The Bankwatch

Tracking the consumer evolution of financial services

Posts Tagged ‘consumers

China continues to display economic strain that will reflect on world economy

In the ‘how is the world doing’ category, this take (from the chairman of Morgan Stanley Asia and author of ‘The Next Asia’ (Wiley), due out in September) on China is consequential for us all. The west imported cheap labour from there for the 15 years preceding 2007, and the after effect is coming home to roost. What will matter to us all, and to banks, is the relative impacts on currency values as the historic imbalances are rebalanced to a different metric.

I have to keep going back to how banks in the west redesign their products and services. The old approach will not apply. Consumers problems reflected in high personal debt were the output of the crisis, and consumer reaction in the west and in China (where they are being laid off by the millions) will be a significant part of the nature of the recovery.

I’ve been an optimist on China. But I’m starting to worry | FT

This outsized bank-directed investment stimulus leaves little doubt as to how bad it was in China in late 2008 and early 2009. An unprecedented external demand shock, stemming from rare synchronous recessions in the developed world, devastated the export-led Chinese growth machine. That triggered sackings of more than 20m migrant workers in export-intensive Guangdong province. Long fixated on social stability, Beijing moved to arrest this deterioration. The government was determined to do whatever it took to restore rapid growth.

Written by Colin Henderson

July 29, 2009 at 14:43

Posted in Uncategorized

Tagged with , ,

A more pragmatic view of the near future for scenario planning

Right after I posted this piece, thinking that finally people were starting to look to the future with a more pragmatic eye,  I came across this from David Olive in The Star.  I am by nature an optimist, however rationalisations such as this piece cannot alter some obvious facts.

David Olive: Will the economy get worse? | The Star

No. The current market downturn is still small by historical standards and the seeds of recovery are already planted. By talking the crisis up, we’re only prolonging it. Here’s some ammunition for the optimists among us.

First we can begin with this graph of the unemployment rate of growth compared to previous recessions.
Both the rate of fall off in jobs and the extent of fall off are unprecedented.  incidentally no-one is expecting a turnaround in March.

Secondly, the value of assets in the world since a peak in Oct 2007 has dropped between 25% – 65% depending on mix of real estate and equities.  Yet consumer debt levels remain at historic highs.

No-one disputes that there will be a turnaround in the economy sometime, and whether it is 2009, 2010, or 2011 is not something I am qualified to judge.  However in my area of interest, or in industry in general, it is clear that the ‘recovery’ will not bring back ‘business as usual’.  The unsaid truth about recovery remains that it will not take us back to where we were before.

Relevance to Bankwatch:
Surely a better approach would be to plan for  a different future – a set of new assumptions to build into strategic plans that are not based on a return to ‘normal’   – for example, over the next 7 years what if we see:

  1. reduced car and home ownership by 30%
  2. increase in rent as a way of life/ reduced home ownership
  3. debt reduction as a way of life for many segments
  4. retirees with portfolios valued at 25 % of what they had expected

These are new reality scenarios that banks must consider, and more likely to generate a sense of positiveness by being grounded in a sense of the possible.

Written by Colin Henderson

March 9, 2009 at 22:54

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