Tag Archives: euromoney

What Do Wayne Swan And The Bank Of Cyprus Have In Common?

6 Apr

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Australian Treasurer Wayne Swan and the Bank of Cyprus were both lauded as the “best” in their class by Euromoney magazine:

Bank of Cyprus has been named as the Best Bank for Private Banking in Cyprus, by the internationally acclaimed magazine EUROMONEY

Bank of Cyprus Private Banking ranked first among Cypriot, Greek and other international financial institutions operating in Cyprus in the Private Banking sector. This accolade classifies the Bank among the leading financial institutions offering Private Banking services and is yet another important international distinction for the Bank of Cyprus Group…

This recognition by EUROMONEY is ever more important in today’s macroeconomic environment as it reaffirms the Bank’s ability to safely and successfully respond to its clients’ financial needs and emphasizes its clients’ loyalty and trust.

It now appears that Bank of Cyprus customers will lose up to 60%and possibly all – of their savings.

Like Wayne Swan, Finance Minister of the Year 2011, and the Bank of Cyprus, Euromoney magazine has a history of picking other winners too:

2006 to 2008 were indeed magic years for Euromoney’s awards selectors with “Best Investment Bank” 2006 going to Lehman Brothers who went broke in 2008. They’re blamed for much of the Global Financial Crisis. “Best at Risk Management” went to Bear Stearns who went bust in 2007. “Best Equity House” 2006 named Morgan Stanley and “Best Investor Services” favoured Citigroup. Both were bailed out in 2008.

What is the secret behind Euromoney’s superb record of success?

The [Finance Minister of the Year] award is judged by leading European banking and finance magazine Euromoney on advice from global bankers and investors.

(h/t MacroBusiness reader ‘innocent bystander’)

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Australia’s And Canada’s House Price Fate Entwined?

22 Jan

Ever since I first experienced the chilling majesty of the landscape and the warm conviviality of the people in that other former British colony, I have informed aspiring travellers that Canadians are just like us, but with an American accent.

Today, I offer you a little proof of the truth of my assertion.

Following my last post ( “The Easy Way To Know Where House Prices Will Go” ), a Canadian retweeted my article, along with the comment, “Coming to Canada”.

Perhaps understandably for a Northern Hemispherian, he got it downside up.

What’s happening with house prices now in Canada, is Coming to Australia.

Here’s why.

Like our RBA, the central Bank of Canada publishes a chart on its website that shows the all-important growth rate in residential mortgage “credit” (debt).  You can find the chart by visiting the Bank of Canada website, and clicking on “Credit Conditions” in the top menu –

BankofCanada

This opens a new window in your browser. Click on “Household Credit” –

HouseholdCredit_BoCanada

… where, if you scroll to the bottom, you will see this chart –

MortgageCredit_Canada

Well, well well.

Quelle surprise! (that’s for French Canadians)

As you can see, the growth rate in Residential Mortgage “Credit” (ie, debt) in Canada topped out at 13% per annum in May 2008.

Amateurs! 

We Aussies peaked out our pre-GFC housing debt annual growth rate at 22%, in March 2004. Here’s how we compare (click to enlarge) –

HousingCreditGrowth_AU_vs_CA

Click to enlarge

What caused that modest (compared to ours) slump in the growth rate of “Residential Mortgage Credit” (debt) in Canada?

That’s right … something called a “Global Financial Crisis”.

The critical growth rate in new “credit” lending did keep growing, mind you.  Just like in Australia, it never actually went negative.  But what is vital to understand is that, as in Australia, the rate of growth decelerated rapidly. 

Australian economist Steve Keen has empirically proven that the rate of change in the change in debt – meaning, the acceleration in growth of debt – is vital to keeping an “asset” price bubble inflated. It takes not just steadily growing debt – say, 5% per annum – but accelerating growth in debt, to keep enough new buyers armed with enough new debt to keep bidding prices ever upward.

The Bank of Canada, aided and abetted by the Canadian government, got the public’s foot rather gingerly back on the borrowing gas, by slashing interest rates to 0.25% (April 2009) .  You can see the result in the blue line of the chart above.  It’s the area of flat / barely accelerating “credit” growth through to 2012.  Since then though, the public’s foot has started to come back off the gas again.

Why?  Because the Bank of Canada started raising interest rates. From June 2010, Canada’s official interest rate has quadrupled to a whole 1% (wow!).

Following the GFC “peak panic” in late 2008 – early 2009, our Reserve Bank began raising interest rates again fully 8 months earlier than Canada. From October 2009 to November 2010, our central bank gradually increased interest rates from a GFC low of 3.25%, up to 4.75%. You can see the result of these interest rate movements as a small hump in the chart above (magenta line).

Thanks to record low interest rates – and unlike Canada, a massive injection of (borrowed) cash home loan deposits as a result of the Rudd Government’s doubling of the First Home Owners Grant – Australia’s long deceleration in housing “credit growth” from the stratospheric heights of 2004 paused, and briefly accelerated again. It reached a mini-peak of 8.3% per annum in May 2010 (when interest rates hit 4.5%), before those rising interest rates once again took the Aussie public’s foot off the housing-debt-growth accelerator. The RBA began cutting rates again in November 2011, hoping to get us back on the borrowing gas, but to no avail. We are now back to 3% interest rates … lower than the GFC low … yet the housing “credit” growth rate is still decelerating. Watch out below?

There are some other similarities between Australia and Canada.  They too, are considered to have a “commodity-based” economy. Just like our own, Canada’s economy relies heavily on exporting stuff they either dig up or grow.  Like Australia, this abundance of natural resources – and gargantuan Chinese “stimulus” spending to stave off the GFC – was a key factor in their economy (and house prices) not following the lead of the rest of the West.

But perhaps the most disturbing similarity between the economies of our two former colonies is this.

Euromoney magazine bestowed Canada’s Minister of Finance with their “World’s Greatest Finance Minister” award in 2009.

Why is this disturbing?

The award is judged by leading European banking and finance magazine Euromoney on advice from global bankers and investors.

Unsurprisingly, Euromoney magazine has a history of picking winners (lest we forget, “global banker” powerhouses like Goldman Sachs were actively betting on a collapse in their own mortgage-backed derivative products prior to the GFC) –

2006 to 2008 were indeed magic years for Euromoney’s awards selectors with “Best Investment Bank” 2006 going to Lehman Brothers who went broke in 2008. They’re blamed for much of the Global Financial Crisis. “Best at Risk Management” went to Bear Stearns who went bust in 2007. “Best Equity House” 2006 named Morgan Stanley and “Best Investor Services” favoured Citigroup. Both were bailed out in 2008.

Just like our own Treasurer Wayne Swan, who received the award in 2011, Canada’s Jim Flaherty supposedly “saved” their economy from recession too.

How?

Exactly the way the “global bankers” wanted, of course. By goosing the public back into supporting their (the bankers’) Great Western Debt-Driven housing bubble –

Interestingly, Canada’s “World’s Greatest Finance Minister” now says he is pleased that Canadian house prices have begun to nosedive –

“I don’t mind prices coming down a bit, too,” he said in an interview, after the latest data showed that home sales fell sharply in December compared with a year ago.

I wonder if The Goose (or the JHockey?) will respond the same way when Australia’s house prices respond similarly to our decelerating growth in housing “credit”.

Wayne Wins Award – My Reaction

21 Sep

Congratulations Wayne –

‘Nuff said.

UPDATE:

Some say that there is more to be said –

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