What can Kan do?
Mixed reaction from major European banks to appointment of Naoto Kan as new Japanese finance minister. ING is pretty scathing, saying the appointment sidesteps a process of change Japan must undertake to avoid further stagnation or a fate far worse.
“PM Hatoyama has appointed someone with no experience in economic management… Mr. Kan takes on the finance minister role without a well documented, deeply considered policy agenda. Here we rely on reports of positions he has taken in the Cabinet, and from public statements on economic management. These suggest his instincts are to pursue a stimulus strategy involving higher government spending; a weaker yen and ultra-loose monetary policy. Mr. Kan appears tone deaf to microeconomic reform or to the threats to financial stability posed by high public debt.”
The implication, ING says, confirms its worries about Japanese government bonds.
Kan’s first big foray onto the stage in his new role, meanwhile, was to talk down the yen. He said many Japanese firms were in favour of dollar/yen around 95 yen, which is a weaker rate for the yen than recently. Barclays Capital found something positive in this.
“His comments may mark a shift of Japanese FX policy towards weakening the JPY, in our view. Such a stance seems to be appropriate for Japan, considering the weak growth prospects, particularly in the first half of 2010, which will see less economic stimulus measures and, therefore, a strong need for exports to push up the whole economy.”
So, a Kan-do or a Kan’t-do kinda guy?
Health and the older worker
An interesting post on ING’s new eZonomics blog points the reader to a new study on older workers and health. The findings — as reported in The Lancet — don’t at first glance look terribly surprising:
A poor work environment and health complaints before retirement were associated with a steeper yearly increase in the prevalence of suboptimum health while still in work, and a greater retirement-related improvement; however, people with a combination of high occupational grade, low demands, and high satisfaction at work showed no such retirement-related improvement.
In simple terms, this is saying that if a worker is happy, their health is better. Anyone who has ever had a bad job could have told them that! But the study, of course takes it further.
Working life for older workers needs to be redesigned to achieve higher labour-market participation.
This has broad implications, given the trend away from final salary pensions and the general view that workers are going to have to work longer than in previous generations. Companies that are faced with workers who cannot easily retire because of a lack of pension savings, that need people to work longer and that are subject to increasing anti-age discrimination will need to take the employment needs of older employees on board.
It may not be easy. As the ING post points out, the OECD looks at the issue in a 2006 report entitled “Live Longer, Work Longer”. It began its report:
In an era of rapid population ageing, many employment and social policies, practices and attitudes that discourage work at an older age have passed their sell-by date and need to be overhauled. They not only deny older workers choice about when and how to retire but are costly for business, the economy and society.
Consider the fact that corporations are considered citizens under US law. They have deep pockets and legislators listen to people with deep pockets.Our educational systems are tied to corporate interests which is why arts and humanities have been all but stripped from educational circles while the sciences and mathematics take top priority.Retirement costs money. If a worker can keep on working into old age then the likelihood of paying out very much before the retiree dies is much less.Want to keep workers happy? It can be done by making sure they have a safety net. In the Netherlands a person who looses their job can remain on unemployment as long as they are going to school or looking for work. They don’t have to worry about loosing their homes or going without food or health care.With that kind of stress off of the shoulders of American workers it would be easy for them to stay happy and healthy, and thus much more productive. Because they would be at work by choice. And not because they need the money.This article looks at ways to maximize the millage an employer can get out of a worker while investing as little as possible in them. If our courts would do the right thing and remove citizen status from corporate America, then the most important constituents to the legislature would once again be the American citizen and not some amorphous facsimile of a “person” with no individual identity.This article shows how it’s in the interests of business to do better by the employee. But it doesn’t address these problems from the point of the citizen. In other words it doesn’t focus on making sure that citizens have more freedom to choose their occupations by making education more easily accessible. And by providing a financial safety net that does not force them into jobs where they would be the least productive.Even the mightiest trees still get their water from the roots. The citizen is the root of the economy. Our workers are best served when our government prioritizes investment in the individual citizen over investment in corporations.We need a REAL social safety net. But all we get is lip service and taxes, which go to keeping “the economy” alive at the expense of the citizens that support it.
Vision of the future? See Japan’s past
MacroScope is pleased to post the following from guest blogger Ian Bright. Bright is senior economist at ING and winner of the 2008 Rybczynski Prize from the UK Society of Business Economists. He says here that bank lending’s future can be seen in Japan’s past — and it is not good for the would-be borrower.
“There is anger in many countries that banks are not lending money. Or more correctly, they are lending less than people want.
There is nothing new in this. Even before the failure of Lehman Brothers and the collapse of the global financial system, banks were tightening lending criteria. We even saw people who paid off their credit cards each month have them withdrawn. Small companies found that the criteria used to value the assets backing loans were made more onerous.
When the financial system virtually collapsed, governments provided money and central banks lowered rates. Many thought that this would increase the ability to get loans from banks. Indeed some governments made efforts to link the provision of public money to increased loans to particular groups, such as small businesses and homeowners.
But that is not what is happening. Banks are still reluctant to lend. And, really, nobody should be surprised.
Two factors are at work.
First, the economic cycle is working against lending. Even if a V shaped recovery takes hold in many countries, the fall in activity that has occurred is large enough to ensure an increase in bad debts for banks over the next year or two. Banks are reluctant to lend under these conditions.
A very nice piece of pro banking writing, and he is right when he says that retail deposits don’t come cheap. Given that 90% of the country holds the worlds banks responsible for the current situation through irisponsible lending and also for taking large sums of money from the public purse and pocketing them instead of injecting it into the economy while operating tough policies against and in too many cases the total abandonment of the very customers they were paying to get into debt via ‘cashback’ loans i think any incoming money for the banks from the man on the street will be even more costly in future.
customers will be moving money around a lot more and selecting top interest rates over loyalty to banks whom many i’m sure will feel that threw away years worth of loyal banking when times got tough for all.
Banks have never been well liked, but everyone i speak to now has them down as public enemy number one.
Are Americans really saving?
The Dutch investment bank ING reckons talk of Americans rediscovering savings is misleading.
Households are slashing their purchases of financial assets. The savings ratio is rising because borrowing is falling even more rapidly. The household savings ratio climbed to 6.9 percent in May, up from a low point of 0.4 percent in 2005. But their purchases of financial assets plunged to -0.5 percent of income in the first quarter (the most recent data), down from a recent peak of 21.6 percent in 2004.
Given this, it will be more than interesting to see the second quarter figures, which should reflect most of the March to June global equity rally. But until then, what do you think? Is the “Americans are saving” mantra misleading?
Emily Kaiser adds:
Jeff Frankel at Harvard has an interesting take on this theme. He’s arguing it’s the end of the global savings glut. Chairman Bernanke, if you’re reading this, what do you say to that?
Not to sound too cynical but the idea that Americans are saving simply because consumer spending has dropped is laughable. The inability to obtain credit for more purchases just means that cash is being used to fund necessities, rather than credit being used to fund things we really couldn’t afford in the first place. The end result is not saving, just spending less money and hopefully incurring less debt.
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Cartoon showing that at least Kan thinks he Kan … http://politicomix.blogspot.com/