« In praise of belief in efficient markets | Main | The rationality of Valentine's day »

February 13, 2009

Comments

Bob B

What's the puzzle?

Presumably, the Conservative Party press office will shortly be issuing a release - if it hasn't already done so - quoting David Cameron saying Gordon Brown is personally to blame for all this.

reason

Umm...
How to lie with statistics. Why did you pick manufacturing as your statictic du jour? You know perfectly well that it the manufacturing which has been replaced by (the extraordinarily robust) financial sector and the building sector in Anglo-Saxon economies.

Bob B

"You know perfectly well that it the manufacturing which has been replaced by (the extraordinarily robust) financial sector and the building sector in Anglo-Saxon economies."

True, but . . . a comment and a question:

How well I remember the many online contributions of New Labour cheer-mongers in the run-up to the 1997 election, which swept Tony Blair to power, about what New Labour was going to do to restore manufacturing to its rightful place in Britain's economy after the blight of Conservative misgovernment. Instead of which there was virtually no growth in manufacturing output from 1997 up to the onset of the credit crunch.

How long will it take for business and financial services to recover from the recession?

The trajectory of the price of London Stock Exchange shares hardly suggests much investor confidence in its future prospects:

"The value of stocks traded on the LSE has plummeted amid the global downturn, and shares in the LSE itself have been battered among concerns over growing competition and threats to its market data services. Its shares have fallen from a peak of over £17 a year ago to less than 500p."
http://www.guardian.co.uk/business/2009/feb/13/clara-furse-london-stock-exchange

Nick Rowe

"Anglo Saxon model" used to mean something different: market-finance vs the "Continental model" of bank-finance.

Bank failures mean the failure of the Continental model.
http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/02/the-stable-anglo-saxon-model.html#more

Tom

Hmm. There's Anglo-Saxon and Anglo-Saxon - comparing Germany (which is a bit more Saxon, if not so much Anglo) and France, who are neither Anglo nor Saxon and bloody proud of it, the Germans appear to be in more trouble.

Of course, the French make yer small cheap car and the Germans specialise in big/sporty gas guzzling luxury models, and I'm guessing the former still have something of a market.

I'd hazard a guess that the French industry is therefore better geared for stimulus aimed at buoying the car market, not least because they're notably better for the environment and also reduce imported oil use and the cost of mobility, so it's actually a form of investment. Safer too, so there's a bit of payback in the form of reduced deaths, injuries, hospital bills...

You aren't going to get yourself out of deflation by offering consumers two grand off a Porsche. Two grand off a nice little Citroen or Renault, on the other hand, might work. In fact, I think the French are doing something along those lines.

The UK problem is that even if we wanted to stimulate manufacturing there's precious little to stimulate. On the other hand, there's precious little to go bust, too.

Evolution Management Solutions

Evolution Management Solutions is a business consulting center, strategically located in Cordoba, Argentina.
Our staff is made of extraordinary, intensively trained groups of proffesionals, each one with solid analytic profile and a great teamwork capacity, able to perform above the standard levels, at your service.

Please, contact us for any question you may have at info@evolutionms.net
We are at your service, and we look forward to have you as a business partner.

Matthew

Can you really talk about the Anglo-Saxon economies? The UK and US are quite different in many ways (and with obvious similarities). But then again so is Spain, and others.

Dipper

It is a feature of mechanics that decreasing the damping of an oscillatory system increases the amplitude and decreases the stability.

In manufacturing, advanced manufacturing techniques such as just-in-time and kanban systems decreased the damping of the manufacturing supply system, and when the recession hit in Oct 1990 it swept rapidly through the sector causing a deep recession. When the economy picked up in 1994 it grew rapidly too.

In banking, has the move to mark-to-market effectively removed the damping? By forcing a reduction in credit outlook to be instantly registered in full magnitude rather than smoothed through accrual accounting? This could be partly responsible for the rapid collapse of finance. And if this is so, could any upswing be similarly rapid?

Bob B

There's mounting international pressure for tougher regulation of banks and - especially - of hedge funds to prevent another global crisis down the line. Christine Lagarde, the French finance minister, is making the credible point that restoring confidence in the present crisis is contingent on agreement about regulatory reforms:

"France will on Friday press for tighter controls on hedge funds, urging other big industrialised nations to strengthen regulation of the industry and compel banks that lend them money to hold more capital. . .

"The proposals will be highly contentious in the hedge fund industry, which is based predominantly in the US and UK, and has been lobbying to restrict regulation to fund managers, rather than the funds themselves."
http://www.ft.com/cms/s/0/75e74f90-f971-11dd-90c1-000077b07658,dwp_uuid=70662e7c-3027-11da-ba9f-00000e2511c8.html

What impact - if any - will regulatory reforms - if any - have on the profitability of London's financial institutions?

In Britain, this is not an issue peculiar to London, as the net fiscal surplus generated in London and the South East regions in pre-crisis times has been bankrolling public spending in the rest of the country to the tune of £12bn to £18bn a year:
http://news.bbc.co.uk/1/hi/uk/7368326.stm

Bob B

News update:

"The Prime Minister said the public was 'rightly' angry about the way the banks had operated - leading to a multi-billion pound bail-out by the taxpayer - and promised that the regulatory system would be overhauled.

"Speaking at a question-and-answer session at Coventry University, he said that in future there should be no rewards for short-term deals."
http://www.independent.co.uk/news/uk/politics/ill-end-banks-irresponsible-risktaking-says-pm-1608895.html

ad

"The belief to the contrary, I fear, owes more to Anglo-centrism than to the data."

I suspect that much of this is managerialism. Non-anglo markets are more closely regulated i.e. managed. Therefore, people reason, they must be more stable, have more long term investment, etc.

After all, in those markets it is easier to see that someone is running things. That is why people believe in managerialism.

ad

“How to lie with statistics. Why did you pick manufacturing as your statictic du jour?”

Reason, clicking on the links provided I get


Japan: “The Cabinet Office is expected to reveal Monday that gross domestic product in the October-December period plunged an annualized 11.7 percent, according to a consensus of market forecasts.”

UK: “Gross Domestic Product (GDP) contracted by 1.5 per cent in the fourth quarter of 2008, compared with a decrease of 0.6 per cent in the third quarter.”

US: “Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 3.8 percent in the fourth quarter of 2008, (that is, from the third quarter to the fourth quarter), according to advance estimates released by the Bureau of Economic Analysis.”

Europe: “GDP declined by 1.5% in both the euro area1 (EA15) and the EU271 during the fourth quarter of 2008, compared with the previous quarter, according to flash estimates published by Eurostat, the Statistical Office of the European Communities.”

That gives an annualised drop in GDP of 3.8% in the US, 6% in the UK, 6% in the euro area and the whole of the EU, and 11.7% in Japan.

So who is doing best?

ad

“In manufacturing, advanced manufacturing techniques such as just-in-time and kanban systems decreased the damping of the manufacturing supply system”

Did they? If I have a lot of supplies in stock, and demand for my product falls, it will be a long time before I need to order more. If I have few supplies in stock, less time will be required before I need to order more. So from my suppliers point of view, my move to just-in-time may have increased the damping, at least during downturns. And every manufacturer is a supplier to someone.

reason

ad
And per head? The US has to grow more just to stand still. But in general it is still very early to play such games.

ad

That earliness has not stopped others from "playing such games".

And according to wikipedia the difference in annual population growth between the US and Japan is 1.02%, compared with an 8% difference in their (negative) annualised growth rates:

US population growth 0.88% per year
French population growth 0.57% per year
UK population growth 0.28% per year
German population growth -0.04% per year
US population growth -0.14% per year

reason

I think you find the difference in the workforce growth is greater still.

cartier watches

This is just one idea, and perhaps displays no more than my limited imagination. If there are better ideas out there, that amount to more than "implement something called "market socialism" and then - alacazam! - full employment!" then I'd love to hear them. http://www.watchgy.com/ mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.
http://www.watchgy.com/tag-heuer-c-24.html
http://www.watchgy.com/rolex-submariner-c-8.html

The comments to this entry are closed.

blogs I like

Why S&M?

Blog powered by Typepad