The recent recession in UK, which ended in the final quarter of 2009, has lasted for 18 months, the longest period on record. In order to avoid an utterly economic collapse, the Bank of England (BoE) kept cutting interest rates down to a historical level of 0.5 percentage points. In early February, central bank officials decided to temporary halt the bond-buying program, mainly because the inflation rate rose to 3.5 percent in January. The actual inflation rate surpassed the 2% target rate due to a rise in the value-added tax back to 17.5% after the expiration of a temporary cut to 15%, a 70% increase in the oil prices and the weakness of the pound. The general consensus is that the United Kingdom’s economy is still struggling and the Bank of England will have to continue its quantitative easing program worth nearly GBP 200 billion. BoE Governor Mervyn King said that it is “far too soon” to say the bond purchasing plan will not be expanded. Continue reading ‘UK – Behind The Curve’
Tag Archive for 'Credit Crisis'
For the last 10 years, the Greeks, the Italians, the Spaniards or the Irish, have enjoyed a good time, spending much more than they afforded. For some of the countries of the 16-member euro currency zone — Greece, Ireland, Italy, Portugal and Spain, the prolonged dream of everlasting consumption has turned into a nightmare. The new reality has raised the probability of default and the risk that the country may be forced-out of Eurozone. Though the prospect is very unlikely, it has to be taken into account very seriously. Since the beginning of the month, when massive problems have emerged within the EU-16, the EUR currency has dropped significantly against the USD, from a level of 1.51 to a level of almost 1.43. According to FX data, the value of the dollar’s net short position fell to around $11.8 billion in the week ending December 13, from 21.8 billion the previous week. Continue reading ‘EUR – On The Verge Of Breakdown’
The Austrian central bank is attempting to calm the financial markets that are increasingly worried about the regional banking system as two major events shocked the markets for two consecutive days. On Monday, the central bank nationalized Hypo Alpe Adria – Austria’s sixth-largest bank, a unit of German public-sector bank BayernLB — a move designed to prevent the bank from sliding into a bankruptcy fueled in part by bad loans, most of them originated in Eastern Europe. Today, Austrian daily Die Presse reported that the Austrian National Bank (ANB) and financial market watchdog FMA had put Volksbanken on a watchlist for endangered financial institutes. At 1530 GMT, shares in key Austrian banks were underperforming the wider Austrian market. Erste Group Bank was off 3.8%, while Raiffeisen Bank was down 6.1%. Continue reading ‘Austria – EU’s Weakest Link’
It is very hard to pick a ground-zero for the housing bubble that pushed the whole world into The Great Recession. Allow me to begin our trip in late 1989 in Japan. The stock market – symbolized by Nikkei 225 index, peaked at approximately 39,000, while the real estate market climbed the summit at approximately $1 million per square meter. This March, Nikkei traded as low as 7,200 while the property tags lost on average 90% of their peak values. We should notice that Japan experienced a dual-bubble shock and that has been underemphasized by many economists. Continue reading ‘Home $weet Home (I)’
Today, before the markets opened in New York, there were plenty of encouraging signs coming from both fronts: corporate earnings and economic indicators. However, Dow Jones index lost 1 percent by the end of the trading day. One could say that the old “buy the rumor sell the news” has prevailed. Early morning, we found out that the sales of existing US homes surged a record 9.4 percent in September. Even though the number is extremely bullish, one should notice that half of the transactions were basically foreclosed properties. According to S&P, there are $408 billion in mortgages more than 90 days overdue and $332 billion in home loans that have been foreclosed or written off by lenders. Continue reading ‘The State of Global Recovery’
Since the global credit crisis began, banks and financial institutions have reported more than $1.5 trillion in credit losses and writedowns worldwide. Even though it seems like we passed the hardest economic period in decades, I strongly believe we are not out of the woods yet. To understand when we could reach that spot, I would pinpoint some key metrics that we should look at when judging the stage of the global economic revival. I hope that many of my readers would agree that the epicenter of the global financial meltdown will coincide with the place where the economic rebound is to occur first. By all means, that place is the US economy. Continue reading ‘Are We Out of the Woods?’
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