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  • Crisis response lessons left unlearned | Business Spectator
    than 10 per cent of GDP while in 2010 the European crisis countries received support equal to 50 per cent of their GDP The Fund component was 800 per cent of IMF quota for the Asians and 2230 per cent of quota for the Europeans The adamant advice on monetary policy in 1997 was to tighten strongly pushing up interest rates In 2008 central banks not only pushed interest rates down to zero but have also spectacularly expanded their balance sheets with innovative support for financial markets Swift closure of troubled financial institutions was mandatory practice in Asia This was supposedly necessary to avoid moral hazard from guaranteeing bank depositors or bailing out banks This concern was forgotten in 2008 It wasn t just banks that were saved by taxpayers support insurance companies AIG the money market and the car industry were all rescued In Europe even clearly insolvent countries such as Greece were bailed out Fiscal policy was tightened in both episodes but in 2008 it was because countries were starting with large deficits and unsustainable debt levels while in 1997 the crisis countries had budget surpluses and low debt The 1997 tightening was a macro blunder crunching countries whose output was already in freefall How could the prescription be so different First the problem in 1997 was misunderstood by the outsiders who tried to help At the time a central role was given to crony capitalism Soeharto in Indonesia and the chaebols in Korea Now fifteen years later the central macro economic issue can be seen as the sudden reversal of foreign capital triggered by concerns about over heating economies overvalued exchange rates and excessive foreign borrowing all of which were symptoms of the pre crisis period of hugely excessive capital inflows This was a liquidity problem which required the sort of treatment given to the European peripheral countries in 2010 Balance of payments support was needed foreign debt had to be reduced through rescheduling and banks had to be kept going not closed Policy was also confused by the doctrinal belief that free markets would deliver the right answers In the middle of the 1997 crisis the Fund was trying to amend its Articles to give free capital movements the same compulsory status as free trade Those involved in 1997 don t seem to feel at all sheepish about the mistakes made Many of them are still around some were at a recent Peterson Institute conference which compared the two crises and many were involved in both crisis periods The nearest the IMF has come to a mea culpa is a 2012 speech by David Lipton now IMF First Deputy Managing Director but then one of the United States Treasury bovver boys standing over the IMF where he said that it all worked out for the best as the result was stronger financial sectors able to withstand the 2008 shock Larry Summers one of the Committee to Save the World no this wasn t derisory or ironic

    Original URL path: http://www.businessspectator.com.au/article/2013/11/5/global-news/crisis-response-lessons-left-unlearned (2014-01-12)
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  • Chinese central bank official urges US to resolve budget impasse | Business Spectator
    in 2013 but progress on the ground was heartening with energy efficiency solar and wind all providing tangible proof of their future potential A fifth year of declining power consumption Power consumption fell again in 2013 dipping 2 8 per cent across the National Electricity Market as scheduled renewables rose to 12 per cent of the market Industries Advertising and Marketing Agribusiness Automotive Aviation Construction and Engineering Education Family Business Financial Services Food and Beverages Gaming and Racing Health and Pharmaceuticals HR Industrial relations Information Technology Infrastructure Insurance Manufacturing Media and Digital Resources and Energy Professional Services Property Retail Small Business SME Telecommunications The Ashes Tourism Transport and Logistics Video KGB TV China Spectator CEO Hub Leadership Lab Management Insights Young Leaders Knowledge Centre Adapt or Die Knowledge Hub Business Accelerators Webinars eBooks Menu Chinese central bank official urges US to resolve budget impasse 11 Oct 2013 5 50 AM 1 Politics International News Asia USA Economy Global News Global Financial Crisis US Economy Global economy cannot handle heightened level of risk deputy governor You must be logged in to read this article Not a member yet Register today Business Spectator is available on all of your devices so you can access the latest news and commentary where and how you like Register now Already a member Sign in here Email Address Enter your Email Address Password Enter the password that accompanies your Email Address Remember me Log in Request new password AAP A top Chinese central banker has called on the United States to overcome political gridlock and avoid a debt default They should have the wisdom to solve this problem as soon as possible Gang Yi deputy governor of the People s Bank of China said at an IMF panel discussion Mr Yi said that the US was adding this budget and debt limit uncertainty to the global economy We certainly need a very stable global economy he said If we see the developed markets recovering the US economy robust next year that s certainly good news Speaking in a CNN hosted panel discussion on the sidelines of the IMF World Bank annual meetings in Washington Mr Yi cautioned that the US Federal Reserve should carefully manage a reduction in its massive monetary stimulus What we need is an orderly well communicated tapering he said More important China needs free trade and investment Premier Li Keqiang of China the largest foreign holder of US government debt reiterated his country s concern about Washington s debt ceiling problem when he spoke with US Secretary of State John Kerry at an Asian summit Thursday in Brunei according to China s official Xinhua news agency The state run China Daily newspaper in Beijing blasted the astonishing failure of the US Congress It is pitiful that the US is now putting the fragile world recovery under renewed threat with its mind boggling political infighting it said Print this page Related articles 12 Jan Obama picks Fed vice chair 11 Jan US jobs

    Original URL path: http://www.businessspectator.com.au/news/2013/10/11/us-economy/chinese-central-bank-official-urges-us-resolve-budget-impasse (2014-01-12)
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  • Buffett reaps $US10bn from GFC | Business Spectator
    insights if it wants to compete Will Twitter s founder strike social gold twice Biz Stone is looking to tap into the selflessness of others with his latest venture Jelly Enterprises But the just launched app will have to quickly shift into something of real value if it s to become a mainstream success Climate Carbon markets Energy markets Renewable energy Resources Solar energy Wind power CleanTech Science Environment Green Deals Policy Politics Smart Energy Latest stories Marking the milestones of 2013 Australia s transition to a clean energy economy took some political blows in 2013 but progress on the ground was heartening with energy efficiency solar and wind all providing tangible proof of their future potential A fifth year of declining power consumption Power consumption fell again in 2013 dipping 2 8 per cent across the National Electricity Market as scheduled renewables rose to 12 per cent of the market Industries Advertising and Marketing Agribusiness Automotive Aviation Construction and Engineering Education Family Business Financial Services Food and Beverages Gaming and Racing Health and Pharmaceuticals HR Industrial relations Information Technology Infrastructure Insurance Manufacturing Media and Digital Resources and Energy Professional Services Property Retail Small Business SME Telecommunications The Ashes Tourism Transport and Logistics Video KGB TV China Spectator CEO Hub Leadership Lab Management Insights Young Leaders Knowledge Centre Adapt or Die Knowledge Hub Business Accelerators Webinars eBooks Menu Buffett reaps US10bn from GFC 8 Oct 2013 9 19 AM Industries Financial Services Food and Beverages Manufacturing Economy Global News Global Financial Crisis Berkshire Hathaway banks rewards from lending to blue chip companies in crisis You must be logged in to read this article Not a member yet Register today Business Spectator is available on all of your devices so you can access the latest news and commentary where and how you like Register now Already a member Sign in here Email Address Enter your Email Address Password Enter the password that accompanies your Email Address Remember me Log in Request new password Billionaire investor Warren Buffett has reaped US10 billion 10 59 billion after lending to blue chip companies during the global financial crisis The Wall Street Journal reports According to the newspaper Mr Buffett s pre tax income on the crisis era investments is close to 40 per cent after confectionery business Mars Inc repaid US4 4 billion that its subsidiary Wrigley borrowed in 2008 which is expected to net his company Berkshire Hathaway a profit of at least US680 million Berkshire also invested in Bank of America Goldman Sachs Swiss Re Dow Chemical Co and General Electric during the crisis Several of the deals continue to pay dividends as Berkshire also owns equity stakes in the companies or warrants to buy them according to the WSJ You make your best buys when people are overwhelmingly fearful Mr Buffett told the newspaper Print this page Related articles 07 Jan Investment banks reformed Rankin 19 Dec A Sterling threat to the UK recovery 10 Dec BoE governor spots global recovery

    Original URL path: http://www.businessspectator.com.au/news/2013/10/8/global-financial-crisis/buffett-reaps-us10bn-gfc (2014-01-12)
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  • IMF warns on US debt ceiling | Business Spectator
    must be logged in to read this article Not a member yet Register today Business Spectator is available on all of your devices so you can access the latest news and commentary where and how you like Register now Already a member Sign in here Email Address Enter your Email Address Password Enter the password that accompanies your Email Address Remember me Log in Request new password AAP International Monetary Fund chief Christine Lagarde has warned that a US failure to raise the debt ceiling which could lead to default could wreak havoc on the global economy The ongoing political uncertainty over the budget and the debt ceiling does not help Lagarde said in a speech in Washington on Thursday the third day of a US government shutdown due to a budget impasse in a bitterly divided Congress The government shutdown is bad enough but failure to raise the debt ceiling would be far worse and could very seriously damage not only the US economy but the entire global economy she said according to her prepared remarks So it is mission critical that this be resolved as soon as possible Prospects for a swift resolution of the budget impasse remained dim as Democrats and Republicans showed no hint of compromise Congress missed a deadline to approve a budget for 2014 fiscal year which began on Tuesday forcing the partial shutdown of the federal government and putting hundreds of thousands of civil servants on unpaid leave The budget fight appears to be bleeding into a battle over raising the US16 7 trillion A17 8 trillion debt limit The Treasury estimates that it would likely exhaust its cash reserves around October 17 In the event that a debt limit impasse were to lead to a default it could have a catastrophic effect on not just financial markets but also on job creation consumer spending and economic growth the Treasury said in a report on Thursday Lagarde reiterated the Fund s concerns about US fiscal policy s dampening effects on the world s largest economy She highlighted the sequester drastic spending cuts stemming from the fight between Democrats and Republicans over the budget and entitlement programs I have said many times before that the US needs to slow down and hurry up by that I mean less fiscal adjustment today and more tomorrow That means replacing the sequester with more back loaded measures that do not hurt the recovery Lagarde said At the same time the US needs to do more to make debt sustainable down the road by containing the growth of entitlement spending and raising revenues Print this page Related articles 08 Jan Lessons in liberalism from New York s left turn 30 Dec The latent danger in Abe s amnesia 20 Dec Clinton decision next year 12 Dec Wall Street closes sharply lower 11 Dec Volcker rule set for green light More from Business Spectator Technology Adapt or die Commercial The Future of Energy Family Business Alan Kohler s Family

    Original URL path: http://www.businessspectator.com.au/news/2013/10/4/usa/imf-warns-us-debt-ceiling (2014-01-12)
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  • A case for economic optimism amid the pundits' gloom | Business Spectator
    that is needed to raise living standards by a couple of per cent a year over the next half decade is competent policy making Meanwhile the structural growth pessimists are agonising over longer term prospects Their hand wringing identifies two contrasting types of malaise First is the fear that after two centuries of spectacular innovation technological progress has slackened reducing the capacity to go on churning out ever more things The second is that we can t use all the available productive capacity there is chronic over supply Robert Gordon is the main proponent of the first theme that we have already invented and applied all the really useful ideas Advances in basic health nutrition and communications brought huge increases in living standards but having got on top of these issues comparable advances aren t available The dramatic reduction in child mortality and deaths from infectious diseases having been achieved cannot be substantially improved Electric lights and motors can only be invented once Higher female workforce participation is another once off boost to GDP Passenger airplanes are traveling no faster now than forty years ago The second concern is oversupply We have been too successful at producing things to keep everyone employed governments provide easy credit and run budget deficits to boost demand both of which store up future problems In the international context this is presented either as a global savings glut or as international imbalances with China s current account surplus often featuring prominently Tyler Cowen melds the two themes In The Great Stagnation Cowen worried that the low hanging fruit has already been picked from the tree of technology Now his additional concern is that technology and the communications information revolution will hand out bountiful rewards to the exceptional few who manage the pivotal creative ideas leaving the rest to lead empty lives of menial work and video games There has been a fair bit of push back for the Cowen Gordon thesis that we have run out of good new ideas The consensus is that even if the golden age is gone there is still quite a bit of room to do things better As for the savings glut the international manifestations are probably transitional China has recognised the need for re balancing Raising consumption to more normal levels automatically lowers savings Just be patient As for the US manifestations if American income distribution had not favoured the extremely rich so heavily and left the average worker with no increase in average real income for three decades demand might be stronger without the artificial stimulus of easy credit and budget deficits The winner takes all society may be an inevitable part of technological progress but a more egalitarian policy seems quite consistent with adequate rewards for innovation This is not just about a less regressive tax scale Intellectual capital should be rewarded so as to maximise innovation not to entrench incumbents It also involves ensuring that the education system is a vehicle for social mobility seeking out the mute inglorious Miltons in the broad population Meanwhile back in the emerging economies the gloomsters debate is about whether fast growth convergence will run into the middle income trap There are enough examples of full convergence to say confidently that sustained rapid growth is feasible if policies and politics are supportive In the first decade of this century the exceptional performance of the emerging economies added an extra full percentage point onto annual world growth Now with emerging economies having additional heft from larger GDP even a more modest pace of expansion would maintain their contribution to global growth In short even if underlying growth potential in already wealthy countries may be a bit slower the world is on track to solving the economic problem of poverty We are getting good growth where it is most needed What s there to be so gloomy about Originally published by The Lowy Institute publication The Interpreter Republished with permission Print this page More from Stephen Grenville 07 Jan The international economy in 2014 06 Dec The case against secular stagnation 20 Nov Naysayers feel the Asiaphoria 12 Nov Think global act local on monetary policy 05 Nov Crisis response lessons left unlearned Related articles 13 Jan Abbott to pursue red tape cuts 12 Jan Obama picks Fed vice chair 11 Jan US jobs growth slows sharply 10 Jan Korea China jostle for Aust resources 10 Jan China trade balance contracts More from Business Spectator Technology Adapt or die Commercial The Future of Energy Family Business Alan Kohler s Family Business China China Spectator Please log in or register to post comments Comments on this article Comments Policy richard mcnaught Tue 2013 10 01 09 18 Stephen you need to get out more Even in this Country we have people living in poverty without housing and very little chance of gaining employment The establishment of the Global Economy was always going to come back to bite the established Countries on the butt Apart from weapons there is only so much production that can be absorbed in any society Today s society is all about competition which will always throw up winners and losers As to innovation humans will always continue to invent and improve It s in our nature As long as we innovate with objects and idea s that benefit society then we can make this planet a better place for all We do not need to go back to the old system but look at the opportunity of reforming the way the Worlds leaders operate to provide a more equitable system Bruce 55 Tue 2013 10 01 10 26 the world is on track to solving the economic problem of poverty Reckon the world is on track to lock poverty in as the norm rich get richer poor get poorer more so now than ever David Doyle Tue 2013 10 01 11 21 the world is on track to solving the economic problem of poverty I hereby announce by

    Original URL path: http://www.businessspectator.com.au/article/2013/10/1/economy/case-economic-optimism-amid-pundits-gloom (2014-01-12)
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  • Britain ordered to cap bank bonuses | Business Spectator
    per cent across the National Electricity Market as scheduled renewables rose to 12 per cent of the market Industries Advertising and Marketing Agribusiness Automotive Aviation Construction and Engineering Education Family Business Financial Services Food and Beverages Gaming and Racing Health and Pharmaceuticals HR Industrial relations Information Technology Infrastructure Insurance Manufacturing Media and Digital Resources and Energy Professional Services Property Retail Small Business SME Telecommunications The Ashes Tourism Transport and Logistics Video KGB TV China Spectator CEO Hub Leadership Lab Management Insights Young Leaders Knowledge Centre Adapt or Die Knowledge Hub Business Accelerators Webinars eBooks Menu Britain ordered to cap bank bonuses 27 Sep 2013 1 55 AM Industries Financial Services Economy Global News Global Financial Crisis EU orders Britain to abide by caps while it fights the new law in court You must be logged in to read this article Not a member yet Register today Business Spectator is available on all of your devices so you can access the latest news and commentary where and how you like Register now Already a member Sign in here Email Address Enter your Email Address Password Enter the password that accompanies your Email Address Remember me Log in Request new password Dow Jones Britain will have to abide by EU rules setting strict caps on bankers bonuses while it fights the new law in court the European Union s executive arm warned Thursday The UK government filed a legal challenge last Friday with the European Court of Justice the bloc s top court A judgment is unlikely before 2015 a year after the bonus rules come into effect on Jan 1 a person familiar with the matter said The British lawsuit doesn t mean that the legislation in force will be suspended said Chantal Hughes a spokeswoman for the EU s internal market commissioner Michel Barnier The UK will have to apply all the rules that are going to be applicable she said at a news conference A person close to the UK Treasury said the government planned to apply the bonus caps next year and would press ahead with its lawsuit in parallel The UK is unlikely to seek any special measures from the court such as seeking to suspend the law while the case is being decided said the person who was not authorized to speak publicly about the matter The UK argues that the plan to limit bankers bonuses to 100 per cent of annual salary or twice the annual salary if shareholders explicitly approve goes beyond what is permitted under current EU treaties and won t make the financial system any safer Britain Europe s biggest financial hub has warned repeatedly that banks could move their operations to the US or Asia as a result of the new rules which would apply to banks in all 28 EU countries and to EU banks operating overseas Proponents of the plan argue that it will ensure banks are safer and more stable by tackling the so called bonus culture which

    Original URL path: http://www.businessspectator.com.au/news/2013/9/27/global-financial-crisis/britain-ordered-cap-bank-bonuses (2014-01-12)
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  • Lehman's ghost haunts banks from beyond the grave | Business Spectator
    receded Some of the crazier innovations have been reined in banks are better capitalised and financiers act more cautiously But the bad news is that the system is just as insane perhaps more so There are a host of developments that are at best counterintuitive and at worst dangerously bizarre Investors may no longer face six new banking shocks before breakfast but there are at least six peculiar features of the post Lehman world that might make Alice blink First the big banks are bigger not smaller When Lehman collapsed there was outrage about the fact that many western banks had become so enormous they were too big to fail forming concentrations of risk Reformers called for banks to be broken up to make them smaller and introduce badly needed diversity Some financial officials such as Richard Fisher of the Dallas Fed continue to demand this sensible step But as the investor Henry Kaufman points out the banking world especially in the US has become more concentrated than ever That is unnerving particularly since no one knows how regulators would ever shut down a really big bank Second the shadow banking world is taking over more activity not less When Lehman failed regulators suddenly realised they had been ignoring the non bank sphere enabling egregious behaviour to flourish Given that you might have expected those shadows to shrink But think again it has expanded since 2008 from US59 trillion A63 66 trillion in size to US67 trillion according to the Financial Stability Board And it is likely to swell further because tighter bank regulations are pushing more and more activity into the non bank world The FSB insists it has become better at monitoring these shadows we had all better hope it is right Third the system depends more than ever on investors faith in central banks One issue that caused the last credit bubble was excessive investor trust in the abilities of central bankers both to keep inflation low and to understand how financial innovation worked Logic might suggest this blind faith should have wilted after Lehman Brothers failed Not so these days all manner of asset prices are being propped up by a sunny investor belief that central bankers know what they are doing with quantitative easing even though nobody has tried it on this scale before or knows how to exit Fourth the rich have become richer The Lehman Brothers crisis triggered a surge of popular anger against wealthy elites hence the rise of the Tea Party Occupy Wall Street and other protest groups But that has not caused elites to lose wealth On the contrary one largely unacknowledged consequence of quantitative easing is that this has increased asset prices and thus benefited the asset rich wealthy elite widening inequalities The Bank of England for example calculates that 40 per cent of the QE benefit has gone to the top 5 per cent including those bankers Fifth financiers have been prosecuted but not for the credit bubble

    Original URL path: http://www.businessspectator.com.au/article/2013/9/13/global-financial-crisis/lehmans-ghost-haunts-banks-beyond-grave (2014-01-12)
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  • Gillian Tett - FT | Business Spectator
    Management Wireless Security Telecommunication Latest stories Google v Facebook Who knows wins The unparalleled Google Analytics service means Google knows more about internet users than anyone else And runner up Facebook must go further to mine precious user insights if it wants to compete Will Twitter s founder strike social gold twice Biz Stone is looking to tap into the selflessness of others with his latest venture Jelly Enterprises But the just launched app will have to quickly shift into something of real value if it s to become a mainstream success Climate Carbon markets Energy markets Renewable energy Resources Solar energy Wind power CleanTech Science Environment Green Deals Policy Politics Smart Energy Latest stories Marking the milestones of 2013 Australia s transition to a clean energy economy took some political blows in 2013 but progress on the ground was heartening with energy efficiency solar and wind all providing tangible proof of their future potential A fifth year of declining power consumption Power consumption fell again in 2013 dipping 2 8 per cent across the National Electricity Market as scheduled renewables rose to 12 per cent of the market Industries Advertising and Marketing Agribusiness Automotive Aviation Construction and Engineering Education Family Business Financial Services Food and Beverages Gaming and Racing Health and Pharmaceuticals HR Industrial relations Information Technology Infrastructure Insurance Manufacturing Media and Digital Resources and Energy Professional Services Property Retail Small Business SME Telecommunications The Ashes Tourism Transport and Logistics Video KGB TV China Spectator CEO Hub Leadership Lab Management Insights Young Leaders Knowledge Centre Adapt or Die Knowledge Hub Business Accelerators Webinars eBooks Menu Gillian Tett FT Lehman s ghost haunts banks from beyond the grave In the five years since Lehman Brothers collapsed the big banks have become bigger the rich have become richer and the system remains ever dependent on investors faith in central banks The world of finance is still a complex dangerous mess by Gillian Tett FT 4 06pm September 13 3 comments Frankenstein CDOs twitch back to life Issuance of collateralised loan obligations has surged this year and some investment banks are considering synthetic CDOs Should policy makers be screaming by Gillian Tett FT 7 00pm June 07 2 comments Bulls leave venture capital on the sidelines A global decline in venture capital has taken seasoned observers aback and raised questions about who will fund big speculative innovation bets in the future by Gillian Tett FT 9 19am May 24 1 comment Lehman s ghost haunts banks from beyond the grave In the five years since Lehman Brothers collapsed the big banks have become bigger the rich have become richer and the system remains ever dependent on investors faith in central banks The world of finance is still a complex dangerous mess by Gillian Tett FT 4 06pm September 13 3 comments Frankenstein CDOs twitch back to life Issuance of collateralised loan obligations has surged this year and some investment banks are considering synthetic CDOs Should policy makers be screaming by Gillian Tett

    Original URL path: http://www.businessspectator.com.au/contributor/gillian-tett-ft-0 (2014-01-12)
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