Japan Daily

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This means they will accept it as collateral for the unlimited USD loans from the Fed.

This will not end well.

BOJ to Accept Asset-Backed Commercial Paper as Collateral from Tuesday

TOKYO (Dow Jones)–The Bank of Japan said Monday it will accept as collateral asset-backed commercial paper guaranteed by the bank’s counterparty financial institutions, starting Tuesday. This is a temporary measure until the end of April 2009 to ease tension in the short-term money market, the BOJ said.

Earlier this month, The BOJ announced a number of steps to ensure the smooth functioning of the country’s money markets, including providing greater access to U.S. dollar funds through a swap agreement with the U.S. Federal Reserve Board, and broadening the kinds of collateral the BOJ would accept for repurchase agreement transactions.


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2008-10-27 CREDIT

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Stocks may have nowhere to go until these spreads narrow

IG On-the-run Spreads (Oct 27)

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IG6 Spreads (Oct 27)

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IG7 Spreads (Oct 27)

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IG8 Spreads (Oct 27)

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IG9 Spreads (Oct 27)


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IMF Ukraine loan and conditions counterproductive

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UPDATE 3-IMF, Ukraine agree $16.5 bln loan with conditions

By Sabina Zawadzki and Lesley Wroughton

KIEV/WASHINGTON, Oct 26 (Reuters) – The International Monetary Fund and Ukraine said on Sunday they had reached an agreement in principle for a $16.5 billion loan package to ease the effects of the global financial crisis.

But analysts said politicians would have to set aside differences to adopt a set of financial measures needed to clinch the deal and secure the loan.

The IMF statement said nothing about the conditions it sought from Ukraine. But a joint central bank and finance ministry statement said the government would have to draw up a balanced budget and introduce measures to support banks.


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Interview with the BBC

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(email exchange)

Dear David:

Let me refer you to what I call “Mosler’s Law”: There is no financial crisis so deep that a sufficiently large increase in public spending cannot deal with it.

But the European problem is, who can borrow? who can spend?

Solving that problem is the key – the only key – to resolving the crisis.

Regards, James

>   
>   Professor Galbraith,
>   
>   This is David … I’m a BBC Spanish listener. You told that the European
>   Central Bank has not the same solid structure as the banking system in
>   the States. I want to ask you what does Europe has to do to recover
>   from this crisis? Ok, deliver less credits and mortgages maybe, I don’t
>   know, you know it much better than me. But how the recovery will be
>   seen through a decrease in unemployment? what does Spain has to do?
>   
>   Call me David (only 43)
>   Yours sincerely,
>   
>   David …
>   


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2008-10-27 USER

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New Home Sales (Sep)

Survey 450K
Actual 464K
Prior 460K
Revised 452K

 
Small blip up from very low levels.

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New Home Sales Total for Sale (Sep)

Survey n/a
Actual 394.00
Prior 425.00
Revised n/a

 
Inventories low enough to cause a shortage if things do pick up.

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New Home Sales MoM (Sep)

Survey -2.2%
Actual 2.7%
Prior -11.5%
Revised -12.6%

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New Home Sales YoY (Sep)

Survey n/a
Actual -33.1%
Prior -35.6%
Revised n/a

 
Also moving up a bit.

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New Home Sales Median Price (Sep)

Survey n/a
Actual 218.40
Prior 220.40
Revised n/a

 
Down some but not in collapse.

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New Home Sales TABLE 1 (Sep)

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New Home Sales TABLE 2 (Sep)


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Roubini prediction

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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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Re: Yen strength

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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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OPEC cuts production by 1.5 million barrels a day

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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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What’s next for the Fed?

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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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