Friday, January 15, 2010
Sovereign defaults head 2010 risk hitlist for WEF
The risk that deteriorating government finances could push economies into full-fledged debt crises tops a list of threats facing the world in 2010, according to a report by the World Economic Forum.
Major world economies have responded to the steep downturn created by the financial crisis with stimulus packages and by underwriting private debt obligations, causing deficits to balloon. This may have helped keep a worse recession at bay, but high debt has become a growing concern for financial markets.
The WEF think tank, in its annual Global Risks report ahead of its meeting in Davos, Switzerland, said unsustainable debt levels ranked among the top three risks for the year ahead, alongside underinvestment in infrastructure and chronic diseases driving up health costs and reducing economic growth. (more)
Things fall apart in eurozone
As fears of a US dollar meltdown have loomed ever larger in recent years, major investors, including central banks, have moved significant portions of their cash reserves into the euro, the currency of the European Union (EU). And while it is true that the euro offers some shelter from the American economic catastrophe, the currency does come with baggage that investors should not ignore.
Introduced as an accounting medium in 1990, the euro became an actual currency in 1992. It is at present issued by 16 of the 27 EU member countries, representing some 329 million people. (more)
Introduced as an accounting medium in 1990, the euro became an actual currency in 1992. It is at present issued by 16 of the 27 EU member countries, representing some 329 million people. (more)
Boskin: U.S. Economic Data Is Almost Criminal
Former White House economist Michael J. Boskin says American investors no longer place much credibility in the economic and fiscal statistics being reported by the U.S. government, and are “increasingly inclined to disbelieve them.”
Boskin, the one-time economic adviser to President George H.W. Bush, says that solid, reliable information is needed by investors, because “as a society, and as individuals, we need to make difficult, even wrenching choices, often with grave consequences.”
To base those decisions on misleading, biased, or manufactured numbers, is not just wrong, “but dangerous,” he wrote in The Wall Street Journal.
But, due to the obvious fudging of numbers involved in the government’s health care insurance industry reform effort, most Americans now believe the health-care legislation will actually raise their insurance costs, rather than reduce them, and increase the federal budget deficit, rather than contain it. (more)
Boskin, the one-time economic adviser to President George H.W. Bush, says that solid, reliable information is needed by investors, because “as a society, and as individuals, we need to make difficult, even wrenching choices, often with grave consequences.”
To base those decisions on misleading, biased, or manufactured numbers, is not just wrong, “but dangerous,” he wrote in The Wall Street Journal.
But, due to the obvious fudging of numbers involved in the government’s health care insurance industry reform effort, most Americans now believe the health-care legislation will actually raise their insurance costs, rather than reduce them, and increase the federal budget deficit, rather than contain it. (more)
Fitch: Some Prime Mortgages Will Soar 15 Percent
More than $47 billion of prime and Alt-A mortgages are due to recast from interest only payments to fully amortizing payments over the next 12 months, Fitch Ratings reports.
This recast exposes borrowers to an average payment increase of 15 percent and possibly higher if interest rates increase.
During the next two years, a total of $80 billion of prime and Alt-A loans, and a total of $50 billion subprime loans, are due to recast.
This payment shock will have a substantial effect on the recasting population, according to Managing Director Roelof Slump. (more)
This recast exposes borrowers to an average payment increase of 15 percent and possibly higher if interest rates increase.
During the next two years, a total of $80 billion of prime and Alt-A loans, and a total of $50 billion subprime loans, are due to recast.
This payment shock will have a substantial effect on the recasting population, according to Managing Director Roelof Slump. (more)
US Foreclosures Up 21% in 2009
The number of U.S. residential properties receiving at least one foreclosure filing jumped 21% in 2009 to a record 2.82 million, rrports RealtyTrac.
The report also showed that 2.21% of all U.S. housing units (1 in 45) received at least one foreclosure filing during the year, up from 1.84% in 2008, 1.03% in 2007 and 0.58% in 2006.
In December, foreclosures jumped 14 percent from the previous month. (more)
The report also showed that 2.21% of all U.S. housing units (1 in 45) received at least one foreclosure filing during the year, up from 1.84% in 2008, 1.03% in 2007 and 0.58% in 2006.
In December, foreclosures jumped 14 percent from the previous month. (more)
US, IMF role in Haiti’s food riots
VIOLENT PROTESTS IGNITED BY SOARING FOOD PRICES TOPPLED ON APRIL 12 PRIME MINISTER Jacques Edouard Alexis of Haiti, the poorest country in the Americas. It was the first government in the world that fell victim to angry people suffering from high food costs due to rising fuel prices, weather problems, increased demand in China and India, low global stocks, the use of crops to create biofuels and commodity speculation.
Food riots have also erupted in more than a dozen countries. (more)
Unemployment claims jump higher
The number of Americans filing for initial unemployment insurance rose more than expected last week, the government said Thursday.
There were 444,000 initial job claims filed in the week ended Jan. 9, up 11,000 from a revised 433,000 the previous week, the Labor Department said in its weekly report.
A consensus estimate of economists surveyed by Briefing.com expected new claims to rise to 437,000.
The 4-week moving average of initial claims was 440,750, down 9,000 from the previous week's revised average of 449,750. (more)
Dollar Crisis Looms if US Doesn't Curb Debt: Experts
The United States must soon raise taxes or cut government spending to curb its debt, and failure to act will risk a crippling dollar crisis as investor confidence ebbs, a panel of experts said on Wednesday.
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"It has got to be done. It will be done some day. It may be done with enormous pain. Or it may be done more rationally," said Rudolph Penner, a former head of the nonpartisan Congressional Budget office who co-chaired the 24-strong Committee on the Fiscal Future of the United States. (more)
The Subsidy That Won't Die
The big bankers are in the news again, and they're steamed. On Wednesday, bank CEOs will testify before the Financial Crisis Inquiry Commission. Meanwhile, the industry is pushing back against plans from the Obama administration to tax large banks as part of an effort to recoup bailout costs. JPMorgan Chase CEO Jamie Dimon, bristling at criticism of his hardworking bankers, told employees: "I am a little tired of the constant vilification of these people." Wall Street's big shots have had enough They've paid back their TARP money—which, some of them say, they didn't need anyway—with interest. They've got the government off their balance sheets, so now the government should stop meddling with them. (more)
Nordic Terror: UK Puts Iceland on Terrorist List
One of the casualties of the financial crisis which has gotten little notice in the US is Icleand, and it went down in a particularly ugly fashion. Gordon Brown, the UK’s fantastically unpopular Prime Minister, said that Icelandic banks had threatened to not honor obligations to British account holders, so he declared Iceland a terrorist country and seized the banks assets. This caused the banks to go under and the Icelandic economy to implode to the extent that if Russia hadn’t sent them billions of dollars, they would have literally starved, since they need to import food. (more)
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