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Subprime crisis continues
Published March 17, 2008 Economics , Stock Market 2 CommentsTags: bear stearns, subprime crisis
JP Morgan Chase is to buy Wall Street’s fifth-largest investment bank, Bear Stearns, for $2 a share, a fraction of its previous value.
The news has rattled investors worldwide, who fear that the credit crisis is deepening.
The bank got into trouble over its sub-prime mortgage debts, and other banks had stopped lending to it.
The rescue has been backed by the US Federal Reserve, who will lend $30bn and lower its discount rate to 3.25%.
The discount rate determines at which rate banks lend to each other, but the Fed is widely expected to slash interest rates that affect consumers as well - by up to 1% - when it meets on Tuesday. Taking inflation into account this would take interest rates into negative territory.
And it has created a new lending facility for big investment banks, who will be able to borrow against the value of their mortgage assets.
Stock markets fell sharply around the world on Monday, with the Hong Kong index down 5%, the Japanese market nearly 4%, while London’s FTSE dropped 100 points on its opening.
The deal values Bear Stearns, which has been at the centre of the US mortgage debt crisis, at just $236m.
Its shares have lost 98% of their value since their high of $158 in April one year ago, when the bank was worth $18bn.
In October, the shares had fallen to $117.
On Friday, the ailing bank’s shares had fallen 46% to $30 after an emergency rescue package was announced.
Under the deal, which emerged on Sunday, the Federal Reserve will fund up to $30bn of Bear Stearns’s less liquid assets.
In turn, JP Morgan will guarantee to meet all the payments due to Bear Sterns clients.
MAIN SUB-PRIME LOSSES SO FAR
Citigroup: $18bn
Merrill Lynch: $14.1bn
UBS: $13.5bn
Morgan Stanley $9.4bn
HSBC: $3.4bn
Bear Stearns: $3.2bn
Deutsche Bank: $3.2bn
Bank of America: $3bn
Barclays: $2.6bn
Royal Bank of Scotland: $2.6bn
Freddie Mac: $2bn
JP Morgan Chase: $3.2bn
Credit Suisse: $1bn
Wachovia: $1.1bn
IKB: $2.6bn
Paribas: $197m
Source: BBC News
The ESRI (Economic and Social Research Institute) is the government’s economic advisor. They predict that the Irish economy will grow by just 1.6% (GNP) this year. This is the lowest rate of growth since 1988.
This slower rate of growth is due to a reduction in the number of houses being built and the appreciation of the Euro.
Other key findings from their Spring 2008 report are:
- As a result of the slow pace of growth in 2008, we now expect no employment growth in 2008. We expect the unemployment rate to reach 6 percent and the rate of net inward migration to slow to 20,000.
- As regards the public finances, our estimates suggest that the Exchequer deficit will top €5 billion in 2008.
- For 2009, we expect a modest recovery and foresee GNP growth of 3 percent. The biggest single difference between 2008 and 2009 is expected to be the rate at which house building slows. By 2009, much of the slowdown will have been experienced and house-building will be closer to its long-run sustainable level.
- The public finances are expected to deteriorate further in 2009. We foresee the Exchequer deficit rising above €7 billion.
2008: A year for new records
Published March 13, 2008 Business , Economics 0 CommentsTags: euro, gold, latest, oil, statistics
Latest economic statistics:
Updated March 17, 2008
The government may have to borrow €5 billion in 2008. According to Budget 2008, they planned to borrow €1.85 billion.
Read the following article from the Sunday Business Post and answer the following questions:
1. Why will the deficit in 2008 be greater than originally planned?
2. State and explain two economic effects of a large budget deficit?
Send your answers by commenting on this post or you can email mrhannon at geralds dot ie
The internet search engine market is now moving towards a duopoly. Look at the current market shares for each company:
Google 58.4%
Yahoo 22.9%
Microsoft 9.8%
AOL 4.6%
Ask 4.3%
Ask have announced that they are no longer going to compete against Google and Yahoo, and if Microsoft buys Yahoo, then the market will be pretty much a duopoly (AOL has a tiny market share).
Can you name any more examples of a duopoly?
UN Human Development Index 2007
Published March 9, 2008 Economics 0 CommentsTags: national income, un, welfare
GDP only measures one aspect of the welfare of a country i.e. income.
Perhaps a better method to compare countries is to look at the ‘quality of life‘ of its citizens. The United Nations use a Human Development Index to rank countries based on the following criteria:
- Life expectancy
- Adult literacy
- Average income to cover basic needs
- School enrolment
- Educational attainment
- GDP per capita
View the Human Development Index for 2007
Now compare the index for 2007 to the index for 2001 on p.243 in your text.
How has the ‘quality of life’ of Ireland’s citizens changed since 2001?
Do you consider this index to be better than GDP per capita when comparing countries?
Comment on this post. Click on Comments below the post title.
The World’s Richest Man!
Published March 7, 2008 Accounting , Business , Business Studies , Economics , Stock Market 0 CommentsTags: richest man, buffet
After 13 years on top, Bill Gates is no longer the richest man in the world. That honour now belongs to his friend Warren Buffett.
Riding the surging price of Berkshire Hathaway stock, Buffett has seen his fortune swell to an estimated $62 billion, up $10 billion from a year ago.
Gates is now worth $58 billion and is ranked third richest in the world. He is up $2 billion from a year ago. Mexican telecoms mogul Carlos Slim Helú now ranks as the world’s second richest person with a net worth of $60 billion. Chelsea FC owner Roman Abramovich is in 15th place.
View the complete list of all the world’s billionaires
The highest ranking Irishman is Seán Quinn with a net worth of $6bn.
And the world’s youngest billionaire is Mark Zuckerburg (age 34), the founder of Facebook, with a net worth of $1.5bn
Read more about the world’s billionaires - Videos, Pictures etc.
I will be posting more about Warren Buffet soon. Meanwhile here’s a short video from Google Videos on a talk Warren Buffet gave to college students in the US on making the right career choice. Note: Google Videos and Youtube are only visible on this blog outside of school. The NCTE has blocked access to these sites.
And another from Youtube at last year’s AGM of Berkshire Hathaway.
Welcome to the SGC Business Blog
Why study Business?
There is a strong argument that in the future everyone will need to have had a business education. Whatever you decide to do when you leave school, the chances are that it will involve some ‘business’. Scientists, engineers, even artists, will need to understand at least the basics of business, and probably a lot more.
Business Studies is a choice subject for Junior Certificate. You will learn how to manage your money, set up and run your own business and learn how to use technology in business.
Download Business Studies Syllabus
Watch a video of Richard Branson
TED | Talks | Richard Branson: Life at 30,000 feet (video)
Published March 6, 2008 Business 0 CommentsTags: branson, entrepreneur
