China will pump loans worth $1.3trn into its economy this year, equal to 1/3rd of GDP. Equally, by tying the yuan to the US$, China has achieved a major devaluation against major currencies such as the euro. The result has been that China’s Q3 GDP rose less in “nominal” terms than in “real” terms. Normally […]
Tag Archives | deflation
The blog’s favourite financial journalist, Gillian Tett, has written an excellent article summarising the similarities between today’s problems in the western banking system, and those of Japan’s during the ‘lost decade’ of the 1990′s. Her point is that although central banks are pouring money into the system via ‘quantitative easing’, it is clearly not reaching […]
Parts of Europe are now following the US lead and seeing deflation. Spain saw prices fell 0.1% last month, for the first time since records began in 1961. In the UK, the retail prices index fell 0.4%, to register the first decline since 1959. Prices have also fallen in Portugal, Ireland and Luxembourg Economists have […]
US consumer prices fell for the first time since 1955 last month. Deflation was more common before 1955, and in the 1929-33 period prices fell by c10% a year. The danger of deflation is that it changes the entire psychology of purchasing. With inflation, it is better to buy today, because the product/service will be […]
There had been speculation that President Obama’s mid-West background might tempt him to take a soft line on the troubled automotive industry. But his comments on Thursday that there has been “a lot of mismanagement of the auto industry over the past several years”, suggested this was unlikely. Today’s news confirms it: • GM’s CEO […]
James Baker was Treasury Secretary to President Reagan. When he says that the US is “repeating Japan’s mistake by viewing our banking crisis as one of liquidity and not solvency”, the blog listens. His prescription is stark: “we should divide the banks into 3 groups – the healthy, the hopeless and the needy”. And he […]
US fund managers Comstock Partners reported a 50+% gain on their flagship Capital Value Fund in 2008. The logic behind their out- performance is summarised in the chart, which depicts their belief that we are now in a global cycle of deflation. Their analysis is that this cycle: • Began with a rise in savings […]
At a time of uncertainty, its sometimes helpful just to frame the questions that need to be answered about the future. Pimco, the world’s largest bond fund managers, have done just this in two separate analyses. Their answers mirror those advanced by former Treasury Secretary Nicholas Brady, and make good sense to the blog: Q1. […]
The current recession is the blog’s fourth, after those of the mid-1970s, and early 1980′s and 1990′s. It is, however, already different from these, as it is the only one which has led to comparisons being made with the 1930′s Great Depression. As Harvard’s Prof Shiller has noted, “Depression fear did not take off” in […]
Prof Nouriel Roubini has long been correctly bearish about the economy, and was one of the first to highlight the deflation risk. In a new interview, he sets out his thoughts for 2009, and concludes: “I don’t believe we are going to be in a depression – but we could end up like Japan that […]
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Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry.
The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts.
Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.