It's official: the US financial sector is deceased. The Federal Reserve is now lending directly to American companies, buying unsecured commercial paper. This will surely put any remaining commercial lenders out of business unless the Fed only buys paper at rates that are high enough to convince companies not to take them. With the Fed now in competition with remaining private banks, it has essentially torpedoed its own efforts to bail out the banking industry. It seems that Ben Bernanke, having studied the Great Depression, its effects and causes, is determined to repeat them.
The effect of this will be to make much-needed credit available to companies at artificially low rates. This will undoubtedly save many healthy companies from defaulting on loans that banks will not re-issue as they come due. But the risk is that it effectively prices banks out of the commercial paper market. If banks were uncertain about lending to companies before, they will have no doubts as to whether it is competitive to do so now. Presumably, companies will still be able to borrow from willing banks at lower rates if they can offer collateral. But why pay a bank interest when you can default on the US taxpayer with no apparent consequences.
This also means that the Fed's measures to boost liquidity and so stimulate lending between banks have failed. Banks are availing themselves heavily of the Fed's credit, but are still refusing to pass along the cheaper funds to each other. The interbank market remains in gridlock.
With $700 billion in funds waiting to purchase non-performing assets, its unclear what choice banks now have but to off-load their junk, buy government debt, and just collect interest. This is essentially what happened to the Indonesian banking sector during the Asian financial crisis. It simply disappeared from the economy for a few years, unwilling to lend. The Fed might argue, however, that it isn't killing the financial sector; it was already dead. Nouriel Roubini, who has so far proved correct on just about all of his predictions related to the crisis, is calling for a blanket US guarantee of all deposits and steps to accelerate the consolidation of the banking sector. This latter move is textbook handling of a financial crisis: regulators need to force ailing banks out of business to give healthier banks more air and food to survive.
While this might be doomsday for the financial sector, it is good news for corporations. So are hints of a rate cut by the Fed. Companies can now count on cheap financing to get them through the recession. It doesn't seem to do good things to the value of the dollar, but with the panic in financial markets prompting a flight to safety, the dollar is still making out. Once the dust settles, though, I suspect the dollar will suffer, as it becomes clear that the US is going to suffer from the crisis more than the rest of the world, not less.
That may be the key conclusion to the decoupling debates. No, the economies of the rest of the world have not decoupled from the US. But it used to be that the US economic cycle was amplified in emerging, trade-dependent economies. The reverse may now prove true. Investors will be looking for a lull in bad macroeconomic news before stepping in to reapportion assets to reflect the new realities of global growth.
warnold@thenational.ae
The specs
Engine: 1.5-litre 4-cylinder petrol
Power: 154bhp
Torque: 250Nm
Transmission: 7-speed automatic with 8-speed sports option
Price: From Dh79,600
On sale: Now
COMPANY%20PROFILE%20
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Business Insights
- Canada and Mexico are significant energy suppliers to the US, providing the majority of oil and natural gas imports
- The introduction of tariffs could hinder the US's clean energy initiatives by raising input costs for materials like nickel
- US domestic suppliers might benefit from higher prices, but overall oil consumption is expected to decrease due to elevated costs
MATCH INFO
Final: England v South Africa, Saturday, 1pm
The specs: 2017 Dodge Ram 1500 Laramie Longhorn
Price, base / as tested: Dhxxx
Engine: 5.7L V8
Transmission: Eight-speed automatic
Power: 395hp @ 5,600rpm
Torque: 556Nm @ 3,950rpm
Fuel economy, combined: 12.7L / 100km
A timeline of the Historical Dictionary of the Arabic Language
- 2018: Formal work begins
- November 2021: First 17 volumes launched
- November 2022: Additional 19 volumes released
- October 2023: Another 31 volumes released
- November 2024: All 127 volumes completed
England's Ashes squad
Joe Root (captain), Moeen Ali, Jimmy Anderson, Jofra Archer, Jonny Bairstow, Stuart Broad, Rory Burns, Jos Buttler, Sam Curran, Joe Denly, Jason Roy, Ben Stokes, Olly Stone, Chris Woakes.
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
Farasan Boat: 128km Away from Anchorage
Director: Mowaffaq Alobaid
Stars: Abdulaziz Almadhi, Mohammed Al Akkasi, Ali Al Suhaibani
Rating: 4/5
Name: Brendalle Belaza
From: Crossing Rubber, Philippines
Arrived in the UAE: 2007
Favourite place in Abu Dhabi: NYUAD campus
Favourite photography style: Street photography
Favourite book: Harry Potter
Company%20Profile
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From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
Tips for taking the metro
- set out well ahead of time
- make sure you have at least Dh15 on you Nol card, as there could be big queues for top-up machines
- enter the right cabin. The train may be too busy to move between carriages once you're on
- don't carry too much luggage and tuck it under a seat to make room for fellow passengers
PRO BASH
Thursday’s fixtures
6pm: Hyderabad Nawabs v Pakhtoon Warriors
10pm: Lahore Sikandars v Pakhtoon Blasters
Teams
Chennai Knights, Lahore Sikandars, Pakhtoon Blasters, Abu Dhabi Stars, Abu Dhabi Dragons, Pakhtoon Warriors and Hyderabad Nawabs.
Squad rules
All teams consist of 15-player squads that include those contracted in the diamond (3), platinum (2) and gold (2) categories, plus eight free to sign team members.
Tournament rules
The matches are of 25 over-a-side with an 8-over power play in which only two fielders allowed outside the 30-yard circle. Teams play in a single round robin league followed by the semi-finals and final. The league toppers will feature in the semi-final eliminator.
PROFILE OF SWVL
Started: April 2017
Founders: Mostafa Kandil, Ahmed Sabbah and Mahmoud Nouh
Based: Cairo, Egypt
Sector: transport
Size: 450 employees
Investment: approximately $80 million
Investors include: Dubai’s Beco Capital, US’s Endeavor Catalyst, China’s MSA, Egypt’s Sawari Ventures, Sweden’s Vostok New Ventures, Property Finder CEO Michael Lahyani
MEYDAN CARD
6.30pm Al Maktoum Challenge Round-1 Group One (PA) US$65,000 (Dirt) 1,600m
7.05pm Handicap (TB) $175,000 (Turf) 1,200m
7.40pm UAE 2000 Guineas Trial Conditions (TB) $100,000 (D) 1,600m
8.15pm Singspiel Stakes Group Two (TB) $250,000 (T) 1,800m
8.50pm Handicap (TB) $135,000 (T) 1,600m
9.25pm Al Maktoum Challenge Round-1 Group Two (TB) $350,000 (D) 1,600m
10pm Dubai Trophy Conditions (TB) $100,000 (T) 1,200m
10.35pm Handicap (TB) $135,000 (T) 1,600m
The National selections:
6.30pm AF Alwajel
7.05pm Ekhtiyaar
7.40pm First View
8.15pm Benbatl
8.50pm Zakouski
9.25pm: Kimbear
10pm: Chasing Dreams
10.35pm: Good Fortune
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COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
SPEC%20SHEET%3A%20APPLE%20IPHONE%2015%20PRO%20MAX
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COMPANY%20PROFILE
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If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
The%20specs
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SPAIN SQUAD
Goalkeepers Simon (Athletic Bilbao), De Gea (Manchester United), Sanchez (Brighton)
Defenders Gaya (Valencia), Alba (Barcelona), P Torres (Villarreal), Laporte (Manchester City), Garcia (Manchester City), D Llorente (Leeds), Azpilicueta (Chelsea)
Midfielders Busquets (Barcelona), Rodri (Manchester City), Pedri (Barcelona), Thiago (Liverpool), Koke (Atletico Madrid), Ruiz (Napoli), M Llorente (Atletico Madrid)
Forwards: Olmo (RB Leipzig), Oyarzabal (Real Sociedad), Morata (Juventus), Moreno (Villarreal), F Torres (Manchester City), Traore (Wolves), Sarabia (PSG)
Lampedusa: Gateway to Europe
Pietro Bartolo and Lidia Tilotta
Quercus
Squid Game season two
Director: Hwang Dong-hyuk
Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
Rating: 4.5/5
WORLD CUP SEMI-FINALS
England v New Zealand (Saturday, 12pm)
Wales v South Africa (Sunday, 1pm)
'My Son'
Director: Christian Carion
Starring: James McAvoy, Claire Foy, Tom Cullen, Gary Lewis
Rating: 2/5
ENGLAND SQUAD
Goalkeepers: Jack Butland, Jordan Pickford, Nick Pope
Defenders: John Stones, Harry Maguire, Phil Jones, Kyle Walker, Kieran Trippier, Gary Cahill, Ashley Young, Danny Rose, Trent Alexander-Arnold
Midfielders: Eric Dier, Jordan Henderson, Dele Alli, Jesse Lingard, Raheem Sterling, Ruben Loftus-Cheek, Fabian Delph
Forwards: Harry Kane, Jamie Vardy, Marcus Rashford, Danny Welbeck