- Written by Dr Robert McCaffrey, Managing Editor, Global Gypsum Magazine
So, they've averted the 'fiscal cliff,' at least for a while. Yes, the deal between the Republicans and President Obama's democrats mean that taxes will rise for some of the richer Americans and that spending cuts will now not take place, at least for a while. Housing prices have started to increase, indicating that the supply of homes and the demand for them is finally starting to balance out. Losses at the wallboard makers who report their results (only USG and Eagle Materials in the US - all others are privately owned) have been staunched and there is even talk of an increase in prices. Time to break open the champagne? Not quite yet... there's still trouble ahead.
The tax rises (up from 35% to 39.6% for those earning over US$400,000) will bring in around US$600bn over ten years (presuming that the taxes stay at that level for the full decade). That's a useful sum - a few hundred billion here and a few hundred billion there and pretty soon you're talking about real money. Taxes under this deal did not rise for 98% of Americans, although the ending of a reduced payroll tax rate meant that every earner will be paying more - a total of US$120bn per year more.
- Written by Dr Robert McCaffrey, Managing Editor, Global Gypsum Magazine
Are you wondering what's going on? Four years into the Great Recession, also known in Australia as the GFC or Global Financial Crisis, it might be worth having a pause to survey the landscape, particularly with regards to the impact of the crisis on the building materials industry.
As is well known, the global crisis was triggered by the collapse of the US sub-prime mortgage market, but this was not the only 'house of cards' waiting to fall. The ill-conceived Euro project was thrown together by European elites, without asking the majority of the European voting public and without first aligning the economic and fiscal policies of its constituent members. This inevitably led to the triumph of human nature over long-term good sense and a 'grab-all-you-can-while-the-going-is-good' mentality from some of the peripheral states. The credit crunch in the US - (actually first triggered when French banks woke up to impossibility of selling or even of assigning a value to the mortgage-backed securities that they held) - led to banks on both sides of the Atlantic mistrusting each other to the extent that they refused to do business with each other and instead were only willing to deal directly with the central banks in their own countries. The immediate decrease in credit availability was one of the factors that led to widespread economic weakness, but the uncertainty sparked by the acute collapse of several institutions in 2008-2009 made investors flee from decisions: we heard reports of companies bankrolling new plant projects in Russia calling up the equipment suppliers and shouting at them to 'cancel all the orders.'
- Written by Dr Robert McCaffrey, Managing Editor, Global Gypsum Magazine
Have you noticed that recently there's been a little show happening up the road from us in London, called 'The Olympics and Paralympics'?
Anywhere we go in the world, we'll be able to chat about what we saw at the Games and there are not many experiences that we have in common with the rest of the world's population. As one of the most-watched events in the world, the Games unite us in our humanity. They are, after all, the competition of mere humans, powered just by food and drink (shame on the drugs cheats - there should be lifetime bans for all of them), with the same amount of oxygen (barring the use of blood doping) to power their metabolism and muscles and with results dependent on genetics, talent, hard work, personality and good luck.
It's endlessly debatable which of those factors has the most effect, but it probably varies from sport to sport: the Caribbeans contesting the 100m final and the East Africans contesting the distance running events show that there must be some influence of genetics, but other sports are more 'open.' Having said that, whenever I have run in a race, I often think that the winner - all other things being equal - is the one who is able and willing to take the most pain. Don't believe me? Try running for yourself and you will soon change your mind.
- Written by Dr Robert McCaffrey, Managing Editor, Global Gypsum Magazine
Do you remember all those family holidays of your youth that went perfectly well? No? What about the disasters - like when it rained for a week in France and you all got bitten by mosquitos, or when you rolled the Land Rover on black-ice in Ireland and it was so cold that the pipes in the youth hostel froze and you all had to brush your teeth in beer? You remember those kind of holidays, don't you? Sometimes it's best when things don't go exactly according to plan.
Such it was when one of my speakers at a recent conference dropped out at the last minute. I had to write and present a paper in his place, given less than 24 hours notice. However, I really enjoyed putting it together, the paper was well-received and it has led to a lot of useful discussion.
- Written by Dr Robert McCaffrey, Managing Editor, Global Gypsum Magazine
I'm often compared to a harbinger of doom, but I believe that it's better to be prepared by thinking through the possible eventualities of a situation. It has struck me over the last few years that the number of possible outcomes from any current situation is so vast that it is nearly impossible to forecast the future (even in a game of chess, the number of possible games is around 10120, the 'Shannon Number'). In the dark days before Lehman's collapse, nobody had a clue as to what might happen afterwards (it turns out that the world didn't end, after all, but it was one of the possibilities). Anyway, despite the wide variety of future outcomes, it's possibly worthwhile to contemplate the effects of the current instability (and weakness) of the Euro on the gypsum industry.
Just to be clear, I am not advocating a 'Grexit' - a Greek exit from the EuroZone - it is just that the markets now suggest that there is only a small chance that Greece will not leave the Euro. A run on Greece's banks and the declination of the ECB to guarantee them would lead to default, as might the rejection of further austerity by the electorate... or a number of other possible scenarios as well. Euro ejection would quickly follow any default.
