If Spain is in trouble with a 3.8% gdp growth in 2007 and a forecast 1.9% growth in 2008, what of France or the UK?

Written by Fabio on 2008-04-18 10:12:55

Fabio, not calling for breakup of the eurozone (why when it makes travel so much less aggravating!) . Just saying how fractitious the eurozone is, let’s face it, the issue of budget limits, who exceeds, who doesn’t is an annual bickerfest – how an impending crisis will magnify these faultlines is anybody’s guess. As for Spain, not disputing the growth rates of Spain signs are they are heading for problems; the Irish aren’t laggards in terms of growth but they are increasingly antsy with good reason.

re trade deficit with Russia, with oil @ 115 or anywhere over 100 its probably a concern, especially if Russia keeps the rouble on hold. But Russia is spending a lot of its windfall on EU goods. EU exports to Russia and Imports from Europe are both up by 25-30% from Jan 2007 to January 2008. Though the deficit is widening a lot more with EU27 than the EU15.

And for 2007 as a whole, exports to Russia rose a lot more than imports – albeit that’s largely before the massive surge in commodity prices. Data comes from Eurostat

http://epp.eurostat.ec.europa.eu/pls/portal/docs/PAGE/PGP_PRD_CAT_PREREL/PGE_CAT_PREREL_YEAR_2008/PGE_CAT_PREREL_YEAR_2008_MONTH_04/6-17042008-EN-AP.PDF

Prospects for Federal Interest Payments to the Rest-of-the-World

I was struck at how Federal government interest payments to the rest of the world have risen even as interest rates have fallen.

http://www.econbrowser.com/archives/2008/04/federal_interes.html

Bernanke is to blame for one reason : PRINTING HAS NOT STARTED. The FED has swapped good T bills for bad "A" mortgage, it should have printed money instead and handed it to the Tresory. If necessary rates could have been brought to 0 where would be the problem ?

Inflation due to government printing is right now NOT a threat. THe threat is deflation because of excess in debt and contraction of private creation of money through a credit crunch.

The IMF is stupid to ask oil exporters to adopt restrictive fiscal policy to avoid ifnlation. Andy reference to the 70′s is plain stupidity.

In the 70′s the PER was around 10 right now it is over 20. In the 70′s debt GDP ratio was less than half its present value.

Printing has not started. And it seems no one will have the balls to start it. Volker was bold enough to raise rates when needed ? Who will be bold enough to bring them to 0% now ?

Of course bringing them to 0% will work only if simultaneously action is taken to curb international movements of K, destroy the present finance industry with new strict regulation, simply put : kill those bankers who brought our global economy in its present mess.

The Fed’s balance sheet is rapidly filling up with garbage loans. From Bloomberg,

" Wall Street firms may be bundling high-yield, high-risk corporate loans into securities to use as collateral to borrow from the U.S. government, according to a report by Morgan Stanley analysts. Securities firms can borrow against collateralized loan obligations at the Federal Reserve’s Primary Dealer Credit Facility, the analysts said. The Fed set up the facility last month, its first extension of credit to non-banks since the Great Depression.

Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, last month created the $2.8 billion Freedom CLO, the largest this year, out of loans that couldn’t be readily sold to investors, such as for buyouts of payment processor First Data Corp. and power producer TXU Corp. JPMorgan Chase & Co., Deutsche Bank AG and Barclays Plc also underwrote CLOs in March, according to data compiled by Bloomberg. "

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=alBrRvnzgSaM

Now we see CLOs being created for the express purpose of swapping to the Fed. The reason the CLOs are being created is there is no market for the underlying loans. Yet supposedly Moody’s, Fitch, and the S&P are supposed to rate this garbage investment grade so that it can be swapped with the Fed.

http://www.timesonline.co.uk/tol/comment/columnists/mick_hume/article3768155.ece

China is now blamed for everything from human rights abuses, trade imbalances, war and genocide to pollution, abortion and rising food prices (how dare those Asian Olivers want to eat more!). Students of doom-mongering may have assumed that man-made global warming was responsible for every woe. Now it seems that the Chinese are to blame for climate change, too. Those out to humiliate China seem to be recycling toxic old prejudices.

The Olympic furore is underpinned by fears about the rise of China at a time when, if we did boycott Chinese goods, there really would be a recession on the high street. In a saner world it would surely be seen as a good thing that the Chinese economy is booming – and subsidising the West – and that China is investing in roads, railways and hospitals in Africa; makes a change from UK charities sending the odd goat. But to suggest so today is to risk being seen as mad – or worse.

You have to be careful about newspaper articles which mix of different quotes. Ma Weihua was just in NYC as part of a roadshow to raise capital and recruit some overseas Chinese from Wall Street. He often speaks at the Chinese Financial Association and he has a nuanced view of the Chinese banking system (i.e. something that can’t be summarized in about one sentence). China Merchants is a pretty unusual bank in that it isn’t tied to the state (as Ma loves to point out).

DC: I have it on good word that the next round of musical chairs for the banking industry will come this June when a large number of lines of credit will expire for subprime corporate debtors.

I haven’t heard anything like this.

DC: The Fed has already burned through $600 billion of its $800 billion capital base accepting subprime garbage for US Treasury bonds. What’s Bernanke going to do?

Fed isn’t accepting subprimes as collateral. Only prime mortgages. Also I don’t see the connection between lines of credit expiring and another musical chairs in banking.