Page 3 of 4 CREDIT BUBBLE BULLETIN Riddle of the burst bubble
Commentary and market watch by Doug Noland
liquidity' to more than 2,600 institutions holding about $12 billion of the
instruments, the SEC said."
August 7 - Bloomberg (David Scheer): "Merrill Lynch & Co. said it will
offer to buy back about $10 billion in auction-rate securities from retail
clients after Citigroup Inc. agreed to take similar steps under a settlement
with US regulators."
August 7 - Bloomberg (Abigail Moses): "Dexia SA, the owner of US bond insurer
Financial Security Assurance Inc., and Allianz SE led a jump in the cost of
protecting corporate debt from default
after writedowns caused by a worsening housing slump. Credit-default swaps on
Dexia jumped 18 bps to 205 ... Allianz rose 2 to 62 as Europe's biggest insurer
abandoned its earnings growth forecast because of subprime losses at its
Dresdner Bank unit."
August 7 - Bloomberg (Hugh Son): "American Express Co., the largest US
credit-card company by purchases, may have its credit ratings downgraded by
Moody's ... after the lender's second-quarter profit fell 37%. The ... company
is under review to have its A1 rating lowered by one level because of future
losses from soured credit-card loans ... A downgrade would affect about $89
billion in securities and deposits. American Express may suffer further loan
losses, 'particularly within geographic markets in the United States that have
experienced sharp home price declines,' analyst Blaine Frantz said ... "
August 5 - Bloomberg (Gonzalo Vina and Poppy Trowbridge): "Northern Rock Plc,
the British bank nationalized six months ago, will receive as much as 3 billion
pounds ($5.9 billion) from the government to strengthen capital after it posted
a first-half loss."
Global Inflation Turmoil Watch
August 4 - Financial Times (Raphael Minder): "Vietnam announced tough measures
to contain rampant inflation on Monday, warning companies they could be
prosecuted for passing on higher commodity costs to customers. The government
will prosecute or revoke the licences of companies that increase the prices of
goods without sufficient justification, part of a plan to freeze prices for the
rest of the year on goods ranging from coal to public transport ... Inflation
accelerated to 27% in July, overtaking Sri Lanka as the fastest rate in Asia."
Currency Watch
August 8 - Bloomberg (William Mauldin and Emma O'Brien): "The ruble dropped the
most in 3 1/2 years, Russia's Micex Index fell to a 22-month low and bond
yields climbed after Prime Minister Vladimir Putin said 'war has started' in
the breakaway Georgian region of South Ossetia."
The dollar index shot 3.3%
higher to 75.85. For the week on the downside, the
South African rand declined 6.4%, the Australian
dollar 4.4%, the Norwegian krone 4.3%, the Euro
3.7%, the Danish krone 3.7%, the New Zealand
dollar 3.5%, the Swiss franc 3.1%, the Swedish
krona 3.1%, the Mexican peso 2.9%, the Brazilian
real 2.9%, the Canadian dollar 2.8%, the Singapore
dollar 2.3%, the British pound 2.1%, and the
Japanese yen 2.7%.
Commodities Watch
Gold sank 6.0% to $856, and Silver was clubbed for 12.5% to $15.325. September
Crude dropped $9.94 to $115.16. September Gasoline fell 6.3% (up 17% y-t-d),
and September Natural Gas sank 11.6% (up 11% y-t-d). September Copper was hit
for 7.1%. September Wheat declined 3.6%, and August Corn sank 11.8%. The CRB
index dropped 6.9% (up 8.0% y-t-d). The Goldman Sachs Commodities Index (GSCI)
fell 7.7% (up 15.4% y-t-d and 43.8% y-o-y).
China Watch
August 6 - China Knowledge: "MasterCard International ... predicted that retail
sales in China will remain strong growth for the second half of this year
despite growing concerns on the international financial market unrest, sources
report ... Retail sales in China are expected to reach RMB 5.566 trillion
during the second half of 2008, representing a robust increase of 18%
year-on-year."
August 7 - Bloomberg (Tian Ying): "China's passenger-car sales rose 6.8% in
July, the slowest pace in two years, as rising fuel prices damped demand and
people delayed purchases ahead of this month's Beijing Olympics."
Japan Watch
August 6 - Bloomberg (Jason Clenfield): "Japan's government said the economy is
'deteriorating,' acknowledging for the first time that the country's longest
postwar expansion has probably ended. 'There is a high possibility the economy
has entered a recession,' Shigeru Sugihara, head of business statistics at the
Cabinet Office said ... "
August 8 - Bloomberg (Patrick Rial and Kotaro Tsunetomi): "Japan's bankruptcies
climbed to the highest level in five years in July, foreshadowing what one
research group predicts could be the worst year since Japan's banking crisis as
more property companies go bust."
India Watch
August 5 - Bloomberg (Kartik Goyal): "India's inflation accelerated to the
fastest pace in more than 13 years, making it more difficult for the central
bank to contain prices and spur economic growth. Wholesale prices rose 12.01%
in the week ... "
Asia Bubble Watch
August 8 - Bloomberg (William Sim): "South Korea's wholesale prices rose at the
fastest pace in a decade in July because of higher oil and commodity costs.
Prices paid to producers jumped 12.5% from a year earlier ... "
August 7 - Bloomberg (William Sim): "The Bank of Korea unexpectedly raised its
benchmark interest rate to an eight-year high of 5.25%, saying the fastest
inflation in a decade poses a greater threat than slowing economic growth."
August 5 - Bloomberg (Tim Culpan and Chinmei Sung): "Taiwan's inflation
accelerated to the fastest pace in almost 14 years after the government ended
caps on power prices and storms led to an increase in food costs. Consumer
prices rose 5.92% in July from a year earlier ... "
August 5 - Bloomberg (Karl Lester M. Yap): "Philippine inflation accelerated
for a ninth month, reaching a 16-year high in July ... Consumer prices climbed
12.2% from a year earlier ... "
August 5 - Bloomberg (Aloysius Unditu and Arijit Ghosh): "Indonesia's central
bank raised its benchmark interest rate for a fourth straight meeting to tame
inflation running at the fastest pace in almost two years. Governor Boediono
... increased the policy rate by a quarter point to 9%..."
Latin America Watch
August 5 - Bloomberg (Daniel Cancel): "Venezuelan President Hugo Chavez enacted
a home lending law that allows banks to offer 100% financing to homebuyers,
including land and construction costs, as part of a package of 26 statutes
decreed on July 31 ... 'My concern is with the deterioration of the financial
sector's credit portfolios with this sort of financing,' Asdrubal Oliveros
said, director of Caracas-based Ecoanalitica."
August 7 - Bloomberg (Sebastian Boyd): "Chilean economists raised their
forecasts for inflation this year to 8.0% in August from 7.5% in July,
according to a survey published today by the Central Bank ... "
Unbalanced Global Economy Watch
August 8 - Bloomberg (Alexandre Deslongchamps): "Canadian employers
unexpectedly shed jobs in July for the second straight month ... Employers
fired 55,200 workers ... "
August 7 - Bloomberg (Jennifer Ryan and Svenja O'Donnell): "U.K. house prices
declined the most in at least a quarter century in July as banks starved the
housing market of credit and pessimism about the economy increased, an HBOS Plc
report showed. The average cost of a home fell 8.8% to 177,351 pounds
($345,825) from a year earlier ... "
August 5 - Bloomberg (Caroline Binham): "The number of repossessed British
homes rose by 40% in the first three months of the year, the U.K. financial
regulator said."
August 6 - Bloomberg (Svenja O'Donnell): "U.K. consumer confidence fell the
most in at least four years in July after house prices slumped, unemployment
rose and inflation accelerated, Nationwide Building Society said."
August 5 - Bloomberg (Jennifer Ryan and Svenja O'Donnell): "U.K. services from
banks to airlines contracted in July and factory production unexpectedly
dropped for a fourth month in June, evidence the economy may be shrinking."
August 6 - Bloomberg (Nicholas Comfort): "German air carriers plan to raise
prices by as much as 20% in the coming winter to compensate for higher fuel
costs, Bild reported, citing the German Airline Association."
August 7 - Bloomberg (Jurjen van de Pol): "Inflation in the Netherlands
accelerated to the fastest in more than five years in July as utilities raised
charges and the government increased taxes on diesel fuel. The inflation rate
... rose to 3% from 2.3% in June ... "
August 8 - Bloomberg (Flavia Krause-Jackson): "Italy's economy unexpectedly
shrank in the second quarter, edging it closer to the fourth recession in a
decade as households and businesses struggle to cope with more expensive oil."
August 7 - Bloomberg (Johan Carlstrom): "Swedish inflation accelerated to 4.4%
in July, the fastest pace in 15 years, increasing pressure on the central bank
to raise its key lending rate even as economic growth slows."
August 5 - Bloomberg (Adam Brown): "Romanian annual wage
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