Interest Rate Roundup

Monday, June 30, 2008

Multiple reports: The world is coming to an end

Okay, just kidding. That's not really what the papers and wires are saying this morning. But it sure is how some of those stories read. Just consider:

* The Bank for International Settlements (no hyperbolic, doom-and-gloomers there) is out with an annual report that sounds downright bearish. A few key quotes ...

On the credit crisis - "The difficulties in the subprime market were a trigger for, rather than a cause of, all the disruptive events that have followed ... the magnitude of the problems yet to be faced could be much greater than many now perceive."

On weak growth and high inflation -- "The global economy now seems to be experiencing both unwelcome phenomena at the same time."

On how policymakers should respond -- "With inflation a clear and present threat, and with real policy rates in most countries very low by historical standards, a global bias towards monetary tightening would seem appropriate."

This is one mega-document you don't want to read unless you have lots and lots of time on your hand. A shorter digest of its contents can be found courtesy of the Wall Street Journal.

* Meanwhile, the International Monetary Fund has chimed in with cheery news on the dollar: Specifically, the greenback now makes up the smallest percentage of global foreign-exchange reserves ever (Data is available via this web page).

Governments and central banks were only holding 63% of their reserves in dollars as of the first quarter of this year, per Bloomberg. That's down from 64% in Q4 2007 and the lowest since the IMF started releasing quarterly figures in 1999. The euro is capturing an all-time high share of 26.8%.

* And of course, the stories of ongoing turmoil in the housing and mortgage markets keep on coming. Here's just one from the New York Times over the weekend:

"When Congress started fashioning a sweeping rescue package for struggling homeowners earlier this year, 2.6 million loans were in trouble. But the problem has grown considerably in just six months and is continuing to worsen.

"More than three million borrowers are in distress, and analysts are forecasting a couple of million more will fall behind on their payments in the coming year as home prices fall further and the economy weakens.

"Those stark numbers not only illustrate the challenges for the lawmakers trying to provide some relief to their constituents but also hint at what the next administration will be facing after the election. While the proposed program would help some homeowners, analysts say it would touch only a small fraction of those in trouble — the Congressional Budget Office estimates it would be used by 400,000 borrowers — and would do little to bolster the housing market.

“It’s not enough, even in the best of circumstances,” said Mark Zandi, chief economist of Moody's The number of people who will be helped “is going to be overwhelmed by the three million that are headed toward default.”

Not enough for ya? How about news that inflation in the Eurozone climbed to 4% in June from 3.7% in May, the highest level in more than 16 years? Or more chatter and other reports that hint at a potential conflict with Iran? Combine all of that with the annoying computer problems I'm dealing with and maybe the best course of action is to just go back to bed!


Post a Comment

<< Home

Site Meter