World Economic News
OECD Calls for Emergency Financial Preparations
In its recently released semi-annual report on "Financial Markets Trends," the Organization for Economic Cooperation and Development (OECD) states that governments and central banks should increase efforts to prepare for financial breakdown situations. Of course, the OECD report doesn't openly elaborate on the rotten state of the global financial system, but rather points to rising risks of man-made, as well as natural catastrophies, like terrorism and earthquakes. These risks, states the report, require rigorous contingency planning. The OECD emphasizes that governments and central banks had temporary roles to play in providing extra liquidity to ease stretched payments systems and also cash for compensation. They needed to act quickly and to communicate effectively with market players. A specific concern played up by the OECD is the physical concentration of financial firms in certain cities and districts.
The OECD report puts a particular emphasis on the worldwide insurance sector. Insurance companies should cooperate with intelligence experts in assessing "terrorism risk," in order to better price such risks. While no major bankruptcies have yet occurred in the insurance sector despite the huge payments associated with Sept. 11, "it has been suggested the insurance industry may not be able to withstand another shock of similar magnitude." The OECD then notes that "financial resources to withstand such shocks could be increased through greater involvement of the worldwide capital markets" and by greater use of public-private initiatives on catastrophe compensation to relieve the burden on the insurance sector, obviously a reference to the need of public bailouts.
The report concludes: "Preparing to deal effectively with the hugely complex threats of the 21st century is a major challenge for decision makers in government and the private sector alike."
China-India Talks Begin on Bilateral Free Trade
China and India have formally launched talks on signing a bilateral free-trade agreement (FTA) and a Comprehensive Economic Cooperation Agreement (CECA), it was officially announced in Beijing March 22, after a two-day working meeting of the Sino-Indian Joint Study Group (JSG) on Trade & Economic Cooperation in Beijing March 22-23.
Chinese Minister of Commerce Bo Xilai met the leader of the Indian delegation, the Deputy Governor of the Reserve Bank of India Dr. Rakesh Mohan and his delegation, according to a press release. Chinese Vice Minister of Commerce An Min, who, with Mohan, is co-chairman of the JSG, co-chaired the meeting.
Bo Xilai noted that China and India are neighbors with glorious ancient cultures, which have laid a lasting basis for traditional exchanges between the two countries, stressing the famous "Journey to the West" stories of Tang Dynasty (A.D. 618-907) monks fetching Buddhist scriptures from India. Now, India and China are two fast developing economies.
Joint trade turnover was US$7.6 billion last year, a 53.6%. increase, he said.
Dr. Mohan emphasized that India and China are the two countries in the world with more than 1 billion population each, and that their two governments have similar problems and concerns relating to economic development and for improving the standard of living of their people, the press release stated. At the same time, there is enormous potential for economic cooperation between China and India. "The Indian side is willing to strengthen understanding and cooperation and together attain the goals of the JSG thereby contributing to mutual economic development," Mohan was quoted.
German Corporate Bankruptcies Hit Record High in 2003
According to figures released on March 18 by the Federal Statistical Office, 39,320 German corporations went bankrupt last year, that is, another 4.6% rise over the historic record set in the previous year. The bankruptcies directly eliminated 220,000 jobs, and included defaults on a combined debt of 42 billion euros. In 2003, bankruptcies among the small and medium-sized corporations, in particular, were rising sharply.
Private bankruptcies in Germany last year increased by 31.1%, with consumer credit defaults exploding by 56.8%, and in eastern Germany even by 86%. The president of the Federal Statistical Office Johann Hahlen emphasized that private bankruptcies will certainly continue to rise dramatically in the coming years as, according to a new study by the German Family Ministry, about 3 million German households are over-indebted.
A 'Strange Upturn' Says Singapore Straits Times
"Something's strange about our economic upturn," both here and in the U.S., observed the Singapore Straits Times March 23. Pointing to the popular belief that the economic recovery in Singapore is "in the bag," writer Eddie Lee notes that "Singapore's economic upturn is entirely dependent on external demand.... Like it or not, we still depend on the United States. While the share of our exports to China and Europe has grown significantly, they are largely intermediate products. The U.S. consumer provides the final demand."
Look at the failure of the U.S. "recovery" to create jobs, Lee writes, quoting from Morgan Stanley chief economist Stephen Roach, who calculates that private non-farm payrolls are running about 8.2 million workers below the path that would have occurred in a more normal upturn in the U.S.! A result of the weak labor market, says Roach, is that U.S. wage growth of blue-collar workers in manufacturing and non-managers in services, at just 1.6%, is now tied with the lowest on record, set in December 1986.
Roach also reports that by keeping interest rates low for so long, the U.S. Federal Reserve is creating bubbles in tech stocks, real estate, and debt markets. Lee adds: "Bond guru Bill Gross says bonds are too expensive. Stock guru Warren Buffet says he prefers to hold cash rather than invest in stocks. Taken together, you can't help but sense that Mr. Roach isn't merely speaking for effect when he talks about bubbles."
|