While much of the news
this week seems quite positive, the unofficial tally of unemployed is
now in the 14-15MM range (incl. those who don’t figure in the official
statistics because they have ceased looking for work). And Prof.
Nouriel Roubini of the Stern School of Business at NYU, who correctly
forecast the financial meltdown, & more importantly its severity,
recently warned in the Financial Times of the risk of a “double-dip”
recession and that, in any case, even if the global economy were bottoming
out, the US & UK economies will likely experience “anemic”/”below
trend” growth for at least a couple of years, with policy makers facing
a “be damned if they do and damned if they don’t” conundrum as
they seek to unwind their massive fiscal & monetary stimulus programs.
One hundred and fifty
years ago today, after much frustration & public ridicule,
Edwin Drake, a ne’er-do-well with a vision, and Billy Smith, a blacksmith
with experience as a salt well driller, produced the first oil ever
on US soil (from a 70 foot-deep well). While at first the price of oil
was about US$500/bbl in current dollar terms, the subsequent massive
increase in oil output by copycats soon drove the price down to US$12/bbl
in current dollar terms.
On several places in
today’s edition there appears to be validation of a recent news magazine
headline that read : We are a nation of liars.; for some of the
answers people are giving to pollsters are, well, simply inconsistent
with one another.
There was a lot of material
on US health care reform. So I have again taken the liberty to add it
as a sort of an addendum at the end of the regular five pages.
No. 327 - August
OECD SAYS MEMBERS’
ECONOMIES STABILIZING (AP)
∙ It said on August
20th that the economies of its 30 member nations as a whole
had stabilized in the Second Quarter as Japan, France & Germany
return to growth made up for the laggards, the US & UK (whose GDP
had continued to shrink by 0.3% & 0.8% respectively).
Still, total member
GDP was flat compared to the preceding quarter & down 4.6% YoY.
ISRAEL FIRST TO
LIFT RATES (Bloomberg)
This came as a surprise
to 10 of the 12 economists surveyed by Bloomberg.
JULY HOME RESALES
SURGE MORE THAN 7 PERCENT (AP)
∙ Expected to rise
2.2% from June’s 4.89MM annual rate to 5.0MM, they did so by 7% to
5.24MM. This was the fourth month of higher sales & the strongest
month in two years.
Much of this is due
to first time home buyers seeking to take advantage of
a tax credit program expiring November 30th.
JULY NEW HOME SALES
JUMP 9.6% (AP)
∙ The 433,000 annual
rate of sales was the fourth increase in four months, the strongest
sales pace since September & the most dramatic MoM sales increase
in 4½ years.
This cut the inventory
of new homes for sale to a 7.5 months’
supply, the least since April 2007.
HOME PRICES POST
FIRST QUARTERLY RISE IN 3 YEARS (AP)
Positive as this may
be, they are still down 15% YoY & 30% off its peak 3 years earlier.
GOODS ORDERS SURGE 4.9% (CNNMoney. com)
∙ This was the most
in two years, and well above June’s 1.3% decline & the 3.0% expected
(but still down 25.8% YoY), largely due to higher orders for commercial
aircraft (which are notoriously volatile) & the resumption
of production at several GM & Chrysler plants. Ex-transportation
equipment, they were up less than the expected 0.8% but for the first
time in 3½ years they were up 3 months in a row.
As is the case with
so much of the recent ‘good news’, it’s primarily good
because it is less bad.
RISES MORE THAN EXPECTED (AP)
∙ The Conference
Board’s Consumer Confidence Index in August soared to 54.1, vs. 47.4
in July & the 47.5 forecast. While more than double its record February
low of 25.3, it is still well short of the level of 90 associated
with a healthy economy.
The sub-index for
their expectations for conditions six months hence rose to 73.5, from
63.4 in July, implying that their assessment of the present not just
remains low, but is still deteriorating.
NEW JOBLESS CLAIMS
AND TOTAL BENEFIT ROLLS DROP (AP)
∙ First-time unemployment
claims in the most recent week fell to 570,000 from 580,000 the week
before. While below the 600,000+ level of most of the year to date,
it’s still 80% above the 325,000 deemed consistent with a healthy
economy. And the number of those drawing unemployment benefits declined
from 6.25MM to 6.13MM.
The latter number
should be treated with caution. For people are starting fall by the
wayside because they have run out of eligibility (as 1½
MM people are expected to do by yearend).
JUMPED TO 416 FROM 305 (AP)
∙ In the Second
Quarter the nation’s banks lost US$3.7BN (causing a 20% decline in
the FDIC’s insurance fund to US$10.4BN) vs. a US$7.6BN profit in the
First Quarter & US$4.7BN in the year-earlier period. The number
of banks ‘in trouble’ grew by 36% to 416. 81 banks have failed YTD
& 100's more will do so as commercial real estate loans go sour.
Meanwhile the FDIC
is running into opposition from banks
for its plan to let the TAG program expire on schedule at yearend or
extend it by just six months at double the cost to the banks (it covers
US700BN of otherwise uninsured bank deposits & thus reduces the
banks’ cost of funds).
OBAMA FACES HARD
CHOICES ON AFGHAN WAR PLANS (AP)
∙ As public support
erodes & the military situation, according to JCS Chairman Adm.
Mike McMullen is ‘serious and deteriorating’, Obama faces a Scylla
& Charibdis-like situation : boost troop levels now still
more from their present level & risk a political backlash that he
doesn’t need at this time or stick with the 68,000 already committed
& risk political flack later if that were proven to have been insufficient.
‘toxic legacy’ from the Bush era.
CANOLA CROP WAY
DOWN (EJ, Business Browser)
∙ Western Canadian
farmers are expected to harvest 9.4MM tonnes of canola this year, down
25% YoY, and barley & oats output is expected to be down by as much
This wasn’t a Goldilocks-type
of summer for them; most had too little rain &
some had too much
PM UNVEILS PLANS
FOR PALESTINIAN STATE (AF-P, Hossam Ezzedine)
∙ On August 25th
Prime Minister Salam Fayyad told a press conference in Ramallah “The
Palestinian government is struggling ... against a hostile occupation
regime; ... a de facto state apparatus ... can and must happen within
two years ... We must confront the whole world with the reality that
the Palestinians are ... steadfast in their determination to remain
on their homeland, end the occupation and achieve their ... independence
... The world should know we are not prepared to continue living
under a brutal occupation and siege that flouts not only the law, but
also the principles of natural justice and human decency.” His
rather ambitious priorities include disentangling the economy’s
dependence on Israel & foreign aid, trimming the size of, and keeping
wages in check & implementing a performance-based system in, the
public sector, increasing the use of technology & unifying a legal
system that is a hodge-podge of Ottoman, British, Jordanian & Israeli
bits & pieces.
∙ Finance Minister
Yual Steinitz, criticized this by saying “There is no place for either
unilateral actions or threats ... a Palestinian state, no matter what
its form, will not see the light of day if Israel’s security concerns
are not taken into account.”
Two Israeli officials
reacted “with consternation” over
what they called “this unilateral action”. But the Palestinians
are feeling their oats, believing the winds of change have changed in
their favour, with their economy this year expected to be one of the
fastest-growing in the world, King Abdullah’s letter & a US President
seemingly intent on achieving Middle East peace.
US AND US DISCUSS
∙ During Netanyahu’s
visit to London he met with Prime Minister Gordon Brown, rejecting any
construction freeze in East Jerusalem, demanding the Palestinians recognize
Israel as a Jewish state & insisting on continued ‘organic growth’
in the West Bank settlements & with Obama’s Special Envoy for
the Middle East, George Mitchell. Afterwards he told reporters “We
are making headway. My government has taken steps in both words and
deeds to move forward.” Then he was off to Berlin (but
Germany seems to be shedding its guilt complex-driven tendency to condone
anything Israel does or wants).
∙ While the Palestinians
refuse to re-enter peace negotiations unless Israel halts all settlement
construction, the Israelis operate on the assumption that they will
go along with any deal Israel makes with the US, if asked to do so by
President Obama who knows that any deal short of ending all construction
activity will cost him some of his credibility with the Arab leaders.
But back home his
coalition partners are doing their utmost to push him to the right,
with several of his Cabinet colleagues recently visiting a
‘wildcat’ settlement of the kind he has undertaken to remove,
prompting an Israeli analyst to wonder how he will be able to stop settlement
construction without toppling his government. And in the midst of all
this two Palestinian families have been camped out on a sidewalk in
East Jerusalem since earlier this month in front of houses they built
50 years ago & occupied ever since, after being evicted & having
their belongings dumped on the street to make room for settlers after
an Israeli court ruled that the land their houses were on were
was legally Jewish-owned, having been purchased during the pre-WW I
HAMAS CLAIMS ABBAS
FOILED SCHALIT DEAL (Jerusalem Post, Khaled Abu Toameh)
∙ Mushir al-Masri,
a Hamas spokesman & legislator, said on August 22nd “We
were very close to striking a deal that would have resulted in the release
of Israeli soldier Gilad Schalit ... but Abbas personally interfered
to prevent the prisoner exchange because he was opposed to the release
of Hamas legislators and officials from Israeli prison” (fearing it
would undermine his authority) & that the US had also intervened,
fearing that a successful prisoner exchange would boost Hamas’ standing
among Palestinians (remember, there is an election in the offing).
Cpl. Schalit, a dual
Israeli-French citizen serving in the IDF, was captured in a June 2006
border raid (Hamas earlier offered to release him in exchange for 450
Hamas members in Israeli jails).
SHIITE LEADER DIES (AP)
∙ Abdul-Aziz al-Hakim
died from lung cancer on August 26th. He led the Shiite opposition
against Saddam Hussein for 20 years from exile in Iran & his Supreme
Iraqi Islamic Council party was a key player in the coalition that brought
Prime Minister Nouri al-Maliki to power although recently, ahead of
next January’s General Election, it withdrew its support of him.
Two days before his
death the creation of a new alliance of Shiite parties was announced,
the main players in which will be the Council & the party led by
the anti-American cleric Muqtada al-Sadr, both with close ties to Iran.
This leaves al-Maliki dependent on support from Kurds & Sunnis and
will likely exacerbate sectarian tensions at a time violence is already
on the upswing
IRAN TO BOOST ITS
INFLUENCE OVER DESTABILIZED NEIGHBOUR
(WP, David Ignatius)
∙ The US-trained
head of the US-trained Iraqi National Intelligence Service (INIS) has
quit in protest over al-Maliki’s attempts to undermine his service
in order to enable Iranian spies to operate more freely in Iraq. This
removes a key figure in the fight against terrorism & without a
US backstop the regime appears vulnerable to pressure from Iran. A July
28th bank robbery that left eight people dead was carried
out by members of a group that supposedly included a member of the security
detail of one of Iran’s Vice-Presidents, Adel Abdul Mahdi. Many senior
INIS officers are fleeing to Jordan, Egypt & Syria, fearing they
will be targeted by Iranian hit teams if they stay. And on August 19th
the bombing of the Ministry of Foreign Affairs killed 100 & wounded
hundreds more, with the Minister not ruling out collusion between the
terrorists & members of the security forces, saying “We have to
face the truth. There has been an obvious deterioration in the security
situation in the past two months.” While the government blames Sunnis,
the C-4 residues found at the site are similar to those of other Iranian-made
explosives found elsewhere in the country in the past three years.
Al-Maliki is so close
to Tehran that he is said to use an Iranian jet & crew for his official
LIGHTLY INJURES SAUDI PRINCE (BBCNews)
∙ A suicide bomber
on August 27th lightly injured Prince Muhammed bin Nayef,
the assistant interior minister, a key figure in the country’s anti-terrorism
campaign & a son of the interior minister, Prince Nayef, when he
blew himself up at a gathering of well-wishers for the holy month of
Ramadan. The royals are vulnerable since it is customary for them to
hold gatherings open to the public where people can air their grievances.
One can only wonder
if this is a harbinger of things to come; if it were, it
would have serious implications for global oil markets & oil prices
MAY PICK UP THIS QUARTER TO 8.5 PERCENT (Bloomberg)
∙ The State Information
Centre said on August 21st economic growth may rise to 8.5%
this quarter on stimulus spending, a “moderately loose” monetary
policy & better export demand.
∙ This would
be a big improvement over the First Quarter’s 6.1% & the Second
Quarter’s 7.9% & above the 8%
threshold deemed necessary to avoid social unrest.
SEVER DROUGHT HITS
CHINA’S GRAIN ZONES (China Daily)
∙ The State Flood
Control & Drought Relief agency said on August 24th insufficient
rain & high temperatures have created drought conditions affecting
170MM mu (11.3MM hectares) of crops, with 10% thereof ‘dried up’
& another 40% suffering ‘serious drought’. Many of the country’s
main grain production regions are among the hardest-hit.
170 mu is 10% of the
country’s crop land. This has also led to water scarcity for millions
of people & livestock, prompting
340,000 automobiles to be put to use transporting water.
PARTY IN TROUBLE AS ELECTION LOOMS (AP)
∙ The opposition
Democratic Party of Japan is expected to emerge from this weekend’s
election with at least 300 of the 480 seats in parliament’s lower
chamber. For voters are turning away in droves from the Liberal Democratic
Party that has ruled Japan for 53 of the past 54 years, angered by growing
unemployment, its plans to raise taxes & its perceived lack
of vision for the future & attracted by the opposition party’s
call for less wasteful government spending and for spurring the economy
& putting more money in consumers’ pockets.
If the opposition
wins the election, the country may be in for
quite a change. For the opposition leader’s wife, a former
performing artist, has let it be known she doesn’t intend to assume
the traditional subservient role of Japanese political wives (&
she seems to have her husband’s support; for he said in a
recent interview that “I feel relieved when I arrive home” &
credited her cheerfulness & ability to infuse him with new energy
for much of his success).
SOUTH ASIA HIT
BY SUGAR SHORTAGES (BBCNews)
∙ With the world
price of sugar at a 28-year peak, soaring sugar prices in India &
Pakistan are causing consumer unrest. World prices have been pushed
up by a growing demand in Brazil for sugar to be turned into ethanol
& a sharp drop in sugar output in India, the world’s No. 1 consumer
&, until recently, its No.2 producer, due to unusually poor monsoon
Sugar may not be essential
to survival, but it sure adds to the quality of life at all levels.
PICK OF TERROR SUSPECT FOR CABINET (AF-P)
∙ President Ahmadinejad
on August 21st nominated Ahmad Vahidi to be his Minister
of Defence. But Argentina’s Chief Prosecutor Alberta Nisman said he
is wanted by Interpol in connection with a 1994 bombing that flattened
the seven story headquarters of the Argentine Jewish Mutual Association
in Buenos Aires, killing 85 & injuring 300, in which he is believed
to have been involved as head of Al-Quds, an elite unit of the Revolutionary
Guards. Asked for comment, Ahmadinejad’s press adviser, Ali Akbar
Javanfekr said “How come they didn’t bring it up in the past ...
Mr. Vahidi (previously) was deputy defence minister and this
is a very senior political position.”
This may actually
help Ahmadinejad to get parliamentary approval for his cabinet.
ALL THE PRESIDENT’S
ZOMBIES (NYT, Paul Krugman)
∙ The most depressing
aspect of the healthcare debate is the way in which the opponents of
reform are getting away with peddling the Reagan mantra that government
is bad & the private sector good. For Reaganomics didn’t deliver
: lower taxes on high incomes & deregulation didn’t trickle down
: between 1980 & 2007 the top 0.1% of Americans saw their real incomes
rise seven-fold while that of median American families rose just 22%,
less than one-third the rate of the previous 27 years. And the President
must take some blame for not more effectively refuting that ‘all government
is bad government’.
low profile on the healthcare issue is surprising given its potential
for being the signature event of his Presidency & the driver of
his agenda for the next four years.
BIG EMPLOYERS DIP
INTO THE HEALTHCARE DEBATE (MSNBC, Allison Linn)
∙ Health care costs
have risen dramatically in recent years & many corporate executives
are now promoting health care reform for the same reason they do most
things, its impact on their bottom line if they can download their healthcare
costs onto the government.
With not just employers
but also the AMA, the American Hospital Association & the drug companies
in Obama’s corner it’s amazing the opponents of reform have been
able to set the agenda for the debate - perhaps
this because they appreciated better that people find it easier to
‘understand’ an issue if it’s presented to them in terms of their
own financial well-being. A Canadian journalist recently referred to
the US health care reform debate as
“class warfare”, saying the middle class is ready to lynch the insanely
well-paid financial people that brought to economy to its knees &
are back at looting the till, but at the same time has little sympathy
for those who work for a living.
HOW OBAMA MISCALCULATED
ON HEALTHCARE (Fortune, Nina Easton)
∙ His critical mistake
was ignoring the fact that 80% of Americans are satisfied with their
health care, even as they tell pollsters they want “reform” &
support “universal healthcare” and cite “healthcare costs as their
top financial concern”, ahead of retirement, mortgage and/or rent,
& job security. So any radical restructuring of the system threatens
a status quo that suits 80% of the people. And the latest NBC poll shows
that 54% are more worried about government control of healthcare than
about reform not going far enough & isn’t buying Obama’s promise
that no one will lose their benefits if they want to keep them.
The public option
issue is particularly tricky. For it is as anathemous to Republicans
& conservative Democrats as it is an article of faith to his liberal
base (which equates it with ‘real’ reform) & could cost him
the support of a hundred or so conservative Democrats in the House.
TACTICS NEED OVERHAUL (AP, Steven R. Hurst)
∙ He is trapped
between the Republicans who won’t tolerate further government involvement
in healthcare & his liberal base that insists he must keep his campaign
pledge to ensure the 50MM Americans now without healthcare coverage
can afford health insurance. And the polls seem to bear out the observation
by Prof. Robin Lauerman, professor of politics at Messiah College
in Grantham, Pa. that “the administration and others backing reform
haven’t done much to educate the public”; for the latest Washington
Post/ABC News poll found that while his overall approval rate is still
57% (12% off its peak), only 49% say they believe the president will
make the right decisions for the country, eleven points below its level
at the 100-day point.
He needs to get a
grip on the ‘Blue Dog” Democrats, whose views on healthcare reform
are closer to the Republicans’ than
to those of many of their fellow Democrats, incl. Obama himself.
GRASS ROOTS TESTS
OBAMA MOVEMENT (WP, Eli Saslow)
∙ Jeremy Bird joined
the Obama campaign as a top organizer in 2007. He is now the Deputy
Director of Organizing for America (OFA), a national network of Obama
supporters that inherited the more than 13MM e-mail addresses collected
during his run for the Presidency that could help determine the outcome
of the healthcare reform debate.
So right now he, & others like him, are crisscrossing the country
seeking to re-energize grass roots supporters outshouted at local rallies
& suffering from post-election fatigue, while reviving in them the
credo of the Obama campaign that grass roots support can power government
& shape legislation and that people should feel “like they can
control almost anything that happens in government ... (and that)
there’s no barrier between the regular people out in the states and
the power players in Washington, D.C.”
While so far the healthcare
reform adversaries have been making all the yards, Obama’s track record
suggests that would be dangerous to underestimate his political savvy.
YOUNG OBAMA BACKERS
SKIP HEALTH CARE FIGHT (AP)
∙ A lot of the tech-savvy
activists instrumental in getting him elected President are young, feel
indestructible & are not much into what they see as an old folks
One of them who is
pro-active on the issue says it makes him nervous that the generation
most supportive of health care reform is not engaged in the battle to
ALAN FRUMIN : KING
OF CAPITOL HILL? (NW, Katie Connolly)
∙ The Democrats
are considering using the budget reconciliation process to ram through
the more contentious aspects of health care reform; for it pre-empts
filibusters in the Senate so that a bill only needs a simple 51-vote
majority for passage. But under the so-called ‘Byrd rule’, passed
in 1985 to prevent it from being abused to pass non budget-related legislation,
only certain types of legislation qualify for consideration under reconciliation.
And the rule’s obtuse language often needs interpretation, and Frumin
is the official interpreter.
His predecessor, Bob
Dove, served many Republican leaders in the Senate but
was nevertheless fired by the then Republican Majority Leader Trent
Lott because he didn’t like his rulings.