Category: WorldEconomy

Lagarde woos Saudis, says debt top IMF target for her | Reuters

French Finance Minister and IMF candidate Christine Lagarde said on Saturday tackling sovereign debt troubles would be a priority of the International Monetary Fund if she led the Washington-based rescue lender.  Lagarde, competing with Mexican central bank chief Agustin Carstens, was in Saudi Arabia as part of a world tour where she needs to drum up support among emerging market economies for her IMF candidacy.

South Africa’s Trevor Manuel ruled himself out of the race for the IMF’s top job on Friday, making Lagarde an even firmer favourite, although she remains under threat of a judicial inquiry in her home country. Lagarde is backed by the European Union and a handful of smaller countries from Georgia to Mauritius. Paris is hopeful that Washington and Beijing will also stand behind her.

Brazil, Latin America’s biggest economy is leaning towards supporting Lagarde but has not yet made up its mind, officials said on Friday. Lagarde said that the IMF should also support countries affected by the pro-democracy protest movement sweeping North Africa and the Middle East.

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RALLY IN COMMODITES

Lateral Thinking | 05/04/2011

The BOJ ( Central Bank of Japan ) answered the question that nobody does. What is causing the rally in Commodities :

“While the strong increase in commodity prices has been driven by global economic growth propelled by emerging economies, speculative investment flows into commodity markets have amplified the intensity of the price surge. The dynamics of global commodity prices has been changing as well, in accordance with the growing presence of financial investors in commodity markets. The entry of new financial investors has paved the way for the “financialization of commodities”. Consequently, global commodity markets have become more sensitive to portfolio rebalancing by financial investors, which has made commodity markets more correlated with other asset markets, including major equity markets. Furthermore, globally accommodative monetary conditions have played an important role in the surge in commodity prices, both by stimulating physical demand for commodities and driving more investment flows into financialized commodity markets.”

So thank you Mr. Bernanke for such a wonderful job !!!

Oil Prices Hit Post-Crisis Peak Levels

Article first published as Oil Prices Hit Post-Crisis Peak Levels on Technorati.

Oil prices are at its peak for the first time after the worst financial crisis since the great depression in1930s that erupted in September 2008 worldwide. Peak levels have been reached on both sides of the Atlantic Ocean i.e. in North America and Europe.

In Europe, Brent crude futures hit $91.58 per barrel while West Texas Intermediate in the US touched $89.35 per barrel, both being highest levels since the financial crisis of September 2008. However, these levels are well below the pre-crisis peak levels. Prior to the financial crisis, due to speculative bubble in House building sector, all commodities prices along with crude price were flying high in the sky. Brent Crude price was pushed up to $147.50 per barrel. oil prices

Factors of Crude Rally

There are several reasons that drove crude price to its peak level. Primary factors have been:

The relatively rising demand due to global recovery though not equalled with pre-crisis demand: This is a long-term factor assuming that a double dip does not occur. The US spent $1.7 trillion as part of “Quantitative Easing 1” that extended unemployment benefits, reduced tax rates for both corporates and consumers and increased liquidity in the market and absorbed toxic mortgage housing loans that became biggest impediment for post-crisis growth of the economy. In addition to this, the US government announced QE2 programme i.e. second stimulus programme in November to buy treasury bonds thereby releasing more printed dollars into the economy. Reports are coming that the Fed is thinking of increasing QE2 money, originally set at $600 billion. If that happens, prices of all commodities including crude oil will increase further.

Cold weather in Europe: This is a short-term factor, which will last up to the end of winter season. All European countries are shivering with cold weather spread across Europe continent. Cold weather increases the consumption of fuel, which in turn increases fuel prices as demand increases.

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Basel III to ease in new bank liquidity rules

Reuters | Oct 19, 2010 | 7:28pm IST

Global banking supervisors agreed on Tuesday to phase in the introduction of a key new global standard on lenders’ minimum short-term funding cover, handing further relief to a sector facing a hefty funding gap. The Basel Committee of banking supervisors and central bankers from 27 countries met on Tuesday in South Korea, which is hosting the Group of 20 leading countries that had called for tougher capital and liquidity requirements in response to the financial crisis.

Bank for International Settlements The committee had already agreed to a soft phase-in for its net stable funding ratio, which covers a bank’s longer-term liquidity. That measure will be tested from 2012 and become mandatory in January 2018. On Tuesday, the committee said it would also phase in over time its liquidity coverage ratio (LCR), which will require a bank to hold enough highly liquid assets to cover 30 days of net cash outflows. The LCR observation period will start next year and the rule will become a minimum global standard in January 2015.

"There are elements of these ratios which we will study during this observation period because these requirements are brand new – that’s the reason for this change," the Chairman of the Basel Committee on Banking Supervision Nout Wellink told a news conference in Seoul.

RELIEF FOR BANKS

While a phase-in of the LCR had been expected, bankers welcomed confirmation of the delay. "The liquidity ratio and net stable funding ratio are some of the most difficult areas as international practices differ," said Pat Newberry, chair of the UK financial services practice at PWC. "Giving themselves time to look and think carefully has to be a sensible move. If you tighten up liquidity regimes, what does that do to lending volumes? It’s much more difficult to forecast than with capital," Newberry said.

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World economy to slow, rely on emerging Asia

Reuters | Oct 14, 2010 | 8:18pm IST

The world economy is set to rely even more heavily on booming emerging markets like China and India next year, as recovery in rich nations from the worst financial crisis in generations, plods on, Reuters polls showed. The consensus from more than 500 economists polled across the Group of Seven industrialised nations and Asia found them less optimistic about recovery in the U.S., but forecasting robust growth in China and India next year.

world-economy Global GDP is expected to grow by a robust 4.6 percent this year from a consensus of 4.2 percent just three months ago, driven by emerging markets, but will then slow to 4.0 percent in 2011, according to the poll. A series of policy tightening moves and interest rate hikes in those fast-growing economies stands in stark contrast to unanimous expectations that the Federal Reserve is about to embark on a new round of asset purchases.

The Reuters consensus is now for a new round of quantitative easing (QE), starting in November and worth $500 billion, an attempt to reinvigorate a recovery that has quickly wilted leaving U.S. unemployment close to 10 percent. Expectations have also risen that the Bank of England will start a new round of asset purchases very soon, with analysts polled now split evenly over whether it will vastly expand its balance sheet.

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Hunger index shows one billion without enough food

BBC News | 11 October 2010 | 09:25 GMT

One billion people in the world were undernourished in 2009, according to a new report. The 2010 Global Hunger Index shows that child malnutrition is the biggest cause of hunger worldwide, accounting for almost half of those affected. Countries in sub-Saharan Africa and South Asia were shown to have the highest levels of hunger.

child undernutrition The report’s authors called on nations to tackle child malnutrition in order to reduce global hunger. The Global Hunger Index is produced by the International Food Policy Research Institute (IFPRI), Welthungerhilfe and Concern Worldwide. The UN Food and Agriculture Organization (FAO) defines hunger as the consumption of fewer than 1,800 kilocalories a day – the minimum required to live a healthy and productive life.

Despite the number of undernourished people in the world falling between 1990 and 2006, the report’s authors say in that number has crept up in recent years, with the data from 2009 showing more than one billion hungry people. The most recent figures from 2010 suggest the number may again be falling but this data is not yet complete.

The Global Health Index (GHI) is calculated for 122 developing and transition countries. Twenty-nine countries – mostly in sub-Saharan Africa and South Asia – have levels of hunger described as "extremely alarming" or "alarming".

The GHI shows hunger increasing in nine countries; North Korea and eight sub-Saharan African nations. The Democratic Republic of Congo saw the biggest increase; GHI rose by more than 65%. The scores are based on the proportion of people who are calorie deficient, the proportion of children under five who are underweight and the child mortality rate. The global food price crisis and the worldwide recession have contributed to the recent rise, says the report.

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Sluggish recovery to linger into 2011 – IMF’s Lipsky

Reuters | Sep 28, 2010 | 7:11pm IST

John Lipsky, IMF 1st Dep Director The slowdown in the global economic recovery is likely to persist into early 2011 and growth is set to fall short of IMF forecasts for the second half of this year, a senior IMF official said in a speech published on Tuesday.

"The global expansion likely will fall somewhat short of the 3.7 percent annual rate that we had anticipated previously for the second half of this year," IMF First Deputy Managing Director John Lipsky told the Depository Trust and Clearance Corporation Executive Forum on Monday.

Global growth reached an annual rate of 4.7 percent in the first half of the year, he said.

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