The Great Debate UK

from The Great Debate:

The dollar’s Tinkerbell moment

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James Saft (James Saft is a Reuters columnist. The opinions expressed are his own.)

Repeat after me: "I believe in a strong dollar as the primary global reserve currency, I believe in a strong dollar as the primary global reserve currency."

Better hope it works, because the current debate over a far-in-the-future new monetary system may bring on a here-and-now dollar selloff and a whole new leg of the crisis.

Sadly, what worked when the children espoused their faith in Tinkerbell may not for a currency backed by the full faith and credit of a debtor nation which has socialised its banking system's risk and needs to sell trillions in further debt to pay that and other bills.

Russia, India and, most significantly, China have all questioned the U.S. dollar's central role in global trade and currency reserve management in the run-up to this week's meeting of the Group of Eight industrialized nations in Italy. The future, it seems, is not greenback.

from The Great Debate:

Stress test the consumer

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Christopher Swann-- Christopher Swann is a Reuters columnist. The views expressed are his own --

People can be divided into three classes, it has been said: the haves, the have-nots and the have-not-paid-for-what-they-haves. The prevalence of the third category may be the biggest single source of vulnerability for the U.S. recovery.

A stress test of the consumer could reveal more distressing results than the one conducted on the banking system.

The EU and Hedge Funds: silencing the dog that didn’t bark

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Laurence Copeland

- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

We could see it coming, couldn’t we? Those gigantic over-leveraged hedge funds were bound to come crashing down, as their massive bets turned sour, forcing them to default on their bank loans and bringing the banking system to its knees.

from The Great Debate:

Bond markets give stress test thumbs down

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James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

The most revealing verdict on the results of the U.S. banking stress test was delivered not by shareholders but by the vigilantes of the bond market, who shunned an auction of 30-year government debt.

This makes sense: if the U.S. is letting banks off too lightly it will be taxpayers and the people who lend the U.S. money who will have to pick up the bill.

from The Great Debate:

A chink of light for the euro zone

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James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

Even without a huge fiscal boost or a hell-for-leather central bank, Europe could have a recovery, albeit a tepid one, on the cards by the end of the year.

Recent forward looking economic data is still grim, but hides within it the seeds of a rebound, as the absolutely brutal fall in manufacturing over the past six months burns itself out.

from The Great Debate:

An emerging opportunity in U.S. housing

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James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

Deep breath. Ok, here goes: For the first time in a very long time U.S. housing might actually be a reasonable buy on a five-year view.

As a long-time housing bear and someone who believes there is still considerable pain to come in the U.S. economy and banking system that is quite a hard thing to say.

from The Great Debate:

Summers’ compensation intensifies reform doubt

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John Kemp Great DebateThe weekend revelation National Economic Council chief Lawrence Summers received almost $5.2 million in salary and other compensation last year from hedge fund DE Shaw and Co, and hundreds of thousands more in speaking fees from other banks, has dealt another blow to the administration's fast-waning credibility on financial reform.

Summers and protege Treasury Secretary Timothy Geithner have already attracted criticism for a strategy many commentators believe is unduly favorable to Wall Street.

from The Great Debate:

Here comes another set of dodgy U.S. loans

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jimsaftcolumn1-- James Saft is a Reuters columnist. The opinions expressed are his own --

Banks in the U.S. face a new source of write-downs and failures in the coming year as loans made to developers to finance residential and commercial property development rapidly go bad.

And as these loans are old-fashioned and concentrated in smaller banks, their fate is particularly interesting as it indicates that issues with the banking system go far deeper than the so-called "toxic assets" belonging to the largest lenders that have thus far gotten most of the attention and government aid.

from Ask...:

Money, money everywhere …except in your pocket?

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There's lots of money sloshing around the financial system these days. The Federal Reserve has established a target range of 0-0.25 percent for its key rate, bringing it closer to unconventional action to lift the economy out of a year-long recession.

From Washington, the first package aimed at rescuing the credit crisis-hit banking sector amounted to $700 billion. Treasury can use only half of that amount and it has already pledged all but $15 billion of it. The Senate has refused to pass a $14 billion rescue package for Detroit's three major car companies last week, leaving it in the hands of the Bush administration to work out a deal.

Slouching towards nationalisation

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James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

The Citigroup bailout is sure to succeed, but only if you count avoiding making unpleasant but needed decisions as success.

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