Subprime Mortgage Crisis
Merrill Lynch reported $16 billion in write-downs, Wells Fargo report similar loses.
It is spreading to other financial sectors such as: Credit Card loss and auto loan portfolios.
The blame:
- Hugh surge of exports from countries such as China and India determined to hold down domestic consumption.
- Soaring oil prices drains the dollar out of consumer spendings, and oil producers have billions of dollars to invest somewhere else.
- Weak Yen that led traders and speculators to borrow for almost nothing in Japan in order to buy stocks and bonds in other markets.
- America's yawning trade deficit, and large spending on the war in Iraq and Afghanistan.
- Mega corporations are shifting to countries with better prospects and higher returns, such as Asia.
Interest rate cuts
Do you think the Fed's interest rate cuts can solve the problem and impede an oncoming recession? Or it is just to sooth the sentiments and ward off the inflation for a while, and confirm the recession that is about the hit the world's biggest economy>
What impact will it have on the economies of Asia, the two giants, India and China and the rest of the developing economies? The Hang Seng Stock Market has taken a severe blow, and other counters are not spared either.
Please share your views with our readers and we can learn much from your experience and viewpoints.
Street Smart
Tijit Pte Ltd
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The slide towards a recession began as early as 2004 during the Clinton Presidency, it has been accelerated and the pressure mounting on the bubble and it bursts on 13 January 2008.
January 07, 2004
Silicon Valley falls to Bangalore. A US$3 trillion bankruptcy started to emerge as a possible climax.
August 2006, there were 15-20% decline in house prices and $1 trillion write-off from the $11 trillion in mortgage debt.
The factors that culminate to the bubble burst:
Falling US Dollar exchange rate, causes American investors to buy gold instead of stocks or bonds.
Rising Trade Deficit, and CPI pressure for inflation.
Outsourcing of its many industries and services.
Hugh debt by US President George Bush of over $5 trillion, borrowed from Saudis, UAE, China, Japan and other states.
The Fed cuts are not long term solution to the crisis, as the Census Bureau is reporting trade deficit in goods and services to $63 billion in October 2007. The US goods are not exported, as more countries are buying from cheaper and new sources of supplies such as India and China.
Fed cuts and stimulus package to pump $15 billion into its economy is unlikely to keep many Americans from losing their dream of home ownership. There may be a short term rally, and this is known as "dead cat bounce", as even a dead cat will bounce if you drop it from high enough place." This is because bargain hunters who buy in at lows, virtually every market downturn will show a brief up tick at the end, but taht up-tick does not signal a reversal. Some will buy commodities as to hedge inflation, and others buy gold as security.
An average American owes $9000 in credit card debts. Less than 2% of cars are own by the people who drive them, and less than 1% of the homes are own by the dwellers. America is a debt country, living in the debt of the lender countries.
Information taken from website "What Really Happened":
http://www.whatreallyhappened.com/archives/cat_economy.html
"The American economy is a false economy versus Nature's Expansion - Contraction cycle."
James 007
Yes, You are right that Mortgage Crisis response to US recession which impact other
sectors of Economy around the world. Please read out the following statement from
Mr. Strauss-Kahn, IMF CHIEF about the current world economic problem which
is alarming:
QUOTE
"Some countries are not in a situation to increase the deficit, but other countries are
in the position where there is some room for fiscal loosening. The countries not in a
position to increase the deficit will die.........????????????
He also called for a Global solution to the current economic problem, which originated
in the US housing market but have spread to infect the global financial system and financial markets
Losses by Banks which invested in complicated securities backed by high-risk US
MORTGAGES have lead to a Credit Crunch. Fear of losses and lack of transparency about
the extent of the problems have led to highly volatile trading on World Stock markets"
UNQUOTE
Please see Part B
"Exporters of Textile and clothing have been advised to be cautious while dealing with USA IMPORTERS, who are presently deafulting owing to all-round recession.
Similarly, the members have been asked not to export to USA MARKET on the basis of DA.
Therefore, Economic Managers in My country have started to thinking switch over to EURO instead of USDOLLAR being Currency Basket. I think this is the time for developing countries to switch over EURO or YUAN being Currency Basket.
Please advise your valuable comments.....................Sir
If you are an importer on goods quoted in US Dollars, you will gain from the weaker Benjamin Franklin, but if you are exporter and quote in US Dollars, you will lose out.
To switch from one currency to another for small companies, it is QED. You can quote in Indian Rupees, or EURO, but you have to first start a bank account in EURO. The pressure is on for Asia to have our own currency. There is an Asian Currency Unit established, but that is also based on the Green back.
It is not possible for the Chinese Yuen to be in circulation for the International Trade at this moment, as the currency is not sufficient to circulate. However, we may see a return of the bullion system, where the currency is peg to the amount of gold.
For countries that are not too depending on the US market, they will be the least affected by the impending recession. But many countries that have their currency pegged to the US Dollars must shift to a basket of currencies to be less vulnerable to the weakening of the Benjamins.
Street Smart
Tijit Pte Ltd
Motto: Digital is our name : Portable is our game
Tijit provides service and supply to Marine Shipping Industry both here in Singapore and abroad focused on portable instruments.
We provide Customer Service for...
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I am really thankful to your for your valuable comments. I export Plastic Scrap
to China. Before crisis in USA, the One Dollars was equal to Pak Rs 60. Now it is
Rs. 63.75. If I quote in USDOLLAR, I can gain more........
Thanks a lot and nice comments..I learned a lot......
Best Regards
ID int786
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CIL Textiles Pvt. Ltd.
CIL TEXTILES PVT. Ltd. Is committed to the production of high quality technical and performanceFabrics for use in wide range of Industrial Markets including, but not limited, Tent and Awning, Outdoor Furnitur...
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