Today in the economy

[Kirkland Laing]

Feb. 25 (Bloomberg) -- Japan’s exports plunged 45.7 percent in January, resulting in a record trade deficit, as recessions in the U.S. and Europe smothered demand for the country’s cars and electronics...........


“The drop in exports is unbelievably bad,” said Yasuhide Yajima, a senior economist at NLI Research Institute in Tokyo. “The pressure on companies to cut jobs and investment is rising and that will make the recession deep and protracted.” ...........


Japan is the world's second-biggest economy. That's the everyday economy bit. Here's the financial system bit :

The Bank of Japan last week said it will buy corporate bonds for the first time, widening its asset-purchase program to prevent a shortage of credit from deepening the recession. Governor Masaaki Shirakawa and his colleagues lowered the bank’s overnight lending rate to 0.1 percent in December.

The world's major central banks used to have nice clean balance sheets, just containing government bonds. Now they're starting to get cluttered up with all kinds of rubbish, low grade crap and corporate stuff. They have to buy the corporate stuff because corporations can't roll over their debt to commercial (bankrupt) banks and so the central banks are the lender of last resort, keeping the corpoations from shutting down large chunks or all of themselves. Balance sheets of major economies' central banks are now looking like those of third world countries and banana republics. This is not good at all.


http://www.bloomberg.com/apps/news?p...Eqw&refer=home

[Kirkland Laing]

The Chairman of the Fed actually said this today in congressional testimony :

"We're not completely in the dark. We're working along a program that has been applied in various contexts, obviously not in identical contexts, in other countries in other times. So we're not making it up, we know broadly speaking what needs to be done."

That's another quote I'll be keeping for future use.

My translation :

We are completely in the dark. The plan changes every few days as we get more and more desperate. We're making it up as we go along.


Here's another good one :

Citigroup and the US Treasury are nearing agreement on a deal that would give the federal government a stake of about 40 per cent in the troubled bank in exchange for bolstering its depleted capital base.


People close to the situation said no agreement had yet been reached and the government had yet to give its approval to the plan proposed by Citi, which stops short of outright nationalisation. But they added that negotiations between Citi's executives and Treasury officials had made progress since the weekend and an announcement could come as early as today or tomorrow.


My translation :


Citi to US Government : For You We Make Special Deal.