Full article
Sunday, November 30, 2008
Mankiw examines Keynes
Full article
Saturday, November 29, 2008
Friday, November 28, 2008
Thanksgiving sales begin
In keeping with tradition, this morning, US stores opened early and offered steep discounts to encourage consumers to part with their cash as the Christmas shopping season kicks off. The day after the Thanksgiving holiday is viewed as an important test of how willing consumers are to spend. Crowds of shoppers turned up at dawn to snare the best deals. A worker died and at least three people were injured after being trampled by a crowd of shoppers at a Wal-Mart in the New York suburbs! Police said a throng of shoppers broke down the doors to the Wal-Mart store in Valley Stream, Long Island, shortly after 5am, knocking the 34-year-old worker to the ground.
Electronics retailer Best Buy and department stores Kohl's and Macy's also opened their doors at dawn. Toys R Us offered up to 60% discounts from 5am to 10am. However, deep discounts are likely to hurt profits even if shoppers turn out in droves. Many retailers have suffered as the US economy nosedives although value chains like Wal-Mart have fared better. US retail sales recorded the biggest monthly decline since 1992 in October as consumers cut back on spending.
Thursday, November 27, 2008
B&Q see lower sales
Irish exports to the U.K. are down
Nokia pull out of Japanese market
Chinese slowdown may fuel social unrest
Wednesday, November 26, 2008
Global downturn causes more sleepwalking!
Iceland's inflation now over 17%
Tuesday, November 25, 2008
Jobs lost in Tuam
Ryanair credit cards
Monday, November 24, 2008
Economics on the TV tonight (Monday)
Panorama
BBC 1 NI (Sky Digital Ch.141)
Monday 24th November 2008
8:30 pm to 9:00 pm
Addicted to Aid:
Reporter Sorious Samura visits Uganda and his home country of Sierra Leone to reveal how aid money is lost, stolen and frittered away. He stops at a showpiece hospital, run by a well-funded health department, that looks like a warzone - yet in the nearby car park of the Ministry of Health there are dozens of new 4x4s for ministry staff. He questions a former minister accused of stealing funds and offers his vision of how Africans can take control of their own destiny.
Further details on the show (plus a trailer)
Manchester United to get new sponsors?
Manchester United already have strong links with Saudi Telecom who agreed a five-year deal in August worth £10m for advertising on its website and at Old Trafford. United also sent a team to Saudi Arabia last year on a 'PR trip'. Man United chief executive David Gill denied, at the time, that trip was money-motivated: 'People can level what they want at us, but we're relaxed about that. People don't understand how these decisions are taken.' We will see.
Sunday, November 23, 2008
Darling lowers VAT
McWilliams cautions Lenihan
- Caution needs to be exercised by Lenihan in putting money into recapitalising the banks now. While now might seem to be the perfect time to do so with their shares so low, the problem is that we still don't know what we are putting money into. The banks' bad debts are going to be far worse than they're admitting now. To demonstate this, the above graph shows how the US banks tried unsuccessfully to deal with their bad debts over the past year. It shows that banks are invariably always wrong when it comes to bad loans, because they underestimate the difficulties in their loan books. The difference between the banks’ forecasts and reality was enormous.
- Massive defaults on mortgages will occur over the coming 2-3 years due to the rising unemployment rate. We cannot tolerate thousands of young people (in many cases, young families) defaulting on their mortgages and being kicked out of their houses. Neither can we entertain the prospects of those people languishing in negative equity for a decade. McWilliams advocates that we reset the principal of these mortgages down to 50%, of their peak value. The banks’ shareholders would take on the lion’s share of this pain, with the state taking a proportion. As people move houses over their lifetimes and tend to trade up, the capital gain when the mortgage holder sells on the starter home to the next generation goes to the state. Therefore, the state is protected, the system is preserved, the banks take the hit and the mortgage holder keeps his house today at the price of significantly lower capital gain tomorrow. It is a bitter pill for the banks to swallow, but so be it. Better to have someone paying some interest on a smaller amount of principal than paying nothing on a big loan.
Saturday, November 22, 2008
Honey makes the world go round
"Bees not only produce honey, they pollinate many of the plants and vegetation which we then go on to consume. And the continental breakfast? Well, bees pollinate almond trees, so if bees were to die out, the almond filling for our croissants would disappear. The one-euro cup of coffee would suddenly rocket in price, as would the orange juice, because bees pollinate the majority of coffee plants and orange trees. Even milk would be more difficult to come by, because bees pollinate most types of animal feed, and the alternatives dairy farmers would have to use, probably cereals, are far more expensive. The threat to breakfast is very real. The bee population of Europe has been falling at an alarming rate. In the UK, it dropped by around 30% between 2007 and 2008, according to the British Bee Keepers Association. Scientists thinks bees ae dying off due to something called the varroa mite. They suck the blood of infected insects, weakening their immune systems. However, it is thought there may be other pressures on bees, including some pesticides and the prolonged spells of wet weather which have been seen during the last two European summers".
Further evidence, if it were needed, came yesterday when it was announced that Canada produced 62 million Ibs of honey this year, down 10% from the 69 million Ibs produced in 2007. The average yield per colony was only 106 Ibs, more than 10 Ibs less than last year.
Full BBC article
'Economist Intelligence Unit' on Ireland
'The Tiger Tamed', The Economist, 20th November, 2008
Demand for first class airline tickets skydives
'For European Airlines, Decline in Premium Ticket Sales Takes a Toll on Earnings', New York Times, 20th November 2008.
Friday, November 21, 2008
Endgame for Irish banks
Thursday, November 20, 2008
Oil price lowest in three years
Wednesday, November 19, 2008
African free trade zone created
The SADC was first established as the Southern African Development Coordination Conference in 1980 in order to reduce independence on apartheid South Africa. It was reincarnated as the SADC in 1992. It covers a population of some 248 million people and a zone whose cumulative GDP is $379bn in 2006. The SADC's members include South Africa, Tanzania, Zambia and Zimbabwe.
Comesa was established in 1994 and replaced the Preferential Trade Area. It includes 398 million people and the area has a combined GDP of $286.7bn in 2006. Among its members are Zimbabwe, Zambia, Uganda and Sudan.
EAC is the smallest of the group in terms of GDP, and had a GDP of $46.6bn in 2006. Set up in 1967, disagreements between founding members Uganda, Kenya and Tanzania led to its collapse. A treaty was signed for its re-establishment in 1999 and the new EAC was formed in 2000.
Tuesday, November 18, 2008
The mouse ate it!
- My computer crashed and I lost it;
- I finished my homework but then I deleted it by accident;
- I could not print it out;
- My internet was down so I could not do any research;
- I lost my laptop.
- My dad's computer was hacked by the Russians and they stole my homework;
- A burglar stole my printed-out homework along with the computer;
- The PC exploded when our dog went to the toilet on it;
- I accidentally tipped a bottle of cider over the computer and it broke.
Car sales drop again
Monday, November 17, 2008
Japan joins the recession club
Crustacean recession
Sunday, November 16, 2008
Now for the canine crunch
Full article
Saturday, November 15, 2008
Spam and other inferior goods rally
Here is an example of the growth in demand for an inferior good in the US — Spam. Spam is a cheap canned precooked meat product. The labeled ingredients are: chopped pork shoulder meat with ham meat added, salt, water, sugar, and sodium nitrite to help keep its color. As it is vacuum-sealed in a can, it does not require refrigeration; Spam can last for years. The product has become part of many jokes and urban legends about mystery meat, which has made it part of pop culture and folklore.
However, the makers of Spam, the Hormel Foods Corporation, have never had it so good. Employees in their factories are working at a furious pace and piling up all the overtime they want. Why? Well, through war and recession, Americans have turned to Spam as a way to save money while still putting something that resembles meat on the table. Now, in a sign of the times, it is happening again, and Hormel is cranking out as much Spam as its workers can produce.
Even as consumers are cutting back on 'normal goods', Spam is among a select group of 'inferior goods' that are selling steadily. Pancake mixes and instant potatoes are booming. So too are vitamins, fruit and vegetable preservatives and beer, according to data compiled, in October, by Information Resources, a US market research firm.“We’ve seen a double-digit increase in the sale of rice and beans,” said Teena Massingill, spokeswoman for the Safeway grocery chain. Kraft Foods said recently that some of its value-oriented products like macaroni and cheese, Jell-O and Kool-Aid were experiencing robust growth.
G-20 Summit or Bretton Woods II?
Some of the media is calling the summit 'Bretton Woods II'. In 1944, the Bretton Woods Agreement followed a 21-day meeting of major world economies to recreate a global financial system which had been all but destroyed by the Great Depression and WWII. British economist John Maynard Keynes was very influential at the meeting.
The members at the summit this weekend are vowing to work together to again reform the global financial system, wrestle the global economy from recession and avoid future meltdowns. The event is being hosted by US President Bush (President-elect Obama won't be in attendance), so hopes of quick joint action are pretty low.
Below, is a report from Al-Jazeera which explains the link between this summit and Bretton Woods 64 years ago.
The Guardian, this morning, analyses the G-20 members, the state of their economies and how desperate each one is for a solution to be found (the fewer stars, the better!).
Argentina - $150bn public debt
Attending: Cristina Fernandez de Kirchner, President
Argentina last month decided to nationalise its 10 largest private pension funds, taking $30bn of assets into public ownership. Shares then lost a fifth of their value in two days. Argentina defaulted on its debts in 2001 and investors fear it may do so again.
Desperation rating: Five stars
Australia - $141bn public debt
Kevin Rudd, Prime Minister
Australia has eliminated net public debt but runs a gross one of about 15% of GDP. Tough regulation meant its banks had little exposure to the US subprime mortgage market but the fall in commodity prices is hurting. Australia could face recession next year.
Desperation rating: Three stars
Brazil - $590bn public debt
Luiz Inacio Lula da Silva, President
Brazil's economy is growing at 5% this year but is expected to slow sharply next year. Central bank is making credit available to help firms boost sales and it has intervened in the market to meet demand for the US dollar.
Desperation rating: Three stars
Canada - $900bn public debt
Stephen Harper, Prime Minister
The Bank of Canada warned that growth would hit zero next year. Weaker oil prices and lower US demand are hurting Canada. Last month, it guaranteed bank lending in a move that could leave the taxpayer liable for up to US$175bn.
Desperation rating: Four stars
China - $580bn public debt
Hu Jintao, President
China is taking a big spending $586bn approach as industrial growth hits a seven-year low. As holder of the world's largest foreign exchange reserves ($1,900bn) China is under pressure to aid global finances but stands to be the biggest winner from the crisis.
Desperation rating: Three stars
France - $1.63tr public debt
Nicolas Sarkozy, President
The French economy grew by 0.1% between July and September but recession may only be temporarily avoided. Paris has made a €320bn guarantee for bank lending and a $40bn fund to recapitalise banks. Sarkozy has announced the creation of a fund to protect French companies from foreign "predators".
Desperation rating: Four stars
Germany - $2.07tr public debt
Angela Merkel, Chancellor
Europe's largest economy officially entered recession this week after GDP shrank by 0.5%, the second quarter of decline. Germany has seen exports plunge. It is providing €400bn in guarantees for bank lending, plus a further €100bn to recapitalise its banks.
Desperation rating: Four stars
India - $637bn public debt
Manmohan Singh, Prime Minister
India is being tipped as a key player in helping bolster the global economy. Growth is expected to be 7.5% this year, down from 9% and disguising the slowdown in the industrial sector. Along with China, a big gainer.
Desperation rating: One star
Indonesia - $147bn public debt
Susilo Bambang Yudhoyono, President
Jakarta unveiled an emergency package last month in response to increasing pressure on its currency and stock market - including export tax cuts and ordering state-owned companies to repatriate foreign currency earnings.
Desperation rating: Two stars
Italy - $2.19tr public debt
Silvio Berlusconi, Prime Minister
The economy has contracted for a second quarter, by a worse than expected 0.5%. It is Italy's fourth recession in seven years. The government has set aside up to €40bn to recapitalise its banks and created a €650m fund to guarantee lending to companies.
Desperation rating: Five stars
Japan - $7.45tr public debt
Taro Aso, Prime Minister
The world's second biggest economy may be on the brink of recession. Despite this, Japan is prepared to take a leading role in helping get the global economy going, standing ready to offer $100bn in loans.
Desperation rating: Three stars
Mexico - $203bn public debt
Felipe de Jesus Calderon Hinojosa, President
The government is increasing spending by more than 13% to $231bn next year in a bid to boost the economy. The slump in the oil price hurt Mexico as oil revenues finance around 40% of its spending. The US slump has also cut the amount expatriate Mexicans send home.
Desperation rating: Four stars
Russia - $76bn public debt
Dmitry Medvedev, President
Russia has pledged a $200bn package for the economy and financial markets while the central bank has raised key interest rates to try to halt capital flight. Share prices have slumped while the rouble has been under heavy pressure. Russia has financial firepower but a fall in commodity prices hurts.
Desperation rating: Four stars
Saudi Arabia - $91bn public debt
King Abdullah
Its stock market is down 40% this year and the government has made $40bn available to its banks. However, the focus has been on Saudi pumping money into the IMF so that it can in turn bail out struggling countries.
Desperation rating: Three stars
South Africa - $88bn public debt
Petrus Kgalema Motlanthe, President
Its financial system is largely unscathed and could use its stronger bargaining position to press for more African voices in international forums such as the IMF. A potential gainer.
Desperation rating: Two stars
South Korea - $269bn public debt
Lee Myung-bak, President
No bank nationalisations but the government said yesterday it was ready to provide liquidity to the sector amid fears of mounting bad debts and slowing growth. Wobbling.
Desperation rating: Three stars
Turkey - $257bn public debt
Tayyip Recep Erdogan, Prime Minister
Turkey's debt was downgraded by credit rating agencies this week. It might need further IMF cash. Its currency lost a third of its value against the dollar last month alone.
Desperation rating: Four stars
UK - $1.2tr public debt
Gordon Brown, Prime Minister
Amid bank bail-outs and interest rate cuts the country sits on the brink of recession. The FTSE has lost around 40% since last summer. Desperation rating: Five stars
US - $8.4tr public debt
George Bush, President
The origin of the subprime crisis. Washington has drawn up a $700bn bail-out plan for the nation's banks, including a fund to buy toxic assets. Needs a solution fast.
Desperation rating: Five stars
EU
The eurozone is now officially in recession. The economy of the 15 countries using the euro shrank by 0.2% between July and September compared with the previous quarter.
Desperation rating: Four stars
Recession prediction in 2006
Friday, November 14, 2008
Batman to sue the Dark Knight
All's not well at Dell
Full article
The best recession-proof jobs in the US
Economics on the TV tonight (Friday)
Friday 14th November
Time: 7 p.m.
The Money Programme's Max Flint investigates the property market and asks if renting is the answer for people buffeted by its troubles. For a decade, millions of us have used the seemingly unstoppable rise in property prices to fund a consumer spending boom, but the credit crunch and global slump has put a stop to that. Max Flint meets the people who are hanging on to the dream of home ownership and those who are convinced that long-term renting makes more financial sense. Also with exclusive research, it reveals if we would have been better off all along renting rather than buying.
Recession hits Germany
The Organization for Economic Cooperation and Development (OECD) forecast on Thursday that all the world’s major industrial countries were headed for a major slowdown. The organization, based in Paris, said the United States and Japan, as well as the eurozone, would undergo economic contractions in 2009 before recovering slightly in 2010. Figures expected later today from Britain, Italy and the Netherlands were likely to show declines as well.
Thursday, November 13, 2008
Paddy Power's Profits Prediction
Inflation rate in Ireland drops again
The main factors contributing to the monthly change were as follows:
- Clothing & footwear, furnishings, household equipment and routine household maintenance decreased due to sales.
- Transport fell due to lower petrol and diesel prices and a decrease in airfares.
- Education rose due to the increases in primary, secondary and third level education.
- Miscellaneous goods & services rose due to an increase in childcare costs and higher house insurance premiums.
Entrepreneurs' brains are different
Wednesday, November 12, 2008
Aldi invest in recession
Unlike conventional outlets discounters, Aldi and its rival Lidl, usually offer one brand of each product. They also have relatively low numbers of staff per store with Aldi employing an average of 14. Over the past decade the two discount retailers have grown their market share at the expense of existing players. Aldi says it has currently a 4.5% share of Irish grocery spending.
In recent months, as the Republic entered a recession for the first time in more than 15 years, the store has done particuarly well with the numbers of customers up 25% in October 2008 compared with the same period last year. The managing director of Aldi UK and Ireland Paul Foley new customers were "trying Aldi because they’re more conscious of seeking out value for money”. He said Aldi customers could expect to spend €60 less on a trolley of goods which would cost €200 elsewhere.
The dangers of deflation
Shoppers coping with the increased inflation of late could be forgiven for welcoming the potential boost to the euro in their pocket, but they may not be so keen on the prospect of falling wages while saddled with the burden of debts piled up in the good times. The one silver lining for homeowners with inflation was that the value of their big debts such as mortgages was eaten away more quickly. With deflation the opposite is the case. A prolonged bout can lead to businesses and consumers deferring spending amid expectations that prices fall further still.
Deflation is far more difficult to control than inflation, unfolds at a faster rate and leaves more havoc in its wake. So what are the consequences of deflation?
- Along with deflation we get a contracting economy and badly run businesses will fail as will others that use old methods and technology.
- Business activity will decline, resulting in lower sales and profits, and many companies will declare losses.
- Commercial property will fall in price due to lack of demand and lack of credit.
- House prices will continue to fall and housing turnover will continue to remain low. This will be due to people seeing houses as a place to live, rather than an 'inflation hedge' or investment.
- Rising unemployment and the possibility of lower pay levels will also hit house prices.
- Commodities will fall in price, particularly base metals, as the production of goods that contain them will drop.
- The price of antiques and works of art could fall dramatically as the contraction in the economy and the difficulty in obtaining credit would make this market come to a virtual standstill.
- Benefit payments such as the state pension are also pegged to the cost of living. A period of deflation next year could herald much smaller increases for many people.
When $700 billion just isn't enough
Full article
Tuesday, November 11, 2008
UK credit card companies increase interest rates
Permanent TSB offers paid breaks to employees!
Economics on the TV tonight (Tuesday)
TV3 (Sky Digital: Ch.103)
Tuesday 11th November 2008, 10 p.m.
We, in Ireland, waited a long time for an economic boom. When the ladder of success was eventually put in place, we wasted no time in leaping on the first rung and climbing up as high and as fast as we could. Forget pensions, forget savings, forget safe and solid jobs - property was a fast track stairway to heaven a gateway to good times. It couldn't last and it hasn't. This programme will sift through the debris of the crash. We will talk to the people who can't afford to pay their mortgages, the people who can't sell their properties, the people who are living in empty housing estates. We will ask why the banks and building societies threw money at anyone who wanted it. Why did no-one shout stop? Where did it all go wrong?
Monday, November 10, 2008
Sterling hits new low against the euro
Bolivia to hit the jackpot with lithium?
Full article
China pumps huge money into its economy.
Following the news, the price of oil climbed more than $4 a barrel today to $65.32. Although analysts had been expecting China to announce a stimulus package, they had not been expecting anything of this magnitude or aggression.
Sunday, November 9, 2008
McWilliams savages Irish banks
"...The problem is simple: if the bank admitted that the problems were as bad as they were, the management and board would have to resign because they would need new capital. New investors would not trust the same people who got the banks into this mess in the first place. So we are experiencing a game of cat-and-mouse between the market and management and, all the while, share prices keep falling. For the sake of clarity, let’s cut to the chase and do some little calculations. The reason Irish banks are in difficulty is because they are stuffed with Irish - and, to a lesser extent, British - property that nobody wants to buy. AIB has development loans in Ireland of just over €18 billion, as well as €5 billion of development loans in Britain. In all property crashes, development land falls further in value than house prices. Let’s take a conservative view: that house prices will fall by just 25 per cent (it is likely to be far greater, but let’s be positive). This means that the development loan book of AIB will have bad debts of at least 30 per cent and, given a total development loan book of €23 billion, that means bad debts of about €7.5 billion. To date, AIB has provided for €1 billion of bad debts. So it is hardly surprising that the share price has fallen again.
...Our bankers are petrified of the following scenario. If they admit how bad things are and make proper provisions, their tier one capital ratio will fall. The reason for this is that the more bad loans there are on the books, the more these eat into capital adequacy ratios. If their capital adequacy ratios fall to, say, 5 per cent, when similar British banks have a ratio of 9 per cent, the game is over for the management. This means the banks will be downgraded by the rating agencies. Some of the banks will have to look for state help to recapitalise and the positions of the management, chairman and board will be called into question. So it’s simple: all this prevarication is about self-preservation. The banks are hoping to spoof now and recover their tier one capital ratios by reducing lending. This is what we do not need, because our economy will seize up without credit and we may face the Japanese long recession scenario, which is precisely what the guarantee was designed to avoid. Ireland’s financial Know Nothings - the lads who blithely brought us to the abyss - are trying to save their own skins and, in the process, are risking the future of the economy. This is the worst of all worlds".