My experience after visiting Bloomberg

Dears readers,

My experience in Bloomberg was very interesting and attracted my curiosity due to the link between designs of the office creating a very specific transparent atmosphere. Also, inside City Gate House, 39-45 Finsbury Square, the office is very impressive due to is size to imagine this fact, Bloomberg, due to specific taste about fish with the CEO’s wife owns the biggest aquarium of Europe inside an office. The personal was also saying that aquarium inside the office created a more relaxing atmosphere and unforgivable atmosphere inside a stressful situation. Like I told you from my professional experience inside trading banks, I was very impress about the effectiveness of creating a positive atmosphere generating better enjoyment and working value on a positive ambience. The lobbies was also very impressive due to the fact that decision and meeting was usually looking very informal in a good way due to this specific creation leading to shaped on the creativity of the staff, inside the decisions making.

Issues created by the crisis within Sino-US Conflicts:

Dear Readers,

(Sources: theoldspeakjournal)

According to an unofficial interview made with a deputy of city group based in Shanghai, since the subprime crisis and the crash of Lehman Brother, the Chinese government and PBOC (People Bank Of China) has bought T-bills, treasure Bills in order to consolidate his reserve, inside the capital account, therefore china has become the owner of the biggest reserve of the world (Kolesnikov-Jessop and Foroohar, Newsweek, 2010). According to an economist blog (economicshelp.org), China, without his actual GDP growth, could dramatically depreciate US dollar and therefore decrease the USA balance of Payment, by making his spending inside imports increasing, according to a deputy of city group based in Shanghai and over the world by related effect due his liquidity’s power, needed inside a shortage of liquidity by others riches countries. However, china also has a huge link within interdependency because the actual growth of Chinese is held by his external export; Chinese became at the end of 2009 the biggest exporting country after dethroning Germany, according to the BBC, “the exports value of china in 2009 was around 1 trillion of dollars”.(BBC website) In paradox the China is hold the pressure from outside more specifically with the Europe and United States of America pressure because the actual growth inside china due to low expansion on the weak part of china in the non coastal zone such as Tibet (China.org.cn).

The actual pressure, which is the main concern of the present, and analyse actually by all economist and professionals of the world, is about the exchanges rates of the RMB and the value which is about 1USD equals 6.6645 Yuan, (according to Forex website), and within a theory principle, “the currency of the country has to be based on the quota of the reserve hold by country, is the value of the invisible balance inside balance of payment, in other word the (deficit or)surplus of the exports and imports, is  positive the money has to be appreciate”, that why western countries push the PBOC to revaluate the Yuan (P. Tadaro, Smith, 2008).

The reason on the western size will be to push the exports inside China by making the price of foreign products cheaper and push the competitiveness of those companies, and also inside the western countries making the Chinese products more expensive. On this other hand the Chinese government has mentioned before by the BBC want to improve the internal competitiveness by push the price at the same level (hold back hyper inflation) in order to against three majors’ points, according to my opinion: (Sino-US Relation)

- “Possible lost of competitiveness of Chinese companies

- Destabilized the invisible balance

- Possible increasing of the unemployment rate, leads to increasing huge amount of investment by the government” (“such as creation of organisation like “man power”) (“Le point” magazine)

The Newsweek magazine pinpoints and emphasis those facts mentioned before by using “intensive protectionism policy”. The terms protectionism, according to a website is a “The doctrine or practice of restricting international trade to favour home producers, by tariffs, quotas, or (most frequently in modern times) by non-tariff barriers such as requiring and example, all Japanese video-recorders imported to France to be cleared through a small customs shed in Poitiers.”(Foreign policy website) In the same connotation, the Chinese government is using tariffs, taxation on imports making the price of the foreign goods more expensive. However the meanings of those techniques have others reasons, which do not need to be shown on this paper.

Secondly, china is using mass investments in order to maintain the equilibrium balance on the balance of payment (in this case in surplus), again in the purpose of controlling the value of the RMB, or Yuan over the dollars. Then those historical and recent facts lead to show the negative size of making international fair in danger, by using protectionism against the Adam smith theory, “invisible hand”. In order to appease the situation the actual administration of Obama and European leaders with the actual Chinese government try to find out better options. More intensively, due to a pick of conflicts between them, internationals leaders met, for example the European leaders Sarkozy and Merkel visit the Chinese government, in 16^th and 17^th of June 2010. Also, in terms of protecting the international atmosphere the WTO and the IMF are working independently to conciliate those international biggest economies. Nevertheless, the issue again is those two internationals organizations “controlling economic conflicts are very westernizes”, and may not be accurate. (James Gerber, 2010) The other point, the paper need to clarify is the term international relation is according to Kornberg and Faust, in 2005 say that: “Study of the relations of states with each other and with international organizations and certain sub national entities (e.g., bureaucracies and political parties). It is related to a number of other academic disciplines, including political science, geography, history, economics, law, sociology, psychology, and philosophy. The field emerged at the beginning of the 20th century largely in the West and particularly in the U.S. as that country grew in power and influence. The study of international relations has always been heavily influenced by normative considerations, such as the goal of reducing armed conflict and increasing international cooperation. At the beginning of the 21st century, research focused on issues such as terrorism, religious and ethnic conflict, the emergence of substrate and non-starter entities, the spread of weapons of mass destruction and efforts to counter nuclear proliferation, and the development of international institutions.”

Therefore what will be the issues of the conflicts in the future?

The future according to my opinion will need to tend for a reform of the Regional Agreement and the other institutes, such as WTO and IMF to give a better balanced position. Due to the fact that the protectionism and all economic conflict will need to increase the influence of those international in order to effectively solve all entry barriers (in MNE’s) destroy the relation between firms and the competitiveness of those, also in order to solve the actual financial and economic current situation.

United States of America

Dear Readers,

(Source: fundcn.org)

For the last century, US has become the largest powerful due to the Bretton woods period when US = 1 once of gold leading to building the largest gold reserve of the world and also gradually increase the value during the boom of the pre-subprime period (Indranarain Ramlall, 2010).

However, according to steps of the “subprime crisis USA has weaker his holding reserve and moreover the capacity of investment of the country” was affecting his economic power (Herman, M. Scwartz, 2009). The second fact, due to high unemployment rates and small liquidity the fed (Federal Reserve Bank) and the government has lost the internal dynamism causing a gradual increasing of the deficit of the currents account due to the increasing of imports and within smaller investment also emphasis the deficit with gap X / M (exp/imp) because, domestics firms are loosing competitiveness advantages from the world and moreover, the BRIC’s (emerging countries, Brazil, Russia, India, and China)

Furthermore, the weak dollar permits, the country to gain external investments shown by the increasing (W. Kolb, 2010) of the Fed stock value (Bloomberg in appendix).

Those facts pinpoint a discordance of US and China needs in terms of currency value and interne growth.

Pre and post subprime for US and China

Dear Readers,

China expansion

Chinese average GDP growth at 10 percent, for more 20 years attract in average 600 000 investments companies over interest on the opportunities to gain low labour cost and special tax treatment, involving 1billions dollars per week on the FDI. Due to this huge attraction employment rates is very high and the middle class (over 250- 350millions of people) and logically consuming power increasing by a huge amount, like since 30 years, the numbers mobile phone users is around 500 millions, or largest auto market in the world etc… (Data from Shiqiang GU, Timothy Weckesser, interview).

A past focus on manufacturing is increasing as keep going up due to cheap labour, technology and management learned from aboard increasing the competitiveness factors, strong tax incentives, emphasize export policy (Data from Shiqiang GU, Weckesser interview). This leads to create positive balance of visible trade inside Balance of payment, in other word the ratio of Exports and imports is positive and leads to explain one of the reasons of the GDP expansion. From “world’s work shop” in order to add value and shift the dominate feature of foreign trade from quantitative and qualitative the government is pushing exports from domestic Chinese firms in order to” gain more comparative advantage”. (Michael E. Brown, Owen R. Cote, Jr Sean m. Lynn-Jones and Steven E. Miller, 1991, Preface)

Therefore, the meaning of this policy based from politic focusing has the impact of maintaining manufacturing base,” in order to enhancement of independent innovation capability as the central link and will promote market-oriented & enterprise-led innovation”: (from Shiqiang GU, Weckesser interview)

Increase R&D spending from 1.3% of GDP in 2005 to 2% by 2010 and2.5% by 2020

Emphasize Support for S&T, Education, Entrepreneurship, and Shift in “Encouraged” foreign investment categories:

Ø       Targets include biotechnology, nanotechnology, renewable energy, etc.

Ø       IC research –Nano circuits and smaller

Ø       Biomedicine ‐Major biotech centers in Beijing and Tianjin, etc.

Ø       Civil aircraft

Ø       Satellite applications

Ø       New materials

Ø       Tax equalization between FIEs and domestic firms, but

Ø       150% deduction for qualified R&D expenditures

Ø       4% of GDP on education

The problem according to china will be an increasing of the RMB and lead to decrease the profit of the competitiveness and the profit made from his past investment inside the capital account. Therefore, by reversal effect US want to increase Chinese currency in order to decrease the amount paid related to the 3^rd part of the paper, also from the paper currencies manipulation by china accused by US (blog Sinous 2010).

The Subprime crisis

Dear readers,

First step

The origin of the subprime was cause by “a number of borrowers took out loans, in order to gain cash on buying house due to very good expectation of the house market price”. (W. Kolb, 2010, p558) However, the speculation was going in the wrong way due to a spill-over “ten years of ballooning properties prices in the united States les to excessive optimism by lenders and borrowers emphasis by the growth of investments made by business and governments” (W. Kolb, 2010, p106) and therefore increasing the mortgages lending, mortgage lending to contribute to rising houses price, “the average US house prices roses 86 percent between 1995 to 2006, and mortgages origination  rose by five times.” (W. Kolb, 2010, p558)   This created and result, a “property bubble deflated in 2006 to 2007, rising subprime defaults spurred a re-evaluation of the credit spread and credit market conditions that reflected boarder and more fundamental issues” (W. Kolb, 2010, p558). And therefore, people thought making money, were actually loosing cash and borrowers were not necessarily sure to get payback, and the all financial system was in panic, creating inside the bubble huge fears reinvestments and refunding risk, and a shortage of liquidity (increase of interest rates) (L. H. Janseng, K. Linsmann, Beulig N., 2008, p26)

The second step

After the property bubble, the banks were in difficulties, due to horrific future perspective. Therefore, the all financial system was in shock and the flow of investments decreased by a huge amount. This event will pinpoint the problems of reorganization and refunding the crisis due to higher risk on the interest rates and loosing money. (L. H. Janseng, K. Linsmann, Beulig N., 2008, p26). The reason of the financial system fears was amplified by the fact that all borrower are in petrifying by increasing the risk of loosing money “the all financial according to the rates of financial quota, such as AAA, AA, A, B etc were downgraded due to maximum risk of lost” (appendix).

In summary, the all investments created by firms and governments is going down and causing unemployment increasing and therefore the consumption decreasing.

The third step

The crisis becoming as a world mate due to decreasing of the balance of payment (imports increasing causing disequilibrium of the invisible balance of trade) of the riches countries and capital account in danger (financial system crash) create the subprime as terrible affect of the world economy.