Tuesday, May 31, 2011

Greece under pressure from EU

The Greek debt crises may be spiraling out of control according to Arthur Beasly and this crises may effect the Irish debt crises.

EU authorities are struggling to contain the worsening financial crisis as Greece is loosing the "confidence of it EU-IMF bailout sponsors". The EU-IMF backers are looking for deeper cuts in the Greek economy and a faster 50 billion privatization program with little enforcement by the Greek government. The lack of execution of the terms set by the EU-IMF by the Greek government is due to the "lack of an advanced land registry in the country, leading to legal uncertainty over the ownership of many public assets".The troika wants the Greek government and opposition to agree on a fixed timetable for the execution of stringent policy measures in return for this aid, but consensus has proved elusive.

The problems in Greece has the potential to affect the countries who are already under pressure under the IMF-EU. It holds the possibilities that the Irish government may be swept off its current course of action as the EU-IMF may become more severe in trying to deal with the economic crises in Europe. Ireland though seems to be on course in dealing with its crises as new banking stress tests have not "thrown up any fresh capital requirements for Anglo Irish Bank or Irish Nationwide Building Society beyond the €34.7 billion already pumped into the two institutions."

Survey: Eight firms a day go bust

A survey has shown that a total of 8 companies a day went bust throughout the month of May and figures also show that people are now shying away from starting a business.
The survey was conducted by vision.net.ie and it showed that court-ordered liquidation are up to 50% and for the first time more than 1 in 2 companies are now showing signs that are consistent with business failure.

Figures show that 1,181 people chose to become a company director for the first time in May , this is down a huge 42% from the same time last year.

Vision-net.ie director Christine Cullen commented: "The sharp drop in 1st time company directors is letting. It is impossible to say with certainty what may be influencing this, but the lack of finance options for would-be entrepreneurs and people adopting a more cautious approach are among likely factors"

Ms. Cullen added that the rise in court-ordered liquidations signals a hardenning of the position being taken by debtors and by the courts.

Figures show that 84% of the liabilities for companies which closed during May are unsecured creditiors, this meaning that unpaid debts will most likely not be realised.

Of the 93 million euro owed to creditors from meetings, more than 40 million euro was in the retail and wholesale sectors.

Overall, 155 liquidators were appointed in May, compared with 190 in April. There was 44 receiverships, compared with 64 on the previous month.

Vision-net also carried out credit rating stress tests on 13,414 private limited companies who have filed accounts in the past 5 weeks and 14% of these firms suffered a worsening of their credit rating. This means that 55% or 7,431 of those companies sampled are now in the high-risk category.
Encouraging Emigration could help solve Ireland Unemployment Problem

Since the economic crisis Ireland has suffered a massive increase in unemployment.
Forecasters have predicted there will be further 20,000-30,000 job losses in the coming year. With the numbers at work in the economy down by 15 per cent so far in the crisis, Ireland has suffered the worst employment shock of any OECD country, a point made in these pages on a number of occasions.

With the current state of the Irish economy, Ireland can ill afford this increase in social welfare. One of the measures that could be considered is to encourage irish people to emigrate.

the irish charactertistic of emigration has being well established. According to Economist Joe Durkan suggested Ireland could accelerate outward migration, thus containing the rise in unemployment. According to Irish Times economist colunmist it may be worth considering for state agencies is to ensure 'that those who are considering a move are incentivised to do so. This would be good for everyone: it would help those who want to move to do so, and it would cut the massive welfare bill of a bust country'.

This policy would greatly enhance the irish economy. In fact the Spainish governemnt introduced these policies earlier in the recession.

Monday, May 30, 2011

On data and statistics

A few years ago my sister in law came into the study at home while I was doing an undergrad economics assignment, a wall of Excel data in front of me, and came out with the line "'tis far from spreadsheets you were born." And she's right. It is.

That quote was brought back to me last week around the time of the death of former Taoiseach Garret FitzGerald. By all accounts he was a man who loved statistics, who reckons that he is the only private citizen of Ireland to have a complete set of CSO figures. Even at his funeral, his son thanked the staff at the CSO for enthralling him with stats during his life. I wonder what my sister in law would have said if she ever met him!

The recent census brought out excitement in Garret FitzGerald, with him writing a column on its importance given Ireland's ever changing demographics. But I also found myself getting a little excited come the 10th of April - indeed I filled out my section a few weeks before, and filled out my parents parts too on the 10th. I even remember saying to my dad "these things are important!" when he gave a "sure it was 1967 or 1968, put either down!" answer to me while I did the census...

So what has all that got to do with anything? This masters has opened my eyes a bit to the importance of data and accurate statistics. For an undergrad assignment data was either considered an irrelevance or a nuisance. But now! As we start our theses a big question has been "what's your data like?" A person could smile with satisfaction if indeed they had a full dataset that they could work with, with all the variables for all the years!

'Tis a long way from spreadsheets we were born. But the importance of them are only becoming apparent now.

Friday, May 13, 2011

Will Ireland follow Greece?


There are constant comparisons being made between Greece and Ireland of late. Recently, Sky News aired an interview with The Economist Intelligence Unit lead analyst Megan Greene. In this interview, Greene argued that the bailout is insufficient to lead Ireland out of the crisis. According to Greene, it is only a fraction of the amount the Economist Intelligence Unit forecast Ireland would need to prosper. The bailout funds are clearly inadequate to cover Ireland's debt and pull it out of the crisis. It seems to be the case that the bailout will actually lead Ireland into more extreme debt further down the line. It is merely delaying the inevitable.



Reports are continuously being produced indicating that the bailout is the wrong way to go. The governments plan to bailout the banks is further exacerbating the matter. A scathing report on the state of Irish debt and planned expenditure has been produced by Morgan Kelly which appeared in The Irish Times on the 22nd of May 2010. This article has recently been considered by Suzanne Lynch and Laura Slattery of the Irish Times. Greene argued that the bailout is insufficient whereas Kelly is of the opinion that as well as being insufficient this attempt at saving Ireland will actually cause us to fall into greater debt. Kelly believes that Ireland's downfall and national bankruptcy is inevitable and this attempt to bail Ireland out will actually put us in a worse position by delaying the unavoidable fall to bankruptcy.

Sunday, May 1, 2011

McCarthy on Eurozone banking crises

The UCD economist and "Brod Snip" author Colm McCarthy again raises some salient points in his column on the eurozone banking crises. Colm McCarthy is someone who's column I enjoy reading as much for his at times caustic wit as his insight on various issues surrounding the banking and fiscal crises. He ends this article on a theme we have seen all too often in the last number of years:

"unless the European banking crisis is acknowledged and dealt with soon, we are witnessing a slow-motion train-wreck that will end badly for Ireland, for several other eurozone members and ultimately for the entire European project"

The problems outlines by Mr Mcarthy in this article are by no means new and are widely acknowledged. However the power-brokers central to the issue( heads of european states and the ECB) remain quite vocally divided on the issue as witnessed in recent elections in Finland

Will any change in attitudes of tack come too late for Ireland? Or indeed, is it already too late?.





Saturday, April 30, 2011

Tougher Times but Life Roles On

According to the RTE news yesterday the government downgraded its outlook for its economic recovery with GDP now forecast to decrease by less than 1%. They have now projected growth 0.8% which is down from 1.8% last November. This gives a pessimistic economic forecast for the rest of the year. They also told of how the domestic economy is expected to remain in recession for this year and next, with only the export sector providing growth according to the revised figures. Employment will fall by 30,000 jobs this year and over four years the number at work will increase by 100,000. But with more than 300,000 jobs going since the recession, high unemployment figures currently at around 14%. We also have to pay back our bailout which is based on our economic growth. Can life get any tougher for families trying to pay mortgages?


They talk about the dull times in the 1980’s how people earned to put food on the table. I know this is a terrible time for some people in Ireland however I personally haven’t heard of any one dying from starvation I think we are not that badly off, were are just worse off than we were 5 years ago and signs on it was the bank paying for our good times. I think we should stop worrying about our finances to an extent. I think that we need to revert back to Abraham Maslows 1943 paper on Theory of human Motivation he found that self-actualization was the most motivating factor. If we provide for one self and important others do we really need a fancy life with 4000 square feet houses for families of four or 2 new cars for driving. Most of the generation before us didn’t have them and it didn’t do them any harm. There is life after high wages and I’m afraid it continues whether we like it or not.

Friday, April 29, 2011

The Property Collapse Shows the Value of Independent Free Thinking

In Ireland the second half of the Celtic Tiger was based nearly solely on the property bubble. This continued Ireland's unprecedented period of sustained economic growth. However when this property bubble burst, the Irish economy went to into a recession which caused high unemployment and mass emigration. Since all bubbles burst, why were so many people caught by surprise when the market crashed?

According to Charlie Fell (2011) in his column for the Irish Times 'All bubbles and busts are a product of human nature, though the Irish experience has been traced to “groupthink” – a faulty decision-making process that leads to a low probability of successful outcomes'.This idea developed from the earlier 1970s to examine why groups consisting of bright intelligent people often made irrational decisions. Common patterns in groupthink include illusions of invulnerability, discouragement of dissenting opinion and illusion of unanimity

These conditions can be seen from analyzing the Irish experience. Individuals seem to believe that the prices of houses would continue to rise for the foreseeable future. It was as if an investment in property was a risk free investment. Although there has never been a property bubble that did not collapse and there was warning signs, people continued to invest. ‘Shur isn’t everyone else investing in property’. So of Irelands most intellectual people became to heavily involved in the risk of the property market.

Our Taoiseach in 2007 Bertie Ahern told a group of reporters that anyone who criticized the Irish economy should commit 'suicide'. This directly relates to a discouragement of criticism.

According to Fell (2011) Diverse opinions based on sound analysis are to be valued rather than frowned upon. To quote Gen George Patton: “If everyone is thinking alike, then someone isn’t thinking.”

Forestry The Way Forward

In recent times many developed countries have viewed growth in the services sector to be the way forward. However, in an article by Joe Dermody, that appeared in the Irish Examiner on April 29th forestry could be a prosperous sector for Ireland. (Available at : http://www.irishexaminer.com/business/ifa-forestry-has-potential-to-inject-50m-into-local-communities-152912.html )


According to John Bryan, who is the IFA president; "forestry has the potential to inject €50m annually into local communities." The article states that private sector timber in Ireland is currently 200,000 cubic metres per annum. However, this figure could increase to one million cubic metres per annum by 2018, according to Mr. Bryan.

The IFA president said that "if this production potential was realised it would mean an annual injection into the local economy of in excess of €50m from timber sales. There is also the prospect of the value of down-stream processed forest products on the market."

These profit opportunities, however, are subject to government policy. According to the IFA "the Government needs to reduce the time required to get a felling license; to increase funding to support construction of essential forest road infrastructure; to support the adoption of more suitable harvesting equipment for small scale forestry and to offer enhanced training for forest owners".

One has to wonder if Ireland can regain prosperity through returning to its agricultural roots. In a modern era, where more and more graduates are entering the services sector, should we be training students for careers in areas such as forestry instead? It is clear, however, that if timber production can increase substantially by 2018, the sector has the potential to create much needed employment and wealth in local communities.

Thursday, April 28, 2011

TEPCO's Contribution


Since the devastating earthquake in Japan, the country have been dreading a major energy shortage in the north-east of the country since the region's power generation capacity was damaged by the quake and tsunami. The Tokyo regional power company, TEPCO, have been working flat out to try to avoid continuous blackouts. From all the work put in they have been able to bring online power plants than initially anticipated. The energy demand in the area is estimated to peak at 55GW (gigawatt), from this the expected shortfall was 8GW but further analysis has reduced this figure to just 3GW.
Japan is known worldwide for having the most enegy-efficient economy in the world. compared to China, their energy consumption is eight times less. Many Japanese companies and residents have been taking voluntary measures to conserve electricity, which is in short supply since the Fukushima plant and several thermal energy plants were shut down by the tsunami. These steps have helped Japan to cope throughout their major ordeal. TEPCO workers have been selfless to help the wellbeing of their country in more ways than one. all their workers have agreed to take a 25% pay cut. They have also made it their main priority to remove the water from its reactor buildings following a sharp rise in the intensity of radioactive substances in the water in the turbine building.

Wednesday, April 27, 2011

On-field success continues to mask overriding problems



http://www.ft.com/cms/s/0/47c7a440-702d-11e0-bea7-00144feabdc0.html#axzz1KiVUKhdQ


A number of weeks ago Joel Glazer, one of the influential sons of American tycoon Malcolm Glazer, walked past a packed away end in Stamford Bridge which contained over 2,000 boisterous Manchester United fans. It is a move that Joel will think twice about repeating in future. He received a torrent of abuse from hard core Manchester United fans that are unrelenting in their insistence to oust the current regime. This is a regime which has continually extracted money directly from the clubs account to foster their personal debt and ambition. In fact it is perhaps only United’s on field success which is preventing a mass outcry to exile the owners permanently. Last night Manchester United reached their 3rd Champions League final in 4 seasons, and are currently in pole position to win the Premiership title which will see them become the most successful domestic club in England. However the facts remain that through the Glazers ownership and particularly the last 3 years, United have been surviving an a shoe string budget. A shoe string budget at least for a club which sits atop Forbes richest sporting franchises.

With the aggro which is being contained by the on-field success palpable, The Glazer family have now hired a PR firm to help readjust the image which the family is blemished with. Their current image is not helped by the fact that they are rarely seen at matches and have never made an attempt to interact with the fans. In fact it is the lack of clarity in their actions which has arguably angered United fans most. The Glazer family, owners since 2005 are only occasionally seen at matches, have intensely kept themselves away from the media glare, and regularly give out only basic financial information about how the club is run. Perhaps this new PR approach may involve finally assuring fans of the clubs direction and ensuring them that the club is not merely a cash cow which will be milked for all its worth.

Surely any half decent PR firm will encourage the Glazers to freeze ticket prices for the coming season and maybe even lower season ticket prices. Indeed, the evidence supports a rise in prices at Old Trafford this summer, backed by another aggressive marketing campaign aimed at selling season tickets. Already, the club has marketed its non-existence ‘season ticket waiting list’. While the list is nothing more than an email marketing database – offering no priority tickets to supporters who sign up – there is also no shame within the regime about using every available tactic to sell tickets. After all, how can there be a waiting list when United failed to sell all available season tickets last summer?

Still, the question for the regime is whether it feels the need to pacify United’s supporters with price cuts and star names, or not. History points to another summer of promises over money available for transfer spend spending; and misleading statements that United is a club built on ‘making stars, not buying them.’ Andy Green, a Manchester United blogger, said: “The Glazer family have spent six years not answering supporters’ questions about the debt burden and have been totally silent about the dividend rights they secured over United’s cash. Given that track record fans are unlikely to be impressed by the hiring of a new spin doctor.”

Tuesday, April 26, 2011

Fiscal Policy in America

Standard and Poor's recently downgraded its outlook (from stable to negative) on the United State's AAA credit rating for the first time in its history. Historically this means that there is a 1 n 3 chance that the downgrade in outlook will result in an actual downgrade. The position of US Treasury bonds play a crucial role in financial markets, being the predominant risk-free asset out there. The chances are the US debt will not be downgraded, S&P merely wanting to give the US policymakers a kick up the ass (and a nice bit of publicity for themselves).

Fiscal policy is conducted in a different fashion over in the US than it is done over here in Ireland or the UK. Over here, the finance minister prepares the budget within the government ,walks into the Parliament and commits the budget to the house (complete with calls to patriotic action.) The house then votes on it, and normally passes it with the government majority.

Over in the US it is the houses (House of Representatives and the Senate) that have the power over budget matters. It is not the Treasury Secretary that draws up the budget and presents it as a fait acompli, but the President and the houses of Parliament (and the congressmen and senators within them) who come up with the US budget. With a whip system that is more relaxed (Republicans and Democrats sometimes "cross the floor" for votes) and an upper house that is not a rubber stamp for the lower house, haggling over the budget and fiscal policy is a staple of American politics. And I love it. But, obviously, the guys at S&P don't appreciate the drama of all this, instead deciding that the squabbling puts the US's ability to repay its debts into question. Killjoys.

The current fiscal battle in the US has began to hot up in recent weeks with the Republicans' main man in this area, Congressman Paul Ryan, and President Obama both outlining their plan's to solve the US's deficit problems. Congressman Ryan drew the battle lines when he presented his longer term plan to get the deficit under control on April 5th. This forced Obama' hand, which came on April 13th. Both claimed to get serious on the deficit, but by partisanly different ways.


  • Ryan's plan would cut the projected deficit by $4.4 trillion. Obama plans to cut the deficit by $4trillion over 12 years.

  • Ryan wants to cut taxes, Obama to raise them by $1trillion.

  • Ryan would take a scalpel to the health care budget, by making the states pay more in the case of Medicaid (for the poor) and the elderly pay more in the case of Medicare (for the elderly).

  • Obama wants to cut military spending, something the Republicans won't countenance.

A standoff has ensued.


This standoff will continue as the date for the approval of an increase to the debt ceiling comes closer. In the 1990s this standoff over raising the debt ceiling (Republicans against and the Democrats for) led to a government shutdown, with non-essential government services suspended as the policymakers fought over the budget and the debt ceiling. President Clinton won and the debt ceiling was raised. Will policymakers let things get that far again?


Dramatic stuff indeed.

Monday, April 25, 2011

Importance of Technology & Science


There are a number of factors have impact on economic growth, such as science & technology improvement, labor, capital, industrial structure, etc. Among of these factors, science & technology improvement is the most important.

Technology & science is the primary productive force, but is not an independent productive factor. It is a kind of potential productivity which promote economic growth through improve efficiency of other productive factors.

Technology cannot eliminate economic fluctuation fundamentally, but it has a buffer effect on economic fluctuation. As the continued improvement of technology, the cycle of economic fluctuation will be increased and volatility will be decreased. The high tech industry has been a leading industry for the US economy. The high tech which is represented by information technology stimulated industries upgrading, meanwhile lead to a high speed of US economic growth, and makes US economy in the leading position of the world economy since 1990s. High tech industry not only has a contribution to the US economic boom, but also has a positive impact on reducing inflation rate and remitting economic recession.

In one of two science policy columns this month relating to jobs and economic growth, Gordon Reikard explores the connection between investment in technology and economic growth, a topic brought to the forefront by President Obama’s State of the Union address that focused on “winning the future” through investment in research, development, and technology. Reikard explains how research and development once dominated the contributions to technological advance and how information technology has become a greater influence in the last few decades.”
-- Steve Pierson, ASA Director of Science Policy
(ASA: American Standards Association)

"Innovation has become a cornerstone of economic policy in Latin America. It is not surprising that companies, both large and small, are beginning to establish a footprint there or are partnering with local businesses to take advantage of the enormous market potential that is evolving. ."
-- G. Steven Burrill, CEO, Burrill & Company

Technology is the motive power of the improvement and growth for either a country or a company. Generally speaking, there is an interaction between economic growth and technology input. Economic growth goes along with technology improvement, and technology improvement quickens economic growth. Meanwhile, there also is an interaction between economic growth and technology output. On the one hand, the faster the economic growth is, the higher standard technology the economy is asking for. On the other hand, due to the great demand of economic growth, technology will better convert into productive.

http://magazine.amstat.org/blog/2011/03/01/econgrowthmar11/
http://www.marketwire.com/press-release/Life-Sciences-Fueling-Economic-Growth-in-Latin-America-1417123.htm

Friday, April 22, 2011

Piracy on the rise



The issue of piracy is something that cannot be avoided in the modern world. Music, movies, games and much more are being downloaded at a rapid rate globally. Of all the industries suffering from this phenomenon, it appears that the music industry is facing the greatest problem with regards decreasing profit margins.

Several artists in the music industry have come forward asking the public not to download their work. A notable case which became widely publicised is the case of Metallica against the online file sharing company, Napster. Metallica went on to win the case and the court ruled against Napster who agreed as a result to negotiate with Metallica. Napster introduced an upgrade to the system which secretly monitored the users. However this worked against both Metallica and Napster. Downloaders who felt their privacy rights were abused quickly developed methods to evade the Napster controls.


Other artists have come forward with their own views on illegal downloading. Certain artists such as Prince feel that there is little threat from the downloading as "the internet's completely over". He believes it to be a fad and would rather not have his music available online through illegal or legal downloading. He has had a long-standing battle against the internet peaking when he stated that he was suing sites such as Ebay and Youtube in 2007. The most significant development from this is the fact that many music publishers can object to their artists' work being available on Youtube with the audio being removed from many Youtube video clips.

The issue of piracy is highly debated but I would assume that there would be very few people who could honestly say they haven't benefited from illegal downloading. There is no doubt that it is indeed wrong and is a act of theft. However many believe it is not serious to download as the artists are so wealthy already. The issue of piracy is more likely to increase in the coming years and more enforcements will surely be introduced. As the supply of TV shows or music, for example, increase in availability it is likely demand will rise as illegal download becomes easier. The entertainment industry needs to increase the easy availability of its product online at competitive prices should they hope to combat the illegal downloading phenomenon.

Thursday, March 31, 2011

The crisis of China's table salt

Japan’s nuclear crisis is fueling panic in China, where shoppers have spurred a run on salt in attempt to prevent radiation-related illnesses and to secure uncontaminated salt sources.

China’s top economic agency, the National Development and Reform Commission, warned consumers Thursday against hoarding salt, and said it would work with local authorities to maintain price stability and market supply. Grocery store shelves have been ransacked over the past several days.

Consumers in cities along the China’s coastline, such as Shanghai and Guangzhou, and even in inland capital Beijing, began stockpiling table salt after problems at Japan’s Fukushima Daiichi nuclear-power complex sparked concerns that radiation would spread to China by air and sea, possibly contaminating the land and future food sources.

While iodized table salt does contain healthy, nonradioactive iodine, health authorities say it doesn’t contain enough to protect the body against damage from radioactive iodine that may be released during a nuclear event.

Further, only a fraction of China’s salt for consumption comes from the sea, said Song Zhangjing, a spokesman for industry organization the China Salt Association. “In China, most salt are from salt mines.”

China’s salt-buying rush is a sign of widespread fear that Japan’s nuclear woes will have far-reaching implications beyond the island. News of Fukushima’s nuclear leaks have stirred up memories of Ukraine’s nuclear accident at Chernobyl in 1986 and fears that nuclear disaster will not be contained.

xperts and Japanese officials have said it is highly unlikely Fukushima’s problems will be as bad as Chernobyl’s, and Chinese officials have said they don’t expect the radiation in Japan to cause harm in China. On Thursday, the U.S. Embassy in Beijing distributed a message to American citizens saying: “Based on information from authoritative sources in the U.S. and throughout the region, there is currently no evidence to suggest that nuclear events in Fukushima, Japan will have any health impact on individuals residing in China.”

Fears of a salt shortage also spread to Hong Kong, where many supermarkets ran out of salt early Thursday as nervous shoppers stocked up on supplies. In several supermarkets in some of Hong Kong’s busiest shopping districts, supermarket staffers said they didn’t know when new shipments would arrive.

The government’s top food safety official called the salt run “totally unfounded.” York Chow, Secretary for Food and Health, said in a statement that salt supplies won’t be affected by contamination around Japan’s waters because “the sea water around Japan will be much diluted or washed off after some time, and he said there’s no reason to take iodine tablets because they’re only used for people are in close contact with high levels of radiation. Buying salt for its iodine content is “totally totally unfounded, both scientifically and medically,” he said.

Chinese parents have also begun to stock up on Japanese-produced infant formula, assuming that future supply will be limited or contaminated. Citizens in Shanghai, about 1,800 kilometers west of Fukushima, have filled their medicine cabinets with iodine pills. People are also circulating over email a doctored map that shows Northeast Asia under a pink cloud of radiation seeping from Japan.

Concerns about transborder radiation are reaching far beyond China, as people in countries as distant as Singapore and the Philippines struggle to understand the effects of nuclear disasters.

Hong Kong, Singapore, Malaysia and South Korea have announced plans to monitor fresh produce for signs of contagion. Thailand authorities said they are prepared to test all Japanese goods.

Chinese authorities have been intensifying efforts to reassure citizens that radiation leaks in Japan pose no imminent threats. The Ministry of Environmental Protection published on its website Wednesday a chart of radiation in 41 cities across China, declaring that “radiation levels have not been affected by the Japanese nuclear power accident.”

Still, many consumers here are in panic mode. Liu Jia, a 36-year-old office worker, was afraid after trying unsuccessfully to buy salt at a Beijing grocery store, where signs that said “No More Salt” hovered above the salt section of the store.

“If you don’t move quickly, you won’t be able to buy any clean salt without radiation,” Ms. Liu said.

Many shoppers in China are also buying up sea salt instead of typical table salt out of fear future sources will be depleted and unsafe, according to China’s state-run Xinhua service.

Standing next to Ms. Liu was a crowd of others who were also looking to buy salt. “It’s always safe to do what the majority are doing,” said Michael Zeng, a 21-year-old college student in Beijing.

A Wal-Mart store in the Yangpu district of Shanghai is considering limits on salt buys.

Some in China are making light of the fright. Taobao.com, the online marketplace of e-commerce giant Alibaba Group Holdings Ltd., is advertising free salt packets with the purchase of a pair of shoes.

(Quote from The Wall Street Journal)

China's table salt crisis actually happened for a few times, but in china, salt is not a free trade good, it is controlled by government, so the situation didn't become worse until now, and people is becoming come back to normal. Street government intervene make Chinese people's life didn't affect too much by the crisis. And also, the speculators got huge influences, many of them have hundreds of tons of salt in their reserve, and majority of this salt's cost is times of normal price. This situation make me think that free market may not suit for China. China has too many people, so the demand of China is too huge, a little change will make the situation even worse in China.

EC to introduce new banking practices

The European Commission unveiled plans today to ensure the practices, that led to the irresponsible behavior during the housing bubble, of the banks become more transparent to the consumer. The EC aims are for clearer advertising and more comparable "pre contractual information" and tougher measures in the ability of borrowers to repay the loans they have applied for. The plan aims to avoid the granting of loans to high-risk borrowers and that borrowers are properly informed about the possible implications and risks involved in taking out the loan.

These new measures will allow a easier and clearer way to understand the terms of a loan offered by banks to consumers and allow consumers to compare the different terms to find the best loan for them. The new measures should also reduce reckless loans given out by the banks as defaults and negative equity rises in the European states as tougher measures in the ability of borrowers to repay will be introduced, although banks still have the final say in offering loans to borrowers who may be classed as high-risk.

"Borrowers will have to provide necessary detail about their ability to pay and lenders will be obliged to assess a customer's ability to repay."

The draft directive is still under review and negotiation of E.U governments.This plan when introduced may force further foreclosures as banks may become more uneasy about loaning to struggling businesses and People looking for a mortgage will have to prove they can repay the loan under this draft European Union law. But in the long run these new measures should ensure that reckless granting of loans will not occur again in the European states.

"We strongly believe that such provisions will lead to an unbalanced shift of liability to the lender and to even more legal uncertainty and litigation, which in turn will result in a restriction of access to credit for an increased range of prospective borrowers, notably first-time buyers, the self-employed, those with a lower income," Ms Lambert EMF Secretary General said.



Irish Banks Still Ailing

In an article by Landon Thomas in the New York Times on the 30th of March 2011 outlines the deepening problems and the bottomless black hole that is the Irish banking system. Months after the initial rescue package of €85 billion further stress tests which will be released today are expected to show that our national banks “may need another €13 billion to cover bad real estate debt”. Some specialists say the final tally could be closer to $140 billion, an extraordinary amount for a country whose annual output is $241 billion. Thomas talks to Dermot O’Leary, chief economist for Goodbody Stockbrokers in Dublin who outlines that Ireland can no longer afford the burden of its banks with national interest payments set to rise 13 % of government revenue by 2012. He believes that “You need burden-sharing with the bondholders. Without that, the debt becomes unsustainable” If the country defaulted on its external debt then we would be ostracised from financial markets. Capital flows to Ireland would stop. Also the IMF would step in to restructure the debt to ensure that private debt holders lose as little as possible. We would become, effectively, left out of the world economy/political system until we agreed to pay the debt back which is not really a possible scenario however can we afford this debt? Given the new government which is in place has become “more vocal in arguing that $29 billion in unsecured senior debt which is not tied to an asset and as a result is deemed riskier from the start is ripe for restructuring because the banks that issued it, like Anglo Irish, have essentially failed and been taken over by the government. So the government should not be obligated to keep paying interest. A major problem is out line by Thomas “banks account for a much larger share of national economies in Europe than they do in the United States with Irish bank assets been 2.5 times the size of its economy” which shows the importance of a healthy banking system. In conclusion the stark reality outlined Ireland has 100 billion euros in irrecoverable bank loans which is something that we will have to accept sooner rather than later..

Wednesday, March 30, 2011

Easons plans to invest €20m in expansion

Irish owned retailer Easons is planning to invest €20 million over the space of the next 3 years, which has beem hit hard during the recession. Its aim is to reconstruct the business by reducing its cost bas by €8 million a year. Easons loses halved to €10 million in the 12 months up to the end of January 2010. Managing director Conor Whelan said that the cost reduction programme would probably involve job cuts those being both voluntary and compulsory redundancies. Easons employs just under 1,000 staff but the cost reduction programme would also involve a store closure programme. Conor Whelan said he wants to maintain as much of the store network as possible, "We will look at it on a case by case basis, as we always do" Despite this,Easons is still Irelands biggest book store and there are still talks of opening stores in the near future in Balbriggan Co. Dublin, Mullingar in Westmeath and in Carlow. Mr. Whelan said that the €20 million investment programme would involve the renoavtion of a number of its shops, new IT systems, an upgraded online retail experiance and a new marketing and brand strategy. It will also reconstruct its bank debt. Easons turnoveraccounted to €193 million last year. The franchise is a family run business, run by 5 families, and they appointed 3 outsiders to non-executive positions last year. It has approximately 200 shareholders.

Tuesday, March 29, 2011

Scientific research around the world








Britain's Royal Society, the world’s oldest scientific academy have been published a report with the conclusion “Science is becoming bigger and more global.” Emerging scientific nations are gaining influence, as measured by how often their researchers get cited in peer-reviewed journals.

The picture was coming from the daily chart on the Economist web. It shows the percentage of the global citation in scientific journals. Compare with 1999 ~ 2003, the percentage of the global citation in scientific journals of the United State has decreased 6.4%, however, it still published the most number of the scientific journals in the world. The second largest percentage country is Britain, which is 8.1%. However, the number is far lower that the United State’s. The top two countries still account 38% of global citations in 2004~2008, down from 45% in the previous five years. China and Spain, with 4% and 3% of global citations in 2004-2008 respectively, and also pushed Australia and Switzerland out of the top ten for the previous five years.

Boffins the world over are also citing more eagerly, on average, than they used to. Citations grew by 55% between 1999-2003 and 2004-2008. Meanwhile, the number of published papers grew by just 33%.” The news said. The growth in citations could be partly down to an increase in the proportion of published papers that are the product of international collaboration to 35% of the total, up from 25% 15 years ago.

http://www.economist.com/blogs/dailychart/2011/03/global_science_research

Enda's Challenge

The challenge facing our new Taoiseach, Enda Kenny, in sorting out our banking mess is spelled out by Arthur Beesley in the Irish Times. The scale of our banking problems is daunting. Two and a half years on since the controversial blanket bank guarantee was given, the Irish banks are on severe life support.

  • Anglo Irish Bank, Irish Nationwide and EBS are wholly nationalised and are to be wound down.

  • Allied Irish Banks is 96% owned by the state and is humiliatingly now listed on a little know secondary index of the already tiny Irish stock exchange.

  • Bank of Ireland is still in minority state ownership (at 36% state owned) and has the proud distinction of being the best looking horse in the glue factory.

  • The only bank that looked like it was going to escape the clutches of Merrion St. was Irish Life and Permanent, but reports today signal that it too will fall into majority state ownership this Thursday following the banks latest, and most comprehensive, round of stress tests.

Unable to fund itself at any level, the Irish banking sector is reliant on short term funding from a reluctant European Central Bank. This is not sustainable as it means every two weeks the Irish banks have to go to the ECB for funding, undermining depositors confidence in them, which has led to a massive flight of deposits in the past year, but particularly in the last few months before Christmas.


In short, the banks are wholly reliant on the broke Irish state for solvency and on the reluctant ECB for liquidity. Sort that one out Enda.


Despite all the talk of stimulus, NewERA policy documents and getting people back to work during the general election, sorting out the banks is the biggest problem facing the country. Without a working (or even a semi-working banking system) businesses will continue to be starved of credit, expansion plans won't go ahead, start-ups won't get anywhere. All this while undermining the solvency of the entire state, which has pushed us into the arms of our boss, Mr Chopra. This banking crisis is the biggest impediment to attempting to sort out the jobs crisis at the moment.


The new government is seeking movement from the EU and the ECB (the IMF lads are our friends it seems) on a number of issues to alleviate the banking problem.



  1. It is seeking the ECB to provide medium to long term funding for the Irish banking sector. This seems to be sown-up and will provide a bit of breathing space to the banks as they sell off many assets in an attempt to downsize and, thus, reduce its dependence on the ECB .

  2. It is seeking to have the sell-off of bank assets to be done over a longer period, as current fire-sale prices would impose losses that would require taxpayers money to fill.

  3. It is looking for a reduction in the interest rate Ireland has to pay for the funds it's getting from the bailout fund. This has still to be hammered out but it seems like we will get a 1% reduction.

  4. It is looking for a level of bondholder burden sharing to cover Irish bank losses. reports this weekend suggest that another €18-€23bn is required to capitalise the banks. This could be tough negotiating (and least likely of these 5 goals to be achieved), as EU countries (read France and Germany) have said that it (they) doesn't want burden sharing anytime before 2013.

  5. All this, while fighting off Nicolas Sarkozy's demands for us to increase our 12.5% corporation tax rate. Kenny, it seems, has won this fight.

The best of luck to him. If he attains the 5 goals set out above, Kenny will have scored a significant political goal, and have reduced the current, as well as future costs of this banking crisis.


But is the damage already done? Has the level of indebtedness and losses in our banking system undermined the solvency of the Irish state in such a comprehensive way that is beyond the capability of our new government? My answer is that I don't know. But I'd like to hear what others think...

Different Party, Same Politics?

Since the onset of the financial crisis, at least one thing has become apparent: crony capitalism has, and has had, adverse affects on economic growth.

This is evident in the recent cosy relationships between Fianna Fail and head bankers and property developers which undoubtedly contributed to bringing the Irish economy to its knees. Political accountability has subsequently been the cry of the leading opposition throughout the recession and recent election campaign. Now in government, Fine Gael face its first test of its commitment to reform in the political system given the emergence of Michael Lowry's alleged participation in illegal activities. The Moriarty Tribunal found that the former Communications Minister assisted businessman Denis O'Brien's consortium Esat Digiphone in acquiring a mobile phone licence in the mid-90s. The report also found Mr Lowry received £420,000 sterling from Denis O'Brien to complete the purchase of English properties. Taoiseach Enda Kenny's response to this situation will determine the party's allegiance to reform in Irish politics and may help restore the trust and confidence which has long been lacking.

Are we on the brink of political reform, or will Fine Gael follow the same trajectory as Fianna Fail: different party, same politics?

Sunday, March 27, 2011

European Motor Industry Hit By Japanese Earthquake

Economists are all to familiar with the notion of exogenous shocks and how these unpredictable events can have devastating effects on an economy. When Japan suffered an earthquake, earlier this month, it not only affected the Japanese economy but also affected European countries. The European motor industry is a prime example of an industry that has been adversely affected by the quake. According to an article by Chris Reiter, that appeared in the Irish Examiner on Saturday March 26th, European car makers have been negatively affected by the earthquake in Japan as supplies of Japanese parts, for example semiconductors, become more scarce. Reiter states that "Volkswagen, PSA Peugeot Citroen and other European car makers may be forced to halt production in the coming weeks as component suppliers in earthquake-ravaged Japan struggle to restart factories." The head of Clepa car suppliers association, Lars Holmqvist estimates that this may result in "billions of euro" of lost revenue in the motor industry. Holmqvist also suggests that it may take "months" for normal productivity levels to resume. European workers in car production facilities are also feeling the effects of the quake. According to the article by Reiter "Peugeot , Europes second-biggest automaker, is temporarily reducing its workforce to reflect production cuts of as much as 60% resulting from a shortage of Hitachi Ltd diesel engine parts..." The article also reports that Opel were forced to cancel shifts in Spanish and German production plants. Carlos Ghosn, the chief executive of Renault and Japanese partner Nissan Motor Co. reported that some 40 Japanese auto-parts makers have been affected by damaged factories and transport routes. http://www.irishexaminer.com/business/car-makers-face-production-woes-as-quake-hit-japan-suppliers-struggle-149432.html

Tuesday, March 22, 2011

Forever in your DEBT!!!


http://www.guardian.co.uk/football/2011/mar/22/manchester-united-record-loss-debt?intcmp=239
Source: Getty Images


In 2005, Manchester United were taken over by American Tycoon Malcolm Glazer, and since that moment United enjoyed massive success on the field of play. 3 Premiership trophies, 1 European Cup and a couple of Carling Cups paint the image of a club on the cusp of an extraordinarily progressive wave. However as I have continually documented, this success has been in spite of The Glazers restrictive reign as opposed to a credit to their management. In fact it is fair for United fans to ponder the thought that had these owners not purchased the club, it is logical to assume that United would be fair and away the most dominant force in the Premiership and Europe. The team has continually competed with minimal investment and has in recent times been forced to sell their most prized assets whilst replacing these players with bargain bin purchases.

Today the Glazers parent company, Joint Football Ventures announced a record loss of £104.6m for the financial year ending June 2010. The owners accredit this loss to a lack of player sales. This is extremely worrying for Manchester United fans when the club owners blame a lack of player sales as the reason they are hemorrhaging money on a constant basis. Surely a club of Manchester United’s stature should not be forced to sell players in order to compete. According to Forbes, Manchester United are the most valuable sports brand in the world and this only adds to the unsatisfactory financial position of the club. Add to this the fact that the Glazers refuse to entertain offers then one wonders what motive the Americans have. They have been offered over £1 billion for the club yet remain stead fast in their refusal to sell. The Glazers appear happy to milk their cash cow for all it has and this can only be at the detriment of the team, the fans and the players.

Unfortunately the continued support of Alex Ferguson for the Glazers has disguised the financial standing of the club and until he speaks out in opposition of his bosses then the club will continue to hemorrhage cash and be forced to sell their prized assets to make ends meet. These men must go soon!!! Love United, Hate Glazer!!

Effects of Nature


Japan is till suffering from the earthquake and tsunami that struck its North-East coast on the 11th of March. The earthquake reached a world-record of 9 on the Richter Scale. The Japanese government are currently struggling to prevent a nuclear distaster with technicians working inside an evacuation zone in the Fukushima Daiichi plant, where they have attached power cables to all six reactors and started a pump at one of the reactors in an attempt to cool overheating of the nuclear fuel rods.

Provisional estimates released by the World Bank on the 17th of March accounted for 15,214 people either death or missing, nearly triple the figure of their 1995 earthquake. The economic damage resulting from the disaster is approximately 235 billion which is around 4% of GDP.

Fuelling concerns emerged last week as a result of the crisis, where world economy may suffer becasue of disrupted supplies to the auto and technology industries. Howeveer help was quickly prompted by the G7 group of rich nations to stailise the yen.

On a lighter note, billionaire investor Warren Buffett said the earthquake and tsunami were an "enormous blow" but should not prompt selling of Japanese shares. Instead, he called the events a "buying opportunity". He continued by saying that this disaster would not affect the economic future of Japan.

Monday, March 21, 2011

The impact of natural calamities on global economy


It is obvious that the impact of bad weather and natural calamities on economy, especially in the age of globalization, the regional calamities can influence the other countries and related industries. From 1970s to 1980s, the various global natural calamities caused the economic losses more than hundred billions.

In Dec 2009, temperature of the US was the lowest level since 2000. As the consumption in heating grew significantly, the energy price was rising, oil price increased 10% and natural price increased 15%. In Jan 2011, the Eastern Australia occurred the most serious floods during the 50 years, the torrential rain inflict devastating damage to the region of producing coking coal which support two thirds of the world.

Hurricane Katrina, that hit New Orleans in August 2005, around 400,000 jobs were lost, economic growth for the second half of the year was trimmed by a full percentage and oil supplies were severely affected. On the day Hurrican Katrina hit Louisiana, August 29th 2005, crude oil prices on the New York Mercantile Exchange closed at $67.20 a barrel, up 1.6 percent, after touching a high of $70.80 a barrel in earlier electronic trading.”
— Jessica Hartogs and Antonia Oprita,CNBC

The biggest earthquake on record to hit Japan in 140 years sent stock markets across the globe sharply lower, while the yen and oil prices also fell. The quake was followed closely by a 10-metre tsunami that killed hundreds of people and swept away everything in its path. The death toll is expected to rise. Auto plants, electronics factories and oil refineries were shut across large parts of the country. Several airports, including Tokyo's Narita, were closed and rail services halted. All of the country's ports were closed.”
— Jessica Hartogs and Antonia Oprita, CNBC

Such of these natural calamities are influencing the global economy.

The events in Japan over the last few days are showing us how it influences the other countries’ economy. Firstly, Japan’s nuclear power plant issue increase the other countries’ fear for nuclear power, if some countries close their nuclear power plant, the other energy price(including petroleum) will sharp rise, and then involve the global economic trend. Specially for Asia, Japan‘s 54% export and 45% import are related to Asia, and 19% export and 22% import are for China. Japan’s import and export are stagnated after calamity, this will bring negative effect to Asia’s economy. Secondly, Japan’s economy highly depend on foreign countries, especially the large export of IT and cars, meanwhile large amounts of imports, so Japan’s calamity can negatively affect global economy in a short term. For instance, the crops and fishes cannot be eaten as the nuclear radiation, hence Japan has to import vast amounts of these products which did not need to import before.

http://www.cnbc.com/id/42075689/Busch_Natural_Disaster_in_Japan_Follows_Historical_Pattern

http://www.cnbc.com/id/42026484/How_Recent_Disasters_Affected_Markets_and_Economies

Monday, March 14, 2011

Death and Income tax.

Benjamin Franklin famously opined that "in this life nothing is certain except for death and taxs". In Ireland it seems we may have proved 'ol Benjie wrong on this count, at least when it comes to income tax.

I have written before on this blog about how our state was for years reliant on a myriad of unsustainable consumption based taxs which collapsed during the recession. However another more pressing concern is the state of income tax returns in Ireland and the land of eternal dreams in which many people exist on the matter.

Its important to note before reading this article by Ronan Lyons entitled "a little quiz on Irelands income tax" that income tax does not include PRSI(which is insurance), consumption based taxs(such as VAT) or the income levies introduced by our previous government.

The article contains a quiz in which I got one of the questions right. Its a real eye opener in terms of who pays what in terms of income tax. When compared with the following chart again from Lyons the issue becomes even more stark.

This graphic shows the all in tax rate of Irish average wage workers in comparison to the US, UK and OECD. According to Lyons:
"The graph below shows the average “all-in” personal income tax rate levied on people who earn the average industrial wage, for a range of economies including Ireland, from 2000 on. The figure given is an average tax rate for four stylised households (a single worker with no children, a single worker with two children, a married couple with one earner and no children and a one-earner couple with two children). The figure for each economy includes family cash transfers, paid in respect of dependent children between five and twelve years of age. All figures come from the OECD."

This graph shows that between the period 2000 and 2007 effective income tax rates for the above families on the average industrial wage had dropped to somewhere below zero.
The incoming government face some big issues the bank(and possibly soverign) default which looks likely to come in the next five years, the excessive wages and spending we can no longer afford, fights with unions from consultants and teachers to the public service and political restructuring on a large scale but somewhere in all of this we need to look at a reformed tax system.

In this article Constantin Gurdgeiv makes some interesting suggestions on changes that could benifit our tax system and indeed social welfare such as a 15% flat tax rate and capped (7 year) lifetime welfare benifits not including pensions or disability benifits. As yet I am not sure what I think about either but when people demand "radical" changes to our society and the way we govern ourselves some very radical suggestions to the issues such as these should be considered. It would be far and away preferable to at least put these issues on the table rather than the stock "not on my patch" consensus built disaster we have sleepwalked ourselves into in the last ten years.

Sony's Struggle

Sony is an extremely successful multinational firm. The company was established in Tokyo in 1946 as a telecommunications and measuring equipment reseach and development firm. It adopted the Sony Corporation name in 1958 and is now located in several countries worldwide. Its focus is now on four sectors: electronics, game, entertainment and financial services. Sony is now famous for products such as the Sony Playstation and Sony brand televisions. It is a firm affiliated with high quality products.



This success however does not make Sony invulnerable to outside threats. Sony faces constant competition from other electronics based firms. An example of this is Microsoft. Sony and Microsoft are the core competitors with regards next generation gaming consoles i.e. Playstation 3 and Xbox 360. However competition can become excessive and this can become negative for both firms involved.

Sony has just been involved in a case with LG, another high quality electronics producer, in which Sony lost. This led to a ban on imports of Sony Bravia HD Televisions and Sony Playstations into Europe. Thousands of Playstation 3's were seized and impounded before they could arrive at retailers. The supply of Playstations already in Europe however was enough for the demand within the 10 day ban. Luckily for Sony, the ban was lifted and trade could continue. However the patent issue which the case is based around is still ongoing according to Stuart.


Sony faces more problems this week with the coming of an earthquake measuring 8.9 which led to a tsunami sweeping Japan. Shares in Sony have fallen by over 8% according to The Irish Times. Economic disruptance and market competition have weakened Sony during the past year but many other firms are facing the similar issues. Sony needs to focus on bringing the firm out of the recession as a strong rather than a weakening multinational. Constant negative news in the press may lead to a brand weakening which in turn will damage brand loyalty.

Monday, February 28, 2011

New law to give Central Bank more powers

The news said that the legislation to put in place a special resolution regime for banks and give the governor of the Central Bank the power to intervene in their affairs. In December 2010, the government promised to publish the law by the end of February and said it would broaden the available resolution tools with the aim of promoting financial stability and protecting depositors. The new law will be used to intervene in the affairs of distressed financial institutions and will replace the Credit Institutions Act.

The legislation was contained in the agreement between the government and the EU-IMF. The EU-IMF deal with the Government said legislation on improved procedures for early intervention in distressed banks and a special bank resolution regime (SRR) would be introduced. “The SRR should include a robust set of powers and tools to ensure the competent authorities can promptly and effectively resolve distressed banks, e.g. when they pose a risk to financial stability. The legislation will be consistent with the EU treaty rules and will be consistent with similar initiatives ongoing at EU level,” the agreement stated.

The UK have been introduced bank resolution legislation in February 2009, however, the absence of such legislation in most jurisdictions seemed it have widely hindered governments’ efforts to deal with distressed banks and the financial crisis.

The Credit Institutions Bill was published and enacted within a week in December. At that time, the minister for finance Brian Lenihan said that a key pillar of the EU-IMF agreement was comprehensive restructuring of the retail banking system. The law, he said, would allow him take actions needed to bring about a domestic retail banking system that is proportionate to and focused on the economy.

http://www.irishtimes.com/newspaper/finance/2011/0228/1224291007031.html

Some reflections of "China's Trade-off"

Razeen Sally, the author of of "China's Trade-off", he wrote some faults of Chinese government policies and interventions of Chinese market, highlight the extremely huge interventions comes from Chinese government in Chinese market even after China joined into WTO. The examples he used are the price control of Chinese food, energy, financial market and the tariff policy of tombarthite. These are all truth, the huge intervention actually exists in Chinese market, but these policies are not as harmful to China as he said, and in opposite, these policies have protected Chinese companies and its weakly market from developed countries' invade and occupy.
And here I just show some of my points about Chinese tariff policy. We have to admit that, more competition can make the companies have more innovation and competitiveness, and also filtrate the disqualification companies. But that is just a totally economic view about market competition, in the real world, more other factors makes governments can not do the theoretically best method to manage its local market. For example, USA's tariff was the the highest of the world in the 19th century, but the highest tariff didn't make USA's industries's decay, it makes the USA's industry got a perfect good environment to develop, and finally make USA became the most powerful country of the world. I'm not mean that high tariff is always good, the overflow of high tariff is really harmful, just like USA's trade war in 1930, the international trade got 70% recession in that time, and Germany's international trade got 76% recession, the industry production of main capitalism countries all got huge influences. Protection tariff policy can provide a good development environment to local companies at the beginning, and it is not suitable for a country which have a mature industry system. The reason why USA always want to make developing countries to execute low tariff policy is because USA has already have a mature industry system, and it want to use its highly developed industry power to destroy the weakly industry systems of developing countries, so that USA can control the industrial power of these countries which means these countries will not be threatening to its position. Chinese history in the 19th century and the beginning of 20th century has fully explained the danger of a country which do not have its own industry system.
And the censure of China's tariff policy is even absurdity. In 11 Sep 2010, Obama government decide to operate the special protectionist tariff for Chinese tire, and after that 24 other special protectionist tariff plans were in considering in USA's commerce department. These evidences show that USA wants to increase the pressure to China for the exchange rate issue and reduce its pressure which comes the huge USA's national debt comes hold by China. USA's actions make thousands of China's company become bankrupt, most of Chinese people want to start a trade war with USA to punish it, and some generals even suggest to sell out all of USA's national debt to give a lesson to USA commerce department. So the duties of China's actions are all belong to USA, the tombarthite tariff and some others are just to give a sign to USA and Japan, tell them don't start a trade war, that's not a good idea for them.
So I think the censure of China's tariff policy makes no sense, the only way is to make USA stop their injustice actions.

Mortgage arrears and repossession rise

Figures released by the Central Bank today shows a 6per cent rise in the number if people in arrears and an acceleration in repossessions. The figures highlight that there is 8.6 billion owed by account holders who are 90 days or more in arrears and 6.2 billion owed by account holders in arrears of 180 days or over. This worsening trend has lead to 106 homes being repossessed in the last quarter and making a new total of 422 homes being repossessed since July 2009.

Official mortgage data that was supplied by the main Irish Banks to the Central Bank has revealed that:

  • 44,508 mortgages (5.7% of all mortgages) valued at a total of 8.6 billion euros were more than 90 days behind payment.
  • The main banks have allowed 59,229 households to restructure their debt and 35,205 of these mortgages have been classified as performing

According to the Conor Pope this new data has shown the debt owed by private households has decreased by 1.7 billion since the forth in 2009. Although the number of arrears and repossessions have risen the figures released by the Central Bank also show that the main banks are willing to restructure and try to accommodate the payment of the mortgages. The Irish Bankers' Federation have said the rise in the number of arrears is due to current economic circumstances and have stated "while the vast majority of borrwes continue to meet theor mortgage repayments, it is important that those borrowers in or facing difficulties are assisted in every reasonable way possible."

The counter argument to burning the bondholders

The counter argument to senior debt restructuring (which I proposed in my last blog) is made in today's Irish Times by Donal O'Mahony, global strategist at Davy's. The key points of his argument are summarised as follows:

  • That senior bondholders are not risk investors are rank alongside ordinary depositors.
  • That senior debt provides financing for credit creation far beyond that of ordinary deposit maturities. I found this an interesting argument that I had never heard of, or thought of, before.
  • That the risk capital in the banks have already taken a substantial hit: equity shares €55bn in the total Irish banking sector and subordinate bonds €10bn, from liquidity management exercises.
  • That the €35bn into Angle and Nationwide are the only bank injections that will end up in black holes and that the money ploughed into the rest of the banks (BoI, AIB, EBS) are "financial transactions" (yes, you heard right, merely a transaction, nothing to worry about!) with "legitimate expectations of longer term return." (What would Keynes say to this?Maybe or grandkids can leave us a note on our gravesides informing us of our return in AIB?)
  • That the cost benefit analysis of imposing the senior losses would be adverse, as burning the bond holders may cause contagion throughout Europe and adversely impact on our bank and sovereign funding.

It's an argument at least. But he lost me when he spoke of our returns in the other banks, speaking of their bail-outs as mere "transactions".

JPMorgan fund eyes 10% stake in Twitter

A JP Morgan fund is in talks to acquire a substantial stake in Twitter. Twitter is one of the world's fastest growing social networking sites. The JP Morgan fund asked for 10% of the online messaging service for $450 billion, this values Twitter at $4.5 billion. It is not yet clear if the fund will make a direct investment or buy out existing investors and shareholders.

JP Morgan's Digital Growth Fund was established this month to give rich clients exposure to fast growing private tech companies. This follows a similar effect by Goldman Sachs to invest in the ever popular Facebook.

The fund has raised $1.22 billion to date. but it plans to raise $1.3 billion in total and will have a maximum of 480 investors. JP Morgan expects to earn commission of at least $13 million from the fund.

JP Morgan also hopes to invest another 1/3 of the fund in one other private web company. Games maker Zyna or telephony provider Skype are two possibilties. The final 3rd of the fund will be allocated among 6 other companies.

Kleiner Perkins invested $200 million in Twitter in December at a $3.7 billion valuation. The JP Morgan valuation of $4.5 billion would mark a swift rise in value.

Facebook is now worth up to $70 billion on the secondary market, this is a price considered too rich for the fund.

Sunday, February 27, 2011

Why Ireland Should Continue to Invest in Research and Development

During the Celtic Tiger Ireland increased greatly its expenditure on R&D. This was put into two areas; Biotechnology and Information and Communication Technology (ICT). Currently Ireland spends 1.6% of GDP on R&D. However this is below the EU average which is around 1.9%. However Ireland’s current financial crisis and commitment to reduce 15 billion in expenditure from the budget means this investment in R&D is under threat. This would be a huge mistake. Ireland needs only to look at the example of Finland when it needs to answer the question of R&D spending
An example for Ireland is Finland. Finland and Ireland are two countries with many similarities. Both are small, open economies on the periphery of Europe. The population in Ireland is just over four million to Finland's five. The financial crisis Ireland has experience is very similar to the financial crisis that happen in Finland during the 1990s. Over the years 1990-1993 GDP fell by 13% from peak to trough and unemployment climbed to nearly 18%.
Both countries experienced asset price bubbles, particularly in housing. Regulators failed to control the behaviour of the banks and fiscal policy was inappropriate. Yet Finland emerged from its economic depression to rapidly become one of the world’s most ICT-intensive economies with one of the highest growth rates among EU countries. From 1994 to 2000, GDP growth averaged 4.5% per annum.
When the Soviet Union collapse Finland lost a huge share of their export market. In order to compensate for this, Finland decided to cut expenditure in nearly every area except in R&D and education. This was a key decision which Finland is still seeing the benefits. After the crisis Finland emerged as one of the most world’s best ICT sectors. In Suonpera (2009) paper “Lessons for Ireland from the Finnish Crisis” said that by 2000, high tech goods accounted for 23% of the value of total goods exports, up from just 6% in 1991.
It is therefore critical Ireland invests in R&D. In these economic times there are no quick fixes. R&D research could be in crucial to Irelands economic development in moving the economy out of these desperate times