Page 4 of
5 CREDIT BUBBLE
BULLETIN Liquidation is only solution to
crisis Commentary and weekly
watch by Doug Noland
industry body said, as
shoppers emptied supermarket shelves of the grain.
The price of imported rice from Thailand has
already risen as much as 20% since January…" ‘To
be short of money is one thing, but running short
of rice is a big deal for the Chinese,’ said Chip
Tsao, a Hong Kong commentator and radio talk-show
host. ‘Chinese people have been living under the
shadow of famine for so long. It’s a throwback to
Chinese history, going back 2,000 years.’"
April 1 - Bloomberg (Nipa
Piboontanasawat): "China’s manufacturing activity
surged last month after the end of disruptions
from the worst snowstorms in half a century, two
surveys showed. The CLSA
Purchasing Managers’ Index rose to 54.4, the
highest level in five months, from 52.8 in
February…"
Japan Watch April 1 -
Bloomberg (Jason Clenfield): "Confidence among
Japan’s largest manufacturers fell to a four-year
low as Toyota Motor Corp. and Canon Inc. struggled
with the yen’s gain and the US slowdown."
India Watch April 4 - Bloomberg
(Anoop Agrawal): "India’s foreign-exchange
reserves rose by $4.5 billion in the week ended
March 28 to a record $309.2 billion."
April 4 - Bloomberg (Kartik Goyal): "India
got a record $20.1 billion of foreign direct
investment in the 11 months to Feb. 29, a jump of
70% from a year earlier. ‘This is the highest
foreign direct investment into equity in the
country during any year,’ the government said…"
April 4 - Bloomberg (Kartik Goyal):
"India’s inflation accelerated to the fastest pace
in more than three years, underscoring a threat
from rising food prices… Wholesale prices rose 7%
in the week ended March 22 from a year earlier…"
April 4 - Bloomberg (Jean Chua): "Indian
Trade Minister Kamal Nath said the government will
take the ‘strongest possible measures’ against
hoarding of food, steel and cement to contain
inflation… ‘We will not hesitate to take the
strongest possible measures including using some
of the legal provisions that we have against
hoarding.’"
March 31 - Bloomberg (Kartik
Goyal): "Prime Minister Manmohan Singh will chair
an emergency cabinet meeting on prices of steel,
wheat and other essential goods as inflation at a
13-month high threatens the government’s bid for
re-election. The cabinet will also discuss cement,
edible oils and food articles including rice
tonight, Trade Minister Kamal Nath said. The
government, willing to settle for slower growth to
check prices, has cut import duties on food and is
considering other fiscal measures to rein in
inflation. Bonds headed for their biggest monthly
loss since June 2006."
April 1 - Bloomberg
(Kartik Goyal): "India’s exports of gems, clothes
and other manufactured products grew 35.3% in
February from a year earlier… Shipments, which
account for about 15% of India’s $906 billion
economy, rose to $14.23 billion…"
Asia
Bubble Watch April 3 - Financial Times:
"Faced with the prospect of street riots, it is no
wonder emerging market governments are opting to
shoulder some of the burden of more expensive
food. From India to Egypt, governments are
slashing import tariffs on food and curbing
exports, as well as cranking up subsidies. Longer
term, however, the side effects of this largesse
are ugly. Forgoing revenues and footing the bill
for subsidies takes a toll on national budgets.
India, for example, spent $600m on rice and wheat
subsidies in 2004-05… In the Philippines…the rice
subsidy is expected to reach $520m this year…
Indonesia will cough up a whopping $2.2bn for food
subsidies…"
April 4 - Bloomberg (Clarissa
Batino and Karl Lester M. Yap): "Philippine
inflation accelerated at the fastest pace in 20
months in March as food and fuel prices surged…
Consumer prices increased 6.4% from a year
earlier…"
April 1 - Bloomberg (Aloysius
Unditu and Arijit Ghosh): "Indonesia’s inflation
accelerated at the fastest pace in 18 months in
March as food and energy prices rose, reducing
room for the central bank to cut interest rates to
boost economic growth. Consumer prices increased
8.2% from a year earlier…"
Unbalanced
global economy watch April 2 - Bloomberg
(Jennifer Ryan): "British customer-owned lenders
approved fewer loans for house purchase in
February, a report by the Building Societies
Association said. Mortgage approvals fell 31% from
a year earlier…"
March 31 - Bloomberg
(Fergal O’Brien): "European inflation accelerated
to the fastest pace in almost 16 years, making it
harder for the European Central Bank to cut
interest rates as a global credit squeeze saps
confidence among executives and consumers.
Consumer-price inflation in the euro area
accelerated to 3.5% this month, the highest rate
since June 1992… The ECB is refusing to follow the
US Federal Reserve and reduce interest rates in
response to a global crisis as food and energy
prices fuel inflation."
April 4 -
Bloomberg (Joshua Gallu): "Swiss inflation
accelerated more than expected in March to the
fastest pace in more than 14 years as prices for
energy and food climbed to records. The inflation
rate rose to 2.6% from 2.4%… That’s the highest
level since October 1993."
March 31 -
Bloomberg (Joshua Gallu): "Switzerland’s current
account surplus widened last year as global growth
and a weaker franc fueled demand for exports, the
central bank said. The surplus in the current
account…reached an estimated 85.6 billion francs
($86.2 billion) in 2007…"
March 31 -
Bloomberg (Flavia Krause-Jackson): "Italy’s
inflation rate in March rose to the highest in
more than 11 years… Consumer prices calculated by
European Union standards rose 3.6% from a year
earlier…"
March 31 - Bloomberg (Jacob
Greber): "An index measuring Australian inflation
held at the fastest annual pace in almost two
years in March, reinforcing the central bank’s
decision to increase borrowing costs to the
highest in 12 years. Consumer prices surged 4%
from a year earlier…"
Bursting bubble
economy watch April 3 - Bloomberg (Hugh
Son): "Consumers fell behind on car, credit-card
and home-equity loans at the highest level in 15
years during the fourth quarter, another sign the
US economy is slowing, according to an American
Bankers Association survey. Payments at least 30
days past due increased across all eight
categories of loans tracked, the Washington-based
group said today in a statement. Late loans
climbed 21 basis points to 2.65% of all accounts
in a consumer-loan index… ‘The rise in consumer
credit delinquencies is consistent with a rapidly
slowing economy,’ ABA chief economist James
Chessen said… ‘Stress in the housing market still
dominates the story, but it’s a broader tale.’"
April 4 - Bloomberg (Bill Rochelle and Bob
Willis): "The jump in March bankruptcy filings is
another indication the US economy is in recession,
led by states where the housing boom turned to
bust. The more than 90,000 bankruptcy filings in
March were the highest since insolvency laws
became more restrictive in October 2005…"
April 3 - The Wall Street Journal
(Jacqueline Palank): "New data show that US
businesses are seeking bankruptcy-law protection
at a faster rate than consumers this year, amid a
global credit crunch that has hurt businesses and
individuals alike. From January through March,
some 13,155 businesses filed for bankruptcy…
That’s an increase of almost 45% from the 9,103
business bankruptcy filings in the first three
months of 2007. The pace for businesses exceeds
the growth rate of consumer bankruptcy filings,
which have climbed to the highest level in more
than two years. During the first quarter, consumer
bankruptcy filings increased 27% from the
year-earlier period… ‘The canary in the mine is
consumer bankruptcies,’ Jack Williams, a resident
scholar at the American Bankruptcy Institute… ‘As
they start to increase, that is usually an
indication that small-to-medium businesses will
follow.’"
California watch April
2 - Associated Press: "Wachovia Corp. (WB) is
considering ending its infamous Pick-A-Payment
mortgage loans in 17 California counties that have
been hit hard by falling home prices and rising
foreclosures."
MBS/ABS/CDO/CP/Money
Funds and Derivatives Watch April 3 -
Bloomberg (Kathleen M. Howley): "Home prices
declined in 21 US cities in January, led by
Sacramento and Las Vegas, as banks sold foreclosed
homes at bargain prices. The price per square foot
in Sacramento dropped 28% to $166 from a year
earlier, according to…Radar Logic Inc…. Las Vegas
dropped 25% to $137 a square foot… The median
price of single-family existing home dropped 8.7%
in February from a year earlier, the most in four
decades of record keeping, the National
Association of Realtors said… ‘Like homebuilders
who feel pressure to get rid of inventory quickly,
many banks and lenders experience the same
pressure when dealing with homes from
foreclosure,'' and decide to sell at below-market
prices, the report said. That leads to further
declines in real estate values."
April 2 -
Financial Times (Paul J Davies): "The financial
instrument (CDOs) that was one of the biggest
drivers of the explosive growth of
mortgage-related debt markets in recent years
faces near certain extinction… The complex debt
securities used to repackage the less attractive
parts of asset-backed bonds are likely to
disappear entirely as a result of the collapse of
the credit market bubble, according to a report
from the Bank for International Settlements."
April 1 - Bloomberg (Jody Shenn):
"Securities backed by US commercial mortgages,
Alt-A and prime home loans fell the most ever last
quarter, as the credit-market slump deepened and
concern grew that banks faced increased writedowns
on the debt. AA rated commercial-mortgage
securities tumbled 18% and A rated bonds fell 22%
in the period through March 31, according to
Lehman Brothers…"
March 31 - Bloomberg
(Josh P. Hamilton and Erik Holm): "Defaults on
privately insured US mortgages rose 38% in
February for the 14th straight month as record US
foreclosures forced the industry to reimburse
lenders for more bad loans. Insured borrowers
falling more than 60 days late on payments rose to
60,911 last month…"
Real Estate Bubble
Watch April 2 - Bloomberg (Sharon L.
Lynch): "Manhattan apartment sales plunged the
most in 18 years last quarter as buyers faced the
prospect of a recession and job cuts at Wall
Street securities firms. First-quarter sales fell
34% from a year earlier and inventory rose 4.6% to
6,194 units… The median price of a Manhattan
co-operative apartment or condominium increased
13.2% to a record $945,000."
March 31 -
Bloomberg (Sharon L. Lynch): "New York City’s
residential real estate market is showing the
first signs of fallout as US banks and securities
firms cut the most jobs in seven years. Manhattan
apartment sales fell in January and February from
a year earlier and new properties came to the
market at the fastest pace since at least 2000…
Transactions slid 6.4% to 3,250, while the number
of condominiums, co- operatives and townhouses for
sale at the end of last month climbed to 6,225,
15% more than at the start of the year."
April 4 - Bloomberg (Hui-yong Yu): "Home
sales in Seattle fell 29% in March and listings
jumped 61% from a year earlier, as the
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