debasing the dollar and confidence Errbanke's SEC-Fed crime brokerage  I know it's not proper, but heck... Abolish The U.S. Federal Reserve
  Moral fallout globalised!January 26, 2005 Economists warn of 'enormous' dollar risk Leading international analysts sounded ominous warnings at Davos yesterday over fundamental imbalances in the global economy and looming risks of a financial and economic crisis.Economist Fred Bergsten, head of America's Institute of International Economics, said that the United States risked provoking a currency crisis if US budget plans did not bolster markets' confidence that Washington was serious about reducing its fiscal deficit - blamed in part for the slide in the dollar. Mr Bergsten said a financial crisis could be triggered within a week. "We face an enormous risk of a major dollar crisis," said Mr Bergsten. "The world would undoubtedly fall into a much slower growth pattern." Mr Bergsten's stark analysis came as the White House estimated on Tuesday that the US budget deficit for 2005, including an extra $80 billion for Iraq and Afghanistan operations, will total $427 billion - 3.5 per cent of GDP. Meanwhile, Stephen Roach, the famously bearish chief economist at Morgan Stanley, said that "self-indulgent" US consumers are the "weakest-link" in a global economy that could falter at any moment. In another gloomy assessment of global economic prospects for 2005, Mr Roach told a meeting of the World Economic Forum that rampant US consumption had been the main driver of the spectacular rates of growth the global economy achieved in 2004. However, with economies all around the world increasingly reliant on exporting their goods to the US, a moderation in US spending could have serious repercussions for the global economy. "For me, something just doesn't add up. The self indulgent American consumer ... is an accident waiting to happen," said Mr Roach, a long-time pessimistic on the US economy. Rather than using the fruits of the increased economic activity, US consumers are funding their massive spending spree through borrowing against the inflated values of their homes, he said "We are in the early stages of a residential property price bubble in the US. Consumers know this and that is why they are turning their homes into a massive ATM machine," explained Mr Roach. US consumers "suck money" out of their properties to fuel imports from Asia. In turn Asian countries buy US dollars, keeping interest rates low and allowing US householders to borrow even more, according to Mr Roach.
"This is an utterly insane way to run the world economy. You know that, we know that, but the Federal Reserve is in denial about that," he said. With US rates rising from the 'unconscionably' levels of recent years, there will inevitably be a fall back in US property price inflation and hence consumer spending, he added.
------------------------------------------------------------------------------------------ We at .Exxell think it all boils down to bad manners and abusive authority you find intertwined in what is now called state-corporate crime or incorporated governance. ----------------------------------------------------------------------------
SEC Mutual recognition�Eplan questioned By Jeremy Grant Published: June 18 2007 20:35 | Last updated: June 18 2007 20:35 Imagine you are at a Dutch bank and you have non-US customers who want to trade stocks on the New York Stock Exchange. The way US regulation works, you can either place the transactions with an NYSE member firm, adding to your custodial and settlement costs, or you will have to become a member of the exchange. EDITORIAL CHOICE If you choose the latter, you are required to be registered with the Securities and Exchange Commission as a broker-dealer, subjecting yourself to supervision by both the SEC and the Dutch regulator's requirements as to how you deal with clients. So far, so bureaucratic. If the SEC has its way, all this could soon change, signalling the most far-reaching effort to redraw the regulatory landscape in transatlantic financial services in years. The US regulator is considering a new system of substituted compliance�Ewith foreign counterparts that could do away with such regulatory duplication and cut the costs of transatlantic securities business. Under such a system, the SEC would allow foreign broker-dealers to provide products and services to US investors without having to register with the SEC. It would also allow foreign exchanges to place trading screens on the desks of US-based brokers without such registration. In both cases, the home country regulator's standards would have to be substantively comparable�Ewith that of the SEC. It marks a radical shift for an agency that has long seen its rules as paramount. While the concept of mutual recognition has been discussed for years, it has taken the reality of cross-border exchange consolidation, electronic trading and recent interest among US investors for foreign equities to spark action. Ethiopis Tafara, director of the SEC office of international affairs, argues the time has come for such a move because it would help raise regulatory standards at a time of intense competition between financial centres. Mutual recognition limits the temptation there is to beggar thy neighbour in the interest of attracting greater interest in your market over someone else's market. It coalesces you around a set of high regulatory objectives and in that way limits the possibility that you get into a race to the bottom, he says.
Yet, the mutual recognition of standards is fraught with unanswered questions. How, for instance, would the SEC decide which countries qualify for such a mutual recognition regime, and which ones would be left out? In Europe, the SEC would find a natural partner in the UK's Financial Services Authority, with which it has been collaborating closely in recent months. Yet that would likely irritate the German, French and other regulators �Eto say nothing of the almost two dozen remaining EU member states�Ewatchdogs �Eif they are excluded. Roberta Karmel, Professor of law at Brooklyn Law School and a former SEC commissioner, says the SEC will have to make a very difficult, politically freighted decision. Central to the SEC's dilemma is balancing a desire to cooperate with other regulators as markets and exchanges globalise with its congressional mandate to protect US investors. David Grayson is managing director of Auerbach Grayson, a New York broker specialising in selling foreign stocks to US institutional clients. It develops relations with carefully picked brokers in over 100 markets around the world. Mr Grayson says he is concerned that while the SEC may be able to satisfy itself that a foreign regulator passes muster for the purposes of US investor protection, this would not necessarily equip the SEC to check on the quality of local brokers. He advocates retaining the requirement that foreign broker-dealers register with the SEC. if I am a US institution and I have a problem with one of these local brokers, who is going to go after them? he asks. Some have suggested that mutual recognition be limited to institutional business because of the risk of exposing retail US investors to what SEC commissioner Paul Atkins calls boiler rooms in Bucharest and Berlin�E Mr Atkins also warns against an approach that would suck regulators into a completely unworkable and never-ending process where regulators analyse the suitability of each other's regimes by a rule-by-rule comparison. Instead, he advocates emulating the approach of the SEC's sister regulator, the Commodity Futures Trading Commission, which has for years operated a system of mutual recognition with foreign counterparts in the futures industry that focuses on adherence to broad principles rather than rules. There are serious implications for US exchanges by allowing foreign ones to place screens in the US without SEC registration, according to Eric Sirri, director of the SEC's division of market regulation. He says: if the foreign screen or broker-dealer comes from a regime that's more lightly regulated, a domestic [US] exchange may turn around and say why do we need to be more heavily regulated than our competitors? We want [regulatory] relief. In spite of such concerns, the SEC seems committed to moving ahead. Christopher Cox, the SEC chairman, said last week that doing nothing is not an option. But he added: this is not going to be like big bang�Ein 1986 in the City of London. This is going to be an evolution. |
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US stocks were left spiralling along with the American currency on fears of broader economic contagion from the sub-prime property slump.
The benchmark Dow Jones Industrial Average plummeted 226.50 points to 13,716.90.
The fall caused London markets to tumble dramatically late in the day. The blue chip FTSE 100 fell 125.7 points to 6498.70, while the FTSE 250, which consists largely of UK-based firms rather than multinationals, plummeted 198.20 points to 11,584. The FTSE was little changed in Wednesday morning trading at 6504.70.
So deep were the concerns about the fate of the US economy, the biggest single engine of global growth, that markets brushed aside US Treasury Secretary Hank Paulson's attempts to allay fears of a sharp US downturn, and reassurance that a strong dollar is in our nation's interest.
"There has been a very significant housing correction. I think we're at or near a bottom there. I don't deny there's been a problem with sub-prime mortgages but it's quite containable," he said.
The closely watched DXY dollar index broke through a crucial support to fall through 80 for the first time since 1995, raising the risk of a disorderly rout as foreign funds pull their money out of the US.
The euro jumped at one point to $1.3852 - the highest level since it was created in 1999. Meanwhile, sterling touched a high of $2.065. By Wednesday's trading, the dollar had recouped more than a cent of its losses against sterling and was back below $2.06. The euro was also strengthened to below $1.38.
David Bloom, currency chief at HSBC, said the dollar had fallen victim to growing fears of a US credit crunch, and likely knock-on effects through debt markets. "Foreigners have made a $2 trillion bet on US credit and now they're discovering it's not as good as they thought," he said.
Mr Bloom said hopes of a brisk US recovery after the winter slowdown were "melting away" as the housing slump continued to hinder consumer spending power. "The concern is that this could spread into equities, which have been insulated so far. Then we have a major problem," he said.
The real spark for concern in equity markets was news of a 33pc fall in quarterly profits at Countrywide Financial, the largest US mortgage lender, which also slashed its full-year profits outlook
USG, the world's largest seller of gypsum wallboard for home building, gave a similarly gloomy housing outlook.
JP Morgan added to jitters with a warning that US house prices could fall 15pc during the next two years as interest rates on mortgage "teaser" loans adjust sharply upwards, triggering further waves of defaults. It said the damage would continue to spill over into the wider credit markets, where spreads on high-yield debt punched up to two-year highs yesterday.
It usually takes months before widening credit spreads start to infect equities but there were signs yesterday that this may be drawing closer. Daniel Stillit, an economist at UBS, said the squeeze in the loan markets would end the craze for jumbo takeovers by private equity groups armed with debt, which have pushed up stock prices. "Deal sizes are being scaled back, with far-reaching implications for equities," he said.
The pound and the euro have taken the brunt of the dollar's slide since the Chinese yuan is fixed to the greenback by a crawling peg, and the Japanese yen has been held down by rock-bottom interest rates. The failure of Asia to play its full part in the dollar adjustment is causing major imbalances in the global currency system. It has already prompted protests from French president Nicolas Sarkozy. Although sterling touched a high of $2.0650 against the dollar yesterday, it hardly moved against the euro. Roughly 65pc of UK exports go to Europe, which is enjoying a mini-boom. As a result, much of British manufacturing has been sheltered from the strong pound so far.
But the first signs of stress among exporters are starting to appear. The CBI's industrial trends survey released yesterday showed a sharp fall in orders from +8 in May to -6 in June. It said export orders had fallen "noticeably" for the first time in 18 months.
"UK exports had been resolute in the face of a strong pound but a combination of a slower US economy and sharp increases in the price of oil, commodities and freight is beginning to tell for exporters," said Ian McCafferty, the CBI's chief economist.
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