Quotulatiousness

February 3, 2011

How bad is Ireland’s banking situation? Try “spectacularly bad” and you’re close

Filed under: Economics, Europe — Tags: , , — Nicholas @ 17:28

Michael Lewis tries to provide some idea of the scale of the problem to American readers:

It had been two years since a handful of Irish politicians and bankers decided to guarantee all the debts of the country’s biggest banks, but the people were only now getting their minds around what that meant for them. The numbers were breathtaking. A single bank, Anglo Irish, which, two years before, the Irish government had claimed was merely suffering from a “liquidity problem,” faced losses of up to 34 billion euros. To get some sense of how “34 billion euros” sounds to Irish ears, an American thinking in dollars needs to multiply it by roughly one hundred: $3.4 trillion. And that was for a single bank. As the sum total of loans made by Anglo Irish, most of it to Irish property developers, was only 72 billion euros, the bank had lost nearly half of every dollar it invested.

That’s one of the three big banks the Irish government had to help. The other two may be in worse shape. You could say Ireland’s banks are awful:

Even in an era when capitalists went out of their way to destroy capitalism, the Irish bankers set some kind of record for destruction. Theo Phanos, a London hedge-fund manager with interests in Ireland, says that “Anglo Irish was probably the world’s worst bank. Even worse than the Icelandic banks.”

Ireland’s financial disaster shared some things with Iceland’s. It was created by the sort of men who ignore their wives’ suggestions that maybe they should stop and ask for directions, for instance. But while Icelandic males used foreign money to conquer foreign places — trophy companies in Britain, chunks of Scandinavia — the Irish male used foreign money to conquer Ireland. Left alone in a dark room with a pile of money, the Irish decided what they really wanted to do with it was to buy Ireland. From one another. An Irish economist named Morgan Kelly, whose estimates of Irish bank losses have been the most prescient, made a back-of-the-envelope calculation that puts the losses of all Irish banks at roughly 106 billion euros. (Think $10 trillion.) At the rate money currently flows into the Irish treasury, Irish bank losses alone would absorb every penny of Irish taxes for at least the next three years.

As mentioned in this post yesterday, the Irish who can do so are starting to head to greener pastures. A thousand a week in net emigration over the last year and a half.

H/T to Tyler Cowen for the link.

Bipartisan big government

Filed under: Economics, Government, Politics, USA — Tags: , , , , — Nicholas @ 12:47

Bruce F. Webster addresses the “Clinton Budget Fallacy” by downloading some publicly accessible numbers and doing a bit of simple math:

Put simply, from 1999 to 2010, the US population grew by 10% and inflation reduced the value of the dollar by about 30%. Combine those two, and Federal spending should have gone up roughly 43% over that period. Instead, it went up 135%, or three times what it should have. Setting aside some of the bailouts, etc., that are in the budget, it’s still clear that almost every Federal line item went up at least twice what it should have during that period. Almost nothing (other than “general government”) grew a “mere” 43%.

I fully blame Bush and the 2002-2006 Republicans as much as I blame Obama and the 2006-2010 Democrats. The real question is whether the 2010 Republicans have the brains and the will to turn back the tide.

The smart money, I’m afraid, is betting against that outcome.

Urban China: growth market for luxury goods

Filed under: China, Economics — Tags: , — Nicholas @ 07:42

The most liberalized areas of China have become a magnet for the purveyors of ostentatious luxury items:

The Chinese may have an age-old reputation as great savers, but China’s young people are now making up for generations of lost spending time.

Compared with the austere youth of China’s older generations, who went through the turmoil of the Cultural Revolution and strove to build savings in a nation without a social safety net, the young, raised in an unprecedentedly wealthy China, are spending freely.

[. . .]

As the world’s fastest growing luxury market, China’s appetite for high-end Western branded goods is fast becoming insatiable, with predictions by Boston Consulting Group suggesting that within five years, 29 percent of global luxury product consumption will come from China. And while European and US luxury sales are making a slow recovery after the global financial crisis, China—relatively untouched and still optimistic—remains the most important market for luxury retailers. Indeed, this was the theme behind last year’s 5th Annual China Luxury Summit, which was given the grandiose subtitle of ‘China Luxury Market: An Oasis of Hope and Possibility’.

China as the deus ex machina of the luxury world is a concept familiar to European retailers. Last Saturday, for example, the Italian luxury brand Prada staged its first fashion show in Beijing. Like French cosmetics and perfume brand L’Occitane, which listed in Hong Kong last year, Prada is expected to have an initial public offering in Hong Kong.

No need to reiterate that this is only a phenomenon in the urbanized areas of China: the vast majority of Chinese consumers are unable to access the fast growing markets and still live to a large extent under the direct control of the party.

Middle East unrest spreads to Yemen

Filed under: Liberty, Media, Middle East, Politics — Tags: , , , — Nicholas @ 07:37

First Tunisia, then Egypt, now Yemen:

Tens of thousands of Yemenis squared off in street protests for and against the government on Thursday during an opposition-led “Day of Rage,” a day after President Ali Abdullah Saleh offered to step down in 2013.

Anti-government activists drew more than 20,000 in Sanaa, the biggest crowd since a wave of protests hit the Arabian Peninsula state two weeks ago, inspired by demonstrations that toppled Tunisia’s ruler and threaten Egypt’s president.

But an equally large pro-Saleh protest also picked up steam, and supporters of the president who has ruled Yemen for more than three decades drove around the capital urging Yemenis over loudspeakers to join their counter-demonstrations.

The protests in Sanaa fizzled out by midday, with demonstrators on both sides dispersing peacefully ahead of a traditional afternoon break to chew qat, a mild stimulant leaf widely consumed in Yemen.

CRTC head called to testify before Commons committee

Filed under: Cancon, Economics, Media, Politics, Technology — Tags: , , , , — Nicholas @ 07:29

In what some are hailing as a victory for Canadian internet users, but might well be just another Conservative sop to public opinion, the head of the CRTC has been called before a Commons committee:

The chairman of the CRTC will appear before the Standing Committee on Industry, Science and Technology on Thursday, as the regulator’s decision on usage-based billing for Internet services continues to generate anger among consumers and businesses.

Konrad von Finckenstein, chairman of the Canadian Radio-television and Telecommunications Commission, will appear before the committee of federal MPs to explain the regulator’s decision, which allows large Internet providers like Bell Canada to charge smaller providers who lease space on their networks on a per-byte, or usage, basis.

On Tuesday, Prime Minister Stephen Harper vowed to review the decision, lending clout to Industry Minister Tony Clement’s announcement to examine the CRTC ruling a day earlier. Mr. Clement and Mr. Harper’s cabinet, of course, have overturned the CRTC before — most notably by striking down the regulator’s ruling that Globalive, which now operates Wind Mobile, couldn’t launch service in the regulated sector because of foreign financial backing.

The problem for the government is that they need to be seen to do something, but the best “something” would be to open up the Canadian market to foreign competition in order to drive prices down toward world levels. That would upset too many cosy arrangements for the current beneficiaries of licenses to print money government approval to operate.

Tools for protest marchers: anti-kettling app

Filed under: Law, Liberty, Media, Middle East, Technology — Tags: , , , , , , — Nicholas @ 07:20

Patrick Kingsley talks to the developers of “Sukey”, a new mobile phone app intended to help protesters avoid being kettled by police:

Cairo, it wasn’t. But at about a quarter to four last Saturday afternoon, on a crowded backstreet in central London, something happened outside the Egyptian embassy that deserves at least a footnote in the annals of protest history. A crowd of students weren’t kettled.

In the context of recent British protests, this was a near-miracle. At each of the previous four major student protests in London since the Millbank riot on 10 November, police have kettled — or, in their terminology, “contained” — thousands of protesters, preventing them from leaving an area for several hours, and often from accessing basic amenities such as food, water and toilets.

Police kettle protesters supposedly to quell violence, but protesters arguably only turn to violence out of frustration at being kettled. Most notoriously, police trapped hundreds of teenage schoolchildren inside a tight grid on Whitehall on 24 November — and only subsequently did a few of them smash up a police van abandoned in their midst.

Saturday’s non-kettle, then, was a victory in itself. But the real excitement wasn’t that it didn’t happen — but how it didn’t happen. It is difficult to pinpoint exactly why police and protesters behave in a certain way at a certain time, but one explanation for the kettle’s failure to form lies with a new communications network, which launched that afternoon: Sukey.

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