Is China's property market a bubble?

After the global downturn and the lessons learnt from property bubbles there are suspicions of a property bubble occurring in China. A property meltdown in China would damage the global economic recovery as China becomes more and more important in the global economy with China accounting for almost a fifth of world growth this year, according to the IMF; at purchasing-power parity.

China’s economy rely’s on its property market is reaching a level close to the housing peaks in the U.S. and Japan, according to Citigroup Inc Shen Minggao. Micheal Pettis said, " Over the next few years if China can re balance its economy, and reduce its trade surplus, it will contribute real growth and employment to the rest of the world.” While China's GDP will likely rise 9% or more it is dependent on real estate investment. “Last year, fixed-asset investment accounted for more than 90% of China's overall growth, and residential and commercial real estate investment made up nearly a quarter of that.” According to Bill Powell continuing on to say that more investors are becoming speculators. This event has been seen before in the U.S that has and has had severe consequences on the economy in the global economy leading to a global downturn.

Chinese authorities are dealing with the bubble and are hoping to deflate it before the bubble burst like in the U.S and Ireland. Shen Minggao said that the country “may only avoid the bubble burst if current property tightening is effective.”

Blanket bank guarantee was to avoid ECB and market scrutiny

In yesterday’s Sunday Tribune Jon Ihle give an account why the blanket guarantee was “solved before it entered the public domain” according to recent documents realised by the Department of finance. He explains that “a "comprehensive guarantee would be necessary" for the Central Bank to step in with emergency liquidity assistance (ELA) to help Ireland's ailing banks”. The paper in question when on to specify that “It is in the interests of the public that the situation is solved before it enters the public domain in order to prevent contagion”.

The government has come in for some just criticism in the recent past but I believe that in this case it may have saved the economy not telling the public. Since this time there has been a complete lack of consumer confidence, which is restricting our economic recovery on a domestic front. As a nation we are leading an export led recovery at a stage when Irish savings are at record highs. I also believe the government did not know the extent of our debt in 2008 and as a result I would be hard fought to blame our government for their action on this particular issue.
This argument is put forward in the article as it is explained that the government's preparations were to "help support public confidence" in the banks, but feared openness could jeopardise financial stability. However the papers indicate that Central Bank officials wanted recourse to the public purse before providing help, as the European Central Bank could have prohibited emergency funding if it was deemed to interfere with monetary policy.

Inally it outlines that European finance ministers in October 2007 and referenced in the Department of Finance documents, which said creditors and uninsured depositors "should expect to face losses" in a bank failure. I believe that if the savings of the country were burned and the Irish people had lost life savings we as a country would have failed our patriotic duty to protect the innocent hard working people of the island of Ireland. I don’t think our government have showered themselves in glory in the past but I think they acted competently in this case.

http://www.tribune.ie/business/article/2011/jan/30/blanket-bank-guarantee-was-to-avoid-ecb-and-market/

Is the world too dependent on the Chinese economy?

This is a question that be discussed on the Economist web, the whole question is

"Is the world too dependent on the Chinese economy?

China's economy may account for up to a fourth of global growth in 2010. What are the risks to dependency on a single country's economic performance, and what, if anything, should the world do to reduce this dependence?"

"The problem with China and its relationship to the global economy is largely tied to its traded goods sector. Excess capacity there imparts a deflationary bias on the global economy. China's policy of intervening to prevent currency appreciation that would adversely impact its traded goods sector enhances that deflationary bias and risks igniting a US-initiated trade war." John Makin gave his opinion of this question, he said the Chinese trade sector is too big.

However, there are some people do not think the world too dependent on the Chinese economy, like Yang Yao said, "China is not the most trade-dependent country in the world; among the large countries, Germany is more dependent on trade than China is." Micheal Pettis said, " Over the next few years if China can rebalance its economy, and reduce its trade surplus, it will contribute real growth and employment to the rest of the world. For now, however, it is hard to argue that the global economy depends too much on China’s economic growth."

in my opinion, China is becoming one of the world largest economy, however, there are many problem into its development. Chinese fast economic growth rely to its cheaper labour cost not the development of the productivity. The structural of the Chinese economy is bigger and still development but the level of productivity is still low. So the fast growth of Chinese economy can't keep long-time. There are also problem between the market economy system and the high government power. High government power is one factor that slow down the development of Chinese the market economic. The huge number of the population, Wen Jiabao has been said, a small question multiply 1.3 billion is a big question, a big problem divided by 1.3 billion is a small problem. China has the 1/5 of the world population. From this side, it is the biggest country in the world, however, the big amount of the population is also a big problem in the development. From all of these, China is one of the most important economy system in the world but the world economy is not dependent on the Chinese economy.

Cowen to quit politics

Brian Cowen announced today that he will not run in the forthcoming general election. Many Irish people expected him to make this move after he stepped down as leader of the Fianna Fail party more than a week ago.

Mr Cowen said "I have to take things into consideration now in the context of the fact of having been Taoiseach and leader of the party and former leader and giving a break to the new leader"

The outgoing Taoiseach said new Fianna Fail Micheal Martin did not ask him to stand down.

Mr. Cowen will dissolve the Dail tomorrow and will announce a date for the general election.

Although Mr. Cowen political career has finally come to an end he stressed that his commitment to the party will always be strong.

He ended stating "It's a momentous decision for me but also I think it's the right decision because the party now is in the process of rebuilding, rejuvenations and renewing. A general shift should take place of which I'm a part certainly in terms of the tenure I've had as a prominent member of the organisation throughout the country for many years"

Decrease in bank deposits

According to an article that appeared in the Irish Examiner yesterday, deposits in irish banks have decreased in December by 3% from the previous month.

Article available at: http://www.irishexaminer.com/business/deposits-in-irish-banks-fall-by-3-143568.html

The article states that "Irish banks saw deposits fall to €201.1 billion from €207.9bn in the previous month and from €213.8bn in October." (Irish Examiner) This is a large decrease. The article goes on to say that "such sharp consecutive drops in countries with stable banking systems are unusual." (Irish Examiner)

The question that needs to be addressed is 'why is this the case?' There are a number of assumptions which could explain this decrease in deposits.

1. With high unemployment rates are people being forced to withdraw their savings to make ends meet.
2. Is it a seasonal factor? Christmas is a costly time of year. Are people spending higher amounts of their income than they would at other times of the year? This could result in an increased demand for cash which would lead to people saving less and depositing lower amounts.
3. Have the public decided to hold their reserves in cash rather than deposit them in a bank?

These are only a few factors which could explain the decrease in bank deposits, there could be many more. The reason for this decrease will need to uncovered quickly, in order to find a solution to the decreasing deposits.

Fergie's rhetorical approach

Rhetoric is the art of using language to communicate effectively and persuasively, and when put to good affect by a maestro such as Sir Alex Ferguson, the ball often tends to reach its target. Two years ago Manchester United sold their most prized asset Cristiano Ronaldo to Real Madrid. Prior to one of the longest drawn out transfer sagas in the history of football, Sir Alex Fergusson continually denied that a deal between the two clubs would be agreed, even going so far as to say he 'wouldn't sell that mob a virus'!! Low and behold a few short months later and the gifted young Portuguese star had donned the famous white strip of Real Madrid.

Ferguson is now famous for his use of phrases which imply a statement of fact but often are mere opinions led to sway the public opinion. It is rare that an Alex Ferguson press conference does not contain the phrase ‘there’s no doubt about that’, in an effort to command a state of fact for an opinion that is often far from factually based. Fergusson might suggest that officials are biased against United and end the statement declaring ‘there’s no doubt that’, and almost instantaneously
dispel any chance of retort from the regularly terrified interviewer.

Ferguson’s press conferences of late have often involved the phrase, ‘there’s no value in the market’, alluding to the fact that the football transfer market is over inflated. It is by no means an unfair argument and in light of a recent transfer where Aston Villa have signed Darren Bent, a fairly standard striker, for over £20 million then it does indicate an over inflated market. However when Ferguson pedals the line that there is no value without a hint of irony, then one has to wonder if he is simply fooling the public, or fooling himself also. This is of course a man who has broken the British transfer fee on no less than 5 occasions. Also it can be argued that the high price demanded by Manchester United for the sale of Ronaldo was perhaps the watershed moment in inflating the market. £80 million which Ferguson will swear is simply resting in United’s bank and waiting for the value to reappear in the market.

Here in lies perhaps the most damaging of Fergusons apparent use of rhetoric. For the past 6 years he has been full of praise for the clubs owners and admonished any supporter uprising against the Glazer regime. Ferguson repeated the oft heard “no value” mantra after a recent victory, which many supporters have taken as a euphemism for Glazer-inspired austerity. That United has broken the £20 million barrier just once under Glazer ownership is symptomatic of a transfer policy that now focuses on the cheaper end of the market. Earlier this month Ferguson admitted that he wanted to “get one player” during the window, qualifying the statement – as always – with a warning about inflated transfer fees. But true to form in recent seasons, Ferguson has now ruled out any new signings in the January transfer window. He continues to spin the propaganda whilst insisting that the Ronaldo money is simply resting in the bank.... Aye Fergie, ‘there’s no doubt about that’!!

Can having children really increase ones utility?

This topic came to mind after a particularly difficult customer visited the store in which I work last weekend. This was a little boy who proceeded to throw jewellery and shoes around the store, pull clothes from hangers and somehow find and press our silent alarm. The mother, it seemed, had just given up on trying to control the situation.

After this distressed woman finally left the store, having left us a nice comment complimenting our patience, I began to think of a topic I studied in my first year of undergraduate economics. This was behavioural economics, more specifically the economics of happiness. The basic premise of this is that a rational person will try to maximise their utility. However, when looking at the utility children generate, results show that over a parents lifetime their child generates more stress than happiness. I certainly would never want to be in the position of the lady who it seemed had just accepted the actions of her child no matter how much stress it caused.

As Stevenson discusses the economics of happiness, she addresses the topic of the utility of becoming a parent. She discusses how the data does suggest that people without children are happier than those with them. However, she puts forward an explanation as to why this might be the case. As people experience events that increase their utility, their utility level is increased. Therefore the reason that parents seem less happy, is because their utility level is higher overall and therefore more difficult to achieve.

If we look at the world from the perspective of 'economic man', then we would be perfectly rational and so having children would be the irrational choice. According to studies, for example Blanchflowers(2008), children generate more stress than utility as well as holding a significant financial cost. Therefore it seems irrational to have a child. However, economic man or 'homo economicus' is not a realistic perception of human beings. We are irrational beings that often put the well-being of others before ourselves and are not always aiming to maximise our own utility.

There are many opinions on this topic and I'm still not sure which opinion I agree with, even though I'm currently leaning a bit more towards the 'rational' choice, after witnessing just how much stress, that which supposedly shifts utility outwards, can cause.