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Category archive for economics

Because archives are so much easier than having just hundreds of posts on the home page. I learned that the hard way.

The REAL reason CBA is buying BankWest

2008.10.08 – 14.25

Perth Skyline, Western Australia
Photo I took of the Perth skyline a few months ago. The dark building with what looks like a pyramid on top is the headquarters of BankWest.

News is flying around Australia today of the Commonweath Bank’s buying of BankWest, a West Australian bank owned by the British HBOS group. As a result, the expansion of new branches into the eastern states will cease according to an ABC News report:

The chief executive of the Commonwealth Bank, Ralph Norris, has confirmed that the rollout of BankWest branches on the east coast will stop as a result of the $2 billion takeover.

Mr Norris has described BankWest as a leader in the growing Western Australian market and a good investment for CBA shareholders.

Mr Norris says there will be no closures of both Commonwealth or BankWest branches and businesses in Western Australia as a result of the acquisition.

Last year, BankWest launched a program to open 160 branches nationwide, but today Mr Norris said he will review BankWest operations in the east.

“I would suggest that the branch rollout would cease,” he said.

Given Australia’s banks are in good shape and the British banks are suffereing as a result of the subprime mortgage crisis, I suspected the buyout was just a result of opportunistic buying. The last line in an ABC News report said it all though:

Mr Norris says a merged BankWest-CBA will be bigger than the Westpac-St George entity.

Aha! This is just a tactic so you can keep calling yourselves number 1 after Westpac buys St George and BankSA! You shrewd, shrewd bankers ;-).

By Ruben Schade | Also posted in australia | Comments (0)

Ouch

2008.10.07 – 06.03

Taken from the Bloomberg application on my iPhone 3G at 05:31am Australian Central Daylight Savings Time… what a mouthful.

Dow Jones at 9636.99

Dow Jones at 9636.99

By Ruben Schade | Comments (0)

My view on the role of capitalism, via Twitter

2008.10.07 – 02.30

Twitter conversation from an hour ago

Given the current financial situation in the United States and resulting global uncertainty, I could be penning thousands of posts here about economics… however given I’m studying economics as one of my degrees, for some reason I feel I’m writing enough about this issue as it is!

That said, I did have quite an involved (and unintended!) conversation with a couple of people about the current situation which evolved into the role of capitalism in general. For those of you not following me on Twitter, here is is. I’d love to hear your feedback if you have any opinion on the issue(s).

My proudly held Keynesian, regulated, sustainable growth over exponential growth, free market skeptic side seems to show a bit ;-).

Rubenerd
Retweet @cburell: As Reagan was to USSR decline, so Bin Laden was to US decline. 10 trillion debt, makes sense. http://tinyurl.com/53mrs4
skydaddy
@Rubenerd utter foolishness. The USSR was paying its soldiers in cabbages and brassieres at the end. The US economy is hardly decimated.
Rubenerd
@skydaddy Was just retweeting. Current US economic conditions are certainly no glowing endorsement of unregulated capitalism FWIW.
skydaddy
@Rubenerd found Clay’s post and replied w/ link. Neither is current condition an indictment of capitalism, nor endorsement of socialism.
Rubenerd
@skydaddy I do think capitalism is the way to go, but it must, MUST be fully regulated to work. Nobody wins unless we all win.
skydaddy
@Rubenerd actually, current market woes an indictment of liberal experiment to use govmt to encourage people to borrow beyond their means
Rubenerd
@skydaddy I agree with you partly. People borrowed beyond their means, but it’s the fault of greedy, unregulated, predatory finance companies.
skydaddy
@Rubenerd agree it’s not a zero-sum game, but some people do in fact lose. bad luck, bad decisions, bad timing take their toll.
Rubenerd
@skydaddy True. And in the end the people who really suffer are people, and that’s a travesty.
skydaddy
@Rubenerd if you’re saying that government should regulate business to prevent all suffering, we disagree. Can’t be done. Capitalism = risks
Rubenerd
@skydaddy That’s true, capitalism = risks, just as communism = bust. Regulated capitalism with sound monetary policy = less risk.
Cburrel
@skydaddy patriotism is no argument against economic realities, is it? we’re mid-avalanche right now, & you cite current snapshots.
skydaddy
@cburell Call me when US Navy puts into port & USAF suspends training flights b/c they can’t buy gas or pay troops. That was USSR in ’80s

@Rubenerd what is the goal of regulation - that’s key. s/b prevent excesses and abuses, not encourage them. hence current troubles

Rubenerd
@skydaddy True that regulation automatically doesn’t = good.

@skydaddy In this case I’d argue a result of insufficient regulations on financial institutions issuing credit.

@skydaddy Provided China and Japan keep buying US bonds the short term ramifications won’t be as bad, but long term not so sure.

skydaddy
@Rubenerd other countries buy our bonds b/c they think we will repay in future. Totally puts the lie to the “binLaden=Reagan” thesis.
Rubenerd
@skydaddy No, China and Japan are buying US bonds to artificially lower their currency values, to allow their exports to be cheaper.

@skydaddy But I do agree that poor people being lied too is just an abhorant situation.

skydaddy
@Rubenerd of course, we have to pay back the loans, which means create real value, not just paper wealth.
Rubenerd
@skydaddy True, that is the point of credit. I guess it bothers me that not enough productive use is being generated from said funds.

Alas I didn’t even get into the real core issues of the subprime mortgage crisis though which are: Greed. Arrogance. Fabrication. Lies. Lack of accountability.

I doubt that this is a signal that the United States Empire is on the decline if only because some of the brightest and sharpest inventors, ethical businesspeople (yes, they do exist), artists, doctors, you name them, live there and continue to do amazing and beautiful things that the world benefits from. I just hope the ship my American friends are sailing on doesn’t sink and drown them.

Of course the other side of this whole issue is that it’s being blown way out of proportion to allow corporate executives and financial institutions to get away with criminal ineptitude. I will restrain myself!

By Ruben Schade | Comments (0)

3/700ths of a Wall Street bailout will feed every child

2008.10.01 – 23.40

Josette Sheeran from the World Food Programme on the Late Show with David Letterman

Sometimes you post comments about how you’re going through a crisis of your own, only to see something that completely puts developed world problems into context.

First a bit of background: Channel Ten in Australia presents a 24 hour delayed telecast of the Late Show with David Letterman from the States on most weeknights which I treat myself to watching after a day of working and studying. Tonight, alongside The Virgins (a band I instantly liked after hearing less than 5 seconds of the song they played) and Anne Hathaway (call me… please?) Dave also had on Josette Sheeran from the World Food Programme.

It was without a doubt one of the most inspirational interviews I’d ever seen. They discussed the plight of starving children from Myanmar to Darfur in Sudan, and how by the WFP’s calculations $3 billion these children could be fed.

$3 billion could feed every child on the planet. Let me say that again.

$3 billion could feed every child on the planet.

My thoughts turned to the nauseating $700 billion plan to bail out the arrogant bankers who exploited people through lax legislation, and it managed not only to boil my blood but turn the mild headache I had at that point into a migraine. $3 billion is NOTHING.

From the site URL they posted on the programme:

Josette Sheeran from the World Food ProgrammeWelcome! You may have just seen me on the “Late Show with David Letterman” where I was talking about hunger and the frontline work of WFP. It is WFP’s goal to put hunger out of business. Together we can do this. Just 25 cents a day or 50 US Dollars a year can ensure that children have a nourishing cup of porridge in school - virtually transforming their lives.

WFP is as effective as it is efficient. 93 cents out of every dollar goes directly to getting food to those who need it. WFP is pioneering solutions to hunger including purchasing 80 percent of the food we buy from developing world farmers. This is a win-win that can break the cycle of hunger at its roots.

I have just come back from Haiti, which has been devastated by series of four hurricanes and tropical storms over a six-week period. I saw people in Gonaives walking knee-deep in grey-brown mud, and escaping to the refuge of their roofs, where they are living as they wait for water to recede and mud to dry.

Their children need your help now. Any contribution you can make will go to school meals. You can be part of the solution now.

Josette Sheeran
WFP Executive Director

Now to business. It’s not often I explicitly tell people to do something, but I’m ordering you to do this right now.

If you have a credit card that has even $5 remaining on it, go to The World Food Programme website, click on "United States" or "Outside the US" depending on where you are, and donate some money. I was saving my credit card balance for a new internal hard drive for my laptop, but I’m giving the money to these folks instead.

I wish the United Nations and the World Food Programme the best of luck in their efforts. If they’re part of a conspiracy to instigate a New World Order, I’m look ing forward to it. Time to put aside this 19th century mindsent nonsense that countries are still relevant in this day and age and start helping… people.

United Nations C-130 Hercules transports deliver food to the Rumbak region of SudanFrom Wikipedia: United Nations transports deliver food to Sudan

By Ruben Schade | Also posted in politics | Comments (1)

At least Australian banks are weathering crisis just fine

2008.09.25 – 16.34

Prime Minister Kevin Rudd in New York, 25th September 2008
Prime Minister Kevin Rudd in New York, 25th Septemter 2008
Photo from The Australian

With all the gloom and doom reports coming from across the Pacific in the United States with regards to the Subprime Mortgage Crisis and the string of unavoidable but nonetheless nauseating bailouts we’ve all heard about by now, it’s good to know that our own banking system and financial institutions in Australia are weathering the storm just fine. According to the Business section of The Australian paper and a recent report from the Reserve Bank, we’re actually in a relatively sound position:

“[Australia's] banking system is soundly capitalised, it has only limited exposure to sub-prime related assets, and it continues to record strong profitability and has low levels of problem loans,” it said.

The mostly upbeat report came a day after the International Monetary Fund issued a similar glowing assessment of Australia’s economy, fiscal settings and the resilience of its banks.

The RBA indicated that it, like many others, has been surprised by the extent of the financial crisis now sweeping global markets, but Australia’s banks were set to ride out the worst of it thanks to strong loan books and limited offshore exposures.

Unfortunately as I had suspected the global distrust and fear of banks is having an impact on Australian banks despite solid domestic performance. It’s another example of panic eclipsing common sense and actually doing research into companies you’re sinking money into.

For all the talk of lax regulations in the United States causing problems, I can’t help but think it has to do more with greed and general slackness. Again from the article:

[...] the central bank highlighted a few areas of the financial system hurt by the global turmoil.

“Australian Bank share prices are down considerably and banks’ funding costs have increased significantly,” the RBA said.

Bank bad debt provisioning has risen, but the ratio of banks’ problem loans to total assets remains below the average since the mid-1990s, “a period of unusually low credit losses”, it said.

In line with its recent comments on the economy, the central bank said that household balance sheets were entering a period of consolidation due to tighter financial conditions, but households were still drawing benefits from low unemployment rates and solid incomes growth.

Some stress signals are emerging for the mortgage belt, although these are minor compared to those in the United States.

This of course prompted the relaxing of interest rates from 7.25% to 7.00% earlier this month.

And to end this post, as if I needed an excuse to show something cool from my iPhone, here’s a screenshot of the Stocks application showing common indexes:

iPhone Stocks application

By Ruben Schade | Also posted in australia, media, sport | Comments (0)

RBA drops interest rates by quarter percent

2008.09.02 – 05.32

UPDATE: It’s now official: the Reserve Bank of Australia has lowered interest rates by one quarter of a percent.

I know this is supposed to be a technology weblog, but I’m also studying economics and like to keep on top of developments. Does that make me more or less of a loser?

Economists in Australia have been waiting for this day for a long time and we’ve all been speculating what the Reserve Bank would be doing on said day. Since 2001 the RBA has incrementally increased interest rates to curb Australia’s stubborn inflation fueled mostly by domestic demand. While the world has gone through several notable economic corrections and booms over the last decade and a half, Australia hasn’t suffered a recession in more than 16 years.

ASIDE: Some attribute this uninterrupted period of growth to the policies of John Howard’s conservative government which was in power until last year when Labor took the reigns again. I’m skeptical!

Back to today’s news though, analysts have long predicted an end to this seven years of rate rises with a cut of one quarter of a percent. The leader of the conservative opposition Brendon Nelson wants a double half percent cut, and even went as far as to recommend it to the Reserve Bank, despite acknowledging that he supposedly respects the nonpartisan independence of the RBA and that if he were the prime minister he wouldn’t be issuing the advice. Our current PM Kevin Rudd took him to task for the comment with another brilliant speech to parliament, but I have to admit Nelson did set up the pins for Rudd to knock over!

Despite the oil price falling in recent days, overall we’re still looking at high levels which have putting pressure on almost all consumer goods prices. Transport costs are through the roof and few manufacturing and service industries have come out unscathed. Much of the inflation in Australia in recent years can be attributed to this relatively inelastic commodity, but according to an ABC News report, even factoring out the oil price inflation is rising, despite an overall drop in August.

I think it’s safe to say the Reserve Bank will be very cautious with any adjustments to rates, and that a prediction of a quarter percent drop is feasible. Inflation is still above 4% which is far in excess of the RBA’s target band of 2-3%, but consumers are demonstratively finding it harder to make ends meet now even compared with a year ago.

As a direct result, last night the Aussie dollar dropped to below US$0.85 for the first time in a year which will help exporters and improve our terms of trade. For my own selfish purposes, I’m hoping the falling interest rate in Australia will allow me to sell my existing Singapore Dollars for more, given that I got such a lousy return when I arrived here last month!

Obligatory Illuminati Section

At this point I feel obligated to say that the Reserve Bank in Australia, just like the Federal Reserve in the United States is part of a worldwide conspiracy to concentrate power into the hands of the Illuminati, a group of people I exposed for their evil in a previous post… uh, yeah!

By using proven techniques such as assuming correlation equals causality, conveniently denouncing the capacity for peer review using the justification that teritary instituions and councils are controlled by the Illuminati too… wait we still can’t prove it. But you’d better believe exactly what we say without question otherwise you’re a duped sheeple because the definition of "duped" is the need for evidence before a belief is upheld, right?

How much wood could a woodchuck chuck if a woodchuck could chuck wood?

By Ruben Schade | Also posted in australia | Comments (2)

Back in Adelaide, world business rant

2008.07.18 – 19.10

I’m currently in the process of moving to Adelaide for my next 6th month study period ending around Christmas. I’m typing this at Adelaide Airport (the new one that I Twitter messages from my phone.

Adelaide
Photo of Adelaide: the colour saturation might be slightly off!

We went via Perth and spend a few days there, Perth really is a beautiful place. If I weren’t already halfway through studies here I would seriously consider studying there! Again I’ve got some photos but the internet here isn’t reliable enough to let me upload huge file right now. Stay tuned.

I’m missing Singapore, and KL, and Asia already, but we went to IKEA this afternoon and it felt as though we were right back there again! When people say how the world is becoming so generic as a result of companies setting up shop in multiple countries, a part of my appreciates the fact I can walk into a Starbucks and an IKEA in Adelaide, Singapore or KL and I’m in a familiar environment and I can order the same stuff… it’s very comforting in a 1980s born child who’s living in a place where he didn’t grow up and who seems to be a hopeless consumerlittle commonality is good, right? It’s okay to be alright with at least some of this right?

Perhaps I should just stop talking before I dig myself even deeper into this hole.

Cheerio everyone :-).

By Ruben Schade | Also posted in australia, rant | Comments (2)

JB Singapore urban rails: about time!

2008.04.17 – 20.17

The always impartial, unbiased and reliable Channel News Asia is reporting some good news in Singapore-Malaysian relations specifically related to Johor Bahru

SINGAPORE: Prime Minister Lee Hsien Loong has responded positively to a suggestion by Johor’s Chief Minister Abdul Ghani Othman to link up the urban rails of Singapore and Johor Bahru.

[Some of the] issues discussed between the Singapore and Malaysian foreign ministers is how to further integrate the economies of both countries and to enhance connectivity across the causeway.

Johor Bahru, Malaysia
Photo of JB taken from Wikipedia by PM Poon

Having lived both in Singapore and Malaysia since the mid 1990s I’m used to hearing a lot of big talk and not much progress on most matters of collaboration, which even just from an economic perspective is such a shame. With so much competition from other players in Asia for the industries and services that Singapore and Malaysia both provide, it seems now that collaboration should be a top priority.

ASIDE: For my readers who aren’t from around these parts, JB is the near universally used name and acronym for Johor Bahru which is the closest Malaysian city to Singapore, separated only by tiny Straits of Johor.

Wikipedia articles on: Johor Bahru, Malaysia, Singapore.

Take Australia and New Zealand as an example: They’re separated by a strait of water (albeit somewhat larger!) and have roughly similar populations to Malaysia and Singapore respectively, but the difference in the amount of trade is huge! Now granted their economies are at different levels of development and the makeup of their exports and imports are different, but it shows that countries with a shared heritage can benefit each other even when socially and politically they may differ in many ways.

Singapore, Batam and Bintan on Google Earth
Google Maps imagery of Singapore and surrounds. The white stripe superimposed over the Straits of Johor is the national border between Singapore and Malaysia which is part of the Asian mainland.

Like it or not, Singapore and Malaysia are neighbours, and the only way they’ll each succeed in the long term is if they cooperate. Some more decent connections between JB and Singapore would be a good start.

By Ruben Schade | Also posted in malaysia, politics, singapore | Comments (0)
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