Bankers are bracing for a Greek default, and their best hope is that
Europe can erect firewalls around the banking system strong enough and
soon enough to prevent it from spreading to other euro-zone countries.
G 20 Pledges to keep markets Stable
Financial ministers and central bankers from the Group of 20 major
economies said in a statement late Thursday that the bloc would conduct a
"strong and coordinated international response to address the renewed
challenges facing the global economy." The comminque added that the G-20
would take all necessary actions to preserve the stability of banking
systems and financial markets as required."
EU officials expect Greece to default
There is a growing consensus among EU diplomats and officials that Greece will default while remaining inside the eurozone.
Intense talks are taking place in Berlin, Paris, Frankfurt and Brussels about
how to manage a Greek default in the short to medium term.
IMF : Weak and Bumpy Global Recovery Ahead
The global economic recovery is slowing, with world growth projected at 4 percent in both 2011 and 2012, down from over 5 percent in 2010, the IMF said in its latest forecast.
IMF Notes
- Global growth forecast to moderate to 4 percent in 2011 and 2012
- Advanced economies facing anemic growth of only 1.6 percent in 2011
- Multiple shocks combined with insufficient rebalancing stalling recovery
FOMC Statement
The following is the text of the Federal Reserve’s decision Wednesday to swap $400 billion of holdings into longer-term debt:
“Information received since the Federal Open Market Committee met in
August indicates that economic growth remains slow. Recent indicators
point to continuing weakness in overall labor market conditions, and the
unemployment rate remains elevated. Household spending has been
increasing at only a modest pace in recent months despite some recovery
in sales of motor vehicles as supply-chain disruptions eased. Investment
in nonresidential structures is still weak, and the housing sector
remains depressed. However, business investment in equipment and
software continues to expand. Inflation appears to have moderated since
earlier in the year as prices of energy and some commodities have
declined from their peaks. Longer-term inflation expectations have
remained stable.
Consistent with its statutory mandate, the Committee seeks to foster
maximum employment and price stability. The Committee continues to
expect some pickup in the pace of recovery over coming quarters but
anticipates that the unemployment rate will decline only gradually
toward levels that the Committee judges to be consistent with its dual
mandate. Moreover, there are significant downside risks to the economic
outlook, including strains in global financial markets. The Committee
also anticipates that inflation will settle, over coming quarters, at
levels at or below those consistent with the Committee’s dual mandate as
the effects of past energy and other commodity price increases
dissipate further. However, the Committee will continue to pay close
attention to the evolution of inflation and inflation expectations.
To support a stronger economic recovery and to help ensure that
inflation, over time, is at levels consistent with the dual mandate, the
Committee decided today to extend the average maturity of its holdings
of securities. The Committee intends to purchase, by the end of June
2012, $400 billion of Treasury securities with remaining maturities of 6
years to 30 years and to sell an equal amount of Treasury securities
with remaining maturities of 3 years or less. This program should put
downward pressure on longer-term interest rates and help make broader
financial conditions more accommodative. The Committee will regularly
review the size and composition of its securities holdings and is
prepared to adjust those holdings as appropriate.
To help support conditions in mortgage markets, the Committee will now
reinvest principal payments from its holdings of agency debt and agency
mortgage-backed securities in agency mortgage-backed securities. In
addition, the Committee will maintain its existing policy of rolling
over maturing Treasury securities at auction.
The Committee also decided to keep the target range for the federal
funds rate at 0 to 1/4 percent and currently anticipates that economic
conditions--including low rates of resource utilization and a subdued
outlook for inflation over the medium run--are likely to warrant
exceptionally low levels for the federal funds rate at least through
mid-2013.
The Committee discussed the range of policy tools available to promote a
stronger economic recovery in a context of price stability. It will
continue to assess the economic outlook in light of incoming information
and is prepared to employ its tools as appropriate.
ECRI : Risk of a Double Dip for US quite high
Achuthan, co-founder and chief operations officer of the Economic
Cycle Research Institute, says all of his economic indicators point to
more sputtering ahead.
"The risk of a new recession is quite high," he says.
If
we do have a double-dip recession, Achuthan says, the people who are
already having trouble finding work and paying bills are already in a
depression and that they "are going to suffer more."
Check Achuthan and the ECRI’s impressive recession calls in recent years here
US fund withdrawals top $75 bn, Highest since lehman collapse
Investors have pulled more money from US equity funds since the end of April than in the five months after the collapse of Lehman Brothers Holdings, adding to the $2.1-trillion rout in American stocks.
About $75 billion was withdrawn from funds that focus on shares during the past four months, according to data compiled by Bloomberg from the Investment Company Institute, a Washington-based trade group, and EPFR Global, a research firm. Outflows totaled $72.8 billion from October 2008 through February 2009, following Lehman's bankruptcy, the data show
About $75 billion was withdrawn from funds that focus on shares during the past four months, according to data compiled by Bloomberg from the Investment Company Institute, a Washington-based trade group, and EPFR Global, a research firm. Outflows totaled $72.8 billion from October 2008 through February 2009, following Lehman's bankruptcy, the data show
Italy suffers downgrade
S&P cuts Italy's sovereign credit ratings by one notch to A/A-1, with a negative outlook., citing "weakening economic growth prospects" for the nation, and political gridlock in Rome.
Obama Unveils Deficit Plan
President Barack Obama called for $1.5 trillion in tax increases over the next decade, largely targeting the wealthy, to help trim the deficit, saying U.S. prosperity depends on paying down the federal debt.
In combination with cuts in spending, Obama said, his plan would reduce the long-term deficit by $3 trillion beyond the $1 trillion that was agreed to as part of a deal to raise the U.S. debt ceiling.
Dollar Libor rate Climbs to highest in a year
The cost to borrow money in dollars remained at the highest level in more than a year on Monday while the rate to borrow euros was little changed. The London interbank offered rate, or Libor, for three-month dollar loans traded at 0.35133%, little changed from Friday and up from 0.34289% a week ago. The three-month Libor rate for euros was little changed at 1.48375%, near the highest since early 2009.
China ready to end dollar peg
telegraph.co.uk : The head of China’s central bank has given the strongest signal yet that the country will move away from pegging its currency to the dollar, but he said any changes would be gradual.
Warren Buffet's Annual letter to shareholders
The Greatest Investor of all time finally speaks,in his annual letter to Berkshire share holders... Read the letter here.
No German rescue plan for debt-ridden Greece says Merkel
Chancellor Angela Merkel Sunday dismissed talk of a German rescue plan for Greece's ailing economy, as Athens braced for an EU audit that could usher in new austerity cuts to tackle its massive debt crisis.
Greek bond prices rallied this week on a report that Europe's top economy was considering coming to the aid of debt-burdened Greece, as Prime Minister George Papandreou prepares to hold talks with Merkel in Berlin on Friday.
But the German chancellor denied any such plan was in the works, saying "there is absolutely no question of it".
More here
Greek bond prices rallied this week on a report that Europe's top economy was considering coming to the aid of debt-burdened Greece, as Prime Minister George Papandreou prepares to hold talks with Merkel in Berlin on Friday.
But the German chancellor denied any such plan was in the works, saying "there is absolutely no question of it".
More here
California is a greater risk than Greece, warns JP Morgan chief
Jamie Dimon, chairman of JP Morgan Chase, has warned American investors should be more worried about the risk of default of the state of California than of Greece's current debt woes.
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Greek PM " Worst Fears Confirmed on Economy "
Cnbc : Prime Minister George Papandreou on Friday vowed to ignore the political costs and take drastic measures to pull Greece out of a debt crisis threatening the stability of the euro zone.
Speaking to parliament after a visit by EU economic inspectors, Papandreou said Greece did not want other countries to pay for its debts but expected solidarity from its European peers as it struggled with worse than expected fiscal problems.
Concerns grow over China's sale of US bonds
Evidence is mounting that Chinese sales of US Treasury bonds over recent months are intended as a warning shot to Washington over escalating political disputes rather than being part of a routine portfolio shift as thought at first.
George Soros on China
A hard landing for Chinese markets could come, Soros said, due to a significant increase in supply offset by falling demand. China's regulatory authorities have managed the situation well thus far, he said, but he's concerned about how various countries are maneuvering in the face of global imbalances.
Looking back at the past year's responses to the global financial crisis, Soros says lending by Chinese government-owned banks was indeed excessive, but that regulatory decisions to adjust reserve ratio requirements were appropriate.
