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Dmitri Tkachenko

Loonie rises as greenback slips back - The Globe and Mail - 0 views

www.theglobeandmail.com/...article2038052

Canadian currency Home buyers Income and spending

shared by Dmitri Tkachenko on 30 May 11 - No Cached
  • Dmitri Tkachenko on 30 May 11
     
    "The Canadian dollar gained 0.14 of a cent to $1.0232 (U.S.).The Canadian currency has drifted lower for the past four weeks, partly on signs of further weakness in the U.S. economy. Data from the U.S. Commerce Department, released Thursday, showed that the economy grew at a tepid annual rate of 1.8 per cent in the first quarter, lower than many economists expected. Higher prices for gasoline and weak consumer spending have held back the economy. The Labour Department also said more people applied for unemployment benefits last week. On Friday, the Commerce Department said that both personal income and spending rose 0.4 per cent in April, in line with what economists expected. But the rise in spending was the smallest in three months. Another report showed that the number of people who signed contracts to buy homes in April plunged 26.5 per cent from a year earlier."
dani tav

Op-Ed: Canada's deflating economy - 1 views

www.digitaljournal.com/...307371

Government attempts to Bail out Canada Debt Large Defecit

shared by dani tav on 01 Jun 11 - No Cached
  • The reason for the minimal GDP growth that we had was government spending increased over this period and government debt increased by about $139 billion.
  • Government Debt
  • The government is in a dilemma now. Despite the rosy forecasts they like to create showing how well our economy is doing there are reasons for major concerns.
  • ...4 more annotations...
  • Government spending cannot continue to increase especially when it is financed by debt. The recession was started by economies overloaded with debt. Rather than deal with the imbalances government decided to increase spending "grow the economy" and create more debt. Now we are in a predicament that there are no tools left for governments to throw at the economic problems.
  • Canada's net debt had grown to $582 billion, up from $516 billion two years earlier.
  • The government's attempt to continue economic growth by borrowing has failed. Canada's economy is going nowhere and we are farther behind because of government debt. The future does not look much better for Canada's economy.
  • government borrowing huge amounts of money to bolster the economy
Dmitri Tkachenko

As Canadians get older, economy gets weaker - The Globe and Mail - 0 views

www.theglobeandmail.com/...article2039511

Aging Unemployment Slowing economy

shared by Dmitri Tkachenko on 30 May 11 - No Cached
  • Dmitri Tkachenko on 30 May 11
     
    "Statistics Canada projection shows a sharp decrease that will continue for at least the next 20 years. Employment growth since 1976 has averaged 1.6 per cent a year, while the population grew at a rate of 1.1 per cent. That extra half a percentage point added roughly 0.3-0.4 percentage points to the average growth rate of real per capita income above what it would have been otherwise. Not only is this source of growth about to disappear, demographic aging is going to start being a negative contributor to economic growth: fewer workers mean less output. One of the first places we'll see the effects of population aging is its effect on the government budget balance. Higher output per worker would help compensate for a reduction in the number of workers, so productivity will become an increasingly important policy priority. But in the short and medium term, there is no quick fix. "
Steven Iarusci

Report cautions that over-indebted consumers can't drive economy - 0 views

www.vancouversun.com/...story.html

economy consumer debt growth

shared by Steven Iarusci on 02 Jun 11 - No Cached
  • a rate hike may come in the fall
    • Steven Iarusci
      Steven Iarusci on 02 Jun 11
       
      Interest rates
  • the main message is that consumers cannot be the main engines of economic growth over the next couple of years,” the authors conclude. “Instead, the economy will have to rely on other sources of growth, such as exports and business investment.”
  • Canadians have “eased off the debt-accumulation throttle,”
  • ...8 more annotations...
  • still net borrowers, meaning they borrow more than they save
  • consumer spending will not be the engine of economic growth in the coming quarters and the inevitable future rebalancing of monetary policy will be a shock to many households
  • some of the drop in household indebtedness is explained by strong income gains, not by debt repayment per se
  • sustainable personal growth is likely in a range of 4.0-4.5 per cent. Credit continues to grow at a pace that is two percentage points above that
  • the level of Canadian household debt — which in December officially surpassed those of our neighbours to the south — is unsustainable
  • total consumer debt load is reported to be about $1.5 trillion
  • Data released late last year suggested Canadians owed on average $112,000 — a figure that includes all kinds of debt, including mortgages — and a debt-to-income ratio of 150 per cent means they were spending $1,500 for every $1,000 in take-home pay
  • Factors that will moderate credit growth over the short term include spending fatigue, a soft landing in the housing market, stricter mortgage rules and Canadians preparing for the higher interest rates that are sure to come as the economy recovers.
Steven Iarusci

Consumer fatigue an ominous sign for economy - The Globe and Mail - 1 views

www.theglobeandmail.com/...article2039584

debt consumer ratio economy slow

shared by Steven Iarusci on 02 Jun 11 - No Cached
  • Consumers typically account for 60 per cent of the country’s gross domestic product, and rising living costs along with elevated debt levels suggest they won’t be much help this year
  • Gross domestic product expanded at an annualized 3.9 per cent in the first quarter, the fastest pace in a year, led by business investment and manufacturing, Statistics Canada said
  • that pace will be cut by almost half in the second quarter, while Finance Minister Jim Flaherty told reporters Monday he’s anticipating “more modest” growth in the rest of the year
  • ...7 more annotations...
  • In the near term, households are under pressure as rising food and energy costs cut into their budgets
  • “I will never, never do that again. I want to have the money up front before I buy something, because I don’t want to get into that trouble again,” said Ms. Thornton
  • In the longer term, high debt levels could restrain spending for years
  • Kim Thornton, for example, is one fatigued consumer. The mother of four says her family ran up about $50,000 in debt in prior years on credit card spending
  • the household debt service ratio – debt payments to disposable income – jumped to a three-year high of 7.8 per cent from 7.2 per cent
  • Canadians are getting the message about whittling down debt, and that is translating into fewer purchases of discretionary goods
  • reduced hours and leaner wages – a legacy from the recession – mean many families have less money with which to service their debt, he added
Noah Schafer

Battle to slay the budget deficit continues to stall - The Globe and Mail - 0 views

www.theglobeandmail.com/...article2040896

debt Canada deficit lower economy

shared by Noah Schafer on 05 Jun 11 - No Cached
  • The Department of Finance estimates that the budget balance for the fiscal year 2010-11 will come in below what had been forecasted, and well below the deficit of 2009-10.
  • he Department of Finance estimates that the budget balance for the fiscal year 2010-11 will come in below what had been forecasted, and well below the deficit of 2009-10. It was expected and hoped that the budget balance would improve as the econom
  • The deficit has been stalled in the $35-billion a year range for the past 8-10 months.
  • ...3 more annotations...
  • The steep decline in the 12-month moving sum that was produced by the recession finally turned around in early 2010, but the rebound lasted only a few months.
  • The graph also makes it clear that the trend to deficit began in early 2008, several months before the recession began.
  • The federal government’s decision to cut the GST would have produced a deficit even if the economy had remained stable.
ngodup yaklha

http://www.theglobeandmail.com/report-on-business/economy/eu-grapples-with-greek-crisis... - 0 views

www.theglobeandmail.com/...article1463543

Deregulation

shared by ngodup yaklha on 05 Jun 11 - No Cached
  • ngodup yaklha on 05 Jun 11
     
    The second was failure to deal with its huge structural costs, the result of excessive government hiring and lack of deregulation. Stefanos Manos, the retired politician who was minister of economy and finance in the early 1990s, launched Greece's deregulation and privatization process. Before he lost his job in 1993, the telecom industry deregulation was well under way and public-private partnerships were put in place. Later, banking was deregulated to some degree. But then the political will to keep going evaporated and the deregulation process pretty much stopped. By last year, Greece's debt as a percentage of GDP was about 112 per cent, more than double that of Spain (another ailing euro zone country) while its budget deficit reached 12.7 per cent of GDP, the EU's highest. The spectre of Greece going bust sent Greek bond yields soaring last week, sending the euro in the opposite direction.
Alexei Goudzenko

China, not U.S., key to global oil demand - The Globe and Mail - 0 views

www.theglobeandmail.com/...article2041157

china oil

shared by Alexei Goudzenko on 04 Jun 11 - No Cached
  • But as the U.S. continues to pare back its oil consumption, other economies will seek a bigger share of the pie from a near static world oil supply. With power shortages spreading in China and Japan, as well as India and Pakistan, demand for diesel fuel is soaring in power-starved Asia.
  • With little, if any usable excess capacity in OPEC, world crude demand is already on the verge of outpacing world supply. In the resulting zero sum world, conflicting trends in oil consumption between the world’s two largest oil consumers, the U.S. and China, will not be the exception but the norm.
  • If the Chinese economy is going to continue to increase its oil consumption by 10 per cent a year, another economy will have to cut back its oil consumption by a comparable amount to make room for the increase in Chinese demand. More and more, that place looks like America.
Kevin Yeo

Can Made in USA survive in a global economy? Should it? - USATODAY.com - 1 views

www.usatoday.com/...-29-cnbc-made-in-america_n.htm

Outsourcing Global Economy

shared by Kevin Yeo on 03 Jun 11 - No Cached
  • Perry also said that, at $2.155 trillion, total U.S. manufacturing output is 45% higher than China's. Despite the increase in output, however, the number of jobs in the U.S. manufacturing sector is down more than 7 million since the late 1970s.
  • But when asked if large corporations have a responsibility during these tough economic times to buy American to create more American jobs, his answer was clear: No.
  • Some have argued the "Made in USA" label is too exclusive and can actually hurt the economy by discouraging consumers from buying goods that are not completely made within US borders, but which benefit the country by creating jobs or promoting innovation.
Kevin Yeo

U.S. will be Canada's top export market in 2040 - The Globe and Mail - 0 views

www.theglobeandmail.com/...article2044537

Canada US trade future

shared by Kevin Yeo on 03 Jun 11 - No Cached
  • Canada has spent years -- and a considerable amount of money -- trying to convince exporters to look beyond the mighty U.S. market and seek customers in fast-growing emerging economies, such as China, India and Brazil.
  • And to some extent, it’s worked. The United States accounted for 75 per cent of total exports last year, down from 85 per cent in the mid-1990s.
  • But a new forecast of long-term export trends by the Department of Foreign Affairs and International Trade suggests the United States will still be our dominant merchandise export destination in 2040, grabbing virtually an identical share as today, at 75.5 per cent.
Chris Li

U.S. will be Canada's top export market in 2040 - The Globe and Mail - 1 views

www.theglobeandmail.com/...article2044537

Trade USA Canada Export

shared by Chris Li on 03 Jun 11 - No Cached
  • ed. The United States accounted for 75 per cent of total exports last year, down from 85
  • The United States accounted for 75 per cent of total exports last year, down from 85 per cent in the mid-1990s.
  • United States will still be our dominant merchandise export destination in 2040
  • ...2 more annotations...
  • “Despite the rapid growth in emerging economies, the United States remains a large and wealthy market that is right next door to Canada, whereas emerging markets are a significant distance away,”
  • the U.S. is also Canada’s leading source of foreign direct investment, or FDI. In 2010, the stock of U.S. investment here was $306-billion.
Carolyne Wang

How paying people's way out of poverty can help us all - The Globe and Mail - 0 views

www.theglobeandmail.com/...singlepage

Income Inequality Tax Cuts Homelessness Set Annual Income Unemployment

shared by Carolyne Wang on 02 Jun 11 - No Cached
  • there’s an increasing awareness, among even the country’s most wealthy, that poverty reaches beyond the tables of the hungry and digs into their own pocketbooks
  • When people are poor, out of work or homeless, it hurts the bottom line of all Canadians. And as the country struggles to maintain a shaky recovery amid growing global economic uncertainty, that’s not a hit they can afford to take.
  • If Ottawa and the provinces fail to make this a priority, Tory Senator Hugh Segal predicts, “over time, we will begin to run out of the money that we need to deal with the demographic bulge because it will be consumed in the health care requirements of the poor, which will increase. It will be consumed in the costs of the illiteracy and unemployment which relate to poverty. ... And it'll be unsustainable.”
  • ...22 more annotations...
  • It’s already on the radar of some provinces: One of Christy Clark’s first actions as B.C. Premier was to raise the province’s minimum wage for the first time in a decade and offer a tax cut for low-income families. Ontario has launched a sweeping review of social assistance programs that Community and Social Services Minister Madeleine Meilleur has admitted are failing the province’s neediest.
  • Despite Canada’s reputation for a strong social safety net, the country is becoming economically polarized. And the decades-old dominant economic dogma that growing wealth among society’s highest earners would trickle down to those less fortunate is being challenged by an alternative approach: Eliminate crushing poverty among the lowest earners, and wealth will trickle up.
  • The ranks of the working poor have swelled as minimum wages fail to keep pace with rising costs and social assistance levels drop.
  • The recession widened the chasm, and a subsequent recovery hasn’t closed it.
  • On paper, almost as many jobs have been added as were lost during the financial crisis. But they offer fewer hours and less pay – and some of the hardest-hit sectors aren’t coming back.
  • Food bank use hit a record high in 2010. Tellingly, more of the people using those food banks have jobs – they just don’t make enough to pay the bills or feed their families.
  • As the incomes of the country’s top earners have risen, the incomes of Canada’s lower- and middle-income earners have stagnated.
  • Tony Masciotra is diversifying himself. The Argentine-Canadian father of two went back to school immediately after being laid off from his tool and die job at Ford Motor Co. in Windsor three years ago.
  • “I have records of over 100 jobs I have applied for,” he said. “I have looked really hard. ... But I haven’t been able to get a job yet.
  • Mr. Masciotra is part of a growing group of skilled labourers on the brink. The métiers in which they’ve worked for years are no longer economically viable: Many well-paying blue-collar jobs are being replaced by minimum-wage, service-sector ones. And that’s causing significant shifts on both sides of the border, notes MIT economist David Autor.
  • It gets more complicated, and more economically detrimental, if the people who’ve lost jobs aren’t the ones being hired to new ones.
  • They enter what Robin Somerville of the Centre for Spatial Economics calls “structural unemployment.” And if they leave the workforce entirely, they fall off the radar of unemployment stats: The numbers look better precisely because they’re worse.
  • The drop is even more significant because more Canadians are putting off retirement. That should mean more people in the workforce. But it doesn’t: So many younger workers are dropping out entirely that they outweigh the older ones sticking around longer.
  • “If you’re losing opportunities in some areas, and you’re not replacing them with opportunities of equal or greater value, then the overall level of income in the economy is reduced. And the ability of people to go out and buy goods and services is reduced.”
  • Homelessness costs taxpayers money – in both foregone wealth and social service spending.
  • Some see a solution in a 40-year-old experiment: In the 1970s, Manitoba wanted to see what would happen if it guaranteed poor people in a few communities a set annual income.
  • The philosophy behind this is simple: People are more likely to stay in school, out of emergency rooms and out of jail; they contribute to the economy through their purchases; they’re more likely to move eventually above the poverty line and pay taxes.
  • The irony is that Canada already scores high compared to other OECD countries when it comes to helping the elderly. Where it falls short is where it matters: The working-age poor – the ones who should be contributing to the economy.
  • $134,000 Estimated amount for emergency shelter, emergency hospital care, law enforcement and other social services for one homeless person in Calgary, for one year
  • $34,000 Estimated cost to proide supportive housing for one person in Calgary, for one year
  • $12,555 Average cost of hospital stay for non-homeless patient at St. Michael's Hospital in Toronto
  • $15,114 Average cost of hospital stay for homeless patient at St. Michael's Hospital in Toronto
Mike Seo

Canada exporters face headwinds, new minister says | Reuters - 1 views

www.reuters.com/...my-trade-idUSN0225115820110602

Trade Export

shared by Mike Seo on 03 Jun 11 - No Cached
  • the strong currency and growing competition from emerging economies could stall the country's export growth.
  • Canada's trade-reliant economy has fully recovered from the recession but growth has been restrained by the exchange rate with the U.S. dollar, which erodes exporter competitiveness.
  • The central bank chief and finance minister have been hounding businesses to find ways to compete with the new normal of a currency on par with the U.S. dollar. These include investing in new technologies and taking other steps to outperform global competitors.
  • ...1 more annotation...
  • Perrin Beatty, chief executive of the Canadian Chamber of Commerce and a former Conservative cabinet minister, warned Canada's dismal productivity rate, which he said is about 25 percent below that of the United States, was the biggest problem facing exporters.
Kiruban Mahadeva

Canada 2011 Budget: Flaherty Budget Speech (Text) - Bloomberg - 1 views

www.bloomberg.com/...herty-budget-speech-text-.html

Government Spending Taxes Debt

shared by Kiruban Mahadeva on 03 Jun 11 - No Cached
  • The global economy is still fragile. The U.S. and our other trading partners are facing challenges. Compared to other countries, Canada's economy is performing very well-but our continued recovery is by no means assured. Many threats remain.
  • Securing our recovery from the global recession The Next Phase of Canada's Economic Action Plan is critically important
  • Now is not the time for instability. It would make it harder for Canadian businesses to plan and to expand. It would drive investment away to other countries. It would jeopardize the gains we have made.
  • ...18 more annotations...
  • We will keep taxes low. We will undertake additional targeted investments to support jobs and growth
  • massive tax increases
  • We will not give in to Opposition demands to impose
  • This reckless policy would lead to continuing deficits and higher taxes on all Canadians. It would stall our recovery, kill hundreds of thousands of jobs and set families back.
  • Sustained growth comes from the private sector. We will help businesses to create jobs. We will not raise taxes on growth.
  • Since July 2009, the Canadian economy has created more than 480,000 new jobs-more than were lost during the recession
  • we remain concerned about the number of Canadians looking for work
  • We need to keep protecting and creating jobs now
  • Keeping taxes low A key part of that foundation is low taxes.
  • Our government has delivered tax relief for all Canadians
  • Our tax cuts are also helping employers to invest, grow and create jobs.
  • Our commitment to low taxes is supported by a strong consensus: that protecting Canada's tax advantage is key to securing our recovery.
  • Canadian industries Even so, in the current global economic climate, many businesses remain hesitant to invest and to hire.
  • Our government will take further action to encourage them to expand and create jobs.
  • The Hiring Credit for Small Business will provide a one-year EI break for some 525,000 Canadian small businesses
  • Expanding international trade Beyond this, we will promote new export opportunities for all Canadian businesses
  • We need to keep expanding our access to foreign markets, to create new jobs here at home.
  • We will provide greater financial security for Canadians, and practical help to make ends meet.
Steven Iarusci

Canadians load up on mortgages, cut card debt - 0 views

www.montrealgazette.com/...story.html

credit card debt mortgage rates bubble housing

shared by Steven Iarusci on 02 Jun 11 - No Cached
  • The bank set aside $145million in provisions for credit losses, down $104-million as more customers repaid their loans.
    • Steven Iarusci
      Steven Iarusci on 02 Jun 11
       
      BMO is the bank in question.
  • consumer credit-card balances are declining as bank customers start to heed warnings about taking on too much debt
  • On the residential mortgage side, Mr. Downe said he expects to see growth start to "soften" in the coming months
  • ...8 more annotations...
  • record household debt levels have left this country vulnerable to economic shocks
  • the Canadian banks will report a slight increase in profit for the quarter as they contend with the impact of declining consumer borrowing, moderating capital markets activity and other headwinds.
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  • With domestic household debt levels hovering close to where they were in the United States prior to the financial crisis, many observers are warning that Canadians need to start paying down debt if the economy is remain on level footing
  • anadian consumers continue to pile on mortgage debt despite repeated warnings that they need to crank back on borrowing if this country is to avoid a painful real estate correction
  • Canadian consumers continue to pile on mortgage debt despite repeated warnings that they need to crank back on borrowing if this country is to avoid a painful real estate correction
  • growth in the overall home loan market "is continuing to be more robust,"
  • Canada's fourth-largest lender on Wednesday kicked off second-quarter bank earnings season with a 7.5% increase in profit on the back of lower provisions for bad loans
naheekim

Housing prices to drop 25%, forecaster predicts - thestar.com - 2 views

www.thestar.com/...to-drop-25-over-next-few-years

Housing Prices Recession

shared by naheekim on 28 May 11 - No Cached
  • House prices in Canada will fall over the next several years by as much as 25 per cent, creating a massive impact on the economy and possibly pushing the country into recession, says a forecast
  • predicting house prices will fall by a cumulative 25 per cent over the next several years
  •  Madani says the effects on consumer spending and housing investment could be significant and perhaps strong enough to “push the economy into another recession
  • ...7 more annotations...
  • “If house prices are to fall, there needs to be a mechanism — an excess of supply relative to demand,”
  • Last year, the Canadian Real Estate Association modified its forecasts at least four times. After initially predicting housing prices would increase in 2011, it now says prices will fall by 1.3 per cent — far below the eye-catching 25 per cent forecast by Capital Economics.
  • Financial agencies such as the Canadian Mortgage Housing Corporation, which provides mortgage loan insurance, could also be exposed to significant losses
  • The Capital Economics forecast is not the first to predict a bubble in the Canadian market. Gluskin Sheff & Associates chief economist David Rosenberg has also predicted a 25 per cent drop in Canadian housing prices, as has The Economist magazine.
  • As in the U.S., financial innovation and very low interest rates have allowed Canadian consumers to take on more debt, and house prices are high relative to income
  • However, consumers have remained complacent because low rates are keeping mortgage payments low.
  • The historical home price-to-income ratio is 3.5, but now it's hovering around the 5.5 mark, meaning average house prices are more than five times the income of workers
  • naheekim on 28 May 11
     
    The economists and forcasters are predicting that housing prices will decrease over the next several years by 25%.
Heshani Makalande

Canadians to get rate hike reprieve - Moneyville.ca - 0 views

www.moneyville.ca/...ians-to-get-rate-hike-reprieve

Mortgages

shared by Heshani Makalande on 28 May 11 - No Cached
  • The Bank of Canada is widely expected to leave its key benchmark interest rate unchanged next Tuesday — and may even sit on the sidelines until September, economists say
  • Even if the central bank leaves its overnight rate unchanged at 1 per cent next week, it’s likely to again warn consumers that the clock is ticking: interest rates will be going up; it’s just a matter of when.
  • “One per cent is not normal. Everybody realizes that. Rates will go up,”
  • ...7 more annotations...
  • Late last year, and even at the beginning of 2011, economists were certain that the Bank of Canada would start increasing its overnight rate this spring. That was pushed to the summer amid continuing worries about the health of the U.S. economy.
  • Now more economists are expecting that the central bank will take a pass at its July policy meeting as well, and begin raising rates in the fall.
  • The central bank is nervously contemplating the continuing European debt restructuring, attempts by China to tame inflation, the impact that will have on commodity prices, and the still-fragile recovery in the U.S.
  • In particular, the U.S. may be susceptible to supply chain disruptions as a result of the earthquake and tsunami in Japan, and the resulting nuclear disaster
  • “The second quarter didn’t start well and the earthquake will weigh on the rest of the quarter. For now Q2 is not looking that great, and when the U.S. doesn’t do well, it affects Canada as well,” Rangasamy said.
  • In Canada, the economy is still expected to expand by a healthy 3.2 per cent in 2011 and 3.1 per cent in 2012, according to the Royal Bank of Canada. Inflation also remains tame, thanks in part to a buoyant loonie.
  • The central bank has been anxious to raise interest rates in order to keep a lid on household debt, which has reached record levels in Canada.
alex yesikov

Governments Are The Primary Creators Of Systemic Risk - Charles Kadlec - Community of L... - 2 views

blogs.forbes.com/...mary-creators-of-systemic-risk

Greece Systemic Risk Blog Resession Euro

shared by alex yesikov on 30 May 11 - No Cached
  • The greatest lesson of the still young 21st century is proving to be that governments are the primary source of systemic risk to the economy, our standard of living, and our liberty.
  • The latest case in point is the European government debt crisis, with Greece once again running out of money and threatening to trigger yet another financial crisis.  The government’s debt now totals more than 150% of its GDP, and continues to grow.  Last year’s bailout by other European governments was supposed to give it the time needed to reduce its budget deficits so that next year Greece could roll over its maturing debts, as well as finance additional deficits at interest rates under 6%. However, the government’s austerity plan of tax increases and budget cuts has not reduced current or projected government deficits because the economy in 2010 contracted by 4.5% and the unemployment rate jumped to 15%.
  • Normally, this would be a matter between a debtor and its creditors. However, European Central Bank (ECB) Executive Board Member Juergen Stark warns that the effects of restructuring “could overshadow the effects of the Lehman bankruptcy,” which is associated with the beginning of the 2008 financial crisis.
  • ...3 more annotations...
  • In the case of Greece, government actions and regulations also lie at the heart of what threatens to be a European financial crisis.
  • This risk is amplified by special rules created by politicians that encourage banks to lend freely to governments.
  • Here’s how it works. Governments require banks to hold capital against the loans that they make, anticipating that in the normal course of business, some of the loans will not be repaid.  The riskier the loan, the more capital that needs to be held in reserve. However, under international rules negotiated by government representatives through the Bank for International Settlements (BIS), government loans fit into a special category that has a 0% risk requirement.  That means European banks do not have to hold any reserves against loans they make to European governments.  That’s right, politicians implicitly promised banks that governments would never default.  And, given the opportunity to make “risk free” loans that require no capital commitment, bankers purchased mountains of government debt.
ngodup yaklha

http://www.theglobeandmail.com/report-on-business/greece-prepares-for-asset-fire-sale/a... - 0 views

www.theglobeandmail.com/...page2

Greece-Deregulation

shared by ngodup yaklha on 04 Jun 11 - No Cached
  • ngodup yaklha on 04 Jun 11
     
    Greece's first privatization effort was launched in the early 1990s under Stefanos Manos, who was minister of economy and finance at the time. Before he lost his job in 1993, the telecom industry deregulation was well under way and public-private partnerships were put in place. Later, banking was deregulated to some degree. But then the political will to keep going evaporated and the deregulation and privatization processes pretty much stopped. Mr. Mitsopoulos says the biggest potential obstacle to the success of the privatization program is a dragged-out process. Fast sales would do two things, he said. It would collect a lot of money quickly, which could be used to pay down debt, and it would deliver the message that Greece is finally serious about making its economy competitive. "All these state investments are burdens on the government," he said. "Privatizations will deliver productivity gains and they can be transformed into tax-paying entities." Privatizations are expected to pick up pace across the EU, as countries with budgets deficits above the 3-per-cent EU limit look for quick debt fixes in the absence of strong GDP growth. The Loterias privatization in Spain is expected to raise about €10-billion, valuing the company at as much as €25-billion, making it the second-largest gaming company in the world, behind casino manager Las Vegas Sands.
Alejandro Enamorado

William Watson - Economic news flash: Inequality is complex | FP Comment | Financial Post - 0 views

opinion.financialpost.com/...ws-flash-inequality-is-complex

income inequality complex

shared by Alejandro Enamorado on 04 Jun 11 - No Cached
  • Almost everywhere there was growth at the bottom. But incomes at the top grew more quickly than incomes at the bottom. In effect, the rich were pulling away.
  • People who can handle the new technology on which most production is based are increasingly in demand and in many cases such brain (as opposed to brawn) workers are already well paid, so paying them even more only widens the income gap.
  • Across the OECD, the number of households with only one head has risen from 15% to 20% of the total. In calculating households’ real income, the statisticians try to factor in the economies of scale families enjoy. (Kids are cheaper by the dozen, yes, but also by twos and threes.) If more families are smaller and therefore not enjoying such economies of scale, more are going to be poorer.
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  • “assortative mating” also seems to blame. More than in the past, the same kinds of people — or at least people with similar earning power — are marrying each other. Doctors increasingly marry other doctors, rather than nurses. Today, 40% of couples in which both partners work have similar incomes, compared with only 33% in the 1980s.
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