Economic News

Insee Cuts French Growth Forecast Sees Stagnation In Q4

The French statistical office Insee downgraded its growth forecast amid a new spike in uncertainty over the summer. (Oct 7, 2011) Full Article

Moody's Downgrades Nine Portuguese Banks

Moody's Investors Service on Friday downgraded senior debt and deposit ratings of nine Portuguese banks, citing deterioration of their unsupported financial strength. (Oct 7, 2011) Full Article

IMF: Risks To Australia's Growth Outlook Tilted To Downside

Risks to Australia's economic growth prospects are tilted to the downside, though the overall outlook is favorable, the International Monetary Fund said Thursday. (Oct 7, 2011) Full Article

ECB's Gonzalez-Paramo: Interest Rates Are " Sufficiently Low"

The current interest rates in Eurozone are " sufficiently low," reports quoted European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo as saying in a radio interview on Friday. (Oct 7, 2011) Full Article

Canadian Unemployment Drops To 7.1%, Economy Generates Nearly 61,000 Jobs

Canadian employment rose sharply in September, with most of the gains coming in full-time positions, official data revealed Friday. (Oct 7, 2011) Full Article

Hsieh Fu Hua steps down as Temasek president

He cites personal priorities as reason for stepping down

Teo Xuanwei

xuanwei@mediacorp.com.sg

Mr Hsieh (picture) was appointed president of Temasek 14 months ago and had been tipped as a potential successor to its chief executive Ho Ching.

In a statement, Temasek said Mr Hsieh decided to step down from his executive position to “make room for personal priorities”.

Mr Hsieh, 60, will remain as a board member, as well as retain his position as chairman at the group’s Fullerton Fund Management Company, ST Asset Management and the Temasek-supported Stewardship and Corporate Governance Centre, according to the statement.

Mr Hsieh is the second president Temasek has lost in three months — former executive director and president Simon Israel retired from his executive and board roles in July to become SingTel chairman.

Mr Hsieh’s departure means Mr Gregory Curl, who oversees investments in financial services and strategy for the Americas, is the sole remaining president among the three appointed between August and September last year to help Ms Ho support and develop the group’s leadership team.SINGAPORE — Former Singapore Exchange chief executive Hsieh Fu Hua has stepped down, with effect from last Saturday, as president of Temasek Holdings — in the latest, and the most high-profile, of a string of management changes in the investment company in recent months.

A SHIFT IN DIRECTION ?

In July, Mr Gan Chee Yen, the co-chief investment officer and senior managing director for special projects at Temasek Holdings Fullerton, was named CEO of Financial Holdings, replacing Mr Francis Rozario.

Meanwhile, two top executives at Temasek’s Seatown Holdings — Messrs Charles Ong and Nasser Ahmad — have left the hedge fund. Mr Ong returned to Temasek as special projects director, while Mr Nasser is exploring other options.

In February, Mr Ding Wei, the investment banking chief of China International Capital, was appointed to lead Temasek’s operations in China.

In September, it tapped Bank of America Merrill Lynch banker Tan Chong Lee to its senior leadership. Last week, Temasek India head Manish Kejriwal quit to start his own fund and was replaced by Mr Rohit Sipahimalani.

Either for personal or professional reasons, the slew of changes in the management ranks raises questions as to whether there is a shift in strategy or direction within Temasek.

CIMB Research executive director Song Seng Wun added that the changes could be part of Temasek’s strategy to create a leadership base and ensure continuity within the management team, noting that some of the new hires are old hands in the industry.

“Perhaps the organisation is preparing itself for the more volatile investment landscape ahead,” he said.

But NRA Capital executive chairman Kevin Scully said: “It’s hard to speculate as to why there have been these changes. “But, looking at it on the surface, it can be down to natural succession or leadership renewal.”

Still, Singapore Management University’s finance don Melvyn Teo felt that the slew of changes were detrimental to Temasek.

He told

Asked if Mr Hsieh’s stepping down as president was a setback to Temasek’s protracted search for Ms Ho’s successor, CIMB Research’s Song said: “I don’t think it’s a blow but it’s not easy.”

Agreeing, SMU Assistant Finance Professor Annie Koh said: “Many people have been paying total attention to changes right at the top level but I think they are jumping ahead by thinking that any president brought in is the next leader,” said Asst Prof Koh.

Temasek doubled its net profit to S$13 billion and saw its portfolio value hit a record S$193 billion in the financial year ended March 31, as compared to the previous year.Bloomberg: “If you have too many changes in too short a span of time, it can’t be good for the organisation — especially in the kind of organisation like Temasek, which takes a long-term view on their investments, it’s important to have a stable pool of senior management at the helm.”

If China cannot do very much about existing gross assets and gross liabilities, it should address new assets and liabilities in order to minimise future capital losses. In short, China must take into consideration the ongoing asset crisis facing emerging economies, especially when considering highly consequential questions such as full yuan convertibility and the currency’s internationalisation.

Meltdown Part 1:

" The Men Who Crashed The World"

Something very big will happen in America within the
next 180 days.

It will be more devastating than the credit crisis of 2008.
For most people, it will hit them like a brick wall.

It will touch Americans harder and deeper than anything
else we've seen since the Great Depression.

Michael Lombardi feels so strongly about this, he's
decided to present his " Critical Warning Number Six" in a
new video.

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Michael correctly predicted the crash in the stock market
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I call Michael's new video controversial because most
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Michael's first five predictions have already come true.
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Yours truly,

Wendy Potter, BA
Managing Editor
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News, Analysis and Information Services Since 1986
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---

Why import graduates if there is oversupply?

Letter from John Chan Chi Yung

I REFER to the report “Expanding the university sector is not ‘just creating more places’” (Sept 16), on the Ministry of Education’s deliberations as it looks into increasing the university intake.

I am a little confused about the fear that doing so may result in graduates being under-employed or unemployed.

This is especially so when part of the requirement for S-Pass and Employment Pass holders is a university degree or equivalent.

For the Government to allow these degree-holders into Singapore, it implies there is a need for them.

How long has the MOE been concerned about the oversupply of graduates and was this a factor in the pace of increase in places at our local universities until now?

The MOE’s concerns seem at odds with the Government’s lament about the difficulty of finding talent.

How will talents arise if they are deprived of tertiary education?

But if the MOE’s concerns are valid, then too many foreign degree-holders are being allowed in now.

DEVELOPED  NATIONS  are  DE-developing  intO  DE-merging nAtIOns

Euro zone death trip

It’s a very big gap between what the euro needs to survive and what leaders are willing to do

Is it possible to be both terrified and

THE NEW YORK TIMES

Paul Krugman is professor of economics and international affairs at Princeton University. He received the Nobel Prize in Economics in 2008.

bored? That is how I feel about the

negotiations now under way over how

to respond to Europe’s economic crisis,

and I suspect other observers share the

sentiment.

On one side, Europe’s situation

is really, really scary: With countries

that account for a third of the euro

area’s economy now under speculative

attack, the single currency’s very

existence is being threatened — and a

euro collapse could inflict vast damage

on the world.

On the other side, European policymakers

seem set to deliver more of

the same. They will probably find a

way to provide more credit to countries

in trouble, which may or may

not stave off imminent disaster. But

they do not seem at all ready to acknowledge

a crucial fact — namely,

that without more expansionary fiscal

and monetary policies in Europe’s

stronger economies, all of their rescue

attempts will fail.

The story so far:

The introduction of the euro in 1999 led to a vast boom in lending to Europe’s peripheral economies(wrongly) that the shared currency made Greek or Spanish debt just as safe as German debt., because investors believed

Contrary to what you often hear, this lending boom was not mostly financing profligate government spending — Spain and Ireland actually ran budget surpluses on the eve of the crisis, and had low levels of debt. Instead, the inflows of money mainly fuelled huge booms in private spending, especially on housing.

But when the lending boom abruptly ended, the result was both an economic and a fiscal crisis. Savage recessions drove down tax receipts, pushing budgets deep into the red.

Meanwhile, the cost of bank bailouts led to a sudden increase in public debt.

And one result was a collapse of investor confidence in the peripheral nations’ bonds.

So now what? Europe’s answer has been to demand harsh fiscal austerity, especially sharp cuts in public spending, from troubled debtors, meanwhile, providing stopgap financing until private-investor confidence returns.

Can this strategy work?

Not for Greece, which actually was fiscally profligate during the good years, and owes more than it can plausibly repay.

Probably not for Ireland and Portugal, which for different reasons also have heavy debt burdens.

But given a favourable external environment — specifically, a strong overall European economy with moderate inflation — Spain, which even now has relatively low debt, and Italy, which has a high level of debt but surprisingly small deficits, could possibly pull it off.

Unfortunately, European policymakers seem determined to deny those debtors the environment they need.

Think of it this way:

Private demand in the debtor countries has plunged with the end of the debtfinanced boom. Meanwhile, publicsector spending is also being sharply reduced by austerity programmes. So where are jobs and growth supposed to come from?

The answer has to be exports, mainly to other European countries.

But exports cannot boom if creditor countries are also implementing austerity policies, quite possibly pushing Europe as a whole back into recession.

Also, the debtor nations need to cut prices and costs relative to creditor countries like Germany, which would not be too hard if Germany had 3 or 4 per cent inflation, allowing the debtors to gain ground simply by having low or zero inflation. But the European Central Bank has a deflationary bias — it made a terrible mistake by raising interest rates in 2008 just as the financial crisis was gathering strength, and showed that it has learned nothing by repeating that mistake this year.

As a result, the market now expects very low inflation in Germany — around 1 per cent over the next five years — which implies significant deflation in the debtor nations.

This will both deepen their slumps and increase the real burden of their debts, more or less ensuring that all rescue efforts will fail.

And I see no sign at all that European policy elites are ready to rethink their hard-money-and-austerity dogma.

Part of the problem may be that those policy elites have a selective historical memory. They love to talk about the German inflation of the early 1920s — a story that, as it happens, has no bearing on our current situation.

Yet they almost never talk about a much more relevant example:

The policies of Heinrich Bruning, Germany’s Chancellor from 1930 to 1932, whose insistence on balancing budgets and preserving the gold standard made the Great Depression even worse in Germany than in the rest of Europe — setting the stage for you-know-what.

Now, I do not expect anything that bad to happen in 21st-century Europe.

But there is a very wide gap between what the euro needs to survive and what European leaders are willing to do, or even talk about doing. And given that gap, it is hard to find reasons for optimism.

Let’s not bark up the wrong financial tree

Letter from Chia Hern Keng

THE tenor of the commentary “Can China escape the debt crisis?” (Sept 22) shifts the blame for the global financial crisis to Asia instead of, rightly, to the West, where the mess originated.

The writer says the Asian propensity to save and invest — rather than to spend even when you lack the means — is a root cause of the financial crisis.

The reverse argument can be made that this kind of national savings made China the biggest creditor of the United States, even while most Chinese subsist on a modicum of current American-type standard of living.

And it is not as if China has no other option to invest its money, like buying up land, properties or companies around the world.

It is needful for such writers to understand that the Asian habit of saving for a rainy day is global, cross-cultural wisdom, lost through decades of manipulation and deceit by American bankers.

The sub-prime scam, the repackaging of these high-risk loans into financial derivatives and reselling them to other banks as well as the Lehman minibonds all represent unethical industry practices, left unchecked prior to the current US administration.

If we analyse the causes of the financial crisis, be it American or European, without having to go into technical details, we find that they are ultimately a matter of life values.

Perhaps I oversimplify the issue, but I say it has to do with living beyond one’s means and failing to save for a rainy day.

Yet even now, international financial institutions are saying that promoting consumerism in Asia is a solution to the global crisis.

It is strange to believe that more mass consumerism is good when it is clearly the cause of the current crisis.

Another tacit and strongly held theory on the subject of the global economy is that it is subject to stock market reactions.

Governments feel powerless to control wild swings of the financial markets they are careful with every statement they make on related matters, fearing a backlash.

In reality, strong market reactions are caused by a small, speculative segment of the investing community.

I venture to suggest that these abrupt changes are made possible to a large extent by instantaneous transactions in electronic trading.

Such a technology, despite its advantages,

This is an area for leaders to look into — moderating the erratic behaviour of financial markets — to prevent the whole house from toppling.

Even if the negative outlook on a double-dip recession and years of slow growth ahead are correct, how will such doomsaying help, given that the damage was done decades ago — be it the sub-prime, European sovereign debt or other related problems?

Apart from finding technical solutions, leaders from the International Monetary Fund, the World Bank and governments everywhere should sit down together, collaborate closely and decide that they cannot afford to act like losers if they want to lead the world.

In each and every AUSTERITY MEASURE, the cOst is always cUt on the PEOPLE at the bOttOm and nEvEr eVer  on thOse VIPs at the TOP whO creAted the hOrrIble mEss has downsides for society and the world.

It’s a dash for cash ...

Gold prices tumble as investors trade metal for money

SINGAPORE

Investors are swapping the traditional haven of gold for cash — causing the precious metal to tumble by as much as US$270 an ounce to touch a low of US$1,534.49 yesterday.

Three weeks ago, gold hit a record high of US$1,920. It ended last week with its biggest two-day plunge since 1983 before diving further yesterday.

ANZ Bank senior commodities analyst Nick Trevethan— Amid the uncertainty plaguing the global economy, gold is losing its lustre as cash becomes king.