France to propose EU Rescue Plan for Banks 300 billion EUR
- EU Countries should contribute 3% of GDP to Plan
- Germany Completely disagrees with French Bank Rescue plan
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Author Archives: WARREN MOSLER
2008-10-01 USER
- MBA Mortgage Applications (Released 7:00 EST)
- MBA Purchasing Applications (Released 7:00 EST)
- MBA Refinancing Applications (Released 7:00 EST)
- MBA TABLE 1 (Released 7:00 EST)
- MBA TABLE 2 (Released 7:00 EST)
- MBA TABLE 3 (Released 7:00 EST)
- MBA TABLE 4 (Released 7:00 EST)
- Challenger Job Cuts YoY (Released 7:30 EST)
- Challenger Job Cuts TABLE 1 (Released 7:30 EST)
- Challenger Job Cuts TABLE 2 (Released 7:30 EST)
- Challenger Job Cuts TABLE 3 (Released 7:30 EST)
- Challenger Job Cuts TABLE 4 (Released 7:30 EST)
- ADP Employment Change (Released 8:15 EST)
- ADP ALLX (Released 8:15 EST)
- ISM Manufacturing (Released 10:00 EST)
- ISM Prices Paid (Released 10:00 EST)
- ISM TABLE 1 (Released 10:00 EST)
- ISM TABLE 2 (Released 10:00 EST)
- Construction Spending MoM (Released 10:00 EST)
- Construction Spending YoY (Released 10:00 EST)
- Construction Spending Residential (Released 10:00 EST)
- Construction Spending TABLE 1 (Released 10:00 EST)
- Construction Spending TABLE 2 (Released 10:00 EST)
MBA Mortgage Applications (Sep 26)
| Survey | n/a |
| Actual | -23.0% |
| Prior | -10.6% |
| Revised | n/a |
MBA Purchasing Applications (Sep 26)
| Survey | n/a |
| Actual | 304.80 |
| Prior | 342.20 |
| Revised | n/a |
Back towards 300, the bottom of the range. Falling like most other indicators. A weak September due to the fears of the financial crisis looks to have pushed q3 into negative numbers.
MBA Refinancing Applications (Sep 26)
| Survey | n/a |
| Actual | 1333.90 |
| Prior | 2043.40 |
| Revised | n/a |
MBA TABLE 1 (Sep 26)
MBA TABLE 2 (Sep 26)
MBA TABLE 3 (Sep 26)
MBA TABLE 4 (Sep 26)
Challenger Job Cuts YoY (Sep)
| Survey | n/a |
| Actual | 32.6% |
| Prior | 11.7% |
| Revised | n/a |
Not normally considered reliable, but this time in sync with other indicators of weakness.
Challenger Job Cuts TABLE 1 (Sep)
Challenger Job Cuts TABLE 2 (Sep)
Challenger Job Cuts TABLE 3 (Sep)
Challenger Job Cuts TABLE 4 (Sep)
ADP Employment Change (Sep)
| Survey | -50K |
| Actual | -8K |
| Prior | -33K |
| Revised | -37K |
The long gradual decline continues. This number is higher by about 50,000 than the same numbers will be as measured Friday due to the Boeing strike and the hurricane. ADP counts the strikers as still employed while the government doesn’t for Friday’s number.
ADP ALLX (Sep)
ISM Manufacturing (Sep)
| Survey | 49.5 |
| Actual | 43.5 |
| Prior | 49.9 |
| Revised | n/a |
Serious nose dive here. Talk of buyers waiting for price reductions due to commodity price drops.
ISM Prices Paid (Sep)
| Survey | 73.0 |
| Actual | 53.5 |
| Prior | 77.0 |
| Revised | n/a |
Down, lower than expected, but more than half still paying higher prices. No deflation yet.
ISM TABLE 1 (Sep)
ISM TABLE 2 (Sep)
Construction Spending MoM (Aug)
| Survey | -0.5% |
| Actual | 0.0% |
| Prior | -0.6% |
| Revised | -1.4% |
Flat, better than expected, but prior month revised down by .8%.
Residential rose .3% for the first increase in a long time.
Construction Spending YoY (Sep)
| Survey | n/a |
| Actual | -5.9% |
| Prior | -5.9% |
| Revised | n/a |
The rate of decline has stabilized, and there will soon be easier comps.
Construction Spending Residential (Sep)
| Survey | n/a |
| Actual | 351662.0 |
| Prior | 350563.0 |
| Revised | n/a |
Construction Spending TABLE 1 (Sep)
Construction Spending TABLE 2 (Sep)
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ISM- Weak!
From Karim:
Very weak both in levels and rate of change across most key components.
Production, orders, employment and export orders all down 5-12 points on the month.
Prices paid down 23.5 points.
- “We have experienced a larger-than-expected slowdown in orders during the last month.” (Electrical Equipment, Appliances & Components)
- “Steel, a main raw good for our business, has finally started showing some signs of softening a bit.” (Machinery)
- “Business continues to slow down. Fourth quarter 2008 is going to be down 15 percent from third quarter.” (Fabricated Metal Products)
- “Customers waiting for material price reductions in the face of falling oil prices.” (Plastics & Rubber Products)
- “Continued strong export demand across several product lines.” (Chemical Products)
Agreed, looks like a negative 4th quarter if this continues and Congress keeps buyers of everything in fear and on the sidelines.
This line is interesting as well:
- “Customers waiting for material price reductions in the face of falling oil prices.” (Plastics & Rubber Products)
Manufacturing at a Glance
September 2008
September 2008
| Index | Series Index September | Series Index August | Percentage Point Change | Direction | Rate of Change | Trend (Months) |
| PMI | 43.5 | 49.9 | -6.4 | Contracting | Faster | 2 |
| New Orders | 38.8 | 48.3 | -9.5 | Contracting | Faster | 10 |
| Production | 40.8 | 52.1 | -11.3 | Contracting | From Growing | 1 |
| Employment | 41.8 | 49.7 | -7.9 | Contracting | Faster | 2 |
| Supplier Deliveries | 52.5 | 50.3 | +2.2 | Slowing | Faster | 15 |
| Inventories | 43.4 | 49.3 | -5.9 | Contracting | Faster | 3 |
| Customers’ Inventories | 53.5 | 54.5 | -1.0 | Too High | Slower | 2 |
| Prices | 53.5 | 77.0 | -23.5 | Increasing | Slower | 21 |
| Backlog of Orders | 35.0 | 43.5 | -8.5 | Contracting | Faster | 5 |
| Exports | 52.0 | 57.0 | -5.0 | Growing | Slower | 70 |
| Imports | 44.0 | 48.5 | -4.5 | Contracting | Faster | 8 |
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Plosser/French Depos/ETC
From Karim:
Plosser offers qualified support for rate cutsâ€â€Âhe voted against the last 2 rate cuts in March and April.
“….prepared to back further interest rate cuts if the financial crisis causes the economic outlook to deteriorate, provided that renewed monetary easing can be judged consistent with containing inflation.”
French economic ministry- denial of Irish Times report that stated that French government was about to mirror Irish government move on deposits from this week behind latest drop in Euro.
ADP down only 8k but has grossly overestimated payrolls in recent months.
Challenger layoff announcements rise from 11.7% to 32.6% y/y in September.
Citi now calling for possible 50 basis point rate cut in UK next week.
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2008-10-01 UK News Highlights
Yes, demand is weak over there but the last one, below, is of particular interest to me.
Seems the banks around the world need USD rather than their local currency.
Another failure of banking regulation that they probably still don’t understand and therefore won’t address going forward.
I’ve been watching external debt bring down governments (and their banks) for over 30 years and it still isn’t part of bank regulation.
Highlights
| U.K. Manufacturing Shrinks the Most Since 1992 |
| U.K. Services Industry Growth Stalls for First Time Since 2002 |
| BOE Emergency Rate Meeting Is `Possible,’ Morgan Stanley Says |
| Financial crisis: Can the Bank of England’s Mervyn King survive? |
| Bank of England Offers $40 Billion in Dollar Auctions Today |
Bank of England Offers $40 Billion in Dollar Auctions Today
Oct. 1 (Bloomberg) The Bank of England offered $30 billion of one-week funds and $10 billion overnight as part of a global coordinated emergency effort to stem the financial crisis.
The bank also will auction another $30 billion in one-week money on Oct. 3. At that sale and in subsequent dollar operations, the bank will accept the same extended collateral eligible for its three-month long-term sterling operations.
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Bloomberg: Trichet says U.S. must pass plan to rescue ‘Global Finance’
Interesting how Europe feels its fate is in the hands of the US.
The Euro was supposed to change all that.
Yes, the national governments know they are constrained fiscally by their self imposed 3% deficit limits. And they also suspect that they are further limited by market forces that may decide not to buy the national government securities and cut off their ability to borrow to spend. The national governments are in that respect similar to the US states which are currently pro-cyclically cutting spending due to funding constraints due to lack of income.
Unlike the US and the UK, in the Eurozone the national governments are providing the deposit insurance for their banks.
It can all come apart very quickly.
They can blame the US, but the fault lies with their failure to be able to sustain domestic demand, which they built into the treaty 10 years or so ago.
Good chance market forces will ultimately force modifications to the treaty.
My highlights in yellow below:
Trichet Says U.S. Must Pass Plan to Rescue `Global Finance’
by Andreas Scholz and Gabi Thesing
Oct. 1 (Bloomberg) European Central Bank President Jean-Claude Trichet said U.S. lawmakers must pass a $700 billion rescue package for banks to shore up confidence in the global financial system.
“It has to go, for the sake of the U.S. and for the sake of global finance,” Trichet said in an interview in Frankfurt with Bloomberg Television late yesterday. “I am confident, but of course it is the decision of the U.S. Congress.”
President George W. Bush and Senate leaders yesterday vowed to revive a plan aimed at buying distressed assets from banks that was rejected by Congress a day earlier. The vote roiled markets already struggling to cope with the collapse of Lehman Brothers Holdings Inc. European governments have helped rescue at least five banks since Sept. 28, with Trichet taking part in talks to save Belgium’s Fortis over the weekend.
Trichet said a pan-European approach to the banking crisis was unlikely, saying “we are not a fully-fledged federation with a federal budget.”
“Each country has to mobilize its own efforts,” said Trichet. “But of course there is a European spirit and that is the spirit of the single market.”
Trichet declined to answer questions about ECB monetary policy before tomorrow’s interest-rate decision. All 58 economists surveyed by Bloomberg News expect the central bank to
keep its benchmark rate at 4.25 percent.
European leaders are trying to better coordinate their response to the financial crisis. Luxembourg Finance Minister Jean-Claude Juncker said yesterday he expects to meet with Trichet and French President Nicolas Sarkozy on Oct. 4 to discuss “a more systematic approach.”
Trichet’s ECB has so far chosen not to follow the Federal Reserve in slashing interest rates since credit markets seized up 13 months ago, injecting cash into their markets instead, while keeping monetary policy focused on inflation.
Price Stability
“What’s needed is for us to continue to tell our fellow citizens that we will ensure price stability,” Trichet said in an interview broadcast yesterday on the France 2 television channel.
Belgium, the Netherlands and Luxembourg on Sept. 28 agreed to inject 11.2 billion euros ($16 billion) into Fortis, the largest Belgian financial-services company.
Governments and other authorities have also taken steps to protect the U.K.’s Bradford & Bingley Plc, Brussels and Paris-based Dexia SA, Iceland’s Glitnir Bank hf and Germany’s Hypo Real Estate Holding AG. Ireland yesterday guaranteed the deposits and borrowings of six lenders.
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Wednesday beginning on the weak side
Could be a very tough three days coming.
Yesterday probably used up all the Paulson plan rally exuberance. Yesterday could have been the first leg of a classic buy the rumor/sell the news event.
The package has been sold by threats of ‘grave risks’. Now the risk is the package doesn’t do anything for those ‘grave risks’ which it won’t, particularly in Europe. And they know cutting rates in the US did little or nothing, reducing expectations of what a rate cut could do in Europe.
Crude back up over $102 right now. This tends to weaken the USD as it increases the US import bill, but for now the desire to exit the Euro could overwhelm that.
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If you missed the radio show, listen here..
Statement of Senator Obama on moving financial legislation forward
Statement of Senator Obama on Moving Financial Legislation Forward
Yesterday, within the course of a few hours, the failure to pass the economic rescue plan in Washington led to the single largest decline of the stock market in two decades.
Might have been worse if they had passed the plan!!!
While I, like others, am outraged that the reign of irresponsibility on Wall Street and in Washington has created the current crisis,
All a result of institutional structure that put the incentives in place in place to do what was done.
Including the way Washington works.
I also know that continued inaction in the face of the gathering storm in our financial markets would be catastrophic for our economy and our families.
At this moment, when the jobs, retirement savings, and economic security of all Americans hang in the balance, it is imperative that all of us – Democrats and Republicans alike – come together to meet this crisis.
The bill rejected yesterday was a marked improvement over the original blank check proposed by the Bush Administration. It included restraints on CEO pay, protections for homeowners, strict oversight as to how the money is spent, and an assurance that taxpayers will recover their money
once the economy recovers.
None of that matters for the ‘success’ of the plan which is doubtful, as it’s not much more than an asset swap, and with the changes, the additions of incentives for CEOs not to participate.
Given the progress we have made, I believe we are unlikely to succeed if we start from scratch or reopen negotiations about the core elements of the agreement. But in order to pass this plan, we must do more.
One step we could take to potentially broaden support for the legislation and shore up our economy would be to expand federal deposit insurance for families and small businesses across America who have invested their money in our banks.
The majority of American families should rest assured that the deposits they have in our banks are safe. Thanks to measures put in place during the Great Depression, deposits of up to $100,000 are guaranteed by the federal government.
While that guarantee is more than adequate for most families, it is insufficient for many small businesses that maintain bank accounts to meet their payroll, buy their supplies, and invest in expanding and creating jobs. The current insurance limit of $100,000 was set 28 years ago and has not been adjusted for inflation.
That is why today, I am proposing that we also raise the FDIC limit to $250,000 as part of the economic rescue package – a step that would boost small businesses, make our banking system more secure, and help restore public confidence in our financial system.
Misses the point. Moving to $250,000 does nothing for the banking system. The cap needs to be removed, and the Fed given the mandate to lend unsecured to member banks in unlimited quantities.
Institutionally, this can be facilitated by extending FDIC insurance to Fed deposits at member banks.
That way, any ultimate bank insolvencies and losses continue to be charged to the FDIC.
I will be talking to leaders and members of Congress later today to offer this idea and urge them to act without delay to pass a rescue plan,” said Barack Obama.
A baby step in the right direction.
Not enough to make a difference.
Doesn’t address the issue of aggregate demand and homeowner’s ability to pay as employment stagnates.
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Re: Mosler plan, short version
>
> Warren,
> I like adding the tax holiday.
>
Thanks, we were all pushing that as a better alternative than the Bush tax cut plan 5 or so years ago.
While not as constructive as, for example, an infrastructure project, and likely to drive up energy consumption, it will get immediate results, ‘cure’ the financial crisis (people will better afford their mortgage payments) and the ‘recession,’ and is far better than what they are proposing which does little or nothing.
>
> Why do you want the Fed to establish 1 month, 2 month, and 3 month rates?
>
To eliminate interbank markets domestically at least out that far. Six months would be even better, and 30 years even better, but at some point it gets beyond political understanding, and most of the benefit comes from the very front of the curve where most of the interbank lending takes place, or tries to!
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