Daily Archives: December 11, 2009

Ralph Atkins

Speaking in Cambridge, UK, on Thursday evening, Jean-Claude Trichet, ECB president, noted that whereas in the past financial crisis built-up over years, they now spread around the world “in the course of half days”.

For Greece – facing a crisis over its perilous public finances - it has certainly been a roller-coaster week. The financial market reaction to its credit downgrade by Fitch has forced an about-turn (of sorts) by the government in Athens, which now plans on Monday to say how it will reduce the deficit from 12.7 per cent to 3 per cent of GDP in coming years. Read more

Ukraine has made an urgent appeal to the International Monetary Fund for about $2bn in emergency loans to ease “an extremely difficult situation” in meeting its external obligations and avoid the danger of a “spill-over effect” on other economically vulnerable states. Read more here.

Two days on and the UK’s pre-Budget report is still generating huge amount of political heat with little light and none of the arguments has anything to do with the windfall tax on bonuses.

Depending on who you read, the PBR was either an eye-wateringly tight budget with swingeing tax rises and spending cuts, a fiscal loosening or a neutral statement. All three can be true depending on what form of legitimate comparison you choose to make. I’ll tell you what I think in a second, but the upshot is whatever assumptions you make, the numbers are small and so have minimal effect on the economy, the likely recovery or the exit from extraordinarily loose monetary, fiscal and financial policies. Read more

  • Still too calm? 30-year US treasuries sell at 4.52% yield – DeLong
  • Beijing imposes steel duties on Russia and US – FT
  • Greek sovereign bond yields rose 1.3% this week – FT

 Read more

Ralph Atkins

Statistics latest: the European Central Bank has launched new data on eurozone investment funds, separating out for the first time information on the hedge fund sector.

What does it show? Er, the eurozone hedge fund industry is not very big – representing just 2 per cent of the share or units issued by investment funds in the 16 country region. That is perhaps not surprising. Continental Europe has nothing to rival, say, Mayfair in London. The largest part (49 per cent) of the eurozone industry is in Ireland, with Luxembourg (19 per cent), Italy (14 per cent) and Malta (6 per cent) accounting for most of the rest. Read more

The central bank of South Korea has today raised its 2010 growth forecast to 4.6 per cent from its 3.6 per cent July estimate, making an interest rate rise more likely. Rates are currently at a record low of 2 per cent. Read more

Further loosening in China? New loans in the People’s Republic rose to RMB 294.8bn ($43.2bn) in November, from a total of RMB 253bn in October. Analysts had expected a fall in new loans, to about RMB 250bn, after the drop from September’s high of RMB 516.7bn. A report from the Bank of International Settlements recently observed that the composition of loans in China was changing dramatically, with fewer short-term loans but a brisk increase in medium- and long-term loans.

Krishna Guha

Britain is doing it, France is doing it. Should the US impose a windfall tax on bankers’ bonuses too? Let me set out what I understand to be the case for the prosecution. I invite readers to comment on whether you think it stacks up or not.

1. People on Main Street are furious about Wall Street bonuses.

2. This anger is justified because the bonuses are based in large part on windfall profits. These profits derive from taxpayer-backed interventions that stabilised the financial system, paving the way for a  recovery in financial markets and collapse of risk spreads. Read more

Simone Baribeau

Federal Reserve governor Elizabeth A. Duke today spoke to the Mortgage Foreclosure Policy Conference about the conditions that led to the housing crisis and her vision of the future of housing finance.

“A speculative mentality took hold among investors and consumers who expected limitless house price appreciation,” she said. Read more

Simone Baribeau

Total US non-financial debt rose at an annualised 2.8 per cent last quarter, putting the US on track for its smallest yearly increase since records began in 1976, according to the flow of funds report released by the Federal Reserve.

Federal debt ballooned 20.6 per cent, off its high of 39.2 per cent in the third quarter of 2008, but still well above its 2007 level of 4.9 per cent. State and local government debt grew as well, but at 5.1 per cent it increased at its slowest pace since the end of 2007. Read more