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Global Economic Matters

  1. Jan 24, 2009 #1

    Astronuc

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    There is a thread on the US economy, but the problems are globally endemic. All national and regional economies are affected, and the problems undermine security and general welfare. It appears that the global economic crisis realized in 2008 is more severe than expected.


    Downturn Accelerates As It Circles The Globe
    Economies Worse Off Than Predicted Just Weeks Ago
    http://www.washingtonpost.com/wp-dyn/content/article/2009/01/23/AR2009012304172.html

    UK in recession as economy slides
    http://news.bbc.co.uk/2/hi/business/7846266.stm

    RBS shares plunge on record loss
    http://news.bbc.co.uk/2/hi/business/7836882.stm
    Fourth-quarter 2008 results (BBC)
    Citigroup: $8.3bn (£5.7bn) loss
    Bank of America: $1.7bn loss
    Deutsche Bank: Estimated $6.4bn loss (4.8bn euros; £4.4bn)
    JP Morgan Chase: $702m profit

    Pakistan stares into economic abyss
    http://news.bbc.co.uk/2/hi/south_asia/7672359.stm

    Reform and restructuring of various national economies is necessary, not only in the US but globally.
     
  2. jcsd
  3. Jan 24, 2009 #2

    mgb_phys

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    The UK was stupidly over leveraged.
    Government policy since 1980 which emphasised owning your own house at any cost, staying out of the Euro for party political reasons and basing an economy on financial services after destroying manufacturing.
     
  4. Jan 26, 2009 #3
    I would not be surpised to see the Euro currency become obsolete in the near future. When the purse strings start becoming stressed, each country will naturally back up their own currency, and if they have additional reserves, they will help with other countries.
     
  5. Jan 26, 2009 #4

    mgb_phys

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    Or being expanded, when countries like Britain and Iceland see what currency speculators can do to their economy.

    Can US states decide to issue their own currency? Perhaps Montana might decide that backing up losses on Wall St and in California isn't in their interest.
     
  6. Jan 26, 2009 #5
    Good point! I believe Texas is a case of unusual circumstances when they joined the Union. I would think if any US state could issue their own currency, Texas could be the first. A state could inspect their net cash flows of all their citizens relative to the federal deficits.

    Look what happened to Iceland so far.
     
  7. Jan 26, 2009 #6

    mgb_phys

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    It looks like Iceland is going to end up joining the EU as a quid-pro-quo for being allowed into the Euro. It is part of the European economic area which is a nice little loophole for smaller countries, it means they get free trade with the EU but don't have to accept all it's conditions. In Iceland's case this was to protect it's fisheries.

    Britain joining the euro is trickier, there is strong anti-europe feeling (somewhat politically motivated) and it has a great deal of trade with the USA so the pound was always caught between two large currencies. Upto now this has mostly been an advantage, at least for the financial institutions that make money off the differences - but has been a real pain for industry. If the crash means that industry now matters more than the banks things might change - the trouble is picking a rate to enter at.
     
  8. Jan 26, 2009 #7

    I think you just lost me. Isn't Iceland and Great Britain a part of the EU? Maybe your meaning was something different?

    http://en.wikipedia.org/wiki/Member_State_of_the_European_Union
     
  9. Jan 26, 2009 #8

    mgb_phys

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    Britain (like Denmark) is in the EU but not in the euro - it uses it's own currency
    Iceland (like Norway) isn't in the EU but is in the European Economic Area - this means they get free trade with the EU but don't have to open up all their industries to EU competition. It means they don't get any financial assistance from the EU but also don't have to pay for French farmers (sorry ;-)
    It's a sort of half-way house for small rich countries that want to protect some local conditions while still having good relations with the rest of Europe.
     
  10. Jan 26, 2009 #9
  11. Jan 26, 2009 #10

    mgb_phys

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    The ones that don't are the newly joined eastern European countries - they will all almost certainly join the Euro and their currency exchange rates should be locked to it already so it's just a matter or reaching some legal agreements and to actually swap the notes.

    Only Britain and Denmark have a political objection to joining.
     
  12. Jan 26, 2009 #11
    I guess that means the Mark and Franc were also converted and quit trading in the same manner you are projecting?
     
  13. Jan 26, 2009 #12

    mgb_phys

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    All the currencies that were going to form the Euro agreed many years in advance and their exchange rates were locked, then there was an internal 'electronic' currency for a few years and finally they all switched actual notes/coins on the same day (1 January 1999) it actually went amazingly smoothly!

    Britain joined the fixed exchange rate part for a while but it went in at an artificially high level for political reasons which ended up being a bit of a disaster.
    Getting the rates set for all the other countries is the tricky part - but when just left to the bureaucrats seems to have worked.
     
  14. Jan 27, 2009 #13
    It appears our new US Treasury head is trying to pressure China, as of last Friday, to quit pegging their currency (or allow it to float). Could backfire in a big way since China is one of our largest bankers. I am not sure what our angle is, as I am still pondering the situation. I don't think we are after trade relation improvment by making a currency statement, at least right now. It could be a power move by us to let China know the US dollar is the only currency that can handle the volume of cash China has and is expected to accumulate in the future. If this is the case, and we are not after trade balance improvement, I am wondering what we are after, specifically.
     
  15. Jan 30, 2009 #14

    Astronuc

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    Yahoo Biz Headlines from AP (Jan 30, 2009)

    Hitachi forecasts $7.7B loss; to cut 7,000 jobs -
    http://biz.yahoo.com/ap/090130/as_japan_hitachi.html
    Japanese electronics maker Hitachi Ltd. predicted it would post a massive net loss this fiscal year and said it will slash about 7,000 jobs as part of a global restructuring plan.

    NEC's loss widens, plans to cut 20,000 workers
    http://biz.yahoo.com/ap/090130/as_japan_earns_nec.html
    Japanese electronics giant NEC Corp. said it will cut 20,000 workers worldwide as it tries to stanch widening losses from semiconductors and other businesses that have been hard hit by competition and the global economic slump.

    Honda cuts annual forecast as 3Q profit tumbles
    http://biz.yahoo.com/ap/090130/as_japan_earns_honda.html
    Honda Motor Co. slashed its annual profit target by over half Friday as profit tumbled 90 percent in the latest quarter, hit by rising costs, a stronger yen and falling sales in key markets.

    Economy likely shrank at fastest clip since '82
    http://biz.yahoo.com/ap/090130/economy.html
    The country tumbled deeper into recession and probably logged its worst economic performance in a quarter-century during the final three months of last year as battered consumers and businesses throttled back spending.

    Euro zone jobless rate climbs, inflation falls
    http://biz.yahoo.com/ap/090130/eu_eu_economy.html
    The jobless rate in euro zone countries climbed to 8 percent in December -- the highest in over two and a half years -- while inflation dropped as the economic downturn intensified, the EU's statistical agency said Friday.

    Japan factory output plunges, jobless rate jumps
    http://biz.yahoo.com/ap/090130/as_japan_economy.html
    The pain of Japan's recession is spreading from the factory floor to the living room, as December figures showed companies slashed output at a record pace, the jobless rate surged and household spending fell sharply.


    We live in interesting times. I'll be interested to see the reflections in the media upon this period in 20+ years, assuming I live that long.
     
  16. Jan 30, 2009 #15

    mgb_phys

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    I suspect everyone will have forgotten about it by then.
    Remember the oil crisis 30years ago - it was the end of the world, but the only legacy was the 55mph speed limit.

    Looking at the lists of companies, even Japanese ones, the successful ones (Toyota, Honda, Sony) are posting reductions in profits - ie. they still made $100M, just not the $1Bn they made the year before. The ones going to the Wall are the Chryslers and Hitachis.

    You also have to look at how many layers of dy/dx the headlines report. "Biggest drop in the rate of GDP growth in 40 years" means it went up -just less fast than it has been doing. It's like complaining that you won the lottery every year for the last 10 years - and this year only won the Bingo at the church social.
     
  17. Feb 2, 2009 #16

    Office_Shredder

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    The US has been concerned about Chinese currency manipulation for a while. If their currency is artificially low, it means it's cheaper for other countries to buy their goods, which helps expand their manufacturing base and increase foreign investment. In particular, that means less people investing in the US economy, which especially now is considered a bad thing (the lack of investment)
     
  18. Feb 2, 2009 #17

    mgb_phys

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    Isn't this what Europe was been complaining about the US doing for the last 5 years?
     
  19. Feb 4, 2009 #18

    Astronuc

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    Japan's Panasonic to cut 15,000 jobs, shut plants
    http://biz.yahoo.com/ap/090204/as_japan_earns_panasonic.html
    Wednesday February 4, 7:37 am ET
    By Yuri Kageyama, AP Business Writer
    Japan's Panasonic to cut 15,000 jobs, shut 27 plants to cope with slump; forecasts annual loss
    Mitsubishi Motors, Mazda project annual losses
    http://biz.yahoo.com/ap/090204/as_japan_earns_autos.html
    Wednesday February 4, 6:51 am ET
    By Tomoko A. Hosaka, Associated Press Writer
    Mitsubishi Motors, Mazda project annual losses, hammered by global slump, strong yen
    Japan's Mitsubishi, Mazda and Subaru to sink into red
    http://news.yahoo.com/s/afp/20090204/bs_afp/japanautoearningscompany_20090204113932

    Honda cuts forecasts again, Toyota losses to balloon
    http://news.yahoo.com/s/nm/20090130/bs_nm/us_autos_4
     
  20. Feb 5, 2009 #19

    Astronuc

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    World stocks fall on grim company earnings
    http://biz.yahoo.com/ap/090205/world_markets.html
    Thursday February 5, 6:29 am ET
    By Carlo Piovano, AP Business Writer
    World markets fall on poor earnings as investors prepare for interest rate decisions in Europe
    The Bank of England did cut its key rate by at least half a percentage point from the current 1.5 pct to a new record low to 1 pct.

    So where are the buyers? Why aren't the companies buying back their stocks?

    I guess people are watching the losses continue and expecting the economy to bottom out sometime mid-year.


    Cigna takes 4Q loss on runoff reinsurance losses
    http://biz.yahoo.com/ap/090205/earns_cigna.html


    GE's stock would seem to be a good investment. Based on the current price of $11.26, its $1.24 dividend represents 10.90% annual return. The question remains whether or not GE can maintain the dividend.
    http://finance.yahoo.com/q?s=GE
     
  21. Feb 8, 2009 #20

    Astronuc

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    WTO chief warns of looming political unrest
    http://news.yahoo.com/s/afp/20090207/bs_afp/financeeconomygermanytradewto_20090207141558
    Hmmmm.
     
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