More Figures To Shake Sticks At

The last couple of days has seen a load of economic statistics many of which, even before the G20 decisions sent Stock markets soaring, suggest that the Financial Crisis is ending, and that on the back of it, the Economic Crisis, will soon be ending too.

ADVFN commented,

“World trade is in "free fall" and will slump this year at the fastest rate since records began, according to a new report from the Organisation for Economic Co-operation and Development, reports the Telegraph.

The G20 must create an emergency $50bn (£34.9bn) fund to reignite the flow of goods around the world, as international trade suffers the biggest collapse in the modern era.”

In fact, the G20 agreed not only to a sum 5 times bigger than that - $250 billion – to go to boosting world trade, but also agreed an extra $750 to go to the IMF with $250 billion of that earmarked specifically for the poorest countries.

According to Reuters,

“The new funds available through International Monetary Fund and other institutions included $250 billion of IMF reserve units called Special Drawing Rights. In addition, the IMF would see its own resources tripled, with up to $500 billion of new funds, of which $40 billion would come from China -- a significant step for the world's third largest economy.

Much of that is likely to go to struggling poorer countries, notably in eastern Europe.

"It is going to be a help to poorer countries that have been hit by the sharp decline in trade flows, said Sarah Hewin, senior economist at Standard Chartered in London.

The summit also agreed a trade finance package worth $250 billion over two years to support global trade flows, which are forecast to fall 9 percent this year under the impact of the credit crunch -- a boost to the world's major exporters.

"That should be good for the big exporters such as China and other emerging economies including Brazil. It should please the Germans as well," said Jim Rollo, European Economics Professor at Sussex University.”

ADVFN went on,

“Meanwhile, Japanese business confidence has collapsed to a 35-year low as the country's biggest manufacturers contemplate a world that is no longer buying their products and a government that appears clean out of ideas for fixing the crisis. The Tankan survey's index of sentiment among large manufacturers hit minus 58 – its weakest level since the index was created, reports the Times.”

In contrast to Japan there was contrasting data elsewhere. Reuters commented,

“House prices in the UK rose in March for the first time since October 2007, a survey showed on Thursday, raising expectations the housing market downturn may be nearing an end.

The Nationwide Building Society said house prices rose 0.9 percent on the month in March after a 1.9 percent drop in February, and a separate survey by the Bank of England showed lenders were becoming more willing to extend credit.

The mortgage lender cautioned against jumping to conclusions about a housing market rebound. However, investors seized on the news as a sign that the Bank of England's aggressive interest rate cuts may be helping conditions to perk up.

The figures also boosted shares in construction firms, with homebuilders Barratt Developments and Persimmon gaining nearly 20 percent and 12 percent respectively.
Construction activity fell at a slower pace in March though the sector still shed jobs at a record rate, CIPS/Markit purchasing managers data showed on Thursday.
Economists warned that it was far too early to call an end to the sharp price falls that have affected Britain's housing market for well over a year, taking prices down by nearly 20 percent from their peak in late 2007.

"We would caution that we still have a long distance to travel before turnover in the housing market is close to average, and prices show genuine signs of stability," said Malcolm Barr, economist at JP Morgan.

The housing market has taken a pounding as a result of the credit crunch, which has forced banks to clamp down on lending. People have also been reluctant to take on debt due to rising unemployment and uncertainty about the economic outlook as Britain suffers its first recession since the early 1990s.

But a survey by the Bank of England on Thursday showed lenders intended to make more credit available to consumers in the next few months, which should also provide a boost to the housing market.

In a further sign of easing credit markets, HSBC, the country's biggest bank, on Thursday said customers who take out one of its tracker mortgages can borrow up to 75 percent of the value of their home, up from the previous ceiling of 60 percent.
The government has pumped billions of pounds of taxpayers' money into shoring up banks against collapse and has tried to extract promises from them to lend more to consumers and businesses in return.

And recent figures suggest such measures may be starting to take effect.
Bank of England data on Monday showed approvals for new mortgages rose to 38,000 in February, their highest in nearly a year, and the Royal Institution of Chartered Surveyors' monthly survey has shown rising interest from prospective buyers for some months.

Nationwide said the annual rate of decline in house prices eased to 15.7 percent in March compared with a 17.6 percent fall in February. But it said the comparison was skewed by conditions last year, so no strong conclusions could be drawn from it.
And economists expect further price falls before any recovery begins, as it will take time for the effect to be fully felt from cuts in interest rates to a record low of 0.5 percent and the Bank of England's quantitative easing plan.

"The current upturn in activity is therefore more likely to reflect the return of buyers who have delayed purchasing through the worst of the financial turbulence at the end of 2008 rather than the beginnings of a swift recovery," Nationwide chief economist Fionnuala Earley said.

"Nevertheless, the willingness of borrowers to return to the market is encouraging and likely to in part reflect the falling cost of borrowing."

See: Reuters

Meanwhile in the US ADVFN reports,

“The National Association of Realtors said on Wednesday its index of pending home sales rebounded in February from a record low, up 2.1% to 82.1. The Institute for Supply Management’s index of manufacturing activity contracted in March but at a slower pace than anticipated.

Meanwhile, the Commerce Department said February construction activity dropped 0.9%, narrower than expectations of a 1.5% drop.

Outplacement firm Challenger, Gray & Christmas said Wednesday that job cut announcements fell 19.3% from February. But the ADP employment report said the US economy lost 742,000 private non-farm job s in the month of March, which was worse than expected.

Insolvency fears about GM and Chrysler had weighed on investor sentiment earlier in the day after the two firms had their restructuring plans rejected by the US government earlier this week.

March auto sales fell 35%, but investors were cheered by a pick up from February. Ford sales fell 41% from a year ago, although sales were up from January and February levels. General Motors' sales fell 45% in the month, while Chrysler's sales fell 39%.”

In fact, it now looks likely that Fiat will pick up Chrysler on the cheap, whilst GM will be slowly put into bankruptcy before being split up so that its more profitable parts can be sold off – or maybe merged with the profitable parts of Ford – whilst the unprofitable parts are closed down. The removal of the huge overproduction of cars will facilitate a resumption of production by the remaining car oligopolies such as Toyota at profitable rates. It’s a picture of how Capital, and US Capital, in particular is likely to proceed from here in redressing the crisis of disproportionality that has arisen out of the last 30 years during which US production and consumption was maintained on a fictitious basis fuelled by the creation of huge amounts of credit and debt. It means a steady relative decline in US workers living standards compared with workers elsewhere, particularly in the new dynamic centres of the world economy in China, India etc.

On top of that largely positive data the decisions of the G20 surprised on the upside and led to a large rally in stocks. Even George Soros interviewed on CNBC by Maria Bartiromo came out with a positive statement which contradicted the pessimistic views attributed to him earlier in the week in relation to the British economy, which he said had been taken out of context.

Reuters summarised the decisions as follows:

“World leaders clinched a $1.1 trillion (748 billion pound) deal on Thursday to combat the worst economic crisis since the Great Depression and said financial rules would be tightened to stop it happening again.
U.S. President Barack Obama declared it a "turning point" for the world economy, even though he had won no promises for more government spending to combat a deepening world recession.

French President Nicolas Sarkozy celebrated the waning of the Anglo-Saxon model of lightly regulated capitalism, which many blame for excess that have triggered the crisis.

World stocks rallied on bold action that will help finance emerging markets, though economists cautioned against euphoria.

"We have agreed on a series of unprecedented steps to restore growth and prevent a crisis like this from happening again," Obama told a news conference.

"We've also rejected the protectionism that could deepen this crisis."

G20 leaders from the largest developed and emerging economies ticked off a raft of actions on politically sensitive topics -- -- new rules on bonuses, publishing a blacklist of tax havens that could lead to sanctions, imposing oversight on large hedge funds and on credit rating agencies. The tax havens marked a victory for France and Germany.

Markets, desperate for good news when the global economy is shrinking for the first time since World War Two, reacted positively to imposing headline of $1.1 trillion that boosts financing through the International Monetary Fund and for trade. Much will be directed to emerging markets increasingly sucked into the global economic turmoil. Its size was unexpected.

In addition Prime Minister Gordon Brown, the summit host, said governments already have pledged $5 trillion of public stimulus by the end of next year, even before taking into account their commitments to do whatever may be needed that came from the London summit.

The G20 said in a communique the measures taken would raise world output by four percent by the end of next year.”

The decisions on Tax Havens could have interesting results too. Many of these Tax Havens have little in the way of economic rationality other than the fact that they are Tax Havens. If that status was really removed then these small states would quickly lose their viability, meaning that a new drive towards a rational European integration would arise.

The Financial Crisis has been a turning point in many ways. It has forced a number of questions on to the agenda of global Capital, perhaps ahead, of the schedule it would have preferred. As a consequence some of the actions it is being driven to maybe more far-reaching than would otherwise have been the case. The last 30 years has created some huge disproportions. It looks as though Capital is beginning to restructure itself to deal with them