"Today’s Summit achieved five key objectives. The leaders:The members also promised to refrain from imposing any new protectionist barriers for the next 12 months.
# Reached a common understanding of the root causes of the global crisis;
# Reviewed actions countries have taken and will take to address the immediate crisis and strengthen growth;
# Agreed on common principles for reforming our financial markets;
# Launched an action plan to implement those principles and asked ministers to develop further specific recommendations that will be reviewed by leaders at a subsequent summit; and
# Reaffirmed their commitment to free market principles."
2. Yves Smith has a useful post about the financial rescue programs and the failure of recent sovereign debt offerings. Yields on sovereign debt are rising as is the cost of insuring the debt (via the infamous, but still marketable, evidently, Credit Default Swaps.) She points out that the supply being added will make yields go up on its own. US Treasury bond supply is expected to reach between $1.4-1.9 trillion. In Europe, government bond supply is expected to grow to more than €1 trillion (~ $1.25 trillion). Carmen M. Reinhart and Vincent Reinhart have an interesting counterpart piece in today's VoxEU, where they ask whether the US is too large to fail. They point out, among other things, that US dollars represent a little more than 60% of foreign government holdings of foreign currency reserves and that foreign governments hold a little more than 20% of American government securities. "As Keynes once said: 'If you owe your bank a hundred pounds, you have a problem. But if you owe a million, the bank has a problem.'" Worth reading in full.
3. Michiyo Nakamoto at the Financial Times reports that Japan entered it's first official depression in seven years. Recession is technically defined as two straight quarters of economic contraction. Japan's GDP shrank at an annual rate of 3.7% in the second quarter and 0.4% in the third.
4. Peter Ford at the Christian Science Monitor writes that some analysts in the Japanese foreign policy community are arguing that Japan ought to use its foreign currency reserves (of which it holds more than $1 trillion) to help shore up the financial systems of South Korea and the United States. The notion is that it would serve Japanese interests economically and that Seoul and Washington would be indebted and, thus, grateful.
5. Paul Beckett at Real Time Economics reports that the managing director general of the Asia Development Bank, Rajat Nag, is upbeat on the prospect of China and India leading Asia out of the financial crisis.
"The Manila-based ADB is forecasting that China’s economy will grow by between 9.5% and 9.7% in 2008 and by about 8.5% in 2009, down from an annual average of about 10.5% from 2002-2007. India’s growth this year is forecast at 7.8% and next year at 6.3%-6.5%, down from about 8% annually from 2002-2007.6. Reuters reports that an adviser to Iranian President Mahmoud Ahmadinejad said in comments published Saturday that Iran had converted its foreign currency reserves into gold. This follows reports that over 13 billion riyals (~ $3.4 billion) was spent on gold purchases in Saudi markets over the last two weeks, according to Mariam Al Hakeem at Gulf News. (h/t Jesse's Café Américain)
'We believe China and India will provide the drivers for Asian economic growth and Asia in turn will provide the driver for world economic growth,' he said."
7. Platts reports that OPEC cut its forecasts for 2008 and 2009 demand in their Monthly Oil Market Report released today.
"In outright terms, OPEC cut its estimate of world oil demand in 2008 by 260,000 b/d to 86.19 million b/d, and reduced the same figure for 2009 by 530,000 b/d to 86.68 million b/d.8. Fiona MacDonald at Bloomberg reports that the Kuwaiti Oil Minister, Mohammed Al-Olaim, is quoted in local media as saying that Kuwait would support further production cuts in OPEC if it were shown that all countries had met their obligations. Platts reports that OPEC president Chakib Khelil told reporters that OPEC might have to wait until the December meeting to make further cuts--as opposed to at the extraordinary meeting scheduled for November 29 in Cairo--as the organization is not likely to have all the data it needs to make a decision before then.
Demand growth next year is expected to be largely confined to China and the Middle East, with consumption in the developed countries making up the OECD falling to 47.42 million b/d from this year's expected average of 48.01 million b/d."
9. Reuters reports that Somali pirates have seized a Very Large Crude Carrier (or a VLCC, which can hold as much as 2 million barrels of crude oil) owned by Saudi Aramco 450 nautical miles southeast of Mombasa, Kenya. The tanker was probably headed to the United States and was far from the Gulf of Aden--where nearly all of the past problems with Somali pirating have taken place. I think we can expect the industrialized nations to take further action.
10. Mary Beth Sheridan at the Washington Post reports that al-Maliki's cabinet has approved a new status of forces agreement with the United States which would allow the US to keep troops in the country until 2011. American soldiers will be required to procure warrants from Iraqi courts prior to executing arrests in Iraq, and then hand over prisoners to Iraqi courts. That does not strike me as a workable arrangement as it in effect puts American troops under the executive veto of Iraqi courts. The Iraqi Parliament must ratify the agreement.
11. Candace Rondeaux at the Washington Post reports that Afghan President Karzai has publicly guaranteed Taliban leader Mohammad Omar's security should he decide to enter into official talks.