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?

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

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.

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

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.