Wall Street and interest rate drop due to decission Fed.

Central banks does something about the credit crisis.

The American, Canadian, British, European and Swiss central bank will cooperate and will take measures to remove the tensions on the money market. That becomes clear from a communication of the Federal Reserve. The Fed will coordinate the measures. the central banks will put extra money in the system against less heavy conditions which are now the case.

On the 17^th of December the Federal Reserve will make a first credit line of 20 billion dollar available. The American central bank will do it once more on the 20^th of December. Banks which want to lend at the Fed will be less strictly treated with de collateral when they want to take a credit line. Collateral is the capacity value which credit takers must transfer to the credit licensor if they can’t pay their loan back. The Fed will also take care less strictly on the bank who comes for a loan. The Fed will also cooperate with the European central banks and the bank of Switzerland.

I think that it is a good proposal of the FED. this will help the American economy.

http://www.tijd.be/artikel/Centrale_Banken_gaan_kredietcrisis_te_lijf.6021960

Benjamin

American House market isn't yet safe !

Some analysts predict that 2008 will be a very bad year for the American housemarket. Right now there are no signs which indicate on an improvement. According to Eric Rosengren, the situation will probably first deteriorate before it can improve himself. It can not be predicted how deeply the crisis will reach. By intervening as soon as possible on the house market, future problems can be prevented.

what was exactly wrong at the American economy the last months ?

The Americans took for almost 5,655 billion dollar mortgage credits since the beginning of 2000 to June 2007, as a result of which the meter stands in sum on 10,145 billion. Insiders believes that the end of the credit crisis is not yet in visibility.

It’s a consequence that the position of the dollar as world leader at the moment is in danger. But, not everyone is such pessimistic concerning the impact of the dollar value. In the United States John Dessauer indicate on the positive impact of the fall of the dollar value. The reasons that Dessauer says, is in fact very easy. The dollar decreased indeed strongly, but the financial markets aren’t decreasing, in opposite. Over the same period the rate of the Dow Jones has almost doubled and American companies made record profits. And that is also my opinion.

http://www.trends.be/nl/economie/beursnieuws/73-1087-120009

Benjamin

Subprime solutions

After the subprime mortgage mess emerged some months ago, the treasury secretary Hank Paulson refused to interfere. What was happening was a self-correcting free market at work. Intervening would be un-neoliberal and protectionist. The economical laws would sort out and clean up the mess themselves.
By the end of August, under pressure from Democratic politicians, Paulson was forced into a modest initiative in favour of the more prudent subprime borrowers, those who would have been able to pay their loans if the crisis would not have happened. They would receive help via a government-sponsored program.
With the crisis showing no intention of coming to a stable end, the treasury secretary has come up with a third approach. At first, the mortgage-holders will be divided into three groups, varying from those who can pay their dept anyhow, over those who ‘deservedly’ got their loan, to those who could plainly not afford the houses they occupied. Only the middle group would get help under the latest approach. They would get a debt-resettlement. The Treasury claims that under this program, there would be only winners, on both sides and it would not involve public money. That’s more than triple win.
However, questions remain. If this solution has only winners, why couldn’t have the market come up with it itself? An answer to that may be that the market is not transparent and that the government thus has to co-ordinate. Moreover, a side-effect of the interference of the state has as an implication that mortgage servicers get some legal protection against investor lawsuits
Other questions remain unanswered. Firstly, does this government interference not simply prolong the subprime mess? Shouldn’t we just let hard economic laws bring a hard but clear new balance? Secondly, governments meddling in private contracts may create an unwanted precedent. Thirdly and lastly, the impact of the new plan may well be very limited and modest.

As I perceive it, Paulson has put himself in a difficult position. As a neo-liberal he doesn’t believe in state intervention in the economy. However, here, he realizes that the market does need government support. In that way, he distances himself from his principles. On the other hand, his interventions that are contrary to his principles, are not enough to save the economy.

Sarah Struyf

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=348876&story_id=10251261

The expensive euro and the low dollar: what does it mean ?

The dollar stands historically low and the euro historically high. That comes because the American economy is in a dept and the European economy does it relatively good. The United States have an billions shortage on the trade assessment. The Americans buy and import more than they deserve. When the euro was born in 1999, it went much better in the US than in Europe. Meanwhile the roles have been turned over. Thanks to a low dollar is an American car in Europe suddenly thousands of euro cheaper. And that applies to all American products. There they deserve so much that they squeeze himself from the youngest credit crisis. The low dollar is for the Americans a blessing, the budget deficit melts away and this way also the trade deficit, the export can become at last larger than the import. The low dollar is exact what they want and necessary have.

http://www.overgeld.nl/rubriek/consument/2744890/

Benjamin

The American employment rate rises harder then expected

In November the number of jobs in the US rose more then expected. Next week the Fed wil have a meeting to discuss a possible decrease of the rate, the numbers about the jobmarket will have a big impact on their decision. The unemployment rate in November was as high as October.
The analysts expected an increase of 80.000 jobs but they increased by 94.000 last month. This bigger then expected increase can have as a result that the Fed will not lower their rates.
The average hour wage rose by 0,5%, this is a slight increase from the 0,3% they expected. In October it rose with 0,1% wich was less then the expected 0,2%.
The figures of the American job market are seen as a very important indicator of the developement of the American economy.

This good news for the economy but then again not so good news. Because because of the huge impact of these numbers it might be that the Fed will not lower its rate's while most other numbers suggest that they should lower them. The Fed better take their time and really investigate what would be the best thing to do for the economy cause any bad decision could have a really bad impact.
Lets hope the Fed will take the best decision.

Nico Cottry

Source: http://www.tijd.be/artikel/Amerikaanse_werkgelegenheid_stijgt_harder_dan_verwacht.3442038