Saturday 21 February 2009

Back To Basics




The financial crisis around the world has touched many of us. People who thought they would never be affected, have felt the cold tendrils of dread as a colleague has been laid off, as a neighbour has been repossessed, as another horror story in the media has filtered through.

Yet, this comes on the back of an era of almost breath-taking prosperity. The current generation is far more prosperous than any previous one, and individuals have reaped the benefits of rising educational standards, burgeoning employment, particularly among women, undepinned by an explosion in technology uninterrupted by major worldwide conflict.

Expectations have risen as a result. What was, in our parents' days, merely an aspiration, is now a given. Unfortunately, those dizzying expectations have also created a very unhappy generation, buffeted by the vicissitudes of a rollercoaster financial system, driven by an ever increasing thirst for corporate profits and shareholder value. When things go wrong, as they recently did, the pervading gloom becomes endemic, a self fulfilling prophecy spreading by contagion, feeding on itself.


How do you stay above this? Is it even possible not be affected by the miasma of misery that seems to be everywhere?


I remember, as a teenager, paying a visit to our local mission, run by an organisation called the Bharat Sevashram Sangh. There was one monk in paricular who impressed me. He was young, very spare, and unfailingly cheerful, and I decided to find out what made him tick.


His dwelling quarters comprised a single room. There was a bed with the thinnest of mattresses to cushion his ramrod straight back, a spare pillow, a table, a cushionless chair for prayer and rumination, and a humble bookcase packed with books that told stories of God, knowledge and other aesthetic pleasures. That was it.


Sworn to celibacy for life, he woke every morning at 4 AM, exercised, and got down to the sacristy for morning prayers. Breakfast was as spartan and basic as his environs, followed by a session he spent with orphans from the local community, who lived at the Sangh and studied there.


During the myriad natural diasters that India seems to have more than her share of, the young ascetic would be called out at a moment's notice to travel hundreds of miles and serve the needy and dying, providing what little succour he could, armed only with a smile and very scarce resources garnered through donations.


Yet, despite that monastic existence, that life shorn of any vestige of material pleasure, job prospects, company pensions, and whatever it is that people take for granted these days, I can honestly say that he was one of the happiest persons I have ever known. The light of self-denial shone in his eyes, and he had a bearing that told of a man utterly at peace with himself.


I don't know where he is now, where destiny has taken him, but he strides my memories resplendently like a beacon of light on a dark night, exhorting me to simplify my life and go back to the basic tenets of austerity he epitomised.

Wednesday 18 February 2009

Decline in National GDPs in 2008

The data are in for fourth quarter GDP figures from the OECD for its member nations. The thirty nations making up the group, headquartered in Paris, shrunk by 1.5% (annualised 6%) in the 4th quarter of 2008. The decline was similar across the EU and the G7 countries, comprising the USA, Japan, Germany, the UK, France, Italy and Canada. The final figures for Canada are awaited, but here are the figures for the other six.

USA: -0.96%
Japan: -3.3%
Germany: -2.1%
UK: -1.5%
France: -1.2%
Italy: -1.8%

What's immediately noticeable is the plight of the manufacturing nations. Germany and Japan are manufacturing based economies, with a very high proportion of their GDPs derived from exports of machinery, tools and cars, and yet they appear to have borne the brunt of the recession far greater than service based (and largely indebted) economies such as the USA & UK. Nobody is immune in this downturn.

Over the course of 2008, the GDP of the top six nations have contracted as follows.

USA-0.21%
Japan- 4.55%
Germany- 1.62%
UK- 1.7%
France- 0.91%
Italy- 2.19%

Across the OECD30, the aggregated GDP fell by 1.21%.

Sunday 15 February 2009

2008 Corporate Losses

Yesterday, the Lloyds HBOS group, Britain's biggest mortgage lender, warned the markets that for the year 2008, it was likely to make a 10 billion pound sterling loss. The loss was largely due to its subsidiary Halifax-Royal Bank of Scotland group, which had had its fingers badly burnt in the subprime market. Thus, Lloyds, a respectable, typically solid British bank, had actually made a profit of just over a billion pounds in profit, but had been dragged down by the massive 11 billion pound loss suffered by HBOS.

Here are the corporate losses by some of the leading banks and automotives in 2008. The sums are dollar equivalents.

Bank Losses

Royal Bank of Scotland- 41 billion
UBS-22 billion
Citigroup- 19 billion
Merrill Lynch-15 billion
Lloyds-HBOS- 14 billion
Credit Suisse- 7 billion
Deutsche Bank- 5 billion
ING- 1.3 billion

Automotive Losses

Ford- 14.6 billion
Toyota- 1.6 billion
Pugeuot-Citroen-0.44 billlion

Ford made a loss of 11.8 billion and 12.6 billion dollars in 2006 and 2007, and has thus lost 39 billion dollars in the last 3 years.GM and Chrysler are yet to declare their full year results but losses will be substantial. GM lost over 4 billion in the third quarter alone, while Chrysler lost over 5 billion in the first 6 months of 2008.

Some companies did make a profit. Barclays, despite huge writedowns and its acquisition of Lehmanns, made a profit of 10 billion dollars in 2008, While French banks BNP Paribas, Socgen and Credit Agricole made profits of 4 billion, 2.6 billion, and 1.3 billion respectively. British banks HSBC and StanChart, which have large operations in the East, are likely to make sustantial profits.

Similarly, Honda is likely to be in the black despite fourth quarter losses, and VW made 4.8 billion in profits in the first 9 months of the year.

Senior bank executives have once again demonstrated what a sucker's game finance is. They have claimed millions in bonuses, walked off with multi million dollar pensions, but offered no accountability for their follies. During a recent grilling by British MPs, the current Lloyd's chief described his annual pay of a million pounds as "relatively modest". It is well known that between 1993 and 2007, Dick Fuld of Lehmann Brothers, earned half a billion dollars in compensation.

How did we land up in this situation, where such utter mediocrity is rewarded with unimaginable riches? Those of us who slog our butts off to make ends meet, struggle with our mortgages and childrens' education, having worked diligently throughout our lives at Medicine, Engineering or IT, will never understand.