Grand Theft Economics
Shamim Adam
Bloomberg
Fri, 13 Nov 2009 09:40 EST
China is facing the biggest challenge to its currency policy since the start of the global recession as economists warn the peg to the dollar risks causing an asset bubble.
As recently as Nov. 9, People's Bank of China Governor Zhou Xiaochuan said he didn't feel much pressure to let the yuan rise, deflecting calls for an increase as exports start to recover and President Barack Obama prepares to discuss the issue in Beijing next week. China's stance risks adding to liquidity after credit surged by $1.3 trillion this year, according to Fred Hu at Goldman Sachs Group Inc.
China's sales of yuan to keep it fixed to the dollar contributed to a 29 percent jump in money supply, and the peg helped spur more than $150 billion in speculative funds from overseas in the past six months, China International Capital Corp. says. Record apartment prices and a 74 percent climb in the benchmark stock index this year are prompting warnings that the policy is inflating asset prices excessively.
Simone Meier
Bloomberg
Fri, 13 Nov 2009 09:38 EST
The euro-area economy emerged from its worst recession since World War II in the third quarter as exports from Germany and France helped compensate for households' reluctance to increase spending.
Gross domestic product in the economy of the 16 nations using the euro rose 0.4 percent from the second quarter, when it fell 0.2 percent, the European Union's statistics office in Luxembourg said today. Economists had forecast the economy to grow 0.5 percent, according to the median of 34 estimates in a Bloomberg survey.
Europe's economy is gathering strength after governments stepped up stimulus measures and the European Central Bank injected billions of euros into markets to encourage lending. While confidence in the economic outlook is at a 13-month high, rising unemployment, the expiration of stimulus plans and a surging euro are threatening to undermine a recovery.
Oliver Biggadike and Matthew Brown
Bloomberg
Fri, 13 Nov 2009 09:27 EST
Brazil, South Korea and Russia are losing the battle among developing nations to reduce gains in their currencies and keep exports competitive as the demand for their financial assets, driven by the slumping dollar, is proving more than central banks can handle.
South Korea Deputy Finance Minister Shin Je Yoon said yesterday the country will leave the level of its currency to market forces after adding about $63 billion to its foreign exchange reserves this year to slow the appreciation of the won. Chile Finance Minister Andres Velasco said the same day that lawmakers approved an increase in local debt sales to finance spending, a move that will allow the government to keep more of its dollar-based savings overseas and slow the peso's rally.
Governments are amassing record foreign-exchange reserves as they direct central banks to buy dollars in an attempt to stem the greenback's slide and keep their currencies from appreciating too fast and making their exports too expensive. Half of the 10-best performers in the currency market this year came from developing markets, gaining at least 14 percent on average, according to data compiled by Bloomberg.
Judy Shelton
The Wall Street Journal
Wed, 11 Nov 2009 19:38 EST
© Chad Crowe
In the Woody Allen film
Annie Hall, the main character tries to explain irrational relationships by recounting an old joke. "This guy goes to a psychiatrist and says, 'My brother's crazy, he thinks he's a chicken.' The doctor says, 'Well, why don't you turn him in?' And the guy says, 'I would, but I need the eggs.'"
It takes similar reasoning to reconcile the elation felt across America every time the stock market rises - partially replenishing personal investment portfolios and 401(k) retirement plans - with the uneasy feeling that we are being set up for yet another big financial disappointment. We dare to hope that the economy is growing solidly once more, that the Federal Reserve has superior knowledge about providing liquidity, and that the U.S. Treasury knows what it's doing by guaranteeing money market-fund assets.
Robert Weissman
Common Dreams
Thu, 12 Nov 2009 21:09 EST
Today marks the 10-year anniversary of the passage of the repeal of the 1933 Glass-Steagall Act and related legislation. It is an anniversary worth noting for what it teaches us about forestalling financial crises, the consequences of maniacal deregulation, and the out-of-control political power of the megafinancial institutions.
The repeal of Glass-Steagall removed the legal prohibition on combinations between commercial banks on the one hand, and investment banks and other financial services companies on the other. Glass-Steagall's strict rules originated in the U.S. government's response to the Depression and reflected the learned experience of the severe dangers to consumers and the overall financial system of permitting giant financial institutions to combine commercial banking with other financial operations.
Glass-Steagall protected depositors and prevented the banking system from taking on too much risk by defining industry structure: Commercial banks could not maintain investment banking or insurance affiliates (nor affiliates in non-financial commercial activity).
As banks eyed the higher profits in higher risk activity, however, they began in the 1970s to breach the regulatory walls between commercial banking and other financial services. Starting in the 1980s, responding to a steady drumbeat of requests, regulators began to weaken the strict prohibition on cross-ownership.
By Kevin Martinez and Dan Conway
World Socialist Website
Wed, 11 Nov 2009 19:56 EST
California finance officials have announced that the state has a current budget deficit of $1.1 billion. News of the shortfall comes less than 10 weeks after a balanced budget deal was reached by Republican Governor Arnold Schwarzenegger and the State Legislature.
An October report released by State Controller John Chiang announced that the latest budget deficit was mainly due to a large drop in third quarter income tax collection; revenues were 11 percent lower than initially projected.
The California Department of Finance is also expecting a deficit of $7.4 billion at the start of fiscal year 2010-2011, which begins next July. This could climb to as high as $20 billion by the start of fiscal year 2011-2012.
Loss of tax revenue due to the economic crisis and widespread unemployment and wage reductions is not the only component of the budget deficit. The state's fiscal health is also largely dependent upon the willingness of outside investors to purchase its municipal bonds and other securities.
Doug Hornig
Casey Research
Tue, 10 Nov 2009 19:42 EST
...wait until you see what's in the cards for commercial real estate.
That's right, the next train wreck will be in commercial real estate. Couldn't be worse than last year's residential market crash? That remains to be seen. But it's coming soon, probably as early as the second quarter of next year, and there's nothing that can prevent it. The government will intervene, trying desperately to delay the day of reckoning, and may even succeed. For a while. But make no mistake about it, that train is going off the tracks no matter what.
Every part of the sector - from multifamily apartment buildings to retail shopping centers, suburban office buildings, industrial facilities, and hotels - has accumulated a huge amount of defaulted or nonperforming paper. It's an impossible, swaying structure that cannot long stand.
Dan Levy
Bloomberg News
Thu, 12 Nov 2009 15:31 EST
U.S. foreclosure filings surpassed 300,000 for an eighth straight month as unemployment made it tougher for homeowners to pay their bills, RealtyTrac Inc. said.
A total of 332,292 properties received a default or auction notice or were seized by banks in October, up 19 percent from a year earlier, Irvine, California-based RealtyTrac said today. One in every 385 households received a filing. The tally fell 3 percent from September, the third consecutive monthly decline.
American Small Business League
Thu, 12 Nov 2009 15:16 EST
Petaluma, California - On October 21, President Barack Obama announced he would convene a small business conference to address increasing access to capital for small businesses. Yet less than a week before the conference is set to convene on Wednesday, November 18, the Administration has refused to release any information regarding the event's location, time, agenda or attendees.
The American Small Business League (ASBL) is concerned that the administration is withholding details on the conference as a means of preventing legitimate small business concerns, small business advocates and the media from attending.
"This is a clear indication that President Obama has no intention of adopting any policies that will actually benefit legitimate small businesses. My guess is that this is going to be a love-fest for his venture capitalist buddies and the Fortune 500 firms he is giving small business contracts to every day," ASBL President Lloyd Chapman said.
Danny Schechter
market Oracle
Wed, 11 Nov 2009 00:00 EST
Hedge Fund Perps Walk Free From Financial Crisis Criminal Trial
I had come from a heated financial journalism conference in a far more orderly Brussels where I had been thundering against Wall Street crime. The first news I saw from "the homeland" was that the only two big shots busted for crimes against their investors when they ran Hedge Funds, now imploded, at Bear Stears were acquitted in a New York courtroom dramatizing the difficulties prosecutors face in achieving the "jail-out" I have been calling for.
Here's how the NY Times covered it:
"It was, prosecutors claimed, a clear case of Wall Street crime - and a chance to bring to account two culprits of the subprime age.
But jurors disagreed, and on Tuesday, two former Bear Stearns hedge fund managers were found not guilty of securities fraud in federal court in Brooklyn, in what legal experts called a setback for prosecutors hoping for easy victories in this era of bailouts and foreclosures.
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