Global Economic Trade Issues Affect Diverse and Disparate Companies, Part Two of Three: INFECTION

By Ron Doyle

In the first part of this series of three blog posts about how global economic problems can spread quickly to affect seemingly unconnected companies, I discussed how bank problems in Mexico quickly resulted in defaults on amounts owed to exporters into that country.

In this second part in the series, I describe financial infections that we see developing on the horizon today. Infection is the process of contaminating a healthy entity with disease-causing organisms. The infection of mounting debts is a real risk in international economies – and there are others:

1. Sovereign debt is the most obvious and most infectious. Many of the Organisation for Economic Co-operation and Development (OECD) countries are carrying record levels of debt in relation to their Gross Domestic Product (GDP). These countries are not developing countries, but rather some of the major economies of the world and their debts are held on the balance sheets of leading financial institutions. In today’s global economy, the value of financial assets held by a bank is subjected to rigorous scrutiny.

2. Greece's recent bailout avoided an imminent crisis and also addressed the short term problems of some other European countries. The problem with this solution: it creates more debt. This type of solution “solves” a debt crisis in highly leverage countries by having better managed economies take on more debt. This type of debt is also held on the balance sheets of major financial institutions.

Click to read more ...

Global Economic Trade Issues Affect Diverse and Disparate Companies, Part one in a three Part Series: CONTAGION

By Ron Doyle

What does “contagion” mean in the context of trade credit insurance, the global economy and credit risk? Contagion is defined as a tendency to spread – as in the spreading of a harmful idea or practice.

The world financial news each day has many stories about different sectors of the economy: banking, mining, manufacturing, etc. When reading these items, it is often difficult to see how, or if, the problems in one geographic area or industrial sector will affect a seemingly unrelated company in another region.

Click to read more ...

Economic uncertainty and countries “at risk” fuel nightmares for many in international trade

By Mark Attley

Over the last several weeks, Export Development Canada (EDC), Canada’s export credit agency has been presenting its Spring 2010 economic update to audiences across Canada.

Peter Hall, EDC’s Chief Economist, presents a complex topic in easy to understand terms – although I will let you be the judge of that, should you care to read the 132-page report. The report provides a Canadian perspective, along with insightful commentary and data on the global economy. While Peter is cautiously optimistic, he refers to five key risks, any one of which could derail the emerging global recovery.

Click to read more ...