Between ” default ” and the crisis

crisis The compromise between Democrats and Republicans saved the U.S. from a technical default. But the problems of the first days of August have not been in vain. Their outcome was downgrading the U.S., to develop markets “swing” around the world and was forced to recall the word “recession.”

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” Antidefoltnye ” vote in the House of Representatives and Senate of the U.S. Congress August 1 and 2 for a while giving hope that the U.S. economy, and behind her- and with global markets- it will let not quite good, but at least normal. Already the first reports that the congressmen agreed, led to the growth of quotations on the stock exchanges. However, in the following days are still visible exchange instability- the situation is not the sword of Damocles hanging too friendly forecasts rating agencies.

It is expected out of the not very clear sky erupted on Friday, August 5. On this day, Standard u0026 Poor’s for the first time on record downgraded the sovereign rating of the U.S. with the highest rated AAA to AA + with a negative outlook. Initially, the agency proposed to reduce the 10-year term budgetary spending 4-4.5 trillion U.S. dollars, and not to those around 2.5 trillion, which came together in the end Democrats with Republicans because its decision S u0026 P explained satisfactory from their point result of ” antidefoltnyh ” negotiations- the debt ceiling is raised, reducing costs not planned on this scale, and announced austerity measures from the point of view of experts while not seem very convincing.

Guide U.S. downgrade expected not pleased. The President was optimistic : “Markets will rise and fall, but it is the United States of America. Matter what some agency may say, we have always been and will always be a country with a triple A rating,”- but Treasury officials were sharper and accused S u0026 ; P in error in the calculations. But the agency warned in advance if need be, the rating will be lowered even more. ” A further downgrade could follow if the financial situation of the United States will continue to worsen or exacerbate political differences,”- said the managing director of Standard u0026 Poor’s John Chambers. Meanwhile, Barack Obama’s remark about market fluctuations actively embodied in the life : August 8 and 9 Exchange collapsed, and by the evening of the 9th and the first half of the 10th began to regain lost.

First working days after Friday sensation from S u0026 P were the apotheosis of exchange chaos. Securities prices fell rapidly, not only in the U.S. but also in Europe and Asia. Sensitive to foreign issues were also Russian and Ukrainian markets. Ukrainian and all showed “achievements” of the unknown in the West- if there have been falling in the 5-6 per cent, the index ” Ukrainian Exchange ” lost 8-10 percent… and remained an unstable situation in Europe. But there to global fluctuations, which still problems associated with the U.S. credit rating and the desire of investors to quickly minimize the risks (while stock prices fell and oil became cheaper, solid leap forward- to a historic high- made ??of gold, ” in passing ” strengthened and traditionally stable currency like Japanese yen and the Swiss franc) were added and internal problems. Another notable difficulty eurozone in August became the default risk in Italy and Spain, about which experts fear : if they do not have to repeat the Greek way. Saturated ” okoloekonomicheskimi ” events early in the week gave impetus to the international community activity. ” Over the coming weeks we will maintain close contact in order to ensure financial stability and liquidity of the markets “,- this statement was made ??senior financiers from Big Twenty.

stabilization or crisis ? {2

} During rescue operations took on both sides of the Atlantic. In Europe as a pledge of stability by the European Central Bank. To save the old world from a new round of ” debt ” crisis regulator has entered the market and took power repurchase bonds in Italy and Spain. The first result of such measures affected rather quickly- in the first days of the yield of these securities fell, but still remained above 5 percent. Experts also believe that the two states enjoy while early. “It (the ECB action- ” Details “) will only work if the yield of Italian bonds drops below 5 % and will remain at those elevations, while in September the country can raise funds at reasonable rates,”- said HSBC analyst Steven Major. But in general, the experts of the same situation in Italy is not too optimistic estimate : even if interest rates fall (and therefore debt service for Rome would be less costly), slow growth of the Italian economy deprives the fiscal position of the desired safety margin.

By the way, the problem unfolded the U.S. stock market is also largely due to the uncertain situation with credit commitments already in Washington. Before the downgrade U.S. bonds Goskaznachestva considered the safest investment, but after solutionAbout S u0026 P worried investors : Do not lose the former guarantor of stability in sustainability. Ninth of August Rush on overseas stock exchange began to subside- markets awaited the results of the meeting of the Federal Open Market Committee, held by the Federal Reserve. Amerkiansky regulator had to voice their opinions on how to go on living conditions in the proposed compromise by Congress, the fall rating and stock market volatility.

The final statement of Fed Chairman Ben Bernanke has spurred the growth of stock prices. The main news was the promise to keep the current low base rate (from zero to 0.25 percent). Keep rates ” extremely low ” while the Fed is going to the summer of 2013. Besides Bernanke warned that it is considering ” the use of additional tools ” to rescue the economy from what is now called the ” second wave of the crisis.”

The most expected ” additional tool ” looks set to remain the third round of “quantitative easing “- serious Fed exits the market in which the regulator bought assets, saturating the economy with dollars. The first such ” set ” in 2008 is considered to be relatively successful- some manifestations of the first wave of the crisis was extinguished, the second- not too. ” Feds ” poured trillions of dollars, but seriously spur growth and it failed. ” The national debt increased by 5.1 trillion, real GDP- less than 1%, more than 7 million people are unemployed, and the average time without it rose from 17 to almost 40 weeks… The money went to purchase bad assets, bank bailouts and companies. They did not go to consumers who have lost their jobs, homes and mortgages “- quoted by ” Vedomosti ” word critique of politics Ron Paul Bernanke- Chairman of the Monetary Policy Subcommittee of the House of representatives. Disapprove hypothetical steps the Fed experts remind that under conditions of slow economic growth this format monetary regulation could spur inflation. On the other hand, a depreciation of the dollar will ease debt problems the U.S.- debt payments cheaper.

At the same time, the U.S. descent down the rating ladder, considered less dangerous problem than not too inspiring economic indicators. Economists insistently discuss the risk of a new crisis, spreading except in estimates where it will be worse- in the States or in Europe. The desire to overcome the debts can lead to market leading economies adjust request tougher markets; but in such circumstances to ensure stable economic growth, rather than try to maintain a balance- is very difficult. ” The increase in taxes and cuts in public spending- the necessary measures, but also, and more harm to the economy,”- says the former head of the U.S. Federal Reserve, Alan Greenspan. There are other recipes strengthen the position of American businesses- the same Republicans defend the need to tighten policy savings, including
social programs, but to avoid strengthening the tax burden, in order to give businesses the opportunity to develop.

Whatever decided in the U.S., the likely recession will affect the Ukraine- the fall (or no growth) industrial production is fraught with decreasing demand for raw materials that are exported and our country… and no wonder that the Ukrainian market reacted so seriously on the world stock fever- in difficult times investors will seek to adjust the risks and are unlikely to want close contact with potentially turbulent markets of developing countries. But until a consensus on whether the recession and will continue to sink any exchange, no. Economists expect the autumn revival of business activity after such a dramatic summer ” lull.”

Author: Xenia Sokulskaya

Source: Details