U.S. Housing Slump End `Not Visible,' Credit to Worsen - IMF

The International Monetary Fund said there's no end in sight to the U.S. housing recession and warned that deteriorating credit conditions for consumers and banks may prolong a period of slow economic growth.

At the moment, a bottom for the housing market is not visible, the IMF said in its Global Financial Stability Report. Stemming the decline in the U.S. housing market is necessary for market stabilization as this would help both households and financial institutions to recover.

The IMF, which a year ago failed to foresee the depth of the subprime mortgage collapse, stood by its April forecast for about $1 trillion in losses stemming from the U.S. mortgage crisis. Worldwide asset writedowns and losses have totaled $469 billion in the past year and $345 billion has been raised.

The Washington-based lender in the report said the Federal Reserve's decisions to expand lending to Wall Street firms have succeeded in containing systemic risks.'' Still, weakness in housing threatens to extend the slump.The growing concern is that, with delinquencies and foreclosures in the U.S. housing market rising sharply, and house prices continuing to fall, loan deterioration is becoming more widespread,'' the IMF said.

As economic growth slows, banks will face continued headwinds in maintaining earnings due to falling credit quality, declining fee income, high funding costs, and exposures to monoline and mortgage insurers.

On July 17 the IMF said inflation in developing and emerging countries would average 9.1 percent in 2008, up from a forecast of 7.4 percent in April. Their prediction for inflation in advanced economies for this year was raised to 3.4 percent, compared with a forecast of 2.6 percent in April.

Bloomberg

Our real challenges lie at home - Internal security concerns

The internal security situation in India continues to remain a cause of concern for the Central/ state governments and all the citizens alike. Out of the many challenges we face at home, the internal security challenge is one of the key one. Violent incidents continue in some states of the North-East, particularly in Assam, Manipur and Nagaland. The ethnic overtones of violent acts in Assam are particularly disturbing. While the situation in Jammu & Kashmir has shown some overall improvement, apart from the bombings by the terrorists which are happening in several areas throughout India in regular intervals.

To control/reduce them we need better security forces, better in all senses, be it training, be it skills, be it equipment, be it resources, be it mobility or be it attitudes and the police forces should not be in control of the politicians. We need superior intelligence capabilities which can alert us to the impending threats. We need greater discipline, lesser politicisation and zero corruption.

We need to work with greater commitment for eliminating the threats posed by Naxalism. In the past that there are many dimensions to the problems of Naxalism. Concerted efforts can be made on the development front to remove any feeling of alienation, the security forces need to redouble their efforts to control the spread of this phenomenon.

Terrorism has become a global phenomenon of our times. In terrorist organisations, we face determined, committed and highly motivated adversaries working with evil design and evil intent. We need to go far beyond conventional responses in facing the severe terrorist threats. The government should work on many fronts — through dialogue processes, through development activities and through improved communication links — to tackle these problems.