At one level, the pursuit of higher and more robust capital requirements for banks is not going well. The US Treasury insisted, throughout the year-long financial reform debate, that capital should be the focus – increasing the loss-absorbing buffers that banks must carry – and that they (and other regulators) needed to negotiate this is through the Basel Committee process.
Asian Market Snapshot: Stocks Struggle on Poor Showing from U.S. Indices and Japanese Unemployment Numbers
Stocks experienced losses throughout Asia as investors exhibited concern about the prospects of the global economy. Investor apprehension stemmed from news coming from the United States and Japan. In the United States, the Dow, NASDAQ and S&P 500 finished down on Thursday. Even though several companies reported profits that exceeded expectations, it was not enough to spur investors’ waning optimism. Jobless claims also fell in the U.S.; however, this did not stop the slide for U.S. equities. (See Critical Issue: U.S. Market Snapshot: Stocks Fall on Fading Optimism About Economic Health).
Latin America Market Snapshot: Bovespa Maintains Winning Streak While Rest of Markets Show Mild Losses
July 29 Market Snapshot:
The Bovespa kept up with its longest winning streak since 2003, while the rest of Latin American markets, affected by Wall Street and a less-than-optimistic view of the U.S. economic recovery, ended mostly with mild losses.
According to Ralph Atkins, writing in the Financial Times:
“Eurozone mortgage borrowing grew last month at the fastest pace in almost two years in a sign that bank lending across the 16-country region may be flickering back to life. Lending for house purchases rose at an annual rate of 3.4 per cent in June – the fastest since September 2008, according to European Central Bank data published on Tuesday. The acceleration pointed to a revival in consumer confidence and an increased willingness by banks to fuel the economic recovery with loans to the private sector.”
Consumer confidence: that extremely coincident, but often cited as leading consumer spending, indicator of really just jobs growth during recovery has struck again, down near four points to 50.4 in July.
Summary: As described in the first post of this series, Hidden truths about the state of the US economy, we can no longer make reliable forecasts for the US economy. We’ve sailed off the map, as the post-WWII era has ended. But we can describe likely scenarios. This describes a grim one. The next chapter is Some thoughts on the political implications of a long recession.
On July 28, the Federal Reserve released its Beige Book, a compilation of anecdotal evidence that describes the current state of the economy. The latest Beige Book’s tone is consistent with data signaling an easing of the recovery. In June, each Federal Reserve district reported gains in activity, but the reports weren’t as rosy in July: Two districts reported no increase in activity while two others reported decreases in activity. Districts that did experience increases in activity indicated that gains were “modest.” (See RGE Critical Issue: “U.S. GDP Growth: Beige Book Consistent With H2 Slowdown“).
Mortgage Originators Everywhere Seeing Red As Freddie 30 Year Mortgage Hits Fresh All Time Low Of 4.54%
The Fed came, saw, and conquered the mortgage market. The 30 year Freddie fixed just dropped another 2 bps from the prior week to 4.54%, a fresh all time low, and more billions in margins chopped off from the profit line of mortgage originators everywhere, now that the Fed and Pimco are the only two entities remaining in the mortgage market, even as consumer cash flows are under more pressure than ever confirming that in this bizarro market just as one wants to buy, the right button to push is sell and vice versa.
…Double-dip downturns are more the rule than the exception. If we focus on real GDP and define a double dip as a historical sequence in which a period long enough to be declared a recession is followed by a period of recovery, and then quickly followed by a second outright recession, the 1980-1982 period in the US is a classic example. In fact, defined more loosely as a sequence that includes periods of growth followed by periods of decline, followed by further periods of growth and decline, the 1973-1975 period in the US, with eight quarters of alternating gains and losses in real GDP, was one quadruple-dip recession.