Archive for May 5th, 2011

The Future of Water

May 5, 2011

A super interview of Charles Fishman, a longtime writer for Fast Company magazine, is the author of “The Big Thirst,” a new book on water. Fishman looks at how US water systems have served them for 100 years but needs to change.

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How EMU countries use Euro notes?

May 5, 2011

A nice report by ECB on the topic.

Seventeen economies use Euro as of now. How do these different economies use Euro currency? What denomiation notes are preferred by the 17 countries? Who uses ATMs more? Who prefers bank branches to cash? And so on…

Since the euro cash changeover in 2002 there has been a strong increase in the circulation of euro banknotes. To obtain a better understanding of this continued growth in demand, the ECB carried out two surveys among the general public and non- financial companies in several euro area countries. For the first time, these surveys provide information on the use of euro banknotes by households and companies within the euro area. This article describes the main results of the surveys and gives some insight into the differences in the use of cash between various euro area countries.

Starting with a description of developments in the circulation of euro banknotes, this article provides an estimate of the amount of transactions in cash in the euro area, details the use of cash by households and enterprises, and considers the value of cash used as a store of value. One of the conclusions is that the value of euro cash payments remains high, compared with card payments. The results of the survey also show that cash usage varies from country to country: of the countries surveyed, Italy, Spain and Austria were among the most intensive users of banknotes,  whereas France and the Netherlands were found to use banknotes the least.

Just like we saw in UK currency usage shot up in the crisis:

Between the end of February 2002, when the legacy currencies of the 12 countries that adopted the euro ceased to be legal tender, and the end of December 2010, the circulation of euro banknotes increased by 241%. In value terms, this represents an increase from €246 billion at the end of February 2002 to €840 billion at the end of December 2010 (see Chart 1).

A noteworthy development occurred in October 2008 when there was a jump in the level of the value of euro banknotes in circulation following the collapse of Lehman Brothers. By breaking down the daily circulation of banknotes into a trend and a “Lehman Brothers” effect, an increased demand for euro banknotes with a total value of €35 billion is estimated between the end of September and the end of October 2008. Issuance data for that period show that two-thirds of this additional demand – a large part of which came from abroad – was for €500 banknotes.

As banks’ vault cash did not increase significantly in this period, the additional demand can be attributed fully to the storeof- value function in a period of exceptionally high uncertainty. By the end of 2009 the oneoff effect of the financial crisis on banknote circulation was no longer visible in the annual growth rates, which means that there are no clear signs of a significant return of those banknotes demanded as a store of value during the height of the crisis.

 

Read the article for many more details….Fascinating stuff.

RBI says no asset bubble in India…what is the basis?

May 5, 2011

In  its Annual macro review 2010-11, RBI said on housing markets:

Asset price concerns remain as housing prices remain firm

V.19 Property prices continued to rise in most cities during Q3 of 2010-11, as reflected in the Reserve Bank’s Quarterly House Price Index (HPI) based on data in respect of seven cities collected from the Department of Registration and Stamps (DRS) of the respective State Governments. However, the indices for Delhi and Chennai witnessed a decline during this period.

Post Apr-11 monetary policy, RBI Governor D. Subbarao said:

“Although there is no asset bubble as such, asset price concerns remain as housing prices remain firm,” said RBI governor D Subbarao.

Both statements raise concerns over prices remaining firm but say there is no bubble. I agree one cannot identify a bubble but atleast one can look at the evidence available post the 2007 crisis.

Let us analyse the Case Shiller Index:

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