Daily Archives: July 6, 2009 @ 2:44 pm (Monday)

swap lines

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Central bank liquidity swaps (13) 115,299 – 6,291

Fed advances to CB’s continues to fall

indicating foreign banks are increasingly able to borrow dollars in the market place.

If the remaining dollar loans to the ECB do become problematic,

it opens the door for the ECB to sell euro vs the dollar to pay down its loans.

It would do this if it wanted the euro weaker, perhaps to assist its exporters.

It would not be building dollar reserves, only paying down loans, so

there would be no ideological issue.


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ISM (non-Mfg)

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(email exchange)

yes,

seems second quarter earnings should be better than expected and that costs are way down which will
add to profitability even with flattish sales.

and very wide net interest margins will support bank earnings growth even with low volume and continuing losses.

this can be a very good environment for stocks.


Karim writes:

Details a bit firmer than headline.

Overall, still contracting at a slower rate.



June May
Composite 47.0 44.0
Activity 49.8 42.4
Prices paid 53.7 46.9
New Orders 48.6 44.4
Employment 43.4 39.0
Export Orders 54.5 47.0
Imports 47.0 46.0

“Business has improved and holding steady.” (Arts, Entertainment & Recreation)

“Activity level is flat. Clients are delaying capital spending decisions.” (Professional, Scientific & Technical Services)

“Economy may be stabilizing. Second half looks more positive than first half.” (Information)

“Have begun spending government stimulus funding, and expect conditions to gradually improve in the near future.” (Public Administration)

“Occupancy levels continue to increase at a slow pace.” (Accommodation & Food Services)

“Activity is still slow and little has changed since last month.” (Wholesale Trade)


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savings rates, growth, and struggling green shoots

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So in the US the high savings rate is hurting growth, and in South Africa the low savings rate is hurting growth.

Next thing they’ll be saying is economies should not have a savings rate in order to have optimal output and employment…

Did I say they don’t understand the monetary system???!!!

And one reason the green shoots may be dying is the relentless monetary tightening as lower rates for savers,

quantitative easing as Central Banks accumulate higher yielding securities in exchange for reserve balances,

and lower interest paid by governments on their securities due to the lower rates

all contribute to removing interest income from world consumers.

South Africa’s Low Savings Threaten Growth, Nene Says

by Nasreen Seria

July 6(Bloomberg) — South Africa’s low savings rate is
crimping the country’s rate of sustainable economic growth,
Deputy Finance Minister Nhlanhla Nene said.

The low rate is also inflating the current account deficit,
making South Africa more reliant on foreign capital inflows,
Nene said in a speech to the South African Savings Institute in
Johannesburg today.

The rate of growth in consumer savings has been declining
since the first three months of 2006 after the central bank cut
interest rates to a 24-year low in 2005, spurring spending.
South Africa’s total savings rate is 17 percent of gross
domestic product, according to the quarterly bulletin of the
South African Reserve Bank.

“Persistently high current account deficits can lead to
macroeconomic instability if foreign liabilities rise too much
and foreign capital inflows dry up,” Nene said. “By reducing a
country’s dependence on foreign capital inflows, higher domestic
saving therefore makes an economy less vulnerable to sudden
reversals in capital flows.”

The current account deficit, the broadest measure of trade
in goods and services, widened to 7 percent of GDP in the first
quarter as mining and manufacturing exports collapsed.

South Africa also needs to boost its savings in order to
lift the economic growth rate, Nene said. Africa’s biggest
economy is in its first recession in 17 years, and will probably
contract 1.5 percent in 2009, according to the World Bank.

“It is crucial to raise the level of our national saving
in support of both short-term economic stability and long-term
productivity growth and prosperity,” Nene said.


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EU News

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Economy looking grim over there:

Highlights

European Investor Confidence Declined in July, Sentix Says
Germany Expects 450,000 New Long-Term Jobless in 2010, FAZ Says
Stark Says Governments Must Trim Budget Deficits, FAS Reports
Nowotny Says ECB to Watch Bond Program, Review Later
EU’s Barroso Says World Needs a Number of Stable Currencies
Spain’s Housing Slump May Last for Seven Years, Acuna Says
European Notes Gain as Stock-Market Decline Spurs Safety Demand


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