ACTIVIDADES CLASE 7

Actividad individual –
A. Traduzca el siguiente fragmento con especial atención a los tiempos verbales y a las frases nominales.
CURRENCY MOVEMENTS -- After collapsing dramatically in 1998, many East Asian currencies strengthened against the
dollar last year. The Indonesian rupiah has risen by 11% against the greenback since the end of 1998; South Korea's won
has gained 6%. However, the Thai baht and the Philippine peso have both slipped slightly against the dollar over that
period. Other emerging economies saw much bigger falls. Brazil's real fell sharply in January 1999 after the government
abandoned its currency peg. And, although the currency has since strengthened, it is still more than 30% below its rate at
the end of 1998.

B. Lea el texto a continuación y responda las siguientes preguntas.

1. What do today’s forecast show?
2. When does an economy enter into recession?
3. What are the reasons behind Australia’s economic success? Mention all the reasons the author mentions.
4. What measures did the Reserve bank take to prevent a crisis? What consequences have they had?
5. Why do families disagree with the Central Bank GDP predictions? Mention the indicators they follow.

How Australia broke the record for economic growth

Twenty-six years and counting Sep 6th 2017 by E.A.D.W. | PERTH
THE last time Australia suffered a recession the web
browser had just been invented and Bryan Adams topped the
charts. Figures released today will show that its economy has
racked up the longest stretch of growth in modern history:
104 quarters. The Netherlands, the previous title-holder,
dipped into recession —defined as two consecutive quarters
of contraction— after 103. In these 26 years, Australia has
navigated the Asian financial crisis, the collapse of the
dotcom bubble and the Great Recession, largely without
scars. Its once-in-a-generation mining boom ended in 2014.
Yet it has managed to avoid a bust. How did it break the
record for economic growth?
Its success was built on the structural reforms of the 1980s and ’90s, when trade barriers crumbled and foreign-exchange
controls were removed. A floating dollar cushioned the economy against external aches; inflation stabilised around a
target band of 2-3%; and government finances greatly improved. By the time the global financial crisis hit, Australia had
enjoyed over a decade of budget surpluses and net debt had been eliminated. It helped that China’s demand for
commodities was fuelling a mining boom that created jobs and pushed up wages. Australia’s terms of trade soared as it
churned out coal and iron ore to feed its neighbour’s factories. By 2013 household incomes were about 13% higher than
they would have been without the bonanza.
History suggested that the rush would be followed by a bust. As prices and investment fell, debt and unemployment rose
in resource-dependent parts of the country like Queensland and Western Australia. But the Reserve Bank responded by
slashing cash rates to lows of 1.5%, where they have remained for the past year, allowing the diverse economies of
Victoria and New South Wales to pick up the slack. A weaker currency boosted agricultural exports and drew students and
tourists in growing numbers. Cheap loans and rapid population growth prompted an explosion in demand for housing.
Last year Australia’s population swelled by 1.6%, over double the average of the OECD, a group of mostly rich countries.
To accommodate its intake of foreign migrants, Australia must build a city roughly the size of Britain’s Birmingham every
five years.
The luck seems set to continue. The central bank predicts that GDP growth will pick up to about 3% in the next couple of
years. But families have reason to feel less optimistic. Unemployment rates have flat-lined above their equivalents in
America, Britain and Japan. Underemployment (the number of people who would like more work) is close to record
highs. Rising national income is not trickling down to workers: wage growth has fallen to about 1.9%, its slowest pace
since the last recession. This is all the more uncomfortable because household debt has ballooned. Its ratio to GDP is close
to 190%, one of the highest in the world. If the central bank raises interest rates, many families will have difficulties
repaying their mortgages. For now, it is likely to do nothing—and the growth will go on.
UNIVERSIDAD NACIONAL DE MAR DEL PLATA - FACULTAD DE CIENCIAS ECONÓMICAS Y SOCIALES
NIVEL DE INGLÉS TÉCNICO 1

Actividad grupal
1. Responder las siguientes preguntas (en castellano).

1. What is a “BANK RUN”?

2. Why are bank runs an spectacle? How are they like in Britain?
3. Why has the Northern Rock arrived to the present situation? (Provide 3 reasons)
4. Why is the difference between loans and deposits so worrying?
5. Which dangers had the Bank of England warned in April? Which could be the consequences?
6. What are the effects currently seen as a consequence of this situation?
7. What does the author think about the course of action of the Bank of England? Explain.

2. Califique de verdadero (V) ó falso (F) las siguientes afirmaciones e indique el párrafo y el número de línea
donde encontró la respuesta. Justifique su respuesta en castellano.

1. The banking regulator is blamed for not having performed its control adequatedly and in all areas.
2. The gap between loans and deposits has remained stable for a long time.
3. Britain is not concerned about other financial disasters as a result of the present situation.
4. The Bank of England has forecast that during a banking crisis, borrowing would become much more costly.
5. As a consequence of the current crisis, the bank has taken measures immediately.

3. Buscar conectores e indicar qué ideas conectan y su propósito.

2
UNIVERSIDAD NACIONAL DE MAR DEL PLATA - FACULTAD DE CIENCIAS ECONÓMICAS Y SOCIALES
NIVEL DE INGLÉS TÉCNICO 1

The great Northern run

The Northern Rock saga points to troubles buried elsewhere in British banks. GOOD old-fashioned bank runs are
such rare events in rich countries that they have now become a spectacle. Among those who made a special trip
this week to witness the undreamt-of sight of scores of middle-class people queuing to withdraw their savings
from Northern Rock, Britain's fifth-largest mortgage bank, was Tim Price, a portfolio manager. “It was a very
British bank run,” he says. “The queues were orderly, but the emotional impact will scar people for generations.”
Confidence lost is not easily regained, which raises the question of whether any more horrors lurk within Britain's
banking system. Optimists assert that Northern Rock lived a bit faster and looser than the rest of the country's
banks. Although all of them happily lent more money than they had gathered in retail deposits—as you would
expect, especially given the buoyant housing market—none did so to the extent of Northern Rock. It relied on
other banks and capital markets for three-quarters of its funding, compared with about half at its nearest
competitors, Alliance & Leicester and Bradford & Bingley.
Northern Rock's reliance on capital markets explains why, despite
the long queues outside its branches, this was not a typical bank
run brought on only by a sudden collapse of confidence. Instead, it
was a crisis that was long in the making, exploited by short-sellers
and embarrassingly played down by some analysts.
Talk of Northern Rock's exceptionalism is intended to soothe
jangled nerves, since it suggests that other banks have pursued a
less risky path. Whether or not any other bank could possibly fail,
the Northern Rock saga raises some disquieting questions about
Britain's banking regulator, the Financial Services Authority
(FSA). The regulator only drew attention to the weakness inherent
in what it now calls Northern Rock's “extreme” funding model.
The way oversight of the financial system is split between the FSA,
the Treasury and the Bank of England is in doubt too. Gordon
Brown's reform of a decade ago means that those responsible for
monitoring the banking system are separate from those who make the decision to intervene.
There are also worrying vulnerabilities in the architecture of Britain's financial system; chief among things is the
wide disparity between loans and deposits in British banks. The Bank of England's Financial Stability department
reckoned in April that this “funding gap” stood at some £530 billion ($1 trillion) at the end of December —a
figure that has almost certainly widened in the intervening nine months. Adjusted for loans that have been
parcelled up into securities and then sold, the gap stood at little more than £200 billion (see chart above), much of
which was financed by commercial paper and interbank loans.
In normal circumstances, this gap would matter little. Loans taken out by banks would come due and would
simply be rolled over or repaid with the proceeds of fresh loans. But today, when banks are hoarding cash in case
they need it and are unwilling to lend to each other for anything longer than a day at a time, loans lasting three
months, for instance, are being replaced with overnight ones. As a result, many of Britain's banks are increasingly
being pressed to approach the interbank market every day for ever-larger loans. A temporary glitch in the banking
payment system or an unfounded rumour could leave an otherwise sound bank short of cash at the close of
business, forcing it to ask the Bank of England to tide it over —which may imperil its future health.
If that were not bad enough, there is a growing worry, in Britain as elsewhere, that instead of spreading risk thinly
around the financial system, innovations such as securitised loans have in fact created a form of congestion.
The Bank of England warned of these dangers in April, pointing out that signs of vulnerability in one part of the
financial system can quickly have knock-on effects in other parts. It sketched out a scenario in which, for
example, a rise in the price investors demand for holding risky assets in capital markets could make it harder and
more expensive for companies and households to borrow. A slowing economy, falling house and office prices, a
jump in loan defaults and a fall in income at investment banks could all follow. In extreme, banks could end up
losing 30-40% of their core capital reserves, the bank said.
Is such an outcome likely? The bank's Monetary Policy Committee reckons the logjam in money markets is
already raising mortgage costs and choking off corporate lending. That would argue for a cut in official rates.
What is strange is that the bank, having identified the problem so early, took so long to do anything about it.