Meltdown Monday
Tutor2u Economics
15th September 2008
A day that shook the world
Lehman tips over the brink
Lehman Bros Share Price
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
USD
90
0
0
Jan
Feb
Mar
Apr
May
Jun
Jul
07
Aug
Sep
Oct
Nov Dec
Jan
Feb Mar
Apr
May
08
Jun
Jul
Aug Sep
Source: Reuters EcoWin
Market Panic over HBoS
HBoS ordinary share price
GBP
£s per share
12 United Kingdom, HBOS ORD, Close, Pounds Sterling 2.325
12
11
11
10
10
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
Jan
Mar
May
Jul
06
Sep
Nov
Jan
Mar
May
Jul
07
Sep
Nov
Jan
Mar
0
May
Jul
Sep
08
Source: Reuters EcoWin
Greenspan on the crisis
• Alan Greenspan has
described the current
chaos in the markets as
"a once-in-a-century type
of financial crisis" adding
that it would inevitably
have a significant impact
on the global economy
AIG seeks emergency funding
Robert Peston’s Blog
“one of the world's biggest insurers,
AIG, is reeling from losses on its
exposure to real estate and credit
default swaps, or complicated
financial insurance - and, according
to the New York Times, is seeking a
$40bn bridging loan from the Fed.”
The US housing slide holds the key
US House Prices - S&P Case-Shiller Index
“The humbling moves,
which reshape the
landscape of American
finance, mark the latest
chapter in a tumultuous
year in which onceproud financial
institutions have been
brought to their knees as
a result of hundreds of
billions of dollars in
losses because of bad
mortgage finance and
real estate investments.”
Source: New York Times
Index
Monthly house price index Jan 2000=100
250
250
225
225
200
200
175
175
150
150
125
125
100
100
00
01
02
S&P Case-Shiller, Chicago
S&P Case-Shiller, Composite-10
03
04
05
06
07
08
S&P Case-Shiller, New York
S&P Case-Shiller, San Francisco
Source: Reuters EcoWin
Click on the headlines
Every cloud …..
Brent Crude Oil Prices
US dollars per barrel
Closing daily price, US dollars per barrel of oil
150
150
140
140
130
130
120
120
110
110
100
100
90
90
80
80
70
70
60
60
50
Jan
50
Mar
May
Jul
06
Sep
Nov
Jan
Mar
May
Jul
07
Sep
Nov
Jan
Mar
May
08
Jul
Sep
Source: Reuters EcoWin
When will rates be cut?
Interest Rates for the Euro Zone, the UK and the USA
Per Cent
6.0
6.0
5.5
5.5
Bank of England Rates
Percent
5.0
5.0
4.5
4.5
4.0
4.0
3.5
3.5
3.0
3.0
Euro Zone Interest Rates
2.5
2.5
2.0
2.0
1.5
1.5
USA Interest Rates
1.0
1.0
0.5
0.5
0.0
Jan
0.0
May
Sep
Jan
May
03
Euro Zone Interest Rate
Sep
04
Jan
May
Sep
Jan
05
United States Interest Rate
May
Sep
06
Jan
May
Sep
07
Jan
May Sep
08
United Kingdom Base Rate
Source: Reuters EcoWin
Too late to avoid a UK recession?
UK Consumer Confidence and Base Interest Rates
Overall index of consumer confidence, seasonally adjusted
6.00
Percent
5.75
6.00
Base Interest Rates
5.75
5.50
5.50
5.25
5.25
5.00
5.00
4.75
4.75
4.50
4.50
4.25
4.25
4.00
4.00
3.75
3.75
3.50
3.50
Index
5
5
Index of Consumer Confidence
0
0
-5
-5
-10
-10
-15
-15
-20
-20
-25
Long run average
-25
-30
-30
Jan
Apr
Jul
04
Oct
Jan
Apr
Jul
05
Oct
Jan
Apr
Jul
06
Oct
Jan
Apr
Jul
07
Oct
Jan
Apr
Jul
08
Oct
Source: Bank of England and GfK Confidence Data
UK property woes
The Housing Recession Deepens
Annual percentage change in UK house prices
30
30
Nationwide
25
25
Halifax
20
15
15
10
10
5
5
0
0
-5
-5
-10
-10
Percent
20
-15
-15
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
Source: HBOS and Nationwide Data
Stocks and Mortar
The Housing Boom Ends - Will Shares Follow?
FTSE 100 index (bottom pane) Average UK house price (top pane)
200000
200000
180000
180000
160000
160000
140000
140000
120000
120000
100000
100000
80000
80000
7000
7000
FTSE 100
Index
£s
House Prices
6500
6500
6000
6000
5500
5500
5000
5000
4500
4500
4000
4000
3500
3500
3000
3000
01
02
03
04
05
06
07
08
Source: Reuters EcoWin