Looking for the green shoots. It is the nature of politicians in government to be optimists. When you are pretending to run a country it is hard to admit that you have very little idea of what is actually going to happen in the months ahead. And so it is that a feature of this global economic crisis has been that the predictions of the world’s leaders as to the likely course of events have invariably been wrong. Thus I find myself treating rather sceptically the sightings of the green shoots of economic recovery.
For me when I hear President Barack Obama spying “glimmers of hope” and US Federal Reserve Chairman Ben Bernanke saying “recently we have seen tentative signs that the sharp decline in economic activity may be slowing” I just think that they would say that wouldn’t they.
Wading through the latest output of analysis and predictions from the International Monetary Fund certainly has kept me in the camp of those expecting things to get worse before they get better. To give but one example from the mass of material released overnight. In response to difficulties banks have had in gaining access to funds authorities have responded by introducing new liquidity facilities, asset purchase schemes, and guarantees for bank debt issuance to prevent fire sales of assets and bank failures.
According to the IMF the measures announced so far provide up to $8.9 trillion of financing, but this amounts to less than one-third of the ongoing wholesale financing needs of banks. Government guarantees are new and still mostly undrawn, so most actual financing support has come through new central bank liquidity provision of $2 trillion. Banks have rapidly built up guaranteed issuance since the facilities were introduced in late 2008, totaling $460 billion in 10 countries through January — $130 billion in the United States alone.
The IMF comments:
Despite these efforts, private bank funding markets are mostly closed—banks rely on central banks and the government (for guaranteed unsecuritized funding), raising the question of how large this financing might conceivably need to be. For an order-of-magnitude estimate, we project the maximum refinancing gap for the 22 largest global banks that would arise if no private wholesale funding were available.
The gap rises from $20.7 trillion in late 2008 to $25.6 trillion in late 2011, despite bank assets remaining roughly constant on average over the period and customer deposits growing in parallel with nominal GDP. The rise reflects the large volume of existing long-term debt that will mature and need to be refinanced.
Give Wayne his due. Wayne Swan has been as wrong as the rest of them when it comes to issuing an optimistic forecast or two but at least he was twigged to the extent of this banking liquidity problem. While his political opponents have hopped into the bank bashing with alacrity, Australia’s Treasurer has grasped the seriousness of the bank funding problem and has curbed the language of his criticism of bankers for not passing on all of the cuts in official interest rates. Every dollar they can squirrel away now reduces the size of the problem to come when the competition to raise that $25.6 trillion short fall gets under way.
A little provincial cash for comment. John Laws has retired but cash for comment lives on. Up in Cairns John McKenzie has a talkback show on 4CA 846AM and The Cairns Post reports this morning that Cairns Regional Council pays $26,000 a year so Mayor Val Schier can have a chat with John on air every Friday morning. 4CA boss Steve Hirst said the council had entered into an agreement with the station and the mayor had been speaking on air for the past four to five weeks. But he said he could not comment further on the agreement.
The genius of a cartoonist. Matt in the London Daily Telegraph summed up the views not just of Britons on their budget overnight but of plenty of people about plenty of budgets in many places around the world.
Just as well Hawkie was not a Polish politician. Those extra rooms added to the Bob Hawke Melbourne home all those years ago as one successful defamation verdict followed another would not have happened if Warsaw had been the home town.
Last week Jarosław Kaczyński, the head of the Law and Justice (PiS) Party and a former Prime Minister, lost a civil case brought by Ludwik Dorn, a former political ally and interior minister. Dorn sued Kaczyński for publicly alleging that he had not been paying alimony. The PiS leader was ordered to pay a symbolic złoty as compensation to Dorn and to contribute zł.5,000 to a charity.
“Can an alcoholic commander in chief of the armed forces be?” It was because I had our own former Oxford University drinking champion of a politician on my mind that I noticed in the German newspaper Die Welt what appeared to be an intriguing dispute over alcohol consumption between the Polish President and and Polish Prime Minister. I say “appeared” because my knowledge of German does not extend much beyond Volkswagen and sauerkraut but the version that appeared with the aid of the instant Google translator confirmed that the presidential drinking habits are being questioned.
There was no mention of toasts in vodka or anything else when President Lech visited Lithuania to be decorated with the Order of Vytautas the Great with the Golden Collar, for his personal contribution to the development of relations between the two states and to the strengthening of political, cultural and people-to-people cooperation.