Monthly Archives: March 2009

Global Currency?

It is interesting for the world economy watchers to note that the talk of an alternative global currency standard is gaining force.

If I recall correctly, the gold standard was the standard the world followed either directly or indirectly until about 1971 where the price of gold and US dollar started diverging.

Now there might be political rationale for going back towards a gold standard (Russia being a gold producer for example), having a common multi-national benchmark is a useful one.

Doing some research on it recently came across the concept of Bancor – as proposed by John Maynard Keynes way back in 1930 or so and recently opened up as a solution by the central bank (vice chairman?) in China.

A quick link to wikipedia will give you the specifics of bancor – but suffice it to say that given the economic turmoil and the expected changes in the global economic paradigms – currency will become a key topic of the future.

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Unemployment – A key metric in the US

Feb 2009. Office of the speaker

Feb 2009. Office of the speaker

Clearly a deep recession here.

Other interestic statistics – if you overlay this on history

More Job losses than ever in the US

More Job losses than ever in the US

Well hopefully at some stage it will change – the direction will turn.

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Interesting visualisations of the crisis

From Flowingdata – Very good collection of 27 visualisations. Some of the quality of this material is outstanding.

In particular, I like this one a lot – simple and to the point.

Submission to the Good magazine on Credit crisis

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Do you understand the credit crisis? This will help!

Some interesting links that help explain the credit crisis cleanly.

Crisis of credit – Visualised

I found this a very simple and illustrative explanation – Well done to the authors.

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Banks – Toxic or what?

Look around at the dramatic up tick in the US stock market last week – If you take the time to ask why it is quite simple: Investors got some good news and everyone concerned, brokers and advisers led, piled in on the good news.

A toxic company like Citigroup’s CEO Vikram Pandit declaring that they are profitable (!Caveat! – Before taxes and special items) created the momentum in the upward direction. Ken Lewis of Bank of America, owner of the quick flip Merrill Lynch, declared the same (!Caveat! Before taxes and provisions). So the first two months has seen profitability on core business.

The good news – they cannot lend any more means they cannot create more CDO and the like and hence they cant create more toxic assets – first two months were good.

The bad news – they still hold toxic assets (both on and off balance sheet) – that will see more provisions (and write offs) over the next few months. Sceptical me very doubtful of this being the end of it. I hope I am wrong but I suspect not.

Here is the alternative view – Blogging Stocks post on Portfolio Killers.

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What is the end state of all the financial turmoil?

Is there an end to the turmoil?

The Dow is plumbing the depths as are most of the markets, in emerging or developed economies. There are various commentators with different perspectives.

The commentaries that interested me are shared here.

BBC and Robert Peston

To summarise here are some interesting factoids from that file:

UK Borrowing/GDP > 300%

UK Gross foreign current liabilities/GDP > 300%

UK Banking funding gap (at Dec 2008) ~ £780 b – may go over £1000b

To put things in context globally, worth having some of the global (rounded estimates) GDP figures to hand:

  1. US GDP  = $14 t (trillion)
  2. UK GDP  = $3t
  3. Japan GDP = $4.4t
  4. China GDP = $3.3t
  5. Germany GDP = $3.5t
  6. Italy GDP = $2.5t
  7. India GDP = $1.1t
  8. France GDP = $2.7t
  9. Brazil GDP = $1.3t

Overall Global total = $60-80 t.

So if you just look at US and UK, there is a total borrowing of over $50t in the economy – at approx 3x GDP – Wow! That is a large number to get your head around.

And who is going to be paying that debt down?

Either taxation in those countries (ie Mr Joe Taxpayer himself) or inflation (Mr Banker floods local cash into the market). Either way the future looks dire. Brace yourself – hopefully this is just a roller coaster and not a runaway train ….

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