BIGCAPITAL's Blog

January 1, 2011

IMF Economist Sees Two-Speed Recovery In 2011

IMF Economist Sees Two-Speed Recovery In 2011

(RTTNews) – A two-speed economic recovery will be extended into 2011 with rich nations facing weak growth and emerging markets moving ahead with strong recovery, according to IMF’s chief economist Olivier Blanchard.

In an interview to the Fund’s online magazine, IMF survey, Blanchard noted that along with their strong rebound, emerging economies will be facing tough challenges like managing possible overheating and capital flows. At the same time, growth in advanced economies will remain low, barely enough to bring down unemployment.

“The two-speed recovery, low in advanced countries, fast in emerging market countries, is striking and its features are increasingly stark. They will probably dominate 2011, and beyond,” Blanchard said.

He also warned that countries will be risking a healthy recovery in the absence of continued focus on rebalancing their economies in the coming year, including structural measures and exchange rate adjustments.

Countries with excessive budget deficit must rely more on external demand or exports. And, by symmetry, surplus countries, many of them emerging markets, must do the reverse, shift from external demand to domestic demand and reduce their dependence on exports, the economist noted.

Regarding the economic prospects of low-income countries, he said recovery in trade and high commodity prices have bettered economic conditions in these nations. Private domestic demand also remained quite strong

Source: http://marketpin.blogspot.com/

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December 31, 2010

Estonia Joins Euro Club Currency 2011

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Estonia Joins Euro Club Currency 2011

via Bloomberg.com – Dec 31, 2010

Estonia Joins Euro Club as Currency Expands East Into Former Soviet Union

Estonia tomorrow becomes the first former Soviet republic to join the euro, putting at least a temporary cap on the currency bloc’s expansion as the sovereign debt crisis ripples through Europe.

Wedged between Russia and Latvia on the Baltic Sea, Estonia will at midnight become the 17th country to switch to the currency. Gross domestic product of 14 billion euros ($19 billion) makes it the second smallest euro economy after Malta.

As Europe grapples with the financial crisis, Estonia is likely to be the last addition to the euro club for several years. Lithuania and Latvia, the next in line, are aiming for 2014 and bigger eastern countries have shied away from setting target dates.

“The euro is still generally seen as a positive for the applicant countries as long as the conversion rate is somewhat competitive,” Elisabeth Gruie, an emerging-markets strategist at BNP Paribas SA in London, said in an email. High deficits are keeping Poland out and an “inner desire for independence” is the obstacle in the Czech Republic, she said.

Debt estimated by the European Union at 8 percent of GDP in 2010 will make Estonia the fiscally soundest country in a currency bloc plagued by budget woes that forced Greece and Ireland to fall back on European and International Monetary Fund aid.

Confidence in Euro

“It is a sign of the confidence of Estonia toward the euro, despite the current difficulties, which will be a positive signal to the markets,” Joseph Daul of France, floor leader of center-right parties in the European Parliament, said in an e- mailed statement.

Estonia’s central bank chief, Andres Lipstok, 53, will join the European Central Bank’s policy-setting council, taking part in his first interest-rate vote on Jan. 13 in Frankfurt.

Some 85 million euro coins featuring a map of Estonia and 12 million banknotes go into circulation tomorrow, according to the central bank, starting a two-week phase out of the national currency, the kroon. One euro buys 15.6466 krooni.

The 1.3 million Estonians have little experience of monetary autonomy. In June 1992, less than a year after regaining independence from the Soviet Union, Estonia shifted from the Russian ruble to a national currency that it immediately pegged to the German mark. The exchange rate was locked to the euro when the first 11 countries began using it in 1999.

Source: http://marketpin.blogspot.com/

October 13, 2010

Korea’s PPP per capita global ranking is 22nd

Korea’s PPP per capita global ranking is 22nd

KOREAN GDP

The nation is closing the gap with Japan on this measurement

Korea’s per capita purchasing power is expected to reach $29,790 this year, placing it 22nd in the world, a report by the International Monetary Fund (IMF) said yesterday.

This year’s purchasing power parity (PPP) is up $1,852 from the comparable figure tallied for 2009, the economic outlook report said. This places the country just behind France and Japan, whose per capita spending power is expected to reach $34,092 and $33,828, respectively. Korea’s PPP this year is also larger than the country’s nominal per capita gross domestic product (GDP) that may hit $20,164 in 2010.

The PPP index is used to gauge actual living standards by measuring purchasing power of people in different countries on the assumption that living costs and currency exchange rates are equal around the world.

The figure may be larger or smaller than the per capita GDP because of differences in consumer prices, various services and utility costs. Besides South Korea, 10 other countries, including Taiwan, Singapore, the Czech Republic and Portugal, had PPP numbers exceeding their respective GDP.

The latest IMF report, meanwhile, showed Luxembourg, Singapore and Norway to have the highest per capita PPP in the world this year, trailed by the United States.

Luxembourg’s PPP could top $80,000, with Singapore and Norway surpassing the $57,000 and $52,000 marks, respectively.

Countries such as Spain, Italy, Israel and Greece may have marginally lower per capita PPPs compared to Korea.

The findings said Korea’s PPP numbers will continue to grow steadily to reach $38,767 in 2015, which could further narrow the gap with Japan, whose per capita PPP may hit $40,195 then.

Korea’s spending power is forecast to reach over $38,000 by 2015, narrowing the gap with Japan, whose figure is expected to be just over $40,000.

The Ministry of Strategy and Finance says the reason for the large difference between the PPP and the per capita GDP is because of the exchange rate and the comparatively cheaper public utility charges in Korea.

September 26, 2010

US Not Aware Of Deficit Dangers, Canada is better than the US

 

US Not Aware Of Deficit Dangers, Canada is better than the US

 

Taleb Says Unawareness of Deficit Risk Has Him `Extremely Bearish’ on U.S

 

Nassim Nicholas Taleb, author of “The Black Swan,” said he’s concerned budget deficits in the U.S. are spiraling out of control and may now represent a bigger problem than in countries such as Greece.

“The U.S. is probably the worst of all,” Taleb told Canada’s BNN television network in an interview today. “They are addicted to debt. We have an administration that, unlike the European administrations, is not aware of the risks of mounting deficits, of the addiction to public deficits and to big government.”

Taleb told the cable network, “People are complaining about Greece, but Greece has the IMF putting some discipline in their system. Who can discipline the U.S. government?”

Greece this year has imposed a series of austerity measures, including wage and pension cuts and higher sales taxes, in exchange for a 110 billion-euro ($148 billion) rescue from the European Union and International Monetary Fund. U.S. President Barack Obama inherited what the National Bureau of Economic Research said this week was the deepest U.S. recession since the Great Depression. The government’s outstanding debt is about $13.5 trillion, according to Treasury figures.

Risks to the global financial system are much larger than before the September 2008 bankruptcy of Lehman Brothers Holdings Inc., Taleb said.

‘Making Things Worse’

“People still don’t understand why we had the crisis and they don’t realize that we are making things worse,” he said. “We still have the same level of debt but we are transforming private debt into public debt. We are socializing these risks, and the system has fewer people employed. So we have a lot more risks than we did in 2007.”

Taleb, in Montreal today to give a speech to a group of business people, said Canada’s fiscal situation makes the country a safer investment than its southern neighbor.

Canada has the lowest ratio of net debt to gross domestic product among the Group of Seven industrialized countries and will keep that distinction until at least 2014, the finance department said in its March budget documents. Canada’s ratio, 24 percent in 2007, will rise to about 30 percent by 2014. The U.S. ratio, now above 40 percent, will top 80 percent in four years, the department said, citing IMF data.

“I am extremely bearish on the U.S.,” he said. “I am more bullish on Canada. Canada is much more robust than the U.S. You guys have much less debt, much more manageable risks.”

Taleb wrote the 2007 best-seller “The Black Swan: The Impact of the Highly Improbable,” which argues that history is littered with rare, high-impact events. The black-swan theory stems from the ancient misconception that all swans were white.

As the founder of New York-based Empirica LLC, a hedge-fund firm he ran for six years before closing it in 2004, Taleb built a strategy based on options trading to protect investors from market declines while profiting from rallies. He now advises Universa Investments LP, a Santa Monica, California-based fund that bets on extreme market moves.

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