read this about the us market, how will this effect interest rates.
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The big news is that the US current account deficit rose to a new record - its ninth record high in ten years. The number for last year was $804 billion. The number for the last quarter of last year was $224 billion, which shows the trend is still upwards.At the current rate, the US current account deficit will hit $1 trillion within a year or two. It is already at 7% of GDP - a figure that would normally only be seen in a banana republic or an empire going bananas."A ticking time bomb," a Canadian economist calls the deficit. The US needs $2.5 billion dollars every day just to cover its borrowing needs. Already, China has lent the world's most prosperous nation so much money it has nearly $1 trillion worth of US government debt in its vaults. If the debtor is slave to the lender, as it tells us in the Bible, what does that make Americans? They'd rather not think about it. Besides, they have economists willing to delude them. And politicians able to defraud them."US tells China to cut its trade surplus," reads a headline in the FT.We wondered where was the equal and opposite headline: "China tells US to cut its trade deficit." But we could find it nowhere.We wondered, too, what big stick the US carried in its hand. What was it going to do...threaten to stop borrowing? Brandish a credit card? How would it fund its war on terror? Its consumer economy? Its housing bubble? America can speak loudly - for the benefit of American voters, we presume - but it has a limp noodle in its hands. The Chinese are the ones holding the big stick; they could dump their US debt holdings and clobber the American economy any time they wanted. But wait. Aren't American companies extremely profitable? And aren't they setting up plants overseas...buying overseas companies...and making deals to leverage their technology, their brands and their know-how on the world markets? Yes, of course they are. But that, too, is reflected in the current account numbers.In the 4th quarter of last year, for example, foreigners actually earned more from their US holdings than Americans earned from their holdings overseas - $132.6 billion compared to $129 billion. And even in the technology sector, where the US is supposed to have a commanding lead, Americans bought more from foreigners than they sold to them.Always grinding away, our General Theory of Grinding tells us that history never stops. She is the mistress of creative destruction, constantly turning things upside down and inside out...always undermining great empires...and eating away at great companies...she grinds men's pathetic little conceits, ambitions and pretensions to a fine dust.
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History cannot seem to leave well enough alone. Economies, societies, institutions...animals, vegetables and even minerals are always degenerating, degrading, and disappearing. When our present civilisation has finally gone away...what will be left of it? Just a few gold coins...and granite countertops...some converted into tombstones.A country should have a revolution every ten years, said Jefferson. He understood that you can't stand still. When a society reaches a certain level of success, it becomes a soft target for gamers. Parasites find the still unprotected spots and move in, like tapeworms into a fat man's belly. New life forms fill the hollow niches...and flourish. Opportunists leech onto the slow-moving hulk. Where a dynamic new republic pushes up its brightest and best to leadership positions - like Washington, Adams, and Jefferson himself - in the stagnant pool of an aging empire, the heavy thinkers sink to the bottom; what rises to the top are lightweight scum...the John Kerrys, George W.Bushes, and Hilary Clintons. Why doesn't the election process produce better political leaders? Because as time goes by, more and more people become complicit in decadence. The voters are farther and farther removed from the actual process of government...it is all only slogans and photo-ops to them. And the people close to power are the hacks and the hustlers, the politicians on the make, the parasites and players on the take. Laws multiply like the fishes and the loaves. Moses handed down only ten commandments. Jesus said only two of them were really important. But federal, state and local government give us ten thousand commandments - each one of them designed to protect or pamper some slimy creature living in some dark hole of the republic.More and more people get cheques, subsidies, grants and payoffs. More and more committees, agencies, and bureaus are set up to provide sinecures and curry favours. If we read it right, as many as half all the jobs created in America in the last five years were created by government! Nearly one-in-two British households now relies on the state for its income!Fraud and decrepitude seeps into the whole society. People begin to believe things that couldn't possibly be true - that deficits are good...that savings are unnecessary...that we don't actually have to make anything, we can just 'think' our way to prosperity. And as the structure degenerates and weakens, practically everyone, everywhere holds up his hands to try to prop it up.We see in Grant's Interest Rate Observer, for example, the efforts of US real estate appraisers to keep the bubble expanding. The Homebuilders Index is at a three-year low. Inventories are growing. But yet, the L.A. papers tell us that prices are still going up, pushed up in part by appraisers. This is revealed in the difference between the House Price Index of the FHEO - the Federal Housing Enterprise Oversight, no doubt a worthy and important agency - and its "Purchase Only Index". The House Price Index includes refinancings, which are based on appraisals. The Purchase Only Index does not; it is based only on what buyers were willing to pay.When you take into account the data that includes appraisals, house prices rose 12.95% in the 4th quarter of '05 over the year before. But when the appraisals are taken out, the number is only 10.8%.
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Sunday, March 19, 2006
Tuesday, March 14, 2006
loans interest rates, how will the dollar effect them
loans and interest rates
Longtime readers of my commentaries may recall that I have been waiting for the dollar to fall while US interest rates rise at the same time. Even though it may not be intuitive that the dollar could fall while interest rates rise, I think current events in both China and Japan are setting the stage for it to happen.
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Since 1992 more than four trillion dollars of foreign capital have been invested in the US. This capital influx was due to a series of currency crises, beginning with the Brazilian Real in 1992. Capital, seeking a safe haven, poured into the United States. Initially, this influx of capital caused US interest rates to fall, US corporate profits to rise and consumer spending to increase. The resultant bull market in stocks and bonds was fertile ground for investor speculation and gave rise to the high-tech, or Internet bubble. When the high-tech bubble burst, the Federal Reserve reacted by artificially driving interest rates even lower, causing a real estate bubble in the US and averting the collapse of the broader US stock market.
When the Southeast Asian currency crisis began in 1996 with the fall of the yen, the extraordinary amount of capital that flowed into the US caused an unprecedented rise in the US dollar exchange rate. This increase in the US dollar exchange rate in turn caused a decrease in the price of all things priced in dollars: oil, commodities, metals, gold and, of course, all US imports. Lower import prices in the US in turn lead to an expansion of the US trade deficit.
At the same time we also saw the emergence of China as an economic powerhouse, with a massive shift of manufacturing capacity away from North America and Europe to China. In order to maximize the benefit of the strong US dollar, both China and Japan elected not to sell the trade dollars they were receiving back into foreign exchange markets. Instead, they bought US Treasuries with those dollars.
Under normal circumstances, when a country such as Japan receives trade dollars due to its trade surplus with the United States, it sells those dollars in the foreign exchange markets. By selling dollars and buying yen, the trade imbalance would lower the exchange rate of the dollar and increase the exchange rate of the yen, thus increasing the cost of exports from Japan and increasing the cost of imports in the US, which would eventually neutralize the trade imbalance. But because both China and Japan (and several other Southeast Asian countries) withheld their trade dollars from foreign exchange markets, their export prices and US import prices were kept low. This caused an exacerbation of the US trade deficit, and it also kept US interest rates low since the bulk of those dollars were invested in US bonds.
Oil and metal prices declined precipitously during the late 1990s because of the rise in the US dollar exchange rate. Declines in metal and oil prices were far less pronounced in many other currencies and, in fact, the gold price increased in some currencies even while it was falling in US dollars. I realized during the late 1990s that the gold price (in US dollars) would not sustain a rally until we saw the end of the rise in the dollar itself. Between 1999 and 2001 the dollar rally petered out and by 2002 the dollar was entrenched in a bear market as the combination of falling interest rates in the US and the trade deficit took their toll. Oil, commodities, metals and gold prices started rising.
The increase in most metals and commodity prices were initially just a reflection of the falling US dollar exchange rate; however, because of the expansion occurring in China, among other things, some commodities and metals prices rose more than what could be accounted for by the dollar alone.
The gold price, on the other hand, was almost exactly paired to the US dollar exchange rate up to the middle of 2005.
Now we can evaluate the current situation with the twin deficits of the United States.
The US trade deficit simply means that US residents buy more imports than what they export. The net result of the trade deficit is that US dollars are being sent to other countries, and, as mentioned earlier, under normal circumstances those dollars would have been sold in foreign exchange markets, putting downward pressure on the dollar. A weaker dollar would translate into higher prices for US imports and lower prices for US exports and that would in turn cause a reduction, or elimination, of the trade imbalance. Therefore, the US trade deficit will eventually cause the US dollar to decline. The only reason it has not yet done so is because China, Japan, and several other countries are not selling their US dollars, but investing them in US Treasuries instead.
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That brings us to the US fiscal deficit. A fiscal deficit arises when the government spends more than it receives from taxes. The US fiscal deficit is much larger than the budget deficit and contrary to what the media and politicians would like you to believe, the US fiscal condition is worsening, not getting better.
The current debt limit for the US government is $8.184 trillion and if that limit is not raised by the middle of the month the government will likely go into default. All it means is that lawmakers will vote to increase the debt limit. But the amount by which they will increase the debt limit is what is interesting. The current proposal is for an increase of $781 billion. Why $781 billion? Probably because that is more or less what they expect the fiscal deficit will be for the next twelve months, or so.
During fiscal 2005 (that ended on September 30, 2005) the government's debt increased by $554 billion. Since then the debt has increased by $337 billion, which, when annualized, comes to $814 billion. Don't be misled by budget deficits: politicians can budget all they like but their spendthrift ways become evident in the increase in debt.
As an aside, the current debt of $8.27 trillion does not include unfunded liabilities of the US government, such as Social Security, Medicaid and Medicare. Including unfunded liabilities the US government is approximately $46 trillion in the hole.
The fiscal deficit means the US government continually has to issue more and more debt to finance its spending and the issuance of debt means an increase in the supply of US bonds that will ultimately lead to lower bond prices and higher interest rates. This is where the trade deficit and the fiscal deficit meet. Just like the trade deficit implies the dollar will fall, the fiscal deficit will ultimately cause US interest rates to rise.
Recall that China, Japan, and others were buying US Treasury debt (bonds) with their trade dollars instead of selling those dollars into foreign exchange markets. That is what kept the dollar afloat, but it is also what kept US medium to long term interest rates so low since no matter how much more debt the government issued, these nations stood ready to buy it.
Looking at this I realized that we are going to witness an unexpected turn of events. When China and Japan decide to stop buying US Treasuries with their trade surplus dollars, the US dollar exchange rate will fall simultaneous with rising US interest rates. This is not intuitive since common dogma suggests currencies rise when interest rates rise and fall when interest rates fall. Yet I believe that the US dollar is going to fall while US interest rates rise.
forward onto our website for free facts on loans and money saving tips www.factsonloans.com
Longtime readers of my commentaries may recall that I have been waiting for the dollar to fall while US interest rates rise at the same time. Even though it may not be intuitive that the dollar could fall while interest rates rise, I think current events in both China and Japan are setting the stage for it to happen.
Sponsored Links www.factsonloans.com
Since 1992 more than four trillion dollars of foreign capital have been invested in the US. This capital influx was due to a series of currency crises, beginning with the Brazilian Real in 1992. Capital, seeking a safe haven, poured into the United States. Initially, this influx of capital caused US interest rates to fall, US corporate profits to rise and consumer spending to increase. The resultant bull market in stocks and bonds was fertile ground for investor speculation and gave rise to the high-tech, or Internet bubble. When the high-tech bubble burst, the Federal Reserve reacted by artificially driving interest rates even lower, causing a real estate bubble in the US and averting the collapse of the broader US stock market.
When the Southeast Asian currency crisis began in 1996 with the fall of the yen, the extraordinary amount of capital that flowed into the US caused an unprecedented rise in the US dollar exchange rate. This increase in the US dollar exchange rate in turn caused a decrease in the price of all things priced in dollars: oil, commodities, metals, gold and, of course, all US imports. Lower import prices in the US in turn lead to an expansion of the US trade deficit.
At the same time we also saw the emergence of China as an economic powerhouse, with a massive shift of manufacturing capacity away from North America and Europe to China. In order to maximize the benefit of the strong US dollar, both China and Japan elected not to sell the trade dollars they were receiving back into foreign exchange markets. Instead, they bought US Treasuries with those dollars.
Under normal circumstances, when a country such as Japan receives trade dollars due to its trade surplus with the United States, it sells those dollars in the foreign exchange markets. By selling dollars and buying yen, the trade imbalance would lower the exchange rate of the dollar and increase the exchange rate of the yen, thus increasing the cost of exports from Japan and increasing the cost of imports in the US, which would eventually neutralize the trade imbalance. But because both China and Japan (and several other Southeast Asian countries) withheld their trade dollars from foreign exchange markets, their export prices and US import prices were kept low. This caused an exacerbation of the US trade deficit, and it also kept US interest rates low since the bulk of those dollars were invested in US bonds.
Oil and metal prices declined precipitously during the late 1990s because of the rise in the US dollar exchange rate. Declines in metal and oil prices were far less pronounced in many other currencies and, in fact, the gold price increased in some currencies even while it was falling in US dollars. I realized during the late 1990s that the gold price (in US dollars) would not sustain a rally until we saw the end of the rise in the dollar itself. Between 1999 and 2001 the dollar rally petered out and by 2002 the dollar was entrenched in a bear market as the combination of falling interest rates in the US and the trade deficit took their toll. Oil, commodities, metals and gold prices started rising.
The increase in most metals and commodity prices were initially just a reflection of the falling US dollar exchange rate; however, because of the expansion occurring in China, among other things, some commodities and metals prices rose more than what could be accounted for by the dollar alone.
The gold price, on the other hand, was almost exactly paired to the US dollar exchange rate up to the middle of 2005.
Now we can evaluate the current situation with the twin deficits of the United States.
The US trade deficit simply means that US residents buy more imports than what they export. The net result of the trade deficit is that US dollars are being sent to other countries, and, as mentioned earlier, under normal circumstances those dollars would have been sold in foreign exchange markets, putting downward pressure on the dollar. A weaker dollar would translate into higher prices for US imports and lower prices for US exports and that would in turn cause a reduction, or elimination, of the trade imbalance. Therefore, the US trade deficit will eventually cause the US dollar to decline. The only reason it has not yet done so is because China, Japan, and several other countries are not selling their US dollars, but investing them in US Treasuries instead.
tell you friends to sign up free at www.factsonloans.com to get hot loan news
That brings us to the US fiscal deficit. A fiscal deficit arises when the government spends more than it receives from taxes. The US fiscal deficit is much larger than the budget deficit and contrary to what the media and politicians would like you to believe, the US fiscal condition is worsening, not getting better.
The current debt limit for the US government is $8.184 trillion and if that limit is not raised by the middle of the month the government will likely go into default. All it means is that lawmakers will vote to increase the debt limit. But the amount by which they will increase the debt limit is what is interesting. The current proposal is for an increase of $781 billion. Why $781 billion? Probably because that is more or less what they expect the fiscal deficit will be for the next twelve months, or so.
During fiscal 2005 (that ended on September 30, 2005) the government's debt increased by $554 billion. Since then the debt has increased by $337 billion, which, when annualized, comes to $814 billion. Don't be misled by budget deficits: politicians can budget all they like but their spendthrift ways become evident in the increase in debt.
As an aside, the current debt of $8.27 trillion does not include unfunded liabilities of the US government, such as Social Security, Medicaid and Medicare. Including unfunded liabilities the US government is approximately $46 trillion in the hole.
The fiscal deficit means the US government continually has to issue more and more debt to finance its spending and the issuance of debt means an increase in the supply of US bonds that will ultimately lead to lower bond prices and higher interest rates. This is where the trade deficit and the fiscal deficit meet. Just like the trade deficit implies the dollar will fall, the fiscal deficit will ultimately cause US interest rates to rise.
Recall that China, Japan, and others were buying US Treasury debt (bonds) with their trade dollars instead of selling those dollars into foreign exchange markets. That is what kept the dollar afloat, but it is also what kept US medium to long term interest rates so low since no matter how much more debt the government issued, these nations stood ready to buy it.
Looking at this I realized that we are going to witness an unexpected turn of events. When China and Japan decide to stop buying US Treasuries with their trade surplus dollars, the US dollar exchange rate will fall simultaneous with rising US interest rates. This is not intuitive since common dogma suggests currencies rise when interest rates rise and fall when interest rates fall. Yet I believe that the US dollar is going to fall while US interest rates rise.
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Sunday, March 12, 2006
uk interest rates on hold, how japen effect it
uk interest rates on hold. no effect on loan and saving rates
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"Tokyo ends loose-money policy," says a New York Times headline.After 16 years of slump, deflation, bust and aimless chopping, Japan's economy seems to be stirring. It seems to be coming back to life. So, central bankers are taking down the I.V. drips of cash and credit that have kept the failing banks alive and encouraged bad investments. The patient is recovering and no longer needs constant medication.Henceforth, borrowers will have to pay for money in Japan just like they do everywhere else. And henceforth, speculators may not be as flush. For several years now they have been able to borrow from Japan at practically zero interest and re-deploy the money elsewhere. The world took to this easy money like a panda to bamboo shoots. The credit goosed up emerging markets in the Mid East...built factories in Asia...and even contributed to the boom in consumer spending in North America and the house-price bubble here in Britain...so much so, that the boomers - we mean, the consumer boomers - now seem to think they no longer need to save money.In January, the savings rate in the US fell to negative 0.5%, for the first time in history. Yet, more Americans than ever before are preparing to retire. What will they retire on? We don't know....They have houses. They have credit cards. And there is always that ready money in Asia to draw on, just in case."Trade balance hits new record," runs another headline. In January, Americans spent $68.5 billion more from foreigners than they earned from them. At this rate, in a year's time, the US trade balance will reach negative $822 billion...not too far from $1 trillion. And close enough to the point where the entire scheme blows up in our faces, though how much closer we don't know.Americans have always been famous for parting with money rather than saving it. But these days they are parting with so much that their own incomes aren't enough for it. The world's most prosperous people need other people's income to keep parting with cash at the same pace. When Americans buy a new Toyota, for example, they have to borrow the money from a finance company that also borrows - at the lowest rates it can get. So the rate they pay to buy their car depends on the rate the finance company can get...which mostly depends on the low rates set by the Bank of Japan and the Bank of Bernanke.It is thanks to easy credit from these two worthies, that the American lumpenhouseholder is able to buy his car at all - or even his house - without any money of his own. The sale brings dollars...and profits...to the Japanese... which are then recycled back to the US as debt, so the American consumer can dig himself into an even roomier hole.And here in Britain this morning, the press has this headline: "Courts swamped with bad debt cases." It could have been a headline from the US. For on both sides of the Atlantic, the proles are getting squeezed.In order to maintain his illusion of financial progress, the average working stiff has to borrow against his house...or on his credit cards. Borrowing has become easy - thanks to the aforementioned central bankers. Paying back may not be so easy.The same waves of globalized commerce that throw up glittering aisles full of tempting gadgets and gizmos for the lumpen in Long Beach and Loughborough...the same currents of trade that bring him automobiles from Asia and bananas from Latin America...are lapping against his own earning power, washing chunks of it away. Wages in rich countries are slowly being eroded...reduced to sea-level...brought down to the lowest common denominator the world labour market can produce.And meanwhile, the rich grow richer."World gains 102 more billionaires," says the Houston Chronicle. There are now 793 of them and their wealth is growing at 18% per year. Currently, they have about $2.6 trillion, according to the Forbes estimate.
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have you signed up for free newsletter at www.factsonloans.com
"Tokyo ends loose-money policy," says a New York Times headline.After 16 years of slump, deflation, bust and aimless chopping, Japan's economy seems to be stirring. It seems to be coming back to life. So, central bankers are taking down the I.V. drips of cash and credit that have kept the failing banks alive and encouraged bad investments. The patient is recovering and no longer needs constant medication.Henceforth, borrowers will have to pay for money in Japan just like they do everywhere else. And henceforth, speculators may not be as flush. For several years now they have been able to borrow from Japan at practically zero interest and re-deploy the money elsewhere. The world took to this easy money like a panda to bamboo shoots. The credit goosed up emerging markets in the Mid East...built factories in Asia...and even contributed to the boom in consumer spending in North America and the house-price bubble here in Britain...so much so, that the boomers - we mean, the consumer boomers - now seem to think they no longer need to save money.In January, the savings rate in the US fell to negative 0.5%, for the first time in history. Yet, more Americans than ever before are preparing to retire. What will they retire on? We don't know....They have houses. They have credit cards. And there is always that ready money in Asia to draw on, just in case."Trade balance hits new record," runs another headline. In January, Americans spent $68.5 billion more from foreigners than they earned from them. At this rate, in a year's time, the US trade balance will reach negative $822 billion...not too far from $1 trillion. And close enough to the point where the entire scheme blows up in our faces, though how much closer we don't know.Americans have always been famous for parting with money rather than saving it. But these days they are parting with so much that their own incomes aren't enough for it. The world's most prosperous people need other people's income to keep parting with cash at the same pace. When Americans buy a new Toyota, for example, they have to borrow the money from a finance company that also borrows - at the lowest rates it can get. So the rate they pay to buy their car depends on the rate the finance company can get...which mostly depends on the low rates set by the Bank of Japan and the Bank of Bernanke.It is thanks to easy credit from these two worthies, that the American lumpenhouseholder is able to buy his car at all - or even his house - without any money of his own. The sale brings dollars...and profits...to the Japanese... which are then recycled back to the US as debt, so the American consumer can dig himself into an even roomier hole.And here in Britain this morning, the press has this headline: "Courts swamped with bad debt cases." It could have been a headline from the US. For on both sides of the Atlantic, the proles are getting squeezed.In order to maintain his illusion of financial progress, the average working stiff has to borrow against his house...or on his credit cards. Borrowing has become easy - thanks to the aforementioned central bankers. Paying back may not be so easy.The same waves of globalized commerce that throw up glittering aisles full of tempting gadgets and gizmos for the lumpen in Long Beach and Loughborough...the same currents of trade that bring him automobiles from Asia and bananas from Latin America...are lapping against his own earning power, washing chunks of it away. Wages in rich countries are slowly being eroded...reduced to sea-level...brought down to the lowest common denominator the world labour market can produce.And meanwhile, the rich grow richer."World gains 102 more billionaires," says the Houston Chronicle. There are now 793 of them and their wealth is growing at 18% per year. Currently, they have about $2.6 trillion, according to the Forbes estimate.
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loans intrest rates stay the same, will japan effect the future
loans and facts on loans
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"Tokyo ends loose-money policy," says a New York Times headline.After 16 years of slump, deflation, bust and aimless chopping, Japan's economy seems to be stirring. It seems to be coming back to life. So, central bankers are taking down the I.V. drips of cash and credit that have kept the failing banks alive and encouraged bad investments. The patient is recovering and no longer needs constant medication.Henceforth, borrowers will have to pay for money in Japan just like they do everywhere else. And henceforth, speculators may not be as flush. For several years now they have been able to borrow from Japan at practically zero interest and re-deploy the money elsewhere. The world took to this easy money like a panda to bamboo shoots. The credit goosed up emerging markets in the Mid East...built factories in Asia...and even contributed to the boom in consumer spending in North America and the house-price bubble here in Britain...so much so, that the boomers - we mean, the consumer boomers - now seem to think they no longer need to save money.In January, the savings rate in the US fell to negative 0.5%, for the first time in history. Yet, more Americans than ever before are preparing to retire. What will they retire on? We don't know....They have houses. They have credit cards. And there is always that ready money in Asia to draw on, just in case."Trade balance hits new record," runs another headline. In January, Americans spent $68.5 billion more from foreigners than they earned from them. At this rate, in a year's time, the US trade balance will reach negative $822 billion...not too far from $1 trillion. And close enough to the point where the entire scheme blows up in our faces, though how much closer we don't know.Americans have always been famous for parting with money rather than saving it. But these days they are parting with so much that their own incomes aren't enough for it. The world's most prosperous people need other people's income to keep parting with cash at the same pace. When Americans buy a new Toyota, for example, they have to borrow the money from a finance company that also borrows - at the lowest rates it can get. So the rate they pay to buy their car depends on the rate the finance company can get...which mostly depends on the low rates set by the Bank of Japan and the Bank of Bernanke.It is thanks to easy credit from these two worthies, that the American lumpenhouseholder is able to buy his car at all - or even his house - without any money of his own. The sale brings dollars...and profits...to the Japanese... which are then recycled back to the US as debt, so the American consumer can dig himself into an even roomier hole.And here in Britain this morning, the press has this headline: "Courts swamped with bad debt cases." It could have been a headline from the US. For on both sides of the Atlantic, the proles are getting squeezed.In order to maintain his illusion of financial progress, the average working stiff has to borrow against his house...or on his credit cards. Borrowing has become easy - thanks to the aforementioned central bankers. Paying back may not be so easy.The same waves of globalized commerce that throw up glittering aisles full of tempting gadgets and gizmos for the lumpen in Long Beach and Loughborough...the same currents of trade that bring him automobiles from Asia and bananas from Latin America...are lapping against his own earning power, washing chunks of it away. Wages in rich countries are slowly being eroded...reduced to sea-level...brought down to the lowest common denominator the world labour market can produce.And meanwhile, the rich grow richer."World gains 102 more billionaires," says the Houston Chronicle. There are now 793 of them and their wealth is growing at 18% per year. Currently, they have about $2.6 trillion, according to the Forbes estimate.
pass our site onto your friend , for free newsletter on loans and saving rates
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sign up for our free newsletter at www.factsonloans.com
"Tokyo ends loose-money policy," says a New York Times headline.After 16 years of slump, deflation, bust and aimless chopping, Japan's economy seems to be stirring. It seems to be coming back to life. So, central bankers are taking down the I.V. drips of cash and credit that have kept the failing banks alive and encouraged bad investments. The patient is recovering and no longer needs constant medication.Henceforth, borrowers will have to pay for money in Japan just like they do everywhere else. And henceforth, speculators may not be as flush. For several years now they have been able to borrow from Japan at practically zero interest and re-deploy the money elsewhere. The world took to this easy money like a panda to bamboo shoots. The credit goosed up emerging markets in the Mid East...built factories in Asia...and even contributed to the boom in consumer spending in North America and the house-price bubble here in Britain...so much so, that the boomers - we mean, the consumer boomers - now seem to think they no longer need to save money.In January, the savings rate in the US fell to negative 0.5%, for the first time in history. Yet, more Americans than ever before are preparing to retire. What will they retire on? We don't know....They have houses. They have credit cards. And there is always that ready money in Asia to draw on, just in case."Trade balance hits new record," runs another headline. In January, Americans spent $68.5 billion more from foreigners than they earned from them. At this rate, in a year's time, the US trade balance will reach negative $822 billion...not too far from $1 trillion. And close enough to the point where the entire scheme blows up in our faces, though how much closer we don't know.Americans have always been famous for parting with money rather than saving it. But these days they are parting with so much that their own incomes aren't enough for it. The world's most prosperous people need other people's income to keep parting with cash at the same pace. When Americans buy a new Toyota, for example, they have to borrow the money from a finance company that also borrows - at the lowest rates it can get. So the rate they pay to buy their car depends on the rate the finance company can get...which mostly depends on the low rates set by the Bank of Japan and the Bank of Bernanke.It is thanks to easy credit from these two worthies, that the American lumpenhouseholder is able to buy his car at all - or even his house - without any money of his own. The sale brings dollars...and profits...to the Japanese... which are then recycled back to the US as debt, so the American consumer can dig himself into an even roomier hole.And here in Britain this morning, the press has this headline: "Courts swamped with bad debt cases." It could have been a headline from the US. For on both sides of the Atlantic, the proles are getting squeezed.In order to maintain his illusion of financial progress, the average working stiff has to borrow against his house...or on his credit cards. Borrowing has become easy - thanks to the aforementioned central bankers. Paying back may not be so easy.The same waves of globalized commerce that throw up glittering aisles full of tempting gadgets and gizmos for the lumpen in Long Beach and Loughborough...the same currents of trade that bring him automobiles from Asia and bananas from Latin America...are lapping against his own earning power, washing chunks of it away. Wages in rich countries are slowly being eroded...reduced to sea-level...brought down to the lowest common denominator the world labour market can produce.And meanwhile, the rich grow richer."World gains 102 more billionaires," says the Houston Chronicle. There are now 793 of them and their wealth is growing at 18% per year. Currently, they have about $2.6 trillion, according to the Forbes estimate.
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Thursday, March 09, 2006
today interest and loans rate , will they move.
loans and saving will find out today , what is happening next
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Back in the UK, the Bank of England will announce its latest decision on interest rates later today. It is expected that the key UK rate is likely to remain frozen at 4.5%. The Bank's specific concerns include the impact of rising energy bills on inflation, and the potential for any rate cuts to reinflate the housing bubble.
the dollar could be the answer read on.
Almost the entire edifice of neo-classical economics and modern financial theory is predicated on the assumption that investors act rationally. After all, why would anyone wield their hard-earned funds in an irresponsibly unhinged way? More to the point, surely anyone who did so would quickly lose their shirt and be unceremoniously removed from the game?
But the thing is that, although investors are, on the whole, rational, markets can take their time to come to their senses. Remember the dotcom bubble? Sure, none of the valuations made any sense. Absolutely, it was all going to end in tears. But it took its own time to run full circle.
The dotcom bubble may be an ever-diminishing memory in the rear-view mirror of the past, but markets are again doing the “wrong thing”. They’re not being rational, and once again Warren Buffett, who famously missed out on the whole tech-market rally, appears to have got it wrong.
His Berkshire Hathaway group had a “very long-term” bet against the US dollar that by June totalled $21.5bn. However, after the first six months of 2005, the dollar had risen more than 10% and Buffett was down $926m. He has subsequently been forced to cut his exposure back.
This was not supposed to happen. Buffett, and he was not alone, predicted that the dollar would weaken because of the huge US trade deficit. As the US sucked in more and more goods from around the world, the sellers of those goods would be receiving dollars and (since they weren’t spending them on US-made goods) exchanging them into their own domestic currency. Wouldn’t they?
Apparently not. It turns out that the countries with the biggest trading surpluses – Japan, Korea and, increasingly, China – haven’t been selling their hard-earned dollars. Instead, they’ve been buying US government bonds with them; effectively lending the money back to Americans to spend on yet more imports. Today, America receives three-quarters of the rest of the world’s savings.So attractive and cheap and free-flowing is this supply of credit that the US household savings rate is now below zero for the first time since 1933.
This makes sense to the Asians. They are having a tough time encouraging consumption at home, so their economies rely on the export industries for growth. It would be cutting off their noses to spite their face to push the dollar down, as that would push their export prices up. So far this year the US is the only major economy with rising short-term rates, so it’s no wonder the dollar has been on the up.
But there is a reason for America’s deficits, according to Fed chairman-in-waiting, Ben Bernanke. “There’s a glut of global savings,” he says. Roughly translated, his point is that it’s everyone else’s fault that the Americans are all up to their eyebrows in debt, because they shouldn’t have been lent the money in the first place.
Technically speaking, he is correct, in that one county’s deficit must be another’s surplus. But it’s just tautological nonsense to say that it’s a glut of global savings that is causing the US to go mad with its credit cards and that this won’t have nasty consequences. The world hasn’t seen a major economy run deficits of this size in modern times - so we can’t be sure it'll all end in tears. But it makes sense to think that anyone, or indeed any nation, that spends money now that it doesn’t have, will have to forgo that money later.
The Americans can’t live beyond their means forever. So what will this mean? When the US gradually ran down its current account deficit between 1987 and 1991, the dollar fell about a third, even though interest rates rose, unemployment went up and the economy slowed sharply. Such periods usually see inflation rising too, because a weaker currency means import prices rise.
It’s not happening yet, I grant you, but when you’ve got people such as Warren Buffett betting $20bn that it could be soon, it’d be foolish to suppose that America can continue partying on with impunity forever.
If building up deficits means strong, inflation-free, full-employment growth with low rates and strong asset markets, it rather suggests that unwinding them will give you the opposite. There is also a concern that the world’s “savings glut” will find a new home for its money, in effect forcing the Americans to stop living beyond their means.
With an inheritance like that, no wonder Bernanke would like to have us all believe this is a sustainable position, but I think we all know that it’s not. Likewise, even if his timing has been a bit out, you can see where Buffett’s mind is going. America has all the debt and everyone else holds all the IOUs, but it’s still Bernanke who controls the printing presses, so it’ll be awfully tempting for him to inflate his way out of trouble simply by expanding the money supply at speed.
That would make the dollar collapse, for certain. But the pain would all be with creditors (read ‘foreigners’) and the gain with the spendthrift debtors (read ‘US voters’). I don’t know about you, but I wouldn’t want a job abroad right now that paid in US dollars.
pass this web site www.factsonloans.com
to friends and family , so everybody is up to speed on the factsonloans.
go to www.factsonloans.com sign up for free newsletter to find the factsonloans
Back in the UK, the Bank of England will announce its latest decision on interest rates later today. It is expected that the key UK rate is likely to remain frozen at 4.5%. The Bank's specific concerns include the impact of rising energy bills on inflation, and the potential for any rate cuts to reinflate the housing bubble.
the dollar could be the answer read on.
Almost the entire edifice of neo-classical economics and modern financial theory is predicated on the assumption that investors act rationally. After all, why would anyone wield their hard-earned funds in an irresponsibly unhinged way? More to the point, surely anyone who did so would quickly lose their shirt and be unceremoniously removed from the game?
But the thing is that, although investors are, on the whole, rational, markets can take their time to come to their senses. Remember the dotcom bubble? Sure, none of the valuations made any sense. Absolutely, it was all going to end in tears. But it took its own time to run full circle.
The dotcom bubble may be an ever-diminishing memory in the rear-view mirror of the past, but markets are again doing the “wrong thing”. They’re not being rational, and once again Warren Buffett, who famously missed out on the whole tech-market rally, appears to have got it wrong.
His Berkshire Hathaway group had a “very long-term” bet against the US dollar that by June totalled $21.5bn. However, after the first six months of 2005, the dollar had risen more than 10% and Buffett was down $926m. He has subsequently been forced to cut his exposure back.
This was not supposed to happen. Buffett, and he was not alone, predicted that the dollar would weaken because of the huge US trade deficit. As the US sucked in more and more goods from around the world, the sellers of those goods would be receiving dollars and (since they weren’t spending them on US-made goods) exchanging them into their own domestic currency. Wouldn’t they?
Apparently not. It turns out that the countries with the biggest trading surpluses – Japan, Korea and, increasingly, China – haven’t been selling their hard-earned dollars. Instead, they’ve been buying US government bonds with them; effectively lending the money back to Americans to spend on yet more imports. Today, America receives three-quarters of the rest of the world’s savings.So attractive and cheap and free-flowing is this supply of credit that the US household savings rate is now below zero for the first time since 1933.
This makes sense to the Asians. They are having a tough time encouraging consumption at home, so their economies rely on the export industries for growth. It would be cutting off their noses to spite their face to push the dollar down, as that would push their export prices up. So far this year the US is the only major economy with rising short-term rates, so it’s no wonder the dollar has been on the up.
But there is a reason for America’s deficits, according to Fed chairman-in-waiting, Ben Bernanke. “There’s a glut of global savings,” he says. Roughly translated, his point is that it’s everyone else’s fault that the Americans are all up to their eyebrows in debt, because they shouldn’t have been lent the money in the first place.
Technically speaking, he is correct, in that one county’s deficit must be another’s surplus. But it’s just tautological nonsense to say that it’s a glut of global savings that is causing the US to go mad with its credit cards and that this won’t have nasty consequences. The world hasn’t seen a major economy run deficits of this size in modern times - so we can’t be sure it'll all end in tears. But it makes sense to think that anyone, or indeed any nation, that spends money now that it doesn’t have, will have to forgo that money later.
The Americans can’t live beyond their means forever. So what will this mean? When the US gradually ran down its current account deficit between 1987 and 1991, the dollar fell about a third, even though interest rates rose, unemployment went up and the economy slowed sharply. Such periods usually see inflation rising too, because a weaker currency means import prices rise.
It’s not happening yet, I grant you, but when you’ve got people such as Warren Buffett betting $20bn that it could be soon, it’d be foolish to suppose that America can continue partying on with impunity forever.
If building up deficits means strong, inflation-free, full-employment growth with low rates and strong asset markets, it rather suggests that unwinding them will give you the opposite. There is also a concern that the world’s “savings glut” will find a new home for its money, in effect forcing the Americans to stop living beyond their means.
With an inheritance like that, no wonder Bernanke would like to have us all believe this is a sustainable position, but I think we all know that it’s not. Likewise, even if his timing has been a bit out, you can see where Buffett’s mind is going. America has all the debt and everyone else holds all the IOUs, but it’s still Bernanke who controls the printing presses, so it’ll be awfully tempting for him to inflate his way out of trouble simply by expanding the money supply at speed.
That would make the dollar collapse, for certain. But the pain would all be with creditors (read ‘foreigners’) and the gain with the spendthrift debtors (read ‘US voters’). I don’t know about you, but I wouldn’t want a job abroad right now that paid in US dollars.
pass this web site www.factsonloans.com
to friends and family , so everybody is up to speed on the factsonloans.
Wednesday, March 08, 2006
loans , which way are interest rates moving
loans are set to move ,which way
here at www.factsonloans.com for free newsletterwe are watching where intrest rates are
heading.Central banks around the world are raising or about to raise interest rates. All except our own Bank of England.The European Central Bank yesterday raised the key eurozone interest rate to 2.5%. It’s the second rate hike in four months, and comes amid concerns about rising inflation, property bubbles, and evidence that the region’s economy is showing signs of improving growth.But back in the UK, analysts cling to the hope that slowing economic growth will eventually lead the Bank of England to trim rates this year.While we don’t doubt that the UK’s economic growth is weak and getting weaker, there’s still the other part of the interest rate equation to worry about – inflation…
sign up for our free newsletter to see the best place to move your money, for loans, morgtages,credit card rates, best intrest ratesgo to www.factsonloans.com for free newsletter, have a click around.tell your friends about the site
here at www.factsonloans.com for free newsletterwe are watching where intrest rates are
heading.Central banks around the world are raising or about to raise interest rates. All except our own Bank of England.The European Central Bank yesterday raised the key eurozone interest rate to 2.5%. It’s the second rate hike in four months, and comes amid concerns about rising inflation, property bubbles, and evidence that the region’s economy is showing signs of improving growth.But back in the UK, analysts cling to the hope that slowing economic growth will eventually lead the Bank of England to trim rates this year.While we don’t doubt that the UK’s economic growth is weak and getting weaker, there’s still the other part of the interest rate equation to worry about – inflation…
sign up for our free newsletter to see the best place to move your money, for loans, morgtages,credit card rates, best intrest ratesgo to www.factsonloans.com for free newsletter, have a click around.tell your friends about the site
Tuesday, March 07, 2006
where is loan intrest rates heading 7 feb 06
here at www.factsonloans.com for free newsletterwe are watching where intrest rates are heading.
Central banks around the world are raising or about to raise interest rates. All except our own Bank of England.The European Central Bank yesterday raised the key eurozone interest rate to 2.5%. It’s the second rate hike in four months, and comes amid concerns about rising inflation, property bubbles, and evidence that the region’s economy is showing signs of improving growth.But back in the UK, analysts cling to the hope that slowing economic growth will eventually lead the Bank of England to trim rates this year.While we don’t doubt that the UK’s economic growth is weak and getting weaker, there’s still the other part of the interest rate equation to worry about – inflation…
sign up for our free newsletter to see the best place to move your money, for loans, morgtages,credit card rates, best intrest ratesgo to www.factsonloans.com for free newsletter, have a click around.tell your friends about the site
Central banks around the world are raising or about to raise interest rates. All except our own Bank of England.The European Central Bank yesterday raised the key eurozone interest rate to 2.5%. It’s the second rate hike in four months, and comes amid concerns about rising inflation, property bubbles, and evidence that the region’s economy is showing signs of improving growth.But back in the UK, analysts cling to the hope that slowing economic growth will eventually lead the Bank of England to trim rates this year.While we don’t doubt that the UK’s economic growth is weak and getting weaker, there’s still the other part of the interest rate equation to worry about – inflation…
sign up for our free newsletter to see the best place to move your money, for loans, morgtages,credit card rates, best intrest ratesgo to www.factsonloans.com for free newsletter, have a click around.tell your friends about the site
Saturday, March 04, 2006
loan interest, where is it heading
here at www.factsonloans.com for free newsletter
we are watching where intrest rates are heading.
Central banks around the world are raising or about to raise interest rates. All except our own Bank of England.
The European Central Bank yesterday raised the key eurozone interest rate to 2.5%. It’s the second rate hike in four months, and comes amid concerns about rising inflation, property bubbles, and evidence that the region’s economy is showing signs of improving growth.
But back in the UK, analysts cling to the hope that slowing economic growth will eventually lead the Bank of England to trim rates this year.
While we don’t doubt that the UK’s economic growth is weak and getting weaker, there’s still the other part of the interest rate equation to worry about – inflation…
sign up for our free newsletter to see the best place to move your money, for loans, morgtages,credit card rates, best intrest rates
go to www.factsonloans.com for free newsletter, have a click around.
tell your friends about the site
we are watching where intrest rates are heading.
Central banks around the world are raising or about to raise interest rates. All except our own Bank of England.
The European Central Bank yesterday raised the key eurozone interest rate to 2.5%. It’s the second rate hike in four months, and comes amid concerns about rising inflation, property bubbles, and evidence that the region’s economy is showing signs of improving growth.
But back in the UK, analysts cling to the hope that slowing economic growth will eventually lead the Bank of England to trim rates this year.
While we don’t doubt that the UK’s economic growth is weak and getting weaker, there’s still the other part of the interest rate equation to worry about – inflation…
sign up for our free newsletter to see the best place to move your money, for loans, morgtages,credit card rates, best intrest rates
go to www.factsonloans.com for free newsletter, have a click around.
tell your friends about the site