Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts

Saturday, August 15, 2015

Apple Feels the Pain of China's Yuan Move

Yuan

Apple’s Discomfort on China’s Yuan Move

U.S. companies relying greatly on sales to China which includes Apple as well as fast food chain Yum Brands are feeling the discomfort of China’s move to weaken its currency. On Tuesday, in reply to the country’s economic slowdown, China’s central bank undervalued the nation’s tightly controlled currency, the Renminbi – RMB or the Yuan.

The 1.9% cut, its biggest one-day drop in decade,was called as a onetime adjustment by the People’s Bank of China though the surprised move had moved the stocks down together with concerns that it would affect U.S. companies, like Apple which have been on the rise selling their products to the world’s most populated nations. China had become Apple’s leading revenue source under CEO Tim Cook, after its Americas region, including the U.S.

The iPhone maker, in the latest financial quarter ending June had stated that China had made up around $13.2 billion of its overall $49.6 billion by way of revenues. This was up by 112% from the same quarter of 2014, when China had made up just around $6.2 billion of the overall revenue of Apple.

Several Companies Deprived of Huge Percentage

Yum Brands also had broad exposure to China owing to the popularity of its KFC fast food chain and about 52% of its revenue came from China as per Goldman Sachs. Mead Johnson Nutrition, the baby formula maker, in the meanwhile developed 31% of its revenue from China and Tesla; the electric car maker had been moving to sell in China after the nation had broken a record for car sales in 2013.

 Wynn Resorts that runs hotels as well as casinos gained a massive 83% of its sales to China, according to Goldman. Several of the chipmakers together with other tech companies too derived a huge percentage of their revenues from China as per Goldman Sachs which included:

  • Chipmaker Qualcomm with 61% of its revenue exposed to China 
  • Chipmaker Nvidia got 54% of its revenue from China 
  • Chipmaker Intel Corp that got 36% of its revenue from China

Negative Effect on Sales – Offset of Lower Production Cost

The negative effect on sales could be the offset of lower production cost for some of the companies, according to Adolfo Laurenti, chief international economist for Mesirow Financial in Chicago.

Apple for instance assembles several of their products in China and hence could benefit from the cheaper Yuan. Laurenti also mentioned that companies having strong brands, such as Apple could not be rejected as badly as the less popular products since wealthy Chinese consumers would be willing to spend more to have those brands name.

He further added that `Chinese consumers in particular preferred American brands especially marquee products and so the adjustment in price would not deter them much’. The major apprehension is what the devaluation move would recommend about the larger economy of China, according to senior economist with Morningstar Investment Management, Francisco Torralba and his main concern is that the depreciation of the RMB is construed by markets as a sign that Chinese economy tends to be weakening more than what they contemplated. He adds that should it occur, sales to China will be affected by more than just currency cost.

Saturday, July 18, 2015

Greece Asks For A Third Bailout

Greece

Greek Government’s Official Request – 3rd International Bailout

The Greek government has officially requested a 3rd international bailout in order to help in paying its debt, to prevent economic downfall and ejection from euro. It was recently confirmed by the European Stability Mechanism which acts as Europe’s financial rescue fund that Greece had applied for a new bailout package. According to a senior economist at ING, Carsten Brzeski who informed CNBC through email that there would be new negotiations and these would be tough.

Greece had received its first aid in 2010 with 110 billion euro rescue package while the second program brought the bailouts of 240 billion euros, for which the payment deadline was extended recently for another four month on the premise that the Greece’s government would be making a renewed push for economic improvements. Greece still needed financial help due to its huge debt burden unlike other euro zone members likeIreland and Portugal.

The latest bailout program ended recently and Greece had missed the big debt payment to the International Monetary Fund thus becoming the first developed economy for non-payment of fund. The Greek government has requested for the new package for three years and has promised to present fresh economic reforms for exchange of money. Moreover it has also implied that it would prefer some form of debt relief from previous bailouts.

Greece Economy in Deep Crisis

The European Union is expected to come to a decision soon whether to grant another bailout program once it receives more details with regards to the economic plans of Greece. Recently the International Monetary Fund had estimated that Greece would need at least 50 billion euros though analysts are of the opinion that the figure could be much higher since the IMF analysis had been conducted prior to the Greek banks being forced to shut down creating added havoc on the economy.

Greek economy is in a deep crisis due to years of overspending as well as mismanagement and the government has fundamentally run out of funds. Banks have been closed for over a week and will continue to remain close for some time with cash withdrawals being stopped for individuals and businesses. Driving has also been stopped by regular people since they now want to conserve any cash that they may have.

Experts are of the opinion that Greece would soon be compelled in printing their own currency and ditch the euro if the leaders tend to disagree on the new rescue package. Market News International – MNI, the News organization had recently reported that the creditors of Greece have been considering the possibility of a third package for several months, quoting top euro zone official.

Germany Powerhouse of Euro Zone

The source also informed that the possibility had increased in the hope of higher deficits and weaker growth owing to the turmoil of the recent snap election of the country. The deputy parliamentary floor leader of Chancellor Angela Merkel’s CDU party, Michael Fuchs, informed CNBC that another round of financial aid would probably be difficult.

He commented that it would depend on the Greek Government and that they have to come up with serious proposals. Greece needs to show that they are capable of really changing the situation. Germany has been known to be the powerhouse of the euro zone and the German taxpayer had portrayed signs that they are little more reluctant in continuing to bail out the struggling euro zone nations.

According to a recent new survey by Polit Barometer, around three quarters of Germans are in doubt that the Greek government would implement the announced serious measures and reforms while an INSA poll also indicated that only 21 percent of Germans support the present extension for Greece. German parliament had voted in support of the bailout extension, however with lot of dissatisfaction shown in these polls, it could not be too long before the German politician may change tact.
Cease Fire But No Peace Agreement
ING’s Brzeski informed CNBC that `the current compromise was a cease fire but no peace agreement. A lot of goodwill has been destroyed by the Greek negotiation strategy and it is completely open whether there will be an agreement on a third package or whether we could still see a Grexit later this year’.

Chief executive at the German Federation of Industry, Markus Kerber, had informed CNBC that Greece needs the reforms for the people of Greece and not just of its international creditors. He further added that Greece has four months now to show that the new government would be willing to do the structural reforms in the country that has been waiting for long and if this happens in the next four months, then there could be signs of hope on the horizon’.

In the meanwhile, a second reading of gross domestic product for Greece recently indicated that the economy had contracted 0.4 percent in the last quarter of 2014. Leaders of all 28 European Union countries would be holding a summit to decide on Greece’s fate in the euro and have warned that any bailout deal would tend to come with tougher requirements than the earlier deal offered which was rejected by the Greeks in a referendum earlier this month.

Wednesday, July 1, 2015

Interest Rates Could Stay 'Glued' to the Floor, Admits Bank's Chief Economist


Bank
Photo: CHRISTOPHER PLEDGER
Interest Rates Remain Glued to the Floor – Andy Haldane-Chief Economist

Reports have come in from the Bank of England’s chief economist, that the interest rates would remain glued to the floor for the instant future. It has been stated by Andy Haldane who sits on the Bank’s committee of interest rate setter that inspite of strong attempts in dislodging them; rates tend to remain stuck at unprecedentedly low levels across major economies.Presently the financial markets are speculating that the UK rates would rise from their lows of 0.5pc to around 2,5pc ten years from now which according to Mr Haldane implies an extraordinarily slow pace of monetary tightening at least by historical standards.

He suggested that policymakers, in trying too hard to raise rates would make the situation even worse, but on the contrary with in due course, they could come free of their own accord. He further stated that it is one reason why the glue holding interest rates to their floor has stayed so strong and feels no immediate need to loosen that glue.Mr Haldane has earlier considered himself as one of the Bank’s most dovish interest rate setters, indicated that he would prefer rates to be lower, instead of being higher. He comments that the Bank should be prepared to cut interest rates if it looks like low inflation and tends to become entrenched in the UK.

Interpreted Downward Drift as Evidence of Secular Stagnation

He has said that the glue holding rates low is remarkably resilient and could have been aggravated by deficient western investment together with additional savings in the east. While in conversation with Milton Keynes, Haldane has stated that `some have interpreted their downward drift as evidence of secular stagnation’, which is a concept that economies tend will grow slowly than in the past and this fear is an echo of concerns raised after the Great Depression. Consumers and businesses now are concerned that what is a reasonable recovery may not be permanent. Consumers are pleased that their glass is now less than half empty but they are no more willing to drink it and this cautious behaviour is to a degree, mirrored also among companies’.

Wage Growth Causing Fluttering 

Inspite of encouraging signs of wage growth during the year right up to April, together with rise in pay with its fastest pace from the time of the crisis, Mr Haldane had cautioned using the phrase `one swallow does not a summer make’. Analysts had informed that the pay growth could be even stronger after accounting changes in the UK’s workforce like the changing mix of employee ages, occupation and job tenures.

However, Mr Haldane has criticized the idea stating that `the wage growth is causing some fluttering though not in this dovecote’. It is now a matter of time to wait and watch for the outcome of the prevailing scenario on the interest rates in the near future.

Monday, June 8, 2015

India's May Month Iran Oil Imports Hit Highest Since March 2014


Iran_OilRefinery_Reuters
India’s Import – Increased to Highest Level – May 2014

Last month, India’s imports of Iranian crude oil increased to its highest level since May 2014 as the refiners enhanced the purchase ahead of a final push by the international negotiator in order to reach a deal on Tehran’s doubtful nuclear program by the end of June.

The increase to a 14 month high just two months after India, dropped its import on crude from Iran to zero under the pressure of U.S. to limit the purchases of the Islamic republics’ oil.For the first time, India did not take any Iranian oil, in at least a decade in March this year. Several analysts state that the United States, Tehran, Britain, China, France, Germany and Russia would be reaching an agreement by or littler later after June 30 deadline for a deal, though the sanctions which have cut Iran’s oil exports to less than half of pre-2012 levels are probably not likely to be lifted till next year.

United States along with its five partners have approved a way of restoring U.N. sanctions on Iran should the country tend to break the terms of any future nuclear deal, clearing a major problem of an agreement ahead of the deadline, though there are several other issues that need to be resolved.

India – World’s Fourth Biggest Oil Consumer

India, being the world’s fourth biggest oil consumer and Tehran’s top consumer after China, had shipped in about 367,900 barrels per day-bpd in nine vessels of Iranian crude in May, up 39% over April, as per preliminary data from trade sources as well as a report compiled by Thomson Reuter Oil Research and Forecasts. The data also indicated that the May imports surged by two-thirds from last year.

Between January to May, India had taken 203,100 bpd from Iran which is about 33% less oil than in the same period of last year, since the nations’ refiners had cut imports in the first quarter. This was to maintain the overall imports from the OPEC producers to a 2013/14 level of around 220,000 bpd. Private refiner Essar Oil was the biggest Indian client of Iran in 2014 which was followed by Mangalore Refinery and Petrochemicals Ltd and India Oil Corp.

Iran – Nuclear Programme – Peaceful/Rejects Accusations

The data also indicated Iran’s biggest Indian client in May which was Mangalore Refinery and Petrochemical Ltd – MRPL.NS that shipped in around 207,400 bpd from Iran. Purchases had been stepped up in May ahead of a three month shutdown by MRPL, during the coming monsoon season of a one point mooring site which enabled it to import oil in large crude carrier, according to a source.

The data also revealed that Indian Oil Corp. – IOC.NS, the country’s largest refiner, received around a million barrels of Iranian oil in May. The data also showed that India’s Iran oil imports surged by 43% to 316,800 bpd, in the first two months of the fiscal year being in April.

According to Iran, it states that its nuclear programme tends to be peaceful and rejects accusations from the Western countries that it wants the possibilities in producing atomic weapons. The data indicated that Iran was the seventh biggest oil supplier to India in 2014 and its share in the overall purchases rose to 7.3% last year when compared with 5.1% in 2013.

Saturday, February 28, 2015

Complication and Implication of Virtual Water- II


Fresh Water – Concern on Global Food Security

For several parts of the world, fresh water has become a scarcity and over exploited natural resource has now given rise to concern on global food security as well as damage to fresh water ecosystems. Situation seems to increase with the FAO making its estimate that the food production should be double by 2050 and hence food chains should be more efficient with regards to the usage of consumptive water. For geographically and small well defined Australian mango industry, with an average annual production of 44,692 ton of marketable fresh fruit, was 2298.1 kg−1 of average virtual water content, which is a sum of green, blue as well as grey water, at the orchard gate.

Due to wastage however, in the distribution as well as the consumption level of product life cycle, the virtual water average content of 1 kg of Australian grown fresh mango used by Australian household was 52181. This figure compared to an Australian equivalent water footprint of 2171 k−1is the volume of the usage of water in Australia with equivalent capabilities in contributing to water scarcity. Nationally, the distribution and consumption waste in food chain of Australian grown fresh mango to the consumers, indicate an annual waste of 26.7 Gl of green water with 16.6. Gl of blue water

Intervention in Reducing Food Chain Waste – Great Impact on Fresh Water 

These discoveries indicate that the intervention in reducing food chain waste would probably have a great or even a greater impact on freshwater resource available like other water use efficiency measures in food production and agriculture. Analyses of evolution and the structure of trade in virtual water had shown that a number of trade connections together with volume of virtual water trade had doubled for the past few decades. Developed countries have been drawing on the rest of the world to ease the pressure on domestic water resources.

Three studies have been done though it fills three important gaps in the research on global virtual water trade, the first being that in previous studies, virtual water volumes were put together from countries which were envisaging various degrees of water scarcity which was incorporated into assessments of virtual water flows. Secondly some previous studies assessing virtual water networks in terms of immediate water was used for food production though refrained from indirect virtual water used in the supply chains underlying all traded goods.

Global Virtual Water Network Structure

In the analysis, the use of input-output analysis included indirect virtual water, noting the existing conflicting views on whether trade in virtual water could lead to overall savings in global water resources. A re-visit to the Hechscher-Ohlin Theorem was done in the context of direct and indirect virtual water, to determine if international trade could be seen as feasible demand management tool in reducing the water scarcity. It was found that the global virtual water network structure changes significantly on adjusting for the purpose of scarcity.

Besides, the Heckscher-Ohlin Theorem can be validated when indirect virtual water is appraised. Water once seen as an infinite resource is in fact, a finite resource. Moreover, fresh water is an important resource to plants, animals, human and all living things on the planet Earth. Geographic zone of abundance and scarcity is due to unequal global distribution of fresh water and global climatic changes tend to redistribute precipitation away from geographic locations which has sufficient or excess supply to cope up with the population.

Wednesday, February 25, 2015

Virtual Water


Virtual Water
Virtual Water Trade – Embedded/Embodied Water 

Virtual water is defined as the total volume water which is needed in order to produce and process. Virtual water trade also known as trade in embodied or embedded water is related to hidden flow of water in case other commodities or food tend to get traded in different places.

On an average it takes around1,600 cubic meters of water to produce ` metric tonne of wheat and the accurate volume could depend on more or less on the climate as well as agricultural conditions. According to Hoekstra and Chapagain they have defined virtual content of product – a commodity, service or good, as `volume of freshwater which is utilised to create a product, measured at the place it was actually produced’ and relates to the sum on the utilisation of the water in the various stages of the production chain.

According to John Anthony Allan, Professor from King’s College London and the School of Oriental and African Studies had introduced the concept of virtual water in order to support his views that countries in the Middle East could save their scarce supply of water by relying on import of food.

He received an award of the 2008 Stockholm Water Prize, for his contribution. He states that `the water is considered to be virtual due to the fact that once the wheat is grown, the real water used to grow it is no longer actually contained in the wheat and the concept of virtual water helps in realizing how much water could be needed to produce different goods and services’.

Some Deficiencies in Concept of Virtual Water

He further states that in `arid and semi-arid locations, the value of the virtual water of good or service could be useful in determining the best use of the available scarce water.’ However there are some deficiencies in the concept of virtual water which means that there is a significant danger on depending on these measures in order to guide policy conclusions.

As per Australia’s National Water Commission it is considered that the measurement of virtual water has less practical value in the making of decision with regards to the best allocation of scarce water resources.

Recently the concept of virtual water trade has been gaining weightage in the scientific and the political arguments with the notion of its concept being ambiguous and changes have been moving between a descriptive, analytical concept and a political induced strategy.

From the point of view of an analytical concept, virtual water trade relates to an instrument which enables the identification as well as the assessment of policy choice not only in the scientific but also in the political discourse.

Concept Analytically helps Global/Local/Regional Level

From the point of politically induced strategy, the query is whether virtual water trade could be used in a sustainable way, or whether implementation could be managed in an economic, social or in an ecological manner and which countries would have a meaningful option of the concept offered.

In the framework of latest developments from supply oriented to demand oriented management of water resources, new field of governance has opened up which facilitates a differentiation as well as balancing of different perspective, interest and basic condition.

The concept analytically helps in distinguishing between global, local and regional level, together with their linkages. Which means that water resource problem needs to be solved.

Tuesday, February 17, 2015

Negative Inflation


Negative_Inflation
Image credit: Sofia news agency
Inflation – Deflation 

Inflation is a term which tends to reduce the real value of money over time and deflation increases the real value of money, the currency of a regional or national economy, enabling an individual to purchase more products with the same amount of money overtime. In other words deflation is a situation when the price level decreases and the inflation rate tends to get negative.

Economist are of the opinion that deflation could be a problem in a modern economy since it increases the real value of debt and affects recessions, leading to a deflationary spiral. All episodes of deflations do not correspond with phases of poor economic growth. During the 19th century, deflation took place periodically in the U.S. and this deflation was the result of technological progress creating significant economic growth while at other times was due to financial crises particularly the Panic of 1837 that caused deflation during1844 as well as the Panic of 1873 triggering the Long Depression which lasted till 1879.

These periods of deflation were prior to the establishment of the U.S. Federal Reserve System and the active management of monetary issues. Deflation episodes were rare and brief with the development of Federal Reserve while American economic progress has been unprecedented

Negative Inflation 

Negative inflation is said to be an economic phenomenon wherein the economy tends to move out of an inflationary phase and enters into a phase where there is less money in circulation. Negative inflation tends to occur when the prices fall due to the supply of goods which is higher than the demand for those products.

It is often due to reduction in money, consumer or credit spending and could be the result of a combination of various factors which may include, having excess money in circulation that may decrease the value of money which in turn would reduce prices, with more products manufactured than the demand for the same.

 This could lead to businesses decreasing their prices in order to urge consumers to purchase those products and not having sufficient money in circulation causes those with money to hold on to it instead of spending it and decreased demand for goods decreases spending.

Though it would seem that lower prices are good, deflation could ripple through the economy for instance when it creates high level of unemployment, turning into a bad situation and this type of a recession could turn into a worse situation like a depression.

Leads to Unemployment => Decrease in Spending => Less Demand

Deflation could lead to unemployment since the companies tend to make less money and react on cutting costs to survive which may include in closing of the stores, plants and warehouses and laying-off their workers.

This results in the worker having to decrease on their spending leading to less demand with more deflation causing a deflation spiral which may be difficult to break. Deflation tends to work without affecting the rest of the economy when businesses are capable of cutting the costs of production for the purpose of lowering prices like in the case of technology, since the cost of technology products has reduced over the years though it was due to the cost of producing technology that had decreased and not due to decreased demand.

Sunday, March 23, 2014

Russian And Chinese Financial Markets

Financial Markets
Chinese Yuan and Russian Ruble have recently experienced major setback, but for very different reasons. The announcement of the Chinese government to let the Yuan move in a range of plus or minus 2 % has created a surprise in the markets. In the days following this statement, the Chinese currency has indeed dropped to an 11-month low against the dollar.

In reality, this decision was expected, since the fall of 2013, the Governor of the Central Bank warned of the upcoming expansion of the trading band of the Yuan. It is true that the sudden depreciation of the early days, especially against the dollar, was fairly quickly resolved. If the depreciation that proves the strongest since 1994, it remains in proportions not only measured but controlled by the Central Bank. Thus, beyond the announcement effect, the markets do not seem to feed strong concern about the evolution of the Yuan and even less about the health of the Chinese economy.

Especially since this return to flexibility of the Yuan down as well as up, is precisely to further solidify the foundation of the Chinese economy. China has embarked on a process of re balancing of growth towards domestic demand as well as a consolidation of public finances. According to him, any measures to boost the economy also helps to reassure people whose financial and social demands are constantly increasing. It is also the objective of a sound and sustainable growth which explains the choice of the Chinese Government to allow a large company to go bankrupt very heavily subsidized renewable energy sector. The company Chaori could therefore meet its debts to its investors. It will clean up some of its financial system, subject to excess debt and opaque practices.

The Chinese government has chosen not to support non-viable enterprises, let alone those who receive large subsidies, in order not to increase the burden of its banks and impose market logic. Until then, the belief that the state would not let such events happen has led to excess in the amount and nature of funding. The latter had to make a choice between business support and support for local communities, also very involved in the shadow banking. Cannot decently leave recent bankruptcy, the Government has favored the establishment of a strict control with the creation of a Court of Auditors Chinese to limit debt and achieve sustainable deflation of this bubble harmful healthy growth.

This is however not the case of the Russian currency, battered since the beginning of the Ukrainian crisis. If the volumes traded in rubles remain incomparably lower than those on the Yuan, the fact is that political tensions between Ukraine and Russia had the effect of attracting new investors, including individuals. He was so good omen to play down a currency bearing the brunt of foreign policy of President Putin. Despite the intervention of the Central Bank of Russia on the changes announced on March 3 despite taking opposite positions past , the depreciation of the Ruble continued until mid- March Rubles against the Euro.

Recall that the currency had already experienced a wave of mistrust in January, as many is emerging market currencies. Since the only vain and the Russian Central Bank intervention the ruble is evolving freely. But not necessarily down. The evolution of the situation in Crimea, who voted in a referendum for unification with Russia, indeed helps to stabilize the ruble since the weekend of March 14. The Yuan and the Ruble does not seem more or engaged in a clear trend but subject to strong price fluctuations under the influence of many political and economic events. Rigorous monitoring of current is necessary for investors who want to try their luck.

Thursday, March 20, 2014

Housing Bubble is going to burst in China!

Housing Bubble
For the last few months the financial analysts fore saw a financial crunch in China and their predictions were come to alive and now China is facing the beginning of the credit crunch now and it will accelerate further. According to the sources in China, most of the real estate developers owe billions of Yuan from the Banks and individuals which leads in turn to Bankruptcy.

Usually the defaults to the bank loans and bankruptcies are quite common but the quantity of amount borrowed as loan by the realtors in China caused the panic. The Chinese News service reported that Zhejiang and Xingrun real estates over 2.4 billion to Banks and 1.1 billion Yuan to private investors. Subsequent to these the real estate sector of the Shanghai stock exchange fell down by one percent

While some analysts are trying to reassure by stating that there will be no domino effect, it certainly begs to believe, but nothing is less certain ... Others point out, however, that real estate developers active in the Zhejiang region face serious difficulties last year, battered by intense speculation, including Ningbo and Wenzhou, two cities that have seen property prices strongly fall.

China's real estate market is showing signs of slowing since the end of last year, mainly because of measures taken by the authorities to contain prices. Many experts also believe that the failure to pay Chaori Solar, occurred on March 7, is related to the Chinese authorities' desire to impose greater rigor in the functioning of credit channels.

Another notable element according to banking and industry sources, many banks have reduced up to 20% of their loans to certain industries. They are worried due to the financial health of these sectors, which tends to be oversized in China.

In September 2013, the Chinese central bank had said for his part that the loans granted in August in the Middle Kingdom had almost doubled in a month, reaching 1.570 billion Yuan. But even more serious element is only 45% of them are bank loans and the majority of loans are informal credit (shadow banking), which already concerned at the highest point to the analysts.

In June 2013, already, the rating agency Fitch indicated that a bursting of a credit bubble unprecedented in the history of the modern world could explode in China.

The Chinese interbank market, on which financial institutions lend money daily , was facing a severe shortage of liquidity,. Chinese Central Bank had injected 17 billion Yuan (2.8 billion Euros) in the banking system.

In February 2013, we had already talked about our fears of analysts. These are alarming excessive growth of bank loans to the private sector, and the loans outside the formal sector were more and more and went up and difficult to repay. These lead to the high level of bad loans held by Chinese Banks.


Hence the Monetary authorities and Chinese policies now wish to terminate the very rapid credit growth in recent years. A situation that pushes the government to "clean up" the banking market, closing the valve to riskier institutions, a policy may lead some into bankruptcy.                                        

                                                                                                     (to be continued)




Sunday, November 24, 2013

Master Bank Closed In Russia



Master bank
Anxious customers gathered outside Master bank closed doors, millions of credit cards suddenly off the abrupt closure of Master Bank this week has plunged the Russians in the most traumatic of the post- Soviet period hours. The central bank withdrew the license of the Master bank Wednesday with immediate effect. The bank was established in 1992 and which has in its Board of Directors Igor Putin, the Russian president 's cousin . The regulator said that they have no other choice after finding the violation on money laundering “repeated violations" , the Ministry of the Interior evaluating the sums involved more than 45 million.

At first glance, Master Bank is the 70th Russian bank in terms of assets hence it may seems that it is a relatively small institution. But “this is the first time a bank with more than three million customers lost its license," he said at a press conference Oleg Ivanov, vice president of the Association of regional banks. And consequences for the general public were eye souring, as Master Bank controls one third of the ATM network in Russia and ranks fifth in terms of total credit cards in circulation. Suddenly, millions of Russians were left without access to their account. Others who thought they had no connection with Master Bank, have seen their credit card stop working all of a sudden and the bank offered its services data processing 200 other small establishments.

Numerous shops, hotels, restaurants, as well as the liberal political party Yabloko were using his credit card to pay the salaries of their employees, who find themselves stranded. Notable difference resounding bank failures of the 1990s, most customers should recover much of their funds: Since 2004, the deposits are insured up to 700,000 rubles (15,700 Euros). Beyond this threshold, the holders have priority to be compensated at the end of the bankruptcy proceedings. The news has had a considerable impact in Russia, where a portion of the population keeps the painful memory of flights in bank failures, especially during the 1998 financial crisis economies, and is suspicious with respect to banks.

Can Structural reforms help Europe!



Structural reforms
The introduction of the single currency has allowed the accumulation of deep macro economic imbalances within the Euro area. Some member countries have generated current account surpluses, while others dug large current account deficits. These imbalances are explained in the loss of competitiveness "peripheral" countries: their real exchange rate has appreciated by 6-15 % compared to few others between 2001 and 2009. These losses of competitiveness explain themselves in part by strong price increases observed in the markets of non-tradable goods, particularly in the property sector. When imbalances are settled violently in 2009, the periphery has shifted into a severe recession and public debt is soaring mechanically. During an economic crisis, each member country of the Euro area can not vary its exchange rate to stimulate activity.

 Therefore, the peripheral countries have sought to simulate a devaluation of the exchange rate. For this, they have implemented structural reforms aimed at increasing competition in the labor markets and products. These include reducing the one hand, the monopoly power of firms and, on the other hand, the bargaining power of workers. In this way, the reforms allow favorable price drops and in purchasing power, prevent excessive wage increases, stimulate entrepreneurship, job creation, etc. Adopting structural reforms, peripheral in Euro area countries hope to regain competitiveness and improve their current balance. In addition, as the reforms are supposed to get agents to expect higher growth in the future, so encourage them to spend today, they should stimulate domestic demand. Structural reforms should they be provided in place when economies are in recession? When aggregate demand is insufficient or governments increase their spending directly to restore the level of aggregate demand , or the central bank eases monetary policy to stimulate private spending. If, in such a context, governments are forced to adopt austerity plans; that is in view of stabilizing the public debt and reassure markets about the sustainability of public debt, then the drop demand accelerates.

However, if the shock is particularly violent, a central bank may not be able to sufficiently lower its key rate to bring the economy to full employment and prevent the onset of deflation. Anticipating a further decline in prices and wages, private agents have an incentive to postpone spending in time, which leads firms to lower new prices and wages. Deflation is also reflected by an increase in real interest rates, which increases the burden of debt. Households and businesses are then no incentive to borrow, but rather to deleverage, which depresses the purchase of new durable goods.

In this case, households are encouraged to reduce their expenses if they anticipate a deterioration of employment protection in times of mass unemployment. Structural reforms cannot be implemented in a recession if governments and central banks are able to offset the impact on aggregate demand. Otherwise, they feed the contraction. Far from building trust and encourage investment, reforms may maintain pessimism and savings behavior. Therefore, they also degrade the potential growth by maintaining long-term unemployment and disincentive for companies to invest.

Friday, November 1, 2013

Iran-Pakistan pipeline unviable



Iran-Pakistan pipeline
While Pakistan has asked Iran for 2 billion dollars to fund its own portion of a pipeline could not be more strategic , ignoring the U.S. sanctions , a recent report now lets hear the Iran Pakistan pipeline would not viable in the state , saying that a review of the conditions necessary. The report by the Institute of Sustainable Development Policy Institute (SDPI ) on the pipeline - report " Rethinking the energy equation of Pakistan" - and says that since the price of purchased gas for the project is linked to prices of crude oil, the country is in this case openly ignoring the dynamics of the energy sector and the development process cost.

The Institute explains and insisting the most unfortunate side of this situation. Since that the United States now paved the way for the implementation of the pipeline project through a softening of sanctions against Iran, the new report says the gas supply agreement should be renegotiated, including on tariff part, otherwise deal a fatal blow to the country's economy. According to calculations made by the authors of the report, in the present state of things, the Iran- Pakistan pipeline should not be allowed to resolve energy problems of Pakistan and rather equivalent to a bailout. The reporters urged Islamabad to renegotiate the import of natural gas earlier price.

As a reminder, Pakistan has a production capacity of 24 000 MW combined electricity, but cannot currently reach this level because of natural gas supply problem. The country is indeed currently facing a decline in natural gas production, a problem even more crucial that domestic demand has more than doubled. To address this shortage, service stations selling compressed natural gas (CNG), low-cost fuel used by taxis, buses, motorcycles and motorists of the middle class will be closing soon. The quantity thus saved should serve the demand for home heating during the winter.

Iran-Pakistan pipeline
At present, Pakistan limited already open pumps few days a week, causing long queues and irritation of the population movements. Under the terms of an agreement in 2013 with Iran, Pakistan should import term in 2014, 21.5 million cubic meters of gas per day from its neighbor Iran, all on for 20 years, and can be extendable to additional 5 years. Note that the pipeline - including the cost of construction is estimated at $ 7.5 billion - about 1,800 km which connect Iran's South Pars gas field - located offshore - and Nawabchah, north of Karachi, Pakistan's economic hub.

The Iranian public television Irib said in March that the construction of 900 km of the Iranian part of the pipeline was completed; adding that 780 km through Pakistani territory remained to be built. At that time, Iran had agreed to pay $ 500 million to Islamabad, one third of the estimated cost of the Pakistani portion. But Pakistan is currently facing financial problems in order to continue the construction of the particular section.

The case could take a significant extent in the coming months; Islamabad may be required to pay compensation to Tehran if Pakistan fails to complete by December 2014 part of the pipeline where it belongs, Pakistan has to pay one million dollars per day of delay. Tending the boom in Tehran, the Pakistani minister however said in early October that the time could be met if Iran had a hand in the portfolio. However, suggesting that the precious goods subsidies should be promptly put on the table quickly in order to ensure the availability of technical equipment necessary to complete the pipeline.

 At present, nearly 50 % of Pakistan's needs are met by natural gas; analysts also believe that the country should look forward to more innovative options, not just the use of energy sources non- conventional and alternative. The report regrets that the country has not taken any substantial degree to initiate the process to take advantage of the potential of shale gas.

Urging Pakistan to follow the example of India to maintain high economic growth. Regarding the issue of sanctions against Iran, it has recently been raised by the Pakistani Prime Minister Nawaz Sharif , during his meeting with President Obama , but the authorities do not confirm or refute a possible softening of the position United States on the issue . Recall that the project, which emerged in the 1990s, has long been delayed, mainly because of pressure from the United States on Pakistan and India, which was initially involved in the IPI project (Iran - Pakistan - India).

 For a decade now, the United States has tried to link the file to the sanctions against the nuclear program of Iran, warning against the risks of the same order that could lead to a possible participation. Faced with these pressures, New Delhi withdrew from the project in 2009, arguing that the financial and security problems.

Thursday, October 31, 2013

China Now Issues Bonds In Euros



China Now Issues Bonds In Euros
Here is hot news that should displease the United States and more to the Fed (U.S. Federal Reserve) and Janet Yellen, its new boss. The China is now on the market for Euro-denominated bonds. The dollar God has longer to behave them. In late September, the oil giant China National Offshore Oil Corporation (CNOOC) has raised € 500 million within a short span of seven years and closely followed by their competitor Sinopec, with 550 million Euros in the same period.

 Experts believe that it is too early to identify a trend in the bond market; the trend is expected to grow according to them. They expect indeed that, in order to diversify their sources of funding Chinese groups continue to try to issue in Euros, and especially the Chinese domestic market does not seem big enough to meet its needs. Encouraging data, the two programs have met with strong demand; some even consider it quite exceptional.

The issue of Sinopec will thus attract a total of 279 investors demand to € 3.3 billion. Another factor to consider: the U.S. fiscal crisis will have prompted investors to turn to the European markets, while Old Europe can regain its appeal as a safe haven. Since the end of 2010, Chinese companies have flooded the credit markets with a dramatic speed.

In the space of a few years or a few months, China has become the first issuer of bonds in foreign currency, surpassing Korea with an average of $ 25 billion. According to Yves Jacob; in 2010, China raised less than $ 5 billion per year, which is an insignificant amount across international markets. For 2013, expects that will up about $ 100 billion. The current context of liberalization of the Chinese economy to alleviate the exchange control system will also gradually open the door to Chinese companies for a program on international markets while now offering the ability to repatriate funds in China.

 Element which should accelerate the movement signed early October a currency swap agreement between the European Central Bank (ECB) and the People's Bank of China, for a period of three years, including facilitating business transactions. The agreement, called “swap “concern more than 350 billion Yuan, 45 billion Euros. What is the third largest amount behind Hong Kong (400 billion Yuan) and South Korea (360 billion Yuan), largely below the agreement signed by the Bank of England (200 billion Yuan) in Paris. Through this agreement, banks in the Euro zone may obtain Yuan in exchange for Euro, China could in turn receive Euros in exchange for Yuan.

Sunday, October 6, 2013

Wall Street and the budget debate!



With perplexity but without panicking, the Wall Street brokers watching the budget negotiations and debt embroiled in Washington and expect an output of impending crisis to be able to look calmly on corporate earnings. Over the past five sessions, the Dow Jones Industrial Average, featured together 30 values NYSE index dropped 1.22% to close at 15,072.58 points. The Nasdaq, dominated by technology, and is slightly advanced 0.69% to 3807.75 point. The week was “surprising “to the New York Stock Exchange, said an Economist.

The indices are mounted on the first day of the budget deadlock, when hundreds of thousands of American officials have been on leave without pay due to lack of agreement on the budget to Congress. They fell Wednesday and Thursday “while walking away the possibility of a resolution close to the crisis," before resuming the force Friday. "Investors do not want to commit, neither too bet down to not miss the relief rally that will surely come when an agreement will be reached , nor of course too early to bet on good news ," he says. "If the situation is the same at the end of next week , then the indices, which have already lost 4% since the highs of mid-September, could lose it again as " the expert predicted . " But if there is a sense that things are moving, we can regain these losses. "

 But beyond the economic impact of the paralysis of government services, investors see approaching at high speed the maturity of the debt ceiling that is after October 17, the U.S. Treasury will not be able to honor its payments. "Until now investors keep their calm, saying that one side will end up making concessions , or that the Treasury still has some cards in reserve to avoid default," says Douglas Porter of BMO Capital Markets . Investors are not rushing to the options market to protect their positions.

 Even if the volatility has increased the portfolio managers did not make sudden changes of direction. Market players leave in a principle that politicians, even the most intransigent, “know they cannot play with the debt ceiling, it's much too dangerous." But, he laments, " you can always have a party completely loses control." Hoping that doomsday scenario does not materialize, investors will begin to look at the quarterly accounts of companies.

 Finally, even if monetary policy has been overshadowed in recent days against uncertainty over the country's budget, brokers pay particular attention to the dissemination Wednesday minutes of the last meeting of the U.S. central bank. The institution was then largely surprised investors by maintaining the status quo on its measures to support the economy.

Tuesday, October 1, 2013

Exchange Traded Funds may be the next bubble! -1



Exchange Traded Funds currently experiencing rapid development in the United States, where they constitute more than half of the daily trading volume in the equity markets. The expansion of these instruments is less visible for the moment in Europe, because in U.S. where half of the market is held by individual investors where as in Atlantic the investors are mainly institutional investors are present in this class asset. Just may be feared that the development of the ETF market is currently powering the next financial meltdown? Recall that the ETF are the basis of funds, that is to say, collective investment vehicles such as UCITS, whose purpose is to replicate the performance of a market index, upward or downward, and whose shares are traded on the stock exchange just like stocks. They offer investors the opportunity to take a position, with management costs and tax costs reduced on a market index, including inaccessible or illiquid markets such as emerging markets, small caps, etc.

There are ETFs on all sectors of the market, and if a little unlikely sector is not yet covered today and in tomorrow it will emerge as new ETF. This is happening almost daily. We will soon invest in the segment of companies specializing in the balloon or tie pins, or companies based in anywhere. If there is no index representing the performance of the sector concerned, no problem, it creates the index and the ETF in stride. The phenomenon went beyond the stock market and extends to all asset classes, bonds (ETN Exchange Traded Notes), commodities (ETC Exchange Traded Commodities), futures, currencies (ETV Exchange Traded Vehicle) etc. The set is grouped under the term FTE, Exchange Traded Products. In short it is a beautiful alphabet soup simmering and is reminiscent of a previous recipe, the securitization (remember the ABS, MBS, RMBS, CMBS, CDO, etc), which had overflowed with some damage collateral for the past 5 years from now.

On the road there is nothing simpler than ETF investor buys an index, and as follows, upward or downward, the performance of the index being tracked. But precisely how this replication is obtained? There are two main methods: physical replication and synthetic replication. With physical replication, the issuer of the ETF actually holds the portfolio securities of the index being tracked. It calculates and communicates information two times: first, the net asset value equal to the valuation at market prices of assets held , divided by the number of shares issued and secondly the market price of the share , which comes from the comparison of buying and selling interests in exchange just like a stock. Both figures; net asset value and share price must be the same to a small margin near.

What will happen in case of divergence? These are specialized intermediaries (“authorized participants "), mandated by the fund issuer, which come into action. If the market value of the share exceeds the net asset value then the ETF is moving faster than the rise in the index, they will buy a basket of stocks in the index. This then delivers their new units; they can sell on the market, realizing a capital gain. Conversely, if the market price is below the net asset value of the fund, they will buy ETFs on the market and present it to again, which reimburses them by delivering the underlying assets. They can then sell these securities on the market and making a profit. These so-called arbitrage transactions are fully automated and have the effect of “realign " asset prices that were uncorrelated. It is the development of algorithmic trading has led to the development of ETFs.

 In case of synthetic replication, the issuer does not directly hold securities of the index, but other assets. It will then go to a specialized intermediary , typically a bank, to negotiate with him a "total return swap " the bank pays the issuer of the ETF 's performance index, while it reverse the performance of assets held in the portfolio. Physical replication is mainly practiced in the United States, where regulation severely limits the use of derivatives by collective investment funds. In Europe, ETFs are equally divided between the two modes of replication. We are mainly interested here in the physical replication, in which today we have a little more perspective. All this cooking takes place behind the scenes between specialized players (asset managers, hedge funds, brokers and banks financing and investment), thus preserving the image of simplicity and transparency between the final investor.

This should not, however, be fooled: many intermediaries are involved in constantly, and we must be aware that they do not by pure philanthropy, but because they have an interest. There was a second there the resemblance securitization market: the first beneficiaries of financial innovation are not the ultimate investors, but those who create and distribute these innovative instruments. That said, proponents point out that these ETF products are primarily funds, and so most of them are within the regulatory framework for the funds. These regulations, both in Europe in the United States, are very demanding especially in terms of transparency to investors . It is up to them to read the prospectus in which he will find, in principle, all the necessary information.

Saturday, September 28, 2013

The Euro strengthened against the Dollar !



The Euro strengthened against the dollar late Friday trading in New York , in a fearful market increasingly a budget impasse in the United States and attentive to the speech of several officials of the U.S. central bank. The euro bought 1.3519 dollars against 1.3485 dollars on Thursday at the same time. The European single currency fell against the Japanese currency to 132.88 yen against 133.51 yen yesterday. The dollar also fell against the Japanese currency to 98.24 yen against 99.00 yen on Thursday. Before a crucial deadline in the United States to reach an agreement on the budget of the country, “the clock is ticking and investors get nervous," commented an Economist. " They accelerate their sales dollars , fearing more a closure ( non-essential ) government affects the quality of U.S. assets and hinders growth," the expert added , citing expectations that a partial closure utilities for two weeks would reduce economic growth " 0.3 to 0.5% ." Elected officials must agree to the Congress to ensure continuity of government services on 1 October. A text passed in the Senate Friday is still pressed by the House of Representatives before returning to the Senate for a final vote. You always hope that a last-minute agreement is possible, but this prospect darkens every moment while Congress keeps the dollar and the economy in hostage.

In addition, the market is still uncertain as to when that will choose the Fed to begin to slow its purchases of assets ($ 85 billion per month). It will be based largely on the level of unemployment to make such a decision, which could happen in October or December. Investors therefore waiting for the next monthly report on employment and unemployment situation in the United States, a major indicator to gauge the strength of the recovery in the world's largest economy which is scheduled for publication on October 4. Uncertainties on Friday were reinforced by new interventions leaders and voting members of the Fed, which accentuated the pressure on the dollar. Faced with such remarks, bond rates declined significantly during the session and bringing with them the greenback.

The current Fed policy has the effect of keeping rates low and dilutes the value of the dollar. Traders also scrutinized Italy where resurfaced fears of a new political crisis and trying to take face saving measures. Around 2100 GMT, the British pound rose against the euro at 83.76 pence per euro and climbed against the dollar at 1.6137 dollar per pound. The Swiss franc rose against the euro at 1.2244 Swiss francs to the euro and against the dollar to 0.9052 Swiss francs to the dollar. The ounce of gold finished at $ 1,321.50 at auction Thursday night against 1333 dollars. The Chinese currency finished at 6.1186 Yuan against one dollar for 6.1206 Yuan yesterday.

Friday, September 27, 2013

Crowdfunding a best alternative to Banks?



The crowd funding begins to touch the world of Start -Up, as an alternative to banks and business funders. Crowd funding is in between barter and solidarity loan capitalism of yesteryear, crowd funding often have much fun and attractions but it is sometimes risky. Many projects that have or will emerge in part through crowd funding (literally financing by the crowd), also called crowd funding. The phenomenon is not new: In 1958, John Cassavetes was able to finance his first film “Shadows “with a call for funds to public through radio. This phenomenon is becoming increasingly important. And now there are more than thirty sites are assisting general public as the crowd funding investors. Few of them are Ulule , MyMajorCompany , Sandawe , KissKissBankBank , Loan Union HelloMerci , Babyloan SmartAngels , Wiseed , Anaxago etc.

 The crowd funding market raised already worth $ 2.5 billion in the United States alone. There are three types of crowd funding. First, there is the gift against gift, nothing but a barter system. Then there is the system of loans or micro-credit. Some are paid, others do not, and that is like solidarity loan. Finally there is the financing of a business project in exchange for shares. The gift system against donation is very common in the world of arts. Projects may be small or substantial. Micro-credit is also very concerned and developed projects in US and abroad, mostly in trade, agriculture etc. According to Ricordeau Vincent, one of the founders of Kiss Kiss BankBank , "the motivation is to give birth to a project without any other return on investment a return emotional . People seek social link, a contact based on sharing, empathy, and trust. It is completely selfless unlike a financial return on investment. "

 For some companies, it is an alternative to banks and business lenders. This is particularly the case of start-ups, with little equity in start-up phase. However, crowd funding sites do not replace the banks. They do not lend money and they do not handle client funds. They are in an intermediate step of advice and not through management. The client chooses his investment and invests himself live in society. The sites just forgive a direct link between investors and entrepreneurs. This is the online community that validates whether the project should be born or not. This is not a window that decides to grant money or not. The risk is real and greater than the stock markets which has the advantage of being more liquid and especially give a real-time indication of the value of its assets.

Capital loss may be total and the second risk is the liquidity, This is an investment you can make for an unlimited period than what you anticipated. So do not invest money that you think you need three to five years. But there is another side: a significant potential gain, as we arrive shortly after the creation of the company. And it's worth it to invest in companies earlier. Here the risk and the reward are fairly standard. Regarding the gift donation against the financial risk is limited because the average financial contribution of users is around 50 Euros. If successful, the trust is garnered monumental. The question of the output is still crucial because all companies are not intended to go on an exchange.

If ramping up its activity, the company may be acquired by a competitor where leaders may choose to redeem the shares of the minority. And the price and the valuation is a matter of negotiation between the parties. Often these issues are anticipated in the shareholders' agreements. Early outputs can also be provided, but the recommended investment period is about 3 to 5 years, to let the company time to create value. In the end, crowd funding today fills a void in the financial needs. It allows artists to project promoters, merchants to support their project to start. Internet also allows them to reach a larger number of donors, lenders or investors, but is by no means a guarantee of success. Crowd funding is still in its early stage. Hence the Crowd funding is a social network linking young companies seeking skills, people willing to integrate a project as a partner or as freelancer and helping each other by joining hands together.

Thursday, September 12, 2013

Know more about Crowd funding!



Crowd funding is a technical project finance business start using the internet as a channel of linkage between project managers and those wishing to invest in these projects. Of course it is an ancient practice but currently it is the subject of a wide popularity due to its simplicity of operation and the difficulties faced by some designers to find financing for their small projects.

 How it works?

The investor who wants to invest some money in a good project at one end and the holder of a project who starts business but does not have the funds needed to start his business and does not want to call the bank credit at the other end. The both meet on the Internet via a dedicated platform. The projects are presented by their holders and investors choose to fund one that they like to live up to what they want to invest. The simple operation of this form of financing also has the advantage of transparency for the investor. Both knows what is funds and by which choice and by its values. Crowd funding is associated with all kinds of projects. Generally, cultural, digital projects, social, environmental, innovative are the few worth mention.

 Three types of inputs are available to investors:

The first type of investment is a small gift or donation that is given to the project but the remuneration of the investor has no financial consideration. The second type of investment is a participation in the equity of the company created. The remuneration of the investor is then by dividends or the gain realized on the sale of securities. The third type of a investment is a loan. Pouring loan interest may only be offered by credit institutions authorized by the Banks. Fundraising to make lending is strictly prohibited. Only collecting interest free loans is open to individuals. The money invested can be few dollars to several hundred. Banking and tax regulations is a source of significant stress for structures offering financing platforms that obey different rules : The detailed identification of the investor ( proof of identity and residence) is needed to controls against money laundering , anti- terrorism, etc.

Cont...

Saturday, September 7, 2013

Crowdfunding


The crowdfunding is a practice that is becoming increasingly important in all sectors. The "Crowdfunding" means "crowd funding" is to highlight key projects on an online platform and collect donations from users to realize the project. To date, there are several online platforms that do crowdfunding. This device allows individuals to find projects that match their taste, nearby or across the world, in all areas that are, and contribute directly to their construction, thanks to their savings in the form of committed gift, loan, or capital. The problem is that more and more participatory sites come onto the market, and each has a different mode of operation. According to the funding model on which they are based, the consequences for individual investors are not the same.

Mymajorcompany is a crowdfunding online in 2007 platform provides an opportunity for people who want to fund a project to place their gifts on a project of an artistic nature of a fixed term of six months. The project manager makes his case online retailer counterparties repay it intends to users. At the end of the operation, if the project has raised enough money to see the date, individual donors perceive generally a share of profits from the commercialization of the project, "if it generates." This model then gives a close to a "micro business angel" to users who invest in the sustainability of the project status. Other platforms offer gifts to reward individuals who contribute to the financing of projects. If the amount set is reached, the project is funded and users receive a symbolic reward for their participation. The counterparty may be a book autographed a copy of the disc, a card or just a letter / email of thanks. The business model here is closer to the hardcore gift. It keeps the character "philanthropist" to donate to help and not to return on investment. The most popular sites are KissKissBankBank, Babeldoor are the few crowdfunding platforms works by financing through a loan. The user advances some funds to the project of their choice. Once the project is completed, the user is reimbursed up to his contribution. In this area, the most famous platform Babyloan.org lends without interest.

 There is currently no legislation governing trade and financial flows on crowdfunding platforms. The reason is that the amounts are not large enough to be controlled by law. However, crowdfunding involves several "soft" areas. In the case of a system based on micro-credit model, the platform must have approval by Authority, which is rarely the case. Then, any financial contribution by an individual to a project gives it the status of "associate" because its contribution is legally speaking a capital contribution to the project, which is never the case. Crowdfunding is basically a system that works through donations. The payments are considered donations, must be reported to the tax and to be taxed. The majority of individuals skip this step. If these sites are regularly used to give large sums of money, it is likely that the IRS is involved.

The Circular Economy


The Institute of circular economy was officially launched in Paris on February 6. The main objective of the principle of circular economy is interesting because it is based on the idea that "The waste of one person is another resources of others. This model, which involves a long-term vision, as well as the economy of resource management and environment, seems like a good track to emerge from the economic, social and environmental crisis in which we are stuck now. The Institute of circular economy is an alternative vision of the economy. The Institute is composed of national and local policy-makers, entrepreneurs, academics from different backgrounds and association leaders. The aim of this structure is to promote an alternative vision of the economy. It is chaired by François-Michel Lambert.

He starts from the premise that the linear economic system that is "extract, produce, consume and throw is out of breath. It is now widely recognized that economic model based on a strong dependence on raw materials are becoming scarce and more difficult to extract in one hand, and the development of consumer non-durables - which obsolescence is sometimes planned - on the other hand, impacts our environment in the broadest sense. This model impact the environment and the people who migrate are sometimes under heavy pollution. The circular economy is pragmatic, because the concepts of recycling and regeneration and alter-growth are the foundation of circular economy.

At the ideological level, extensive consumption, reduced product life cycles and the relocation of production are central to the debate. Usage and consumption are also redesigned, including the concept of ownership. The idea is not to share or collectives of the properties but to think in terms of "a well-differentiated uses." Example is taken from the washing machine: the advantage of being owned by such a machine is zero, but its usefulness is high. The circular economy is unifying as it aims to "unite and involve all stakeholders and experts in a collaborative approach by pooling resources to conduct collective thinking."