FXstreet.com

Daily Global Commentary

0

0

The Picture of a Credit Crunch

Mon, Jun 30 2008, 22:00 GMT
by Paul Kasriel

Northern Trust


The Picture of a Credit Crunch

Not to belabor the point I have made in recent commentaries, but last Friday afternoon’s report from the Fed of assets and liabilities of commercial banks in the U.S. showed the sharpest 13-week contraction in bank credit – loans and investments – in the history of the series, which dates back to January 3, 1973. In the 13 weeks ended June 18, bank credit contracted at an annualized rate of 9.14% (see Chart 1 below). Because of current or expected capital inadequacy, banks are reining in their earning assets and, therefore, are not availing themselves of the cheap credit the Fed is offering to fund them at. This suggests that the 2% fed funds rate in the current context does not represent as accommodative a monetary policy as it would if the banking system were willing and able to extend credit to the private sector.


More Regions Report Weakening Manufacturing Activity in June

In recent weeks the Philly Fed and the Buffalo branch of the New York Fed have reported weaker new orders in the manufacturing sector for June. Today, the Chicago, Milwaukee and Dallas “precincts” reported their June manufacturing results. The story is the same –weaker new orders. Chart 2 contains the new orders indexes as reported by the Chicago and Milwaukee purchasing managers. Chart 3 contains the new orders data from the Dallas Fed manufacturing survey. These reports plus the ones from Philly and Buffalo suggest that the new orders index in June ISM manufacturing report will be down, too.


Northern Trust Corporation  | 50 S. LaSalle. Chicago, IL 60675
http://www.northerntrust.com/ | webmaster@ntrs.com

Legal disclaimer and risk disclosure

The information herein is based on sources which The Northern Trust Company believes to be reliable, but we cannot warrant its accuracy or completeness. Such information is subject to change and is not intended to influence your investment decisions.


Interested in forex trading? forex brokerage firms!


FOREX.com
Contact the broker/FDM
Open a demo account
NordMarkets.com
Contact the broker/FDM
Open a demo account
Alpari (US), LLC
Contact the broker/FDM
Open a demo account
Interbank FX, LLC
Contact the broker/FDM
Open a demo account
FXA Securities Ltd ( MF Global Group)
Contact the broker/FDM
Open a demo account

GET CASH BACK FOR YOUR TRADES!   Learn more about the Pip Rebate Program

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

©2009 "FXstreet.com. The Forex Market" All Rights Reserved.