The word on the streets is now there is a possible double dip recession in America. This is a considerable concern for not only large manufacturers in Asia and Europe, but also for smaller economies in the Western Hemisphere as we depend on American investment and tourism.
The American stimulus plans have run out of steam, with unemployment is still unacceptably high. President Obama, on the other hand, has said that there is no need for concern over a double dip recession in America- but, forewarned, is forearmed and the will of the possible, may not be the will of a natural course of events.
Simultaneously in and around Western European and American Consensus economic policy circles, is that budget cuts- and in some instances tax increases- is what should be done to stem the tide of fiscal deficits, even during this still yet sensitive time in the economy.
However, the ideas that: 1. Consideration’s over the option of more economic stimulus is out of the question and 2. Tax increases, in particular, is a desirable option, need more fleshing out in terms of their intended impact from a purely theoretical standpoint.
The first and obvious truth is that the American stimulus package did not go far enough. In fact, it has far less impacted America and the world, much more than it was billed to help.
For one reason, employment did not substantially grow over the course of the stimulus being rolled out. About 9.5 percent of Americans are unemployed, with business confidence still very low. In addition, the stimulus money way spent in areas that had little to do with the private sector, but rather with government sponsored programs that were and are short lived.
Service related jobs were not factored in to the American stimulus package, other than from “shovel ready” jobs- which were temporary- in addition to that creating more services related activity which didn't have a manufacturing base to support it.
For example, leading up to passages of both, The Economic Stimulus Act of 2008 and The American Recovery and Reinvestment Act of 2009, beginning from January 2007, business inventory rose by nearly 25% while service related work over manufacturing work increased considerably.
This displayed as well as created a major problem with the American stimulus plan; as the service related jobs were built around the government sponsored programs, they were not based on supply and demand for private investment along with an increase in manufacturing jobs outside of automobiles- which was also a government sponsored program for three of the top four automakers in the USA. And, as the money dried up, so too did the jobs and the economic multiplier effect that it temporarily displayed.
Even more so, a large amount of subsidies to private firms went towards technology, education and renewable energy. The first concern is that technology, need not be manufacturing based, especially with cheaper labor markets outside of the USA and global competition in the tech-sector being very stiff.
The second issue is that education does not stimulate the economy in the short term, especially when employment for trained professionals are even weaker than that of trained workers with years experience. And renewable energy is a new frontier and is a long way from being an economic staple for average consumers.
This added to the fundamental weakness in the structural economy of the USA- the main being that manufacturing has declined well below their peaks, even into the late 1980’s- , has led to current revenue shortfalls in addition to those forecasted.
The worst of it all is that countries in Western Europe, with Germany leading the way with respect to what they term “Ordnungspolitik”, are in the mood for not only budget cuts, but permanent budget cuts and tax increases as well as with Germany going through in the process of a wide sweeping deficit reduction program.
With the Euro-Zone and The USA representing over 40% of global GDP and, in turn, world production being affected by budget cuts and, in some instances, tax increases, the global economic outlook does not look so rosy, just yet.
Why are large European governments, with smaller countries following in lock step as much as they can, willing to sacrifice global economic recovery efforts rather than continuing to keep it afloat with additional credit?
The first issue is that it is seen that Keynesian spending, coupled with lower than normal interest rates, have not effectively dealt with the situation for the long term. In fact, I would be surprised if any economist, who is at the very least an observer of this crisis, would cant rip the public that government intervention is the measure that stops this recession.
With further respect to Keynesian spending, as a consequence, it, in effect, pulled private sector jobs into the government sector, with the government sector now being affected by budget cuts, which also signifies that if those government jobs were temporary- as in the case of the shovel ready projects- the private sector is back at square one and stuck with persons without the rigour of private sector competition, who would add dynamically less to the real economy.
A second issue is that sovereign bond yields affect public policy and economic policy making.
As government revenues decline, and if interest rates move lower, bond yields are adversely affected. For one, as the outlook for a country’s economic position worsens, governments find it harder to sell sovereign bonds at a higher rate. Secondly, as real “short term” interest rates move lower, in many instances, bond yields move higher as inflationary expectations are equated more so into financial risk matrices- which are also tied to the overall outlook of the economy.
Monetary policy is ever more important at times such as these. Interest rates have already been slashed, but this would be innefective if structural change and program design does not faccilitate the interest rate movements.
When the Central Bank is inactive with regard to market regulation, credit supervision and running the type of private sector related programs to assist banks with extending credit, while the economic landscape is still yet brown with deep-rooted buds are yet to take shape, using interest rates for private sector stimulation, is a zero option and an even more undesirable policy option to the extent it affects the bond market.
At the totally worse end, it is more damaging if monetary policy is not in sync with fiscal policy. It may lead to a loss to investors in the sovereign bond market as well as it may hurt Main Street in the short term if not negated by other economic policy measures.
From where I sit, it is a balancing act taking place in America and in Europe. They can afford to play the game with respect to large stimulus plans, budget cuts that affect economic recovery- while the smaller economies suffer as a result- and interest rate cuts- the latter probably causing what a liquidity trap.
Smaller countries are in a much different position and they need to monitor larger countries from a cautious perspective and continually seek to understand the causes of things.
Sunday, August 8, 2010
The troops are coming home!
Well, it seems as if the troops are coming home- well, most of them.
It was announced that the USA plans to drawn down troops in Iraq to 50 k by September 1st. Allot of families are glad to hear that.
Will this destabilise Iraq? Who knows? Reports from Iraq are mixed on the matter. Some want the USA to stay longer, others want them to get out- in both Iraq and American circles.
I think the worst of it is over. Saddam is gone. The real battle for terror and the middle east is in Afghanistan. While there are terrorist elements in Iraq, they have never taken hold as they have in the no-man's country as in Afghanistan.
President Obama's mission to end the engagement with Iraq is finally here.
It was announced that the USA plans to drawn down troops in Iraq to 50 k by September 1st. Allot of families are glad to hear that.
Will this destabilise Iraq? Who knows? Reports from Iraq are mixed on the matter. Some want the USA to stay longer, others want them to get out- in both Iraq and American circles.
I think the worst of it is over. Saddam is gone. The real battle for terror and the middle east is in Afghanistan. While there are terrorist elements in Iraq, they have never taken hold as they have in the no-man's country as in Afghanistan.
President Obama's mission to end the engagement with Iraq is finally here.
Friday, July 16, 2010
A plug for my blog on American-Xpress...
Dr. Jeff Cornwall, in his column space saw fit to plug my blog, as a way to give entrepreneurs who wish to go gloal, insight on the international economic trends.
9 Ways to Stay Worldly-Wise- American Express' "Open Forum".
"7. Track the trends. International economic trends can quickly turn a market opportunity into a financial disaster. If you’re engaging in business overseas, it’s important to keep a close eye on the world economy, from the budget deficit in Greece to the housing boom in China. The trends can change minute by minute, but you can stay current with blogs such as Mish’s Global Economic Trend Analysis, Global Economy Matters and Global View Today. "
I may not be everywhere, but I'm where the people who need to know serious and credible information, is.
9 Ways to Stay Worldly-Wise- American Express' "Open Forum".
"7. Track the trends. International economic trends can quickly turn a market opportunity into a financial disaster. If you’re engaging in business overseas, it’s important to keep a close eye on the world economy, from the budget deficit in Greece to the housing boom in China. The trends can change minute by minute, but you can stay current with blogs such as Mish’s Global Economic Trend Analysis, Global Economy Matters and Global View Today. "
I may not be everywhere, but I'm where the people who need to know serious and credible information, is.
Monday, July 12, 2010
The Chinese Connection!
There was a study tour coordinated and sponsored by The Chinese government, for Junior Caribbean Officials, during the date of May 17th and May 27th, 2010- the second of its kind for the region.
The trip was attended by delegations from the Free National Movement, the governing party of the Bahamas and the loyal opposition, Progressive Liberal Party, in addition to the Bajan delegation, from the opposition Barbados Labor Party.
I went as a member of the delegation from the Progressive Liberal Party. Having done some policy work for the party on economic, international affairs and trade matters in the past, as well as my background on such issues, I was a suitable candidate to attend the study tour in order to gather the information for the benefit of us all.
The trip was more than a fantastic experience. One in which I am very thankful to have spent time with such wonderful people from China and Barbados and my colleagues from the Bahamas and to have been asked to attend, overall.
We had some time for leisure, but it was strictly business for the most part. Even the tour to the cultural sites, had a very structured, business feel to it. And when I did have time for leisure, it was done in a way for us to see the Chinese culture first hand, rather than it being about fun and frolic.
“Party to Party Relationship Building”, pretty much sums the main theme for the gathering, and I commend the Chinese government for using this format for discussions, as I see it as helpful for all sides.
Foremost, this format is an attempt by the Chinese government to "stabilize" the environment for their investments and strengthen their diplomatic relationships in a very healthy and open manner, for the long term.
For an aspiring leader, diplomat or someone with a foreign affairs interest, the mode, style and presentation, as well as the setting of the discussion environment, could not have been any better.
In all, we visited three cities: Beijing, Wuhan and Xiamen. They were three very distinctively different cities and all with different flavor and styles.
Beijing is the administrative centre of China and very much a concrete jungle to a large extent. No special frills and no special distinction, other than it being very much about business and administration.
There were some signs of social life in Beijing, especially from the point of the mega market- The Silk Factory- to which one of our colleagues had turned us on to. Almost everyone in the market that had a space, or booth, spoke English. To my surprise, they also spoke several other languages- from Arabic to German.
The city of Wuhan, on the other hand, is in a state of physical development. You can see it as soon as you hit the airport. Large cranes, buildings being erected, lots of road work and large equipment everywhere. It wasn’t until after my trip, when I conducted background research, I found out that French investment in Wuhan for industrial and international business was so heavy. Apparently, over one third of all French investment in mainland China is invested in Wuhan- more than any other province or city, along with the other foreign direct investment China receives from Western companies and countries.
The last city, Xiamen, is a tropical delight and very much a tourist destination. It reminded me of South Beach Miami, Florida, in so many ways. It has more restaurants than Beijing and Wuhan, as well as the people are more trendy as well as the shops very westernized and upscale.
Xiamen is also a strategic port city, directly opposite the island of Taiwan. Hence, they do allot business with Taiwanese companies, and the relationship is very lucrative.
Through all of the sightseeing, we had to attend seminars about a number of issues- most of which is the Taiwan/Straights issue and how important Taiwan is for the Chinese people and government, especially to the city of Xiamen.
Thus far, the import volume in China from Taiwan is $30 billion (USD) and the export volume from China to Taiwan is $9 billion (USD).
Industries most involved in the cross straights relationship are: chemicals, hospital services, low to high technological devices, technological information services, software, the construction of physical facilities and other construction related equipment as well as the cultivation and exportation of fruits, with Xiamen playing a very strategic role in the overall economic success, as well as an important role in the cultural and political changes in mainland China as a result.
The top Chinese officials we had dinner and meetings with, were all concerned with how The Bahamas was handling this economic recession. They also shared with us what tools and strategies they had employed and planned to employ during this downturn. For example, they have initiated a 4 trillion (YUAN) stimulus plan that they have directed towards capital related projects, or "shovel ready projects", and services related upgrades.
A chief Chinese economist made mention that more inward investment is what Chinese economic regulators are looking for and increasing wages and domestic investment, is critical to sustainability.
We saw evidence of this with the Dong-Feng car company. They operate solely in China and have had increases in profit, over the last 4 years, of an average of 12% per year, even during this economic crisis.
I was especially curious about the system the Chinese have in place to ensure continuity in the local market for SME’s, considering that China is a Socialist country. I was made aware by the same economist that Chinese SME's face no such problems; because Chinese culture dictates shared responsibility with their business practices and that practice is culturally understood as standard practice. So, if one person falls within any given company, the social collective comes together to fill the void, rather than having companies shut down unnecessarily- so, in a sense, SME’s are on their own in terms of the state assistance, but a built in social/community system kicks in automatically and provides support.
My mind thinks on so many SME's in The Bahamas that fell due to the owner having passed on and not having a sound succession plan, or due to a failure in other cooperative measures, to keep business open. SME’s in The Bahamas and the region could learn well from what we learned about China and its growing SME sector.
So many other things we could have noted, but too little space in my column. If anything, I can safely say that I now have "people" in China.
The trip was attended by delegations from the Free National Movement, the governing party of the Bahamas and the loyal opposition, Progressive Liberal Party, in addition to the Bajan delegation, from the opposition Barbados Labor Party.
I went as a member of the delegation from the Progressive Liberal Party. Having done some policy work for the party on economic, international affairs and trade matters in the past, as well as my background on such issues, I was a suitable candidate to attend the study tour in order to gather the information for the benefit of us all.
The trip was more than a fantastic experience. One in which I am very thankful to have spent time with such wonderful people from China and Barbados and my colleagues from the Bahamas and to have been asked to attend, overall.
We had some time for leisure, but it was strictly business for the most part. Even the tour to the cultural sites, had a very structured, business feel to it. And when I did have time for leisure, it was done in a way for us to see the Chinese culture first hand, rather than it being about fun and frolic.
“Party to Party Relationship Building”, pretty much sums the main theme for the gathering, and I commend the Chinese government for using this format for discussions, as I see it as helpful for all sides.
Foremost, this format is an attempt by the Chinese government to "stabilize" the environment for their investments and strengthen their diplomatic relationships in a very healthy and open manner, for the long term.
For an aspiring leader, diplomat or someone with a foreign affairs interest, the mode, style and presentation, as well as the setting of the discussion environment, could not have been any better.
In all, we visited three cities: Beijing, Wuhan and Xiamen. They were three very distinctively different cities and all with different flavor and styles.
Beijing is the administrative centre of China and very much a concrete jungle to a large extent. No special frills and no special distinction, other than it being very much about business and administration.
There were some signs of social life in Beijing, especially from the point of the mega market- The Silk Factory- to which one of our colleagues had turned us on to. Almost everyone in the market that had a space, or booth, spoke English. To my surprise, they also spoke several other languages- from Arabic to German.
The city of Wuhan, on the other hand, is in a state of physical development. You can see it as soon as you hit the airport. Large cranes, buildings being erected, lots of road work and large equipment everywhere. It wasn’t until after my trip, when I conducted background research, I found out that French investment in Wuhan for industrial and international business was so heavy. Apparently, over one third of all French investment in mainland China is invested in Wuhan- more than any other province or city, along with the other foreign direct investment China receives from Western companies and countries.
The last city, Xiamen, is a tropical delight and very much a tourist destination. It reminded me of South Beach Miami, Florida, in so many ways. It has more restaurants than Beijing and Wuhan, as well as the people are more trendy as well as the shops very westernized and upscale.
Xiamen is also a strategic port city, directly opposite the island of Taiwan. Hence, they do allot business with Taiwanese companies, and the relationship is very lucrative.
Through all of the sightseeing, we had to attend seminars about a number of issues- most of which is the Taiwan/Straights issue and how important Taiwan is for the Chinese people and government, especially to the city of Xiamen.
Thus far, the import volume in China from Taiwan is $30 billion (USD) and the export volume from China to Taiwan is $9 billion (USD).
Industries most involved in the cross straights relationship are: chemicals, hospital services, low to high technological devices, technological information services, software, the construction of physical facilities and other construction related equipment as well as the cultivation and exportation of fruits, with Xiamen playing a very strategic role in the overall economic success, as well as an important role in the cultural and political changes in mainland China as a result.
The top Chinese officials we had dinner and meetings with, were all concerned with how The Bahamas was handling this economic recession. They also shared with us what tools and strategies they had employed and planned to employ during this downturn. For example, they have initiated a 4 trillion (YUAN) stimulus plan that they have directed towards capital related projects, or "shovel ready projects", and services related upgrades.
A chief Chinese economist made mention that more inward investment is what Chinese economic regulators are looking for and increasing wages and domestic investment, is critical to sustainability.
We saw evidence of this with the Dong-Feng car company. They operate solely in China and have had increases in profit, over the last 4 years, of an average of 12% per year, even during this economic crisis.
I was especially curious about the system the Chinese have in place to ensure continuity in the local market for SME’s, considering that China is a Socialist country. I was made aware by the same economist that Chinese SME's face no such problems; because Chinese culture dictates shared responsibility with their business practices and that practice is culturally understood as standard practice. So, if one person falls within any given company, the social collective comes together to fill the void, rather than having companies shut down unnecessarily- so, in a sense, SME’s are on their own in terms of the state assistance, but a built in social/community system kicks in automatically and provides support.
My mind thinks on so many SME's in The Bahamas that fell due to the owner having passed on and not having a sound succession plan, or due to a failure in other cooperative measures, to keep business open. SME’s in The Bahamas and the region could learn well from what we learned about China and its growing SME sector.
So many other things we could have noted, but too little space in my column. If anything, I can safely say that I now have "people" in China.
Saturday, July 3, 2010
Nice article on Financial Reform....
The Economist.
Sets out some key areas on reform. Not too analytical, but it sums up what reforms are already in the pipeline for the USA. The key of it all is the reform on derivatives- no more back room dealing, but now derivatives will be traded on the open market.
Sounds good. It will force firms to trade deviates and derivative packages they know, and now because also it will be attached to their overall firm's performance.
The other key things are mostly administrative- new general council to oversee things (big government) and special powers through the FED to use tax payers money to save failing banks and stop them from spreading their problems through the system.
The last is mostly cosmetic, as it only will serve as a warning shot in the early stages to other firms who may look like a firm in distress, so they can get out of the activity they are engaged. Will not stop a panic from starting, but it will stop a panic from being so severe over a long period of time.
Sets out some key areas on reform. Not too analytical, but it sums up what reforms are already in the pipeline for the USA. The key of it all is the reform on derivatives- no more back room dealing, but now derivatives will be traded on the open market.
Sounds good. It will force firms to trade deviates and derivative packages they know, and now because also it will be attached to their overall firm's performance.
The other key things are mostly administrative- new general council to oversee things (big government) and special powers through the FED to use tax payers money to save failing banks and stop them from spreading their problems through the system.
The last is mostly cosmetic, as it only will serve as a warning shot in the early stages to other firms who may look like a firm in distress, so they can get out of the activity they are engaged. Will not stop a panic from starting, but it will stop a panic from being so severe over a long period of time.
Monday, June 21, 2010
Not been here in a while...
Again. Been off. No real reason why...I guess I have "blog fatigue"...but, I'm still here.
I promised to chat about my China trip, aye? Well, China was excellent. Went to three cities- Beijing, Wuhan and Xiamen.
Was surprised that Xiamen was more like South Beach Miami, Fla. Very much a tropical place and tourist destination. Very trendy...lot's of bars and such. It is also a port city.
Beijing is stricly business. No frills and no fuzzy stuff. Straight up concrete for the most part. Yes, it has some sites to see- Tiananmen Square and Chairman Mao's body, etc...but, nothing really to report.
Wuhan is more like a rural linked city. Right in Central China. Went to a few housing bloc's and some agricultural farms...it was "ok".
All in all, a fantastic trip.
I promised to chat about my China trip, aye? Well, China was excellent. Went to three cities- Beijing, Wuhan and Xiamen.
Was surprised that Xiamen was more like South Beach Miami, Fla. Very much a tropical place and tourist destination. Very trendy...lot's of bars and such. It is also a port city.
Beijing is stricly business. No frills and no fuzzy stuff. Straight up concrete for the most part. Yes, it has some sites to see- Tiananmen Square and Chairman Mao's body, etc...but, nothing really to report.
Wuhan is more like a rural linked city. Right in Central China. Went to a few housing bloc's and some agricultural farms...it was "ok".
All in all, a fantastic trip.
Monday, June 7, 2010
How the world turns...
Dang. The oil spill in The Gulf of Mexico is more serious than I thought. Apparently, British Petroleum, BP, does not have the technology to fix the oil leak from it's pipeline.
How could that be? You mean to tell me, you have the technology to drill baby drill, but not the technology to stop the leak? Totally unacceptable.
What is even more ironic, is the issue that BP is supposedly one of the more "eco-friendly" oil companies and it prides itself on its performance as it relates to changing its production model to one of a more new energy model. I guess this is all out of the window.
In the meantime, BP is being hit in the stock market as stocks plunged more than 45 percent.
Tony Hayward, BP's CEO, has been wavering in the media as he is, apparently, caught out in mis-statement after mis-statement.
It is not good for BP. As for The Bahamas, we are preparing for the worst. We have already reached out to officials from BP and the U.S. government as it relates to disaster management of the oil spill- BP has committed to pick up the tab of the clean up and the U.S. government will offer assistance as necessary.
Apparently, the oil spill, once it gets into the Gulf "slip-stream", can reach The Northern border of The Bahamas within another 30 days or so. Floridians are already bracing for the worse and persons in Louisiana and Alabama, are already seeing oil clumps washing up on shore.
Additionally, the marsh lands in The Gulf off of the Coast of L.A. and Ala., are already taking the toll as animals and wildlife are being found oil slathered and the marsh lands are drenched in crude oil.
Without a doubt it is a national disaster and an international incident.
Through all of this the fishermen in The Gulf Coast have been more than hit hard. They have not been able to earn a livelihood as a result of the disaster as fishing spots are now disaster areas. In addition, shipping lanes are being affected as ships going through the Gulf, are having to 1. take extra precautions to avoid the deepest part of the slick, as well as 2. having to clean off their tankers and ships, after every trip as a result of the heavy crude that is sticking to them.
I pray for the best, but the disaster shocked everyone and no one expected it to last this long. To me, this should have been resolved in a matter of days- the capping of the oil pipe-line, that is. Instead, BP showed a nasty side of business practice by showing that drilling, was more important than disaster management and safety.
Help and hope for the coast!
How could that be? You mean to tell me, you have the technology to drill baby drill, but not the technology to stop the leak? Totally unacceptable.
What is even more ironic, is the issue that BP is supposedly one of the more "eco-friendly" oil companies and it prides itself on its performance as it relates to changing its production model to one of a more new energy model. I guess this is all out of the window.
In the meantime, BP is being hit in the stock market as stocks plunged more than 45 percent.
Tony Hayward, BP's CEO, has been wavering in the media as he is, apparently, caught out in mis-statement after mis-statement.
It is not good for BP. As for The Bahamas, we are preparing for the worst. We have already reached out to officials from BP and the U.S. government as it relates to disaster management of the oil spill- BP has committed to pick up the tab of the clean up and the U.S. government will offer assistance as necessary.
Apparently, the oil spill, once it gets into the Gulf "slip-stream", can reach The Northern border of The Bahamas within another 30 days or so. Floridians are already bracing for the worse and persons in Louisiana and Alabama, are already seeing oil clumps washing up on shore.
Additionally, the marsh lands in The Gulf off of the Coast of L.A. and Ala., are already taking the toll as animals and wildlife are being found oil slathered and the marsh lands are drenched in crude oil.
Without a doubt it is a national disaster and an international incident.
Through all of this the fishermen in The Gulf Coast have been more than hit hard. They have not been able to earn a livelihood as a result of the disaster as fishing spots are now disaster areas. In addition, shipping lanes are being affected as ships going through the Gulf, are having to 1. take extra precautions to avoid the deepest part of the slick, as well as 2. having to clean off their tankers and ships, after every trip as a result of the heavy crude that is sticking to them.
I pray for the best, but the disaster shocked everyone and no one expected it to last this long. To me, this should have been resolved in a matter of days- the capping of the oil pipe-line, that is. Instead, BP showed a nasty side of business practice by showing that drilling, was more important than disaster management and safety.
Help and hope for the coast!
Subscribe to:
Posts (Atom)
