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The Economist – 10/08/07
August 10, 2007, 7:41 am
Filed under: current affairs

The Economist – 10/08/07

Credit squeeze

  • For the past few years, money have been lent too cheaply and easily to too many people.
  • Standards are now tightening; the question is how serious the impact would be.
  • Most companies will be able to shrug off higher rates, as they are creditworthy and many do not need to use debt. Many firms are flush with cash and corporate profits are high.
  • Emerging markets seem to be in a better position to withstand the squeeze compared to the late 1990s.
  • The biggest risk to the global economy lies with the debt-ridden American consumer, who face high oil prices, credit meltdown, falling house prices and slowing spending.
  • Despite the talk about hedge funds and derivatives, the real worry lies with banks. They face trouble on several fronts and they are the crucial entities that turn a credit crunch into a recession. Some have substantial exposure to subprime credit due to involvement with hedge funds.

Hedge funds investors face lock up

  • In their eagerness to invest, many investors agree to “lock-ups” of invested funds.
  • Some companies have been developing secondary markets for investors to sell their share in a hedge fundĀ at a discount.

Liberal Democratic Party loses big in Japanese elections

  • Shinzo Abe refuses to quit; opposition is not strong and credible enough to take over.

Corruption remains a formidable problem in China

  • Dishonesty often happens at the highest levels and involves groups rather than individuals.
  • Corruption might be partly explained by the Confucianist beliefs of the Chinese, that family and friends come first, then “face” before compliance with the law.

Marketing reaches out to Muslims

  • Muslims in America are above average in terms of salaries, education and family size.
  • Food, finance and packaged goods are theĀ consumer markets most affected by Islamic laws.
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