It's the Economy, Stupid: Sid Harth

[chhotemianinshallah]

It's the economy, stupid

"It's the economy, stupid" was a phrase in American politics widely
used during Bill Clinton's successful 1992 presidential campaign
against George H. W. Bush. For a time, Bush was considered unbeatable
because of foreign policy developments such as the end of the Cold War
and the Persian Gulf War. The phrase, coined by Clinton campaign
strategist James Carville, refers to the notion that Clinton was a
better choice because Bush had not adequately addressed the economy,
which had recently undergone a recession.

In order to keep the campaign on message, Carville hung a sign in Bill
Clinton's Little Rock campaign headquarters that said:

Change vs. more of the same
The economy, stupid
Don't forget health care.[1]

Although the sign was intended for an internal audience of campaign
workers, the phrase became something of a slogan for the Clinton
election campaign. Clinton's campaign used the recession to
successfully unseat George H.W. Bush. In March 1991, days after the
ground invasion of Iraq, 90% of polled Americans approved of President
Bush's job performance.[2] Later the next year, Americans' opinions
had turned sharply; 64% of polled Americans disapproved of Bush's job
performance in August 1992.[2]

The phrase is repeated often in American political culture, usually
starting with the word "it's" and with commentators sometimes using a
different word in place of "economy." Examples include "It's the
deficit, stupid!"[3]
"It's the corporation, stupid!"[4]
"It's the math, stupid!"[5]
and "It's the voters, stupid!".[6]
In British political satire The Thick Of It, It's the Everything,
Stupid was the name of a book written by one of the characters.[7]

See also

List of political catch phrases
The War Room
It's About The Money, Stupid

References

Wikiquote has a collection of quotations related to: James Carville

^ Alleyne, Richard. Gordon Brown: It's the economy, stupid! The Daily
Telegraph. 2008-05-23

^ a b Agiesta, Jennifer. Approval Highs and Lows. The Washington Post.
2007-07-24.

^ Plumer, Bradford. It's the Deficit, Stupid!. Mother Jones.
2004-09-16.

^ Ivins, Molly. It's the Corporation, Stupid. AlterNet. 2006-02-23.

^ Falvey, Christopher J. It's the Math, Stupid. The VN/VO.
2005-01-03.

^ It's the Voters, Stupid Time Magazine 2008-01-21

^ The Thick Of It Cast of Characters: Ben Swain BBC.

Retrieved from "http://en.wikipedia.org/wiki/It
%27s_the_economy,_stupid"

http://en.wikipedia.org/wiki/It's_the_economy_stupid

James Carville

Born Chester James Carville, Jr.

October 25, 1944 (1944-10-25) (age 65)

Fort Benning, Georgia

Residence New Orleans, Louisiana

Nationality American

Education Louisiana State University (A.B., J.D.)

Occupation Political consultant,

Political science lecturer, Tulane University

Spouse(s) Mary Matalin (m. 1993–present) «start: (1993)»"Marriage:
Mary Matalin to James Carville"

Location: (linkback:http://en.wikipedia.org/wiki/James_Carville)

Website

Official site

James Carville (born October 25, 1944) is an American political
consultant, commentator, actor, attorney, media personality, and
prominent liberal pundit. Carville gained national attention for his
work as the lead strategist of the successful presidential campaign of
then-Arkansas governor Bill Clinton. Carville was a co-host of CNN's
Crossfire until its final broadcast in June 2005. Since its
cancellation, he has appeared on CNN's news program, The Situation
Room. As of 2009, he hosts a weekly program on XM Radio titled 60/20
Sports with Luke Russert, son of the late Tim Russert who hosted NBC's
Meet The Press. He is married to Republican political consultant Mary
Matalin. In 2009, he began teaching political science at Tulane
University.[1]

Early life and education

Carville, the oldest of eight children, was born Chester James
Carville, Jr.[2]

at Fort Benning, Georgia, the son of Lucille (née Norman), a former
school teacher who sold World Book Encyclopedias door-to-door, and
Chester James Carville, a postmaster as well as owner of a general
store.[3][4]

He has Irish and Cajun ancestry. James Carville was raised in
Carville, Louisiana,[5] and attended Ascension Catholic High School in
Donaldsonville, Louisiana.[4]

He graduated from Louisiana State University with undergraduate and
law degrees. He served for two years in the United States Marine
Corps.

Early career

Before entering politics, Carville worked as a litigator at a Baton
Rouge law firm from 1973–1979, spent two years serving in the United
States Marines, and worked as a high school teacher.

Prior to the Clinton campaign, Carville and consulting partner Paul
Begala gained other well-known political victories, including the
gubernatorial victories of Robert Casey of Pennsylvania in 1986, and
Zell Miller of Georgia in 1990. But it was in 1991 when Carville and
Begala rose to national attention, leading appointed incumbent Senator
Harris Wofford of Pennsylvania back from a 40-point poll deficit over
White House hand-picked candidate Dick Thornburgh. Also noteworthy is
that Wofford's campaign was where the "it's the economy, stupid"
strategy used by Bill Clinton in 1992 was first implemented.

Bill Clinton's 1992 Presidential campaign

In 1992, Carville helped lead Bill Clinton to a win against George H.
W. Bush in the Presidential election. In 1993, Carville was honored as
Campaign Manager of the Year by the American Association of Political
Consultants. His role on the Clinton campaign was documented in the
feature-length Academy Award-nominated film, The War Room. One of the
formulations he used in that campaign has entered the language,
derived from a list he posted in the war room to help focus himself
and his staff, with these three points:

Change vs. more of the same.
The economy, stupid.
Don't forget health care.

Political/Media work

After 1992 Carville stopped working on domestic campaigns, stating
that he would bring unneeded publicity, but he has worked on a number
of foreign campaigns, including those of Prime Minister Tony Blair of
the United Kingdom, Ehud Barak of Israel's Labor Party, and the
Liberal Party of Canada. In 2002, Carville worked as a Greenberg
Carville Shrum (GCS) strategist to help American-educated Bolivian
Gonzalo Sánchez de Lozada win the presidency in Bolivia which was
portrayed in a documentary Our Brand Is Crisis.

Carville at an All the King's Men press conference in 2006

In 2004, he was brought in for last-minute consulting on Senator John
Kerry's Presidential campaign, but he did not play a major role.

In 2005, Carville taught a semester of the course "Topics in American
Politics" at Northern Virginia Community College. Among the guests he
had come speak to the class were Al Hunt, Mark Halperin, Senator
George Allen, George Stephanopoulos, Karl Strubel, Stan Greenberg,
Tony Blankley, representatives from the Motion Picture Association of
America, James Fallows.

In 2006, Carville switched gears from politics to sports and became a
host on a sports show called 60/20 Sports on XM Satellite Radio with
Luke Russert, son of the late NBC journalist Tim Russert. The show is
an in-depth look at the culture of sports based on the ages of the two
hosts (60 and 20). After the Democrats' victory in the 2006 midterm
election, Carville criticized Howard Dean as Democratic National
Committee Chair, calling for his ouster, as he believed Dean had not
spent enough money. In late November 2006, Carville proposed a truce
of sorts.[6]

Carville is the executive producer of the 2006 film All the King's
Men, starring Sean Penn and Anthony Hopkins, which is loosely based on
the life of Louisiana Governor Huey Long.

Carville had believed that Al Gore, whom he helped put in the White
House as vice president in 1992, would run for president in 2008.[7]

This prediction did not come true.

Carville has moved to New Orleans, and will teach at Tulane University
as professor of practice starting spring semester of 2009.

On March 4, 2009, Politico reported that Carville, Paul Begala, and
Rahm Emanuel were the architects of the Democratic Party's strategy to
cast conservative talk radio host Rush Limbaugh as the face of the
Republican Party.[8]

Carville was particularly critical of Limbaugh for saying he wanted
Barack Obama to "fail." It was later reported that Carville had voiced
the opinion, during the presidency of George W. Bush, that, "I don’t
care if people like him or not, just so they don’t vote for him and
his party. That is all I care about. I hope he doesn’t succeed, but I
am a partisan Democrat. But the average person wants him to succeed.
It is his country, his life or their lives. So he has that going for
him."[9]

Carville made the remarks on September 11, 2001, shortly before the
terrorist attacks on the United States. Upon hearing news of the
attacks, Carville asked reporters to "disregard" his prior comments.
[10]

Afghan presidential candidate Ashraf Ghani hired Carville as a
campaign advisor in July 2009. Carville said that the 2009 Afghan
presidential election is "probably the most important election held in
the world in a long time," and he called his new job "probably the
most interesting project I have ever worked in my life."[11]

Carville, whose work for Ghani is pro bono, when asked about
similarities between politics in Afghanistan and politics in
Louisiana, responded:

Yeah, I felt a little bit at home, to be honest with you.[12]

Hillary Clinton's 2008 Presidential campaign

Main article: Hillary Clinton presidential campaign, 2008

As an advisor to Hillary Rodham Clinton's 2008 presidential campaign,
Carville told The New York Times on March 22, 2008, that New Mexico
Governor Bill Richardson, who had just endorsed Senator Barack Obama
for the Democratic nomination, was comparable to Judas Iscariot. It
was "an act of betrayal," said Carville. "Mr. Richardson’s endorsement
came right around the anniversary of the day when Judas sold out for
30 pieces of silver, so I think the timing is appropriate, if ironic,”
Mr. Carville said, referring to Holy Week. Governor Richardson had
served in President Bill Clinton's administration as both United
States Ambassador to the United Nations and Secretary of Energy, and
Carville believed that Richardson owed an endorsement to Senator
Clinton in exchange for being offered those posts by her husband.
Carville also claimed that Richardson assured many in the Clinton
campaign that he would at least remain neutral and abstain from taking
sides.[13]

Richardson refuted Carville's account, arguing that he had not made
any promises to remain neutral. Richardson claims that his decision to
endorse Obama was "clinched" by his speech on race relations following
the swirl of controversy surrounding Obama's former pastor Jeremiah
Wright.[14]

Carville went on to note,"I doubt if Governor Richardson and I will be
terribly close in the future," Carville said,[15]

but "I've had my say...I got one in the wheelhouse and I tagged it."

Even as Clinton's campaign began to lose steam, Carville remained both
loyal and positive in his public positions, rarely veering off message
and stoutly defending the candidate. But on May 13, 2008, a few hours
before the primary in West Virginia, Carville remarked to an audience
at Furman University in South Carolina, "I'm for Senator Clinton, but
I think the great likelihood is that Obama will be the nominee."[16]

The moment marked a shift from his previous and often determinedly
optimistic comments about the state of Hillary's campaign.

After Barack Obama's clear lead for victory in the Democratic
presidential campaign on June 3, James Carville said he was ready to
open up his wallet to help Obama build a political war chest to take
on John McCain in November.[17]

Career as author

Carville is also a best-selling author. With his wife, Republican Mary
Matalin, and writer Peter Knobler, Carville co-wrote All's Fair: Love,
War and Running for President, published in 1995. He later wrote:
We're Right, They're Wrong: A Handbook for Spirited Progressives,
published in 1996; ...And The Horse He Rode In On: The People vs.
Kenneth Starr, published in 1998; With Paul Begala he co-wrote
Stickin. Suck Up, Buck Up... and Come Back When You Foul Up, in 2001,
which detailed strategies for fighting and winning in business,
politics, and life. In 2004, Carville released a political banter book
entitled Had Enough?, as well as a children's picture book, Lu and the
Swamp Ghost, with co-author Patricia McKissack and illustrator David
Catrow. In January 2006, he released another book co-written with
Begala, Take It Back: Our Party, Our Country, Our Future.

Carville's most recent book is entitled 40 More Years: How the
Democrats Will Rule the Next Generation.

In 1996, Carville was inducted into the Louisiana Political Museum and
Hall of Fame in Winnfield, along with former Louisiana State Treasurer
Mary Evelyn Parker and the late segregationist leader Leander Perez.

Personal life

Carville is married to Republican political pundit Mary Matalin, who
had worked for President George H. W. Bush on his 1992 reelection
campaign. Carville and Matalin were married in New Orleans in October
1993. They have two daughters: Matalin Mary "Matty" Carville and
Emerson Normand "Emma" Carville. Carville publicly acknowledged that
he has adult attention-deficit disorder.[18]

In 2008, Carville and Matalin relocated their family from Virginia to
New Orleans.[19]

He is currently on the faculty of the department of political science
at Tulane University.

Film and television appearances

Lists of miscellaneous information should be avoided. Please relocate
any relevant information into appropriate sections or articles.
(September 2008)

Carville and Keith Ellison in 2007Carville takes a lead role in The
War Room, a documentary about Bill Clinton's 1992 presidential
campaign, together with George Stephanopoulos.

He appeared in the 1996 film The People vs. Larry Flynt as attorney
Simon Leis.

He appeared in three episodes of the sitcom Mad About You playing
himself, as head of a political consulting firm that hires Jamie
Buchman, played by Helen Hunt.

In the film Old School, Carville makes a cameo appearing as himself,
brought in as a ringer at a college-level debate society meeting and
introduced as the "ragin' cajun". Will Ferrell then inexplicably gives
a complex answer regarding US biotechnology policy.

When it comes to Carville's rebuttal, he only says, "...We...
(stumbles) have no response. That was perfect..."

In the film Wedding Crashers, Carville makes a cameo appearance
alongside Senator John McCain of Arizona.

He appeared as himself in Rachel Boynton's Our Brand Is Crisis, a
documentary that goes behind-the-scenes to show the manipulation and
orchestration that is involved in big-time political campaigning. The
movie follows members of the consulting firm of Greenberg Carville
Shrum to Bolivia, where they have been hired to help controversial
candidate Gonzalo Sanchez de Lozada reclaim the presidency.

Carville appears as the Governor of Missouri, Thomas Crittenden, in
the 2007 movie The Assassination of Jesse James by the Coward Robert
Ford.

He was in a Coca-Cola ad during Super Bowl XLII in 2008, with former
Republican Senator Bill Frist.

He appeared as himself in NBC's comedy 30 Rock, season 2 episode 8,
where he advises Jack Donaghy (a Republican supporter) on his
relationship with a Democratic Congresswoman, and advises numerous
characters on how to deal with their problems "Cajun style". ("Tryin'
to steal candy from a vending machine? Here, let me show you how it's
done...Cajun style.")

Appeared in cartoon form in Season 2, Episode 10 of the Family Guy
"Running mates". Carville was introduced as the ragin' cajun and was
trying to save Peter Griffin's career as school president. Peter
cringed in terror every time he saw Carville's face.

Starred in Steven Soderbergh's HBO series K Street along with his
wife

Starred in a 1998 Alka-Seltzer commercial with his wife Mary Matalin

Quotations

This biographical section needs additional citations for
verification. Please help by adding reliable sources. Contentious
material about living persons that is unsourced or poorly sourced must
be removed immediately, especially if potentially libelous or harmful.
(July 2009)

Wikiquote has a collection of quotations related to: James Carville

On the odds of John McCain beating Obama: "John King said that it
would be the biggest comeback of the century. It actually would be the
biggest comeback since Lazarus"[20]

"But one of Clinton's problems was, the interest groups don't care
about the working poor. The Republicans don't care about the working
poor — they don't know any. The Op-Ed writers don't care about the
working poor. The editorial writers don't care about the working poor.
The talking heads don't care about the working poor."

"Drag $100 bills through trailer parks, there's no telling what you'll
find." regarding Paula Jones[21]

Further reading

Clinton, Bill (2004). My Life. Vintage. ISBN 1-4000-3003-X.

See also

United States Marine Corps portal
K Street (TV series)
Ray Nagin

References

^ Hobgood, Kathryn (2008-11-18). "Political Pundit Joins Faculty". New
Orleans, LA: Tulane University. http://tulane.edu/news/newwave/111808_carville.cfm.
Retrieved 2009-01-29.

^ James Carville Deposition section 3

^ The Columnists. Salon.

^ a b Carville, James; Mary Matalin; Federal News Service (transcript)
(2007-03-

27). "CEA Washington Forum" (.doc). Washington, D.C.: Consumer
Electronics Association.

http://www.ce.org/Events/event_info/downloads/WF07/3.27.07%20Carville%20&%20Matalin%20Keynote.doc.
Retrieved 2008-04-01.

^ Anchors & Reporters. CNN.

^ Hotline On Call: Carville's Truce? The Hotline. National Journal
Group. 2006-11-30.

^ James Carville: Al Gore Will Run in 2008. NewsMax.com. 2007-02-27.

^ Martin, Jonathan (March 4, 2009). "Rush Job: Inside Dems' Limbaugh
Plan". Politico.

http://www.politico.com/news/stories/0309/19596.html. Retrieved
2009-03-12.

^ Sargent, Greg (March 12, 2009). "Revealed: What James Carville
Really Said On 9/11 About Wanting Bush To Fail". WhoRunsGov.com.

http://theplumline.whorunsgov.com/political-media/revealed-what-james-carville-really-said-on-911-about-wanting-bush-to-fail/.
Retrieved 2009-03-12.

^ Sammon, Bill (March 11, 2009). "Flashback: Carville Wanted Bush to
Fail".

FoxNews.com. http://www.foxnews.com/politics/2009/03/11/carville-wanted-bush-fail/.
Retrieved 2009-03-12.

^ "U.S. strategist helps rival of Afghan president". Associated Press.
2009-07-08.

http://www.kansascity.com/659/story/1312800.html. Retrieved
2009-07-14. Cf. "Carville to Advise Karzai Challenger in Afghan
Election Contest". Bloomberg. 2009-07-06.
http://www.bloomberg.com/apps/news?pid=20601070&sid=aHvyg97ihhPM.
Retrieved 2009-07-14.

^ Bruce Eggler & Michelle Krupa, "Carville finds familiar politics in
Afghanistan" (section titled "Going native") in Times-Picayune, 2009
August 1, Saint Tammany Edition, p. B3.

^ Adam Nagourney and Jeff Zeleny, "First a Tense Talk With Clinton,
Then Richardson Backs Obama", The New York Times, March 22, 2008.

^ CNN Political Ticker: All politics, all the time Blog Archive -
Richardson: Obama’s speech was decisive « - Blogs from CNN.com

^ Sinderbrand, Rebecca (2008-03-25). "Carville: Controversial Judas
comment 'had the desired effect'". CNN Political Ticker
(CNNPolitics.com).

http://politicalticker.blogs.cnn.com/2008/03/25/carville-controversial-judas-comment-had-the-desired-effect.
Retrieved 2008-04-01.

^ CNN Political Ticker: All politics, all the time Blog Archive -
Carville: Obama likely to win nomination « - Blogs from CNN.com

^ http://www.nndb.com/org/684/000167183/

^ Thakkar, Vatsal, Medscape Psychiatry & Mental Health, "Depression
and ADHD: What You Need to Know", http://www.medscape.com/viewarticle/549018,
retrieved 2009-04-17

^ Argetsinger, Amy; Roxanne Roberts (2008-03-27). "His Family Is
Following the Ragin' Cajun Home". The Reliable Source (The Washington
Post): pp. C03.

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/27/AR2008032700006.html.
Retrieved 2008-04-01.

^ http://transcripts.cnn.com/TRANSCRIPTS/0811/03/lkl.01.html

^ Adam Cohen (1997-01-20). ""Will she have her day in court?"". Time
(magazine) (New York). http://www.time.com/time/magazine/article/0,9171,985789,00.html.
Retrieved 2008-01-21.

External links

Wikimedia Commons has media related to: James Carville

The Office of James Carville

CNN Biography

James Carville at the Internet Movie Database

http://en.wikipedia.org/wiki/James_Carville

...and I am Sid Harth

...and I am Sid Harth

[chhotemianinshallah]

A Citizen's Guide to the US Economy for the 2008 Election

You don't need to be an economist to understand this Guide, but it
will provide you with an intelligent roadmap to understanding the US
economy so you can make more informed, intelligent choices about our
future in the new global economy.

ACADEMIC DISCOUNT:
Students and teachers with a .edu

email get $5 OFF every paperback copy.

Feb 02, 2010

It's the Economy (stupid) Introduction

"A most timely book and one that every American concerned for his
country should read and think about. Patric Hale may be a voice crying
in the wilderness but those who fail to heed it will pay a terrible
price."
Hugh Menzies

Former Assoc. Editor, Fortune
Former Int'l Bus. Editor, BusinessWeek

In 2008, the American people will be barraged with claims and counter-
claims during our quadrennial presidential elections. In the process
there will be the usual myriad of issues facing Americans presented by
the candidates, from which the common citizen will have to determine
our next leader. The most important ones that always face Americans,
however, are those of war-and-peace and "pocketbook" issues. But of
these two, everyone knows that the economy is the most important daily
issue that faces us all. Despite this nothing exists in America that
gives the people a guide to the US economy so they can better
understand these issues in a more intelligent, informed way. This is
the fundamental reason why I've written this Guide.

This Guide is not meant to be polemic in terms of the data. As Joe
Friday from Dragnet used to say: "Just the Facts, Ma'am." That's what
this Guide is meant to provide - just the facts. "Ah, facts," you say,
(I hear the skeptics amongst you), "but one man's fact is another
man's opinion!" There's also the other saying: "There are lies, damn
lies, and statistics!" Both are witty, of course, but mostly untrue. I
say mostly because the world is never stagnant enough to fully achieve
perfection in the accumulation of statistical information; invariably
the world has moved on and the statistical snapshot becomes history.
Nonetheless, there is a body of statistical information that policy-
makers in Washington, and indeed those around the world, accept as
benchmarks to help them truly understand the economy in as unbiased a
way as possible. These are the sources that are used in this Guide.
Most of them are readily available as public information on the
internet. Unfortunately, if you really want to know the information it
will literally take you months to find it, and more to put it together
in a useful form. That's also why I've written the Guide - to save you
the time and trouble to put it in a useful format that helps make you
a better informed citizen.

Facts and figures by themselves, however, don't provide enough
perspective on the US economy. The American Heritage dictionary
defines "perspective" as "the relationship of aspects of a subject to
each other and to a whole". That's what this Guide will also provide
the reader. The first perspective required is for every reader to
remember that the United States is only one of almost 200 countries in
the world, and although it is the largest economy it must be seen in
perspective to the global economy to properly understand its role.
Indeed, issues like our deficits - either short-term or long-term -
only truly matter in a global economy relative to America's global
competitors and to its own GDP (see Chapter 9). The second perspective
of importance is that of time; so I've provided historic data where
appropriate to explain the development of the US economy over time.

Why is perspective important, especially in an election year? A friend
of mine, for example, once made the pronouncement that "under Bush we
have the largest deficit in our history". This is true in absolute
terms; but compared to what? Deficits are not absolutes; they are
actually relative terms, particularly to our competitors because it
affects our global competitiveness, and relative to our own GDP and to
our past. So part of the guiding light in understanding the US economy
and some of the polemic subjects that always arise in an election is
to always keep the question "compared to what?" in mind. This Guide
provides this perspective, too.

The USA in the New Global Economy

Click to enlarge

Click to enlarge
"A universally helpful and insightful book. I particularly liked the
straightforward charts and summary points. It should be a reference
manual for everyone interested in the US economy."
David Gamble
Former Chief Executive
British Airways Pension
Investment Management Ltd
(excerpt from the book...)

It seems almost trite to say we live in a global economy in ways we
never have before. But this is, nonetheless, a fact. While there has
always been a global economy, with trade being carried out around the
globe, nonetheless, the level of trade and the interconnectivity
through the internet, global telecommunications, and relatively
inexpensive air transportation has increased the importance of the
global economy, especially to America. Unfortunately, it does not
always seem that America's policy-makers understand this point as will
be clarified in this book.

As we all know, the US economy became the world's biggest as a result
of WWII, since all its major competitors--France, UK, Germany, Italy,
Soviet Union, and Japan--had their economies seriously disrupted if
not destroyed. As Stalin imposed the Cold War on the world, and Mao
took China out of the community of nations, the world economy was
divided into: Capitalist states (free markets), communist states
(command economies), and the rest of the world, which were referred to
as "under-developed nations" or "less-developed nations" or
"developing nations". (There were numerous economists who quite
rightly drew up ways of dividing the rest of the world into these
categories). But nonetheless, the total sum contribution to the global
economy of these countries was very little. There was the "First
World" - i.e., the capitalist countries (also known as "the free
world"); then the "Second World" - i.e. the communist countries; and
then the "Third World" - meaning everyone else.

Consequently, it is vitally important moving forward that Americans
understand its relative position in the new global economy and the
implications. On page 14 is a list of the top 20 economies in the
world ranked by GDP (see Summary Point #1 for definition). As you can
see, according to the World Bank, the top 20 economies are responsible
for over 80% of the economic activity of the world. Consequently, as
the top 20 goes, so goes the rest of the global economy. You will see
that the USA remains the #1 single country economy in the world with
roughly 25% of the global economy. However, as you'll see in the chart
on the bottom, the European Union has surpassed the USA, although
those countries that accept the euro is still smaller than the USA.

The distinction is important since currencies are determinants of
trade in the global economy. Consequently, unlike in the past up to
2002, the US dollar--and thus the US economy--now has competition of
equal standing in the new global economy. The US cannot claim
leadership in this regard as it has since WWII; it has to earn its
leadership.

What does this mean, and why is it important? In the past, to be
blunt, the USA determined terms of trade in the "global" (albeit
"restricted") First World because no other economy could provide the
liquidity in the form of the US dollar needed for the global economy
to grow. This is now no longer the case. Now for America to remain
leader in the global economy--despite the size of its economy- it has
to compete in the global economy in ways it never has had to before.

US Trade in the Global Economy

Click to enlarge

Click to enlarge
"I am a retired professor of economics, having taught for 40 years at
New York University, San Francisco State University, and the
University of California. During my tenure, I worked for three
publishing companies as a consulting editor on new book proposals.
"It's the Economy! (Stupid)" is one of the best manuscripts that I
have ever read covering the golden keys to our economic future and a
"must read" for our politicians, university faculty, and money vendors
on Wall Street."
Prof. Stanford L. Johnson, PhD
Emeritus, San Francisco State Univ.
(excerpt from the book...)

The one thing that truly distinguishes the new global economy is
trade. Since the fall of the Wall in 1989, global trade has defined
economic growth. There is simply no way to compete economically
without competing on trade. Trade means competing and in ways that the
USA has never understood before. As much as some people seem to argue
against "globalization" the fact is we have no choice as Americans.
Either we understand this fundamental truth, pull up our straps, and
get out into the global market and sell more American products or our
national economic security will be even more imperiled than it already
is. It simply does no good to bemoan some of the displacement effects
of globalization; these effects are with us and the only way to
counter them is to compete even harder in the new global economy.

In the early 80s, as some may recall, America was awash with fear-
mongering about the "Japanese Challenge". Back then the prospect of
Japan surpassing the USA actually unified Americans--especially
American business--and we rose to the challenge and turned it back
decidedly. Now, however, there doesn't seem to be any sense of urgency
either by the federal government--Congress and the Administration--or
American businesses to rise to this new global challenge and compete
aggressively. This is surprising considering the verve with which
capitalist America supposedly embraces competition. Yet the facts
don't lie as you will see from the charts in this chapter.

America's trade deficit from 1976 up to 1999 remained under 3% of GDP.
Since US economic growth--including productivity gains--outstripped
this deficit, it was viewed with benign neglect and generally drew a
big yawn from policy-makers. But something happened in 1999: Our trade
deficit went from 1.8% the previous year to 2.8%, and it hasn't
stopped growing since. By 2006, our trade deficit had grown to over 6%
of GDP, surpassing American economic development. Simply put, this
means 6% of America's economy is walking out the backdoor each year
and no one is paying any attention! Can you imagine the response if an
employee were stealing 6% of a store's stock out the back door? Yet
that's what's happening to the US economy with our trade deficit but
our government is doing nothing about it!

OVERSEAS AMERICANS:
Why Our Trade Deficit is Our Own Fault

In 1962, the Kennedy administration was convinced that movie-stars and
millionaires were living outside of the U.S. to avoid taxation.
Despite this having never been proved either then or since, it hasn't
stopped the US government from instituting a myriad of legislation to
effectively punish any private citizen from leaving America's shores
to pursue any opportunity abroad, especially increasing US exports.
This includes instituting a taxation regime based on nationality
instead of territoriality--the only industrial country in the world to
do so. What this means is all Americans--not just millionaires--are
required to file a tax return on his/her worldwide income no matter
where they live, and pay US tax liability on any income not taxed
according to the rules of the IRS. The government is "kind" enough to
grant a tax credit for any income tax a US citizen pays to the local
government, but requires the overseas American to make up any
difference between comparable local taxes and any hypothetical US tax
liability. In practice this means that if an overseas American lives
in a country with little or no income tax comparable to US taxes, he/
she is required to pay taxes to the US government on their income as
if he/she never left America. But, of course, not all countries in the
world use income taxes similar to America to fund themselves. As far
as the US government is concerned this is just too bad for the
individual and he/she faces an increased tax liability to the IRS. Of
course, the Federal government never understands that overseas
Americans do not receive any of the benefits that the US government
provides citizens and other residents in the USA, but they are
nonetheless required to act fiscally as if they never left. The
concept and practice is simply absurd--moreso now when we need more
and more Americans going overseas to increase our exports!

The USA in the New Global Economy

Click to enlarge
"Patric Hale has done a wonderful job researching and presenting the
key issues facing the United States in the 21st century. His new book
is exciting to read and should be in the library of every concerned
citizen and corporate manager. This book is a general guide and
reference that can be used and accessed for many years to come."
Robert Johnson
Director (Ret.)
Hewlett-Packard
(excerpt from the book...)

Since 87.8% of the US GDP is a result of private industries (see chart
below and on the following page), it is important to understand which
industries and companies produce this 87.4% of our current $13 trillion
+ GDP. First, however, take a look at the chart at the left. In a
nutshell, here is the Summary Point:

SUMMARY POINT #18:
The USA economy is 70% consumption, 17% investments, 19% government,
and it loses 6% of its consumption through our trade deficit.

While the concentration of economic power represented by just the top
500 companies in America can be seen as "threatening" (concentrated
economic power--like political power--always has a latent threat),
they nonetheless also represent the success of America's free
enterprise system which shouldn't be overlooked. Despite the seemingly
monolithic nature of America's largest companies, nothing could be
farther from the truth. The US economy--as has been stated so often--
is one of the most dynamic in the world. In theoretic terms, at the
heart of what's known as "capitalism" is a term called "creative
destruction". Essentially this means that as long as the capitalist
system is based on intense competition, the newer, better, cheaper,
more-in-demand solutions will inevitably defeat the older ways of
doing things. Here's one of the best ways to illustrate this in
laymen's terms: There is more computing power in today's cell-phone
than was on board the Apollo spacecraft that landed on the Moon in
1968!

But perhaps in economic terms the page at the left and the two that
follow best illustrate this point. The Fortune 500 list was
inaugurated in 1957. Last year they celebrated their 50th anniversary
by printing the original list and the current list. On these pages
you'll find the top 100 companies from both lists. See how many
companies that were on the original list in 1957 are still on the list
in 2007. Surprisingly, only 22 companies from 1957 are still on the
Fortune 500 list in 2007; of these, only 20 are amongst the top 100.
That means that 80 of the top 100 companies in America weren't around
50 years ago--including the #1 company, Wal-Mart!

The USA in the New Global Economy

Click to enlarge
"Patric Hale has done a wonderful job researching and presenting the
key issues facing the United States in the 21st century. His new book
is exciting to read and should be in the library of every concerned
citizen and corporate manager. This book is a general guide and
reference that can be used and accessed for many years to come."
Robert Johnson
Director (Ret.)
Hewlett-Packard
(excerpt from the book...)

The financial markets--and especially the banking industry--of any
economy, and especially the USA, hold a privileged position. And for
good reason. In this chapter you will learn why this must be so and
how these markets work. This will be accompanied with a statistical
analysis of the various parts to provide a factual basis for
understanding this point.

"Money makes the world go around" as the song from the show Cabaret
states so eloquently, and it is certainly true. Another word for money
in economic terms is "liquidity". Liquidity is to the body of an
economy what blood is to your own body. Maintaining your body's blood
pressure and preventing any blockages is as vital to your personal
health as ensuring the circulation of money/liquidity is to our
economy. The reason why I use the term "liquidity" instead of simply
money is that "money" denotes a "thing", in this case the currency we
hold that hopefully retains its value and is used as a means for
exchange. "Liquidity", however, denotes the "dynamic process" whereby
money flows throughout the entire body of the economy. To continue the
blood analogy, while the blood itself is what maintains healthy cells
in the body, it is meaningless without the constant flow to-and-from
the heart to constantly replenish the cells. This is why maintaining a
well-regulated blood pressure is so important to maintaining a healthy
body, in the same way as the importance of liquidity is to the
economy. Hence the process is vitally more important than the thing
itself, though the two are invariably connected.

This is a "dynamic process" because the US economy is constantly
changing--expanding and contracting--and therefore the need for
liquidity management for the economy is like maintaining blood
pressure to your own body.

The Federal Reserve system is virtually the heart of the economy in
almost the same way as the heart is to the body. That's why our
current crisis in the financial markets is so critical: It is similar
to a heart attack and the Fed is trying to prevent the economy from
going into cardiac arrest or developing a stroke. This is just as
important to the economy as if you were going through something with
your own heart.

In this chapter you'll learn how liquidity/money is added to the
economy, how it is distributed, how it is managed, how it is lent out,
how it is invested, how the pension fund and money managers affect the
investments, as well as putting our stock markets into perspective,
both relative to our own economy and to other stock markets around the
world. This is an essential part of understanding the role of money/
liquidity in our society that affects all of us. Clearly, the
objective here is not to cover all of the bases in depth, but to
provide you with a basic but understandable panorama of the US
financial markets.

Income in America and the IRS

Click to enlarge
"I am a retired professor of economics, having taught for 40 years at
New York University, San Francisco State University, and the
University of California. During my tenure, I worked for three
publishing companies as a consulting editor on new book proposals.
"It's the Economy! (Stupid)" is one of the best manuscripts that I
have ever read covering the golden keys to our economic future and a
"must read" for our politicians, university faculty, and money vendors
on Wall Street."
Prof. Stanford L. Johnson, PhD
Emeritus, San Francisco State Univ.
(excerpt from the book...)

Show Me the Money! - The IRS Data

Before going into an analysis of the Federal Government's role in the
economy and an explanation of the Federal budget, it's important to
remember that the source of the US government's revenue--as with most
governments--comes from its power to impose taxation on the people and
then enforce the collection of it.

Of course, each country in the world has developed various forms of
direct and indirect taxation. In the USA most of the revenue generated
to fund the Federal Government comes from five major sources:
Corporate income tax, individual income tax, employment taxes, estate
and gift taxes, and excise taxes. On the facing page you'll see how
these five categories break out from 2002-2006. As you can see the
Federal Government took in a total of $2.5 trillion in taxes in 2006.
Since the GDP of America in 2006 was $13.2 trillion, tax receipts
equaled 18.9% of GDP--let's say 19% to make it easy. In other words,
for each $1 trillion of GDP growth, the government receives $190
billion in new tax receipts.

But how much the government receives, especially from individuals,
isn't nearly as interesting as who pays it, particularly since there
are common assumptions in public opinion and the presidential campaign
about this issue. On the next three pages you will see who paid the
$935 billion in individual income taxes based on the IRS income bands.
(The IRS provides all of these income bands and more information on
their website as a matter of public record; www.irs.gov).

There were about 90 million returns filed in 2006 (no break-out is
provided as to how many were single and how many joint), which showed
total taxable income of roughly $5 trillion. Of this taxable income,
$935 billion, or 18.7%, was paid in taxes. As we all know, the tax
burden is not the same for all. But who paid the taxes might surprise
you.

This chapter also includes a brief but interesting history of taxation
in America under different administration and compare and contrasts
them to the function of the US economy.

The Federal Government & the Economy

Click to enlarge
"Patric Hale has done a wonderful job researching and presenting the
key issues facing the United States in the 21st century. His new book
is exciting to read and should be in the library of every concerned
citizen and corporate manager. This book is a general guide and
reference that can be used and accessed for many years to come."
Robert Johnson
Director (Ret.)
Hewlett-Packard
(excerpt from the book...)

The Federal government comprises 7.1% of the GDP of the USA (see table
on next page), a budget of almost $3 trillion, and it employs 4.2
million people in all its branches. It is the largest organization in
the United States, and indeed the entire world. The responsibility of
the President of the United States is not only to identify problems in
America and abroad that affect our lives and security, and then
proffer possible solutions to Congress, but he or she must also be the
CEO and COO of this large organization with all of the management
requirements this implies. It is, therefore, not for the faint of
heart and requires considerable analytical, organizational,
managerial, and budgetary skill. While much of this is always
delegated, as Harry Truman so eloquently pointed out with the sign on
his desk in the Oval Office - "the buck stops here" with the
President.

This chapter will look at how the government relates to and affects
the US economy as a whole. In the next chapter we will examine the
budget itself and how it is constituted. The information in these two
chapters - like most of the information in this book - comes from the
Bureau of Economic Advisors. These are the numbers that the President
and his cabinet use to help them manage the government and the
economy. Thus, if you ever want to become President, pay attention to
these numbers and understand the implication of what it means to
manage the US government. When you do this, you will understand why
the US public has felt more comfortable in the last 100 years with
electing men (to date) who have served either as governor of one of
our states or as Vice President before occupying the Oval Office. In
fact, only one sitting Senator has been elected President during this
time--President Kennedy. While all presidents must have an
understanding of the problems that face us, and be able to communicate
effectively about the policies he/she chooses to deal with them, he/
she also must be acutely adept at managing the business of the Federal
government, too. This presidential role is as critical as the others
in assuring the country's interests are well looked after.

On the facing page you will see the percentage shares of the major
components of the US economy broken out into categories since 1930 to
get an overview of their relationships to the economy as a whole. On
the next two pages you will find a further break-out of these
categories into smaller parts for those who want more detail.

As you can easily see, the share of government at all levels at its
height in the 70s comprised only 22.5% of the GDP of the country -
that's the most it has been except during WWII itself which was an
extraordinary period as we all know. Consumption makes up about 70%,
investment about 16% and there was little or no trade deficit until
1990. Beginning in 1990, however, and accelerating after 1999, as the
negative sign implies, the trade deficit has been depleting the US
economy ever since. Indeed, the percentage of the GDP dedicated to
both imports and exports has risen markedly since 1970, again
underscoring the growing dependence of our country on the new global
economy in ways it hasn't been in the past. Imports, for instance,
jumped by over 55% during the 90s, from 10.9% in 1990 to 16.9% in
2006. Exports grew, however, from 9.5% to only 11.1%.

What's perhaps most interesting looking at the chart on the facing
page is how fairly consistent the economy has performed over time. The
only major anomaly since 1930, besides trade, has been the shift from
the production of non-durable goods (from 37% in 1930 to 20% today) to
services (from 32% in 1930 to 42% today).

The Federal Budget Explained

Click to enlarge
"Having worked in the financial world for over 30 years and witnessed
first hand the lack of education relative to global economies, this is
the first book that finally allows non-professors a birds-eye view on
world economics in plain English!"
Jeff Marshall - President & CEO,
Green Earth Technologies, Inc.
(excerpt from the book...)

As stated in the previous chapter, the US Federal Government is the
largest business in the world with a budget of almost $3 trillion and
employs 4.2 million people. By itself, it is as large as the entire
economy of China--the third largest in the world. By contrast, the
largest private company in the world by market capitalization is
ExxonMobil at a mere $410 billion, or roughly 14% the size of the
Federal Government. For US citizens the Federal government's size
seems overwhelming and unwieldy. The budget itself seems beyond
comprehension--to citizens and some of our leaders alike.

On the facing page you will see the development of the Federal
Government by the numbers since 1901. The numbers quickly become
staggering almost beyond comprehension. But "beyond comprehension" is
simply unacceptable both for us who pay all that money, and especially
for the media and members of the government who must try to explain it
to us. So this chapter will focus on trying to bring some clarity to
the Federal Budget, showing where the money goes, and putting all of
this in context.

Let's begin with the $3 trillion itself. Some politicians on both
sides rail against this figure as being either too big or too small
depending on what one wants the Federal Government to actually do for
its citizens. Again, the question is: "Compared to what?" On the next
page you will see the same chart as that on the left but broken out as
a percentage of GDP since 1930. The numeric size of our government by
the numbers is actually meaningless--as our economy grows, and
inflation affects all things economic, so will our government grow as
well. Consequently, the only way to keep these big numbers in context
is understanding them as a percentage of GDP over time. Only then can
we track whether the situation is getting better or worse compared to
the past.

On the chart on the next page it is the "outlays" column that matters
most because this is the amount of money the government actually
spends that determines its size, not how much it actually receives.
Naturally most citizens would prefer that it be the other way around,
but that's another issue. Over time, as you can see, with the
exception of WWI and WWII, Federal Government outlays have generally
been between 18-23%, or an average of about 20%. Considering the size
of the US economy, an average of 20% is hardly unreasonable for its
government. And despite our understandable anathema for deficits--for
good reason--even that has been hardly out of whack over the years
(see Chapter 9). Nonetheless, it seems incongruous that our leaders
can't seem to balance the books each year as the difference between
receipts and outlays is statistically so small. But let's move on....

The best way to approach the budget of the Federal Government is to
view it just as if it were any other business: That is, it has
receipts and different subsidiaries that have demands on those
receipts; then a bottom line after the receipts are distributed. On
the next three pages you will see the Federal Budget described
department-by-department, and the major sub-expenditures. On the left
you will see a top-line summary of all of these.

The States and Their Economies

Click to enlarge
"Having worked in the financial world for over 30 years and witnessed
first hand the lack of education relative to global economies, this is
the first book that finally allows non-professors a birds-eye view on
world economics in plain English!"
Jeff Marshall - President & CEO,
Green Earth Technologies, Inc.
(excerpt from the book...)

The US economy is more than the private sector and the Federal
government, of course. Most Americans regard the Federal government as
the ultimate political power in the land, but we all really live in
the 50 states or the District of Columbia (except the 4 million living
overseas). Consequently, our perspective in our day-to-day lives for
the most part is local and state, not federal and international. But
since we all live in one state as our principle residence, chances are
we don't know too much about the rest of the other states with respect
to their economies, how large they are, and how they compare to each
other. You might know something about what's happening in a
neighboring state if you live in places like New England, but chances
are if you live in Texas, California, or Alaska you have no clue as to
what's happening in other parts of the same state let alone
neighboring states. Similarly, those on the coasts of America probably
have little in common with or knowledge of those who populate the big
middle of America. If you live on the coast, for example, how amazed
are you whenever you meet someone from the Great Plains who has never
seen the ocean before; or the last time a coastal dweller has seen
corn-fields going on and on for miles?

In 1981, a book called "The Nine Nations of North America," written by
Joel Garreau, divided North America into nine separate regions, (or
"nations" as he called them), based upon socio-economic commonalities
(see map on next page). Garreau identified different parts of North
America in terms readily identifiable for most: Hence the Great Plains
is referred to as the "Breadbasket Nation"; the South as "Dixie";
southern Texas, New Mexico, and Arizona are merged with Mexico to form
"Mexamerica", etc. While doing this goes decidedly against most
Americans' political sensitivities, from a socio-economic perspective
of how Americans work and are integrated with their neighbors it is
too close to being correct to ignore. Naturally when North America is
put into this perspective, issues on trade under NAFTA, for instance,
become more readily understandable to almost everyone.

We are defined as a nation because of our common history and the
political development that stemmed from that history. But as far as
our daily lives are concerned, they are ruled by the invisible--and
more and more by the very visible--hand of economics. Americans living
in the Great Plains, for instance, have more in common with Canadians
north of the border than they do with Californians or those who live
on the East coast since their lives and livelihood are commonly
connected more to corn, wheat, and soy prices than stock markets or
commuting problems.

So it's appropriate in this chapter to make you all aware of your
fellow Americans in the other states and how you compare to each other
from an economic perspective. The tables on page 140 and on the facing
page rank the states based first on GSP (Gross State Product - the
state equivalent to GDP for countries) and then per capita income--the
same criteria as we began the book when putting the USA in perspective
with the rest of the world. As you can readily see, although Thomas
Jefferson in the Declaration of Independence may have stated that "all
men are created equal", we know, however, that's not how we are likely
to live out our economic lives. Indeed, as the table on the facing
page shows, the per capita of people living within the 50 states
varies greatly from a low of $24,062 in Mississippi to a high of
$59,228 in Delaware--a variance of over 145%!

On Deficit & the Economy

Click to enlarge
"Patric Hale has done a wonderful job researching and presenting the
key issues facing the United States in the 21st century. His new book
is exciting to read and should be in the library of every concerned
citizen and corporate manager. This book is a general guide and
reference that can be used and accessed for many years to come."
Robert Johnson
Director (Ret.)
Hewlett-Packard
(excerpt from the book...)

Much is made of government deficits and perhaps it is important to
remind politicians on a regular basis about deficit spending since it
is, after all, our money that they are spending. But in macro-
economics there are deficits, and then there are deficits. And all
deficits are not the same or have the same effect on the economic
health of the nation. Nor are deficits static and unrelated to events.
Nor are they unrelated to our competitors in the new global economy.
For example, you'll hear in 2008, how "Bush has increased the deficit
to $8 trillion! Oh my god!" This actually is true. But, so what? That
is: "Compared to what", and "how bad is it?" You are probably thinking
I'm crazy, but bear with me because this is very important to
understand about our economy, and especially relative to the new
global economy.

First, let's identify the "deficits" that are common to normal
political discourse: These are the short-term current budget deficit
and the long-term government deficit (also know as "the national debt"
in popular parlance). The first concerns the difference between how
much the government takes in and how much it spends on a yearly basis.
This deficit then accumulates over time and becomes the long-term
government (national) debt. These two are the deficits used most often
in the political football game that's played during election years.
But there are actually two other deficits that aren't talked about
which in many ways are far more important to the issue of American's
global competitiveness: These are our trade deficit and our
international investment deficit (see Chapter 2).

While all deficits effectively mean "we owe someone", unfortunately,
as mentioned in Chapter 2, these latter deficits don't seem to get the
attention from anyone in America that they should, neither from the
administration, nor Congress, nor the American people. Yet these
deficits are what should concern us most in the new global economy!
This notwithstanding, since so many Americans focus on and discuss the
politics of the long-term national debt and budget deficit, these will
be the focus of this chapter to bring more clarity to them for all.

Let's begin by dealing with deficits in the abstract. To do this, try
to think beyond our own nation-state's borders and imagine the entire
world in its galactic state as an on-going globe that spins around on
its axis, and its axis spins around the sun, and the universe spins
around in space. In other words, the global economy never stops.
Therefore, to view deficits just within the confines of our own
country at any one given time is to ignore that our economy is
intricately linked to the global economy, and at any given time, our
economy has always been relative to the rest of the world.
Consequently, all things economic should truly be considered based on
this new paradigm because the USA is not alone in the world, and its
deficits are intricately connected to our relative competitive
position in the new global economy.

THE LONG-TERM NATIONAL DEBT
IN GLOBAL & HISTORIC PERSPECTIVE

So when discussing America's budget "crisis", one needs to ask first:
"Is there a crisis?" And then ask: "Compared to what?"
Only by answering these questions can we have a better perspective on
the subject. The first thing against which to measure our budget is
our own economy. Why? Because the first perspective on deficits is on
the totality of our relative economic progress spinning through the
universe and not just on a fixed point. In 2007, the size of the US
economy was roughly $13.8 trillion. Our long-term debt was $8.8
trillion. This works out to our long-term debt being approximately 64%
of our current GDP. This, in isolation, seems like a colossal disaster
in the making. But is it? For instance, is the current long term debt
the worst in our history?

On Energy Independence

Click to enlarge

Click to enlarge
"Having worked in the financial world for over 30 years and witnessed
first hand the lack of education relative to global economies, this is
the first book that finally allows non-professors a birds-eye view on
world economics in plain English!"
Jeff Marshall - President & CEO,
Green Earth Technologies, Inc.
(excerpt from the book...)

THE USA AND THE GLOBAL ENERGY INDUSTRY

Industrial countries run on energy - no energy, no industrial society,
it really is that simple. Consequently, one of the primary
responsibilities for national policy-makers must be an accurate
appraisal of long-term energy management. This requires, first,
identifying energy dependency through consumption and production
patterns; and, second, developing a long-term policy to secure our
future energy resources. Understanding how these two responsibilities
play out by the numbers for the USA is the first step in being clear
about the issue of "energy independence" - a term that many political
candidates are talking boldly about this election year. However it is
clear they aren't fully aware of what this means, and therefore are
misleading the public!

This Chapter will provide you with the numbers about our energy uses -
past and present - and then those for the future as determined by the
Department of Energy (DoE). Then we'll look at what has to happen to
achieve energy independence and the implications for our country. It
is understood that we are all in favor of energy independence for lots
of good reasons. Consequently as a country we should all seriously
understand these numbers if we want to move in that direction. To do
so requires an evaluation of how our country consumes energy. And it
means an appreciation of "time" in how long it takes to accomplish
changes in our pattern of energy consumption. Unfortunately, Americans
are not the most patient people in the world when it comes to
"change". So let's first evaluate what our energy consumption is,
particularly historically and then in relation to the rest of the
world.

Although this chapter is entitled "energy independence" much of it
will be devoted to the issue of "oil independence" for one important
reason: Although energy encompasses many forms--oil, coal, natural
gas, hydro, nuclear, and renewable sources--only oil poses a serious
threat to our national economic security, as we all now know from our
forays into the Middle East and the price of gasoline now at over
$4.00/gallon. And for the most part, all Americans would be more than
happy to figure out a way where we are no longer dependent on oil
imports from the Middle East (or other unstable regimes for that
matter) for our energy needs. But wishing it so doesn't make it
happen!

The Department of Energy publishes an International Energy Outlook
(IEO) each year as well as a US Annual Energy Outlook (AEO), both of
which are available on their website, www.doe.gov, and OPEC maintains
an excellent website as well to provide information about global
energy and oil patterns www.opec.org. OPEC is focused entirely on oil
and natural gas, while the other DOE reports focus on all energy
sources at a comparable focus. The DOE uses a standard for energy
measurement called the "British thermal unit" (Btu) since Btus measure
energy output from any energy source. Gross energy consumption and
production is measured in "quadrillion British thermal units," or Btu
quads, for short. In this way we can equate energy produced and/or
consumed whether from coal, nuclear, oil, or any source. This is
useful in the overall analysis of our energy production and
consumption patterns, especially compared to other countries, but of
course different energy sources are used for different purposes; for
example, we're not shoveling coal into our cars to make them go, are
we?

On page 172 is a quick historic view of global energy consumption by
energy source since 1635. In a snapshot you can see that it is only
150 years that we've lived in a truly multi-energy source world. "King
Coal" lasted less than 100 years before oil supplanted it as the
dominant energy source. There is a corresponding statistic to this
snapshot that should be kept in mind here: In 1800, the world
population was only 978 million. By 1900, it had increased 69% to 1.65
billion. In the last century, however, the world population has
exploded from 1.65 billion to over 6 billion--an increase of 363% -
the greatest increase of population in recorded history! While energy
sources are certainly not the cause for this increase in population -
declines in infant mortality, fewer global wars, and medical
improvements, esp. disease control, are the major reasons -
nonetheless, the end result of this population explosion has led to an
equal explosion in energy demand that quite literally the world had
never seen before. To bring this down to a personal level, many of you
reading this probably had a grandparent born around 1900 who witnessed
most of this transformation personally, so it isn't so far removed
from our own lives.

On Health Care in America

Click to enlarge
"A universally helpful and insightful book. I particularly liked the
straightforward charts and summary points. It should be a reference
manual for everyone interested in the US economy."
David Gamble
Former Chief Executive
British Airways Pension
Investment Management Ltd
(excerpt from the book...)

INTRODUCTION

The sickest thing in America these days is its health care "system".
This isn't just my opinion but everyone's opinion. The price for
health insurance doesn't seem to ever decline, let alone increase at
anything as low as the rate of inflation. We, the people who pay
health insurance - either as individuals or corporately - are told
it's because costs keep increasing. It's a vicious circle that seems
to have stymied even the most sensible and experienced minds. I, for
one, am literally sick and tired of being ripped off in this colossal
bunko game. So, in this chapter will be a number of possible
solutions, all of which are improvements on the current situation.

Permit me give you some of my personal background: I grew up in
Connecticut but lived in Europe for 27 years (France, Germany, and the
UK) before returning to the USA 10 years ago. Shortly after arriving
back in America I was ripped off by the first insurance company when
my wife had to have an emergency operation for which they refused to
pay, so it ended up costing us $14,000 for just one overnight stay in
the hospital. At least that was the hospital's first bill.... When I
explained my circumstances of not being insured and "could we do
something?" I was told that if I paid cash it would "only" cost
$9,000! Incidentally, in this process the original bill just for ONE
HOUR of the anesthetist was $1,200! I'm sure he was very good, but for
ONE HOUR's work?! In the end, when I told them I had no insurance,
they, too, settled the bill for only $400! It was, in my opinion,
still an obscene amount of money for one hour's work, but at least
infinitely more reasonable than $1,200! Why the lowered cost? Because
no insurance company was involved! So if the hospital considers they
were actually saving 28% if insurance companies were not involved,
that should tell us all something about this so-called "system" that
supposedly "insures" us, but doesn't "assure" anyone about our health
care.

Since then I've been insured by only one company. After the first year
my insurance rate increased 25%. The second year it increased 24%,
simply because I turned 50 - the worst birthday present you can
imagine, especially since I was still in the peak of health. The third
year it increased another 20%. I actually called and asked what I
thought was a sensible question: "Considering the inflation rate is
less than 2%, on what basis can you justify such an increase?" The
answer made my blood boil: "Well, we've separated Fairfield and New
Haven counties [Connecticut] from the rest of the state since the
costs are higher there, so we've had to increase your rates
accordingly." "But that negates the very principle of insurance which
is to spread the risk as widely as possible to lower the cost for
everyone," was my--I thought--intelligent retort. "Nothing we can do
about it, we're sorry." I wrote to the governor complaining that in
such a small state like Connecticut such a thing shouldn't be allowed.
I received a very polite, professional response from the state
insurance department explaining that it was fully within the legal
rights of the insurance company to do so. That brings us up to today
when I've just received my renewal contract which came with another
increase of 10%! Oh yes...wouldn't you know, each year as prices went
up, benefits have gone down and the only way I could keep costs as low
as I did was to agree to a $1,500 annual deductible! In the interim,
because I've had some health problems, I've been told that even if I
could find a cheaper insurance, chances are I wouldn't be accepted. So
now I seem to be caught in a trap and I can't get out.

Now I am not a socialist of any kind, let me make that clear! Since
part of my university studies took place in Berlin during the height
of the Cold War (including living virtually next to the infamous
Wall), I absolutely abhor anything having to do with centrally planned
anything. Nonetheless, I do believe the purpose of politics is to
provide a better government for a better society. And in that
definition, I expect government to intervene to resolve problems that
are critical to a better society where the "market" has fallen down or
fallen apart. And that's what I believe is the case concerning health
care in America and why a drastic and dramatic rethink about improving
it is imperative.

It's clear that the health care industry is simply out of control.
Health care workers blame trial lawyers for malpractice suits. And
malpractice suits are blamed by health insurers for increasing
premiums. And increasing premiums are blamed on health care workers
for increasing costs. In the end, it seems a vicious circle where
those inside the circle all benefit at the expense of the rest of us
who live outside of the circle. America is the land of innovation in
business, to say nothing of being the richest country on earth. There
simply must be better ways to organize providing health care and peace-
of-mind to the American people. A few suggestions follow an analysis
of this issue.

The Hale 200 Index of Global Economic Entities

Click to enlarge
"Having worked in the financial world for over 30 years and witnessed
first hand the lack of education relative to global economies, this is
the first book that finally allows non-professors a birds-eye view on
world economics in plain English!"
Jeff Marshall - President & CEO,
Green Earth Technologies, Inc.
(excerpt from the book...)

Throughout this book I've referred to the "new global economy", and in
the first chapter I described what I meant by this term. But
describing something is never as effective as presenting a visual
presentation of what I mean. For that, an expansion on the definition
of the "new global economy" is necessary. Heretofore, global economic
competition was waged mostly by private companies based in a sovereign
state--sometimes with the aid of that sovereign state--against other
companies from different sovereign states. In this process the
"sovereignty of the state" ruled; that is, the economic pursuits of
the private companies accrued to the general benefit of the state in
which that company was domiciled. Below is the political definition of
"sovereignty":

"Sovereignty is the claim to be the ultimate political authority,
subject to no higher power as regards the making and enforcing of
political decisions. In the international system, sovereignty is the
claim by the state to full self-government, and the mutual recognition
of claims to sovereignty is the basis of international society."
While no doubt our leaders and those of other countries still view
this definition as valid, nonetheless the development of the new
global economy is breaking up this definition significantly. Not only
has the establishment of the European Union superseded this definition
in many ways, but the development of the private sector has literally
outgrown the geographical and political confines of the nation-state
to where the on-going power and "sovereignty" of that state is being
challenged by these new global economic forces.
Consequently, the private sector is rapidly dissolving any economic
notions of sovereignty that still remain the world. While the USA, as
the largest economy in the world, has been more immune than most in
the past, this is no longer true. Indeed, one of the major points of
this book is to awaken America's national leaders and decision-makers
to the realities of the new global economy and how the implications
affect the national economic security of the nation. While it is
understandable that most of us still view issues of sovereignty in
terms of the geographical delineations of the nation-state, this
remains true only in political terms. In economic terms a nation-state
is just another "economic entity" in the new global economy and it is
on a par as an economic entity with other entities in the private
sector that co-occupy this new global economy.

On pages 222 and 226-229 is what I immodestly call the "Hale 200 Index
of Global Economic Entities". This is a co-mingled ranking of the top
countries ranked by GDP, the top 50 financial institutions ranked by
assets, the 50 largest global money managers ranked by assets under
management (that is, funds held in trust by the managers to maximize
the returns), and the top 50 companies in the world ranked by market
value. The result is a ranking of the Top 200 Global Economic Entities
in the world.

Index of Tables

TABLE OR GRAPH PAGE
Global GDP - Top 20 Countries 14
Major Economic Countries & Groups 14
Global Population - Top 25 Countries 16
Comparative G-7 Data 20-22
US Gross Domestic Product in Detail 24
Macro-economic Overview of the USA 26
US International Transactions 28
US Trade in Goods 31
GDP & US Trade Balance, 1976-2004 33
Top 30 US Suppliers (Imports) Manufactured Products 34
How Much Red Ink is Too Much? 36
What's Wrong with This Chart? 36
International Investment Position of the United States at Year-end 41
US Net International Investment Position at Year-end, graph 42
US Gross Domestic Produce, Expanded Detail 44
US Economy Sectors 45
US Economy by % GDP of Major Industry Sector 46-47
Percentage Shares of Gross Domestic Produce 1930-2006 48
Gross Domestic Product, Expanded Detail 50-52
Forbes Global 2000-Top 40 Companies by Market Value 54
Forbes Global 2000-Top 40 Companies by Sales 55
Forbes Global 2000-Top 40 Companies by Profits 56
Forbes Global 2000-Top 40 Companies by Assets 57
Composition of Fortune 100: 1957-2007 58, 60, 61
The Federal Reserve System 62
The Fed Rate and US GDP - Regulating the Heartbeat od the US Economy,
1954-2006 64
FDIC-Insured Financial Institutions 66
FDIC-Insured Financial Institutions by Asset Size: 2006 68
Insured US Chartered Commercial BanksRanked by Consolidated Assets 70
Equities, Corporate Bonds, and Treasury Securities Holdings by Type of
Investor 72, 74
Watching the Rich Getting Richer 76
Rest of World Investing in America, % of Total Holdings 77
Largest Stock Exchanges 78
Global Stock Exchanges Ranked by Market Cap 80
P&I/Watson Wyatt Top 40 Global Money Managers 82
P&I/Watson Wyatt Top 40 US Money Managers 84
P&I/Watson Wyatt Top 40 Global Pension Funds 86
P&I/Watson Wyatt Top 40 US Pension Funds 88
Worldwide Total Net Assets of Mutual Funds 90
Stock Market/Dow Jones Index Performance 1900-Oct 2007 92
Internal Revenue Gross Collections by Type of Tax, 2002-2006 94
Who Pays Individual Income Taxes? - 2006 95
Internal Revenue Gross Collections, by Type of Tax 96
Internal Revenue Receipts & Refunds, by Type of Tax 98
Selected Income & Tax Items and Accumulated Size of AGI - 1 Size of
Adjusted Gross Income 100
Selected Income & Tax Items and Accumulated Size of AGI - 2
Accumulated from Smallest Size of Adj. Gross Income 101
Selected Income & Tax Items and Accumulated Size of AGI - 3
Accumulated from largest Size of Adj. Gross Income 102
USA Government Receipts, Outlays, and Surpluses or Deficits as % of
GDP: 1930-2013 108
US GDP Growth 1930 - 2007 116
Percentage Shares of GDP 1930- 2006 118
Government Current Receipts & Expenditures 1930.-1980 120
Government Current Receipts & Expenditures 1990 - 2006 121
Federal Receipts, Outlays, Surpluses or Deficits 1901-2011 124
Federal Receipts, Outlays, Surpluses or Deficits as % of GDP: 1930 -
2011 126
Federal Budget Top Line Amounts 127
Federal Budget - Outlays by Function and Sub-function 128-130
FY 208 Appropriations Earmarks Summary 131
Top Suppliers to US Government: 2000-2007 135-138
Real GSP by State, 2003-2006 140
Per Capita Real GSP by State, 2003-2006 142
The Nine Nations of North America, illustration 143
State & Local Revenues 2004 144-145
State & Local Governments-Summary of Finances: 1990-2004 146-147
US States Compared to Countries by GSP/GDP - 2006 148
Personal Income Summary: Metropolitan Statistical Areas 150
G-7 Comparable Government Balances 1980-2008 152
USA Government Receipts, Outlays, and Surpluses or Deficits as % of
GDP: 1930-2013 158
Government Deficits/Surpluses 1997-2007 168
Global Energy Consumption by Source, 1635-2000 172
US Energy Consumption History & Outlook 1949-2030 172
Oil Production/Consumption Industrial Countries 174
World Oil Reserves by Country 176
US Energy Production by Major Source, 1950-2006 180
US Oil Imports by Country of Origin 2002-2007 182
US Energy Overview and Consumption per Person 1950-2006 184
US Energy Use per dollar of GDP 184
US Petroleum Consumption by Sector, 1950-2006 186
US Transportation Energy Consumption 186
US Petroleum Consumption by Major Product 186
US Motor Vehicle Indicators, Fuel Consumption, Mileage 188
US Motor Vehicle Fuel Rates, Motor Vehicles in USA 190
US Energy Imports and Exports, 1950-2006 193
World Total Energy Consumption by Region and Fuel 195-196
Health Expenditures as a % of GDP, OECD Countries, 2005 201
Health Expenditures per Capita, Public & Private Expenditure, OECD
Countries, 2005 203
The Hale 200 Index of Global Economic Entities 222, 226-230
The Hale Super 25 Index of Global Economic Entities 231

While there is narrative in each section, I have endeavored to keep
this to a minimum. It is my belief that all Citizens can look at the
statistics, if properly presented (which I hope I've accomplished
here) and truly understand our economy in perspective. Economics and
statistics are dreary sciences for most citizens, and I, too, was
personally disinterested in these subjects. But the problem with this
disinterest is that it overlooks an undeniable fact: Economics rule!
Or as a business professor once said: "If you don't know your numbers,
you don't know what you're talking about!" Another professor once
said: "If something is knowable--know it!"

In the past several years I've found, sadly, that, along with most of
us, few journalists or politicians actually take the time to dig for
the numbers before making all too often wild claims in the press. And
we, the citizens of the United States, normally take their information
on face value because we don't have the time either to dig for the
numbers, thus accepting these bold statements as fact instead of
opinion (and all too often badly formed opinion). Before the internet,
there was good reason for this: There was little opportunity for the
private citizen to seek out the numbers by him/herself without
essentially taking a sabbatical from everyday work to camp out in
Washington DC, and New York, and go from office to office to find out
the information for ourselves. And, of course, few amongst us could
afford to do so or truly would want to. Thankfully, the internet is a
liberating medium because all of this information is now there to be
found in the comfort of our own home - but it still requires digging!
I've found it shameful, however, that many of the most reputable news
organizations don't seem to do more than a modicum of research via the
web to find out the veracity of economic claims, particularly when the
internet is so accessible and easy to use for this purpose. So I've
taken the months to dig, and worked diligently to put this information
in a useful, easily understandable form to help our fourth estate,
too, because an informed press also leads to an informed citizenry,
and thus strengthens our democracy.

The Guide will be unwelcomed particularly by polemicists who seem to
be out there in abundant numbers spouting off figures that are either
not true, or without a proper perspective that would explain the
economy better. But this Guide is truly for them, too. Despite all the
numbers and statistics in the Guide, these still only frame our
political economic debateas a society moving forward. Past performance
is never a predictive guarantee for the future - but it can certainly
help us better understand the parameters of the debate. Santayana's
admonition about those who fail to learn from the mistakes of the past
are condemned to repeat them should continue to guide us moving
forward as a nation in the new global economy.

An advanced word of caution. Although I have endeavored diligently to
present just the facts in their non-polemic form, inevitably these
color my narration, and I, too, have my own opinions which I
occasionally interject based on these facts. This I consider an
author's prerogative and even responsibility since interpreting the
information herein is as important as actually presenting the data and
facts. The reader is, of course, free--and welcome--to ignore my
opinions and form his/her own views. I hope, nonetheless, the data and
facts will be the formative basis for these views. At the end of the
day, the numbers are the numbers--at least you have them here.

Finally, this website has a blog section where you can see updates and
discussions on these issues, so feel free to join in. I also intend to
update this book on a regular basis and would welcome your input,
comments, and suggestions. Please contact me at:

Patric Hale
President
Capital Markets LLC
PO Box 347
Cos Cob, CT 06807-0347
***@itstheeconomy-stupid.com

NOTE: STATISTICS DON'T BITE!

Some people have a problem "relating" to charts and graphs, and
"statistic-rich zones". There are many in this book as you will see.
Don't let all of the numbers force you to overlook the information in
these charts--I've taken the effort to color code the charts to make
it easier for you to read, too. If you take as much time reading them
as you would a normal page of text you will begin to understand them
with increasing ease. And when you take the time to patiently
understand these charts it will permit you to make your own analysis
without listening to anything I have to say.

http://itstheeconomy-stupid.com/store/

..and I am Sid Harth

[chhotemianinshallah]

It's the Incompetence, Stupid!
June 4, 2002
By Caroline Spector

Back in the halcyon days of the early 1990s – before our Lives Were
Changed Forever – a brash young Democrat went up against a sitting
president who had recently won a “war” in the Middle East. Though
flush with his victory and riding high poll numbers – the president
had mismanaged things so badly at home that the young contender had a
foothold to climb into the most powerful office in the land.

During Bill Clinton’s campaign against Poppy Bush, there was one thing
that his campaign managers kept hammering away on: The moribund US
economy. The “It’s the Economy, stupid” slogan was born and written in
large letters in the campaign war room.

It’s time for a new slogan.

Personally, I think “It’s the Stupidity, stupid” has a nice
alliterative ring to it, but since that might sound like too much of
an ad hominem attack on the person currently occupying the White
House, perhaps we should go with “It’s the Incompetence, stupid.”

After all, even the spokespeople for this administration keep telling
us, there isn’t anything they can do.

Which, you have to admit, is a pretty amazing statement coming from
the group who promoted themselves as “the adults,” as in, “The adults
are back in charge.” This really begs the question, “In charge of
what?”

As more and more revelations regarding information about the events
leading up to September 11 in the possession of the various
intelligence agencies and top administration officials comes to light,
the Bush regime has trotted out a wide variety of excuses and
“explanations” for why all these hints were missed, and as each one of
the excuses were shown to be nonsensical, they’ve fallen back on the,
“I dunno, boss” sword.

In short, “We screwed up, but anyone else would have done the same.”

Except that is utter nonsense.

In fact, numerous terrorist attacks were planned during the Clinton
administration, especially plans for attacks during the 2000
millennium celebrations. These were all stopped.

Though there were terrorist attacks on American property around the
world during the Clinton administration, and even a bombing of the WTC
in 1993, on the whole, the losses on American soil were relatively
minor. The losses at the American embassies in Africa in 1998 were
another story. Of course, when Bill Clinton tried to go after
terrorists at that time, he was accused of using this as a distraction
from the Paula Jones matter and got no support from Congressional
Republicans.

Now the Bush administration would have you believe that there are
looming terrorist attacks about which they can do nothing.

This is an astounding statement.

This group of “adults” are saying they are too incompetent to do
anything about terrorist violence to our people on our own soil.

Color me amazed.

And in their latest act of stunning incompetence, the Bush
administration has finally admitted that, yes, indeed, there is global
warming. But hey, they can’t do a thing about it, so we must “adapt.”

How pray tell do they suggest we do such a thing. Drink more ice tea?
Turn up our air conditioners?

Is there anything resembling leadership from this cabal? Do they
acknowledge that gutting emission standards by classifying SUVs as
trucks for the first ten years of their manufacture has wreaked havoc
on the ozone layer? Do they suggest that maybe crappy fuel standards
have added to the carbon dioxide levels?

Do they suggest that they should lead a national charge to change from
our fossil fuel dependency to more clean and renewable sources? Do
they encourage Americans to tackle this new threat to life on the
planet by having a vision of the future that is more ecologically
friendly? Do they challenge corporations to help in this effort?

Nope.

They can’t do a thing.

Part of the mantra for George Bush’s campaign was that though the
candidate himself was woefully inadequate in matters such as foreign
affairs, economics, and, well, much of anything, his “managerial”
style was to delegate and therefore he would be bringing aboard the
very best minds to do the heavy lifting for him. (Apparently, these
were mostly to be relics from Poppy’s regime, The Gang That Couldn’t
Iran/Contra Straight with a few fundamentalist Christians thrown in
for good measure.)

And yet, these supposedly grown-up and bright appointees managed to
miss the terrorist ball completely.

Actually, what's at play here is really pretty simple. As most of us
who’ve held jobs in the real world know, any workplace reflects the
values and attitudes of its boss.

In other words, the fish rots from the head down.

The incompetence of this administration should be the mantra of every
committed Democrat. The Bush administrations repeated claims that they
can’t do anything about terrorism, that they can’t do anything about
global warming reveals a mindset of incompetence. If you believe
there’s nothing you can do, you usually prove yourself right.

The incompetence this sort of rhetorical garbage reveals must be
pounded home as often as possible. We don’t pay taxes to be told that
there’s nothing the administration can do. We don’t give the lives of
our men and women so that the Bush administration can be derelict in
its duty to the citizens of this country, security being but one its
obligations. We should expect leadership.

And we sure as hell need to point out that though they may claim the
adults are in charge, the leader of this pact is an overgrown teenager
who acts as if he’s been given and exceptionally annoying chore to
do.

And the result has been nothing but incompetence.

Caroline Spector is a writer living in Austin, TX (where you can't
swing a dead cat without hitting far too many other writers). She is a
yellow-dog Democrat, thank you very much.

http://www.democraticunderground.com/articles/02/06/04_stupid.html

It's the economy, stupid DNC

Following a tour of Montana's lovingly restored capitol, we settled
down into the Old Supreme Court Chambers. In the midst of all this
history: wireless networking!

This is pretty rough, as I'm trying to type and listen all at the same
time...and we have to go, so I'll post my notes and try to clean them
up later.

Panel 1: Rebuilding the West's Economy in George Bush's America
Speakers: Bill Lombardi: Former Montana Dem. Party Economic
Development Advisor

Rebuilding the West's Economy in George Bush's America.

Evan Barrett--Montana Chief Development Officer
Bill Lombardi--Former Montana Democratic Party Development Advisor

Bill Lombardi:

Have to plan economics on local, regional, state, federal bases. Need
a game plan because it's a top issue. Work with state legislators and
candidates. Dems learned that you have to have a positive plan that
you can sell to the voters.

Looked at polling: economy right track/wrong track.

Affordable, reliable energy
Access to land to hunt fish camp
Healthcare
Jobs with good pay
Strengthening families

Went round state and asked chambers of commerce, labor leaders, local
business, economists.

West is one of fastest growing areas of the country.
People are moving here. Health services, small businesses,
engineering,

Declining: mining, transportation.

Symbols: how do you change the symbols? Independence/freedom: cowboys,
farmers, railroad workers--myth of the west even though only a
fraction of economy. Simple, common messages. Plain-spoken so people
can understand in their hearts and guts.

Montana Dems for jobs and business plan. Boiled it down. Trained all
candidates in the message. Based on what was heard in the field. Added
to it. Made sure everyone was on the same page. Formed basis for
legislative agenda.

Barrett:

This is NOT George Bush's america. West is most dynamic economic area
in the country. "Third coast" up the Rocky Mountains.

Montana is growing less fast. When the economy isn't working, the Dems
have an opportunity if they address jobs. Parts of Montana are growing
really, really fast, but in rural areas are suffering--much economic
dislocation. Challenge the Democratic Party needs to look at.

Dems had abdicated rural areas. "You cannot turn over regions of your
state any more than you can turn over part of the country if you want
to be successful." It's the rural areas that have the most economic
dislocation--if Dems aren't there, they get the social "ills" message
and vote against their own economic interests. Must compete for those
votes--and the best way to compete is on jobs. Should not let the
republicans have that message: got painted into environment vs jobs.

We're for clean environment: for fishing, hunting, and camping. Do not
accept jobs vs. environment. You can have mining, agriculture, energy--
we need to have that--but we need to do it right. Dems need to be
about responsible economic growth.

Key component of growth: education. Don't want to get victimized as
tax and spend. "smart use of money." Articulate it. What doesn't work:
Republican: "I'll do anything for jobs." Dem: "Jobs require education
so we have to put more money into education to train people for the
jobs of the 21st century"

Real stuff, and then there's the rhetoric. Be smart. Let's define us,
not let the Reeps define us. The dominant thinking in west is
populist. In populist thinking, a job is a basic thing needed. Can't
be ashamed of it. Find allies, peel them away from interest groups
that don't really serve them.

Jobs were blue collar jobs in west. West is where people go to find
challenge and opportunity--entrepreneurial thinkers. Need to allow new
economy to grow while continuing to develop the traditional economy.
We are first and foremost about making sure you have a job that
enables you and your family to live.

We have to make growth everywhere: not just the easy high-tech stuff.
Do resource industries. Make it OK to be a Dem in Glendive. It's not
about what church they go to, but what plant they work at.

Where economic development happens:

Competitive advantage: cheaper shipping
Comparative: quality of life

Energy policy: producing domestic energy the right way, not just
bulldozing anwar. Comparative advantage.

Tech, manufacturing, services.

do not give up the right to talk about development and job growth to
the republicans

Q: Jeff Smith re populism

Populism was a negative movement: against big business, trusts, etc.
We need to be against something.
What direction does the blame arrow go? Does it go up (big business)
or down (welfare queens) battling for minds of people who want to be
against things.

13-14 drafts of economic document draft. Very time-consuming, but
worthwhile. All legislators, Sen. Baucus, Gov. 6 months to pull it
together and another month to edit, then field-tested, then refined.

Political message: Frank Mankowitz "you can always tell what a
politician means if you look for the active part of the sentence,
which often comes after the "but." It doesn't matter what you're for--
just think about where the emphasis is. Do qualifiers first, then
hammer at the end.

Jenny Greenleaf | June 3, 2005 |

http://www.westerndemocrat.com/2005/06/its_the_economy.html

...and I am Sid Harth

[chhotemianinshallah]

ALL of the Despicable Democrats;
Barney Frank, Nancy Pelosi, Barbara Boxer,
Dianne Feinstein, Sheila Jackson Lee, and Harry Reed,
Have BLOCKED Congressional Investigations into
ACORN's Crimes, Illegal Activities and CORRUPTION.

Obama has FAILED to Request an Investigation
into the Crimes, Illegal Activities and CORRUPTION.

Could it be that All of these Despicable Democrats are not only
CORRUPT, but also on the Payroll of ACORN?

Could it be that ALL of the Despicable Democrats;
Barney Frank, Nancy Pelosi, Barbara Boxer,
Dianne Feinstein, Sheila Jackson Lee,
and Harry Reed are ALL CORRUPT????

ALL of the Despicable Democrats;

Barack Hussein Obama, Barney Frank, Nancy Pelosi,
Barbara Boxer, Dianne Feinstein, Sheila Jackson Lee,
and Harry Reed are Guilty of

High Crimes and Misdemeanors

and

Obstruction of Justice

IMPEACH THEM ALL!

OBAMA IS ACORN

ACORN IS OBAMA

ABOLISH ACORN

Obama is a Miserable Failure

Hey, 3 Stooges....
Respect the Will of the People!

www.RespectTheWillOfThePeople.com

The 3 Stooges:
Commie, Crazy and Looney (a/k/a "Blinkie")

www.ImpeachThe3Stooges.com

for

www.HighCrimesAndMisdemeanors.com

Impeach Nancy Pelosi

www.ImpeachNancyPelosi.com

"Blinkie" has got to go, NOW!

www.ImpeachNancyPelosi.com

Nancy Pelosi - You are a LIAR.

Nancy Pelosi - You are a HYPOCRITE.

OUR NATION'S SECURITY IS MORE IMPORTANT THAN
WHICH PARTY IS IN OFFICE OR
"WINNING AN ELECTION," AS YOU SAID.

SHAME ON YOU NANCY PELOSI.

Nancy Pelosi - You are a very BITTER person, with
a personal agenda, and driven by your Partisan Politics,
and a SELFISH agenda. You no longer capable of
doing the People's business.

RESIGN NOW,

TURN IN OUR JET

and

LEAVE OUR OFFICE.

Be sure to turn off the Lights when you LEAVE (or get IMPEACHED!) so
you can reduce your Greenhouse Gas Emissions!

If the "truth commission" is going to move forward, we want Nancy
Pelosi on the witness stand first. We want to know what she knew
about being briefed on our CIA's interrogation methods and when she
knew it. When Nancy Pelosi is found to be lying - as everyone knows
she is - we want her indicted for perjury, impeached and removed from
our office.

www.ImpeachNancyPelosi.com

Barack Hussein Obama:

You are a Liar.
You are a Loser.
You are a Moron.
You are a COMPLETE Failure.
You and your radical, extremist, Un-American Liberal agenda brings
Shame and Disgrace to the Office of President and the American
People.

RESIGN NOW!

NO COMMUNISTS, SOCIALISTS, BLACK NATIONALISTS OR CZARS
IN OUR WHITE HOUSE OR GOVERNMENT
This is not Russia:
TERMINATE ALL "CZARS"
"Czars" like Van Jones are UNCONSTITUTIONAL!

John Kerry - one miserable, despicable human being.
You are a despicable democrat.

Barbara Boxer - Shame on you "mam" - you are not worthy of the title.
You are a "despicable democrat."

Barack: keep the terrorists in GITMO.

GITMO isn't broken, and your logic on this is illogical.

If you want to break something that is working just fine,
and are hell-bent on closing GITMO, send the terrorists
to a prison back in Iraq or Afghanistan.

KEEP ALL TERRORISTS OUT OF OUR COUNTRY!

Rise Above Politics!
www.RiseAbovePolitics.com

Thank you!
President Bush
and
Vice President Cheney
for your outstanding job, hard work, and success
in protecting our country,
from September 12, 2001 to January 20, 2009

Sick of Barack Obama, his OVER-EXPOSURE,
his RADICAL, Socialist Agenda and Policies???

Everyday, we are BOMBARDED by the "drive-by" liberal
(and completely dishonest) press about what Obama did and
what Obama said. It's simply a case of way too much
Obama and what we call; "Obamaitis!"

www.Obamaitis.com

for more information on Obamaitis.

The good news is you don't have to see your government (socialist)
doctor just yet, but you DO have to go vote next time, and vote for
FREEDOM and CONSERVATIVES who are opposed to Obama and his destructive
policies and socialist agenda.

Say NO To Socialism
www.SayNoToSocialism.com

Nancy Pelosi
www.YouHypocrite.com

Barack Hussein Obama:

Your "Change" is NOT: the "Change We Can Believe In"

Keep YOUR Change
and DO YOUR JOB:

Protect Our Country and Protect Our Borders and REMOVE ILLEGAL ALIENS
FROM OUR COUNTRY WHO ARE TAKING OUR JOBS, BREAKING OUR LAWS, AND
COMMITTING SERIOUS CRIMES AGAINST AMERICANS!

Obama: Rosa Brooks appointment is evidence of your poor judgment. Fire
or Terminate Rosa Brooks, NOW! REMOVE THIS RABID, ULTRA LEFT-WING
LIBERAL AND NUT JOB FROM OUR PENTAGON.

Barack Obama, Hugo Chavez & Fidel Castro
Advocates of Socialism and
Banana Republic Politics
www.BananaRepublicPolitics.com

ONE TERM ONLY
FOR
ALL POLITICIANS!

Don't VOTE FOR PROFESSIONAL POLITICIANS!!

ONE TERM ONLY
FOR OBAMA
DON'T GET FOOLED AGAIN

PROFESSIONAL POLITICIANS
ARE THE PROBLEM

IMPEACH Despicable Democrats
like Obama, Pelosi and Reid!

Sarah Palin, Newt Gingrich,
Rick Santorum, J.C. Watts, or Ron Paul
FOR PRESIDENT 2012!!!!

Unborn Babies are People Too!
Defend and Protect Innocent Life!
Abortion Stops A Beating Heart!
Life Begins At Conception!
www.LifeBeginsAtConception.com

Return to the Constitution!
www.ReturnToTheConstitution.com

IT'S TIME AMERICA,
Time for a "National Sales Tax"
www.NationalSalesTax.net
The "Fair Tax" Works, FAIRLY, for All!

GOVERNOR SARAH PALIN

Brilliance, Brains and Beauty
& a role model for all "real women"!

Governor Sarah Palin

www.HotChickForPresident.com

Smart, Articulate, Competent, Proven,
Tenacious, AND a Proven Conservative!

Sarah Palin for President 2012

J.C. Watts, Rick Santorum, or Ron Paul
for Vice President 2012

Sarah Palin is the
"Change We Can Believe In"

DRILL BABY DRILL!

www.DrillBabyDrill.com

WE SUPPORT OUR BRAVE SOLDIERS,
THANK YOU FOR ALL YOU DO!

COUnTRY FIRST!

CONSERVATIVES UNITE!!!!

We The People Have Had Enough!
www.WeThePeopleHaveHadEnough.com

We The People Are Mad As Hell!
www.WeThePeopleAreMadAsHell.com

Enforce Immigration Laws!
www.EnforceImmigrationLaws.com

"A nation without borders is NOT a nation!"
President Ronald Reagan
www.GreatestPresidentEver.com

Protect Our Borders!
www.ProtectOurBorders.net

IMPEACH DIANNE FEINSTEIN
Corrupt to the Core
www.ImpeachFeinstein.com

Question: What is the definition
of a "Despicable Democrat"?

Answer: Barack Hussein Obama, Nancy Pelosi, Diane einstein, Harry
Reid, Joe Biden, and any democrat that places their party and their
political agenda over our country's best interests.

Say NO To Obama and
Say No to Socialism
www.SayNoToSocialism.com

Vote for REAL
"Change We Can Believe In"
in 2012

VOTE EXTREMIST LIBERALS OUT OF OFFICE!

Joe Biden - you are a pathological LIAR - I would rather follow
President George W. Bush anyday.
Hey Joe, turn around, take a look and see.....
Nobody is following you!

Joe Biden is a CLOWN,
and a "Jimmy Carter" wannabe!

Abolish The Federal Reserve
www.AbolishTheFederalReserve.net

We Support Congressman Ron Paul's Bill, H.R. 1207
that will Make a GREAT Start to Abolishing the Fed,
by Auditing the Fed, under his Bill, H.R. 1207!

Let's Elect an Honest, Decent, American For President
Someone that Places America First, and will Support and Defend our
Constitution, our Borders, and will Insure that American Jobs - go to
AMERICANS - NOT ILLEGAL ALIENS!

Support and Defend the Constitution

Change
We Can Believe In

www.ChangeWeCanBelieveIn.com

Email: ***@ChangeWeCanBelieveIn.com

Change We Can Believe In
www.ChangeWeCanBelieveIn.com

Obama, Pelosi & Reid

www.ImpeachThe3Stooges.com

Are Obama, Reid and Pelosi,
Guilty of High Crimes and Misdemeanors
Against our country and our Constitution?
www.HighCrimesAndMisdemeanors.com

And now, a Message From Jimmy Carter,
The First Clown to Ever be Elected President:

"Thanks Barack!"

Denzel Washington, Hollywood Box-office Star, also a Real American and
True Patriot!

Remember this next time you walk up to the ticket window of your local
movie theater with $10 in your hand.

The Liberal Left-wing media missed this one, but our brave soldiers
didn't!

They would like you to send the following to everybody you know, about
what an outstanding American and Patriot that Denzel Washington truly
is!

Denzel Washington with Soldiers at the
Brooks Army Medical Center in San Antonio, Texas

Did you hear that Denzel Washington and his family visited the troops
at Brook Army Medical Center, in San Antonio, Texas (BAMC) the
other day?

Brook Army Medical Center is where soldiers who have been evacuated
from Germany come to be hospitalized in the United States, especially
burn victims. There are some buildings there called Fisher Houses.

The Fisher House is a Hotel where soldiers' families can stay, for
little or no charge, while their soldier is staying in the Hospital.
BAMC has quite a few of these houses on base, but as you can imagine,
they are almost filled most of the time.

While Denzel Washington was visiting BAMC, they gave him a tour of
one of the Fisher Houses. He asked how much one of them would cost to
build. He took his checkbook out and wrote a check for the full
amount right there on the spot. The soldiers overseas were amazed to
hear this story and want to get the word out to the American public,
because it warmed their hearts to hear it.

Why can't the "Hollywood Fluffs" like Brad Pitt, Angelina Jolie,
Madonna and Tom Cruise Self-centered and Ego-maniacs follow Denzel
Washington's Patriotic Lead?

The "Hollywood Fluffs" with their ridiculous antics make front page
headlines while real patriots like Denzel Washington, don't even make
the news (except the local newspaper in San Antonio).

A true American and friend to all in uniform!

Thank you Denzel Washington!

AFTER ALL, IT'S JUST "ANOTHER DAY,"
AND, THE LAW IS THE LAW!
The following adapted from a popular, and wide-spread email

As the U.S. government has determined that it is against the law for
the words 'under God' to be on our money, then, so be it.

And, in its' infinite and all-knowing wisdom, the U.S. government has
decided that our Lord's '10 Commandments' are not to be used in or on
a government facility of installation, then, so be it.

We say, 'so be it,' as we would all like to be a law abiding American
citizens, right?

We say, 'so be it,' because we would like to think that smarter people
- our "elected" representatives and senators, who are in positions to
make "wise" decisions for those they represent, right?

We would like to think that these people have our country's best
interests at heart, right?

BUT, IN REALITY, DO YOU REALLY BELIEVE OUR ELECTED OFFICIALS HAVE
AMERICA'S BEST INTERESTS AT HEART????

We believe, that our elected officials have THEIR "special interests"
at heart, and that's what drives their decisions and and every single
vote that they cast - their special interests come first, and really,
America and its citizens, do not matter at all in their decision-
making.

We think, that they think, our elected officials (including judges and
federal judges) that they are unaccountable to those they have a
sacred trust to represent.

We think, that they think, they are "above the laws" they enact - that
the laws they create, are for the "regular" citizens, and the
"commoners."

We think, that they think, they are above God's laws, and that some of
these elected officials, Nancy Pelosi, Harry Reid, Barack Obama,
Barbara Boxer, Diane Feinstein, and Barney Frank, believe that the
government is (or should be) "God."

We know, that they have forgotten that America is a CHRISTIAN, nation,
founded by Christians, who were forced to flee their native England,
to escape the tyranny and oppression of their government, to come to
America and form a more perfect government, of the people, by the
people and for the people, and to be a Christian nation with liberty,
freedom and justice for all.

Question: Is the American government of today - that is led by these
"wise" elected representatives, turning our government back into a
"monarchy" of tyrants and oppressors of the 1700's of England???????

Have they forgotten why there was a revolution and why there was a
Boston Tea Party?

We believe the answer is readily apparent.

We are - after all, a nation of laws, are we not?

And, since we are a nation of laws, and "the law is the law," after
all, and as our government and judges have decided or ruled that we
can no longer pray to God (the Creator of Heaven and Earth - not the
god the government) in "OUR" public schools, or public functions,

And, as we can no longer "Trust in God"

And, as we cannot post "His" Commandments in Government buildings, we
don't believe the Government and its employees should participate in
those days that honor Him, those days and holidays like; Easter,
Thanksgiving and Christmas, or participate in any of the celebrations
which honor the God that our government has eliminated.

THEREFORE,

We would like our mail delivered on the following days:

* Christmas Day (and the day before or after which is now a
day off )
* Good Friday
* Easter Sunday
* Thanksgiving Day (and the day before or after which is now
a day off)

After all, our all-knowing and wise leaders and judges have declared
these days that honor our Lord and Savior, as "just another day."

We would also like "OUR" government, as well as the U.S. Supreme Court
to be in session on these "regular days:"

* Christmas Day (and the day before or after which is now a
day off )
* Good Friday
* Easter Sunday
* Thanksgiving Day (and the day before or after which is now
a
day off)

After all, our leaders and judges have declared that these days are
"just another day."

We would also expect that all state governments, elected officials,
and employees, to ALL be working on these "regular" dates.

And, for the elected and wise leaders in the U.S. Senate and the House
of Representatives, you will no longer have to worry about wrapping
up the "people's business" early, so you can fly off in your private
jets (paid for or owned by "special interests"),

or you nancy pelosi,

taking OUR Boeing 757 across the country, so you can get home in time
to celebrate the birth of Jesus, our Lord and Savior, and the
'Christmas Break,' after all, this is just another day.

We also don't understand how the Catholic Church has not ex-
communicated you - Nancy Pelosi - for your radical and ultra-liberal
views on supporting and advocating the death of innocent babies, as
the Catholic Church has done to the "commoners" for supporting the
slaughter of the innocents.

We believe that our taxpayer dollars would be better spent, and this
could also help save the taxpayers dollars, for you to follow the laws
you created, and judges have ruled, that these dates are, in fact,
"just regular days."

We believe that if all of our government offices and employees that
are on the "public dole" would actually "work" (no pun intended) on
these "regular days" (Christmas, Good Friday & Easter and the other
days surrounding these "regular days," now taken for as holidays),
then we - the regular citizens, and taxpayers, would save on overtime
pay, and actually get more "work" (again, no pun intended) from our
government, that provides us with all of their wonderful government
services it provides its "regular" citizens. Since, after all, these
are "regular" days, just like any other day of the week - and for a
government that is trying to be 'politically correct,' is this not the
PC thing to do? Should our government not lead by example?!?

In fact.... we believe that our government SHOULD work (again, no pun
intended!) on Sundays that were originally set-aside for worshipping
"the" one true God. Again, our government says that it should be just
another day.

If this idea gets to enough people, maybe our elected officials,
judges, and bureaucrats will stop giving in to the 'minority opinions'
like the ultra-radical, the A.C.L.U. - the American Civil Liberties
Union - and their anti-God and atheist views - and for our government
to represent the 'MAJORITY' of ALL of the American people.

We pray, dear Lord, please forgive our country's leaders and those
judges, for not remembering you, and the special days that were set-
aside to honor you. Please restore our country to be the Christian
nation we once were. And to be a country that President Abraham
Lincoln said, "that this nation, under God, shall have a new birth of
freedom -- and that government of the people, by the people, for the
people, shall not perish from the earth." Please provide us and our
leaders with your wisdom and guidance, and remind our elected
officials that we are a Christian nation, founded on the Bible. We
pray for those elected officials that you have placed in to office,
that they will be reminded of what Jesus said in Matthew 22:36-40 (New
International Version);

36 "Teacher, which is the greatest commandment in the Law?"

37 Jesus replied: " 'Love the Lord your God with all your heart and
with all your soul and with all your mind.'

38 This is the first and greatest commandment.

39 And the second is like it: 'Love your neighbor as yourself.'

40 All the Law and the Prophets hang on these two commandments."

and we are also pray that we as a nation, 'seek ye first the kingdom
of God, and his righteousness; and all these things shall be added
unto you.'"

AMEN!

Coming Soon: The United States of Meximerica

After hearing illegal aliens (mexicans) want to sing OUR National
Anthem in Spanish - that was about all I could stand. Enough is
enough.

Nowhere did they sing our National Anthem in Italian, Polish, Irish
(Celtic), German or any other language because of LEGAL immigrants who
obeyed the laws of our land, and immigrated to our country LEGALLY.
Our National Anthem was written by Francis Scott Key and should be
sung word for word the way it was written, and in OUR language.

We are proud of our country and it being a melting pot of many
cultures and languages - all of who came here LEGALLY and learned OUR
language.

We are NOT sorry if this offends anyone because this is OUR COUNTRY.
IF THIS IS YOUR COUNTRY, SPEAK UP NOW - IT MAY NOT BE OUR COUNTRY MUCH
LONGER.

We can't even afford to educate OUR children so that they can compete
with children from Asia and Europe, and we have to pay to educate
ILLEGAL ALIENS CHILDREN IN THEIR FOREIGN LANGUAGE?!?!

We are NOT opposed to immigration -- just come here like every other
citizen that has come here from other countries. Get a sponsor; get a
home or apartment - with YOUR money; have a job; pay your taxes, live
by OUR laws and rules AND LEARN OUR LANGUAGE as every other immigrant
has in the past. And, GOD BLESS AMERICA!

PART OF THE PROBLEM IS YOU if you don't want to forward information
for fear of offending ILLEGAL aliens.

BTW: Calling an ILLEGAL alien an "undocumented worker" is like
calling a drug dealer an 'unlicensed pharmacist' !!!

The U.S. Postal Service was established in 1775. You have had 234
years to get it right; it is Broke.

Social Security was established in 1935. You have had 74 years to get
it right; it is Broke.

Fannie Mae was established in 1938. You have had 71 years to get it
right; it is Broke.

The "War on Poverty" started in 1964 - you have had 45 years to get
it right; $1 trillion of our money is confiscated each year and
transferred to "The Poor";
it hasn't worked, they are still poor. 45 years and counting...

Medicare and Medicaid were established in 1965. You have had 44 years
to get it right; they are Broke.

Freddie Mac was established in 1970. You have had 39 years to get it
right; it is Broke.

Trillions of dollars were spent in the massive political payoffs
called TARP, the "Stimulus", the Omnibus Appropriations Act of
2009... none show signs of working, although ACORN appears to have
found a new Involuntary Contributor: . . . the American Taxpayer.

And finally, to set a new record:

"Cash for Clunkers" was established in 2009 and went broke in 2009!
It took good dependable cars (that were the best some people could
afford) and replaced them with high-priced and less-affordable cars,
mostly Japanese. A good percentage of the profits went out of the
country. And the American Taxpayers pay the bill for Congress'
generosity in burning three $billion more of our dollars on failed
experiments. Additionally, the car buyers are now finding out that
this $4,500 Gift from the American Taxpayers might be taxed as REGULAR
INCOME... (gee, who would have thought that?)

So with a perfect 100% failure rate and a record that proves that
"services" you shove down our throats are failing faster and faster,
you want Americans to believe you can be trusted with a Government-
run Health Care System?

Putting our Very Lives at Risk?

20% of our Entire Economy?

With all due respect,

ARE YOU 3 STOOGES:
IDIOTS, INSANE, OR JUST PLAIN CRAZY??

Hey Barack,
It's the Economy, Stupid!
www.ItsTheEconomyStupid.net

As it Appears you FAILED your History classes.... Here's a History
Lesson for you to help you Get it Right:

Capitalism: Good
Socialism: Bad

What Does STUPID Look Like?

The Barack Obama Plan
for "Helping" our Economy

Barack Obama: Just Plane STUPID?!?

Why can you have the people's Air Force One fly down the Hudson River
in New York City, scaring the hell out of hundreds of thousands of
people thinking another 911 was underway - for a photo op, and WASTE
thousands of gallons of jet fuel, PLUS all those dangerous carbon
dioxide emissions that Air Force One generates, and yet you forbid a
private company, from flying their privately owned business jet, that
uses far less jet fuel, and far fewer carbon dioxide emissions, that
they use as it saves time and money for them?!?

Are you just a hypocrite -
or a "carbon criminal" or both?

Barack Hussein Obama:
www.YouHypocrite.com

Barack Obama: HOW DARE YOU SAY
WE ARE NOT A CHRISTIAN NATION!

Barack Hussein Obama - you need a history lesson in the founding on
this Christian nation because you are WRONG again, the U.S.A. is a
CHRISTIAN nation.

Barack Obama said in Turkey : "We do not consider ourselves a
Christian nation or a Jewish nation or a Muslim nation. We consider
ourselves a nation of citizens who are bound by ideals and a set of
values."

Do you know the Preamble
for your state?

Alabama 1901, Preamble
We the people of the State of Alabama , invoking the favor and
guidance of Almighty God, do ordain and establish the following
Constitution..

Alaska 1956, Preamble We, the people of Alaska , grateful to God and
to those who founded our nation and pioneered this great land.

Arizona 1911, Preamble We, the people of the State of Arizona ,
grateful to Almighty God for our liberties, do ordain this
Constitution...

Arkansas 1874, Preamble We, the people of the State of Arkansas ,
grateful to Almighty God for the privilege of choosing our own form of
government...

California 1879, Preamble We, the People of the State of California ,
grateful to Almighty God for our freedom...

Colorado 1876, Preamble We, the people of Colorado , with profound
reverence for the Supreme Ruler of Universe...

Connecticut 1818, Preamble. The People of Connecticut, acknowledging
with gratitude the good Providence of God in permitting them to
enjoy.

Delaware 1897, Preamble Through Divine Goodness all men have, by
nature, the rights of worshipping and serving their Creator according
to the dictates of their consciences...

Florida 1885, Preamble We, the people of the State of Florida ,
grateful to Almighty God for our constitutional liberty, establish
this Constitution...

Georgia 1777, Preamble We, the people of Georgia , relying upon
protection and guidance of Almighty God, do ordain and establish this
Constitution...

Hawaii 1959, Preamble We , the people of Hawaii , Grateful for Divine
Guidance ... Establish this Constitution.

Idaho 1889, Preamble We, the people of the State of Idaho , grateful
to Almighty God for our freedom, to secure its blessings.

Illinois 1870, Preamble We, the people of the State of Illinois,
grateful to Almighty God for the civil , political and religious
liberty which He hath so long permitted us to enjoy and looking to Him
for a blessing on our endeavors.

Indiana 1851, Preamble We, the People of the State of Indiana ,
grateful to Almighty God for the free exercise of the right to choose
our form of government.

Iowa 1857, Preamble We, the People of the St ate of Iowa , grateful to
the Supreme Being for the blessings hitherto enjoyed, and feeling our
dependence on Him for a continuation of these blessings, establish
this Constitution.

Kansas 1859, Preamble We, the people of Kansas , grateful to Almighty
God for our civil and religious privileges establish this
Constitution.

Kentucky 1891, Preamble.. We, the people of the Commonwealth are
grateful to Almighty God for the civil, political and religious
liberties..

Louisiana 1921, Preamble We, the people of the State of Louisiana ,
grateful to Almighty God for the civil, political and religious
liberties we enjoy.

Maine 1820, Preamble We the People of Maine acknowledging with
grateful hearts the goodness of the Sovereign Ruler of the Universe in
affording us an opportunity .. And imploring His aid and direction.

Maryland 1776, Preamble We, the people of the state of Maryland ,
grateful to Almighty God for our civil and religious liberty...

Massachusetts 1780, Preamble We...the people of Massachusetts,
acknowledging with grateful hearts, the goodness of the Great
Legislator of the Universe In the course of His Providence, an
opportunity and devoutly imploring His direction

Michigan 1908, Preamble. We, the people of the State of Michigan ,
grateful to Almighty God for the blessings of freedom, establish this
Constitution.

Minnesota, 1857, Preamble We, the people of the State of Minnesota,
grateful to God for our civil and religious liberty, and desiring to
perpetuate its blessings:

Mississippi 1890, Preamble We, the people of Mississippi in convention
assembled, grateful to Almighty God, and invoking His blessing on our
work.

Missouri 1845, Preamble We, the people of Missouri , with profound
reverence for the Supreme Ruler of the Universe, and grateful for His
goodness . Establish this Constitution...

Montana 1889, Preamble. We, the people of Montana , grateful to
Almighty God for the blessings of liberty establish this
Constitution ..

Nebraska 1875, Preamble We, the people, grateful to Almighty God for
our freedom . Establish this Constitution.

Nevada 1864, Preamble We the people of the State of Nevada , grateful
to Almighty God for our freedom, establish this Constitution...

New Hampshire 1792, Part I. Art. I. Sec. V Every individual has a
natural and unalienable right to worship God according to the dictates
of his own conscience.

New Jersey 1844, Preamble We, the people of the State of New Jersey,
grateful to Almighty God for civil and religious liberty which He hath
so long permitted us to enjoy, and looking to Him for a blessing on
our endeavors.

New Mexico 1911, Preamble We, the People of New Mexico, grateful to
Almighty God for the blessings of liberty..

New York 1846, Preamble We, the people of the State of New York ,
grateful to Almighty God for our freedom, in order to secure its
blessings.

North Carolina 1868, Preamble We the people of the State of North
Carolina, grateful to Almighty God, the Sovereign Ruler of Nations,
for our civil, political, and religious liberties, and acknowledging
our dependence upon Him for the continuance of those...

North Dakota 1889, Preamble We , the people of North Dakota , grateful
to Almighty God for the blessings of civil and religious liberty, do
ordain...

Ohio 1852, Preamble We the people of the state of Ohio , grateful to
Almighty God for our freedom, to secure its blessings and to promote
our common.

Oklahoma 1907, Preamble Invoking the guidance of Almighty God, in
order to secure and perpetuate the blessings of liberty, establish
this

Oregon 1857, Bill of Rights, Article I Section 2. All men shall be
secure in the Natural right, to worship Almighty God according to the
dictates of their consciences

Pennsylvania 1776, Preamble We, the people of Pennsylvania, grateful
to Almighty God for the blessings of civil and religious liberty, and
humbly invoking His guidance....

Rhode Island 1842, Preamble. We the People of the State of Rhode
Island grateful to Almighty God for the civil and religious liberty
which He hath so long permitted us to enjoy, and looking to Him for a
blessing...

South Carolina , 1778, Preamble We, the people of he State of South
Carolina grateful to God for our liberties, do ordain and establish
this Constitution.

South Dakota 1889, Preamble We, the people of South Dakota , grateful
to Almighty God for our civil and religious liberties ...

Tennessee 1796, Art. XI..III. That all men have a natural and
indefeasible right to worship Almighty God according to the dictates
of their conscience...

Texas 1845, Preamble We the People of the Republic of Texas ,
acknowledging, with gratitude, the grace and beneficence of God.

Utah 1896, Preamble Grateful to Almighty God for life and liberty, we
establish this Constitution.

Vermont 1777, Preamble Whereas all government ought to enable the
individuals who compose it to enjoy their natural rights, and other
blessings which the Author of Existence has bestowed on man ..

Virginia 1776, Bill of Rights, XVI Religion, or the Duty which we owe
our Creator can be directed only by Reason and that it is the mutual
duty of all to practice Christian Forbearance, Love and Charity
towards each other

Washington 1889, Preamble We the People of the State of Washington,
grateful to the Supreme Ruler of the Universe for our liberties, do
ordain this Constitution

West Virginia 1872, Preamble Since through Divine Providence we enjoy
the blessings of civil, political and religious liberty, we, the
people of West Virginia reaffirm our faith in and constant reliance
upon God ...

Wisconsin 1848, Preamble We, the people of Wisconsin, grateful to
Almighty God for our freedom, domestic tranquility...

Wyoming 1890, Preamble We, the people of the State of Wyoming ,
grateful to God for our civil, political, and religious liberties,
establish this Constitution...

After reviewing acknowledgments of God from all 50 state
constitutions, one is faced with the prospect that maybe, the ACLU and
the out-of-control federal courts are wrong! If you found this to be
'Food for thought' send to as many as you think will be enlightened as
I hope you were.

(Please note that at no time is anyone told that they MUST worship
God.)

GOD BLESS AMERICA!

We Oppose Obama's Selection of
Harold Koh
to our U.S. State Department

We oppose Rosa Brooks selection
to serve in our Pentagon.

Let's replace the dishonest, immoral, indecent, pathological liars and
idiotic imbeciles and Socialists now in the White House and Congress
with decent, honest, freedom-loving American's like:
Sarah Palin
Newt Gingrich
Rick Santorum
J.C. Watts
Ron Paul

The Following Op-Ed Posted on Thu, Apr. 9, 2009
The Elephant in the Room: Obama vs. United States

The president is contemptuous of American values. And one key nominee
prefers the judgment of other countries and global elites.
By Rick Santorum
Watching President Obama apologize last week for America's arrogance -
before a French audience that owes its freedom to the sacrifices of
Americans - helped convince me that he has a deep-seated antipathy
toward American values and traditions. His nomination of former Yale
Law School Dean Harold Koh to be the State Department's top lawyer
constitutes further evidence of his disdain for American values.

This seemingly obscure position in Foggy Bottom's bureaucratic maze is
one of the most important in any administration, shaping foreign
policy in the courts and playing a critical role in international
negotiations and treaties.

Let's set aside Koh's disputed comments about the possible application
of Sharia law in American jurisprudence. The pick is alarming for more
fundamental reasons having to do with national sovereignty and
constitutional self-governance.

What is indisputable is that Koh calls himself a "transnationalist."
He believes U.S. courts "must look beyond national interest to the
mutual interests of all nations in a smoothly functioning
international legal regime. ..." He thinks the courts have "a central
role to play in domesticating international law into U.S. law" and
should "use their interpretive powers to promote the development of a
global legal system."

Koh's "transnationalism" stands in contrast to good, old-fashioned
notions of national sovereignty, in which our Constitution is the
highest law of the land. In the traditional view, controversial
matters, whatever they may be, are subject to democratic debate here.
They should be resolved by the American people and their
representatives, not "internationalized." What Holland or Belgium or
Kenya or any other nation or coalition of nations thinks has no
bearing on our exercise of executive, legislative, or judicial power.

Koh disagrees. He would decide such matters based on the views of
other countries or transnational organizations - or, rather, those
entities' elites.

Unsurprisingly, Koh is a strong supporter of the International
Criminal Court, which could subject U.S. soldiers and officials to
foreign criminal trials for their actions while fighting for our
security. He has recommended that American lawyers work to "undermine"
official American opposition to the court.

If only Koh's transnationalism ended there. Our Eighth Amendment's
prohibition on cruel and unusual punishment? Koh believes it should be
reinterpreted in light of foreign and international law to pay "decent
respect to the opinions of humankind."

Old fogies like me believe we ought to pay more attention to the
opinions of the Founders who wrote the Constitution and the people who
have lived under it. If Americans want to end the death penalty, they
can do so through their elected state representatives.

If foreign opinions trump those of Pennsylvanians on capital
punishment, why not on other issues? Why not, indeed: Koh thinks
"international comity" trumps American sovereignty. He believes that,
since certain nations recognize a right to same-sex marriage, our
courts should, too. He wrote that "the principles of human dignity and
autonomy that are the essence of the modern right-protecting democracy
demand that civil marriage be available to all couples and that the
equality of all citizens triumph over historical attitudes."

What's beneath this legal jargon? Simply this: Even if marriage in
Pennsylvania has always been understood as involving one man and one
woman - even if Pennsylvanians, through referendum or constitutional
amendment, decide it should remain so - none of that should count.
What should count are the views of courts in other nations or
international bodies.

"I'd rather have [Supreme Court Justice Harry] Blackmun, who used the
wrong reasoning in Roe to get the right results," Koh wrote of the
landmark abortion case, "and let other people figure out the right
reasoning."

Stunning and revealing: Koh tells us it doesn't matter if the right to
abortion can be found in the Constitution. In fact, he concedes that
Blackmun's reasoning was wrong. But it is up to others to get it
right. How? By finding out what the United Nations, European Union, or
particular European nations think.

Koh tops the list of Obama's potential Supreme Court nominees. Is this
what Sen. John Kerry meant when he once suggested that American policy
must pass a "global test"? Or what Barack Obama meant when he said
last week that we have failed to "appreciate Europe's leading role in
the world"? Or when he spoke of "change we can believe in"? And just
who are "we"?

“This op-ed originally appeared in The Philadelphia Inquirer" and has
been re-printed with the permission of Senator Santorum with our
thanks.

Congressman Ron Paul Introduces Bill to Audit the Fed

By admin • February 28, 2009

February 26, 2009

Madame Speaker,

I rise to introduce the Federal Reserve Transparency Act. Throughout
its nearly 100-year history, the Federal Reserve has presided over the
near-complete destruction of the United States dollar. Since 1913 the
dollar has lost over 95% of its purchasing power, aided and abetted by
the Federal Reserve’s loose monetary policy. How long will we as a
Congress stand idly by while hard-working Americans see their savings
eaten away by inflation? Only big-spending politicians and politically
favored bankers benefit from inflation.

Serious discussion of proposals to oversee the Federal Reserve is long
overdue. I have been a longtime proponent of more effective oversight
and auditing of the Fed, but I was far from the first Congressman to
advocate these types of proposals. Esteemed former members of the
Banking Committee such as Chairmen Wright Patman and Henry B. Gonzales
were outspoken critics of the Fed and its lack of transparency.

Since its inception, the Federal Reserve has always operated in the
shadows, without sufficient scrutiny or oversight of its operations.
While the conventional excuse is that this is intended to reduce the
Fed’s susceptibility to political pressures, the reality is that the
Fed acts as a foil for the government. Whenever you question the Fed
about the strength of the dollar, they will refer you to the Treasury,
and vice versa. The Federal Reserve has, on the one hand, many of the
privileges of government agencies, while retaining benefits of private
organizations, such as being insulated from Freedom of Information Act
requests.

The Federal Reserve can enter into agreements with foreign central
banks and foreign governments, and the GAO is prohibited from auditing
or even seeing these agreements. Why should a government-established
agency, whose police force has federal law enforcement powers, and
whose notes have legal tender status in this country, be allowed to
enter into agreements with foreign powers and foreign banking
institutions with no oversight? Particularly when hundreds of billions
of dollars of currency swaps have been announced and implemented, the
Fed’s negotiations with the European Central Bank, the Bank of
International Settlements, and other institutions should face
increased scrutiny, most especially because of their significant
effect on foreign policy. If the State Department were able to do
this, it would be characterized as a rogue agency and brought to heel,
and if a private individual did this he might face prosecution under
the Logan Act, yet the Fed avoids both fates.

More importantly, the Fed’s funding facilities and its agreements with
the Treasury should be reviewed. The Treasury’s supplementary
financing accounts that fund Fed facilities allow the Treasury to
funnel money to Wall Street without GAO or Congressional oversight.
Additional funding facilities, such as the Primary Dealer Credit
Facility and the Term Securities Lending Facility, allow the Fed to
keep financial asset prices artificially inflated and subsidize poorly
performing financial firms.

The Federal Reserve Transparency Act would eliminate restrictions on
GAO audits of the Federal Reserve and open Fed operations to enhanced
scrutiny. We hear officials constantly lauding the benefits of
transparency and especially bemoaning the opacity of the Fed, its
monetary policy, and its funding facilities. By opening all Fed
operations to a GAO audit and calling for such an audit to be
completed by the end of 2010, the Federal Reserve Transparency Act
would achieve much-needed transparency of the Federal Reserve. I urge
my colleagues to support this bill.

111th Congress - 1st Session

H.R. 1207

A BILL

To amend title 31, United States Code, to reform the manner in which
the Board of Governors of the Federal Reserve System is audited by the
Comptroller General of the United States and the manner in which such
audits are reported, and for other purposes.

1. Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.
This Act may be cited as the “Federal Reserve Transparency Act of
2009″.

SEC. 2. AUDIT REFORM AND TRANSPARENCY FOR THE BOARD OF GOVERNORS OF
THE FEDERAL RESERVE SYSTEM.

(a) IN GENERAL. - Subsection (b) of section 714 of title 31, United
States Code, is amended by striking all after “shall audit an agency”
and inserting a period.

(b) AUDIT. - Section 714 of title 31, United States Code, is amended
by adding at the end the following new subsection:

“(e) AUDIT AND REPORT OF THE FEDERAL RESERVE SYSTEM. -

“(1) IN GENERAL. - The audit of the Board of Governors of the Federal
Reserve System and the Federal reserve banks under subsection (b)
shall be completed before the end of 2010.

“(2) REPORT -

“(A) REQUIRED. - A report on the audit referred to in paragraph (1)
shall be submitted by the Comptroller General to the Congress before
the end of the 90-day period beginning on the date on which such audit
is completed and made available to the Speaker of the House, the
majority and minority leaders of the House of Representatives, the
majority and minority leaders of the Senate, the Chairman and Ranking
Member of the committee and each sub-committee of jurisdiction in the
House of Representatives and the Senate, and any other Member of
Congress who requests it.

“(B) CONTENTS. - The report under subparagraph (A) shall include a
detailed description of the findings and conclusion of the Comptroller
General with respect to the audit that is the subject of the report,
together with such recommendations for legislative or administrative
action as the Comptroller General may determine to be appropriate.”.

Sponsor

Rep. Ronald Paul [R-TX]

HOW DARE YOU OBAMA,
TO BOW DOWN TO A MUSLIM!
YOU BOW DOWN TO A FELLOW-MUSLIM?
AND NOT THE QUEEN OF ENGLAND?!?

We Support the Impeachment of
Barack Hussein Obama
and His Removal from the Office of the President
for his Multiple Failures, including:

Obama's failure to protect and defend our country,

Obama's failure to protect and defend American jobs,

Obama's SLASHING of our defense budget,

Obama's failure to keep the full tax deduction for churches and other
non-profits,

Obama's failure to deport illegal aliens, including his aunt, who has
been told TWICE to leave our country,

Obama's failure to uphold America's Christian principals and beliefs
on which our great country was founded,

Obama's failures to control spending, and out of control government
growth,

Obama's failures to reduce taxes for 95% of all Americans,

Obama's failures to allow failed companies, to fail, or file for
bankruptcy,

Obama's failures to protect innocent, unborn Americans,

Obama's radical socialist agenda,

Obama's failures to protect innocent, unborn Americans,

Obama's pro-islam and anti-Christian beliefs,

Obama's closing down of GITMO - the prison where we are detaining
terrorists, and considering moving these terrorists to U.S.
Mainland,

Obama's bowing down to a muslim, and NOT to the Queen of England?

Obama has done more in 30 days to damage our county, our economy and
our nation's defense than all presidents for the past 100 years -
combined.

Obama has got to be a complete IMBECILE, and TRAITOR, for announcing
Al Qaeda - our enemy - what our timetable is for withdrawing our
troops from Iraq!

Obama - guilty of gross negligence, incompetence and dereliction of
duty,

Obama's appointment of the Ultra-Liberal and Left-wing NUT-JOB Rosa
Brooks to OUR Pentagon, is COMPLETELY UNACCEPTABLE. Her selection and
appointment is yet another indicator of Obama's many FAILURES to
appoint American's who will PROTECT AND DEFEND OUR COUNTRY.

WE REQUEST YOU IMMEDIATELY REMOVE AND TERMINATE ROSA BROOKS, NOW!

Barack Hussein Obama - an ignorant imbecile and a real danger to the
peace, safety, and welfare of the U.S.A., our Constitution and freedom-
loving people everywhere.

Hey Obama, hear our voices LOUD AND CLEAR:

1. NO AMNESTY, EVER, FOR ILLEGAL ALIENS - NO HOW, NO WAY, NEVER!

2. NO MORE ILLEGAL ALIENS TAKING AMERICAN JOBS.

3. FIND OUT WHO AND WHERE THESE 12 - 20 MILLION ILLEGAL ALIENS ARE
AND ROUND THEM UP AND GET THESE ILLEGAL ALIENS OUT OF OUR COUNTRY, DO
IT NOW!

4. PROTECT AND SECURE THE U.S. - MEXICAN BORDER - DO IT NOW!

5. START PROTECTING AND DEFENDING OUR COUNTRY AND OUR JOBS.

YOU CAN START BY SENDING YOUR AUNT BACK TO AFRICA WHO HAS ALREADY BEEN
ORDERED BY AN IMMIGRATION JUDGE, 2 TIMES ALREADY, TO LEAVE OUR
COUNTRY.

START DOING YOUR JOB, OBAMA.

Barack Hussein Obama - goes from: Despicable Democrat to DESPICABLE
FAILURE in record time.... only 60 days in office and already, Obama
is the WORST PRESIDENT EVER!

FOR THESE REASONS, AND MANY MORE....

Barack Hussein Obama is NOT MY PRESIDENT

IMPEACH BARACK HUSSEIN OBAMA

SUPPORT YOUR LOCAL
TAX DAY
TEA PARTY!

According to Joe Biden -
Who we all know NOW, is a pathological "LIAR"
Barack Hussein Obama is
"NOT Ready To Be President."

This time, Joe Biden was telling the truth about Obama: Barack Hussein
Obama
has now PROVEN, just like Joe Biden stated,
he is NOT ready to be President

IMPEACH BARACK HUSSEIN OBAMA NOW
BEFORE HE DESTROYS OUR COUNTRY
OR TAKES US OVER THE CLIFF!

Hey Joe Biden - you're a LIAR....
I would rather follow an honorable, decent and honest President like
George W. Bush
ANYDAY - over you and Obama

Obama & Biden:
NOT MY PRESIDENT
NOT MY VICE PRESIDENT

The Facts of Life in California
This is only one State out of 50, if the following doesn't open your
eyes nothing will!

The following facts are from the L. A. Times:

1. 40% of all workers in L. A. County ( L. A. County has 10.2 million
people)are working for cash and not paying taxes. This is because they
are predominantly illegal immigrants working without a green card.

2. 95% of warrants for murder in Los Angeles are for illegal aliens.

3. 75% of people on the most wanted list in Los Angeles are illegal
aliens.

4. Over 2/3 of all births in Los Angeles County are to illegal alien
Mexicans on Medi-Cal, whose births were paid for by AMERICAN
taxpayers.

5. Nearly 35% of all inmates in California detention centers are
Mexican nationals here illegally

6. Over 300,000 illegal aliens in Los Angeles County are living in
garages.

7. The FBI reports half of all gang members in Los Angeles are most
likely illegal aliens from south of the border.

8. Nearly 60% of all occupants of HUD properties are illegal.

9. 21 radio stations in L. A. are Spanish speaking.

10. In L. A. County 5.1 million people speak English, 3.9 million
speak Spanish.
(There are 10.2 million people in L. A. County.)

The above facts are from the Los Angeles Times

Less than 2% of illegal aliens are picking our crops, but 29% are on
welfare. Over 70% of the United States ' annual population growth (and
over 90% of California , Florida , and New York ) results from
immigration. 29% of inmates in federal prisons are illegal aliens.

We are a bunch of fools for letting this continue.
And you wonder why Nancy Pelosi wants them to become voters!

IT'S TIME AMERICA,
Time for the National Sales Tax!
www.NationalSalesTax.net

NO TAXATION WITHOUT REPRESENTATION!
STOP THE OUT-OF-CONTROL SPENDING!
PROTECT AND DEFEND OUR HOMELAND!
www.NationalSalesTax.net

9 Principles We Believe In
(from www.GlennBeck.com)
1.
America Is Good. (Correction, America is GREAT, and the best hope for
man wanting to be free!)

2.
I believe in God and He is the Center of my Life. (and, in Jesus
Christ, God's only begotten Son)

God “The propitious smiles of Heaven can never be expected on a
nation that disregards the external rules of order and right which
Heaven itself has ordained.” from George Washington’s first Inaugural
address.

3.
I must always try to be a more honest person than I was yesterday.

Honesty “I hope that I shall always possess firmness and virtue
enough to maintain what I consider to be the most enviable of all
titles, the character of an honest man.” George Washington

4.
The family is sacred. My spouse and I are the ultimate authority, not
the government.

Marriage/Family “It is in the love of one’s family only that
heartfelt happiness is know. By a law of our nature, we cannot be
happy without the endearing connections of a family.” Thomas
Jefferson

5.
If you break the law you pay the penalty. Justice is blind and no one
is above it.

Justice “I deem one of the essential principles of our government…
equal and exact justice to all men of whatever state or persuasion,
religious or political.” Thomas Jefferson

6.
I have a right to life, liberty and pursuit of happiness, but there
is no guarantee of equal results.

Life, Liberty, & The Pursuit of Happiness “Everyone has a natural
right to choose that vocation in life which he thinks most likely to
give him comfortable subsistence.” Thomas Jefferson

7.
I work hard for what I have and I will share it with who I want to.
Government cannot force me to be charitable.

Charity “It is not everyone who asketh that deserveth charity; all
however, are worth of the inquiry or the deserving may suffer.” George
Washington

8.
It is not un-American for me to disagree with authority or to share
my personal opinion.

On your right to disagree “In a free and republican government, you
cannot restrain the voice of the multitude; every man will speak as he
thinks, or more properly without thinking.” George Washington

9.
The government works for me. I do not answer to them, they answer to
me.

Who works for whom? “I consider the people who constitute a society
or a nation as the source of all authority in that nation.” Thomas
Jefferson

12 Values We believe In
(from: www.GlennBeck.com)
Honesty

Reverence

Hope

Thrift

Humility

Charity

Sincerity

Moderation

Hard Work

Courage

Personal Responsibility

Gratitude


The Following is a True Story About Ted Turner and Jane Fonda!

The radio station America FM was doing one of its 'Is Anyone
Listening?' bits this morning.

The first question was, 'Ever have a celebrity come up with the 'Do
you know who I am routine?'

A woman called in and said that a few years a go, while visiting her
cattle rancher uncle in Billings, Montana, she went to dinner there at
a restaurant that does not take reservations. The wait that night was
about 45 minutes and there were many ranchers and their wives waiting
to eat there.

Ted Turner and his ex-wife Jane Fonda came in to the restaurant and
wanted a table. The hostess informed them that they'd have to wait 45
minutes.

Jane Fonda asked the hostess, 'Do you know who I am?'

The hostess answered, 'Yes, but you'll have to wait 45 minutes.'

Then Jane asked the waitress if the manager was in.

When the manager came out, he asked, 'May I help you?'

'Do you know who we are?' both Ted and Jane asked.

'Yes' replied the manager, who then said, 'these folks have been
waiting, and I can't put you ahead of them.

'Then Ted asked the manager to speak with the restaurant's owner.

The owner came out, and Jane again asked, 'Do you know who I am?'

The owner answered, 'Yes, I do.' The owner then said to Ted and Jane
'Do you know who I am? I am the owner of this restaurant and I am a
Vietnam Veteran. Not only will you not get a table ahead of my friends
and neighbors who have been waiting here, but you also will not be
eating in my restaurant tonight or any other night. Good bye.'

To all who read this - it is a true story and the name of the steak
house is: Sir Scott's Oasis Steakhouse. They are located at 204 W.
Main in Manhattan, Montana 59741 Their phone number is: (406)
284-6929 (but they don't accept reservations!)

If you ever get there, give the owner a special thank you for his
service to our country, enjoy a great steak dinner and tip the
waitress!

Keep passing this on. We should never forget our country's number one
national traitor and her socialist ex-husband!


IT'S TIME AMERICA,
TO ABOLISH THE FEDERAL RESERVE!

"The powers not delegated to the United States by the Constitution,
nor prohibited by it to the States, are reserved to the States
respectively, or to the people."


Questions never asked or answered about the Federal Reserve System:

1. Who owns the member banks of the Fed/Reserve? Who owns the shares
of stock of the Federal Reserve?

2. Since "our" money is not backed by anything of intrinsic value,
what purpose does the gold reserve in Ft. Knox serve?

3. It is said that the Federal Reserve is a “quasi” governmental
institution. Which part is governmental?

4. If the Chairman of the Federal Reserve decides to raise or lower
interest rates, can anyone say no to him?

5. Foreign holders of dollars can exchange them for gold. Why can’t
U.S. citizens do the same?

6. What causes inflation?

7. The President appoints the Chairman of the Fed/Res but who picks
the nominee?

8. Why must "our" money be processed through the Federal Reserve?

9. Who sets the amount of money a bank must hold in surplus assets?

10. Since the Federal Reserve is a private corporation, where is the
Federal Reserve incorporated?

Oct 9, 2008

President Bush FINALLY vindicated on WMD in Iraq...A national defense
analyst says President Bush should be commended for keeping quiet
about a discovery that could have blown his critics out of the water.

Retired Major General Jerry Curry is a decorated combat veteran who
served as an Army aviator, paratrooper, and Ranger during a military
career that began during the Korean conflict. He recently wrote about
a very under reported story by the Associated Press.

According to the report, a large stockpile of concentrated natural
Uranium, known as "yellowcake," reached a Canadian port to complete a
top secret U.S. Operation that included a two-week airlift from
Baghdad, and a ship voyage crossing two oceans. The Uranium material
had been housed at a former Iraqi nuclear complex 12 miles from
Baghdad.

Curry says the president kept mum about the discovery in order to keep
terrorists in the dark. "He made a very brave stand, a resolute
stand..., in which he decided that he wasn't going to blab everything
to the press, "Curry commends."...And in the meantime while he kept it
quiet, he was buying time from the terrorists to get all that stuff
out of the country. So that's what was done -- he just very quietly
kept his mouth shut."

"The press beat him to death for the last several years," he
continues," and now it turns out that, yes, there were weapons of mass
destruction...." Curry also maintains that Saddam Hussein had an
active nuclear program and the material could have been made into a
nuclear weapon.

President Bush's actions took courage, he notes, and all Americans
should be thankful to have such a brave president who puts the welfare
of the American people above personal considerations.

On July 5, 2008, the Associated Press (AP) released a story titled:
Secret U.S. mission hauls uranium from Iraq. The opening paragraph is
as follows:

The last major remnant of Saddam Hussein's nuclear program (a huge
stockpile of concentrated natural uranium) reached a Canadian port
Saturday to complete a secret U.S. operation that included a two-week
airlift from Baghdad and a ship voyage crossing two oceans.

See anything wrong with this picture?

We have been hearing from the far left for more than five years how
President Bush lied. Somehow, that slogan loses its credibility now
that 550 metric tons of Saddam's yellowcake, used for nuclear weapon
enrichment, has been discovered and shipped to Canada for its new use
as nuclear energy.

It appears that American troops found the 550 metric tons of uranium
in 2003 after invading Iraq. They had to sit on this information and
the uranium itself for fear of terrorists attempting to steal it. It
was guarded and kept safe by our military in a 23,000-acre site with
large sand beams surrounding the site.

This is vindication for the Bush administration, having been attacked
mercilessly by the liberal media and the far-left pundits on the blogo-
sphere. Now that it is proven that President Bush did not lie about
Saddam's nuclear ambitions, one would think that the mainstream media
would report the true story. Once the AP released the story, the
mainstream media should have picked it up and broadcast it worldwide.

That never happened, due in large part, I believe, to the fact that
the mainstream media would have to admit they were wrong about Bush's
war motives all along. Thankfully, the AP got it right when it said,
"The removal of 550 metric tons of yellowcake, the seed material for
higher-grade nuclear enrichment, was a significant step toward closing
the books on Saddam's nuclear legacy."

Closing the book on Saddam's nuclear legacy? Did Saddam have a nuclear
legacy after all? I thought Bush lied? As it turns out, the people who
lied were Joe Wilson and his wife.

Valerie Plame engaged in a clear case of nepotism and convinced the
CIA to send her husband on a fact finding mission in February 2002,
seeking to determine if Saddam Hussein attempted to buy yellowcake
from Niger. The CIA and British intelligence believed Saddam contacted
Niger for that purpose but needed proof.

During his trip to Niger, Wilson actually interviewed the former prime
minister of Niger , Ibrahim Assane Mayaki. Mayaki told Wilson that in
June of 1999, an Iraqi delegation expressed interest in "expanding
commercial relations" for the purposes of purchasing yellowcake.

Wilson chose to overlook Mahaki's remarks and reported to the CIA that
there was no evidence of Hussein wanting to purchase yellow cake from
Niger.

However, with British intelligence insisting the claim was true,
President Bush used that same claim in his State of the Union address
in January of 2003. Outraged by Bush's insistence that the claim was
true, Wilson wrote an op-ed in the New York Times in the summer of
2003 slamming Bush.

Wilson did this in spite of the fact that Mayaki said Saddam did try
to buy the yellowcake from Niger. The Senate Select Committee on
Intelligence disagreed with Wilson and supported Mayaki's claim. This
meant nothing to Wilson who was opposed to the Iraq war and thus had
ulterior motives in covering up the prime minister's statements.

It was a simple tactic, really. If the far-left and their friends in
the media could prove Bush lied about Hussein wanting to purchase
yellowcake from Niger, it would undermine President Bush's credibility
and give them more cause for asking what other lies he may have told.

Yet the real lie came from Wilson, who interpreted his own meaning
from the prime minister's statements and concluded all by himself that
the claim of Saddam attempting to purchase yellowcake was
"unequivocally wrong." Curiously the CIA sat on this information and
did not inform the CIA Director, who sided with Bush on the yellowcake
claim. This was made Public in a bipartisan Senate Intelligence
Committee report in July 2004.

Valerie Plame also engaged in her own lie campaign by spreading the
notion that the Bush Administration outed her as a CIA agent. Never
mind that it was Richard Armitage - no friend of the Bush
administration – who leaked Plame's identity to the press. Never mind
that Plame had not been in the field as a CIA agent in some six years.

The truth is, due to their opposition to the war, Joe Wilson, Valerie
Plame, the mainstream media, and their left-wing friends on the blogo-
sphere engaged in a propaganda campaign to undermine the Bush
administration.

Now that Saddam's uranium has been made public and is no longer a
threat to the world, do you think these aforementioned parties will
apologize and admit they were wrong?

Don't count on it.

The rest of the American people should hear the truth about Saddam's
uranium. It is up t you and me to inform them.

As far as the anti-war crowd is concerned, the next time they say that
Bush lied, we should tell them to "have the yellowcake and eat it
too."

What is sad is this is being claimed as 'False' because,and I quote
the NY Times; This is not the same yellow cake that bush claimed in
his 2003 state of the union speech."

So, since this isn't the "same" uranium therefore we should ignore the
facet that Saddam DID IN FACT HAVE YELLOW CAKE!

For verification of the above, see: http://www.msnbc.msn.com/id/25546334/

http://www.truthorfiction.com/rumors/u/uraniumyellowcake.htm

Nancy Pelosi:
YOU HYPOCRITE!

TURN IN "OUR" BOEING 757

AND TAKE THE SMALLER C-20 JET

Like Speaker Hastert before you!

IT WILL TAKE MORE THAN A THOUSAND OF US TAXPAYERS PAYING OUR TAXES TO
GIVE THE PRIVILEGE TO NANCY PELOSI TO FLY BACK AND FORTH TO
CALIFORNIA.

Who does "Blinky" Pelosi think she is?

Remember the big media flap about Sarah Palin's clothing expenses?

Americans! Where are you? Are you awake?

Newt Gingrich, a Republican, served in the House as a member from
Georgia beginning in 1978. He became House Minority Whip in 1989. He
was Speaker of the House from 1995 to 1999.

During all of that time he never made use of US military aircraft.

Today Nancy Pelosi, a Democrat from California, is Speaker of the
House. The Pentagon provides the House speaker with an Air Force plane
large enough to accommodate her staff, family, supporters, and members
of the California delegation when she travels around the country.
But, Pelosi wants routine access to a larger plane that includes 42
business class seats, a fully-enclosed state room, an entertainment
center, a private bed, state-of-the-art communications system, and
requires a crew of 16 to fly. Pelosi wanted "carte blanche for an
aircraft any time," including weekend trips home to San Francisco.
Pretty nice but a very expensive perk!

The Air Force C-32 now flies around in costs approximately $15,000 an
hour or approximately $300,000 per trip home. And she has the
unmitigated gaul to confront the Big Three CEOs
for flying their corporate jets to Washington?!?!?

What an OUTRAGEOUS and "lavish" luxury that Pelosi is NOT deserving
of.... Send Pelosi a letter demanding that she turn in this
OUTRAGEOUS and expensive luxury and start taking the small jet that
was good enough for the previous Speaker.

We haven't heard any comments from media on "Queen" Pelosi's snit
about having to ride home in the small private, economy jet that comes
with the Speaker's job.

Remember how Pelosi was so aggravated that this little jet had to
refuel while transporting her to California every week?

Remember that she insisted on a luxurious 200 seat jet to fly her to
California nonstop, instead?

WHY IS NANCY PELOSI DESERVING OF SUCH AS AN EXPENSIVE JET?

AND ONE THAT CONSUMES ALMOST 4 TIMES AS MUCH CARBON AS THE SMALLER
JET!

NO OTHER SPEAKER HAD THIS EXPENSIVE "LUXURY!"

Washington legislators who observed the Pelosi's Big Fat jet grinned
with glee as Joe The Plumber informed all of us that Nancy 's luxury
Jet will require hard working American taxpayers, to buy thousands of
gallons of expensive jet fuel every week.

Pelosi only works 3 days a week but her gas guzzler luxury jet flights
home, to California, costs to taxpayers $60,000 one way! As Joe noted,
'Unfortunately we have to pay to bring her back on Monday night,' so
there goes another $60,000. (and everyone thought CEO pampering was
unreal)!!

Folks, that is $480,000 per month or an annual cost to taxpayers of
$5,760,000.

And Pelosi complains about the cost of the war?!?

Pelosi should try "leading" by example! Pelosi should take the
smaller jet (C-20) which she says would cramp her style -- but since
her flying in style takes precedence over war costs -- what do you
say?

Military families in this country do without while this woman, who
heads up the most do-nothing Congress in the history of our country,
spends lavishly to fly herself and associates to and from California
every week. Does that burn you, too?

Pelosi - you are not only a HYPOCRITE, you are a "Carbon Criminal!"
Pelosi, if you care so much for the environment, why don't you take
the smaller jet?!? Pelosi, if you are so concerned about the economy,
and the budget deficit, TAKE THE SMALLER JET!

Pelosi expects you and I to conserve our carbon footprint by driving
smaller cars and buying a bicycle pump to over-inflate our tires for
better economy while she and her hypocrite cohorts waste tax payer
dollars.

Ticks you off, too, right?

Please keep this circulating and let's join Joe bringing their "pork
barrel" spending to American's attention to make a difference in how
Congress spends our hard earned money through their "personal waste"
and "ear marks."

Here is more information on what the Former Speaker was "authorized"
to fly in - the C-20

Mission

The C-20 is a twin-engine, turbofan aircraft acquired to fill the
airlift mission for high-ranking government and Department of Defense
officials. The 89th Airlift Wing, Andrews Air Force Base, Md.,
operates five C-20B's for worldwide special air missions. The 86th
Airlift Wing, Ramstein Air Base, Germany, operates two C-20H's for
operational support airlift missions.

Features

Two Rolls Royce Spey Mark 511-8 engines power the C-20B models. The
primary difference between the C-20B and H model is the electrical
system, engines, and the avionics package. Two Rolls Royce Tay Mark
611-8 engines power the C-20H. The Tay Mark 611-8 engines provide
greater performance, greater range and are reduced noise signature
than the B model. The C-20H is also slightly longer than the B model,
and has an upgraded avionics package and interior. Worldwide secure
and non-secure passenger communication capability exists on both
aircraft.

Background

The C-20A/B, military versions of the Gulfstream III, was chosen in
June 1983 as the replacement aircraft for the C-140B Jetstar. Three A
models were delivered to the 89th Airlift Wing under a cost-saving
accelerated purchase plan. Upon delivery of the C-20B's, Andrews
transferred the three C-20A's to Ramstein Air Base and all C-140B's at
both locations were phased out of the U.S. Air Force inventory. In
1992, Gulfstream delivered their latest model, the C-20H (Gulfstream
IV) to Andrews AFB. In 2002, the C-20A was selected for
decommissioning and two C-20Hs at Andrews were transferred to
Ramstein.

HISTORY LESSONS ON GUNS AND WHAT HAPPENS TO A COUNTRY'S CITIZENS WHEN
GUNS ARE OUTLAWED:

In 1929, the Soviet Union established gun control. From 1929 to 1953,
about 20 million dissidents, unable to defend themselves, were rounded
up and exterminated.

In 1911, Turkey established gun control. From 1915 to 1917, 1.5
million Armenians, unable to defend themselves, were rounded up and
exterminated.

Germany established gun control in 1938 and from 1939 to 1945, a total
of 13 million Jews and others who were unable to defend themselves
were rounded up and exterminated.

China established gun control in 1935. From 1948 to 1952, 20 million
political dissidents, unable to defend themselves, were rounded up and
exterminated

Guatemala established gun control in 1964. From 1964 to 1981, 100,000
Mayan Indians, unable to defend themselves, were rounded up and
exterminated.

Uganda established gun control in 1970.. From 1971 to 1979, 300,000
Christians, unable to defend themselves, were rounded up and
exterminated.

Cambodia established gun control in 1956. From 1975 to 1977, one
million educated people, unable to defend themselves, were rounded up
and exterminated.

Defenseless people rounded up and exterminated in the 20th Century
because of gun control: 56 million.

It has now been 12 months since gun owners in Australia were forced
by new law to surrender 640,381 personal firearms to be destroyed by
their own Government, a program costing Australia taxpayers more than
$500 million dollars. The first year results are now in after banning
guns in Australia:

Australia-wide, homicides are up 3.2 percent.

Australia-wide, assaults are up 8.6 percent.

Australia-wide, armed robberies are up 44 percent (yes, 44 percent)!

In the state of Victoria alone, homicides with firearms are now up
300 percent. Note that while the law-abiding citizens turned them in,
the criminals did not, and criminals still possess their guns!

While figures over the previous 25 years showed a steady decrease in
armed robbery with firearms, this has changed drastically upward in
the past 12 months, since criminals now are guaranteed that their prey
is unarmed.

There has also been a dramatic increase in break-ins and assaults of
the ELDERLY. Australian politicians are at a loss to explain how
public safety has decreased, after such monumental effort, and expense
was expended in successfully ridding Australian society of guns. The
Australian experience and the other historical facts above prove it.

You won't see this data on the US evening news, or hear politicians
disseminating this information.

Guns in the hands of honest citizens save lives and property and, yes,
gun-control laws adversely affect only the law-abiding citizens.

The next time someone talks in favor of gun control, please remind
them of this history lesson.

With guns, we are 'citizens'. Without them, we are 'subjects'.

During WWII the Japanese decided not to invade America because they
knew most Americans were ARMED!

If you value your freedom, please spread this anti-gun control message
to all of your friends.

The purpose of fighting is to win. There is no possible victory in
defense. The sword is more important than the shield, and skill is
more important than either. The final weapon is the brain. All else is
supplemental.

SWITZERLAND ISSUES EVERY HOUSEHOLD A GUN! SWITZERLAND 'S GOVERNMENT
TRAINS EVERY ADULT THEY ISSUE A RIFLE. SWITZERLAND HAS THE LOWEST
GUN RELATED CRIME RATE OF ANY CIVILIZED COUNTRY IN THE WORLD!!!

DON'T LET OUR GOVERNMENT WASTE MILLIONS OF OUR TAX DOLLARS IN AN
EFFORT TO MAKE ALL LAW ABIDING CITIZENS AN EASY TARGET!

Bumper Stickers for Conservatives

Background: William Ayers was a member of the Weather Underground, a
radical leftist group that from 1969 to the mid-'70s conducted several
bombings of government institutions. Ayers served on the group's
Central Committee. The Weather Underground bombed the U.S. Capitol,
the Pentagon, military installations, and police stations. In all,
seven people were killed. In 1981, two police officers and one
security guard were killed by members of the Weather Underground in
the robbery of a Brinks truck in New York state. After Ayers married
Bernardine Dohrn, also a member of the Weather Underground (who was
described by FBI Director J. Edgar Hoover as "the most dangerous woman
in America"), they settled in Chicago.

Fact: Bernardine Dohrn had this to say in response to the Charles
Manson murders, which she romanticized as a revolutionary coup at a
Flint, Mich., Weatherman War Council in December 1969: "Dig it! First
they killed those pigs, then they ate dinner in the same room with
them. They even shoved a fork into the victim's stomach! Wild!" Dohrn
later stated this was meant as a "joke."

Fact: In 1969, Bernardine Dohrn and other members of the Weather
Underground traveled to Cuba and met with representatives of the North
Vietnam and Cuban governments.

Fact: In 1970, Ayers explained what the Weather Underground was all
about: "Kill all the rich people. Break up their cars and apartments.
Bring the revolution home; kill your parents; that's where it's really
at."

Fact: Both Ayers and Dohrn lived on the run from authorities from
approximately 1970 to 1980. The case against Ayers and Dohrn was
dropped due to illegal wiretaps and prosecutor misconduct. The FBI was
conducting "black bag jobs," or illegal break-ins, in their pursuit of
the Weather Underground. Some of these black bag jobs were authorized
by Mark Felt, later to be known as "Deep Throat" of Watergate fame.

Fact: Shortly after turning themselves in, Dohrn and Ayers became
legal guardians of the son of former members of the Weather
Underground, Kathy Boudin and David Gilbert, after they were convicted
of murder for their roles in a 1981 armored car robbery. Two police
officers and one Brinks guard were killed in the robbery.

Fact: Starting in the mid-'90s, Ayers and Obama served on the board of
the Chicago Annenberg Challenge Project. They served together on the
board for approximately seven years. Ayers and Obama were tasked with
the oversight of a $100 million budget. The board, under Obama's
chairmanship the Annenberg project gave hundreds of thousands of
dollars to Bill Ayers' projects promoting alternative schools.

["Anderson Cooper 360," CNN, Oct. 6, 2008]

Fact: From 1984 to 1988, Bernardine Dohrn was employed by the
prestigious Chicago law firm Sidley Austin. She was hired by Howard
Trienens, the head of the firm at that time and someone who knew
Thomas G. Ayers, Bill's father. However, Dohrn's criminal record has
prevented her from being admitted to either the New York or Illinois
bar. "Dohrn didn't get a [law] license because she's stubborn . . .
She wouldn't say she's sorry."

[Chicago Tribune, May 18, 2008]

Fact: In 1991, Dohrn was hired by Northwestern University School of
Law in Chicago, as an adjunct professor of law, with the title
"clinical associate professor of law." Thomas Ayers was a long-time
member of the Northwestern Board of Trustees, and was named life
trustee in 1987.

[Source: Feb. 7, 2008 speech to the Conservative Political Action
Conference, CPAC]

Fact: In 1994, Dohrn was quoted on her political beliefs: "I still see
myself as a radical."

[Chepesiuk, Ron, "Sixties Radicals, Then and Now: Candid Conversations
With Those Who Shaped the Era," McFarland & Company, Inc]

Fact: In 1995, Obama's first autobiography is released. In it he
writes of his years in college, associating with radicals. "To avoid
being mistaken for a sellout, I chose my friends carefully. The more
politically active black students. The foreign students. The Chicanos.
The Marxist professors and structural feminists and punk rock
performance poets . . . When we ground out our cigarettes in the
hallway carpet or set our stereos so loud that the walls began to
shake, we were resisting bourgeois society's stifling constraints. We
weren't indifferent or careless or insecure. We were alienated."

[Obama, Barack, "Dreams from My Father: A Story of Race and
Inheritance,
Random House, Pages 100-101]

Fact: In 1995, Ayers and Dorn opened their Chicago Hyde Park home to
host a political coming-out party for Barack Obama, when he ran for
the state Senate. Someone who was at this party for Obama wrote that
Ayers and Dohrn were launching him, "introducing him to the Hyde Park
community as the best thing since sliced bread."

[Politico.com, Feb. 22, 2008]

Fact: From 1999-2002, Ayers and Obama served together on a second
charitable foundation, The Woods Fund. While at the Woods Fund, they
gave money to the Rev. Jeremiah Wright's church, which Obama attended,
and a children and family center, where Dohrn worked.

["Anderson Cooper 360," CNN, Oct. 6, 2008]

Fact: In a 1996 interview, one year after hosting Barack Obama's
coming-out party in their home, Ayers and Dohrn were profiled by "The
NewsHour" on PBS. Ayers was asked, "Looking back, would you do it
differently now?" He stated, "I doubt it . . . probably not."

Fact: Question to Obama in 2000, during his run for the U.S. Congress:
"What is your argument, based on the one term that you served in the
[Illinois] Senate so far, that makes you prepared for the Congress?"

Answer: "I would argue . . . my experience previous to elected office
equips me for the job . . . I've chaired major philanthropic efforts
in the city, like the Chicago Annenberg Challenge that gave $50
million to prompt school reform efforts throughout the city."

Fact: In 2001, Ayers made a $200 campaign contribution to Illinois
state Sen. Barack Obama.

Fact: In promoting his book "Fugitive Days" Ayers told The New York
Times on Sept. 11, 2001, "I don't regret setting bombs. I feel we
didn't do enough." When asked if he would "do it all again," he said,
"I don't want to discount the possibility."

Fact: Just days after 9/11, Ayers was quoted in The New York Times
Magazine: "This society is not a just and decent place . . . We're
living in a country where the election was stolen, and we didn't have
a mass uprising. It's incredible. We're all asleep. The pundits all
pat themselves on the back: 'God, what a great country'. . . It makes
me want to puke."

WILLIAM AYERS, YOU ARE A SOCIALIST PIG!

<---- LOOK AT THIS SOCIALIST PIG!

WILLIAM AYERS, DISGRACING OUR AMERICAN FLAG, THAT REPRESENTS OUR
COUNTRY. WHY IS THIS "UNAMERICAN AMERICAN" WHO HATES OUR COUNTRY,
MURDERS INNOCENT AMERICANS BY MULTIPLE BOMBINGS, STILL NOT INDICTED
AND IN PRISON, AND IF HE ISN'T INDICTED, WHY ISN'T HE LIVING IN
RUSSIA, WHERE YOU BELONG?

Fact: In 2001, Ayers posed for a photograph in Chicago magazine,
accompanying a profile of his book, which shows him stepping on an
American flag.

[www.chicagomag.com/Chicago-Magazine/August-2001/No-Regrets/]

Fact: In a 2001 profile, a writer quotes Ayers as saying, "I think
there will be another mass political movement, because I believe that
the kind of injustice that is built into our world will not go quietly
into the night."

[Chicago magazine, August 2001 online edition]

Fact: In his 2001 memoir, "Fugitive Days," Ayers writes of the time he
took part in bombing the Pentagon. "Everything was absolutely ideal on
the day I bombed the Pentagon. The sky was blue; the birds were
singing. And the bastards were finally going to get what was coming to
them."

Fact: In 2008, Ayers again denies he was ever a terrorist, writing on
his blog: "The September 11 attacks were acts of terrorism, and the
U.S. bombings in Viet Nam for a decade were acts of terrorism.
Terrorism is never justifiable, even in a just cause . . . I've never
advocated terrorism, never participated in it, never defended it. The
U.S. government, by contrast, does it routinely and defends the use of
it in its own cause consistently."

[billayers.wordpress.com/2008/04/page/2/]

Fact: In the 2008 presidential race, Obama downplays his association
with Ayers, saying that he is just a "guy who lives in my
neighborhood."

[The Washington Post, Oct. 7, 2008]

Fact: David Axelrod, Obama's chief strategist, attempted to downplay
the Obama/Ayers relationship: "Bill Ayers lives in his neighborhood.
Their kids attend the same school . . . They're certainly friendly;
they know each other, as anyone whose kids go to school together."

[Politico.com, Ben Smith, Feb. 26, 2008]

Fact: Obama's children never attended school with the Ayers children.
Obama's children are ages 9 and 6. Ayers and Dohrn have two adult
children, and they adopted a son from their fellow Weather Underground
terrorist Kathy Boudin. That son was born in 1981.

Fact: Chicago's Hyde Park residents speak of Obama and Ayers'
relationship. "Neighbors said it's only natural that Obama would know
Ayers and Dohrn, who often open their homes for gatherings filled with
lively discussions about politics, arts, and social issues. Obama and
his wife 'are part of our neighborhood and part of our social circle,'
said Elizabeth Chandler, a neighbor of Ayers'."

[ChicagoTribune.com, April 17, 2008]

Background: The driver's license issue emerged in September 2007, when
then-Gov. Eliot Spitzer ordered New York officials to grant driver's
licenses to illegals. During the Oct. 30, 2007, Democratic primary
debate at Drexel University, Sen. Hillary Clinton fumbled a question
from the late Tim Russert over whether she supported Spitzer's plan.
As for Obama, he has supported driver's licenses for illegals since
his days in the Illinois Senate, and continues to maintain that
training illegals to drive, and insuring them, enhances public
safety.

Fact: Homeland Security chief Michael Chertoff called then-Gov. Elliot
Spitzer in October 2007, warning his plan to grant driver's licenses
to illegals would undermine federal plans to enhance security. Spitzer
withdrew the plan two weeks later.

[Source: The New York Times, Oct. 31, 2007]

Fact: During the Democratic presidential debate held in Las Vegas in
November 2007, moderator Wolf Blitzer asked Obama if he supported
driver's licenses for illegal immigrants. Obama answered: "Yes."

[Source: Debate transcript, Nov. 15, 2007, Las Vegas]

Fact: Obama also addressed the licensing of illegals during the
October 2007 debate. Asked if he favored Spitzer's plan, Obama
replied: "I think that it is the right idea. And I disagree with
[Sen.] Chris [Dodd], because there is a public safety concern. We can
make sure that drivers who are illegal come out of the shadows, that
they can be tracked, that they are properly trained, and that will
make our roads safer. That doesn't negate the need for us to reform
illegal immigration."

[Source: Debate transcript, Drexel University, Philadelphia, Pa., Oct.
30, 2007]

Fact: The 19 terrorists involved in 9/11 obtained 13 driver's
licenses, as well as 21 federal or state-issued ID cards. Eight of the
9/11 terrorists were registered to vote.

[Source: Wall Street Journal column by John Fund, Nov. 2, 2007]

Fact: The day Gov. Spitzer withdrew his driver's license plan, Clinton
released this statement: "I support Governor Spitzer's decision today
to withdraw his proposal. His difficult job is made that much harder
by the failure of the Congress and the White House to pass
comprehensive immigration reform.

"As president, I will not support driver's licenses for undocumented
people, and will press for comprehensive immigration reform that deals
with all of the issues around illegal immigration including border
security and fixing our broken system."

[Source: Hillary Clinton statement dated Nov. 14, 2007]

Fact: A full 77 percent of American adults oppose granting driver's
licenses to people who are in the United States illegally.

[Source: Rasmussen Reports, national telephone survey, November 2007]

Fact: There are 203 million licensed drivers in America, according to
the Federal Highway Administration. Approximately 1 in 5 fatal car
accidents involves a driver who, for whatever reason, does not have a
valid driver's license.

[Source: "Outrageous! Cracking Down on Illegal Drivers"
by Michael Crowley, Readers Digest, September 2008]

Fact: Sen. John McCain's online policy statements do not specifically
address driver's licenses for illegals. McCain is on record, however,
opposing any benefits for those who "have come here illegally and
broke our laws."

In one speech he pledged, "It would be among my highest priorities to
secure our borders first, and only after we achieved widespread
consensus that our borders are secure, would we address other aspects
of the problem in a way that defends the rule of law and does not
encourage another wave of illegal immigration."

[Source: Feb. 7, 2008 speech to the Conservative Political Action
Conference, CPAC]

Fact: In February, Obama told ABC's David Muir, "If [McCain] wants to
try to parse out this one issue of driver's licenses, an issue of
public safety, my response is that we have to solve the overall
problem and this driver's license issue is a distraction."

[Source: "Obama Defends Illegals' Driver's Licenses," ABC.com]

Fact: When he served as a member of the Illinois state Senate, Obama
voted to train, insure, and license illegals to operate motor vehicles
in order to "protect public safety."

[Source: Debate transcript, Nov. 15, 2007, Las Vegas]

Fact: Obama has promised amnesty for all 12 million illegal aliens in
the U.S.
Granting amnesty absolves illegal aliens of violating federal law by
entering the U.S. illegally. Once granted, the aliens are eligible for
citizenship and the full benefits of citizenship.

[www.topix.com/who/illegal-aliens/2008/07/obama-promises-amnesty-for-
illegal-immigrants]

Fact: When asked about the fact that illegal immigrants don't speak
English, Obama said the solution was for American kids to learn
Spanish. "Instead of worrying about whether immigrants can learn
English, they will learn English. You need to make sure your child can
speak Spanish." (Obama himself cannot speak Spanish.)

Fact: Obama voted "No" on making English the official language of the
United States government. A full 91 percent of the people in America
want English as an official language, and 76 percent of Hispanics
believe English should be the official language.

[thomas.loc.gov/cgi-bin/bdquery/z?d110:SP1151:]

Fact: Obama voted "Yes" on allowing illegal immigrants to participate
in Social Security. Obama voted to kill an amendment that would
"reduce document fraud, prevent identity theft, and preserve the
integrity of the Social Security system, by ensuring that persons who
receive an adjustment of status under this bill are not able to
receive Social Security benefits as a result of unlawful activity."

[www.senate.gov/legislative/LIS/roll_call_lists/
roll_call_vote_cfm.cfm?congress=109&session=2&vote=00130]


Fact: Obama wants healthcare for illegal immigrants. When Obama was
asked, "Does your healthcare plan cover the estimated 12 million
illegal immigrants?" He answered that his health plan will cover all
of America's 47 million uninsured, but that figure includes
approximately 12 million illegal aliens. Obama said, "When we've got
millions of citizens that aren't yet covered, it's important for us to
make sure that they are provided coverage."

[Democratic Presidential Debate sponsored by CNN and
the Congressional Black Caucus Institute on Jan. 21, 2008]

Fact: Obama supports giving illegal immigrants a driver's license.
Obama was asked, "In the absence of comprehensive immigration reform,
do you support driver's licenses for illegal immigrants?" To which he
responded, "Yes. I am going to be fighting for comprehensive
immigration reform, and we shouldn't pose the question that, somehow,
we can't achieve that. The American people desperately want it; that's
what I'm going to be fighting for as president."

[Democratic Primary Debate in Las Vegas, Nev., Nov.15, 2007]

Fact: Obama wants all states to give illegals in-state tuition at
state and community colleges.

[www.topix.com/forum/who/arnold-schwarzenegger/TVN00A9GL567L5BJ5]

Fact: Obama opposed punishing "sanctuary" cities that violate federal
law by harboring illegals. He voted "Yes" to kill an amendment that
ensured that federal assistance does not go to sanctuary cities that
ignore the immigration laws of the United States and create safe
havens for illegal aliens and potential terrorists. Those who voted
"No" stated, "Are we going to give folks in sanctuary cities amnesty
for defying federal law and refusing to cooperate with federal
immigration officials?"

[www.Ontheissues.org/SenateVote/Party_08-S069.htm]

Fact: Obama supported The Dream Act for children of illegal
immigrants. The Dream Act is a piece of proposed federal legislation
in the United States that would provide achieving illegal immigrant
high school students the opportunity to obtain permanent residency.

[Democratic Debate Jan. 31, 2008]

Fact: Obama co-sponsored a bill to provide funding for social services
for illegal aliens.

[www.ontheissues.org/Notebook/Note_06-SP4072.htm]

Fact: Obama receives an 8 percent rating from USBC (The U.S. Border
Control). The USBC was founded in 1988, and is a non-profit, tax-
exempt, citizen's lobby to protect the border and deter illegal
immigration.

[www.usbc.org/]

Fact: Barack Obama blames a rise in hate crimes against Hispanics on
Lou Dobbs and Rush Limbaugh. He stated at a Palm Beach fundraiser, "A
certain segment has basically been feeding a kind of xenophobia.

"There's a reason why hate crimes against Hispanic people doubled last
year. If you have people like Lou Dobbs and Rush Limbaugh ginning
things up, it's not surprising that would happen." (According to The
Washington Post fact checker, Obama's "hate crimes statistics are
wildly inaccurate — and a subsequent modified claim provided by his
campaign was also off the mark.")

Fact: Obama is against raids on illegal immigration. Obama's plan?
"Improve Our Immigration System: We must fix the dysfunctional
immigration bureaucracy and increase the number of legal immigrants to
keep families together and meet the demand for jobs that employers
cannot fill."

["The Blueprint for Change: Barack Obama's Plan for America," Pages
38-39]

Why Does Barack Hussein Obama's Aunt Receive Special Treatment?

Barack Hussein Obama's Aunt Receiving Special Treatment
An Illegal Alien, She Was Ordered to IMMEDIATELY Leave the U.S. by an
Immigration Judge 4 Years Ago Yet, She Is STILL in the U.S.

And, as an Illegal Alien, she has been Receiving Public Assistance,
and Making Illegal Campaign Contributions to Barack Hussein Obama's
Campaign. Both of These Are Criminal Offenses.

Why is She Not Prosecuted and Deported?

Why is the US Immigration and Customs Enforcement Agency NOT Doing
Its' Job and IMMEDIATELY DEPORTING THIS CRIMINAL?

Why Does This Illegal Alien Receive Special Consideration?

Why is Sandra B. Henriquez Still The Head of the Boston Housing
Authority for Protecting Barack Hussein Obama's Aunt?

Why Are "Heads NOT Rolling" at the Boston Housing Authority and US
Immigration and Customs Enforcement Over This?

Why is the Federal Election Commission NOT Investigating the Millions
of Dollars Flowing into Barack Hussein Obama's Campaign?


Barack Hussein Obama's aunt, Zeituni Onyango, a woman who, for the
past 4 years, has been living, illegally in the U.S. and in PUBLIC
HOUSING, in Boston, Massachusetts, after an immigration judge rejected
her request for asylum four years ago.

Zeituni Onyango, 56, was ordered to leave the United States by a U.S.
immigration judge who denied her asylum request.

In addition to living in the U.S. illegally, and defying an
immigration judge's order to leave the U.S. over 4 years ago, Zeituni
Onyango has also been receiving welfare and public assistance, which
illegal aliens are prohibited from receiving.

And, according to the Federal Election Commission documents filed by
the Barack Hussein Obama's campaign, Onyango has contributed $260 to
Obama. Under federal election law, only U.S. citizens or those
legally permitted to be here in the U.S., and have a "green-card," are
legally permitted to give money to campaigns.

Zeituni Onyango is employed by the Boston Housing Authority - and we
have to ask why an illegal alien is being employed by a public agency,
and why her citizenship was not verified by the Boston Housing
Authority.... and why she is permitted to receive public assistance if
she is employed, illegally, by the Boston Housing Authority.
According to Barack Hussein Obama's campaign, Zeituni Onyango's latest
contribution was for $5 on Sept. 19.

We believe the Federal Election Commission needs to immediately
investigate Barack Hussein Obama and learn more about how many
millions of dollars his campaign is receiving from illegal sources,
and why there are no indictments or prosecutions for these clearly
illegal campaign contributions.

We also call on the Attorney General for the State of Massachusetts to
investigate Zeituni Onyango's illegal and criminal acts, and why she
has not been deported - and why an illegal alien is permitted to take
a job away from a U.S. citizen. And, how is it that an illegal alien
is permitted to live in public housing and receive public
assistance.... and why "heads are not rolling" at the Boston Housing
Authority for their ineptness and incompetence.

Why is the US Immigration and Customs Enforcement Agency NOT Doing
Its' Job and IMMEDIATELY DEPORTING THIS CRIMINAL?

Finally, we call for an investigation into Sandra B. Henriquez, the
head of the Boston Housing Authority, to learn she does not verify the
citizenship of their employees, and why illegal aliens are permitted
to receive public assistance. Who else, other than Sandra B.
Henriquez needs to be fired for NOT doing their jobs, and protecting
Barack Hussein Obama's aunt?

"Heads need to be rolling, and rolling now!"

Hillary's Secrets Can Defeat Obama
Dear Fellow American:

Never before in the history of our nation have we faced such a grave
crisis: one of the most radical political figures ever to be nominated
by a major party is just minutes away from becoming President of the
United States.

That man is Barack Obama.

He promises to change America forever. If elected, he will do just
that — but in ways you make not like.

Remember Obama is the most liberal member of the United States Senate.

He received a 100 percent Liberal Rating from the National Journal,
making him the most left-wing Senator in Washington — more liberal
than even Democratic senators like Ted Kennedy.

If you look at Obama's record, you will understand just how dangerous
this man is.

He even has terrorist friends he won't denounce. One such man is
William Ayers, a leader in the radical terrorist group the Weatherman
Underground. The group bombed several government buildings, including
the Pentagon, killing civilians and police officers.

In 2001, Ayers said he had no regrets for his actions and wished he
could have done more.

The ties between Obama and Ayers are tight. Both served on two non
profit boards and they worked closely together. Ayers even hosted a
political event at his home for Obama.

Obama has acknowledged he is a friend of Ayers and defends his
association by saying he, Obama, was only 8 years old at the time of
the Pentagon bombing.

However, Obama has no explanation as to why he is still a friend of
Ayers.

Obama has even been endorsed by radicals such as Nation of Islam
Leader Louis Farrakhan.

No one can deny hearing about Obama's relationship with the America-
hating Rev. Jeremiah Wright.

There should be little doubt that William Ayers and Louis Farrakhan
and the Rev. Jeremiah Wright are rooting for Obama — because he is one
of them.

In keeping with such friends, Obama has promised to meet with radical
leaders like Iranian President Mahmoud Ahmadinejad without
"preconditions" even though Ahmadinejad has promised to "wipe Israel
off the map" and "destroy" America.

Even radical Hamas terrorists have praised him.

"We like Mr. Obama and we hope he will win the election," Ahmed
Yousef, senior Hamas leader was quoted by ABC radio as saying.

Help the National Republican Trust PAC tell the truth about Obama — Go
Here Now

Dangerous Economic Plan
And then there are Obama's dangerous economic plans for America.

He wants to almost double the capital gains tax. He wants to strip the
FICA tax cap off every worker making more than $97,500. He wants to
increase the dividend tax. He wants to let the Bush tax cuts expire —
giving almost every American family an automatic tax increase.

He has called for more than $800 billion in new spending programs.

He is so radical he even backed driver's licenses for illegal aliens —
even though such a move would help future terrorists move freely in
the United States.

He is the most pro-abortion candidate in the history of the country.
In 2001, as a state legislator in Illinois, he opposed a bill to
protect live born children — children actually born alive! He was the
only Illinois senator to speak out against the bill.

He opposes gun rights. He has long history of trying to deny ordinary
citizens access to guns.

He originally backed Washington D.C.'s total ban on private handguns —
a ban that was overturned. The NRA rated him an "F" on gun positions
and says he is one of the most dangerous anti-gun politicians in the
nation.

Never forget that Obama is a Harvard educated elitist. To him we
Americans are simply "bitter" and he has mocked us saying "[they]
cling to their guns and their religion."

Support the National Republican Trust PAC's Campaign to Expose Obama —
Go Here Now

Exposing the Truth
Hillary Clinton was late in recognizing the threat Obama posed to her
campaign, but once she did, her strategy worked.

When Hillary exposed Obama publicly, her campaign saw a major
turnaround.

Hillary won every major state primary in the nation with the sole
exception of Obama's home state of Illinois.

And even though Obama was "anointed" by the media and Democratic
elites, Hillary went on to win eight of the last 10 Democratic
primaries.

How did Obama beat Hillary for the nomination?

Well, using a loophole in Democratic rules, he was able to rack up
large majorities in caucus states where he outspent and out organized
her.

But in large, contested states she won almost every time. Why? Because
when Democrats heard what Obama really stood for, they turned on him.

Make no mistake about it: If we let Americans know the truth about
Obama, John McCain can win this election!

But we must employ Hillary Clinton's strategy.

We must expose Obama for the dangerous radical he is.

Send a donation today to help our cause — Go Here Now

Barack Hussein Obama:

ABORTION IS MURDER

www.AbortionIsMurder.net

Barack Hussein Obama:

You are VERY confused on the very basics of theology and what the
Bible says about life, and when life begins

The Bible is VERY clear on this issue:

LIFE BEGINS AT CONCEPTION!

www.LifeBeginsAtConception.com

Barack Hussein Obama:

If you are so concerned about theology and what the Bible says about
Abortion, you would stand up for the most innocent of all human life,
and vote to:

OVERTURN ROE VERSUS WADE

www.OverturnRoeVersusWade.com

Barack Hussein Obama's
Support of Abortion
includes the following statements and votes he made for supporting the
death of innocent, unborn babies:

Just like a "flip-flopper," and actually, "much worse than a flip-
flopper," Barack Hussein Obama seems to think he can have it both ways
as he stated, "We can find common ground between pro-choice and pro-
life." (Apr 2008) FACT: There is NO common ground on this issue, you
are either PRO-LIFE or PRO-DEATH.

Despite proclaiming to be a "Christian" and that he reads the Bible,
he is still undecided on whether
"Life Begins At Conception." (Apr 2008)

Rated 100% by NARAL on pro-choice votes in 2005, 2006 & 2007. (Jan
2008)

Voted against banning partial birth abortion. (Oct 2007)

Supports the death penalty for unborn babies via his support of
partial-birth abortion. (Apr 2007)

Extend presumption of good faith to abortion protesters. (Oct 2006)

Passed the Stem Cell Research Bill. (Jun 2004)

Protect a woman's right to kill her unborn baby through abortion. (May
2004)

As a PRO-DEATH supporter, he fully supports the death penalty for
unborn babies and
Roe versus Wade. (Jul 1998)

Voted NO on defining unborn child as eligible for SCHIP. (Mar 2008)

Voted NO on prohibiting minors crossing state lines for abortion. (Mar
2008)

Voted NO on notifying parents of minors who get out-of-state
abortions. (Jul 2006)

Voted YES on $100M to reduce teen pregnancy by education &
contraceptives. (Mar 2005)

Rated 0% by the NRLC, indicating his radical, and ultra extremist pro-
death stance. (Dec 2006)

The following by President Abraham Lincoln
still timely, and still 100% correct!

You cannot help the poor by destroying the rich.

You cannot strengthen the weak by weakening the strong.

You cannot bring about prosperity by discouraging thrift.

You cannot lift up the wage earner by pulling down the wage payer.

You cannot further the brotherhood of man by inciting class hatred.

You cannot build character and courage by taking away man’s initiative
and independence.

You cannot help men permanently by doing for them what they could and
should do for themselves.

Spoken in 1862 by the great emancipator: President Abraham Lincoln

The Real Difference Between

John McCain
&
Barack Hussein Obama:

John McCain puts
"Country Over Party"

Barack Hussein Obama puts
"Party Over Country."

IS BARACK HUSSEIN OBAMA A SOCIALIST?

WE ALREADY KNOW HE WAS A LAWYER FOR ACORN, AND ACORN IS AN UN-
AMERICAN, TAX-PAYER FUNDED, AND NON-PROFIT ORGANIZATION THAT SUPPORTS
SOCIALISM.

A.C.O.R.N. IS A SOCIALIST ORGANIZATION WITH AN UN-AMERICAN SOCIALIST
AGENDA THAT SUPPORTS
BARACK HUSSEIN OBAMA, WHICH IS ILLEGAL FOR A NON-PROFIT ORGANIZATION
TO SUPPORT ONE CANDIDATE OVER ANOTHER.

THEREFORE, THE FOLLOWING NEEDS TO TAKE PLACE, IMMEDIATELY:

1. ABOLISH A.C.O.R.N.

2. REMOVE A.C.O.R.N.'s TAX FREE EXEMPTIONS

3. STOP TAX-PAYER FUNDING OF A.C.O.R.N.

4. IMPRISON A.C.O.R.N.'s LEADERS FOR VOTER FRAUD

5. DON'T DEMAND THAT "COUNT EVERY VOTE" IN THIS UP-COMING ELECTION,

6. DEMAND "COUNT EVERY 'LEGAL' VOTE."

7. STOP VOTER FRAUD!

CALL YOUR CONGRESSMAN/WOMAN NOW, AND URGE THEM TO SUPPORT THE ABOVE 7
ITEMS.

DEFUND ACORN, NOW!
www.DefundAcorn.com

Stop Tax-Payer Funding of this Partisan, Racist, Anti-Republican, Pro-
Democratic, Tax-Exempt/Non-Profit and Socialist Organization that
Supports Voter Fraud, Illegal Voting and other Criminal Activities!

WHERE ARE THE CONGRESSIONAL INVESTIGATIONS INTO THIS CORRUPT AND UN-
AMERICAN ORGANIZATION?

WHERE IS THE OUTRAGE BY THE DEMOCRATIC LEADERSHIP INTO THE OUTRAGEOUS
ACTIONS OF THIS PARTISAN AND CRIMINAL ORGANIZATION?

WHY DOESN'T HARRY REID AND NANCY PELOSI CALL FOR INVESTIGATIONS INTO
THIS PARTISAN, PRO-DEMOCRATIC, ORGANIZATION?

Could it be that a Democratic Congress investigating
"one of its' own" would be like Richard Nixon calling
for investigations into Watergate?

We know that Barack Hussein Obama is an extremist, left-wind radical
liberal, with the most outrageous and extremist voting record in
support of the socialist agenda.

Barack Hussein Obama - the very best friend to:
Domestic Terrorists like William Ayers,
who proudly admits to bombing our own Pentagon

Barack Hussein Obama, the very best friend to terrorists who attack a
woman's womb to murder innocent babies.

Barack Hussein Obama: enemy to the U.S. Constitution, and
every person's right to "Life, Liberty and the Pursuit of Happiness."

Barack Hussein Obama has the most extreme, pro-death voting record of
any Senator.

Barack Hussein Obama, the very best friend to radical racists and
people that preach hate and racism, such as Jeremiah Wright, Barack
Hussein Obama's preacher and friend for over 20 years:

Sen. Barack Hussein Obama, with Jeremiah Wright, his preacher and good
friend for over 20 years, a radical racist that preaches hate and
racism.

Democratic Vice President Nominee and Multi-Millionaire
Joe "Cheapskate" Biden:
supposedly, a good, sympathetic Democrat who is concerned about
others, and also being a "good" Catholic, yet only gives $369/year to
charity, each year, on average over the past 10 years.

A real compassionate Democrat, and Catholic multi-millionaire, Joe
Biden gives a MEASLY $369/year each year to charity?!?

Joe, don't you read your Bible, it states that the first 10% of your
income belongs to the Lord. And you didn't even give 1%?!?

More information about this cheapskate multi-millionaire follows:

Delaware Senator Joe Biden, the Democratic nominee for vice president
and his wife reported giving a very small fraction of 1 percent of
their income to charity during the past decade. This amount of
"charitable" giving is far below the national average according to
most experts.

Biden and his wife, Jill, earned $319,853 in adjusted gross income and
paid $72,787 in federal taxes last year, including $2,721 in
alternative minimum taxes.

Over the past 10 years, the Biden's gave an average of $369/year to
charity.

Their deductions for charitable giving amount to about two-tenths of 1
percent of their income -- and this amount is far lower than the
national average of about 3.1 percent - this, according to
JustGive.org, a nonprofit organization that connects donors with
charities.

What is the definition of a
"Despicable Democrat?"

A "Despicable Democrat" is a Democrat that places the
Democratic Party's agenda over our country's best interests.

2008 PRESIDENTIAL CANDIDATE COMPARISON ON THE ISSUES

ISSUE JOHN McCAIN
BARAK
HUSSEIN OBAMA

Favors new drilling offshore US
Yes
No

Will appoint judges who interpret the law not make it
Yes
No


Served in the US Armed Forces
Yes
No

Amount of time served in the US Senate
22 YEARS
173 DAYS

Will institute a socialized national health care plan
No
Yes

Supports abortion throughout the pregnancy
No
Yes

Would pull troops out of Iraq immediately
No
Yes

Supports gun ownership rights
Yes
No

Supports homosexual marriage
No
Yes

Proposed programs will mean a huge tax increase
No
Yes

Voted against making English the official language
No
Yes

Voted to give Social Security benefits to illegals
No
Yes

CAPITAL GAINS TAX

MCCAIN
0% on home sales up to $500,000 per home (couples). McCain does not
propose any change in existing home sales income tax.

OBAMA
28% on profit from ALL home sales. (How does this affect you? If you
sell your home and make a profit, you will pay 28% of your gain on
taxes. If you are heading toward retirement and would like to down-
size your home or move into a retirement community, 28% of the money
you make from your home will go to taxes. This proposal will adversely
affect the elderly who are counting on the income from their homes as
part of their retirement income.)

DIVIDEND TAX

MCCAIN
15% (no change)

OBAMA
39.6% - (How will this affect you? If you have any money invested in
stock market, IRA, mutual funds, college funds, life insurance,
retirement accounts, or anything that pays or reinvests dividends, you
will now be paying nearly 40% of the money earned on taxes if Obama
becomes president. The experts predict that 'Higher tax rates on
dividends and capital gains would crash the stock market, yet do
absolutely nothing to cut the deficit.')

INCOME TAX

MCCAIN

(no changes)
Single making 30K - tax $4,500
Single making 50K - tax $12,500
Single making 75K - tax $18,750
Married making 60K- tax $9,000
Married making 75K - tax $18,750
Married making 125K - tax $31,250

OBAMA (reversion to pre-Bush tax cuts)
Single making 30K - tax $8,400
Single making 50K - tax $14,000
Single making 75K - tax $23,250
Married making 60K - tax $16,800
Married making 75K - tax $21,000
Married making 125K - tax $38,750
Under Obama, your taxes could almost double!

INHERITANCE TAX

MCCAIN
- 0% (No change, Bush repealed this tax)

OBAMA
Restore the inheritance tax

Many families have lost businesses, farms, ranches, and homes that
have been in their families for generations because they could not
afford the inheritance tax. Those willing their assets to loved ones
will only lose them to these taxes.

NEW TAXES PROPOSED BY OBAMA

New government taxes proposed on homes that are more than 2400 square
feet. New gasoline taxes (as if gas weren't high enough already) New
taxes on natural resources consumption (heating gas, water,
electricity) New taxes on retirement accounts, and last but not
least....New taxes to pay for socialized medicine so we can receive
the same level of medical care as other third-world countries!!!

Let's Make Barack Hussein Obama a 1-Term President and Consider
Electing a Real American, Like Governor Sarah Palin!

See How Governor Palin Compares with Obama
on the Following Issues

Governor Sarah Palin

Barack Hussein Obama

Office being sought
Vice President of the United States
President of the United States and Leader of the Free World

Full name
Sarah Louise Heath Palin
Barack Hussein Obama II

Nickname
Sarah Barracuda
Barry Obama; "The One"

Public opinion
Smoking hot in a "naughty librarian" sort of way
May be The Messiah

Age
44
48

Children
5: two sons, three daughters
2: two daughters

Religion/Church attendance
Evangelical Christian;

attends Juneau Christian Center when in Juneau and grew up attending
Wasilla Assembly of God
Attended Trinity United Church of Christ for 20 years, a "black
liberation theology" church formerly led by Rev. Jeremiah Wright and
governed according to the Black Value System

Current Job
Governor of Alaska
Junior Senator from Illinois

Previous Public Jobs
Mayor of Wasilla , AK (1996-2002); President of Alaska Conference of
Mayors;

City Council member (1992-1996)
State Senator (1997-2004);

Community Organizer

Executive Experience
Governor for 2 years;

Mayor for 10 years
None

Foreign Relations experience
Governor of state that borders two foreign countries ( Canada and
Russia )
Chaired Senate subcommittee on Europe but never called it into
session;

once gave a speech to 200,000 screaming Germans

Military Affairs experience
Commander in Chief of Alaska National Guard;

Son is enlisted Infantryman in U.S. Army
None

Private Sector Experience
Sports reporter;

Salmon fisherman
Associate at civil rights law firm

Speaking ability
Beautifully executed initial stump speech in Dayton , OH hockey arena
without a teleprompter
An enter...wait--did you say without a teleprompter??

Spouse's name
Todd Mitchell Palin
Michelle LaVaughn Robinson Obama

Spouse's occupation
Salmon fisherman;

Former North Slope production supervisor for BP Oil
Vice President for Community and External Affairs at University of
Chicago Hospitals;

former Associate Dean of Student Services at the University of
Chicago ;

former Executive Director for the Chicago office of Public Allies;

former Assistant to the Mayor of Chicago;

former associate at Sidley Austin law firm

Reaction to spouse's political success
Quit 17-year BP oil job when BP became involved in natural gas
pipeline negotiations with wife's administration
Promoted and given 160% pay raise by UofC hospitals within months of
husband's election to U.S. Senate;

Employer received $1,000,000.00 federal earmark, requested by husband,
after her promotion

Coolest thing about Spouse
Tesoro Iron Dog Snowmobile race champion (longest snowmobile race in
the world);

In 2008, while defending his championship, was injured when he was
thrown 70 feet from his machine. He was sent to the hospital but still
finished in fourth place
Sister of Oregon State University head basketball coach Craig
Robinson

Most Courageous Moment in Public Service
Resigned in protest from position of Ethics Commissioner of Alaska
Oil and Gas Conservation Commission in order to expose legal
violations and conflicts of interest of Alaska Republican leaders,
including the former state Attorney General and the State GOP Chairman
(who was also an Oil & Gas Commissioner), who was doing work for the
party on public time and supplying a lobbyist with a sensitive e-mail.
Gave an anti-Iraq war speech to a crowd of anti-Iraq war
demonstrators in Hyde Park in 2002

In Current Office Because...
Upset sitting Governor in GOP primary due to public support for her
efforts to clean up corrupt government establishment
Republican opponent, who was leading in the polls, was forced to
leave race after unsealing of divorce records exposed a sex scandal

Theme:
Change and Clean Government
Hope and Change;

"Bringing Change from Outside Washington "

What they've done to live that theme:
Replaced entire Board of Agriculture and Conservation because of
conflict of interest;

Resigned from position of Ethics Commissioner of the Alaska Oil and
Gas Conservation Commission in order to expose corruption among
members of own party
Selected 36-year incumbent Senator as running mate

Family Affairs
May have removed State Public Safety Commissioner as part of effort
to protect sister in messy divorce and child custody battle
Often says, "I am my brother's keeper";

Brother lives in a hut in Nairobi on $12 per year

Union affiliation
Union member, married to Union member
Endorsed by a union

Iraq and Troop Support
Formerly (pre-surge) critical of apparent lack of long-term strategy
for Iraq ;

Visited wounded U.S. soldiers in Germany ;

visited AK National Guard soldiers deployed to Kuwait ;

Son deploying to Iraq on 9/11/08 as Army infantryman
Gave an anti-Iraq war speech to a crowd of anti-Iraq war
demonstrators;

almost visited wounded troops in Germany , but decided to go shopping
in Berlin instead

Bipartisan/"maverick" credentials
Married to a non-Republican;

Exposed corruption within own party;

Campaigned for Lt. Gov. Sean Parnell against corrupt GOP congressman
Don Young;

Called out Sen Ted Stevens (R-AK) to "come clean" about financial
dealings that are under fed investigation
Talks about bipartisanship

Legislative Record
Passed a landmark ethics reform bill;

Used veto to cut budgetary spending;

Prevented "bridge to nowhere" that would have cost taxpayers $400
million dollars.
Voted "present" over 100 times as IL state senator

How they dealt with corrupt individuals in home city/state
Exposed legal violations and conflicts of interest of Alaska
Republican leaders;

Campaigned against corrupt GOP Representative;

Ran against and defeated corrupt incumbent governor in GOP primary
Launched political career in home of unrepentant domestic terrorist
Bill Ayers (and still refers to him as a part of "mainstream
Democratic Chicago";

Purchased home with help of convicted felon Tony Rezko

Guns
Lifetime member of NRA and avid hunter;

video can be found on YouTube of Palin firing an M4 at a military
firing range
Worked to pass legislation in Illinois that would prevent all law-
abiding citizens from owning firearms

Earmarks
Opposed "Bridge to Nowhere" project;

Said Alaska should avoid relying on federal money for projects;

Campaigned against porker Don Young (R-AK) in 2008 primary
Secured federal earmarks for wife's employer and for campaign
bundlers

Abortion
Pro life;

gave birth to 5th child knowing that he would have Down's syndrome
Pro-death - favors the murder of unborn babies and is the most
liberal of all liberals on abortion.;

only IL state sen. to speak against the Born Alive Infant's Protection
Act, which required medical care to be given to live infants who
survived abortions

Energy
Believes energy independence is a matter of national security;

For drilling in ANWR, which is in her state
Says Americans should "get tune-ups" and "check tire pressure";

Says "we can't expect the world to be okay with" our use of heating
and air conditioning

Environment
Chair of Alaska Conservation Commission (2003-4);

Announced plans to create sub-cabinet group of advisors to address
climate change and reduce greenhouse gas emissions in AK
Talks about the environment a lot

Athletic prowess
Runs marathons
Has reporters tailing him to the gym

Barack Hussein Obama's
38 Lies, Half-Truths, and "Not-Exactly's"

1.) Selma Got Me Born - NOT EXACTLY, your parents felt safe enough to
have you in 1961 - Selma had no effect on your birth, as Selma was in
1965. (Google' Obama Selma ' for his full March 4, 2007 speech and
articles about its various untruths.)

2.) Father Was A Goat Herder - NOT EXACTLY, he was a privileged, well
educated youth, who went on to work with the Kenyan Government.

3.) Father Was A Proud Freedom Fighter - NOT EXACTLY, he was part of
one of the most corrupt and violent governments Kenya has ever had.

4.) My Family Has Strong Ties To African Freedom - NOT EXACTLY, your
cousin Raila Odinga has created mass violence in attempting to
overturn a legitimate election in 2007, in Kenya . It is the first
widespread violence in decades. The current government is pro-American
but Odinga wants to overthrow it and establish Muslim Sharia law. Your
half-brother, Abongo Obama, is Odinga's follower. You interrupted your
New Hampshire campaigning to speak to Odinga on the phone.

Obama's cousin Odinga in Kenya ran for president and tried to get
Sharia muslim law in place there. When Odinga lost the elections, his
followers have burned Christians' homes and then burned men, women and
children alive in a Christian church where they took shelter.. Obama
SUPPORTED his cousin before the election process here started. Google
Obama and Odinga and see what you get. No one wants to know the truth.

5.) My Grandmother Has Always Been A Christian - NOT EXACTLY, she does
her daily Salat prayers at 5am according to her own interviews. Not to
mention, Christianity wouldn't allow her to have been one of 14 wives
to 1 man.

6.) My Name is African Swahili - NOT EXACTLY, your name is Arabic and
'Baraka' (from which Barack came) means 'blessed' in that language.
Hussein is also Arabic and so is Obama.

Barack Hussein Obama is not half black. If elected, he would be the
first Arab-American President, not the first black President. Barack
Hussein Obama is 50% Caucasian from his mother's side and 43.75%
Arabic and 6.25% African Negro from his father's side. While Barack
Hussein Obama's father was from Kenya , his father's family was mainly
Arabs.. Barack Hussein Obama's father was only 12.5% African Negro and
87.5% Arab (his father's birth certificate even states he's Arab, not
African Negro). From....and for more....go to the following website:
http://www.arcadeathome.com/newsboy.phtml?Barack_Hussein_Obama_-_Arab-American,_only_6.25%25_African

7.) I Never Practiced Islam - NOT EXACTLY, you practiced it daily at
school, where you were registered as a Muslim and kept that faith for
31 years, until your wife made you change, so you could run for
office.

April 3, 2008 Article "Obama was 'quite religious in islam'"
http://www.wnd.com/index.php?fa=PAGE.view&pageId=60559

8.) My School In Indonesia was Christian - NOT EXACTLY, you were
registered as Muslim there and got in trouble in Koranic Studies for
making faces (check your own book).

February 28, 2008. Kristoff from the New York Times a year ago: Mr.
Obama recalled the opening lines of the Arabic call to prayer,
reciting them with a first-rate accent. In a remark that seemed
delightfully uncalculated (it'll give Alabama voters heart attacks),
Mr. Obama described the call to prayer as "one of the prettiest sounds
on Earth at sunset." This is just one example of what Pamela is
talking about when she says "Obama's narrative is being altered,
enhanced and manipulated to whitewash troubling facts."

9.) I Was Fluent In Indonesian - NOT EXACTLY, not one of your former
teachers says you could speak the language.

10.) Because I Lived In Indonesia , I Have More Foreign Experience -
NOT EXACTLY, you were there from the ages of 6 to 10, and couldn't
even speak the language. What did you learn, how to study the Koran
and watch cartoons.

11.) I Am Stronger On Foreign Affairs - NOT EXACTLY, except for Africa
(surprise) and the Middle East (bigger surprise), you have never been
anywhere else on the planet and thus have NO experience with our
closest allies.

12.) I Blame My Early Drug Use On Ethnic Confusion - NOT EXACTLY, you
were quite content in high school to be Barry Obama, no mention of
Kenya and no mention of struggle to identify - your classmates said
you were just fine.

13.) An Ebony Article Moved Me To Run For Office - NOT EXACTLY, Ebony
has yet to find the article you mention in your book. It doesn't, and
never did, exist.

14.) A Life Magazine Article Changed My outlook on Life - NOT EXACTLY,
Life has yet to find the article you mention in your book. It doesn't,
and never did, exist.

15.) I Won't Run On A National Ticket In '08 - NOT EXACTLY, here you
are, despite saying, live on TV,
that you would not have enough experience by then, and you are all
about having experience first.

16.) Voting "Present" is Common In Illinois Senate - NOT EXACTLY, they
are common for YOU, but not many others have 130 NO VOTES.

17.) Oops, I Misvoted - NOT EXACTLY, only when caught by church groups
and Democrats, did you beg to change your misvote.

18.) I Was A Professor Of Law - NOT EXACTLY, you were a senior
lecturer ON LEAVE.

19.) I Was A Constitutional Lawyer - NOT EXACTLY, you were a senior
lecturer ON LEAVE.

20.) Without Me, There Would Be No Ethics Bill - NOT EXACTLY, you
didn't write it, introduce it, change it, or create it.

21.) The Ethics Bill Was Hard To Pass - NOT EXACTLY, it took just 14
days from start to finish.

22.) I Wrote A Tough Nuclear Bill - NOT EXACTLY, your bill was
rejected by your own party for its pandering and lack of all
regulation - mainly because of your Nuclear donor, Exelon, from which
David Axelrod came.

23.) I Have Released My State Records - NOT EXACTLY, as of March,
2008, state bills you sponsored or voted for have yet to be released,
exposing all the special interests pork hidden within.

24.) I Took On The Asbestos Altgeld Gardens Mess - NOT EXACTLY, you
were part of a large group of people who remedied Altgeld Gardens .
You failed to mention anyone else but yourself, in your books.

25.) My Economics Bill Will Help America - NOT EXACTLY, your 111
economic policies were just combined into a proposal which lost 99-0,
and even YOU voted against your own bill.

26.) I Have Been A Bold Leader In Illinois - NOT EXACTLY, even your
own supporters claim to have not seen BOLD action on your part.

27.) I Passed 26 Of My Own Bills In One Year - NOT EXACTLY, they were
not YOUR bills, but rather handed to you, after their creation by a
fellow Senator, to assist you in a future bid for higher office.

28.) No One on my campaign contacted Canada about NAFTA - NOT EXACTLY,
the Candian Government issued the names and a memo of the conversation
your campaign had with them.

29.) I Am Tough On Terrorism - NOT EXACTLY, you missed the Iran
Resolution vote on terrorism and your good friend Ali Abunimah
supports the destruction of Israel .

30.) I Want All Votes To Count - NOT EXACTLY, you said let the
delegates decide.

31.) I Want Americans To Decide - NOT EXACTLY, you prefer caucuses
that limit the vote, confuse the voters, force a public vote, and only
operate during small windows of time.

32.) I passed 900 Bills in the State Senate - NOT EXACTLY, you passed
26, most of which you didn't write yourself.

33.) I Believe In Fairness, Not Tactics - NOT EXACTLY, you used
tactics to eliminate Alice Palmer from running against you.

34.) I Don't Take PAC Money - NOT EXACTLY, you take loads of it.

35.) I don't Have Lobbyists - NOT EXACTLY, you have over 47 lobbyists,
and counting.

36.) My Campaign Had Nothing To Do With The 1984 Ad - NOT EXACTLY,
your own campaign worker made the ad on his Apple in one afternoon.

37.) I Have Always Been Against Iraq - NOT EXACTLY, you weren't in
office to vote against it AND you have voted to fund it every single
time.

38.) I Have Always Supported Universal Health Care - NOT EXACTLY, your
plan leaves us all to pay for the 15,000,000 who don't have to buy it

GOD HELP US IF WE JUST SIT IDLY BY AND LET THIS PERSON BECOME OUR NEXT
PRESIDENT. IT WOULD BE SUICIDAL FOR US TO DO NOTHING TO PREVENT THIS
FROM HAPPENING. PASS THE ABOVE 38 LIES AND HALF-TRUTHS AND NOT-
EXACTLY'S ON TO ALL THE ONES YOU VALUE, JUST AS I AM DOING. IT'S TIME
THE "SILENT MAJORITY" TAKE A STAND! GET OUT AND VOTE! PLEASE!

According to Joe Biden,
Barack Hussein Obama is
"NOT Ready To Be President."

On August 19, 2007, in the Democratic Debates, Joe Biden said Barack
Hussein Obama was "not ready to lead."

About "his good friend" Senator John McCain, Senator Joe Biden said;
"I would be honored to run with or against John McCain, because I
think the country would be better off."

The exact language used by Joe Biden from the democratic debates from
August 2007 follows:

ABC’S GEORGE STEPHANOPOULOS: You were asked, “Is he ready?” You said,
“I think he can be ready but right now, I don’t believe he is. The
presidency is not something that lends itself to on-the-job training.”

JOE BIDEN: "I think that I stand by the statement."

And what about John McCain?

JOE BIDEN: "I would be honored to run with or against John McCain,
because I think the country would be better off."

Senator Joe Biden, like a typical democrat, has a problem telling the
truth and also with honesty - not to mention his little "problem" when
he was caught plagiarizing someone else's speech.

Joe Biden is obviously lying about Barack Hussein Obama's "readiness"
to serve as our country's President, as well as Joe Biden's "good
friend," John McCain.

QUESTION: When was Joe Biden lying about his "good friend" John
McCain and Barack Hussein Obama's "readiness" to serve as our
country's President?

In 1997, when he was quoted when Joe Biden was running for the
nomination of the Democratic Party for President, or now, after August
24, 2008, when he was introduced as the Democratic Party's Vice
President?

According to Joe Biden,
Barack Hussein Obama is "NOT Ready To Lead."

Barack Hussein Obama:
an Unborn Baby's #1 Enemy?

FACT: Barack Hussein Obama is the most radical pro-death, pro-
abortion candidate to ever be nominated for president by the
democratic party

FACT: Barack Hussein Obama
has the most liberal pro-death, pro-abortion
voting record of all members of the U.S. Senate

Barack Hussein Obama:
"Leader" or Clown ?

Barack Hussein Obama's "Energy Plan."

Just what America Needs - a "Tire Gauge"
For our national "Energy Plan."

Yeah, that will make high gasoline prices drop.

We've already had one clown as President
(Jimmy Carter).

America NEEDS America's Energy!

America NEEDS America's Oil!

America doesn't need another:

Clown-in-Chief (Jimmy Carter)

or

Liar-in-Chief (Bill Clinton)

or

Adulterer-in-Chief (Bill Clinton)

Bill Clinton lost his license to practice law for lying under oath
regarding his sexual relationship with Monica Lewenski while he was
President and in the Oval Office.

Bill Clinton DISGRACED the Office of President
Just as Nancy Pelosi has disgraced the Speakers office
through her DESPERATE LIES, Hypocrisy,
and PARTISAN POLITICS.

IMPEACH NANCY "THE LIAR" PELOSI NOW!

NO MORE BILL CLINTON'S!

VOTE SARAH PALIN FOR PRESIDENT 2012!

Barack Hussein Obama:

Friend of Communists and Communist Sympathizers?
Friend & Associate of Convicted Felon Tony Rezko?
Friend of Terrorists and Terrorist Sympathizers?
Friend of Those Who Bombed our Pentagon?
Friend of Murderers?

Did you know that Barack Hussein Obama was a director of the Woods
Fund board from 1999 to Dec. 11, 2002 ?

This is according to the website of the Woods Fund.

Barack Hussein Obama served on the board with Ayers, who was a
Weathermen leader and has written about his involvement with the
group's bombings of the New York City Police headquarters in 1970, the
Capitol in 1971 and the Pentagon in 1972.

"I don't regret setting bombs. I feel we didn't do enough," Ayers told
the New York Times in an interview released on Sept. 11, 2001

"Everything was absolutely ideal on the day I bombed the Pentagon,"
Ayers wrote in his memoirs, titled "Fugitive Days." He continued with
a disclaimer that he didn't personally set the bombs, but his group
set the explosives and planned the attack.

A $200 campaign contribution is listed on April 2, 2001 by the
"Friends of Barack Obama" campaign fund. The two appeared speaking
together at several public events, including a 1997 University of
Chicago panel entitled, "Should a child ever be called a 'super
predator?'" and another panel for the University of Illinois in April
2002, entitled, "Intellectuals: Who Needs Them?"

The charges against Ayers were eventually dropped in 1974 because of
prosecutorial misconduct, including illegal surveillance.

Ayers is married to another notorious Weathermen terrorist, Bernadine
Dohrn, who has also served on panels with Barack Hussein Obama. Dohrn
was once on the FBI's Top 10 Most Wanted List and was described by J.
Edgar Hoover as the "most dangerous woman in America." Ayers and Dohrn
raised the son of Weathermen terrorist Kathy Boudin, who was serving a
sentence for participating in a 1981 murder and robbery that left 4
people dead.

Steve Chapman takes Barack Hussein Obama to task over his dodge about
the relationship between himself and William Ayers. Not only does
Barack Hussein Obama misrepresent the connection, Chapman writes, he
appears not to understand what it says about him and his judgment.

The Chicago Tribune columnist offers a handy analogy for those who
still don’t comprehend it:

Would Obama be friendly with someone who actually bombed abortion
clinics and defends that conduct? Not likely. But he is friendly with
William Ayers, a leader of the radical Weather Underground, which in
the 1970s carried out numerous bombings, including one inside the U.S.
Capitol. (Though the last person who should object is Hillary Clinton,
whose husband pardoned two Weather Underground members.)
Obama minimized his relationship by acknowledging only that he knows
Ayers. But they have quite a bit more of a connection than that. He’s
appeared on panels with Ayers, served on a foundation board with him
and held a 1995 campaign event at the home of Ayers and his wife,
fellow former terrorist Bernardine Dohrn. Ayers even gave money to one
of his campaigns.

It’s not as though Ayers and Dohrn have denied or repudiated their
crimes. After emerging from years in hiding, they escaped federal
prosecution because of government misconduct in gathering evidence,
but they don’t pretend they were innocent. In 2001, Ayers said, “I
don’t regret setting bombs. I feel we didn’t do enough.” …

It’s hard to imagine he would be so indulgent if we learned that John
McCain had a long association with a former Klansman who used to
terrorize African-Americans. Barack Hussein Obama’s conduct exposes a
moral blind spot about these onetime terrorists, who get a pass
because they a) fall on the left end of the spectrum and b) haven’t
planted any bombs lately.

You can tell a lot about someone from his choice of friends. What this
friendship reveals is that when it comes to practicing sound moral
hygiene, Barack Hussein Obama has work to do and no interest in doing
it.

What would the Left say if McCain had sat on nonprofit foundation
boards with David Duke and sent money to Holocaust deniers? McCain
couldn’t have won the nomination in the first place, as such a
connection would have repulsed Republicans, and it simply is outside
the character of McCain to tolerate that. If he had, Democrats would
have a field day with it — and rightly so.

However, Barack Hussein Obama and the Left want to demand an end to
the probing of the years-long Obama-Ayers association as irrelevant.
Never mind that Ayers has openly bragged of bombing the Pentagon.
Never mind that Obama and Ayers voted to give $75,000 to Rashid
Khalidi, a Yasser Arafat protege in the PLO, during their tenure with
the Woods Foundation. The difference apparently is in the target of
one’s hatreds; as long as the hatred was directed at the American
government, the Left believes it to be irrelevant.

It’s an interesting double standard, and one that Americans might see
as very revealing in November.

Imagine a presidential candidate being associated with Bill Ayers.....
a person that joined a leftist terrorist group called Weatherman, an
offshoot of the communist-supported and socialist Students for a
Democratic Society (SDS) in 1969. The Weatherman organization engaged
in and committed violent riots, murders, bombings, various acts of
terrorism, and even officially declared war on the United States! The
group, which bombed the Pentagon, United States Capitol, also targeted
police stations and the family of a judge who presided over the trial
of the so-called "Panther 21," members of the Black Panther Party
indicted in a plot to bomb New York landmarks and department stores.

Bill Ayers has summed up the Weatherman philosophy as thus:

"Kill all the rich people. Break up their cars and apartments. Bring
the revolution home, kill your parents, that's where it's really
at..."

In addition to their communist ideology, they also believed that white
people, as a whole were racist. In the early 1970s, Bernardine Dohrn,
a leader of the Weatherman organization and also the wife of Bill
Ayers stated that:

"White youth must choose sides now. They must either fight on the side
of the oppressed, or be on the side of the oppressor."

The members of the Weatherman organization have remained proud of
their attacks on America, even to this day. Here are some of the
statements made by Bill Ayers:

On bombing the Pentagon:

"Everything was absolutely ideal on the day I bombed the Pentagon.

The sky was blue. The birds were singing. And the bastards were
finally going to get what was coming to them."

In a 2001 interview which was published on 9/11:

"I don't regret setting bombs, I feel we didn't do enough."

Bill Ayers has since been rewarded for his terrorist attacks on his
own country with a comfortable position as a tenured education
professor at the University of Illinois-Chicago. Similarly, Bernardine
Dohrn is now a Clinical Associate Professor of Law at Northwestern
University in Chicago and has previously been employed by the law firm
Sidley Austin.

In 1995, Illinois State Senator Alice Palmer introduced Barack Hussein
Obama has her chosen successor to some of the well-known leftists of
her district at the home of Bill Ayers and Bernardine Dohrn. Some of
the guests at that gathering described Obama and Ayers as "friends".

Indeed, Barack Hussein Obama and Bill Ayers' paths have crossed many
times. Both Barack Hussein Obama and Bill Ayers served on the Woods
Fund board, a Chicago-based non-profit organization that has also
donated large sums of money to Islamic groups associated with
terrorist organizations. In addition, Bill Ayers, who still serves on
the Woods Fund board, contributed $200 to Obama's senatorial campaign
fund and has served on panels with Barack Hussein Obama at numerous
public speaking engagements.

In addition to Barack Hussein Obama's connections with Bill Ayers, in
the late 1980s, Michelle Obama worked at the Chicago office of the law
firm Sidley Austin, which was the same time that Bernardine Dohrn
worked there.

Of course, these communists and communist sympathizers were a very
influential and important part of Barack Hussein Obama's constituency,
while he was running for and serving in the Illinois Senate. Yet, even
as a US Senator and now, as the Democratic Party presidential nominee,
Barack Hussein Obama has continued to represent very far left ideas,
ranking as the number one liberal in the US Senate. Above all, Obama's
ties to communists go back to the 1970s, when he was still a teenager.

In "Dreams from My Father," Barack Hussein Obama's autobiography, he
discusses the influence a mentor identified in the book only as
"Frank" had on his intellectual development. "Obama described Frank as
a drinking companion of his grandfather, who had boasted of his
association with African-American authors Richard Wright and Langston
Hughes during the time Frank was a journalist in Chicago." "Frank" has
since been identified as Frank Marshall Davis, a poet, journalist, and
member of Communist Party USA (CPUSA) - which was controlled by the
Soviet Union.

Before moving to Hawaii, Davis lived in Chicago, where he was involved
with numerous communist groups and causes. The same CPUSA and other
communist forces also supported the radical movements in the 1960s,
including the Students for a Democratic Society (SDS), of which a
faction founded the Weatherman organization.

Interestingly, after finishing college, Barack Hussein Obama followed
in the footsteps of his childhood friend and mentor Davis by moving to
Chicago and becoming involved with radical leftist individuals and
groups. Furthermore, those very same radical leftist groups helped
Obama start his political career. And, even more peculiar is the fact
that Obama went from being a barely known state senator to Democratic
Party presidential nominee in just four short years!

The Barack Hussein Obama campaign has already had its fair share of
controversies that spawned from Obama's connections with radical
leftist and anti-American figures, including Jeremiah Wright, Louis
Farrakhan, and others. In February of 2008, it was reported that a
Cuban flag featuring the image of Che Guevara was hanging in an Obama
campaign office in Texas. After being questioned about this issue, the
Obama campaign issued the following statement:

"The office featured in this video is funded by volunteers of the
Barack Hussein Obama Campaign and is not an official headquarters for
his campaign."

Finally, to no surprise, Obama has also picked up endorsements from
Cuban dictator Fidel Castro and Venezuelan dictator Hugo Chavez.

Barack Hussein Obama's Relationship with
Convicted Felon Tony Rezko

Convicted Felon Tony Rezko (left)
and Barack Hussein Obama (right)

According to the Chicago Sun Times, there are 8 things you should know
about Barack Hussein Obama and
convicted Felon Tony Rezko:

1. Tony Rezko and Barack Hussein Obama met in 1990. Obama was a
student at Harvard Law School and got an unsolicited job offer from
Rezko, then a low-income housing developer in Chicago. Obama turned it
down.

2. Barack Hussein Obama took a job in 1993 with a small Chicago law
firm, Davis Miner Barnhill, that represents developers -- primarily
not-for-profit groups -- building low-income housing with government
funds.

3. One of Barack Hussein Obama's law firm's not-for-profit clients is
the Woodlawn Preservation and Investment Corp., co-founded by Obama's
then-boss Allison Davis -- was partners with Rezko's company in a 1995
deal to convert an abandoned nursing home at 61st and Drexel into low-
income apartments. Altogether, Obama spent 32 hours on the project,
according to the firm. Only five hours of that came after Tony Rezko
and WPIC became partners, the firm says. The rest of the future
senator's time was helping WPIC strike the deal with Rezko. Rezko's
company, Rezmar Corp., also partnered with the firm's clients in four
later deals -- none of which involved Obama, according to the firm. In
each deal, Rezmar "made the decisions for the joint venture," says
William Miceli, an attorney with the firm.

4. In 1995, Barack Hussein Obama began campaigning for a seat in the
Illinois Senate. Among his earliest supporters: Rezko. Two Rezko
companies donated a total of $2,000. Obama was elected in 1996 --
representing a district that included 11 of Rezko's 30 low-income
housing projects.

5. Tony Rezko's low-income housing empire began crumbling in 2001,
when his company stopped making mortgage payments on the old nursing
home that had been converted into apartments. The state foreclosed on
the building -- which was in Barack Hussein Obama's Illinois Senate
district.

6. In 2003, Barack Hussein Obama announced he was running for the U.S.
Senate, and Rezko -- a member of his campaign finance committee --
held a lavish fund-raiser June 27, 2003, at his Wilmette mansion.

7. A few months after Barack Hussein Obama became a U.S. senator, he
and Tony Rezko's wife, Rita, bought adjacent pieces of property from a
doctor in Chicago's Kenwood neighborhood -- a deal that has dogged
Obama the last two years. The doctor sold the mansion to Barack
Hussein Obama for $1.65 million -- $300,000 below the asking price.
Rezko's wife paid full price -- $625,000 -- for the adjacent vacant
lot. The deals closed in June 2005. Six months later, Obama paid
Rezko's wife $104,500 for a strip of her land, so he could have a
bigger yard. At the time, it had been widely reported that Tony Rezko
was under federal investigation. Questioned later about the timing of
the Rezko deal, Obama called it "boneheaded" because people might
think the Rezkos had done him a favor.

8. Eight months later, in October 2006, Tony Rezko was indicted on
charges he solicited kickbacks from companies seeking state pension
business under his friend Gov. Blagojevich. Federal prosecutors
maintain that $10,000 from the alleged kickback scheme was donated to
Barack Hussein Obama's run for the U.S. Senate.

Barack Hussein Obama:

WRONG ON EVERY ISSUE?

www.WrongOnEveryIssue.com

Barack Hussein Obama:

Too Liberal For America?

www.TooLiberalForAmerica.com

Barack Hussein Obama:

Change We Can Believe In?!?

www.ChangeWeCanBelieveIn.com

Barack Hussein Obama:

* Unproven
* Unqualified
* Inexperienced
* Unvetted
* Over-Hyped
* Flip-Flopper
* Extremist Liberal
* Wrong on EVERY Issue
* Too Liberal For America
* Looney-leftist & Left-wing Nutjob
* More closely aligned with the Socialist Party
than the Democratic Party
* Admitted marijuana and cocaine user - others have claimed he also
was a drug dealer

Barack Hussein Obama
FULLY SUPPORTS
The Murder of Innocent Babies and
is 100% in favor of Abortion
and
Partial Birth Abortion
The Most GRUSOME and HORRIFYING
and PAINFUL Death an INNOCENT
baby can experience.

and
Barack Hussein Obama
is the Abortion Lobby's STRONGEST
Defender and Supporter.

Barack Hussein Obama:

ABORTION IS MURDER

www.AbortionIsMurder.net

Barack Hussein Obama:

You are VERY confused on the very basics of theology and what the
Bible says about life, and when life begins

The Bible is VERY clear on this issue:

LIFE BEGINS AT CONCEPTION!

www.LifeBeginsAtConception.com

Barack Hussein Obama:

If you are so concerned about theology and what the Bible says about
Abortion, you would stand up for the most innocent of all human life,
and vote to:

OVERTURN ROE VERSUS WADE

www.OverturnRoeVersusWade.com

Barack Hussein Obama's
Support of Abortion
includes the following statements and votes he made for supporting the
death of innocent, unborn babies:

Just like a "flip-flopper," and actually, "much worse than a flip-
flopper," Barack Hussein Obama seems to think he can have it both ways
as he stated, "We can find common ground between pro-choice and pro-
life." (Apr 2008) FACT: There is NO common ground on this issue, you
are either PRO-LIFE or PRO-DEATH.

Despite proclaiming to be a "Christian" and that he reads the Bible,
he is still undecided on whether
"Life Begins At Conception." (Apr 2008)

Rated 100% by NARAL on pro-choice votes in 2005, 2006 & 2007. (Jan
2008)

Voted against banning partial birth abortion. (Oct 2007)

Supports the death penalty for unborn babies via his support of
partial-birth abortion. (Apr 2007)

Extend presumption of good faith to abortion protesters. (Oct 2006)

Passed the Stem Cell Research Bill. (Jun 2004)

Protect a woman's right to kill her unborn baby through abortion. (May
2004)

As a PRO-DEATH supporter, he fully supports the death penalty for
unborn babies and
Roe versus Wade. (Jul 1998)

Voted NO on defining unborn child as eligible for SCHIP. (Mar 2008)

Voted NO on prohibiting minors crossing state lines for abortion. (Mar
2008)

Voted NO on notifying parents of minors who get out-of-state
abortions. (Jul 2006)

Voted YES on $100M to reduce teen pregnancy by education &
contraceptives. (Mar 2005)

Rated 0% by the NRLC, indicating his radical, and ultra extremist pro-
death stance. (Dec 2006)

Is Barack Hussein Obama
a Racist?

The Pastor of
Barack Hussein Obama's
church for the past 20 years is a Racist.

Is Barack Hussein Obama
a Christian?

The Pastor of Barack Hussein Obama's
church for the past 20 years preaches hate, bigotry and UN-Christian,
ANTI-Christian and
UN-American EXTREMIST Political "ideals."

How could Barack Hussein Obama be a Christian with the
teachings, preaching and political indoctrination and training this
ultra-liberal extremist and hate-monger has espoused for 20 years???

Is Barack Hussein Obama the kind of "American" we want to serve as the
President of the USA?

Is Barack Hussein Obama the kind of person that represents AMERICAN
VIEWS on religion... who believes that God has "Damned" our country?

GOD HAS WONDERFULLY AND MERCIFULLY BLESSED OUR COUNTRY!

"If it looks like a duck, quacks like a duck and
smells like a duck, it's probably a duck!"

Sen. Barack Hussein Obama,

"Change We Can Believe In"?!?!

YOU HAVE GOT TO BE JOKING, RIGHT?

BIGOTRY, RACISM AND HATRED IS NOT THE "CHANGE" THAT MY FAMILY, MY
RELATIVES, MY FRIENDS, MOST AMERICAN'S, OR I, "CAN BELIEVE IN."

Sen. Barack Hussein Obama,

Your: "Change We Can Believe In,"
along with

Your (Pastor's) Bigotry,

Your (Pastor's) Racist Agenda,

Your (Pastor's) Politics

and Your (Pastor's) HATE

Which you have condoned and approved of for the past 20 years through
your membership and association of this "Pastor" and your church and
does NOT belong HERE in MY country.

You can probably find support for this brand of politics, hate and
racism in the Middle East or Germany's NAZI past, where these UN-
CHRISTIAN Philosophies, Politics and Agenda might still find support
and win an election!

Sen. Barack Hussein Obama, with his preacher and good friend for 20
years, a radical racist that preaches hate and racism.

Since you are either confused,
or have forgotten....

This is NOT Syria,
This is NOT Palestine,
This is NOT Iran,

THIS is the USA!

Sen. Barack Hussein Obama,

While your wife is not "proud to be an American,"

There are still a great many
"Great American's"

that are "Proud to be an American!"

One more history lesson or you, since you obviously either failed the
class or were out smoking or dealing crack ....

Barack Hussein Obama,

WE are a CHRISTIAN nation,
founded by CHRISTIANS.

We are NOT a Muslim country, that

OUR Lord God Almighty -
the One True God,
Creator of Heaven and Earth

(NOT "allah")

has BLESSED

AND CERTAINLY NOT "DAMNED"
(using YOUR PASTOR'S words)

And finally,
Barack Hussein Obama....

MY Bible
(and certainly NOT the koran)
states that we are to love our brothers
and sisters in Christ.

While we obviously cannot and will NOT support someone such as
yourself - we will pray for you that you find and trust Jesus, the
Christ, as your Lord and Savior, as Jesus is the Son of God and the
One you should be looking to for spiritual guidance.

A spiritual leader and "preacher" of the Bible who preaches hate,
bigotry and says that God has damned our country, is a LIAR, HYPOCRITE
and NOT a Christian.

Matthew 22 Verse 39
"The second greatest command from God (in the BIBLE) is:

"YOU SHALL LOVE YOUR NEIGHBOR AS YOURSELF."

1 Corinthians 13
The Excellence of Love

1 If I speak with the tongues of men and of angels, but do not have
love, I have become a noisy gong or a clanging cymbal.

2 If I have the gift of prophecy, and know all mysteries and all
knowledge; and if I have all faith, so as to remove mountains, but do
not have love, I am nothing.

3 And if I give all my possessions to feed the poor, and if I
surrender my body to be burned, but do not have love, it profits me
nothing.

4 Love is patient, love is kind and is not jealous; love does not brag
and is not arrogant,

5 does not act unbecomingly; it does not seek its own, is not
provoked, does not take into account a wrong suffered,

6 does not rejoice in unrighteousness, but rejoices with the truth;

7 bears all things, believes all things, hopes all things, endures all
things.

8 Love never fails; but if there are gifts of prophecy, they will be
done away; if there are tongues, they will cease; if there is
knowledge, it will be done away.

9 For we know in part and we prophesy in part;

10 but when the perfect comes, the partial will be done away.

11 When I was a child, I used to speak like a child, think like a
child, reason like a child; when I became a man, I did away with
childish things.

12 For now we see in a mirror dimly, but then face to face; now I know
in part, but then I will know fully just as I also have been fully
known.

13 But now faith, hope, love, abide these three; but the greatest of
these is love.

You could have heard a pin drop!

When in England , at a fairly large conference, Colin Powell was asked
by the Archbishop of Canterbury if our plans for Iraq were just an
example of 'empire building' by President George Bush.

He answered by saying, 'Over the years, the United States has sent
many of its fine young men and women into great peril to fight for
freedom beyond our borders. The only amount of land we have ever
asked for in return is enough to bury those that did not return.'

You could have heard a pin drop!

There was a conference in France where a number of international
engineers were taking part, including French and American. During a
break, one of the French engineers came back into the room saying
'Have you heard the latest dumb stunt President Bush has done? He has
sent an aircraft carrier to Indonesia to help the tsunami victims.
What does he intended to do, bomb them?'

A Boeing engineer stood up and replied quietly: 'Our carriers have
three hospitals on board that can treat several hundred people; they
are nuclear powered and can supply emergency electrical power to shore
facilities; they have three cafeterias with the capacity to feed 3,000
people three meals a day, they can produce several thousand gallons of
fresh water from sea water each day, and they carry half a dozen
helicopters for use in transporting victims and injured to and from!
their flight
deck.

We have eleven such ships; how many does France have?'

You could have heard a pin drop!

A U.S. Navy Admiral was attending a naval conference that included
Admirals from the U.S. , English, Canadian, Australian and French
Navies. At a cocktail reception, he found himself standing with a
large group of Officers that included personnel from most of those
countries.

Everyone was chatting away in English as they sipped their drinks but
a French admiral suddenly complained that, whereas Europeans learn
many languages, Americans learn only English. He then asked, 'Why is
it that we always have to speak English in these conferences rather
than speaking
French?'

Without hesitating, the American Admiral replied 'Maybe it's because
the Brits, Canadians, Aussies and Americans arranged it so you
wouldn't have to speak German!'

You could have heard a pin drop!

Did you know.....

There were 39 combat related killings in Iraq in January. In the fair
city of Detroit there were 35 murders in the month of January?!?

That's JUST ONE AMERICAN CITY, about as deadly as the entire war-torn
country of Iraq!

When some claim that President Bush shouldn't have started this war,
tell them the following:

FDR (DEMOCRAT) led us into World War II. Germany never attacked us;
Japan did. From 1941-1945, 450,000 lives were lost at an average of
112,500 per year.

Truman (DEMOCRAT) finished that war and started one in Korea. North
Korea never attacked us. From 1950-1953, 55,000 lives were lost.... an
average of 18,334 per year.

John F. Kennedy (DEMOCRAT) started the Vietnam conflict in 1962.
Vietnam never attacked us.

Johnson (DEMOCRAT) turned Vietnam into a quagmire. From 1965-1975,
58,000 lives were lost ..... an average of 5,800 per year.

Clinton (DEMOCRAT) went to war in Bosnia without UN or French consent.
Bosnia never attacked us. He was offered Osama bin Laden's head on a
platter three times by Sudan and did nothing. Osama has attacked us on
multiple occasions. And Bill Clinton did NOTHING!

This one is a fact that makes me mad as hell..... Did you know, that
in the years since terrorists attacked us, President Bush has
liberated two countries, crushed the Taliban, crippledal-Qaida, put
nuclear inspectors in Libya, Iran, and, North Korea without firing a
shot, and captured a terrorist who slaughtered 300,000 of his own
people?!? And the Democrats are complaining about how long the war is
taking?!?

But Wait, There's more.

It took less time to take Iraq than it took Janet Reno (DEMOCRAT) to
take the Branch Davidian compound. That was a 51-day operation.

We've been looking for evidence for chemical weapons in Iraq for less
time than it took Hillary Clinton (DEMOCRAT) to find the Rose law firm
billing records.

It took less time for the 3rd Infantry Division and the Marines to
destroy the Medina Republican Guard than it took Ted Kennedy to call
the police after his Oldsmobile sank at Chappaquiddick.

It took less time to take Iraq than it took to count the votes in
Florida!!!

Our Commander-In-Chief (President George W. Bush) is doing a GREAT
JOB!

The Military morale WAS high when President Bush was our President!
Thank you and God bless you President Bush!!!!

Now with Obama in the people's office, morale of our military is
sinking. Especially now that Obama is SLASHING our Defense budget.

The biased media hopes we are too ignorant to realize the facts.

But Wait ....There's more!

JOHN GLENN (on the Senate floor - January 26, 2004)

Some people still don't understand why military personnel do what they
do for a living. This exchange between Senators John Glenn and Senator
Howard Metzenbaum is worth reading. Not only is it a pretty impressive
impromptu speech, but it's also a good example of one�man's
explanation of why men and women in the armed services do what they do
for a living.

This IS a typical, though sad, example of what some who have never
served think of the military.

Senator Metzenbaum (speaking to Senator Glenn):

'How can you run for Senate when you've never held a real job?'

Senator Glenn (D-Ohio): 'I served 23 years in the United States Marine
Corps. I served through two wars. I flew 149 missions. My plane was
hit by anti-aircraft fire on 12 different occasions. I was in the
space program. It wasn't my checkbook, Howard; it was my life on the
line. It was not a nine-to-five job, where I took time off to take the
daily cash receipts to the bank. I ask you to go with me, as I went
the other day... to a veteran's hospital and look those men, with
their mangled bodies ... in the eye, and tell THEM they didn't hold a
job!

You go with me to the Space Program at NASA and go, as I have gone, to
the widows and orphans of Ed White, Gus Grissom and Roger Chaffee ...
and you look those kids in the eye and tell them that their DAD'S
didn't hold a job?!?

You go with me on Memorial Day and you stand in Arlington National
Cemetery, where I have more friends buried than I'd like to remember,
and you watch those waving flags. You stand there, and you think about
this nation, and you have the gall to tell ME that those people didn't
have a job?

What about Metzenbaum? For those who don't remember. During W.W.II,
Howard Metzenbaum was an attorney representing the Communist Party in
the USA. Now he was a Senator!

If you can read this, thank a teacher.

If you are reading this in English you need to thank EVERY Veteran!

"But in this country, it's phony to say, 'I'm for the environment but
not for limiting immigration.' It's just a fact that we can't take all
the people who want to come here. And you don't have to be a racist to
realize that." by Gaylord Nelson, Founder of Earth Day

"A nation without borders is not a nation" by Ronald Reagan, Greatest
President Ever! www.GreatestPresidentEver.com

"We need to quit subsidizing the costs for illegal immigrants'
residency in America immediately. How long will we allow them to
siphon millions upon millions from honest taxpaying Americans by
supporting their health care, welfare, education and criminal
expenses?"
by Newt Gingrich

"If the government can't track illegals, then let's outsource the job
to UPS or FedEx."
By Governor Mike Huckabee

"How is it that we can militarily overthrow a military government like
Iraq, yet we can't militarily keep illegalities (drugs and aliens)
from crossing our borders?"
By: Chuck Norris

"The ongoing migration of persons to the United States in violation of
our laws is a serious national problem detrimental to the interests of
the United States."
by Ronald Reagan, Greatest President Ever!
www.GreatestPresidentEver.com

“The one absolutely certain way of bringing this nation to ruin, or
preventing all possibility of its continuing to be a nation at all,
would be to permit it to become a tangle of squabbling nationalities.”
by President Theodore Roosevelt

"Credibility in immigration policy can be summed up in one sentence:
Those who should get in, get in; those who should be kept out, are
kept out; and those who should not be here will be required to leave."
"...for the system to be credible, people actually have to be deported
at the end of the process."
by Rep. Barbara Jordan, Testimony to the House Immigration
Subcommittee, February 24, 1995

"For an American citizen to vote as a German-American, an Irish-
American, or an English-American, is to be a traitor to American
institutions; and those hyphenated Americans who terrorize American
politicians by threats of the foreign vote are engaged in treason to
the American Republic." by President Theodore Roosevelt, 1915

"Americans should be told that diseases long eradicated in this
country – tuberculosis, leprosy, polio, for example – and other
extremely contagious diseases have been linked directly to illegals.
For example, in 40 years, only 900 persons were afflicted by leprosy
in the U.S.; in the past three years, more than 7,000 cases have been
presented." by Rep. J.D. Hayworth, R-Ariz., told the Business Journal
of Phoenix

"First, our cities will not be flooded with a million immigrants
annually. Under the proposed bill, the present level of immigration
remains substantially the same.... Secondly, the ethnic mix will not
be upset…. Contrary to the charges in some quarters, [the bill] will
not inundate America with immigrants from any one country or area."
by Sen. Ted Kennedy (D-MA) assuring voters in 1965 that the passage of
the Immigration Act could not change America's ethnic balance

"...If liberals think Iraqis are genetically incapable of pulling off
even the most rudimentary form of democracy, why do they believe 50
million Mexicans will magically become good Americans, imbued in the
nation's history and culture, upon crossing the Rio Grande? Maybe we
should dunk Iraqis in the Rio and see what happens...." by Ann
Coulter

"In the book of Nehemiah (Chapter 4), we learn that border security is
so important that the people of Jerusalem were told to rebuild the
wall "with a tool in one hand, and a sword in the other hand".
Christians are supposed to be charitable, but not foolish. If someone
comes to your door and asks for water, give them water -- and food,
and a coat, if they need it. But, if someone breaks into your house,
you don't adopt them!." by Tom Kovach

"There are some benefits [that illegal aliens] clearly ought not
have...[including] health benefits and welfare benefits and others
that serve as a magnet attracting people here from other countries."
by Henry Cisneros

"…Why should Pennsylvania, founded by the English, become a Colony of
Aliens, who will shortly be so numerous as to Germanize us instead of
our Anglifying them, and will never adopt our Language or Customs, any
more than they can acquire our Complexion..." by Benjamin Franklin

"A man who thinks of himself as belonging to a particular national
group in America has not yet become an American, and the man who goes
among you to trade upon your nationality is not a worthy son to live
under the Stars and Stripes." by President Woodrow Wilson

"As a nation with a long history of immigration and commitment to the
rule of law, this country must set limits on who can enter and then
credibly enforce our immigration law." by U.S. Commission on
Immigration Reform (1995)

"Illegal is anything that is against the law including drug
trafficking, smuggling, terrorism or crossing the border into a
country. Undocumented is anything that can no longer be verified
including unemployed American workers who no longer qualify for
unemployment benefits and are no longer counted in statistics. What a
sorry nation we are becoming when we allow corporate political
correctness to pervade our daily speech. Illegal means illegal."
by Peter Romanenko, Waco, Texas

"The laws should be rigidly enforced which prohibit the immigration of
a servile class to compete with American labor, with no intention of
acquiring citizenship, and bringing with them and retaining habits and
customs repugnant to our civilization." by President Grover Cleveland

"If we do not get control of our borders, by 2050 Americans of
European descent will be a minority in the nation their ancestors
created and built. No nation has ever undergone so radical a
demographic transformation and survived." by Pat Buchanan

"In the first place, we should insist that if the immigrant who comes
here in good faith becomes an American and assimilates himself to us,
he shall be treated on an exact quality with everyone else, for it is
an outrage to discriminate against any such man because of creed, or
birthplace, or origin. But this is predicated upon the person's
becoming in every facet an American, and nothing but an American...
there can be no divided allegiance here. Any man who says he is an
American, but something else also, isn't an American at all. We have
room for but one flag, the American flag... We have room for but one
language here, and that is the English language... and we have room
for but one sole loyalty and that is a loyalty to the American
people." by Theodore Roosevelt in 1907

Tiger Woods vs. Barack Hussein Obama

Bet you can't figure this one out.

I THINK IT IS REMARKABLE THAT THE PRESS CAN FIND EVERY WOMAN THAT
TIGER HAS HAD AN AFFAIR WITH IN THE LAST FEW YEARS, COMPLETE WITH
PHOTOS, TEXT MESSAGES, RECORDED PHONE CALLS, ETC. THEY KNOW, NOT ONLY
THE CAUSE OF THE FAMILY FIGHT, BUT THEY EVEN KNOW, IT WAS A WEDGE FROM
HIS GOLF BAG, THAT SHE USED FOR BREAKING OUT THE WINDOWS IN THE
ESCALADE AND A COUPLE OF HIS TEETH. NOT ONLY THAT, THEY KNOW WHICH
WEDGE.

THIS IS THE SAME PRESS THAT CANNOT LOCATE OBAMA'S BIRTH CERTIFICATE,
PASSPORT , HOW HE PAID FOR HIS IVY LEAGUE EDUCATION OR ANY OF HIS
PAPERS WHILE HE WAS IN COLLEGE.

TRULY REMARKABLE!

More signs posted by Bill Balsamico outside his
Casa D'Ice Restaurant in Versailles, Pennsylvania:

Way to Go Bill, Keep up the Great Work,
You are a Patriot!

WRITE A LETTER TO YOUR YOUR CONGRESSMAN AND SENATOR, TELL THEM TO:

PROTECT OUR BORDERS, NOW!

ENFORCE IMMIGRATION LAWS, NOW!

Reject amnesty for illegal aliens - no matter how the politicians may
disguise it.

Reject all temporary foreign-worker or guest-worker bills.

Put troops on our borders to stop the invasion of illegal aliens and
save lives, and American jobs, for America's "legal" citizens.

Cut off federal highway funds to any state that gives drivers licenses
to illegal aliens. (This is just as important and legal as past laws
that cut off funds from states that don't enforce speed-limit, seat-
belt, or alcoholic-content laws.)

Prosecute employers who import illegals and/or hire workers in the
underground economy.

Terminate the H-1B program; we have no labor shortage of engineers.

Pass strict rules to stop the rampant abuse of L-1 visas.

Forbid government agencies to outsource jobs offshore.

Forbid "totalization" of Social Security with foreign countries.

Reduce the number of legal immigrants we admit every year from 1
million to one-half million.

Eliminate fraud in legal immigration (such as fake marriages) and in
refugee admissions.

Cut off federal funds to cities that have "sanctuary" laws and refuse
to arrest illegals and turn them over to federal authorities.

Thoroughly screen immigrants for diseases in order to stop the
importation of West Nile virus, malaria, and other Third World
diseases, as well as diseases that the United States long since
eliminated in our country such as tuberculosis, polio and measles.

Napolitano is: Incompetent, Unqualified, and
a COMPLETE IDIOT!
PROTECT OUR BORDERS & DEPORT ILLEGAL ALIENS
Appoint a Secretary of Homeland Security
that will DO THEIR JOB!

FIRE JANET NAPOLITANO NOW!

WE OPPOSE SONIA SOTOMAYOR AS AN

EXTREMIST
AND
ULTRA-LEFT WING RADICAL

WHO IS UNFIT TO SERVE ON OUR SUPREME COURT

WE REJECT SOTOMAYOR AS A SEXIST

WE REJECT SOTOMAYOR AS A RACIST

SOTOMAYOR IS DISQUALIFIED AS A "JUDGE" DUE TO HER OUTRAGEOUS SEXIST
AND RACIST STATEMENTS

NO RACIST JUDGES ON OUR SUPREME COURT

NO SEXIST JUDGES ON OUR SUPREME COURT

NO PRO-DEATH JUDGES ON OUR SUPREME COURT

NO SOTOMAYOR AS A JUDGE ON OUR SUPREME COURT

WE OPPOSE Kathleen Sebelius,
as Secretary of Health and Human Services

Kathleen Sebelius is a pro-death liberal activist that fails to
support the most innocent of all human life, the unborn baby.
Yet she supports baby-killers like George Tiller.

Sebilius is an ultra-liberal pro-death, pro-choice extremist and
RADICAL who supports the killing of babies in the womb, including
partial birth abortion.

We agree with Senator Demint's statement in opposition to Sebelius
which states: "The overwhelming majority of Americans oppose late-
term abortions of babies that can survive on their own, but Kathleen
Sebelius clearly believes there are no limits to taking the life of
innocent unborn children. Sebelius' veto of a common sense bill to
reduce late-term abortions is an insult to Americans who respect human
dignity. This is a clear example of the her extreme pro-abortion
agenda that should disqualify her from leading our nation's health
agency. President Obama should withdraw her nomination and keep his
promise to reduce abortions, not promote politicians that seek to
reverse decades of bipartisan progress on this important issue."

IRRESPONSIBLE & UNETHICAL JOURNALIST:

HEATHER MALLICK

Attention: Hubert T. Lacroix, President and CEO
Canadian Broadcasting Corporation

TERMINATE
Heather Mallick
NOW!

HEATHER MALLICK - UGLY CANADIAN

Leftist Lunatic? YES
Female, Sexist Pig? YES
Despicable, Ugly Canadian? YES
Irresponsible Journalist? YES

We are calling on the Canadian Broadcasting Corporation to IMMEDIATELY
TERMINATE
Heather Mallick for this SEXIST, IRRESPONSIBLE JOURNALISM, Socialistic
views as well as being a LIAR for her unwarranted attack on
Governor Sarah Palin.

2008 Socialist (Democratic)Party Leaders, Extremist Liberals,
Looney-Leftists, Left Wing NutJobs
and other Despicable Democrats

Despicable Democrats
www.DespicableDemocrats.com

Eli Pariser:
Unamerican, Ignorant, Imbecile and a Socialist PIG
Executive Director - moveon.org

Markos Moulitas Zuniga - Pathetic Unamerican and a LOSER
who has sold out to the extremist agenda of the Socialist party

Markos Moulitas Zuniga is completely ignorant of the grave matters of
the times and too stupid to learn. . . . a complete incompetent and
imbecile.

Founder of the Whacked-out and ultra liberal extremist and socialist
organization: moveon.org who has been quoted as saying:

"We Own The Democratic Party"
www.WeOwnTheDemocraticParty.com

2008 Socialist (Democratic)Party Leaders,
Looney-Leftists and Other Lesser-known
Left Wing NutJobs & Socialist Sympathizers:

Wes Boyd
Co-founder of Moveon.org

Joan Blades
Co-founder of Moveon.org

George Soros

Well-known Left Wing NutJobs
Unamerican Americans
www.UnamericanAmericans.com
&
Socialist Sympathizers:

Al Franken

The best word that describes this looney-liberal:

IDIOT

So far LEFT, he's "Left of Lenin."
So far left, he's left the mainstream of the democratic party and more
closely aligns with the Socialist Party.

One more word that describes Al Franken:

UN-ELECTABLE

Barbara Streisand

A real left-wing whack job and Tight-Wad.
She's more concerned about her money and investments than her left-
wing politics or friends.

Barbra Streisand
CHEAP AND SELFISH. SHE NEVER HELPS THE HELPLESS, OR THE HOMELESS, OR
LESS FORTUNATE, WITH HER VAST FORTUNE AND WEALTH

Bruce Frederick Joseph Springsteen:

Nancy Pelosi

Harry Reid

Chevy Chase

A washed-up Hollywood has-been that used to be a very funny and gifted
comedian - but not anymore.

Chevy Chase is one of those extremists from Hollywood, that think it's
in vogue to be an "America-hater."

Chevy Chase: "I'm a complete idiot, and you're not"

Chevy Chase no longer has anything to contribute except Hollywood's
extremist, left-wing socialism and whacked-out propaganda.

John Kerry

Dennis Kucinich

Other Extremists and Racists:

Al Sharpton

the "reverend"
Jesse Jackson

Hey Jesse, you're not a reverend unless you graduated from a school of
theology or seminary... what theological school or seminary did you go
to? Oh, you didn't go to either? That makes you a LIAR and a FRAUD.

What kind of "reverend," who is supposedly married, commits adultery,
and father's children outside of marriage?

You're a fine example and role model for the black community you
supposedly care so much about.

SHAME ON YOU
RACIST PIGS:

Chris Rock

Oprah Winfrey

Please BOYCOTT anything and everything associated with Oprah Winfrey,
including her television program, her magazine, her sponsors
and advertisers, for being a racist pig.

Still, NOT well-known racist and ARAB-AMERICAN:

Barack Hussein Obama

Hey, Barack Hussein Obama....

You're No Ronald Reagan!

President Ronald Reagan
Greatest President Ever!
www.GreatestPresidentEver.com

"I didn't leave the Democratic Party.
The party left me."
President Ronald Reagan

"We will always remember. We will always be proud. We will always be
prepared, so we may always be free."
President Ronald Reagan - Normandy, France 1984

Ronald Reagan Conservatives
www.RonaldReaganConservatives.com

"A nation without borders is NOT a nation!"
President Ronald Reagan
www.GreatestPresidentEver.com

IMPEACH FEINSTEIN
Corrupt to the Core
www.ImpeachFeinstein.com

Impeach Nancy Pelosi
www.ImpeachNancyPelosi.com

It's The Economy, Stupid !
www.ItsTheEconomyStupid.net

Rise Above Politics!
www.RiseAbovePolitics.com

Return To The Constitution!
www.ReturnToTheConstitution.com

Return To Our Constitution!
www.ReturnToOurConstitution.com

We Support the National Sales Tax!
www.NationalSalesTax.net

Say NO To Socialism !
www.SayNoToSocialism.com

We Support
Enhanced Oil Recovery
www.EnhancedOilRecovery.com

Enhanced Oil Recovery:

* Recovers OVER 400 Billion barrels of AMERICA'S oil
from EXISTING ONSHORE OILWELLS!

* the "green" way to produce America's oil

* makes the U.S. energy independent

* ends the need for importing oil from the Middle East

* $60 Trillion market opportunity in the U.S.

* Removes Carbon Dioxide Emissions from the atmosphere!

Boycott ABC
www.BoycottABC.com

Fire the Liberal David Letterman!
www.FireLetterman.com

Drill Baby Drill !

www.DrillBabyDrill.com

Boycott Spain!

www.BoycottSpain.com

Don't buy any products from Spain, EVER!
Don't Travel or Vacation in Spain, EVER!

Spain: Country of cowards and traitors!
Spain: Country of Terrorists and radical muslim Sympathizers
Spain: country of muslims, socialists and anti-Christians

www.BoycottSpain.net

Susan Roesgen - CNN:

1. You are NOT the Story, and neither is CNN's
radical political agenda.
2. You are COMPLETELY CLUELESS.
3. You are an Irresponsible Journalist.
4. You are a ROTTEN Reporter.
5. You don't have a single ounce of integrity.
6. You are a COMPLETE Disgrace and
EMBARRASSMENT to the Journalism Profession.
7. Find another line of work - as you suck at reporting.

BOYCOTT CNN
AND THEIR ADVERTISERS' PRODUCTS
www.BoycottCNN.net

Stop buying the products from the following companies who advertise on
CNN thereby supporting "JUNK Journalism."

Boycott the following products and companies that advertise on CNN:
List of CNN Advertisers:

1. Hyundai

2. Kentucky Fried Chicken

3. Mercedes Benz

4. Apple

5. AT&T

6. Chrysler

7. RoomsToGo

8. Alltel

9. Ford

10. Home Depot

11. Honda

12. TMobile

13. Chili’s

14. Cisco

15. Exxon-Mobile

16. Visa

17. Nissan

18. Sprint

Boycott the above companies and their products until they stop
advertising on CNN.

CNN and their ultra-liberal agenda and liberal bias to reporting needs
to understand that we will NOT tolerate their liberal and biased
"agenda" and false reporting any longer. They need to get the politics
OUT of their duty of honestly and fairly reporting the news. The only
way CNN will get the message is to BOYCOTT the products of the
companies that advertise on their network, until such time that they
can be "fair and balanced" in their journalism and news reporting.

BOYCOTT CNN

www.BoycottCNN.net

AND ALL COMPANIES
THAT ADVERTISE ON THEIR
ULTRA-RADICAL NETWORK
& FAILS TO HONESTLY REPORT AND
COVER THE NEWS
www.BoycottCNN.net

OPRAH WINFREY - SHAME ON YOU,
YOU HYPOCRITE!

www.YouHypocrite.com

www.TurnOffOprah.com

Oprah Winfrey:
Your hypocrisy proves you are a RACIST

www.TurnOprahOff.com

IMPEACH DIANNE FEINSTEIN
Corrupt to the Core
www.Impeach Dianne Feinstein.com

Our Mission

The mission of the National Chapter of "Change We Can Believe In" is
to promote and defend the great American principles of individual
liberty, constitutional government, sound money, free markets, and a
foreign policy that seeks to protect and defend our U.S. Constitution
and a strong military that defends the homeland. We believe in
"American Exceptionalism" and that our form of government and true
capitalism is the best way to protect individual liberty. We are
opposed to open borders and illegal aliens coming into our country and
taking our jobs. Without the gross corruption of big business and our
present government that does not enforce our immigration laws, and
permits big business to profit through illegal aliens and cheap labor,
wages in our country would rise significantly, and create good paying
jobs for Americans.

Our Mission will be accomplished by means of educational and political
activity, that our forefathers envisioned. While we welcome anyone
and embrace everyone who chooses to legally come into our country,
they must understand that our country is a Christian country, founded
by Christians. Christian's who go to muslim countries do not go to
their countries expecting to have them change their government, laws
or religion. Similarly, non-Christians in our country should respect
our laws, government, religion and the fact that we are a Christian
counrty.

While we do not advocate any one state religion, or advocate any one
denomination, we will not tolerate our country's laws or Constitution
to be changed, challenged or influenced by non-Christians, muslims and/
or atheists.

Our Purpose

The U.S. Constitution is at the heart of what the Campaign for Liberty
stands for, since the very least we can demand of our government is
fidelity to its own governing document. Claims that our Constitution
was meant to be a “living document” that judges may interpret as they
please are corrupt in their thinking as well as fraudulent in their
analysis. Furthermore, these corrupt and liberal judges actions are
incompatible with republican government and without foundation in the
constitutional text or the thinking of those that wrote our
Constitution.

Three New Navy Ships

USS REAGAN

Seeing it next to the Arizona Memorial really puts its size into
perspective... ENORMOUS!

When the Bridge pipes 'Man the Rail' there is a lot of rail to man on
this aircraft carrier: shoulder to shoulder, around 4.5 acres. Her
displacement is about 100,000 tons with full complement.

Capability

Top speed exceeds 30 knots, powered by two nuclear reactors that can
operate for more than 20 years without refueling

1. Expected to operate in the fleet for about 50 years

2. Carries over 80 combat aircraft

3. Three arresting cables can stop a 28-ton aircraft going 150 miles
per hour in less than 400 feet

Size

1. Towers 20 stories above the waterline

2. 1092 feet long; nearly as long as the Empire State Building is tall

3. Flight deck covers 4.5 acres

4. 4 bronze propellers, each 21 feet across, weighing 66,200 pounds

5. 2 rudders, each 29 by 22 feet and weighing 50 tons

6. 4 high speed aircraft elevators, each over 4,000 square feet

Capacity

1. Home to about 6,000 Navy personnel

2. Carries enough food and supplies to operate for 90 days

3. 18,150 meals served daily;

4. Distillation plants provide 400,000 gallons of fresh water from
sea water daily, enough for 2,000 homes

5. Nearly 30,000 light fixtures and 1,325 miles of cable and wiring
1,400 telephones

6. 14,000 pillowcases and 28,000 sheets

7. Costs the Navy approximately $250,000 per day for pier side
operation

8. Costs the Navy approximately $25 million per day for underway
operations (Sailor's salaries included).

USS BILL CLINTON

The USS William Jefferson Clinton (CVS1) set sail today from its home
port of:
Vancouver, B.C., Canada

The ship is the first of its kind in the Navy and is a standing legacy
to President Bill Clinton 'for his foresight in military budget cuts'
and his conduct while holding the (formerly dignified) office of
President.

The ship is constructed nearly entirely from recycled aluminum and is
completely solar powered with a top speed of 5 knots.

It boasts an arsenal comprised of one (unarmed) F14 Tomcat or one
(unarmed) F18 Hornet aircraft which, although they cannot be launched
on the 100 foot flight deck, form a very menacing presence.

As a standing order there are no firearms allowed on board.

This crew, like the crew aboard the USS Jimmy Carter, is specially
trained to avoid conflicts and appease any and all enemies of the
United States at all costs.

An onboard Type One DNC Universal Translator can send out messages of
apology in any language to anyone who may find America offensive. The
number of apologies are limitless and though some may seem hollow and
disingenuous, the Navy advises all apologies will sound very
sincere.

In times of conflict, the USS Clinton has orders to seek refuge in
Canada

USS Barack Obama

General Disclaimer

See something on our website that makes you angry or upset? Great,
that's why we're here, to encourage our rights of free speech given to
us by our forefathers in our Constitution and First Amendment.

We are neither Republican or Democrat. We are conservatives first,
and actually believe the two party system of both Republicans and
Democrats are corrupt. We really need a third party, one that defends
the innocent unborn, as well as the elderly in their last days. All
life is precious and a gift from our Creator.

Website content validity and accuracy:

The point of this website is to foster political dialog and debate -
we encourage bipartisan debate - however, as conservatives, we believe
President Ronald Reagan's ideas, ideals, and vision that he brought us
as a people and a nation, are the best examples to follow. When we
believe that political opinion, laws and a person or political party's
vision are wrong, we will so state. When we place information on our
website that we believe to be true and factual material, we believe it
to be correct. However, some things change over time. Therefore,
today's "fact" may be tomorrow's fallacy. Sometimes, we conservatives
may err. When we recognize we may not be correct on a topic or issue,
we will change course. Please remember that before using any of our
website content in your homework, reports, research, essays, news
stories, lawsuits or if you are running for President, or City
Council. In other words, be a good researcher as well as a good
citizen, and double-check anything that may find to be useful on our
website!

External Links:

When we link to websites that are outside of our site, we do so as
believe that that website may have either useful or relevant
information or commentary on issues that we discuss here. We always
try to ensure that any external websites that we link to are
appropriate for our young audience as well. As we don't control those
external websites, there may be times that they either change their
website content, or may even change website owners, and may place
content on those sites that we will not be aware of. So, when you
click on one of our external website links, we have no control over
what may be found there, and you are taking responsibility for what is
there.

Photographs and Graphics:

We post images and graphics in order to enhance the debate and add to
our site's content. Any copyrighted images that we post are done so
under the claim of "fair use." We always give credit to the rightful
owner of the image or graphics, or copyright holder on all copyrighted
images. However, if we unintentionally misidentify the person, o fail
to give appropriate credit, please call this to our attention, and we
will make any appropriate corrections.

In the event that you are the copyright holder/owner of any content
that we use on our site, and you believe that;

1.) we are not giving you the proper credit or
2.) that we are going beyond fair usage of your material,
please contact us, and we will look into it as soon as possible to
make a determination.

Also, please note, that just because we have an image or graphic on
our site, does NOT mean that we are making any claim on that
material.

Personal Opinions & Political Differences

The opinion posted on our website are our own personal opinions as
well as those as our contributors. Again, last we checked, this is
still the U.S.A., and you too, are also entitled to your own personal
opinions. This is our website. If you don't like what we have to say,
you may publish your own personal opinions and political differences
on YOUR website. Your political opinions and differences are yours -
and as long as they are not in support of NAZI's, the KKK, Socialism,
Communism or Anarchism, or other radical leftist ideologies, you are
welcome to share your views and political opinions with us.

The content of this website, especially our blog, contains our own
personal opinions as well as opinions from others. The material is not
intended to malign any religion, ethnic group, club, organization,
company, individual, anyone, or anyone's dog or cat or anything else
that may become offended. This doesn't mean that we won't challenge
somebody's opinion, logic or viewpoint, or let them know when they are
wrong. Our intent is never to harm or injure anyone.

Copyrighted Material:

All material on our website and blog should be considered copyrighted
material.

There are times we claim the copyright and at other times we own the
copyright.

You are free to use any material you find on our website useful, and
for which we own the copyright, as long as you agree to the the
Creative Commons Attribution-Noncommercial 3.0 license. This also
means that if you publish in a work, paper, website, etc. that you
give credit to us at: www.ChangeWeCanBelieveIn.com

Political and Cultural Issues and Debate:

Our website and related blog are developed and maintained under
guidance of the laws of the United States of America. We will not be
responsible for material or statements that may not comply with laws
in countries outside of the United States.

Questions or concerns?

email us at: ***@ChangeWeCanBelieveIn.com

Our First Amendment

While Obama and the liberal loonies on the left would like to seize
control of all forms of media for advancing their European Socialist
agenda and schemes, we still have a First Amendment.

Because we treasure our Constitution and value the First Amendment
right of free speech, while we still have a First Amendment, we also
value the thoughtful opinions, posts and commentaries of fellow
conservatives - we encourage your posts and commentaries in this
discussion. Please remember that your posts and commentaries CANNOT be
edited by you once you have clicked the send button! Be sure to
review and re-read your comments before submitting.

Please remember that we have a website audience that has viewers as
young as 10 years old (according to recent email). The youth of our
nation also has a vested interest that we leave them a government and
heritage that is "of the people, for the people and by the people" as
our forefathers left us. There are many young children that are
interested in politics and exchange of political discourse. In order
to keep our site both civil and safe for our young audience, we will
delete any comments that are off-topic, unnecessarily rude, contain
foul language, or contain any advertising.

Posts and commentaries older than 7 days are moderated which helps us
eliminate any/all spam. Due to heavy volume, it may take up to 10
business days before we can approve any new posts or commentaries.
Your patience is greatly appreciated!

This material is based upon research and work supported by Ronald
Reagan Conservatives, a private, members-only group that seeks to
restore the great work President Reagan - through his true leadership
and bipartisanship - left us, and that Obama and the extremists
liberals seek to destroy. At last check, while Obama seeks to control
the media, and now the internet, we still have the First Amendment
rights to free speech.

Looney-Leftists and Others Pretending to be so concerned with the
rights of others and to "love our country" yet support the Pro-Death
Agendas of the Slaughter of the Innocents and the Euthanasia of the
Elderly:

Your utter contempt and dis-respect for human life indicts you on any
so-called concern for the rights of others.

You who are on the "front-lines" to protect and defend the baby seals,
and baby whales from slaughter, are also on the front-lines supporting
the slaughter of innocent babies in their "mother's" wombs at abortion
clinics.

Where is your compassion or concern for the rights of the unborn baby
humans?

Your complete lack of reasoning as it relates to protecting and
defending the most innocent of all humans, the unborn babies, defies
any logic.

WE RESERVE THE RIGHT TO PRINT THE NAMES, EMAIL ADDRESSES AND IP
ADDRESSES OF ANYONE THAT SEND VILE, THREATENING OR HARASSING EMAILS OR
BLOGS.

ANY AND ALL THREATENING COMMUNICATION WILL BE REPORTED TO LAW
ENFORCEMENT.

email us at: ***@ChangeWeCanBelieveIn.com
Change We Can Believe In

www.ChangeWeCanBelieveIn.com

© 2007 - 2009
All Rights Reserved

www.ChangeWeCanBelieveIn.com

Email: ***@ChangeWeCanBelieveIn.com

http://itstheeconomystupid.net/

...and I am Sid Harth

[chhotemianinshallah]

Slogans We’ll Remember
Jan R. Van Meter
Addenda to Tippecanoe and Tyler, Too: Famous Slogans and Catchphrases
in American History

The book, ends with Ronald Reagan’s speech at the Berlin Wall in 1987
for no other reason than it had to end at some point. However, slogans
and catchphrases as an integral part of American life did not cease
then—or now. But what will survive 30 or 50 years from now, much less
nearly three centuries as have John Winthrop’s words: “We shall be as
a city upon a hill.”?

Predicting the survival of anything, much less anything as normally
ephemeral as a slogan or a catchphrase is as chancy as predicting the
survival of a clothing style or a film. The Godfather endures; Easy
Rider is now both embarrassing and forgotten. Blue jeans seem eternal;
the mini-skirt comes and goes, and the Nehru jacket and the leisure
suit don’t bear thinking about any more than Jerry Ford’s “Whip
Inflation Now (WIN).”

What seems to matter are any of a number of qualities: The importance
of the moment recalled by the phrase; the use of mnemonic devices like
meter, rhyme (why else does Tippecanoe survive?) and repetition; the
importance of the encapsulated cultural value, and the phrase’s
adaptability to other uses and times. Here are a few that might make
it in 2050.

Read My Lips; No New Taxes (1988)

George Herbert Walker Bush needed to prove he was tough, tough enough
to win the presidential election against the Democrat Michael Dukakis,
tough enough to continue the legacy of the outgoing president Ronald
Reagan, tough enough to erase his lingering reputation as an effete
aristocrat and long-time government insider.

The Bush campaign staff wanted to demonstrate his toughness, his
devotion to the Reagan ideals, and his strong conservative
convictions. And so, in his acceptance speech to the GOP Convention,
Bush stared directly into the lens of the television cameras and
grimly said:

My opponent won’t rule out raising taxes. But I will. And the Congress
will push me to raise taxes and I’ll say no. and they’ll push, and
I’ll say no, and they’ll push again, and I’ll say to them, “Read my
lips: no new taxes.”
Bush was elected, but less than two years later, with the federal
deficit reaching record levels, Bush was forced to raise some taxes as
well as cut spending. He was never forgiven by his own party’s
conservatives or by the media. Though Bush’s approval ratings with the
public improved following the first Gulf War, his slogan became a
byword for political untrustworthiness.

You’ve Got Mail (1989)

Personal computers for office and home, though common in most
businesses by the end of the 1970s, did not see any serious sales
until the 1980s. They began to take off then, but became a cultural
phenomenon in the ’90s with the advent of email late in the decade,
since email was a cheap and rapid form of communication for business
and, most important, for teenagers.

In 1989, when AOL was about to introduce its content service,
including email, with a massive and relentless marketing drive, the
CEO wanted a voice for the product to make it unique. An employee
suggested the company try her husband, an experienced broadcaster. It
did, and Elwood “El” Edwards’s “You’ve Got Mail” became ubiquitous. At
the time, just 22.8 percent of households in the U.S. had a computer—
but AOL became the market leader in a highly popular and highly
visible product.

Today, more than 75 percent of all households have a computer, and AOL
has long lost its dominant position, falling far behind the leaders.
El’s voice and words, though, live on—at least for now.

It’s the Economy, Stupid (1992)

In the latter part of the twentieh century, presidents have tended to
prefer foreign affairs to domestic ones. The approval ratings after
the start of major diplomatic or military ventures rise dramatically
and the president only has to deal with foreign leaders and villains
rather than pesky congressmen.

The problem with the preference, though, is that it ignores the fact
that voters have most often voted with their wallets and pocketbooks.

President George H.W. Bush began his reelection campaign in 1993 with
a victory in the first Iraq War and an approval rating of nearly 80%.
But he had broken his promise not to raise taxes—permanently
alienating the fiscal conservatives in the Republican Party—and failed
to appreciate the effect of a recession on both the middle and working
classes, both developments dropping his approval well below 50%. Even
worse, he faced opponents with far more charisma than he: the
Democratic candidate Bill Clinton and a wealthy and popular third
party candidate, Ross Perot.

Clinton’s chief campaign strategist James Carville had a strong
candidate in Clinton, but also one who was difficult to control in the
heat of a campaign. He posted a sign in campaign headquarters with
three commandments, one of which was “The economy, stupid.”

The race was tight, made that way by the pull of Perot among voters
unhappy with both candidates and both parties. Clinton and the
Democrats hammered on the economic issues and Carville’s slogan became
public as “It’s the economy, stupid,” and Clinton won with 43% of the
popular vote. Since then, the slogan has been altered to fit any
situation the speaker wants to make significant—a sure way for a
slogan to survive though risking death through triteness. The insult
seems to go unnoticed.

Don’t Ask, Don’t Tell (1993)

There have been gays in the military for as long as there have been
armies and navies—and gays, for that matter. Winston Churchill
famously raged at a group of British admirals, “Don’t talk to me about
naval tradition. It’s nothing but rum, sodomy and the lash.”

In the United States, pressure for civil rights for gays and lesbians
had been building since the 1970s, but the resistance in the military
remained unmoved on the grounds of morale, unit discipline, and
security. This belief persisted despite at least two internal studies
that concluded otherwise.

As one of his many campaign promises in the 1992 presidential
election, Bill Clinton vowed to end the ban on gays in the military by
executive order, just as President Truman had ended racial segregation
in the military. Predictably, there was a storm of protest from the
public, from embattled or hostile congressmen, and from the military.
Clinton’s promise threatened to derail his political agenda and the
avowed executive order turned into a compromise. Gays could serve in
the armed forces as long as they did not engage in sexual activities
or announce their sexual orientation. The military, in turn, would not
actively seek out and dismiss gays in their ranks.

The new policy quickly became known as, “Don’t ask, don’t tell.” And
so the policy remains despite ever-increasing public acceptance of
gays and lesbians. But myths die hard. The slogan will last as long as
the policy—though, since it has never been successfully used in
another context—probably no longer.

Mission Accomplished (2003)

If ever a slogan came to embody the concept of irony, the sign behind
President George W. Bush aboard the carrier USS Abraham Lincoln on May
1, 2003 did it. After some 40 days, the Iraq war—or at least the
combat part of it—was over, or, as the sign read, “Mission
Accomplished.”

The ironies were many:

The President who had spent his years during the Vietnam War in the
reserves had never seen combat, though he arrived in a flight suit as
if he had flown there himself.

The carrier was named for one of the least hubristic president in
history.

Whatever the mission was that brought about the invasion shifted as
the prior mission failed, and kept shifting.
Vastly more casualties—civilian and military—occurred after the end of
official combat than during.

This slogan has survived as a warning to anyone who boasts and thereby
tempts fate. It is, then, one example of negative catchphrases like
Richard Nixon’s “I am not a crook,” and Bill Clinton’s “I did not have
sex with that woman,” that have characterized the darker side of
American history.

Yes We Can (2008)

It is odd that Barack Obama has been attacked for the quality of his
oratory, since he has single-handedly evoked and revived one of the
oldest traditions of American politics. With echoes of Patrick Henry,
William Jennings Bryan, and Dr. Martin Luther King, Jr., Obama’s
ability to electrify a crowd with the power of his speeches with
positive emotion is rare in modern times. Speeches have, once again,
become national events.

It was Obama’s speech in a defeat that first used the refrain “Yes We
Can” that best demonstrates his abilities. Given to his supporters on
the night of January 8, 2008, after he was narrowly defeated by
Senator Hillary Clinton in the New Hampshire primary, the speech
emphasized his momentum as a candidate. With its rhythms and
repetitions most often heard in Black churches and its subliminal
allusion to the children’s story of The Little Engine that Could, the
power of this oldest of American art forms can best be experienced as
you listen to the speech or read it aloud yourself. The phrase is used
again and again in his peroration as he builds to this conclusion:

And so tomorrow, as we take the campaign South and West; as we learn
that the struggles of the textile worker in Spartanburg are not so
different than the plight of the dishwasher in Las Vegas; that the
hopes of the little girl who goes to a crumbling school in Dillon are
the same as the dreams of the boy who learns on the streets of LA; we
will remember that there is something happening in America; that we
are not as divided as our politics suggests; that we are one people;
we are one nation; and together, we will begin the next great chapter
in the American story with three words that will ring from coast to
coast; from sea to shining sea: Yes. We. Can.

Copyright notice: ©2008 by The University of Chicago. All rights
reserved. This text may be used and shared in accordance with the fair-
use provisions of U.S. copyright law, and it may be archived and
redistributed in electronic form, provided that this entire notice,
including copyright information, is carried and provided that the
University of Chicago Press is notified and no fee is charged for
access. Archiving, redistribution, or republication of this text on
other terms, in any medium, requires the consent of the University of
Chicago Press

Jan R. Van Meter
Tippecanoe and Tyler Too: Famous Slogans and Catchphrases in American
History
©2008, 344 pages
Cloth $22.50 ISBN: 9780226849683

For information on purchasing the book—from bookstores or here online—
please go to the webpage for Tippecanoe and Tyler Too.

http://www.press.uchicago.edu/Misc/Chicago/849683.html

"Garve se kaho hum hindu hain"

"Mera Bharat mahan"

"India Shining"

Garibi hatao"

"Aam admi"

"Amachi Mumbai"

"Marathi manoos"

"Akhand Bharat"

"Satyameva jayate"

"Jai Hind"

"Jai Ho"

"Inqilab zindabad"

"Pakistan murdabad"

"Firangi"

"Meleccha"

"Shudra"

"Dalit"

"Sanatan dharm"

"Hindutva"

"Loh purush"

...and I am Sid Harth

[chhotemianinshallah]

It’s the Partisan Economy, Stupid
By Michael Barone
Wednesday, January 23, 2008

Filed under: Public Square, Government & Politics

Americans’ views of macroeconomic trends are increasingly a product of
their political leanings, writes MICHAEL BARONE.

“It’s the economy, stupid.” That’s the sign that James Carville
famously put up in the 1992 Bill Clinton campaign war room. As we know
now, the economy was not in such bad shape at the time: the shallow
recession of July 1990-March 1991 was already over, according to the
National Bureau of Economic Research, when Clinton announced his
candidacy in October 1991. But Clinton and the off-and-on independent
candidate Ross Perot insisted that the economy was experiencing its
worst recession since the Great Depression, and the standing of
President George H.W. Bush never recovered.

Carville’s slogan was based on the conventional wisdom about how the
economy affects American politics. That conventional wisdom is based
on the political science developed in the years after the Depression.
It was based on how voters with vivid memories of the Depression
responded to macroeconomic trends. These voters knew how a temporary
downturn in the economy could lead to a downward deflationary spiral—
and to personal economic disaster. The impact of the Depression on
Americans’ personal lives is illustrated in the fact that U.S. birth
rates declined 15 percent between 1929 and 1933, and divorce rates
dropped 25 percent. As Ben Wattenberg once put it, “If you already
were in a household, you couldn’t afford to set up a second one.”

As a result, for decades after the 1930s Americans tended to vote for
the “in” party (the party of the incumbent president) when the
macroeconomy was growing, and vote for the “out” party when the
macroeconomy was faltering or in recession. Political scientists
developed a simple rule of thumb for predicting elections: when the
economy was in good shape, the incumbent party would win.

But in recent years, this rule has proved increasingly unhelpful. One
formula predicted that Al Gore would win the 2000 election with 56
percent of the popular vote. In fact, he won 48 percent of the popular
vote, far short of the prediction.

What has changed? Two things. First, most voters today do not remember
the Great Depression. Second, voters’ assessment of the economy is
increasingly a product of their partisan leanings, rather than the
other way around.

The median-aged voter of 2008 has lived all of his or her adult life
in an economy that has had low-inflation growth about 95 percent of
the time.
The first point should be obvious. Voters from different generations,
with different experiences and different perspectives, do not
necessarily behave the same. Political scientists, to the extent that
they try to come up with universal generalizations about voting
behavior, run up against this inconvenient fact. The median-age voter
in 1960 was born around 1915 and had vivid memories of the 1930s. He
or she remembered how hard it was to get a job and begin a family in a
time of widespread unemployment. The median-age voter in 1992 was born
around 1947 and had vivid memories of the stagflation and gas lines of
the 1970s. He or she remembered how hard it was to pay rising monthly
bills with paychecks that were being eroded by bracket creep. As a
result, such voters were skeptical of high government spending and
stringent government regulation. Bill Clinton, even as he was decrying
“the economy, stupid,” kept these attitudes very much in mind.

The median-age voter in 2008 was born around 1963. This voter never
waited behind the steering wheel in gas lines and never struggled to
pay bills during the stagflation of the 1970s. This voter has lived
all of his or her adult life in an economy that has had low-inflation
growth about 95 percent of the time. For these voters, such prosperity
may largely be taken for granted. And their assessments of the economy
are likely to be very different from those of voters who had a
personal memory of the 1930s.

This leads to my second point—that Americans’ views of the economy are
increasingly a function of voting behavior or party loyalty, rather
than the other way around. The most succinct evidence of this comes
from a January 2006 report by the Pew Research Center for the People
and the Press entitled “Economy Now Seen Through Partisan Prism.” As
the Pew report notes, during the1992 campaign year and up through 1994
there was a partisan divide on the economy, with about 20 percent of
Republicans and less than 10 percent of Democrats rating it as
excellent or good. From 1995 to 1998, with a Democratic president and
a visibly aggressive Republican Congress, Democrats and Republicans
gave similar ratings to the economy. From 1998 to 2000, Democrats were
somewhat more positive about the economy than Republicans, at a time
when economic growth was vibrant and inflation low.

Then, after the election of George W. Bush, the divergence between the
two parties expanded into a chasm. It began to widen during the
recession of March-November 2001, and it widened much more as the
economy recovered and resumed low-inflation growth. By early 2006, a
time of vibrant economic growth, 56 percent of Republicans said the
economy was excellent or good, while only 28 percent of independents
and 23 percent of Democrats agreed. We have seen similar responses in
the years since, although the percentage of Republicans rating the
economy positively has dropped somewhat since the subprime mortgage
crisis and the decline in housing prices during the second half of
2007. As the Pew Research Center points out, Democrats and Republicans
of similar income levels gave sharply different ratings of the
economy.

There is a divergence here between Democrats’ and independents’
assessments of their personal economic condition, which have generally
been positive, and their assessments of the economy as a whole. It’s
hard to resist the conclusion that when Democrats—and, in 2004-2006,
independents—were responding to questions about the condition of the
economy, they were actually responding, “I am a Democrat,” or, more
emphatically, “I hate George W. Bush.”

Today, as financial markets face instability and the possibility of
recession looms, the economy is emerging as an issue in the 2008
presidential campaign. But what should be done about it? In the post-
Depression years, the alternatives were fairly clear-cut: Democrats
tended to favor increased public spending or, in the case of the
Kennedy-Johnson administration, stimulative tax cuts. Republicans
tended to favor tighter discipline on public spending and balanced
budgets, and they resisted the Kennedy-Johnson tax cuts. More
recently, since Ronald Reagan successfully pressed for tax cuts and
supported tight monetary policy in a time of slow growth and high
inflation, Republicans have tended to favor those measures. Democrats
have generally favored tax increases, as they did in 1993, or allowing
tax cuts (at least those on high earners) to expire, as they do today.
In the short term, Republicans seem to be following Democrats in
seeking tax rebates and other short-term fiscal stimulants.

But it’s not clear that either set of solutions addresses the true
policy needs of the nation—or the political needs of the presidential
candidates. At a time when the political science models of the 1950s
and the Keynesian economic models of the 1960s seem to be out of sync
with reality, new models and new policies are needed.

Michael Barone is a resident fellow at the American Enterprise
Institute.

Image by Getty.

http://www.american.com/archive/2008/january-01-08/it2019s-the-partisan-economy-stupid

...and I am Sid Harth

[chhotemianinshallah]

"It's the economy, stupid."

greenspun.com : LUSENET : TB2K spinoff uncensored : One
Thread

(For educational purposes only)

Bill Gave Us Peace and Prosperity

By Denis Hamill

www.nydailynews.com

Nine years ago, about one of four people I met in Brooklyn were either
getting laid off from a job or were already out of work.

The biggest talk on everyone's mind in the saloons, diners,
launderettes and unemployment offices of the city was work. If you
grew up and lived in the working-class neighborhoods of the outer
boroughs, you were usually defined by your work status.

Terms like "downsizing" were entering the American lexicon. Full-time
jobs were being broken into two part-time jobs so employers wouldn't
have to pay benefits. My first column for the Daily News in 1992 was
about the subject of work, and what it meant to average New Yorkers.

"How ya doin'?" was the working class refrain. "Workin' or wha'?"

After 12 years of union-busting and voodoo Reaganomics, a lot of
people were hurting. We were still reading George Bush's lips. But
only those fortunate enough to have a j-o-b were paying those new
taxes he swore we would never have to pay. The rest were signing for
unemployment checks. Unemployment reached 7.4% and inflation was at
4.2%. The Dow Jones was as low as 2,470. Everywhere I went, people
worried about work. And health insurance, rent, tuition and Christmas.
Times were terrible. Unless you were a Texas oilman, like George Bush,
life in America stunk.

That year, 1991, also was the year Bush did NOT win the Gulf War. I
never thought we should have shed a single drop of American blood for
oil, but Bush needed something to improve his approval ratings. And if
the war was going to be about oil, it was at least close to his
heart.

So Bush ordered up a live TV war.

Some 800,000 troops from 30 nations went after 545,000 entrenched
Iraqis. And after 148 Americans were killed in battle, Kuwait was
"liberated" when Iraq surrendered after 100 hours. But Bush decided
not to let Gen. Norman Schwarzkopf go into Baghdad and finish the
dirty job.

And so today, Saddam Hussein is still around, smirking, making an A-
bomb for laughs. Hoping to use it as leverage against another oilman
named George W. Bush, if we're silly enough to elect him.

That year, everybody watched the Gulf War on TV. It was all there was
to do, since so many people were out of work, sitting on sofas in
places like Bay Ridge and Ozone Park, tuned to CNN, waiting for the
mailman to deliver the unemployment check. Which was mostly worthless
in the high inflation economy.

At George Bush's side through all of this was a guy named Dick Cheney,
his ultra-conservative oilman defense secretary, who this week was
named by George W. Bush as his vice presidential running mate. Which
was really Bush's father, with his hand up the back of Junior's shirt,
saying "read my lips" all over again.

But, in 1991, after being distracted by that live reality-TV war,
rooting for the home team, waving American flags, belching jingoistic
anti-Arab slogans, and rallying around Bush for a half-hour, America
soon went back to being out-of-work. And scrounging to make ends
meet.

When the presidential election rolled around the next year, the slogan
of the Democratic Party  from sea to polluted sea  was "It's the
economy, stupid."

And a guy from Arkansas named Bill Clinton, whom most of us never
heard of, was elected. A lot of those votes came from working-class
people in places like Norwood, Red Hook and Elmhurst who were tired of
signing their names on unemployment checks and praying that their kids
wouldn't get sick at a time in their lives when they had no health
coverage.

After four years of Clinton/Gore, the Dow went up to 6,500,
unemployment dropped to 5.4% and inflation fell to 3.3%. Clinton was
reelected. After eight years of Clinton/Gore, there was a very dumb
scandal that didn't make anyone I know miss a day of work.

But the Dow is now over 10,000, unemployment is 4%, and inflation is
2.5%. Crime is also down nationwide in double digits.

And most importantly, no Americans are coming home in body bags to
help boost anyone's approval ratings.

Many of the people who I met cashing unemployment checks nine years
ago in Brooklyn, are now gainfully employed, new homeowners, bragging
about their 401-K plans and playing the stock market.

Meanwhile, George W. Bush Jr. teams up with the same busted valise who
helped us NOT win the Gulf War, another anti-choice, pro-gun Texas
oilman, for a rerun of his father's vision of America. Their slogan
might be "Read Our Lips  No More Jobs."

If Al Gore really wants to win all he needs is a simple slogan:

"Are you better off than you were eight years ago?"

Because, in places like the working-class neighborhoods of the outer
boroughs, in this election, it's still the economy, stupid.

-- Cherri (***@brigadoon.com), July 31, 2000

Answers
just like the poor said when goldwater-ran..=vote for GOLDWATER-WASH
YOUR BUTT-IN COLDWATER!!!--the repubs. are the rich-landowner,s--
keeping the GOLD -controlled!!as usual-blame everything on the poor!!
oh well-the beat go"s -on.LIFE IN SATAN,S-TERRITORY!! sure glad this
is temporary!!

-- al-d. (***@zianet.com), August 01, 2000.

Cherri,
Never followed your political bent before. If this unfortunate drivel
actually reflects what you think is real, well, you and Hawk need to
get a room.

-- Carlos (***@cybertime.net), August 01, 2000.

How did a whining bitch like me end up with a name like Carlos? Isn't
that a man's name?

-- Carlos (***@on.the.rag), August 01, 2000.

Yes but he bombed Yugoslavia and continues the slaughter in Iraq (by
upholding sanctions)

-- richard (***@onion.com), August 01, 2000.

Carlos, the article is by an author named Denis Hamil; used to write
for the New York Daily News. Pulitzer Prize winner, if I'm not
mistaken (or is that Pete Hamil? Not sure). (Yeah, the Daily News is a
tabloid; but not as bad as the New York Post.)

Anyway, I was living in Brooklyn during those years. He's telling it
pretty much as it was; including the sentiments that were going around
at the time. Doesn't matter if you agree with the "drivel" or not; it
is what is.....history. The "middle class" was almost non- existent in
that area at that time ... you were either rich or you were poor (or
rapidly approaching poor).

Frankly, I'm much better off than I was back then. Can't say for sure
why; could just be a natural progression of events that may or may not
have happened anyway. I was unemployed at that time; I was lucky to
have found a string of temp jobs, some long-term (+/- six months). If
I hadn't found the job I left last August, I was going to move to San
Diego.....

Funny how things happen.

(Ever see the film, Sliding Doors? Wonderful story from two
perspectives: if she makes the train, or if she misses the train. Rent
it if you haven't seen it.)

-- Patricia (***@lasvegas.com), August 01, 2000.

He's So Fine

-- Dixie Cups (***@luv.misogynists), August 01, 2000.

Clinton only cared about his cigars. It wasn't until we finally took
over the congress that things started happening. After thirty years of
Democratic do-nothing rule, we got the economy turned around.

It wasn't until we finally took over the congress that things started happening. After thirty years of Democratic do-nothing rule, we got the economy turned around. <<

I am curious, Maria. Exactly what sort of "things" started to happen
in January, 1993 (when "we" took over the Congress) and how do you
credit them with turning around the economy?

My own belief is that the two tax hikes, first under Bush and then
under Clinton, finally got the runaway Reagan deficit back under
control, giving Greenspan and the Federal Reserve Board room to lower
interest rates, which they did. This financed the next investment
cycle in high tech. That's where most of the job growth has been
coming from in the last decade.

Inflation has been down because so much of our manufacturing has been
moved offshore, at rock-bottom wages, letting a goodly chunk of the
Fortune 500 keep profits obscenely high without raising prices here.

Very little of that was done by Congress. The tax hikes were, but they
weren't especially popular with Republicans. In fact, raising taxes
was only made possible by Ross Perot hammering away on the subject of
the national debt in 1992 and convincing the middle class that
something had to be done.

Without Perot, the Democrats would have dithered and split over
raising taxes. As it was, the Dems barely passed it and the R's get no
credit at all in that department. The repubs still want to give away
all the prospective "surplus" in tax breaks for the rich instead of
paying down the national debt. And it is still a numbskull idea in my
opinion.

Even though Ross Perot is a certifiable loony, we owe him a big thanks
for making the 1992 election revolve around a real, serious, grown-up
issue, as opposed to an empty excercise in PR and posturing. With some
luck, Nader will have a similar effect this time around, using
campaign finance as his centerpiece issue the way Perot used the
debt.

If only Nader had a billion dollars to play with out of his own
pocket...

Exactly what sort of "things" started to happen in January, 1993 (when "we" took over the Congress) <<

Correction: January, 1995.

-- Brian McLaughlin (***@ims.com), August 01, 2000.

Nader doesn't have a chance to do the same thing that Perot did. Not
even close. Even if he did have the money, he wouldn't get any
attention. Perot, thank him for the country's turn around? Right.
Where do you live Brian?
Yeah, after I hit the submit, I realize that there was a "we" in that
sentence. Oh well, that's what happens when I type too fast.

I remember when Clinton first got into office (maybe three or four
months), my cousin commented how things were so much better. What?
Didn't argue at the time but really what was being felt across the
country was an attitude. The economic changes were basically a result
of the previous admin's policy taking affect. Clinton wasn't in office
long enough to make any policy that could take affect that quickly
(even if he did actually put any policies to work).

Newt, remember him, he had the "contract with America". It wasn't
until Newt came around that we started seeing some true changes.
Clinton latched on to Republican ideas as if they were his own. Go-
with-the-flow Clinton didn't have a original thought except for
where's the next piece of axx. Even his "war" was because he wanted
Hillary back, not for any sense of foreign policy.

George S. (sorry can't spell it) left Clinton because of his turn coat
policies, too conservative for George's too liberal style.

Perot did nothing except split the vote. His views were nothing new
that prompted any action on the adminstration's part.

Nader doesn't have a chance to do the same thing that Perot did. Not even close. Even if he did have the money, he wouldn't get any attention. <<

By reading this I can see your opinion, but not what it is based on.
However, since Nader hasn't got Perot's billion and change, it is a
moot point, I guess.

Perot, thank him for the country's turn around? Right. <<

Close. You mistate my premise. Perot raised the issue and waved the
bloody flag over deficits when both parties wanted to duck it. He
managed on the strength of that one issue to get almost 20% of the
vote. In the next Congress, that issue was addressed effectively,
after almost 10 years of blathering and hand-wringing, but no
effective action. I do thank him for that.

Where do you live Brian? <<

Oregon. Why?

I remember when Clinton first got into office (maybe three or four months), my cousin commented how things were so much better. What? Didn't argue at the time but really what was being felt across the country was an attitude. The economic changes were basically a result of the previous admin's policy taking affect. <<

And what Bush "policy" might those be? And how did it have this
effect? Even a minimal explanation of cause and effect would be better
than bald assertion.

ALso, I was under the impression that earlier in this thread you were
crediting the Republican control of Congress for the positive news in
the economy. When Bush was in office, the Democrats controlled
Congress and (you also argued) they did nothing.

Now do you argue that they were implementing Bush's policies? I am
mildly puzzled.

Newt, remember him, he had the "contract with America". It wasn't until Newt came around that we started seeing some true changes. <<

"True", as opposed to the changes your friend noticed a few months
after Clinton took office? OK. For the sake of argument, I'll accept
that Bush's policy turned the economy around when Clinton took office,
but the only "true" changes occured after Newt "came around". I am
guessing that you mean when he became Speaker of the House instead of
Minority Leader, 1995.

Refresh my memory. Exactly what changes did Newt bring about and how
did they lead to the economic strength we see today? No need to be
elaborate. A paragraph or two outlining Newt's achievments and how
they affected inflation and the unemployment rate will be plenty.

Clinton latched on to Republican ideas as if they were his own... <<

And so on.... Is any of this important? Or can we just skip ahead?

Perot did nothing except split the vote. His views were nothing new that prompted any action on the adminstration's part. <<

Well, in 1992, Clinton promised a "middle class tax cut" in just about
every speech he made right up to November. On th other hand, Bush ran
on his record (those "policies" you now credit with turning things
around in 1993) and was soundly trounced.

While Perot's views may not have been new, they hadn't ever been put
to a vote in such a clear way. So many people jumped off the major
party's ships that you could see them bobbing like corks.

So, if Perot's substantial showing had no effect on Clinton, what
happened to that tax cut he promised? Any explanation based on
political reality will be happily accepted.

P.S. Any explanation that attempts to explain this glaring about-face
as simply "Clinton being Clinton - a perfidous bastard" will be
laughed at. Willy may be a perfidous bastard, but he doesn't lose many
points when it comes to being shrewd. He whalloped Newt right out of
town, Maria, right when the Republicans were impeaching him. That man
is no slouch at politics.

He abandoned the tax cut for a good political reason. How do you
explain it?

-- Brian McLaughlin (***@ims.com), August 01, 2000.

Brian I can see I pushed a couple of your buttons.

Nader doesn't have a chance to do the same thing that Perot did. Not even close. Even if he did have the money, he wouldn't get any attention. << By reading this I can see your opinion, but not what it is based on. However, since Nader hasn't got Perot's billion and change, it is a moot point, I guess.

Yes it's moot. But if you have some proof as to your to your stand
please add it. "With some luck, Nader will have a similar effect this
time around, using campaign finance as his centerpiece issue the way
Perot used the debt." It seems wer're talking lots of what if's and
you only have your opinion.

"You mistate my premise. " Sorry I don't. Perot didn't raise any
bloody flag. He got 20% of the vote because people didn't want the
other two. You are making more of this than need be. My opinion, Brian
just as you're entitled to yours.

I asked where you lived because I thought you lived in Canada. No
cutting meant here.

Sorry I don't have time right now to answer the rest of your rantings.
Just a real quick comment. Get a grip. Policies don't see any results
right away; it takes time. Sorry I have no proof, just observations.
It's sorta like implementing development changes; it doesn't happen
over night. If you have proof of the contradiction, please add it.

Policies don't see any results right away; it takes time. <<

Yes. You are right. Very shrewd observation, that one.

But, in my opinion, the two spheres of government policy that really
move an economy are fiscal policy and monetary policy. The Federal
Reserve Board controls monetary policy. The Congress controls fiscal
policy. George Bush didn't control either one. So he could not (in my
opinion) have instituted much of any policy that did squat to turn
around the economy in 1993.

(The Administrative branch does control foreign policy, if that is any
consolation.)

As for Congress under the Republicans being responsible for the

Policies don't see any results right away; it takes time. <<

So, let's just assume that in 1995 Newt put some kind of new fiscal
policy into place that benefitted the economy. You still haven't said
what this wonderful policy consisted of, but we'll pass over that
detail and assume a wonderful new policy was put in place.

So, how long did it take (in your opinion) for this "new" fiscal
policy of Newt Gringrich to show results? A year? Two years?

Let's be generous and say it took just one year. That would put the
first results of this policy into 1996. Right? Of course, this
expansion started before 1996.

So, why do you credit the expansion exclusively to the Republicans
controlling Congress? ...Aside from the fact that you think
Republicans are wonderful people who deserve credit for having
wonderful policies.

-- Brian McLaughlin (***@ims.com), August 01, 2000.

Patricia--
I never saw "Sliding Doors" but I did see "Run, Lola, Run". Similar
idea. It's interesting, even spooky, how our lives and world history
are hugely affected by the smallest perturbations.

-- (***@indy.net), August 01, 2000.

Maria--
A Republican woman? I have seen another woman on this forum (no names)
refer to Republican women and Republican blacks as oxymorons.

-- Lars (***@indy.net), August 01, 2000.

Lars, I was wondering how long it would take you to recall that little
tidbit :-)

I said they SHOULD be oxymorons. But that's JMO.

Are you secretly a curmudgeon? Not knowing your age, I would guess yes
[g].

-- Patricia (***@lasvegas.com), August 01, 2000.

Help here Patricia,
Splain please why you would say the terms "Republican women" &
"Republican blacks", well, "SHOULD" be consider oxymoronic?

ps: Backhoe available here but doubt you'll need it.

-- Carlos (***@cybertime.net), August 01, 2000.

Patricia--
My memory fails. I should file old posts, cross-referenced 8 ways like
cpr does.

I can't even remember my age, but Bess Myerson thinks I am studly.

-- Lars (***@indy.net), August 02, 2000.

Carlos, it was a (pretty bad, it would seem) joke, but one that I
wholeheartedly used to believe, and still do to a certain extent. Can
you sit there and tell me with a straight face (?!) that the
Republican Party -- in the past -- has ever represented anyone outside
of White, Middle to Upper Class Men?

Didn't think so ;-)

Lars, if you saved and cross-referenced everything, you'd need a
network (I used to do that a couple of years ago as part of my job,
which is why I now cringe at the very thought.....what made it worse
was that no one ever looked at my "library" and no one ever used the
Intranet I set up to house and catalogue it...talk about *sigh*).
-- Patricia (***@lasvegas.com), August 02, 2000.

Brian, I remember now, you're the tree-hugger who believes that our
forests are depleting at astronomical rates, regardless of the fact
that we seem to be surviving now. And according to the officials, we
have too much forest, fueling our wild fires across the west.
But back to politics You seem to not want to give any credit to the
Republicans in the current economic situation. You think it lies with
the cigar smoking (er ah sucking) prez. I heard NPR (that picko
commie joking, just joking) radio station support my view of
"euphoria" when Clinton took office. They, as a matter of fact, gave
three reasons the economy was looking good; one of them attributed to
the former prez. I can't remember the numbers but they weighted each
of these reasons on the size of their effect. At no time did they say
it was because the esteemed President Clinton was doing such a
wonderful job.

Let's see when Clinton got into office: he took back the pledge on
gays (I knew that would never fly in the military); his health care
went nowhere (thank God, it would have been the downfall of our
country); and he (and the true president, his wife ) was responsible
for confiscating FBI files, travel-gate, and a slue of other fiascos.
Newt and the newly acquired Republican Congress began with balancing
the budget. Pretty good considering that the thirty-year Democratic
Congress couldn't do anything but spend. This was the beginning policy
that started to turn around our economy. As I stated above, Clinton,
as you so appropriately referred to him as the shrewd politician,
jumped on the bandwagon. He began to look like a repub. So much so,
George had enough. Poor George first he had to squash the scandals
constantly cleaning up after the little affairs. Turning red coat was
the last straw. George left him.

And Brian, I also believe that Greenspan had more to do with the
economy than prez Clinton. So your evaluation of my opinion is not
quite accurate. It would be more accurate to say that I believe that
Clinton had nothing to do with our present state. Just about anyone
but Clinton. Because you see, Clinton is a worthless piece of red neck
crap, a sociopath liar.

Clinton ran Newt out of town? Give me a break. Brian, didn't you get
the Y2K thing wrong also?

Clinton ran Newt out of town? Give me a break. <<

Oh, yes. Now I remember. After running for reelection and winning,
Newt was suddenly overcome by a desire to give up his seat and the
speakership a few weeks after the election, because he wanted to spend
more time with his family and catch up on his reading.

Of course, there was the fact that Clinton spent tens of millions of
dollars in tv ads, tying Dole to Newt in every one of them, so that he
cleverly framed the 1996 election as a referendum on how voters felt
about Newt. When Clinton won, it hurt Newt with his Republican troops
in the House, but it didn't sweep Newt away.

Seems to me that Newt and Willy went toe to toe over the budget and
"shutting the government down". Twice. Each one was on tv every night
for weeks, crooning their own version of the story. The people backed
Willy and Newt was hurt even worse with his troops, who expected
victory and got a public whupping. Twice.

So, it turned out the Democrats mimicked Clinton and ran their entire
strategy for the 1998 campaign as another referendum on Newt and the
House barely missed reverting back to the Democrats. The House
Republicans also noticed that Clinton, even in the middle of his
impeachment over the Lewinsky scandal, had approval ratings that were
triple what Newt's were and rising, the troops who survived the 1998
debacle tossed Newt overboard as more of a liability than an asset.

But that could just be me misremembering the story.

BTW, I see my tree-hugging offends you. Sorry. I will endeavor to just
pat them affectionately on the rump whenever you are around.

-- Brian McLaughlin (***@ims.com), August 02, 2000.

HAHAHA Brian, no I'm not offended by your tree hugging. Make love to
as many trees as you like; whatever floats your boat. Just a warning:
trees can give you splinters.

So we moved on from economic policies to the scandals. I'm reminded of
the interview Hillary gave on a morning talk show about how the
"enemies" are doing this to Bill. She proved that she only saw what
she wanted to see. She believed that Bill didn't have sex with that
woman, Monica. Bill does have his legacy.

Bill knows how to make friends; he does it so well. And Republicans
are not known for having this attribute. "Went to toe to toe" was a
popularity contest, nothing about issues or policies. Polls don't tell
the whole story; you should know that, Brian, from the Y2K polls. I
never pay much attention to polls or popularity contests for that
matter. I believe that it was extremely exhausting to deal with the
Clintons (the most devious couple of low lifes ever in politics and
referring back to the "forgiveness" thread, they will also find their
karma) and Newt gave up; I can't blame him for that, George S did too.
I thought that Newt would continue to speak up but alas I was wrong
about that.

-- Maria (***@ymous.com), August 02, 2000.

{Hushed silence}
Maria.... is.... wrong?

{Two years of antagonism erupt in hysterical laughterfest}

-- lisa (***@work.now), August 02, 2000.

Cherri you are in a world of your on! I do not support dem or rep
because neither care about people who have lost their jobs. People who
have been working for thirty years for on company and this company
wenth to china and they are lost. Their unimploiment runs out they
can't find jobs and they know longer count.

-- Et (***@zebra.net), August 03, 2000.

Hey Lisa, I'm ready for my kiss.

-- Maria (***@ymous.com), August 03, 2000.

Maria:
This is just my observation, so I hope you're not offended when I
suggest that you're not ready for prime time in political
discussions.

In almost every post you've made on this thread, your thoughts were
limited to Clinton and cigars, Clinton not having an original thought
beyond [something about axxes], Clinton just a redneck, credit ANYONE
but HIM, etc. You are apparently unaware of all the sexual scandals
that have followed Newt [and continue to follow Newt with him now
divorcing his second wife to marry the woman with whom he's NOW having
an affair.] Brian didn't mention any of Newt's scandals, yet your last
post stated:

"So we moved on from economic policies to the scandals. I'm reminded
of the interview Hillary gave on a morning talk show about how the
"enemies" are doing this to Bill. She proved that she only saw what
she wanted to see. She believed that Bill didn't have sex with that
woman, Monica. Bill does have his legacy."

You must have missed all the jokes about Bill using the Newt excuse
when he said that he didn't consider fellatio sex.

I don't think Hillary is the only one seeing only what she wants to
see. In addition, I consider bringing opinions on the unfolding of Y2k
and/or bringing environmental concerns into a political argument
reflective of YOUR inability to discuss the issue at hand, which is/
was how the economy is better 8 years later [not MONTHS later, as your
relative example described.]

-- Anita (***@hotmail.com), August 03, 2000.

Anita, please check your reading (scanning) capability. When you
state, "your thoughts were limited to Clinton and cigars", then I can
only assume you ignored most of my points. That's fine, it's your
prerogative. To answer conclusively and succinctly (obviously you
can't read too many words at once) the question as to if we're better
off than eight years ago, I'd say no. Things didn't turn around eight
years ago, when Clinton got into office. Things turned around within
the last four years, only after Republicans took over Congress.
As to Newt's affairs, your point is?

By the way who made you the discussion goddess on how to respond on
this forum? Are you now making the rules on debating on political
threads or does this apply to all threads? I'm not allowed to give my
opinion on politics and must present my discussions to your
satisfaction. How pompous of you. Do you like trees, Anita?

And Anita I hope you don't take offense but you're not ready to go
prime time on "women in the military" discussions. You never did
address my point except to direct me to endless Internet articles
forcing me to decipher your point. If you recall I just stopped
responding on that thread, simply mystified by your lack of discussion
prowess. However, I thought it best not to state my opinion.

Finally, your input is appreciated. And please don't misconstrue my
response to you. I'm not offended by your critique; just amazed by the
size of your ego.

-- Maria (***@ymous.com), August 03, 2000.

Link
8/02/00 10:55 p.m. Shays Shocker Clinton Raped Broaddrick Twice.

By NR staff onnecticut Rep. Chris Shays said on a talk radio show
Wednesday that, based on secret evidence he reviewed during the
impeachment controversy, he believes President Clinton raped Juanita
Broaddrick, not once, but twice.

Talk-show host Tom Scott of Clear Channel Broadcasting, New Haven
(WELI 960) asked Shays about the mysterious impeachment "evidence
room," prompting the GOP moderate to say that Broaddrick "disclosed
that she had been raped, not once, but twice" to Judiciary Committee
investigators.

Shays, who is often hailed by the New York Times for his independent
judgment and good sense, found the evidence compelling:

"I believed that he had done it. I believed her that she had been
raped 20 years ago. And it was vicious rapes, it was twice at the same
event." Asked point blank if the president is a rapist, Shays said, "I
would like not to say that it way. But the bottom line is that I
believe that he did rape Broaddrick."

And Shays voted against impeachment!

-- Dumb Broad (***@elected.sociopath), August 03, 2000.

Maria:
Anita, please check your reading (scanning) capability. When you
state, "your thoughts were limited to Clinton and cigars", then I can
only assume you ignored most of my points. That's fine, it's your
prerogative. To answer conclusively and succinctly (obviously you
can't read too many words at once) the question as to if we're better
off than eight years ago, I'd say no. Things didn't turn around eight
years ago, when Clinton got into office. Things turned around within
the last four years, only after Republicans took over Congress.

I didn't ignore your points, but your prejudices were openly offered
regarding your hatred of Clinton, and each post reiterated this
hatred. I'm not suggesting that you shouldn't hate Clinton, but
suggesting that your hatred of the man shouldn't interfere with your
objectivity regarding what was accomplished during the Clinton
administration. Since cause and effect is difficult to pinpoint [as
we're discussing on Stephen's forum], I cannot [and have not] said
with certainly that what happened was due to Clinton or due to the
Republican Congress. As to Newt's affairs, your point is?

My point is that he was/is the KING of blow-jobs and coined the "it
isn't sex if" excuse. He was/is also the KING of extramarital affairs,
yet your posts only reference Clinton as a guilty party. My point is
that Brian didn't bring up anything about Newt in the sexual arena,
but that you made several references to those of Clinton and then went
on to suggest that the topic had changed from economics to scandal. By
the way who made you the discussion goddess on how to respond on this
forum? Are you now making the rules on debating on political threads
or does this apply to all threads? I'm not allowed to give my opinion
on politics and must present my discussions to your satisfaction. How
pompous of you. Do you like trees, Anita?

Yes...I DO like trees, although I don't consider them possible sexual
partners. And Anita I hope you don't take offense but you're not ready
to go prime time on "women in the military" discussions. You never did
address my point except to direct me to endless Internet articles
forcing me to decipher your point. If you recall I just stopped
responding on that thread, simply mystified by your lack of discussion
prowess. However, I thought it best not to state my opinion.

Again, Maria, you're looking at my offering on another topic and
suggesting that because my opinion differed from yours on that topic,
I'm proven to be wrong in every area. I certainly understand that both
you and Cherri began your careers in the military many years ago.
Neither of you have experienced combat with the current generation of
young people. Perhaps both of you have experienced discrimination due
to folks who used their own subjective experiences to say, "Women
shouldn't be allowed in the fields of men." Yesterday's woman is/was
NOT the same as today's woman. MY point was that yesterday's MAN is
NOT the same as today's man. Since I've not had experience in the
military, I linked to threads written by women recently in the
military. Finally, your input is appreciated. And please don't
misconstrue my response to you. I'm not offended by your critique;
just amazed by the size of your ego.

My lack of ego is perhaps only exceeded by my lack of emotion on many
topics that drive others to see only the side they've chosen to see. I
DO speak openly with my opinions on what I see, but I TRY to form my
side of each debate with points and links as backup.

-- Anita (***@hotmail.com), August 03, 2000.

Anita, "...because my opinion differed from yours on that topic, I'm
proven to be wrong in every area". When and where did I say this? How
did I even imply that your difference in opinion made you wrong. You
have no experience in the military so you don't know first hand
anything about. But that doesn't prove you are wrong just that you are
not willing to accept an opinion from someone who does have experience
with that topic. Again I think your ego and your willingness to "read
up" on the topic made you believe that you didn't need to "hear" the
other side of it.
You never addressed the fact that women and men in stressed situations
don't work. Yes you continued to talk about how women are as good as
men, how women have changed.

Anita wrote, "Neither of you have experienced combat with the current
generation of young people." And neither have you... So, your opinion
counts more than our opinions. What does this have to do with it? I
see the following statement clarifies that the current generation is
somehow different. Well, not really... Women haven't changed that much
in 10,000 years. We're still (for the most part) attracted to men.
10,000 years will not change the basic attraction between the sexes.

"Perhaps both of you have experienced discrimination due to folks who
used their own subjective experiences to say, "Women shouldn't be
allowed in the fields of men."" Please don't assume my experiences
included discrimination; they didn't. Quite the opposite, I was
treated exactly as any other in the military, no discrimination
whatsoever. Promotions and rankings based on accomplishments, not sex.
My opinions don't come from other people saying that "Women shouldn't
be allowed in the fields of men." Please Anita, give me more credit
than that. If you haven't concluded much from my postings, please see
that I do have a mind of my own.

Back to Clinton... Absolutely I can't hide my hatred for the man and
his wife. (I guess calling them low lifes was your clue. Glad to see
you picked up on it.) But that's my point. His administration did
nothing. His legacy is how he change the meaning of the statement
"Have a cigar".

The beginning states Clinton's responsible for peace. So that's why he
sent troops overseas? For the peace, geez and I thought it was because
he wanted to get back into Hillary's good graces. Look Anita, Of
course we can't say with certainty; it's all about opinions. And I can
see you are full of them.

-- Maria (***@ymous.com), August 03, 2000.

"Brian, I remember now, you're the tree-hugger who believes that our
forests are depleting at astronomical rates, regardless of the fact
that we seem to be surviving now. And according to the officials, we
have too much forest, fueling our wild fires across the west."
"Clinton ran Newt out of town? Give me a break. Brian, didn't you get
the Y2K thing wrong also?"

"Do you like trees, Anita?"

"And Anita I hope you don't take offense but you're not ready to go
prime time on "women in the military"

"Anita, "...because my opinion differed from yours on that topic, I'm
proven to be wrong in every area". When and where did I say this? How
did I even imply that your difference in opinion made you wrong."

Maria, I offer the above as implications that you feel that anyone
that disagrees with your opinions on ONE subject is wrong if they
disagree with you on OTHER subjects.

"The beginning states Clinton's responsible for peace. So that's why
he sent troops overseas? For the peace, geez and I thought it was
because he wanted to get back into Hillary's good graces. Look Anita,
Of course we can't say with certainty; it's all about opinions. And I
can see you are full of them. "

Did we watch our troops come home in body-bags?

Yes, indeed I have opinions. You do as well. I've never suggested that
mine were better than yours. I've simply suggested that you haven't
explored politics enough to state an unbiased opinion. [THAT's an
opinion, too.]

I'm no fan of Clinton, but your biases are hanging out like a shirt-
tail at a formal dinner.

-- Anita (***@hotmail.com), August 03, 2000.


Proven wrong in every area? My my aren't we testy. So what if I bring
up some out of topic areas! Oh I forgot I broke one of your "how to
discuss" rules. So sorry.

And you still haven't addressed "women in combat" but hey that's your
prerogative. You truly are a pompous ass. I thought it when you stated
you wouldn't vote for Bush because you could out-debate him, now I
know it. What an ego and now I see it for what it really is. Oh wait
do I need to define the word is?

-- Maria (***@ymous.com), August 03, 2000.

Oh and Anita you really need to lighten up. So serious debating, "let
me research the internet to find articles to support my view, but of
course I don't get excited as others do, I can see both sides of the
debate."

-- Maria (***@ymous.com), August 03, 2000.

Maria:
I think we've both expressed our opinions enough to this audience. I
won't bother to engage you again. I found myself in a discussion not
so long ago regarding how some of us could agree on the unfolding of
Y2k yet disagree vehemently on other things in life after the CDC.
IMO, there never was a correlation between consistencies on the one
versus the other.

-- Anita (***@hotmail.com), August 03, 2000.

Anita, it might help to do some creative visualization when engaging
Maria in debate. Imagine she is your youngest aunt sitting in an
overstuffed chair, with a basket of yarn next to it, knitting away at
an afghan. From time to time she looks at you over the tops of her
eyeglasses and delivers her political or other opinions. You wait
until she finishes before you answer.
Sometimes she gets involved with the talk and drops a stitch.
Sometimes she gets involved with the afghan and drops the thread. It
all makes the same amount of difference in the end.

-- Brian McLaughlin (***@ims.com), August 03, 2000.

BWAWAWAHAHAHAHAHA!!!!
.....I don't mean to be overbearing or anything, but this political
discussion has got to be one of the most rooted in naivete that I have
had the pleasure of seeing!

.....The fed is responsible for the economy; not the administration,
not the congress or anyone else. The money spigots are opened and
closed at the whim of the international bankers; same with the
expansion and contraction of credit. But that's okay, you just keep
believing in fairy tales the way the polytick folks want you to, and
we'll never get this ship righted.

.....I now see why you don't discuss politics very often, Anita; (G),
but I'll leave you ladies to further this fictionalized debate, and
I'm including you, as well, Brian... (are you sure it isn't Brianna)?

The fed is responsible for the economy; not the administration, not the congress or anyone else. The money spigots are opened and closed at the whim of the international bankers... <<

Okey-dokey, Patrick. We can't all be sophisticates like you.

I can see your point. One morning an international banker just gets a
whim (your word, not mine) to close a "money spigot", and sure enough,
there she closes with a deft twist of the wrist. On. Off.

What a clean concept! What a beautiful theory!

No need for any messy reasons for anything to happen in the economy.
It's all based on a whim (your word, not mine). We are just the
playthings of the gods (read: international bankers). They kill or
spare us on a whim. I am really impressed!

But that's okay, you just keep believing in fairy tales the way the polytick folks want you to, and we'll never get this ship righted. <<

Oh, but now I want to stop believing in fairy tales! It seems so...
unbecoming, somehow. And you seem like just the person to dish out the
straight scoop. Like f'rinstance, what we have to do to get the "ship
righted". Yeah! That's a good start!

So, tell me what to do. [Whines and wriggles like an eager puppy.] I
want to know! Tell me what to do! Tell me what to do! Tell me what to
do! Tell me what to do! Tell me what to do!

I insist!

-- Brian McLaughlin (***@ims.com), August 03, 2000.

Brian:
"It all makes the same amount of difference in the end."

If nothing else, I understand what you said here, and that's one of
the reasons why I reserve my emotions for real life. IMO, Maria felt
some sortof allegiance existed between us because we were both pollies
prior to Y2k's unfolding and she chose not to express herself
completely regarding my opinions on the appropriate threads at the
appropriate time. Again, IMO, it all kinda grew and festered until she
felt I'd attacked her in this thread and it all came out.

I'm pleased that you brought up visualization, however. I've found it
to be a great healer. When my son had a mole removed from his leg, I
asked the doctor if my son and I would be allowed to talk during the
"operation", or whether the only conversation would be hers. She
agreed to allow my son and I converse, and we went off to the rain
forest [both speaking aloud], with only one slight interjection by the
doctor's assistant who said, "I THINK you're talking hippopotamus
there." When the surgery was done, the surgeon gently suggested that
we return "home." Upon her return she said, "I've never encountered
such a relaxed patient. What do you call that?" I said,
"Visualization." My son then looked at his leg [which was already
bandaided] and asked, "Can I look at it?"

-- Anita (***@hotmail.com), August 03, 2000.

Brianna...
.....Since this is the unc forum, I trust my one-time lapse against my
language policy will be forgiven; but you could begin by taking your
mockingly condescending tone and childlike foolish antics and shove
them up your ass; that is, once you get your head out of the way.

-- Patrick (***@gradall.com), August 03, 2000.

Patrick:
I'm sure you feel better now that you've had your outbursts. You have
no need to worry about being a one-time or XX-time offender on this
forum. Posts are preserved here, and everyone/anyone can look at the
posts and make their own decisions on the rational of the poster.

-- Anita (***@hotmail.com), August 03, 2000.

I hate it when that happens. Patrick, please throw an 'e' at the end
of rational if you'd like my last post to make more sense.

-- Anita (***@hotmail.com), August 03, 2000.

Okay, Anita...
....."e"

.....That was completely out of character for me; but folks can search
high and low, and the only cussword they'll find is that one above...
I believe...

-- Patrick (***@gradall.com), August 03, 2000.

So that's why he sent troops overseas? For the peace, geez and I
thought it was because he wanted to get back into Hillary's good
graces.

You mean there weren't those hundreds (thousands) of bodies in mass
graves over in Cosivo? Or that Clinton was responsible in some way for
the atrosities that were occuring, or that he UN was going out of
their way to help him get back in Hillary's good graces.

When people are fanatic in their belief's they tend to be blind to
anything that would show them otherwise, kinda like some people were
in Y2K.

Newt had run his campaign on "Family values". It was about the only
thing he could use against his opponent, a woman, saying she was
breaking up her family by trying to go to DC. The first thing he did
was dump his sick wife after he won the election, while she was in the
hospital suffering from cancer. Also the fact that he had been caught
getting a blow job in a car by an aid and his own daughters. If the
repub's were not aware of this fact, they soon became aware of it and
others after "someone" provided this information to over half of
them.

He had gotten through his innappropriate campaign practices, but with
everyone screaming about Clinton and Monica, his own transgressions
were a BIG liability that could not be explained away with any
justification by his own party. Clinton didn't have to do anything to
him, he did it all to himself.

Don't assume my party beliefs because of what I post. But I believe in
intellectual honesty and will not "pretend" that what is "put on" is
real.

Those people in Washington are supposed to represent us, they are more
concerned about getting to where they are than what we, the people
want.

The Repub convention was so overwhelmingly phoney and manipulated that
it was an insult to the American people.

The repub's know that if they used Newt's tactics of attacking the
other party blatently and openly that the people who were discusted
over their behavior from the last two elections and of the public
airing the monica situation would be reminded and would attack them
for this behavior. They have cleverly kept the loudest critics of
Clintons behavior out of the convention

Sex in politics is not new, why does Clinton's situation with Monica
negate every other action he has performed while in the white house?
Yes, I was sick of hearing about it too, and especially mad because my
children were forced to hear about it, but place the blame for that
where it belongs, on those who manipulated the situation so that it
was aired so publicly and for so long. Why is it you had not heard of
Newt doing worse? Because it was made a political issue to have it
aired for over a year.

As for the Republican convention, don't pretend that every step has
been planned, every non white, every physically handicapped and every
female wasn't stratigly placed this past week. Bush gets off a plane
and stopps by his limo to talk animatedly to two non-whites before he
gets in the car, his 14 year old nephew's mention of "bringing respect
back to the office of the presidency" was so obviously rehearsed,
(Same exact words repeated by many others) there had to have been a
group of statements that were decided on that were to be used by
people to make sure they were heard by the largest audience possible.

The entire convention is a joke and backfired because minorities,
disabled and parents of small children are outraged over the
difference between what Bush has done in Texas and the "show" he is
putting on. It was an insult to the intellegence of everyone, and
showed he considers members of the groups he showcased as stupid
enough to fall for this farce.

It was not a republican convention, it was a well planned and
choriagraphed George W Bush show.

If you fall for everything either party had done or said hook line and
sinker, I can only feel as sorry for you as I did for those who fell
for TEOTWAWKI the same way.

Guess we just have to wait to see what goes on in the Democratic
primary.

Bringing up how Anita believes about women in combat has nothing to do
with politics, she believes with the information she has or can gain.
Not been in the military, I feel she cannot understand to the degree
that we do and accept her right to believe as she chooses and do not
consider it a fault on her part.

I choose to disagree with others without resenting them as people for
it.

It is not up to me to tell you what to do.

you could begin by taking your mockingly condescending tone and childlike foolish antics and shove them up your ass <<

Damn, Patrick! And here I was, all ready to join the cognescenti of
international banking! My bad luck! And my ass is tingling, too. Is
this normal?

-- Brian McLaughlin (***@ims.com), August 03, 2000.

Brianna...
.....My guess is that you were always the class clown. How simple does
one have to be to not understand the correlation between money and
power? Hard to imagine; but if you only wish to be a cut-up, then
you'll be destined to blindly falling in line with tree-huugers, and
the politically naive to the point that all you have to offer is the
useless drivel that has so customarily appeared above your name. Do
you really consider yourself intelligent, or are you quite aware that
it's only your "front"?

How simple does one have to be to not understand the correlation between money and power? <<

But, Paaa-trick! [He whines.] I doooo understand the correlation
between money and power. Really. I do.

What I don't understand about what you came shlepping into this thread
to chastise me about, and tut-tut at Anita and Maria over (not to
mention striking a damned arrogant pose while doing so) is this:

1) How you came to lame conclusion that the Congress has no
responsibility for the economy, when they control how a budget of over
1.5 trillion dollars is spent. And they write the tax laws. And they
ratify the President's choices for all sitting members of the Federal
Reserve Board. And more.

2) How it came about that "the fed is responsible for the economy",
but at the same time "the international bankers" appear to be pulling
all the strings in your stupid little scenario? How can both be true?
And how does it happen. Name names. I dare you.

2) Why you think my name is "Brianna".

So please, explain all these to my "naive" self and all us other
"naive" participants in this thread, because so far you haven't said
one god damn thing worth blowing out my nose.

If you do make a credible accounting of your opinions and their basis,
then I promise to stop clowning around with you and come to grips with
your arguments like a thinking person. Otherwise, why the bleeping
hell should I bother?

If you don't explain yourself and just lob some more ad hominems
around and pretend you are just too cool to be bothered, then as far
as I am concerned you can just shut your cake hole, Patty, because you
are a smirking, ignorant bastard and a comb-over excuse for the
patriot you pretend to imitate.

So put up or shut up, "Patrick Henry", you poor excuse for a
decorative plant. Your choice.

[Ooops! Have I... gone too far?] [Ominous soap opera music fades out.
Roll credits.]

-- Brian McLaughlin (***@ims.com), August 04, 2000.

mutters darkly to himself... stupid tags. Oughta be a law.

-- Brian McLaughlin (***@ims.com), August 04, 2000.

"But, Paaa-trick! [He whines.] I doooo understand the correlation
between money and power. Really. I do."
.....Then what is you problem, running out of clown material?

"What I don't understand about what you came shlepping into this
thread to chastise me about, and tut-tut at Anita and Maria over (not
to mention striking a damned arrogant pose while doing so) is this:

1) How you came to lame conclusion that the Congress has no
responsibility for the economy, when they control how a budget of over
1.5 trillion dollars is spent. And they write the tax laws. And they
ratify the President's choices for all sitting members of the Federal
Reserve Board. And more."

.....Read above, Brianna; I said the fed controlled the money spigots,
which is to say the expansion and contraction of the money supply, as
well as the expansion and contraction of available credit. A child
could understand this, Brianna, why do you think you have such
difficulty?

"2) How it came about that "the fed is responsible for the economy",
but at the same time "the international bankers" appear to be pulling
all the strings in your stupid little scenario? How can both be true?
And how does it happen. Name names. I dare you."

.....The "fed" is privately owned by said bankers, and it matters not
one wit what a purchased and therefore compromised congressman does or
doesn't do. Stupid little scenario? You've been victim of it your
entire life, Brianna; that you aren't learned enough to know these
things is your problem, not mine, but if you choose to "shoot the
messenger" as it were, be my unlearned guest. You want names? These
are well hidden from public view, and I understand completely why you
haven't found the information; they hide these facts in books! Do some
homework for yourself; the names are hiding in plain sight...

"2) Why you think my name is "Brianna"."

.....I just can't believe that you're really a man; you certainly show
enough signs of emasculation; perhaps your glands are just producing
too much estrogen, sweetie.

"So please, explain all these to my "naive" self and all us other
"naive" participants in this thread, because so far you haven't said
one god damn thing worth blowing out my nose."

.....As if you, with your towering intellect would recognize such when
you see it; I could explain it fully, in irrefutable terms, but it
would be lost on you, Brianna... The only way you'll learn anything is
to do the legwork yourself, but I really don't expect that to
happen... you shun such exercises in favor of running around with your
puffed up rhetoric, and ridiculing demeanor, expecting that to remove
the burden of true knowledge from your obviously overly narrow
shoulders. That's fine by me, remain shrouded in ignorance; but don't
come on board spouting your hogwash expecting me to educate you. Get
off your seat and try the library, oh he-of-the-Bozo- pursuasion.

"If you do make a credible accounting of your opinions and their
basis, then I promise to stop clowning around with you and come to
grips with your arguments like a thinking person. Otherwise, why the
bleeping hell should I bother?"

.....Your first error was to assume this was mere opinion when
presented with fact; that you don't recognize one when you spot one is
predictable of someone that is "like a thinking person" as opposed to
actually being one.

"If you don't explain yourself and just lob some more ad hominems
around and pretend you are just too cool to be bothered, then as far
as I am concerned you can just shut your cake hole, Patty, because you
are a smirking, ignorant bastard and a comb-over excuse for the
patriot you pretend to imitate."

.....This one is actually kinda funny, Brianna; there were no ad homs
lobbed; I just think you learned some new words on the net, and just
can't stop using them. I don't "pretend" anything, lady, my name is my
name by birthright.

"So put up or shut up, "Patrick Henry", you poor excuse for a
decorative plant. Your choice."

.....This is beneath a response...

"[Ooops! Have I... gone too far?] [Ominous soap opera music fades out.
Roll credits.]"

.....Likewise...

-- Patrick (***@gradall.com), August 04, 2000.

-- C (***@b.c), August 04, 2000.

It is midnight. The blackbirds must be sleeping.

I could explain it fully, in irrefutable terms, but it would be lost on you, Brianna... <<

I think this pretty much sums up Patrick's contribution. I think I
first heard this dodge on the playground, and it had lost all effect
on me by the time I was in 8th grade.

The only way you'll learn anything is to do the legwork yourself <<

Ah yes. In your rather strange version of debate I am expected to
prove your assertions for you. You are too busy saving your self for
the finer things in life. If I fail to do your work for you, then I am
lazy. Geez. I read Tom Sawyer, too, Patrick. Whitewash your own
goddamn fence.

Your first error was to assume this was mere opinion when presented with fact <<

Jesus turned wine into water. Patrick turns unsupported assertions

The "fed" is privately owned by said [international] bankers <<

Far from being a "fact", this is a well-known canard, believed only by
kooks.

and it matters not one wit what a purchased and therefore compromised congressman does or doesn't do. <<

And you have the damn gall to pretend you have no "opinions", but only
"facts"!

Patrick, your own words would have been sufficient to brand you as a
poser without my commentary. You waltzed in here and expected to be
taken for someone with important knowledge and ideas, based on waving
your hand and calling the rest of us naive. It won't wash.

Crawl back into your hole. You are the worst kind of fool - an
arrogant one.

-- Brian McLaughlin (***@ims.com), August 04, 2000.

">> The "fed" is privately owned by said [international] bankers <<
Far from being a "fact", this is a well-known canard, believed only by
kooks."

.....This statement alone show how very inept you are at research; you
won't even look for the facts of the matter, you believe the fed's own
debunking "programming"... sad, really... it's no wonder this upsets
you so, Brianna, sweetie; perhaps you were too busy doing your hair to
go looking?

-- Patrick (***@gradall.com), August 04, 2000.

-- Anita (***@hotmail.com), August 04, 2000.

Patrick,
I am baffled as to why you refrain from citing evidence to support
your position, and how you could be shocked by the provocative effect
of telling people that they're naive and they should do their own
research.

-- David L (***@dnet.net), August 04, 2000.

"and how you could be shocked by the provocative effect of telling
people that they're naive and they should do their own research."
.....Therein lies the problem, David; this information is readily
available to anyone that goes looking for it, (think financial forms
for the fed; think government agencies in the "white pages" and why
the fed isn't listed under US Government). Why should I do Brianna's
research? If he's too lazy to do so, let him remain ignorant...

-- Patrick (***@gradall.com), August 04, 2000.

Why should I do Brianna's research?
Because it would prove your point.

-- (***@hmm.hmm), August 04, 2000.

Patrick,
The number of non-mainstream (though not necessarily invalid) opinions
voiced on this forum is much too large for anyone to personally
investigate all of them. I don't think it unreasonable to want some
assurance that one won't be pursuing a wild goose.

-- David L (***@dnet.net), August 05, 2000.

Cherri wrote, "Bringing up how Anita believes about women in combat
has nothing to do with politics, she believes with the information she
has or can gain."

That's true, it has nothing to do with politics but it has to do with
her comment that I'm not ready for prime time debate. It's that people
in glass houses thing.

Cherri wrote, "Not been in the military, I feel she cannot understand
to the degree that we do and accept her right to believe as she
chooses and do not consider it a fault on her part. "

But that's the point. She thinks that she debates with clarity and
objectivity. That because I have been in the military, I can't be
objective that women belong in combat, with the statement "Perhaps
both of you have experienced discrimination due to folks who used
their own subjective experiences to say, "Women shouldn't be allowed
in the fields of men." With this statement she implies that my view
and objectivity has been clouded by my experiences. But of course,
hers are not clouded, she sees both sides of the issue.

Is that illogical or what? We all have our opinions that are shaped by
our experiences. We "debate" based on our opinions, of what we've read
and done. If someone points to an article, the next person with an
opposing view can rip into it. Does that form the basis for debate,
no. It's all about opinions. If anyone thinks they are debating on
this forum, they are welcome to their illusions.

-- Maria (***@ymous.com), August 05, 2000.

Moderation questions? read the FAQ

http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=003aei

...and I am Sid Harth

[chhotemianinshallah]

New Ground 46
May - June, 1996

Contents

The Counter-Offensive Gathers: It's Still the Economy, Stupid! by Bob
Roman

Downsizing: An Expensive Illusion by Albert R. Verri

Rainbow Coalition Meets in Chicago By Christine R. Riddiough, DSA
Political Director

A Future for Socialism by Gene Birmingham

5th Midwest DSA Activist Conference

Other DSA News

The Counter-Offensive Gathers
It's Still the Economy, Stupid!
by Bob Roman

After a year of damage control following the disastrous 1994
Congressional elections, a counter offensive is beginning to take
shape around economic issues of immediate concern to working people
across the nation. If Clinton is inclined to paste a smiley face on
the current situation, labor and the democratic left have not
forgotten Carville's reminder: "It's the Economy, Stupid!"

Across the country, DSA has been holding town hall meetings on
"Economic Insecurity" to packed rooms. The University of Chicago Youth
Section's first town hall meeting in February attracted an audience of
over 300. In Boston, a coalition effort led by DSA brought almost
1,000 people together.

The Progressive Caucus has decided to hold a series of monthly
hearings on Capitol Hill and in the Districts on the theme of "The
Silent Depression - The Collapse of the American Middle-Class." The
first of these hearings, was held in Washington, DC, on March 8.

Caucus chair Bernard Sanders (I-VT) said, in calling for the hearings,
"The most important economic issue facing our country is that 90% of
the American people since 1973 have seen their standard of living
stagnate or decline. The reality is that the average American, whether
white-collar manager or blue-collar factory foreman, today is working
longer hours for lower pay and in constant fear of a sudden pink slip.
Meanwhile, the richest people in America have never had it so good."

Future hearings will be held around the country and will address
issues ranging from whether we need a new national jobs policy, how to
offset the impact of corporate downsizing to the creation of jobs that
pay a living wage. Later in the years hearings will provide an
opportunity to explore untried ideas for keeping and creating more
good-paying American jobs and achieving more economic justice and
security in the context of sustainable economic development.

The AFL-CIO has adopted a strategy similar to DSA's Activist Agenda.
The campaign links its legislative, organizing, bargaining and
political efforts under the slogan "America Needs a Raise". AFL-CIO
President John Sweeney announced in February the labor federation
would hold a series of town hall meetings from March through May to
hear from workers on the impact of stagnant wages on their families.
Organized labor will also support the Jobs and Living Wage campaigns
in states and cities around the country. The AFL-CIO will hold a town
hall meeting in support of an increase in the minimum wage on
Wednesday, May 29. At press time, the venue and program were to be
determined.

The campaign begins in Chicago with a rally on April 24th in support
of the Jobs and Living Wage Ordinance and the Minimum Wage bill (HR
620). The event will take place at 5 PM in downtown Chicago in
conjunction with SEIU's national convention. At press time, the exact
venue for the rally had not been finalized, but the initial plans had
it located at the band shell in Grant Park. AFL-CIO President John
Sweeney will be a featured speaker.

The Jobs and Living Wage Ordinance will be formally introduced into
the Chicago City Council at the May meeting of the Council. The
measure, patterned after similar ordinances introduced in major cities
around the country, provides that companies contracting with or
subsidized by the city pay a living wage. The Chicago ordinance also
has provision for community based hiring halls for non-construction
employees.

The campaign for the Jobs and Living Wage Ordinance is led by Chicago
ACORN and SEIU Local 880 under the auspices of Chicago Jobs with
Justice. The campaign is very well organized and it brings together a
broad coalition of labor and community groups. Nearly every Alderman
has a group assigned to lobby in favor of the Ordinance. A video has
been produced to popularize the issue. Economic research is being done
to investigate the effect on business and the city's finances.

But opposition to the Ordinance is also organizing. The Ordinance has
been attacked by CANDO, the Chicago Association of Neighborhood
Development Organizations, on the grounds of "business climate" and
paperwork. They also do not like the hiring hall idea. Some of CANDO's
arguments could have merit. The quality of the debate is demonstrated
by the lack of any effort by CANDO to get these concerns addressed
prior to the introduction of the ordinance.

In Congress, the counter offensive is mostly centered on two "wedge"
bills, the Corporate Responsibility Act (HR2534) and the Income Equity
Act (HR 620). Neither of these bills have much chance of passing in
this Congress, but the campaign in support of them frames the issues
of economic insecurity and budget priorities in ways that are awkward
for conservatives; they bring issues of class to the forefront.

The Corporate Responsibility Act was part of the reaction to the
conservative victory in the 1994 elections. A relatively large and
complicated bill, it raised the issue of "corporate welfare" at a time
when social programs were under increasing attack. The bill closes a
number of a number of tax loopholes favored by corporations and the
wealthy. It also ends a number of Federally financed research and
development projects that are viewed as being primarily corporate
boondoggles.

Unfortunately, this approach to the issue runs into the ambiguities of
the Federal budgeting process and the issue of industrial policy.
There is no way to distinguish between "handouts" and "investments" in
the current Federal budgeting process and there is no way to track the
performance of "investments" even if there were agreement on which is
which. Under the current Federal budgets, one person's "welfare" could
easily be another person's "investment".

The Income Equity Act is simply a bill to raise the Federal minimum
wage from $4.25 an hour to $6.50 an hour. It also has an interesting
provision which closes a tax loophole that rewards employers that pay
their most highly paid employees more than 25 times their lowest paid
employee. This bill also dates back to 1995, but it has attracted the
majority of its cosponsors in this session of Congress.

Your support for these two bills is important. Legislators need to
understand that the balance of power and wealth needs to begin tilting
toward the working people. Enclosed with this issue of New Ground is a
postcard, courtesy of Share the Wealth, to send to your Congressman.
The address is: U.S. House of Representatives, Washington, DC 20515.
Don't forget to include your name and return address. Don't delay! Do
it today! (And it only takes a 20¢ stamp!)

Chris Riddiough contributed the portion about the Progressive Caucus
to this article.

Downsizing: An Expensive Illusion
by Albert R. Verri

A generation ago, one might have heard of the word "downsizing" to
mean a slimming down of some sort. Today it is used as an euphemism
for the reduction and restructuring of workforces and such other
situations that could lessen cost to a company's operations.

Reduction of non-personnel costs is usually a regular function of
management. Extraordinary reductions of workforces, on the other hand,
have broader significance because of the social consequences they
bring in their wake.

A company decides to "downsize" in the hope that its leanness will
enable it to remain competitive and to be more profitable. The
American Management Association has reported that less than 50% of the
downsized firms had realized better profits.

In their frenzy to downsize, many firms have neglected to consider the
consequences of their actions. A host of mainstream publications, such
as the Wall Street Journal, U.S. News, Time, The New Republic and
others, have expressed some misgivings about the downsizing process as
being a form of "...anorexia - dumbsizing - neglecting future growth -
loss of employee morale - reduced productivity - making workers feel
insecure - causing disruption in workers' families...", etc.

Recently CBS-TV's 60 Minutes demonstrated how downsizing was now
affecting the higher levels of management structure with testimonials
of insecurity and bleak promises of future employment in their former
higher-paying professions. Downsizing is now affecting the ranks of
middle management, not just the entry-level jobs.

The downsized worker today has hardly the job options of a generation
ago. In 1994, for example, 45% of the 3.5 million new jobs created
were in the service sector. The proliferation of jobs in the service
industry has created a devastating "cliff effect" from a worker's
former wage to drop precipitously to low-paying service occupations.

A downsized workforce is the twin of an economic equation that we must
posit and not ignore. Our own economic history reminds us that a
healthy economy has to have a viable consuming population. Can we
forget the obvious economic deficiency of the 1930's Great Depression
that made it clear to the nation that consumer demand had to be
restored?

The departure from the laissez-faire economics of the 1920's and the
advent of the New Deal ushered in the Civilian Conservation Corps, the
Home Owners Loan Corporation to stop evictions and farm foreclosures,
guaranteed savings accounts, and mammoth programs of public works that
put millions of our "downsized" workers back on paying jobs that
resulted in increased demands for goods and services.

Should "downsizing" be the option of individual entrepreneurs along?
To paraphrase a famous quote, each company is not an island unto
itself where it can make its own decisions without regard to the
impact their actions have upon the whole of society.

Massive layoffs of workers inevitably have their effect on the level
of consumption: the part of the equation that must always balance and
synchronize with available products and services.

It was Will Rogers who said a century would have to pass before we
could determine whether the first Henry Ford had hurt or helped us.
Ford did come forth, however, with an economic principle that is still
basic to any economic system: that workers have to have the power of
consumption. Raising his workers' wages to $5 a day and then to $7 a
day during the 1920's was a phenomenal event that won no plaudits from
the business community.

Ford's dictum still prevails today as it did in the 1920's. Unless his
workers had adequate and steady wages, they could not buy the flivvers
they made and he could not have realized his own profits. Had all the
entrepreneurs followed that advice in the 1920's, perhaps, the
catastrophic depression of the 1930's might have been averted or
ameliorated.

Unemployment and public buying power must be faced directly and
meaningfully as a question of national policy. An exaggerated "natural
rate of unemployment" departs from the reality that exists. We need to
learn from the pitfalls that occurred in the 1920's that brought us an
historic and catastrophic depression.

Creating aggregate demand to increase workers' buying power needs to
be a top priority of public policy. Ignoring this great social need
can only mean serious social consequences for our country.

Rainbow Coalition Meets in Chicago
By Christine R. Riddiough, DSA Political Director

The National Rainbow Coalition and Education Fund held its annual
meeting in Chicago at the beginning of March. The two themes of the
meeting were Target '96 and setting a new education agenda. The
convention was interesting in several respects. Perhaps most striking
was the participation on panels by key Democratic and labor leaders
who had not previously been particularly friendly to either the
Rainbow Coalition or Jesse Jackson.

Jackson, who ran for President in 1984 and 1988, has often been seen
by Democrats as too radical to include in many party activities. At
times he has been vilified as a splitter who has weakened the party
and provided fuel to the right. But it seemed clear from the presence
on Rainbow convention panels of such prominent leaders of the party as
House majority leader Dick Gephardt and Democratic National Committee
Chair Don Fowler, that Jackson is now seen as the one person who can
mobilize the African American vote; this vote is understood to be
crucial to Democratic victory in November.

Party leaders perhaps recognize that failure to mobilize these voters
(and many white women) in 1994 led to the resounding triumph of the
right in that election.

The labor breakfast drew some 600 people. It featured a keynote
address by John Sweeney, the new president of the AFL-CIO and a DSA
member. Sweeney is the first AFL-CIO leader to speak at a Rainbow
meeting and this was yet another signal of changes in direction for
the labor movement.

While the involvement of these leaders hints at the potential for
change in American politics, the meeting as a whole also hinted at
some problems. Although the labor breakfast and a sports dinner both
drew large crowds, overall attendance at the event was relatively
small - only about 300 people, most apparently from the Chicago area.
The weakness of the grass roots base of the Rainbow is an indication
of the need for stronger organizing efforts. Jackson's presence was
overwhelming; he spoke at almost every panel, as did newly elected
representative Jesse Jackson, Jr. This suggests that leadership
development is also weak.

The Rainbow Coalition continues to have enormous potential as part of
the movement to rebuild the American Left, but the challenges it faces
are also great.

A Future for Socialism
by Gene Birmingham

Harold Wells, A Future for Socialism? Political Theology and the
Triumph of Capitalism, Trinity Press International, Box 851, Valley
Forge, PA 19482, 1-800-421-8874, $19.00, paperback.

This book is for everyone interested in socialism's future, even
though addressed directly to Christians. The author has solid
credentials for his subject. He was active in the New Democratic Party
of Canada and its predecessor organization, the Cooperative
Commonwealth Federation. As a young minister in Saskatchewan he
witnessed the first "socialist" government in North America produce
universal, government sponsored medicare. He maintained a connection
with the New Democratic Party after moving to northern Ontario.

He taught Theology and Ethics and served as chaplain at the National
University of Lesotho in southern Africa, 1976 - 1981. There he
encountered a combination of Marxist and Christian thought struggling
with apartheid. He offered courses on Christian Faith and Marxism and
Liberation Theology. Wells is now Professor of Systematic Theology,
Emmanuel College, Toronto School of Theology.

Part I of the book, "What is Political Theology", is for Christians
looking for a connection between theological and socialist concepts.
One example is the similarity between the terms "kingdom of God" and
"utopia". Wells does not rule out a contribution from other religions
but emphasizes Christianity because that has provided his orientation
and has been the focus of his professional life.

Part II of the book, "The Triumph of Capitalism?", deals with the rise
and fall of Soviet communism, the problems of North American
capitalism, and the issues arising from capitalism in the Third World.
A major problem for socialists is that many transnational corporations
have more power than some governments. It will, therefore, take more
than electing new governments to make a difference. That holds
implications for socialist strategy.

In Part III, "What Is Socialism?", Wells takes the reader through a
brief, but pointed, history of socialism from the Industrial
Revolution to the present as a background for defining socialism and
looking at its various contemporary expressions. The final section,
"Concluding Theological Reflections", ties in with explicitly
Christian thought with which he began. After an attempt at definition,
Wells points to contemporary possibilities for socialism and leaves
the reader with enough hope to be optimistic in pursuing a socialist
agenda.

I found helpful his distinguishing between broadly stated goals of
socialism and the need to decide on methods and strategies. Socialists
often agree on the former but disagree on the latter. His other main
point, that socialism is not one clearly defined system but a
continuum along which various kinds of socialist thought have emerged,
is also helpful.

There is no place in the world where either socialism or capitalism
exist in pure form and probably never will be. The goal for socialists
is to settle on achievable goals consistent with their ideal or
utopian visions and to find ways to bring them about in practice in a
changing world.

This book would serve well for small groups or individuals who lack
knowledge of the history of socialism and its concepts and who seek to
try to create a socialist practice in the face of contemporary
capitalist power. It offers incentive for Christians who want some
relevance between political and theological concepts. Wells
acknowledges the lack of socialist answers at present but reminds us
that the present practice of capitalism is going to lead increasingly
to calls for an alternative vision. His book provides a springboard
for that search.

5th Midwest DSA Activist Conference

A Labor Activist/Midwest Activist conference will be held in Chicago
on May 4 at Roosevelt University, 430 S. Michigan. It will follow the
annual Chicago DSA Debs - Thomas - Harrington dinner to be held Friday
evening, May 3, at the Congress Hotel at 520 S. Michigan. Tentative
agenda for the conference is:

8:30 am - Registration (Room 232)

9:00 am - Opening Plenary - Overview of Labor Today

10:30 am - Workshop Session I

DSA's Agenda: Economic Insecurity
Labor Organizing
International/Globalization
Noon Lunch

1:30 pm - Workshop Session II

DSA's Agenda: Election's 96
Immigration, Labor & Politics
Labor & Youth, Diversity
3:00 pm - Mini-plenaries/Meetings

Labor Commission
Midwest Activists
4:30 pm - Closing Speaker/Panel

Registration for the conference is $5 to help cover costs. For more
information contact the DC DSA office at [phone].

Other DSA News

Three out of four candidates endorsed by Chicago DSA in the March
primary election won. Only Willie Delgado lost in his effort to win
nomination for 3rd General Assembly District; he received only 43% of
the vote. Danny Davis walked away with the nomination for the 7th
Congressional District; he also had no trouble defeating two
candidates for 29th Ward Democratic Committeeman. Patricia Martin's
race for Judge of the Circuit Court (7th Subcircuit) was more of a
cliff-hanger as she won by only 3%. She will have no opposition in
November's General Election. Barack Obama won nomination to the
Illinois Senate with no opposition. He will have no opposition in
November. The 49th Ward non-binding referendum in support of the Jobs
and Living Wage Ordinance won with 3,164 votes against 576 "no" votes
and 1,140 "abstentions".

Among other election results of interest, Marc Loveless, candidate for
the Harold Washington Party nomination for Circuit Court Clerk, lost
the election to Philip Morris, which leads to some interesting
speculation. Mr. Loveless did win election as 32nd Ward HWP
Committeeman.

Michael Chandler, Alderman of the 24th Ward, was elected in the non-
partisan Chicago City Council election last year with support from the
New Party. In March, he was elected 24th Ward Democratic Committeeman,
easily defeating Jesse Miller, Jr.

Add yourself to the Chicago DSA mailing list (snail mail and email).

http://www.chicagodsa.org/ngarchive/ng46.html

...and I am Sid Harth

[Sid Harth]

Can the Chinese consumer save the global economy?
posted on February 2, 2010 at 10:30 am

If, as I argued in my January 29 post
http://jubakpicks.com/2010/01/29/maybe-the-u-s-consumer-is-never-coming-back-and-the-global-economy-will-stay-awash-in-excess-capacity/
, the free-spending, never met a credit card they didn’t like U.S.
consumer of 2006 and earlier isn’t coming back within the next decade,
who will pick up the slack? Who will buy all the cars, the flat-screen
TVs, the steel, the natural gas that the global economy is geared up
to produce?

The hopeful answer, of course, is China’s growing numbers of middle
class consumers. Not only does that country’s growing wealth add
hundreds of millions of buyers to the markets for everything from
designer sunglasses to air conditioners, the Chinese government is
committed to policies that will grow domestic consumption in China.

All the world has to do is wait and the Chinese consumer will pick up
the shopping bags dropped by exhausted U.S. consumers and spend the
global economy back to prosperity.

At least that’s how the hopeful story goes.

But a new study from McKinsey & Co. makes me doubt exactly how much
global lifting China’s consumers will be able to do over the next
couple of decades.
The big obstacle is the heavy structural emphasis in the Chinese
economy on exports and government-led investment. Currently domestic
consumption makes up just 36% of GDP.

In 2007 China was, in aggregate the fifth-largest consumer market in
the world behind the United States, Japan, the United Kingdom, and
Germany. But China’s consumer spending accounts for a much lower
percentage of the economy—just 36% in 2008–than in the United States
(where consumer spending accounted for 71% of GDP in 2008) or in the
United Kingdom (where consumer consumption accounted for 67%) or Japan
(where consumer consumption accounted for 55% of GDP).

China’s consumer consumption to GDP ratio is low even for the
developing world. Brazil’s ratio came in at 65% in 2008, India’s at
57% and Thailand at 54%. As McKinsey points out China has the lowest
consumption-to-GDP Ratio of any major world economy except Saudi
Arabia where oil exports account for a huge share of the economy

And in fact China’s consumer has been losing ground since 1990 when
consumer consumption accounted for about 51% of GDP.

So what would it take to get that ratio up in China?

The study (and you can find a summary of it at
http://www.mckinseyquarterly.com/A_consumer_paradigm_for_China_2429 )
looks at three scenarios for the future trend of consumer demand in
China.

First, there’s what McKinsey calls the base case. In this scenario,
the Beijing government doesn’t do anything to increase consumer
spending in China. Any gains in the share of the economy going into
consumer consumption come from the increasing wealth of Chinese
consumers as the economy grows. Under this scenario consumption rises
to about 39% of GDP over the next fifteen years.

Second, there’s the policy scenario. In this case the Chinese
government fully implements the changes that I have already announced
for promoting consumer consumption. Under this scenario consumption
rises to 45% of GDP. That’s a big increase but still leaves consumer
consumption with a smaller share of the economy than in South Korea
(where consumer consumption accounts for 48% of economic activity.)

Third, there’s what McKinsey calls the stretch scenario. In this case
the Chinese government implements new policies to reorder the
country’s economy. This effort could push consumption up to 50% of
GDP, still short of the consumption/GDP ratio of countries such as the
United States, the United Kingdom, and Canada (at 60% ) or France
(at 58%), but creeping toward Japan’s 55% ratio.

This third scenario would add $1.9 trillion a year in consumption to
the global economy.

China’s government seems committed to the pro-consumer changes that
make up McKinsey’s second scenario. Those changes concentrate on
repairing the social safety net in China so that Chinese families feel
more secure and don’t believe they have to put away quite so much in
savings. The average Chinese family now saves about 25% of its
discretionary income. That’s three times the savings rate for Japan, a
country of notorious savers, and 15 percentage points above the GDP-
weighted average for Asia as a whole.

The changes that have been proposed so far include health insurance
and better pensions. Lower school fees and more aid so that Chinese
families don’t have to save as much to send their children to college.
(McKinsey found in surveys that saving for the cost of a university
education was the No. 1 reason for families to save.) Implement those,
the theory goes, and Chinese families would feel able to save less.

But, according to McKinsey’s models, these plans would do very little
to increase consumption as a percentage of GDP. More financing for
education, for example, would add just 0.4 to 0.7 percentage points to
the current 36% consumption to GDP ratio. Better health care would add
just 0.4 to 0.6 percentage points.

To get to the major shift of the third scenario, the one that would
pump $1.9 trillion a year in new consumer spending into the global
economy, China’s government would have to make radical changes in the
Chinese economy.

Real wages would have to climb: currently even taking into account an
artificially undervalued currency and lower prices for many goods in
China, it takes a Chinese worker seven hours to buy the same goods and
services that a U.S. worker pays for after one hour o work.

Interest rates would have to rise from the low levels set by the
government so that Chinese savers could earn a reasonable return on
their money and could save a smaller part of their income.

The government would have to expand consumer access to credit.
Outstanding consumer credit is just 3% of GDP. In Brazil it’s 12%.

These steps McKinsey estimates could raise consumers’ share of the
economy by roughly 3 to 5 percentage points.

All this is important for investors anywhere in the world for two
reasons.

First, the Chinese government’s announced plan to raise domestic
consumer spending as a percentage of GDP will make domestic (and
foreign companies with a presence in the Chinese domestic economy)
companies in fields such as life insurance, medical services, and
health care products good investments. And as the share of the
domestic economy going to consumers increases, companies selling
consumer goods—at the right price point—in the domestic economy will
profit.

Some names? Coach (COH), Luxottica (LUX), China Mobile (CHL), China
Life Insurance (LFC), Ctrip.com (CTRP), and Home Inns and Hotels
Management (HMIN). Most of these are either in one of my portfolios
such as Coach or on my new Jim’s Watch List. I’ll be adding Home Inns
and Hotels Management to my watch list with this post.

Second, I don’t expect that the Chinese government will turn the
country’s economy inside out to give domestic consumption a bigger
piece of the pie than it gets under scenario No. 2. I’m afraid that
means that China’s consumers won’t be picking up enough clout to soak
up all the excess capacity built up in the global economy. For more on
global excess capacity see my post
http://jubakpicks.com/2010/01/19/get-your-portfolio-ready-for-the-profitless-global-economic-recovery/

In that post I mentioned three themes—brands, service and distribution
networks, and technology–to use to fill a portfolio with stocks that
will profit despite this excess capacity.

Third, I think you can overweight your portfolio not to China but to
other economies in the developing world that offer a better balance of
domestic consumer spending, on the one hand, and exports and fixed
asset investment on the other than China does. I’ve got one country in
mind, Brazil.

In my next column I’m explain to you why I think Brazil is a better
long-term play—say over the 15 years of the McKinsey study—than China.

Full disclosure: I own shares of the following stocks mentioned in
this post in my personal portfolio: Coach and Ctrip.com.

4 comments

tostoryteller on 2 February 2010
Jim,
If you look at Scenario 2 or 3 and a net increase in consumption
growth in the world economy, how much do you subtract from global
growth if you believe US consumption will deteriorate as a % of US GDP
over the next ten years?

I believe Brazil is the trend call at the moment, but I think your
original advice to keep investments focused on companies benefiting
from internal non-export Brazilian growth is the best opportunity.

sevenacorns on 2 February 2010
I see HAO etf as similar investment vehicle for internal consumption
in China, just as BRF is for Brazil.

EdMcGon on 2 February 2010
Sevenacorns,
When I look at the chart for HAO, it seems to be trapped in a trading
range of $24-28/share for the last 3 months.

Frankly, I’d sooner recommend finding some good Chinese small cap
stocks to buy. HAO is going to require some good news to get a bump
out of it’s trading range, whereas there are plenty of good Chinese
small caps to buy directly.

terryw on 2 February 2010
The consumption story in China seems to be real, they recently
surpassed the US to become the #1 automobile market, for now.

http://jubakpicks.com/2010/02/02/can-the-chinese-consumer-save-the-global-economy/

...and I am Sid Harth

[Sid Harth]

FEBRUARY 2, 2010, 10:59 A.M. ET.

OECD: Inequality in China Leveling Off .
By ANDREW BATSON

BEIJING—The increase in inequality in China has leveled off in recent
years and could be less severe than previously thought, the
Organization for Economic Cooperation and Development says, suggesting
that Beijing is starting to make progress in tackling one of its
biggest social problems.

The OECD, in its economic survey of China published Tuesday, said more
welfare spending in rural areas and increased migration to cities
helped arrest a widening of the income gap. The Paris-based
organization urged China to lower what is still a fairly high level of
inequality by further boosting social programs and eliminating
discrimination against rural residents.

The report is the OECD's second major study of China, which isn't a
member of the organization. China's economy is on pace to surpass
Japan this year as the world's second-biggest after the U.S. The OECD
urged China to take a range of measures to liberalize its economy,
such as freeing up interest rates to encourage banks to lend more to
small companies, and privatizing state-owned enterprises. It also said
that allowing the currency to appreciate would help the government
manage the economy better.

China's breakneck economic growth of the past three decades has pulled
hundreds of millions of people out of poverty. But the incomes of
people at the top have risen much faster than the rest, creating new
divisions in a once-egalitarian society. Tensions between property
developers and dispossessed farmers, and between factory bosses and
their rural work force, are often a flashpoint for social conflict.
That has pushed China's government to narrow the gap, and officials
have repeatedly said they will do more to boost incomes of the worst-
off.

"We've already seen, in the last five years, a stabilizing of the
disparities," Richard Herd, a senior economist at the OECD, told a
press briefing in Beijing. Much of that is due to an enormous movement
of rural people off farms and into urban jobs, a change which allows
them to raise their incomes significantly. "You've had a major
adjustment in the labor market since the mid-1990s," he said.

China's income inequality as measured by the Gini index—a scale on
which zero is perfect equality and 100 is perfect inequality—was at
49.6 in 2005, already greater than the U.S., according to the Chinese
Academy of Social Sciences. But the OECD, using what it says are
better estimates of price changes and the ranks of undocumented rural
migrants in cities, puts the Gini index for 2005 at 41, and says the
measure of inequality edged down to 40.8 by 2007.

The OECD's numbers indicate that inequality remains higher in China
than in the U.S. and most other developed countries. But China's
inequality remains less severe than that of South Africa, Brazil,
Chile, Russia or Mexico. Many domestic commentators have urged China
to narrow the income gap and avoid the so-called "Latin
Americanization" of its economy, a reference to the region's chronic
wealth disparities.

Chinese officials often focus on the gap between the country and
cities. Last year, per-capita annual income in urban areas was about
$2,500, more than three times the $750 in rural areas – a ratio that
has risen over the past decade.

But that comparison doesn't take into account the growing number of
rural migrant workers in urban areas, or the fact that prices for most
things are cheaper in rural areas. After adjusting for those factors,
the OECD says, average urban incomes are actually closer to two times
rural ones, not three.

Much of the remaining gap between urban and rural incomes comes from
urban workers having more education than rural ones, Mr. Herd said. He
urged China's government, which has already cut school fees, to make
12 full years of education universally available in the countryside.
It is also important, he said, to overhaul the household registration
system, which often blocks rural migrants from receiving health care
or education in the cities where they work, and deters them from
settling there permanently.

Those initiatives will require money, which China should be able to
afford. The OECD said China's low level of government debt gives it
the ability to spend more on social programs over the long term,
particularly after spending on economic-stimulus projects is phased
out.

Write to Andrew Batson at ***@wsj.com

Discuss: There are 4 comments

4 hours ago..Mike Zhang wrote:

.Is the OECD study robust? Inequality is the biggest domestic problem
in China, I think. The problem is not that easy to solve.

2 hours ago.Nonsubscriber .
bob king replied:
.
Communityclose window ..Your message has been sent.Close
window .Connect
.It sounds like you are the exact the guy to solve the problem.

33 minutes ago..Elton Ho replied:

.The basis of OECD's calculations is clear and rational. Rural
migrants send large portions of their earnings back home to take care
of families, and living standards are lower in rural areas. So these
are clear factors that should be taken into account.

Of course this does not mean there are still huge disparities to work
out. China now has the money to bring equality and prosperity to the
long suffering rural people, and should do so with haste.

Raising public education to high school level in rural areas is a
particularly good suggestions. It would be a huge help to soak up the
current huge surplus of college graduates too.

Urbanizaton and mobility will be the biggest drivers for higher
productivity and growth for China. Policies that brought inequalities
to rural people should be removed ASAP.

1 hour ago.Nonsubscriber
Feng Wen wrote:

.It takes a bit of time for Beijing to solve social problems
concerning a fifth of the human race. More work need to be done for
sure.

http://online.wsj.com/article/SB10001424052748704022804575040814244036390.html?mod=WSJ_business_AsiaNewsBucket

...and I am Sid Harth

[Sid Harth]

February 2, 2010, 9:24 AM ET.

Groundhog Day 2010: Is the Economy Coming Out of Its Hole
By Phil Izzo

For the third year in a row groundhog Punxsutawney Phil saw his shadow
and headed back to his hole for six more weeks of winter. Does the
famous rodent meteorologist tell us anything about the economy?

His record as an economic forecaster isn’t much worse than some pros.
(Associated Press)

According to CNN, Phil doesn’t have the best record as a weatherman
(he’s correct just 39% of the time). During the last two years, he’s
had more success as an economic forecaster predicting turning points.

In 2008, six weeks to the day after the groundhog saw his shadow, Bear
Stearns collapsed, signaling a new phase to the credit crisis and the
first signs of the Great Panic that sent the economy into a tailspin
late that year. In 2009, Phil saw his shadow again, and who could
blame him for heading back into his hole? The stock market was still
falling, gross domestic product was tumbling and politicians were
debating stimulus plans and bank rescues.

But six weeks later, the thaw had started. The stock market hit its
low and that week began a major rally that pushed shares up nearly 19%
for the year. Soon, everyone was seeing the green shoots of spring.

So does Phil seeing his shadow mean we’ll have another turning point
for the economy six weeks from now? Probably not. As we said last
year, this is all just coincidence.

But the lesson remains the same. It’s important to remember that a lot
can change in the economy in six weeks.

There are 10 Comment(s)
comments email ***@wsj.com
..
9:41 am February 2, 2010
Rug wrote:
.Oh, deja vu … I thought he already said this YESTERDAY!! Hmmmmmmmmmmm
…. ;-))
.
9:47 am February 2, 2010
morgan wrote:
.winter……………sucks …………………………bad
.
9:49 am February 2, 2010
HAILEY wrote:
.I THINK THAT GROUN HOG IS CUTE!!!!!!!!!!!!!!!!!!!!!1
.
9:57 am February 2, 2010
Suz wrote:
.I think he’s cute, too. I still think the movie is fun to watch. If
you HATE winter, you are wasting your energy hating it. It comes every
year. If you are really that unhappy about cold, slushy weather, move
to Hawaii.
.
10:03 am February 2, 2010
cody harris wrote:
.ground hogs are cool but i hate the winter
.
10:14 am February 2, 2010
Anonymous wrote:
.Phil should just stop predicting if he’s always wrong when it comes
to spring. WASTING TIME…
.
10:17 am February 2, 2010
Chirs B wrote:
.Phil should just stop predicting seriously, he’s always wrong so why
bother broardcasting him. WASTE OF TIME…
.
10:20 am February 2, 2010
Get Real wrote:
.Once again this blog is brought down to the lowest common denominator
and the comments on here add to my belief that the average American is
stupid, lazy, spoiled and worthless (Noth that there are not great
people too). However, given the advantages we used to have over other
countries whatever happens to this country we deserve it because of
the sheer number of brain dead idiots being churned out every day.

First of all, Rupert please try to compete with Bloomberg/FT/Economist
and not Fox/CNN/MSNBC, by firing this author and whipping the
journalism into shape (ie eliminate the stupid articles). Second of
all, to the above commentors please take your stupidity to the
American Idol blog spots, Mr. Murdoch would appreciate it.
.
10:39 am February 2, 2010
Stupid little rat wrote:
.Let’s shoot it. He NEVER predicts spring..haha

Can’t take this cold gray hell anymore
.
11:47 am February 2, 2010
Jeff d wrote:
.I love ground hog day and the ground hog is so cute:)
.
http://blogs.wsj.com/economics/2010/02/02/groundhog-day-2010-is-the-economy-coming-out-of-its-hole/?mod=rss_WSJBlog&mod=marketbeat

...and I am Sid Harth

[Sid Harth]

FEBRUARY 2, 2010, 11:14 A.M. ET.
UK Prime Minister Defends Slow Start; Opposition
Critical .ArticleCommentsmore in
.
By LAURENCE NORMAN And JOE PARKINSON

LONDON — British Prime Minister Gordon Brown said Tuesday that it was
right for the U.K. to run a large deficit to get through the
recession, but an opposition Treasury spokesman criticized the move,
saying spending cuts should have started this year.

The U.K. Treasury expects the public sector to run a deficit of some
12.6% of gross domestic product this year, one of the highest levels
of any developed economy. The government has promised to reduce the
deficit by half over the next four years, starting in 2011, but the
opposition Conservative Party reiterated that it would start cutting
this year.

Britain will hold elections some time before June 3. Several ratings
agencies have warned the U.K. could see its AAA credit rating
downgraded if its deficit reduction plans aren't tightened.

"Every country has a higher level of debt because of the recession,"
Mr. Brown said. The policy "meant that we were able to run a flexible
enough policy—with a high deficit—to take us through the recession."

He said the government hopes that its plan to halve the deficit in
four years is clear enough, adding that he thinks investors "will be
satisfied that we are taking the actions necessary."

Mr. Brown also said he doesn't think the U.K. Treasury's growth
projections are too optimistic. The Treasury forecasts the U.K. will
grow 1.0%-1.5% in 2010 and 3.0%-3.5% in 2011.

But Conservative Party spokesman for the Treasury, George Osborne,
said that if elected, it should be judged on whether they can defend
the country's AAA credit rating. He stressed that a downgrade from any
major ratings agency would be a failure of economic policy.

In a speech in London, Mr. Osborne also confirmed that the Bank of
England would remain independent under a Conservative administration
and retain its current 2% inflation target

"I know that we are taking a political gamble to set this up as a
measure of success... but judge us by whether we can protect the U.K.
credit rating," Mr. Osborne said.

Still, the opposition spokesman declined to give details on the depth
of the Conservative Party's planned spending cuts should it win this
year's election.

Mr. Osborne also laid out several other benchmarks on which a
Conservative government should be judged, including a commitment to
raising exports as a percentage of gross domestic product.

Mr. Osborne also said that he wouldn't set a timetable for selling off
the government's stakes in banks taken during the global financial
crisis.

http://online.wsj.com/article/SB10001424052748704022804575041170039413344.html?mod=WSJ_economy_LeftTopHighlights

...and I am Sid Harth

[Sid Harth]

FEBRUARY 2, 2010, 7:10 A.M. ET.
UPDATE: Bank Of China Orders Property Development Loan Rate Hikes -
Source

BEIJING (Dow Jones)--Bank of China Ltd. (3988.HK) ordered an "overall
hike" in interest rates on new loans extended to property developers
Monday, as part of efforts to curb the size of new loans and lower
potential risks in property lending, a person familiar with the
situation told Dow Jones Newswires on Tuesday.

The move appears to be in response to the China Banking Regulatory
Commission's call last week for lenders to remain vigilant to property-
market fluctuations. The regulator has pledged to step up its
supervision of property-related loans amid growing concern about the
formation of asset bubbles.

Bank of China told its credit officials at a meeting Monday that
interest rates on new loans extended to real-estate developers should
be raised from Feb. 1, and that "in principle" officials aren't
allowed to offer a rate below benchmark interest rates, according to
the person, who declined to be named.

During the meeting, management also criticized some teams for lending
too much in January, said the person, without elaborating.

An official in Bank of China's news department said he was unaware of
the move.

Analysts say the move shows lenders are making progress in curbing
loans to property companies, amid concerns over an asset bubble
forming in the fast-growing sector, but the impact on property
developers will likely be limited in the near term.

Sophie Jiang Li, a banking analyst with CCB International Investment
Ltd., said Bank of China's move signals lenders are scrutinizing their
lending practices more strictly, which will cause the growth in new
loans to stabilize in February from January.

However, she said raising loan rates won't deliver a "mortal blow" to
property developers as they have high levels of profitability and
multiple fund-raising channels other than bank lending.

State banks' average loan rates to property developers are around 15%
higher than benchmark rates, compared with the average 30% premium for
other industries, she said.

Johnson Hu, a property analyst at UOB Kay Hian, said smaller property
developers with limited liquidity and some bigger companies with
relatively higher leverage ratios would be more sensitive to such
moves.

Bank of China asked its branches to halt lending in mid-January after
an overly rapid expansion in new loans in the first half of last
month. A few other banks also slowed lending growth last month.

In a report Monday that cited unnamed sources, the Century Weekly
magazine, headed by former editors of the well-regarded Caijing
magazine, said new loans had fallen below CNY1.1 trillion as of Jan.
28 from CNY1.45 trillion as of Jan. 19 as banks slowed lending and
some bills matured.

China's regulators including the CBRC and the central bank took steps
last month to rein in the surge in loans, including hikes in banks'
reserve requirement ratio. They called for banks to achieve more
balanced lending growth throughout the year to prevent inflationary
pressures and curb asset bubbles.

Fan Gang, a key adviser to China's central bank, said Monday asset
bubbles are "the real worry" for China's economy and the government
should properly manage them, reflecting increasing official concern
about rapid real-estate price rises.

-Victoria Ruan contributed to this article, Dow Jones Newswires; 8610
8400 7799; ***@dowjones.com

http://online.wsj.com/article/BT-CO-20100202-705351.html?mod=WSJ_latestheadlines

...and I am Sid Harth

[Sid Harth]

China Economic Indicator: Largest Oil Company To Up Output 28%
Posted: February 2, 2010 at 6:29 am

Print Email Subscribe Free Newsletter Follow us on Twitter 24/7 Wall
St Real Time 500 If there was any question about how quickly the
Chinese think their economy will grow this year, the production
targets for Cnooc, its largest off shore oil and gas exploration
company, answer them.

Cnooc plans to increase production by 28% according to Bloomberg.
“That’s a staggering production forecast after a stand-out 2009,”
David Hewitt, an energy analyst at CLSA Asia Pacific Markets said the
news service reported.

The forecast says a great deal about the likely trajectory of China’s
manufacturing and transportation industries for the balance of the
year. But, it is also a reasonable guide to oil demand, which so far
analysts have expected will be modest this year.

The predictions of $70 to $80 a barrel of crude this year are usually
based on moderate industrial growth in the developing world and tiny
improvements in the older developed nations. China’s internal growth
forecasts must be better than most experts expect.

Douglas A. McIntyre

http://247wallst.com/2010/02/02/china-economic-indicator-largest-oil-company-to-up-output-28/

...and I am Sid Harth

[Sid Harth]

Financial Confusion Reigns On Record $1.6 Trillion Deficit Forecast
Posted: February 1, 2010 at 5:54 am

The White House is about to present its budget to Congress for the
2010 fiscal that will cause a $1.6 trillion deficit and $3.8 trillion
in spending. That would be an all-time record and $200 billion higher
than the 2009 number. The Administration’s budget would add $8.5
trillion to the federal debt through 2020 growing the debt as a
percentage of GDP to 77%, The White House forecasts that the deficit
would drop to $727 billion, or 4.2% of the gross domestic product, by
2013.

Obama’s proposal will include a freeze on spending increases in some
discretionary government programs, but the $250 billion savings that
represents over ten years will have the most minor affect on the red
ink.
The President and some members of Congress would like to put together
a bipartisan panel to analyze the nation’s finances and suggest budget
cuts, but members of the legislative branch may find the cuts
unpalatable as they seek re-election.

One of the most difficult problems is solving the budget crisis is
agreeing on what the deficits will be. The differences between the
Congressional Budget Office forecasts and those from The White House
budget authority are substantially different, which means it will be
difficult to moderate spending because there is so little agreement on
what expenses and revenue will be.

For the 2010 fiscal year, the Administration forecasts a $1.6 trillion
deficit. The CBO forecast is $1.35 trillion. The 2011 forecast from
the Administration is for a shortfall of $1.3 trillion. The CBO figure
is $980 billion. The spread between the two predictions grows even
further apart by 2020 when the difference is between a White House
estimate of a $1.6 trillion shortfall and a CBO figure of $687
billion.

These tremendous difference will cause more disputes over how the
problem should be attacked and solved. The most important assumption
is the figure for receipts to the IRS. It may be possible to manage
costs to some extent. Managing revenue is nearly impossible. It relies
on economic growth, unemployment, and tax rate. There has been a
school of thought for many years that raising tax rates slows economic
activity so the net collections by the IRS actually fall.

The other difference in projections is one of degree but not one of
severity. The costs of Social Security, Medicare, and Medicaid rise
faster than almost any other sets of costs. As the population,
especially the so call Baby Boomers, age, the needs for social
services for the old and infirmed increase at an impressive rate.

The need to bring down the deficits is clear. The size and scope of
those deficits seem nearly impossible to measure, which makes the
cutting all the more difficult.

Douglas A. McIntyre

http://247wallst.com/2010/02/01/finanacial-confusion-reigns-on-record-1-6-trillion-deficit-forecast/

...and I am Sid Harth

[Sid Harth]

Signs Of The Apocalypse: The 182 Page CBO 2010 Deficit Analysis
Posted: January 27, 2010 at 4:52 am

A review of the Congressional Budget Office forecast of the 2010 to
2020 fiscal P&L and balance sheets for the US government leaves the
impression that the government is caught in a financial vice from
which it cannot free itself—at least not in the next ten years.

Every newspaper, newscast, and online information site gave front page
billing to the CBO report that the 2010 federal budget deficit will be
$1.35 trillion, assuming current laws and policies remain unchanged.
‘The agency worried in its report that if Congress does not cut
spending or raise revenue via taxes that the numbers could be even
worse than they were in 2009 when the deficit was $1.4 trillion. The
part of the analysis that should startle people the most is the CBO
assumption that unemployment will remain above 10% for at least the
first half of next year. This information must have caused everyone in
The White House to blanch. The Administration has pushed the idea that
its stimulus package would rescue the U.S. from severe joblessness
early this year.

The CBO was not as optimistic about the economic recovery as many
politicians and economists are. The agency expects GDP growth between
the fourth quarter of last year and the last quarter of this will only
be 2.1%.

The reasons for the deficits in 2010 and beyond are old-fashioned
ones. Outlays rise from $3.15 trillion in 2009 to $3.94 trillion in
2014. Revenue moves up much more modestly, and reaches $3.46 trillion
in 2014. And, that is if the pace of the economy goes moderately well.
The effect that accompanies this is that national debt held by the
public goes from $7.5 trillion in 2009 to $15 trillion in 2020.

The authors of the CBO report do not give any advice on how to cut the
deficits of the next decade, but they do give the reader some hints.
The report puts together two different cases for the withdrawal of
troops from Iraq and Afghanistan. The effect on the deficit in the
case of a rapid cut in troop strength is $1.8 trillion during the
2011-2020 time-frame. A freeze in discretionary spending and changes
in the tax rate are also suggested avenues to decrease the huge
deficits.

The CBO report is full of analysis of the value of the dollar, trade
figures, inflation, and inventories. The reality of the choices which
face taxpayers and the federal government get easier as each year
passes in the 2010-2020 forecasts. The mandatory outlays in the budget
rise 55% over the period. Social Security costs go up by 67%, Medicare
rises by 96%, and Medicaid by 64%. The only very large outlay that
grows modestly is the Defense budget, which only rises 17%.

President Obama has suggested a freeze on the part of the budget which
is considered discretionary spending for the period from this year
until 2013. That, The White House estimates will cut the deficit by
$250 billion over the next ten years. A number of opponents of the
Administration and economists consider the proposal nothing more than
the most modest of gestures.

The hard truth about driving the deficit down is the same now as it
has been at any point in the last quarter of a century when deficits
were high. Taxes can bring in more money, but are hard to levy during
a soft economic period without throttling the recovery. Stimulus
programs may work over time, but their upfront costs are considerable
and add quickly to the government’s debt burden, perhaps so quickly
that they offer no reasonable financial return.

The reality of the probable failure of higher taxes to shrink deficits
leave only cuts in the nation’s large social safety network and its
war machine as sources of funds. No one wants to take on the project
of telling the old and those in need of help that it is not realistic
for the nation to give these services at the same level any more. Like
the people who lost their fortunes in the market crash or to swindlers
like Madoff, the country’s needy will almost certainly have to learn
to live with less.

S&P recently told the Japanese government that it would put the
nation’s sovereign debt on its negative credit watch list. Japan’s
bonds may be downgraded to “AA”. The action would not only be
humiliating to the government of the world’s second largest nation by
GDP; it would drive up the costs for Japan to borrow money to fund its
deficit. S&P reasoned that Japan’s economic growth is too slow, its
government spending is too high, and its aging population will cause
the nation to have fewer productive people who can be readily taxed.
The US might be described the same way.

The American social services that have become part of the fabric of
what the federal government provides its citizens may remain a part of
that fabric, but the services come at too high a price. The nation can
cut them judiciously now or be forced to make deeper cuts and perhaps
haphazard cuts when the question of the US government’s ability to
raise money is on the line.

Douglas A. McIntyre

http://247wallst.com/2010/01/27/signs-of-the-apocalypse-the-182-page-cbo-2010-deficit-estimates/

...and I am Sid Harth

[Sid Harth]

Congressional Budget Office 2010 Outlook… Time for the Deficit
Manifesto
Posted: January 26, 2010 at 10:20 am

The Congressional Budget Office has released new data for the 2010
budget, and the need for more spending freezes and spending controls
is becoming more and more evident by the day (as if you didn’t know
that). The projections are less dire than they were in August, but
the notions of finding any comfort beyond that are not present. The
CBO projects that if current laws and policies remained unchanged for
fiscal 2010, the federal budget would show a deficit of $1.35 trillion
or 9.2% of GDP. The CBO also expects an average of a little over 10%
unemployment for the first half of 2010. Here is the kicker though
that will dash any hopes for all those who have opted out of the
workforce. The CBO noted that unemployment will probably not dip
below 9% until 2012. Also noted was that under the current law the
CBO expects that individual income tax receipts are projected to surge
by 33% in 2011 and by 14% in 2012.

This deficit of $1.3 trillion for fiscal year 2010 would be slightly
smaller than the 2009 deficit but, would still be the second largest
since World War II as a share of the economy as a whole. The CBO also
said that the budget picture remains daunting beyond this year, with
deficits averaging about $600 billion annually from 2011 through 2020.

More data verbatim from the CBO summary is as follows:

Those estimates are not intended to be a prediction of actual budget
outcomes; rather, they indicate what CBO estimates would occur if
current laws and policies remained in place. Toward that end, CBO’s
projections presume no changes in current tax laws or spending
programs. Any new legislation that reduced revenues (such as indexing
the alternative minimum tax for inflation) or boosted spending (such
as providing supplemental funding for military operations in
Afghanistan) would increase projected deficits. For example, if all
tax provisions that are scheduled to expire in the coming decade were
extended and the AMT were indexed for inflation, deficits over the
2011–2020 period would be more than $7 trillion higher. (See the above
chart for details on the budgetary impact of some alternative policy
actions and see the sidebar for more information on CBO’s baseline.)

Accumulating deficits are pushing federal debt to significantly higher
levels. CBO projects that total debt will reach $8.8 trillion by the
end of 2010. At 60 percent of GDP, that would be the highest level
since 1952. Under current laws and policies, CBO’s projections show
that level climbing to 67 percent by 2020. As a result, interest
payments on the debt are poised to skyrocket; the government’s
spending on net interest will triple between 2010 and 2020, increasing
from $207 billion to $723 billion.

Economic growth will probably remain muted for the next few years. The
deep recession that began in 2007 appears to have ended in the middle
of 2009. The economy grew during the third quarter, and early signs
suggest that the labor market strengthened slightly late in 2009. CBO
expects that the economy will continue to grow, although at a slower
pace than in past recoveries. Hiring rates remain very low, and CBO
projects that the unemployment rate will average more than 10 percent
during the first half of 2010, before beginning a gradual decline.
That pattern is typical of recent recessions, where hiring continues
to fall for 6 to 12 months after the economy begins to grow.

Beyond the 10-year projection period, growth of spending for Medicare,
Medicaid, and Social Security will speed up from its already rapid
rate. To keep federal deficits and debt from reaching levels that
would substantially harm the economy, lawmakers would have to
significantly increase revenues, decrease projected spending, or enact
some combination of the two.

Doesn’t this recovery just feel stellar? The only good news here is
that this is not quite as awful as what the CBO made in projections
back in August. If you love things now, wait until you have far
higher tax outlays on top of all the continued uncertainty.

JON C. OGG

http://247wallst.com/2010/01/26/congressional-budget-office-2010-outlook-time-for-the-deficit-manifesto/

...and I am Sid Harth

[Sid Harth]

Tuesday, February 2, 2010
The EU, China and Dual-Use Technology

The more I've read this report I linked to in an earlier post
concerning the PRC's licit and illicit means of information gathering,
the more I'm compelled to make a separate post of it as it really is
very interesting. The gist is that there's a tradeoff between security
concerns such as limits on the export of "dual-use" (military and
civilian) technologies and revenue generation to ensure that Europe's
innovation lead does not dwindle quickly. This situation is especially
true in the context of [no surprises here] China. Yes, it's an IPE
question with security dimensions: how can a systematic information-
gathering apparatus be put in place that monitors the export of truly
sensitive technologies abroad while not hindering exports of less-than-
sensitive ones? It's good stuff from May-Britt Stumbaum. Below is the
summary; you can download the entire report as well.

China’s rise as a high-tech military power is central to US security
concerns, while a European debate on the implications of a rising
China beyond the economic sphere is conspicuous by its absence.
Concerns about Intellectual Property Rights (IPR) have prevailed in
debates on high technology transfers to the PRC, with less attention
being paid to the ‘dual use’ nature of many of these technologies that
can be utilised in both civilian and military applications. Unlike the
United States, the European Union has no overview on the amount and
generation of sensitive technology exported to the PRC. European
policy on dual-use technologies is fragmentary at best, while
conflicting export regimes and shrinking investments in research and
education throughout the European Union are putting the EU’s
technological lead at risk. This pressure further increases the need
to find outside revenues to fund innovation and the next generation of
technology – which could come from the expanding Chinese market. Given
the central role of dual-use technologies in today’s information-based
warfare, the EU’s traditionally high level of technology exports to
China has become a sensitive topic across the Atlantic in recent
years, as was highlighted by the clash over the potential lifting of
the EU arms embargo in 2004/2005. In sum, dual-use technology
transfers touch on aspects of competitiveness and innovative capacity,
market access and security concerns.

A proactive policy needs to be based on a common understanding of
China’s potential as a military superpower and of its likely impact on
the European Union, the EU’s policies and its relationship with the
United States.
High-tech, transatlantic relations, and China on the prowl: what more
could you ask for in free reading materials?

Posted by Emmanuel at 2:51 AM

http://ipezone.blogspot.com/2010/02/eu-china-and-dual-use-technology.html

...and I am Sid Harth

[Sid Harth]

U.S.-China tension was the underaddressed theme of Davos
Posted by Adam Lashinsky, Senior Editor at Large
February 2, 2010 2:34 AM

Attendees of the World Economic Forum crave validation. Validation
that they learned enough things or met enough people or conducted
enough business to justify the time and expense of spending nearly a
week in Switzerland. One form of validation, I’ve learned, is to
confidently believe one understands the mood of the conference, which
by inference is the mood of the world’s elites regarding, well, the
state of the world.

Candidates for topics of the conference that concluded Sunday in the
Swiss ski-resort town of Davos include a commitment to alternative
energy and climate-change mitigation; banker bashing and the fragile
economy; and the rise of protectionism.

In my opinion, the most important topic was one that received
relatively little direct commentary in Davos: the dramatically
heightened tension between the United States and China.

Rather than address the issue head on, most participants danced around
it. Plenty of U.S.-China side issues were prominent. As I noted
earlier, the dichotomy of 10% U.S. unemployment and 10% Chinese GDP
growth featured prominently. The important but wonky topic of the
Chinese refusal to revalue its currency received plenty of lip
service, though Chinese vice-premier Li Keqiang failed to address it
in his widely followed address to the conference. (When I asked David
D. Li, a professor of economics at Tsinghua University in Beijing, his
opinion of U.S.-China tension, he answered only about the currency
dispute, saying he thought China would in fact raise the value of the
yuan. This view is becoming less controversial in China, and it’s
telling that Li thought it was the only aspect of the relationship
worth discussing.)

Google’s confrontation with China flared up repeatedly. CEO Eric
Schmidt was hounded at every turn by Chinese and Western journalists
to address Google’s threat to abandon China over its disdain for
censorship and belief its computers in China have been hacked. On a
panel I moderated, Schmidt said Google (GOOG) wants to stay in China
but hopes to exert pressure in order to improve the lives of the
Chinese people.

The Google issue is at once significant and marginal. Yes, the
confrontation is real and serious, even if Google is confusing matters
by marrying two distinct issues: censorship, on the one hand, which
Google embarrassingly and uncomfortably has been cooperating with in
China for several years; and hacking, a crime of stealing intellectual
property that Google has all but accused the Chinese government of
orchestrating.

Yet the Google affair may ultimately prove to be most analogous to the
assassination of Austrian Archduke Franz Ferdinand that started World
War I, even if by itself it hardly represented a call to arms. The
main issue here is bigger than a currency dispute or a corporate
spying incident. It is far more about a confident and increasingly
powerful China that increasingly intends to confront, stand up to and
otherwise challenge the U.S., which in turn appears weaker and less
confident than it has in years.

The World Economic Forum isn’t designed to address such prickly issues
head on. It is important that all nations feel comfortable in Davos
and even more important that China be encouraged to attend in ever
larger numbers. Where you stand on the issue depends on where you sit.
Ian Bremmer, who runs the U.S.-based political-risk consulting firm
Eurasia Group, says the looming conflict isn’t a cold war. “Instead,
it is economic mutually assured destruction,” he says. “China knows it
is coupled with the U.S. But it doesn’t want to be coupled.”

This coupling featured in Vice-premier Li’s comments when he vowed
that China would increase its domestic consumption. The implicit
message: China wants to be less reliant on exports, particularly to
the United States. U.S. politicians, for their part, take greater and
greater umbrage at China’s actions, from Secretary of State Hillary
Clinton’s “remarks on Internet freedom” to multiple threats of
throwing up trade barriers to America’s biggest creditor. “Both sides
will take measures that will be bad in the long term but are
politically popular in the short term,” says Bremmer, noting that the
Chinese people overwhelmingly support its attacks on the cultural
imperialism of the West, just as many U.S. voters support
protectionist measures. (U.S.-China tension features prominently in
Bremmer's upcoming book, "The End of the Free Market: Who Wins the War
Between States and Corporations?")

Each day brings an upping of the ante. The Chinese have threatened
retaliation over a recent U.S. arms sale to Taiwan, exactly the kind
of foreign policy move you’d expect from Washington when it sees its
interests threatened.

Important relationships like that of the U.S. and China run hot and
cold. It very likely will be cold again next year in Davos. I’m not
talking only about the weather.

This is the reason why we state opinions. Although I agree that China
is not going on bankrupt and in fact Google is leaving them not to
save face but with other reasons.

Reasons that perhaps won't be disclosed by google.

I for one believed that BIG G is not the type of PRO HUMAN ACTIVIST
company.

China on the other hand is a big giant ball of cock.tail that if they
would just concentrate their manpower (physical, mental) they would
surely beyond the doubt beat the heck out of USA. Imagine, their
manpower is 1/4 even 1/5 cheaper than here in America?

More details of this Google Vs China Dispute: http://bit.ly/google-china-censorship-details

Posted By Jack Bane, USA: February 2, 2010 5:11 AM

About This Author

Adam Lashinsky

Adam Lashinsky is a San Francisco-based editor-at-large for FORTUNE,
covering Wall Street and Silicon Valley. Lashinsky joined FORTUNE in
2001, after two years as a contributing columnist. Prior to joining
FORTUNE, Lashinsky covered Silicon Valley for TheStreet.com and The
San Jose Mercury News. A Chicago native, Lashinsky holds a B.A. in
history and political science from the University of Illinois at
Urbana-Champaign.

Email This Author

http://brainstormtech.blogs.fortune.cnn.com/2010/02/02/u-s-china-tension-was-the-underaddressed-theme-of-davos/

...and I am Sid Harth

[Sid Harth]

FEBUARY 2, 2010, 12:22 P.M. ET.
OIL FUTURES: Crude Above $76/Bbl On US Home Sales, Economy

By Claire Rangel
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Crude oil futures are trading above $76 a
barrel Tuesday, after positive U.S. home sales data aided momentum to
the economic recovery.

Light, sweet crude for March delivery recently traded $1.96, or 2.6%,
higher at $76.39 a barrel on the New York Mercantile Exchange. Brent
crude on the ICE futures exchange traded $2.03, or 2.8%, higher at
$75.14 a barrel.

Existing-home sales in the U.S. unexpectedly rose in December with the
National Association of Realtors' index for pending sales of
previously owned homes increasing by 1% in December. This added to a
batch of economic indicators recently that have proved more positive
than anticipated.

"The bullish economic data of the last three trading days that began
with U.S. [gross domestic product] growth Friday, strong manufacturing
data [Monday] and [Tuesday's] home sales attracted buying interest in
industrial commodities, such as gasoline," said Andy Lebow, senior
vice-president for Energy with MF Global in New York.

The increase in manufacturing activity wasn't just limited to the
U.S., with China and Europe reporting stronger gains on Monday, too.

For some oil market participants, this rise in manufacturing portends
an eventual improvement in energy demand.

"After yesterday's manufacturing data and some positive economic data,
it is bringing the market back," said Tom Bentz, analyst and trader
with BNP Paribas in New York.

"But keep in mind that the market was oversold, and when it gets that
oversold, a rebound is inevitable and it looks for a reason to
bounce," Bentz added. Oil prices had fallen to a one-month low at the
end of last week.

Higher equity markets added to the positive economic sentiment
Tuesday, helping to lift oil prices, as investors moved out of the
dollar and into what are considered riskier assets such as stocks and
oil.

Expectations of the weather in the U.S. turning colder lent further
support to oil, Jim Ritterbusch, of trading advisory firm Ritterbusch
and Associates in Galena, Ill., said in a note.

However, Ritterbusch noted that maintaining the "optimism will require
some additional assistance from several important macro numbers
through the rest of the week."

Data on nonfarm productivity and factory orders will be released
Thursday and employment figures on Friday are shaping up to be the
most widely anticipated data set.

Despite this optimism, some analysts caution that the oil market still
faces a huge stock inventory and the economic data have yet to
translate into a real recovery in U.S. consumption. Indeed, last week
the U.S. reported a 2% decline in oil demand year-on-year for the
previous four-weeks.

In Wednesday's inventory data report from the U.S. Energy Information
Administration, analysts surveyed by Dow Jones Newswires are expecting
crude oil stocks to have risen by 400,000 barrels and gasoline by 1
million barrels. Distillate inventories are projected to have fallen
by 700,000 barrels. Refinery processing rates are seen rising 0.1
percentage point to 78.6% of total capacity.

Front-month March reformulated gasoline blendstock, or RBOB, recently
traded 6.15 cents, or 3.1%, higher at $1.9936 a gallon. March heating
oil recently traded 5.63 cents, or 2.9%, higher at $2.0112 a gallon.

-By Claire Rangel, Dow Jones Newswires; 212-416-2846;
***@dowjones.com

http://online.wsj.com/article/BT-CO-20100202-711374.html?mod=WSJ_World_MIDDLEHeadlinesEurope

...and I am Sid Harth

[bademiyansubhanallah]

WSJ Blogs

Economic insight and analysis from The Wall Street Journal.

February 2, 2010, 11:04 AM ET.

Volcker’s Rules
By Damian Paletta
Not so fast, bankers.

Former Federal Reserve Chairman Paul Volcker will try to dispel some
of the recent complaints made by Wall Street executives in his
testimony to the Senate Banking Committee Tuesday.

Ever since President Barack Obama proposed last month limiting the
ability of commercial banks to engage in “proprietary trading,”
bankers have complained that the definition of “proprietary trading”
is too open to interpretation and vague. Mr. Volcker doesn’t buy it.

“Every banker I speak with knows very well what ‘proprietary trading’
means and implies,” he will tell the Senate Banking Committee in the
afternoon, according to prepared remarks. (Essentially, a bank engages
in proprietary trading when it makes bets using its own capital, not a
client’s).

He says “only a handful of large commercial banks — maybe four or five
in the United States and perhaps a couple of dozen world-wide — are
now engaged in this activity in volume.”

He also ticks off a list of eight different business practices besides
proprietary trading that banks use to make money, such as lending,
underwriting corporate and government securities, and managing
brokerage accounts. His point: stop your whining, bankers.

Just as interesting in the testimony is what Mr. Volcker doesn’t say.
He doesn’t delve into details of another part of the White House
proposal, which would place new constraints on the size of a bank.

All of these changes must first be approved by Congress, which is one
reason Mr. Volcker is headed to Capitol Hill.

There are 9 Comment(s)

comments email ***@wsj.com

11:56 am February 2, 2010
pete wrote:
.Memo to congress:take Volcker’s NY times Sunday’s op ed and use it as
the blueprint for reform; you can even use it as your committe notes
( that is, if you can see past the bags of money the banks’ lobbyists
are waving in front of them).:

Volcker saved us from our own excesses before(i.e., when he did what
had to be done to end inflation in the early 80’s); thanks God he’s
still around to save us again. It’s.time for the adults to take the
car keys away from the reckless teenagers who have clearly
demonstrated their irresponsibility. To paraphrase John Belushi in
“Animal House”, “we screwed up; we trusted them.”
.
12:40 pm February 2, 2010
Jim wrote:
.Volcker’s the MAN!!! About time someone stands up for Main Street.
.
12:48 pm February 2, 2010
murrko76 wrote:
.Totally agree! When you listen to CNBC and such networks you would
think the world will end because of the Volcker rule. These folks are
such cry babies that it drives me nuts. It is imperative to have
checks and balances, but these folks just want the market to correct
itself without any intervention.

I think it is clear where that led us, and it is not pretty.
.
2:21 pm February 2, 2010
ReturnFreeRisk wrote:
.Volcker was the only Fed chairman in history who stood up against the
market and the banks - not to mention the politicians and the bs
phillips curve proponents. The question is what do we want - long term
welfare of the country OR higher S&P 500 tomorrow?

From all indications, the majority wants the latter.
.
3:10 pm February 2, 2010
Gddt wrote:
.Volcker saved things once. He’s smart and honest, Bernanke is a
complete failure and I believe an eminent crook.
.
3:29 pm February 2, 2010
ReturnFreeRisk wrote:
.Difference between Bernanke and Volcker is -
Bernanke thinks higher S&P 500 is the solution to all problems.
Volcker believes in reform and hard work.
.
3:33 pm February 2, 2010
Fennec wrote:
.Volker tells bankers to quit whining. Bankers tell Volker to quit
banking. Volkswagen tells whiners to quit braking. Brokers tell
Volkers to take a break. It all comes out in the wash.
.
4:21 pm February 2, 2010
paul wrote:
.who would you listen to? Paul Volcker, the career civil servant who
never earned more than a junior trader at Wall street and refused to
join Wall Street after his retirement, or some wall street executives
who think making millions from us as a god given right?

The only problem is that none of the government leaders would put
forward such a plan and we need to ask the 80-year Volcker to save us
again….
.
4:27 pm February 2, 2010
lynardbeezard wrote:
.Good news finally!
.
http://blogs.wsj.com/economics/2010/02/02/volckers-rules/

FEBRUARY 2, 2010, 4:29 P.M. ET.
Volcker Pushes for Limits on Banks' Trading
By COREY BOLES

WASHINGTON–Large commercial banks should be restricted from engaging
in proprietary trading or private-investment activity as part of a
wider move to overhaul the regulation of the financial sector, former
Federal Reserve Chairman Paul Volcker told a panel of Senate lawmakers
Tuesday.

Mr. Volcker was testifying before a hearing of the Senate Banking
Committee, which is considering a proposal backed by the former
central banker that received the key endorsement of President Barack
Obama last month.

View Full Image

Associated Press

Paul Volcker testifies on Capitol Hill in Washington on Tuesday.

."What we can do, what we should do, is recognize that curbing the
proprietary interests of commercial banks is in the interest of fair
and open competition as well as protecting the provision of essential
financial services," Mr. Volcker said in prepared opening remarks.

A senior Treasury official told the lawmakers that the administration
had concluded that more stringent measures are needed to rein in the
excesses at financial firms.

"We should impose mandatory limits on proprietary trading by banks and
bank holding companies, and related restrictions on owning or
sponsoring hedge funds or private equity funds," Neal Wolin, deputy
secretary at the Treasury, said in an opening statement.

The so-called Volcker Rule would prohibit large commercial banks from
owning private-equity arms or hedge funds and limit their ability to
engage in trading their own books in search of higher returns on
investment.

"These proposals were borne out of fear that a failure to act would
leave us vulnerable to another crisis, and of frustration at the
refusal of financial firms to rein in their reckless behavior," Senate
Banking Committee Chairman Christopher Dodd (D., Conn.) said Tuesday
in support of the plan.

Sen. Richard Shelby (R., Ala.), the top Republican on the banking
committee, said he is open to any proposal that would strengthen the
regulatory framework. He said he wanted to find out more of the
details of what the proposal would entail as well as whether it should
be included in the current round of regulatory overhaul or if it can
wait to be considered at a later date.

Mr. Volcker told the lawmakers that when a bank is in effect a
customer by trading its own account, it "will almost inevitably find
itself, consciously or inadvertently, acting at cross purposes to the
interests of an unrelated commercial customer of a bank."

The plan would need to be implemented as part of a wider effort to re-
regulate the industry, Mr. Volcker said, and would be best done with
international cooperation.

Mr. Volcker has been promoting the plan for several months, but until
recently it had failed to win the support of leaders in Congress or
the Obama administration. It didn't form part of the regulatory
overhaul initially put forward by Treasury Secretary Timothy Geithner,
nor was it included in sweeping legislation approved by the House of
Representatives last year.

The House did include a broad mandate for federal regulators to take
action to limit the activities of firms deemed systemically risky, but
it didn't spell out precisely what action could be taken, nor under
what circumstances.

After Mr. Dodd's plan failed to win the backing of a majority of
members of the banking panel, he was forced to return to the drawing
board and asked members of the committee to work toward reaching a
compromise agreement on a revised plan. Those negotiations continue
and it remains unclear whether Democrats and Republicans on the panel
will be able to strike a bipartisan agreement.

By deciding to back Mr. Volcker, the president chose to pursue a more
aggressive

Paul Volcker

.approach to overhauling the financial industry's rulebook than Mr.
Geithner favors. It is believed that Vice President Joe Biden also
favors the tougher approach outlined by Mr. Volcker.

The Treasury secretary had advocated requiring big banks to
substantially increase their capital reserves rather than explicitly
banning some market activities by financial firms.

Mr. Volcker served as chairman of the Fed from 1979 until 1987 when he
was succeeded by Alan Greenspan.

Write to Corey Boles at ***@dowjones.com

Watch Video

http://online.wsj.com/article/SB10001424052748704022804575041320302301844.html?mod=WSJ_hps_LEADNewsCollection#articleTabs%3Dvideo

Discuss: There are 33 comments

2 hours ago..Charles B. Mattingly wrote:

.I commend Mr. Volker...and President Obama for bringing his ideas
back into the discussion. Now is a time when American and the world
need a responsible, experienced and honest voice for real, workable
financial system reform. Mr. Volker provides this voice.

2 Recommendations

1 hour ago..David Pearlman replied:

.You commend Obama for bringing his ideas into the discussion? How
about the last year when, after trotting him out to appease the
economic middle, he was entirely marginalized in the Obama
administration. We are now in MUCH worse shape than when Obama took
office, and it's only because they see the ship sinking that Obama and
his team have decided to, once again, roll out Volker.

1 Recommendation

1 minute ago..AMY GRAZIOSA replied:

.Please. Drama much? My portfolio is up 30% from when O took office.

2 hours ago..Phillip Hwee wrote:

.Chairman Paul Volcker was certainly a giant when he ran the Federal
Reserve. Times have changed so much since his tenure. Undoubtedly, he
was in the right job at the right time. Today's US economy is entirely
different than the one Chairman Volcker knew intimately. As super
intelligent as he is, Mr. Volcker is not the person who President
Obama and his inept economic team should be relying upon on how to
turn around the enormously complex US economy. He's out of touch with
reality and he's looking at the world through the prisim of the
1980's. With all due respect, Mr. Volcker's advice might be
interesting but not useful. Why not call upon Professor Paul Krugman,
who like President Obama received a Nobel Prize. Professor Krugman is
in contact with the next generation of American workers in his
classrooms on a regular basis and he likely better understand the new
digital economy (than Mr. Volcker) because of his association with the
NYT. Maybe the unemployment rate is stubbornly 10 plus percent because
Mr. Obama has placed way too much reliance upon Mr. Volcker.

1 hour ago..RICHARD TERANDO replied:

.This article addresses Volker's recommendation on how to prevent "to
big to fail banks" from again bringing the economy to the point of
failure not on our current jobs crisis. Volker wants to keep these
banks from playing with my bank deposits as if they belong to the
bank. When Mark to Market gets reinstated the FDIC doesn't want to be
taking over the bank with taxpayer money because the bank lost most of
their non-depositor funds at the casino we call market investments.

1 Recommendation

1 hour ago..Charles J Jernigan replied:

.You must have lost your mind. Mr. Krugman is without a doubt the most
inept economist of our age. The work he did on trade patterns which
gained him the Nobel prize was noteworthy, however, he is an
unrepentant Keynesian. We would be much better off if we could dig up
Milton Freedman or F.A Hayke and seek their council. Failing that I
vote for Volcker who may be old but I feel certain is up to this task.
BTW no one ask Mr. Volcker to solve all of our economic problems, just
help make meaningful recommendations on restructuring the banking
industry. Paul Krugman indeed.

1 Recommendation

.The specifics of his agenda don't matter as much as fact that he
agrees in some regulations.

1 hour ago..William Ledsham wrote:

.Perhaps we would be better off with less government diktat as to who
to loan to and under what circumstances. When you remove the deck of
cards, its harder to play poker.

1 Recommendation

1 hour ago..MATTHEW WAGNER replied:

.Yeah cause that lack of regulations has really been working out for
us.

1 Recommendation

57 minutes ago.Nonsubscriber
Abe Froman replied:

.Matthew,

The Finance industry is one of the most regulated industries in the
country. The regulations in place have not been working out for us.

It is wiser to not speak and be considered dumb than to open ones
mouth and prove it.

2 Recommendations

30 minutes ago..Kevin McAleer replied:

.Regulations have been in place. Tell the regulators to do their job.
Take a look at Bernie Madoff.

29 minutes ago..NILE GARRITSON replied:

.To the sausage king of Chicago:

The intensity of bank regulation doesn't compare with that of drugs/
medical devices or utilities.
Does it escape you that we had an epic meltdown just a few years after
the main pillar of bank regulation was repealed? Or that the
instruments at the heart of the crisis are barely regulated at all?

26 minutes ago.Nonsubscriber
JERRY MORIARTY replied:

.It's not the regulations,it's the regulators themselves.If they had a
true understanding of complex banking and instruments,they would be
working for a banking firm.Remember how Madoff intimidated regulators
that were still wet behind the ears.Maybe bonuses for talented
regulators is the answer.

14 minutes ago..NILE GARRITSON replied:

.Jerry, the banks themselves hardly understood what they owned. The
Friday night before Bear was rescued they were scrambling to figure
out how much collateral they've have to post in the event they were
downgraded to junk.

8 minutes ago.Nonsubscriber
Abe Froman replied:

.Nile,

"The intensity of bank regulation doesn't compare with that of drugs/
medical devices or utilities." - So what's your point? I didn't say it
was the most regulated industry, just one of the most.

Second, "Does it escape you that we had an epic meltdown just a few
years after the main pillar of bank regulation was repealed?" Explain
to me how Glass-Steagall was the pillar of bank regulation. I would
love to hear your expert explanation. One catch, no Wiki.

Third, " Or that the instruments at the heart of the crisis are barely
regulated at all?" - Those "instruments", CDOs and MBSs, are in fact
securities, which are highly regulated. In regards to loan
origination, there were regulators in place that could have halted
rampant fraud and inflated appraisals. They did not do their job. Your
comments show that you do not understand the fundamental issues that
caused this down-turn.

It wasn't lack of regulation, it was lack of enforcing regulation.

Sure, the TSA makes things look safe, until you find out that the guy
next to you is trying to light his bomb-filled man-made underwear...

1 hour ago..Amelia Chen wrote:

.Why is no one concerned with the impact that Volcker's legislation
will have on the liquidity in the markets? Undermining the consumer's
ability to place trades to say, I don't know, hedge against the rise
of future commodity prices, will not only hurt the business but the
industry itself.

The entire premise of this rule is based on false assumptions and
misunderstandings of the financial inner workings of our economy.
Pitiful.

1 hour ago..NILE GARRITSON replied:

.Was there a liquidity deficit before Glass Steagall was repealed?

1 Recommendation

29 minutes ago..Kevin McAleer replied:

.True. But was repeal of Glass Steagall the real cause of this mess.

Lehman. AIG. Bear Stearns. Fannie Mae. Freddie Mac.

Were ANY of these firms commercial banks with prop trading arms?

51 minutes ago..Charles J Jernigan replied:

.His suggestions have nothing to do with your ability to place trades.
They have to do with separating a firms own trading activity from that
of its customers and in setting up a method that shields the taxpayer
from loss by establishing a resolution trust mechanism to liquidate
failing firms. I'm for it.

1 hour ago..Albert Gelsthorpe wrote:

.Just 'cause they both use the term "bank" in their title, commercial/
lending banks and investment banks have about as much in common as
lightening and a lightening bug.

The laws of Physics haven't been repealed; the basics of human nature
havn't changed since we began walkiing upright; and risk, an income
statement and balance sheet havn't fundamentally changed since the
days of Adam Smith. Listen to Mr. Volker! His words of wisdom are
sensible.

Thank about it..we don't license barrooms in churches & synagogues; we
don't license "bath houses" in nursery schools; and we expect
ourselves and our neighbors to earn a living, spend less than they
earn, and save & invest the difference.

1 Recommendation

1 hour ago..Charles B. Mattingly replied:

.Amen!

1 hour ago.Non
domenick negri wrote:

.Philip:

The economic problem is not the fault of Volcker, Bernake or Giether
so much as it is Obama's socialist agenda. Obama said that he is not
an ideologue, making a statement like that just shows how disconnected
he is from reality.

His Cap & Trade is a massive tax on the entire industrial economy.
China is sitting back and is laughing at us. They are saying bring it
on, because we will keep manufacturing cheap goods and we will not
worry about pollution. The Chinese will keep burning coal to generate
electricity whether it is dirty coal or not. All they can see is the
huge advantage they will get once Obama imposes the largest tax
increase on America.

1 hour ago..NILE GARRITSON replied:

.Right, our economy is on life support because of Obama. Everything
was cool until he took office.

I love your childish logic. Since China is going to pollute we
shouldn't stop polluting either.

.21 minutes ago.
JERRY MORIARTY replied:

.China doesn't engage in worker safety,rights,or a living wage,but we
seem to have no problem with that.Should we have Americans living in
houses with dirt floors and no flush toilets,in the name of Free
Market Globalism.Civil wars have started on less.

1 hour ago..Scott Keck wrote:

.If this administration wants to intensify regulation of our financial
institutions then the first place they should start is repealing the
Community Reinvestment Act. Let's face it, the more the government
gets involved, the more things get screwed up.

1 hour ago..Thomas Berhalter wrote:

.Thank you Chairman Volcker for your continuing service to our
Country. I commend you for stepping up to help protect our system and
the American Taxpayer from the costly shenanigans of a few.
it would benefit all of us to heed his concerns and support his
efforts. What comes out of all this may not be exactly what he is
putting forward but he is more right than wrong in his concerns and
remedies!!!

1 Recommendation

1 hour ago..Jorge L. Rodriguez wrote:

.Volcker is out of step with today's world. "I'll tell you when I see
it" as a reply can only be from someone who is trying to pin blame on
proprietary trading because that's the way "he wants to see it" not
that it was the real cause for any of the systematic issues.

1 hour ago..Daniel Dimicco wrote:

.Thank you Chairman Volcker for your continuing service to our
Country. I commend you for stepping up to help protect our system and
the American Taxpayer from the costly shenanigans of a few.
it would benefit all of us to heed his concerns and support his
efforts. What comes out of all this may not be exactly what he is
putting forward but he is more right than wrong in his concerns and
remedies!!!

1 Recommendation

38 minutes ago..Steven Weisbrod wrote:

.Volcker was a great Fed Chairman during the high inflation of the
late 70s because he abandoned interest rate targeting. As a result
policy focused on reducing base money and the fed funds rate became
highly volatile. Both the level and the volatility were necessary to
drive inflation out of the system. But he has always been a regulator.
For example, he opposed repealing interest rate ceilings on bank
deposits when he was President of the New York Fed. As far as his
present regulatory proposals go, I don't see any evidence to suggest
that they would have prevented the mortgage crisis. None of the major
investment banks -- Goldman, Morgan Stanley, Merrill, Bear, or Lehman
-- were bank holding companies. Thrifts such as Wa Mu and Countrywide
were major originators of loans securitized by subsidiaries of these
companies. Under the Volcker rule, this would go on as before.

23 minutes ago..Robert Boni wrote:

.Contrast the feeling that Volcker generates with the odors that
bernanke, summers, krugman et al exude.
He is a breath of fresh air.

19 minutes ago..Bill Buntin wrote:

.I guess I'm having trouble connecting the dots here. I thought the
big problem with banks related to their investment in securities
backed by mortgages, many of which were of the subprime variety. The
ratings agencies, relying on the protection provided by Fannie and
Freddie, gave banks the green light on these wonderful investments.
Banks participated in the process by parking money. Why the focus on
proprietary trading? It seems the problem TARP was designed to handle
could be dealt with by regulating the mortgage lending/securitization
process, including Fannie and Freddie...

27 seconds ago..James Curry replied:

.Apparently a number of investment banks were designing and selling
CDOs to customers knowing they were high risk and then placing bets
against them to the benefit of the bank. Not currently legal but
certainly a conflict of interest.

3 minutes ago..James Curry wrote:

.Regardless of who is proposing bank regulation, it is clear that US
banking must be considered a strategic industry in that it is vital to
our national interests and its failure due to inappropriate behavior
can not be tolerated. Therefore as with any strategic industry, such
as air transportation, energy or telecommunications, banking must have
stricter oversight. Just imagine what air travel would look like if we
applied current banking regulation to it. Planes would be falling out
of the sky.

This industry needs adult supervision.

1 Recommendation

2 minutes ago..Michael Moore wrote: .

.Frankly, I thought it was already the law that banks were not
permitted to finance investments in securities with government insured
deposits. Thus, what Mr. Volcker is proposing sounds more like an
effort to tighten up the current restrictions. The rule should be
simple and straightforward: no speculating in corporate securities
with government insured deposits.

http://online.wsj.com/article/SB10001424052748704022804575041320302301844.html?mod=WSJ_hps_LEADNewsCollection

WSJ Blogs

An up-to-the-minute take on deals and deal makers.

February 2, 2010, 10:02 AM ET.
Paul Volcker’s Prepared Testimony on Prop Trading Proposal
By Michael Corkery

Paul Volcker is due to testify today at 2:30 p.m. before the Senate
Banking Committee on his proposal to limit trading activities at
commercial banks. Here is his prepared statement

STATEMENT OF PAUL A. VOLCKER BEFORE THE COMMITTEE ON BANKING, HOUSING,
AND URBAN AFFAIRS OF THE UNITED STATES SENATE WASHINGTON, DC

FEBRUARY 2, 2010

Mr. Chairman, Members of the Banking Committee:

You have an important responsibility in considering and acting upon a
range of issues relevant to needed reform of the financial system.
That system, as you well know, broke down under pressure, posing
unacceptable risks for an economy already in recession. I appreciate
the opportunity today to discuss with you one key element in the
reform effort that President Obama set out so forcibly a few days ago.

That proposal, if enacted, would restrict commercial banking
organizations from certain proprietary and more speculative
activities. In itself, that would be a significant measure to reduce
risk. However, the first point I want to emphasize is that the
proposed restrictions should be understood as a part of the broader
effort for structural reform. It is particularly designed to help deal
with the problem of “too big to fail” and the related moral hazard
that looms so large as an aftermath of the emergency rescues of
financial institutions, bank and non-bank, in the midst of crises.

I have attached to this statement a short essay of mine outlining that
larger perspective.

The basic point is that there has been, and remains, a strong public
interest in providing a “safety net” –in particular, deposit insurance
and the provision of liquidity in emergencies – for commercial banks
carrying out essential services. There is not, however, a similar
rationale for public funds - taxpayer funds - protecting and
supporting essentially proprietary and speculative activities. Hedge
funds, private equity funds, and trading activities unrelated to
customer needs and continuing banking relationships should stand on
their own, without the subsidies implied by public support for
depository institutions.

Those quintessential capital market activities have become part of the
natural realm of investment banks. A number of the most prominent of
those firms, each heavily engaged in trading and other proprietary
activity, failed or were forced into publicly-assisted mergers under
the pressure of the crisis. It also became necessary to provide public
support via the Federal Reserve, The Federal Deposit Insurance
Corporation, or the Treasury to the largest remaining American
investment banks, both of which assumed the cloak of a banking license
to facilitate the assistance. The world’s largest insurance company,
caught up in a huge portfolio of credit default swaps quite apart from
its basic business, was rescued only by the injection of many tens of
billions of dollars of public loans and equity capital. Not so
incidentally, the huge financial affiliate of one of our largest
industrial companies was also extended the privilege of a banking
license and granted large assistance contrary to long-standing public
policy against combinations of banking and commerce.

What we plainly need are authority and methods to minimize the
occurrence of those failures that threaten the basic fabric of
financial markets. The first line of defense, along the lines of
Administration proposals and the provisions in the Bill passed by the
House last year, must be authority to regulate certain characteristics
of systemically important non-bank financial institutions. The
essential need is to guard against excessive leverage and to insist
upon adequate capital and liquidity.

It is critically important that those institutions, its managers and
its creditors, do not assume a public rescue will be forthcoming in
time of pressure. To make that credible, there is a clear need for a
new “resolution authority”, an approach recommended by the
Administration last year and included in the House bill. The concept
is widely supported internationally. The idea is that, with procedural
safeguards, a designated agency be provided authority to intervene and
take control of a major financial institution on the brink of failure.
The mandate is to arrange an orderly liquidation or merger. In other
words, euthanasia not a rescue.

Apart from the very limited number of such “systemically significant”
non-bank institutions, there are literally thousands of hedge funds,
private equity funds, and other private financial institutions
actively competing in the capital markets. They are typically financed
with substantial equity provided by their partners or by other
sophisticated investors. They are, and should be, free to trade, to
innovate, to invest – and to fail. Managements, stockholders or
partners would be at risk, able to profit handsomely or to fail
entirely, as appropriate in a competitive free enterprise system.

Now, I want to deal as specifically as I can with questions that have
arisen about the President’s recent proposal.

First, surely a strong international consensus on the proposed
approach would be appropriate, particularly across those few nations
hosting large multi-national banks and active financial markets. The
needed consensus remains to be tested. However, judging from what we
know and read about the attitude of a number of responsible officials
and commentators, I believe there are substantial grounds to
anticipate success as the approach is fully understood.

Second, the functional definition of hedge funds and private equity
funds that commercial banks would be forbidden to own or sponsor is
not difficult. As with any new regulatory approach, authority provided
to the appropriate supervisory agency should be carefully specified.
It also needs to be broad enough to encompass efforts sure to come to
circumvent the intent of the law. We do not need or want a new breed
of bank-based funds that in all but name would function as hedge or
equity funds.

Similarly, every banker I speak with knows very well what “proprietary
trading” means and implies. My understanding is that only a handful of
large commercial banks – maybe four or five in the United States and
perhaps a couple of dozen worldwide – are now engaged in this activity
in volume. In the past, they have sometimes explicitly labeled a
trading affiliate or division as “proprietary”, with the connotation
that the activity is, or should be, insulated from customer
relations.

Most of those institutions and many others are engaged in meeting
customer needs to buy or sell securities: stocks or bonds,
derivatives, various commodities or other investments. Those
activities may involve taking temporary positions. In the process,
there will be temptations to speculate by aggressive, highly
remunerated traders.

Given strong legislative direction, bank supervisors should be able to
appraise the nature of those trading activities and contain excesses.
An analysis of volume relative to customer relationships and of the
relative volatility of gains and losses would go a long way toward
informing such judgments. For instance, patterns of exceptionally
large gains and losses over a period of time in the “trading book”
should raise an examiner’s eyebrows. Persisting over time, the result
should be not just raised eyebrows but substantially raised capital
requirements.

Third, I want to note the strong conflicts of interest inherent in the
participation of commercial banking organizations in proprietary or
private investment activity. That is especially evident for banks
conducting substantial investment management activities, in which they
are acting explicitly or implicitly in a fiduciary capacity. When the
bank itself is a “customer”, i.e., it is trading for its own account,
it will almost inevitably find itself, consciously or inadvertently,
acting at cross purposes to the interests of an unrelated commercial
customer of a bank. “Inside” hedge funds and equity funds with outside
partners may generate generous fees for the bank without the test of
market pricing, and those same “inside” funds may be favored over
outside competition in placing funds for clients. More generally,
proprietary trading activity should not be able to profit from
knowledge of customer trades.

I am not so naive as to think that all potential conflicts can or
should be expunged from banking or other businesses. But neither am I
so naïve as to think that, even with the best efforts of boards and
management, so-called Chinese Walls can remain impermeable against the
pressures to seek maximum profit and personal remuneration.

In concluding, it may be useful to remind you of the wide range of
potentially profitable services that are within the province of
commercial banks.

• First of all, basic payments services, local, national and
worldwide, ranging from the now ubiquitous automatic teller machines
to highly sophisticated cash balance management;
• Safe and liquid depository facilities, including especially deposits
contractually payable on demand;
• Credit for individuals, governments and businesses, large and small,
including credit guarantees and originating and securitizing mortgages
or other credits under appropriate conditions;
• Analogous to commercial lending, underwriting of corporate and
government securities, with related market making;
• Brokerage accounts for individuals and businesses, including “prime
brokerage” for independent hedge and equity funds;
• Investment management and investment advisory services, including
“Funds of Funds” providing customers with access to independent hedge
or equity funds;
• Trust and estate planning and administration;
• Custody and safekeeping arrangements for securities and valuables.

Quite a list. More than enough, I submit to you, to provide the base
for strong, competitive – and profitable - commercial banking
organizations, able to stand on their own feet domestically and
internationally in fair times and foul.

What we can do, what we should do, is recognize that curbing the
proprietary interests of commercial banks is in the interest of fair
and open competition as well as protecting the provision of essential
financial services. Recurrent pressures, volatility and uncertainties
are inherent in our market-oriented, profit-seeking financial system.
By appropriately defining the business of commercial banks, and by
providing for the complementary resolution authority to deal with an
impending failure of very large capital market institutions, we can go
a long way toward promoting the combination of competition,
innovation, and underlying stability that we seek.

There are 10 Comment(s)

comments email ***@wsj.com
..
10:32 am February 2, 2010
Anonymous wrote:
.Why not return to Glass/Stigal?
.
10:39 am February 2, 2010
Let's See wrote:
.It is difficult to argue with the sound logic of Volcker’s prepared
testimony. Republicans, who think it is politically advantageous to
take the side of banksters on this issue, underestimate the anger of
struggling Americans and do so their own peril. Now is the time to
reign the avarice and arrogance of Wall Street bankers who brought our
economy to its knees. Let’s see if our elected officials, whether
Democrats or Republicans, are in the tank for the scoundrels who buy
off politicians with the crumbs of their ill-gotten gains.
.
11:11 am February 2, 2010
dfree wrote:
.if the investment banks don’t like, let them stop paying out all
their earnings in bonuses and instead buy back their public float and
revert to private partnerships. unlimited access to 0% financing from
the Fed and investment into risky prop desk trading is an economic
farce. all this incredible speculation began when the banks went
public and uncouple their personal risk from their business risk. stop
the music for them and let’s get back to building this country through
productive business creation.
.
11:31 am February 2, 2010
Craig Nisnewitz wrote:
.What Volcker says makes a lot of sense. If they want to engage in
proprietary trading than do not function as a commercial bank. The
problem is simple. If the proprietary side fails it can take down the
whole bank. We say that happen with Bear Sterns, Merrill and Lehman.
Their divisions that traded stock and invested for customers were
stable. It was their own trading that went bad and brought down the
entire entity.
.
11:39 am February 2, 2010
The OZ... wrote:
.I’m with… (I) eye’s-new-it on this one. At “ZERO” % Interest to the
Mega Banks they can’t lose!
The question is how in the hell can Turbo-Tax-Cheat Timmy’s desk tag
as he speaks right now say…
QUOTE:
The HON. - Timmy Geithner
There is absolutly nothing Honorable about a crook, a thief and a
lier… ya’ think!
.
11:49 am February 2, 2010
JFB N>Y> wrote:
.The cities and towns did very well with taxes generated from the
boom. Freddie and Fanny opened the gate for all types of hype. The
Supreme Court decision to give corporations the same right as
individuals under the law has to be revisited. Risk without
consequence is not risk it’s shamefull corporate behavior. Most
American corporations have social conscious and know that the system
requires there acts be in fairness and with consequence.
.
11:56 am February 2, 2010
CLH8712 wrote:
.A very simple way to control the outright gambling by these “couple
of dozen worldwide” mega-banks is to require a cash back-up to ALL
derivative or hedge type trading of at least 50% of the value of the
underlying asset that drives that trade. So, if they want to “bet”
$100 billion that “Company XYZ” stock will rise, they can make that
deriviative trade only when they “show the money” worth $50 billion in
a cash account on deposit with the Fed or some other similar group.
Hard currency or gold, cash on the barrel — no stocks, bonds or other
“funny money.” When their own skin is at risk, they’ll stop making
these outrageous gambles.
.
12:02 pm February 2, 2010
Fool me once shame on me, fool me twice... off with their heads! The
OZ... wrote:
.Volker’s Rules is nothing more than a side show… called the “Gong
Show”! What is transpireing as we speak in Washington “The Turbo-Tax-
Cheat Timmy Show”… is really the one you want to watch with “EYES Wide
OPEN”!
.
12:07 pm February 2, 2010
Jnewman wrote:
.Mr Volcker, THESE BANKERS ARE DRIVING YOU INSANE! Do you need a
thousand words to say a baseball team may not pitch to itself AND be
the Umpire AND provide bats to the opposite team AND keep the Score
AND whatever … AND, as if the audience didn’t know this already !
.
4:03 pm February 2, 2010
crittinker wrote:
.“Let’s See” should stick with the facts behind his directionally
correct arguement and drop his bipartisan emotional response because
he is factually incorrect in labeling the republicans as the
government of “chrony capitalism”. Chrony capitalism is as dangerous
as socialism whereby both put control in the hands of a few elected
officials and their chosen few business leaders. A large majority
(approx. 70%) of wallstreet bankers are registered democrats. The CEOs
of 4 of the 5 largest bailout receivers voted for Obama. Political
patronage and chrony capitalism come at a high price..

http://blogs.wsj.com/deals/2010/02/02/paul-volckers-prepared-testimony-on-prop-trading-proposal/

...and I am Sid Harth

[bademiyansubhanallah]

SMALL BUSINESS
FEBRUARY 2, 2010, 4:49 P.M. ET.

Obama Rolls Out Small Business Lending Program
By ELIZABETH WILLIAMSON

WASHINGTON—President Barack Obama proposed a $30 billion small
business lending program Tuesday, the latest in a series of
administration efforts to jump-start hiring by the nation's small
businesses.

The program, which Mr. Obama detailed at an appearance in Nashua,
N.H., would invest $30 billion from the government's Troubled Asset
Relief Program in community banks to encourage them to lend to small
businesses. If approved by Congress, the program would incentivize
small and midsize banks to provide loans valued at several times that
figure.

"Small businesses … have created roughly 65% of all new jobs over the
past decade and a half. And I think we should make it easier for
them," said Mr. Obama, according to prepared remarks.

Getty Images

President Barack Obama answers questions during a town hall meeting at
Nashua North High School in Nashua, N.H.

.Senior administration officials who helped draw up the proposal said
that under the program the Treasury would provides capital investments
in a swath of the nation's 8,000 banks with assets under $10 billion,
which do more than half of U.S. small-business lending.

Banks that increase lending to small businesses beyond 2009 levels
would qualify for reduced dividends owed to Treasury on the capital
investment. White House economists hope that feature will spur
interest in the program among community banks that shunned the
original TARP program because of restrictions on the capital and
worries that they would be tarred by their competitors as "troubled."

Earlier Tuesday, White House Budget Director Peter Orszag defended the
plan against a Republican lawmaker's charges that TARP is being used
as a "piggy bank."

In a testy exchange at a Senate Budget Committee hearing, Sen. Judd
Gregg (R., N.H.) said the program would violate current law by using
TARP funds for a purpose other than debt reduction.

Mr. Orszag, appearing in the first of two hearings on the White
House's $3.8 trillion fiscal 2011 budget request, said the program is
necessary because a lack of credit among small businesses is one of
the lingering problems facing financial markets and the U.S. economy.

"No, no, no, you can't make that type of statement with any
legitimacy," Mr. Gregg responded, his voice rising. "You don't appear
to understand the law."

."The law is very clear: The monies recouped from the TARP shall be
paid into the general fund of the Treasury for the reduction of the
public debt. It's not for a piggy bank," Mr. Gregg said.

Mr. Orszag said new legislation would be required to create the new
small-business plan. He said the cost of the plan would depend on the
subsidy rate of new activity and wouldn't amount to a net cost, in
terms of the deficit, of $30 billion.

Sen. Bernie Sanders (I., Vt.) jumped to Mr. Orszag's defense,
interrupting Mr. Gregg to say, "That is how laws are made. Congress
passes them."

"He's indicating he's going to go to Congress to amend the law," Ms.
Sanders said.

The program is part of a package of incentives Mr. Obama has spoken
about since his campaign, and discussed during his State of the Union
address last week. Last week, he announced a $33 billion program to
provide up to $500,000 in tax credits for businesses that add jobs or
increase wages beyond the rate of inflation this year. In the 2011
budget blueprint released Monday, the administration also proposes to
eliminate all capital gains taxes on small-business investment and
raise the limit on Small Business Administration loans from $2 million
to $5 million.

On the Road in New Hampshire
View Slideshow

Jason Reed/Reuters

President Obama presented his small-business proposal in Nashua, N.H.,
Tuesday.
.More photos and interactive graphics

.At Tuesday's hearing, Budget Committee Chairman Kent Conrad (D.,
N.D.) praised the administration's budget for not pulling back on
stimulative spending in the near term, but said he's "very concerned"
about the nation's long-term fiscal path, which features $8.5 trillion
of deficits over the next decade.

"It has to be addressed, and I don't think the president's 10-year
outlook is the path we can take as a nation," Mr. Conrad said.

Mr. Gregg was more harsh, accusing the administration of "malfeasance"
for crafting a budget that "ends in insolvency for this nation."

Mr. Orszag sketched the administration's plans to tackle the deficit
through a fiscal commission, health-care overhaul and other steps.

"We agree the fiscal course that we are on out in 2020, 2030 and 2040
is unsustainable, and it needs to be addressed," Mr. Orszag said.

Messrs. Gregg and Conrad are advocates of a bipartisan fiscal
commission, which the Senate rejected last week. Mr. Obama will create
the panel through an executive order, but the presidentially appointed
group isn't likely to have the teeth of a statutory commission. And
it's unclear whether Republicans will take part in the panel.

Mr. Gregg suggested Congress vote again on a commission, saying both
parties should be able to cobble together enough votes for passage.
But Mr. Conrad was skeptical toward that idea. After the hearing, the
Democrat told reporters he sees no indication that lawmakers opposed
to the panel would change their mind.

—Henry J. Pulizzi contributed to this article.

Write to Elizabeth Williamson at ***@wsj.com

Discuss: There are 121 comments

http://online.wsj.com/article/SB10001424052748704022804575040722955784294.html?mod=WSJ_hps_LEFTWhatsNews#articleTabs%3Dcomments

http://online.wsj.com/article/SB10001424052748704022804575040722955784294.html?mod=WSJ_hps_LEFTWhatsNews

...and I am Sid Harth

[chhotemianinshallah]

Could the U.S. Economy Record Stronger GDP Growth in 2010?
Posted Jan 27th 2010 5:20PM
by Joseph Lazzaro

Can a case be made for stronger-than-expected U.S. GDP growth in 201?
Indeed it can, but you'd be decidedly in the minority camp of
economists.

It goes like this: the fiscal stimulus' second stage (about $200
billion), plus inventory replenishment by businesses, plus a sizable
increase in annual U.S. auto sales (a 2 million vehicle increase),
plus further stabilization of the housing sector, topped off by a
continued uptrend in U.S. exports.

The above could result in U.S. GDP exceeding 3.0% in 2010, up from the
current consensus range of 2.5 to 2.7%.

The wildcard in the above? The U.S. consumer: the 'frugal consumer'
era is well underway and if it continues -- with a savings rate above
4% -- it will continue to serve as a headwind for the U.S. economy.
The economy grew at a revised 2.2% rate in Q3 2009, in what many
economists believe marked the start of the economic recovery.

Investors large and small will find out if the recession officially
ended in Q4 2009 on Friday, January 29 at 8:30 a.m. EST when the U.S.
Commerce Department releases its initial estimate for Q4 2009 GDP. The
Bloomberg News consensus estimate forecasts a 4.5% GDP growth rate,
and if that's achieved, it would mark two consecutive quarters of
positive GDP growth -- historically the standard that economists use
to declare a recession over.

Financial Editor Joseph Lazzaro is writing a book on the U.S.
presidency and the U.S. economy.

http://www.bloggingstocks.com/2010/01/27/could-the-u-s-economy-record-stronger-gdp-growth-in-2010/

Is the New York Fed a Black Ops Outfit for the Nation's Central Bank?
Posted Feb 2nd 2010 11:20AM
by Connie Madon


The current investigation of the American International Group (AIG)
bailout by Congress has brought to light the inner workings and secret
deals that were made.

Center stage in the investigation is the New York Federal Reserve.
There are 12 Federal Reserve Banks that operate under the supervision
of Federal Reserve's Board of Governors, chaired by Ben Bernanke.
Member bank presidents are appointed by the nine member board, who
themselves are appointed by other bankers.

During the AIG hearing, Representative Mary Kaptur said: "A lot of
people think that the president of the New York Fed works for the U.S.
government. But in fact you work for the private banks that elected
you."

So what you have is a closed and secret group of bankers whose main
task it is to help other bankers when things go bad. This is exactly
what happened when AIG exploded.

AIG sold credit default swaps on toxic assets to banks including
Goldman Sachs (GS), Merrill Lynch, Societe Generale and Deutsche Bank
(DB) among others.

The New York Fed took it upon itself to buy out these swaps at 100%
face value when they knew full well that they were not worth that
much. So they took $30 billion of taxpayer money and gave it to the
banks under the guise that AIG's position was in the midst of
collapsing.

Now the cover up. First, there is the denial by Treasury Secretary
Paulson and Chairman Ben Bernanke. We didn't know anything about it.
That leaves Timothy Geithner, who was then head of the New York Fed
that engineered this deal. Meanwhile, can you imagine Bernanke telling
the bankers (fictitiously): Don't worry boys. Things will be fine. I'm
going to use $11.2 trillion dollars of taxpayer money to bail you guys
out. We don't have to disclose any of this to the public, so please,
keep this under wraps. It didn't matter that this $11.2 trillion could
have paid off our national debt, saved Social Security and Medicare,
provided health care for all Americans, rebuilt our infrastructure,
and provided jobs and prevented 17 million people from losing their
jobs.

When things got heated, James Bergen e-mailed colleagues saying: "I
have to think this train is probably going to leave the station soon
and we need to focus efforts on explaining the story as best we can.
There are too many people involved in these deals -- too many
counterparties, too many lawyers and advisors, too many people from
AIG -- to keep a determined Congress from the information."

The New York Fed under Geithner muzzled the SEC and told them to
button up on this matter.

So there you have it. Does this sound like Watergate? Or is it
Bankgate? Here we have billions of dollars of taxpayer money funneled
to our big banks in secret deals at 100% of face value.

The question is what is Congress going to do about it?

What do you think Congress should do? Should the bankers return this
money to the Fed?

http://www.bloggingstocks.com/2010/02/02/is-the-new-york-fed-a-black-ops-outfit-for-the-nations-central/

Baidu.com Could Benefit from Google's Misfortunes
Posted Feb 2nd 2010 10:00AM
by Mark Fightmaster

Yesterday was a good day for Baidu (BIDU), the Chinese Internet search
portal, after some Wall Street analysts noted that the departure of
Google (GOOG) from China could "benefit Baidu tremendously."

BIDU has traded well in the United States, hovering in the upper
reaches of the $380 region -- but GOOG's decision to operate in China
without censoring local search results after recent cyber attacks
pushed BIDU as high as $470 before the stock settled into the lower
$400s.

Both Susquehanna Financial Group and Credit Suisse expressed the same
belief on Monday, with Credit Suisse estimating that -- should GOOG
pull out of China -- as much as one-third of GOOG's search advertising
in China could move to BIDU. GOOG would then see its local market
share drop to 20% from 31% by 2011. What's more, Credit Suisse
believes that BIDU's market share could stabilize this year, at up to
47%. This combination of assertions gave Credit Suisse the impetus to
upgrade BIDU to neutral from underperform.

We have looked at some of the technicals on BIDU already, but it is
very important to note that the shares enjoy support from their 10-
and 20-week moving averages. These two trendlines escorted the equity
higher throughout 2009 and are in position to continue this role in
2010.

If the shares falter, watch for this duo to step into the fray.
Furthermore, the 20-week trendline currently resides in the $405
region, making a drop below $400 unlikely. If the equity tries to fall
past $400, it won't be easy. Of course, there is always the chance
that news could push the stock considerably lower; nevertheless, BIDU
appears to be in a nice position, ready to capitalize on the
misfortunes of its major competitor.

http://www.bloggingstocks.com/2010/02/02/baidu-com-could-benefit-from-googles-misfortunes/

Obama Budget, Republican Obstruction, May Lead to Gridlock in
Washington
Posted Feb 2nd 2010 4:40PM by Joseph Lazzaro


Political Science Scholar Larry Sabato co-wrote, The Party's Just
Begun, which could also prove to be an apt phrase for the political
climate in the months ahead in Washington.

That's because Congressional Republicans, emboldened by the securing
of their 41st -- and filibuster-capable -- vote in the Senate as a
result of Scott Brown's victory in the Massachusetts U.S. Senate race,
may now choose to lock horns with U.S. President Barack Obama, D-
Illinois, over his proposed $3.8 trillion fiscal 2011 budget.

And what a battle it may become: there's a 50/50 chance that the
federal government will be shut down because of a lack of a budget.
That's correct: a shutdown of non-essential services -- something the
financial markets would not look favorably on, needless to say.

http://www.bloggingstocks.com/

The Party's Just Begun: Shaping Political Parties for America's Future
(2nd Edition) (Paperback)
~ Larry J. Sabato (Author), Bruce Larson (Author)


US economy races ahead

Financial markets reacted swiftly to the stronger-than-expected
growth, with the dollar gaining ground and bond yields rising amid
fears of rising inflation in the US economy
Comments (9)

Ashley Seager guardian.co.uk,
Friday 29 January 2010 14.06 GMT

US dollar gained ground on news that the economy had grown strongly in
Q4. Photograph: Getty/Piet Mall

The US economy grew at a faster-than-expected 5.7% annualised rate in
the fourth quarter, the strongest figure in more than six years, as
businesses reduced inventories less aggressively than before.

Growth in the October to December period was much faster than the
third quarter's 2.2% rate and was boosted by a sharp slowdown in the
pace that businesses ran down stock levels, a factor that could mask
the strength of the economic recovery from the longest and deepest
downturn since the Great Depression.

But even stripping out inventories, the economy expanded at an annual
rate of 2.2%, accelerating from the 1.5% increase in the third
quarter, reflecting relatively strong performance from other segments
of the economy.

Financial markets reacted swiftly to the surprise news, with bond
markets around the world selling off and pushing up yields as markets
feared that a roaring US economy could eventually generate inflation.

The dollar rose against most major currencies , with the pound falling
below $1.61.

Business inventories fell only $33.5bn (£20.74bn) in the fourth
quarter after dropping $139.2bn in the July-September period. The
change in inventories alone added 3.39 percentage points to GDP in the
last quarter. This was the biggest percentage contribution since the
fourth quarter of 1987, official data showed.

For the whole of 2009, the economy contracted 2.4%, the biggest
decline since 1946 but one which is half the contraction of the
British economy over the same period.

In the last three months of 2009, consumer spending increased at a 2%
annual rate, below the 2.8% in the prior quarter when consumption got
a boost from the government's "cash for clunkers" program.

Consumer spending, which normally accounts for about 70% of US
economic activity, has been held back by the worst labour market in a
quarter of a century with unemployment at 10%.

Business investment in the fourth quarter grew for the first time
since the second quarter of 2008 as the drag from the troubled
commercial real estate sector was offset by robust spending on
equipment and software.

Investment rose at a 2.9% rate after falling 5.9% over the previous
three-month period.

The growth of spending on new home construction braked sharply in the
fourth quarter to an annual rate of 5.7% from an 18.9% pace in the
third quarter. Home building has received a lift from a popular tax
credit for first-time buyers, but recent data have hinted at some
weakness starting to creep in.

Export growth outpaced imports, leaving a trade gap that contributed
half a percentage point to GDP growth in the last quarter.

http://www.guardian.co.uk/business/2010/jan/29/us-economic-growth-surged-q4

Deficit politics: Chase to the cuts
Comments (41)

Editorial
The Guardian,

Tuesday 2 February 2010

America cannot continue to spend as though government deficits do not
matter, Barack Obama announced yesterday as he unveiled his 2011
budget. That sort of message has now become the default position of
political leaders in many other countries too, including our own,
although the recognition has been conspicuously grudging in Gordon
Brown's case. Yet if the politics of deficits have now become
increasingly universal, the immediate implications still differ
sharply in the light of differing local circumstances.

British politicians, for instance, have few expensive shop-window
programmes whose disappearance will cause as little political blowback
as President Obama is likely to face for scrubbing Nasa's expensive
return to the moon programme this week. America is unlike Britain in
other respects too. Unemployment is higher on the other side of the
Atlantic than it is here, for instance. And the emphasis on job
creation in Mr Obama's budget is a vital reminder that there are other
ways of bringing down deficits – economic stimulus and tax rises – as
well as spending cuts.

Cuts in this country, as opposed to cuts on the moon, all come at a
political price – even the big-ticket defence cuts which many
ministers eye as an easy option but which Mr Brown is expected to try
to face down this week. The reason for this is obvious. Deficits may
matter, but spending cuts of any kind are a hard political sell in the
run-up to an election. That's why, of course, our politicians prefer
to keep it vague and to talk as much as possible about efficiency
savings that fudge the really difficult decisions about cuts, taxes
and timing.

David Cameron's decision to soften his position on early spending cuts
fits this pattern. Because the Tories have not yet set out their cuts
plans in detail, and because even their emergency budget would be
likely to make the biggest cuts in 2011-12 and beyond rather than in
2010-11, Mr Cameron's words do not rearrange many actual commitments.
Yet the words matter all the same. They are an admission that the
earlier rhetoric of immediate austerity is out of step with the
hesitant recovery and with the growing mood of public caution. Mr
Cameron may also be unnerved by recent polls showing a narrowing lead
over Labour. Either way, it is smart positioning, though the
ideologues of the right may smell a rat.

The real need as the election nears is for all the parties to get
specific about where they will spend less, where they will tax more
and where they will rely on recovery to do the job. Mr Obama has had
to get real in America. It is now time that the Tories and Labour –
and the Lib Dems too – put their cards clearly on the table over here.

Comments in chronological order (Total 41 comments)

http://groups.google.com/group/soc.culture.indian.marathi/browse_thread/thread/a46d86d4a3976279/ebadceda6d0ba53f#ebadceda6d0ba53f

http://www.guardian.co.uk/commentisfree/2010/feb/02/public-spending-us-budget-conservatives

Labour spending has 'failed' to improve child health
Wave of spending and policies 'not delivering value for money',
according to Audit Commission

Randeep Ramesh, social affairs editor
The Guardian,
Wednesday 3 February 2010

Steve Bundred, the outgoing chief executive of the Audit Commission,
said its findings were 'disappointing'. Photograph: Frank Baron

The government has failed to "significantly improve" children's health
despite spending more than £10bn and producing a policy every six
months over the last decade, according to the Audit Commission.

In a report published today, the spending watchdog found that
childhood obesity has risen from 10.1% to 13.9% between 1995 and 2008.
While infant mortality rates have declined, Britain still has the
highest number of deaths per 1,000 live births in western Europe,
higher than countries such as the Netherlands, France, the Republic of
Ireland and Spain.

The commission said it was also concerned about the persistence of
health inequalities which meant children under five living in deprived
areas had a significantly "higher risk of poor health". Children in
poorer areas are 19% more likely to have bad dental health and 9% more
likely to be born underweight.

Steve Bundred, outgoing chief executive of the commission, said the
findings were "disappointing. The policies are not delivering
commensurate improvement and value for money. Large inequalities
persist … and even before [children] are born, for many, place and
parents' income determine their quality of life and their lifespan."

The government had failed to focus on the youngest in society, the
report said. The result was that obesity, a factor in heart disease
and diabetes, cost the NHS £4.2bn a year and without action this could
double in the decades ahead. Bundred said poor diet lay at the heart
of many health inequalities. "Sugary drinks, unhealthy foods are
factors that do contribute to [health] inequalities with young
children in poorer areas," he said.

Despite 27 national policies since 1999 aimed at improving the health
of under-fives as a way to reduce the gap between rich and poor,
Bundred said much of the government's efforts ended up being
concentrated on older children.

The increasing volume of national children's policy meant there was
now "duplication and inconsistencies across government departments,
leading to confusion locally about planning and delivering health
services for the under-fives".

The report also pointed out that while councils were aware of health
issues facing young children, such as a decline in immunisation rates
for mumps, measles and rubella, there had been a 10% drop in the
number of health visitors employed in England. The commission also
found that parents from vulnerable groups were not using the
government's Sure Start children's centres, designed to serve those in
deprived areas.

This was, according to Bundred, either because they were unaware of
the service or because they "found the attitude of the staff off-
putting … too judgmental". The commission called on the government to
clearly target spending on vulnerable groups to reduce inequalities
and said there should be a single set of priorities to avoid
confusion.

Many experts say that what is needed is a bigger "cultural change"
that makes children a priority in society.

In today's Society Guardian, Terence Stephenson, president of the
Royal College of Paediatrics and Child Health and Nuffield professor
of child health at University College London, says that "of 188
performance indicators available to local authorities, only six relate
to under-fives' health, and none feature in the top 20".

He added that unequal rich wealthy societies often did not produce
high levels of "child wellbeing" .

"Children in countries with more unequal wealth distribution fare
worse," he said. "Similarly, infant mortality is related to inequality
in rich countries. The UK has a worse infant mortality rate than
Greece, despite having almost double the income per person."

The government defended its record, saying that there had been
increases in breastfeeding rates and that because of a successful
immunisation programme no child died of meningitis C in 2008.

"We know there is still more to do and we're determined to keep up the
momentum. This is why we introduced the Healthy Child Programme, the
first universal, evidence-based programme to ensure that all children
get the best possible start in life," said Gillian Merron, minister
for public health.

http://www.guardian.co.uk/politics/2010/feb/03/labour-spending-failed-child-health

...and I am Sid Harth

[chhotemianinshallah]

Lisa Twaronite's This Week in Japan

Feb. 3, 2010, 12:28 a.m. EST ·

Demons out ... for now
Commentary: Japan's GDP bean counters will see improvement

By Lisa Twaronite, MarketWatch

TOKYO (MarketWatch) -- On Wednesday, children all over Japan observe a
holiday called Setsubun, which literally means "seasonal division" but
is commonly called the "Bean-Throwing Festival."

On Feb. 15, economists all over Japan will observe their own quarterly
"Bean-Counting Festival," when Japan's Cabinet Office releases its
preliminary October-December gross domestic product report at 8:50
a.m.

Japanese children will toss roasted soybeans at a family member or
teacher wearing a mask of an "oni," or demon, while chanting, "Oni wa
soto! Fuku wa uchi!" or "Demons out! Good luck in!" Throwing the beans
is supposed to drive away the demon and bad luck for the coming year,
and let the good luck in. Then, as a bonus, the kids get to eat the
beans, which don't have much taste but are at least nice and crunchy.

Reuters

Economists get paid for crunching their beans, but it just isn't the
same -- they aren't able to drive away the bad stuff so easily.

In fact, it's the beans they don't count that can come back to haunt
them later, when they revise the preliminary data. The July-September
quarter's data were a classic example of this.

Revised data for the third quarter of 2009 showed Japan's economy grew
just 0.3% in real terms from the previous quarter -- far less than the
on-quarter rise of 1.2% in the preliminary data. On an annualized
basis, Japan's GDP grew by a revised 1.3% in the July-September
period, down from an initial reading of 4.8%.

The dramatic downward revisions were mostly due to inclusion of the
Ministry of Finance's capital-expenditure data, which were unavailable
at the time of the initial GDP data release. The inclusive revised
figures showed a big cut in corporate capital investment, which fell
2.8% on quarter, far worse than the preliminary data's 1.6% increase.

Pick up, slow down

Most economists expect Japan's fourth-quarter GDP data to show an
improvement. But as for improvement in the current quarter already in
progress -- not so much.

A poll of economists by Japanese business daily Nikkei came up with an
average expectation of annualized GDP growth of 4.3% in real terms in
the fourth quarter of 2009. A Reuters poll found a median forecast of
4.1% expansion.

But for the quarters after that, the same polls showed economists
expect growth to slow, with the Nikkei poll showing consensus
predictions of just 1.1% growth for the January-March quarter, and
April-June growth at 0.8%, as the new Democratic Party-led government
slows its spending on public works projects approved by its
predecessor.

"Going forward, real GDP growth is likely to slowdown to nearly zero
in [the first half of] this year, as the effect of policy stimulus
fades out," said Junko Nishioka, chief economist at RBS Securities
Japan Ltd. in Tokyo, in a recent note to clients.

The government is due to start discussing the budget for the fiscal
year starting in April from this Friday, and the DPJ may yet get that
budget passed sometime this month. Moreover, she added, there could be
additional fiscal stimulus measures ahead of Japan's Upper House
elections in July.

But even so, she said, an economic slowdown in the first half "is
increasingly likely, given the political-vacuum period."

Local media reports Tuesday said the Cabinet Office plans to revise
its GDP-computing method this summer. Hopefully, the new steps will
help smooth out some of the gaping differences between preliminary and
revised data.

The government will adopt the new method from the July-September
period, the data for which are scheduled to be released in December
this year. It will also double the number of bean counters on its data-
compiling team to over 100.

In the meantime, as public spending wanes, Japan could use a little
bit of that good luck.

Lisa Twaronite is MarketWatch's Tokyo bureau chief.

http://www.marketwatch.com/story/japans-fourth-quarter-gdp-will-improve-2010-02-03?reflink=MW_news_stmp

...and I am Sid Harth

[chhotemianinshallah]

Feb. 2, 2010, 4:12 p.m. EST · Recommend · Post:

Obama budget attacked over deficit, lending fund
Budget chief Orszag and Treasury's Geithner take proposals to Congress
Explore

By Robert Schroeder & Greg Robb, MarketWatch

WASHINGTON (MarketWatch) -- Republicans and Democrats alike picked
apart President Barack Obama's $3.8 trillion fiscal year 2011 budget
on Tuesday, as Cabinet members offered a strong defense of Obama's
plan to create jobs and pull the economy out of the Great Recession.

Treasury Secretary Timothy Geithner and White House budget director
Peter Orszag made separate appearances before two Senate committees to
sell lawmakers on Obama's budgetary priorities, at times meeting
fierce resistance from lawmakers.

Reuters

Timothy Geithner, Treasury secretary. He said Tuesday: "Part of laying
a foundation for future prosperity is returning to living within our
means."

Orszag quickly found part of Obama's jobs agenda under intense attack
from Sen. Judd Gregg, R-N.H.

Gregg slammed a proposal to use $30 billion in money repaid to the
government by Wall Street banks to set up a new lending fund for small
businesses. Obama highlighted the fund Tuesday afternoon at a town
hall meeting in Nashua, N.H. Read story about New Hampshire town
hall.

"The purpose [of the money] was to reduce the debt!" Gregg said, hotly
telling Orszag at one point: "You don't appear to understand the
law!"

Orszag replied that the proposal will require congressional approval
and that the White House will be following the law.

The budget plan released Monday forecasts a record $1.6 trillion
deficit in fiscal 2010 but then sees the red ink falling to $1.3
trillion in fiscal 2011.

But Sen. Kent Conrad, D-N.D., said the White House's budget doesn't
tackle the deficit in later years.

"I don't see the focus on bringing down that long-term debt," said
Conrad, who chairs the Senate Budget Committee.

Geithner said that the administration will seek to put in place
policies to bring the deficit down once the recovery has a "firm
footing."

"Part of laying a foundation for future prosperity is returning to
living within our means," Geithner said. He called the deficit
"alarmingly high." Read Geithner's prepared testimony.

For his part, Orszag acknowledged that the U.S. faces big deficits but
is also confronting a "jobs deficit." Unemployment is stuck at 10% and
economists expect that only modest job growth occurred in January. See
MarketWatch Economic Calendar.

Geithner's comments illustrate the tightrope that the Obama
administration is walking on fiscal policy. On the one hand, the White
House is advocating new spending to boost jobs -- but is also pledging
to be fiscally conservative in the medium term.

Reuters

Peter Orszag, director of the Office of Management and Budget.

Republicans have given the budget a harsh reception, saying it spends
too much, taxes too much and borrows too much from future generations.
The transmission of the budget to Congress on Monday begins a lengthy
annual process in which the budget is scrutinized by congressional
committees and detailed spending plans are made.

The lending program and other parts of the White House's jobs plan
would need to be approved by Congress.
Robert Schroeder is a reporter for MarketWatch in Washington.

Greg Robb is a senior reporter for MarketWatch in Washington.

Obama budget attacked over deficit, lending fund
Budget chief Orszag and Treasury's Geithner take proposals to
Congress

Comments Screener (85)

http://www.marketwatch.com/story/obamas-budget-plan-defended-on-capitol-hill-2010-02-02/comments?dist=beforebell

http://www.marketwatch.com/story/obamas-budget-plan-defended-on-capitol-hill-2010-02-02?dist=beforebell

Feb. 2, 2010, 5:08 p.m. EST

Banks shouldn't be hedge funds, Volcker tells Senate
Federal safety net shouldn't cover speculators, Obama adviser says

WASHINGTON (MarketWatch) -- The federal safety net for commercial
banks should protect depositors, not speculators, former Federal
Reserve Chairman Paul Volcker told senators on Tuesday, urging them to
pass the so-called Volcker Rule that would ban banks from trading for
profit and that would restrict the size of the biggest banks.

Volcker, now an adviser to President Barack Obama, told the Senate
Banking Committee that the banking system must be restructured to
prevent a repeat of the bailouts of 2008.

The top Republican on the Senate Banking Committee, Sen. Richard
Shelby of Alabama, initially said he was open to any idea that would
prevent another "calamity," but, after the hearing, he said he was
inclined to vote against Volcker's idea. He chastised the
administration for "air dropping" its latest proposal months after
debate had begun on rewriting the rules of the banking system.

Sen. Chris Dodd, D-Conn., said he "strongly supports" Volcker's
proposal.

Banks must not be allowed to reap the benefits of successful
speculation while handing taxpayers the costs of failure, Volcker
said.

AM Report: Testing Volcker's Rule

The so-called "Volcker Rule," which argues for a change in proprietary
lending by banks, will be argued before the Senate this afternoon, the
News Hub reports.

Banks must not be allowed to own or operate as hedge funds. Read David
Weidner's commentary on Volcker's testimony.

Instead, commercial banks covered by the federal safety net should be
restricted to the profitable businesses of traditional banks:
operating the payment system, providing credit, helping customers
manage their money.

Volcker said only four or five U.S. commercial banks and only a couple
dozen worldwide engage in the kind of risky proprietary trading that
would be banned by the Volcker Rule.

He didn't name them, but the firms likely on the list would include
Bank of America /quotes/comstock/13*!bac/quotes/nls/bac (BAC 15.59,
-0.01, -0.06%) , JP Morgan /quotes/comstock/13*!jpm/quotes/nls/jpm
(JPM 40.72, +0.17, +0.42%) , Citigroup /quotes/comstock/13*!c/quotes/
nls/c (C 3.39, -0.02, -0.59%) , Goldman Sachs /quotes/comstock/13*!gs/
quotes/nls/gs (GS 158.10, +1.16, +0.74%) and Morgan Stanley /quotes/
comstock/13*!ms/quotes/nls/ms (MS 28.01, -0.05, -0.18%) .

In addition to the handful of commercial banks whose risks are
taxpayer-subsidized, there are thousands of other hedge funds, private
equity firms and other institutions that do not have taxpayer
protection, yet are actively competing in capital markets, Volcker
noted. "They are, and should be, free to trade, to innovate, to invest
-- and to fail."

"What we plainly need are authority and methods to minimize the
occurrence of those failures that threaten the basic fabric of
financial markets," Volcker said. "The essential need is to guard
against excessive leverage and to insist upon adequate capital and
liquidity."

Commercial banks are covered by federal deposit insurance, access to
the Fed's discount window for emergency loans to survive liquidity
crises, and the knowledge that some firms are seen as simply "too big
to fail." Other types of financial institutions are not explicitly
insured by the government.

Volcker and Deputy Treasury Secretary Neal Wolin pressed the senators
to toughen their proposals for financial regulatory reform to more
closely match those already approved by the House.

"Our financial system will not be truly stable, and our recovery will
not be complete, until we establish clear new rules of the road for
the financial sector," Wolin said.

'The essential need is to guard against excessive leverage and to
insist upon adequate capital and liquidity.'

Paul Volcker

The Volcker Rule is meant "to prevent a banking firm from putting its
clients, customers and the taxpayers at risk by conducting risky
activities solely for its own enrichment," Wolin said.

The White House faces a tough political fight, because Republicans on
the Banking Committee and in the Senate are skeptical at best of the
new proposals from the White House.

In the Senate, the Republicans hold an effective veto despite being
outgunned by 59 to 41. Dodd has been meeting with Shelby in an effort
to write a bipartisan regulatory reform bill that could avoid a
filibuster.

Even before the administration advocated strengthening the bill by
including the Volcker Rule, a bipartisan deal was an uphill climb.
Republicans are also fighting against the creation of an independent
consumer financial protection agency to safeguard Americans against
hazardous financial products.

The heart of the financial regulatory plan is the creation of a way to
deal with large and systemically interconnected banks and financial
firms that are on the brink of failure. In 2008, those failed
companies were either bailed out, or left to die. Both approaches were
unacceptable.

The administration's proposal would follow the model of the Federal
Deposit Insurance Corp., which takes over failing banks to protect
depositors and the payment system, without protecting management or
shareholders. "In other words, euthanasia, not rescue," Volcker said.

Wolin dismissed concerns that the Volcker Rule would hobble U.S. banks
competing globally. He noted that U.S. banks already face tougher
restrictions than their foreign competitors. Yet U.S. banks do compete
globally, and U.S. financial markets remain the biggest and most
liquid.

Wolin said regulators from the Group of 20 are working on similar
proposals. Volcker said international cooperation was important, but
should not delay or stop the United States from acting.

Wolin said the proposal to limit any bank to 10% of total assets would
not require any bank to be broken up. It would prevent banks from
growing too big by merging, but would not "impede the organic growth
of financial firms."

Rex Nutting is Washington bureau chief of MarketWatch.

Banks shouldn't be hedge funds, Volcker tells Senate
Federal safety net shouldn't cover speculators, Obama adviser says

Comments Screener (193)

http://www.marketwatch.com/story/banks-shouldnt-be-hedge-funds-volcker-testifies-2010-02-02/comments?dist=beforebell

http://www.marketwatch.com/story/banks-shouldnt-be-hedge-funds-volcker-testifies-2010-02-02?dist=beforebell

...and I am Sid Harth

[chhotemianinshallah]

Deflation menaces Japan's economy
Published On Fri Jan 29 2010
The Associated Press

TOKYO—Japan's economy took baby steps forward in December as
unemployment eased and factory output rose.

It could not, however, shake off a troubling combination of falling
prices and wages that only worsened during the month and threatens to
hamstring recovery.

The Japanese government released a slew of data Friday that offered
both hope and uncertainty for the world's second biggest economy.
While Japan appears unlikely to fall into recession again — as some
have feared — it faces a murky future under entrenched deflation.

"The bottom line is that a double dip is unlikely in Japan," said
Kyohei Morita, chief economist at Barclays Capital in Tokyo. "That's
mainly because corporate activity is not that weak. Exports have been
rising, which has resulted a pickup of production activity, which we
hope will translate into a pickup in capex this year."

Industrial production climbed 2.2 per cent in December from the
previous month, powered by a pickup in exports. The result just missed
Kyodo News agency's forecast for 2.3 per cent growth in its survey of
economists.

The trade ministry expects factory production to rise 1.3 per cent in
January and 0.3 per cent in February.

Earlier this week, government figures showed that robust Asian demand
in December fueled the first expansion in Japan's exports in 15
months.

There was also a small improvement on the jobs front. The nationwide
unemployment rate fell to 5.1 per cent in December — better than 5.2
per cent in November, though still high by Japanese standards.

The average ratio of job offers to job seekers stood at 0.46, a tad
higher than 0.45 a month earlier. The figure means there were 46
offers for every 100 job seekers.

Household spending posted a solid rise in December, up 2.1 per cent
from a year earlier. The figure represents a key indicator of private
consumption, which accounts for about 60 per cent of Japan's economy.

Despite the better jobs numbers, reaction from officials and analysts
was far from jubilant.

"The rate improved slightly," Prime Minister Yukio Hatoyama told
reporters, according to Kyodo. "But it is far from giving grounds for
optimism."

Goldman Sachs economist Chiwoong Lee warned that export-driven
progress may not necessarily last.

"A sustained pace of improvement in external demand is by no means
assured, and companies have become cautious in their stance," Lee said
in a note to clients. "This is not fertile ground for a strong labour
market turnaround."

Deepening deflation further complicates Japan's outlook.

Prices and wages continued to fall in December with core consumer
prices falling 1.3 per cent from a year earlier, the government said.

The key consumer price index, which excludes volatile fresh food
prices, has now fallen for 10 straight months. The reading matches
Kyodo's market forecast.

Lower prices may seem like a good thing, but deflation plagued Japan
during its "Lost Decade" in the 1990s. It can hamper economic growth
by depressing company profits, sparking wage cuts and causing
consumers to postpone purchases. It also can increase debt burdens.

Core CPI for the Tokyo area, seen as a barometer of price trends
nationwide, retreated 2 per cent in January. For the 2009 calendar
year, core CPI retreated 1.3 per cent, according to the Ministry of
Internal Affairs and Communications.

Lower prices and wary companies have led to dwindling wages. Average
monthly household income fell 4.8 per cent in December from a year
earlier, the ministry said.

Morita of Barclays Capital expects consumers to spend less in the
months ahead as wages slide and consumer incentives implemented by the
previous government run their course.

Japan's recovery should strengthen if exports remain robust and the
new government can effectively implement policy, such as cash handouts
for families with children, he said.

Hatoyama's Democratic Party of Japan swept into power last summer
promising more support for struggling workers and families. Lawmakers
this week passed a stimulus package with $80 billion yen in spending
on steps to bolster employment and help small and medium-size firms
hurt by a strong yen.

http://www.thestar.com/business/article/757788--deflation-menaces-japan-s-economy

T.O. lures 10 million despite recession
Wet summer, strong loonie, new border rules only minor deterrents

Published On Wed Feb 3 2010

Despite the recession, Toronto's tourism industry held steady in 2009
compared with the year before, according to initial estimates.

The city welcomed about 10 million overnight visitors, down from about
10.6 million in 2008, Tourism Toronto said Tuesday.

"It's off a bit from the prior year, but still, it's 10 million,"
spokesman Andrew Weir said.

In 2008, overnight visitors added about $3.5 billion to the economy in
the Greater Toronto Area as they spent money on hotels, restaurants
and shopping. Another 10 million day trippers contributed an
additional $1 billion.

Through the first half of 2009, the recession took a bite out of the
travel industry as leisure and business travellers stayed home.

Then a cool, wet spring and summer season put a damper on May and
June, pulling down hotel occupancy rates by about 10 per cent from
2008 levels.

Along with the stronger Canadian dollar, new rules requiring American
visitors to present a passport at the border and travellers from
Mexico to have visas seemed to add insult to the tourism industry's
injuries.

But the sector began to turn around in August, first with better
weather and then amid signs the economy was stabilizing through the
fall.

For the year, Toronto hotels' average occupancy rate was 62.3 per
cent, down from 67.6 per cent in 2008, according to Smith Travel
Research.

"We're optimistic that 2010 will be a better year, and in Toronto we
have a lot of opportunities," Weir said. "The biggest is the G20."

Toronto will host the G20 Summit in June, a gathering of finance
ministers and central-bank governors from 20 countries. The event will
bring tens of thousands of visitors to the city, along with blanket
media coverage.

Toronto has also scored three high-profile international events: the
International Indian Film Academy Awards in 2011, World Pride in 2014
and the Pan Am Games in 2015.

"We want to raise Toronto's profile, make sure people know this is one
of the top urban destinations in North America.

"These events will help cement that reputation and move Toronto up in
people's destination choices," Weir said.

Canada has recently been added to China's list of approved
destinations and the country will be an important growth market for
Toronto's tourism industry in the coming years, along with Brazil and
India, Weir said.

These countries have a burgeoning middle class with travellers who are
eager to see North America.

"They're looking for a big North American urban experience and Toronto
delivers that," Weir said. "If you like cities, Toronto should be on
your list and it should be high on your list."

Nearly two-thirds, or 65 per cent, of Toronto's 10 million overnight
visitors annually come from other parts of Canada.

About one-in-five, or 20 per cent, come from the United States,
followed by Great Britain (244,000 visitors) and Germany (77,000).

http://www.thestar.com/business/article/759600--t-o-lures-10-million-despite-recession

Resize:AAA.U.S. Losing Global Competitiveness with High Corporate Tax
Burden
Posted February 2nd, 2010 at 10:03am in Enterprise and Free Markets
with 0 comments Print This Post

High corporate tax rates are undermining U.S. international
competitiveness. The global economy continues to demand that companies
be flexible and swift in order to remain competitive. High tax rates
deprive companies of both the means and the incentive to take
advantage of new market opportunities or technological changes that
can improve productivity.

Most advanced countries in the world have responded to new global
economic realities by slashing corporate tax rates. The U.S. stands
almost alone in having resisted such cuts, and its corporate tax rates
are now among the highest in the world. Future U.S. prosperity depends
on the willingness of our political leaders to resist populist anti-
corporate dogma and make the necessary adjustments to keep the U.S.
economy competitive.

America’s strength and economic success are based on economic freedom,
which fosters the virtuous cycle of entrepreneurship, innovation, and
growth. Our economic freedom has sustained economic opportunity and
prosperity, as well as the creativity that leads to new products and
new jobs. Clearly, U.S. inaction in improving fiscal freedom through
more competitive tax rates undermines our economy’s innovative pulse;
America stands still while its competitors are moving forward. As the
2010 Index reveals, since July 2008, more than 30 countries have
introduced reforms in direct taxes or have implemented tax cuts as
previously planned, despite the challenging economic and political
environment caused by the global economic slowdown.

America’s inaction is particularly damaging in a time of economic
slowdown and ongoing recovery. A long-term policy plan that
strengthens economic fundamentals would calm fears among entrepreneurs
and restore confidence in the U.S. economy.

http://blog.heritage.org/2010/02/02/u-s-losing-global-competitiveness-with-high-corporate-tax-burden/

It’s Time to Turn to Innovation, Competition to Spur Economy

Posted January 27th, 2010 at 10:10am

In a recent poll by the Wall Street Journal and NBC news, a majority
of Americans expressed their frustration with the approach our
government has taken in response to the financial crisis and economic
slowdown. Just 43 percent of the respondents expressed satisfaction
with how President Obama has handled the economy, a decline of 13
percentage points from a year ago. The disapproval vividly reflects
disappointment toward economic policy decisions and management over
the past year.

As the downward-trending poll numbers suggest, a majority of our
fellow citizens are not comfortable with the “dramatic change” we have
witnessed. The quest to enlarge and mobilize government in the name of
rescuing and rebuilding our economy has created both economic
uncertainty and a considerable degree of anxiety about our economic
future.

There has always been tension between the state and the free market.
The genius of the American economy has been its ability to balance the
two, with policies that preserve stability while promoting innovation.
However, as shown in the 2010 Index of Economic Freedom that was
released last week, the battle has tilted decidedly toward big
government. The magnitude of the recent loss of economic freedom has
been alarmingly high, with considerable negative implications for our
economic future. While many countries around the world continue on the
path of economic liberalization, the United States is, in many
respects, moving in the opposite direction, simultaneously burdening
its economy with increasing government spending, uncompetitive tax
rates, and barriers to trade and investment that stifle
entrepreneurship and dynamic growth.

By burdening our economy with even bigger government and stifling it
with less economic freedom, we are creating a dangerous economic
environment where opportunities are missed, and lingering uncertainty
undermines our economic potential.

In one of his many inspiring speeches, President Obama in fact talked
about the importance of innovation:

“[There is] an important role that we can play, laying the ground
rules to spur innovation. That’s the role of government — to provide
investment that spurs innovation and also to set up common-sense
ground rules to ensure that there’s a level playing field for all
comers who seek to contribute their innovations.”

As a matter of fact, the proven path to stimulating economic growth is
to advance economic freedom by promoting policies that generate a
virtuous cycle of innovation, vibrant economic expansion, and more
opportunities for people. Economic freedom is strongly linked to
innovation and business initiatives that cumulatively lead to greater
economic vitality for all.

As the findings of the 2010 Index demonstrate empirically, today’s
successful economies are not necessarily geographically large or
richly blessed with natural resources. Many economies have managed to
expand opportunities for their citizens by enhancing their innovation
capacities that are among the chief engines of economic prosperity.

Unfortunately, our economy’s dynamic innovative pulse is slowing in
the presence of ever more bloated government.

No doubt that the vigor of our ongoing recovery depends on private
businesses that will flourish with greater economic freedom. However,
many small and large firms are currently postponing spending decisions
and projects until they see more clearly government’s latest
intentions. Others are put off by anti-business rhetoric that
demonizes those whose profit-seeking is the very foundation of
investment and job creation.

It is time to put back our country onto the right course. In preparing
for his second State of the Union address this Wednesday, President
Obama should be reminded of how to best spur innovation, not throttle
it. The tool of choice—economic freedom—requires only an understanding
that the people, expressing their wishes freely in the market-places
of America, know better than any central planner or government
bureaucrat what they need to get moving again.

http://blog.heritage.org/2010/01/27/its-time-to-turn-to-innovation-competition-to-spur-economy/

Scott Brown’s Reading List: The Index of Economic Freedom
Posted January 20th, 2010 at 4:33pm

Within a span of just a few hours this week, three seemingly unrelated
events all, by happenstance, made headlines in America: the one-year
anniversary of President Obama’s inauguration, a historically
earthshaking election in Massachusetts, and the release of The
Heritage Foundation’s Index of Economic Freedom. But perhaps there are
no coincidences in life.

What narrative arc ties these headlines together? Our Index revealed
today that the United States is no longer as economically free as it
once was (and, in fact, dropped out of the “free” category
altogether); President Obama spent his first year continuing – and
exacerbating – dangerous economic policies that predated his swearing-
in; and Scott Brown seized an unlikely victory in a true-blue state by
campaigning on fighting the President’s disastrous economic policies.
What’s more, he made it known to all that he would cast the 41st vote
to be a firewall of conservative sanity to President Obama’s liberal
agenda.

Just as one wouldn’t turn up their nose at a lucky four-leaf clover,
Heritage will not let this series of coincidences pass us by. We’re
sending Mr. Brown a copy of the Index of Economic Freedom. Why not?
His campaign hit hard at Mr. Obama’s “stimulus” package, which,
according to the Index, is a policy that was a significant
contributing factor to America’s drop in economic freedom and has led
to the plunge in our investment freedom. In main street terms, the
devastating consequence is an unemployment rate of 10% that doesn’t
appear to be budging any time soon. It’s not just the layoffs, it’s
also that there’s no new investment to create employment
opportunities. In fact, of the ten categories the Index measures to
determine degree of economic freedom, the United States fell in seven.

It’s as if Mr. Brown took a page (or several pages) right out of our
Index. He relentlessly attacked our government’s interventionist
instincts—the takeover of major parts of our economy—that led to a
drop in our property rights, another reason why we are today “the land
of the mostly free.”

Let there be no doubt, our Index, which spans the June 30, 2008, to
June 30, 2009, period, makes clear that many of the policies which
have led to our “less free” status were started under President George
W. Bush. One glaring example is the Troubled Asset Relief Program,
which started under Mr. Bush. The Index makes clear, though, that Mr.
Obama has at least doubled down on all of the economically harmful
policies from the previous administration.

The Index does not cover Mr. Obama’s attempted takeover of our health
sector, which is almost one fifth of our economy. (To put it in
perspective, if it were a country it would have an economy as big as
the UK’s.) And it leaves out the attendant tax burden, deficit
spending, and miles of red tape that would come with Obamacare. And
the Index doesn’t include the job-killing cap-and-tax scheme, which
would surely cripple our economy. Of course, all of that looks less
likely right now after the fortuitous Boston Tea Party of January 19,
2010.

So we hope that Sen. Brown will enjoy our Index. Whether he knew it or
not, the message he campaigned on mirrors the ideal of economic
freedom the Index espouses. Perhaps it was a coincidence, but it’s not
one we’re willing to overlook.

The Index is published annually with The Wall Street Journal. You can
read more about it at JobsandFreedom.com or at Heritage.org/index

Follow Heritage’s Mike Gonzalez on Twitter @Gundisalvus

http://blog.heritage.org/2010/01/20/scott-brown%e2%80%99s-reading-list-the-index-of-economic-freedom/

Morning Bell: Americans Call for Change As U.S. Becomes Less
Economically Free
Posted January 20th, 2010 at 9:36am

Scott Brown’s shocking victory in Massachusetts on Tuesday was a shot
across the bow of the liberal ruling class in Washington and declared
one clear message: Americans do not like the direction the country is
heading, and they’re not going to stand for it, even in the solidly-
blue Bay State.

The United States’ direction today is a dangerous one, even when
compared to the country’s state of affairs just one year ago, as
revealed in the 2010 Index of Economic Freedom, which we are releasing
this morning in a joint project with The Heritage Foundation and The
Wall Street Journal. The Index analyzes just how economically “free” a
country is, and this year America saw a steep and significant decline,
enough to make it drop altogether from the “free” category, the first
time this has happened in the 16 years we’ve been publishing these
indexes. The United States dropped to “mostly free.”

The drop in rankings is notable as it comes in the same week that
marks the one-year anniversary of President Barack Obama’s
inauguration. By any standard, over the last year Americans’ overall
wealth and prosperity has continued to decline. Americans, in fact,
are more likely than ever to believe that their children and
grandchildren will be worse off than the current generation. They
believe future generations will live in a less prosperous and less
economically mobile America. The traditional American faith in upward
economic mobility – widely understood to be the American Dream – seems
more elusive now than ever.

One recent poll by the Pew Research Center found that 55% of Americans
believe their children will be worse off when they grow up, while only
36% see a better future for them. Similarly, a December 2009 Gallup
study found that Americans are more pessimistic about our future now
than at any time since the late 1970s.

Sadly, this bleak view of the future is understandable – after all,
unemployment has skyrocketed and shows no signs of abating, government
spending and debt are at unprecedented levels during peacetime, and
our elected officials seem determined not only to ignore these alarm
bells but to pursue policies – expensive new entitlement programs;
debilitating new taxes on wealth creation, savings, and investments;
and new government regulations that have created a climate of such
uncertainty – that will cause entrepreneurs to stay on the sidelines
rather than take the risks that have led the United States out of
previous recessions. Studies indicate that this is indeed the case.
“The largest force driving unemployment [in the U.S.],” Heritage’s
James Sherk argues, “is the sharp drop in private-sector job creation”
rather than job losses incurred through lay-offs.

In a nutshell, there is a growing sense that, in economic terms,
America is less free and is destined to remain that way.

As the Index of Economic Freedom reveals (and as each and every
American can feel in their daily lives), the United States is now the
home of the mostly free. This development is huge – akin to learning
that the premier rating agencies have been forced to downgrade U.S.
Treasury debt to second tier status.

What exactly is the Index? It’s a comprehensive review of 179
countries around the world that considers economic freedom in ten
separate areas. Five of these measurements — freedom in business,
trade, investment, finance, and labor—measure the regulatory burdens
government places on businesses and entrepreneurs. Three — fiscal
freedom, government spending, and monetary freedom—examine the overall
size and level of intrusiveness of government and its effectiveness in
maintaining a stable economic environment. The remaining two—property
rights and freedom from corruption—look at fundamental societal
characteristics that underpin all modern prosperous economies.

Detailed analyses have found that citizens in countries with the
highest scores on the Index enjoy much higher standards of living than
their neighbors in countries that are less free. Freer countries, for
example, have levels of per capita GDP that are more than 10 times
higher than in countries that are mostly unfree or repressed. Higher
levels of economic freedom also go hand-in-hand with broader
indications of both economic and social well-being.

While some of the decline is attributable to policies enacted under
the previous Administration, this year’s findings nevertheless should
be especially relevant to the policy agendas now dominating Capitol
Hill. Specifically, the Index records a wide disparity among the 20
largest economies in the world over the past year, with half
continuing to increase economic freedom while the other half,
including the United States and the United Kingdom, embraced policies
that substantially diminished it.

In particular, countries that undertook large stimulus measures or
other government-directed attempts to spur growth failed to realize
economic growth. Not only have growth rates not increased, but the
long term impact of these measures, which includes increased deficits,
inflation, higher taxes, and protectionist measures against foreign
trade, actually diminish economic activity. In the case of a country
like the United States, which has such a large impact on the world
economy, slower growth harms not only Americans, but citizens of
almost every other country in the world, as well.

Alarmed by the findings in this year’s Index, The Heritage Foundation
has embarked on a comprehensive project to identify those policy
changes that, if enacted, would return the United States once again to
the ranks of the freest countries on Earth. We will identify the
policies in each of the ten areas of economic freedom that are most
highly associated with true economic freedom, compare those “best
practices” to the policies currently in place here, and recommend an
economic freedom agenda worthy of America.

Quick Hits:

•Read more about the 2010 Index of Economic Freedom and watch a video
by Heritage Vice President Kim R. Holmes, Ph.D. at JobsandFreedom.com.

•In the wake of Scott Brown’s victory in Massachusetts last night,
Speaker Nancy Pelosi (D-CA) said of Congressional Democrats’ efforts
at health care reform: “We will get the job done. I am confident of
that. I have always been confident of that.”

•The Yemeni air force bombed the home of a suspected al-Qaeda leader
as part of a government crackdown related to the attempted Christmas
day airplane bombing over Detroit.

•Pennsylvania welcomed 53 Haitian orphans ranging from 11 months old
to age 12 on Tuesday; the earthquake destroyed two of three buildings
in their Port-au-Prince orphanage.

•Embattled Transportation Security administration nominee Erroll
Southers withdrew his name from consideration this morning. The Obama
nominee faced “fierce opposition” “since revelations that he may have
misled Congress about an incident in the late 1980s involving a
background check of the boyfriend of his ex-wife.”

http://blog.heritage.org/2010/01/20/morning-bell-americans-call-for-change-as-u-s-becomes-less-economically-free/

...and I am Sid Harth

[chhotemianinshallah]

Re: The law and the current scandal surrounding Ozawa

February 02, 2010
[SSJ: 6040] Japan's Fake Reforms
From: Richard Katz
Date: 2010/01/29

Foreign Policy's online edition ran a comment by me on the DPJ's new
ten-year growth strategy under the title "Japan's Fake Reforms," (my
title had been "Can the DPJ Revive Japan's Economy"). It's at

http://www.foreignpolicy.com/articles/2010/01/08/japans
_economic_reforms

Much of the background economic argument will be familiar to Forum
members, but here are the parts that, hopefully, add to the dialogue.
I'd be curious to hear responses to the political analysis regarding
the DPJ.

To wit: even though short-term electoral tactics lead the DPJ to avoid
real reforms, the longer term political pressure says it must either
bring about real revival or fall from power, and that there are some
really sharp younger Diet members who get this.

Here are the excerpts:

Just before the recently elected Japanese government released its new
10-year growth strategy, two top policymakers locked horns in a
sterile economic debate. Heizo Takenaka, economic advisor to former
Prime Minister Junichiro Koizumi, said the chief priority should be
business-oriented supply-side measures to generate new wealth. Naoto
Kan, the new deputy prime minister and finance minister, stressed the
need to boost demand and help consumers. Arguing that the Koizumi
cohort had failed, Kan said that companies would neither hire new
workers nor boost capacity if they couldn't sell their output.

In the end, Prime Minister Yukio Hatoyama took Kan's approach, saying,
"[The past government] was biased toward the supply side, and we
intend firmly to generate demand." His government set goals of 2
percent GDP growth per year for the next decade and the creation of
4.76 million new jobs in fields like elderly care, health, the
environment, tourism, and exports. The problem is that his "growth
strategy" includes neither growth nor strategy. It lists targets but
offers no means to achieve them.

Moreover, the goals themselves are off base. Hatoyama set a target of
2 percent per year GDP growth, starting from a 2009 baseline. But from
2007 through early-2009, the recession slashed GDP by a remarkable 9
percent. If the Japanese government based its goal from the pre-
recession GDP levels -- as it should have -- its GDP target for 2020
works out to just 1 percent growth per year, a truly dismal rate.[see
note below]. The targets on the jobs side are equally off. Over the
next decade, the country's working-age population will plunge by 7.6
million people, or 10 percent, and the number of retirees will rise by
6.5 million. How can the Hatoyama administration promise 4.8 million
additional jobs when Japan won't have the workers to fill them? No one
expects a rush of immigrants or women into the workforce to counter
this trend.

For Japan to revive, it has to move beyond Kan and Takenaka's false
supply-side, demand-side dichotomy. As famed economist Alfred Marshall
pointed out more than a century ago, scissors need two blades: supply
and demand. Japan has trouble growing because both blades are so
banged up that neither cuts very well. Plus, each blade's dullness
worsens the other.

[snip]

The LDP claims as one of its alleged supply-side reforms to have aided
labor flexibility by increasing the use of part-time and temporary
workers, who now represent one-third of the labor force. In reality,
by paying these "irregular" workers meager incomes, businesses have
lowered real wages for everyone, thereby crippling consumer demand and
creating an anti-reform political backlash. Rather than addressing the
problem by providing safety nets and wage equality for "irregular"
employees, the DPJ has promised to ban their use in some sectors,
focusing on a futile effort to restore the old lifetime employment
paradigm.

Some in the DPJ understand that genuine flexibility, better wages, and
strong consumer demand are interdependent. But the party's political
tacticians, especially Secretary-General Ichiro Ozawa, understandably
do not want to alienate constituents in weak sectors or allies in the
unions. Therefore, the DPJ has punted on the question of the economic
fundamentals Japan needs to change.

Fortunately, there is a way out. These days, party loyalty and
traditional political machines are weaker than ever. Voters are
increasingly choosing on the basis of the economy. Hence, though it
may seem in the short-term that there is a political need to placate
assorted interest groups at the expense of economic growth, in the
long-term that is the road to electoral defeat. That's what brought
down the LDP in a landslide rejection in 2009. This new political
equation will put pressure on the DPJ to come up with some genuine
reforms.

Many in the DPJ already recognize this. Several members, for instance,
have argued for allowing in cheaper food imports while giving income
support rather than production subsidies to the dwindling ranks of
aging farmers -- something that could have been political suicide in
the LDP era. And younger Diet members -- many of whom came from the
bureaucracy, business, or academia -- seem to understand that in the
long run effective politics requires effective policies.

Hopefully, the new growth strategy announcement will prove nothing
more than a disposable campaign pamphlet for this July's pivotal upper
house elections. The DPJ needs to get a single-party majority in that
chamber so it can rid itself of dependence on two small retrograde
parties and focus on hashing out the tough economic issues. The things
it had to say to win the lower house in 2009 and thinks it has to say
to win this July are very different from what it needs to do in order
to retain power. If it fails to revive Japan, it too will fall from
power. More political realignments will ensue. Japan will have no
political stability without prosperity, and no prosperity without
serious reform.

Richard Katz
The Oriental Economist Report

Note for the economically inclined

The DPJ pledges to achieve 3% nominal growth between now and 2020, of
which 1% would be inflation and 2% real growth. But look at the fine
print. The DPJ says it wants GDP to hit ¥650 trillion in 2020.
Compared to an estimated ¥473 trillion in 2009, that’s 3% nominal
growth per year—but only by starting off from the very low level
resulting from the severe recession. If we compare the ¥650 trillion
target to the pre-recession peak GDP of ¥515 trillion (nominal) in
2007, a goal of ¥650 trillion in 2020 means only 1.8% average annual
nominal growth between 2007 and 2020. This translates into less than
1% real (price-adjusted) growth. The DPJ only announced a nominal GDP
target and its inflation assumption rather than a separate real GDP
target.

http://ssj.iss.u-tokyo.ac.jp/archives/2010/02/ssj_6040_japans.html

Random Shots
Wednesday, February 3, 2010 at 09:40AM

Watching, monitoring, and analysing the economy and her markets is as
much about tracking discourses (and how they change) as it is about
perusing data material on various leading and lagging indicators. And
thus, as I am still knee deep into putting the last touch on my thesis
[1] I thought that I might as well move in with some random shots at
what just might (or might not) be a subtle change of discourse in the
context of the areas of the economy I am interested in.

Rallying Risky Assets no More?

The first interesting piece that got my attention was the coverage by
FT Alphaville's Tracy Alloway of this week's musings by JPMorgan and
UBS about whether the recent dip in risky assets (and subsequent rally
of the buck) is a decisive turning point or merely a blip à la Dubai.

In terms of a change in discourse there is not much in the way of one
as e.g. JPMorgan's equity team concludes;

We advise adding to positions on weakness and would revisit this view
if jobless claims were to move back towards 500k, if Greek default
becomes a reality or if manufacturing leading indicators roll over.

Now, this appears as full out frontal bid on equities to me since if
jobless claims were to move into the 500ks it would not, I presume,
happen overnight as well as a de-facto Greek default would constitute,
an ex-post, post mortem on an equity market in shambles as it would
surely wreck havoc even in the initial stages. As for the leading
indicators they are of course, by nature leading and thus this may be
the figue leave JPMorgan can cling on to if and when they decide to
back pedal on this bullish strategy. More generally, UBS is quoted of
pointing to three sources for the recent dip in risky assets and thus
immediate source of a sudden correction. The first is the growing
worry by part of Chinese policy makers of the bubblicious state of the
economy and thus the incipient signs of monetary tightening. The
second relates to the recent barrage from Obama against the financial
sector and especially, I assume, the declared war against proprietary
trading which has been the source of fat profits for the likes of
Goldman, illuminati, Sach, Morgan Stanley and other of their ilk.
Finally, there is of course the growing unease in the market place
with the unfolding mess in the Eurozone where Greece is still taking
center stage teetering on the brink of a bailout in the form of either
and IMF led representation or an internal agreement with the EU.

While I certainly agree that those factors represent sand in the
otherwise smoothly running machine of excess liquidity driving the
rally in risky assets I tend towards a more straightforward source of
a potential correction. Consequently, and for all the stimulus and
inventory driven growth we are currently observing I think that final
demand at the end consumer as well as the willingness and capabilities
of companies to ramp up investment will disappoint thoroughly to the
downside. The need to rebuild balance sheets and deleverage across all
sectors of the real economy will trump the current positive discourse.
It is ironic in this sense that the current flurry on government
deficits (especially in the Eurozone) represents exactly the
inflection point reached by many OECD governments with respect to the
need to decisively rein deficit spending in order to put in a
reasonable effort at covering future age related liabilities (as the
principal although not only reason). In short; it is really difficult
to see from which sector in the real economy we are likely to see a
recovery to confound the current expectations in the market.

Yet, as is clear from the latest equity research from the good equity
analysts at JPMorgan and UBS the discourse is still fixed on recovery.
My bet though is that it will change at some point in 2010 in line
with the lack of response from the real economy in taking over from
stimulus driven growth, but of course; when it comes to the movements
of stocks ... I am not the right one to as. Really, I am not!

Speaking Truth on Japan

Meanwhile in Japan it was interesting to note the comments by
economist at the BOJ Kazuo Momma who managed to pinpoint with surgical
precision what exactly Japan's current woes are in terms of
macroeconomic dynamics;

(Quote Bloomberg)

Japan’s economy is far from achieving self-sustained growth as the
export-led recovery fails to spur spending at home, according to Kazuo
Momma, the Bank of Japan’s top economist. “The risk that the Japanese
economy will fall off from a cliff is small, but there is still a long
way to go,” before the expansion becomes sustainable, Momma said in
Tokyo today. “Even if the global economy continues to recover, the
spread of that to capital spending and the labor market will be
limited.”

The key thing to notice above and beyond the real economic effects in
the form of entrenched deflation and low growth is the failure of the
momentum from external demand to reach the domestic economy. Perhaps
more than anything this is the defining characteristic of the Japanese
economy and, I would argue, export dependent economies in general.
Consider also that the discourse on Japan to large extent has been
solidly anchored in the expectation that the strong momentum of the
export related activities would eventually lead into a positive
feedback loop with domestic activity. This has so far closely
resembled the well known perennial wait à la Beckett and it is worth I
think to ask what exactly underlies this disconnect in the economy. In
this sense, I thought it interesting that Mr. Momma and thus the BOJ
moved in with such a decisive recognition that something seems
thoroughly broken in terms of the ability of the domestic Japanese
economy to gain traction.

Elsewhere on Japan I also took note of the veritable tableau d'horreur
in the context of the estimated fiscal outlay in the coming years.
Consequently, recent numbers from the ministry of finance suggest that
Japan will up the its bond issuance by as much as 16% moving towards
2013. Concretely, the butcher's bill is estimated to total 51.3
trillion yen in the year starting April 2011, 52.2 trillion yen in the
fiscal year of 2012 and 55.3 trillion yen in the fiscal year of 2013.
Naturally, former minister and now opposition member Yoshimasa Hayashi
was quick to slam on the critique simply noting that it was unclear
whether the new DPJ led government was worried at all about the fiscal
conditions of Japan's economy. Specifically Mr. Hayashi worries about
10 year yields which I reckon is the right time horizon for when this
could really turn out sour for Japan; (quote Bloomberg) ...

The deteriorating fiscal position has raised concern that bond
investors may start to demand higher yields for holding Japan’s debt.
The yield on the 10-year government bond rose half a basis point to
1.31 percent at 2:28 p.m. in Tokyo. It hasn’t exceeded 2 percent in
more than a decade.

Finance Minister Naoto Kan said yesterday that the government’s mid-
term fiscal strategy to be released by June will help to maintain
investors’ confidence. “We need to keep yields around the current
level by maintaining markets’ trust in our fiscal health,” he told
parliament. S&P’s downgrade of the outlook for Japan’s debt to
“negative” indicates it may cut the local-currency rating for the
first time since 2002. National Strategy Minister Yoshito Sengoku
called the warning a “wake-up call.”

Before we start comparing Japan with Greece et al though there is
little doubt that demand will be there for the securities since we can
be pretty sure that the BOJ will be provide the bid through
quantitative easing. However, in a longer term perspective and with
largest debt to GDP ratio as well as the oldest population in the
world one does not have to be a macroeconomic literate to see how this
cannot go on forever. However, as long as Japan remains a net external
lender the problem is one of accounting really and with its own
independent central bank the show can go on for quite a while.
Moreover, the likely side effect on the JPY makes it an almost
attractive route to follow by Japan in the sense that a long waited
depreciation of the JPY (if it comes) will not only strengthen the
export sector but also provide some welcome inflation to the economy.

Wither the Euro (as a "reserve" currency)?

Perhaps the most interesting headline coming in on the wires in the
beginning of the week was this Bloomberg piece running under the
header that the Euro is losing its allure as a reserve asset.

Investors are pulling cash out of Europe at a record pace as central
banks slow euro purchases, jeopardizing its status as a substitute to
the dollar as the world’s reserve currency.

Last year, policy makers loaded up on euros, while analysts at
Barclays Plc in London and Aletti Gestielle SGR SpA in Milan predicted
central bankers would make good on threats to reduce the greenback’s
dominance. Now the euro is down 8.4 percent since Nov. 25 in its
fastest slide in 10 months amid concern that cash-strapped countries
like Greece won’t pay their debts. Billionaire investor George Soros
said Jan. 28 that there’s “no attractive alternative” to the dollar.

Well well, what a difference a couple of jitters in Southern Europe
makes. Now, before we get ahead of ourselves in terms of the long term
significance of the Euro's recent slip I think this abrupt change in
discourse on the Euro is a good testament to the difficulty many have
in understanding exactly what these so-called global imbalances are.
This may sound arrogant as I imply here that I do actually understand,
but I find it extremely difficult to see how people who hitherto
believed in the Euro as a the new dominant global currency can
suddenly shift position on the back of trouble in Greece, Spain et al.
I mean, surely and if you had cared to look and listen the structural
difficulties of the Eurozone and the obvious inability of the EUR/USD
to move about in the 1.50s/1.60s and thus act as the main vessel of
rebalancing were there for anyone to see. Well not quite and while the
coup de grace from George Soros is significant in itself I think it
worthwhile to think back to the heaty days when Bernanke lowered rates
as an initial response to the subprime fallout (and the ECB
momentarily raised) and thus where the Eurozone was hailed as the new
engine of the global economy to take over from an ailing US economy.
Some of us tried to dimiss this nonsense but it appears that it takes
near default along the periphery, before it really hit the main wires.
So let me be quite clear here. The Euro is not an alternative to the
Dollar in so far as goes rebalancing of the global economy which would
entail the Eurozone being a relatively large and sustained net
external borrower. In fact, given the troubles in Spain and Greece the
real challenge is how the Eurozone can become a net surplus region and
thus reduce the borrowing of key member countries.

Bubble Trouble in China

This one is hardly news and neither has there been much of a change in
discourse as it has been some weeks now that Chinese authorities
little by little have started to voice concerns over the growing
tendencies of overheating in the Chinese economy and property sector
in particular.

China’s “real worry” is asset bubbles as capital flows into an economy
awash with money and the nation emerges from the crisis into a “boom
time,” central bank adviser Fan Gang said. Moves by the central bank
this year to curb liquidity were “timely and necessary,” Fan told a
forum in Beijing today. “Although globally we’re still talking about
the crisis, China and some developing countries now are facing another
boom time.”

Stocks fell in Asia and Europe today on speculation that Chinese
policy makers will do more to cool the world’s fastest- growing major
economy after two reports showed a sustained rebound in manufacturing
and rising prices. Excess liquidity is a “problem” as low interest
rates and slower growth in the U.S. and Europe encourage money to flow
into China, said Fan, the academic member of the monetary policy
committee.

One economist and long time China observer, Andy Xie, that I tend to
lean on is much more out spoken on the current risks in China as well
as a recent report by BNP Paribas sees decisive turning point already
in 2010 as tighter liquidity conditions begin to bite;

China’s property market “bubble” is set to burst as the government
curbs credit growth and clamps down on speculation, according to
independent economist Andy Xie As bank lending slows, “it’s very
difficult to see this demand continuing,” Xie, formerly Morgan
Stanley’s chief Asian economist, told Bloomberg Television in Hong
Kong today. Tougher property policies may lower 2010 sales volumes 10
percent, compared with an earlier forecast for growth of as much as 5
percent, BNP Paribas said in a report today.

I agree in the main. The key however is timing and just how far China
may run here. It may be longer than many imagine, but I agree with the
fundamentals of the argument. Xie apparently thinks that 2010 will see
a significant correction. I have no reason to disagree, but a bubble
in China (in general) may run a long time before she runs out of
steam. Having said this though, recent bits and pieces of information
that I have been fed from the ground in China by my "contacts"
strongly suggest that a breaking point is near. One key ingredient
here according to a property insider in China is that almost all of
the stimulus money currently being poured into the Chinese economy
(which is a lot) is going into property and needless to say, this
cannot run forever.

More generally, a full blow out of the Chinese property sector in e.g.
some of the most bubbilicious parts of the real estate sector would
constitute a severe dent in the expectations of a global recovery
driven from Asia. Perhaps this more than anything suggests why it is
important to keep a weary eye on port side property in Shanghai and
elsewhere even if you are not in the market for a condo.

A Change in Discourse?

Whether there has really been a change in discourse in some parts of
the market as per reference to the points mentioned above or whether I
am just preying on a well worn narrative to take some random shots I
will leave it for the reader to decide. In general, the ball is still
rolling on the recovery discourse but with events in the Eurozone and
a Chinese economy looking set to fall short of the promises to pull
forward the global economy things might change sooner rather than
later. To this I would add the fundamental and lingering trend of
deleveraging in all real sectors of the economy which ultimately means
that self sustained growth will disappoint thoroughly to the downside
and this I hold to be quite certain and not just a random shot.

[1] - Which I will present here in due course.

Senator Bob Corker Needs to Be Updated on His Bank Failure History
Submitted by Reggie Middleton on 02/02/2010 16:08 -0500

American International GroupBob
CorkerCitibankCitigroupCountrywideCredit CrisisFailFannie MaeFederal
Deposit Insurance CorporationFinancial Accounting Standards
BoardFreddie MacGoldman SachsHenry PaulsonHousing
MarketIllinoisLehmanLehman BrothersMerrill LynchNew York Stock
ExchangeRisk ManagementWaMuWashington MutualWells Fargo

Senator Corker challenged Mr. Volcker's stance in today's
congressional hearings on the Volker Rule by saying that no financial
holding company that had a commercial bank failed while performing
proprietary trading. It appears as if Mr. Cofker may have received his
information from the banking lobby, and did not do his own homework.

Let's reference the largest commercial bank/thrift failure of the all.
First off, a little historical reference courtesy of WSJ.com:

WaMu Is Seized, Sold Off to J.P. Morgan, In Largest Failure in the
History of the US!!!

In what is by far the largest bank failure in U.S. history, federal
regulators seized Washington Mutual Inc. and struck a deal to sell the
bulk of its operations to J.P. Morgan Chase & Co...

The collapse of the Seattle thrift, which was triggered by a wave of
deposit withdrawals, marks a new low point in the country's financial
crisis...

The seizure was another watershed event in a frenetic period for the
U.S. banking system, and came while members of Congress wrangled over
the Bush administration's proposed $700 billion bailout package. The
tally of U.S. financial giants that have either been seized by the
government or sold themselves off to stronger firms in recent weeks
includes mortgage titans Fannie Mae and Freddie Mac, insurer American
International Group Inc., and Wall Street firms Lehman Brothers
Holdings Inc. and Merrill Lynch & Co.

The failure of WaMu eclipsed what had long been America's largest bank
bust on record, the 1984 collapse of Continental Illinois, which had
$40 billion in assets.

The seizure of Washington Mutual is likely to send tremors through the
thrift industry. Many of WaMu's smaller brethren are also struggling
with a wave of bad loans and some have already been ordered by
regulators to raise capital and stop growing. Many community and
regional financial institutions are also slashing dividends, selling
branches and reining in lending in order to preserve capital...

While WaMu has been struggling since last year, its demise occurred
with breathtaking speed.

Starting Sept. 15, the day that Lehman filed for bankruptcy
protection, WaMu's customers began heading for the exits. Over the
next 10 days, they yanked a total of $16.7 billion in deposits,
according to the Office of Thrift Supervision. That was about 9% of
the thrift's deposits as of June 30. WaMu declined to comment...

In March, with the credit crisis in full bloom, J.P. Morgan offered to
acquire WaMu but was spurned in favor of a $7 billion infusion led by
the private-equity firm TPG, considered one of the savviest buyout
firms. TPG, led by investor David Bonderman, said it will lose $1.35
billion, wiping out its investment....

"Obviously, we are dissatisfied with the loss to our partners from our
investment in Washington Mutual," said a TPG spokesman. "The
unprecedented turmoil in global financial markets and resulting macro
crisis of confidence has radically changed the dynamics for all
financial institutions, and led to widespread losses among investors
throughout the sector." TPG said its losses are about $1.35 billion,
wiping out its investment....

Regulators also hustled to shut down WaMu faster than they have with
other failing banks this year. Normally, when the FDIC and another
regulatory agency are preparing to take over a bank, the FDIC will
solicit bids for the bank on Tuesday or Wednesday and then seize it on
Friday evening, after the bank's branches have closed for the weekend.
Sometimes the FDIC will even wait another week to step in. Every bank
to fail this year has been shut down on a Friday. The FDIC steps in on
Fridays to ensure a smooth transition so that customers hardly notice
the handover.

In WaMu's case, the FDIC set a Wednesday evening deadline for
interested parties to submit their offers for various parts of WaMu.
Twenty-four hours later, they were already preparing to seize the
bank. Earlier this month, Treasury Secretary Henry Paulson made it
clear to WaMu that the company should have accepted the takeover deal
J.P. Morgan had offered earlier this year, according to a person close
to WaMu.

As pressure mounted on WaMu over the past two and a half weeks,
regulators sparred over how to handle the situation, according to
people familiar with the matter. Last week WaMu met in Washington,
D.C., with the FDIC and OTS, WaMu's chief regulator. WaMu, according
to a person familiar with the situation, asked for the meeting because
it had received conflicting information from the two agencies. The
tension between the two groups was palpable, this person said. The
FDIC, this person said, was more aggressive in describing the
information it wanted from the thrift.

Federal regulators said the exodus of deposits left WaMu "with
insufficient liquidity to meet its obligations." As a result, WaMu was
in "an unsafe and unsound condition to transact business," according
to the OTS.

The OTS closed WaMu on Thursday and appointed the FDIC as receiver.
The FDIC ran the bidding process that resulted in the decision to sell
WaMu's banking operations to J.P. Morgan....

"The housing market downturn had a significant impact on the
performance of WaMu's mortgage portfolio," said OTS director John
Reich. [which was actively traded on a proprietary basis, hence the
pertinence of the Volcker Rule]

With mortgage losses mounting and its stock price plunging, WaMu has
been scrambling over the past month to find a solution. Last week, it
put itself on the auction block. A number of banks -- including
Citigroup Inc., Wells Fargo and Banco Santander SA -- pored over
WaMu's books, but the bank didn't receive any offers. This week,
WaMu's outside bankers approached a group of private-equity funds to
gauge their interest in a deal. Those talks were viewed as a last-
ditch effort.

The article above was date SEPTEMBER 26, 2008. I warned my blog
readers about Washington Mutual in September of 2007, and was short
the stock from that point until its demise. Reference "Yeah,
Countrywide is pretty bad, but it ain’t the only one at the subprime
party… Comparing Countrywide to its Peers", Saturday, 08 September
2007 :

From my experience, there is evidence of this from Lehman Brothers,
Washington Mutual and potentially IndyMac Bank as well. I am fairly
sure that there are surprises to be had from all three of these banks
as well in the upcoming quarters, big surprises. These practices were
supported indirectly by Citibank, Lehman Brothers and Wamu through
their warehouse credit lines to subprime mortgage banks, most of which
have gone out of business or scaled down operations...

Wamu's nonperforming loans have doubled from the June 30th quarter of
‘06 to the most recent quarter, from .62% to 1.29%, but excludes
"Excludes nonaccrual loans held for sale". My best guess is that these
are the loans that have not been earmarked for the investment
portfolio, and are being held for sale, thus are not held under the
accrual accounting rules. If this is the case, these numbers were
delivered just before the massive upheaval in the markets where
investors totally shunned the MBS products. If my hunch is correct,
then "Excludes nonaccrual loans held for sale" category will be forced
into the investment portfolio, and this may look bad. The banks tried
to sell off the garbage, and Wamu wrote its fair share of it.
Reference their option arm product which was not only an annual (and
monthly) arm product, but gave the payer the option to go negative
amortization (pay a portion of the interest and allow the rest to get
tacked onto the principal)...

Even in reclaiming the property through foreclosure, Wamu will take a
BIG loss on these. Wells Fargo shows a large amount of Level 3 gains
in their latest earnings report. Level 3 gains are those market to
myth (I mean model) profits that are derived from modeling a price in
lieu of obtaining it from the market place. They may be force to keep
these on the books for a long time and/or take significant losses on
them. More on Wells Fargo later...

I think Wamu got stuck with a lot of this stuff... Unlike Countrywide,
Wamu appears to have adequate liquidity due to a larger and more
diversified thrift business, but that doesn't mean that they ain't
going to lose a lot of money on their less than prudent lending
practices. Their tangible equity to total capital is 6.07%, but
includes the footnote "Excludes unrealized net gain/loss on available-
for-sale securities and derivatives, goodwill and intangible assets
(except MSR) and the impact from the adoption and application of FASB
Statement No. 158, Employers' Accounting for Defined Benefit Pension
and Other Postretirement Plans, as of December 31, 2006. Minority
interests of $2.94 billion for June 30, 2007, $2.45 billion for March
31, 2007 and December 31, 2006 and $1.96 billion for September 30,
2006 and June 30, 2006 are included in the numerator." Now this is
scary, for these are most likely the derivatives that have no credible
bid, thus cannot be priced and/or marked to market. Exactly what is
the unrealized net gain/loss and how is it derived? We're talking 20.1
billion in subprime, and almost 30 billion in multi-family loans with
a total of 206.7 billion dollars of loans in their portfolio. Wamu
does not want high defaults or the impairment of their collateral. I
think both are a forgone conclusion due to the aggressive underwriting
to obtain these loans, specifically through the Option ARM product.
How much so is the question. The Home Loans group within Wamu has
taken consistent losses for the last 4 quarters, primarily due to
provisions for losses and non-interest expenses.

Now, on to the importance of the Volcker Rule since we have put WaMu
into historical perspective.

From Allbusiness.com

Washington Mutual Hires John Drastal as Managing Director of Trading
for WaMu Capital Corp.

Publication: Business Wire
Date: Monday, November 18 2002

Business Editors

SEATTLE--(BUSINESS WIRE)--Nov. 18, 2002

WaMu Capital Corp., a fixed-income institutional broker-dealer and
subsidiary of Washington Mutual, Inc. (NYSE:WM), has hired John
Drastal as the managing director of trading.

Drastal will oversee all fixed income trading and risk management
within the firm, and will act as primary contact within the dealer
community.

"John will play a key role as WaMu Capital Corp. continues to build
out its mortgage and securitization platform," said Tim Maimone,
president, WaMu Capital Corp. "Over the next year we expect to
strategically grow our sales and trading operations. We also plan to
open a New York sales office to complement our current offices in
Seattle and Los Angeles."

Drastal brings a wealth of Wall Street experience to the broker-
dealer. Prior to joining WaMu Capital Corp., Drastal spent five years
as managing director and principal for Donaldson, Lufkin and Jenrette,
where he was responsible for all aspects of the mortgage and asset-
backed security trading business, including position and risk
management, personnel, distribution, research, finance, operations and
new business development.

In his 14 years of experience in fixed-income trading and management,
Drastal has also held senior positions at Goldman Sachs and Company,
Lehman Brothers Inc. and Drexel, Burnham and Lambert. Drastal holds a
master's degree in industrial administration (MBA) from Carnegie Melon
University and earned a bachelor's degree in computer science from the
University of Delaware.

About Washington Mutual

With a history dating back to 1889, Washington Mutual is a national
financial services company that provides a diversified line of
products and services to consumers and small- to mid-sized businesses.
At September 30, 2002, Washington Mutual and its subsidiaries had
assets of $261.10 billion. Washington Mutual currently operates more
than 2,500 consumer banking, mortgage lending, commercial banking,
consumer finance and financial services offices throughout the
nation.

It is truly unfortunate that such misinformation and disinformation is
allowed to permeate through not only the media, but actual
congressional hearings. It is truly a shame. If I am not mistaken,
WaMu was the biggest bank/thrift failure, EVER! If anything, this
should provide momentum BEHIND the Volcker Rule in lieu of having
politicians trying to out-regulate an accomplished regulator on how to
regulate banks.

by Anonymous
on Tue, 02/02/2010 - 19:19
#215406

While Mr. Corker's stance came across as an advertisement for the
banks "Since you have no opposing facts, let's move forward with my
statement as fact." Yeah - Volcker is supposed to be pulling stuff out
of his ass to shoot down your endorsement of the banks that is
blatantly self interested.

Mr. Corker was referring ONLY to bank failures WRT this meltdown,
nothing prior to 2007.

I believe someone already posted how his statement was false - wrt -
Merrill Lynch going under.

by Rainman
on Tue, 02/02/2010 - 19:23
#215410

Corker needs to catch some " LIAR " lines thrown at him.

He's reading off the Bankster teleprompter. He really has no grasp of
what the hell is already processed and understood by the morts in the
world of uncorrupted reality.

by Kayman
on Tue, 02/02/2010 - 19:43
#215424

Corker needs to put a Cork in it. A lapdog of GS or delusional. Or a
lapdog of GS and delusional.

Either way this puppy is going to be put outside in the cold for a
very long time.

by boooyaaaah
on Tue, 02/02/2010 - 20:20
#215455

Corker knows who butters his bread -- not Volker

by deadhead
on Tue, 02/02/2010 - 20:23
#215463

Nicely done, Reggie. Thank you.

by Anonymous
on Tue, 02/02/2010 - 21:01
#215503

Bank lobby dressing down the best Fed chair ever via an arrogant
corrupt U.S. Senator? Shameful, pathetic, nauseating.

by Screwball
on Tue, 02/02/2010 - 21:04
#215508

It was pretty obvious who's side this clown is on. Throw his ass
out. Volcker has some quality one liners today. It was fun to watch.

Thanks Reggie.

by JR
on Tue, 02/02/2010 - 21:09
#215510

Great reporting, Reggie. "The truth has always been dangerous to the
rule of the rogue, the exploiter, the robber." --Eugene V. Debs

The Congress is out of control, worse than we’ve ever seen throughout
our history. America is at her low point. The people are finding out
what most of the world has long known. What it’s like to have a
government without representation, what it’s like to have someone ride
in and take your property and there’s nothing you can do about it.

As stock ownership (and lobbyist influence) rises in Congress, experts
warn of potential ethics concerns.

More than half of all lawmakers own stock. In the House, the number of
lawmakers trading stock jumped from 91 in 2001 to 259 today (November
23, 2009 date of article)…

"It is time for Congress to take a fresh look at the financial
conflict-of-interest rules, and how they should be enforced --
starting with a thorough overhaul of the disclosure process," said
Harvard University government professor Dennis F. Thompson, author of
"Ethics in Congress." "Stronger regulation of financial conflicts is
necessary not so much to prevent quid pro quo deals, but to check the
erosion of trust in government," he said.

http://www.washingtonpost.com/wp-dyn/content/article/2009/11/22/AR2009112202217.html

by Anonymous
on Tue, 02/02/2010 - 23:09
#215597

Although yes WaMu was a commercial bank that failed, their failure had
absolutely nothing to do with WaMu capital Corp. The reason WaMu
failed, and the reason Countrywide would have failed was because of
the incredible amount of horrible loans that they made. In fact WaMu
capital Corp was closed for a year by the time the bank was ever taken
over. The fact of the matter and what the senator should have said is
that the Volker rule wouldn't have regulated pretty much all the
places that would have failed. And the ones that it did regulate , it
would have no power to stop what caused them to fail. Fannie and
Freddie were way to big and had billions in bad loans on their books,
their "failure" had nothing to do with prop trading. Lehman and Bear
were both not commercial banks. AIG is goverened by the states and
once again is not a bank.

by Reggie Middleton
on Wed, 02/03/2010 - 06:01
#215682

What he should have said and what he "did" say are two different
animals. In addition, there is a connection with prop trading by
insured entities and failure. The reason why the MBS market got so big
in the first place was the excess liquidity provided by instituions
who were federally insured. Subtract the federally insured instiutions
who had access to cheap govt. subsidized capital (ex. insured
deposits, window access, etc.) and you would have had a materially
smaller market in which to sell said MBS. If deposit holding banks
weren't allowed to engage in said trading, it would have been left up
to pure, non-insured speculators, ex. hedge funds and investment
banks, and would have made the garbage MBS distribution much more
shallow, not to mention would have reduced the market for the MBS and
would have induced more banks to keep whole loans on their books which
would have made them more responsible for prudent underwriting in the
first place.

Hence, AIG, Lehman and Bear would have had less MBS to begin with, and
potentially may not have even failed.

by Anonymous
on Tue, 02/02/2010 - 23:29
#215607

It is really shame that a Senator would have no clue as to what is
going on. And indeed it is high-time for Congress to look into the
financial conflict of interest rules and how to perfect the
unsustainable economic imperfections. Fire Congress, abolish the Fed,
redo legal tender laws, abolish fractional reserve banking/multiplier
effect, and adopt mathematical soundness in all of transactions. No
more dudes stealing from Peter to pay Paul. mms

by Anonymous
on Tue, 02/02/2010 - 23:46
#215620

ouch, i used to work for wcc

by Anonymous
on Wed, 02/03/2010 - 04:03
#215667

......That to secure these rights, Governments are instituted among
Men, deriving their just powers from the consent of the governed, —
That whenever any Form of Government becomes destructive of these
ends, it is the Right of the People to alter or to abolish it, and to
institute new Government, laying its foundation on such principles and
organizing its powers in such form, as to them shall seem most likely
to effect their Safety and Happiness.......

throw the bum out.

by Anonymous
on Wed, 02/03/2010 - 04:27
#215670

Problem is the population is too busy watching reality TV and
refinancing their houses for 5% to really care about what goes on in
congress. Give people the illusion of wealth by falsely inflating
stock markets and subsidizing loans and they don't really care about
what a smart man like Volcker has to say. The rot in our society runs
deep.

http://www.zerohedge.com/article/mr-corker-needs-be-updated-his-bank-failure-history

Economic Recovery: The Unresolved Mysteries
By Bill Bonner

02/02/10 Baltimore, Maryland – What a marvelous recovery! But there
are so many unresolved mysteries! GDP growth over 5%…but,
mysteriously, no jobs…and no rally in the housing market.

And now, to compound the mystery, Mr. Obama has come forward with a
$3.8 trillion budget.

The markets like it. Stocks rose 118 points on the Dow yesterday. Gold
went up $21. Investors see more hot money on its way…a Vesuvius of it…

The amount of the budget itself is staggering. That’s a lot of money.
But even more staggering is the glaring omission: the Obama
administration is planning to spend $1.6 trillion it doesn’t have. And
that’s on top of the $1.35 trillion it didn’t have, but nevertheless
spent, last year. Where is all this money coming from? Another
mystery…

Let’s see…put those two deficits together and you’ve got a budget hole
as big as the Milky Way… Nearly $3 trillion, or more than 20% of GDP.

Another thing that is mysterious about this galaxy of debt is that it
comes just as the economy is supposed to be recovering. If you thought
the economy were recovering, why would you risk such a huge, record-
shattering deficit?

Nothing quite adds up. The GDP is expanding at a healthy pace –
according to the numbers handed out by the feds. But people have few
jobs and little income.

“Wage and benefit growth hits historic low,” reports The Wall Street
Journal.

Employers aren’t employing. Workers aren’t working. And houses are no
longer throwing off cash. That leaves more and more people with empty
pockets.

Apparently, not even the feds themselves believe the economy is really
out of the ditch. We are already rolling along on the recovery road –
supposedly. Still, the feds send out the most expensive tow truck in
history!

And now The Financial Times draws the obvious conclusion:

“US Deflation No Longer Seen as a Risk.”

You wanna bet?

The world’s number one economy is running huge deficits. But the
world’s number two economy is running even bigger ones. Not much
bigger…but slightly bigger.

In Japan, deficits are a bit larger than tax receipts. In America,
they are a bit smaller. In both cases they are enormous…and growing.

For all its colossal deficits, Japan has not bought its way out of
depression…or out of deflation either. Au contraire, the more it
spends fighting deflation the further prices fall.

How could this be? Another mystery. How could government be so inept
as to shoot itself in the foot whenever it pulls a trigger? How could
it be so near-sighted as to aim for one thing and hit the thing it was
meant to protect? How could it be so lame-brained as to do exactly the
wrong thing at exactly the wrong time?

We can’t answer those questions…at least, not this minute.

So, let’s turn to the evidence. There it is in yesterday’s news report
from Bloomberg:

“Consumer prices in Japan in record fall.”

And there you have another mystery, don’t you? Japan inflates the
money supply with its zero rates over more than a decade…and its
Godzilla budget deficits. And what happens? Its economy sinks and its
consumer prices go down!

And so here comes the US of A following the Japanese lead…in the
sincerest form of flattery…

Will it not get the same results?

We don’t know. But we wouldn’t be surprised.

We have a lot more to say about this…

…about how the economic theories behind these moves are corrupt,
linear and superficial (if not downright stupid)…

…and about how the real driving force behind these deficits is
politics, not economics. Economists are just useful idiots. The
politicians are using them to grab more money and power for themselves
and their friends…

…but let’s go directly to the denouement of this mystery story. Here’s
what is really going on:

First, the GDP growth story is one part statistical noise, one part
counterfeit, and one part damned lie. We’re in a depression. It will
take years to resolve itself.

That’s why unemployment remains high…and why there will be no recovery
in housing prices. They may go up. They may go down. They won’t ever
get back to the bubble highs of 2006 – not in real terms. Not in our
lifetimes.

Second, the mystery of the $1.8 trillion deficit – it too is a mixture
of mendacity, audacity, and intellectual laxity. In short, the feds
are spending so much money for one reason only: because they think
they can get away with it.

Can they?

Of course not…not really. Here’s what is going to happen…

The reality of the non-recovery is going to catch up with this market.
Stocks were down in January. Most likely, they’ll sink for the rest of
the year too.

The economy will slide as the de-leveraging process continues. It
won’t be straight down. But by fits and starts, the mistakes will be
corrected…

…but that brings us back to this $3.8 trillion government budget. Its
purpose, in large part, is to prevent the corrections from occurring.
The feds will try to turn the US into Zombieland, just like the
Japanese feds did. You’ll see massive federal spending taking up some
of the slack from the private sector – but essentially wasting money
on useless projects. And you’ll see major zombie corporations – GM…AIG…
etc – propped up with taxpayer’s money.

Speaking of AIG, special agent Neil Barofsky is on the case. He’s
‘probing’ 25 cases of possible fraud involving TARP funds. The AIG
bailout is one of them. The original price tag for saving Goldman’s
speculative positions with AIG was $85 billion. The whole tab later
came to $182 billion.

The flatfoot Barofsky wants to know where the money went. To tell you
the truth, we’re curious too – although we doubt there will be any
surprises.

But back on our beat…how the mysteries get resolved…

…we know why the economy is winding down…and we know why the feds are
running such huge deficits…

…but big deficits aren’t pushing up prices in Tokyo; they’re having
the opposite effect. They’re pushing them down. Does that mean US
deficits will get the same results – the economy and prices lower
instead of higher?

We don’t know…but our guess is that ‘yes’ is the right answer.

Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and
garnered camaraderie in numerous communities and industries. A man of
many talents, his entrepreneurial savvy, unique writings,
philanthropic undertakings, and preservationist activities have all
been recognized and awarded by some of America’s most respected
authorities. Along with Addison Wiggin, his friend and colleague, Bill
has written two New York Times best-selling books, Financial Reckoning
Day and Empire of Debt. Both works have been critically acclaimed
internationally. With political journalist Lila Rajiva, he wrote his
third New York Times best-selling book, Mobs, Messiahs and Markets,
which offers concrete advice on how to avoid the public spectacle of
modern finance. Since 1999, Bill has been a daily contributor and the
driving force behind The Daily Reckoning .

Special Report:The Endless PAYCHECK PORTFOLIO: In three simple steps,
unleash a steady flow of work-free income… starting with up to 75
automatic “paychecks” deposited directly into your account.

View articles by Bill Bonner
The articles and commentary featured on the Daily Reckoning are
presented by Agora Financial. Additional market commentary is
available through The 5Min Forecast .

http://dailyreckoning.com/economic-recovery-the-unresolved-mysteries/

American GDP data will hit golden price Wednesday, Feb 3 2010
Uncategorized conacc 1:01 am

London gold goes power be locked in a seesaw struggle after Asian open
quotation yesterday, obtain around 1080 dollars raise goes up after
carrying on, go up to evening new York dish period of time trades
first, in touch highest that day encountered the market is cast after
1096 dollars pressure. Spread out concussion be issued to lower levels
to go subsequently situation, be in new York end dish trade period of
time quickens be issued to lower levels, it is better to touch lowest
was obtained after 1074 dollars that day carry on buy dish, newspaper
of end of a show receives 1086.2 dollars / ounce, recover dish in drop
for the most part. Beautiful couplet store Zhou Si of be related of be
reappointed consecutively of chairman Bai Nake is obtained in senate
through, but before the blackball that he gets also exceeded any
Chairman Fed chairmans. The 4 data that publish show beautiful couplet
Chu Zhou, the United States was supplied when week M2 money on January
18 raise 7.1 billion dollar, to eighty-four thousand five hundred and
eighty-six billion dollar. Foreign Central Bank had American bond to
decrease when Zhou Chi on January 27 2.031 billion to 2.949 trillion
dollar. American senatorial Zhou Si is voting come through increasing
a government to raise debt upper limit 14.3 trillion dollar. Spokesman
of German Ministry of finance says, germany is Greek without the help
the plan that spends budgetary crisis. Zhou Si of American Department
of Commerce is announced, will be able to bear or endure in December
things order increases 0.3% , beforehand appraise is increase 2% .
Yesterday of German Ministry of finance make known his position to hit
euro to carry once more brace up dollar, look at present from global
limits, develop in economic system only economic condition of the
United States is best, euro area is perplexed by Greek problem, and
the predicament that the economic stimulation that Japan just
announced 7.2 trillion yen plans to show Japanese economy. Below this
kind of environment, beautiful couplet store begin to remove special
fluidity tool again, bring about what capital keeps to swarm into a
dollar. Present circumstance is, any United States’ favorable economy
data will bring about capital to swarm into a dollar, and because the
economy of euro area and Japan is insufficient still hopeful, the
benefit of data of obtain employment of such as United States and
building data is empty by market desalt. The American the four seasons
that will announce tonight below this kind of circumstance spends GDP
data is to give the fund that waiting for irruptive dollar undoubtedly
good accept excuse. The market anticipates American the four seasons
spends GDP data to will be in now 4.2% , show at present the market
was full of confidence to American economy, the state of mind of the
each benefit sky of the dollar of each benefit good desalt that
current market is in exaggerated dollar, the data that no matter give
heat finally,we predict below this kind of circumstance is good
anticipate at the market difference of it may not be a bad idea
anticipates it may not be a bad idea at the market, good benefit
dollar, hit the price that press gold thereby. Golden price takes
situation side, of configuration of double bottom of 1075-1085 dollar
a gleam of prop up look at present very one cannot say for sure lives,
if the near future has rebound, investor still has much sheet ought to
decisive check inventory leaving an ability is. Technical
configuration respect, line mouth is down 4 hours of Tubulin, golden
price is in in course lower part moves, at present in course
obstruction is near 1091 dollars, it is weak force structure. Macd
index twines a horizontal stroke in 0 lines lower part dish, keep a
few green post, kinetic energy of be issued to lower levels continues
abate. Overall see a technology pursue short kinetic energy of line be
issued to lower levels is progressively and abate, dropping at a
certain level it seems that the extreme of situation, the near future
may appear one rebounds situation.

http://conacc.wordpress.com/2010/02/03/american-gdp-data-will-hit-golden-price/

Difference of data of American obtain employment rebounds considerably
at expecting golden price Wednesday, Jan 20 2010
Uncategorized conacc 11:08 pm

5 evening are Euramerican last week period of time, the raise after
international gold price ors first, at expectant United States in
difference data of blame farming obtain employment will be announced
in December hind, golden price spreads out rebound. one Asia period of
time, international gold price continues to go up, dish in with one
action breaks through early days obstruction 1140 dollars, highest and
adjacent 1160 dollars. On wire of London gold day, the price is
located in 5 days all line upper part, RSI is located in 50 upper
part, MACD crewel forms golden fork, gong Zhu expands, index is
bullish. Home market respect, shanghai gold week jumps to leave high
for nothing, but shock of the price inside day goes low. Brunt 1006
agreement clinch a deal delicate, hold the storehouse is small to
raise 2916 hands, fund is small are flowed into. United States of Zhou
Wu evening announces number of blame farming obtain employment will
reduce 85000 people in December, reduce 8000 people only under what
the market anticipates far, number of blame farming obtain employment
is small in November add 4000 people, unemployment rate will keep
balance in December at 10% . The market after data is announced is
right beautiful couplet store the anticipation of breath is added
first half of the year this year abate, dollar dish in glide
considerably, drive golden price to go tall. Meanwhile, euro area
announces unemployment rate also will continue in November small are
climbed litre, GDP of the 3rd quarter glides compared to the same
period 4.0% , market of excel of in a way anticipates, data is overall
half of stand or fall. Look nevertheless from ETF fund, although 5
prices are climbed considerably last week,rise, but ETF fund reduces a
storehouse however. Of the price rebound need merchandise on hand is
bought dish prop up, ETF decreases a storehouse to mean apt of this
kind of fund to be in exalted finish, of short line rebound the space
is unfavorable look to exorbitant. The train of thought that central
line still maintains concussion to arrange is advisable, the much
sheet of early days can continue hold, the discretion that did not
enter is chased after tall.

http://conacc.wordpress.com/2010/01/20/difference-of-data-of-american-obtain-employment-rebounds-considerably-at-expecting-golden-price/

Economic census 2008: Reappearance of Chinese big trend is dug
Saturday, Dec 26 2009
Uncategorized conacc 2:39 pm

Last a period of time census of two years of much economy of the 2nd
whole nation, 25 days published main data. As investigation of
national power of a major national condition and peacetime great
society arouses, this census announces to change a lot of new cases
that give Chinese economy, newly, census data itself is very good to
problem of heat of a few economy solve. GDP gross increases 1.34
trillion yuan of basises the 2nd times result of countrywide economy
census, national statistic bureau according to international
convention, right count of countrywide GDP preliminary nucleus
undertook editing 2008. After editing countrywide GDP gross was thirty-
one thousand four hundred and four billion five hundred million yuan
2008, increased one thousand three hundred and thirty-seven billion
five hundred million yuan than preliminary nucleus count. Why does GDP
gross increase 1.34 trillion? Horse of director of national statistic
bureau builds an explanation to say, 2008 is census year, the 2nd
times countrywide economy general checks all the 2nd, the legal person
unit of 3 industries and individual manage door undertake ” carpet
type ” check, release than in the past so, the GDP that reachs through
groovy statistic increased. Did GDP gross increase 2008 can you affect
was GDP added 2009 fast? Economic accounting of countryman of national
statistic bureau manages director Peng Zhilong says, as a whole, after
was being moved on data 2008, right GDP gross impact is bigger 2009,
very small to speed influence. Tertiary industy is occupied than
increasing the weak point that 1.7 percent tertiary industy is
national economy progress all the time, also be statistical weak
point. The 2nd times countrywide economy general checks the data of
tertiary industy made more apparent editing. Countrywide tertiary
industy raised a cost 2008, edit by twelve thousand and forty-eight
billion seven hundred million yuan of preliminary business accounting
it is thirteen thousand one hundred and thirty-four billion yuan,
increased one thousand and eighty-five billion three hundred million
yuan; Tertiary industy holds GDP proportion by 40.1% rise for 41.8% ,
increased 1.7 percent. Edit this in 1.34 trillion yuan of addition
GDP, 80% above come from service line of business. Economic accounting
of our country countryman uses corporeal product for a long time in
the past to express a system evenly, serve trade statistic weakness.
Although after this conforms stage by stage with the business
accounting level with current international, statistic of service line
of business is strengthened ceaselessly, but because development of
line of business of service of individual privately owned is rapid,
burgeoning service line of business appears in great quantities,
groovy statistic catchs up with its grow metabolic pace hard, cause on
the low side of data of business accounting of service line of
business. Be in successive in two economy census, serve trade data
edit increasing is most outstanding. Preliminary make a thorough
investigation of energy production uses up the energy-saving demand
decreasing a platoon that highlights increasingly to answer, census of
economy of the 2nd whole nation is used up in energy production a
large number of works were done on the energy-saving index decreasing
a platoon such as gross. Xu Yifan of deputy director general of
national statistic bureau says, this census enlarged the investigation
limits that the sources of energy and water natural resources use up,
expand by dimensions above industry all the 2nd, 3 estates unit,
raised high cost can the trade is global the investigation of
equipment circumstance. Carry this general investigation, preliminary
check solid the circumstance that production of our country energy
uses up. Consume findings according to the sources of energy of census
of economy of the 2nd whole nation, gross of countrywide energy
consumption was adjusted 2008 for coal of 2.91 billion tons of
standards, more preliminary than what already announced data raises
2.12% . The energy consumption after the basis edits and GDP data,
specific power consumption of GDP of our country unit was compared
2008 on year drop 5.2% , fall a data that before comparing this,
publishs deepen 0.61 percent. (Xinhua News Agency)

http://conacc.wordpress.com/2009/12/26/economic-census-2008-reappearance-of-chinese-big-trend-is-dug/

Statistical bureau: The person that illicit look forward to inducts
Chinese nearly half obtain employment Tuesday, Dec 29 2009
Uncategorized conacc 12:42 am

The 2nd times result of countrywide economy census is announced GDP
growth edited 2008 the job ends the general investigation of economy
of the 2nd whole nation that is 9.6% 　 last a period of time more than
two years basically. Yesterday, national statistic bureau holds a
press conference, reported the main condition of countrywide economy
census and main positive result the 2nd times. Ma Jiantang of director
of national statistic bureau is entered in response “country civilian
when removing “issue, express, 2004, two census year is medium 2008,
the proportion that is not state-owned company or private enterprise
proportion rise, so census data from do not support alleged ” country
to enter on the whole civilian the existence that cancels ”
appearance. Building city: Profit of room look forward to 4 years of
census results of a real estate that adds 290.4% 　 to care to the
people, xu Yifan of deputy director general of national statistic
bureau is in the 2nd times on press conference of result of
countrywide economy census made detailed introduction. He points out,
2008, business profit of Chinese estate company three hundred and
eighty-six billion one hundred and thirty million, grow 290.4% than
2004, make an appointment with 3 times. In addition, arrived 2004
between 2008, the dimensions of real estate expands quickly, to 2008
end whole nation shares real estate business 214397, increased 85354
than 2004, year all grow 13.5% . Xu Yifan emphasizes technically,
“These 4 years the real estate of an our country is to last to develop
quickly, the industrialization that should say to driving a city, city
changed a respect to have main effect, the data of this respect that
the 2nd times place of countrywide economy census gains will is real
estate health will develop the fundamental data with be offerred
important continuously henceforth. “　 response: Of short duration is
entered without ” country civilian retreat ” phenomenon 　 since last
year, a few media acclaim alleged ” country to enter civilian the
appearance that cancels ” appears, to concerning doubt, ma Jiantang
expresses on the news briefing, “The data phase of a few data that the
2nd times countrywide economy census gets and census of first time
economy is compared, go up in company unit amount at least, make clear
on the structure of company capital, 2004, year of these two census is
medium 2008, the proportion of state-owned company drops, the
proportion that is not state-owned company perhaps says the proportion
of the private enterprise rises, so census data from do not back
presence on the whole what ‘ country is entered civilian retreat ‘
phenomenon ” . Ma Jiantang still expresses, although data had not
produced heat 2009, but from 2005, 2006, 2007, annals data of 4 years
looked 2008, on the index such as proportion of a number of the
enterprise, asset, asset, capital, sales revenue, all show proportion
of civilian battalion economy is rising ceaselessly. Finally, ma
Jiantang thinks, everybody is entered to ” country civilian the
discussion that retreats ” has active sense, “On one hand vigilant the
reform that we want to push Chinese forestall trade further, vigilant
the adjustment with the state-owned strategical economy that we want
to advance China further and recombine, vigilant we should promote the
civilian battalion enterprise, reform development that is not public
company further. “　 census data still shows, form from personnel of
course of study in unit of industrial legal entity on, state-owned
company and state-owned and solely invested company are occupied
9.2% , and the private enterprise is occupied 44.4% , this means the
person that illicit look forward to inducted nearly half obtain
employment. Ma Jiantang expresses, this means civilian battalion
economy to already made the main component of national economy. Data:
0.6% 　 rises the 2nd times after GDP edited 2008 result of countrywide
economy census shows, basis gross domestic product (GDP) business
accounting system and census result, after editing countrywide GDP
gross was thirty-one thousand four hundred and four billion five
hundred million yuan 2008, increased 0.6 percent than customary rate.
The government before this releases GDP data was 30.06 trillion yuan
2008, gross of the GDP after editing via this increased about 1.34
trillion yuan, growth is 9.6% . In addition, consume findings
according to economic census the sources of energy, gross of
countrywide energy consumption was adjusted 2008 for coal of 2.91
billion tons of standards, more preliminary than what already
announced data raises 2.12% . Be opposite according to current
practice at the same time 2005-2007 year consumptive gross data also
did the sources of energy to edit accordingly. The sources of energy
after the basis edits consumes data and GDP data, specific power
consumption of countrywide unit GDP was compared 2008 on year drop
5.2% , drop than 2005 12.45% . Concerned official thinks, 2008 of GDP
data edit to impact of GDP increase rate is not big 2009.

http://conacc.wordpress.com/2009/12/29/statistical-bureau-the-person-that-illicit-look-forward-to-inducts-chinese-nearly-half-obtain-employment/

...and I am Sid Harth

[chhotemianinshallah]

Japan’s Recovery Failing to Spread, BOJ’s Chief Economist Says
By Mayumi Otsuma

Feb. 1 (Bloomberg) -- Japan’s economy is far from achieving self-
sustained growth as the export-led recovery fails to spur spending at
home, according to Kazuo Momma, the Bank of Japan’s top economist.

“The risk that the Japanese economy will fall off from a cliff is
small, but there is still a long way to go,” before the expansion
becomes sustainable, Momma said in Tokyo today. “Even if the global
economy continues to recover, the spread of that to capital spending
and the labor market will be limited.”

More than $2 trillion in global stimulus spurred demand for Japanese
exports last year, helping pull the nation out of its worst postwar
recession. Momma said there’s no “magic” solution to stamp out
deflation and that overcoming price declines is the central bank’s top
priority, echoing remarks made by Governor Masaaki Shirakawa last
week.

“Japan’s economy can probably avert a double-dip slump, but the pace
of expansion won’t gather momentum as deflation lingers,” Hiroaki
Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in
Tokyo, said before Momma’s speech.

Since lowering its benchmark interest rate to 0.1 percent in December
2008, the central bank has increased its purchases of government bonds
and made it easier for companies to obtain funds. It unveiled a 10
trillion yen ($111 billion) lending program for commercial lenders in
December, a facility Shirakawa has said the bank can expand if
necessary.

Momma said capital spending won’t show signs of a clear rebound until
the year starting April 2011. Companies “remain under pressure” to
fire workers, underscoring the weakness of domestic demand, he said in
a speech at the Japan National Press Club.

Record Drop

Core consumer prices, which exclude fresh food and are the central
bank’s preferred measure of inflation, slid 1.3 percent in December.
Prices minus food and energy, which economists say reflect the trend
of prices more accurately, dropped a record 1.2 percent.

“Data underscores that deflation is entrenched in the Japanese
economy,” said Yasunari Ueno, chief market economist at Mizuho
Securities Co. in Tokyo. Ueno doesn’t expect the central bank to raise
rates until July 2011 at the earliest.

Bank of Japan board members last week affirmed their forecasts that
they expect prices will keep falling through the year ending March
2012, the third consecutive year of declines.

“As for beating deflation, there are no concrete policies with which
we can do one or two things and be able to resolve all problems at
once,” Momma said. “We would have taken those steps already if they
existed.”

Momma said the global economy is recovering, though many countries
continue to struggle with high unemployment, which poses a risk to the
outlook. Such uncertainties could spur market volatility, and policy
makers need to monitor developments until the global recovery gains
stability, he said.

To contact the reporter on this story: Mayumi Otsuma in Tokyo at
***@bloomberg.net

Last Updated: February 1, 2010 02:10 EST

http://www.bloomberg.com/apps/news?pid=20601101&sid=aF3OpGJzIapg

UPDATE 1-Fed's Warsh says more regulation might hurt US economy
Tue Feb 2, 2010 5:33pm EST

WASHINGTON, Feb 2 (Reuters) - U.S. Federal Reserve Board Governor
Kevin Warsh said on Tuesday that financial reform efforts that focus
narrowly on expanding regulation could stifle the economy.

His comments, published in a Financial Times newspaper opinion piece,
come as President Barack Obama pushes for tighter rules that would
attempt to limit risky behavior by banks.

Warsh described attempts to strengthen the system as "worthwhile," but
said time would be better spent reviewing the role of government-
sponsored mortgage finance agencies Fannie Mae and Freddie Mac.

Banks, he said, should not be treated like heavily-regulated
utilities.

"In a global economy, big is not bad," Warsh wrote."The U.S. economy
runs grave risks if we slouch toward a quasi-public utility model."

The Obama administration's efforts, led by senior White house adviser
Paul Volcker, would look to reinstitute the separation between the
speculative trading of investment brokers and the desposit-taking and
lending that is the bread-and-butter of commercial banks.

Volcker testified before the Senate Banking Committee on Tuesday,
arguing that while his proposal would not have prevented the collapse
of firms like Lehman Brothers and AIG, it could help avert future
crises.

"I may not live long enough to see the next crisis but my soul will
come back to haunt you," the 82-year-old Volcker quipped.

Warsh, however, spoke of a return to market discipline which he
maintained could only take place if government became, less, not more,
engaged in the banking system.

"The specter of government support threatens to confuse price signals
and create a class of institutions that operate under different rules
of the game," he said.

http://www.reuters.com/article/idUSN0211628820100202

U.S. Economy: Q4 GDP Numbers Unearthed 3 comments
by: ETFdesk.com
January 31, 2010

Tom Schumacher's articles on Seeking Alpha

The US economy in the fourth quarter expanded at the fastest rate in
nearly six years, at 5.7% annualized. Before we jump out of our seats
with joy, it might be worthwhile to take a deeper look into these
numbers. The huge jump in real GDP was largely due to inventory
adjustments which contributed to 3.4% of GDP growth.

Keep in mind during the recession companies sold off their existing
inventories, nervous to produce new goods as the economy was falling
off a cliff. As business sold off much of their existing stocks over
the last few quarters, restocking is contributing a larger share to
GDP growth. Let's keep in mind that inventory growth is not a solid
foundation for a sustained recovery, it can't last forever. Looking at
GDP as final sales to US-based producers, the economy only grew 3.9%.
That is, before the inevitable revisions that will come.

Source: WSJ

One of our favorite analysts, Dave Rosenberg, has more to say on the
"Houdini Recovery." He brings up four good points to give a slightly
different perspective on the GDP numbers.

First, the report was dominated by a huge inventory adjustment — not
the onset of a new inventory cycle, but a transitory realignment of
stocks to sales. Excluding the inventory contribution, GDP would have
advanced at a much more tepid 2.2% QoQ annual rate, not really that
much better than the soft 1.5% reading in the third quarter. Second,
it was a tad strange to have had inventories contribute half to the
GDP tally, and at the same time see import growth cut in half last
quarter. Normally, inventory adds are at least partly fuelled by
purchases of foreign-made inputs. Not this time. Strip out inventories
and the foreign trade sector, we see that domestic demand growth in
the fourth quarter actually slowed to a paltry 1.7% annual rate from
2.3% in the third quarter. Some recovery. Based on some simulations we
ran, demand growth with all the massive doses of fiscal and monetary
stimulus should already be running in excess of a 10% annual rate. So,
the real question that nobody seems to ask is why it is that
underlying demand conditions are still so benign more than two years
after the greatest stimulus of all time. The answer is that this epic
credit collapse is a pervasive drain on spending and very likely has
another five years to play out. Third, if you believe the GDP data —
remember, there are more revisions to come — then you de facto must be
of the view that productivity growth is soaring at over a 6% annual
rate. No doubt productivity is rising — just look at the never-ending
slate of layoff announcements. But we came off a cycle with no
technological advance and no capital deepening, so it is hard to
believe that productivity at this time is growing at a pace that is
four times the historical norm. Sorry, but we're not buyers of that
view. In the fourth quarter, aggregate private hours worked contracted
at a 0.5% annual rate and what we can tell you is that such a decline
in labour input has never before, scanning over 50 years of data,
coincided with a GDP headline this good. Normally, GDP growth is 1.7%
when hours worked is this weak, and that is exactly the trend that was
depicted this week in the release of the Chicago Fed’s National
Activity Index, which was widely ignored. On the flip side, when we
have in the past seen GDP growth come in at or near a 5.7% annual
rate, what is typical is that hours worked grows at a 3.7% rate. No
matter how you slice it, the GDP number today represented not just a
rare but an unprecedented event, and as such, we are willing to treat
the report with an entire saltshaker — a few grains won’t do. Fourth,
while the Chicago PMI and the revision to the University of Michigan
consumer sentiment index also served up positive surprises, the “hard”
data in terms of housing starts, home sales and consumer spending
suggest that there is little, if any, momentum heading into early
2010. Moreover, the prospect that we see a discernible slowing in the
pace of economic activity this quarter and a relapse in the second
quarter is non trivial, in my view — by then, today's flashy headline
will be a distant memory.

http://seekingalpha.com/article/185659-u-s-economy-q4-gdp-numbers-unearthed

The Future of the U.S. Economy: 2050
By Matthew Bandyk
Posted: February 2, 2010

Think back to 1967. The job you have today may not even have existed.
The Internet, and all the jobs that have come with it, were decades
away. The Detroit automakers were dominant. Quality of life was
different, too: The median household income was an inflation-adjusted
$40,261, compared with $50,303 in 2008. There were also a hundred
million fewer of us; 1967 was the year the U.S. population hit 200
million. We passed the 300 million mark in 2006, and by 2050, there
will very likely be more than 400 million Americans. The lifestyle of
the average American may change just as much from 2010 to 2050 as it
did from 1967 to 2006. The economy will especially undergo change.

Joel Kotkin, distinguished presidential fellow in urban futures at
Chapman University, has spent a lot of time thinking about exactly
what those changes might look like in 2050. He previously wrote a book
about the history of American cities, but in his new book, The Next
Hundred Million: America in 2050, he looks ahead to how recent
economic and demographic trends may play out over the next few
decades. Here are a few of the book's most striking predictions.

1. The death of the suburbs is highly exaggerated. In the 20th
century, the suburbs became the primary place for Americans to live.
But the recent housing market crash, high gas prices, and concerns
about environmental sustainability have caused many to wonder how long
suburbs will be able to grow. Kotkin writes that the suburbs will not
only continue to grow; they will become even more like cities. "The
suburbs of the future will in many ways be more diverse than the
cities," Kotkin told U.S. News. While the suburbs of the 1950s were
predominantly white, suburbs today have an increasing number of ethnic
minorities and recent immigrants. A major reason suburbs are changing
is that they are providing more jobs than ever. Historically, people
living in bedroom communities outside of a city have commuted downtown
to work. Suburbs are also becoming more appealing because they are
developing their own cultural amenities. "Many have rebuilt town
centers and revived Main Streets," says Kotkin.

This growth will be made possible—and desirable, Kotkin argues—because
suburbs will become what he calls "greenurbia." Kotkin predicts that
while cars will continue to be the dominant mode of transportation,
fuel-economy improvements, more energy-efficient homes, and
telecommuting will allow suburbs to coexist with a clean environment.

2. The rise of "luxury cities." Cities, however, are not on the way
out. Kotkin points to New York and San Francisco as models for some
cities in the future: expensive places that are playgrounds for
younger and often single residents. This is one trend that Kotkin
finds worrisome. "New York has got to be able to hold on to enough
middle-class people, ages 30 to 45," he says. The "luxury city" also
creates problems for residents' upward mobility. Kotkin's chief
concern is that even as more ethnic minorities join the middle class,
the ability for people in the middle class to enjoy the same lifestyle
as the upper class in their cloistered cities will be limited. "Class,
not race, is going to be the great American issue," says Kotkin.

3. Jobs get more virtual. Jobs are perhaps the biggest concern of
Americans today. Kotkin looks to new businesses that began during the
recession to point the way to the future of jobs. "There has been a
huge surge in the number of independent proprietorships," says Kotkin.
Thanks to the Internet, the average entrepreneur does not need a large
corporation in an office building to run a business and can instead
find people to help run the business online. "Some of these jobs are
going to places like China and India, but they are also going to
places like North Dakota," says Kotkin.

That's not to say that physical locations for businesses will be
unnecessary or that rural towns in the heartland can be just as
innovative as large metropolitan areas. "You'll still have centers.
Wall Street will still be a center of finance, for example. Their
market shares will reduce over time, however," says Kotkin.

4. The decline of mobility. Moving companies might not be the biggest
boom industry this century. If you don't work from an office, you
don't need to live in a particular city. Kotkin predicts that in the
next 50 years, Americans will more often choose their communities and
cities based on where they want to live, not where they want to work.
"Once they find where they want to be, they will be less likely to
move," he says. That decline in mobility would be a big change from
the trend over the past 50 years, when it became common for Americans
to move many times in their lifetime. Demographics provide another
reason moving might decline: Aging baby boomers are more likely to
stay put.

5. Less to fear from China. America is becoming a more elderly
country, but it's not alone. Demographics, Kotkin argues, will prevent
China from eclipsing the United States as an economic superpower, as
some have predicted. In the late 1980s and early 1990s, Kotkin
disagreed with people who feared that the Japanese economy was going
to outcompete America. Today, he says similar claims about the Chinese
economy are just as overblown. The United Nations has projected that
in 2050, 31 percent of China will be over age 60, compared with 25
percent in the United States. Because of its aging populace, China
will have to spend more to care for the elderly and deal with
workforce shortages. The United States will surely face those problems
with baby boomers, but Kotkin argues that America is better equipped
to handle its aging citizens than China. "We have a little more of a
head start. Our older people have quite a bit more money," he says.
China will still be a superpower, Kotkin says—but it will share that
status with the United States and India.

http://www.usnews.com/money/business-economy/articles/2010/02/02/the-future-of-the-us-economy-2050.html

...and I am Sid Harth

[bademiyansubhanallah]

Japan – the indispensable power in East Asia
February 3rd, 2010

Author: Peter Van Ness, ANU

In East Asia, ‘the times they are a-changing,’ and the pundits are
full of speculation about what the new ‘architecture’ for the region
will look like. After the Democratic Party of Japan’s historic
electoral defeat of the Liberal Democratic Party in August, the
government of Prime Minister Yukio Hatoyama has the opportunity to
take the country in new directions, but it is unclear whether it will
have the vision and determination to prevail. America, the world’s
only superpower, is in serious trouble, and meanwhile China is on the
rise. The focus is on how relations between United States and China
will work out, and a discussion of new forms of multilateralism. Often
ignored in these discussions, however, is the key role of Japan. Japan
is too rich and too powerful to be left out. Whatever the future of
East Asia, Japan will have to be a founding participant. In my view,
Japan is an indispensable power in the region.

The Japanese are worried about the rise of China, but they worry even
more about how to manage their relations with their post-World War II
security guarantor, the U.S. Ever since the end of the Allied
occupation of Japan in 1952, Japan has relied on the U.S. to guarantee
its security. But now, American hegemony in East Asia has become
problematic. The disastrous policies of President George W. Bush’s
eight years in office have left the U.S. weakened militarily,
economically, and morally. Over-stretched militarily in two unwinnable
wars, staggered by a global financial crisis largely of its own
making, and humiliated in its claim to be a moral example to the world
by incontrovertible evidence of torture, America under Barack Obama
must try to find new ways to lead in what looks to be a post-hegemonic
world — while Japan watches anxiously.

Japan’s leaders worry about what those new ways might be.
Conservatives in Japan would much prefer to maintain the status quo,
but there is no longer a status quo to depend on. Hilary Clinton in
her initial trip as Secretary of State visited Japan first, but it is
clear that she and President Obama seek to build their East Asian
policy in cooperation with China. There is no way that Washington can
hope to deal effectively with the global financial crisis, climate
change, Iran, and North Korea without Beijing’s cooperation. Like all
countries in East Asia, Japan has to consider how to position itself
within this process of fundamental power transition.

Japan will have to play a major part in any new design for East Asia.
If Japan is ignored, it can readily sabotage the new arrangements. For
example, there cannot be a successful East Asian Community without
Japan’s participation. The Association of Southeast Asian Nations
(ASEAN) doesn’t want to find itself vulnerable in an ‘ASEAN +1’
arrangement just with China, but insists on an ‘ASEAN +3’ (with China,
South Korea and Japan).

Similarly, the Six-Party talks on North Korea’s nuclear programs
cannot succeed without significant financial incentives offered to
Pyongyang, for which Japan is expected to make the major contribution.
Alternatively, if the region were to turn away from cooperation toward
a confrontation between the two major powers, the U.S. and China, in
some version of a new cold war, Japan would be the mainstay of the
American strategic position in East Asia. The U.S. could not hope to
confront China successfully in the region without Japan’s full
support. Finally, if Japan’s interests are ignored, it could go
nuclear and destroy any future hope for multilateral cooperation in
the region.

Let me explain.

The Uniqueness of Japan

Pressures have been growing for years, both within and outside of the
country, for Japan to adopt the international role of a so-called
‘normal nation,’ turning its formidable economic might into political
and military influence, and even deciding to go nuclear, if necessary,
to assert its position in the global power hierarchy. But Japan is not
a normal nation. It is unique in many important ways, a fact that
provides significant opportunities to play an importantly different
kind of role in international affairs.

How is Japan unique?

Just prior to the modern period, Japan was purposefully isolated from
outside influences by its Tokugawa leaders for 250 years — a period
during which a characteristic Japanese cultural distinctiveness was
shaped.

Admiral Matthew C. Perry’s ‘black ships’ broke down the Tokugawa
barriers to commerce with the West in the middle of the 19th century,
and Japan subsequently became the first non-Western country to
industrialise successfully.

Turning that industrial power into military might, Meiji Japan became
the only non-Western imperialist power in the modern period, for a
time competing successfully with Russian, British, German, and
American imperial interests in East Asia.

Defeated in World War II, Japan was the only country in history to be
attacked with nuclear weapons, in Hiroshima and Nagasaki.

The Japanese Constitution, which was adopted under the occupation by
the Allied powers, includes the unique provision in Article 9 that
states ‘the Japanese people forever renounce war as a sovereign right
of the nation and the threat or use of force as means of settling
international disputes.’

Successfully re-industrialised after World War II, Japan has served as
an economic model for other developing Asian countries, joined the
influential Group of 7 (G7) industrial countries as the only non-
Western member, and became the second largest economy in the world.

Finally, during the 65 years since 1945, Japan has lived in peace with
its neighbors, was the world’s number one bilateral foreign aid donor,
and has made major contributions to United Nations institutions and
international peace-keeping operations.

Yet successive Japanese governments have made little use of Japan’s
distinctive history to fashion the kind of unique international role
that Japan might play. Instead, in strategic deliberations like the
Six-Party talks on North Korea, Japan was often seen as simply
providing another vote for the United States – a ‘yes man’ to George
W. Bush, or a country in denial about the atrocities of its imperial
past with a prime minister insistent on insulting his Asian neighbors
by repeatedly visiting the Yasukuni Shrine or denying that so-called
‘comfort women’ were coerced into sexual slavery during the war.

However, then-Prime Minister Junichiro Koizumi was obviously a man
capable of the kind of decisive action that is needed. Sometimes
people forget that he risked not just one but two unprecedented trips
to Pyongyang to try to work out problems with Kim Jong-il. And which
other post-World War II Japanese prime minister would have dared to
attack conservatives in his own party by putting ‘assassin’ candidates
up for election against them in their own constituencies? Koizumi’s
margin of victory in the September 2005 election gave him a special
opportunity, both to overrule the Upper House should they oppose his
reform plans and to take significant initiatives in foreign policy,
but the opportunity to improve relations with Asia was largely
squandered by his insistence on visiting the Yasukuni Shrine.

When Japan attempts to gain a permanent seat on the United Nations
Security Council, some United Nations member-states must ask
themselves: how has Japan earned consideration for a permanent seat?
What is special about Japan when compared with all the other countries
that would like to achieve such an elevated strategic status? What
benefit might the rest of the world gain by supporting Japan’s hopes
for a permanent seat on the Security Council? I think that Prime
Minister Hatoyama and his colleagues in the ruling coalition should
have to answer these questions. Japan showed the way to economic
prosperity in Asia in the past. Can Japan help to lead Asia toward
greater strategic stability and security in the future?

This is an extract of a feature essay published here by Global Asia.

Peter Van Ness is a visiting fellow in the College of Asia and the
Pacific at the ANU, and coordinator of the PeaceBuilder project on
linking historical reconciliation and security cooperation in
Northeast Asia.

http://www.eastasiaforum.org/2010/02/03/japan-the-indispensable-power-in-east-asia/

Daiy Market Commentary
03.02.2010 08:35 Wednesday
Fundamental Outlook at 1500 GMT (EDT + 0500)

€
The euro appreciated vis-à-vis the U.S. dollar today as the single
currency tested offers around the US$ 1.3965 level and was supported
around the $1.3885 level. The common currency gained some ground on
news the European Commission will support Greece’s deficit-reduction
program that will be published tomorrow. Greece’s budget deficit was
12.7% of GDP last year and is struggling to convince the markets it
can bring that down to 3% by 2012. Greek debt is now trading at a
massive 400bps premium at the ten-year level over German bunds, the
highest level since 1998. Most traders expect the European Central
Bank will keep monetary policy unchanged on Thursday. Data released
in the eurozone today saw EMU-16 producer price inflation up 0.1% m/m
and off 2.9% y/y. Also, January PMI construction improved to 48.6
from 47.1 and German December retail sales were up 0.8% m/m and off
2.5% y/y. Some dealers were spooked into selling the euro last night
after Reserve Bank of Australia surprised the markets by not raising
interest rates last night on the premise that higher-yielding
currencies like the Australian dollar could be weaker. ECB member
Weber today said fiscal consolidation is the “main challenge” in 2010
and said he expects a “slight” worsening of the German labour market
in 2010. He also said Germany will not experience a recovery before
2011 and added the economic recovery in 2010 increasingly depends on
exports. In U.S. news, traders will pay close attention to testimony
today from former Fed Chairman Volcker who will indicate hedge funds
and private equity funds should be allowed to profit and fail.
Volcker is also a proponent of limiting the size of banks so that none
are “too big to fail” and create unmanageable systemic risk. Data
released in the U.S. today saw December pending home sales print as
expected at 1.0% m/m and up 10.5% y/y. Tomorrow’s data will include
MBA mortgage applications, January Challenge job cuts, and January ISM
non-manufacturing data. The big news this week will be Friday’s
January non-farm payrolls data. Some dealers believe the U.S. jobs
report will show some improvement following a bit of an economic
bounce the economy received at the end of Q4 2009. Treasury Secretary
Geithner today reported small banks “remain under enormous pressure”
and said the proposed additional fee on banks will not impact
lending. Euro bids are cited around the US$ 1.3740 level.

¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback
tested bids around the ¥90.25 level and was capped around the ¥90.90
level. Finance minister Kan urged Bank of Japan to continue
implementing “appropriate and flexible policies” and work closely with
the government to combat deflation. BoJ Governor Shirakawa last week
reported it is a “critical challenge” to root out deflation but said
this week that a lack of final private demand is the “root cause of
deflation” and there is no “magic wand” to lift prices. Kan also said
“it is possible that the yuan will be one of the agenda items. I will
discuss it on the understanding that stable growth in China is
desirable for Japan.” Notably, bids fell short of the BoJ’s offer
today in its open market operation as part of the central bank’s
lending program announced in December. Prime Minister Hatoyama said
the budget environment in 2011 will remain “severe.” Bank of Japan
Chief Economist Momma yesterday reported “the risk that the Japanese
economy will fall off from a cliff is small, but there is still a long
way to go. Even if the global economy continues to recover, the
spread of that to capital spending and the labour market will be
limited.” Momma also indicated capital spending will not indicate
signs of a rebound until the fiscal year beginning in April 2011 and
said the labour market will also remain weak. The Nikkei 225 stock
index gained 1.63% to close at ¥10,371.09. U.S. dollar offers are
cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen
as the single currency tested bids around the ¥125.80 level and was
capped around the ¥126.80 level. The British pound moved lower vis-à-
vis the yen as sterling tested bids around the ¥143.85 level while the
Swiss franc moved lower vis-à-vis the yen and tested bids around the
¥85.45 level. In Chinese news, the U.S. dollar depreciated vis-à-vis
the Chinese yuan as the greenback closed at CNY 6.8271 in the over-the-
counter market, down from CNY 6.8275. A rumour circulated through the
market last night that China will permit the yuan to appreciate after
July. People’s Bank of China adviser Fan Gang yesterday reported
China’s “real worry” remains asset bubbles that could emerge as
China’s economy emerges from a crisis period into a “boom time.” Fan
also noted moves by PBoC to reduce liquidity last month were “timely
and necessary

₤
The British pound moved higher vis-à-vis the U.S. dollar today as
cable tested offers around the US$ 1.5995 level and was supported
around the $1.5900 figure level. The big question facing traders is
whether Bank of England’s Monetary Policy Committee will scale back,
pause, or extend its bond purchase program when its monetary policy
announcement is made on Thursday. The opposition Tory party,
appearing poised to assume the top government slot in H1 2010, today
reported it would keep the BoE’s inflation target at 2.0% if they
assume power and control of the government. Many data were released
in the U.K. yesterday. First, January manufacturing PMI improved to
56.7 from 54.6, a fifteen-year high. Second, December mortgage
approvals decreased to 59,020. Third, net lending to individuals rose
by ₤1.2 billion in December. Fourth, Hometrack January house prices
were up +0.1%. Cable bids are cited around the US$ 1.5720 level. The
euro moved higher vis-à-vis the British pound as the single currency
tested offers around the ₤0.8760 level and was supported around the
₤0.8710 level.

CHF
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the
greenback tested bids around the CHF 1.0540 level and was capped
around the CHF 1.0605 level. There was talk in the European session
that Swiss National Bank lifted the euro/ Swiss franc cross to keep a
lid on the Swiss franc. Data released in Switzerland today saw the
SECO consumer climate indicator improve to -7 from -14. The media
this week reported Swiss National Bank is unlikely to abandon its
policy to keep a lid on the Swiss franc even though the domestic
economy continues to improve. U.S. dollar offers are cited around the
CHF 1.0760 level. The euro moved higher vis-à-vis the Swiss franc as
the single currency tested offers around the CHF 1.4740 level while
the British pound moved lower vis-à-vis the Swiss franc and tested
bids around the CHF 1.6800 figure.

DISCLAIMER: GCI’s Daily Market Commentary is provided for
informational purposes only. The information contained in these
reports is gathered from reputable news sources and is not intended to
be used as investment advice. GCI assumes no responsibility or
liability from gains or losses incurred by the information herein
contained.

http://fxtraders.eu/resources/Attachment/2010/02_03/file1795.pdf

http://fxtraders.eu/article.php?id=19558

Emerging markets will fuel global economic recovery, report says
Financial Post
Published: Wednesday, February 03, 2010

Warren Jestin

OTTAWA - Recovery of the world's economy will be led by emerging
nations such as China, and the Canadian government and business
leaders should take advantage of that to fully realize their growth
potential in the years to come, according to the latest Economic
Directions report released Wednesday by Scotia Economics.

"The U.S. and other developed economies should become fully airborne
in the months ahead, fuelled by unprecedented monetary and fiscal
stimulus set in motion in 2009, the revival of consumer spending and
the re-ignition of production as firms react to improving sales
prospects," Warren Jestin, chief economist at Scotiabank wrote in a
release.

Jestin noted the report, entitled Liftoff Achieved, But The Flight
Path Will Be Turbulent, shows this year's growth in Canada and the
U.S. will do little more than backfill the hole created by the steep
decline in activity during 2008-09.

"Even this modest performance will compare favourably with trends in
Europe and Japan, where economic retrenchment has been much deeper and
the timetable for regaining lost GDP will stretch beyond 2010," he
wrote.

However, China and other fast-growing emerging markets will provide a
large share of growth. China grew by nearly nine per cent in 2009 at a
time when global output shrank by over two per cent.

According to Mr. Jestin, demand from China and other emerging markets
has already helped push commodity exports to roughly half of Canada's
foreign sales. Rising incomes in these nations will underpin rapid
growth in consumer spending, providing important new opportunities for
Canadian businesses.

"Highly entrepreneurial small- and medium-sized businesses in these
rapid-growth areas will likely be a key source of Canadian job
creation over the next decade," wrote Mr. Jestin.

"For governments and many businesses, focusing scarce resources on
familiar markets and industries, while ignoring or avoiding new and
unfamiliar ones, is likely to be a losing strategy."

http://www.financialpost.com/news-sectors/economy/story.html?id=2517101

Mitsubishi UFJ returns to profit in April-December period as global
economy begins to recover
Associated Press
02/03/10 3:56 AM PST

TOKYO — Mitsubishi UFJ Financial Group, one of Japan's "megabanks",
returned to profit in the nine months through December amid economic
recovery in Japan and overseas.

Tokyo-based Mitsubishi UFJ reported 217 billion yen ($2.4 billion) net
profit in the April-December period, compared with a 42 billion yen
loss a year earlier.

Revenue fell to 3.77 trillion yen ($41.66 billion) from 4.35 trillion
yen.

The bank kept unchanged its projection of a 300 billion yen net profit
for the fiscal year ending March 2010. The bank posted a net loss of
256.95 billion yen in the last fiscal year.

The bank credited economic recovery in the U.S., Europe, Japan and the
rest of Asia in helping boost its income in lending and market
products.

Cost cuts also helped improve the results in the first nine months,
Mitsubishi UFJ said.

The bank said its assets increased by 2.5 trillion yen ($27.6 billion)
to 201 trillion yen ($2.2 trillion) on equity gains, including
issuance of new shares.

Mitsubishi UFJ shares fell 0.6 percent to 475 yen ($5.2) in Tokyo.

http://www.sfexaminer.com/economy/83424087.html

Quote Of The Day: “We’re not finished with Toyota.”
By Bertel Schmitt on February 3, 2010

“We’re not finished with Toyota,” said Transportation Secretary Ray
LaHood in an e-mailed statement to Reuters. Bad choice of words?
Doesn’t that sound a tad vengeful? If a 900 lbs gorilla barks “I’m not
through with you” at me, then I’m very afraid. Toyota should be too.

Officially, LaHood’s comments referred to renewed efforts at the NHTSA
to recheck files from past investigations that found no problems with
Toyota’s electronic throttle control system. An Obama administration
official leaked to Reuters that safety regulators are continuing to
look at the “possibility that electromagnetic interference” might be
messing with Toyota’s throttle control systems.

“NHTSA has not seen evidence to support that” said the deep throat.
“Yet.”

Toyota will have to testify in two hearings in Washington. Rep Bart
Stupak, chairman of the House Energy and Commerce Committee’s
investigations subcommittee, has scheduled a hearing for February 25.
The House Government and Oversight Committee will also hold a hearing
on Toyota on February 10. Reuters adds that Stupak’s “home state of
Michigan is headquarters for U.S. automakers.”

Does that smell like the beginnings of a witch hunt to anyone?

...and I am Sid Harth

[bademiyansubhanallah]

FEBRUARY 3, 2010.
Toyota's U.S. Sales Skid; Ford Gains

Recall, Sales Halt Hurt Japanese Auto Maker in January; GM Reports

By SHARON TERLEP

DETROIT—U.S. auto sales rose in January as the economy strengthened,
but results were tempered by Toyota Motor Corp., which suffered a
sudden decline late in the month after a recall and a sales halt of
more than half its vehicles.

Toyota's monthly sales fell 16% from a year ago, dropping to less than
100,000 for the first time since 1999.

The seasonally adjusted annualized selling rate for all car makers in
January was 10.8 million cars and light trucks, marking the third
consecutive year-over-year sales increase for the beleaguered auto
industry, according to Autodata Corp. It was a substantial lift over
January 2009's rate of 9.6 million, but less than in December when
auto maker wooed customers with year-end fire sales.

Overall, car makers sold 698,378 cars and light trucks in December, up
6.3% from January 2009, Autodata said. The 2009 month had two fewer
selling days.

Improving consumer confidence, economic growth and reduced joblessness
helped bolster the market even as Toyota's troubles weighed on the
industry.

"There was more uncertainty in the marketplace by people who owned
Toyotas," said Ken Czubay, Ford's vice president of U.S. marketing. "I
don't think they made decisive moves from one dealer to another, it
was more that people said they didn't know what they wanted to do."

Toyota last week halted sales of vehicles that account for about 10%
of the U.S. retail market while it worked on a fix for sticking gas
pedals connected to unintended acceleration of some vehicles. The
company announced Monday it has found a repair that should solve the
problem and is shipping the fix to dealers this week.

Toyota's share of the U.S. market fell to 14.1%, nearly four points
lower than a year ago and the lowest since 2006, according to the
company.

Meantime, Ford Motor Co. reported a 24.4% sales increase from a year
earlier, while General Motors Co. said sales rose 14.6%.

A month earlier, Toyota passed GM in U.S. "retail" sales for the first
time. On Tuesday, GM's chief sales analyst said the company is closing
in on Toyota as again being the world's largest auto maker.

Bob Carter, Toyota's group vice president and general manager, Toyota
was on track to increasing sales in January until the sales stoppage.
He estimated Toyota lost 20,000 sales as a result, but predicted the
collateral impact on vehicles not involved in the recall will be
limited.

"We are fortunate to have a very strong brand," he said on a
conference call with reporters.

Analysts at Ford and GM said the controversy likely led many potential
car buyers to hold off on a purchase until the issue is resolved.
Toyota owners considering a new purchase were concerned about the
trade-in value of their vehicles, they said, while potential Toyota
shoppers may have postponed their decision.

Neither GM nor Ford had data indicating whether they succeeded in
poaching customers with incentives and low-financing offers for Toyota
owners.

Industry-wide, the strong results were offset by the fact that much of
the growth came from fleet sales to rental and commercial operators,
which are generally less profitable than retail sales to individual
customers. Retail sales were down modestly across the industry.

The industry is likely to see higher fleet sales in February and
March, which will moderate later in the year. Auto makers, especially
Detroit's Big Three, have struggled to find a balance when it comes to
the fleet business.

Ford has attributed its recent sales success in part to its ability to
cut back on fleet sales but said Tuesday it is happy to have the
increased business.

Elsewhere, Honda Motor Co. sales fell 5% to 67,479, as car sales grew
2.7% but truck sales dropped 15%.

Nissan Motor Co. reported sales rose 16% to 62,572 vehicles, and the
company said it expected to see "significant market-share gains."

Chrysler Group LLC's sales fell 8% to 57,143, with similar drops for
cars and trucks.

Hyundai Motor Co. said its January sales rose 24% to 30,503 vehicles,
while Volkswagen AG's sales increased 41% to 18,019.

http://online.wsj.com/article/SB20001424052748704022804575041222551214214.html

Global Manufacturing Continued Its Expansion In January

by Global Economy Matters (View the original article)
Posted on Feb 3, 2010

by Edward Hugh: Barcelona

The global manufacturing expansion continued to gather momentum in
January. Coming in at 56.1, up from 54.6 in December, the JPMorgan
Global Manufacturing Purchasing Managers’ Index registered its highest
reading for five and a half years. The latest improvement in overall
operating performance reflected accelerated growth of production and
new orders, while there was a slight gain in staffing levels for the
first time since March 2008.

Production increased for the eighth successive month in January, with
the rate of expansion hitting a 69-month high. The improvement in the
performance of the United States manufacturing sector was most
noticeable. The Institute for Supply Management output index rose by
6.5 points since December to reach its highest level since April 2004.

Elsewhere the position was much more uneven, with West European and
Japanese manufacturing having a much more qualified start to 2010,
with rates of expansion growth well below the global average, - and in
the case of some countries well below. Meanwhile emerging economies
like Brazil,India and Turkey continued to show a strong performance.

Asia and Emerging Markets

In Japan activity slowed, although at 52.5, the seasonally adjusted
Nomura/JMMA Purchasing Managers’ Index pointed to a moderate
improvement in operating conditions in the Japanese manufacturing
sector at the start of 2010.

Commenting on the Nomura/JMMA Japan Manufacturing PMI data, Minoru
Nogimori, Economist of Financial & Economic Research Centre at Nomura,
said:

“The Japan Manufacturing PMI fell 1.3 points to 52.5 in January. It
remains above the key dividing line of 50.0, but has continued to
fluctuate in recent months. Although the PMI has been holding firm,
the sharp rebound phase from February through to August in 2009 has
lost steam. Furthermore, the New Export Orders Index fell rapidly, by
3.2 points to 51.5, signaling that the yen’s appreciation has
depressed exports which are the main factor behind the current
recovery in the Japanese economy. Exports are an important factor of
the future of the Where an expansion of production was signalled,
panellists generally attributed growth to higher intakes of new
orders, which increased for the seventh month running in January.
However, the latest improvement in firms’ order books was the slowest
in that sequence amid concerns over the sustainability of economic
growth. Export sales placed at manufacturers rose again in January,
extending the current period of expansion to eight months.
Nonetheless, the pace of expansion was the slowest since last June.
Anecdotal evidence suggested that increased new business from China
and other Asian countries continued to support export growth.

January data signalled that backlogs were depleted at the fastest rate
since last June, largely as a result of slower new business growth and
a robust rise in output.

Elswhere in Asia, both China and India showed strong expansions. At
57.4, up from 56.1 in the previous month, the headline HSBC China
Manufacturing PMI rose to a record high at the start of 2010,
signalling a continuing improvement in operating conditions in the
Chinese manufacturing sector. The index has now risen more than
sixteen points since posting a record low in November 2008. Export
sales also rose in January, increasing at a near-record rate. This was
in sharp contrast to the severe reductions seen at the beginning of
2009.

Commenting on the China Manufacturing PMI survey, Hongbin Qu, Chief
Economist for China at HSBC said:

“Industrial activity continues to accelerate, implying stronger GDP
growth in 1Q. But rising input and output prices also point to greater
inflationary pressure, which will likely prompt more tightening
measures in the coming months.”


The Indian manufacturing sector expanded at fastest pace for nearly
one-and-a-half years in January. Climbing to 57.6 in January, its
highest level for seventeen months, the seasonally adjusted HSBC
Markit Purchasing Managers’ Index signalled a considerable improvement
in operating conditions faced by Indian manufacturers. The headline
index has now signalled expansion of the sector since April 2009, and
at increasing rates for the past two survey periods.

Commenting on the India Manufacturing PMI survey, Robert Prior-
Wandesforde, Senior Asian Economist at HSBC said:

“Any lingering concern that India's manufacturing recovery was tailing
off should be well and truly put to rest by this strong release. A
second consecutive rise in the PMI has taken the series to a new cycle
high, consistent with on-going double digit rises in industrial
production. The most impressive part of the release was the more than
5 point jump in the new export orders index, which took it to its
highest level since October 2007 and indicated that the recovery is by
no means dependent on domestic demand alone.

“At the same time, however, price pressures are clearly intensifying.
The rate of increase in input prices was the largest since the PMI
began nearly 5 years ago, while the survey suggests that companies are
more willing to pass on these rises in the form of higher output
prices - something which the RBI is unlikely to take too kindly to.
Admittedly, the employment index only inched above 50 but it can't be
long before job hiring picks up more aggressively.”

Elsewhere among emerging economies, the Brazil performance stood out,
with the sector expanding at a considerable pace as shown by the fact
the headline seasonally adjusted Brazil Manufacturing PMI climbed to
57.8 in January, its highest level since data were first available in
February 2006.

Commenting on the Brazil Manufacturing PMI survey, Andre Loes, Chief
Economist, Brazil at HSBC said:

“The Brazilian manufacturing industry expanded at a survey record pace
in January. The Manufacturing PMI reached 57.8, up from December’s
55.8, with all five of its components supporting the strong
performance of the composite indicator.

“In our view, the particularly strong growth of output, new orders and
input stocks – all of them reached series record peaks – indicate
further vigorous expansions in manufacturing going forward. Employment
also grew faster, but as a variable that normally lags production, its
expansion fell short of the three components mentioned above. Last but
not least, charges rose, albeit modestly, for the fourth month in a
row.

“All in, January’s Brazil Manufacturing PMI confirms the very
favorable dynamics of manufacturing activity. This highlights the
concern recently expressed by the BCB, that the quick reduction of
idle capacity could result in increased inflation pressures.”

While the South African PMI continued to show an increase in activity.
The index surged to its highest level in 21 months in January,
indicating that a recovery in manufacturing is gathering pace as
consumer spending picks up, according to Kagiso Securities who
prepared the report. The seasonally adjusted index increased to 53.6
from 52.5 in December. The PMI has now been above 50, which indicates
an expansion in factory production, for three consecutive months.

Western Europe

In Europe, solid expansions in output were recorded in Sweden, France,
Germany, the Netherlands and Austria, but these were in marked
contrast to the deeper recessions in Spain, Ireland and Greece.

The Eurozone PMI hit a two-year high, with France and Germany leading
the recovery, while Spain and Greece fell further behind. The headline
final Eurozone Manufacturing PMI – a composite index based on measures
of production, orders, employment, inventories and supplier
performance – posted 52.4 in January, its highest reading for two
years. The index value was above both its earlier flash estimate of
52.0 and the final reading of 51.6 posted in December. The level of
the PMI has risen in each month since hitting a record low last
February and has now remained above the neutral 50.0 mark for four
consecutive months.

Commenting on the PMI data, Markit Senior Economist, Rob Dobson said:

“The January final PMI readings confirm that the Eurozone
manufacturing sector has built on its positive end to last year, with
growth of output and new orders the fastest since mid-2007 and above
the earlier flash estimates. However, the recovery is becoming two-
track, with Spain and Greece in particular falling further into
recession when growth in most of the other nations, led by France and
Germany, is accelerating. Manufacturers are also continuing to focus
on reducing headcounts and lowering stocks despite gains in output.
This suggests that they retain a cautious outlook, especially while
sales are still being supported by price discounting.”

But the West European picture was characterised by two extremes. On
the one hand we have France and Sweden, were economic activity is
rebounding strongly, and on the other there is Spain and Greece, where
the contraction continues, and the outlook seems bleak.

Business conditions in the French manufacturing sector improved for a
sixth consecutive month in January. The headline Purchasing Managers’
Index posted 55.4, up from 54.7 in December. The rise in the PMI
reflected faster expansions of both output and new orders during the
latest survey period, while supplier delivery times lengthened at a
sharper rate. Manufacturing production increased for the seventh month
running in January. Furthermore, the rate of growth accelerated to the
strongest for almost nine-and-a-half years, with over one-third of
panellists reporting a rise.

Commenting on the Markit/CDAF France Manufacturing PMI final data,
Jack Kennedy, economist at Markit, said:

“The recovery in the French manufacturing sector remained intact at
the start of 2010. Output rose at the strongest rate for almost nine-
and-a-half years in January, as the rebound from the record
contraction seen in early 2009 continued. While domestic demand
remained the primary driver of growth, there was also evidence of
strengthening export sales, indicating a broad-based expansion.
However, staffing levels continued to be cut as manufacturers targeted
cost savings and productivity gains at a time when input price
inflation reached a sixteen-month high.”

In Sweden, activity simpled roared ahead, and the Silf / Swedbank
Sweden Manufacturing Purchasing Managers' Index stood at a seasonally
adjusted 61.7 in January, well above December's 58.2. The production
sub-index surged to 70.2 in January from 59.7 in the previous month.
The new orders sub-index climbed to 66.8 from 63.7, with the new
export orders sub-index gaining 4.2 points to 62.3. Despite the
improvement in new orders and production, employment levels were
slashed again. The employment sub-index stood at 49.6, up slightly
from 49.5.

In Spain January data pointed to a further deterioration of operating
conditions at Spanish manufacturing firms. Both output and new orders
fell at faster rates than in the previous month, while employment
continued to decrease sharply. Companies offered discounts to clients
in an attempt to boost sales, despite input costs rising again during
the month.

The seasonally adjusted Markit Purchasing Managers’ Index remained
well below the 50.0 no change mark, edging up slightly to 45.3 in
January, from 45.2 in December, indicating that business conditions
deteriorated for the twenty-sixth successive month. Production
contracted for the sixth month running in January, and at a steeper
rate than was registered in the previous month. The latest decline
reflected a further reduction in new business.

Commenting on the Spanish Manufacturing PMI survey data, Andrew
Harker, economist at Markit, said:

“The Spanish manufacturing sector began the new year with output, new
orders and employment all continuing to fall. The steepest decline in
input buying for seven months highlights the lack of confidence in the
sector, with firms reluctant to invest in new stock until sales have
been secured. Manufacturers were again forced to cut prices in January
as weak demand made it difficult to pass on higher raw material costs
to clients.”

Central and Eastern Europe

Turkish manufacturing sector started 2010 on positive footing as
output and new orders rose at robust rates. Increased new orders from
overseas continued to provide support to expansion of sector, and the
growth in employment was sustained. Higher input cost inflation
however droves a further rise in output prices. The headline index
posted 53.0 in January, indicating a solid improvement of business
conditions in the Turkish manufacturing sector. The rate of expansion
accelerated since December, and was the strongest in four months.

Commenting on the Turkey Manufacturing PMI survey, Dr. Murat Ulgen,
Chief Economist for Turkey at HSBC said:

“The Turkish manufacturing sector has started 2010 with a solid
expansion rate, thanks to robust increases in new orders and output.
Overall manufacturing activity has also gained traction, breaking the
five-month streak of deceleration in the pace of growth since July.
Export order growth was also strong, reflective of an improvement in
Turkey’s export markets. Manufacturers continued to slash their
finished goods inventories in order to partially fulfil rising orders,
while backlogs of work were also reduced for the third month.
Employment conditions maintained their favourable trend, improving for
the eighth consecutive month. On the other hand, the ominous outlook
on cost pressures remained intact in January, as input prices
continued to rise much faster than output prices, possibly because of
soaring raw material prices. This tells us that inflationary pressures
are in the pipeline and businesses may pass on rising costs to their
end prices when they feel more comfortable about aggregate demand
conditions.”

Business conditions in Russia’s manufacturing sector showed tentative
signs of recovery at the start of 2010, according to January survey
findings from VTB Capital. Output rose for the sixth straight month,
and at a faster rate as new orders increased for the first time since
last October. Employment continued to fall, but at a much slower rate
than the trend pace recorded over late-2008 and 2009. Inflationary
pressures strengthened, but remained relatively weak. The headline
seasonally adjusted Russian Manufacturing PMI posted above the no-
change mark of 50.0 for only the second time in the past eighteen
months in January, indicating an overall improvement in operating
conditions in the sector. The latest PMI reading reflected stronger
positive contributions from the output, new orders and suppliers’
delivery times indices, and less negative effects from the employment
and stocks of purchases components. That said, the latest reading of
50.8 signalled only a marginal overall improvement in conditions, and
was below the long-run trend of 52.1.

Commenting on the survey, Dmitri Fedotkin, economist at VTB Capital,
reported:

“January’s Manufacturing PMI rose to 50.8, the second reading pointing
to an expansion across the sector over the past 18 months. The
headline number was supported by new orders crossing the no-change 50
level to reach 53.0, while new export orders also rose (50.8). The
output index rose to 52.3, pointing to production rising for six
straight months and supporting the recent upturn in official
statistics. In addition, at 48.2 the employment index improved for the
fourth month running with further stabilization expected on the job
market. The input price index rose to 61.4 amid higher commodity
prices and freight charges while the output price index rose to 54.0
as companies tried to pass rising costs on to customers.”

Hungary's manufacturing purchasing manager index (PMI) jumped 4.4
percentage points to 53.5 points in January 2010, the Hungarian
Association of Logistics, Purchasing and Inventory Management (HALPIM)
reported on Monday. This marks a halt in the contraction of the
manufacturing industry that had started in September 2008. Hungary's
manufacturing PMI stood at 53.5 in Jan 10, up by 4.4 ppts from Dec 09.
This is the first time since August 2008 when the index is above 50.
(The Dec reading was revised upward to 49.1 from 48.5 originally).

HSBC survey data for the Polish manufacturing sector signalled an
overall improvement in business conditions in January, in stark
contrast to the marked contraction posted one year earlier. The
headline HSBC Poland Manufacturing PMI posted 51.0 in January, having
been unchanged at a near two-year high of 52.4 in the previous month.
Any figure greater than 50.0 represents an overall improvement in
business conditions. The PMI remained above its long-run trend of 49.5
in the latest period.

Commenting on the Poland Manufacturing PMI survey, Kubilay Ozturk,
economist at HSBC, said:

“The headline PMI remained above break-even in January, but the
momentum that prevailed in the last two months of 2009 appears to have
lost some steam, with slower expansions in output and new orders.
Domestic and external demand continued to improve over the month,
albeit at a slower pace, particularly for the former. A decline in the
employment index after a long-awaited rise in December confirms the
labour market is not out of the woods yet, while the noticeable drop
in output prices indicates a benign inflation environment ahead.
Overall, the reading is a reminder that a straight-line recovery may
not be that likely, although the Polish economy will continue to
outperform its regional peers in 2010.”

Czech manufacturing output grew at fastest rate since March 2008 and
the latest PMI data compiled by Markit for HSBC showed an overall
improvement in business conditions for the third month running in
January. Moreover, the rates of growth for both output and new orders
accelerated, and were sharper than the averages over eight-and-a-half
years of data collection for the survey. Meanwhile, manufacturers shed
jobs at a slower pace and continued to cut charges to support sales
drives. Supply delays were again registered as firms raised purchasing
volumes. The headline HSBC Czech Republic Manufacturing PMI rose to
53.1, signalling a robust overall improvement in business conditions.

Commenting on the Czech Republic Manufacturing PMI survey, Kubilay
Ozturk, economist at HSBC said:

“The headline index improved noticeably in the first month of 2010 on
the back of a remarkable increase in output and a solid rise in new
orders, underlining the uninterrupted improvement in demand. Both
external and domestic markets appear to have been on the mend in
January, suggesting a wider economic recovery is under way. The latter
was also confirmed by a leap in firms’ purchasing volumes over the
month. However, subdued increase in EMU manufacturing PMI in January
and the downside surprise in a flash estimate for German 2009 growth
suggest the impact of fiscal stimuli and car-scrappage schemes in
Western Europe may fade earlier than expected, implying recovery may
be gradual and bumpy.”

http://www.emerginvest.com/GlobalEconomyMatters/2/3/2010/Global_Manufacturing_Continued_Its_Expansion_In_January.html

...and I am Sid Harth

[bademiyansubhanallah]

FEBRUARY 3, 2010, 2:45 P.M. ET.
UPDATE: Fed Warsh: Banking Reform Needs International Coordination
.
By Michael S. Derby
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Federal Reserve Governor Kevin Warsh said
Wednesday that reforming the financial regulatory system will require
international cooperation, if those efforts are to be successful.

"I wouldn't say there's one size that fits all" when it comes to
reforming bank oversight, Warsh said. But even so, "the need to
coordinate with our G-20 colleagues is essential," and what's been
seen so far has been good, the official said.

Warsh's comments came in response to audience questions after a speech
given before the New York Association for Business Economics.

Warsh's formal remarks centered on the matter of regulatory reform.
Congress is currently mulling proposals that could see the Fed
stripped of its bank oversight powers, a possibility that worries many
central bankers. In an opinion piece in the Financial Times published
Wednesday, Warsh argued in favor of the Fed maintaining its current
portfolio, and offered his thoughts on the best way forward for
reform.

In his prepared remarks, Warsh had warned against trying to "micro-
manage" banks. "The U.S. economy runs grave risks if we slouch toward
a quasi-public utility model." His remarks come as President Barack
Obama's administration is pushing for a $90 billion tax on big banks
to make up for taxpayer money spent on rescuing the financial sector
and tighter rules aimed at limiting risky behavior by lenders to
prevent a new financial crisis.

"In a global economy with integrated financial markets, big is not
bad," Warsh said, adding that it is better to foster competition among
banks so that smaller lenders can take market share than to "bully"
large banks.

Warsh told the audience he was heartened by the tone he has heard in
Washington over recent weeks when it comes to reform overall. He also
said that Main Street supports reform.

"If I leave places like Washington and New York and go to places in
the real part of the country where there are real businesses that are
trying to get their wits about them" and grow and hire, "they are
finding credit availability isn't what they wish it were," Warsh
said.

"I find the message of trying to bring real competition to financial
services is incredibly well received," the official said, explaining
he hopes government also allows Wall Street the space to heal some of
its own troubles.

While he didn't address the economic outlook, Warsh spoke as financial
markets await Friday's key nonfarm payrolls for January, which
investors hope will offer clues about how solid the U.S.' move out of
recession is.

While growth has returned to the economy, it has thus far been
relatively muted and has only led to a moderation in the pace of job
losses. Policy makers and many private sector economists worry the
moderate growth expected over the course of the new year won't do much
to help lower the unemployment rate from its currently elevated
level.

This uncertain outlook is keeping the Fed on the sidelines when it
comes to interest rates. It's seen keeping that near the current zero
percent level at least until summer, if not longer. The more immediate
question for central bankers is what they need to do with the soon-to-
end mortgage securities buying program. Some feel it should be
extended beyond March, to give the economy more room to transition to
higher growth, while other officials feel the program has done what it
can do.

While he made no direct comments on monetary policy, Warsh did flag
what he believes is the Fed's most important tool.

"The most valuable asset that the Federal Reserve had a generation or
two ago and today is our credibility," Warsh said. "We have a $2.3
trillion balance sheet and people think the source of the power comes
from the ability to grow your balance sheet, to run your printing
press," the official said. But that's wrong, because the real power is
consistent behavior and "our credibility to live up to our dual
objective, both in respect to price stability and employment," he
said.

In other comments, Warsh said the U.S. banking system, even with its
proliferation of huge banks, compares favorably to the systems seen in
many other large nations. Warsh also said that trading conditions in
derivative securities had improved, although there was more distance
to go on that front.

-By Michael S. Derby; Dow Jones Newswires, 212-416-2214;
***@dowjones.com

(Luca DiLeo in Washington contributed to this report)

http://online.wsj.com/article/BT-CO-20100203-714117.html?mod=WSJ_latestheadlines

Feb 03, 2010
Obama: U.S. 'can win the race' for clean energy economy
03:03 PM

President Barack Obama meets with a bipartisan group of governors in
the State Dining Room of the White House in Washington, Wednesday,
Feb. 3, 2010, to discuss energy policy. Governors pictured, from left:
Tennessee Gov. Phil Bredesen; Maine Gov. John Baldacci; Kentucky Gov.
Steve Beshear; Montana Gov. Brian Schweitzer (obscured); Wyoming Gov.
Dave Freudenthal (obscured). From right to left: Washington Gov.
Christine Gregoire; Vermont Gov. Jim Douglas; West Virginia Gov. Joe
Manchin; Alabama Gov. Bob Riley; Ohio Gov. Ted Strickland. (AP Photo/
Charles Dharapak) ORG XMIT: WHCD103
CAPTIONBy Charles Dharapak, APPresident Obama told a bi-partisan group
of governors today he is "convinced that America can win the race to
build a clean energy economy -- but we're going to have to overcome
the weight of our own politics."

"We have to focus not so much on those narrow areas where we disagree,
but on the broad areas where we agree," Obama said at a White House
meeting with 11 governors from both parties.

The president who supports legislation to cap greenhouse gas emissions
said he is also willing to explore new offshore drilling for oil and
gas, as well the possibilities of "clean coal" technology. Obama also
discussed new steps to boost production of bio-fuels.

China is making major advances on new energy sources, Obama reminded
the governors, and the United States cannot afford to finish behind
other countries "in what will be the most important economic engine in
the future."

New "clean" energy sources will help reduce global warming, Obama
said, but will also have benefits for those who do not believe in
climate change. He noted that new energy is good for "our national
security and reducing our dependence on foreign oil," amid benefits
the economy "because it will produce jobs."

"Whoever builds a clean energy economy," Obama said, "whoever is at
the forefront of that, is going to own the 21st century global
economy."

Here is a list of the governors who attended the energy meeting with
Obama:

Governor Jim Douglas (R-VT), Chair, National Governors Association

Governor Joe Manchin (D-WV), Vice Chair, National Governors
Association

Governor Steve Beshear (D-KY)

Governor Dave Freudenthal (D-WY)

Governor Brian Schweitzer (D-MT), Chair, Western Governors'
Association; Chair, NGA Natural Resources Committee

Governor John Baldacci (D-ME)

Governor Phil Bredesen (D-TN)

Governor Christine Gregoire (D-WA)

Governor Bob Riley (R-AL) Chair, Southern Governors Association

Governor Mike Rounds (R-SD)

Governor Ted Strickland (D-OH)

(Posted by David Jackson)

http://content.usatoday.com/communities/theoval/post/2010/02/obama-us-can-win-the-race-for-clean-energy-economy/1

FEBRUARY 3, 2010, 2:32 P.M. ET.
Bernanke: We Must Protect The Fed's Independence

By Luca Di Leo
OF DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--Federal Reserve Chairman Ben Bernanke
Wednesday said protecting the central bank's independence was key for
the U.S. economy, adding the Fed must become more transparent than it
already is.

At a swearing-in ceremony at the Fed marking the start of his second
four-year term, Bernanke said the central bank's independence serves
important public objectives.

"Critically, it allows the Federal Open Market Committee to make
monetary policy in the longer-term economic interests of the American
people, rather than in the service of short-term political
imperatives," the Fed chief said.

While the U.S. economy's return to growth is encouraging, Bernanke
said the country and the Fed still face "enormous" challenges.

The Fed chief faces formidable political and economic challenges in
2010, made tougher by the harsh confirmation battle in the U.S. Senate
which ended last week.

Bernanke won confirmation with a 70-30 vote, the highest level of
opposition ever from the Senate for a Fed chief, reflecting public
anger over the Wall Street bailouts during the financial crisis.

Bernanke's toughest challenge this year will be deciding when to raise
interest rates as the economic recovery takes hold. Analysts expect
the recovery will be strong enough for a rate hike around September or
October, an unpopular move right before the November mid-term
elections.

Bernanke told staff that, although the Fed is already one of the most
transparent and accountable central banks in the world, "we should be
prepared to do even more, to become even more transparent."

-By Luca Di Leo, Dow Jones Newswires; 202 862 6682;
***@dowjones.com

...and I am Sid Harth

[bademiyansubhanallah]

Why an American Recovery Matters
Michael Spence

MILAN – It is hard to be optimistic about America at present. With
the help of crucial government support in the crisis, the US financial
sector (or at least parts of it) has bounced back, while America’s
real economy struggles with high unemployment, discouraged labor-force
dropouts, and damaged balance sheets.

So it is no surprise that the American public and the US Congress are
angry. The focus of that anger has been the massive and unwise
financial-sector bonuses. As a result, regulatory reforms have thus
far consisted of, first, a threat to the Federal Reserve’s autonomy,
and, second, a tax on bonuses.

The first idea is a bad one. The latter may be politically mandatory
and marginally beneficial in fiscal terms. Its effects on risk-taking
are debatable. But the much-needed structural reforms to limit
leverage and contain the risks that the financial system periodically
imposes on the real economy – and the public purse – have only
belatedly gotten off the to-do list, and the prospects of enacting
them are difficult to estimate.

In fairness, the new rule proposed by former US Federal Reserve
Chairman Paul Volcker to separate financial intermediation from
proprietary trading is not a bad idea. Combined with elevated capital
requirements for banks, it would reduce the chance of another
simultaneous failure of all credit channels. But it is not sufficient.
Hedge funds can also destabilize the system, as the collapse of Long
Term Capital Management in 1998 demonstrated. So they also need clear,
albeit different, limits on leverage.

Health-care reform has deeply divided the American public and US
politicians alike. Whatever the merits and shortcomings of various
proposals, these divisions suppressed the bipartisan aspects of the
political process and emphasized its zero-sum dimension. That, in
turn, has put in jeopardy other reforms.

One might expect that after a dangerous crisis rooted in growing
structural imbalances and an unsustainable growth pattern on the
demand side, there would be serious, ongoing debate about what is
needed to restore long-term growth and productive job creation in the
context of a rapidly evolving global economy. But there is not, which
is both puzzling and worrisome.

This is not to say that the US economy has lost its dynamism. Far from
it. But in the long term, sustaining it will require far-sighted
public policies and investments in hard and soft infrastructure to
support the private sector’s high capacity for innovation.

There are those who disagree and believe that an economy’s dynamism is
found almost entirely in the private sector, while the task of
government is mainly to stay out of the way. Still others accept that
government could in principal do something useful, but believe that it
normally does not, and that the risks outweigh the benefits.

A policy agenda in the US that is overloaded, overwhelmingly
domestically focused, and partially paralyzed will mean a lack of
attention to global issues that require cooperation and compromise,
including the international dimensions of financial reform. Absent
coordination, there is also a risk that monetary policies designed to
promote growth (or at least not impede it) will lead to a return of
financial-sector distortions and imbalances. The rebalancing and
restoration of global demand in the medium term is discussed within
the G-20, but has not really gotten underway.

From the perspectives of both policy and investment, the short and
medium term is once again risky. Many countries, including developing
ones, will adopt defensive postures, some of which, such as making
better use of the domestic market as a driver of growth, will have
broadly positive impacts, even if growth prospects are somewhat
diminished in the aggregate.

More importantly, the crisis highlighted the risks associated with
high dependence on foreign capital. That, combined with slow progress
on financial-sector reform, makes it likely that risk-aversion will
prevail, which could slow, if not reverse, financial globalization,
and probably lead to slower growth in many countries.

Restarting the Doha round of trade negotiations with a more manageable
agenda – and one focused on the poorer and more vulnerable developing
countries – would be a good way to revive progress on trade. But, in
an environment of slow growth and high unemployment, sentiment in the
advanced countries regarding efforts to liberalize trade is distinctly
negative.

The restoration of growth and balance in the US economy is crucially
important, not only for its effect on global growth, but also as a
foundation for tackling a broad array of international problems and
challenges. Right now, it looks as though creating that foundation is
on hold.

Outside the advanced countries, there is a view that the world will
return to pre-crisis conditions, with a stable US that functions as
borrower, lender, and consumer of last resort. What this perspective
ignores is that pre-crisis growth in the US and the global economy was
based in part on an unsustainable configuration.

Returning to that model is neither likely nor wise. While a relatively
high and sustainable growth pattern can be achieved, it will take
time. And it will occur (if it does) in a global economy with
fundamentally different structural and regulatory characteristics.
Waiting around for the advanced countries to right their ships so that
we can all go back to the old normal is neither good policy nor a good
bet.

What is needed is coordinated restructuring and policy setting. That
is hard to do when the US, the largest fiscally unified economy, is
focused elsewhere.

Copyright: Project Syndicate, 2010.
www.project-syndicate.org

Michael Spence

Michael Spence is the 2001 Nobel Laureate in Economics, and Professor
Emeritus, Stanford University. He chairs the Commission on Growth and
Development.

http://www.project-syndicate.org/commentary/spence8/English

UK economy: fiscal in-fighting
February 3, 2010 3:37pm
by Chris Giles

Britain’s two premier economic think tanks disagree on the speed and
scale of the necessary fiscal tightening. That is no surprise: the
issue is genuinely difficult.

Early this morning, the National Institute of Economic and Social
Research called for economic stability before cuts in public
borrowing. The Institute for Fiscal Studies has followed this with a
demand for faster cuts in budget deficits in the next Parliament.

There is no doubt of a difference of emphasis. Ray Barrell of NIESR
says:

“There is no reason for tightening fiscal policy now. People are
worrying about long-term debt problems when they should be worried
about short-term output problems.”

While Robert Chote of the IFS argues:

“Whoever forms the Government after the forthcoming general election
should put in place a fiscal tightening more ambitious over the next
Parliament than that set out in the Pre-Budget Report”.

But the difference really is one of emphasis. Both organisations
insist that it would be unwise to start taking much more radical
action to reduce deficits until 2011, something it is increasingly
clear also fits Conservative plans. And both essentially see reducing
the deficit as a contingent process - you cut borrowing hard once you
are sure the private sector can cope with the pain.

That, slightly mushy position, is emerging as a consensus in Britain.
No one is willing to say yet when the axe should fall, nor how deep
the cuts should be. That is partly because we do not know, but mainly
because the choices are unpalatable and muddling through is the
British way. It is very different to the plans announced in Ireland,
Spain, Greece and the US - also countries with 10 per cent plus budget
deficits.

It would be nice to think politicians would give the electorate a
clear choice come May, with specific options for cuts, such as those
outlined by the IFS today. Don’t hold your breath.

Tags: fiscal consolidation, UK economy

Your blogging team

Chris Giles has been the economics editor of the Financial Times
since 2004. Based in London, he writes about international economic
trends and the British economy. Before reporting economics for the
Financial Times, he wrote editorials for the paper, reported for the
BBC, worked as a regulator of the broadcasting industry and undertook
research for the Institute for Fiscal Studies.

Krishna Guha, US economics editor and deputy Washington bureau chief,
is the FT's chief Fed-watcher. He leads coverage of the US economy,
the IMF and the World Bank, writing on the global economy for 15
years. Educated at Cambridge and Harvard, Krishna was a Fulbright and
CV Starr scholar. He has worked as an FT economics editorial writer
and Lex columnist.

Ralph Atkins, Frankfurt bureau chief, has been writing about European
economics and politics for the Financial Times for more than 20 years
following an economics degree from Cambridge. He has been watching the
European Central Bank and eurozone economies since 2004. He has
previously worked in London, Bonn, Berlin, Jerusalem and Brussels.

Robin Harding is a Tokyo correspondent for the FT - covering the Bank
of Japan in addition to the country's technology sector - before which
he was an economics leader writer based in London. Robin studied
economics at the University of Cambridge and then did a masters degree
in economics at Hitotsubashi University in Tokyo, where he was a
Monbusho scholar. Before joining the FT, Robin worked in various
positions in asset management and banking.

Simone Baribeau is US editor of Money Supply. Before joining the FT,
she wrote for the business sections of the Washington Post, Christian
Science Monitor and TheStreet.Com, among other news outlets. She also
worked as a researcher at a DC-based economic think tank. Simone
studied economics at Cornell University and received her MA in
business journalism at NYU. See posts.

Emma Saunders is the editor of Money Supply. Before joining the FT,
Emma worked for five years in energy trading and investment banking.
She has also set up her own business, done research for the IPPR and
NGOs, and has a PPE degree from Oxford. She is currently studying for
CFA II. See posts. The FT's Money Supply blog: a guide

February 3, 2010 3:37pm in

http://blogs.ft.com/money-supply/2010/02/03/uk-economy-fiscal-in-fighting/

Picking Up the Slack — Or Is It Too Late?

By Invictus - February 3rd, 2010, 11:30AM As the countdown to
Friday’s jobs number begins, it might be instructive to get yet
another perspective on the amount of slack in the labor market and its
effect on wages.

Here’s a chart built at the St. Louis Fed website that clearly drives
home the point — it perfectly captures the inverse relationship
between the Unemployment Rate and Average Hourly Earnings:

Unemployment and Average Hourly Wages: Mind the Gap

I’d postulate that only when this gap starts to close meaningfully
will we have to consider the possibility that the Fed will tighten and/
or that inflation might be somewhere out there on the horizon. Until
then, it’s very hard to envision they’ll consider moving off their
ZIRP.

Additionally, there was much fanfare when ISM printed at an above-
consensus 58.4. And certainly it’s good to have expansion in the
manufacturing sector, to be sure. But we’re starting to get data
points (like ISM) that are really more late-cycle than they are early-
cycle. And the jobs market — admittedly a lagging indicator — is
simply taking too long to play catch up. Here’s the ISM (Index, LHS)
and Nonfarm Payrolls (YoY Pct. Change, RHS). I’ve adjusted payrolls
by three months to clearly show the correlation and account for the
lag. Is it too late to see a jobs recovery that’s going to even put a
dent in the damage that’s been done over the past 25 months? That is
the question.

ISM: How much better will it get?

http://www.ritholtz.com/blog/2010/02/picking-up-the-slack/

Jim Hightower | Republicans Out of Touch as Middle Class Sinks
Wednesday 03 February 2010

by: Jim Hightower, t r u t h o u t | Op-Ed

American politics is a hoot! Where else can raw ignorance rise to such
high places -- and then flaunt itself shamelessly for all to see?

For example, who needs Jay Leno or Conan O'Brien for comic relief,
when we've got Andre Bauer? He's the Lieutenant governor of South
Carolina (a state, by the way, that really is a comer on the political
comedy circuit -- especially after Gov. Mark Sanford's madcap schtick
last year involving his disappearance, the Appalachian Trail and an
Argentine mistress.

But Sanford is leaving office, and Bauer, who is now a Republican
contender for governor, is the state's new star joker. He had 'em
rolling in the aisles recently when he did a wild, slapstick routine
on food stamps at a town hall meeting. Andre proclaimed that much of
his political thinking was shaped by his grandmother and that he had
learned a valuable lesson from her.

"She told me as a small child to quit feeding stray animals. You know
why?" he asked, pausing for comedic effect. "Because they breed!
You're facilitating the problem if you give an animal or a person
ample food supply. They will reproduce."

I tell you, Andre Bauer is an absolute scream!

But here's the real punch line: The need for food stamps has been
soaring as more and more Americans are falling out of the middle class
into poverty. From 2000 to 2008, 5 million more were added to the
poverty rolls, and that was before the economic collapse of the last
two years. In fact, check this out Andre, and laugh if you feel like
it: About 6 million Americans today are living entirely on food stamps
-- they've lost their jobs and have no other income. That's one out of
every 50 of us, and their numbers are growing rapidly. Now, isn't that
a hoot?
Well, one who's not laughing is Republican member of Congress John
Linder. This far-out Georgia right-winger is irked that America's food
stamp program will grow to more than $60 billion this year. "This is
craziness," Linder barked to a New York Times reporter. "We're at risk
of creating an entire class, a subset of people, just comfortable
getting by living off the government."

Comfortable? When was the last time this pampered lawmaker experienced
the "comforts" of the food stamp life? Linder himself has been "living
off the government" for 18 years, but at the high end -- drawing
$174,000 a year in pay, plus subsidized health care, a fat pension and
generous perks of office.
Hypocrisy aside, Linder is an anti-government, laissez-faire extremist
who buys into Bauer's fantasies about lazy, good-for-nothing strays
getting food stamps.

"You don't improve the economy by paying people to sit around and not
work," he grumps, adding, "You improve the economy by lowering taxes."

Really? Perhaps the gentleman from Georgia has forgotten that he and
the whole Washington insider crowd tried that scam again and again
throughout the past decade, slashing all sorts of taxes for
corporations and the wealthy. Since Linder is a multimillionaire, that
economic "plan" undoubtedly worked out splendidly for him.
For the middle class, however, the 10 years since January 2000 are
known as "the lost decade." In that period, the U.S. economy lost more
jobs than it created -- zero job growth. That's the first decade since
the end of the Depression that our country has had less than a 20
percent rise in job creation.

Also, after the 10-year frenzy of tax-cutting, middle-class families
are earning less today, in real dollars, than they did in 1999. Add in
skyrocketing health care costs and the plummeting value of people's
homes, and we get the harsh reality of mushrooming poverty.

So that "subset of people" on food stamps whom Linder so callously
denigrates are his own spawn! The food stamp program has had to grow
because the tinkle-down economy that he pushed has wrecked America's
middle class.

Does knocking poor people make these guys feel better about
themselves? How pathetic. Bauer and Linder are living proof that when
it comes to leadership, America has too many 5-watt bulbs screwed into
150-watt sockets.

Copyright 2010 Creators.com
All republished content that appears on Truthout has been obtained by
permission or license.

Comments

People tend to relate with
Wed, 02/03/2010 - 18:48 — Anonymous (not verified)
People tend to relate with people they consider being like themselves.
So Liberals looks for Liberal or whatever it is called. Conservatives
for conservatives and, so on. It looks like some people feel very
comfortable voting for jokers and idiots and ignorant. But these
idiots/ignorant are the leaders of the country. And the situation is
becoming worse. Honestly I do not see any hope for improvement.
.Just Republicans? I don't

Wed, 02/03/2010 - 18:59 — Anonymous (not verified)
Just Republicans?
I don't hear much of a message from community organizer Obama.
Neither do I see most Congressional Democrats ready to confront our
economic realities.
When they are out on the street (unfortunately probably K Street),
they can reflect on why.
.I dunno, I suspect the title

Wed, 02/03/2010 - 19:14 — Anonymous (not verified)
I dunno, I suspect the title is off a bit, Politicians, unless totally
deranged or senile, are aware of the shafted underclass. Bauer uses
them as an example. These bought and sold bums work for their
constituents. The hick from Georgia wants to make sure there's enough
dough for Lockheed Martin, can't have that if more people get on
foodstamps and cut into profits.
.LAWMAKERS NEED TO PURCHASE

Wed, 02/03/2010 - 19:46 — marg (not verified)
LAWMAKERS NEED TO PURCHASE THEIR OWN HEALTH INSURANCE!!
Why am I footing their bill? They're not paying mine...
.The sad irony is that food

Wed, 02/03/2010 - 20:05 — Banquo (not verified)
The sad irony is that food stamps (like school lunch programs and most
of our foreign aid) are at heart agricultural subsidies. It's so easy
to blame the recipients and ignore the real beneficiaries.
.Why don't we eliminate

Wed, 02/03/2010 - 21:23 — radline9 (not verified)
Why don't we eliminate government subsidies and tax breaks for
corporations. After all, they are going to breed.
.Why not eliminate the FREE

Wed, 02/03/2010 - 22:43 — Anonymous (not verified)
Why not eliminate the FREE LUNCHES congress people have at the
congressional dining room???
they eat pretty darned good there on our dime. Not the stuff of us
peasants, believe me.
.Yet according to a recent

Wed, 02/03/2010 - 22:58 — Anonymous (not verified)
Yet according to a recent poll commissioned by daily Kos (or a Kos
member), a majority say they'd vote for Palin as GOP candidate and
would vote for a GOP candidate.

So what's up? Certainly I agree w/Mr. Hightower, but it seems that,
receiving food stamps or not, people are still seeing themselves as
gop. Very durable propaganda I'd say.

Or maybe it's because Obama's administration seems like bushlite in
many ways, bailing out bankers, they're still getting huge bonuses,
patriot act, still around, gitmo--still open & 50 people who have not
been convicted of anything will continue to be detained, reaffirming
Bush's DOJ stance re: gov't secrecy & ability to do warrantless search
& seizure/survelliance and so on.

Budget of aggression? Still bloated & specifically exempted from any
spending cuts.

So the differences are? A few. But there's a whole lot of angry energy
& fear that out there & neither the Obama administration nor Congress
(& definitely not an oblivious, corporate profits obsessed S.Ct
majority) seems to be able to offer it any constructive release.
Apparently because they are unable to stop themselves from kowtowing
the the corporate elite (maybe a few Congresspeople do).

the health insurance reform bill looked like farce to me. Just made
the entire uninsured population free for insurer pillaging & making
sure people will be underinsured & unable to pay for medical care
(especially preventive) because all their disposable income is going
towards paying health insurance premiums for a policy that covers
almost nothing.

."Where else can raw
Wed, 02/03/2010 - 23:06 — Anonymous (not verified)
"Where else can raw ignorance rise to such high places -- and then
flaunt itself shamelessly for all to see?"

An everyday occurence in Texas.
.Someone here had a a good

Wed, 02/03/2010 - 23:32 — Anonymous (not verified)
Someone here had a a good idea, take away Congress' health care that
we pay for and watch thing change fast. I've known people that had to
collect food stamps for a little time and I can assure you that they
weren't "comfortable."
.I've found that the most

Wed, 02/03/2010 - 23:39 — Anonymous (not verified)
I've found that the most virulent, anti-government right-wingers ALL
are getting by through generous pensions provided by their years
working on government jobs (military, police, state government, etc.)
and my most liberal, left friends are either small business owners/
entrepreneurs or work for private firms (private colleges, etc.). And
although I don't know their income levels, it would be a pretty safe
bet that my left friends pay A LOT more in federal taxes than my right
friends and relatives. Interesting, isn't it?

http://www.truthout.org/jim-hightower-republicans-out-touch-middle-class-sinks56622

...and I am Sid Harth

[bademiyansubhanallah]

Bloomberg

U.S. Economy: Services Expanded Less Than Forecast in January
February 03, 2010, 02:58 PM EST

Feb. 3 (Bloomberg) -- Service industries in the U.S. expanded less
than anticipated in January, a sign the recovery will be slow to
spread from manufacturing to the rest of the economy.

The Institute for Supply Management’s index of non- manufacturing
businesses, which make up almost 90 percent of the economy, climbed to
50.5 from 49.8 in December, figures from the Tempe, Arizona-based
group showed today. Readings above 50 signal growth. Other reports
showed firings eased last month.

Unemployment close to a 26-year high may restrain growth as Americans
limit spending on clothing, vacations and restaurant meals. Stocks
dropped on concern the recovery will lose momentum after business
investment and efforts to rebuild inventories drove the strongest pace
of expansion in six years last quarter.

“Manufacturing is getting an awful lot of help, and it looks like the
rest of the economy is getting awfully dull growth,” said Robert
Mellman, an economist at JPMorgan Chase & Co. in New York, which
correctly forecast the ISM index. Employment “will gradually get
better. Profits had another strong quarter and margins are going up.
Businesses are very, very lean and they’ll be hiring soon.”

Companies cut an estimated 22,000 jobs in January, the smallest drop
in two years, data from ADP Employer Services showed today. The report
includes only private payrolls and doesn’t take into account
government hiring.

The Standard & Poor’s 500 Index decreased 0.6 percent to 1,096.96 at
12:41 P.M. in New York. Treasury securities also dropped, sending the
yield on the benchmark 10-year note up to 3.67 percent from 3.64
percent late yesterday.

Another report showed planned firings fell 70 percent last month to
71,482 from 241,749 in January 2009, according to data collected by
the job placement firm Challenger, Gray & Christmas Inc. Announcements
increased from a two-year low of 45,094 in December, the Chicago-based
firm said today.

The report on services showed four industries, including utilities and
wholesalers, grew last month while 11 contracted. Entertainment,
mining and retail companies were among those shrinking in January.

Payroll Forecast

The economy probably created more jobs than it lost last month,
economists project a Feb. 5 report from the Labor Department will
show. Payrolls rose by 10,000 employees in January, according to the
median estimate of economists surveyed, helped by federal government
hiring of temporary workers to carry out the 2010 population count.

Retailers are among companies still cutting jobs. Atlanta- based Home
Depot Inc. last week began eliminating 1,000 positions after sales at
older stores fell 6.9 percent in the quarter ended Nov. 1.

“Household spending is expanding at a moderate rate, but remains
constrained by a weak labor market, modest income growth, lower
housing wealth and tight credit,” Federal Reserve policy makers said
after their meeting last month. The central bankers kept the benchmark
interest rate on overnight loans between banks near zero and said it
would remain “low” for an “extended period.”

The ISM services survey has lagged behind the group’s manufacturing
gauge, which rose in January to the highest level in five years as
factories ramped up production to rebuild inventories and meet
increasing global demand.

Economic Growth

The economy grew at a 5.7 percent annual pace in the fourth quarter,
the government reported last week. It was the second quarter of growth
following a year-long contraction that marked the deepest recession
since the 1930s.

Consumer spending, which accounts for 70 percent of the economy, rose
at a 2 percent pace, compared with an average 2.8 percent increase per
quarter in the six-year expansion that ended in December 2007.

United Parcel Service is among companies seeing an improvement.
Atlanta-based UPS yesterday said first-quarter profit would be
“slightly better” than a year ago, signaling that the world’s largest
package-delivery company expects a slow start to a recovery that
builds through the year.

“Economic forecasts indicate gradual improvement as 2010 unfolds,”
Kurt Kuehn, UPS’s chief financial officer, said in a statement. “The
first quarter will be the most challenging of the year for UPS, with
profitability only slightly better than last year.”

--Editors: Carlos Torres, Christopher Wellisz

To contact the reporter on this story: Bob Willis at [phone]
or ***@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz
[phone] or ***@bloomberg.net

http://www.businessweek.com/news/2010-02-03/u-s-economy-services-expanded-less-than-forecast-in-january.html

Is the U.S Economy Really Set for Recovery?
Ed Liston

Mohammed A. El-Erian, the CEO of PIMCO, the world’s biggest mutual
fund, is not very optimistic about the way the U.S economy is
recovering from the global financial crisis.

According to him, the investors have been wrong in analyzing the
orderly withdrawal of stimulus measures provided by the government, a
rebound of bank lending, and other government policies to restore
growth. Wall Street analysts expect that Standard & Poor’s 500 will
rise 10% in 2010. He says on Bloomberg that Wall Street projections
for 2010 will not prove to be right and the prices will slump. The
decline in the stock market witnessed over the last eleven months may
further decline.

The Standard & Poor’s 500 Index fell 3.7% in January, which was more
than any month since February 2009. This was in reaction to China’s
policy of setting higher reserves for lenders and Barack Obama’s
policies of reducing risk taking by banks. The MSCI Emerging Markets
Index also lost 5.7 percent last month. The employment levels also do
not seem to be improving, which is hampering the overall growth of the
economy.

El-Erian sees January’s global equity sell off as a flag that has
marked the beginning of a disappointing year for several asset
classes. The global financial crisis has increased the levels of
public debt and budget deficit of the country. The U.S government’s
budget deficit in the fiscal year ending September 30th was a record
amount of $1.42 trillion.

El-Erian however says that due to increased government regulation,
lower consumption and a smaller role for the U.S in the global
economy, the investors will get returns that trail the historical
average. He predicts that the GDP will expand 2.7 % in 2010 and 2.9%
in 2011.

http://www.benzinga.com/general/109587/is-the-u-s-economy-really-set-for-recovery

market pulse
Feb. 3, 2010, 10:06 a.m. EST

U.S. Jan. ISM services index rebounds to 50.5%

By Greg Robb

WASHINGTON (MarketWatch) -- The service sectors of the U.S. economy
rebounded in January, the Institute for Supply Management reported
Wednesday. The ISM non-manufacturing index rose to 50.5% from 49.8% in
December. Despite the improvement, the increase was below
expectations. Economists were looking the index to rise to 51%. The
index had been above 50 for two months in the fall but then slipped
under the threshold in November and December. The closely-watched
employment index rose to 44.6% in January from 43.6 in December. The
employment index has been below 50 since December 2007. It hit a low
of 31.1 in November 2008.

http://www.marketwatch.com/story/us-jan-ism-services-index-rebounds-to-505-2010-02-03

US Job Market Improves
VOA News 03 February 2010

The battered U.S. job market got a bit better as private employers cut
just 22,000 jobs in January.

That is about one-third the number of jobs cut the prior month.

The information comes from ADP, a company that processes paychecks
across the nation.

On Friday, government experts will publish the national unemployment
rate and the net number of jobs lost or gained across the economy.

The U.S. economy lost 85,000 jobs in December, but economists
interviewed by news organizations say there could be a net gain in
January.

They also say the jobless rate might edge up slightly to 10.1 hit
percent.

Some information for this report was provided by AFP, AP and Reuters.

http://www1.voanews.com/english/news/usa/US-Job-Market-Improves-83438667.html

...and I am Sid Harth

[chhotemianinshallah]

Bloomberg

Asian Stocks Decline on Australian Retail Sales, Commodities
February 04, 2010, 05:21 AM EST

By Jonathan Burgos

Feb. 4 (Bloomberg) -- Asian stocks dropped, dragging the MSCI Asia
Pacific Index lower for the first time in three days, after Australian
retail sales unexpectedly fell in December and commodity prices
declined.

CSR Ltd., Australia’s second-largest building-products maker, tumbled
6.5 percent after a court blocked the company’s plan to separate its
sugar business. Jiangxi Copper Co. Ltd., China’s biggest producer of
the metal, dropped 3.7 percent in Hong Kong after metal prices
declined. Toyota Motor Corp., the world’s biggest carmaker, slid 3.5
percent in Tokyo as the U.S. stepped up pressure on the company to fix
defects that caused the recall of almost 8 million vehicles.

The MSCI Asia Pacific Index lost 0.8 percent to 117.54 as of 7:20 p.m.
in Tokyo, snapping a two-day, 1.9 percent gain. The gauge has fallen
7.3 percent from a 17-month high on Jan. 15 on concern central banks
from China to India will tighten monetary policy to curb inflation.

“It’s not yet the time to start buying equities after the recent
declines,” said Pearlyn Wong, Singapore-based investment analyst at
Bank Julius Baer Co., which manages about $350 billion. “We’ll have to
see what happens after the Lunar New Year holiday. Economic growth may
have peaked in the fourth quarter when we’ve seen a lot of re-
stocking.”

Japan’s Nikkei 225 Stock Average dropped 0.5 percent. Denso Corp., a
supplier to Toyota, slumped 6.3 percent. Mitsubishi UFJ Financial
Group Inc., Japan’s largest bank by market value, dipped 2.7 percent
as bad-debt charges increased.

U.S. Service Industries

The Hang Seng Index sank 1.8 percent in Hong Kong, where Bank of
Communications Co. declined 1.7 percent after China Business News
reported the lender may sell shares. China’s Shanghai Composite Index
lost 0.3 percent.

Australia’s S&P/ASX 200 Index declined 0.6 percent as a government
report showed the country’s retail sales fell in December for the
first time in five months. A Bloomberg economist survey had projected
an increase.

Futures on the U.S. Standard & Poor’s 500 Index lost 0.7 percent. The
gauge sank 0.6 percent yesterday as a gauge of the country’s service
industries expanded less than forecast and Pfizer Inc.’s profit
trailed estimates.

“Signals remain mixed about the strength of economic recovery,” said
Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd.
in Melbourne. “A tug of war seems to be occurring between fundamentals
and liquidity at the moment.”

Australian Retailers

Governments around the world cut borrowing costs and boosted spending
last year to help drag the global economy out of its worst slowdown
since World War II. The MSCI Asia Pacific Index climbed 34 percent
last year on optimism growth in Asia, will outpace the rest of the
world, led by China’s expansion.

The advance beat gains of 23 percent by the Standard & Poor’s 500
Index in the U.S. and 28 percent for Europe’s Dow Jones Stoxx 600
Index. Companies in the MSCI index trade at 18.6 times estimated
earnings, compared with 14.1 times for the S&P 500 and 12.5 times for
the Stoxx 600.

David Jones Ltd., Australia’s second-biggest department store
operator, slumped 4.1 percent to A$4.73. JB Hi-Fi Ltd., the S&P/ASX
200 Index’s best-performing retail stock in 2009, sank 3.7 percent to A
$20.28. Flight Centre Ltd., the nation’s largest travel agency,
dropped 3.8 percent to A$19.04.

CSR tumbled 6.5 percent to A$1.725. UBS AG lowered the stock to
“neutral” from “buy” after the Federal Court of Australia blocked
CSR’s plan to separate its sugar business.

‘Negative Consequences’

“This decision appears to have significant negative consequences for
CSR value,” UBS AG analysts David Leitch and Satya Tammareddy wrote in
a report.

A gauge of materials producers on the MSCI Asia Pacific Index sank 1.3
percent, the biggest decline of 10 industry groups. Material producers
led the gains in the past year amid signs the global economic recovery
is accelerating. China’s gross domestic product expanded at its
fastest pace since 2007 in the fourth quarter, while U.S.
manufacturing expanded at its fastest pace since August 2004 in
January.

Jiangxi Copper dropped 3.9 percent to HK$15.62 in Hong Kong. Aluminum
Corp. of China Ltd., the nation’s biggest producer of the metal,
declined 3.7 percent to HK$7.87. BHP Billiton Ltd., the world’s
biggest mining company, slipped 1.2 percent to A$40.99. Rio Tinto
Ltd., the world’s third-biggest mining company, dropped 2.6 percent to
A$70.12.

Metals, Oil

Mitsubishi Corp., which gets about 47 percent of sales from
commodities, fell 2.7 percent to 2,190 yen. Inpex Corp., Japan’s
largest oil explorer, lost 1 percent to 671,000 yen.

The London Metal Exchange Index of six metals including copper and
zinc declined 2.5 percent to its lowest level since Nov. 13. Crude-oil
futures fell 0.3 percent to $76.98 a barrel in New York yesterday,
while gold retreated 0.5 percent.

In Tokyo, Toyota dropped 3.5 percent to 3,280 yen after U.S.
Transportation Secretary Ray LaHood said he planned to call Toyota
President Akio Toyoda to tell him that this vehicle recall is “serious
business.”

The stock has fallen 22 percent since announcing the recall of
vehicles with gas-pedal flaws on Jan. 21. After Japan’s stock market
closed today, Toyota forecast a return to annual profit and a 51
percent surge in North American sales this quarter even as the company
faces its worst recall crisis.

Denso, which makes automobile parts, slumped 6.3 percent to 2,532 yen.
Toyota Boshoku Corp., a parts-maker affiliated with Toyota Motor, sank
9.1 percent to 1,673 yen.

Honda, Mitsubishi UFJ

Honda Motor Co. rose 2.6 percent to 3,220 yen. Honda expects net
income of 265 billion yen ($2.9 billion) in the year ending March 31,
compared with an earlier forecast of 155 billion yen, the Tokyo-based
company said in a statement yesterday.

Mitsubishi UFJ, Japan’s largest bank by market value, slipped 2.7
percent to 462 yen as an increase in bad-debt charges at a unit in
California and a consumer-lending subsidiary at home raised concern
about earnings prospects.

“The bank’s overseas exposure and loans at its domestic consumer unit
make it vulnerable,” said Kristine Li, a Singapore-based credit
analyst at Royal Bank of Scotland Plc. “The big concern is earnings
growth is not visible.”

In Hong Kong, Bank of Communications, China’s fourth- biggest lender
by market value, dropped 1.7 percent to HK$7.90. The lender may sell
shares to the Ministry of Finance to raised funds, China Business News
reported, without citing anyone.

Dainippon Sumitomo Pharma Co. lost 5 percent to 975 yen. Citigroup
Inc. cut its rating to “sell,” citing higher-than- expected costs from
a $2.51 billion acquisition.

--With assistance from Kana Nishizawa in Tokyo. Editors: Darren Boey,
Sam Waite.

To contact the reporters for this story: Jonathan Burgos in Singapore
at [phone] or ***@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at
[phone] or ***@bloomberg.net.

http://www.businessweek.com/news/2010-02-04/asian-stocks-decline-on-australian-retail-sales-commodities.html

Bloomberg

Portugal, Spain Lead Worldwide Decline in Stocks; Dollar Gains
February 04, 2010, 08:01 AM EST

By Gavin Serkin

Feb. 4 (Bloomberg) -- Stocks and bonds fell in Spain, Portugal and
eastern Europe on concern governments will struggle to fund their
budget deficits as spending cuts in Greece trigger strikes. The dollar
rallied.

Portugal’s PSI-20 Index slumped 4 percent, the most in 14 months, at
11:43 a.m. in London. Spain’s IBEX Index dropped 2.6 percent to the
lowest level since August and credit-default swaps on Hungary climbed
to a record. Futures on the Standard & Poor’s 500 Index slipped 0.7
percent. The dollar strengthened against all but one of its 16 most-
traded peers. The pound pared declines after the Bank of England
announced a pause in its asset-purchase program.

The European Union’s pledge yesterday to back Greece’s plan to cut the
region’s biggest budget deficit prompted investors to shun securities
of countries with the worst shortfalls. Spanish borrowing costs rose
at a sale of three-year notes today and Portugal scaled back an
auction of Treasury bills yesterday.

“The focus is shifting toward Spain and Portugal, where the deficit-
reduction plans have been far less ambitious than Greece,” said
Kornelius Purps, a fixed-income strategist in Munich at UniCredit
Markets & Investment Banking.

The MSCI World Index of 23 developed nations’ stocks fell 0.5 percent
as Greece’s ASE Index lost 1.9 percent on concern plans for a strike
by the country’s biggest union show Prime Minister George Papandreou
may not win enough support in parliament for spending reductions.
Piraeus Bank SA, Greece’s fourth-biggest lender, dropped 3.1 percent,
while Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank,
declined 4.4 percent. Europe’s Dow Jones Stoxx 600 Index slipped 0.9
percent.

Futures Fall

U.S. stock futures fell before a Labor Department report at 8:30 a.m.
New York time that may show initial jobless claims declined last week.
Other reports may show factory orders rose 0.5 percent in December and
worker productivity kept increasing in the fourth quarter.

The MSCI Emerging Markets Index dropped 1.2 percent, snapping a three-
day rally. Poland’s WIG 20 Index fell 1.4 percent after the European
Commission said the government’s budget gap may widen to a 15-year
high of 7.5 percent of gross domestic product in 2010, from 6.4
percent last year, without “sizeable” measures. The Budapest Stock
Exchange Index lost 1.1 percent after the opposition Fidesz party, the
favorite to win general elections in 10 weeks, said the country faces
a continuing recession and mounting debt, and has an unrealistic
budget deficit target.

Hungary Premium

The extra yield investors demand to own Hungarian sovereign and quasi-
sovereign bonds jumped the most in eight months, rising 29 basis
points to a two-month high 2.59 percentage points more than similar-
maturity U.S. Treasuries, according to JPMorgan Chase & Co.’s EMBI
Global indexes.

Portugal led declines in government bonds, with the premium investors
demand to hold the securities instead of benchmark German bunds
widening 10 basis points to 157 basis points, the biggest difference
since March. Spain sold 2.5 billion euros ($3.5 billion) of three-year
securities today to yield 2.63 percent, compared with 2.14 percent the
last time the notes were issued Dec. 3.

Credit-default swaps on Portugal’s government debt soared 15 basis
points to a record 211, according to CMA DataVision prices. Contracts
on Greece jumped 18 basis points to 415.5, Spain increased 12 basis
points to 164, Italy was up 7 at 138 and Ireland climbed 6.5 basis
points to 169.5.

Kiwi Falls

The dollar gained against high-yielding currencies, adding 1.1 percent
versus the New Zealand dollar and 0.6 percent against the South
African rand. The Dollar Index, which tracks the U.S. currency against
those of six major trading partners, climbed 0.3 percent.

The New Zealand dollar declined after a government report showed the
unemployment rate climbed to a 10-year high. The Australian dollar
dropped because retail sales unexpectedly fell in December for the
first time in five months.

Crude oil for March delivery fell 68 cents, or 0.9 percent, to $76.30
a barrel in electronic trading on the New York Mercantile Exchange
after a U.S. Energy Department report yesterday showed a bigger-than-
forecast weekly increase in crude inventories. Lead for delivery in
three months fell 0.8 percent to $2,005.75 a metric ton on the London
Metal Exchange. Gold for immediate delivery retreated 0.6 percent to
$1,103.02 an ounce.

--With assistance from Justin Carrigan, Abigail Moses, Andrew
Reierson, Stuart Wallace, Steve Voss and Andrew Rummer in London.
Editors: Paul Sillitoe, Mark Gilbert

To contact the reporters for this story: Gavin Serkin at +44
20-7673-2467 or ***@bloomberg.net

To contact the editor responsible for this story: Paul Sillitoe at +44
20-70773-3857 or ***@bloomberg.net

http://www.businessweek.com/news/2010-02-04/asian-stocks-currencies-fall-on-outlook-for-economic-recovery.html

Market Snapshot December 16, 2009, 3:56PM EST

U.S. Stocks Erase Gain, Bond Yields Rise

Indexes retreated from earlier highs on concerns the Fed's near-zero
target for interest rates will stoke inflation Finance

By Elizabeth Stanton

Dec. 16 (Bloomberg) -- U.S. stocks erased most of their advance, the
dollar strengthened and yields on 10-year Treasury notes rose to the
highest level in four months on concern the Federal Reserve's near-
zero target for interest rates will stoke inflation.

The Standard & Poor's 500 Index added 0.2 percent to 1,109.90 at 3:54
p.m. in New York, paring a gain of as much as 0.8 percent. The dollar
rose 0.2 percent to 89.79 yen. The yield on 10-year notes touched 3.60
percent, which would be the highest closing level since August.

The Fed repeated its pledge to keep interest rates "exceptionally low"
for an "extended period," driving metal producers, energy companies
and banks to the steepest gains among 10 industries in the S&P 500.
Policy makers restated that low interest rates are contingent on "low
rates of resource utilization, subdued inflation trends, and stable
inflation expectations."

"The fear is that the Fed may wait too long before they begin raising
rates," said Joseph Veranth, chief investment officer at Dana
Investment Advisors in Brookfield, Wisconsin, which manages $2.8
billion. In the S&P 500, "when you see materials, financials and
energy leading, it means the market fears higher prices and inflation.
Market participants are going to the sectors that will perform well in
that environment."

While repeating its pledge to keep interest rates "exceptionally low"
for "an extended period," the Fed said the economy is strengthening
and that most of its special liquidity facilities will expire on Feb.
1, 2010.

"Household spending appears to be expanding at a moderate rate, though
it remains constrained by a weak labor market, modest income growth,
lower housing wealth, and tight credit," the Federal Open Market
Committee said in a statement after meeting in Washington. "Businesses
are still cutting back on fixed investment" and "remain reluctant to
add to payrolls." Deterioration in the labor market is "abating."

To contact the reporter on this story: Elizabeth Stanton in New York
at ***@bloomberg.net

http://www.businessweek.com/investor/content/dec2009/pi20091216_769179.htm

Japan’s Government Bonds Fall, Pushing Yields to 3-Month High
Share Business ExchangeTwitterFacebook| Email | Print | A A A By
Yoshiaki Nohara

Feb. 4 (Bloomberg) -- Japan’s bonds fell, pushing 10-year yields to
the highest in almost three months, as signs of a recovery in the U.S.
economy damped demand for government debt.

Five-year yields climbed to the most in two months after Treasuries
slid yesterday on a private report that estimated U.S. companies cut
the fewest jobs since January 2008. Figures tomorrow will show the
biggest gain in U.S. employment in two years, according to a Bloomberg
News survey.

“People’s expectations are turning positive for the U.S. employment
data,” said Koji Ochiai, a senior market economist in Tokyo at Mizuho
Investors Securities Co., a unit of Japan’s second-largest bank.
“Japan’s bonds are under downward pressure, following the drop in
Treasuries.”

The yield on the 1.3 percent bond due December 2019 rose two basis
points to 1.375 percent as of 4:17 p.m. in Tokyo at Japan Bond Trading
Co., the nation’s largest interdealer debt broker. The price fell
0.173 yen to 99.348 yen. The yield was at the highest level since Nov.
12.

Five-year yields gained 1.5 basis points to 0.54 percent, the highest
since Dec. 1. Ten-year bond futures for March delivery dropped 0.27 to
138.80 as of the afternoon close at the Tokyo Stock Exchange.

Japan’s yield curve steepened as the spread between 2- and 10-year
securities widened to 1.22 percentage points today, the most since May
2006, according to data compiled by Bloomberg.

A yield curve is a chart that plots the yields of bonds of the same
quality, but different maturities. It steepens when yields on shorter-
maturity notes fall, those on longer-dated bonds rise, or both happen
simultaneously.

U.S. Jobs Data

“Investors don’t need to buy bonds in a rush before the U.S. jobs data
tomorrow,” said Takafumi Yamawaki, a senior strategist in Tokyo at BNP
Paribas Securities Japan Ltd., one of the 23 primary dealers required
to bid at the government’s debt sales. “Still, there are lingering
expectations bonds could be bought with 10-year yields approaching 1.4
percent.”

The U.S. added 15,000 workers last month after losing 85,000 in
December, according to a Bloomberg News survey ahead of the Labor
Department’s report.

U.S. companies cut 22,000 jobs in January, the fewest in two years,
ADP Employer Services reported yesterday.

Ten-year Treasury yields rose six basis points to 3.71 percent
yesterday, according to BGCantor Market Data.

Nakamura Comment

Demand for Japan’s short-term notes was underpinned after Bank of
Japan board member Seiji Nakamura today reiterated that the central
bank will maintain a very accommodative monetary policy. Downward
pressure on prices won’t easily go away, Nakamura said at a business
meeting in Fukuoka, western Japan.

“As consumers expect chronic deflation, Japan’s bonds are in a
favorable environment for investors compared with foreign markets,”
Makoto Noji, a senior market analyst at Mizuho Securities Co. in
Tokyo, wrote in a research note today.

Consumer prices excluding fresh food fell 1.3 percent in December from
a year earlier, the statistics bureau reported on Jan. 29 in Tokyo.
That was a 10th-straight decline.

Deflation, a general drop in prices, enhances the value of the fixed
payments from bonds.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at
***@bloomberg.net.

Last Updated: February 4, 2010 02:22 EST

http://www.bloomberg.com/apps/news?pid=20601101&sid=a3Fe.fOFFbGQ

Sony books $870mln quarterly profit
(AFP) – 6 hours ago

TOKYO, Japan — Japanese electronics and entertainment giant Sony Corp.
Thursday announced a third-quarter net profit of 870 million dollars,
a result it said "significantly exceeded expectations".

The maker of PlayStation game consoles, Bravia televisions and Cyber-
shot cameras is still emerging from the global economic slump but
narrowed its full-year loss forecast to 70 billion yen from 95 billion
yen.

"We did well across the board during the year-end shopping season,"
said Nobuyuki Oneda, Sony's chief financial officer. "It significantly
exceeded expectations."

"Cost cutting efforts bore fruits. Improvements were also seen in our
financial businesses," he told a press conference.

For the October-December quarter, Sony reported a net profit of 79.2
billion yen (870 million dollars) against a 10.4-billion-yen profit in
the same period a year earlier. In the July-September quarter, it lost
26.3 billion yen.

Sales of PlayStation 3 rose following a price cut and introduction of
successful game titles, Oneda said.

Liquid crystal display televisions in Asia -- a key product group in
an important market -- also boosted the operating profit during the
quarter although lowered prices reduced overall sales value, he said.

Sony also reported an operating profit of 146 billion yen during the
three months -- compared with an operating loss of 17.96 billion yen a
year earlier -- on revenue of 2.24 trillion yen in the three months to
December.

Sony continued to pursue aggressive cost-cutting measures, including
shedding 20,000 jobs, Oneda said.

The company was on course to reducing cost by 330 billion yen and to
close roughly 20 percent of its factories in the year to March, he
added.

The result came days after Sony's competitors Sharp Corp. of Japan and
Samsung Electronics of South Korea also reported they had returned to
the black in the last three months of 2009 as the global economic
crisis eased.

The robust performance in the third quarter led Sony to upgrade its
annual earnings expectations to March.

The company halved annual its operating loss estimate to 30 billion
yen, compared with an earlier loss projection of 60 billion yen.

Volatile prices of raw materials still posed risks going forward,
although Oneda remained optimistic.

"We have a sense that the economy might be bottoming out. It's
difficult to imagine things will again crumble down," Oneda said.

"We are keeping our eyes on prices of materials and memories," he
added.

Copyright © 2010 AFP. All rights reserved.

Sony announced an October-December net profit of 870 million dollars

http://www.google.com/hostednews/afp/article/ALeqM5he1vHhmJDqNOO6YKAcxwFhxO8-vA

News and analysis

Europe On The Brink
4/02/2010 7:15:03 PM
By Greg Peel

To recap, the European Union is comprised of 27 sovereign nations in a
common trading bloc, the purpose of which is to compete as a
collective more effectively with the world's economic powerhouses of
the US, Japan and now China. It was born of the old "Common Market".

Of those 27 nations, 16 have chosen to also band together under a
common currency - the euro. Responsibility for the euro falls to the
European Central Bank, and "euro-zone" membership comes with the
requirement to satisfy various economic criteria in exchange for
central bank protection (such as lender of the last resort insurance).
One of those criteria is that members must maintain a level of public
sector deficit of no more than 3% of GDP. In order to finance
deficits, individual members issue their own soveriegn bonds. There is
no single euro-zone bond. Excessive debt issuance from one member
state incrementally impacts on each member state via the devaluation
of their common currency.

Any sovereign nation can also go cap in hand to the International
Monetary Fund for financial assistance, as that is what the IMF is
there for. But the IMF also imposes strict criteria itself when it
bails out an economy, and one of those is a forced devaluation of that
nations' currency. In the case of euro-zone members, clearly this is
not an option. Thus the ECB must respond first.

In 2009, the ECB was forced to bail out euro-zone member Ireland.

One of the euro-zone's biggest problems is economic disparity. The CIA
World Factbook (yes, the US charges the spooks with the task of
measuring everyone's economy) puts the European Union's total GDP in
2009 down as US$16.0 trillion, ahead of the US on US$14.2 trillion.
China's economy is now assumed to have exceeded that of Japan's but
for the sake of comparison, the CIA suggests Japan's GDP was US$5.0trn
in 2009 and China's US$4.7trn.

On an individual basis, in fourth place is Germany with (the numbers
are all in US$ trillions from here) 3.2 and then France with 2.6 in
fifth. Of the euro-zone members, Italy's GDP is 2.1 (7th) and Spain's
is 1.4 (9th). We then descend through the Netherlands, Belgium and
Austria before we get to Greece on 0.3 (28th), and then Finland and
Ireland before we get to Portugal on 0.2 (38th). For comparison
purposes, Austalia's GDP is 0.9 in 13th place, only 64% as big as
Spain's.

We would not like to think of the consequences of Australia defaulting
on its sovereign debt.

Last night the European Commision used new EU treaty powers to impose
strict measures upon the Greek government and economy. Greece has
vowed to reduce its deficit from 13% of GDP to 3% by 2012 but the EU
has given the government only one month to actually come up with a
viable plan to achieve the target and has ordered public spending to
be slashed. The new socialist government is already meeting opposition
from its trade union support base and a general strike has been
planned. The EU is under pressure from the ECB and from dominant
member Germany to bring a profligate Greece into line.

The measures are intended to prevent money flowing out of Greek
government bonds for fear that Greece may not be able to meet its
interest payment obligations. Previously the Gulf state of Dubai had
announced a freeze on interest payments, sparking fears of default,
but since the neighbouring United Arab Emirates agreed to underwrite
Dubai debt, the danger has subsided for now. The ECB cash rate is set
at 1% and the benchmark German bonds are yielding around 3%, but last
week Greek bond yields blew out to 7% as funds quickly departed.

The panic has now subsided over Greece. And nobody honestly expects
that the EU member will default. However, the austerity measures now
being imposed on Greece will not be well received by an angry
electorate.

It is the nature of such default risk episodes that contagion is a
feature. When Thailand's currency began to falter in 1997 the Asian
Currency Crisis, affecting all the Asian "tiger" economies, followed.
The following year Russia defaulted, bringing down the world's biggest
hedge fund. When Iceland became the GFC's first major victim, Ireland
soon followed. No sooner had Dubai hit the headlines, Greece was not
far behind. And with the pressure now somewhat off Greece, the
attention has turned to Portugal. Last night bond traders shifted
focus to the next perceived victim and began selling out of Portuguese
bonds.

There is, of course, a level of self-fulfillment about such flights of
capital. When Bear Stearns went down, Lehman Bros was not far behind.
And then the US government was forced to bail out all major US banks.

The Portuguese economy is smaller than the Greek economy, but much
larger than the Greek economy is that of Spain - the ninth biggest
economy in the world. Spain is considered to be the next domino, and
beyond Spain even the larger Italian economy is drawing attention. If
Spain were to default, the ramifications would be enormous. It would
be another Lehman Bros as far as some commentators are concerned.

Economists suggest the reason why Greece and Spain in particular are
in serious trouble is due to the lax collection of taxes. In the
property markets in particular - and Greece and Spain are both popular
rental destinations for foreigners let alone the local population -
landlords are estimated to be collecting more than half of all rents
as cash and thus avoiding tax payments. This is leaving public coffers
short by billions of euro. Clearly a serious shake-up is needed among
the so-called Club Med nations and austeritiy measures will have to be
complemented by some aggressive crack-downs.

Fortunately for Spain, it entered the GFC with a budget surplus which
provided an initial buffer against deflation. In response to criticims
from other EU members, Spain has boasted that not one Spanish bank has
needed an injection of public capital, and indeed one Spanish bank has
bought into the crumbling British banking system. (Is the UK next?).
But Spain has since suffered a huge bubble and bust in its property
market, and quickly it is becoming more Greece-like every day.

Standing on the sidelines is the huge economy of Germany, which is the
only major EU member still in surplus. As a world exporting
powerhouse, Germany has long run a fiscal surplus which has formed a
large percentage of the offsetting US deficit. Germany is the senior
member of the EU and the only member with any real capacity to come to
the aid of Club Med and, for example, bail out banks. But Germany
refuses to do so.

Which is quite understandable. Germans are renowned for being a nation of strict savers unlike their frivolous Club Med peers. Why should Germans have to stump for Mediterranean profligacy? But at the end of the day, Germany agreed to be a member of both the EU and the euro-zone and hence the survival of both may depend on German intervention.

Critics of Germany point out the underconsumption of Germans is just
as much to blame for EU disparities as is excess consumption
elsewhere. Germany is selling goods into its EU neighbours but buying
little in return. This is a microcosm of the wider world malaise,
which sees Japan, China and Germany on the one hand failing to spend
on imports to balance out the rampant spending of the US, the UK, the
rest of Europe and Australia etc on the other. The world is trapped
with the pendulum having swung too far in the one direction.

The Chinese government is currently making aggressive attempts to stimulate China's domestic economy to address the imbalance which has been exacerbated by China's currency being pegged to the US dollar. Germany's currency is also pegged to its neighbours in that they share the one single currency. For the current European economic situation to be eased, critics argue, and for the sheer survival of the euro and the EU, Germany needs to come to the party.
Otherwise what we have building is a crisis of confidence in the euro which could get out of hand. The pound would not be far behind. The irony is that once again the world is seeking sanctuary in the safety of short term US debt despite the US boasting the biggest deficit of all. The devaluation of the US dollar, as a reflection of this deficit, appeared to be underway late last year, but the trend has now reversed as the other side of the world appears in more dire straits. Nevertheless, the longer US bonds have begun to creep up again in yield as investors again begin to fear inflationary pressures.
The collapse of Lehman Bros and subsequent ramifactions showed that one investment bank had the power to bring down the world. Such a catastrophic collapse was nevertheless prevented by coordinated government intervention across the globe. But what happens when national economies start going down?

© FN Arena

http://money.ninemsn.com.au/article.aspx?id=1008304

...and I am Sid Harth

[chhotemianinshallah]

Satyajit Das: The China Syndrome, parts 1,2 and 3
February 4, 2010
China Syndrome Part 1 - The Unbalanced Bicycle

by Satyajit Das

The China Syndrome

In 1971, Ralph Lapp, a nuclear physicist, used the term “China
syndrome” to describe a hypothetical nuclear reactor meltdown where
the molten core breaches containment barriers and melts through the
crust of the Earth reaching China. The economic equivalent of the
China Syndrome describes a process where China’s strong growth,
abundant savings and foreign exchange reserves assists a rapid
restoration of global growth.

The nuclear metaphor ignores the geographical fact that the opposite
side of the globe from the USA is actually the Indian Ocean and that
the entire idea is physically impossible. The economic metaphor
conveniently discards some significant doubts about the ability of
China to act as a catalyst for global recovery.

The Unbalanced Bicycle

China’s economic growth model was a contributing factor in the current
Global Financial Crisis (”GFC”).

Under Deng Xiaoping, leader of the Communist Party from 1978, China
undertook Gaige Kaifang (Reforms and Openness) - reform of domestic,
social, political and economic policy. Economic stagnation and serious
social and institutional woes that could be traced to Mao’s Cultural
Revolution forced the change.

The centrepiece was economic reforms that combined socialism with
elements of the market economy. It entailed engagement with the global
economy reversing the traditional policy of economic self-reliance and
a lack of interest in trade. As Robert Hart, 19th Century British
trade commissioner for China, wrote: “[The] Chinese have the best food
in the world, rice; the best drink, tea; and the best clothing,
cotton, silk, fur. Possessing these staples and their innumerable
native adjuncts, they do not need to buy a penny’s worth elsewhere.”

In embracing markets, Deng famously observed that: “It doesn’t matter
if a cat is black or white, so long as it catches mice.” Deng also
embraced a change in philosophy: “Poverty is not socialism. To be rich
is glorious.”

China’s economic reforms coincided with the ‘Great Moderation’ – a
period of strong growth in the global economy based on low interest
rates, low oil prices and deregulation of key industries such as
banking and telecommunciations. The boom was also based on increases
in global trade and investment driven, in part, by the fall of the
Berlin Wall, the collapse of the Soviet Union and integration of
socialist economies into the world economy.

China’s growth model, inspired by the post-War recovery of Japan, used
trade to accelerate the growth and modernisation of its economy. The
economic engine was export driven growth. Special Economic Zones
(”SEZ”), for example in Shenzen located strategically close to Hong
Kong, were established to encourage investment and industry.

The model took advantage of China’s large, cheap labour force. The
strategy benefited from rising costs in neighbouring Asian countries
such as Japan, South Korea, Taiwan, Hong Kong and Singapore. China was
able to attract significant foreign investment, technology and
management and trading skills from countries keen to outsource
manufacturing to lower cost locations to improve declining
competitiveness.

China converted itself, at least parts of the country, into the
world’s factory of choice. It imported resources and parts that were
then assembled or processed and then shipped out again. The Great
Moderation ensured a growing market for exports.

Innate conservatism, the desire to maintain Communist Party control of
the domestic economy and avoid social disruption favoured partial
market liberalisation. China’s need to provide employment for its
underemployed population and improve its technology also favoured this
strategy. China currently needs to grow at around 7-8% pa. to absorb
workers entering the formal workforce each year.

The strategy was decidedly ‘trickle down economics’ as Deng himself
acknowledged: “Let some people get rich first.” Later, Deng would
grouse: “Young leading cadres have risen up by helicopter. They should
really rise step by step.”

As economic momentum increased, foreign businesses invested in China
to take advantage of the growth and rising living standards.
Opportunities encouraged Chinese nationals living, studying and
working overseas to return. As Deng astutely noted: “When our
thousands of Chinese students abroad return home, you will see how
China will transform itself.”

Over time, a novel liquidity system also accelerated growth to
staggering levels.

Liquidity Vortex

Export success created large foreign reserves that now total over $2
trillion. These reserves became the centre of a gigantic lending
scheme where China would finance and thereby boost global trade flows.

Dollars received from exports and foreign investment have to be
exchanged into Renminbi.

In order to maintain the competitiveness of its exporters, China
invests the foreign currency overseas to mitigate upward pressure on
the Renmimbi.

As reserves grew paralleling its growing trade surplus, China invested
heavily in dollars helping to finance America’s large trade and budget
deficits. It is estimated that China has invested around 60-70% of its
$2 trillion reserves in dollar denominated investments, primarily U.S.
Treasury bonds and other high quality securities.

Chinese funds helped keep American interest rates low encouraging
increasing levels of borrowing, especially among consumers. The
increased debt fuelled further consumption and housing and stock
market bubbles that enabled consumers to decrease savings as the
‘paper’ value of investments rose sharply. The consumption fed
increased imports from China creating further outflows of dollars via
the growing trade deficit. The overvalued dollar and an undervalued
Renminbi exacerbated excess U.S. demand for imported goods.

In effect, China was lending the funds used to purchase its goods.
China never got paid, at least until the loan to America was paid off.

The Asian crisis of 1997-98 encouraged China to build even larger
surpluses. Reserves were seen as protection against the destabilising
volatility of short-term foreign capital flows that had almost
destroyed many Asian countries during the crisis.

The substantial build-up of foreign reserves in China and the central
banks of other emerging countries was a liquidity creation scheme. The
arrangements boosted growth and prosperity in China, other emerging
markets and the developed world. Commodity exporters, such as
Australia, benefited significantly from the increased demand for
commodity and the higher prices for resources.

© 2010 Satyajit Das

Satyajit Das is a risk consultant and author of Traders, Guns & Money:
Knowns and Unknowns in the Dazzling World of Derivatives (2006, FT-
Prentice Hall).

China Syndrome Part 2 - Lock & Load

by Satyajit Das

Fall & Rise

In 2007, unsustainable levels of debt in many economies triggered a
near collapse of the global banking system that, in turn, triggered a
major slowdown in growth.

The unprecedented external demand shock, with sharp decreases in
consumption and investment from synchronous deep recessions in the
developed world, affected the Chinese economy. The sudden and
precipitous fall in exports led to a significant slow down in China’s
stellar growth rates in 2008 triggering sharp declines in stock and
property markets.

Job losses in export-intensive Guangdong province were in excess of 20
million migrant workers. Workers and students entering the workforce
were unable to find work. Fearful of social instability, the Beijing
government moved quickly to restore rapid growth.

Panicked government spending and loose monetary policies increasing
available credit is currently driving China’s recovery, contributing
around 75% of China’s growth of around 8-9% in 2009. In the June
quarter, Chinese exports (around 35-40% of the economy) decreased by
around 20% implying that the non-export part of the economy grew
strongly.

In the first half of 2009, new loans totalled over $1 trillion. This
compares to total loans for the full 2008 year of around $600 billion.
Current lending is running at around three times 2008 levels and at a
staggering 25% of China’s GDP.

The availability of credit is fuelling rampant speculation in stocks,
property and commodities. Estimates suggest that around 20-30% of new
bank lending is finding it way into the stock market, driving up
values. The market for initial public offerings for new companies has
recommenced after being closed for six months.

China’s recovery, in turn, underpinned the recovery in commodity
prices and economies dependent on natural resources. In recent
parliamentary testimony, Reserve Bank of Australia Assistant Governor
Philip Lowe highlighted the extent to which Australia, a major trading
partner of China, was reliant on Chinese demand. Lowe noted that 23%
of Australia’s total exports went to China in the most recent quarter,
up from 4% 10 years ago. China now also takes 80% of Australia’s iron
ore exports and 20% of coal exports.

While a significant part of the importation of commodities is
restocking depleted inventory, abundant and low cost bank finance
combined with a deep seated fear of the long term prospects of U.S.
Treasury bonds and the dollar has encouraged speculative stockpiling
artificially boosting demand.

Lock & Load

Government spending and bank loans has resulted in sharp increases in
fixed asset investments (over 30% up on 2008). A major component is
infrastructure spending which accounts for over 70% of the Chinese
government’s stimulus package. In the first half of 2009, investment
accounted of over 80% of growth, approximately double the 43% average
contribution over the last 10 years.

Infrastructure investment is adding to production capacity in a world
with sluggish demand and major over-capacity in many industries. In
the absence of sufficient domestic demand, the production may be
directed into exports increasing the global supply glut and creating
deflationary pressures.

Progress on shifting the emphasis to domestic consumption has been
disappointing. Government incentives, in the form of rebates for
purchases of high value durables such as cars and white goods, has
increased consumption in the short run (up 15% on 2008). But, over the
last 25 years, Chinese consumption has declined from around 50% to its
current levels of 37%.

The current expansion in lending also risks creating China’s own home
grown banking crisis with a rise in non-performing bank loans. The
problems of bad debts from loose lending are not new. In the 1990s,
similar credit expansion led to an increase in bad debts. The big
state-owned Chinese banks had to be substantially recapitalised and
restructured at significant cost to the State in a series of steps
that ended as recently as 2004. Recently regulators have brought
pressure on banks to increase capital ratios to cover the rapid growth
in their loan books.

Chinese bank regulators are concerned that new lending is being used
to finance real estate and stock market speculation rather than
productive purposes. They have moved to try to reduce speculative
lending but it is likely that the central bank will resolutely
maintain its moderately loose monetary policy because of uncertainties
in the external and domestic environment.

On 24 August 2009, Chinese Premier Wen Jiabao was reported as saying:
“China will maintain its stimulative policy stance because the
economy, far from being on solid footing, is facing fresh
difficulties, … Beijing would ensure a sustainable flow of credit and
a ‘reasonably sufficient’ provision of liquidity to support growth…
‘We must clearly see that the foundations of the recovery are not
stable, not solidified and not balanced. We cannot be blindly
optimistic…Therefore, we must maintain continuity and consistency in
macro economic policies, and maintaining stable and quite fast
economic growth remains our top priority. This means we cannot afford
the slightest relaxation or wavering.’”

The centralised control structure of the Chinese economy has allowed
rapid action to be taken to avert the slowdown in growth. In July
2009, Su Ning, Vice Governor of the Chinese Central Bank People’s Bank
of China observed: “… ‘the mind and action’ of all financial
institutions should ‘be as one’ with the government’s goal, and
financial institutions should properly handle the relationship between
supporting the economy’s development and preventing financial risks.”
Even if execution is not in question, the appropriateness of the
policy measures and the sustainability of the recovery are unclear.

There are also concerns that Chinese statistics are unreliable and
frequently manipulated by officials to meet political and personal
objectives. One unexplained and nagging discrepancy is the difference
between reported growth figures and electricity consumption. It is
difficult to reconcile falls in electricity consumption with continued
robust economic growth.

Even China’s state-controlled media has become increasingly sceptical
about the accuracy of statistics. In recent polls, a high percentage
of the population doubted official data.

International commentators have become concerned about the quality of
the economic data. Commenting on the time taken by China’s National
Bureau of Statistics (”NBS”) to compile growth data, Derek Scissors,
from the Washington-based Heritage Foundation, wryly observed:
“Despite starkly limited resources and a dynamic, complex economy, the
state statistical bureau again needed only 15 days to survey the
economic progress of 1.3 billion people.”

The NBS recently launched a campaign - “Statistical Feelings: We have
walked together – Celebrating the 60th anniversary of the founding of
New China” - to increase confidence in its work. The campaign has
already produced memorable slogans and poems. “I’m proud to be a brick
in the statistical building of the republic.” “I can rearrange the
stars in the sky because I have statistics.”

The problems extend to financial information as generally accepted
accounting principles are not generally accepted in China. Writing in
the 17 August 2009 New York Times, Mark Dixon, a mergers and
acquisition advisor in China, expressed surprise that revenue and cost
gymnastics were not included as an official event at the Beijing
Olympics.

Bounding Mines

China’s $2 trillion foreign currency reserves, a large proportion
denominated in dollars, may have limited value. They cannot be
liquidated or mobilised without massive losses because of their sheer
size. Increasingly strident Chinese rhetoric reflects rising concern
about the security of these dollar investments as the U.S. issues
massive amounts of debt reducing the value of Treasury bonds and the
currency.

China’s Premier Wen Jiabao has expressed concern: “If anything goes
wrong in the U.S. financial sector, we are anxious about the safety
and security of Chinese capital…” In December 2008, Wang Qishan, a
Chinese vice-premier, noted: “We hope the US side will take the
necessary measures to stabilise the economy and financial markets as
well as guarantee the safety of China’s assets and investments in the
US.”

Yu Yindong, a former adviser to the Chinese central bank castigated
the U.S. over its “reckless policies”. He asked Timothy Geithner, the
U.S. Treasury Secretary to “show us some arithmetic.” At the
University of Beijing, Mr. Geithner obliged indicating that the U.S.
intended to reduce its budget deficit to 3% of GDP from its current
level of 12% eliciting sceptical laughter from students.

China’s position is similar to that of a bank or investor with poor
quality assets. China is trying to switch its reserves into real
assets – commodities or resource producers where foreign countries
will allow.

In the meantime, China continues to purchase more dollars and U.S.
Treasury bonds to preserve the value of existing holdings in a surreal
logic. On the other side, the U.S. continues to seek to preserve the
status of the dollar as the sole reserve currency in order to enable
the Treasury to finance America’s budget and trade deficit.

Every lender knows Keynes’ famous observation: “If I owe you a pound,
I have a problem; but if I owe you a million, the problem is yours.”
Almost 40 years ago, John Connally, then the U.S. Treasury Secretary,
accurately identified China’s problem: “it may be our currency, but
it’s your problem.”

The Chinese used to refer to dollars affectionately as mei jin,
literally “American gold”. Chinese investments may not be the real
thing – merely iron pyrite, fool’s gold.

China’s position is like that of an unfortunate who has stepped on a
type of anti-personnel mine, known as a ‘bounding mine’. The mine does
not explode when you step on it. Instead, it trips when you step off
it as a small charge propels the body of the mine into the air where
the explosive charge bursts and sprays fragmentation at a height of
around 3 to 4 feet (1 to 1.3 metres). China, in building and investing
its massive foreign exchange reserves in dollars and U.S. Treasury
Bonds, has stepped onto the mine and it cannot step off without
serious damage!

© 2010 Satyajit Das

Satyajit Das is a risk consultant and author of Traders, Guns & Money:
Knowns and Unknowns in the Dazzling World of Derivatives (2006, FT-
Prentice Hall).

China Syndrome Curtain Part 3 - A Future That Was?

by Satyajit Das

The Future That Was

China’s economic model is reminiscent of 17th century mercantilist
policies. Thomas Mun, a Director of the East India Company, in
England’s Treasure by Foreign Trade (1664), wrote that the purpose of
trade was to export more than you imported. At the same time, a
country should amass foreign ‘Treasure’ that would be the basis of
acquiring foreign colonies to allow control of essential natural
resources. The strategy required reducing domestic consumption and
imports and export of goods manufactured with imported foreign raw
materials. China’s strategy coincides almost entirely with Mun’s
views.

China’s mercantilist strategies have important implications for other
developing countries. Chinese investment in and trade with Latin
America and Africa is concentrated on securing access to resources
forcing these nations to specialise in commodities. This reversion to
a 19th century trend may not be compatible with Latin American and
African long term development and stability.

The Chinese economic model may be unsustainable. It relies on global
trade and investment (much of it export related), which together
contribute a high proportion of China’s GDP. This trade entails
importing foreign components that are then reassembled and then
exported. Domestic consumption has been kept low. Treasure has been
built up in the form of domestic savings and trade surpluses.

Recently, China announced that its $2 trillion treasure would be used
to make foreign acquisitions to secure exclusive access to raw
material. The problem is that China’s treasure is already invested in
assets of dubious value and limited liquidity to finance global
consumption.

Chinese Premier Wen Jiabao warned that the Chinese growth was becoming
increasingly “unstable, unbalanced, uncoordinated and ultimately
unsustainable”. That was two years ago! Currently, China may be
aggravating the problems by massive liquidity-driven stimulus to
perpetuate a failed strategy. Speaking at the meeting of the World
Economic Forum in Dalian on 10 September 2009, the Chinese Premier Wen
Jiabao repeated his message from two years ago without signalling any
change in direction: “China’s economic rebound is unstable, unbalanced
and not yet solid. We cannot and will not change the direction of our
policies when the conditions aren’t appropriate.”

There is broad agreement that a key component of the GFC was the
problem of global capital imbalances. A central feature was debt-
funded consumption by the U.S. that allowed 5% of the global
population to constitute 25% of its GDP, 15% of consumption and 48% of
global current account deficit. Japan, China, Germany and the other
savers funded the consumption.

Any lasting solution to the GFC requires this imbalance to be dealt
with. The glib solution requires the U.S. to save more and consume
less and the savers to save less and consume more. The problems in
implementing the solution are considerable. Timothy Geithner’s recent
discussion with Chinese officials, to assure his hosts of the safety
of their investments in dollars and U.S. Treasury Bonds, reveals the
dilemma.

On the one hand, America needs the Chinese to continue and increase
their purchase of U.S. Government debt to finance its fiscal stimulus
and bailouts. On the other hand, America needs China to cut the size
of its current account surplus, boost government spending, encourage
personal consumption and reduce savings. All this should also occur
ideally without any major decline in the value of the dollar or U.S.
Treasury bonds or the need for China to liberalise it currency and
allow internationalisation of the Renminbi.

A cursory look at the respective economies also highlights the
magnitude of the task. Consumption’s contribution to GDP in the U.S.
is 71% while in China it is 37%. Given that the GDP of China is around
$4-5 trillion versus $15 trillion for the U.S. and average income in
China is around 10-15% of U.S. earnings, the difficulty of using
Chinese consumption to drive the global economy becomes apparent.

During the last quarter of century, Chinese savings have risen and
exports have been the engine for growth. Given that a significant
portion of exports is driven ultimately by American and European
buyers, lower global growth and declining consumption creates
significant challenges for China.

Dealing with the global imbalance has not been a high priority in the
various summits global leaders have shuttled to and from.

In March 2009 in advance of schedule G-20 meeting, the Chinese central
bank proposed replacing the US dollar as the international reserve
currency with a new global system controlled by the International
Monetary Fund. In an essay posted on the Peoples’ Bank of China’s
website, Zhou Xiaochuan, the central bank’s governor, argued that
creating a reserve currency “that is disconnected from individual
nations and is able to remain stable in the long run, thus removing
the inherent deficiencies caused by using credit-based national
currencies”. Mr. Zhou wrote: “The outbreak of the [current] crisis and
its slipover to the entire world reflected the inherent
vulnerabilities and systemic risks in the existing international
monetary system.”

The US predictably dismissed the proposal. The Wall Street Journal
argued that: “For all its faults, the dollar is attractive as a
reserve currency because it is the common language of global finance
and trade. In other words, its appeal is proportionate to how many
other market players use it. For decades, the dollar has been a
convenient medium of exchange for everyone from a central bank seeking
to buy US Treasury bonds to a business exporting commodities from
Latin America to Asia.” The unstated reason was the loss of the
ability to finance itself in its own currency would significantly
disadvantage the US.

In July 2009, at the G8 Summit in the earthquake damaged town of
L’Aquila in Italy, Dai Bingguo, Chinese state councillor, was again
openly critical of the dominant role of the U.S. dollar as a global
reserve currency: “We should have a better system for reserve currency
issuance and regulation, so that we can maintain relative stability of
major reserve currencies exchange rates and promote a diversified and
rational international reserve currency system,”

Western leaders expressed concerns about even raising the issue
fearing that discussion of long-term currency issues could undermine
the nascent recovery in markets and economies. Gordon Brown, Britain’s
prime minister, spoke on behalf of the West: “We don’t want to give
the impression that big change is around the corner and the present
arrangements will be destabilised.”

In September 2009, the Americans and Europeans proposed an effort to
tackle global economic imbalances at the G20 summit in Pittsburgh.
Against a background of rising trade tensions, China’s ambassador to
the U.S. Zhou Wenzhong expressed scepticism about the proposals,
seeking focus instead on avoiding protectionism.

Still heavily reliant on exports, China was wary of a global push on
imbalances that would focus of its large trade surplus (which reached
nearly 10 per cent of GDP in 2008). Zhou pointedly blamed the crisis
on “the lack of supervision and abuse of the openness of the market,
very risky levels of leverage and too much speculation.” He proposed
improving global financial supervision, strengthen bank capital and
create global early warning systems to identify threats but resisted
action to address the imbalance.

Ironically, recent modest improvements in the global economy
potentially risked increasing the same imbalances that were one of the
factors that caused the current financial crisis. China’s and the
world’s economic future requires resolving fundamental global
imbalances that lie at the heart of the GFC.

Turning Japanese

China’s problems, to a degree, mirror earlier problems of Japan, its
neighbour and competitor for global influence.

Japan’s export driven model successfully generated strong growth of
10% average in the 1960s, 5% in the 1970s and 4% in the 1980s. This
growth was driven by a number of factors, including an artificially
low exchange Yen rate.

On 22 September 1985, Japan, the U.S., the U. K., Germany and France
signed the Plaza Accord agreeing to depreciate the dollar in relation
to the Japanese Yen and German Deutsche Mark by intervention in
currency markets. The Accord had limited success in reducing the U.S.
trade deficit or helping the American economy out of recession.

The Plaza Accord signalled Japan’s emergence as an important
participant in the international monetary system and global economy.
The effects on the Japanese economy were disastrous.

The stronger Yen triggered a recession in Japan’s export-dependent
economy. In an effort to restart the economy, Japan pursued
expansionary monetary policies that led to the Japanese asset price
bubble that collapsed in 1989. Economic growth fell sharply and Japan
entered an extended period of lower growth and recession, generally
referred to as ‘The Lost Decade’.

In the 1990s, Japan ran massive budget deficits to finance large
public works programs in a largely unsuccessful attempt to stimulate
growth to end the economy’s stagnation. Only structural reforms in the
late 1990’s and early 2000’s restored modest rates of growth. Japan’s
public debt is now approaching 200% of Japan’s GDP.

Significant shifts in economic strategy are now necessary. Chinese
President Hu Jintao recently noted: “From a long-term perspective, it
is necessary to change those models of economic growth that are not
sustainable and to address the underlying problems in member
economies.”

China can try to continue its existing economic strategy, which looks
increasingly difficult. Changing its economic model is also difficult
if it means a slower rate of growth. China’s challenge will be to
learn from and avoid the problems and fate of Japan.

History and cultural issues compound China’s dilemma. The 1842 Treaty
of Nanking entered into at the end of the first Opium War awarded
Britain war reparations, eliminated the Chinese Hong monopoly, set
Chinese exports and imports at a low rate, provided British access to
several Chinese ports and transferred Hong Kong to the English. The
humiliation of the Treaty is deeply etched into China’s dealing with
the West.

China should have heeded the warning of Kang His, emperor of China, on
the British presence at Canton in 1717: “There is cause for
apprehension lest in centuries or millennia to come China may be
endangered by collision with the nations of the West.”

The trade-off between economic and political liberalisation may also
be problematic. As Fang Li, a renowned astro-physicist often called
China’s Andrei Sakharov, remarks in dissident author Ma Jian’s novel
about China “Beijing Coma”: “Without a democratic political system in
place, [China’s] economy will eventually flounder. The people’s wealth
will be eaten up by the corrupt institutions of this one party state.”

There is an apocryphal story about a visiting world leader drawing
back the current of his hotel room to be stunned by the futuristic
skyline of Shanghai’s Pudong Financial District. “How long has this
being going on?” He asked. Today, the question might be: “How long can
this go on?”

© 2010 Satyajit Das

Satyajit Das is a risk consultant and author of Traders, Guns & Money:
Knowns and Unknowns in the Dazzling World of Derivatives (2006, FT-
Prentice Hall).

http://www.bizcast.co.za/2010/02/04/satyajit-das-the-china-syndrome-parts-12-and-3/

...and I am Sid Harth

[chhotemianinshallah]

Toyota May Recall New Prius After Japan Orders Probe Into Brake
Complaints

By Makiko Kitamura and Tetsuya Komatsu

Feb. 4 (Bloomberg) -- Toyota Motor Corp. may recall its new Prius
hybrid model in Japan after the government ordered the company to
investigate brake-related complaints on the car.

“The possibility of a recall is not zero,” spokesman Takanori Yokoi in
Tokyo said today by phone. The company is considering measures that
may include a recall, he said.

A recall of the world’s best-selling hybrid car would bring the crisis
to Toyota’s home market and tarnish the reputation of what President
Akio Toyoda has called the company’s flagship model. The carmaker is
already reeling from recalls approaching 8 million units worldwide due
to cases of unintended acceleration.

“This could be fatal for Toyota,” said Yasuhiro Matsumoto, a Shinsei
Securities Co. analyst in Tokyo. “Toyota’s got a global problem and
it’s not a problem of local suppliers.”

Toyota is examining 77 reports in Japan and eight in North America,
Yokoi said. Driver complaints include brake failure or weaker braking
while driving on bumpy roads, according to a list posted on the Web
site of Japan’s Transport Ministry.

Toyota shares fell as much as 4.7 percent to 3,240 yen in Tokyo, to
the lowest level in almost 11 months.

U.S. Agency

The U.S. National Highway Traffic Safety Administration also has
received a number of complaints about a possible defect, the agency
said yesterday.

“There is a small computer inside the brake and Toyota is making
adjustments and improvements,” Economy Minister Masayuki Naoshima said
yesterday after meeting with Toyota Executive Vice President Shinichi
Sasaki, according to comments broadcast on NHK. “For cars currently
being built at the factory, measures have already been taken.”

Toyota was ordered by Japan’s government to investigate brake-related
problems in August, Shunsuke Miyaoka, an official in the
Transportation Ministry’s recall division, said yesterday. The public
scrutiny in Japan may undermine the company’s efforts to reassure
consumers amid a global recall on other models involving almost 8
million vehicles globally.

“Our dealers have received a lot more complaints, but we are pursuing
the root cause and we will be considering what improvement measures we
will take for our customers,” Sasaki said yesterday in remarks
broadcast on the Fuji News Network.

Toyota’s third-generation Prius, introduced last year, is made in
Japan and was the nation’s top-selling model last year. It is not
among vehicles whose sales were halted in the U.S.

Sasaki also met with Japan’s Transport Minister Seiji Maehara
yesterday, Yokoi said.

Outside Japan

Outside of Japan, the company is recalling at least 7.8 million
vehicles. The carmaker is fixing accelerator pedals on models
including the top-selling Camry and Corolla models.

That recall covers 2.57 million vehicles in the U.S. and Canada. It
also includes 1.71 million in Europe, 80,000 in China, and 180,000 in
Latin America, Africa and the Middle East, Toyota’s Sasaki told
reporters earlier this week.

Separately, Toyota is recalling 5.35 million vehicles in the U.S.,
because of floor mats that could jam pedals. Covered vehicles include
model years 2004-2009 Prius hybrid, 2007-2010 Lexus ES350, 2006-2010
Lexus IS250 and 2006-2010 Lexus IS350. Toyota has said 2.1 million
cars are covered by both safety actions.

To contact the reporter on this story: Makiko Kitamura in Tokyo at
***@bloomberg.net; Tetsuya Komatsu in Tokyo at
***@bloomberg.net

http://www.feedcry.com/archive/aid/550720?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+fulltext%2FBloomberg+%28Bloomberg%29

...and I am Sid Harth

[chhotemianinshallah]

Vietnam Rapid Economic Recovery Attract More Japanese Firms: JETRO
Posted by VBN on Feb 4th, 2010

Vietnam’s economy on the fast recovery is attracting more Japanese
firms, according to an official from the Japan External Trade
Organization (JETRO).

Managing Director of the JETRO Office in Hanoi Yoshida Sakae said,
since mid-2009, his office has received an increasing number of
Japanese companies’ applications for consultancy for new projects in
Vietnam.
Japanese businesses have always considered Vietnam “a firm
manufacturing base and consumption market in the long run,” he added.

The official noted that, powered by Vietnam’s economic recovery,
Japanese companies operating in the country have recovered over 80% of
their production output and many of them are recruiting more laborers.
Sakae said the implementation of the Vietnam-Japan Joint Initiative
would also help increase the number of Japanese projects in the
Southeast Asian nation.

He, however, suggested that Vietnam should continue improving the
quality of human resources and simplifying administrative reforms to
lure more foreign investors.

As of mid-December last year, Japanese companies invested in 1,160
projects worth US$17.81 billion in Vietnam, ranking the fourth among
biggest foreign investors in the country. (vietnamplus)

http://vietnambusiness.asia/vietnam-rapid-economic-recovery-attract-more-japanese-firms-jetro/

Addressing Barriers for FDI Attraction

Posted by VBN on Feb 4th, 2010

The United Nations said the global investment is estimated to reach US
$1.4 trillion in 2010 and US$1.8 trillion in 2011. Of the sum, 4 %
will go to developing countries and this is the opportunity for
Vietnam to attract FDI in the coming year.

The Foreign Investment Agency (FIA) under the Ministry of Planning and
Investment, said: Vietnam will remain a magnet to FDI capital in 2010.
However, to maximise the effectiveness of this investment capital
source, the country needs to overcome the weakness of infrastructure,
improve the legal framework and create favourable conditions for
registered FDI to be disbursed.

In 2010, Vietnam is expected to attract US$22-25 billion of registered
FDI capital. The disbursed capital is estimated to reach US$11
billion, up about 10 % from 2009. In fact, weak infrastructure put a
brake on FDI capital disbursement. In 2008, registered FDI was US$71.7
billion but the actual disbursement was only US$11.5 billion. In 2009,
the values were US$21.48 billion and US$10 billion in 2009,
respectively.

The low %age of FDI capital disbursement distressed many foreign
investors. In 2009, the number of countries investing in Vietnam
plunged. Only four out of 89 countries and territories continued with
their new investment projects in Vietnam in 2009.

According to Mr Dang Xuan Quang, Deputy Director of Investment
Department under the Ministry of Planning and Investment, the
infrastructure systems like electricity, water, traffic, seaport and
other facilities are still very weak. Site clearance still encounters
many difficulties. Although Vietnam has joined the WTO for more than 2
years, it still lacks instructions on conditional investment sector.
According to the law, there are some 70 conditional investment areas
for which there are no instructions.

In fact, in the past time, Vietnam has adopted a number of solutions
to improve the investment environment. Most recently, in the report
submitted to the Prime Minister, the Foreign Investment Agency
proposed eight measures to attract FDI capital, focusing on law and
policy; planning; infrastructure improvement; human resources
management , investment promotion ; with an aim to draw the new wave
of investment when the climate is over.

Creating a healthy business environment and promoting social
advantages are very important for the development of the economy. In
recent years, Vietnam has successfully carried out trade and
investment promotion activities. Economic expert Le Dang Doanh said:
“In 2010, the world economy recovers, Vietnam can expect an increase
in FDI. If Vietnam wants to attract more FDI, it needs to improve the
infrastructure and the investment environment. If the infrastructure
is poor, seaports are incapable, traffic congestions are frequent and
electricity supply is instable, it will be very difficult to attract
investors.”

One of the areas has not attracted much FDI capital is agriculture.
According to the statistics released by the Foreign Investment Agency,
over the past 20 years of enacting FDI attraction policies, the number
of FDI projects in agriculture, forestry and fisheries is very small.
In particular, in 2009, agriculture accounted for less than 1 % of FDI
value injected into Vietnam.

Vietnam is an agricultural country but the investment capital for this
sector is the lowest; thus failing to reflect the potential of this
sector. The main reason is, according to Dang Xuan Quang, the
Vietnamese agricultural production is still small and scattered.
Besides, unguaranteed seedling and techniques also keep foreign
investors away from the agricultural sector. According to the Foreign
Investment Agency, out of 839 FDI projects with registered capital of
US$21.48 billion in 2009, only 16 investment projects with a
registered capital of US$84.9 million were involved in agriculture,
forestry and fisheries.

Mr Do Duc Dinh, Director of Vietnam Socioeconomic Research Centre,
said: The agricultural sector of Vietnam has a lot of potential. To
attract foreign capital, Vietnam needs to have the land fund large
enough to implement key agricultural and hi-tech projects, create
favourable conditions in policy and tax for agricultural investors.

http://vietnambusiness.asia/addressing-barriers-for-fdi-attraction/

Confidence returns among investors: VAM chairman

Posted by VBN on Feb 4th, 2010

The executive chairman of Vietnam Asset Management Ltd. (VAM) said
investors’ confidence has swung back in tandem with strong hopes for
Vietnam’s higher economic growth and recovery of the global economy
this year.

John Lyn shared the point with the Daily after he made a presentation
on Vietnam’s outlook for 2010 at a business luncheon, which was
organized by the Malaysian Business Chamber (MBC) in Vietnam in HCMC
on Tuesday.

Lyn underlined the reality of more liquidity in the market despite
concern over inflation in Vietnam and elsewhere in the world. “People
are earning more money and say where they are investing right now.”

Confidence has come back after a period of time when investors had
experienced years of greed and fears with the world’s unexpected
economic growth and then downturn over the past years.

Lyn said most investors psychologically wanted to do better in making
money. “Sometimes, there’s greed that you want to double your money
quickly and at the same time there’s fear because you can lose you
your money too.

“I mean if you want higher returns, you take higher risks,” Lyn said.
He pointed out speculation on the stock and property markets as a
typical case of greed, but stressed the equity market was now okay
while the property market has recovered slightly.

In all, Lyn said the world’s improving economy backed the return of
investors’ confidence in Vietnam and there was more money put in the
market. “Confidence comes back because the whole world’s economy is
improving.”

He noted companies would expand business and have more money to invest
in factories when they got more orders from the United States if this
world’s biggest economy improved.

What Lyn said was supported by the Foreign Investment Agency’s figures
that Vietnam attracted combined foreign direct investment capital of US
$318 million in the first month of 2010, a whopping increase of 71.9%
year-on-year.

Talking about Vietnam’s prospects in 2010 and beyond, Lyn predicted a
good future for the industries linked to consumer goods, agriculture,
food and durable goods.

Shimi Sumathi Muthu Kunju, president of the Malaysian Business Chamber
(MBC) in Vietnam, said what Lyn talked about the investment
opportunities was true. She said her 18 years of living and doing
business in Vietnam showed that there was plenty of promising
industries for foreign companies to invest in.

Kunju called for investors to look for the opportunities beyond
infrastructure development, in the other areas including food
processing. “Food is so important to Vietnam and the world too… Areas
are still abundant for you to invest and produce things.”

Kunju told the Daily that she was confident in better growth of
Vietnam and had always asked Malaysian investors and others she met to
come in this market to stay long rather than wanting to make fast
money.

“I keep telling people if you want to invest or you want to get to
know what the Vietnamese market is, come in for a long term. That’s
always my advice and I still keep saying the same,” Kunju said.

Lyn told the business luncheon that Vietnam was a true emerging
market. He depicted a general good picture of Vietnam’s economy coming
back to high growth of between 6% and 7% this year, from the 5.32%
last year, and said that most of the world’s economies in Asia and
elsewhere were improving.

“We cannot look at Vietnam in isolation. Although there’s a very
strong demand here, it is still linked internationally,” Lyn said.

VietNamNet/SGT

http://vietnambusiness.asia/confidence-returns-among-investors-vam-chairman/

Vietnam Rapid Economic Recovery Attract More Japanese Firms: JETRO
Posted by VBN on Feb 4th, 2010

Vietnam’s economy on the fast recovery is attracting more Japanese
firms, according to an official from the Japan External Trade
Organization (JETRO).

Managing Director of the JETRO Office in Hanoi Yoshida Sakae said,
since mid-2009, his office has received an increasing number of
Japanese companies’ applications for consultancy for new projects in
Vietnam.
Japanese businesses have always considered Vietnam “a firm
manufacturing base and consumption market in the long run,” he added.

The official noted that, powered by Vietnam’s economic recovery,
Japanese companies operating in the country have recovered over 80% of
their production output and many of them are recruiting more laborers.
Sakae said the implementation of the Vietnam-Japan Joint Initiative
would also help increase the number of Japanese projects in the
Southeast Asian nation.

He, however, suggested that Vietnam should continue improving the
quality of human resources and simplifying administrative reforms to
lure more foreign investors.

As of mid-December last year, Japanese companies invested in 1,160
projects worth US$17.81 billion in Vietnam, ranking the fourth among
biggest foreign investors in the country. (vietnamplus)

http://vietnambusiness.asia/vietnam-rapid-economic-recovery-attract-more-japanese-firms-jetro/

...and I am Sid Harth

[chhotemianinshallah]

Will Japan’s new economic growth strategy deliver?
February 4th, 2010

Author: Aurelia George Mulgan, ***@ADFA

On 30th December last year, the Hatoyama government launched its ‘New
Growth Strategy’ (Basic Policies). It was produced by the National
Policy Unit, or NPU (Kokka Senryaku Shitsu) as an interim strategy
with the final version to be compiled by June this year.

Prime Minister Hatoyama admitted in early December that the NPU was
‘dysfunctional’ because of a shortage of staff, but it nevertheless
produced the ‘New Growth Strategy’ in only two weeks. The NPU meeting
to decide on the strategy consisted of the prime minister, deputy
prime minister, chief cabinet secretary and all the government
ministers, as well as ‘team support’ from seven DPJ Lower House Diet
members. The former MIAC administrative vice-minister-turned deputy
chief cabinet secretary also participated.

Subtitled ‘Toward a Radiant Japan’, the 29-page document immediately
brings to mind former LDP Prime Minister Abe’s 2006 book entitled
Towards a Beautiful Country, and ex-LDP politician, Takemura
Masayoshi’s 1994 book, Japan: A Small but Shining Country.

The elevated prose does not stop at the subtitle. The strategy is
replete with the international language of strategic planning
fashionable amongst governments, which conveniently ignores the day-to-
day economic realities and hard choices that have to be made in actual
decision-making. This is despite the strategy’s espousal of the trendy
‘Plan-Do-Check-Action’ (PDCA) cycle to evaluate and verify the extent
to which its policy goals have been attained. The main function of
such strategic ‘management speak’ appears to be as political rhetoric,
not as an actual guide to action. The major growth targets the
strategy incorporates are so distant (over 10 years or by 2020) that
the DPJ will be absolved from any accountability in not achieving
them.

The document represents a more detailed elaboration of the DPJ’s
stated policy of demand-led growth, which it pretentiously (and not
originally) describes as a ‘third way’, as opposed to the LDP’s ‘first
way’ (dependence on public works) and ‘second way’ (market
fundamentalism – a reference to Prime Minister Koizumi’s structural
reforms).

The new strategy promises over ¥100 trillion in demand-led growth in
three key sectors – environment, health and tourism – and the creation
of 4.76 million extra jobs. It anticipates an increase in the average
annual economic growth rate to more than 3 per cent in nominal terms
(and more than 2 per cent in real terms) over the next 10 years until
2020. An editorial in the Nikkei, however, notes that ‘Japan’s
potential economic growth capacity has fallen to just around 0.5 per
cent a year. To make 2 per cent real economic growth a reality, more
than just the creation of new demand must be accomplished – industry
must also be transformed to spur competition and boost productivity’.
This means significant deregulation in the tourism (airlines), health
(medical care) and energy (electric power) sectors.

A major disconnect in the document lies between ends and means: the
2020 ‘goals’ and the ‘measures’ outlined to achieve them. For example,
the strategy talks about ‘Opening New Frontiers’ in ‘Asia and in
Tourism and Local Revitalisation’. The ‘Asia’ targets are:

- the creation of an APEC FTAAP (Free Trade Area of the Asia-Pacific)
- a doubling of the flow of people, goods and money
- a doubling of incomes in Asia
The principal means (i.e. measures) to achieve these goals are:

- the establishment of international safety standards together with
Asian countries
- building infrastructure in Asia in areas like rail transport, water
supply and energy
- making Haneda Airport a 24-hr international hub facility
- carrying out the strategic development of ports

It would take a giant leap of faith to believe that these proposed
measures could actually deliver on the targeted goals.

Other goals are simply unrealistic.

Increasing food self-sufficiency to 50 per cent on a calorie basis
(from the present level of 39 per cent) under the broad heading of
‘Tourism and Local Revitalisation’ is an objective that has proved
elusive for two decades despite continuing agricultural subsidies and
protection. The present target is 45 per cent by 2015.

Achieving the 50 per cent rate would need, amongst other things, a
complete reversal of several current trends: declining rice
consumption, agricultural productivity, area of cultivated land and
agricultural workforce. The 50 per cent food self-sufficiency rate
also sits uneasily alongside the APEC Free Trade goal, given the
increased levels of farm support and protection it would need for the
goal to be achieved. In practice the free trade goal is far enough off
for it not to place any immediate pressures on the Hatoyama government
for agricultural trade liberalisation.

The New Growth Strategy also smacks of LDP-style pork-barrelling,
namely the statement that ‘we will identify public infrastructure
including airports and ports that can be Japanese dynamos open to the
world and will invest intensively in them’. As economic journalist
Machida Tetsu points out, there are already 100 airports in Japan,
many of which previous LDP governments wasted money on constructing
and which are now in the red. In his view, the growth strategy is
redolent of the kind of easy pork barrel spending that will inevitably
increase taxpayer and corporate tax burdens. The strategy also refers
to ‘Revitalising forests and the forestry industry through road
network improvement, etc.’. Building forest roads was a favoured area
of public works construction under the LDP as was port development.

Machida also points out that the strategy takes no account of and has
not been coordinated with the independently produced growth strategies
being drawn up in the Ministry of Economy Trade (METI) and Industry;
Ministry of Internal Affairs and Communications (MIAC) and Ministry of
Land, Infrastructure, Transport and Tourism (MLIT). MIAC’s ‘Haraguchi
Vision’, for example, came out prior to the NPU document and is a far
superior strategy in terms of concrete implementation plans and
timetables. Machida concludes that the government’s strategy reflects
both Hatoyama’s lack of leadership and coordination ability.

To me, it brings to mind a comment made by Australia’s leader of the
opposition – Tony Abbott – about Prime Minister Rudd’s government: ‘it
over-promises and under-delivers’. The Hatoyama administration would
need to take immediate, concrete steps to implement its strategic
goals to make them credible.

http://www.eastasiaforum.org/2010/02/04/will-japans-new-economic-growth-strategy-deliver/

4th February 20102010:

The Best of Times or the Worst?
posted in Robert Kiyosaki |

Is the recession over? Are happy days really here again? Paraphrasing
Dickens, my answer is, “For people who are prepared, 2010 will be the
best of times. For many, 2010 will be the worst of times.”

The following are a few of my predictions and reasons behind them…

Prediction #1: The real estate market will crash again.

Pictured above is a graph of mortgage resets. In simple terms, a
mortgage reset is when a mortgage comes due. In normal times,
refinancing was a simple process…but these are not normal times. Some
points of interest:

1. In September 2008, the mortgage resets hit $35 billion that
month. That was the exact time the financial crisis hit. When people
could not afford to refinance and began to default, the stock market
and banking industry crashed.

2. The eye of the storm: In the summer of 2009 mortgage resets were
low — around $15 billion a month. This is when optimists began to see
“green shoots” in the economy. The green shoots were the eye of the
storm. In 2010, as I see it, the second half of the financial
hurricane hits. By late 2011, the resets climb to nearly $40 billion a
month. The storm will not end until 2012.

3. The first half of the storm was primarily due to subprime
defaults. The second half of the storm will hit more solid homeowners.
The question is, can they weather the storm? Will Mac Mansion
foreclosures be next?

4. In America, there are over 40 million people who own more than two
homes. Can they afford to carry and refinance two or more mortgages?

5. Since home values have gone down, many homeowners will find they
owe more than their home(s) are worth. Will the bank be kind to them?

6. The time for using your home as an ATM is over. This is crushing
retailers and retail real estate. Shopping centers are in trouble.
Strip malls are empyting as shopkeepers close — permanently. This will
lead to the crash of the office, warehouse, and other commercial
properties.

My prediction: Obviously these are the best of times if you are a
buyer of distressed properties and the worst of times if you are a
seller.

Other things I am watching for in 2010:

1. Will China crash? America’s crash has hit China in the gut. The
Chinese are laying off millions of workers. Only massive government
bailout is keeping the economy afloat. The Chinese boom will
eventually go bust…but will it bust in 2010? Only time will tell.

2. When America stopped importing from China, China stopped importing
from the rest of the world. This affects Asian countries as well as
Australia, Brazil, and other suppliers of raw materials.

3. Fed Chairman Ben Bernanke is replacing toxic debt with new debt.
By protecting his friends in the mega-banks, he is turning the U.S.
into a zombie nation. The recession is over, but America is entering
an era we will be calling The New Depression, a period when the rich
become extremely rich but everyone else becomes poorer. Taxes will
kill anyone working for a paycheck.

4. The U.S. dollar will grow weaker. If the dollar strengthens, we
will have more unemployment because our goods become too expensive and
we will export less.

5. The deficit will increase. The bailouts for the rich are killing
the economy.

6. Israel may attack Iran. Israel will not tolerate Iran developing
nuclear power, even if Iran claims it is for peaceful purposes. If
there is an attack, oil prices will go through the roof.

7. Dead cat bounce. The current stock market rally will probably turn
into a dead cat bounce. If the Dow drops below 6500, 5,000 may be the
next stop.

The Best of Times

I know I sound painfully pessimistic. I know my predictions are bad
news for most people. Yet, for others, bad news is good news.

The following are the bright spots for people who are prepared.

Prediction #2: Gold, silver, and oil will continue to be safe
investments in 2010.

The following recaps the year-end prices of gold and silver:

YEAR GOLD
SILVER
2000 $ 273 $ 4.57
2001 $ 279 $ 4.57
2002 $ 348 $
4.78
2003 $ 416 $ 5.92
2004 $ 438 $ 6.79
2005 $ 518 $ 8.80
2006 $ 638 $12.78
2007 $ 838 $14.77
2008 $ 882 $11.33
2009 $1100 (approx) $17.50 (approx)

In 2009, the Dow rose approximately 18%. Gold rose approximately 25%.
Silver rose approximately 50%.

By the end of 2010, I predict gold will be at $1,775 an ounce, silver
at $24 an ounce, and oil at $85 a barrel. If Israel attacks Iran,
these predictions will be blown away.

Prediction #3: The next market to crash will be commercial real
estate.

Cash flow positive real estate will be even more affordable. 2010
through 2012 will be a real estate buffet for those with cash and
access to credit.

My Personal Investments

As I stated in 2002, “You have up to the year 2010 to become
prepared.”

The following are things I have done to prepare myself:

1. I started The Rich Dad Company in 1997 because I saw this crisis
coming. For the past three years, I have tightened internal controls
and prepared for global expansion via a franchise distribution system.
The company is debt free with strong income.

2. 2009 was my best real estate year to date. With the Fed handing
out large sums of money and pension funds looking for projects to
invest in, my real estate holding company has acquired tens of
millions of dollars for acquisition of bankrupt properties and
development projects. Development projects are affordable again, as
labor, material, and land costs are low and the government is generous
with 40-year, low interest, non-recourse loans. People still need a
roof over their heads.

3. My oil development projects have done well. We drilled three wells
and hit oil on two of them. Government tax breaks for oil exploration
remain generous, even for dry holes. Even if the economy crashes, we
will still burn oil.

4. I took 90% of my money out of the stock market in 2007. If the Fed
raises interest rates, the stock market and real estate market will
collapse.

5. I loaded up on gold and silver between 1996 and 2004.

6. With the Fed printing trillions of dollars, cash is trash and
savers are losers. As soon as I have excess cash I invest in oil, real
estate, gold, and silver.

7. In a zero-interest-rate environment, debtors are winners…but only
if you have good debt…debt that’s paid by tenants.

In Conclusion

A few years ago, Japan was ‘King of the Financial World.’ Japan’s
economy was the world’s second largest economy — till the bubble burst
in 1990. Japan’s budget went into deficit in 1993. Since then, the
deficit has averaged 5.4 percent of GDP per year. As a result,
Japanese government debt is now 200 percentof GDP today. The U.S. is
following Japan, and China will follow the U.S.

We will not see much inflation because the Fed is not able to print
enough money to replace the losses from the burst of the credit
bubble. Also, factories have too much excess capacity due to lack of
demand, which means prices for consumer goods will remain low and
unemployment will remain high. Instead, we will see inflation in gold,
silver, oil, some stocks, some real estate sectors, and food — not
because values are going up but because the dollar is going down.

Welcome to The New Depression. And may these times be the best of
times for you.

http://www.richdadwisdom.com/2010/02/2010-the-best-of-times-or-the-worst/

Just who DO we trust?
February 3, 2010, 5:34PM

A hallmark in my world of anti-accomplishment, I finally got around to
seeing "Rising Sun," an early '90s crime thriller. The only reason I
give a damn is that long ago I shared a saloon table with a gal who'd
just seen it on the big screen and came away absolutely convinced of
its insight and canniness not only toward our economic future, but
that future's physical face.

With assured arrogance, and trendy anti-American disdain, she detailed
how, in a tomorrow not far away, we'd all be turning Japanese.
(Apologies to the The Vapors.)

I know movies are impressive - big, colorful, engineered to take us by
surprise and lead us to unexpected places. But her prattle was
ridiculous. It was as if "Rising Sun" - a movie, after all - had
allowed her a secret aperture to the coming paradigm, one overseen by
insistant Lords of Commerce hailing from shores more Eastern. Finally
seeing the movie, free on the Fox Movie Channel last night, I
understand the grounds for her delusion.

This movie has two things going for it: Wesley Snipes, vital and
charismatic before his career went all vampire-zombie, and Sean
Connery, who's always a welcome presence. Connery's cop character is
evidently Japan's roving ambassador of ass-kissing adoration.
Infuriatingly smug and omniscient, he's there not so much to
investigate the central murder as tell us all, through Snipes'
chronically fascinated everyman, just how wildly superior are Japanese
culture and business practices compared to hick-town U.S.A. They will
RULE THE WORLD in Toyotas, listening to Sony's, wearing expensive
Kenzo cologne. Hmm.

This extreme, in-our-face Nipponophilia obviously sourced from the
late Michael Crichton, who helped adapt the screenplay from his novel;
guess some Tokyo visits impressed him or maybe he was a big Atari fan.
Now... Crichton was a doctor and attorney. He made movies. He wrote
bestseller after bestseller - not one of them above the quality of
potboiler, but moneymakers all. Unless you're a mountain-climbing
Nobel-Prize winner and potential Antichrist married to a supermodel
who herself cured cancer, he was a daunting overachiever. But psychic?
Seer? Prophet of the socioeconomic future? Well... in that capacity,
he flopped. Badly. "Rising Sun" was released in 1993, the year Japan's
economy plunged into a 10-year economic tank from which it still
hasn't fully recovered. In that time, South Korea, China, even Taiwan
have emerged as the Asian powerhouses - and, in the region as well as
globally, are stiff competition for the sons of heaven. So it goes.

(Lemme put on my movie-critic hat for a moment: Aside from all the
'future shock' nonsense, the murder mystery itself is pinned to vast,
vast conspiracies run by deep-pockets Japanese corporations on the
American west coast. Any plot inconsistencies or unbelievable
coincidences are written off to the nefarious puppet-masters
controlling everything but jackrabbit population. Mighty convenient
for lazy film-makers, but for viewers, it proves turgid, routine
stuff. "Rising Sun" is ridiculous and unbelievable; even the car
chases are lame.

Another cuh-reepy element: The main murder at issue takes place during
a session of conference-table fornication; it's all recorded on video
disk and during the course of the investigation, we're "treated" to it
about 37 times. Can we say "voyeuristic"? A little! That's probably no
accident, since Crichton wrote a low-budget independent about that
very subject in the early '70s called "Extreme Close-Up". It was a...
thing... with him... evidently. If it's not your own particular
fetish, you'll feel your skin begin to crawl. I've got some vomitous
quirks of my own, but my hide just about peeled off my musculature.)

The American movie industry invented the industry, and from Edison's
Blackhawk Studios in Jersey to today's enfant terribles, did and does
dominate cinema entertainment globally. As such, Hollywood is part of
the Great Noise, the American media machine. This conglomeration of
news, entertainment - even sports and commercials - has become our
cultural guidepost, especially in the last century, when film added
sensual enticement in the dark, and television washed into our homes.
It's not hard to consider it taking over our perceptions, if not our
lives. It's pervasive, inescapable. We depend on it. Maybe too much.

Today, the news end of this titanosaur is all abuzz with reports from
all our intelligence agencies - all of 'em - that an al Qaeda attack
is "certain" within six months. CERTAIN! Mice!

It was all over the radio as I hustled my robust li'l PT Cruiser - a
lame, plastic Wii paddle of a car affording only vicarious driving
capability - through late drunks and early drudges on the 101. OK! I'm
already scared shitless! What else can they throw at me? I'm almost
glad I wasn't home, sick in bed (should'a been), because I knew I'd be
spending most of the day with MSNBC and CNN and they'd be scouring
every nook and cranny of this report's porous (flaky?) surface,
endlessly cutting between talking head experts passionately arguing
that we're in this long, long war on terror forever. FOREVER! Mice!

It's all amorphous. Nobody knows when the attack will come or in what
form the lethal agent will be - gunman or radiological "dirty bomb".
In a way, it's reminiscent of those History Channel Nostradamus shows,
where at least someone interviewed will spout that he or she got a
mysterious email in early 2001 about tall buildings, airplanes and
terror but... uh... they don't have the message now 'cause they didn't
recognize it's significance. About then, I'm always jolted by the
screeching sirens of my oversensitzed BULLSHIT detectors.

But we can be absolutely sure this story will be exhaustively covered.
Unlike others. Early last week, after months of silence and so
deliberately ignored it may well have been Michelle Triola Marvin's
post-palimony career, the anthrax case surfaced again. In a very good,
very sobering little op ed in the Washington Post, Edward Jay Epstein
destroyed the key piece of evidence suposedly implicating Dr. Bruce
Ivins, convicted in death by the FBI as the killer who committed the
late-2001 biological attacks through the nation's mail system.

Silicon was used in the 1960s to weaponize anthrax. Through an
elaborate process, anthrax spores were coated with the substance to
prevent them from clinging together so as to create a lethal aerosol.
But since weaponization was banned by international treaties, research
anthrax no longer contains silicon, and the flask at Fort Detrick
contained none. Yet the anthrax grown from it had silicon, according
to the U.S. Armed Forces Institute of Pathology. This silicon
explained why, when the letters to Sens. Leahy and Daschle were
opened, the anthrax vaporized into an aerosol. If so, then somehow
silicon was added to the anthrax. But Ivins, no matter how weird he
may have been, had neither the set of skills nor the means to attach
silicon to anthrax spores.

The FBI, in the 18 months since Ivins committed suicide, has
maintained he was the only perp in the case, and that he was the only
one with access to the anthrax. This is significant because, now,
we're left with only one piece of evidence against Ivins - his own
suicide. But we must keep in mind that the put-upon man, fragile to
begin with, had been relentlessly hounded by the agency, that his
friends and family had been chipped away from him by lawmen who'd
apparently already convicted him of the crimes.

In other words: We got nothing. It's back to square-one.

Expectedly, this has caused nary a ripple in the media-at-large. The
news industry helped render a guilty verdict in absentia for this
public enemy. It has, in all those months since, rested its case.

The anthrax attacks, killing five people and coming but weeks after
9/11, seemed to confirm what was already current in the Bush
Administration and its media acolytes: That Saddam Hussein was behind
this outrage, as he helped Mohammed Atta with his infamies. The only
conclusion possible was that unless this madman of Iraq was stopped,
he'd soon add nuclear weapons to his chemical/biological arsenal...
and radioactive cumulous would boil up from our cities.

As we sadly learned after invading and occupying Iraq, it was all
hogwash. In a pathetic postscript to all this garbage, last week
Saddam's cousin and "dirty war" specialist, Ali Hassan al-Majid, known
to freedom-loving peoples as "Chemical Ali" was executed in Iraq in
what probably was a legalized lynching as repellantly ugly as that of
Saddam himself three years ago.

But this cannot be overemphasized: For the interests, public and
private, who wanted to invade Iraq and begin the neoconservative
template for across-the-board regime change of Muslim nations
throughout the Middle East, the anthrax attacks were godsend.

Over at Antiwar.com, Justin Raimondo has another relentlessly
overlooked morsel, this time a detail about the Christmas Day panty
bomber. Seems a witness said Abdul Farouk Abdulmutallab was
accompanied to the airport by a well-dressed older guy who helped get
Abdulmutallab on the plane, telling an airport attendant "we do this
all the time". The witness, Kurt Haskell, then was snubbed by
investigators and even told by MSNBC that his story was nothing more
than an urban legend. Then other witnesses came forward to confirm his
account, and ABC News now reports Haskell's story is verified, in a
backhanded way, by investigators.

It doesn't bug me that Haskell's story didn't stick at first with
lawmen - or so they said. I've given up getting straight word from our
security and intelligence apparatus; they gave up issuing explanations
when the Sheriff of Nottingham approach to law enforcement was
revived. What really bothers me is the media's behavior. There was a
time when reporters would smell blood in the water around something
like this, and be all over it. Now, with a media as kiss-ass and
mewlish to authority as the old Soviet-era Pravda - nothing. Daddy say
'drop', we drop.

You'd think magazines like Vanity Fair, or the New Yorker, would jump
on live-wire anomalies like this, or the Sibel Edmonds allegations
about Rep. Jan Schakowsky having a lesbian affair with a Turkish
secret agent - something that sounds straight from the plot of a '70s
drive-in movie. It's been a year and a half since Ivins' suicide.
And... nothing. Maybe all the questions about these muffled tales are
"urban legends". Will they be verified and revived in the future...
long after it's too late?

Just how useless is our media?

Maybe this all to soften us up. Maybe, soon, our 3-D, stereo media
will offer us a video-game reality, not real, but much more
satisfying. We won't have to avert our eyes at the starving and the
burned, for the forgotten and tormented. We'll believe them when they
tell us it's all just a movie. But like "Rising Sun", sometimes movies
let us down.

They're like... fiction, y'know.

http://tpmcafe.talkingpointsmemo.com/talk/blogs/s/a/san_fernando_curt/2010/02/just-who-do-we-trust.php

Born in Japan, but ordered out

By Blaine Harden
Sunday, January 17, 2010; A20

TOKYO -- Fida Khan, a gangly 14-year-old, told the court that
immigration authorities should not deport him and his family merely
because his foreign-born parents lacked proper visas when they came to
Japan more than 20 years ago.

During the past two decades, his Pakistani father and Filipino mother
have held steady jobs, raised children, paid taxes and have never been
in trouble with the law.

"I have the right to do my best to become a person who can contribute
to this society," Fida told a Tokyo district court in Japanese, the
only language he speaks.

But the court ruled last year that Fida has no right to stay in the
country where he was born. Unless a higher court or the Minister of
Justice intervenes, a deportation order will soon split the Khan
family, sending the father, Waqar Hassan Khan, back to Pakistan, while
dispatching Fida and his sister Fatima, 7, to the Philippines with
their mother, Jennette.

Aggressive enforcement of Japanese immigration laws has increased in
recent years as the country's economy has floundered and the need for
cheap foreign labor has fallen.

Nationality in Japan is based on blood and parentage, not place of
birth. This island nation was closed to the outside world until the
1850s, when U.S. warships forced it to open up to trade. Wariness of
foreigners remains a potent political force, one that politicians dare
not ignore, especially when the economy is weak.

As a result, the number of illegal immigrants has been slashed, often
by deportation, from 300,000 in 1995 to just 130,000, a minuscule
number in comparison to other rich countries. The United States, whose
population is 2 1/2 times that of Japan's, has about 90 times as many
illegal immigrants (11.6 million).

Among highly developed countries, Japan also ranks near the bottom in
the percentage of legal foreign residents. Just 1.7 percent are
foreign or foreign-born, compared with about 12 percent in the United
States. Japan held a pivotal election last year and voters tossed out
a party that had ruled for nearly 50 years. But the winner, the
Democratic Party of Japan, has so far done nothing to alter
immigration policy.

That policy, in a country running low on working-age people, is
helping to push Japan off a demographic cliff. It already has fewer
children and more elderly as a percentage of its population than any
country in recorded history. If trends continue, the population of 127
million will shrink by a third in 50 years and by two-thirds in a
century. By 2060, Japan will have two retirees for every three workers
-- a ratio that will weaken and perhaps wreck pension and health-care
systems.

These dismal numbers upset Masaki Tsuchiya, who manages a Tokyo
welding company that for seven years has employed Waqar Khan.

"If Khan is deported, it will not be possible to find anyone like him,
as many Japanese workers have lost their hungriness," said Tsuchiya,
who has urged Japanese immigration officials to rescind the
deportation order for the Khan family. "When the Japanese population
is declining, I believe our society has to think more seriously about
immigration."

At the Ministry of Justice, immigration officials say they are simply
carrying out rules politicians make. The rules, though, are not
particularly precise. They grant wide leeway to bureaucrats to use
their own discretion in deciding who stays and who gets deported. Last
year, immigration officials granted "special permits" to 8,500
undocumented foreigners, with about 65 percent of them going to those
who had married a Japanese citizen.

Exercising their discretion under the law, immigration authorities
last year offered Noriko Calderon, 13, the wrenching choice of living
with her parents or living in her homeland. The girl, who was born and
educated in the Tokyo suburbs, could stay in Japan, the government
ruled. But she had to say goodbye to her Filipino mother and father,
who were deported after living illegally in Japan for 16 years.
Following tearful goodbyes at a Tokyo airport, Noriko remained in
Japan with an aunt.

Japan's growing need for working-age immigrants has not gone unnoticed
by senior leaders in government and business. Slightly relaxed rules
have admitted skilled professionals and guest workers. The number of
legal foreign residents reached an all-time high of 2.2 million at the
end of 2008, with Chinese accounting for the largest group, followed
by Koreans, Brazilians (mostly of Japanese descent) and Filipinos.

Still, experts say these numbers are far too low to head off
significant economic contraction. A group of 80 politicians said last
year that the country needs 10 million immigrants by 2050. Japan's
largest business federation called for 15 million, saying: "We cannot
wait any longer to aggressively welcome necessary personnel."

Yet the treatment of foreign workers already in Japan is
unpredictable. The government opened service centers last year to help
foreign workers who lost their jobs to recession. For the first time,
it offered them free language training, along with classes on social
integration. As that program got underway, however, the government
began giving money -- about $12,000 for a family of four -- to foreign
workers, if they agreed to go home immediately and never come back to
work.

The Khan family's troubles began two years, when a policeman nabbed
Waqar Khan on his way home from work. He was detained for nine months.
Police in Japan often stop foreign-looking people on the street and
ask for residency documents.

The letter of the law was clearly against Khan and his wife. He had
overstayed a 15-day tourist visa by 20 years. She came into the
country on a forged passport.

But they have refused to sign deportation documents, arguing that
although their papers are bad, their behavior as foreigners has been
exemplary. Under Japanese law, foreigners are eligible to become
naturalized citizens if they have lived in the country for more than
five years, have good behavior and are self-sufficient.

The Khans also argue that their children, who regard themselves as
Japanese, are assets for Japan. "It is a bit weird that the country
needs children, but it is saying to us, go away," Khan said.

The family's lawyer, Gen'ichi Yamaguchi, has tried -- and so far
failed -- to convince immigration officials and judges that the Khans
are just the sort of hardworking, Japanese-speaking immigrants that
the country should embrace for the sake of its own future.

"During the bubble years, the number of illegal workers increased a
lot and the police looked the other way," Yamaguchi said. "Japan has
always looked at immigrants as cheap but disposable labor."

An appeals court is scheduled to rule on the Khan case in the first
week of February.

Special correspondent Akiko Yamamoto contributed to this report.

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/16/AR2010011602639_Comments.html

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/16/AR2010011602639_pf.html

...and I am Sid Harth

[chhotemianinshallah]

Booming Chinese economy snaps at Japan's heels DANIEL ROOK
January 21, 2010

China appears to be on the brink of overtaking beleaguered Japan as
the world's second-biggest economy after another blistering
performance in 2009, analysts said Thursday.

Asia's two biggest economies look to have ended 2009 in a tight race
but China, which grew 8.7 percent last year, is soon expected to
unseat its neighbour from the position it has held for more than 40
years.

"It may have already overtaken Japan in 2009 and, if not, is likely to
do so this year," said Brian Jackson, a senior strategist at Royal
Bank of Canada in Hong Kong.

China on Thursday reported nominal -- unadjusted for inflation --
gross domestic product (GDP) for 2009 of 33.5 trillion yuan, or 4.9
trillion US dollars at today's exchange rates.

Japan posted nominal GDP of about 505.1 trillion yen, or 5.5 trillion
US dollars, in 2008 and its economy is expected to have shrunk by
roughly six percent last year, reducing the figure to about 5.2
trillion US dollars.

"If you look at nominal figures, the Japanese and Chinese economies
are now very close to each other in size," said Yoshikiyo Shimamine,
chief economist at Daiichi Life Research Institute in Tokyo.

Japan is scheduled to release its 2009 GDP figures on February 15.

With China expected to post another year of strong growth in 2010,
Japan seems likely to end this year in third place worldwide as it
struggles to cope with renewed deflation and a shrinking population,
experts said.

China returned to double-digit growth in the fourth quarter of 2009
with a red-hot expansion of 10.7 percent.

Without China's boom, Japan's economy would be even more sluggish
given that the two are major trading partners, analysts said.

Comparisons between the two countries are complicated by exchange rate
fluctuations. If the yen weakens further, that could hasten China's
ascent to world's number two behind the United States.

And China could overtake the United States as early as 2020,
PriceWaterhouseCoopers said in a report Thursday, underlining the
"seismic change" in global economic power.

By 2030, India could also take third spot to relegate Japan to fourth,
the business consultancy said.

But in terms of per capita GDP, China -- with a population of more
than 1.3 billion people -- trails far behind Japan, with about 128
million.

On this basis, China ranked 104th in the world in 2008 with nominal
GDP per person of 3,259 US dollars, while Japan was 23rd at 38,457 US
dollars, according to the International Monetary Fund. Luxembourg was
top with 113,044 US dollars.

Japan's economy staged a stunning recovery from the ashes of World War
II and in the 1980s it was widely predicted to outstrip the United
States.

But it suffered a decade of stagnation after an asset price bubble
burst in the early 1990s.

The country plunged back into recession in 2008 as its exports
collapsed due to a severe global downturn.

It returned to growth in the second quarter of 2009, exiting a year-
long downturn. But the recovery remains fragile with falling consumer
prices, high public debt and weak domestic demand all major concerns
for policymakers.

China meanwhile has achieved remarkable growth since opening up its
economy 30 years ago, growing at an average of more than nine percent
each year in the three decades since 1978 -- three times the world
average.

Growth stalled in the second half of 2008 as the global crisis took
hold, but rebounded in the latter half of last year thanks in large
part to a massive government stimulus package.

© 2010 AFP

This story is sourced direct from an overseas news agency as an
additional service to readers. Spelling follows North American usage,
along with foreign currency and measurement units

http://news.smh.com.au/breaking-news-world/booming-chinese-economy-snaps-at-japans-heels-20100121-moeu.html

...and I am Sid Harth

[chhotemianinshallah]

Bloomberg

Yen, Dollar Gain on Concerns Over Asia Recovery, Europe’s Debt
February 03, 2010, 11:58 PM EST

By Yasuhiko Seki and Ron Harui

Feb. 4 (Bloomberg) -- The yen and dollar strengthened against higher-
yielding currencies on speculation the Asia- Pacific region’s economic
recovery could slow and European nations will struggle to reduce their
deficits.

Japan’s currency advanced versus 14 of its 16 major counterparts after
reports today showed Australian retail sales unexpectedly shrank and
New Zealand’s jobless rate rose to the highest level since 1999. The
euro was near a seven-month low against the dollar on speculation the
European Central Bank will refrain from ending emergency measures at a
meeting today as Greece struggles to contain its deficit.

“Emerging uncertainties about the Australian economy hurt sentiment
toward higher-yielding currencies,” said Masahide Tanaka, a senior
strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s
second-largest bank. “Lingering sovereign woes in Europe also helped
strengthen risk aversion.”

The yen rose to 126.21 per euro as of 1:24 p.m. in Tokyo from 126.42
yesterday in New York. It gained 0.8 percent to 63.43 against New
Zealand’s dollar, and climbed 0.4 percent to 80.04 versus the
Australian currency.

The greenback advanced 0.7 percent to 69.77 cents against the so-
called kiwi and added 0.3 percent to 88.03 versus the Australian
dollar. The U.S. dollar was at 90.90 yen from 90.98 yen in New York.
The euro traded at $1.3883 from $1.3893. It dropped to $1.3853 on Feb.
1, the weakest level since July 8.

Australian Sales

Australian retail sales fell 0.7 percent in December from November,
the Bureau of Statistics said in Sydney. Economists had forecast a
gain. New Zealand’s unemployment rate climbed to 7.3 percent last
quarter from 6.5 percent in the previous three months, Statistics New
Zealand said.

“It is quite a big miss on the monthly number and that’s probably
going to give the Aussie a weaker tinge,” Greg Gibbs, a currency
strategist with Royal Bank of Scotland Group Plc, said about the
Australian sales data. “The U.S. dollar is generally looking firmer
against other majors, and this is all shaping up for a bit of a wash-
out of longs in the Aussie.” A long position is a bet a currency will
advance.

The MSCI Asia Pacific Index of shares fell 1.1 percent, ending two
days of gains. The yen tends to strengthen during economic and
financial turmoil because Japan’s trade surplus makes it less reliant
on foreign capital. The dollar benefits from its role as the world’s
reserve currency.

The euro dropped for a second day against the Swiss franc on concern
Greece and other European nations will face increasing difficulty in
curbing their budget deficits.

‘Permanent Loss’

Greece’s largest union is set to approve its second strike this month,
showing Prime Minister George Papandreou’s parliamentary majority may
not be enough to implement his plan to cut the European Union’s widest
deficit. Greece, Portugal and Spain have suffered a “permanent”
decline in competitiveness since joining the euro, European Monetary
Affairs Commissioner Joaquin Almunia said yesterday.

“Almunia warned that Greece and Portugal have ‘quite big’ financing
needs,” analysts led by Hans-Guenter Redeker, London- based global
head of foreign-exchange strategy at BNP Paribas SA, wrote in a
research note today. “The euro-dollar is on the edge of its next leg
down.”

The European Central Bank will keep its main interest rate unchanged
at 1 percent after its meeting today, according to all 55 economists
surveyed by Bloomberg.

The euro weakened to 1.4709 franc from 1.4720. It dropped to 1.4636 on
Jan. 29, the lowest level since March 10.

Implied Volatility

Implied volatility on one-month euro-dollar options rose to 10.6
percent from 10.4 percent in New York yesterday. Wider fluctuations
increase the risk for carry trades, where money borrowed from
countries with low rates is used to invest for higher yields.

“Volatility is absolutely going to persist in the foreign- exchange
market,” Monica Fan, a senior currency product engineer at State
Street Global Advisors, said in a Bloomberg Television interview. “The
market’s been hit by a series of micro-geopolitical event risks.
Certainly investors are being forced to be much more nimble about the
types of strategies they are undertaking.”

--With assistance from Haslinda Amin in Singapore and Candice
Zachariahs in Sydney. Editors: Rocky Swift, Nicholas Reynolds

To contact the reporters on this story: Yasuhiko Seki in Tokyo at
[phone] or ***@bloomberg.net; Ron Harui in Singapore at
[phone] or ***@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at
[phone] or ***@bloomberg.net.

http://www.businessweek.com/news/2010-02-03/yen-dollar-gain-on-concerns-over-asia-recovery-europe-s-debt.html

...and I am Sid Harth

[chhotemianinshallah]

What Bill Gross Really Thinks: The US Economy Is Screwed
The Pragmatic Capitalist | Feb. 3, 2010, 12:45 PM | 5,293 | 9

(This guest post originally appeared at the author's blog)

James Carville, the famed political strategist once said:

” I used to think if there was reincarnation, I wanted to come back as
the President, or the pope, or a .400 baseball hitter. But now I want
to come back as the bond market. You can intimidate everybody.”

In today’s world, the bond market runs through Bill Gross, the Founder
and CEO of PIMCO. The soft spoken Californian, former professional
blackjack player and billionaire, oversees over one trillion (with a
T) dollars in assets under management. He has been referred to as
the 4th branch of the U.S. government and with the bond market under
his thumb it’s not a stretch to say that he is the most powerful man
in the United States.

His current outlook for the U.S. economy is not particularly rosy
(read his latest outlook here). Gross recently coined the term “the
new normal” when talking about the post-crisis economy. He believes
the global economy has been effectively reset as investors take on
less risk, de-leverage the mountain of debt, regulation hampers growth
and de-globalization takes hold. He believes this is best presented
by the low expectations in the bond market where 10 year treasuries,
at 3.5%, are still positioned for very meager economic growth. He
says we are entering a sustained period of low growth and low
inflation.

A year ago, Gross was seen as a co-conspirator of sorts in the
government bailouts. As the U.S. government began to take stakes in
financial institutions Gross jumped in head first with them. He piled
his firm’s assets into the riskiest of risky assets in what turned out
to be a brilliantly simple bet – the U.S. government won’t let these
assets fail therefore, we are wise to invest along side them. It
couldn’t have worked out much better for the bond king. He is
rumored to have netted $1.7B alone on the day of the Fannie and
Freddie bailouts. Some saw it as talking his book and asking for his
own bailout. Others see it as unrivaled power and brilliance.

Gross believes the U.S. economic recovery has been largely based on
the stimulus and that the economy could suffer a relapse when the
stimulus is finally removed. In preparation he says investors are
wise to move money into stable, conservative income generating
assets. He also says assets are likely to move from debt-laden
governments such as the U.S and U.K. into those who were more fiscally
responsible such as Germany and China.

So where is an investor to look for high quality, stable and
conservative fixed income assets in this low yield, high risk
environment? At the 2010 Barron’s roundtable Gross made a number of
suggestions. He currently likes the Reaves Utility Income fund
(ticker: UTG) which is a stable utility fund yielding 7.25%. He also
likes the PIMCO Corporate Opportunity a high yield corporate bond fund
that Gross himself manages. It yields a juicy 13%. In terms of
specific bonds Gross still likes to trade along side the government.
He recommends investors look into the GMAC 8% due 2031 and the AIG
8.25% due 2018.

http://www.businessinsider.com/what-bill-gross-really-thinks-the-us-economy-is-screwed-2010-2

Why China is Not an Economic Threat to the United States
Posted February 3rd, 2010 at 8:00pm

Recent reports of China’s economic growth contrasted with the U.S.
economic downturn have left Americans increasingly concerned that
China is becoming a new superpower, controls American finances and
will surpass the United States as the world’s leading power. The
reality is that the fundamentals of the American economy are stronger
than China’s, and U.S. prospects are better.

Let’s take exhibit A. It may appear that China contributes the most to
world GDP and leads global growth given its 10.7 percent growth last
quarter, as well as its 8.7 percent average growth last year. However,
that’s not an indicative measure of a strong economy.

Aside from the fact that China’s GDP numbers are illusory (largely
because of how the country calculates its GDP), a significant portion
of the growth China is experiencing is not creating wealth, it is
merely taking it from other countries. In other words, Chinese growth
is partly the result of detraction from, not addition to, world GDP,
which means much of its success is dependent upon others.

This is because of the way China’s economy is set up. China relies on
its trade surplus with the rest of the world as the lifeblood of its
economy. It exports vastly more than it imports. Seen in this light,
China sucks GDP from other countries in addition to creating its own.
Therefore, while it may be leading the world in GDP growth, to a
notable extent these GDP gains are the result of China using the world
to boost itself higher.

That does not mean, however, that China does not produce anything. To
the contrary, over the last couple of decades, China has contributed
to the world economy. While China’s production has historically met
consumer demand to keep prices low around the globe, the world-wide
recession is now causing China to oversupply due to weak global
demand, which could lead to deflation. This is hardly an indication of
a sound, robustly-growing economy. If China does not start developing
more of its own domestic economy for its people, trouble looms.

Further, China is not America’s banker, as many people believe.
President Obama’s stimulus package was bad policy, but the notion
that China is now funding our economy as a result is a fallacy.

America could get by without China funding its debt. What’s largely
unknown is that China officially holds less than 7 percent of U.S.
treasuries, and that Chinese bond purchases declined in 2009, to under
$100 billion, while our deficit soared to an all-time high of $1.4
trillion.

Moreover, China does not buy our debt for our sake; it does so it
because it depends on an economy as large and sound as ours for its
own growth propelled through trade: The same set of rules that keep
its currency undervalued means, by law, it can’t spend at home the
huge pile of cash that it sits on.

In that respect, China is more directly tied to us than we are to
them. If the United States were to discontinue trade with China, it
would hurt them more than us.

Finally, China is not going to surpass the United States as the world
economic leader any time soon. We control about a fourth of the wealth
in the world – more than China, India, Japan and the rest of Asia
combined. Other indicators are just as definitive. The average
American earns close to fifteen times more than the average person in
China. If the United States keeps tax rates low, shows spending
discipline, and brings the deficit down to promote solid economic
growth, there is strong reason to believe that China will never
surpass the United States as the world’s largest economy.

http://blog.heritage.org/2010/02/03/why-china-is-not-an-economic-threat-to-the-u-s/

CHART OF THE DAY: Guess What, The US Just Started Creating Jobs Again
Vincent Fernando and Kamelia Angelova | Feb. 3, 2010, 3:07 PM | 2,981
| 24

In case you missed it, U.S. job growth was buried in today's ADP
employment report.

While ADP reported and overall net loss of -22,000 jobs during
January, they at the same time reported that -37,000 jobs were lost in
construction. Another -16,000 jobs were lost in the category
'Financial Activities'.

Given that the U.S. just came off of a housing and finance bubble,
while we want new jobs to appear, hopefully they won't be in the
housing or financial industries, which probably still have a ways to
go before fully deflating from bubble-levels.

And actually, if you strip construction and financial jobs from the
ADP data, you see a refreshing picture of the rest of the U.S.
economy.

For the first time during this downturn, ADP jobs data, ex-
construction and finance, grew in January. The data implies that job
creation started in January for the rest of the American economy.
(Note we say 'implies' since ADP's available data was seasonally-
adjusted, thus subject to some estimation) Hopefully these new jobs
won't end up being part of a new bubble economy since we're still
trying to work off the old one.

http://www.businessinsider.com/chart-of-the-day-change-in-us-employment-2010-2

Sindh Today – Online NewsOnline Sindh Newspaper
HomeBusinessEntertainmentHealthIndiaPakistanSportsTechnologyWorld

US to pressure China, other countries to open markets: Obama
February 3rd, 2010 SindhToday

Washington, Feb 4 (DPA) US President Barack Obama Wednesday said he
favoured free “reciprocal” trade and would put pressure on China and
other countries to open its domestic markets to competition.

“The approach that we’re taking is to try to get much tougher about
enforcement of existing rules, putting constant pressure on China and
other countries to open up their markets in reciprocal ways,” Obama
said during a conference in Washington with senators

from his own Democratic Party.

Obama also suggested countries like China were artificially keeping
down their currencies to boost exports, indirectly weighing into a
long-standing dispute between the two major powers.

“One of the challenges that we’ve got to address internationally is
currency rates … to make sure that our goods are not artificially
inflated in price and their goods are (not) artificially deflated in
price,” Obama said, though he did not specifically

mention China. “That puts us at a huge competitive disadvantage.”

Obama said trade with China and the rest of Asia remained critical to
the future growth of the US economy. Last week, Obama proposed
doubling US exports within five years in a bid to revive the
struggling labour market in the United States.

“I would not be in favour of revoking the trade relationships that
we’ve established with China,” Obama said, responding to such a
suggestion from Democratic Senator Arlen Specter. But he said: “We’ve
got to put our foot down and show that we’re serious about

enforcement.”
[LM1]

http://www.sindhtoday.net/news/1/100801.htm

...and I am Sid Harth

[chhotemianinshallah]

Economic crisis looms for Japan amid financial and manufacturing
problems

Pedestrians cross a street in Tokyo January 29, 2010. (Reuters)

By Blaine Harden
Washington Post Foreign Service
Thursday, February 4, 2010

TOKYO -- It's been a humbling few days for Japan.

Toyota, the nation's largest company, announced vehicle recalls on
three continents and shut down five assembly plants in the United
States, and its president told the world, "We're extremely sorry."

Standard & Poor's threatened to downgrade the Japanese government's
credit rating because Prime Minister Yukio Hatoyama is moving too
slowly to reduce the debt.

And China overtook Japan as the world's largest maker of cars,
according to an announcement from the Japanese Automobile
Manufacturers Association.

The triple whammy of manufacturing and fiscal problems is a harbinger
of what Japan faces in the coming years as its listless economy
meanders into an era of reckoning and national loss of face.

Within a year, Japan will probably lose to China its longtime status
as the world's second-largest economy. It is also expected to descend
into the uncharted waters of public indebtedness as government debt
swells to double the size of the country's gross domestic product.

'Quite doomed'

Although the alarming headlines grabbed the public's attention,
Japan's most fundamental economic ills have not. Like distant melting
glaciers, they have not alarmed voters, mobilized politicians or
triggered a national emergency response.

"I do think the current situation is quite doomed, but Japan does not
yet have a sense of crisis," said Hiroko Ogiwara, an economic
commentator and author of popular books that advise housewives on
money management.

The building blocks of Japan's future are collapsing, in the view of
many economists. Japan has fewer children and more senior citizens as
a percentage of its population than any country in recorded history,
but the government does little to encourage childbirth or enable
immigration.

Even as the working-age population shrinks, only a third of Japanese
women stay on in the workforce after having a child, compared with
about two-thirds of women in the United States. Government spending on
education ranks near the bottom among wealthy countries.

Although the government has been talking for two decades about
weaning itself from dependence on exports, Japan's economy remains
addicted to exports for growth.

And deflation, the curse of the "Lost Decade" of the 1990s, is back
with a paralyzing bite. Prices and wages are falling as aging
consumers save their pension checks and wait for still-lower prices.

"It is a slow-motion implosion," said Takatoshi Ito, a professor of
economics at the University of Tokyo. "The current direction is
clearly unsustainable, and something has to be done. The more delayed
the response, the more sacrifices will have to be made. It is not good
for future generations."

Expert panels and detailed policy papers have been spelling out an
antidote for decades:

-- Raise the consumption tax and control benefits for senior citizens,
including pensions and access to health care.

-- Use the money to build day-care centers, improve public education
and create a framework of subsidies that reward young people for
bearing children and help mothers stay in the workforce.

-- Increase immigration so that by 2050, 10 million residents will be
foreign-born.

The problem with these measures is that they are not very popular with
voters, especially those older than 65, who make up about 22 percent
of the population. These measures are likely to become less popular
over time: By 2050, 40 percent of the population is projected to be
older than 65.

"We haven't had a crisis big enough to force pensioners to see it is
in their own best interest to force politicians to do the right
thing," said Robert Feldman, head of economic research at Morgan
Stanley in Tokyo.

'Haven't bottomed out'

Feldman and many other analysts say Japan has the capacity to respond
to a crisis and to mobilize its human and industrial resources in a
highly focused way.

Out of the ashes of World War II, it organized a miracle of
manufacturing. After the oil shock of the 1970s, no industrialized
country squeezed more affluence out of less imported energy than
Japan.

"We are quite strong in times of real peril," Ogiwara said. "But we
haven't bottomed out yet."

Japan's public debt is the highest among industrial countries as a
percentage of GDP, but it is probably not going to be the problem that
sinks the economy. For unlike the United States, which has borrowed
heavily from China, Japan borrows almost exclusively from its
citizens.

Housewives and pensioners keep much of their money in bank savings
accounts. They don't mind ultra-low interest rates and are unlikely to
withdraw their money if Standard & Poor's blows a whistle on Japan's
sovereign rating.

"Japan is not Iceland," said Ito, the economics professor, referring
to the country that went bankrupt in fall 2008 when it could not meet
foreign-debt obligations.

Ito said that even in the extremely unlikely event that Japan defaults
on its debts, "it would not be an international crisis or a currency
crisis."

But Ito and other economists also said the interest rates that the
Japanese government pays to borrow from its citizens are creeping
upward as the pool of Japanese workers and savers drains.

By 2060, Japan will have two retirees for every three workers, a ratio
that will dry up savings and could overwhelm pension and health-care
systems.

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/03/AR2010020303840.html

Fiscal worries drive euro lower; stocks fall
Natsuko Waki
LONDON
Thu Feb 4, 2010 8:03am EST

LONDON (Reuters) - The euro hit a seven-month low against the dollar
on Thursday as concerns about Greece's fiscal problems spread to other
highly-indebted euro zone countries, while world stocks fell broadly.

Sterling jumped after the Bank of England halted its pro-growth
program of buying government bonds, as expected, taking the first step
toward normalizing policy. Both the BoE and the European Central Bank
left interest rates unchanged, underscoring generous liquidity
conditions would remain.

The premium investors demand to hold government debt issued by
peripheral countries such as Greece, Portugal and Spain rather than
benchmark German bunds rose again. The cost of insuring Portuguese
debt against default hit a record high.

The European Union said on Wednesday Greek plans to cut the budget gap
from 12.7 percent of gross domestic product in 2009 to below 3 percent
in 2012 would not be easy to implement but vowed to hold Athens to its
pledges.

"The euro remains vulnerable and the market has now turned its
attention to Spain and Portugal. Rallies have been short-lived and I
am targeting a move toward $1.3745 in the short-term," said BNP
currency strategist Ian Stannard.

The euro fell as low as $1.3827, its lowest since early July while the
dollar .DXY rose 0.3 percent against a basket of major currencies.

The 10-year Portuguese/German government bond yield spread widened
nine basis points on the day to 154 basis points. The equivalent Greek
spread widened 12 basis points to 360 bps before coming back in while
the Spanish spread edged out to 93 bps from 91 bps.

Political tension in Portugal over a regional spending bill and a
climbdown by the Spanish government over pension reform added to the
woes of peripheral euro zone states facing huge challenges to curb
budget shortfalls.

"Small irregularities in fiscal or funding spheres are being picked up
by the market and magnified in spread moves," Nomura said in a note to
clients. "A case in point was yesterday's T-bill auction by Portugal."

Portugal added to investor jitters on Wednesday after it cut its
planned T-bill placement because yields spiked from January's
placement on Greek concerns. [

Portuguese five-year credit default swaps hit a record high of 216
basis points from 196.2 bps late on Wednesday. This means it costs
216,000 euros per 10 million euros of exposure. Greek and Spanish five-
year CDS also rose. MSCI world equity index .MIWD00000PUS fell 0.6
percent while the FTSEurofirst 300 index .FTEU3 lost 0.8 percent.

Banks took the most points off the index. Santander (SAN.MC), the euro
zone's biggest bank, lost 2.8 percent after traders pointed to
concerns over the outlook for crisis-hit Spain and worries the bank is
not doing enough to address its property exposure despite results
beating forecasts.

U.S. stock futures fell around 0.5 percent, pointing to a weaker open
on Wall Street.

Japanese stocks fell 0.5 percent .N225 with Toyota Motor (6753.T)
sliding further on its recall woes.

Emerging stocks .MSCIEF dropped 1.2 percent.

U.S. crude oil fell almost 1 percent to $76.24.

Bund futures rose 16 ticks.

(Additional reporting by Neal Armstrong, editing by Mike Peacock)

http://www.reuters.com/article/idUSTRE5B30HG20100204

...and I am Sid Harth

[bademiyansubhanallah]

By Rod Nickel

WINNIPEG, Manitoba, Feb 4 (Reuters) - The Canadian economy is looking
up and should recover its lost ground this year, well ahead of Japan
and Europe, though possible storms lie ahead, Bank of Canada Governor
Mark Carney said on Thursday.

"My message is relatively straightforward: the thaw is coming," he
said. "The recovery has begun. After a brutal economic winter, spring
is within sight."

The optimistic signs in his speech were enough for Scotia Capital to
suggest he was carving an independent exit strategy, possibly hiking
rates before some other advanced economies, though this was not a
unanimous view.

"On net, we read this as a speech that reinforces the notion that the
need for emergency levels of stimulus is over," Scotia economists
Derek Holt and Karen Cordes wrote, suggesting hikes by the third
quarter and quite possibly earlier.

The comments had limited market impact, with Canadian stocks and the
currency tumbling on fears about debt-laden European economies.

Carney said Canada's labor market appeared to have stopped bleeding,
businesses expect to make modest fixed investments this year, the
private sector should be the sole contributor to Canada's domestic
demand growth next year and real output should reach pre-crisis levels
by the third quarter of 2010.

By contrast, it will be 1-1/2 years before Europe and Japan reach
their pre-crisis levels, he said.

The central bank has promised to keep interest rates at rock bottom
through the middle of this year, assuming inflation remains tame. In a
subsequent news conference Carney said current monetary policy was
still appropriate.

However, while he said he did not think there was a housing bubble, he
also cautioned Canadian households against borrowing too much since
interest rates will at some point have to rise.

He also warned a sustained global recovery could be jeopardized unless
there was major fiscal consolidation in the United States and
elsewhere, higher U.S. household savings, policy-induced domestic
demand in China and other nations, and higher exchange rates in
countries with big surpluses.

"Should these conditions fail to materialize over the medium term, two
equally troubling paths for the global economy are possible," Carney
said.

There would be a return to unsustainable current account imbalances,
which would build financial imbalances again, he said, or there would
be years of fiscal contraction and sluggishness that could lead to
deficient demand and sharp global disinflationary pressures.

Speaking before this weekend's meeting in Canada of the Group of Seven
leading industrialized nations, he said it was important that all
countries lay out credible paths back to fiscal sustainability in the
not-too-distant future. [ID:nN04101777]

Though Canada's economy is in many ways in better shape than its
advanced competitors, he qualified its productivity performance in the
past decade as abysmal, and tepid future productivity could mean the
economy's rate of potential growth is closer to 2 percent than the
usual 3 percent.

The performance of the labor market and productivity growth will be
important influences on monetary policy, Carney said.

BMO Capital Markets senior economist Michael Gregory read his comments
on the implications of productivity as hawkish but balanced by dovish
comments on the challenges Canada's corporate sector is having in
making needed adjustments. (Writing by Randall Palmer; editing by
Jeffrey Hodgson)

http://www.reuters.com/article/idUSN0423274420100204

A Look at Global Economic Developments

By THE ASSOCIATED PRESS
Published: February 4, 2010
Filed at 2:21 p.m. ET

A look at economic developments and activity in major stock markets
around the world Thursday:

ATHENS, Greece -- Stock markets sank in Greece, Portugal and Spain
amid worries over the European Union's debt woes, with Greek customs
and tax officials walking off the job in opposition to cutbacks aimed
at digging the government out of a budget crisis that has shaken the
entire EU.

The 48-hour Greek customs strike is expected to choke imports until
next week, with fuel supplies the most likely to suffer. Lines of
trucks were already forming at the country's borders, with customs
workers allowing through only those carrying perishable goods or
pharmaceuticals.

The government of Socialist Prime Minister George Papandreou is under
intense pressure from markets and other EU governments to bring its
budget deficit down from 12.7 percent of economic output last year to
2 percent in 2013.

A Greek default would be a serious blow to the shared euro currency,
but Greece and the EU have insisted that will not happen. Doubts about
Greece's finances have also affected market sentiment toward the debt
of Portugal and Spain, two other eurozone countries struggling with
deficits.

Markets appear worried that political resistance to cutbacks will keep
Greece and Portugal from sticking to their plans.

Greece's main composite index was down 3.3 percent, while Spain's IBEX
slid 5.9 percent and Portugal's PSI 20 slumped 5 percent.

The euro plunged towards $1.37, hitting its lowest since May.

FRANKFURT -- The European Central Bank kept its main interest rate
unchanged at the record low of 1 percent for the ninth month running
and gave its cautious backing to the Greek government's attempt to get
a grip on its borrowing.

Bank President Jean-Claude Trichet said it was ''absolutely crucial''
that the Greek government stick to its plan to get the budget deficit
down from a staggering 12.7 percent of the country's gross domestic
product in 2009 to below 3 percent in 2012.

Stock markets sank in Europe. The FTSE 100 index of leading British
shares closed down 2.2 percent, Germany's DAX slid 2.5 percent and the
CAC-40 in France ended 2.8 percent lower.

HONG KONG -- Asian stocks mostly retreated. Japan's Nikkei 225 stock
average fell 0.5 percent with Toyota continuing to drag on the market
as the world's largest automaker grappled with a global recall. Hong
Kong's Hang Seng tumbled 1.8 percent, Shanghai's main index fell 0.3
percent but South Korea's market added 0.1 percent.

LONDON -- The Bank of England kept its main interest rate unchanged at
the record low of 0.5 percent and said it will not be asking the
government for the authority to pump more newly created money into the
barely recovering British economy.

The rate-setting Monetary Policy Committee (MPC) voted to keep its
asset purchase program unchanged at 200 billion pounds ($317 billion)
but said it will continue to monitor the scale of the program and
could ask the government to make further purchases.

The program boosts the money supply in the economy, thereby lowering
interest rates across lending markets.

PARIS -- The International Monetary Fund stands ready to help Greece
solve the debt crisis that has alarmed bond markets and rocked the
credibility of the European Union's shared currency, the head of the
multinational lending agency said.

Dominique Strauss-Kahn said he didn't believe Greece was heading for
bankruptcy and expressed confidence that the government of Prime
Minister George Papandreou would take the ''necessary but extremely
difficult'' steps to solve the crisis.

''We are there to help,'' Strauss-Kahn said. ''If we're asked to
intervene, we will.''

BERLIN -- German industrial orders fell 2.3 percent on the month in
December amid a broad slip in demand.

BRUSSELS -- European employers called on EU leaders to act now to plug
a gap in skilled workers by increasing training programs and doing
more to attract well-educated migrants.

North Korean officials reopened hundreds of markets two months after a
major economic upheaval sparked riots and left scores starving in the
impoverished communist nation, an activist said .

http://www.nytimes.com/aponline/2010/02/04/business/AP-Economy-Countries-Glance.html

UPDATE 1-U.S., China must lead global rebalancing-euro zone
Thu Feb 4, 2010 2:35pm EST
(Adds details from euro zone document)

Currencies

By Jan Strupczewski

IQALUIT, Canada, Feb 4 (Reuters) - The United States and China will
have to lead a rebalancing of global growth as the world economy
slowly emerges from a downturn, the euro zone will tell G7 financial
leaders this weekend according to a document prepared for the meeting.

Finance ministers and central bank governors from the Group of Seven
(G7) industrialised nations meet Friday and Saturday in the small town
of Iqaluit in north Canada. The G7 includes the U.S., Canada, Japan,
France, Germany, Britain and Italy.

The document, which sums up the agreed views of the 16 countries using
the euro, said global trade and savings imbalances, which deepened the
global economic downturn, have decreased during the crisis, but were
still a medium-term challenge and need to be unwound in an orderly
way.

"Looking further ahead imbalances will widen again -- driven by the
recovery of oil prices and global trade -- although at a lower level
compared to the period before the crisis, with the exception of China
where the current account surplus will continue to increase in dollar
terms," the document said.

"The United States and China will have to take a central role in the
rebalancing of global growth," said the document, which was obtained
by Reuters.

To achieve this, the United States should boost domestic savings, cut
its budget gap and improve financial regulation.

"Beyond the current short-term counter-cyclical requirements, fiscal
consolidation should remain the main objective," the document said.

Unless U.S. fiscal and monetary stimuli are withdrawn once economic
recovery is well established, it said, expansionary policies could sow
the seeds of instability, including the building up of bubbles.

China needs to boost domestic consumption by improving its social
safety nets.

"A reformed taxation of state-owned enterprises' profits would
increase tax revenues, which could, in turn, be used to finance
increased state spending on social safety nets without jeopardising
longer-term fiscal sustainability," it said.

China should also allow its yuan currency, now effectively pegged to
the dollar, to appreciate, the document said.

"Its current exchange rate policies may induce a return to large
global imbalances and may drive up asset prices which could jeopardise
China's financial stability."

Beijing could start rebalancing its growth model next year, it said.

"The 12th five-year plan starting in 2011 should aim at laying the
foundations of a different Chinese growth model, which relies less on
export-led growth and more on private consumption."

EXIT STRATEGIES

The document said G7 countries should coordinate and clearly
communicate in advance their plans to withdraw fiscal stimulus to help
control inflation, among other things.

"Increasing budget deficits and public debt could weigh on the
economies going forward. Clearly communicated medium- to longer-term
policy frameworks are an essential component for stabilising
expectations," it said.

It said inflation in the euro zone, which the European Central Bank
wants to keep below, but close to, 2 percent over the medium term, was
likely to rise moderately near term.

"The outlook further out is for relatively subdued inflation rates, as
the sizeable slack in the product and labour markets can be expected
to restrain inflation."

The world economy was improving but that was partly due to government
support. "Looking forward, moderate optimism is warranted on the back
of recent macro-economic indicators and normalising financial
markets," it said.

"Overall, available leading indicators suggest a modest resumption of
growth in the coming months, while Asian continues to show dynamism,"
it said.

But it cautioned the recovery could run out of steam if private demand
did not kick in once fiscal stimulus is gone.

"This is particularly worrying given that unemployment is expected to
stay high in the short term, precautionary saving has increased,
private sector deleveraging continues and also given the negative
wealth effects as a result of the crisis," it said.

"The pace of recovery is expected to be gradual and growth subdued,
while risks remain given the high unemployment rates and the recent
increase in commodity prices," it said.

FX VOLATILITY A THREAT TO RECOVERY

Volatile markets were another threat to stable growth.

"Market volatility, in particular in the foreign exchange market, as
well as the possible build up of new asset bubbles, could destabilise
the nascent global recovery by placing growth on an unbalanced path
and trigger unwelcome protectionist reactions," the document said.

In remarks to Japan, the euro zone document said medium-term fiscal
consolidation was a key challenge.

"As the risk of a protracted recession dissipates, ambitious fiscal
consolidation should be considered," it said.

It also said that over the medium term, higher Japanese interest rates
would help correct current account imbalances and anchoring inflation
expectations.

http://www.reuters.com/article/idUSN0419485220100204?type=marketsNews

...and I am Sid Harth

[bademiyansubhanallah]

12 Countries With The Highest & Lowest Tax Rates

Seemingly everyone has an opinion about taxes. As one of the largest
economic and political issues of any country, the subject of how high
taxes are (and upon which segment of society they predominantly fall)
can be counted on to engender heated debates among politicians,
academics, and ordinary citizens. However, beneath all the heated
rhetoric and opinions are hard facts and numbers. Certain tax rates in
certain countries correlate with certain outcomes, regardless of
whether these are acknowledged by various strains of financial
opinion. Today, Business Pundit takes an honest look at twelve
countries — six with the highest tax rates, and six with the lowest —
and examines other facets of those economies with an eye toward
possible correlations.

The Highest Tax Rates

Belgium

Image Source

As will be seen throughout this article, most of the world’s highest
tax rates can be found in western European nations. Belgium tops the
list, with a marginal tax rate that goes as high as 54%. Despite such
a high tax rate, Belgium ranks relatively highly on various economic
measures. NationMaster.com, for instance, reports that Belgium’s $392
billion GDP ranks 18th out of 203 countries, and exports over $322
billion worth of goods and services yearly. However, other statistics
show Belgium’s high tax rate coming back to haunt it. The
International Monetary fund ranks Belgium 18th on its list of Gross
Domestic Product based on purchasing power parity, at $36,416. It is
also noted that Belgium was “likely to have negative growth, growing
unemployment, and a 3% budget deficit.” Canada’s Trade Commissioner
Service similarly reported “a slowdown of the activity in all sectors”
during the last two quarters of 2008. In sum, it seems that Belgium’s
high tax rates stifle economic vitality to some extent, despite the
social safety net it provides.

Germany

Image Source

Clocking in just beneath Belgium is Germany, with a 53.2% marginal tax
rate on average income workers. Despite having the largest national
economy in Europe (and the fourth largest in the world measured by
nominal GDP), Germany has effectively traded off having a
comprehensive social safety net against more robust economic growth.
Its GDP measured by PPP is $35,539 according to the International
Monetary Fund – 21st on the list, behind Belgium. As recently as 2007,
TheNewEditor.com reported that Germans were emigrating at their
highest rate since the 1940’s, resulting in a “brain drain” on the
nation’s brightest and most motivated people. As a result of “high
taxes and bureaucracy, thousands of Germans have upped sticks for
Austria and Switzerland, or emigrated to the United States” — 155,290
during the year in question, which rivals “levels last experienced in
the 1940s during the chaotic aftermath of the Second World War.”
Furthermore, emigrants are generally said to be highly motivated and
educated, while those immigrating to Germany are increasingly poorer
and less educated — perhaps more inclined to consume Germany’s
generous social benefits.

Finland

Image Source

With a marginal tax rate of 46.6 on average workers, Finland has the
fourth highest such rate in the world. However, unlike many similarly
taxed countries, Finland has managed to have a stronger overall
economy despite its taxation. Unemployment currently sits at 6.8% –
surprisingly low given the current economic crisis and double-digit
unemployment in the United States. Additionally, Finland’s $36,320 GDP
per capita ranks 20th on the International Monetary Fund’s list. The
CIA Factbook likewise states that Finland has “a highly
industrialized, largely free-market economy with per capita output
roughly that of the UK, France, Germany, and Italy.” It is also worth
noting that Finland has been one of the best performing economies in
the entire European Union in recent years, owing in no small part to
the country’s having avoided the worst of the banking crisis.

Denmark

Image Source

Denmark clocks in as having the fourth highest tax rate in the world
at 44.4%. On the surface, high taxes have not had the chilling effect
on Denmark that they appear to be having on other highly taxed
nations. An ABC News story, for instance, reports that “Danes Rank
Themselves as Happy and Content” – indeed, the happiest nation on
Earth – despite the tax burden they bear. Furthermore, the high taxes
mean that “a banker can end up taking home as much money as an artist”
so that “people don’t chose careers based on income or status.”
However, outsiders are skeptical of whether high taxes impose a bigger
burden than is acknowledged. The New York Times (hardly an enemy of
high taxation) reported in 2007 – the same year of ABC’s story – that
Denmark’s tax structure was worsening a labor shortage. As in Germany,
the Times found that “the Danish labor force had shrunk by about
19,000 people through the end of 2005″ (significant in a country of
less than 6 million) because “Danes and others had moved elsewhere.”
To its credit, Denmark does boast the 16th highest GDP per capita at
$37,304 – impressive for a small and highly taxed nation.

Italy

Image Source

As of 2006, the highest tax rate in Italy has been roughly 43%.
Unfortunately, Italy also has the lowest GDP per capita of any country
covered so far — $30,631, good for 27th on the International Monetary
Fund’s list. Various economic indicators portray Italy negatively, not
the least of which is debt as a percentage of GDP being higher than
100%, according to EconomicsHelp.org. Italy also appears to have a
sluggish male work population. According to Mint.com’s article on
bizarre tax breaks around the world, Italy once toyed with the idea of
offering males 30 and over a tax incentive to leave their mother’s
homes and start their own lives. The problem, Mint writes, is ” is
apparently so bad that a third of all men over 30 live at home” in
Italy. Naturally, this segment of the population is not participating
in economic growth by having their own homes or apartments, utility
bills, and the like. The case could be made that overly generous
government benefits have softened the population’s will to work.

France

Image Source

Finally, no discussion of highly taxed nations would be complete
without including France. With a top marginal tax rate on average
workers of about 40% (and a top tax on high-income workers of nearly
50%), France is long-known for sacrificing economic growth to social
benefits handed out by government. As Charles Wheelan writes in his
book Naked Economics, “France is a good place to be a struggling
artist, and a bad place to be an Internet entrepreneur.” Despite being
the fifth largest economy in the world, France’s GDP per capita stands
at just $34,205 – only 23rd on the IMF’s ranking. A study done several
years ago by the Organization for Economic Cooperation and Development
found that “France’s tax burden as a percentage of gross domestic
product last year rose to 43.7%, from 43.4% a year earlier”, according
to ThisFrenchLife. A 2009 Wall Street Journal piece likewise finds
France’s popular universal healthcare system “has been in the red
since 1989″, with an expected 2010 shortfall of €15 billion.

The Lowest Tax Rates

Switzerland

Image Source

Perhaps unsurprisingly, the country with the lowest marginal tax rate
on average income workers — Switzerland, at 20% — also boasts the
world’s 7th highest GDP per capita at $43,196. The UK’s Times Online
called attention to Switzerland’s “benign tax system” in a 2009
article about the nation’s “low tax high life” that invites people to
escape 50% tax rates by moving there. Contrary to general assumptions,
the Times explains, Switzerland has found a way to maintain a high
standard of living alongside an extremely low personal income tax
rate. BusinessWeek likewise reported in 2009 that Switzerland was
“openly and legally urging multinationals to relocate” — and
succeeding, while other nations buckled beneath staggering debt.
Switzerland’s low tax rates have not stopped it from having some of
the leading universities in the world, a highly educated work force
and less than 3% unemployment as of 2009.

USA

Image Source

The United States is still relatively tax-friendly, with a marginal
tax rate of around 27% on average income workers. As the world’s
largest economy by far, the economic vitality and high standards of
living in the U.S. speak for themselves. The United States boasts the
7th highest GPD per capita in the world at $47,440 and serves, in the
words of Wikipedia, as “the epicenter of world trade.” Total GDP stood
at over $14 trillion for 2008, which is more than three times that of
the world’s second largest economy (Japan). American citizens also
have the highest income per hour worked of any nation surveyed. By any
objective measure, the United States and its relatively low tax rates
offer the best of both worlds — reasonable social safety nets, and
extraordinary economic capacity stemming from essentially free market
policies. The standard of living in the US is evidenced by
consistently being the most immigrated-to nation on earth — 38,355,000
immigrants currently call the US home, more than double that of
Russia, which is second on the list.

Australia

Image Source

Australia, with a 31.5% marginal tax rate on average income workers,
manage to clock in at 17th on the IMF’s GDP per capita ranking with
$36,918. The island nation is bouncing back surprisingly strong from
the worldwide economic meltdown, with the BBC reporting on January 14,
2010 that had fallen to 5.5% at a time when similarly situated nations
are struggling with double-digit unemployment. According to Deputy
Prime Minister Juliar Gillard, the BBC’s findings “provide further
evidence of how Australia has outperformed virtually every other
advanced economy during the global recession.” With a tax rate similar
to that of the United States, Australia has long provided incentives
for the hard work, entrepreneurship and risk-taking that are
fundamental to sustained economic growth and high standards of
living.

Canada

Image Source

Canada is taxed in a manner similar to that of the United States,
imposing a 31.2% marginal tax rate on average income workers. Despite
a $39,098 GDP per capita (good for 13th on the IMF’s list), Canada has
struggled amidst the current economic crisis. The Canadian
government’s statistical agency, Statistics Canada, reported on
January 8, 2010 that the national unemployment rate sat at 8.5% –
slightly below the double-digit rate of the U.S., but still troubling.
Canada-based CBC News also reported in early 2009 that the
International Monetary Fund had “slashed Canada’s GDP growth for 2009
and 2010.” Like Japan and several other nations so far discussed,
Canada maintains universal healthcare coverage for all its citizens in
addition to other social programs. Canada has also, according to
Reuters, ruled out raising taxes to ease the national deficit, but
rather, would “constrain public spending” instead.

Japan

Image Source

Japan is an interesting case on several fronts. Despite being the
second largest economy on Earth, Japan’s GDP per capita is just 24th
on the International Monetary Fund’s list, at $34,116. Canada’s
Parlimentary Research Service offers some answers. One explanation for
Japan’s recently diminished economic vitality could be that “Japan was
the country with the lowest government revenue-to-GDP ratio (31%) and
the second-highest government net debt-to-GDP ratio (78%).”
Nonetheless, it’s 33% marginal tax rate on average income workers
represents one of the lowest in the world. Japan’s unemployment rate
also stood at a manageable 5.5% as of late October 2009, according to
the BBC. To its credit, Japan boasts a strong standard of living,
including a hybrid system of public and government-subsidized health
insurance for all its citizens.

United Kingdom

Image Source

With a 32% marginal tax rate imposed on average income workers, the UK
still qualifies as a relatively low-taxed nation, but only amidst the
rest of highly-taxed Western Europe. With a GDP per capita of $36,358
(19th on the IMF’s ranking), Great Britain stands as the sixth largest
economy in the world by this measure. The United Kingdom provides
universal healthcare to its citizens, as do most industrialized
nations in Europe, and Poverty.org reports that roughly 21% live below
40% of the country’s median income. The country is also a major
financial hub in the world economy, with London housing various
important stock exchanges and investment banks. Unemployment is
manageable at 7.8%, as of the fourth quarter of 2009, compared with
double-digit employment in many similarly situated nations. All told,
London continues to offer one of the higher standards of living in the
world, owing in part to its relatively low taxes and focus on economic
growth.

http://www.businesspundit.com/12-countries-with-the-highest-lowest-tax-rates/

The National DebtPosted by Leo Cecchini on Thursday, February 4th
2010 A strange coalition is forming across the political spectrum.
Groups from the ultra-right to the ultra-left find themselves sounding
the same alarm about the steadily growing national debt or
specifically the federal government’s debt. It now stands at $11
trillion and promises to rise to an estimated $14 by 2011. The growth
will be due to the major infusions of funds by the Feds in the effort
to overcome the recession and create new jobs.

By now you have all heard the dire warnings about “indenturing” our
children and grandchildren. Now we have the bond rating agency Moody’s
suggesting that the USA will lose its triple A rating. Well if the USA
with its “amber waves of grain” is looking like a risky investment who
or what is sound? Our national debt is guaranteed by the “full faith
and credit” of the USA. To put it in a nut shell, there is no greater
guarantee. When the US goes out of business, the show is over. And no
one suggests that the US will go out of business.

No, what this concern should yield is a higher interest rate to carry
the debt. But guess what, the cost is actually going down. The
national budget for 2010 calls for $164 billion to service the
national debt which is almost all interst costs. This is a sharp drop
from the $240 billion budgeted in 2008, since the cost for the Feds to
borrow has declined, not increased during the “Great Recession.” Of
course this is counterintuitive, but the reason is, that in the wake
of the “Financial Meltdown of 2008,” investors moved most of their
funds into “cash,” which in reality means into US Treasury bills, i.e.
federal debt. So many clamoring to buy US T bills drove the rate down
(demand outstripped supply).

The cost to carry the debt is a bit misleading since maybe half the
federal debt is owned by the government itself, mainly by the Social
Security and Medicare trust funds. There is no budgeted cost here,
rather there is the guarantee that the Feds will cough up the dough to
pay Social Security pensions and Medicare costs in the future.

The lesson learned, however, is that federal debt is not viewed like
other debt where the cost to borrow goes up as the debt increases.
Here the cost of borrowing is determined by how much “cash” one holds
in his investment portfolio.

Now much is made about foreign holdings of US debt. To put the issue
in numbers, foreigners hold about $3.4 trillion of our national debt.
That represents about half of the “public” part of the debt, i.e. that
not held by the government itself, or roughly 25% of the total debt.
But the concern is how long will these foreign investors continue to
hold and buy our national debt?

It would be useful here to compare the US national debt with that of
other countries. The most common comparison here is national debt as a
percentage of national income as measured by the GDP. The percentage
for the USA is now at 75% and this will rise to exceed 100% during the
Obama Administration. The next largest economy in the ranking of the
most developed countries is Japan where the national debt stands at
199% of GDP. Perhaps that is why Japanese investors own 22% of the US
debt held by foreigners. Others in this group -Germany, France and
Italy - have ratios similar to the USA. So the level of US
indebtedness compared to other major economies does not suggest any
reason per se to move one’s holdings to another nation’s currency.

This leaves China to ponder. Chinese investors, mainly its central
treasury, hold 27% of the US deb held by foreigners placing it more or
less than on a par with Japan. These two countries are thus the main
foreign players by far. China has a national debt to GDP ratio of less
than 20%. But the Chinese want to keep surplus foreign holdings in
those other currencies, not its own money. Given the debt to GDP
ratios of the other major economies it does not make much sense to
move to those currencies. Even more important, no other currency
exists in the mega-quantities offered by the US Dollar.

In a previous blog on our national debt I calculated that, at the
current cost of borrowing, the US could reasonably carry a national
debt of $28 trillion. Current government projections suggest that we
could reach this level by the year 2020. So by my calculations we
could handle the debt projected for 2020 now, which is good forward
planning.

Of course, an increase in the cost to the Feds for borrowing would
alter this scenario. But this will only come if there is a massive
movement of funds out of public debt into private debt which is what
the Obama recovery plans seek to achieve. And if private investment is
up, the Feds will not have to engage in massive deficit spending to
prime the engine, thus reducing, or eliminating, growth in the
national debt.

Sounds like a plan.

http://peacecorpsworldwide.org/new-economy/2010/02/04/the-national-debt/

QUINN'S DAILY DOSE OF REALITY

JimQ

IF PIIGS COULD FLY .I love when Europeans come onto the site and
lecture us about how to run our affairs. The European economy is in
worse shape than the U.S. The truth is that Europe, Japan and the US
are all screwed. Too much debt, too much spending, too many
entitlements, too much delusion, too little brains, too little
courage. There is no escape.

If PIIGS Could Fly
By Niels Jensen

The Absolute Return Letter - February 2010

"A democracy is always temporary in nature; it simply cannot exist as
a permanent form of government. A democracy will continue to exist up
until the time that voters discover that they can vote themselves
generous gifts from the public treasury. From that moment on, the
majority always votes for the candidates who promise the most benefits
from the public treasury, with the result that every democracy will
finally collapse due to loose fiscal policy..."

Alexander Fraser Tytler, Scottish lawyer and writer, 1770

Travelling with John Mauldin

It was always naïve to believe that a crisis so deep and profound was
going to go away with a whimper; however, an increase of more than 50%
in global equity prices can be very seductive, and nine months of
virtually uninterrupted gains have led many to believe that the
problems of 2008-09 are now largely behind us.

Well, not quite everybody. Friend and business partner John Mauldin
remains a sceptic. I have had the pleasure of travelling across Europe
with John over the past week or so and, as the week progressed, my
mood swung decisively towards a state where Prozac would probably be
the most appropriate remedy.

Now, John and I do not agree on absolutely everything. For example, I
believe – and have believed for a while – that he is too bearish on
equities. But, before we go there, allow me to share with you the
essence of John's views which can be summed up quite nicely by two
charts, courtesy of BCA Research.

In John's opinion – and I do not disagree – we are still only in the
second or third innings of the de-leveraging process (chart 1). Years
of excessive debt accumulation cannot be reversed in 18 months, and it
will take at least another 5-6 years to play out, possibly longer.

The other part of John's argument – and again it is hard to disagree –
is that it remains an open question how much de-leveraging has in fact
taken place. As you can see from chart 2, US sovereign debt has risen
as fast as private debt has declined (and the picture is similar in
many other countries), providing support for the argument that all we
have achieved so far is to move liabilities from private to public
balance sheets, effectively burdening tomorrow's taxpayer.

The basket case named Greece

In the last few days, developments in Greece have totally overshadowed
other events. As I write these lines, the 10-year Greek government
bond trades a shade under 7%, now yielding a whopping 370 basis points
more than the corresponding Bunds. At the same time, and not at all
surprisingly, Greek credit default swaps – measuring the cost of
insurance against a Greek sovereign default – have exploded (chart
3).

When I was in Zurich with John last week, I bumped into the famous
Swiss investor, Felix Zulauf, who pointed out to me that Greece has in
fact been in default in 105 of the last 200 years, so never say never.
Having said that, Greece cannot be allowed to default, as the
implications would be catastrophic. Bond investors would immediately
pick apart the next country in line, and it is almost certainly going
to be one of the other PIIGS – Portugal, Italy, Ireland or Spain.
Bailing out Greece is just about manageable, but having to save all of
them would overwhelm the EU. Swift action must therefore be taken,
moral hazard or not.

Back in early January, the research team at Danske Bank in Copenhagen
produced a most interesting research paper[1], revealing how desperate
the fiscal outlook is for many EU members. Table 1 illustrates the
path of debt-to-GDP between now and 2020, assuming no change to
current policy.

Now, we all know what cannot happen, will not happen. There is a
reason the EU, via its stability pact, set the debt-to-GDP ceiling at
60% for its euro zone members. Obviously, with the low interest rates
we currently enjoy, one could argue that a higher debt-to-GDP ratio
could be sustained, and that is essentially correct as long as
interest rates remain low; however, you leave yourself seriously
exposed, should rates rise which they almost certainly will as
sovereign debt increasingly becomes junk. .

Danske Bank then went one step further in its analysis. In order to
illustrate the magnitude of the problem, they calculated how
aggressive the fiscal tightening would have to be in order for the
euro zone member states to comply with the stability pact by 2020.
Table 2 below indicates how much the deficit must be reduced every
year for the next five years in order to bring debt-to-GDP to 60% by
2020. Greece, being in the most precarious position, would need to
shave 4% off its budget every year. We all know that is not going to
happen because that would spell depression.

In the short term, Greece needs to find over €50 billion before the
end of the year to refinance debt which is about to mature. The
question is not so much whether it will fail in its endeavour but what
price it will have to pay. An already fragile Greek fiscal situation
could be further undermined, if Greece is forced to pay 7% going
forward which it can hardly afford.

Is Spain next?

Towards the end of last week it became apparent that there might be
some appetite for rescuing Greece, although few details are currently
available. However, I am not convinced that there is a strong
consensus in favour of a rescue package. Most of the positive vibes
have come from Spain, whereas Germany and France have been decidedly
less forthcoming. It is perhaps not surprising that it is the Spanish
who seem most eager to bail Greece out, considering that they could
very well be the next victim of the bond market's invisible hand.

In the last few days, Spain has gone out of its way to demonstrate its
commitment to greater fiscal discipline in general and to the
stability pact in particular. The government has just proposed for the
retirement age to be increased from 65 to 67 (to be introduced
gradually from 2013), and a fiscal programme designed to reduce the
annual deficit to 3% of GDP by 2013 has been presented. The problem
for Spain is that words are cheap. Few commentators believe that 3% is
a realistic target given the depth of Spain's problems at the moment.
Don't hold your breath.

The outlook is very grim

The outlook goes from murky to unbelievably grim, if one includes off-
balance sheet items such as social security, pension and health
liabilities, which have been promised to us over the years by well
meaning but financially inept governments (see chart 4). As Societe
Generale's Dylan Grice puts it:

"I don't see how our governments can pay these liabilities. EU and US
net liabilities add up to around $135 trillion alone. That is four
times the capitalization of Datastream's World equity index of about
$36 trillion, and forty times the cost of the 2008 financial
crisis."[2].

I also note that Greece, not included in the chart, stands at 875%
debt-to-GDP when including off-balance sheet items!

The bond market will ultimately determine when enough is enough. As
President Clinton's campaign strategist James Carville once put it:

"I used to think if there was reincarnation, I wanted to come back as
the President or the Pope or a .400 baseball hitter. But now I want to
come back as the bond market. You can intimidate everyone."

It can play out in a couple of different ways. Either bond investors
will go on strike until they feel that they are being sufficiently
rewarded for the higher risk associated with sovereign debt following
the credit crunch or governments will implement budget curtailments
designed to bring the debt escalation under control again, but that
will be detrimental to economic growth. My bet is that the latter
outcome will ultimately prevail but not until the bond market forces
the hand of our governments.

The end game for Japan?

The first country to really feel the pinch could very well be Japan;
in the bigger context, Greece is just the appetizer. Japan's debt-to-
GDP ratio has grown from 65% in the early 1990s when their crisis
began in earnest to over 200% now. Fortunately for Japan, the high
savings rate has allowed shifting governments to finance the deficit
internally with about 93% of all JGBs held domestically[3]. This is
the key reason why Japan gets away with paying only 1.3% on their 10-
year bonds when other large OECD countries must pay 3-4% to attract
investors.

Now, predicting the demise of Japan has cost many a career over the
years. Despite the ever rising debt, and contrary to many expert
opinions, the yen has been rock solid and bond yields have remained
comparatively low. I often hear the argument from the bulls that the
Japanese situation is sustainable because they, unlike us, are a
nation of savers. Wrong. They were a nation of savers.

Looking at chart 5, it is evident that the demographic tsunami has
finally hit Japan. The savings rate is in a structural decline and the
Ministry of Finance in Tokyo may soon be forced to go to international
capital markets to fund their deficits. I very much doubt that non-
Japanese investors will be as forgiving as the Japanese, and that
could force bond yields in Japan in line with US and German yields.
Herein lies the challenge. Japan already spends 35% of its pre-bond
issuance revenues on servicing its debt. If the Japanese were forced
to fund themselves at 3.5% instead of 1.3%, the game would soon be up.

Why stock markets go up

Despite the grim outlook, the world's stock markets have produced
brilliant returns over the past nine months. This has provoked some of
the best and brightest in our industry (most recently Mohamed El-
Erian, CEO of Pimco[4]) to declare that there is a dis-connect between
the economic reality and the picture painted by Wall Street.

I am not convinced. Firstly, global equities reached extremely
depressed levels back in February 2009, and the recovery, however
muted it may ultimately turn out to be, has stopped the bleeding in
most large companies, giving investors an excuse to accumulate stocks
again (smaller companies is a different story altogether, but that is
a story for another day). What matters to the likes of Coca Cola,
Rolls Royce and Volkswagen is not so much how the domestic economy
performs, because the leading lights of industry today are becoming
increasingly detached from the domestic economy. Ever more important
to those companies is the global stage, and the global outlook is
considerably more upbeat than, say, the US, UK or German growth
prospects.

Secondly, equities usually do very well in the very late stages of
recession and early stages of recovery. I refer to our July 2006
Absolute Return Letter for an in-depth analysis of this, which you can
find here.

Thirdly, valuations are not prohibitively high. Many bears refer to
the stock market (whether European or US) as being very expensive at
current levels, but that is plainly untrue. Based on 2010 projected
earnings, most OECD markets are either in line with or 10-20% below
historical averages (see table 3). Only in emerging markets can you
reasonably argue that current P/E levels are not cheap relative to the
long term average.

In 2009 there have been massive flows of capital towards emerging
markets – and towards Asia in particular – and valuations have been
driven up as a result. It is hard to argue that those markets are yet
in bubble territory, if one uses the valuations in table 3 as a
benchmark; however, by pegging their currencies to the US dollar,
Asian countries have effectively adopted a monetary policy which is
entirely unsuitable for economies growing as fast as they do. That is
how bubbles have been created in the past and why Asian equity markets
should be monitored closely for signs of overheating in the months to
come.

Conclusion

Summing it all up, the fate of global equity markets is very much in
the hands of bond investors. Under normal circumstances, this is the
best time to be in equities. But these times are not normal, so do not
expect that the outstanding performance of 2009 will be repeated in
2010. If international bond markets calm down again – and that may
happen, at least temporarily – equities can probably post further (but
modest) gains in 2010; however, the end game is approaching. If bond
investors do not revolt in 2010, they probably will in 2011, so
playing the economic recovery through equities is a dangerous game.

As far as the bond market is concerned, as often pointed out by Martin
Barnes at BCA Research, if you want to know where the next crisis will
be, then look at where the leverage is being created today. And
nowhere is there more leverage being created at the moment than on
sovereign balance sheets. What is happening is an experiment never
undertaken before. As John Mauldin puts it, we are operating on the
patient without anaesthesia.

The big challenge will be to get the timing right. These situations
can run for longer than most people imagine. Japan's crisis has been
widely predicted for almost a decade now, and the ship appears to be
as steady as ever. As I suggested earlier, the key to predicting the
timing of Japan's demise – because there will be one – may very well
be embedded in the savings rate, which could quite possibly turn
negative in the next few years.

The Dubai crisis taught us that markets are in a forgiving mode at the
moment and, before long, Greece could very well find some respite from
its current problems. But then again, ultimately, governments will
find – just like millions of households have found over the years –
that you cannot spend more then you earn in perpetuity. The enormous
debt levels being created at the moment will haunt us for many years
to come and we may have to wait a long time to see the PIIGS fly
again.

TLaCour

1"Table 2

below indicates how much the deficit must be reduced every year for
the next five years in order to bring debt-to-GDP to 60% by 2020.
Greece, being in the most precarious position, would need to shave 4%
off its budget every year. We all know that is not going to happen
because that would spell depression."

I will stipulate to "we all know that's not going to happen." But the
second phrase, "because that would spell depression."?

Is this one of those things "everybody knows"? Or is there any hard
evidence that government reduction in budget causes depressions?

Written 19 hours ago Leave a ReplyScreen name (optional): Defaults to
"Anonymous" if no screen name is entered. Email (optional): To be
notified of replies. Your email will remain anonymous. Reply: *NOTE:
is our spam filter eating your comments? Become a registered user and
login. Click here to learn more.
..
Kill Bill ReplyVote10"A democracy is always temporary in nature; it
simply cannot exist as a permanent form of government. A democracy
will continue to exist up until the time that corporations discover
that they can buy themselves generous gifts from the public treasury.
From that moment on, the minority interests will donate campaign funds
to all candidates that will give a great ROI from the public treasury,
with the result that every democracy will finally collapse due to
loose fiscal policy..." -=Alexander Fraser Tytler, Scottish lawyer and
writer, 1770=- FIXED IT!

http://theburningplatform.com/groups/quinns-daily-dose-of-reality/discussions/if-piigs-could-fly

How financial innovation causes bubbles
Feb 4, 2010 06:16 EST

Stephen Gandel has a good, thought-provoking interview with Roy Smith,
a former Goldman banker whose book is available in the UK. His way of
looking at both bubbles and busts as being driven by liquidity I think
has a lot to be said for it:

There is now about $140 trillion in market capitalization in the
word’s financial markets looking for investments. That money can now
move around very easily. But even if a relatively small portion of
that money goes after something — say, mortgages — it can quickly
cause a bubble and a crisis. So all this good work we have done in the
past few years to make our capital markets more efficient and open has
also made them very hazardous, and we haven’t done anything yet to
address that problem.

Here’s Smith’s verdict on the history of Wall Street:

The net result has been a positive for users of capital markets, which
can be accessed more cheaply than ever before. But the success of the
market has resulted in a vast accumulation of capital in tradable form
that is now capable of wrecking whole economies. In 2000 and 2007,
financial bubbles did great damage, and the monster is still out
there.

Up until now, I’ve thought that the harmfulness of financial
innovation was largely a function of its role in enabling regulatory
arbitrage. But Smith’s idea I think is stronger. Financial innovation,
on this view, is in large part the art of turning illiquid assets into
liquid assets. And once an asset is liquid, it’s susceptible to highly-
dangerous booms and busts.

The point is that it’s pretty much impossible to have a bubble in
something which doesn’t have a liquid asset class supporting it.
There’s a good reason that the very concept of a bubble is associated
with stocks: stocks are one of the most liquid asset classes in the
world. The carry trade is essentially the art of creating bubbles in
liquid currency markets. The invention of the mortgage-backed security
allowed trillions of dollars to flow into the housing market, where a
huge bubble formed. There was a veritable frenzy of trading in Dutch
tulips, when they were in a bubble. (Can someone help me out with the
Japanese property bubble of the 1980s? What was the driving force
behind that?)

It’s not like you can’t lose money where there isn’t a speculative
frenzy, of course: banks and insurance companies have been going bust
for centuries, after misjudging creditworthiness or losing a gamble
when some tail event finally happened. And a lack of liquidity can be
just as bad as a surplus of it: if a country has exchange controls and
high interest rates, a huge proportion of the money in that country
eventually ends up being lent in some form or another to the
sovereign, which when it eventually defaults can cause massive
economic devastation.

But as Smith says, a world with over $100 trillion in liquidity is by
its nature a world prone to bubbles: a tiny slosh of that money in a
certain direction can cause massively destabilizing effects in
formerly-sleepy corners of the market. And the explosive growth of
ETFs, which can turn all manner of fixed-income, commodity, and
currency asset classes into liquid and bubble-prone stocks, only makes
matters worse.

The monster is still out there — and the monster is growing, as
sovereigns with trillions of dollars of disposable wealth at their
disposal look for asset classes to invest that wealth in, and as Wall
Street continues to extoll its ability to corral multi-billion-dollar
financing deals by doing clever things in the capital markets. What’s
more, it’s far from clear that regulators even have the ability to
identify bubbles, let alone to prevent them growing to destabilizing
levels. George Soros said in Davos that he loves identifying bubbles
and then jumping on the bandwagon and making lots of money. Can
anybody hope to stop him?

14 comments so far

Feb 4, 2010 12:31 pm EST
Does this mean Tobin tax or any sort of transaction tax should be
looked at as it would likely reduce liquidity?
For Japan, wasn’t it exporters’ cash that fuelled the property bubble?
The riches earned abroad from Japan’s relentless international
expansion were recycled at home in the real estate part of the
keiretsu.

Posted by fxtrader14 |
Feb 4, 2010 1:25 pm EST
On Japan see the book by Christopher Wood: The Bubble Economy: Japan’s
Extraordinary Speculative Boom of the ’80s and the Dramatic Bust of
the ’90s

Posted by david3 |
Feb 4, 2010 1:45 pm EST
Felix – property by itself is not a particularly liquid asset, but the
instruments created in this instance enabled agents to make it more
liquid.

I think this is along the same lines as what Buttonwood has referred
to in the Economist a number of times: In recent years there has been
very little real wealth creation, but a lot of creation of claims on
wealth.

Posted by edepicier |
Feb 4, 2010 4:22 pm EST
Oh yeah, the Japanese real estate bubble back in the ’80s. What drove
it I haven’t a clue, but I do recall two notable occurences from it:
1) at one point, a square mile of property in Tokyo was worth more
than ALL the real estate in America, which sounds fantastic and 2)
property buyers were taking out multi-generational mortgages. Fancy
that, paying off a mortgage your grandfather incurred! Talk about
serfdom.

Posted by Gotthardbahn |
Feb 4, 2010 5:03 pm EST
Increasing the liquidity of the rest of the economy is the whole point
of banking.

The fundamental rule of banking is borrow short, lend long. The
banking sector is fundamentally illiquid. The rest of the economy,
then, becomes fundamentally more liquid with a banking sector.

Unfortunately, as noted, with liquidity come new risks. This is one
reason good regulations and regulators are a necessary component of
capitalism.

Posted by wcw |
Feb 4, 2010 6:22 pm EST
the other problem, Felix, is ONE SIDED liquidity – it is difficult to
get short real estate – which fuels the bubble

Posted by KidDynamite |
Feb 4, 2010 6:26 pm EST
Volker is right – the only financial innovation has been the ATM (ok,
on-line banking, too). Everything else is just re-packaging of risk so
that it becomes unrecognizable. Risk doesn’t disappear just because it
is chopped up into tiny little pieces and spread outlike manure in a
filed, it just becomes harder to track, which makes it easier for
people to profit from the ones who are unable to recognize the risk.

What causes the bubbles is when enough people believe the risk has
disappeared or has been reduced, and asset values are distorted. The
“innovation” actually leads to increased instability, as bets are made
using inaccurate information (e.g., believing the companies that rated
debt).

What people refer to as financial innovation is innovative only for
the select few who are able to profit from it, but for the rest of the
world, those “innovators” are just parasites who have extracted value
from the system while weakening it.

http://www.onthetimes.com

Posted by OnTheTimes |
Feb 4, 2010 6:29 pm EST
“There’s a good reason that the very concept of a bubble is associated
with stocks: stocks are one of the most liquid asset classes in the
world.”

Bubbles can be associated with anything from oil (recently as last
year) to housing (does anyone remember?), tulip bulbs, and so forth.

Posted by yr2009 |
Feb 4, 2010 6:41 pm EST
What is the definition of a bubble? How do I measure a bubble?

Posted by Boabdil |
Feb 4, 2010 7:28 pm EST
You measure a bubble when credit is plentiful, hyperinflation in
demand swamps supply. The exact timing of the peak is unknown but is
characterized by hyperinflation in quantity supplied swamping demand
and coincides with an eerie silence followed by a stampede for the
exit followed by what we are experiencing now…deflation.

Posted by csodak |
Feb 4, 2010 8:45 pm EST
Was Enron “financial innovation”? Is it “financial innovation” for
dishonorable bankers to whisk up a bunch of toxic and in some cases
fictitious mortgages, bury them amongst a load of other fluff, re-rate
them as though they possessed real worth, then leverage their
aggregate face value ten times over, hawking them as though they were
lighting in a bottle to see who the last man standing might be?

Is that even legal? Not really, when you cut to the chase.

Burying in fancy language what these “sovereigns” have been up to,
even dignifying an ungentlemanly rigged game with taxpayer dollars as
markers as “capitalism” is an inflation of language. Referring to what
came out their back ends a “bubble” is yet another euphemism, when
it’s more like an explosion with countless civilian wounded.

I don’t want to see what moves they might pull next, or what new names
they have for the game. It’s time these self-infatuated playas called
it quits, without parole.

Posted by HBC |
Feb 4, 2010 9:05 pm EST
Felix — After the Plaza Accord in 1985, Japan began running a loose
monetary policy, which fed into the asset markets. Here’s a quick
summary:

http://en.wikipedia.org/wiki/Plaza_Accor d

Posted by DavidMerkel |
Feb 4, 2010 9:26 pm EST
The one thing that bubbles are always associated with is leveraged
debt, even going back to the tulips, and that requires someone
convincing someone else that it is going to be worth enough in the
future to cover your cost of cash.

I disagree with the position that we haven’t created wealth recently,
we have created enormous wealth in the form of extra years of life,
even since 1970 the life expectancy of a 65 year old has increased
almost four years.

A higher percentage have gone to school and are carrying around
knowledge which is theirs for life, even if jobs are tough right now
that is gained for good.

Maybe free time needs to be calculated into the GDP as a positive
contribution, there are a lot of ways to look at wealth and maybe as
we pass through these hard times we need to re-evaluate and decide
what kind of a country we want to live in.

Posted by jstaf |
Feb 4, 2010 11:06 pm EST

Someone, maybe the housing industry lobby, the mortgage industry lobby
etc,. managed to convince the top lawmakers in this country the ‘home
ownership’ was an important American value, and that it had huge
social benefits.

This notion prompted law makers to subsidize the housing industry
through twisting the taxation system.
Bankers saw the opportunity to leverage on this ‘value’, and make a
ton of money for themselves, and the rest is history, that’s written
by the winners –
but who are they in this case?

Posted by yr2009 |

http://blogs.reuters.com/felix-salmon/2010/02/04/how-financial-innovation-causes-bubbles/

...and I am Sid Harth

[bademiyansubhanallah]

U.S. officials hopeful China will make concessions on currency

By John Pomfret
Washington Post Staff Writer
Friday, February 5, 2010

Treasury Secretary Timothy F. Geithner said Thursday that he believed
China would allow its currency to appreciate vis-à-vis the dollar -- a
move President Obama contends is essential to the U.S. economy by
making U.S. exports more competitive and lowering China's massive
trade surplus.

"I think it's actually quite likely [China] will move. I think they
recognize it's important to them, in their interest as well," Geithner
told the Senate Budget Committee.

The issue of China's overvalued currency, known as the yuan or the
renminbi, is another in a string of problems bedeviling U.S. ties with
China. Last week, the Obama administration announced that it was
selling $6.4 billion worth of weapons to Taiwan, and China blasted the
decision. This week the administration reiterated the president's
intention to meet the exiled Tibetan leader, the Dalai Lama, and China
criticized the move. The United States and China don't agree on a
strategy for coping with Iran's alleged nuclear weapons program. And
they are at odds on the issue of Internet freedom, which was
highlighted last month when Google said it was considering pulling out
of the country because China continues to censor Internet searches.

But the currency issue is potentially the most nettlesome because it
has to do with the American economy and jobs at a time when growth
remains weak and unemployment is at 10 percent. In addition, during
his State of the Union address, Obama vowed to double U.S. exports by
2014. Most economists agree that he probably won't reach that goal
with a cheap yuan.

Behind the bluster

Geithner's statement came a day after Obama vowed to "get much
tougher" on China over this issue "to make sure our goods are not
artificially inflated in price and their goods are not artificially
deflated in price; that puts us at a huge competitive disadvantage."

Obama's statement marked a shift for the administration which has for
the past year played down its concerns about China's currency. On
Thursday in Beijing, a spokesman for the Ministry of Foreign Affairs
said that China's currency was not overvalued and that Obama's
"wrongful accusations and pressure will not help solve this issue."

Behind the bluster, U.S. officials and experts said they think the
Chinese are moving on the issue. A team of U.S. officials was in
Beijing last week, and the United States is pushing China to make the
currency issue a central part of the two countries' Strategic and
Economic Dialogue scheduled for this summer. U.S. officials have also
told China that the United States would rather not designate China a
"currency manipulator" in a Treasury Department report in April.

A senior Treasury official who spoke on the condition of anonymity
because of the sensitivity of the issue said the global financial
crisis has helped to convince Beijing that it needs to make its
economy less reliant on exports and more reliant on domestic demand.
Allowing the yuan to strengthen against the dollar would theoretically
put more money in the pockets of the Chinese by making imports
cheaper.

"You are always reading tea leaves when you're talking to the
Chinese," said the senior Treasury official, "but we definitely get
the sense that the one thing the crisis has done is catalyze a view in
China that they need to speed up their efforts to promote home-grown
growth."

Most economists agree that the yuan is generally undervalued by 25 to
40 percent against the dollar. The cheap yuan has allowed China to
amass by far the largest trade surplus in the world and a war chest of
more than $1.7 trillion of foreign exchange.

Uncertain impact

C. Fred Bergsten, the director of the Peterson Institute for
International Economics, said he also thinks the Chinese are going to
revalue.

"It's a big deal," he said. "The one remaining misalignment in the
world is this huge undervaluation of China."

Bergsten said other currencies -- in Singapore, Hong Kong, Taiwan and
Malaysia -- are linked to the yuan, so if China revalued, those
countries would follow suit.

If they allowed their currencies to float or at least revalue them
significantly, he said, the U.S. economy could see its exports jump,
create 700,000 to 800,000 jobs, and watch its trade deficit drop by as
much as $125 billion.

Bergsten said he thinks the Chinese will probably go for a quick
revaluation of 5, 8 or even 10 percent sometime this year. Any slower
move would prompt speculators to rush cash into China as they awaited
further revaluations, risking a massive asset bubble in real estate or
other sectors of China's economy.

Other economists aren't convinced that a Chinese revaluation of the
yuan would help the U.S. economy. Derek Scissors, an economist with
the Heritage Foundation, said China has so many other techniques --
such as lowering taxes, giving companies free land, adopting export
subsidies -- to goose its exports that a revaluation wouldn't matter
much. He cited the example of 2005-07 when China allowed the yuan to
appreciate by 20 percent and still the U.S. trade deficit with China
ballooned.

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/04/AR2010020404365.html

Bloomberg

China to Prevent Yuan From Strengthening This Year, Fukoku Says
February 04, 2010, 11:03 PM EST

Feb. 5 (Bloomberg) -- China is likely to prevent its currency from
strengthening against the dollar this year to help its exporters
weather the weakness in global demand, according to Fukoku Capital
Management Inc.

China’s policy makers have limited gains in the yuan since July 2008
as the world economy suffered its deepest downturn since World War II,
after allowing the currency to rise 21 percent over the previous three
years. U.S. Treasury Secretary Timothy F. Geithner said yesterday
Chinese officials realize a more flexible exchange rate is in their
economy’s best interest, and he indicated such a shift is “likely.”

“The Chinese economy may struggle to sustain robust growth without
government stimulus measures,” said Yuuki Sakurai, chief executive
officer in Tokyo at Fukoku Capital, a unit of one of Japan’s 10
largest life insurers. “Given the adverse impact of a stronger yuan on
the nation’s exports and economic recovery, the chance of the
government letting the yuan rise this year looks slim.”

China’s consumer prices rose 1.9 percent in December, the fastest pace
in a year, and gross domestic product climbed 10.7 percent in the
fourth quarter, fueling speculation the nation’s authorities will
allow the yuan to strengthen to damp economic growth and reduce the
risk of asset bubbles.

International Pressure

China may let the currency resume its appreciation as early as March
to help curb inflation as exports rebound and international pressure
for it to strengthen builds, Zhang Ming, deputy chief of the
International Finance Research Center at the Chinese Academy of Social
Sciences, wrote in the China Securities Journal this week.

“China hasn’t yet reached a stage where it needs to be worried about
asset-price bubbles,” Sakurai said. “It will be a slow process before
policy makers can actually hike interest rates and revalue the yuan.”

Brokerages pared bets this week on how much the yuan is likely to
appreciate in the next 12 months.

Twelve-month non-deliverable yuan forwards dropped 0.6 percent from
Jan. 29 to 6.6670 per dollar, the biggest decline since the period
ended Dec. 11, according to data compiled by Bloomberg. The contracts
indicate traders see the currency rising 2.4 percent in a year from
the current spot rate of 6.8273.

Sakurai also said he sees only a limited chance the U.S. Federal
Reserve will make an early end to its policy of flooding the economy
with cash because of concern the global economic recovery is waning.

Prospects ‘Hazy’

“With prospects for the global economy in 2011 still hazy and U.S.
housing markets still far from clearly bottoming out, the Fed can’t
possibly increase interest rates this year,” Sakurai said.

“Given the risk the global economy will fail to gather strong momentum
going forward, which will also hamper the outlook for stocks, there is
no other choice but to buy government bonds,” Sakurai said.

Japan’s 10-year yields may fall to as low as 1.20 percent in the first
half of this year, from their current level of 1.355 percent, Sakurai
said.

Japanese government bonds have provided investors a return of 2.7
percent this year in dollar terms, beating the 1.6 percent gain from
Treasuries and the 2.4 percent loss for German bunds, according to
indexes from Bank of America Corp.’s Merrill Lynch unit.

--Editors: Nicholas Reynolds, Simon Harvey

To contact the reporters on this story: Yasuhiko Seki in Tokyo at
[phone] or ***@bloomberg.net; Nobuyuki Akama in Tokyo at
[phone] or ***@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at
[phone] or ***@bloomberg.net.

Stocks tumble on worries about jobs, European debt
By John Schmid of the Journal Sentinel

Posted: Feb. 4, 2010 9:57 p.m.

Fresh economic worries Thursday triggered the worst single-day selloff
for the Dow Jones industrial average in nearly 10 months.

"Traders are very skittish about growth in the U.S. and growth
globally," said Brian Jacobsen, the chief portfolio strategist for
fund management group at Wells Fargo Bank.

The Dow lost 268.37 points, or 2.6%, to close at 10,002.18. It was the
biggest one-day point decline since April 20. And it carried the index
to the psychologically important 10,000-point floor, even briefly
below it for the first time since November

The broader Standard & Poor's 500 Index lost 3.1% to close at 1063.11,
down 34.17 points. The Nasdaq Composite Index lost 3%, or 65.48
points, to finish at 2125.43.

Selling began at the opening bell as investors reacted to negative
news overnight from Europe, said Jeff Nelson, director of research in
Milwaukee at the MBO Cleary Advisors Inc. investment firm.

Greece, a member of the European Union's common currency bloc, is in
the throes of a national debt crisis that set off a chain reaction in
global markets. EU policy makers are concerned that Greece might
default on its debt, weakening the stability of the continent's single-
currency project. Other Mediterranean euro nations such as Portugal
and Italy also came under fiscal scrutiny, compelling foreign exchange
traders to hammer the euro, push up the value of the dollar, which in
turn can weaken American exports by making them more expensive.

Problems at home

But it wasn't long before domestic economic concerns spilled into the
markets and added to the bearish pressure.

The government reported that initial claims for weekly jobless
benefits unexpectedly rose last week. Many economists had expected a
decrease, expecting that fewer people would apply for unemployment
benefits in an improving economy. It was the fourth increase in the
past five weeks, signaling that the economy remains too fragile to
inspire employers to hire. The four-week moving average, which is
meant to smooth volatility in the weekly claims data, also increased.

That report raised the stakes for Friday's publication of national
unemployment data for January.

Will hopes be dashed?

More than two years after the recession began, wiping out more than 7
million jobs, many economists had begun to hope that the United States
might post a small but symbolic increase in the net number of jobs in
January. Given the severity of Thursday's plunge, however, traders are
braced for another month of net jobs losses in the U.S.

In December, the latest data available, the nation lost 85,000 jobs
while the unemployment rate held steady at 10%.

In a globally intertwined economy, other developments beyond Europe
influenced the markets.

China worries

The central bank of Australia this week noted that China is reducing
its own stimulus spending, signaling that Australia is concerned that
a slowdown in China could slow other Western economies as well. That
announcement, from monetary authorities in a nation with close
economic ties to China, prompted concerns about U.S. growth, Nelson
said.

With China's economy expected to grow as much as 10% this year, many
nations look to the mainland as one of the few reliable engines of
global growth.

Among Wisconsin stocks, the biggest losers on Thursday were: Modine
Manufacturing Co., down 10.3%; Merge Healthcare Inc., 8.4%; Marcus
Corp., 8%; MGIC Investment Corp., 7.6%; and Bucyrus International
Inc., 7.5%.

Top gainers in the state were Tufco Technologies Inc. at 5.8%; Orion
Energy Systems Inc., 5.3%; and Regal Beloit Corp., 4%.

Paul Gores of the Journal Sentinel staff contributed to this report.

http://www.jsonline.com/business/83608972.html

Sniffing out China's leverage power from Obama's State of the Union
10:16, February 05, 2010

By Li Hongmei People's Daily Online

Given the fact that the China-U.S. relationship, commonly said to be
in a "Bermuda Triangle" stage with Taiwan, Tibet issues and trade
tussles, is in neither side's interest to get derailed, there is
nothing new for any U.S. president relates China in delivering the
State of the Union, but it is noteworthy that this year when President
Barack Obama speaks of China, the significant changes are still
perceived by some observant people.

First change is seen in his attitude. In a stark departure from his
predecessors, who tend to force upon China their demands or even
finger point China once discord sets in, Obama' s speech, instead,
lays more stress on engagement and cooperation with China.

Second, the coverage of China is somewhat enlarged and enriched,
compared with the standard practice of the U.S. Previously, the State
of the Union would merely cover the spheres of diplomacy and security,
and more often than not, the U.S. side would prefer to nose into
China's internal affairs. But Obama resets the tone in his address
with economy as the basic formula at the mention of China. Besides
touting China's achievements scored in economic development, he also
attaches importance to China's economic influence over the U.S.

It even looks, as it were, that the U.S. president is prepared to bend
down to learn from China, as remarked by some wishful Chinese
commentators. In his first ever State of the Union, President Obama
positively cites China as an example in two places: when mentioning
infrastructure construction, he says, "from the first rail roads to
the interstate highway system, our nation has always been built to
compete. There's no reason Europe or China should have the fastest
trains, or the new factories that manufacture clean energy products,"
this in a vivid and violent contrast with the 2008 State of the Union
delivered by the then President George W. Bush, in which he proposed
to set up a new international clean technology fund to help the
developing nations like China and India better utilize clean energy.

When he airs his opinions on the economic recovery, Obama once again
quotes China as saying "China's not waiting to revamp its economy,"
alluding to Washington's stall for time in reviving its ailing
economy.

Admittedly, it is definitely not that Obama intends to praise China
for the sake of extolling its achievements, but that he is dropping a
hint that the U.S. would by any means remain its position as the
leading power, rather than descending to be the second best.

Why he so rarely and positively speaks of the emerging economies such
as China and India, in the meantime, reflects that the increasingly
besetting specter of crisis is hovering over the United States in a
time when the world's economic structure is undergoing a profound and
far-reaching change. The unstoppable trend, forging ahead in torrents
and with the nascent economies leading the tide, appears to have
outpaced the anticipation of the one-year-old U.S. Democratic
administration.

Compared with the U.S. presidential addresses of the previous years,
which, apart from showing off the U.S. technological edge, invariably
targeted China as a "do-nothing" state that always needs a push from
the U.S. to integrate into the world, Obama's speech this year
highlights more of China's active role in the international affairs,
reflecting to some extent that China-U.S. relationship, though
periodically unhappy, is going deep and extensive; and the bilateral
cooperation has been greatly upgraded to cover a wide span from
diplomacy, security to economy and energy.

Meanwhile, the bilateral ties are developing more on a reciprocal and
interrelated basis. And at least viewed from Obama's speech, the U.S.
is going to accept a rising China on an equal footing.

That said, it is not a good timing to see rough sailing in the
relationship when the world is grappling with the economic meltdown,
as neither side would like to spoil the ship for a ha'porth of tar.
Hopefully, bumpy for a while, the China-U.S. relations will still get
back on track.

About this column

Li Hongmei, editor and columnist of PD Online.

ColumnistsLi Hong

After 19 years working for China Daily and its website, Li Hong moved
to english.people.com.cn in March 2009.

Li has been a reporter and column writer, mainly on China's economy
and politics.

He was graduated from Beijing Foreign Studies University, and once
studied in University of Hawaii and the Poynter Institute in Florida.

Gavin Jon MowatGavin Jon Mowat, editor and columnist for People's
Daily Online.

As a graduate from Heriot-Watt University in Edinburgh, UK, Gavin came
to Beijing 2 years ago to study Chinese.

Enjoying the culture and traditions of the orient so much, Gavin has
since left his home in Scotland and is now living and working in
China.

Gavin uses his background in writing to share his experiences of China
with you at People's Daily Online.

http://english.people.com.cn/90002/96417/6888877.html

Deplorable for Obama to meet Dalai Lama
09:42, February 04, 2010

It is pathetic to see that U.S. President Barack Obama is likely to
succumb to domestic politics and go ahead with a plan to meet the
Dalai Lama.

The fact that the meeting is still being planned, as confirmed by
White House spokesman Bill Burton on Tuesday, bodes ill for Sino-U.S.
relations, already battered by the latest announcement of a 6.4-
billion-U.S.-dollar arms sale package to Taiwan.

The long-term U.S. policy of publicly supporting the Dala Lama stems
from the Cold War mentality, which requires Washington to use all
means to contain what it believes threats from communist China.
Declassified U.S. intelligence documents reveal that for much of the
1960s, the CIA provided the Tibetan exile movement with 1.7 million
U.S. dollars a year for operations against China, including an annual
subsidy of 180,000 U.S. dollars for the Dalai Lama himself.

Times have changed. But those ideology-driven politicians and China
bashers in the United States still don't realize that the ground has
shifted beneath them. They still persist with this meeting with the
Dalai Lama as a ritual to trumpet what they believe are "core
democratic principles."

Yes, the meeting may serve as a morale booster for Tibetan
separatists. It may appear as a symbolic act to show the U.S. on
"moral high ground." But it will never change the fact that Tibet was,
is, and will always be part of China.

Obama, with all his intelligence, of course knows the nature of the
meeting and its ramifications. It would be deplorable if he decides to
continue playing this age-old dull political game that will serve no
interests for the U.S. but only stoke anger among the Chinese.

As the president of the world's only superpower, Obama is free to meet
anybody at anytime on his own soil. But just don't paint this farce
with a moral hue. We call that audacity of shame.

Source: China Daily

http://chinatibet.people.com.cn/6887724.html

...and I am Sid Harth

[chhotemianinshallah]

February 03, 2010
The Emperor's New Statistics
This article appears in the February 5, 2010 issue of Executive
Intelligence Review.

by John Hoefle

Jan. 29—U.S. government economic statistics and other economic reports
increasingly remind one of the fable of the emperor's new clothes. The
statistics keep improving, while the economy keeps getting worse.

This observation is prompted by today's report from the Department of
Commerce that the nation's gross domestic product rose 5.7% in the
fourth quarter of 2009, after rising 2.2% in the third quarter. That's
quite an accomplishment, considering that the number of people
employed fell by 1.2 million during the quarter, according to equally
suspicions numbers from the Bureau of Labor Statistics.

Considering the avalanche of problems which usually befall people when
they lose their jobs these days, it's obvious that any statistic that
purports to show that the economy is expanding, is but cloth from the
emperor's wardrobe. That is certainly the case for GDP, which, because
it fails to take into account the difference between productivity and
overhead, actually hides the way the economy is being destroyed.

The Obama Administration and Wall Street would have us believe that
the economy has turned the corner and is recovering, each for its own
reasons. But as with all habitual liars, watch what they do, instead
of what they say. If they really believe the crisis has passed, why
are they so committed to ramming fascist austerity measures down our
throats? They talk about things getting better, but they are rather
openly preparing for things to get worse—much worse.

Saving the Parasites

The great success of the "economic recovery," we are encouraged to
believe, has been the rebound of Wall Street. To believe that,
however, you have to swallow some real whoppers.

The first of these is that Wall Street has actually recovered. Despite
the biggest theft of public funds in history, Wall Street remains
hopelessly bankrupt, its financial institutions holding enough
uncollectable debt and toxic waste to sink them all many times over.
The level of fraud is so great that, were proper investigations to be
done and all the guilty punished, we'd have to build new prisons to
hold all the bankers, accountants, lawyers, and regulators being
incarcerated.

The second whopper is that the profitability of Wall Street is a valid
marker for the health of the economy. That's akin to measuring the
health of a dog by the growing number of fleas it carries, since, just
like the fleas, the bankers of Wall Street thrive by sucking wealth
out of the economy. It was Wall Street, after all, which oversaw the
dismantling of the industrial might of the nation, and promoted the
transfer of U.S. production overseas, in the name of profits.

We would also have to believe that Wall Street is an American
phenomenon, dedicated to the welfare of our nation. Wall Street is
actually an arm of that London-centered global financial oligarchy
known as the British Empire, and its actions are designed to destroy
our nation. As it has.

The giant theft known as the "bailout" is actually designed to keep
this imperial looting operation alive during the transition to an
intended global fascist dictatorship. No recovery is intended, or even
possible, under this regime.

Instead, what is planned is the systematic looting of the population,
to keep the financial profits flowing as the economy continues to
decline. President Obama's health-care plan is a good example of what
is intended, forcing people to pay premiums to the insurance
companies, while at the same time cutting the care people will receive
for their money. "Pay more, get less," is the motto for this unholy
future. As governments at all levels go broke, they will be under
increasing pressure to raise fees on such basic infrastructure as
roads, water, and sewer systems, or sell them to private companies
which will jack up the fees.

The imperial bankers know we will rebel against such austerity
measures, which is why they are so determined to expand the police-
state apparatus. They know they will need it! This is the future that
awaits us, under the present "recovery" policy.

An Honest Recovery

An honest recovery plan starts from the standpoint that the people
come first, and that the way to raise the standard of living of the
people is to increase the productive power of human labor. The history
of our own nation is exemplary of that principle. We developed our
inland waterways and then transcontinental railroads to tie us
together; we improved the quality of our land, generation after
generation; we developed new technologies to expand the power of our
machines, and so on.

This commitment to science and technology for the benefit of all our
citizens, was what turned our land into a nation, into the most
advanced economy the world has even seen. It enabled our young nation
to not only break free of the British Empire, but to begin to
transform the world. We saved the world from fascism in World War II,
largely because of our physical-economic prowess—we produced more
ships, more planes, more trucks, and guns than anyone else.

After the war, we had the great promise of the Atoms for Peace program
and the peaceful use of nuclear power. But that was shut down by a
campaign organized by the British, who wanted to stop the world from
advancing to a new technological level. As a result, our scientific
advancement was halted in crucial areas, and our economy began to
stagnate. Since then, we have watched one industry after another
wither, to the point where we are today just a shadow of our former
productivity.

To compensate for this loss in wealth-production, the bankers of Wall
Street stepped in with loans. We gradually became a nation of debtors,
and as that debt grew, Wall Street developed new financial instruments
such as derivatives, which were used to turn the growing mountains of
debt into new classes of assets, fuelling even more speculation, and
debt. In the end we had so much debt that it could never possibly be
repaid, and we were choking on paying even the interest.

This is the system that the bailout would restart, the system which
Treasury Secretary Tim Geithner defended so ardently in his
Congressional testimony on AIG this week. These fools are not saving
the world, they are destroying it, and turning back the clock to the
days before the American Revolution changed the world.

If we are to have a real recovery, we must return to those American
System principles we have abandoned, restoring sound physical-economic
development. We must not only rebuild, but expand, our infrastructure,
using the most advanced technologies. That means building lots of
nuclear power plants to generate the electricity we will need to power
a new Renaissance. We need to build a national network of high-speed
mag-lev trains, and connect that network into Ibero-America, and
across the Bering Strait into Russia, from whence it can reach into
the rest of Asia, into Europe, and Africa. We need huge water-
management projects, to provide water for our arid western states, and
the new cities we will build there. We must put a man on Mars. Such
projects are not just costs, they are investments—real investments—in
the future of our nation and of mankind. They are absolutely necessary
for our survival.

To do this, however, means a complete reorganization of our existing
structure. We must put the financial system into bankruptcy
protection, where the financial claims associated with the imperial
casino can be written off, and the financial claims associated with
economically useful activity can be protected. We must shut down the
casino, and end the power of the Federal Reserve and other private
banks to control the issuance of our money. We must break the grip of
the British Empire over global finance, so that we can move forward in
the interests of the people, instead of the financial "elite." We must
do so now, while we still have the chance.

***@larouchepub.com

Posted by Naxal Watch at 7:29 PM

http://intellibriefs.blogspot.com/2010/02/emperors-new-statistics.html

February 04, 2010
Two Superpowers Take on the World
The Rise of 'Chimerica'

By Andreas Lorenz in Beijing

http://www.spiegel.de/international/world/0,1518,druck-674848,00.html

The US and China are already the two most powerful countries in the
world. As allies, they would be unstoppable. Is the era of a double
superpower taking shape?

When China sneezes, the whole world gets a cold. Bill Clinton
recognized this during his term as United States president, speaking
of the "potential challenge that a strong China could present to the
United States in the future." At the same time, he warned of the risk
presented by a "weak China," which could destabilize large regions of
Asia.

Now Clinton's successor and fellow Democrat Barack Obama is looking
for ways to work more closely with the giant nation, with its 1.3
billion people. Obama believes that cooperation with China is
essential in the coming years. "The major challenges of the 21st
century, from climate change to nuclear proliferation to economic
recovery, are challenges that touch both our nations, and challenges
that neither of our nations can solve by acting alone," the US
president said during his recent visit to China.

In China, meanwhile, politicians, economists and the military come to
much the same conclusion when they brood over how best to interact
with that old superpower, the US. "In the 21st century," says the
Chinese president and party leader, Hu Jintao, "relations between
China and the US are among the most important in the world." There is
the perception that, without American help, it will take a long time
for China to achieve the "moderate prosperity for all citizens" that
the Communist Party promises its people and uses to justify its rule.

Never have the two countries been more dependent on one another than
today. Without the American market and American investments, things
wouldn't be looking as good as they do in China. But at the same time,
many Americans would be struggling to make ends meet during the
current economic downturn without cheap imported Chinese goods. And
the American government would no longer be able to function if China's
central bank didn't buy so much American debt. Last year, China held
US Treasury securities worth around $800 billion (€570 billion).

The Rise of Chimerica

Former US National Security Advisor Zbigniew Brzezinski sees a
geopolitical shift from the Atlantic to the Pacific. He calls China
and the US "the Group of Two that could change the world," while
economic historian Niall Ferguson coined the term "Chimerica" to
describe his view that the two countries are so closely joined, they
have long since formed "one economy."

One side gives while the other takes: Does that make Chimerica a match
made in heaven?

China's newfound economic strength is causing uneasiness in the US.
Seeing their country become increasingly dependent on decisions made
in a faraway part of the world is an unfamiliar sensation for American
businesspeople and politicians. Worse still is watching those
decisions be made by communist rulers. The People's Republic has not
only overtaken the US as the number one investment destination for
foreign money, but Beijing's $2.3 trillion in foreign currency
reserves also give Chinese firms the ability to acquire portions of
American companies -- as happened with the computer giant IBM, for
example.

Strategic Reassurance

"We feel the hot breath of this economic dragon on our backs," writes
Susan Shirk, a professor and former deputy assistant secretary of
state under the Clinton administration, in her book "China: Fragile
Superpower."

That's why US Deputy Secretary of State James Steinberg coined the
phrase "strategic reassurance" to describe his country's relations
with China. The idea is as follows: If Washington and its allies
welcome China to the international arena as a "prosperous and
successful power," then Beijing "must reassure the rest of the world
that its development and growing global role will not come at the
expense of security and well-being of others," Steinberg explains.

The Pentagon is watching uneasily as China builds up its army and --
in particular -- its navy. The military show held at Tiananmen Square
last year to celebrate the 60th anniversary of the founding of the
People's Republic of China both impressed and alarmed the entire
world.

Naval Ambitions

It's only a matter of time before China launches its first aircraft
carrier. The US military and intelligence services are also watching
nervously to see if China succeeds in developing an effective anti-
ship missile that could compromise American aircraft carriers.
According to its own accounts, the Chinese army recently successfully
tested a defense system that could destroy intercontinental missiles.

Some harbor suspicions that China's intentions may not be quite as
peaceful as the country always claims. Naval ships disguised as
fishing boats cruise with increasing frequency through the South China
Sea, where China has territorial disputes with Taiwan, Vietnam,
Malaysia, Brunei and the Philippines over the tropical Spratly Islands
and with Taiwan and Vietnam over the Paracel Islands.

Chinese warships also now patrol along the Somali coast to protect
Chinese ships carrying raw materials from pirates. American experts
have never before located so many Chinese submarines making such long
patrols so far from the mainland as they have in recent months.

'We Need America to Strike a Balance'

On two occasions, Chinese fishing boats have stopped an American spy
ship near China's Hainan Submarine Base. Feelings of mistrust were
further fueled by a Chinese general's announcement that Beijing will
need permanent naval bases in the Pacific in the future.

Singapore's "minister mentor," Lee Kuan Yew, a wily veteran of Asian
politics, summed up the situation: "The size of China makes it
impossible for the rest of Asia, including Japan and India, to match
it in weight and capacity in about 20 to 30 years. So we need America
to strike a balance."

Lee's warning in the face of China's growing economic and military
strength expressed what many Asians are thinking, namely that the US
needs to remain a counterbalance to an ever more powerful China.

In China, though, Lee's comments drew anger. And Chinese politicians
have their own reasons for being skeptical. They suspect the US of
having a single goal in mind -- impeding China's "peaceable
advancement" and forcing it to accept Western values like democracy.

Keeping the Yuan Down

Beijing checks all messages from the US carefully for signs that they
serve the goal of "keeping China down." Is this why, for example
Washington is pushing so insistently for the Chinese yuan to be
revalued? American economists say the Chinese government keeps the
exchange rate on its currency, also called the renminbi, so low
expressly for the purpose of artificially increasing the price of
American imports and making Chinese exports especially cheap -- and
that this costs the US a great number of jobs.

Beijing responds that the accusation is unfair, since many American
companies also manufacture their products in Chinese factories. If
prices rose because of a stronger yuan, those companies would suffer
as well.

But in the US, calls to protect domestic businesses against Chinese
competitors are growing louder. Some economists now extol the
advantages of protective tariffs, where before they preached free
trade. China "follows a mercantilist policy, keeping its trade surplus
artificially high," writes Nobel Prize winning economist Paul Krugman.
"In today's depressed world, that policy is, to put it bluntly,
predatory." The US, for its part, has slapped high tariffs on imported
car tires and steel pipes, in a bid to protect domestic industry from
cheap Chinese imports.

China "won't give in to any form of pressure" about revaluing the
yuan, Chinese Prime Minister Wen Jiabao stated coolly at the beginning
of the year. Communist Party leaders don't deny, though, that China's
undervalued currency hands them advantages in international trade. But
they feel justified in using these advantages.

The "American elite" has "no idea" what fatal consequences a
revaluation of the yuan could have, says political commentator Liang
Jing, adding that it would lead to a collapse in Chinese exports and
"cause a worsening in domestic income distribution."

Desire for a Stronger Voice

What that means in plain language is that Chinese factories would need
to lay off many workers and the divide between rich and poor would
quickly grow wider -- potentially plunging the country into social
unrest.

And if the Chinese government were to start allowing money to flow
freely across its borders, something Washington is also pushing for,
it would mean an "unprecedented exodus" of capital from the country,
the commentator says.

When Zhou Xiaochuan, head of the People's Bank of China, called for
the US dollar to be replaced in the long term as the world's reserve
currency, he wasn't just contributing to discussions about the global
financial crisis. He was also sending a signal: Beijing politicians
plan to have a stronger voice in bodies such as the International
Monetary Fund. They don't want to leave the playing field completely
to China's rival on the other side of the Pacific.

Above all, China wants to prevent the US from printing too much money
to stimulate its economy. Inflation would cause the dollars China has
invested in the US to melt away like ice in the sun.

Marriage of Convenience

With fears over the balance of power in the Pacific, an impending
trade war, the dispute over the yuan, American armament supplies to
Taiwan, and a possible meeting between US President Obama and the
Dalai Lama, who is detested in Beijing, it looks like the US and China
have some hard times ahead of them.

What will happen to "Chimerica," that economic marriage of
convenience? The sense that it would be better to dissolve the forced
union sooner rather than later is growing within China's Communist
Party. Financial managers within the party are already exchanging long-
term US Treasury securities for more short-term securities.

Sooner or later, Chimerica will come to an end. The real question is
whether the former partners will be able to live peacefully with one
another -- or if the divorce proceedings will turn acrimonious.

Translated from the German by Ella Ornstein.

URL:
http://www.spiegel.de/international/world/0,1518,674848,00.html

RELATED SPIEGEL ONLINE LINKS:

Photo Gallery: The Power of Chimerica

http://www.spiegel.de/fotostrecke/fotostrecke-51297.html

Google Under Attack: The High Cost of Doing Business in China
(01/19/2010)

http://www.spiegel.de/international/world/0,1518,672742,00.html

Stalling in Copenhagen: Chimerica Against the World (12/17/2009)

http://www.spiegel.de/international/world/0,1518,667626,00.html

Niall Ferguson on Obama and the Global Crisis: 'A World War without
War' (11/11/2008)

http://www.spiegel.de/international/world/0,1518,589735,00.html

SPIEGEL 360: Our Full Coverage of China

http://www.spiegel.de/international/world/0,1518,k-7214,00.html

Posted by Naxal Watch at 4:13 AM

http://intellibriefs.blogspot.com/2010/02/two-superpowers-take-on-world.html

February 04, 2010
BANKING: Papers say data theft highlights Swiss weakness

http://www.swissinfo.ch/eng/Specials/Swiss_banking_secrecy_under_fire/News/Papers_say_data_theft_highlights_Swiss_weakness.html?cid=8231948

St Galler Tagblatt: The government has made a thoughtful, intelligent
decision. It would be tempting for ministers to collect populist
points by revolting William Tell style. This would have probably
accomplished little. After all, those who threaten must be able to
bluff credibly or be prepared to follow through. Switzerland mustn’t
get into power games with Germany.

Blick: Switzerland has landed on the floor of reality. Only by going
on the offensive can Switzerland get out of this mess.

Le Temps: We’ve given up on the distinction between tax evasion and
fraud but the past is back again and we are afraid that daylight will
shine on the practice of actively assisting others evade their taxes.

Der Bund: Of course the data theft is condemned but negotiations over
a new tax agreement are not suspended and relationships with the most
important trading partner should not be burdened.

The government’s conciliatory tone toward Germany’s plan to use stolen
Swiss bank data to find tax cheats shows just how problematic Swiss
banking has become, newspapers say.
Commentators wrote that Finance Minister Hans-Rudolf Merz and the
Swiss cabinet have little room to negotiate with the country’s largest
single trading partner.

German Chancellor Angela Merkel said earlier this week that Germany
would do what it could to fight tax evasion. An unknown informant has
offered to sell data on some 1,500 bank clients with money in Swiss
accounts for €2.5 million (SFr 3.7 million). Investigators estimate
the information could net €100 million in undeclared tax money.

From a law-abiding point of view it is “shocking” that the German
government wants to buy the stolen goods, writes commentator Patrick
Feuz in Bern’s Der Bund newspaper.

But “Switzerland is in no position to be outraged”, he continues. “For
many the decades-long business of Swiss banking has been indignant”.

The rightwing Swiss People’s Party disagreed in a 20 Minuten report
and put its disgust at the cabinet’s willingness to continue tax
treaty talks with Germany more bluntly: “The government has no balls.”

U turns
Other newspapers pointed to the U-turn that the Swiss government,
particularly Finance Minister Hans-Ruldolf Merz, has taken.

When French authorities said they planned to use stolen data in a
similar manner, the Swiss government set out to suspend negotiations
on double taxation accords. Now Merz has “abandoned his fighting
words” with Germany, the Blick newspaper wrote. “This time it’s all
friendly.”

“Merz recently said banking secrecy was not up for negotiation,” the
paper continued. “Then yesterday he said, ‘We have no interest in
foreign tax-evader money'. A 180-degree turn.”

Switzerland is paying the price for shortsightedness, wrote the Bund.
Those on the centre right allowed financial centres to exhaust banking
secrecy as a “competitive advantage” up until the last minute. Only
the left has dared to say that such a model has a shelf life, it
said.

Of course the Swiss government over the past year has eased banking
secrecy laws while under foreign pressure but, the paper argued,
“Finance Minister Merz is naïve if he now believes that the framework
of a new accord will solve the problem of existing black money
accounts.”

Plan B
“So what’s next?” asked the Blick.

The Geneva-based Le Temps said the only thing to do now is to say
“loud and clear” that the time of stashing away grey money is over.

“It’s not about giving up without negotiating but about leaving the
holdout where too many bankers and elite are still walled up,” the
paper said.

It added that the Swiss have a “historical responsibility” to find a
solution for taxpayers who used Swiss institutions to protect their
capital from practices that would confiscate their money.

Many papers said it is high time that the Swiss purge once and for all
the “accumulation of dangerous waste” that has built up in their
vaults over the year.

The European Union is demanding an automatic exchange of banking
information, which the Swiss are understandably worried about, Blick
wrote.

“But if Switzerland doesn’t want to be steamrollered, the cabinet
ministers and bankers must this time come up with an emergency plan
B,” Der Bund answered.

Whatever that plan B may be, other countries are already lining up to
get their hands on the data, too. Austria has expressed its interest.

In the meantime, Le Temps says Hans-Rudolf Merz has “condemned” the
use of the stolen data but that no one is really worried about that.

“He wants to calm things down but it’s been a long time, too long,
since he lost his authority to negotiate—and he’s taken Switzerland
along with him.”

Tim Neville, swissinfo.ch

Posted by Naxal Watch at 4:09 AM

http://intellibriefs.blogspot.com/2010/02/banking-papers-say-data-theft.html

February 03, 2010
CHINA BLOWING HOT, BLOWING COLD
B.RAMAN

Is the tension in the relations between the US and China over the
decision of President Barack Obama to notify the US Congress on
January 29,2010, of his decision to clear the sale of a new arms
package to Taiwan showing signs of cooling down?

2. It is less than a week since Mr.Obama cleared the sale, but some
Chinese comments have already started referring to the consequent
diplomatic tension in the past rather than in the present tense. A
reference is made to it not as a continuing tension, but as the
“recent” strain.

3. Does this mean that after having stepped up the rhetoric with blunt
warnings of Chinese economic sanctions against US companies such as
Boeing and Lockheed Martin, which manufacture the weapons and other
military equipment that are proposed to be sold to Taiwan, the Chinese
are trying to cool the crisis?

4. The threat of sanctions still remains, but the realization seems to
be sinking in that the sanctions could prove to be a double-edged
sword. For example, a half of the existing Chinese commercial aircraft
fleet is of Boeing manufacture. If the Chinese impose sanctions
against Boeing, what impact that would have on the maintenance of the
aircraft acquired in the past and the continued availability of spare
parts for them?

5. Next to the Beijing Olympics of August, 2008, the Chinese have
attached a major importance and status symbol to the forthcoming World
Trade Expo in Shanghai. Its success would to a considerable extent
depend on the participation of American manufacturers and businessmen.
If China tried to take punitive action against some US companies in
retaliation for the Taiwan deal, what impact it might have on US
participation in the Shanghai Expo?

6. China has to stood to benefit in recent years not only in its
economic development, but also in its diplomatic standing in the
international community as a result of the over-all improvement in its
relations with the US. Individual areas of tension remain and will
continue to remain, but should such areas be allowed to damage the
over-all relationship?

7. The Obama Administration might be sticking to the policies of the
previous Administration in matters such as those concerning Taiwan and
human rights in Tibet, but it is not showing any indication of
reverting to the policy of multilateral tie-ups with countries such as
India, Japan and Australia in a manner that could be detrimental to
China. Is it not in China’s interest to encourage the Obama
Administration to continue to avoid such tie-ups which worry China?

8. One could see signs of an introspection in the articles carried by
sections of the Chinese media , which are more balanced and less
jingoistic than those published immediately after the decision of
Mr.Obama. Even the titles of these articles speak of a desire to cool
it. Examples: “ China & US On Steady Path To Warmer
Relations” ( “Global Times” of Feb.2) ; “Old Issues, New Ways of
Engagement” ( “Global Times” of February 4); “Keep Sino-US Soft
Conflicts Under Control “ ( “China Daily” of February 4).

9. Even on the issue of the expected meeting of His Holiness the Dalai
Lama with Mr.Obama possibly later this month, Chinese analysts have
started making a distinction between Mr.Obama’s right to receive any
foreign visitor, which may not be that deplorable, and his using such
meetings for moralizing purposes such as highlighting the continuing
US interest in Tibetan human rights, which would be deplorable.

10. A clear enunciation of the Chinese official thinking on the
general issue of the importance attached by Beijing to China’s
relations with the US and the sequel to the current tensions relating
to arms sale to Taiwan and the proposed meeting with His Holiness
might be given by Mr.Yang Jiechi, the Chinese Foreign Minister, during
his participation in the annual Munich Security Conference starting on
February 5. This is the first time a Chinese Foreign Minister is
participating in this conference. (4-2-10)

( The writer is Additional Secretary (retd ), Cabinet Secretariat,
Govt. of India, New Delhi, and, presently, Director, Institute For
Topical Studies, Chennai. He is also associated with the Chennai
Centre For China Studies. E-mail: ***@gmail.com )

Posted by Naxal Watch at 7:10 PM

http://intellibriefs.blogspot.com/2010/02/china-blowing-hot-blowing-cold.html

...and I am Sid Harth

[chhotemianinshallah]

IBD Editorials

While China Invests In Its Future, We Invest In Our Past: The Elderly
By GEORGE F. WILL
Posted 02/04/2010 07:00 PM ET

On Day One of his vow to take "meaningful steps to rein in our debt,"
Barack Obama asked Congress to freeze portions of discretionary
domestic spending. This would follow an astonishing permanent
expansion:

Republicans on the House Budget Committee say appropriations bills
Obama has signed, along with his stimulus spending, have increased
discretionary domestic spending by 84%. He almost certainly will not
keep his promise to veto spending bills when Congress, as it almost
certainly will, largely disregards his request.

On Day Two, taking a break from the rigors of austerity, he was in
Tampa, Fla., promising $8 billion for high-speed rail projects there
and in a dozen other places. Four days later, he released a $3.8
trillion fiscal year 2011 budget that would add another $1.3 trillion
to the national debt.

The budget reveals that the deficit emergency is not so great as to
preclude another stimulus, aka "jobs bill."

Or to require that middle-class tax cuts enacted under The Great Alibi
(George W. Bush) be allowed to expire. Or even to scrub from the
budget such filigrees from olden days as $430 million for the
Corporation for Public Broadcasting, which perhaps made some sense 42
years and 500 channels ago, when public television meant for some
Americans a 33% increase in channels, from three to four.

The depressing minutiae of the moment pale next to two large
possibilities anticipated by Robert Fogel, a Nobel Prize-winning
economist. They concern the rise of American health spending and the
even more dramatic rise of China's economy.

Writing last September for the American, an online journal published
by the American Enterprise Institute, Fogel warned that spending on
health care is going to surge, for two reasons:

By living longer, Americans will become susceptible to more health
problems. By becoming richer they will be able to purchase more
biotechnologies that make health interventions more effective.

"The financial per capita (health care) burden at age 85 and older,"
Fogel wrote, "is nearly six times as high as the burden at ages 50-54"
and "the financial burden of health care for ages 85 and older is over
75% higher per capita than at ages 75-79." A century ago, "the burden
of chronic diseases among elderly Americans was not only of greater
severity but began more than 10 years earlier in the life cycle than
it does today."

But the severity of afflictions increases and the cost of preventing
further deterioration increases with age:

http://www.investors.com/NewsAndAnalysis/Article.aspx?id=520216

"No warning can save a people determined
to grow suddenly rich." - Lord Overstone

February 04, 2010

Beware - The "January Barometer" Points to Bear Markets
by Gary Dorsch

Beware! It was a cold January on Wall Street. The S&P-500 Index lost
3.7% of its value in January, the biggest monthly setback in a year's
time, succumbing to heavy selling, especially after US President
Barack Obama and his economic adviser Paul Volcker, shocked the
markets, by calling for stricter limits on the "proprietary trading,"
activities of Wall Street's titans, - aiming to rein-in their ability
to buy and sell commodities, derivatives, and equities for their own
accounts.

The fear of Washington re-imposing the 1930's-era Glass-Steagall laws,
requiring the separation of commercial and investment banking, rattled
the stock market bulls, and extended the S&P-500's slide to a 6.7%
retreat from its most recent high of 1150, set on January 19th. It's a
worrisome sign for traders who see the first month of the year as a
trendsetter for the next 11-months that follow. According to the so-
called January Barometer, - as January goes, so goes the year.

Since 1950, there were only six-times when January got it wrong in a
big way, giving it an accuracy rate of 90-percent. However, in 2009,
the January Barometer went terribly awry, and its reputation was badly
tarnished. Although the S&P-500 suffered an -8.5% loss in January
2009, portending another year of negative returns, quite the opposite
occurred. The S&P-500 index finished the year with a 23.5% gain,
following a spectacular 65% rebound from its bear market bottom.

The Nasdaq ended up 44%, and the Shanghai Composite Index rallied 80%
for the year. The Euro- Stoxx 600 Index gained 28%, its biggest annual
increase in a decade. Dollar inflows to Brazil totaled $28.7-billion
in 2009, lifting the ballistic Brazilian Bovespastock index up 81%,
and the Brazilian real up 33% against the dollar. The CRB commodities
index climbed about 24% last year, sealed its biggest annual gain
since the 1973 oil crisis.

Unprecedented intervention by the Group-of-20 central banks and
governments, including $13-trillion in bank guarantees, monetization
of government debt, bailouts, and the alteration of FASB #157 in the
United States, was deployed in a coordinated strategy, in order to
overturn the bearish tide, and putting a big monkey wrench in the
January barometer. A nine-month rally was underpinned by expectations
that a global economic recovery, would spur capital spending for
technology, and increase demand for energy, metals and other natural
resources.

However, January 2010 got off to a rocky start, with commodity and
stock markets tumbling worldwide, on signals that the politicians
pulling the strings in the world's two fastest growing economies -
China and India, have given instructions to start withdrawing large
dosages of monetary stimulus. News that Beijing is clamping down very
hard on bank lending, and draining yuan through "Quantitative
Tightening," has sent shock waves from Asia, to London, to Wall
Street, and Brazil, and convinced many speculators to dump over-
extended long positions in key commodities, such as copper, crude oil,
rubber, platinum, and soybeans.

The Reuters-Jefferies CRB Index, a basket of 19-exchange traded
commodities, suffered a loss of 6% in January, led by the copper
market - rudely interrupted with a sharp 9% decline, and crude oil
fell 8%, all tracking losses on the Shanghai stock market, which
surrendered 8.8% of its value. On Feb 1st, Fan Gang, a top advisor to
the People's Bank of China's (PBoC) monetary policy committee, said
Beijing must address the problems caused by excessive liquidity, and
that inflation and asset bubbles are the biggest worries for the
Chinese central bank.

Selling pressure in commodities in January was extenuated by a
stronger US-dollar - which knocked its top rival, the Euro, below
$1.400 for the first time in more than six-months. Big speculators
began to unwind the massive US-dollar carry trade that was utilized
for risky bets in global stock markets. In a virtuous cycle, a
stronger US-dollar makes commodities more costly for users of other
monies, and helps to contain inflation. Ironically, it wasn't the
Federal Reserve that ignited the unwinding of US-dollar carry trades,
but rather the central banks of China and India.

Chinese and Indian policymakers became alarmed by the sharp rebound in
industrial commodities, particularly crude oil, which must be imported
in large quantities, in order to fuel their manufacturing based
economies. Higher food and energy costs feed heavily into the consumer
price indexes of the emerging Asian giants, and adjustments of
interest rates and other monetary tools are often utilized by their
central banks to contain inflationary pressures.

Global demand for crude oil has been buoyed by a powerful rebound in
global factory activity, led by the United States, where the ISM
factory index rose to a reding of 58.4 in January from 54.9 in
December, it's highest level in six-years. India's Purchasing
Managers' Index (PMI) rose to 57.7 in January, consistent with double-
digit increases in industrial production. Overall, the global
manufacturing PMI rose to 56.1 in January, up from 54.6 in December,
which combines data from the United States, Japan, Germany, France,
Britain, China, and Russia.

Over the past four-months, US light crude oil has mostly confined
within OPEC's target zone of $70-to-$80 /barrel. "We are satisfied
with the market situation of $80 /barrel, said Libya's oil chief
Shokri Ghanem on Jan 13th. "I don't think an action will be taken to
increase production, unless the price reaches $100," he said. However,
once crude oil prices surged above the upper limit of OPEC's targeted
range, Beijing acted to snuff-out the crude oil rally as it approached
$84 /barrel.

On Jan 12th, the PBoC shocked the global markets, with its first
meaningful move to tighten liquidity in eighteen months. Armed with
knowledge that China's economy was growing at a 10.7% annualized rate
in the fourth quarter and with its import bill in December soaring to
an all-time high of $112-billion, the PBoC began draining liquidity,
and clamped down on bank loans. Consequently, $12 /barrel of
speculative fluff was wiped-off the crude oil market over the next two-
weeks.

The Bank of India (RBI) followed suit on Jan 29th, surprising
commodity traders, by lifting cash reserve requirements for banks by
more than expected 75-basis points to 5.75%, and warned of mounting
inflation, suggesting its next move may be an interest rate hike.
India's closely watched wholesale price index (WPI) is closely
correlated with the direction of commodities, and the RBI has bumped-
up its forecast for the WPI to an 8.5% inflation rate by year's end.

On Feb 1st, India's central bank chief Duvvuri Subbarao left no doubt
about a tighter monetary policy in the months ahead. "It is the
responsibility of the Reserve Bank to manage expectations about
inflation and what we are going to do in the next few months is to
target inflation," he said. However, the resiliency of key commodities
such as crude oil, buoyed by indications of expanding factory activity
in the top industrialized nations, will make the task of containing
inflation much harder for the PBoC and RBI. Therefore, traders can
expect further Quantitative Tightening (QT) moves in Asian nations and
hikes in interest rates in the months ahead.

"China might increase interest rates once consumer inflation exceeds
the one-year benchmark deposit rate of 2.25%," warned Ba Shusong, a
prominent government adviser on Feb 1st. Consumer prices rose +1.9% in
the year to December, but inflation could accelerate at a 6% clip,
without further tightening measures. Thus, the Shanghai red-chip
market is likely to remain under selling pressure, which in turn, is
bound to cause greater anxiety in world commodity markets.

China consumed 43% of the world's base metal supply last year. Thus,
Beijing is most anxious to engineer a speculative shakeout in the base
metals markets, to help lower the cost of key raw material imports.
Copper was a star performer in the commodity sector last year, nearly
tripling in value, from its lowest levels in December 2008, to as high
as $3.55 /lb in January 2010, riding the boom of a powerful revival of
global demand, including massive Chinese stockpiling.

However, in reaction to Chinese and Indian central bank tightening,
combined with the Euro's descent below $1.400 due to Greece's debt
crisis, copper futures in New York tumbled 20% from their January
high, to around $2.87 /lb today. Global factory activity might begin
to decelerate as Asian governments withdraw high powered fiscal and
monetary stimulus, to prevent inflation from overheating.

Beijing is also aiming to weaken the leverage of the big-3 global
miners, BHP Billiton, Brazilian mining giant Vale, and Rio Tinto,
which control a combined 70% of the world's sea-borne iron-ore market,
ahead of critical contract negotiations. China imported a total of 630-
million tons of iron ore in 2009, up 42% year-on-year, as it produced
a record 700-million tons of steel. China's iron ore import dependency
ratio has increased from 44% in 2002 to 69% last year.

In the first round of iron ore pricing negotiations between Rio Tinto
is asking Japanese and Korean steel mills for a 40% price increase.
However, since Beijing tightened its monetary policy on Jan 12th, iron-
ore prices have tumbled $10 /ton on the Chinese spot market to around
$121 /ton today. Chinese steel mills might wait for iron ore prices to
tumble further on the spot market, before agreeing to a 2010 contract
price, especially if the PBoC plans to tighten its money supply
further.

Gold weighed down by weaker Euro,

Last year, China made great contributions to the world economy, as it
was the first country to recover from the international financial
crisis. As a result of its 4-trillion yuan stimulus spending, China's
debt to GDP ratio is expected to reach 31-percent this year, far less
than the average government debt of OECD countries, which is projected
to almost equal their total GDP this year, and exceed it in 2011.

In sharp contrast to the sound finances of China, backed by $2.4-
trillion of foreign currency reserves, the newly elected government of
Greece's socialist Prime Minister George Papandreou faces massive
pressure to get its fiscal house in order. Among the 16-nations within
the Euro-zone struggling to cope with their budgetary imbalances,
Greece faces the most difficult situation. With a budget deficit of
12.7% of GDP this year, and debt outstanding of €300-billion, Greece's
debt-to-GDP ratio is expected to top 120%. In the short term, Greece
needs to borrow €53-billion before year's end to refinance debt which
is about to mature.

Over the course of the past two-months, the interest rate that Greece
must pay in order to attract foreign capital for 10-years has risen by
175-basis points to 6.75% today. Amid growing doubts that Athens can
repay its debt, the cost of insuring €10-million of Greek government
bonds against default for five-years has soared to €370,000. That
putsGreece among the top-four countries in the world that are most
likely to default, behind Argentina, Ukraine, and Dubai.

On Jan 29th, Greek Prime Minister George Papandreou complained that
his country was being targeted as a weak link, by speculators with
ulterior motives, and seeking to profit handsomely from the possible
break-up of the single European currency. Already, amid the capital
flight from Greek bonds, there's been a simultaneous exodus fleeing
the Euro currency, knocking it below the psychological $1.400 area,
from around $1.500 just two months ago.

In an ironic twist, the "flight for safety" from the Greek bond
market, isn't finding a "safe haven" in the gold market. Instead, the
yellow metal is enduring selling pressure, undermined by the weakening
Euro. The US-dollar is getting stronger by default, largely due to the
unwinding of "carry trades" in global stock markets. Furthermore,
spike rallies in the gold market could meet resistance, as it becomes
increasingly apparent, that China and India are still on course for
further tightening of their money supply (QT) in the months ahead.
Also, G-20 central banks allowed their foreign currency swap
agreements to expire as of Feb 1st, eliminating a huge source of
global liquidity, which at its peak reached $586-billion.

In the event that Greece defaults on its loans, or if its interest
rates climb too high, it could prompt a chain reaction for other weak
links in Euro-zone bond markets, with devastating consequences for the
entire Euro currency system. The most vulnerable to capital flight is
Spain, where the jobless rate hit 18.8% in the fourth quarter of 2009
and the government said it could reach 20% this year.

Already, contagion sales from the troubled Greek bond market are
starting to seep into the Spanish bond market. The credit default swap
rate to insure 10-million euros of Spanish bonds has nearly doubled to
148,000-euros, and yields have climbed 40-basis points higher to 4.15%
over the past two months. Spain, expects a fiscal deficit of 9.8% of
gross domestic product in 2010, but said its ratio of public debt to
GDP should peak at 74% of GDP in 2012, well below Greek levels.

Still, capital flight from the weakest links in the Euro-zone bond
markets is triggering the unwinding of US$ and Japanese yen carry
trades, which in turn, is rattling global commodity and stock markets,
and precious metals. While it's true that the January Barometer was
far off the mark in 2009, one also should remember that it's been
accurate for 90% of the time over the past 60-years. Much will depend
on the degree to which the G-20 central banks drain the global
liquidity swamp, which led that the emergence of asset bubbles in
2009.

This article is just the Tip of the Iceberg of what's available in the
Global Money Trends newsletter. Subscribe to the Global Money Trends
newsletter, for insightful analysis of (1) top stock markets around
the world, (2) Commodities such as crude oil, copper, Gold, Silver,
and grains, (3) Foreign currencies (4) Libor interest rates and global
bond markets, (5) Central banker "Jawboning" and Intervention
techniques that move markets.

GMT filters important news and information into (1) bullet-point, easy
to understand reports, (2) featuring "Inter-Market Technical
Analysis," with lots of charts displaying the dynamic inter-
relationships between foreign currencies, commodities, interest rates,
and the stock markets from a dozen key countries around the world, (3)
charts of key economic statistics of foreign countries that move
markets.

Gary Dorsch
http://www.sirchartsalot.com/

Mr Dorsch worked on the trading floor of the Chicago Mercantile
Exchange for nine years as the chief Financial Futures Analyst for
three clearing firms, Oppenheimer Rouse Futures Inc, GH Miller and
Company, and a commodity fund at the LNS Financial Group.

As a transactional broker for Charles Schwab's Global Investment
Services department, Mr Dorsch handled thousands of customer trades in
45 stock exchanges around the world, including Australia, Canada,
Japan, Hong Kong, the Euro zone, London, Toronto, South Africa,
Mexico, and New Zealand, and Canadian oil trusts, ADR's and Exchange
Traded Funds.

He wrote a weekly newsletter from 2000 thru September 2005 called,
"Foreign Currency Trends" for Charles Schwab's Global Investment
department, featuring inter-market technical analysis, to understand
the dynamic inter-relationships between the foreign exchange, global
bond and stock markets, and key industrial commodities.

Disclaimer: SirChartsAlot.com's analysis and insights are based upon
data gathered by it from various sources believed to be reliable,
complete and accurate. However, no guarantee is made by
SirChartsAlot.com as to the reliability, completeness and accuracy of
the data so analyzed. SirChartsAlot.com is in the business of
gathering information, analyzing it and disseminating the analysis for
informational and educational purposes only. SirChartsAlot.com
attempts to analyze trends, not make recommendations. All statements
and expressions are the opinion of SirChartsAlot.com and are not meant
to be investment advice or solicitation or recommendation to establish
market positions. Our opinions are subject to change without notice.
SirChartsAlot.com strongly advises readers to conduct thorough
research relevant to decisions and verify facts from various
independent sources.

Copyright © 2005-2010 SirChartsAlot, Inc. All rights reserved.

Image rendition and html coding Copyright © 2000-2010 SafeHaven.com

http://www.safehaven.com/article-15702.htm

...and I am Sid Harth

[chhotemianinshallah]

Bloomberg

Yuan Forwards Slip as China Seeks to Cement Economic Recovery

Feb. 4 (Bloomberg) -- Yuan forwards declined on speculation the
Chinese government will refrain from allowing currency gains to help
sustain the economy’s recovery. Bonds were little changed.

Central bank Deputy Governor Zhu Min said last weekend there were no
immediate plans to let the currency strengthen and China would
continue with its current accommodative fiscal and monetary policies.
The government today rejected President Barack Obama’s comments that
the yuan should appreciate, saying its currency has little impact on
the U.S. trade deficit.

“Overseas bets on the yuan’s appreciation have retreated recently,”
said Shi Lei, a Beijing-based analyst at Bank of China Ltd., the
nation’s third-largest lender. “China won’t let the yuan gain very
soon as the export sector is still the weakest component in
contributing to economic growth.”

Twelve-month non-deliverable yuan forwards fell 0.1 percent to 6.6525
per dollar as of 5:36 p.m. in Hong Kong, according to data compiled by
Bloomberg. The contracts reflected traders’ bets the currency will
advance 2.6 percent from the spot rate of 6.8269.

Obama yesterday said the U.S. would press China on the currency “to
make sure that our goods are not artificially inflated in price and
their goods” aren’t deflated.

The exchange-rate has “never been the major cause of the U.S. trade
deficit,” China Foreign Ministry spokesman Ma Zhaoxu told reporters
today in Beijing. “Accusations and pressure will not help solve the
issue.”

Earlier Appreciation

China will keep its exchange rate stable this year, said Bank of
China’s Shi. The nation has kept the yuan at about 6.83 per dollar
since July 2008, after allowing its currency to strengthen 21 percent
in the previous three years.

Vice Premier Li Keqiang reaffirmed the nation’s stable yuan policy on
Jan. 28 at the World Economic Forum in Davos, Switzerland. Zhu,
speaking Jan. 30 at the same meeting, said stability is important for
China’s economy and that a “stable exchange rate” during a crisis “is
good for China and good for the world.”

China’s Purchasing Managers’ Index was a seasonally adjusted 55.8 in
January, after reaching a 20-month high of 56.6 in December, the
Federation of Logistics and Purchasing reported this week in Beijing.
A number above 50 indicates manufacturing expanded. Exports climbed
17.7 percent in December from a year earlier, the first increase in 14
months, official figures show.

China may let the yuan resume appreciation as early as March to help
tame inflation as overseas sales recover from a slump and the U.S. and
Europe step up calls for the currency to be allowed to strengthen,
Zhang Ming, a state researcher wrote in an article published in the
China Securities Journal.

Export Rebound

The yuan may gain as much as 5 percent in 2010, wrote Zhang, deputy
chief of the International Finance Research Center at the Chinese
Academy of Social Sciences, which advises the government on economic
policy.

“The rebound in exports means aggregate demand in China’s economy is
headed into an overheating zone again,” he wrote. “It’s relatively
difficult to tighten fiscal and monetary policies, while the yuan’s
appreciation will help accomplish the same tightening effect.”

A stronger yuan would help damp inflation by lowering the local-
currency cost of the raw materials China imports. Consumer prices rose
1.9 percent from a year earlier in December, the biggest increase
since November 2008.

Bonds Stable

Government bonds were little changed after the central bank kept its
three-month bill yield unchanged for a second week in open-market
operations today.

The People’s Bank of China sold 42 billion yuan ($6.2 billion) of 91-
day bills at a rate of 1.4088 percent. The monetary authority earlier
this week offered one-year bills at 1.9264 percent, unchanged for a
second week.

The yield on the 3.48 percent note due in July 2019 was 3.47 percent
and its price was 100.08 per 100 yuan face amount, according to the
National Interbank Funding Center.

The central bank injected capital into the financial markets for a
third week. Net inflows rose to 220 billion yuan this week from 146
billion yuan a week earlier, according to data compiled by Bloomberg.

--Belinda Cao, Judy Chen. Editors: James Regan, Shanthy Nambiar

To contact the editor responsible for this story: Sandy Hendry at
[phone] or ***@bloomberg.net.

http://www.businessweek.com/news/2010-02-04/yuan-forwards-slip-as-china-seeks-to-cement-economic-recovery.html

India, China playing major role in economic recovery: IMF

IANS

Published on Fri, Feb 05, 2010 at 12:13,
Updated on Fri, Feb 05, 2010 at 12:37 in World section

ECONOMY RECOVERY: India and China are contributing a lot to global
growth.

Washington: India and China with their large economies growing at 7
per cent and 10 per cent respectively are playing a significant role
in global economic recovery, according to a top International Monetary
Fund (IMF) official.

"It's actually true, just by looking at the numbers and the weights
that they have in the global economy," said Kalpana Kochhar, Deputy
Director, Asia and Pacific Department.

"When you have two relatively large economies growing at 7 per cent
and 10 per cent, respectively, India and China, they are contributing
quite a lot to global growth," she said.

Noting that IMF forecast for global growth for next year is close to 4
per cent, of which advanced countries are only contributing less than
2 per cent, Kochhar said "So the rest of it is in fact coming from
emerging markets, and from within emerging markets, a large part from
China and India."

"So it's a significant contribution that's coming from these two
countries," she added noting India was one of the first countries to
recover from the crisis.

"It benefited from the normalisation of global financing conditions
and the return of risk appetite, but also benefited from fiscal
stimulus that was already in the pipeline and from timely monetary and
further fiscal easing after the crisis broke out."

After annual Article IV consultations with India last month, IMF has
projected India's growth to reach 6.75 per cent for the fiscal year
ending on March, 2010, and then rising to 8 per cent for the year
ending on March, 2011.

IMF "believed there are a lot of indications already in the pipeline
that suggest that this recovery will in fact occur and will broaden,"
Kochhar said. But "along with the recovery, we've seen an upward rise
in prices. Inflation has picked up. Some of it is due to food, but
some of it is also due to demand pressures."

Against that background, IMF welcomed the moves that were taken by the
Reserve Bank of India (RBI) just last week to tighten monetary policy,
Kochhar said. "And we believe that, given current trends, there should
be further gradual withdrawal of monetary accommodation."

While the stimulus measures were instrumental in supporting activity
during the crisis, it has pushed the deficit into double digits again,
and the debt back to nearly 80 per cent, Kochhar said.

IMF, therefore, recommend that the fiscal adjustment strategy begin
with this next budget suggesting that it should be anchored on a debt
target along with some nominal expenditure rules.

However as noted in its report just setting a debt target isn't
enough. It has to be accompanied by measures on both the revenue side
and the expenditure side, particularly subsidy reform, Kochhar said.

The third issue that IMF focused on was in financial sector reform,
particularly reforms that would be beneficial to finance the major
infrastructure investment that the government of India is planning
over the next few years, she said.

http://ibnlive.in.com/news/india-china-playing-major-role-in-economic-recovery-imf/109703-2.html

Bloomberg

China’s 2009 Fiscal Revenue Growth Exceeds Target (Update1)
February 05, 2010, 04:07 AM EST

(Adds tax revenue in second paragraph.)

Feb. 5 (Bloomberg) -- China’s fiscal revenue growth exceeded targets
last year as a recovery in the world’s third- largest economy boosted
tax income, offsetting higher state spending, government data show.

State revenue rose 11.7 percent last year to 6.85 trillion yuan ($1
trillion), the Ministry of Finance said on its Web site today. That
compares with the government’s target of 8 percent set in March. A
rebound in the economy and rising consumer spending helped consumption
tax revenue surge 85.3 percent, while taxes on car purchases rose 17.5
percent, the data show.

China’s economic growth accelerated to 10.7 percent last quarter as a
4 trillion-yuan stimulus package and record lending drove car sales
and a property boom. Passenger car sales surged 53 percent last year,
prompting the nation to surpass the U.S. as the world’s No. 1
automobile market.

Government expenditure expanded 21.2 percent to 7.59 trillion yuan,
the ministry said. That would result in a budget deficit of 740
billion yuan, according to Bloomberg calculations. That compares with
the record deficit of 950 billion yuan that the government originally
forecast, which included 200 billion yuan of provincial bonds planned
for sale in 2009 to fund stimulus spending.

Fiscal revenue in December surged 55.8 percent from a year earlier to
508.4 billion yuan, while spending increased 17.1 percent to 1.96
trillion yuan, according to today’s statement.

--Li Yanping. Editors: Stephanie Phang, Russell Ward

To contact the editor responsible for this story: Chris Anstey at
[phone] or ***@bloomberg.net

http://www.businessweek.com/news/2010-02-05/china-s-2009-fiscal-revenue-growth-exceeds-target-update1-.html

Bloomberg

China Current Account Surplus Falls 35%, SAFE Says (Update1)
February 05, 2010, 01:27 AM EST

(Adds economist comment in fourth paragraph.)

Feb. 5 (Bloomberg) -- China’s current-account surplus fell 35 percent
last year as exports accounted for a smaller percentage of the world’s
fastest-growing major economy, the State Administration of Foreign
Exchange said.

The current-account surplus, the broadest measure of trade, narrowed
to $284.1 billion from a year earlier, the foreign- exchange regulator
said in a statement today. China’s capital and financial account
surplus, which tracks investment flows, was $109.1 billion in 2009,
the regulator said, without giving a comparative figure.

A smaller balance of payments surplus may ease pressure on China to
resume appreciation in the yuan, which was re-pegged to the dollar in
July 2008, following a 21 percent appreciation in the previous three
years. The government this week rejected President Barack Obama’s
comments that the currency should be allowed to strengthen, saying the
exchange-rate has little effect on the U.S. trade deficit.

“Chinese leaders will continue to resist foreign pressure on their
currency to help secure the nation’s recovery,” said Tao Dong, a Hong
Kong-based economist at Credit Suisse Group AG.

The current-account surplus accounted for 5.8 percent of gross
domestic product last year, compared with 9.9 percent of GDP in 2008
and 11 percent in 2007, Guan Tao, head of SAFE’s international
payments department, said at today’s briefing. The decline reflects a
shift in China’s economic growth to being less dependent on exports
and more driven by domestic consumption, Guan said.

‘Reasonable Level’

“Theoretically speaking, the decline in the current- account
percentage showed our currency rate has come closer to a reasonable
level,” Guan said.

Twelve-month non-deliverable yuan forwards dropped 0.2 percent to
6.668 per dollar as of 1:25 p.m. in Shanghai, extending this week’s
decline to 0.6 percent, according to data compiled by Bloomberg. It
earlier touched 6.674, the weakest level since Jan. 7. The contracts
reflect traders’ bets the currency will advance 2.4 percent from the
spot rate of 6.8273.

Economic growth in China accelerated to 10.7 percent in the fourth
quarter after the government introduced a 4 trillion yuan ($586
billion) stimulus package and state-owned banks extended a record
amount of new loans to offset a slump in exports.

Record Reserves

China’s foreign exchange reserves rose to a record $2.4 trillion last
year. Of the $453 billion increase in reserves in 2009, $382.1 billion
came from net trading gains and $71 billion from fluctuations in
exchange-rates, Guan said.

Cross-border capital inflows will increase in 2010 as the global
economy recovers, China Forex reported on its Web site yesterday,
citing Yi Gang, director of SAFE. The international payments surplus
may increase this year from 2009, China Forex said. Improving the
balance of payments remains an “arduous” task, the magazine cited Yi
as saying.

The capital and financial account surplus last year included $36.5
billion of net inflows from foreign direct investment, according to
SAFE’s statement. Total foreign direct investment in China declined
2.6 percent to $90.03 billion in 2009, the commerce ministry said Jan.
15.

--Belinda Cao. With assistance from John Liu and Li Yanping in
Beijing. Editors: Shanthy Nambiar, Sandy Hendry

To contact the editor responsible for this story: Sandy Hendry at
[phone] or ***@bloomberg.net.

http://www.businessweek.com/news/2010-02-05/china-current-account-surplus-was-5-8-of-2009-gdp-safe-says.html

...and I am Sid Harth

[chhotemianinshallah]

Friday, February 5, 2010
Shoe Made Hu 2: China Takes EU to WTO on Shoes

If the title of this post sounds like a bad kung fu movie, let me
explain. Probably inspired by the Bush incident in Iraq, some guy
decided to throw a shoe at Chinese President Wen Jiabao while he was
speaking at fancy pants Cambridge University. With this incident in
mind, I entitled a post featuring excerpts from an interview with Wen
Jiabao in the Financial Times Shoe Made Hu since it rhymes nicely with
his boss's name. In normal situations, I'd have featured a video clip
of AC/DC's "Who Made Who." However, as I've overdosed on video clips
in recent days, I 'll leave you to view it on your own if so desired
since these things slow down page loading times considerably.

Anyway, the reason for this post is that the Chinese have now taken
the EU to task for continuing to levy what it believes are unjust anti-
dumping duties on footwear from the PRC--another footy episode
involving China. Late last year, the EU extended anti-dumping duties
on Chinese footwear by default:

EU-China trade tensions were further strained on Thursday (4
February), after China filed a formal complaint with the World Trade
Organisation over European shoes tariffs. The Chinese government said
European tariffs "violated various obligations under the WTO and
consequently caused damage to the legitimate rights and interests of
Chinese exporters." Brussels immediately hit back, saying the tariffs
had been imposed in response to the "unfair trade practices" pursued
by the Asian powerhouse.

"Anti-dumping measures are not about protectionism; they are about
fighting unfair trade," said the European Commission's acting trade
spokesperson, John Clancy. "The decision to impose measures was taken
on the basis of clear evidence that dumping of Chinese products has
taken place and that this is harming the otherwise competitive EU
industry," he added...

On 22 December, EU countries voted to extend anti-dumping duties on
Chinese and Vietnamese leather footwear imports for a further 15
months as of January 2010. In total, 13 member states voted against
the commission's proposal to extend the duties, nine voted in favour
and five abstained. Under EU anti-dumping rules, abstentions count in
favour of a commission proposal. The European duties add between 9.7
percent and 16.5 percent to the import price of Chinese shoes and 10
percent to Vietnamese shoes.

It is interesting how European Council (EC) voting functions, where
abstention equals assent. To me, this gives European nations that are
wary of offending China but are keen on maintaining these sanctions a
neat loophole. Interestingly enough, Lord Mandelson--the fellow who
previously implemented the anti-dumping duties while still at
Brussels--recently encouraged that they be removed. Prior to becoming
the first EU foreign affairs minister, then-EU Trade Commissioner
Baroness Ashton (Mandelson's successor) decided against recommending
their removal, thus setting the stage for the vote mentioned above
that has extended the duties. The vote itself reflects an internal
split: Italy and Spain would like to shield their (remaining) shoe
manufacturers, while countries that hardly make them anymore and
import lots of them like the UK and the Netherlands have voiced
opposition. Clarks, the largest shoe retailer in Britain, is one of
those on China's side for obvious reasons. From the FT in November of
2009:

Extending anti-dumping duties against footwear from China and Vietnam
puts Europe's long-term commercial relations with both countries at
risk, the UK business secretary has warned. There was no longer
justification for the duties, said Lord Mandelson, who initiated the
measure in 2006, as he expressed concern about waning enthusiasm for
free trade across the European Union as a result of the economic
crisis. "You have a more inward-looking 'let's keep hold of what we
have' attitude growing within member states," he said after a speech
in Brussels where he called for a stronger and more decisive Europe.
"The job of the European Commission is obviously to take note of the
political pressures but not to be swayed by them," he said.

Footwear duties have proved highly divisive since Lord Mandelson, as
European trade commissioner, first imposed them when low-price imports
took market share from small European manufacturers, particularly in
Italy and Spain. At the time, the Commission reported "compelling
evidence" of dumping and the trade commissioner said: "It is important
that we act against unfair trade while encouraging legitimate and
competitive trade from emerging economies. We do not target China and
Vietnam's natural competitive advantages, only unfair distortions of
trade."

Tariffs of 16.5 per cent for Chinese imports and 10 per cent for
Vietnamese were set for a two-year period instead of the typical five,
reflecting the deep misgivings of other member states, such as the UK
and the Netherlands, which have derided them as protectionist. Large
footwear retailers, such as Clarks and Adidas, have also opposed the
measures.

The Commission and member states are expected to reach a final
decision on the matter on November 19. Baroness Ashton, trade
commissioner, last month issued a preliminary recommendation for a 15-
month extension, arguing that European market share had only just
begun to recover.

Now back to the present: Mandy's changed reasoning is utterly obscure
to me. In any event, the European footwear trade association is siding
with China:

The European Footwear Alliance, which represents several big global
footwear brands, including Adidas, ECCO and Timberland, and opposes
the duties, said in a statement that it “shares China’s view” that the
E.U. decision was based on flawed analysis. “Ironically the measure
hurts European business and consumers the most,” it said.

It will be interesting to see how this matter plays out. As with the
US, China-EU relations are not hunky-dory. I guess that's always going
to be the danger with mercantilist strategies.

UPDATE: I almost forgot--here is the Ministry of Finance and Commerce
(MOFCOM) statement in rather mangled English.

Posted by Emmanuel at 12:25 AM

http://ipezone.blogspot.com/2010/02/shoe-made-hu-2-china-takes-eu-to-wto-on.html

Market Commentary From Monty Guild
Posted: Feb 04 2010
By: Monty Guild
Post Edited: February 4, 2010 at 3:04 pm

WORLD MARKETS DANCE TO CHINA’S TUNE… AND THEY ARE MISTAKING A MODEST
SLOWDOWN IN TEMPO FOR A CALL TO STOP THE MUSIC

World markets are frightened that the fastest growing economy in the
world will slow too rapidly. Thus, when China tried to slow real
estate speculation with a series of actions over the last three weeks,
many global investors panicked and sent stocks down in most of the
world.

We find this interesting for the following reasons:

China is now recognized as the engine of world economic growth, with
over $2.4 trillion U.S. dollars in surplus capital and a fast growth
rate. People are looking more and more to China. The new saying is,
“If China sneezes, the world catches a cold.” More and more countries
are exporting to China, India, and non-Japanese Asia; and less to the
U.S. and Europe.

Investors who do not know much about China’s economics are panicked
that China’s economy will somehow implode because the government is
trying to reign in speculation in real estate. This is patently
wrong. China will grow rapidly in 2010.

There is a difference between the real estate speculation that is
currently taking place in China with the speculation that occurred in
the U.S. and Europe that eventually imploded.

In China, real estate speculation has been the result of large capital
surpluses in the hands of Chinese investors. These investors have few
options for investing their capital. Their options are:

A) They can buy stocks, although most of them already have stock
portfolios.
B) They can purchase physical commodities like gold, but not futures
on commodities.
C) They can buy residential real estate (apartments) to rent or to
hold for appreciation.
D) They can hold bank deposits which pay a low interest rate.

Contrary to the developed markets of the North America, Europe, and
Japan, China has virtually no bond market. In addition, sending money
overseas for investment is close to impossible for Chinese investors.
Within the developed world, bonds and foreign investments soak up a
lot of capital, but this is not so in China. For these reasons, China
has a large amount of surplus capital looking for a place to invest.

CHINA’S GDP WILL GROW BY AT LEAST 9% IN 2010, EVEN IF THE REAL ESTATE
BUBBLE DEFLATES

Today, wealthy Chinese who invest in real estate put 50% down and pay
higher interest rates than an owner occupied apartment purchaser would
pay.

Compare this to the low down payment, or no down payment, real estate
speculation that we saw 2-3 years ago in the developed world. In
China, there is no speculation based on the feeling that they can
quickly sell for a big mark-up; thereby it is OK to take on a lot of
leverage.

The Chinese economy is booming because consumer and infrastructure
spending are growing at double-digit rates. Accordingly, a decline in
real estate activity as the government brings the real estate bubble
under control will not cause the economy to grow by less than 9% in
2010.

Some investors have come to believe that lending to industrial and
consumer companies will stop as China reigns in real estate lending.
We disagree with this theory. There is no shortage of financing
available for other types of businesses. Businesses can get financing
to buy inventories and production machinery. Capital is available for
Chinese companies to buy smaller competitors in China and abroad (the
news media is full of stories of Chinese companies buying foreign
suppliers).

In short, China is not going to implode if the Chinese government is
successful at deflating the real estate bubble. The government
believes that the currently too-rapid growth will moderate to a more
acceptable 9-10% rate if the real estate bubble deflates.

SUMMARY

The current market declines in global markets will lead to a buying
opportunity in Asian and selected Latin and Eastern European markets
within 2 to 3 months. When the decline has run its course, we will
also look closely at opportunities in Canada, Australia, Europe and
the U.S.

In 2010, we expect to see China will grow by 10%, India by 8%, Brazil
and non Japan Asia by 5%. Some other well-run countries will grow in
excess of 5%. This means corporate profits in these nations will grow
substantially, leading to higher prices for stocks.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

http://jsmineset.com/2010/02/04/in-the-news-today-450/

By staff reporter Liu Zhijie 02.04.2010 13:52
Hush Money Journalism
Systemic corruption in local governments has created a rise in
professional blackmail journalists

Later last year, a dozen journalists were discovered to have taken
hush money totaling 2.6 million yuan, according to a Hebei Provincial
government report released January 9. Local authorities in Weixian,
Hebei Province bribed journalists, including four from national media,
to silence a mining accident that occurred July 14, 2008. Crowds of
journalists lined up for hush money to be handed out after a local
coal mine accident in Shanxi Province Nov. 3, 2008.

As these cases show, the lure of money continues to dull the
consciences of a few journalists. But as for whether only the
journalists should be responsible, Professor Zhan Jiang from the
Beijing Foreign Studies University said that the brunt of criticism
ought to be directed at local government officials.

Officials in areas with intense mining, such as Hebei and Shanxi, are
frequently found attempting to conceal accidents from the public.
Professor Zhan said local authorities in mining areas have come to
rely on concealing work safety accidents through cutting information
off from the public and using public funds for bribes. Zhan says this
systemic corruption creates "professional blackmail journalists."

Corrupt journalists have their roots in the current institutional
structure, says Zhan. Recent changes in the landscape of the Chinese
media from market reforms have shifted the flow of government funds to
media outlets. Meanwhile, advertising has become a buyer's market in
China, resulting in a more competitive environment for revenues.
Journalists have been reacting to the transition in different ways.

Ultimately, the corruption of the media boils down to government
corruption. Zhan Jiang stressed the responsibility of the propaganda
department in government administration but he said the General
Administration of Press and Publication (GAPP) shouldn't be
responsible for the supervision journalists, beyond approving
professional qualifications of journalists.

The current reliance on mere government supervision has only created
an atmosphere where journalistic ethics are systematically
eviscerated. As Chinese society becomes more open, legal regulations
for bribery should replace government supervision over media.

(Translated by GC)

Full Article in Chinese: http://economy.caing.com/2010-02-03/100113090.html

http://english.caing.com/2010-02-04/100113698.html

China and U.S. clash again, this time over trade and currency
By Chris Dade.

With U.S.-Chinese relations having already deteriorated during the
last week due to a proposed arms deal between the U.S. and Taiwan and
a possible meeting between President Obama and the Dalai Lama the two
countries are now clashing over trade.

The latest strain on relations between Washington and Beijing resulted
from comments U.S. President Barack Obama made during a meeting on
Wednesday with Senate Democrats.

While the BBC notes that the President warned against the U.S.
adopting a protectionist stance he reportedly did state that existing
trade agreements must be more strictly enforced and mentioned China
when talking about countries opening up their markets "in reciprocal
ways". He added:

One of the challenges that we've got to address internationally is
currency rates and how they match up to make sure that our goods are
not artificially inflated in price and their goods are artificially
deflated in price
And while the comment regarding currency rates did not specifically
mention China it has drawn an angry response from Beijing where,
regardless of its intention, it has been taken as criticism of Chinese
policy regarding the value of the yuan, sometimes referred to as the
renminbi.

Observing that the Foreign Ministry has no influence over China's
policy of suppressing the value of its currency, thereby making its
exports cheap and creating jobs in its manufacturing sector, Reuters
reports that it was a spokesman from that ministry, Ma Zhaoxu, who
responded to President Obama's comments at a press briefing on
Thursday. Mr Ma said:

At the moment, looking at international balance of payments and forex
market supply and demand, the level of the yuan is close to reasonable
and balanced

The BBC indicates that Mr Ma continued:

Trade co-operation between the US and China is mutually beneficial. We
hope the American side sees the problems within the China-US trade co-
operation objectively and reasonably and continues to negotiate on an
equal basis. Accusations and pressure do not help to solve the problem

According to AFP China has also argued that pegging the yuan to the
dollar has a stabilizing effect. Furthermore China has supposedly
claimed that its contribution to the recovery of the global economy
was a $565 billion stimulus package, although AFP does not make clear
what form that stimulus package took or whether it was a reference to
a package solely directed at the Chinese economy.

But despite the seemingly tough words from President Obama the current
administration, like the administration of George W. Bush, has refused
to name China as a currency manipulator.

Reuters says that it has failed to do so on two occasions, one such
occasion was in October 2009 when the People's Daily reported that
accusing China of currency manipulation could lead to economic
sanctions on Beijing as the U.S. presented its case to the World Trade
Organization.

There will be another opportunity in April for the Obama
administration to declare China a currency manipulator.

Among the politicians from both sides of the aisle unhappy with
Chinese economic policy is Chuck Grassley, the Republican Senator from
Iowa who is the Ranking Minority Member on the Senate Committee on
Finance. Senator Grassley is quoted by AFP as saying:

China is a big beneficiary of international trade, yet it fails to
allow its currency to float freely. That's not right for such a major
economy, and American exporters are cheated as a result

The Washington-based Peterson Institute for International Economics is
said to have estimated that the yuan is currently 30 percent below its
true value compared to all world currencies and 40 percent undervalued
in comparison to the dollar.

Which might explain why figures released by the Chinese authorities in
December show that China exported goods worth $1.2 trillion in 2009,
enabling it to overtake Germany as the leading exporter in the world.
Germany's exports in 2009 are thought to have been worth $1.18
trillion.

With the markets and economic analysts allegedly dismissing any
prospect of the U.S. changing its stance towards China when it comes
to trade, the value of China's currency is considered a likely topic
when G7 Finance Ministers and central bank governors meet in Canada
this coming weekend.

http://www.digitaljournal.com/article/287017

Soros: China’s first recover from the financial crisis

is noteworthy that one of the major factors contributing to China’s
economy is relatively quick exit from the crisis, said Soros, speaking
to teachers and students of the University of Hong Kong, it became the
“ultimate isolation from the global financial system.”

“The global financial crisis has hurt China only” tangential “,
without affecting the actual economic system of this country, – has
explained the American financier. – In addition, Beijing initially had
great potential to effectively support, if necessary, the national
economy priori and was in better condition to withstand impact of the
crisis “.

http://elnotes.com/11293.html

...and I am Sid Harth

[chhotemianinshallah]

With suspicious statistics, China obscures economyRate this story

By David M. Dickson

China has acknowledged that its export-driven economy took a beating
in 2008 and 2009, but Western analysts, most of whom are suspicious of
Beijing's willingness to concede downturns, think China may have even
slipped into a recession.

Because of political pressures and different methods of measuring,
Chinese economic statistics can be notoriously suspect when compared
with Western numbers. But the consensus among Western economists,
including earlier skeptics, is that China has experienced an
especially strong rebound since early 2009 from the global recession.

The Chinese government reported in late January that its economy
expanded by 10.7 percent during 2009, measured on a fourth-quarter-
over-fourth-quarter basis.

While official data point to a robust recovery, Chinese statistics may
have masked a significant economic contraction at the height of the
global financial crisis, according to analyses by Thomas G. Rawski, an
economics professor at the University of Pittsburgh, and China
specialist Gordon Chang.

"I agree with the trajectory and the timing of the recovery," Mr.
Rawski said, "but the extent of the Chinese slowdown is far larger
than suggested" by the official data.

Although China's economic figures do not reveal a definitive
contraction during the global downturn, Mr. Rawski thinks China
experienced an outright recession, when its gross domestic product
(GDP) declined during one or more quarters.

"China is experiencing a classic V-shaped recovery," Mr. Rawski said.
He thinks the downward portion of the "V" dipped into negative
territory, probably during the first half of 2009.

One problem with China's method of economic measurement is politically
motivated fudging of the numbers, but another is a different method of
calculation.

Other major economic powers measure growth from one quarter to the
next, meaning that a recession will show up in the form of negative
growth figures. But because China measures growth by comparing a three-
month period with the same quarter in the previous year, a recession
in one or two quarters could be masked by intervening quarters of
robust growth. As a result, "negative growth" rarely or never happens
in China.

For example, that 10.7 percent figure from China's National Bureau of
Statistics for the fourth quarter of 2009 was a year-over-year growth
rate compared with the fourth quarter of 2008. Similarly, the 6.1
percent growth rate reported for the first quarter of 2009 was a year-
over-year comparison with the January-to-March period of 2008.
Likewise, the 7.9 percent growth rate for the second quarter of 2009
measures growth against the same quarter in 2008. The three growth
rates - 10.7 percent, 7.9 percent and 6.1 percent - even if accurate,
suggest a significant slowing of the economy in late 2008 and early
2009.

Regardless of accounting details, Mr. Chang and Mr. Rawski said, other
Chinese economic figures are inconsistent with Beijing's official
picture of robust growth.

Mr. Chang pointed to plunging export numbers and evidence of flat
retail sales. Mr. Rawski cited official data showing that electricity
output during the first half of 2009 was lower than it was during the
first half of 2008.

"If electricity output is declining, I find it hard to believe that
GDP is growing far ahead of electricity production," he said. That
phenomenon hasn't happened since the Asian financial crisis of the
late 1990s, when Mr. Rawski also argued that official Chinese
statistics were covering up a recession.

In a widely cited paper, "What is happening to China's GDP
statistics?" published in 2001 in the China Economic Review, Mr.
Rawski questioned how China's economy could have expanded by the
reported 34.5 percent during the 1998-to-2001 period when, over the
same period, energy use declined by 5.5 percent and employment
increased by just 0.8 percent.

Mr. Rawski and Mr. Chang detected similar statistical anomalies during
the recent global economic crisis, which ended during the second half
of last year in large part because of the strength of Asia's rebound,
propelled especially by China.

During the intervening decade between the Asian financial crisis and
the latest downturn, China consistently reported annual growth rates
in or near double-digit territory. Mr. Rawski said he had no dispute
with those growth rates.

And then there are the political motivations.

"They couldn't admit to poor performance because the government
believed it was necessary to maintain the image of a vibrant economy,"
Mr. Chang said.

In early 2009, Chinese Prime Minister Wen Jiabao projected 8 percent
growth for 2009, making it unlikely that official data would
contradict him, Mr. Chang said.

However, at the time Mr. Wen issued his forecast, many reports from
China revealed that tens of millions of workers lost their
manufacturing jobs in coastal factories that were shuttered because
China's exports had collapsed. Such an acknowledgment of mass
unemployment could invite rampant speculation from abroad about
imminent social unrest.

As it happened, year-over-year growth in 2009 came in at 8.7 percent,
indispensably achieved by the booming fourth quarter. That strong
growth figure was "probably too good to be true," Mr. Chang said. "The
reported 10.7 percent rate catapulted them over the 8 percent line,
with room to spare," he said with a note of skepticism.

The national government thinks an 8 percent growth rate is needed to
absorb the country's expanding labor force, including migrants from
the rural areas into large cities and manufacturing hubs.

"The 8 percent number has been repeated so many times, including by
Chinese government officials, that it has taken on a life of its own,"
said Nicholas Lardy, an analyst on the Chinese economy at the Peterson
Institute for International Economics.

Mr. Lardy, who does not think China cooks its economic books in any
substantive way, even to mask downturns, rejects the basis for the 8
percent growth requirement.

"There is no one-to-one relationship between China's growth rate and
the amount of jobs created," he said. "That is too simplistic,
especially for China."

Mr. Lardy said China has not generated as many jobs over the past few
years, compared with earlier periods, because its unbalanced economy
is disproportionately geared toward huge investments in capital-
intensive industries.

Ironically, he said, China could create more jobs with balanced growth
of 6 percent, including a focus on labor-intensive service industries,
than it is creating by pursuing economic policies aimed at achieving
an 8 percent, or higher, growth rate.

Derek Scissors, an Asia scholar at the conservative Heritage
Foundation, said China systematically underreports its economic
activity, only to have to upwardly revise its growth rate after taking
a more complete picture.

"In 2004, China conducted a nationwide census and discovered its
economy was almost 17 percent larger than previously reported," Mr.
Scissors noted last week in a paper. "The service sector was found to
be larger than previously thought, as was also the case in the 1993
census."

Mr. Scissors says he thinks that China is "still undercounting" its
economic growth. "A proper census would show that China's economy has
been larger than announced at the time for every single year in the
reform period" that began more than 30 years ago.

http://washingtontimes.com/news/2010/feb/05/china-obscures-economy-in-great-wall-of-statistics/?page=2

China Still Holds Decidedly Different View on the Yuan's Value
Posted Feb 4th 2010 4:40PM by Joseph Lazzaro

China is sending signals that efforts to assimilate the giant Asian
economy into the international financial system are not likely to
include measures that Beijing has heretofore resisted.

One tack China is opposed to: changes in the yuan's value that it does
not see as acceptable.

Ma Zhaoxua, a China Foreign Ministry spokesman, said at a regular news
conference, "wrongful accusations and pressure will not help solve
this issue," The New York Times reported Thursday.

On Wednesday, President Barack Obama, while stopping short of calling
China a currency manipulator, said China's economic policies were
harsh, and that the United States had to make sure that American goods
were not artificially inflated in price, putting the U.S. "at a huge
competitive disadvantage," The Times reported.

China keeps it currency, the yuan, pegged to the dollar at roughly
6.83 yuan to the dollar. The peg has the effect of substantially
decreasing the price of China's exports to the U.S., which in many
cases gives its companies a price advantage.

Monetary/Economic Analysis: Internet censorship, apparent hacking of
U.S. companies, the Dalai Lama's upcoming visit to the U.S. -- let's
face it, this is not the best time in U.S.-Sino relations. Even so,
China knows that it's in its interest, as well as the U.S.'s, to
resume the process of the yuan's value adjustment to market forces.
The yuan has not been adjusted since 2008, and no one is suggesting a
wholesale move to free-float the yuan: a small adjustment of 3-5% is
in order, followed by another 3-5% appreciation in the fall. The
benefits to China: 1) it will help lower domestic inflation and thus
encourage domestic consumption, and 2) it will lower the temperature
in the U.S. Congress: protectionist sentiment has been growing to
counter what some in Congress are calling China's 'monetary
mercantilism' with the yuan.

http://www.bloggingstocks.com/2010/02/04/china-still-holds-decidedly-different-view-on-the-yuan-s-value/

OPINIONFEBRUARY 4, 2010, 11:50 P.M. ET.

Why Antagonize China?
The revitalization of Asian capitalism is the most important positive
event in the world in the last 30 years.
.
By GEORGE GILDER

While attempting to appease a long list of utterly unappeasable foes—
Iran, North Korea, Hamas, Hezbollah, and even Hugo Chávez—today the
U.S. treats China, perhaps our most crucial economic partner, as an
adversary because it defies us on global warming, dollar devaluation,
and Internet policy.

It started last June in Beijing when U.S. Treasury Secretary Timothy
Geithner lectured Chinese Premier Wen Jiabao, who recoiled like a man
cornered by a crank at a cocktail party. Mr. Geithner was haranguing
the Chinese on two highly questionable themes, neither arguably in the
interests of either country: the need to suppress energy output in the
name of global warming—a subject on which Mr. Geithner has no expertise
—and the need for a Chinese dollar devaluation, on which one can
scarcely imagine that he can persuade Chinese holders of a trillion
dollars of reserves. This week in a meeting with Senate Democrats,
President Obama continued to fret about the dollar being too strong
against the yuan at a time when most of the world's investors fear
that the Chinese will act on his words and crash the dollar.

View Full Image

Associated Press

U.S. Treasury Secretary Tim Geithner and Chinese Premier Wen Jiabao

.Meanwhile, Secretary of State Hillary Clinton and the president's
friends at Google are hectoring China on Internet policy. Although
commanding twice as many Internet users as we do, China originates
fewer viruses and scams than does the U.S. and with Taiwan produces
comparable amounts of Internet gear. As an authoritarian regime, it
obviously will not be amenable to an open and anonymous net regime.
Protecting information on the Internet is a responsibility of U.S.
corporations and their security tools, not the State Department.

Yes, the Chinese are needlessly aggressive in missile deployments
against Taiwan, but there is absolutely no prospect of a successful
U.S. defense of that country. Sending them $6 billion of new weapons
is a needless provocation against China that does nothing valuable for
the defense of the U.S. or Taiwan. Yes, the Chinese have also spurned
America's quixotic effort to herd the gangs of anti-Semitic, anti-
American oil-dependent felines at the United Nations to undertake an
effective program of economic sanctions against Iran.

A foreign policy of serious people at a time of crisis will recognize
that the current Chinese regime is the best we can expect from that
country. The Chinese revitalization of Asian capitalism remains the
most important positive event in the world in the last 30 years. Not
only did it release a billion people from penury and oppression but it
transformed China from a communist enemy of the U.S. into a now
indispensable capitalist partner. It is ironic that liberals who once
welcomed appeasement of the monstrous regime of Mao Zedong now become
openly bellicose at various murky incidents of Internet hacking.

Nonetheless, with millions of Islamists on its borders and within
them, China is nearly as threatened by radical Islam as we are. China
has a huge stake in the global capitalist economy that Islamic
terrorists aim to overthrow. And China, like the U.S., is so heavily
dependent on Taiwanese manufacturing skills and so intertwined with
Taiwan's industry that China's military threat to the island is mostly
theater.

Although some Taiwanese politicians still dream of permanent
independence, Taiwan's world-beating entrepreneurs have long since
laid their bets on links to the mainland. Two thirds of Taiwanese
companies, some 10,000, have made significant investments in China
over the last five years, totaling some $200 billion. Three quarters
of a million Taiwanese reside in China for more than 180 days a year.

With Taiwan, greater China is the world's leading actual manufacturer
and assembler of microchips, computers and network equipment on which
the Internet subsists. Virtually all U.S. advanced electronics, as
eminent chemist Arthur Robinson reported last month in his newsletter
Access to Energy, are dependent on rare earth elements used to enhance
the performance of microchips and held in a near global monopoly by
the Chinese firm Baotou Steel Rare-Earth Hi-Tech Company in Mongolia.

The U.S. is as dependent on China for its economic and military health
and economic growth as China is dependent on the U.S. for its key
markets, reserve finance, and global capitalist trading regime.

It is self-destructive folly to sacrifice this core synergy at the
heart of global capitalism in order to gain concessions on global
warming, dollar weakening, or Internet politics.

How many enemies do we need?

Mr. Gilder is a founder of the Discovery Institute and author of "The
Israel Test" (Richard Vigilante Books, 2009).

Twentytwo Comments:

http://online.wsj.com/article/SB10001424052748704041504575045573110641044.html?mod=googlenews_wsj#articleTabs%3Dcomments

http://online.wsj.com/article/SB10001424052748704041504575045573110641044.html?mod=googlenews_wsj

...and I am Sid Harth

[Sid Harth]

Chinese vice premier stresses economic structure adjustment

English.news.cn 2010-02-05 23:58:54

BEIJING, Feb. 5 (Xinhua) -- Chinese Vice Premier Li Keqiang Friday
called for efforts to step up economic structure adjustment so as to
guarantee the country's sustainable development.

Li made the remarks when addressing a seminar for provincial and
ministerial level officials.

"China has entered a key period of time when adjusting economic
structure is the only approach to advance the country's sustainable
development," said Li.

To achieve the end, China should further promote domestic consumption,
he said, emphasizing the important roles that employment and the
social security net play in fuelling domestic demand.

Great potentialities to expand domestic demand lie in China's ongoing
urbanization process which makes new room for the growing economy and
market, according to the vice premier, who also stressed coordinated
development between urban and rural areas.

He said upgrading industrial structure is a very important aspect of
China's economy restructuring and called for efforts to develop modern
agriculture, the service industry as well as technology innovation
which he referred as the core to upgrade industry.

He also urged to improve energy, ecological and environmental
conservation to accelerate the economic structure adjustment.

Editor: Mu Xuequan

http://news.xinhuanet.com/english2010/china/2010-02/05/c_13165350.htm

Feb. 5, 2010, 9:15 a.m. EST · Recommend (1) · Post:

Market tumble raises questions over Asia's recovery hopes

By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) -- Asia's recovery story came under fire
Friday as markets across the region tumbled in line with the overseas
sell-off, raising fresh doubts that export-geared economies are really
in a position to sustain torrid growth amid renewed concerns over the
outlook for the U.S. and Europe.

"This is more than a technical readjustment, it's the beginning of a
realization that expectations were too high," said Jim Walker,
managing director of Asianomics Ltd. in Hong Kong.


'You are probably fine the top of a bubble for all sorts of things in
China -- from the topping of copper to property, to even the equity
market.'

David Roche, Independent Strategy

Regional asset prices, he said, are likely to come under further
pressure in the days and weeks ahead, in line with a tightening of
liquidity conditions.

A reliable forecaster of the region's economic activity is a tracker
of U.S. monetary conditions known as MPrime, Walker said. Recent
readings suggest liquidity will tighten throughout February and March,
but beyond that there's little certainly as to the direction.

"There is much less money around and there is more real economic
activity, so the thing that gets squeezed hardest at this point is
asset prices," Walker said.

Losses were seen from the early going, with a slight acceleration to
the downside by late afternoon that saw left market-tracking indexes
in Hong Kong, Tokyo and Seoul with losses of about 3%. Taiwan's main
index fell more than 4%, while Australia and Singapore ended more than
2% lower. Shanghai fell 1.9%. See related story on Asia's Friday
downdraft.

Important contrast

Credit Suisse strategists said in note Friday that Asian economies
face few of the twin-deficit worries at the heart of the European
crisis. Indeed, the broker noted that most of the regional economies
stand apart from their troubled European counterparts, with current
account surpluses and hefty foreign-exchange reserves as positives.

"If global growth slows, we think Asia has fiscal and monetary policy
flexibility to keep stimulating growth at home," Credit Suisse's
strategists said in the market note.

The markets' mood proved less sanguine, however, with some brokers
citing the global sell-off as a chilling reminder that the decoupling
story, fashionable among analysts at the start of the year, has yet to
be thoroughly tested at a time of stress.

Asia's economies have been pulled along by rapid economic growth in
China, which escaped recession -- but doubts have been mounting over a
repeat performance for 2010.

Much of China's resilience in the face of the global downturn was the
product of easy credit pumped throughout the economy in enormous
quantities, according to David Roche of Independent Strategy in Hong
Kong.

Jetsetting Panda Says Farewell To WashingtonThe Smithsonian National
Zoo's main attraction - a four-year-old panda - has left Washington,
D.C., for a new life in China. WSJ's Neil Hickey and Stokely Baksh
provide up-to-the-minute coverage of the departure.

Bank lending, set to contract an estimated 30% in 2010 from last
year's level, doesn't bode well for China or its closest trading
partners in the region.

"You are probably find the top of a bubble for all sorts of things in
China -- from the topping of copper to property, to even the equity
market," Roche said.

Much as China helped shield its neighbors last year from the pain of
the global crash, a sharp cooling in the world's third-largest economy
could have negative kickbacks.

Still, Roche pointed out he's an all-out bear on China.

"I think the whole thing is going to start to unravel, not toward
depression levels, I just think the growth there is going to be
lower," Roche said.

Meanwhile, Asia strategist Peter Elston of Aberdeen Asset Management
Asia in Singapore called Friday's declines a healthy correction,
adding that he believes prospects for a double-dip slowdown in Asia
are unlikely.

"We don't see it as the start of a big correction, we see it as the
kind of correction that you tend to get during the recovery phase,"
Elston said.

Beware 'extreme scenarios'

More likely, he said, Asian markets would resume an uptrend after some
time. The region, with its higher growth profile, stands poised to
take the focus during a prolonged period of flat performance for
developed markets that he foresees as likely lasting for up to two
years.

Martin Hennecke, a financial adviser with Tyche Group in Hong Kong,
said Asia ranks as fundamentally stronger than western economies but
warned that any bets on the outcome were risky in light of the global
uncertainties.

"Extreme scenarios in all directions are possible," Hennecke said
Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.

http://www.marketwatch.com/story/market-tumble-raises-questions-over-asias-outlook-2010-02-05?reflink=MW_news_stmp

...and I am Sid Harth

[Sid Harth]

US economy sheds 20,000 jobs in January

By Timothy Prickett Morgan • Get more from this author

Posted in Financial News, 5th February 2010 15:24 GMT

Through the magic of a large number of Americans giving up on finding
a job and removing themselves from the official calculations, the
unemployment rate in the United States dropped by three-tenths of a
per cent to 9.7 per cent, even as the economy shed 20,000 jobs in
January.

This employment level is what the US Department of Labor, wanting to
say something positive about the economy while not seeming partial,
characterized as "essentially flat." While the construction,
transportation, and warehousing sectors lost jobs, temporary help
services and retailers actually added jobs in the quarter.

Construction companies shed 75,000 jobs last month, and companies
engaged in transportation and warehousing let go of 19,000 employees.
Manufacturers actually added 11,000 jobs, retailers added 42,000 jobs,
healthcare providers added 15,000 jobs, and temporary help services
added 52,000 jobs. Uncle Sam itself added 33,000 jobs, include 9,000
temporary (and yet full-time) workers needed to take the 2010 census.

The Bureau of Labor Statistics, which released its monthly jobs report
for January this morning, calculates that there are 14.8 million
people unemployed in the US, and that the number of long-term
unemployed people has risen by 1.3 million, to 6.3 million, since the
Great Recession began officially in December 2007. In total, the US
economy has lost 8.4 million net jobs since the recession started.

The BLS doesn't track jobs by title, but rather by industry, so you
can't really get a sense of what is happening in the IT sector from
the monthly jobs report except in an oblique manner.

Last month, computer and electronic products makers cut 7,500 jobs
against a labor pool of nearly 1.1 million workers. Within this group,
computer and peripheral equipment makers added 1,000 jobs (to
160,500). Communication equipment manufacturers in the States held
their workforce steady at 119,600, and semiconductor manufacturers cut
3,800 jobs, to 358,200.

Within the information sector of the economy, which includes
telecommunication, television, publishing, movies, music recording,
and data processing services, the telecommunications industry cut
4,900 jobs, to 955,400. Data processing and hosting service providers
cut jobs, too: 4,100, to be precise, leaving 246,800 still with work
and a paycheck.

The professional and business services sector has an IT component,
computer systems design and related services, which has an astounding
1.43 million workers in the US, down 2,700 people from December 2009.
Companies in the management and technical services business can have
an IT aspect to their work, too, and there were 973,400 people
employed in this area in January, down 30,500 from December. ®

http://www.theregister.co.uk/2010/02/05/us_jobs_report_jan2010/

Analysis

Jobs vs deficits in Obama budget
By CHRIS CERMAK Deutsche Presse Agentur
February 5, 2010, 4:39pm

WASHINGTON — US President Barack Obama faced a delicate balancing act
in presenting his budget for next year: Stimulating the economy
without bankrupting the government.

The dilemma has only worsened after a year in which the Obama
administration spent unprecedented amounts of public money to wrest
the world's largest economy from its deepest economic crisis since the
Great Depression of the 1930s.

Government spending helped return the US economy to growth in the
second half of 2009, but that recovery has yet to translate into new
jobs - a problem facing many wealthy countries around the world as
they emerge from the global recession.

With US unemployment at a quarter-century high of 10 per cent, Obama
declared jobs his ''number-one focus'' for 2010 in a State of the
Union address last week to Congress.

At the same time, the White House has acknowledged that federal
deficits are running at dangerously high levels. In presenting his
2011 budget proposals Monday, Obama said: ''We simply cannot continue
to spend as if deficits don't have consequences.''

The federal government will run a record 1.6-trillion-dollar deficit
this budget year, about 10.6 percent of gross domestic product (GDP),
before falling to 1.3 trillion dollars in the 2011 budget, which
starts October 1.

Which priority is more important - jobs or debt - depends on who you
ask. Some left-leaning politicians said Obama was spending too little
to revive job growth, while conservatives fretted that government
deficits remained far too high to calm market concerns.

''The president has sent us more of the same - a budget that claims to
be fiscally responsible, but just below the surface contains more
spending, more borrowing and more taxes,'' said Judd Gregg, the top
Republican on the Senate's Budget Committee. Obama's budget sought to
walk a fine line between the two sides.

The document included 100 billion dollars in targeted business tax
incentives and other measures to encourage hiring, but pledged other
spending cuts and higher taxes on the highest-earning Americans and
Wall Street banks.

Both tasks are fraught with political risk: New spending on jobs could
be deemed wasteful if there is no noticeable improvement in the
unemployment rate, while curbing the deficit too quickly – or too
slowly – could strangle the country's economic recovery.

Even with the new job stimulus measures, the White House expects the
labour market will recover extremely slowly, a fact that could
severely impact the chances of Obama's Democrats in mid-term
congressional elections scheduled for November.

Christina Romer, head of the White House Council on Economic Advisors,
projected that unemployment will remain at 9.8 per cent at the end of
this year before falling to 8.9 percent by the end of 2011 and 7.9
percent at the end of 2012.

John Irons of the left-leaning Economic Policy Institute argued that
the Obama administration is still spending too little - the enormity
of the jobs crisis means that reviving the labour market should take
precedence over tackling the deficit.

''The first thing we must do to address the long-term debt is to put
Americans back to work so we can get the recovery on the right
track,'' Irons said.

Bringing down the deficit carries its own challenges including
political resistance to cutting popular spending programmes.

http://www.mb.com.ph/articles/242082/jobs-vs-deficits-obama-budget

Currencies
Feb. 5, 2010, 12:06 p.m. EST

By Deborah Levine & Steve Goldstein, MarketWatch

NEW YORK (MarketWatch) -- The dollar extended gains in midday trading
on Friday, reaching an eight-month high versus the euro, after
economic data showed the U.S. unemployment rate unexpectedly fell last
month.

The dollar also remains attractive investment for those who are
looking to move assets to relatively safer territory amid ongoing
credit concerns about some countries in Europe.

"We're not convinced that the declines in Europe have reached an end,"
said Todd Elmer, a currency strategist at Citi. "Dollar longs are
attractive at this stage."

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 80.51, +0.59,
+0.74%) , which tracks the greenback against a trade-weighted basket
of six major currencies, rose to 80.555 from 79.882 in North American
trading late Thursday. During the session it touched 80.620, the
highest on a closing basis since July.

Risk Off Back OnFor much of the past year, investors have been chasing
risk in every corner of the globe and every asset class. Now they're
being reminded there's potential downside to all that risk. So far the
move is barely a correction relative to the size of the rally. But
fundamentals dictate it could go much further yet.
The euro /quotes/comstock/21o!x:seurusd (CUR_EURUSD 1.36, -0.01,
-0.79%) fell further, down to $1.3608 down from $1.3754 late Thursday.
It fell as low as $1.3592, the lowest since last May.

The dollar rose 0.2% to buy 89.29 Japanese yen. The yen also tends to
be a beneficiary when investors seek stable assets.

The dollar extended a rally that started Thursday amid heightening
fears that credit risks in some European countries are deepening,
increasing demand for the relative safe haven of the U.S. currency.

Portugal decided on Friday to increase spending and Greece faced a
second day of striking in protest of its proposal to improve its
balance sheet. See more on Portugal, Greek budget problems.

Gains based on that move out of riskier assets remained as "U.S. data
cannot fix the budgetary problems of Spain, Portugal and Greece," said
Jane Foley, research director at Forex.com.

The Labor Department said U.S. nonfarm payrolls shed 20,000 jobs in
January, while economists expected a net increase in jobs. The report
also said the unemployment rate fell to 9.7%, while economists
expected the rate to remain at 10%. Read story on employment data.

"The latest report is mildly positive for the U.S. dollar simply
because it confirms that the U.S. economy is slowly recovering," Kathy
Lien, director of currency research at Global Forex Trading, wrote in
an email.

"It is becoming increasingly clear that the U.S. labor market has
turned a corner and positive job growth will probably return in
February, but unemployment remains high, which means that recovery
will continue to be slow and messy," she said.

That will lend support to the dollar over time, Citi's Elmer said,
even after fiscal problems in Europe, or the fears revolving around
them, dissipate in the eyes of investors and traders.

Interest-rate futures markets indicated traders pared expectations of
the Federal Reserve raising rates by this fall, after seeing a pretty
good chance of a hike earlier in Friday's session. The fed funds rate,
the central bank's overnight target interest rate for loans between
banks, has remained at a range of zero to 0.25% for more than a year.

Fed fund futures showed traders see a 67% chance that the central bank
will raise interest rates to 0.5% by September, down from nearly 80%
early in the session. Futures for December indicate a 68% expectation
that rates will rise by 75 basis points, or 0.75%, by the end of the
year, down from 75% when the jobs data was released.

The jobs data "likely will not force anyone to alter their Fed call or
revisit their big picture forecasts," wrote Stephen Stanley, chief
economist for RBS Securities.

Deborah Levine is a MarketWatch reporter, based in New York.

Steve Goldstein is MarketWatch's London bureau chief

http://www.marketwatch.com/story/dollar-gains-on-rivals-ahead-of-us-jobs-report-2010-02-05?reflink=MW_news_stmp

...and I am Sid Harth

[Sid Harth]

UPDATE 1-Japan Kan:G20 better venue to discuss yuan than G7
Fri Feb 5, 2010 5:45am EST

TOKYO, Feb 5 (Reuters) - Group of 20 meetings could be a better forum
to discuss the strength of China's currency than Group of Seven
events, although the issue might come up at a G7 meeting this weekend,
Japan's finance minister said on Friday.

Naoto Kan, speaking to reporters just before leaving Tokyo for the
meeting, said he had not requested that discussions on the yuan should
be on the agenda.

"It's more fair to debate the yuan at the G20 instead of G7 meetings,"
Kan told reporters.

Finance Ministers and central banks chiefs from the Group of Seven
major industrialised countries will meet this weekend in Canada.

China, along with other major developing countries such as Brazil and
India, sits at the larger G20 table of industrial and emerging powers.
The G20 has been overtaking the G7 as the prime forum for global
economic matters.

Although the G7 has repeatedly urged China to revalue its currency,
which some economists say is kept artificially low, giving it an
unfair export advantage and hindering more balanced economic growth,
it has had little leverage with China.

Beijing has continued to shrug off pressure from its major trading
partners to let the yuan appreciate, repeating its line that stability
is in everybody's best interests.

Tokyo believes that a more flexible yuan is desirable but has been
more reserved than its G7 peers in its criticism of China's currency
system on the view that pressuring Beijing won't work.

"Our position on the yuan is based on desire for the Chinese economy
to grow stably, and I think Chinese officials are working to that
end," Kan told reporters on Friday.

He also said the did not ask for the G7 to discuss the yuan.

"Everyone is interested in China, and as it is part of Asia, we may be
asked our views... (but) media reports suggesting I asked Canada to
put the yuan on the G7 agenda are mistaken," he said.

Kan, who took over as finance minister last month, had earlier said he
would closely watch any G7 debate on the yuan as it could affect
Japan's economy, which is heavily reliant on exports to fast-growing
Asian nations like China. [ID:nTOE60D04W]

Canada has said the G7 may discuss the need for a more flexible yuan,
among other topics, at the meeting that it will host on Friday and
Saturday.

Asked about President Barack Obama's financial regulation plan, Kan,
who is also deputy prime minister, said it was important to make sure
the regulations did not harm the real economy.

The G7 finance leaders are unlikely to issue a joint communique this
time, after they agreed at the previous meeting in Istanbul last year
to make the G7 a more informal forum of debate.

(Reporting by Stanley White; Editing by Joseph Radford)

http://www.reuters.com/article/idUSTOE61408T20100205

HIGHLIGHTS-UPDATE 1-Bank of Canada sees thaw, warns of storms

Thu Feb 4, 2010 3:32pm EST

Following are highlights from his appearance in Winnipeg:

ON FINANCIAL REFORM AND G7 MEETING IN IQALUIT

"The forum for bringing forward financial reform is the G20, supported
by the FSB. The opportunity in Iqaluit is to have frank open
discussions about the progress within G7 countries towards those ends,
to identify key issues, to have frank discussions about them."

"I would not look for announcements out of this weekend's meetings
with respect to financial reform because that is running on the
track ... of the G20."

ON A COMMON G20 APPROACH AFTER INDIVIDUAL OBAMA REFORMS

"Clearly we all want to have a coordinated approach that builds a
resilient global financial system, and we have a common agenda, and
there's a tremendous amount of work that's being done to move that
agenda forward ... I would say that individual countries may choose to
make measures above and beyond that agenda which reflect their own
particular circumstances. And provided that the very high standard of
the core agenda is adhered to, it's entirely appropriate ... So I
don't think that it's inconsistent at all, and I don't think that's
the way the U.S. administration views it either, and we will be
discussing this in Iqaluit ... but we welcome the progress that's been
made."

ON EXIT STRATEGIES

"What's important for all major economies is that in the not too
distant future ... that there are credible paths being laid out back
to fiscal sustainability."

"We are still at the phase of the recovery where it remains important
at a global level that the fiscal plans that have been put in place --
the stimulus from the fiscal side -- is carried through."

ON THE CANADIAN MORTGAGE MARKET

"The Canadian mortgage market has functioned I think exceptionally
well during the course of the last decade ... we've seen the strength
of the system of mortgage insurance and it's provided an important
funding avenue for the banks as well. It's allowed our housing market
to weather the storm."

"I must say we don't see a need for structural change in the mortgage
market."

ON HOUSING BUBBLE TALK

"We had expected strength in the housing market given where monetary
policy was. We've seen it. We are following it closely but we would
not characterize the current state of the housing market in those
terms (a housing bubble)."

ON HOUSEHOLD BORROWING

"What we have said is that we have some concerns with the scale of
household borrowing, or the pace of household borrowing. Again I would
characterize this as a perspective issue. We want to caution people
that rates are extraordinarily low right now, they're low for a
reason ... but it's a means to an end." (Reporting by Rod Nickel, Ka
Yan Ng, Randall Palmer, David Ljunggren, Claire Sibonney and Jennifer
Kwan; Editing by Jeffrey Hodgson)

http://www.reuters.com/article/idUSN0410177720100204?loomia_ow=t0:s0:a49:g43:r1:c0.272727:b30265628:z0

Latest U.S. China-bashing is particularly risky

Thu Feb 4, 2010 6:20pm EST

By James Pethokoukis

WASHINGTON, Feb 4 (Reuters Breakingviews) - President Barack Obama is
talking tough on treaty enforcement and bashing China over its
currency. He also says he wants to increase trade. But with a
politicized Congress itching to raise trade barriers, Obama's
protectionist-tinged rhetoric is in danger of becoming reality.

The president's goal, according to his recent State of the Union
address, is to double U.S. exports over the next five years. That's
ambitious. During the past 25 years, the fastest doubling of exports
was over seven years in the late 1980s as the global economy boomed
and the dollar plunged. Goldman Sachs estimates that a similar
scenario today might require 4.5 percent average annual global GDP
growth accompanied by a 30 percent dollar depreciation.

Those long-shot macro factors aren't the only obstacle. Another is the
president's method. Obama could be using his political capital and
bully pulpit to push for passage of free-trade agreements, including
those with Colombia, Panama and Korea. Instead, he is engaging in an
odd game of political Twister by employing protectionist oratory to
support supposed export-boosting policies.

Despite what Obama says about enforcing trade rules, America is
already as tough as anyone. Out of the 400 or so disputes registered
with the World Trade Organization in its 15-year history, the United
States has been a complainant in 93, the most of any nation. And
through the end of 2009, only India had more active antidumping and
countervailing duty measures than the United States.

As for the yuan, China's currency may still be overvalued, but from
2005 through 2008, it appreciated by nearly a fifth. Rather than
narrowing, the U.S.-China trade deficit increased by a third over that
period.

So it's hard to see how Obama's rhetoric does anything other than harm
the environment for international trade. That said, his administration
probably has no intention of officially accusing China of manipulating
the yuan. But paying lip-service to the issue -- while avoiding action
-- isn't as politically safe as it used to be.

Right now the tactic could hand credibility to the protectionists in
Congress, a group eager to scapegoat China at a time of high U.S.
unemployment. Flirting with a trade war is a risky way for Obama to
try boosting exports.

CONTEXT NEWS

-- President Barack Obama on Feb. 3 vowed to get tougher with China
over the yuan, which Washington believes is artificially undervalued.
The Chinese government had no immediate official comment, but Li Jian,
a researcher with a think tank under the Ministry of Commerce, said
Beijing was unlikely to change its currency policy in response to
pressure from Washington.

-- At a Feb. 3 meeting with Senate Democrats, Obama said: "I have
shown myself during the course of this year more than willing to
enforce our trade agreements in a much more serious way ... So the
approach that we're taking is to try to get much tougher about
enforcement of existing rules, putting constant pressure on China and
other countries to open up their markets in reciprocal ways ... One of
the challenges that we've got to address internationally is currency
rates and how they match up to make sure that our goods are not
artificially inflated in price and their goods are artificially
deflated in price. That puts us at a huge competitive disadvantage."

-- For previous columns by the author, Reuters customers can click on
[PETHO/]

(Editing by Richard Beales and Martin Langfield)

http://www.reuters.com/article/idUSN0424668520100204?loomia_ow=t0:s0:a49:g43:r3:c0.142857:b30252556:z0

Google facing many risks in China standoff
Alexei Oreskovic - Analysis
SAN FRANCISCO
Thu Feb 4, 2010 8:11pm EST

A man runs past the logo of Google China outside its company
headquarters in Beijing, January 20, 2010.
Credit: Reuters/Barry Huang

SAN FRANCISCO (Reuters) - Google Inc's near-silence and seeming
inaction since its bombshell announcement it may exit China reflects
the Internet search leader's fear of running afoul of the law and
jeopardizing a multi-pronged strategy for the world's top Internet
market.

China

Google sent shockwaves across the business and political worlds when
it declared on January 12 it would stop censoring Chinese search
results. But in the three weeks since, the Web giant has trod
cautiously.

Despite early reports suggesting Google had lifted filters on certain
search results, the company insists it has made zero changes to its
Chinese search engine and that it remains in dialogue with Beijing.
Otherwise, executives have mostly been tight-lipped about the entire
affair.

That guarded, restrained approach reflects the thorny legal issues
surrounding the situation and the high stakes involved in its standoff
with China, the world's No. 3 economy and largest Internet market by
users.

Many analysts believe the Chinese government would have no qualms
shutting down an uncensored search engine. But experts on Chinese law
warn that Google employees in China could also face prosecution for
breaking the law.

China's detention of four Rio Tinto employees including Australian
Stern Hu in July on accusations of illegally obtaining commercial
secrets amid contentious iron ore contract negotiations has
underscored the risk when business matters cross into politically
sensitive areas.

"If they have a lot of personnel in China and they suddenly decide to
change what they're doing in a way that was not permitted by the
Chinese government, then that could lead to problems," said Donald
Clarke, a professor of Chinese law at George Washington University Law
School, noting Google staff could be at risk of everything from arrest
to harassment.

And with political momentum building -- U.S. Secretary of State
Hillary Clinton and the U.S. Senate have voiced strong support for
freedom of expression on the Internet -- Google has room to sit back
and let others advance its cause.

"As long as individual actors, even ones as large as Google, are doing
this alone as opposed to collectively, then these risks are going to
be much more pronounced," said Arvind Ganesan, director of business at
Human Rights Watch.

STATE SECRETS: A CATCH-ALL

A sudden move by Google to lift search censorship in China could hurt
other business interests in the country, including its fast-growing
Android cell phone products, advertising sales and its research and
development operations.

"Both parties probably want to reach some sort of a solution, so I
think both have been careful in their public statements," UBS analyst
Brian Pitz.

Websites in China are prohibited from publishing content that
jeopardizes the security of the nation, divulges state secrets and
disturbs the social order.

"It would be normal for anybody running a high-profile, politically
controversial operation in China to anticipate worst-case scenarios,
and to do everything possible to guard against them," said Rebecca
MacKinnon, a fellow at the Open Society Institute who has written
extensively about Internet censorship in China.

Google is therefore more likely to voluntarily shut down its search
operation if it is unable to reach a compromise with China, rather
than unilaterally lift censorship, she said.

Google CEO Eric Schmidt said last month the company was still
censoring search results in China, but that it would be making changes
in a "reasonably short time." He added that Google was committed to
having some presence in China.

The company does not disclose the size of its business in China, where
it has several hundred employees and is the No. 2 search engine after
Baidu Inc. Analysts estimate it generates $200 million to $600 million
a year in revenue.

While many experts believe Beijing is unlikely to let Google operate
an uncensored website, some say last summer's "Green Dam" software
episode could offer a lesson for the company as it looks for a way
forward.

Beijing backed down from a controversial plan that would have required
personal computer makers to install special Internet filtering
software on PCs in the face of opposition from industry groups,
activists and Washington officials such as U.S. Trade Representative
Ron Kirk and Commerce Secretary Gary Locke.

"What you saw is a pretty much global pushback on what were pretty
onerous and odious regulations on the part of the government. And
guess what? As of today, there is no requirement" to install filtering
software, said Ganesan of Human Rights Watch.

(Reporting by Alexei Oreskovic; Editing by Richard Chang)

http://www.reuters.com/article/idUSTRE61408520100205?loomia_ow=t0:s0:a49:g43:r1:c0.189597:b30255552:z0

Changing China tied to rough ride with U.S.
Chris Buckley - Analysis
BEIJING
Thu Feb 4, 2010 2:30pm EST

A worker checks the lamps in red lantern decorations for the Chinese
Lunar New Year of the Tiger in Beijing February 3, 2010.
Credit: Reuters/Jason Lee

BEIJING (Reuters) - "Ride on a tiger and it's hard to climb down,"
goes a Chinese saying that is proving apt for Beijing's quarrels with
Washington this year, when swollen ambitions at home are driving China
on a harder tack abroad.

Barack Obama | China | COP15

China's outrage over U.S. arms sales to Taiwan and President Barack
Obama's planned meeting with the Dalai Lama has shown that, in the
wake of the global financial crisis, Beijing is growing pushier in
public.

In past decades, a poorer, more cautious China greeted U.S. weapons
sales to the disputed island with angry words and little else.

Not now, as China enters the Year of the Tiger in its traditional
lunar calendar cycle of talismanic animals.

The Obama administration last week announced plans to ship $6.4
billion of missiles, helicopters and weapons control systems to the
self-ruled island Beijing calls its own. China threatened to downgrade
cooperation with Washington and for the first time sanction companies
involved in such sales.

Beijing this week also condemned Obama's plan to meet the Dalai Lama,
the exiled Tibetan leader reviled by China.

China's loud ire adds to signs the country is becoming surer about
throwing around its political weight, growing along with an economy
soon likely to whir past Japan's as the world's second biggest, though
it will still trail far behind the United States.

Behind this assertiveness are domestic pressures likely to make it
harder work for China's leaders to cool disputes with Washington and
other Western capitals.

"There is this paradox of increasing confidence externally and lack of
confidence domestically," said Susan Shirk, a professor specializing
in Chinese foreign policy at the University of California, San Diego.

"There's also what I consider a serious misperception of the country's
economic strength and how that translates in power."

RESPECT AND REACH

Chinese citizens and powerful constituencies, including the military,
have been told through state media and leader's speeches that the
nation's rising power would bring the nation greater international
respect and reach.

"Staunch and cool-headed, battling the roaring waves," said one
headline in the People's Daily, celebrating President Hu Jintao's role
in fighting the financial crisis.

Having pulled through the global downturn with 8.7 percent growth in
2009, China's leaders face pressure to meet those expectations, or
risk seeing their authority eroded.

Well-placed analysts do not expect Sino-American friction to spiral
into full-blown confrontation. Both sides have too much at stake,
economically and politically.

But China's stirring home-grown pressures will discourage Beijing from
quietly stepping down over Taiwan and Tibet, and could encourage
harder positions over trade disputes, exchange rate shifts and climate
change policy, where national pride and prosperity are seen by many as
threatened.

"These perceptions of strength create expectations on the part of the
Chinese public of how their leaders will behave internationally," said
Shirk, who served as a Deputy Assistant Secretary of State in the
Clinton administration.

"It's too early to say there's been a strategic shift," she added.
"But clearly it's going to be a difficult period for relations with
the United States."

NOT A PASSING SQUALL

China's top-down political system gives the ruling Communist Party
immense power to drive foreign policy.

But that power is not unconditional.

As revolutionary Communist ideology has sputtered, and social controls
loosened by market reform, appeals to patriotic pride and national
revival -- "prosperity and power" -- have become pillars of Party
authority.

China's leaders must in turn heed public reactions in crafting foreign
policy, especially dealing with volatile subjects such as Taiwan and
Tibet, seen by most Chinese as unquestionably parts of their country.

"It's almost like a positive feed-back loop that puts China in a
position where it can't be seen as weak or compromising, because
people have had it drummed into them that China can't be weak or
compromising," said Drew Thompson, director of China Studies at the
Nixon Center, an institute in Washington, D.C.

With China boasting robust growth while Western economies floundered,
those public expectations have swelled.

In a poll by the Pew Global Attitudes Project (pewglobal.org) last
year, 41 percent of Chinese respondents said the United States was the
world's leading economic power. The same number, 41 percent, named
their own country, China -- almost double the number who named it in
2008.

The U.S. gross domestic product was actually worth $14.2 trillion in
2008, while China's was worth $4.6 trillion -- for a much bigger
population -- according to the respective statistics of each country.

PRESSURE FROM THE INTERNET

The domestic pressures bearing on China's leaders are clearest and
loudest on the Internet, which the government says has 384 million
users.

Nationalist calls for tough steps against the United States, Japan or
other countries echo online at times of tension, and can reach beyond
what officials deem acceptable.

"The Chinese government does pay careful attention to opinion on the
Internet, and these troubles with the United States will affect that
public opinion," said Liu Jiangyong, a professor of international
relations at Tsinghua University in Beijing.

A Chinese public opinion poll last year organized by the Sydney-based
Low Institute for International Policy found 50 percent of respondents
thought the United States was a threat to their nation's security.
Younger Chinese citizens were more likely to support that view.

"The U.S. view that this will all be a passing squall could be out of
date," said Liu, who formerly worked as a government adviser. "China's
expectations for itself are changing."

Powerful arms of China's state could also bolster a harder stance
against the West.

China's Communist Party leaders keep a tight leash on the country's
military.

But after over two decades of near unbroken double-digit percentage
growth in the official defense budget, People's Liberation Army
officers have become more public about their expectations, including
for a tough stand on Taiwan.

Major-General Jin Yinan of China's National Defense University said in
a Communist Party newspaper last month his government would have to
punish the United States if it went ahead with selling new arms to
Taiwan.

"Our only choice is vigorous retaliation," he wrote in the Study
Times, the newspaper of the Central Party School.

Whether China really does take counter-steps awaits to be seen. The
government has so far not specified any penalties on the U.S.
companies selling the arms.

Nor have officials even hinted at broader trade and economic hits at
the United States, steps that could maul China's own economic health,
alarm international investors, and turn public feeling against the
government.

But abandoning the threats of sanctions could also prove humiliating
at home and abroad.

"China has few palatable options for economic coercion," wrote
Thompson in a comment on the arms sale dispute.

(Editing by Jerry Norton)

http://www.reuters.com/article/idUSTRE6130IP20100204?loomia_ow=t0:s0:a49:g43:r5:c0.036806:b30259384:z0

...and I am Sid Harth

[Sid Harth]

FEBRUARY 5, 2010.

Global Markets Shudder
Doubts About U.S. Economy and a Debt Crunch in Europe Jolt Hopes for a
Recovery.
.
By BRIAN BLACKSTONE in Frankfurt, TOM LAURICELLA in New York and NEIL
SHAH in London

Concerns are growing that the world hasn't seen the last of the
economic crisis.

Jitters about the U.S. economy and signs that Greece's debt woes are
spreading across Europe roiled markets on Thursday, driving the Dow
Jones Industrial Average briefly below the 10000 mark.

U.S. stock investors, waking up to a turbulent European trading
session, were further unnerved by an unexpected rise in the latest
report on initial claims for jobless benefits. Ahead of a key January
employment report due out Friday, the claims numbers revived on-again,
off-again concerns about the strength of the U.S. economic recovery.

The resulting selloff took the Dow below the psychologically important
10000 level in the final moments of trading. It managed to finish at
10002.18, but nevertheless had a 2.6% decline, led by big drops in
financial stocks. The 268.37-point fall was its biggest one-day loss
since last April.

Asian markets, which had eased modestly Thursday, opened sharply lower
on Friday, underscoring the global impact of the market tremors.

Commodities, too, took a hit, partly on expectations that the troubles
in the European bond market will create a drag on the global economic
recovery. Crude oil fell nearly 5% and even gold prices—which usually
rise in times of crisis—fell 4.4% in response to a stronger dollar and
as investors pulled back from more volatile investments. U.S. Treasury
prices rose sharply as investors sought out the bonds' relative
safety.

European stocks and bonds also swooned, with markets in the U.K.,
Germany and France all losing more than 2%.

Behind the turmoil are worries that a collection of European countries
including Portugal, Ireland, Greece and Spain, known derisively as
PIGS, won't be able to finance budget deficits that have ballooned to
around 10% of gross domestic product. That has sparked fears that
Europe's decade-old monetary union could unravel.

This sentiment spilled over into markets on Thursday. Although the
European Commission had signed off on Greece's budget plans the day
before, confidence was shaken at the same time by a stumble in a
Portuguese bond sale and Spain's raising of its budget-deficit
forecasts.

The cost of insuring against the default of sovereign debt from
Greece, Portugal and Spain soared to new highs, and the euro slid to
an eight-month low against the dollar and lost 3% of its value against
the Japanese yen.

Many are beginning to worry that Greece could be the next "subprime"—
referring to a debt situation that appears initially to be contained
but that quickly spreads. It also focuses attention on the massive
amounts of debt racked up by governments around the globe, including
the U.S.

"Greece is simply an illustration of a much broader issue," says
Mohamed El-Erian, chief executive officer at giant bond manager
Pacific Investment Management Co. in Newport Beach, Calif. Governments
around the world borrowed heavily to counter the massive problems in
the banking system brought on by the collapse of real-estate markets
in many countries. "Now we're living through the consequences," says
Mr. El-Erian.

"I was laid off from a cafeteria 10 days ago," says Nikos Bouzitsepis,
20 years old, a photography student in Athens. "It was a new shop that
never got off the ground because of the crisis."

While expectations are that countries like Greece will ultimately not
default and instead be bailed out by Germany and other healthier
economies in the European Union, the decline in the euro reflects that
investors are electing to take what they see as the less risky route.
They pulled money out of Europe and parked it in the relative safety
of the dollar, yen and short-term government debt in Japan and the
U.S., putting downward pressure on the euro.

That came to the fore on Thursday as bond markets in places like
Belgium and Austria also came under pressure, traders say. In
addition, European banks, which are major holders of government debt,
saw their share prices take big hits.

"We've definitely entered the stage where the European debt crisis is
becoming systemic," says Barry Knapp, equity market strategist at
Barclays Capital in New York.

Officials at the U.S. Treasury Department and Federal Reserve have
been watching developments in Greece closely, and have seen the
problems largely as a regional issue that European governments can
handle. If markets continue to sink globally, that could shift the
thinking. The topic is likely to come up at a meeting of Group of
Seven finance ministers that starts Friday in Iqaluit, Canada.

For years, Greece, Spain and others were among the fastest growing
economies in the euro zone, with low interest rates fueling a boom in
construction and consumer spending. Yet the financial crisis has
exposed the countries' chronic lack of fiscal discipline and
longstanding structural deficiencies.

In the past, the countries could respond to such crises by devaluing
their currencies—an option not on the table for members of the 16-
member euro zone.

The austerity measures that the governments are being forced to pursue
will likely only worsen their already high unemployment and thwart
economic growth in the medium term.

Moreover, as the problem spreads, it becomes that much more difficult
to manage. Spain, for example, is the euro zone's fourth-largest
economy and nearly twice as big as Greece, Portugal and Ireland
combined. That likely makes it simply too big to undertake the kind of
bailout that Germany and other euro-zone countries have privately been
contemplating for Greece.

In an effort to shore up confidence in the euro zone's ability to
weather the crisis, European Central Bank President Jean-Claude
Trichet on Thursday delivered an impassioned defense of the common
currency.

Mr. Trichet, in an uncharacteristically feisty appearance at the ECB's
monthly news conference, stressed that despite the fiscal woes in some
member states, the average budget deficit for the euro zone as a
whole, at 6% of gross domestic product, is well below the double-digit
gaps in the U.S. and Japan. "It is not necessarily very well known the
kind of solidity" that the euro zone has, Mr. Trichet said.

Thursday's frenzy was whipped up in part by big moves in the credit-
default swap markets, where traders can take big bets on the
likelihood of a country defaulting.

As credit-default swaps on debt of Greece and Portugal soared,
indicating more worries about a default, investors became more
alarmed. That often sets off a cycle of more CDS buying. Prices of
government bonds issued by Spain and Portugal sank along with their
stock markets, while the cost to insure these bonds against default
using credit-default swaps soared.

In a worrisome sign, concerns about the fiscal woes of European
governments are starting to infect corners of the credit markets that
European banks and companies rely on to raise money.

Prices of credit-default swaps tied to European companies with
stronger credit ratings, including banks, also rose on Thursday, with
the cost of insuring the debt of Spanish and Portuguese banks jumping
in particular.

Even banks like the U.K.'s Barclays PLC and Germany's Deutsche Bank AG
saw their debt-default insurance costs rise.

—Sebastian Moffett in Athens contributed to this article.

http://online.wsj.com/article/SB20001424052748704041504575045743430262982.html

Forex Trading Review For 05/02/2010
By UFXBank on February 5, 2010

USD Dollar (USD)

The Dollar consolidated gains across the board. Markets worldwide
tumbled on concerns about the European financial system and weak data
on jobless claims which came out 480K worse than expected 455K. The
Dow Jones lost -2.6%, finished barely above 10.000 and the NASDAQ fell
by -3%. Commodities also plunged; Crude oil erased weekly gains and
fell to test January lows at $72.50 but managed to close at 73$ a
barrel. Gold (XAU) fell more than $40 to the lowest level three months
closing at 1063$ an ounce. Today, the Nonfarm Payrolls is expected at
15K vs. -85K previously and the Unemployment Rate is expected
unchanged at 10%.

EURO (EUR)

Problems in Europe sink the Euro to a 7 month low. Concern widening
deficits can make harder to Europe’s economic recovery. The Interest
rate decision came out as expected unchanged at 1%. Breaking the
1.3720 level may depth the decline in the European currency. Overall,
EUR/USD traded with a low of 1.3720 and a high of 1.3902. Today, The
German Industrial Production is expected unchanged at 0.7%.

EUR/USD - Last: 1.3720

Resistance
1.3825
1.3900
1.3950

Support
1.3725
1.3660
1.3610

British Pound (GBP)

The Pound fell sharply and more risk aversion should send the pair
lower. The pound weakened against the dollar after the Bank of England
will keep to more asset purchases to safeguard the economic recovery.
The Interest rate decision came out as expected unchanged at 0.5%.
Breaking the 1.5730 level may depth the decline. Overall, GBP/USD
traded with a low of 1.5729 and a high of 1.5917. Today, the PPI Input
is expected at 0.9% vs. 0.1% previously.

GBP/USD - Last: 1.5745

Resistance
1.5850
1.5920
1.5970

Support
1.5725
1.5670
1.5575

Japanese Yen (JPY)

The Yen are consolidating gains across the board it helped by risk
aversion. Despite fundamentals problem in Japan’s economy, its
currency still works as a safe haven for investors. Breaking below the
88.80 level, can strength more the Japanese currency otherwise it
might rebound to the 90 area. Overall, USD/JPY traded with a low of
88.54 and a high of 91.06. No major economic data expected today.

USD/JPY-Last: 89.70

Resistance
89.45
.89.75
.90.10

Support
88.50
88.00
87.35

Canadian Dollar (CAD)

Canada’s dollar dropped against the dollar as an unexpected increase
in U.S. jobless claims and Europe’s deficit troubles led to collapsing
in commodity and equities prices. The Ivey PMI came out 50.8 worse
than expected 52. Breaching the 1.0750 level can continue to weak the
Canadian dollar. Overall, USD/CAD traded with a low of 1.0596 and a
high of 1.0751. Today, The Employment Change is expected at 15K vs.
-2.6K previously and The Unemployment Rate is expected unchanged at
8.5%.

USD/CAD - Last: 1.0725

Resistance
1.0750
1.0780
1.0800

Support
1.0645
1.0600
1.0575

http://www.dailymarkets.com/forex/2010/02/05/forex-trading-review-for-05022010/

Financial turmoil underscores stakes as G-7 countries work for
economic revival
By: MARTIN CRUTSINGER
Associated Press
02/04/10 10:01 PM PST

IQALUIT, NUVAVUT — A bout of turmoil in global markets has provided
sobering reminder to global financial leaders that the aftershocks
from the worst recession in seven decades are far from over.

Finance ministers and central bank presidents from the world's seven
major industrial countries — the United States, Japan, Germany,
France, Britain, Italy and Canada — were scheduled to arrive Friday
for discussions in this small snow-swept Canadian town about 200 miles
south of the Arctic Circle.

The talks are expected to be dominated by the question of how much
longer extraordinary government stimulus should be provided to lift
economic growth.

The risks still facing the global economy were highlighted
dramatically after bad economic news sent markets plunging around the
world on Thursday.

The Dow Jones industrial average fell by 268 points or 2.6 percent,
its biggest one-day loss in seven months.

The slide had begun in Europe over concerns about high debt levels in
Greece, Portugal and Spain. Worries in those countries set off broader
concerns that government will have difficulty containing rising debts
and borrowing more money to help revive their economies.

On Friday, the global downturn extended to Asia, where markets from
Tokyo to Hong Kong to Sydney dropped 2.5 percent or more.

U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman
Ben Bernanke were meeting with their counterparts from the other G-7
countries.

Geithner is expected to urge other G-7 nations to keep providing
stimulus through the rest of this year, arguing that without continued
government support the fledgling recoveries could falter, plunging the
world back into recession.

The talks, which will begin with a dinner Friday night, were scheduled
to wrap up with a closing joint news conference on Saturday afternoon.

The meeting was taking place in the most unusual G-7 setting ever: a
tiny outpost where temperatures can dip to 40 degrees below zero in
February. Canadian Finance Minister Jim Flaherty invited the other
finance officials to begin their Arctic stay with an afternoon of
dogsledding.

Flaherty, the gathering's host, chose Iqaluit in part to drive home
Canada's claim to a region that may contain one-fifth of the world's
petroleum reserves.

Some countries have expressed concern about how long stimulus aid
should be maintained. They worry about soaring budget deficits and the
risk of inflation.

"We need to see a resumption of private-sector growth, but the key is
that you don't want to withdraw government support prematurely," a
senior U.S Treasury official told reporters. He spoke on condition of
anonymity because he was speaking before the finance officials'
discussions.

Geithner will likely point to the mistakes nations made during the
Great Depression, when a tentative rebound fizzled after governments
withdrew emergency support too soon.

President Barack Obama set an example with a budget plan Monday that
would boost job-creation efforts and raise the U.S. budget deficit to
a record $1.56 trillion this year.

Obama has pledged to make jobs his No. 1 priority in part to counter
Republican charges that he spent too much time during his first year
in office concentrating on health care reform.

British Prime Minister Gordon Brown, whose Labor Party is trailing in
polls ahead of likely June elections, is also stressing government
stimulus. Britain's budget deficit as a share of its gross domestic
product could reach 12 percent this year.

In Japan, where the economy has struggled for two decades, the
government unveiled more stimulus spending last week. Other G-7
nations also have stimulus measures still in place. But some
politicians in Germany and France have raised concerns about stoking
inflation.

A year ago, the United States pressed Europeans to boost their
stimulus packages to match the $787 billion U.S. effort. Europeans
resisted for fear of escalating budget deficits. They instead enacted
smaller stimulus packages.

Now, the focus is more on the duration of stimulus aid. Geithner is
expected to argue that government programs to support jobs must be
kept in place through this year to give business and consumer spending
time to gather momentum.

But U.S. stimulus spending has raised fears that budget deficits could
trigger inflation and further drive down the dollar's value. A further
fall in the dollar would irk nations such as France and Germany. Their
manufacturers have complained that the dollar's slide against the euro
gives U.S. competitors a competitive edge. A weaker dollar makes U.S.
goods cheaper in overseas markets and European goods costlier for
American consumers.

Another issue on the agenda is financial reform where G-7 officials
are working to develop a consensus on strengthening lax regulations
that led to the financial meltdown in 2008.

The efforts to narrow differences were dealt a setback after the Obama
administration last month surprised its G-7 allies by proposing
tougher rules on risky bank activities.

"The Europeans were very upset that Obama was going off in a different
direction than they had signed up for," said Nariman Behravesh, chief
economist at IHS Global Insight.

British officials have said they don't need the strict limits on risky
trading operations the administration is proposing. French Finance
Minister Christine Lagarde has also expressed concern while German
Finance Minister Wolfgang Schaeuble has stressed the need for global
coordination on financial regulation.

Associated Press Writers Jane Wardell and Rob Gillies in Iqaluit,
Tomoko Hosaka in Tokyo, Juergen Baetz in Berlin, Emma Vandore in
Paris, Colleen Barry in Milan and Joe McDonald in Beijing contributed
to this report.

http://www.sfexaminer.com/world/geithner-to-press-g-7-nations-to-keep-stimulus-aid-us-regulatory-plans-worry-europeans-83580252.html

Brazil’s Economy Will Grow Five Percent in 2010: Minister
Posted by Vamban on Feb 5th, 2010 11:50:01

Brasilia, Feb 5 (IANS/EFE) The Brazilian finance minister has said
that his country’s economy will grow by five percent this year and
‘pull away’ from wealthy nations incapable of matching that pace.

Only Brazil, India, China and ‘a few more countries’ will enjoy
‘meaningful growth’ in 2010, Guido Mantega said, while the European
Union is expected to grow by only 1 percent and Japan, 1.7 percent.

Brazil, he said, has ‘growth with quality’, as the economy is
expanding in an environment of controlled inflation, stable
macroeconomic indicators, job creation and increasingly equitable
income distribution.

The minister cited recent data showing that Latin America’s largest
economy created 995,000 new jobs last year and his office’s
‘conservative forecast’ of an additional 1.6 million positions in
2010.

‘Not in absolute terms, but proportionately, we are creating more
employment than China,’ Mantega said at a conference to review the
first three years of the government’s Growth Acceleration Programme or
PAC.

The PAC, which calls for the investment of roughly $250 billion in
infrastructure projects, ‘has been key’ to maintaining dynamism in the
Brazilian economy amid the global recession, the finance minister
said.

http://www.vamban.com/brazils-economy-will-grow-five-percent-in-2010-minister/

Amid Slow Global Recovery, India to Grow 7.5 Percent in 2010
Posted by Vamban on Jan 21st, 2010 21:21:02


Washington, Jan 21 – India is expected to grow at 7.5 percent this
year, up from 6 percent in 2008, even as the global economic recovery
that is underway slows later this year as the impact of fiscal
stimulus wanes, according to a new report from the World Bank.

India’s GDP is projected to grow further at 8 percent in 2011, says
Global Economic Prospects (GEP) 2010, released Thursday even as it
warns that while the worst of the financial crisis may be over, the
global recovery is fragile.

It predicts that the fallout from the crisis will change the landscape
for finance and growth over the next 10 years.

Growth in the East Asia and Pacific region as well as in South Asia,
particularly India has been resilient, buoyed by a massive fiscal
stimulus package in China and by India’s skilful macroeconomic
management, the report noted.

Global GDP, which declined by 2.2 percent in 2009, is expected to grow
2.7 percent this year and 3.2 percent in 2011. Prospects for
developing countries are for a relatively robust recovery, growing 5.2
percent this year and 5.8 percent in 2011 — up from 1.2 percent in
2009.

GDP in rich countries, which declined by 3.3 percent in 2009, is
expected to increase much less quickly – by 1.8 and 2.3 percent in
2010 and 2011. World trade volumes, which fell by a staggering 14.4
percent in 2009, are projected to expand by 4.3 and 6.2 percent this
year and in 2011.

Excluding China and India, the remaining developing countries are
projected to grow at at 3.3 and 3.9 percent rate in 2010 and 2011,
respectively, compared with 5.4 percent growth on average between 2003
and 2008, the GEP noted.

Combined, GDP growth in developing countries is projected to grow by
some 5.2 percent in 2010, after a modest 1.2 percent rise in 2009 (2.2
percent if India and China are excluded), and by a relatively weak 5.8
percent in 2011.

Despite these relatively robust growth rates, the unusual depth of the
recession will mean that spare capacity and unemployment will continue
to plague economies in 2011 and some sectors may well still be
shrinking.

Prospects for developing countries are for a relatively robust
recovery in 2010, with growth of 5.2 percent in aggregate or 3.3
percent if China, India, and Europe and Central Asia are excluded, the
WEP said.

(Arun Kumar can be contacted at ***@ians.in)

Japan Index of Economic Health Climbs for Ninth Month (Update1)
By Tsuyoshi Inajima and Aki Ito

Feb. 5 (Bloomberg) -- Japan’s broadest indicator of economic health
rose for a ninth month in December as growth in Asia spurred factory
output.

The coincident index, a composite of 11 indicators including
industrial production and retail sales, gained to 97.6 from 96 a month
earlier, the Cabinet Office said today in Tokyo. The median estimate
of nine economists surveyed by Bloomberg was for an advance to 97.3.

More than $2 trillion in stimulus spending worldwide and a rebound in
Asia have been sustaining Japan’s recovery from its worst postwar
recession. Growth in the world’s second-largest economy probably
accelerated in October through December, economists estimate a report
will show this month.

Japan is “facing a continued export pickup in the coming year,” said
Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo.
“That’s definitely going to help the industrial revival we’ve been
seeing.”

The leading index, a gauge of economic conditions in three to six
months, rose to 94 in December from a revised 91 in November, today’s
report showed.

The economy probably expanded at an annual 4 percent pace in the three
months ended December, accelerating from 1.3 percent in the previous
quarter, according to the median estimate of 18 economists surveyed by
Bloomberg ahead of the Feb. 15 Cabinet Office report.

Production Growth

Industrial production climbed for a 10th month in December, buoyed by
exports, and manufacturers said they will continue to boost output in
January and February, Trade Ministry data showed last week.

After 10 consecutive month-on-month advances, in December Japan’s
exports rose from a year earlier for the first time since Lehman
Brothers Holdings Inc. collapsed in September 2008. Shipments to
China, which expanded 10.7 percent last quarter, led the gains.

JFE Holdings Inc. is among companies that have benefited from growth
in the region. Japan’s second-largest steelmaker said its net income
last quarter surged 67 percent from a year earlier to 27.3 billion yen
($304 million).

Even so, the export revival is failing to spread to the domestic
economy, Kazuo Momma, the Bank of Japan’s top economist, said this
week. Finance Minister Naoto Kan has been urging the central bank to
combat deflation that has been exacerbated by weakening spending at
home.

Workers’ average monthly wages dwindled to 315,164 yen last year, the
lowest level since the government started tracking the data in 1990.
Some 3.17 million people are out of work, with only 46 positions
available for every 100 applicants.

To contact the reporters on this story: Tsuyoshi Inajima in Tokyo at
***@bloomberg.net; Aki Ito in Tokyo at ***@bloomberg.net

Last Updated: February 5, 2010 00:10 EST

http://www.bloomberg.com/apps/news?pid=20601101&sid=av8SppYkpK.k

Bank calls time on quantitative easing
The era of extraordinary monetary policy is over, writes Edmund
Conway.

Published: 6:00AM GMT 05 Feb 2010

Link to this video Little under a year ago, with the economy in its
worst three-month period of growth in modern history, the Bank of
England began to do something it had never done in its 315-year
history - it started to create money and to go out and buy assets. The
reason was quite simple: the economy was facing the prospect of
depression, and interest rates, already down at 0.5pc (effective zero)
weren't doing enough to stimulate the economy.

Since last March, the Bank has bought just over £200bn, of which all
but around £2bn are government bonds. It has been the biggest monetary
policy experiment in history - bigger, compared with the size of
Britain's economy, than Japan's attempt following its crisis some
years ago; bigger than equivalent schemes in the US or euro area this
past year. Now that the Bank has called a halt to the quantitative
easing scheme (albeit leaving the door ajar for "further purchases...
should the outlook warrant them"), can we deem it a success?

Loadsamoney Mervyn King underlines stimulus schismEven in the ever-
equivocal world of economics, the answer seems pretty clear: on most
bases, the policy hardly seems to have been a resounding success.
Money growth – the flow of cash around the economy – has collapsed,
rather than rising fast on the back of the policy. Bank lending has
been insipid, and is still stiflingly weak. The wider economy is
barely even out of recession, recording growth of a mere 0.1pc in the
final quarter of 2009, and even this could yet be revised lower. The
spreads between what banks are charged to borrow by the Bank and what
they charge household customers remain far higher than before the
crisis. Indeed, the only section of society which can be said without
doubt to have benefited from the policy is the investment banking
sector, where financiers have made millions by buying gilts from the
Government and selling them straight back to the Bank at a hefty mark-
up.

Indeed, according to Danny Gabay, director of Fathom Financial
Consulting, "quite frankly, it has not been very successful - and this
is coming from someone who was firmly in favour of QE from the word
go."

To his mind, the greatest benefits of the programme have been to help
lift the FTSE 100 a bit higher (though markets elsewhere around the
world enjoyed similar increases without the benefit of so much money
creation), and to reduce the average yield on government bonds by
around 0.75pc - though this has since been reversed. So is that all
the UK has to show for an experiment which involved spending the
equivalent of 15pc of Britain's entire annual income?

Bank insiders, unsurprisingly, argue the contrary. Although they admit
that the fall in the flow of money around the economy (which is
intrinsically tied to growth) has disappointed, they believe the
policy has helped banks rebuild balance sheets, has helped lift equity
prices and, most importantly, has helped defrost various markets which
had been frozen throughout the crisis, allowing companies to start
raising money again. But above all else, they argue that we don't know
the counterfactual: that had the Bank done nothing, the consequences
for the economy would have been far worse, with a full-scale
depression a distinct possibility. However, they concede that it may
never be clear whether QE was a success.

One lesson is certainly clear from the experience. Just as its
Japanese counterpart did before it, the Bank found it immensely
difficult to prevent banks around the country from hoarding the newly-
created money they poured into their balance sheets rather than
lending it out to households and businesses.

According to a variety of economists, it would have done better to
have spent the cash on corporate bonds or even semi-toxic assets (as
the Federal Reserve did) – though even this would not prevent the
money from getting held up somewhere along the way in banks' vaults.
Either way, economists are likely to be picking over this episode in
future textbooks for many years. The one sure thing is that they will
fail to come up with a conclusive answer about whether it was a
definitive failure, and how it could have been done better.

Regardless, investors' attention has already turned to the thornier
issue of what this means for markets. The Bank's £200bn of purchases
effectively meant it was the only net buyer of gilts over the past
year or so.

The question is whether the private sector is willing to take up the
slack left by the Bank's departure. With the Government issuing an
unprecedented amount of debt in the coming years, and investors
increasingly paranoid about the prospects for governments' finances,
the end of QE signals the start of the tensest few months in the gilt
markets since the depths of the 1970s. The gilt market's roller-
coaster ride still has another lap to run.

http://www.telegraph.co.uk/finance/economics/7159151/Bank-calls-time-on-quantitative-easing.html

JGBs rise as euro zone fiscal woes curb risk appetite
Fri Feb 5, 2010 1:55am EST

By Shinichi Saoshiro

TOKYO, Feb 5 (Reuters) - Japanese government bonds rose on Friday,
with the benchmark 10-year yield slipping from a three-month high as
fears about the euro zone's worsening fiscal problems hit stocks,
boosted U.S. Treasuries and hurled the yen higher.

Government debt such as JGBs and U.S. Treasuries have climbed as
widening fiscal concerns over debt-laden euro zone members like
Greece, Portugal and Spain have curbed risk appetite as investors sell
off stocks in these countries. [ID:nLDE6130RE]

But JGB gains were capped as investors awaited a key U.S. jobs report
that is expected to shed further light on the health of the world's
biggest economy.

"The euro zone's fiscal problems gave JGBs an early lift, but their
immediate impact is lessening as the market gears up for the U.S. jobs
numbers," said Shinji Nomura, chief fixed-income strategist at Nikko
Cordial Securities.

March JGB futures 2JGBv1 jumped as high as 139.29 in early trade
before trimming gains to 138.93, up 0.13 point on the day.

Futures were also weighed down by investors trying to hedge against
potential obligations created through bond options, market players
said.

Earlier in the year these investors sold options on 10-year bonds
allowing the buyer of the option to sell at a yield of 1.35 percent,
considered a tough level to crack.

But the 10-year yield rose above that level for the first time in
three weeks on Wednesday, prompting sellers of the bond option puts to
sell futures, they said.

The benchmark 10-year yield dipped 0.5 basis point to 1.370 percent
JP10YTN=JBTC, off a three-month high of 1.380 percent brushed the
previous day. It slid as low as 1.350 percent earlier on Friday.

The 10-year yield has been trapped in a narrow range of 1.300 percent
and 1.380 percent so far this year.

While JGBs are being supported by expectations the Bank of Japan could
further ease monetary policy to combat deflation, concerns the
government may need to boost debt issuance to make up for a tax
revenue shortfall are preventing investors from chasing prices higher.

"Having no fresh domestic factor to aggressively buy or sell JGBs now,
players are looking for factors elsewhere," said Koichi Ono, a senior
strategist at Daiwa Securities Capital Markets.

"One focal point in the JGB market is whether today's U.S. jobs data
would turn investors more positive about the U.S. economy or not," Ono
said.

Surprisingly solid jobs figures would likely help shift the upper end
of the 10-year yield's near-term range to just below 1.45 percent, he
said.

The median economists' forecast for U.S. non-farm payrolls data on
Friday is for 5,000 jobs to have been added to the economy in January
after an unexpected loss of 85,000 in December. [ECI/US]

While an upbeat result is expected to hurt government debt, market
players said some investors may take the opportunity to scoop up JGBs
at higher yield levels.

The two-year yield edged up 0.5 basis point to 0.160 percent
JP2YTN=JBTC, while the 20-year yield was down 1.5 basis points at
2.150 percent JP30YTN=JBTC as life insurance companies bought longer-
dated bonds.

The yield curve flattened as a result.

Risk aversion hit stock markets and supported currencies perceived as
safe havens, such as the dollar and yen.

A stronger yen is considered JGB-friendly as it could fan deflation by
reducing prices of imported goods.

Tokyo's Nikkei stock average .N225 slid nearly 3 percent to post a two-
month closing low near the psychologically important 10,000 level.
[.N]

The yen hovered close to a seven-week high against the dollar JPY= and
a one-year peak versus the euro EURJPY=R reached the previous day.
[FRX/] (Additional reporting by Rika Otsuka; Editing by Chris
Gallagher)

http://www.reuters.com/article/idUSTOE61402Y20100205

...and I am Sid Harth

[Sid Harth]

Japan’s political watershed and its economic challenges
January 25th, 2010

Author: Akira Kojima

Last year was a politically exciting but economically depressing year
for Japan. It was the first time in 16 years that the government had
been led by a party other than the Liberal Democratic Party (LDP), but
also a year in which Japan suffered its largest decline in GDP in half
a century. The year 2010 is to be another difficult and challenging
year, with economic deflation necessitating the adoption of a new
growth strategy and a July upper-house election which could create a
historical watershed of Japan’s politics.

While Japan was not at the epicenter of the global financial crisis,
with Japanese banks having better balance sheets and much less
exposure to toxic financial commodities, the ensuing collapse in
export demand and financial spillovers have plunged Japan’s economy
into its severest recession in many decades. After expanding by 2.3
per cent in 2007, GDP contracted by 1.2 per cent in 2008, and then by
more than 5 per cent in 2009.

Japan’s financial markets have now stabilised from the after-shocks of
the Lehman Brothers collapse of September 2008, after the Japanese
economy bottomed out sometime around March 2009, but economic recovery
is still very slow and the level of economic activity, as shown in
various indices, is still below pre-crisis levels.

Moreover, Japan has slipped into sustained deflation which now
presents a difficult challenge to the Bank of Japan’s monetary policy.
Deflation puts pressure on business and government through higher debt
burden and reduced sales and tax revenue. If business responds to
deflation by cutting wages and government by increasing taxes or
cutting expenditures, a vicious deflation cycle could occur, leading
to further contraction of GDP. Indeed, nominal GDP shrank 6
consecutive quarters until the 3rd quarter of 2009 and the nominal GDP
level of that quarter was still only back to the level of 1991.

The so-called ‘GDP gap’ – a gap between actual economic activity level
and potential level, is now negative 6.7 per cent of GDP, the largest
negative number ever in the post-1945 period. Whether the government
and the Bank of Japan will be able to lift the economy out of this
situation will be one of the most important economic policy challenges
of 2010.

In the political realm, 2009’s ‘power shift’ was historical.

The new coalition government, led by the Democratic Party of Japan
(DPJ) with Yukio Hatoyama as Prime Minister, is the first government
not led by the LDP in the 16 years. This has meant a departure from
the ‘iron triangle’ politics of the LDP, business and bureaucrats,
which created deep-rooted and vested interests amongst those wielding
power.

The DPJ is trying to fracture this pork-barrel ‘triangle’, by shifting
resources, as they describe it, ‘from concrete to people’s lives’. In
actuality, the LDP government lasted for 46 years from 1955, except
for only 11 months from 1993 to 1994 in which Morihiro Hosokawa was
Prime Minster. In the 38 years from 1955 to 1993, the LDP monopolised
rule of Japan’s government, and from 1994 to 2009, the government was
led by the LDP in coalition with other parties.

There are several apparent and latent problems facing the DPJ-led
coalition government. In particular, security policy, including the
U.S. military presence in Okinawa, requires an urgent solution, given
the serious tension and friction that has been created between the
Obama administration and the Hatoyama government. This year is the
50th anniversary year of the US-Japan Security Treaty, but the U.S, is
currently in no mood of celebrating this anniversary.

It is difficult to reconcile differences over various policy choices
amongst parties in a coalition. The DPJ’s two coalition partners are
very small with less than 5 per cent seats of 3 coalition party’s
total. But in the 242-seat upper-house, with 2 seats vacant, the DPJ,
with 108 seats, still needs the Social Democratic Party’s 5 votes and
the People’s New Party’s 5 votes to command a majority. Because of
this situation, a victory for the DPJ in the July upper-house election
is extremely important. For now, the DPJ cannot afford to exclude
these marginal parties in the coalition, no matter what they demand.
The confusion and indecision over the Okinawa issue, which has been
increasingly irritating the Obama administration, has to be viewed in
light of this political backdrop.

Other important policy issues facing the DPJ government this year
include: construction of a new economic growth model, fiscal
reconstruction, pension system reform, policy formation over Japan
policy towards East Asian Community.

All in all, 2010 will be a crucially important year of big decisions,
for the DPJ government and for Japan’s economy and society as a whole.

This is part of the special feature: 2009 in review and the year
ahead.

Akira Kojima is Senior Fellow at the Japan Center for Economic
Research (JCER) and Visiting Professor of National Graduate Institute
For Policy Studies (GRIPS) and was formerly Editor-in-Chief of the
Nihon Keizai Shimbun.

http://www.eastasiaforum.org/2010/01/25/japans-political-watershed-and-its-economic-challenges/

EU Warned Is On The Brink Of Collapse
Posted by Europe
on Feb 04, 2010 |

To recap, the European Union is comprised of 27 sovereign nations in a
common trading bloc, the purpose of which is to compete as a
collective more effectively with the world’s economic powerhouses of
the US, Japan and now China. It was born of the old “Common Market”.

Of those 27 nations, 16 have chosen to also band together under a
common currency – the euro. Responsibility for the euro falls to the
European Central Bank, and “euro-zone” membership comes with the
requirement to satisfy various economic criteria in exchange for
central bank protection (such as lender of the last resort insurance).
One of those criteria is that members must maintain a level of public
sector deficit of no more than 3% of GDP. In order to finance
deficits, individual members issue their own soveriegn bonds. There is
no single euro-zone bond. Excessive debt issuance from one member
state incrementally impacts on each member state via the devaluation
of their common currency.

Any sovereign nation can also go cap in hand to the International
Monetary Fund for financial assistance, as that is what the IMF is
there for. But the IMF also imposes strict criteria itself when it
bails out an economy, and one of those is a forced devaluation of that
nations’ currency. In the case of euro-zone members, clearly this is
not an option. Thus the ECB must respond first.

In 2009, the ECB was forced to bail out euro-zone member Ireland.

One of the euro-zone’s biggest problems is economic disparity. The CIA
World Factbook (yes, the US charges the spooks with the task of
measuring everyone’s economy) puts the European Union’s total GDP in
2009 down as US$16.0 trillion, ahead of the US on US$14.2 trillion.
China’s economy is now assumed to have exceeded that of Japan’s but
for the sake of comparison, the CIA suggests Japan’s GDP was US$5.0trn
in 2009 and China’s US$4.7trn.

On an individual basis, in fourth place is Germany with (the numbers
are all in US$ trillions from here) 3.2 and then France with 2.6 in
fifth. Of the euro-zone members, Italy’s GDP is 2.1 (7th) and Spain’s
is 1.4 (9th). We then descend through the Netherlands, Belgium and
Austria before we get to Greece on 0.3 (28th), and then Finland and
Ireland before we get to Portugal on 0.2 (38th). For comparison
purposes, Austalia’s GDP is 0.9 in 13th place, only 64% as big as
Spain’s.

We would not like to think of the consequences of Australia defaulting
on its sovereign debt.

Last night the European Commision used new EU treaty powers to impose
strict measures upon the Greek government and economy. Greece has
vowed to reduce its deficit from 13% of GDP to 3% by 2012 but the EU
has given the government only one month to actually come up with a
viable plan to achieve the target and has ordered public spending to
be slashed. The new socialist government is already meeting opposition
from its trade union support base and a general strike has been
planned. The EU is under pressure from the ECB and from dominant
member Germany to bring a profligate Greece into line.

The measures are intended to prevent money flowing out of Greek
government bonds for fear that Greece may not be able to meet its
interest payment obligations. Previously the Gulf state of Dubai had
announced a freeze on interest payments, sparking fears of default,
but since the neighbouring United Arab Emirates agreed to underwrite
Dubai debt, the danger has subsided for now. The ECB cash rate is set
at 1% and the benchmark German bonds are yielding around 3%, but last
week Greek bond yields blew out to 7% as funds quickly departed.

The panic has now subsided over Greece. And nobody honestly expects
that the EU member will default. However, the austerity measures now
being imposed on Greece will not be well received by an angry
electorate.

It is the nature of such default risk episodes that contagion is a
feature. When Thailand’s currency began to falter in 1997 the Asian
Currency Crisis, affecting all the Asian “tiger” economies, followed.
The following year Russia defaulted, bringing down the world’s biggest
hedge fund. When Iceland became the GFC’s first major victim, Ireland
soon followed. No sooner had Dubai hit the headlines, Greece was not
far behind. And with the pressure now somewhat off Greece, the
attention has turned to Portugal. Last night bond traders shifted
focus to the next perceived victim and began selling out of Portuguese
bonds.

There is, of course, a level of self-fulfillment about such flights of
capital. When Bear Stearns went down, Lehman Bros was not far behind.
And then the US government was forced to bail out all major US banks.

The Portuguese economy is smaller than the Greek economy, but much
larger than the Greek economy is that of Spain – the ninth biggest
economy in the world. Spain is considered to be the next domino, and
beyond Spain even the larger Italian economy is drawing attention. If
Spain were to default, the ramifications would be enormous. It would
be another Lehman Bros as far as some commentators are concerned.

Economists suggest the reason why Greece and Spain in particular are
in serious trouble is due to the lax collection of taxes. In the
property markets in particular – and Greece and Spain are both popular
rental destinations for foreigners let alone the local population –
landlords are estimated to be collecting more than half of all rents
as cash and thus avoiding tax payments. This is leaving public coffers
short by billions of euro. Clearly a serious shake-up is needed among
the so-called Club Med nations and austeritiy measures will have to be
complemented by some aggressive crack-downs.

Fortunately for Spain, it entered the GFC with a budget surplus which
provided an initial buffer against deflation. In response to criticims
from other EU members, Spain has boasted that not one Spanish bank has
needed an injection of public capital, and indeed one Spanish bank has
bought into the crumbling British banking system. (Is the UK next?).
But Spain has since suffered a huge bubble and bust in its property
market, and quickly it is becoming more Greece-like every day.

Standing on the sidelines is the huge economy of Germany, which is the
only major EU member still in surplus. As a world exporting
powerhouse, Germany has long run a fiscal surplus which has formed a
large percentage of the offsetting US deficit. Germany is the senior
member of the EU and the only member with any real capacity to come to
the aid of Club Med and, for example, bail out banks. But Germany
refuses to do so.

Which is quite understandable. Germans are renowned for being a nation of strict savers unlike their frivolous Club Med peers. Why should Germans have to stump for Mediterranean profligacy? But at the end of the day, Germany agreed to be a member of both the EU and the euro-zone and hence the survival of both may depend on German intervention.

Critics of Germany point out the underconsumption of Germans is just
as much to blame for EU disparities as is excess consumption
elsewhere. Germany is selling goods into its EU neighbours but buying
little in return. This is a microcosm of the wider world malaise,
which sees Japan, China and Germany on the one hand failing to spend
on imports to balance out the rampant spending of the US, the UK, the
rest of Europe and Australia etc on the other. The world is trapped
with the pendulum having swung too far in the one direction.

The Chinese government is currently making aggressive attempts to stimulate China’s domestic economy to address the imbalance which has been exacerbated by China’s currency being pegged to the US dollar. Germany’s currency is also pegged to its neighbours in that they share the one single currency. For the current European economic situation to be eased, critics argue, and for the sheer survival of the euro and the EU, Germany needs to come to the party.
Otherwise what we have building is a crisis of confidence in the euro which could get out of hand. The pound would not be far behind. The irony is that once again the world is seeking sanctuary in the safety of short term US debt despite the US boasting the biggest deficit of all. The devaluation of the US dollar, as a reflection of this deficit, appeared to be underway late last year, but the trend has now reversed as the other side of the world appears in more dire straits. Nevertheless, the longer US bonds have begun to creep up again in yield as investors again begin to fear inflationary pressures.
The collapse of Lehman Bros and subsequent ramifactions showed that one investment bank had the power to bring down the world. Such a catastrophic collapse was nevertheless prevented by coordinated government intervention across the globe. But what happens when national economies start going down?

http://www.eutimes.net/2010/02/eu-warned-is-on-the-brink-of-collapse/

China Dumps Dollar – US Meltdown Underway
Posted by asgard
14 on Apr 16, 2008 |

Comments by China that it intends to move away from its reliance on
the dollar triggered a sharp drop in the Dow Jones Industrial Average
and heightened worldwide fears about the U.S. currency’s stability.
Chinese Central Bank Vice Director Xiu Jian said that his country is
planning to shift much of its $1.4 trillion national currency reserve
from dollars to more stable currencies, such as the euro or Canadian
dollar. After these comments, the dollar fell to record lows relative
to other currencies — the lowest ever against the euro, the lowest in
a generation against the British pound, and the lowest in 57 years
against the Canadian dollar.”The big issue on any currency is if its
rate of depreciation is so fast that it scares away all capital, and
the announcement that we heard from China sort of feeds those fears,”
said Larry Smith, chief investment officer at Third Wave Global
Investors.

China is the world’s largest investor in U.S. Treasury bonds and
securities, holding more U.S. debt than any country but Japan. Because
China’s currency is linked to the dollar, the country also maintains a
massive reserve of the currency.

But this policy had already begun to shift at the time of Xiu’s
comments. China has divested approximately 5 percent of its $400
billion holdings in the U.S. Treasury and established a $200 billion
fund to help diversify its investments in equities and stocks around
the world.

“We will favor stronger currencies over weaker ones, and will readjust
accordingly,” said Cheng Siwei, vice chairman of China’s National
People’s Congress.

It is not just U.S. investors who are concerned. Because the dollar’s
fluctuations have driven up the euro, exports in Europe have fallen
and sparked fears for the stability of that continent’s economy. In a
recent speech, French president Nicolas Sarkozy added his voice to
those calling for the Bush administration to act to stabilize the
currency.

“The dollar cannot remain ’someone else’s problem,’ ” Sarkozy said.
“If we are not careful, monetary disarray could morph into economic
war. We would all be its victims.”

http://www.eutimes.net/2008/04/china-dumps-dollar-us-meltdown-underway/

U..S. debt is losing its appeal in China
Posted by asgard
14 on Feb 23, 2009

HONG KONG: China has bought more than $1 trillion in American debt,
but as the global downturn has intensified, Beijing is starting to
keep more of its money at home – a shift that could pose some
challenges to the U.S. government in the near future but eventually
may even produce salutary effects on the world economy.

At first glance, the declining Chinese appetite for U.S. debt –
apparent in a series of hints from Chinese policy makers over the past
two weeks, with official statistics due for release in the next few
days – comes at an inopportune time. On Tuesday, the U.S. president-
elect, Barack Obama, said Americans should get used to the prospect of
“trillion-dollar deficits for years to come” as he seeks to finance an
$800 billion economic stimulus package.

Normally, China would be the most avid taker of the debt required to
pay for those deficits, mainly short-term Treasury securities. In the
past five years, China has spent as much as one-seventh of its entire
economic output on the purchase of foreign debt – largely U.S.
Treasury bonds and American mortgage-backed securities.

But now, Beijing is seeking to pay for its own $600 billion economic
stimulus – just as tax revenue falls sharply as the Chinese economy
slows. Regulators have ordered banks to lend more money to small and
midsize enterprises, many of which are struggling with slower exports,
and Chinese bankers say they are being instructed to lend more to
local governments to allow them to build new roads and other projects
as part of the stimulus program.

“All the key drivers of China’s Treasury purchases are disappearing,”
said Ben Simpfendorfer, an economist in the Hong Kong office of the
Royal Bank of Scotland. “There’s a waning appetite for dollars and a
waning appetite for Treasuries. And that complicates the outlook for
interest rates.”

Fitch Ratings, the credit rating agency, forecasts that China’s
foreign reserves will increase by $177 billion this year – a large
number, but down sharply from an estimated $415 billion last year.

In the United States, China’s voracious demand for American bonds has
helped keep interest rates low for borrowers ranging from the
government to home buyers. Reduced Chinese enthusiasm for buying those
bonds takes away some of this dampening effect.

But with U.S. interest rates still at very low levels after recent
cuts to stimulate the economy, it is quite cheap for the U.S. Treasury
to raise capital now. And there seem to be no shortage of buyers for
Treasury bonds and other debt instruments: Prices for U.S. debt have
soared as yields have declined.

The long-term effects of this shift in capital flows – with China
keeping more of its money home and the U.S. economy becoming less
dependent on one lender – are unclear, but the phenomenon is something
economists have said is long overdue.

What is clear is that the effect of the global downturn on China’s
finances has been drastic. As recently as 2007, tax revenue soared 32
percent, as factories across China ran flat out. But by November,
government revenue had actually dropped 3 percent from a year earlier.
That prompted Finance Minister Xie Xuren to warn Monday that 2009
would be “a difficult fiscal year.”

A senior central bank official mentioned last month that China’s $1.9
trillion in foreign exchange reserves had actually begun to shrink.
The reserves – mainly bonds issued by the U.S. Treasury and by Fannie
Mae and Freddie Mac, the mortgage finance companies – had been rising
quickly ever since the Asian financial crisis in 1998.

The strength of the dollar against the euro in the fourth quarter of
last year contributed to slower growth in China’s foreign reserves,
said Fan Gang, an academic adviser to China’s central bank, at a
conference in Beijing on Tuesday. The central bank keeps track of the
total value of its reserves in dollars and a weaker euro means that
euro-denominated assets in those reserves are worth less in dollars,
decreasing the total value of the reserves.

But the pace of China’s accumulation of reserves began slowing in the
third quarter along with the slowing of the Chinese economy, and
appears to reflect much broader shifts.

China manages its reserves with considerable secrecy, but economists
believe about 70 percent is in dollar-denominated assets and most of
the rest in euros. The country has bankrolled its huge reserves by
effectively requiring its entire banking sector, which is state-
controlled, to hand nearly one-fifth of its deposits over to the
central bank. The central bank, in turn, has used the money to buy
foreign bonds.

http://www.eutimes.net/2009/02/us-debt-is-losing-its-appeal-in-china/

Japan to lose 2nd’s largest economy ranking to China in 2010, China to
overtake USA in 2020
Posted by asgard
14 on Jun 22, 2009 |

China to overtake USA in 10 years.

China’s economy is now a fourth the size of the $14 trillion U.S.
economy, but given plausible growth rates in both countries, China’s
output will exceed America’s in the 2020’s. China will overtake the
U.S. in terms of economic output within a decade, according to
estimates released by Deutsche Bank, which said it had to accelerate
its forecast of the mainland’s leadership in the global economy in
view of favorable growth dynamics in emerging markets. China’s growth
will be underpinned by a rapid expansion in emerging market economies,
which will account for about 70% of global GDP growth in the coming
decade.

China will “massively invest” in these emerging economies using its
nearly $2 trillion in foreign exchange reserves, extend its leverage
by extending loans to the International Monetary Fund, and allow the
yuan to appreciate in preparation for the currency’s potential reserve
status.

China’s nominal GDP growth could surpass that of the United States
within ten years, a period which will likely be accompanied by a
gradual appreciation of the yuan.

China to overtake Japan in 2010

Around 2010 or sooner 2009, Japan will only be the 3rd world’s largest
economy, behind the United States and China. 41 years ago, the
Japanese industry set itself behind the USA.

The International Monetary Fund predicted it. The Minister of Economy,
Commerce and industry of Japan confirms that Japan will soon lose its
place of 2nd World’s Largest economy, a rank that it occupied since
1968 !

“The statutes of second biggest econmy is touching to its end”,
indicated the minister. In terms of internal PIB, China will overtake
Japan in 2010, perhaps even the end of this year, if the Japanese
economy degrades at the same rhytm as now. In the second Trimester of
2009, the Japanese PID contracted to 14.2%. The IMF predicted a
recession rate of 6.2% for the year, against 6.5% for China.

If the minister recongnize that the temptation of protectionism in
increasing, he warned that it could be dangerous. He is well aware of
the lessons of the past, that protectionism slowed down international
commerce, and led to the world’s recession, followed by the world war
II.

According to the ministry of economy, commerce and industry, Japan
must find solution to stay competive, making references to Japan’s
lead in technology that has longtime helped it’s economy stay afloat.

Japan’s economy in decline

Japan is still suffering from an economic crisis that hit the country
in 1989-90, when the “bubble economy” of high land prices and high
stock market prices collapsed.

Both banks and businesses had much of their assets in either land or
in cross-shareholdings with companies to which they were allied.

Suddenly, these assets – and therefore the debts on which they were
secured – were wiped out.
As a result, banks became burdened with bad debts and lending to
companies for expansion dried up.
Gradually, companies which produced in Japan have shifted some of
their factories abroad, increasing unemployment.

And as unemployment rose to record levels, people have stopped
spending so freely, causing prices to drop.
This makes everyone more reluctant to spend in the hope that they
might get even greater bargains in the future.

Japan has been seriously affected by the world economic slowdown.

In the past, exports by its large and successful companies have helped
sustain its economy, but with the US economy wobbling, this is much
more difficult.

The day of reckoning for the banking sector is getting closer, with
banks being forced finally to declare their non-performing assets.

In addition, Japan is suffering from a large debt overhang from its
excessive government borrowing, which will have to be reduced to lower
long-term interest rates.

http://www.eutimes.net/2009/06/japan-to-lose-2nds-largest-economy-ranking-to-china-in-2010-china-to-overtake-usa-in-2020/

Obama Bailout plan to “save” US economy: Obama plans to bailout
American economy for companies that have moved off manufacturing to
China and India.

Posted by asgard
14 on Feb 27, 2009 |

Obama plans to bailout American economy for companies that have moved
off manufacturing to China and India.

“You can’t put people to work in American factories that don’t
exist.”

The strength of the federal economic stimulus package is seriously
diluted by the fact that many of the manufactured goods that will be
purchased for the attempted recovery must be imported from outside the
United States. America simply doesn’t make lots of things, anymore.
That means many billions of dollars that folks assumed would go
towards fueling an American economic comeback, will instead provide
work and paychecks to employees in other countries, that still have
manufacturing bases. That’s fine with the U.S. Chamber of Commerce,
which is dominated by large multinational corporations – the same guys
that began stripping the United States of manufacturing jobs decades
ago.

The U.S. Chamber of Commerce was one of the main lobbyists opposed to
provisions that would have mandated that stimulus money go to U.S.
companies. The Chamber is a U.S. organization in name only, like its
finance capital comrades, the guys that gave the world such a bad case
of the dreaded “American Disease,” much of the planet is praying that
cash-rich China will eventually bail everybody out.


The United States’ lack of a manufacturing capacity makes it even less
likely that anything resembling a lasting recovery can emerge from
President Obama’s approach to the economic crisis. The infrastructure
projects that are supposed to be central to the recovery scheme are
only valued at $150 billion – which is not much of a jolt, especially
when much of what will have to be bought is only available in other
countries, made by foreign workers. Barack Obama has put a huge
emphasis on building a green economy. However, according to the New
York Times , most of the sources of solar panels and wind turbines are
located in Europe and Asia. There can be no green economy without a
mass transit makeover of the United States, but the U.S. hasn’t made
subway and light rail cars in many years. They’d have to be imported.

“Most of the sources of solar panels and wind turbines are located in
Europe and Asia.”

Every product that must be imported for the infrastructure project
means a watering down of the stimulus impact of the dollars spent. You
can’t put people to work in American factories that don’t exist.

A true national recovery effort would mean re-industrialization, on a
grand scale and a green model, through massive direct federal creation
of state-owned industries independent of the finance capitalists who
murdered American manufacturing and then blew up their own businesses
on Wall Street. But this is already nearly impossible, since President
Obama is committed to saving the banking class through unlimited
infusions of public money, and then allowing these reborn zombies to
resume their roles as lords of development. The bankster parasites
have neither the capacity nor the intention to build anything other
than mountains of debt for the rest of us. Therefore, Obama’s
partnership with them spells doom for national recovery.

Like Billy Preston said, ” Nothin’ from noth in’ leaves nothin’.”The
U.S. cannot create the conditions for economic health without
rebuilding a manufacturing capacity. And the remnants of Wall Street
have nothing to contribute to an economic recovery, but an infinite
capacity to steal.

By Glen Ford

http://www.eutimes.net/2009/02/obama-bailout-plan-to-save-us-economy-obama-plans-to-bailout-american-economy-for-companies-that-have-moved-off-manufacturing-to-china-and-india/

...and I am Sid Harth

[bademiyansubhanallah]

Reacting to mixed signals
Economists say recovery is slow but on right track
By Steven Syre
Globe Staff / February 6, 2010

The stock market eked out a small gain yesterday, with the Dow Jones
industrial average closing at 10,012.23. But stocks have fallen about
7 percent since a January peak. The US unemployment rate fell
unexpectedly to 9.7 percent in January, even though the economy shed
20,000 net jobs during the month, the Labor Department said yesterday.

Contradictions like that are everywhere in the economy and markets.
But economists say such mixed signals are common in the early stages
of a recovery and the US still seems headed for modest improvement
this year.

“I think there’s a lot of noise out there right now,’’ said economist
Bob Murphy of Boston College. “People are looking for signs, and
they’re looking everywhere. Sometimes they react more than they should
when they see something that’s not too promising.’’

Confusion is understandable because every positive economic signal
seems to come with a qualifier. Company profits are growing, but
businesses remain reluctant to hire. Consumer spending is stabilizing,
but commodity prices have been slipping for months.

US stock prices were already slipping before the volatile trading days
at the end of this week, despite the fact that hundreds of big
companies reported mostly encouraging news on quarterly profits. The
slippage may be due to just how high stocks had climbed in the rally
that followed the devastation of the credit crisis that began in 2008.

From their lows in March 2009, stocks had soared for about nine
months, gaining 70 percent by Jan. 19. Sooner or later, stock
investors would find a reason to worry and sell some of their shares.

“This market has been rallying for so long it was due for a pause,’’
said Tom Manning, chief investment officer at Silver Bridge Advisors
in Boston. “I view it as a necessary evil, something that was bound to
happen. But I’m not looking for the market to go down much more than a
couple of percentage points more in this environment.’’

The key signpost for the US economy remains embedded in employment
data. Clear evidence of job creation will confirm a real recovery and
probably lift stocks higher again.

Like the recoveries from the past two recessions, economic expansion
has gotten ahead of job growth. But the trend has been mostly headed
in the right direction. The nation’s unemployment rate may still rise
before hitting a peak, but new unemployment claims are far below their
high point.

The news on jobs yesterday was another mixed message. The 9.7 percent
unemployment figure for January, down from 10 percent the previous
month, was a little better than expected. The 20,000 net jobs lost was
a bit worse than forecast, though manufacturers hired more people for
the first time in three years.

Companies have grown profits without hiring new employees thanks to
extraordinary gains in productivity, which rose by 6.2 percent during
the final three months of 2009. That was the third consecutive quarter
of sharp gains in productivity.

“That can’t keep up,’’ says Murphy. “Eventually hiring has to start to
pick up or the recovery stalls. My guess is the employment number
starts to move up in the next few months.’’

Some of the most serious threats to better times in America may
actually lie in the economies of Europe and Japan, economists say.
Weak economies in several countries - Greece, Spain, Portugal, and
Ireland - threaten to throw a wrench in the European recovery.

Soaring government budget deficits are a particular problem in Greece
and Spain. Investors worry those countries, especially Greece, could
default on their debts. The price of insuring those debts soared to
record highs this week, then eased yesterday on speculation the
European Union would come to the financial aid of Greece.

“When you have a wave of international banking crises, as sure as day
follows night, you will have a wave of sovereign debt crises in a few
years,’’ says economist Kenneth Rogoff of Harvard University. “The
buildup in public debt we’re seeing is quite normal after a deep
crisis.’’

It was those concerns that shook stock markets around the world this
week. The Dow Jones industrial average plunged 268 points Thursday and
fell another 167 points by mid-session yesterday before recovering.
The Dow average ended the day up 10.05 to 10,012.23.

And the economy in Japan, an important US trading partner, continues
to limp badly.

“We’re better off with a stronger global economy,’’ said Brian
Bethune, director of financial economics at IHS Global Insight in
Lexington.

Steven Syre can be reached at ***@globe.com.

© Copyright 2010 Globe Newspaper Company.

http://www.boston.com/business/articles/2010/02/06/markets_reacting_to_economic_contradictions/

US jobs data show mixed picture
By James Politi in Washington

Published: February 5 2010 20:04 | Last updated: February 5 2010 23:13

Anyone looking for clarity about the direction of the US labour market
will have been disappointed by the mixed picture in the government
data released on Friday.

On the one hand, the unemployment rate declined from 10 per cent to a
five-month low of 9.7 per cent in January, offering hope that
companies are bringing in new workers as the US economy grows again.

“The jury is still out,” said Andrew Tilton, an economist at Goldman
Sachs in New York.

One message was clear however: the recession that began in December
2007 was even more devastating to US employment than previously
thought.

Friday’s data included revisions to figures from a year ago showing
that 8.4m jobs were lost since the crisis started – almost 1m more
than earlier estimates – a stark reminder of the extent of the problem
the labour market faces.

Economists have been expecting the US labour market to begin returning
to normal in the coming months amid roaring productivity and strong
annualised growth of 5.7 per cent in the fourth quarter.

There were some encouraging signs beneath the headline numbers.
Stephen Stanley of RBS in Connecticut said the data “confirm our
conviction that the labour market is gradually turning around but
wishing that payrolls would improve faster”. The average work week
increased by 0.1 to 33.3 hours, while wages increased to $18.89 per
hour – both reflecting trends that are expected in a labour market
recovery.

On the payrolls front, US manufacturing industry created 11,000 new
positions last month – posting its first monthly gain since 2007. In
addition, the number of temporary workers jumped by 52,000 and retail
workers increased by 42,000, helping employment in service industries
– which account for the bulk of US jobs – to increase by 48,000.

But for some economists, the glass was half-empty. “Overall, output
has now been expanding for about six months, yet the economy is still
shedding jobs,” said Paul Ashworth of Capital Economics in Toronto.
“Output and employment normally move roughly concurrently, so based on
what we’ve seen so far, this is without doubt a jobless recovery.”

The growing number of “discouraged” workers – who have stopped even
looking for jobs – remains a big concern. It has ballooned from
734,000 to 1.1m people over the past year – having grown last month by
136,000. Long-term unemployment – which includes people who have not
found a job for 27 weeks or more – also increased to 6.3m from 2.7m a
year ago.

In addition, certain industries such as construction, remain deeply
troubled. It lost 75,000 jobs last month, and while some of that
decrease is being attributed to cold weather, much of it reflects the
precarious health of the US housing market, which is still struggling
to recover.

While the decline in the unemployment rate affected many sections of
the US population, workers with college degrees or higher benefited
the most – with their unemployment rate falling 0.5 percentage points
to 8.5 per cent. African-Americans saw their unemployment rate jump
0.3 percentage points to 16.5 per cent.

The monthly employment report is arguably the most politically
sensitive measure of the health of the US economy, invariably
attracting strong reactions from both Republicans and Democrats. On
Friday, Christina Romer, chair of the White House Council of Economic
Advisers, said the numbers contained “signs of the beginning of
recovery” but were “also a reminder of how far we still have to go to
return the economy to robust health and full employment”.

The Obama administration has made job creation its top domestic
priority this year, recently announcing proposals, including tax
breaks and other incentives to jump-start hiring.

Copyright The Financial Times Limited 2010.

http://www.ft.com/cms/s/0/ce92fdf2-128d-11df-a611-00144feab49a.html

Op-Ed Columnist
Time Is Running Out

By BOB HERBERT
Published: February 5, 2010
Palo Alto, Calif.

Bob Herbert

We’ve now lost 8.4 million jobs in this recession, and a vast majority
of them are gone for good. The politicians are clambering aboard the
jobs bandwagon, belatedly, but very few are telling the truth about
the structural employment problems in the U.S. and the extremely heavy
lift that is necessary to halt our declining living standards and get
us back to an economy that is self-sustaining.

We don’t hear a lot that is serious about the sorry state of the
nation’s infrastructure or the trade policies that crippled so many
American industries or our inability (or unwillingness) to compete
effectively with China when it comes to the new world of energy for
the 21st century or our abject failure to provide a quality public
education for the next generation of American workers, scientists,
artists and entrepreneurs.

Speaking at a conference here on Wednesday, Gov. Ed Rendell of
Pennsylvania said that if we don’t act quickly in developing long-term
solutions to these and other problems, the United States will be a
second-rate economic power by the end of this decade. A failure to act
boldly, he said, will result in the U.S. becoming “a cooked goose.”

Neither the politicians nor much of the mainstream media are spelling
out the severity of these enormous structural problems or the sense of
urgency needed to address them. Living standards are sinking in the
United States, and there is no coherent vision or plan for reversing
that ominous trend over the long term.

The conference was titled, “The Next American Economy: Transforming
Energy and Infrastructure Investment.” It was put together by the
Brookings Institution and Lazard, the investment banking advisory
firm.

When Governor Rendell addressed the conference on Wednesday, he used
words like “stunning” and “unbelievable” to describe what has happened
to the nation’s infrastructure. His words echoed the warnings we’ve
been hearing for years from the American Society of Civil Engineers,
which tells us: “The broken water mains, gridlocked streets, crumbling
dams and levees, and delayed flights that come from failing
infrastructure have a negative impact on the checkbook and on the
quality of life of each and every American.”

The conference was sparked by a sense of dismay over what has happened
to the U.S. economy over the past several years and a feeling that
constructive ideas about solutions were being smothered by an
obsessive focus on the short-term in this society, and by the chronic
dysfunction and hyperpartisanship in much of the government.

I was struck by the absence of grousing and finger-pointing at the
conference and the emphasis on trying to develop new ways to establish
an economy that is not based on financial flimflammery, that enhances
America’s competitive position in the world, and that relieves us of
the terrible burden of reliance on foreign energy sources.

I was also struck by the pervasive sense that if we don’t get our act
together then the glory days of the go-go American economic empire
will fade like the triumphs of an aging Hollywood star. One of the
participants raised the very real possibility of Americans having to
get used to living in an economy “that won’t be number one,” an
economy that perhaps is more like Germany’s.

Rescuing the U.S. economy will require a commitment, and undoubtedly
sacrifices, that need to start now. And it will require leadership
that pulls together the best talents from all sectors of the society —
not just business, not just government, but from everywhere.

Bruce Katz, the director of Brookings’ Metropolitan Policy Program,
discussed some of the steps that need to be taken to remake an economy
that has been thrown completely out of whack by frantic, debt-driven
consumption, speculative bubbles, exotic financial instruments, and so
on.

A new, saner, more sustainable economy will have to be more export-
oriented, powered by cleaner fuels, bolstered by innovation that comes
from a renewed focus on research and development, and committed to
delivering a better-educated, more highly skilled work force.

Mr. Katz believes this is doable, but by no means easy. The nation’s
infrastructure, he said, will have to “shift from 20th-century models
of transport and energy transmission to rapid bus, ubiquitous
broadband, congestion pricing, smart grid, high-speed rail and
intelligent transport.”

New ways of financing such transformative changes will have to be
developed, linking public and private capital, preferably through the
creation of a national infrastructure bank, among other things. The
nation’s political leaders and the public at large will have to grasp
the difference between wasteful spending and crucial investments in
the future.

It’s time for serious people to step forward and help lead on these
critically important issues. Time is short.

http://www.nytimes.com/2010/02/06/opinion/06herbert.html

...and I am Sid Harth

[bademiyansubhanallah]

Saturday, Feb. 6, 2010
Startup firms, innovation key to ties: Roos

By ERIC JOHNSTON
Staff writer

KYOTO — Innovation and entrepreneurship will not only revitalize
Japan's economy but also help strengthen and build upon Japan-U.S.
relations that have become strained by security issues, U.S.
Ambassador to Japan John Roos told senior Kansai business leaders
Friday afternoon.

John Roos KYODO PHOTO

With concern in Tokyo and Washington mounting that the stalemate over
the relocation of U.S. Marine Corps Air Station Futenma in Okinawa is
negatively impacting bilateral relations, participants at the two-day
Kansai Economic Seminar spent Thursday and Friday morning in
discussions that were often highly critical of Prime Minister Yukio
Hatoyama's handling of Futenma.

On Friday afternoon, Roos attempted to soothe concerns by
concentrating on the role of technological innovation and the creation
of startup companies, especially in green technologies, an issue that
as a former lawyer in Silicon Valley he feels passionately about.

"I know that there's concern with regard to the current issues. I'm
confident that we'll work through them," he said.

"What is very clear to me is that the Japan-U.S. strategic and
underlying relations are critically important to both countries. It's
been the cornerstone of U.S. policy in Asia for the past 50 years and
will be for another 50 years," Roos said.

"Both of our countries also face big economic challenges. But Japan
and the U.S. are two of the most, if not the most, innovative
countries in the world. Forty-two percent of the world's research and
development takes place in the U.S. and Japan, and over half of the
international patents are filed on behalf of either U.S. or Japanese
companies," Roos said, adding that despite international attention to
the rise of China, Japan may be a sleeping giant when it comes to
startup companies.

For the past 16 years, since the opening of Kansai airport, Kansai's
official relationship with the United States has been a distant second
priority to relations with East Asia, especially China.

In 2007, 48 percent of Kansai's exports went to, and 59 percent of its
imports came from, the Asian region, according to the Ministry of
Economy, Trade and Industry. Less than 21 percent of Kansai's exports
and just 15 percent of its imports came from the U.S.

Although the Kansai Economic Seminar was designed to focus on economic
issues, this year marked the first time the seminar has met since the
Democratic Party of Japan-led coalition took power last fall.

This year's focus was on how national political issues affect local
international trade strategies, especially on how to balance Kansai's
growing dependence on trade with Asia against the role Japan is
expected to fulfill under its treaty obligations with the U.S.

At times, participants pushed for the kind of relationship officials
under former President George W. Bush once envisioned, one similar to
America's ties with Britain.

Though the analogy is rarely used today by politicians in Washington
and Tokyo due to the inherent political and cultural differences
between the U.S.-Britain and Japan-U.S. relationships, Takushoku
University professor Takashi Kawakami invoked the comparison to say
Tokyo's ties with Washington should be based on the U.S.-Britain
relationship in terms of power-sharing.

Meanwhile, Masahisa Miyazaki, of the Okinawa Association of Corporate
Executives, warned participants Thursday afternoon that with the
election of an antibase mayor in Nago, it was no longer inevitable
that Futenma's relocation would be to Nago's Henoko district. This
prompted other participants to worry that the Nago poll outcome may
hurt bilateral relations.

"Unless the 2006 agreement between Japan and the U.S. is honored, the
economic aspects of the bilateral relationship will also be affected,"
said Yukiyoshi Okano, president of Daikin Industries Ltd.

http://search.japantimes.co.jp/cgi-bin/nn20100206f2.html

Posted on Friday, February 5, 2010 email|print|tool nameclose tool
goes here Global market turmoil hints that U.S. recovery may founder
Sign up for email newsletters now!
Sign up for email newsletters now!Never miss a McClatchy story


Register
Log in logout
member center
--------------------------------------------------------------------------------
Follow us on Twitter
Follow us on Facebook
Add us to your iPhone or G1 More on this Story
Story | What are Toyota's idled U.S. workers doing? You might be
surprised
Story | Despite millions in tax credits, wind energy firms aren't
hiring
Story | U.S. economy grew 5.7% in 4th quarter, capping dismal year
Story | Nursing graduates discover medicine is not recession-proof
Story | Jobs funding is set to expire before it has chance to work
Story | Geithner: Regulators, Congress to blame for banks not lending
Story | Cuomo charges BofA, ex-CEO Lewis with securities fraud
Graphic | US Jobless claims
On the Web | How unemployment can go down when more jobs are lost
Comments (22) | Recommend (3)
By Kevin G. Hall | McClatchy Newspapers
WASHINGTON — Conflicting U.S. jobs data and mounting concerns about
debt defaults abroad that threaten global economic growth triggered a
worldwide wave of stock-market volatility Friday amid fears that the
improving U.S. economy could unravel.

A mixed jobs report from the Labor Department, including a revision
that showed that 2009 job losses were far greater than thought, called
into question the strength of the U.S. recovery.

In Europe, the European Union's inability to chart a path forward for
debt-ridden Greece, Ireland and Spain also led investors to fear a
return to the credit freeze of 2008 and scurry for havens. Investors
on Friday fled countries from Portugal to Argentina on concerns that
their widening deficits could signal future debt defaults.

"Greece's debt problems and the contagion effects to other southern
European countries or beyond are real and are likely to stay with us
for some time," Barclays Capital Research, a division of the big
British bank, warned in a research note.

The potential of new global financial woes piled on top of U.S.
employment worries. Shortly after opening, the Dow Jones Industrial
Average sank below 10,000, at one point down 170 points. It swung 120
points in the final hour of trading, however, as investors
repositioned in case of a weekend solution in Europe, perhaps
involving a rescue by the International Monetary Fund.

Friday's global stock-market turmoil could continue next week. The
downturn in recent weeks has doused investors and hit the retirement
plans of ordinary Americans alike, eroding last year's wealth gains.

The Dow finished up 10.05 points to 10012.23. The S&P 500 and Nasdaq
rallied to close up, respectively, 3.08 points to 1066.19 and 15.69
points to 2141.12.

Friday's volatile trading followed a 267-point drop on the Dow a day
earlier, and it began minutes after the Labor Department released the
jobs report, which found an unexpected drop in the unemployment rate
from 10 percent to 9.7 percent. Analysts had expected a slight uptick.

"These numbers, while positive, are a cause for hope but not
celebration, because far too many of our neighbors and friends and
family are still out of work," President Barack Obama said during a
meeting with small business owners in Lanham, Md. "We can't be
satisfied when another 20,000 have joined their ranks and millions
more Americans are underemployed, picking up what work they can."

Still, optimists pointed to the household survey, which questions
workers to determine the jobless rate. That survey found that more
people reported new jobs, 541,000, than reported jobs lost, 430,000.
The work force participation rate, which reflects people working or
looking for work, also rose slightly as the jobless rate dipped.

"Despite the obvious disappointment of the failure to show a gain in
employment in January, we judge there is more good news than bad news
in this report," a research note from forecaster RDQ Economics said.

If the jobs report confounded investors Friday, problems in the
European Union scared them. The problem isn't so much that a nation
defaults on its sovereign debt — the bonds that individual countries
issue — but that such a default could trigger a chain reaction of
global panic similar to what happened after the bankruptcy of U.S.
investment giant Lehman Brothers in September 2008.

That scenario would add to the hurt on American shores, since it would
slow the global economy, bring more bank losses and hurt U.S. exports.

Even without a panic, weaker European economies such as Spain's and
Portugal's already face a credit crisis as they're hit with higher
borrowing costs because investors consider them riskier bets.

An economic slowdown in Europe would hurt Main Street America because
exports have been one of the few drivers of economic growth, and
Europe is a chief buyer of everything from farm products to expensive
U.S. technology.

If Greece and other nations default on their debts, that also could
unleash a new wave of contagion, and countries from Iceland to
Argentina could find themselves unable to make good on their
commitments to bondholders. This would bring even more losses at
global financial institutions just as they're beginning to claw back
from the brink of collapse.

Alan Levenson, the chief economist of investment-management firm T.
Rowe Price, warned in a note to investors that renewed financial
market turbulence "could cause a pullback in business-decision making
that would interrupt the economy's forward progress."

If the future is uncertain, today's economic problems seem to be
improving gradually.

January's jobs report found that improvements in hiring continued, but
the data conflicted. The Labor Department revised upward the November
estimate of a small net gain of 4,000 jobs to show that 64,000 jobs
had been added, but statisticians also revised December's estimate,
saying that 150,000 jobs were lost that month, not 64,000 as they'd
reported previously.

"The job market remains very tough, but headed in the right
direction," said Mark Zandi, the chief economist for forecaster
Moody's Economy.com in West Chester, Pa. "Job growth should resume
this spring."

Zandi warned against cheering Friday's drop in the jobless rate.

"I don't think the decline in the unemployment rate has much meaning.
It appears to be more of a statistical decline than a real one," he
said, suggesting that statistical revisions to the estimated size of
the work force explain much of the drop, the second consecutive
decline in the jobless rate.

Many experts think the rate will rise again as more people who'd given
up looking for jobs try to get back into the work force as the economy
thaws.

"I think unemployment rates are going to keep going up for a while.
Even if job growth returns, it's not going to outstrip the magnitude"
of past job losses, said Harry Holzer, a former Labor Department chief
economist who's a researcher at the Urban Institute, a centrist policy-
research organization.

An annual revision to last year's numbers, published in Friday's data,
found that 600,000 more workers lost their jobs last year than first
estimated. The revision means that 8.4 million people have lost their
jobs since the recession began in December 2007.

"This number, however, understates the size of the gap in the labor
market by failing to take into account the fact that simply to keep up
with population growth, the labor market should have added around 2.6
million jobs since December 2007. This means the labor market is now
roughly 11 million jobs below what would restore the pre-recession
unemployment rate," said Heidi Shierholz, a labor economist at the
Economic Policy Institute, a liberal policy-research group.

In an analysis of Friday's jobs report, she added that in order to
fully fill in the 11 million-job gap in the labor market within three
years — by January 2013 — employment would have to increase by more
than 400,000 jobs every month between now and then.

That's a daunting task, made even tougher if the problems in Europe
lead to slower global economic growth.

Despite the conflicting data, some details of Friday's jobs report
were positive. The hard-hit manufacturing sector posted January gains
of 11,000. That confirms data showing that factory orders for all
sorts of goods and materials are up.

Other positive signs include a boost of 52,000 jobs in temporary
employment — a harbinger of future full-time hiring — and 42,000 new
positions in retailing. Federal government employment grew by 33,000
jobs.

However, the construction sector has shed jobs faster and more deeply
than all other sectors, and it pulled down January's employment
numbers. Another 75,000 construction jobs were lost in January, and
analysts think that much of that was weather-related. More than half
of those lost construction jobs were specialty contractors in non-
residential building.

January by the numbers:

•Construction, down 75,000


•Manufacturing, up 11,000


•Retail, up 42,000


•Government, up 33,000


•Financial services, down 16,000


•Professional and business services, up 44,000


•Health Care, up 17,100


•Transportation, warehousing, down 19,000


•Leisure and hospitality, down 14,000

http://www.mcclatchydc.com/330/story/83814.html

Economic News Release FONT SIZE: PRINT: CPS Labor Force Statistics
from the Current Population Survey
CPS Homepage
CPS Overview
CPS FAQ
Contact CPS
CES Current Employment Statistics - CES (National)
CES Homepage
CES Overview
CES FAQs
Contact CES

Employment Situation Summary
Transmission of material in this release is embargoed
USDL-10-0141
until 8:30 a.m. (EST) Friday, February 5, 2010

Technical information:
Household data: [phone] * ***@bls.gov * www.bls.gov/cps
Establishment data: [phone] * ***@bls.gov * www.bls.gov/ces

Media contact: [phone] * ***@bls.gov


THE EMPLOYMENT SITUATION -- JANUARY 2010


The unemployment rate fell from 10.0 to 9.7 percent in January, and
nonfarm
payroll employment was essentially unchanged (-20,000), the U.S.
Bureau of
Labor Statistics reported today. Employment fell in construction and
in
transportation and warehousing, while temporary help services and
retail
trade added jobs.

Household Survey Data

In January, the number of unemployed persons decreased to 14.8
million,
and the unemployment rate fell by 0.3 percentage point to 9.7
percent.
(See table A-1.)

In January, unemployment rates for most major worker groups--adult men
(10.0 percent), teenagers (26.4 percent), blacks (16.5 percent), and
Hispanics (12.6 percent)--showed little change. The jobless rate for
adult
women fell to 7.9 percent, and the rate for whites declined to 8.7
percent.
The jobless rate for Asians was 8.4 percent, not seasonally adjusted.
(See tables A-1, A-2, and A-3.)

This release includes new household survey tables with information
about
employment and unemployment of veterans, persons with a disability,
and the
foreign born. In January, the unemployment rate of veterans from Gulf
War
era II (September 2001 to the present) was 12.6 percent, compared with
10.4
percent for nonveterans. Persons with a disability had a higher
jobless rate
than persons with no disability--15.2 versus 10.4 percent. In
addition, the
labor force participation rate of persons with a disability was 21.8
percent,
compared with 70.1 percent for those without a disability. The
unemployment
rate for the foreign born was 11.8 percent, and the rate for the
native born
was 10.3 percent. (The data in these new tables are not seasonally
adjusted.)
(See tables A-5, A-6, and A-7.)


----------------------------------------------------------------
| |
| Changes to The Employment Situation Text, Tables, and Data |
| |
| Several changes to The Employment Situation news release text |
| and tables are being introduced with this release. In addi- |
| tion, establishment survey data have been revised as a result |
| of the annual benchmarking process and the updating of sea- |
| sonal adjustment factors. Also, household survey data for Jan-|
| uary 2010 reflect updated population estimates. See the notes |
| at the end of the text for more information about all of |
| these changes. |
| |
----------------------------------------------------------------


In January, the number of persons unemployed due to job loss decreased
by
378,000 to 9.3 million. Nearly all of this decline occurred among
permanent
job losers. (See table A-11.)

The number of long-term unemployed (those jobless for 27 weeks and
over)
continued to trend up in January, reaching 6.3 million. Since the
start of
the recession in December 2007, the number of long-term unemployed has
risen
by 5.0 million. (See table A-12.)

In January, the civilian labor force participation rate was little
changed at
64.7 percent. The employment-population ratio rose from 58.2 to 58.4
percent.
(See table A-1.)

The number of persons who worked part time for economic reasons
(sometimes
referred to as involuntary part-time workers) fell from 9.2 to 8.3
million
in January. These individuals were working part time because their
hours had
been cut back or because they were unable to find a full-time job.
(See
table A-8.)

About 2.5 million persons were marginally attached to the labor force
in
January, an increase of 409,000 from a year earlier. (The data are
not
seasonally adjusted.) These individuals were not in the labor force,
wanted
and were available for work, and had looked for a job sometime in the
prior
12 months. They were not counted as unemployed because they had not
searched
for work in the 4 weeks preceding the survey. (See table A-16.)

Among the marginally attached, there were 1.1 million discouraged
workers in
January, up from 734,000 a year earlier. (The data are not seasonally
adjusted.)
Discouraged workers are persons not currently looking for work because
they
believe no jobs are available for them. The remaining 1.5 million
people
marginally attached to the labor force had not searched for work in
the 4 weeks
preceding the survey for reasons such as school attendance or family
responsi-
bilities.

Establishment Survey Data

Total nonfarm payroll employment was essentially unchanged in January
(-20,000).
Job losses continued in construction and in transportation and
warehousing,
while employment increased in temporary help services and retail
trade. Since
the start of the recession in December 2007, payroll employment has
fallen by
8.4 million. Over the last 3 months, however, employment has shown
little net
change. (See table B-1.)

Construction employment declined by 75,000 in January, with
nonresidential
specialty trade contractors (-48,000) accounting for the majority of
the de-
cline. Since December 2007, employment in construction has fallen by
1.9
million.

In January, transportation and warehousing employment fell by 19,000,
due to
a large job loss among couriers and messengers (-23,000).

Employment in manufacturing was little changed in January (11,000).
After expe-
riencing steep job losses earlier in the recession, employment
declines
moderated considerably in the second half of 2009. In January, job
gains in
motor vehicles and parts (23,000) and plastics and rubber products
(6,000)
offset small job losses elsewhere in the industry.

In January, temporary help services added 52,000 jobs. Since reaching
a low
point in September 2009, temporary help services employment has risen
by
247,000.

Retail trade employment rose by 42,000 in January, after showing
little
change in the prior 2 months. Job gains occurred in January among food
stores
(14,000), clothing stores (13,000), and general merchandise retailers
(10,000).

Health care employment continued to trend up in January. Ambulatory
health
care services added 15,000 jobs over the month.

In January, the federal government added 33,000 jobs, including 9,000
tempo-
rary positions for Census 2010. Employment in state and local
governments,
excluding education, continued to trend down.

This release includes a new establishment survey table with
information about
women employees. In January, women made up 49.9 percent of total
nonfarm pay-
roll employment, compared with 48.8 percent when the recession began
in
December 2007. (See table B-5.)

Also new in this release are data on hours and earnings for all
employees in
the private sector. The average workweek for all employees on private
nonfarm
payrolls was up by 0.1 hour to 33.9 hours in January. The
manufacturing work-
week for all employees rose by 0.3 hour to 39.9 hours, and factory
overtime
increased by 0.1 hour over the month. Since June, the manufacturing
workweek
has increased by 1.2 hours. In January, the average workweek for
production
and nonsupervisory employees on private nonfarm payrolls rose by 0.1
hour to
33.3 hours. (See tables B-2 and B-7.)

In January, average hourly earnings of all employees on private
nonfarm pay-
rolls increased by 4 cents, or 0.2 percent, to $22.45. Over the past
12 months,
average hourly earnings have risen by 2.0 percent. In January, average
hourly
earnings of private production and nonsupervisory employees rose by 5
cents,
or 0.3 percent, to $18.89. (See tables B-3 and B-8.)

The change in total nonfarm payroll employment for November was
revised from
4,000 to 64,000, and the change for December was revised from -85,000
to
-150,000. Monthly revisions result from additional sample reports and
the
monthly recalculation of seasonal factors. The annual benchmark
process also
contributed to these revisions.

_____________
The Employment Situation for February is scheduled to be released on
Friday,
March 5, 2010, at 8:30 a.m. (EST).




---------------------------------------------------------------
| |
| Changes to The Employment Situation Text and Tables |
| |
| Effective with this release, several changes to The Employ- |
| ment Situation news release text and tables have been intro- |
| duced. Two new summary tables--one for the household survey |
| titled "Summary table A" and one for the establishment survey |
| titled "Summary table B"--replace what previously had been a |
| single table (table A) containing data from both surveys. |
| |
| Three new household survey data tables provide information on |
| the employment status of veterans (table A-5), persons with a |
| disability (table A-6), and the foreign born (table A-7). In |
| addition, two new seasonally adjusted series (on permanent |
| job losers and persons who completed temporary jobs) are |
| being added to table A-11, which shows unemployment by reason.|
| |
| The establishment survey data tables (the B tables) have been |
| redesigned to include the addition of several data series. |
| New data on all employee hours and earnings are being pub- |
| lished for the first time. Data on women employees and produc-|
| tion and nonsupervisory employees are now being published |
| concurrent with the newest-available establishment survey em- |
| ployment data. Previously, employment data on women were |
| available with a one-month lag and were not published in The |
| Employment Situation news release. The Technical Note section |
| of this release has been updated to cover the new concepts |
| being introduced. |
| |
| Additional information about these changes, including cross- |
| walks between the old and new tables, is available at www. |
| bls.gov/bls/upcoming_empsit_changes.htm. |
| |
---------------------------------------------------------------




Revisions to Establishment Survey Data

In accordance with annual practice, the establishment survey data have
been
revised to reflect comprehensive universe counts of payroll jobs, or
benchmarks.
These counts are derived principally from unemployment insurance tax
records
for March 2009. As a result of the benchmark process, all data series
were
subject to revision from April 2008 forward, the time period since the
last
benchmark was established. In addition, with this release, the
seasonally
adjusted establishment survey data from January 2005 forward were
subject to
revision due to the introduction of updated seasonal adjustment
factors.

Table A presents revised total nonfarm employment data on a seasonally
adjust-
ed basis for January through December 2009. The revised data for April
2009
forward incorporate the effect of applying the rate of change measured
by the
sample to the new benchmark level, as well as updated net business
birth/death
model adjustments and new seasonal adjustment factors. The November
and
December 2009 revisions also reflect the routine incorporation of
additional
sample receipts into the November final and December second
preliminary
estimates. The total nonfarm employment level for March 2009 was
revised down-
ward by 902,000 (930,000 on a seasonally adjusted basis), or 0.7
percent. The
previously published level for December 2009 was revised downward
1,390,000
(1,363,000 on a seasonally adjusted basis).

An article that discusses the benchmark and post-benchmark revisions,
as well
as all revised historical Current Employment Statistics (CES) data,
can be
accessed through the CES homepage at www.bls.gov/ces/. Information on
the
revisions released today also may be obtained by calling (202)
691-6555.



Table A. Revisions in total nonfarm employment, January-December
2009,
seasonally
adjusted

(In
thousands)

_______________________________________________________________________
|
|
| Level | Over-the-month
change

|---------------------|---------------------------------
Year and month| As | | As |
|
|previously| As |previously| As |
Difference
|published | revised |published | revised
|
_______________|__________|__________|__________|__________|
___________
| | | |
|
2009 | | | |
|
January........| 134,333 | 133,549 | -741 | -779 |
-38
February.......| 133,652 | 132,823 | -681 | -726 |
-45
March..........| 133,000 | 132,070 | -652 | -753 |
-101
April..........| 132,481 | 131,488 | -519 | -582 |
-63
May............| 132,178 | 131,141 | -303 | -347 |
-44
June...........| 131,715 | 130,637 | -463 | -504 |
-41
July...........| 131,411 | 130,293 | -304 | -344 |
-40
August.........| 131,257 | 130,082 | -154 | -211 |
-57
September......| 131,118 | 129,857 | -139 | -225 |
-86
October........| 130,991 | 129,633 | -127 | -224 |
-97
November.......| 130,995 | 129,697 | 4 | 64 |
60
December (p)...| 130,910 | 129,547 | -85 | -150 |
-65

-----------------------------------------------------------------------
p =
preliminary.




Adjustments to Population Estimates for the Household Survey

Effective with data for January 2010, updated population estimates
have been
used in the household survey. Population estimates for the household
survey
are developed by the U.S. Census Bureau. Each year, the Census Bureau
updates
the estimates to reflect new information and assumptions about the
growth of
the population during the decade. The change in population reflected
in the
new estimates results primarily from adjustments for net international
migra-
tion, updated vital statistics and other information, and some
methodological
changes in the estimation process.

In accordance with usual practice, BLS will not revise the official
household
survey estimates for December 2009 or earlier months. To show the
impact of
the population adjustment, however, differences in selected December
2009 labor
force series based on the old and new population estimates are shown
in table B.
The adjustment decreased the estimated size of the civilian
noninstitutional
population in December by 258,000, the civilian labor force by
249,000, and
employment by 243,000; the new population estimates had a negligible
impact
on unemployment rates and other percentage estimates. Data users are
cautioned
that these annual population adjustments affect the comparability of
household
data series over time. Estimates of large levels, such as total labor
force and
employment, are impacted most. Table C shows the effect of the
introduction of
new population estimates on the changes in selected labor force
measures between
December 2009 and January 2010. More detailed information on the
population
adjustments and their effect on national labor force estimates are
available at
www.bls.gov/cps/cps10adj.pdf.



Table B. Effect of the updated population controls on December 2009
esti-
mates by sex, race, and Hispanic or Latino ethnicity, not seasonally
ad-
justed

(Numbers in
thousands)

____________________________________________________________________________
| | | | | |
|
| | | | | Black |
|
| | | | | or | |
Hispanic
Category |Total| Men | Women| White| African| Asian | or
Latino
| | | | |American| |
ethnicity
| | | | | |
|
_____________________|_____|_____|______|______|________|_______|
___________
| | | | | |
|
Civilian noninstitu- | | | | | |
|
tional population...|-258 |-168 | -90 | -274 | 56 | -31 |
-212
Civilian labor | | | | | |
|
force............|-249 |-185 | -64 | -235 | 31 | -42 |
-169
Employed..........|-243 |-179 | -64 | -222 | 22 | -40 |
-160
Unemployed........| -5 | -6 | 0 | -13 | 9 | -2 |
-8
Unemployment | | | | | |
|
rate............| .0 | .0 | .0 | .0 | .0 | .0 | .
1
_____________________|_____|_____|______|______|________|_______|
___________

NOTE: Detail for men and women may not sum to totals because of
round-
ing. Estimates for the above race groups (white, black or African
American,
and Asian) do not sum to totals because data are not presented for
all
races. Persons whose ethnicity is identified as Hispanic or Latino
may be
of any race.



Table C. December 2009-January 2010 changes in selected labor
force
measures, with adjustments for population control
effects

(Numbers in thousands)

____________________________________________________________________________
| |
|
| | | Dec.-
Jan.
| Dec.-Jan. | 2010 |
change,
| change, | population | after
re-
Category | as | control |
moving the
| published | effect |
population
| | |
control
| | |
effect (1)
_____________________________________|___________|____________|
_____________
| |
|
Civilian noninstitutional population.| -92 | -258 |
166
Civilian labor force...............| 111 | -249 |
360
Participation rate...............| .1 | .0 | .
1
Employed..........................| 541 | -243 |
784
Employment-population ratio......| .2 | .0 | .
2
Unemployed........................| -430 | -5 |
-425
Unemployment rate................| -.3 | .0 | -.
3
| |
|
_____________________________________|___________|____________|
_____________

1 This December-January change is calculated by subtracting the
population
control effect from the published over-the-month change.

Employment Situation Summary Table A. Household data, seasonally
adjusted
Employment Situation Summary Table B. Establishment data, seasonally
adjusted
Employment Situation Frequently Asked Questions
Employment Situation Technical Note
Table A-1.Employment status of the civilian population by sex and age
Table A-2.Employment status of the civilian population by race, sex,
and age
Table A-3.Employment status of the Hispanic or Latino population by
sex and age
Table A-4.Employment status of the civilian population 25 years and
over by educational attainment
Table A-5.Employment status of the civilian population 18 years and
over by veteran status, period of service, and sex, not seasonally
adjusted
Table A-6.Employment status of the civilian population by sex, age,
and disability status, not seasonally adjusted
Table A-7.Employment status of the civilian population by nativity and
sex, not seasonally adjusted
Table A-8.Employed persons by class of worker and part-time status
Table A-9.Selected employment indicators
Table A-10.Selected unemployment indicators, seasonally adjusted
Table A-11.Unemployed persons by reason for unemployment
Table A-12.Unemployed persons by duration of unemployment
Table A-13.Employed and unemployed persons by occupation, not
seasonally adjusted
Table A-14.Unemployed persons by industry and class of worker, not
seasonally adjusted
Table A-15.Alternative measures of labor underutilization
Table A-16.Persons not in the labor force and multiple jobholders by
sex, not seasonally adjusted
Table B-1.Employees on nonfarm payrolls by industry sector and
selected industry detail
Table B-2.Average weekly hours and overtime of all employees on
private nonfarm payrolls by industry sector, seasonally adjusted
Table B-3.Average hourly and weekly earnings of all employees on
private nonfarm payrolls by industry sector, seasonally adjusted
Table B-4.Indexes of aggregate weekly hours and payrolls for all
employees on private nonfarm payrolls by industry sector, seasonally
adjusted
Table B-5.Employment of women on nonfarm payrolls by industry sector,
seasonally adjusted
Table B-6.Employment of production and nonsupervisory employees on
private nonfarm payrolls by industry sector, seasonally adjusted(1)
Table B-7.Average weekly hours and overtime of production and
nonsupervisory employees on private nonfarm payrolls by industry
sector, seasonally adjusted(1)
Table B-8.Average hourly and weekly earnings of production and
nonsupervisory employees on private nonfarm payrolls by industry
sector, seasonally adjusted(1)
Table B-9.Indexes of aggregate weekly hours and payrolls for
production and nonsupervisory employees on private nonfarm payrolls by
industry sector, seasonally adjusted(1)

HTML version of the entire news release

Access to historical data for the "A" tables of the Employment
Situation Release
Access to historical data for the "B" tables of the Employment
Situation Release

The PDF version of the news release http://www.bls.gov/news.release/pdf/empsit.pdf

Table of Contents

Last Modified Date: February 05, 2010

http://www.bls.gov/news.release/empsit.nr0.htm

...and I am Sid Harth

[bademiyansubhanallah]

Volcker Still 'Just A Photo Op'?
First Posted: 02- 5-10 10:55 AM | Updated: 02- 5-10 12:13 PM

When Paul Volcker was first appointed chairman of President Obama's
Economic Recovery Advisory Board, he really didn't expect to have much
influence.

Sondra Gotlieb, Volcker's friend and associate from when they both
lived in Washington during the Reagan presidency, says that the former
Fed chair told her that the position was a public relations stunt:
"I'm just a photo op," Volcker told her. "All they wanted was my
picture for the press."

And for more than a year, Volcker's assessment seemed about right.
"Everyone knew he didn't have the president's ear no matter what his
title was," Gotlieb writes.

But all that seems to have changed in the past several weeks, after
the president, as part of his financial reform package, proposed that
Congress adopt a key reform measure that Volcker has long championed.
The "Volcker Rule," as the new regulation is known, would prohibit
commercial banks from owning or investing in hedge funds, private
equity funds or "proprietary trading" operations.

Volcker, who stands a towering 6'7" tall, was at the president's side
during the announcement. But whether his ideas for reform will be
enacted into law is still unclear: Senate Banking Committee chair
Chris Dodd (D-Conn.) has indicated that he may not amend the Senate's
reform package to include the rule, saying the administration is
"getting precariously close" to asking for too much.

http://www.huffingtonpost.com/2010/02/05/volcker-still-just-a-phot_n_450955.html

Op-Ed Columnist
Fiscal Scare Tactics

By PAUL KRUGMAN
Published: February 4, 2010

These days it’s hard to pick up a newspaper or turn on a news program
without encountering stern warnings about the federal budget deficit.
The deficit threatens economic recovery, we’re told; it puts American
economic stability at risk; it will undermine our influence in the
world. These claims generally aren’t stated as opinions, as views held
by some analysts but disputed by others. Instead, they’re reported as
if they were facts, plain and simple.

Skip to next paragraph

Fred R. Conrad/The New York Times
Paul Krugman

Yet they aren’t facts. Many economists take a much calmer view of
budget deficits than anything you’ll see on TV. Nor do investors seem
unduly concerned: U.S. government bonds continue to find ready buyers,
even at historically low interest rates. The long-run budget outlook
is problematic, but short-term deficits aren’t — and even the long-
term outlook is much less frightening than the public is being led to
believe.

So why the sudden ubiquity of deficit scare stories? It isn’t being
driven by any actual news. It has been obvious for at least a year
that the U.S. government would face an extended period of large
deficits, and projections of those deficits haven’t changed much since
last summer. Yet the drumbeat of dire fiscal warnings has grown vastly
louder.

To me — and I’m not alone in this — the sudden outbreak of deficit
hysteria brings back memories of the groupthink that took hold during
the run-up to the Iraq war. Now, as then, dubious allegations, not
backed by hard evidence, are being reported as if they have been
established beyond a shadow of a doubt. Now, as then, much of the
political and media establishments have bought into the notion that we
must take drastic action quickly, even though there hasn’t been any
new information to justify this sudden urgency. Now, as then, those
who challenge the prevailing narrative, no matter how strong their
case and no matter how solid their background, are being marginalized.

And fear-mongering on the deficit may end up doing as much harm as the
fear-mongering on weapons of mass destruction.

Let’s talk for a moment about budget reality. Contrary to what you
often hear, the large deficit the federal government is running right
now isn’t the result of runaway spending growth. Instead, well more
than half of the deficit was caused by the ongoing economic crisis,
which has led to a plunge in tax receipts, required federal bailouts
of financial institutions, and been met — appropriately — with
temporary measures to stimulate growth and support employment.

The point is that running big deficits in the face of the worst
economic slump since the 1930s is actually the right thing to do. If
anything, deficits should be bigger than they are because the
government should be doing more than it is to create jobs.

True, there is a longer-term budget problem. Even a full economic
recovery wouldn’t balance the budget, and it probably wouldn’t even
reduce the deficit to a permanently sustainable level. So once the
economic crisis is past, the U.S. government will have to increase its
revenue and control its costs. And in the long run there’s no way to
make the budget math work unless something is done about health care
costs.

But there’s no reason to panic about budget prospects for the next few
years, or even for the next decade. Consider, for example, what the
latest budget proposal from the Obama administration says about
interest payments on federal debt; according to the projections, a
decade from now they’ll have risen to 3.5 percent of G.D.P. How scary
is that? It’s about the same as interest costs under the first
President Bush.

Why, then, all the hysteria? The answer is politics.

The main difference between last summer, when we were mostly (and
appropriately) taking deficits in stride, and the current sense of
panic is that deficit fear-mongering has become a key part of
Republican political strategy, doing double duty: it damages President
Obama’s image even as it cripples his policy agenda. And if the
hypocrisy is breathtaking — politicians who voted for budget-busting
tax cuts posing as apostles of fiscal rectitude, politicians
demonizing attempts to rein in Medicare costs one day (death panels!),
then denouncing excessive government spending the next — well, what
else is new?

The trouble, however, is that it’s apparently hard for many people to
tell the difference between cynical posturing and serious economic
argument. And that is having tragic consequences.

For the fact is that thanks to deficit hysteria, Washington now has
its priorities all wrong: all the talk is about how to shave a few
billion dollars off government spending, while there’s hardly any
willingness to tackle mass unemployment. Policy is headed in the wrong
direction — and millions of Americans will pay the price.

http://www.nytimes.com/2010/02/05/opinion/05krugman.html?src=twt&twt=NytimesKrugman

Dodd Says The Senate Banking Bill Is At An Impasse
JIM KUHNHENN | 02/ 5/10 04:24 PM |

WASHINGTON — Looking to douse public and congressional anger, chief
executives at some of the biggest financial institutions are on a
mission to repair their image and gain more influence over legislation
that would overhaul regulations that govern their industry.

They have their work cut out for them.

Attempts to reach a bipartisan agreement on new regulations hit an
impasse in the Senate Banking Committee on Friday, a day after
Chairman Christopher Dodd accused the financial industry of deploying
"an army of lobbyists whose only mission is to kill the common-sense
financial reforms we have been working so hard to achieve."

Eager to change that tone, top bankers fanned out across Capitol Hill
this week, meeting with House and Senate members involved in banking
policies and assuring them that they, too, want to prevent another
financial meltdown.

"The No. 1 goal we have is to be relevant to this fix," said Richard
Davis, the chairman and CEO of U.S. Bancorp.

The breakdown in the Senate negotiations, however, is a setback for
the bill. A priority of the Obama administration, the legislation
intends to address weaknesses in the financial system that led to the
crisis that gripped Wall Street in fall 2008. The legislation aims to
increase consumer protections on loans and credit cards, add
restrictions to previously unregulated financial products and find
ways to dismantle failing firms without resorting to taxpayer
bailouts. The House has already passed its version of the bill.

But Dodd, D-Conn., has been unable to find common ground over consumer
protections with Sen. Richard Shelby of Alabama, the top Republican on
the committee. Nonetheless, Dodd said he will incorporate compromises
into the bill that were agreed on by other committee members from both
parties.

Shelby, siding with banks, opposes creation of a new entity that would
have authority to write its own regulations. Currently, consumer
protections are carried out by the various bank regulators, who also
watch over the safety and soundness of banks.

Story continues below

"In order to strike the appropriate balance, they must be integrated
with each other, not separated from each other," Shelby said Friday.

If the banking industry lobbyists have been the combat troops in the
effort to influence regulatory legislation, then these bankers are
casting themselves as the diplomats, seeking to assure lawmakers that
they share more in common than not.

Their effort is part of an industry-wide push to put a face on banking
that is not defined by Wall Street giants such as Goldman Sachs and
Citigroup, institutions that have borne the brunt of public and
congressional criticism.

"The word 'bank' covers a lot of ground; part of our role is to
provide some differentiation," said James Smith, chairman and CEO of
Webster Bank, a regional New England bank based in Connecticut, Dodd's
home state.

The industry is also taking the public's pulse, underwriting national
surveys of customers, small businesses and corporations to gauge how
much damage control they have ahead of them. The polling is a joint
effort of the Financial Services Roundtable and the American Bankers
Association, two industry groups.

"We need to tell our story better than we have in the past," said
Davis, who is also the roundtable's chairman.

Robert Kelly, chairman and CEO of Bank of New York Mellon, said
bankers agree with the administration that no financial institution
should be deemed too big to fail. Kelly, who heads an industry group
of the biggest banks, the Financial Services Forum, said they support
regulations that would require large institutions to pay for the
orderly dismantling of failing firms.

At the same time, they still have substantive differences that have
been major sticking points between Democrats and Republicans. One of
them is their objections to a consumer financial protection agency –
the issue that ended up dividing Dodd and Shelby.

http://www.huffingtonpost.com/2010/02/05/dodd-financial-reform-bil_n_451249.html

The Baseline ScenarioWhat happened to the global economy and what we
can do about it
Goldman Sachs And The Republicans
with 85 comments

I testified yesterday to the Senate Banking Committee hearing on the
“Volcker Rules” (full pdf version; summary). My view is that while
the principles behind these proposed rules are exactly on target –
limiting the size of our largest banks and preventing any financial
institution backed by the government, implicitly or explicitly, from
taking big risks – the specific rule changes would need to be much
tougher if they are to have any effect.

Wall Street is strongly opposed to the Volcker Rules (link to the
written testimony; webcast) and the discussion elicited some classic
Goldman Sachs moments. Gerry Corrigan, a senior executive at Goldman
and former head of the New York Fed, suggested that Goldman Sachs has
an impeccable approach to risk management and seemed to imply that the
firm was not in trouble in fall 2008. When pressed on why Goldman
requested and was granted a banking license – and access to the Fed’s
discount window – in September 2008, he fell back slightly, “There is
no question whatsoever that when you look at totality of the steps
that were taken by central banks and government, particularly in 2008,
that Goldman Sachs was a beneficiary of this.”

The public record is clear – Goldman Sachs would have failed in
September 2008, were it not for the support provided by the
government. The fact that some of this support did not involve direct
use of taxpayer money speaks to the ingenuity of the people involved,
but it should not distract us from the substance. Goldman Sachs was
failing and it was saved.

Why is this so hard for Goldman to admit?

Goldman Sachs was too big to fail in fall 2008, with assets over $1
trillion. It is still too big to fail, with assets closer to $800
billion. Everyone now says that “too big to fail” is a terrible
problem and must be addressed.

But none of the ideas currently on the legislative table would have
any real effect – in the sense that next time you will be able to let
Goldman fail.

•The Republicans (and Goldman Sachs) want a “resolution authority”
that would give the government greater power to take big banks through
bankruptcy. But even assuming there were sufficient political will to
use such power, as Mr Corrigan and John Reed conceded at yesterday’s
hearing, because this would be only US-centric (and there is no
prospect of a G20 or other international agreement anytime soon) it
simply would not work for huge cross-border firms. When such a firm
fails – and Mr Corrigan made a point of emphasizing that half of
Goldman’s meteoric growth since 1997 has been “global” – a resolution
authority will do you no good at all.

•The Federal Reserve leans towards “stronger regulation”. But every
regulator sent to control big banks over the past 30 years has ended
up completely captured – most recently the people who allowed Goldman
to keep its bank license while retaining its full range of risky
activities. You can add to the powers of the Fed or take them away
completely but this will not change.

•The administration prefers a bipartisan approach – avoiding
confrontation on the true nature of “too big to fail” or even
explaining how much worse our problems became during the Bush years –
but that just can’t work when the other side refuses to cooperate.
Given Republican relationships with big banks, there will be no
serious attempt to cut financial institutions down to a size at which
they could be allowed to fail – no meaningful version of the Volcker
Rules will make it into law.
Goldman and the other big Wall Street firms have already won big on
this round. They will plow even more money into defeating political
candidates who have opposed them – for example, on credit card
legislation. The Republicans see this coming and are rubbing their
hands with glee.

With their incentive structure intact – they get the upside and
regular folk get the downside – and their closest friends on their way
back to power, Big Finance is ready to roll into the next great global
boom-bust cycle.

By Simon Johnson

http://baselinescenario.com/2010/02/05/goldman-sachs-and-the-republicans-2/

...and I am Sid Harth

[bademiyansubhanallah]

A Balanced China Policy
Max Boot - 02.05.2010 - 11:33 AM

George Gilder has been one of our most interesting and important
public intellectuals since the 1970s, so his pro-China commentary
today in the Wall Street Journal deserves a more serious response
than, say, the mindless boosterism of the average Tom Friedman column.
In fact, I agree with him that it is hardly worth wasting American
diplomatic capital with China on the issues of global warming and the
value of the Chinese currency.

I am surprised, however, to see Gilder — who has been an Internet
visionary — so blithely suggest that the U.S. government has no stake
in Google’s battle with China over Internet censorship and hacking.
“Protecting information on the Internet is a responsibility of U.S.
corporations and their security tools, not the State Department,” he
writes. That is like saying that protecting downtown New York is the
responsibility of the corporations headquartered there, not the FBI
and NYPD. Cyber infrastructure is fast becoming even more important
than physical infrastructure to the functioning of the U.S. economy.
Accordingly, it is, indeed, an issue for the State Department — and
not only the State Department but also the Defense Department, the
Justice Department, and other government agencies.

I am even more surprised to see Gilder — known as a relentless
defender of Israel — seemingly write off another embattled democracy:
Taiwan. His stance here is a bit contradictory. On the one hand, he
writes: “Yes, the Chinese are needlessly aggressive in missile
deployments against Taiwan, but there is absolutely no prospect of a
successful U.S. defense of that country.” On the other hand: “China,
like the U.S., is so heavily dependent on Taiwanese manufacturing
skills and so intertwined with Taiwan’s industry that China’s military
threat to the island is mostly theater.” Those propositions would seem
to be at odds: is China a threat to Taiwan or not? In any case,
neither proposition is terribly convincing.

Conquering Taiwan would require China to oversee the biggest
amphibious operation since Inchon. Stopping such a cross-Strait attack
would not be terribly difficult as long as Taiwan has reasonably
strong air and naval forces — and can call on assistance from the U.S.
Navy and Air Force. Taiwan doesn’t need the capability to march on
Beijing, merely the capability to prevent the People’s Liberation Army
from marching on Taipei. It would be harder to prevent China from
doing tremendous damage to Taiwan via missile strikes but by no means
impossible, given the advancement of ballistic-missile defenses and
given our own ability to pinpoint Chinese launch sites. Moreover,
giving Taiwan the means to defend itself is the surest guarantee that
it won’t have to. Only if Taiwan looks vulnerable is China likely to
launch a war.

The notion that such a conflict is out of the question because of the
economic links between Taiwan and the mainland is about as convincing
as the notion — widely held before World War I — that the major states
of Europe were so economically dependent on one another and so
enlightened that they would never risk a conflict. If the statesmen
who ran Austria and Germany and Russia and France and Britain were, in
fact, primarily interested in economic wellbeing, they would never
have gone to war. But other considerations — national honor and
prestige and security — trumped economics back then and could easily
do so again, especially because the legitimacy of the Chinese regime
is increasingly based on catering to an extreme nationalist viewpoint.

That doesn’t mean we should engage in needless and self-destructive
confrontations with China over global warming and currency, but that
also doesn’t mean we should mindlessly kowtow to China’s every whim.
As I argued in this Weekly Standard article in 2005, we should pursue
a balanced approach to China, tough on security and human-rights
issues but accommodating on trade and currency policy. In other words,
we should make clear to China that we are prepared to accept it as a
responsible member of the international community but that we will not
overlook its transgressions, like its complicity in upholding rogue
regimes (Sudan, Iran, North Korea) and threatening democratic ones
(South Korea, Taiwan).

http://www.commentarymagazine.com/blogs/index.php/boot/232111

Why The Moody's Warning About US Debt Is Pure Nonsense
Marshall Auerback | Feb. 5, 2010, 4:45 PM | 1,370 | 22

America’s Triple AAA credit rating could be at risk should its nascent
economic revival not develop into a full-blown recovery, Moody’s
Investor Service warned yesterday. The credit ratings agency cautioned
that if the US were to grow at slower pace than expected, the largest
economy in the world’s already-extended finances could be over-
stretched, in turn damaging its AAA credit rating.

Dis-credited ratings agencies

Sound familiar? The so-called “Big Three” ratings agencies have been
making claims like this for years: in Japan, the UK and, now, the
United States. It is worth recalling that these are the same
organizations which, as recently as 2007, were conferring Triple AAA
ratings on subprime mortgage paper. Did that work out well for you?

The real news here is that anybody takes anything these discredited
rating agencies say seriously. As my colleague, Randy Wray, has
already suggested, the top three ratings agencies — Moody’s, Fitch,
and S&P — should all be ignored. In fact, Wray is right to suggest
that we should prohibit regulated and protected institutions from
using any ratings by this group. Their history of failure makes my
beloved Toronto Maple Leafs seem like a veritable hockey dynasty in
comparison.

Moody’s war on governments freely deploying fiscal policy is nothing
new: In November 1998, the day after the Japanese government announced
a large-scale fiscal stimulus to its ailing economy, Moody’s Investors
Service began the first of a series of downgradings of the Japanese
government’s yen-denominated bonds by taking the Aaa (triple A) rating
away. The next major Moody’s downgrade occurred on September 8, 2000.

Then, in December 2001, Moody’s further downgraded the Japan
Governments yen-denominated bond rating to Aa3 from Aa2. On May 31,
2002, Moody’s Investors Service cut Japan’s long-term credit rating by
a further two grades to A2, or below that given to Botswana, Chile and
Hungary.

Why Japan doesn’t bounce checks

What was the long term impact of these downgrades? Well, since that
time, Japan’s debt/GDP has gone over 200%, and all with a zero or near-
zero interest rate policy for over a decade, and 10-year Japanese
Government Bonds (JGBs) were continually issued in any size the
Japanese government wanted, at the lowest rates in the world.

This, despite the country’s dire economic circumstances: Last year,
not only did Japan’s economy fall in percentage terms by three times
that of the U.S.; it fell in percentage terms in a year by more than
the U.S. economy fell from cyclical peak to cyclical trough in all of
its recessions and depressions over the last two hundred years with
the exception of 1837-1841, 1929-1933, and perhaps the panic of 1907.
Japan’s business expansion in this past decade was driven almost
entirely by the growth in exports and an increase in business fixed
investment which was itself driven for the most part by the growth in
exports. If one looks at the peak to trough decline in Japanese GDP
over the last year or so, almost three quarters of it was due to the
collapse in exports.

And yet despite these dire economic circumstances, the Japanese
government has yet to bounce a check. The country’s central bank has
the ABILITY to clear any Ministry of Finance check for ANY size,
simply by adding a credit balance to the member bank account in
question. Yes, the BOJ could be UNWILLING to clear ANY check, but that
is an entirely different matter than being UNABLE to credit an
account. Operationally, concepts of the BOJ not having “sufficient
funds” to credit member accounts are functionally inapplicable.

Sadly, not even all Japanese policy makers appear to understand this.
BOJ board member Seiji Nakamura sounded much like the ratings agencies
themselves when he spoke of the need for the US, the UK, and Japan to
get their debts down to a “sustainable level” (a level which,
curiously, is never defined, because there is no modern economics
textbook which offers clear explanations of what constitutes a
“sustainable” public debt position). Unfortunately, Nakamura continued
in this vein, insisting that Japan’s reliance on fiscal stimulus to
spur an expansion without having a strategy to cut public debt would
only exacerbate the government’s fiscal situation, and place the
country in the same position as Greece, Spain and Portugal.

He’s wrong. The position of Japan, like the US, is very different,
because both can operationally issue unlimited quantities of debt in
their own national currencies. By contrast, as we have argued before,
the relationship of member countries in the Euro zone to the European
Central Bank (ECB) is more similar to that of the national treasuries
of member states of the United States to the Fed than it is of the US
Treasury to the Fed. In the US, states have no power to create
currency; nor does Greece, Spain, or any euro zone nation. In this
kind of circumstance, taxes really do ‘finance’ state spending and
states really do have to borrow (sell bonds to the markets) in order
to spend in excess of tax receipts because they are users of a
currency, not its creator. Eventually, one hopes that even the Germans
will begin to appreciate this point, as they persistently frustrate
any rational response to mitigate the possibility of a major national
insolvency within the EMU.

But they are not there yet. Purchasers today of Greek, Spanish or
Portuguese bonds do worry about the creditworthiness of these nations
much as we might also fret about California’s ultimate solvency. That
solvency fear is now spreading across the Euro zone and creating
contagion effects in all of the world’s capital markets right now.

What about the United States? Well, according to Steven Hess, Moody’s
lead analyst for the United States ,”The Aaa rating of the U.S. is not
guarantee…So if they don’t get the deficit down in the next 3-4 years
to a sustainable level, then the rating will be in jeopardy.” This
assessment is made without any mention of what the net spending would
be achieving or what the non-government sector might be doing by way
of debt-retrenchment and saving. It also assumes that the surpluses in
the coming years are attainable, which seems unlikely if the US is
bullied into cutting back expenditures, as Moody’s advocates.

We also have no idea how Moody’s defines “sustainable” levels of debt.
Even if the US sought to identify a debt threshold in the way in which
the European Monetary Union has done, this threshold would tell us
nothing at all about fiscal discipline. Imagine an economy faced with
a sequence of aggregate demand failures due to private sector
pessimism. Without any change in fiscal parameters, the government
would see its deficit increasing and because it voluntarily ties net
spending to debt-issuance, the former will also rise. You can easily
construct circumstances where the debt/GDP ratio could skyrocket
without any discretionary change in fiscal policy at all, as Bill
Mitchell and Joan Muysken describe in their book, Growth and Cohesion
in the European Union.

The running-out-of-money myth

Unlike Moody’s, we think it is absurd to say that the government is
going to ‘run out of money’ as our President has repeated. It is not
dependent on China or anyone else. There is no operational limit to
how much government can spend, when it wants to spend. This includes
making interest payments and Social Security and Medicare and Medicaid
payments. It includes all government payments made in dollars to
anyone.

And if Moody’s (or any other ratings agency) genuinely thinks that
government debt is intrinsically evil and that surpluses should be the
stated goal of US government policy (in order to safeguard America’s
Triple AAA rating) then it must spell out the full consequences of
this policy choice. The ratings agencies appear incapable or (at the
very least) unwilling to explain the essential sectoral relationships
that link the government, private and external sectors. They seem to
think that you can have everything - a budget surplus and high private
saving and debt reduction. You cannot as a matter of plain accounting
logic unless you suddenly start net exporting in great volumes, (which
has not happened to the US in its post W.W. II history), or if the
domestic private sector is either choosing to deleverage or use
leverage less than in the past, that means it will take large and
increasing fiscal deficits, or small and decreasing trade deficits, or
some combination of the two, in order to achieve trend real GDP growth
paths. Otherwise, the result is stagnation or in the extreme, debt
deflation. That will not do much to enhance America’s credit rating.

So if the political preference is for the government to deficit spend
less, (as Moody’s implicitly advocates), what other sector is ready
and willing to reduce its net saving position? The reduction in fiscal
deficits cannot occur without an offsetting reduction in domestic
private or foreign net saving (the latter being the inverse of the
trade deficit). If the answer is that no other sector is willing or
able to reduce its net saving, then income growth in the economy will
have to adjust downward. Which means higher unemployment, lower growth
and more social misery.

That is where the perverse logic of the ratings agencies take us,
which people ought to remember the next time yet another one of these
silly debt downgrade scare stories makes the front pages of the
financial press.

Roosevelt Institute Braintruster Marshall Auerback is a market analyst
and commentator.

http://www.businessinsider.com/why-the-moodys-warning-about-us-debt-is-pure-nonsense-2010-2

...and I am Sid Harth

[bademiyansubhanallah]

Resize:AAA.Does the Government Pose a Bigger Threat to Toyota Than its
Sticky Pedals?
Posted February 5th, 2010 at 9:40am

Toyota’s bad press has been for its sticky pedal incident certainly
isn’t surprising, but is all the negative attention warranted? When
asked about the Toyota recalls, Transportation Secretary Ray LaHood
responded by saying, “My advice to anyone who owns one of these
vehicles is stop driving it, and take it to the Toyota dealership
because they believe they have the fix for it” and that “we’re not
finished with Toyota.” Hood later toned down his remarks but
immediately after his “stop driving” comment, Toyota’s stocks
plummeted. Even after recovering some, the stock closed down 6% that
day.

Much like Vice President Biden’s comments not to use public
transportation or ride an airplane because of swine flu, LaHood’s
comments were a bit over the top and have caused some to question the
government’s motive. We don’t speculate motives at The Heritage
Foundation, but it’s easy to understand why a government that now owns
a major stake in General Motors would want to put continuous bad press
on a rival automaker. In fact, GM’s sales were up 14 percent in
January while Toyota’s fell 16 percent. Ford, which refused government
bailout cash, had sales figures increase 25 percent. This could simply
be a market response to a bad product; profits and losses are a
telling sign in the economy, but the government shouldn’t be holding
Toyota’s head under the water. Toyota handled the problem quickly by
recognizing the problem as well as recalling and guaranteeing a fix
for all 2.3 million potentially affected owners.

But when every Member of Congress and the Obama administration is a
jobs, jobs, jobs message, it would cause more harm than good to keep
the bad press on Toyota since its integral in the U.S. economy. Weston
Konishi of the Mansfield Foundation says, “Toyota is now a real
stakeholder in the US economy — think of its auto plants and jobs — so
trying to score points against it would be somewhat self-defeating.”

While an accelerator pedal that could get trapped on the floor mat is
a serious issue, the remarks and the reactions have been overblown
according to David Champion, director of automobile testing for
Consumer Reports: “When you look at the statistics we are putting an
awful lot of effort on a very small risk. There has been something
like 2,000 complaints of unintended acceleration in some 20 million
Toyota vehicles — it’s almost like trying to find a needle in a
haystack.”

Either way, this is what happens when the ref starts playing for one
team. The fans begin to question every call.

http://blog.heritage.org/2010/02/05/does-the-government-pose-a-bigger-threat-to-toyota-than-its-sticky-pedals/

Feb 6, 2010

G7: Canada, Japan, Germany, France, Italy, the United Kingdom and the
United States meet near artic in Iqaluit Canada to focus on Global
economy and issues related to China and Greece

The two-day Group of Seven finance ministers' conference, the first
high-level international meeting to be held in the Nunavut capital, is
considered a "venue for relatively informal discussions" between
financial leaders from Canada, Japan, Germany, France, Italy, the
United Kingdom and the United States. The meetings, described as
informal "fireside" chats, are slated to begin Friday evening. The
agenda includes economic issues that have arisen with China and
Greece.

Unlike past G7 meetings, no concluding written communiqué will be
issued when talks wrap up on Saturday.

http://www.europehouse.com/

EU-DIGEST - AN ONLINE EUROPE HOUSE ELECTRONIC PUBLICATION
EU-Digest is a daily on-line publication edited and distributed for
free by

EUROPE-HOUSE. EU-Digest provides news highlights and links to
European related news reports on economic, social and political
issues. Editor of EU-Digest is Rick Morren, CEO of Europe House, Inc.

EUROPE HOUSE CAPABILITY STATEMENT

Europe House is a non-profit corporation, fostering a better global
understanding of the European Union, and its member states, through
business ventures, trade missions, educational, business and
technological exchanges, internet applications, the media,
conferences, seminars, sports, cultural activities and exchange
programs. Europe House actively seeks to promote European solidarity
on issues of common interest to its citizens, and the further
strengthening of European Unity, through an international network of
partner organizations and volunteers.

WHY EUROPE HOUSE
The European Union

The European Union--previously known as the European Community--is an
institutional framework for the construction of a united Europe. It
was created after World War II to unite the nations of Europe
economically so another war among them would be unthinkable. Presently
twenty five countries are members of the European Union, and some 460
million people share the common institutions and policies that have
brought an unprecedented era of peace and prosperity to Western
Europe.

The EU – a Major Global Business Partner

European integration was launched after World War II with the active
support of the United States, and the Atlantic partnership has
remained firm ever since. As President Clinton said in May 1995,
echoing several US Presidents before him: "The United States
partnership with Europe is a powerful, positive force."

As one of the world's largest trading powers, and as a leading
economic partner for most countries, the EU is a major player on the
world scene. Its scope for action extends increasingly beyond trade
and economic questions. More than 130 countries maintain diplomatic
relations with the EU, and the EU has over 100 delegations around the
world. The United States and Europe are economically interdependent.
Some 40 percent of US investment abroad goes to the EU, as do some 20
percent of US exports, making the EU one of the top two markets for
the US. The EU-25 is the source of some 58 percent of foreign
investment in the US. Up to 3.5 million highly paid jobs in the US are
due to EU investment and a permanent dialogue is carried on between
the EU and the US on matters of mutual concern through regular
consultations at the highest official levels.

EUROPE HOUSE – We want to be your Partner

Europe House founding members are an active force in promoting and
participating in the process of European integration. Europe House is
a reliable and knowledgeable partner for anyone seeking to connect
with, or do business in Europe. Europe House maintains a permanent
presence in Europe, and is affiliated with numerous local and regional
Public, and Private sector organizations.

EUROPE HOUSE ACTIVITIES:

· Supporting educational, business, and cultural events
focusing on Europe.

· Developing a European Business directory

· Monthly networking meetings

· Conferences and Seminars related to a variety of issues in
relation to Europe

· Hosting trade missions from Europe

· Organizing trade missions to Europe

· Advocating, and promoting EU issues

Editing and producing news reports, including EU-Digest, with news
highlights and links to European related news reports on economic,
social and political issues
EUROPE HOUSE MEMBERSHIP BENEFITS:
· Accurate information on Europe

· Networking opportunities

· Referrals

· Listing in the membership directory

· Listing on the Europe House website *

· Opportunity to meet people with an interest or knowledge
about Europe in a social or professional setting

· Support in locating potential European business partners

· Receive regular electronic non-traditional news updates

· Ability to join those who speak with one voice on Europe

* Only for corporate members

THE EU-DIGEST EDITORIAL POLICY

To encourage a world, where globalization is not only about
homogeneity and standardization, but also about diversity and
cooperation.

To cover local events that are ignored or poorly covered by the
corporate media.

To provide edited print stories, audio and video of the above on the
Internet for independent media contacts, thought leaders, and the
general public

To favor a strict separation between state and religion.
To oppose all radical religious movements and violence associated with
these movements.
To support democratically elected governments
To oppose war as a solution for solving conflicts

To facilitate the networking and coordination of like minded
individuals for the coverage of local events as well as the gathering
of information about events to be covered

To provide links to a broad spectrum of news resources, including the
alternative media, activist, and research groups
To seek out
and provide coverage on the global reason's for social, economic, and
environmental problems, as seen from the perspective of those that are
most affected by these problems

To encourage, facilitate, and support the creation of a global system
of independent newsgathering organizations

http://www.eu-digest.com/about.htm

http://www.eu-digest.com/2010/02/g7-canada-japan-germany-france-italy.html

...and I am Sid Harth

[bademiyansubhanallah]

Everybody Off the Beach!
By Bill Bonner

02/05/10 Baltimore, Maryland – Last August, it was reported that
deflation in Japan had reached a new record. Prices were dropping at
the fastest pace 38 years. By November, it was duration, rather than
depth, that got the press’s attention. Prices had been going down for
10 months in a row. Then, last week an update:

“Japan Deflation Hits a Record Pace,” reported the BBC. Prices in
Japan were falling faster than they ever had since they began keeping
track in 1970. The tide has gone out so far; beachcombers can’t
remember when there was so much beach to comb. But what follows is not
offered as a prediction, but only out of curiosity. We don’t know how
this will turn out. Could it end in hyperinflation? Maybe.

Prices fall in Japan. The yen rises. And the government uses every
trick in the book – and some as yet unpublished – to knock it down. If
you are in a position to borrow money from the central bank, the
bankers will give it to you at practically zero interest. And if your
neighborhood wants a bridge or a community center, that too will be
forthcoming from the Japanese government. No government has ever been
so generous. At least, not without going broke. For every yen the
government squeezes from its taxpayers, it returns more than 2 yen in
public spending.

Investors must think the trend is eternal. Or perhaps they don’t think
at all. They lend money to the world’s most spendthrift major
government for 10 years in exchange for a yield of only 1.310%.

The drama of this story is an old and familiar one. Deeply flawed
heroes at the world’s central banks and treasury departments think
they can do a better job of guiding the economy than the markets
themselves. It is they who set the price for short-term money, for
example, not willing borrowers and lenders. They are the ones who
fight the correction every inch of the way. They are also the ones you
don’t want to stand behind; every shot they take backfires.

In France, the savings rate, as percentage of revenue, has gone up for
the last 16 months, to 17% – the highest rate in 27 years. This comes
as the Sarkozy government follows the lead of the US and Japan, with a
deficit of about 8%…compared to 10% in the US and even higher in
Japan. This is not the first time this has happened in France. The
previous savings rate peak came when the Mitterrand government was
trying to stimulate the economy out of the slump of the early ’80s.
The more the government tries to stimulate spending by running
deficits, the more people try to protect themselves by saving.

While the drama continues throughout the world, the story is most
advanced in Japan. Which is to say, the central bankers have gotten
themselves into deeper trouble. Martin Wolf of The Financial Times and
Richard Koo of Nomura Securities applaud their performance. But by
trying to suppress a correction in the private sector, Japan’s central
bankers have stretched out a slump over two decades and set up the
nation for a bigger crisis in the public sector. And there is nothing
they can do about it. Their fiscal stimulus no longer stimulates.
Their monetary inflation no longer inflates. And every quack cure they
offer brings the patient closer to the grave. You might think they’d
give up. Instead, they increase the dosage. Fiscal stimulus hits a new
record, right along with deflation.

But it’s the final act that interests us. With public debt at nearly
200% of GDP and 700% of tax revenues, we shouldn’t have to wait much
longer. Given the track record, we have to assume that it will be the
exact opposite of what central bankers expect. They are aiming for the
whimper of newborn growth. More likely, they will get the bang of
hyperinflation.

The Japanese were recently among the champion savers of the world.
Directly or indirectly, these savings financed the government’s
stimulus efforts. Banks, pension plans, insurance companies – all
bought government bonds as a safe way to store wealth. The government
then drew upon this stored up wealth to finance its bridges to nowhere
and its other boondoggles. The result is a misunderstanding on its way
to becoming a disaster. The typical Japanese person looks forward to
his retirement with a mountain of savings in his backyard. He believes
he still has his cake. The government, however, has eaten it.

Higher savings rates typically produce lower prices, for a while.
Currencies rise. Even in Weimar Germany, there was a period in 1920
when the mark rose. Falling prices would seem to be proof that the
money is still there. But the real money is gone. Then, suddenly,
people notice that their savings are nothing but paper. The tide
turns. Confidence disappears. The big wave of accumulated savings hits
the marketplace like a tsunami. Desperate people try to get rid of
paper. They want something solid to hold onto. Long-term bonds, the
most vulnerable to inflation, are exchanged for cash. Cash and
government securities flood the market. Prices soar. Middle-class
savers drown. Meek debtors, relieved of their burdens in the flood,
inherit the world. So do the arrogant debtors in the government. And
the shrewd speculators. And then central bankers return to their desks
and come up with a new plan.

Regards,

Bill Bonner
for The Daily Reckoning

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and
garnered camaraderie in numerous communities and industries. A man of
many talents, his entrepreneurial savvy, unique writings,
philanthropic undertakings, and preservationist activities have all
been recognized and awarded by some of America’s most respected
authorities. Along with Addison Wiggin, his friend and colleague, Bill
has written two New York Times best-selling books, Financial Reckoning
Day and Empire of Debt. Both works have been critically acclaimed
internationally. With political journalist Lila Rajiva, he wrote his
third New York Times best-selling book, Mobs, Messiahs and Markets,
which offers concrete advice on how to avoid the public spectacle of
modern finance. Since 1999, Bill has been a daily contributor and the
driving force behind The Daily Reckoning .

Special Report:The Endless PAYCHECK PORTFOLIO: In three simple steps,
unleash a steady flow of work-free income… starting with up to 75
automatic “paychecks” deposited directly into your account.

View articles by Bill Bonner .

http://dailyreckoning.com/everybody-off-the-beach/

Japan, U.S. discuss common economic challenges
Leika Kihara
IQALUIT, Canada
Fri Feb 5, 2010 8:25pm

ESTIQALUIT, Canada (Reuters) - Japan and the United States, still the
world's two biggest economies, face similar roadblocks as they deal
with fiscal and economic challenges, Japanese Finance Minister Naoto
Kan said on Friday.

Japan

In a briefing that stressed the common ground Kan found after his
first meeting with U.S. counterpart Timothy Geithner since he took
over as finance minister in January, Kan said problems were similar
for both countries.

"The United States faces roadblocks in terms of its economy and fiscal
policy. Japan has similar issues. The two countries both face the same
kind of difficult problems," Kan told reporters.

A U.S. statement issued after the meeting said Kan and Geithner had
discussed the "critical importance" of rebalancing economies and the
"shared priority" of achieving comprehensive financial reform.

Asked if he and Geithner had discussed foreign exchange issues, a
topic that has often divided the two economic powers, Kan only said:
"We exchanged views on various topics, which include some sensitive
issues."

Kan said he expected financial regulation to be among the major issues
at the G7 meeting, although he declined to say what he discussed with
Geithner on the issue.

Japan has barely pulled out of recession and deflation and weak
domestic demand are keeping its economic recovery fragile. But a high
deficit means it has little room to boost spending.

Tokyo is under pressure from ratings agencies to keep a tight rein on
finances and markets already fear it could face a future funding
crunch as public debt climbs to almost twice the size of the economy,
by far the heaviest burden in the developed world.

Asked if he talked about vehicle recalls by Toyota Motor Corp with
Geithner, Kan said the bilateral meeting focused more on expected
topics at the G7.

Toyota has recalled more than 8 million vehicles worldwide for two
separate problems with sticky accelerator pedals. One of the problems
has led to five deaths in two incidents, according to U.S. safety
authorities.

(Editing by Janet Guttsman)

http://www.reuters.com/article/idUSTRE61507520100206

Toyota's Pain Will Be Rivals' Gain With Little Net Economic Impact
By VANCE CARIAGA, INVESTOR'S BUSINESS DAILY
Posted 02/05/2010 07:16 PM ET

A lot depends on whether fallout from the recall causes a big shift in
market share — and whether that shift lands in the laps of U.S.
manufacturers Ford (F), General Motors and Chrysler.

If so, it could breathe new life into the U.S. auto industry, and
perhaps lead to an increase in output and jobs. But a lot must change
for it to happen.

"I apologize from the bottom of my heart for all the concerns that we
have given to so many customers in so many countries," Toyota Motor
Corp.... View Enlarged Image

"It's going to take more than this for Toyota to lose a large chunk of
its customer base," said Peter Morici, a professor at the University
of Maryland's Robert H. Smith School of Business. "They're going to
have to keep making more mistakes. For now, the macroeconomic impact
is not large."

He and others figure rival carmakers will fill in the sales gaps while
Toyota fixes its problems. They expect little impact on overall auto
sales in the U.S.

Last month Toyota recalled 2.3 million vehicles in the U.S. because of
faulty accelerator pedals. On Feb. 2, the company said it was
suspending U.S. sales of eight of its most popular models — including
the Camry, Corolla and Highlander — because of faulty gas pedals.
Production at some parts plants has been suspended.

Elkhart, Ind.-based CTS Corp. made the accelerators at a plant outside
of Toronto.

On Feb. 3, Toyota said it would recall an additional 1.09 million
vehicles over floor mat problems. It may also have to recall 270,000
Prius hybrids due to faulty brakes, though a final decision has not
been made.

For Toyota, the impact has been substantial. Its stock price is down
nearly 19% since hitting a 17-month high of 91.97 on Jan. 19, even
after Friday's 4% rebound.

Toyota has more than 35,000 U.S. employees. Officials have said some
jobs may be affected at plants in Alabama, Kentucky and West Virginia,
though the company expects most workers to be at their jobs during the
shutdown. Workers can also receive additional training or take
vacation or unpaid leave, Toyota said.

So far the company has not altered its plans to open a Blue Springs,
Miss., plant to build the Prius.

In addition, there are more than 1,400 Toyota, Lexus and Scion
dealerships in the U.S. employing more than 115,000 people. Many of
those dealers have little they can sell right now, though they are
reportedly being besieged by calls from customers fretting over
whether they should return or repair their cars.

Dealers have already started to repair defective gas pedals in
millions of U.S. vehicles. Some are reportedly extending hours, making
house calls and offering other services.

Toyota is giving U.S. dealers payments of up to $75,000 to help win
back customers' trust. Checks are being sent based on the number of
cars each dealer sold last year. Dealers who sold fewer than 500 cars
will get $7,500. Dealers who sold more than 4,000 will get $75,000.

Meanwhile, Toyota's problems continue to pile up.

A shim that will be used to repair gas pedal systems is shown at a
Toyota dealer in Topsham, Maine. AP View Enlarged Image

On Thursday, officials acknowledged a problem with the Prius brakes.
The Transportation Department has opened a brakes probe into the
hybrid's 2010 model. On Friday, Toyota said there may be brake issues
with some Lexus vehicles.

Sorry To Alarm You

Toyota President Akio Toyoda, grandson of the company's founder, said
Friday that he would set up a special quality-control task force to
address the problems. He also expressed regret "that we have caused
such concern."

Toyota has estimated that the global gas-pedal recall would cost it $2
billion — $1.1 billion for repairs and $770 million to $880 million in
lost sales. It expects to lose 100,000 in vehicle unit sales because
of the recall fallout, with 80,000 of those in North America.

Toyota's (TM) U.S. January sales fell 16% year over year. Unit sales
sank below 100,000 vehicles for the first time in more than a decade.

Toyota also lost market share as GM, Ford, Nissan (NSANY) and Hyundai
all notched double-digit sales gains. Meanwhile, Honda's (HMC) Accord
dethroned the Toyota Camry as the best-selling car in the U.S.

Rivals like GM, Ford and Hyundai have been quick to respond to
Toyota's woes by offering incentives in the U.S. to woo Toyota owners.

For its part, Toyota is left playing defense after years as the
industry aggressor.

"You can ruin a reputation in an instant that it took 30 years to
build. Toyota has always stood for quality, so this hurts them," said
Steven Dyer, an analyst who follows Ford for Craig-Hallum Capital
Group.

He expects Ford to benefit from Toyota's problems, though he says it's
too early to gauge by how much.

"I don't think it will be immediate, but something that will play out
for the next several months," Dyer said. "A lot depends on how Toyota
deals with its problems. Right now the feedback seems to be that it
hasn't dealt with them well. We'll just have to wait and see over the
next couple of months."

He has not yet changed his sales model due to the Toyota recalls.

Some experts figure Toyota's problems won't cause a big market shift
over the long term. A recent report from Goldman Sachs said that while
Ford is expected to gain some market share in coming months, much of
that will come at the expense of GM and Chrysler.

"We expect a modest gain against foreign brands," the report said.

According to a recent report from industry tracker Edmunds.com, Ford
grew its share of the U.S. auto market last year — the first annual
gain since 1995. Its share rose by 1.1 percentage points to 16% of all
cars and trucks, mainly because it reported smaller losses than its
rivals.

Ford's U.S. auto sales fell 15.6% in 2009, Edmunds said. That compares
with an industry decline of 21%. GM's sales fell 30%, Chrysler's
dipped 36%, and Toyota's and Honda's sales each sank about 20%.

Sales To Climb Off 2009 Lows

Dirk van Dijk, director of research at Zacks Investment Research,
expects the overall U.S. car industry to do better this year. But
that's mainly because 2009 was so bad.

"You're talking about a 12-million-unit annual sales rate vs. a 17-
million rate only a couple of years ago," van Dijk said.

Billionaire investor Wilbur Ross told Reuters in January that he
expected U.S. auto sales to grow by up to 1.5 million units in 2010
from the roughly 10.4 million units sold last year. He said U.S. sales
of 13.5 million were achievable in 2011.

The question is how those sales totals might play out now that
Toyota's reputation has taken a beating.

"If there's a market-share shift that goes to Honda or Hyundai, it's
not much of a big net impact on the U.S. industry," van Dijk said. "If
it's being picked up by the Ford Fusion, then incrementally that will
have a higher U.S. content to it. It's probably too early to say."

Job losses tied to a Toyota production shutdown may not be that big of
a deal either, professor Morici says.

"Losing production has some employment effect, but you expect it will
be made up with other car companies," he said. "There certainly is the
ability to make more cars over at GM and Chrysler."

http://www.investors.com/NewsAndAnalysis/Article.aspx?id=520388

FEBRUARY 5, 2010, 10:13 P.M. ET.
China's Export Focus Breeds Backlash

Developing Nations Join West in Criticism of Beijing's Policies to
Support Its Factories Despite Fears of Global Imbalance.

By ANDREW BATSON

Reuters

A woman sells chickens in Hubei province, Wednesday.

.BEIJING—China's efforts to extend its dominance as the world's top
exporter are facing stiff challenges, as the policies it has used to
support exports bring new economic problems and escalate tensions with
a growing list of trade partners.

Key elements of the strategy—including a cheap currency, regulated
interest rates and low energy prices—are stoking discontent in fellow
developing countries, not just Western capitals. That could crimp its
drive to seek gains from emerging markets as growth in the rich world
falters. At the same time, many economists argue, China's export-
friendly policies are fueling inflationary pressures at home, placing
a burden on the rest of the economy.

Beijing is increasingly pushing back against what it calls unfair
protectionism. Chinese authorities Friday set duties on some U.S.
chicken products to counter alleged dumping. And on Thursday, Beijing
filed a complaint to the World Trade Organization against European
Union tariffs on imports of Chinese shoes.

China's current-account surplus narrowed sharply in 2009, the
government said Friday, a reflection of the impact of the global
financial crisis on the nation's trade balance.

But that may have just increased the pressure on Beijing to support
its exporters.

China now accounts for more than 9% of global exports, a share that,
after stagnating for most of 2007 and 2008, has been rising since the
outbreak of the financial crisis and the ensuing collapse in global
trade.

China has surpassed the U.S. as the world's largest car market and is
close to passing Japan as the world's second-largest national economy
after the U.S.—milestones that create a sense of its dominance at a
time when other nations continue to struggle with the aftermath of the
crisis.

"China and some of the other emerging economies are emerging intact
out of this recession, and probably even stronger than before," said
Maarten Kelder, Asia president of consultants Monitor Group. "They
have been able to adjust their cost structures and that has made them
more competitive."

.That may not be enough to keep China's exports growing at the 20%-
plus rates of recent years, even when the world economy recovers.

While China has long faced pressure on trade from the U.S. and the EU,
officials from developing countries such as Indonesia, Brazil,
Thailand and Russia have also expressed concern in recent months.

India filed more trade complaints against China than any other nation
last year, according to figures from China's commerce ministry. "A
balance of exports and imports is important," Indian Trade Minister
Anand Sharma said in January in Beijing. China's trade surplus with
India grew 46% last year to $16 billion, probably aggravated by the
weakening of the yuan against the Indian rupee.

"The dollar peg of the [yuan] has put additional strain on lower-end
Asian exporters. This has led to charges of unfair trade from across
Asia," said Jamie Metzl, executive vice president of the Asia
Society.

Even nations in Africa and the Middle East that have benefited from
China's oil demand and foreign aid are now voicing discomfort with its
economic rise. "When we look at the reality on the ground we find that
there is something akin to a Chinese invasion of the African
continent," Libyan Foreign Minister Musa Kusa said in November.

China's government says it isn't banking on an export-driven future
and has tried, though so far without much success, to shift the
emphasis of the economy to domestic consumption and services.

The collapse in world trade that began in late 2008 was far from
painless for China: It put millions of people out of work and closed
thousands of factories. Chinese exporters responded to the downturn by
redesigning products and looking for new markets. They also benefited
as the recession encouraged consumers to switch to the kind of lower-
price products China provides. Shipments of traditional products such
as toys and clothing held up far better than its other exports last
year.

Gu Wu, who runs a company exporting radio-controlled toy cars from
Shenzhen, says export orders have started to pick up since September.
During the depths of the downturn, he asked his U.S. salespeople to
fan out and find new clients, and is now reaping some of the benefits.
"Many of them have come back with big orders, although cheaper goods
are still the most wanted," Mr. Gu said.

China's government worked to reinforce exporters' efforts. After
allowing the yuan to rise for much of 2007 and 2008, authorities
repegged it to the dollar in mid-2008. Exports got a further boost
once the dollar started to fall in March. The effective exchange rate
of the yuan—its value against the currencies of all trading partners—
is down by 9% to 10% since then, according to the Bank for
International Settlements.

The result: China accounted for 19% of U.S. imports in the first half
of 2009, up from 16% in 2008, according to U.S. Census Bureau
figures.

China's global market-share gains enabled it to do less badly than
other trading powers in the downturn. It exported $1.202 trillion of
goods in 2009, 16% less than in 2008 but still more than any other
nation. Export growth is expected to resume this year.

The export resurgence has reached into new markets: A majority of
China's exports now go to other developing countries, with exports to
India, Brazil, Indonesia and Mexico growing by 30% to 50% in recent
months, according to China International Capital Corp.

"There's a potential spoiler for China in relations with the
developing world. They've only been exporting and not importing," said
Ben Simpfendorfer, an economist for Royal Bank of Scotland. "It's one
thing to produce job losses in the U.S., but it's another to produce
job losses in Pakistan," with which China has close military ties, he
said.

If China is able to overcome the obstacles, it could continue to
expand its share of global exports for several more years. According
to International Monetary Fund projections, if current trends
continue, China's share of world exports could reach 12% by 2014, a
higher portion than Japan managed at the peak of its dominance in the
1980s.

But some researchers at the IMF say current trends aren't likely to
continue. A paper by IMF researchers published last year suggests that
for China to continue the rapid export gains of recent years, it would
need to boost its share of world exports to about 20% in coming
decades, an unprecedented level. The fund's researchers said China is
unlikely to be able to do that without using even more government
subsidies, which would further aggravate trade tensions and cause
domestic economic problems.

—Ellen Zhu and J.R. Wu contributed to this article.
Write to Andrew Batson at ***@wsj.com

http://online.wsj.com/article/SB10001424052748703837004575012960493292150.html?mod=googlenews_wsj

...and I am Sid Harth

[bademiyansubhanallah]

Asian markets had a grim day, with Tokyo stocks down 2.89 percent and
Hong Kong's Hang Seng plunging 3.33 percent in panic selling, and
there were also steep falls in Seoul and Sydney.

The euro slipped to 1.3639 dollars, a low last seen in May 2009,
despite a temporary bounce following the US jobs figures, as investors
concerned about a potential sovereign debt default in Europe fled to
the safe-haven greenback.

European markets were all down. London's main FTSE index lost 1.62
percent, Frankfurt 1.29 percent, Paris 2.10 percent and Madrid 2.35
percent.

The falls accelerated Thursday's heavy losses amid mounting fears over
the impact of the tattered finances of Greece, Spain and Portugal on
the 16-nation eurozone.

Meanwhile in New York, stocks slid after opening in positive territory
as analysts digested a Labor Department report that offered mixed
signals about prospects for a sustainable recovery.

It showed the US economy shed 20,000 jobs last month but that the
unemployment rate eased to 9.7 percent.

The Dow Jones Industrial Average was down 13.53 points (0.14 percent)
to 9,988.65, below the psychological 10,000 level and extending
Thursday's heavy losses that had brought the blue-chip index to a
November low.

The tech-heavy Nasdaq composite fell 0.05 percent and the broad
Standard & Poor's 500 index shed 0.15 percent.

The White House said it was encouraged by the figures, a view only
partly shared by analysts.

"While unemployment remains a severe problem, today's employment
report contains encouraging signs of gradual labor market healing,"
said White House economic advisor Christina Romer.

Wells Fargo economist Eugenio Aleman said the better than expected
drop in the unemployment rate was positive.

"It's a very strong drop," Aleman said. "It's good news but I don't
know if it is sustainable."

In Spain, the central bank released figures showing the country still
mired in recession, with the economy shrinking 0.1 percent in the
fourth quarter of 2009 and 3.6 percent for the year as a whole.

Its government last week announced plans to slash the public deficit
to the EU limit of 3.0 percent of output by 2013 after it mushroomed
to 11.4 percent last year.

But public debt is projected to rise from 55.2 percent of gross
domestic product in 2009 to 74.3 percent in 2012, above Europe's 60-
percent limit.

Prime Minister Jose Luis Rodriguez Zapatero acknowledged the
pressures.

"This is not an easy moment, there are fundamental economic challenges
of great magnitude for Spain and other countries" in Europe, he told
reporters during a visit to Washington.

Britain's Business Secretary Peter Mandelson, whose country is not
part of the eurozone, also acknowledged London was struggling with its
debt burden.

In Germany, new data showed industrial production plunged 2.6 percent
from December. On an annual basis, the fall was an even larger 7.1
percent.

"In difficult times like these, it is all the more important that we
combine all our forces in Europe to push for additional growth
impulses," German Economy Minister Rainer Bruederle told reporters.

Britain and Germany recently crawled out of recession but the recovery
seen in most major economies remains delicate.

Greece has been placed under unprecedented EU surveillance as it
attempts austerity measures to slash its massive debt and 12.7-percent
public deficit, while Portugal's deficit hit 9.3 percent last year,
its highest since 1974.

In London trading, New York's main futures contract, light sweet crude
for delivery in March, lost 34 cents to 72.80 dollars a barrel after
having fallen nearly four dollars on Thursday.

London's Brent North Sea crude for March fell 69 cents to 71.44
dollars.

burs/km/nh

http://news.ph.msn.com/business/article.aspx?cp-documentid=3841845

Bloomberg

U.S. Consumer Credit Fell for 11th Straight Month (Update2)
February 05, 2010, 04:56 PM EST
(Adds markets in seventh paragraph.)

By Vincent Del Giudice

Feb. 5 (Bloomberg) -- Consumer borrowing in the U.S. declined less
than anticipated in December as Americans took out loans to buy cars.

The series of declines is the longest on record and indicates consumer
spending, which accounts for about 70 percent of the economy, will be
restrained with Americans reluctant to take on more debt until hiring
picks up. A separate government report today showed the unemployment
rate unexpectedly dropped to 9.7 percent last month.

“Consumers have been reducing their debts and are not borrowing to
finance spending like they did before the recession,” said Gary
Thayer, macro strategist at Wells Fargo Advisors LLC in St. Louis.
“Banks are lending, but they are being more cautious and they are
having to write off a lot more consumer loans.”

The economy unexpectedly lost 20,000 jobs in January after a 150,000
decline a month earlier, figures from the Labor Department in
Washington showed earlier today. Revisions to previous data increased
the number of jobs lost in the recession to 8.4 million.

November Revision

The Fed’s figures track credit card debt and non-revolving loans, such
as those to buy autos. The December decrease in credit was the
smallest since a gain in January 2009. The Fed initially reported that
consumer credit plunged $17.5 billion in November.

Stocks rose as investors speculated the European Union may come up
with a solution for the budget deficits of Greece and Spain. The
Standard & Poor’s 500 Index gained 0.3 percent to 1,066.19.

Revolving debt, such as credit cards, fell by $8.5 billion in
December, according to the Fed’s statistics. Revolving credit has
decreased 15 straight months, the longest series of declines since the
Fed began keeping those records in 1968.

Non-revolving debt, including auto loans and mobile-home loans, rose
by $6.8 billion as car sales increased during the month. The Fed’s
report doesn’t cover borrowing secured by real estate.

Auto sales in the U.S. increased in December to a seasonally adjusted
annual rate of 11.23 million, the strongest since 14.09 million in
August, when Americans took advantage of government incentives. The
pace slowed last month, to 10.8 million.

Consumer Spending

Consumer spending in the fourth quarter increased at a 2 percent
annual rate after a 2.8 percent pace in the prior three months,
Commerce Department figures showed on Jan. 29. The gain contributed to
economic growth of 5.7 percent at an annual rate, the fastest in six
years, from October through December.

A Fed report on Feb. 1 showed fewer banks tightened standards for
loans to consumers and companies last quarter as the economy improved.
Banks continued to tighten the terms of loans they did make, and
demand for both business and household loans weakened further over the
past three months, the Fed said in its quarterly survey of senior loan
officers.

There is some indication Americans are getting their balance sheets in
better order, and today’s jobs report produced some signs the labor
market may be poised to climb out of its deepest slump since World War
II.

Unemployment Rate

The unemployment rate fell to 9.7 percent in January, the lowest since
August, and manufacturers hired for the first time in three years,
Labor Department figures showed.

Credit-card delinquencies fell in December, Moody’s Investors Service
reported Jan. 25.

All of the “Big-6” U.S. card issuers, including Bank of America Corp.,
Citigroup Inc. and American Express Co., reported fewer early-stage
delinquencies. JPMorgan Chase & Co., the nation’s biggest card lender,
was the only one to report higher overall late loans due to a “payment
holiday” the company offered customers.

“We still face the challenge of high unemployment levels, depressed
real estate values and shrunken household balance sheets, but the
overall economy and our company are in stronger shape than they were a
year ago,” Kenneth I. Chenault, chief executive officer of American
Express, said Jan. 21 in a press release. New York-based AmEx is the
biggest U.S. credit-card issuer by purchases.

“While the economic recovery now under way is likely to be modest, we
expect it to continue,” Chenault said.

Consumer spending is also being threatened by rising home foreclosures
that are projected to reach 3 million this year compared with a record
2.82 million last year, according to Irvine, California-based data
provider RealtyTrac Inc.

--With assistance from Peter Eichenbaum and Michael McKee in New York,
Joshua Zumbrun and Timothy R. Homan in Washington. Editors: Vince
Golle, Brendan Murray

To contact the reporter on this story: Vincent Del Giudice in
Washington [phone] or ***@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at
[phone] or ***@bloomberg.net

http://www.businessweek.com/news/2010-02-05/u-s-consumer-credit-fell-for-11th-straight-month-in-december.html

The Jobs Report for January 2010
Unemployment, U.S. Economy

Gary Burtless, Senior Fellow, Economic Studies

The Brookings Institution

Man looks at employment opportunities in San Francisco

View Larger

REUTERS/Robert Galbraith

A less optimistic picture is revealed by the BLS employer survey. It
shows a continued drop in payroll employment. For the second month in
a row – and for the 24th month out of the last 25 – the nation’s
employers reported lower payrolls. The drop was very small – about
20,000 jobs – and the decline may be reversed when better payroll
statistics become available. Nonetheless, the payroll jobs number is
the employment indicator most closely watched by investors. It will be
seen, correctly, as one more sign of the hesitating response of
employers to increased demand for U.S. goods and services.

Indeed, the payroll employment revisions published by BLS today
underscore the severe weakness of the U.S. job market. The new numbers
show that private payrolls fell in the recession even faster than
previously thought. (The BLS had previously signaled that the
revisions would be grim.) The total number of nonfarm jobs in December
2009 was 1.4 million lower than the BLS reported last month. All of
the difference is explained by a bigger loss in private payrolls
during the recession than was first estimated. The initial BLS
estimate showed that private payroll employment fell 6.3% since the
recession began. The revision suggests private employment actually
shrank 7.4%. Equally worrisome, payroll employment has continued to
fall, although slowly, since the economy started to grow last summer.

The revisions in the payroll statistics mean that worker productivity
probably jumped even faster last year than shown in the preliminary
estimates published by the government. Earlier this week, BLS analysts
estimated that the broadest measure of worker productivity increased
5.2% between the fourth quarter of 2008 and the fourth quarter of
2009. Employers achieved this gain by keeping total output nearly
constant while slashing the number of payroll jobs and hours needed to
produce it. In the last quarter of 2009, a sizeable increase in total
output was achieved in spite of shrinking company payrolls and only a
slight rise in the total number of hours worked.

The response of private employers to this recession has been to reduce
sharply their costs, especially their payroll costs. This strategy has
taken a heavy toll on American workers and job seekers. In contrast to
employer behavior in Japan and most of western Europe, U.S. employers
have been very fast to slash payrolls in the face of perceived
weaknesses in current and future demand. Their response has produced a
quick rebound in business profitability, but it has also given rise to
an unusually steep fall in U.S. employment and a painful increase in
the price of being unemployed.

http://www.brookings.edu/opinions/2010/0205_job_report_burtless.aspx

David Sessions
Contributor

European Economic Woes Could Prolong Worldwide Downturn

Posted: 02/5/10
10 Comments

Worries about the stability of the European economy sent worldwide
markets into a slide Thursday and fueled worries that the Euro zone's
struggles with debt could affect the rest of the world, the New York
Times reports. The Dow Jones dropped 2.61 percent yesterday, dipping
below 10,000 for the first time since November. Stocks across Europe
slumped as much as 6 percent, driving the euro down to its lowest
value against the dollar in seven months.

While some countries, including Germany and France, have acted quickly
to help their economies recover from the global recession, others,
such as Greece and Portugal, are seeing the consequences of profligate
spending as they now struggle to pay off mountains of debt. If they
default, the consequences could be felt deeply in Europe and prolong
the economic downturn in American and Asian markets.

The financial troubles of some European nations have ignited a debate,
mostly unnoticed by Americans, about the value and future of the
European currency. There are rumors that countries with stronger
economies could come to the rescue of nations like Spain, which is
saddled with 19 percent unemployment and loads of debt after an
American-style housing bust. If not, economists worry that a ripple
effect could impact the entire globe.

http://www.politicsdaily.com/2010/02/05/european-economic-woes-could-prolong-worldwide-downturn/

OOPS! – U.S. Government Unemployment Numbers Have To Be Revised
Because They Were Off By Almost One MILLION!

It Is Now Mathematically Impossible To Pay Off The U.S. National Debt

A lot of people are very upset about the rapidly increasing U.S.
national debt these days and they are demanding a solution. What they
don't realize is that there simply is not a solution under the current
U.S. financial system. It is now mathematically impossible for the
U.S. government to pay off the U.S. national debt. You see, the truth
is that the U.S. government now owes more dollars than actually exist.
If the U.S. government went out today and took every single penny from
every single American bank, business and taxpayer, they still would
not be able to pay off the national debt. And if they did that,
obviously American society would stop functioning because nobody would
have any money to buy or sell anything.

And the U.S. government would still be massively in debt.

So why doesn't the U.S. government just fire up the printing presses
and print a bunch of money to pay off the debt?

Well, for one very simple reason.

That is not the way our system works.

You see, for more dollars to enter the system, the U.S. government has
to go into more debt.

The U.S. government does not issue U.S. currency - the Federal Reserve
does.

The Federal Reserve is a private bank owned and operated for profit by
a very powerful group of elite international bankers.

If you will pull a dollar bill out and take a look at it, you will
notice that it says "Federal Reserve Note" at the top.

It belongs to the Federal Reserve.

The U.S. government cannot simply go out and create new money whenever
it wants under our current system.

Instead, it must get it from the Federal Reserve.

So, when the U.S. government needs to borrow more money (which happens
a lot these days) it goes over to the Federal Reserve and asks them
for some more green pieces of paper called Federal Reserve Notes.

The Federal Reserve swaps these green pieces of paper for pink pieces
of paper called U.S. Treasury bonds. The Federal Reserve either sells
these U.S. Treasury bonds or they keep the bonds for themselves (which
happens a lot these days).

So that is how the U.S. government gets more green pieces of paper
called "U.S. dollars" to put into circulation. But by doing so, they
get themselves into even more debt which they will owe even more
interest on.

So every time the U.S. government does this, the national debt gets
even bigger and the interest on that debt gets even bigger.

Are you starting to get the picture?

As you read this, the U.S. national debt is approximately 12 trillion
dollars, although it is going up so rapidly that it is really hard to
pin down an exact figure.

So how much money actually exists in the United States today?

Well, there are several ways to measure this.

The "M0" money supply is the total of all physical bills and currency,
plus the money on hand in bank vaults and all of the deposits those
banks have at reserve banks. As of mid-2009, the Federal Reserve said
that this amount was about 908 billion dollars.

The "M1" money supply includes all of the currency in the "M0" money
supply, along with all of the money held in checking accounts and
other checkable accounts at banks, as well as all money contained in
travelers' checks. According to the Federal Reserve, this totaled
approximately 1.7 trillion dollars in December 2009, but not all of
this money actually "exists" as we will see in a moment.

The "M2" money supply includes everything in the "M1" money supply
plus most other savings accounts, money market accounts, retail money
market mutual funds, and small denomination time deposits
(certificates of deposit of under $100,000). According to the Federal
Reserve, this totaled approximately 8.5 trillion dollars in December
2009, but once again, not all of this money actually "exists" as we
will see in a moment.

The "M3" money supply includes everything in the "M2" money supply
plus all other CDs (large time deposits and institutional money market
mutual fund balances), deposits of eurodollars and repurchase
agreements. The Federal Reserve does not keep track of M3 anymore,
but according to ShadowStats.com it is currently somewhere in the
neighborhood of 14 trillion dollars. But again, not all of this
"money" actually "exists" either.

So why doesn't it exist?

It is because our financial system is based on something called
fractional reserve banking.

When you go over to your local bank and deposit $100, they do not keep
your $100 in the bank. Instead, they keep only a small fraction of
your money there at the bank and they lend out the rest to someone
else. Then, if that person deposits the money that was just borrowed
at the same bank, that bank can loan out most of that money once
again. In this way, the amount of "money" quickly gets multiplied.
But in reality, only $100 actually exists. The system works because
we do not all run down to the bank and demand all of our money at the
same time.

According to the New York Federal Reserve Bank, fractional reserve
banking can be explained this way....

"If the reserve requirement is 10%, for example, a bank that receives
a $100 deposit may lend out $90 of that deposit. If the borrower then
writes a check to someone who deposits the $90, the bank receiving
that deposit can lend out $81. As the process continues, the banking
system can expand the initial deposit of $100 into a maximum of $1,000
of money ($100+$90+81+$72.90+...=$1,000)."

So much of the "money" out there today is basically made up out of
thin air.

In fact, most banks have no reserve requirements at all on savings
deposits, CDs and certain kinds of money market accounts. Primarily,
reserve requirements apply only to "transactions deposits" –
essentially checking accounts.

The truth is that banks are freer today to dramatically "multiply" the
amounts deposited with them than ever before. But all of this
"multiplied" money is only on paper - it doesn't actually exist.

The point is that the broadest measures of the money supply (M2 and
M3) vastly overstate how much "real money" actually exists in the
system.

So if the U.S. government went out today and demanded every single
dollar from all banks, businesses and individuals in the United States
it would not be able to collect 14 trillion dollars (M3) or even 8.5
trillion dollars (M2) because those amounts are based on fractional
reserve banking.

So the bottom line is this....

#1) If all money owned by all American banks, businesses and
individuals was gathered up today and sent to the U.S. government,
there would not be enough to pay off the U.S. national debt.

#2) The only way to create more money is to go into even more debt
which makes the problem even worse.

You see, this is what the whole Federal Reserve System was designed to
do. It was designed to slowly drain the massive wealth of the
American people and transfer it to the elite international bankers.

It is a game that is designed so that the U.S. government cannot win.
As soon as they create more money by borrowing it, the U.S. government
owes more than what was created because of interest.

If you owe more money than ever was created you can never pay it back.

That means perpetual debt for as long as the system exists.

It is a system designed to force the U.S. government into ever-
increasing amounts of debt because there is no escape.

We could solve this problem by shutting down the Federal Reserve and
restoring the power to issue U.S. currency to the U.S. Congress (which
is what the U.S. Constitution calls for). But the politicians in
Washington D.C. are not about to do that.

So unless you are willing to fundamentally change the current system,
you might as well quit complaining about the U.S. national debt
because it is now mathematically impossible to pay it off.

***UPDATE***

It has been suggested that the same dollar can be used to pay off debt
over and over - this is theoretically true as long as the dollar
remains in the system.

For example, if the U.S. government gives China a dollar to pay off a
debt, there is a good chance that the U.S. government will be able to
acquire that dollar again and use it to pay off another debt.

However, this is not true when debt is retired with the Federal
Reserve. In that case, money is actually removed from the system. In
fact, because of the "money multiplier", when debt is retired with the
Federal Reserve it can remove ten times that amount of money (and
actually more, but let's not get too technical) from the system.

You see, fractional reserve banking works both ways. When $100 is
introduced into the system, it can theoretically create $1000 as the
example in the article above demonstrates. However, when that $100 is
removed, it can have the opposite impact.

And considering the fact that the Federal Reserve "purchased" the vast
majority of new U.S. government debt last year, we have got a real
mess on our hands.

Even if a way could be figured out how to pay off all the debt we owe
to foreign nations (such as China, Japan, etc.) it would still be
mathematically impossible to pay off the debt that we owe to the
Federal Reserve which is exploding so fast that it is hard to even
keep track of.

Of course we could repudiate that debt and shut down the Federal
Reserve, but very few in Washington D.C. have any interest in doing
that.

It has also been suggested that instead of just using dollars to pay
off the U.S. national debt, we could use the assets of the U.S.
government to pay it off.

That is rather extreme, but let us consider that for a moment.

That total value of all physical assets in the United States, both
publicly and privately owned, is somewhere in the neighborhood of 45
to 50 trillion dollars. Of course the idea of the U.S. government
"owning" every single asset of the American people is repugnant to our
entire way of life, but let's assume that for a moment.

According to the 2008 Financial Report of the United States
Government, which is an official United States government report, the
total liabilities of the United States government, including future
social security and medicare payments that the U.S. government is
already committed to pay out, now exceed 65 TRILLION dollars. This
amount is more than the entire GDP of the whole world.

In fact, there are other authors who have written that the actual
figure for the future liabilities of the U.S. government should be
much higher, but let's be conservative and go with 65 trillion for
now.

So, if the U.S. government took control of all physical assets in the
United States and sold them off, it could not even make enough money
to pay for everything that the U.S. government is already on the hook
for.

Ouch.

If you have not read the 2008 Financial Report of the United States
Government, you really should. Actually the 2009 report should be
available very soon if it isn't already. If anyone knows if it is
available, please let us know.

The truth is that the U.S. government is in much bigger financial
trouble than we have been led to believe.

For example, according to the report (which remember is an official
U.S. government report) the real U.S. budget deficit for 2008 was not
455 billion dollars. It was actually 5.1 trillion dollars.

So why the difference?

The CBO's 455 billion figure is based on cash accounting, while the
5.1 trillion figure in the 2008 Financial Report of the United States
Government is based on GAAP accounting. GAAP accounting is what is
used by all the major firms on Wall Street and it is regarded as a
much more accurate reflection of financial reality.

So needless to say, the United States is in a financial mess of
unprecedented magnitude.

So what should we do? Does anyone have any suggestions?

53 comments to It Is Now Mathematically Impossible To Pay Off The U.S.
National Debt

http://theeconomiccollapseblog.com/archives/it-is-now-mathematically-impossible-to-pay-off-the-u-s-national-debt

Unemployment Falls to 9.7%, but 20,000 Jobs Were Lost in January
By JOSEPH LAZZARO

Posted 9:40 AM 02/05/10 Economy

Comments: 1428

Americans will have to wait at least another month to hear
unambiguously good news regarding job growth in the U.S. The Labor
Department announced Friday that the world's largest economy
unexpectedly lost 20,000 jobs in January. Although the unemployment
rate fell to 9.7% from 10% in December, economists caution that the
fall could prove to be temporary. When many of the unemployed who have
stopped looking for work start trying again, they'll be included in
the unemployment rate, potentially pushing it back up.

Compared to January 2009's monthly job loss of 779,000, this report
shows that massive job cuts have ended. But it also shows that hiring
has not rebounded.

A Bloomberg News economists survey had forecast flat job growth in
January and the unemployment rate to rise to 10.1%.

The Labor Department also revised December's job loss total to 150,000
jobs from the previously released 85,000 loss, but it said November
actually had a gain of 64,000 jobs from the initially reported
increase of 4,000.

Further, the Labor Department revised its job loss total for the
recession. It now estimates that about 8.4 million jobs have been lost
since the downturn started in December 2007.

A separate unemployment gauge, which includes workers who can find
only part-time work and discouraged workers, fell to 16.5% in January
from 17.3% in December.

Some Positive Signs

While January's 20,000 job loss was a disappointment, the report had a
few bright spots. First, temporary jobs, which usually signal a new
hiring phase, increased by 52,000 in January. Since July, the
temporary job category has added 247,000 jobs.

Second, the retail sector added an impressive 42,000 jobs, after scant
gains in the past two months. Also, health care added 15,000
positions, and government added 33,000 jobs (including 9,000 for the
2010 U.S. Census).

On the downside, construction lost 75,000 jobs, transportation and
warehousing lost 19,000, and manufacturing shed 11,000 jobs.

Average hourly earnings rose 5 cents to $18.89, and the average
workweek rose to 33.9 hours from 33.8 hours in December.

A Lot Hinges on Job Growth

Further, not only will job growth (or lack thereof) help determine
whether the U.S. economic expansion continues, it will say a lot about
who leads the nation. That's because voters historically hold the
party in power in Washington accountable for the nation's economic
performance, with the U.S. unemployment rate being high on the list.

If the unemployment is high, voters remove the party in power -- in
this case the congressional Democrats -- from office. If joblessness
is low, they reelect the party in power. President Barack Obama is on
the hot seat, too, but the focus is on the Democrats in Congress, due
to their upcoming 2010 election.

Also, job growth in the U.S. may take on added importance globally as
a result of recent financial developments in Europe. On Thursday,
global equity markets fell substantially -- including a 268-point
plunge in the Dow -- amid concern that Spain and Portugal might have
government debt problems similar to Greece's long-known fiscal
troubles. If that's the case, these weakened euro-zone nations would
likely weigh on Europe's GDP growth. That will only heighten the need
for stronger U.S. economic expansion to maintain adequate global
growth. And a faster-growing U.S. economy requires job creation.

Not There Yet

Overall, the January jobs report is disappointing because it
represents another month without adequate job growth. Also, investors
should view the drop in the U.S. unemployment rate to 9.7% with
caution. At least employers keep adding to temporary jobs, and that
suggests permanent hiring will occur in the months ahead.

The growing U.S. economy is providing a tailwind for the job market,
but the country -- assuming continued credit market healing -- is
still at least a month or two away from sustained, adequate job
growth.

Joseph Lazzaro
View all Articles

Economics and Markets WriterJoseph Lazzaro is the former managing
editor of financial news web sites WallStreetEurope.com/
WallStreetItalia.com, based in New York. Prior to graduate training in
U.S. public policy and international economics, Lazzaro also served as
a copy editor and staff writer for The Hartford (Connecticut) Courant.

http://www.dailyfinance.com/writers/joseph-lazzaro/

http://www.dailyfinance.com/story/unemployment-falls-to-9-7-but-20-000-jobs-were-lost-in-january/19346268/

...and I am Sid Harth

[Sid Harth]

The Baseline Scenario

What happened to the global economy and what we can do about it

Is Tim Geithner Paying Attention To the Global Economy?
with 34 comments

In an interview that will air Sunday on ABC, Treasury Secretary Tim
Geithner says, “”We have much, much lower risk of [a double-dip
recession] today than at any time over the last 12 months or so … We
are in an economy that was growing at the rate of almost 6 percent of
GDP in the fourth quarter of last year. The most rapid rate in six
years. So we are beginning the process of healing.”

The timing of this statement is remarkable because, while the US is
finally showing some signs of recovery, the global economy is bracing
for another major shock – this time coming from the European Union.

The mounting debt and deficit problems in Greece might seem relatively
small and faraway to the US Treasury – concerned as it is with China’s
exchange rate and the ritual of G7 meetings, and likely distracted by
the major snow storm now hitting Washington DC.

But the problems now spreading from Greece to Spain, Portugal, Ireland
and even Italy portend serious trouble ahead for the US in the second
half of this year – particularly because our banks remain in such weak
shape.
Greece is a member of the eurozone, the elite club of European nations
that share the euro and are supposed to maintain strong enough
economic policies. Greece does not control its own currency – this is
in the hands of the European Central Bank in Frankfurt. In good times
over the past decade, this helped keep Greek interest rates low and
growth relatively strong.

But under the economic pressures of the past year, the Greek
government budget has slipped into ever greater deficit and investors
have increasingly become uncomfortable about the possibility of future
default. This impending doom was postponed for a while by the ability
of banks – mostly Greek – to use these bonds as collateral for loans
from the European Central Bank (so-called “repos”).

But from the end of this year, the ECB will no longer accept bonds
rated below A by major ratings agencies – and Greek government debt no
longer falls into this category. The market can do this kind of math
in about 20 seconds: If the ECB won’t, indirectly, lend to the Greek
government, then interest rates will go up in the future; in
anticipation of this, interest rates should go up now.

That is trouble enough for an economy like Greece – or any of the
weaker eurozone countries that have been known, for some time and not
in an endearing way as the “PIIGS”. But paying higher interest rates
on government debt also implies a worsening of the budget; this is
exactly the sort of debt dynamics that used to get countries like
Brazil into big trouble.

The right approach would be to promise credible budget tightening down
the road and to obtain sufficient resources – from within the eurozone
(the IMF is irrelevant in the case of such a currency union) – to tide
the country over in the interim.

But the Germans have decided to play hardball with their weaker and –
it must be said – somewhat annoying neighbors. As we entered the
weekend, markets rallied on the expectation that there might be a
bailout for Greece (and all the others under pressure). But,
honestly, this seems unlikely. The Germans hate bailouts – unless
it’s their own banks and auto companies on the line. And the
Europeans policy elite loves rules; in this kind of situation, their
political process will grind on at a late 20th century pace.

In contrast, markets now move at a 21st century global network pace.
This is a full-scale speculative attack on sovereign credits in the
eurozone. Brought on by weak fundamentals – it’s the budget deficit,
stupid – such attacks take on a life of their own. Remember the
spread of pressure from Thailand to Malaysia and Indonesia, and then
the big jump to Korea all in the space of two months during fall 1997.

Tim Geithner and the White House may feel they must stand aloof,
waiting for the Europeans to get their act together. This is a
mistake – the need for US leadership has never been greater,
particularly as our banks are really not in good enough shape to
withstand a major international adverse event (e.g., Greece defaults,
Greece leaves the eurozone, Germany leaves the eurozone, etc).

Yes, we subjected our banks to a stress test in spring 2009 – but the
stress scenario was mild and more appropriate as a baseline. Many of
our banks – big, medium, and small – simply do not have enough capital
to withstand further serious losses (think commercial real estate).

As the international situation deteriorates – or even if it remains at
this level of volatility – banks will hunker down and credit
conditions will tighten around the US.

And if the European situation spins seriously out of control, as it
may well do early next week, the likelihood of a double-dip recession
(or significant slowdown in the second half of 2010) increases
dramatically.

By Peter Boone and Simon Johnson

Written by Simon Johnson
February 6, 2010 at 8:48 am
Posted in Commentary

.« The Economist Backs Cantwell-Collins.34 Responses

I think if these banks and big companies are trying to see this
president fail. So if there is a “double dip” recession they would be
the cause and everyone who supports their efforts to see this country
fail. Just note that if that is the plan be prepare to reap what you
sow.
Jermil

February 6, 2010 at 9:46 am

In my more conspiracy-minded moments, I’ve wondered if that’s why TARP
was passed in the first place; create a financial crisis and saddle
the new Democratic administration with that financial crisis so that
liberal policies cannot be enacted, increasing the chance that
Republicans will return to power quickly despite the fail of the Bush
years.

But conspiracy theories don’t get you far in the real world.
zic

February 6, 2010 at 9:57 am

Banks would not trade off short term results, as extreme as a double
dip would create, to achieve a long term objective.
JJ

February 6, 2010 at 10:35 am

I call BS. Obama’s words claim he’s not captured by the banks, but his
actions prove he most definitely is.

It doesn’t matter which party’s in control; the banks paid good money
for this government, and damned if they don’t own everyone in it.
Anonymous

February 6, 2010 at 12:49 pm

Oops, somebody delete this one. I double posted.
3-D

February 6, 2010 at 12:52 pm

I call BS on this conspiracy theory. Obama’s words claim he’s against
the banks, but his actions make his captured status 100% clear.

The banks paid good money to buy the best government they could get,
and damned if they didn’t get it.
3-D

February 6, 2010 at 12:51 pm

Perhaps the lack of concern stems from our ability to continue
borrowing from China; the dollar is more attractive if there aren’t
other viable options.
zic

February 6, 2010 at 9:59 am

Ever since our administration decided last year to (literally) buy the
banks some time and help them “earn” their way back to solvency, it
has been politically invested in (1) giving the impression of recovery
regardless of what is really taking place, and (2) downplaying the
banks’ persistent exposures. For this reason, they will not
acknowledge potential problems until they are right on top of us, let
alone develop plans as to how to deal with them. It’s kind of similar
to how, with the previous administration, the credit crisis was
“contained” until we were merely days away from the complete collapse
of the financial system. I’m sure they believe the sovereign credit
crisis is contained within Europe.

It’s hard to blame Germany, however, for being relectant to throw
money at a bloated and corrupt government.
Bond Girl

February 6, 2010 at 10:07 am

The most bloat is in the retirement/benefits system, and Germany
suffers from that too. US as well – In US municipal govts, 25-30 years
employment buys a compensation package that is currently above private
sector for comparable hours worked & education, and retirement at age
55 (with a bachelor’s degree to start) that carries through with
health insurance and inflation-adjusted benefits (better than
inflation with health care) for an average of 23 years afterwards
(life span of 78). Such benefits packages in the private sector have
vanished – a hidden wage cut.

That’s the supply side argument – and it’s a serious one. The demand
side argument still points at excess capacity and unemployment. We
have both, but the demand siders (Krugman) don’t seem to get the issue
with ongoing debt. Structurally, we have the issue that elders did not
save and health care costs (along with range of services and length of
support) are rising, meaning that they can’t draw on owed obligations
to sustain consumption (meaning that they need support from taxes,
meaning that we’ll need much higher tax rates to support them unless
they go back to work, but many skills have decayed due to years in
retirement, and some are in poor health). But right now, taxes are a
non-starter, so we’re covering consumption with debt (future tax
load), even though the FUTURE relative base of tax payers will be even
smaller.

There are ways out, but they are so politically toxic to the groups in
power that I cannot see any solution emerging until the crisis hits
squarely (e.g. Greece), but the US position as reserve currency will
trump that for a long while. Threats to the world economy cause such a
huge aggregate demand shock that we see “flight to safety”, and
massive carry trade unwinds (we’re now in dollar carry trade unwind
2.0 – yay). Meaning the dollar will probably be able to go further
into debt than any currency in the history of the world before it
really blows up, and then all hell will break loose.

Consider this – if the US govt were to formally default (hopefully it
will inflate, but I can imagine a gridlock that actually causes a
formal default), this could actually INCREASE the demand for dollars
as a settlement currency due to massive deleveraging.

We’re going to need to raise taxes, cut transfers, cut retirement
benefits, control health care, and prevent an aggregate demand
implosion by using aggressive monetary policy AND deploying massive
investment tax credits all at the same time. Which is possible, IF we
had an economic dictator. Not possible in the US political system.
StatsGuy

February 6, 2010 at 10:40 am

Excellent points except for the end. We don’t need a dictator we need
a leader with brass balls. For starters it would be great to have
Volker as treasury secretary, or at least any one of the other
economists that understand the problem and the solution. Obama is a
coward, he cannot even get his appointees through the Senate much less
an economic agenda. Harry Reid is a coward as well. We need strong men
like LBJ and FDR or Teddy Roosevelt. You don’t need a dictator.
Remember that Clinton raised taxes his first 100 days in office and he
did not have 60 votes in the senate. What we lack is leadership.
Problem is that great leaders are rare. If our country was run with
the same energy and passion that Steve Jobs runs Apple Computer we
would be out of this mess. The problem is that everyone wants to “be”
a leader – but they don’t know how to lead.

Obama should have fired Bernanke & Geithner the moment he discovered
the AIG cover-up. Like Bush, Obama is loyal people who fail.
Dave F

February 6, 2010 at 11:17 am

I agree we don’t need a dictator, however concerning Obama not gettin
appointments thru you must have missed what the esteemed Senator from
Alabama (Shelby) has been doing so that he can bring the pork home.
The Senate with its arcane rules is due a large part of blame, and the
fact that so many are bought off from corporate interests should be
quite obvious. They need to call the Republicans out on their faux
filibusters. Put some sunlight on these guys!
Harley T

February 6, 2010 at 2:24 pm

The “bloat” you refer to was a contract between employer and employee.
Civil service retirement is not a gift, it’s defered income which is
taxable.

Having retired at 50, I was back to work at 51.From the government
sector to the private sector. Not into a related field either.

I pay into the social security system from which I will received a
benefit reduced by 90%. The hidden tax former civil service government
retirees pay to sustain social security.

My health insurance is paid in thirds. I pay a third, the union I
belong to pays a third, the government pays a third. It’s a PPO
administrated by a not for profit health care organization. There’s a
deductable and a co pay.
Civil service retirees did not cause the banking system to fail. The
banker’s and their cohorts did it all by themselves.

The message should be the Powell Doctrine. You broke it, you own it.
theotherguydidit

February 6, 2010 at 12:03 pm

Bingo….
schatsie

February 6, 2010 at 12:28 pm

Exactly, he who inflates the bubble should be responsible when it
bursts. It was not a perfect storm, it was a perfect con. The
financial/ruling elites knew what they were doing and knew their
lackeys in Congress and the WH would have no choice but to bail them
out with taxpayer money. I believe they call that extortion. Now they
get to go around and gobble up smaller, weaker banks, houses, and
commercial property at bargain basement prices. Feel like you’ve been
conned? Well that’s because you have been. No biggie, it’s just been,
and continues to be, the largest re-distribution of wealth in the
history of the planet. It’s so big, Goldman Sacs and JP Morgan Chase
are now fighting over it. Greed is such a great motivator.
NonConformist

February 6, 2010 at 1:34 pm
“Structurally, we have the issue that elders did not save”

The problem is, unless we force them somehow, they never will. My
rabidly conservative father was the first to take government aid and
charity when he hit retirement age. Why? In part because he had raided
his retirement 20+ years before he needed it. He certainly never saved
a dime toward it. Most Americans are no better (in part because they
can’t afford to, but also in part because it’s more pleasant not to).

So unless we can force people to save, they won’t. If they won’t then
we have a decision: Do we let them starve or die from lack of
healthcare, or do we suck up an pay for them?

So far the answer has been, appropriately I think, suck up and pay.

On the other hand, if these seniors started hitting the wall with no
safety net, maybe their children (like me) wouldn’t take it for
granted that someone else will come to rescue them. Maybe we would
start seeing ourselves of having the obligation to return to our
parents what they brought to us (it used to be the norm). That might
even help the social fabric by strengthening long term family bonds.
Right now, I think we are (me included) pretty selfish.

I don’t know the answer. At the moment I look at this as a “compact” –
I take care of the seniors and then when our kids grow up they take
care of me and so on. It’s like public school – each generation has an
obligation to the previous and the next. Therefor we must find a way.
scathew

February 6, 2010 at 12:21 pm

I do agree with you about the social contract…the other part about
saving is interesting because the returns have been so lame…It is
clear that Wall Street has seduced the public with the 401ks because
an investment in Treasuries would have been much more profitable.
schatsie

February 6, 2010 at 12:31 pm

http://www.boston.com/business/personalfinance/articles/2010/02/06/for_savers_low_rates_are_matter_of_high_interest/

I am so tired of this crap. Many citizens played by the rules; saved,
invested in their homes and children and only got into debt when
recession after recession punched them in the face. They re-invented
themselves, sent second family members to work, diversified their
skills and put themselves part-time through college. They paid into a
system that used that money for what is was not intended. That vast
401K pool supported a bubble that gave us little in return.

As far as bloat in the government sector it is no different than the
private sector.

Give your hard working fellow citizens more respect. They have added
more value to this country than most of the CEO’s on Wall Street.
Clodene

February 6, 2010 at 2:15 pm

StatsGuy,

I agree with most of what you said, but in a sense your argument
reveals the wisdom of Germany’s reluctance in bailing out other
countries (if indeed that is the case).

Suppose you are a developed country in the position of bailing out
other, smaller developed countries now. You look around and realize
that most developed countries have their own versions of epic fiscal
gimmickry that will eventually have to be dealt with (with painful
political and economic consequences), your own country included
(although perhaps to a lesser degree). You realize that the cost of
the current crisis is actually establishing the initial conditions for
your own reckoning, and initial conditions matter…
Bond Girl

February 6, 2010 at 2:23 pm

“Many of our banks – big, medium, and small – simply do not have
enough capital to withstand further serious losses (think commercial
real estate).”

Rather than taking further measures to keep reinforcing banks (at
taxpayer expense) to preserve the precious credit system as the
economy implodes, perhaps we could actually try to keep the economy
from imploding?
StatsGuy

February 6, 2010 at 10:09 am

When the dust settles, expect third economic status of many of these
countries, maybe including the United States. Could the IMF bailout
the U.S., dipping into their dwindling coffers? It will be interesting
to see if countries like Greece, Spain and Portugal take up similar
options of the Latin America countries did by the early 1980s.
Domestically, President Obama takes his talking points from Mr.
Geithner, instead of the other way around (as reported at the G7 by
Financial Times – “Tim Geithner, the US Treasury secretary, will
discuss American plans to impose a fee on banks to recoup bail-out
costs, and the “Volcker rule”, about restricting commercial banks’
ability to engage in proprietary trading.”). It was rightly pointed
out last evening in Paul Solman’s continuing interviews on the
financial crisis, this time with David Stockman that “the party is
over”, that government bailouts only rewards the lack of financial
discipline and everything else that has gone wrong – and I would also
add, as has been enumerated continuously by this awesome blog; it’s
definitely a case of “hurry up and wait” for the markets to correctly
get it right the next time even it’s raining cats and dogs out here.
Beth

February 6, 2010 at 10:29 am

‘US Leadership’? Just exactly what does that mean? What are the
possible alternatives for the US? We bail them out? Ha! Ask US banks
to take on high sovereign risk? Pressure other EU countries to bail
them out? Germany already has maximum self interest in seeing PIIGS
through all this, how is any US ‘leadership’ going to change the
equation?

I am no fan of Geithner, but this is one time I’d cut him some slack.
Chris Marino

February 6, 2010 at 10:34 am

” ‘US Leadership’? Just exactly what does that mean? ”

That’s what I was thinking. Not only are we broke, but we’re probably
the ones who did the most to cause this latest debacle.

Wait one, maybe an innovation, like a triple looped FX inverted Yuan/
Peso/rouble arbitrage long-short derivative is just what they need…
stop any panic by freezing them up in incomprehension…
RA

February 6, 2010 at 12:35 pm

The problem is not the strength of the banks, it’s the lack of a
systemic risk regulator and the lack of resolution authority.

If Europe rises to the level of a systemic threat, the only option the
United States would have is another AIG bailout – which was: a too-
late diagnosis of an existent systemic event and a country with no
resolution authority over systemically important entities.

And Geithner and Bernanke started telling us this when Geithner was
still the President of the New York Federal Reserve.
JCH

February 6, 2010 at 10:52 am

And don’t forget the brewing storm in the China lending story that is
now unfolding. The housing bubble in Australia is yet to pop, too.
Plenty of big shoes to fall before this over.
Tom Hickey

February 6, 2010 at 10:55 am

A short but definitive Analysis of what is Wrong With America Today:

“Democrat’s Economic “Assumption-of-Death”.

“The fatal flaw that produced stagflation in Europe in the 20th C is
taking hold of America, mistakenly promoted by the erroneous and
perverted economic policy – or non-economic policy – of the Obama
administration.”

If you are a VOTER, read on pass captions like this:

……“All good comes from economic success, and all success comes from
the creation of profits. There is no stronger disincentive to profits
than taxation.”…….

They are saying,………no need to punish “profits”.

All good Americans should debate and decide on this thesis at;
http://www.robbingamerica.blogspot.com

Think about it until 2010…………there is still time “to survive”!
E. Pierce

February 6, 2010 at 10:57 am

Ahh yes, more support for redistributing wealth upward.
zic

February 6, 2010 at 11:19 am

Celebrate the “all good” coming from profits on bogus medical
insurance plans that renege on the sick and injured.

Celebrate the “all good” coming from profits from processed junk food
that create obesity and other health problems in the customers.

Celebrate the “all good” coming from profits on innovative “financial
products” that allow looters to operate on a vast scale.

Celebrate the “all good” coming from profits from over-sized fuel
wasting SUVs ample enough to transport obeso families (with their
often obese dogs).

Celebrate the “all good” coming from profits earned by refering people
to medical testing facilities owned by the refering physician, for
unneccesary sometimes dangerous tests.

Celebrate the “all good” coming from the all encompassing good coming
from not having to deal with external costs.
RA

February 6, 2010 at 12:47 pm

How can you say: ‘…double dip’ when you never recovered in the first
place.

And we’re not in a recession but a breakdown crisis of the entire
Anglo-Dutch imperial monetary system.

That means sovereign defaults, massive un-employment (permanent), and
un-governability in Western countries.

Articles like this really hurt us because you marginalize and
underestimate the crisis.

This is not some typical ‘business cycle’ but a segway into a New Dark
Age.
whitemale08

February 6, 2010 at 11:29 am

Throughout history, an unified Germany has always spelled trouble for
the rest of the world.
Mark G.

February 6, 2010 at 11:54 am

I am fortunate to live adjacent a conservation zone and none of the
wildlife seems to appreciate our “crises” which reminds me that our
economy is an artificial construct. We can make it work.
hermanas

February 6, 2010 at 12:27 pm

Of course we’re headed for another recession. The minute the price of
oil goes significantly over $100/barrel in another 6 – 12 months, you
watch everything fall apart just like it did a year ago. Sure the
financial system needs reform, but they are not the base problem. It’s
really only when oil is too expensive to take advantage of cheap labor
anywhere in the world that the trouble really starts.

Sure there’s lots of oil we can scrounge around for, but sucking up
the Alberta tar sands or miles under the ocean doesn’t give you
gasoline for less than $4 a gallon. And then one must assume that the
world will put no price whatsoever on carbon emissions. Unlikely.
Rojelio

February 6, 2010 at 1:29 pm

Insane behaviour from the ECB. The best thing that you can say about
it is that it is gross stupidity.
vimothy

February 6, 2010 at 2:18 pm

No panic. The USA can stay home, and lick its wounds, mostly self
inflicted. The French and the Germans know what they are doing. The
long head and architect of the Euro, Jean Claude Trichet used to head
the Banque De France, with its Franc fort policy… Now he works from
Frankfurt (=Frank-fort).

Greece’s problems are not such a bad development… For France, Germany,
and their immediate satellites.

Indeed the Euro was way too high relative to the Sino-American
currency. No doubt the sneaky ones in the arcane vaults of European
government monetary and economic policy are delighted to see this
“problem” unfold throughout Southern Europe. I guess the Euro will
have to fall from its mighty perch, how sad for China and the USA!

After all, after talking softly, for years, it’s time to use a big
stick.

One can, and ought to crack down on, Greece, China and the USA. That
Northern Europe’s discipline shall be imposed on Southern Europe is
good. Just as it is going to be good to dismantle the plutocratic
infection in Britain.

Americans and Chinese did not exert moderation, they kept undercutting
Europe with their competitive devaluations. After the dismal Chinese
show of raw asinine brutality at Copenhagen, Europe has apparently
decided to play hard ball. Good: the USA and China will suddenly that
Europe exists, and can be mighty their way, by letting its currency go
down. I tip my hat. It’s a wolf hat I use in the mountains, among the
snows.
PA
Patrice Ayme

February 6, 2010 at 3:01 pm

How will this be good for Greece?!
vimothy

February 6, 2010 at 3:09 pm

http://baselinescenario.com/2010/02/06/is-tim-geithner-paying-attention-to-the-global-economy/

...and I am Sid Harth

[Sid Harth]

The Baseline Scenario
Tom Hoenig For Treasury
with 89 comments

The White House is floating, ever so gently, the notion that they are
open to nominations for the position of “Tim Geithner’s Successor.”

It’s not clear if they mean this job is likely to be advertised
formally sometime in 2012 or 20 minutes after the November midterms.
Nor is it obvious if this is a real request for proposals – it could
be just an effort to make critics “put up or shut up.”

Fortunately, there is an entirely plausible successor already in
waiting, ready now or whenever the president finally realizes the need
to fundamentally change banking policy.
Tom Hoenig, president of the Kansas City Fed, is best known for three
things.

1.He’s currently the only senior Fed official who has been outspoken
(or even spoken out) against banks that are undoubtedly Too Big To
Fail (TBTF). Hoenig has been a beacon of clarity on this issue over
the past year. Compared with central bank officials – and almost
everyone else – Hoenig stands out as a model of straight thinking and
a proponent of tough action. With his disarming but no nonsense
approach, he is the perfect person to take on the likes of Lloyd
Blankfein (Goldman Sachs) and Vikram Pandit (Citigroup) both in the
corridors of power and in the nitty gritty of their rather sordid
business models. Hoenig is a career bank supervisor and nobody’s
fool. Blankfein and Pandit are just two more guys who run banks that
have gone bad. You know how that movie ends.

2.Hoenig, who sits on the Federal Open Market Committee, is also an
inflation hawk – at least by today’s standards. This makes some would
be supporters – including fans of his attitude on TBTF – rather wary
of advancing his name (e.g., as chairman of the Fed Board). This
hesitation is understandable although likely mistaken; you don’t keep
the federal funds rate essentially zero for long when nominal GDP is
growing at more than a 6 percent annual rate. In any case, the issue
is irrelevant for the Treasury job. The Treasury Secretary’s
responsibility in a modern administration is to run financial sector
policy, meaning bailouts and how to avoid them. Peter Orszag has the
budget and Ben Bernanke (gulp) holds the monetary tiller. What we
desperately need is someone who can sort out our largest banks.

3.Tom Hoenig is almost certainly a Republican, although – as head of a
regional reserve bank – the full range of his views, outside of
banking and money, are not widely known. Paul Krugman reasonably
points out that if he (Krugman) were nominated for the Fed (or
Treasury or anything else), this would likely run into trouble in the
Senate. Hoenig is a completely different kettle of fish, appealing to
sensible Democrats and Republicans – yes, there are a few – who
increasingly worry about massive banks and their electoral
implications. And while financial sector policy is job one, serious
efforts to address the budget – led by people of all ilk with a strong
grip on economic realities – also lie in our future. Either that or
the republic will perish. Not a tough choice in the end, but it does
need to involve at least a few Republicans.
There will be objections to be sure.

•He’s just a regional Fed governor. True, but so was Tim Geithner.
•He’ll be captured by Big Finance, just as Geithner was. Spend some
time with Tom Hoenig before you jump to this conclusion.
•The market will react negatively, because it will sense the era of
unlimited bailouts is drawing to a close. Sure, but that’s the
point.
•He’s a Republican. See point 3 above, and remember that President
Obama offered Senator Judd Gregg (R., New Hampshire) the position of
Commerce Secretary at the beginning of his administration.
There’s also the question of whether Tom Hoenig would take the job.
He doesn’t seek it and no doubt doesn’t need the hassle and the
heartache.

So it would be a question of how he is asked and what powers he is
given. With the right job description and enough protection from the
very top, Hoenig is not the kind of person who shrinks from the
opportunity to help his country back onto safer ground.

He’s not a politician and he’s not a banker. But he knows the
politics of central banking and what bankers – of any size and kind –
get up to.

Joe Kennedy, first head of the SEC, was by all accounts a poacher
turned gamekeeper. Tim Geithner sees himself as a gamekeeper, but he
is undone by the belief that the principal poachers are decent and
honorable folk who mean no ill.

Tom Hoenig is just a plain spoken old-fashioned gamekeeper. Not many
of them are left, but you only need one.

By Simon Johnson

Written by Simon Johnson
February 1, 2010 at 8:08 pm
Posted in Commentary

Last night, I had a dream where I was summoned to the White House to
meet with Bernanke and Geithner. All three of us were sitting in a row
in an office, Bernanke to my right and Geithner to my left, facing a
large and expensive-looking wooden desk.

They told me the desk and office belonged to a “mystery guest”.
Eventually Larry Summers walked in and took his seat behind the desk.

They asked me if I had any questions. I asked whether they really knew
what they were doing with all the bail-outs and buying $1 trillion+ in
MBS with fresh money. “Are you sure the cure isn’t worse than the
disease?” I asked.

Summers said that is an interesting question, because before all of
the extraordinary measures began, they asked him to explore and report
on all of the potential failure modes. Only he deliberately did not do
a very thorough job, because — he explained to me — he is such a
strong debater that he was worried he would convince everybody else
not to proceed.

True story.
Nemo

February 1, 2010 at 8:19 pm
Reply
Nemo – In general, I find your postings insightful, clear-headed, and
blogfully diplomatic… but your above comment of “I had a dream” and
“True story”… to me itsn’t “self-evident”… Are you claiming that
Summers is pulling the strings because you have inside knowledge
(True) or because it is apparent (as in a dream)??

Either way, the general populace thinks we have skated past the crack
in the ice, when in reality we are out deeper in the pond where the
ice is thinner.
Teotac

February 1, 2010 at 8:53 pm
Reply
re: “the general populace …thinner.”

Good imagery & description.
d4winds

February 2, 2010 at 7:06 am
Reply
I interpret your dream to tell that the issues at stake are way more
than what words can heal, even the forceful words of the Harvard
Hammer. It is a time for action, is what I would make of your dream.

Nice story. It sure sounds like an accurate dream even if you had not
pointed out that it is a true experience.
Dan Palanza

February 1, 2010 at 8:55 pm
Reply
Which brings me back to a question I would like to see answered
objectively: how do “toxic” MBS asset prices look compared to
September 2008? The repeated revisions to the better of the cost of
TARP seem to suggest that prices were too low during the panic, but I
have not seen a retrospective analysis of whether it was, in fact,
liquidity crisis or a massive bank insolvency.
AJ

February 1, 2010 at 8:56 pm
Reply
For the record, by “true story” I mean I really had that dream last
night. I am making no claims about reality.

P.S. I agree Hoenig would be a fantastic choice to head Treasury.
Nemo

February 1, 2010 at 9:08 pm
Reply
That’s the right kind of kool-aid drinking, President Obama should
consider—President Obama imagining the audicity of real goverance.
Heads up to you, Simon, and readers, another one-on-one interview with
Mr. Hoenig scheduled this coming Friday, 02.05.10. with PBS’ Nightly
Business Rreport host Susie Gharib. The last interview with him is in
archives, dated 11.17.08 (Susie Gharib interviewed Th=”/nbb is der-
et=”_blaerviewed Thoy e. /nbr/blog/econte/ima)
Beth

February 1, 2010 at 9:47 pm
Reply
You probably ate too much chocolate just before bed time.
Rich S.

February 1, 2010 at 9:57 pm
Reply
Yours beats mine. I dreamed that the libertarians and street gangs
were having a firefight in my neighborhood (in the mad-max world of
tomorrow) and I was training my neighbors to adjust fire with the PVC
mortar we made.

Full moon and low atmospheric pressure…
Redleg

February 1, 2010 at 10:53 pm
Reply
My own dream is that Bernanke, Geithner and Summers are exposed for
the corporatist shills they have always been, that people wake up
realize that systemic risk is a euphemism for disturbing existing
power and privilege, that letting AIG, GS and all the dependent banks
suffer through bankruptcy reorganization would have produced exactly
the correct response to thirty years of globalization, securitization,
financeering and free market idiocy, that Obama wakes up to understand
that this miraculous recovery is being financed by a generation of
retirees whose savings of a lifetime now produce NOTHING, that what
these savers have left will soon float into the stock market providing
opportunity for hedge fund scammers to exit just before the s**t hits
the fan, that it is time the Fed stopped paying interest on reserve
deposits and the govt started paying 5% interest on short term
deposits of small savers before all of them are simply eaten up by
capital erosion and Wall Street finaglers.

What I read about finance on a daily basis indicates that nobody
really understands it. For those seeking understanding I highly
recommend Philip Augar’s book, The Greed Merchants. The book is low
key, even handed and devastating to the picture which investment
banking paints on the virtues of financial innovation. If the country
as a whole understood the lessons of this book there would be no place
on earth for Lloyd and his buddies and his political stooges
(including most of you know who) to hide out.
jake chase

February 2, 2010 at 7:06 am
Reply
Exactly right. And the book by Augar was written way b e f o r e
the crisis!
Ritz

February 2, 2010 at 7:41 am
Reply
“letting AIG, GS and all the dependent banks suffer through bankruptcy
reorganization would have produced exactly the correct response to
thirty years of globalization, securitization, financeering and free
market idiocy”

another trenchant Jake Chase comment
tippygolden

February 2, 2010 at 11:43 am
Reply
Allow me to agree with jake chase’s comments. I ask myself every day
what kind of fool I’ve been to invest and save all my life (I am over
60) and now I have little to show for it but hear constantly about
“too big to fail” and “stimulus”. Sure, let’s take care of the MBAs
and bankers.

I have a Masters degree. But I am being told that I need to return to
school in order to be qualified to get a stimulus job laying asphalt
on the roads or perhaps repairing other sadly neglected
infrastructure. I’ll get right on that…. after I figure out what
happened to the concept of retirement. Oh yes, and I’ve been out of
work for a year now…
MsInAndover

February 2, 2010 at 12:58 pm
Reply
Boy, I couldn’t agree with you more. I would pay serious money to see
Bernanke, Geither, and Paulson in jail. In my opinion they did far
more damage to this country than Hitler, Saddam Hussein, and Osama Bin
Laden.

Greenspan was bad, yes, for keeping interest rates low. But the damage
he did was as nothing compared with the destruction those three did
cleaning up the mess. By bailing out the Rich and Powerful and
Politically Connected they have not only ensured that our economy is
going to experience a Japanese style great depression, they have
destroyed the basic American social compact. They are nothing less
than traitors, willing to betray our country for private gain.
dlr

February 3, 2010 at 3:31 am
Reply
Really? You’re dreaming of Bernanke, Summer and Geithner? That’s so
sad. First, let’s call it what it is; a nightmare. Second, stop
looking at your stock portfolio before bed and start looking at your
porn portfolio. You will have much better dreams.
Tailor Made

February 2, 2010 at 9:34 am
Reply
Wow, synchronicity! I had a dream the other night where I was a Krispy
Kreme donut and Bernanke, Geithner, and Summers were racing sausages
chasing after me. What do you think that means???

http://milwaukee.brewers.mlb.com/mil/fan_forum/racing_sausages.jsp
Siggy Fashizzle

February 2, 2010 at 1:38 pm
Reply
“With his disarming but no nonsense approach, he is the perfect person
to take on the likes of Lloyd Blankfein (Goldman Sachs) and Vikram
Pandit (Citigroup) both in the corridors of power and in the nitty
gritty of their rather sordid business models.”

Maybe I’m talking out of my posterior here, but you’re making the
(wild) assumption that anyone voting for this nomination would be
ready and willing to bite the hand that feeds. This sounds extremely
unrealistic in such a well captured and controlled government.
3-D

February 1, 2010 at 8:43 pm
Reply
Except that Geithner was the NY fed governor. Surely you do not
believe that NY and KC are the same?

Also, if you are going to accuse Blankfein and Pandit of “going bad,”
don’t you think you should have some evidence? Or at least a prior
post you can link to? I don’t think it is enough that they are big in
a regulatory environment that let them get big, in particular you are
ascribe negative motives, rather than negative results.
AJ

February 1, 2010 at 8:50 pm
Reply
Who is ‘ever so gently’ floating this notion? You?
frtw0b

February 1, 2010 at 9:09 pm
Reply
I don’t care who’s floating or how gently. That’s the best news I’ve
had in weeks.
chas

February 1, 2010 at 10:32 pm
Reply
My vote goes to Jamie Galbraith. Joe Stiglitz should get Summers job.
Looking at the latest New York Times article on the budget, along with
Krugman’s blog post about the depressing budget, we are in a lost
decade. Then it’s supposed to get worse. We need people in these jobs
who know what to do. Gosh, that’s what I was saying before the 2008
election. Why didn’t that happen?
LJM

February 1, 2010 at 9:36 pm
Reply
Galbraith and Stiglitz certainly seem to care about unemployment, and
for that reason, I’d support them.

I’d respectfully disagree though with the notion that we don’t have
people in those posts who know what to do. Just as in healthcare, do
you really think Obama would veto a great bill written by an academic
(for example, Simon Johnson)? that Summers and Geithner are so corrupt
that they’d work to defeat a good bill? It’s plausible, but I doubt
it. To me, the bigger problem is what you can get through Congress.
Academics know what to do. But academics don’t run Congress.
Daniel Habtemariam

February 2, 2010 at 8:51 am
Reply
Yes, I believe Geithner is definitely corrupt enough to work to defeat
a good bill. He is a wholly owned subsidiary of Goldman Sachs, Morgan
Chase, Bank of America and Citibank. Is he that way because of
cognitive capture or corruption? I don’t know, and I don’t care. But
his DEFINITON of a good bill is a bill that is good for Goldman Sachs,
Morgan Chase, Bank of America and Citibank.
dlr

February 3, 2010 at 3:36 am
Reply
Poacher? Gamekeeper?
Sandrew

February 1, 2010 at 9:41 pm
Reply
There are a few sensible Republicans? Could you name them? I’m drawing
a blank.
Rich S.

February 1, 2010 at 9:58 pm
Reply
Colin Powell? He’d have his honor to restore too.

That’s the only one I can think of. Then again I’d be hard pressed to
find a sensible Democrat too. (Franken?)
Redleg

February 1, 2010 at 10:57 pm
Reply
Franken was one of the “process” sociopaths who voted for cloture
before voting against Bernanke.

The process mentality is an inverse metric for sensibility.
Russ

February 2, 2010 at 2:10 am
Reply
unless my checklist was wrong, Franken voted no x2. I have my paper
checklists right here. My numbers checked w/ the final tallies, so I
didn’t bother to look for misallocated checkmarks. Check out Franken’s
amendment to the health care bill – the one that capped profits. He’s
on the good side (so far).

Broadly defined, every soldier that does not desert (even then…) is a
war criminal – including myself. Come and arrest me!

My point was that there are people of personal integrity on either
side that might have the motivation AND courage to make real changes
that benefit the PEOPLE. These individuals must be identified and
supported, regardless of party affiliation. Expecting them to be as
pure as new snow is completely unrealistic – they will probably be
filthy insiders with a lot of guilt to expunge.
redleg

February 2, 2010 at 1:05 pm
Reply
I went to double check and here’s what I found:

http://thehill.com/homenews/senate/78597-senate-puts-bernanke-one-step-closer-to-second-term

There were six Democrats who switched their positions on the votes.
The six Democrats voted in favor of cloture, but opposed Bernanke on
the final vote. They were Boxer, Dorgan, Franken, Harkin, Kaufman and
Whitehouse.

But I agree with your basic point, though I think if any filthy
insiders want to expunge their guilt, now’s the time to start. No
takers yet.
Russ

February 2, 2010 at 4:23 pm
Please, please just stop it. Colin Powell is a war criminal who should
be in jail. He went before the UN and lied about everything. The blood
of thousands and thousands of people are on his hands. “sensible”, I
don’t think so.
Fresita

February 2, 2010 at 10:08 am
Reply
Are we sure Hoenig hasn’t tried to cheat us tax payers out of $32,000?

If so I’m for him.
chas

February 1, 2010 at 10:25 pm
Reply
Simon, I hope that you are more than a passing acquaintence of
Volcker’s (I suspect). Even if not, you should (by a multitude of
connections that you no doubt have) seek his ear in this matter,
because, it seems that he has the President’s ear. With B reconfirmed
for another term (alas!!), we must take action to affirm responsible
policy, and G is definitely NOT the one to do it. I love your
suggestion, and feel very strongly that Tom Hoenig would be an ideal
replacement for tiny Tim (mentally, that is). I just don’t believe
that he could ever be capture by Wall Street. Maybe we should get word
to the R’s, Barney and Bernie that he would make the optimal choice.
After the Republicans bonor at having invited POTUS to their shindig
in Baltimore, maybe they would love to have an R at Treasury. Oh,
pleeeze, I know that it’s after Christmas, but Santa can come late to
my house. All I want is a rational and tough Treasury Secretary so
that we can stop holding our breaths collectively wondering what will
be done in financial reform. It goes without saying that Goldman
(under a Hoenig Treasury) would never have gotten 100 cents on the
dollar for their rotting security insurance. But then, Neil Barofsky
may yet have the last word on that.
Bayard

February 1, 2010 at 10:56 pm
Reply
Hopefully this will happen soon. Having Geithner contradict the
President’s “Volcker Rule” introduction gave the impression that
someone was outside the loop.

While it is possible that the President is the one on the outside, its
more likely that Geithner is the outsider and will be sent packing
relatively soon.
Redleg

February 1, 2010 at 11:05 pm
Reply
What?! They want to replace Geithner? The looting is already over?
bungalowbill

February 1, 2010 at 11:50 pm
Reply
Questions from an economic illiterate about keeping the fed funds rate
at zero: If the fed rate is increased doesn’t it have the potential of
setting off yet another wave of foreclosures, given the number of
adjustable mortgages out there? I can understand why ARMs make sense
when mortgage interest rates are at their highest, how do they make
sense when rates are at their lowest? Wasn’t the fed rate reduced to
zero to forestall the ARM foreclosure problem? Didn’t the bubble burst
because we couldn’t go below zero?
oldgal

February 1, 2010 at 11:53 pm
Reply
The market will react negatively, because it will sense the era of
unlimited bailouts is drawing to a close. Sure, but that’s the point.


One metric I’d use to tell if anyone’s serious is if he’s willing to
stand up to stock market terrorism.

So far, no one within the system…
Russ

February 2, 2010 at 2:09 am
Reply
He was my choice for Fed Chief!! Instead we got that “MAKE BANK AND
BANKSTERS RICH AT ANY COST” Bernanke.

I can’t wait for November and the election results ..

ALL THE INCUMBENTS WHO ARE UP FOR RE-ELECTION AND WHO VOTED YES FOR
THE CLOTURE ON BERNANKE SHOULD BE BOOTED OUT .. IRRESPECTIVE OF
WHETHER HE/SHE IS A DEMOCRAT OR REPUBLICAN..

But how do you ensure the guy is elected does not go running for the
crumbs from the banksters is another question altogether
killben

February 2, 2010 at 7:22 am
Reply
Shudder. The main reason I’d go for him for Treasury is to get him out
of having authority over interest rates for the next year or so.
Having him as Fed chief would be a disaster.
Kathryn

February 2, 2010 at 1:26 pm
Reply
Boy, you’re way nicer than I am. I would say any incumbent who voted
for Bernanke OR THE BAILOUT BILL, should be booted out of office.
dlr

February 3, 2010 at 3:51 am
Reply
Word Rich S.. The last person on earth I want posited at the Treasury
is a republican. There are a vast field of potential candidates to
replace the taxdodging, wallstreet insider, and Godlman Sachs minion
currently holding the job, and ruining millions of families in the
process. There is no compromising with republicans. There is no
reaching across the isle. Obama continually exhibits this weakness out
of true sportsmanship, or goodwill, or my dread concern complicity.
All our politicians are in owned, purchased, and in the pockets of
oligarchs, – but democrats at least hold some distant concern for the
plight of poor and middleclass Americans, – the gop is works for the
predatorclass exclusively, and while they talk populism from one
tentacle of their forked tongues, – their actions across the board,
and in every circumstance work to disadvantage and undermine poor and
middleclass Americans to protect, shield, and advance the interests of
the predatorclass who pay, fund, and contribute to them luxuriously.

We need at least one progressives, a true democratic voice in a
position of power, like the Treasury to counter the entirely onesided
array of cacophonous screeching and dire threats from Wall Street
insiders that currently running the show.

Stiglits, Krugman, and you Professor Johnson if you are eligible.

I agree with you that “Hoenig has been a beacon of clarity on this
issue over the past year”, and that he is well qualified and a viable
candidate, (anyone including Homer Simpson would be a marked
improvement over Giethner who is a predatorclass minion) – but the
nation (the other 99.5% of population) needs a progressive democrat at
Treasury, with the courage and the determination to stand up to the
oligarchs and whose responsibility is to “…run financial sector
policy, meaning bailouts and how to avoid them.”

Republicans and the gop in it’s current panjandrum are the bane of
America and deleterious to the best interests of the other 99.5% of
the American populations. Republicans work for oligarhs and brute
their conjurings to redneck Amerika.

Trust me brother, anyone is better than that swindling apologist, Wall
Street insider, taxdodger, viper, and thief Giethner, – and maybe the
right honorable Mr. Hoenig is a solid choice, – but many of us are
tired of the status quo and want to see new idea’s and new visions,
and real champions of the peoples best interest, (which is sorely
lacking now).

Get rid of Giethner, and lickity split, – but lets fish around for a
replacement.
Tony Foresta

February 2, 2010 at 7:30 am
Reply
Ugh, spoken like a true partisan, which is exactly what we need less
of. Mr. Johnson is right, we need someone honest and competent who
will not be captured. Whether he is a Democrat or Republican is much
less important, and I feel sorry for you if you really think that is
the most important thing. (And I usually tend to vote Democratic, for
what it’s worth.)
VacantHomes

February 2, 2010 at 3:11 pm
Reply
I call bullsh!t. There’s no way the White House is soliciting names
for Geithner’s potential successor. First, that’s not at all how
cabinet-level nominations are handled. The White House doesn’t solicit
suggestions from outsiders. I’ve been in politics for 26 years,
including in the West Wing, and I’ve never once seen anything like
that happen. Second, in the extremely unlikely event that the White
House were talking about a potential successor for Geithner, there’s
no way in the world that Simon of all people would know it. The White
House tends to exclude loud-mouth, self-important pundits from such
sensitive deliberations.

Nope, this is just Simon pretending to be an Important Figure who’s
“in the know.” Usually I see this kind of thing from 25-year-old LAs,
not MIT professors. There’s an old saying in DC: “Those who talk,
don’t know; and those who know, don’t talk.” Simon doesn’t know.
Bill

February 2, 2010 at 7:35 am
Reply
Then appointing the likes of Summers and Geithner was a failure of the
current process. I don’t see why the White House shouldn’t consult an
economist like Simon Johnson who also possesses practical experience
from his post at the IMF. SJ never claimed the White House was
soliciting suggestions, but he did offer a suggestion for who he
thinks should replace Geithner.
SDProg

February 2, 2010 at 11:36 am
Reply
actively soliciting suggesstions would be appropriate.
SDProg

February 2, 2010 at 12:05 pm
Reply
As leak free as a Tyler #200 sieve.
redleg

February 2, 2010 at 1:11 pm
Reply
Simon Johnson for Treasury Secretary!
Moruobai

February 2, 2010 at 7:41 am
Reply
I dreamed of a fire in the middle of my living room. I could not get
anyone to help. I picked up a stuffed animal and it turned into my dog
and ran away. I called the fire department and when they came the hose
was too short. I had a priest in the living room but all he wanted was
another cup of tea and some cookies.

I have 2 in college, a house I fixed up and cannot sell and a husband
constantly worried about his job. Do you think they are related?
Jennifer Peter

February 2, 2010 at 9:42 am
Reply
“This makes some would be supporters – including fans of his attitude
on TBTF – rather wary of advancing his name (e.g., as chairman of the
Fed Board). This hesitation is understandable although likely
mistaken; you don’t keep the federal funds rate essentially zero for
long when nominal GDP is growing at more than a 6 percent annual
rate.”

I understand the rationale, but I’m more concerned with expected
medium term (3-5 year) growth. Hoenig seems to believe in a backward
facing rule (like a lagged variable approach). The original Taylor
rule is an example.

Here is the problem – If you have an economy plugging along at even
keel, and you hit it with a negative shock, it takes 3 months before
the Fed reacts. In that three months, the economy tanks. Then the Fed
unloads with 10x the amount of stimulus that would have been required
to prevent the collapse in the first place, and over the next 6 months
the economy spikes. Then the Fed starts to get inflation jitters and
tightens, and so forth… we get a cyclical dynamic (it’s like a simple
oscillating system). Hopefully, the economy has some shock absorbers
so that the oscillations fade over time.

By contrast, a FORWARD-looking rule is inherently stabilizing. It’s a
negative feedback rule. (In a closed system, negative feedback is
good, positive feedback is bad – positive feedback means eventual
system destruction.)

What we had in Sept 08 was the Fed FAILING to lean against
EXPECTATIONS, even as we had a massively unstable overleveraged system
that simply could not endure 6-12 months of low asset prices in an MtM
environment after 10 months of recession, and a Fed that continued to
sterilize asset purchases in fear of commodity inflation in the rear
view mirror.

Plosser was the villain in 2008. But Hoenig was the ONLY dissenter out
of 9 FOMC members in the most recent meeting… Do we really expect
hyperinflation this year? Short Run Supply is flat, asset prices have
peaked temporarily (simply due to the end of MBS purchases), final
demand is still flat, the most recent survey said incomes are going up
but not spending (instead, savings is going up). The PRIMARY issue is
not expanding money supply, it’s expanding money supply without
administrative mechanisms that force this money into the real economy
instead of into asset bubbles. And the dollar is _still_ overvalued.

Thus, Hoenig in Treasury would be splendid! It kills two birds with
one stone (e.g. targeting TBTF, and getting him off the FOMC). :)
StatsGuy

February 2, 2010 at 9:43 am
Reply
Do you mean “asset bubbles rather than the real economy”?
Bee1

February 2, 2010 at 11:14 am
Reply
That’s what’s happening – the goal should be the opposite.
StatsGuy

February 2, 2010 at 3:40 pm
Reply
Stats Guy,

Your statement that: “The PRIMARY issue is not expanding money supply,
it’s expanding money supply without administrative mechanisms that
force this money into the real economy instead of into asset bubbles,”
seems very important to me. Previously you’ve called for direct
subsidies/tax credits for infrastructure investments and matching
grants to states willing to spend on certain kinds of approved
projects to accomplish this goal of expanding the money supply into
the real economy. President Obama’s comically named “cash for
caulkers,” program seems to be a small-bore attempt to follow this
line of thinking. Do you know of any other plans out there attempting
to do the same? I’d like to get behind a politician really interested
in combining fiscal and monetary policy in the way you describe here,
but all I see in the media is endless harping on the size of the
deficit/national debt. Sometimes I think we should just do away with
debt issuance entirely and let interest rates fall to zero.
NKlein1553

February 2, 2010 at 11:40 am
Reply
Unfortunately, no. Most pols on the dem side seem to be more concerned
with maintaining transfer programs intact, even going so far as to cap
non-military discretionary spending. Long term investment credits
would fall into discretionary spending. The Build America Bonds
program probably was a step in this direction, although it’s hard to
say what % of municipal bonds is going to investment vs. budget
(especially taking into account budget shifting). Team Obama has lots
of little good ideas in this area. Little being the problem – they are
utterly dwarfed by the projected increases in transfers.
StatsGuy

February 2, 2010 at 3:48 pm
Reply
I completely agree with all of this. Can we get you in the FOMC
somehow??
Kathryn

February 2, 2010 at 1:35 pm
Reply
I agree. Out with Bernanke! Stats Guy for Chairman of the Federal
Reserve!
NKlein1553

February 2, 2010 at 4:43 pm
Reply
Elizabeth Warren!
A.L. Thompson

February 2, 2010 at 9:45 am
Reply
Here here!
Mitch

February 2, 2010 at 1:57 pm
Reply
Leave this guy there getting grilled by congress for the whole four
years. I want this guy on the hotseat. When he gets fired he is going
to be paid more money than anyone can imagine. No one in history has
ever had favors to call in for giving the fat cats hundreds of
billions. He’s probably picking his island in the Carribean right now.
Andrew

February 2, 2010 at 10:10 am
Reply
The Republic is going to perish unless income inequalities are
addressed, and I doubt any in the current cast in power care about
that.
purple

February 2, 2010 at 10:24 am
Reply
Johnson, did Tom Hoeing ask you to write this? It seems to me an
undisguised PR job. Good try.
Dr. Sam

February 2, 2010 at 10:35 am
Reply
Thank you for the informative glimpse into the practical debate over
replacing our corrupt Secretary of Treasury.

I hope that Obama is listening to your insightful advice.

Hoping and expecting are two different paradigms.
Eric Roth

February 2, 2010 at 10:41 am
Reply
What is known about Tom? How has his supervision of his banks been?
What has his tenure been like at the KCFRB? It’s great that he now
does not believe in TBTF but where was he prior to the financial
crisis? Everyone now is against TBTF.
Confused

February 2, 2010 at 10:49 am
Reply
Good question. How many banks in HIS region have been closed by the
FDIC?

The 10th district doesn’t include any of the states that were ground
zero states for the housing boom/bust (Nevada, Arizona, California,
Florida or Michigan ), so that is a good sign.
dlr

February 3, 2010 at 3:49 am
Reply
I suggest Eliot Spitzer as the best replacement.

He understands Wall Street and politics and is not afraid to be
aggressive. His appointment would signal an administration
determination to get tough with the financial community — a popular
stance which would outweigh qualms caused by his past use of a
prostitute.

He is too bright to waste. The financial community would go bonkers —
a decided plus.
Peter

February 2, 2010 at 10:57 am
Reply
I agree with Peter.

Elliot Spitzer had his personal problems. But hey, I think he would
take on the big banks and the financial fat cats with a zest like
another Elliot took on the bootleggers. That would be Elliot Ness.
David C.

February 2, 2010 at 12:37 pm
Reply
Elizabeth Warren, all the way. Just announcing her name would be
enough to scare the bankers into doing the right thing. Her
credentials and reputation are impeccable. When was the last time
America actually had a economist that could create as much enthusiasm
as she can?
Matt Bird

February 2, 2010 at 11:01 am
Reply
Elizabeth Warren is not an economist. She’s a consumer bankruptcy law
professor, with no training in economics. She’s woefully
underqualified for the position of Treasury Secretary. You think
Elizabeth Warren seriously understands international currency markets?
Puh-leeze.
Bill G

February 2, 2010 at 11:32 am
Reply
Your misogynism is showing. Elizabeth Warren probably has more
knowledge of economics in her left little toe than 90% of the
commenters on this board, including you. Probably, she’s too smart to
take the job of Treasury Secretary, although I agree with Matt Bird:
just mentioning her name would scare the beejesus out of Wall Street
and the banksters. More importantly, though, I think it would cause
Larry Summers to have to repeatedly change his underwear, or sit for
long periods on the toilet…maybe even to leave the administration
altogether.
BobW

February 2, 2010 at 12:10 pm
Reply
Economists and bankers have managed the position soooooo well over the
years, why would we want anyone else in the position?
redleg

February 2, 2010 at 1:15 pm
Reply
I think Elizabeth Warren should have a cabinet level appointment as a
Consumer Advocate. This is not the right role for her. She is someone
we need to hear from at the highest levels. If she is placed in the
role of protecting consumer rights I think she will be as fondly
remembered as FDR’s labor secretary Frances Perkins.
David C.

February 2, 2010 at 12:42 pm
Reply
Sorry, there are no more sensible Republicans. If they haven’t
realized what the GOP is, they are not sensible. They may not be
crazy, but they don’t fit the actual definition of “pragmatic.” Maybe
they are pragmatic by Village standards?
NotTimothyGeithner

February 2, 2010 at 11:05 am
Reply
i sure hope that they do not get rid of tim he is the best thing that
ever happened to the whitehouse bye for now your stat at home mom
linda
LINDA LANDFAIR

February 2, 2010 at 11:14 am
Reply
Geithner stays thru 2012, Larry Summers will make sure of it. Geithner
is Larry’s boy toy at Treasury.
Alex02139

February 2, 2010 at 11:14 am
Reply
i interpret dreams. Would have 2Question U to disclose the dream
properly since some of personal iconography changes meaning from one
person to the next even in ones lifetime. One thing can be said about
it. Your bornWith clearVision is obscured by XYZ arising w/concepts
you(all of us) fight 2Keep alive but your gut knows & sees clearly
their folly{summoned to desk= explainSelfDecisions & comply2Power =
allFolly}. My guess is your left is Satan side[Christian?] Right side
is Giminy Cricket’s side. Summoned 2 the WH ultimate power but the
boss is a banker w/power to debate and lobby his position[selfFulfiled
Prophesy]. U intellectually abhor whatLobbying is doing 2ourCountry &
feelPowerless over the merits ofArguments even when U know who is in
the side of evil{your imagery & dream not mine} even when the whole
biz is clear 2ur gut. There is a wealth of info in that dream ..learn
2meditate 2stop doubting your…your “Blink”
be well and don’t sweat it ..please take my advise am not using it
right now :-D
redserpent

February 2, 2010 at 11:28 am
Reply
We need Mr. Hoenig AT THE FED. He is one of the FEW sane voices left
there. My opinion is BERNANKE wants to get rid of him (by sending him
to the treasury) so that he can PRINT MORE.

SEND BERNANKE TO THE TREASURY INSTEAD.
ReturnFreeRisk

February 2, 2010 at 11:29 am
Reply
Send Bernanke to Zimbabwe. He would be a real voice of restraint on
printing money – compared to Mugabe. Or to Venezualia! Another place
he would be a real influence for restraint in hyper-inflationary
monetary policy. In fact, let’s be selfish and say ‘Anywhere but
America’.
dlr

February 3, 2010 at 4:01 am
Reply
I don’t want a REPUBLICAN anywhere near that position.
Paul

February 2, 2010 at 11:33 am
Reply
Would Professor Johnson take the job?
SDProg

February 2, 2010 at 11:37 am
Reply
Mohamed el Erian of PIMCO would be the ideal guy. Obama, if he is to
replace Geithner, should take someone from the private sector, since
none of his econ team is from outside govt, creating distrust on wall
st. That said, I’m sick of the finger pointing at Geithner by pols who
helped drive the economy off the cliff while Tim, Paulson and Bernanke
helped save it and would’ve done better had their hands not been tied
trying to keep Lehman from collapsing.
jc

February 2, 2010 at 11:43 am
Reply
While I agree, his name alone would invoke a racist backlash. An
atheist would have a better chance at being elected president that el
Erian would at getting confirmed.
redleg

February 2, 2010 at 1:20 pm
Reply
Watch Summer’s interview on Charlie Rose from the Davos meeting.
He rarely made eye contact, pontificated, blustered, and bloviated.
tfitz

February 2, 2010 at 11:45 am
Reply
On the subject of Hoenig for Treasury, he spoke in NYC several months
ago. He comes out of enforcement. He believes in the RTC approach to
troubled banks, i.e., take them over, clean house of the managers who
created the problem, write down bad debt to current value, and turn
them back to the private sector. He spoke out strongly against the
current approach.

Hoenig seemed concrete, practical and experienced in bank workouts. He
might make an excellent “tough cop” contrast to Elizabeth Warren’s
“reasonable professor.”
Peter van Schaick

February 2, 2010 at 11:49 am
Reply
Hoenig is, and Geithner was, a Fed President, not a governor. The
equivalency between the two men is a false one. Geithner ran the
Regional Bank that impliments Fed policy. He was at the center of the
crisis (take this to mean whatever you like) and also at the center of
the Asian Crisis (this, too), while Hoenig was merely close to the
center.

The fact that Hoenig shares some views with Simon is not, in itself,
reason to put him at Treasury, but that is more or less the rationale
offered here. Running a Regional Fed Bank ain’t nothing, but it is far
from a demonstration of the ability to run the Treasury. And running
the Treasury is one of the bigger parts of the job. By the time Hoenig
could be confirmed, even if nominated today, the momentum behind
various policies would be difficult to change, so his own policy views
would either validate those of the administration – so would be the
reason he would be chosen – or would mostly have to give way to
policies in place. So we need a guy who gives good advice, no matter
what the policy choice, he will make it less bad than it could be, and
we need a guy who can run a big department, and we need a guy who
doesn’t make a whole bunch of ideosyncratic mistakes. Nothing here
suggests he is that guy. He may well be. I’ve got nothing against him.
But the case made here is pretty flaccid.
kharris

February 2, 2010 at 11:56 am
Reply
Why is hearsay being bandied about as if it was hard news? Is this the
standard of this publication, eh?
Jawaralal F. Schwartz

February 2, 2010 at 12:29 pm
Reply
Bernacke and Geithner and Summers are just the guys we know about who
happened to work in public office. The real criminals are on Wall
Street and the sooner we shut down the packaged asset trading and make
give all stock holders and vote in the leadership and operation of the
companies they own, the thievery will continue.
Andy

February 2, 2010 at 12:35 pm
Reply
Can we ask Summers to give back the millions he earned in ’speech’
fees from said Wall Street criminals?
1 Kings

February 2, 2010 at 1:11 pm
Reply
Middle and poor Americans did not get America in the Dilemma she now
find her self in
It did not happen over night,
It was not by a specific party
The problem cannot be fixed in one year.
America has a culture problem that first has to be addressed
cuniverse

February 2, 2010 at 12:38 pm
Reply
Not caused by a specific party? That’s very diplomatic of you, but I
must disagree. Take a look at the economy foisted upon us by Reagan,
slowed a bit by Bush Sr. and then turned around during Clinton’s
administration. Take a look at the projected Budget surplus we were
looking at in 2001 compared to the projected 10 deficit Obama
inherited. I think that at no other time in American history has the
cause and effect of supply-side economics vaunted by the GOP been more
apparent.

The rest of your comment I concur with 100%. I was going to say 100
and 10% but I was afraid that might make you doubt by ability to
analyze the economy.
theconservativelie

February 3, 2010 at 5:45 pm
Reply
Dr. Elizabeth Warran, Dr. R. Reisch or … someone NOT necessary from
FED RESERVE… why?

They could have controlled better before the fall out of WS…
Munki

February 3, 2010 at 4:30 am
Reply
.
Ashley

February 3, 2010 at 5:18 pm
Reply

All contents are copyright of the authors. The Baseline Scenario is a
trademark of the authors.
.Blog at WordPress.com. — Journalist theme by Lucian E. Marin

http://baselinescenario.com/2010/02/01/tom-hoenig-for-treasury/

...and I am Sid Harth

[Sid Harth]

K Subrahmanyam: Ying and Yang in the US-China relationship

With the global economic recovery underway, Obama may have decided to
demonstrate that the US is still the world’s pre-eminent military
power

K Subrahmanyam / February 07, 2010, 0:45 IST

All those strategic pundits who concluded that the international
system had become G-2 — with US and China sharing a cosy duopoly —
would have had a rude awakening with the notification of the proposed
$6.4 billion US arms sales to Taiwan and China’s predictable reaction
to it.

The Chinese point out that this sale is a clear violation of various
joint communiqués in which the US pledged to respect China’s core
interests. According to the Chinese, this sale comes at a time when
the cross-straits relationship had started to walk on a path of
positive interaction. The official Chinese News Agency Xinhua warned,
“The age of our times needs healthy, stable and developing China-US
ties. Defying such historical trend and making such a wrong decision
that undermines China’s core interests and the overall situation of
China-US cooperation can’t be viewed as a wise action by any
responsible government, no matter if it was influenced by residue of
the Cold War mentality or the pressure of certain special interest.
China has recently made several solemn representations to the American
government on the arms sale issue, asking the US to fully assess the
serious damage caused by the sale and take China’s concerns seriously
and stop the transaction. If the US continues to ignore the solemn
position made by China and is determined to make the wrong decision to
sell arms to Taiwan, it ought to take all responsibilities for any
serious consequences caused by such a decision.”

Following this warning, China is postponing bilateral military
programmes and security talks and will sanction certain US companies.
The company which is likely to be affected most is Boeing, which sells
civil aircraft to China. Even in that case the loss will be minimal,
since China has already started constructing civil passenger airliners
under licence from the Airbus consortium. While the Taiwanese
President, who has improved relations with China significantly in
recent months, said that the sale will increase Taiwan’s confidence
and sense of security and will enable it to further stabilise and
improve its relations with China, Beijing is understandably angry.

Responding to the Chinese reaction, the US National Security Adviser,
General James Jones, said, relations with China are of the “utmost
importance” and a “very, very high priority” for the United States.
“We all recognise that there are certain things that our countries
will do periodically that may not make everybody completely happy, but
we are bent on a new relationship with China as a rising power in the
world and influence on a variety of issues that go beyond arms sales
and go beyond military confrontation.”

US media has reported that the timing of the arms sale was deliberate
and that it comes along with the strong defence of the US Secretary of
State on Internet freedom and speculation in Washington that the
postponed meeting of the Dalai Lama with Obama may now be scheduled.
The Chinese criticism reveals that the sale announcement was not a
surprise to them. After they made several representations the decision
was taken to override Chinese objections.

Though the US subscribes to the ‘one-China thesis’, it has made it
clear that it will oppose use of force to integrate Taiwan with China.
Hardly 10 weeks ago, following Obama’s carefully choreographed visit
to Beijing, there was world-wide speculation that the US was prepared
to coexist with China in a duopolistic arrangement, and there were
predictions that Asian countries would be adjusting themselves to this
reality.

In India this view had wide support. It was also felt that Obama, with
his commitment to multilateralism, was not as tough as George Bush in
sustaining US pre-eminence. It would appear that Obama has finally
decided to communicate to the world he is not going to surrender US
pre-eminence.

With the global economic recovery now underway and with the US
acquiring a good sense of Chinese capability to hurt the US
economically, Obama may have decided to demonstrate that the US still
retains the capability to act and has greater manouevrability in the
international system as a pre-eminent military power. President Obama
appears to have chosen China’s backyard to demonstrate it. Perhaps
there are messages to Japan, South Korea and Asean nations too. From
the American NSA’s comment it would appear that China's possible
adverse reactions have been taken into account and this US move is not
likely to come in the way of continuing US-Chinese economic
cooperation.

At this stage it will be useful to recall the views of candidate Obama
on China. During his campaign he once said: “Having China as a banker
is not good for the US economy, it is not good for US global
leadership. It is not good for US national security……History teaches
us for a nation to remain a pre-eminent military power, it must remain
the pre-eminent economic power.”

Obama may have discovered by now that having invested so much in the
US, Beijing has become a stakeholder in the prosperity and growth of
the US. While China’s growth is symbiotically linked with that of US,
the latter is in a position to step up its exports and growth without
linking it up with China, especially in respect of new sources of
clean energy generation and energy-efficient and energy-conserving new
products.

These developments underscore our own need for developing adequate
intelligence assessment capabilities and avoiding the tendency to draw
immediate conclusions based on individual events. In international
politics, as Bhishma advised the Pandavas at the end of the
Mahabharata war, for kings (read states in today’s context) there are
no friends and no enemies. Only circumstances make enemies and
friends.

In the wake of the financial crisis it became imperative for the US
and China to cooperate in their mutual interest. There are other
issues in which their interests conflict. There may be circumstances
in which the compulsions of mutuality of interests may subsume other
conflicts of interests, and other times when it may not. By making
assumptions that nations’ relationships with other nations will be
fixed and unaltered, we will be foregoing opportunities which are open
to us to exploit.

http://www.business-standard.com/india/news/k-subrahmanyam-yingyang-inus-china-relationship/384818/

Here's a Fair Way to Balance the U.S. Budget
By JOSEPH LAZZARO
Posted 12:30 PM 02/06/10

President Barack Obama releases his proposed $3.8 trillion federal
budget for fiscal year 2011 and immediately the hue and cry is one of
"$1 trillion structural deficits," "a nation going broke" and "an
unserviceable debt."

One trillion dollar structural deficits? How's that again? A nation
going broke? Are we talking about Argentina in the 1970s here? Or cash-
strapped Russia in the early 1990s? Or the United States in the
digital age? Has the United States really outstripped its resources?
And is the federal budget -- including defense spending -- an
immutable document whose priorities represent an ever-lasting,
ultimate and objective moral norm, from a fiscal standpoint?

Federal Budget Is A Political Act

Well, as anyone who's worked inside the beltway knows, most of the
budget -- including the U.S. Defense Department's budget -- is a
political document. Hence, analysis of it can contain more than an
ounce of subjectivity, rhetoric and hyperbolic posturing, to put it
diplomatically. In other words, some interest groups will never look
at the budget in an even light -- and will focus only on ways to keep
their "cut of the pie." And their skewed analysis often reflects it.

But for those citizens who are willing to look at the budget in a fair
and balanced way, here's the fiscal low-down. Most of the projected
$1.6 trillion fiscal 2011 deficit stems from:

1. Irregular expenses, or things that don't normally occur
2. The revenue lost as a result of the Bush 2001 income tax cut and
another tax cut in 2003 and
3. The recession/economic downturn, which has decreased federal
receipts. Those irregular expenses are the Iraq and Afghanistan wars,
support from mortgage lenders Fannie and Freddie support, the bailout
and the 2009 fiscal stimulus package

Quick Budget Reduction Possible

Take all those irregular expenses out of the budget and add back the
revenue from the 2001 Bush income tax cut only -- not the 2003 tax cut
-- and the deficit totals about $500 billion to $550 billion.

To give you an idea how quickly the budget deficit can be reduced, the
2001 Bush income tax cut alone increased the annual deficit by about
$400 billion. The New York Times (NYT) offered an excellent chart of
the Bush administration's red ink. When President Bill Clinton left
office in 2001, the federal budget was in surplus. That's correct, a
surplus.

Now, due to the recession, letting the 2001 tax cuts expire on upper
income groups, but not the middle class, would not generate 100% of
the $400 billion lost annually as a result of the Bush income tax cut.
But it would generate most of it. Perhaps as much as $300 billion
would be retrieved. Budget deficit after the change: $1.3 trillion.

Winding Down The Iraq War

Next, the end of the TARP (Troubled Asset Relief Program) would
produce a $210 billion savings and a wind-down of the Iraq War would
result in a $60 billion savings. Combine that with the end of 2009
fiscal stimulus package spending ($100 billion) and that would
altogether subtract another $370 billion in irregular spending. Budget
deficit after the change: $930 billion $930.

Next, add back federal tax revenue that's likely to increase, assuming
a normal, minimum, 3.0% U.S. GDP growth rate per year economic
expansion. Estimated increase in federal revenue (conservative
estimate): $100 billion per year.

Also, subtract about $50 billion per year from the deficit as a result
of reduced interest payments on the debt, as the financial markets
realize the U.S. is serious about deficit elimination, and interest
rates decline. Budget deficit after the changes: $780 billion.

Health Reform Is a Balanced-Budget Requirement

That leaves a $780 billion deficit to be eliminated via cuts in
discretionary civilian programs and cuts in entitlements Social
Security, Medicare, Medicaid and the roughly $700 billion U.S.
Department of Defense budget, assuming the end of the Iraq war.

To be sure, there is a problem with Medicare and Medicaid health-care
costs: As the health-care reform debate demonstrated, they spiral out
of control beginning in about 2015 to 2016. But that's why President
Obama and many congressional Democrats, among others, pushed so hard
for health care reform.

True, the health care reform debate is largely over. But the need for
health-care reform is not. If you doubt this, check out the CBO's
evaluation of health care costs. However, if health care reform is
passed, subtract conservatively another $50 billion per year via
reduced federal health care outlays. Budget deficit after the change:
$730 billion.

Finding Big Savings

Then, much like the bipartisan commission that successfully closed
unneeded military bases in a fair, nonpartisan way, a bipartisan
fiscal commission, already proposed by President Obama, would have the
task of finding the aforementioned cuts in Social Security, the
Pentagon and other federal programs. It would also have the task of
recommending tax increases that are fair, to close the remaining
budget gap.

With any luck, the commission, assuming $300 billion in spending cuts
and $300 billion in tax increases, should be able to get the deficit
by 2020 down to $130 billion.

The federal government would then be left with a $130 billion budget
deficit in a projected roughly $4.8 trillion to $4.9 trillion budget
2020.

And as most investors know, a few years of "Roaring '90s" style U.S.
GDP growth can take care of that remaining $130 billion deficit,
pronto.

Financial Editor Joseph Lazzaro is writing a book on the U.S.
presidency and the U.S. economy.

http://www.dailyfinance.com/story/heres-a-fair-way-to-balance-the-u-s-budget/19347232/

Mauldin: A Bubble in Search of a Pin
By Paul Kedrosky · Saturday, February 6, 2010 ·
John Mauldin’s latest:

Should Greenspan and Bernanke have seen the bubble in housing and
other assets and acted, or should we accept their defense that you
can't know whether there is a bubble until after the fact? We will
look at research that suggests they should have known, and, at the
least, policy makers should no longer be allowed to say, "How could I
have known?"

Of course, the employment numbers came out this morning, and the
results are mixed; but that is better than they have been for the past
two years. We dig into the numbers to see what they are really saying.
And finally, we examine why the markets are so volatile. Is it just
Greece, or is there more? There's a lot of very interesting, and
important, material to cover.

…January employment numbers are characteristically volatile, as the
birth/death ratio numbers are typically the largest of the year. This
month the birth/death model subtracted (rather than added) 427,000
jobs (yes, I wrote that correctly). This is a very large "adjustment"
month, and the volatility gets smoothed over in the seasonal
adjustments. It is part and parcel of the process, as making estimates
about how many new businesses are formed or die is extraordinarily
difficult at turning points in the economy.

As an acknowledgment of that, the employment level for March 2009 was
revised down by 930,000 jobs, and by December it was a total of almost
1.4 million extra jobs lost. That means that the Bureau of Labor
Statistics overestimated the number of new jobs significantly.
December's job loss was really 150,000, not the 85,000 originally
reported. How would the markets have reacted to a number that large?

January saw a slightly larger than estimated loss of 22,000 jobs,
which would have been 53,000 without new federal employees, 9,000 of
whom were hired to perform the census. (By the way, federal employment
is absolutely exploding!)

Now, the somewhat good news. I have been writing about how the
household survey has been much weaker for almost two years than the
establishment survey. For instance, the total number of unemployed
rose by 589,000 in December, while the number of people not classified
as looking for work rose by 843,000. No matter how you spin it, those
were very ugly numbers.

This month the household survey showed the largest one-month
turnaround that I could find. As The Liscio Report noted:

"Adjusting for the changes in the population controls, total household
employment rose by 784,000 - and when further adjusted to match the
payroll concept, employment was up 841,000. Moves of this magnitude
(regardless of sign) are unusual, but not unknown - and frequently
undone in subsequent months. The less volatile ratios were also up,
with the participation rate up 0.1 point, and the employment/
population ratio rose a nice 0.2 point, its first increase since last
April. While it's too early to say whether this strength in the
household survey is a harbinger of an upturn that will soon show up in
payrolls, it's something to be filed under 'tentatively encouraging.'"

The work-week hours rose slightly. Income growth was better than it
has been. Temporary workers rose, which is typically a harbinger of an
increase in full-time employment. The number of people working part-
time for economic reasons plummeted by 849,000.

And finally, the unemployment rate fell 0.3% to 9.7%. This of course
means that more people are dropping out of the labor pool, and it also
means they will at some point come back.

On the negative side, a loss of 22,000 jobs is nowhere close to the
100,000 new jobs that are needed just to hold unemployment steady. 41%
of those unemployed have been so for over 6 months.

And quoting David Rosenberg:

"While there will be many economists touting today's report as some
inflection point, and it could well be argued that we are entering
some sort of healing phase in the jobs market just by mere virtue of
inertia, the reality is that the level of employment today, at 129.5
million, is the exact same level it was in 1999. And, during this 11-
year span of Japanese-like labour market stagnation, the working-age
population has risen 29 million. Contemplate that for a moment; fully
29 million people competing for the same number of jobs that existed
more than a decade ago. That sounds like pretty deflationary stuff
from our standpoint.

"Not only that, but consideration must be taken that in 2009, we had a
zero policy rate, a $2.2 trillion Fed balance sheet and an epic 10%
deficit-to-GDP ratio. You could not have asked for more government
stimulus. Yet employment tumbled nearly 5 million in 2009."

Finally, a very sad chart, courtesy of David. Those in the 25-54 year-
old male category have seen their total number of jobs fall back to
the level it was in 1996. Fourteen years later, and the "breadwinners"
who are supposedly in their prime have seen an almost 10% drop in
employment.

As noted above, January employment numbers are very volatile, and are
likely to be adjusted either up or down by a lot in coming months. But
this report was not the disaster of December. It still shows a very
weak economy that certainly does not need a large tax hike next year.
I hope we start seeing some positive numbers soon, but I am not
optimistic that we are going to see the 200,000-plus new jobs per
month we need to really start denting the unemployment numbers, for
some time. Not when the National Federation of Independent Business
says 71% of small businesses do not plan to hire this year.

The Fed is taking away quantitative easing. Stimulus spending is
exiting in the last half of the year. States and communities are
having to either raise taxes or cut spending by $350 billion! I heard
on the radio coming back from the gym (I think it was my friend Steve
Liesman on CNBC) that there are now 55,000 fewer teachers than a few
years ago.

And again from the NFIB, small businesses see very tight credit
conditions, which makes it hard for them to expand (see chart below).
The headlines this week from the Fed banking survey said that banks
were prone to be less tight, but the NFIB writers went deep into the
report. What they found is that very large banks are willing to be
less tight in their lending standards. Smaller banks were in fact not
as easy. Loan demand is falling. Consumer credit actually declined
slightly in December, after plunging in November. If you can't count
on Americans to buy during Christmas, the world is in fact moving to
the New Frugal.

All this is not the stuff that robust recoveries are made of. We drift
back into Muddle Through the last half of the year, I think. And if
Congress does not act to postpone or mitigate the enormous tax
increases due in 2011, we slip back into recession. It will be a
policy error of major magnitude to raise taxes with 10% unemployment
and a weak economy.

A Bubble in Search of a Pin

We are going to once again return to the book highlighted the last few
weeks, This Time Is Different, by Carmen M. Reinhart and Kenneth
Rogoff. This is a book you should buy and read, especially the last
4-5 chapters, and try to get your Congressman to read it as well, so
he or she can see what happens to countries that run up their debt. It
makes no difference if it is small or large, the end result is the
same.

Last week we looked at the role of confidence in allowing governments
to borrow money. This week we ask whether Greenspan and Bernanke,
along with the entire Fed, should have been able to determine whether
a bubble was building in the US economy and lean against it,
preventing the debacle we are now in. Reinhart and Rogoff gently come
down on the side of those who think they should have, and that we need
to implement changes in our institutions. Others, as we will see, are
not so gentle. Let's look at a few selected paragraphs I pulled off my
Kindle (all emphasis mine).

"As we will show, the outsized U.S. borrowing from abroad that
occurred prior to the crisis (manifested in a sequence of gaping
current account and trade balance deficits) was hardly the only
warning signal. In fact, the U.S. economy, at the epicenter of the
crisis, showed many other signs of being on the brink of a deep
financial crisis. Other measures such as asset price inflation, most
notably in the real estate sector, rising household leverage, and the
slowing output - standard leading indicators of financial crises - all
revealed worrisome symptoms. Indeed, from a purely quantitative
perspective, the run-up to the U.S. financial crisis showed all the
signs of an accident waiting to happen. Of course, the United States
was hardly alone in showing classic warning signs of a financial
crisis, with Great Britain, Spain, and Ireland, among other countries,
experiencing many of the same symptoms.

"... On the one hand, the Federal Reserve's logic for ignoring housing
prices was grounded in the perfectly sensible proposition that the
private sector can judge equilibrium housing prices (or equity prices)
at least as well as any government bureaucrat. On the other hand, it
might have paid more attention to the fact that the rise in asset
prices was being fueled by a relentless increase in the ratio of
household debt to GDP, against a backdrop of record lows in the
personal saving rate. This ratio, which had been roughly stable at
close to 80 percent of personal income until 1993, had risen to 120
percent in 2003 and to nearly 130 percent by mid-2006. Empirical work
by Bordo and Jeanne and the Bank for International Settlements
suggested that when housing booms are accompanied by sharp rises in
debt, the risk of a crisis is significantly elevated. Although this
work was not necessarily definitive, it certainly raised questions
about the Federal Reserve's policy of benign neglect.

"The U.S. conceit that its financial and regulatory system could
withstand massive capital inflows on a sustained basis without any
problems arguably laid the foundations for the global financial crisis
of the late 2000s. The thinking that "this time is different" -
because this time the U.S. had a superior system - once again proved
false. Outsized financial market returns were in fact greatly
exaggerated by capital inflows, just as would be the case in emerging
markets. What could in retrospect be recognized as huge regulatory
mistakes, including the deregulation of the subprime mortgage market
and the 2004 decision of the Securities and Exchange Commission to
allow investment banks to triple their leverage ratios (that is, the
ratio measuring the amount of risk to capital), appeared benign at the
time. Capital inflows pushed up borrowing and asset prices while
reducing spreads on all sorts of risky assets, leading the
International Monetary Fund to conclude in April 2007, in its twice-
annual World Economic Outlook, that risks to the global economy had
become extremely low and that, for the moment, there were no great
worries. When the international agency charged with being the global
watchdog declares that there are no risks, there is no surer sign that
this time is different. [By that they mean that the attitude of the
market in general and central bankers in particular was that "this
time is different" and so we did not need to worry about the warning
signs. The entire point of the book is that it is never different. We
just somehow believe we are in a special situation.]

"... We have focused on macroeconomic issues, but many problems were
hidden in the 'plumbing' of the financial markets, as has become
painfully evident since the beginning of the crisis. Some of these
problems might have taken years to address. Above all, the huge run-up
in housing prices - over 100 percent nationally over five years -
should have been an alarm, especially fueled as it was by rising
leverage. At the beginning of 2008, the total value of mortgages in
the United States was approximately 90 percent of GDP. Policy makers
should have decided several years prior to the crisis to deliberately
take some steam out of the system. Unfortunately, efforts to maintain
growth and prevent significant sharp stock market declines had the
effect of taking the safety valve off the pressure cooker.

"... The signals approach (or most alternative methods) will not
pinpoint the exact date on which a bubble will burst or provide an
obvious indication of the severity of the looming crisis. What this
systematic exercise can deliver is valuable information as to whether
an economy is showing one or more of the classic symptoms that emerge
before a severe financial illness develops. The most significant
hurdle in establishing an effective and credible early warning system,
however, is not the design of a systematic framework that is capable
of producing relatively reliable signals of distress from the various
indicators in a timely manner. The greatest barrier to success is the
well-entrenched tendency of policy makers and market participants to
treat the signals as irrelevant archaic residuals of an outdated
framework, assuming that old rules of valuation no longer apply. If
the past we have studied in this book is any guide, these signals will
be dismissed more often that not. That is why we also need to think
about improving institutions.

"... Second, policy makers must recognize that banking crises tend to
be protracted affairs. Some crisis episodes (such as those of Japan in
1992 and Spain in 1977) were stretched out even longer by the
authorities by a lengthy period of denial."

The evidence is there. So why did the Fed miss it?

A more pointed critique is leveled at the Fed and Greenspan, and at
Bernanke in particular, by Andrew Smithers in his powerful book (now
updated) Wall Street Revalued: Imperfect Markets and Inept Central
Bankers. The foreword is by one of my favorite analysts, Jeremy
Grantham. This is on the top of my reading list for the coming week. I
am loving the first part, which ties nicely into the themes explored
by Reinhart and Rogoff.

The book is a withering critique of the Efficient Market Hypothesis
(EMH), among other economic theories. Smithers argues that because the
tenets of EMH are so ingrained, Greenspan and Bernanke could not
recognize the bubble, because they believed in the efficiency of
markets. "Dismissing financial crisis on the grounds that bubbles and
busts cannot take place because that would imply irrationality is to
ignore a condition for the sake of theory." Which they did.

As Grantham wrote in the foreword: "My own favorite illustration of
their views was Bernanke's comment in late 2006 at the height of a 3-
sigma (100-year) event in a US housing market that had no prior
housing bubbles: 'The US housing market merely reflects a strong US
economy." He was surrounded by statisticians and yet could not see the
data... His profound faith in market efficiency, and therefore a world
where bubbles could not exist, made it impossible for him to see what
was in front of his own eyes."

Reinhart and Rogoff show time and time again that bubbles always end
in tears. Markets and investors are in fact irrational. What kind of
Fed governor would it have taken to suggest that housing was in a
bubble and we were going to have to take steps to slow it down -
raising rates, analyzing securitization and ratings? It would have
taken one tough hombre. In fact, we had Greenspan, who encouraged the
unchecked expansion of the securitized derivatives market. And a
Congress that would not allow proper supervision of Fannie and Freddie
(which is going to cost US taxpayers on the order of $400 billion).
The list is long.

And Speaking of Bubbles

This week the turmoil that is Greece continues. One of my favorite
quotes comes from Donald Morris, writing in June of 1993 (hat tip to
Dennis Gartman):

"If all of the Greek islands were merged with the mainland, it would
be about the size of Alabama; there are 10 million Greeks - and
perhaps another 4 million living throughout the world, who still think
of themselves as Greek. They are, thanks to their history, magnificent
patriots and nationalists - and abominable citizens, who deeply
mistrust every government they've ever had. Essentially they are
fierce individualists, who mistrust not so much whatever government
happens to be in power as the very idea of government. The have almost
no sense of civic responsibility - Pericles complained about this at
length - and History has never given them much of a chance to work out
a stable system of government. Democracy, yes (the Greeks invented
it!!), but stability, no."

Have things changed? From here it does not seem so. Greece apparently
hid about 40 billion euros of debt from the public and EU governing
bodies. (If the government can hide that much, is it any wonder that
individual Greeks themselves can hide their income and pay so little
in actual taxes? They have made it an art form!) In response to just
the initial phase of belt tightening, unions are launching strikes and
protests. What will happen when it gets serious? Stratfor estimates
that Greek deficits may actually run as high as 15% of GDP rather than
"just" the 10% or so publicly revealed. That will require far more
than a little belt tightening.

Let's look at the record. Greece has been in default for 105 years out
of the last 200. They have never had a balanced budget, at least not
willingly.

The EU is backed into a corner. They have this treaty that says
governments will act in certain ways. Greece is flaunting that treaty.
Everyone acts as if Greece defaulting on its debt would be the end of
the EU. Will the EU force Greece to withdraw if they do not control
their budget? Upon reflection, I am not so sure.

Let's take that proposition to the US. What if Illinois defaulted on
its debt? Would we kick them out of the Union? Hardly. A default would
mean a severe loss of credit, a forced retrenching, and a severe
economic crisis in Illinois. The losses would be serious for banks and
investors. There would be negotiations on how to deal with the debt,
who gets a haircut on their bonds, what pension assets and expenses
would be cut, and so on. A crisis? Yes. End of the world? No.

So what if Greece does default? The banks and those who lent them the
money would take a loss of some amount. The cost of borrowing for
Greece would rise dramatically, if they could even get into the debt
market. If they actually cut their budgets enough to deal with the
deficit in a responsible way, it would mean, at best, a severe and
prolonged recession. If Stratfor is right about deficits reaching 15%
of GDP, it could mean a depression. They have no good choices.

It is doubtful that German and French voters will be happy with any
bailout using their tax money that does not impose serious cuts in
Greek budgets, with realistic controls as a condition for the bailout.
Can Greece live with that? We'll see.

(I am sure I have hundreds of Greek readers. I would love to hear from
you as to your views, from the inside.)

But is it so unthinkable that Greece could simply default and then be
forced by the market to get realistic about its deficits? The same
market forces that work in Illinois can work in Greece.

But if the EU does bail out Greece, what then of Ireland, which is
making the tough choices? Will Portugal be next? If Greece is allowed
to fail, or better, actually shows some fiscal discipline, that bodes
well for the EU in the long run. It will be a lesson that each nation
is responsible to maintain its own house.

The data presented by Reinhart and Rogoff show clearly that adding yet
more suffocating debt to a bloated debt crisis is not the solution. It
simply puts off the inevitable. Greece is an intractable problem. From
here it looks like default or a very serious recession, with large
unemployment numbers.

But in the meantime the Greek situation is adding volatility to risk
markets of all types. I have written before of the connection between
what is called the euro-yen cross and risk markets all over the world.
Right now, you can borrow money very cheaply in dollars and yen (the
so-called carry trade). When investors want to reduce risk, they pay
back those loans, which has the result of increasing the value of the
dollar and the yen.

That is what is happening with the euro-yen cross as of this morning.
It is in the process of falling out of bed. And so are risk markets.
Markets do not like uncertainty. And Greece and Portugal and Spain are
uncertainty in spades. If Greece defaults, who owns the debt? Which
banks? My bank? Will they call my loan? This happened in 2008 a lot!
Can it happen again? We still have banks all over the world that are
too big too fail. Credit default swaps are not on an exchange (because
to do that would make them less profitable for the investment banks
that sell them, and thus the lobbyists have convinced Congress to
ignore them).

Are we at the place where we can think the unthinkable? That sovereign
nations can in fact default? I think we see a de facto default by
Japan this decade.

Do not assume that we have weathered the storm. We may just be getting
ready for the next one.

http://paul.kedrosky.com/archives/2010/02/mauldin_a_bubbl.html

...and I am Sid Harth

[Sid Harth]

Bloomberg

G-7 Vows to Keep Stimulus at Arctic Talks Even as Deficits Rise
February 06, 2010, 03:37 PM EST

By Simon Kennedy and Sandrine Rastello

Feb. 6 (Bloomberg) -- Group of Seven finance ministers promised to
maintain the flow of stimulus into their economies even as investors
intensify their focus on mounting budget deficits.

“We all committed to maintaining the support for our economies until
we make sure we have the recovery established,” U.K. Chancellor of the
Exchequer Alistair Darling told reporters today after a meeting of G-7
counterparts and central bankers in Iqaluit, Canada.

Governments face a growing dilemma as they seek to fortify recoveries
from last year’s recession at a time when rising sovereign debt
burdens are being punished by investors and threaten to hobble future
expansion. The MSCI World Index of stocks fell to its lowest since
October this week amid worries that Greece and some other European
nations may default.

“They are running a gauntlet, hemmed in between debt crisis on the one
side and a double-dip recession on the other,” said T.J. Marta, chief
market strategist at Marta On The Markets LLC, a financial-research
firm in Scotch Plains, New Jersey.

Greece

Greece is struggling to persuade financial markets it can restrain the
European Union’s largest budget shortfall without outside assistance,
while borrowing costs are also rising for Portugal and Spain. Credit-
default swaps on the debt of all three countries rose to record highs
yesterday.

European Central Bank President Jean-Claude Trichet told reporters in
Iqaluit that the bank is sure Greece will cut its deficit below the
European Union’s limit of 3 percent of gross domestic product by 2012
from 12.7 percent. “We expect and are confident that the Greek
government will take all decisions to reach that goal,” he said.

Deutsche Bank AG yesterday warned that the increase in the cost of
insuring against default the debt of the peripheral European nations
may be a “dress rehearsal” for the U.S. and U.K., whose own budgets
deteriorated during the financial crisis and recession.

The G-7 officials, who oversee about half of the world economy, are
betting that spending now will generate enough economic growth to help
erode their fiscal imbalances and make it easier for them to pull back
later.

Rising Debt Levels

With the International Monetary Fund calculating debt in the advanced
Group of 20 economies will reach 118 percent of gross domestic product
in 2014, up from about 80 percent before the crisis, some G-7 nations
are attracting the ire of investors and credit rating companies.

“The global economic situation has of course improved,” Flaherty said.
“We need to continue to deliver the stimulus to which we are mutually
committed and begin looking at exit strategies to move to a more
sustainable fiscal track consistent with strategic recovery.”

Standard & Poor’s last month cut the outlook for its sovereign credit
rating of Japan, whose debt burden is the biggest in the
industrialized world and nearing twice the size of its economy.
Moody’s Investors Service Inc. said on Feb. 2 that the U.S.’s Aaa bond
rating will come under pressure unless additional measures are taken
to reduce deficits.

Nassim Nicholas Taleb, author of “The Black Swan” and a principal at
Universal Investments LP in Santa Monica, California, said Feb. 4 that
“every single human being” should bet U.S. Treasury bonds will
decline, while Pacific Investment Management Co. calls U.K. government
bonds “a must to avoid.”

Acknowledging the risks, a document drawn up by Canadian officials for
discussion said G-7 members should set “clear, credible and
consistent” plans to strengthen their budgets.

The G-7 officials met 195 miles south of the Arctic Circle in a former
whaling and fur-trading outpost that is now the capital of Canada’s
northernmost territory, Nunavut.

--With assistance from Gonzalo Vina, Theo Argitis, Toru Fujioka,
Sandrine Rastello, Mark Deen and Rebecca Christie in Iqaluit. Editors:
Andrew Barden, Paul Badertscher

To contact the reporters on this story: Simon Kennedy in Iqaluit at
***@bloomberg.net

To contact the editors responsible for this story: John Fraher at
[phone] or ***@bloomberg.net; Andrew J. Barden at
[phone] or ***@bloomberg.net

http://www.businessweek.com/news/2010-02-06/g-7-pledges-to-keep-stimulus-even-amid-budget-stress-update1-.html

Public apology part of business culture in Japan
By Peter Rowe, UNION-TRIBUNE STAFF WRITER

Saturday, February 6, 2010 at 2:34 a.m.

The world knows Toyota cars.

The world knows Toyota cars have experienced a rash of mechanical
failures — more than 9 million of these vehicles have been recalled
across five continents.

But much of the world didn’t know what to make of yesterday’s news
conference at Toyota’s Nagoya headquarters. President Akio Toyoda,
grandson of the corporation’s founder, bowed low and apologized.

“I deeply regret that I caused concern among so many people,” he said.
“We will do our utmost to regain the trust of our customers.”

Trading on a reputation for quality and reliability, Toyota had been
one of the global economy’s winners — until malfunctioning
accelerators and other mechanical flaws led to a series of accidents,
including a fiery crash in Santee in August that killed a California
Highway Patrol officer and three family members.

This week, as its stock slid and its workings were scrutinized by U.S.
congressional investigators, Toyota revealed new concerns over faulty
brakes in its 2010 Prius. As the crisis mounted, Toyoda did what
Japanese corporate leaders usually do.

He apologized.

“The public apology is a part of how business is done in Japan,” said
Ulrike Schaede, a professor of Japanese business at the University of
California San Diego. “But it doesn’t come easy. People don’t
apologize for just anything, right and left.”

Still, this is an odd sight for Americans more accustomed to seeing
corporate chieftains evading rather than apologizing.

“The Japanese culture is more conducive to the concept of apology than
Western culture has become, especially in recent years,” said Jay
Scovie, a spokesman for the North American division of Kyocera, a
Japanese manufacturer of industrial ceramics. “The Japanese people
have an expectation that a leader is personally responsible.”

Moreover, American tycoons worry that any apology will be seen as an
admission of guilt — and an invitation to a lawsuit. In Japan,
executives can ritually abase themselves without fear of going to
court.

“The legal systems in Japan and the United States are so different,”
Schaede said.

If these apologies are peculiarly Japanese, Toyota is well-versed in
this custom. Two years ago, Toyoda’s predecessor apologized for
quality defects. Last year, Toyoda himself issued an apology when CHP
Officer Mark Saylor, his wife, daughter and brother-in-law died after
the accelerator jammed in their Lexus.

But if apology follows apology, yet serious design flaws still dog the
automaker, why should anyone trust Toyoda’s pledges now?

One reason, Schaede noted: This crisis strikes at Toyoda’s personal as
well as professional honor.

“He’s the grandson of the founder, and that’s why his apology is so
genuine,” she said. “It’s the family name. He will give this 150
percent or more.”

Japanese observers argue that the stakes are higher than the fate of
one family or company, even one as wealthy as Toyota. In the English-
language edition of today’s Yomiuri, Japan’s largest newspaper, an
editorial blasts the company for trusting its technology more than its
complaining customers.

“Failure to properly deal with the current fiasco could deal a blow to
the international trust in Japan’s manufacturing technology,” the
editorial warned. “We hope Toyota humbly accepts the criticism leveled
against it and will do all it can to ensure the safety and high
quality of its vehicles.”

Before yesterday’s news conference, Tokyo reporters had been so
frustrated in their attempts to obtain a corporate statement that they
had nicknamed Toyoda “No-Show Akio.” Yesterday, they asked him if he
should have acted more quickly.

“I will do my best,” he replied.

But Schaede, author of a 2008 book on 21st-century Japanese business
culture, argued that Toyota wasn’t about to be rushed. Japanese
corporations prize consensus; it’s not unusual for a team of
executives to spend days crafting a mutually acceptable response to a
crisis.

Yesterday’s apology must have been only a first step, Schaede said.
Toyota can’t recover its reputation without taking further steps to
repair its current fleet and to prevent similar design flaws in future
cars.

She warned, “You can only apologize so often.” Even in Japan.

The New York Times contributed to this report.

Peter Rowe: [phone]; ***@uniontrib.com

http://www.signonsandiego.com/news/2010/feb/06/public-apology-part-business-culture-japan/

...and I am Sid Harth

[Sid Harth]

2010/01/29/
economy-grows-percent-th-quarter
Updated January 29, 2010

FOXNews.com

President Obama on Friday hailed a report showing the U.S. economy
grew faster than expected at the end of last year, calling it a "stark
improvement" compared to the economic decline last year.

President Obama on Friday hailed a report showing the U.S. economy
grew faster than expected at the end of last year, calling it a "stark
improvement" compared to the economic decline last year.

"This morning we received a report that affirms our progress and the
swift and aggressive actions that made it possible," he said during an
appearance at Chesapeake Machine Co. in Baltimore.

But the engine of that growth -- companies replenishing stockpiles --
is likely to weaken as consumers keep a lid on spending.

The 5.7 percent annual growth rate in the fourth quarter was the
fastest pace since 2003. The Commerce Department report Friday is the
strongest evidence to date that the worst recession since the 1930s
ended last year, though an academic panel that dates recessions has
yet to declare an end to it.

The White House immediately reacted with cautious praise.

"Today's GDP report is the most positive news to date on the economy,"
said White House economic adviser Christina Romer.

But she added, "As always, it is important not to read too much into a
single report, positive or negative. There will surely be bumps in the
road ahead, and we will need to continue to take responsible actions
to ensure that the recovery is as smooth and robust as possible."

The two straight quarters of growth followed a record four quarters of
decline. Still, the expansion in the fourth quarter was fueled by
companies refilling depleted stockpiles, a trend that will eventually
fade. Some economists worry that when that happens, the recovery could

Growth exceeded expectations mainly because business spending on
equipment and software jumped 13.3 percent -- much more than forecast.
It's the second quarter in a row that business spending has increased,
after six quarters of decline.

The report provided an upbeat end to an otherwise dismal year: The
nation's economy declined 2.4 percent in 2009, the largest drop since
1946. That's the first annual decline since 1991.

Still, economists expect growth to slow this year as companies finish
restocking inventories and as government stimulus efforts fade. Many
estimate the nation's gross domestic product will grow about 2.5
percent to 3 percent in the current quarter and about 2.5 percent or
below this year.

That won't be fast enough to reduce the unemployment rate, now 10
percent. Most analysts expect it to keep rising for several months and
remain close to 10 percent through the end of the year.

High unemployment is likely to keep consumers cautious about spending.
Without strong consumer spending, economists worry the recovery could
falter.

"That's why there's so much hand-wringing right now," said Brian
Bethune, chief U.S. financial economist for IHS Global Insight. "Can
the economy really sustain this? That's the big question mark sitting
out there."

Still, it's a "surprisingly good report," Bethune said, with several
factors contributing to growth, including a rapid rise in exports and
business investment.

About 60 percent of the fourth quarter's growth resulted from a sharp
slowdown in the reduction of inventories as firms began to rebuild
stockpiles depleted by the recession.

A shift in the so-called inventory cycle can make a big difference to
economic growth, even if overall spending by consumers and businesses
grows only modestly. That's because an increase in inventories, or
even just a much slower rate of decline, means that companies are
producing more goods to fill orders, rather than drawing on their
existing stockpiles.

Excluding inventory changes, the economy would have grown at a 2.2
percent clip, the government said. That's an improvement from 1.5
percent in the third quarter.

Besides business spending on equipment and software, also powering
growth in the October-December period was consumer spending, which
rose 2 percent.

A steep increase in exports also helped boost growth. The shipment of
goods overseas rose 18.1 percent, far outpacing a 10.5 percent rise in
imports.

Government spending was actually a slight drag on growth in the fourth
quarter: A small increase in federal spending was outweighed by a drop
in state and local spending.

The Associated Press contributed to this report.

http://www.foxnews.com/politics/2010/01/29/economy-grows-percent-th-quarter/

Bill Gates Says U.S. Economy Needs 'Years of Digging Out'

By: Scott Ferguson
2010-01-25

There are 60 user comments on this IT Management story.

Microsoft co-founder Bill Gates makes an appearance on ABC to talk
about the U.S. economy and his charitable works, telling viewers that
the economy needs several years to recover and that taxpayers can
expect to pay more in the coming months.

Former Microsoft CEO Bill Gates says the U.S. economy needs
considerable time to recover from the recent recession and that
taxpayers are going to have to shoulder much of that burden.

Gates, who remains chairman of Microsoft but spends most of his time
working with the Bill & Melinda Gates Foundation, spoke on the Jan. 25
edition of ABC's "Good Morning America." During the interview, Gates
said he generally supports the economic policies of President Obama
but that the country needs to prepare for several years of hardship
before the economy stabilizes.

"Without changes in taxes or entitlement policies, it won't get back
into balance," Gates said. "Taxes are going to have to go up and
entitlements are going to have to be moderated."

Although Gates talked about policies and programs that will have to be
modified to work within the new economic reality, he said Obama should
continue to focus the government's efforts on long-term goals, such as
improving education. Gates also encouraged the United States to
continue its financial aid to poor and developing countries, such as
Haiti.

Gates' TV interview comes just a few days before Obama is set to
deliver his first official State of the Union address. The
administration has already begun developing plans to further stimulate
the economy, including taxing major banks and financial institutions.
Gates said he supported this type of plan.

However, Gates did point out that government does not have all the
answers and noted that the U.S. recovery will be neither quick nor
painless.

"He inherited a very tough situation," Gates said. "The financial
markets were stabilized ... now we're having a slow recovery.
Everybody's frustrated by the pace of the recovery. When you have a
financial crisis like that, it's years of digging out."

Also on Jan. 25, the Bill & Melinda Gates Foundation released its
second annual letter, which restated the foundation's goals, such as
developing vaccines to fight disease in developing countries,
increasing agricultural productivity, and encouraging students and
educators both in the United States and overseas.

"Although innovation is unpredictable," Gates wrote, "there is a lot
that governments, private companies and foundations can do to
accelerate it. Rich governments need to spend more on research and
development, for instance, and we need better measurement systems in
health and education to determine what works."

As of September, the Bill & Melinda Gates Foundation had an endowment
of about $34 billion, according to the annual letter.

Gates has been re-engaging with the public. In just the past few days,
Gates restarted his Facebook page and launched his own Twitter feed.
In addition, he started a Website called Gates Notes, which looks at a
range of international issues.

Reader Comments: Bill Gates Says U.S. Economy Needs 'Years of
Digging Out'

A user comment on this article

Please read book ISBN: 1-4500-1343-0 There you will found how to make
100% of employment, therefore insurance? How make USA energy...
Posted At: 01-30-10
By: Michael Ioffe

Illegal immigration

Get rid of all the illegal immigration and we as a country will save 2
trillion a year. Who is going to pick our fruits and vegies. Easy. Low
crime...
Posted At: 01-29-10
By: Concerned

A user comment on this article

Bill Gates' "foundation" is a front group for eugenics and de-
population. Google "Bill Gates seed vault" for more fun from the new
world order papal...
Posted At: 01-28-10
By: Anonymous

Lower Std of Living?

If you read between the lines, what Mr. Gates is saying is that we
need to accept the reality of a lower standard of living. We lived on
credit for...
Posted At: 01-28-10
By: MidMgr

Very Meaningful Statements

Hi, You, really have very brilliant thoughts. But, we, most people in
india, are kept so busy in their daily needs (water, food, shelter,
kids...
Posted At: 01-28-10
By: Sanskar

Free MS development tools

http://www.microsoft.com/exPress/
Posted At: 01-27-10
By: Denver Dave

Maybe you don't know who Bill Gates is

Bill Gates is the founder and chairman of Microsoft corporation, the
second largest software company in the world (first is IBM). His
company has...
Posted At: 01-27-10
By: Denver Dave

http://www.eweek.com/c/a/IT-Management/Bill-Gates-Says-US-Economy-Needs-Years-of-Digging-Out-790492/

...and I am Sid Harth

[bademiyansubhanallah]

Arvind Subramanian: It is the poor who pay for the weak renminbi

The costs of China's low exchange rate policy are borne more by other
developing countries
Arvind Subramanian / February 7, 2010, 0:48 IST

China’s exchange rate policy has largely been viewed through the prism
of global imbalances. That has had three unfortunate consequences. It
has allowed China to deflect attention away from its policy. It has
obscured the real victims of this policy. And it has made political
resolution of this policy more difficult.

No sooner is China’s exchange rate policy criticised for creating
global imbalances, and hence contributing to the recent global
financial crisis, than the door is opened for China to muddy the
intellectual waters. Why single us out, the Chinese say? Why not the
other surplus-running countries such as Japan or Germany or the oil
exporters? And, in any case, countries on the other side of the
imbalance — namely, the large current account deficit-running
countries — should carry the greatest responsibility for pursuing
irresponsible macroeconomic and regulatory policies that led to
“excessive consumption”. This debate cannot be settled. But
inconclusiveness is just what China needs — and creates — to escape
scrutiny of its policies.

The second consequence of the global imbalance perspective is that it
has created an opposition between current account deficit and current
account surplus countries, which has become a slanging match between
the US and China. But an undervalued exchange rate is above all a
protectionist trade policy, because it is the combination of an import
tariff and an export subsidy. It follows therefore that the real
victims of this policy are other emerging market and developing
countries — because they compete more closely with China than the US
and Europe, whose source of comparative advantage is very different
from China’s. In fact, developing countries face two distinct costs
from China’s exchange rate policy.

In the short run, with capital pouring into emerging market countries,
their ability to respond to the threat of asset bubbles and
overheating is undermined. Emerging market countries such as Brazil,
India and South Korea are loath to allow their currencies to
appreciate — to damp overheating — when that of a major trade rival is
pegged to the dollar.

But the more serious and long-term cost is the loss in trade and
growth in poorer parts of the world. Dani Rodrik of Harvard University
estimates that China’s undervaluation has boosted its long-run growth
rate by more than 2 per cent by allowing greater output of tradable
goods, a sector that was the engine of growth and an escape route from
underdevelopment for postwar successes such as Japan, South Korea and
Taiwan.

Higher tradable goods production in China results in lower traded
goods production elsewhere in the developing world, entailing a growth
cost for these countries. Of course, some of these costs may have been
alleviated by China’s rapid growth and the attendant demand for other
countries’ goods. But China’s large current account surpluses suggest
that the alleviation is only partial.

These emerging market victims of China’s exchange rate policy have
remained silent because China is simply too big and powerful for them
to take on. And this despite the fact that disaffected constituencies
now encompass not just companies but also central bankers, who have
found macro-economic management constrained by renminbi policy.

Hence the third consequence. By default, it has fallen to the US to
carry the burden of seeking to change renminbi policy. But it cannot
succeed because China will not be seen as giving in to pressure from
its only rival for superpower status. Only a wider coalition,
comprising all countries affected by China’s undervalued exchange
rate, stands any chance of impressing upon China the consequences of
its policy and reminding it of its international responsibilities as a
large, systemically important trader.

It is time to move beyond the global imbalance perspective and see
China’s exchange rate policy for what it is: mercantilist trade
policy, whose costs are borne more by countries competing with China —
namely other developing and emerging market countries — than by rich
countries. The circle of countries taking a stand against China must
be widened beyond the US to ramp up the pressure on it to repudiate
its beggar-thy-neighbourism. But progress also requires that the
silent victims speak up. Emerging market and developing countries must
do a “Google” on China.

The writer is senior fellow at the Peterson Institute for
International Economics and Center for Global Development

http://www.business-standard.com/india/news/arvind-subramanian-it-ispoor-who-pay-forweak-renminbi/384819/

Is China’s Success at Neighbors' Expense? (by OilPrice)
Feb 06, 2010

Tim Knight

Slope Of Hope

(Note to Slopers: I know these essays can be long, but they can also
be quite interesting; I'll be chiming in during this weekend with my
thoughts about the market. Have a relaxing break! - Tim)

During the decade after the 1997 Asian financial crisis, China was
generally seen throughout East Asia as a friendly alternative power-
center to the American-led Washington-consensus that told countries in
trouble they had to force their banks to declare their bad loans and
clean up the political influence of big finance – commands which, of
course, the US completely ignored when its own banking & insurance
sectors went over the cliff in Black September 2008.

But in the last couple of years, some of China’s neighbors are
beginning to wonder if “friendly uncle” is more of a “roaring dragon.”
Concern is particularly acute among China’s economic partners to the
south.

After a decade of trade surpluses with Asean [ Association of South
East Asian Nations ] nations that ran as high as $20 billion, the
surplus through October totaled a bare $535 million, according to
Chinese customs figures, and appears headed toward a 10-year low. That
is prompting some rethinking of the conventional wisdom that China’s
rise is a windfall for the whole neighbourhood.

One immediate area of contention is the stability of China’s currency,
linked tightly as it is to the US dollar. This was greatly appreciated
by ASEAN countries in 1997, when the yuan / renminbi, appreciated
against their currencies along with the US dollar, allowing the prices
of their exports to remain relatively low vis-à-vis Chinese exports.

While it is ludicrous for Americans to complain about the relative
under-valuation of the yuan compared to the US dollar – Chinese and
American exports occupy completely different ends of the manufacturing
sector, whether in the US or third-country markets – the situation is
quite different for SE Asian countries, which DO compete directly with
China in both their home and third-party markets.

The result is the beginning of a round of so-called “competitive
devaluations,” in which governments rapidly decrease the relative
value of their currencies, in order to keep the prices of their
exports lower than those of competitors from other nations.

As a result, Indonesia, among others, is expressing considerable
unhappiness with a recently-concluded free-trade pact between the main
ASEAN countries and China.

Under strong pressure from industries as varied as steel and motorbike
makers, the Trade Ministry said last week that it would seek to
renegotiate some of the 350-odd tariff reductions that were envisioned
in the first year of the accord, set to take effect in January. …

“Not just the size, but the speed of China’s emerging power is really
unprecedented in the region,” [ Jong-Wha Lee, chief economist of the
Asian Development Bank] said. “So it creates a lot of issues — not
just trade and exchange-rate policies. But in the future, what will be
the role of China?”

Part of the problem for Indonesia and other low-cost / export-oriented
nations is that they are simply following in China’s footsteps in
pursuing that basic strategy for economic development – just as China
did with Japan and, later, South Korea.

However much the rest of the world may complain, there is no way China
is going to become a US-like “global consumer of last resort” in the
foreseeable future – such a transition is far from easy, as shown by
the brutal recent experience of South Korea, and Japan since the crash
of its [ commercial ] real estate market in 1989, from which it is
still recovering.

And even if they might want to change the structure of their economy –
which is understandably unclear – it would be awfully difficult, given
the existing set-up, since while the rest of the world is in
recession, China continues to undergo a prolonged boom.

Now, the reasons for China’s continuing economic success are not hard
to discern – and they have relatively little to do the value of the
yuan:
on the one hand, state control of the banks – which does have its down
sides, notably rampant corruption and often shoddy construction, on
which more below – nevertheless meant the Chinese stimulus program,
unlike America’s, was instituted quickly and thoroughly throughout
several sectors of the economy, acting just as intended; on the other,
as indicated by the complaints of Indonesia and other ASEAN nations
alluded to above, China has just about cornered the Wal-Mart / Target
end of the American market – the one sector of the US economy that is
definitely growing rapidly.

The result is a rapidly growing consumer market in China at the very
moment the US and European macro-economies are barely holding on, if
not caving in completely.

For more and more consumer goods, China is surpassing the United
States as the world’s biggest market — from cars to refrigerators to
washing machines, even desktop computers. …

Chinese households are crossing a series of income thresholds at which
cars and other big-ticket purchases become affordable …Retail sales
are growing 17 percent a year in China after adjusting for inflation,
almost twice as fast as the overall economy …At the same time, Chinese
banks are stepping up consumer lending. The proportion of car sales
financed with loans has doubled this year, to nearly 25 percent ...

Credit card spending rose 40 percent in the first nine months of the
year compared with the same period last year, yet China still has just
one credit card for every eight people, compared to two credit cards
for each American man, woman and child.

Now, it remains uncertain how long this consumer spending boom, as
there are understandable fears that low interest rates and easy credit
will end up creating the same disasters now afflicting the US and the
rest of the West. But some of these concerns are assuaged by the MUCH
lower unit prices for the same goods in China as compared to the US:

Total consumer spending in China is still less than a sixth of
American consumer spending at current prices and exchange rates. That
is mainly because China has relatively few restaurants, hotels and
other service businesses, even as sales of manufactured goods have
risen. The average price tags on most Chinese products are much lower
than in Western markets. For many products, including some in which
China leads in the sheer number of goods, the total dollar value of
sales in China is still smaller than in the United States

While the Chinese market is one-quarter larger in the number of cars
sold, the American market is still about two-thirds larger in dollar
terms. Similarly, the United States market for household appliances is
a third larger in dollars, even though the Chinese market is a third
larger in the number of appliances.

So while it might be understandable that some Americans believe China
is now economically more powerful than the US, it’s not true, and
won’t be so for quite a while, despite this sudden surge of Chinese
consumer spending – especially because all of this cash STILL is a
result of China’s dependence on the US import market.

Finally, if there IS a potential danger in Chinese “business culture,”
it might come more to the Chinese people themselves than either its SE
Asian neighbors or the US – namely, the potential dangers of its
“great leap forward” in the construction of civilian nuclear energy
plants.

To be sure, this is encouraging on the global warming front, where
China is now the largest TOTAL emitter of carbon-based pollution,
although, again, its per capita contribution is far less than the US.
At the same time, the problems pointed to above – notably corruption
and a general disregard for safety standards, as evidenced by the
horrific toll in the Sichuan earthquake last year – can’t help but
give rise to concerns, above all among the Chinese themselves, about
the potential dangers of “breakneck” nuclear plant construction.

China is preparing to build three times as many nuclear power plants
in the coming decade as the rest of the world combined, a breakneck
pace with the potential to help slow global warming. China’s civilian
nuclear power industry — with 11 reactors operating and construction
starting on as many as an additional 10 each year — is not known to
have had a serious accident in 15 years of large-scale electricity
production. And with China already the largest emitter of gases blamed
for global warming, the expansion of nuclear power would at least slow
the increase in emissions.
Yet inside and outside the country, the speed of the construction
program has raised safety concerns.

And should anyone think such concerns are related to China alone, one
might do well to re-call that the last time such a full-on nuclear
energy campaign was undertaken, it was in the post-1973-oil-crisis US
– which ended abruptly with the disastrous Three-Mile Island meltdown
in 1979. While examples of safety-ignoring practices in consumer
sectors like food, pharmaceutical, toys and school construction are
legion, China DOES have a much better record in areas like aviation,
where the government generally pays strict attention. Still, scandals
have already arisen in one area of the nuclear sector, and there is,
naturally, concern about cutting corners among the inevitably growing
ranks of contractors and sub-contractors.

The challenge for China is to build and operate its nuclear reactors
without the equivalent of the Three Mile Island accident, in which a
reactor core partly melted and released radioactivity, or the
Chernobyl disaster in the former Soviet Union in 1986, the world’s
worst civilian nuclear accident. China does not use the kind of
reactor that exploded at Chernobyl. And engineers in China study the
mistakes that poorly trained operators made at Three Mile Island.

Nevertheless, there can’t help but be popular concern, since “China is
placing many of its nuclear plants near large cities, potentially
exposing tens of millions of people to radiation in the event of an
accident.” So whatever fears Indonesians or Americans may have about
the rapid rate of China’s economic growth, the people with the most to
worry about may well be the Chinese people themselves.

http://www.mrswing.com/articles/Is_China_s_Success_at_Neighbors_Expense_by_OilPric.html

On Not "Antagonizing" China. Or How Many Enemies Does The US Need?
Posted by Dan on February 6, 2010 at 04:48 PM

Every once in a while, I get an email accusing me of costing Americans
their jobs and going on and on about how China is terrible and anyone
who has anything to do with China is terrible, presumably including
me.

I usually respond by talking about how China is a reality and how
countries should be judged not only on where they are now, but also on
where they came from and where they are going, and on how under those
criteria, there are plenty of countries far far worse with whom the
United States deals every day. I will then usually link over to the
most recent story of US ally Saudi Arabia executing a juvenile or
someone who has been raped or converted from Islam or to an article of
how US ally Egypt turns a blind eye to the slaughtering of Coptic
Christians and then ask the person what they purpose "we" should do
about those sorts of things. And what about US allies that do not
allow women to vote or drive cars and in which homosexuality is a
capital offense? Or the Sudan, which is engaged in genocide, or
something very close to that. Why are we not more focused on those
countries? Is it racism? Is it that we don't care? Is it strategic
interest? Is it too controversial? Is it that we believe change is not
possible? What?

I then talk about how as an unabashedly patriotic American I believe
it to be in my country's best interest to seek to make common cause
with those countries whose values do not include wanting to kill all
Americans.

George Gilder says something roughly similar in the Wall Street
Journal, in an opinion piece entitled, "Why Antagonize China?:"

While attempting to appease a long list of utterly unappeasable foes—
Iran, North Korea, Hamas, Hezbollah, and even Hugo Chávez—today the
U.S. treats China, perhaps our most crucial economic partner, as an
adversary because it defies us on global warming, dollar devaluation,
and Internet policy. * * * *

Meanwhile, Secretary of State Hillary Clinton and the president's
friends at Google are hectoring China on Internet policy. Although
commanding twice as many Internet users as we do, China originates
fewer viruses and scams than does the U.S. and with Taiwan produces
comparable amounts of Internet gear. As an authoritarian regime, it
obviously will not be amenable to an open and anonymous net regime.
Protecting information on the Internet is a responsibility of U.S.
corporations and their security tools, not the State Department.

Gilder goes on to explain why the United States should seek to ally
itself with a capitalistic Islamist-fighting China:

A foreign policy of serious people at a time of crisis will recognize
that the current Chinese regime is the best we can expect from that
country. The Chinese revitalization of Asian capitalism remains the
most important positive event in the world in the last 30 years. Not
only did it release a billion people from penury and oppression but it
transformed China from a communist enemy of the U.S. into a now
indispensable capitalist partner. It is ironic that liberals who once
welcomed appeasement of the monstrous regime of Mao Zedong now become
openly bellicose at various murky incidents of Internet hacking.

Nonetheless, with millions of Islamists on its borders and within
them, China is nearly as threatened by radical Islam as we are. China
has a huge stake in the global capitalist economy that Islamic
terrorists aim to overthrow. And China, like the U.S., is so heavily
dependent on Taiwanese manufacturing skills and so intertwined with
Taiwan's industry that China's military threat to the island is mostly
theater.

Gilder concludes by asking "How many enemies do we need?"

Great question.

What do you think?

See other posts in: China Business Comments
Gilder concludes by asking "How many enemies do we need?"

Certainly not this one:
http://www.ustreas.gov/tic/mfh.txt

Posted by: ZZX | February 6, 2010 7:10 PM

China Law Blog focuses on business law in China. It is written by Dan
Harris, an international lawyer based in the United States and Steve
Dickinson, an international lawyer based in China. Dan and Steve are
both members of Harris & Moure, pllc, a boutique International Law
Firm.

http://www.chinalawblog.com/2010/02/on_not_antagonizing_china_or_h.html

Tiny bubbles
By Belmont Club
February 6, 2010

There were fears that a tide of lending by Chinese banks to keep the
economy going was building up a “bubble” of uncertain proportions.
Beijing-based Fitch Ratings said that it was difficult to estimate
just how large the bad debts were because the Chinese banking system
was so opaque. One party trying to peer into China’s economic future
was Japan. At the recent G7 conference in the artic city of Iqaluit,
Japanese Finance Minister Naoto Kan said Japan is “paying attention to
China’s economic conditions, and we’re concerned about [signs of] a
bubble” in the mainland’s economy. Fitch Ratings were quoted as saying
that:

“The agency views ‘bubble risk’ as greatest for Chinese banks given
their 32 percent loan growth in 2009; this looks likely to be followed
by a further 20 percent in 2010,” Fitch said in a statement.

“Credit growth of more than 50 percent over a two-year period in an
economy where bank credit is already quite large relative to gross
domestic product almost inevitably involves some misallocation of
credit,” it added.

New loans extended by China’s banks nearly doubled in 2009 from the
previous year to 9.6 trillion yuan (1.4 trillion dollars) as banks
heeded Beijing’s calls to pump up lending to keep the economy growing.

Fitch however noted the limited transparency of Chinese banks and said
their tendency to reschedule loans meant any bad debt problems would
surface slowly.

CNN’s Katie Brenner quotes a number of academic authorities who claim
that even if a Chinese bubble popped its effects would be speedily
managed by an authoritarian Communist Party which is far better than
the West at managing such crises — or so the experts said. Beijing can
prevent capital flight by draconian control; prices can simply be set
by fiat, banks can be forced to extend credit whether they like it or
not.

“The [Chinese] government can really push money into enterprises to
keep them going even amid a crisis,” says Peter Morici, a public
policy professor at the University of Maryland. “You wouldn’t see a
credit shortage like the one we saw in the U.S.”

As for the rash of bad loans that could be made amid a period of
forced lending, China has an answer to that, too. The government
pushes debt problems off into the future and is notoriously opaque
when it comes to reporting problems. For these reasons, bad debts
would surface in a slow and hopefully orderly manner, Fitch wrote in
its recent report.

But Brenner notes these measures “solve” the problem by widening it.
They create huge resource distortions that ripple outward to foreign
markets and pass risks on to the outside world and to the political
system. An unmanaged bubble, Brenner says, is an existential risk to
the Communist Party of China. Maybe a bubble in China isn’t a
realistic possibility but if one does inflate it will be a sight to
behold indeed.

Bubbles in China are about much more than finance. Economic upheaval
is a source of potential mass unrest, threatening the Communist Party
…

In fact, to keep things flowing, it might open the spigots on exports
and try to grow its way back, doubling down on its main engine of
growth — exactly what it did during the global meltdown. And that’s
where the U.S. needs to worry. An even more export-focused China would
mean ever less-expensive goods flowing into the biggest market in the
world — the U.S.

“Because prices are so heavily managed, China could easily flood the
U.S. and the world with extremely cheap stuff,” says Morici. If nearly
everything America buys is made in China now, just wait. The trade
imbalance would spiral further out of control; and manufacturers in
other nations fighting China for market share would be at a greater
disadvantage.

“Remember, when we talk about bubbles, the stakes are the future of
the Communist Party,” says Morici. “They’ll try to survive no matter
what; and it could mean destroying other economies to do it.”

With the ante set so high, in the worst case scenario a collapsing
Chinese economy would essentially keep its cash flow going by selling
underpriced goods at slave-labor wages to the outside world. It’s
unsustainable strategem which in the process will destroy not just the
Chinese economy but the economies of those who trade with it. Japan’s
exports, now in the doldrums would go completely into the tank.
American producers, faced with the last brilliant flare of a dying
economic supernova, would be burned to a crisp. Then the Chinese
bubble, no longer able to sustain itself from outward forces will
shrivels on itself like a dwarft star, leaving only the cinders of a
world economy in its radius of effect.

But Shaun Rein at Forbes says there is nothing to worry about. There
will be no Chinese collapse in the foreseeable future. The reason he
gives are that the high rate of Chinese savings means that the lending
burst is based on a real basis, not airy discounted cash flows.
Moreover, there is more money in China than Westerners think because
they don’t understand Chinese accounting. Lastly, China is going to
keep its currency low and keep exporting. With savings, a higher than
reported income and a steely determination to keep on making money,
China is safe, Rein says.

Whether you believe that or not, the WSJ says the key components of
Beijing’s export strategy are provoking a kind of hidden protectionism
among other economies and may fuel the inflationary forces internally.
In other words, China’s exports are part of what is inflating the
bubble not simply what is preventing the bubble from collapse.

Key elements of the strategy—including a cheap currency, regulated
interest rates and low energy prices—are stoking discontent in fellow
developing countries, not just Western capitals. … At the same time,
many economists argue, China’s export-friendly policies are fueling
inflationary pressures at home, placing a burden on the rest of the
economy.

The economic downturn has forced consumers in the West to switch to
cheaper — typically “made in China” products — creating an even
greater demand for its export goods. “According to International
Monetary Fund projections, if current trends continue, China’s share
of world exports could reach 12% by 2014, a higher portion than Japan
managed at the peak of its dominance in the 1980s.” Can it continue?
Some researchers have their doubts.

But some researchers at the IMF say current trends aren’t likely to
continue. A paper by IMF researchers published last year suggests that
for China to continue the rapid export gains of recent years, it would
need to boost its share of world exports to about 20% in coming
decades, an unprecedented level. The fund’s researchers said China is
unlikely to be able to do that without using even more government
subsidies, which would further aggravate trade tensions and cause
domestic economic problems.

In any event, huge global economic pressures with complex
interrelationships are building up based on asserted information.
Beijing, Brussels and Washington’s economic managers are embarking
upon ambitious strategies. By setting values, concealing debts,
accumulating toxic assets and acquiring obligations on the basis of
almost fictional cash flows the world’s economic managers are setting
up a series of bets may save the day or sink the ship; which it is
will sooner or later will be judged by the market. An economy can only
undervalue things and overborrow for so long. Eventually the laws of
supply and demand, like gravity, reasserts their control over the
situation and the entire edifice settles into an equilibrium that will
leave those who bet on the wrong horse holding the bag. We certainly
live in interesting times.

[There is a video that cannot be displayed in this feed. Visit the
blog entry to see the video.]

Congratulations Scott Brown!

Thank you to everyone who poured in their time and money to help
support the Scott Brown for Senate campaign make a statement that we
the people will not stand for the type of government that the
Democratic controlled White House, Senate and House are trying to
shove down our throats! This truely was an historic moment where our
democracy really let the people speak. Hopefully those in DC will
hear.

What is Conservative Blog Watch?

The purpose of this site is to have a quick snapshot of news coming
from the conservative blogosphere. We are hoping to save you the time
it takes to find where the pulse of conservatism is at.

Most users scan this front page and the headlines until they find
something of interest. Each post also has related article links to
help you find out more about each topic.

If there is a site you want added or you want to add your site, please
use the contact us page. Our goal is to plug in to the top 100+ viewed
conservative websites and keep the latest 100 headlines on this
homepage.

We encourage you to visit all of the sites that this news comes from
but when you need a quick summary of the latest conservative headlines
head on back to www.conservativeblogwatch.com.

http://www.conservativeblogwatch.com/2010/02/06/tiny-bubbles/

Skeptical CPA

I am a CPA in Texas with an MBA from the University of Chicago. I have
seen a lot and made many mistakes. Hopefully by now I will have
learned something from them. Just as importantly, you may learn
something from my mistakes. You can e-mail me by clicking on my "View
my complete profile".

Saturday, February 6, 2010
Chanos on China

"James S. Chanos built one of the largest fortunes on Wall Street by
forseeing the collapse of Enron and other highflying companies whose
stories were too good to be true. Now Mr. Chanos, a wealthy hedge fund
investor, is working to bust the myth of the biggest conglomerate of
all: China Inc. As most of the world bets on China to helplift the
global economy out of recession, Mr. Chanos is warning that China's
hyperstimulated economy is headed for a crash, rather than the
sustained boom that most economists predict. Its surging real estate
sector, buoyed by a flood of speculative capital, looks like 'Dubai
times 1,000--or worse,' he frets. He even suspects that Beijing is
cooking its books, faking, among other things, faking, among other
things, its eye-popping growth rates of more than 8 percent. ... As
America's pre-eminent short-seller--he bets big money that companies'
strategies will fail--Mr. Chanos's narrative runs counter to the
prevailing wisdom on China", David Barboza at the NYT, 8 January 2010,
link:

http://www.nytimes.com/2010/01/08/business/global/08chanos.html.

Posted by Independent Accountant at 4:01 PM

3 comments:

Anonymous said...
Chanos represents the best part of capitalist markets... individuals
able and willing to take the contrary side of a trade... he's very
good at it... exceptional speculative skill...

And he doesn't expect to be bailed out if his bets go the wrong way.
Imagine that.

Saturday, February 06, 2010

edgar said...
They should try unrestricted immigration like the usa does.

Saturday, February 06, 2010
Independent Accountant said...

Edgar:
Do you hate the Chinese? Haven't we done them enough harm by trading
our useless dollars for real goods, impoverishing the Chinese
peasants? Isn't reverse socialism grand? Chairman Mao Tse Tung must be
turning in his grave.

IA

Saturday, February 06, 2010

http://skepticaltexascpa.blogspot.com/2010/02/chanos-on-china.html

...and I am Sid Harth

[chhotemianinshallah]

Page last updated at 11:23 GMT, Sunday, 7 February 2010

Darling 'confident' on economic recovery at G7 meeting

G7 finance ministers agree stimulus spending must continue

Chancellor Alistair Darling has said the UK and other industrial
nations are committed to public spending to bolster the shaky return
to growth.

He added he was "confident" the global economy was on the path to
recovery.

Mr Darling was speaking at the end of a meeting of finance ministers
from G7 leading industrial nations in Canada.

Bank regulation and worries over budget deficits in Greece, Spain and
Portugal were among issues discussed at the two-day meeting.

In a separate development, the finance ministers pledged to write off
the debts that Haiti owes them, following the country's devastating
earthquake last month.

'Turbulent period'

Ministers agreed that the global economy was starting to recover, but
was still too weak for governments to withdraw stimulus measures.

"The important thing is that we all are absolutely committed to
maintaining the support for our economies until we make sure we have
recovery established, and then to make sure we can chart a way to
ensure that we got sound, long-term growth in the future," Mr Darling
said.

"And I hope that this meeting will provide yet another stepping stone
along that way. And the last 18 months, we've come through an
extremely turbulent period. But I think we can be confident, although
we remain cautious, that we are on the right path, provided we see
that through."

Although the UK did officially come out of recession in the fourth
quarter of 2009 - ending six consecutive quarters of economic decline
- the growth was just 0.1%, much less than expected.

Monitoring pledge

The collapse in confidence among investors about Greece's ability to
pay its debts, and knock-on concerns about Portugal and Spain, meant
the European financial crisis was high on the agenda of the G7
meeting.

The European G7 countries told the US, Japan and Canada that they
would ensure that Greece delivered on its pledge to drastically cut
its budget deficit by 2012.

"Will we will monitor and make sure the Greek plan is managed," said
French Economy Minister Christine Lagarde.

The ministers also discussed various proposals to tax banks to
recapture bailout costs, but reached no decision on a uniform way to
proceed.

http://news.bbc.co.uk/2/hi/business/8502776.stm

Finance Officials Work to Stress Economic Unity
In talks to repair battered economy, global financial officials stress
coordinated efforts

By MARTIN CRUTSINGER AP Economics Writer
IQALUIT, Nunavut February 7, 2010 (AP)
The Associated Press

Giulio Tremonti, Italian Minister of Economy and Finance, left, rides
a dogsled on the outskirts of the northern Canadian Arctic community
of Iqaluit, Nunavut,

Friday Feb. 5, 2010.

Iqaluit is the site of the G7 Finance Ministers meeting. (AP Photo/The
Canadian Press, Fred Chartrand)

(AP)Top international finance officials renewed their commitments to
keep spending to support a global rebound while playing down
differences over new U.S. approaches on bank reform.

Finance ministers and central bank presidents of the Group of Seven
major industrial economies normally seek to strike a united front at
their meetings to avoid upsetting financial markets.

But that imperative seemed even more urgent at their two days of talks
Friday and Saturday given the bad week experienced by global markets,
which were thrown into a tailspin by new worries over rising debt
levels in Greece, Portugal and Spain.

The G-7 officials struck a united front at their closing news
conference, announcing an agreement to push the international lending
agencies to grant new debt relief for earthquake-ravaged Haiti and
expressing broad consensus on the need to continue spending to support
a tentative economic rebound.

"The world economy is coming back. We've been through together a very
difficult time, a very uncertain time and now we see signs of
recovery," Canadian Finance Minister Jim Flaherty told reporters.

The G-7 countries are the United States, Japan, Germany, France,
Britain, Italy and Canada.

Iqaluit, population 7,000 and only 200 miles from the Arctic Circle,
was the most unusual site ever chosen for a G-7 meeting. Flaherty said
he wanted to spotlight Canada's Arctic region and force his colleagues
into more informal discussions. Neck ties were banned and Flaherty
kicked things off with dogsledding for the finance officials on frozen
Frobisher Bay.

While U.S. Treasury Secretary Timothy Geithner and Federal Reserve
Chairman Ben Bernanke turned down the dogsledding, Flaherty insisted
his effort at informality had been a resounding success.

The European debt crisis did force its way onto the G-7 agenda after
financial markets from Wall Street to Tokyo went into a tailspin over
worries that Greece might require some type of emergency bailout.

The debt concerns in Greece, Spain and Portugal highlighted the
problems many countries face because expensive stimulus programs to
recover from the severe downturn are sending government debt burdens
soaring.

Geithner succeeded in getting agreement from other G-7 countries on
the need to keep pushing ahead with stimulus spending this year to
make sure the recovery gains strength.

In the United States, President Barack Obama this past week unveiled a
new jobs program with billions of dollars in new spending.

Geithner said that once the recovery gains strength, the
administration will "turn to starting to unwind and walk back the
exceptional measures we took in this crisis."

British Treasury chief Alistair Darling is also pushing stimulus
spending to fight high unemployment even as Britain's budget deficit
surges. Darling's government is facing a tough election campaign this
spring.

Darling said "the key challenge is to ensure that we get our borrowing
down, get our deficits down, but at the same time we do that in a way
that doesn't damage the recovery."

Several G-7 nations had complained heading into the meetings about
Obama's surprise announcement last month that he would ask Congress to
impose tougher rules to prevent big banks from threatening the
financial system with risky trading ventures.

But after their talks, the G-7 officials insisted they were now on the
same page and would push ahead to get consensus on global bank reform
guidelines by the end of this year.

"We were very clear that we needed to continue to work together on
this," Darling told reporters. "Of course, different countries have
different systems and to some extent the recent U.S. proposals have
reflected that."

French Finance Minister Christine Lagarde told reporters "there was a
very, very strong consensus to keep the momentum, to work
comprehensively" to complete work on the banking reform effort.

Associated Press writers Jane Wardell and Rob Gillies contributed to
this report.

On the Net: Meeting site: http://g8.gc.ca/home/

Copyright 2010 The Associated Press.

http://abcnews.go.com/Business/wireStory?id=9769839

Largest U.S. Jobs-Lies Yet
Jeff Nielson

The U.S. Bureau of Labor Statistics deserves credit for being
audacious, if nothing else. On the same day that it admitted that its
“birth/death model” had understated U.S. job losses by more than
100,000 jobs per month throughout 2009, it started off 2010 with its
largest one-month jobs-lie yet – since it severed all connection with
reality in its “statistics”.

Let's take these bombshells one at a time. Once a year, the Bureau of
Labor Statistics does a revision of its jobs numbers, by comparing
actual jobs totals from tax receipts against their own “estimates”,
which include the “birth/death” adjustment. For those unfamiliar with
this statistical manipulation, the BLS's “birth/death model” is a
completely discredited tool which supposedly counts all the jobs which
are “invisible” to the U.S. government's massive army of
statisticians. No other government engages in these flawed
adjustments.

Conveniently, what this supposedly unbiased “model” always does is to
understate job creation when the economy is strong, and understate job
losses when the economy is weak. Put more bluntly, this is a
statistical contrivance where the U.S. government 'borrows' jobs from
the good months to add to the bad months. Of course, with the debt-
crippled U.S. economy no longer having any “good months”, it's only
function now is to add phantom “jobs”.

During 2009 alone, the BLS has just admitted that the “birth/death
model” incorrectly added more than 1.39 million jobs last year. Put
another way, these supposed “margins of error” were much larger than
the birth/death adjustments, themselves. Statistically, any model
which produces margins of error which are larger than the results of
the model is obviously hopelessly flawed. A valid economic model
should have margins of error which are generally no larger than 5- 10%
of the results. Thus, the refusal of the BLS to abandon this
statistical fraud is just as outrageous as the birth/death lies,
themselves – especially when there is a distinct and obvious pattern
to these lies.

Did I mention the second, large annual adjustment which the BLS makes
with its birth/death model every year? Every January, the BLS also
makes a subtraction of hundreds of thousands of additional jobs. This
“adjustment” is for the bias in the model which the BLS admits to, in
advance each year – with a second revision then done after the fact.

This January, the BLS subtracted 427,000 jobs via the birth/death
model – a fact that it is desperately hoping that no one noticed. The
reason why it is so important that no one notice this revision, is
because the BLS's January jobs report is its largest one-month lie
yet. Given that the final figure released by the BLS was a net job-
loss of only 20,000 jobs, without the birth/death adjustment, we are
supposed to believe that the crippled U.S. economy created over
400,000 net jobs in January.

Editorial: The Truth About The U.S. Deficit
2010-02-07 05:07:54 (4 hours ago)
Posted By: Intellpuke

Intellpuke: This editorial appeared in the New York Times edition for
Sunday, February 7, 2010.

When the White House released its new budget last week, including more
spending to create desperately needed jobs, Republican leaders in
Congress denounced President Obama for driving up the deficit and
demanded that the Democrats halt their “reckless” ways.

The deficit numbers - a projected $1.3 trillion in fiscal 2011 alone -
are breathtaking. What is even more breathtaking is the Republicans’
cynical refusal to acknowledge that the country would never have
gotten into so deep a hole if President George W. Bush and the
Republican-led Congress had not spent years slashing taxes - mainly on
the wealthy - and spending with far too little restraint.
Unfortunately, the problem does not stop there.

The Republican amnesia and posturing are playing well on the hustings,
where Americans are deeply anxious about the economy and fearful of
losing their jobs and homes. Far too many Democratic lawmakers are
losing their nerve.

Americans should be anxious, for reasons including the huge deficit.
But the cold economic truth is this: At a time of high unemployment
and fragile growth, the last thing the government should do is to
slash spending. That will only drive the economy into deeper trouble.

None of this means that the politicians - from either party - are off
the hook. They will soon need to make hard decisions about how to
reduce the deficit. But more posturing and sniping is not going to
make the economy better or solve the deficit problem. President Obama
has called on the Republicans to join a bipartisan commission to help
make those tough decisions, but they have been resistant to the
proposal.

We fear the demagoguing is not going to stop, especially with
Congressional elections this November. As the budget debate plays out,
here are some basic facts about the deficit that Americans need to
consider:

HOW DID WE GET HERE? When President Bush took office in 2001, the
federal budget had been in the black for three years, and continued
surpluses were projected for a decade to come.

By the time Mr. Bush left office in early 2009, the government had run
big deficits for seven straight years, and the economy was on the
brink of another Great Depression. On Jan. 7, 2009 - two weeks before
Mr. Obama was inaugurated - the Congressional Budget Office issued new
budget estimates showing a fiscal year 2009 deficit of well over $1
trillion.

About half of today’s huge deficits can be chalked up to Bush-era
profligacy: mainly cutting taxes deeply while borrowing to wage two
wars and to enact the Medicare prescription drug benefit - all of
which Republicans supported, virtually in lockstep.

The other half of recent deficits is due to the recession and the
financial crisis.

To avoid a meltdown, the government - under President Bush and
President Obama - rightly decided it had no choice but to spend
hundreds of billions of dollars to bail out banks and car companies
and to stimulate the economy. That prevented a very bad situation from
becoming much worse, but as the recession dragged on, hundreds of
billions in tax revenues have also dried up.

As for why the financial system and the economy imploded, President
Bush and Congress deserve much of the blame for their devotion to debt-
driven growth and blind deregulatory zeal - although on deregulation,
President Clinton and his team (some of whom are back in the White
House) were also complicit.

Were it not for those multiple calamities, budget deficits today would
be negligible. That does not mean we would be off the hook. An aging
population and relentlessly rising health care costs will hit the
country with even deeper deficits as the baby boomers retire.
Politicians need to pass health care reform now and start thinking
seriously about Social Security and tax reform.

So what are the immediate fiscal lessons here? The first lesson is
that spending without taxing is a recipe for huge deficits, and that
running big deficits when the economy is expanding only sets the
country up for bigger deficits when the economy contracts. The second
lesson is that once a deep recession takes hold, slashing government
spending is not going to solve the problem. It will only make it
worse.

WHAT CAN BE DONE NOW?

Here is an unpopular but undeniable fact of life: When private sector
demand is weak, the federal government must serve as the spender of
last resort. Otherwise, collapsing demand sets in motion a negative,
self-reinforcing spiral in which lack of demand - for goods, services
and new employees - leads to ever deepening economic weakness.

That is why when the banks and the economy began to crumble in 2008,
President Bush responded with a $700 billion bank bailout and a $168
billion stimulus package. When Mr. Obama took office, the banks were
still shaky and the economy was still plunging - as measured by real-
life indicators like jobs, consumer spending, credit availability,
home equity, retirement savings and business confidence. The new
administration made the sound decision to continue the bailout and
pushed a $787 billion stimulus through Congress, with very little
Republican help.

The stimulus package slowed job losses and helped spur activity - in
the third quarter of 2009, the economy grew at an annual rate of 2.2
percent, and the initial fourth-quarter reading was 5.7 percent, a
rebound few thought possible a year ago.

Still, without a jobs revival to boost consumer spending and tax
revenues - and with the states facing immense budget shortfalls - the
economy is unlikely to do anything other than limp along, at best,
once the effects of the stimulus fade this year.

In his recent budget, Mr. Obama proposed to spend $266 billion on tax
credits for hiring and new job-creation investments, and on other
short-term stimulus including extended unemployment compensation. That
would improve on the House-passed $154 billion jobs bill. But in the
Senate, Republicans are balking at the prospect of a big bill, saying
they need to hold down the deficit. They have spooked the Democrats,
who are now trying to negotiate what appears to be a far too modest
bill in hopes of winning Republican support.

What they should be saying - and what the White House should be saying
a lot louder - is that a prolonged downturn or a renewed recession
would do far more damage to the budget than upfront deficit spending.
In fact, a clear lesson from the Depression of the 1930s is that
reducing deficits at a time of economic fragility undercuts recovery.

SO DO WE JUST LIVE WITH THE DEFICIT?

The problem must be addressed. Persistently high deficits are harmful
to the economy and the country’s long-run security.

If the government must keep borrowing to make up the difference, it
could drive up interest rates and force private companies to compete
with the government for investors. That, in turn, would reduce
economic growth and, by extension, the potential earnings - and
standard of living - of everyone.

The process is generally gradual. But it could be wrenching if
creditors lose confidence that the government will ever put its fiscal
house in order and suddenly decide to put their money elsewhere. That
could lead to a fiscal crisis, with sharp spikes in interest rates and
a rapidly depreciating currency.

There is no question that, over the next several decades, deficits and
debt in the United States are headed for dangerously high levels. But
today’s deficit fearmongers invariably fail to note that the impact of
stimulus spending on the long-term fiscal problem is small, because
the spending is temporary.

The real problem, which also goes unmentioned, is that dangerous
deficits will accumulate over time if continuing trends and policies -
especially in health care - persist unchanged.

SO HOW DO WE FIX IT? Mr. Obama’s budget makes a down payment on
deficit reduction by freezing some non-security discretionary spending
for three years, and by letting the Bush tax cuts for the richest
Americans expire at the end of this year.

To truly tame deficits will require serious health care reform, the
sooner the better. Other aspects of the long-term fiscal problem -
raising taxes and retooling Social Security - must take place in
earnest as the economy recovers.

Contrary to popular belief, there are many well-thought-out ideas for
such reforms. Where technical questions are difficult, particularly on
health care costs, reformers have advocated demonstration projects
that can be tested over time. Where the real difficulty lies is
summoning the political will to do what must be done, even though it
will be unpopular.

If these problems are not addressed, here is what we face: Under
current policies, federal debt in the United States - the sum total
of annual deficits - would grow from 53 percent of the size of the
economy in 2009 to more than 300 percent by 2050, driven mainly by
rapidly rising health care costs and, in part, by the aging of the
population. Combined, those two factors exert enormous pressure on the
government’s biggest spending programs, Medicare and Medicaid, and, to
a lesser extent, Social Security.

Unless health care costs are controlled, there is no way to solve the
country’s long-term deficit and debt problems.

But that will not be enough. Broad tax reform is also essential to
ensure that revenues keep pace with expenditures. From 1978 to 2008,
revenues averaged about 18.4 percent of the economy. But without
policy changes, expenditures for everything other than interest on the
national debt will increase from 19.2 percent of the size of the
economy in 2008 to 24.5 percent in 2050.

On the need for more taxes, Mr. Obama has been less than candid,
pledging never to raise taxes on anyone making less than $250,000.
Republican lawmakers have been worse, calling for tax cuts at most
every opportunity - and never acknowledging that a shortfall in
revenue is one of the important causes of the deficit.

The deficit commission that Mr. Obama intends to establish could be
helpful in breaking this logjam, by calling for necessary changes that
politicians would be loath to broach without political cover.

We hope that health care reform will move ahead before that. If it
does, the commission will still have to press for new taxes that both
raise revenue and broaden the tax base, including a value added tax.

And then there is Social Security. What is needed is a combination of
benefit cuts and tax increases that preserve the program’s essential
nature - a contract under which the young support the old via taxes
and the rich help the poor via a benefits formula that favors low-
income beneficiaries. One sound approach would be to link benefit
levels to life expectancy, so that as people live longer, future
benefits would be modestly reduced while payroll taxes that support
Social Security would be modestly increased.

There is no way to get deficits under control until our political
leaders are willing to acknowledge difficult truths and make even more
difficult political choices. We have heard and seen too little of that
from the Democrats lately, and none at all from the Republicans. That
is truly a recipe for disaster.

Intellpuke: You can read this New York Times editorial in context
here:

www.nytimes.com/2010/02/07/opinion/07sun1.html?hpw

http://freeinternetpress.com/story.php?sid=24477

Editorial
The Truth About the Deficit

Published: February 6, 2010

When the White House released its new budget last week, including more
spending to create desperately needed jobs, Republican leaders in
Congress denounced President Obama for driving up the deficit and
demanded that the Democrats halt their “reckless” ways.

The deficit numbers — a projected $1.3 trillion in fiscal 2011 alone
— are breathtaking. What is even more breathtaking is the Republicans’
cynical refusal to acknowledge that the country would never have
gotten into so deep a hole if President George W. Bush and the
Republican-led Congress had not spent years slashing taxes — mainly on
the wealthy — and spending with far too little restraint.
Unfortunately, the problem does not stop there.

The Republican amnesia and posturing are playing well on the hustings,
where Americans are deeply anxious about the economy and fearful of
losing their jobs and homes. Far too many Democratic lawmakers are
losing their nerve.

Americans should be anxious, for reasons including the huge deficit.
But the cold economic truth is this: At a time of high unemployment
and fragile growth, the last thing the government should do is to
slash spending. That will only drive the economy into deeper trouble.

None of this means that the politicians — from either party — are off
the hook. They will soon need to make hard decisions about how to
reduce the deficit. But more posturing and sniping is not going to
make the economy better or solve the deficit problem. President Obama
has called on the Republicans to join a bipartisan commission to help
make those tough decisions, but they have been resistant to the
proposal.

We fear the demagoguing is not going to stop, especially with
Congressional elections this November. As the budget debate plays out,
here are some basic facts about the deficit that Americans need to
consider:

HOW DID WE GET HERE? When President Bush took office in 2001, the
federal budget had been in the black for three years, and continued
surpluses were projected for a decade to come.

By the time Mr. Bush left office in early 2009, the government had run
big deficits for seven straight years, and the economy was on the
brink of another Great Depression. On Jan. 7, 2009 — two weeks before
Mr. Obama was inaugurated — the Congressional Budget Office issued new
budget estimates showing a fiscal year 2009 deficit of well over $1
trillion.

About half of today’s huge deficits can be chalked up to Bush-era
profligacy: mainly cutting taxes deeply while borrowing to wage two
wars and to enact the Medicare prescription drug benefit — all of
which Republicans supported, virtually in lockstep.

The other half of recent deficits is due to the recession and the
financial crisis.

To avoid a meltdown, the government — under President Bush and
President Obama — rightly decided it had no choice but to spend
hundreds of billions of dollars to bail out banks and car companies
and to stimulate the economy. That prevented a very bad situation from
becoming much worse, but as the recession dragged on, hundreds of
billions in tax revenues have also dried up.

As for why the financial system and the economy imploded, President
Bush and Congress deserve much of the blame for their devotion to debt-
driven growth and blind deregulatory zeal — although on deregulation,
President Clinton and his team (some of whom are back in the White
House) were also complicit.

Were it not for those multiple calamities, budget deficits today would
be negligible. That does not mean we would be off the hook. An aging
population and relentlessly rising health care costs will hit the
country with even deeper deficits as the baby boomers retire.
Politicians need to pass health care reform now and start thinking
seriously about Social Security and tax reform.

So what are the immediate fiscal lessons here? The first lesson is
that spending without taxing is a recipe for huge deficits, and that
running big deficits when the economy is expanding only sets the
country up for bigger deficits when the economy contracts. The second
lesson is that once a deep recession takes hold, slashing government
spending is not going to solve the problem. It will only make it
worse.

WHAT CAN BE DONE NOW? Here is an unpopular but undeniable fact of
life: When private sector demand is weak, the federal government must
serve as the spender of last resort. Otherwise, collapsing demand sets
in motion a negative, self-reinforcing spiral in which lack of demand
— for goods, services and new employees — leads to ever deepening
economic weakness.

That is why when the banks and the economy began to crumble in 2008,
President Bush responded with a $700 billion bank bailout and a $168
billion stimulus package. When Mr. Obama took office, the banks were
still shaky and the economy was still plunging— as measured by real-
life indicators like jobs, consumer spending, credit availability,
home equity, retirement savings and business confidence. The new
administration made the sound decision to continue the bailout and
pushed a $787 billion stimulus through Congress, with very little
Republican help.

The stimulus package slowed job losses and helped spur activity — in
the third quarter of 2009, the economy grew at an annual rate of 2.2
percent, and the initial fourth-quarter reading was 5.7 percent, a
rebound few thought possible a year ago.

Still, without a jobs revival to boost consumer spending and tax
revenues — and with the states facing immense budget shortfalls — the
economy is unlikely to do anything other than limp along, at best,
once the effects of the stimulus fade this year.

In his recent budget, Mr. Obama proposed to spend $266 billion on tax
credits for hiring and new job-creation investments, and on other
short-term stimulus including extended unemployment compensation. That
would improve on the House-passed $154 billion jobs bill. But in the
Senate, Republicans are balking at the prospect of a big bill, saying
they need to hold down the deficit. They have spooked the Democrats,
who are now trying to negotiate what appears to be a far too modest
bill in hopes of winning Republican support.

What they should be saying — and what the White House should be saying
a lot louder — is that a prolonged downturn or a renewed recession
would do far more damage to the budget than upfront deficit spending.
In fact, a clear lesson from the Depression of the 1930s is that
reducing deficits at a time of economic fragility undercuts recovery.

SO DO WE JUST LIVE WITH THE DEFICIT? The problem must be addressed.
Persistently high deficits are harmful to the economy and the
country’s long-run security.

If the government must keep borrowing to make up the difference, it
could drive up interest rates and force private companies to compete
with the government for investors. That, in turn, would reduce
economic growth and, by extension, the potential earnings — and
standard of living — of everyone.

The process is generally gradual. But it could be wrenching if
creditors lose confidence that the government will ever put its fiscal
house in order and suddenly decide to put their money elsewhere. That
could lead to a fiscal crisis, with sharp spikes in interest rates and
a rapidly depreciating currency.

There is no question that, over the next several decades, deficits and
debt in the United States are headed for dangerously high levels. But
today’s deficit fearmongers invariably fail to note that the impact of
stimulus spending on the long-term fiscal problem is small, because
the spending is temporary.

The real problem, which also goes unmentioned, is that dangerous
deficits will accumulate over time if continuing trends and policies —
especially in health care — persist unchanged.

SO HOW DO WE FIX IT? Mr. Obama’s budget makes a down payment on
deficit reduction by freezing some nonsecurity discretionary spending
for three years, and by letting the Bush tax cuts for the richest
Americans expire at the end of this year.

To truly tame deficits will require serious health care reform, the
sooner the better. Other aspects of the long-term fiscal problem —
raising taxes and retooling Social Security — must take place in
earnest as the economy recovers.

Contrary to popular belief, there are many well-thought-out ideas for
such reforms. Where technical questions are difficult, particularly on
health care costs, reformers have advocated demonstration projects
that can be tested over time. Where the real difficulty lies is
summoning the political will to do what must be done, even though it
will be unpopular.

If these problems are not addressed, here is what we face: Under
current policies, federal debt in the United States — the sum total of
annual deficits — would grow from 53 percent of the size of the
economy in 2009 to more than 300 percent by 2050, driven mainly by
rapidly rising health care costs and, in part, by the aging of the
population. Combined, those two factors exert enormous pressure on the
government’s biggest spending programs, Medicare and Medicaid, and, to
a lesser extent, Social Security.

Unless health care costs are controlled, there is no way to solve the
country’s long-term deficit and debt problems.

But that will not be enough. Broad tax reform is also essential to
ensure that revenues keep pace with expenditures. From 1978 to 2008,
revenues averaged about 18.4 percent of the economy. But without
policy changes, expenditures for everything other than interest on the
national debt will increase from 19.2 percent of the size of the
economy in 2008 to 24.5 percent in 2050.

On the need for more taxes, Mr. Obama has been less than candid,
pledging never to raise taxes on anyone making less than $250,000.
Republican lawmakers have been worse, calling for tax cuts at most
every opportunity — and never acknowledging that a shortfall in
revenue is one of the important causes of the deficit.

The deficit commission that Mr. Obama intends to establish could be
helpful in breaking this logjam, by calling for necessary changes that
politicians would be loath to broach without political cover.

We hope that health care reform will move ahead before that. If it
does, the commission will still have to press for new taxes that both
raise revenue and broaden the tax base, including a value added tax.

And then there is Social Security. What is needed is a combination of
benefit cuts and tax increases that preserve the program’s essential
nature — a contract under which the young support the old via taxes
and the rich help the poor via a benefits formula that favors low-
income beneficiaries. One sound approach would be to link benefit
levels to life expectancy, so that as people live longer, future
benefits would be modestly reduced while payroll taxes that support
Social Security would be modestly increased.

There is no way to get deficits under control until our political
leaders are willing to acknowledge difficult truths and make even more
difficult political choices. We have heard and seen too little of that
from the Democrats lately, and none at all from the Republicans. That
is truly a recipe for disaster.

http://www.nytimes.com/2010/02/07/opinion/07sun1.html?%2362;=&hpw=&%2360;br=&pagewanted=all

...and I am Sid Harth

[chhotemianinshallah]

Dazzled by Asia
When will China lead the world? Don’t hold your breath.

(Frederic J. Brown/Getty Images )

By Joshua Kurlantzick
February 7, 2010

During his trip to Asia in November, Barack Obama seemed strangely
mute. Unlike Bill Clinton, who criticized China’s human rights record
in front of then-president Jiang Zemin, Obama largely avoided the
topic of rights. In Singapore, despite pressure from human rights
activists, the president deferred to pressure to not release a
statement calling for the freeing of Burmese opposition leader Aung
San Suu Kyi. In Japan, the president worked valiantly to massage local
sentiments, bowing deeply to Emperor Akihito - and drawing flak back
in the United States from conservative critics for appearing weak.

More than any recent American president, Obama displayed deep
deference to his Asian counterparts. He did so, in part, because, like
many Americans, he has become convinced that this will be Asia’s
century, and that the United States must begin to accommodate itself
to this stark new geopolitical fact. A recent report by the US
National Intelligence Council concluded that the world is witnessing
the rise of “major global players similar to the advent of a united
Germany in the 19th century and a powerful United States in the early
20th century...[and they] will transform the geopolitical landscape.”
Major media outlets covered the president as if he was some kind of
Dickensian vagrant, appealing to his increasingly powerful creditors
in China for leniency. “Obama’s trip reveals a relationship with a
strangely lopsided quality to it,” wrote longtime China specialist
Jonathan Fenby, in one typical example of the coverage.

Over the past two years, some of the most important foreign policy
thinkers have chronicled America’s decline, and argued that Asia is
rising to preeminence. Parag Khanna’s “The Second World: Empires and
Influence in the New Global Order” landed on the cover of The New York
Times Magazine, while Fareed Zakaria’s “The Post-American World”
became a bestseller. Meanwhile, the influential former Singaporean
ambassador Kishore Mahbubani, who helped spark the “Asian values”
debate of the 1990s, released “The New Asian Hemisphere: The
Irresistible Shift of Global Power to the East.” Martin Jacques, a
prominent columnist for The Guardian, took the idea one step further.
In his book “When China Rules the World,” he contends that China’s
rise will have a greater impact on the globe than the emergence of the
United States as an international power in the 20th century.

Yet predictions of America’s decline are vastly overstated. Asia is
indeed increasing its economic footprint in the world, but it still
lags far behind the United States in military might, political and
diplomatic influence, and even most measures of economic stability.
Asia’s growth, the source of its current strength, also has
significant limits - rising inequality, disastrous demographics, and
growing unrest that could scupper development. Nationalism in Asia
will prevent the region from developing into a European Union-like
unified area for the foreseeable future, allowing regional conflicts
to continue, and preventing Asia from speaking, more powerfully, with
a unified voice.

The future of American power is a vital question. America’s foreign
policy choices will be directed by judgments about the United States’
staying power, and how the United States, like Britain before it,
should adapt to new powers emerging on the scene. If, as Jacques
argues, America’s influence will naturally fade while Asia’s grows,
Washington should adopt policies similar to Britain’s in the mid-20th
century - ceding influence over large portions of the world while
working to ensure that it remains an important player on a few key
issues. American leaders would have to radically shift their style,
adopting a new humility while selling the US public on a diminished
global role, a major comedown for a superpower.

Conversely, if it is not to be Asia’s century, Washington’s strategy
would be radically different. No concessions of fading glory: Though
the United States might not be the only superpower, it could assume
that, for the near future, it would remain the preeminent power,
allowing Washington to dictate the terms of everything from climate
change negotiations to global talks on nuclear weapons.

The idea of American power giving way to a rising Asia has been
building for two decades. In the late 1980s and early 1990s, many in
the United States predicted that Japan, which then seemed to have a
hyper-charged economy, would rule the world. But Japan’s economy,
built on a real estate bubble, imploded, and Japanese leaders never
truly matched their economic power with political might; limited by a
pacifist constitution, Japan did not fight in the first Gulf War and
wound up merely paying the check for much of the battle.

But now China has assumed the mantle. Next year, China will become the
world’s second-largest economy, according to a study by the China
Policy Institute of the University of Nottingham. The global financial
crisis has badly dented the Western model of liberal capitalism,
leaving Asia as the world’s growth engine, and main banker - China
alone holds some $800 billion in American treasury securities. The
chief economist of the Asian Development Bank, a regional
organization, declared in September, “Developing Asia is poised to
lead the recovery from the worldwide slowdown.” China and India likely
will grow by more than 7 percent this year, compared to minimal growth
in the West, and other leading Asian nations, like Indonesia and
Vietnam, are also predicted to post high growth rates in 2010.

At the recent Copenhagen climate summit, two of Asia’s most powerful
leaders, Chinese Premier Wen Jiabao and Indian Prime Minister Manmohan
Singh, showed this newfound confidence. Meeting in a back room, they
pointedly tried to exclude Obama from their negotiations. Obama
ultimately had to burst into the closed-meeting like a kind of
diplomatic party crasher.

Asia’s new swagger has caused a crisis of confidence in the West that
makes the fear of Japan in the late 1980s look like a mild tremor. In
the late 1980s it was only one Asian giant growing powerful, and at
that time Europe, newly united after communism, looked boldly to the
future. Today many of Asia’s nations are getting stronger, and not one
major Western nation can be confident about its future growth.

The belief in Asia’s rise has sparked this mini-industry of books on
the Eastern renaissance. In the most apocalyptic of the bunch, such as
Jacques’, the authors focus on how Asia’s powers, from China to
Malaysia to Singapore, are taking the final step from rising power to
global hegemon - using state-directed economic policies to dominate
industry after industry, while delivering what Mahbubani calls
“modernity” - good governance, growth, and the rule of law, without
the messiness of Western liberal democracy. In fact, Mahbubani
suggests that this “modernity” ultimately may be more appealing than
Western democracy, which has not helped produce growth in Africa,
Latin America, or many other democratic regions. Other authors, like
Zakaria, focus more on American decline.

Yet there are many good reasons to think that Asia’s rise may turn out
to be an illusion. Asia’s growth has built-in stumbling blocks.
Demographics, for one. Because of its One Child policy, China’s
population is aging rapidly: According to one comprehensive study by
the Center for Strategic and International Studies, a Washington think
tank, by 2040 China will have at least 400 million elderly, most of
whom will have no retirement pensions. This aging poses a severe
challenge, since China may not have enough working-age people to
support its elderly. In other words, says CSIS, China will grow old
before it grows rich, a disastrous combination. Other Asian powers
also are aging rapidly - Japan’s population likely will fall from
around 130 million today to 90 million in 2055 - or, due to
traditional preferences for male children, have a dangerous sex
imbalance in which there are far more men than women. This is a
scenario likely to destabilize a country, since, at other periods in
history when many men could not marry, the unmarried hordes turned to
crime or political violence.

Looming political unrest also threatens Asia’s rise. China alone
already faces some 90,000 annual “mass incidents,” the name given by
Chinese security forces to protests, and this number is likely to grow
as income inequality soars and environmental problems add more
stresses to society. India, too, faces severe threats. The Naxalites,
Maoists operating mostly in eastern India who attack large landowners,
businesses, police, and other local officials, have caused the death
of at least 800 people last year alone, and have destabilized large
portions of eastern India. Other Asian states, too, face looming
unrest, from the ongoing insurgency in southern Thailand to the rising
racial and religious conflicts in Malaysia.

Also, despite predictions that Asia will eventually integrate,
building a European Union-like organization, the region actually seems
to be coming apart. Asia has not tamed the menace of nationalism,
which Europe and North America largely have put in the past, albeit
after two bloody world wars. Even as China and India have cooperated
on climate change, on many other issues they are at each other’s
throats. Over the past year, both countries have fortified their
common border in the Himalayas, claiming overlapping pieces of
territory. Meanwhile, Japan is constantly seeking ways to blunt
Chinese military power. People in many Asian nations have extremely
negative views of their neighbors - even though they maintain positive
images of the United States.

More broadly, few Asian leaders have any idea what values, ideas, or
histories should hold Asia together. “The argument of an Asian century
is fundamentally flawed in that Asia is a Western concept, one that is
not widely agreed upon [in Asia],” says Devin Stewart, a Japan
specialist at the Carnegie Council for Ethics and International
Affairs.

Even as Asia’s miracle seems, on closer inspection, less miraculous,
America’s decline has been vastly overstated. To become a global
superpower requires economic, political, and military might, and on
the last two counts, the United States remains leagues ahead of any
Asian rival. Despite boosting defense budgets by 20 percent annually,
Asian powers like India, China, or Indonesia will not rival the US
military for decades, if ever - only the Pentagon could launch a war
in a place like Afghanistan, so far from its homeland. When a tsunami
struck South and Southeast Asia five years ago, the region’s nations,
including Indonesia, Thailand, and India, had to rely on the US Navy
to coordinate relief efforts.

America also has other advantages that will be nearly impossible to
remove. With Asian nations still squabbling amongst themselves, many
look to the United States as a neutral power broker, a role America
plays around the world. German writer and scholar Joseph Joffe calls
the United States today the “default power”: No one in the world
trusts anyone else to play the global hegemon, so it still falls to
Washington.

Even in the economic realm, the United States remains strong. As
Zakaria admits, the United States accounted for 32 percent of global
output in 1913, 26 percent in 1960, and 26 percent in 2007, remarkably
consistent figures. The United States remains atop nearly every
ranking of economies according to openness and innovation. While
Asia’s centrally planned economies can build infrastructure without
worrying about public opposition - China has built impressive networks
of airports and highways - they are less successful at nurturing world-
beating companies, which thrive on risk-taking and hands-off
government. Compared to Intel, Google, or Apple, China’s major
companies still are state-linked behemoths that do little innovation
of their own. The leading corporations in most other Asian nations
(with the exception of Japan and South Korea) also are either giant
state-linked firms or trading companies that invest little in
innovation. And censorship or tight government controls alienate the
most innovative firms - Google is now threatening to pull out of China
entirely.

As Asia throws up barriers to immigration, in the United States
immigration helps ensure long-term economic vitality. Chinese and
Indian immigrants accounted for almost one-quarter of all companies in
Silicon Valley, according to research by AnnaLee Saxenian at the
University of California-Berkeley. According to the most comprehensive
global ranking of universities, compiled by Shanghai Jiao Tong
University, American schools, powered by immigrants and flush with
cash, dominate the top 100, with Harvard ranked first. Asia has no
schools in the top 10.

Most important, the United States is a champion of an idea that has
global appeal, and Asia is not. During the opposition protests in
Iran, demonstrators look to the United States, not China or Indonesia
or even India, to make a statement. In a reversal of the Iranian
regime’s rhetoric, some protestors even chant “Death to China” because
of Beijing’s support for the repressive government in Tehran. As long
as protestors in places like Iran, or Burma or Ukraine, call out for
the American president, and not China’s leader or India’s prime
minister, the United States will remain the preeminent power.

To be the global hegemon requires military, economic, and political
might, but it also means offering a vision for the world. As Mahbubani
admits, during Britain’s imperial period, elites in places like
Malaya, India, or the Caribbean wanted to study in England, or read
British authors and philosophers, because they believed that the ideas
Britain had imparted - the rule of law, the Westminster political
system, an idea of fair play, a meritocratic civil service, evidence-
based scientific exploration - had merit for the entire world. Even
men and women who, ultimately, became some of the biggest thorns in
Britain’s side, like Jawarhal Nehru, cherished their British studies
and their links to British culture.

So, too, since World War II the United States has been, for many
foreign publics, the nation looked up to in this way. Even at the
worst moments, such as the period after 9/11 in which the Bush
administration created the prison at Guantanamo Bay and allowed
torture and other questionable tactics, I have rarely met anyone, in
any country, who wanted to move to China, or India, or even Japan,
rather than the United States. Foreigners may want to spend a few
years in China or India or Indonesia, to see the dynamism of these
places, but few, if any, have plans to become Chinese, Indian, or
Indonesian citizens. Perhaps one day China or Indonesia or India will
draw these migrants, who would come seeking the same dreams and
openness as they do today in the United States. But it won’t be soon -
and it might not even be this century.

Joshua Kurlantzick is a Fellow at the Council on Foreign Relations.

© Copyright 2010 Globe Newspaper Company.

http://www.boston.com/bostonglobe/ideas/articles/2010/02/07/dazzled_by_asia/?page=full

China economy to grow 10 percent in 2010: think tank
(AFP) – 6 hours ago

BEIJING — A top state-run think tank has forecast that China will
return to double digital growth this year, with a 10 percent rise in
gross domestic product, state media reported Sunday.

The Centre for Forecasting Science at the Chinese Academy of Sciences
said GDP could grow by 11 percent in the first quarter of the year,
before slightly slowing down for the rest of 2010, the official Xinhua
news agency reported.

Investment was expected to increase as a result of the government's
economic stimulus package, but overall growth in investment for the
year would fall to 25 percent, Xinhua quoted a report by the state-run
institution as saying.

China's GDP, which analysts say could overtake that of Japan, expanded
by 8.7 percent in 2009. It returned to double-digit growth in the
fourth quarter last year, with a 10.7 percent growth -- the fastest in
two years.

A government stimulus package worth four trillion yuan (586 billion
dollars) has widely been credited with sustaining growth in a year
when much of the global economy was in crisis.

But inflation surged towards the end of 2009, sparking concern.

The report estimated that China's consumer price index, the main gauge
of inflation, would increase by more than three percent in 2010 as an
economic revival and liquidity helped drive up prices.

Exports, meanwhile, were expected to rise by nearly 17 percent and
imports by just under 19 percent, it added, as overseas demand picked
up amid a global economic recovery.

Copyright © 2010 AFP. All rights reserved.

Farmers sell strawberries from carts on a Beijing street

http://www.google.com/hostednews/afp/article/ALeqM5ji8sQJ6ztBV84Tg0xmtCIwfDw48g

Sunday, February 7, 2010 9:39 PM

Fixing China's current account surplus

Yiping Huang , Eastasia forum , Canberra |
Sun, 02/07/2010 3:10 PM | Opinion

China's current account surplus has been the subject of fierce debate
in recent times. The argument runs that, by artificially depressing
the value of the renminbi (RMB), China took jobs away from its trading
partners.

Rapid growth in China's current account surplus is, in fact, a
relatively recent phenomenon. The sharpest rise in current account
surplus occurred after 2004. Within three years, the surpluses jumped
from 3.5 percent of GDP in 2004 to 10.8 percent in 2007. In 2008,
external demand was severely cut by the global crisis. But China's
current account surplus still stood at 9.6 percent of GDP.

What are the fundamental factors contributing to China's growing
current account surpluses? Previous explanations may be grouped into
five broad categories: measurement errors; the saving and investment
gap; industry relocation; policies promoting growth and exchange rate
distortion.

All these explanations are related to understanding China's growing
external imbalance problem. But none really explains it completely.
The core of the problem in the real economy is factor market
distortions that result from China's asymmetric market liberalization
approach.

During the reform period, the government focused on reform of the
product markets. Today, the prices of more than 95 percent of products
are determined by free market forces.

In contrast, factor markets remain highly distorted. China is known
for the low cost and abundance of its labor - a key factor behind
China's success in labor-intensive manufacturing exports.

But labor costs in China may be distorted, for two reasons -
segmentation of rural and urban labor markets and under-development of
social welfare systems.

Distortions in capital markets exist at two levels. Domestically, the
financial system remains repressed, evidenced by highly regulated
interest rates and state influences on credit allocation. Externally,
capital account controls are more restrictive on outflows than on
inflows. The currency is likely undervalued and has probably been so
for the past 15 years.

China's financial system remains overly dependent on banks. Despite
numerous reforms, giving banks more flexibility in determining the
actual rates, the People's Bank of China (PBOC) still maintains floors
for lending rates and ceilings for deposit rates.

The larger gap between nominal GDP growth potential and long-term
government bond yields in China, relative to the gaps in other Asian
economies, also suggests that China's capital is far too cheap.
Compared with other Asian economies, China's nominal growth potential
is among the highest, but its Treasury yield is among the lowest.

The price of key energy products are also regulated by the state.
China has introduced a series of environmental laws and regulations.
But, they have not been well enforced.

Cost distortions in the above five categories add up to RMB2.138
billion in 2008, or 7.2 percent of GDP. Producers in China receive
significant *subsidies' from the rest of the economy, equivalent to
about 7 percent of GDP or 15 percent of industrial GDP. This lowers
input costs, increases production profits, raises investment returns
and improves international competitiveness of the Chinese exports. It
makes China growth very strong,

Averaging 10 percent a year during the past 30 years. But it makes
investment and exports even stronger.

Meanwhile, producer subsidy equivalents depress household income.
Total labor compensation dropped from 52 percent of GDP in 1997 to
only 40 percent in 2007. If household income share in GDP declines
over time, consumption growth would not be able to keep up pace with
GDP growth.

While exchange rate policy is important it is not only, and perhaps
not, the most

important part of the story. Exclusive focus on the exchange rate
policy issue is not likely to be able to deal with the imbalance
problem, economically or politically.

The factor market distortion hypothesis not only satisfactorily
explains the imbalance, but also provides a clear set of policies for
remedying the problem of liberalizing the factor markets.

China's large external sector imbalance is a product of incomplete
economic reform. The best way to reduce the imbalance is to finish the
task of economic reform.

Yiping Huang is Professor in the Chinese Center for Economic Research
at Peking University and in the China Economy Program at the
Australian National University.

http://www.thejakartapost.com/news/2010/02/07/fixing-china039s-current-account-surplus.html

Double-digital GDP growth forecasted this year
(Xinhua)
Updated: 2010-02-07 15:43

A top Chinese think tank forecasted the nation's economy would
experience a mild rebound this year, with gross domestic product
expanding around 10 percent year on year.

Among the three economic engines, investment is expected to contribute
6.3 percentage points to the GDP growth, while consumption and net
export will contribute 4.2 and 0.5 percentage points, respectively,
the Center for Forecasting Science of the Chinese Academy of Sciences
said in a report issued on Saturday.

Investment would continue to increase as a result of the government's
economic stimulus measures, with focuses in agriculture,
transportation, and industries relating to people's livelihood, but
the annual investment growth would decrease from 30.1 percent in 2009
to 25 percent, the report said.

The country's foreign trade is expected to step out of recession as
overseas demand rises due to the recovery of the world's economy.

Total value of the foreign trade would advance 17.6 percent year on
year, with export up 16.6 percent and import up 18.9 percent,
according to the report.

The report also estimated that consumption price index (CPI), a major
gauge of inflation, would rise 3.06 percent from a year earlier, as a
combination of economic revival, ample liquidity, and inflation
expectations would drive up the prices.

Data from the National Bureau of Statistics (NBS) showed China's
economy expanded 8.7 percent last year, of which investment growth
contributed 8 percentage points, consumption contributed 4.6
percentage points, while net exports dragged down GDP growth by 3.9
percentage points due to the sluggish external demand.

http://www.chinadaily.com.cn/china/2010-02/07/content_9440431.htm

...and I am Sid Harth

[chhotemianinshallah]

Bloomberg

Retail Sales Probably Climbed in January: U.S. Economy Preview
February 07, 2010, 09:30 AM EST

By Timothy R. Homan

Feb. 7 (Bloomberg) -- The rebound in spending that gave U.S. retailers
a lift during the holiday season probably carried over into the new
year, signaling consumers may contribute more to growth, economists
said before reports this week.

A drop in unemployment last month, combined with a longer workweek and
rising wages, signals the economy is poised to generate jobs, leading
to gains in income that may boost sales at companies like Macy’s Inc.
and Gap Inc. Retailers have kept inventories in check, resulting in
fewer markdowns that point to increases in volumes and profit margins.

“Consumers have shown an increased willingness to spend,” said Maxwell
Clarke, chief U.S. economist at IDEAglobal in New York. “We see
improved prospects stemming from gradual stabilization in labor
markets.”

Auto sales probably cooled last month, restraining the overall
increase, economists said. Vehicles sales fell in January after three
months of gains, industry figures showed last week.

Excluding automobiles, sales probably rose 0.5 percent after a 0.2
percent decrease the previous month, according to the survey median.

Sales at Macy’s

Macy’s, the second-largest U.S. department-store company, said in a
statement last week that sales at stores open at least a year gained
3.4 percent in January, helped by online purchasing. The Cincinnati-
based retailer said fourth-quarter profit exceeded its forecast.

Purchases at 31 chains rose 3 percent last month, the International
Council of Shopping Centers said Feb. 4, beating the 1 percent
increase the group anticipated.

The jobless rate unexpectedly fell to 9.7 percent last month from 10
percent in December, figures from the Labor Department showed last
week. The median forecast of economists surveyed anticipated no
change.

A 20,000 drop in payrolls served as a reminder that the labor market
has yet to fully recover.

The U.S. economy, the world’s largest, expanded 5.7 percent in the
last three months of 2009, the most in six years, the Commerce
Department said last month. Consumer spending grew 2 percent during
that period.

As the economy expanded in the second half of last year, the Standard
& Poor’s 500 Index rose 21 percent. Stocks have declined 4.4 percent
since the beginning of the year as China stepped up efforts to curb
lending, the Obama administration proposed rules to rein in risk-
taking at banks and concern grew over government debt levels in
Greece, Spain and Portugal.

Business Investment

Manufacturing gains, spurred by business investment in new equipment
and growth overseas, probably boosted U.S. exports, helping to narrow
the trade gap, economists project a Feb. 10 report from the Commerce
Department will show. The deficit probably shrank to $35.5 billion in
December from $36.4 billion the prior month, according to the survey
median.

Inventories in the U.S. probably rose in December for a third straight
month, economists said ahead of a Feb. 11 Commerce Department report.
Stockpiles increased 0.3 percent after 0.4 percent in November as
businesses gained confidence in the strength of the U.S. recovery, the
survey showed.

Consumers may also be turning more confident. The Reuters/University
of Michigan preliminary sentiment index for February, due Feb. 12,
probably rose to 75, the highest level since January 2008, from 74.4
last month, the survey showed.

--With assistance from Cotten Timberlake in Washington. Editors:
Carlos Torres, Vince Golle

To contact the reporter on this story: Timothy R. Homan in Washington
at [phone] or ***@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz
[phone] or ***@bloomberg.net

Feb/07/2010 05:01 GMT

http://www.businessweek.com/news/2010-02-07/retail-sales-probably-climbed-in-january-u-s-economy-preview.html

U.S. Economy: In Sum, Still Pretty Bad
by: Michael Panzner February 07, 2010
Michael Panzner 292

The Federal Reserve Bank of Minneapolis has posted an interesting
interactive feature at its website, "The Recession and Recovery in
Perspective," which allows visitors to visualize the length and depth
of 11 postwar recessions in various ways. Here are two examples:

Despite continued speculation on Wall Street and elsewhere that
economic recovery is upon us, these images sum up just how bad things
have been during the current downturn.

Click here to explore the other options, including an ability to
compare recessions by state.

http://seekingalpha.com/article/187076-u-s-economy-in-sum-still-pretty-bad

Taking a bite out of NASA
Slashed budget would decimate agency and leave the U.S. no longer the
leader in space

By WALTER CUNNINGHAM
HOUSTON CHRONICLE
Feb. 6, 2010, 5:03PM

President Barack Obama's budget proposal may not be a death knell for
NASA, but it certainly would accelerate America's downward spiral
toward mediocrity in space exploration. Now it's up to NASA's leaders
to put the best face possible on this nail that the administration is
trying to hammer into their coffin.

This proposal is not a “bold new course for human spaceflight,” nor is
it a “fundamental reinvigoration of NASA.” It is quite the opposite,
and I have no doubt the people at NASA will see it for what it is — a
rationalization for pursuing mediocrity. It mandates huge changes and
offers little hope for the future. My heart goes out to those who have
to defend it.

NASA has always been a political football. The agency's lifeblood is
federal funding, and it has been losing blood for several decades. The
only hope now for a lifesaving transfusion to stop the hemorrhaging is
Congress.

It is hard to be optimistic. President Obama has apparently decided
the United States should not be in the human spaceflight business. He
obviously thinks NASA's historic mission is a waste of time and money.
Until just two months before his election, he was proposing to use the
$18 billion NASA budget as a piggybank to fund his favored education
programs. With this budget proposal, he is taking a step in that
direction.

NASA is not just a place to spend money, or to count jobs. It is the
agency that has given us a better understanding of our present and
hope for our future; an agency that gives us something to inspire us,
especially young people.

NASA's Constellation program was not “over budget, behind schedule,
and lacking in innovation due to a failure to invest in critical new
technologies,” as stated in the White House budget plan. The program's
problems were due to perennial budget deficiencies. It would have been
sustainable for an annual increase equal to the amount thrown away on
the “cash for clunkers” program, or just a fraction of the tens of
billions of dollars expended annually on congressional earmarks.

It's debatable whether Constellation was the best solution to
President George W. Bush's vision of “Moon, Mars and Beyond,” but it
was far better than the vacuum in which we now find ourselves, and
without a viable alternative in sight.

Yes, jobs will be lost and the local economy will suffer. This will
hurt and be readily measured. In the long run, intangible losses
(those on which we cannot put a price tag) will be far more
devastating.

The cancellation of Constellation will guarantee several things.

Most important, strategically, is the gap, the period during which we
will be dependent on Russia to carry Americans to our own space
station. With the cancellation of Constellation, that gap will grow
longer, not shorter. American astronauts will not travel into space on
American-developed and -built spacecraft until at least 2016 or 2017.

We are not trying to fix any deficiencies in Constellation; our fate
will be in the hands of commercial companies with COTS (Commercial
Orbital Transportation Services) program awards. They will attempt to
regain our lost greatness with new capsules and new rockets or
military rockets, after man-rating them. Supposedly, they will do this
faster and cheaper than NASA. Cheaper, maybe; faster is not going to
happen. These will be companies that have never made a manned rocket
and have little idea of the problems they face trying to man-rate a
brand new launch vehicle and space capsule.

Even under the best of circumstances, humans will not be flying to the
space station on COTS-developed vehicles before 2017.

After 50 years and several hundred billion dollars, the
accomplishments of NASA and the U.S. space program in science,
technology and exploration are unchallenged. They are admired,
respected and envied by people and countries around the world. Our
space program has provided inspiration to the human spirit for young
and old alike. It said proudly to the world that Americans could
accomplish whatever they set their minds to. Look at the efforts of
China and India in the past 30 years to emulate this success.

Young people have always been inspired with talk of sending explorers
to the planets. Do you think they will have the same reaction when we
speak of the new plan for “transformative technology development”?

NASA may have been backing away from the real challenge of human
spaceflight for years, but in canceling Constellation and NASA manned
vehicles we are, in effect, abdicating our role as the leading
spacefaring nation of the world. America will lose its pre-eminence in
space.

The real economic impact will not be immediate.

The public at large is not fully aware of NASA's role as a principal
driver in our economy for the past 50 years. They forget that much of
the technology we now take for granted either originated in the space
program or was utilized and improved by the space program. That is
NASA's real legacy. The investments we made in NASA in the 1960s are
still paying off in technology applications and new businesses.

The annual investment in NASA is not simply an expenditure; it is an
investment — with a payback. The payback is generated because NASA
operates at the frontiers of space, exploring the frontiers of our
civilization.

At the frontiers of space, be it going to Mars or constructing the
most amazing engineering project in history — the International Space
Station — huge obstacles, sometimes considered insurmountable, are
encountered. NASA takes these obstacles as challenges that must be
overcome to reach its goals. The solution may lie in new technology or
a new application of existing technology. These solutions eventually
make their way into the marketplace with applications we never even
dreamed of. NASA has tens of thousands of examples of these spinoffs.

Now, after spending $11 billion on the development and closeout of the
Ares 1 launch vehicle and the Orion space capsule, we are eliminating
them. Gone! And with them, most of NASA's human spaceflight program.
In the ongoing struggle for leadership in science, technology and
exploration, which was represented by America's pre-eminence in space,
we have raised the white flag of surrender.

Who will this proposed budget please? It will please those who have
opposed the Constellation program and have a vested interest in an
alternative plan; those who are against human space exploration and
for unmanned exploration; and those who will benefit from the COTS
program.

None of this new vision sits very well with those of us who have known
NASA at its best. From its inception, one of NASA's motivating forces
was pride in being the very best, in displaying American leadership in
human spaceflight, and maintaining the pre-eminence in space that
derived from this attitude. It appears this attitude is foreign to a
president who believes American pre-eminence should be avoided at all
costs.

President Obama, we do not want a space program that turns us into
“just another country” among countries.

Cunningham piloted the first manned Apollo mission in 1968 and is
author of The All-American Boys.

Five myths about how to create jobs

By James Manyika and Byron Auguste
Sunday, February 7, 2010

With the unemployment rate in the United States lingering just below
10 percent and the midterm elections just nine months away, job
creation has become the top priority in Washington. President Obama
has called for transferring $30 billion in repaid bank bailout money
to a small-business lending fund, saying, "Jobs will be our number one
focus in 2010, and we're going to start where most new jobs do, with
small business." The fund is among several measures -- tax incentives,
infrastructure projects, efforts to increase exports -- that the White
House has proposed to help boost employment. As Americans consider the
various approaches, we must have realistic expectations. We need to
debunk some myths about what it takes to stimulate job growth.

Oh, were only that the case. The scale of the challenge is enormous.
Quick action is important, but remember that the U.S. economy has lost
more than 7 million jobs in the past two years. The country would need
to create more than 200,000 net new jobs each month for the next seven
years to get unemployment back to what was once considered a normal 5
percent. Quick fixes focused on 2010 alone won't be enough.

Of course, the right mix of government policies can help. But even if
Obama's proposals were enacted right away and they accomplished all
that he hopes, that would at best represent a good start. America's
jobs challenge is a multiyear marathon, not a sprint.

2. The key to boosting employment quickly is to help small businesses.

New jobs come from both small and big businesses. From 1987 through
2005, nearly a third of the net new jobs were created by businesses
that each employed more than 500 workers. By 2005, these big companies
accounted for about half of the country's total employment, although
they made up less than 1 percent of all U.S. firms.

But a look at the past two economic booms shows that the pace of job
creation depends on more than the size of the businesses. During the
economic expansion of the 1990s, large U.S. multinational corporations
-- which employ an average of about 1,000 workers each in the United
States -- created jobs more rapidly than other companies. This was
because they dominated computer and electronics manufacturing, the
sector that drove much of that boom. During the more recent expansion
of 2002-2007, most of the net new jobs came from local service
sectors, such as health care, construction and real estate -- which
comprise both large and small businesses.

3. High-tech jobs will solve the problem.

There is a lot of talk these days about green businesses,
biotechnology and other emerging industries that will create the jobs
of the future. While they are obviously part of the solution, these
industries are too small to create the millions of jobs that are
needed right away. The semiconductor and biotech industries, for
instance, each employ less than one-half of 1 percent of U.S. workers;
clean-technology workers, such as those who design and make wind
turbines and solar panels, account for 0.6 percent of the workforce.

We'll be able to generate significant numbers of new jobs only by
spurring broad-based job growth across the economy, particularly in
big sectors such as retail, wholesale, business services and health
care. High-tech innovations will help employment grow over the long
term, as new technology spreads throughout the economy and transforms
other, larger sectors. For example, while the semiconductor industry
alone doesn't account for much U.S. employment, the computer
revolution has fueled the growth of other industries such as retail
and finance; similarly, the clean-technology business by itself
doesn't employ many people, but its developments could transform a big
sector such as energy, creating new business models and new jobs.

4. Higher productivity -- when an economy produces more goods and
services per worker -- kills jobs.

Not so. While productivity growth means that individual companies may
need fewer employees in the short term, it spurs long-term gains in
the economy as a whole. Since the industrial revolution, increasing
worker productivity has brought rising incomes, higher profits and
lower prices. These forces stimulate demand for consumer goods and
services and for new plants and equipment -- fostering, in turn,
industry expansion and job creation.

Take cellphones. Even 15 years ago, they were big, unwieldy, expensive
and worked only in limited coverage areas. But as new technologies
enabled workers to produce phones and provide service more cheaply,
the industry took off. Cellphones are now ubiquitous, and this has
created jobs not just among phonemakers but also among retailers,
service providers and a new industry of developing and selling
applications for cellphones.

5. Increasing exports will revive manufacturing employment.

Maybe for some companies in some industries, but not for the economy
overall. While it's painful to accept, reducing unemployment is not
mainly about regaining the jobs that have been lost. Sure, rising
exports will cause some factories to scale up again, and many laid-off
workers will be called back. But most new job growth will come from
other sectors.

History shows that recessions -- particularly those following a
financial crisis -- accelerate the growth or decline already underway
in industries. In this recession, for example, the auto, financial
services and residential real estate industries have contracted
significantly and won't regain their peak employment anytime soon.

An increase in exports may stem -- but will not reverse -- the
multidecade decline in manufacturing employment. In today's developed
economies, net growth in new jobs doesn't come from manufacturing; it
comes from service industries. Fortunately, boosting exports creates
jobs in supporting service industries, such as design, trucking,
shipping and logistics.

***@mckinsey.com

James Manyika is the San Francisco-based director of the McKinsey
Global Institute. Byron Auguste is a Washington-based director of
McKinsey & Company's social sector office.

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/05/AR2010020501445.html

...and I am Sid Harth

[chhotemianinshallah]

US economy chiefs: Kubilius applies appropriate saving policy
2010/02/06 – 15:25

The Lithuanian Government’s measures aimed at cutting the budget
deficit were necessary and yielded positive results, said the United
States economy and finances chiefs during their meetings with Prime
Minister Andrius Kubilius in Washington.

On Thursday the Prime Minister met with Chairman of the United States
Federal Reserve Ben Bernanke at the headquarters of the Federal
Reserve (FED). Later on, the Prime Minister met with Director of the
White House’s National Economic Council Lawrence Summers, an
influential adviser to President Barack Obama. Afterwards, Kubilius
met with US Secretary of the Treasury Timothy F. Geithner. Minister of
Finance Ingrida Šimonytė and the Prime Minister’s delegation also
attended the meetings.

Chairman of the FED Bernanke and Kubilius discussed the situation of
the global economy and shared thoughts on the crisis management
strategy. Bernanke welcomed the stringent saving measures that helped
the Lithuanian Government manage the crisis, as a result of which the
country can now expect economic recovery. At the same time he
regretted that not all the EU member states pursued similarly
consistent budgetary policy; therefore he considered that economic
recovery of the entire European Union will be delayed as compared to
the Asian and the US economies. According to Bernanke, the global
economy is to recover at different speeds. He said that the biggest
challenge for the US economy is unemployment, which remains high,
although some of the major economic indicators show its recovery.

During the meeting with the Lithuanian Prime Minister, President
Obama’s economic advisor Larry Summers projected that the global
economic recovery would hardly be homogeneous. In his view, the
European Union\`s economic curve will be L-shaped, while that of the
US, U-shaped; the Asian economy, however, will be fastest to recover
and most likely will take the V shape.

Influential U.S. Treasury Secretary Timothy F. Geithner found
Kubilius’s measures for budget consolidation laudable. The Secretary
said that his country was fortunate to be spared of taking similar
measures, as U.S. dollar happens to be world\`s reserve currency. T. F
Geithner also noted that Lithuania and other Baltic States had no
choice but to take the course of austerity. \”This was a difficult,
but also brave, responsible and just step by the Lithuanian
Government. I admire what your Government did over the last year\”,
said the U.S. Treasury Secretary to the Prime Minister Kubilius. He
also noted that some other EU countries showed lack of commitment as
regards tighter fiscal policy; therefore, the EU economy, unlike the
Baltic States, is deemed to recover later.

http://lithuanianews.eu/2010/02/06/us-economy-chiefs-kubilius-applies-appropriate-saving-policy/

Europe's Sovereign Disaster Makes U.S. Bonds Look Awesome
Vincent Fernando | Feb. 7, 2010, 12:54 AM | 745 | 9

As Europe sinks deeper into its sovereign debt morass, America should
be partly happy. That's because, on a relative basis, Europe is making
the U.S. economy look better in the eyes of bond investors.

At a time when many have questioned investors' willingness to continue
gobbling up American bonds, it thus should be comforting for the U.S.
that a major alternative to U.S. bonds, Euro bonds, isn't looking as
attractive as it used to. Japanese bonds aren't looking so hot either
given Japan's economic challenges as well.

Thus European travails have ensured increased demand for U.S. bonds
going forward, and an increased ability for the U.S. to weather
through its current period of deficit spending and economic weakness.
Sometimes victory is had by the player who simply commits the least
errors. It economics this rings especially true given that almost
every nation seems to blunder along whatever path political winds
blow.

Am I gobbling up U.S. debt? No. But for investors who need to park
massive amounts of capital in 'low-risk' fixed-income, ie. the
investors that matter here, the above applies.

http://www.businessinsider.com/europes-sovereign-debt-disaster-is-great-news-for-americas-debt-binge-2010-2

U.S. Consumers Finally Getting Religion About Debt
Henry Blodget | Feb. 6, 2010, 9:42 AM | 1,540 | 7

For the first time since the early 1990s, the debt load of US
consumers is finally dropping. And it's dropping at a faster rate
than it ever has.

Most of this austerity is probably forced: Lending standards have
(finally) tightened, 10% of the country is unemployed, and many folks
have walked away from their debts. But there are probably some
lessons-learned in there, too.

Regardless of of what's causing it, in the long-term, the debt-
reduction is good: We borrowed so heavily from the early 1980s through
2007 that consumer credit soared over 100% of GDP. Reducing this
debt, and strengthening the consumer balance sheet, will eventually
make the economy more healthy.

In the short term, of course, reducing our debts means spending less,
because you can't spend money you aren't borrowing. (The notable
exception to this is when the debt is reduced via default, in which
case the debt is merely transferred to the government and taxpayers
via bank bailouts and subsidies).

Here's a snapshot of the consumer debt picture from Asha Bangalore at
Northern Trust:

And here, from the Fed, is US consumer debt:

And here, from Ned Davis, is consumer debt as a percent of GDP:

http://www.businessinsider.com/henry-blodget-us-consumers-finally-getting-religion-about-debt-2010-2

Had the Fed Stopped Buying Stocks and Can we trust the U.S. Economic
Statistics?
Stock-Markets / Financial Markets 2010
Feb 06, 2010 - 02:35 PM

By: Anthony_Cherniawski

The unemployment rate fell from 10.0 to 9.7 percent in January, and
nonfarm payroll employment was essentially unchanged (-20,000), the
U.S. Bureau of Labor Statistics reported today. Employment fell in
construction and in transportation and warehousing, while temporary
help services and retail trade added jobs. In January, the federal
government added 33,000 jobs, including 9,000 temporary positions for
Census 2010. Employment in state and local governments, excluding
education, continued to trend down.

In accordance with usual practice, BLS will not revise the official
household survey estimates for December 2009 or earlier months. To
show the impact of the population adjustment, however, differences in
selected December 2009 labor force series based on the old and new
population estimates are shown in table B. The adjustment decreased
the estimated size of the civilian noninstitutional population in
December by 258,000, the civilian labor force by 249,000, and
employment by 243,000; the new population estimates had a negligible
impact on unemployment rates and other percentage estimates.

Did you catch the sleight-of-hand? The total labor force is being
reduced while they are adding 33,000 census takers to the rolls as
full-time employees, thus they are getting their (statistical)
improvement. Discouraged workers are nowhere to be found. Table A
shows the reduction of total non-farm employees in 2009. While
reducing the number of (427,000 fictitious) jobs, they reduced the
number of total workforce, which gave a statistically lower percentage
of unemployed, after counting part-time census takers as full-time
employees.

When you run into headlines like "Payrolls fall in January, jobless
rate at 5-month low" don't stop and ask "If 20,000 jobs are going
away, how can the unemployment rate drop?" If you are scratching your
head, you're not supposed to understand any of this stuff...isn't
everything clear? The BLS should be abolished. It serves no useful
function.

Has the Fed stopped buying stocks?

-- The S&P 500 Index may be finishing its third consecutive down week.
We have speculated that the Federal Reserve or the U.S. Treasury could
be allowing a "buyer" to accumulate stock index futures to boost stock
prices. Perhaps the "buyer" has stopped buying. We know that the S&P
500 has dropped 6.6% since the close on January 20, the day before
President Obama announced a plan to restrict proprietary trading by
banks. Moreover, the S&P 500 fell on seven of those 11 trading days.

Are treasury bonds a safe haven or a trap?

-- Treasuries climbed yesterday, pushing 30-year bond yields down the
most in four months, as investors sought the safety of U.S. debt on
concern some European countries face difficulty financing budget
deficits. The U.S. Treasury will sell a record-tying $81 billion of
notes and bonds next week: $40 billion in 3-year securities, $25
billion of 10-year debt and $16 billion in 30-year bonds. The auctions
will be held over three days starting Feb. 9.

Gold’s decline is causing chaos with traders.

-- Gold fell to a three-month low in London as the dollar’s rally cut
bullion’s appeal as an alternative investment. Other precious metals
slid. Gold liquidation continues along with other “risk” assets. The
Reuters-Jefferies CRB Index of 19 raw materials fell 2.6 percent
yesterday, the most since Aug. 14. After reaching a 14-month high in
January, the gauge ended the month down 6.3 percent, the most since
November 2008.

The Nikkei turns south, again.

-- The Nikkei 225 Stock Average fell, sending the Japanese Stock
Average to its lowest close in almost two months, after the yen
gained, commodity prices slid and U.S. jobless claims rose, hurting
confidence in a global recovery. It is becoming more apparent that
the U.S. economy won’t rebound any time soon, raising the anxiety
level of Japanese investors who are dependent upon the U.S. for
exports.

Shanghai deals with overheated economy.

-- China’s Shanghai Index fell, sending the benchmark index to its
longest weekly losing streak since October, on concern faltering
global economic growth will prevent the nation’s exports from
sustaining a recovery. Chinese regulators have been tightening access
to credit to slow down their overheated economy. Even a declining
market won’t cause officials to relax because of already existing
overcapacity issues.

The dollar is up on increased risk aversion.

The dollar gained against the yen after a government report showed the
U.S. unexpectedly lost jobs last month while the unemployment rate
declined. “People are saying the labor market looks a bit weak,” said
James Shugg, a senior economist at Westpac Banking Corp. in London.
“That’s consistent with this concern that the global economy is going
to lose some momentum and budget deficits are going to be a problem
and there’s going to be an increase in risk aversion.”

FHA facing a crush of foreclosures.

-- The share of borrowers who are falling seriously behind on loans
backed by the Federal Housing Administration jumped by more than a
third in the past year, foreshadowing a crush of foreclosures that
could further buffet an agency vital to the housing market's recovery.
About 9.1 percent of FHA borrowers had missed at least three payments
as of December, up from 6.5 percent a year ago, the agency's figures
show.

Gasoline prices are easing, but slowly.

The Energy Information Agency weekly report suggests, “For the third
week in a row, the U.S. average price for regular gasoline declined.
Settling at $2.66 per gallon, the average fell more than four cents
but was $0.77 above last year. On the East Coast, the price slipped
almost four cents to $2.69 per gallon. The average in the Midwest
dropped the most of any region, tumbling six cents to $2.56 per
gallon.”

NatGas prices still feeling the winter effect.

The Energy Information Agency’s Natural Gas Weekly Update reports,
“Since last Wednesday, January 27, natural gas spot prices posted
relatively modest increases at most market locations amid continued
cold temperatures. Cold winter temperatures throughout most of the
lower 48 States and rising crude oil prices likely contributed to
rising natural gas prices. On the week, price increases were generally
less than 10 cents per MMBtu at most markets.”

“Fear the Boom and Bust” rap is gaining public attention.

The beauty of new media is its capacity for showing us what we
otherwise might miss. Fear the Boom and Bust, a YouTube video made by
producer John Papola and economist Russ Roberts, and backed by the
Mercatus Center of George Mason University, turns this advantage to
the point of genius, pitting Keynes and Hayek against each other in a
rap that captures a reality few have fully understood until now.

For more commentary, click here.

Congresswoman Marcy Kaptur exposes Tim Geithner.

Video: Congresswoman Marcy Kaptur questions Turbo on AIG, Goldman
Sachs, and NY Federal Reserve actions regarding AIG counterparty
payouts at PAR. Kaptur: A lot of people think that the president of
the New York Fed works for the U.S. government, but in fact, you work
for the private banks that elected you. Can you provide — Geithner:
No, that is not true. Kaptur: Can you provide for the record the names
of the bankers that elected you in 2002? Geithner: That is a matter of
public record, and of course we can do that. Hmmm…

Traders alert: The Practical Investor is currently offering the daily
Inner Circle Newsletter to new subscribers. Contact us at
***@thepracticalinvestor.com for a free sample newsletter and
subscription information.

Our Investment Advisor Registration is on the Web

We are in the process of updating our website at www.thepracticalinvestor.com
to have more information on our services. Log on and click on Advisor
Registration to get more details.

If you are a client or wish to become one, please make an appointment
to discuss our investment strategies by calling Connie or Tony at
[phone], ext 10 or 11. Or e-mail us at
***@thepracticalinvestor.com .

Anthony M. Cherniawski,
President and CIO
http://www.thepracticalinvestor.com

As a State Registered Investment Advisor, The Practical Investor (TPI)
manages private client investment portfolios using a proprietary
investment strategy created by Chief Investment Officer Tony
Cherniawski. Throughout 2000-01, when many investors felt the pain of
double digit market losses, TPI successfully navigated the choppy
investment waters, creating a profit for our private investment
clients. With a focus on preserving assets and capitalizing on
opportunities, TPI clients benefited greatly from the TPI strategies,
allowing them to stay on track with their life goals

Disclaimer: The content in this article is written for educational and
informational purposes only. There is no offer or recommendation to
buy or sell any security and no information contained here should be
interpreted or construed as investment advice. Do you own due
diligence as the information in this article is the opinion of Anthony
M. Cherniawski and subject to change without notice.

Anthony M. Cherniawski Archive

http://www.marketoracle.co.uk/Article17053.html

Dollar rise to trigger reverse carry trade

The dollar index has risen four per cent In the past fortnight.
(REUTERS)

By

Shashank Shekhar on Sunday, February 07, 2010

Analysts and currency traders see the possibility of a reverse carry
trade in dollars this year.

In the past fortnight the dollar index – the index that measures the
value of the dollar versus a basket of currencies – has risen four per
cent. Further, there is every possibility of the greenback
strengthening this year considering the economic results and
employment data posted at various stages this year will be more
lustrous than the forgettable 2009.

"The possibility of a reverse carry trade is beginning to show. It may
be triggered by an acceleration in the dollar," said Mike Baghdady the
Head of Currency trade with the London-based Spy Glass Trading
Solutions.

A carry trade in dollars involves borrowing US dollars at lower
interest rates and then investing in securities, derivatives and other
products that provide higher interests in foreign countries in their
currencies.

A strong investment by foreign institutional investors (FIIs) in the
security markets of emerging economies is supposed to come from carry
trade.

A flight of capital into dollars as the greenback strengthens and
therefore the interest rates of US Treasury securities become higher
is termed reverse carry trade.

A reverse carry trade in dollars is expected to adversely impact the
financial markets in emerging economies because that's where most of
the FIIs parked their money during the global meltdown of 2008-2009.
It is also expected to impact asset classes such as gold where
investors are known to have parked money the last year thus inflating
the bullion's price to record levels.

Baghday said reports of economic growth in the US for two consecutive
quarters can strengthen confidence in the US economy triggering a
flight of capital to the dollar denominated assets.

He warned that a crash in Chinese economy or iterative news of a
slowdown of demand in US and Europe could also contribute to the
dollar's strengthening.

"The Chinese economy is overheating. It should not suck away growth
from US and European markets," Baghdady said.

"If demand for Chinese goods in the US and Europe continues to decline
then the Chinese growth will suffer. And investors may want to pull
out money from China and direct it to dollar denominated assets," he
added.

Investors will not hesitate from taking risks this year, if such a
situation arises.

"The emerging markets have taken 'a rest' after an unpleasant last
week, but they will not be afraid to put on some risky trades if the
situation arises. After all, much of the previous 'risk on' moves had
been significantly supported by a succession of favourable macro news
flow, given a recovery that was well anchored," said Bill Hubard,
Chief Economist at Swiss Forex Bank MIG.

A Dubai-based analyst said that the reversal of US dollar will hit
asset classes such as precious metals.

"A rise in dollar is inevitable. And logically it will have an adverse
impact on gold." said Deborah Fuhr, Global Head of ETF research at
Blackrock. He added that a stronger dollar has the potential of
adversely impacting precious metal ETFs.

http://www.business24-7.ae/Articles/2010/2/Pages/06022010/02072010_27593b5bf2da4a5393b313b4bba7583e.aspx

...and I am Sid Harth

[chhotemianinshallah]

Global

Reining in the Front-Riders
February 05, 2010

By Manoj Pradhan | London

Today, Norges Bank (NB), which along with the Bank of Israel (BoI) and
the Reserve Bank of Australia (RBA) had started the global rate hike
cycle late last year, kept its policy rate steady. Likewise, on
Tuesday the RBA refrained from hiking its policy rate for a fourth
time, which came as a surprise to markets. These are not isolated
incidents, in our view. All the central banks who either had embarked
on removing policy accommodation in 2009, such as the BoI, the RBA and
NB, or were expected to begin raising rates early in 1Q10, such as the
Reserve Bank of India (RBI) and the Bank of Korea (BoK), have
refrained from hiking policy rates in their meetings so far this
year. Korea's strong recovery and extremely low policy rates, and
India's economic bounce and the risk of inflation made the central
banks of these two economies front-runners for hiking policy rates in
early 2010. Yet none of these ‘front-riders' have made any fresh
attempts to break away from the pack this year. Why? We believe that
the decision to raise policy rates has to balance concerns about the
domestic economy against policy constraints of a global nature.
Headwinds from tightening ahead of the major central banks have made
it difficult for the policy action to gain traction. Early-hiking
central banks have had to deal with currency appreciation and asset
markets that have stubbornly stayed buoyant in line with their
counterparts in the major economies.

Japan
Economy Gets Better, Deflation Gets Worse: Upgrading 2010 Forecast

The Global Economics Team

Chetan Ahya
Chetan Ahya is an Executive Director and the India & South East Asia
economist at Morgan Stanley.

Qing Wang
Qing Wang is an Executive Director and Chief Economist for Greater
China.

Joachim Fels
Joachim Fels is a Managing Director and Morgan Stanley's Chief Global
Fixed Income Economist and Strategist.

Read about other GEF team members

The monetary peloton rides on: In the past, we have likened the
synchronisation of central bank policies in the Great Recession to the
synergies exploited by cyclists in a peloton (see "The Peloton, the
‘Elastic Band Effect' and Monetary Policy", The Global Monetary
Analyst, September 2, 2009). Being part of this peloton gives riders
serious protection from wind-drag. Riders at the front of the peloton
do attempt to break away from the bulk of the riders. However,
breaking away makes sense only if you can fight the headwinds. Central
bank strategy, it appears, is not very different.

Headwinds present central banks with a dilemma: In fact, the dual
headwinds of currency appreciation and poor traction in stock and bond
markets illustrate the dilemma that front-riding central banks are
dealing with. In order to extract a meaningful reaction from domestic
asset prices, policy rates would probably have to be raised
substantially. However, such a strong move would most likely lead to a
very strong appreciation of the currency, which the central bank is
unlikely to find desirable.

The RBA is a case in point, having raised rates three times already in
this hiking cycle. Markets followed the RBA's lead and priced in a
series of rate hikes into front-end interest rates, but they also bid
up the Aussie dollar. By contrast, stock markets and long-term
interest rates in Australia have barely noticed all of this action. We
illustrate that stock markets and bond yields have stayed closely
linked to their counterparts in the US. Of the three early hikers, the
RBA has been easily the most aggressive central bank, spurred by the
resilience shown by the Australian economy. It is certainly in a
position to argue that its actions have taken away a decent portion of
the monetary accommodation and that these rate hikes will have an
impact on household spending via variable-rate mortgages. However, the
fact that asset markets have not responded to even the most aggressive
central bank in this hiking cycle reflects the difficulty that early
hikers face in finding policy traction.

Similar experiences for the BoI and the NB: The other front-riders,
the BoI and NB, have both had similar experiences. In both economies,
currency strength has constrained rapid tightening of monetary policy.
The shekel has strengthened as the BoI's interventions in the FX
markets have eased. Governor Fischer recently acknowledged that such
interventions could not continue endlessly.

Our Israel economist Tevfik Aksoy continues to expect the trend of
smaller interventions and shekel appreciation to persist. Similarly,
part of the reason for NB's pause in its hiking cycle is the strength
of the Norwegian krone. Further, stock and bond markets in Israel and
Norway have mimicked their counterparts in the US and the euro area,
respectively, mirroring Australia's experience.

AXJ central banks face these headwinds too: But perhaps the most
persuasive argument in favour of this global trend is the reluctance
of central banks in Asia to raise policy rates off their lows. Given
its economic outperformance, the Asia ex Japan (AXJ) region has been
the natural recipient of capital flows. In addition to monetary
stimulus from the domestic central bank, countries with pegs to the US
dollar also import the Fed's easy monetary policy through the fixed
exchange rate. Keeping hyper-easy monetary stimulus in place when
growth has already rebounded strongly is clearly not part of the
central bank playbook. However, being part of the monetary peloton has
prompted a change in strategies.

Living with the Trilemma: AXJ economies with fixed exchange rates face
the prospect of even more capital flows if they tighten policy ahead
of the peloton (see "Living with the Trilemma", The Global Monetary
Analyst, January 20, 2010). Even India, with its relatively flexible
exchange rate regime, has reason to worry. In its statement in October
2009, the RBI expressed concern about "perverse" capital inflows
attracted to its rate hikes. Stronger capital inflows would likely
have at least two effects: they would put pressure on the currency to
appreciate and find their way into asset markets. In its policy
meeting on January 29, the RBI kept the policy (reverse repo) rate on
hold but raised the cash reserve ratio - a tool used for liquidity
management - by 75bp. Part of the reason for such liquidity management
is the capital that has been flowing into its economy. In a similar
move aimed at managing excess reserves, the PBoC also raised reserve
requirements on January 12. Upward pressure on AXJ currencies and
capital flows into their markets are making independent monetary
policy increasingly difficult to conduct. The parallels with the
experience of the BoI, the NB and the RBA are striking but not
surprising, since all of them are the result of excess liquidity
provided courtesy of the peloton.

The international spillovers from the synchronised and massive policy
response to the Great Recession helped to ward off a second Great
Depression. However, the same forces of excess liquidity are now
making it difficult for many central banks to start withdrawing
monetary stimulus ahead of tightening by the major central banks.
While these major central banks continue to encourage domestic growth
through their AAA (ample, abundant and augmenting) liquidity regime,
early hikers are going to have to work very hard if they want policy
action to find any traction. Just like in cycling, breaking away makes
sense only if you can fight the headwinds. After all, there is a
reason that professional athletes find strength in numbers.

No easy resolution for the front-riders: Our global economics team
expects the front-riders to continue to grapple with the risks of
overheating and inflation in their domestic theatres. The BoK is
expected to hike rates in 1Q10 while our India team thinks that the
RBI could well raise its policy rates before its next policy meeting
in April in an inter-meeting move some time in 1Q10 as well. Having
stayed on hold today, our NB watcher Spyros Andreopoulos believes that
a hike at the March 24 meeting is a close call but more hikes are very
likely in 2H10. Finally, our Israel and Australia teams expect the BoI
and the RBA to raise rates by 150bp and 50bp, respectively by 3Q10.

Switching gears for the hiking stage: We are not very far from the
time when the peloton itself will change gears. Our US and euro area
economics teams expect policy rates to be hiked in 3Q10 and withdrawal
of excess reserves in the US and a gradual rise in EONIA in the euro
area to begin before that. As markets price in those hikes, stock and
bond markets in the US and euro area will likely respond. The close
links between international financial markets that we have highlighted
will be the conduit for transmitting these effects around the world.
In such an environment, central banks who wish to tighten their
policies will likely find the going easier. Rate hikes that are more
in sync with the peloton are less likely to cause currency
appreciation, giving central banks more legroom.

Global

Asian Amplification
February 05, 2010

By Joachim Fels | London

Pacing ahead: Asia was the first region to emerge from the Great
Recession last year. It is also the first region where the incoming
data justify a forecast upgrade this year. Consequently, our Asia team
has just boosted its 2010 GDP growth forecasts for Japan (by 1.4pp),
China (1pp), India (0.5pp), Malaysia (0.5pp) and Thailand (0.3pp). We
now see Pan-Asia motoring along at a 7.4% pace (from 6.6% previously)
and Asia excluding Japan (AxJ) at an 8.8% clip (previously 8.2%). The
main trigger for this upward revision was a stronger-than-expected
surge in external trade around the turn of this year, which should
also lead to stronger capex and, especially in India, a better outlook
for domestic demand. For details, see our Asia team's notes released
earlier today.

Now looking for 4.4% global GDP growth in 2010 ... The Asian upgrade,
along with some minor changes elsewhere, pushes our 2010 global GDP
forecast up by almost half a point to a solid, above-consensus 4.4%,
from 4.0% previously. Importantly, even though Asia's share in global
GDP is only slightly above 30%, it will account for no less than 60%
of global GDP growth this year, on our forecasts - Asian
amplification.

... slowing to 4% in 2011: Our view on 2011 has barely changed - we
have nudged up our global GDP forecast only marginally to 4%, from
3.9% previously. Thus, factoring in a stronger 2010 outlook, we now
forecast a more accentuated fading of global growth momentum in 2011,
reflecting less monetary and fiscal stimulus as well as the lagged
effects of the sharp rise in long-term interest rates that we expect
this year (which, admittedly, is still a forecast). The risks to our
2011 outlook are probably skewed to the downside, as several countries
in the developed world might be forced into a sharper fiscal
tightening than currently anticipated.

Amplifying our five global themes: Moving on from the naked numbers,
our Asian forecast upgrade serves to underscore the five global
economic themes we have been highlighting in recent months.

1. A tale of two worlds: This theme, which juxtaposes strong growth in
emerging markets versus tepid growth in the advanced economies, shines
even more brightly with our Asia growth revisions. We now see output
in the EM economies growing by close to 7% this year, from 6.5%
previously. Thus, the EM universe contributes fully 75% of the 4.4%
global GDP growth we forecast for 2010, against a meagre growth
contribution of 25% from the advanced economies.

2. BBB recovery in G10: We now forecast significantly higher GDP
growth in Japan - 1.8% compared to 0.4% previously - and we have
abandoned our call for a double-dip in Japan in the first half of this
year. However, looking at the advanced economies as a whole, we still
expect this recovery to be bumpy, below-par and boring overall, with
GDP in the G10 rising at only just over 2.2% (against 2.0%
previously).

3. G3 growth differentiation: With today's forecast revision, Japan
has passed on the red lantern in terms of growth within the G3 to
Europe, where we continue to see GDP growing by a sluggish 1.2% this
year. However, our view that growth differentials within the G3 are
likely to garner more attention this year remains unchanged, as we
continue to see the US leading the pack with a 3%+ growth rate this
year. We expect Europe to lag behind, mainly because the bulk of the
labour market adjustment is still to come there and because credit
availability is likely to be lower than in the US, where credit
markets as opposed to banks play a larger role in financing the
economy.

4. AAA liquidity cycle remains intact: While we now expect China to
start hiking official interest rates already in 2Q, and thus one
quarter earlier than previously thought, the big picture hasn't
changed, in our view: central banks around the world are more likely
to crawl rather than rush towards the exit. Any tightening is likely
to be gradual and cautious, and short rates are likely to stay well
below neutral levels in the foreseeable future. Hence, we expect
liquidity in the hands of consumers, investors and companies to remain
ample, abundant and augmenting.

5. Sovereign and inflation risks up: The sovereign risk theme has
already started to play out with the Greek fiscal drama, and is now in
the process of widening out to other European countries. While our
Asian forecast upgrades do not affect the sovereign risk theme
directly, they underscore the second part of the theme - rising global
inflation risks. In fact, our 2010 CPI inflation forecast in the AxJ
region has gone up from 3.7% to 4.1%, and our team believes that risks
to this forecast are still skewed to the upside, given the pick-up in
growth momentum and strong capital inflows into the region.

For further details, see Asian Amplification, February 4, 2010.

China

Upgrading 2010 Forecasts on Improved External Outlook
February 05, 2010

By Qing Wang | Hong Kong & Steven Zhang | Shanghai

Introduction

Both export growth and CPI inflation readings surprised on the upside
by a considerable margin in December 2009, registering 17%Y (versus
the consensus of 5%Y) and 1.9%Y (versus the consensus of 1.5%Y),
respectively. These developments are symptomatic of stronger external
demand than we had envisaged under our original baseline scenario (see
China Economics: Rebalancing, Not Overheating, January 21, 2010).

Improved External Outlook

While the stronger-than-expected export growth in December 2009 to
some extent reflects the low base effect, it is consistent with the
trends of the OECD leading indicator - a stronger-than-expected 4Q09
GDP growth reading for the US and stronger-than-expected ISM for
January 10, as well as the observations by our global economics team
of more convincing signs of a sustainable recovery in major
industrialized economies (see US Economics: Outlook 2010: Higher
Rates, Fed Exit and Sustainable Growth, January 4, 2010; European
Economics: Transition Towards a Tepid Recovery, January 4, 2010; and
Japan Economics: Economy Gets Better, Deflation Gets Worse, January
29, 2010).

The latest strength of China's exports also reflects robust demand
from emerging markets. The growth rate of exports to AXJ and Latam/
Africa - which combined account for nearly 50% of China's total
exports - was about 30%Y and 20%Y in December 2009, respectively.

The effective depreciation of the renminbi exchange rate may have also
contributed to the remarkable recovery in exports. We estimate that
the renminbi trade-weighted exchange rate has depreciated by nearly 6%
since the end of March 2009, as the currencies of China's main trading
partners have appreciated against the USD substantially, while the
renminbi remains pegged to the USD at around the rate of 6.83.

Robust Domestic Demand Intact Despite Policy Shift

We continue to believe that the policy environment in 2010 will be
characterized as one of normalization rather than outright tightening,
despite the earlier-than-expected policy shift. We forecast Rmb7.5
trillion in new loans in 2010, which was recently confirmed by the
bank regulator as the target amount for new loans in 2010, implying
19%Y loan growth. As long as the target amount for new loans remains
unchanged at Rmb7.5 trillion in 2010, domestic credit conditions
should be supportive of growth, in our view. In addition, we estimate
that about Rmb1.0-1.5 trillion out of Rmb9.5 trillion in loans made in
2009 has not actually been utilized, but remains available for 2010.
Therefore, the effective amount of new bank lending in 2010 could
amount to Rmb8.5-9.0 trillion, versus Rmb8.0 trillion in 2009. The
bottom line is that we expect monetary and credit conditions to remain
supportive of the real economy this year. Moreover, private
consumption is likely to show steady improvement through 2010 as
consumer confidence and employment continue to improve.

Inflation: Higher Upside Risk

Export growth is an important gauge of inflationary pressure, because
it is a useful proxy for output gap, especially in the industrial
sectors, in China, in our view. Much weaker exports represent a
powerful negative demand shock that is disinflationary. China has
suffered three episodes of deflation in the last decade or so: one
during the Asian Financial Crisis, the other in the aftermath of the
TMT bubble burst, and the current one. The pattern has been that the
deflation/disinflation either coincided with, or occurred in the
immediate aftermath of, a collapse in export growth.

We have estimated that there is around a six-month lag between change
in monetary conditions and headline inflation (see Worried About
Inflation? Get Money Right First, October 19, 2009). Since money
supply (M2) growth already peaked in November 2009, the key swing
factor in determining the inflation outlook for the next six months is
how fast the output gap will close, which, in our view, can be gauged
approximately by the export growth rate. In this context, it is no
surprise that stronger-than-expected export growth coincided with
higher-than-expected headline CPI inflation in December last year.

Forecast Upgrade

In light of the developments since late November 2009, when we
initially presented our 2010 outlook (see China Economics: A
Goldilocks Scenario in '10, November 22, 2009), we have revised up our
forecasts for China's GDP growth and inflation in 2010 to 11% (from
10%) and 3.2% (from 2.5%), respectively, primarily to reflect an
external outlook that will likely turn out to be stronger than we
originally envisaged.

Specifically, we have revised export growth for 2010 up to 15% from
9%, and accordingly import growth to 18% from 10%, partly to reflect
the high imported content of China's exports. We envisage that the
stronger exports will contribute to stronger economic growth mainly
through their positive impact on private investment in the
manufacturing sector, such that the contribution of net exports to
growth - which is largely an accounting concept - remains zero.

In terms of trajectory, an early policy tightening should help lower
the risk of overheating and prevent a boom-bust cycle. While the 2Q09
rebound represents a sharp bounce from the cyclical trough, we expect
the sequential growth rate to return to a more sustainable 2.0-2.5% in
the quarters ahead. Nevertheless, we project that the year-on-year
growth rate is set to peak at 11.7%Y in 1Q10, before slowing down - in
part on the base effect - towards a more sustainable high-single-digit
level. The moderation in growth rate over the course of 2010 would
reflect acceleration in private consumption and investment, as well as
a recovery in exports, partly offset by a smaller dose of policy
stimulus.

The upward revision of CPI inflation hinges on three key assumptions:
1) money supply (M2) growth will be around 19%; 2) export growth will
be 15%; and 3) crude oil prices will rise steadily over the course of
the year and reach US$95 per barrel by year-end (see Crude Oil:
Fundamentals Improving: Raising Oil Price Forecasts, January 24,
2010). We forecast that headline CPI inflation could peak at 4.3%Y by
June 2010 and then start to moderate over the course of 2H10.

Under the reviewed baseline scenario, we expect China's trade surplus
to shrink further to 4.0% of GDP from 4.5% of GDP in 2009, but to
remain broadly unchanged in absolute terms at about US$200 billion.

The risk to this revised baseline scenario is broadly balanced. The
key swing factor will be external demand. If external demand were to
be even stronger than envisaged under our revised baseline scenario, a
full-blown overheating would become possible, as illustrated by the
forecasts under the bull case. On the other hand, the strong export
growth in December 2009 may well turn out to be transitory, and the
subsequent export growth over the course of the year would be tepid.
Under these circumstances, we would expect that neither investment nor
consumption growth would accelerate from their levels in 2009.

Policy Implications: RRR Hikes in 1Q; Interest Rate Hike in 2Q; and
Renminbi De-Peg in 3Q

Stronger-than-expected data, especially for exports, will likely bring
forward the policy measures that we have envisaged to be part of
policy normalization. First, we expect multiple RRR hikes, as
warranted by the need to sterilize the liquidity impact, as persistent
FX reserve accumulation returns (see China Economics: Rebalancing, Not
Overheating, January 21, 2010). We choose not to forecast exactly how
much the RRR might be raised, because this hinges on how much excess
liquidity is created as a result of persistent FX inflows stemming
from the twin balance of payments surpluses: the current and capital
accounts. In general, we expect that the multiple RRR hikes will
ensure that excess reserve ratio will not exceed 3%.

We now expect the first base interest rate hike to take place as early
as April, to help manage inflation expectations by ensuring positive
interest rates for savings deposits. We forecast that headline CPI
inflation may exceed the one-year deposit interest rate at 2.25% by
March-April. In view of its strong determination to manage
inflationary expectations, the PBoC is unlikely to tolerate negative
real interest rates on deposits for too long this time, in our view.
We expect three hikes of base interest rates, distributed evenly over
the three remaining quarters, with the primary purpose of the hikes
being to maintain the rate hike cycle and expectations until real
deposit rates climb out of negative territory.

While higher growth and inflation make a stronger case for renminbi
appreciation, we maintain our call that an exit of the renminbi from
the USD peg will take place in 2010, but not likely in 1H10. This is
because it takes time to build consensus, given that any potential
move would be tantamount to a regime shift instead of a fine-tuning of
existing policy. At the same time, we would be surprised if the
current de facto US peg regime remains intact beyond November 2010
(see China Economics: Five Potential Surprises in 2010, December 7,
2009).

According to our colleagues Dick Berner and David Greenlaw, the US Fed
will likely make its first rate hike in 3Q10. If, as we expect, the
PBoC were to hike interest rates in 2Q10, the mismatch in the timing
of rate hikes would mean that China-US interest spreads would widen
and likely trigger renewed expectations of renminbi appreciation, and
thus hot money inflows, in our view. In response, the Chinese
authorities may impose additional controls over inbound capital
inflows and intensify scrutiny of trade-related transactions with a
view to stemming hot money flows, in our view.

Moreover, aggressive front-loading of lending by the banks may force
the authorities to respond in kind with administrative measures with
the objective of achieving the new lending target of Rmb7.5 trillion
for the year. In fact, the PBoC has already applied a higher bank-
specific RRR to some banks that have engaged in aggressive lending so
far this year (vis-à-vis the lending target), as a warning to other
banks that might follow suit. This move appears to have been effective
in forcing those banks to cut back their lending.

Market Implications

Policy uncertainty and non-transparency - instead of policy tightening
per se - as a result of the cat-and-mouse game between commercial
banks and the authorities will likely weigh on market sentiment in the
near term. While the growth and inflation mix has become less benign
for 2010 than we had envisaged under our original baseline, the
fundamental strength of the economy remains intact, in our view.

On an interesting note, the cash flow/income implications of a rising
interest rate environment on enterprises and households in aggregate
are quite different. This is because the household sector as a whole
is a net creditor, with bank savings deposits as its main form of
financial assets, while the enterprise sector is a net debtor. We
estimate that a 27bp hike in base deposit and lending rates could
generate about Rmb56 billion in interest income for households, or
0.16% of annual household disposable income.

Japan

Economy Gets Better, Deflation Gets Worse: Upgrading 2010 Forecast
February 05, 2010

By Takehiro Sato & Takeshi Yamaguchi | Tokyo

Exports to Asia Are Pushing Manufacturing Beyond our Forecast

We must concede that the forecasts we made last December were too
cautious. Though manufacturing is slowing just ahead by a touch,
output is poised to continue rising in the Jan-Mar quarter, led by
brisk exports to Asia. Last December, production levels were still
about 20% below the peak of 2007, and it was touch-and-go as to
whether the capacity utilization ratio would get back to 70%. Overall,
levels of economy activity are far from satisfactory now, but momentum
is proving far stronger than in past recoveries, and clearly ahead of
our earlier forecast.

The encouraging manufacturing performance owes much to the strength of
exports to Asia. Relative to pre-crisis average levels for 2007,
volumes (after our seasonal adjustment) at end-December had rebounded
to 67% for US-bound exports and 71% for European exports, but were
already back to 100% for exports to Asia (and to 87% of the peak level
from February 2008). Trade statistics for 2009, released alongside
preliminary December data, also show that China (18.9% share) has now
leapfrogged the US (16.1%) as Japan's biggest export market.

Japan's exports are increasingly reliant on Asia, and on China in
particular. As the upward revision of our forecasts for Asia discussed
below shows, Asian economies continue to boom, despite the
authorities' attempts to check overheating, and the region is likely
to remain the lynchpin of Japan's exports for some time.

Raising Our Growth Rate for Japan While Revising Up for Asia Overall

Our Asian economists, Chetan Ahya (covering India and ASEAN) and Qing
Wang (China), have lifted their economic growth forecast for Asia ex-
Japan in 2010 by 0.6pp to 8.8%. The salient changes are an increase of
1.0pp to 11.0% for China, and 0.5pp to 8.5% for India. In conjunction,
we have raised our Japan forecast for 2010 by 1.4pp to 1.8%, primarily
driven by exports.

The reason why our numbers move up more for Japan than for AXJ is the
boost to the base effect for growth in the following year created by
the strong export contribution in Oct-Dec 2009. We now estimate that
real GDP in Oct-Dec grew at an annualized rate of 5.3%, which is
substantially better than the 1.8% we were looking for last December,
and pushes up the base effect for growth in 2010 by 0.7pp to 1.5pp.
Also note that the manufacturing outlook for Jan-Mar 2010 is now more
favorable, which reduces the likelihood that GDP growth in this
quarter will be sharply negative. In connection with the base effect,
this boosts the 2010 outlook significantly. The continuing decline in
public investment will of course constrain growth, but the probability
that this factor alone will trigger a double-dip in 1H10 is receding.
Ultimately, we believe that despite a drop in growth rate in 1H10
relative to Oct-Dec last year, Japan's economy will avoid a true
double-dip and maintain a path of moderate growth.

This brings up our global economic forecast for 2010 by 0.4pp to 4.4%.
Note that in the previous growth period from January 2002 to October
2007, Japan's industrial output (smoothing out monthly variations)
continued to rise in step with overall economic growth. Although the
recent industrial production growth pace of 3-4%Q marks a slowdown
from Apr-Jun and Jul-Sep (7-8%) last year, it approximates to the rate
of global economic growth in 2010-11 (+4.3%). If Japan's manufacturing
continues to recover at this clip, we would expect production to
return to the 2005 level by 2012 or so, which lies within the current
inventory cycle.

Nevertheless, Deflation Is Getting Worse

Meanwhile, deflation in Japan is intensifying. Wage declines are
having an impact on a broad range of goods and services prices,
especially clothing and personal effects, highlighting a negative
spiral from wages to general prices.

Although we have moved up our real growth rate forecast substantially
by 1.4pp for 2010 (and by 1.3pp for F3/11), the increase for nominal
growth at 0.6pp (0.6pp for F3/11) is not all that large. This is due
to a downward revision for the GDP deflator, where we now factor in a
much slower rate of improvement, having incorporated a slower CPI
improvement than in our outlook last December. So, although our
economic forecast rises, deflation is actually getting worse.

We expect the Japan-style core consumer prices (excluding food and
energy) to show narrowing margins of year-on-year decline as the
effects of falling oil prices in 2009 drop out of the year-on-year
comparison. Yet, keynote prices from the US-style core (a stripped-
down version of the core CPI, also excluding food and energy) will
show widening declines from April as the effects of the new
administration's policies, such as ending high school tuition fees,
filter through. On this measure, we expect deflation to run at around
-1.5%Y.

It is necessary to distinguish between price declines due to such
systemic factors and genuine deflation. But an upward revision to the
growth rate is not going to rapidly close the output gap, which
remains as wide as it has even been at about -7% (Cabinet Office
estimate for Jul-Sep 2009). There is also an approximate four-quarter
lag before the output gap affects actual prices, so it would be
mid-2010 at the earliest before economic recovery from Apr-Jun last
year shows up in key prices via a narrowing output gap.

As commodity prices, especially crude oil, have recently been rising
in reflection of booming demand from emerging markets, declines in
consumer prices could shrink by more than expected, depending on
future energy and raw materials prices. However, as 2007 and 1H08
showed, price rises brought about by soaring commodity prices are
ultimately deflationary, as they erode the purchasing power of
domestic producers and consumers. In fact, trading gains, a measure of
the real purchasing power of Japan's economy, deteriorated from an
annualized JPY11.7 trillion loss in Jan-Mar 2009 to a JPY18.2 trillion
loss in Jul-Sep.

The path from such cost-push inflation caused by rising import prices
to demand-pull inflation is roundabout. So, it is necessary to front-
load consumer and company investor behavior via changes in medium-term
inflation expectations. There is an outside chance that this could set
off a mechanism whereby a narrowing output gap feeds through to higher
prices. However, overall demand is likely to be held back by a drop in
purchasing power and lead to deflationary pressure in Japan before
people's inflation forecasts change.

Further Loosening of Monetary Policy

Though the end of deflation remains a distant prospect, we expect the
government to intensify calls for the BoJ to ease in the run-up to the
July Upper House election. Essentially, we expect the BoJ to favor
cooperation with the government. Along with our interest rate cut call
for Apr-Jun 2010, we think that the following specific measures will
be on the easing menu, in order of probability.

1) Increasing the current account balance held at the BoJ: The BoJ
steps up the supply of funds liberally towards the end of the fiscal
year with a view to increasing the current account balance by about
JPY10 trillion, from some JPY15 trillion now to JPY25 trillion. This
measure, however, would most likely not be accompanied by a clear
announcement, such as a current account balance target.

2) Allowing a temporary fall in unsecured call rates from the target
level: While stepping up quantitative easing, the bank holds off on
fund absorption operations, thus allowing the weighted average
overnight unsecured call rate to drop temporarily below 0.10%. The
effect of this should be to guide market rates lower. However, we
would not expect this to be accompanied by a clear announcement
either.

3) Increasing JGB purchases: Under the regulations of the Public
Finance Act, the probability of increased JGB purchase amounts is low
in the current circumstances. However, if the medium-term framework
for management of the public finances that the government plans to
announce by May-June 2010 includes credible targets for balancing the
public books, the BoJ could act from the standpoint of JGB market
stability to demonstrate solidarity with the government and increase
purchase amounts. For the ‘banknote rule', which prevents the BoJ from
holding more JGBs than it has banknotes in circulation, we would
expect such a decision to involve technical, systemic changes (for
example, excluding mid/longer-term JGBs with less than one year to run
from the definition of outstanding holdings). If so, we would expect
the BoJ to gradually increase monthly purchases from the current
JPY1.8 trillion to about JPY2.4 trillion.

4) Clarifying commitment to policy duration: The regular MPM on
December 17-18, 2009 attempted to define the understanding of price
stability more clearly, and a step on from that would be to re-clarify
the commitment to policy duration. If so, a commitment relating not to
a Japan-style core CPI but to a US-style core (core-core) would
probably enhance the policy effect. However, the timing of such action
could coincide with the adoption of an inflation target, as discussed
below.

5) Unsterilization of forex intervention funds: Under the new finance
minister, it seems clear that the MoF is veering towards a weaker yen
strategy in its currency policy. In a destabilized forex market, the
possibility of market intervention increases, and unsterilization of
intervention funds is one means by which the BoJ can promote growth in
the current account balance and step up quantitative easing. In terms
of timing, we think the period around Feb-Mar, towards the end of the
fiscal year when repatriating funds exert pressure for a higher yen,
will be worth watching.

6) Adopting an inflation target: To demonstrate that the government
and the BoJ are cooperating to rid Japan of deflation, they could
share an inflation target, with the government entrusting the mandate
to achieve this to the BoJ. Traditionally, the BoJ has been reluctant
to adopt an inflation target in a deflationary setting. However, the
scheme we would envisage is a UK-style one, wherein the government
sets a common target with the BoJ, and the BoJ decides how it could be
achieved. The government is already shifting to a weak-yen policy to
achieve such a target; for the BoJ, intensified monetary easing, by
means including those listed above, could be the way of achieving the
target. With successive overseas central banks embarking on exit
strategies from mid-2010, intensified easing by the BoJ would exert
pressure for a weaker yen

Tweaking Our Interest Rate Outlook

We maintain our out-of-consensus call for a rate cut in Apr-Jun 2010.
Although the domestic economy has recently been tracking ahead of our
cautious forecast, the government has made beating deflation its
economic priority, so we believe that tightening in Japan is unlikely
to be a discussion item this year, even if overseas central banks
embark on exit strategies. Meanwhile, we push back the expected timing
of Japan's policy exit by six months from Jul-Sep 2011 to Jan-Mar
2012.

The BoJ did, however, bump up its forecast for core CPI in its interim
assessment of the October Outlook Report, from -0.4%Y to -0.2% for
F3/12. This does not speak to any core improvement in deflation, as
the increase stemmed from a revised outlook for imported commodity
prices such as oil. The BoJ has a track record here, though, as when
ending quantitative easing in 2006, it justified tightening on the
basis of inflation rooted in rising commodity prices. Implicit in the
BoJ's forecast for average deflation of -0.2% in F3/12 is the
perception that the core CPI could turn positive year on year in the
second half of that year, and we can easily imagine the bank moving
opportunistically towards an exit based on the timing of this price
inflection.

Meanwhile, we expect long-term yields to stay stable at low levels,
backed by the healthy private-sector investment/savings balance, even
as fiscal anxiety mounts. With deflation now a policy priority, policy
rates and long-term rates are not going to be keenly sensitive to
economic data even if the domestic economy is surprising on the
upside. More decisive for the bond market outlook is the trend for
deflation, which we believe is here to stay.

India

Towards a Higher Growth Path
February 05, 2010

By Chetan Ahya | Singapore & Tanvee Gupta | India

Domestic Demand Surprising on the Upside

As mentioned in India EcoView: Upside Risks to Growth Rising, January
21, 2010, strong incoming data have affirmed our view that upside
risks to growth have increased significantly. Growth in domestic
demand has lifted IP growth close to peak levels. IP growth
accelerated to 11.7%Y in November 2009 from the trough of -0.2%Y in
December 2008, driven by expansionary policy, low interest rates and a
sharp rise in capital inflows. Indeed, seasonally adjusted IP
increased by 10.9% between November and March 2009. The bulk of this
rise occurred between November and June 2009. Private consumption has
revived, with discretionary spending taking the lead. Passenger car
and two-wheeler sales growth accelerated to an average of 44.3%Y and
46.8%Y (our estimates) during the three months ended January 2010
(versus 1.2%Y and -7.2%Y during the same period last year). Also,
consumer durables sales growth accelerated to a 14-year high of 37.3%Y
as of November 2009, after reaching a low of -4.2% as of December
2008. The segment breakdown of the IP trend indicates that the growth
recovery is beginning to broaden. While in the initial months, growth
was driven by consumption - discretionary as well as staples - over
the last three months, there are incipient signs that capital goods
demand is improving.

F2011 - Transitioning from Policy-Driven to Private Sector-Driven
Growth

We expect GDP growth to rise to 8.5% in F2011 (12-months ended March
2011) compared to 7.1% in F2010. On a calendar year (CY) basis, we
expect GDP growth to accelerate to 8.5% in 2010 from 6.4% in 2009.
While the key driver of the growth acceleration recovery process in
2009 was greater traction to policy measures, in 2010 even as the
policymakers will gradually withdraw the monetary and fiscal policy
support, we expect the recovery trend to be sustained. The policy-
driven domestic demand recovery is now replaced by visible signs of
improvement in autonomous domestic demand. We expect consumer and
business confidence to pick up significantly, helping to revert to
private sector-driven growth in F2011. Simultaneously, we believe that
the moderation in discretionary consumption growth due to withdrawal
of policy support will be offset by a revival in the investment cycle.

In addition, one of the most important factors supporting this
recovery is global growth. As we have argued, India's growth trend
remains highly influenced by capital inflows. Improving global growth
will mean more capital inflows into the country, as well as higher
external demand. Over the past three months, our global economics team
has lifted global GDP growth for 2010 to 4.4% from 4% (versus -1.1% in
2009).

Acceleration in Reforms to Enhance the Scope of Recovery

The verdict of the May 2009 general elections had raised hope of
acceleration in the pace of reforms, considering that the share of the
single-largest party in the Lower House of the Parliament had
increased to the highest levels since the 1991 elections. However,
every major policy decision in India goes through a one- to three-year
cycle of POTA (Proposition, Opposition, Treaty-Consensus and Action).
The good news is that many of the key reforms are now moving toward
the action phase. The most prominent measures likely to see action in
F2011 are: a) the Goods and Services Tax system; b) consolidation of
the public sector deficit; c) meaningful steps towards divestment of
the government's stake in state-owned enterprises; d) acceleration in
infrastructure spending, particularly in roads; and e) direct tax
reforms. We expect the government to be able to successfully push
through a number of critical policy changes in 2010. We believe that
some of these changes are key to lifting India on a sustainable higher
growth path.

F2012 - Sustaining Higher Growth of Plus 8%

We forecast 2012 GDP growth of 8.4% in F2012 (and CY2011) compared
with 8.5% in F2011 (and CY2010). Domestic demand will continue to be
the primary growth driver. Acceleration in the pace of reforms in
F2011 and a stable global growth trend (implying healthy capital
inflows into India) should ensure that investments continue to improve
in F2012. We believe that savings and investments (as a percentage of
GDP) already reached a trough in F2009, at 32.5% and 34.9%,
respectively. We expect the structural story of rising savings and
investments to be reinforced after this major dip in F2009 due to the
global credit turmoil.

Increasing Our Inflations Forecasts Too

In 2004 and 2005, the recovery in growth gradually allowed adequate
time for the private corporate sector to initiate capex plans. In the
current cycle, however, the recovery in growth has been sharp and the
business investment cycle has been hit badly. The transition from low-
capacity to full-capacity utilization is likely to occur in a much
shorter period. For instance, in the current cycle, the seasonally
adjusted IP index has risen 11% cumulatively in eight months from the
trough, whereas in the previous cycle seasonally adjusted IP index
took 19 months to rise 11% cumulatively from the trough. Moreover, the
input price pressures appear to be emerging much earlier in the
current cycle than in the previous one. For instance, crude prices
reached US$77/bbl only by September 2007 - three years into the growth
upcycle. For F2011, we expect the non-food inflation to average 5.5%
compared to our earlier estimate of 4.5%, as domestic demand pressures
build up.

Reversal in Monetary Policy Ahead

The January 29 monetary policy statement highlighted that the RBI's
"main policy instruments are all currently at levels that are more
consistent with a crisis situation than a fast-recovering economy". We
agree and believe that the economy is in a fast recovery mode and that
the RBI will need to start lifting policy rates toward normalized
levels. Indeed, the reverse repo rate, at 3.25% currently, is a full
125bp below the previous cycle low of 4.5%, while growth has rebounded
much more sharply than the previous cycle. Building in our higher
growth and inflation forecasts, we expect the RBI to hike the reverse
repo rate (the policy rate in operation right now) by 175bp in 2010
compared with 150bp estimated earlier. Similarly, in 2011 we expect
the RBI to hike the repo rate (which will be the policy rate in
operation then) by 100bp instead of 50bp estimated earlier.

Consolidation of Public Sector Deficit to Begin in F2011

We expect the government to take the first step towards reducing the
deficit to more sustainable levels in the February 2010 budget. The
recent report of the 13th Finance Commission will be a good guide for
the government to move on this correction path. We expect the
government to reduce expenditure to GDP, as there will be no major one-
off expenditure items. A simultaneous increase in tax to GDP should
help cut the consolidated national fiscal deficit to 8.8% of GDP in
F2011 from 10.5% in F2010. In 2010, the government should be able to
increase non-tax receipts through divestment of a stake in state-owned
enterprises and 3G telecom license fees. We expect the government to
continue to be on a consolidation path, reducing the fiscal deficit to
7.5% of GDP in F2012.

Bull-Bear Scenarios

We believe that there are two key factors that will influence India's
growth outlook in F2011 and F2012. The most important among them will
be the global growth trend. This will be reflected in global risk
appetite and capital inflows into the country, as well as external
demand. Second, we believe that the pace of structural reforms from
the government can also swing the investment growth outlook. In our
base case, we expect F2011 and F2012 GDP growth of 8.5% and 8.4%,
respectively. The upside and downside risks to India's GDP growth
estimates will likely depend on the influence of these two factors.
Based on this framework, we see bull scenario growth for India at 10%
in F2011 and 9.8% in F2012 and the bear case at 7% in F2011 and 6.8%
in F2012.

ASEAN

Outlining the Themes and Realigning our Views
February 05, 2010

By Deyi Tan, Chetan Ahya & Shweta Singh | Singapore

Laying the Framework and Highlighting the Themes

We have previously highlighted three macro themes that investors are
likely to be focused on for 2010 (see ASEAN Economics: Preferring
Domestic Demand Plays in a Slow and Steady World, September 24, 2009).
They are 1) global conditions and the type of macro recovery; 2)
inflationary pressures and potential inflation hedges; and 3) policy
exit roadmap. We still think these themes are pertinent in assessing
how ASEAN economies will fare and how they will perform relative to
one another in 2010 and 2011. Based on this framework, our preference
rankings for ASEAN (in terms of the growth outlook and the certainty
of growth prospects) are Indonesia then Singapore and Malaysia
followed by Thailand. We outline why below:

1. Not Quite a Bed of Roses but Global Macro Conditions Have
Definitely Become Rosier

With the exception of Indonesia, ASEAN economies are fairly open to
international trade, which is why global conditions is the single-most
important factor affecting our preference rankings. The global economy
is way past doom and gloom and now looks to be on a respectable
rebound, which will have ripple effects, most notably for Singapore,
then Malaysia followed by Thailand. This is why we rank Singapore and
Malaysia ahead of Thailand in terms of our growth rankings.

The low base effects post Lehman in 2008 ensures a favourable export
reading on a year-on-year percentage basis, but the strength of the
momentum can be seen in the healthy sequential momentum across the
region. Indeed, December exports in AXJ (excluding Malaysia) rose
11.1%M on a seasonally adjusted basis, a robust momentum by any
account. To be sure, part of this surge may be due to restocking. The
inventory-to-sales ratio in the US still stands at a low of 1.37 as at
November 2009. Moreover, in the latest January US Manufacturing ISM,
40% of respondents indicated that their stockpiles were too low versus
only 4% who reported that they were too high. Anecdotally, we heard
that companies did not want to unduly stock up during the pre-
Christmas season due to demand uncertainty. However, the ensuing
momentum has caught them by surprise and, coupled with low inventory
levels, led to the rush orders seen in recent datapoints. Indeed, we
expect ASEAN economies to see very strong 1Q10 GDP numbers on the back
of this and given the base effects. The sustainability of what may be
a restocking bounce is key. However, to the extent to which the global
macro team is not expecting a double-dip recession, we think the tail
risk that the global economy will roll over after this data bounce is
significantly reduced.

International trade aside, global macro conditions also matter from
the perspective of asset market linkages and capital flows. This may
be more relevant to Indonesia, given its comparatively thinner current
account balance. Global risk appetite as seen in Morgan Stanley's GRDI
indicator has been on the back foot recently, and our strategists also
believe that markets may be range-bound for 2010. However, the
improvement in Indonesia's macro fundamentals post the 1998 Asian
Financial Crisis has strengthened its ability to withstand shocks from
capital outflows with lesser impact on the currency, inflation and
consequently monetary policy. To the extent to which the world is not
returning to the severe risk-aversion mode we saw in late 2008 and
early 2009, we think that global macro conditions are generally
conducive for further unfolding of the structural decline in the cost
of capital story in Indonesia. We see this structural secular domestic
demand story as a more powerful one than the cyclical external demand
stories in Singapore or Malaysia, hence our number one ranking for
Indonesia.

2. Inflationary Pressures Are on the Rise, and Who Offers an Inflation
Hedge?

With breakeven inflation (BEI) going higher (see ASEAN MacroScope:
Inflation Risk or Scare? January 20, 2010), we think that a net
commodity exporting base would be a nice inflation hedge to have in
this environment. In this area, Malaysia (the largest net commodity
exporting economy within Asia) and Indonesia have an edge over
Singapore and Thailand. As we highlighted in our last ASEAN
MacroScope, both the inflation camp and deflation camp may be right in
the near-term assessment of the inflation outlook, depending on which
inflation matrix one is looking at. We suspect that demand-pull
inflationary pressures may take some time before coming back and core
inflation would stay subdued. Indeed, while producers are facing
higher input costs as seen in the PPI, pricing power does not seem to
have returned as manufactured goods inflation still stays on a subdued
trend. However, the aggressive policy stimulus and the sentiment
support it provides have already led to significant asset reflation at
a far earlier stage of this recovery cycle. In this regard, commodity
reflation is likely to push headline inflation higher. As it is,
tradeables and non-core inflation are already on an uptrend in ASEAN
while non-tradables and core inflation lag behind.

3. Navigating the Policy Exit Roadmaps

2010 will be the year of policy exit for ASEAN and Asia for that
matter. Indeed, on monetary policy, our base case has been for
Indonesia to hike in 2Q10 and Malaysia and Thailand to hike in 3Q10.
Yet, the recent initiation into monetary policy renormalization seen
in China and India's reserve ratio hikes, the tonal shift seen in the
monetary policy statements of the Bank of Thailand and Bank Negara
Malaysia and our reassessment of GDP outlook lead us to think that
monetary policy renormalization in some parts of ASEAN could proceed
sooner than expected. We still expect Indonesia to start its first
rate hike in 2Q10. For Malaysia and Thailand, we are now bringing
forward the first policy rate hike to 2Q10 from 3Q10, though we are
not changing our terminal policy rate forecast.

Fiscal policy response is where the differentiation is more stark, in
our view. Most ASEAN economies are likely to see a fiscal winding down
in 2010. In Malaysia, the 2010 budget deficit is expected to narrow to
5.6% of GDP from 7.4% in 2009. In Singapore, the government has
extended but scaled down the stimulus measures announced in the 2009
budget, such as the Jobs Credit scheme and the Risk-sharing
initiative. A second stimulus package is unlikely to be incorporated
into the 2010 Budget to be announced on February 22. Meanwhile in
Indonesia, the fiscal policy tool has not been used as aggressively as
in other ASEAN economies despite the reduction in public debt ratios
to be one of the lowest in the region. Thailand is where fiscal policy
measures are most aggressive for 2010. While the budget expenditure is
expected to come off in 2010, this understates the true expansionary
nature of fiscal policy, given the Bht350 billion extra budgetary
spending and investment in mega projects such as the mass transit
lines being undertaken by the state-owned agencies. Overall, we think
that Thailand still operates the most aggressive policy response.

Having said that, we note that at the trough of the cycle, having an
aggressive policy response serves as a last line of defense against a
too-severe macro slowdown. Yet, with the rebound now panning out and
tail risks behind us, having an aggressive policy stimulus will help
to bolster the recovery but is now a less critical factor in
determining whether an economy will outperform, in our view. This is
why we rank Singapore and Malaysia ahead of Thailand in terms of
growth outlook.

Indonesia: On India's Trail?

Where Do We Differ?

We are bullish on Indonesia and our 2010 and 2011 GDP forecasts stand
at 5.5%Y and 6.3%Y, respectively. This is more or less in line with
consensus at 5.6% and 6.0%. Most analysts on the Street point to the
improving political landscape, favourable demographic patterns and
natural commodity resources as factors supporting higher growth. We
agree but would point out that the most important factor in the growth
equation is likely to be the structural decline in cost of capital,
which we have been highlighting for some time now.

What's the Key Thesis?

From a structural perspective, we see Indonesia following India's
trail (see Asia Pacific Economics: Indonesia on India's Trails?
December 9, 2009). India's story has been one of a decline in the cost
of capital and a consequent rise in corporate ROE spreads over cost of
capital, which has in turn boosted investment and raised the growth
trajectory. Indonesia is seeing a similar pattern. A structural
decline in cost of capital has been underway and should continue to
unfold as macro stability continues to improve.

As to why the structural decline in cost of capital is now underway,
bad leverage structure in the form of high dependence on external
leverage has been the key issue for Indonesia in the pre-1998 crisis.
However, this has now been corrected as the government reduced the
share of external debt in public debt from 100% in 1997 to 45.7% in
2008. Local borrowing now largely funds the government's fiscal
deficit and fiscal consolidation has also been underway, with the
fiscal deficit maintained in the tight range of 0.5-1.7% in the last
five years. The current account has also been largely in surplus since
1999, given the strong resource base and elevated commodity prices.
Banking sector and corporate sector restructuring has also been
ongoing with the former maintaining conservative balance sheets and
the latter deleveraging. The increased confidence among international
investors and non-residents would also increase remittances and
capital inflows, which should help reduce the cost of capital further.
The upshot is that the private corporate sector is likely to get a
boost. Investment would be increased, lifting GDP to a higher
sustainable growth of 6.5-7%. Indeed, the recent upgrade of sovereign
bonds by the rating agencies underscores the macro improvement which
we are highlighting.

However, having said that, we would point out that while Indonesia
holds similarities with India, it may be difficult to reach 8-9% GDP
growth, unlike India. India has had a long history of sustaining a
stable democracy. While Indonesia has made the transition to a stable
democratic system, it is still relatively young. The tertiary
education institutions in Indonesia are also not as strong as in India
or China. Moreover, India also has an experienced bureaucracy and a
strong regulatory system to manage the private sector in an
environment where the economy is driven by the private sector. In this
regard, Indonesia will need to strengthen its institutional capability
to enable transparent and effective decision-making by the private
sector.

From a cyclical perspective, the macro rebound is panning out nicely
with both external demand and domestic demand lending support. In line
with data seen elsewhere in the region, December data show exports
surging 14.4%M sa, on the back of non-oil and gas exports (+21.4%M
sa), which brought export levels to 6.8% above the pre-crisis peak
levels of September 2008. Meanwhile on the domestic demand front,
motorcycle sales (+22.3%Y, 3MMA in Dec-09 versus +1.8% in Nov-09),
motor vehicle sales (+7.1%Y versus -10.8%Y) and commercial vehicle
sales (-1%Y versus -24.9%Y) are also in the recovery mode, albeit to
varying degrees.

For now, inflation readings remain subdued, with January headline and
core CPI standing at 3.7%Y and 4.4%Y, respectively. However, we think
the low reading is a result of the high base effect and inflation is
likely to trend up as base effects get washed out. Moreover, we think
that Indonesia is more susceptible to inflation risks within ASEAN.
Elevated commodity prices translate into direct cost-push pressures in
the CPI, given the high commodity weights in the CPI basket. They also
bring about demand-pull pressures as they confer positive terms of
trade. Moreover, infrastructure bottlenecks tend to accentuate such
demand-pull pressures when they occur. We look for inflation at 6% in
2010 and 6.5% in 2011 and reiterate our call for the first rate hike
in 2Q10.

Where Are The Risks?

Politics is a risk with the inquiry into the Bank Century bailout
case. However, in our view, the risk may be somewhat lesser than what
is generally perceived. We see President SBY as having enough support
within the coalition government to withstand calls to remove officials
who are known to be clean technocrats.

We see the oil price as being a double-edged sword for Indonesia. Low
oil prices will not benefit Indonesia. Yet, high oil prices at above US
$100/bbl may not be optimal either, given the potential for
overheating concerns on top of the infrastructure bottlenecks which
tend to exacerbate inflationary pressures when they happen and Bank
Indonesia's typically dovish monetary stance.

Malaysia: Cyclical Support but Structural Gaps

Where Do We Differ?

We are raising our 2010 GDP forecast for Malaysia to 4.8%Y, from
4.3%Y, but keeping our 2011 forecast intact at 4.8%Y. This will bring
our GDP forecast in line with consensus for 2010. However, our 2011
forecast is marginally below consensus' 5.0%Y.

What's the Key Thesis?

Our upgrade of 2010 GDP to +4.8% from +4.3% marks to market and takes
into account the better-than-expected export data which have been
coming out of the region and the corresponding spillover onto domestic
demand. Malaysia's export data for December are not out yet, but
export data for December have seen a relatively uniform bounce through
Asia. We think Malaysia's non-commodity exporters still face
structural pressures as seen in their declining global market share.
Yet, with Malaysia being the second-most export-oriented within the
ASEAN economies, the rising tide should help to lift this boat.
Moreover, our conversations with manufacturers had reinforced that
cyclical momentum is gaining strength. While 4Q08 had seen a slew of
cost measures being taken such as reduction in compensation/overtime,
layoffs, shorter workweeks and plant shutdowns, double-shifts are now
back and full workweeks have resumed, given the new export orders and
restocking trends. We believe these developments should gradually
manifest in the incoming datapoints in addition to the positive terms
of trade accorded by elevated commodity prices. Indeed, the commodity
export base (includes inedible crude materials, mineral fuels and
animal and vegetable oils and fats) makes up about 30% of total
exports in Malaysia and the filter-through effect from positive terms
of trade tends to be fairly strong, given the fragmented nature of the
resource industry, such as in crude palm oil.

On the domestic demand front, private consumption should gradually
follow suit as the job market improves and the rate of retrenchment
abates. Expansion plans have not come back in a significant way, given
the unstretched capacity utilization. However, the end-use
classification of import data suggests that this is slowly catching up
as well. Indeed, on a 3MMA basis, imports of consumption goods (+4.0%Y
in Nov-09) and capital goods (+1.9%Y in Nov-09) have led the
turnaround in the import momentum.

While we would point out that it should not be too difficult for
Malaysia to achieve 4-5% growth in this global environment, our
cyclical optimism is tempered by a cautious outlook on a longer-term
structural basis. Looking at the longer-term GDP trends, it seems that
Malaysia has seen a structural downshift in its GDP momentum post the
1998 crisis. Indeed, we highlighted before that Malaysia seems to be
suffering from a ‘Dutch Disease' of sorts, where capital provided by
commodity resources (K) and labour inputs from favourable demographic
trends (L) have accorded a growth buffer while the competitiveness and
productivity front have been neglected. The current PM has been
undertaking well-intentioned reform efforts, which makes us less
bearish on the structural aspect compared to before. However, the crux
in these reform measures still boils down to the execution and
consistency of policy action with policy rhetoric.

In light of this GDP upgrade, we also reassess our policy rate
forecasts. In this cycle, Bank Negara (BNM) appears to have gotten on
the front foot much earlier than expected, despite the nascent stage
of the recovery. In its last monetary policy statement, BNM reiterated
that "monetary policy would remain accommodative to ensure that the
economic recovery is well-entrenched"; however, a new line was added
saying that it "recognizes the need to ensure that the stance of
monetary policy is appropriate to prevent the build-up of financial
imbalances that could arise from interest rates being too low for a
prolonged period of time". We think that calling for BNM to implement
its first hike in the March 4 meeting would be too aggressive,
particularly when growth economies such as China and India have yet to
embark on hard tightening in the form of rate hikes. Moreover, BNM had
been comparatively less aggressive in terms of implementing monetary
policy easing. In terms of financial imbalances, the supply issues in
certain segments of the real estate market have also kept a lid on the
extent of real estate asset reflation, implying that BNM does not have
to contend with the dilemma of a potential asset bubble in a nascent
recovery environment. However, we do think that the upside growth
surprises in the region, our forecast upgrade and the recent tonal
shift in the monetary policy statement mean that BNM may move slightly
earlier than our previous forecast of 3Q10. We now expect BNM to
implement its first rate hike in the May 13 meeting, but we still
maintain the terminal policy rate of 3% by end-2010.

Where Are the Risks?

The global environment and fluctuations in commodity prices would be
key risks to watch out for in Malaysia, given how they impact the
economy. Additionally, a potential downside risk to the consumer also
stems from a planned adjustment in the fuel subsidy system in May. We
have not factored this into our numbers, given the implementation
track record on this front.

Singapore: Riding the Rising Tide

Where Do We Differ?

Our 2010 and 2011 GDP forecasts stand at 5.0%Y for both years. This is
slightly below consensus for 2010 (+5.7%Y) but in line with consensus
in 2011 (+5.1%Y). Looking into the details, our slightly below-
consensus headline is due to our expectations on both the domestic
demand and export front. Having said that, while we do not see the
unbridled optimism reflected in some of our competitors' forecasts (as
high as 7% for 2010), we think that 5%Y GDP growth is by all means a
respectable rate for the economy. Indeed, if the 5% annual growth rate
is achieved for 2010, it would be roughly in line with the average
recovery momentum seen post a contraction year if one were to compare
the four downcycles (1964, 1985, 1998 and 2001) since the 1960s.

What's the Key Thesis?

Trade and financial market linkages are two important transmitters
that tie the Singapore economic outlook to global macro fortunes
before domestic demand fluctuates in a similar fashion. Indeed, asset
markets have rebounded strongly since the trough last year. On the
trade front, while the initial phase of the second-order derivative
improvement in non-oil domestic exports has been to a certain extent
supported only by the volatile rise in pharmaceutical exports, the
latest December data show that even cyclical components such as
electronics NODX have finally also bounced back into positive
territory (+26.1%Y in Dec-09 versus -6.2%Y in Oct-09).

As we highlighted in the earlier part of the note, part of this may
reflect a restocking trend and rush orders as inventory levels were
too low to begin with, in coping with the recovery that is underway.
Restocking or not, Singapore will stand to benefit the most from the
nice bounce in the sequential trade momentum which we saw across Asia,
and we have factored this into our forecast. At the same time,
however, we are cautious of the fact that the recent bounce is the
mirror image of the destocking trend and the deep plunge in trade that
we saw in late 2008. When exports fell off a cliff in late 2008,
analysts (ourselves included) extrapolated the trend outwards and
brought 2009 GDP growth forecasts to as low as -10%Y. We would be
loath to repeat the same mistake of extrapolating the same trend on
the way up. Moreover, even while global GDP momentum slowly edges back
the trend momentum we saw in the 2004-07 cycle, we think the headline
number likely represents a different growth mix altogether. 2004-07
saw a super credit cycle funding developed world consumers, which in
turn supported the export machinery in Asia. Now, the growth rebound
is driven by policy stimulus. The forecasts by our US economist, Dick
Berner, show that the mix of US growth (of 3.1%Y in 2010) sees an
increased contribution from public spending, inventory restocking and
external balance rather than private spending and capex as was the
trend in 2004-07. A rising tide will lift all boats, but to the extent
to which global growth is not driven by the traditional growth driver
of US consumer spending but more so by public spending or Chinese
policy stimulus which tends to be more investment-related, Singapore
exporters may not benefit from this as much as other capital goods
exporters, in our view.

Another reason why we think growth will be at 5% rather than 7% is due
to domestic demand. Indeed, the bigger gaps on our domestic demand
component forecast versus consensus come from the fixed investment
side. While we are still forecasting a capex recession in 2010, our
peers forecast fixed investment to go back to positive territory of
7.5%Y in 2010. As a comparison, in all the down cycles since the 1980s
where we saw a GDP contraction year, fixed capex has seen at least two
years of year-on-year percentage decline before returning to positive
territory. Moreover, this time round, the base effect is less
favourable since we saw a big property boom in office space, private
residential, hotels, retail space and tourism infrastructure before
the downturn began, and this real estate supply is just beginning to
come onstream. A transitional office site on the reserve list that has
been triggered for sale recently may represent a bright spot. However,
we think the still-elevated vacancy rate could put a cap on the
strength of fixed capex in the future.

Another related component of domestic demand would be the job market.
Here however, we note that job creation data have surprised us, with
the unemployment rate for both overall headline and resident
unemployment dropping to 2.1% and 3.1%, respectively, in the 4Q09 data
(versus a low of 1.7% and 2.4% in 4Q07, and 3.4% and 5.0% in 3Q09,
respectively). Arguably, a part of this drop is due to the opening
timing of the integrated resorts. Indeed, we understand from our
gaming analysts that the employment count at Resort World Sentosa has
now exceeded 7,000. We see job market data as intertwined with the
outlook on capex (expansion of capacity needs both K and L inputs). We
have been arguing that job creation could stay lackluster, given the
payback for previous strong numbers which have stayed higher than
expected, given the lagged completion of previously commissioned capex
and the need for manpower when they are eventually completed. However,
if job market data continue to surprise on the upside, then the upside
risk to our capex numbers will also concomitantly materialise.

Where Are the Risks?

Global macro conditions is the key upside and downside risk to the
economy, given the high export orientation. Over the longer term,
restructuring of the economy will be needed to rebalance growth in
terms of the end-destinations and the type of end-demand (whether
consumers, corporates or public sector).

Thailand: Of Exports and Public Spending

Where Do We Differ?

We are raising our 2010 GDP forecast to 4.6%Y, from 4.3%Y, but keeping
our 2011 GDP forecast unchanged at 4.8%Y. At these numbers, our
figures are slightly above consensus, which stands at 4.3%Y for 2010
and 4.5%Y for 2011.

What's the Key Thesis?

Similar to the upgrade on Malaysia, we are marking to market our 2010
GDP to take into account the high-frequency datapoints, both on the
domestic demand front as well as on trade, which result in a higher
entry point into 2010. Looking at the incoming datapoints versus the
forecasts penciled into our model, the biggest upside comes from net
external balance and then to a lesser extent from domestic demand. A
case in point - 4Q09 export volume has moved back into positive
territory of +4.6%Y while import volume is still declining at -4.6%Y,
thereby opening up a positive expectation gap on the net external
balance front. Meanwhile, domestic demand indicators such as composite
consumption indicators also suggest that consumer spending has moved
into positive momentum as early as 4Q09. Meanwhile, although the
private investment index indicator is turning around, it still remains
in negative territory, and it seems like investment momentum is likely
to find more support from the public sector going forward.

We have been highlighting since last year that the differentiating
factor in Thailand (versus other ASEAN economies) is the fact that
policymakers will still run an aggressive fiscal policy in 2010. We
hold onto this view, and this story is unfolding. The latest
government expenditure data show it running at 19.9% of GDP on a 12M
trailing sum basis in January 2010. Additionally, the signing of the
second contract for the Purple Line also recently took place within
schedule in mid-January and the third awarded contract for the Purple
Line is similarly due for signing soon. Indeed, such capex investment
will also serve to attract crowding-in impact from the private sector.
Moreover, unlike what some have postulated, the 2010 expenditure
budget (Bht1.7 billion versus Bht1.9 billion in the 2009 Budget)
understates the true expansionary nature of the fiscal policy since
another Bht350 billion under the stimulus plan is financed via extra-
budgetary spending and investment in mega projects such as the mass
transit lines, which is also under the second stimulus plan, is
undertaken by state-owned agencies. Having said that, we think that
the beta accorded by the global rebound, particularly given the high
export orientation in other economies, means that this differentiating
fiscal factor becomes comparatively less significant in terms of
helping Thailand to outperform compared to when we were in a more
subdued global environment.

In light of the growth upgrade, we also reviewed our assessment of the
monetary policy exit. The January monetary policy statement marked
important tonal shifts from the BoT. The reference that the economy
"still requires sustained policy support" has been dropped and the
statement that "MPC views the current interest rate level" as
"appropriate and supportive of the economy recovery" has now been
replaced with the statement that "MPC will continue to closely monitor
inflation and economic developments". The next meeting will be on
March 10, before which the 4Q09 GDP data, January trade data and
February inflation data will be released. The 4Q09 GDP readings will
be good (~+4%Y), which means that the January trade data would be the
critical macro datapoint to watch out for. The change in tone prepares
the market that the BoT is at the cusp of a transition phase. The
tonal shift, coupled with our reassessment of the GDP outlook, makes
us think that the likelihood of the BoT implementing its first rate
hike in 2Q10 has become higher (versus our base case of 3Q10). Hence,
we are bringing forward our expectation of the first policy rate hike
to 2Q10 and for policy rates to reach 3.75% by 2Q11.

Where Are the Risks?

Politics continue to remain a risk due to the push for constitutional
amendments and Thaksin's court case on February 26.

If oil prices go towards the US$100/bbl territory, this would be
negative for Thailand, given the negative terms-of-trade impact and
the inflationary impact.

Important Disclosure Information at the end of this Forum

Disclosure Statement

The information and opinions in Morgan Stanley Research were prepared
by Morgan Stanley & Co. Incorporated, and/or Morgan Stanley C.T.V.M.
S.A. and their affiliates (collectively, "Morgan Stanley").

Global Research Conflict Management Policy

Morgan Stanley Research observes our conflict management policy,
available at www.morganstanley.com/institutional/research/conflictpolicies.

Important Disclosure for Morgan Stanley Smith Barney LLC Customers The
subject matter in this Morgan Stanley report may also be covered in a
similar report from Citigroup Global Markets Inc. Ask your Financial
Advisor or use Research Center to view any reports in addition to this
report.

Important Disclosures

Morgan Stanley Research does not provide individually tailored
investment advice. It has been prepared without regard to the
circumstances and objectives of those who receive it. Morgan Stanley
recommends that investors independently evaluate particular
investments and strategies, and encourages them to seek a financial
adviser's advice. The appropriateness of an investment or strategy
will depend on an investor's circumstances and objectives. Morgan
Stanley Research is not an offer to buy or sell any security or to
participate in any trading strategy. The value of and income from your
investments may vary because of changes in interest rates or foreign
exchange rates, securities prices or market indexes, operational or
financial conditions of companies or other factors. Past performance
is not necessarily a guide to future performance. Estimates of future
performance are based on assumptions that may not be realized.

With the exception of information regarding Morgan Stanley, research
prepared by Morgan Stanley Research personnel is based on public
information. Morgan Stanley makes every effort to use reliable,
comprehensive information, but we do not represent that it is accurate
or complete. We have no obligation to tell you when opinions or
information in Morgan Stanley Research change apart from when we
intend to discontinue research coverage of a company. Facts and views
in Morgan Stanley Research have not been reviewed by, and may not
reflect information known to, professionals in other Morgan Stanley
business areas, including investment banking personnel.

To our readers in Taiwan: Morgan Stanley Research is distributed by
Morgan Stanley Taiwan Limited; it may not be distributed to or quoted
or used by the public media without the express written consent of
Morgan Stanley. To our readers in Hong Kong: Information is
distributed in Hong Kong by and on behalf of, and is attributable to,
Morgan Stanley Asia Limited as part of its regulated activities in
Hong Kong; if you have any queries concerning it, contact our Hong
Kong sales representatives.

Morgan Stanley Research is disseminated in Japan by Morgan Stanley
Japan Securities Co., Ltd.; in Canada by Morgan Stanley Canada
Limited, which has approved of and takes responsibility for its
contents in Canada; in Germany by Morgan Stanley Bank AG, Frankfurt am
Main, regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht
(BaFin);in Spain by Morgan Stanley, S.V., S.A., a Morgan Stanley group
company, supervised by the Spanish Securities Markets
Commission(CNMV), which states that it is written and distributed in
accordance with rules of conduct for financial research under Spanish
regulations; in the US by Morgan Stanley & Co. Incorporated, which
accepts responsibility for its contents. Morgan Stanley & Co.
International plc, authorized and regulated by Financial Services
Authority, disseminates in the UK research it has prepared, and
approves solely for purposes of section 21 of the Financial Services
and Markets Act 2000, research prepared by any affiliates. Private UK
investors should obtain the advice of their Morgan Stanley & Co.
International plc representative about the investments concerned. RMB
Morgan Stanley (Proprietary) Limited is a member of the JSE Limited
and regulated by the Financial Services Board in South Africa. RMB
Morgan Stanley (Proprietary) Limited is a joint venture owned equally
by Morgan Stanley International Holdings Inc. and RMB Investment
Advisory (Proprietary) Limited, which is wholly owned by FirstRand
Limited.

Trademarks and service marks in Morgan Stanley Research are their
owners' property. Third-party data providers make no warranties or
representations of the accuracy, completeness, or timeliness of their
data and shall not have liability for any damages relating to such
data. The Global Industry Classification Standard (GICS) was developed
by and is the exclusive property of MSCI and S&P. Morgan Stanley bases
projections, opinions, forecasts and trading strategies regarding the
MSCI Country Index Series solely on public information. MSCI has not
reviewed, approved or endorsed these projections, opinions, forecasts
and trading strategies. Morgan Stanley has no influence on or control
over MSCI's index compilation decisions. Morgan Stanley Research or
portions of it may not be reprinted, sold or redistributed without the
written consent of Morgan Stanley. Morgan Stanley research is
disseminated and available primarily electronically, and, in some
cases, in printed form. Additional information on recommended
securities/instruments is available on request.

The information in Morgan Stanley Research is being communicated by
Morgan Stanley & Co. International plc (DIFC Branch), regulated by the
Dubai Financial Services Authority (the DFSA), and is directed at
wholesale customers only, as defined by the DFSA. This research will
only be made available to a wholesale customer who we are satisfied
meets the regulatory criteria to be a client.

The information in Morgan Stanley Research is being communicated by
Morgan Stanley & Co. International plc (QFC Branch), regulated by the
Qatar Financial Centre Regulatory Authority (the QFCRA), and is
directed at business customers and market counterparties only and is
not intended for Retail Customers as defined by the QFCRA.

As required by the Capital Markets Board of Turkey, investment
information, comments and recommendations stated here, are not within
the scope of investment advisory activity. Investment advisory service
is provided in accordance with a contract of engagement on investment
advisory concluded between brokerage houses, portfolio management
companies, non-deposit banks and clients. Comments and recommendations
stated here rely on the individual opinions of the ones providing
these comments and recommendations. These opinions may not fit to your
financial status, risk and return preferences. For this reason, to
make an investment decision by relying solely to this information
stated here may not bring about outcomes that fit your expectations.

http://www.morganstanley.com/views/gef/index.html#anchor64a03fa9-1263-11df-8ed5-77be4e01ae79

...and I am Sid Harth

[chhotemianinshallah]

Factbox: Major issues at G7 meeting in Canada
Sat Feb 6, 2010 7:59pm EST

(Reuters) - Finance ministers and central bankers from the Group of
Seven economies met in the Canadian Arctic to discuss the euro zone's
budget crisis, the recovery from global recession and reforms of
international banking.

Natural Disasters

Below is a summary of the outcome of the two days of talks that ended
on Saturday, based on comments from G7 officials:

EURO ZONE FISCAL CRISIS

The collapse in confidence among investors about Greece's ability to
pay its debts, and knock-on concerns about Portugal and Spain, pushed
the euro zone's fiscal crisis onto the agenda of the G7 meeting.

European G7 countries told the United States, Japan and Canada that
they would make sure that Greece delivered on its promises to slash
its budget deficit by the end of 2012.

"Will we will monitor and make sure it (the Greek plan) is managed,"
French Economy Minister Christine Lagarde said.

FINANCIAL REGULATION

Last September, world leaders asked the International Monetary Fund to
come up with proposals for a levy on banks to help pay for financial
rescues and in Canada this weekend ministers roundly supported the
idea.

The Obama administration was seen as cool to the idea last year but it
has since taken a tougher approach to banking regulation, mindful of
the anger among voters at huge bonuses on Wall Street soon after its
rescue with taxpayers' money.

GLOBAL RECOVERY, EXIT STRATEGIES

The G7's host, Canadian Finance Minister Jim Flaherty, said the global
economy was recovering but was still too weak for governments to
withdraw stimulus measures.

In an apparent nod to concerns about huge budget deficits run by
countries like the United States to keep their economies going, he
said governments were starting to look at scaling back their support
and returning to fiscal health.

CURRENCIES

The G7 made no comment on foreign exchange, but ministers said the
group stood by its statement of last October.

That communique politely welcomed China's decision to allow its
currency to strengthen and said that should help narrow the imbalances
in the world economy that, many say, sowed the seeds of the financial
crisis of 2008.

France's Lagarde said under the new, more informal format of the G7
meetings, the group had decided to issue statements on currencies only
when it had something new to say.

G7 members appear split on what is the best forum to discuss foreign
exchange policy with some European members, like France, favoring the
G7 and Japan suggesting that discussions on China's yuan, for example,
could take place in the wider Group of 20 developed and emerging
economies, of which China is a member.

FUTURE OF THE G7

The G7 is expected to continue to meet as often as it deems necessary,
and several officials said they liked the no-nonsense, informal format
of the Iqaluit talks, which allowed them to speak their minds openly
and freed them from long hours negotiating over the language of a
communique.

"Open speech, not working out communiques, that is the meaning of the
new G7," said German Finance Minister Wolfgang Schaeuble.

The next G7 finance ministers' meeting will be on the sidelines of the
International Monetary Fund's spring meetings in Washington, Canada
announced.

HELPING HAITI

Canada said the G7 countries were writing off debts owed to them by
disaster-struck Haiti and urged global lenders to do the same. Few
delegates mentioned the Caribbean island where more than 200,000
people died in a January 12 earthquake.

http://www.reuters.com/article/idUSTRE61602S20100207

Gordon Brown interview: The economy'Banking bonuses? I'm angry too. We
took action on banks'

Toby Helm The Observer, Sunday 7 February 2010 Article historyWill
there be tough decisions in your pre-election budget?

Well, that's for Alistair Darling, and I don't want to presume what's
in his budget. But we are prepared to take any tough decisions that
are necessary to make sure we halve the deficit over the next four
years. To do it quicker would be a mistake because we would endanger
the recovery we've got.

People are now beginning to accept that the decisions that we took to
take this country through a recession were the right decisions. We had
a global financial recession. We had a complete banking collapse that
was in danger of spreading to the whole economy.

And now that people look back on this last year-and-a-half, they can
see that unemployment has not risen in the way that they expected,
it's half what it was in the 1990s; as a result of our action, about
half a million jobs have been saved that would otherwise have been
lost. And people know that we've taken this country through this
recession without the level of repossessions, and without the level of
small business insolvencies seen in other countries.

Is there some regret on your part that we allowed Britain's structural
deficit to grow to something like £30bn as we entered recession? Do
you think that you could have curbed the structural debt as chancellor
during the good times?

I cut debt during the good times. People should be under no illusion;
the debt in Britain as we started this recession was lower than
France, lower than Germany, America, Japan, Italy, lower than the euro
area. And I think some people are trying to create myths about the
position that we have been in as a result of the actions I took as
chancellor; completely wrong. You had a banking collapse, 7% [of our
economy] is the financial services, a bigger percentage than most
other economies. A lot of our tax revenue depended on the financial
services.

There's still a lot of resentment about banking bonuses. Do you think
we've done enough to curb them?

I'm angry as well. When we took action in the pre-budget report and
put a 50% National Insurance levy on bankers' bonuses, there was a
storm of protest saying we were being too tough. I think we took the
right action because we know banking is an international market. We
know that the measures that are going to work in the long term are
actually global. We are trying to work with other countries to develop
a new system for remuneration for ­banking, and that's got to happen.
It cannot be managed by one country.

But having set principles for the future, we took a decision to do a
50% tax on bonuses, so where there are bonuses, the public will get a
share. Our aim is first of all to get the money that we have had to
give to the banks back, and every ­measure we are taking is based on
us getting more back than we've had to give.

So the shares we've taken in banks, that is of benefit to the public
as these share prices recover. What money we've given to banks has
been based on an insurance levy or other forms of levy that they've
got to pay back.

Then what we're going to do is create a system for managing risk in
the future. That will involve a global financial levy, and I believe
there is growing support for that round the world. I'm talking about a
levy on the banks themselves.

The world is coming to a conclusion that we need a levy long term, we
need it to be global, and we're now looking at the basis on which that
is done. So there is progress in this area.


Do you see a position within a year or 18 months, where you could
confidently say that there has been sufficient structural reform in
the banking industry globally to prevent the kind of collapse that we
saw two years ago?

I think we've made some progress, but there is still a lot to do. I
think we've taken action to deal with the problem of capital and
liquidity requirements, but we've got more to do to put that in place
right round Europe and America.

In other words, we've taken some action, but there's more to be taken.
I hope there will be progress at the European Union meeting next week,
at the G7 finance ­ministers' meeting this weekend, and then at the
G20 when it meets in the spring.

And, of course, we've got an International Monetary Fund report coming
in April about how we can manage some aspects of the banking system
for the future. So there's a lot of work being done, but my view is,
yes, we have to do more.

http://www.guardian.co.uk/politics/2010/feb/07/gordon-brown-helm-interview-economy

...and I am Sid Harth

[bademiyansubhanallah]

China's fast trains may offer tips for U.S.
Updated 2h 47m ago | Comments 2 | Recommend 2

Enlarge By Calum MacLeod, USA TODAY

Passengers at Guangzhou North Railway Station pose for photos on Dec.
28 before boarding the new high-speed train linking south Guangzhou
and Wuhan, China. The train has an average operating speed of 217
miles per hour.

By Calum MacLeod, USA TODAY

ABOARD THE GUANGZHOU-WUHAN EXPRESS — Once the speed gauge hits 350
kilometers per hour, or 217 miles per hour, passengers charge down the
aisle to photograph the electronic display.
"If we go any faster, we'll take off!" jokes Hu Qing, cracking open
another can of beer on China's world-record-breaking train.

The Dec. 26 opening of the high-speed link between south Chinese
cities Guangzhou and Wuhan is the latest example of massive state
spending to keep China's economy roaring. The fast-expanding network
of high-speed trains is stoking patriotism, too.

"This train is the pride of the Chinese people," says Hu, 42, the boss
of a paper factory, who chose the train over a direct flight home to
northeast China.

U.S. companies await the first round of government grants announced by
President Obama in his State of the Union address totaling $8 billion
to jump-start long-delayed high-speed rail in the USA.

Meanwhile, China enjoys a considerable head-start.

Last year, Beijing invested $88 billion in the country's railways,
according to the Ministry of Railways, and now operates a world-
leading 1,758 miles of high-speed rail.

An alternative to flying or driving

Obama said he wanted to study China's high-speed trains during his
November 2009 visit, recalls the ministry's beaming spokesman Wang
Yongping. The USA "can learn from Chinese rail's speed, comfort and
other aspects," Wang suggests.

Like railway advocates in the USA, the Ministry touts rail as a
greener, more energy-efficient form of transportation than driving or
flying. For passengers, it promotes high-speed trains as "fast, safe,
comfortable, convenient and punctual."

With top operating speeds of 221 mph, the new trains connect cities
almost as fast as a jet but without the lengthy security procedures at
airports.

Speed and convenience are paramount for business traveler Zhao
Shiquan. The founder of an environmental equipment company, Zhao
stopped checking in for a Wuhan flight at Guangzhou airport in late
December when a friend suggested the new train.

"I wanted to know which is more convenient, the plane or the train?"
says Zhao, settling into his reclinable, first-class seat.

At $110 one way, the train is more expensive than flying because
airlines such as China Southern Airlines offer prices as low as $28 to
fight the new competitor.

But many people still prefer the trains.

"Planes are often late, and time is vital to a company," says Zhao,
42, who employs 100 people in his firm in Changsha, a major city en
route. "In China, you need to meet people in person to do business,
and take clients out for meals, so I often have to travel. High-speed
trains could be the answer."

The previous ride for the 664-mile Guangzhou-Wuhan journey took 101/2
hours in cars filled with cigarette smoke. The new train takes 3
hours, 45 minutes, or 3 hours for the express, and smoking is banned.

The route is an important one. Guangzhou is one of China's richest
cities, an export powerhouse whose thousands of factories manufacture
many of the items found in an average U.S. home. Wuhan is a Yangtze
River port and central China's major industrial center.

Passenger comforts

The trains are powered by electricity, so they're not weighed down by
huge engines and hundreds of gallons of diesel fuel. The carriages of
the "Harmony" trains running between these two cities bear a smart,
plane-like appearance, with restrooms far larger than their airborne
counterparts.

Attendants dressed like air stewards push trolleys of snacks,
including beer and peanuts, down aisles that are patrolled by two
armed, uniformed policemen.

The dining car, usually a noisy focus of days-long Chinese rail
journeys, appears a zone of quiet. Only microwaved Chinese dishes and
fast food such as beefburgers, at $1.30 each, are available.

While most media coverage in China's state-run press has been reliably
positive, some commentators complain about prohibitively high ticket
prices. At $69, the second-class fare from Guangzhou to Wuhan costs
far more than regular trains, and several slower services have been
canceled to make way for the new trains.

Debate about payoff

The focus on infrastructure, and failure to raise incomes, has created
a "lopsided development model," that may leave China as "an emerging
market economy without emerging consumers," worried You Nuo in the
state-run China Daily.

The cost of building high-speed tracks, at $20.1 million per mile, is
money well spent, counters Qian Lixin, a veteran rail expert at the
China Academy of Railway Sciences in Beijing.

"China has met many difficulties in construction, and gained
experience in building railroads at low cost. But American railways
are owned by individuals, not the government, so investment is the
biggest problem," Qian says.

In its April 2009 strategic plan for high-speed rail, the U.S.
Department of Transportation said that decades of focusing on highway
and aviation networks have seen America's railways fall behind other
nations. The plan lists private railroad ownership, state fiscal
restraints, a lack of expertise and resources as the biggest
challenges.

The No. 1 barrier remains "the lack of access to adequate funding,"
and the lack of political will driving that inadequacy, says John
Spychalski, professor emeritus of supply chain management at Penn
State. "You can't do much with $8 billion, and the $1 billion a year
(for five years), but at least it's a start," he says.

If federal funding is spread too thinly, and directed mostly at
enhancing conventional services that will remain below 110 miles per
hour, then "there's not going to be much left to build a dedicated,
true high-speed line that would even approach" the current Chinese
services, he says.

Will it work in U.S.?

Not everyone thinks high-speed rail is right for the United States.

"Transportation works best if you use markets, not subsidies by
government," says Randal O'Toole, a senior fellow at the libertarian
Cato Institute who researches transportation and urban planning.

"High-speed rail is an obsolete technology that requires huge
subsidies in France, Japan and China. Our government seems to view
trains as a form of social engineering that they think is better than
driving or flying," he says. "Everybody will pay for these new rail
lines through taxes, but only a few people will use them."

O'Toole says high-speed rail here will just transfer wealth from
airline owners to train owners, at great expense to taxpayers as
contracts go to the politically connected. He also rejects the
argument that trains are more convenient because they deliver people
into the heart of cities instead of to airports outside of cities.

"Less than 8% of all jobs in the U.S. are located in the downtown of
our cities," he says.

As for clean energy: "Energy efficiency is rapidly growing for
automobiles and aircraft," O'Toole says.

But many experts believe it will happen in the United States.

"To mix a metaphor, I think there's a lot of wind in the sails of high-
speed rail in the United States," says Keith Dierkx, director of the
IBM Global Rail Innovation Center, which opened in Beijing last June.

"There will be high-speed rail in North America."

Costs top benefits

The basic obstacle facing development of high-speed rail lines is that
the direct economic benefits rarely exceed the direct costs, according
to a Congressional Research Service report in December.

The report says the two main reasons such trains are not widely
available in the United States is that only a small portion of the
U.S. rail network is electrified, and federal regulations require that
passenger trains have design features to protect passengers in a train
crash. This results in relatively heavy passenger trains, which are
slower, it says.

But Dierkx believes the USA's lagging could be an advantage.

"All of the innovation that is taking place globally can play to the
U.S. advantage," as U.S. firms cherry-pick the best capabilities and
technologies. "I think that the U.S. is going to benefit significantly
from the work that is being done in China."

At the end of the line, businessman Zhao considers his trial run a
success, and vows to return.

"I feel very proud, as China now has the fastest train in the world.
On average incomes, we remain far behind the West, and it's very hard
to catch up," he says. "But in some areas we are very advanced."

Yahoo! Buzz Mixx Posted 6h 39m ago
Updated 2h 47m ago

http://www.usatoday.com/money/world/2010-02-08-fasttrain08_ST_N.htm

Profits at Chinese airlines surge on economic recovery
Updated 10/28/2009 2:29 PM | Comments 1 | Recommend

BEIJING (AP) — China's three main state-owned airlines said Wednesday
third-quarter profits surged as an economic recovery helped to boost
travel.

China Southern Airlines, the country's biggest carrier by passenger
numbers, said profit for the quarter ending Sept. 30 was 284 million
yuan ($41.6 million), or 0.04 yuan (0.5 U.S. cents) per share.

That compared with a loss of 830 million yuan for the same period of
2008, when Chinese carriers were hit by record-high fuel prices and a
decline in travel amid the global economic crisis. Results last year
also were hurt by wrong-way bets on fuel price contracts.

China Southern and rivals Air China Ltd. and China Eastern Airlines
Ltd. all reported that third-quarter revenue rose and costs fell as
fuel prices eased.

Travel was boosted by a rebound in China's economic growth, which
accelerated to 8.9% in the third quarter over a year earlier.

Air China said quarterly profit jumped to 884 million yuan ($129
million), or 0.40 yuan (5.8 U.S. cents) per share, rebounding from a
1.94 billion yuan loss in the same period last year.

China Eastern Airlines in Shanghai reported quarterly profit of 23
million yuan ($3.3 million), or 0.003 yuan (0.04 U.S. cents) per
share. That was an improvement over China Eastern's record-setting
2.33 billion yuan loss in the same period of 2008.

China Southern, based in the southern business center of Guangzhou,
said its costs fell 9.7%, while Beijing-based Air China reported a
10.6% fall in costs.

Copyright 2009 The Associated Press.

http://www.usatoday.com/travel/flights/2009-10-28-china-airline-profits_N.htm?obref=obnetwork

Washington
The Oval: Tracking the Obama Presidency

A high speed train enters a railway depot in Pantin, northeast of
Paris, in 2007. "There's no reason why other countries can build high-
speed rail lines and we can't," President Obama said Thursday in
announcing $8 billion in grants for high-speed-rail projects.

By Remy de la Mauvinere, AP

Posted 1/28/2010 10:32 PM | Comments 967 | Recommend 15

President Obama announced $8 billion in grants for rail-building
projects in 13 rail corridors in 31 states (in billions):

Source: U.S. Department of Transportation

High-speed trains get green light

By Larry Copeland, USA TODAY

The USA took a first step toward building a national high-speed rail
network when the Obama administration announced the winners of $8
billion in grants for rail-building projects Thursday.

"We want to start looking deep into the 21st century," President Obama
said at a town hall meeting in Tampa. "There's no reason why other
countries can build high-speed rail lines and we can't."

Thirteen existing rail corridors in 31 states will receive funds. The
big winners: California, Florida and Illinois.

http://www.usatoday.com/news/washington/2010-01-28-high-speed-trains_N.htm?obref=obnetwork

...and I am Sid Harth

[bademiyansubhanallah]

China Leading World Economy Out Of Global Recession
Source: Organisation for Economic Co-operation and Development (OECD)
Posted on: 7th February 2010

With the help of massive government stimulus action, China is now
leading the world economy out of recession, according to a new OECD
report. Already the world’s second largest economy, China could well
overtake the United States to become the leading producer of
manufactured goods in the next five to seven years, it says.

The OECD’s latest Economic Survey of China says it will be important
to ensure that government saving, now falling in the wake of the
crisis, does not revert to its previous, excessively high levels.
Public spending should be stepped up to support much needed social
reforms in areas such as education, welfare assistance, pensions and
health.

China can afford the extra spending as its public finances remain
strong. Gross government debt amounted to only 21% of GDP in 2008. The
stimulus measures, which nevertheless dwarfed those of other
countries, are expected to increase this debt ratio by only 3% of GDP
in 2010. By contrast, gross public debt in OECD countries is projected
to almost reach their total GDP this year and even exceed it in 2011.

Speaking at the launch of the survey in Beijing, OECD Chief Economist
and Deputy Secretary General Pier Carlo Padoan said; “The Chinese
government’s swift and vigorous action to support its economy has
contained the impact of the global recession.

By helping to rebalance China’s economy towards stronger domestic
demand, the stimulus is also benefitting the rest of the world.
Further stepping up of social spending in China will be important both
to foster social cohesion domestically and to promote continued
external rebalancing.”‪

Even though government reforms have focussed increasingly on the need
for social cohesion over recent years, the survey identifies a number
of areas where action is needed for living standards in China to
continue to improve over the longer term:

Further progress is needed to unify the fragmented system of welfare
assistance, pension and health care. Responsibility for social
protection should ultimately be transferred from cities to the
national level to ensure better integration, efficiency and
solidarity.

The registration system and restrictions on migrant workers’ access to
social services creates obstacles to labour mobility and should be
relaxed.

Health care reforms need to be pursued to ensure that provision at a
local level is improved, hospitals are run more efficiently and that
eventually the different insurance systems are merged.

These reforms will also help alleviate international imbalances by
keeping saving at a lower level. So would greater exchange rate
flexibility.

Although banks and financial institutions are generally stronger and
better regulated than a few years ago, further opening is needed
together with firmer supervision.

Competition and productivity can be boosted by cutting red tape,
loosening traditional ties between state-owned enterprises and central
authorities, allowing private companies to operate in the network
industries and lowering barriers to foreign direct investment in
services.

China and the OECD work in close partnership on a number of projects
through the Organisation’s Enhanced Engagement initiative, in which
Brazil, India, Indonesia and South Africa also participate.

The peer review process behind the OECD’s economic surveys is a key
part of the Organisation’s contribution to the G20’s Framework for
Strong, Sustainable and Balanced Growth.

http://thegovmonitor.com/economy/china-leading-world-economy-out-of-global-recession-23349.html

From The Times February 8, 2010

Why China is stoking war of words with US

Beijing’s belligerence is a diversionary tactic. There’s nothing like
nationalist outrage to sweeten unpopular economic reformBill Emmott

Recommend? (16)

Europeans bemoaning the loss of their prominent world-governing (or,
at least, photo-op-ing) role in the almost defunct G7 of industrial
powers often worry that in future the world will not be steered by the
broad and representative G20, but by a “G2” consisting of America and
China. If so, the current war of words between those two giants should
make the Europeans (and Japanese) feel lucky to be out of it. Harder
to work out, though, is quite what this word-war means.

To some degree, admittedly, it is just following typical Chinese
patterns. As Nicolas Sarkozy and Angela Merkel, the French and German
leaders, both know, if you agree to meet that gentle, smiling fellow
the Dalai Lama, you will get an earful from Beijing about how talking
to the exiled spiritual leader is tantamount to fomenting a revolution
in occupied Tibet (sorry, in an integral part of the Chinese nation).
That is also why it is to Barack Obama’s credit that he is insisting
on meeting the Dalai Lama this month when he visits America.

Mr Obama will do so in the full knowledge that this will aggravate the
rather fraught US-China relationship. This was made fraught most
particularly by America’s latest sale of arms to Taiwan, a sale worth
$6.4 billion (£4.1 billion), which includes systems to defend the
island against the large Chinese missile battery stationed near by,
and which simply continues defence support mandated by the 1979 Taiwan
Relations Act, passed by Congress at the time when America switched
diplomatic recognition to the mainland.

Again, no topic is more probable to provoke colourful Chinese
invective than Taiwan. I recall, some years ago, a friendly interview
with a man who was then China’s top arms control expert, and is now a
senior UN official, suddenly changing when I mentioned Taiwan. He
slammed his fist on the table and shouted that he was prepared to die
over the issue of Taiwanese separatism. I hope not here and now, I
thought to myself.

What is unusual about China’s reaction to these two traditional issues
is the volume of its response and that it is threatening sanctions
against American firms. It has just imposed penalties on American
chicken imports, in retaliation for US protectionism against Chinese
car tyres. The Chinese Government has been very truculent over the
alleged hacking of Google and 30 other foreign companies by Chinese
cyber-warriors, refusing to investigate — which bolsters the belief
that the hackers work for the Government.

Nor is America the only Chinese target. The hackers also attacked
departments of the Indian Government, including the Prime Minister’s
office. In Indian eyes China has become increasingly provocative over
the two countries’ long-running territorial disputes in the Himalayas,
over which a short border war was fought in 1962. China has been
building up its troop numbers along those disputed borders. And to
this list you can also add the obstreperous stance China took in the
Copenhagen climate change conference last December.

So what explains this apparent rise in Chinese belligerence? For the
past two decades the country’s official policy has been to keep its
head down in international affairs, in line with a dictum of Deng
Xiaoping, its great leader of the 1980s: “keep a low profile and hide
your claws”, he said, while focusing on building up your strength.
That was a good description of Chinese policy in the 1990s and for
much of this decade. But it now looks out of date.

One tempting explanation is Chinese confidence. China has been the big
winner from the global economic crisis, runs this argument. Not only
did it survive the crisis without suffering social unrest, it has seen
its growth rebound strongly — indeed, back into double digits during
the most recent quarter. Its huge fiscal stimulus package and
expansion of lending by state-owned banks has been much lauded. It was
popular in Davos last week to claim that China is in the vanguard of a
revival of state-led capitalism, with the Beijing model being
increasingly admired by other emerging economies.

This interpretation is tempting for any American or European who feels
weak and self-critical about their region’s power and prospects. It is
certainly true that China is increasingly viewed with awe by others,
even if many countries (notably India) also fear or resent it. It is
also true that many Chinese feel that their country is on a roll.

But there is another explanation. If you look more closely, China’s
economy starts to look much less strong. The huge increase in money
supply and bank lending that revived its GDP growth is bound to lead
to inflation — and is already doing so. If its apparent strength is to
be sustained, China needs to find a new model, a new source of growth,
now that reliance on exports to the US and Europe looks like a thing
of the past. For even a state-run banking system cannot continue to
boost lending by 35 per cent a year indefinitely without causing
problems.

That is why a popular debate in the markets concerns whether China is
experiencing an asset bubble and whether there is a risk of its growth
collapsing in the same way as Japan’s did in 1990. That comparison
looks far-fetched, for although asset-price bubbles are evident in
some local property markets they do not look like enveloping the whole
economy. But more plausible is the idea that current policies are
producing a dangerous rise in conventional inflation. To deal with it
will require a sharp — and sharply unpopular — change of policy,
tightening credit conditions and regaining control over interest rates
and the money supply by revaluing or even fully floating the Chinese
currency.

That, of course, is exactly what Americans and Europeans have been
lobbying for. It would not, however, be comfortable for the Chinese
leadership to seem to be doing this in response to foreign pressure.
So a diversionary tactic, aimed at rallying nationalistic support at a
time when painful changes are needed, looks suspiciously convenient.

This is a more comfortable explanation for the recent word-war than
simple Chinese assertiveness. A change of Chinese economic policy
would be highly welcome, given the need to get the world into a much
better balance between surplus countries like China and deficit ones
such as America and Britain. It would also please other developing
countries, which suffer badly from China’s artificially cheap exchange
rate. Yet the short-term results could be far from comfortable: more
Chinese nationalism, even less Chinese co-operation. Jaw-jaw may be
better than war-war, but that doesn’t make it nice.

(Displaying 1-10)

Thomas Dontal wrote:
im not sure why chinese people like ray fu and bajie zhu comment on
this site, their opinions do not make any sense and are without
foundation or backed up with facts.they belive everything that is said
to them by the mouthpiece china papers, everyone who lives in china
refers to the china daily as the daily liar. the only people who know
whats going on are the chinese and US leaders we can only surmise.
china is a disaster waiting to happen, most educated people hate the
government and want change, freedom and media freedom. they hate the
corruption which is infested into every part of life. government
officials are all liars and cheats who steal and lie to gain financial
advantage. i know this from experience of working in china for many
years and meeting many chinese from goverment people to normal ones.
chinese people used to believe that loving their country meant loving
their government because they were conditioned to do so in their
education system.now more and more now realise they still love their
country but can hate the government
February 8, 2010 5:00 AM GMT Recommend?

Owen G wrote:
Europe needn't worry about “G2” consisting of America and China.

With America and China squabbling with each other, "G2" is really a
lame duck.
February 8, 2010 3:03 AM GMT Recommend? (1)

ivan darko wrote:
Everybody forgets (including and especially the chinese) that china
would not be in this position if the USA wouldn't have imported all
thsir junk.
Stopping all imports from China is a lot more effective policy than
lining up missiles along the taiwanese shores!!!
February 8, 2010 2:14 AM GMT Recommend? (3)

e.duke widin wrote:
Bajie Zhu;
Perhaps China should do something different.
As so many US companies can't pay there bills in China in time,Beijing
should consider sending in the bailiffs to the Province Taiwan and
confiscate the US weapons to keep them as collateral till the US
companies paid there bills.

By the way, has the US Pavilion been paid for by the US administration
or was the blackmail of google successful and Clinton does no have to
pay the outstanding 61 Million USD to the Shanghai builders?

February 8, 2010 1:57 AM GMT Recommend? (3)

John Reid wrote:
It's not a good idea to try to paint China (or anyone else) as an
"enemy of the West" because this has, historically been little more
than an excuse for ramping up the arms trade, but this is one of the
factors which has brought the US economy to its current pass. The US
would do better to keep its own counsel and repair its broken
infrastructure. Their current policies have off-shored lots of jobs,
but done little else. There is no reason for the rest of us to embrace
that sort of foolishness any longer.
February 8, 2010 1:41 AM GMT Recommend? (12)

Bajie Zhu wrote:
Why does one need to be an EXPERT to understand China? "Do unto
others..." works just as well, actually exceptionally well, with the
Chinese. Whatever you do not want done to you, do not do it to the
Chinese. Do you see the Chinese entertaining or financially and
militarily (ala the CIA) supporting native American leaders in their
quests for "greater autonomy" from America? Do you see China selling
tens of billions of dollars of "defensive weapons" to Cuba? What is
good must be universal. Either the Yanks stop doing what they are
doing, or don't act surprised if China start doing same.
February 8, 2010 1:27 AM GMT Recommend? (10)

e.duke widin wrote:
Regarding the convertibility of the RMB, there are 5 Cities set up for
trading and settling companies registered there in foreign currencies
as a test case in China..

For regular readers of the China Daily its no news; prior to Obamas
visit Shanghai, the Central Bank of China wanted the RMB revalued, but
they did not get the go ahead from Beijing, Therefore its a political
decision and perhaps secretly not wanted by the Obama administration
as it could trigger a USD fall but currency speculators are filling
the coffers of the bank China in the meantime by 55 Billion USD only
in December by getting out of the USD.

A the same time a new development in the Asian Pacific Trading area is
taking place, since the start of ASEAN FTA trading block about 4 weeks
ago the 10+3 including Japan and Taiwan,economist are lauding the RMB
as the new leading currency in that trading block for settlements.

February 8, 2010 1:17 AM GMT Recommend? (3)

Bajie Zhu wrote:
Why does one need to be an EXPERT to understand China? "Do unto
others..." works just as well, actually exceptionally well, with the
Chinese. Whatever you do not want done to you, do not do it to the
Chinese. Do you see the Chinese entertaining or financially and
militarily (ala the CIA) supporting native American leaders in their
quests for "greater autonomy" from America? Do you see China selling
tens of billions of dollars of "defensive weapons" to Cuba? What is
good must be universal. Either the Yanks stop doing what they are
doing, or don't act surprised if China start doing same.
February 8, 2010 1:13 AM GMT Recommend? (6)

Brad Spring wrote:
This is rubbish, full of wishful thinking.

The US Ambassador to China Huntsman once said: "And I've come to the
conclusion that 'China expert' is kind of an oxymoron. And those who
consider themselves to be China experts are kind of morons. "
February 8, 2010 1:06 AM GMT Recommend? (10)

Andrew Carter wrote:

Not at all one-sided! I consider this to be a well-balanced article
which gives due credit to alternative perspectives and draws shrewd
and pithy conclusions from it's diverse sources. IF ONLY.
It is time to wake up and smell the coffee; your depiction of China is
as accurate - and informative - as to caricature all Englishmen as
wearing bowler hats, drinking afternoon tea on the croquet lawn, and
having a butler.

There IS an alternative perspective on this, but it wouldn't sell
nearly as many newspapers in the UK, so why report it? SHAME ON YOU!
(and on Dominic Lawson, for that matter - I bet Matthew Parris would
present a far more perceptive viewpoint).
February 8, 2010 12:58 AM GMT Recommend? (4)

(Displaying 11-20)

Bajie Zhu wrote:
The China American relationship in the last few decades was a
seriously dysfuctional one - actually abusive, with America being the
abuser, basically doing whatever it damn well pleased, and repeatedly
trampled on the core interest and feelings of the Chinese. For
practical reasons, such oppressive transgressions were tolerated, but
it does not mean that there were any less hurt or vexation. Times have
changed, and fortunes shifted. China is just urging that the
relationship return to a normal, civil one, in which both sides
respect the core interests of the other.
February 8, 2010 12:58 AM GMT Recommend? (12) Re

David Lea-Smith wrote:
Another explanation is plausible. That the Chinese, or more correctly,
a small, elitist group of unelected, communist government officials,
are acting like a bunch of spoilt, arrogant children. Perhaps they
need to re-read (or read) their confucius who said 'arrogance brings
on destruction'.
February 8, 2010 12:42 AM GMT Recommend? (7) Report

Savo Djukic wrote:
Nothing is wrong with the China's exchange rate.

It is only a lame excuse of the 'experts', who delivered such dip of
our economies.
February 7, 2010 11:48 PM GMT Recommend? (10)

e.duke widin wrote:
By meeting the head of the old Tibetan Slave keepers ,Obama shows now
what he stands for to the world and they love it.
Perhaps he got to meet that Lama as part of the agreement to give the
peace laureate to him.
How nice,the Dalai Lama, Al Gore ,Barack Obama, and the big
loosers,Nicolas Sarkozy and Angela Merkel,without them the world could
be a better place

February 7, 2010 11:48 PM GMT Recommend? (12)

S Z wrote:
Dear Bill, it is so naive to think in your wishful way. I can tell and
understand how much you really hope what you have suggested will be
true.

But China will not float its currency soon. As you correctly point
out, such a move will please everyone (US, EU, India...) but bring
uncomfort to China herself. Then why should China do it? and do it
using a 'clever' trick as you cleverly guessed?
February 7, 2010 11:44 PM GMT Recommend? (10)

http://www.timesonline.co.uk/tol/comment/article7018411.ece

...and I am Sid Harth

[bademiyansubhanallah]

From Times Online April 16, 2009

China economy grows at slowest pace in 15 yearsLeo Lewis, Asia
Business Correspondent

Mauled in a storm of tumbling exports, soaring unemployment and the
closure of tens of thousands of factories in the “workshop of the
world”, China’s economy expanded at just 6.1 per cent in the first
quarter of 2009 – the most anaemic phase of growth since quarterly
records began over 15 years ago.

The government’s numbers showed that, for the second consecutive
quarter, growth in the world’s third-largest economy has remained well
below the 8 per cent mark – a level identified by many observers as
the “danger line” for Beijing as it attempts to calm unrest among tens
of millions of newly unemployed migrant workers.

The GDP report coincided with a public statement by Timothy Geithner,
the US Treasury Secretary, who had previously labelled China a
manipulator of its currency. Those comments were reversed today,
suggesting that Washington has temporarily softened its view that
Beijing must allow the Yuan to appreciate. Without that pressure, a
weaker Yuan would be a following wind for Chinese exporters.

But the grim GDP figures were accompanied by other readings from the
economy suggesting that the path to recovery may already be clearing
and that Beijing may yet make good on its promise to become the first
major economy to recover from the global downturn.

Driving that optimism is the sense that Beijing’s immense $585 billion
stimulus plan may already be starting to work. The package, which
involved expansive promises of infrastructure projects, cuts in export
taxes and ordering the banks to open the lending taps wide, has
already had a dramatic effect on Shanghai-listed stocks.

The index has soared to an 8-month high, though analysts warned today
that the cascade of state money could itself produce asset bubbles and
other future risks. Careful policy steps were needed, Wang Tao of UBS
told reporters, to reduce the risk of “massive resource misallocation,
asset bubbles and damage to the banking system.”

Bank lending, it was revealed earlier this week, expanded six-fold in
March and urban fixed-asset investment leaping more than 30 per cent
in the same month. Spending on real estate development was also on the
rise in the first quarter, swelling 4.1 per cent and rising
substantially from the 1.0 per cent gain logged between January and
February.

Others said today that the signs of recovery were only tentative, and
that significant risks remain as the global economy struggles to right
itself.

Although in considerably better shape than many other countries around
the world – especially in Asia – the rapid fall in growth rates
provided more bearish observers with evidence of China’s vulnerability
to the global economy and to the spending slump by American and
European consumers.

One closely-watched gauge of the Chinese economy, given many analysts’
scepticism over the accuracy of official statistics, is power
consumption: the numbers cannot be manipulated as easily and it
closely tracks the true pace of industrial activity. In the first ten
days of April, said local Chinese media today, the decline in
electricity consumption accelerated – a possible sign that deeper cuts
in industrial production and further factory closures may be around
the corner.

On a national level, power running through the grids was down 3.57 per
cent compared with the same period a year earlier: a considerable jump
from the average 2.0 per cent decline throughout March.

Analysts at CLSA had already warned that the relatively shallow
declines in March should not be taken as a sign of a bottoming-out.

Some analysts use power data as an early indicator of economic
activity, and have cautioned against viewing the improvement in March
as a sign that demand had started to bottom-out.

http://business.timesonline.co.uk/tol/business/economics/article6102955.ece

From Times Online February 11, 2009

Chinese exports fall at fastest pace in 13 years

Report shows exports falling at their fastest pace in 13 years along
with a record 43.1% plunge in January importsLeo Lewis, Asia Business
Correspondent

The Chinese government faces intensifying pressure to boost its
already massive $586 billion economic stimulus package after a report
showed exports falling at their fastest pace in 13 years.

The huge drop in exports, along with a record 43.1 per cent plunge in
January imports, serve-up yet more evidence to Beijing that the
world’s third largest economy remains highly vulnerable to demand
outside its borders.

The severe decline in import figures, said Citigroup’s China economist
Ken Peng, undermined the sense that December marked China’s
“inflection point” and that its recovery was now underway. The figures
were a heavy blow to China-watchers who believe that the country may
be able to ride out the global crisis via the strength of domestic
growth and consumption.

More than 20 million Chinese workers have lost their jobs in recent
months as the slowdown has forced thousands of factories out of
business and made ghost towns of once thriving industrial zones. With
those giant manufacturing plants now silenced, and the accompanying
property boom on hold, Chinese imports of raw materials, electrical
components and machinery have also collapsed.

The scale of the decline in imports was amplified by the wider slump
in raw commodity prices: crude oil and metals prices are a fraction of
what they were this time last year, partly because markets started
last year to price-in the prospect that China would cease to be such a
white-hot consumer of raw materials.

The January dip in overseas shipments comes in the wake of what was,
for China’s thousands of export-driven manufacturers, a terrible
December shopping season in the US and Europe with few immediate
prospects for a recovery. China’s toy exports have been particularly
hammered by a combination of crashing demand and tighter safety
standards in the EU. India, in what was interpreted by some as a
protectionist measure, has banned Chinese toy imports for six months,
citing safety concerns.

The 17.5 per cent year-on-year plunge in January exports was
significantly worse than market forecasts were predicting, and, said
analysts, is likely to revive the internal debate in Beijing over
whether China should devalue the yuan in a bid to prevent the decline
in exports accelerating any further.

Economists at JP Morgan Chase said that the steep trade decline should
prompt Beijing to continue easing monetary policy, possibly cutting
the key one-year lending rate by one percentage point from its current
level of 5.31 per cent within the year. Other observers believe that
the government may be planning a raft of further measures to revive
both consumption and the languishing property market.

But while some economists believe that Beijing may be forced to
increase the size of its stimulus package simply to quell social
unrest among the rising tide of jobless Chinese, Société Générale’s
Chief Asia Economist, Glenn Maguire, said there was still grounds for
optimism on the effectiveness of the Chinese stimulus package.

Beijing’s “guidance” to its banking sector – a tacit order to open the
financial sluice gates wide to fund enterprise investment – has
already been zealously acted upon, he said. January lending figures
should, he added, reveal that 25 per cent of bank funding for
investment spending and infrastructure projects by state-owned
companies has already fallen into place just four weeks after the
“guidance” was issued.

Broken down further, the January export data showed a 17.4 per cent
plunge in January exports to the EU, and a 9.8 per cent drop in
shipments to the US. Steel exports nosedived by nearly a third.

The yuan devaluation debate will be closely watched far beyond
Beijing, especially in view of China’s $39.1 billion trade surplus and
gathering fears that more months of global economic misery may trigger
a series of protectionist gambits by governments around the world.

Chinese officials are reportedly concerned by the “Buy American”
provisions in the US stimulus package and the Chinese authorities were
unimpressed by comments last month from Washington accusing Beijing of
manipulating its currency. In his new role as US Treasury Secretary,
Timothy Geithner said yesterday that the Obama administration has yet
to decide whether it will continue to define China in those terms.

http://business.timesonline.co.uk/tol/business/economics/article5711469.ece

Times February 10, 2009

Half of China's toy factories close after exports slumpJane Macartney
in Beijing

Nearly half of China's toy factories closed last year as the financial
crisis tightened its grip.

The country started the year with 8,610 factories producing and
exporting 70 per cent of all the world's toys. By the end of 2008,
only 4,388 remained — a decline of 49 per cent, figures from the
customs office showed. The blow has been particularly hard-felt in the
southern province of Guangdong, which borders Hong Kong, and which is
responsible for producing the majority of the toys made in China.

The plight of China's toy industry has been exacerbated by a recent
decision by India to impose a six-month ban on imports on the grounds
of health and safety. That drew an angry response yesterday from
Beijing, which warned Delhi that the action could harm ties between
the neighbours.

The Ministry of Commerce said: “China hopes that in a period during
which the world economy faces grim challenges, India takes cautious
and prudent trade remedy measures, otherwise bilateral trade relations
could be seriously impacted.”

China has already said that it plans to ask the World Trade
Organisation's dispute settlement body to study whether the Indian ban
violated WTO rules.

The clash highlights a rise in protectionist sentiment around the
world, prompted by the economic slowdown. However, China said that it
had no plans for a “Buy China” drive.

Among those sectors that make up the Chinese industrial juggernaut,
one of the worst hit has been the light industry that churns out
everything from zips to lighters and socks to toys. The decline in the
toy sector has come just as a government policy to encourage
consolidation and to allow smaller, less technologically advanced
firms to wither had begun to gain ground in southern Guangdong.
Combined with a sudden slump in overseas orders, the impact has been
swift.

While toy exports managed to grow marginally in 2008, up by 1.8 per
cent to $8.6 billion (£5.8 billion), the figures hid a dramatic
deterioration towards the end of the year. In November, exports
slumped by 8.6 per cent from a year earlier, while December saw a drop
of 7.6 per cent.

Even some large factories ran into difficulties. Among the biggest
closures was that of Smart Union, a Hong Kong-listed maker of toys for
companies such as Mattel and Disney in the United States. It closed
last October with the loss of 7,000 jobs.

However, toy industry experts have said that the closure of some
factories could help others to survive the downturn, with the biggest
and most sophisticated likely to benefit. Most of those that closed
were smaller, cheaper plants producing toys to lower safety
standards.

China's toy producers were already reeling after recalls around the
world of some of its output over the past 18 months severely tarnished
the industry's reputation. Rising labour and land costs had been
adding to overheads.

A report from China's Customs office was gloomy: “Toys are not a life
necessity, so people's demand for that kind of product declined in the
face of a grim economic situation.”

http://business.timesonline.co.uk/tol/business/markets/china/article5697090.ece

From The Times February 3, 2009

China fears trouble from 20m jobless migrantsJane Macartney in
Beijing

Twenty million rural migrants are jobless in China because of the
economic downturn, prompting fears in Beijing of social unrest by an
army of unemployed workers.

As the Prime Minister, Wen Jiabao, laid the blame for the downturn at
the door of the West, Chen Xiwen, the top policy official on
agriculture, revealed that 15.3 per cent of the 130 million migrants
moving from farms and villages to cities and factories – about one in
seven – had now returned without jobs to the countryside. That is
double an official estimate given a month ago. Mr Chen acknowledged
the threat posed by masses of workers going home without an income.

China has a rural population of 750 million, many of whom rely on
relatives in factories to send money home. “After they return to
villages, what about their incomes? How will they live? That’s a new
factor concerning social stability this year,” Mr Chen said.

The rise in unemployment prompted the Communist Party’s security chief
to call for measures to prevent social unrest. Zhou Yongkang said that
economic growth was essential to the nation’s stability.

The rise in rural unemployment has been exacerbated by the six to
seven million new entrants expected to join the rural labour market
this year. There are also many millions of urban jobless, for which
the Chinese Government does not release figures.

The leadership is particularly determined to avoid trouble on the
streets and eager for smooth celebrations for the 60th anniversary of
Communist Party rule. Hundreds of “mass incidents”, or outbursts of
discontent, shake China every day but most are too small or too local
to be reported in the media.

The official number soared to 87,000 in 2005 but fell the next year.
In the past two years the police have chosen not to release the
statistics.

http://www.timesonline.co.uk/tol/news/world/asia/article5645537.ece

...and I am Sid Harth

[bademiyansubhanallah]

Trade tensions flare as recovery fades

By Emily Kaiser
Reuters
Sunday, February 7, 2010; 3:02 PM

WASHINGTON (Reuters) - Trade tensions are starting to flare as the
pace of the global economic revival shows signs of slowing.

Trade figures coming this week from three of the world's biggest
exporters -- Germany, China and the United States -- are likely to
show vast gains from a year earlier, when the global recession was at
its peak.

But they may also reflect a downshift in the rate of recovery. In
China, for example, economists polled by Reuters are looking for a
sharp 23 percent jump in January's exports year-over-year, but a
decline when compared with December.

The contrast is even more dramatic for China's January imports, which
are forecast to jump by 86 percent from a year earlier but decline
from December.

That pattern matches what is happening in the United States, China's
best customer. Fourth-quarter economic growth was considerably
stronger than expected, but recent readings suggest January's growth
will be slower.

"We're going to settle down, growth is going to slow," said Nigel
Gault, chief U.S. economist with IHS Global Insight, listing
stubbornly high unemployment and weakness in domestic demand among the
obstacles.

Most economists think it will be at least four years before U.S.
unemployment gets anywhere close to its pre-recession level of 5
percent, which leaves the United States relying heavily on the rest of
the world to help lift growth and create jobs.

President Barack Obama wants to double U.S. exports over the next five
years. China also needs to maintain its export growth to create jobs
and keep its economy humming.

That is a recipe for conflict, and the disputes have been piling up.
The latest round came on Friday when China said it would levy anti-
dumping duties on U.S. chicken products.

"Up until now we could be pleased that trade tensions have stayed as
low as they have given how deep the recession was and how much
unemployment was created," Gault said. "Going forward, there will be
more spats and at some point there's a potential for both sides to
lose their patience."

DEBT AND THE DOLLAR

If the United States is to achieve its export goal, which economists
see as a tall order, it will need strong global economic growth to
boost demand. It will also need a weaker U.S. dollar -- or stronger
Chinese yuan -- to make its goods more competitively priced.

Obama vowed last week to "get much tougher" with China on trade and
currency rules. That elicited a tart response from Beijing that its
currency was already at a reasonable level.

Goldman Sachs economist Sven Jari Stehn estimated that the dollar
would need to depreciate about 30 percent over the next five years in
order to reach the export target -- and that assumes global growth
comes in at a healthy 4.5 percent clip.

The International Monetary Fund expects 2010 global growth of 3.9
percent, and 2011 growth of 4.3 percent.

Stehn said if GDP is more like 4 percent, the dollar decline would
need to be around 41 percent.

The dollar has been moving in the opposite direction lately, largely
because of growing worries over government debt burdens in European
countries including Greece, Portugal and Spain that prompted risk-
averse investors to sell euros and buy dollars.

The dollar is up some 8 percent against a basket of currencies since
early December.

There may be more bad news from Europe this week. Euro zone fourth-
quarter GDP figures are due on Friday, and are likely to show growth
slowed to 0.3 percent from 0.4 percent in the previous period. In
Germany, Europe's biggest economy, fourth-quarter GDP growth is
expected to fade to 0.2 percent after advancing 0.7 percent in the
third quarter.

Julian Callow, an economist with Barclays Capital in London, said
recent euro zone production and demand data have been disappointing,
suggesting that first-quarter GDP will also be weak and raising the
risk of a double-dip recession.

If Europe is to avoid that, it will need Germany's exports running at
full strength, he said.

Europe has also drawn China's attention on trade. Last week, China
launched a dispute at the World Trade Organization against European
Union duties on shoes.

With the United States, Germany and China all looking to export their
way to stronger growth, there may be a three-way trade fight brewing.

(Editing by Leslie Adler)

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/07/AR2010020701865.html

...and I am Sid Harth

[bademiyansubhanallah]

February 7, 2010, 7:00 pm
Will Americans Really Learn Chinese?
By THE EDITORS

Brendan Hoffman for the New York Times

A second grade class receiving Chinese language instruction at the Yu
Ying charter school in Washington. View slide show.

The Times recently reported on the rise of Chinese-language
instruction in American schools, a push supported by aid from the
Chinese government. While language fads come and go — there was
Russian during the cold war, then Japanese in the 1980’s, then Arabic
after 9/11 — thousands of public schools have stopped teaching foreign
languages in the last decade. Is the boom in Chinese language
education going to last?

There’s a long tradition of bemoaning Americans’ inadequacy in foreign
languages. But what specifically should the nation do to improve its
citizens’ knowledge of other languages? What are the impediments?


Susan Jacoby, author of “The Age of American Unreason”
Ingrid Pufahl, Center for Applied Linguistics
Marcelo and Carola Suárez-Orozco, N.Y.U.’s immigration studies
program
Norman Matloff, University of California, Davis
Hongyin Tao, professor of Chinese language and linguistics
Bruce Fuller, U.C. Berkeley professor of education and public policy

Parochial, and Proud of It

Susan Jacoby is the author of nine books, most recently “The Age of
American Unreason.”

The disproportionate media attention devoted to a mini-blip increase
in Chinese classes in U.S. schools only underlines the parochialism
and mediocre education standards that undercut America’s attempts not
only to compete in the global economy but to lay claim to any cultural
sophistication beyond the world of video.

Our problems are rooted in the much larger dumbing down of the
American concept of what it means to be an educated person.

Between 1997 and 2008, according to a survey by the Center for Applied
Linguistics, the proportion of elementary and high schools offering
some sort of instruction in Chinese rose from 1 to 4 percent. This is
a meaningless statistic. Many of the schools rely on a Chinese
government program that subsidizes salaries for teacher-ambassadors it
sends to the lowly, economically deprived U.S. The fad for Chinese
will pass — born, like the promotion of Russian studies during the
cold war, out of the idea that we must know the language of our chief
competitor.

Americans have never been particularly interested in learning other
languages and are even less interested today (with the exception of
conversational Spanish).

Only 9 percent of Americans, compared with 44 percent of Europeans,
speak a foreign language. The Web has only reinforced the smug
American conviction that everyone worth talking to in the world speaks
English.

The only real expansion of foreign language programs in both secondary
schools and universities came with the 1958 National Defense Education
Act — a direct response to the Soviet Union’s launching of Sputnik.
The N.D.E.A. promoted not only the teaching of Russian but of all
foreign languages. Our government now spends 25 percent less, adjusted
for inflation, than it did 40 years ago on foreign language training
at the university level.

Even more disturbing, our pinched budget for foreign language teaching
includes an additional 20 percent for Arabic and Middle East studies
appropriated after the 9/11 terrorist attacks — meaning that the
teaching of other languages has declined dramatically. Richard D.
Brecht, executive director of the Center for Advanced Study of
Langauge at the University of Maryland, told me in 2003 that “America
has no long-term strategy to build the expertise we need to understand
other cultures. We’ve seen, in the worst possible way because of our
lack of Arabists, where this short-term thinking leads.”

The situation is, needless to say, worse today as the recession has
squeezed education at every level. But the utilitarian problem — we
don’t have enough diplomats, spies and business people who know other
languages — is rooted in the much larger dumbing down of the American
concept of what it means to be an educated person. Most states have
dropped foreign language requirements for high school graduation, and
most students complete college without studying any foreign language.
We’re a Know-As-Little-As-You Can-Get-Away-With Nation and proud of
it.

How Europe Does It

Ingrid Pufahl, a native of Germany, is a research associate at the
Center for Applied Linguistics. She is co-author of “Foreign Language
Teaching in U.S. Schools: Results of a National Survey” and “Foreign
Language Teaching: What the United States Can Learn From Other
Countries.”

For decades, U.S. policy makers, business leaders, educators, and
research organizations have decried our students’ lack of foreign
language skills and called for better language instruction. Yet,
despite these calls for action, we have fallen further behind the rest
of the world in preparing our students to communicate effectively in
languages other than English.

Many U.S. school programs offer general exposure to languages but
don’t expect proficiency.
I believe the main reason for this disparity is that foreign languages
are treated by our public education system as less important than
math, science and English. In contrast, E.U. governments expect their
citizens to become fluent in at least two languages plus their native
tongue. This different attitude toward languages has wide-ranging
implications that contribute to successful language learning abroad.
Foreign languages are core academic subjects for all students,
including special-needs students and vocational students.

In contrast, foreign language instruction in the U.S. is frequently
considered a “luxury,” a subject taught to college-bound students,
more frequently in affluent than poor school districts, and readily
cut when math or reading test scores drop or budget cuts loom.

Language instruction starts early and lasts for many years. While
China and the E.U. are teaching more languages to even younger
children, fewer U.S. elementary and middle schools are now offering
foreign languages than they did 10 years ago. As a result, students
abroad study languages for 9 to 12 years, whereas most Americans don’t
start language study until they enter high school and simply have too
little time to become proficient.

Schools abroad offer intensive language programs, frequently teaching
academic subjects in the foreign language. Thus, Finnish students, who
spend about 16 hours per week on foreign languages, nevertheless top
the charts in international math, science and reading achievement
tests.

In contrast, many U.S. elementary and middle school language programs
only offer general exposure to languages but don’t expect proficiency.
The only programs here that achieve high proficiency levels are
immersion programs, where at least 50 percent of the school day is
taught in a second language.

Finally, European policy makers, educators and the general public
realize that the benefits of language study extend well beyond the
ability to communicate in another language. A recent E.U. meta-study
presented scientific evidence that multilingualism contributes to
creativity by enhancing mental flexibility, problem solving
capability, language awareness, learning capacity and interpersonal
ability.

Education policy in the U.S. does not reflect a similar understanding
and thus does not emphasize language learning as an integral part of
an individual’s overall cognitive development. Instead, languages
achieve popularity according to world events and contexts — Russian in
the 1980s, Japanese in the 1990s, Chinese today — but U.S. education
lacks a cohesive approach to language instruction as part of each
citizen’s right to a basic education.

Dedicated to Monolingualism

Marcelo and Carola Suárez-Orozco are members of the Institute for
Advanced Study at Princeton University and co-directors of Immigration
Studies at New York University. They are co-authors of “Learning a New
Land: Immigrant Students in American Society” and the forthcoming
“Educating the Whole Child for the Whole World: The Ross Schools and
Education for the Global Era.”

Is the new interest in learning Chinese another language fad? We
certainly hope not. But the U.S. record with foreign language
instruction is underwhelming.

The immigrant languages of yesteryear like German, Italian and
Japanese were obliterated.
When it comes to languages, as a nation we are of two minds: while
urging middle class kids to pursue study abroad with the understanding
that it will better prepare them linguistically and culturally for the
new global marketplace, concurrently we undermine the maintenance of
the great linguistic diversity of our newest Americans — the millions
of immigrant children that enrich our national linguistic reservoir.

This has deep roots in American history. Benjamin Franklin’s excessive
anxieties about German (and Germans) in Pennsylvania and Teddy
Roosevelt’s chilling “We have room for but one language here, and that
is the English language” have echoed through the ages.

For over a century the United States has maintained an implacable
regime of compulsive monolingualism — as famously quipped by a
sociologist, the “U.S. is a cemetery for languages.” The great
immigrant languages of yesteryear such as German, Italian and Japanese
now R.I.P. in American soil.

Developing English skills, of course, is as always, essential for
doing well in the educational system, in the workplace, and above all,
for full democratic engagement in society. But more than ever before,
in an increasingly interconnected world, the ability to negotiate in
more than one language represents an extraordinary cognitive and meta-
cognitive advantage for communicating in diverse neighborhoods, for
working in various sectors of the economy, and for success in global
businesses.

The archeology of the English-only logic that has reigned in the U.S.
for generations emerged in the context of nation-building and the need
for social cohesion, as millions of immigrants speaking multiple
languages were turned into loyal citizens, workers and consumers in
the new nation. As the center of global power slowly but surely moves
East and South with the “BRIC” countries (Brazil, India and China),
the advantages (economic, diplomatic and for security) of a
multilingual citizenry are becoming increasingly obvious, as Doris
Sommer of Harvard and others have shown.

If Teddy Roosevelt turns out to be right, our kids will be left in the
dust in the new global race to the top. And when the top science- and
math-scoring multilingual kids from Finland, Korea and Netherlands get
there they will hear the sweet sound of success in many languages.

Not Just a Passing Fad

Norman Matloff is a professor of computer science at the University
of California, Davis. He is the developer of a Chinese language
software tool.

Americans have a bad rap in linguistics. Europeans relish speaking
multiple languages, we’re told, while Americans simply aren’t
interested.

Unfair comparison. Most Europeans live within a couple hundred miles
of another nation, so they speak multiple languages out of necessity.

The comparison to Europeans is unfair: they speak multiple languages
out of necessity.

In U.S. regions with similar necessity, interest in language learning
is brisk. Walk into any chain bookstore in California and you will see
tons of books on learning Spanish. Indeed, in many stores, Spanish has
its own section, separate from Foreign Languages.

It is thus only natural that, with China’s dramatic rise in economic
and political presence, Americans are now interested in learning
Chinese. Chinese instruction is no passing fad, what with 1.3 billion
people to talk to.

But CAN Americans learn Chinese? All those characters to memorize! And
then the curveball–those dreaded, elusive tones! Much better
instructional methods are needed.

American kids may not have the patience for the tian yazi (“stuff the
duck”) rote-memory methods those teachers from China may use. An
increase in active learning is key, say based on singing and learning
movie scripts. And Perapera-kun, an open-source Firefox browser plug-
in, is a great way to increase reading comprehension for immediate
learners.

One problem is that enrollment in U.S. Chinese courses often includes
a number of native speakers, children of immigrants. A startling
illustration of this is that the SAT Subject Test in Chinese has a
mean score of 764, far higher than French at 621 and Chemistry at 629.
Teaching “mixed” classes doesn’t serve either group well. Some rich
schools solve the problem by offering separate courses for Chinese-
American kids who can speak the language but can’t write it, but this
option may be infeasible for many schools.

In spite of difficulties, though, Chinese courses are here to stay,
and those who stick with the language will find it very rewarding.

Start Early, to Learn Tones and Characters

Hongyin Tao, professor of Chinese language and linguistics, is
coordinator of the Chinese language program at UCLA. He is executive
editor of the journal, Chinese Language and Discourse, and of the book
series, “Studies in Chinese Language and Discourse.”

As long as China is on the rise, one can expect that interest in the
Chinese language will grow.

We have heard claims that Chinese is among the world’s most difficult
languages, if not the most difficult language, to learn. This is bit
of an overgeneralization, as it really depends on who the learner is
and what aspects of the language we are talking about.

Princeton University Art Museum

The Chinese Language, Ever Evolving: Simplified vs. Traditional
CharactersChinese is not necessarily harder than, say Korean, for
English (non-heritage) speakers. After all, the grammar is rather
simple: There is no need to conjugate verbs (for example, the verb “to
go” in Chinese is always qu 去, no matter it is ‘we go’, ‘they went’,
or ‘she goes’). Word order, unlike, say, Korean, is very similar to
English (e.g., wo ‘I’ + qu ‘go’ + nali ‘there’). Nouns do not have to
change to reflect differences in number (singular vs. plural) or
gender (as in Spanish and French).

The most difficult part in learning to speak Chinese may be in
figuring out the tones. Chinese is a tonal language, where pretty much
every word must be uttered with a particular tonal contour, and this
has to be memorized.

With different tonal contours imposed, ostensibly identical sound
combos, which tend to be short, can render completely different words
and meanings (e.g. gou with a falling-raising tone (as in a V shape)
means ‘dog’, whereas gou in a sharp falling tone (as in a \ shape)
means ‘enough’). To the novice learner, speaking Chinese is akin to
singing. Worse yet, tones in isolated words may need to be adjusted
when put together in an utterance.

The character writing system is another major hurdle for English
learners, because the system is non-phonetic and non-alphabetical.
There are thousands of them and many look extremely complicated.

Yet, the characters are not totally random. Once you have learned how
to decompose the characters, you will realize that many share the same
or similar components (called ‘radicals’), and they may tell you
something about the sound or the meaning of the character. Once you
have learned 400-500 characters, chances are that you have encountered
some of the most commonly used components, and you can use them as
building blocks for comprehending and producing other characters.

The younger the leaner is, the easier to master a language. This is
also true for Chinese learning. Not surprisingly, then, we have seen a
lot of success stories from young children in American schools. Adults
will always have a hard time learning a new language, no matter how
hard one tries, especially when the language in question shares very
little with your native language in terms of history and culture.

What all this means is that for Chinese language education in the
U.S., it is always a good idea to start the learning process as early
as possible; and between the spoken and the written language, try to
focus on the spoken language first and worry about the written part
later. For the writing system, English-speaking learners need to be a
little patient, knowing that after some initial hardship, a break-out
moment will eventually arrive, and after that, characters may no
longer be as daunting as they first seem.

We’d Better Learn It

Bruce Fuller, professor of education and public policy at the
University of California, Berkeley, served as a sociologist at the
World Bank. He is the author of “Standardized Childhood.”

Imagine that your monthly mortgage bill arrives, unremarkable except
that it’s suddenly written in Mandarin. Then, your bank sends over a
Chinese translator to explain that you are falling deeper into debt.
Mind-boggling? Well, this is America’s contemporary predicament as the
Chinese finance a growing share of our national debt. Beijing holds
$1.8 trillion in U.S. bonds and other instruments of borrowing. We are
fused at the hip with the Chinese, economically speaking.

We are economically fused at the hip with the Chinese, so we must bear
down.
So, we better get to know them. They certainly want to know us,
sending over hundreds of teachers to spark our children’s interest in
Mandarin and East Asian ways. Affluent urban parents get it. (One San
Francisco colleague felt compelled to apologize that his 6-year-old
daughter had access only to a dual-language Spanish-speaking school,
rather than to the Mandarin immersion he wanted.) But unlike Europe,
the U.S. has no coherent strategy for making our society bilingual,
unless you count our growing Babel of texting as a second tongue.

We are pathetically slow in realizing that East Asia will soon
dominate the global economy. We believe, as did the last living
Romans, that the American empire will reign forever. So, we fail to
grasp the hard work, collective spirit and enormous investment in
public institutions advanced by Chinese citizens.

We must learn the language and engage them at a human scale as first
steps in appreciating the strengths of East Asian cultures. These
virtues already lift America’s best universities. Over half of
Berkeley’s undergraduates are now of East Asian descent.

Rather than bumbling along, government and corporate leaders should
advance coherent policies for bilingualism. Europe began this process
about four centuries ago. Washington moves quickly when military
interests dominate. My Arabic-speaking son, Dylan, was offered $20,000
up front to staff intelligence outposts in the Middle East. But
Mandarin? What’s the rush? The count of American high school students
enrolled in Chinese classes is less than those studying German.

Instead, President Obama’s ballooning budget for education could focus
dollars on teaching foreign languages. This should be co-financed by
multinational corporations who richly benefit from the bilingual
skills and graduate training of top Chinese students, financed in part
by American taxpayers. Cash-strapped school districts need strong
incentives to rethink their language programs. And let’s see language
as a window into China’s cultural assets and cooperative skills, not
simply as a tool to expand market share.

http://roomfordebate.blogs.nytimes.com/2010/02/07/will-americans-really-learn-chinese/

...and I am Sid Harth

[bademiyansubhanallah]

Political Punch
Power, pop, and probings from ABC News Senior White House
Correspondent Jake Tapper

Political coverage and musings on pop culture from ABC News Senior
White House Correspondent Jake Tapper and the ABC News White House
team.

Exclusive: Geithner Says Brown Wrong About Stimulus
February 07, 2010 9:00 AM

Treasury Secretary Timothy Geithner challenged newly elected Senator
Scott Brown’s claim that the last stimulus bill “didn’t create one new
job.” Brown made the remark during his first press conference after
being sworn in Thursday, but in my “This Week” interview, Geithner
said he doesn’t “think there’s any basis for that judgment.”

The administration has faced some criticism for using the phrase “jobs
saved or created” in describing the impact of the stimulus package.

Massachusetts Governor Deval Patrick, Friday, said the stimulus
package created more than 7,000 jobs in that state.

Watch Video HERE:

Read the Full exchange HERE:

TAPPER: The new senator from Massachusetts, Scott Brown, one of the
first things he said after being sworn in was that the stimulus
package has not created one job.

BROWN:“The last stimulus bill didn't create one new job. And in some
states, the money that was actually released hasn't even been used
yet.”

GEITHNER: Oh, I don't think there’s any basis for that judgment. I
mean, again, just think where we were. January of 2009, three-
quarters of a million Americans losing their jobs. We have an economy
now that's growing again. With growth you're going to see jobs
created.

Again, we already saw some job -- a month where we had positive job
growth. But, you know, it's going to take a while. It took a long
time for these problems to develop. They're going to take some time
to heal. But we're in a much stronger position today.

But our priority has to be, and I think you see broad recognition of
this now, is to make sure we're working very hard to make sure that
we're seeing this growth translate into more jobs to reach more
Americans.

jpt

February 7, 2010
Comments (140)

Treasury Secretary Timothy Geithner challenged newly elected Senator
Scott Brown’s claim that the last stimulus bill “didn’t create one new
job.” Brown made the remark during his first press conference after
being sworn in Thursday, but in my “This Week” interview, Geithner
said he doesn’t “think there’s any basis for that judgment.”

Posted by: Faurtz8 | Feb 8, 2010 1:01:16 AM

jschmidt posted "Don't forget, most Democrats supported going into
Iraq." Sorry, but this isn't true at all. 98% of Republicans voted
going into Iraq; only 40% of Democrats voted for going into Iraq. The
numbers are out there; all you have to do is look them up.

Posted by: Faurtz8 | Feb 8, 2010 12:48:40 AM

Of course the stimulus helped. Three of the 5.7 points are a direct
result of stimulus spending. I'm just not sure how long China can
afford to grow Obama's GDP.

Posted by: smartlillena | Feb 8, 2010 12:29:45 AM

hey folks ,the GDP grew last quarter - the first time in two years.
Fact. It's working. REad forbes Magazine, read Business week
magazine ,read Wall Street Journail and read The Economst magazine.
All agree. The stimulus did help.

Posted by: seriously | Feb 7, 2010 11:41:01 PM

if you had an education would know that War is what is created with
getting the US out of the great depression---oh gee, and nobody goes
into debt from a war??? FDR walked into office with 25% unemployment
and brought it down 16% by the time the bombs dropped on pearl harbor.
It was 9% that day. And the only difference between the New Deal 1 & 2
and the war, was spending. We spent MUCH More during the war and we
went into MUCH more debt and we had NO income for any of it. Britian
did not pay us once cent for what we sent them, yet the government all
but took over factories andbought every single thing they made and
employed nearly a generation of men, trained them, fed them, clothed
them, housed them. IF the depression was spending, the war was
spending on steriods, and yes, that spending is what got us OUT of the
depressio nand into the boom-time 50s, when we paid off the wartime
debt, quite easily, with our growing GDP.

Posted by: seriously | Feb 7, 2010 11:38:45 PM

Brown sounds like Palin. ANother republican so caught in their looks
they forgot to exercise their brain. I live in mass, and I know of
jobs that resulted from stimulus spending. Brown seemed good with all
the talk of the healthcare bill. Everyone hated that bill. But now,
buyers remorse. Never really realized he was so stupid.

Posted by: joe | Feb 7, 2010 11:35:19 PM

Were you kids asleep when the stimulus passed? Our economy was
tanking. There was no plan to be able to create "net" new jobs (total
jobs created - jobs lost) - it was an attempt from keeping the bottom
of this recession from going as deep as it was heading. For goodness
sakes, your argument would have more credibility if you started from a
less hysterical, less cyinical position.

Posted by: Mom | Feb 7, 2010 9:08:49 PM

Hey, timmy, will you bet our tax return on that?

No NET jobs have been created by the stimulus.

When unemployment was 6% in 2001, Nancy Pelosi demanded of Bush WHERE
ARE THE JOBS!

Well, Timmy, other than no-show government jobs to increase union
paying federal workers, there are no NET JOBS!

Posted by: Karen | Feb 7, 2010 8:49:16 PM

jmb- when has govt laid off? If you increase govt spending for hiring,
you'll never be able to cut back on spending because the unions will
never allow it. Once the govt either employees or gives entitlement to
more the 50% of the voters, they would tend to keep the Democrats in
power forever. Big govt will not get us out of this mess and only
private industry will get us out. And Congress men from oth parties
got us into this mess. Don't forget Frank/Dodd cheerleading for Fannie
and Freddie while taking large amounts of contributions. Don't forget
Clinton signed the repeal of Glas Steagel. Don't forget, most
Democrats supported going into Iraq.

Posted by: jschmidt | Feb 7, 2010 8:46:03 PM

History and solid economic theory is proof that a trickle-down method
is too slow and highly ineffective in stimulating a weak economy.
Without additional stimulus (even with additional U.S. debt), we will
see many, many people suffer for a very, very long time. Because of
eight years of Bush & Cheney (including one unnecessary war, tax cuts
for the wealthy, etc.), the United States has been severely weakened.
This is a very sad time in our history; it will take years to "fix"
the damage caused by the radical conservatives.

Posted by: jmb | Feb 7, 2010 8:20:14 PM

I agree with you Billy

Posted by: Arthur W. Burns | Feb 7, 2010 8:08:45 PM

Remember back in January of 09. If the stimulus wasn't passed Obama
said the unemployment rate would go past 8% and the end of the world
would happen. Well we went well past 8%. Only 9% of the stimulus was
for infrastructure which would have been used to build roads and
bridges. But the vast majority was used by states to preserve their
own budgets. Muni unions made out but not construciton unions. Shovel
ready projects included long range high spped rail that won't be built
in years. So the stimulus was a sham to get money for Democrat pet
projects and unions. Brown was exagerating but so was Timmy. The Prez
and the Dems lied to the the people. They really don't have a clue on
how to get the economy going. Only private industry creates jobs that
last.

Posted by: jschmidt | Feb 7, 2010 7:04:46 PM

Little Timmy is doing the same thing his boss does, lie. He is picking
up all of Obama's bad habits.

Posted by: oldrtoy | Feb 7, 2010 6:47:09 PM

Just like the loan modification, just rhetoric. The banks have no
respect or concern for anyone but themselves. We have been on the loan
mod for 6 months and still no answer from BofA. All that has happened
is a trashed credit score now and the bank will reap the benefit of
the 100k down patment and other "fees".

Posted by: rwspanglerq | Feb 7, 2010 6:21:47 PM

Hello!!! Timothy Geithner Stop your fat lying which you are already in
a verge of losing your job. Scott Brown was talking about private job
that have not been created or saved, not federal, state, and county
which cost us billions of dollars down the drain and those jobs are
temp. to fool american people for dem. and president to get re-
elected. By the time 2012 comes then you have no choice but cut
massive gov. jobs to stop that crazy out of control debts

Posted by: David | Feb 7, 2010 6:20:34 PM

Brown's claim that the stimulus didn't create one job is ludicrous.
There can be legitimate debate about how to count the number of jobs
saved or created, and about the wisdom of the details and the size of
the stimulus, but his claim is pure partisan fantasy. It doesn't
encourage me that he seems to be starting off as a Senator by making
these kinds of claims.

Posted by: factscount | Feb 7, 2010 6:16:05 PM

Does anyone remember the website recovery? Supposively when you got to
that page you could see all the jobs the first stimulus created but
don't forget, alot of those so-called "zip codes" were fake as to
where the government said they sent the money too.
Brown is someone noble and good along with Palin and cares about this
country. Forget she is a female folks and listen to her words. I would
vote for either.
It's horrible the way this is going. I have been sitting here
wondering what Obama would benefit from all this....I just don't want
to see us hanging on and on and on til we can't turn things around.
Because of Brown, we stand a real chance of getting back our country.

Posted by: fedup | Feb 7, 2010 5:37:28 PM

threeriverscrossing wrote: "you can blame the GOP for the policies
that cause the Great Depression of the 21st century due to the
economic policies from 2001 to 2009"

Then we can credit the Reagan and Bush I economic policies for the
Clinton-era boom, correct?

Posted by: BillyBilly | Feb 7, 2010 5:31:31 PM

This administration doesn't want to face up to anything that's
happened and are willing to step on ANYONES toes no matter what the
consequences. Shame on them.
Im literally tired of talking about the whole ordeal. I don't know
what were waiting for but my gut feeling tells me by the time Obama is
finished with the country...China will own us along with Russia.
We need to make our move and get rid of all of them. They are wasting
my time and my childrens. Sick of it!!

Posted by: fedup | Feb 7, 2010 5:28:49 PM

Who can have confidence on Geithner's best guess?

Posted by: justamaz | Feb 7, 2010 5:14:16 PM

User Comments

I credit Franks and Dodd and their scams with Freddie and Frannie and
Obama's acron shake down banks for the collapse.

Posted by: horseforfeathers | Feb 7, 2010 4:59:48 PM

Show us yer jobs Timmy.

Posted by: Luigi | Feb 7, 2010 4:53:42 PM

First, if you are one who joined the ranks of unemployed from last
year and this year you can blame the GOP for the policies that cause
the Great Depression of the 21st century due to the economic policies
from 2001 to 2009.

When the Republicans failed to act in the October, November and
December of 2008, trillion of dollars of equity were lost which
directly caused the current 10% unemployment rate.

But have no fear, recovery and expansion are in the cards, sure but
slowly. Jobs are lagging indicator and will take some time to rebuild
and gain momentum.

Only a fool or a politician would state that the stimulus bill did not
have a positive effect on stabilizing the economy and without economic
stabilization or baseline any future growth would be questionable.

As for Senator Brown, his previous employment was a state legislator
without any prior major national economic legislation to show for or
economic expertise.

Posted by: threeriverscrossing | Feb 7, 2010 4:52:18 PM

the fanatical finger pointing is another sign that the wheels are
coming off. Obama, Geithner, et al have been in office for a year and
the fox news viewers and tea party constituency (as well as pubs
leadership)are waving the finger of blame that dems are responsible
for all this countries woes. The house of cards that is our economy
has been crumbling since wall street figured out they could sell
futures & speculatory notes like junk bonds, dot com bubble start ups,
over-valued real estate and get real money in return. Geithner,
Bernancke, Greenspan are the guys dems and pubs put in office to keep
our overly mortgaged economic machine from completely dying. Get rid
of those guys, let the big american banks/ insurance companies fail
and what's left? The Chinese taking all the dollars they own and
buying american companies, buildings, infrastructure. The chinese
won't sell off all their dollars because the devaluation would mean
they would lose money. So they would buy everything in this country
that would be foreclosed on. then china would literally own us.
freedom at last!!

Posted by: frosty | Feb 7, 2010 4:51:02 PM

Actually Frosty, if you had an education would know that War is what
is created with getting the US out of the great depression.

Posted by: horseforfeathers | Feb 7, 2010 4:31:51 PM

Frooking hilliarous...Turbo Timmy saying Brown is wrong about the
stimulus when the US has done but lose jobs and rack up accounts of
the Obama's administration flat out lying about jobs since Obama's
stimulus scam.

Posted by: horseforfeathers | Feb 7, 2010 4:30:04 PM

"Massachusetts Governor Deval Patrick, Friday, said the stimulus
package created more than 7,000 jobs in that state."

Uh, huh. The population of Massachusetts in 2008 was 6,497,967. Call
it 6.5 Million today. Even accepting the *Democrat* governor's claim,
a 0.11% increase in jobs is hardly anything to brag about. In fact
it's likely that these jobs would have been "created or saved" WITHOUT
the stimulus - many "created" jobs turn out to be merely jobs that
already existed that they funded with stimulus dollars instead of
state revenues. Whether those "saved" state revenues went toward job
creation is questionable - in many cases they just gave themselves
raises or bought more office equipment or supplies.

Posted by: Orion | Feb 7, 2010 4:13:44 PM

Geithner is a mouthpiece only, repeating the party line, he doesn't
seem to have any real ideas and is extremely uncomfortable being in a
leadership position on ABC.

Democrats say "Its all Bush's fault, we are doing great, re-elect us"

Republicans say "Obama is a socialist, elect us before he messes
everything up"

Both parties are insider only parties... time to break the
stranglehold of insiders and give these guys competition.

Posted by: markc | Feb 7, 2010 4:13:01 PM

"Government can only create government jobs."

See a need, fill a need.

Posted by: Flash Override | Feb 7, 2010 4:02:36 PM

I agree with Scott Brown's opinion.
Nowadays, I've focused on watching of CNN, special program, where the
stimulus money, $78,700,000,000.- have been used and how many people
get the job with the money? Mostly the 600,000 jobs by Gov. are
temporary, which will be gone when the project of Gov. will be ended.

Posted by: fairnbalance | Feb 7, 2010 3:58:15 PM

gee thanks mr Geithner. A few $50k jobs was well worth $1.6million per
job.
Thanks a lot!!

Posted by: jonny | Feb 7, 2010 3:57:56 PM

Another question:

Does Barry's use of drones in Pahhhkeestan amount to a war crime? If
so, should we impeach him or should we wait till he's out of office a
pursue him criminally?

Posted by: Pablo | Feb 7, 2010 3:13:07 PM

Let's just say that Obama's idea of stimulating the economy and
Reagan's differ, the former being a spendthrift the latter being more
of an concerned leader.

And for Timmy G to parrot "we're not bleeding near as bad a we used
to" is par for his course. The point, Timmy, is that Barry and his eco
team are screw-ups, just like Barry and his nat'l security team, just
like Barry and his healthcare tream, not to mention Barry and his
crack GM?GMAC bailout team.

Can we get rid of these clowns fast enough?

Who voted for Obama anyway???

Posted by: Pablo | Feb 7, 2010 3:11:07 PM

I almost wish McCain and Palin won so these tea party/angry old
curmudgeons could lavish themselves in their "freedom" of joblessness,
unending, unfunded, unnecessary wars and bankrupt healthcare system.
The funny part is most of the people screaming the loudest are people
that would benefit more with what Obama is looking to do. The "rich
greedy" bankers and fortune 500 CEO's should be the ones protesting
the current administration. Nobody got them richer and most of America
poorer than "trickle down" Ronnie Reagan and 'W'. But they're "your
good ol' boys". So if they screw you and trample on the
constitutionit's for freedom & liberty. You people are laughable.

Posted by: frosty | Feb 7, 2010 3:11:00 PM

Government can only create government jobs.
___________________________________

Not at all true. If a government funds an infrastructure program, then
the various private companies that provide products or services to
that project benefit. Including creating the jobs to undertake the
work - whether it be producing concrete, servicing the vehicles,
organizing the work, engineers to design the contruction, etc.

Posted by: tierra | Feb 7, 2010 2:42:47 PM

Government can only create government jobs. It can foster the
development of private enterprise by makeing laws that are favorable
to buisiness growth and development. The liberal policies that are
coming from the Capital and White House will only set us back further.
YOu can't tax and spend your way to prosperity.

Posted by: steve | Feb 7, 2010 2:32:05 PM

Sen. Brown, the stimulous money created one new job that I know of --
yours.

Posted by: Bobert123 | Feb 7, 2010 2:26:52 PM

Brown was not talking about saving jobs for the financial industry
Greedy Guts, he was talking about REAl JOBS for REAL people. This
administration can twist words better than any I have seen in my life
of 75 years. Remember Geithner's boss saying, critize only my policies
not me? He should go back and read his speeches maybe he can find them
on C-Span right next to the health care debate. When they are shy only
1 vote not it's lets really work together, This whole crew are so
hyprocitical it is appaling.

Posted by: GripperDon | Feb 7, 2010 2:24:46 PM

Mr. Geithner, if you have trouble with TurboTax you just may have
problems with basic economics as well.
Ed Taylor | Feb 7, 2010 1:59:50 PM

Debate by meaningless bumpersticker. It's gotten to the point that you
can hardly even understand the Party of Stupid.

Posted by: jhw539 | Feb 7, 2010 2:20:39 PM

Saving is good, but what to save? Saving by not going into debt is
good, but saving cash in the bank may backfire on us that do save that
way. If the dollar continues to devalue, our savings in cash are
stolen by inflation. So what kind of durable goods that might prove
useful in a hyper-inflated economy are we to save and how long will it
last when others that don't have what you have want to take it from
you?

Posted by: Ben | Feb 7, 2010 2:13:51 PM

February 7, 2010 in|

Posted by: Ed Taylor | Feb 7, 2010 1:59:50 PM

Are there more or fewer jobs available in Mass. now than before. Give
us the score on total jobs available not the shift in jobs from
private to public sector jobs. Private sector jobs pay the taxes;
public sector jobs use up the money. Ok yes public employees pay taxes
on their income, but it does not match what they cost to keep them
employed.

Posted by: Ben | Feb 7, 2010 1:58:35 PM

DigitalDiva - Thanks, but I think I'll spend MY money on only the
necessities of life.

This economy will have to rebound WITHOUT me. I'm now a SAVER, not a
spender!!

But hey, good luck with that spending stuff... the current
Administration needs you! ROTFLMFAO!!

Posted by: Laughing_All_the____Way | Feb 7, 2010 1:49:06 PM

Malcat - CONGRATS, DigitalDiva, sincerely. Any ray of sunshine is
welcome. I just wish there were a lot more success stories like
yours.

Thanks. There are lots more stories but mainstream media doesn't want
the American public to know about them. Everyone, go buy something
from a small business.

Posted by: DigitalDiva | Feb 7, 2010 1:32:39 PM

Net result - 0 new jobs. 0 - new equipment purchased. 1 - Outdoor Ice
Rink that is now sweep and resurfaced daily instead of weekly. Extra
$10k going toward cost of gas for equipment usage.
MNDave | Feb 7, 2010 12:18:48 PM

The rink is now swept daily rather than weekly - is this being done
for free? Or is that someone now being paid to provide the service,
aka part of a job (which brings a paycheck that gets spent, helping
maintain other jobs)?

It used to be Democrats were the Party of Stupid, embracing vacant
headed ideas like rent control. But now Republicans have proudly
wrested the Stupid title away, unable to go more than a few sentences
without contradicting themselves and lacking the critical thinking
ability to even notice.

Posted by: jhw539 | Feb 7, 2010 1:25:27 PM

The majority of stimulus funds did save jobs, public service jobs and
pot hole filling jobs. It was a short term program and had no longterm
planning involved. The Administraion is at the mercy of the just
bailed out banksters.
Proof you ask? New lending plan for small businesses is for $30
billion, we have already given Banking industry $4 trillion in loans
and mortgage pool purchases. Face it America, in the revolutionary war
we fought the soldiers of King George, now we fight the mortgage
brokers of the banksters.
Our nation is crumbling and the Obama Administration is just going
along for the ride.

Posted by: Scott Alden Stabler | Feb 7, 2010 1:22:11 PM

"The last stimulus bill didn't create one new job."

What an idiot. Who is dumb enough to believe this nonsense? There is a
fine line of argument that the jobs created cost too much per job, but
claiming that the package (which included over $200 billion in tax
breaks to private individuals) didn't create a single job simply shows
how stupid he believes his base is.

Posted by: jhw539 | Feb 7, 2010 1:21:21 PM

Why is it when someone complains about the MORONS in the majority,
they automatically assume the complainers are members of the OTHER
party.

Guess what, geniuses... a lot of us INDEPENDENTS are FED UP WITH BOTH
PARTIES.

You're BOTH going down in just 268 more days!!

Posted by: Laughing_All_the____Way | Feb 7, 2010 1:20:37 PM

"We need to stand up and protect the constitution. We need to defeat
socialism. Get rid of Reid and Pelosi"

-Like the Republicans didn't just get done walking all over the
Constitution when they were in power. You people don't even know what
socialism is. It's just your little bogeyman word now.

Posted by: Skip | Feb 7, 2010 1:12:38 PM

malcat - You said "Things have got to get better..."

What in the WORLD makes you think ANYTHING will get better, at least
over the next 268 days?

We're all caught in the whirlpool that forms whenever you flush the
toilet... and the only place to go is DOWN THE DRAIN!! And Obama is
leading the way!!

Posted by: Laughing_All_the____Way | Feb 7, 2010 1:12:36 PM

We need to stand up and protect the constitution. We need to defeat
socialism. Get rid of Reid and Pelosi. They are those adivising the
socialist in the White House.


Posted by: Moa | Feb 7, 2010 1:06:03 PM

You may say it's just one job but I spread the word and there are more
of us that this will help to keep the doors open. I'm your poster gal
stilettos on the ground who's fighting to be one of you all getting
the breaks!

CONGRATS, DigitalDiva, sincerely. Any ray of sunshine is welcome. I
just wish there were a lot more success stories like yours.

The problem is a lot of stimulous money has been wasted or is still
sitting in a bank account when it could be helping others like you and
your small business.

Hang in there. Things have got to get better or all of us will be in a
lot more trouble than we are now.

Posted by: malcat | Feb 7, 2010 1:02:32 PM

Giethner and Bernacki were at the helm when this mess started and now
the want to be called hero's for supposedly pulling us out of it, when
were not out of it?

Personally I think the worst of it is comming.

Posted by: dean | Feb 7, 2010 12:52:16 PM

Ok, enough already. You can now take "the last stimulus bill 'didn’t
create one new job.'” off the table. The stimulus bill has given me
the opportunity to hire "1" new person and I'm interviewing for a 2nd.
This 1st one is so good that he will help me to grow my company to
keep him and pay him what he is truly qualified for. He needed a job,
I needed help and the stimulus program has given me the good fortune
to survive as a small business. You may say it's just one job but I
spread the word and there are more of us that this will help to keep
the doors open. I'm your poster gal stilettos on the ground who's
fighting to be one of you all getting the breaks!

Posted by: DigitalDiva | Feb 7, 2010 12:51:04 PM

Please help congress raise salary for nurses. RN's are so underpaid!

Posted by: Jacob | Feb 7, 2010 12:49:08 PM

BO is a one shot wonder, next will come a lady , then a Latino and
when all the tests are completed and all the minorities are given
their chance then it will be old white males in failing health once
again

Posted by: John | Feb 7, 2010 12:49:00 PM

I marvel at the stupid comments posted here. Where is the thoughtful
thinking, or considered facts that contribute to the conversation? You
may have an opinion, and it is your right to express it, however all
it seems to do is magnify the elitist oopinion that the general
American public is dumb, stupid, etc.

Posted by: jean | Feb 7, 2010 12:47:23 PM

It must hurt the hand of the scum that runs Goldman Sacks as he has to
keep his hand under Geithners’ coat so he can manipulate everything
out of the guys mouth. I would love to see Geithner’s phone records
from his office, I bet he calls Goldman Sacks four or five times a
day.

Posted by: Greg | Feb 7, 2010 12:45:49 PM

it's all poppycock whatever will sell newspapers and get people to
watch the news on TV (trivial vomit)

Posted by: John | Feb 7, 2010 12:41:09 PM

I find it odd when people respond to a post with comments that have no
bearing on the post to which they are responding.

Here is an example:
Someone said: 'Democrats took control of Congress in 2007. That
includes Obama. Which Bush budget did they cut and make smaller?
Anyone?'
=================
The responder said: 'So who was the last REPUBLICAN President to
reduce the deficit or decrease the size of gov't? (HINT: W didn't,
Bush1 didn't, Reagan didn't, Ford didn't, Nixon didn't)......Anyone?'

MY QUESTION: Why didn't the responder answer the other person's
question concerning President Bush's budgets and the Democratic-
controlled Congress starting in 2007?

Posted by: malcat | Feb 7, 2010 12:40:23 PM

User Comments

You can follow this conversation by subscribing to the comment feed
for this post.

Geithner needs to pay his taxes.

Posted by: Good Lt | Feb 7, 2010 12:39:00 PM

What don't you understand about a DUD!!! Just like his pathetic
boss!!! Come on 2012!

Posted by: lovingpolitics | Feb 7, 2010 12:38:04 PM

Don't you LOVE the way this guy moves his head to the side, and talks
out of THAT side of his mouth?

It REALLY generates a lot of trust, huh?

NOT!!!

And then he says Brown is wrong, and I sit here wondering, why in the
hell don't I believe a WORD he says?

Oh yeah, he's an Obama "talking head."

Never mind...

Posted by: Laughing_All_the____Way | Feb 7, 2010 12:34:36 PM

Scott Brown was wrong. The stimulus did create one job: his. If it
wasn't for Porkulus, and Son of Porkulus, Brown would probably be
doing something else.

I also heard Shrum defend Obama saying, "just because you throw out
the names of a few million dollar projects that have gone astray,
doesn't mean the stimulus failed."

Talk about a failure of comprehension. There are thousands of shady/
fraudulent pograms; just because no one has the time or patience to
list them, doesn't make the bill suddenly "effective". What BS.

Posted by: jrobinson | Feb 7, 2010 12:34:16 PM

Never trust anyone with an overly wrinked forehead.

Posted by: LongT | Feb 7, 2010 12:26:01 PM

I have heard nothing from the darky that makes much sense. He is so
busy posing and preening, he cannot even put words together that make
sense. As for his "state of the union" address, he said absolutely
nothing that he hadn't said before. Frankly, his almost fanatical use
of teleprompters tells me this man is an imposter, an actor and a
fraud! Where is the real Barack Obama? Kept in hiding? Or fed to the
Lions of Tsavo?

Posted by: Lee Wacker | Feb 7, 2010 12:22:15 PM

Example 1: A local city applied for and received a $10k "Grant" from
the stimulus package to "improve and enhance" the City's outdoor ice
rink. Net result - 0 new jobs. 0 - new equipment purchased. 1 -
Outdoor Ice Rink that is now sweep and resurfaced daily instead of
weekly. Extra $10k going toward cost of gas for equipment usage.

Posted by: MNDave | Feb 7, 2010 12:18:48 PM

As had the entire Obama admin. given the mess they were handed.
---
So why'd Barry keep digging when he jumped in the hole?

Posted by: Shovel | Feb 7, 2010 12:15:35 PM

If you're first name is Goldman and the last is Sachs, Geithner has
really helped you out.

Posted by: Thanks | Feb 7, 2010 12:14:08 PM

"How is it the Pubs know that everything in Obama's bills are wrong
and yet they admit to never reading them?"

If Barry can't admit that a tax is really a tax, yes. But I'll forward
your concerns to John Conyers.

Posted by: Page 19 | Feb 7, 2010 12:12:16 PM

Of course the stimulus created and saved jobs. and on top of it - it
is case where our government has made a heroic attempt at being
transparent. You can go on to recovery.gov and find a reasonable
attempt to accurately post where each and EVERY dollar went. Just when
have we EVER seen that kind of attempt from our government before. And
when there are mistakes - as there will be in something this massive-
they quietly correct them and keep on doing their best. I admire
Geithner he has done a great job. As had the entire Obama admin. given
the mess they were handed.

Posted by: Sue B | Feb 7, 2010 12:11:27 PM

Can't help but wonder if that is why ABC is their Mouth Piece
========================
And Fox is "fair and balanced" right? It's not a 24/7 right wing
propaganda machine is it? Hahahaha. You would have to be truly
ignorant and easily manipulated to belive that.

Posted by: Fact Check | Feb 7, 2010 12:09:43 PM

Entitlement really, what about the defense budget; the hundred and
twenty five billion a year we spent on two wars that has added over a
trillion dollars in debt. The billions we will be spending for the
next 30 to 40 years on caring for our veterans who were physical or
mentally wounded fighting these two wars. Cut entitlements good
answer, let’s make the people that can least afford a reduction in
services pay the price for leaders who are afraid to tell their
constituent the truth. Taxes will have to go up if we are going to
reduce our deficits. But we as a people need to decide whether we
invest in our people or we invest in the war machine (guns vs.
butter).

Posted by: papo | Feb 7, 2010 12:09:37 PM

So an increasing unemployment rate means more jobs have been created?

Posted by: Payout | Feb 7, 2010 12:09:22 PM

This is coming from an Obama-bot that has never worked a day in his
life.

Posted by: WhatChange? | Feb 7, 2010 12:06:47 PM

My father always told me, "Figures don't lie but liars know how to
figure!"

Posted by: 312capri | Feb 7, 2010 12:06:46 PM

Democrats took control of Congress in 2007. That includes Obama. Which
Bush budget did they cut and make smaller?
Anyone?
=================
So who was the last REPUBLICAN President to reduce the deficit or
decrease the size of gov't? (HINT: W didn't, Bush1 didn't, Reagan
didn't, Ford didn't, Nixon didn't)......Anyone?

Posted by: Fact Check | Feb 7, 2010 12:06:33 PM

Would you believe anything an admitted tax evader says?

Posted by: 312capri | Feb 7, 2010 12:04:45 PM

I am a small business owner in NC. I have been trying to get a small
business loan in the amount of $50,000, to be used for inventory since
August of 2009. We tracked 3 million dollars in ARC money to a bank in
Greenville, SC and called them. When the banker was asked why he had
not loaned out free money he hung up on us! Our compnay grossed over
$450,000 last year in sales. Does Geithner even know what is going on?
SBA loaning 70% more, to who??I have been working with the SBA for 6
months and tge results are NOTHING!

Posted by: Cara | Feb 7, 2010 12:03:34 PM

Of course the stimulus bill saved jobs and create some. To think
otherwise is to reveals one stupidity or partisanship.

Posted by: docboricua | Feb 7, 2010 12:01:02 PM
User Comments

You can follow this conversation by subscribing to the comment feed
for this post.

Perhaps officials should look closer at their numbers...here in Las
Vegas, which seems to be the town of choice for administration to keep
the rest of the country from...we have the highest rate of
foreclosure, the highest rate of suicides, and close to the highest
rate of unemployment in the country...
=======================
Sorry, but the suicides are directly related to losing gamblers - not
the economy (and have been for years), foreclosures were primarily due
to breal estate speculations and people buying houses they really
couldn't afford, and the unemployment rate is much higher in Detroit
(a city that actually produces something). Las Vegas is a city in a
desert that shouldn't exist. It's main revenues are made from
gambling. It's a massive unnessesary draw from the Colorado river. The
best thing for your city would be an exodous. If it's ok to ruin
people with gambling, it's ok to lose by relying on it.

Posted by: Poor Las Vegas? | Feb 7, 2010 12:00:14 PM

What an absolutely sleezy guy! Even the democrats have to admit it...

Posted by: LongT | Feb 7, 2010 11:53:23 AM

I trust nobody in the BO administration because to all of them are BO
henchmen and they will say anything possitive for him because he is
paying them well.

For the most part BO lied to get into the White House and continues to
lie to stay in My White House the only thing he knows to lead is his
wife and children and they believe anything he says because they love
him.

Posted by: Carol | Feb 7, 2010 11:52:19 AM

How is it the Pubs know that everything in Obama's bills are wrong and
yet they admit to never reading them? In the SOTU response, they
admitted they never read the health care bill. Yet, they know it was
"terrible for the people". How can one know that something is bad or
good without reading it? Or is it more likely they are going to say
ANYTHING the President tries is wrong for politival reasons? Now
they're going against ideas even THEY wanted a year ago. Funny how
they coward when the President asked them that at their own conference
last week. (Of course, Fox cut away as soon as they realized what was
happening. Obviously it didn't fit with their agenda. But I bet they
played the entire Palin speech didn't they?)

Posted by: Hypocrisy 101 | Feb 7, 2010 11:50:35 AM

Dave in VA; Nice try.....

Posted by: LongT | Feb 7, 2010 11:44:22 AM

Geithner is a liar. We've already seen the statistics. They claim they
created or "Saved" 2 million jobs. But the recent studies show clearly
that America has lost 4 million jobs. So Geithner, The President or
anyone else to say that jobs were created is a lie. IT IS AN OUT AND
OUT LIE!!! It's really quite insulting if you think about it.
Americans have woken up and we're watching and listening. We know the
truth and for these guys to blatanly lie to our faces, make payoffs
behind closed doors and openly give senators BILLIONS OF DOLLARS for
their votes is unbelievably arrogant. We, as Americans have already
shown our disgust with these guys during these last elections. You'd
think they get it. But they don't

Posted by: Dave | Feb 7, 2010 11:40:20 AM

harley93; OK, but just watch what doesn't happen...

Posted by: LongT | Feb 7, 2010 11:40:04 AM

The economy was doomed during the Bush administration. Both Pubs and
Dems allowed it to happen. But the "party of no" is NOT helping
anything now. In fact, they do not want things to get better. God
forbid our country gets better - then they might not get their guys
elected. It's easier to point fingers and place blame than come up
with solutions to difficult problems. As long as we keep the we're
always right you're always wong BS, our nation will suffer.

Posted by: Education is Not a Bad Thing | Feb 7, 2010 11:40:03 AM

I work for a Fortune 500 Company that now targets hiring all part-time
people that they want to work 20-25 hours a week without benefits.
These are the kind of jobs available in the marketplace.Our economy
will not recover with this kind of mentality.

Posted by: Patience Dogood | Feb 7, 2010 11:37:31 AM

A bigger question is why Browns opinion even gets the press it does.

Posted by: secondlook | Feb 7, 2010 11:37:18 AM

The stimulus plan may have created a few jobs but nothing of
significance. I have yet to meet anyone that got a job directly or
indirectly related to the stimulus plan. Where are all these jobs? The
stimulus plan is not working...

Posted by: mjoe | Feb 7, 2010 11:34:19 AM

And we are supposed to believe a tax cheater?
========================
But you believe tax cheater Sarah Palin don't you?

Posted by: Dave in VA | Feb 7, 2010 11:33:38 AM

Until these idiots in government realize that outsourcing destroyed
the U.S. economy, nothing will change...greedy CEO's will continue
sending good jobs over seas for cheap labor.

Posted by: anthony | Feb 7, 2010 11:29:53 AM

Those wanting to bash Obama are lost and just mouthing off. Although I
feel like he is acting week as far as dealing with the GOP. And the so
called Tea Party republicans. It takes a couple of years for anything
any president does or starts to take any effect or begine to work as
planned and Obama is no different. We are still dealing with the fall
out of the Bush Cheney admin. If you could call it that. The GOP has
no intrest in helping anyone other then them selfs

Posted by: harley93 | Feb 7, 2010 11:27:39 AM

Talk about a lap dog!.....

Posted by: LongT | Feb 7, 2010 11:19:01 AM

C'mon Jake, you let him off way too easy!! Like most CEO's the day
before filing bankruptcy, Geithner told us that we would have a triple-
A rating AND that he didnt have the political power to limit social
programs. What planet does this work on? Not ours.

Geithner is a administration puppet and a loser and has to go. Lets
get real leadership that has the guts to make the real decisions.

Posted by: markc | Feb 7, 2010 11:14:57 AM

Is he paying his taxes now?...

Posted by: LongT | Feb 7, 2010 11:14:54 AM

Geithner: "January of 2009, three-quarters of a million Americans
losing their jobs"

Actually, it was 598,000. Thats only an exaggeration of 177,000 jobs.

Posted by: Joel Vincent | Feb 7, 2010 11:14:45 AM

I honestly don't get it.

Posted by: LongT | Feb 7, 2010 11:13:47 AM

Scott Brown, the male Sarah Palin. Thanks Massachusetts!

Posted by: Simon | Feb 7, 2010 11:12:48 AM

User Comments

You can follow this conversation by subscribing to the comment feed
for this post.

Beside basketball.....what else?...Chicago politics?

Posted by: LongT | Feb 7, 2010 11:12:13 AM

And we are supposed to believe a tax cheater? After the dust settled
maybe it is time to investigate the IRS Secretary.

Posted by: myohmy | Feb 7, 2010 11:11:47 AM

I will say it again, Ron Paul's ideology is the answer. It was the
ideology of the founders that made this country so great.

I would also like to say that Tom's last post is excellent and true.

Posted by: Huh | Feb 7, 2010 11:08:23 AM

Another Obama appointee...What else can be said?...

Posted by: LongT | Feb 7, 2010 11:05:33 AM

Democrats took control of Congress in 2007. That includes Obama. Which
Bush budget did they cut and make smaller?

Anyone?

Posted by: drjohn | Feb 7, 2010 11:05:03 AM

Dear ChicagoBob: This massive, massive deficit was begun by BUSH. He
came into office and there was a SURPLUS waiting for him, thanks to
Clinton. He immediately sent out checks to make himself popular, then
started a war (but let's not count that... right?) which tanked us
financially. For NO good reason. Said it then, say it now.
And Obama walked into office with the financial world crashing into
the worst recession since the Great Depression - he HAD to spend to
keep us from another depression. Wake up. Get your facts straight. I'm
so sick of these' 'holier than thou' Republican (and so-called
'Independents') types who are willing to see people without health
care and without means to keep their families fed.

Posted by: sevresblue | Feb 7, 2010 11:02:42 AM

"I guess Brown forgot that the package was put in under President Bush
(who only helps rich people anyway)."
Posted by: jrpryor1 | Feb 7, 2010 9:55:05 AM___

The $787 billion American Recovery and Reinvestment Act of 2009 was
introduced in the House on Jan 26, 2009 (6 days AFTER President Obama
was inaugurated); passed by the House on Jan 28, 2009; passed by the
Senate on Feb 10, 2009; and signed into law by President Obama on Feb
17, 2009. Bush had nothing to do with this stimulus package.

If you are referring to TARP, then yes that was passed by the
Democratic controlled House and Senate and signed into law by
President Bush.

You might want to check the facts on the Bush tax cuts. All federal
income tax bracket rates were lowered. With the bottom three federal
income tax brackets being lowered from 15%, 28% and 31% to 10%, 15%
and 25%. So ANYONE making any money saw their federal income taxes
lowered. And tax credits for the poor were increased.

Posted by: James Danley | Feb 7, 2010 11:02:23 AM

"a month where we had positive job growth."

Right. 20,000 jobs lost and the Obama adminstration calls it growth.
Any more of this growth and we're doomed as a country.

What else can one expect from a tax cheat who was a failure at the NY
Fed?

Posted by: drjohn | Feb 7, 2010 10:59:47 AM

Brown's wrong about a LOT of things. All mouth and no brain. You'll
see.

Posted by: sevresblue | Feb 7, 2010 10:58:37 AM

Has anyone done the math?

Going with a debateable figure of 2.4 trillion dollars the Bush and
Obama administrations have sank into the various bailouts, rescues,
stimulus, ect,divided by the population of the US, what do you get? I
come up with $80,000 per every man, woman, and child in America.

Is it just me, or is what we are seeing an engineered collapse of the
economy, looting of the treasury, and creation of debt slavery? What
genius came up with the concept of fractional reserve anyway?

It has always fascinated me that in America's version of the free
market, the most basic concepts are violated by propping up companies
that SHOULD fail because of their poor judgment or even criminal
conduct of their executives. Yet the working class is left to fend for
themselves while our governmental leaders continue to steal from the
poor to give to the rich.

Posted by: Tom | Feb 7, 2010 10:58:17 AM

I guess Brown forgot that the package was put in under President Bush
(who only helps rich people anyway). President Obama had to come in a
fight for the people. posted by jrpryor1 | Feb 7, 2010 9:55:05 AM
-----------
I think you have your bills confused; you are talking about the bank
bailouts, which was passed during the Bush administration-----approved
of and voted for by then-Senator Obama.

This article and Brown's statements are about the stimulous bill,
which was conceived by President Obama and passed during President
Obama's administration.


Posted by: malcat | Feb 7, 2010 10:51:55 AM

High-ranking bureaucrats should avoid becoming entangled in the
political fray... Better he should have kept his mouth shut.

Posted by: Quo Warranto | Feb 7, 2010 10:51:44 AM

I wonder if Tapper uses waders to interview guys like Timmy. 'Cause it
sure got deep in there. And Chicago Bob, it was only the primary.
Hopefully Illinois will see a brighter day in November when Quinn and
Cohen lose.

Posted by: Rueuhy | Feb 7, 2010 10:51:08 AM

Lousy interview

Allows weasel Geithner to get away with not answering question. Let
Geithner repeat his opt-repeated unresponsive comments with no follow-
up.

Posted by: artbab | Feb 7, 2010 10:50:40 AM

This guy is a total guru....cheats on taxes, and winds up the
treasurer!......

Posted by: LongT | Feb 7, 2010 10:50:27 AM

ChicagoBob-I agree with your anger. My only hope is that if Al Qaeda
does hit us as our, justifying their insane funding, intelligence
agencies are telling us is the case, that Bin Laden chooses the likes
of Goldman Sachs and Monsanto execs for their retribution.

Posted by: Huh | Feb 7, 2010 10:49:30 AM

Goldman Sachs the democrats new best friends. LETS take as much as we
can from the American public. YEAH lets steal it all at once. Who can
we get DUMB enough as president to let us do this? OH Yeah an
ideologue. We will tell the we will redistribute it to the masses when
really we are STUFFING our POCKETS. What SUCKERS you Obama supporters
all are. Look at home prices and 401k's and look in your pockets. Look
at the underemployment numbers. THEN look who got BILLIONS from Obama
himself? My CC interest has GONE up bunch and they have reduced my
limits on everything. MY MY how good I feel since this administration
took over.
Banks are raking me over the coals. And Obama? yeah we need to spend
more more more because Goldman needs BIGGER bounuses. You want to
impress me Mr PRESIDENT? LOAN TO ME at 0% interest. I NEED A BRAKE.

Posted by: ChicagoBob | Feb 7, 2010 10:43:18 AM

As Peter Schiff and Ron Paul say, the stimulus has created some jobs
at the expense of more productive jobs because of misallocated
resources and at the expense of future jobs because of interest
payments on the national debt. We live in Keynesian fantasyland that
will make the future much harder for our country.

Posted by: Huh | Feb 7, 2010 10:42:59 AM

Sadly one more time ABC is allowing it self to be used as the
propaganda arm of the Obama Administration. When do you stop?
The fact that Geithner is trying to use Patrick (long time Obama
lackey) to dispute Browns statement shows just how low the Obama
administration has sunk it is almost like they paid for an "expert"
opinion on Health Care oooops wait they did!
Can't help but wonder if that is why ABC is their Mouth Piece

Posted by: Rick | Feb 7, 2010 10:41:38 AM

Here is Massachusetts, 70% of the so-called stimulus jobs just turned
out to be government workers that the Patrick administration diverted
stimulus money into subsidizing State & Local governments to make up
for lower tax revenue.

Posted by: Tyrone | Feb 7, 2010 10:40:56 AM
User Comments

You can follow this conversation by subscribing to the comment feed
for this post.

If I have a company and I lay off 10 people -- those 10 are
unemployed. But I hire 1 in a totally different position. Can I brag
that I created a new job? Technically, I suppose. But, in reality,
it's a lie, it's smoke and mirrors, and only the most ignorant would
believe it.

Posted by: JoeM | Feb 7, 2010 10:38:14 AM

Perhaps officials should look closer at their numbers...here in Las
Vegas, which seems to be the town of choice for administration to keep
the rest of the country from...we have the highest rate of
foreclosure, the highest rate of suicides, and close to the highest
rate of unemployment in the country...it is worse after this last full
year than it was even at the beginning of 2009...the numbers here are
being covered up and the big stimulous??? we are trying to figure out
how to fire 2500 more teachers and close half the college due to lack
of funds, but the sidewalk corners got new grates and wheelchair ramps
this last week with a large sign "OUR STIMULOUS FUNDS WORKING FOR US"
tell our children who will be unable to take higher math classes just
how much help they got!

Posted by: Laura | Feb 7, 2010 10:38:10 AM

h5mind wrote: "If I took a cash advance on my credit card and hired
you to remodel my house, how long would you have a job? Until the
money ran out, of course. Worse, I'd still need to repay that money
with interest..."

But, h5, if you collect 25% of my paycheck as taxes, then I got a
haircut and you collected 25% of the barber's income, then the barber
bought a new pair of scissors and you collected 25% of the store's
profits, then the clerk took her family out to dinner and you
collected 25% of the restaurant workers profits, etc. how far would
you actually be behind?

Additionally, there's plenty of potential investment money sitting on
the sidelines in American right now. But, as in every severe
recession, it takes government money to prime the pump.

Did the government spend that money the best way? I don't know. I'm no
expert, I only have a graduate degree in Chemistry and spent part of
my career as an industrial R & D chemist, working out profitable
chemical processes for "niche" organics, and I'm very well studied in
Securities and Corporate Analysis and have done better than average in
the Stock Market over time. So I know something.

Still, I wouldn't pretend to be able to say with any certainty
whatsoever if Obama's or Bush's actions were the wisest actions
available to them.

But I see that, outside of construction, the private sector jobs
jumped 33,000 last month despite it being right after the Christmas
season, after which many layoffs occur, and in the middle of Winter.

So whatever they did, it looks like it's in the right direction.

Posted by: The_Mick | Feb 7, 2010 10:36:36 AM

It just does not pay to be an honest decent person in America. You
have to be John Edwards or just like the Timmy the Tax cheat a sleazy
lying CROOK. America has sunk to a NEW low with this administration.
CROOKS, KICKBACKS and the total destruction of middle America.

Posted by: ChicagoBob | Feb 7, 2010 10:35:51 AM

DOLLARS SPENT VERSUS Gains. The stimulus was NOT CHUMP change. It was
3/4 of a TRILLION DOLLARS FOLKS. Our deficit is making us into a
banana republic. Tim the tax cheat is just another LIAR. No doubt
about it this administration has done more to destroy the wealth and
security of this country than increase its value. How is your HOME
value doing. Most middle class peoples largest asset is their HOME and
the value of that has fallen. 401K ? Under and unemployment is around
18% or more. PEOPLE are hurting. Bankruptcy? Whats the new numbers
there. THE TAX CHEAT TIM SHOULD STRIPPED OF ALL HIS MONEY and told to
hit the road. BUT Corruption is ALL WE WANT in America. We want to all
be CROOKS. Thats how it is here in ILLINOIS. Why else would you spend
two million dollars to get a 100,000 a year job? Eh? Look at our new
DEMOCRATIC lieutenant Governor that was just elected by the morons in
this state.

Posted by: ChicagoBob | Feb 7, 2010 10:33:56 AM

Even if the stimulus did create jobs, it is taking us in the wrong
direction. God warned against debt, interest, insurance and seeking
riches and honors, things our culture embraces..
The holy books say, "Be not conformed to this world." Only a garden
paradise lifestyle can end the problems created by the employment
lifestyle: pollution to air, land, water and food, disease, energy
crisis, climate change fears, wars, immigration, inequality, poverty
and social welfare programs. True freedom and independence with no
sorrow added only come using God's wisdom, not man's.

Posted by: Marie Devine | Feb 7, 2010 10:21:19 AM

How much money do you think the States are making by holding on to the
stimulus money as the interest builds in their Bank Accounts? I don't
know about you all, but when the words money and Government are placed
together the first thing that crosses my mind is "Corruption"

Posted by: Impeach Obama | Feb 7, 2010 10:15:47 AM

Has the stimulus actually added jobs? Can anyone prove it either way?
Both sides will spin it in their favor. As far as Bush helping only
the rich, we are in the state we are in personally, because we bought
into the "I have to have it now" mentality. Bob bought a 50" LCD, I
need to get one bigger, and I don't care how much it cost. I lost my
job in September, and am on unemployment, and we are still able to
money into savings. Why you ask, because we pay cash and don't buy
things that we don't need. Maybe if more people did that, we wouldn't
be in as bad of shape as we are. Remember that, last year, Biden and
Obama said that the recession was over, so this isn't the past
administrations fault anymore.

Posted by: Charlie | Feb 7, 2010 10:11:31 AM

If I took a cash advance on my credit card and hired you to remodel my
house, how long would you have a job? Until the money ran out, of
course. Worse, I'd still need to repay that money with interest, but
if I had it in the first place, I wouldn't need the advance, would I?
Imagine the same thing happening on a massive, multi-trillion dollar
scale, but using YOUR credit card, and there's the stimulus. It is
ludicrous to assume if the government behaves irresponsibly, they can
avoid the repurcussions any more than you or I.

Posted by: h5mind | Feb 7, 2010 10:11:25 AM

I see guys like Greenspan, Geitner and others on the networks giving
their analysis but these guys are the ones that didn't finish reading
Adam Smith's economic theory. Sad that a guy born centuries before can
lay out a simple theory and these modern geniuses are not even smart
enough to read the full theory that they dictate their economic
policies on. Interview me, I know more than Greenspan, apparently.
John Boehner is the funniest, he was spouting off about more
deregulation after all the Reagan theory of massive deregulation that
has put us in a much worse position than ever before despite giving
some boom years by borrowing from the future.

Posted by: Greg | Feb 7, 2010 10:04:41 AM

Seriously? All of you do realize that he was the president of the fed
bank of NY. He's just as culpable as Alan Greenspan. Regardless of how
fancy and complex his tools are to clean up the milk...he still spilt
it.

Posted by: HA! | Feb 7, 2010 9:58:56 AM

I guess Brown forgot that the package was put in under President Bush
(who only helps rich people anyway). President Obama had to come in a
fight for the people. Less than 1% of Americans are wealthy, no matter
what party, race gender or religion you are. Non of you posting
against President Obama are rich, so all you are doing is hurting
yourselves. Less than 3% of Americans make over 250,000,000k per year.
So go ahead and keep supporting the GOP and wonder why you keep have a
hard time getting by. We don't know how the Obama administration will
turn out yet, only time will tell. We do know how the last
administration turn out and all the numbers and facts say it was the
worst administration ever, with direct casue and effect policies and
unnessary wars that killed our economy. It takes time to see the
results of political action from either party, but a bunch of dumb $#
%^ like you won't know that.

Posted by: jrpryor1 | Feb 7, 2010 9:55:05 AM

Well, of course Brown is wrong. To say that there are "no stimulus
jobs" is absurd. Brown is obviously a rookie, starting right off the
bat, making partisan comments.

Posted by: plantain_11 | Feb 7, 2010 9:44:27 AM

"I enjoyed how many people are already regretting electing Brown."

Not half as many as those who regret voting for Obama!

And you will learn to LISTEN in November.

Posted by: Dell | Feb 7, 2010 9:44:16 AM

I have to wonder if Geitner really believes what he's saying or if he
knows he's lying? I really wish I could actually believe someone from
that administration. This has to be the most dangerous administration
the United States has ever had in office. We don't even realize the
magnitude of their mistakes yet.

Posted by: Rueuhy | Feb 7, 2010 9:39:59 AM

Project much, Come On?

Yeah, some people know all too much about regretting electing Obama
(the numbers are huge), so it helps if you pin it on the other guy,
eh? :-)

Posted by: dave | Feb 7, 2010 9:35:18 AM

This madman reminds me of David Copperfield, the magician. He can just
say things and there they are. He can spend money to pay his buddies
on wall street and just like that the moneies there. Of course it
created jobs, the wall street boys can now hire more maids and
gardners with the stiimulus money that was fleeced from the American
taxpayer.

Posted by: Carl Peterson | Feb 7, 2010 9:34:53 AM

Geithner, like the rest of that inept administration is simply trying
to cover his backside. This tax cheat has no credibility whatsoever.

Posted by: rplat | Feb 7, 2010 9:31:13 AM

I enjoyed how many people are already regretting electing Brown. Guess
they should have thought it out a little more before sending him. "I
drive a truck and I deserve to go to Washington" apparently not.

Posted by: Come On | Feb 7, 2010 9:28:09 AM

Geithner's rich friends got richer off the stimulus.

Posted by: dave | Feb 7, 2010 9:11:07 AM

http://blogs.abcnews.com/politicalpunch/2010/02/geithner-says-brown-wrong-about-stimulus.html

...and I am Sid Harth

[bademiyansubhanallah]

Worst is Over for Global Economy But Recovery Weak: G7
Posted by Vamban on Feb 7th, 2010 10:02:02

Toronto, Feb 7 – Finance ministers from the world’s top seven
industrialised (G7) nations who wound up their two-day informal chats
in the Canadian Arctic city of Iqaluit admitted Saturday that the
recovery from the global recession is still weak.

Though there was no formal communique at the end of the 24-hour
gathering, the finance ministers and central bank heads from the US,
Canada, Italy, France, Britain, Germany and Japan said the worst was
over for the global economy.

Expressing cautious optimism over the recovery, they said their
governments would continue with stimulus spending to speed up the
recovery process.

Canadian Finance Minister Jim Flaherty, who hosted the meeting, said
there are signs that the worst is over for the global economy, but the
recovery process is still not firmly established yet.

Reading a statement on behalf of the G7 finance ministers, Flaherty
said, ‘The global economic situation has of course improved and is
improving. We do not have firmly established recovery yet but there
are good signs.

‘We need to continue to deliver the stimulus to which we are mutually
committed and begin to look ahead to exit strategies and move to a
more sustainable fiscal track consistent with continued recovery.’

They said their strategies to get out of the economic crisis were
paying off and committed themselves to avoiding such crises in the
future.

The meeting started Friday with a working dinner on the global
economic crisis, followed by a fireside chat on the recovery process.

The finance ministers discussed financial sector reforms and efforts
by G7 nations to address the underlying causes of the financial
crisis. Later, they held a session on ‘Framework for Strong,
Sustainable and Balanced Growth,’ endorsed by the G20 summit in
Pittsburgh last year.

Before the start of the meeting, the host Canadian finance minister
had said that ‘the G7 cannot play the role it once did, but it can and
it must continue to lead by example in whatever role it will play in
the future.

‘The first responders to the recent crisis were G7 members….The
group’s role in preventing the next crisis must be just as determined,
with benefits that go far beyond G7 members themselves. The G7 will
continue to evolve in an ever-changing world, while contributing to a
more stable and prosperous world for all.”

But the discussion of the global crisis without involving the emerging
economies – China, India and Brazil – came in for criticism in the
local media.

‘At a time when countries such as China, India and Brazil factor in
the effective running of the global economy just as much or more than
the G7 nations, it made little sense to stake out new strategies or
lecture governments that weren’t present to defend themselves,” said
the Globe and Mail newspaper.

Canada chose its north-most city in the Arctic for informal chats
because of its isolation. With a population of just over 6,000, this
isolated city is the capital of Canada’s Nunavat territory.

http://www.vamban.com/worst-is-over-for-global-economy-but-recovery-weak-g7/

Global Economy to Grow 2.7 Percent in 2010: World Bank
Posted by Vamban on Jan 21st, 2010 08:49:02

Washington, Jan 21 – The global economy is poised to grow 2.7 percent
this year, but the recovery will be slow as the impact of fiscal
stimulus wanes, the World Bank has said in a report.

The Global Economic Prospects 2010 report released Wednesday said the
recovery ‘that is now underway will slow later this year as the impact
of fiscal stimulus wanes.’

It said the global economy shrunk 2.2 percent in 2009.

Financial markets remain troubled and private sector demand lags amid
high unemployment. However, the economy is expected to grow 3.2
percent in 2011, Xinhua reported.

‘Overall, these are challenging times,’ said Justin Lin, World Bank
chief economist and senior vice president.

‘The depth of the recession means that even though growth has
returned, countries and individuals will continue to feel the pain of
the crisis for years to come,’ he said.

The report warns that while the worst of the financial crisis may be
over, the global recovery is fragile. It predicts that the fallout
from the crisis will change the landscape for finance and growth over
the next 10 years.

Gross domestic product (GDP) — the wide measure of overall economy —
for developing countries are for a relatively robust recovery, growing
5.2 percent this year and 5.8 percent in 2011 — up from 1.2 percent in
2009.

The World Bank predicts China’s economy to grow by nine percent in
2010 and 2011.

Prospects in rich countries, which declined by 3.3 percent in 2009, is
expected to increase much less quickly — by 1.8 and 2.3 percent in
2010 and 2011.

The US, world’s biggest economy and the epicentre of the financial
crisis that triggered the downturn, would see 2.5 percent growth in
2010 and 2.7 percent in 2011. The World Bank projected the US economy
to shrink 2.5 in 2009.

World trade volumes, which fell by a staggering 14.4 percent in 2009,
are projected to expand by 4.3 and 6.2 percent this year and in 2011,
said the World Bank.

While this is the most likely scenario, considerable uncertainty
continues to cloud the outlook. Depending on consumer and business
confidence in the next few quarters and the timing of fiscal and
monetary stimulus withdrawal, growth in 2011 could be as low as 2.5
percent and as high as 3.4 percent.

‘Unfortunately, we cannot expect an overnight recovery from this deep
and painful crisis, because it will take many years for economies and
jobs to be rebuilt. The toll on the poor will be very real,’ said Lin,
the World Bank’s chief economist.

‘The poorest countries, those that rely on grants or subsidised
lending, may require an additional $35-50 billion in funding just to
sustain pre-crisis social programmes,’ he said.

http://www.vamban.com/global-economy-to-grow-2-7-percent-in-2010-world-bank/

India to Grow 7.5 Percent in 2010 Despite Slow Global Recovery
Posted by Vamban on Jan 22nd, 2010 09:01:01

Washington, Jan 22 – India is expected to grow at 7.5 percent this
year, powered by skilful macroeconomic management, even as the global
economic recovery that is underway slows later this year as the impact
of fiscal stimulus wanes, according to a new report from the World
Bank.

India’s GDP is projected to grow further at 8 percent in 2011 –
compared to 6 percent in 2008 – says Global Economic Prospects (GEP)
2010, released Thursday even as it warns that while the worst of the
financial crisis may be over, the global recovery is fragile. It
predicts that the fallout from the crisis will change the landscape
for finance and growth over the next 10 years.

Growth in the East Asia and Pacific region as well as in South Asia,
particularly India, has been resilient, buoyed by a massive fiscal
stimulus package in China and by India’s skilful macroeconomic
management, the report noted.

Global GDP, which declined by 2.2 percent in 2009, is expected to grow
2.7 percent this year and 3.2 percent in 2011. Prospects for
developing countries are for a relatively robust recovery, growing 5.2
percent this year and 5.8 percent in 2011 — up from 1.2 percent in
2009.

GDP in rich countries, which declined by 3.3 percent in 2009, is
expected to increase much less quickly – by 1.8 and 2.3 percent in
2010 and 2011. World trade volumes, which fell by a staggering 14.4
percent in 2009, are projected to expand by 4.3 and 6.2 percent this
year and in 2011.

Excluding China and India, the remaining developing countries are
projected to grow at at 3.3 and 3.9 percent rate in 2010 and 2011,
respectively, compared with 5.4 percent growth on average between 2003
and 2008, the GEP noted.

Combined, GDP growth in developing countries is projected to grow by
some 5.2 percent in 2010, after a modest 1.2 percent rise in 2009 (2.2
percent if India and China are excluded), and by a relatively weak 5.8
percent in 2011.

Despite these relatively robust growth rates, the unusual depth of the
recession will mean that spare capacity and unemployment will continue
to plague economies in 2011 and some sectors may well still be
shrinking.

Prospects for developing countries are for a relatively robust
recovery in 2010, with growth of 5.2 percent in aggregate or 3.3
percent if China, India, and Europe and Central Asia are excluded, the
WEP said.

(Arun Kumar can be contacted at ***@ians.in)

http://www.vamban.com/india-to-grow-7-5-percent-in-2010-despite-slow-global-recovery/

...and I am Sid Harth

[chhotemianinshallah]

Bloomberg

India Growth May Accelerate for First Time Since 2007 (Update3)
February 08, 2010, 03:03 AM EST

(Adds company official’s comment in fourth paragraph.)

By Kartik Goyal

Feb. 8 (Bloomberg) -- India’s economic growth may accelerate this year
for the first time since 2007, giving Finance Minister Pranab
Mukherjee room to withdraw fiscal stimulus.

Asia’s third-largest economy will probably expand 7.2 percent in the
year ending March 31 from a year earlier after growing 6.7 percent in
the previous 12 months, the Central Statistical Organisation said in a
statement in New Delhi today.

Mukherjee is under pressure from the central bank to raise taxes in
the budget on Feb. 26 to check inflation in the world’s fastest-
growing major economy after China. Companies including Hero Honda
Motors Ltd., India’s biggest motorcycle maker, and Videocon Industries
Ltd., a refrigerator maker, resist removal of tax support, saying
demand hasn’t strengthened sufficiently.

“Stimulus measures should continue,” said Ravi Sud, chief financial
officer at Hero Honda. “My sense is that the finance minister may
partially withdraw stimulus as inflation and fiscal deficit become
prime concerns.”

Manufacturing output may rise 8.9 percent in the year through March
after a 3.2 percent gain in the previous year, according to today’s
report. Banking and insurance services may grow 9.9 percent, mining
may gain 8.7 percent while electricity production will probably rise
8.2 percent, the report showed. Farm output may decline 0.2 percent.

Food Prices

Reserve Bank of India Governor Duvvuri Subbarao on Jan. 29 raised
India’s growth forecast to 7.5 percent in the year ending March 31 and
said the central bank will target inflation in the next few months. He
estimated inflation to accelerate to 8.5 percent from 6.5 percent
forecast earlier.

India’s inflation rate rose to 7.3 percent in December as shortages of
rice, wheat and sugar after the weakest monsoon rains since 1972
pushed up food costs. Food prices are a top political issue in India,
where the World Bank estimates about 800 million people live on less
than $2 day.

India’s Prime Minister Manmohan Singh Feb. 6 said the worst of food
inflation is over and formed a panel of state chief ministers to
ensure adequate supplies and tame prices. Bhartiya Janta Party, the
main opposition, is staging protests in the country to highlight the
government’s failure.

‘Bigger Risk’

To curb inflation, Subbarao last month raised the proportion of
deposits that lenders need to maintain as cash reserves to 5.75
percent from 5 percent. He said monetary policy alone won’t be
“effective” unless Mukherjee rolls back fiscal sops and cuts the
budget deficit, which is forecast to touch a 16-year high this year.
He called the budget deficit a “bigger risk” to India’s economy than
any other factor.

Asian stocks extended their declines today from last week amid growing
concern that European nations including Portugal, Spain and Greece
will struggle to control their budget deficits. India’s benchmark
Sensitive stock index dropped 0.4 percent to 15847.43 at 1:15 p.m.
local time on the Bombay Stock Exchange. The yield on the key 10-year
government bond was little changed at 7.66 percent after the report.

“Fiscal consolidation in India will be credible,” said Rajeev Malik, a
Singapore-based regional economist at Macquarie Group Ltd. “There is
now a political consensus on disinvestment.”

Asset Sales

Mukherjee, who in 2008 and 2009 cut taxes and stepped up government
spending to provide fiscal stimulus worth more than 4 percent of GDP
amid a global recession, is relying on asset sales to plug the budget
deficit that may widen to the equivalent of 6.8 percent of GDP in the
year through March.

Prime Minister Manmohan Singh’s government plans to reduce stakes in
68 companies including NMDC Ltd., the nation’s largest iron-ore
producer and NTPC Ltd., the biggest electricity provider, after he
returned to power in May last year without the help of communist
parties, who as part of the previous coalition had opposed the policy.

India may not immediately raise excise or service tax rates to cut the
deficit, Pronab Sen, the government’s top statistician, told reporters
in New Delhi on Feb. 3. Even though industrial recovery in India’s
$1.2 trillion economy was “on track,” the government may wait for
economic data until March before it starts to remove any stimulus, Sen
said.

Gradual Withdrawal

Government data shows some areas in the economy such as textile,
leather and other consumer non-durable goods gained 3 percent in India
in November, the weakest pace since June.

Even so, economies across Asia are showing signs of improvement, led
by China. China’s economy grew 10.7 percent in the fourth quarter, the
fastest pace since 2007.

Indian companies including Bajaj Auto Ltd., the nation’s second-
largest motorcycle maker and Tata Motors Ltd., the country’s biggest
truck and bus maker reported sales growth of more than 70 percent in
January.

“The improving data on demand is likely to encourage Indian policy
makers to gradually withdraw stimulus,” said Nikhilesh Bhattacharyya,
an economist at Moody’s Economy.com in Sydney. “The authorities may
opt to consolidate the deficit in the upcoming budget.”

Improvement in public finance is vital for India to upgrade its credit
rating.

Currently, Moody’s Investors Service ranks India’s local currency debt
at Ba2, two levels below investment grade, while Standard & Poor’s has
assigned a BBB- rating, the lowest level in the investment grade.

--With assistance from Manish Modi in New Delhi. Editors: Cherian
Thomas, Michael Dwyer

To contact the reporter on this story: Kartik Goyal in New Delhi at
011-4179-2030 or ***@bloomberg.net.

To contact the editor responsible for this story: Chris Anstey at
[phone] or ***@bloomberg.net

http://www.businessweek.com/news/2010-02-08/india-growth-may-accelerate-for-first-time-since-2007-update1-.html

February 8, 2010, 3:23 PM HKT.
China Disclosing More Data.

China, sometimes criticized for dodgy data, is continuing to make more
information about its economy available to global investors and
policymakers, as the world scrutinizes Beijing’s policies and their
impact on the world’s third-biggest economy.

The State Administration of Foreign Exchange said Friday it will start
to put out data on balance of payments quarterly, rather than half-
yearly. It’ll strip out the impact of currency fluctuations on
Beijing’s $2.4 trillion worth of foreign-exchange reserves, the
world’s biggest. That would help analysts poring over the data for
signs of speculative capital inflows and for a measure of China’s
imbalances with the rest of the world.

Friday’s move is just SAFE’s latest to become more accessible. In the
past few months, for instance, it has published a book on forex
management, explaining to a wider audience how it manages its reserves
among other issues.

SAFE itself is just one of several Chinese government agencies that
are disclosing more economic data. The statistics bureau, for
instance, will start to issue quarter-on-quarter economic growth this
year, among other efforts to provide better indicators. The central
bank has published economic analyses, including its own leading
indicator of consumer price inflation, for the past three quarters.

Such efforts to improve the range and availability of economic data
are a recognition that the world is watching China — whether it’s
investors anxious about whether Beijing will sell its dollar assets
or, perhaps, Australia’s central bank deciding on interest rates.
Policymakers, too, need better data to make their decisions. Premier
Wen Jiabao, for instance, has stressed the need to look at sequential
data, rather than just comparing the data with the year-earlier
period.

For sure, there are some setbacks and still room for improvement. The
General Administration of Customs, for instance, published last month
inaccurate final commodities trade data for December, before fixing
the error later in the day. Still, Beijing’s broader efforts to
publish more indicators, more frequently, will help investors and
policymakers make better sense of where China’s economy–and the world
economy–may be heading.

–Terence Poon

NOTE: A previous version of this incorrectly said SAFE has already
started to publish a quarterly balance-of-payments breakdown. It
provided only full-year 2009 figures Friday.

http://blogs.wsj.com/chinarealtime/2010/02/08/china-disclosing-more-data/

Glimpse of China’s Economy

China’s economy which is said to be a massive $2.4 trillion is made up
of foreign exchange reserves and this is considered to be a landmark
in the financial world that most politicians and economists of the
world would envy. The agency that takes care of its details had now
let the world take a sneak peek at what they are made off. In the
process they would also let them know of how much hot money is coming
into the economy. Although you cannot term this as being transparent,
since we all know that the vital details will be kept away from prying
eyes.

What happens in the forex market is a regular monthly update that is
given by the State Administration of Foreign Exchange (SAFE). Once
this is done it is time for economists to work on numbers and see how
much of it was from speculative inflows, betting as compared to the
rise in the currency value of China.

However the change that is supposed to be huge is that the SAFE will
now showcase the foreign currency as well as asset price movement on a
quarterly basis. Last years inflow seemed to be somewhere between $60
million. Most of this money inflow however does not seem to be
anything by Chinese banks repatriating funds and not the capital that
foreigners bring into the country. The banks in china also have had a
chance to block some of the foreign exchange money by the central bank
and of which most of it have be converted to the local currency.

http://www.forex-flash.com/2010/02/glimpse-of-china%E2%80%99s-economy/

...and I am Sid Harth

[chhotemianinshallah]

Bloomberg

Pimco’s El-Erian Favors Brazil’s Bonds, Chinese Yuan (Update2)
February 08, 2010, 07:40 AM EST

(Adds El-Erian comment in seventh paragraph.)

By Sarah McDonald and Wes Goodman

Feb. 8 (Bloomberg) -- Mohamed A. El-Erian, whose company runs the
world’s biggest mutual fund, favors investments in emerging markets on
expectations they’ll outpace developed economies in growth and wealth.

Brazilian sovereign bonds and Chinese yuan non-deliverable forwards
are attractive, El-Erian, co-chief investment officer at Pacific
Investment Management Co., said today in Sydney in a Bloomberg
Television interview. Greece needs outside help as it tackles the
European Union’s largest budget shortfall, he said.

Pimco portfolio managers are reducing their riskiest positions, said
El-Erian, who shares his job title with Bill Gross. Debt strains in
Greece, Portugal and Spain, along with the emphasis on non-developed
markets, underscore Pimco’s view that 2010 will be a year of slower-
than-average growth and a shrinking global role for the U.S. economy.

“We have been moving up in quality, which has meant certain sales of
high-yield names,” said El-Erian, 51, who is also author of the book
“When Markets Collide.” “We’ve been very selective on which sovereigns
we are exposed to.”

The next six months will be healthy for the U.S. economy, though the
expansion may slow after that, El-Erian said.

‘Big Difference’

The U.S. will be able to withstand investor aversion to sovereign risk
better than other nations, El-Erian said at an earlier press
conference today during his trip to Sydney for a Reserve Bank of
Australia symposium.

“It makes a big difference if you are the reserve currency,” he told
reporters at the press conference. “It makes a big difference if you
are the provider of the deepest and most predictable financial
markets.”

Gross’s $210 billion Total Return Fund handed investors a 15 percent
gain in the past year, beating half of its competitors, according to
data compiled by Bloomberg.

The company, based in Newport Beach, California, has about $1 trillion
in assets under management. It is a unit of Munich- based insurer
Allianz SE.

Pimco prefers Brazilian debt over that from “much of the G-7”
countries in part because of the central bank’s “hawkish” inflation
stance, Michael Gomez, a co-head of emerging markets, said in a Feb. 4
interview.

Loosen Controls

China will loosen currency controls in 2010 and allow the yuan to
strengthen, Gomez said in a separate interview Dec. 10. International
investors use forwards, agreements to buy and sell assets at current
prices for delivery at a future specified time and date, to bet on the
yuan. Non-deliverable contracts are settled in dollars.

China’s economy will expand 6 percent or more in the coming years, El-
Erian said in today’s press conference.

Greece is trying to persuade financial markets it can restrain its
budget shortfall without outside assistance, while borrowing costs are
also climbing for Portugal and Spain. Credit-default swaps on the debt
of all three countries rose to records last week, increasing demand
for the relative safety of U.S. government securities.

Credit-default swaps are contracts designed to protect against or
speculate on default.

Seven-Week Low

Ten-year Treasury yields fell to 3.53 percent on Feb. 5, the lowest in
seven weeks. The 3.375 percent security due November 2019 yielded 3.60
percent as of 8:47 a.m. in London.

“As the sovereign risk moves out, it will have an impact on adjacent
products,” El-Erian said at the press conference. “We have been
selling certain corporates that we simply believe are too rich for
this environment.”

The comments reiterate those from Paul McCulley, a member of the Pimco
investment committee, who wrote in a report last month that the
company is reducing risk.

Pimco calls its forecast for an extended period of lower- than-average
economic growth the “new normal.”

The extra yield investors demand to own corporate debt instead of
government bonds widened four basis points last week to 169 basis
points, the most since the period ended Nov. 27, according to the Bank
of America Merrill Lynch Global Broad Market Corporate Index.

Greece, which had the European Union’s widest budget deficit at 12.7
percent of output last year, has struggled to convince investors it
can bring the budget shortfall within the bloc’s limit of 3 percent.

--With assistance from Heidi Couch and Garfield Reynolds in Sydney.
Editors: Garfield Reynolds, Nicholas Reynolds

To contact the reporter on this story: Sarah McDonald in Sydney at
[phone] or ***@bloomberg.net; Wes Goodman in Singapore
at [phone] or ***@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at
[phone] or ***@bloomberg.net; Will McSheehy at +65 6212
1140 or ***@bloomberg.net.

http://www.businessweek.com/news/2010-02-08/pimco-s-el-erian-favors-brazilian-bonds-chinese-yuan-forwards.html

Q+A - Will North Korea resume nuclear talks? If so, so what?
Jack Kim

SEOUL
Mon Feb 8, 2010 1:11am EST

Following are some questions about whether the North is set to return
to disarmament-for-aid talks and what may happen next:

WILL NORTH KOREA RETURN TO NUCLEAR TALKS?

North Korea's moves are often linked to the precarious state of its
finances and the economic pressure it is facing now indicates it will
likely return to the talks in the hopes of winning aid.

North Korea has attached two conditions to its return and a face-
saving compromise would need to be found to resume the talks among the
two Koreas, China, Japan, Russia and the United States.

North Korea has called for an end to U.N. sanctions imposed to punish
it for detonating a nuclear device in May 2009 and for direct talks
with Washington to replace the armistice that ended the 1950-53 Korean
War with a peace treaty.

IF TALKS RESUME, WHAT WOULD BE THE NEXT STEP?

North Korea will be expected to resume where it left off when it
stepped away from the disarmament-for-aid deal a year ago. This means
taking apart its Yongbyon plant that makes arms-grade plutonium and
allowing in international nuclear inspectors.

While this would help ease tension, it does not address the progress
the North is believed to have made in uranium enrichment, which could
give it a second path to a bomb.

Pyongyang may seek a much bigger payoff for giving up its uranium
ambitions and this could bog down already sputtering negotiations for
several more years.

CAN THE TALKS BREAK DOWN?

Most analysts feel a breakdown is inevitable because there is little
reason for North Korean leader Kim Jong-il to ever give up nuclear
arms. The North's propaganda has justified years of sacrifice to build
a nuclear programme to prevent an invasion from a hostile United
States and the weapons are seen at home as the crowning achievement of
Kim's military-first rule.

WHAT HAPPENS TO REGIONAL SECURITY IF THE TALKS BREAK DOWN?

North Korea may try to raise the stakes. If the North resorts to its
usual brinkmanship, there will likely be missile tests, military
provocations towards the South and perhaps another nuclear test.

WHAT IS THE IMPACT ON MARKETS?

Short-lived military grandstanding that results in little to no
damage, such as a missile launch or the exchange of artillery fire as
happened late last month, usually leads to quick blips in foreign
exchange and stock trading that have no lasting impact.

They dampen sentiment and serve as a reminder of the risks of
investing in the divided peninsula. Financial analysts say markets
would only really worry if there were signs of serious armed
confrontation.

WHAT ARE THE ECONOMIC PRESSURES ON PYONGYANG?

U.N. sanctions have cut into the North's arms trade, which estimates
said earned the state with a $17 billion a year economy about $1
billion annually.

A currency reform imposed late last year that was aimed at reasserting
the government's control over the economy triggered inflation and led
to rare civil unrest, putting pressure on Kim to ease some of the
economic strain on his impoverished people.

China, the North's main benefactor, is willing to help with economic
assistance to prop up Kim's leadership but the U.N. sanctions mean
Beijing would be reluctant to do so openly and may only do so on
condition that the neighbour returns to the six-party nuclear talks
hosted by China.

North Korea may also try warming up to South Korea, which once
supplied about $1 billion a year in aid. Seoul cut off the
unconditional handouts about two years ago and said aid would only
come once the North abandons its atomic ambitions.

(Editing by Jon Herskovitz)

http://www.reuters.com/article/idUSTRE6170RG20100208

...and I am Sid Harth

[chhotemianinshallah]

Markets
China Resources Land to join Hang Seng Index
February 8, 2010

State-controlled property developer China Resources Land (CRL) will be
added to Hong Kong’s Hang Seng Index (HSI), Bloomberg reported. The
change, which takes effect from March 8, will take the number of HSI
member stocks to 43 from 42. In addition, China Minsheng Banking Corp,
Metallurgical Corp of China, ZTE Corp and Sinopharm Group will join
the Hang Seng China Enterprises Index, which tracks H-shares. Eight
stocks will be removed from the gauge. These are Jiangsu Expressway,
Harbin Power Equipment, Sinopec Shanghai Petrochemical, Maanshan Iron
& Steel, Beijing Capital International Airport, China Communication
Services Corp, China Shipping Container Lines and China Molybdenum.
Funds that mirror the indexes, including the US$4.9 billion Tracker
Fund of Hong Kong, are likely to adjust their holdings ahead of the
changes being implemented. Sandy Lee, head of equity quantitative
strategies for Asia excluding Japan at Nomura, estimates that CRL’s
inclusion in the HSI could attract buying of US$49 million.

http://www.chinaeconomicreview.com/dailybriefing/2010_02_08/China_Resources_Land_to_join_Hang_Seng_Index.html

...and I am Sid Harth

[Sid Harth]

Strong Chinese growth resumes but increased social spending needed,
says OECD report

Send Print 02/02/2010 - With the help of massive government stimulus
action, China is now leading the world economy out of recession,
according to a new OECD report. Already the world’s second largest
economy, China could well overtake the United States to become the
leading producer of manufactured goods in the next five to seven
years, it says.

The OECD’s latest Economic Survey of China says it will be important
to ensure that government saving, now falling in the wake of the
crisis, does not revert to its previous, excessively high levels.
Public spending should be stepped up to support much needed social
reforms in areas such as education, welfare assistance, pensions and
health.

China can afford the extra spending as its public finances remain
strong. Gross government debt amounted to only 21% of GDP in 2008. The
stimulus measures, which nevertheless dwarfed those of other
countries, are expected to increase this debt ratio by only 3% of GDP
in 2010. By contrast, gross public debt in OECD countries is projected
to almost reach their total GDP this year and even exceed it in
2011.

Speaking at the launch of the survey in Beijing, OECD Chief Economist
and Deputy Secretary General Pier Carlo Padoan said; “The Chinese
government’s swift and vigorous action to support its economy has
contained the impact of the global recession.

By helping to rebalance China’s economy towards stronger domestic
demand, the stimulus is also benefitting the rest of the world.
Further stepping up of social spending in China will be important both
to foster social cohesion domestically and to promote continued
external rebalancing.”‪

Even though government reforms have focussed increasingly on the need
for social cohesion over recent years, the survey identifies a number
of areas where action is needed for living standards in China to
continue to improve over the longer term:

Further progress is needed to unify the fragmented system of welfare
assistance, pension and health care. Responsibility for social
protection should ultimately be transferred from cities to the
national level to ensure better integration, efficiency and
solidarity.

The registration system and restrictions on migrant workers’ access to
social services creates obstacles to labour mobility and should be
relaxed.

Health care reforms need to be pursued to ensure that provision at a
local level is improved, hospitals are run more efficiently and that
eventually the different insurance systems are merged.

These reforms will also help alleviate international imbalances by
keeping saving at a lower level. So would greater exchange rate
flexibility.

Although banks and financial institutions are generally stronger and
better regulated than a few years ago, further opening is needed
together with firmer supervision.

Competition and productivity can be boosted by cutting red tape,
loosening traditional ties between state-owned enterprises and central
authorities, allowing private companies to operate in the network
industries and lowering barriers to foreign direct investment in
services.

China and the OECD work in close partnership on a number of projects
through the Organisation’s Enhanced Engagement initiative, in which
Brazil, India, Indonesia and South Africa also participate. The peer
review process behind the OECD’s economic surveys is a key part of the
Organisation’s contribution to the G20’s Framework for Strong,
Sustainable and Balanced Growth.

Further information is available from www.oecd.org/eco/surveys/china
The Policy Brief (pdf format) can be downloaded in English. It

contains the OECD assessment and recommendations.

Journalists can obtain a copy of the OECD Economic Survey of

China, from the OECD’s Media Division (***@oecd.org; tel +
331 4524 9700)

La Chine renoue avec une croissance forte mais doit accroître ses
dépenses sociales, selon un rapport de l’OCDE (French)

http://www.oecd.org/document/7/0,3343,en_2649_34571_44495047_1_1_1_37443,00.html

...and I am Sid Harth

[Sid Harth]

Bank lending spree may hurt China economy: OECD

3 Feb 2010, 0430 hrs IST, AGENCIES

BEIJING: Surging bank lending could threaten the stability of
financial institutions in fast-growing China, the OECD said Tuesday in
a report that urged more market reforms to help reduce such risks.

The Organisation for Economic Cooperation and Development said in its
first China survey for five years that while Beijing's policies had
helped shield the country from the world slowdown, excess government
controls were a problem.

It recommended China loosen its grip on the value of the yuan and
further accelerate other market-based economic reforms, including
allowing greater foreign access to its financial markets.

The report identified the recent surge in new lending as a key problem
facing the nation's economy and financial system.

"While Chinese banks have so far weathered the global slowdown well,
the acceleration in new lending since early 2009 raises the risk of a
renewed surge in non-performing loans (NPLs) in the years ahead," the
report said.

The lending binge has emerged as a key concern for China's economic
policymakers, with Liu Mingkang, chairman of the China Banking
Regulatory Commission, saying last month the government would rein in
credit.

His comments come after the central bank moved to hike the minimum
amount of money that banks must keep in reserve and took other steps
analysts said were meant to curb lending amid fears of bad loans,
asset bubbles and overheating.

Chinese state media also has reported major banks were verbally
ordered by authorities to cut new lending, although Liu denied such a
move.

Some analysts have said they expect Beijing to go even further by
raising interest rates, but most have said such a move is unlikely
before mid-2010, as it could fuel inflation.

"We welcome measures recently taken by authorities to deal with
inflationary pressures, but we think this will have to be carefully
monitored," OECD Chief Economist and Deputy Secretary General Pier
Carlo Padoan told reporters.

"Inflation risks are coming up in a way that is a source of concern."

The OECD report said recent "sharp increases in land prices" stemmed
partly from excess liquidity and it warned financial institutions
could be stuck with bad loans if property prices fell.

Property prices in Chinese cities have soared, rising in December at
the fastest pace in 17 months, according to official figures.

Senior OECD economist Richard Herd said wage increases had outpaced
the spike in housing costs nationwide, but noted the huge rises in
Beijing, Shanghai and southern China.

He said it was important to avoid a spread in high property prices
while also keeping the housing market going, noting: "The key is an
increase in the supply of land."

http://economictimes.indiatimes.com/news/international-business/Bank-lending-spree-may-hurt-China-economy-OECD/articleshow/5529605.cms

Obama plans $30-bn push to boost small business

3 Feb 2010, 0300 hrs IST, REUTERS

WASHINGTON: Gloomy budget forecasts will shadow President Barack Obama
as he takes his economic message on the road on Tuesday, seeking to
reassure Americans he has a plan to tackle high unemployment and
surging debt levels. Obama will propose using $30 billion in funds
from the TARP bank bailout scheme for use as a small business lending
fund to spur job growth in a critical sector of the US economy.

“I think we should make it easier for them to open their doors, expand
their operations, and hire more workers,” he will say, according to
speech excerpts released by the White House. Obama will outline the
plan during his visit to Nashua, New Hampshire, for an event that will
feature a ‘town hall’ question and answer session.

The trip comes as Obama seeks to rebound from political setbacks and a
drop in his popularity among middle-class voters anxious over the
economy and wary of parts of his agenda, such as the push for a
healthcare overhaul.

New Hampshire, a northeastern state known for fiscal conservatism, is
next to Massachusetts, where a Republican handed Obama’s Democrats an
embarrassing defeat last month in a pivotal Senate race.

On Monday, Obama sent Congress a $3.8-trillion budget for the 2011
fiscal year that begins on October 1. The document painted a bleak
fiscal picture, prompting Republicans to accuse Obama of pursuing big-
spending, fiscally reckless policies. The White House counters that
Obama inherited enormous deficits and a deep recession from the Bush
administration and had to try to revive the economy with a large
stimulus package when he took office in January 2009.

The budget forecasts a record $1.6-trillion deficit for the 2010
fiscal year. The shortfall is expected to ease slightly to a still-
high $1.3 trillion in 2011 and Obama has set a goal of halving it by
the end of 2012, when he faces re-election.

With US unemployment stuck at a nearly 26-year high of 10%, Obama has
made jobs growth his most pressing near-term priority.

Obama is seeking $100 billion in the current 2010 fiscal year for a
package of business tax credits and other steps aimed at creating jobs
and giving a boost to struggling middle-class families.

His proposal to use $30 billion from TARP bank bailout fund is aimed
at rapidly increasing lending to credit-worthy small businesses.

Senior Obama administration officials, briefing reporters, said the
program would be limited to smaller or community banks, those with $10
billion in assets or less. Banks would be able to take capital at
attractive terms that would become better as they increase small
business lending.

“These are the small, local banks that work most closely with our
small businesses — that provide them their first loan, and watch them
grow through good times and bad,” Obama will say.

“The more loans these banks provide to credit-worthy small businesses,
the better a deal we’ll give them on capital from this fund.”

Obama is also giving new emphasis to a promise to put the United
States on a firmer fiscal footing in the longer term as he seeks to
cast off the ‘big spender’ label Republicans have tried to pin on
him.

He proposed a three-year freeze on some domestic spending and said he
would establish a bipartisan commission to come up with
recommendations for tackling the long-term debt problem.

Part of Obama’s job will be to try to sell the budget to the public
and the Democratic-led Congress, where ideas such as a spending freeze
are likely to meet some resistance.

But budget analyst Stan Collender, a former congressional aide now
with Qorvis Communications, said Obama struck the right balance in his
budget by putting the top focus on jobs.

“The president was faced with a choice between paying attention to the
deficit and paying attention to jobs and he chose jobs,” Collender
said.

“Consumers aren’t spending a whole lot yet. Businesses still aren’t
spending a whole lot. So under those circumstances, there’s only one
arrow left in the quiver and that’s fiscal policy.”

http://economictimes.indiatimes.com/news/international-business/Obama-plans-30-bn-push-to-boost-small-business/articleshow/5529511.cms

Is Greece's debt trashing the Euro?

8 Feb 2010, 1953 hrs IST, New York Times

ATHENS: Dimitris Damianidis is a high school teacher and a strong
supporter of Greece’s socialist government. But that won’t deter him
from going More on Financial crisis on strike with hundreds of
thousands of other public sector workers next week to fight for the
28,000-euro pension that he expects to receive annually after he turns
60 next year.

“Why should I as a worker pay for the errors in policies?” he asked,
in response to reports that the embattled Greek state will cut his pay
and, by extension, retirement benefits. “The worker can’t be the
scapegoat. So we have to defend ourselves.”

As Damianidis and others on the state payroll prepare to stop work on
Wednesday, fear is building that the country’s new government may lack
the nerve to cut public wages and pension payments, which make up 51
percent of its budget.

Over the past decade, Greece took full advantage of a strong euro and
rock-bottom interest rates to fuel a debt binge by the country’s
consumers and its government. This year, if Greece can’t persuade
investors to buy 53 billion euros of its government debt, it may have
to seek a bailout from its European Union brethren or the
International Monetary Fund – or, worse, default.

The stakes are high, not just for Greece but for the entire euro zone,
where efforts to forge a common economic identity are threatened by
the financial crisis. Last week, the panic spread to Portugal and
Spain, and the cost of insuring their debt against a default soared to
record levels as investors bet that, like Greece, governments in those
countries won’t be able to rein in bloated budgets.

“The risk of contagion is a real one,” said Scott Thiel, head of
European fixed income at the asset management firm BlackRock in
London. “Investor sentiment is now focused on countries like Spain and
Portugal, where fundamentals are weakest.” He said that for now, he
saw little risk for Italy, given the relative stability of its
economy.

The euro, which has become one of the world’s strongest currencies
since its introduction over a decade ago, is down 5 percent against
the dollar this year. The euro’s decline picked up speed when the
European Commission’s statistical office revealed in mid-January that
Greece had been submitting false data to calculate its budget deficit.
(Late last year, Greece stunned investors by saying that its
government deficit would be 12.7 percent of its gross domestic
product, not the 3.7 percent the previous government had forecast
earlier).

Greece’s problems, and those looming over its neighbors, have laid
bare the dangers of divergent fiscal and political policies in the
euro zone, calling into question the grand European experiment of
squeezing 16 disparate countries into a monetary union.

http://economictimes.indiatimes.com/News/International-Business/Is-Greeces-debt-trashing-the-Euro/articleshow/5549184.cms

This website has been reported as unsafe
economictimes.indiatimes.com

We recommend that you do not continue to this website.
Go to my home page instead

This website has been reported to Microsoft for containing threats
to your computer that might reveal personal or financial information.

More information

This website has been reported to contain the following threats:

Malicious software threat: This site contains links to viruses or
other software programs that can reveal personal information stored or
typed on your computer to malicious persons.

Learn more about phishing
Learn more about malicious software
Report that this site does not contain threats
Disregard and continue (not recommended)

http://economictimes.indiatimes.com/News/International-Business/Greece-readies-tax-change-to-fight-crisis/articleshow/5548896.cms

...and I am Sid Harth

[Sid Harth]

Bloomberg

China Faces ‘Great Pressure’ on Currency, Zhong Says (Update1)
February 08, 2010, 09:17 AM EST
(Adds comment on yuan in fourth paragraph.)

By Zijing Wu

Feb. 8 (Bloomberg) -- China’s government faces pressure to allow the
yuan to appreciate and might give the currency a “small range” to move
depending on the economic situation, Vice Commerce Minister Zhong Shan
said.

“There is great pressure on the renminbi to appreciate,” Zhong told
journalists at an event in Birmingham, England today. “But we believe
a stable renminbi is good for both the Chinese economy and the world.”

Central banker Zhu Min on Jan. 27 defended the nation’s “stable” yuan
policy, and Premier Wen Jiabao said in December that China will
“absolutely not yield” to calls for currency gains. China has kept a
lid on its currency since July 2008, stoking criticism that its
exporters have an unfair advantage and adding to tensions on trade
policy.

“Now our official stance is to keep the yuan basically stable,” Zhong,
who doesn’t manage the nation’s currency policy, told reporters.
“There might be a small range to allow it to move, but it all depends
on the economic situation in China and the world.” China doesn’t want
any move in the yuan to be too large, he said.

China’s yuan was unchanged today, trading at 6.8270 per dollar in the
spot market as of 10:26 a.m. in London. It strengthened 21 percent
against the dollar in the three years before China curbed gains in
2008.

Export Concern

China is unlikely to allow its currency to gain against the dollar
over the next three months as the global economy has made its leaders
“more concerned” about export prospects, Credit Suisse Group AG said
last week.

The nation will probably let its currency appreciate at least 5
percent in a one-time move and raise interest rates to cool the
economy, Goldman Sachs Group Inc. Chief Economist Jim O’Neill said
Jan. 23.

China’s exports surged 17.7 percent from a year earlier in December,
while imports rose to a record in a stronger-than- forecast trade
rebound. China may overtake Germany to become the world’s largest
exporter this year, Zhong said last year.

“Exports will rebound a lot this year, from a low base, but not to the
level seen in 2008 before the crisis,” Zhong told reporters today.

The U.S. and China, with $409 billion in annual trade, have been
engaged in a spat over allegations of dumping and subsidies. China
says U.S. complaints are signs of protectionism, while the U.S. says
it’s enforcing trade rules.

“Trade friction between China and the U.S. is also escalating,” Zhong
said. “I don’t see a trade war happening between China and U.S. The
Chinese government is firmly opposed to protectionism. We are for free
trade and investment.”

--Editors: Craig Stirling, Andrew Atkinson

To contact the reporter on this story: Zijing Wu in London at
[phone] or ***@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at
[phone] or ***@bloomberg.net

http://www.businessweek.com/news/2010-02-08/china-faces-great-pressure-to-allow-yuan-increase-zhong-says.html

After Buying Spree, China Owns Stakes in Top U.S. Firms
By DAVID BARBOZA and KEITH BRADSHER
Published: February 8, 2010

SHANGHAI — Flush with cash despite the global economic downturn,
China’s sovereign wealth fund quietly snapped up more than $9 billion
worth of shares last year in some of the biggest American
corporations, including Morgan Stanley, Bank of America and Citigroup.

Although most of the stakes were small, China Investment Corp., the
government’s $300 billion investment fund, now owns stock in some of
the best-known American brands, including Apple, Coca-Cola, Johnson &
Johnson, Motorola and Visa.

The detailed list, which contained holdings totaling $9.6 billion as
of Dec. 31, was disclosed Friday in a filing with the U.S. Securities
and Exchange Commission; it lists stakes only in companies traded in
the United States.

The filing offers a glimpse of how China is trying to diversify its
more than $2 trillion in foreign currency holdings with stock, rather
than investing almost entirely in U.S. Treasury bonds and other debt
securities issued by governments and by government-sponsored
enterprises like Fannie Mae.

Prime Minister Wen Jiabao of China and other officials have repeatedly
expressed worry about how the country’s holdings of U.S. Treasury
securities could be hurt by inflation or by mounting U.S. debt. By
buying the securities of international companies, China is trying to
spread its fast-growing wealth more widely. It is also seeking to
acquire strategic stakes in companies that could feed its hungry
economy with a wide range of commodities.

C.I.C., already one of the world’s largest sovereign funds, was formed
in 2007 with about $200 billion. It now has assets of nearly $300
billion and, according to state-run news media, is expecting another
large injection of funds.

A spokeswoman for C.I.C., which is based in Beijing, did not return e-
mail messages or phone calls seeking comment. But analysts said the
filing showed that the fund had invested only a small portion of its
$300 billion in American stocks, and the fund seemed to be following a
cautious strategy to diversify globally after initially having put its
biggest investments into shoring up the capital of Chinese banks.

“This is still a relatively small amount compared to the total size of
the fund,” said Chang Chun, a professor of finance at the China Europe
International Business School in Shanghai.

The sovereign wealth fund got off to a rocky start in 2007 and early
2008 by acquiring a $3 billion nonvoting stake in the American private
equity firm Blackstone and paying another $5 billion for a 9.9 percent
stake in Morgan Stanley.

Shares of both companies plummeted in 2008 during the financial
crisis, leading to a storm of criticism directed at C.I.C. But
analysts say the fund performed well in 2009, particularly because it
was buying aggressively as the market recovered.

Exactly when C.I.C. bought the shares of various companies was not
disclosed in the filing. And C.I.C.’s acquisition of nonvoting units
of Blackstone and its early stake of preferred shares in Morgan
Stanley are not listed in the filing. The Blackstone and Morgan
Stanley stakes are not listed, apparently because they are not traded
equities.

The filing indicates that C.I.C. owns about $19 million worth of Bank
of America stock, close to $30 million worth of Citigroup shares and
about $333 million worth of shares in Visa, as well as holdings in
various index funds.

The fund’s largest listed holdings were $1.7 billion worth of shares
in Morgan Stanley and nearly $650 million worth of shares in
BlackRock, the New York money management fund.

The Morgan Stanley stake was acquired last June, when the investment
bank issued about $2.2 billion worth of common shares to help repay
the U.S. government under the Troubled Asset Relief Program; C.I.C.
acquired about $1.2 billion worth of shares at that time.

Some U.S. politicians in both parties have been nervous about China’s
growing financial reach, and particularly wary that China might seek
political influence in the West commensurate with its corporate
stakes. Wariness in Washington flared four years ago when Congress
discouraged Cnooc, a state-owned Chinese oil company, from buying
Unocal.

Most sovereign wealth funds, with the exception of Norway’s, disclose
few details about their holdings. But C.I.C. made its list available
for the first time on the S.E.C.’s form 13F, which is filed quarterly
by institutional investors and mutual funds in the United States.

Ben Simpfendorfer, an economist at Royal Bank of Scotland, said the
Chinese sovereign wealth fund’s decision to disclose its holdings
could limit concerns about secrecy in government holdings.

“This should help reassure politicians that Chinese sovereign wealth
funds can take minority positions responsibly,” he said.

C.I.C.’s holdings outside the United States are substantial and
growing. In Canada, it owns a $3.5 billion stake in Teck Resources, a
mining and resources company listed in the United States, and a $1
million stake in Research in Motion, the maker of BlackBerry mobile
phones.

The sovereign wealth fund has also been buying small stakes in
Australia's biggest banks and paid $646 million last autumn for a
stake in Noble Group, a diversified commodities company based in Hong
Kong with operations around the world in industries like iron ore
mining and sugar mills.

Executives whose companies have accepted investments from C.I.C. tend
to defend it as apolitical.

Richard S. Elman, the founder and chairman of Noble, said last month
that C.I.C. executives had been businesslike in their approach to the
investment.

“They are hugely commercial, and they want results,” he said. “They do
not interfere in the day-to-day operations.”

Keith Bradsher reported from Hong Kong.

http://www.nytimes.com/2010/02/09/business/global/09invest.html?dbk

Stocks Trade Mixed as European Debt Woes Remain

Stocks trade in tight range as investors remain wary about economic
recovery; Hasbro, CVS rise
By STEPHEN BERNARD and TIM PARADIS AP Business Writers

NEW YORK February 8, 2010 (AP) The Associated Press

Stocks traded mixed Monday as investors remained wary about the
strength of the economic recovery and mounting debt in Europe.

The market's major indexes held to a tight range and were nearly
unchanged at midday, recovering from an early slide. Stocks have
traded erratically in the past four weeks as investors try to
determine whether a global economic recovery is sustainable.

Concerns are growing that some European countries including Greece,
Portugal and Spain might not be able to handle their mounting levels
of debt. Stocks have also been hurt by China's plans to contain
economic growth and the Obama administration's proposed rules to
restrict trading by large financial institutions.

The questions have investors on edge about whether the global economy
can maintain a recovery. Stocks have climbed for 10 months on hopes of
a rebound after hitting 12-year lows last March.

Investors are looking for fresh evidence of economic growth. The
recent troubles demonstrate a recovery might not be happening as fast
as some had hoped. The concerns have hit stocks. The Dow Jones
industrial average is down 713 points, or 6.7 percent, since closing
at a 15-month high of 10,725.43 on Jan. 19.

Brett Hryb, a portfolio manager with MFC Global Investment Management
in Toronto, said he was encouraged by the market's ability to hold its
ground Monday as traders sort through questions about debt in Europe.

Hryb said the concern is that the financial troubles in a country like
Greece will spill into other markets. "Clearly Greece itself is
nothing. It's just a blip. It's what the contagion could be," he said.

In midday trading, the Dow fell 12.77, or 0.1 percent, to 9,999.46
after being down as much as 78 points after the opening bell. On
Thursday, the Dow traded below the psychological barrier of 10,000 for
the first time since November.

The broader Standard & Poor's 500 index rose 3.87, or 0.4 percent, to
1,070.06, while the Nasdaq composite index rose 10.31, or 0.5 percent,
to 2,151.43.

Bond prices fell, pushing their yields slightly higher. The yield on
the benchmark 10-year Treasury note rose to 3.60 percent from 3.57
percent late Friday.

The dollar was mixed against other major currencies, while gold rose.

Crude oil rose 73 cents to $71.92 per barrel on the New York
Mercantile Exchange.

In earnings news, the toymaker Hasbro Inc. said its profit surged 77
percent in the fourth quarter while CVS Caremark Corp. said its
earnings rose 11 percent. The results beat analysts' estimates.

Hasbro jumped $4.33, or 14.1 percent, to $35.13, while CVS rose $1.83,
or 5.9 percent, to $32.90.

Three stocks rose for every two that fell on the New York Stock
Exchange, where volume came to 314.8 million shares compared with 429
million shares traded at the same point Friday.

The Russell 2000 index of smaller companies rose 1.62, or 0.3 percent,
to 594.60.

In afternoon trading, Britain's FTSE 100 rose 0.4 percent, Germany's
DAX index gained 0.9 percent, and France's CAC-40 rose 1 percent.
Earlier, Japan's Nikkei stock average fell 1.1 percent.

Copyright 2010 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten, or redistributed.

http://abcnews.go.com/Business/wireStory?id=9775156

European Union | 08.02.2010
As Europe and China fall in line, sanctions loom over Iran

Großansicht des Bildes mit der Bildunterschrift: Iranian President
Mahmoud Ahmadinejad has consistently defied the interntional
communityAs EU members unify their stance, the US is lining up members
of the international community to punish Iran for its nuclear program.
With France as chief of the UN Security Council, a showdown could come
soon.

Since 2004, the European Union has publicly claimed the united
position that the row over Iran's nuclear program should be resolved
diplomatically, but has reserved the right to back United Nations
Security Council sanctions if Iran does not comply to international
demands.

Yet, consistently since that time, individual nations have indicated a
willingness to establish independent relationships with Iran, both
political and economic, which seemingly ignore Brussels' position.
Europe claims to be united, but a closer examination shows that this
unity is an illusion.

For instance, Germany has developed deep business ties with Iran, with
more than 50 German companies basing their offices there. Trade volume
between the two has increased steadily over the last decade despite UN
sanctions, with Germany having the largest share of Iran's export
market.

Italy also has developed a strong relationship, both polticial and
economic, with Iran. Last year Italian Foreign Minister Franco
Frattini met with his Iranian counterpart Manouchehr Mottaki in Tehran
to discuss a host of matters from the Italian, not EU, perspective.
Italian companies also have frequently done business with Tehran,
selling them goods and services that could have both military and
civilian uses.

These relationships have helped Iran to sustain and continue its
nuclear program. As of Tuesday, Tehran plans to enrich uranium at a
higher level than previously, prompting the United States to renew its
call for heavy sanctions against Iran.

Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift:
Supporters of an Iranian opposition group demonstrate outside the EU
Council to urge a tough line against the Tehran government's nuclear
program Last year, Tehran was cited by the International Atomic Energy
Agency for defying UN Security Council prohibitions on uranium
enrichment. The IAEA also said it was impossible to confirm whether
the program is for peaceful or military purposes.

The EU's public front masks internal disagreement and double-speak.
Charting a course for allies to have a united front will be difficult,
let alone getting countries like China and Russia, reluctant to
punish Iran, to back stronger sanctions. And as the international
community dithers over what action to take, Israel is looking to
Europe to take the lead. The prospect of unilateral Israeli action
looms.

A test for the United States

US President Barack Obama has followed through on his promise to
diplomatically engage Iran, taking a much different approach than
predecessor George W. Bush. But no progress has been made, despite
promising talks last fall in which Iran appeared to agree to a deal to
move nuclear fuel out of the country. Yet the deal was abandoned by
the Iranians at the last moment.

"Negotiators are bitter about the experience," Patrick Clawson, an
analyst at the Washington Institute for Near East Policy, told
Deutsche Welle.

This lack of faith, combined with Iran's insistence that it would not
retreat from what it deems its right to develop a nuclear program, has
led to a recent escalation in tone from Washington. At the end of
January, White House officials indicated that they would

Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift:
Western nations have put on a united front on Iran's nuclear program
increase missile defenses in the Middle East to protect Gulf state
allies against Tehran. US Secretary of State Hillary Clinton has
publicly pressed China for tougher sanctions.

The United States also has begun to pressure European allies to lessen
business ties with Iran. It seems to have had an affect; last week,
German manufacturer Siemens announced that it would cut future trade
ties with Iran. Italian companies have yet to do the same, but Italy's
Prime Minister Silvio Berlusconi indicated last week that a nuclear
Iran was not acceptable.

France holds the UN Security Council's presidency this month and is
widely expected to bring a resolution calling for strict sanctions.
Orde Kittrie, a visiting scholar at the Johns Hopkins University of
Advanced International Studies and expert on nuclear nonproliferation
and sanctions, said any action must be strong, with much of the
responsibility for their effectiveness falling on Europe.

"A broad-ranging European embargo would almost immediately bring the
Iranian economy to its knees," he told Deutsche Welle. "The pressure
could quickly succeed in coercing Iran's leadership to cease its
nuclear weapons program, and would certainly constrain the pursuit of
that program and send a strong deterrent message to other potential
proliferators."

"The Iranian regime could not function without Iran's imports from
Europe. It would cost Europe relatively little to halt those exports,
and that short-term investment would save us all from the terrible
prospect of a nuclear-armed Iran," he said.

Getting China and Russia on board

Even with the United States and its allies on the same page, Russia or
China still need to support sanctions if they are to succeed. China
has close energy relations with Tehran - energy which is needed to
sustain China's economic growth - and is loath to do anything that
risks them.

Russia, meanwhile, has been Iran's loudest defender. It has provided
Tehran with a number of materials, from weapons to heavy machinery
with dual-use nuclear purposes. Moscow has consistently watered down
sanctions in the past, and has yet to indicate whether it would be
willing to revist that stance.

Recognizing Russia's unwillingness, Washington has concentrated the
majority of its lobbying effort on swaying Beijing to back sanctions.
Beyond Clinton's recent comments, members of the House of
Representatives have traveled to China in an attempt to convince
lawmakers there about the dangers of a nuclear-armed Iran.

The United States did itself no favors by recently announcing a deal
to sell weapons to Taiwan. But other factors in the Middle East might
force China's hand and compel them to acquiese to sanctions supported
by the United States and its European allies.

Israel, the X Factor

Israel has not made direct military threats against Iran - whose
President Mahmoud Ahmadinejad has said that Israel "should be
Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift:
Iranian President Mahmoud Ahmadinejad calling for the destruction of
Israel in 2005 wiped off the map" - but has said that Iran will not
be permitted to have a nuclear weapon.

Israel has used unilateral military force in similar situations in the
past, taking out nuclear sites in Iraq and suspected nuclear sites in
Syria. Iran presents a more unique challenge, as its nuclear sites are
spread around the country and are difficult to target.

Still, Dan Hamilton, executive director of the Center for
Transatlantic Relations in Washington, says the fallout from an
Israeli strike - chaos in the Middle East, and likely beyond - might
compel China to back sanctions that would starve Iran's nuclear
program.

"The United States' message to China is that the Israelis think Iran
is an existential threat to their existence," Hamilton told Deutsche
Welle. Facing this threat, "all kinds of logic are off the table and
one cannot predict behavior. If there is some kind of sudden surprise,
it is hard to know what Israel would do."

The next step

Hamilton said he does not believe Iran will soften its position. With
Europe coming together to form a cohesive policy, China facing growing
pressure to support sanctions, and the insistence of the United States
that action needs to be taken, sanctions are the most likely course of
action.

"The Obama administration came into office saying the United States
needs to talk to Iran, and they tried that. It didn't produce,"
Hamilton said. "The White House can now say we tried everything we
could, Iran isn't responding, and [the international community] must
be united."

Author: David Francis
Editor: Rob Mudge

http://www.dw-world.de/dw/article/0,,5210454,00.html

...and I am Sid Harth

[bademiyansubhanallah]

Gadkari accuses govt of ignoring manipulative futures trading

BS Reporter / New Delhi February 09, 2010, 0:48 IST

Bharatiya Janata Party (BJP) president Nitin Gadkari today alleged
that soaring food inflation reflected manipulation in commodity
exchanges and a failure of the government’s oversight over these
exchanges.

While conceding that forward trading in many commodities had been
banned, he said the past year’s record of trading in some commodities
suggested transactions were 99 per cent speculation and less than 1
per cent delivery.

Gadkari said the ministries of agriculture, commerce, food and
consumer affairs, and finance were responsible for the rising prices
of commodities. He also demanded permanent de-listing of essential
food/agriculture commodities from the forward trading list.

He said the prices of wheat, sugar, rice and dal had doubled in the
past few months. That was wide variation between general inflation and
food inflation — for instance, while general inflation grew from 1 per
cent to 8 per cent, the food price index went up from 12 per cent to
20 per cent.

As a result, while consumers were paying three times more than the
price paid to the farmers, the profits of commodity companies had gone
up by 500 per cent to 2,900 per cent in the last quarter (October-
December) of 2009.

Gadkari said while wheat production was up from 75.8 million tonnes
(mt) in 2006-07 to 80.5 mt in 2008-09, the farmer got Rs 10 per kg,
while the consumer was paying Rs 24 a kg. The BJP president said no
forward trading was permitted in wheat till May 2009, when the ban on
trading of wheat futures was lifted.

He claimed that between May and December 2009, of a turnover of 1.4 mt
at the commodity exchanges, the actual delivery was just 1,400 tonnes.
This suggested 99.99 per cent speculative trading during the period.

Wheat, however, has a weight of just 1.38 per cent in the Wholesale
Price Index (WPI), diluting Gadkari’s argument that speculation in
wheat had pushed the index up, leading to a rise on food inflation.

Gadkari said the government should take action not just against
hoarders but also oversee the function of the commodities exchanges.

http://www.business-standard.com/india/news/gadkari-accuses-govtignoring-manipulative-futures-trading/385115/

Gadkari blames it on speculative activity

Special Correspondent

NEW DELHI: The government’s faulty policy that was failing to take
note of the unprecedented spurt in prices of essential food items had
led to a situation in which a majority of the population was unable to
buy enough to eat, even as black marketers, hoarders, multi-nationals
and corporate houses made huge profits, Bharatiya Janata Party
president Nitin Gadkari said on Monday.

Mr. Gadkari outlined the party’s decision to stage an agitation on
this issue in and outside Parliament and take whatever help was
necessary from the other Opposition parties to corner the government
in the Budget session. While the party’s programme, including a march
to Parliament, was announced, its parliamentary strategy would be
worked out by Leader of the Opposition in the Lok Sabha, Sushma
Swaraj, he said.

Mr. Gadkari presented an array of facts and figures from official
sources to make out the case that it was not the farmers who
benefitted from the high prices of wheat, rice, sugar and pulses. He
demolished the government argument that higher minimum support price
for major agricultural produce, including sugarcane, had led to the
higher prices. “Inferior red wheat was imported at Rs. 19 a kg, while
farmers were given Rs. 9.50 a kg for better quality wheat,” he said.
The consumer was often paying three times the price paid to farmers,
with the middlemen making the bulk of the profit.

Since 78 per cent of the population spend most of its monthly income
on food, their capacity to buy enough to eat had weakened
considerably, and this would have a long-term impact on health and
nutrition, he said.

Mr. Gadkari’s view was that speculative activity, covering up to 99
per cent of the total produce of some items at the commodity
exchanges, led to this state of affairs. Through graphs and charts, he
tried to establish the direct co-relation between speculation and
higher price.

One key demand made by the BJP was the removal of all food items from
commodity exchange forward trading.

Buffer stocks

He said the United Progressive Alliance government was unable to build
adequate buffer stocks even when there was good domestic production.
Instead of building up stocks, it earlier allowed sugar export.
“Maharashtra alone has the capacity to store 50 lakh tonnes of
sugar.”

http://www.hindu.com/2010/02/09/stories/2010020959631000.htm

BJP woos parties against government on price rise platform
Monday, 08.02.2010, 05:44pm (GMT+5.5)

New Delhi, Feb 8 (IANS) Ahead of the budget session, the Bharatiya
Janata Party (BJP) Monday said it will launch a nationwide stir and
get opposition parties, including the Left, on board to corner the
government for its "wrong" economic policies triggering food prices
skyrocketing.

"We will launch a nationwide protest against the government which has
failed to check price rise," BJP president Nitin Gadkari told
reporters here.

Gadkari said Leader of Opposition in the Lok Sabha Sushma Swaraj is
trying to get the opposition parties on board, adding: "We will invite
all parties, including the Left and Lalu (Prasad's Rashtriya Janata
Dal) who are protesting against rising prices."

The government, he contended, "is not competent enough to handle
economic matters", adding: "They have wrong economic policies. It is a
collective failure of the government."

"I also invite UPA (United Progressive Alliance) parties who are
opposed to the government's economic policies to join us," Gadkari
said.

The budget session of parliament will begin Feb 22.

The BJP president said the main reason behind food inflation was that
"commodity exchanges are manipulated to jack up food prices".

"The records of last year's transaction on forward exchanges in
essential commodities clearly establish that it is 99 percent
speculation and less than one percent deliveries. These exchanges are
used for manipulation," he said.

The BJP also demanded permanent delisting of essential food-
agriculture commodities from forward trading list.

http://www.indiavision.com/news/article/politics/24038/

...and I am Sid Harth

[bademiyansubhanallah]

China to become largest grocery market by 2014
February 9, 2010
just-food

China is set to overtake the US as the world’s largest grocery market
for the first time by 2014, new research has suggested. According to
market research firm IGD, the Chinese grocery market will grow to a
value of EUR761bn (AUD$1,202bn), outstripping the US that is set to be
worth EUR745bn in four years’ time.

IGD said that the Chinese economy was not as badly hit by the global
economic recession as the US. Meanwhile, the IMF has predicted that
Chinese economic growth could outstrip the US by three times over the
next four years.

Investment and consumer spending has increased in China and private
sector demand has been driven by the Government’s stimulus package,
IGD researchers added.

Additionally, between 2010 and 2014 China’s population growth rate is
expected to be double that of the US.

“Chinese population growth and economic prosperity are contributing to
the rise of China as an important grocery market on the world stage.
The US and key European markets still offer an important source of
growth for food and grocery businesses, but it is becoming harder to
ignore the BRIC countries,” Joanne Denney-Finch, IGD chief executive,
observed.

Other BRIC (Brazil, Russia, India, China) markets are set to grow in
size with India becoming the third largest food and grocery market in
four years’ time, while Russia and Brazil rank fifth and sixth
respectively, IGD predicted.

IGD also revealed that Indonesia is likely to enter the top ten
grocery markets by size for the first time.

http://www.just-food.com/

http://www.ausfoodnews.com.au/2010/02/09/china-to-become-largest-grocery-market-by-2014.html

In The News Today
Posted: Feb 08 2010 By: Jim Sinclair Post Edited: February 8,
2010 at 9:26 pm

Filed under: In The News

Dear Extended Family,

New York State spending is out of control. California tried to go off
the dollar but the California IOU is a total failure.

There are 38 states right behind California and New York, all of which
are too big to fail.

The debts of the weaker European Union states are under attack by the
huge short players. In time every currency will come under attack by
the same ever-growing source of wealth.

Today’s action in gold, especially before the Crimex attack and dollar
linking in the inverse, has delivered me my answer.

The following is ABSOLUTELY correct, so therefore sell all currencies
into strength and buy gold on all weakness. There is no other strategy
that will survive.

This is all you need to know:

1. Bretton Woods was folded.
2. The floating exchange rate system is about to be folded.
3. By default or design we are going to a one-world currency and a one-
world central bank of central banks.
4. For Portugal, Ireland, Italy, Greece or Spain to break off from the
euro would be an expansion of the floating exchange rate system under
present conditions.
5. There are presently 3 major currencies. That is the US dollar, the
euro and gold.
6. The SDR was an attempt to form a single reserve currency that never
took flight.
7. The SDR is an accounting unit made up of an index of currencies
much like the USDX.

Respectfully,
Jim

Thought For The Day:

The recent two central banks meeting are so secret that it has all the
appearance of how the Nazis were tricked into thinking General Patton
would lead the invasion of Europe.

They were cordoned off by military or police to a distance of three
miles in all directions with air force cover protection.

I accept the action of gold in Asia and Europe pre-Crimex attack with
a modestly lower Euro as confirmation of the conclusions contained in
the email sent to you over the weekend.

Social security is headed for the rocks.

The longer the heavy business conditions last the more retirements
will occur within the social security network.

You have to ask yourself if there is anything government wise of a
financial nature that is not a wreck. Then ask yourself can these
wreckers make anything right except the OTC derivative winners.

You have to ask yourself if the social security system is being
analyzed as net cash or gross cash and receivables from the Federal
government.

Should it be the latter then the problem is more serious.

Rash of retirements pushes Social Security to brink
By Richard Wolf, USA TODAY

WASHINGTON — Social Security’s annual surplus nearly evaporated in
2009 for the first time in 25 years as the recession led hundreds of
thousands of workers to retire or claim disability.

The impact of the recession is likely to hit the giant retirement
system even harder this year and next. The Congressional Budget Office
had projected it would operate in the red in 2010 and 2011, but a
deeper economic slump could make those losses larger than anticipated.

"Things are a little bit worse than had been expected," says Stephen
Goss, chief actuary for the Social Security Administration. "Clearly,
we’re going to be negative for a year or two."

Since 1984, Social Security has raked in more in payroll taxes than it
has paid in benefits, accumulating a $2.5 trillion trust fund. But
because the government uses the trust fund to pay for other programs,
tax increases, spending cuts or new borrowing will be required to make
up the difference between taxes collected and benefits owed.

Experts say the trend points to a more basic problem for Social
Security: looming retirements by Baby Boomers will create annual
losses beginning in 2016 or 2017.

More… http://www.usatoday.com/news/washington/2010-02-07-social-security-red-retirements_N.htm

Jim Sinclair’s Commentary

Meaning no disrespect, the following photoshopped picture clearly
communicates our views on allowing corporations to make political
contributions without limit.

Jim Sinclair’s Commentary

The following is from Zero Hedge.

Their suspicions are on the mark. It is a short raid just like we
witnessed when Bear, CITI and Lehman went down.

One has to wonder if the MOPE of draining liquidity, the Fed and
Britain are sustaining this raid. I think intentionally or
coincidently the answer is yes!

"In the pre-math of the Greek collapse, conspiracy theories are
swirling about who keeps blowing Greek CDS spreads wider. The answer,
so far completely unconfirmed, is that a large US investment bank (we
"wonder" just which US investment bank dominates the sovereign CDS
market), and two major hedge funds are behind the CDS "attacks" on
Greece, Portugal and Spain. According to Jean Quatremer, and his
Coulisses de Bruxelles, UE blog, the plan involves blowing spreads to
record levels, and is prompted by the hedge funds’ anger at not having
been allocated substantial amount of the recent €8 billion GGB issue,
in order to lock in profits from their CDS long exposure. Being thus
unhedged with a short bias, their alternative is to continue buying
protection else risking to mark losses on their extensive CDS short
risk exposure."

More… http://www.zerohedge.com/article/two-hedge-funds-one-bank-there-concerted-effort-destroy-greece

Jim Sinclair’s Commentary

This was not limited to the G7 meeting. This was a very secret
meeting.

I gave you the skinny on it yesterday both by postings here on the
site and by direct email. Secrets are not required when the material
in discussion is about normal matters.

"However, a secretive gala dinner at the Art Gallery of NSW to mark
the event last night attracted a who’s who of Australia’s political
and business world."

"The event was held in the Grand Court, which seats up to 350 people."

"The low profile of the meeting is also a matter of design. Security
is tight and the location of events a closely guarded secret."

Treat for elite as Reserve Bank celebrates
JESSICA IRVINE, VANDA CARSON AND ELLIE HARVEY
February 9, 2010

CENTRAL bankers are an unobtrusive breed by nature and necessity. So
it might have escaped the attention of many that Sydney is playing
host to a meeting of some of the world’s top money men and women to
celebrate the 50th birthday of the Reserve Bank of Australia.

However, a secretive gala dinner at the Art Gallery of NSW to mark the
event last night attracted a who’s who of Australia’s political and
business world.

Bankers rubbed shoulders with celebrated economic figures. Past prime
ministers from both sides of the political divide gathered to drink a
toast to Australia’s success in weathering the global economic storm,
including John Howard and Paul Keating.

Past treasurers included Peter Costello, John Dawkins, John Kerin and
Ralph Willis. And, of course, the RBA was well represented, with
governor Glenn Stevens and former governors Ian Macfarlane and Bernie
Fraser in attendance.

Around 7.15pm, John Howard and his wife Janette arrived, almost at the
exact time as Mr Costello, from the other side of the entrance. The
pair met, shook hands, and offered a polite ”Good to see you” before
moving up the stairs.

More… http://www.smh.com.au/business/treat-for-elite-as-reserve-bank-celebrates-20100208-nnc5.html

Jim Sinclair’s Commentary

This is what CIT is. Small business depends on CIT to factor
inventories as well as other requirements.

This is Main Street’s business life blood. This is a company with no
access to the commercial paper market. No commercial paper market
means no funds for factoring.

Small businesses could drag down recovery.
Small businesses helped lead the economy out of the four recessions
since 1980, but are now threatening the country’s economic recovery as
they continue to cut capital spending and fire employees. Another
3,000 jobs were eliminated from small businesses in January; if the
trend continues, improvement in the national unemployment rate, which
dropped to 9.7% in January from 10.1% in December, could stall and
economic growth could fall short of the 2.7% annual rate forecast.

Jim Sinclair’s Commentary

This seems to me to as comparable to President Bush’s shipboard
announcement on the Iraq war, "Mission Accomplished."

There is something I am careful about and that is NEVER say NEVER. It
is however a volley over the bow of Moody’s rating service.

Geithner Says U.S. Will ‘Never’ Lose Aaa Debt Rating (Update1)
By Rebecca Christie

Feb. 8 (Bloomberg) — Treasury Secretary Timothy F. Geithner said the
U.S. is in no danger of losing its Aaa debt rating even though the
Obama administration has predicted a $1.6 trillion budget deficit in
2010.

“Absolutely not,” Geithner said, when asked in an ABC News interview
broadcast yesterday whether a downgrade is a concern. “That will never
happen to this country.”

Geithner said investors around the world turn to U.S. Treasury
securities and dollar-denominated assets whenever they are worried
about global stability. That reflects “basic confidence” in the U.S.
and its ability to bounce back from the global recession, he said.

Moody’s Investors Service Inc. last week said the U.S. government’s
bond rating will come under pressure in the future unless additional
measures are taken to reduce budget deficits projected for the next
decade.

The U.S. plans to rein in the deficit once the labor market recovers,
Geithner said. In the short run, that means focusing on ways to “make
sure that this economy is growing again,” he said. The administration
says the deficit will shrink over the next four years as more
Americans find jobs and the economy accelerates.

More… http://www.bloomberg.com/apps/news?pid=20601087&sid=apZULWyXpqhE&pos=6

Jim Sinclair’s Commentary

The real CIT story is that they are NOT welcome in the commercial
paper market which restricts their business to their present fixed
loan lines and available cash capital.

That is extremely bad news from Middle America. Thain will not find a
ready buyer for CIT as he did for Merrill, even though that was not
his will.

Former Merrill Lynch boss appointed CIT chief

The former chief executive of Merrill Lynch, John Thain, has been
appointed as the new boss of US lender CIT Group, which recently
emerged from bankruptcy.

CIT will pay Mr Thain $6m (£3.8m) a year – $500,000 in cash, $2.5m in
stock to be held for one year, and $3m in stock to be held for three
years.

Mr Thain resigned from Merrill just after it merged with Bank of
America at the start of last year.

He was criticised for allowing big bonuses despite Merrill’s hefty
losses.

These were paid out just days before the takeover by Bank of America.

More… http://www.bloomberg.com/apps/news?pid=20601087&sid=ahGwg7V3u3Gs

Jim Sinclair’s Commentary

There is no PRACTICAL means of draining the huge liquidity injected
into the economy.

The operative word is PRACTICAL.

The Fed is playing with fire as this will not impress Wall Street, but
scare the hell out of worldwide equity people.

By playing this game the Fed may well loose the wealth effect of the
improved equity market, thereby risking losing it all.

QE to infinity or the Fed is history.

The Fed’s "Exit Plan" Is Just Another Secret Gift To Wall Street
Feb 08, 2010 09:50am EST
by Henry Blodget

The Fed is planning to detail its "exit plan" this week, the WSJ
says. This exit plan is the means by which the Fed will gradually
reverse the tremendous stimulus it is still pumping into the economy
and financial system.

As we’ve noted often over the past year, the Fed is in a bind. During
the financial crisis, it bought hundreds of billions of dollars of
real-estate and other assets from banks to reduce mortgage rates and
ease the pressure on bank balance sheets. This, in turn, pumped
hundreds of billions of new dollars into the economy, which has
enabled the banks–and bankers–to make a killing over the past year.
The question is how the Fed can reverse this stimulus without killing
the economy.

The idea behind giving the banks cheap money was that the banks would
lend it to consumers and businesses. Unfortunately, that hasn’t
happened: Since the start of the crisis, bank lending has fallen off a
cliff. The banks are, however, lending to the Federal government,
which needs to fund record deficits by borrowing more than $1 trillion
a year. The combination of the Fed’s desire to stimulate lending via
cheap money and the government’s desire to stimulate the economy by
running a huge deficit has made it a great time to be a bank: Banks
can borrow from the government at artificially cheap rates and then
lend the money back to the Federal government at higher rates,
pocketing the difference.

And now it’s going to get even better to be a bank.

More… http://news.bbc.co.uk/2/hi/business/8505009.stm

Jim Sinclair’s Commentary

The best technology for this type of transportation is not resident in
the USA. The US program to build this will benefit non American
companies to a large degree.

China’s fast trains may offer tips for U.S.
By Calum MacLeod, USA TODAY

ABOARD THE GUANGZHOU-WUHAN EXPRESS — Once the speed gauge hits 350
kilometers per hour, or 217 miles per hour, passengers charge down the
aisle to photograph the electronic display.

"If we go any faster, we’ll take off!" jokes Hu Qing, cracking open
another can of beer on China’s world-record-breaking train.

The Dec. 26 opening of the high-speed link between south Chinese
cities Guangzhou and Wuhan is the latest example of massive state
spending to keep China’s economy roaring. The fast-expanding network
of high-speed trains is stoking patriotism, too.

"This train is the pride of the Chinese people," says Hu, 42, the boss
of a paper factory, who chose the train over a direct flight home to
northeast China.

U.S. companies await the first round of government grants announced by
President Obama in his State of the Union address totaling $8 billion
to jump-start long-delayed high-speed rail in the USA.

Meanwhile, China enjoys a considerable head-start.

More…
http://finance.yahoo.com/tech-ticker/the-fed%27s-%22exit-plan%22-is-just-another-secret-gift-to-wall-street-420443.html?tickers=spy,dia,XLF,qqqq,tlt,uup,%5egspc&sec=topStories&pos=9&asset=&ccode

Jim Sinclair’s Commentary

No currency will do this for you, yet gold can going into 2011.

Decade 2000-2009: Gold’s gain against 17 currencies (in %)

More… http://www.usatoday.com/money/world/2010-02-08-fasttrain08_ST_N.htm

Jim Sinclair’s Commentary

Typical and across the board.

What is the difference between the weak states of the euro and the
weak states of the USA? What is the difference between Greece going
back to the Drachma or California issuing IOUs?

The answer is pure MOPE.

Oregon government revenues still dropping
By David Steves
The Register-Guard

SALEM — Passage of measures 66 and 67 may not have rescued state
government from budget woes after all.

Even with the new taxes and a slowly recovering economy, Oregon’s
revenue collections are now expected to fall $183 million below
previous expectations, according to the latest forecast issued today.

That’s a small fraction of the $13.3 billion in general-fund spending
planned for 2009-11 — but enough to put the budget $106 million after
whack, after accounting for the $77 million ending balance. State
Economist Tom Potiowsky attributed the dropoff in projected personal
income tax revenue to two factors:

A slightly slower pace of economic recovery than was expected in the
previous forecast.

A reduction in the tax payments coming in from high-income
individuals.

More…
http://www.leap2020.eu/GEAB-N-41-is-available!-Global-Systemic-Crisis-The-Decade-2010-2020-Towards-a-knockout-victory-by-gold-over-the-Dollar_a4201.html

Jim Sinclair’s Commentary

The Fed is playing with a nuclear-hot potato.

Talk hawk and the house will fall down in the Western world.

Believe me, neither the White House or the ECB want to hear that.
Clearly the equity boys do not want to hear that.

If Bernanke plays it wrong, the only way a democrat will be elected in
November is by changing the party affiliation. QE to infinity must
happen or the Fed is History.

Dow Industrials Post First Close Below 10,000 Since Nov. 4
By JAVIER C. HERNANDEZ
Published: February 8, 2010

The Dow Jones industrial average, one of the most watched metrics of
the financial world, dipped below the 10,000 threshold on Monday,
delivering a psychological setback as investors sought to overcome
fears of a faltering global recovery.

At the close of trading on Monday, the Dow settled at 9,908.39, its
lowest close in three months.

Lingering fears over a debt crisis in Europe helped trigger the Dow’s
fall. As several countries across the Atlantic grapple with swelling
deficits, investors spent Monday trying to gauge how seriously
American banks would suffer if European governments could not pay back
their debt.

Analysts said the Dow’s drop below 10,000 probably did not mean much
for the future of the stock market, but they noted it had a deeper
psychological effect for Wall Street.

“Investors and traders find solace in 10,000,” said Jeffrey A. Hirsch,
editor of The Stock Trader’s Almanac. “While it may not be important
technically, falling below that level indicates that the whole
economic picture is not as rosy as everyone had thought.”

More… http://www.registerguard.com/csp/cms/sites/web/updates/24440481-55/million-budget-expected-forecast-government.csp

Jim Sinclair’s Commentary

You can bust any debt by just running the OTC derivative market in the
direction of your play. It is simple and effective.

Cash markets are always run by the leverage market. Damn those OTC
derivatives anyway! You think any country will escape this?

What Do Rising Sovereign Credit Default Swaps Mean?
Monday, February 8, 2010

Here are the CDS of Greece, Portugal, Spain and the U.S.:

Rolfe Winkler argues that – in the short-run – the PIIGS countries
(Portugal, Ireland, Italy, Greece and Spain) will slash their budgets
and get bailed out by the EU.

Simon Johnson thinks that the weakening Euro caused by the PIIGS’ woes
will hurt American exports (weaker Euro equals stronger dollar), and
could lead to problems for leading global banks.

Other commentators fear that the PIIGS’ crisis has as much potential
as a financial "contagion" as the subprime meltdown and the failure of
Lehman.

More… http://www.nytimes.com/2010/02/09/business/09markets.html

Jim Sinclair’s Commentary

And what makes you think that MOPE will ever report truthfully?

The US Economic Crisis: Jobs Continue to Vanish While the Media
Applauds “Recovery”
by Shamus Cooke

At first glance it appeared there was a typo in the headlines. The
national media reported that, in January, another 20,000 more jobs
were lost. Somehow, the unemployment rate dropped, from 10 percent to
9.7 percent. Nobody thought this paradox was worth explaining;
instead, the media’s attitude was “more good news” about the
economy.

But there was other evidence of an obliterated job market hiding
behind the cheerful headlines. After revising the employment numbers
in 2009, The New York Times reported, “…the economy lost 150,000 jobs
in December, far more than the 85,000 initially reported.” Overall in
2009, the adjusted numbers showed an additional “…1.36 million fewer
jobs…” (February 5, 2010).

And yet the unemployment rate dropped. One reason this happened is
that the U.S. government uses a separate, more unreliable survey to
calculate the unemployment rate, in contrast to the survey used to
calculate job losses. There are other more important ways the
government obscures the unemployment numbers: if you are no longer
receiving unemployment benefits you’re not counted as unemployed; if
you’ve given up looking for a job, you’re not counted either. You are
counted, however, if you are working only 15 hours a week, or if
you’re a temporary worker.

In this way the government cooks the books to bring fake optimism to
the masses. The mainstream mediareports these fraudulent numbers
without asking questions, so that the Democrats can continue doing
absolutely nothing towards creating jobs.

But there is a method to the madness. Mass unemployment brings
incredible pressure on workers’ wages and benefits. The mere threat
of being unemployed puts unorganized workers in a precarious position
when they’re told to work for less.

More… http://www.washingtonsblog.com/2010/02/global-sovereign-credit-default-swaps.html


Jim Sinclair’s Commentary

You expected any different?

Irked, Wall St. Hedges Its Bet on Democrats
By DAVID D. KIRKPATRICK
Bankers, unhappy at the president’s proposals for tighter financial
regulations, are shifting donations to Republicans.

Jim Sinclair’s Commentary

The illusion now is that ANY currency will maintain buying power.

"The top four U.S. states in the Fiscally Challenged Rankings would
make the Greek situation look something akin to a storm in a tea cup."

The Illusion of U.S. Dollar Safety

NFP Fickleness

Over the course of December and January traders witnessed the ultimate
in fickle behavior by the globally traded market, which was instigated
by the December 4th 2009 Non-farm Payroll numbers printing at -11K
jobs, that was far better than the expected -114K. Joyous jubilation
hit Wall Street and, as the bunting and tick-tape floated around
sunshine lit skies, the USD found buyers.

The equity markets took their time to absorb the historically
unreliable NFP report, but within three sessions had found enough
support to move S&P futures trade off the 1085 area, and up to test
1151, in a 6.5% move that topped out just in time to absorb January’s
NFP numbers.

The Correlation Story

In the December move higher in stocks, the USD shed its high
correlation with the equity markets, and took a hiatus from the 90%
correlated moves each day, as the global market bought into U.S.
economic jobs growth. Stocks went higher, yields went higher,
commodities went higher (it took an extra week for commodity markets
to catch up, but they too bought into the party with oil moving from
$77 to $84 in an 8.5% move), all at the same time, in a play that
bought into USD strength and safety.

In January, the NFP party had some cold water thrown on it with a read
of -85K. Two days after the release the S&P futures market started its
decline from 1151 toward 1068 at the time that February NFP numbers
were revealed. The 7% drop in S&P trade reversed the December NFP
equity rally.

The USD took strength from the January equity decline, and re-built
the Risk Aversion = Stocks Lower = USD higher correlation (dollar up
as Treasuries are bought as stocks are sold). The February NFP numbers
were released at -20K, with massive revisions to the October and
November numbers that added over 200K more job losses than had been
reported, and threw into question the market-wide reaction to
previously positive numbers.

More… http://globalresearch.ca/index.php?context=va&aid=17487

Jim Sinclair’s Commentary

This is the big guys rolling over.

Apparently not every mansion is owned by a derivative dealer.

Jumbo Mortgage ‘Serious Delinquencies’ Rise to 9.6% (Update1)
February 08, 2010, 12:52 PM EST
By Jody Shenn

Feb. 8 (Bloomberg) — U.S. prime jumbo mortgages at least 60 days late
backing securities reached 9.6 percent in January from 9.2 percent in
December, the 32nd straight increase for “serious delinquencies,”
according to Fitch Ratings.

“The trend line for delinquencies indicates the 10 percent level could
be reached as early as next month,” Vincent Barberio, a Fitch managing
director in New York, said today in a statement. The rate almost
tripled in 2009, Fitch said.

Soured debt across loans backing so-called non-agency securities
ballooned last year amid new defaults caused by slumps in home prices
and employment, and as the federal government pushed loan servicers to
consider debt modifications and states moved to slow foreclosures,
reducing property liquidations after borrowers stopped paying.

The share of borrowers current the previous month and that then turned
delinquent fell to 1.2 percent in the month covered by January bond
reports, down from 1.3 percent as of December reports, Fitch said. The
jumbo sector of the non-agency market was the only one in which so-
called roll rates — or the amount of loans turning delinquent — rose
from a year ago, according to the statement.

Jumbo home loans are larger than government-supported mortgage
companies Fannie Mae or Freddie Mac can finance. Their limits now
range from $417,000 in most places to as much as $729,750 in high-cost
areas. Loans in jumbo securities can be smaller than those amounts if
they were issued in earlier years. Non-agency mortgage securities lack
guarantees from Fannie Mae, Freddie Mac or federal agency Ginnie Mae.

More… http://seekingalpha.com/article/187143-the-illusion-of-u-s-dollar-safety

http://jsmineset.com/2010/02/08/in-the-news-today-455/

...and I am Sid Harth

[bademiyansubhanallah]

Pimco's El-Erian Favors Brazil Bonds, Yuan Forwards; Says Greece Needs
Aid

By Sarah McDonald and Wes Goodman

Feb. 8 (Bloomberg) -- Mohamed A. El-Erian, whose company runs the
world’s biggest mutual fund, favors investments in emerging markets on
expectations they’ll outpace developed economies in growth and
wealth.

Brazilian sovereign bonds and Chinese yuan non-deliverable forwards
are attractive, El-Erian, co-chief investment officer at Pacific
Investment Management Co., said today in Sydney in a Bloomberg
television interview. Greece needs outside help as it tackles the
European Union’s largest budget shortfall, he said.

Pimco portfolio managers are reducing their riskiest positions, El-
Erian said. Debt strains in Greece, Portugal and Spain, along with the
emphasis on non-developed markets, underscore Pimco’s view that 2010
will be a year of slower-than- average growth and a shrinking global
role for the U.S. economy.

“We have been moving up in quality, which has meant certain sales of
high-yield names,” said El-Erian, 51, who is also author of the book
“When Markets Collide.” “We’ve been very selective on which sovereigns
we are exposed to.”

The next six months will be healthy for the U.S. economy, though the
expansion may slow after that, El-Erian said during a trip to Sydney
for a symposium sponsored by the Reserve Bank of Australia.

Pimco, based in Newport Beach, California, has about $1 trillion in
assets under management. It is a unit of Munich- based insurer Allianz
SE.

Hawkish Brazil

Brazil is poised to be Latin America’s first major country to raise
borrowing costs after leading the region out of the global recession
last year, according to Bloomberg surveys of economists.

Pimco prefers Brazilian debt over that from “much of the G-7”
countries in part because of the central bank’s “hawkish” inflation
stance, Michael Gomez, a co-head of emerging markets, said in a Feb. 4
interview.

Gomez also said China will loosen currency controls in 2010 and allow
the yuan to gain, in a separate interview Dec. 10. International
investors use forwards, agreements to buy and sell assets at current
prices for delivery at a future specified time and date, to bet on the
yuan. Non-deliverable contracts are settled in dollars.

China’s Economy

China’s economy will grow 6 percent or more in the coming years, El-
Erian told reporters at a separate briefing.

Greece is trying to persuade financial markets it can restrain its
budget shortfall without outside assistance, while borrowing costs are
also climbing for Portugal and Spain. Credit-default swaps on the debt
of all three countries rose to records last week, increasing demand
for the relative safety of U.S. government securities.

Credit-default swaps are contracts designed to protect against or
speculate on default.

“It’s going to take years to sort out the sovereign balance sheet
issue,” El-Erian said at the briefing. “Europe has become a huge game
of chicken, whereby the Greeks are waiting for help from outside and
donors are waiting for Greece to take a step forward.”

Greece, which had the European Union’s widest budget deficit at 12.7
percent of output last year, has struggled to convince investors it
can bring the budget shortfall within the bloc’s limit of 3 percent.

Pimco’s Total Return Fund, run by Bill Gross, handed investors a 15.1
percent gain in the past year, beating half of its competitors,
according to data compiled by Bloomberg.

To contact the reporter on this story: Sarah McDonald in Sydney at
***@bloomberg.net; Wes Goodman in Singapore

http://www.feedcry.com/archive/aid/556531?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+fulltext%2FBloomberg+%28Bloomberg%29

Faber Says U.S. Would Be Rated 'Junk' if It Were a Company

Watch Video

All Comments (21 total)

Loading...ObamaSteinNo2012 (5 hours ago) It's not going to get any
better until the people take America back!

ShannCole888 (8 hours ago) I hear the Chinese may drop U.S. treasury
bonds in Freddie Mac,and Freddie Mae worth 1.3 trillion dollars, over
the Taiwan arms ordeal, Iran, and the Daila lama in Tibet, as well as
the Google ordeal...

ShannCole888 (8 hours ago) I am hearing 21% unemployment, not 9.7%,
the U.S. Government is hiding the facts...Jesus Christ is the
Way...turn from sin,and believe in Jesus Christ...

fal2grace (7 hours ago) Sho think it is much higher than the govt is
saying

Airave (9 hours ago) Junk is too nice a word.
Junk can be thrown away
and done with, This can not.
This is like radioactive waste.
Pure poison poised to poison
for generations to come.

Geithner....? Not in prison yet???
Yeah, sure....
fal2grace (9 hours ago) Show Hide Marked as spam Reply lol! nice

letitgothinkpositive (10 hours ago) the title fits to every
government
fal2grace (10 hours ago) Show Hide Marked as spam Reply quite a few of
them

hatch381 (11 hours ago) Its a historical fact all fiat currencies
eventually return to their intrinsic value. Just like its a fact that
oil is a finite resource. I think Ill hang onto my gold, silver, and
my bicycle for now. But, I will time the market on when to purchase
the horse and plow. Thanks for posting Deb.

fal2grace (10 hours ago) :) you're welcome

mbrowshan (11 hours ago) Capitalism does not work well long term. Look
back at the history of Wall Street and 1929.....The Corporate elite
now rule the world. All of this legalized gambling on the stock market
is all a big dog and pony show to strip the regular joe investors of
the last bit of cash they have. These corporate ass wipes would steal
money from their own mother if they could. Greed, gluttony, and deceit
are good words to describe Wall Street.

fal2grace (10 hours ago) well said. thanks

doobsta (10 hours ago) What you are describing and the current
western economic environment we have...is NOT capitalism and never
was.

If it had been capitalism, this would have never happened...

borat443 (12 hours ago) great vid , thanks for posting...

fal2grace (11 hours ago) you're welcome. Faber's an interesting guy.

skybirdbird (12 hours ago) junk......that sounds about right........i
don't think there is a way out.....as they wish it....
isreal and geithner......does anyone believe what they say?
`
fal2grace (12 hours ago) no:)

plalelal (12 hours ago) Listen to this man. He is dead right on!

fal2grace (12 hours ago) yep

JimGraham1973 (13 hours ago) Thanks Deb

fal2grace (13 hours ago) you're welcome

Janet Yellen Discusses The China Paradox
Submitted by Tyler Durden on 02/08/2010 14:21 -0500

Janet Yellen, who in mid-November completed a "fact-finding" trip to
Hong King and China, provides some insightful observations into the
closely tied monetary fates of China, Hong Kong and the US, as well as
China's Catch 22 paradox of overcapacity. As Yellen points out, US
monetary policy is a critical factor for both Hong Kong and the
mainland "both Hong Kong and the mainland are currently pegging to the
dollar, they are both to some extent stuck with the policy the Federal
Reserve has chosen to promote recovery." In essence, and in
confirmation with Zero Hedge's "vassal theory" of the Sino-US
relationship, China has a "considerable interest" in the Fed's exit
strategy. Yellen demonstrates that while China is forced to look to
growing its own internal economy now that the export-led, current
account surplus model is over, the transition will require yet more
stimulus, thereby further inflaming the asset bubble, spurred by the
massive overcapacity already in place in the country, and further
pushing the country into a monetary-fiscal zone of disequilibrium.
This would be exacerbated by any move to strengthen the Yuan, which is
what has to happen for the US to keep inflating its troubles, yet
won't happen so long as China continues being in denial about its
bubble conditions, thanks to a phenomenal precedent set by none other
than the Federal Reserve itself. Yellen won't go so far as admitting
it, but all the ingredients for a massive Chinese (and thus, U.S.)
crash are now in place.

The problem for China as it struggles to readjust from an export-led
economy, is that admitting a need to focus more internally, would
suggest even more stimulus is needed to prop up precisely the sectors
where immediate job creation is greatest. For China keeping its
population employed and happy is critical which is why "given the
difficult in winding down the engines of job creation will make a
transition toward a less trade-oriented growth strategy" to take place
slowly.

Yellen then highlights some of the critical flaws in the economic
model and makes a full circle to what Hugh Hendry was discussing
yesterday about substantial Chinese overcapacity (and why he took some
not so friendly jabs at Jim O'Neill):

To hold down the renminbi’s value in the face of continuing trade
surpluses and sizeable capital inflows, China’s central bank has had
to buy dollars at a rapid pace. The result is that China’s foreign
exchange reserves have now swelled to over $2.25 trillion dollars (see
Figure 3). China’s money supply has also increased rapidly. Inflation
in China has turned up, and most analysts with whom we met recognized
that the renminbi will need to be revalued and monetary policy
tightened to avoid inflation. Even though future exchange rate
adjustments seem all but inevitable, they are unlikely to resume until
at least the middle of 2010 because of lingering concerns about the
pace of economic recovery among China’s major trading partners.

Alas, it is dangerous to confuse wishful thinking with reality. And
China is more than likely going to need a persistently weak currency
even as it struggle with increase price pressures which will demand
that the Yuan rate be let loose again.

And, at the very bottom of it all, is the problem which Hendry
highlighted so well - massive overcapacity.

Household consumption is already growing at a robust double-digit
pace. The problem is that investment is growing at an even faster
pace, so the household consumption share is likely to continue to
decline. Moreover, the stimulus packages introduced to counter the
global recession have had the unfortunate side effect of acting
against reform, since the bulk of stimulus was in the form of
increased investment, which primarily found its way into the export-
oriented and state-owned sectors, or into infrastructure projects that
supported these sectors. The consequence is that the stimulus has
exacerbated overcapacity in Chinese manufacturing and increased
pressure on Chinese firms to export.

Bottom line - China is screwed, and every false move performed by the
Fed, whose actions by implication reflect in China's broader monetary
policy, will be amplified and make the bubble increasingly worse, as
the right move here, which is for China to cut down on its stimulus
and to focus on the growth of its own economy, will likely not occur
before it is far too late. One should just look to the US to see how
eager politicians are to step away from a tenuous and ultimately
destructive status quo and proceed to do the right things needed to
fix a broken system, which however would result in significant popular
revolt and most likely a near-certain loss in any future political
elections/referendum. This is precisely why the economic system, from
a physical system perspective, is teetering on the balance and is
about to break.

Full must read FRBSF Economic Letter

by BlackBeard
on Mon, 02/08/2010 - 14:23
#222366

This still doesn't change the fact that she's an idiot.

by SWRichmond
on Mon, 02/08/2010 - 15:53
#222454

+1,000,000

The first thing I thought when I read the headline was: "Who cares
what she thinks? I might as well ask my cat to do differential
equations."

by Anonymous
on Mon, 02/08/2010 - 21:01
#222832

+1

I have the answer - she needed a 6-star vacation. Bankers in Asia know
how to show you a good time, even for an old rubbery old lady.

by velobabe
on Mon, 02/08/2010 - 14:52
#222387

was wondering why david bonderman of TPG had to jump in his $70
million Gulfstream jet for an emergency meeting with finance in
beijing, last thurday.

by Anonymous
on Mon, 02/08/2010 - 21:02
#222833

her mistress was with John Terry non?

by WaterWings
on Mon, 02/08/2010 - 14:53
#222388

Everyone is waiting for some kid to yell out, "Mao and Uncle Sam
aren't wearing any clothes!"

by DaveyJones
on Mon, 02/08/2010 - 14:58
#222392

and the only thing worse is when they're naked together, behind closed
doors.

by WaterWings
on Mon, 02/08/2010 - 16:02
#222471

David Carradine was going to tattle. Big mistake.

by Anonymous
on Mon, 02/08/2010 - 14:57
#222389

Go to this site to see why you should be investing in Precious Metals.

by SilverIsKing
on Mon, 02/08/2010 - 14:58
#222394

I am anxiously awaiting the "Murtha Is Dead" thread.

by bugs_
on Mon, 02/08/2010 - 15:02
#222397

bugs_: Is she gellin'?

nigaz: Like a felon.

by Anonymous
on Mon, 02/08/2010 - 15:05
#222401

I'm assuming you've read In the Jaws of the Dragon and that accepting
the CW on China and how what happens there fits into neoclassical
economics theory needs to be taken with a grain of salt.

by cougar_w
on Mon, 02/08/2010 - 15:31
#222436

Have not. So someone please elborate.

by Anonymous
on Mon, 02/08/2010 - 15:23
#222424

How does this figure into the china calculus?
GOLD - China's End Game (video):

http://www.brasschecktv.com/page/800.html

by carbonmutant
on Mon, 02/08/2010 - 15:24
#222426

If Bernanke were out she'd be on the short list.

by Orly
on Mon, 02/08/2010 - 15:26
#222427

I am glad that hendry is there to set all these boys straight:
Rodgers, Soros, etc. Anyone who seriously believes that the Chinese
"miracle" is going to pull our rabbit out of a hat is severely naive.

It just can't happen.

by Anonymous
on Mon, 02/08/2010 - 15:27
#222429

Where does China purchase these currency reserves? Does this mean that
the US is holding $2.25 trillion worth of Renminbi? Are all the
reserves in USD or a bunch of different currencies?

by Anonymous
on Mon, 02/08/2010 - 16:55
#222551

Treasuries...they give us back these reserves in exchange for
treasuries.

by Anonymous
on Mon, 02/08/2010 - 17:14
#222569

US buys tons of Chinese exports, pays in dollars. Chinese government
requires exporters to turn in dollars to China central bank, gives
them renminbi in return at government determined exchange rate.
Central bank saves some dollars as reserves, gives other dollars over
to government investment agencies who use them to buy dollar-
denominated assets, buy oil, etc. So Chinese gov gets to completely
control value of yuan, and spend whatever US dollars it wants on
whatever.

by ozziindaus
on Mon, 02/08/2010 - 17:55
#222643

China's currency reserves are from trade surplus (in USD) which are
converted to US T bills, Bonds and Notes obviously priced in dollars.
The PBoC then distributes Yuan to their people in exchange therefore
"maintaining the peg.

As for other currencies in their reserves....

http://www.imf.org/external/np/sta/ir/hkg/eng/curhkg.htm

by Anonymous
on Mon, 02/08/2010 - 15:33
#222437

I resent having to pay for her to traipse off the China. Furthermore,
I resent maintaining 12 regional Federal Reserve “banks” all with huge
staffs originally conceived as being no more than a one-day rail
journey apart so paper check could be readily transported.

How about 7 Fed Governors on conference calls from their home offices?

by WaterWings
on Mon, 02/08/2010 - 16:21
#222486

Or ten treasonous governors that have no problem with broad language:

(e) other matters of mutual interest pertaining to National Guard,
homeland defense, and civil support activities.

http://beforeitsnews.com/story/11712/FEMA_Regions_What_Section_Are_You_I...

But who cares! Who dat! Who dat! Where'd you party last night?

http://images.huffingtonpost.com/gen/139362/BOURBON-STREET-NEW-ORLEANS-S...

by Anonymous
on Mon, 02/08/2010 - 17:32
#222594

There is no such thing as overcapacity. There is such a thing as
malinvestment, which Federal Reserve policy has created in this
country in spades.

The thing about China is that they spend more of their money on
investment than they do on consumption, meaning that they will witness
an ever increasing amount of goods for ever cheaper prices (priced in
gold--real money). Economies built on consumption are like houses
built upon the sand. Economies built on capital investment are built
upon the bedrock that reaches down to the foundations of the Earth.
Ours is the former, theirs is the latter.

They may experience some growing pains as they shift away from
supporting the US, but the vast majority of the change will be for the
better. Some may lose their jobs, but more will be created, and their
vast savings will buy more in the meantime.

by SWRichmond
on Mon, 02/08/2010 - 20:04
#222768

+1,000!

by El Capitan
on Mon, 02/08/2010 - 17:33
#222597

Infrastructure expansion/improvement labor for flow from the export
manufacture labor market in China as a tenet for them being 'screwed'?

Fear based nonsense came across much more effectively in the 2009 film

'Paranormal Activity'

by dleddy14
on Mon, 02/08/2010 - 19:47
#222743

Hey, did you guys catch Yellen as an extra in "District 9"? She was
perfect for the role.

by Anonymous
on Mon, 02/08/2010 - 20:34
#222806

Zero Hedge's comment and conclusion that "China is screwed" is way,
way too definitive. A very typically armchair opinion of a western
fella reading third hand stuff.

Please remember these facts:
1. China has 800 million poor peasants waiting in the wings to buy
stuff that the factories cannot export to the West. Yellen's report
fails to mention this very important part of the economy. In the last
two years, Beijing has been pushing for the development of its rural
economy. Farmers are now seeing real increases in their takehome pay,
and are starting to buy stuff like TVs and fridges.

2. The Chinese govt is pushing hard to reduce dependence on exports.

3. China is not involved in any expensive military adventure like the
West. Wars are very expensive undertakings.

Once again, comments like this prove that white people should just
stick to commenting abt their own stuff.

http://www.zerohedge.com/article/janet-yellen-discusses-china-paradox

...and I am Sid Harth

[Sid Harth]

RESERVE BANK OF INDIA
Foreign Exchange Department
Central Office
Mumbai - 400 001

RBI/2009-10/310 February 9, 2010

A.P. (DIR Series) Circular No.32

To
All Category - I Authorised Dealer Banks
Madam / Sir,

Exim Bank's Line of Credit (LOC) of USD 100 million to Bank for
Development and Foreign Economic Affairs (Vnesheconombank), Russia

Export-Import Bank of India (Exim Bank) has concluded an agreement
dated December 7, 2009 with the Bank for Development and Foreign
Economic Affairs (Vnesheconombank), Russia, making available to the
latter, a Line of Credit (LOC) of USD 100 million (USD one hundred
million) for financing exports of equipment, technology or any goods
and services from India. The goods and services for export under the
agreement are those which are eligible for export under the Foreign
Trade Policy of the Government of India and whose purchase may be
agreed to be financed by Exim Bank under this agreement.

2. The Credit Agreement under the LOC is effective from January 18,
2010. Under the LOC, the terminal date for opening Letters of Credit
is January 17, 2013 (36 months from the effective date of the
Agreement) and terminal date of disbursements is July 17, 2014 (42
months from the effective date of the Agreement).

3. Shipments under the credit will have to be declared on GR / SDF
Forms as per instructions issued by Reserve Bank from time to time.

4. While no agency commission shall be payable in respect of exports
financed under the above line of credit, the Reserve Bank may
consider, on merit, requests for payment of commission up to a maximum
of 5 per cent of the f.o.b. /

2

(free on board)/ c&f (cost and freight)/ c.i.f. (cost, insurance and
freight) value in respect of goods exported and which require after
sales service. In such cases, commission will have to be paid by
deduction from the invoice of relevant shipment to agents and the
reimbursable amount by the Exim Bank to the negotiating bank will be
90 per cent of the f.o.b. / c&f/ c.i.f. value minus commission paid.
Approval for the payment of commission should be obtained from the
Foreign Exchange Department, Reserve Bank of India, under whose
jurisdiction the Head Office of the exporter is situated, before the
relevant shipment is effected. In other cases (i.e. exports not
involving after sales service), if required the exporter may use his
own resources or utilize balances of his Exchange Earners’ Foreign
Currency Account for payment of agency commission in free foreign
exchange. Authorised Dealer Category –I (AD Category –I) banks may
allow such remittance after realization of full payment of contract
value subject to compliance of prevailing instructions on payment of
agency commission.

5. AD Category-I banks may bring the contents of this circular to the
notice of their exporter constituents and advise them to obtain full
details of the Line of Credit from Exim Bank's office at Centre One,
Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005.

6. The directions contained in this circular have been issued under
sections 10(4) and 11(1) of the Foreign Exchange Management Act
(FEMA), 1999 (42 of 1999) and is without prejudice to permissions /
approvals, if any, required under any other law.

Yours faithfully,
(Salim Gangadharan)
Chief General Manager-in-Charge

http://rbidocs.rbi.org.in/rdocs/Notification/PDFs/APDIR090210.pdf

RESERVE BANK OF INDIA
Foreign Exchange Department
Central Office
Mumbai - 400 001
RBI/2009-10/311

A. P. (DIR Series) Circular No.33 February 09, 2010

To
All Category-I Authorised Dealer Banks
Madam / Sir,

External Commercial Borrowings (ECB) Policy - Liberalisation

Attention of Authorized Dealer Category-I (AD Category-I) banks is
invited to the Foreign Exchange Management (Borrowing or lending in
foreign exchange) Regulations, 2000, notified vide Notification No.
FEMA 3/2000-RB dated May 3, 2000, amended from time to time and the
A.P. (DIR Series) Circular No. 5 dated August 1, 2005 relating to the
External Commercial Borrowings (ECB).

2. As per the extant ECB procedures, any changes in the terms and
conditions of the ECB after obtaining the Loan Registration Number
(LRN) from the Department of Statistics and Information Management
(DSIM), Reserve Bank, require the prior approval of the Reserve Bank.
Accordingly, the requests of the borrowers for changes in the terms
and conditions, such as, drawdown / repayment schedules, currency of
borrowing and changes in designated AD bank, name of the borrowing
company, etc. are referred to the Reserve Bank for necessary approval.

3. As a measure of simplification of the existing procedures, it has
been decided to delegate powers to the designated AD category-I banks
to approve the following requests from the ECB borrowers, subject to
specified conditions:

2

a) Changes / modifications in the drawdown / repayment schedule

Designated AD Category – I banks may approve changes / modifications
in the drawdown / repayment schedule of the ECBs already availed, both
under the approval and the automatic routes, subject to the condition
that the average maturity period, as declared while obtaining the LRN,
is maintained. The changes in the drawdown / repayment schedule should
be promptly reported to the DSIM, Reserve Bank in Form 83. However,
any elongation / rollover in the repayment on expiry of the original
maturity of the ECB would require the prior approval of the Reserve
Bank.

b) Changes in the currency of borrowing

Designated AD Category I banks may allow changes in the currency of
borrowing, if so desired, by the borrower company, in respect of ECBs
availed of both under the automatic and the approval routes, subject
to all other terms and conditions of the ECB remaining unchanged.
Designated AD banks should, however, ensure that the proposed currency
of borrowing is freely convertible.

c) Change of the AD bank

Designated AD Category - I banks may allow change of the existing
designated AD bank by the borrower company for effecting its
transactions pertaining to the ECBs subject to No-Objection
Certificate (NOC) from the existing designated AD bank and after due
diligence.

d) Changes in the name of the Borrower Company

Designated AD Category - I banks may allow changes in the name of the
borrower company subject to production of supporting documents
evidencing the change in the name from the Registrar of Companies.

4. The modifications to the ECB guidelines will come into force with
immediate effect. All other aspects of the ECB policy, such as USD 500
million

3

limit per company per financial year under the automatic route,
eligible borrower, recognised lender, end-use, all-in-cost ceiling,
average maturity period, prepayment, refinancing of existing ECB and
reporting arrangements remain unchanged.

5. AD Category –I banks may bring the contents of this circular to the
notice of their constituents and customers concerned.

6. The directions contained in this circular have been issued under
sections 10(4) and 11(1) of the Foreign Exchange Management Act 1999
(42 of 1999) and are without prejudice to permissions /approvals, if
any, required under any other law.

Yours faithfully
(Salim Gangadharan)
Chief General Manager-in-Charge

http://rbidocs.rbi.org.in/rdocs/Notification/PDFs/APDIR33090210.pdf

...and I am Sid Harth

[bademiyansubhanallah]

FEBRUARY 9, 2010, 11:27 P.M. ET.
China State Newspaper: Country Not Ready For Large Yuan Rise 1H

SHANGHAI (Dow Jones)--China doesn't have the right economic conditions
to allow a large yuan appreciation in the first half of this year, and
if there is an appreciation in future it won't be due to international
pressure, the state-run China Securities Journal wrote in a front-page
editorial Wednesday.

The newspaper, which is operated by the Xinhua News Agency, said in
the editorial that data for January will likely show the pace of
China's exports recovery slowed from the previous month, while
Beijing's exit strategy from its stimulus policies, with a
strengthening yuan a key part of that strategy, may take longer than
expected this year. Data issued Wednesday showed January exports rose
21% from a year earlier but were down 5.5% from December on a
seasonally adjusted basis.

"Whether, when and how much the yuan should appreciate is part of
China's foreign-exchange policy," the paper said. "Only what China
says about it counts. Just as China won't interfere with the Federal
Reserve's purchase of U.S. Treasurys, the U.S. has no right
interfering in China's foreign exchange policy.

"Even if the yuan would appreciate in the future, it will be based on
China's judgement of domestic and international economic conditions,
not a result of external pressure."

The editorial comes as Beijing steps up the defense of its currency
policy amid calls from multinational organizations and China's largest
trading partners for a stronger yuan.

China Vice Commerce Minister Zhong Shan said at a trade fair in
Birmingham on Monday: "We need to maintain the [yuan] at a stable and
equilibrium level, which I believe will be of benefit to China and to
the world economy."

The state-controlled China Daily, an English-language newspaper, said
in a front-page article Friday that Beijing "won't fold on RMB,"
referring to the renminbi, the other name for China's currency.
Foreign ministry spokesman Ma Zhaoxu said at a semiweekly briefing
Thursday that the exchange rate has never been a major cause of
bilateral trade imbalances and outside pressure won't help resolve the
issue.

The China Securities Journal said any yuan appreciation would attract
hot money, and allowing the yuan to appreciate earlier than the
currencies of other countries when the foundations of China's economic
recovery are still not sound and the property market shows signs of a
bubble forming would put the country's economic recovery at risk.

The newspaper said U.S. hopes that the yuan would appreciate 20% or
more against the dollar are "unrealistic," and a yuan appreciation
won't fundamentally resolve the trade imbalances between the U.S. and
China.

Newspaper Web site: http://www.cs.com.cn

-By China Bureau, Dow Jones Newswires; 8621 6120-1200;
***@dowjones.com

Bloomberg

China’s Exports Advance 21%, Adding Pressure on Yuan (Update2)
February 09, 2010, 11:51 PM EST

(Adds economists’ comment in fourth paragraph.)

Feb. 10 (Bloomberg) -- China’s exports jumped 21 percent in January
from a year earlier, providing more ammunition to trading partners
calling for a stronger yuan.

Imports climbed a record 85.5 percent, according to data released by
the customs bureau on its Web site today.

U.S. officials may see Chinese trade gains as a sign that the nation
no longer needs to protect exporters by keeping the yuan pegged to the
dollar. At the same time, China’s policy makers may see the below-
forecast exports and trade surplus as indicating that global demand is
only gradually improving.

“Chinese policy makers will be very cautious in interpreting the
January data, which is highly distorted by the Chinese lunar new year
holiday,” said Lu Ting, a Hong Kong- based economist at Bank of
America-Merrill Lynch. “They may wait a few more months before making
major policy moves.”

Twelve-month non-deliverable yuan forwards dropped 0.3 percent to
6.6808 per dollar as of 12:20 p.m. in Hong Kong. Also today, an
editorial in the state-owned China Securities Journal said that the
currency may not have “big gains” in the first half because economic
conditions haven’t improved.

Stocks pared gains after the trade release, with the MSCI Asia Pacific
index up 0.3 percent as of 12:10 p.m. in Hong Kong after earlier
rising as much as 0.8 percent.

China’s export gain was the biggest since September 2008. It compared
with a 17.7 percent increase in December and the median 28 percent
estimate of economists. The trade surplus of $14.17 billion fell short
of economists’ $20 billion forecast.

Imports rose by the most since Bloomberg data began in 1991.

Fastest-Growing Economy

The week-long lunar holiday was in January last year and February in
2010.

The “positive trend remains intact,” and today’s report bolsters the
case for the government to tighten policies and let the yuan
strengthen in coming months, said Brian Jackson, an emerging-market
strategist at Royal Bank of Canada in Hong Kong.

The central bank has already raised banks’ reserve requirements to
cool the world’s fastest-growing major economy. U.S. officials,
pressing for a stronger Chinese currency to reduce trade imbalances,
also argue that yuan gains against the dollar would also help China to
restrain inflation.

China last year overtook Germany as the world’s largest exporter, the
German statistics office confirmed yesterday. Germany itself is
benefitting from the expansion of China’s market, with its BGA
wholesale and export federation projecting a 10 percent gain in
shipments abroad in 2010, propelled by Chinese demand.

Arms Sales, Chickens

In Taiwan, government figures this week showed the biggest gain in its
exports in more than 30 years on spending in China before the lunar
holiday.

Comparisons from a year earlier are also affected by depressed
readings in early 2009 due to the financial crisis. China’s exports
slid 17.5 percent in January 2009 and imports tumbled 43.1 percent.

China’s static currency is fueling tensions with the U.S. that span
anti-dumping duties on American chicken, arms sales to Taiwan, and the
Dalai Lama’s planned meeting with President Barack Obama. On Feb. 4,
China’s Foreign Ministry rejected Obama’s call for a stronger yuan,
adding that “accusations and pressure will not help solve the issue.”

The Chinese economy risks overheating this year as exports rebound,
government economist Zhang Ming wrote in the China Securities Journal
this month, adding that inflation pressures will encourage policy
makers to let the yuan gain.

Economic Acceleration

Gross domestic product climbed 10.7 percent in the fourth quarter from
a year earlier, the fastest pace in two years, after the government
loosed an unprecedented expansion in credit to counter the effects of
the financial crisis. China this year is projected to overtake Japan
as No. 2 in global GDP rankings, after the U.S.

“It’s getting too big a part of the global pie to keep relying on
exports for growth, and so we do think there’s going to be a lot more
policies to drive domestic consumption going forward,” Robert
Subbaraman, chief economist for Asia excluding Japan at Nomura
International Ltd., said in an interview on Bloomberg Television in
Hong Kong today.

Policy makers may opt to shrink the trade surplus through raising
wages rather than yuan gains, Credit Suisse Group AG economist Tao
Dong said in an interview yesterday. Higher labor costs would cut
Chinese export competitiveness while boosting domestic spending power
and sustaining growth, he said.

Jiangsu’s Wage Boost

Jiangsu, the nation’s third-largest exporting province in 2008,
boosted the minimum wage 13 percent this month in an effort the local
labor department said was aimed at attracting workers.

Central bank Governor Zhou Xiaochuan said yesterday that policy makers
need to “closely watch” inflation. Fan Gang, the academic member of
the monetary policy committee, warned Feb. 1 that asset bubbles are
“the real worry” for the Chinese economy.

--Sophie Leung, Li Yanping, Kevin Hamlin. Editors: Paul Panckhurst,
Lily Nonomiya.

To contact the reporter on this story: Sophie Leung in Hong Kong at
[phone] or ***@bloomberg.net

To contact the editor responsible for this story: Chris Anstey at
[phone] or ***@bloomberg.net

http://www.businessweek.com/news/2010-02-09/china-s-exports-advance-21-adding-pressure-on-yuan-update1-.html

February 09, 2010 Chinese Military Destroying Chinese Economy?

China and the U.S. have a very special relationship based around the
tremendous debt that the Chinese hold from the United States.
Apparently, the PLA believes that gives them leverage. Reuters
reports:

Senior Chinese military officers have proposed that their country
boost defense spending, adjust PLA deployments, and possibly sell some
US bonds to punish Washington for its latest round of arms sales to
Taiwan.

The calls for broad retaliation over the planned US weapons sales to
the disputed island came from officers at China's National Defence
University and Academy of Military Sciences, interviewed by Outlook
Weekly, a Chinese-language magazine published by the official Xinhua
news agency.

This would definitely be bad for China. Much of the Chinese economy is
based upon a low labor price which allows export prices to remain
artificially low vis-á-vis the U.S. If the Chinese were to sell off a
large portion of American debt, they would put pressure on their own
currency. Moreover, while the sudden increase in U.S. securities on
the market might make securing new US debt expensive, ultimately the
change in the currency rates might encourage a re-balancing of the
trade balance, which ultimately benefits the United States.

All this might be immaterial, insofar as the Chinese seem to realize
this, even if the PLA doesn't.

http://www.realclearworld.com/blog/2010/02/china_military_boost.html

25+ China People You Should Follow On Twitter. Not One "China Expert"
Among Them.
Posted by Dan on February 9, 2010 at 07:28 AM

Discussion: Comments (4) : TrackBacks (0) : Linking Blogs : Add to
del.icio.us A few weeks ago, a client who will be opening a factory in
China within a couple of months told me how much he has been learning
about China by following people on Twitter and following their news
links. He then asked me who if I had a list of "China people" he
should be following.

I said about all I could tell him is that he should go through the
people I follow on Twitter and pull out those related to China. The
problem there is that I follow about 900 people and many of them have
absolutely nothing at all to do with China. This morning, while
perusing Ad Age China, I came across an excellent article by Normandy
Madden (yes, she was named after the region in France) entitled, "25
China Experts You Should Follow on Twitter" and, with one giant
caveat, it is a really good list.

The caveat is that I do not believe any of the 25 people on the list
are China experts (myself included) and I would guess all 25 would
agree with me on this. Calling someone a "China expert" is like
calling someone an expert on the United States. There are no U.S.
experts. There are US historians expert on particular historical
periods. There are US economists, expert on particular aspects of the
US economy. There are US lawyers, expert on particular aspects of US
law. Etc., etc., etc. Same is true of China. Having said that, here's
the list:

William Bao Bean, venture capitalist at Softbank focused on early
stage tech, media, telco and consumer investments in Asia
Follow: @williambaobean

Sage Brennan, independent media and internet analyst and TEDx
organizer in Shanghai
Follow: @sagebrennan

Richard Burger, blogger and editor at the Chinese newspaper Global
Times
Follow:@ThePekingDuck

Simon Cousins, CEO of the PR and strategic communications agency
Illuminant Partners in Beijing
Follow: @illuminantceo

Thomas Crampton, director of digital influence, Asia-Pacific at Ogilvy
& Mather in Hong Kong
Follow: @ThomasCrampton

Oli D., Shanghai-based blogger
Follow: @djodcouk

Paul Denlinger, ex-VP at Chinadotcom and founder of China Business
Strategy, which advises internet startups
Follow: @pdenlinger

David Feng, founder of Civitology, a network of mass transit-based
China city sites
Follow: @DavidFeng

Andrew Galbraith, deputy editor, China Economic Review in Shanghai
Follow: @apgalbraith

Jeremy Goldkorn, founder and editor In Chief of Danwei.org in Beijing
Follow: @goldkorn

Dan Harris, China law blogger
Follow: @DanHarris

Lonnie Hodge, CEO at CFM, Asia Director at Pitchengine, Educator and
Social Median
Follow: @lonniehodge

Kaiser Kuo, Beijing-based China tech watcher, Youku.com consultant and
guitarist in one of China's top heavy metal bands, Tang Dynasty
Follow: @kaiserkuo

Ray Kwong, Asia market entry adviser in Beijing
Follow: @raykwong

Andy Lee, digital media and finance consultant in China
Follow: @andylee

Kevin Lee, magazine brand manager and integrated media strategist in
Beijing
Follow: @kevinkclee

Kristie Lu Stout, Hong Kong-based anchor/correspondent on CNN
International
Follow: @klustout

Ryan McLaughlin, writer and web designer in China
Follow: @thehumanaught

Will Moss, American spin doctor in Beijing
Follow: @imagethief

Jay Oatway, Hong Kong-based journalist covering tech news, culture,
digital media, trends and social media
Follow: @JayOatway

Philip Pan, Moscow bureau chief of the Washington Post, formerly based
in Beijing, author of the book "Out of Mao's Shadow: The Struggle for
the Soul of a New China"
Follow: @panphil

Adam Schokora, manager, digital, China at Edelman in Shanghai
Follow: @ajschokora

Dan Washburn, writer and founding editor of Shanghaiist
Follow: @danwashburn

Steven Weathers, TV host, video producer and founder of American
English Circle in Shanghai
Follow: @sdweathers

David Wolf, communications strategist in Beijing
Follow: @wolfgroupasia

I sent this list to my client and told him this is a great place to
start but that plenty of people are missing from this list. Who would
you add? Do you know of any other good lists?

http://www.chinalawblog.com/2010/02/25_china_people_you_should_fol.html

...and I am Sid Harth

[bademiyansubhanallah]

Robert L. Borosage: Rogue Nation: How Does the US Deal with China?

China has surpassed Germany as the world’s largest exporter. It is
the largest holder of American Treasury bonds, nearly $800 billion.
America runs its largest trade deficit by far with China. The low
price flood of goods – the Wal-Mart trade – is pervasive. Now the US
even runs a growing deficit in advanced technology products.

China flaunts the rules and the spirit of the “free trade” global
economic order that the US constructed and, under Bill Clinton,
invited China to join, granting both permanent normal trading
relations and membership in the WTO.

China is a mercantilist nation, largely copying the successful Asian
model developed by the Japanese and the Asian tigers. Its communist
dictators plan and guide an economy geared to develop through exports.
The elements of its model are clear, evident to all who would see, and
not often admitted. They include:

An artificially undervalued currency, pegged to the dollar;

An industrial policy that targets “pillar industries,” using a broad
range of subsidies and protections to capture of world markets;

A complicated maze of trade barriers that allows Systematic pressure
on foreign multinationals to invest for export in China and to
transfer their most advanced production techniques to China;

Systematic efforts to pirate technology, trade secrets and copyrighted
materials;

A system of forced savings that funds investment

In the global economy, China is a rogue nation – with success that
breeds envy and imitation. Its system works very well for China, but
not for the rest of the world, as respected commentators like Martin
Wolf of the Financial Times have pointed out. Fixing Global Finance,
2008 As the IMF warned, the dramatic trade imbalances run by China as
a mercantilist nation and the US as the consumer of last resort are
destabilizing and unsustainable – and contributed directly to the
financial bubble and bust that drove the world into the Great
Recession.

This poses a central problem. What do you do when the most successful
nation in a trade regime routinely and systematically violates that
regime?

You can deny reality. This has been a favored response of the China
lobby, arguing that China is really far more open and free market than
Japan and other East Asian countries, or trumpeting preposterously
that the “World is Flat,” and there are no alternatives to the
Washington consensus.

You can argue that the situation is improving. Successive
administrations have claimed that the Chinese will inevitably become
more democratic and more free as the economy grows, that the Chinese
government has agreed to crack down on piracy, to curb its internal
systems of bribes and controls, to let its currency adjust, to
increase domestic demand and decrease forced savings. But after twenty
years, the routine gets a bit tired. .

You can argue that the situation doesn’t matter. This is the favorite
trope of the US foreign policy elite.(See most recently, Fareed
Zakaria) China and the US have a symbiotic relationship, we’re told.
They have to keep the dollar strong and cover our deficits. So we
benefit by buying more than we produce and getting a flood of cheap
products; they benefit by producing more than they buy.

But this too is hard to swallow after twenty years. The imbalances
contributed directly to the financial casino that Wall Street opened —
while US workers saw their jobs shipped abroad, their wages fall, and
their prospects dim.

The Obama administration, not surprisingly, has tip-toed around this
question. Obama led the drive to get the G-20, including China, to set
up a process to monitor – and highlight — excessive trade imbalances.
Unlike Bush, Obama accepted the decision of the US Trade Commission in
cases concerning Chinese dumping or flooding of our markets. But as
under Bush, the Obama Treasury Department ducked calling things by
their real name, refusing to certify that China was doing what
everyone understands it is doing – manipulating its currency to keep
it undervalued.

Now, as the world starts to turn its attention to recovery – however
prematurely – the question remains. How will the US handle a rogue
nation with policies that are destabilizing for the globe, and ruinous
for the American middle class?

At the end of the day, the US will have to have an aggressive trade
policy to challenge Chinese mercantilism and a smart industrial policy
to revive advanced US manufacturing. We know how to do it – to target
a key industry with public supported R and D, smart procurement,
planning to build supply chains, subsidies for investment here.

The president rightly says that capturing a lead in the new green
industrial revolution is a matter of our nation’s basic economic
security. Well, consider the way we deal with national security when
it comes to the military. There’s no parading about free trade. No
conservative blather about small government, or getting government out
of the way. Here’s how the Pentagon’s recently published 2010
Quadrennial Defense Review described the Pentagon’s industrial policy:

America’s security and prosperity are increasing linked with the
health of our technology and industrial bases. In order to maintain
our strategic advantage well into the future, the Department requires
a consistent, realistic, and long-term strategy for shaping the
structure and capabilities of the defense technology and industrial
bases–a strategy that better accounts for the rapid evolution of
commercial technology, as well as the unique requirements of ongoing
conflicts.

That strategy includes export controls, procurement policy, and “a
strategic approach to climate and energy.”

China has made new energy a “pillar industry.” It has deployed the
entire range of its mercantilist strategies to make itself the leading
manufacturing of solar panels.

If capturing a leading edge of these industries is vital to our
nation’s economic security, then shouldn’t we get serious about an
industrial policy that goes far beyond the Pentagon?

Article source: http://www.huffingtonpost.com/robert-l-borosage/rogue-nation-how-does-the_b_456129.html

This entry was posted on Tuesday, February 9th, 2010 at 10:45 PM

http://twitmerlin.com/robert-l-borosage-rogue-nation-how-does-the-us-deal-with-china/

Sector brief: Economics & Trade
Report says China will see double digital growth in 2010
February 10, 2010:

A top Chinese think tank forecasts China's economy will experience a
mild rebound this year, with gross domestic product expanding around
10% year on year.

The Center for Forecasting Science of the Chinese Academy of Sciences
said in a report that among the three economic engines:

Investment is expected to contribute 6.3% to the GDP growth;

Consumption will contribute 4.2%.

Net exports will drag down the growth rate by 0.5%.

The GDP may expand 11% in the first quarter and see a moderate
slowdown in most of the remaining year, the report said.

English News.cn reported that data from the National Bureau of
Statistics (NBS) shows China's economy expanded 8.7% last year.

http://www.chinaeconomicreview.com/china-eye/2010_02_10/Report_says_China_will_see_double_digital_growth_in_2010.html

China leading world economy out of global recession
Wednesday, February 10, 2010 | Volume: 10808

With the help of massive government stimulus action, China is now
leading the world economy out of recession, according to a new OECD
report.

The OECD’s latest Economic Survey of China says it will be important
to ensure that government saving, now falling in the wake of the
crisis, does not revert to its previous, excessively high levels.
Public spending should be stepped up to support much needed social
reforms in areas such as education, welfare assistance, pensions and
health.

China can afford the extra spending as its public finances remain
strong.

Gross government debt amounted to only 21% of GDP in 2008. The
stimulus measures, which nevertheless dwarfed those of other
countries, are expected to increase this debt ratio by only 3% of GDP
in 2010. By contrast, gross public debt in OECD countries is projected
to almost reach their total GDP this year and even exceed it in 2011.

(Source: thegovmonitor.com)

http://www.tehrantimes.com/index_View.asp?code=214116

U.S.-China Friction: Why Neither Side Can Afford a Split
By Zachary Karabell Monday, Feb. 08, 2010

Freight ships docked in port in Shanghai, China
Yann Layma / Getty

It hasn't been a banner few weeks for U.S.-China relations. In mid-
January, Google announced that it was contemplating pulling out of
China because of repeated attacks on its network as well as censorship
constraints. In the past week, the U.S. government authorized $6
billion in arms sales to Taiwan, and the White House announced that
President Obama would meet with the Dalai Lama after having postponed
that visit last fall on the eve of Obama's trip to China.

Beijing's response has been increasingly unfriendly, even hostile. A
senior Communist Party official announced that any meeting between the
President and Tibet's spiritual leader would "seriously undermine the
political foundation of Sino-U.S. relations" and would lead to
"corresponding action" — a phrase made more ominous by its utter
vagueness. Then, in response to the proposed Taiwan arms sales, the
Chinese threatened sanctions against U.S. defense companies, which
include conglomerates doing substantial nonmilitary business in China
such as United Technologies, which has seen booming demand for its
Otis elevators in Chinese skyscrapers, and Boeing, which has staked
its future growth in part on demand from China's air carriers. Most
recently, on Feb. 5, China's Commerce Ministry accused the U.S. of
dumping chicken on the China market.

(See the worst business deals of 2009.)

This increasing truculence is a direct reflection of a rapidly
shifting economic balance of power. One of the consequences of the
financial crisis of 2008-09 was the catapulting of China to the
forefront of the global economic system. That trend wasn't created by
the crisis, but the crisis certainly accelerated it. As the U.S.,
Europe and Japan contracted sharply, China registered its own brief,
if scary, dip and then proceeded to use its trillions in foreign
reserves to undertake a massive spending program. More effective than
similar stimulus packages in the United States and elsewhere, the
approach by the Chinese government not only halted the swoon but
propelled China to even more robust growth.

China's relative strength has attracted considerable attention. From
Washington to Tokyo to Davos, global business leaders are hailing
China's resilience and calling on Beijing to take a greater role in
governing the global economy. Its model of state-driven capitalism,
having weathered the storm, has won widespread praise (as well as
criticism), and slowly Chinese leaders have taken note. Now there are
signs that all the talk of the Chinese miracle has started to have an
effect — and not a good one.

(See TIME's special report on Davos.)

The recent flurry of hostile words was capped by a haughty rebuttal of
U.S. Commerce Secretary Gary Locke's criticism of Chinese economic
policies that favor domestic companies over American and foreign
competitors. Said the official Xinhua news agency: "Ironically, the
United States is now turning around and accusing China of protecting
its domestic companies. Burdened by high unemployment and facing mid-
term elections in November, some people in the U.S. are trying to
shift public attention from thorny political and economic issues to
other countries. However, such irresponsible moves will prove to be
unhelpful, and China will not accept being a scapegoat."

In short, China is brimming with confidence, and in recent weeks that
self-confidence has turned into arrogance, with scorn for the U.S.
There is a long legacy of Chinese distrust of the West. Today, Chinese
nationalists cannot explicitly criticize Beijing, but they can
indirectly attack the government by challenging the close relationship
between the U.S. and China. For many in China, the U.S. is a corrupt
nation that bears China no goodwill and will drag China down if
Beijing doesn't find a way to distance itself from the American
economic embrace.

(Comment on this story)

But while many Chinese take delight in America's plight and would like
to end the close embrace that has brought China such prosperity over
the past two decades, they are falling prey to delusions of grandeur.
The fact remains that as much as China may want to go it alone, it
cannot.

(See pictures of the global financial crisis.)

To begin with, it holds more than $1 trillion in U.S. assets, mainly
in U.S. Treasuries. No other country or entity in the world could
absorb those assets if China wanted to sell them, and with China's
currency value pegged to the dollar, any massive sale would lead to a
steep decline in the Chinese currency and economy. China's holding of
U.S. debt is leverage only in a theoretical world where it could dump
its U.S. assets or stop buying more. What's more, even a hobbled
America is the world's largest economy and the most significant market
for Chinese goods. In 2009, a supposedly bad year, Chinese exports to
the U.S. were approximately $300 billion, about the same as in 2007.
That is a vast source of income for China — and one that no other part
of the world can provide.

The U.S., meanwhile, has been a source of billions of dollars in
direct investment in China, from thousands of American companies big
and small. While it's true that China doesn't need any one of these
companies as much as each one needs China, China needs all of them and
depends on them for everything from brand-name goods to know-how and
capital. Beijing can't just snap its fingers and go it alone; its
domestic economy is far too entwined with that of the U.S., its
companies, its capital and its consumers.

There's little question that neither China nor the U.S. wants to be
dependent on the other. China's rhetoric of late is proof, and you
could easily demonstrate the same attitude coming from Americans. But
each country has tied its economy to the other, and buyer's remorse
notwithstanding, there is no immediate exit from this relationship. It
remains a source of stability and prosperity for both countries. Two
decades ago, China cast its lot with the United States, and until
recently, that has brought it affluence. Now that things have gotten
difficult, the Chinese want out. But when the heady intoxication of
these weeks wears off, they will find that they have nowhere else to
go. One day, perhaps, but not today.

Karabell is the author of Superfusion: How China and America Became
One Economy and Why the World's Prosperity Depends on It (Simon &
Schuster 2009) and president of River Twice Research (rivertwice.com)

http://www.time.com/time/world/article/0,8599,1960606,00.html

...and I am Sid Harth

[bademiyansubhanallah]

Poor farm show queers pitch for Sharad Pawar

10 Feb 2010, 0501 hrs IST, ET Bureau

NEW DELHI: Even as Congress puts the onus of controlling food prices
on food and agriculture minister Sharad Pawar, the latest growth
estimates for the farming sector present a gloomier picture and is
expected to add to inflationary pressure.

According to the figures released by the Central Statistical
Organisation here, the agriculture sector exhibited a decline of 0.2%
during 2009-10. But what should set government managers thinking are
production estimates for grain, oilseeds and sugarcane. While the
output of grain is expected to come down by 8% over the corresponding
period in the previous year, oilseeds production will be down by 5%.
Projections for sugarcane production should set alarm bells ringing in
PMO and Krishi Bhawan, as it was expected to decline by 11.8%.

These figures are expected to add to the worries of the government,
facing considerable flak for goofing up on the agricultural front.
Prices of essential food items, including pulses, cooking oil, sugar,
rice and wheat have been soaring in the past few months, adding to the
woes of the common man by sending their household budgets into a
tailspin. If the latest CSO projections about farm output hold good,
the poor and the middle classes, especially salaried sections, are in
for an even more difficult and testing times ahead.

With popular outrage about the alleged mishandling of the food economy
growing, Congress has acted swiftly to blame Mr Pawar for skyrocketing
prices. NCP retaliated by asserting that the buck stopped at the PM’s
door. “Tackling the prices issue is a collective responsibility of the
government,” Mr Pawar had said on Monday.

The issue is expected to resonate in Parliament during the ensuing
budget session, with the Opposition gearing up to pin the government
down for its failure to rein in prices. While BJP president Nitin
Gadkari held the entire government, including the prime minister and
his agriculture minister, responsible for the trend, RLD leader and
former Union minister Ajit Singh considers Mr Pawar as the villain in
the piece.

``The agriculture minister is responsible for the price rise,’’ Mr
Singh said while speaking to newspersons here on Monday. In 2007-08,
there was, RLD leader said, excess production of sugar in the country
and the following year, when its production fell, the government
exported it, leading to scarcity.

``Mr Pawar this way created scarcity of sugar and now the government
is importing raw sugar, which has led to high prices,’’ he said,
adding that Mr Pawar’s party, NCP, was now advising people to stop
consuming sugar.

The RLD chief wondered why the government was importing raw sugar when
there was adequate sugarcane stock available in the country. It should
have waited for this stock to get exhausted first, he felt. ``The
government should bridge the wide gap which exists between prices of
commodities from the time they leave the fields and reach the markets.
Middlemen should be curbed and forward trading should immediately be
banned,” the RLD chief said.

“Though price rise is a major issue, the farmers are not benefiting
from this as they get a very low price for their produce while the
same is sold at urban wholesale markets at much higher prices,’’ Mr
Singh said.

http://economictimes.indiatimes.com/news/politics/nation/Poor-farm-show-queers-pitch-for-Sharad-Pawar/articleshow/5554288.cms

India FY10 GDP growth at around 7.75%: Pranab Mukherjee

10 Feb 2010, 1056 hrs IST, REUTERS

NEW DELHI: The economy could grow at around 7.75 per cent in the
2009-10 financial year ending in March, Finance Minister Pranab
Mukherjee said on Wednesday.

"With latest GDP data on 2009-10 indicating 7.9 per cent growth in the
second quarter, the growth outlook for the next two quarters and for
the whole year is expected to be in the upper bound range of more
predictions for the Indian economy," he said in a speech.

http://economictimes.indiatimes.com/news/economy/indicators/India-FY10-GDP-growth-at-around-775-Pranab-Mukherjee/articleshow/5555010.cms

No financial crisis impact? India's poor grew by 34 mn

10 Feb 2010, 0519 hrs IST, Rukmini Shrinivasan, TNN

It's a myth that the global financial crisis left India virtually
unscathed. In fact, India is the biggest victim of financial crisis-
induced poverty, according to data obtained by TOI from the United
Nations Department of Economic and Social Affairs' (UNDESA). Check out
these figures.

The UNDESA data estimates that the number of India's poor was 33.6
million higher in 2009 than would have been the case if the growth
rates of the years from 2004 to 2007 had been maintained. In 2009
alone, an estimated 13.6 million more people in India became poor or
remained in poverty than would have been the case at 2008 growth
rates.

In other words, while a dip from the 8.8% growth in GDP averaged from
2004-05 to 2006-07 to the 6.7% estimated for 2008-09 may be nothing
like the recession faced by the West, its human consequences for India
were probably worse. The 2.1% decline in India's GDP growth rate has
effectively translated into a 2.8% increase in the incidence of
poverty.

According to the UNDESA's World Economic Situation and Prospects 2010,
47 million more people globally became poor or remained in poverty in
2009 than would have been the case at 2008 growth rates, and 84
million more than would have poor at 2004-7 growth rates. Of these, 19
and 40 million respectively are in south Asia.

While the report did not give India-specific figures, these were given
to TOI by the UNDESA in response to a request for more information on
the numbers pertaining to the country. The numbers come from revised
per capita income estimates for 2009. The report uses the World Bank's
definition of poverty, which is people living on less than $1.25 per
day in 2005 Purchasing Power Parity (PPP) dollars.

The estimates assume that there has been no change in income
distribution. If inequality grew in India in 2009, the number of poor
would be even higher than these projections.

The UNDESA report attributes this increase in poverty to a combination
of reduced household incomes, rising unemployment and pressure on
public services. Job losses in India were primarily in export-oriented
industries like textiles while employment levels in Indian firms
catering to the domestic market were largely unaffected, the report
says. Monetary and fiscal policy intervention gave Indian growth some
resilience, while safety nets like India's National Rural Employment
Guarantee Act (NREGA) helped to mitigate the effects of the slowdown,
the report adds.

"Surveys conducted by the labour bureau did show big job losses
through most of 2008, but a pick up by mid-2009," said economist and
Planning Commission member Abhijit Sen, adding the caveat that the
construction industry, which was hit badly by the recession and is now
recovering, was not covered by those surveys. "It's true that there
has not been anything special for labour in government policy except
the general fiscal stimulus," added Sen.

In addition to job losses, food price inflation is a major factor in a
decline in poverty reduction in India, said Sen. "It is not yet clear
to what extent the spike in food prices is linked to the global
financial situation, the poor monsoon or other factors", he added.

The report is clear that the situation is picking up, but celebrations
would be premature, "global economic recovery is expected to remain
sluggish, employment prospects will remain bleak". Job creation will
lag output growth and as social protection coverage is limited,
working poverty levels will rise and be difficult to reverse, the
report warns. It is too early for fiscal stimuli to be withdrawn, the
report adds.

There is no agreement yet on the number of poor people in India. The
last official (National Sample Survey) household expenditure figures
are for 2004-5 and the next round (2009-10) is yet to be completed.
Further, the definition of poverty remains disputed, the Suresh
Tendulkar committee's recommendation that India move away from
calorific norms being the latest iteration. This committee pegged the
number of poor in India at 408 million in 2005.

http://economictimes.indiatimes.com/News/Economy/Indicators/No-financial-crisis-impact-Indias-poor-grew-by-34-mn/articleshow/5554307.cms

Exports growth pegged at 13% in Jan

10 Feb 2010, 0256 hrs IST, ET Bureau

NEW DELHI: Exports are likely to grow for the third consecutive month
in January 2010, as per estimates of the commerce department, making
the case for a possible withdrawal of the stimulus package for sectors
that were doing well.

The finance and commerce ministers are scheduled to meet later in the
week to take a decision on the continuation of the stimulus package
for exporters, commerce secretary Rahul Khullar has said.

Exporters, however, feel that it is too early to pull the plug,
especially for sectors that were yet to come out of the red.

“In January, I expect exports to be about $ 14 billion,” commerce
secretary Rahul Khullar told reporters at an event organised by
Assocham on Tuesday. This is about 13% higher than $12.38 billion of
exports in January 2009. The figures will be out early next month.

The commerce secretary said exporters should be ready for some cut-
back of the stimulus given to them by the government over the past
year to make their products more competitive in the shrinking global
market.

The government had extended support to exporters in the form of loans
at discounted interest rates and incentives, including duty-free
scrips, which can be used either to import goods duty-free or sold in
the market for cash for exporting identified products to particular
markets. Intense debate is on within the government for withdrawal of
stimulus with both FM Pranab Mukherjee and Planning Commission deputy
chairman Montek Singh Ahluwalia indicating that time may be ripe for
planning an exit as the domestic as well as global economies were
showing signs of improvement.

Exporters, on the other hand, argue that there is still a lot of
instability globally and the government should not be in a hurry to
withdraw stimulus.

“The world has certainly not stabilised as news of countries like
Spain, Greece and Portugal defaulting on their commitments are still
pouring in,” says Tilak Raj Manaktala, a Delhi-based exporter and
member of the Delhi Exporters Association.

Commerce and industry minister Anand Sharma, on Monday, said there
could be a partial withdrawal of the stimulus package for sectors that
were doing well.

The commerce department announced additional sops for about 2,000 new
products from labour intensive sectors such as engineering,
handicrafts, textiles, chemicals, electronics and some metals which
had not responded well to the packages announced earlier.

Exports had slipped into the negative growth zone in October 2008,
mainly due to low demand in the EU and US markets, and had failed to
grow for thirteen straight months. With the stimulus packages given by
the Western governments beginning to show results in the form of
increased demand, exports turned positive in November 2009.

Overall exports for the entire fiscal, however, is expected to be much
lower than last fiscal’s exports of $189 billion. In the April-
December 2009 period, exports were at $ 117.5 billion, about 20% lower
than exports worth $147.56 billion in the same period of the previous
fiscal.

http://economictimes.indiatimes.com/News/Economy/Indicators/Exports-growth-pegged-at-13-in-Jan/articleshow/5554146.cms

Dec industrial output seen up 12% y/y

9 Feb 2010, 1805 hrs IST, REUTERS

Industrial output to rise 12 percent in December from a year earlier,
the median forecast in a poll of 21 economists shows. That is
marginally higher than an annual rise of 11.7 percent in November.

Forecasts ranged from a rise of 9.94 percent to 14 percent.

FACTORS TO WATCH: Manufacturing, on the back of strong consumer demand
on tax concessions and easier credit, is expected to continue to
propel output growth. An exports revival since last November is also
expected to underpin growth momentum in factory output.

MARKET IMPACT: A strong rise would reinforce investors' view the
economy, which is expected to grow 7.2 percent this fiscal year from a
six-year low last year, is on a firm footing.

A robust figure, ahead of the Feb. 26 annual budget, would also allow
the federal government, fighting a 16-year high fiscal deficit, to cut
the deficit by phasing out fiscal stimulus.

A strong rise would help the central bank to focus better on
containing inflation by raising interest rates in coming months.

http://economictimes.indiatimes.com/News/Economy/Indicators/Dec-industrial-output-seen-up-12-y/y/articleshow/5552765.cms

...and I am Sid Harth

[chhotemianinshallah]

Gadkari Leads BJP Protest Against Price Rise
Posted by Vamban on Feb 10th, 2010 13:07:02

New Delhi, Feb 10 – In his first show of strength in the capital after
he became president of the Bharatiya Janata Party (BJP), Nitin Gadkari
Wednesday led a protest against the rise in food prices.

Hundreds of party supporters joined the protest at Jantar Mantar as
the BJP alleged that the government’s ‘wrong’ economic policies were
the main reason behind spiralling prices of essential commodities.

The protest, which comes as the government is planning a hike in
petrol prices, is part of the BJP’s nationwide agitation against price
rise.

Gadkari is planning a three-tier protest against rising prices, at
block, district and state levels.

The party workers will march towards Parliament House with senior BJP
leaders likely to join them.

The Delhi unit of the BJP is keen to make the protest a success
because the newly appointed BJP chief, who was formally elected
unopposed Tuesday, is participating in a rally in the capital for the
first time.

http://www.vamban.com/gadkari-leads-bjp-protest-against-price-rise/

Lalu Leads March Against Price Rise Ahead of Shutdown
Posted by Vamban on Jan 28th, 2010 02:41:02

Patna, Jan 27 – Rashtriya Janata Dal (RJD) chief Lalu Prasad led
hundreds of party workers and leaders on a march here Wednesday, a day
ahead of party’s call for a state-wide shutdown in Bihar to protest
rising prices of essential items.

Lalu Prasad appealed to people to support the party’s dawn to dusk
shutdown Thursday.

In his own style, he told people on a portable public address system:
‘Listen, listen, there will be a shutdown in Bihar and I request all
of you to support us to protest rising prices.

‘I am confident that the shutdown will break all previous records with
massive people support it against rising prices of essential food
items,’ Lalu Prasad said.

The RJD chief also attacked Chief Minister Nitish Kumar for his
failure to check rising prices.

‘Both the Congress-led UPA (United Progressive Alliance) and the
Nitish Kumar-led government in the state are blaming each other for
price rise,’ he said.

http://www.vamban.com/lalu-leads-march-against-price-rise-ahead-of-shutdown/

UPA’s Disastrous Economic Policies Behind Price Rise: Gadkari
Posted by Vamban on Jan 31st, 2010 14:30:07

Bangalore, Jan 31 – Bharatiya Janata Party president Nitin Gadkari
Sunday blamed the ‘wrong economic policies’ of the UPA government for
the skyrocketing prices and double-digit food inflation.

‘Economist Prime Minister Manmohan Singh says GDP to grow double-digit
soon but food inflation is growing at high double-digit (17 percent to
20 percent),’ Gadkari told reporters here.

He demanded that essential commodities be immediately taken out of
commodities exchange.

‘The government should take out 17 essential commodities permanently
off the commodities exchange where speculation and manipulation is
resulting in food prices soaring,’ said Gadkari on his first visit to
the state after becoming BJP president.

The BJP chief blamed the government’s export-import policy for the
dramatic rise in sugar prices. Export and transport subsidy given to
sugar mills was responsible for the steep fall in sugar buffer stock
which was 4.8 million tonnes in 2008, he asserted.

‘India exported 4.8 million tonnes of sugar in 2008-2009 at Rs.20 a
kg, after paying the farmers at the rate of Rs.12.5 a kg. Now the
country is importing raw sugar at Rs.36 a kg,’ he said.

Similarly 10 million tonnes of rice were exported at Rs.18 to Rs.20 a
kg after paying the farmers Rs.8 to Rs.10 a kg. Now rice costs Rs.32 a
kg, Gadkari said.

‘The UPA government’s skewed economic policies were beneficial to
MNCs, corporates and big companies whose profits have multiplied by
hundreds of percentage,’ the BJP president said.

Demanding immediate introduction of food security for all bill in
parliament, creation of buffer stock of wheat, rice, pulses and edible
oils, Gadkari assured his party’s full support to the government in
this regard.

He called for stringent action against profiteering, hoarding and
black marketing in essential commodities.

Noting that ’since November 2009 prices of 17 essential commodities,
especially rice, wheat, pulses, sugar and edible oils have doubled,’
Gadkari said 78 percent of the country’s population was spending about
80 percent of monthly income on food articles alone.

Inflation rate that was negative in August 2009 (minus one percent)
has shot up to 7.8 percent now and the country was heading again for
double-digit inflation by March 2010, he said.

http://www.vamban.com/upas-disastrous-economic-policies-behind-price-rise-gadkari/

Government Concern Over Food Price Rise: Pawar
Posted by Vamban on Nov 4th, 2009 14:37:02

New Delhi, Nov 4 – Expressing concern over the inflation in prices of
food articles in the country, Agriculture Minister Sharad Pawar
Wednesday said the government has taken several steps to control the
increases in prices of essential commodities.

‘The year 2008-09 witnessed a spurt in the prices of food articles.
However, the overall availability of essential commodities has
generally remained satisfactory,’ Pawar told the Economic Editors’
Conference here.

‘Inflation in food article is a matter of concern,’ the minister
said.

According to the data released by the government Tuesday, production
of foodgrain was hit by drought and floods in many parts of the
country.

Rice was the worst hit. Rice production is estimated to reduce by 15
million tonnes to 69.45 million tonnes in the kharif (summer)
harvest.

Pawar said the government’s main concern was to ensure the
availability of foodgrains for the public distribution system ’so that
the impact of inflation on common man is minimised’.

‘The increase in foodgrain production has been matched by increased
procurement for the central pool,’ the minister said.

Wheat procurement in 2008-09 and 2009-10 was 226.89 lakh tonnes and
253.81 lakh tonnes respectively.

‘As a result of record procurement during the last two years, the
central pool stock of wheat as on Oct 1 this year was 284.57 lakhs,’
Pawar said and added that there was increase in rice procurement
also.

‘Government has a stock 153.49 lakh tonnes of rice in the central
pool,’ he said.

The minister said production of an estimated 8.5 million tonnes of
foodgrain and 1.5 million tonnes of oilseeds in the rabi season could
compensate for the loss of foodgrain output during the kharif season
due to the drought. The minister expressed hope that this target could
be achieved.

‘Improved soil moisture due to late monsoon rains has improved the
prospect of rabi (winter) crops throughout the country,’ he said.

http://www.vamban.com/government-concern-over-food-price-rise-pawar/

CPI-M to Hold Rallies in Himachal Over Price Rise
Posted by Vamban on Jan 29th, 2010 10:35:02

Shimla, Jan 29 – The Communist Party of India-Marxist (CPI-M) has
decided to hold demonstrations across Himachal Pradesh Feb 1 against
the rising prices of essential commodities, a party leader said here
Friday.

‘We (the CPI-M) have decided to stage protests and demonstrations Feb
1 against rising prices of essential goods. The demonstrations would
be held at all the district and sub-divisional headquarters,’ CPI-M
state secretariat member Tikender Singh Panwar told IANS.

He said food prices rose 19.83 percent in the week ending Dec 31,
2009, as reported by the commerce ministry.

The recent price index reveals that prices of potato has doubled,
onion prices are up by 23 percent, pulses 2 percent, wheat 13 percent,
rice 12 percent, fruits 13 percent and milk 11.3 percent, he added.

The situation has been aggravated in the state due to factors like
reduction in rice quota by the central government from 25,5615 tonnes
to 16,3299 tonnes and delay in release of sugar quota.

The CPI-M would also hold a rally in New Delhi March 12 in this
regard, he added.

http://www.vamban.com/cpi-m-to-hold-rallies-in-himachal-over-price-rise/

Lalu to Take Agitation Against Price Rise to National Level
Posted by Vamban on Jan 30th, 2010 15:06:01

Patna, Jan 30 – Rashtriya Janata Dal (RJD) chief Lalu Prasad Saturday
announced he would take his party’s agitation to protest the rising
prices of essential commodities to the national level.

‘The RJD, along with like-minded parties, particularly the Left, will
launch a national-level agitation to protest rising prices of
essential items,’ Lalu Prasad said at a press conference here.

He said he was in touch with several leaders of different political
parties in this regard.

‘I will go to New Delhi next week to discuss the programme with
different leaders to launch the stir,’ Lalu Prasad said.

The RJD chief did not disclose the names of other parties which would
join the protest.

Elated over the ‘overwhelming success’ of the state-wide shutdown in
Bihar Thursday, called by his party to protest rising prices of
essential items, Lalu Prasad said: ‘History was witness to the fact
that whatever began in Bihar, spread all across the country.’

The shutdown was supported by the Lok Janshakti Party, Communist Party
of India, Communist Party of India-Marxist and Communist Party of
India-Marxist Leninist.

http://www.vamban.com/lalu-to-take-agitation-against-price-rise-to-national-level/

Lalu Elated with Success of Bihar Shutdown
Posted by Vamban on Jan 29th, 2010 13:46:01

Patna, Jan 29 – Rashtriya Janata Dal (RJD) chief Lalu Prasasd is
elated over what he says was the overwhelming success of the state-
wide shutdown called by his party to protest rising prices of
essential items.

‘Yes, we are happy. After all, people’s anger was evident with the
total success of the shutdown,’ Lalu Prasad told IANS here Friday.

He vowed to expose, along with the Lok Janshakti Party (LJP) and Left
parties, the ‘double standards’ of the National Democratic Alliance
(NDA) government of Chief Minister Nitish Kumar in Bihar.

‘People, particularly poorest of the poor Mahadalits, are dying of
hunger and government schemes are not reaching them due to rampant
corruption. But Nitish Kumar is busy talking about ‘Shining Bihar’. It
has angered the people,’ he said.

Deputy Chief Minister Sushil Kumar Modi called the shutdown, during
which protestors marched on the streets and frequently attacked
motorists, as another form of terror. He warned the people of the
‘return of jungle raj’ — a clear reference to the 15 years Lalu Prasad
and his wife Rabri Devi ruled Bihar.

RJD leaders see a ray of hope ahead of assembly polls due in November.
Until recently, the RJD was seen as a spent force.

Political analyst Satyanarain Madan said that Lalu-Rabri had, for the
first time, made a political mark by organising a near total shutdown
after losing power in 2005 in Bihar.

According to police reports from different districts, nearly 12,000
workers and leaders of the RJD were arrested during the shutdown and
later released.

Lalu Prasad, Rabri Devi and LJP chief Ram Vilas Paswan were arrested
along with dozens of other leaders in Patna.

The shutdown was also supported by the Communist Party of India,
Communist Party of India-Marxist and Communist Party of India-Marxist
Leninist.

In September last year, the RJD-LJP alliance surprised all when they
performed better than expected in the by-elections to 18 assembly
seats in Bihar. The alliance bagged nine seats while the ruling
coalition won just five.

http://www.vamban.com/lalu-elated-with-success-of-bihar-shutdown/

Lalu, Rabri Held; Shutdown Evokes Total Response
Posted by Vamban on Jan 28th, 2010 19:58:02

Patna, Jan 28 – Rashtriya Janata Dal (RJD) chief Lalu Prasad and his
wife and former chief minister Rabri Devi were arrested along with
dozens of party leaders in Bihar capital Patna Thursday during a dawn-
to-dusk state-wide shutdown to protest rising prices of essential
items. Normal life came to a halt across the state due to the bandh,
which evoked a total response.

Rabri Devi was first arrested followed by Lalu Prasad, along with
dozens of party leaders and hundreds of party workers at the busy Dak-
Bungalow when they blocked roads.

RJD leader Shakil Ahmad Khan told IANS: ‘Lalu Prasad and Rabri Devi,
along with RJD parliamentarian and former minister Raghuvansh Prasad
Singh and several party legislators, took out a march on the main
roads to protest rising prices during the bandh.’

Police officials said Rabri Devi, Lalu Prasad and other RJD leaders
and party workers were arrested for blocking roads and disrupting
normal traffic. ‘They have been taken to a place and will be released
in the evening,’ a police official said.

According to reports from different districts, more than 500 workers
and leaders of the RJD have been arrested during the shutdown.

Police arrested RJD workers and leaders in Patna, Nalanda, Bhagalpur,
Khagaria, Gaya, Jehanabad, Aurangabad, Madhepura, Chapra, and other
districts during the shutdown ‘for disrupting normal life during
bandh.’

The RJD’s shutdown evoked a total response with thousands of party
workers blocking highways, rail tracks and bridges. Roads in Patna,
Gaya, Nawada and other major towns in the state were deserted. Only a
few private vehicles were seen.

RJD supporters blocked Mahatma Gandhi Setu, a bridge over the Ganges
in Patna that connects south Bihar to the north.

Party workers targeted trains at several places, including Jehanabad,
Gaya, Bhagalpur and Hajipur railway stations. Dozens of RJD workers
were arrested in Nalanda district for taking out a protest march.

The shutdown was supported by RJD’s ally Lok Janshakti Party and the
Communist Party of India, Communist Party of India-Marxist and
Communist Party of India-Marxist Leninist.

In view of the shutdown, most schools in Patna had decided to stay
closed.

Lalu Prasad Wednesday appealed to the people, particularly
businessmen, to support the shutdown.

The state administration have deployed extra security forces in Patna
and other district headquarters to deal with the situation.

http://www.vamban.com/lalu-rabri-held-shutdown-evokes-total-response/

RJD-called Shutdown Paralyses Life in Bihar
Posted by Vamban on Jan 28th, 2010 11:32:02

Patna, Jan 28 – Normal life ground to a halt in Bihar Thursday, with
opposition Rashtriya Janata Dal’s (RJD) dawn-to-dusk state-wide
shutdown to protest rising prices of essential items evoking a total
response.

Thousands of party workers blocked highways, rail tracks and bridges.

Roads in Patna, Gaya, Nawada and other major towns in the state were
deserted. Only a few private vehicles were seen.

RJD supporters blocked Mahatma Gandhi Setu, a bridge over the Ganges
in Patna that connects south Bihar to the north.

Party workers targeted trains at several places including Jehanabad,
Gaya, Bhagalpur and Hajipur railway stations. Dozens of RJD workers
were arrested in Nalanda district for taking out a protest march.

The shutdown was peaceful in the morning with no report of violence,
police officials here said.

RJD chief Lalu Prasad, party MPs and legislators were expected to lead
protest marches at different places in the state during the day. The
shutdown was supported by RJD’s ally Lok Janshakti Party and the
Communist Party of India, Communist Party of India-Marxist and
Communist Party of India-Marxist Leninist.

In view of the shutdown, most schools in Patna had decided to stay
closed anyway.

Lalu Prasad had Wednesday appealed to people, particularly
businessmen, to support the shutdown.

The state administration have deployed extra security forces in Patna
and other district headquarters to deal with the situation.

http://www.vamban.com/rjd-called-shutdown-paralyses-life-in-bihar/

...and I am Sid Harth

[chhotemianinshallah]

McDonald's Corp. (MCD) is closing 430 restaurants in Japan, the latest
sign of the faltering economy in the Asian country.

A 50% owned affiliate will shutter the locations over the next 12 to
18 months in conjunction with the strategic review of the company's
real estate portfolio. The world's largest restaurant chain plans to
take charges of $40 million to $50 million in the first half of the
year. McDonald's Holdings Co. (Japan) has 3,700 stores.

"These actions are designed to enhance the customer experience,
overall profitability and returns of the market," the company said in
a press release.

McDonald's also is opening 90 new restaurants and refurbishing 200 in
Japan. Clearly, McDonald's is retrenching. The fast food market in
Japan is bad because of the weak economy. It's the same reason that
Wendy's Arby's Group Inc. (WEN) said in December that it was exiting
the Asian country. A Wall Street Journal editorial recently argued
that "the unfolding economic crack-up in Tokyo is something to
behold." Japan has never really recovered from the lost decade of the
1990s and the current worldwide economic recession is underscoring
these weaknesses. Some experts have urged U.S. officials to learn from
Japan's mistakes.

The Golden Arches has been struggling in Japan for a while. Last year,
a marketing campaign featuring "Mr. James," a geeky, Japan-loving
American, was denounced as an offensive flop, according to Time.com.
McDonald's has tried to appeal to Japanese tastes with wassabi
burgers, chicken burgers and sukiyaki burgers. A Texas Burger, with
barbecue sauce, fried onions, bacon, cheese and spicy mustard, proved
to be a hit. But consolidated sales at McDonald's Japan fell 10.8%
last year. Profit is expected to plunge 54.7% this year.

Overall, though, McDonald's continues to hum along. Global sales rose
2.6% in January, topping analysts' estimates. Comparable store sales
in the U.S. fell 0.7% in January, a weak performance that nonetheless
surpassed the rest of the industry thanks to the popularity of the Mac
Snack Wrap and the Dollar Breakfast Dollar Menu. In Europe, Asia/
Pacific, the Middle East and Africa, comparable sales rose 4.3%.
Shares are up 6.6% over the past year

Jonathan Berr

Financial Writer and Media ColumnistJonathan Berr is a former reporter
with Bloomberg News whose work has appeared in The New York Times,
BusinessWeek and The Philadelphia Inquirer. In 2000, he won the Gerald
Loeb Award, one of the most prestigious prizes in business journalism.

http://www.dailyfinance.com/story/mcdonalds-to-close-430-outlets-in-japan-as-economy-falters/19350531/

Japan’s Bond Futures Rise for Fourth Day as Stocks Trim Gains
Share Business ExchangeTwitterFacebook| Email | Print | A A A By
Yasuhiko Seki

Feb. 10 (Bloomberg) -- Japanese bond futures rose for a fourth day as
local stocks trimmed gains, boosting demand for the relative safety of
government debt.

Ten-year futures completed the longest stretch of gains since November
after a government report showed producer prices fell for the 13th
month, backing the case for the Bank of Japan to keep interest rates
near zero. Ten-year yields approached a one-week low also on
speculation Japanese banks will keep buying government bonds as demand
for loans wanes.

“The widespread view that the Bank of Japan will keep interest rates
on hold will continue to serve as a key buffer for the bond market,”
said Katsutoshi Inadome, a fixed-income strategist in Tokyo at Bank of
Tokyo Mitsubishi UFJ Securities Co. “The bond market also rose as
stocks pared gains.”

Ten-year bond futures for March delivery rose 0.10 to 139.43 as of the
3 p.m. close of the Tokyo Stock Exchange. They earlier declined as
much as 0.17.

Ten-year yields fell one basis point to 1.33 percent, the lowest since
Feb. 1, as the Nikkei 225 Stock Average pared its gains to 0.3 percent
after climbing as much as 1.2 percent.

The costs companies pay for energy and unfinished goods fell 2.1
percent from a year earlier, easing from a 3.9 percent slide in
December, the Bank of Japan said today in Tokyo. The median estimate
of economists surveyed by Bloomberg News was for a 2.3 percent drop.

BOJ’s Policy Outlook

“Downward price pressure will persist for a while,” said Yoshiki
Shinke, a senior economist at Dai-Ichi Life Research Institute in
Tokyo. Given the Bank of Japan’s forecasts, it won’t raise the
benchmark interest rate from 0.1 percent at least through the year
ending March 2012, he said.

Central bank board members this month affirmed their forecasts for
Japan’s economy to keep expanding while consumer prices will fall
through the year ending March 2012, a third consecutive year of
declines.

Bonds also rose on speculation that tumbling bank lending will
encourage Japanese financial institutions to buy government
securities.

Bank lending, excluding advances from credit associations, fell for a
second month in January, dropping 1.7 percent from a year earlier, the
central bank said this week.

“Corporate demand for new loans is not likely to start recovering
immediately, making it harder for financial institutions to find
alternative assets in which they can invest,” said Takeshi Minami,
chief economist in Tokyo at Norichukin Research Institute Ltd. “That
will support the debt market.”

Greece Bailout

Government bonds fell earlier on speculation European nations will
bail out Greece, easing concern worsening government finances will
derail the global recovery.

Support for Greece will be discussed in coming days, Olli Rehn, the
European Union’s new economic affairs commissioner, said yesterday.
Michael Meister, a German legislator from Chancellor Angela Merkel’s
Christian Democrats, said lawmakers in that country are considering
financial assistance.

“Emerging expectations for a rescue for Greece by the EU and Germany
weakens flight-to-safety assets,” said Makoto Yamashita, chief Japan
interest-rate strategist at Deutsche Securities Inc. in Tokyo. “People
are now watching closely if policymakers there can hammer out
reasonable rescue measures and if the euro can halt its prolonged
downtrend.”

Machinery Orders

Bond gains were also tempered on speculation the world’s second-
largest economy is gaining momentum. Machinery orders, an indicator of
business investment in three to six months, surged 20.1 percent in
December from the previous month, the Cabinet Office said today.
Economists forecast an 8 percent gain, according to a Bloomberg News
survey.

“Assuming that a recovery in overseas demand remains intact, capital
spending may also start picking up sooner rather than later following
the upturn of machinery orders,” said Tatsushi Shikano, senior
economist in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s
largest banking group. “A sustained recovery will weaken prospects for
additional monetary easing and push up bond yields gradually.”

Japan’s economy expanded at an annual 3.6 percent pace in the three
months ended Dec. 31, according to a Bloomberg survey of economists
before the Cabinet Office releases its gross domestic product report
on Feb. 15.

To contact the reporter on this story: Yasuhiko Seki in Tokyo at
***@bloomberg.net.

Last Updated: February 10, 2010 02:21 EST

http://www.bloomberg.com/apps/news?pid=20601101&sid=aT9aaD.Fa7u0

Bloomberg

Asian Stocks, Currencies Rise on Greek Aid, Global Growth Signs
February 09, 2010, 11:50 PM EST

By Sandy Hendry and Shani Raja

Feb. 10 (Bloomberg) -- Asian stocks and emerging-market currencies
rallied as Germany signaled it may help support Greece’s finances and
economic reports showed recovering demand in Asia.

The MSCI Asia Pacific Index added 0.2 percent to 114.90 as of 12:36
a.m. in Tokyo, with two stocks rising for each one that dropped. The
South Korean won climbed 0.3 percent and the cost of protecting Asia-
Pacific bonds from default fell the most in five months.

Germany is considering assistance for Greece after the country’s
deficit threatened the stability of financial markets, two lawmakers
from Chancellor Angela Merkel’s governing coalition said yesterday.
Reports showed rising Japanese machinery orders in December and the
fastest pace of economic growth in Indonesia in a year in the fourth
quarter. China’s car sales doubled from a year earlier in January.

“Whether Greece will fail to repay its debt is the crux of this issue,
and I think it’s unlikely that an EU member will default,” said Masaru
Hamasaki, chief strategist at Tokyo-based Toyota Asset Management Co.,
which oversees the equivalent of $14 billion. “With robust foreign
demand, companies, especially manufacturers, will likely beat their
own earnings forecasts.”

Futures on the Standard & Poor’s 500 Index fell 0.3 percent, after the
index gained 1.3 percent yesterday. Walt Disney Co., the world’s
biggest media company, posted fiscal first-quarter profit that beat
analysts’ estimates after the market closed as television revenue
rose.

Commodities Producers

“Earnings across the region reinforce the view that the recovery is
gaining momentum,” said Stephen Halmarick, Sydney- based head of
investment-markets research at Colonial First State Global Asset
Management, which holds about $135 billion.

Japan’s industrial manufacturers advanced after the Cabinet Office
reported a 20.1 percent month-on-month surge in machinery orders in
December, more than twice as much as economists had estimated. Fanuc
Ltd., Japan’s largest maker of industrial robots, advanced 1.8 percent
to 8,950 yen, while Komatsu Ltd., the world’s second-biggest maker of
earthmoving equipment, gained 4.2 percent to 1,801 yen.

Car Sales

Nissan Motor Co., Japan’s No. 3 carmaker, jumped 3 percent after
scrapping its loss projection yesterday to forecast net income for the
year to March 31. The company benefited from government subsidies in
China and Japan.

China’s Shanghai Composite Index rose for a second day, adding 0.6
percent. SAIC Motor Corp., the largest carmaker, climbed 2.6 percent.
Sales of cars, multipurpose vehicles and sport-utility vehicles
increased to 1.32 million units, the China Association of Automobile
Manufacturers said yesterday.

Malayan Banking Bhd., Malaysia’s biggest bank, rose 1.3 percent, the
most in two months, after second-quarter profit rose 35 percent on
faster loan growth. Acer Inc., the world’s second-largest computer
vendor, added 1.9 percent after reporting its biggest quarterly profit
in almost three years.

Won, Peso

The won climbed to 1,160.3 per dollar after South Korea’s Vice Finance
Minister Hur Kyung Wook said yesterday the impact from Greece’s fiscal
woes on his nation will be “limited.” The Philippine peso gained 0.1
percent to 46.36 after a report showed exports increased 23.6 percent
from a year earlier in December, the fastest pace in four years. The
Indonesian rupiah strengthened 0.1 percent to 9,363 as a government
report showed the economy expanded 5.4 percent in the fourth quarter
from a year earlier.

The greenback pared losses against the yen before the release of
testimony today by Federal Reserve Chairman Ben S. Bernanke on the
central bank’s strategy for exiting from a policy of keeping interest
rates low. The dollar advanced to 89.72 yen in Tokyo from 89.69 yen in
New York yesterday. It earlier touched 90.02 yen, the highest level
since Feb. 4.

“Demand for the dollar will increase if Bernanke’s remarks indicate
the U.S. is heading for exit,” said Toshiya Yamauchi, manager of
currency margin trading at Ueda Harlow Ltd. in Tokyo.

Yuan, Commodities

Yuan forwards declined, snapping a two-day advance, after an editorial
in a state-owned newspaper signaled Chinese authorities may limit
appreciation to help sustain a recovery in exports. The currency may
not have “big” gains in the first half because economic conditions
haven’t improved, the China Securities Journal column said. Twelve-
month non-deliverable yuan forwards dropped 0.3 percent to 6.6770 per
dollar.

Copper dropped, reversing earlier gains, after January imports by
China were less than expected. Shipments of copper and products by the
world’s largest consumer of the metal totaled 292,096 metric tons last
month, the customs office said today. That’s 21 percent less than
December’s level, according to data compiled by Bloomberg. Copper for
three-month delivery on the London Metal Exchange fell as much as 0.2
percent to $6,576.25 a ton.

Oil dropped 0.7 percent to $73.27 a barrel after the American
Petroleum Institute said crude inventories rose 7.2 million barrels
and gasoline supplies by 1.55 million barrels last week, more than
expected.

--With assistance from Ben Sharples in Melbourne, Li Xiaowei in
Shanghai, Bob Chen in Hong Kong and Masaki Kondo in Tokyo. Editors:
Matthew Brooker, Ken Kohn

To contact the reporter on this story: Shani Raja in Sydney at
[phone] or ***@bloomberg.net;

To contact the editor responsible for this story: Sandy Hendry at
[phone] or ***@bloomberg.net.

http://www.businessweek.com/news/2010-02-09/stocks-commodities-won-rise-on-greek-aid-china-growth-signs.html

Nikkei drifts up 1 percent;Toyota up but Honda falls
Tue Feb 9, 2010 9:22pm EST
By Elaine Lies

TOKYO, Feb 10 (Reuters) - Japan's Nikkei stock average rose 1 percent
on Wednesday after reports of an aid plan for heavily indebted Greece
eased worries about global economic stability, while a weaker yen
buoyed exporters such as Canon Inc (7751.T).

Toyota Motor Corp (7203.T) edged up, with some market players saying
its share price may have bottomed and despite a new recall of Camry
sedans for steering problems.

Honda Motor Co (7267.T) slipped after saying on Wednesday it would
recall 437,763 vehicles globally for defective airbags.
[ID:nTFA006595]

A senior German ruling coalition source said euro zone governments
have decided in principle to help Greece, calming investors after risk
aversion increased in the past two weeks on concern about the fiscal
stability of Greece, Portugal and Spain. [ID:nSGE61801C]

"Certainly there are reports about support for Greece, but nothing
concrete's been decided. So while downward pressure has definitely
decreased, there's still no real reason to buy," said Hideyuki
Ishiguro, a strategist at Okasan Securities.

Japan's core machinery orders rose more than expected in December from
the previous month, easing concern that capital spending may continue
to slump and shackle the economy's fragile recovery, and while this
boosted individual machinery shares, gains were expected to be
limited. [ID:nTOE61708J]

"The machinery orders data is extremely volatile -- the month before
this orders really plunged. So while today's figures aren't bad for
the market, it's hard to say that this recovery will go on, so few
investors really want to buy on this," said Ishiguro.

The benchmark Nikkei .N225 gained 102.88 points to 10,035.78, while
the broader Topix rose 0.8 percent to 888.83. Volume slipped a bit the
day before a market holiday on Thursday.

Market players said that investors, including commodity trading
advisors (CTAs) appeared eager to sell a bit above 10,000, and that
this would also limit gains.

In the latest blow to its reputation, Toyota said in a document sent
to U.S. dealers and obtained by Reuters that 2010 Camrys equipped with
a 4-cylinder engine might have a shorter-than-required power steering
pressure hose in their engine compartments. [ID:nN09109575]

Toyota shares rose 0.3 percent to 3,385 yen after briefly dipping into
negative territory, while Honda slipped 0.2 percent to 3,055 yen.

Shares of machinery makers gained after core machinery orders rose
20.1 percent, with machine tool maker Okuma Corp (6103.T) climbing 2.7
percent to 539 yen and Amada Co (6113.T), a maker of metal-processing
machines, rising 4.3 percent to 651 yen.

Industrial robot maker Fanuc Ltd (6954.T) advanced 2.4 percent to
9,000 yen. (Reporting by Elaine Lies; Editing by Joseph Radford)

http://www.reuters.com/article/idUSTOE61903F20100210

...and I am Sid Harth

[chhotemianinshallah]

Published: February 09, 2010
Washington and Lee University Economic Expert on Toyota

Newswise - Toyota's current dilemma results from a perfect storm of
factors that include rapid expansion that led to strained resources
and wishful thinking, both amplied by a parochial management
structure.

That is the assessment of Michael Smitka, Washington and Lee
University professor of economics who specializes in the automotive
industry and the Japanese economy.

According to Smitka, Toyota's expansion strained its engineering
resources.

"Engineers were remote from the market and are rotated from project to
project rather than being encouraged to specialize," Smitka says. "It
is likely that in the process the institutional memory of why, for
example, one accelerator pedal design is used in Japan and another
everywhere else has been lost - an item first used in 2005 would have
been sourced in 2003 or earlier.

"In addition, those decisions were almost certainly made in Japan, and
not at the Toyota Technical Center outside Ann Arbor. But few of the
hands-on engineers in Toyota City have worked extensively outside
Japan, and they would be unlikely to understand the penchant of
Americans to throw a cheap floor mat on top of the Toyota one to keep
it pristine. Long lines of communication would make it less likely
they would ask for, or listen to, outside advice."

Smitka is available to speak about Toyota's current recalls and the
impact on the Japan economy, the company's culture, and what its
future might be.

He is the author of the book, Competitive Ties: Subcontracting in the
Japanese Automotive Industry, and numerous articles about the Japanese
automobile industry, including a 2001 article on Toyota for the
Encyclopedia of Japanese Business.

Source: NewsWise

http://newsblaze.com/story/2010020917200300004.wi/topstory.html

Bloomberg

Yen Falls as Greece Aid, China Growth Bets Curb Safety Demand
February 09, 2010, 11:56 PM EST

By Yoshiaki Nohara and Ron Harui

Feb. 10 (Bloomberg) -- The yen fell for a second day against the euro
on prospects the European Union will help Greece stem its budget
crisis, damping demand for Japan’s currency as a refuge.

The yen weakened against all of its 16 major counterparts as Asian
stocks rallied and before reports forecast to show growth in Chinese
trade. The dollar climbed against the yen before the release of
testimony by Federal Reserve Chairman Ben S. Bernanke on the strategy
for exiting from low interest rates and liquidity programs.

“There was a suggestion from Germany in particular that they will come
up with something to support Greece, and you’ve got a decent bounce in
the euro,” said Phil Burke, chief dealer for global foreign exchange
and rates at JPMorgan Chase & Co. in Sydney. “In Asia, currencies and
equities will be supported on dips.”

The yen slipped to 123.81 per euro at 11:01 a.m. in Tokyo from 123.75
in New York yesterday. The dollar advanced to 89.79 yen from 89.69
yen, after touching 90.02 yen, the highest level since Feb. 4. The
euro traded at $1.3789 from $1.3797.

German Finance Minister Wolfgang Schaeuble plans to brief lawmakers
today on steps he may take to support the Greek government before the
European Union holds a summit tomorrow. Olli Rehn, who takes over as
European economic affairs commissioner tomorrow, said Greece has to
“do the necessary measures” in exchange for the EU’s support.

Greek Bonds

“This will be further discussed in the coming days,” Rehn said in an
interview in Strasbourg, France. “We are talking about support in the
broad sense of the word. I cannot specify it now. Solidarity goes both
ways.”

Greek 10-year bond yields yesterday slid 37 basis points to 6.39
percent. The premium investors demand to hold the securities instead
of benchmark German bunds narrowed 40 basis points to 323 basis
points. The two-year note yield dropped 32 basis points to 6.28
percent.

“Investors hope that official assistance to Greece will help stop the
debt crisis from spreading elsewhere in the world,” said Danica
Hampton, senior strategist for markets at Bank of New Zealand Ltd. in
Wellington. “Against a backdrop of firm equities and improving risk
appetite, the dollar and the yen may face downward pressure.”

China’s Trade

The Australian dollar traded near its highest level in almost a week
against the greenback on prospects China’s imports rose by the most
since at least January 1991, adding to signs growth in the world’s
third-largest economy is picking up.

“Strong China data would likely enhance risk appetite,” said Masanobu
Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda
Harlow Ltd. “Resource-rich currencies like Australia’s dollar will
probably be bolstered, while the U.S. dollar and the yen could
weaken.”

Australia’s dollar bought 87.89 U.S. cents from 87.87 cents in New
York yesterday, after earlier rising to 87.97 cents, the highest level
since Feb. 4. The so-called Aussie was at 79.02 yen from 78.80 yen.

The Nikkei 225 Stock Average rose 1.1 percent, and the MSCI Asia
Pacific Index of regional shares gained 0.6 percent.

Bernanke Testimony

The dollar was supported before Bernanke’s testimony on the Fed’s exit
strategy is released at 10 a.m. in Washington today. He was scheduled
to speak before the House Financial Services Committee on “Unwinding
Emergency Federal Liquidity Programs and Implications for Economic
Recovery.” The hearing was postponed due to snow and hasn’t been
rescheduled.

“Demand for the dollar will increase if Bernanke’s remarks indicate
the U.S. is heading for exit,” said Toshiya Yamauchi, manager of
currency margin trading at Ueda Harlow Ltd. in Tokyo.

The dollar rose against the pound on speculation a U.S. report will
show the U.S. trade deficit narrowed, increasing the allure of assets
in the world’s largest economy. The dollar gained to $1.5708 per pound
from $1.5719.

--Editors: Rocky Swift, Nicholas Reynolds

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at
[phone] or ***@bloomberg.net; Ron Harui in Singapore at
[phone] or ***@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at
[phone] or ***@bloomberg.net.

http://www.businessweek.com/news/2010-02-09/euro-may-extend-gains-versus-yen-on-signs-of-greece-bailout.html

Bloomberg

Japan Needs to Be More Flexible on Steel Mergers, Official Says
February 09, 2010, 08:45 PM EST

By Masumi Suga and Yasumasa Song

Feb. 10 (Bloomberg) -- Japan’s competition regulator needs to be more
flexible on anti-monopoly rules to enable domestic steelmakers to
compete with international rivals, a trade ministry official said.

“The Fair Trade Commission needs to embrace a perspective of
international competitiveness” when it considers mergers and tie-ups
among Japanese steelmakers, Masaki Koito, director of the iron and
steel division at the Ministry of Economy, Trade and Industry, said in
an interview on Feb. 5.

Kyoei Steel Ltd. and Tokyo Tekko Co. in October called off a merger to
create Japan’s second-largest electric-arc furnace steelmaker after
saying it took more time than anticipated for the watchdog to review
the plan.

Japan, the second-biggest steel producer behind China, is losing
ground as China considers a new steel policy that will encourage
mergers to create three to five mills with capacity of about 50
million metric tons each. Nippon Steel Corp., Japan’s biggest mill,
produced 26.5 million tons in 2009.

Shares in Nippon Steel gained 1.3 percent to 323 yen as of 9:34 a.m.
in Tokyo. They have dropped 14 percent this year. JFE Holdings Inc.,
the second-largest producer, rose 2.3 percent to 3,165 yen.

Nippon Steel plans to raise its stake in Nisshin Steel Co., the
smallest of Japan’s five blast-furnace steelmakers, to 20 percent and
sell part of its 80 percent stake in a stainless steel unit, the Asahi
newspaper reported on Jan. 1.

Improving Efficiency

Nippon Steel has notified the commission of the plan and may reduce
the proposed stake in Nisshin Steel, depending on the commission’s
judgment, the report said. Company spokesman Hayato Uchida declined to
confirm the report.

“There’s room for an improvement in efficiency, given it took so long
for the commission to conclude its probes in some cases,” Koito said.

Follow-up inquiries were necessary before the commission could approve
the Kyoei Steel and Tokyo Tekko merger, said Wataru Kobayashi,
director of the Japan Fair Trade Commission’s merger and acquisition
division.

The commission typically looks at whether a merger will stifle
competition domestically, according to Koito. The regulator should
also consider the international arena to get a wider perspective of
the ramifications of a merger, he said.

The regulator is chaired by Kazuhiko Takeshima, who worked in the
office of then Prime Minister Junichiro Koizumi before joining the
agency in 2002.

Steel Mergers

JFE Holdings was formed in September 2002 by the merger of Kawasaki
Steel Corp. and NKK Corp. Nippon Steel, Sumitomo Metal Industries Ltd.
and Kobe Steel Ltd. have extended a partnership since they agreed to
buy stakes in each other in November 2002.

China’s economy is forecast to expand by 10 percent and India’s by 7.7
percent in 2010, while Japan is expected to grow at 1.7 percent after
coming out of its worst recession since the end of World War II,
according to a report last month by the International Monetary Fund.

Japanese steelmakers are depending more on exports to Asia after
domestic manufacturers cut investment and the government halted public
work projects, including construction of the $5 billion Yamba Dam
north of Tokyo, as part of its efforts to control spending.

Domestic consumption of construction steel has fallen 9 percent in the
past two years to 25.6 million tons, according to Tokyo-based Nippon
Steel, which cites the data from the Iron and Steel Federation.

Japanese steelmakers should target Asian markets for steel used in
quakeproof homes, railroads and nuclear plants to keep pace with
overseas rivals, Koito said.

Automotive steel has been the main source of revenue outside Japan and
growing economies in Asia will enable them to expand sales for housing
and infrastructure, Koito said.

“There are many more areas where Japanese steelmakers can be more
competitive in their steel products,” Koito said, citing China and
India.

--Editors: Aaron Sheldrick, Indranil Ghosh.

To contact the reporters on this story: Masumi Suga in Tokyo at
[phone] or ***@bloomberg.net; Yasumasa Song in Tokyo at
[phone] or ***@bloomberg.net.

To contact the editor responsible for this story:

Andrew Hobbs in Sydney at [phone] or ***@bloomberg.net.

http://www.businessweek.com/news/2010-02-09/japan-needs-to-be-more-flexible-on-steel-mergers-official-says.html

The world seeks an exit strategy

Ben Bernanke must today begin explaining how the US will pull back
from the unprecedented monetary and fiscal support given to the
economy after the credit crisis. It is a debate going on across the
globe

By Stephen Foley and David Prosser

Wednesday, 10 February 2010

In his first term chairing the Federal Reserve, Ben Bernanke won the
nickname "Helicopter Ben" for his willingness to shower money on the
markets, as he tried to put out fires in the credit crisis. Second-
term Ben will need a new nickname, because the next order of business
is pulling all that money back out of the system.

Mr Bernanke is due on Capitol Hill today to outline some of the tools
at his disposal, his contribution to the burgeoning worldwide debate
about "exit strategies". For governments that have loosened the fiscal
purse strings to pay for economic stimulus packages, just as for
central banks that printed money to bring down interest rates, these
are vital and controversial questions. The pressures vary from country
to country, but a burgeoning army of exit strategists must answer two
questions: not just "when?", but "how?".

In the US, the Obama administration is taking a similar approach to
fiscal policy as it is to the war in Afghanistan: a surge now,
followed by a commitment to begin pulling out in 2011. There will be
more economic stimulus this year (this time a $100bn "Jobs Bill"),
plus a promise to freeze spending and cut the deficit next year. It is
a tricky balancing act, a high wire between Republican fears that the
national debt is dangerously high, and Democratic fears that the
economy is dangerously weak.

For Mr Bernanke, exit strategies are also fraught, with the added
complication that any move could have amplified consequences across
fragile financial markets. The US banking system has been rejuvenated
because institutions have been able to borrow from the Fed at
effectively no cost, turning all the interest they get from customers
into profit. A gentle move to raise rates could thus have a
disproportionate effect on banks' capitalisation.

The Fed's balance sheet, meanwhile, has swollen from a pre-crisis
$600bn to more than $2 trillion, and it is using newly printed money
to buy $1.25 trillion of mortgage-backed securities in order to hold
down home loan interest rates. But the US housing market is not yet
unequivocally on the up, so selling these securities back into the
market seems unlikely to be an early part of the exit strategy.
Neither does selling the $300bn of US Treasuries that the Fed
purchased in another example of quantitative easing last year, though
the New York branch of the Fed has been researching the market impact
of potential sales with a number of small trial runs in recent months.

"The Fed has to undertake this process gradually," says John Lonski,
US economist at Moody's Investors Service. "I think it is a bit too
early to be putting energy into debating exit strategies; we are yet
to normalise the credit markets and there is still an insufficient
supply of credit."

In front of the House Financial Services Committee, Mr Bernanke will
major on "how?", and keep his counsel on the "when?". At least the Fed
chair can boast he has plenty of levers to pull, when the time is
right. One in particular is crucial. Congress last year gave the Fed
permission to pay interest on the reserves that financial institutions
leave at the central bank. The first move in the exit strategy could
be to raise that rate from its current 0.25 per cent, which the Fed
thinks will be an effective way to push up rates across the range of
credit markets.

But much is out of Mr Bernanke's hands. If Europe's central banks end
their loose monetary policy, that could strengthen their currencies at
the expense of the dollar and stoke inflation in the US, which might
force his hand into tightening policy early.

UK: A weak recovery but no money left to pay for additional help

Britain's decision on when to begin withdrawing fiscal and monetary
policy boosts to the economy is not being taken from a position of
strength. With economic growth of just 0.1 per cent in the final
quarter of last year, it is clear that in an ideal world, economists
and politicians would like to carry on boosting the recovery for the
foreseeable future. But against that must be balanced the fear that
public debt is becoming unsustainable.

Indeed, while the political game of insult-swapping continues – "you
would cut, we would invest", "you're irresponsible, we're not" – the
UK is already being weaned off life support. The temporary reduction
in the VAT rate was reversed at the beginning of the year, while the
scrappage scheme, providing a boost to the car industry, is now
drawing to a close.

The Bank of England, meanwhile, has suspended its quantitative easing
programme and economists expect the next move in interest rates to be
up rather than down, though not before the second half of 2010 at the
earliest.

That said, public spending cuts, other than mild retrenchment to
appease the markets, are unlikely this year, whoever wins the
election. And while some tax rises will kick in in April, the fiscal
tightening begins in earnest in April 2011.

Europe: Mixed fortunes make for hard debate

The eurozone may have one currency, but it is deeply divided on
economic policy. On the one hand, countries such as Greece, Portugal
and Spain are barely out of recession – or still in downturn, in the
latter's case – but under huge pressure to improve their public
finances while on the other, Germany, from a position of relative
economic strength, is keen to pare back. Broadly in the middle sits
France, which accepts the need for a return to the strict rules on
borrowing that once ruled the single currency area – borrowing capped
at 3 per cent of GDP annually – but believes the pruning must be done
with some patience.

The European Central Bank, meanwhile, which has been consistently less
aggressive than the Bank of England on monetary easing, now wants to
cut back on its emergency lending to the financial sector, though the
Greek crisis may make that more difficult.

Japan: The curse of Japanese deflation continues – with no end in
sight

Japan is less far advanced on the move to unwind fiscal and monetary
support packages than any other developed economy in the world.
Indeed, amid fears that a return to recession is a real danger in the
months ahead, with unemployment at record highs and no sign of any
improvement in consumer spending, Japan's parliament has been debating
whether to introduce a third round of fiscal stimulus measures.

The Bank of Japan is equally determined not to deviate from its course
of easing, with deflation continuing apace so far this year. Though
the Bank does not share the more gloomy forecasts of a return to
recession this year, it is predicting prices will continue to fall,
which makes a change of monetary policy unlikely.

China: No longer willing to prop up the global economy

A $586bn (£373bn) package of government infrastructure, training and
research spending helped prop up not just China's economy but also
optimism about world trade last spring, but the Communist regime has
now unequivocally entered "tightening" mode. The economy was growing
at a 10.7 per cent annual rate by the end of 2009, and the stock
market had leapt 80 per cent on the year, leaving rulers concerned
that banks had begun to make frothy investments in the stock market
and in real estate.

Prime Minister Wen Jiabao said he wished bank lending last year had
not reached the $1.4 trillion that it did.

With signs that it was accelerating rather than slowing, some state-
owned institutions were told to stop making new loans halfway through
January, and there have been local reports of infrastructure projects
being cancelled. It was these reports that sparked a sell-off by Asian
stock markets at the end of last month.

The Chinese central bank has also so far this year hiked a key lending
rate and demanded that banks put aside more reserves against potential
bad loans – all measures designed to crimp the bank lending spree that
fuelled last year's economic expansion.

India: A budget to rein in price increases

The price of lentils, rice and other basic foods is rising at an
annual rate of 17.6 per cent in India. Potatoes are up 44 per cent.
The soaring prices have put inflation at the top of the list of
political issues and piled pressure on the government to rein in the
fiscal and monetary stimulus with which the economy was dosed last
year. The country's central bank governor, Duvvuri Subbarao, has begun
to pull some of the $125bn in extra liquidity in the system, demanded
higher capital reserves at banks, and is widely expected to push up
interest rates without waiting for the next scheduled policy meeting
in April. He has also urged the government to mirror these efforts
with spending cuts, in part to get a grip on a deficit that will pass
10 per cent of GDP this year. The government's next budget, due later
this month, is likely to be highly contentious.

Australia: Last in and first out

Having weathered the slowdown better than any other developed nation,
Australia was the first economy to begin tightening monetary policy,
and has announced three interest rate increases since October. The
Reserve Bank of Australia surprised economists by leaving rates on
hold at 3.75 per cent last week, but said it expected to impose
further increases later this year.

After boosting the economy in 2008 and 2009, the government has also
begun to cut back its fiscal stimulus programmes, stopping, for
example, grants for homebuyers, though higher public infrastructure
spending is continuing.

http://www.independent.co.uk/news/business/analysis-and-features/the-world-seeks-an-exit-strategy-1894530.html

...and I am Sid Harth

[chhotemianinshallah]

Truckers' spending to gauge economy's health
Tom Abate, Chronicle Staff Writer

Wednesday, February 10, 2010

A new index that tracks the movement of goods shipped by truck
suggests that the U.S. economy is growing, but too slowly to bring
about a strong labor market recovery.

The Ceridian-UCLA Pulse of Commerce Index, a measure being introduced
today by UCLA Anderson economist Edward Leamer, uses credit card
purchases by truckers at more than 7,000 truck stops nationwide as a
proxy for the goods-producing sector of the U.S. economy.

The production of goods accounted for 23 percent of the gross domestic
product in the last quarter, and was dwarfed by the service sector,
but Leamer said goods are the volatile part of the economy, throttling
up or pulling back as consumers spend more or less.

Looking back over the past 10 years, Leamer found that purchases of
diesel fuel and supplies by truckers paralleled the GDP - they fell
before the GDP tumbled and rose before that overarching economic
measure moved up.

Leamer said the pulse approximates the flow of goods in real time as
transactions are processed by Ceridian Corp., issuer of the Comdata
credit card, which is widely used by truckers who work for large
fleets.

"We're taking the pulse of the economy, not just at the neck or the
wrist but at 7,000 locations nationwide," he said.

Applying this gauge to the current situation, Leamer said the index
rose at a 7.3 percent annualized rate in the fourth quarter of 2009
when, according to preliminary figures, the GDP grew 5.7 percent.

But in January, the index's quarterly rate of growth slipped back to
3.3 percent - less than half the year-end figure.

"What this suggests is that the expansion at the start of 2010 is half
as fast as it was at the end of 2009," Leamer said.

The Ceridian-UCLA index will be released monthly. Leamer said the
March figure will be particularly important because that is a peak
shipping month - the others being August and October.

E-mail Tom Abate at ***@sfchronicle.com.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/02/09/BUMD1BUVAI.DTL

Forecaster of the Month
Feb. 10, 2010, 12:00 a.m. EST ·

'Virtuous cycle' of growth is ahead, winning forecaster says

Citi's D'Antonio: Rising incomes should fuel an increase in consumer
spending

By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) -- As the nation's temporary economic
stimulus fades, the U.S. economy is beginning to grow on its own
steam, a top economic forecaster says.

"We'll see a virtuous cycle of growth," in which rising incomes create
more spending, which in turn creates more income, said Peter
D'Antonio, an economist for Citigroup Global Markets, an arm of
Citigroup Inc. "We'll have better growth driven by demand."

He projects real gross domestic product rising at an annual pace of 3%
to 3.5% by the end of the year.

Typically, the economy would grow much faster than that coming out of
such a deep recession. But the economy is still hobbled by a
dysfunctional financial system, he said.

Peter D'Antonio
citigroup

Forecaster of the Month award from MarketWatch, in recognition of his
prowess at estimating 10 key economic indicators released during the
month. Compared with 43 other forecasters, D'Antonio had the most
accurate forecasts on two of the indicators, and was among the top 10
most accurate on four others.

It's the first time D'Antonio has won the contest. His predecessor,
Brian Jones, won it five times when he was doing the forecasting for
Citi.

D'Antonio has been at Citi since 1991, and worked at Chemical Bank
before that. He earned his undergraduate degree at Princeton and his
doctorate in economics at the University of Pennsylvania. He was the
firm's main forecaster until the merger with Salomon Bros. in 1998. He
took over the short-term forecasting again in 2007.

Fixing the Hole in America's BucketDeputy Markets editor Dennis Berman
says America still hasn't come to terms with the hole in its fiscal
policy. He asks Evan Newmark what event would help the U.S. understand
that there's something "terribly wrong."
"Consumers will do OK," D'Antonio said, but consumer spending will not
be the main driver of growth. He's encouraged by improvement in the
labor market, especially the increase in average hours, which is
putting more money in consumers' pockets.

Although some people insist that there can be no recovery without job
growth, actually it's just the opposite: There can be no job growth
without recovery. "Income is the main fuel for consumer spending,"
D'Antonio said.

A year ago, income from wages was falling at nearly a 4% annual rate;
over the past four months, incomes are rising about 0.7% annualized.
That's not enough to fuel a boom, but it's enough to push the economy
forward.

D'Antonio said the Fed probably won't raise short-term interest rates
until the fourth quarter, when he expects the federal funds to go from
near 0% to 1%. Before any move, the Fed will look for signs that the
recovery is sustainable, that the downside risks to inflation have
been capped, and that the financial system is healthy.

The runners-up in the January contest were Sherry Cooper's team at BMO
Capital Markets, Joel Naroff of Naroff Economic Advisers, Dean Maki's
team at Barclays Capital, and Mike Thomas of Met Capital.

The median forecasts that MarketWatch publishes each week in the
Economic Calendar come from the forecasts of the 10 economists who've
scored the highest in our contest over the past 12 months, as well as
the forecast of the most recent winner. See our complete economic
calendar and consensus forecast.

Over the past year, the top economists are, in order: Nigel Gault and
Brian Bethune of IHS Global Insight; Maury Harris's team at UBS;
Stephen Stanley's team at RBS Securities; independent consultant Brian
Jones; Spencer Staples of EconAlpha; David Greenlaw of Morgan Stanley;
John Silvia's team at Wells Fargo Securities; D'Antonio of Citigroup;
Michael Feroli and Abiel Reinhart at J.P. Morgan Chase; and Maki's
team at Barclays Capital.

Rex Nutting is Washington bureau chief of MarketWatch.

http://www.marketwatch.com/story/virtuous-cycle-of-growth-coming-forecaster-says-2010-02-10?reflink=MW_news_stmp

Bloomberg

Trade Deficit in U.S. Probably Narrowed as Exports Increased
February 10, 2010, 04:06 AM EST

By Courtney Schlisserman

Feb. 10 (Bloomberg) -- The trade deficit in the U.S. probably narrowed
in December as exports grew for an eighth consecutive month,
economists said before a report today.

Faster economic growth in emerging countries and a drop in the
dollar’s value that is making American goods more competitive are
propelling a rebound in sales overseas that may spur further gains in
U.S. manufacturing. Efforts to rebuild inventories will probably also
draw in goods from abroad, giving global trade a lift.

“The exporting piece of the economy is going to do pretty well,” said
Ken Mayland, president of ClearView Economics LLC in Pepper Pike,
Ohio. “Imports are growing fast, which is reflective of our own
economy doing better.”

The Commerce Department’s trade figures are due at 8:30 a.m. in
Washington on the Census Bureau’s Web site. Survey estimates ranged
from gaps of $31 billion to $40 billion.

Emerson Electric Co. and Dow Chemical Co. are among manufacturers
benefiting from the recovery in global growth.

Emerson, the maker of industrial equipment and garbage disposals, this
month forecast fiscal 2010 profit that topped analysts’ estimates.
Sales in the first fiscal quarter also topped estimates, partly driven
by a 13 percent increase at the St. Louis-based company’s climate-
technologies unit amid growth in Asia and the U.S.

Demand Overseas

Dow, the largest U.S. chemical maker, this month reported fourth-
quarter profit and sales that topped the average estimate of analysts
surveyed by Bloomberg. Revenue in the Asia Pacific region jumped 27
percent as sales volumes rose 34 percent, Dow said. Revenue increased
34 percent in India, the Middle East and Africa and 6.5 percent in
Latin America.

“The same strong demand growth we’re witnessing in emerging
geographies bodes well for global growth,” Chief Executive Officer
Andrew Liveris said during a Feb. 2 call with analysts and investors.
“We continue to closely monitor China’s overheating manufacturing
engine for the potential for the creation of asset bubbles.”

Concerns that China will cool its economy and that budget deficits
will undermine some European economies such as Greece have contributed
to a slump in stocks this year. The Standard & Poor’s 500 Index has
dropped 4 percent in 2010 after climbing 65 percent last year
following a 12-year low March 9 on signs the world economy was
emerging from the worst recession in the post- World War II era.

Lower Dollar

The dollar has dropped 10 percent against a trade-weighted basket of
currencies from the U.S.’s biggest trading partners from a five-year
high reached on March 9, making American products more affordable to
buyers overseas.

Manufacturing expanded in January at the fastest pace since August
2004, a report from the Institute for Supply Management this month
showed. The group’s export gauge increased to the highest level in
more than a year.

Sales overseas contributed 1.9 percentage points to economic growth in
the fourth quarter, the most in two years and the second-biggest
addition since 1996. The world’s largest economy expanded at a 5.7
percent annual in the last three months of 2009, the best performance
in six years.

At the same time, the need to prevent inventories from falling even
more as demand improves also causing imports to rise. Purchases of
goods made overseas subtracted 1.4 percentage points from growth,
leaving trade’s contribution to the recovery at a half point in the
fourth quarter.

--With assistance from Chris Middleton in Washington, Jack Kaskey in
New York and Will Daley in Chicago. Editors: Carlos Torres, Brendan
Murray

To contact the reporter on this story: Courtney Schlisserman in
Washington at [phone] or ***@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz
at [phone] or ***@bloomberg.net

Company news: EMR US <Equity> CN DOW US <Equity> CN

-0- Feb/10/2010 05:00 GMT

http://www.businessweek.com/news/2010-02-10/trade-deficit-in-u-s-probably-narrowed-as-exports-increased.html

Bloomberg

GM Expects Heavy-Duty Silverado to Appeal to Work-Truck Buyers
February 10, 2010, 12:26 AM EST

By Katie Merx

Feb. 10 (Bloomberg) -- General Motors Co. is rolling out a revamped
heavy-duty version of the Chevrolet Silverado pickup that the largest
U.S. automaker expects to sell to work-truck buyers as U.S. economy
improves.

The 2011 model is being unveiled today at the Chicago Auto Show and is
slated to go on sale in the middle of this year, GM said in a
statement. Changes include more towing capacity, better fuel economy
and a stronger chassis, the automaker said. The styling for the truck
is largely unchanged.

GM worked on the revised version of the Silverado while the Detroit-
based company underwent a government-aided bankruptcy restructuring,
limiting how much could be done. The company did seek input from
customers of the heavy-duty pickups, said Jim Campbell, Chevrolet’s
general manager, in the statement.

“With a vehicle like that, it’s important to continually upgrade its
capability more than the styling,” said Stephanie Brinley, an analyst
at consulting firm AutoPacific Inc. in Troy, Michigan. “The launch of
the heavy-duty truck will coincide nicely with the improvements
expected in the economy in the second half of the year.”

GM forecasts that industrywide U.S. sales will rise to 11.5 million to
12 million light vehicles this year, from 10.4 million in 2009. The
automaker also has said it expects work-truck sales to increase with
an improving outlook for the housing industry.

--Editors: John Lear

To contact the reporter on this story: Katie Merx in Southfield,
Michigan, at [phone] or ***@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at
[phone] or ***@bloomberg.net

-0- Feb/10/2010 05:01 GMT

http://www.businessweek.com/news/2010-02-10/gm-expects-heavy-duty-silverado-to-appeal-to-work-truck-buyers.html

THE "ONE NOTE REPUBLICANS" HAVE NO CLUE FOR FIXING AN ECONOMY

Gary AterFebruary 09, 2010 How can the past Republicans, that left
Americans with the largest deficits in history, decry Democrats for
spending to save the economy?

…Previous underwear model, & new US Senator, Scott Brown says:
"Stimulus didn´t create one new job." However, the city of Oakland,
CA, says that the stimulus money "created 5000 new infrastructure
jobs".

Even though the conservatives keep having "hissy fits" about all the
government spending, there are very few economists that agree that
cutting government spending and applying massive tax cuts are the way
to go at this time.

One recent article in the New York Times said "To stop government
spending now would be suicide while the economic recovery is still so
fragile. In today´s atmosphere, the US government is the only source
available for getting money out into the market as the private
investors are holding on to what they have while they are keeping an
eye on the overall US business economy." Even the Noble Prize winning
economist, Paul Krugman says that there needs to be more government
spending on real US infrastructure and "Green" jobs programs until the
economy actually starts to outwardly show real recovery.

It just drive me bonkers when these so called "conservatives" keep
saying that "it´s time to stop spending and we need massive tax cuts
for small businesses for increasing more US jobs". Pleeeeeease read
your history people. "Tax cuts don´t create jobs, and neither does
stopping government spending. Especially when the government is the
country´s last resort for making large sums of money available."

As a case in point, in a recent polling of small business owners, the
owners were asked; "What would you do with the additional revenue if
your business was able to receive an immediate major tax cut?" In
fact, they were specifically asked, "Would you hire a new employee if
you received a small-business tax cut?"

Every small business owner that was asked gave a resounding; "No, they
would not hire another employee."

They did say however, that they would probably spend some money on
some investments in their business. And some even said that they might
re-do their kitchen or bathroom at home. But they would not add any
new employees.

They were very clear that from their experience, tax cuts don´t create
jobs. Only increases in sales or their actual business activity
creates openings for new employee hiring´s. Once they could no longer
handle their business or sales increases with their current staff,
then, and only then would they consider hiring a new employee.

This has always been the traditional approach by small businesses in
America, and probably most everywhere else. Small businesses do not
normally plan ahead like those in an R&D environment where one invests
ahead to get a jump on their competitors. Small businesses use a
"reactive" business approach", not a "pro-active" approach, in regards
to their new hires.

The business owners added that the government could possibly offer
some financial incentives for opening up some new positions, but only
if the government would take the responsibility for the salary and
benefits of these new employees for some initial period of time.

So why do the Republicans and the conservatives continue to push the
old "wives´ tale" that spending must stop and taxes must be cut to fix
the economy?

It didn´t work with the Great Depression and it is pretty much agreed
that if there had not been the TARP bail-out and Obama´s Stimulus
Package, the market would still be in the dumper. In addition, the
unemployment rate would probably also be above 25%. And even with all
that help, we still have a long way to go. (After Ronald Reagan, two
Bush´s and a Clinton that was sometimes more centrist about trade than
expected, it will still take some time for things to work out.)

This weekend on the Sunday morning talk show, Meet the Press, both
former Bush Treasury Secretary, Henry "Hank" Paulson and Former Fed
Chairman, Alan Greenspan appeared together to discuss the current US
economy. Both of these conservatives agreed that the economy was in a
recovery mode and that the actual recession was "officially" over.

As expected, neither of these individuals agreed with Obama´s plan for
letting the Bush "tax-cuts-for-the-rich" expire, but their opinions on
that issue were not very adamant in their comments. (Basically, as
with most conservatives, their DNA is totally unable to accept any
concept that would once again increase taxes on wealthy Americans.)

They did however agree with the poll that was taken with the small
business owners. As if on cue, they both thought that tax cuts for
small business was a good idea, but they also said it takes business
increases to increase job opportunities. Secretary Paulson said that
with an increase in business, it would "increase the[small business
owners] confidence which would support increasing job opportunities"
Paulson went on to emphasized that "confidence is the key", while
Chairman Greenspan sat there nodding in agreement.

Both of these financial "experts" seemed to say that baring a
catastrophic event, the economy would continue to improve. However,
the increase in available financing and overall business must occur in
order for the unemployment numbers to continue to decline.

Both men expected the unemployment rate to remain at 9-10% for most of
this year and to start declining by the end of the year.

So what´s the anticipated recipe for future US financial success?

Pass another Jobs stimulus bill that actually supports jobs to fix the country´s infrastructure.
Still allow the Bush tax cuts to expire.
In order to get some business accomplished in the US Senate, make the Republican Senators actually have to stand and "Filibuster" a bill, just as the filibuster was originally designed.
Just as China, India and Japan have done, institute a "Buy American" program for as many American items as possible.
Rework our trade agreements to make our trade, "fair trade" not "free trade".
Follow through on reforming America´s entitlement programs for removing as much of the waste and graft as possible.
Cut defense spending of unnecessary "pork" programs.
The Democrats must stop being "wusses" and use reconciliation for getting a modified health care bill that covers 95% of Americans, controls the insurance industry while lowering our costs over time. (I know, easier said than done.)

Will this do the job? Well, it would get us a lot closer than we have
been over the past 30 years.

But I´m not holding my breath as to how many of these things will
occur.

One can only hope and pray.

Copyright G.Ater 2010

Wednesday, February 10, 2010 4:51:44 AM

http://www.americanchronicle.com/articles/view/140663

Obama seeks common ground on deficit, jobs
Tue, Feb 9 2010

By Jeff Mason

WASHINGTON, Feb 9 (Reuters) - U.S. President Barack Obama sought
common ground with Republicans on Tuesday over his top priorities of
job creation and deficit reduction, winning hints of support in both
areas but a rebuke on healthcare reform.

Obama, a Democrat, has been forced to work more closely with
Republicans since an election in Massachusetts in January deprived his
party of its "super majority" in the Senate.

As lawmakers eye November elections that could change the balance of
power in the U.S. Congress further, the president sought to engage the
opposition on shared priorities, while accusing them of sometimes
prioritizing politics over policy.

The president showed evidence of a more focused, retooled strategy
after his roughly 90-minute meeting with congressional Republican and
Democratic leaders at the White House. [ID:nN09247366]

Rather than calling for sweeping measures to boost jobs -- his top
priority in 2010 -- Obama said "incremental steps" may be necessary to
get initial job-boosting initiatives passed.

"I think that it's ... realistic for us to get a package moving
quickly that may not include all of the things I think need to be
done," Obama said during an impromptu press conference at the White
House.

"It may be that that first package builds some trust and confidence
that Democrats and Republicans on Capitol Hill can work together," he
said.

Republican leaders told reporters after the meeting they saw a basis
for support from both parties on trade, nuclear power and offshore
drilling. But they called for wide-ranging legislation to reform
healthcare to be scrapped.

Obama's first year in office was characterized by sweeping proposals
on healthcare, climate change and financial reform that are all still
pending in Congress. Meanwhile, the economy -- though improving -- is
still a top concern for U.S. voters.

The economy grew by a brisk 5.7 percent year-on-year in the fourth
quarter of 2009 and unemployment dipped to 9.7 percent in January. But
the jobless rate remains historically high and the White House wants
additional stimulus on top of a $787 billion emergency spending
package Obama signed last year.

JOBS, JOBS, JOBS

Obama said one area where both parties could agree was eliminating
capital gains taxes for small businesses. He said he hoped all sides
would also support a way to get more capital to community banks
lending to small businesses.

The House of Representatives passed a $155 billion jobs bill in
December but the Senate has yet to act.

Senate Democratic leaders unveiled a set of job-creating ideas last
week and said they would solicit Republican input before moving ahead
with legislation.

Senate Majority Leader Harry Reid hoped to introduce a bill on Monday
and pass it by the end of the week, but he has been delayed by a
severe snowstorm that has prevented many lawmakers from coming to
work.

A jobs bill that could go through the Senate would extend soon-to-
expire jobless payments, healthcare subsidies for the unemployed and
highway-funding programs, according to the text of the bill obtained
by Reuters. [ID:n N09101879]

"Frankly, it is not ready yet," Senate Republican leader Mitch
McConnell told reporters after the meeting with Obama, referring to a
jobs bill. "Most of my members have not seen it yet. We're certainly
open to it and ... there is a chance we can move this forward on a
bipartisan basis."

In one potential sign of conciliation, House Republican leader John
Boehner said the party was mulling appointing members to Obama's
proposed bipartisan deficit commission.

Obama plans to issue an executive order to set up the commission to
study options on spending and taxes after lawmakers failed to create a
congressional panel on the issue.

Republican leaders, however, did not budge on Obama's plans to reform
the healthcare industry, calling on Democrats to scrap current
versions of the bills and start over. (Additional reporting by Alister
Bull, Ross Colvin, Steve Holland, Matt Spetalnick and Andy Sullivan;
Editing by Cynthia Osterman)

http://www.reuters.com/article/idUSN0916413220100209

...and I am Sid Harth

[chhotemianinshallah]

UPDATE 1-US job openings rise, hirings steady in December
Tue Feb 9, 2010 1:10pm EST

WASHINGTON, Feb 9 (Reuters) - U.S. job openings rose in December and
the number of unemployed workers fell, according to a government
report on Tuesday that supported views the labor market was on the
brink of recovery.

Job openings edged up to 2.5 million from 2.4 million in November, the
Labor Department said in its monthly Job Openings and Labor Turnover
Survey. At the same time, the number of unemployed workers fell 73,000
to 15.3 million.

Larry Mishel, president of the Economic Policy Institute in Washington
said this meant there were 6.1 jobseekers per available job in
December, slightly less than 6.3 in November.

"Job openings appear to be stabilizing in recent months. In the first
quarter of 2009, job openings declined an average of 197,000 per
month, but in the last two quarters of 2009, job openings were
basically flat," Mishel said.

"However, for the labor market to recover, we must start seeing
substantial increases. There is considerable ground to make up. Before
the recession hit in 2007, there were 4.6 million job openings per
month on average."

While the U.S. economy resumed growth in the second half of last year,
the labor market has lagged the recovery. There are signs the jobs
sector, ravaged by the worst economic downturn since the Great
Depression of the 1930s is on the mend.

Government data last week showed employers only cut 20,000 jobs in
January after reducing payrolls by 150,000 in December. At the same
time, factory payrolls increased for the first time in three years,
while the total average workweek in January was the highest in a year.

"We already know that the number of unemployed fell 430,000 to 14.8
million in January. If job openings in January remain at their
December levels then the ratio of job openings per unemployed worker
will fall to 5.9," said Mishel.

"However, improvement will still leave this imbalance at a level far
more than double the highest it reached in the prior recession."

The Labor Department report on Tuesday also showed hiring was little
changed at 4.1 million in December. Total separations -- quits, layoff
and discharges -- fell 36,000 to 4.2 million in December.

In the face of rough labor market conditions, workers are reluctant to
change jobs. The quits rates, a measure of workers' willingness or
ability to change jobs, decreased in the business sector and was
unchanged for government in December, the report showed. (Reporting by
Lucia Mutikani; Editing by Andrew Hay)

http://www.reuters.com/article/idUSN0910214620100209

Bernanke to set out Fed exit strategy
By James Politi in Washington

Published: February 9 2010 18:44 | Last updated: February 9 2010 18:44

A vision for how the US Federal Reserve will begin unwinding its
support for the financial system is expected to be laid out by
chairman Ben Bernanke in written testimony on Wednesday.

But while the Fed’s exit strategy might become clearer, officials and
economists have indicated that a policy shift is still months away.

Mr Bernanke’s appearance on Capitol Hill on Wednesday was supposed to
mark a turning point in the recovery of the US economy. The Fed
chairman was due to face legislators for the first time since his
jittery Senate confirmation to a second term last month, and set out
his plans to remove liquidity from the US financial system.

However, the latest crippling snowstorm bearing down on Washington
forced the House financial services committee to postpone all of its
hearings for the week. Mr Bernanke’s written testimony will
nevertheless be released as planned.

During the financial crisis, the size of the Fed’s balance sheet
expanded from about $800bn to more than $2,000bn. The central bank has
been under pressure to give more guidance to the markets and the
public about its efforts to shrink it now that the worst of the
recession is over.

“The FOMC is in no hurry to start their exit. We expect they will wait
for concrete evidence of a turn in housing, employment and lending,”
said Michael Cloherty and Michael Hanson, economists at BofA Merrill
Lynch, in a recent note. “They will likely proceed slowly, to minimise
the risk that the recovery backslides. They also will tweak and
experiment as they go, in our view.”

The Fed has been toying with various ideas on how to withdraw money
from the system before it even begins to tighten monetary policy
through increases in the Fed funds rate, its main interest rate. For
one, officials have been considering when and how quickly to increase
the 0.25 per cent interest rate paid to banks for storing excess
reserves at the US central bank.

The Fed gained congressional approval to begin paying interest on
reserves as part of the October 2008 bailout bill.

Another idea is the creation of a “term deposit facility” at the Fed,
which would also encourage banks to store more money at the central
bank instead of lending it out.

A third tool Fed officials have been looking at is “reverse repos”,
which would allow the US central bank to borrow from short-term
lending markets – therefore removing liquidity from it – with its own
securities as collateral.

At the end of March, the Fed is also expected to end its purchases of
mortgage-backed securities. At some point later, it will start selling
those securities. Earlier this week, aides on Capitol Hill said that
in questioning Mr Bernanke lawmakers would probably focus on the end
of the support for the housing market, which has shown some signs of
stabilisation but continues to struggle because of high foreclosure
rates, prices that are still falling, and a glut of unsold homes.

Some economists have warned that the end of the Fed’s mortgage
purchase programme could raise mortgage rates and stifle any nascent
rebound in the housing market. Supporters of the plan believe that it
will only marginally lead to an increase in rates, and is a necessary
step towards a normalisation of US mortgage markets.

“The question is whether the private markets will be able to pick up
the slack,” said one aide, who said that lawmakers would focus on the
issue because it is what matters most to voters.

In debating which tools to use first to drain liquidity from the US
financial system, Mr Bernanke will have to deal with a re-emerging
divide between inflation hawks and doves on the FOMC. In their note,
the BofA economists cited the dissent by Tom Hoenig of the Kansas City
Fed at the last FOMC meeting, where he disagreed that rates should
remain at historic lows for an “extended period”. On the other hand,
they noted last week’s remarks by William Dudley of the New York Fed,
who told the Associated Press that the Fed would “adjust its course”
and may continue its mortgage purchases if conditions in the economy
deteriorated further. “Nothing is on automatic pilot,” Mr Dudley
said.

Copyright The Financial Times Limited 2010.

http://www.ft.com/cms/s/0/a9cc355a-15a9-11df-ad7e-00144feab49a.html?nclick_check=1

...and I am Sid Harth

[chhotemianinshallah]

Sometimes Deficits Are Fine, But This Time They'll Kill Us
The Pragmatic Capitalist | Feb. 9, 2010, 5:50 AM | 1,214 | 13

A Chinese proverb known by Americans as the “Chinese curse” says: “may
you live in interesting times”. Boy do we live in interesting times.
This is a veritable golden age in economic evolution. New theories
are being crafted as we speak and old theories that have stood the
test of (our short) economic time are being torn down. No theory has
come under fire in recent years like Keynesianism. After decades of
success, Keynesianism doesn’t appear to be having the same magical
effect. Economic theorists are confused. To their dismay (and with
all apologies to Sir John Templeton, to whom I promised I would never
utter these words) – it’s different this time. Literally.

We are fighting a very rare and wretched economic beast. As
Bernanke’s great reflation experiment has ripped higher I have
maintained that the hyperinflationists are wrong. Though we appear to
have slipped through the hands of the balance sheet depression Grim
Reaper, the balance sheet recession continues to nip at our heels.
At his side always is his good friend Deflation.

A balance sheet recession is so rare that it has only occurred a
handful of times in modern economic times. And thus far, he remains
undefeated by all of the powerful economic minds who have stood in his
path. In his path today is the great Sir John Maynard Keynes. The
global economy has stood behind the theories of Lord Keynes as the
economy has tumbled and Central Bankers have literally bet their
printing presses on his theories. I fear they are not working and
could be setting the table for an even greater catastrophe.

Over the course of the last 75 years governments around the globe have
implemented policies of print and spend in times of economic downturns
with great success. The truth is – Keynesianism works – in the right
environment. It works well when debt is fairly low and organic
economic growth is relatively strong, but exponential debt growth
becomes an increasing concern every time you print your way out of an
economic downturn. The larger the downturn, the larger the response.
So on and so forth. If you happen to enter a period of severe
irrationality and spending the problems multiply. If the recovery
period is not used to pay down debts the problems become exponentially
worse. The tipping point comes when the debt burden hinders future
economic growth and destroys your ability to spend your way out of any
future recessions. It effectively turns into one great pyramid scheme
if it you let it get out of hand.

Marc Faber believes we are already there. He refers to the current
period in U.S. history as “zero hour” – the point where we have
indebted ourselves so deeply that we can’t be trusted to pay off our
debts. Perhaps worse, however, is the inability to fend off future
economic downturns. Not everyone agrees with this perspective,
however.

Paul Krugman argues that the deficit worrying is entirely political.
He’s correct to a certain extent, but as someone who loathes politics
and understands that money has no political party I can say, without
bias, that Krugman is also wrong to a large extent. Krugman argues
that the economic downturn caused much of the current budget deficit –
as if that somehow justifies it. But therein lies the problem. The
prior Keynesian responses became multiplied and directly contributed
to the current downturn. 20 years of easy money and accommodative
print and spend monetary and fiscal policies have finally boiled
over. In essence, we have tried to print and spend our way out of
one too many recessions while failing to use the recovery periods to
pay down our debts.

The problem is, as the United States economy has matured we have
become increasingly confident of future growth and increasingly less
fiscally prudent. The following chart shows the decade change in
debt, GDP and debt/GDP. What was once a sustainable ratio in the
50’s, 60’s and 70’s has ballooned in the 80’s, 90’s and 00’s. The
story in the private sector is largely the same as debt ratios have
ballooned in the 90’s and 00’.

Now, as the recovery remains weak and worries of a double dip
increase, Krugman and the other Keynesians are saying we’re not
spending enough:

“The point is that running big deficits in the face of the worst
economic slump since the 1930s is actually the right thing to do. If
anything, deficits should be bigger than they are because the
government should be doing more than it is to create jobs.”

Talk about doubling down on a losing bet….The truth of the matter is
the U.S. economy is on an unsustainable path and our Keynesian
economic responses have been large contributors. As the U.S. economy
has matured and growth has slowed our spending has actually picked up
pace. As we became more wealthy as a society we began to price-in
increasing wealth expansion and with it came more debt – and more
risk. That’s all well and good until the revenues begin to fall off a
bit and then the debts become a substantial constraint.

Reinhart and Rogoff recently published a paper titled “growth in a
time of debt”. They found that debt at 90% of GDP begins to
substantially impact future economic growth:

“The relationship between government debt and real gross domestic
product (GDP) growth has been weak for debt/GDP ratios below a
threshold of 90% of GDP. Above 90%, median growth rates fell by one
percentage point and average growth fell considerably more. The
threshold for public debt was similar in advanced and emerging
economies.”

With the budget expected to reach 95% of GDP this year we are nearing
the point of no return. Not only will the public debt severely hinder
our ability to grow our way out of the debt crisis, but this continued
growth in debt will severely hinder our response to future downturns.
Remember, I am not an anti-Keynesian. I simply don’t believe it is
applicable in times of a balance sheet recession.

Krugman argues that there is no need to panic about the debts now:

“But there’s no reason to panic about budget prospects for the next
few years, or even for the next decade.”

The Rogoff and Reinhart study shows that Krugman is wrong. The time
to worry about the deficit is right now. Unfortunately, the Keynesian
policies which Krugman has promoted, not only contributed to the
current downturn, but severely cripple the U.S. economy going
forward. Doubling down or continuing such policies has the potential
to create subsequent economic downturns – downturns which we won’t
have the option to print a trillion dollars in response to.

My greatest issue with U.S. monetary & fiscal policy over the last
decade is a continuing lack of risk management (something, ironically,
which is all too prevalent in the money management business as
well). We continue to run up massive debts based on false economic
growth assumptions. Like the consumer who assumed the 90’s would
continue forever, (or the banker who created mortgage backed
securities assuming real estate could never decline) we continue to
spend assuming future growth will be high and recessions will be rare
occurrences. What our policymakers should be asking themselves is how
we can best prepare for the worst should the economy grow at a lower
than average rate and downturns become more common occurrences.
Instead, they continue asking themselves how quickly we can return to
the go-go 90’s.

There is little doubt that Keynesianism works in a time of low debt
and stable GDP growth, but this balance sheet recession is different.
And it requires a different solution. A solution that politicians
with short terms in office do not have the stomach (or time) to deal
with.

In sum, the idea that you can turn on the debt spigot every time your
economy gets into trouble is deeply flawed. The major flaw in the
Keynesian approach is that it ignores exponential growth in debts.
As a government continually spends and prints to get themselves out of
one recession the debt they incur slowly hinders their ability to
overcome any impending economic woes. Should they continue to
attempt to print and spend their way out of each subsequent recession
it becomes a negative feedback loop. The debt hinders future economic
growth, the potential for subsequent downturns actually increases and
the ability to handle those downturns is severely reduced. If fiscal
imprudence continues in times of recovery you end up right where we
are today.

Richard Koo, who has helped the Japanese deal with their own
devastating balance sheet recession, believes we can spend our way out
of this debt crisis. I disagree. At this point, our only option
appears to be regulatory overhaul and belt tightening – and for a
bloated U.S. economy that could mean substantial short-term economic
pain. On the bright side, a little short-term pain will help us in
removing the excesses that hinder the economy and will help to lay the
foundation for the next great bull market. Unfortunately, the great
Keynesian minds of our day continue to push these failed policies and
the politicians in charge are unlikely to bite the bullet given their
short-term needs for re-election and instant gratification. That
likely means we confront increasing chances of facing our own “zero
hour” and the more we spend the worse we can expect that event to be.

We live in most interesting times, and unfortunately, they are
“cursed” not by the times we live in, but by the people who are
crafting the economic policies of the times. This is not the time for
more spending. Disastrously , I fear that our flawed response of
bailing out the banks has already hindered our ability to recover.
It would take a great leader and great economic mind to deviate from
the flawed paths we have chosen. Unfortunately, in these “cursed”
times neither appears to be in existence.

http://www.businessinsider.com/sometimes-deficits-are-fine-but-this-time-theyll-kill-us-2010-2

...and I am Sid Harth