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Justin Hale
Joined: 24 Nov 2007
Location: the Straight Talk Express
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 Posted: Wed Oct 22, 2008 7:06 pm Post subject: UK to suffer deepest recession of any major economy |
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So say economists at the Swiss investment bank UBS.
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| with its economy contracting by 1.4% next year, the effects of the financial crisis are compounded by a "collapsing" housing market |
http://www.guardian.co.uk/business/2008/oct/23/recession-pound-dollar |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Wed Oct 22, 2008 7:31 pm Post subject: |
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Sounds right. Though Spain and Korea will give her good competition. Switzerland could totally implode as well.
UBS won't survive the crises. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Wed Oct 22, 2008 7:37 pm Post subject: |
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I feel like this is the Fed's fault. Sorry, Europe.  |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Wed Oct 22, 2008 7:55 pm Post subject: |
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The ECB wasn't exactly working with a healthy monetary policy herself. And British, Irish, Icelandic, Spanish and Swiss banks all have balance sheets in excess of 100% of GDP. The Dutch too.
This isn't America's fault. This is a paradigms fault.
If you're sitting down (or if you don't understand this stuff, feel free to stand):
http://www.ft.com/cms/s/0/61d7e148-8f15-11dd-946c-0000779fd18c.html
Yes, UBS has 484% of Swiss GDP in "assets".
The amount of those assets that are CDS or other level 3 assets is terrifying. |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Wed Oct 22, 2008 9:37 pm Post subject: |
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| Though Spain and Korea will give her good competition. |
It seems Korea is giving it the old college try today: KOSPI down 66.55 so far today--to 1068 (about 50% from where my investment fund would be happy) and the Won down another 49.00 to W1409.00 to the US dollar. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Wed Oct 22, 2008 9:56 pm Post subject: |
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Yeah, I'm surprised at how aggressive the declines in Asia have been this soon. The Korean government is really trying to reverse the problem, but I doubt they will be able to.
Post-AFC, the Tigers recovered and began excellent - though unbalanced - growth very quickly and I assume this will be no different. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Wed Oct 22, 2008 10:07 pm Post subject: |
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Related to Ya-ta's comment:
http://blogs.cfr.org/setser/2008/10/23/very-true/
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Alan Ruskin argues that the moves in the foreign exchange market today � with the dollar and yen rising sharply against nearly everything � reflect an unwinding of bets made on the assumption that the world economy would remain strong and market volatility would remain low even as the US slowed.
The dollar�s rise since July is part of a reversal in longstanding investment trends that prevailed during years of plentiful borrowing, strong growth and low financial-market volatility. �Essentially, every large trade that built up a head of steam in the go-go years has blown up or is in the process of blowing up,� wrote Alan Ruskin, chief international strategist at RBS Greenwich Capital, in a report to clients. �That goes for almost every asset class.�
That seems more or less right to me.
Crises have a way of clarifying what happened in the past. I think it is now clear that the scale of emerging market reserve growth from the end of 2006 to q2 2008 should have been a leading indicator that a lot of investors � probably too many � were betting that emerging markets (and indeed the world) could continue to grow rapidly even as the US slowed. Reserve growth was running well in excess of the emerging world�s current account surplus, as private capital was flowing into the emerging world in a big way. The IMF data indicates that private flows to the emerging world in 07 and the first part of 08 ($600b a year in 2007 � over twice the average pace of 04-06; see table A13 of the IMF�s WEO) were well above the levels seen before the 97-98 crisis.
Those capital flows � plus very low real interest rates, as many emerging markets followed the US rates down even though they were still booming � helped fuel surprisingly strong global growth even as the US slowed. The US actually wasn�t driving global demand growth over the last two years. Europe and a few booming emerging economies were. The world did decouple. Energy prices certainly decoupled from the trajectory of US demand. But only for a while.
In retrospect, large inflows to the emerging world - and expectations that emerging currencies were generally on an appreciating trend, making it safe to borrow in foreign currencies (or sell insurance against a large depreciation of an emerging market currency) led investors to take on a lot of risk. Consider for example the rise in borrowing from global banks by many emerging markets (documented by my colleagues at the Council�s Center for Geoeconomic Studies) over the past few years. The fuel for the current market fire was there.
I still never would have experienced that the emerging world could experience a sudden stop like it is experiencing now while it was still running a large aggregate current account surplus. Particularly after most emerging markets had built up rather substantial reserves. Both should have helped to buffer against a huge swing in market sentiment, at least in aggregate.
I haven�t done a detailed analysis, but my sense is that the scale and pace of recent market moves � and in all probability the scale and pace of associated capital flows � is comparable to the Asian crisis of 97-98.
Faster perhaps.
That is scary.
The leaders of the G-20 countries will have plenty to talk about when they meet in the middle of November. |
Kinda bizarre. The capital flows were supposed to cause stability (foreign reserves), not instability which Setser suggests they did by creating the illusion of perfect stability. Weird. |
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rusty1983
Joined: 30 Jan 2007
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| Posted: Thu Oct 23, 2008 10:28 am Post subject: |
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| Iceland is utterly fucked, the UK threatened them with terrorisst legislation to get them to cough up their debts. Theyre going back to fishing for their livelihood. |
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