EconomicCrisis.US

The U.S. services sector, like its sister sector manufacturing, is showing an increase in activity, which bodes well for the U.S. economy. The Institute for Supply Management’s Non-Manufacturing Index, also known as the services index, rose to 50.1 in December from 48.7 in November, the ISM announced Wednesday. Readings above 50 indicate an expansion; below 50, a contraction.

A Bloomberg News economists survey had expected the services index to rise to 50.4 in December. The index totaled 50.6 in October, and hit a cycle low of 37.4 percent in November 2008.

What’s more, the index’s closely watched business activity component also jumped 4.1 points, rising for the fourth time in five months, to 53.7 in December from 49.6 in November. The business activity component totaled 55.2 in October.
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The U.S. dollar has fallen in value vs. most other currencies for most of the last nine months and is now flirting with multi-year lows. More U.S. dollar weakness should be expected but not necessarily feared. Contrary to many proclamations from official and private sources, a “strong” dollar is not necessarily in the U.S. or collective global economic interest. Attempts to prevent a continued orderly dollar decline may further perpetuate global imbalances, slow U.S. economic recovery and prevent a stabilization in the U.S. debt dynamic that is badly needed.

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Moody’s Investors Service said its top debt ratings on the U.S. and the U.K. may “test the Aaa boundaries” because their public finances are worsening in the wake of the global financial crisis.

The U.S. and U.K. have “resilient” Aaa ratings, as opposed to the “resistant” top ratings of Canada, Germany and France, analysts led by Pierre Cailleteau in London said in a report. None of the top-rated countries is “vulnerable,” or have public finances that are “stretched beyond the point of ‘no return’ to the Aaa category,” New York-based Moody’s said.

The dollar weakened to 88.60 yen, from 89.51 yen, and strengthened to $1.4795 per euro from $1.4827. The pound fell against all 16 most-traded counterparts, dropping to $1.6289, from $1.6446. It weakened to 90.83 pence per euro, from 90.16. U.K. bonds rose, pushing the yield down 8 basis points to 1.08 percent, the biggest drop since Nov. 9.
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Around the world, investors are breathing a sigh of relief as the surprise financial crisis in Dubai starts looking more and more like a regional, not global, contagion. But the crisis has shined a spotlight on the dangers of overleveraged governments – and every American should be paying attention.

In many ways, Dubai is a special case. It’s a glitzy city-state controlled by a sheikh, populated mostly by migrant workers at every level of the economic spectrum. It’s had a reputation as the Vegas of the Middle East – and its flashy, fast-rising hotels, shady forms of financing and (comparatively) lax social standards seemed to fit the bill.
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