1 ‘Someone please wake up the IMF before another catastrophe’ (Phillip Inman in The Guardian) The complacency is palpable. Despite some dire warnings about risky trading and the threat posed by overly indebted banks, the mood last week at the International Monetary Fund’s spring conference was one of calm. We have turned a corner since the financial crisis, the Washington-based organisation says. Normality is returning. Officials expect the US to lead the way. As consumer-in-chief, it will propel the world economy and global growth much as it has in the last 60 years.
George Osborne revealed himself a cheerleader for the technocratic answer to debt and financial risk. The chancellor declared that central banks and regulators would make sure the west’s economies had a bright future, as they withdrew the post-2008 stimulus and locked down risky lending. It would be a neat trick. And the betting must be that it will fail. It will fail because policymakers will be unable to cope with more fundamental forces at work.
First there are the debts: government debts and household debts across the developed world. Put simply they are still too high. Bank debts in the eurozone and corporate debts in many emerging-market economies are similarly at risk from small financial shocks. The eurozone poses a particular problem. Spain is growing, but only with the help of government cash. France is staggering on, but Italy is in permanent recession. Inflation is falling to the point that many worry it will go into reverse. The Germans have blocked initiatives that might boost output.
Another part of the problem is the legacy of savings generated in Asia. That savings glut has had to find a home, and one that provides a good return. There is about $70tn-$80tn invested in assets of various kinds from government bonds to property and exotic derivatives. The IMF highlighted how a $300bn market in US credit mutual funds in 2000 has grown to $2tn today. These funds are invested in junk bonds that are difficult to sell when the panic starts, making the panic even worse.
Andy Haldane, soon to be chief economist at the Bank of England, said we were “still in the intellectual foothills in terms of dealing with potential financial risks”. He pointed out that while there was some good news the problem had shifted to exotic derivatives, which accounted for $19tn of bank portfolios in 2006, but total $31tn today. Then there is the fact that 90% of trades in New York are generated by algorithm-driven computers, making the financial system prone to extreme volatility.
The IMF wants a financial system with airlocks that can contain panics, but knows there are instruments of contagion everywhere it looks. Its boss, Christine Lagarde, has warned of the threats, but without accusing those whose complacency she fears. It is time for some straight talking.
2 Scotch whisky exports remain flat (BBC) Scotch whisky exports stagnated last year, as sales were hit by slowing demand in China and other emerging markets. Figures from the Scotch Whisky Association showed overseas sales remained flat at £4.3bn by value. In volume terms, exports increased by 2.5% to the equivalent of 1.23 billion bottles. Scotch whisky performed strongly in the US, Mexico and India but direct exports to China fell by nearly 30% to £51m.
The best performers included the US, which saw exports of Scotch grow 8% on 2012 to a record £819m. The US was by far the largest market for whisky by value. France remained the largest volume market for Scotch. India, which is now Scotch whisky’s fourth biggest market by volume, saw the value of whisky sales climb by 12% to £69m. SWA said it hoped EU-India Free Trade Agreement negotiations would restart following this year’s Indian elections, leading to a reduction of the current 150% import tariff. Overall, Scotch whisky accounts for about 85% of Scottish food and drink exports and nearly a quarter of the British total.
3 Samsung looks to life beyond smartphones (Straits Times) After years of record profit growth, tech giant Samsung Electronics looks to be at a commercial crossroads as it searches for a new growth driver to counter slowing sales of its phenomenally successful smartphones.
Alarm bells have been sounding for a while over Samsung’s reliance on smartphone sales in increasingly mature markets such as Europe and the US, and increasingly competitive emerging markets like China. The world’s largest smartphone maker has a diverse product line ranging from memory chips to home appliances, but more than half its profits are generated by mobile devices.
Last week, Samsung said it was on track for a second consecutive quarter of year-on-year profit decline, and its stock price fell nearly 10 per cent in 2013 – the first annual drop in five years.
4 Nearly half of Twitteratis never tweet (DNA) Twitter has a whopping 974 million registered accounts. However 44% of these have never tweeted even once, a new survey has found. Twitter analytics company Twopcharts found that the micro-blogging site has nearly 974 million accounts, meaning roughly 429 million accounts have never tweeted.
According to PC World, some of the account users just use them to read tweets and others may have created an account, only to forget that it exists. Twopcharts’ data indicates that 30% of accounts have sent between one and 10 tweets, and that only 13% of accounts have at least 100 tweets. According to TheNextWeb, Twitter had 241 million active users in the last quarter of 2013, the report added.