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Market turmol « Previous | |Next »
August 17, 2007

A turbulent day say the finance commentators about the volatility of global finance markets and as they work to try to reassure everybody that their company is not caught up in the repricing of credit that is taking place due to the fallout from the US sub-prime market.

MoirQCC.jpg
Alan Moir

The bottom line is that credit is now more expensive, the hedge funds dump the Australian dollar to finance their loans, and borrowing money is going to become more expensive for both businesses and households.This is no Beltway issue. It is another blow for Howard's battlers.

It was no suprise that John Howard and and Peter Costello quickly seized on the global financial market turmoil to bolster their economic credentials and warn voters of the risks of changing government. As if the Howard Government controls the re-pricing of credit. Financial instability highlighted the need to keep economic management in safe hands was their message.

| Posted by Gary Sauer-Thompson at 5:57 AM | | Comments (3)
Comments

Comments

Gary,
it is only the non-bank lenders (eg.,RAMS) who should be affected by the higher prices for credit. From what I've read RAMs borrowed short to lend long. So they are going to pay big increases--1% to 3% to get new credit.

Nan,
RAMS has a flawed finance strategy then. I understand that they had been due to refinance more than $6 billion on Wednesday but they had been unable to do so. Or rather they couldn't refinance around 40% of its mortgage portfolio, (some $6 billion of short term loans).

But why would the Commonwealth Bank and Aussie Home Loans signal an interest rate rise? They are not borrowing short to lend long. Nor are they exposed to the slumping US housing market. How is the global credit crunch effecting them?

Some institutions are taking a hammering. As Mathew Stevens in The Australian says:

Three months ago, Macquarie was leading the race to be the first $100 stock in this market. Over the past three weeks, the price has retreated more than 30 per cent and yesterday the stock closed down 4 per cent at $64. Macquarie mini-me Babcock & Brown has fared worse over the past three weeks, with its value being trimmed nearly 45 per cent to $19.81. David Coe's Allco Finance has surrendered 35 per cent of its value over that same period.

And they--the market pundits---are calling that an overdue, even healthy correction? Looks more like a meltdown to me.

Market pundits are going on about the strength of the US economy despite the double deficit.


I find this quite a good site to rss
http://www.dailyreckoning.com.au/