Fed swap lines

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Recession’s Grip Forces U.S. to Flood World With More Dollars

By Rich Miller

Nov. 24 (Bloomberg) — The world needs more dollars. The United States is preparing to provide them.

In an all-out assault on capitalism’s worst crisis since the Great Depression, the U.S. is taking on the role of both lender and borrower of last resort for the global economy.

To help fight the worldwide dollar squeeze, the Fed has set up currency swap lines with more than a dozen other central banks. Some arrangements, including those with Europe, Britain and Japan, are open-ended, allowing the Fed’s counterparts to draw as many dollars as they need. The U.S. has also established individual $30 billion swap lines with Brazil, Mexico, South Korea and Singapore.

In a speech to a banking conference on Nov. 14, Bernanke characterized these efforts as an “internationally coordinated approach” among central banks to fulfill their function as lenders of last resort.

I’d characterize it as a pure Fed ‘give away’ program.


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From the same ratings agency looking to downgrade the US

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Germany Retains `Stable’ Rating Outlook at Moody’s Amid Crisis

By Rainer Buergin

Nov. 24 (Bloomberg) — Germany retained a “stable” outlook at Moody’s Investors Service on its Aaa government bond ratings even as the financial crisis puts strains on public coffers, the rating company said today in an e-mailed report.

Moody’s, in a regular credit analysis, kept the “Aaa – stable” rating for Germany’s government bonds, the country ceiling and the bank deposit ceiling, both in foreign and local currency.

“Germany’s public debt payment capacity is strong and Moody’s anticipates no problems with regard to affordability or adverse debt dynamics, even with the impact of the economic slowdown likely to be felt on both sides of the government balance sheet,” said Moody’s analyst Alexander Kockerbeck.

Chancellor Angela Merkel’s government faces revenue shortfalls this year and will have to expand net borrowing in 2009 as the worst economic recession in at least 12 years takes its toll on the budget. Lawmakers last week authorized higher net federal borrowing in 2009 compared with 2008, the first increase since Merkel came to office three years ago.


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Mastercard shows sales down, but some improvement

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Note the good news is quietly put in at the end as an afterthought:

U.S. retail sales struggle in early November: MasterCard

NEW YORK (Reuters) – U.S. sales of apparel, shoes and appliances fell dramatically in the first two weeks of November, as consumers worried about a recession and job losses further cut spending, MasterCard Advisors said in a report.

The results from SpendingPulse provide an early look into the strength of the crucial U.S. holiday sales season, which traditionally begins on the day after Thanksgiving. This year, the major holiday sales period begins on Friday, November 28.

Analysts are predicting the worst holiday sales season in nearly two decades.

Overall apparel sales are down 19 percent from the same period a year ago, according to a report by SpendingPulse, the retail data service of MasterCard Advisors, an arm of MasterCard Worldwide. Apparel sales fell 5.5 percent in September and 12.2 percent in October.

Women’s apparel fell 19.7 percent in the first half of November compared with last year, with men’s apparel down 20.5 percent.

Footwear sales fell 11 percent, and electronics and appliance sales dropped a steep 22.1 percent, according to the report. Total luxury sales, which includes jewelry and high-end luxury stores, fell 21.1 percent.

Internet sales showed the most modest decline of the period, at 7.5 percent.

SpendingPulse’s report includes sales from November 1 to November 15 and comes on the heels of dismal October sales, as consumers focused on essential purchases as the global financial crisis deepened.

“It’s still very, very challenging. We’ve been seeing a deteriorating retail environment for some time, but in the last 10 days of October things started to deteriorate rapidly. That’s continuing in November,” said Michael McNamara, vice president of SpendingPulse.

Sales were better in the second week of November than the first, as consumers previously distracted by the U.S. election returned to the stores and gasoline prices eased.

“Sales are getting better in relative terms compared to where they had been in October and the first week in November in several categories” such as apparel, McNamara said.


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Congress to send Obama stimulus bill first day

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Whether or not you like the details, $700 billion of actual, front loaded spending will quickly turn things around.

Equities could easily double from current levels over the next year.

The credit machine will turn back on with a vengeance.

And without an energy policy that immediately cuts gasoline consumption, CPI could quickly be back over 5%.

Obama Will Get Stimulus Bill First Day, Democrats Say (Update1)

By Daniel Whitten

Nov. 23 (Bloomberg) — Congress will send President-elect Barack Obama an economic stimulus package the day he takes office Jan. 20, two Democratic lawmakers said today.

Senator Charles Schumer of New York told ABC “This Week” today the package will be between $500 billion and $700 billion. House Majority Leader Steny Hoyer, of Maryland, said on “Fox News Sunday” that he believed the Inauguration Day goal would be met, but he declined to put a price tag on it.

“I think Congress will work with the president elect starting now and will have a major stimulus package on his desk by Inauguration day,” Schumer said. “I think it has to be deep. My view it has to be between 5 and $700 billion.”


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Obamaboom fiscal fitness update

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Leaning in the right direction to restore demand.

A decisive move from the new Obama team is very possible given the latest rhetoric.

FACTBOX-Fiscal stimulus plans to tackle the crisis

Nov 23 (Reuters) – Countries around the world are setting out fiscal stimulus packages to help their economies withstand the impact of the global financial crisis.

Below are some details:

* AUSTRALIA:

— The government has announced a A$10.4 billion ($6.8 billion) package of cash handouts and family benefits and has pledged more if it is needed.

— It is providing A$1.5 billion to boost the housing and home building markets and doubling the grant for first-time home buyers. They will now get A$14,000 from an original A$7,000.

* CHINA:

— Provincial government plans will add an additional 10 trillion yuan ($1.464 trillion) to a 4 trillion yuan stimulus package announced by the central government earlier this month, state television said. The central scheme included rail and infrastructure schemes as well as extra social spending to offset the sharp drop in demand for the exports which fuel China’s economy.

— China is also changing value added tax (VAT) to allow companies to deduct the cost of capital equipment, saving them about 120 billion yuan a year.

* EUROPEAN UNION

– An economic stimulus plan to be presented on Nov. 26 will include a significant budgetary expansion, the head of the EU executive said on Friday, as it signalled longer deadlines for countries to slash budget gaps.

— German Economy Minister Michael Glos has said the plan envisaged, among other things, a 1 percentage point cut in value-added tax across the EU and that the total value of the stimulus was 130 billion euros ($163 billion).

* GERMANY:

— The government has announced a package which will generate about 50 billion euros ($64.22 billion) in investment and contracts.

– A new lending programme of up to 15 billion euros will be introduced for German state-owned development bank Kreditanstalt fuer Wiederaufbau (KfW) to strengthen its lending activities. KfW’s infrastructure programme for structurally weak local authorities will be raised by 3 billion euros.

— Urgent investment in transport will be accelerated via a new programme totalling 1 billion euros in both 2009 and 2010.

— Parliament has approved a rise in government net new borrowing in 2009 to 18.5 billion euros from 10.5 billion.

* NETHERLANDS

— The government has announced a “liquidity impulse” of about 6 billion euros ($7.5 billion), including allowing companies to write down investments earlier than usual.

— Companies will also receive temporary financial support from an unemployment fund to pay employees who will cut down on their working hours.

*RUSSIA

— Prime Minister Vladimir Putin on Nov. 20 unveiled a $20 billion economic stimulus package and help for people hurt in the economic slowdown. He offered assurances there would be no repeat of the economic turmoil when the Soviet Union collapsed in 1991 and, 10 years ago, when the state defaulted on its debt.

— The package will include a cut in profit tax, which accounts for 8.5 percent of budget revenues, to 20 percent from 24 now, and a new depreciation mechanism that will allow firms to reduce the profit tax further.

— The government has already sanctioned state-run banks to support industry with billions of dollars of soft funding.

* SOUTH KOREA:

— The government has unveiled a package worth at least 14 trillion won ($9.37 billion), including tax cuts

— Measures also include an extension of 1.3 trillion won to state-owned banks to help SMEs. The government is to expand credit guarantees to SMEs by 6 trillion won.

* SPAIN:

— In the last six months, Spain announced various measures to cushion the impact of the economic slowdown and soaring unemployment including a 38 billion euro ($49.28 billion) fiscal stimulus package.

— The package includes 6 billion euros in tax cuts and 4 billion euros of liquidity to credit strapped companies and households.

— It also includes a 400-euro income tax rebate for employees, pensioners and the self-employed.

* SWITZERLAND:

— The government announced an economic stimulus package worth 890 million Swiss francs ($753 million). It includes government spending of 340 million francs on flood defence, natural disasters and energy efficiency projects.

— Spending plans also include up to 1 billion francs on roads and railways and 550 million francs as tax breaks to 650 firms for job creation programmes.

* TAIWAN:

— Taiwan has announced T$122.6 billion worth of subsidies and tax cuts and T$58.3 billion of infrastructure spending. The steps unveiled are expected to generate T$1 trillion ($31.2 billion) in investment and consumption.

* UNITED KINGDOM:

— The government is expected to announce on Monday a package of tax cuts and extra public spending of upto 20 billion pounds ($29.70 billion), with the centrepiece a temporary cut in sales tax.

— The packagesis also expected to feature tax relief for small firms, efficiency savings and help for mortgage payers.

— British Prime Minister Gordon Brown said on Nov. 11 he was ready to borrow to provide the British economy a fiscal boost and he urged other countries to do the same.

* UNITED STATES:

— President-elect Barack Obama said he is crafting a two-year plan to revive the economy and save or create 2.5 million jobs. He called in October for a $175 billion stimulus measure but appears ready to for a much larger package. — Congressional Democrats have promised to make a broad economic stimulus a priority when they reconvene in January. The package is expected to include middle-class tax cuts and billions of dollars for public works projects, such as the construction of roads, bridges and mass transit. OTE]))

— President George W. Bush signed a $168 billion, two-year economic stimulus package into law in early 2008. Of that total, $152 billion was earmarked for 2008.

— The package includes tax rebates of up to $600 per individual earning $75,000 in adjusted gross income or less and $1,200 per couple plus $300 per child. Businesses would be able to deduct half the costs of purchases of new equipment. (Editing by David Cowell; +44 207 542 6486)


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Pac Rim vows ‘Extraordinary’ steps

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How about:

‘Conduct ongoing fiscal adjustments to support domestic demand at full employment levels?’

Not quite, but moving in that direction.

They would all rather export than sell their output internally.

Pacific Rim Leaders Vow Further ‘Extraordinary’ Steps on Crisis

By Shamim Adam and Bill Faries

Nov. 23- Leaders of Pacific Rim nations promised to work together on further “extraordinary” steps to combat the global economic crisis and pledged to refrain from erecting new barriers to trade and investment.

Leaders of the 21-nation Asia-Pacific Economic Cooperation group, which includes the U.S., China and Japan and accounts for half of world output, also called for improved corporate governance and backed efforts to thaw frozen credit markets.

“We have already taken urgent and extraordinary steps to stabilize our financial sectors and strengthen economic growth and promote investment and consumption,” the group said in a statement during its meeting in Lima, Peru. “We will continue to take such steps, and work closely, in a coordinated and comprehensive manner, to implement future actions.”


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ObamaBOOM around the corner?

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Obama says drafting bold economic stimulus

U.S. President-elect Barack Obama said Saturday that he was crafting an aggressive two-year stimulus plan to revive the troubled economy, warning that swift action was needed to prevent a deep slump and a spiral of falling prices.

Agreed!

“If we don’t act swiftly and boldly, most experts now believe that we could lose millions of jobs next year,” the Democratic president-elect said in a weekly radio address.

Agreed!

Obama, who succeeds President George W. Bush on Jan. 20, said the economy could get worse before it gets better. “We now risk falling into a deflationary spiral that could increase our massive debt even further,” he said.

Obama said the plan would aim to save or create 2.5 million jobs by January 2011 and would be “big enough to meet the challenges we face.” Any additional jobs would offset what is expected to be a dismal employment picture in the near future.

I vote for ‘create’ and await clarity of what he means ‘boldly’.


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2008-11-24 CREDIT

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The worst of the ‘great repricing of risk’ that followed the discovery of the ‘great sub prime mortgage fraud’ could be behind us.

The aggregate demand from the expansion phase of the mortgage fraud episode caused output and growth to expand faster than it otherwise would have, and when that lending stopped and that source of aggregate demand was removed all was suddenly thrown into reverse- slowly at first as mainly housing reversed, and more recently with a rush as the Mike Masters commodity liquidation gave it all a final push down and even consumer lending dried up, as today’s Mastercard report reflects.

Not to mention the various blunders along the way by policy makers who continuously demonstrated a lack of a fundamental understanding of monetary operations. Seems with Citibank the government had learned something as they broke their pattern and didn’t take 79.9% of the equity.

This policy change itself serves to reduce systemic risk for the financial sector, as government assistance may no longer automatically mean the elimination of that much shareholder equity above and beyond ‘payback’ to the government.

The blowout ‘bottom’ for this cycle may have come in the credit products, where it all started,
rather than equities as had generally been the case in previous cycles.

IG On-the-run Spreads (Nov 24)

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IG6 Spreads (Nov 24)

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IG7 Spreads (Nov 24)

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IG8 Spreads (Nov 24)

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IG9 Spreads (Nov 24)


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2008-11-24 USER

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Existing Home Sales (Oct)

Survey 5.00M
Actual 4.98M
Prior 5.18M
Revised 5.14M

 
Down a bit but not through the lows as foreclosure sales continue.

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Existing Home Sales MoM (Oct)

Survey -3.5%
Actual -3.1%
Prior 5.5%
Revised 4.7%

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Existing Home Sales YoY (Oct)

Survey n/a
Actual -1.6%
Prior 0.6%
Revised n/a

 
Down a bit but still off the lows as foreclosure sales continue.

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Existing Home Sales Inventory (Oct)

Survey n/a
Actual 4.234
Prior 4.272
Revised n/a

 
Starting to make progress as actual inventories decline.

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Existing Home Sales ALLX 1 (Oct)

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Existing Home Sales ALLX 2 (Oct)


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