Sunday, September 7, 2008

The Perfect Storm

We are on a rather slippery stretch now! The Mobius Strip was born on a landmark day in the history of United States - on a day when the two biggest mortgage companies were taken over by the U.S. government. The Financial Times, (http://us.ft.com/ftgateway/superpage.ft?news_id=fto090720081413418980) painted a picture of a hurricane ready to wreac havoc in its way, as it spreads to other parts of the global economy. The way Americans and American banks bought and sold homes, has just become history.

Tax-payers will be called on to pay for massive capital injections into Fannie and Freddie. Credit rating company S&P has already downgraded F&F stock to junk after the government took over. As United States goes to sleep after the largest government bailout that made the treasury secretary Henry Paulson a hero, rest of Asia wakes up to tumbling US treasuries and rallies in its stock exchanges.

At a time when there is very little leeway for central bankers across the world to devise a truly autonomous monetary policy, this blog will try to explore the pressure points for economies. While its too early to speak about the death of decoupling, we will try to understand how connected economies truly are. In short it will try and answer the question of how rising prices in one part of the world, can lead to higher cost of money elsewhere?

Welcome to The Mobius Strip.

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