On-Money

Despite a reduced global growth forecast of 2.7% and slackening demand in commodities such as oil,  metals and agriculture, the developing world particularly China still has growing demand. The recession should be seen as cyclical with underlying growth reduced and continuing into 2009 but structural demand is still present albeit somewhat quiescent at present.

In the last five years 30% of crude oil demand growth and 60% of copper demand growth has come from just one country: China. Compared to the USA in the same period, where demand has been declining in copper and almost unchanged in crude oil.  Inflationary pressures had begun to tell on China so their easing off fir a short time offers some respite.

Reduced oil prices down from the peak of $140/barrel in July 08 are also reducing the incentive to find new supplies or bring more expensive oil supplies online.  However demand will not stay depressed forever and there will be a long term need to increase oil supply.

Popularity: 73% [?]

 The U.S. government is planning to take over Fannie Mae and Freddie Mac on Sunday, September 7 and all shareholders of the two mortgage giants will lose out. 

This is expected to be announced later today, and is believed to be possibly the largest financial bailout in the nation’s history, in an attempt to prevent further damage to a housing market experiencing the worst downturn since the Great Depression.

The government will run the two companies suggesting that the chief executives would be removed. The two government-sponsored enterprises were sent a letter by their regulator, the Federal Housing Finance Agency, that detailed problems at the companies and said why the federal government was taking control.

The two companies own or guarantee almost half of the country’s $12 trillion in home mortgage debt and being placed in receivership would be a major blow to the administration and likely to have adverse effects on the dollar as well as confidence in the administration. A bailout would avoid the more onerous step of being placed in a receivership in the interests of debtholders.

Popularity: 77% [?]