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World risks fresh credit bubble, BIS warns - (www.telegraph.co.uk) Asset prices across the world
have risen to heady levels not seen since the credit boom five years ago and
may be losing touch with economic reality yet again, the Bank for International
Settlements has warned. “Some asset prices appeared highly valued in a
historical context relative to indicators of their riskiness,” said the bank in
its quarterly report. Yields on morgtage bonds have fallen to the lowest level
ever recorded. Spreads on corporate debt have narrowed to the wafer thin
margins of 2007, even though default rates are currently three times higher
than they were then for junk bonds and twice as high for investment-grade
companies. The venerable Swiss-based institution – almost alone in warning of a
global debt crisis in the build-up to the
Great Recession – said it is rare for markets to gather steam at a time when
the major forecasters are turning gloomy.
Consumer sentiment nose-dives in December - (www.marketwatch.com) Consumer sentiment took a
giant step back in December, as the looming fiscal cliff made its first
measurable dent on the public’s psyche. The preliminary University of
Michigan-Thomson Reuters consumer sentiment index fell to 74.5 from 82.7 in
November. That’s far below the 82.0 expected in a MarketWatch-compiled
economist poll, eliminating four months of gains and also representing the
biggest one-month drop since March 2011. The report took some of the shine off
a better-than-expected jobs report in November, as U.S. stocks pared their
gains.
2 million could lose unemployment benefits this month - (www.washingtonpost.com) Hovering in the background of
the “fiscal cliff” debate is the prospect of 2 million people losing their
unemployment benefits four days after Christmas. “This is the real cliff,” said
Sen. Jack Reed, D-R.I. He’s been leading the effort to include another
extension of benefits for the long-term unemployed in any deal to avert looming
tax increases and massive spending cuts in January. “Many of these people are struggling to pay
mortgages, to provide education for their children,” Reed said this past week
as President Barack Obama and House Speaker John Boehner, R-Ohio, rejected each
other’s opening offers for a deficit deal.
The Icelandic success story - (www.azizonomics.com) Iceland went after the people
who caused the crisis — the bankers who created and sold the junk
products — and tried to shield the general population. But what Iceland did is
not just emotionally satisfying. Iceland is recovering, while the rest of the
Western world — which bailed out the bankers and left the general population to
pay for the bankers’ excess — is not. Bloomberg reports:
Few
countries blew up more spectacularly than Iceland in the 2008 financial crisis.
The local stock market plunged 90 percent; unemployment rose ninefold;
inflation shot to more than 18 percent; the country’s biggest banks all failed.
This was no post-Lehman Brothers recession: It was a depression. Since then,
Iceland has turned in a pretty impressive performance. It has repaid
International Monetary Fund rescue loans ahead of schedule. Growth this year
will be about 2.5 percent, better than most developed economies. Unemployment
has fallen by half. In February, Fitch
Ratings restored the country’s investment-grade status,
approvingly citing its “unorthodox crisis policy response.”
Big
banks halt evictions for the holidays - (www.americanbanker.com) Some of the nation's biggest
lenders will suspend foreclosure activity to help borrowers remain in their
homes for the holidays. Wells Fargo (WFC), U.S. Bancorp (USB), PNC Financial
Services Group (PNC), Bank of America (BCA), SunTrust (STI) and Citigroup (C)
all said this week they plan to halt until after New Year's evictions of
borrowers whose homes have been foreclosed on for loans the banks' own. U.S.
Bank, PNC and Citigroup will offer the moratorium from Dec. 17 through Jan. 2.
Wells Fargo and SunTrust will start their suspensions two days later. Wells
Fargo and U.S. Bank will halt evictions and hold off on foreclosure sales
nationwide, according to spokespeople for both banks, while PNC says it will
suspend evictions.
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