Archive for November 20, 2012

Mon Dieu – Adieu to the Triple A

The second of the major credit agencies have downgraded France from it’s treasured triple A status in the World’s financial markets.  The result is unclear at the moment but there is a huge risk that it’s borrowing costs will rise as a result of this action.  Of course, the last thing any country needs with a high debt rating is to have the cost of it’s loans rise. Read this excellent article by the Economist on the French Economy.

France TV Direct

 

The rating has been downgraded one notch to Aa1 and apparently is the result of ’deteriorating economic prospects’.   The agency involved – Moody’s says it was maintaining a negative outlook on the French economy ude to the many challneges the country faces primarily structurally.  They cite a loss of competitive advantage which may be referring to the high levels of taxation and the costs of employing labour in France.

It will cause France lots of issues, not only because it will lose access to the many investment funds which only deal with countries which have multiple AAA ratings.   There is optimism that there will be little overall effect at least in the short term as much of Frances debts are in the form of 10-15 year yields on bonds.

All this comes alongside the backdrop of the EU asking for more money, in fact they want an increase in 4.8%.  While the rest of Europe implement spending cuts and austerity policies, the commission keep spending more.

It’s often difficult to keep up to date with the Euro Crisis news in the US, but I would recommend the BBC for relatively impartial reporting.  The French Press is good as well and most of the main news is translated to some extent, you can also try the excellent M6 Replay for some great documentaries occasionally.  The economic stories usually get at least one programme a week on Newsnight on BBC2, and through this post – if you want to watch BBC Iplayer on the Ipad in the US – http://www.proxyusa.com/iplayer-ipad-us-vpn, it’s a viable solution.

The negotiations for the EU budget levels will be even more interesting when one of the biggest supporters sees the growing costs of servicing their own National debt.

 

Globalisation and Tourism

 

Although there are some positive aspects of globalisation, for example, the ability to experience different cultures through food and music without having to travel across continents, there are also many downsides.

It has led to a very stereotypical view of the world. Because of globalisation, we have an opinion about different cultures without having experienced them firsthand. This can be dangerous as our culture will always seem superior compared to others, particularly when it comes to political opinion, or the reporting of news from other countries.

Similarly, although there are rules against big businesses monopolising the markets, we still see it in action. Tourism is huge, and the big brands know this, it is why there is a chain at some of the biggest tourism sites across the world. Perhaps the most bizarre example of this is the McDonalds’ restaurant that is located a mile away from the Dachau concentration camp in Germany. There seems to be little consideration about the local businesses that simply cannot afford to compete with the corporations.

It could also be argued that because businesses are attracted to the sites that attract the most tourists, they are destroying the local community. This can be in many different ways such as the building of main roads which could potentially remove great scenic cycling or walking routes.

Although these well-known brands may increase visitors or through traffic to a location which may in turn help the local economy, it is important to preserve local cultures and environments otherwise everywhere in the world will be the same.

It is also important to help those who cannot help themselves. If a nation does not have to means to join the ‘global village’ it may become lost, as less attention will be paid to it. To put in another way, if a nation has nothing to offer for globalisation, it will not become a part of the global community.

We have come to terms that we live in a world that is connected, but to be connected you need to be able to offer something in return, whether it is a financial offering or something else, this is a clear disadvantage to the poorer nations of the world.

The IMF Picks Winners

The IMF certainly is allowed to pick winners isn’t it?

I mean, I recently had a conversation with a wine company which focuses not only on single bottles of wine, but instead on wine gift baskets and what they told me was pretty amazing.

First, the IMF despite being a non political and non religious organization won’t fund the planting or growing of grapes.  As it turns out, there is usually some non veto holding member of the United Nations Security Council whom would object on religious grounds to any type of alcohol so the IMF stays as far away as possible.

Anyway, the whole idea is disassapointing on a number of levels.  Mostly it flat out sucks for local farmers because good wine grapes can bring in $4,000 or more per acre per year, while apples bring in about $500.

If you are an economic development agency, which way would you go?