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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Archive for October 24th, 2008

Roubini prediction

Posted by WARREN MOSLER on 24th October 2008


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Yes, getting closer. The eurozone could be first.

All due to errant political responses.

This did not have to happen.

Operationally it’s a simple matter for governments to spend their way out of it.

The problem is political, mainly due to ignorance of monetary operations and how a non-convertible currency functions.

Roubini says forecast of Market shutdown coming true

By Ben Sills and Amanda Ross-Thomas

Oct. 24 (Bloomberg) — New York University Professor Nouriel Roubini said the suspension of U.S. futures trading today shows his prediction that financial markets will be shut down amid panic selling is coming true.

“This morning, even before the markets in the U.S. opened, the S&P futures fell by more than their daily limit,” resulting in futures trading being halted, Roubini told a conference in Madrid today. “What I said yesterday has already started.”

Roubini said yesterday that policy makers may need to shut down financial markets for a week or two as investors dump more assets. In July 2006 he predicted the financial crisis and in February this year he forecast a “catastrophic” meltdown that central bankers would fail to
prevent, leading to the bankruptcy of large banks exposed to mortgages and a “sharp drop” in equities.
Roubini said today that the risks of a “multi-year economic stagnation” in the U.S. are increasing. “Things are getting worse, they are not getting better,” he said. “There’s a growing risk of something worse, an L-shaped recession.”
Roubini, a former senior adviser to the U.S. Treasury Department, said earlier this month that the world’s biggest economy will suffer its worst recession in 40 years.


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Posted in Articles | 9 Comments »

Re: Yen strength

Posted by WARREN MOSLER on 24th October 2008


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(email exchange)

Yes! And it’s deep- Hungarian homeowners borrowed yen to buy their homes, for just one example.

And with Japan an importer of all its crude, lower prices make yen that much harder to get, much like USD. And maybe even more so.

>   
>   On Fri, Oct 24, 2008 at 9:17 AM, James wrote:
>   
>   Liquidation of Yen carry trades also in full force…..
>   


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Posted in Asia, Currencies | 2 Comments »

OPEC cuts production by 1.5 million barrels a day

Posted by WARREN MOSLER on 24th October 2008


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I take this as a signal that the Saudis (and probably Russians as they just met with the Saudis) have decided to hold or raise prices and let quantity sold adjust.

Fuel prices are low enough to restore growth in demand with any positive economic performance.

Oct. 24, 2008

The Organization of Petroleum Exporting Countries decided to make a deep cut in oil production, taking 1.5 million barrels a day off global markets as it embarks on the task of managing prices amid a potential global recession.

December light, sweet crude oil futures fell $3.34 to $64.50 a barrel in electronic trading on the New York Mercantile Exchange by midday in London.


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Posted in Oil | 2 Comments »

EM Asia

Posted by WARREN MOSLER on 24th October 2008


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Thailand Proposes Asia Pool $350 Billion for Crisis

Not a good sign that they think they need that much in USD. Looks like they are too strung out on USDs.


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Posted in Articles, Asia | No Comments »

What’s next for the Fed?

Posted by WARREN MOSLER on 24th October 2008


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Bernanke may seek new ways to ease credit as Fed rate nears 1%

By Craig Torres

Oct. 23 (Bloomberg) — Federal Reserve officials are likely to bring interest rates down so aggressively over the next few months that they will have to search for fresh tactics to continue easing credit.

All that’s left is the Fed buying longer term treasury securities to attempt to flatten the curve, get mortgage rates down, and add reserves.

This will ‘flood the market’ with reserves that now pay interest, so they can do this without a zero interest rate policy.

Their theory is that with more reserves banks will lend more, which is not the case, both in theory and practice, as Japan proved not long ago.

Instead of the Fed buying long term securities the treasury should simply stop issuing them and issue more bills. The treasury not issuing longer term securities is functionally the same as the treasury issuing them and then the Fed buying them. But with a lot fewer transaction costs.


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Posted in Articles, Credit, Fed | 6 Comments »

Fed relying on ratings agencies?

Posted by WARREN MOSLER on 24th October 2008


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Ironically (?) after reading all the criticism of private sector lenders relying on ratings agencies rather than internal analysis I see this:

GE to use Fed’s commercial paper facility next week

By Rachel Layne and Scott Lanman

The Fed is setting up the special fund to buy commercial paper, and will start the program on Oct. 27. The U.S. Treasury will make a $50 billion deposit into the fund as an indication of support. The Fed said the maximum amount of commercial paper that could be funded by the facility is about $1.8 trillion.

The central bank will buy only debt with the top short-term ratings of A-1, F1 and P-1 given by Standard & Poor’s, Fitch Ratings and Moody’s Investors Service respectively. The facility provides for 90-day borrowing which may help lengthen the time periods for which liquidity is available.


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Posted in Credit, Fed | No Comments »

Looking like a classic external debt story

Posted by WARREN MOSLER on 24th October 2008


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I was just sent this:

External debt (%of GDP)

Asia 1997 Total
Thailand 62%
Malaysia 52%
Indonesia 42%
South Korea 34%
Central/Eastern Europe Today
Latvia 135%
Estonia 114%
Hungary 102%
Croatia 96%
Bulgaria 90%
Ukraine 53%
Poland 47%
Romania 43%
Czech 40%
Lithuania 40%
Turkey 34%


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Posted in ECB | No Comments »

2008-10-24 USER

Posted by WARREN MOSLER on 24th October 2008


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Existing Home Sales (Sep)

Survey 4.95M
Actual 5.18M
Prior 4.91M
Revised n/a

 
A little surprise blip up as foreclosed property sellers hit bids.

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Existing Home Sales MoM (Sep)

Survey 0.8%
Actual 5.5%
Prior -2.2%
Revised n/a

 
Same as above.

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Existing Home Sales YoY (Sep)

Survey n/a
Actual 1.4%
Prior -10.7%
Revised n/a

 
Same as above.

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Existing Home Sales Inventory (Sep)

Survey n/a
Actual 4.266
Prior 4.335
Revised n/a

 
Lower inventories means foreclosures are being sold at a faster rate than new loans are going into foreclosure.

That’s a good sign.

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Existing Home Sales ALLX 1 (Sep)

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Existing Home Sales ALLX 2 (Sep)


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Posted in Daily | No Comments »