GENEVA, SWITZERLAND – Credit ratings agency Moody’s announced 13 July that it will review the US debt rating, since the country is not yet making significant progress on resolving the budget and debt ceiling crisis that could lead to a US default 2 August if not resolved soon. The announcement was followed a few hours later by President Barack Obama walking out of heated talks between Republicans and Democrats. It also prompted the head of the US Federal Reserve, Ben Bernanke, to say that a default would constitute a major crisis that would send ripples through the financial world.
“The review of the US government’s bond rating is prompted by the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes. As such, there is a small but rising risk of a short-lived default.
“Moody’s considers the probability of a default on interest payments to be low but no longer to be de minimis. An actual default, regardless of duration, would fundamentally alter Moody’s assessment of the timeliness of future payments, and a Aaa rating would likely no longer be appropriate. However, because this type of default is expected to be short-lived, and the expected loss to holders of Treasury bonds would be minimal or non-existent, the rating would most likely be downgraded to somewhere in the Aa range.”
Links to other sites: BBC, Financial Times, Moody‘s, Washington Post
The UN’s world-food price index rose to 231 in January, a 3.4 percent increase over December and a record highest level since the Food and Agriculture Organization (FAO) began tracking prices. This is the seventh consecutive monthly record-breaking rise, showing a continuing trend that is particularly worrisome for poorer countries that must import much of their food and poor households where a large percentage of the family budget goes to food.
The January increases are due mainly to rising corn and wheat prices worldwide, which nevertheless fall short of a high for cereals in 2008, while meat prices remained stable and rice prices decreased slightlty, a seasonal factor because of harvests in some countries in recent weeks.
US Federal Reserve Chairman Ben Bernanke told journalists at a press conference in Washington Thursday 3 February that the increases are due to rapid growth in developing countries and not to the Fed’s currency management policies.
Links to other sites: Al Jazeera, Mail & Guardian, S Africa, MSNBC, Telegraph, UK
The US currency was at a 15-year low against the Japanese yen, never-before-seen lows against the Swiss franc and an 11-month low against the Euro as markets waited for a sign of the direction the US central bank, the Federal Reserve, would take. Ben Bernanke, its chairman, is to give a speech at the Boston Fed later 15 October.
The Fed had previously indicated it might resume “quantitive easing”, the buying of government and corporate bonds to keep interest rates low, in an effort to kick-start a faltering US economy, one which is not creating the jobs it needs, crimping consumers’ spending.
Li Xiangyang, an influential Chinese academic cited by Reuters has pointed out that the massive creation of money is likely to stoke inflation, allowing the US government to inflate its way out of its debts.
Links to other sites: Bloomberg, Reuters, Romandie News,
The US Federal Reserve said Wednesday 16 December that the US economy is improving, and in the hours that followed the US dollar gained against most other major currencies. It was up 0.9 percent against the euro, a three-month high. The Fed said it wants to keep interest rates “extremely low” but that figures on jobs and consumer spending are showing positive signs.
Links to other sites: Bloomberg, Financial Times, Time Magazine
Ben Bernanke, chairman of the US central bank the Federal Reserve, said 15 September that the recession in the US was probably technically over, but that unemployment would continue to undermine any recovery. A recession is officially no or negative economic growth for two consecutive quarters. Latest data about US employment indicates that the unemployment rate is at its highest since 1983, at 9.7 percent. US consumer confidence was up significantly, according to a survey published 15 September by Investor’s Business Daily/Technometrica market Intelligence. BBC, Reuters
Oil prices rose to their highest since October 2008 in trading 24 August. A barrel of light sweet crude oil trading on the NY Mercantile Exchange (Nymex) for October delivery touched $74.81 before closing at $74.37. Traders give several reasons, chief among them the continuing demand for oil from China, which has seen a massive expansion in the number of automobiles on the road. Oil output from the Middle East, especially Saudi Arabia is steady, and the onset of the hurricane season in the North Atlantic adds to supply worries. Increased optimism about the economy is driving the price of commodities higher, too. US Federal Reserve Chairman Ben Bernanke was cautiously optimistic about the US economy last week and said that it was nearing recovery.
Others are not so optimistic. Nouriel Roubini, a NY University professor who accurately predicted the world financial melt-down, says that growth could be anemic for several years in the major economies. He says that commodity prices are running ahead of fundamentals and sees signs of speculation in those markets. BBC, Reuters, Romandie News (Fre)
