Search this site powered by FreeFind

Quick Link

for your convenience!

Human Rights, Youth Voices etc.

click here


 

For Information Concerning the Crisis in Darfur

click here


 

Northern Uganda Crisis

click here


 

 Whistleblowers Need Protection

 


News Items on World Economy


January 15, 2009

OBAMA : ‘DRAMATIC ACTION’ URGENT (CanWest, Sheldon Alberts) 

    ∙ On January 7th the Congressional Budget office (CBO) said the deficit for the year to September 30th will be US$1.2TR (triple last year’s & 8% of GDP) before the cost of any further bailout package. The next day Obama told a George Mason University audience the nation is headed for years of recession unless a stimulus package is approved pronto & defended its size by saying “there is no doubt that the cost will be considerable. It will certainly add to the budget deficit in the short term. But equally certain are the consequences of doing little or nothing at all, for that will lead to an even greater deficit of jobs, incomes and confidence in our economy.” And he pledged a “sweeping effort” to halt the foreclosure crisis & to use a “full arsenal of tools to get credit flowing again.” 

His Director-designate of the Office of Management and Budget (OMB) subsequently told the Senate Budget Committee to expect budget deficits in the 5% of GDP range for five to ten years but that the incoming administration’s long-term goal remained fiscal restraint. But while John Maynard Keynes is being quoted ad nauseam, he also said “In the long term, we’re all dead.” 

OBAMA : $350 BILLION BAILOUT MUST HELP PEOPLE (AP) 

    ∙ He wants to improve the monitoring of the second $350BN installment of the financial bailout & says home owners, small businesses & consumers should get some help. 

He is reading the tea leaves : Congress is being told too much of the first $350BN went to the banks who created this mess (& who have started to campaign for still more bailout money). 

OBAMA FIGHTS TO KEEP HIS BLACKBERRY (Volkskrant) 

    ∙ On Inauguration Day he is supposed to turn it in but he told journalists that “I am going to try & keep it, they’ll have to tear it out of my hands, but I don’t know if I can win this one.” 

The official reason is that it can be used to locate and/or target him. He knows he no longer could use it to send messages since all Presidential communications by law must be available to members of Congress & others but wants to keep it to stay in touch with the world outside the “bubble” (the very reason some people  want him not to have it). 

GEITHNER SLOWED, NOT STOPPED BY TAX PROBLEMS (AP) 

  • Before becoming the New York fed President, Obama’s choice for Treasury Secretary  worked for the IMF. In 2006 the IRS found that he hadn’t paid self-employment taxes for 2003 & 2004; so he paid them. Then the transition team found he had made the same mistake for 2001 & 2002 which he corrected before Obama announced his choice as a key member of his Cabinet. And Senators in both parties seem to think this won’t impede his  confirmation with the most negative comment coming from Sen. Charles Grassley (Rep.-Ia)  who called it “disconcerting”’ but not necessarily “disqualifying.”
 

There was also a matter that he had employed a housekeeper whose immigration work status had briefly lapsed while in his employ, but that seems to gone away.    

DEMOCRATS CALL FOR $825BN STIMULUS (AP) 

    ∙ On January 15th the House Democrats introduced a stimulus bill calling for US$550BN in federal spending & US$275BN tax cuts (over two years). And its size is likely to grow if only since it provides no relief from a minimum tax that, while intended to ensure the super rich pay tax, has since ensnared 20+MM middle- to upper income tax filers. 

Going through the list of programs, most seem of a ‘replacement-’ rather that ‘additive’ nature. 

DESPITE BILLIONS IN AID, U.S. BANKS NEED MORE HELP (IHT, Edmund L. Andrews) 

    ∙ They may need a lot more. Obama seems to know that & Bernanke certainly does; for on January 13th he warned that the very financial institutions that created the credit crisis would need a lot more money from the unpopular US$700BN TARP (Troubled Assets Relief Program) program (on top of the US$200+BN they had already received).  

This could be a hard sell. For Congress is annoyed to no end at how little of the US$350BN spent so far has benefitted ‘little people’ (in recognition of which Obama has assured it that a sizable chunk of the remaining US$350BN would be used to help distressed home owners).  

CONGRESS TAKES UP FORECLOSURE RELIEF PLANS (MSNBC, John W. Schoen) 
 

  • Both Congress & Obama have identified foreclosure relief as a top priority & after a year of going nowhere are considering more aggressive measures. So far 3+MM homes have been foreclosed on, one in ten homeowners with mortgages are either in foreclosure or over 30 days behind in their payments, and according to Credit Suisse total foreclosures could hit 10MM over the next four years, i.e. one in six households with a mortgage. Part of the problem is that the convoluted way in which the housing boom was funded has hopelessly complicated once fairly simple negotiations between lenders & home owners. The most controversial foreclosure relief idea is the “cram-down” that envisages courts modifying the terms of first mortgages on primary residences by adjusting the loan balance to fair market value, cutting the interest rate & extending the term of the loan.

 

Risk could only be moved around, not made to disappear, & neither can losses : saving home owners means dumping more losses onto lenders & creating a need for still more bailouts.     

US RETAIL SALES SLUMPED IN DECEMBER (AP) 
 

  • In December they were down 2.7% MoM, vs. a 1.2% forecast. The sixth straight month of lower retail sales brought the year’s decline to minus 0.1%, vs. a  4.1% gain in 2007.
 

In the face of this, business is running down inventories, further undermining economic growth.  

GRIM JOB OUTLOOK TURNS BLEAKER (MSNBC, John W. Schoen) 

    ∙ The January 9th employment report showed another half million plus jobs lost. Analysts now say that even with a new US$775BN stimulus package the job market probably won’t pick up until early 2010 & the fact that job losses have now spread to the service sector tells them that “the recession is now rippling out into all parts of the economy.”  

As more jobs are lost, confidence sags further.

NEW JOBLESS CLAIMS UP MORE THAN EXPECTED (AP) 
 

  • 500,000 new claims for unemployment benefits had been forecast for the week to January 10th. But there were 524,000, 15% more than the week before.
 

One analyst thinks they could hit 750,000 later this year (almost 2½ the year-ago level). And according to Washington-based Economic Policy Institute the labour market took four years to recover from the 2001 recession & three years from the 1990m slump (with ‘recovery’ defined as ‘the time it takes to regain the number of jobs lost earlier’). 

BIG THREE MAKE THEIR CASE AT DETROIT SHOW (AP) 

  • They sought to tell consumers & taxpayers, ‘we’re different & our new stuff is really good’ as Chrysler sought to assure people their company is viable, GM organized a pep rally of employees to cheer on its parade of 17 new & upcoming models & Ford extolled its plans for electric vehicles. But analysts are still forecasting new car sales of 10.5MM, down 6MM from 2007, as consumers delay purchases due to the economic uncertainty (as a result of which GM & Ford in the Third Quarter each outspent their revenues by US$1BN per month).
 

And its COO told reporters that GM may need more than the US$13.4BN it was allocated by the Treasury but wouldn’t say if it would need more than originally asked-for US$18BN. Meanwhile, several major automakers, incl. Nissan, Japan’s No. 2, were conspicuous by their absence from what is been the marquee event of the auto world.

  

ELECTIONS C’TEE BANS UAL, BALAD LISTS (Jerusalem Post) 

  • Israel’s Central Elections Committee decided on January 12th, by a vote of 21 to 3 with eight abstentions, to ban the United Arab List- & the Balal parties from next month’s General Election since Section 7A of the Basic Law states that “ ‘a candidates’ list shall not participate in elections to the Knesset if “its objectives or actions ... include ... support of ...an enemy state or a terrorist organization.”

They each had three seats. Their exclusion will enhance the importance of the other fringe parties in any post-election coalition building (at dissolution there were nine parties in the 120 seat Knesset with the latest polls giving Likud & Kadima 28 each, the Labour Party 16, and the other six the rest). This decision was since appealed to the High Court of Justice which has promised a decision by January 22nd (in 2003, at the height of the second intifada it overturned a similar ban against Balal). 

PM : RICE LEFT EMBARRASSED BY UN VOTE (Jerusalem Post) 

  • He bragged on January 12th that when he heard she was thinking of supporting a Security Council cease-fire resolution, “I [called the White House and] said, ‘Get President Bush on the phone.’ They ... told me he was in the middle of a lecture in Philadelphia. I said ... ‘I need to speak to him now.’ He got down from the podium ... took the phone call ... immediately called the secretary of state and told her not to vote for it. She was left quite embarrassed.”
 

Soon we will be shot of the pair of them (although, if Netanyahu were to be the next  Prime Minister, as everyone glibly assumes, we may soon wish Olmert was there). 

TOP HAMAS REPORTEDLY KILLED (MSNBC) 

    ∙ An Israeli air strike in Gaza City killed Interior Minister Said Siam (the head of the security forces), his brother & his brother’s family. And Israeli artillery shelled the UN headquarters (causing the Secretary-General to express ‘outrage’), purportedly after coming under fire from anti-tank weapons & machine guns. Shells also struck a hospital, five high rises & a building housing (Palestinian) journalists working for foreign news services. 

The IDF has been using 155 mm artillery shells, an inappropriate calibre to use in close combat & purportedly also phosphorus shells. When the latter are used in an anti-personnel role they are about the nastiest ordnance ever devised; for when phosphorus comes in contact with air, it bursts into flames that cannot be extinguished (the Allies used it for that purpose on occasion during WW II & have been criticized ever since for doing so since it was ‘inhumane’ if it found its way onto human skin).

        

GAZA CRISIS IMPERILS 2-STATE PLAN (IHT, Michael Slackman) 

  • Egypt worries it may be pressured to re-absorb Gaza (which was part of Egypt until Israel annexed it after the 1967 War), Jordan (half the population of which is Palestinian) that Israel will try & push Palestinians from the West Bank onto its territory, & both that they may be dragged into policing the conflict.  Abdel Raoud el-Reedy, once Ambassador to the US & now Chairman of the Egyptian Council for Foreign Affairs, says “Gaza is no longer Egypt’s responsibility, and Egypt is determined not to take it back”. And Israel’s attack on Gaza has exacerbated a region-wide battle for influence among the Muslims in the region that has reversed a trend towards normalizing diplomatic relations between Egypt & Iran that seemed underway a few months ago.
 

In the first nineteen days an estimated twenty or so Israelis & over 2,000 Palestinians (half of them women & children) have been killed, about 2,300 airstrikes targeted at Palestinian targets and nearly 600 missiles & several hundred mortar rounds fired by Hamas into Israel. And in a seeming echo of the lead-in to the invasion of Iraq, Haaretz  suggested the nature of the fighting to date has proven false earlier IDF claims Hamas had acquired shoulder-fired surface-to-air missiles & sophisticated anti-tank weapons.

     

FADLALLAH CALS FOR ‘THREE ISLAMIC POLES’ TO OFFSET ISRAEL’S POWER (AF-P) 

  • The leading Lebanese Shiite cleric, Mohammad Hussein Fadlallah, said on January 11th that “to correct the military & political imbalance in the region that has the [Israeli] enemy waving its military & and security machinery in the face of the Arabs, Islamic cooperation will be required between three essential poles in the region ... Iran, Turkey and Egypt.”
 

They would make strange bedfellows indeed : Turkey is a secular Muslim state flirting with Islamism & a NATO member that nevertheless wouldn’t let the US use its territory as the ‘jumping-off point’ for a second front in the invasion of Iraq, Egypt is the birthplace of, & is now having growing problems with, the Islamic Brotherhood, and is getting billions in US foreign aid, and Iran is Shiite, Persian & part of Bush’s “Axis of Evil”    

HIZBULLAH WARNS ISRAEL AGAINST USING ROCKETS AS A PRETEXT TO ATTACK LEBANON (Daily Star, Mohammed Zaatari) 

    ∙ On January 8th three rockets were fired from Southern Lebanon into Israel with the latter responding by shelling the area from which they were launched. Hizbullah denied any responsibility but warned Israel not to use this as an excuse to attack Lebanon, with MP Mohammed Raad telling a crowd in the Southern town of Nabatijeh “if Israel decides to attack, it will be faced by a stronger resistance than it has ever faced, or imagined.” 

On January 14th several more were fired. While they did no damage, they fueled fears in Israel that militants in Lebanon might try & open a ‘second front’. 

DEBT AND EQUITY PUMMEL DEUTSCHE BANK (Bloomberg) 

  • On January 14th it reported a 4.8BN Euro loss for the Fourth Quarter (vs a 1BN Euro profit in the year earlier period). It said this was due to “exceptional market conditions, which severely impacted results in the sales and trading businesses, most notably in credit trading including proprietary trading business, equity derivatives and equities proprietary trading.” Apart from bond & equity trading losses, it was due in part also to higher  provisions for losses on debt backed by bond insurers & to “other exceptional gains  and charges”.
 

And this is a bank that supposedly had avoided direct exposure to the sub-prime market! 

MEDVEDEV TAKES APPARENT SWIPE AT PUTIN (FT, Isabel Girst) 

  • On January 11th the Russian President publicly rebuked Prime Minister Putin for moving too slowly to alleviate the country’s economic crisis.
 

But Putin has been telling the Russian people all along that there is no crisis. 

CHINA CAN BE FIRST TO ‘RECOVER’ FROM CRISIS (China Daily) 

  • Premier Wen Jiabao said over the January 9th weekend ‘Our aim is to be the first to recover from the financial crisis. We must have faith and determination” & Bank of China Vice-Governor Yi Gang predicted that economic growth will pick up between the Second & Third Quarters since local enterprises by then will have reduced inventories to the point where they have to start replenishing them
  • On November 9th Beijing announced a US$586BN stimulus package (that as a % of GDP far exceeds that of the US) & now expects to add thereto before the session of the National People’s Congress on March 5th. And while in October electricity use (deemed a barometer of economic activity) dropped for the first time in a decade (by 4% YoY), in December it was up 6.8% MoM.
 

A recent 17 country poll indicated that almost 60% of those interviewed in China believe their country’s economic situation in three months would be better or the same, compared to just over 40% in the US (and almost 80% in India & Brazil, 30% in Canada & Germany & < 20% in Britain). And confidence is what’s it all about. 

Home Books Photo Gallery About David Survey Results Useful Links Submit Feedback