EU-DIGEST

Labels: G7, World Economy

Labels: Economy, World Economy

In an interesting and animated presentation by Ernst & Young at the World Trade Center in Almere, the audience heard that based on information collected by this Global Accounting and Consulting firm Europe's future growth will probably spring from the knowledge and intelligence assembled in its large cities. Urban development is showing to be a powerful global growth trend based on the fact that world's cities are adding 200,000 citizens a year, and that by 2030, 60 or 80% of the world's population will be urban. Cities are increasingly where wealth creation and origination of products and services is happening. Already, 75% of global added-value is produced in cities and their inhabitants generate 9 out of 10 innovations.

Looking at the big picture Ernst and Young says Europe is considered - by risk-averse investors - to be the most attractive business location today, and ranks ahead of China in its perceived ability to overcome the economic crisis. Business decision-makers however believe the post-crisis world will also see the eastward shift continue. For the long term a total of 74% of the Ernst and Young respondents said they are very confident, or at least fairly confident in Western Europe's ability to tackle the financial and economic meltdown. It is apparent now that Europe's advanced regime of "flexicurity" can be viewed as having been an advantage; cushioning the downturn and drop in demand, by keeping more people at work, avoiding home foreclosures, and providing social security payments to the jobless.

Overall, the future outlook for Europe, based on the Ernst & Young survey is looking good. The report also indicates that in the coming three years the ranking of the economic players on the world scene will change, with the six most attractive investment regions being: 1.Central and Eastern Europe 2.China 3.India 4.Russia 5.Western Europe and 6.Brazil.

For a copy of the Ernst and Young report click on this link.

Labels: Ernst and Young, Europe, Investment opportunity, World Economy

Builder of a Better World

"When I was a kid, they said money comes from trees. But today children know that money comes from the ATM. They know that when they don't have money, they can put a card into the machine and take their money out. They also know that if they want to have money, they have to work," said Ancona, founder, CEO and president of KidZania, the world's famous indoor theme park featuring a child-sized replica of a real city. Today, Ancona earns his living through a business that allows children to play, and at the same time, be taught about the value of things around them. It is vital, he said, for children these days to understand the value of money, education, careers and socialisation as well as of other facets in life, as such knowledge can pave the way for a better future when they grow up. In the business world, Ancona is recognised as a famously successful entrepreneurs. Yet his ultimate goal is not just to make financial profits. Rather, the 45-year-old businessman is more committed to creating a better world for the young generation around the globe.

Labels: Entrepreneurial, World Economy

Wall Street pay soars to record levels. But have you got a job yet?

Despite all the rhetoric of "our" political leaders the so-called regulation of the financial market so far has only been a lot of "hot air". Today major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year — a record high that shows compensation is rebounding despite the announced "regulatory scrutiny" of Wall Street’s pay culture. Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did the peak year of 2007, according to an analysis of securities filings for the first half of 2009 and revenue estimates through year-end by The Wall Street Journal. Total compensation and benefits at the publicly traded firms analyzed by the Journal are on track to increase 20% from last year’s $117 billion — and to top 2007’s $130 billion payout. This year, employees at the companies will earn an estimated $143,400 on average, up almost $2,000 from 2007 levels. An economic advocate noted: "the market might have rallied, but the public on Main street is not convinced the economy is getting better for them. Many people are becoming more and more convinced that this holiday season they will be spending far less on all kinds of unnecessary plastic and electronic junk (not produced in their own countries) for their families. Bottom line: "the stop gap" economic measures are not working for the public at large and if not drastically corrected very soon there will be a "class warfare", with the people taking control of the deteriorating situation".

Labels: Financial Regulation, Wall Street, World Economy

Enthusiasm Builds for Financial Tax Idea - by Paul Taylor

No longer just a hopeless cause for anti-capitalist activists, the idea of a global tax on financial transactions is gaining ground in Europe. European Union leaders could not agree to put it on the agenda this week of the Group of 20 summit meeting in Pittsburgh on changing the financial system, but the leaders of France, Germany and the European Commission endorsed the concept. More strikingly, the head of the British Financial Services Authority, which regulates the world’s second biggest banking center after New York, said last month that such a levy could help shrink a swollen financial sector.

Labels: World Economy

Muslims celebrate end of Ramadan fasting

The Islamic holy month of Eid has ended today. During Ramadan, Muslims fast during daylight hours, so this is the first big, daytime meal in a month.

Note EU-Digest: To all our Muslim readers we wish a happy Eid.

Labels: World Economy

Loss of confidence in US dollar could be as dangerous as this crisis

As the global economy appears headed toward recovery, concerns are growing that the United States' addiction to massive fiscal stimulus as an economic panacea could eventually lead to an even bigger crisis - a loss of confidence in the US dollar. Nobel Prize-winning economist Paul A. Samuelson raised the specter of a "truly global financial panic" if countries funding the US deficit, particularly China, decide their investments in US Treasury securities are no longer safe.

Warren Buffett warned in The New York Times that side-effects of the current fiscal intervention could be as dangerous as the financial crisis recently averted - in the form of inflation eroding the dollar's purchasing power.

Labels: World Economy

Russian premier Putin says US dollar issuance 'uncontrolled', calls for diversified reserves - Sergei Venyavsky

Russia's Prime Minister Vladimir Putin on Friday said other currencies besides the dollar should be used as global reserves to reduce the risks posed by swelling U.S. debt. Putin, who spoke at an international investment forum in the Black Sea resort of Sochi, chided the United States for "an uncontrolled issue of dollars" and said the American currency's dominance had been "one of the triggers" of the global crisis. Putin renewed Russia's call on the U.S. administration and global community to give the green light to alternative reserve currencies: "If there are several reserve currencies, this will not harm the U.S. economy in any way."Russia's Prime Minister Vladimir Putin on Friday said other currencies besides the dollar should be used as global reserves to reduce the risks posed by swelling U.S. debt.

Putin, who spoke at an international investment forum in the Black Sea resort of Sochi, chided the United States for "an uncontrolled issue of dollars" and said the American currency's dominance had been "one of the triggers" of the global crisis. Putin renewed Russia's call on the U.S. administration and global community to give the green light to alternative reserve currencies: "If there are several reserve currencies, this will not harm the U.S. economy in any way."

Labels: monetary stability, Russia, US, Vladimir Putin, World Economy

FSB Warns of Renewed Banking Strains

The Financial Stability Board (FSB) assessed that it has made substantial progress in achieving the mandates given by G20 leaders last November and this April at a plenary meeting Tuesday. The panel said that it would submit two reports to the G20 summit slated for Sept. 24 and 25 in Pittsburgh on progress made in the aftermath of the unprecedented financial crisis. ``Good progress has been made on the policy development needed to implement the package of reforms set out previous Financial Stability Forum (FSF) reports, the G20's Washington Action Plan of November 2008 and the London summit statement of April 2009,'' the FSB said in a statement. The Financial Stability Board (FSB) assessed that it has made substantial progress in achieving the mandates given by G20 leaders last November and this April at a plenary meeting Tuesday. The panel said that it would submit two reports to the G20 summit slated for Sept. 24 and 25 in Pittsburgh on progress made in the aftermath of the unprecedented financial crisis.

Labels: Banking Industry, World Economy

Norway PM defends strong state as election starts<

Norway's prime minister defended on Sunday his government's cautious tactics in steering the economy through crisis, as early voting began in a closely fought parliamentary election. Polls show Prime Minister Jens Stoltenberg's centre-left coalition neck-and-neck with the right-of-centre opposition in a race set to determine whether the affluent Nordic country opens new Arctic regions for oil and gas exploration and how it spends its vast oil windfall. One new opinion poll on Sunday showed the government taking 85 seats in the 169-member parliament, just enough to be returned to power. That would be only the first time in 16 years that Norwegians have voted back the incumbents.

Labels: Banking Industry, EU Economy, Norway, World Economy

Alternative Energy is here to stay: China is planning to set up seven wind power bases

The vice-president of the Chinese Wind Energy Association announced recently that China is planning to set up seven wind power bases - with a minimum capacity of 10 GW each - by 2020. That means each wind power base will generate more than double the power that's expected to be generated at T. Boone Pickens' wind farm in Texas. Certainly for those who invest in turbine manufacturers, this kind of continued support for wind energy in China could prove to be quite lucrative. But this opportunity is not limited to only China. Whether you believe it's the right thing or not, governments around the world are facilitating the wind energy industry's early growth, not only by offering direct support for research, testing and development. . .but also by building electric infrastructures to enable the transmission of new wind power generation. The fossil fuel economy is being phased out.

Labels: Alternative Energy Resources, China, Oil Industry, World Economy

EEStor Capacitors- "This could change everything"- by Lloyd Alter

Tyler Hamilton of the Toronto Star and website Clean Break has been digging around a very secretive company. Asking them for information they said: "EEStor is not making public statements at present time," company co-founder and chief executive Richard Weir replied when the Toronto Star requested an interview via email. "EEStor would also like to have you and your paper not publish any articles about our company and the Toronto Star is certainly not authorized to publish this response." which of course he published instantly in Canada's biggest newspaper, BoingBoing style. What they are doing in Austin with their Kleiner Perkins Caufield & Byers money is developing a "parallel plate capacitor with barium titanate as the dielectric" or hyper capacitor as John recently coined.

The batteries fully charge in minutes as opposed to hours. * Whereas with lead acid batteries you might get lucky to have 500 to 700 recharge cycles, the EEStor technology has been tested up to a million cycles with no material degradation. * EEStor's technology could be used in more than low-speed electric vehicles. The company envisions using it for full-speed pure electric vehicles, hybrid-electrics (including plug-ins), military applications, backup power and even large-scale utility storage for intermittent renewable power sources such as wind and solar. * Because it's a solid state battery rather than a chemical battery, such being the case for lithium ion technology, there would be no overheating and thus safety concerns with using it in a vehicle. * Finally, with volume manufacturing it's expected to be cost-competitive with lead-acid technology. "It's the holy grail of battery technology," said my source. "It means you could do a highway capable electric city car that would recharge in three or four minutes and drive you from Toronto to Montreal. Consumers wouldn't notice the difference from driving an electric car versus a gas-powered car."

Labels: Electric energy, Energy, EU, World Economy

Fiscal ruin of the Western world beckons - by Ambrose Evans -Pritchard

"For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state. No doubt Ireland has been the victim of a savagely tight monetary policy - given its specific needs. But the deeper truth is that Britain, Spain, France, Germany, Italy, the US, and Japan are in varying states of fiscal ruin, and those tipping into demographic decline (unlike young Ireland) have an underlying cancer that is even more deadly. The West cannot support its gold-plated state structures from an aging workforce and depleted tax base. As the International Monetary Fund made clear last week, Britain is lucky that markets have not yet imposed a "penalty interest" on British Gilts, given the trajectory of UK national debt – now vaulting towards 100pc of GDP – and the scandalous refusal of this Government to map out any path back to solvency. France and Italy have been less abject, but they began with higher borrowing needs. Italy's debt is expected to reach the danger level of 120pc next year, according to leaked Treasury documents. France's debt will near 90pc next year if President Nicolas Sarkozy goes ahead with his "Grand Emprunt", a fiscal blitz masquerading as investment.

The imperative for the debt-bloated West is to cut spending systematically for year after year, off-setting the deflationary effect with monetary stimulus. This is the only mix that can save us. My awful fear is that we will do exactly the opposite, incubating yet another crisis this autumn, to which we will respond with yet further spending. This is the road to ruin."

Labels: Interest rates, meltdown, World Economy

What cost a China-US divorce? - by William Pesek

Returning from China last month, US Congressman Mark Kirk had a bearish take on a high-level visit by American officials. Treasury Secretary Timothy Geithner claimed the US's biggest creditor voiced great confidence in its debt. Kirk, an Illinois Republican, came back with the opposite impression. ''China is beginning to cancel Congress's credit card,'' he told Fox News on June 10. It ''doesn't want to lend much more money to the United States and especially is worried about the Fed's policy of printing money to buy new debt.''

A month later, there's no doubt about whose assessment was more accurate. Chinese leaders are clearly very concerned about the US dollar. Rumors of the US dollar's demise are no longer exaggerated. What is being exaggerated, though, is how easy it will be for Asia to get out of the quandary it's in. Cutting off the US government's credit card, for example, means American consumers can't buy your goods. And any sudden divorce between the world's two main economic powers won't be pretty. Far from it.

It's time to figure out what the next step is, and policy makers need to get serious. Complaining about our dollar-based system won't get us there. Some brainstorming about where to go from here would be far more constructive.

Labels: China, US, US Dollar, World Economy

World Economy - More US consumer worries as Germany boosts hopes

Talk of another US stimulus plan and data showing American consumers falling behind on their bills underscored worries about the global economy on Tuesday, overshadowing an upturn in German manufacturing orders that provided a glimmer of hope. Soaring US unemployment and a shrinking economy drove delinquencies on credit-card debt and home equity loans to all-time highs in the first quarter, the American Bankers Association said.

Data showed orders in Germany, Europe's largest economy, rose at the strongest monthly pace in nearly two years in May, but economists said the yearly comparison would remain weak for some time yet.

Labels: consumers, US, World Economy

G8 leaders believe the world economy still faces "significant risks" and may need further help, according to summit draft documents that also reflect failure to agree climate change goals for 2050." Although there have been signs of stability in the economy and the sentiment has improved, the real economy has not recovered yet with job and wage conditions still stagnant," said Takao Hattori, senior strategist at Mitsubishi UFJ Securities. But few big initiatives are expected as the G20, a broader forum that also includes the main emerging economies, is tasked with formulating a regulatory response to the crisis and meets in September in Pittsburgh after an April summit in London. Not mentioning China's push for a sensitive debate about a long-term alternative to the dollar as global reserve currency, the draft talked only of global "imbalances". G8 diplomats had said this might be the only oblique reference to currency. "Stable and sustainable long-term growth will require a smooth unwinding of the existing imbalances in current accounts," read the draft prepared for the G8 talks.

Labels: G8 Summit, World Economy

Developing Nations Rebuff G-8 on Curbing Pollutants - by Peter Baker

The discussion of climate change was among the top priorities of world leaders as they gathered here for the annual summit meeting of the Group of 8 powers. Mr. Obama invited counterparts from China, India, Brazil, South Africa, Mexico and others to join the G-8 here on Thursday for a parallel “Major Economies Forum” representing the producers of 80 percent of the world’s greenhouse gases. But since President Hu Jintao of China abruptly left Italy to deal with unrest at home, the chances of making further progress seemed to evaporate. The G-8 leaders were also grappling with the sagging global economy, development in Africa, turmoil in Iran, nuclear nonproliferation and other challenging issues. On Friday, Mr. Obama planned to unveil a $15 billion food security initiative by the G-8 to provide emergency and development aid to poor nations.

The failure to establish specific targets on climate change underscored the difficulty in bridging longstanding divisions between the most developed countries like the United States and developing nations like China and India. In the end, people close to the talks said, the emerging powers refused to agree to the specific emissions limits because they wanted industrial countries to commit to midterm goals in 2020, and to follow through on promises of financial and technological help.

Labels: G8 Summit, World Economy

Europe must lead climate talks- by Roland Rudd

Through the 20/20/20 targets, Europe has displayed its commitment and provided leadership to nations in the G20 and beyond. We view the transition to a low-carbon economy as a great opportunity for business and we call upon EU leaders to display robust leadership in the lead-up to December’s climate change talks in Copenhagen.

Labels: G8 Summit, World Economy

World Bank warns of deeper global contraction - by Lisa Twaronie

The World Bank predicted today Monday June 22 that the global economy will shrink 2.9% this year, a deeper fall than the 1.7% contraction it predicted in March. It also warned that international capital to developing nations will continue to slow, with flows projected to fall to $363 billion in 2009 from their peak of $1.2 trillion in 2007. Developing countries will grow by 1.2% in 2009, the bank said, down from 5.9% in 2008 and 8.1% in 2007. Excluding China and India, gross domestic product in developing countries is expected to contract 1.6%. The world has entered an era of slower growth that will require tighter and more effective oversight of the financial system, the bank said in a statement.

Labels: Forecast, World Bank, World Economy

Germany's Merkel criticizes central banks' approach in financial crisis

German Chancellor Angela Merkel has voiced skepticism about leading central banks' approach to tackling the economic crisis, suggesting that they may be storing up more trouble for the years ahead. Merkel's comments come as the European Central Bank has faced criticism from some analysts for not being as aggressive as either the U.S. Federal Reserve or the Bank of England, both in cutting interest rates and in promoting measures such as bond purchases to boost the money supply.

Merkel appeared to defend the ECB's more conservative instincts and raise questions about the Fed and Bank of England actions. "The independence of the European Central Bank must be preserved and the things that the other central banks are doing now must be reversed," Merkel said in a speech Tuesday, the text of which was posted on the government Web site. "I view with great skepticism the powers that the Fed has, for example, and how, in the European area, the Bank of England has developed its own little lines," she said, adding that the ECB "also bowed somewhat to international pressure" with its decision to buy bonds. "We must together return to an independent central bank policy and to a policy of good sense," Merkel said. "Otherwise, in 10 years we will again be standing at exactly this point."

Note EU-Digest: Mrs. Merkel is absolutely right. Even Thomas Jefferson one of the founders of the United States said: "If the American people allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children wake up homeless on the continent their fathers conquered"

Labels: Angela Merkel, Banking Industry, EU, Germany, World Economy

World Economy - Emerging economies: Decoupling 2.0

Remember the debate about decoupling? A year ago, many commentators—including this newspaper—argued that emerging economies had become more resilient to an American recession, thanks to their strong domestic markets and prudent macroeconomic policies. Naysayers claimed America’s weakness would fell the emerging world. Over the past six months the global slump seemed to prove the sceptics right. Emerging economies reeled and decoupling was ridiculed. Yet perhaps the idea was dismissed too soon. Even if America’s output remains weak, there are signs that some of the larger emerging economies could see a decent rebound. China is exhibit A of this new decoupling: its economy began to accelerate again in the first four months of this year. Fixed investment is growing at its fastest pace since 2006 and consumption is holding up well. Despite debate over the accuracy of China’s GDP figures (see article), most economists agree that output will grow faster than seemed plausible only a few months ago. Growth this year could be close to 8%. Such optimism has fueled commodity prices which have, in turn, brightened the outlook for Brazil and other commodity exporters.

Labels: US, World Economy

Swine Flu: What You Need to Know - by Huma Khan

The rapidly spreading swine flu is a new virus that includes combination of swine, bird and human strains. It has taken the lives of 81 people in Mexico, and sickened more than a thousand south of the border. In the United States, 20 cases have been confirmed thus far -- seven in California, two in Kansas, eight in New York City, one in Ohio and two in Texas. Spain's Health Ministry Sunday said three persons have been brought to Spanish hospitals in the last 24 hours with symptoms of potential swine flu, in what may be the first recorded cases of the virus in Europe. Some other cases have also been detected in Canada, and Britain and France.

Simple preventive measures, such as washing hands frequently and avoiding people who are coughing or sneezing, can go a long way toward keeping you safe from the virus, which health officials expect is likely to afflict more people.

Concerns of the uncertainty and spread of the virus dealt a blow to the travel and leisure industry in Europe Monday. British Airways shares lost 11.5% and EasyJet fell 5.7% amid swine flu fears. TUI Travel declined 7.5% and Thomas Cook shed 4.8%. However, pharmaceutical and healthcare stocks got a boost. Shares of Switzerland's Roche rose 4.6%. The company said it stands ready to deliver 3 million doses of flu treatment Tamiflu, which has proven effective in treating swine flu. The U.K.'s GlaxoSmithKline rose 3.1%. The company has also been contacted by the WHO regarding its Relenza treatment, another antiviral drug.

Over the weekend, the World Health Organization declared the strain of swine flu to be a "public health emergency of international concern," with at least 103 people in Mexico dead, and advised all countries to be on the lookout for unusual outbreaks of flu.

Labels: EU, Prevention, Swine-Flu, World Economy

Some simple economic guidelines that seem to have been forgotten - by RM

*Government stimulus programs just for the financial sector to wipe out bad debt, while leaving the same players in charge with limited or no controls won't work. **Government stimulus programs focused on "trickle down" instead of "bottom to top" results have never worked and won't work today.***Getting people back to work through Government infrastructural stimulus programs has worked in the past and will work today.****Government stimulus programs which focus directly on consumers instead of producers has worked in the past and will work today.

Bottom line: helping people that need it the most will eventually benefit those that need it the least. When the trend is reversed expect revolution - just read your history books if you don't believe that.

Labels: Economic principals, Economic Stimulus, World Economy

Financial experts from a variety of disciplines are not finding much to cheer about following the more rosy reports coming out of Wall Street, the Banking Sector and the Government. They are saying that the value of key collateral on loans is still falling. That close to half of bank lending continues to be tied to real estate, which has shifted from boom to bust in many parts of the United States. Presently the typical home price is down more than 20 percent nationwide, and it has continued to fall by about 2 percent a month. The experts are saying that if that continues, it boosts both the likelihood of defaults by borrowers and the losses for banks when they resell those homes after foreclosure. In the meantime the FDIC reported that loans are going delinquent faster than banks are adding to reserves to cover those losses. This certainly will hit bank profits down the road.

Uncontrolled accounting methods may also be hiding key problems even though banks are saying that a shift away from so-called mark-to-market accounting is a more accurate reflection of the assets’ worth. Banks may be right. But the resulting values could also prove to be too rosy. Just take that pool of risky assets at Citigroup, which the bank is valuing at $101 billion. The more accurate mark-to-market accounting would put the actual value of risky assets at only $29 billion. Losses could therefore outweigh capital on hand.

Collectively, US banks have equity capital of $1.2 trillion, or about 10 percent of their loans, the FDIC says, but many economists including those at the International Monetary Fund (IMF) warn that "hidden" bank losses of those not yet recognized in charge-offs – are larger, possibly exceeding $2 trillion. This could wipe out their equity capital, says Peter Nigro, a former economist at the Office of the Comptroller of the Currency, now at Bryant University in Smithfield, R.I. If you put all that together, the negative forces make it very hard for banks to earn their way out of losses by relying on their interest-rate spreads. "So what the yield curve is doing now is mitigating those losses a little bit", says Mr. Lachman, who used to work for the IMF. Moreover, Lachman expects that European banks will see rising loan problems this year, with ripple effects that will hurt US banks as well.

For the US and European economies to stage a strong recovery, banks need enough capital to lend strongly, economists say. That’s especially true today, because other channels of credit that were strong before the recession, like debt securities funded by non-bank investors, have basically disappeared. The risk, they say, is that political pressures will prevent or delay an accurate assessment of bank losses and how big their write-downs should be and how much capital they need. Another issue that still has not been answered, what are these assets on the bank balance sheets actually worth? Overall it seems to indicate that the financial sector has not yet turned the corner, but instead still remains in a precarious situation.

Labels: Banking Industry, EU, US Economy, US housing market, World Economy

GM Bankruptcy Plan Developing as Board Seeks Savings - by Jeff Green

General Motors Corp. is speeding up preparations for a possible bankruptcy filing even as directors scout for deeper savings this week to avoid that outcome, people familiar with the plans said. GM would focus on forming a new company from its best assets if court protection is needed, said the people, who asked not to be named because the details aren’t public. The efforts to set a new cost-cut goal center on how to go beyond a proposal to slash debt by 46 percent and shed 47,000 jobs in 2009, and will include talks with Treasury officials, the people said.

The moves are a response to President Barack Obama’s March 30 rejection of GM’s bid to keep $13.4 billion in federal loans. With bondholders and the United Auto Workers balking at concessions, a push for more savings makes bankruptcy more “probable,” Chief Executive Officer Fritz Henderson has said.

Labels: Bankruptcy, economic meltdown, GM, US, World Economy

How a Green Economy Is an Antidote to Casino Capitalism - by Robert Pollin

The convergence of a profound economic crisis and the inauguration of Barack Obama as President has created both tremendous challenges and opportunities for progressives in the United States. Two of the overarching economic issues around which progressives will need to struggle are: first, how to build a clean energy economy, creating millions of good jobs in the process; and second, how to create a financial system focused on channeling money toward productive investment as opposed to destabilizing speculation.There are only two possible ways to finance a clean energy transition -- public funding, with money coming from either state treasuries; or private funding, with money coming from private businesses and households. We often think about large-scale economic policy initiatives as necessarily being funded by the federal government. In fact, both public and private sources of funds will be needed to build a clean energy economy. But the key will be to ensure that private funds are channeled into green investments and away from fossil fuels.

Labels: Alternative Energy, EU, Green Policy, World Economy

Blue-eyed bankers' prompt G20 divide- by Gaby Hinsliff

The attack last week by Brazil's president, Luis da Silva, on "white blue-eyed bankers" revealed a new anger among some of the world's most populous countries at being dragged into a mess not of their making - and a determination to hold the west to account. India's prime minister will use the summit to challenge what it says is creeping protectionism costing Asian jobs. China will exact more influence over the IMF in return for bailing it out. Chile's Michele Bachelet used a joint appearance with Brown to stress how, unlike Britain, her country saved vast revenues "during the good times" - which it is now having to spend.

One key issue for debate on Thursday is what role the difference in saving and spending habits between the two economic powerhouses of America and China played in triggering the crisis. While Americans love to shop, often on credit, Chinese households traditionally put money aside. For years, China used those savings to invest abroad, particularly in US bonds - thus pumping billions into the US economy and helping fund more cheap credit. Many economists believe a recovery now requires bursting that artificial bubble and rebalancing the economy so that Chinese consumers are encouraged spend a little more - reducing America's trade deficit - and Americans a little less. Malloch Brown suggests Britons, too, will need to relearn the art of saving.

Labels: EU, G20, World Economy

G20 protesters to march in London

Thousands of people are expected to march through London later to demand action on poverty, climate change and jobs ahead of next week's G20 summit. The Put People First alliance of 150 charities and unions will march from Embankment to Hyde Park for a rally. Speakers will call on G20 leaders to pursue a new kind of global justice. A series of protests are planned around the London summit and police say the level of planned activity is creating an "unprecedented challenge".

Labels: EU, G20, World Economy

Netherlands, Germany call for tighter regulation of financial markets

Financial markets must be subject to tight supervision and regulation, Dutch Prime Minister Jan Pieter Balkenende and German Chancellor Angela Merkel wrote in an article published on Thursday by Dutch daily NRC Handelsblad and several other European newspapers. Balkenende is supporting the German and French side in the transatlantic debate on how to take on the economic crisis. The United States accuses the European Union of doing too little to stimulate the economy.

"Apart from the discussion on how to bring our economies back onto a robust growth path, the key challenge we face in London is to build a new financial architecture that meets 21st century requirements," Merkel and Balkenende wrote. "The credibility of the process hinges upon whether we deliver on our Washington commitments, e.g. that all financial markets, products and participants must be subject to appropriate oversight or regulation, without exception and regardless of their country of domicile," they said.

Labels: EU, France, G20, Germany, Netherlands, World Economy

Wallstreet-"There is a sucker born every day"

The Capitalist system of doing business is usually based on raising capital through public markets. Funds are accessed that are made available by institutions and individual investors. In this scenario, the likelihood that the individual investor somewhere along the line gets the shaft is pretty high, because the market is set up in such a way as to favor the large institutional investors. Basically one could say that the game is rigged and because there are very few rules to avoid that. Brokers and traders today make deals and can manipulate prices every day. So since tens of millions of trades are made around the clock daily in the global marketplace, one could also say that the financial markets operate very much like a multi-national casino. What makes it even more scary is that most of the public is sucked into believing what some of the "insider pundits", like a Cramer, who plays in one market and promotes another says. Therefore, don't be fooled or take any of these market terms - 1y Target Est.,T-Bill index, Actual EPS, CPS, or DPSwe - you get bombarded with serious. Most, or just about all of these terms used have absolutely no scientific base and must be seen as a clever attempt to give legitimacy to what is nothing else but a complex uncontrolled and unregulated financial gambling operation.

The purpose of the stock market has never been to spread wealth, maintain financial order, or support the economy. For every winner in Wall Street you can find a loser, for without losers, there are no winners. Wall Street is a gambling place where the winner takes it all. And like at any Casino the House always takes a cut. Brokers will make commissions no matter what happens, win or lose. Should the taxpayer fund such a rigged and unregulated financial system. Absolutely not.

Labels: Financial Regulation, G20, Stock Market, Wall Street, World Economy

Bankruptcy's global onslaught - by Matt Mille

It's a frightening world out there: Chinese factories by the thousands lock their doors, and their owners disappear into the night. Russia's once-mighty resource giants scamper to restructure crippling debt and avoid going under. Ukraine and Latvia teeter on Iceland-like insolvency. Financial institutions just about everywhere seize up and are shut down or nationalized. On just one day late last month, a Danish bank collapsed, a Japanese finance company went bankrupt and two German states were forced to pour almost $4 billion into a crippled lender to keep it afloat.

Labels: Bankruptcy, World Economy

Cut Flower Sales - Economy may deflect Cupid’s arrow on Valentine's Day

Vases filled with red roses, baby’s breath and greenery fill the coolers at Fannin Flowers. But they’re not flying off the shelves as quickly as Lolies Holleman would like. “I think it’s because of the recession,” said Holleman, after waiting on a customer who ordered a delivery of flowers and chocolate. “It’s a little slow.” Sales are down about 10 percent compared to last year, one reason the company only opened two of its three Fannin Street flower shops, she said. During peak seasons like Valentine’s Day, the business typically opens all three of its locations.

Note EU-Digest: Christmas sales were one of the worst we've seen in years," said Boylen, the third-generation owner of Martin Flowers, which dates back to 1927. "It's a trend happening across the country. From FTD orders we get from other states, quantity is down significantly for Valentine's Day." Media Youngblood, who has owned Mable's Flower Shop in Bessemer for 14 years, said her sales are half of what they were a year ago. 1-800-Flowers.com reported last month that it expects revenues to decline as much as 10 percent this year. Flower shipments from Ecuador to the United States are down 23 percent so far this year in what is normally peak season, said Gonzalo Luzuriaga, president of Expoflores, the country's main growers' association."And the quality has also slipped," Markowski said. Ecuador sold $523 million in flowers from January to November 2008, but its central bank predicts sales will drop by $150 million this year. The country produces 17 percent of cut flowers imported into the United States. Importers in South Florida, the cut-flower capital of the United States, are also feeling the pain. Roughly two-thirds of all cut flowers sold nationwide come through Miami International Airport, mostly farmed in Colombia, Ecuador and other Latin American nations. A few South American farms have folded. As prices for fertilizers and jet fuel soared last year, some found their profits so squeezed they could not cover higher costs. Banks have been tightening credit to growers too, stung by the U.S. financial meltdown.

Labels: Cut Flowers, Flower Industry, World Economy

World potable water drying up

Sustained economic growth, human security and political stability over the next two decades depend on how water is managed, warned the World Economic Forum in a report urging governments and businesses to address consistent under-charging, waste and overuse of water. Referring to a UN-sponsored 2005 Millennium Ecosystem Assessment, the report underlines that 70 of the world's major rivers, including the Colorado, Ganges, Jordan, Nile and Tigris-Euphrates, are "near [their] maximum extraction levels to supply water for irrigation systems and for reservoirs".Many of the "regional water bubbles" are already bursting in parts of China, the Middle East, the southwestern US and India, and "more will follow", with serious consequences for regional economic and political stability, the report continues. Climate change further adds to the urgent need to manage water efficiently, the report notes. In many parts of the world, glaciers act as "water banks". For example, melting glaciers in the Himalayas and Tibet alone will cause serious water supply problems for more than two billion people, it predicts.

Labels: EU, Global warming, Water, World Economy

Does Anybody Else Think Getting You Shopping Again is Crazy Talk? - by by Dave Lindorf

Does Anybody Else Think Getting You Shopping Again is Crazy Talk? - by by Dafe LindorfThe problem facing America, and to a great extent the broader world economy, is that we’ve pretty much met basic human needs long ago, and now it’s about creating human wants and then convincing people that they need to buy more stuff and more services

This is wrong in so many ways and on so many levels. First of all, we don’t need all this stuff. Is my life any better if I go from a 18-inch TV screen to a 60-inch TV screen? Is it, for that matter, any better if I go from an old cathode-ray tube to a flat screen digital display, or from no TV to a TV? Is my life any better if I buy a high-performance $50,000 BMW than if I drive a $20,000 Honda Civic, or even a $5000 used Toyota Corolla with extended warranty? Is my life any better if I live with my wife and my teenage son in a 4000-square-foot house than if I live in a 1800-square-foot or a 1200-square-foot house? The answer is no. The benefits, if there are any at all, are minuscule, and usually short-lived.

The good news is that this particular economic downturn in the US may prove to be more than just another turn of the business cycle, but rather, the beginning of the inexorable spiral of decline of the US as a global economic power. The corporations (along with the schools, churches and politicians) that have lured and tricked us all into this mad consumer scramble for more and more useless crap and momentary gratification have driven the country into a debt hole from which it will clearly be impossible to climb out. That may not sound like good news, but viewed from the perspective of the wider world it certainly is—especially if it bankrupts the American military machine, and slows the production of greenhouse gases. It could also be good news if it leads us, the American people, to rethink what our lives are really all about—if it leads us to start thinking of ourselves as part of a society, again, instead of just that incredibly insulting and derogatory term: “consumers.”

Labels: Consumerism, World Economy

The Hyperinflationary Depression - by Eric deCarbonnel

Federal bailouts have worsened things. Dollar creation exploded. Crisis has been pushed into the future. Its enormity will be far greater, and foreign investors will get stuck with a lot of it. When it arrives in strength, capital outflow will follow, and dollar valuation will plunge with it. Williams believes that “both central bank and major private investors know that the dollar is going to be a losing proposition. They either expect and/or hope that they can get of (it) in time to lock in their profits (or for central bankers) that they can forestall the ultimate global economic crisis” as long as possible. Dollars are very vulnerable in this environment. If Treasuries are dumped, the Fed will monetize debt to make up the difference. Inflation will then accelerate, multi-trillion dollar deficits will worsen things, and a “self-feeding cycle of currency debasement and hyperinflation” will follow. Cash as we know it will disappear. A barter system and black market will replace it or possible introduction of a new currency. Since most money today is electronic, not physical, chances of it adapting “are practically nil.” With hyperinflation, electronic commerce would completely shut down and economic collapse would follow. Gold and silver will be invaluable. Holders could exchange them for goods and services.

Physical goods will also be precious for survival and as a medium of exchange. Anything with a long shelf life may be stocked in advance, and providers of essential services could barter them for goods and other services. Forewarned is forearmed. Safety and liquidity are crucial. Anything retaining value is essential. Real estate, other currencies for example. Foreign equities and debt to a small degree because US financial assets hammering will spill everywhere.

Labels: Balance of Trade, Inflation, US, World Economy

The Return of High Oil - by Steve LeVine

Demand in China, India and elsewhere in the developing world is probably going to roar back and outstrip supply in 2011 or beyond. That alone will push prices back up. But oil companies also are now responding to $50 oil by shelving oilfield development projects. So, as Jesse told me, “In 2010 or 2011, we will be in the same situation as [the high prices of] last year. Then we will start all over again [in an energy crisis], but it will be much more difficult.”

Labels: Oil Prices, Oil Production, World Economy

Global crisis reason to rethink market economies - Andrew Ojede

In the 1930s, the US banks were the flagships of American economic might, and emulation by other nations of the fiercely free market financial system in the United States was encouraged. The recent financial crisis in the US and currently propagating through the entire global financial systems has its roots in the previous global financial crises that occurred in the 1990s and early 2000s. Capital movements were directed toward the US market with low interest rates, but with little or no regulation. Many American consumers, even those without sound credit history, became over-leveraged. There was explosion in sub-prime mortgage lending – lending at an adjustable interest rate to American consumers without sound credit and amidst uncertain future income. The financial turmoil threatens to put the banks, at the heart of the US financial system, partly in the hands of the government.

An economy based on the free market cannot function that way. It is reasserting itself in the lives of American citizens in ways that were unthinkable in the era of market-knows-best thinking. The hands-off brand of capitalism in the US is now being blamed for the easy credit that sickened the housing market and allowed a freewheeling Wall Street to create a pool of toxic investments. Many critics now view the heavy intervention in the market as further robbing Washington of the moral authority to spread the gospel of laissez-faire capitalism.

Labels: Capitalism, World Economy

Recipe for a Successful G-20: Preparation, the Right Actors, and Political Sensitivity - by C. Randall Henning

The impending Group of 20 summit in Washington, DC, November 14–15, organized to discuss solutions to the economic crisis and reforms to the international financial architecture, is potentially the most important international economic meeting in a very long time. However, it has been hastily convened, insufficiently prepared, and President-elect Barack Obama will not participate. To make this meeting and those that will follow successful, officials of the Bush administration and other governments should heed six key principles for successful international negotiations. The Obama team should also reflect on them as it prepares to take office.

Labels: G20, World Economy

Barack Obama: Europe should throttle down their expectations

Even though Obama's victory was a watershed political development of historic proportions, the European public and policy makers should not see him as the “new Messiah” or expect that the transatlantic relationship has suddenly become a “marriage made in heaven”. The reality is that Obama is the US President elect and that his main objective is to serve the American people and US interests. Therefore his principal focus, at least initially during his Presidency, will be to try and clean up the terrible mess the Republican Administration has left him. Obviously European relations are very important to any US Administration, but one should also realize that given Europe's already solid long term relationship and existing mechanisms of cooperation with the US, Europe will not be at the very top of Obama's Administration "to-do" list. European leaders therefore need to move forward with their own views and plans about solving the global financial crisis, or in dealing with environmental or foreign policy issues, independent of what the new Administration is saying or doing. At the same time the EU and the US should continue working together to uphold Western values, even though they might have a different interpretation or implementation of this philosophy.

uropeans and Americans must also not make the mistake to identify Mr. Obama as a left wing politician in the European sense of the word. If he was a European politician he would probably be catogorized as a “right from center” politician. Francis Wurtz, leader of the left wing Group in the European Parliament, said pressure from Wall Street to reassert US leadership of the financial world, which it lost to London after the Enron corporate scandal, was likely to be very high on the new president's agenda as he deals with the financial crisis. The challenges are therefore numerous for the EU and regardless of what the new Obama Administration does or not do, the EU must take a variety of independent decisions, to include, a realistic review of NATO's Afghan mission, dealing with the instability in Pakistan, reviewing Russia's long term relationship with the EU based on common needs, managing the emergence of China as a world power and partner of the EU, dealing with the the Middle East and Palestinian issues in a more balanced political and economic way than in the past. The EU must also realize that US support for a break-through global deal on climate change is not certain at all, even with Obama as the president. US domestic action to cut greenhouse gas (GHG) emissions is unlikely to be dramatic to say the least. The best the EU can expect is that the US Congress and Senate will sign off on the 2007 bi-partisan American Climate Security Act, proposed by US Senators Joe Lieberman (Independent Democrat, Connecticut) and John Warner (Republican, Virginia). While the relationship with Russia is a top priority for Europe, the Obama Administration will in all likelihood be dealing with it in the context of a variety of strategic relationships. Advisers to Obama have already stated that the missile defense shield alongside the Russian border, planned by the Bush Administration, is not high on their agenda.

On the other hand President Obama can be expected to demand more support from the Europeans, particularly as it relates to the NATO activities in Afghanistan. In return, Europeans must call on the US to deliver solid progress on issues that are of key importance to Europe, such as the financial crisis and the control mechanisms to be established, climate change, and non-proliferation. Equally urgent is a new US policy towards the UN, the International Criminal Court of Justice and the closing down of the Guantanamo Bay prison. All this while a time bomb is ticking away for the US in the form of a current account deficit of over 10 trillion dollars. To finance both the current account deficit and its own foreign investments, the United States must import about $1 trillion of foreign capital every year or more than $4 billion every working day. This situation is unsustainable in both international financial and domestic political (i.e., trade policy) terms. Right now this debt is covered largely by China and a variety of other countries. If any of these countries withdraws their support of the US economy the dollar won't be worth the paper it is printed on. Consequently the US bargaining position in the world market place has weakened. We can be sure the new US President will be dealing with that as a critical priority.

A Chinese proverb says “these are interesting times”. Yes they are indeed. So, regardless of the fact that the EU wants to, and should give Mr. Obama the benefit of the doubt, time is pressing and it certainly won't hurt the EU to be more assertive when it comes to urging the new US Administration to move swiftly in a more realistic direction than it has done during the past eight years.

Labels: EU, G20, Obama Administration, US, US Foreign Policy, World Economy

Worldwide poll by Pleon Communications in 27 countries sponsored by Shell shows today's 17-24 years olds reluctant to make personal sacrifices to solve effects environmental challenges

The poll shows that most of those questioned believe that by 2050 people will travel in flying cars, get much of their power from renewable energy and live a life of luxury in a world without borders. That optimistic image of the future emerged from a survey of young adults in 27 countries worldwide. And while survey respondents believe their generation will have to adapt to rising sea levels and other effects of global warming, they are reluctant to make personal sacrifices that could help address the problem. The worldwide poll gives a fascinating insight into the younger generations view of the future.

Their answers to 24 questions about hopes and fears show they are largely optimistic about their own welfare. Most expect to be better off than their parents by 2050. More young adults in Nigeria, India, Mexico and Russia think so than in any other surveyed country. On the other hand, Dutch and Japanes respondents were the most pessimistic, expecting to earn less than their parents. Although they fear climate change, very few young people say they are prepared to rein in their economic ambitions to help protect the environment. Over 80% of those surveyed want to live in a big house and to travel the world. Although two thirds are ready to make small changes in their lives to help the environment, such as composting or recycling, they are less willing when it comes to tougher lifestyle choices that could have the largest impact on climate change. Only one-fifth of respondents are prepared to take fewer long-distance holiday trips and just a third will change their diet to eat only locally grown food.

Labels: Future, Polls, Pollution and the environment, Shell Oil, World Economy, Youth

Spain barred to attend G20 summit by Bush Administration as payback for their Iraq position

Spain,which has the world's eight largest economy has pressed for an invitation to next week's global G20 financial crisis summit in Washington. They have won French support, which presently also represents the EU presidency, to attend as an observer, officials said yesterday. France, which first proposed the summit last month, has asked the U.S. to let Spain attend as an "associate". As the host of the summit, the Bush Administration is in charge of the guest list.

Labels: EU, G20, Spain, World Economy

For the complete report from the guardian.co.uk click on this link

The EU likely will take a 5 key point message to Washington

Europe is likely to take a five key point message to the Washington meeting on the overhaul of global financial institutions. This boils down a more extensive list of actions agreed by EU finance ministers, a draft paper showed. The paper, prepared by the French presidency of the European Union for a meeting of EU leaders on Friday, also said the EU would like the Washington summit to produce concrete proposals on priorities agreed within 100 days from Nov. 15.

The five priorities identified by the EU stick closely to the priority wish-list approved by the EU finance ministers earlier this week, and they are:
- to give the IMF "primary responsibility", together with the Financial Stability Forum, to recommend steps to restore confidence and stability. The IMF should be given the necessary resources and appropriate tools to help countries in trouble.
- registration of rating agencies and surveillance of implementation of codes of conduct relating to them.
- convergence of accounting standards and a review of the application of the "fair value" rule in financial institutions. The "fair value" rule currently requires instititions to value their assets at market value, which creates valuation problems when the market for a given security is not functioning.
- to take steps to ensure that no market segment, territory, or financial institution, including hedge funds, is beyond regulation or surveillance.
- to implement codes of conduct to avoid excessive risk taking in the financial industry, including the sphere of compensation. These codes should be taken into account by supervisors in evaluating the risk profile of institutions.

Labels: EU, G20, IMF, World Economy

"Poverty and a failing economy is created by the system not the people"

The current financial crisis is a direct result of the utterly unregulated derivatives and other speculation driven markets combined with large scale lending and borrowing which have choked the system to the point of no return. As average income of all economic units are usually equivalent to the average wage of all working people, only a few can draw very high salaries at the expense of the majority drawing less than average. In order to deal with this inequality and the potential opposition to it, the corporate powers developed a multi-layered income structure whereby income can be widely distributed in a trickle down fashion among people, without endangering the income levels of the top 1.5 percent of the people at the top. The ones who control more than 90 % of the wealth.

Nobel Peace Prize winner Muhammad Yunus says: "Globalization is not working for people who are poor. ... Sometimes, it acts like a 20-lane highway running across the world. But the problem is the big trucks from the USA are taking over all the lanes. No lane is safe for rickshaws. ... So if that image is correct, why don't we have traffic rules? This lane is reserved for rickshaws ... that lane is for heavy vehicles. Today, heavy vehicles are taking over everything. ... So we need traffic rules and traffic police". Today, in globalization, there are no traffic police.

But the system is not only creating more poor people in the developing world. Even the US considered the worlds economic powerhouse has had the most unequal distribution of wealth in the past 30 years. opinion polls show that a substantial majority of Americans say the rich don't pay their fair share of taxes. A growing number also say the U.S. is becoming a nation of haves and have-nots. The public's concerns reflect a shifting dynamic in recent years, as an increasing share of the wealth has gone to people at the top of the income scale. The top tenth of U.S. households now earn an average of 11.2 times what those in the bottom tenth make, according to the Census Bureau. That's up from a ratio of 8.7 three decades ago. The wealthiest fifth of U.S. households now take in 50 percent of all income, up from 44 percent in 1977. The differences are even more pronounced in analyzes of incomes for the top 1 percent of households. Already in 2005 the then Federal Reserve Chairman Alan Greenspan said: "The income gap between the rich and the rest of the U.S. population has become so wide, and is growing so fast, that it might eventually threaten the stability of democratic capitalism itself." Today at the end 2008 the economic system as we know it is broken on a world-wide scale and needs urgent repair. Bandages in the form of tax breaks or economic stimulus programs, or propping up failed banks just won't solve the problem anymore.

Labels: G20, the Financial crises, The Financial Meltdown, World Economic Order, World Economy

"Slump", the new world order - by D Ravi Kanth

Darkening recessionary clouds are steadily enveloping country after country. While the mayhem caused by Wall Street continues unabated, its impact on the real economy is rather difficult to fathom.The underlying reality is finance played havoc with the real economy that produces goods and services for people to consume and survive. Those who depended on the production of these goods and services have not only suffered via depressed real wages during the last 30 years when the boom took the incomes of those in the financial sector to stratospheric levels.Those erstwhile heroes of "irrational exuberance" fame, like Alan Greenspan, are already admitting the "flaw[s]" and "mistake[s]" in their assessment of the credit boom and the housing bubble they unleashed on the world economy. Similarly, the pressure is mounting to put some of the high-profile Wall Street actors behind bars. Clearly, there is an urgent need for naming and shaming of all those who are responsible for creating this gigantic mess.

The person responsible for this drift towards unilateralism is none other than US President George W Bush. So, when he summons world leaders from 20 countries to "advance common understanding of the causes of the [financial] crash" and prepare "a common set of principles for the reform of the regulatory and institutional regimes for the world's financial sectors", it is hardly surprising there is a deep cynicism as to what this will achieve. Amid conflicting interests around the table next month in Washington , it will be too much to expect any radical policy prescriptions. For all we know, Karl Marx -- whose Das Kapital is selling more copies in Germany this year due to the financial plague -- might prove right once again when he said history repeats itself twice, "the first time as tragedy, the second as farce"!

Labels: US, World Economy

The way all the bubbles burst -- by Liu Junhong

"Back in the 1990s the US staged a rousing production known as "the new economy" very much to the envy of the whole world. One of the prime reasons for this success was the support from an extensive and very sophisticated financial market, which enabled emerging enterprises to go public anytime they wanted with the lowest possible cost guaranteed. This is also one of the fundamental forces that drove Japan's financial system reform at that time.Nowadays, however, the system of direct financing is in a shambles and enterprises have to rely on the old ways for direct financing by borrowing mostly from banks. The problem is that the crisis is spreading deeper into the banking industry, crippling the banking market as well. The two pillar systems of securities and banking are both in big trouble, causing the whole financial system to go haywire.Back to where it all began, the root of the US financial crisis has stemmed from the loopholes in the US-led "financial capitalism" format, with the bursting of "the real estate bubble" serving as the fuse. The "reverse asset effect" created by the bursting of the real estate bubble directly caused the "bursting of the consumption bubble".

It is widely known that the biggest characteristic of the US economy is consumption in overdrive, to the point that people would rather bury themselves in debts than cut back spending. As of August this year, the total value of individual consumption in the US accounted for over 70 percent of the country's GDP. If that is not a pillar of the US economy, I don't know what is".

Labels: World Economy

Reshaping World’s Financial System Now a Must - by Andrew C. Schneider

The West knows it can’t set the terms as it has in the past. That’s why the biggest developing nations were invited to join the G-8 in Washington on Nov. 15 for the first in a series of summits that will run well into 2009. Remaking the G-8 into something closer to the G-20 also appears likely. A large part of the reason the G-8 has been seen as increasingly irrelevant in recent years has been its exclusion of so many of the world's new stars.

Most of the economies poised to join the IMF's leadership are each worth $1 trillion or more. Two, China and Brazil, are already larger than some current members. The Group of 20, whose full membership President Bush invited to the Nov. 15 summit, comprises the G-8 countries as well as China, Brazil, India, South Korea, Mexico, Argentina, Australia, Indonesia, Saudi Arabia, South Africa, Turkey and the European Union (EU).

Note EU-Digest: "contrary to what the above Kiplinger report indicates, the major hurdle to establish stricter international regulatory rules will be to overcome the US reluctance to allow more transparency and controls over their own financial system. They have historically opposed most forms of regulatory safeguards when it appears to tamper with their own laissez-faire style of capitalism. Unfortunately we recently have seen what kind of havoc this has created in the world financial system."

Labels: G20, World Economy

Europe Seeks to Implement New Bretton Woods Fiat Currency System

It looks like Europe wants to re-invent the wheel and soundings are being made to introduce a "new Bretton Woods". Bretton Woods was effectively an exchange rate mechanism, were gold backed the new kid on the world block, namely the post war US dollar and all other currencies floated around the dollar in a fixed range. If a currency moved too far either way of the range then the respective Central Bank stepped in and delivered the appropriate medicine. However the US dollar was pegged to the price of gold which was fixed at an official rate of $35. All went well until one or two countries, well, mainly France decided that they wanted the gold that backed the dollar reserves they had accumulated by repatriating the dollars back to Uncle Sam. Eventually President Nixon decided in 1971 to abandon the BW agreement, triggering other attempts to set other fixed currency systems which all failed. In the end FX became a free floating system that has resisted any attempts to regulate exchange rates other than "pegs".

European Central Bank President Jean- Claude Trichet said officials reshaping the world's financial system should try to return to the "discipline" that governed markets in the decades after World War II. "Perhaps what we need is to go back to the first Bretton Woods, to go back to discipline," Trichet said after giving a speech at the Economic Club of New York recently. "It's absolutely clear that financial markets need discipline: macroeconomic discipline, monetary discipline, market discipline."

Labels: EU, World Economy

Europe and US wrestle for control of global markets - by Tom Baldwin

A weekend meeting at Camp David with President Sarkozy of France and José Manuel Barroso, the European Commission President, produced a joint statement promising to hold “a series of summits on addressing the challenges facing the global economy”. The first will be held soon after the US elections on November 4, when Mr Bush will still be President. He hopes to put his stamp on policies that will largely be implemented by either Barack Obama or John McCain after one of them is inaugurated on January 20. Mr Bush said: “As we make the regulatory institutional changes necessary to avoid a repeat of this crisis, it is essential that we preserve the foundations of democratic capitalism — commitment to free markets, free enterprise and free trade. “We must resist the dangerous temptation of economic isolationism and continue the policies of open markets that have lifted standards of living and helped millions of people escape poverty around the world.”

Mr Sarkozy, who holds the rotating presidency of the European Union, which has a tradition of deeper and stronger intervention in markets, advocates a new form of “regulated capitalism” because there is “no liberty without some regulation and stability”.

Labels: EU, US, World Economy

Sarkozy, joined by European Commission chief Jose Manuel Barroso, heads to the storied US presidential retreat armed with a mandate from his EU colleagues to push for a top-to-bottom revamp of the world's financial system. But the White House has preemptively declared that the talks will yield no new policy proposals, and no date or location for a world leaders summit that the French leader hopes will generate sweeping reforms. "I don't believe that tomorrow night's meeting will have any new policy announcements or any decision on a date or a location for that meeting -- although everybody is working towards that," said spokeswoman Dana Perino."There's a lot of things to work through and we'll find a date; that won't be -- that's the least of our worries, is finding a date," said Perino, who poured cold water on Sarkozy's call for a wholly new economic framework.

Sarkozy on Thursday renewed his call for a wide-ranging summit "before the end of the year" -- something the White House now supports -- while warning that reforms cannot wait for Bush's successor to take office in January.

Labels: EU, US Economy, World Economy

Iceland secures €200m from Norway, Denmark - by Angela Jameson and Steve Hawkes

Iceland secured €200million (£156million) from Norway and Denmark yesterday as it sought help to stablise its stricken economy, but talks to secure a far larger loan from Russia continued. It also emerged yesterday that the country, which has been forced to nationalise its banking sector, is only one of several asking the International Monetary Fund (IMF) for financial assistance. According to reports, Hungary, Ukraine and Serbia have signalled that they need help, too.

Labels: Denmark, Iceland, Norway, World Economy

US financial system headed to intensive care says Paul Volcker

The US financial system is already in the emergency ward and will move into intensive care, Paul Volcker, former chairman of the US Federal Reserve, said in Singapore on Tuesday. "I'm afraid it's going to be there for a considerable period of time before it returns to normal," he said in a lecture here, painting a gloomy picture of current economic woes. The crisis that began in the United States has become a global problem which needs a global solution, he said. Volcker said the United States appeared to be in recession, and he feared Europe was in the same situation but he hopes a series of bailout measures announced by governments around the world will ensure any recession is manageable and short-lived. The former chairman called bailouts and guarantees "distasteful" because they are inconsistent with capitalism but said they were crucial in the current climate.

"However distasteful, I'm afraid that they are necessary, necessary in this emergency to restore some sense of stability in financial markets," Volcker told an audience of academics at the event hosted by the Lee Kuan Yew School of
Public Policy.

Labels: US, World Economy

Global Economic Crisis Likely To Have Profound Consequences For US Politics, World Relations

In the United States, economic developments have the potential to lay the groundwork for a political transformation with major alterations in both the composition of, and balance of power between, the major political parties. There are "reasons for thinking that the American election of 2008 may be the equivalent of the election of 1932 - an electoral sea change ushering in a new wave of government intervention and, if that intervention is successful, a durable electoral realignment," says Peter Hall, Krupp Foundation Professor of European Studies at Harvard, in a wide-ranging analysis he provided to the Huffington Post.

In Europe, Hall contends, "the political effects are likely to be more diffuse. If the ensuing recession is not too deep, the current crisis may provide Prime Minister Gordon Brown with just enough credit for the Labour party to survive the next British election and Angela Merkel with the wherewithal to remain German Chancellor. But history suggests that electorates tend to punish governments that preside over deep recessions and to look, in some cases, to the political extremes for new faces and voices. Therefore, there is reason to worry about the rise of far right parties in Europe, in particular, where they have already made inroads by running against the market-oriented policies of the European Union. Although enthusiasm for market competition has been waning in European capitals for some years, the current financial crisis will strike it a serious and potentially fatal blow," according to Hall.

"Most Europeans and some Americans attribute the crisis to subprime lending in the US housing market, but that was only the trigger for contemporary events," Hall argues. "The deeper roots of the crisis lie in shifts in banking practices that led many financial institutions to borrow heavily in short-term capital markets to finance the purchase of riskier securities than they once held. The 'financial innovation' behind the development of these securities was said to diffuse risk. Indeed, it did and now everyone is at risk.

Labels: economic meltdown, Poltical, World Economy

Europe's Domino Effect

A variety of government interventions have suddenly sprung up across the continent since Sunday: Iceland is drafting a plan to bring its banks back from the brink; Britain's treasury secretary is "looking at some pretty big steps" to do the same; Spain and Portugal are set to guarantee all bank deposits; Sweden's central bank is upping its loans to Nordic banks; and Greece, Denmark, Ireland and Germany have all made moves to guarantee bank deposits.

Some still think Europe is forgetting its key unifying force: the European Central Bank. Cantor Fitzgerald Strategist Stephen Pope thinks the best way to calm markets is for the ECB to step in and act as a kind of clearing bank, or middle man between lenders, in order to help keep the faith that banks' loans will be returned. That could be more effective than even a rate cut, or the central bank's current method of offering overnight loans to individual banks, or injecting liquidity.

Labels: ECB, EU, meltdown, World Economy

Mad run on banks 'can't be ruled out'

Professor Ian Harper, a member of the Wallis inquiry into banking, said no one had lost money in an Australian bank since the 1930s. But even though the banks remained well regulated and capitalised, an irrational run caused by a crisis of consumer confidence could not be absolutely ruled out, he said. Only then, might the government have to resort to extreme measures such as guaranteeing deposits, he said.

Labels: meltdown, World Economy

International crisis meeting as Dow Jones plummets below 9,000 - by Gary Duncan

As panic over the danger of financial and economic meltdown swept Wall Street once more, the latest 7 per cent plunge in the value of America’s blue-chip businesses piled pressure on world financial leaders gathering in Washington today to take yet more drastic measures to avert disaster. In its seventh consecutive trading session of steep losses, the worst such run since the Black Monday crash in October 1987, the Dow Jones industrial average sank by a further 678.91 points, or 7.33 per cent, to close at a five year low of 8,579.19. The broader-based S&P 500 index of top US companies fell 75.05 points, or 7.62 per cent, to a five-year low of 909.90.

Labels: meltdown, World Economy

Calls grow for a new model for global trade - by Robert Weisman

Never before have world markets been so integrated. And yesterday's concerted interest rate cuts by central banks in the United States and other countries from Britain to China was a signal that the financial crisis rippling around the globe has grown too big for any one of them - even the US Federal Reserve - to contain on its own. It also could mark the start of an effort to overhaul the global financial system conceived at the 1944 summit in Bretton Woods, N.H., which set the rules of international commerce for industrial countries."There's going to be a large push for re-regulation," said Lori Wallach, director of Public Citizen's Global Trade Watch, a policy advocacy group in Washington. Wallach said trade pacts have undermined safeguards for workers and consumers worldwide. "We're seeing the fruits of three decades of deregulation of the financial markets," said Tonya Hennessey, project director at CorpWatch, an antiglobalization group in San Francisco. "Because of that, we've had this complex packaging of securities sold around the world. There's no choice but to go back to strong regulation."

Note EU-Digest: there finally seems to be a flicker of hope for a new movement away from the so-called "Free Trade" to Fair-Trade.

Labels: World Economy, World Trade

IMF: World economy to slow sharply, led by US - by Jeannine Aversa

The world economy will slow sharply this year and next, with the United States likely sliding into recession reflecting mounting damage from the most dangerous financial jolt in more than a half-century. The International Monetary Fund, in a World Economic Outlook released Wednesday, slashed growth projections for the global economy and predicted the United States — the epicenter of the financial meltdown — will continue to lose traction.

Labels: IMF, World Economy

Former IMF chief to advise EU on financial crisis

A former top International Monetary Fund official will advise the European Union as part of the bloc's response to the global financial crisis, the EU executive body said on Wednesday. Jacques de Larosiere, a 78-year-old former IMF managing director and ex-governor of the Bank of France, will head a high-level group to consider longer-term responses such as changing how banks are supervised.A "permanent steering group" on the crisis will be set up within the Commission and chaired by Barroso. It will include Internal Market Commissioner Charlie McCreevy, Competition Commissioner Neelie Kroes and Economic and Monetary Affairs Commissioner Joaquin Almunia.

Labels: EU, World Economy

A chance to change Capitalism - by **Will Hutton

"This is a crisis that has been 30 years in the making - a Gordian knot of libertarian free-market fundamentalism, unregulated globalism, the collapse of social and political forces committed to fairness, the explosive impact of financial innovations such as 'secularization', and sheer greed. In the United States this first manifested itself in Newt Gingrich's 'Contract with America', that gave free license to the anti-tax, anti-government, pro-deregulation instincts of an increasingly fervent Republican party. That wasn't all. The financial markets were exploiting the new freedoms to insist that governments did Republican things. The Bush presidency sealed the market fundamentalists' victory.

In the early Nineties came a breakthrough that would transform the financial landscape. Goldman Sachs took the concept hitherto used by mortgage companies of packaging up mortgage payments and selling them as a financial security and applied it to an Arizona trailer park. The site pledged its income to a new company, specially set up, which then issued securities - backed by Goldman. The market bought them. 'Secularization' took off: there are more than $8 trillion of securities backed by a weird and wonderful range of income streams. America, followed rapidly by Britain, did not have to worry that it did not save enough cash to support its borrowing ambitions; it could sell these securities to all bidders from all over the world - especially in Asia and to China's central bank - to finance ambitions to borrow. Each has contributed to the fiasco - and all now need to be unraveled if the economy is to have a sustained recovery.

What we are witnessing now is a system failure that requires a systemic response – the creation of a new system that sponsors a fairer, more productive capitalism in its place, while maintaining high flows of credit and debt. Banks issued bonds allowing huge takeovers. Hedge funds and private equity companies blossomed. Money flowed into residential housing. New York and London were in an unseemly race to regulate less. And if regulators raised an eyebrow they were told not to worry. The securitized bonds - this packaged income - could always be sold to raise cash; and on top of that banks took out insurance against the risk of default. Nor should regulators worry if banks directed the investment funds under their management to buy any unsold bonds which might look like a fraudulent conflict of interest; one day they would rise in value. So confident did bank directors become that they authorized their managers to run hidden portfolios of securitzsed assets offshore in secret tax havens; thus would profits be boosted at no risk. Bonuses also grew larger and larger, residential and property prices kept rising, fees from ever-bigger deals became juicier and juicier. And when there were setbacks, such as the dot.com bubble bursting, the then chairman of the Federal Reserve Alan Greenspan was on hand to flood the markets with cheap money. The free-market fundamentalists seemed to be right. Markets never did make mistakes, financial business kept booming, leverage became astronomical. The ever more extravagant school fees were easily paid and Britain's Home Counties - like New York and the Hamptons - became home to parties of astounding luxury and lifestyles of grotesque opulence. Gentlemanly capitalism became super-gentlemanly capitalism. The Financial Times' How to Spend it magazine is studded with dresses that cost up to euro 40.000. Private submarines, jets and yachts became the rage. Some hedge fund managers even considered themselves underpaid at euro 150 million for one year's work.

The left's critique of capitalism - that markets delivered instability, booms and busts, monopoly and gross inequity that paradoxically undermined the values of integrity and trust that bind markets together - was proven wrong. There should not even be a mixed economy between private and public sectors. The job was to enlarge the role of markets. There was no effective opposition. The left and organized labor collapsed as intellectual, social and political forces; there was no conviction that any alternative to this shareholder value-driven, financial, 'securitised' capitalism existed, or any political muscle to support it, even if there were. Mainstream culture moved away from public purpose and fairness; the new priorities were individual self-fulfilling, personal experience and loyalty to self. The past 20 years also saw an unparalleled boom in the money markets. As the free market blossomed, so too did cheap debt, huge bonuses and ostentatious wealth.

Now, as the world financial system lies on the brink of collapse, it is time to build a new one, based on fairness instead of naked greed, and with long-term commitment to building businesses and supporting investment. This is a terrifying moment; but it is also our generation's once- in-a-lifetime chance to change world capitalism.

**Will Hutton was the former editor-in-chief for The Observer in London and is currently the Chief Executive of The Work Foundation (formerly the Industrial Society). The analysis in his books is characterized by a support for the European Union and its potential, alongside a disdain for what he calls American conservatism. He is a governor of London School of Economics, a visiting professor at the University of Manchester Business School and Bristol University, a visiting fellow at Mansfield College Oxford, a trustee of the Scott Trust that owns the Guardian Media Group, rapporteur of the Kok Group and a member of the Design Council's Millennium Commission.[2] . Hutton's most recent book The Writing On The Wall' was released in the UK in January 2007. The book examines Western concerns and responses to the rise of China and the emerging global division of labor, and argues that the Chinese economy is running up against a set of increasingly unsustainable contradictions that could have a damaging universal fallout. On February 18, 2007, Hutton was a featured guest in BBC's “Have Your Say program” discussing the implications of China's growth.

Labels: Capitalism, EU, Europe, The US economic meltdown, World Economy

International Monetary Fund cuts its forecasts for 2008 and 2009 world economic growth

International Monetary Fund cuts its forecasts for 2008 and 2009 world economic growth

The International Monetary Fund has cut its forecasts for 2008 and 2009 world economic growth, mainly due to a revision in the outlook for the Eurozone, an official of the G20 group of developing countries said yesterday.The IMF now projects 2009 growth of 3.7 per cent, down from 3.9 per cent, in a briefing prepared for a meeting of deputy finance ministers of the Group of 20 (G20) emerging and industrialised economies to be held in Rio de Janeiro on Saturday.

“Commodity prices will remain high and volatile... market turbulence will go on through 2009,”said the official, adding that the IMF saw the world economy slowing further in the second half of the year.

Labels: World Economy

Geo-political Forecast August through December 2008

1. A Dollar in distress (EUR 1 = USD 1.75 at the end of 2008): Panic-fear of a US currency and economy collapse eats into the American collective psyche 2. Global financial system: An impossible requirement – placing Washington under international trusteeship – provokes the system's break 3. European Union: The periphery sinks into the recession, the Eurozone only slows down 4. Asia: The « double whammy » inflation/export-collapse 5. Latin America: Difficulties increase but growth remains steady in most parts of the region, Mexico and Argentina in crisis 6. Arab world: Pro-Western regimes go adrift / 60 percent risk of socio-political explosion on Egypt-Morocco axis 7. Iran: 70 percent probability of an attack by October 2008 confirmed

Labels: EU, US Economic Meltdown, World Economy

A global war on inflation - by Mark Trumbul

With inflation a rising threat, nations around the world are trying to navigate a delicate task: containing that price pressure even as the linchpin US economy reels from the opposite challenge of a credit bust. If all goes well, the global economy will muddle through. But signs of how difficult this will be are all around. Rising unemployment in America, for example, shows that the risk of recession is real – and could potentially spread worldwide. Global inflation is growing harder to ignore. Oil, which has become the main symbol of global inflation, traded at a new record Monday. And European inflation has reached highs never seen under the euro currency. By one new survey, 3 billion people – 42 percent of the world's population – are experiencing double-digit annual rises in consumer prices.

Labels: World Economy

World Economy - Bloc-Buster Idea: Make It The G-3 - by Jim Hoagland

John McCain would kick Russia out of the Group of Eight economic powers that meet in Japan this week. But this is no time to think small. The G-8 leaders themselves should declare surrender and disband their high-profile huddle on the state of the world. Think of it as global shock therapy: Using the July 7-9 summit on Hokkaido Island to abandon the bloated, unwieldy G-8 format would be a first step toward acknowledging and rethinking -- at the highest level -- these important international realities. The G-8 long ago proved that bigger is not always better. The intimate gathering of just six leaders that French President Valéry Giscard d'Estaing convoked in 1975 has been transmogrified into a giant public relations exercise with little real point. And the admission of Russia in 1998 -- despite its lack of qualifications as an established democratic industrial power -- further diluted the process.

Predictable suggestions that this body be expanded to a G-13 or a G-20 go in the absolute wrong direction.

Labels: World Economy

THE SORCERER’S APPRENTICE AND THE CREDIT CRISES - by Mrs .I.K. Koutstaal

"The original Walt Disney ‘Phantasia’ production, released in the nineteen thirties, contains a magnificent episode in which Mickey Mouse, accompanied by the inflaming music of Paul Dukas, plays the sorcerer’s apprentice. The story is well-known: the great sorcerer has an appointment elsewhere. Before he leaves he orders his apprentice to mop down the floors. Mickey really does not feel like it. He comes up with a trick. From the conjuring books of his master he recovers a magic spell that will have the brooms do all the work without his actual interference. He casts the spell, the brooms fetch the water and mop the floors. Mickey leans back lazily. Somewhat later he realizes that he has summoned powers that he can no longer control. A major flooding is the result. Whatever he tries, he cannot find the spell to break the enchantment. When things were at their worst the great sorcerer returns home. He averts the disaster and Mickey gets a good beating. This image of the unfortunate Mickey regularly comes to my mind when I read about the way in which the diverse financial authorities react to credit crisis. An inspiring image for a column."

Labels: Credit Meltdown, the Financial crises, World Economy