International Markets–“Zen International”– (UK Expands QE Experiment)...
(NewDesignWorld Press Release Center) -- London, UK- “Zen International”: BoE holds rates but opens the spigot further with another £25bn of paper.
Sources close to analysts at “Zen International” say that the extension of the quantitative easing experiment may serve to cripple the British pound. The stark warning came after the Bank of England announced its intention to create another £25bn to buy government debt in a bid to channel more liquidity into the economy.
Britain’s economic recession has proven far more stubborn as evidenced by the shock 0.4% contraction in gross domestic product in the third quarter of 2009.
Despite the announcement, sterling rallied against the currencies of its main trading partners although “Zen International” analysts apparently attributed this to the fact that the markets were expecting the Bank to plump for a £50bn expansion.
The new, higher figure takes the total of quantitative easing to an unprecedented £200bn and will see the Bank of England owning 20% of the country’s debt, a situation described by “Zen International” analysts as “extremely dangerous”.
Some of the money being created by the QE policy is being used by banks to speculate on markets in an effort to rebuild their balance sheets more quickly than they could by simply lending to businesses and individuals who may default.
“Zen International” sources also suggested that the decision this week to add another £30bn to the total of the biggest banking sector bailout in the world by purchasing equity in two British banks shows that the UK government does not have a viable plan to drag the country out of recession.
“Zen International” Fannie Mae will seek $15bn of US Treasury aid after losing $18.9bn in Q3.
“Zen International” analysts are said to have expressed no surprise as news emerged that Fannie Mae, the giant US mortgage finance company, would seek to drawdown an additional $15bn of a $200bn lifeline thrown to it by the Federal government after it reported further losses in the third quarter totaling $18.9bn.
The losses, as before, are attributable to the stubbornly persistent decline in the US real estate market. Foreclosures and delinquencies continue to mount as more Americans lose their jobs. A record 2.6 million defaults, scheduled foreclosure auctions or bank repossessions occurred in the first nine months of this year, 22.1 percent more than a year earlier, as unemployment rates climbed and temporary programs aimed at delaying foreclosure expired.
“Zen International” analysts are thought to be skeptical of recent data showing a pick-up in pending home sales and cite a “last dash” by first-time buyers to secure access to the government’s $8000 tax credit for purchasing a home. They maintain that US consumers and potential homebuyers are in no position to begin taking on large debts especially in the economic environment that prevails in the United States.
“Zen International” believes that any continued mild buoyancy in the property market will come from further government incentives and cited the fact that the US Senate yesterday voted to extend the $8,000 first-time homebuyer tax credit until April 30, 2010. The Senate also agreed to expand the program to include people with higher incomes and some who already own homes.
“Zen International” has advised its US clients to avoid the US property market for investment purposes for the immediate future.
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