Death Star Economics



How the US became the world’s biggest economic threat

The G20 has done it and banned Greece from being the single biggest annoyance threat to the world economy. In its place, just in time for tomorrow’s elections, is the US fiscal cliff. Or in last year’s press jargon, the end of the Bush-era tax cuts paired with a truckload of spending cuts. The US debt ceiling, which has been of concern in virtually every administration, was last lifted in August 2011, and the same might be required come January. read article

Otherwise, people are pulling their hair out about who will win the election and what move to make in either situation. The Wall Street Journal says post-election America will have answers for questions of fiscal policy, taxes and regulation, giving investors a better base for their decisions disregarding who wins. Bloomberg goes even furtherthis glass is more than half full:

No matter who wins the election tomorrow, the economy is on course to enjoy faster growth in the next four years as the headwinds that have held it back turn into tailwinds. Consumers are spending more and saving less after reducing household debt to the lowest since 2003. Home prices are rebounding after falling more than 30 percent from their 2006 highs. And banks are increasing lending after boosting equity capital by more than $300 billion since 2009.

So we’re all set then. Meanwhile, WSJ MarketBeat says that either presidential candidate could fail to address the fiscal policy issues or lead the Fed to stop throwing money at the country. And Bruce Bartlett (no, not President Barlet from the West Wing), former White House economist, says no president can save the US economy.

On the other side of the Atlantic, it has dawned on the ECB that it is giving Spain too much credit, both literally and figuratively. Spanish government debt used as collateral for corporate loans may be overvalued and is thus dangerous for the central bank’s massive balance sheet. Spain’s banks got almost €17bn from the ECB by putting up their government’s treasury bonds as collateral. For corporate loans, this number grows to €80bn. The crux is  the ECB rated Spanish debt as highest-quality collateral. Hmm. The story was first broken by the German newspaper Welt am Sonntagread article

In AustraliaStandard&Poor’s has been found guilty of misleading investors by misrating CPDOs (constant proportion debt obligations: a leveraged bet on the creditworthiness of a small group of companies), which created by Dutch bank ABN Amro’s in 2006. Twelve councils in New South Wales have lost AUD15.3m, which equals 90% of their initial investments.

Also on a regulatory note, HSBC could be fined up to $1.5bn for money laundering. In July, the US Senate initiated an investigation of the bank’s finances as a response to allegation of money laundering for Mexican drug cartels. HSBC announced to have a buffer of $2bn for regulatory expenses in 2012.

So long.


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2 Responses

  1. princess1960 says:

    hello and have a nice start week ..
    Fiscal clifft is ( take from this hand and give another hand)or greek say (pigady xoris patto)..
    if this don’t stop emergancy will go hyperinflation …
    Election in USA is important for the world too ..NOW who’s winn ?is clear ..OBAMA( this is from 2008)
    S&P finded not legal or not clean investiment in AUstralia ..every institution can make mistake ..this is sure but for me this mistake become because they wanted or not wanted ???/

    Romania..this rich peace of earth is so poor in the humman
    GV is really in coruption
    thank you

  2. […] in the publishing company fell the most since 1987 in response to the lawsuit. In November 2012, S&P was found guilty for misrating CPDOs (constant proportion debt obligations). The other big rating agencies, Moody’s and Fitch, […]

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