Search Results

Open Access (free)

Indonesia

Crisis, reform and recovery

Shalendra D. Sharma

approximately US$33 billion was short-term debt with maturities due within one year (IMF 1997a). In addition to this amount, Indonesian firms also took out large lines of short-term credit in foreign currencies both directly from foreign lenders and from Indonesian banks – greatly adding to their foreign currency exposure. By contrast, foreign exchange reserves in mid1997 stood at about US$20 billion. In other words, short-term debts owed to foreign commercial banks were about 1.75 times the size of Indonesia’s total foreign exchange reserves (Radelet 1999, 3). The massive

Open Access (free)

Introduction

Issues, debates and an overview of the crisis

Shalendra D. Sharma

stability and productivity growth and reducing inflation between 1994 and 1998 (after decades of out-of-control inflation), it failed to contain the fiscal deficit adequately. The fiscal deficit, estimated at 8 per cent of GDP in 1998, also contributed to a widening of the external current account deficit to 4.5 per cent of GDP in 1998.15 These substantial fiscal and trade deficits and the structure of public debt (which makes the government’s finances extremely sensitive to changes in short-term interest rates and the exchange rate), made Brazil highly vulnerable to changes in

Open Access (free)

Oonagh McDonald

at that time used a high-risk, high-leverage model, which depended on retaining the confidence of the counterparties. Lehman maintained about $700bn of assets and corresponding liabilities on capital of about $25bn. Lehman borrowed heavily to meet its cash needs, creating a high debt-to-equity ratio. The assets were generally long-term, whilst the liabilities were short-term; for example, Lehman financed most of its balance sheet in the short-term repo market to the tune of over $200m. per day in 2008. It relied on short-term secured financing to conduct its daily

Open Access (free)

Oonagh McDonald

portfolios used cash-flow models to value their mortgage-related securities by the third or fourth quarter of 2007’. 24 Hedge funds and ‘special investment vehicles’ saw a huge outflow of capital in mid-2007. As a consequence, Bear Stearns, BNP Paribas and others stopped withdrawals and refused redemptions of their investment funds, arguing that it was impossible to value the assets in these funds, as there were ‘just no prices’ for some of these securities. These actions were also taken because the funds had been largely financed with short-term debt and with falling

Open Access (free)

Oonagh McDonald

advertising space, short-term tenancies or temporary car parking. Since large developments are phased over time, that is reflected in the developer's cash flows, and hence in the valuation of the property. This means that some of the costs can be deferred, as indeed receipts may be. Where the sales are residential properties or commercial retail units, they may begin before the development is completed, and may be phased in over a long period of time. The income then has to be recognized as cash flow and must be recognized at the appropriate time, as should relevant costs

Open Access (free)

Contemporary discourses of working, earning and spending

Acceptance, critique and the bigger picture

Anne B. Ryan

the premise that the costly trappings of contemporary living are necessary. Within this discourse, couples are assumed to need two full incomes simply to make ends meet. House prices and the need for a range of essentials, from the latest in mobile phones to bottled water, are cited as justification for living beyond eih ch-9.P65 159 26/3/03, 15:16 160 Ryan one’s means, or just breaking even each month. In turn, this discourse facilitates short-term financial thinking, borrowing and credit, and precludes the idea of doing without, living within one’s means or

Open Access (free)

Series:

Neil McNaughton

problems for policy makers are, therefore, how to deal with unemployment and how to finance the public debt which inevitably mounts up in a recession. It was also normal to reduce taxation at such times to try to boost consumption, so governments were able to make decisions which enjoyed short-term popularity. 3 Governments have conspicuously failed to maintain sustained periods of economic growth, at least until after 1995. Tempted by the availability of increased funds governments have tended to raise public expenditure and reduce taxation dramatically in the good

Open Access (free)

Series:

Neil McNaughton

, nevertheless, to pay back large portions of the national debt and avoid any short-term borrowing. In some ways he sacrificed some short-term spending options, in order to meet the criteria on debt. In other words, he favoured long-term benefits at the expense of short-term gains. By 2000, therefore, Britain had achieved the criteria with a good deal to spare. Since then it has been necessary to try to ensure that the economy did not stray from the rules. Up to 2002 at least, this proved relatively comfortable. It may not always be so. The five economic tests These are

Open Access (free)

Oonagh McDonald

-backed securities, but in 2006 Lehman started to retain the assets, both residential markets and commercial real estate, as its own assets. The risk and return remained with Lehman. The effects of this policy were that Lehman had to continually roll over its debt because of the mismatch between short-term debt and long-term illiquid assets. The company had to borrow billions of dollars on a daily basis. Its business risk was increased because of its investments in long-term assets – residential and, especially commercial real estate, private equity and

Open Access (free)

From uniqueness to uniformity?

An assessment of EU development aid policies

William Brown

projects to a greater emphasis on funding programmes of policy reform. The Bretton Woods institutions – the IMF and the World Bank – coordinated and led this change. To an extent, the IMF had always been involved in policy conditionality in this sense, granting short-term balance-of-payments support to countries in return for commitments by the recipient to address the sources of imbalance, particularly through austerity measures. The 1980s saw this role revitalised and generalised with respect to developing countries. For the World Bank the change was more marked