by
Chris Gilbey
on February 26, 2006 08:00AM (EST)
If you have ever wondered how it is that when economic figures on GDP, GNP, unemployment, inflation etc are released they just seem to be out of whack with your own personal reality, you should read this interview with John Williams, an economist with a website called Shadow Government Statistics.. It deconstructs how the US government, over decades, has played with the assumptions to ensure that the figures that are released created a rosy outlook. After all, bad news only sells newspapers, not economic miracles.
Here is a taste of the article:
The point is that you are dealing with people
where someone is going to lose money. Everyone knows it. The question is,
who is going to be left with losses and who is going to be the first to get
out the door? I can’t tell you how it’s going to break, but it’s the type of
thing that could break any time. I mean, it could be three years off or it
could be next week. But once the selling pressure starts, it’s going to be
massive. You’re going to see a lot of dumping of U.S. securities,
particularly Treasuries. To absorb them, you’re going to see a sharp spike
in rates or the Fed will step in and provide liquidity to the market and buy
them. My betting is, especially with Mr. Bernanke, who is a student of what
happened in the Great Depression, now in charge, that he has some ideas
about what is going to happen here. If you look at what happened in the
banking collapse in the early ’30s, it’s widely believed now that the Fed
made a mistake in not pumping liquidity into the system. They let the money
supply collapse as the banking system collapsed and that tended to
accelerate the deflation and the depression; made the depression deeper than
it perhaps had to be. So going forward here, if we have a circumstance where
that mistake could be made again, the effort likely will be in the other
direction, to provide liquidity to the system. You’re not going to see banks
fail. You’re not going to see large financial institutions fail. The Fed
will back the system with every dollar that it can print. But of course all
that would go on top of what is already an uncontrolled federal deficit. The
end result, when it does all come together, will be something akin to a
hyperinflation, but at the same time you’ll have also a very depressed
economy. So there’ll be an inflationary recession, which I think we’re
already beginning to get into, that possibly could evolve into a
hyperinflationary depression, as much as I really hate to use that term. I
am an optimist at heart. I’m not a perennial bear.
by
Chris Gilbey
on February 26, 2006 06:46AM (EST)
Is the global economic system out of balance as Stephen Roach asks pretty regularly? And will this year be the time for it to find that balance?
Here is an article about the Yen Carry Trade that predicts that the Bank Of Japan will increase interest rates very soon because of the improving Japanese economy, and that by moving interest rates off of zero, this could cause an unwinding of the Carry Trade. This is the facility by which banks in Japan can borrow money from the BoJ for zero percent and then effectively get a 4% gain by getting US treasuries.
"The BOJ literally acts like a central bank of the
world through the Yen carry trade, supplying liquidity that finds its
way into markets everywhere."
According to the article when the BoJ last increased interest rates to control the heating of the Japanese economy it led to a fast appreciation of the Yen (by 20%) and then directly to the failure of Long Term Capital which in turn led to the a global crash.
If this occurs again, what will the implications be? Particularly at a time when the US is carrying unprecendented debt.
by
Chris Gilbey
on February 24, 2006 04:51PM (EST)
Stephen Roach has another insightful piece on macro-economics on the Morgan Stanley site, that it is well worth reading in full.
It is all about globalization and the fact that there are totally unprecedented things happening right now across the world in terms of labour, inflation, wages, deficits - you name it.
A quote:
A key aspect of this IT-enabled strain of globalization is its speed.
The Internet only came into existence about ten years ago, and yet the
user population exceeded 1 billion people in late 2005, with
penetration ratios rising to around 60% in the developed world,
according to Mary Meeker. Never before has a major technology reached so many in such a short period of time. Students of technology will tell you that’s the norm — that each succeeding wave of technological transformation is accompanied by increasingly rapid rates of dissemination. That was true of railroads, motor vehicles, air conditioning, radio, and TV. The Internet follows that pattern but with an important twist —
it rewrites the rules of cross-border connectivity between developing
and developed countries and it takes that connectivity very quickly
into the once sacrosanct realm of services. For
those reasons, alone, the potential macro impacts of the interplay
between globalization and the Internet cannot be minimized.
by
Chris Gilbey
on February 24, 2006 04:43PM (EST)
Very good panel discussion today on infrastructure.
John Craven from Terranovate was a stand out presenter providing insights into China technology infrastructure roll out.
Some of the data is staggering:
Currently there are:
388,000,000 Mobile phones in circulation 350,000,000 Fixed line phones Over 12 Billion SMS messages were sent out over Chinese New Year 40,000,000 people use colour ring back tones There are 10,000,000 anticipated 3G subscribers by the end of this year, provided the governement grants the licenses.
By the end of this year there will be 111,000,000 Internet users in China, against 109,000,000 users in the USA. This will make the Chinese Internet the 500 pound gorilla.
58% of users are Broadband subscribers 83% are urban dwellers There are 25,000,000 paying customers for on line games as at December 2005 And... US$35Billion was spent on comms infrastructure in 2005 alone!
Beijing has a massive online infrastructure plan taking it through to 2010.
By then there will be 100% Broadband coverage. They will spend US$12 Billion on this. There will be 48,000 major projects split over 5 groups, (including network infrastructure, application projects that include e-government, education, community and enterprise), Infrastructure resource projects.
At the heart of this will be the Digital Olympics project called "Millions of Families" which is all about training people. And the Digital City project will require 1100Km of fibre to be laid.
by
Chris Gilbey
on February 23, 2006 10:56PM (EST)
After the conference today I wanted to talk to Bob Peters from Global Media Analysis. His presentation on media metrics included reference to the increase in podcasting being a significant driver to watch.
He was talking to someone from DMG (whose Australian radio network is pretty significant). What I found really interesting was that she didn't understand at all the fact that podcasts are an entirely different proposition for the consumer to radio. Radio is an ephemeral medium for the consumer whereas podcasts by virtue of RSS are a totally different proposition. Amazes me - but it shouldn't - when I meet people from radio who have no idea of what RSS is, and think that podcasts are an extension of broadcasting. It is about as different as movies are to TV. Both got pictures, but they are a whole different proposition for the consumer.
by
Chris Gilbey
on February 23, 2006 10:45PM (EST)
Spent most of the day in Leura, in the Blue Mountains outside of Sydney, at the Network Insight Conference today. This is an annual event that is put on by Mark Armstrong and brings together leading technology and media executives in Australia to discuss: The Networked Home, Mobile Entertainment, Telco Legislative Environment, OnLine Advertising etc....... This year the presentations are really superior!
I caught most of the afternoon sessions today. Of particular note today were the presentations by David Cassidy who is in charge of Convergent Media at PBL and Mike Walsh who runs Group Strategy for News Corp for Asia Pacific - both communicating a real depth of strategic view on what is happening globally.
Later on in the Telco session it became even more evident that Australia is seriously lagging in its attitude to broadband roll out in the world market.
by
Chris Gilbey
on February 22, 2006 08:47PM (EST)
Seems like Skype's encryption is sufficiently strong to ensure that phone calls via the technology are unlikely to be able to be monitored. See this stoy in the Star.
Interesting, isn't it, that the path to market for technologies is now direct to the consumer and not first to defence or government, and then to enterprise, and then to public.
Instead we have an intensely viral technology that is being spread by the community that is in the process of bubbling up to the enterprise sector and, who knows, may find itself being used even in the defence space!
by
Chris Gilbey
on February 19, 2006 11:24AM (EST)
There has been a lot of talk about "Disruptive Technology" over the last 4 or 5 years..... Should it be "Destructive".
If Fon gets away, it, together with Skype are going to lay waste the shareholder value of the old school telcos, without doubt.
Look at what Craig's List has done for the newspaper (= classified) business. Interesting to see what Craig Newmark's self view is on this. He says that he doens't see citizen journalism as being a big thing, because citizen journalists don't have the fact checking disciplines that major media has.... I would argue the contrary personally. Seems to me that most major newspapers are largely there to reprint PR messages from the various self interest groups and it is the bloggers who are keeping them honest!
by
Chris Gilbey
on February 19, 2006 10:24AM (EST)
I just read that Amazon is going to be the next player in the music download biz.....
This should suit the content companies. They have been getting concerned that Apple is getting too much power, and Apple doesn't want to play ball on variable pricing.
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