Tuesday, March 17, 2009

An economist is something to be...

The Irish Independent has an interesting article where they report that the current recession is making economics a cool subject again (wasn't it always?!) and how the numbers studying it will increase substantially. Fourth Years - I told you, you chose well when you joined Economics! :o)

There has never been a better time to be an expert in the subject once known as the "dismal science''. Economists are in constant demand in the media, and some faces -- most notably David McWilliams and George Lee -- are now as well known in Ireland as film stars and footballers. But will their popularity, and the constant discussion of the country's beleaguered economy, rub off on a new generation of students?

Colm Harmon, professor of economics at UCD, predicts a boom. "In my experience, enrolments in economics go up as the economy goes down,'' says Professor Harmon. "In the '80s, they had to use two lecture theatres for the subject in UCD, because there were so many doing it.
"Our worst time for enrolments was early in this decade, at the height of the boom.'' It is too early to say whether there has been a significant growth in CAO applications for economics courses in universities, but college authorities report a surge in interest in the subject, particularly at graduate level.

Dr Alan Ahearne (pictured above), lecturer in economics at NUI Galway, has emerged as one of the most respected commentators during the current recession. He has noticed a big increase in the number of applicants to NUI Galway's masters degree in international finance. "The course covers a lot of the issues around international economics and banking. These have been constantly in the news over the past few months, and that is having an effect. "We are getting a lot of interest from students with backgrounds in business studies, law and engineering.'' Dr Ahearne almost stumbled upon economics as a subject when he was studying for his Leaving Cert at St Clement's College in Limerick. "When I was doing my Leaving, it was a choice of physics and economics. Economics was the least worst option. "Then, when I actually started the Leaving Cert course, I became fascinated by the subject and I carried that into college. "At school, we learned early on about micro-economics, such things as supply and demand. You could be looking at apples or bread. I loved the rigour of the subject.'' Ahearne studied business studies at the University of Limerick, and only specialised in economics as a post-graduate. His career thus far shows where studying economics can lead. As a PhD student at the US-based Carnegie Mellon University, one of his mentors was Finn Kydland, winner of the Nobel Prize for Economics in 2004. After stints teaching at a number of universities and working for accountants Coopers and Lybrand, and Bank of Ireland Treasury, he worked for the US Central bank -- the Federal Reserve. Among his tasks was the preparation of research notes for Alan Greenspan, one of the most influential global financial figures of the past 20 years.

Jim Power, economist at Friends First and lecturer at DCU and the Smurfit Business School, came to the subject by a similar haphazard route at the Leaving Cert. "After my Inter (now Junior) Cert, I was studying three science subjects but after a month I decided to drop one of them. I chose economics over biology and I grew to love the subject.'' The graduate of economics and politics at UCD believes the subject will grow in popularity in the near future. "We have a problem of economic illiteracy at the moment. You only have to look at the Government to see it. So, the skills of economists are likely to be in greater demand in the near future.
"People are fascinated by the death of the Celtic Tiger, and how it happened. There was a similar surge in interest in economics during the currency crisis of the early '90s. That was a turning point for economics in this country. "Students are realising how useful economics is as a training. With few jobs out there at the moment it is a good general discipline.'' Most of those who study economics do not actually become economists. "It can be used as a stepping stone into many different careers, including politics, journalism and accountancy," says Mr Power.

Many economics graduates work in financial services. "It is a very broad subject that applies to different areas,'' says Professor Colm Harmon of UCD. "It is relevant to health, education and transport. When you think of a single mother deciding to join the workforce, that is an economic issue.''
While a new generation of economists is likely to emerge from the current global recession, Thomas Conefrey of the Economic and Social Research Institute, said that his interest was sparked, in part, by the Celtic Tiger boom. The Trinity College graduate says: "Just as there is immense interest now in analysing our difficulties and how we can overcome them, similarly, at that time, there was great interest in finding out what had caused this economic boom and how long it was going to last.''

Full article

Wednesday, March 4, 2009

Toys.com R Us

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Live register crashes through the 10% mark

The latest figures from the Central Statistics Office show that 354,437 people were on the Live Register last month. This represented an increase of 26,576 from the January figure, which was a record. The Live Register has now risen by 87% over the past 12 months, also a record. The CSO said the unemployment rate rose to 10.4% from 9.6% in January.

Bloxham Stockbrokers' Alan McQuaid says that as with January, the Live Register figures are 'simply horrendous'. He says they underline the fact that the Irish economy is now in severe crisis mode with the labour market heading for meltdown. 'It is essential in our view that the forthcoming mini-Budget includes some measures to stimulate demand in the economy and project jobs. Focusing on just simply stabilising the public finances and not targeting economic growth will not work, and indeed is likely to do more damage than good', the economist says. In a note today, Davy predicts that the unemployment rate will pass the 12% level by October. That would mean a near 8% increase in two years - the rate was only 4.5% in October 2007. The stockbrokers said that the last eurozone country to see an equivalent jump was Finland during the period from 1990 to 1992.

The Live Register is not designed to measure unemployment. It includes part-time workers (those who work up to three days a week), seasonal and casual workers entitled to Jobseekers Benefit or Allowance. Unemployment is measured by the Quarterly National Household Survey and the latest seasonally adjusted figure, for September to November 2008, is 170,700 persons unemployed.

The Bank of England to start 'quantitative easing'?

The Bank of England is expected to reduce interest rates to yet another record low tomorrow lunchtime; but with their rate-cutting ammunition all but exhausted, they are expected to press the button on a much more drastic policy — quantitative easing. As the recession deepens, weakening wage growth, plunging oil prices and consumer demand are threatening to drag inflation well below the Bank's 2% target.

With interest rates already at a historic low of just 1%, the monetary policy committee (MPC) believes further cuts will not be enough to kick-start the economy. Quantitative easing is popularly known as "printing money," but it doesn't actually involve turning on the presses. It actually means that the Bank will buy billions of pounds of assets, usually government bonds, from cash-strapped banks, in the hope that they will push the money back out again in loans to the public. In recent years the tool has been used by Japan to stimulate their economy and to fight inflation. Much of the global economic crisis is caused by frozen credit markets. Many companies find themselves unable to secure loans necessary for day to day operations. The credit crunch has adversely affected the interbank market - meaning banks have been unwilling to lend to each other.

Tuesday, March 3, 2009

Roubini

Every couple of months we publish what Dr. Doom, Nouriel Roubini is saying/predicting about the economic mess we find ourselves in. This week's TIME Magazine has an interview with him where he mentions Ireland. Here is some of it:

Where is the global economy heading from here?
My concern right now is that this U-shaped recession we are in could turn into something much uglier, meaning a Japanese-style L-shaped recession: near stagnation or stag-deflation. We're in the worst global synchronized recession in the last 60 years. Unless we take the right policy actions we'll end up in a near-depression. I did not want to use that term six months ago. At that time I said the chances of a near-depression were only 10%. But today those chances are 33% or so.

How can this be avoided?
You have to have a set of concerted, coherent policies done not just by the U.S., but Europe, Japan, China and everyone else. The credit crunch is just massive. One thing that's needed is much more aggressive monetary easing. The second dimension is that you need much more fiscal stimulus — in the countries that can afford it — that is front-loaded. The U.S. [stimulus package] is $800 billion but only $200 billion is front-loaded. Of that $200 billion [in stimulus] this year, half of it is tax cuts. That's going to be a waste of money because people are not going to spend it.

Why hasn't the banking mess been cleaned up?
You have to do triage between banks that are illiquid and undercapitalized but solvent, and those that are insolvent. The insolvent ones you have to shut down. You need more aggressive credit creation by the government or you have to force the banks to lend. We're in a war economy. You need command-economy allocation of credit to the real economy. Otherwise the incentive individually for every institution is to pull out, not extend credit. Not enough is being done.

Is there a part of the world you are especially worried about right now?
I'm worried about every part of the world. People thought the rest of the world would decouple from the U.S. That was nonsense. Emerging Europe is on the verge of a fully fledged sovereign debt, banking and currency crisis. I think China is in a near-recession right now. Many emerging markets, even those that are in better shape, are in severe trouble. I don't think there is any economy in the world right now that is safe.

Is a breakup of the European monetary union possible?
I don't see that as being likely but the probability of that eventually happening is rising. Right now we are facing a situation in which many countries now have banking systems that are too big to fail and also too big to be saved. Now if Ireland or Greece go bust, then there is already a commitment from the Germans and French to, one way or another, bail them out — because they know that otherwise the monetary union is going to collapse. But if you have to rescue on top of them Austria and Italy, Portugal and Spain and Belgium and the Netherlands, then that is not going to be possible. I am still of the view that we can avoid a collapse of the monetary union, but this is really the very first true test of its stability.

Many people are pinning their hopes on the Chinese government to stimulate demand. Is that justified?
I have to give credit to the Chinese. Their fiscal stimulus will contain the degree of economic contraction. But China is radically dependent on U.S. growth. Forcing state-owned enterprises and banks to spend more when you have overcapacity, or to lend more when there are already large [amounts of bad debt], is going to postpone a problem, maybe by a few months. But it will lead to a harder fall down the line. A hard landing is unavoidable given what has happened to the rest of the world.

60% of the world has a mobile

The speed and scale of the world's love affair with mobile phones was revealed yesterday in a UN report that showed more than half the global population now pay to use one. The survey, by the International Telecommunications Union (ITU), an agency of the UN, also found that nearly a quarter of the world's 6.7 billion people use the internet.

But it is the breathtaking growth of cellular technology that is doing more to change society, particularly in developing countries where a lack of effective communications infrastructure has traditionally been one of the biggest obstacles to economic growth. By the end of last year there were an estimated 4.1bn mobile subscriptions, up from 1bn in 2002. That represents six in 10 of the world's population, although it is hard to make a precise calculation about how many people actually use mobile phones.

Africa is the continent with the fastest growth, where penetration has soared from just one in 50 people at the turn of the century to 28%. Much of the take-up is thought to have been driven by money transfer services that allow people without bank accounts to send money speedily and safely by text messages, which the recipient - typically a family member - can cash in at the other end. Vodafone's M-Pesa money transfer service was launched in Kenya in 2007 and now has 5 million users. Developing countries now account for about two-thirds of the mobile phones in use, compared with less than half of subscriptions in 2002. A single mobile phone may have several users in poorer countries, where handsets are sometimes shared or rented out by their owners.

The report also recorded a marked increase in internet use, which more than doubled from 11% of people using the net in 2002 to 23% last year. Here the report identified a clear gap between the rich and poor world: fewer than one in 20 Africans went online in 2007, for instance, and less than 15% in Asia, whereas Europe and the Americas recorded penetration of 43% and 44% respectively. Across the world just 5% of people have broadband internet at home, although this rises to 20% in the developed world. Sweden was the world's most advanced country in the use of information and communications technology, in an index of 154 countries that took various factors into account such as access to computers and literacy levels. .

AIG bailed out... again

Stock markets around the world crashed yesterday as American International Group (AIG), the embattled US insurer, panicked investors by announcing a loss of $61.7 billion (£44 billion), the largest quarterly loss in corporate history. The FTSE 100 tumbled 204.26 points, or 5.3 per cent, to close at 3,625, its lowest level since April 2003.

The company could cost $250 billion (£178 billion) to repair, experts said yesterday as it received a further $30 billion from taxpayers via the US Government. The government has now made four separate efforts to save the company, totaling more than $170 billion. The White House dare not allow the company to fail because of the complex web of insurance and investment products that AIG sold to individuals and companies in 130 countries as it raced to become the world's largest insurer. AIG's collapse could affect 100 million Americans, according to government estimates. It is so big and sprawling, so intertwined with institutions around the globe, that its downfall could set off a vicious chain reaction. Upheaval on such a global scale would plunge the U.S. economy deeper into recession, drive up unemployment and stifle hopes for an economic rebound any time soon.

Paddy Power defies the odds

Bookmaker Paddy Power yesterday reported a 4pc increase in pre-tax profits to €79m for 2008 thanks mainly to growth in its online business. The bookmaker saw profits hold in the face of a sharp downturn and said there would be no job cuts or closures. All its rivals have announced such cuts. On the contrary, chief executive Patrick Kennedy reported that the group is well placed to grow the business as it is now able to secure prime high street retail slots previously closed off to bookmakers.