The current stability of the US dollar in relation to foreign currencies may prove to be a transitory condition- continuing drops in the US market dynamics may prove too much for state aid to handle. The “artificial” stability, which has pushed the American currency against six other foreign currencies, might lose its steam once the world economies stabilize themselves in the coming year.

According to Bob Sinche, economic planner and strategist at the Bank of America, “Foundations for the dollar’s recent rally have not been solid. The result of repatriation, deleveraging, quantitative easing and a major scarcity of dollars. But now we are bound for a correction.”
Economic dip

Just how quick can the recession catch up with the US dollar? According to Sinche, the stable 1.38 that the US dollar is experiencing this final month of 2008 might dip to an unfavorable 1.44 in January. Right now, the demand for the US dollar continues to rise even if there is widening recession in the country of its origin. This contradictory situation will resolve itself in the year 2009, whether the US economy is ready or not.

Even the European Union is experiencing a general economic slowdown, and foreign exchange strategists like Sinche are all ears as to what the large EU states would be doing to alleviate the crisis on their part of the world. In the final analysis, it would be the first time that the European Union would have to face a systemic problem of this magnitude.

Daniel Katzive of Credit Suisse Securities, explained the situation of the EU and the US: “The dollar was at the receiving end of leverage flows and also concerns about the euro zone’s ability to navigate its first systemic crisis.”

Some positive notes

Some are still optimistic regarding the current status of the US dollar in the foreign exchange market. Even Abby Cohen of Goldmann Sach’s is saying that the current state of the dollar is completely where it should be to buffer the effects of the recession.

The dollar should remain “expensive”, basically, to stay afloat. In 2005, television was already lampooning the US dollar for its failure to rise against even smaller currencies. Indeed, when US economy catches a cold, all nation-states catch a draft as well.

We have “extreme risk aversion”, where local and international investors pull out before the thing topples. Whether an economic system would topple or not is not really relevant- the figures of the day dictate whether investors would be staying for long or not. In some cases, the investors simply pull out and invest elsewhere.

The role of the European in the larger and more complex transnational economics of the global financial system was explained by Mr. Blackstrom: “The European Union should be part of the solution, not part of the problem. What is needed is a general guarantee for the entire banking system – not the fragmented approach currently in place. This is not working.”

Brussels under pressure

The EU or European Union has a majestic membership- France, Germany and Sweden is included in the ranks of EU states. All the larger countries in the European Union are now putting scrutinizing eyes on Brussels regarding the utilization of state-funded capital to help banks that have experienced the most damage in the on-going global financial crisis.
French President Sarkozy and Chancellor Merkel of Germany have already given their warnings to Brussels regarding inappropriate management of the aid plans that have been put in place to alleviate the problems brought about by the economic downturns in relation the single market “Pensee unique” economic model.

Blackstorm further emphasizes the crucial roles of government leaders in the smaller EU states regarding the economic crunch: “Governments in member states should be allowed by the European Union to take quick and decisive actions with the clear objective of removing uncertainty about future private sector losses.”

The finance minister of Germany, Peer Steinburck has been very clear also as to how the present situation should be handled. Clear structural measures should be studied well and implemented to secure the EU in the coming weeks and months.

State aids on hold

So far, France and Germany have been halted in their own plans to regulate the situation with state capital. In the final analysis, state intervention would be altering the very nature of free competition in the Free Market or the world market. Brussels might be concerned as to how this would affect the general market structure in the long term.

What measures are France and Germany taking to safeguard against recession? France for one has been securing the positions of six major financial institutions to stabilize the position of these banks in relation to other financial institutions in the EU. Germany on the other hand, has been attempting to lend state aid to Commerzbank, but Brussels thus far is still silent whether Germany would be allowed to do so.

One way of understanding this disgruntling intervention in the European Union is to first take note of the very nature of the EU; the EU itself is a supranational entity, which means its powers override those of the legislative and administrative functions and powers of the member states. In the end, the EU proves itself to be more powerful than the member states themselves, which forms it.

Crude oil is now being sold at $42 dollars per barrel, bringing joy to poorer countries while worrying the United States. Lower crude oil prices means the dollar is losing to other foreign currencies, and the demand for the dollar per crude oil is dropping as well. The price of crude oil in the world market has decreased to as much as 22% this week alone.

Since the number one crude oil consumer in the world is in recession, large oil companies are worried about the general drop in the demand for oil. If we are to remember, only a year ago there was a general panic regarding the crisis and the inevitable rise for the demand for oil. But now, with the largest consumer exhibiting the ill effects of recession, things seem to be going into reverse for the oil supply and demand on a global scale.

Joblessness in the US

What rate of joblessness are we looking in the United States? The actual figure (which is still dynamic, therefore still changing) is 6.7%, translating to literally thousands rendered without a livelihood. This rate is the “new record high” since the year 1993.

The price of crude oil has actually decreased a total of 70% since the record-breaking high of $147. It appears that the world market is in turmoil either way. If we would look at the trend since the year 2000, the only time that the condition worsened this much was in the year 2003; but let it be noted as well that during this time, the figure was only 24%.

The I.E.A. or International Energy Agency has been showing signs of restlessness as well. It has now altered its forecast for the general global demand for crude oil because of the tenuous slowdown in the world economies, brought about in large part by the recession being felt in the United States.

Stabilizing crude oil

The I.E.A., which is based in France, has actually forecasted that the demand for this coming year would only amount to about 170,000 per day, relatively smaller than the usual forecasts in the past years. How large was the difference during the re-computation? The difference was significant, from the original forecast of about 86.37 million.

To help stabilize the situation, Qatar’s oil minister is hinting a cut-down on production: “The Organization of Petroleum Exporting Countries will definitely cut output at its next meeting in Algeria in December 17.”

Projected cut-downs have been estimated to result in only 1.5 million barrels of crude oil produced a day.

Beijing has called the US for significant moves to counteract the US economic backslide during the economic talks that took place on Thursday. Because of the transition that is taking place in the United States government, immediate plans to action won’t be possible. It is also unclear whether Barack Obama would continue with the long-running S.E.D. or Strategic Economic Dialogue, which was the brainchild of Henry Paulson of the US Treasury.

One of the main concerns for the S.E.D. is the currency reform, which would be doubly significant for Mainland China because a reverse trend is now being seen with the Chinese Yuan. This trend also hints that by next week the Yuan would remain weak, if it will not become weaker.

China and currency reform

According to Chun Deming, the currency reform in China remains vital to its central governing plans: “The recent drop in the Yuan was due to purely market forces. The currency reform in China remains progressive, and should be controllable. This principle has never changed.”

The governor the People’s Bank in the Mainland, Zhou Xiaochuan urged US legislators and economists to look deeply at the consequences of the existing economic and trading policies of the United States to other countries around the world. It should be noted that the United States to this day has old foreign treatises still operating in smaller countries.

It should be noted too, that Mainland China is the largest stakeholder in the United States Treasury. The Vice Premier of Mainland China, Wang Qishan sounds worried about the whole global financial problem: “China hopes the U.S. can take all necessary measures to stabilize its economy and the financial market to ensure the security of China’s assets and investment in the U.S.”

Aside from the G20, a counterpart organization, the so-called Group of 30 is also meeting to talk about the financial problem in the United States and the consequences to the other countries of the world. Unlike the G20, which is a very exclusive group of the world’s wealthiest individuals and economically powerful world leaders, the G30 is decidedly a poorer nonprofit organization, composed of less powerful leaders, representatives from both the public sector and the private sector and even academics.

China is worried about its financial state because of its heavy dependence on the United States economy- though the currency is now experiencing improvement on some levels, it remains to be seen whether the trend would continue to flourish in the coming weeks. The silence regarding the state of the currency may be due to the fact that economic trend modeling can only tell us so much.

Chrysler and General Motors are both having trouble getting the large financial bail-out they need to keep from collapsing this coming year. The Senate handlers for the large billion-dollar US aid package for ailing companies is not too willing to lend a helping hand if General Motors does not show that it is doing something to keep from going bankrupt.
Though the situation is generally bleak for all companies faced with the possibility of a chapter 11 bankruptcy, the US Senate is bravely making a bright face for the global media regarding the aid plan. According to Christopher Dodd, the chairman of Senate Banking, things are looking up somehow: “We’ve got the makings of putting something together. We’ve got a working situation here, and I’m going to try to get it done.”

Just how much does General Motors need to stay afloat this coming 2009? The actual figure is of course, still in its dynamic stage, but the needed financial bailout accrues to about $8 billion. The smaller company, Chrysler on the other hand, needs about half of this figure to keep from ruining its finances this coming year.

The US Senate’s conditions

The Senate is willing to give a higher amount to General Motors, but if they show no signs of re-structuring their operations by the 31st of March next year, the multinational company would be required by the US Senate to return the financial bailout and file for the dreaded chapter 11 bankruptcy. Indeed, things are looking very dim for this company, which has proved to be strong in the past decade.

“Would you take our money?” were the words on the lips of one legislator, Senator Bob Corker. Rick Wagoner, the CE or Chief Executive of General Motors answered with an unwavering yes. It seems that the company is willing to take the very last step before it declares bankruptcy.

Posturing a bit, Senator Corker added that the aid package would prove that the US government can intervene during the harshest periods in global financial history: “A big stick by the government in this case could actually cause your company, for the first time in modern history, to have the tools and the levers to actually do the things that will make you strong for the future.”

Thomas Carper on the other hand, who is a Democrat from the state of Delaware, wanted banks and other financial institutions to lend the necessary money to keep General Motors afloat. So far this has been the steps taken by the Bush administration. Barack Obama would then have a longer period of time to plan for the harshest points in this global financial crisis.

Loong, Prime Minister of the Lion City of Singapore stated that this kind of optimism was the direct product of the strong bond and cooperation that has been fostered by the leaders of the 21 nations of the APEC organization for the past decades. Unlike other global counterparts, many APEC leaders are more willing to work with other leaders to solve economic meltdowns.

Prime Minister Lee, on the other hand states that: “Now the Americans want to join, the Australians want to join, the Peruvians want to join, and we know of one or two others who are also interested in joining… Just having these 3 plus the original 4 makes it a significant grouping.”

To address the problem of possibly adding to the already bourgeoning global financial problem, the 21 leaders in the APEC summit declared and vowed to be judicious when it came to decisions that will have domino effects in this region of the world. The leaders stated that measures will be quickly undertaken to make sure that things do not spin out of hand.
Transnational is the keyword, as the leaders of the APEC talked about increased integration of the regions, as well as increased regulation and facilitation of the most important facets of global trade: customs, trade and services that are achieved cross-border, not only domestically.

Free trade is also being pushed, to encourage further growth among the stronger countries. The measures being undertaken by the APEC leaders are drawing cheers from members of the G20 and the EU, signaling the possible impact of the APEC decisions on the grander scale of things. The significant interest in the economic plan is designed to boost further national growth worldwide.

The Asia Pacific region, if all goes well, will be the site of increased growth and prosperity in the coming years, if the economic models are correct, and indeed, the leaders of the APEC nations would be judicious in implementing the right kinds of regulation in its countries. If all goes well, recovery might be well on its way; if not, the credit crunch will continue to consume large portions of economies, and there would be massive layoffs once again, possibly mimicking the events of the Wallstreet collapse in the 30s.

Prime Minister Lee continues to describe the long-term and progressive solution for the global financial crisis in the Asia Pacific region: “Of course in Asia, we believe Asia’s dynamism has got deep structural reasons and the transformation will continue. So whatever the short or medium-term difficulties with the financial system or with the recession now, there are these longer term trends, which we should not neglect and which we should keep our eyes on and try to build upon.”

APEC leaders are aware that there would be some short term difficulties that would be encountered on the way to increased stability; but these would simply be observed and remedied as the countries go along.

Saad  notes that APEC leaders are also aware of the need to reinforce the financial system of local economies: “APEC leaders also emphasized the importance of strengthening financial markets in the wake of the liquidity crunch and market slump.”

The G20 group wanted increased alliances and work that is geared toward an efficient international cooperation that would mediate the reparation of the damaged global economies.

One of the first steps that would be undertaken to slow down the current pace of the global financial fiasco is the regulation of banks throughout the world, which are all contributing to the widespread meltdown of national economies. Debts, increased interest rates on mortgages and general credit forms, all of these are feeding gasoline to the already raging fire.

Progress is slow, as the leaders and diplomats of the powerful nations are still disagreeing as to how to go about things. For instance, the formational of a supranational regulating body that would take care of the regulation of national financial institutions is a key problem. Who regulates which country, and who watches the watchdog, in any case?
In any case, George Bush reiterates that the G20 “must strengthen co-operation among the world’s financial authorities“.

Germany’s own Angela Market stated that a “global map” must be put into place to make sure that depreciating trends are observed and remedied before immanent collapse follows.

On a lighter note, the formation of a so-called early warning system would be undertaken to control any potential symptoms that might lead to another credit crunch.

Against the demands of most national governments, some leaders in the G20 are asking for widespread tax cuts for large business (and small consumers as well?) and an increased drive to wake up and stimulate further growth in non-industrial domestic economies around the world. Increased growth in this region would also help alleviate the effects of widespread global recession.

Hauntingly called a renewed “Bretton Woods” agreement among the most powerful capital-driven nations around the world, the weekend meet of the G20 has been hailed as successful. Interestingly enough, new US President-elect Barack Obama did not attend the G20; this put a pause in everyone’s thought as Obama would still have to give his own decision regarding what the other leaders in the G20 wanted.

Obama’s predecessor, Fray continues, was against any kind of supranational regulation:
“The Bush administration initially resisted moves to strengthen international regulation of the financial system, preferring instead to talk of bolstering national regulatory structures.”

Nicolas Sarkozy, president-elect of France, in a true pensee unique attitude, stated that the only way for things to brighten up is to establish supranational bodies and establish more and more economic growth to stem the tide of failed assets, recession and increased inflation in all parts of the world. Hopefully, Sarkozy is right.

The problem is not debt per se - but with the kind of intensive capitalization that is required to keep the whole power infrastructure functioning in the next 25 years. To add pressure to the already tenuous situation, European countries still have to follow international treatise that demand reduction of harmful emissions that increase the global greenhouse effect and deplete the already thin ozone layer.

According to Colette Lewiner of Global Leader of Energy, Utilities & Chemicals: “Security of supply and CO2 emissions curbing issues will be exacerbated after the crisis…”To avoid this, utilities and governments should keep their investment plans in zero carbon generation investments”

It was only in the last few years that individual investors and group investors had paid more attention to energy assets; this fact remains the deciding factor in this fatal power problem. If the capitalization is not met, there just might be a chance that the whole framework just might implode. Energy is not something that could withstand a weak physical infrastructure, especially if the zones that are served are composed of literally millions of Europeans.

Unfortunately, the so-called credit crunch, which, unsurprisingly, became a global problem, has slowed down much needed growth in this area of European economy. The little progress in the last two years is now experiencing an alarming reversal and there is already an energy deficit.

Collette Lewiner warns the energy companies of abrupt decisions: “We are in a long time lead type of industry, so you cannot change quickly so you should not stop.”

One of the key problems that are being seen as a deciding factor here in the long run is the falling demand for energy assets. With too little new investments, capital growth comes slowly per year, and the much needed new infrastructure could not be purchased immediately. In a way, this fatal cycle has placed Europe at a very delicate and tenuous position in relation to other industrialized regions of the world.

Even energy companies are doubtful whether there is enough demand to substantiate an increase of capitalization in the energy market. There is the general possibility of further losses if the energy companies remain adamant about the current economic situation, because there would also be a very big possibility of the demand spiking up once again.

The boom and bust cycle of capital intensive economies gives us the possibility of Europe recovering from this slump; which is the reason why  the long-term nature of the energy industry demands that whatever capitalization that has to be done, that affects the consumers, should be undertaken immediately.

Citigroup, one of the largest companies in its category, was literally saved by the bailout plan, easing the fears and anxieties of investors, and tapering off the downward spiral that has been characteristic of Wallstreet since the credit crunch of the year 2007. People actually compare the times with the Wallstreet crash 21 years ago, and people are on tenterhooks to see how much can be saved with the government bailout plan.

One of the largest banks in the United States, Citigroup’s stock meteorically rose to 60% this week, and eased the burden off the Dow assets. Liquidity notwithstanding, this has been the relief that investors have been waiting for, for nearly a week. In the last week alone, shocked investors watched as the “iron fortress” that is Citigroup tumbled downward to its lowest value in Dow in more than 10 years.

$306 billion is the magic figure for Citigroup- this is the precise amount that the US bank has that has been labeled “risky assets”. The losses resulting from this figure has been buffered by the government bailout plan. If the US economy succumbs to widespread recession, the largest banks in the United States are hopeful that they would not be forgotten by the US government as well.

Even Google is feeling the hard-pressed times. According to Jane Penner, the spokeswoman of the largest search engine company on the Web today: “We have been thinking for some time, before the acute phase of the economic crisis, about significantly reducing the number of contract workers.”

Goldman Sachs is also another company that is neck deep in financial problems. Just this week, the company plans to sell more than $1 million in debts. The debt so to speak, which will be taken under the wing of the FDIC, will mature in four years.

Real estate is also suffering heavily from the global financial trouble; it has bee observed that the increasingly difficult financial conditions in the United States has forced potential home buyers to back out from buying new properties.

Prices are dropping steadily due to lack of demand, and this is never a good thing. In other news, a possible takeover by the company Exelon was bluntly rejected by NRG because the figure so to speak, had been very, very low. The figure was closed at $6 billion, and NRG is not smiling.