The great interest rate rip off part 1

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FT.com / World - Denmark, UK vulnerable to house prices fall

 

Denmark, Britain and New Zealand are the economies most vulnerable to a fall in house prices, says a report released on Monday by Fitch Ratings.

The credit rating agency says the combination of overvalued property and highly indebted consumers makes these economies especially vulnerable as central banks tighten interest rates around the world.

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The report comes amid signs of slowing in many housing markets. In the US, stagnant or falling prices have contributed to the subprime mortgage crisis.

Fitch finds that houses are most overvalued in France, where prices are furthest above their long-run trend, and especially high relative to household incomes. Prices are high relative to rents in New Zealand and the UK.

High prices relative to rents make housing less attractive to landlords. “Nominal housing yields are now lower than bond yields in the UK,” said Brian Coulton, head of global economics and Europe in Fitch’s sovereign debt team.

House prices are the best value in Japan, Germany and the Netherlands. In Japan they are more than 10 per cent below their long-run trend when compared with incomes.

Households in the Scandinavian countries are among the most exposed because of debt. Norwegian families are the most leveraged while the Danes have the highest level of net debt.

Despite its housing overvaluation, France is considered only the eighth most vulnerable country overall, because levels of household debt, leverage and interest payments are relatively low.

The UK also has a buffer because of its high levels of household wealth. “Net wealth is the most comprehensive measure of household long-run solvency,” says the report.

Many countries have seen rapid growth in house prices after central banks cut interest rates during the global slowdown that started in 2001.

“Monetary easing earlier in the decade did pump up housing markets,” Mr Coulton said.

But with rates rising in many countries, including two rate rises in the eurozone so far this year, he did not expect that to continue.

 

So some of the price growth is imaginary and has been funded by debt. Luckily none of this is the fault of the worlds central bankers, how could they have possible known this might have happened. You know they only merely influence inflation. It's not like they could have helped cause the problem in the first place with poor economic decisions.

 

Never question the link between inflation and interest rates, and certainly never question the competence of the worlds central bankers!!!

 

If there is a world wide economic recession how many heads will roll at central banks, I predict none.

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House price growth hits the buffers - Telegraph

 

Richard Donnell, Hometrack's director of research, said: "It was inevitable that the steady increase in interest rates which began last year would ultimately impact on levels of housing demand right across the market. We expect demand to remain weak over the second half of the year as the impact of higher interest rates continues to feed into the market."

 

I would like to know what a steep rise in interest rates is, if a mere 21% raise in interest rates over the last year can be considered "steady".

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Gavyn Davies: Over-leveraged credit markets an accident waiting to happen - Independent Online Edition > Business Comment

 

Markets were in free fall last week, with some equity indices (including the FTSE 100) eliminating all of their previous gains for the year.

Investors who have been holding sensible diversified portfolios did much better than those in UK equities, because international stockmarkets outperformed the FTSE, and other asset classes (like bonds and commodities) rose in value as equities collapsed. As the graph shows, balanced portfolios of global assets are probably still up by around 4 per cent this year. But if this sudden equity collapse turns into a prolonged bear market, there will be few places for anyone to hide.

A correction in risky assets has been long predicted by market pessimists, and indeed long-desired by many central bankers, who have been arguing that the risk appetite of investors has become excessive and dangerous.

Observing the behaviour of many hedge funds in the mortgage markets, it is easy to see their point. But remember that in the 1990s Alan Greenspan warned of "irrational exuberance" almost four years before the bull market finally ended. Investors who paid attention to him would have missed the second greatest bull market of the 20th Century, a mistake from which there is no swift recovery. So investment managers are forced to address the most difficult question of all - is this "the big one"?

 

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All this could damage the stockmarket and the economy, especially if the available quantum of credit becomes restricted, as well as becoming more expensive. Academic evidence suggests that a "credit crunch" of this type can do significant economic damage.

This will undoubtedly happen for a while. Now that the credit debacle has spread beyond the mortgage market to the corporate debt market more generally, the banks will inevitably become much more cautious. They are reported to be sitting on deals worth $200-300 billion which they have underwritten, but are now unable to pass on to syndicates.

 

"A correction in risky assets has been long predicted by market pessimists, and indeed long-desired by many central bankers, who have been arguing that the risk appetite of investors has become excessive and dangerous."

 

I'm sorry central bankers have been fuelling this with low interest rates with no borrowing limits. Amazing they highlight the risk and take no action knowing when they do act, rising rates may cripple the market and could lead to a full scale recession. However that's obviously not gross negligence on there part.

 

It's just a good job where not paying for that incompetence with higher interest rates as we might all be a bit annoyed at that.....

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Mortgage lending grows at fastest pace for three months | | Guardian Unlimited Business

 

Mortgage lending in June grew at its fastest pace in three months, figures show today, while approvals for new home loans held steady, suggesting that the housing market is still holding up despite a string of interest rate increases.The latest data contrasts with a series of surveys from leading mortgage lenders which have shows signs of a cooldown in price growth.

The Bank of England data showed that lending rose by £9.55bn last month, after a £8.75bn rise in May. The City had forecast a rise of only £8.5bn.

Mortgage approvals - an indicator of the future health of the housing market - held steady at 114,000 in June against predictions of an ease to 109,000.

"Overall these figures are firmer than we expected," said George Buckley, economist at Deutsche Bank. "We expect some weakening in these numbers towards the end of the year, but for now the market seems to be holding up well."

While recent evidence has suggested that activity in the housing market may be running out of steam as affordability becomes even more squeezed, policymakers at the Bank have noted that these signs of a slowdown are at best tentative.

 

There's a slowdown and record lending, and somehow us mere mortals are meant to make decisions on how much we can afford to borrow!!! Even seasoned economists have no idea so how do they expect Joe Public to have any idea? If the rates where fixed and didn't change it would be much easier.

 

I would be interested to see what the spread of these figures are over the various regions, is the growth in borrowing even are some areas borrowing significantly higher than others?

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Larry Elliott: After the ball, the clean-up should begin | Special report | Guardian Unlimited Business

 

Chuck Prince is the chief executive of Citigroup, one of the world's biggest financial institutions. It goes without saying that he is a very rich man. Whether he is a wise man, though, is an entirely different matter.I say this without the slightest personal knowledge of Mr Prince, but purely on the basis of an interview he gave to the Financial Times less than three weeks ago. Prince summarily dismissed the notion that there was a whole heap of trouble brewing in the financial markets as a result of excessive and reckless borrowing. Citigroup, one of the biggest providers of finance for private equity deals, would certainly not be drawing in its horns.

"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing," Prince said. Adding for good measure: "At some point, the disruptive event will be so significant that instead of liquidity filling in, the liquidity will go the other way. I don't think we're at that point."

That was July 10. Last Thursday the dancing stopped, as at some point it had to. Why? Because this was not the equivalent of a ball in a Jane Austen novel where young ladies and their elegant beaus glide across the floor in a stately waltz, but a crazed St Vitus dance of uncontrolled wildness.

The markets can't say that they weren't warned. Only a few weeks ago, the Bank for International Settlements - the central bank's central bank - warned that markets were starting to believe their own hype. Pointedly reprising Alan Greenspan's "irrational exuberance" comment, the BIS had this to say: "There seems to be a natural tendency in markets for past successes to lead to more risk taking, more leverage, more funding, higher prices, more collateral and, in turn, more risk-taking."

In such an environment, the BIS noted, every fall in asset prices is seen as a buying opportunity, until the point is reached when prices are so out of kilter with fundamentals that they have only one way to go - down. The bull market has been predicated on the notion that risks were minimal, credit was cheap and problems like the sub-prime lending scandal were localised.

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Last week's assessment of the state of the world economy from the International Monetary Fund showed growth this year is now expected to be 5.2% - higher than the 4.9% estimated in the spring. Yet more than half the expansion is the result of growth in three developing countries - China, India and Russia. These are countries that are growing rich on the export of low-cost manufacturing, services and commodities.

What's more, the trade surpluses they are building up are providing these developing countries with enormous financial clout. The growth of sovereign funds is the result of countries such as China and Russia having money to burn. They are looking for investment opportunities in the west, and where they once concentrated on amassing financial assets they are now looking to take stakes in western companies. Barclays, for example, could find itself part-owned by the Chinese government, which is bankrolling its bid for ABN Amro.

Some countries find this trend disturbing. Washington is far from relaxed about US industries falling into the hands of the Russians and the Chinese, fearing that both countries may be playing a long, strategic game. Likewise the French and the Germans.

What is happening, though, is the direct and inevitable consequence of a highly unbalanced global economy, where debtor countries like Britain and the US rely on the largesse of creditor countries like China to fund their profligate lifestyles.

 

Everything is fine why worry, we can rest assured those in charge of the fundamentals know what they are doing, the pursuit of profit won't be put for greater good....

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Business Viewpoint | Business | Guardian Unlimited Business

 

Nils Pratley

Friday July 27, 2007

 

Is this the big one? Has confidence finally cracked? Does a serious financial accident lie around the corner? These are impossible questions but some rough-and-ready barometers were giving truly horrible readings yesterday. Some 200 points off the FTSE 100 was bad enough but the real damage was done in the debt markets where the leveraged buyout of Alliance Boots provided the first clear evidence that investment bankers are seriously rattled.The Boots deal is funded with debt provided by eight top-notch international banks, including Barclays and Royal Bank of Scotland. Their task as underwriters is to sell the debt on to smaller institutions. For this, they are paid handsomely but bear the risk of being unable to find buyers.

 

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Business market forces | Business | Guardian Unlimited Business

 

A higher bid for ICI, results from banking group HSBC that were not as bad as expected, and a revival among the miners - all this helped leading shares edge into positive territory today.Paint and chemicals business ICI climbed 41p to 618p as predator Akzo Nobel raised its bid from 600p to 650p. Some ICI shareholders however believe the company is worth closer to 700p, and the new bid has indeed been rejected. Talks however are continuing.

 

Looks like the economy is booming again, well for a minute anyway...

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FT.com / Markets / Europe - Europe struggles after IKB warning

 

Following a sharp fall last week which dragged the FTSE Eurofirst 300 to its lowest level for almost four months, European equity markets made a negative start trading on Monday but inched higher towards the end of morning trade. The shockwaves from the crisis in the US sub-prime mortgage market continued to reverberate with a profit warning from IKB dragging the German banking sector lower.

The FTSE Eurofirst 300 rose 1.4 points or 0.1 per cent to 1,521.47 while in Germany the Xetra Dax index added 17.4 points, or 0.2 per cent, at 7,464.9 and in France, the CAC 40 gained 10.8 points, or 0.1 per cent, at 5,654.8.

Continuing concerns about the impact of turmoil in credit markets were amplified by a profit warning from IKB. The German industrial bank dropped 17.2 per cent to €17.79 after it warned that earnings would be “significantly lower” this year due to problems in the US sub-prime market. IKB’s chief executive has stepped down and its biggest shareholder, KBW, the state bank has stepped in to provide liquidity support to prop up its creditworthiness.

 

So is the momentary boom over???

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FT.com / World - Home lending stays strong in June

 

Mortgage lending remained strong in June but there were still signs of a loss of momentum in the housing market, according to Bank of England figures published on Monday.

The number of approvals for house purchases was 114,000 in June, only slightly below the 115,000 six-month average. Although the June figure was unchanged from May, it was stronger than expectations.

Ian Kernohan, economist at Royal London Asset Management said: “While the monthly total of mortgage approvals has fallen somewhat since the beginning of the year, today’s numbers suggest that five interest rate rises have yet to affect demand for mortgages to any great extent.”

Nevertheless, the overall total of 337,000 in the second quarter of 2007 was down from 350,000 in the first quarter and 368,000 in the fourth quarter of 2006.

 

So less people are borrowing, but the amount being borrowed is going up. The cash rich must still be borrowing, which would tend to suggest that those with lower incomes are footing all the financial strain with the recent rises. Seems perfectly fair to me.

 

Surely this would mean that certain areas of the economy are doing very well but others aren't, therefore a single interest rate is inappropriate and is flawed economic management.

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The Trap (television documentary series) - Wikipedia, the free encyclopedia

 

The programme traces the development of game theory with particular reference to the work of John Nash, who believed that all humans were inherently suspicious and selfish creatures that strategised constantly. Using this as his first premise, Nash constructed logically consistent and mathematically verifiable models, for which he won the Bank of Sweden Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics. He invented system games reflecting his beliefs about human behaviour, including one called "So Long Sucker---F*** Your Buddy", in which the only way to win was to betray your playing partner, and it is from this game that the episode's title is taken. These games were internally coherent and worked correctly as long as the players obeyed the ground rules that they should behave selfishly and try to outwit their opponents, but when RAND's analysts tried the games on their own secretaries, they instead chose not to betray each other, but to cooperate every time. This did not, in the eyes of the analysts, discredit the models, but instead proved that the secretaries were unfit subjects.

 

What was not known at the time was that Nash was suffering from paranoid schizophrenia, and, as a result, was deeply suspicious of everyone around him—including his colleagues—and was convinced that many were involved in conspiracies against him.

 

The football analogy springs to mind, good on paper sh*t on grass.

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Public choice theory - Wikipedia, the free encyclopedia

 

Public choice theory is the use of modern economic tools to study problems that are traditionally in the province of political science. (A more general term is 'political economy', an earlier name for 'economics' that evokes its practical and theoretical origins but should not be mistaken for the Marxian use of the same term.)

In particular, it studies the behavior of voters, politicians, and government officials as (mostly) self-interested agents and their interactions in the social system either as such or under alternative constitutional rules. These can be represented a number of ways, including standard constrained utility maximization, game theory, or decision theory. Public choice analysis has roots in positive analysis ("what is") but is often used for normative purposes ("what ought to be"), to identify a problem or suggest how a system could be improved by changes in constitutional rules (Tullock, 1987, pp. 1040-41). A key formulation of public choice theory is in terms of rational choice, the agent-based proportioning of scarce means to given ends. An overlapping formulation with a different focus is positive political theory. Another related field is social choice theory.

It's just such a good job private companies don't pursue self-interest and profit.

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Capitalism is safe and well (probably) -Times Online

 

When presidents of the United States make reassuring statements about the stock market, investors with any historic memory prepare to run for the hills. The most famous example was Herbert Hoover after the 1929 crash: “The business of America is sound.”

Last week global stock markets fell heavily. On Friday President Bush commented that: “The world economy is strong.” Until that point, I felt fairly sure that what was happening in stock markets was a relatively minor correction, a response of the equity markets to the problems of the debt markets. Now I am not so sure. President Bush has shaken my confidence in the world economy.

Why should we worry about these reassurances from the White House? There is no one less suited to comment on markets than a president. The ideal commentator should have a lifetime experience of markets, but have no axe to grind. Of course, almost everyone has some interest in world financial markets, if only in terms of house prices, but a good commentator will have a detached point of view. No one in the world can be less detached about the world economy than a president, save possibly for a few rogue traders with overexposed positions.

Wise presidents leave it to other members of their Administrations to make any official comments that may be thought desirable. When the Treasury Secretary makes a comment, that is his proper business, though he will not be detached; in the market phrase, he will be “talking his book”.

When the President himself intervenes, that is a sign of higher than normal financial anxiety in the White House. Therefore, all presidential reassurances should be treated as alarm signals. What they tell one is not that “the world economy is strong”, but that the President is worried that the world economy is weaker than it looks.

 

How could it possible be weaker, it's not like mass debt has ballooned share prices giving a misleading sense of growth and a impending credit crunch is looming because of the lax management by the worlds central bankers...

 

Errr wait a minute......

 

It's Carry On Central Bankers.

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Capitalism is safe and well (probably) -Times Online

 

The reaction against excess liquidity is the most important consequence of the defaults of the poorest customers of the sub-prime mortgage market. It is, as always, the weakest who go first to the wall, but reducing excess liquidity is uncomfortable for everyone.

 

So the poor get to pay for the excesses of the rich. Seems a fair trade and seems to ratify the fairness of using a singer interest rate for the entire economy.

 

The poor go to the wall while the rich sit back and watch.

 

All the worlds central bankers must feel so pleased with themselves, and not one will lose their job they'll all congratulate themselves on a job well done.

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Say hello to a world without cheap money - Times Online

 

FOR the past five years big business has been hijacked by a crowd of smart financiers who, backed by cheap money, have bought and sold companies at their whim.

But as the events of the past week have shown, and as my colleagues explain in The Party's Over (see related link in panel, left), the days of easy credit are over. The world’s big banks, which have made billions fuelling this boom, have called a halt. It has happened in the space of only a few weeks and the impact has hit global equity markets hard as companies whose shares had fizzed up on the back of takeover speculation have seen those gains wiped off.

But the big question is whether we are just seeing a repricing of risk or whether liquidity is being withdrawn. If it is the former, the consequences are not so severe. It simply blows away the ability of private equity to pay prices well beyond what a trade buyer could justify.

In all the madness of the past five years it is easy to forget that business is about long-term revenue growth, about operational skills, development in people and research and development.

 

The importance of all this has been sidelined in the orgy of leveraged buyouts. If risk is simply being repriced it will lead to a new and more sober era where banks will become more cautious about their exposure to leveraged buyouts. Deals will still get done but with more equity and less debt.

 

Never you mean private equity firms and hedge funds have gone after a quick profit!!!! God job this isn't risking an economic recession...

 

Luckily we've got the worlds central bankers looking after our interests.

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Bank may have squeezed enough - Times Online

 

AT this time of year, when many ordinary folk have departed for their holidays, the men and women of the Bank of England’s monetary policy committee (MPC) still have work to do.

For the past three summers, August has been busy for the MPC. They raised Bank rate by a quarter point in August 2004, cut by a quarter in August 2005 and hiked a quarter this time last year. The 2005 cut has been blamed, not entirely accurately, for reviving house-price inflation, while 2006’s hike started the current phase of monetary tightening.

This is a challenging time for the MPC. Sir John Gieve, one of the Bank’s deputy governors, last week described it as a return to normality, the so-called Great Stability having reached its zenith, coincidentally, between August 2004 and August 2006. Looking at financial markets – the global credit panic leading to last week’s equity sell-off – it is hard to disagree.

Normality, for some, means the Bank should bite the bullet and contemplate significantly higher interest rates, even from present levels. Paul Mortimer-Lee and Alan Clarke of BNP Paribas, in a report called English Lessons, say the economy is operating above capacity and inflation expectations have risen, so a Bank rate of 6.75% may be needed for 2% inflation over the medium term.

Chris Watling of Longview Economics believes the “pervasiveness” of inflation – the fact prices are rising across a wide range of components of the prices index – means a Bank rate of 7% may eventually be required.

 

Yep because a 7% interest rate will help improve the supply of food and correct the effects of the floods, it will stop China/India/Russia needing more oil to fuel there own domestic growth. The only thing a 7% interest rate will do is help ensure more families have there houses repossessed and may even create a recession, but at least that will clear out the excesses in the economy. It's just a pity it will be the poor that pay for it rather than the rich.

 

But hey the Central Banks are doing a wonderful job, why would anyone possible criticise!!!!

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Britain's banks face £1bn bill from charges revolt | Special report | Guardian Unlimited Business

 

The full impact of the consumer rebellion against bank charges was revealed today as HSBC said it has paid out £120m in refunds to customers. The figure is five times higher than earlier estimates and suggests that Britain's high street banks face a bill of £1bn repaying allegedly unfair charges for unauthorised overdrafts and bounced cheques.

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UK's house prices are second most overvalued - Telegraph

 

The UK house prices are now the second most overvalued among the world's developed economies, trailing only France, according to a new survey by ratings agency Fitch.

The survey shows that in all but two of the countries surveyed the ratio of house price growth to increases in incomes is above the long-term historical average.

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BBC NEWS | Business | UK housing market is 'overvalued'

 

UK house prices are at least 20% overvalued compared with their long term average, according to credit rating agency Fitch. Fitch, which judges how risky debt is, looked at how house prices have raced away from incomes over the past decade.

High levels of debt make the UK economy one of the most vulnerable in the world to higher interest rates, it added.

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Banks reporting season: the full results - Telegraph

 

First half pre-tax profits: £14.2bn, +13pc | Total bad debt provision: £6.35bn, +63pc

 

Helpfully no repossession figures.

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Oil prices top record closing high - Telegraph

 

Oil prices briefly moved above its all-time closing high in New York after Iran said it saw no reason to increase production quotas when the oil cartel OPEC holds its next meeting in September.

West Texas Intermediate for delivery in September hit $77.14 a barrel in early trading - up from the $77.02 close on Friday which was just two cents shy of the record.

The price later fell back as traders took profits. Nevetheless, with global growth still surging and the International energy Agency warning of a supply crunch ove the next five years, oil prices are expected to continue their recent increase.

 

Sounds great where going to have a credit crunch and an oil crunch either together or one after another.

 

I wonder how rising interest rates is going to sort that out.

 

Luckily we've got the worlds central bankers on the case. They know what there doing!!!!

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FT.com / Companies / Financial services - Subprime woes claim first German victim

 

IKB Deutsche Industriebank, the German bank for industry, on Monday became one of the biggest European casualties of the fallout in the subprime mortgage market as it ousted its chief executive and issued a profit warning.

The bank said losses in the US subprime mortgage market meant full-year earnings would be “significantly lower” than the €280m ($383m) it had forecast for its 2007-08 financial year.

The warning, which came just 10 days after it had affirmed its full-year target, sent shares in IKB plunging 16.7 per cent to €17.89.

KfW, the state owned development bank that owns 38 per cent of IKB, said it would step in and cover all potential losses in order to avoid a full-blown crisis.

Subprime mortgages are the riskiest property loans, extended to people that often have payment difficulties or a bad credit history. Recent defaults and valuation downgrades have led to large losses at several high-profile funds and banks, including HSBC, the UK bank, and hedge funds at Bear Stearns in the US.

IKB said the bank and Rhineland Funding, an investment portfolio managed by the bank, had invested in structured credit portfolios, which included exposures to US subprime mortgages.

“Towards the end of last week IKB’s creditworthiness was being questioned. There was a risk that this confidence crisis would deteriorate further,” the bank said in a statement on Monday.

 

It's a good job the world economy isn't global and that perhaps coordinating economic policy might be a good idea.

 

Fortunately central bankers know what they are doing, they have the holy grail of economic knowledge and it's naive to thing anything else.

 

Luckily banks have gone after profit at the expense of common sense otherwise there could be a major recession on the horizon, especially if there was a energy crisis looming with the price of oil. Erm......

 

It was like that when I got here....... Not my fault honest.

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FT.com / Markets / Europe - Europe struggles after IKB warning

 

European equity markets moved lower on Monday as problems in the US subprime mortgage market sent shockwaves through the German banking sector.

IKB dropped 20.1 per cent to €17.16 after the German industrial bank warned that earnings would be “significantly lower” this year due to the subprime crisis.

IKB’s chief executive resigned and its biggest shareholder, KBW, the state bank stepped in to provide liquidity support.

West LB downgraded IKB’s recommendation from “buy” to “hold” and cut its price target from €33 to €22 after reducing forecasts for net profit for this year by 38 per cent from €217m to €134m.

Concerns that other German banks could be affected were amplified by Commerzbank, which said problems from the US subprime mortgage market would cost it €80m. Commerzbank fell 3 per cent to €30.77.

Deutsche Postbank was also hit, falling 1.5 fell per cent to €55.08, even though the company said it did not expect to see any impact on its own business from problems in the US subprime market as it reported second-quarter earnings broadly in-line with market expectations.

Hypo Real Estate lost 3.8 per cent at €44.55 while Deutsche Bank, which is due to report results on Wednesday, was also dragged lower, down 0.9 per cent to €97.

 

It does seem the banks knew what they where doing all along, there's no need to panic and certainly no need for any sort of investigation into why the worlds central banks sat idly by and did nothing apart from rise interest rates to cause the problem in the first place.

 

But remember never ever criticise the central bankers as they know what they are doing and to do so would be incredible naive.

 

Good job this isn't costing the consumer any money, O right it is isn't it.

 

Perhaps if central bankers had any real back bone and sense of honour they would be resigning en masse, albeit to nice highly paid city jobs.

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BBC NEWS | Business | Global stocks struggle to recover

 

European markets were broadly flat after flip-flopping nervously throughout the trading day following last week's tumble. Fears that higher interest rates around the world will hit company profits and dent consumer spending has hurt appetite for risky assets, like shares.

London's FTSE 100 closed down 9.1 points at 6206.1, while Frankfurt's Dax rose 4.63 points to 7456.31.

Meanwhile, US stocks were see-sawing in New York trade.

The Dow Jones index of largest shares had risen 41.1 points at 13,306.6 in afternoon trade, while the broader S&P 500 was also showing tentative signs of recovery, up 5.45 points at 1,464.4.

This follows a worldwide global share sell-off on Friday, led by the US, amid heightened concerns over the possibility of a credit squeeze, which could affect global economic growth.

By the close of trade in New York on Friday, the Dow Jones Industrial Average of leading shares fell 1.5%, bringing its fall for the week to 4.2%, the largest weekly percentage drop since March 2003.

Yet, the sharp slump on Wall Street failed to have an impact in Asia on Monday, where indexes closed up.

Japan's Nikkei 225 index finished up 5.5 points at 17,289.3, while Hong Kong's Hang Seng added 169.5 points to end at 22,739.9.

 

It's a good job none of this credit fiasco is affecting the worlds stock markets, you could be embarrassed by it all if you where a central banker. Luckily interest rates is a 100% full proof way of controlling the economy. It's all under control and they know what they are doing.

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BBC NEWS | Business | Japan industrial output recovers

 

Japanese industrial output rose for the first time in four months in June, led by electronics firms meeting strong demand both at home and overseas. Output grew 1.2% in June compared with the previous month, bouncing back from May's 0.4% decline, the Ministry of Economy, Trade and Industry said.

Looking forward, the survey found that manufacturers now predict output to rise 1.8% in July and 4.9% in August.

Analysts now expect the Bank of Japan to raise interest rates in August.

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For the April to June period, Nippon, the world's second largest steelmaker, saw its profits increase 21% to 149bn yen ($1.25bn; £618m), from 123bn yen a year earlier.

JFE, the world number four, saw its quarterly profits soar 59% to 145.2bn yen.

It's a good everyone knows what they are doing. Are central bankers trying to have a recession to curb the excesses of the economy, which really means make the poor poorer. The poor are the ones to go to the wall first, probably not important anyway as there votes don't really count for much.

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Demography | How to deal with a falling population | Economist.com

 

Worries about a population explosion have been replaced by fears of decline

 

THE population of bugs in a Petri dish typically increases in an S-shaped curve. To start with, the line is flat because the colony is barely growing. Then the slope rises ever more steeply as bacteria proliferate until it reaches an inflection point. After that, the curve flattens out as the colony stops growing.

Overcrowding and a shortage of resources constrain bug populations. The reasons for the growth of the human population may be different, but the pattern may be surprisingly similar. For thousands of years, the number of people in the world inched up. Then there was a sudden spurt during the industrial revolution which produced, between 1900 and 2000, a near-quadrupling of the world's population.

Numbers are still growing; but recently—it is impossible to know exactly when—an inflection point seems to have been reached. The rate of population increase began to slow. In more and more countries, women started having fewer children than the number required to keep populations stable. Four out of nine people already live in countries in which the fertility rate has dipped below the replacement rate. Last year the United Nations said it thought the world's average fertility would fall below replacement by 2025. Demographers expect the global population to peak at around 10 billion (it is now 6.5 billion) by mid-century.

 

Another problem to contend with in the long-term.