US Public Debt and Statutory Debt Limit

• How much is current US Public Debt ?
• Is the US Public Debt near the Statutory Debt Limit ? How near ?
• Where can we find updated information on these ?

Daily Treasury statement
http://www.fms.treas.gov/dts/

Example:
Nov. 17, 2009 Daily Treasury statement

Go to "Table III C – Debt Subject to Limit", look at the "Closing balance today", at items "Total Public Debt Subject to Limit" and "Statutory Debt Limit".

On Nov. 17, 2009:
Total Public Debt Subject to Limit is $11,982,556 billions (11.982556 trillions).
Statutory Debt Limit is $12,104,000 billions (12.104000 trillions).

The Statutory limits on Federal Debt are changed many many times.
We can see the changes from this file (This file is from White House’s website.):
Statutory limits on Federal Debt: 1940 – current

Amazing !
In 1940, statutory limit for Federal Debt is 49 billions.
Sep 29, 2007, it is 9,815 billions.
Feb 17, 2009, it is 12,104 billions.

Stonehage Affluent Luxury Living Index 2009

Stonehage Affluent Luxury Living Index, or SALLI is an index to measure the inflation experienced by High Net Worth (HNW) and Ultra High Net Worth (UHNW) individuals and families. It’s Sterling-based.

PDF file : SALLI 2009

One key highlight is that SALLI actually falls by an average of 3.7% in 12 months ended on April 09, compared to average inflation rate of 2.3% of UK’s CPI over the same period. This is under the background of significant fall in the value of Sterling against USD and Euro. SALLI deflation will be even greater if not for this reason. In a way, recession affects HNW/UHNW individuals spending. In another way, it’s “cheaper” to live as HNW/UNHW individuals now.

We can take a glimpse of luxury industry through SALLI.

It’s eye-opening to see what the High Net Worth (HNW) and Ultra High Net Worth (UHNW) live on. This can be seen from the component items of SALLI from the pdf file. (Check out the items, the brands etc…)

It’s really an extremely big gap between HNW/UHNW and the masses. :-)

Result of Supervisory Capital Assessment Program (SCAP) (a.k.a. Bank Stress Test)

On 7 May 09, Fed released the results of the Supervisory Capital Assessment Program (SCAP).

Press release, Statement by Bernanke and Overview of Results (pdf file)

Some highlights:

1. SCAP Buffer

Page 9 of the Overview of Results (PDF) shows the summary for all 19 Participating Bank Holding Companies (BHC). Of particular interests are SCAP Buffer (total, as well as for individual banks). Total $74.6B extra needed. Refer to Pg 9 of the file for SCAP Buffer needed for individual banks.

2. Deadline (from the Joint Statement)

have until June 8th, 2009 to develop a detailed capital plan, and
until November 9th, 2009 to implement that capital plan.

3. Capital Plan (Excerpt from Joint Statement)

[three main elements:

3.1 A detailed description of the specific actions to be taken to increase the level of capital and/or to enhance the quality of capital consistent with establishing the SCAP buffer. BHCs are encouraged to design capital plans that, wherever possible, actively seek to raise new capital from private sources. These plans should include actions such as:

• Issuance of new private capital instruments;
• Restructuring current capital instruments;
• Sales of business lines, legal entities, assets or minority interests through private transactions and through sales to the PPIP;
• Use of joint ventures, spin-offs, or other capital enhancing transactions; and
• Conservation of internal capital generation, including continued restrictions on dividends and stock repurchases and dividend deferrals, waivers and suspensions on preferred securities including trust preferred securities, with the expectation that plans should not rely on near-term potential increases in revenues to meet the capital buffer it is expected to have.

3.2 A list of steps to address weaknesses, where appropriate, in the BHC's internal processes for assessing capital needs and engaging in effective capital planning.

3.3 An outline of the steps the firm will take over time to repay government provided capital taken under the Capital Purchase Program (CPP), Targeted Investment Program (TIP), or the CAP, and reduce reliance on guaranteed debt issued under the TLGP. ]

4. Mandatory Convertible Preferred under the CAP (from Joint Statement)

A BHC may apply for Mandatory Convertible Preferred (MCP) in an amount up to 2% of risk-weighted assets (or higher upon request).

In addition, (in simpler term) to consider requests to exchange outstanding preferred …for new mandatory convertible preferred issued under the CAP.

5. Redeeming Preferred Securities Issued under the CPP (from Joint Statement)

(In simpler term) Supervisors will decide on redemption; banks will have to show they are financially "strong" but it's still up to the supervisors to decide on redemption of outstanding CPP preferred stock. :-)

Question now will be:
How will the banks with shortfall raise capital ?

(My previous post on SCAP)

US Banks Stress Test - SCAP (Supervisory Capital Assessment Program)

On 24 Apr, Fed released the method it used to conduct stress tests of 19 biggest US banks.
press release
PDF file

Have browsed through it, trying to figure out what it means..

Some highlights:
It is called SCAP (Supervisory Capital Assessment Program).

1. SCAP Template
The SCAP template is in Appendix A (of the PDF file).
(Read the PDF file for further breakdown of items)

Few parts:

a. Loan and Security Categories to be included in the Loss Estimates

• Loans (many different types of loans)
• Commitments and Contingent Obligation
• Securities
• Trading Account

b. Resources to absorb losses

• Pre-provision Net Revenue
• Allowance for Loan Losses

c. Post Scenario Tier 1 Capital

2. Scenarios

Year to assess: 2009, 2010
2 scenarios: baseline scenario, more adverse scenario

On page 6, there is a Table 1 to show how they formulate the 2 scenarios.

• Average baseline scenario for Real GDP and Civilian Unemployment Rate is calculated by using the average of Consensus Forecasts, Blue Chip and Survey of Professional Forecaster.
  Average baseline for House Prices is by using Case-Shiller 10-city Composite Index.
  
• "More Adverse" Scenario is mentioned in Page 5 Footnote. (refer to the PDF file)
  It was mentioned in the text, "More Adverse" scenario is not "Worst Case" scenario. It is "conditions that are severe but plausible"

3. Securities in Available-for-Sales (AFS) and Held-to-Maturity (HTM) Portfolios

All those ABS, CMBS, RMBS etc.. are here.
Important ! These are the so called "toxic assets".

How is the new FASB guidance on fair value measurement and impairments (see my previous post) being used ?

• Baseline scenario: use FASB new guidance (read: not mark-to-market)
• More adverse scenario: not using FASB new guidance (read: mark-to-market)
  

Some questions to ponder:

• Is the "More Adverse" scenario adverse enough compared to reality ? Is the modelling reasonable ? How to ensure accuracy of inputs ?
• How will the stress test be used ? What happens next if passed ? What happens next if failed ?

US Economic Indicators

We can get US Economic Indicators from this website.
Its data sources are US Census Bureau and Bureau of Economic Analysis (BEA).

We can find out what are the economic indicators, source, frequency and date of release.

I try out its email updates. When there are updates, an email will be sent to my Inbox directly.

In case we want to check for data when it’s released, refer to "US Economic Indicators – calendar for 2009". This PDF file shows date and time release of particular economic indicator.

We can also go directly to US Census Bureau and Bureau of Economic Analysis (BEA) to access the data.

What are the significances of these economic indicators ?
I find this book " The Atlas of Economic Indicator – a visual guide to market forces and the Federal Reserve" useful and simple to refer to.

However, do bear in mind that there is a lag between the date data is released and period it is used to measure. This in a way limits its usefulness.

More on Reform on Monetary System

Zhou Xiaochuan, Governor of The People’s Bank of China has more speeches related to international reserve currency:
On saving ratio
Changing Pro-cyclicality for Financial and Economic Stability

His speech text of "Reform the International Monetary System" was released on 23 Mar, "On saving ratio" on 23 Mar, "Changing Pro-cyclicality for Financial and Economic Stability" on 26 Mar. We can see his urgency to get the messages across before the G20 Summit :-)

In this Reuter’s article, it was said that "Russia said it would put forward a proposal for the creation of a new reserve currency issued by international financial institutions at the Group of 20 meeting in April." and "Moscow said it has the support of other emerging market countries, including Brazil, South Korea and South Africa for its proposal. ".

In a FT’s article, it was said that "EU leader condemns US ‘road to hell’".

US and UK are against to the proposal of new international reserve currency.

It left to be seen what will happen on the coming G20 Summit.

Zhou Xiaochuan of The People’s Bank of China proposed “Reform to International Monetary System”

Zhou Xiaochuan of The People’s Bank of China has proposed a reform to international monetary system in his speech "Reform to International Monetary System" (published in both Chinese and English).

Read his text of speech for details.

A lot about international reserve currency can be learnt from his view.

A summary: (I try to figure it out)
*
(Previous) International reserve currency : Silver Standard, the Gold Standard, the Gold Exchange Standard and the Bretton Woods system

Theoretical characteristics of an international reserve currency:
1. Anchored to a stable benchmark and issued according to a clear set of rules, therefore to ensure orderly supply
2. Its supply should be flexible enough to allow timely adjustment according to the changing demand
3. Adjustments should be disconnected from economic conditions and sovereign interests of any single country

Why existing system doesn’t work:
Triffin Dilemma, i.e., the issuing countries of reserve currencies cannot maintain the value of the reserve currencies while providing liquidity to the world, still exists.

Desirable goal :
create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run

Solution:
super-sovereign reserve currency, proposed to use SDR.

Not a new idea:
1940s, Keynes: "Bancor", based on value of 30 representative commodities
1969, IMF: SDR

Proposed SDR valuation:
basket of currencies, expanded to include currencies of all major economies, GDP included as weight.

Steps
1. short run, the international community, needs to recognize and face up to the risks resulting from the existing system, conduct regular monitoring and assessment and issue timely early warnings.

2. Give SDR a greater role; push forward a SDR allocation; approved Fourth Amendment to the Articles of Agreement and relevant resolution on SDR allocation proposed in 1997; broaden scope of using SDR; Set up a settlement system; promote the use of the SDR; Create financial assets denominated in the SDR; improve the valuation and allocation of the SDR

(This may be the difficult part) :
Entrusting part of the member countries' reserve to the centralized management of the IMF and IMF as international "supervisor" on the macroeconomic policies of its member countries.

Suggestion for IMF to promote greater role of SDR :
set up an open-ended SDR-denominated fund based on the market practice, allowing subscription and redemption in the existing reserve currencies by various investors as desired.
*

Many countries are really frustrated with status of USD, especially those that bought lots of USD-denominated debts.

But questions remain:
1. Can IMF really handle this big role of handling all member countries' reserve and be the international "supervisor" on the macroeconomic policies ?
2. Will countries of the world let IMF handle it ?



Note:
You may wish to check out my other posts on US investment and economic analysis.

Nordic Capitalism – the future of capitalism ?

In this FT's article, it was said that, Jorma Ollila, advocates that Nordic style of capitalism (characterised by openness to globalisation balanced by strong government programmes to protect people from its excesses and an egalitarian education system), is the future of capitalism.


Who is Jorma Ollila?

His more prominent roles are:

1. Chairman of both Nokia and Royal Dutch Shell
2. Chairman of European Roundtable of Industrialists (an informal forum of around 45 chief executives and chairmen of major multinational companies of European parentage covering a wide range of industrial and technological sectors).

European Roundtable of Industrialists is a good place to get views of European Industrialists.

So, what is Nordic Capitalism ?
I found this insightful PDF file written by University of Jyväskylä.

Nordic economies:
Five small North European countries, which includes Denmark, Finland, Norway, Iceland, Sweden.

There is this book, Creating Nordic Capitalism – the business history of a competitive periphery, which is a good source to learn about Nordic Capitalism.

You can get a sample chapter from the website.

There are case studies given by the books on Capitalism of Sweden, Finnish, Danish and Norwegian.

Swedish Capitalism
Bonnier & Wallenberg
ASEA/ABB

Finnish Capitalism
Stora-Enso
Nokia and Tampella

Danish Capitalism
Arla Foods
Carlsberg

Norwegian Capitalism
Elkem
Kreditkassen

Iceland, as we know, is in deep trouble.

I wonder how are the status of these countries (Denmark, Finland, Norway, Sweden) and the companies used as success stories of Nordic Capitalism.

Can they withstand the onslaught of this financial crisis ?
How should the future of capitalism be ?

US Stimulus Package - Bush's TARP/EESA; Barack Obama's American Recovery and Reinvestment Bill

For investors who wish to look at details of US Stimulus Package:

Bush’s Stimulus Package
Name: Troubled Assets Relief Program (TARP) under Emergency Economic Stabilization Act of 2008 (EESA)

Troubled Assets Relief Program (TARP) under Emergency Economic Stabilization Act of 2008, is passed and became Public Law No: 110-343 (H.R.1424 prior to enactment)

H.R. 1424 (from Library of Congress)
link

H.R. 1424 pdf file (from GPO)
PDF file

Public Law No: 110-343
PDF file

Obama’s Stimulus Package
Name: American Recovery and Reinvestment Bill
Summary of American Recovery and Reinvestment Bill (from Committee of Appropriations) – (as passed by the house on 28 Jan 09) (refer to Committee of Appropriations for updates)
PDF file

Full text
PDF file

Note:
If you like this post, you may be interested on my other posts on US and fiscal stimulus.
Feel free to check them out and comment.

10-point plan by Ministry of Industry & IT (MIIT) of PRC China to boost internal needs

On previous post, we see that to boost internal needs, China has a 10-point plan to boost internal needs, mostly through different types of infrastructure building and policy on agriculture, taxation, credits.

Came across this complementary 10-point plan by "Ministry of Industry and Information Technology of the People’s Republic of China" (MIIT) (工业和信息化部) to boost China’s internal needs.
Link on MIIT

A good read. We can see which are the industries or industries’ aspects that the China government is going to promote/encourage. This one will be more on the industries.

Related aspects/industries (refer to website for details) in summary:
1. On factor of productions like energy, transport, commodity; also on import-export, pricing, taxation, credits
2. Some projects are mentioned: 钢铁基地、百万吨乙烯、百万吨钾肥、磷复肥基地
Wow.. million tonne !
3. Equipment industry
4. Communication, Integrated System industry
5. on SME funding, credit, risk
6. IT + Industrial integration; emphasis on 汽车电子、机床电子、医疗电子
7. TD-SCDMA, IMT-Advanced
8. Agriculture
9. Fashion/apparel industry
10. Quality of corporate internal management

How will it be implemented ? Will it be effective in boosting internal needs ?

Financial Stability Forum

On previous post about G20, one of the bodies mentioned are Financial Stability Forum.
website

Let's explore Financial Stability Forum today :-)

There are some publications by category:
capital flows
credit risk transfer
dealing with weak banks
deposit insurance
enhanced disclosure
highly leveraged institutions (HLIs)
implementation of standards
market and institutional resilience
offshore financial centres (OFCs)
ongoing work on sound financial systems
other

Members Institutions
link
We can find relevant bodies here. Lots of information..

Compendium of standards
link
This is cool ! The "12 key standards for sound financial systems" and its issuing bodies are eye-opener. Will the "New Financial Order" (if any) be following these standards (or its variations) ?

G20 Leaders Summit on Financial Markets and the World Economy

Found on website of "G20 Information Centre": the "Documents and Declarations G20 Leaders Summit on Financial Markets and the World Economy November 14-15, 2008, Washington DC" and other related documents.
Link

The "Declaration of the Summit on Financial Markets and the World Economy" is available inside.

It is a great read, particularly the "Common Principles for Reform of Financial Markets" and its more detailed "action plans" part.

Its timeline: Immediate Actions by March 31, 2009; Medium-term actions.
Its "common principles for reform":
1. Strengthening Transparency and Accountability
2. Enhancing Sound Regulation
3. Promoting Integrity in Financial Markets
4. Reinforcing International Cooperation
5. Reforming International Financial Institutions

There will be lots of new regulations and standardizations, in global scale, provided a consensus can be reached.

Some of the international bodies/"guidelines" etc. that are mentioned in the documents may worth a search or understanding to get a glimpse on the future "world financial order" will be (however, the list below is not exhaustive):

• IMF, World Bank and other multilateral development banks (MDBs)
• Financial Stability Forum (FSF)
• World Trade Organization (WTO)
• WTO's Doha Development Agenda
• Millennium Development Goals
• development principles agreed at the 2002 United Nations Conference on Financing for Development
• Financial Sector Assessment Program (FSAP)
• Credit Ratings Agencies
• Basel Committee
• Financial Action Task Force
• World Bank - UN Stolen Asset Recovery (StAR) Initiative
• Organization for Economic Cooperation and Development (OECD)
• Bretton Woods Institutions
  
  Other more general information on G20:
  website

UNCTAD World Investment Report

UNCTAD (United Nations Conference on Trade and Development) World Investment Report 2008:
PDF report
(Wow, a 411-page PDF report)

The 2008 report emphasizes on FDI (foreign direct investment), TNC (transnational corporation), infrastructure industries, policy challenges and options.

The "Methodological Notes" portion is a good resource on how and where to get FDI data for different countries: inflows, outflows, inward stocks, outward stocks.

FDI statistics are also available from:
link

National Bureau of Statistics of China

National Bureau of Statistics of China
website

Statistical data is available monthly.
data

The Chinese version website has more information compared to English version.

Found this 改革开放30年经济社会发展成就系列报告 in Chinese version only.
report
A great read.

Quite a lot of information on 统 计 分 析:
For examples:
企业景气报告
link
农 产 品 价 格
link
工 业 品 价 格
link

Though the information may still lag the real situation, there are still good reads.

Financial Development Report by World Economic Forum

Came across this Financial Development Report by World Economic Forum.
Financial Development Report link

Financial Development Index 2008 ranking.

We can learn a great deal from the report:
components of financial development, weak and strong points of each country etc..

The Financial Development Index is divided into 3 categories, 7 pillars:
Categories are :
factors, policies, institution – pillars 1 to 3
financial intermediation – pillars 4 to 6
capital availability and access – pillar 7

1st pillar: institutional environment
2nd pillar: biz environment
3rd pillar: financial stability
4th pillar: bank
5th pillar: non-banks
6th pilllar: financial markets
7th pillar: size, depth and access

Singapore is at rank #10 . Malaysia is at rank #20.
Maybe we can see what our country is weak at and learn from the best in class.

From Table 2 (page 14):
Wow, Malaysia actually gets #2 position in "bank", what a surprise !
Singapore gets #1 position in pillars 1-3, all the pillars related to policymaker !

Malaysia detailed report is at page 156, Singapore at page 204.

Seems like Malaysia’s bank is good at "financial information disclosure" (rank #1).

Technical Notes and Sources (page 331 onwards) provides information of where to get data for all the indicators for the Financial Development Index. Great resources to do country analysis, economic analysis !

Economic Analysis : Malaysia

Where to get data for economic analysis of Malaysia ?

1. Bank Negara Malaysia
BNM website

Some of the data available:
National Summary Data,
Statement of Asset & Liabilities (official international reserves position) ,
detailed breakdown of official international reserves,
rates like: exchange rate, interest rates, Islamic interbank rates,
Malaysian Government Securities ("risk free rate" for Malaysia, useful in investment calculation. Also can look at MGS yield curve),
Kijang Emas prices (gold price),
primary issues of all instruments etc.

• Some information comes with downloadable historical data or historical chart. A good source to see the trend of the parameters.
• By checking Advance Release Calendar, we can proactively know and check for timely, relevant data, instead of passively waiting to see the same data appearing in newspaper etc..
• Monthly statistical bulletin is a compilation of monetary, financial & macro economic statistics. A good one-stop summary.

2. Department of Statistics, Malaysia
website
We can find macro-economic statistics for e.g population, vital statistics, GDP/GNI, BOP, external trade, exports, production, CPI, PPI etc. from the website. The growth rate is useful as a benchmark for economic growth.