House prices on the overheated fringes of Europe have begun to turn down sharply, replicating the early phase of the sub-prime property slide in the United States.
Housing booms in Romania, Bulgaria, Croatia, and even Russia are all looking stretched to extremes.
Irish property has fallen for the past four months in a row as higher eurozone interest rates start to bite harder, while the speculative bubble in the Baltic states has burst.
House prices in the greater Riga region of Latvia fell 3.5pc in June, following a 1pc fall in May. Flats in the old city became more expensive than Berlin by early this year in a speculative frenzy, much of it with euro, Swiss franc, and yen mortgages that could prove disastrous if Latvia's currency is suddenly devalued - as may well happen, given the country's current account deficit has exploded to 26pc of GDP.
Similar booms in Romania, Bulgaria, Croatia, and even Russia are all looking stretched to extremes. Danske Bank has warned that much of Eastern Europe has been inflated by a "monster bubble" that recalls conditions in east Asia shortly before the crisis broke in 1997.
more ...
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Tuesday, 28 August 2007
Business comment: Look to China for root causes of the crisis
This crisis has not fundamentally been about equity market valuations. The proximate cause of this crisis has been difficulties in the US sub-prime mortgage market. But although the story started there it didn't have to.
A week's break in the Med did not bring escape. No sooner had I arrived than, as news of market shenanigans reached us, some chap, recognising me from my photograph on this page (and that was a first!) pinned me to the edge of the swimming pool and asked me the fundamental question: "What on earth is going on?"
The first thing to say is that the gyrations of the equity market, although striking, are not extraordinary. This is the third significant global sell-off in equities since the beginning of 2006. After its recovery in the last couple of days, the FTSE 100 is now some 8pc below its July peak. But that means that it is pretty much back to where it was at the beginning of the year.
Yet this crisis has not fundamentally been about equity market valuations. True, some equity markets have looked toppy, especially the US. But the UK market has not appeared to be seriously over-valued. This puts this episode in stark contrast to the dotcom boom and bust and the equity market crash of 1987.
The proximate cause of this crisis has been difficulties in the US sub-prime mortgage market. But although the story started there it didn't have to.
It could easily have begun somewhere else. The saga which this episode set running is about the financial markets' wholesale embrace of risk at the prospect of little extra reward, and about the distribution of this risk around the system.
more ...
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Check out the rest of this blog here.
A week's break in the Med did not bring escape. No sooner had I arrived than, as news of market shenanigans reached us, some chap, recognising me from my photograph on this page (and that was a first!) pinned me to the edge of the swimming pool and asked me the fundamental question: "What on earth is going on?"
The first thing to say is that the gyrations of the equity market, although striking, are not extraordinary. This is the third significant global sell-off in equities since the beginning of 2006. After its recovery in the last couple of days, the FTSE 100 is now some 8pc below its July peak. But that means that it is pretty much back to where it was at the beginning of the year.
Yet this crisis has not fundamentally been about equity market valuations. True, some equity markets have looked toppy, especially the US. But the UK market has not appeared to be seriously over-valued. This puts this episode in stark contrast to the dotcom boom and bust and the equity market crash of 1987.
The proximate cause of this crisis has been difficulties in the US sub-prime mortgage market. But although the story started there it didn't have to.
It could easily have begun somewhere else. The saga which this episode set running is about the financial markets' wholesale embrace of risk at the prospect of little extra reward, and about the distribution of this risk around the system.
more ...
------------------------
Check out the rest of this blog here.
Brace yourself for the insolvency crunch
Yes, investors are jumping back into the stock markets, hoping this is just another routine shake-out - much like February 2007, or May 2006 - before the rally resumes. The `buy-on-dips’ orthodoxy dies hard.
And yes, speculators have renewed their leveraged bets on the yen and Swiss franc carry trades, borrowing cheap in Tokyo and Zurich to play global assets. The core belief is that nothing has really changed, that the world economy is still in rude good health.
Be very careful. Interest rates in Europe and Asia are that much higher now, with delayed effects starting to bite hard. Japan’s economy has stalled to 0.1pc growth in Q2; the euro-zone has slowed to 0.3pc; and China’s refusal to import (by currency manipulation) makes it a drain on world demand. Above all, the credit bubble that perpetuated the rally of the last eighteen months beyond its natural life has definitively burst.
more ...
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Check out the rest of this blog here.
And yes, speculators have renewed their leveraged bets on the yen and Swiss franc carry trades, borrowing cheap in Tokyo and Zurich to play global assets. The core belief is that nothing has really changed, that the world economy is still in rude good health.
Be very careful. Interest rates in Europe and Asia are that much higher now, with delayed effects starting to bite hard. Japan’s economy has stalled to 0.1pc growth in Q2; the euro-zone has slowed to 0.3pc; and China’s refusal to import (by currency manipulation) makes it a drain on world demand. Above all, the credit bubble that perpetuated the rally of the last eighteen months beyond its natural life has definitively burst.
more ...
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Check out the rest of this blog here.
House prices hit a standstill
House prices slowed to a standstill during August, according to the latest survey from Hometrack, the property website.
The group recorded the lowest rate of monthly growth since November 2005, with average house prices "unchanged".
London, the real engine for house price growth over the last 18 months, was the only region to record a price increase over August. However, it was a rise of just 0.1pc. Three regions recorded price falls of 0.1pc, namely Yorkshire and Humberside, the North and South West.
more ...
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Check out the rest of this blog here.
The group recorded the lowest rate of monthly growth since November 2005, with average house prices "unchanged".
London, the real engine for house price growth over the last 18 months, was the only region to record a price increase over August. However, it was a rise of just 0.1pc. Three regions recorded price falls of 0.1pc, namely Yorkshire and Humberside, the North and South West.
more ...
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Check out the rest of this blog here.
Wednesday, 8 August 2007
Tuesday, 17 July 2007
29 graduates chasing every new vacancy
Competition for degree-level jobs is so intense that every vacancy is being chased by 29 new graduates, according to the latest graduate recruitment survey.
Consumer brands companies such as Unilever and Procter & Gamble, lead the way with 104 applicants for every graduate vacancy, compared with 50 for insurance companies, 26 for investment banks and 10 for accountancy firms.
Carl Gilleard, chief executive of the Association of Graduate Recruiters, said that, with increased competition for the best talent, the majority of employers were asking for a 2.1 as a minimum qualification.
“With such large numbers of applications for every vacancy, employers have to find a way to reducing numbers to a manageable size.
more ...
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Consumer brands companies such as Unilever and Procter & Gamble, lead the way with 104 applicants for every graduate vacancy, compared with 50 for insurance companies, 26 for investment banks and 10 for accountancy firms.
Carl Gilleard, chief executive of the Association of Graduate Recruiters, said that, with increased competition for the best talent, the majority of employers were asking for a 2.1 as a minimum qualification.
“With such large numbers of applications for every vacancy, employers have to find a way to reducing numbers to a manageable size.
more ...
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Check out the rest of this blog here.
Thursday, 5 July 2007
Debt costs 'reach record levels'
The burden of paying off household debts has reached record levels, a leading firm of accountants has said.
PricewaterhouseCoopers says repaying money borrowed, and the interest on it, now takes up 19% of the average UK household's disposable income.
That is more than the previous peak of the domestic debt burden, which was 18% of household income in late 1990.
more ...
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PricewaterhouseCoopers says repaying money borrowed, and the interest on it, now takes up 19% of the average UK household's disposable income.
That is more than the previous peak of the domestic debt burden, which was 18% of household income in late 1990.
more ...
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UK interest rates raised to 5.75%
The Bank of England has raised UK interest rates from 5.5% to 5.75%, its fifth rate rise since last August.
Its Monetary Policy Committee (MPC) warned that inflation remains a danger, saying "most indicators of pricing pressure remain elevated".
Some analysts have taken that to mean there may be a further rise this year.
The higher rates will add £16 a month to an average £100,000 repayment mortgage, but it could be good news for savers who should earn higher interest.
Charities have expressed concern that higher mortgage costs will leave many borrowers facing difficulties.
more ...
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Its Monetary Policy Committee (MPC) warned that inflation remains a danger, saying "most indicators of pricing pressure remain elevated".
Some analysts have taken that to mean there may be a further rise this year.
The higher rates will add £16 a month to an average £100,000 repayment mortgage, but it could be good news for savers who should earn higher interest.
Charities have expressed concern that higher mortgage costs will leave many borrowers facing difficulties.
more ...
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Check out the rest of this blog here.
Why inflation targeting is a bad idea.
Fifteen years ago, the UK exited from the ERM in humiliation. At the time, the failure struck at the very core of the Bank of England’s counter-inflationary strategy. By targeting the pound to the German DM, the bank hoped that it could hold down inflation. However, the Bank couldn’t maintain the target.
In the days following the ERM exit, the Bank of England faced the difficult question of “what now?” It came up with a barely noticed idea. From now on, the bank announced, we will target inflation directly. No more intermediate targets for us, the Bank declared. The Bank would no longer look at money supply growth, interest rates, or exchange rates; only the end result would matter. Inflation, and only inflation, would be the only target that mattered.
At the time, the implications of this new inflation targeting regime were only dimly understood. Superficially, it seemed like a sound idea. Its simplicity and clarity was appreciated by politicians. In 1997, the inflation targeting regime was further enhanced when the Bank of England gained policy independence from the Treasury.
However, inflation targeting had a deep dark side that only became apparent much later. The chosen target wasn’t price inflation, it was consumer price inflation. The Bank of England chose to target a subset of inflation. Crucially, the Bank chose to ignore asset prices, housing costs and indirect taxes.
Inflation targeting also meant that the Bank no longer paid much attention to other indicators, which could guide monetary policy. The Bank, in effect, threw away, monetary economics as a guide for policy. It ignored the money supply, interest rate policy and exchange rates.
more ...
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Check out the rest of this blog here.
In the days following the ERM exit, the Bank of England faced the difficult question of “what now?” It came up with a barely noticed idea. From now on, the bank announced, we will target inflation directly. No more intermediate targets for us, the Bank declared. The Bank would no longer look at money supply growth, interest rates, or exchange rates; only the end result would matter. Inflation, and only inflation, would be the only target that mattered.
At the time, the implications of this new inflation targeting regime were only dimly understood. Superficially, it seemed like a sound idea. Its simplicity and clarity was appreciated by politicians. In 1997, the inflation targeting regime was further enhanced when the Bank of England gained policy independence from the Treasury.
However, inflation targeting had a deep dark side that only became apparent much later. The chosen target wasn’t price inflation, it was consumer price inflation. The Bank of England chose to target a subset of inflation. Crucially, the Bank chose to ignore asset prices, housing costs and indirect taxes.
Inflation targeting also meant that the Bank no longer paid much attention to other indicators, which could guide monetary policy. The Bank, in effect, threw away, monetary economics as a guide for policy. It ignored the money supply, interest rate policy and exchange rates.
more ...
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Check out the rest of this blog here.
Tuesday, 26 June 2007
How Fake Job Ads Defraud Americans To Secure Green Cards For Immigrants
http://www.theinquirer.org/default.aspx?article=40526
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