Posts belonging to Category debt



US debt default would be like Lehman crash

Raising the debt ceiling

A U.S. debt default would create significant confusion and uncertainty in financial markets and could prove as catastrophic as the failure of Lehman Brothers in 2008, the Organization for Economic Cooperation and Development (OECD) said in a new report.

Lawmakers in the U.S. side-stepped a debt default at the 11th eleventh hour in October and brought an end to prolonged negotiations over raising the debt ceiling. But talks are set to resume in the new year with the debt ceiling extended until February 7 and funding approved until January 15.

“An outright default would have extremely severe effects” the OECD said in the report, released on Tuesday.

http://www.cnbc.com…  Mon.,  12  June 2017

Greek debt deal

Euro zone, IMF to seek compromise

Euro zone finance ministers and the International Monetary Fund will seek a deal on Monday on Greek debt relief that balances the IMF’s demand for a clear “when and how” with Germany’s preference for “only if necessary” and “details later”. Without the deal, no new loans can be disbursed to Athens, even though the bailout is now handled only by euro zone governments, and Greece needs new credit to repay some 7.3 billion euros worth of maturing loans in July.

Without the loans, Athens is likely to default – a bad start for a country that wants to return to market financing next year when its latest bailout, the third since 2010, ends in mid-2018. For its part, Greece has done what it could to secure a deal. It has agreed, albeit after months of negotiations, with the euro zone lenders and the IMF on pensions and tax reforms.

http://www.reuters.com…  Mon.,  22  May 2017

General Motors says Venezuela illegally seizes auto plant

The seizure comes amid a deepening economic crisis

General Motors said on Wednesday that Venezuelan authorities had illegally seized its plant in the industrial hub of Valencia and vowed to “take all legal actions” to defend its rights.

The seizure comes amid a deepening economic crisis in leftist-led Venezuela that has already roiled many US companies.

http://www.moneycontrol.com…  Thu.,  20 April 2017

China to post solid, steady first-quarter growth

Building booms, but debt risks loom

China is expected to report on Monday that its economy grew 6.8 percent in the first quarter, well above Beijing’s full-year target, buoyed by surging government infrastructure spending and a gravity-defying property market that is showing signs of overheating. A strong reading could help wobbly global financial markets but add to worries that China’s government is still relying too heavily on old growth engines like stimulus and not doing enough to tackle risks from an explosive build-up in debt.

Though policymakers have pledged repeatedly to push reforms to head off financial risks and asset bubbles, the government is seeking to keep the world’s second-largest economy on an even keel ahead of a major leadership transition later this year.

http://www.reuters.com…  Mon.,  17 April 2017

Student debt reaches about US$1.3 trillion

Student debt may drag on home ownership

US students’ debt burden is soaring, creating a barrier to home ownership and economic mobility as well as a potential drag on consumer spending, a senior Federal Reserve policymaker said on Monday (Apr 3). The phenomenon persists even as the overall picture for US household debt has steadily improved. A decade after the financial crisis, rising incomes and housing prices as well as steady job creation mean more mature borrowers are in better financial shape, said William Dudley, president of the New York Federal Reserve Bank. Dudley is also vice chair of the Federal Reserve committee that sets the central bank’s benchmark interest rates.

http://www.channelnewsasia.com…  Wed.,  05 April 2017

RBS road to recovery

RBS rising from ruins as shadow of former self

Nine years after the beginning of a 45-billion-pound ($56 billion) bailout by the British government, Royal Bank of Scotland (RBS.L) is emerging from its restructuring process a shadow of what was once the biggest lender in the world. RBS had a balance sheet of 2.4 trillion pounds in 2008 – almost double Britain’s annual economic output at the time – having staged a meteoric rise from being a small Scottish lender in the early 1990s.

Since the bailout it has offloaded billions of pounds of assets a week, as it tries to shrink down to being a simple UK-focused lender. Later this year RBS will shut its Capital Resolution division, which has sold off large chunks of its huge stockpile of unwanted assets. The closure will mark a milestone in the bank’s road to recovery, with its balance sheet around 1.6 trillion pounds lighter than when its great sell-off began.
http://www.reuters.com…  Mon.,  03 April 2017

Trade-deficit reduction is the main goal for Trump

The Trump administration will review all of America’s trade deals

According to a document crafted by the Trump administration, a model trade agreement has 24 elements. Second on the list is “trade-deficit reduction”, giving a hint as to why Mr Trump wants to review America’s existing agreements. In January Sean Spicer, his press secretary, said the administration would “re-examine all of the current trade deals.” A presidential order to do just that is reported to be in the offing.

http://www.economist.com…  Fri.,  24 March 2017

Greek Debt

The last thing Europe needs: another Greek crisis

Greece needs European creditors to release cash from a bailout agreed in 2015 so it can make debt repayments, but officials are at loggerheads. Investors are starting to worry, demanding higher returns on Greek debt. Adding to the confusion is a warning from the International Monetary Fund that Greece’s debt is unsustainable and on an “explosive” path, an assessment that prevents the fund from participating in a rescue.

http://www.cnn.com … Thu.,  09 February 2017

China’s debt binge

China’s $3.8 Trillion Wealth Products Reel Amid Bond Rout

China’s bond market is facing more turbulence as banks scramble to avoid losses on wealth management products that raised $3.8 trillion from the nation’s savers. The investment plans typically use leverage to boost returns on the 56 percent of their holdings parked in fixed-income securities. That model is under threat after Chinese corporate notes plunged the most in nine years in the fourth quarter. Banks may have to use their own money to repay holders of maturing WMPs because it will be hard to sell bond holdings during an extended rout or to raise cash by issuing new products, Citigroup Inc. wrote in a Dec. 21 note.

 http://www.bloomberg.com … Thu.,  19 January 2017

Inflation is back

Inflation is on the way back in the rich world, and that is good news

It was telling that Germany, a country with a phobia of rising prices, in the first week of 2017 reported a jump in inflation. Its headline rate rose from 0.8% to 1.7% in December. After two years of unusually low price pressures, inflation across the rich world is set to revive this year. Much of this is because of the oil price, which fell below $30 a barrel in the early months of 2016 but has recently risen above $50 (see chart). Underlying inflation, too, seems poised to drift up. That is good news. The story for 2017 is not of inflation running too hot but rather of a welcome easing of fears of deflation.

To understand why, consider the three big drivers of inflation in the rich world: the price of imports, capacity pressures in the domestic economy and the public’s expectations. Start with imported inflation. A year ago, global goods prices were falling because of a slide in aggregate demand and a seemingly endless glut of basic commodities and manufactures. China’s economy wobbled. Emerging markets in general were in a funk; two of the largest, Brazil and Russia, were deep in recession.

 http://www.economist.com … Fri.,  13 January 2017