Page 2 of 3 CREDIT BUBBLE BULLETIN Just the facts
Market watch by Doug Noland
widespread political unrest, Malaysia’s Prime Minister Abdullah Ahmad Badawi
said ... Abdullah said the inflation crisis has erupted as a global recession
looms, spelling trouble for the D8 group meeting in Malaysia. The countries
represented at the forum were Bangladesh, Egypt, Indonesia, Iran, Malaysia,
Nigeria, Pakistan and Turkey. Abdullah also called on member nations to boost
food production to avert conflict. ‘The price of oil has skyrocketed to levels
never anticipated ... The price of food has increased beyond the normal
abilities to pay by the poor, which form the majority of the world's people ...
There is also the danger of the food crisis creating political unrest in many
societies.’"
July 7 - Associated Press: "Saudi Arabia: Sultan al-Mazeen
recently stopped at a gas station to fill up his SUV, paying 45 cents a gallon
— a price Americans could only dream of as they pay nearly 10 times that at the
pump. But cheap gas and the record wealth pouring into Saudi Arabia’s coffers
from high oil prices are little relief for al-Mazeen. The 36-year-old Saudi
technician and many other Saudis say they’re only feeling poorer amid the oil
boom because of inflation that has hit 30-year highs in the kingdom. ‘I tell
the Americans, don’t feel envious because gas is cheaper here,’ said al-Mazeen.
‘We’re worse off than before.’"
July 9 - Bloomberg (Janice Kew): "Higher fuel costs may make taxi fares
unaffordable for poorer South Africans, threatening jobs, Business Report said,
citing Carel van Aardt, a research professor at University of South Africa ...
About 60% of commuters in South Africa use minibus taxis and most users earn
700 rand ($91) to 4,000 rand a month ... "
July 9 - Bloomberg (Radoslav Tomek): "The Slovak government is ready to
regulate prices after the eastern European nation switches to the euro to
prevent ‘speculative’ increases that would accelerate inflation, Economy
Minister Lubomir Jahnatek said. The government approved establishing a
so-called Price Council which will monitor consumer prices throughout 2009. The
council will have powers to ask the government to regulate prices of particular
goods or services, should it discover any ``anomalies'' in their development,
according to a document of the proposal discussed by the Cabinet today."
July 11 - Bloomberg (Khalid Qayum): "Pakistan’s inflation accelerated to a
30-year high in June ... Consumer prices in South Asia’s second-largest economy
jumped 21.53% from a year earlier ... "
July 9 - Bloomberg (Abeer Allam and Abdel Latif Wahba): "Egyptian inflation
accelerated to an average 11.7% in the fiscal year that ended June 30 ... "
July 7 - Bloomberg (Daryna Krasnolutska and Halia Pavliva): "Ukraine’s
inflation, the fastest in Europe ... fell to 29.3% in June from 31.1% in May,
which was the highest in Europe ... "
July 9 - Bloomberg (Milda Seputyte): "Lithuanian inflation accelerated in June
to the fastest pace in more than 11 years ... The inflation rate rose to 12.5%,
the third-highest in the EU, from 12 percent in May ... "
July 7 - Bloomberg (Ott Ummelas): "Estonian inflation accelerated in June,
returning to the fastest pace in 10 years, as energy and accommodation costs
jumped. The rate increased to 11.4%..."
July 9 - AFP: "Inflation in some emerging countries in Latin America and Africa
‘is getting out of control,’ International Monetary Fund head Dominique
Strauss-Kahn said ... "
Currency Watch
July 9 - Bloomberg (David M. Levitt): "New York’s Chrysler Building, once the
world’s tallest skyscraper, was acquired yesterday by the Abu Dhabi Investment
Council, a Middle Eastern sovereign wealth fund, for an undisclosed price."
The dollar index declined 0.9% to 72.1. For the week on the upside, the South
Korean won increased 3.8%, the Euro 1.3%, the Danish krone 1.3%, the South
African rand 1.3%, the Swiss franc 1.1%, and the Australian dollar 1.0%. On the
downside, the Taiwanese dollar and the Brazilian real both declined 0.1%.
Commodities Watch
July 7 - Bloomberg (Chanyaporn Chanjaroen): "Aluminum rose to a record in
London as a power shortage forced smelters in the north of China, the world's
largest producer of the metal, to reduce output."
Gold rose 3.3% to $964 and Silver 2.4% to $18.82. August Crude added 40 cents
to $144.52. August Gasoline declined 0.6% (up 43% y-t-d), and August Natural
Gas sank 12.9% (up 58% y-t-d). September Copper dropped 5.3%. September Wheat
dropped 6.2% and August Corn sank 8.8%. The CRB index declined 2.3% (up 28.6%
y-t-d). The Goldman Sachs Commodities Index (GSCI) fell 1.2% (up 44% y-t-d and
73% y-o-y).
China Watch
July 7 - Wall Street Journal Asia (Lawrence J. Brainard): "It’s becoming ever
clearer that China’s inflation problem is a monetary phenomenon after all, and
not just a temporary spike in the prices of a couple food staples. But
consensus on how to solve that monetary problem is still elusive. Beijing’s
adoption last week of administrative measures to combat speculative ‘hot money’
inflows shows policy makers still believe ... that tightening regulation alone
can do the trick. That may prove a costly mistake. Consider the scale of the
problem facing policy makers. Headline consumer price inflation has clocked in
at or above 7.1% every month this year. Supply shocks for foods like pork play
a role, but the fundamental problem is too much money pouring into the economy,
chasing too few assets. One indicator of this is that China has recently been
accumulating foreign assets at the astonishing rate of $75 billion a month."
July 8 - Bloomberg (Tian Ying): "China’s car sales rose 17% in the first half
as economic growth spurred demand in the world’s fastest growing major vehicle
market. Automakers sold a total of 3.61 million cars, sport-utility vehicles
and multipurpose vehicles ... "
July 11 - Bloomberg (Li Yanping and Nipa Piboontanasawat): "Foreign direct
investment in China rose 45.6% in the first half from a year earlier, swelling
inflows of cash that may stoke inflation in the world’s fastest-growing major
economy. Spending by overseas companies increased to $52.4 billion ... "
Japan Watch
July 10 - Bloomberg (Mayumi Otsuma): "Japan’s wholesale inflation rate rose to
a 27-year high in June as companies raised prices to counter record oil and
commodity costs. Producer prices climbed 5.6% from a year earlier, after a
revised 4.8% gain in May ... "
July 11 - Bloomberg (Toru Fujioka): "Japanese consumers became the most
pessimistic they’ve been in at least 26 years as higher gasoline prices and
food costs eroded their spending power."
India Watch
July 11 - Bloomberg (Kartik Goyal): "India’s inflation accelerated to the
fastest pace since 1995 ... Wholesale prices rose 11.89% in the week to June 28
... "
July 11 - Bloomberg (Cherian Thomas and Kartik Goyal): "India’s industrial
production grew at the slowest pace in more than six years and Standard &
Poor’s said it may cut the nation’s credit rating to junk if the economy
deteriorates further ... Bonds dropped after S&P said its BBB- ranking on
India’s long-term local currency debt may be lowered to ‘speculative grade.’ ‘A
rating downgrade would be a blow to India,’ said Ramya Suryanarayanan, an
economist at DBS Bank Ltd ... ‘Heading in that direction isn’t good as
investors are already panicking about inflation, growth and fiscal prospects.’"
Asia Bubble Watch
July 9 - Bloomberg (Seyoon Kim): "South Korea’s retail sales rose 10.2% in May
as consumers paid more for gasoline and bought more cars and computers."
July 7 - Bloomberg (James Peng): "Taiwan’s export growth unexpectedly
accelerated in June on demand from China, Europe and Japan. Overseas shipments
rose 21.3% from a year earlier after increasing 20.5% in May ... "
July 9 - Bloomberg (Soraya Permatasari): "Malaysia’s central bank said
inflation probably exceeded 6% in June, higher than earlier estimated and
bolstering expectations it will raise interest rates as early as this month."
July 8 - Bloomberg (Kyung Bok Cho): "Asian companies outside Japan will face a
‘perfect storm’ of rising commodities costs and slowing growth in export
volumes, triggering earnings-estimate downgrades by analysts, Citigroup Inc.
said. Materials and industrials stocks ... have ‘lofty’ valuations and should
be avoided ... "
July 8 - Bloomberg (Naila Firdausi): "Indonesia’s consumer confidence index
dropped to a record low in June after the government increased fuel prices a
month earlier and on concern that food costs will continue rising, a research
body said."
July 8 - Bloomberg (Woro Widya Utami and Berni Moestafa): "Indonesia may have
to spend as much as 300 trillion rupiah ($33 billion) to cap fuel prices next
year as oil surges, Finance Minister Sri Mulyani Indrawati said."
Latin America Watch
July 9 - Bloomberg (Jens Erik Gould): "Mexican inflation accelerated to the
fastest in almost four years last month on higher costs for food and housing
... Consumer prices climbed 5.26% in June from a year earlier ... "
July 8 - Bloomberg (Daniel Cancel and Matthew Walter): "Venezuelan annual
consumer prices in June rose the most since 2003 as the easing of price caps on
foods caused supermarket prices to surge. Consumer prices rose 32.2% in June
from a year earlier ... "
Unbalanced Global Economy Watch
July 7 - Bloomberg (Alexandre Deslongchamps): "Confidence among Canadian
consumers fell to a 13-year low in the June as households put off plans to make
big-ticket purchases, a survey by the country’s Conference Board showed."
July 9 - Wall Street Journal (Nirmala Menon): "Canadians are going to tighten
their belts after the spending spree of the last couple of years ...
‘Households have been spending almost like drunken sailors over the past couple
of years . . .’ says the report by TD Bank Financial Group economists Craig
Alexander and James Marple. ‘The central question is whether consumers can keep
tipping pints or whether a hangover is in store.’"
July 9 - Bloomberg (Brian Swint): "U.K. mortgage rates surged to the highest in
eight years and consumer confidence dropped, adding to signs that the economic
downturn is deepening. The rate on a home loan fixed for two years rose to
6.63% in June, the highest since February 2000."
July 8 - UK Times (Grainne Gilmore): "The number of new home loans granted
during May plunged by 44% compared with last year ... "
July 8 - Bloomberg (Brian Swint): "Sales of services and manufactured goods in
the U.K. fell in the second quarter, posing ‘serious risks’ that the economy
will tumble into a recession, the British Chambers of Commerce said ... ‘We are
now facing serious risks of recession,’ David Kern, economic adviser to the
BCC, said ... ‘The outlook is grim, and we believe that the correction period
is likely to be longer and nastier than anticipated.’"
July 8 - Bloomberg (Alan Purkiss): "U.K. Chancellor of the Exchequer Alistair
Darling faces a 7.5 billion-pound ($14.8 billion) budget shortfall next year
because of the slowdown in the economy ... That means the government will have
to raise taxes, reduce spending or borrow more, the newspaper said."
July 9 - Bloomberg (Gabi Thesing): "Exports from Germany, Europe’s largest
economy, declined the most in almost four years in May, as a cooling global
economy and a stronger euro curbed demand. Sales abroad ... decreased 3.2% from
April ... That’s the biggest drop since June 2004."
July 7 - Bloomberg (Maria Petrakis): "Greece’s inflation rate remained at 4.9%
in June, matching the previous month’s 10-year high, as higher fuel prices and
housing costs led price increases."
July 9 - Bloomberg (Mark Sweetman): "Russian inflation climbed 9% in the year
through July 7, led by higher costs for diesel fuel and rice."
July 9 - Bloomberg (Paul Abelsky): "Russia surpassed Germany as Europe’s
biggest auto market in the first half as sales rose 41% to 1.65 million cars,
Pricewaterhouse Coopers LLP said. Spending on autos increased 64% to a record
$33.8 billion, buoyed by $27 billion of imports ... "
July 9 - Bloomberg (Victoria Batchelor): "Australian consumer confidence fell
to a 16-year low and home-loan approvals dropped by the most in eight years ...
"
July 8 - Bloomberg (Tracy Withers): "New Zealand companies say sales and
trading will decline in the third quarter, pushing profit expectations to a
25-year low, as economic growth slumps."
July 11 - Bloomberg (Tracy Withers): "The average net wealth of New Zealand
consumers posted the biggest fall in almost 10 years as house prices and stocks
declined while rising interest rates increased debt."
Bursting Bubble Economy Watch
July 9 - Wall Street Journal (Jacqueline Palank): "Home builders, retailers and
transportation companies were among the nearly 5,000 businesses that filed for
bankruptcy last month, a number that has almost doubled in two years. In June,
4,992 businesses sought to reorganize or liquidate under bankruptcy protection
... That is an increase of nearly 50% over last June’s 3,408 filings and almost
twice as many as the 2,574 companies that filed for bankruptcy in June 2006."
July 8 - Wall Street Journal (Sara Schaefer Munoz): "The future looked bright
when several small banks decided to open in this city along the Gulf of Mexico.
Property values in southwest Florida were surging, and older start-up banks had
sold themselves for handsome profits after just a few years in business.Now,
though, for-sale signs dot shopping centers, offices and vacant lots.
Developers are desperately hawking
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