Interbank Credit Crisis

Oct 15th, 2008, in Business & Economy, by

CallumThe credit crisis, focusing on the Lehman Brothers bailout and the interbank credit crunch.

Lehman's Legacy

The last 4 weeks has been an unprecedented time for financial markets. The slow burning credit crisis in the United States was whipped into a wildfire that threatened to engulf the world financial system. The catalyst for this cataclysm was the decision by the US Treasury to allow Lehman Brothers to collapse into bankruptcy. After the political heat they received from conservatives for the bailout and shotgun weddings of Bear Sterns and Merrill Lynch they decided to placate their critics and play hardball with Lehman.

The ensuing firestorm threatened like falling dominos to bring the world’s financial system to collapse. Some of the repercussions of that ill fated decision included:

  • “Breaking the Buck” in Money Market Funds. Money market funds had never before fallen below $1 in face value. The bankruptcy of Lehman forced some fund to fall to 97 cents which precipitated huge withdrawals of funds. Money markets allow companies to borrow short term money at preferable rates and is a major source of corporate funding. Having them fail threatened to bring the US economy into collapse which forced the U.S. Federal Reserve Bank to guarantee the $3.4 trillion dollars in money market funds.
  • The collapse of Lehman also eroded what little faith was left in a lot of other major financial institutions. Not only was the market worried about institutions holdings of Lehman’s debt but also about what exposure the may have to Credit Default Swaps on that debt. Credit Default Swaps are a form of insurance on bonds. If you had purchased Lehman Bonds you could also purchase Credit Default Swaps on that debt. That way if Lehman defaulted on their bonds the seller of the Credit Default Swap would have to make up the difference on between what you where able to collect on the bonds and their face value. This led the US Government to take over AIG and inject $85 Billion into it mainly due to its credit default swap exposure.
  • This forced the US Government to launch a $700 billion bailout of their banks by agreeing to purchase financial assets for which any market had long ago dried up.
  • Europe was caught up in this turmoil by its exposure to Lehman's debt and Credit Default Swaps. The casualty list is long and extensive. Fortis, Dexia, Hypo Real Estate as well as all the banks in Iceland and the UK barring HSBC have had their governments intervene.
  • Libor (London Interbank Offered) rates where trading at a 6% premium to their underlying central banks rates and interbank lending had ground to a halt because no one trusted anyone else’s ability to repay the loans.
  • Asia has not escaped unscathed. We have had a Bank run on Bank of East Asia in Hong Kong as well as the collapse of the Japanese Insurer Yamato Life. From Seoul to Mumbai real estate prices have been in freefall as well as collapsing stock markets as people realize that this recession is likely to be global, long and deep.

The fall has been arrested by unprecedented co ordination and intervention by the governments of the major economies. These interventions include:

  • Part or complete nationalization of a number of banks including Fortis, Dexia, RBS, HBOS and Lloyds TSB.
  • A coordinated effort to unfreeze interbank lending by an agreement to underwrite and guarantee interbank loans
  • Cuts in interest rates including 1% by Australia and a 50 basis point cut by the US, ECB, UK, Canada and Sweden.
  • A number of countries to guarantee the safety of all bank deposits.

The message is that governments are prepared to intervene to protect depositors and interbank lending. It seems that we have dodged the bullet, for now. We will probably need further interventions as the Lehman defaults cascade through the system. We have yet to see how much of Lehman’s debt will be recoverable by creditors and how much will have to be made up by underwriters of Credit Default Swaps.

The danger is that no one really knows how much in Credit Default Swaps are out there. Since Credit Default Swaps are unregulated you did not actually have to have Lehman debt to buy them. So no one knows if there are less swaps than the Bonds or if there are multiples of Lehman’s debt. Whichever way it turns out things don’t look good for the underwriters. At a recent auction of Lehman Credit Default Swaps the market midpoint was 91.375 cents on the dollar. This indicates a belief that only 8.625 cents on the dollar will be recoverable on assets for Lehman’s bond holders.


45 Comments on “Interbank Credit Crisis”

  1. avatar syed putra says:

    Indonesia a should have followed Malaysia introducing currency control during the asian economic crisis. Only then could they have saved their local banks and companies without having to sell them out to foreigners at bagain basement prices as dictated by IMF.
    Unlike Indonesia, The US dollar did not plummet, maybe due to support by those countries who hold the reserve in USD. More reason why there should be a common ASEAN currency or ASEAN nation should peg their currency to one another.
    Reason for economic plight is simple. More money are in the hands of speculators, acting on behalf of pension funds and trusts. These speculators make money from market trumoil. In stable conditions, they make almost nothing.
    Less money goes to investing in factories and manufacturing. Too much trouble. Manufacturers and most businesses prefer stable conditions.
    At the moment, the speculators are winning. If US/EU does not have some form of regulation on their behaviour, expect more trumoil, in the form of comodities/forex/equity. And since less money goes into genuine businesses, expect more unemloyment etc.

  2. avatar Purba Negoro says:

    It is as Sarkozy stated: “it is the Death of market capitalism- the death of laissez-faire”

    According to CNN’s “Mad Money”: US-UK Greed, greed and greed are entirely to blame, Callum.
    Freddy Mae was a massive campaign contributor to the Democrats- who ensured for their “johns” lowered mortgage eligibility so the banks could massively exploit this untapped, NINJA (no income, job applicants) loans.
    Greensxpan willingly complied- the economic argument being that in a period of high job growth and increasing disposable income, house ownership would be the best means of forcing Americans to sink equity into non liquid brick-and mortar investments.
    Commercial/Merchant banks more than happy to lend high risk at the price of high interest borrowed more than they could repay in the short term- lending it to mortgage retailers.

    Did I not state you the era of nationalisation and sovereign capitalism emergent as the dominant beast?

    This is why we do not privatise strategic assets Callum- our advisors are the true market makers, not merely the market players, like us mere mortals.
    I truly wish I could pass on more information from my own personal friends, but I am not permitted.

    Summarily, 2010 will be a fantastic year for Indonesia- the Garuda shall soar again.

    Indonesia will ride the storm relatively intact as Indonesia is not run by money-lusting Jews, nor a spiv or wide-boy, unlike the US and UK.

    The Indonesian Stock Exchange suspended trading to protect from the damaging speculative trade and short-selling of the over-leveraged (on fraudulently acquired credit ) Chinese – the Slipi Soros’ and the Bekasih Buffett’s, and also the mincing mary’s of Temasek, nursing a bloodied nose after our courts smacked Singapore Cukong back into his rightful place.

  3. avatar dragonwall says:

    By saying these:

    Indonesia a should have followed Malaysia introducing currency control during the asian economic crisis. Only then could they have saved their local banks and companies without having to sell them out to foreigners at bagain basement prices as dictated by IMF

    Another Sputjam kind of comments.

    I am quite sure many are unaware why Malaysia choose to peg 4MR to 1 USD or the HKD 7+ to 1 USD.

    When you peg your currency to a certain currency, the whole economy will come to a standstill. Very little growth.

    Before when MR was fluctuating, they were developing at a very fast pace. The moment after Soros came in with his investment scam, backed by some heavy stuffs, and sabotage the Asian economy, Malaysia’s development completely stopped.

    SGD did not budge or attempt to pegged their currency. Why? Fundamental Foundation of the country’s economic structure.

    So much for the peg.

  4. avatar David says:

    Yes, Syed Putra is Sputjam, don’t know why he changed his nickname, but there you go.

    Folks, can we stick to the topic that Callum has started, Lehman Brothers bailout, world banking system etc, Callum will deal with the Indonesian situation in the next articles….Incidentally there’s another very interesting post on the banking system which may be of interest here – The Misesian explanation of the bank crisis.

  5. avatar dragonwall says:

    Hmm..big mouth.

    When Indonesia went into a crisis. tolong..tolong.. asking every one for help. Here comes the neighborhood watch.. pumping money into the Indonesian economy. SEMUA BISA DIATUR YAG PENTING SEKARANG ADA DUIT.

    Now the share multiplied everyone ..mata merah.. Oh.. kick Temasek.. transaksi itu haram.. ngak boleh.. NGAK KASIH BELI AJA JAKSA, HAKIM.. SEMUA JUGA BISA DIATUR.

    You know what does that represent? NO DIGNITY.

    Citra dan Wibawa..sama dengan tanah begitu rata..

  6. avatar sputjam says:

    Sorry folks. just recovered after a wild night and back as sputjam.
    Singapore did very well during asian financial crisis becasue every tom dick and harry with some liquidity were cashing out from their investment in south east asian region and dumping it in singapore.
    The reason is simple. The forex traders were willing to give huge interest for their local currency in order to short sell it further. RM interest were something like 20% per month. In order to stop this, RM was declared invalid overseas and so those holding the currency was forced to bring it back home, bringing in some liquidity into malaysian economy.
    Compare that to Thailand and Indonesia, which did not go through similar scheme. End result, many banks in Thailand and Indonesia now belong to foreigners, due to IMF intervention.
    Singapore’s economy is vastly different from that of Malaysia/Indonesia/Thailand, which is largely rural. If it may help, maybe indonesia should introduce a different economic solution for cities such as jakarta and give them some form of autonomy in its administration, including financial liberty etc.

  7. avatar dragonwall says:

    Hmm..

    If it may help, maybe indonesia should introduce a different economic solution for cities such as jakarta and give them some form of autonomy in its administration, including financial liberty etc.

    Will this work?

    Autonomy or adminstration is still different, unless it is called the Indonesian dollars. But still it will take something like 500 years to establish like the HK SAR. Though she has returned to PRC she continues to use her currencies.

    Not otherwise.

    There is no other way out for Indonesia, unless they act and reacted like giving the economy a shock treatment to boost foreign currency to buyin IDR and buffer the faltering economy.

    Strategy needs to be in place and policies set firmly, like what Zhu Rongji did to China when he assumes as Prime Minister and had every corruptor and would be corruptor repatriated, abducted, back to Indonesia and have them beheaded or shot.

    First one ABU and Yusril and so on….Ha.ha.ha.ha…..

  8. avatar sputjam says:

    US import real products manufactured overseas at a deficit, and export overvalued financial junks overseas in terms of US bonds and hence the US dollar will never collapse as they hold the world to ransom.
    isn’t this similar to unleashing a terror attack and should be punished by UN sanction?

  9. avatar dragonwall says:

    Well how is that!

    Deficit?

    Overvalued financial junks overseas?

    Hold the world at ransom?

    Unleashing a terror attack?

    My..so much for world economics.

  10. avatar sputjam says:

    Its a financial terror attack, subtely called sub prime crisis. The latest weapon of mass destruction of wealth word wide. designed and created by the financial genius of new york, whose purpose was to sell over valued asset at an even higher price, and earn ever larger commission.
    If the crisis had begun in asia, we would hav been called idiots by the west and lectured about transparency, nepotism, corruption and cronyism. But since it occured in the west, it was just a serious miscalculation. Just wondered if anyone would be found guilty from this episode.

  11. avatar Ross says:

    So what should we mere mortals be doing to preserve our life-styles, such as they are?
    I have been getting some USD for my next plane ticket to visit the kids, and as usual go in once a week and buy a hundred, often in different money-changers.
    It has been very obvious that lots of people with no travel plans are doing the same. The lady behind me in the queue last week told her pal that all her kin were buying as many as they could.
    Some of you folks reading this must be rich – any useful suggestions for those of us who wish to weather the storm in Indonesia, which is surely coming?

  12. avatar David says:

    I think Ross if you are worried about a gathering storm I’d be buying gold not US dollars.

  13. avatar dragonwall says:

    Right but of course

    Some of you folks reading this must be rich – any useful suggestions for those of us who wish to weather the storm in Indonesia, which is surely coming?

    But it will make someone jealous that says the Chinese this and the Chinese that.

    At this very moment Indonesians are buying up those foreign currencies to safeguard themselves from people like him because when he has no more money he will get someone to start another riot.I am making a countdown for the day come November 4th 2008.

    Buying gold will not even help because you will end up square one. I would suggest buying up more bullets and ammunition…how nice.

    Indonesian still don’t learn their lesson.

    Let me give a suggestion.

    Open up several foreign accounts in different countries not US dollars. The lower the USD dollars goes the worst the rupiahs become. Because rupiahs is relying too much on the dollar. The more USD you buy the high it goes then you need more rupiahs to buy the dollar.

  14. avatar Ross says:

    But Patung, I only want to buy a plane ticket, to watch a graduation in Oz. Travel agents have never asked me for gold sovs, only greenbacks! But maybe that will change.

  15. avatar David says:

    So what should we mere mortals be doing to preserve our life-styles, such as they are?

    I was answering that. 🙂

  16. avatar dragonwall says:

    I think mere mortal needs no money or food so why the gold. Propaganda is more appropriate to mere mortals.

    And

    But since it occured in the west, it was just a serious miscalculation. Just wondered if anyone would be found guilty from this episode.

    Of course I am sure someone will be accounted for like the Enron case. But it was much expected to be stumbling like a house of cards chain reaction. Do you really think there is a serious miscalculation?

    No simply the US economy cannot sustain themselves and you can watch out the US economy will slide even further due to a far bigger gap that they were unable to apprehend. DEFICITS..

    Earlier it was the higher you buy the higher it goes and now the lower they sell the lower they go. I suppose these are trigger point.

    The rupiahs just cannot withstand the strain. Gasoline in US is sliding belofw 3 USD per gallon but I doubted any changes in Indonesia.

    Nah..gimana itu para cukong pompa bensin apakah mereka tidak ditegorin ngak menurun harga bensin malah rupiah merosot.

  17. avatar pramino says:

    I think this article nicely summarized the current upheavals in global finance. I’m looking forward to see the other parts.

    The financial tsunami is what Greenspan calls it when he had to testify to the US Senate a few days ago. He looked a bit shaken and was actually reading from a script. Some people said he got too much credit for the so called longest expansion in the US economy, got treated as if he’s some kind of Messiah and now perhaps being unfairly targeted for being chiefly responsible for the present calamity.

    I recall there was a meeting between the US and EU over the crisis recently. Sarkozy seemed to have grasped the issues and offered to establish some sort of worlwide regulatory body to control the flow of short term funding around the globe (something to that effect) whereas Bush said some gibberish and appeared as clueless as always.

  18. avatar sputjam says:

    If anything, I hope the authorities will clamp down hard on those speculating on currencies and commodities. It is very difficult to do any actual business projections as all tend to bounce like yo-yos. What everybody needs to expand global trade is stable trading system based on actual trade and no speculative buying and making money from nothing.
    this will create stable business environment and help create investments in manufacturing and employment. Presently, speculators trade in currencies are almost twenty times than that used by actual businesses.

  19. avatar TheWrathOfGrapes says:

    If anything, i hope the authorties will clamp down hard on those speculating on currencies and commodities. It is very difficult to do any actual business projections as all tnd to bounce like yo-yos.

    Before the Asian Financial Crisis, Bank Negara Malaysia was the biggest culprit sepculating in the currency and commodity markets. They tried to corner the tin market. Speculated against the pound and lost billions. Guess who was on the other side? None other than George Soros. Which was why Mahathir hated Soros so much and blamed him for the Asian Financial Crisis. The Bank of England warned BNM against forex speculation by a central bank against puny individual investors, and BNM had the cheek and gall to reply that they were only engaging in “active reserve management”.

  20. avatar ET says:

    Americans should stop watching MTV and trying to emulate movie-, hiphop-, rock- and R&Bstars with their 10million dollar mansions, RR, Ferrari and Lamborghini fleets and the rest of their inseperable blingbling. Isn’t this what these NINJA loans ultimately were
    based upon? Greed of the underdog taking it all for granted and Wallstreet yuppies brownnosing, hoping to make a quick buck and get a promotion for having sold yet another underwarranted mortgage.
    The American dream has made a fool of itself and has turned into a nightmare. Time to find a new role model.

  21. avatar dragonwall says:

    TheWrathOfGrapes Says

    Bank Negara Malaysia was the biggest culprit sepculating in the currency and commodity markets.

    and

    “active reserve management”.

    Well many metal and mineral producing countries do that, that is why the futures market. As a hedge! or perhaps as a guarantee that they will be selling at that price upon delivery. But to say they are the biggest culrpit is such a gross misrepresentation of facts. Noting that Malaysia is one of those tin producing country so by right they have the rights to short the market and I don’t there is anything wrong.

    Since their currencies is pegged to the USD I suppose this is one way of hedging their losses which the Indonesians do against the USD and Asian currencies.

    It is agreeable that this bastard SOROS have been behind some of the most inhumane destroying other country’s economy as a joy he receive achieving something, I guess.

    and

    The American dream has made a fool of itself and has turned into a nightmare

    I think this sentence is being blown out of proportion when everyone is seeking a CHANGE like what the Indonesians does. The only difference is intellectual mentality. If we want to have a future then you have to fight for it and work things out and not just DNSOYA..
    There has never been and will never have a new role model in America.

  22. avatar dragonwall says:

    Sorry word “think missing after don’t
    thanks

  23. avatar sputjam says:

    I believe bank Negara malaysia speculated on the british pound when they lost to soros. As for the tin market, they tried and failed to corner the market. The guy who messed up on the pound speculation is now the deputy fianance minister of Malaysia.
    This is more proof that, not only in america, but emeging economies also reward the dastardly.
    The same deputy finance minister has now set up a similar fund to singapore”s GIC (govenrment investment corporation) and have invested heavily in indonesia, including banks and telcos.

  24. avatar dragonwall says:

    Sputjam

    The guy who messed up on the pound speculation is now the deputy fianance minister of Malaysia. This is more proof that, not only in america, but emeging economies also reward the dastardly

    That must be a great guy and very likely a Mahatir ass licker.

    Then I think the next Minister for Finance for Indonesia should be for Dicky Iskandardinata!

    Did you remember I said that the Indonesian Government should have an investment arm? So as to make investment to boost the Indonesian economy and you said something like ridiculous?

    I failed to see why Singapore is doing it and Malaysia is also making attempt but not Indonesia?

  25. avatar Purba Negoro says:

    Dragonwall-
    you finally make some sense.
    Actually Indonesia is slowly moving in this direction- as opposed to Singapore and Malaysia- as you are aware- the bulk of major strategic money-earning “real” assets are government corporations with BLO (build-lease-operate) type shared ownership/business arrangement beng the most prevalent.
    Currently the main issue Indonesia is facing is capital- with the extremely competitive G8 remaining DFI of that flowing toward China, Indonesia is forced by necessity to seek out Gulf partners with much deeper pockets and more politically strategically important than Singapore.
    Also there is a lot of unpublished cross-ownership between all three nations- but Indonesia is pulling out of Singapore to put the money elsewhere- such as in Phllippines (San Miguel has been very busy- a beer corp interested in nat gas??!!) China or Malaysia etc.

    Many government corporations having had their core business either eroded by Indian/Chinese/others competition, commodity pricing issues etc, have actively engaged very reputable brokers such as my own- PT Sari Jaya Investama (are fund managers for many major blue chip Indonesian firms-) to “swing trade” to meet budgeting and in some few very scary situations- salary targets.

    The days of Singapore as a source of investment have long passed- they have truly abused and ripped off Indonesia and our more identical neighbours Malaysia, Thailand and Phillipines to be frank.
    Lee Kwan Yew has been the perfect little b!tch once again- but this time he bit the hand that fed him- and his son’s a closet-gay moron who couldn’t keep organise his own shoelaces. Old Lee was reasonably good- but his era, is over and his son has fallen very far from the tree. The Indian guy was far better.

    Singapore is best served to permanently severe all ties to Granny Victoria and integrate as a truly ASEAN nation with the same anti-Colonial goals as the other members.

    But yes- Indonesia should have its’ own development arm- it may also be an issue of US/G8 nations being very relcacitrant about allowing us too- worried about competition in the only marketplaces that earn money these days- proven promising EM’s like Indonesia, China, India, Brazil, Argentina, Mexico, Chile etc

    Personally I would like Indonesia to pursue closer ties with Venezuela, Brazil, Argentina and Chile- it appears Brazil is going to be the next big thing after the China hype dies down or the Communists get too proud/ foolish and become militarily strident.

    Sputjam:
    If the 1998 crisis proves anything it was the opinion of most conservative financial advisors that Indonesian bank system was rotten and oversupplied with too many over leveraged, very marginally competent private banks who keenly indulged in speculative trading to meet their fraudulent loans.
    Very few have emerged intact- all have been full or part sold off or cross-owned and those that remain are keenly supervised within the board room- this is why Lippo and other crappy ones are essentially extinct never to revive.

    Indonesia is actually better served by having foreign well capitalized foreign banks who can be better regulated by an independent governance (as opposed to the previous very sordidly incestuous Dutch Colonial Resident type: Chinese cukong bulky brown envelopes for bossman to look the other way).

  26. avatar dragonwall says:

    My sense?

    This clearly shows that your mentality are at least 2 to 5 years behind that of mine.

    The days of Singapore as a source of investment have long passed- they have truly abused and ripped off Indonesia and our more identical neighbours Malaysia, Thailand and Phillipines to be frank.

    Investment is something to you a terminology of abuse and ripped off. SO how you refer to the communication projects of Indonesia that was once worthless picked up by Singapore. On seeing that the company had progress everyone started to elbow the investor out. Is that ripped off? Or daylight robbery? KKN perhaps or your theory of being law abiding when it was approved by the government.

    If so, where is the Indonesian integrity. So what you wrote here are full of rubbish that contain no truth let alone backed by facts.

    The days of Indonesian investment is over and for them to invest they are being left far behind. You should be sending your ladyboy ABRI so that you could elbow everyone out of Asia.

    I will put you when standing in front of LKY and his son stand in front of you, you are just something no bigger than 2 inch tall.

  27. avatar Tammy says:

    Interesting article. Even more interesting comments. Here in Myrtle Beach the foreclosures are through the roof due to people wanting to live beyond their means. I own a real estate company, so I see it everyday.

  28. avatar sputjam says:

    Govenrments should not indulge in business activities, but regulate them. Havng entities like singapore’s temasek or GIC will kill competition locally.
    If Malaysia is taken as an example, infrstructure built by private enteprise, which failed have to be taken over by the govenrment, while those that proper, kept the money all to themselves(minus taxes).
    More micro businesses should be encouraged in the rural Indonesian areas, such as banks, TV/radio stations, telcos managed by local communities and diversify and provide jobs.

    The transjava highway should have been built decades ago, together with parallel rail links. The proposal to build the java-sumtra bridge by a chinese conglomerate should have been accepted. All these cost money. But these project benefits to local economy so much more, helps to redistribute wealth from jakarta to countryside. All these cost can be colected in the form of taxes and selling govenrment bonds, payable in the form of tolls and tickets collected in the future. Now with the financial bust, this will be the best time to start infrstructure spending as cost of raw material have collapsed.

  29. avatar dragonwall says:

    I think the intepretation of

    will kill competition locally

    is being blown out of proportion.

    How you compare a huge fund from a country be in competition with locals? And they are referring to foreign investments, not Indonesian.

    So I suppose when the Indonesian government invested in let say a bank in Switzerland or Israel, they will kill the Indonesian money market?

    Singapore invested in Indonesia’s communication project, have they killed the Singapore market or Indonesian market? The answer is no! or rather they are actually complimenting the topic at large. Why. Expansion, new products and service.

    I failed to see your point on why Indonesian government should not have an investment arm.

    Every one seemed to have a good laguh when the last time I said the rupiah will hit 12,000. Have they not? It already has. My forecast by 2016 came in much earlier had shown signs of feeble and an even worst Indonesian econmy forthcoming.

    I also said if the BI cuts back on interest rate it will casue the economy to dip even further, Was I right? Yes it did because the first victim is the Rupiahs? Why. Capital flights seeking foreign currency? Lack of investment attraction. No one comes in but many going out of Indonesia.

    How could an economy survive with no money coming in but mostly fleeing the country for fear of an even worst economic dilemna.

    In the next two years, if the economy is not contained in within a reasonable scope of allowing the government to adjust the hyperinflation, you can even see rupiahs reaching between 13,500 to 14,500 before the 15,000 marker.

    By that time if the Indonesian government does not take any offensive stance then the country will come to chaos again. This time it will not be the Chinese but governmental.

    No one can convince the government unless there is someone that can drive the message through.
    People like Aulia Pohan, Sri Mulyani, Miranda Goeltom, none of them actually help.

    People that most pribumis detest are those that will help if the conditions permit. You need to pull strings and all the help needed to bring this country back to reasonable norm in order not to be in a coma.

  30. avatar Purba Negoro says:

    Dragonwall-

    Chinese Indonesians are the source of the problem.
    They are the ones who have been banned from speculative currency trading- the “Slipi Soros” and the “Bekasi Buffett’s”- some Chinese Indonesian trading firms are over 1000% leveraged- source Bisnis Indonesia.

    And to prove you wrong about the Indonesian economy- I quote a Western Economist- something you clearly are not.

    Standard and Poors are holding Indonesian credit ratings stable and its credit rating may even be raised.
    Singapore could slip into recession
    Indonesia will not

    It has fixed foreign investment of $57.6 billion and holds $9 billion of investment in other countries.

    Its current economic growth is 6.5% and its feared may fall below 6% in 2009 due to reduced exports. Government will stimulate growth using the national budget which already reached $100 billion in 2008. Government is confident it can hold growth at 6%. The World Bank has set aside a $2 billion standby loan for 2009 only to be triggered if growth falls below 5.8%.

    Indonesian banks are strong with adequate reserves, low non performing loans and almost no exposure to sub prime losses.

    The Indonesian inflation rate is declining from a high of 12% to maybe 9% by January with reductions planned to between 9% and 7% for the rest of 2009.
    The bank rate is being stabilized at 9.5% after 6 months of consecutive rises. It will be held for a while and then reduced to 7.5% in 2009.

    The Indonesian Government also says it will pursue legally those who misused its name and dragged it into the Netherlands Indover bank collapse,

    By Dr. Terry Lacey

    Indonesia is already in the top 20 economies of the world.
    Indonesia is currently overtaking Belgium and Sweden. It will soon overtake Turkey, the Netherlands and Austria as it enormous size, resources and population come into play. It is a strong candidate to join the top ten economies in the world within two decades.

    Singapore? Shrinking- the native-born Singaporean will be a minority in his tiny little island by 2015.

    Singapore new telcom products? Q What do they have? Nothing new. Just licensed third party product. We have the REAL majors here- Hutchison Telecom, 3, Motorola etc- all here- SingTel has nothing- exactly like all Chinese businesses- it overpromised and never delivered.

    Also- to prove you’re an absolute idiot- Indonesia economy is predicted to GROW by 5.5% according to the IMF

    They will start to lower the rate in January, not in December because the rupiah has been under pressure lately. A rate cut in December is too soon,’ said economist Aldian Taloputra of Mandiri Sekuritas.

    A Reuters poll conducted before the GDP data release had forecast 2008 growth of 6.15 percent against 6.32 percent last year, which was the highest pace in over a decade.

    Sputjam- you really have no idea do you?
    Have you ever actually set foot in Indonesia?

    The Java-Sumatera Briudge was actually designed and envisaged to be built by a Japanese consortium in the early 1980’s. It was deemed economically unviable.

    The Dutch also tinkered with the idea of a trans Java-Sumatera tunnel- but seismic conditions of the Sunda Strait meant it would be near impossible to cost-effectively engineer (ie cost/benefit analyses).

    There were unsurprising very serious concerns about quality of construction and quality of construction materials- Chinese being infamous for skimping wherever possible to obtain greatest possible profit margin. Case in point- San Lun milk using melanine to bulk up whey powder.

    The Japanese are world leaders all things technical- light years ahead of the Chinese and world leaders in bridge design and construction- with the world’s longest bridge to prove it- furthermore they have far more experience in similar seismic/geotechnical conditions as Indonesia.

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