Notes

Slide Show

Outline

1	DOLLARIZATION AND THE ECONOMY TONY HAWKINS
2	PANACEA
3	"When,"
4	"We were spot on."
5	"Dollarization (or perhaps Randization"
6	BENEFITS
7	DEPOLITICISING MONEY
8	INFLATION
9	CPI
10	CROSS BORDER COMPARISONS
11	PURCHASING POWER PARITY
12	WHY?
13	MARK-UPS
14	THRESHOLDS
15	CURRENCY BOARD?
16	"That will change however as..."
17	CREDIT CREATION
18	SCARCE CREDIT
19	RAND LOANS
20	ADVANTAGES
21	DRAWBACKS
22	DISADVANTAGES
23	TECHNICAL, BANKING ISSUES
24	CRITICAL ISSUES
25	1. RAND VERSUS DOLLAR
26	Rand versus Dollar
27	(a) GEO-POLITICAL
28	MONETARY INTEGRATION
29	(b) WEAK CURRENCY
30	DEVALUATION
31	NO OPTION
32	"Going forward the signs are..."
33	THREE DOWNSIDES
34	NO ALTERNATIVE
35	POPULISM
36	LEGAL TENDER
37	CONSISTENCY
38	(c) CONVENIENCE
39	CLARITY
40	NEW CURRENCY
41	EXIT PLAN
42	ISSUE TWO: DOLLAR LIQUIDITY
43	DOLLAR LIQUIDITY
44	SUPPLY SIDE
45	THREE CRUCIAL ASPECTS
46	PREREQUISITES
47	TIME
48	CREDIBILITY
49	CONFUSION
50	CONFUSION - TWO
51	72 Ministers
52	THE GLOBAL ECONOMY
53	EXPORTS WILL FALL
54	GRIDLOCK
55	RECAPITALIZATION?
56	WHO?
57	FULL DOLLARIZATION
58	FEASIBILITY?
59	IMPOVERISHMENT
60	RECAPITALIZING INDUSTRY
61	ISSUE 3 – ELEVATED PRICES AND WAGE DEMANDS
62	ELEVATED PRICES AND WAGE DEMANDS
63	BUSINESS MODELS
64	WHY PROFITS BOOMED Real wages fell as prices escalated Formal sector employment collapsed Productivity increased while real wages declined Accordingly, margins widened but firms were generating paper – not real – profits because accounting practices do not reflect inflation adequately
65	WIDENING GAP Puzzlingly, productivity rose while real GDP per head and real wages fell, with wages falling far more. In 1990, there was virtually no gap between productivity and real wages. By 2006 however, real wages were only about a quarter of productivity per head.
66	THE JAWS SYNDROME Wages and Profits as % of GDP
67	GDP, Wages and Productivity (constant prices)
68	"The striking finding – consistent..."
69	MARKUPS
70	EXPLANATIONS Inflation exaggerates profits because: Firms do not provide adequate depreciation of their capital Because stock (or holding) gains arise from the use of historical accounts in respect of stocks and inventories.
71	FIRE-FIGHTING Management boosted margins by Cost cutting Retrenchment Delaying maintenance Postponing investment, and Cutting back on training and advertising and marketing budgets
72	NON CORE ACTIVITIES Firms boosted profits by non-core activities: Trading in foreign exchange Investing – temporary – surpluses in the stock market or the money market This last aspect is important because it suggests that trading margins were only part of the explanation
73	TIME TO GET REAL
74	UNSUSTAINABLE BUSINESS MODELS
75	PRODUCTIVITY
76	PRICING
77	INTERACTION
78	THE HONEYMOON IS OVER
79	DEVALUATION NOT AN OPTION
80	DOMESTIC ADJUSTMENT
81	WAGES
82	SOLUTION?
83	TRANSACTION COSTS
84	COMPETITION
85	CONFRONTATION?
86	COMPETITION
87	UNSUSTAINABLE PROFITS
88	THE JAWS SYNDROME Wages and Profits as % of GDP
89	"The realities are:"
90	"But also,"
91	"What I am saying –..."
92	Wages not the main driver
93	REGIONAL RELATIVITY
94	PPP AGAIN
95	NOT A STARTER
96	NO FREE LUNCHES
97	EXPECTATIONS
98	PROSPECTS
99	MINING DOWN
100	DISTRIBUTION GAINS
101	GROWTH IN THE SECOND HALF
102	NO QUICK FIX