NEW YORK - Wall Street joined in a worldwide cascade of despair Monday over the financial crisis, driving the Dow Jones industrials to their biggest loss ever during a trading day. Even a big afternoon rally failed to keep the Dow from its first close below 10,000 since 2004.
The sell-off came despite the $700 billion U.S. government bailout package, which was signed into law Friday after two weeks in which traders had appeared to count on the rescue as their only hope to avoid a market meltdown.
By JOE BEL BRUNO and TIM PARADIS, AP Business Writers source www.yahoo.com
WASHINGTON - Jobs are vanishing at the fastest pace in more than five years with pink slips likely to keep stacking higher in the months ahead, an urgent signal the country may be careening toward a deep and painful recession just as Americans prepare to elect a new president. Whether that's Democrat Barack Obama or Republican John McCain, one of them will be dealing with the weakest employment climate in years.
Increasingly skittish employers dropped the ax even harder in September, chopping payrolls by 159,000 — more than double the cuts made just one month before. It was the ninth straight month of job losses. A staggering 760,000 jobs have disappeared so far this year.
The Labor Department's report, released Friday, also showed that the nation's unemployment rate was 6.1 percent, up sharply from 4.7 percent a year ago. Over the last year, the number of unemployed people has risen by 2.2 million to 9.5 million.
"Washington, the labor market has a problem," said Joel Naroff, president of Naroff Economic Advisors. "Firms are hunkering down and running as lean as possible. ... We are likely to see more months of job losses before conditions turn around."
The unemployment rate for blacks shot up to 11.4 percent, the highest since late 2003.
Even with Congress' unprecedented $700 billion financial bailout, the faltering economy and the jobs market probably will get worse. Many believe the economy will jolt into reverse later this year — if it hasn't already_ and will stay sickly well into next year.
The unemployment rate could hit 7 or 7.5 percent by late 2009. If that happens, it would mark the highest since after the 1990-91 recession. Some economists say the jobless rate could rise even more before the situation starts to get better.
By JEANNINE AVERSA, AP Economics Writer Sat Oct 4, 12:06 AM ET
It is a very fragile argument.When US Army and USAIF crushing innocent iraqis and muslims with their bombs and chemical weapons,you simply cant say that It is american or nato force not George.w.bush or tony blair or angela merkel because they are not in iraq or afghanistan.you got my point.Everybody knows that all forces come into action with the command of their chief who is answerable to president that is George.W.Bush.similarly President of usa or the enitre parlimant is answerable to the entire nation of United States of America.and becuase all the economies are dependent on USA thats why this financial crisis spread out from america.Thanks for understanding.
i wuld like to post an article which talks about effect of liquidity crunch in the indian market. The author is Nandkumar Surti.Head, Fixed Income JPMorgan AMC India.
Last year the single most important factor that contributed significantly to surplus liquidity in the system was robust FII and capital inflows, which led to appreciation of rupee and thus prompted the RBI to intervene in the forex markets by purchasing dollars and thus releasing rupee liquidity in the system. The RBI has taken various measures such as MSS issuances, increasing cash reserve ratio (CRR) and daily LAF to absorb excess liquidity created through sterilisation operations.
However, in the last few months global liquidity crunch, subprime and credit crisis and heightened global uncertainties have changed global market dynamics in a significant way. These global events have had an indirect impact in the Indian market in the form of reversals in FII and capital flows and have also put pressure on the rupee.
This has prompted the RBI to intervene in the forex market by selling dollars that led to withdrawal of liquidity from the system. Besides this, the increase of CRR to fight the inflation evil has also led to extremely tight liquidity conditions in the market during the last few weeks. Active liquidity management remains the top priority of the RBI and we have seen them taking various measures such as the 150 bps CRR cut and the allowance of banks to use additional 1% of NDTL(Net Demand & Time Liability) for drawing liquidity support under LAF facility.
In our opinion, we might not see huge liquidity pressure in the Indian market as we believe that the RBI will be very proactive in liquidity management. It also has various effective weapons in its arsenal such as lowering CRR (medium-term target of RBI at 3% which means they can cut CRR another 450 bps from the current 7.50% to infuse Rs 1,80,000 crore) and unwinding of MSS (Rs 1,75,000 crore) which can infuse instant liquidity into the system.
Since these are extraordinary circumstances (given the global turmoil and India being indirectly affected by the same), the RBI could also resort to unconventional measures such as subscribing to government debt (monetisation) or cut SLR ratio by 1-2%. We maintain that liquidity is only a temporary issue for India and RBI and government have numerous tools at its disposal to ease the liquidity-led credit crunch.
The surge in inflation to double digits in the last few months was primarily due to rising oil, commodity and metal prices and depreciating dollar especially against euro and pound. Most of these factors have corrected significantly from its all-time high. Oil is currently ruling around $80, the dollar has appreciated significantly against the euro and the pound.
Therefore, inflation devil can touch single digit quicker than anticipated if the above factors continue the downslide. We believe that the RBI can use various policy measures swiftly to address the liquidity crunch without worrying much about inflation. In addition, the recent soft readings of IIP might prompt the RBI to focus on growth rather than only on inflation.
Liquidity can have both favourable and unfavourable impact on the real economy. Excess liquidity can lead to higher money supply which can put pressure on inflation by creating excess demand. It can also lead to higher asset prices and might eventually lead to an asset bubble.
Liquidity crunch, however, can deprive manufacturing, financial companies and other corporates the much-needed credit to meet expansion plans, working capital needs and regulatory requirements, which, in turn, might affect growth and lead to overall slowdown in the economy. Tight liquidity can also lead to higher short-term rates and this can lead to a slowdown of growth. The latest soft IIP reading is attributed to some extent to higher interest rates, which is driven by tight liquidity. Thus, liquidity has to be adequate in the system, supporting growth without fueling inflation.
6 comments:
NEW YORK - Wall Street joined in a worldwide cascade of despair Monday over the financial crisis, driving the Dow Jones industrials to their biggest loss ever during a trading day. Even a big afternoon rally failed to keep the Dow from its first close below 10,000 since 2004.
The sell-off came despite the $700 billion U.S. government bailout package, which was signed into law Friday after two weeks in which traders had appeared to count on the rescue as their only hope to avoid a market meltdown.
By JOE BEL BRUNO and TIM PARADIS, AP Business Writers
source www.yahoo.com
WASHINGTON - Jobs are vanishing at the fastest pace in more than five years with pink slips likely to keep stacking higher in the months ahead, an urgent signal the country may be careening toward a deep and painful recession just as Americans prepare to elect a new president.
Whether that's Democrat Barack Obama or Republican John McCain, one of them will be dealing with the weakest employment climate in years.
Increasingly skittish employers dropped the ax even harder in September, chopping payrolls by 159,000 — more than double the cuts made just one month before. It was the ninth straight month of job losses. A staggering 760,000 jobs have disappeared so far this year.
The Labor Department's report, released Friday, also showed that the nation's unemployment rate was 6.1 percent, up sharply from 4.7 percent a year ago. Over the last year, the number of unemployed people has risen by 2.2 million to 9.5 million.
"Washington, the labor market has a problem," said Joel Naroff, president of Naroff Economic Advisors. "Firms are hunkering down and running as lean as possible. ... We are likely to see more months of job losses before conditions turn around."
The unemployment rate for blacks shot up to 11.4 percent, the highest since late 2003.
Even with Congress' unprecedented $700 billion financial bailout, the faltering economy and the jobs market probably will get worse. Many believe the economy will jolt into reverse later this year — if it hasn't already_ and will stay sickly well into next year.
The unemployment rate could hit 7 or 7.5 percent by late 2009. If that happens, it would mark the highest since after the 1990-91 recession. Some economists say the jobless rate could rise even more before the situation starts to get better.
By JEANNINE AVERSA, AP Economics Writer
Sat Oct 4, 12:06 AM ET
source www.yahoo.com
I want to post my comment in one sentence rather than a speech.Capitalist America become herself the victim of her Economic System.
You cannot blame the entire country for the crisis can you ? there has to be a particular class of people behind this .
It is a very fragile argument.When US Army and USAIF crushing innocent iraqis and muslims with their bombs and chemical weapons,you simply cant say that It is american or nato force not George.w.bush or tony blair or angela merkel because they are not in iraq or afghanistan.you got my point.Everybody knows that all forces come into action with the command of their chief who is answerable to president that is George.W.Bush.similarly President of usa or the enitre parlimant is answerable to the entire nation of United States of America.and becuase all the economies are dependent on USA thats why this financial crisis spread out from america.Thanks for understanding.
i wuld like to post an article which talks about effect of liquidity crunch in the indian market. The author is Nandkumar Surti.Head, Fixed Income JPMorgan AMC India.
Last year the single most important factor that contributed significantly to surplus liquidity in the system was robust FII and capital inflows, which led to appreciation of rupee and thus prompted the RBI to intervene in the forex markets by purchasing dollars and thus releasing rupee liquidity in the system. The RBI has taken various measures such as MSS issuances, increasing cash reserve ratio (CRR) and daily LAF to absorb excess liquidity created through sterilisation operations.
However, in the last few months global liquidity crunch, subprime and credit crisis and heightened global uncertainties have changed global market dynamics in a significant way. These global events have had an indirect impact in the Indian market in the form of reversals in FII and capital flows and have also put pressure on the rupee.
This has prompted the RBI to intervene in the forex market by selling dollars that led to withdrawal of liquidity from the system. Besides this, the increase of CRR to fight the inflation evil has also led to extremely tight liquidity conditions in the market during the last few weeks. Active liquidity management remains the top priority of the RBI and we have seen them taking various measures such as the 150 bps CRR cut and the allowance of banks to use additional 1% of NDTL(Net Demand & Time Liability) for drawing liquidity support under LAF facility.
In our opinion, we might not see huge liquidity pressure in the Indian market as we believe that the RBI will be very proactive in liquidity management. It also has various effective weapons in its arsenal such as lowering CRR (medium-term target of RBI at 3% which means they can cut CRR another 450 bps from the current 7.50% to infuse Rs 1,80,000 crore) and unwinding of MSS (Rs 1,75,000 crore) which can infuse instant liquidity into the system.
Since these are extraordinary circumstances (given the global turmoil and India being indirectly affected by the same), the RBI could also resort to unconventional measures such as subscribing to government debt (monetisation) or cut SLR ratio by 1-2%. We maintain that liquidity is only a temporary issue for India and RBI and government have numerous tools at its disposal to ease the liquidity-led credit crunch.
The surge in inflation to double digits in the last few months was primarily due to rising oil, commodity and metal prices and depreciating dollar especially against euro and pound. Most of these factors have corrected significantly from its all-time high. Oil is currently ruling around $80, the dollar has appreciated significantly against the euro and the pound.
Therefore, inflation devil can touch single digit quicker than anticipated if the above factors continue the downslide. We believe that the RBI can use various policy measures swiftly to address the liquidity crunch without worrying much about inflation. In addition, the recent soft readings of IIP might prompt the RBI to focus on growth rather than only on inflation.
Liquidity can have both favourable and unfavourable impact on the real economy. Excess liquidity can lead to higher money supply which can put pressure on inflation by creating excess demand. It can also lead to higher asset prices and might eventually lead to an asset bubble.
Liquidity crunch, however, can deprive manufacturing, financial companies and other corporates the much-needed credit to meet expansion plans, working capital needs and regulatory requirements, which, in turn, might affect growth and lead to overall slowdown in the economy. Tight liquidity can also lead to higher short-term rates and this can lead to a slowdown of growth. The latest soft IIP reading is attributed to some extent to higher interest rates, which is driven by tight liquidity. Thus, liquidity has to be adequate in the system, supporting growth without fueling inflation.
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