31/8/2013: WLASze Part 1: Weekend Links on Arts, Sciences and Zero Economics

This is the first WLASze: Weekend Links on Arts, Sciences and zero economics post for this weekend, so enjoy and stay tuned for more.


Random complexity arising out of the hand-drawn patterns virtually freely visually narrated by Marlene Huissoud are creating interesting, dynamic textures in these drawings and textiles:

Artist website: http://www.marlene-huissoud.com/ It is an object of utilitarian design (hence the 'shop' section of her website), but in my opinion it is an expression of art - non-conceptually driven compositional flow that explores dynamic of line and space absent a premeditated attempt at a composition.

Cy Twombly being the pioneer here, and there are indirect parallels to Lucio Fontana. In a distinct approach, the line drawings of Egon Schiele were actually figurative, hence non-random. Yet they are all united by the simple difference between human error / deviation that distinguishes them from replicative mathematical chaos and makes each line uniquely determined when it is created by a person.


Returning back to last week's theme of the Venice Biennale: some additional links relating to previous notes on the exhibition:
Russian pavilion: 

• http://it.phaidon.com/agenda/art/articles/2013/june/03/venice-biennale-the-russian-pavilion/
• http://artdaily.com/news/62974/Russian-pavilion-in-Venice-turns-around-the-ancient-Greek-myth-of-Danae
• http://vernissage.tv/blog/2013/06/14/vadim-zakharov-danae-russian-pavilion-at-the-venice-biennale-2013/

Spanish rock garden:

• http://www.designboom.com/art/spanish-pavilion-at-the-55th-international-art-exhibition/

Retrospective of national pavilions: 

• http://www.telegraph.co.uk/culture/art/venice-biennale/10088917/Venice-Biennale-2013-National-pavilions-round-up.html

Out of the Biennale's 'rock halls' into rock sculpture project by the Next Fab Studio by Gabriel Boyce and Preston. The duo constructed a "simple, organic rock" "using digital fabrication equipment". NextFab "developed a Rhino model of the rock, which was digitally divided into sections and cut from acrylic on NextFab's laser cutter. Gabriel and Preston then assembled the 150-plus sections into the complete ROCK sculpture." Daft? Not really - rather quite striking:

An interesting story from the city that is currently assessing its art collection for sale: Detroit. Detroit's brilliant DIA (I cited its excellent collection earlier here) has digitalised its world-famous Diego Rivera murals. The story of digitalisation is here.

Digitalising works of art is a superbly challenging technical and mathematical problem, even though it seems like a relatively simple task. The most fascinating story of digitalisation of art was written up back in 2005 by the NewYorker: http://www.newyorker.com/archive/2005/04/11/050411fa_fact. It tells the story of two applied mathematics geniuses you won't hear much about, David and Gregory Chudnovsky:

The duo have pioneered the algorithmic approach to large scale digitalisations. Humorous take on their fascination with visualising mathematics is the floor of the Chudnovskys' lab at Brooklyn Polytechnic University which bears an orbital pattern mapping of mathematical equations

What a brilliant link: from the decay of the fractal definition to the decay of the entire city and onto eternity of mathematics and art… to large scale numerical computations… from Communist Ukraine to Communist murals… See more on the two: http://www.pbs.org/wgbh/nova/sciencenow/3210/04-chud-06.html and at http://www.math.poly.edu/people/faculty.phtml. Oh, and the murals, of course: http://it.phaidon.com/agenda/art/articles/2013/august/08/detroit-digitizes-its-diego-rivera-murals/

Do note, Chudnovsky's worked extensively on 'pi'. I covered the visualisations of 'pi' before here.  So for some additional images: pi, fi, e, combined from the above-linked posts by Martin Krzywinski (http://mkweb.bcgsc.ca/pi/art/):

Now on to science: the geeks have been armed with a HD camera and a submarine… outcome: live broadcast of an eruption of the underwater volcano. Here are the videos (H/T to ‏@alexwitze): http://www.interactiveoceans.washington.edu/story/Visions%2713+Videos. They'll be back with live stuff in 2014… smokey stuff… maybe they can roast some marshmallows on that Axial Caldera next.


In case you need a dose of laughter after all this heavy heady maths, here's some humorous take on the subject: http://mathwithbaddrawings.com/2013/08/21/five-math-experts-split-the-check/


Geeks with cameras and formulas above, followed by geeks with computer codes next: an amazing story about the Israeli army tech-intelligence unit that is behind some major ICT innovations and entrepreneurs. The story really goes to the heart of learning-by-doing models of training (via @GPIngersoll and @BI_Defense): http://www.businessinsider.com/best-tech-school-is-israels-unit-8200-2013-8. The story also highlights the non-linear nature of human capital formation. Military leadership has always been at a premium in the civilian business life, but now direct skills are also becoming marketable.

And to further illustrate the same points, here's the 'governmentorial' - a promotional site for NASA claims of contribution to civilian everyday world: http://www.nasa.gov/vision/earth/technologies/spinoffs.html
Est Cool… But not to get too futuristic with all of this tech: although the space age might be relatively young, our capacity innovate in relation to space is not… back in ancient Egypt, meteorites were deemed to be valuable enough to make it into jewellery:
http://scinewsblog.blogspot.ie/2013/08/ancient-egyptian-iron-beads-were-made.html


Stay tuned for more WLASze links later.

30/8/2013: Hypo-Depfa Saga

One of the best articles on Hypo-Depfa fiasco I've seen to-date anywhere!

http://www.irishtimes.com/business/sectors/financial-services/near-collapse-of-german-bank-and-its-irish-subsidiary-shrouded-in-mystery-1.1509849r via @DerekinBerlin and @IrishTimes

Key quotes (for me, personally):

"Sitting in his Frankfurt office, in the shadow of Deutsche Bank’s twin towers, the 75 year-old Bavarian says the mainstream view in German finance circles – that Depfa sank HRE – is not strictly correct. “HRE would have gone down on its own, because of its own business,” he says, a view he formed during a hectic year studying HRE’s books."

It was clear from the beginning of the Hypo collapse that aside from Depfa, German lender was all over the shop in terms of loans it was issuing, its own funding was no different from the market consensus model, which relied on a toxic mix of medium term and short term funding sources exacerbating maturity mismatch risk with liquidity risk.

"Six months before the end, in early 2008, German financial regulator BaFin asked experts at the Bundesbank to conduct a full audit of all HRE operations. Its final audit report warns about “serious deficits” right across the group’s structures – from Dublin to Munich – particularly in the division supposed to assess risk of investments worth around €400 billion. ...employees were often unable to answer questions about the bank’s activities. ...HRE executives had no idea what was going on at their bank – either in Germany, or in their Dublin subsidiary, Depfa – because they had “no adequate, timely presentation of the actual financial situation”."

You have to just love the incompetence of the German financial authorities. Having received a report listing 49 breaches of regulations by Hypo-Depfa, in July 2008 (amidst already raging liquidity crisis worldwide), German BaFin "demanded quarterly progress reports on remedial action. Six weeks later, HRE and Depfa went over the edge."

A sense of BaFin being run by Dublin's FinReg or their equivalent is ever present.

30/8/2013: Some Good Stats on Travel to Ireland: July 2013

Some decent numbers on travel to Ireland: http://www.cso.ie/en/media/csoie/releasespublications/documents/tourismtravel/2013/overseastravelmayjuly2013.pdf

Summary table:

Particularly encouraging are the following data points:

1. May-July figures are up 5.24% on same period 2011, and this is in excess of January-July increase of 4.60%. The significance here is that in May-July we had fewer EU Presidency activities in Ireland, thus trips to Ireland during this period are more likely reflective of tourism, rather than of bureaucravel from Brussels.
2. North American visits are up solidly +16.5% for May-July 2013 on same period 2011 and +13.4% for January-July 2013 on same period in 2011.
3. Trips to Ireland from areas other then EU, Other Europe, US, Canada, Australia, New Zealand and Other Oceania are up in May-July on 2011 and 2012 levels, though they are still slightly down for H1 2013 compared to H1 2013.

30/8/2013: Retail Sales Dynamics: July 2013

Retails sales stats for July 2013 were released yesterday amidst a torrent of data releases for Ireland this week. With slight delay, here's my take on the core numbers. All referencing seasonally-adjusted data.

Core (ex-Motors) retail sales improved in value in July on seasonally-adjusted based, posting a rise of 2.32% m/m and 1.46% y/y.

• Current 3mo MA is at 95.9 - which means that value of sales is running at 4.1 percentage points below 2005 levels of activity. Previous 3mo MA was 95.5, which means the over the last 3 months there was virtually no growth in the value of retail sales compared to 3 months prior.
• Current 6mo MA is at 95.7 and this compares to higher 6mo MA for the previous period which stood at 96.8. In other words, last 6 months activity in retail sales, as measured by value, was lower than previous 6 months period.

Core (ex-Motors) retail sales improved in volume in July on seasonally-adjusted based, posting a rise of 1.31% m/m and the same y/y.

• Current 3mo MA is at 99.9 - which means that volume of sales is running at 0.1 percentage points below 2005 levels of activity. Previous 3mo MA was 99.2, which means the over the last 3 months there was some growth in the volume of retail sales compared to 3 months prior.
• Current 6mo MA is at 99.6 and this compares to higher 6mo MA reading for the previous period which stood at 100.5. In other words, last 6 months activity in retail sales, as measured by volume, was lower than previous 6 months period.

Meanwhile - a reminder - Consumer Confidence, measured by the ESRI has deteriorated m/m by 3.40% and there was a marginal rise of 0.74% y/y.

• Current 3mo MA is at 66.7 - which means that consumer confidence over the last 3 months period is running ahead of previous 3mo MA of 59.4. Broadly-speaking Consumer Confidence indicator moved in-line with core retail sales in value and volume over the 3mo periods.
• Current 6mo MA reading for Consumer Confidence is at 63.1 and this compares to lower 6mo MA reading for the previous period which stood at 59.8. In other words, Consumer Confidence continues to countermove vis-a-vis retail sales indices on 6mo average basis.

Couple of charts. First one illustrates three core indicators:

 
Chart above continues to show generally negative correlation between actual retail sales and Consumer Confidence indicator, as well as the general flat-line trend in the retail sales series for both indices over the last 20-21 months.

Next, relationship between Consumer Confidence and retail sales indices:

Lastly, my own Retail Sector Activity Index (RSAI) that take into the account dynamics and levels of all three indices: CSO's Retail Sales Indices (Value and Volume) and ESRI's Consumer Confidence index:

Per above, RSAI continues to run within the broad confines of the flat-trend average, with uptick in July being much flatter than in previous months.

Note: here are correlations between all four measures of retail sector activity health:

Summary conclusion: things are improving, but the sustainability of improvement is questionable, with 3mo averages divergent from 6mo averages. Consumer Confidence remains largely irrelevant to actual outcomes delivered by the sector. The base of activity remains low and we are now into 5 years-plus of effectively unchanging 'bouncing along the bottom' activity. 

30/8/2013: How's that 'credit supply' to the economy promise going?

On foot of my analysis of the credit extended to Irish Private Sector Enterprises and to SMEs (see PSEs analysis here and SMEs analysis here), I was asked if I can pool together the two datasets to provide a summary of the 'Government performance table' on both.

Here it is. All changes are referenced to Q2 2011 in levels (Euro millions) and the colour codings are: bold green marks expansion on Q2 2011, bold red - contraction.

As you can see, only two sectors of the economy experienced an overall increase in credit levels: Manufacturing and Human Health & Social Work.

As I noted in the previous post: Truth be told, neither this nor any other Government can stop the deleveraging in the Irish private sector economy and this deleveraging will have more adverse impact on SMEs than on larger enterprises. But, truth be told, the Irish Government is not exactly keen on this truth and is insisting that it can 'unlock' credit flows... Two years in, we are still waiting...

29/8/2013: Credit to SMEs in Ireland: Q2 2013

Earlier today, I debunked the myth that we are experiencing any sort of significant uptick in private sector enterprise investment on the foot of poor credit supply figures for Irish private sector enterprise. You can read my analysis on this here: http://trueeconomics.blogspot.ie/2013/08/2982013-credit-to-private-enterprises.html. However, let us recall that the current Government came into the office rattling sabres on the high goals of setting banks straight on SMEs credit.

How are we doing on this front?

Here's a handy summary for Q2 2013 changes in credit outstanding to the SMEs (green bold marks sectors where there has been any improvement - either quarterly or annual):

Spotting any significant improvements in access to credit? Me neither.

What about longer trends? Here are the charts:

Total credit is down.

Manufacturing credit is up and off the bottom levels, but the overall levels are tiny, minuscule, irrelevant to the aggregate economy. Primary sectors credit is down over longer time range and flat since ca Q2 2011.

No love from the banks for property, construction, and now less love for financial intermediaries too.

No need to describe what's going on in wholesale, retail and hospitality sectors.

Education faring better, but at insignificant levels of activity to start with. Health is at the bottom of the empty swimming pool and not even flapping arms...

Even the 'white knights in shining armour' that are exports drivers and generators and the darlings of our development agencies: business services and ICT are starving of credit.

So run by me again: what are the banks doing to respond to the Government loud calls to do their bit for the economy, to support recovery etc? Oh, here's a table showing what happened in SME credit per sector since Q2 2011 (in bold red - sectors that saw decline in credit, in bold green - those where there was an increase in credit):

Truth be told, neither this nor any other Government can stop the deleveraging in the Irish private sector economy and this deleveraging will have more adverse impact on SMEs than on larger enterprises. But, truth be told, the Irish Government is not exactly keen on this truth and is insisting that it can 'unlock' credit flows... Two years in, we are still waiting...

29/8/2013: Broader Unemployment & Underemployment in Ireland: Q2 2013

On foot of the latest data from the QNHS (broad trends analysis here), let's take a look at the broader measures of unemployment, as reported by the CSO (with the last measure: PLS4+STP being compiled by myself based on CSO data from the Live Register and QNHS).

Here are the core definitions, used:

And the numbers are:

• PLS1 - unemployed persons plus discouraged workers - rose from 14.6% in Q1 2013 to 14.8% in Q2 2013, but declined 1.3 percentage points on Q2 2012. Relative to peak (16.2% in Q3 2011), the indicator is now down 1.4 percentage points, which is a pretty poor performance, when you think of it: 1.4 ppt down in 7 quarters).
• PLS2 is at 16.2% in Q2 2013, up on 16% in Q4 2012 and Q1 2012. Year on year, indicator is down 1.0 percentage points and it is down 1.1 percentage points on peak attained in Q3 2011. Again, poor performance relative to peak.
• PLS3 is at 18.2%, up on 18.0% in Q1 2013 and down 0.7 ppt on Q2 2012. Relative to peak the indicator is down 1.0 percentage points with the peak at Q3 2011.
• PLS4 is at 24.7%, which is down on 24.9% in Q1 2013 and is also down 1.1 ppt y/y. Q2 2012 was the peak reading for indicator, so PLS4 is down now 1.1 ppt on peak too - decline delivered over 4 quarters.
• Finally, adding State Training Programmes participants to PLS4, we have PLS4+STP indicator at 27.8%, down on 28.9% in Q1 2013 and down only 0.5 ppt on Q2 2012. Indicator peak was attained in Q3 2012, so the indicator is now down 1.1 ppt on peak.

Summary of y/y and relative to peak changes recorded in Q2 2013 is here:

Lastly, gains in the labour force illustrated:

The above marks a nice increase in the labour force participation out to 2,170,700 in Q2 2013 from 2,137,500 in Q1 2013 and 2,159,100 in Q2 2012. The increase, however, comes off the low base to begin with and basically returns labour force numbers to the levels where they were back around Q3 2011.

Summary: Broader unemployment and underemployment metrics are improving y/y but not q/q. The broadest measure PLS4+STP down very marginally y/y by just 0.5 percentage points. This is hardly encouraging. On a positive side, all metrics are showing signs of stabilisation, albeit at very high levels of unemployment and underemployment. In most basic terms, with 27.8% of our broader potential workforce either unemployed, underemployed or in state training programmes, we have a real problem on our hands, still, and it is not getting better at any appreciable rate of improvement.

29/8/2013: Some positives v negatives from QNHS data: Q2 2013

Latest QNHS figures from Ireland are encouraging. Actually, given much of the tough news on the front of employment and jobs creation prior, these are heart warming. Here are the headlines:

Employment:

• "There was an annual increase in employment of 1.8% or 33,800 in the year to the second quarter of 2013, bringing total employment to 1,869,900. This compares with an annual increase in employment of 1.1% in the previous quarter and a decrease of 1.3% in the year to Q2 2012." This is good. Employment is up against adverse demographic effects, which is good, but it is also up due to superficial effects of reclassifications of some categories (see warning below).
• Even better news: "Full-time employment increased by 21,600 or 1.5% in the year to Q2 2013 while part-time employment increased by 12,100 or 2.8% over the year." So levels of increase in full-time employment are outstripping increases in part-time employment, implying that average jobs pool quality is not declining anymore.
• This marks third consecutive quarter of q/q increases in employment: "On a seasonally adjusted basis, employment increased by 9,600 (+0.5%) in the quarter." There was a seasonally adjusted increase in employment of 9,000 (+0.5%) in Q1 2013 and 12,100 (+0.7%) in Q4 2012.
• Employment increases and decreases composition are not sending a good signal, with higher value-added sub-categories of employment up: "Employment fell in five of the fourteen economic sectors over the year... The greatest rates of decline were recorded in the Administration and support service activities(-7.9% or -5,000), Transportation and storage (-5.4% or -4,900) and Public administration and defence; compulsory social security (-4.5% or -4,500) sectors. The largest rates of increase were recorded in the Agriculture, forestry and fishing (+18.7% or 16,300) and the Accommodation and food service activities(+8.0% or 9,600) sectors. 
• Here is a warning shot on the above figures: "In the case of the Agriculture, forestry and fishing sector it can be noted that estimates of employment in this sector have shown to be sensitive to sample changes over time." So, wait... +16,300 'new' jobs in Agriculture etc are really old jobs reclassified... or at least a large share of these are... Oops.. Note that this exactly matches decrease in the 'Not in the labour force' category (-16,300 y/y) and this knocks out quite a bit of wind out of the 'jobs creation' figures sails...

Unemployment:

• "The seasonally adjusted unemployment rate decreased from 13.8% to 13.7% over the quarter while the number of persons unemployed fell marginally by 500 persons, again on a seasonally adjusted basis." This is news in so far it is 'official' QNHS reading, but we knew 13.7% figure back in May when we had the standardised rate of unemployment estimate from Live Register.
• "Unemployment decreased by 22,200 (-6.9%) in the year to Q2 2013 bringing the total number of persons unemployed to 300,700. This is the fourth quarter in succession where unemployment has declined on an annual basis." Which is good news, indeed, except, wait... what about the 16,300 'new' jobs in Agriculture, Forestry & Fishing flagged above? Marginal decline of just 500 in terms of q/q seasonally-adjusted unemployment is a poor reading, to be honest. Better than an increase, but still, very weak. This weakness suggests that the bulk of 22,200 declines in unemployment rosters is due to exits and reclassifications of workers, not due to jobs creation.
• "The long-term unemployment rate decreased from 9.2% to 8.1% over the year to Q2 2013. Long-term unemployment accounted for 58.2% of total unemployment in Q2 2013 compared with 61.8% a year earlier and 56.1% in the second quarter of 2011." What we do not know here is whether this decrease was due to exits from benefits or entries into jobs or move to state-run training programmes. I will do analysis on these later, so stay tuned.

Labour force participation:

• Good news: "The total number of persons in the labour force in the second quarter of 2013 was 2,170,700, representing an increase of 11,500 (+0.5%) over the year. This compares with an annual labour force decrease of 19,600 (-0.9%) in Q2 2012." 
• The above is a good bit of news and it is made even better when we consider that increases in labour force were driven by increased participation rather than by demographic effects. In Q2 2013 there was a negative demographic effect cutting -16,300 from the overall labour force. This was more than offset by "a positive participation effect of 27,800 on the size of the labour force over the year.
• There was "an increase in the overall participation rate from 60.1% to 60.5% over the year to Q2 2013." Which is excellent news.
• "The number of persons not in the labour force in Q2 2013 was 1,415,600, a decrease of 16,300 (-1.1%) over the year." This seems to be related to reclassifications into Agriculture, etc. sector.

To summarise:

We have some positive news above, but overall, numbers remain obscured by reclassifications, changes in composition and lack of clarity on flows in- and out- of unemployment. 

Analysis of broader measures of unemployment, more indicative of underlying quality and nature of changes in the aggregate figures, is to follow, so stay tuned.

29/8/2013: Credit to Private Enterprises in Ireland: Q2 2013

Credit supply figures for credit extended to Irish businesses are out and make a depressing reading, once again.

Taken from the top, here's the summary of all latest (Q2 2013) changes:

I marked in green bold only those observations where there has been any sort of a positive movement either y/y or q/q. There are only five such subsectors: Water, Sewage & Waste Treatment, etc (although q/q the sector is again down on credit), Transport & Storage (although the sector is down y/y), Information & Communication (solid y/y rise, with a big question as to whether the credit increase is accounted for by the Eircom going back into leveraging up), Education (solid y/y gain, weak q/q growth) and Health and Social Work (down q/q, but up y/y).

We hear much about the fabled revival of fortunes in the construction sector and property investment sector. I am afraid there is none visible in the credit supply data:

Unless Russian oligarchs with suitcases of cash are rolling into town, where's the fabled 'pick up of building activity' being funded from? Mars? Or cash piles of our farmers?

Total credit is still shrinking, most critically, in the sectors excluding Financial Intermediation and Property:

Credit in Primary Industries and Manufacturing has flat-lined some 33-39 months ago and is showing no life since, which is sort of suggests that the PMIs (Manufacturing) 'boom' is a signal of skewed PMI metric, capturing more of the MNCs than of domestic activity:

When it comes to the 'brighter' spot of Transport - credit pick up is off extremely weak position:

In short, as credit is linked directly to investment activity, the above suggests continued deep-freeze in the economy through H1 2013. There seem to be no signs of revival so far, albeit caveats to this apply - this is just one indicator and it is an indicator that does not tell us much about new loans issuance as opposed to old loans expirations/maturing etc. Still, to get investment-driven growth, we need credit figures to rise. Not fall...

28/8/2013: Islamic Finance in Ireland? Few questions...

Anyone residing in Ireland needs no introduction to the nearly boundless supply of stories from the Irish financial services sector that are just begging to be converted into a menacing thriller replete with villains and victims and clueless asleep-on-the-job 'enforcement' authorities.

Well, here's another one of such stories: http://www.insurancejournal.com/news/international/2013/08/23/302671.htm citing Ireland's example of allegedly Sharia-compliant financial fund that .

Lest we forget, Islamic finance is one of the cornerstones of Irish Government strategy for stimulating inward FDI and growing the IFSC. Back in 2012, the Journal.ie asked a handful of simple questions about this new 'knight in the shining armour' riding into town to save us. You can see more up-to-date stats on this here: http://www.pwc.ie/asset-management/islamic-finance.jhtml.

I am more than open to comments on this topic, as I am not an expert on Islamic finance. I am also absolutely neutral to the Islamic finance just as I am neutral toward a bunch of other services I neither research nor consume... but... have we bothered to ask some core questions about all this Sharia-compliant financial engineering in Ireland before jumping into the waters we know little about?

1. Ireland has no practical or cultural experience in any of the basic tents of Islamic finance.
2. Ireland has a society rooted in ownership of assets and profit-extracting considerations of ownership - a notion that is directly contradictory to the principles of the Islamic finance.
3. Where are the skills sets required for conducting Islamic finance transactions coming from in Ireland? There are some training facilities now available, including those provided by law firms and financial advisories. But the programmes are nascent and hardly present a critical mass (or capability to deliver such in foreseeable future) of skills.
4. Where is the certification infrastructure on the ground (as opposed to offshore) to certify the Islamic finance products? Who are the Islamic scholars approving the products domiciled into Ireland? Who monitors them? Who are the requisite Sharia-compliant directors? How many of them reside in Ireland? Notice that per article in the Insurance Journal - there is a shortage of Islamic scholars necessary to provide cover for Islamic finance in one of the largest Muslim countries: Malaysia. But, obviously, not in Ireland.
5. Irish regulatory environment relies on low-burden of regulation (and in the past also relied on low-burden supervision, which is changing, but the process of change is not yet completed) applied across standardised sets of products (services). This conceptual framework is potentially not aligned with the highly regulated and regimented, Sharia-compliant structures of the Islamic finance, reliant often on specific judgements and decisions, rather than explicit processes.

There is even a curious case of something called the Islamic Financial Regulator in Ireland (http://islamic-chamber.org/divisions-2/islamic-finance-ireland-2), despite the fact that it appears it is the Central Bank of Ireland that carries out the regulatory functions in relation to the Islamic finance. At least the Revenue Commissioners seem to be sure of that: http://www.revenue.ie/en/practitioner/tech-guide/guidance-notes-islamic-finance.pdf.

Having contacted the Central Bank, I received a confirmation that

1. The Central Bank acts as a regulatory body overseeing all financial products domiciled into Ireland and in this capacity it also oversees Islamic finance products; 
2. Islamic finance products are not treated differently from other products by the Irish regulatory frameworks; and 
3. The Central Bank of Ireland has no relationship with IFR or the Islamic Financial Regulator (Ireland). 

So here's a follow up question: Do you think it would be ok for, say, an average Joe to call himself a 'XYZ' Financial Regulator (Ireland) and then publicly market himself as such?

And now a follow up question: Should we be concerned with what is going on in the Islamic finance sub-sector in Ireland?

28/8/2013: Some charts on China's debt addiction (via FT)

China has been the 'Big Asian Hope' when it comes to global growth and more recently, the 'Big Asian Worry'. The problem, however, is that China is not unique. Like the rest of the world, China is incapable of delivering growth at the rates below the rate of expansion of debt. Leveraging seems to be the worldwide story when it comes to growth generation, as if the entire global economy is populated by compulsive gambler-states...

FT has a fascinating set of slides on China's debt-growth links: http://www.ft.com/intl/cms/s/0/e76db82e-0a4d-11e3-aeab-00144feabdc0.html#slide0

And here are my two favourites:

Chart above clearly shows that China is in a league of its own when it comes to debt vs GDP per capita. If anything, the healthy due of countries by these metrics are Russia and Mexico (note South Korea, in my opinion, does not belong with Emerging Markets - it is an advanced economy). India is a sick economy, compared to the rest. But China... well, China is on its own.

Worse, however, as the chart below shows, China's mountain of debt is now shifting out of the banking sector and into the least transparent and trust loans markets:

Now, trust loans are debt that has been dressed up as 'investment product' and sold onto retail investors. This debt is funded usually by banks and/or investors. Back in 2010 these were problematic already, but arguably manageable. Since then they have shot up in importance. Trust loans are short-term finance, with maturities of few months and up to a year, implying high risk of exposure to liquidity shocks and interest rates shocks. They are also expensive. Roll over risk is rising in the Chinese economy.

FT had additional coverage on these back in 2010 here: http://ftalphaville.ft.com/2010/07/15/286766/chinas-trust-factor/

All of the above speaks of severe debt addiction in the Chinese economy. 

27/8/2013: Ifo Business Expectations: Germany, August 2013

On foot of my previous post (http://trueeconomics.blogspot.ie/2013/08/2782013-ifo-business-climate-survey-for.html), here is a longer-term view of the role expectations play in co-determining / tracking the subsequent realisation of business conditions and climate under the Ifo index.

Answer is: not much. The same picture holds for 12 months lags.

In other words, as I said above: expectations (in the case of German businesses) are more conservative and less volatile than either current situation index or climate index. And this suggests that expectations tend to adjust to current climate imperfectly but stronger than lead the future index readings. For the forecasting purpose, it is probably the longer-run averages, in more complex econometric structures, that are more likely more indicative of the true underlying dynamics being declared under the expectations. In simple terms: don't read too much into short term changes (short-term being 12 months and less) in expectations...

Interestingly, the Ifo series are high quality data, unlike many other series, such as, for example, smaller economies' PMIs. Yet, to my knowledge, no one does any serious analysis of expectations and their predictive power for any of the regularly-released series on business activity. This just goes to show how simplistic the markets-related macro analysis can be.

27/8/2013: Ifo Business Climate Survey for Germany: August 2013

CES Ifo Business Climate figures for Germany are out today, showing further gains in underlying economic conditions and expectations forward.

Year on year, business climate index reading improved 5.2% to 107.5 in August 2013, with monthly improvement of 1.2%. 3mo average over the last 3 months was 106.5 against 105.6 average for the 3mo period through May 2013 and 103.5 3mo average through August 2012.

On business situation side, index rose to 112.0 in August 2013, up 1.7% on July 2013 and 0.9% on August 2012. 3mo average through August 2013 stood at 110.5, ahead of 109.1 3mo average through May 2013, but below 112.1 average through August 2012.

Business expectations index also rose in August to 103.3 from 102.4 in July, showing a monthly gain of 0.9% and an annual gain of 9.8%. 3mo average through August 2013 is at 102.7 against 3mo average through May 2013 102.3, suggesting that pick up in overall expectations has been rather subdued. This might be due to the index overall showing lower volatility around the mean than other two indices. In other words, conservative expectations are staying closer to the mean and watching if the rest of the series do catch up with expected expansion. 3mo average through August 2012 was 95.6, suggesting that overall, there has been some serious optimism built up over the last 12 months, further warranting some moderation in the rate of optimism growth forward.

Chart to summarise:

25/8/2013: WLASze Part 2: Weekend Links on Arts, Sciences and Zero Economics

In the previous WLASze post, I promised to cover in more detail the Future Generation Art Prize 2013 at Venice Biennale. Here are some links and this year's artists.

The newsletter covering applicants and participants is here,  and you can explore all of the artists exhibited in Venice here.

An architectural/spatial geometric installation with fractal-like dynamic repetition of the subsets is somewhat clinical in nature, yet, the size and span of it do impress, as well as superbly un-natural and inorganic reduction in size...

Like extra-human on extra-terrestrial scale...


Lynette Yiadom-Boakye is a well-recognised painter and her work deserves some series consideration: "Underlife" illustrates

Although not all of it is of consistent quality (I guess this is why she is still in the 'future generation' league), as "The Edifying Oracle's Cheque, 2012 shows:

Incomplete work both compositionally and figuratively.


Jonathas de Andrade from Brazil "Nostalgia, a Class Sentiment" is an installation that merges the lego-like figurative formalism (not quite an abstraction) with text-based contextualisation. The result is rather poor attempt at making cataloguing fun...

I am not a fan of this stuff... It is neither nostalgic (being deprived of emotional content) nor sentimental (being deprived of emotive form). It might be relevant to 'class' as it speaks directly to the academists... Why on Earth would I care to put this here? Precisely because someone, somewhere on this plant thought this is a potential for the Future in art... right...


Neither am I a fan of post-Rauschenbergian collections of refuse as installation art. Rauschenberg was an indisputable master of assemblage: http://www.rauschenbergfoundation.org/ and since his works, the approach of amassing discarded objects into some sort of meaning has become a very-hard-to-execute form of art. Abigail DeVille's "Nostalgia, a Class Sentiment" just doesn't cut it:

According to curators, DeVille "creates archaeological constructs full of cultural and historical references. Her dark sculptural installations steeped in “destruction” and “decay” are a reflection on social repression, racial identity and discrimination in the ruinous decadence of the big city. With building waste and rubbish from the streets, which she incorporates as found objects and “intergenerational debris”, DeVille builds black holes and vortexes like metaphorical time warps. In the periphery of this constructed decay, or once through the vortex, we meet lost individuals, grotesque parodies of how blacks were perceived in the American past."

Blah, blah, blah... DeVille's 2012 installation, "a vortex representing street life based on Claes Oldenburg’s found object environment The Street at the Judson Gallery in New York 1960."

Sorry, folks, but Oldenburg was cool. DeVille missed the point: there is no need to 're-narrate the 1960s'. This isn't Hollywood, where routine running out of plots to produce movies on results in re-narration of old classics. Oldenburg's links: http://www.moma.org/collection/artist.php?artist_id=4397 and http://www.tate.org.uk/art/artists/claes-oldenburg-1713 and http://www.guggenheim.org/new-york/collections/collection-online/artists/bios/689 and so forth... I just don't dig this 'connection' to De Ville - except at the most superficial...

Between - assemblage, cataloguing and objects-based installations are best exemplified by the master of the art: Ilya Kabakov (http://www.tumblr.com/tagged/ilya-kabakov). Eat your "vortex representing ...life ... based on... found object environment", DeVille:

 and your sentimental nostalgia catalogue, Jonathas de Andrade: 

Source for the latter: http://contemporaryrubbish.wordpress.com/garbage/the-garbage-man-the-man-who-never-threw-anything-away/#main for the former: http://noyspi.com/kabakov.html

Enough of stuff I don't like, here's some that actually looks good.

Mykyta Kadan from Ukraine has a classical education in art and this shows - in contrast to the majority of Western artists who often have only scant command of composition and practical experience in 'crafting' their works. Ideas are fine and necessary, but remember - art, like poetry, maths, philosophy etc is more than just ideas. it is also about execution.

"Kadan combines intellectual reflection with continuous social engagement, using his artistic practice to act in the socio-political discussions in Ukraine. With a strong historical awareness, Kadan focuses his research on the urban transition of Kyiv, a city in continuous transformation losing its historical roots and its public spaces to commercialism. Kadan works mostly in painting and sculpture, and in his use of abstraction and modelling he references the Russian avant-garde movements from the turn of the 20th century." Can't agree more. Fantastic dynamism, merged organically with pure statism, accentuated by the intensity of colours.

24/8/2013: WLASze Part 1: Weekend Links on Arts, Sciences and Zero Economics

Due to travels, I have taken a break away from posting WLASze: Weekend Links on Arts, Sciences and zero economics last week. This is the return of my blog's regular weekly feature.

Thus, fresh from Biennale in Venice, few thoughts for the opener of this week's WLASze. Enjoy


Overwhelming sense of being underwhelmed is the best way to describe the Biennale 2013. My concern was evident from the main pavilions of Giardini on: much of this year's Biennale is banal, over-selected, non-challenging and yawn-inducing academism of post-modernist art. It is as if the two sources of artistic expression: ideas and forms, all have been mined out to hollow caverns filled with brackish polluted water and no longer capable of producing gem stones.

Perhaps the best performance art (and there was some around that pretended to be such, inclusive of two women moaning at each other in the middle of the large hall in the main hall of Giardini - I personally thought the moderately-sized crowd of art-refusnik professorial types gobbling it all up watching them was probably a better part of the performance) for the entire Biennale is the permanent installation of Venezuela pavilion next to Switzerland. What a contrast to the irony and though-free general outlook of the Biennale itself. The juxtaposition of a resources-rich self-impoverished economic blackhole of Venezuela and self-made resources-impoverished uber-rich Switzerland.

Let's go for the rest of it.

Spanish pavilion was… booooooring… it contained a large collection of various piles… of various stuff… bark, rocks, dirt…

The best bit was a small lizard that made the pile of rocks its home and calmly lazed about while viewers were exerting much effort to comprehend why would an insolvent Spain send to Venice a pile of rocks, plus three tiny weeds that sprung leaves from the pile, allegorically suggesting green shoots amidst what appeared to be a representation of Spanish housing market collapse... Neither intended, both more original than the installation itself.

Dirt-in-the-room thingy has been done. Ages ago. Walter de Maria did it best - DIA still has it…

Reinventing the wheel… Enough said.

Still, little delightful surprise (albeit in a very large shape) awaited us in the next pavilion - Belgium, which was represented by Berlinde De Bruyckere's Kreupelhout – Cripplewood.

I like Coetzee's work, fine writer, full of textbook sensitivities, yet very much outside the traditional space of 'African' literature. Alas, I disagree with Coetzee: knots of human reason are infinitely more complex than knots of that occur in nature. Nature has finite dimensions, until a human being enters the picture.

Yet, more good stuff awaited in Mark Manders's "Room with a Broken Sentence" at the Dutch pavilion:

Aurelien Froment, Pulmo Marina and other from the Future Generation Art Prize

I am planning to post more on this later.


In the main hall of Giardini, majority of works were fully captured by relentless academism. Formulaic stuff, delivered with competence and, thus, made even less exciting.

Here are few exceptions, though even these are not exactly earth-shattering. Jean-Frederic Schnyder's Swiss folkeshism so much loved by kids...

Thierry De Cordier's series of dark, brilliant oils... begging for some larger canvases and bigger walls:

Sarah Sze's installations at the US pavilion were quite a hit, an occasionally intricate, but at times perhaps too-direct interplays between nature, stasis, imbedded dynamic and restraint, they were fresher than the average stuff on show.

Sarah Sze did grand work also mixing up some clinical variety of counterbalancing thought and expression. Her brilliant triple point (planetarium) is large, lab-reminiscent and only tangentially related to stars… which is a sort of… the main point o a planetarium

And this brings us to my favourite of the Biennale 2013: the Russian pavilion, where performance art of high quality infused sarcasm and satire, mixed up with some basic ethics, amidst what would pass for a good quality installation art too… Vadim Zacharov pulled no punches in his work:

Double-take on 'semechki'... :-) I smiled... MrsG loved it... and then there was the main installation (which we first experienced by MrsG walking under the coins shower):

You can see the coins rain:

Note: only 'ladies' (no girls or men or boys) were allowed to walk under the 'rain' and collect coins to bring back into the entrance hall. The rain, however, was generated by a man:

Sort of gender play / role restatements.

Russian pavilion was simply brilliant. By far the best of all we have seen, followed by the US pavilion.


I shall take a break… stay tuned for Part 2.