FORIGN MONEY MARKET

As financial crisis is expanding globally, the state of the U.S. economy might remain weak for most of 2009. Housing have not shown a bottom yet and consumes could shortly see new lows. In reality, existing home sales rose 5.5% in September, but numbers should be checked again in the near future to confirm the validity. In effect, it takes time for households to repay debts and for the financial sector the increase reserves. So, with the unemployment rate rising and the inflation softening, the Federal Reserve is preparing another rate cut by 50/25 basis points. In addition, a new fiscal stimulus package is a possible solution, albeit not probable, while the Fed might buy Treasury bonds in an effort to increase its balance sheet. Will it be enough? Yes and no. As opposed to the past, the current crisis is systemic. It includes both the real economy and the financial sector. The easy access of the financial resources is a story of the past and the new tightening cycle has just begun. As a result, a different paradigm, a new frame of reference from which the world is seen, might be necessary for policymakers to face the challenges of the new era. During these periods of transition different powers will emerge. China, as an example, could use its enormous financial reserves to intensify the role of a global economic player. A creative set of values will be brought to the table by a fresh generation of leaders. This will be one of the most challenging and rewarding tasks for the new president of the United States.