March 31, 2009
Posted: 750 GMT
March 27, 2009
Posted: 1139 GMT
Spring has sprung, and of course that brings with it the inevitable claim that the "green shoots of recovery" are upon us.
This was emphasised by Larry Kantor of Barclays Capital writing in his latest client note that he saw signs of "green shoots."
His argument is that expectations are so low, the market is beaten and the prognosis so grim, that it is time to start being more aggressive in investment decisions to take advantage of the situation. He believes a turnaround starts in Asia and quickly moves to other markets not so badly affected by financial collapse.
In other words, countries like Britain and the U.S. which are at the center of the financial meltdown are going to be amongst the last to recover.
There is solid common sense in Kantor's views. There has been so much unprecedented action by policy makers on the monetary, fiscal and regulatory front that recovery is inevitable. It is just a question of when and how strong.
Are you seeing the green shoots of recovery in your economic life yet ?
March 25, 2009
Posted: 2258 GMT
Tonight's Profitable Moment....from Quest Means Business
So with what is the road to recovery paved ? We certainly know rose petals aren't being strewn in our path. But is it right to say we are on a road to hell as the Czech prime minister described Obama's economic policy.
No one doubts the road has deep pot holes. The evidence of a hard journey ahead is everywhere. Large budget deficits that will be millstones round our necks for decades are piling up. Homes are being lost, there is virtually no economic cheer – and the best we can hope for is a tepid growth later in the year. This much we already know.
But what makes the journey hellish ? Is it the fear of the unknown, or the near certain fact that our standards of living are going to fall. Perhaps we are now so much in love with the latest gadget and mobile gizmo that the thought of anything else sends us into despair. I find that hard to accept. We can do better than define our journey being consumed by the latest consumer trinket.
Whether it's the road to recovery or hell – there are many twists, turns and cul de sacs. We won't always agree on the best route to get us home. There is no Satnav to economic nirvana.
Posted: 654 GMT
The cat is out of the bag in Britain in a big way. The warning by the governor of the Bank of England AGAINST a further large stimulus package was a slap in the face to Gordon Brown's government .It is in the very nature of Central bankers to be cautious – to proceed ponderously when others wish to rush, but Mervyn King left no doubt as to his views. ""Given how big these deficits are", King said, "I think it would be sensible to be cautious about going further in using discretionary measures to expand the size of the those deficits."
In Quest-speak Whoa....time to start worrying about how we are going to pay the bills when this is all over.
The Gov. was speaking before a parliamentary committee and would have been well aware of the bomb he was dropping on the UK governments head. Normally he would never be so blunt. Coming just a week before the G20 meeting it is an explosion indeed.....giving Gordon Brown's European counterparts Angela Merkel and Nikolas Sarkozy good ground for saying "hang on, even your own central bank chief believes enough is enough !"
The issue isn't more needs to be done: The problem is so much has been done already, in such a short period of time, and not just in the UK.
We have had record breaking cuts in interest rates (in less than two years they have fallen 5.25 per cent !) to record breaking lows. We have had record breaking Stimulus Packages and Bailout packages and we have seen central banks embark on record breaking printing of money known as Quantitative Easing. All of which will create record breaking budget deficits ! That's a lot of record breaking, even in record breaking times !
There is a tsunami of money slowly, but inexorably working its way through the economy. And all the Governor was saying was.....er....maybe it's time to watch and wait and see the effect of all of this stuff before doing anymore.
Let there be no doubt – all this record breaking stuff will have an effect and we will see it, albeit later rather than sooner. By which time it may be too late.
Which is why the Governor made his, almost, record breaking comments.
March 18, 2009
Posted: 1427 GMT
The AIG bonus issue has me on the defensive – and all because I was silly enough to open my mouth in support of the rule of law. I opined out loud that it seemed very heavy handed for any government, let alone the US Federal Government to try and overturn existing contractual arrangements – a true slippery slope argument if ever I saw one.And then the flood gates opened. Most of you thought I was wrong. The malfeasance at AIG being so great that anything short of the Public Stocks of Victorian England would be too good for the executives who got retention bonuses.
So let me clarify – I agree that the way AIG was run into the ground is amongst the most heinous of corporate acts. I don't believe retention bonuses should be paid, or indeed any bonuses. But if you were lucky enough to get some sucker to agree to such a term in your contract then it has to be honoured.
I am pleased that the US government appears to have found a way out – by deducting the bonus amount , $160m, from bailout funds being paid to AIG. After all, it is the US government money keeping the company afloat and it is entitled to say what should be done with it. The old phrase He who Pays the Piper...comes to mind.
A simple solution that preserves the rule of law – decisions have consequences and the result of this one leaves the mess where it belongs: With AIG and its ill-deserving employees.
March 14, 2009
Posted: 1138 GMT
HORSHAM, England - I am sitting in the press tent at the G20 Finance Ministers, having just watched the "family photo" being taken. (What is the collective noun for such a group? A stimulus of ministers? - thanks to craigeyles on Twitter for that. A Recovery of Financiers?)
There are of course actually 26 groups in the room - the IMF, World Bank, ECB all come along, as well as Spain and the Netherlands as the special invitation of the hosts.
Actually there seems to be a great deal more people everywhere, and it is upon their shoulders and those of their political bosses, that rests the future course of this "Great Recession" - a phrase coined this week by the IMF Managing Director, Dominique Strauss-Kahn.
And I doubt few of them every believed they would find their economies in the horrible position they are today.
Here in the rural West Sussex countryside, at a grand looking country house hotel, they are attempting to sort out the very real differences that exist between them. Despite the world economy facing the first recession since the 1940s, they do not have a common view on how it should be handled.
The U.S. (with the UK in tow) wants other nations to provide greater stimulus packages. The Europeans along with some Asian economies want agreement on better regulation.
Everyone agrees on giving the IMF more money to help bail out distressed countries, but some, like Brazil, will only sign on the dotted line if they get greater power within the Fund.
There is nothing new about any of these issues, positions taken or disagreements, except the seriousness of the situation.
Bob Zoellick the president of the World Bank described the economic conditions this year as "dangerous."
So even though it was all smiles at the group photo taken outside this magnificent period hotel - those inside can't escape the fact that what they are deciding will influence the course of this recession for months to come.
Are they upto the job ? That's a moot question. They are the only ones we've got, so whether we like it or not, our financial future is in their hands
March 6, 2009
Posted: 1650 GMT
"PRINTING MONEY" scream the newspaper headlines. Not surprisingly many of you are getting worried about the possiblities of inflation. We have all been taught printing money is a recipe for economic calamity.
The Bank of England has decided to introduce quantitative easing.
Remember Weimar in Germany; the wheelbarrows of cash required to buy a loaf of bread? Or Mugabe's Zimbabwe, where inflation is running at 230 million percent because the central bank has printed so much cash? You can stop worrying. Now.
There is a world of difference between the so-called quantitative easing being introduced by central banks like the Bank of England, and running the money printing presses willy-nilly thus stoking hyperinflation.
First and foremost, inflation in major economies like the U.S. and EU is falling Today the fear is deflation. The money being printed is actually trying to turn that around. There is little danger of sudden hyperinflation before we have a chance to do something
Secondly, the money is being used to buy government and corporate bonds. It is being channeled through the banks, and hopefully onto consumers. It is not being handed to the government to pay everyday bills with no thought to how or where. In previous disasterous cases the money was used to pay wages, and there was no end in sight. It was out of control.
Finally, this is all being done in the full glare of the markets and transparency. We know how much has been approved and when. Government and central bankers have a firm hand on what is being done and why. We also know that there is an exit strategy for when the economy does turn around.
For those who are worried about the environmental effects of all this printing (well, of course, they are not actually going to print bank notes): Commercial banks have accounts with the central bank. Those accounts will be topped up automatically and electronically. Literally, the accounts will suddenly be much healthier and richer.
Yes, this is new territory for most countries, and the bankers admit they don't know quite how it works, but they are doing it carefully and with thought.
Are you still worried ?
March 5, 2009
Posted: 1957 GMT
Richard uses a cocktail fountain to explain how quantative easing might work.
Posted: 946 GMT