Oil Rises From a Six-Week Low on Tropical Storm, Iran's Nuclear Standoff
Crude oil rose from a six-week low as a tropical storm headed toward
the Gulf of Mexico and Iran, the world's fourth-biggest producer,
resisted demands to suspend nuclear research.
Trouble at Fannie Mae and Freddie Mac Stirs Concern Abroad
About
one-fifth of securities issued by Fannie, Freddie and a handful of much
smaller quasi-governmental agencies, some $1.5 trillion worth, were
held by foreign investors at the end of March. One out of 10 American
mortgages is,
in effect, in the hands of institutions and governments outside the United States.
Now
that the two companies are at risk, how their rescue is handled will
ultimately test the world’s faith in American markets. It could also
influence the level of interest rates and weigh on the strength of the
dollar for years to come, analysts say.
“No
less than the international perception of the credit quality of the
U.S. government is at stake,” said Richard Hofmann, an analyst with
CreditSights, an independent research house with offices in London and
New York."
Also
at stake is Americans’ future ability to gain access to credit. If
foreign companies and governments abandon United States investments,
home, auto and credit card loans will be much more difficult to come by.
Never Have So Many Short Sellers Made So Much Money With Stocks Worldwide Investors worldwide are betting more than $1 trillion on a collapse in stock prices.
Economist’s View on Why The Economy Is as GOOD as It Is (and not worse … yet)
Perhaps most importantly, however, is the massive liquidity
injections from the rest of the world, or what Brad Setser calls “
the quiet bailout.”
In the first half of this, global central banks accumulated $283.5
billion of Treasuries and Agencies, something around $1,000 per capita.
This is real money – I
outlined the likely implications in January.
Foreign CBs are happily financing the
first US stimulus package; will
they be happy to finance a second? Do they have a choice? Their
accumulation of Agency debt is also keeping the US mortgage market
afloat. Do not underestimate the impact of these foreign capital
inflows. If the rest of the world treated the US like we treated
emerging Asia in 1997-1998, the US economy would experience a slowdown
commensurate with the magnitude of the financial market crisis. The
accumulation of US assets
is also forcing an expansion of foreign CB’s
balance sheets, creating global monetary stimulus that allows the rest
of the world to decouple from the US economy, supporting
continued US export growth
Commercial bankruptcies soar, reflecting widening economic woes.
Commercial
filings for the first half of 2008 are up 45 percent from last year, as
the national climate for commerce continues to deteriorate amid rising
energy and food costs, mounting job losses, tighter credit and a
reticence among consumers to part with discretionary income.
From
April through June, 15,471 U.S. businesses called it quits, according
to data from Automated Access to Court Electronic Records, an Oklahoma
City bankruptcy management and data company.
The Coming Systemic Bust of the U.S. Banking System: “Dead Stocks Rallying”
This
past week started with concerns about another systemic meltdown of the
U.S. financial system as the insolvency of Fannie and Freddie was
revealed and as IndyMac went bust (this third largest bank collapse in
U.S. history). But the week ended with a remarkable rally of financial
stocks as better than expected results from Wells Fargo, JP Morgan and
Citi soothed the fears that major financial institutions were in even
more distress than already predicted by market analysts.
Unfortunately,
this massive rally of financial stocks in the latter part of the week
is just another temporary bear market rally that will fizzle away once
the onslaught of bad financial and macro news builds up again.
Paulson braces public for months of tough times
Treasury
Secretary Henry Paulson sought to reassure an anxious public Sunday
that the banking system is sound, while also bracing people for more
troubled times ahead.
The 2008 oil shock
This calculation assumes that the oil exporters will export about 45 million barrels a day of oil.
Each
$5 increase in the aver
age price of oil increases the oil exporters’
revenues by about $80 billion, so if oil ends up averaging $125 a
barrel this year rather than $120 a barrel, the increase in the oil
exporters revenues would be close to a trillion dollars.
Beijing orders half its cars off roads to clear air for Olympics
Authorities
forecast that the sweeping traffic restrictions, and measures to shut
down polluting factories, would help clear smog over Beijing in time
for the Games, which begin Aug. 8.
