Jump to content
House Price Crash Forum
Sign in to follow this  
Realistbear

" We Will Soon See Contagion From U S- Sterling & Euro Will Be In Trouble"

Recommended Posts

http://www.telegraph.co.uk/money/main.jhtm...cndollar114.xml

Dollar plunge sets off global alarm bells
By Ambrose Evans-Pritchard
Last Updated: 6:42am GMT 14/03/2008
The dollar has plummeted against all major currencies on dire US retail sales and fears that the Federal Reserve may need to slash interest rates further to stop the downward spiral in the credit markets.
..../
"We're in the eye of the dollar storm," said David Bloom, currency chief at HSBC. "The last phase of a sell-off is always the most extreme. We think the dollar will recover in the second quarter. People are treating the euro as if it was the D-Mark. They are looking at how well German exports are doing, but ignoring the weakness in Italy and Spain.
"This is a big mistake.
We will soon see contagion from the US, and then both sterling and the euro will be in trouble
," he said.
....../
Hans Redeker, head of currencies at BNP Paribas, said the central banks may soon spring a trap on the markets, clubbing together to boost the dollar. The aim would be to chill the commodities, bringing down energy and food prices. "Shaking out speculators would be an indirect way of reducing the inflation impact from raw materials," he said.

The credit market troubles triggered by the largest HPC in history is not contained. The Great Depression of the 1930's was not contained either and this time its a little different: the economies of the world are more "global" in the sense of interdependency. Never has the anaology of the sneeze:cold been more true.

The miracle economy is even more miraculous than the US economy where house prices were allowed to double on the back of "miracle loans." Gordon's miracle has allowed house prices to treble in most areas and most are backed by miracle loans. The troubles in the US are spreading here and they will be a lot worse as out debt ratios are a lot higher than the US and our economy is too reliant on the machinery that created the miracle: financial services.

Short term: As U-turn Ali said, the miracle economy is immune to the rest of the global troubles and our diversified and bouyant house market is well placed to weather the storm. Howver, next month will be different.

Medium Term: Things go downhill raidly in the next Q

Long term: We all pay the price of Gordon's decade of miracles.

Edited by Realistbear

Share this post


Link to post
Share on other sites

<i>Hans Redeker, head of currencies at BNP Paribas, said the central banks may soon spring a trap on the markets, clubbing together to boost the dollar. The aim would be to chill the commodities, bringing down energy and food prices. "Shaking out speculators would be an indirect way of reducing the inflation impact from raw materials," he said.</i>

Ooooh, lots of threats this morning from the central banks, warning people fleeing their idiotic money pumping.

Stop pumping the stupid money out, that may have some effect, until then talk is cheap and ten years of talking about fighting inflation have made this bunch of crooks look cheaper than a tanzanite necklace.

Share this post


Link to post
Share on other sites

Hans Redeker, head of currencies at BNP Paribas, said the central banks may soon spring a trap on the markets, clubbing together to boost the dollar.

So what have the CB's got left in their powder keg?

Clue, IMF has agreed to allow bullion sales.

Would that be enough? What else do they have left?

Share this post


Link to post
Share on other sites
<i>Hans Redeker, head of currencies at BNP Paribas, said the central banks may soon spring a trap on the markets, clubbing together to boost the dollar. The aim would be to chill the commodities, bringing down energy and food prices. "Shaking out speculators would be an indirect way of reducing the inflation impact from raw materials," he said.</i>

Ooooh, lots of threats this morning from the central banks, warning people fleeing their idiotic money pumping.

Stop pumping the stupid money out, that may have some effect, until then talk is cheap and ten years of talking about fighting inflation have made this bunch of crooks look cheaper than a tanzanite necklace.

Nonetheless, it would be foolish to ignore what he is saying.

IMO the markets are ready for this. It may be a permanent turning point or it may just be a short-lived correction but it looks to be coming soon.

They'll talk it up first. When that fails they'll act.

Share this post


Link to post
Share on other sites

But don't these people work for the banks that brought us to where we are today?

What's the betting they have massive dollar positions and are trying to save them.

Edit to add: This is also from the Telegraph, where "Why the Euro will collapse" articles are as common as Maddy stories in the Express

Edited by bobthe~

Share this post


Link to post
Share on other sites
Nonetheless, it would be foolish to ignore what he is saying.

IMO the markets are ready for this. It may be a permanent turning point or it may just be a short-lived correction but it looks to be coming soon.

They'll talk it up first. When that fails they'll act.

Fixed exchange rates may be introduced to try to stabilise the global markets. The Euro was heading into trouble at 1.40, at 1.60 it headed for a catastrophe.

As of now, Ben is insistent on reducing IR to between 1% and 2% which he kinows will only increase market rates by twice the amount of the drop. Liquidity is not being helped by cutting IR as the fear of inflation is causing the money to be pumped into commodity and metal bubbles rather than where it can do the most good: the broader economy.

Ben needs to hike IR to a global level of, say, 5% and let the houses and commoditees fall. Pain and gain etc. A hike to 5% will drop commercial rates to around 4% from current levels as confidence is restored. Ben does not seem to get the picture that inflation is the supremo concern of the markets--not falling house prices.

Share this post


Link to post
Share on other sites
But don't these people work for the banks that brought us to where we are today?

What's the betting they have massive dollar positions and are trying to save them.

Edit to add: This is also from the Telegraph, where "Why the Euro will collapse" articles are as common as Maddy stories in the Express

Dollar weakness is the pivot around which everything else turns.

Keep a close eye on the Euro/Dollar and Yen/Dollar. Gold/Oil/Commodities etc will all turnaround the moment these CBs decide to actively support the dollar. When the dollar bounces in a big way the turnaroudn will be swift imo, which is why I shall be short Euro v Dollar and short the shiney thing.

Share this post


Link to post
Share on other sites
Dollar weakness is the pivot around which everything else turns.

Keep a close eye on the Euro/Dollar and Yen/Dollar. Gold/Oil/Commodities etc will all turnaround the moment these CBs decide to actively support the dollar. When the dollar bounces in a big way the turnaroudn will be swift imo, which is why I shall be short Euro v Dollar and short the shiney thing.

....but the Dollar has to weaken further to solve this. What they are doing is weakening the Dollar to reverse the flow from West------>East. Where they are trying to get to is a Reganomics/Thatcherism style supply-side revolution but that looks to be around 2-3 years away and from where is the politician going to come from that can achieve this? Therefore they will keep pumping money, let painful price inflation rip (and lie about it) and keep their finger crossed that we don't get strikes/wage inflation in the meantime.

edit:typo

Edited by scott666

Share this post


Link to post
Share on other sites
....but the Dollar has to weaken further to solve this. What they are doing is weakening the Dollar to reverse the flow from West------>East. Where they are trying to get to is a Reganomics/Thatcherism style supply-side revolution but that looks to be around 2-3 years away and from where is the politician going to come from that can achieve this? Therefore they will keep pumping money, let painful price inflation rip (and lie about it) and keep their finger crossed that we don't get strikes/wage inflation in the meantime.

edit:typo

yeh your 100% correct

thats why zimbabwae is a powerhouse economy right now

they did the right thing and devalued their currency to get rich

WTF?

its not a GOOD thing to have a weak currency, its easy to weaken your currency. its hard to have a strong stable currency

Share this post


Link to post
Share on other sites
yeh your 100% correct

thats why zimbabwae is a powerhouse economy right now

they did the right thing and devalued their currency to get rich

WTF?

its not a GOOD thing to have a weak currency, its easy to weaken your currency. its hard to have a strong stable currency

You don't understand, it's what they have to do, it will be a painful process but it will happen. They don't need or want a strong currency (at the moment) because this is what globalization is all about.....a level playing field for global industry, trade and commerce.

There are two possible outcomes from here;

A ) THEY FIX THIS

outcome: high inflation for 2/3 years, followed by supply-side revolution in the West. (repeat of 1970's/early 80's)

B ) THEY DON'T FIX THIS

outcome: deflation, great depression mark II (or III) (repeat of 1929)

You should know where to invest under either scenario........place your bets now!

Share this post


Link to post
Share on other sites

The Federal Reserve Is

Throwing Everything at this Crisis ...

The Federal Reserve's reaction to the mortgage crisis started with a discount rate cut in August — 50 basis points. That was followed by another 50-point cut in September ... a 25-point cut in October ... another 25 in December ... a whopper 75-point cut on January 22 ... then another 50 eight days later. During that same time period, the federal funds rate was slashed from 5.25% to the current 3%. And by all indications, we'll see another 50-point or 75-point cut into the 2s at the Fed's March 18 gathering.

The Fed is slashing rates and throwing hundreds of billions of dollars at the credit crisis. But that's not all. In mid-December, the Fed unveiled an unconventional "Term Auction Facility" (TAF) for the first time. The supposedly-temporary plan allows for the periodic auction of funds to depository institutions in exchange for a wide variety of collateral. The Fed is willing to accept everything at the TAF — from U.S. Treasuries to foreign government debt to commercial mortgage-backed securities, residential mortgages, and even consumer loans (credit cards, auto loans, etc.). Each asset gets a "haircut" depending on the risk involved.

These auctions started at $20 billion each. That jumped to $30 billion a pop in January. Then a few days ago, the Fed boosted the auction sizes to $50 billion! And the Fed wasn't finished. It also said it would conduct several repurchase transactions totaling roughly $100 billion. Repurchase operations are those where the Fed swaps cash for assets. It's doing them on a 28-day basis, too, rather than the customary overnight term. To top it all off, the Fed reached into its bag of tricks to come up with yet another plan — the TSLF, or "Term Securities Lending Facility." The TSLF will allow major Wall Street firms and banks that trade directly with the Fed to conduct up to $200 billion in fresh transactions. They'll be permitted to swap their less-liquid, somewhat impaired mortgage-backed securities and Fannie Mae and Freddie Mac debt for highly liquid, rock-solid U.S. Treasuries. The assumption is that this will help ease pressure on balance sheets and help reduce mortgage rates.

I don't know about you, but I'm having a very hard time keeping up with all these acronyms and all these "solutions." Moreover, it's not just the Fed that has shifted into action ...

The Legislative and Executive Branches

Are Moving into Major Rescue Mode, Too

The "FHASecure" plan was one of the first major offers unveiled in August. The idea there was to make it so borrowers with high-risk private mortgages could refinance into government-insured FHA loans. Soon thereafter, we heard about the "Paulson plan" to freeze adjustments on certain subprime adjustable rate mortgages. And we learned the government had put together a "HOPE NOW" alliance of top mortgage lenders and servicers that would try to come up with ways to help stressed borrowers. Then in February, it was time for "Project Lifeline" — a plan to postpone foreclosures for 30 days for certain borrowers. During that time, their servicers would be obliged to hammer out loan modification or workout plans. House Financial Services Committee Chairman Barney Frank is introducing anti-foreclosure legislation. The economic stimulus package that is getting refund checks mailed out to most U.S. citizens also included some mortgage-related provisions. They allow Fannie Mae, Freddie Mac, and FHA to buy or insure larger loans — an attempt to loosen up the market for "jumbo" mortgages. Over in Congress, House Financial Services Committee Chairman Barney Frank is introducing anti-foreclosure legislation. States would get $10 billion to buy foreclosed homes. Mortgage servicers would also be encouraged to write down the value of outstanding loans. Then, the borrowers would be refinanced into government-insured FHA mortgages.

Finally, policymakers are unveiling a list of reforms designed to prevent future crises in the mortgage industry:

Nationwide licensing of mortgage brokers will be implemented. Credit ratings firms will be required to update their ratings scales to distinguish between "structured" products (that would be CDOs and other complex debt) and traditional bonds. They'll also have to disclose conflicts of interest. And other proposals will affect how loans are bundled and packaged into bonds for sale to investment firms.

But you know what?

All the King's Horses and All the King's Men

Can't Seem to Put the Market Back Together Again

Despite all the government intervention ... and artificial monetary stimulus ... when you look around, not much has changed. We're still awash in millions of excess homes ... We're still witnessing the sharpest home price declines in decades ... We're still seeing hedge fund implosions ... mortgage company meltdowns ... and multi-billion dollar write-downs almost every day. Just this week, a mortgage bond fund run by the high-powered private equity firm Carlyle Capital essentially collapsed. The fund couldn't meet more than $400 million in margin calls from its lenders, forcing it to default on a whopping $16.6 billion in debt. Bloomberg puts the total count of losses and write-downs related to the mortgage crisis at $188 billion ... and counting.

And that just underscores a fundamental point I've been making for a long time ...

The only way to prevent the pain of popping bubbles is to prevent bubbles from inflating in the first place!

You see, the Federal Reserve have this asinine policy of ignoring asset bubbles as they inflate. Policymakers claim that's because they shouldn't substitute their judgment for the market's, and that it's impossible to identify bubbles except in hindsight anyway. The better solution — in their view — is to come in and try to mop up the aftermath by slashing rates and taking other steps.

But that's just nuts!

I mean, if you asked 100 people on the street whether dot-com stocks were experiencing a massive bubble in 1999, you'd have heard 99 answer yes. And if you asked another 100 people whether the housing market was a massive bubble in 2004 and 2005, you'd get the same thing: A resounding yes from just about everyone. You could see it in the statistics. You could see it all around you in everyday life — the Miami condo parties, the buyers camping out to snap up three, four, or five homes at a time, the 5%-every-quarter price increases in homes. Respectable economists and analysts everywhere were warning that we were courting disaster. The idea that the Fed couldn't identify that we were in a bubble — one that called for aggressive regulatory and monetary policy action to counter it — is patently ridiculous.

So here we are: Stuck in a real estate down cycle that's more severe than anything we've had to face in decades.

I want to believe we can turn things around. I want to believe that all these policy actions ... the aggressive construction cutbacks we're seeing from the major home builders ... lower home prices ... lower interest rates ... and everything else will help turn the tide. And I still think that can happen as we head into 2009 and beyond (I'm writing off 2008).

But I have to tell you, it's hard to eliminate that nagging voice in the back of my mind — the one that says we're heading for the same thing that happened to Japan in the 1990s.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 297 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.