Page 4 of 5 CREDIT BUBBLE BULLETIN A changed financial landscape
Commentary and weekly watch by Doug Noland
decade. Financial Secretary John Tsang said the rumors were 'unfounded' and the
bank has enough capital to serve its clients. Joseph Yam, head of Hong Kong's
central bank, urged depositors to stay calm and pumped $500 million into the
banking system. Li Ka-shing, chairman of Cheung Kong, bought the stock."
September 25 - Bloomberg (David Yong and Ron Harui): "Money market rates in
Asia's biggest financial centers jumped on concern that US lawmakers may delay
or dilute the Treasury Department's $700 billion plan ... Benchmark three-month
rates in Hong Kong and Singapore climbed past the levels when Lehman Brothers
Holdings Inc. filed for bankruptcy ... Short-term rates on yen loans climbed to
a two-month high and bill swap rates in Australia rose to the highest since
August, suggesting more than
$180 billion of cash injections by central banks have failed to unfreeze
lending. 'The conditions are revealing a new level of breakdown in the global
financial system that central banks appear powerless to fix,' Greg Gibbs,
director of foreign-exchange strategy at ABN Amro ... wrote. 'There's an
element of end-quarter demand for liquidity intensifying the problem.'"
September 23 - Bloomberg (Patricia Kuo): "Hong Kong and Singapore regulators
pledged to support individuals who claim they suffered losses on investments in
credit-linked securities in the wake of Lehman Brothers Holdings Inc.'s
collapse. Hong Kong's Securities and Futures Commission said it may take 'steps
to protect' individual investors who complained structured notes arranged by
Lehman were mis-sold. The Monetary Authority of Singapore said it would punish
institutions found to have misled investors ... "
September 24 - Bloomberg (Stephanie Phang and Ranjeetha Pakiam): "Malaysia's
inflation held at the fastest pace in more than 26 years on higher food and
fuel costs, as the central bank refrained from raising interest rates. Consumer
prices rose 8.5% in August from a year earlier ... "
Central Banker Watch
September 26 - Wall Street Journal (Joellen Perry): "The US Federal Reserve
Friday boosted the amount of dollars it can funnel to foreign markets to $290
billion, in global central banks' latest bid to calm persistent money-market
tension in the wake of the U.S.'s biggest-ever bank failure and ongoing
uncertainty ... The Fed upped its currency-swap line, which lets foreign
central banks channel dollars to cash-strapped commercial banks on their
shores, by $13 billion."
September 25 - Bloomberg (Janet Ong and Chinmei Sung): "Taiwan's central bank
unexpectedly reduced interest rates for the first time since 2003, saying the
global financial crisis has heightened the risk of an economic slowdown."
Unbalanced Global Economy Watch
September 23 - Bloomberg (Alexandre Deslongchamps): "Canada's annual inflation
rate rose to the highest in more than five years in August as prices for
gasoline and food surged. Consumer prices rose 3.5% from a year earlier ... "
September 25 - Bloomberg (Alexandre Deslongchamps): "The Canadian housing
market is headed for a meltdown because households finances are in even worse
shape than in the US or the U.K., said David Wolf, chief strategist at Merrill
Lynch & Co. Canada. Wolf said in a report published today that Canadian
families in 2007 carried an average net debt load that was 6.3% of their
disposable income, more than in the U.K. and 'not far off' from the 2005 peak
in the U.S."
September 23 - Bloomberg (Brian Swint and Svenja O'Donnell): "U.K. mortgage
approvals fell to the lowest level in at least a decade in August as slumping
property values deterred buyers, a report by the British Bankers' Association
showed. Banks granted 21,086 loans for house purchase, down 64% from a year
earlier ... "
September 22 - Bloomberg (Brian Swint): "U.K. house prices fell for a fourth
month in September as the global credit crisis intensified, locking out
homebuyers and forcing the sale of the country's biggest mortgage lender, a
report by Rightmove Plc showed. 'The housing market is on its knees and will
remain so until financial institutions address the disastrous state of the
mortgage funding markets,' said Miles Shipside, commercial director at
Rightmove. 'While this market provides a good opportunity to trade up, it
requires a degree of bravery.'"
September 23 - Bloomberg (Fergal O'Brien): "Europe's manufacturing and service
industries contracted at the fastest pace in almost seven years in September as
the credit-market seizure intensified and companies scaled back production in
response to slowing orders."
September 25 - Bloomberg (Gabi Thesing): "European money-supply growth slowed
more than economists forecast in August as bank lending to companies and
households cooled. M3 money supply ... rose 8.8% from a year earlier after
increasing 9.1% July ... "
September 23 - Bloomberg (Rainer Buergin): "Germany's IG Metall labor union,
representing 3.2 million workers, is seeking the biggest pay increase in at
least 16 years for workers ... The union, Germany's biggest, wants wages to
rise 8% ... "
September 26 - Bloomberg (Emma Ross-Thomas): "Mortgage lending in Spain fell
for the 12th month in July ... Mortgage lending, in terms of the amount of
money disbursed, fell 29% from a year earlier ... "
September 25 - Bloomberg (Johan Carlstrom): "Swedish household credit grew at
the slowest pace in four years in August as the economy weakened on the back of
rising interest rates, higher unemployment and accelerating inflation.
Household lending grew an annual 10.2%, compared with 10.5% in July ... "
September 25 - Bloomberg (Maria Levitov): "Russian inflation may 'slightly'
exceed 12% this year, Interfax reported, citing President Dmitry Medvedev's
adviser."
September 24 - Bloomberg (Michael Dwyer): "Pakistan President Asif Ali Zardari
will ask the U.S., U.K. and other industrial nations for financial aid amid
concern South Asia's second-largest economy is in danger of defaulting on its
debt."
Bursting Bubble Economy Watch
September 22 - Wall Street Journal (Kelly Greene): "Nancy Davis, a 59-year-old
senior marketing manager for a law firm in San Diego, had hoped to ease into
her retirement after her son finishes college in two years. But 'I may be 70
before I retire at this point,' she said Friday, after watching the markets
take their toll on her 401(k). 'It's very unnerving.' For millions of Americans
approaching retirement, events of recent weeks are delivering a clear message:
Not so fast. With nest eggs shrinking, housing prices still falling and
anxieties about their financial future growing, the oldest members of the
baby-boom generation are putting the brakes on plans to leave the office.
'We'll see more and more people postpone' their retirement dates, says Helga
Cuthbert, a certified financial planner ... 'Their expectations about the
future and the kinds of returns they would get were simply unrealistic.'"
September 24 - Wall Street Journal (Kara Scannell, Phred Dvorak, Joann S.
Lublin and Elizabeth Williamson): "A rapid-fire series of moves Tuesday
promised to extend Washington's reach into American business, illuminating the
ways in which the financial crisis could reshape the relationship between
government and the economy. During a Senate hearing, SEC Chairman Christopher
Cox -- citing a 'regulatory hole that must be immediately addressed' -- issued
a strong call for Washington to exert oversight of exotic types of financial
instruments that previously were unregulated. Also moving forward: proposals
from Congressional Democrats to allow the government to set limits on executive
pay and to take equity stakes in companies that tap a possible $700 billion
government-bailout fund ... All told, the moves represent the early stages of
what economists and policy makers say typically happens at moments of great
economic turmoil: Government responds by crafting solutions that revolve around
beefing up regulation and oversight."
September 22 - Wall Street Journal (Vanessa Fuhrmans): "As the credit crunch
threatens to throw the economy into a deep slump, Americans are already cutting
back on health care, a sector once thought to be invulnerable to recession.
Spending on everything from doctors' appointments to preventive tests to
prescription drugs is under pressure. The number of prescriptions filled in the
US fell 0.5% in the first quarter and a steeper 1.97% in the second, compared
with the same periods in 2007 -- the first negative quarters in at least a
decade ... Despite an aging and growing US population, the number of physician
office visits also has been declining since the end of 2006 ... In a survey by
the National Association of Insurance Commissioners last month, 22% of 686
consumers said that economy-related woes were causing them to go to the doctor
less often. About 11% said they've scaled back on prescription drugs to save
money."
September 23 - Bloomberg (Chris Burritt): "McDonald's Corp ... told some US
franchisees to seek other ways to finance store improvements after Bank of
America Corp. declined to increase lending. Store owners have exhausted
financing used to pay for upgrades and equipment to make lattes and espressos,
and Bank of America won't provide more money as it works on the planned
purchase of Merrill Lynch & Co ... Banks have tightened credit after Lehman
Brothers ... bankruptcy filing and the government takeover of Fannie Mae and
Freddie Mac ... Bank of America's reluctance to increase the loan may show that
even well-known brands such as McDonald's face difficulties financing
expansion."
September 23 - Dow Jones (Mark Peters): "The upheaval on Wall Street is cutting
liquidity in the electricity market, but a wholesale evacuation from power
trading by big banks is unlikely, with changes in the market expected to be
more subtle. Financial companies are reassessing their appetite for risk and
reshuffling operations following a series of rushed acquisitions."
September 25 - Bloomberg (Alex Lange): "Recreational-vehicle
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