International Economics: IB Economics

I'm not sure that this article ties in with the previous 'scoop' - superficially, some might have concerns about the US economy, not least in the wake of the collapse of a few banks. 

However, inflation is below 5%, unemployment remains remarkably low at 3.4%, lower than it was a year ago, and there's expected to be 1.6% economic growth this year. I think we'd settle for that in the UK, wouldn't we? 

Unlike the collapse of Silicon Valley Bank, it would seem that the Federal Reserve are ahead of the curve in this instance in looking to find a buyer for First Republic, the 14th largest bank in the US. 

According to the article, Federal Deposit Insurance Corporation (FDIC), a US financial regulator, have asked six banks to bid for the stricken bank and in doing so, shore up the US banking system.

Well might you ask.

The answer is probably - not at the moment, and we don't think it's likely to become one but...

An interesting pronouncement in the current environment - with the OECD advising that central banks should keep interest rates high despite the current uncertainty in financial markets after the collapse of Silicon Valley Bank and the worries about Credit Suisse. 

However, the international financial organisation is of the view that there's still a need for relatively tight monetary policy to overcome the scourge of inflation, even though there are a growing number of commentators opposed to this position. 

The latest US inflation data has been released and inflation has fallen to 6% from 6.4%, and this is a good thing. 

Where problems arise are that the Chairman of the Federal Reserve, Jerome Powell, has indicated that the central bank were prepared to keep interest rates high to drive inflation out of the system. However, since then the collapse of Silicon Valley Bank has spooked a number of investors, sparking fears of a banking crisis and, potentially, adverse macroeconomic implications. So, the question is which way are both the economy, and by definition, interest rates headed. 

Larry Elliott thinks that the threat to PacWest and Western Alliance don't represent a systemic threat to the US banking system, and that there's no cause for concern as yet, and thus no need for the Federal Reserve to intervene.

The fact of the matter is that the US still has 4,000 banks - that's more than 80 per state - and it's just likely that we're seeing a period of consolidation in the sector. 

It's not 2008. But it seems like it might be 2008-lite. 

Have we learnt anything? Richard Partington thinks that, on balance, we probably have...

It seems as thought the Swiss have taken pre-emptive action to prevent the collapse of Credit Suisse, with banking giant UBS stepping in, with the support of the Swiss government. 

Is it panic over? Monday will see.

The Credit Suisse situation is an interesting one, with the Swiss government offering a sizeable loan of £44bn from the Swiss central bank. So are we on the brink of a financial crisis? 

Commentators think not - despite a series of setbacks - although one or two people are worried about the prospects of contagion. This BBC clip gives some of the background, but spare a thought for the poor executives, who've trousered millions in salaries whilst presiding over this. Another example of why executive pay is so absurd.