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Verrazzano Capital PartnersAustralia learns, as Dutch did in 1960s, that resource boom has downside |BEWARE Dutch disease. No, this is not a travel warning for tourists visiting the seedier parts of Amsterdam. It's a history lesson about how commodities booms can become double-edged swords for resource-rich countries, a lesson that Australia is now learning as a strong Australian dollar becomes an unbearable burden for much of its economy. Coined after a surging Dutch guilder eviscerated Holland’s manufacturing industry in the aftermath a giant natural gas discovery in 1959, 'Dutch Disease' refers to the loss of competitiveness that labor-intensive industries suffer when a currency appreciates on the back of rapid growth in a capital-intensive resource sector. Companies that extract and market the commodity do well, but the rising currency also causes downstream manufacturing exporters to lose market share to foreign competitors while foreign investment inflows associated with the boom push local asset and consumer prices ever higher.
BlueCrest Capital Management (UK) LLPRBA: Bulletin February 2001-Statement on Monetary PolicyReserve Bank Bulletin – February 2001 Download the complete Statement [PDF 771K] Go To International economic conditions have weakened in recent months and are likely to provide a less favourable environment for the Australian economy in the coming year. The slowing now under way in the US economy comes after a period of exceptional strength, both in terms of the length of the economic expansion to date and the average pace of growth recorded in the past few years, with growth being particularly strong in the first half of 2000. Financial market developments have played an increasingly important role in shaping US economic performance in recent years, both adding impetus to growth through much of the second half of the 1990s and more recently dampening demand. There is at present, therefore, a good deal of uncertainty about the near-term prospects for the US economy. The Australian economy has also slowed in recent months, although for somewhat different reasons than the US. Graph 1 Japan
The Complete And Annotated Guide To The European Bank Run (Or The Final Pha"Nervous investors around the globe are accelerating their exit from the debt of European governments and banks, increasing the risk of a credit squeeze that could set off a downward spiral. Financial institutions are dumping their vast holdings of European government debt and spurning new bond issues by countries like Spain and Italy. And many have decided not to renew short-term loans to European banks, which are needed to finance day-to-day operations. " So begins an article not in some hyperventilating fringe blog, but a cover article in the venerable New York Times titled "Europe Fears a Credit Squeeze as Investors Sell Bond Holdings." Said otherwise, Europe's continental bank run in which virtually, but not quite, all banks are dumping any peripheral exposure with reckless abandon is now on. But first some more details from the NYT: The flight from European sovereign debt and banks has spanned the globe. Is this setting familiar to anyone?
SAC Capital AdvisorsUn article de Wikipédia, l'encyclopédie libre. Portail de la financeMohamed El-Erian offers six reasons why business investment has stalled, deNEWPORT BEACH, CALIFORNIA – Some economists, like Larry Summers, call it “secular stagnation.” Others refer to it as “Japanization.” But all agree that after too many years of inadequate growth in advanced economies, substantial longer-term risks have emerged, not only for the wellbeing of these countries’ citizens but also for the health and stability of the global economy. Those looking for ways to reduce the risks of inadequate growth agree that, of all possible solutions, increased business investment can make the biggest difference. And many medium-size and large companies, having recovered impressively from the huge shock of the 2008 global financial crisis and subsequent recession, now have the wherewithal to invest in new plants, equipment, and hiring. However one looks at it, the corporate sector in advanced economies in general, and in the US in particular, is as strong as it has been in many years. First, companies are concerned about future demand for their products.
Bank Runs: The Concise Encyclopedia of Economics | Library of Economics andA run on a bank occurs when a large number of depositors, fearing that their bank will be unable to repay their deposits in full and on time, simultaneously try to withdraw their funds immediately. This may create a problem because banks keep only a small fraction of deposits on hand in cash; they lend out the majority of deposits to borrowers or use the funds to purchase other interest-bearing assets such as government securities. When a run comes, a bank must quickly increase its cash to meet depositors’ demands. It does so primarily by selling assets, often hastily and at fire-sale prices. As banks hold little capital and are highly leveraged, losses on these sales can drive a bank into insolvency. The danger of bank runs has been frequently overstated. Of course, if the depositors’ fears are justified and the bank is economically insolvent, other banks will be unlikely to throw good money after bad by recycling their funds to the insolvent bank. About the Author George G.