The chairman of the US Federal Reserve has accused China of damaging prospects for a global economic recovery through its deliberate intervention in the currency market to hold down the value of the renminbi.
…..“Right now, our concern is that the Chinese currency policy is blocking what might be a more normal recovery process in the global economy,” he said. “It is to some extent hurting the recovery”.
Europe Races to Stem Debt Crisis Amid Rescue Plan for Dexia – WSJ.com
Euro-zone governments suffered a blow Tuesday in their efforts to contain a deepening sovereign debt crisis as one of the Continent’s biggest banks, dogged by fears about its exposure to Greek and Italian debt, was on the verge of a government-backed breakup. Bank executives and government officials zeroed in on a drastic plan to break up Dexia SA, a Belgian-French bank that is one of Europe’s 20 largest in assets.
via Europe Races to Stem Debt Crisis Amid Rescue Plan for Dexia – WSJ.com.
Bull versus bear is dead – macrobusiness.com.au
As the S&P500 rocketed into the close this morning on yet another European bailout rumour, it occurred to me just how broken the equity market is right now. We are trapped in bear market dynamics of grinding sell-offs punctuated by explosive short-covering rallies with no end in sight.
….. Days like today are not some romantic struggle between bulls and bears, they are a reminder that in periods of structural risk that volatility reigns. Anyone that tells you otherwise is a fool or trying to sell you something.
via Bull versus bear is dead – macrobusiness.com.au | macrobusiness.com.au.
Australia: August retail sales up 0.6%
Westpac reported Australian retail sales posted another strong month with nominal sales up 0.6%mth in Aug following a similar gain in July. Through the year sales growth rose from a low of 1.4%yr in Jun to 2.1%yr in August, suggesting a modest 0.6%yr gain in per capital spending.
Talking to a mobile phone salesman yesterday, however, he said that state-wide they had a very quiet September. One has to be careful of seeking out evidence that supports your market view, but it occurred to me that mobile phone sales may be a good barometer of consumer sentiment.
The Ugly World Of Auto Sales | ZeroHedge
While the media giddily reported the September new vehicle sales numbers, beneath the surface, there was little to be giddy about. At 1,053,722 units, sales were down 2% from an already lousy August, but up 10% from an even lousier September 2010.
….But September benefited from a traumatic August: Consumer confidence was hit by the absurd debt-ceiling negotiations in Congress; stock markets worldwide plummeted; and upheavals in the Eurozone made it into the daily news. Then during the last week of August, hurricane Irene wreaked havoc on the East Coast. Sales in the affected areas came to a halt.
To Cure the Economy – Joseph E. Stiglitz – Project Syndicate
The economy was very sick before the crisis; the housing bubble merely papered over its weaknesses. Without bubble-supported consumption, there would have been a massive shortfall in aggregate demand. Instead, the personal saving rate plunged to 1%, and the bottom 80% of Americans were spending, every year, roughly 110% of their income. Even if the financial sector were fully repaired, and even if these profligate Americans hadn’t learned a lesson about the importance of saving, their consumption would be limited to 100% of their income. So anyone who talks about the consumer “coming back” – even after deleveraging – is living in a fantasy world.
via To Cure the Economy – Joseph E. Stiglitz – Project Syndicate.
Follow the Money: Behind Europe’s Debt Crisis Lurks Another Giant Bailout of Wall Street
A Greek (or Irish or Spanish or Italian or Portuguese) default would have roughly the same effect on our financial system as the implosion of Lehman Brothers in 2008. Financial chaos.
….The Street has lent only about $7 billion to Greece, as of the end of last year, according to the Bank for International Settlements. That’s no big deal.
But a default by Greece or any other of Europe’s debt-burdened nations could easily pummel German and French banks, which have lent Greece (and the other wobbly European countries) far more.
That’s where Wall Street comes in. Big Wall Street banks have lent German and French banks a bundle.
Guest Post: Credit Spreads In The New Normal | ZeroHedge
A banking crisis implies easy money, ZIRP, various types of balance sheet expansion, and lower credit quality on central bank balance sheets. This acts to suppress credit risk, compressing spreads. This creates “artificiality” in credit market insofar as a central bank is not a natural buyer of higher risk securities. There will come a time when risk is moved off central books, and markets will have to learn how to re-price risk with no government support.
via Guest Post: Credit Spreads In The New Normal | ZeroHedge.
Beginning of the end is near for Greek drama | The Big Picture
After yesterday’s meeting with European Finance Ministers, they are finally facing the reality that the July 21st agreement where Greek bondholders would face just a 21% cut to the value of their bond holdings was just not enough. Said early this morning, Juncker, the European FM head, said “As far as PSI private sector involvement is concerned, we have to take into account that we have experienced changes since the decision we have taken on July 21. These are technical revisions we are discussing.” What he calls ‘technical revisions’ is a nice way of saying a bigger haircut is going to be demanded, something hopefully on the order of 50%+. While bondholders European banks included won’t like it because of a harsher mark, the bonds are already trading at distressed levels.
via Beginning of the end is near for Greek drama | The Big Picture.
Bernanke Defends Fed Focus on Unemployment
In an appearance before the Joint Economic Committee, Bernanke blamed slow-growing consumer spending, which accounts for 70 percent of economic activity, on persistently high unemployment and the gnawing fear among a growing number of Americans that their jobs may be at risk. After noting that the decline in home values and financial assets also contributed to decreasing confidence, he said “probably the most significant factor depressing consumer confidence, however, has been the poor performance of the job market.”