Global Economic Crisis in the News
Global Marshall Plan - The Global Marshall Plan aims at a "World in Balance". To achieve this we need a better design of globalization and the global economic processes - a worldwide Eco-Social Market Economy. This is a matter of an improved global structural framework, sustainable development, the eradication of poverty, environmental protection and equity, altogether resulting in a new global 'economic miracle'. Why do we need a Global Marshall Plan? Because today's global situation is scandalous, and because the current conditions of globalization produce the complete opposite of what is constantly demanded in rosy speeches. Poverty, the north south divide, migration, terror, wars, cultural conflicts, and environmental catastrophes are all problems, which can no longer be resolved nationally under the conditions of a widely unregulated globalization process. Therefore, we need an improved and binding global framework for the world economy, that brings economy into harmony with society, culture, and environment. In order to create a World in Balance a worldwide Eco-Social Market Economy with globally binding social, ecological, and cultural standards is required. The Global Marshall Plan combines a functional and coherent global governance structure with appropriate reforms and intelligent interlinking of UN, WTO, IMF, World Bank and ILO and UNEP standards with the raising of an additional 100 billion US$ a year in order to co-finance development. The enlargement process of the European Union serves as a conceptual model for combining co-financing and the compliance with eco-social standards. This enlargement, however, requires a better financial support than it is the case in the current enlargement round. Funding In addition to the creation of fair competitive conditions in the agricultural sector and improved North-South cooperation in this sector as well as reasonable methods of debt relief for the less and least developed countries, the Global Marshall Plan focuses on new financial funding sources. They are based on global added value processes and therefore neither strain domestic economies nor distort competition. Possible financing mechanisms are a Terra-Tax on world-wide trade, a levy on global financial transactions, trade with equal per capita emission rights, a cerosine tax, or Special Drawing Rights with the IMF. (WorldShift Network: The Club of Budapest is a founding member)
Links: MUST WATCH!!! - In this Brand New DVD presentation Don and David McAlvany analyze the financial market chaos of 2008 and its immediate impact on the real world economy of 2009 and beyond. Order your FREE copy today at www.mcalvany.com/request.php Perot Charts: Charting Government Fiscal Irresponsibility - Why this web site now? Because we are running out of time. The American people must wake up and face the reality that promises made in the past will soon bankrupt this nation. These problems are explained in an easy-to-understand chart presentation discussed further at the bottom of this page. Comments to the charts and other material described to the right [at originating website linked above] are encouraged. more...
Europe's major
economies contract
BBC News
(August 14, 2008) - The 15 economies of the
eurozone contracted by 0.2% between April and June, heightening fears
that the euro area is sliding towards recession. The eurozone's first
decline since it was created in 1999 was driven by a slowdown in exports
and consumer spending. The German economy, Europe's largest, shrank by
0.5% in the second quarter compared with the previous quarter. And in
both France and Italy GDP shrank by 0.3% in the second quarter. The
slowdown was less pronounced in the wider European community of 27
nations including the UK, which contracted by 0.1%. However Estonia,
where the economy contracted for the second consecutive quarter, is now
considered to be in recession. Ireland, whose economy contracted in the
first quarter of the year, has not yet released its second quarter
growth figures. Compared to the second quarter of 2007, the eurozone
economies grew by 1.5% and the 27 European Union countries grew by 1.7%.
The news weakened the euro, which was already well down from its recent
highs against the dollar. But high eurozone inflation, which was
unchanged on the month, made it unlikely that the European Central Bank,
which raised interest rates last month, will reverse its stance. Spain
was the only one of the major eurozone economies to see its economy
expand between April and June. It grew by 0.1% compared with the
previous quarter. Figures also released on Thursday showed that prices
across the euro area rose by 4% in July compared to a year earlier. The
European Central Bank increased interest rates in July by 025% to 4.25%
in a bid to combat rising prices. The July figure is the same as June's
inflation rate, but although the rate of increase is not quickening,
economists said rising prices were still a concern. "Although inflation
has been stable at 4.0 % in July, it is still way above target," said
Jörg Radeke from the Centre for Economics and Business Research. "Hence,
the possibility that the European Central Bank is cutting interest rates
in 2008 to support the sickening economy is remote." more...
Japan on brink of recession as economy shrinks
AFP
(August 13, 2008) - Japan said Wednesday
its economy contracted in the second quarter as falling exports and weak
consumer spending sent Asia's largest economy hurtling toward its first
recession in six years. The slump reflects the rapidly deteriorating
global economic climate, with fears of a recession in the eurozone also
mounting as the fallout from the US financial crisis ripples around the
world. Japan's gross domestic product (GDP) shrank by 0.6 percent in the
three months to June from the previous quarter, the Cabinet Office said,
marking the first time in a year that the world's second-biggest economy
has contracted. The economy shrank by 2.4 percent on an annualised
basis, matching market expectations. The slump put Japan on the cusp of
outright recession, which is usually defined as two or more straight
quarters of economic contraction. The last time that happened in Japan
was in 2001, when the recession lasted for three quarters. Tokyo share
prices slumped 2.1 percent as the weak growth figures added to jitters
about problems in the US banking sector. GDP growth for the first
quarter of 2008 was also revised down to 0.8 percent quarter-on-quarter
from 1.0 percent previously. Economic growth "will remain very weak
throughout this fiscal year," said Mamoru Yamazaki, chief economist for
Japan at RBS Securities. "The increase in oil and commodity prices is
damaging corporate profits," while rising inflation is hurting
households, he said. more...
Fed holds first auction for 84-day loans
Yahoo Finance News
(August 12, 2008) - The Federal Reserve has
auctioned another $25 billion in loans to the nation's banks and given
them more time to pay the money back in an effort to combat a serious
credit squeeze. The Fed announced Tuesday that the money would be loaned
at a rate of 2.754 percent. In the latest auction, the Fed offered the
loans for an extended period of 84 days, rather than the 28-day period
for the previous loans. It marked the Fed's latest attempt to be
innovative in providing the nation's banking system with the cash it
needs to combat a serious credit crisis stemming from mounting mortgage
loan losses. The credit squeeze hit with force a year ago and the
central bank has shoveled out billions of dollars in loans. From
September through April it also was aggressively cutting interest rates
to keep the financial turmoil from pushing the country into a deep
recession. The Fed's interest-rate setting panel met again last week and
for the second meeting held interest rates unchanged amid concerns that
lowering rates further could stoke inflation pressures. Fed policymakers
instead indicated that they are likely to hold rates steady for an
extended period. That signal bolstered financial markets that had been
worried higher inflation pressures might prompt the Fed to start raising
rates even though the economy remains weak. The latest Fed auction was
held on Monday with the results announced Tuesday. It saw 64 bidders
seeking a total of $54.8 billion in funds. The Fed had announced that it
would auction off $25 billion for 84 days. In two weeks the Fed will
auction $75 billion in loans for 28 days. The Fed began the auction
process last December in an effort to increase use of its discount
window borrowing facility, believing that the auctions would help remove
the stigma that banks feared was attached to their petitioning for
direct loans from the Fed's discount window.
Credit crisis triggers unprecedented response
The Washington Post
(August 8, 2008) - Since the credit crisis
erupted a year ago, the Bush administration has presided over one of the
broadest expansions of the government into private lending in U.S.
history, risking public money to prop up financial firms both large and
small. The administration has transformed federal agencies into dominant
players in such diverse realms as student lending and mortgage finance
while exposing itself to trillions of dollars in loans. The scope of
these commitments demonstrates the unprecedented nature of the challenge
facing the nation. Not since the Great Depression have so many debt
markets been in turmoil at the same time, financial historians say.
During the savings and loan crisis of the late 1980s and early 1990s,
for example, the financial upheaval was largely contained to banks and
thrifts, though the real estate market also felt the impact. Now, the
contagion has rapidly spread from mortgages to bonds and exotic
securities, student and corporate lending, credit cards and home equity
loans, and residential and commercial real estate. The disruption has
buffeted investment and commercial banks, mortgage finance agencies, and
insurance firms of different stripes. "We have a banking crisis and an
agency crisis and a mortgage crisis and a coming credit card crisis.
We've never seen anything like that before. And it all seems to be
coming home to roost at the same time. That's never happened either,"
said Charles Geisst, professor of finance at Manhattan College. He said
the Great Depression was the last time financial markets were hammered
by such a variety of factors. "But we did not even have credit cards in
the 1930s; there were no such thing as student loans," he added. The
breadth and speed of events have sent federal officials scrambling to
plug leaks in the financial system. In the process, the government
has bound taxpayers to the fate of a wide variety of banks and borrowers
and could ultimately be responsible for losses in the tens of billions
of dollars or more, according to estimates by congressional reports and
interviews with regulators. But the government may also end up
paying nothing at all, largely because it received collateral in return
for backing much of these debts and could recoup some money if borrowers
stop making their interest payments. No one knows for sure because much
of the government's response involved novel programs designed to contain
an unpredictable crisis. As the credit crisis worsened, Treasury
Secretary Henry M. Paulson Jr., a strong proponent of free markets and
the architect of much of the administration's response, began to push
initiatives that enlarged the government's involvement on Wall Street
and in the housing industry. "What I've said is that I'm playing the
hand that was dealt and that my responsibility is to protect the U.S.
economy and the American people," Paulson said in an interview. The pace
of these interventions accelerated as the credit crisis spread across
the capital markets. At first, the administration avoided programs that
exposed taxpayers to potentially large losses. The Federal Housing
Administration, for instance, offered struggling mortgage holders a
chance to refinance into low-cost loans backed by the government with
any losses borne by the agency's insurance fund. Last summer, Paulson
also pressed private mortgage lenders to form an alliance called Hope
Now to rework mortgages. The initiative did not require public funds,
except to set up a hotline, and it may have prevented lawmakers at that
time from pursuing more expensive initiatives, he said. Within months,
however, Paulson was directing more significant intrusions into the
markets. In March, he strongly endorsed the Fed leaders' decision to put
$29 billion in public money on the line to facilitate the takeover of
the crippled investment firm Bear Stearns by Wall Street bank J.P.
Morgan Chase. In April, Paulson helped the Department of Education set
up emergency programs to ensure students could get loans as private
lenders fled the business because of trouble in the credit markets.
Education officials ramped up their direct lending, which some analysts
say could reach $75 billion, and got new authority from Congress to buy
loans outright from lenders. Then, last month, Paulson pushed for new
authority to lend or invest in mortgage giants, Fannie Mae and Freddie
Mac, which the Congressional Budget Office said could impose a wide
range of costs to taxpayers, from nothing to more than $100 billion.
Along the way, the Fed was injecting money into the banking system,
including through several new, unusual programs. In negotiations over
the Bear Stearns rescue, the Fed agreed to back $30 billion worth of
risky mortgage assets but persuaded J.P. Morgan to absorb the first $1
billion of any losses. At the end of July, the portfolio was worth $29.1
billion, according to the central bank. Because the Fed can be patient
and sell the assets gradually over time, officials believe taxpayers
are highly unlikely to lose more than a couple billion dollars and
the central bank may ultimately make some money. more...
IMF Contemplates System Failure. Could it be the 1.2 Quadrillion in
Derivatives? McAlvany Weekly
Commentary
(July 30, 2008)
U.S. companies vulnerable to foreign buyers
Reuters
(July 29, 2008) - With a record volume of international takeovers
of U.S. companies, it almost appears America itself is up for sale. The
weak dollar and slumping stock prices of U.S. companies has created a
window of opportunity for international buyers to snatch up American
icons such as beer brewer Anheuser-Busch Cos Inc and the landmark
Chrysler Building in New York. "The dollar has depreciated so much that
America is on the sale rack," said Sung Won Sohn, a professor of
economics at California State University. "America has such an appetite
for foreign goods -- Chinese imports and oil -- that U.S. dollars have
gone overseas. Now, many Americans aren't happy that foreign companies
are buying pieces of America with the money we gave them in the first
place," Sohn said. In the second quarter, acquisitions of U.S. companies
by international buyers totaled $124.3 billion, marking the highest
total for any second quarter on record and jumping 23 percent over the
year-earlier quarter, according to research firm Dealogic. International
takeovers represented 22 percent of all U.S. merger activity in the
first half of the year, up from 17 percent in the first half of 2007,
according to research firm Dealogic. InBev NV's deal to acquire
Anheuser-Busch for $52 billion gave Belgium the distinction of being the
most active foreign buyer of U.S. assets in the first half of this year,
followed by Spain and Canada, Dealogic said. The Anheuser-Busch deal
ranked as the second-biggest cross-border acquisition of a U.S. company
in history, following Vodafone Group Plc's $60.3 billion
acquisition of AirTouch Communications in 1999, according to Thomson
Reuters. Other U.S. assets recently falling into international hands
include Barr Pharmaceuticals Inc, which agreed to be acquired by
Israel's Teva Pharmaceutical Industries Ltd, the world's largest generic
drug company, for $7.46 billion; and eye care company Alcon Inc which is
being bought by Switzerland's Novartis AG for about $27.7 billion.
Earlier this month, Swiss drugmaker Roche AG made a bid to acquire the
shares of its U.S. partner Genentech Inc it does not already own for
$43.7 billion. Even the Pennsylvania Turnpike awarded long-term leasing
rights to a Spanish-led investor group for $12.8 billion. Although some
investment bankers and analyst pin the spike in cross-border activity to
the weak dollar, others contend that strategy and the desire to expand
globally were the motivators behind many of these recent corporate
deals. "Strategic buyers don't wake up in the morning and say: 'This
currency is cheap. I'm going to go do a deal.' They do a deal because
it's strategic and makes sense," said Herald Ritch, president and
co-chief executive officer of investment bank Sagent Advisers. "There's
no question that, on the margin, currency levels tend to influence
decisions, but strategic deals get done because they fit a company's
strategy," Ritch said. European companies have been the most active
buyers of U.S. assets, with 314 deals so far this year, compared with
117 deals by Asian acquirers, and 33 by African and Middle Eastern
buyers, according to Thomson Reuters. "Europe and the U.S. dominate deal
activity globally, so it makes sense that deals between those areas
would predominate," Ritch said. Although some investment bankers view
the second quarter's record pace of U.S. takeovers as an anomaly, Sohn
said the 13-percent depreciation of the dollar against major currencies
over the past 18 months should fuel more acquisitions. "There are
trillions of dollars overseas that have to be put to work. This is just
the tip of the iceberg," Sohn said.
Home prices drop by record 15.8 pct. in May
Associated Press
(July 29, 2008) - Home prices tumbled by the steepest rate ever
in May, according to a closely watched housing index released Tuesday,
as the housing slump deepened nationwide. The Standard & Poor's/Case-Shiller
20-city index dropped by 15.8 percent in May compared with a year ago, a
record decline since its inception in 2000. The 10-city index plunged
16.9 percent, its biggest decline in its 21-year history. No city in the
Case-Shiller 20-city index saw price gains in May, the second straight
month that's happened. The monthly indices have not recorded an overall
home price increase in any month since August 2006. Home values have
fallen 18.4 percent since the 20-city index's peak in July 2006. Nine
metropolitan cities — Las Vegas, Miami, Phoenix, Los Angeles, San Diego,
San Francisco, Seattle, Wash., Portland, Ore., and Washington, D.C. —
posted record declines in May. And the value of housing in Detroit is
now lower than it was in 2000. But a possible bright spot in an
otherwise dismal report, seven metros — Tampa, Fla., Boston, Detroit,
Minneapolis, New York, Dallas and Atlanta — showed smaller annual
declines. Las Vegas recorded the worst drop, with prices plunging 28.4
percent in the month. Miami came in a close second, with prices down
28.3 percent. Charlotte, N.C., posted the smallest drop at 0.2 percent.
Until April, the North Carolina city had been the last metro still
showing price gains.
Jim Deeds: End of the World? No, Not Really. Just Time to Adjust Your
Thinking McAlvany Weekly
Commentary
(July 23, 2008)
Dinars for Dollars: Arabs Buying Out Collapsing Western Banks
Israel National News
(July 16, 2008) - First it was Citibank.
Now it's Barclay's and New York City's Chrysler Building skyscraper.
Muslim Arabs are buying out collapsing Western banks and businesses and
gaining growing international power, but some Arab investors are worried
their investments may go down the drain with the American economy. The
current financial crisis in the United States has spread to other
countries because of a massive debt that was not backed by enough real
and liquid collateral. Banks and businesses gasping for financial breath
are up for sale at basement prices, but no one is certain if the
basement is the bottom. "The possibility remains that more Arab white
knights will be sought to rescue ailing financial institutions," wrote
Dr. Mohammed Ramady, a former banker and Visiting Associate Professor at
the King Fahd University of Petroleum and Minerals in the Financial
Adviser magazine. He said he fears that Arab investors will end up
chasing their investments with more money to keep them from going under.
The Abu Dhabi Investment Council of the oil-rich United Arab Emirates
kingdom of Abu Dhabi last November announced it was bailing out the
mammoth Citibank financial institution, formerly headed by Bank of
Israel Governor Prof. Stanley Fischer, with $7.5 billion. Next in line
was Britain's Barclay's Bank, which raised $9 billion from investors in
the oil-rich kingdom of Qatar and in Asian countries. The Abu Dhabi
Investment Council last month forked out approximately $800 million for
a 75 percent stake in New York City's 1,046-foot-tall Chrysler Building,
which was the world's tallest building for a year until the Empire State
Building surpassed it in the 1930's. The purchase of American banks by
foreigners has been blocked in the past by security and political
considerations, but the barriers have come down, wrote Dr. Ramady. "How
long this lasts is only a matter of guesswork, as once again, the
specter of foreign takeovers of 'national' symbols will be hard to
accept," he added. In a more serious vein, The Australian
editor-at-large Paul Kelly wrote earlier this month that the foreign
investments, headed by Arabs, signal a major change in international
power. "The energy, financial and political woes that grip the U.S.
signal a decisive shift in world power, mocking the liberal delusion
that Barack Obama or John McCain can return American prestige and power
to its pre-Bush year 2000 nirvana," he wrote. "There is no such nirvana.
There is instead a new reality: the greatest transfer of income in human
history [and] the rise of a new breed of wealthy autocracies that
cripple U.S. hopes of dominating the global system and demands on the
U.S. to make fresh compromises in a world where power is rapidly being
diversified." more...
Americans may be losing faith in free markets
Los Angeles Times
(July 16, 2008) - For a generation, most people accepted the idea
that the core of what makes America tick was an economy governed by free
markets. And whatever combination of goods, services and jobs the market
cooked up was presumed to be fine for the nation and for its citizens --
certainly better than government meddling. No longer. Spurred by the
continued housing crisis, turmoil in financial markets, spiking oil
prices, disappearing jobs and shrinking retirement savings, the nation
and its political leaders have begun to sour on the notion that the
current market system is the key to a fair, stable and efficient
society. "We're at a hinge point," said William A. Galston, a senior
fellow at the Brookings Institution in Washington who helped craft
President Clinton's market-friendly agenda during the 1990s. "The strong
presumption in favor of markets, which has dominated public policy since
the late 1970s, has been thrown very much into question." Now, to a
degree not seen in years, politicians and outside experts are looking
with favor at more, not less, government involvement in the economy. Of
course, Americans always grouse during troubled times. And as market
advocates are quick to point out, the current run of bad economic breaks
has yet to result in the throwing over of free-market principles in
favor of some drastically different approach -- such as a
government-directed economy. "There may be a backlash against markets at
the moment," acknowledged Kevin A. Hassett, economic studies director at
the American Enterprise Institute in Washington and an advisor to
presumed Republican presidential nominee John McCain. "But the backlash
doesn't seem to be informed by any alternative view of how the world
works." more...
Euro soars to $1.60 against U.S. dollar, a new record high
Associated Press
(July 15,
2008) - The European single currency leapt to a record high above
1.60 dollars here on Tuesday as investor fears grew over the state of
the US economy and its financial services sector, dealers said. In late
morning London deals, the euro jumped to 1.6038 dollars, which beat the
previous all-time peak of 1.6019 that was set on April 22.
Fannie Mae, Freddie Rescue a 'Disaster,' Rogers Says
Bloomberg
(July 14,
2008) - The U.S. Treasury Department's plan to shore up Fannie
Mae and Freddie Mac is an "unmitigated disaster" and the largest U.S.
mortgage lenders are "basically insolvent," according to investor Jim
Rogers. Taxpayers will be saddled with debt if Congress approves U.S.
Treasury Secretary Henry Paulson's request for the authority to buy
unlimited stakes in and lend to Fannie Mae and Freddie Mac, Rogers said
in a Bloomberg Television interview. Rogers is betting that Fannie Mae
shares will keep tumbling. Goldman Sachs Group Inc. analyst Daniel
Zimmerman said the mortgage finance companies' shares may fall another
35 percent and lowered his share-price estimate for Fannie Mae to $7
from $18 and for Freddie Mac to $5 from $17. Freddie Mac fell 64 cents,
or 8.3 percent, to $7.11 in New York Stock Exchange trading, while
Fannie Mae fell 52 cents, or 5.1 percent, to $9.73. "I don't know where
these guys get the audacity to take our money, taxpayer money, and buy
stock in Fannie Mae," Rogers, 65, said in an interview from Singapore.
"So we're going to bail out everybody else in the world. And it ruins
the Federal Reserve's balance sheet and it makes the dollar more
vulnerable and it increases inflation." The chairman of Rogers Holdings,
who in April 2006 correctly predicted oil would reach $100 a barrel and
gold $1,000 an ounce, also said the commodities bull market has a "long
way to go" and advised buying agricultural commodities. Rogers, a former
partner of hedge fund manager George Soros, predicted the start of the
commodities rally in 1999 and started buying Chinese stocks in the same
year. He traveled the world by motorcycle and car in the 1990s
researching investment ideas for his books, which include "Adventure
Capitalist" and "Hot Commodities." Billionaire investor Soros said today
that Fannie Mae and Freddie Mac face a "solvency crisis," not a
liquidity one, and that their troubles won't be the last financial
disruption, Reuters reported. "This is a very serious financial crisis
and it is the most serious financial crisis of our lifetime," Soros told
Reuters in a telephone interview. "It is an idle dream to think that you
could have this kind of crisis without the real economy being affected."
"These companies were going to go bankrupt if they hadn't stepped in to
do something, and they should've gone bankrupt with all of the mistakes
they've made," Rogers said. "What's going to happen when you Band-Aid
and put some Band-Aids on it for another year or two or three? What's
going to happen three years from now when the situation's much, much,
much worse?" Paulson's proposal, which the Treasury anticipates will be
incorporated into an existing congressional bill and approved this week,
signals a shift toward an explicit guarantee of Fannie Mae and Freddie
Mac debt. The Federal Reserve separately authorized the firms to borrow
directly from the central bank. more...
Analysts say more U.S. banks will fail
International Herald Tribune
(July 14,
2008) - As home prices continue to decline and loan defaults
mount, U.S. regulators are bracing for dozens of American banks to fail
over the next year. But after a large mortgage lender in California
collapsed late Friday, Wall Street analysts began posing two crucial
questions: Just how many banks might falter? And, more urgently, which
one could be next? The nation's banks are in far less danger than they
were in the late 1980s and early 1990s, when more than 1,000 federally
insured institutions went under during the savings-and-loan crisis. The
debacle, the greatest collapse of American financial institutions since
the Depression, prompted a government bailout that cost taxpayers about
$125 billion. But the troubles are growing so rapidly at some small and
midsize banks that as many as 150 out of the 7,500 banks nationwide
could fail over the next 12 to 18 months, analysts say. Other lenders
are likely to shut branches or seek mergers. "Everybody is drawing up
lists, trying to figure out who the next bank is, No. 1, and No. 2, how
many of them are there," said Richard Bove, the banking analyst with
Ladenburg Thalmann, who released a list of troubled banks over the
weekend. "And No. 3, from the standpoint of Washington, how badly is it
going to affect the economy?" Many investors are on edge after federal
regulators seized the California lender, IndyMac Bank, one of the
nation's largest savings and loans, last week. With $32 billion in
assets, IndyMac, a spinoff of the Countrywide Financial Corporation, was
the biggest American lender to fail in more than two decades. Now, as
the Bush administration grapples with the crisis at the nation's two
largest mortgage finance companies, Fannie Mae and Freddie Mac, a rush
of earnings reports in the coming days and weeks from some of the
nation's largest financial companies are likely to provide more gloomy
reminders about the sorry state of the industry. more...
Feds take over mortgage lender IndyMac. May become most expensive bank
collapse ever CNN Money
(July 12,
2008) - In what could turn out to be the most expensive bank
failure ever, troubled mortgage lender IndyMac Bank was taken over by
federal regulators on Friday. The operations of the Pasadena,
Calif.-based bank - once one of the nation's largest home lenders - were
shut down at 3 p.m. by the Office of Thrift Supervision and transferred
to the Federal Deposit Insurance Corp. According to the FDIC, 10,000
IndyMac customers could lose as much as $500 million in uninsured
deposits. The agency says the failure will cost the Deposit Insurance
Fund between $4 billion and $8 billion, based on preliminary estimates.
"It's possible this will be the most costly bank failure in history, but
it's too soon to say," FDIC Chairman Sheila Bair said in a conference
call late Friday night. The failure could also affect premiums paid by
all banks for deposit insurance, she added. IndyMac, with assets of
$32.01 billion and deposits of $19.06 billion, is the fifth bank to fail
this year. Between 2005 and 2007, only three banks failed. And in the
past 15 years, the FDIC has taken over 127 banks with combined assets of
$22 billion, according to FDIC records. "There will be increased
failures, but it will be within range of what we can handle," Bair said.
"People should not worry." IndyMac marks the largest bank collapse since
1984, when Continental Illinois, which had $40 billion in assets,
failed, according to FDIC records. The two most expensive failures were
in 1988: American Savings and Loan Association in California ($5.4
billion) and involved First Republic Bank in Texas ($4 billion).
more...
Report: Emirates calls on GCC countries to depeg currencies from US
dollar The Jerusalem Post (July
6, 2008)
- A newspaper in the United Arab Emirates says the tiny Gulf state's
government is lobbying neighboring countries to depeg their currencies
from the US dollar to curb inflation. The National, which is owned by
the Abu Dhabi ruling family, reported Sunday that the UAE is calling on
all six Gulf Cooperation Council member states to "rethink" their
monetary policy amid soaring inflation in the oil-rich region. It cited
an internal report by Abu Dhabi's Department of Planning and Economy.
The GCC members are Saudi Arabia, Qatar, Kuwait, the United Arab
Emirates, Bahrain and Oman. All of their currencies are pegged to the
dollar except Kuwait, which depegged its currency, the dinar, from the
dollar in May 2007 in favor of a basket of currencies.
Muslim Terrorists May Be Trying To Sink the Dollar
Israel National
News
(June 27, 2008) -
Mujahideen Muslim terrorists may be behind the sinking American dollar
as part of a campaign to cripple the American economy, the Middle East
Media Research Institute (MEMRI)
reported. The media watch group, which specializes in tracking Arabic
language websites, said that postings on websites the past two years
reflect a move toward waging an economic war against the United States.
Mujahideen terrorist groups that operate in Afghanistan, Pakistan and
other countries "have come to the conclusion that it is financial,
rather than military, losses that will prompt the U.S. to change its
policies in the Middle East and elsewhere," according to MEMRI. An
article recently posted in Sada Al-Jihad (Echo of Jihad) magazine and
posted on several Muslim websites, discusses the September 11, 2001
attacks on the U.S. as having influenced the decline in the dollar. It
also cited the cost of the war in Iraq and Afghanistan as draining the
American economy. Another recent posting stated, "The dollar can expect
two additional blows that will break its back... [namely] the
announcement of the return of the [religious rule of the] Caliphate..."
and the reinstatement of the gold standard in international monetary
trade. It urged Mujahideen "to get rid of American dollars" before an
"imminent" terrorist attack that "will put an end to the so-called
United States of America and destroy its economy completely." MEMRI
concluded, "Given that it is highly atypical for Al-Qaeda to give prior
warning of its attacks, the message is probably an attempt to pressure
Muslims to sell dollars, in order to generate pessimism in the dollar
market and thus accelerate the drop in its value."
Chinese renew interest in U.S. property
Reuters
(June 23, 2008) - Chinese interest in U.S.
commercial property is back, and this time Chinese investors may become
significant players as the nation devises a vehicle to divert large
amounts of funds for foreign investment, a Cushman & Wakefield executive
said on Monday. Flush with dollars from a huge trade imbalance, Chinese
sovereign wealth funds are beginning to test the waters in New York real
estate, said Scott Latham, executive vice president, Capital Markets
group for real estate services company Cushman & Wakefield. "They are
coming. We've seen them in the bidding process over the past four months
on a number of assets we've handled," Latham said at the Reuters Global
Real Estate Summit in New York. They were recently among the throng of
bidders for three of seven former Equity Office properties marketed
after Harry Macklowe defaulted on loans he used to buy them last year,
he said. Latham is one of the most powerful commercial real estate
brokers in Manhattan, the largest U.S. commercial real estate market. He
has shepherded deals such as the $1.72 billon sale of the MetLife
Building, the $1.8 billion sale of 666 Fifth Avenue and the $675 million
sale of The Plaza Hotel. "I think that unlike the Middle Eastern
sovereign wealth funds, they have not yet figured out an efficient way
to get the money out of their country," he said. Back in the depths of
the real estate depression in the early 1990s, private individuals from
Hong Kong were big players in New York real estate. A group headed by
Henry Cheng, for example, was able to buy a distressed loan and control
of the property from Donald Trump for less than $100 million along the
West Side and make a killing when they recently sold it for $1.8
billion. "Almost every one of those investments was an absolute home
run," Latham said. more...
RBS issues global stock and credit crash alert
Telegraph UK
(June 19, 2008) -
The Royal Bank of Scotland has advised clients to brace for a
full-fledged crash in global stock and credit markets over the next
three months as inflation paralyses the major central banks. "A very
nasty period is soon to be upon us - be prepared," said Bob Janjuah, the
bank's credit strategist. A report by the bank's research team warns
that the S&P 500 index of Wall Street equities is likely to fall by more
than 300 points to around 1050 by September as "all the chickens come
home to roost" from the excesses of the global boom, with contagion
spreading across Europe and emerging markets. Such a slide on world
bourses would amount to one of the worst bear markets over the last
century. RBS said the iTraxx index of high-grade corporate bonds could
soar to 130/150 while the "Crossover" index of lower grade corporate
bonds could reach 650/700 in a renewed bout of panic on the debt
markets. "I do not think I can be much blunter. If you have to be in
credit, focus on quality, short durations, non-cyclical defensive names.
"Cash is the key safe haven. This is about not losing your money, and
not losing your job," said Mr Janjuah, who became a City star after his
grim warnings last year about the credit crisis proved all too accurate.
RBS expects Wall Street to rally a little further into early July before
short-lived momentum from America's fiscal boost begins to fizzle out,
and the delayed effects of the oil spike inflict their damage. "Globalisation
was always going to risk putting G7 bankers into a dangerous corner at
some point. We have got to that point," he said. US Federal Reserve and
the European Central Bank both face a Hobson's choice as workers start
to lose their jobs in earnest and lenders cut off credit. The
authorities cannot respond with easy money because oil and food costs
continue to push headline inflation to levels that are unsettling the
markets. "The ugly spoiler is that we may need to see much lower global
growth in order to get lower inflation," he said. more... Secret Bilderberg Agenda To Microchip Americans Leaked Prison Planet (June 10, 2008) - Sources from inside the 2008 Bilderberg meeting have leaked the details of what elitists were discussing in Chantilly Virginia last week and the talking points were ominous - a plan to microchip Americans under the pretext of fighting terrorist groups which will be identified as blonde haired, blue eyed westerners. Veteran Bilderberg sleuth Jim Tucker relies on sources who regularly attend Bilderberg as aides and assistants but who are not Bilderberg members themselves. The information they provided this year is bone-chilling for those who have tracked the development of the plan to make the general public consider implanted microchips as a convenience as routine as credit cards. "Under the heading of resisting terrorism there were points made about how the terrorist organizations are recruiting people who do not look like terrorists - blonde, blue eyed boys - they're searching hard for those types to become the new mad bombers," said Tucker. Ominously, Tucker's source also told him that Bilderberg were discussing the microchipping of humans on a mass scale, which would be introduced under the pretext of fighting terrorism whereby the "good guys" would be allowed to travel freely from airports so long as their microchip could be scanned and the information stored in a database. Tucker said the idea was also sold on the basis that it would help hospital staff treat a patient in an emergency situation because a scan of the chip would provide instantaneous access to health details. Tucker underscored that Bilderberg were talking about subdermally implanted chips and not merely RFID chips contained in clothing. The discussion took place in a main conference hall and was part of the agenda, not an off-hand remark in the hotel bar. Such a bizarre concept may seem unbelievable to some, but over the last ten years there have been dozens of examples of people accepting implanted chips for a variety of different reasons. In 2004, Mexico's attorney general and 160 of his office staff were implanted with tracker chips to control access to to secure areas of their headquarters. The Baja Beach Club in Barcelona and other nightclubs around the world are already offering implantable chips to customers who want to pay for drinks with the wave of a hand and also get access to VIP areas of the club lounge. Bilderberg skeptical of attack on Iran Tucker's source told him that Secretary of Defense Robert Gates did attend Bilderberg despite him not appearing on the official list. Tucker said that his sources told him Gates was in attendance to present his case for war with Iran, but that the majority of Bilderberg members were against an attack at this time. "The Europeans were generally opposed to an invasion of Iran - Gates made the regular war propaganda drill about how Iran is a nuclear threat to everybody," said Tucker, adding that European Bilderbergers made snide comments about where such nuclear weapons actually were being kept and at one point joking that they were possibly "in Saddam Hussein's tomb". Despite Bilderberg opposition, Tucker said that the administration was still considering an attack before Bush leaves office in January. "At least 90 per cent of the Europeans oppose a war, probably closer to 100 per cent," said Tucker, adding, "most of the Americans were passive and deferential to the Secretary of Defense and Condoleezza Rice's pitch in so far as Iran is concerned". Tucker said that most Americans present at the meeting were opposed to attacking Iran but dare not be as visible and loud in their opposition as the Europeans. Energy and oil prices
"One of the Bilderberg boys raised this question - should we put a
lid on the rise in oil prices, are we reaching the point of diminishing
returns," said Tucker, adding that Bilderberg noted how Americans were
trading in their SUV's in record numbers for small and more fuel
efficient cars and using more public transport to combat high gas
prices. Tucker's source said that Bilderberg were predicting $5 for a
gallon of gas by the end of this summer and oil over $150 dollars a
barrel, but that this was a ceiling and oil prices would probably begin
to decline thereafter because they thought the acceleration had happened
too quickly.
As we previously reported, Bilderberg called for oil prices to soar
in 2005 when oil was a mere $40 a barrel. During the conference in
Germany, Henry Kissinger told his fellow attendees that the elite had
resolved to ensure that oil prices would double over the course of the
next 12-24 months, which is exactly what happened.
During their 2006 meeting in Ottawa Canada, Bilderberg agreed to
push for $105 a barrel before the end of 2008. With that target having
been smashed months ago, the acceleration towards $150 is outstripping
even Bilderberg's goal, which is why the elitists expressed a desire to
cool prices at least in the short term. Just two days after he left
Bilderberg, Fed Chairman Ben Bernanke, George W. Bush and others
expressed support for a strong dollar and Bernanke hinted that interest
rates could rise, which immediately caused oil prices to drop in line
with Bilderberg's consensus.
Ultimately the system being developed now by the mystery of iniquity will require either a pledge of allegiance to the man of sin or death. So in the name of peace and security, the deceitful system is being put in place that will destroy all those who refuse to worship this man who would claim to be God. Regarding Iran, I think this summer may bring about God's intervention and destruction of the Iranian-Turkish-Russian allied forces that are prophesied to attack Israel from the North. There are many aspects to this prophecy that are coming into alignment and even though that is the case, I still can't claim to be 100% sure. Just read through the Gog/Magog and Isaiah 17 news to see why I think this is forming on the near horizon. Will this involve action on the part of America? I don't think so, although I can't rule out strategic action against America, the great Satan, coinciding with an attack on Israel, the little Satan. Keep watching and praying!
0:02:25
U.S. stops following foreign money trail
WorldNet
Daily
(June 9, 2008) - Foreign investment in
the United States is on the rise and key U.S. businesses and
infrastructures such as roads and airports are being sold to foreign
investors. Now comes word from the U.S. Department of Commerce the
Bureau of Economic Affairs will stop publishing a key report tracking
those foreign dollars.
WND reported earlier on a decision by the Federal Reserve to quit
publishing M3 data, a money-supply measure watched closely by
economists. Last month, econometrician John Williams reported on his
subscription website,
"Shadow Government
Statistics," that the M3 statistic he compiles from available
government data shows the growth of M3 at historically high rates last
seen in June 1971, two months before President Nixon closed the gold
window and instituted wage and price controls. Charles McMillion,
president and chief economist at MBG Information Services in Washington,
D.C., also has expressed concern over the recent decision by the
Department of Commerce to discontinue publishing foreign investment data
and warned that may forecast an unprecedented surge in foreign
investment anticipated by the Bush administration. In the announcement,
BEA claimed funding limitations necessitated
halting future reports. The most recent report, released Wednesday,
showed direct foreign investment in U.S. businesses reached $276.8
billion in 2007, the second largest amount recorded and the highest
since 2000, when new foreign investment outlays peaked at $335.6
billion. Of the direct foreign investments in the U.S. in 2007, only
about 10 percent, approximately $21.9 billion, established new U.S.
businesses, while foreign investments to acquire existing U.S.
businesses totaled $255.0 billion. Nearly 37 percent of the foreign
investments in 2007 involved European investors, although the BEA noted
investments from Asia and the Middle East rose substantially. McMillion
noted in an e-mail that the BEA decision to discontinue publishing
foreign investment data comes at a time when public and congressional
concerns have increased over the acquisition of U.S. assets by foreign
investors McMillian referenced the recent attempt by "China's mysterious
but closely state-aligned Huawei" to acquire 3Com, a key supplier of
Internet security technologies to the U.S. Department of State, in
conjunction with Boston-based Bain Capital, a private equity firm
founded by Republican 2008 presidential candidate Mitt Romney. In March,
Bain pulled out of the deal after learning that the secretive Committee
on Foreign Investment in the United States, or CFIUS,
organized in the U.S. Treasury Department, planned to block the
deal. In May, during a four-day trip to the Middle East that included
Saudi Arabia and Dubai, U.S. Secretary of Treasury Henry Paulson
encouraged foreign investment in the United States, arguing the
controversy over
Dubai Ports in 2006 did not reflect an adverse U.S. attitude toward
foreign investment. "I have met with many leaders from the Middle East
who ask if the United States really continues to welcome investment,"
Paulson said in a speech to the U.S.-United Arab Emirates Business
Council, according to Bloomberg.com. "As we seek to open new markets
abroad, America will keep our markets open at home to investment from
private firms and from sovereign wealth funds."
WND previously reported that since the beginning of the year, Dubai
and Abu Dhabi, two of the largest United Arab Emirate states, have been
in discussions with the U.S. Treasury, offering reassurances that their
investments in U.S. banks and security firms would not impose
restrictions usually dictated by Islamic law, commonly known as sharia.
WND also has reported sovereign wealth funds in six Persian Gulf
countries, including Kuwait, the United Arab Emirates and Qatar, have
now amassed $1.7 trillion, positioning them for attempts to control
major banks and securities firms in the United States. In September
2007, Dubai
acquired 19.9 percent of Nasdaq, the second largest stock exchange
in the United States. WND also reported last month
the top bid to lease the Pennsylvania Turnpike on a long-term
public-private-partnership, or PPP lease, for a bid of $12.8 billion
was submitted by Spanish infrastructure management company Abertis
Infraestructuras of Barcelona.
We can reduce risk in the financial system
Financial Times
(June 8, 2008) - Since last summer,
we have lived through a severe and complex financial crisis. Why was the
financial system so fragile? What can be done to make the system more
resilient in the future? The world experienced a financial boom. The
boom fed demand for risk. Products were created to meet that demand,
including risky, complicated mortgages. Many assets were financed with
significant leverage and liquidity risk and many of the world’s largest
financial institutions got themselves too exposed to the risk of a
global downturn. The amount of long-term illiquid assets financed with
short-term liabilities made the system vulnerable to a classic type of
run. As concern about risk increased, investors pulled back, triggering
a self-reinforcing cycle of forced liquidation of assets, higher margin
requirements, increased volatility. What should be done to strengthen
the system in the future? First, when we get through this crisis we have
to increase the shock absorbers held in normal times against bad
macroeconomic and financial outcomes. This will require more exacting
expectations on capital, liquidity and risk management for the largest
institutions that play a central role in intermediation and market
functioning. They should be set high enough to offset the benefits that
come from access to central bank liquidity, but not so high that they
succeed only in pushing more capital to the unregulated part of the
financial system. Second, we have to improve the capacity of the
financial infrastructure to withstand default by a big institution. This
will require taking some of the risk out of secured funding markets,
increasing resources held against default in the centralised clearing
house, and encouraging more standardisation, automation and central
clearing in the derivatives markets. Third, the regulatory framework
cannot be indifferent to the scale of leverage and risk outside the
supervised institutions. I do not believe it would be desirable or
feasible to extend capital requirements to leveraged institutiions such
as hedge funds. But supervision has to ensure that counterparty credit
risk management in the supervised institutions limits the risk of a rise
in overall leverage outside the regulated institutions that could
threaten the stability of the financial system. And regulatory policy
has to induce higher levels of margin and collateral in normal times
against derivatives and secured borrowing to cover better the risk of
market illiquidity. Fourth, we need to streamline and simplify the US
regulatory framework. Our system has evolved into a confusing mix of
diffused accountability, regulatory competition and a complex web of
rules that create perverse incentives and leave huge opportunities for
arbitrage and evasion. The blueprint by Hank Paulson, Treasury
secretary, outlines a sweeping consolidation and realignment of
responsibilities. The institutions that play a central role in money
and funding markets – including the main globally active banks and
investment banks – need to operate under a unified framework that
provides a stronger form of consolidated supervision, with appropriate
requirements for capital and liquidity. To complement this, we
need to put in place a stronger framework of oversight authority over
the critical parts of the payments system – not just the established
payments, clearing and settlements systems, but the infrastructure that
underpins the decentralised over-the-counter markets. Because of its
primary responsibility for the stability of the overall financial
system, the Federal Reserve should play a central role in such a
framework, working closely with supervisors in the US and in other
countries. At present the Fed has broad responsibility for financial
stability not matched by direct authority and the consequences of the
actions we have taken in this crisis make it more important that we
close that gap. The big central banks should put in place a standing
network of currency swaps, collateral policies and account arrangements
that would make it easier to mobilise liquidity across borders quickly
in a crisis. As we reshape the incentives and constraints for
risk-taking in the financial system, we have to recognise that
regulation has the potential to make things worse. Regulation can
distort incentives in ways that may make the system less safe. One of
the strengths of our system is the speed with which we adapt to
challenge. It is important that we move quickly to adapt the regulatory
system to address the vulnerabilities exposed by this financial crisis.
We are beginning the process of building the necessary consensus here
and with the other main financial centres. more...
Gas hits national average of $4 for first time
Associated Press (June
8,
2008) - The average price of regular gas crept up to $4 a
gallon for the first time over the weekend, passing the once-unthinkable
milestone just in time for the peak summer travel season. Prices at the
pump are expected to keep climbing, especially after last week's furious
surge in oil prices, which neared $140 a barrel in a record-shattering
rally Friday. While Americans who have to drive will feel the biggest
squeeze, the increased prices also translate into higher costs for
consumers and businesses, who will be forced to shoulder increased costs
for food and anything else that needs to be transported. "I don't think
we've felt quite the full impact of $138 or $139 a barrel oil," said
Jason Toews, co-founder of fuel price research site GasBuddy.com. Gas
prices rolled past their latest threshold Sunday, increasing to $4.005 a
gallon overnight from $3.988 the day before, according to AAA and the
Oil Price Information Service. Of course, drivers in many parts of the
country have already been paying well above that price for some time.
California has seen some of the highest prices; a gallon there now
averages $4.436 a gallon, the most in the country. Missourians are
paying the least at the pump, with a gallon in the Show-Me State selling
for a relatively cheap $3.802 a gallon. Prices have risen by about 20
cents in the past three weeks, according to a report by the Lundberg
Survey released Sunday. Truckers and others with diesel engines under
the hood have it even worse off. A gallon of diesel now sells for
$4.762, up nearly a penny overnight, according to AAA and OPIS. Prices
hit a record atop $4.79 at the end of May. Skyrocketing oil prices,
which are trading at more than double their level last year, are largely
to blame for the surge. Crude prices shot up more than 13 percent late
last week in their biggest two-day price gain in history. Benchmark
light, sweet crude for July delivery officially finished the week at
$138.54 on the New York Mercantile Exchange, but at one point jumped as
high as $139.12. "This could be a real weight on the economy," James
Cordier, president of Tampa, Fla.-based trading firm Liberty Trading
Group, said of oil's jump Friday. "With every nickel that gas goes up,
people are driving less and less." Oil's latest surge caught some
longtime petroleum industry veterans off-guard, and left analysts
wondering if it represented a one-time spike or the beginning of a new
wave of advances. more...
Investors Flee Stocks As Oil Surges Close to $140
Washington Post (June
6,
2008) - Stocks plunged Friday, with the Dow Jones industrials
having their worst day in more than a year, after oil prices shot up
by more than $11 a barrel and neared $140, wiping out investors'
recent optimism about the economy in the process. The prospect of
higher energy prices that could hobble consumers and worsen a
slowing economy had investors frenetically pulling money out of
stocks. The bad news about rising energy prices compounded
investors' anxiety over a worrisome reading on unemployment, which
for May showed its biggest monthly rise since 1986. According to
preliminary calculations, the Dow Jones industrial average fell
394.64, or 3.13 percent, to 12,209.81. It was the worst percentage
and point drop since Feb. 27, 2007. Standard & Poor's 500-stock
index lost 43.37, or 3.09 percent, to 1,360.68, and the Nasdaq
composite index fell 75.38, or 2.96 percent, to 2,474.56. Crude oil
has had a huge price rebound this week after falling amid a drop in
demand for gasoline. The jump continued Friday; light, sweet crude
passed $139 before settling at $138.54, a gain of $10.75 in the
regular session. The surge followed a Morgan Stanley analyst's
prediction that crude would reach $150 a barrel by July 4; a decline
in the dollar and fresh tensions in the Middle East added to crude's
advance. On Wall Street, crude's soaring price intensified worries
that ever-more-expensive fuel will lead consumers to curtail their
spending on nonessential items. Average gasoline prices are close to
$4 a gallon nationwide, and crude's surge is expected to propel
prices even higher -- and make Americans more reluctant to spend.
Moreover, the spike in energy prices came as the Labor Department
said the nation's unemployment rate jumped to 5.5 percent in May
from 5 percent in April. more...
Energy fears looming, new survivalists prepare
Associated Press
(May 24,
2008) - A few years ago, Kathleen Breault was just another
suburban grandma, driving countless hours every week, stopping for lunch
at McDonald's, buying clothes at the mall, watching TV in the evenings.
That was before Breault heard an author talk about the bleak future of
the world's oil supply. Now, she's preparing for the world as we know it
to disappear. Breault cut her driving time in half. She switched to a
diet of locally grown foods near her upstate New York home and lost 70
pounds. She sliced up her credit cards, banished her television and
swore off plane travel. She began relying on a wood-burning stove. "I
was panic-stricken," the 50-year-old recalled, her voice shaking.
"Devastated. Depressed. Afraid. Vulnerable. Weak. Alone. Just terrible."
Convinced the planet's oil supply is dwindling and the world's economies
are heading for a crash, some people around the country are moving onto
homesteads, learning to live off their land, conserving fuel and, in
some cases, stocking up on guns they expect to use to defend themselves
and their supplies from desperate crowds of people who didn't prepare.
The exact number of people taking such steps is impossible to determine,
but anecdotal evidence suggests that the movement has been gaining
momentum in the last few years. These energy survivalists are not
leading some sort of green revolution meant to save the planet. Many of
them believe it is too late for that, seeing signs in soaring fuel and
food prices and a faltering U.S. economy, and are largely focused on
saving themselves. Some are doing it quietly, giving few details of
their preparations - afraid that revealing such information as the
location of their supplies will endanger themselves and their loved
ones. They envision a future in which the nation's cities will be filled
with hungry, desperate refugees forced to go looking for food, shelter
and water. "There's going to be things that happen when people can't get
things that they need for themselves and their families," said
Lynn-Marie, who believes cities could see a rise in violence as early as
2012. more...
Surging inflation will stoke riots and conflict between nations, says
report
Guardian UK (May 23,
2008) - Riots, protests and political unrest could multiply
in the developing world as soaring inflation widens the gap between the
"haves" and the "have nots", an investment bank predicted yesterday.
Economists at Merrill Lynch view inflation as an "accident waiting to
happen". As prices for food and commodities surge, the bank expects
global inflation to rise from 3.5% to 4.9% this year. In emerging
markets, the average rate is to be 7.3%. The cost of food and fuel has
already been cited as a factor leading to violence in Haiti, protests by
Argentinian farmers and riots in sub-Saharan Africa, including attacks
on immigrants in South African townships. Merrill's chief international
economist, Alex Patelis, said this could be the tip of the iceberg,
warning of more trouble "between nations and within nations" as people
struggle to pay for everyday goods. "Inflation has distributional
effects. If everyone's income moved by the same rate, you wouldn't care
- but it doesn't," said Patelis. "You have pensioners on fixed pensions.
Some people produce rice that triples in price, while others consume
it." A report by Merrill urges governments to crack down on inflation,
describing the phenomenon as the primary driver of macroeconomic trends.
The problem has emerged from poor food harvests, sluggish supplies of
energy and soaring demand in rapidly industrialising countries such as
China, where wage inflation has reached 18%. Unless policymakers take
action to dampen prices and wages, Merrill says sudden shortages could
become more frequent. The bank cited power cuts in South Africa and a
run on rice in Californian supermarkets as recent examples. "You're
going to see tension between nations and within nations," said Patelis.
The UN recently set up a taskforce to examine food shortages and price
rises. It has expressed alarm that its world food programme is
struggling to pay for food for those most at need. Last month, the World
Bank's president, Robert Zoellick, suggested that 33 countries could
erupt in social unrest following a rise of as much as 80% in food prices
over three years. Merrill's report said the credit crunch has
contributed to a global re-balancing, drawing to a close an era in which
American consumers have been the primary drivers of the world's economy.
In a gloomy set of forecasts, Merrill said it believes the US is in a
recession - and that American house prices, which are among the root
causes of the downturn, could fall by 15% over the next 18 months.
more...
Congress vs. OPEC: Flexible-fuel cars
One News Now
(May 22, 2008)
-
An engineer and energy authority says the
Organization of Petroleum Exporting Countries (OPEC) led by Saudi
Arabia wants to drive the world into an economic depression with the
eventual goal of establishing a worldwide Islamic caliphate. Dr.
Robert Zubrin has a Ph.D. in nuclear engineering and is president of
Pioneer Astronautics, an aerospace engineering firm. He recently
published Energy Victory: Win the War on Terror by Breaking Free
of Oil. He believes the OPEC cartel has consciously decided to
restrict the production of oil in the face of growing world demand,
and that this year the U.S. is going to spend $1 trillion on oil,
most of which is going into the pockets of the cartel. "They'll use
part of it to fund terrorism internationally," he says, "and they're
putting the rest into a giant takeover fund called sovereign wealth
funds, which they will use to take over the companies that they
wreck as they push us into recession. They'll take over these
companies at a fraction of their value; 10 cents on the dollar,"
Zubrin contends. The author argues that the power of the OPEC cartel
must be destroyed internationally -- and that the U.S. Congress can
help. He urges Congress to make "flex-fuel" the international
standard and force gasoline to compete at the pumps. "The United
States Congress can effectively destroy OPEC with the stroke of a
pen, simply by passing a law requiring that every new car sold in
the United States gives the consumer fuel choice. That is, [to] be a
fully flex-fueled car able to run not just on gasoline but on
methanol and ethanol," Zubrin explains. According to Zubrin, a
Senate bill cosponsored by Senators Evan Bayh (D-Indiana) and Kansas
Republican Sam Brownback (R-Kansas) would do just that and crash the
price of oil to $50 a barrel. Flexible-fuel vehicles, or FFVs,
according to the U.S. Department of Energy, are designed to run on
gasoline or a blend of up to 85% ethanol (E85), and have been
produced since the 1980s. The DOE says while FFVs experience no loss
in performance when operating on E85, they typically get fewer miles
per gallon because an equal amount of gasoline contains more energy.
Ethiopian millions 'risk hunger'
BBC News
(May 20, 2008)
- Six million children
in Ethiopia are at risk of acute malnutrition following the failure
of rains, the UN children's agency, Unicef, has warned. More than
60,000 children in two Ethiopian regions require immediate
specialist feeding just to survive, Unicef says. The situation is
expected to worsen in the next few months as crops fail. Aid
agencies in Ethiopia say they are short of funds as donors
concentrate on the emergencies in China and Burma. Paulette Jones,
of the World Food Programme (WFP), said a combination of events had
led to the situation. "We have drought - a really poor rainy season
- and, of course, we have high food prices worldwide." The UN
estimates it currently has a shortfall of 180,000 tonnes of food -
and presently has no promises to meet this target. more...
China says quake killed 12.5 million farm animals, will hurt rice
production
International Herald Tribune
(May 19, 2008)
- China's devastating
earthquake killed 12.5 million farm animals — mostly chickens — and
wrecked vegetable crops and irrigation systems needed to grow rice,
the government says. More than 20,000 hectares (50,000 acres) of
vegetables and more than 10,000 hectares (25,000 acres) of wheat
were destroyed by the May 12 quake in Sichuan province, according to
the Agriculture Ministry. Damage to irrigation systems could prevent
farmers from growing rice on as much as 100,000 hectares (250,000
acres) of rice paddies, the ministry said. But it said that land
might be used for alternative crops while the damage is repaired.
Most of the farm animals killed were poultry, said Wei Chao'an, a
deputy agriculture minister, in comments reported by the official
Xinhua News Agency. He said the losses should not affect food
supplies, because they account for a small share of the 1.5 billion
birds that Sichuan province was expected to produce this year.
Sichuan usually supplies about 6 percent of China's grain and 5
percent of its vegetables, according to Wei.
High food prices forcing millions of Filipinos into poverty
Inquirer.net
(May 18, 2008)
- Soaring food prices
are forcing millions of Filipinos into poverty, the Asian
Development Bank said in a study released here Sunday. "Increases in
food prices have enormous impacts on poverty" in the Philippines,
where poor people spend nearly 60 percent of their income on food,
the Manila-based lender said. The Philippines is one of the world's
biggest rice importers and the government estimates a third of the
country's 90 million people live on a dollar a day or less.
Inflation spiked to a three-year high of 8.3 percent last month due
mainly to surging prices of rice and petroleum products, which are
at all-time highs. A 10-percent rise in food and non-food prices
"will lead to an additional 2.3 million and 1.7 million poor people,
respectively," the ADB study said. Between January 2007 and March
2008, rice prices have risen at an annual pace of 22.9 percent, the
study said, urging Manila to "direct government policies toward
stabilizing food prices." "Monetary policy may not be an effective
tool to combat rising inflation," it said, adding, "such policies
may push the economy into recession, which will hurt the poor even
more."
World economy on thin ice - U.N.
CNN Money
(May 16, 2008)
- The world economy is
"teetering on the brink" of a severe downturn and is expected to grow
only 1.8% in 2008, the United Nations said in its mid-year economic
projections Thursday. That's down from a global growth rate of 3.8% in
2007, and the downturn is expected to continue with only a slightly
higher growth of 2.1% in 2009, the U.N. report said. The mid-year update
of the U.N. World Economic Situation and Prospects 2008 blamed the
downturn on further deterioration in the U.S. housing and financial
sectors in the first quarter, which is expected to "continue to be a
major drag for the world economy extending into 2009." But the U.N. said
developing countries will suffer as badly: They should grow by 5% this
year and 4.8% next year, compared to a robust 7.3% in 2007, the report
said. The U.N. economists said the deepening credit crisis in major
market economies triggered by the U.S.-led slump in housing prices, the
declining value of the U.S. dollar, persistent global imbalances and
soaring oil and commodity prices pose considerable risks to economic
growth in both developed and developing countries. "The baseline
forecast projects a pace for world economic growth of 1.8% in 2008," the
U.N. report said. However, it said the final figure will largely depend
on developments in the United States. Global growth this year could fall
to 0.8% if the U.S. subprime mortgage market turmoil has a more serious
impact on developing countries and countries in transition, the U.N.
report said. But if the monetary and fiscal measures the U.S. government
has taken to stimulate the economy - including tax refunds and lower
interest rates - boost consumer spending and restore confidence in the
business and banking sector, the world economy could only slow to 2.8%
growth this year and 2.9% in 2009, it said. The report, prepared by the
U.N. Department of Economic and Social Affairs, forecast that U.S.
economic growth will decline from 2.2% in 2007 to -0.2% this year, with
only slight recovery in 2009 to 0.2% growth. "At issue is how deep and
long this contraction will be," the report said. "As the housing slump
continues and the credit crisis deepens, a broad array of ... indicators
are already hinting at a recession." more...
Jim
Deeds. Hyperinflation: Are We There Yet?
McAlvany Weekly Commentary
(May 14, 2008) - 65% of
American Dollars are circulating outside of the United States. At
the moment they trust the American Dollar. 85% of the debt in the
last five years has been sold to foreigners like the Russians and
the Chinese.
Egypt extends ration cards due to high food prices
Reuters
(May 8, 2008) - Egypt has opened its
ration card system to an extra 17 million people and doubled the amount
of rice that card holders receive in an effort to counter the effects of
rising food prices. The global prices of staple foods have risen more
than 40 percent in the last year causing shortages, hoarding and riots
in many developing countries and prompting the United Nations to warn of
malnutrition and social unrest. In Egypt, inflation has jumped to 16.4
percent and the government is trying to contain growing public
discontent over rising food prices which are accentuated by low wages.
Three people were killed in a Nile Delta town last month in clashes with
police after textile workers tried to strike. Egypt had not added to the
ration card registry since 1988 before opening it up for new
registrations until June 30. "Up to now we have received about 17
million additional citizens... This means we will cover about 55 million
people," Social Solidarity Minister Ali Musailhi told Reuters. Egypt's
population is about 75 million. The poor spend a disproportionate amount
of their income on food and in Tajikistan, an impoverished Central Asian
republic, their problems have been worsened by a locust infestation
which threatens maize and wheat crops. Last month, the U.N. said locusts
had infested an area of 150,000 hectares -- 30 percent more than last
year -- and could damage food supplies in a nation of 7 million. Many
countries have responded to high food prices by imposing taxes and other
restrictions on exports to try to ensure adequate supplies at home.
Export bans by India and Vietnam, the world's second biggest exporter,
have helped rice prices in Asia to treble this year and filled the
coffers of rice exporters in Thailand. Thailand, the world's biggest
rice exporter, is expecting to sell more than 9 million tonnes of rice
overseas this year, about the same as last year, but at far higher
prices. Thai rice prices eased this week from a record level above
$1,000 a tonne. "Everybody turns the spotlight on Thailand and this year
will be the golden year for Thai rice exports," Commerce Minister
Mingkwan Sangsuwan told reporters. more...
Mogadishu rocked by food demonstrations
News Daily
(May 5, 2008) - A young man was killed
when thousands of Somalis protested in Mogadishu on Monday over food
traders' refusal to take old currency notes blamed for stoking spiraling
inflation, witnesses said. A shopkeeper shot the man dead after dozens
of demonstrators wielding clubs and stones broke into his store. Locals
said police wounded a teenage boy while trying to disperse hundreds of
angry residents. "The shopkeeper fired a pistol at the crowd and it hit
the young man's head," one witness in the Madina district in the
southeast of the capital said, refusing to give his name. Despite still
being a legal currency, many shopkeepers have been refusing to accept
the worn out old notes, saying wholesale traders were also refusing to
take them. The Somali shilling is valued at roughly 34,000 to the dollar
-- more than double what it is was a year ago -- and many blame the fall
in value on counterfeiters. With an interim government focused on
containing islamist insurgency, there is no one to control rampant
counterfeiting of currency which is often exchanged for real dollars
that are then taken out of the country. The problem has been compounded
by sharply rising world food prices, leaving many in the lawless Horn of
Africa nation of 10 million short of money to buy food, triggering
several protests or riots in the past six months. On Monday, thousands
were on the streets of the bombed-out capital, clutching tattered old
notes while shouting "Down with traders" and "We want to buy food." All
shops remained closed and the streets empty as protestors stoned the few
vehicles moving around. more... Gulf States May End Dollar Pegs, Kuwait Minister Says (Update4) Bloomberg (May 1, 2008) - Gulf states are considering dropping their pegs to the dollar after the U.S. currency's decline stoked inflation across the region, Kuwaiti Finance Minister Mustafa al- Shimali said. "Yes, there are some'' Gulf Cooperation Council states considering dropping their pegs to the dollar, which has fallen 13 percent against the euro in the last 12 months, al-Shimali said in an interview in Kuwait late yesterday without naming the countries. ``Some countries will do what we are doing.'' Al-Shimali's comments may restoke speculation of a change in Middle East currency systems that eased after the United Arab Emirates and Qatar last month ruled out any revaluation or dropping the dollar peg in the short term. The issue will remain a key issue as long as inflation remains high. "Inflation is rising in the Gulf to a great extent because of loose monetary policy,'' said Marios Maratheftis, head of research for Standard Chartered Plc in the Middle East in a telephone interview from Dubai. "Tightening monetary policy can only happen if they drop their currency pegs or strengthen the currency, preferably both.'' The U.A.E., Bahrain and Qatar lowered their benchmark interest rates today by a quarter point, matching a cut by the U.S. Federal Reserve a day earlier. The move is needed to maintain the dollar pegs. Saudi Arabia is on its weekend while Oman moves its interest rates in line with the London Inter Bank Offered Rate. Inflation is running close to 10 percent in Saudi Arabia and the U.A.E., while Qatar's consumer prices rose 14 percent in the fourth quarter. The Kuwaiti dinar has appreciated 7.9 percent against the dollar since the nation in May became the only Gulf Arab state to drop its peg to the U.S. currency. Contracts to buy U.A.E. dirhams in 12 months time are trading at a 2 percent premium and Saudi riyal forwards are trading at a 1.3 percent premium to the spot price, suggesting that |
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