The Greek debt crisis may be giving eurozone finance ministers plenty to talk about in Brussels this week, but their careful choice of words has led to a veritable boom for the economic vernacular.
We have 2007 to thank for the terms ‘sub prime’ and ‘credit crunch,’ now 2011 has given us a new lexicon. It includes words like ‘soft’ and ‘hard’ restructurings and ‘brutal austerity.’
Economic novices may think they are alone in finding this new jargon opaque and perhaps intimidating. Fear not.
But while no one could have predicted the drama that was about to unfold in New York last weekend, economists, at least, began addressing the topic of Strauss-Kahn's succession months ago.
Several names have been touted as potential candidates to succeed Strauss-Kahn, 62, and his deputy, John Lipsky, who has already said he will step down in August.
As you'd expect, many of the favorites come from the world's emerging markets which want more of a say in the boardroom, in accordance with their rising economic clout.
Mind you, experts say it's unlikely the West will cede too much control, especially given ongoing concerns about the solvency of certain Eurozone members.
"The key global posts at the IMF and World Bank will still be carved up as privileges for the United States and the Eurozone," says Rachel Ziemba, a senior analyst at Roubini Global Economics in London.
"If that’s the case, keeping the institutions' legitimacy will remain suspect in the mind of the emerging market countries. They could insist Eurozone countries stick to their deficits and other criteria more stringently," she says.
Here's a snapshot of some of the potential successors the market is putting its money on for the top job.
(CNN) – Emerging market bonds are telling an interesting story about investing right now.
According to data from ING, EM bonds are in demand. David Spegel, ING’s global head of Emerging Markets Strategy says, “Investors are increasing their risk exposure, first by moving into EM corporate bonds from EM sovereigns … and by buying bonds that are rated further down the credit ratings spectrum.”
The best-performing emerging market bonds are in Belize, up 67 percent; Ukraine, up 32 percent; Argentina, up 24 percent; Uruguay up 22 percent; and Iraq, up 19 percent.
That is not bad compared with the year to date return of the S & P, which is about 4.25 percent.
Emerging market equities, according to ING, have returned 11.94 percent year to date. EM bonds have outperformed EM equities by more than 3 percentage points.
Even the worst performing year-to-date emerging market bonds don't look too bad compared with developed markets: Ecuador is up 2 percent, Serbia is up 5 percent, and China is up 7 percent.
So, what does it mean? Investors appear to be banking on growth in developing nations like the BRIC countries - Brazil, Russia, India and China - we follow closely on World Business today.
That’s because developing nations don't have the problems that developed markets have, such as heavy debt. Many BRIC nations export commodities and the price of commodities is on the rise. Developing nations also have populations that are young and growing.
In addition, the International Monetary Fund projects developing nations will grow 6.4 percent next year, while developed economies will expand just 2.2 percent.
It’s been about a decade since Jim O’Neill coined the acronym BRIC and two decades since I first interviewed him as a leading currency economist with a Swiss bank based in London.
O’Neill has been hanging his hat at Goldman Sachs for years and beyond his BRIC research most recently garnered attention as one of the Red Knights, a small group of wealthy Manchester United fans working on a buyout of the famed football club.
I caught up with O’Neill in Cernobbio, Italy, the site of the annual European House/Ambrosetti workshop. It is a not a big affair – about 150 attendees – which means it is much better for brainstorming and networking, with the spring breeze coming off Lake Como providing added inspiration.
O’Neill is an ideal Marketplace Middle East interviewee, because he was one of the first in the west to see the world in a different way. When he coined the BRIC acronym, his counterparts in the research field poured cold water on the concept.
Yes his choice of countries had high populations, but the word on the street was they cannot deliver growth. Fortunately for him, the data answers all the naysayers, minus the severe bump in the road for the R in his equation. Russia is an invited participant of the G-8 but is still finding it difficult to find its free-market footing. When this downturn smooths out, O’Neill’s inclusiveness will prevail.
Many have tried in vain to jump onto the economic acronym bandwagon. One of the more recent additions has been “Chindonesia”. Nicholas Cashmore at CLSA Asia-Pacific Markets came up with the term to describe the Asian triangle of growth with China, India and Indonesia. Sounds catchy, but his work has not garnered the support of the BRIC.
Meanwhile, O’Neill is looking at new frontiers and this is where the Middle East comes in. As the momentum continues to build in developing markets, the son of a Manchester, England postman is casting his economic net wider and raising a few eyebrows along the way with his selection of countries.
During our interview at Villa D’Este, O’Neill explained why he put three Middle Eastern players into what he calls “The Next 11” – the next wave of economic bright sparks. (He coined that phrase five years ago.)
Going from West to East around the globe, O’Neill and his team see the greatest potential coming from Mexico, Nigeria, Egypt, Turkey, Iran, Pakistan, Bangladesh, Indonesia, Vietnam, South Korea and the Philippines. He believes most in western economies are overlooking what is really transpiring today – new trade relationships from the Middle East and Africa to Asia, without a European or American partner involved in the process.
The economist does not shrug off the political implications of some of the emerging relationships with Middle Eastern countries. For example, he says a timeline for Turkey’s membership into the European Union would be a “good way to explore bringing civilizations together” and that he “looks forward to the day when European leaders act in a more pro-active way” with the Muslim world.
Turkey and Egypt garner their fair share of attention due to their respective populations and the fact both have pursued an aggressive economic reform agenda has kept foreign direct investment flowing in. O’Neill likes Iran’s educated workforce and natural resources, but certainly recognizes that real economic progress will need to happen in an environment where the word “investment” replaces the first thought that often comes to mind, economic “isolation”.
If Iran does indeed open up, Gulf states move to a single currency and continue to mount record surpluses, it may be worth joining the chorus of others who have asked the economist to amend his original work.
Maybe BRIC can be expanded to ARABRIC?
Looking back on this year to early March, you'll find the precise point when the U.S. stock market seemed to find its bottom. The Dow has had a tremendous rally since then, but just about everyone is concerned about what it means.
Dropping commercial real estate values is leading fears of a double-dip recession.
Does the recovery lack any real support from economic fundamentals? It is jacked-up on stimulus programs that governments will soon try to unwind– and with what consequences?
Many analysts argue that the consequence will be the dreaded double dip.
As Mark Zandi, chief economist for Moody's Economy.com, told CNN Money this week: "If we do slide back into recession, it will be very difficult to get out."
Some economists are so concerned they want another round of stimulus early next year because the U.S. labor market is still so weak.
About two months ago, I sat down with Steve Palm of "Smart Numbers," a Real Estate analysis company. He feared that so many commercial developments and large housing projects were defaulting it all but assured a double dip sometime in the middle of 2010. It was a dire prediction that stuck with me.
Checking back with him this week, I am sorry to say that the situation from his vantage point is no better. Palm still sees "Way too much stuff coming back to the banks." "This is causing poor liquidity as the banks still cannot lend. The dollar is way too weak too."
Small regional banks continue to go under across the United States. Most of them are going down because of foreclosures on large commercial real estate ventures. Palm sees no end in sight, and fears that if unemployment keeps mounting and housing indicators start falling again, it will be ample evidence of the "W-shaped" trend that analysts say signals an imminent double dip.
The bankruptcy rate further complicates how to gauge this recovery. As unemployment drags on and home values continue to suffer, personal bankruptcies surged 9 percent in October, with a 7 percent jump in business bankruptcies. The American Bankruptcy Institute also expects total bankruptcies in 2009 to reach almost 1.5 million. That's an increase of 30 percent from last year.
Analysts say given all of these factors, the way governments unwind the current stimuli will be key in determining whether the recovery is sustainable, or whether it slides once again. How will we know? CNN Money.com has a great primer on six key indicators to watch if you're concerned as well.
How to protect our own investment portfolios in 2010 is something we should all be discussing. Stay tuned for more on World Business Today.
SINGAPORE – The talk was about global rebalancing. U.S. President Barack Obama arrived in Asia on his first official tour, talking about a "rare inflection point in history". A time where "we have the opportunity to take a different path." A chance to rebalance the model where Asia consumers consume more and US exporters export more.
Chinese President Hu Jintao was among world leaders at the APEC summit in Singapore.
APEC leaders fully endorsed the strategy; virtually every economy in the world does. But look inside the APEC meeting in Singapore, and see the problems of turning this into reality. One of the biggest may be China.
More than two years ago, China began to allow its currency to appreciate against the dollar. By the time the financial crisis exploded, it had risen in value by about 20 percent. The crisis was the signal for China to freeze the exchange rate there at about 6.83 to the US dollar.
That was a year ago. Even China's Asian trade partners are now worried that the Chinese yuan is undervalued against the sinking dollar. So one of the key issues in Singapore was to put subtle pressure on China to unfreeze its currency.
Finance ministers talked about flexible exchange rates, the APEC leaders were expected to talk to about "market oriented" exchange rates - all aimed at prodding China to become a little more "market oriented" in its own exchange rates.
But by the end of the gathering, all reference to market-oriented exchange rates in the final statement from leaders had been erased. There had been debate behind closed doors between the U.S. and China about the statement. In the end China appears to have won out.
The message seem to be China will move only when its ready. And for all its newfound goodwill and push for re-engagement, there's not much the U.S. can do about that.
I've got my own piece of Berlin Wall stuffed away somewhere in my house. I had borrowed a hammer and chisel from a man at the wall and hacked off my very own piece.
West Berliners crowd in front of the Berlin Wall as they watch East German border guards demolish a section of the wall.
It was a week after "Checkpoint Charlie" - a crossing point between Easy and West Germany - in Berlin had been thrown open, a week after a divided city and a divided Germany were reunited.
I had flown over from London with friends for a first-hand view of history. We arrived late on a snowy Friday evening, found a cheap place to stay and headed out into the night. Every bar, every cafe was packed with exuberant West Germans and uncertain East Germans. But everywhere we went, the air of German brother/sisterhood was palpable. Everyone was so positive. We were all Germans, they told us. It would be a seamless unification. Only a few people voiced their concern about how exactly this would work.
We stayed up all night, drinking and talking to Germans. In the morning we headed for the checkpoint ourselves. It was packed with people; all along the wall people were busy trying to knock it down. One other snapshot that still stays with me is the East Germans pulling overloaded shopping baskets full of consumer goods back across the dividing zone to their homes. Little things like washing up trays for the kitchen sink, boot polish, soft drinks. Anything, as long as it wasn't made in the German Democratic Republic.
We snatched a few hours sleep that afternoon and went back out into the night to join the party. The feeling of optimism was still burning.
Well, as history shows, reunification turned out to be much harder, more expensive and longer than anyone could have seen. A few months after the wall came down I visited the former East Germany working on a story about East Germany Inc. being up for sale. An enormous firesale of outdated factories and machinery. Buyers were only interested in the property, and as long as they could get rid of most of the workforce.
Fast forward to today. Think of another communist economy. And think of the difference. This economy is leading the world out of recession, this economy is, at the moment, one of the great hopes for global economic growth, this economy now lectures the U.S. on economic policy. This economy is China. Two decades ago this day, East German communism was finally put to rest. In China, it's going from strength to strength.
BARCELONA, Spain - Cell phone manufacturers and network operators may be able to ride out the recession as consumers view their handsets as an essential rather than a luxury, but there's a potential dark cloud on the horizon for the mobile technology industry - the capacity crunch.
As our appetite for mobile internet and data services continues to grow, thanks to devices like the iPhone, mobile service providers are soon going to fiind that their networks won't cope with demand.
Too much traffic will clog the wireless highway and the networks know that they have to invest heavily in their infrastructures to head off the problem.
In the current economic downturn they'll find it hard to raise the required funds by borrowing and are reluctant to pass on the cost to consumers who are unwilling to pay more.
The most likely solutions, mobile advertising and peak time network congestion charging are also unpallatable. So there's no easy answer to this thorny issue, which is one of the main talking points here at this year's Mobile World Congress in Barcelona. Watch more about the capacity crunch
I've just completed my first two big CEO interviews planned for this week at the Mobile World Congress, and they couldn't have been more different.
First it was Microsoft's Steve Ballmer, who is here to launch an upgrade to the Windows mobile operating system (look out for my TV reports for details).
Steve's a cool guy and gave us a great interview, but before we could talk to him we had to negotiate the huge, highly efficient Microsoft media machine.
We were placed into the care of no less than four different minders before being ushered into the great man's hotel suite overlooking the conference venue for our 10-minute audience which was over all too quickly.
Contrast that with the welcome we got at RIM, the makers of BlackBerry devices.
I know it's a much smaller company, but the atmosphere at their show "chalet" was so much more relaxed and informal.
Joint CEO Jim Balsillie was his usual, cheerful and irreverent self and gave his time generously, even when I asked him awkward questions about stock options which have been getting RIM into the news for all the wrong reasons. (You can see both interviews throughout the week on CNN or here at cnn.com.)
Otherwise, it's been a crazy first morning here at the Congress. First job of the day was an early call on a company called Tellabs, which helps mobile operators get the best out of their networks.
They told us about a survey they commissioned in which they asked mobile consumers about their future plans. The results have given the mobile telecoms industry confidence it can weather the worst of the economic downturn.
It showed that while people may be reluctant to splash out on a handset upgrade in the near future, they aren't planning to cut back on the number of calls they make or the amount of data they use.
It would seem that we just can't live without our beloved mobiles and in a recession our phone bills will be considered by many as essential spending.
LONDON, England – In life, there are always decisions you want to keep on putting off. In my case, the one that always stresses me out centers on the heating oil tank in my garden.
It's no great beauty - a big green plastic job that could probably swallow up two entire bedrooms in one of those Japanese capsule hotels, but which apparently holds 2,500 liters of fuel.In these days of wildly fluctuating crude prices, working out when to fill the wretched thing is a task requiring the greatest wisdom, calculation and foresight.
The seesawing price of oil has given consumers worldwide much to consider during 2008.
It is not helped by the fact that the local company with which we have a supply agreement employs a high-pressure salesman to answer the phone, quote the latest price per liter and coax customers into buying as many liters as possible.
His strong-arm tactics probably earn him an annual bonus which would not disgrace an oil company mogul.
What he knows is that those of us who use oil to heat and cook in the winter (I know, not desperately environmental, we have no mains gas supply but do have a solar panel and turn the oil off for six months each year) can imagine nothing worse than being stranded with an empty tank just as the extended family descends for the holidays and Jack Frost starts to tighten his wintry grip.
Desperate + gullible = ripped off. Game on, I thought last April. I cheated the man on the phone at the oil company of a few pounds in bonus by refusing to buy a full tank of oil at what I felt to be an inflated price of 51.5 pence per liter (around 65 euro-cents or US$1.03).
Instead I persuaded my skeptical wife to order a mere 500 liters, on the basis that this would be enough to last until nearly the end of the year, by which time (I said, crossing my fingers) crude prices would be way back down again from around $110 a barrel and heating oil would be way cheaper.
Over the summer, I chewed my nails as crude rose majestically to $147 a barrel, taking my wife's eyebrows up with it. I could see that I was going to be saddled with yet another financial clanger, my eternal optimism (see last week's blog) dragging the family budget and my personal credibility down with it.
But then my bet started to pay back. Crude prices slid and slid and slid, all the way down to around $40 a barrel.
I started to dream of a holiday in the sun on the basis of all the money we had saved by holding back on buying oil and waiting for the price to drop; after all, if the price drops 10 euro-cents, that's a saving of €250 on a full tank. If you go away to somewhere sunny, you're not even consuming any oil!
Then, out of the blue, my wife rang me at work. The oil in the tank was getting dangerously low and would only last another week.
It might run out just as... well, this is nearly the week before the holidays and you can guess the rest.
But luckily, she told me, she had spoken to the man at the oil supply company and he would fill our tank for 37.5 pence a liter. I sighed.
The connection between crude prices and the price of heating oil to consumer dorks like me is actually more tenuous and delayed than you'd think.
Even so, I valiantly weighed the odds. On the one hand, crude demand is falling, and will probably fall further as the global economy struggles to shake off recession next year.
On the other hand, petroleum prices have been underpinned by OPEC's determination to tighten supply; Saudi Arabia, the "swing producer" in the producer cartel and its biggest player, is already rumored to be cutting the amount of oil it exports.
In the end, the salesman won - more or less. My wife rang around, got a lower quote, called him back and got him to match it.
So next week the truck will roll up, the man will jump out and run out his hose to the green plastic thing, turn a switch - and we'll be warm and cosy over the holidays.
We'll also be £900, or $1,340, poorer off. So were we robbed? Should I have held on, maybe bought another 500 liters (at a slightly higher price; the salesman knows his job)? Or was I right to get my personal big oil deal out of the way before OPEC tightens demand? What do you think? How have changing oil prices had an impact on your life? Post your questions and comments below, and we'll put them to an expert on Friday's edition of Business International. (It's helpful if you also say where you are writing from.) And here are some answers from Philip Sellwood, chief executive of the Energy Saving Trust
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