Asian News

[Ichiro]

EXPECTING SHORT-TERM TOP
Chart Spotlight
by Carl Swenlin
DecisionPoint.com
August 24, 2007

In my August 17 article, Looking For A Retest, I speculated that we would get a bounce from the extreme price lows hit in mid-August, but that a retest of those lows needed to occur before we could be reasonably certain that the completion of a solid bottom had been accomplished. As it happened, the bounce was initiated before I posted the article. At this point I think the evidence suggests that the reaction rally has just about run its course, and that we should be expecting a price top to mark the beginning of a decline into the retest of recent lows.

The evidence of which I speak can be seen on the chart below (and on many other short-term indicator charts). There are two versions of the Swenlin Trading Oscillator (STO) -- one is calculated from advance-decline breadth (STO-B) and the other from volume (STO-V). On the chart I have outlined two corrective phases -- the February/March correction, and the current correction, which, in my opinion, is not yet complete.


Note that there were three separate down thrusts in February/March. The first was into the initial price low, which also registered the lowest of the STO readings. The second was the retest of the first price low, which registered a slightly lower price accompanied by higher STO readings. The third move down was a pullback after a breakout. Note that the breakout was accompanied by very high STO readings, indicating an initial impulse for a new rally, and after that third pullback, the price configuration was clearly bullish.

The current correction has a more bearish slant. The price decline has been more violent, and the second down thrust has led to a much lower price low. The market has rallied out of that low, but you can see that the STO has reached overbought territory, and we should be expecting a short-term top leading to a retest of the correction low. There is no guarantee that the support will hold, so it is no time to be trying to pick a bottom.

http://www.financialsense.com/editorials/swenlin/2007/0824.html

 

[Ichiro]

OUR MONETARY SYSTEM IS DEBT-BASED
by Anthony M. Cherniawski
The Practical Investor, LLC
August 24, 2007


Many people still don’t know that fact. They think of Fort Knox and the gold that is reported to be there and somehow are reassured that all is well. But what is stored there has nothing to do with our currency. Look at a $20 bill. The inscription above Andrew Jackson says, “Federal Reserve Note.” What is a note? It is a promise to pay. In what, you ask? Well, therein lies the tale.

Michael Nystrom has just published an article, entitled, “Our Debt Money System Explained.” Once you have a basic understanding of our monetary system, lets examine what happened this last week and try to put it into a perspective of what is really going on.

On Wednesday, August 22nd, four of the largest U.S. banks borrowed $2 billion from the Federal Reserve’s Discount Window. This came three days after Deutsche Bank borrowed an unspecified sum from the Discount Window. The terms of the loan were altered by the Fed. Interest rates on these loans were reduced from 6.25% to 5.75%. The normal 1-day term was lengthened to 30 days. This may sound normal, but in fact, it is unprecedented. The normally conservative Forbes Magazine commented on this move.

The Federal Reserve Discount Window is considered the credit line of last resort, so why are these major banks borrowing at a considerable loss there? Mish’s Brave Face Masks Bold Lie may have something there. "Basically this is a PR move coordinated by Fed to hide the fact that going to (the Fed) window is (an) emergency move. It hides the fact that some banks have to."

Was it Deutsche Bank? Or one of our own? Needless to say, there is more to this story that we don’t know. In any event, Dr. Bernanke is prescribing bleeding the patient (more loans) as a cure for anemia.

The Nikkei recovers partially, but not out of the woods.

The news of the Bank of Japan’s involvement in the subprime debacle may have been the catalyst for last week’s rout in the Nikkei. After four days of rally, the Nikkei pulled back by .4% this morning. There still appears to be some unfinished business on the downside for the Nikkei. Investors are still flighty and the rally may be attributed to short-sellers covering their positions.

The Shanghai index seems unstoppable…

…but the news of the Bank of China holding $13 billion of subprime debt is rattling some. Is this the end for the Chinese stock market? The recovery from last week’s sell-off suggests not. Bank of China’s Hong Kong shares fell 8.1% on Friday as it reported heavy involvement in subprime loan. But on Mainland China, where the press is heavily censored, Bank of China’s shares rose.

http://www.[[financialsense.com/fsu/editorials/cherniawski/2007/0824.html

 

[Ichiro]

INVESTMENT FLASH: BULL MARKET IN CASH
by Paul J. Lamont
August 23, 2007

It looks as if the Summer of 1929, has finally past. We are now experiencing "forced selling and unwinding of leverage on assets" that we stated would follow.

Fed Injections

On Monday, it was reported that the Fed has been injecting short term cash onto the balance sheet of Deutsche Bank. Two days later, Citigroup, J.P. Morgan Chase, Bank of America, and Wachovia all said they had borrowed $500 million each. According to Foundations of Financial Markets and Institutions by Fabozzi, Modigliani and Ferri; “Banks temporarily short of funds can borrow from the Fed at its discount window…Continual borrowing for long periods and in large amounts is thereby viewed as a sign of a bank’s weakness” because the Fed is “the bank of last resort.” Banks are borrowing from the Fed because they can’t get the money anywhere else, not as they claim: “it is important at this time to take a leadership role in demonstrating the potential value of the Fed's primary credit facility and to encourage its use by other financial institutions.” As we warned last November as the credit boom comes to an end: “‘severe macroeconomic repercussions’ are highly likely and that ‘banking system capital’ will be impaired.” To think the Fed will save the day is to ignore the lessons of 1929: “the Federal Reserve can print money, but it cannot create credit or confidence. ‘Money’ is therefore hoarded, by either the public or the banks themselves (if they are concerned about an increase in redemptions).”

http://www.[[financialsense.com/fsu/editorials/lamont/2007/0823.html

 

[Ichiro]

AP-Experts See Modest Impact in Bush Plan
Friday August 31, 6:19 pm ET
By Alan Zibel, AP Business Writer
Experts Predict Bush Plan Will Have Modest Impact on Mortgage Market's Credit Crunch ((It is good that President Bush finally got involved with the Subprime problem because helicopter Ben is not too aggessive with reducing the federal funds rate. If Greenspan was in charge, he would had already reduced the federal funds rate by .50))

WASHINGTON (AP) -- President Bush's plan to help financially struggling homeowners likely will have a modest impact on a worrisome global credit crunch, economists said Friday.

The White House's proposal -- to have a government agency created during the Great Depression to insure mortgages assist homeowners at risk of default -- is symbolic more than substantive, says Nigel Gault, chief economist at Global Insight.

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Expanding the activities of the Federal Housing Administration "makes it clear that the federal government is going to do something," Gault said. "How much it will ultimately do is not clear."

The Department of Housing and Urban Development estimates the plan will allow 80,000 homeowners to refinance into lower-rate loans over the next year.

That's less than 1 percent of the estimated 2 million homeowners research firm RealtyTrac estimates will foreclose in 2007.

The change affects a "fairly limited number of the troubled households," said Celia Chen, director of housing economics at Moody's Economy.com.

The new FHA Secure program would offer government-guaranteed loans to mortgage-holders in default because they couldn't afford to keep up payments after interest rates on their mortgages reset at much higher levels.

FHA currently insures 3.7 million loans, many of which were made to low-income borrowers with risky credit although this will be the first time the FHA backs loans for borrowers in default.

However, only borrowers who made monthly payments on schedule before the rate resets kicked in will be eligible for the new loans, the FHA said, bringing "much-needed liquidity to the mortgage market."

Experts said most homeowners confronting financial woes likely wouldn't meet that criteria, which also requires income verification of the ability to make payments and a down payment of at least 3 percent.

That won't help borrowers who are already in over their heads, including those with weak credit who were able to get so-called "liar loans" because the income stated on their loan applications was never verified, says mortgage industry consultant Brian Chappelle.

http://biz.yahoo.com/ap/070831/risky_mortgages_government_help.html?.v=1

 

[Ichiro]

Daily FX-Bank of Japan Still Grappling With Deflation, Risk Seeking Likely To Take Yen Lower
Friday August 31, 6:18 pm ET

((Folks, let me tell you that Japan is still in Deflationary environment... prices of everyday goods are still dropping... the consumers are worse off than a year ago...and the recent drop of the NIkkei is causing many individual investors to move their money to a money market funds. ))


By Richard Lee, Currency Strategist strategist@dailyfx.com

The Japanese yen has appreciated quite a bit over the past two months, as risk aversion has pervaded the forex markets and led carry trades to unwind.

However, after a choppy day of trading in the yen crosses, it appears that Fed Chairman Ben Bernanke has somewhat assured investors that he will support the markets in times of distress, which has left the low-yielding currency down slightly from Thursday?s New York close. Starting out next week, Japanese capital spending is anticipated to remain strong, but show a slowdown from the quarter prior, while wage growth is predicted to soften further, which will not bode well for consumer spending. With two drivers of economic growth - business investment and consumption - showing diminishing power, the picture does not look good for Japan. Furthermore, the most recent inflation report showed that the Bank of Japan is still grappling with persistent deflation.

http://biz.yahoo.com/fxcm/070831/1188598757102.html?.v=1

 

[Ichiro]

THE DICHOTOMY OF M1 AND M2
by David Yu
Chartmentary.com
August 31, 2007

((Folks, you better watch the M! money supply rate... If it dips in the negative, watch out!!! ))

I'm sure we'll read every possible analysis about the "imminent" rate cut on the benchmark Fed Fund's Rate before (and possibly even more after) the next FOMC meeting. As a technician, I'm really apathetic about this speculative obsession. Trading on guessing what the FOMC will do has very little, if anything, to do with the study of probability based on statistical data. Money would probably be better spent, and enjoyably so, in Vegas. And, as a fundamentalist, I don't believe the rate cut is going to solve the real problems anyway. There's no need to dispense my resources jut to go through this exercise in futility.

One useful exercise that I go through faithfully, however, is keep track of money in the hands of the public, a.k.a the M1 Money Supply. Since the housing market top in the 2nd half of 2005, the 52-week ROC (Rate of Change), or the year-over-year change, of M1 had started to dipped into the negative territory (see Chart 1). And, since the beginning of this year, the ROC had begun to fall below minus 2% (blue circle). Overall, it's been oscillating with greater volatility (higher up-and-down fluctuations from week to week) around 0% (no change) for almost 2 years. I've looked through past 26 years worth of data, and I've seen nothing like this. I'm concerned this unprecedented pattern may be foreshadowing more serious problem ahead.

http://www.[[financialsense.com/fsu/editorials/yu/2007/0831.html

 

[Ichiro]

FINANCIAL MARKETS ON CRACK
by Kevin Duffy
Bearing Asset Management
August 29, 2007

(This is a very interesting info....FED acting as a fireman))

Critics of paternalist government were hardly surprised August 17th when the Federal Reserve responded to the hopes, tantrums and demands of the investor class (led by the likes of Larry Kudlow, Jim Cramer, and Barton Biggs) by lowering the discount rate from 6.25% to 5.75%. Cramer immediately predicted the largest single day Dow Jones Industrials Average point gain ever (wrong) and Dow 14,500 by the end of the year, up nearly 11% from Friday's close. He also recounted the tread marks on his back from fighting the Fed's response in October, 1998 to the Long-Term Capital Management fiasco, professing his allegiance to "don't fight the Fed" this time.

This is now the third time in 9 years the Fed has acted as "fireman" as many believe is part of its job description:

http://www.[[financialsense.com/fsu/editorials/bearing/2007/0829.html

 

[Ichiro]

AP-Security Tight as APEC Meeting Begins
Sunday September 2, 12:52 am ET
By Charles Hutzler, Associated Press Writer
Security Tight in Sydney as Officials Start APEC Meeting to Focus on Trade, Global Warming

SYDNEY, Australia (AP) -- Police tightened security Sunday as senior officials from Pacific Rim nations began meetings to prepare for a summit of regional leaders that will tackle trade and global warming.

The annual Asia-Pacific Economic Cooperation forum -- with its focus on trade and a membership that includes powerhouses China, Japan and the United States -- is a magnet for anti-globalization and environmental protesters.

President Bush, who arrives Tuesday, and anger at the Iraq war are also drawing protesters.

Parts of Sydney began to resemble a besieged camp, with police erecting a 10-feet-tall security fence, dubbed by local media the Great Wall of APEC near the summit site.

http://biz.yahoo.com/ap/070902/apec.html?.v=2

 

[Ichiro]

AP
Social Security Scandal Angers Japanese
Sunday September 2, 5:18 am ET
By Mari Yamaguchi, Associated Press Writer
Japanese Angry Over Their Troubled, Mismanaged Social Security System


((Japan's financial system is a big mess. Unlike the USA, they have few internal auditors who would review the internal control system.))

TOKYO (AP) -- After reading a book this year about serious flaws in Japan's pension system, retired deliveryman Yoshikazu Hirano thought he'd check his own records just to be safe. He's glad he did: The 74-year-old discovered the government had shortchanged him by 460,000 yen ($3,770) in benefits he accrued while driving a truck for three years in the 1950s and 60s.


Hirano wasn't alone. Shortly afterward, the government confessed to losing track of pension records linked to an astounding 64 million claims -- igniting a scandal that has punished the ruling party at the polls and eroded confidence in the ability of the world's second largest economy to support its growing legions of elderly.

Hirano, who is single and lives outside Tokyo, felt defrauded. "Had I not asked, I would have never gotten the money back," he said.

The pension mess, fully disclosed in May, has landed on one of the world's fastest-aging societies: 21 percent of its 127 million inhabitants are 65 or older and some 25 million retirees are collecting pensions, rising to 35 million by 2040.

http://biz.yahoo.com/ap/070902/japan_pension_mess.html?.v=5

 

[Ichiro]

aP-Wall Street Watches for More Fed Clues
Sunday September 2, 2:33 pm ET
By Madlen Read, AP Business Writer
Returning From Labor Day Weekend, Wall Street Will Watch for More Fed Clues, Await Jobs Data

((Bank of England and European Central Bank might to lower rates Thursday. If they do, I am sure that the FED will lower the FED rAtes, too. If they all do, watch out.... the market will explode upwards. If not, the market will drift slowly downwards)).


NEW YORK (AP) -- Wall Street investors left for Labor Day weekend pleased about the prospects of an interest rate cut, but they're likely to come back wanting more evidence that rates are indeed about to come down.

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The market has been in better spirits, for the most part, over the past two weeks than in midsummer, when fears that lending troubles would freeze up credit sent stocks tumbling. Although the Fed has injected cash into the banking system and lowered the discount rate -- the rate it charges commercial banks for loans -- Wall Street's fears haven't been completely assuaged.

The Dow Jones industrials and Standard & Poor's 500 finished slightly lower in a week where they plunged and later recovered. The Nasdaq finished the week higher.

Fed Chairman Ben Bernanke has not come right out and declared that a rate cut will happen, but many investors believe he has telegraphed it by saying the central bank will "act as needed." Traders who bet on the Fed's next move are not only pricing in a 100 percent chance of a quarter-point rate cut at its next meeting on Sept. 18, but also are pricing in a 100 percent chance of similar move in October.

The Fed has not reduced the benchmark fed funds rate since 2003, when it declined from a low 1.25 percent to 1 percent. Starting in 2004, the central bank made gradual rate increases until the summer of 2006, when it began holding the benchmark rate at 5.25 percent -- the highest it's been since early 2001, but historically, fairly moderate.

Investors will be curious to see if the Bank of England and European Central Bank decide to lower rates Thursday. Rate cuts abroad could signal a similar move from the Fed.

http://biz.yahoo.com/ap/070902/wall_street_week_ahead.html?.v=3

 

[Ichiro]

Yen Pares Fall on Speculation Subprime to Weigh on Carry Trade

By David McIntyre and Stanley White

Sept. 3 (Bloomberg) -- The yen pared a decline on speculation measures from the U.S. government and Federal Reserve will fail to solve the subprime mortgage crisis and discourage investors from riskier bets funded by loans in Japan.

Fed Chairman Ben S. Bernanke said Aug. 31 the central bank is ready to take ``additional actions'' after widening losses on mortgages to homeowners with poor credit made banks reluctant to lend. U.S. President George W. Bush pledged at the end of last week to help people with delinquent mortgages keep their home. The yen gained 2.5 percent against the dollar last month as subprime woes sparked an unwind in so-called carry trades.

``The markets had expected much more from Bernanke and Bush,'' said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank in Tokyo. ``Their policies largely remained unchanged. There emerged great uncertainty as to what they're going to do against institutional investors. This will weigh on the dollar.''

Japan's currency was at 115.74 per dollar at 9:47 a.m. in Tokyo from 115.77 late in New York Aug. 31. The yen traded at 157.77 per euro from 157.79 last week. The U.S. currency may move between 114.50 and 116.50 yen this week, Muramatsu said.

http://www.bloomberg.com/apps/news?pid=20601101&sid=a0P.Fe_H6hds&refer=japan

 

[Ichiro]

Japan's Capital Spending Drops on Services Companies (Update1)

By Lily Nonomiya

Sept. 3 (Bloomberg) -- Corporate investment in Japan unexpectedly declined in the second quarter after services providers pared back spending.

Capital spending sank 4.9 percent in the three months ended June 30 after advancing 13.6 percent in the first quarter, the Ministry of Finance said in Tokyo today.

The report may hinder the Bank of Japan case that the economy is strong enough for it to raise the key overnight call rate in two weeks. Companies may pare spending even more in the coming months if the U.S. housing recession curbs demand in Japan's largest export market.

``The U.S. housing recession is a risk factor and may slow foreign demand,'' said Naoki Iizuka, senior economist at Mizuho Securities Co. in Tokyo. ``It is too early to conclude that capital spending will be a problem for the Japanese economy,'' he said, adding that a change to the sample used by the finance ministry may have distorted the reading.

http://www.bloomberg.com/apps/news?pid=20601101&sid=agMA2r7zrUO0&refer=japan

 

[Ichiro]

Mizuho Changes Forecast, Calls for Dollar to Weaken to 106 Yen

(when the FED reduces the fund rate, the $$ will drop to less than 110 yen.))

By Kosuke Goto and Shigeki Nozawa

Sept. 3 (Bloomberg) -- Mizuho Corporate Bank Ltd. predicted the dollar will fall to a two-year low of 106 yen, reversing its forecast for gains, as a housing slump and mortgage losses force the Federal Reserve to cut interest rates.

The currency has declined for two months against the yen, slumping to a 14-month low of 111.61 yen on Aug. 17, on concern credit-market losses and increased financing costs will slow the economy. Traders have increased bets the Fed will lower borrowing costs, diminishing the appeal of dollar-denominated assets.

``The turmoil in the financial markets will continue this year,'' Masaki Fukui, a senior economist and currency analyst in Tokyo at a unit of Japan's second-largest lender, said in an interview today. ``The chain reaction of anxieties will adversely affect the real economy in the U.S., buffeting the dollar.''

The U.S. currency traded at 115.80 yen as of 9:33 a.m. in Tokyo from 115.77 on Aug. 31 in New York. It has dropped 6 percent versus the yen this quarter. Fukui's previous prediction was for 119 yen by year-end.

The Fed will be forced to cut rates from 5.25 percent three times this year to 4.50 percent by December, Fukui said. Interest-rate futures show traders see a 78 percent chance the Fed will reduce its rate to 4.50 percent by year-end, up from 26 percent a week ago and zero a month ago.

http://www.bloomberg.com/apps/news?pid=20601083&sid=avYtzJjGUPWQ&refer=currency

 

[Ichiro]

Yen Falls as BOJ May Delay Rate Increase, Helping Carry Trades

By Stanley White and Kosuke Goto
Enlarge Image/Details

Sept. 3 (Bloomberg) -- The yen fell against the 16 most- active currencies on speculation the central bank will delay raising interest rates, prompting investors to buy higher- yielding currencies with money borrowed in Japan.

The currency dropped the most versus Australia's dollar after an unexpected gain in that nation's home building bolstered the central bank's case for rate increases. A Japanese government report showed a slump in business spending, encouraging fund managers to resume so-called carry trades.

``It's becoming easier to sell the yen,'' said Takuma Kurosawa, global markets treasurer at HSBC Bank in Tokyo. ``Many of the world's central banks have to remain hawkish to stem inflation. Hedge funds may gradually return to the carry trade.''

The yen fell to 95.31 against the Australian dollar at 2:36 p.m. in Tokyo from 94.76 late in New York on Aug. 31. Against New Zealand's dollar, it dropped to 81.60 from 81.23. It was at 158.15 against the euro from 157.79 and may fall to 158.20 today, Kurosawa said.

Trading will be ``about 60 percent'' of the average as U.S. markets are closed today for a holiday, said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney.

http://www.bloomberg.com/apps/news?pid=20601083&sid=aphREYHZGA3w&refer=currency

 

[Ichiro]

Asian Currencies Gain on Speculation Funds to Return to Region

By Jake Lee

Sept. 3 (Bloomberg) -- Asian currencies gained, led by the Philippine peso, on speculation global investors will increase holdings of the region's assets, betting it can withstand a global credit crisis.

Philippine central bank Governor Amando Tetangco said the peso will ``remain firm'' this year, spurred by investment in stocks and bonds. The South Korean won traded at a one-week high as the economy expanded at the fastest pace in almost four years in the second quarter.

``Global demand will support these economies and that should be good for the currencies,'' said David Cohen, an economist at Action Economics in Singapore. ``The Korean economy is regaining momentum after a pause at the beginning of the year, and that should contribute to the strengthening of the won.''

The peso strengthened 0.3 percent to 46.380 against the dollar as of 12:09 p.m. in Manila, according to Tullett Prebon Plc, the world's second-largest inter-dealer broker. The won rose as much as 0.1 percent to 937.70, according to Seoul Money Brokerage Services Ltd. The Indonesian rupiah rose 0.1 percent to 9,389.

Trading in Asian currencies may be less than normal today due to a U.S. holiday, said Cohen.

http://www.bloomberg.com/apps/news?pid=20601083&sid=aw.zC9qjhXQ0&refer=currency

 

[Ichiro]

M&A, Bernanke set to push European stocks higher
Mon Sep 3, 2007 1:17AM EDT


LONDON (Reuters) - European shares look set to extend their rally on Monday as merger news picks up, with France poised to announce a deal between GDF (GAZ.PA: Quote, Profile, Research) and Suez (LYOE.PA: Quote, Profile, Research) and after the Federal Reserve chief soothed markets with a vow to limit damage to the U.S. economy from financial turmoil.


Investors interpreted Fed Chairman Ben Bernanke's remarks at a meeting of central bankers on Friday as a sign the bank would cut rates at its September meeting, sparking a 1 percent rally on Wall Street.

http://www.reuters.com/article/marketsNews/idUKL0324565220070903?rpc=44

 

[Ichiro]

DO INVESTORS REALLY WANT THE FED TO LOWER RATES?
by Hans Wagner
TradingOnlineMarkets.com
September 6, 2007

Investors trying to beat the market are closely following the trends in interest rates, especially the Federal Funds Rates. With many of the market traders and talking heads calling for a cut in the Fed Funds rate, do investors follow their advice or make their own assessment. Let’s look at what the theory says about the link of interest rates and the market. Next we will look at the impact of inflation will have on rates and finally a chart that compares Fed Funds rates, the 3 month Treasury Rate and the S&P 500.
The Theory

In theory changes in interest rates and movements in the stock market move in opposite directions. Assuming investors are rational people, when interest rates decrease should encourage them to move money from the bond market to the stock market, as bonds will be returning less as rates are lower. Also, businesses will be able to borrow at lower rates to finance growth and expansion, which should lead to future growth and as a result higher stock prices.

The other effect a cut in interest rates is psychological. Investors and consumers see lower interest rates a sign that they can borrow more cheaply, meaning they can spend more. This in turn should contribute to higher corporate profits, expansion of the economy and therefore higher stock prices.

The discounted cash flow model is one method used to value securities. This approach takes the sum of all expected future cash flows from a company and discounts them at a capital value rate to derive the current value. To obtain the stock price one takes the sum of future discounted cash flows and divides this value by the number of shares available.

Using this method and investor can compare the return on two investments; let’s say a treasury bond and a stock. If the money they get from bonds is less than the money they get from the stock they should buy the stock. On the other hand if the money they get from bonds is greater than the bond then they should buy the bonds.

Basically the higher the interest rate, the lower will be the value and therefore the price of a payment in the future. A rise in the interest rate causes stock prices to fall. And a fall in interest rates causes the price of a stock to rise.

http://www.[[financialsense.com/fsu/editorials/wagner/2007/0906.html

 

[Ichiro]

CENTRAL BANKS CONTINUE ON PATH OF MONETARY INFLATION
by Toni Straka, CEFA
PrudentInvestor.blogspot.com
September 6, 2007


The European Central Bank donned its two masks again on Thursday. With one hand the ECB decided at its monthly meeting of the governing council to leave the key interest rates unchanged while the other hand continued to create fresh money, showering bidding banks with 42.2 billion Euros in a new overnight tender that drew an average rate of 4.13% or 13 basis points more than the current key overnight rate.

The Bank of England (BoE) left its key interest rate unchanged at 5.75% too.

In the USA the Federal Reserve allotted a total of new $23 billion in a 1- and 2-week tender besides replacing yesterday's 1-day repo.

And they want to make us believe markets are returning to normal. Money market rates tell a very different picture and I rather rely on the data than the propaganda coming from central banks. And in this reality banks are scrambling to borrow funds at rates significantly higher than what the priests of ever expanding credit would like to see implemented.

http://www.[[financialsense.com/fsu/editorials/straka/2007/0906.html

 

[Ichiro]

TOO BIG TO BE BAILED OUT
by Peter Schiff
Euro Pacific Capital
September 7, 2007

Now that home mortgage defaults are spreading like wildfire from coast to coast, there is a growing sense of certainty that the government will attempt to bail out homeowners and lenders. The ideas put forward last week by President Bush may be the camel’s nose pushing under the bottom of the tent. However, just as some things are too big to fail, this problem is far too big to fix.

First of all, one has to consider the moral hazards inherent in any bailout. Immediate relief in the form of debt reductions and more favorable loan terms will create a powerful incentive to default. Why would anyone stretch to make a burdensome mortgage payment while others are being rewarded for failing to make theirs?

Even without the incentives of a government bailout luring more people into default, policy makers simply have no idea as to the scope of the problem. Before this home mortgage correction runs its course, nearly every homeowner in the country who had availed themselves of an adjustable rate mortgage or a home equity loan will be in need of a bailout. Even a sizable percentage of those with traditional fixed rate mortgages will find themselves in danger. With millions, or perhaps tens of millions, of home owners on the rocks, there is simply no way the government can structure a bailout without bankrupting the country or destroying the currency.

http://www.[[financialsense.com/fsu/editorials/schiff/2007/0907.html

 

[Ichiro]

Fed May Cut to 5 Percent Without Promising More: John M. Berry

By John M. Berry

Enlarge Image/Details

Sept. 7 (Bloomberg) -- If Federal Reserve officials cut their 5.25 percent target for the overnight lending rate when they meet on Sept. 18, it will be by only a quarter-percentage point with no promise of more to come.

Officials have already disappointed many market participants by refusing to cut the target in response to turmoil in financial markets. And they will surely disappoint those hoping for a half-point cut at the next meeting of the Federal Open Market Committee.

While the Fed might decide on a rate reduction as a bit of insurance against having growth weaken too much, there's no sign of serious problems in the economy outside of housing.

New information can still influence the meeting's outcome because the impact of the financial market dislocations on the economy remains so uncertain. But right now there's no worry among Fed officials that the economy is about to fall out of bed, or that some major financial institution is going belly up.

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_berry&sid=avsPSp2cXT0U