G.O.O.D

Source: Reuters

The financial crisis is shattering global confidence, with three quarters of households cutting spending and consumers in emerging countries feeling especially squeezed, a survey showed on Tuesday.

While countries like China, India and Russia have helped fuel world growth in recent years, the survey of 22 states in November found consumer optimism in such emerging economic powers in “precipitous decline.”

“There’s a lot of doubt right now where growth is going to come from,” Clifford Young of Ipsos Global Public Affairs, the international market research and polling company that carried out the online survey, told Reuters in a telephone interview.

He said the survey, which included a whole range of rich, and emerging states, “put in check a lot of strategies of global companies that were banking on emerging markets. In addition it puts in check any notion of ‘decoupling.’”

Despite boasting a year ago that they were “decoupled” from the problems gripping developed markets, emerging stock markets are hovering near their lowest point in four years.

What started as a meltdown in the U.S. market for high-risk mortgages has engulfed the world, freezing access to credit, sparking bank collapses and requiring the bailout of whole industries and some entire countries.

“We expected things to be bad but it’s most striking in the two big emerging markets India and China,” Young said of the poll. “It’s not good news in the short to medium term.”

The poll found that global consumer optimism had nearly halved. Only 31 percent described the economic situation as very good or somewhat good in November compared with 55 percent who said the same thing in April 2007.

The largest falls in optimism, using this method, were in China, which plunged to 46 percent from 90 percent 18 months ago, and India, which dropped to 65 percent from 88 percent.

Many leading emerging markets export commodities. Flush with cash from soaring prices until six months ago, domestic demand helped to underpin growth. But now, the lag effect of falling demand and prices for oil, grains and industrial metals is being felt in these nations too.

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Technorati Tags: financial crisis, consumer spending

Source: globalresearch.ca

The Federal Reserve has bluntly refused a request by a major US financial news service to disclose the recipients of more than $2 trillion of emergency loans from US taxpayers and to reveal the assets the central bank is accepting as collateral. Their lawyers resorted to the bizarre argument that they did so to protect ‘trade secrets.’ Is the secret that the US financial system is de facto bankrupt? The latest Fed move is further indication of the degree of panic and lack of clear strategy within the highest ranks of the US financial institutions. Unprecedented Federal Reserve expansion of the Monetary Base in recent weeks sets the stage for a future Weimar-style hyperinflation perhaps before 2010.

On November 7 Bloomberg filed suit under the US Freedom of Information Act (FOIA) requesting details about the terms of eleven new Federal Reserve lending programs created during the deepening financial crisis.

The Fed responded on December 8 claiming it’s allowed to withhold internal memos as well as information about ‘trade secrets’ and ‘commercial information.’ The central bank did confirm that a records search found 231 pages of documents pertaining to the requests.

The Bernanke Fed in recent weeks has stepped in to take a role that was the original purpose of the Treasury’s $700 billion Troubled Asset Relief Program (TARP). The difference between a Fed bailout of troubled financial institutions and a Treasury bailout is that central bank loans do not have the oversight safeguards that Congress imposed upon the TARP. Perhaps those are the ‘trade secrets the hapless Fed Chairman,Ben Bernanke, is so jealously guarding from the public.

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Technorati Tags: Hyperinflation, Weimar Republic

Source: Bloomberg.com

The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.

Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression.

The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests.

“If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, a senior managing director at New York-based ICP Capital LLC, which oversees $22 billion in assets.

The Fed stepped into a rescue role that was the original purpose of the Treasury’s $700 billion Troubled Asset Relief Program. The central bank loans don’t have the oversight safeguards that Congress imposed upon the TARP.

Total Fed lending exceeded $2 trillion for the first time Nov. 6. It rose by 138 percent, or $1.23 trillion, in the 12 weeks since Sept. 14, when central bank governors relaxed collateral standards to accept securities that weren’t rated AAA.

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Technorati Tags: Federal Reserve, TARP

Source: Hindustan Times

The world could go through its worst recession since the Great Depression as a massive financial crisis has slashed global investment and sharp drops in commodity prices severely hurt poor-country exports, the World Bank warned on Tuesday.

The global development bank slashed its previous estimates for global growth to 2.5 per cent in 2008 and 0.9 per cent in 2009, well below the 3 per cent rate typically considered the dividing line between global growth and contraction. “The financial crisis is now likely to result in the most serious recession since the 1930s,” said the World Bank’s chief economist Justin Lin, as the group released its annual report on the global economy.

The current economic slowdown was notable for both its length and breadth across all regions of the world, leading to a contraction in the most wealthy nations and a sharp slowdown in emerging countries, the bank said.

The bank’s analysis pointed to a number of indicators of a dramatic slowdown. Global trade volumes will contract for the first time since 1982. Worldwide investment will fall 50 per cent in 2009, compared to 2007. The financial crisis has cut access to loans in advanced and developing countries, pulling investment out of poorer nations and reducing consumer spending.

Lin urged all countries with the ability to increase government spending to use it to boost domestic demand.

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Technorati Tags: World Bank, Great Depression

Germany

Source: Bloomberg.com

Germany’s economy will shrink 2.2 percent next year, the Munich-based Ifo institute said, the second assessment in as many days to predict the worst recession since World War II in Europe’s biggest economy.
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“Signals for the German economy are flashing red for 2009,” Ifo said in the statement. “The German economy, which benefited in particular from the strong global economic upswing because of its trade orientation, is now being pulled into the maelstrom that the financial crisis has created globally.”

The latest forecast adds to evidence that Germany is facing its deepest economic crisis since returning to democracy in 1949, piling pressure on Chancellor Angela Merkel to play a more active role in promoting growth. Merkel has been criticized by European leaders including French President Nicolas Sarkozy for doing too little to prepare for the downturn.

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Technorati Tags: recession

Source: Bloomberg.com

A global stock slump may have further to go, according to Tobin’s Q ratio, which compares the market value of companies to the cost of their constituent parts, CLSA Ltd. strategist Russell Napier said.

The ratio, developed in 1969 by Nobel Prize-winning economist James Tobin, indicates the Standard & Poor’s 500 Index is still too expensive relative to the cost of replacing assets, said Napier. While the 39 percent drop in the S&P this year pushed equity prices below replacement cost, history suggests the ratio must sink further as deflation sets in, he said. The S&P may plunge another 55 percent to a trough of 400 by 2014, the strategist said.

“Things have always looked absolutely terrible at the bottom,” said Napier, Institutional Investor’s top-ranked Asia strategist from 1997-1999. With deflation “the value of assets falls and the value of debt stays up, then equity gets crushed. The results are always horrific.”

Shares have fallen this year as the worst financial crisis since the Great Depression caused almost $1 trillion of losses at institutions around the globe and dragged the world’s largest economies into recession. The MSCI World Index has tumbled 44 percent in 2008, set for the biggest annual decline in its four- decade history.

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Technorati Tags: Q ratio