Page 4 of 5 CREDIT BUBBLE BULLETIN History's biggest margin call
Commentary and weekly watch by Doug Noland
accelerated more than expected ... The consumer price index increased 6.7% from
a year earlier ... "
Latin America Watch
October 23 - Bloomberg (Andre Soliani and Jamie McGee): "Brazil's central bank
pledged to sell $50 billion of currency swaps, its boldest move yet to stem a
two-month, 28% tumble in the real that has saddled companies with losses and
sparked concern inflation will surge ... "
October 22 - Bloomberg (Joshua Goodman and Andre Soliani): "Brazil's efforts to
shore up the falling local currency totaled $22.9
billion in the past month, including sales of foreign reserves, derivatives and
loans."
October 21 - Bloomberg (Joshua Goodman and Andre Soliani): "New lending by
Brazilian banks fell 13% in the first eight business days of October compared
with the same period last month, Brazilian central bank President Henrique
Meirelles said."
October 21 - Bloomberg (Thomas Black): "Vitro SAB, the century-old Mexican
glassmaker which sells in more than 45 countries, may be forced into creditor
protection because of derivative losses, according to analysts at ING Groep NV
and Deutsche Bank AG."
Central Banker Watch
October 21 - Bloomberg (Simon Kennedy): "The European Central Bank's lending to
banks and its exposure to possible collateral losses jumped to records last
week as the battle against the credit crisis forced it to shoulder more risk.
The ... ECB said it loaned banks 773.2 billion euros ($1.02 trillion) through
monetary operations, up from 739.4 billion euros a week earlier and a 68% surge
from the first week of September."
October 22 - Wall Street Journal (Jon Hilsenrath and Diya Gullapalli): "In
another move to bolster fragile credit markets, the Federal Reserve said it
would lend as much as $540 billion to the money-market mutual-fund industry,
which has been plagued by investor withdrawals."
October 24 - Bloomberg (Tasneem Brogger): "Denmark's central bank unexpectedly
raised the benchmark lending rate by half a percentage point to an eight-year
high, showing policymakers will defend the krone even as the economy teeters on
the brink of recession. ... Nationalbanken lifted the rate to 5.5%..."
October 22 - Bloomberg (Balazs Penz and Zoltan Simon): "Hungary's central bank
raised the benchmark interest rate by 3 percentage points today, after a series
of earlier measures to prop up the forint failed to halt the flight of
investors from local assets. The Magyar Nemzeti Bank lifted the two-week
deposit rate today to 11.5%..."
Unbalanced Global Economy Watch
October 24 - MarketNews International: "The UK is possibly facing the biggest
financial crisis in human history, according to Bank of England Deputy Governor
Charles Bean ... 'We have had bank crises in the past but what is unique about
this event is its sheer scale. It is global. It originated in the United States
but its tentacles have spread across the world. Particularly in the last six
weeks when financial markets really ground to a halt, and trust in the
financial positions of a whole range of institutions have come into question.
This is a once in a lifetime crisis, and possibly the largest financial crisis
of its kind in human history'."
October 23 - Bloomberg (Simon Kennedy): "After easing the financial-market
panic by committing trillions of dollars to shore up their banking systems,
governments are broadening their focus to buffering its economic aftershocks.
US lawmakers are moving toward the second fiscal stimulus bill this year and
Japanese Prime Minister Taro Aso is set to cut income taxes. In Europe,
Britain's Gordon Brown plans to spend more on schools, Italy's Silvio
Berlusconi looks to enact tax breaks for manufacturers and Angela Merkel of
Germany mulls tax rebates. French President Nicolas Sarkozy today lifted a tax
on business investment until the start of 2010. 'Having taken action on the
banking system, we must take action on the global recession,'' Prime Minister
Brown told U.K. lawmakers ... 'No country can insulate itself.'"
October 24 - Bloomberg (Jennifer Ryan): "The U.K. economy shrank more than
forecast in the third quarter as the financial crisis ravaged industries from
banking to construction, evidence that Britain is in the grips of its first
recession since 1991. Gross domestic product dropped 0.5% from the second
quarter ... "
October 20 - Bloomberg (Mark Deen): "Britain had its biggest six-month budget
deficit since World War II as the slide into a recession hobbled tax receipts
and government spending jumped. The 37.6 billion-pound shortfall ($65 billion)
in the fiscal first half through September was the largest since records
started in 1946 ... "
October 22 - Bloomberg (Alex Nicholson): "Russia's inflation rate in the year
through Oct. 20 reached 11.2%, as egg and poultry prices rose."
October 21 - Bloomberg (Tasneem Brogger): "More than any of its Nordic
neighbors, Iceland under Prime Minister Geir Haarde imbibed the economic
policies of Margaret Thatcher and Ronald Reagan - state-asset sales, light
regulation and corporate growth abroad through debt. Now that the hangover has
arrived, many of Haarde's countrymen want his Independence Party-led coalition
to pay the price for turning one of the world's wealthiest countries per capita
into a beggar state staving off depression."
October 20 - Bloomberg (Steve Bryant): "Turkey plans to increase government
spending by 12% to almost 262 billion liras ($175 billion) in 2009, under a
draft budget submitted to the Ankara parliament over the weekend, a Finance
Ministry official said."
October 22 - Bloomberg (Jacob Greber): "Australia's annual inflation
accelerated in the third quarter to the fastest pace since 2001, driven by
costs for housing and food. The consumer price index jumped 5% from a year
earlier ... "
October 21 - Bloomberg (Tracy Withers): "New Zealand's annual inflation rate
accelerated to the fastest pace in more than 18 years in September, fanned by
fuel and food costs that have hastened the nation's slide into a recession. The
consumer prices index rose 5.1% in the year ... , the most since 1990 ... "
Bursting Bubble Economy Watch
October 21 - Wall Street Journal (Joe White): "Baby Boomers have pumped up the
global economy with their profligate ways for nearly two decades. It's been a
great party. Now the music's over. Generalizations about the 79 million people
born between 1946 and 1964 are overdone and easy to debunk ... But what Baby
Boomers of all persuasions have done, without dispute and to an unprecedented
degree, is spend money instead of saving it ... When Boomers ran out of cash,
they financed their dreams. The US household saving rate plunged to 2% of
income in the 2000-2005 period, when Boomers were hitting their earning peak,
from 10% during the early 1980s."
October 20 - Bloomberg (Rich Miller): "The US may be on its way to becoming a
nation of savers, whether Americans like it or not. With home and stock prices
declining and credit hard to come by, consumers who have fallen out of the
savings habit are being forced to curb borrowing and rein in spending. That is
bad news for companies catering to them, which will have to retrench as well.
Detroit automakers may need to slash costs and merge ... Shopping malls might
be forced to shut as retail traffic trails off. Hotels may have to shelve
expansion plans as vacationers become stingier ... "
October 24 - Associated Press: "Traders and investment bankers might have more
to worry about than dwindling bonus pools this year as mass firings on Wall
Street are set to hit a record. The fallout from this year's global credit
crisis has claimed jobs throughout Wall Street, from hedge fund managers to
floor traders and beyond. More than 110,000 people have lost their jobs so far
this year, and some industry experts forecast it could come close to 200,000
before the year is over ... 'Wall Street the way we know it is, frankly, gone,'
said Michael Williams, dean of the graduate school of business at Touro College
in New York."
October 22 - Wall Street Journal (Scott Kilman): "The Farm Belt, one of the
hottest parts of the US economy in recent years, is rapidly cooling. The
Midwest faces plunging crop prices and stubbornly high production costs. Corn
prices have dropped from $7.54 a bushel around July Fourth in central Iowa to
just $3.81 a bushel on Tuesday. But growers are hearing from suppliers that
fertilizer and seed costs could rise by more than 40% each for next spring's
plantings ... Many Midwest farmers worry that the combination of lower crop
prices and high costs will usher to an end, by next year, one of the most flush
periods in American farm history."
October 22 - Wall Street Journal (Matthew Futterman): "The Tampa Bay Rays have
slayed the big-market bullies from New York, Chicago and Boston, but the team
will soon face a much greater foe. 'The economy could kill us,' says Stuart
Sternberg, the team's principal owner and a former partner at Goldman Sachs ...
But Mr. Sternberg has a problem: The Rays, he says, can barely afford their $44
million payroll with their current attendance ... . Once the glamour of October
baseball fades, the Rays will need to build a stable fan base in a region that
has never truly embraced them - and it must do so during an economic crisis
that is worse in Florida than nearly anywhere else."
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