It was about ten to midnight and I got this odd feeling as I was going through the rss feeds. Just reading the snippets of news and blogs and so on. Then I came across this from Roar Prawn about bad agricultural news (esp. Fonterra as turns out). And I felt compelled, before I had read it to go straight to the exchange rate because I had this odd feeling.The US dollar and the Yen were all spiking down seriously in the last few hours. We have an interest rate announcement from the Reserve bank on Thursday, so it may be factoring in a big rate cut, or it may be reaction to the nation's bad economic outlooks. We are vulnerable at this point structurally, balance of payments-wise (we have been for some time), and we seem to have been kept afloat in large part because our big trading partners, Australia and China, have not gone into recession... yet. the Economist is all gloom.
Prices are collapsing as demand contracts in wake of the credit implosion which was created by the banks when they had to own-up to not having any money. Which was incredibly embarrassing for all involved and resulted in the partial loss of some executive bonuses not already paid out, the complete destruction of orthodox market theory as they knew it, cataclysmic economic and monetary realignments and the continued popularity of self-help books.
*** DON'T PANIC ***
[end Hitchhikers Guide to the Galaxy narration].
Maybe we just had another credit downgrade?
Reading the article from agridata I copy and paste a graph of the falling wool price from their site - a reflection of the other falling commodity prices affecting producers other than Fonterra shareholders. Earlier in the week from an NBR story:
We share the economic stresses of the world with the notable exception that our major retail banks have weathered the crisis so far. I note Slate saying today that "Washington Post leads with word that Congress is likely to give the Federal Reserve broad new powers so that it can regulate the nation's entire financial system. The move would allow the Fed to demand information from a wide range of companies to make sure no one is taking on excessive risk that could imperil the financial system." I've posted before on my suspicion that many of these last minute mergers in the finance sector were dodgy:
I suspect that some mergers occuring recently may have been methods of disguising both firms' bad books - it buys them some breathing space, it means they can reward each other with bonuses for a successful merger, and they have a better argument that they are a salvageable pillar like AIG, rather than an expendable side-show like Lehman Bros. when it comes to the Treasury Secretary's cheque book - and I'm talking about the UK here too.
Economist reporting on Bank of America's deal to buy Merrill Lynch. Heads are now rolling as the problems are revealed.
Dim Post has a graph of the baseless capitalisations of some of the the world's big banks.