Page 3 of 4 CREDIT BUBBLE BULLETIN Hoping there's hope
Commentary and weekly watch by Doug Noland
China Watch
October 8 - Bloomberg (Li Yanping and William Bi): "China cut interest rates
for the second time in three weeks as the global financial crisis threatened to
undermine the world's fourth-largest economy."
Japan Watch
October 10 - Bloomberg (Kyung Bok Cho and Chua Kong Ho): "Asian stocks tumbled,
driving Japan's Nikkei 225 Stock Average to its biggest weekly decline on
record, on concern the deepening
credit crisis will push the global economy into a recession. The yen surged."
India Watch
October 10 - Bloomberg (Anil Varma): "India's rupee slid to a six-year low,
completing its worst week since 1997, as a global stocks rout prompted
investors to seek safer bets than emerging markets. The currency reached a
record low of 49.26 per dollar in intraday trading as the Sensitive Index
plunged as much as 9.6%."
Asia Bubble Watch
October 7 - Bloomberg (Janet Ong): "Taiwan's exports declined for the first
time since February 2007 because of falling shipments to the island's biggest
market, mainland China."
October 6 - Bloomberg (Shinhye Kang): "South Korea may post a $6 billion trade
deficit in 2008, Knowledge Economy Minister Lee Youn Ho said ... The shortfall
amounted to $14.2 billion for the first nine months this year."
October 6 - Bloomberg (Aloysius Unditu and Arijit Ghosh): "Indonesia's
inflation accelerated to the fastest pace in two years in September ...
Consumer prices rose 12.14% from a year earlier ... "
Latin America Watch
October 7 - Bloomberg (Adriana Brasileiro and Andre Soliani): "Brazil canceled
a local bond sale for the first time in seven months, a sign the global credit
crisis is beginning to squeeze the finances of Latin American countries ... The
real sank as much as 5.8% today to a two-year low of 2.3125 per dollar."
October 7 - Bloomberg (Andre Soliani and Telma Marotto): "Brazilian President
Luiz Inacio Lula da Silva authorized the central bank to buy loans from cash-
strapped lenders and will use the nation's international reserves to ease a
credit crunch that sent the local currency to the lowest in two years and
roiled stock markets."
Central Banker Watch
October 6 - Wall Street Journal (Jon Hilsenrath, Joellen Perry and Sudeep
Reddy): "The world's central banks launched a large coordinated attack against
the widening global financial crisis, lowering short-term interest rates in
unison ... The emergency interest-rate action, which involved the Fed, the
European Central Bank, the Bank of England and others, is a sign that fears
that the financial crisis could cripple the global economy are spreading
rapidly."
October 10 - Wall Street Journal (Meena Thiruvengadam and Brian Blackstone):
"Total direct borrowing from the Federal Reserve's expanded discount window
soared to more than $430 billion ... "
October 7 - Bloomberg (Craig Torres): "The Federal Reserve will create a
special fund to purchase US commercial paper after the credit crunch threatened
to cut off a key source of funding for corporations. The Treasury will make a
deposit with the Fed's New York district bank to help set up the new unit. The
central bank will also lend to the program at policy makers' target rate for
overnight loans between banks. The Fed Board invoked emergency powers to set up
the unit, the central bank said ... "
October 9 - Bloomberg (Janet Ong): "Central banks in South Korea, Taiwan and
Hong Kong cut interest rates a day after their colleagues in the US and Europe
coordinated monetary easing to stem the damage of the global financial crisis."
Unbalanced Global Economy Watch
October 9 - Times of London (Miles Costello): "More than �100 billion
will be wiped off the personal fortunes of Britain's wealthiest industrialists
and entrepreneurs in the coming months as tumbling stock markets and sliding
property prices take their toll. Steel magnates, City brokers, hedge fund
managers and the owners of Premier League football clubs will see their
spending power cut, and that is likely to influence the price of urban mansions
and hit sales of luxury goods."
October 9 - Bloomberg (Brian Swint and Jennifer Ryan): "U.K. house prices fell
by the most in 25 years as the global financial crisis discouraged buyers and
prompted banks to stop lending, HBOS Plc said. The average cost of a home
dropped 13.3% in September from the same month a year earlier ... "
October 9 - Bloomberg (Svenja O'Donnell): "The U.K.'s trade deficit matched the
widest on record in August as exports to countries outside the European Union
dropped the most in two years. The goods-trade gap was 8.2 billion pounds
($14.2 billion), the same as in July ... "
October 7 - Bloomberg (Svenja O'Donnell): "U.K. factory production contracted
for a sixth month in August in the worst streak for almost three decades,
bringing the British economy closer to a recession. Manufacturing output fell
0.4% from July, the Office for National Statistics said ... "
October 10 - Dow Jones (Caroline Hyde): "Irish retail sales have posted their
biggest fall in 24 years ... Consumers are bracing themselves for a painful
2009 budget next Tuesday when the public are expecting major cuts in services
and no change in tax bands, economists say. The volume of retail sales fell 6%
on the year during August 2008 ... "
October 9 - Bloomberg (Johan Carlstrom): "Sweden's inflation rate unexpectedly
rose to a 15-year high in September, damping the chances of a second rate cut
this month when the central bank makes its next rate announcement on Oct. 23.
The headline inflation rate rose to 4.4% from 4.3% in August ... "
October 7 - Bloomberg (Johan Carlstrom): "Norway plans to boost spending by
3.25% next year to cushion the economy from turbulence on the international
financial markets ... 'The Norwegian economy is in good standing,' Finance
Minister Kristin Halvorsen said ... 'We have money on our books and bigger
opportunities than most to meet the difficulties that we have to face.'"
October 10 - Bloomberg (Yuriy Humber, Greg Walters and Maria Kolesnikova):
"Russian billionaires from aluminum magnate Oleg Deripaska to soccer-club owner
Roman Abramovich lost more than $230 billion in five months during the nation's
worst financial crisis since the 1998 default on its debt. The combined wealth
of Forbes magazine's 25 richest Russians tumbled 62% between May 19 and Oct. 6
... "
October 9 - Bloomberg (Maria Levitov): "Russia's international reserves, the
world's third largest, fell $16.7 billion last week, the biggest decline this
year ... The value of reserves decreased to $546.1 billion ... 'We are
confident that we're in a stable position,' President Dmitry Medvedev's
economic aide Arkady Dvorkovich said ... 'The reserves are huge, they are above
$500 billion and we believe that any figure above $100 billion is good for
Russia today.'"
Bursting Bubble Economy Watch
October 10 - Wall Street Journal (Pui-Wing Tam, Ben Worthen and Robert A.
Guth): "The technology industry, which had seemed immune to the financial
crisis, is now getting squeezed on two sides: Established companies are
struggling with slackening demand while venture capitalists are telling
start-ups to cut costs and plan for a prolonged downturn. Sequoia Capital,
which has invested in Silicon Valley stars such as Google Inc. and YouTube,
gathered the chief executives of its portfolio companies this week and told
them to focus on becoming profitable and take a hard look at expenses they
could cut ... Sequoia's partners, who began the special meeting with a slide
that read 'RIP: Good Times,' pored over dire economic data and warned that the
current downturn will be long and painful ... Until a few weeks ago, the tech
sector looked relatively insulated from a downturn ... But the turmoil of the
past few weeks has changed that momentum. Venture capitalists are running into
trouble raising new funds and tech vendors are getting squeezed as businesses
cut budgets, banks pull credit lines and consumers close their wallets."
October 10 - Bloomberg (Joseph Galante): "Experts wonder if the financial
crisis will lead to a rise in crime in New York City, a pattern associated with
every recession since the late 1950s, the New York Times reported, citing
Richard Rosenfeld, sociologist at the University of Missouri-St. Louis. After
the stock market fell in 1987, New York City murders hit historic highs in
subsequent years, the Times said. During the financial crisis in the 1970s, the
city saw abandoned neighborhoods and increased robberies, the newspaper said."
MBS/ABS/CDO/CP/Money Funds and Derivatives Watch
October 8 - Bloomberg (Jody Shenn): "Moody's ... put $110 billion of
prime-jumbo mortgage-backed securities under review for downgrades, a spokesman
said."
GSE Watch
October 8 - Bloomberg (Dawn Kopecki): "Fannie Mae and Freddie Mac were directed
to step up their purchases of mortgage bonds to help speed the housing market's
recovery, Treasury Secretary Henry Paulson said. Paulson, who cited falling
real estate prices as the 'root cause' of the current economic turmoil, said
Fannie and Freddie can purchase more than $150 billion before reaching
regulatory limits. The government seized control of the two money-losing
mortgage-finance companies last month partly to intensify federal efforts to
bolster mortgage finance and lower interest rates. 'We must continue to keep
mortgage credit available and support the housing market so that we can more
quickly turn the corner on the housing correction,' Paulson said ... "
October 9 - Bloomberg (Dawn Kopecki): "Fannie Mae and Freddie Mac's federal
regulator suspended their capital rules and classified the companies as
undercapitalized in the second-quarter, citing deteriorating credit quality and
market conditions that raised 'significant questions about the sufficiency of
capital' ... The agency is suspending the capital classifications while the
companies are in conservatorship, as FHFA Director James Lockhart 'determined
that it is prudent and in the best interests of the market.'"
Real Estate Watch
October 7 - Bloomberg (Sharon L. Lynch): "New York City home prices fell in
every borough except Manhattan in the third quarter, according to the Real
Estate Board of New York ... Prices fell the
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