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 […]
Chemicals and the Economy
The cycle of deflation
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 […]
Knowing what we don’t know
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. […]
Consumers prioritise “needs” versus “wants”
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 […]
Roubini on the 2009 Outlook
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 […]
“Markets braced for big European rate cuts”
Sometimes a headline says it all. Today’s in the Financial Times, “Markets braced for big European rate cuts”, showed just how far we have travelled since the first signs of global financial crisis in August last year. Then, a co-ordinated round of interest rate cuts would have sent stock markets soaring. Now, they are taken […]
UK cuts sales tax to fight deflation
The UK’s Finance Minister, Alistair Darling, was the first western leader to warn that the current recession was the worst in 60 years. He was also the first to effectively nationalise major banks, to stave off their collapse. Now he has become the first to try to tackle the real threat of deflation, by cutting […]
Dow warns of need for “radical actions”
Andrew Liveris, Dow CEO, has consistently warned that we are facing a major recession. Today, in a Bloomberg interview, he spells out the need for “radical actions” to “take out capacity”. He notes that Dow’s volumes are down 10%-20% this quarter, and expects this to continue into H1 next year. And he forecasts that “we […]
Survival tips for CFOs
The Financial Times series on surviving the downturn focuses this week on CFOs. It includes advice from Feike Sijbesma, CEO of DSM, who suggests that “you need to see how creditable your debtors are, very quickly”, and advises that “maintaining a good relationship with your creditors and banks is also critical”. The Key Tips from […]
Bank of England warns on deflation
The UK’s Finance Minister said today that interest rates might need to be cut “to an unprecedented zero”. And the Bank of England warned there is a real “risk of persistent and damaging falls in prices”. Deflation would be a major challenge for chemical companies, for two main reasons: • Demand is deferred, because prices […]
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