MEDIA REACTION: GLOBAL ECONOMY: SUB-PRIME MORTGAGE CRISIS

UNCLAS SAO PAULO 000375 SIPDIS STATE INR/R/MR; IIP/R/MR; WHA/PD DEPT PASS USTR USDOC 4322/MAC/OLAC/JAFEE E.O. 12958: N/A TAGS: KMDR OPRC OIIP ETRD BR SUBJECT: MEDIA REACTION: GLOBAL ECONOMY: SUB-PRIME MORTGAGE CRISIS ¶1. Another Package Editorial in liberal Folha de S. Paulo (7/15) says: "Frightened by the galloping economic crisis, the Bush administration announced another billion dollar package to help the financial crisis. ...With another billion dollar contribution, the Bush government and the Fed are trying to stem the contagious flow of the crisis. Judging by the pessimistic reaction of the markets yesterday, other considerable battles will come." ¶2. The Turbulence Continues Editorial in center-right O Estado de S. Paulo (7/15) comments: "Pressured by the mortgage crisis, the Fed slows down the fight against inflation. ... The crisis was, in great part, facilitated by the excess of liquidity permitted by the Fed, in its long process of reducing interest rates. With this policy, the American Central Bank allowed prices to increase. ...the Fed started to export inflation to the rest of the world and became a threat to Latin America. In fact, the fight against inflation will be much more difficult without the participation of the world's most important central bank. But, will the Fed be prepared soon to initiate a new phase of higher interest rates? Unfortunately, no other central bank can keep waiting for an answer. It is necessary to act, and in Brazil, the effort for the adjustment has already started." Story