Today in the economy

[CGM]

Here's one year charts of the Toronto Stock Exchange and the Toronto Dominion Bank. If this is a big economy least affected, I'd hate to see the worst affected.

[Kirkland Laing]

Here's one year charts of the Toronto Stock Exchange and the Toronto Dominion Bank. If this is a big economy least affected, I'd hate to see the worst affected.

A recession and a global financial system meltdown has quite an adverse effect on any stock market index or financial stock so looking at the numbers right now doesn't give you the real picture. The measuring stick is solvency. None of Canada's banks are bankrupt and they haven't needed a bailout to remain solvent either. Despite already having been bailed out with trillions of dollars, major US/European/Asian banks are all bankrupt.

[CGM]

Here's one year charts of the Toronto Stock Exchange and the Toronto Dominion Bank. If this is a big economy least affected, I'd hate to see the worst affected.

A recession and a global financial system meltdown has quite an adverse effect on any stock market index or financial stock so looking at the numbers right now doesn't give you the real picture. The measuring stick is solvency. None of Canada's banks are bankrupt and they haven't needed a bailout to remain solvent either. Despite already having been bailed out with trillions of dollars, major US/European/Asian banks are all bankrupt.

OK, if we are talking about bank solvency, then perhaps we are better off in some respects. But when it comes down to the usual recession and market issues and impact to the average person because of what has happened, Canada is not really that much better off than anyone else, which is the point I was making.

[Kirkland Laing]

Here's one year charts of the Toronto Stock Exchange and the Toronto Dominion Bank. If this is a big economy least affected, I'd hate to see the worst affected.

A recession and a global financial system meltdown has quite an adverse effect on any stock market index or financial stock so looking at the numbers right now doesn't give you the real picture. The measuring stick is solvency. None of Canada's banks are bankrupt and they haven't needed a bailout to remain solvent either. Despite already having been bailed out with trillions of dollars, major US/European/Asian banks are all bankrupt.

OK, if we are talking about bank solvency, then perhaps we are better off in some respects. But when it comes down to the usual recession and market issues and impact to the average person because of what has happened, Canada is not really that much better off than anyone else, which is the point I was making.

I was kind of hoping your PM would stick to the no stimulus policy so we could have a control experiment in a major economy to compare to countries that had one. Sorry about that. And having a solvent banking system definitely makes you better off. You won't have to raise trillions in taxes over the next few decades to pay for late 2000s losses by your banks unlike other major economies.

[killersheep]

3/3/09

Canada - Interest Rate Statement

Actual0.50%|Forecast0.50%|Previous1.00%

Eight times per year the Bank of Canada (BOC) Governing Council meets to set the nation's short term interest rate (i.e., "overnight rate"). Shortly after the meeting they release a statement that contains the decided rate, a brief commentary of the economic conditions that effected their decision, and most importantly, clues regarding the outcome of future meetings. The decision on where to set interest rates depends mostly on inflation. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates in an attempt to bring prices down. A rising trend in interest rates has a positive effect on the nation's currency. Short term rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. High interest rates attract foreigners looking for the best "risk-free" return on their money, which can dramatically increases demand for the nation's currency.

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Australia - GDP

Actual-|Forecast0.10%|Previous0.10%

Gross Domestic Product (GDP) determines the total worth of all goods and services produced by the economy. GDP is the broadest measure of activity and the primary gauge of the economy's health. To foreign investors, a strong economy is viewed favorably as it spurs investment opportunities in the domestic stock and bond markets. More importantly, the central bank is more likely to raise interest rates in the face of a strong and growing economy. The combination of these effects can have a large impact on the demand for the country's currency. An upward trend has a positive effect on the country's currency.

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USA - Bernanke testifies

Ben Bernake, US federal reserve chairman will be testifying before a house panel regarding America's economic outlook and financial markets.

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EU - Trichet speaks

European Central Bank (ECB) President Jean-Claude Trichet will hold a press conference after the bi-monthly Bank for Intercountryal Settlements (BIS) meeting, in Basel. As head of the ECB's governing body, which is responsible for setting the euro zone's short term interest rate, his speeches can sometimes cause market volatility as Currency traders react to clues regarding future monetary policy.

[Kirkland Laing]

Protecting the taxpayer


Federal Reserve Chairman Ben S. Bernanke acknowledged for the first time that a U.S. recession is possible because homebuilding, employment and consumer spending will deteriorate.........


Bernanke, making his first extensive public comments since the Fed's decisions two weeks ago to back the takeover of Bear Stearns and lower interest rates by 0.75 percentage point, is trying to fend off criticism of the deal while struggling to prevent a deeper economic slump.........

Bernanke, questioned by lawmakers about putting taxpayer money at risk, expressed confidence the Fed won't lose money on the Bear Stearns deal. ``I feel reasonably confident that we'll be able to recover all the principal and indeed some interest, and there is some chance of even upside beyond that,'' Bernanke said.

Ben Bernanke
Fed Chairman
Testimony to Congress
April 2nd, 2008








U.S. taxpayers may be stuck with losses on $30 billion of Bear Stearns Cos. assets owned by the Federal Reserve even though the central bank has said otherwise, according to Robert A. Eisenbeis, Cumberland Associates Inc.’s chief monetary economist. “There is no prospect for a profit on the assets,” Eisenbeis wrote in a report yesterday. “Losses are mounting.”.........



“The transaction was not structured with adequate over- collateralization to protect the taxpayers from losses,” based on the risks associated with housing-related assets at the time, Eisenbeis wrote.
The central bank’s Board of Governors wrote in a Dec. 29 report to Congress that it didn’t expect “any net loss to the Federal Reserve or taxpayers” from the Bear Stearns holdings.



Bloomberg
February 4th 2009


















Federal Reserve Chairman Ben S. Bernanke said American International Group Inc. operated like a hedge fund and having to rescue the insurer made him “more angry” than any other episode during the financial crisis. “If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” Bernanke told lawmakers today. “AIG exploited a huge gap in the regulatory system, there was no oversight of the financial- products division, this was a hedge fund basically that was attached to a large and stable insurance company.”....




AIG is getting as much as $30 billion in new government capital and relaxed terms on its bailout announced yesterday...........


In his testimony, the Fed chief said that policy makers may need to expand aid to the banking system beyond the $700 billion already approved, and take other aggressive measures even at the cost of soaring fiscal deficits......


The insurer’s first bailout package grew to $150 billion last year. After failing to sell enough subsidiaries to repay the government, the company had to turn to the government again. The company may need more support if financial markets don’t improve, the Treasury and Federal Reserve said in a joint statement yesterday.
Bernanke said the revised bailout gives taxpayers “the best chance” of eventually recovering “most or all of the investments” the public has.



Bloomberg
March 3rd, 2009

[killersheep]

3/6/09

UK - PPI Input

Actual0.60%|Forecast0.10%|Previous1.50%

The Producer Price Index (PPI) determines the rate of inflation (i.e., the rate of price changes) experienced by manufacturers when purchasing goods and services. When manufactures pay more for goods and services, they are likely to pass the higher costs to the consumer, so PPI is thought to be a leading indicator of consumer inflation. A rising trend has a positive effect on the nation's currency. PPI is highly regarded, and at extremes will have a market impact equal to that of its CPI counterpart.

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USA - Non-Farm Employment Change

Actual-651.00K|Forecast-636.00K|Previous-598.00K

Determines the change in amount of employed people during the last month, excluding the farming industry. A rising trend has a positive effect on the nation's currency. This report is the first of the month that relates to human resource conditions, making it susceptible to big surprises. Job creation is an important indicator of economic health as consumption, which is highly correlated with human resource conditions, makes up a large portion of GDP.

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USA - Unemployment Rate

Actual8.10%|Forecast7.90%|Previous7.60%

Determines the percentage of total work force that is unemployed and actively seeking employment during the last quarter. A downward trend has a positive effect on the nation's currency as working people tend to spend more money, and consumption makes up a large portion of GDP.