News Week | Michael Hirsh | Feb 16, 2010
“Behind each great historical phenomenon,” Niall Ferguson has written, “lies a financial secret.” So it is with Europe’s latest identity crisis. Greece’s euro troubles have a lot to do with its fiscal irresponsibility and the instability at the heart of European Monetary Union—a group of countries that sometimes behave like “the United States of Europe” and at other times revert to nationalistic petulance (witness German resistance to a Greek rescue). But the Greek panic—and fears of a euro collapse and another financial contagion—also have a great deal to do with secret derivatives deals orchestrated by big American banks. As a result, the euro crisis is casting, yet again, a harsh light on efforts by Wall Street lobbyists to gut proposed rules requiring transparency in trading.
As always with European crises, we start out thinking they should be left for the Europeans to fix. Then we get dragged in. Only this time, we discover, Goldman Sachs and other investment banks already dragged us in years ago. Their strategy dates back to the ’90s, when countries such as Greece and Italy, with chronic fiscal deficits, were eager to join the EMU but couldn’t match the standards of budget discipline imposed by the 1992 Maastricht Treaty. So Wall Street helped them hide their true national indebtedness, at a high price. But these deals only made the crisis worse when the market reckoning finally came. This is not a new phenomenon. Many previous currency crises, going back to Asia in 1997–98 and Mexico in 1994–95, were exacerbated by overleveraged derivatives trades that were not revealed until much later. In those earlier cases it was the local banks, not the governments that cut quiet swaps deals to juice their income. When Mexico decided in Continue reading
PAUL KRUGMAN | NYT | November 16, 2009
International travel by world leaders is mainly about making symbolic gestures. Nobody expects President Obama to come back from China with major new agreements, on economic policy or anything else. But let’s hope that when the cameras aren’t rolling Mr. Obama and his hosts engage in some frank talk about currency policy. For the problem of international trade imbalances is about to get substantially worse. And there’s a potentially ugly confrontation looming unless China mends its ways. Some background: Most of the world’s major currencies “float” against one another. That is, their relative values move up or down depending on market forces. That doesn’t necessarily mean that governments pursue pure hands-off policies: countries sometimes limit capital outflows when there’s a run on their currency (as Iceland did last year) or take steps to discourage hot-money inflows when they fear that speculators love their economies not wisely but too well (which is what Brazil is doing right now). But these days most nations try to keep the value of their currency in line with long-term economic fundamentals.
China is the great exception. Despite huge trade surpluses and the desire of many investors to buy into this fast-growing economy — forces that should have strengthened the renminbi, China’s currency — Chinese authorities have kept that currency persistently weak. They’ve done this mainly by trading renminbi for dollars, which they have accumulated in vast quantities. And in recent months, China has carried out what amounts to a beggar-thy-neighbor devaluation, keeping the yuan-dollar exchange rate fixed even as the dollar has fallen sharply against other major currencies. This has given Chinese exporters a growing competitive advantage over their rivals, especially producers in other Continue reading
The following article was published in renowned International Magazine ‘Le Monde Deplomatique’ which is printed in French and English mainly. Recently it began its editions in few other languages. It is well known for its unbiased dealing with the subject in question. It mainly concentrates on International political and financial affairs. Though the present article came in March 2007 issue, in view of its importance in the context of recent developments I’m reproducing it here for this blog’s readers.
LEILA FARSAKH | Le Monde diplomatique | March 2007
Ehud Olmert and Mahmoud Abbas may have afﬁrmed that they want a two-state solution to the Israel-Palestinian conﬂict, but it may be more promising to return to a much older idea.
THERE is talk once again of a one-state bi-national solution to the Israeli Palestinian conflict. The Oslo peace
process failed to bring Palestinians their independence and the withdrawal from Gaza has not created a basis for a democratic Palestinian state as President George Bush had imagined: the Palestinians are watching their territory being fragmented into South African-style Bantustans with poverty levels of over 75%. The area is heading to the abyss of an apartheid state system rather than to a viable two-state solution, let alone peace (1).
There have been a number of recent publications proposing a one-state solution as the only alternative to the current impasse. Three years ago, Meron Benvenisti, Jerusalem’s deputy mayor in the 1970s, wrote that the question is “no longer whether there is to be a bi-national state in Palestine-Israel, but which model to choose” (2). Respected intellectuals on all sides, including the late Edward Said; the Arab Israeli Continue reading
In Bad Times for Capitalism Socialists in Europe Suffer
The N Y Times | Steven Erlanger | Sept. 29, 2009
PARIS — A specter is haunting Europe — the specter of Socialism’s slow collapse. Even in the midst of one of the greatest challenges to capitalism in 75 years, involving a breakdown of the financial system due to “irrational exuberance,” greed and the weakness of regulatory systems, European Socialist parties and their left-wing cousins have not found a compelling response, let alone taken advantage of the right’s failures. German voters clobbered the Social Democratic Party on Sunday, giving it only 23 percent of the vote, its worst performance since World War II. Voters also punished left-leaning candidates in the summer’s European Parliament elections and trounced French Socialists in 2007. Where the left holds power, as in Spain and Britain, it is under attack. Where it is out, as in France, Italy and now Germany, it is divided and listless. Some American conservatives demonize President Obama’s fiscal stimulus and health care overhaul as a dangerous turn toward European-style Socialism — but it is Europe’s right, not left, that is setting its political agenda. Europe’s center-right parties have embraced many ideas of the left: generous welfare benefits nationalized health care, sharp restrictions on carbon emissions, the ceding of some sovereignty to the European Union. But they have won votes by promising to deliver more efficiently than the left, while working to lower taxes, improve financial regulation, and grapple with aging populations. Continue reading
My friend recently wrote a small article after visiting my blog and asked me to post it. Here it is.
Well. I have been visiting different prominent news sites and I have been reading various news papers also. World Economic Crisis has been occupying prominent place on business pages of news papers. No need to tell about financial or economic news papers which mostly cover the news of economic crisis in different countries, conditions of industries and agriculture, factories spending, consumer spending, GDP growths in month, quarter, half-year, and year in various countries … particularly in US, UK, Germany, Japan and other industrial or developed countries, fiscal policies, measures etc.. Just like ‘all roads lead to Rome’, all these news lead to world crisis and it’s recovery.
Till April they used to cover only crisis news in various countries because there was only crisis until then. After that a sense of relief began to appear as IMF, WB, and different financial and economic analysts -firms as well as individuals- began to express optimistic opinions about recovery from World Economic Crisis (WEC). They started to say bottom has already been touched; Signs of recovery are seen in US; This or that country is out of recession; There is a slight improvement in consumer spending in this month or that quarter; Factories output raised to a small extent; Banks or issuing new loans in this or that corner; Certifying reports of analysts, IMF or WB, and theoreticians like Paul Krugman saying “yes, it is recovery” etc… Some people like Chiefs of IMF and WB give occasional warnings telling ‘Don’t be so optimistic about recovery. There are still huge gaps’ or “sustainable recovery is still some time away”.
But all these optimistic reports, analyses have one common issue. That is, ‘but, unemployment keep rising’. Which means though economy is recovering or going to recover what ever it may be, jobs will not grow for certain. Moreover jobs would continue to decline. As such every developed or emerging or developing country is reporting increase in unemployment. GDP grows. Growth returns. Sales of goods and services increase. Factories’ output increase. New investment start to flourish. Business activities flare up. Stock prices rise. Share markets would be bullish. Bears return to caves. And yet jobs continue to decline. Unemployment continues to rise. What a hypocrisy? What a treachery? What an uncivilized robbery? What an indecent, vulgar, obscenic, psycho-pathetic nature?
So these capitalist slaves want to say people need not recover from their economic difficulties. Recovery can only mean recovery of firms, companies, corporates, MNCs, and TNCs. Recovery means revival of accumulation of capital in the form of profits on a mega, giga and terra scale for capitalists. But not for people who work to make them profits. Not for workers who strive for accumulation of profits. Not for home owners who lost their homes. Not for families who lost their livelihood. Not for babies who perished in utter poverty lacking minimum food. And even not for souls of those who committed suicides after loosing jobs.
A greatest economic scientist Paul Krugman coined a term recently in his NYTimes blog, ‘jobless recovery’ which can be found in this blog. What can we grasp from this contemporary American economic intellectual’s spontaneity? He conceptualized the expulsion of large masses of workers from ‘recovery from economic crisis’. He certified the exclusion of billions of people from ‘return of voluminous economic growth’. He once again sold his so called intellectual soul to his treacherous, piratic and plunderous capitalist bosses.
We may not get this wonderful opportunity of seeing true colours of these charismatic looters of capitalist kings in imperialist era. We can not see their real faces when accumulation of capital is at it’s glorious era with the help of share market bubbles, more alluring dotcom bubbles and even more voluminous sub-prime lending bubbles. Rainbow colours of illuminations of bubbles don’t allow us to see the reality. Only crisis gives us such rare opportunities of watching rainbow colours disappearing into a single white emptiness. Not only that. Crisis shows us how even great, decades long economic theories shiver to explain what happened actually. It proves us how futile even Keynesian theory which helped to come out of ‘The Great Depression’ of 1930s. And It unequivocally proves “Marxism-Leninism” is a true and realistic alternative for the well being of billions of workers, peasants, and employees spread across hundred above countries of the world. Only thing left is to strive to achieve “socialism” on the line of “Marxism-Leninism-Mao thought”.
Marxism-Leninism never stops glowing. Because it’s shining is not out of reflection but out of self-illumination.
Kiran Stacey and Saskia Scholtes in New York | August 26 2009 19:54 | FT.com
Shares of Fannie Mae, Freddie Mac and AIG, the three financial groups taken over by the US government at the height of the financial crisis last year, have surged over the past three weeks, making them the most improved stocks on the New York Stock Exchange since early August. AIG, the insurance conglomerate that came close to collapse last September, has soared 150 per cent since August 3, while government-run mortgage financiers Fannie and Freddie have both gained nearly 250 per cent.
The gains made by Fannie and Freddie were in part sparked by the recent stabilisation of the US housing market and speculation that the US government would extend its tax credit for first-time homebuyers. Trading has also been fuelled by a recent widely read analysis of Fannie and Freddie’s long-term earnings potential by John Hempton, portfolio manager at Bronte Capital, a hedge fund based in Australia that has invested in the preferred stock of the two companies. The gains have also squeezed short sellers, traders betting on a fall in the three companies’ shares. The short sellers have been forced to buy stocks to close their positions and minimise their losses. The result has been unusually frenzied trading. AIG closed trading on Wednesday at $37.69, from a peak of nearly $1,500, while Fannie and Freddie are close to $2, down from 2007 highs of about $66.
Latam exports ‘worst in 70 years’
Exports from Latin American and Caribbean nations are set to show their steepest fall in more than 70 years, the United Nations has predicted. The region’s exports are expected to shrink in volume by 11% in 2009, says the UN Economic Commission for Latin America and the Caribbean (Eclac). If the prediction proves accurate, it will be the worst drop since 1937. “Policies to reactivate trade are urgently needed,” said Eclac executive secretary Alicia Barcena. Imports are also expected to fall sharply, says Eclac. The commission predicts a decline of 14%, which would be the biggest reduction since 1982.
According to Eclac, Latin America and the Caribbean are feeling the impact of the global economic crisis on four fronts: foreign direct investment, remittances from citizens abroad, commodity prices and trade. Worst hit have been countries that thrive on exporting commodities, oil and minerals. Venezuela and Ecuador (which are oil exporters), Colombia (oil and coal) and Bolivia (natural gas) could see their exports slashed by as much as 32.6% this year, Eclac says. In the first half of 2009, mineral and oil exports from the region slumped by 50.7%, while exports of manufactured and agricultural products showed lesser falls of 23.9% and 17% respectively. The steepest fall was in exports to the European Union (-36.3% in total) and the US (-35.3%).
Story from BBC NEWS | http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/8222389.stm | 2009/08/26 11:29:35 GMT