Liquidity crunch in global financial market, Long-term security food supply, disruptive supply chain and energy security are main global risks that need to be resolved. To reduce risk effectively, risk assessment, risk transfer and risk mitigation must be taken into account. The issue is how can we reduce the risk in global financial market and what action should be taken?
First, we need to assess and identify the risks so that we need to improve the understanding of national risk exposures and indentify the clusters of countries that are exposed to the same risks in similar level. Then we can create a framework which is compatible with the global approach taken in previous risks. Individual countries might have their specific set of risks, and an aggregate risks measure can be derived from the model's capability to integrate a wealth of data, account for cross-correlations among risks, analyze specific vulnerabilities, and identify country clusters that engage in similar scenario to alleviate risk. For example, United Kingdom set up the Civil Contingencies Secretariat in 2001 to improve the effectiveness of post-crisis management, and to identify and assess prospective risk to national resilience. Therefore UK has been improving their consistency across governments concerning with assessment, roles and responsibilities clarification and basis for effective risk management.
Second is risk transfer by securitization, insurance-linked securities, and insurance-linked financial instrument. Securitization is the process of pooling risk and dividing that pool into portions sold to wide range of investors on the secondary market. The consequence will be a diversification of risk for insurer to an increase in the pool of capital available to cover insurance risk. Securitization grows more cost effective, insurer will be able to increasingly share cost benefit. To illustrate, it shares one-third of the US fixed income market. Other method is Insurance-linked securities which are able to fulfill the insurer capital requirement by diversifying the increasingly broad set of risks. To cover some traditional peak risks like natural disaster, the price of catastrophe risk is considerably high so that the coverage is insufficient. Therefore, we need to link security covering catastrophe by issuing the bond or note. For example, Hurricane Katrina or earthquake in Japan is traditional peak risk, so that we can issue "cat" bond to provide additional capital to the insurance industry. In "cat" bond process, at first, the sponsor enters into a financial contract with a Special Purpose Vehicle such as bank or financial institution. Second, SPV issues notes to investor in capital market, and securities offering are invested in high quality securities and held in a collateral trust. Third, investment returns are swapped by counterparties. In some transaction, principle and interest of the notes maybe guaranteed. On the other hand, insurance-link financial instrument is also used to transfer insurance risks, yet this method is used in some severe cases, exceptional or extreme weather for instance. Risk transfer is usually done by private sector such as insurance company, bank or other financial institution.
Third is risk mitigation which is required the involvement and action by the government or public sector. Government bodies should play 4 crucial functions. First, in addition to risk identification and assessment, government also manages the risk. To demonstrate, government can subsidize the gasoline price or food price if the price of these commodities is so high. Besides, government also has to communicate to mass carefully because it can make the situation worse especially some risks assessment that need to be kept confidential. Mass media sometimes helps a lot if government can communicate in a proper way, not to make people scare and create chaos, but create the trust. Second, government must regulate the legislation to help prevent the emergence of risks and protect the effect of risks. To illustrate, government can increase the interest rate in order to decrease the bank loan in case of liquidity crunch. However, legislation sometimes also can cause bad effect to investment and economic growth so that we need to study carefully before we set up the rule and regulation. For example, Cambodia just released regulation that all constructors need to reserve 2% of their total expenditure in any banks in Cambodia. As a result, investors complained it harshly and threatened to withdraw their investment, thus this regulation must be put aside; otherwise investors will run away. Third, government should boost economic continuity by using some specific measure such as the release of financial reserves or strategic energy reserve. A good example is America released their oil reserve when the oil price reached the peak in 2008. Forth, government must play a role of insurer of last resort owing to build the trust and motivation for investor and citizens.
In brief, to reduce risk successfully both private and public sector must take the plunge. However, we need to identify and assess the risk clearly so that we can transfer and mitigate it in a proper way.
Is a "Recession" really going on in US economy? Is US currently in the state of recession? Are US citizens face-to-face with recession? Are people living under the fear of ending up with loss of their jobs, losing into stack markets, going bankrupt, heading to ever highest inflation in the economy, huge downfall in property rates and a lot more.....
Recession is a state when country's GDP or Gross Domestic Product descents for two sequential quarters. Recession in an economy focuses on negative growth of GDP over two consecutive quarters. This negative growth during recession is more seeable in people's income, bank balances, payroll systems, lowering employment opportunities, reducing retail sales, lower investment returns and various others.
As per experts, the normal period of recession in an economy is about 1-2 years. The whole economy slows down during recession which leads to panic in the country. The hard time of downfall causes lot of stress in the economy. People point out the root of recession towards government. On the other hand, it is important to know that recession is somehow deflation. If the government tries to improve on economy's GDP, it has to invest in a lot more money in order to improve liquidity. But this causes an increase in inflation and ultimately stagflation. Hence, government has to make a choice whether to increase liquidity or reduce increase rate.
The U.S. GDP was down 0.2% in the third quarter of 2008, with U.S. economists forecasting a 0.8% fall in the fourth quarter. International Monetary Fund experts forecast the U.S. economy's growth at 1.6% for 2008. However, they say, in 2009 the U.S. GDP is expected to increase by only 0.1%. Recession has lead to a reduction in global economic growth in U.S., from this year's 3.9% to 3% in 2009, according to IMF experts. Each quarterly GDP report gets three releases..... In their Q3 2008 GDP report, the preliminary report showed a slowdown of .5%, slightly more than the advance estimate of .3% while advance report showed a downfall in growth by .3%, the second time in a year.
During the rough sledding of recession, with all the above mentioned consequences, people certainly look for options to successfully deal with the alarming situation and emerge out of it without getting much affected. But since we survive in this economy, we can't get rid of such a national downfall when every other citizen is suffering. Certainly there are ways to beat the recession in the economy and come out as a more confident one. Lowering down interest rates is one of the major steps that government can take to slightly correct the situation. Everyone in the economy has to be focused towards what they do best. Spend less on luxuries, stick to the necessities, save money are the best steps one can do in their general lives. People should not lose hope and confidence as these are the best remedies to success. After all, this is not the end of the world.
It's a beautiful thing to behold. It represents scarcity, value, glory and prestige but most of all it represents stability. As these months pass, more and more of my friends who thought I was nuts for suggesting we return to a commodity backed currency over our inflationary, prone to radical abuse monetary system are beginning to seriously consider what was once out of the question - gold.
We are at a precipice today; what was once considered the 'good as gold' greenback is now the least risky of all other currencies denominations, but least risky by no means implies secure and stable. The time has come when real alternatives have to be considered.
The benefit of having one is that it is fully transparent and as a consequence self-correcting since the marketplace controls its value, not a minority of 'masters of the universe' central bankers.
Under a gold standard, governments cannot increase the money supply without buying the equivalent value in gold.
A gold standard is not fool proof. There is the risk of deflation but that was a problem before the era of lightning speed electronic transactions and down to the decimal accounting and limited mining capabilities.
Whatever we do, we have to accept the fact that the Federal Reserve does not perform its function as was intended upon being signed into law under The Federal Reserve Act on December 23rd 1913. Here's a quote on what then President Woodrow Wilson wrote the day he signed it - keep in mind that many question its complete authenticity but having read the history so thoroughly, I believe it is authentic and is ironically verified in the congressional record as authentic.
"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men." -Woodrow Wilson 1913
As ominous as that sounds, consider what President Thomas Jefferson warned about central banking back in 1791. The authenticity of this quote is complete:
"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. This issuing power should be taken from the banks and restored to the people to whom it properly belongs. If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered. I hope we shall crush in its birth the aristocracy of the moneyed corporations which already dare to challenge our Government to a trial of strength and bid defiance to the laws of our country" Thomas Jefferson, 1791
All the nations of the world who have sold out their liberty for the false sense of security provided by fiat based currencies in the exclusive control of central bankers need to consider alternatives; gold is only one, if there are others, I'd love to hear them and discuss it openly.
Publisher & Editorial Director
Horus Onoma Group inc.
BCA President Michael Chaney in the WSJ, proving that international comparisons are what you make of them:
We are particularly concerned that there is no overarching plan or vision for Australia’s tax system…
Mr. Costello’s review, which has confirmed that key areas of the Australia’s tax system are not competitive and need immediate reform, provides the conceptual groundwork for a program of more comprehensive and sustained reform.
Most analyses of the cost of the war in Iraq fail to take adequate account of the relevant counter-factuals. This paper by academics at the University of Chicago GSB is a notable exception. They conclude that not only are the costs of intervention on a par with the pre-war containment strategy, but that the war will lead to large improvements in the welfare of the Iraqi people.
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