Tuesday, December 9, 2008
The Key to Stabilizing House Prices: Bring Them Down
The Key to Stabilizing House Prices: Bring Them Down
December 2008, Dean Baker
This report states that bringing about the rapid adjustment of house prices to trend levels is the best means of returning stability to the housing market. The paper also calls for the restriction of GSE capital in bubble-inflated markets, with the intent of forcing house prices in these areas to return to trend level. The removal of capital from bubble markets and the consequent infusion of loans into non-bubble markets would stabilize prices in these areas, thus preventing a downward price spiral and overshooting of trend-level prices on the negative side. The report also advocates mortgage appraisal based on a price-to-rent ratio of 15 to 1. As well, the paper suggests giving families facing foreclosure the right to rent their homes both to keep them in their houses and offer banks real incentives to avoid foreclosure.
Emerging economies more dependent on foreign capital: BIS study
Emerging economies more dependent on foreign capital: BIS study
BASEL
Tuesday, December 9, 2008
EMERGING economies are increasingly dependent on foreign capital, making them more vulnerable to the current financial crisis, a study by the Bank of International Settlements found.
In the study published on Sunday, the world's top central bank body said: "Many emerging economies have increased their dependance on credit accorded by international banks."
However, with the ongoing financial crisis, these banks could reexamine their exposure to the emerging economies and cut back on lending, resulting in a "negative impact on the real economy" of these emerging countries.
In recent years, lenders particularly in eastern European countries such as Hungary and Poland have offered loans in Swiss francs or euros at lower interest rates than those of central European currencies.
While the low interest rates are attractive, borrowers were essentially betting on a constant exchange rate with a weak franc or euro.
But they were in for a rude shock when the franc or euro gained significantly in recent weeks against local currencies.
Hungary, which was severely hit by the financial crisis due to its heavy dependence on foreign capital, was forced to tap on aid from the International Monetary Fund and the European Union.
According to BIS statistics, international lending to emerging economies quadrupled after 2002, reaching US$4.9 trillion in mid-2008. International credit to Hungary increased seven-fold in the first half of this year, reaching almost 80 per cent of total credit accorded to the non-banking sector.AFP
BASEL
Tuesday, December 9, 2008
EMERGING economies are increasingly dependent on foreign capital, making them more vulnerable to the current financial crisis, a study by the Bank of International Settlements found.
In the study published on Sunday, the world's top central bank body said: "Many emerging economies have increased their dependance on credit accorded by international banks."
However, with the ongoing financial crisis, these banks could reexamine their exposure to the emerging economies and cut back on lending, resulting in a "negative impact on the real economy" of these emerging countries.
In recent years, lenders particularly in eastern European countries such as Hungary and Poland have offered loans in Swiss francs or euros at lower interest rates than those of central European currencies.
While the low interest rates are attractive, borrowers were essentially betting on a constant exchange rate with a weak franc or euro.
But they were in for a rude shock when the franc or euro gained significantly in recent weeks against local currencies.
Hungary, which was severely hit by the financial crisis due to its heavy dependence on foreign capital, was forced to tap on aid from the International Monetary Fund and the European Union.
According to BIS statistics, international lending to emerging economies quadrupled after 2002, reaching US$4.9 trillion in mid-2008. International credit to Hungary increased seven-fold in the first half of this year, reaching almost 80 per cent of total credit accorded to the non-banking sector.AFP
Monday, December 8, 2008
Japan's recession worse than thought: official data
Japan's recession worse than thought: official data
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Mon Dec 8, 7:41 pm ET
AFP/File – Tokyo Tower, a symbol of the Japanese capital. The country sank deeper into recession than previously …
TOKYO (AFP) – Japan's economy shrank 0.5 percent in the third quarter of this year, sinking much deeper into recession than previously thought, official figures showed Tuesday.
Asia's largest economy contracted 1.8 percent on an annualised basis in the three months to September, when Japan entered its first recession in seven years with a second straight quarter of negative growth, the government said.
An initial estimate last month had shown the Japanese economy shrank 0.1 percent in the third quarter, and 0.4 percent on an annualised basis.
Weak business investment was the main culprit for the revision as companies slashed investment in new equipment and factories by 2.0 percent, compared with an initial estimate of 1.7 percent.
Japan's export-dependent economy was also hit by sluggish exports as the global financial crisis hit international trade.
The latest snapshot of the Japanese economy was even more gloomier than analyst forecasts for a contraction of about 0.2 percent quarter-on-quarter.
The government said the economy shrank a revised 1.0 percent in the second quarter, which was also slightly worse than previously thought.
Japan has relied on brisk exports of cars, electronics and other goods to drive its recovery from recession in the 1990s.
But it has seen exports weaken in recent months due to worsening demand in recession-hit overseas economies.
Buzz UpSendSharePrint
Mon Dec 8, 7:41 pm ET
AFP/File – Tokyo Tower, a symbol of the Japanese capital. The country sank deeper into recession than previously …
TOKYO (AFP) – Japan's economy shrank 0.5 percent in the third quarter of this year, sinking much deeper into recession than previously thought, official figures showed Tuesday.
Asia's largest economy contracted 1.8 percent on an annualised basis in the three months to September, when Japan entered its first recession in seven years with a second straight quarter of negative growth, the government said.
An initial estimate last month had shown the Japanese economy shrank 0.1 percent in the third quarter, and 0.4 percent on an annualised basis.
Weak business investment was the main culprit for the revision as companies slashed investment in new equipment and factories by 2.0 percent, compared with an initial estimate of 1.7 percent.
Japan's export-dependent economy was also hit by sluggish exports as the global financial crisis hit international trade.
The latest snapshot of the Japanese economy was even more gloomier than analyst forecasts for a contraction of about 0.2 percent quarter-on-quarter.
The government said the economy shrank a revised 1.0 percent in the second quarter, which was also slightly worse than previously thought.
Japan has relied on brisk exports of cars, electronics and other goods to drive its recovery from recession in the 1990s.
But it has seen exports weaken in recent months due to worsening demand in recession-hit overseas economies.
Saturday, December 6, 2008
Oil prices slump towards US$40
Oil prices slump towards US$40
LONDON
Saturday, December 6, 2008
CRUDE oil prices slumped close to US$40 a barrel in trading yesterday as the United States lost a stunning half a million jobs in November, raising prospects of a steep drop in energy demand.
In London, Brent North Sea crude hit US$40.72 a barrel, the lowest level since the start of 2005. Light sweet crude for January slid to US$42.00 in New York, also a near four-year low.
Later on London's InterContinental Exchange (ICE), Brent North Sea crude for delivery in January recovered to stand at US$41.47, down 81 cents from Thursday's close.
Meanwhile, the International Energy Agency yesterday cut its forecast for world oil demand growth in the next five years, the latest in a series of downward revisions in response to the slowing global economy.
Oil demand is expected to grow by 220,000 barrels per day (bpd) in 2009, the agency, which advises 28 industrialised countries, said in its Medium Term Oil Market Report.
The Paris-based agency gave its previous forecast, for growth of 350,000 bpd, in a monthly report on Nov 13.
The IEA also said new investment in oil refineries is expected to boost crude distillation capacity in the next five years at a faster pace than growth in demand, a trend that would ease any strain on supplies.
"Refinery investments are forecast to add 8.0 million barrels per day of crude distillation capacity by the end of 2013, significantly outpacing expected demand growth," the report said.
Global oil product demand is expected to grow by 1.2 per cent on average, or about 1 million bpd, every year between 2008 and 2013, from 86.2 million bpd to 91.3 million bpd.
Agencies
LONDON
Saturday, December 6, 2008
CRUDE oil prices slumped close to US$40 a barrel in trading yesterday as the United States lost a stunning half a million jobs in November, raising prospects of a steep drop in energy demand.
In London, Brent North Sea crude hit US$40.72 a barrel, the lowest level since the start of 2005. Light sweet crude for January slid to US$42.00 in New York, also a near four-year low.
Later on London's InterContinental Exchange (ICE), Brent North Sea crude for delivery in January recovered to stand at US$41.47, down 81 cents from Thursday's close.
Meanwhile, the International Energy Agency yesterday cut its forecast for world oil demand growth in the next five years, the latest in a series of downward revisions in response to the slowing global economy.
Oil demand is expected to grow by 220,000 barrels per day (bpd) in 2009, the agency, which advises 28 industrialised countries, said in its Medium Term Oil Market Report.
The Paris-based agency gave its previous forecast, for growth of 350,000 bpd, in a monthly report on Nov 13.
The IEA also said new investment in oil refineries is expected to boost crude distillation capacity in the next five years at a faster pace than growth in demand, a trend that would ease any strain on supplies.
"Refinery investments are forecast to add 8.0 million barrels per day of crude distillation capacity by the end of 2013, significantly outpacing expected demand growth," the report said.
Global oil product demand is expected to grow by 1.2 per cent on average, or about 1 million bpd, every year between 2008 and 2013, from 86.2 million bpd to 91.3 million bpd.
Agencies
Auto sector sinks deeper into crisis
Auto sector sinks deeper into crisis
Cash-strapped: Honda Motor Co president Takeo Fukui. Cash-strapped Honda quit Formula One. Picture: Reuters
TOKYO
Saturday, December 6, 2008
DEEPENING turmoil in the global auto industry depressed investor sentiment yesterday as the fate of the Big Three US automakers hung in the balance and cash-strapped Honda quit Formula One.
The fate of the Big Three US automakers remained uncertain after contrite chief executives asked sceptical senators to deliver a multi-billion-dollar bailout for the ailing industry.
Following a near-six-hour grilling of the car giant bosses, senior Democratic Senator Chris Dodd said he would work to broker a compromise but it was unclear whether a majority of lawmakers were ready to back a rescue.
The Big Three bosses must repeat their ordeal for the House Financial Service committee yesterday.
South Korea said it was considering tax cuts for automakers who are struggling with declining domestic and overseas demand.
Anglo-Australian mining giant Rio Tinto said it was likely to shut its iron ore mines in Western Australia for nearly two weeks over Christmas to cut production in the face of reduced demand.
Investors were concerned that a record 75 basis point rate cut by the European Central Bank and a 100 basis point reduction by the Bank of England would not bring much relief to markets in the near term.
"The previous coordinated rate cuts didn't work. No one expects the European economy to hit a bottom thanks to the cuts this time around," said Kazuhiro Takahashi, equity trading information chief at Daiwa Securities SMBC.
The heads of the struggling Big Three American automakers warned that their collapse could cost up to three million jobs in the auto sector and wider economy, and pleaded for US$34 billion in financial lifelines.AFP
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Cash-strapped: Honda Motor Co president Takeo Fukui. Cash-strapped Honda quit Formula One. Picture: Reuters
TOKYO
Saturday, December 6, 2008
DEEPENING turmoil in the global auto industry depressed investor sentiment yesterday as the fate of the Big Three US automakers hung in the balance and cash-strapped Honda quit Formula One.
The fate of the Big Three US automakers remained uncertain after contrite chief executives asked sceptical senators to deliver a multi-billion-dollar bailout for the ailing industry.
Following a near-six-hour grilling of the car giant bosses, senior Democratic Senator Chris Dodd said he would work to broker a compromise but it was unclear whether a majority of lawmakers were ready to back a rescue.
The Big Three bosses must repeat their ordeal for the House Financial Service committee yesterday.
South Korea said it was considering tax cuts for automakers who are struggling with declining domestic and overseas demand.
Anglo-Australian mining giant Rio Tinto said it was likely to shut its iron ore mines in Western Australia for nearly two weeks over Christmas to cut production in the face of reduced demand.
Investors were concerned that a record 75 basis point rate cut by the European Central Bank and a 100 basis point reduction by the Bank of England would not bring much relief to markets in the near term.
"The previous coordinated rate cuts didn't work. No one expects the European economy to hit a bottom thanks to the cuts this time around," said Kazuhiro Takahashi, equity trading information chief at Daiwa Securities SMBC.
The heads of the struggling Big Three American automakers warned that their collapse could cost up to three million jobs in the auto sector and wider economy, and pleaded for US$34 billion in financial lifelines.AFP
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US sheds over half million jobs in November
US sheds over half million jobs in November
WASHINGTON
Saturday, December 6, 2008
THE US economy lost a stunning 533,000 jobs in November, sending the unemployment rate to a 15-year high of 6.7 per cent, the Labor Department reported yesterday.
The monthly report on nonfarm payrolls, seen as one of the best indicators of economic momentum, highlighted the severe retrenchment by companies in the face of a struggling economy and tight credit.
The number of job losses was much higher than the 325,000 expected by private forecasters.
"This is almost indescribably terrible," said Ian Shepherdson, chief US economist at High Frequency Economics.
"In the past six months the US has lost 1.55 million jobs, almost as many as were lost in the whole 2001 recession, which included 9/11 and the two months after. The pace of job losses is accelerating alarmingly."
The Labor Department also made a sharp upward revision in the number of job losses in the prior two months: October saw a loss of 403,000 jobs (up from an earlier estimate of 240,00) and September job losses were revised up to 320,000 from 284,000.
"There is no sugar-coating this data," analysts at Briefing.com said. "It is bad news that will weigh heavily on consumer sentiment and will serve to increase concerns about the depth and length of the current slowdown."
Sophia Koropeckyj at Economy.com said that losses "were broad-based across both service-producing and goods-producing industries" and the worst single-month decline since 1974.
"The economy is in recession, and the severity will far surpass the depths of the last two recessions."
The jobless rate, based on a separate survey of households, was the highest since October 1993 but slightly better than the consensus estimate of economists of 6.8 per cent.
The Labor Department noted that since the official onset of recession in December 2007, some 2.7 million jobs have been lost, and the unemployment rate rose by 1.7 percentage points.AFP
WASHINGTON
Saturday, December 6, 2008
THE US economy lost a stunning 533,000 jobs in November, sending the unemployment rate to a 15-year high of 6.7 per cent, the Labor Department reported yesterday.
The monthly report on nonfarm payrolls, seen as one of the best indicators of economic momentum, highlighted the severe retrenchment by companies in the face of a struggling economy and tight credit.
The number of job losses was much higher than the 325,000 expected by private forecasters.
"This is almost indescribably terrible," said Ian Shepherdson, chief US economist at High Frequency Economics.
"In the past six months the US has lost 1.55 million jobs, almost as many as were lost in the whole 2001 recession, which included 9/11 and the two months after. The pace of job losses is accelerating alarmingly."
The Labor Department also made a sharp upward revision in the number of job losses in the prior two months: October saw a loss of 403,000 jobs (up from an earlier estimate of 240,00) and September job losses were revised up to 320,000 from 284,000.
"There is no sugar-coating this data," analysts at Briefing.com said. "It is bad news that will weigh heavily on consumer sentiment and will serve to increase concerns about the depth and length of the current slowdown."
Sophia Koropeckyj at Economy.com said that losses "were broad-based across both service-producing and goods-producing industries" and the worst single-month decline since 1974.
"The economy is in recession, and the severity will far surpass the depths of the last two recessions."
The jobless rate, based on a separate survey of households, was the highest since October 1993 but slightly better than the consensus estimate of economists of 6.8 per cent.
The Labor Department noted that since the official onset of recession in December 2007, some 2.7 million jobs have been lost, and the unemployment rate rose by 1.7 percentage points.AFP
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