Global consensus on interest rates?
Wise Money is not sure if its just wishful thinking but opinion appears to be growing that some sort of fledgling agreement to co-ordinate a Global-wide cut in interest rates was hatched at last week's meeting in Sao Paolo.
If this is correct then expect to see an announcement as part of the G20 Heads of State communique at the close of this weekend's summit in Washington and lower interest rates all round come next week.
Not sure if the gradual acceptance of this possible development was the sole reason for the massive turn round in Wall Street's fortunes last night but the bounce in US share prices was massive (DJIA up 6.67% and NASDAQ up 6.5%) and a positive impact on other stock markets has been/is being seen.
As I mentioned before, the problem is that monetary policy tinkering (albeit with a capital T) will not work on its own.
In order for the stagnant global economies to benefit from lower rates, we need to see adjustments to fiscal policy plus a return of confidence to the Financial Markets and here is where the problem lies.
The big player at the table is the US of course, who are presently in a complete fiscal mess. While Congress are keen to pass through a large fiscal stimulus package, there is considerable doubt as to whether George Bush will sign it.
The second biggest player is the Eurozone who have no mechanism for the harmonisation fiscal policy and it is obvious to all that there is considerable discord amongst members as to the desirability of any immediate stimulus.
Japan, the third largest in the group, has no scope for any sizeable fiscal adjustment as its debt ratio is far too large for it to be able to push anything meaningful through. In other words it looks very unlikely that any sort of agreement on fiscal stimulus will be reached this weekend and as such, the kick-start will sputter along for a while yet.
It is interesting that the focus of Paulson's bail-out plan for the US banking system has shifted dramatically with concern centred suddenly on consumer demand rather than the Banks' huge portfolios of toxic assets and the fund being used to invest in Financial Institutions rather than just buying toxic assets from them.
This, I suppose, is about as close as we are going to get to a cash injection into the US economy as we are going to get ahead of the change in the US administration in January.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
If this is correct then expect to see an announcement as part of the G20 Heads of State communique at the close of this weekend's summit in Washington and lower interest rates all round come next week.
Not sure if the gradual acceptance of this possible development was the sole reason for the massive turn round in Wall Street's fortunes last night but the bounce in US share prices was massive (DJIA up 6.67% and NASDAQ up 6.5%) and a positive impact on other stock markets has been/is being seen.
As I mentioned before, the problem is that monetary policy tinkering (albeit with a capital T) will not work on its own.
In order for the stagnant global economies to benefit from lower rates, we need to see adjustments to fiscal policy plus a return of confidence to the Financial Markets and here is where the problem lies.
The big player at the table is the US of course, who are presently in a complete fiscal mess. While Congress are keen to pass through a large fiscal stimulus package, there is considerable doubt as to whether George Bush will sign it.
The second biggest player is the Eurozone who have no mechanism for the harmonisation fiscal policy and it is obvious to all that there is considerable discord amongst members as to the desirability of any immediate stimulus.
Japan, the third largest in the group, has no scope for any sizeable fiscal adjustment as its debt ratio is far too large for it to be able to push anything meaningful through. In other words it looks very unlikely that any sort of agreement on fiscal stimulus will be reached this weekend and as such, the kick-start will sputter along for a while yet.
It is interesting that the focus of Paulson's bail-out plan for the US banking system has shifted dramatically with concern centred suddenly on consumer demand rather than the Banks' huge portfolios of toxic assets and the fund being used to invest in Financial Institutions rather than just buying toxic assets from them.
This, I suppose, is about as close as we are going to get to a cash injection into the US economy as we are going to get ahead of the change in the US administration in January.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Labels: house price falls, interest rates, stock market falls, wise money
posted by Dr Search- Principal Consultant at the Search Clinic @ 10:33 AM
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