World Economic News
London Bankers: British House Prices Are About To Crash
In a report titled "Bubble Trouble," David Pannell of the London-based investment bank Durlacher, said that house prices in Britain will crash by 30% from their peaks and this crash will be "sharper but shorter than in the 1980s," Reuters reported Feb. 24. He added, "Our pessimism is based on international and historic experiencefor example, the UK housing market has never experienced a soft landing.... Our analysis suggests a correction will take place even if interest and unemployment rates remain at their current levels."
Capital Economics, an independent research company in London, also came out with a warning concerning a 30% fall of British house prices before the year ends.
Asia Warned: Deal with Dollar Crisis Now
A leading Malaysian economic journalist warned Asia to deal with the dollar crisis now, according to New Straits Times Feb. 22. Munir Majid, in a headlined "The Big Picture: America Has the World by the Dollar," leads with a quote from Treasury Secretary John Connally in 1971: "The dollar is our currency, but it is your problem." He continues: "More than 30 years on, it still is; perhaps even more so. The current Bush Administration policy of benign neglect of the dollar, which has seen the greenback plummet against all major currencies, is leaving in its trail a lot of problems for many countries, as the U.S. struggles to address its trade deficit and assumed loss of jobs to foreign imports. And the Bush Administration, as we know, is not one to take half-measures.... There is plenty more benign neglect to come, to impart certain clear messages and to hurt certain countries over their currency management policies."
Munir points out that if the U.S. intends to close the trade gap, it is not working. "Exporters to the U.S. have squeezed their profit margins to ensure volume and to protect market share. In the luxury car market, for instance, European automobiles are selling almost 30% cheaper than in Europe.... Has the dollar to fall further? This is the worrying part....
"Every once in a while, after the Americans have chalked up an unhealthy current-account deficit, the whole world will have hell to pay. Stuck with the dollar as the international reserve currency, there is not very much the rest of the world can do, except to dance to the American tune."
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