The Bank Bailouts Are Very Well Intended, But Where Is All The Money Going To Come From?

Edward Hugh November 2nd, 2008

As every woman who has ever had dealings with a man knows only too well, it is a lot easier for people to make promises than it is for them to keep them. And when Europe’s leaders met in Paris on the 12 October, a lot of fine promises (which were all, surely, very well intentioned) were made. The reality of having to live up to them, however, is turning out, as might only have been expected, to be much more complicated.

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As The BOJ Cuts Rates Japan Grits Its Teeth For Another Bout Of Deflation

Edward Hugh November 1st, 2008

Well, suddenly Japan’s economy seems to be back in the news. The BOJ today lowered interest rates, inflation seems to have peaked (and deflation may be once more looming on the horizon), householding spending is in decline, employment is falling, exports are languishing as the yen hits one high after another against both the dollar and the euro, Prime Minister Taro Aso is (despite the perilously large size of Japan’s debt to GDP ratio) preparing yet another counter-recession spending package (this time of some $275 billion dollars, with $50 billion in additional spending), and yes, above all, Japan already seems to be mired deeply in recession.

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As Ukraine And Hungary Accept IMF Loans, Will Poland Be Next?

Edward Hugh October 29th, 2008

Yesterday, the Ukraine received a USD16.5bn loan from the IMF and the IMF at the same time said that it would agree with the Hungarian government on a rescue package in the coming days. Under normally circumstances this would be good news for CEE assets. However, it seems like the markets are totally giving up on CEE. This morning the Hungarian stock markets have dropped more than 10% despite the promise of an IMF package.

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And So It Ends – Hungary’s Government Announces Foreign Currency Loan Wind-up Package

Edward Hugh October 27th, 2008

Hungarian Prime Minister Ferenc Gyurcsány announced yesterday (Wednesday) that the government had reached an agreement with commercial banks intended to protect the interests of those who have taken out foreign currency loans.

The agreement, which is expected to be signed early next week, has three key components:

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Despite The “Sudden Stop” Kazakhstan Won’t Be Calling On The IMF For Help

Edward Hugh October 22nd, 2008

“The Kazakh government is ready to step in,” Kazakhstan’s Prime Minister Karim Masimov said this morning in a telephone interview with Bloomberg “The Kazakh banking system with the support of the government and central bank will fulfill all obligations to international investors…..We have our own specific plan to survive without any external support….I don’t think we need support from the International Monetary Fund or overseas.”

Well that is good news, so at least we know that one of the CIS and CEE economies won’t be looking to the IMF for bail-out support in this crisis which is presently growing by the day. So Kazakstan, that country which is reputedly host to reserves of approximately 95% of the elements in the periodic table, with a population of around 15 million housed on a surface area greater than the whole of Western Europe, is going to be able to look after itself. But hang on a minute, just where is Kazakhstan, and just what have they been getting up to over there, and why the hell should I take Karim Masimov’s word for it, when just about all the other Iceland Look-alike show contestants seem to be saying the same? After all, didn’t those extermely bright and able young people over at RBC Capital Markets in Toronto say in a report only last week that, along with Latvia, the country’s $100 billion oil-led economy is among the most vulnerable to the present global credit crisis and the skid-row economic trajectories that go with it simply because of its excessive reliance on short-term foreign borrowing. And isn’t it the case that the cost of protecting Kazakhstan government debt against default has more than doubled this month – to over 1,000 basis points (or 10%), the level for borrowers that investors term “distressed,” according to CMA Datavision credit-default swap prices. Only Ukraine, which as we know is already seeking IMF support, is classified as being a bigger risk among European emerging-market governments. Surely all those highly dedicated, bright, and extremely able young people who are doing all that trading know what they are about, don’t they?

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Hungary Is Headed For A Substantial Recession As Foreign Exchange Lending Seizes Up

Edward Hugh October 20th, 2008

Hungary’s agony has simply dragged on and on all this week with both currency and stock markets falling sharply while bankers continue to report acute credit shortages. At the same time contagion has started to extend its ugly reach right across eastern Europe, with Ukraine, the Baltics and Serbia (at a minimum) all in ongoing negotiations with the IMF, as the credit crunch which followed in the wake of the latest bout of global financial turmoil really starts to bite.

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Training Session on the Spanish Bank Bailout Plan

Edward Hugh October 20th, 2008

Keynes, however, once semi-seriously proposed, as an anti-deflationary measure, that the government fill bottles with currency and bury them in mine shafts to be dug up by the public.

Ben Bernanke, Deflation: Making Sure “It” Doesn’t Happen Here

Many of the macro-economic fundamentals of Spain today are very different from those of ten or fifteen years ago………..A lot of factors look better this time around. Compared to its history, Spain has low interest rates, low unemployment and a strong fiscal position……..the 2007 levels of government debt, unemployment and interest rates are about half the level of 1993. Equally, a lot of factors related to debt levels, housing and bank funding are worse versus the last downturn. For instance, the relative size of mortgage debt or total private sector debt to GDP, or the size of the construction sector to GDP, were all about 60% bigger in 2007 than in 1993. As was the bank system’s loan-to-deposit ratio. And the housing PE has expanded almost as much. So when Spanish bank management’s argue that the world today is not like the early 1990s, they are right: some things are better, but others are worse. As Mark Twain noted many years ago, history may not repeat itself but it does rhyme.

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Now Serbia Adds Its Name To Those In The IMF Sick Ward

Edward Hugh October 16th, 2008

Serbia has also decided to ask the International Monetary Fund for additional support, according to a stament from senior government officials last Monday cited in Reuters.

“We are certainly not in a group of emergency cases, such as Hungary,” a senior official who asked not to be named told Reuters. “But we need the agreement for longer-term stability.”

So, to be clear, Serbia is not an “emergency case”, like Hungary for example – although it should be noted that the Hungarian government are stating that they are not an emergency case like Iceland, who are themselves not an emergency case, like Ukraine, for example, who are in no way to be considered as being in need of support in the way in which, let us say, Latvia is. And Latvia according to Prime Minister Ivars Godmanis is not any kind of case at all, and certainly not one to be compared with Serbia.

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The Baltic States May Soon Follow Hungary Into IMF Receivership

Edward Hugh October 15th, 2008

Well, the Icelandic aithorities seem to have bitten the bullet, and after some coming and going agreed to accept assistance from the IMF. An IMF mission is on the island preparing a plan which will then be put to the Icelandic government (protocols here are important). Under negotiation are the terms of any possible loan. [...]

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IMF To Step In With Rescue Package For Hungary

Edward Hugh October 15th, 2008

Well, these are indeed troubled times. According to the latest news to come off the Reuters wires the International Monetary Fund has announced its readiness to offer financial and technical help to Hungary, effectively stepping in and providing support for an EU member state in difficulty at a time when the EU institutional and financial [...]

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