Oh, just when it might be looking safe to go into the pool again, by virtue of the EU putting up a substantial enough plan to possibly start calming overfrayed nerves, another source of worry appears to be deteriorating, namely Morgan Stanley. Sports fans may recall that a badly-needed cash injection into the embattled investment […]
Read more...The statement of intent by the EU today is progress but far short of a plan. However, measures by major countries are to be announced tomorrow. The statement, that each country will announce measures, may be greeted with disappointment, since there had been some hope that the summit would announce an EU program, as opposed […]
Read more...Reader Saboor pointed to a BBC report on grim words from IMF chief Dominique Strauss-Kahn about the state of the global financial system; reader Dwight later sent a link to a bit more detailed Reuters report. First from the BBC, “IMF in global ‘meltdown’ warning“: The world financial system is teetering on the “brink of […]
Read more...One troubling aspect of the banking crisis was that European banks, like their US peers, are at risk of failure, and some of them are sufficiently large that they are beyond the capacity of any one country to save. While Fortis was bailed out by three countries, ad hoc arrangements are risky. As Keynes said, […]
Read more...We’ve said for some time that European banks are (believe it or not) in even worse shape on average than their US peers, although the public at large is far more aware of the problems here by virtue of our financial system having hit the wall so spectacularly. While US firms waded into risky waters […]
Read more...England, which has been more candid in talking about the financial crisis than other countries (the governor of the Bank of England has said, for instance, that living standards will fall) issued a blunt assessment earlier today. The scary update is that even overnight lending is starting to break down. From the Financial Times: UK […]
Read more...I have been more than a tad concerned about near-paralysis in the money markets and imploding equity prices. But this e-mail, from a well connected international investor not prone to alarm or (normally) the use of capital letters says that the banking crisis is staring to bring international shipping to a halt. By way of […]
Read more...BBC reports that the IMF is reactivating some of the emergency mechanisms used during the 1997 Asian crisis to help support countries suffering from capital flight. The story is a bit thin on particulars; we’ll provide an update should they surface later today. From the BBC (hat tip reader Saboor): The International Monetary Fund (IMF) […]
Read more...So far, the statement released this afternoon US time out of a Euro summit amounts to an attempt at reassuring hand-waving but in fact was merely a restatement of the status quo. The group of European leaders did agree on a set of principles, but it remains an open question whether they will be able […]
Read more...We have been asserting for many moons that despite having lower incidence of US style, “another quarter, another writedown” behavior, European banks are actually in weaker condition than their US counterparts. That’s based on the view of a buddy who has top level regulatory connections here and in Europe, and it seems plausible given the […]
Read more...The unravelling that started with the Freddie and Fannie conservatorship has exacted a toll not just on dollar-denominated paper but on financial assets around the world. As they have fallen, so too has the standing of the US, which zealously promoted liberalized capital markets and saw US firms establish dominant positions when those rules were […]
Read more...Ken Ohmae, former head of McKinsey’s Tokyo office (disclosure: I have a passing acquaintence with him and he was enormously well regarded in his day despite being a tireless self-promoter) says that the Paulson program is grossly inadequate and the magnitude of the US crisis is so large that a $5 trillion international facility is […]
Read more...Two stories on Bloomberg discussed how the world’s export powerhouses, China and Japan, are feeling the effects of the global slowdown. First on China, which seems inclined to weaken the yuan to defend growth. That’s a mixed blessing for the US. A stronger dollar hurts the export sector, the one sunny area of the economy, […]
Read more...Note the not-pretty pattern. The flow of funds out of emerging markets has reached the high-water mark of the period leading into the Asian, then Russian financial crises of 1997-1998. However, after recovering from the damage of this period, emerging markets as a whole enjoyed a period of strong growth. In theory, their economies are […]
Read more...A very useful post comes from Robert Dekle, Jonathan Eaton, and Samuel S. Kortum at VoxEU. The authors steer clear of the “when will global imbalances end” question (as in when will China, Japan, Taiwan, and the Gulf States tire of funding our current account deficit) to focus on one at least as important: “what […]
Read more...