For the last couple of years the value of the dollar has been sliding gradually. The last couple of months, however, the dollar has lost value at an increased pace. Analysts have been warning for a full-blown collapse of the dollar. Many ingredients for a nasty crash are already present.
Since years, the US has been accumulating a gigantic trade deficit. That pain has been relieved somewhat in itself because of the lower dollar value. However, it remains an enormous problem.
More recently, the credit crisis has added troubles for the dollar and the Fed. Traditionally, America’s deficits have been sustained by two factors. At first, foreign national banks have been very willing to offer cheap loans to America and have, by doing so, sustained the Americans’ shopping spree and thus the foreign producing industries. Lately, however, these national banks have proven to be less willing to offer cheap credit to the American economy. Secondly, the intentions of some national banks to swap the dollar for the euro as the currency for their reserves may add to the woes of the dollar and the Fed.
All these developments make up a perfect mix that may herald a crash of the dollar. However, far too much is at stake. Analysts believe that self-interest and sensible policy can cut the odds of trouble.
I believe that the international markets already are very volatile. Further troubles with the dollar could increase this instability even more. The consequences would be disastrous, not only for the American economy but also for the entire global economy. An even more weakened dollar would kill European export to the States and would thus harm the European economy. Such an dynamic would put economies in recession for years.
Sarah Struyf
http://www.economist.com/opinion/PrinterFriendly.cfm?story_id=10215040
donderdag 6 december 2007
zondag 2 december 2007
American house prices
Things look bleak for American homeowners, and not only for those with subprime and adjustable-rate mortgages. Market analysis shows that American house prices have fallen a 4.5% during the last quarter. A Yale University economist expects prices to fall a further 5%. Even worse: he does exclude a further decline up to 50%.
Recent evolutions have come as a shock for many homeowners. Some of them have found solace in virtual reality. Realius developed a game that allows players to guess the price of houses on the market. ( www.realius.com) American homeowners can use some escapism these days. The current crash of house prices contradicts popular American wisdom that house prices in America do not fall.
As the chart indicates house prices witnessed a previous slump in 1991. But soon afterwards prices started to climb again steadily. However, there is no guarantee whatsoever that the current crises will evolve in a similar rebounce.
I believe it can be considered as ‘American’ to create a game out of similar painful, economical situation. One can consider it as a nice practical joke to make a game based on so much personal misery. On the other side, it also puts a finger on a very delicate topic for such a broad segment of the population.
Next to that, Americas habit of the past decades to live on borrowed money was always to come back one day. Few, however, expected such a large fallout with so many people involved.
Sarah Struyf
http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=348876&story_id=10225023
Recent evolutions have come as a shock for many homeowners. Some of them have found solace in virtual reality. Realius developed a game that allows players to guess the price of houses on the market. ( www.realius.com) American homeowners can use some escapism these days. The current crash of house prices contradicts popular American wisdom that house prices in America do not fall.
As the chart indicates house prices witnessed a previous slump in 1991. But soon afterwards prices started to climb again steadily. However, there is no guarantee whatsoever that the current crises will evolve in a similar rebounce.
I believe it can be considered as ‘American’ to create a game out of similar painful, economical situation. One can consider it as a nice practical joke to make a game based on so much personal misery. On the other side, it also puts a finger on a very delicate topic for such a broad segment of the population.
Next to that, Americas habit of the past decades to live on borrowed money was always to come back one day. Few, however, expected such a large fallout with so many people involved.
Sarah Struyf
http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=348876&story_id=10225023
Diggest drop house prices since 1970.
The prices of new houses in the U.S have dropped by 13% annualy-based, last month. The price of a new house is $218000, $44000 less than in Mars.
Dimitry Fleming, economist at ING, says that these figures prove that the housing crisis is still on a role. He also points out that sales of houses can be very volatile on a monthly basis, therefor he works with a
3-monthly average.
Wednesday evening, The Fed announced in the latest version of the "Beige Book" that the demand for residential property is keeping to decrease with only few points of stabilization. Secondly the Fed will have to lower its interest rate (-0.25%) to sustain the "labour market". This is somehow strange, despite a growth of 4.9% of the American economy, the Fed still wants to lower its interest rate.
ING economist Rob Carnell explains why we should look with caution at this 4.9%. First the housing crisis hadn't yet fully kicked in. Secondly the figures were "improved" by a rase of stocks. This even could mean that companies aren't able to sell all their goods , so it's actually bad news.
The expectation of lowering the interest rate is giving the stock markets a boost, despite the bad economical news.
Dimitry Fleming, economist at ING, says that these figures prove that the housing crisis is still on a role. He also points out that sales of houses can be very volatile on a monthly basis, therefor he works with a
3-monthly average.
Wednesday evening, The Fed announced in the latest version of the "Beige Book" that the demand for residential property is keeping to decrease with only few points of stabilization. Secondly the Fed will have to lower its interest rate (-0.25%) to sustain the "labour market". This is somehow strange, despite a growth of 4.9% of the American economy, the Fed still wants to lower its interest rate.
ING economist Rob Carnell explains why we should look with caution at this 4.9%. First the housing crisis hadn't yet fully kicked in. Secondly the figures were "improved" by a rase of stocks. This even could mean that companies aren't able to sell all their goods , so it's actually bad news.
The expectation of lowering the interest rate is giving the stock markets a boost, despite the bad economical news.
I fully agree with the fact that the housing crisis is still on a role. I even think that the full effects will only kick in within 2 months. The Fed said that de demand is still decreasing, so we'll first have to see an end to this decrease before we can talk about full effects.
The Fed will probably lower its interest rate to sustain the labour market. I agree that they have to be more concerned about employment, at this point, than about inflation and the dollar rate.
With the housing market causing social dramas, they can't aford less employment.
The latest figures were smukked up... Well, that's almost the case every month. We'll just have to be carefull with our interpretation.
Thomas
source: de tijd, editie vrijdag 30 november 2007, pg 17, huizenprijzen VS kennen grootste daling sind 1970
Chavez treathens to cut off petroleum supply to the US.
The president of Venzuela, Hugo Chavez, announced that he is sending his army to the petroleumfields in his country. With this he is threathening to cut off the petroleum supply to the US.
The president said this in his adress this friday in Caracas.
The president said this in his adress this friday in Caracas.
Sunday a referendum will be held in Venezuela about to socialistic revision of the constitution. Chavez used these threats in front of an audience excisting of thousand of supporters in Caracas. He said there will not go another drop of petroleum to the United States if Washington does not revise their plan to destabelise Venezuela. Venezuela is the sixth lagergest petroleum distributer in the world. Half of their production is exported to the United States.
This is offcours very bad news for the United States. If they lose this much petroleum it will have a bad impact on their economy. This could well be a devestating blow to the economy. The goverement is doing their best to stabelize the economy and this could cause a blow to their industry and that would be very bad.
I don't know what Washingtons plan is but they better revise it cause they don't won't this to happen. Im curious what Bush will do.
Nico Cottry
Abonneren op:
Posts (Atom)