25.11.2008

Finance & Economics

• Banks reduce deposit rates on bulk deposits
• At a time when the world is grappling with a liquidity crisis, India appears to be experiencing a reverse trend. Wasn't till the other day that the FM and the PM were seen exhorting the bankers to keep lending and a slew of measures were announced to boost liquidity in the system? Why is that suddenly the scenario has changed and we see banks going to the extent of cutting deposit rates, which signals an excess liquidity in the system?
• The answer lies in the slow credit offtake. Loans, which were rising sharply at nearly Rs 33,000 crore a fortnight until early October 2008, have slowed down to around Rs 14,000 crore in the past two fortnights.
• Is the Federal Reserve doing it right?
• We learned from conventional text books that printing money to finance your deficits is bad.
• With the US Fed reportedly set to lend/guarantee more than $7.4 trillion to rescue the financial system, I think the time has come for us to revisit the conventional wisdom. Where is it finding that much of money from? If it is only in guarantees and that no actual outflow of funds is involved, what would happen if it has to face the claims in reality? Would it go back on the guarantees or would it print money? Where would printing that much of money take the value of the dollar to?
  
• Very worrying question; isn't it?
  
• Let us remember that this kind of money is about 50% of its GDP. No small change.
• At first these figures appeared unbelievable. But once you read this Bloomberg report, you will surely be shocked.
• World markets welcome Citigroup bail out?
  
• All the world markets appear to have given a vote of confidence for the Citigroup bail out (more on it below); but I would prefer to wait and watch which way this bailout works in the months to come.
  

International

• US unveils a Citigroup rescue act
• As per the rescue plan, the treasury would invest $20 billion in Citigroup from the Troubled Asset Relief Programme in exchange for preferred stock.
  
• Besides, the Treasury and the Federal Deposit Insurance Corporation (FDIC) would provide protection against $306 billion of toxic loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet.
  
• Citi is fighting to stay away from the list of failed banks in the US. It is reported that 22 banks have collapsed in the US this year so far.
  
• With this bail out the US government's guarantees to its banking system have crossed the $1.4 trillion mark.
• Credit squeezes Dubai
• This emirate, one of the seven in the UAE federation, with barely any oil to call its own, made its bid for fame by housing banks, retail, media, shipping and logistics enterprises and by billing itself as a safe haven in a volatile region for investors.
• Now with the global financial crisis resulting in a credit squeeze, its breakneck building boom stalled, its lending bonanza evaporated and the government pondered wider steps to rescue banks.
• Lenders blinded by rising oil prices and borrowers spellbound by easy returns have helped build a mountain of private sector debt that has generated an illusion of excess and abundance. Now investors fear that individuals and corporations alike will have trouble paying back Dubai's non-bank foreign currency debt estimated at just under $70 billion.
• Many had hoped that the six countries of the Gulf Cooperation Council (GCC) would escape the crisis due to their massive current account surpluses from energy exports. With these surpluses quickly evapourating from the fall in the crude price, Dubai which is dependent heavily on the investments from the surpluses from GCC, Iran and Russia is looking extremely vulnerable.
• The government has already pumped in $19 bn dollars into the banking system; and is willing to pump more if the need arises.

Technology & Computing

• Graphene memory
• Research into finding new memories which can store more and more of data with less and less of moving parts has just crossed one more milestone with the successful testing of Graphene memory.
• Researchers said the conducting properties of graphene (a form of graphite) would have many advantages over today's state-of-the-art flash memory and other new technologies. Graphene memory increases the amount of storage, consumes far less power, generates less heat and is highly heat resistant.
  
• Water mill
• We have heard of wind mills. Now is time for water mills.
• A gadget that uses the same technology as a de-humidifier, and creates a ready supply of drinking water by capturing it from the air, has been developed by a Canadian firm Element Four.
• Costing about 800 pounds, the gadget can produce about 12 litres of water a day.