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In China the Government owns the Banks; the bankers do not own the Government. China’s stimulus plan is working better than in the US and the UK because the government is using the banks for public ends, rather than allowing the banks to use the government for private ends. In the USA, the banks are the most powerful lobby on Capitol Hill; they own the Government.

The USA is spending trillions of greenbacks to bail out its banking system, leaving its economy to languish, as China, now called a “miracle economy,” decoupled from the rest of the world, is maintaining a phenomenal 8% annual growth rate. That, by the way, is being questioned by lots of Pols, commentators, economists and other talking heads, as they ask how that growth is possible, when other countries relying heavily on exports have suffered major downturns and remain in the doldrums. Read more

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Only one week after the US$ hit its lowest level for 10 months, the main talking point in FX markets is whether the US currency is about to strengthen. The change of sentiment has been sparked by last week’s US payrolls report, which saw far fewer job losses in July than expected. This strengthened the view that the US is past the worst of its recession and that its economic recovery could precede that of Europe and Japan. Some traders are hesitant to call an end to the trend of US$ weakness, given that the currency’s rebound has been based on its reaction to a single piece of economic data, but if the US$ does continue to rise, it would mark a very significant development given the pattern of trading that has tended to characterize the currency markets since the onset of the financial crisis. This has seen the US$ benefit from haven demand when equities, and hence risk appetite, have fallen. In contrast, the US$ has lost ground when stocks and investor confidence have risen as investors abandon the relative safety of the US currency in search of higher returns elsewhere.

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US President Barack Obama has Rock Star appeal among the investing class, except in the USA. The Quarterly Bloomberg Global Poll of financial investors and analysts finds attitudes about the new president in Asia and Europe are overwhelmingly positive. In the US, by contrast, they are slightly negative. In Europe and Asia, 87% of respondents say they view Obama positively, compared with just 49% in the US. His standing among American investors is even lower on economic matters: only a quarter of US poll respondents rate his economic policies as “good” or “excellent,” compared with more than half in Europe and Asia. President Obama’s “stratospheric favorability ratings” outside the US after five months in office are related to attitudes about his predecessor, former President George W. Bush. “It speaks as much to the visceral distaste for George Bush outside of the US,” she says. In Europe and Asia, more than four of five poll respondents choose Obama over Bush as the president offering better economic leadership. In the US, investors pick Bush, 43% to 41%.

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Officials says Obama set to lift US restrictions on family travel and remittances to Cuba. The Obama administration intends to allow Americans to visit relatives in Cuba and send money back to their families on the communist island nation, senior U.S. officials last Saturday.

President Barack Obama plans to announce the policy change before the Summit of the Americas April 17-19 in Trinidad and Tobago, according to the officials, who spoke on condition of anonymity because the announcement had not been made. Although some restrictions have been eased temporarily in legislation Obama signed last month, lifting the bans would meet a pledge he made during the presidential campaign and could signal a new openness with Cuba.”The intent is to try to test the waters and see if we can get Cuba to move in another direction,” one official said. “One way of getting the regime to open up may be to let people travel, increase exchanges and get money flowing to the island.” There are growing calls in the US Congress to repeal restrictions on Cuba.

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Fixed mortgage rates in the USA fell to a record low for the second consecutive week, signaling that Federal Reserve Chairman Ben Bernanke’s effort to spur the housing market is gaining traction. The 30-year rate dropped to 4.78% from 4.85% a week prior, the lowest since records began in 1971, Freddie Mac said today in a statement. Rates are falling to historic lows as the Federal Reserve ramps up purchases of mortgage-backed bonds to support home lending. Mortgage applications in the U.S. rose for a fourth consecutive week as a decline in borrowing costs prompted more refinancing. “Lower rates will help increase demand for homes,” said Celia Chen senior director at Moody’s Economy.com in West Chester, Pennsylvania. “We need to see stronger demand for homes to help end the housing correction.” The Fed’s efforts to expand lending “should make new consumer, business, and mortgage loans more available, at lower cost,” Bernanke said in a March 20 speech to a Phoenix banking conference.

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Since the World’s credit markets seized up on September 8, 2009 many corporations are either cutting costs, waiting for government bailout money, or preparing for bankruptcy, as banks are reluctant to lend to all but the most credit worthy and then at unconventionally high interest rates.

In the center of the storm lies the US, UK and EU financial industry where it all started.
The US Federal Deposit Insurance Corporation said last week that the nation’s banks and thrifts lost US$32.1B in the Q-4 Y 2008, the first quarterly deficit in 18 yrs, compared with the US$575MM profit in Q-4 Y 2007. The industry’s net income for Y 2008 plunged from US$16.1B to US$10.2 B for the period.

In the US eighteen federally insured banks have failed so far this year. Last year the number was 25, more than the total number of the previous five years, and up from only three in 2007.
Shares of Citigroup Inc., once the most powerful U.S. bank, have fallen below 1 dollar this month. Pummeled by the financial crisis, the group has lost more than 98 % of its value from its peak in October 2007, and is down more than 95 % from a year ago.

The American International Group (AIG), covered almost daily in www.stockpreacher.com’s Stock Talk, reported this month that it lost US$ 61.7B in Q-4 Y 2009, the largest corporate loss in history. AIG has benefited since from more than US$170B in federal rescue funds with more likely needed and to come.

HSBC Holdings PLC, the largest bank in Europe, early this month reported a 70% drop in its Y 2008 profit and said it would cut 6,100 jobs as it closes its consumer loan business in the United States. It also announced that it would cut its dividend and not pay bonuses to top executives.

In the US, the DJIA sank below 6,800 on March 3, its lowest close since May 1997, losing more than 50% from its highest level in October 2007. Since then the S&P 500 has staged a 19.8% rally off of its lows in the same frame.

On March 23 when the markets were surprised by the US government’s latest plan on clearing bad bank assets and a larger-than-expected rise in existing home sales, the three main indexes all surged more than 6.5% on the day.

Some Economists suggest that financial crisis has yet to bottom out, and the real economy continues to slip as the global economic situation deteriorates.

Therefore, stimulus spending, market confidence, financial regulation and free trade will be key issues at the G20 summit of the World’s leading developing and developed economies next week in London.

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