In the Financial Papers: Today’s Top Forex News 082307

August 23, 2007

Here is the “In the Financial Papers Radio Broadcast” (Length: 12:36 minutes). The player should load automatically. Please let me know if you like it. Contact Kathy

Lower the Fed Funds Rate
The FOMC cannot issue enough reserves to buy up all the subprime and other credit extensions that the market does not want. But the FOMC can reduce the rush into scarce Treasury securities. It can do so by permitting Treasury yields to fall enough to encourage banks and other lenders to reach for higher returns, through assuming some risk by buying mortgages and other needed credit to finance the real economy.

Reliance on Bank Loans Shields Asian Firms
Companies in Japan and the rest of Asia are weathering the storm in global credit markets more easily than firms in the U.S. and Europe. That’s because they rely more on an old-fashioned form of financing: their banks.

Fukui Says Keeping Rates Low May Spur Risky Investing
“Fukui’s comments today make it pretty clear he’s still committed to raising rates,” said Teizo Taya, former Bank of Japan policy maker and now special adviser to Daiwa Institute of Research Ltd.

ECB Signals Rate Increase Is Still Likely
The European Central Bank signaled that it is still inclined to raise interest rates by a quarter of a percentage point on Sept. 6 to 4.25%, provided market turmoil doesn’t deepen.

Why Chinese May Still Invest Close to Home
China’s government is encouraging its citizens, for the first time, to put some of their money directly into offshore stocks and bonds. But it isn’t so clear how many will actually want to.

Insight: History teaches this is just a bull market correction - FT Subscription Needed
On July 18, just past the market’s peak, I wrote here claiming the sub-prime mortgage mess would not trigger a bear market and recession – that there was more bull market ahead. Since then stocks tanked. But I still think I’m right. This is just an archetypal bull market correction. Here is why!

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