even so, I kept my resume posted on the jobs boards and continued flirting with other employers. I was playing the field, I had no intention of settling down and getting married to a job permanently, because there was always something better out there for me. And then the unthinkable happened – I was dumped.
15 October 2009. After big outflows at the end of last year and the start of this, both FDI and FII investment in India is on a tear. While at first sight this looks like a great thing, is it really? We take you through the reasons for optimism - and the dangers lurking.
For seven years, India has enjoyed good rains - admittedly sometimes too good - and farmers and the retailers who served them have prospered. With more than half the country now experiencing drought, the good times have come to an end.
$5 trillion is needed by governments around the world to pay for deficit spending for the rest of the year, and the US will need about $3 trillion of that. Where will it all come from?
10 October 2010. Gold is the New Black for traders, but not all of the reasons are sound, and a massive new bubble could be getting build. Here are five reasons why.
Bloomington, Indiana, US, 9 June . As GM goes under, pundits around the world speculate the reasons, and what it means to them today. Everybody seems to be an expert on GM's downfall, but nobody has the solution to saving this dying Behemoth.
At any Olympic games, the big powerful countries always seem to win. China, the US, the UK, Russia, Japan, and Germany are usually at the top of the list. Every now and then some obscure nation may win a medal or two. How were the Beijing games any different? Were GDP and winnings comparable?
Shakespeare said First, Kill all the Lawyers - but today it is bank accountants who do the most damage, hiding the truth by changing, subverting or ignoring disclosure rules. More pheasant, anyone?
London, 11 June . The results of the European Union’s parliamentary elections last weekend surprised many with the widespread center-right wins. Germany, Italy, France, and Poland all voted in right-leaning leaders. Meanwhile, Socialist Spanish and British administrations took a beating.
As Wall Street shows signs of recovery, many investors are watching emerging markets. They could very well prove to be the markets to invest in as we pull out of the economic crisis.
One of the few relatively recession-proof industries is education. With exponentially growing numbers of Chinese and Indians being willing and able to buy higher ed, Hong Kong, Singapore and Malaysia are looking to capitalize on that demand.
EconomyWatch Special Report – Surge of Interest in Methods of Reducing Petrol and Gasoline Costs. Sky high oil prices are leading to a lot of innovation in the world of energy efficiency, with new methods to extract hydrogen from water and mix it with petrol & gasoline attracting a lot of attention.
Vienna, Austria, 6 September 2009. Coffee shop talk among economists, investors and business people alike has increasingly turned to one topic; what shape will the recovery take. And the discussion sounds more like an episode of Sesame Street with each passing day.
Predicting markets is something that investors have been trying to do for centuries, with limited success. What if you had the key to real estate forecasting? There are a few models which may hold the secret.
There were fears that the Obama administration were in the pockets of the banks, but new legislation on credit card industry reform and derivates suggests rather that they are picking their battles.
China is growing at an amazing rate, and when the global economic crisis comes to a close this incredible power will inevitably emerge with more momentum than ever. But this has to taper off eventually, and when it does, it will be more than just a decline. We will see that great bubble burst.
Meet Chun Hua. Fittingly enough, her name means Spring Flower, but she prefers her nickname Pinky. She could very well determine your future wealth and happiness.
China’s economic stimulus package worth $585 billion is starting to show positive results, giving hope to the massive export-based economy. These results are indications that recovery is not far ahead.
Geography plays a major role in the economies of countries and regions. Rivers offer irrigation and shipping, and ports give access to international trade. The US, Russia, China, and Europe all have dissimilar geographies, and thus their economic mandates and priorities are different.
Western Economists have long attacked China's trade surplus as being a great source of economic imbalance in the world - but it is investment that is the real imbalance.
5 Oct 2009. Economists are getting excited about China overtaking Japan as the second largest economy in the world, within the next year or so. Although the Chinese would do well to look at the export-oriented growth policies - and mistakes - of the Japanese, it is perhaps the US that really needs to heed the lesson of decline in Japan, with its zombie banks, Lost Decade and continued lack of growth. For the US appears hell-bent on following the same path, and that will have disasterous consequences for all of us.
David Caploe PhD, Chief Political Economist. Although China and the US are now so intertwined economically they are called Chimerica, and although there are clearly problems with how bank loans in China are being given out and spent, China is clearly in ruder economic health than the US.
In the summer of 2008, with trade and inflation both rampant, it cost on average $1,400 to transport a container from Asia to Europe. By January 2009, the price from China to Europe had collapsed to $0, excluding fuel and handling.
As Americans, we often jokingly poke fun at our northern neighbor by referring to Canada as the 51st state. We say they talk funny; their baseball is no good, and their beer is overpriced. And don't forget the ice hockey jokes. But really, I think we're just jealous.
16 October 2009. Banks control US policy by funding the campaigns of both parties and hiring lobbyists. The returns they achieve are astronomical. Take Citigroup for example. If it was a normal company, it would be out of business by now. Instead it has invested $11 million for a $50 billion bailout. That is a staggering ROI of 401,194%.
Aah. Brasil. Endless sandy beaches. Beautiful boys juggle footballs, the girls sun their perfect bodies, ready for carnival. A place of pleasure, certainly, but not a place where money is invested wisely, surely?
The nationalization of major banks has already happened in Europe and the UK, and is getting more likely in US. A year ago this idea would have been unthinkable, but many Economists and even Republicans now think this is the way to go.
I think we'll lose 1,000 banks out of the system...over the next two years. We've already lost 81 this year. The numbers are climbing everyday. Now many of these institutions nobody has heard of," said John Kanas, whose firm bought over Florida's BankUnited in May.
1 October, 2009. The five largest banks in the UK have voluntarily agreed to limit their bonuses for 2009. This could become a moral victory for embattled Prime Minister Gordon Brown, who has gone back to the traditional Labour policy of fighting for the little person against the fat cats. This is in stark contrast to Obama, who has become the Why Change? President as far as the banks are concerned.
23 March 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com Last year, we identified the fundamental difficulty with Obama’s approach to just about EVERY important problem as playing ball with the middlemen, in this case, the health insurance companies, as if they were the only game in town.Once that decision was taken – and it obviously happened early on, when Obama made clear that not only was single-payer off the table, but he also wasn’t going to push very hard for the “public option” that, its exponents claimed, would impose some “market discipline” on the insurance companies – the outcome was basically foreordained: either the whole thing would go down in flames, or the insurance companies would definitely be taken care of in whatever emerged. And that’s exactly what happened. Read more
An Australian community has introduced a new currency, in an effort to stimulate the local economy. The Blackall Range and Sunshine Coast Hinterland region of Queensland, Australia has invented the Baroon Dollar.
Asia-Pacific ex Japan up 45 per cent since March lows, up 4.6 per cent on 4 May alone, thanks to promising economic data – but strong resistance is up ahead as markets meet the 200 Day Moving Average
It's consumer confidence that drives markets and precedes recovery, and if the latest poll about economic sentiment around the world means anything, we could be in for good times.
2006 and 2007 were particularly good years for most investors, with emerging markets powering ahead the world over, and developed nations bolstered by rising stock and property markets. If 2006 and 2007 were particularly good, 2008 has been particularly bad.
It is often said that those who do not remember the past are doomed to repeat it. With economics it's no different, considering the world has experienced dozens of crashes and recessions, undoubtedly caused by acquisitive traders and lawmakers with few memories of the past. So let us review past crashes - hopefully we won't repeat them.
Have the markets reached bottom? This is something all investors want to know. Ordinary people also want to know when the economy begins its recovery too. And when they do, spending will increase and it will happen.
Zimbabwe has been experiencing ridiculous inflation, widespread famine, social instability and an uncompetitive economy. What was the cause of these disastrous conditions, and what can be done to avoid them in the future?
The issue of economics is not something I’ve understood as well as I should.” These very words, uttered by Senator John McCain came back to haunt him. Most likely, they played a role in him losing the White House.
First the most powerful banks in the US were “too big to fail”. Now the same is said about US automakers General Motors, Ford, and Chrysler. The moral hazards continue.
The final US presidential debate between John McCain and Barack Obama is over and the verdict is the same as the last: Obama won. However, he will face massive economic hurdles assuming he is elected this November.
The increasing cost of oil over the past few years (and especially months), has been hard on consumers at the pump, and elsewhere, resulting in inflation from increased transportation costs, for example. But it has been good for many Big Oil companies.
When John McCain announced his vice-presidential running-mate, Alaskan Governor Sara Palin, not many Americans had heard of her. But now she is a household name, with controversy surrounding her family life, religious views, and oil-drilling agenda.
Treasury Secretary Henry Paulson cajoled the nine largest banks in the US to sell $250 billion of shares yesterday. This is the largest US taxpayer-funded rescue plan of banks ever, and not everybody is happy.
The past few weeks have made history in the financial markets. Some say the only way to recovery is through a government bailout, while others oppose it.
18 March 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com The problems with the US and, because the global political economy is American-centered, the world economies have little to do with China in general, and certainly NOTHING to do with the value of China’s currency. Those problems have to do with the lies that America’s political / corporate / media / academic elites have been telling the American people and the rest of the world – and, for all we know, themselves – since at least the Reagan regime, exponentially multiplied, of course, during the age of Cheney / Bush. And if the US is going to somehow manage to find a way out of the mess it’s in, it should stop blaming China, and admit, as Shakespeare put it, 'the fault lies not in our stars, but in ourselves.'
15 March 2010. David Caploe PhD, Chief Political Economist, EconomyWatch.com. The Valukas Report on the bankruptcy of Lehman Bros is a nine-volume, 2200-page behemoth, so it may take a while til every juicy morsel can be digested. While certain facets have already become clear, there is one so glaringly obvious to us we couldn't believe it hasn't been discussed: the dynamic described as Repo 105 in Lehman is the EXACT same trick Goldman Sachs used several years before to help Greece do exactly what Lehman did, ie, hide the true picture of its leverage situation by arranging shady deals that recorded debt as sales. We conclude that not even this is going to make a difference to either Wall Street or Washington, so we cordially "welcome" everyone to the Lost Decades.Read more
12 March 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com The Indian government owns ~ 500 companies, which together are worth about USD 500 billion, approximately 45% of GDP. It also has huge public debt, about 80% of GDP. Unlike Greece, about 90% of India’s debt is owed to its own people & corporations. Unfortunately, India is now paying more to service the debt than any other item in the budget, including military, education & health care. There actually IS a relatively easy economic solution – but it has major political drawbacks: it almost suicidal for ANY Indian government to give up too much control of these companies and the political & economic power they bring, while the public is against the government "selling off" what is seen by many as modern India's communal legacy.Read more
13 October 2009. You probably know that growth in the West will be miniscule, and that China and India will lead in Asia - but did you know that global economic growth in 2010 will be led by Qatar, Botswana, Azerbaijan and Congo?Read more
9 March 2010. EconomyWatch.com Chief Political Economist David Caploe PhD was recently interviewed about the state of the US and global economies by Jorge Nascimento Rodrigues, Executive Editor of the Portuguese and Brazilian Management Review, as well as a regular contributor to the Economics section of Lisbon's weekly EXPRESSO. His latest book is entitled Pioneers of Globalization, and his interests include long-wave analysis of macro-economies, most recently waves of financialization, financial crisis, great recessions and great depressions. This interview will appear next week in both Portuguese & English, but Sr Rodrigues was kind enough to give readers of Economy Watch.com a special "sneak preview" of this fascinating interchange.Read more
4 March 2010. By Dwayne Ramakrishnan, EconomyWatch.com. Cheered by a new showing of fiscal discipline, the Sensex has reacted with delight to the 2010 Indian Union Budget, having its best two day run since 2004 and leaving some gratifying egg on the face of the Wall Street Journal. Some experts worry, however, that a major opportunity to introduce a unified Goods and Services Tax (GST), that could add as much as 1.7 per cent to GDP, has been missed. Read more
27 February 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The emerging drama in Greece begins to outline how the use of derivatives -- in this case, credit default swaps, or CDSs -- can exacerbate an already screwed-up situation, and, in the case of the US housing market, create a problem where none previously existed. If for no other reason, not just Europeans, but Americans, Asian andothers from all over the world, should pay careful attention to this latest dimension of the unfolding Greek tragedy.Read more
25 February 2010. These 10 Global Geopolitical Predictions been provided by our partners over at OilPrice.com, publishers of the Market Intelligence Report. They cover everything from the growing disparity between public statements and the actions of politicians to the west ceding oil interests to China and India, and from Afghanistan, Iran and Israel to the possible opening up of Mynmar. Read more
24 February 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. It's a truism that the 21st century future Asia - and the entire world - will be significantly determined by relations between the globe's two fastest-growing large economies, China and India. It is therefore significant that China - India's own largest trading partner - is building major economic ties with South Asian countries - Sri Lanka / Bangladesh / Nepal etc - that have long been considered in India's traditional "sphere of influence". India's reaction to this dynamic development could go a long way to determine the Asian - and world - future.Read more
22 February 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Last week's slight increase in the Federal Reserve's discount rate surprised many long-time Fed watchers. It lacks a visible motive, since inflation is hardly a concern in the US, where high & long-term unemployment seem much more immediate problems. Given this, we argue the move represents a capitulation by the Fed & Obama to three powerful groups: the TBTF banks, who had made clear their lending freeze would continue until they got assurances of taxpayer coverage of their losses, while they retain profits; confused "deficit hawks" who don't understand the key fact about money is its movement, not total supply; and China, whose motives are the most realistic of the three, being the largest single foreign holder of US debt.Read more
16 February 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com Goldman Sachs and other Wall Street companies, using tactics akin to the ones that undermined the US housing market, have worsened the financial crisis shaking Greece, and undermining the euro, by enabling European governments to hide their mounting debts. The chief instruments of this consistent misrepresentation were DERIVATIVES, the potential losses from which have led to the lending freeze by TBTF banks and insurance companies, whose actions, in turn, have created the worst economic crisis in the US and Europe since the Great Depression.Read more
12 February 2010. By Keith Timimi, EconomyWatch.com. Having been imprisoned and tortured as a young scientist in Saddam's Iraq, Dr Shahristani has overcome almost insurmountable odds first to become the Iraqi Oil Minister, and then to run an oil auction contract bidding process that has produced results experts predicted would have been impossible only a year ago. Next up: a plan to become the world's largest oil producer.Read more
11 February 2010. What did Warren Buffett know about the negative position of Goldman Sachs towards the housing market - and when - such that he had great confidence giving a $5 billion loan to GS at a time when the whole financial world seemed headed towards Doomsday? Maybe someday we'll know if there's yet another Goldman scandal to be uncovered - this time involving the last man anyone would ever expect: Warren Buffett. Or maybe we won't.Read more
6 February 2010 By David Caploe PhD, Chief Political Economist, EconomyWatch.com. Since its inception, Eurozone members have been aware of a potential conflict between monetary policy - set by the European Central Bank for the entire Euro-area - and fiscal policy - government spending managed by each country. This conflict remained merely potential, however, until the eruption of the global financial crisis in Black September 2008. As a result, a structural division has arisen between "rich" northern countries - Germany/France/Netherlands - & their poorer neighbors to the south, the so-called PIGS: Portugal/Italy/Greece/Spain, presenting the Eurozone with its most serious crisis to date.Read more
2 February 2009. By Keith Timimi, EconomyWatch.com. Key trends at Davos, indicative of some of the key themes of the year ahead, include the growing clout of the Indian delegation, rising tensions between the US and China, and the backfiring efforts of 'tone-deaf' bankers that seem to be helping the rest of the world to agree on the need to regulate them. Read more
31 January 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. It was big news when it was announced the US economy supposedly grew at a robust 5.7% during the fourth quarter of 2009. But there are real reasons - both immediate and structural - to be wary of this alleged good news. Broadly speaking, there are at least SEVEN reasons to hold off on breaking out the Champagne to celebrate the "end" of the recession.Read more
28 January 2010. Juan Abdel Nasser, EconomyWatch.com. The sucker's rally in equity markets has come to an end, as I predicted last year, and there will be a major crash in 2010. In fact, it looks like the March 2009 lows are in danger, and a 40% - 50% wipe out could be on the cards.Read more
25 January 2010. David Caploe PhD, Chief Political Economist, EconomyWatch.com. On January 21, the US Supreme Court overturned the most recent attempt to put some kind of limits on political campaign finance activities with a far-ranging decision that insures the already broken and corrupt American political system will become even more so almost immediately, barring the unlikely passage of new laws by the current Congress. While this decision has already attracted commentary, relatively little has been written about the ruling's disastrous likely effects on the US and world economies.Read more
19 January 2010. By David Caploe Phd, Chief Political Economist, EconomyWatch.com. This third article on the inter-connection of today’s 24-hour / 7 days a week global media and marketplaces will look at some of the OTHER little bits of 'bad' or scandalous news that were also 'hidden in plain sight' in the New York Times during this period – while extending it to the Friday of the first week AFTER the holidays, a day when all most people can look forward to is the end of what is usually a difficult re-entry into the work-week. Read more
15 January 2009. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. In this second in a three-part series on the economedia, we lay the ways companies manipulate media by timing release of bad news they want to say 'well, we DID tell you,' while hoping that no one sees it. We look at how the New York Times 'buried' - by publishing on Xmas Eve - a crucial expose of how TBTF banks like Goldman Sachs sold debt packages they knew were bad while simultaneously 'selling short' against those same packages - a perfect example of the 'double game' media organizations play with companies they are allegedly watching over 'in the public interest.'Read more
11 January 2010. David Caploe PhD, Chief Political Economist, EconomyWatch.com. While some have intuited it, relatively few have commented upon the significance of the increasing interpenetration of the world of finance / economics / trading with the larger global media society - what we call the economedia. This first article in a series of three outlines the sources of this inter-connection of the worlds of economics and media, paying attention both to macro conditions and the role of 24-hour trading markets and how they relate to rising emerging markets.Read more
6 January 2010.By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The obvious temptation at this time of year is to a) look backwards - especially given the 'end' of a decade [depending on how you count it], and b) go with the 'Top Ten' theme - especially given that the New Year is 20-'10.' But we're going to keep it simple and look forward with only one resolution: to redically decrease the levels of income inequality in practically every country in the world. Read more
27 December 2009. David Caploe PhD, Chief Political Economist, EconomyWatch.com. While it lacked the dramatics of a 2008 that featured a Black September that will go down in history as one of the most chaotic and fear-inspiring episodes in modern financial & economic history, 2009 has been pretty rough in most places.In that context, here are our Top Five Christmas wishes for the world political economyas it concludes a roller-coaster of what Queen Elizabeth, in a different context, called, an “annus horribilus”.Read more
22 December 2009. David Caploe, PhD, Chief Politcal Economist, EconomyWatch.com. The Copenhagen environmental talks ended in a weak, informal “agreement” that some called the end of the UN-based world ecological process that began in the early 1990s with the Rio de Janeiro meetings. There were, however, some significant events – which bodes even worse for our global future. Take the extraordinary blow-up between the US and China at the climactic moment of negotiations, involving both Chinese Premier Wen Jiabao and President Barack Obama personally.Read more
19 December 2009. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. While it wouldn’t take much to have a more activist response than the downright laissez-faire – and, consequently, increasingly irrelevant – approach of the Obama administration to the steadily deteriorating economic / financial situation, the UK government of Gordon Brown and Chancellor of the Exchequer [Treasury Secretary] Alistair Darling – are at least doing something, albeit not too much either.Read more
17 December 2009. By David Caploe PhD, Chief Political Economist During the decade after the 1997 Asian financial crisis, China was generally seen throughout East Asia as a friendly alternative power-center to the American-led Washington-consensus. But in the last couple of years, some of China's neighbours are beginning to wonder if 'friendly uncle' is more of a 'roaring dragon', one which ironically its own people might have the most to fear from.Read more
15 December 2009. By David Caploe PhD, Chief Political Economist, EconomyWatch.com.In a global economic scene dominated by continuing uncertainty, one of the few “sure bets” has SEEMED to be the “green tech / clean tech” – whatever you want to call it – sector. But in the last weeks, significant bumps have appeared in what has almost universally been considered one of the few relatively unblocked roads to “certain” prosperity.
11 December 2009. By David Caploe PhD, Chief Political Economist, EconomyWatch.com.It was a great relief to the world that Obama replaced the no-bid-contracts gang of Bush and Cheney, bringing a more civilized face to leadership of the world's key economy. But being the not-Bush is not enough. Instead of implementing the policy of Change that he promised us, he has taken a frighteningly casual business-as-usual approach, making himself increasingly irrelevant even as he accepts the Nobel Peace Prize.Read more
8 December 2009. By David Caploe PhD, Chief Political Economist, EconomyWatch.com.On 4 key policy fronts, Obama is making the same mistake. From the Too Big to Fail Banks to the health "care" debate, and from the collapse of the housing market to the mystifying "double-down" on Afghanistan, Obama is relying on middlemen to carry out his policies. And while he begs them for help, they chortle into their Veuve Cliquot. Read more
7 December 2009. By David Caploe PhD, Chief Political Economist, EconomyWatch.com. The economic collapse of the United States has its roots in a political failure in which politicians serve the interests of their sponsors on K Street and Wall Street, rather than the American people. This process was started by Reagan/ism, pushed to new heights by Bush and Cheney, and obediently continued by Obama. Unless real change is enacted, the US is rushing headlong into an economic and political Nietzschean abyss.Read more
4 December 2009. India's economy is primarily driven by consumption, and yet with most of the population earning less than $2.50 a day, there is clearly massive potential for real growth - i.e. not debt-based and driven by necessities and small luxuries. Yet massive challenges remain. We review an economic report, things we agree with in part - boosting agricultural productivity, improving governance and infrastructure, more trade, less inflation and better education - but violently oppose in it's support of liberalizing the financial markets.Read more
3 December 2009. Take a look at the top consumer trends for 2009 from TrendWatching.com, from Business As Unusual, or the movement against greed and towards transparency (despite gun toting Goldman execs), to Eco-Easy (and its counter force, Eco-Uneasy) and Embedded Generousity, where anything you buy will cause a donation to someone less needy. We also highlight Urbany, the fact that more than half of the world's population lives in cities as of about now, and what changes that will herald. Read more
2 December 2009. Goldman executives, frightened by the growing anger against their company, are taking up guns to protect themselves. Humility, an apology or two and less bonus payments would be a much better way of deflecting that anger, but of course Goldmanites want to take those bumper bonuses - half of their total profits, backstopped by the taxpayer - and are therefore preparing for the worst. Ironically, it is their bonuses that may finally alert the public to what former Treasury Paulson feared the most - the revelation that the system is not designed to protect the free market, but the lack of one.Read more
27 November 2009. State-owned Holding Company Dubai World has just stopped repayments on $59 billion of debt, including a $3.5 billion Nakheel bond due 14 Dec. The markets see this effectively as a default, and they have been shaken out of their complacency. European markets are down 3%, the most since the March rebound, with banking and construction stocks leading the bloodshed.Dubai's sovereign debt has been downgraded, its borrowing costs have risen 50%, as they have in Turkey, Russia and South Africa. Read more
25 November 2009. The luxury goods market is in crisis. It is expected to plummet by 16% in the US alone, where de-blinging is the order of the day both financially and psychologically. And yet in China luxury is going to grow by 12%, and this sudden and unexpected change will put China at the top of the world luxury pecking order.Read more
23 November 2009. We generally assume that the boom and bust cycle is bad and to be avoided - but maybe there are financial interests that want the boom and bust cycle to continue and grow, as they amass vast wealth in the process? Read more
20 November 2009. The Federal Reserve is a private bank. While this is not new - it has been this way since 1913 - it is certainly news to most people. The Fed is owned 100% by shareholders, who are all private banks. The express purpose of the Federal Reserve Act was and is to protect private banks, not the government. That is why great figures such as Jefferson and Lincoln bitterly opposed the bankers and their financing systems, fearing them more than standing armies. Read more
18 November 2009. There is an elephant in the room, and it is hard to write about anything else while that is the case. The financial system in the US and Europe needs to be reformed. Not in the way that the regulation currently going through the House and Senate calls for. That is not real reform - it entrenches Too Big to Fail and still allows hundreds of trillions of dollars - more than the entire GDP of the world - to be traded in secret. Lets just say that with the banks financing politicians campaigns, they are getting their money's worth, and driving the US into ever deeper debt. Real reform is based on transparency, increased capital requirements, transaction taxes and the break up of Too Big to Fail firms.Read more
17 November 2009. When Osama and Al-Qaeda launched the 9/11 attacks, they aimed to shake the foundations of western capitalism. Although the official line is that they failed to do that - and, indeed, that he is now somewhat irrelevant since we have 'won' the War on Terror - the measures used to contain the negative effects of the attacks involved pumping the system with cheap money. That liquidity helped to build up the asset price bubbles, bank leverage levels and global trade imbalances that imploded so successfully (from Osama's point of view) in the Financial Crisis. Now, we not only have to ask ourselves whether he planned this or got lucky; our more pressing question is what happens next, since the problems in the system have not been fixed.Read more
13 November 2009. Despite its economic successes, India leads the world in hunger. The monsoon failure, followed by torrential rains at the end of the season that destroyed more crops, has led to growth in the numbers of food insecure to an estimated 220 million. While the government has done will to increase access to funds, the key is technology. A second Green Revolution is needed to take advantage of less thirsty crop varieties, sprinklers to reduce water usage, and even lasers to level fields. Read more
12 November 2009. Sweeping economic reforms have been announced in Russia, that could see the major state-supported companies restructured. Western media have trumpeted this as President Medvedev going after former President Putin and his allies, but they are wrong. It is a factional clan fight happening beneath them, between the FSB (KGB) linked siloviki who control those companies, and the rising technocrats of the civiliki. The outcome of this fight will shape Russian politics and economics for years to come. Read more
11 November 2009. What will are expected the worst economic crashes that happen in 2010? The list is dominated by European countries, so much so that we must stop talking about the sick man of Europe. Now we need to talk about Europe as the sick continent of the world. Indeed, out of the top 12 countries on the disaster list, only one - Equatorial Guinea, scene of corruption, embezzled oil money and attempted coups - is not European. Leading the pack are Ireland, a microcosm of the US but without their own reserve currency to fall back on, and Lithuania, once a proud Baltic Tiger but now struggling with debt and a lack of export orders. Read more
5 November 2009. Forget what the Happy Clappy Fed is saying, and ignore the frothing talking heads on TV. The US stimulus has had a positive impact, but it is not enough. Paul Krugman does the math - if you don't want to see high unemployment for the next decade - and that is the real generational theft going on here - then we need a second stimulus.Read more
4 November 2009. Too Big To Fail. Government Bailout. Protectionism. 2009 was the Year of Big. It seems we have forgotten about entrepreneurialism. It is therefore refreshing to read the op ed of Jack Ma, founder of Alibaba.com, calling for greater support for entrepreneurs, the innovation engine of the economy. While we agree with his vision of a world where 1 billion people buy products and services online daily, we can’t help but question his motives for regulatory support.Read more
3 November 2009. World trade collapsed in 2009 - but China dropped less than Germany, Japan and the US, thanks to aggressive price cutting, and it has now become the world's largest exporter. With its focus on the 'Walmart Gang' and with growing unemployment and stagnating wages in the US, that lead is only going to grow, despite an increasing number of trade spats.Read more
30 October 2009. Some of the best returns for investors over the coming years will be in the Frontier Markets, tomorrow’s version of the ‘Asian Tigers’. And while markets like Kazakhstan carry risk, we would argue that there is might well be more risk in the low-growth/ high-debt developed economies than a well managed and diversified frontier fund. Read more
28 October 2009. The press have been complaining about the Reserve Bank of India's latest policy moves, and the stock market tanked. But the analysts have failed to see the bigger picture; the RBI is essentially declaring the end of the Financial Crisis in India, and taking moves to strengthen the long term fundamentals the economy and particularly the banks, who are in much ruder health than their western counterparts.Read more
27 October 2009. US consumers are the demand engine of the global economy. The whole world is therefore waiting on tenderhooks to see if and when the official US unemployment level crosses the 10% threshold. The shocking truth is that the real unemployment level is already more than 20%, but has been manipulated by politically motivated tampering to show smaller figures.Read more
26 October 2009. Crisis? What crisis? That seems to be the message for investors nowadays. Naysayers are labelled permabears and the boosters point to many mistaken forecasts of a suckers rally during the last few months as evidence not to listen to sceptics. Fundamentals still matter, however, and the fundamentals say that the US economy, and most of the G7s for that matter, is still in crisis. Here are four reasons why this still is a Sucker's Rally.Read more
23 October 2009. The United Nations has said that, for the first time in history, there are more than 1 billion people going hungry. This number has jumped by 100 million as a direct result of the Financial Crisis. Hunger is no longer a result of droughts or other natural causes - it is now primarily a man made problem. Bill Gates has announced that fighting hunger will now be the main focus of the Gates Foundation, but more is needed; as in so many other cases, reform of the financial system is needed to change the dynamics of hunger. Read more
25 September, 2009. By David Caploe PhD, Chief Political Economist. By the time Friday rolls around, there's a natural tendency to want to chill out a bit, especially after the brutal week - nothing to do with my colleagues at Economy Watch, thankfully - I've experienced ... but then you start to check websites, ideas start bouncing around and it becomes impossible not to start seeing new - and not especially happy - connections Read more
8 October 2009. We have just been through the worst Financial Crisis in living memory - but you need to know now that there will be another Financial Crisis, and the next one is likely to be even worse. When will it hit? And what will it mean in terms of growth, jobs, houses, stock markets and trade? How can we get prepared? To help you understand what is going to happen to the world economy in 2010, we have prepared reports on the two economies that count - the US and China Read more
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