The year-old recession in the US appears to be growing worse, according to new data from the Federal Reserve. Now the government is scrambling to find ways to resuscitate the housing markets as prices for homes continue to fall and even creditworthy buyers find banks reluctant to lend at reasonable rates. Now the market for commercial real estate appears to be in a tailspin, particularly in Manhattan, where the demise of Wall Street is having a somewhat predictable impact on occupancy rates.
In a worrisome development, apparently President-elect Barack Obama has been resisting suggestions that he become involved on planning of how to use the remaining TARP funds, suggesting there will be yet another change in restructuring policy once he takes office, or worse, a complete reversal. In the meantime, Obama's non-participation will hamstring any effort to shape economic and financial policy, recreating the vacuum many have feared will seize financial markets from now until Jan 20. The appetite for Asian risk (and hopefully Gulf risk eventually) keeps creeping in. Coke's continued bid to buy China Huiyuan represents a bet in the long-term health of the global economy and the rise of emerging economies such as China, India and the Gulf. Foreign funds continue to trickle into China and Hong Kong, and currencies augur a slight retreat from safety plays.
Yet one big problem remains on this side of the subcontinent: it emerges that Pakistan was the source of the Mumbai gunmen. This blog has been warning of the threat posed by instability in Pakistan. Now we have an abject example of just how big a risk the country's problems pose to the region. This is an opportunity to step in and shore up the country's government and ensure that Pakistan does not slip further towards becoming a failed state. warnold@thenational.ae
