Financial & Economic Crisis
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WTO predicts global trade to fall 9%
03 Apr 2009
The World Trade Organization forecasts global trade to decline by 9% during 2009. Developed countries will see their exports fall by around 10% during the year, while poorer nations’ trade levels will drop by 2-3%. According to WTO Director-General Pascal Lamy, this will be the biggest fall in world trade since World War II and any protectionist measures taken by individual states will only further worsen the situation. Global trade will be one of the hottest issues on the agenda during the G20 summit in London on 2 April. The WTO experts note that the forecast might need to be updated during the year depending on various factors including the depth and severity of global recession. Some positive signs include February increase in trade levels for Singapore, China, Taiwan and Vietnam. Read more...
UK government debt hit £750bn in 2008
28 Mar 2009
The Office for National Statistics data shows that the British government’s debt rose to £750.3bn in 2008, which represents more than 50% of Britain’s GDP (gross domestic product). At the same time, the government’s net borrowing reached 5.4% of the GDP. According to the EU’s Maastricht Treaty, deficits should not exceed 3% of GDP mark and debt should not go over 60% of GDP respectively. The European Commission set targets for five member countries to reduce their budget deficits. The UK is required to meet the 3% target by 2013-14. The above debt figure includes the rescue package of Northern Rock, however does not include the bank bail-outs as well as treasury bills provided to the Bank of England in 2008. Read more...
US budget deficit will reach $1.8 trillion
20 Mar 2009
The Congressional Budget Office forecasts the US budget deficit to hit $1.8tn (£1.25tn) this year and total a massive $9.3tn between 2010 and 2019. The President Obama’s $3.55tn budget plan designed to address issues in education, healthcare as well as to lower greenhouse emissions appears to be the main contributor to the huge deficit estimated by the Congress, however as announced by the White House it will not change the President’s political agenda. The forecast for the US economy is just as gloomy – a 3% contraction in 2009 with a 2.9% growth in the following year and 4% growth for 2011. The current government’s objective is to cut the deficit in half by the year 2013. Some experts believe that the public spending programs need to be cut as simply unaffordable in these turbulent times. Read more...
Norway government pension fund lost $92bn
16 Mar 2009
The Norwegian Government Pension Fund lost 633bn kroner ($92bn or £66bn) on its investments during 2008. Being the world’s second biggest sovereign wealth fund after the United Arab Emirates, the fund is worth $330bn. The main contributing factor to the fund’s losses was a dramatic drop in equity prices worldwide. The following financial crisis in the banking sector and the resulting problems in the real economy have further affected the fund’s performance. The pension fund’s shares fell by around 20%, while its bonds rose only by 1.6%. On the other hand the fund’s international division known as the oil fund was performing well. With Norway being the fourth largest gas and oil exporter worldwide, there have been some significant inflows of funds during the record energy prices of the summer months. The favourable currency movements during the year also provided a source of growth for the pension fund. Read more...
Federal Reserve chairman warns of stagnation
08 Mar 2009
Federal Reserve chairman believes the US government needs to act now to stabilize financial markets. He warned the US Senate Budget Committee that if more aggressive steps are not taken, the US will be facing a prolonged economic stagnation which in turn would lead to lower production, employment and income levels as well as worsening fiscal situation. According to Mr Bernanke the US government has made some progress since autumn last year however more aggressive measures need to be implemented to revive the economy. Read more...
Insurance giant AIG reports $61.7bn in losses
04 Mar 2009
Insurance company AIG reported a $61.7bn (£43bn) loss in the last quarter of 2008 which represents the biggest quarterly loss in the corporate history. Following the news the stock markets fell sharply over concerns about the health and stability of the financial system. The giant insurer was already given $150bn in financial support from the US government marking it the biggest bail-out of an American company. Another $30bn is due to come in as part of the revamped rescue package. Both the Federal Reserve and the Treasury are confident that the provision of funds will stabilize the financial system warning that the cost of inaction would be extremely high. The rescue deal involves restructure of AIG’s operations and the Federal Reserve taking shares in two international units. Read more...
Job losses to reach 7.2 million in Asia
24 Feb 2009
According to the recent UN report about 7.2 million people in Asia are expected to lose their jobs in 2009 as a result of the global economic downturn. The International Labour Organization (ILO) forecasts the number of jobless people to reach 97 million or as much as 113 million in the worst case scenario. The governments of Asian countries are urged to focus their efforts on projects that could safeguard and create jobs. As was suggested by Sachiko Yamamato, regional director of ILO, expansion of already existing public spending projects can be a good way to create and support jobs. The UN report also highlights the fact that enough jobs are unlikely to be created to keep up with the expected labour force growth as well as to compensate for job losses associated with the global economic downturn. read more...
EU leaders support regulation of financial markets
18 Feb 2009
During the meeting in Berlin European leaders agreed that financial markets including hedge funds need to be regulated. While the leaders were unanimous in recognizing the fact that the rules of the global financial system had to be re-written, it was apparent that the differences in views were significant on a number of issues. It was also noted that international institutions including International Monetary Fund need to play a greater role at preventing financial crises rather than concentrating on dealing with the consequences of such crises. The European leaders have made a commitment to work out the details of a plan to re-design the global financial system before the next meeting of the G20 group of major developed and developing countries which takes place on 2 April in London. read more...
Russia’s economic growth is weakening
11 Feb 2009
Russian economic growth fell substantially to 5.6% in 2008 compared to 8.1% figure in 2007. A dramatic drop in commodity prices especially the fall in the price of oil from record highs of $147 a barrel in July to below $50 a barrel at the end of the year, had a major impact on the Russian economy. The rouble, the national currency, has dropped to 40.80 roubles against the dollar-euro basket. In an effort to support the rouble, the Russian government spent a third of its financial reserves or $200bn (£141bn), however the band might require further widening due to increasing pressure. According to the Russian officials the country’s economic growth is forecast to be close to zero in 2009. read more...
Nissan will cut 20,000 jobs worldwide
09 Feb 2009
Due to the sharp decline in global car sales, Nissan will cut 20,000 jobs worldwide between March 2009 and March 2010. As a result of this reduction, the car manufacturer’s global workforce will decrease from 235,000 to 215,000 employees. The details as to which plants will be affected have not been released yet. The Japanese car maker already announced the expected loss to be $2.9bn or £2bn in the current financial year. Between October and December 2008, 731,000 Nissan vehicles were sold worldwide - down 18.6% from previous year. As a result of a sharp fall in demand for new cars, there is a global trend for cutting production and jobs among car manufacturers. read more...
French government will provide 6.5bn euros to its carmakers
06 Feb 2009
The French government announced a 6.5bn euros ($8.5bn) loan to be provided to three carmakers. According to the plan, Peugeot-Citroen and Renault will receive 3bn euros each and Renault Trucks owned by Swedish AB Volvo will get 500m euros. The loans are offered on a five-year basis at 6% interest rate. In exchange, the car manufacturers agreed not to close any French sites and to do everything possible to avoid job cuts. In addition both Renault and Peugeot-Citroen's finance departments will receive double the amount of state aid of 2bn euros. The European Commission is going to investigate all components of the arrangement very closely to ensure their compliance with the relevant state aid and single market legislation. read more...
US companies will cut 100,000 jobs
03 Feb 2009
The US job market is experiencing tough times with over 100,000 job cuts announced last week alone. Caterpillar, a major heavy equipment manufacturer announced it would cut 22,000 jobs. Pfizer, the leading drug manufacturer in the number of pharmaceutical sales per year, is planning to lay off another 20,000 employees in an effort to cut costs. Boeing, the Chicago-based airplane manufacturer, confirmed it would lay off 10,000 workers, which includes the 4,500 previously announced job cuts. The rest of the job reductions came from a number of companies from various industries. According to the leading economists, the forecast for 2009 is just as pessimistic. According to government reports, the US economy lost 2.6 million jobs in 2008. The forecast for 2009 is predicted to be another 2 million in job losses. read more...
Sales of newly constructed homes hit record lows
02 Feb 2009
A government report released on Thursday shows that sales of newly constructed homes fell to a record low level with an annual rate hitting 331,000 for December. This figure is 14.7% lower than a revised annual rate for November and 44.8% down from December last year. That’s the lowest level of sales since the reporting was initiated in 1963. Various reasons contribute to the worsening situation on the real estate market including rising job losses, credit crunch and the number of foreclosures. The problem is particularly acute in the western states including Arizona, Nevada and California where house prices have dropped dramatically and the number of foreclosures keeps mounting. read more...
Microsoft will lay off 5,000 employees
26 Jan 2009
Microsoft is planning to cut 5,000 jobs following a sharp drop in global demand for information technology products. During the next 18 months the reductions will be made in a wide range of areas including sales, IT, research and development, human resources and finance with 1,400 layoffs expected immediately. These are the biggest job cuts the company has ever experienced since it was founded in 1975. The IT giant’s management was compelled to take such drastic measures after quarterly profits fell 11% to $4.17bn in the last quarter. The envisaged layoffs are aimed to save $1.5bn annually. read more...
UK automobile production fell 50% in December
23 Jan 2009
The UK car production nearly halved in December as a result of the credit crunch and falling demand for new cars. According to the Society of Motor Manufacturers and Traders data, automobile production fell 47.5% to just 53,823 vehicles in December with the overall production hitting 1.45m for the year - a 5.7% drop compared to the previous year. Commercial vehicles sector has been even more affected by the worsening economic conditions with the number of vehicles manufactured dropping 56.7% to 6,209 vehicles, while the overall production for the year was down 5.9% to just over 200,000 vehicles. Car manufacturers all over the world are cutting production as the number of unsold cars in inventories is reaching unprecedented levels. read more...
Stock markets in the US fall sharply
21 Jan 2009
The US stock markets saw the biggest one-day fall in the last two months with Dow Jones dropping 4%, S&P 5.2% and the Nasdaq 5.7% respectively. After major banks announced poor results in the last quarter, there have been growing concerns over the future outlook for the banking sector. Citigroup showed a quarterly loss of $8.29bn with plans for the company to be split into two. Merrill Lynch recorded a quarterly loss of $15.31bn, Bank of New York Mellon saw quarterly earnings drop 88%, State Street revealed a 71% fall for the quarter and Royal Bank of Scotland estimated losses over £28bn for 2008. Finally, Lloyds Banking Group lost over a third of its value and Barclays fell 18%. Read more...
Bleak future for European car manufacturers
19 Jan 2009
As consumer spending plunges all over the world, major European car makers are struggling to survive the economic downturn. Car sales in Europe have fallen dramatically, particularly in the last quarter of 2008 declining by 20%. The projections for 2009 are just as bleak with an estimate of another 20% decrease which will have a major impact on thousands of workers. According to the current state aid rules in the EU, governments cannot bail out individual car manufacturers and fund operational expenses to keep the company running, however state funds can be provided for investment or restructuring purposes. The EU Industry Commissioner, Guenter Verheugen, ruled out provision of any subsidies to the car industry, although mentioned the possibility of offering car manufacturers increased loans from the European Investment Bank. The EU ministers agreed to find a coordinated approach to boost consumer demand. The two possible solutions discussed during the meeting in Brussels include provision of aid to car financing firms and payments to new car owners to scrap their old cars. read more...
US Job Market had its worst year since 1945
13 Jan 2009
The American job market is experiencing its worst downturn in over sixty years. According to the recent report issued by the U.S. Labour Department, 524,000 jobs were lost in December totalling 2.6 million for the year with 1.9 million lost in the final four months of 2008 only. The unemployment rate went up to 7.2% in December from an already high level of 6.7% in November. Some experts predict unemployment rate to go beyond the 10% mark. Under-employment numbers are soaring too up by 715,000 to 8 million people seeking full-time employment who are only able to work part-time. To rescue the increasingly fragile labour market, the government stimulus plan is aimed at creating 3 million jobs in the next two years, however experts agree that the proposed infrastructure projects will not have an effect on the general economy until late in the year. read more...
Stock Market: back to reality
12 Jan 2009
After starting the new year on a positive note, the stock market is getting back to reality. In the last week of December and start of January, major stock indexes gained 5-8% on average, however during the first full week of trading in 2009 half of the gains were already lost. Further decline in stock prices is expected in the coming weeks. Recessionary trends are coming from different areas of the economy, as we see weak consumer spending environment, soaring unemployment, falling retail sales and profit warnings from major companies. With the quarterly reporting period starting next week, we will see more stock market movements in the weeks ahead. According to Larry Glazer, managing director at Mayflower Advisors "The worst damage to the economy has probably already happened, but we're going to keep seeing the messy aftermath in the months ahead". read more...
China’s industrial output continues to decline
06 Jan 2009
China’s industrial output keeps falling for the third consecutive month due to dropping global demand for goods and services. Thousands of factories have closed down following a substantial decline in orders, particularly from overseas, causing fears of possible social unrest as a result of rising unemployment. China’s economic growth is predicted to fall to around 9% in 2008 compared to 11.9% in 2007 and expected to drop even further to around 6% in 2009. read more...
Stock markets start 2009 on a positive note
05 Jan 2009
Stock markets worldwide have started the New Year with optimism with major indexes rising by an average of 3-5%. In Europe, London FTSE 100 index went up by 2.88% and major indexes in France and Germany rose by 4.09% and 3.39% respectively. In the US, the Nasdaq was also up by 3.50% and the S&P 500 went up 3.16% by the close of business day. In Asian markets, Hong Kong's Hang Seng index rose 4.6% and South Korea's stock markets closed up 2.9%. Chinese and Japanese markets were closed for a public holiday. Most experts however agree that these temporary gains will not last long as it is typical for markets to start the year with optimism. After record falls in 2008 and economies heading into recession, it is unlikely the markets will recover any time soon. read more...
Industrial output plunges in Japan
29 Dec 2008
November saw the biggest fall on record in Japan’s industrial production with an 8% drop compared with the previous month. Automobile, machinery and electronics industries experienced the biggest decline in production. Recessionary trends worldwide resulting in falling demand for goods and services negatively impacted Japan’s manufactures forcing them to cut production and lay off workers. Japan’s unemployment has climbed to around 4% with over 2.5m people out of work for November, representing a 100,000 rise from the year before. According to Japan’s Ministry of Economy, Trade and Industry data, the country’s industrial output will continue to fall in December with projected decline of around 8%. Despite the government’s efforts to boost economic activity by increased government spending and cutting interest rates, there are signs that Japan’s recession is worsening. read more...
US consumer spending continues to fall
24 Dec 2008
The US economy is showing more signs of a deepening recession. Consumer spending has been falling for the last five consecutive months. According to the US Department of Commerce, November saw a 0.6% reduction in consumer spending after a 1% fall in October. Demand for long-lasting US manufactured goods has been hit particularly hard. Orders declined by 1% in November and 8.4% in October making it the biggest fall since July 2000. Automobile manufacturers, in particular, are experiencing difficult times, relying on government help in the New Year. Rising unemployment and falling incomes are another source of concern with weekly jobless claims on the rise from 556,000 to 586,000 according to the US Labour Department. read more...
China’s GDP growth will be lower than expected
22 Dec 2008
Due to exceptionally weak economic activity in November, a number of investment banks as well as International Monetary Fund had to revise their growth estimates for China. According to the Royal Bank of Scotland, the projected GDP growth rate is expected to be around 5 percent compared to 8 percent as previously estimated. Although such estimate cannot be defined as a recession, experts suggest that economic situation in China might feel like a depression to an average citizen especially for millions of migrant workers who will be hit hardest. Social tensions and unrest might occur as a result of the downturn. The government has taken a number of steps to battle the slowdown including a sizeable stimulus package, interest rates cuts as well as measures to support the real estate market. More supportive measures are envisaged to help the industry including import and export tax cuts, loans to smaller businesses and increased government spending on raw materials to top up the country’s reserves. read more...
France and Germany are pumping in more money to fight recession
19 Dec 2008
France and Germany, the two largest economies in the eurozone, are sinking deeper into recession. According to Insee, the national statistics agency of France, the economy is expected to contract by 0.8% this quarter and another 0.4% next quarter. The German economics ministry is predicting a 3% contraction for the German economy. With the increasing pressure from other EU members, the two governments are planning to pump in more money to support their struggling economies. Germany announced a second stimulus package of €40bn which will be predominantly spent on infrastructure, education programs and internet networks. French government is launching €26bn program to boost economic activity in the country. read more...
Will OPEC cut its production to stop falling oil prices
18 Dec 2008
In an effort to stop falling oil prices, OPEC members met in the Algerian port of Oran to discuss what is described as the biggest oil production cut since the 1960s. There were earlier attempts to impose lower production quotas on member states, however according to independent observers the cartel nations’ compliance for November was just above 50%. Some OPEC members including Venezuela and Iran are hoping that a production cut between one and two million barrels can be agreed upon. Russia and Azerbaijan, two non-OPEC members agreed to support OPEC’s quotas once a decision has been reached. Faced with dropping global oil demand and prices plunging from its peak of over $147 a barrel to just around $44 last night, the OPEC member states face a difficult decision. read more...
The US Federal Reserve cut interest rates to virtually zero
17 Dec 2008
In an attempt to battle the oncoming recession, the US Federal Reserve cut its key interest rates from 1% to a range between 0% and 0.25%. The Fed’s officials expect such low rate to stay in place for some time as well as plan on spending additional funds to boost the weakening economic activity and support credit markets by buying mortgage-based loans. The Federal Reserve is also considering buying long-term US government bonds, an important tool to prevent any deflationary trends. With interest rates getting close to zero, deflation becomes a real risk further suppressing economic activity. In addition to these measures, the US government will implement an economic recovery plan which includes creating at least 2.5 million jobs by 2011 and improving the nation’s infrastructure. read more...
Treasury bailout money to be used to save automakers
15 Dec 2008
The Bush administration announced on Friday 12 December that some funds from the $700bn bailout plan approved earlier by Congress might be used to save the US carmakers from bankruptcy. After the $14bn bailout plan for the automotive industry was turned down in the Senate, the $700bn Troubled Asset Relief Program (TARP) was the only option left for the administration to fund the automakers bailout. GM warned that the company would require $4bn at the end of December and another $6bn in January-February of 2009 to keep the business running. Chrysler officials announced that $4bn would be necessary early next year for the company to stay afloat. Ford’s officials confirmed that currently the company has enough cash on hand to run the business, however additional funds might be required from the government later next year if auto sales do not increase. It is not clear at this stage how much funding will be provided and when and if any restrictions will be placed on cash. read more...
$50 billion Ponzi scheme uncovered
14 Dec 2008
After the arrest of New York money manager Bernard Madoff, the list of potential victims has been growing exponentially. Some of the bigger clients included former Philadelphia Eagles owner Norman Braman, the chairman of GMAC Financial Services J. Ezra Merkin, and New York Mets owner Fred Wilpon, the Robert I. Lappin Charitable Foundation, The North Shore-Long Island Jewish Health System, the Texas-based Julian J. Levitt Foundation, as well as a number of hedge funds and investment groups. Although Madoff had a dual reputation among investors, it came as a surprise to investigators how such questionable operations could have escaped the scrutiny of the regulatory organizations. Madoff claims that he acted alone and it was his own family who turned him in. read more...
Investors bought U.S. government debt at zero return
09 Dec 2008
Thousands of investors showed up at a government auction on Tuesday, 9 December to purchase $30bn worth of short-term government securities with four weeks’ maturity. The demand was so incredible that the US government could have sold four times the amount. In times when fortunes were lost in stocks, bonds and real estate, people turned to the investment that offers security accepting a zero rate of return. It was an alarming sign for economists and the government with possible implications that an economic recovery is still miles away. With investors reluctant to put their money into corporate stocks and bonds, the funds required to finance business operations might not be available. read more...
World Bank predicts global economic decline
09 Dec 2008
Specialists from the World Bank predict that in 2009 the global economy will see a significant decline in economic growth in both developed and developing countries. According to the Bank’s forecast, global economic growth will slow down to 0.9% a year compared with 2.5% in the current year. For developing countries, the rate of growth is expected to be around 4.5% compared with 7.9% last year, however the Bank also warns that the world economy will face negative growth due to global population growth. Despite the current economic crisis, the Bank sees positive prospects for developing countries in the longer-term and as a result a considerable decrease in world poverty rates by 2015. read more...
Airlines are expected to lose $5bn in 2008
09 Dec 2008
Airlines worldwide are expected to lose $5bn in 2008 and another $2.5bn in the coming year according to the forecast from the International Air Transport Association (IATA). The organization predicts passenger air traffic to drop by 3%, the first decline since 2001, compared with growth of 2% this year. Airlines are expected to incur losses worldwide with North America being the only profitable region. With air cargo traffic diminishing, the prospects for the airlines remain bleak. read more...
Recession in Japan deepening
09 Dec 2008
The Japanese economy, the second largest after the US is shrinking fast. With the declining global demand and rising yen, Japanese companies are closing down production facilities and laying off workers. GDP has dropped at a rate of 1.8% per year in the latest quarter, which is a much higher decline that most economists had forecasted. Many smaller companies are going bankrupt and bigger firms see their profits decimated. In response to the crisis the Japanese Prime Minister Taro Aso has promised to increase public spending to help businesses and families, however the support for the government is very low among population with only 20% of voters still supporting the current government. read more...
European stock markets fall sharply
06 Dec 2008
European markets fell sharply on Friday 5 December after news about jobs losses in the US reaching 533,000 in November. The report from the US Labour Department also included revised figures for September and October with 403,000 and 320,000 job losses respectively. With weakening economy and tight credit conditions, the companies are feeling the pinch. read more...
Consumer borrowing $3.6B down in October
05 Dec 2008
According to the Federal Reserve data, consumer credit in the US fell by 3.6 billion dollars in October. Credit card borrowing dropped at an annual rate of 0.2%, student and car loans fell at an annual rate of 2.5%. Although major economists expected consumer borrowing figures to rise by 1.5 billion for that period, weakening economy and job losses put enormous pressure on budgets of households. According to Bob Brusca, economist at Fact and Opinion Economics in New York, "Consumers don't feel they have the asset power to borrow against. They have no prospect for a raise and may not have a job." read more...
Foreclosures hit new highs
05 Dec 2008
The number of foreclosures reached almost 3% in the third quarter hitting a record of 1.35 million homes, which represents a 76% increase in foreclosure rate from a year ago. At the same time, the number of homeowners who fell behind in their mortgage repayments has reached 6.99% rising from 5.59% last year. California and Florida have the highest delinquency rates and highest job losses nationwide. Seven other states including Arizona, Nevada, Illinois, Michigan, Indiana, Ohio and Rhode Island have foreclosure rates above national average. With weakening economic activity and increasing job losses, the number of foreclosures is expected to climb to new highs. read more...
Global recession: oil prices hitting a 4 year low
05 Dec 2008
On Friday 5 December, oil prices fell below $41 a barrel, its 4 years low, after the government reported job losses for November. According to the Labor Department, US employers cut 533,000 jobs in November, the highest figure since 1974, and unemployment rate rose to 6.7%, the highest level since October 1993. With businesses and consumers cutting back on expenses, commodity prices are plunging and weak economic activity is affecting all sectors. In order to slow down falling oil prices, OPEC made a decision to cut oil production by 1.5 million barrels a day at its meeting in October, however according to production estimates from Bloomberg Finance, the group made a reduction of 725,000 barrels so far. Some experts think OPEC would need to take some drastic measures to keep the oil price above the $40 mark. read more...
Increasing number of foreclosures is hurting US economy
04 Dec 2008
US Federal Reserve chairman Ben Bernanke has urged the government to take action in relation to the daunting number of home foreclosures. He said that the crisis in the housing market has a negative impact on the overall economic activity and the efforts made both by private and public sector organizations are not resolving the problem. According to the Federal Reserve chairman, the government has several options to dramatically reduce the number of foreclosures. One solution included offering home loans to problematic borrowers at lower rates, however this option would require raising the federal debt ceiling by Congress. Another solution would be to reward lenders who agree to share the cost of restructured loans. Banks, in their turn, could look into reducing existing mortgages by writing down negative equity in people’s homes. According to FDIC forecast, such measures could reduce the number of foreclosures by 1.5 million. read more...
02 Dec 2008
US recession began in December '07
According to the National Bureau of Economic Research (NBER), the US economy has been in recession since December 2007. The decision was made using a number of economic indicators including production, employment, real income and other indicators. The NBER is a private sector organization which has been dating the US business cycle since 1929. According to the NBER recession is defined as a "significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income and other indicators." The NBER committee has not provided a forecast as to the length of the recession. read more...
02 Dec 2008
Asian stock markets fall again
Following the US business activity slowdown as well as the global trend towards recession, Asian stock markets fell on Tuesday, 2 December. Japan, South Korea, the Philippines, Hong Kong, Singapore and Taiwan were among those whose markets were affected. Exporters were hit hard with Honda Motor among the biggest losers. In response to that, Japan’s central bank announced a number of measures aimed at tackling the current economic crisis. read more...
02 Dec 2008
US Home sellers suffer from a wave of foreclosures
Ordinary sellers in the US are hit hard when trying to sell their house as they cannot compete with a flood of foreclosed homes currently on the market. According to Trulia.com, a real estate Web site, foreclosed homes sold by the lenders are typically priced around 40% lower than other real estate offers and account for 40-50% of the market in many areas. In addition to missed mortgage repayments and soaring administrative costs, lenders have to pay insurance, maintenance and property taxes. Therefore, it makes sense for the lender to cut the price substantially to get rid of the property in a short period of time. With real estate prices falling very fast, ordinary sellers need to be very aggressive in their pricing to be able to compete in this currently very tough market. read more...
01 Dec 2008
World economy at its lowest level since 1930s
According to the United Nations projections, global economic output will decrease by a mere 0.4% during 2009, which will mark the first year of contraction for the world economy since the Great Depression of 1930s. The UN also predicts that economies of developed countries would contract by up to 1.5%, while developing countries’ economies would expand by at least 2.7%. However economic expansion in developing countries will be offset by population growth, which means that world income per capita would fall in 2009. read more...
01 Dec 2008
JPMorgan Chase will cut 9,200 WaMu jobs
JPMorgan Chase announced its plans to lay off 9,200 employees at Washington Mutual, purchased by the banking giant in September. Seattle-based Washington Mutual, once representing the largest savings and loan in the US, collapsed due to bad debts following subprime mortgage crisis resulting in the largest bank failure in American history. The job cuts will come from the central office in Seattle slashing 3,400 employees, Pleasanton and San Francisco in California laying off 1,600 employees and the remaining 4,200 positions will be cut at the corporate level nationwide. read more...
01 Dec 2008
US Manufacturing index hits 26 years low
The US index of manufacturing activity hit a 26-year low in November indicating overall contraction in the economy for the second month in a row. With prices going down, there are fears of the coming deflation among economists. While lower prices can provide some relief for businesses and consumers, if deflation occurs it would start a vicious circle of weakening demand and further slowdown. Weak demand would force businesses to cut on costs including jobs while this would further reduce consumer spending and lead to further economic decline. read more...
26 Nov 2008
200bn euro plan to save European economy
The European Commission announced a 200bn euro economic recovery plan aimed to boost consumer confidence and spending. Member states are expected to contribute 170bn euros and the European Union will provide 30bn euros The funds will be spent on job training, improving broadband access, developing green technologies, programs to improve energy efficiency of households and industries, as well as aid to small and medium sized businesses. The EU hopes the plan will allow to save millions of European jobs. read more...
25 Nov 2008
US announced $800bn rescue plan
The US Federal Reserve announced a 800bn stimulus package aimed to stabilize the financial system and make more lending available to consumers. Approximately 600bn is to be spent on mortgage-backed securities and the remaining 200bn will flow into the consumer credit market. The rescue plan was taken positively by most analysts. read more...
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