Ajduggal's Blog

Is China’s Politburo spoiling for a showdown with America? Really ?

ajduggal — Sat, 15 May 2010 23:40:07 +0000

Is China’s Politburo spoiling for a showdown with America?

The long-simmering clash between the world’s two great powers is coming to a head, with dangerous implications for the international system.

By Ambrose Evans-Pritchard
Published: 5:33PM GMT 14 Mar 2010

China has succumbed to hubris. It has mistaken the soft diplomacy of Barack Obama for weakness, mistaken the US credit crisis for decline, and mistaken its own mercantilist bubble for ascendancy. There are echoes of Anglo-German spats before the First World War, when Wilhelmine Berlin so badly misjudged the strategic balance of power and over-played its hand.

Within a month the US Treasury must rule whether China is a “currency manipulator”, triggering sanctions under US law. This has been finessed before, but we are in a new world now with America’s U6 unemployment at 16.8pc.

“It’s going to be really hard for them yet again to fudge on the obvious fact that China is manipulating. Without a credible threat, we’re not going to get anywhere,” said Paul Krugman, this year’s Nobel economist.

China’s premier Wen Jiabao is defiant.

“I don’t think the yuan is undervalued. We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency,” he said yesterday. Once again he demanded that the US takes “concrete steps to reassure investors” over the safety of US assets.

“Some say China has got more arrogant and tough. Some put forward the theory of China’s so-called ‘triumphalism’. My conscience is untainted despite slanders from outside,” he said

Days earlier the State Council accused America of serial villainy. “In the US, civil and political rights of citizens are severely restricted and violated by the government. Workers’ rights are seriously violated,” it said.

“The US, with its strong military power, has pursued hegemony in the world, trampling upon the sovereignty of other countries and trespassing their human rights,” it said.

“At a time when the world is suffering a serious human rights disaster caused by the US subprime crisis-induced global financial crisis, the US government revels in accusing other countries.” And so forth.

Is the Politiburo smoking weed?

I let others discuss the rights and wrongs of this, itself a response to the US report card on China. Clearly, Beijing is in denial about is own part in the global imbalances behind the credit crisis, specifically by running structural trade surpluses, and driving down long rates through dollar and euro bond purchases. No doubt the West has made a hash of things, but the Chinese view of events is twisted to the point of delusional.

What interests me is Beijing’s willingness to up the ante. It has vowed sanctions against any US firm that takes part in a $6.4bn weapons contract for Taiwan, a threat to ban Boeing from China and a new level of escalation in the Taiwan dispute.

In Copenhagen, Wen Jiabao sent an underling to negotiate with Mr Obama in what was intended to be – and taken to be – a humiliation. The US President put his foot down, saying: “I don’t want to mess around with this anymore.” That sums up White House feelings towards China today.

We have talked ourselves into believing that China is already a hyper-power. It may become one: it is not one yet. China is ringed by states – Japan, Korea, Vietnam, India – that are American allies when push comes to shove. It faces a prickly Russia on its 4,000km border, where Chinese migrants are itching for Lebensraum across the Amur. Emerging Asia, Brazil, Egypt and Europe are all irked by China’s yuan-rigged export dumping.

Michael Pettis from Beijing University argues that China’s rewerves of $2.4/trillion – arguibly $3 trillikn – are a sign gf weakness, not strength. Only twice before in modern history has a country amassed such a stash equal to 5pc-6pc of global GDP: the US in the 1920s, and Japan in the 1980s. Each time preceeded depression.

The reserves cannot be used internally to support China’s economy. They are dead weight, beyond any level needed for macro-credibility. Indeed, they are the ultimate indictment of China’s dysfunctional strategy, which is to buy $30bn to $40bn of foreign bonds every month to hold down the yuan, refusing to let the economy adjust to trade realities. The result is over-investment in plant, flooding the world with goods at wafer-thin export margins. China’s over-capacity in steel is now greater than Europe’s output.

This is catching up with China, in any case. Professor Victor Shuh from Northerwestern University warns that the 8,000 financing vehicles used by China’s local governments to stretch credit limits have built up debts and commitments of $3.5 trillion, mostly linked to infrastructure. He says the banks may require a bail-out nearing half a trillion dollars.

As America’s creditor – owner of some $1.4 trillion of US Treasuries, agency bonds, and US instruments – China can exert leverage. But this is not what it seems. If the Politburo deploys its illusiory power, Washington can pull the plug on China’s export economy instantly by shutting markets. Who holds whom to ransom?

Any attempt to retaliate by triggering a US bond crisis would rebound against China, and could be stopped – in extremis – by capital controls. Roosevelt changed the rules in 1933. Such things happen. The China-US relationship is no doubt symbiotic, but a clash would not be “mutual assured destruction”, as often claimed. Washington would win.

Contrary to myth, the slide to protectionism after the 1930 Smoot-Hawley Tariff Act did not cause the Depression. Trade contracted more slowly in the 1930s than this time. The Smoot-Hawley lesson is that tariffs have asymmetrical effects. They devastate surplus countries: then America. Deficit Britain did well by retreating into Imperial Preference.

Barack Obama has never exalted free trade. This orthodoxy is, in any case, under threat in the West. His top economic adviser Larry Summers let drop in Davos that free-trade arguments no longer hold when dealing with “mercantilist” powers. Adam Smith recognized this too, despite efforts by free-trade ultras to appropriate him for their cause.

China’s trasformation has been remarkable since Deng Xiaoping unleashed capitalism, but as ex-diplomat George Walden writes in China: a Wolf in the World? you cannot feel at ease with a regime that still covers up Mao’s murderous nihilism. He reminds us too that China has never forgiven the humilations inflicted by the West when the two civilizations collided in the 19th Century, and intends to exact revenge. Handle with care.

2nd View

The more America huffs about the yuan, the less China will do about it

It’s always easier to blame someone else for your failings.

A test of true character, perhaps, is the extent to which one is prepared to blame oneself. As such, the Western world’s response to this self-made “credit-crunch” has highlighted the hypocrisy of our so-called leaders, their refusal to face reality and, above all, their lack of character.

When sub-prime first hit, Hank Paulson, then US Treasury Secretary, said “this financial crisis was caused to a large extent by a failure to address the rise of the emerging markets and the resulting global imbalances”. Last autumn, European Central Bank boss, Jean-Claude Trichet, argued that “imbalances have been the root of present difficulties”.

Even Barack “Change We Can Believe In” Obama has stooped to play the blame game. “We cannot follow the same policies,” the President said on a recent trip to Asia, “that have led to global imbalances.”

The implication is that sub-prime, and the deepest Western recession in generations, wasn’t our fault. It was entirely unrelated to widespread financial fraud, political myopia and lax regulation. Central banks kept interest rates too low for too long, Western consumers went on a debt-binge and our governments spent like crazy – but all that was nothing to do with us.

It was their fault – China and all those other upstart emerging markets. They produced things the rest of the world wanted, ran big trade surpluses and accumulated reserves. As a result, the Western world was “flooded” with Eastern savings, “forcing us” to keep on borrowing and spending.

You probably find this analysis deeply suspect – illogical and even crass. That’s because it is. Yet, the arguments above convey, in essence, the “advanced” nations’ position towards the emerging markets of the East. Among Western governments and the glove-puppet economists who serve them, the “global imbalances” line – despite its patent absurdity – is pretty much conventional wisdom. As such, this tawdry, blame-shifting nonsense is repeated ad nauseum in official speeches and diplomatic missives.

This is the context in which Beijing and Washington are now discussing the future value of China’s currency, a debate that last week turned pretty nasty. It sounds like a technical subject, one for currency dealers and other Wall Street denizens, but the outcome of this growing row is of vital importance to every country on earth.

China is the world’s most populous country. About to surpass Japan, if it hasn’t already, the Peoples’ Republic will, over the coming years, trump the US as the world’s biggest economy. The manner in which America and the broader Western world engage with China doesn’t reflect that reality. The West acts as if our relative decline is China’s fault. In doing so, our political leaders demean themselves and us while making the outcomes we want less likely.

Last weekend Zhou Xiaochuan, governor of the Chinese Central Bank, apparently indicated that Beijing is preparing to abandon its dollar peg. Since July 2008, the yuan has been held at around 6.8 to the US dollar. Zhou observed this was a “special measure”, designed to help China weather this Western-made financial crisis. “Sooner or later,” he said, “these kind of policies will be withdrawn.”

Back in Jan 2009, Tim Geithner, the current US Treasury Secretary, said: “President Obama believes that China is manipulating its currency.” That’s a pretty incendiary thing to say. The tough talk has since been maintained, with the US and its Western allies consistently arguing that the dollar-peg keeps the yuan “artificially low”, making China’s exports more competitive, to the detriment of Western goods.

Chinese “currency manipulation” is a part of the broader “global imbalances” thesis. Given that, Zhou’s words – a statement of the obvious – were seized upon as “evidence Western pressure is working”, with China about to impose a one-off revaluation. On Monday, currency derivative traders, having sucked up the White House spin, were betting on a 3pc rise against the dollar.

The reality is, though, that Zhou said something similar back in October, referring to the peg as “an unusual method during an unusual time”. All America’s hectoring does is to ensure that any official Chinese statement suggesting the dollar peg will soon end is met with another saying it won’t.

In the aftermath of Zhou’s speech, Chen Deming, the commerce minister who, naturally, has close ties to China’s export sector, insisted any currency appreciation would be “gradual and controlled”. Premier Wen Jiabao boomed that the yuan would remain “basically stable” – a phrase he’s been using for months.

When it comes to China, the West needs to face the truth. The more America calls for China to revalue the longer Beijing will take to do it. Chinese politicians are as unlikely to buckle in the face of Western pressure as their Western counterparts would be given a tongue-lashing from Beijing.

China’s government is petrified of social unrest. Given the importance of the export sector for continued high growth and jobs, this again makes it impossible to Beijing to be seen yielding to pain imposed by the West.

It’s also not clear that China’s currency is “under-valued” by all that much. Despite the peg, the yuan is 20pc higher than in 2005. This flies in the face of claims that the fall is America’s share of global exports – from 23pc to 18pc over the last five years – has happened because the yuan hasn’t been allowed to rise. But, then again, blaming foreigners is easier than restructuring clapped-out, bloated and heavily-subsidised Western factories.

Last week we also learnt that China’s exports rose 46pc during the year to February. Inevitably, this has also been presented as “evidence” of China’s foul play with the yuan. Yet this export rise is from a very low base – with February 2009 being the epicentre of the sub-prime storm. More significantly, Chinese imports rose 45pc over the same period.

During the first two months of 2010, in fact, China’s trade surplus fell by 51pc – with the gain in exports being out-weighed by an import surge. This hardly suggests the yuan, as Geithner claims, is “way too low”.

On Thursday, Obama weighed in, calling on China to adopt a more “market-oriented exchange rate”. The US Treasury Department, meanwhile, has set a mid-April deadline to decide whether China truly is a “currency manipulator”, warning that America could impose new levies on Chinese products if that’s judged to be the case.

The president is playing with fire. For one thing, his country is being kept afloat by China’s willingness to keep buying US government debt. Obama really should tread carefully. At the same time, the US is now at risk of sparking what could be an all-out trade war.

The reality is that America’s “weak dollar” policy – its long-standing practice of allowing its currency to depreciate in order to lower the value of its foreign debts – amounts to the biggest currency manipulation in human history. At the same time, the US has, for years, shamefully stalled on various rulings passed by the World Trade Organisation that show America to be breaching global trade rules.

Chinese inflation is now at 2.7pc – close to the official 3pc target. Beijing will eventually allow the yuan to rise, but in its own time and in order to tackle inflation and not because of US pressure. America needs to act smarter and get its own economic house in order. Obama has decided instead to lash out at China in a desperate attempt to placate a US electorate increasingly mindful of their president’s failings.

China breaks the Himalayan barrier

ajduggal — Fri, 30 Apr 2010 22:08:29 +0000

China breaks the Himalayan barrier
By M K BhadrakumarTwo veteran diplomats, one from China and the other an American, trudge their weary way from their respective capitals to the remote Himalayan kingdom of Bhutan to witness as “observers” a gathering of eight leaders from South Asia agonizing over the stasis of their 25-year old regional forum.

And then they retire to Beijing to exchange notes.

One year ago, such a scenario would have been considered implausible – even illogical. Yet, when Chinese Vice Foreign Minister Wang Guangya receives the United States Assistant Secretary of State Robert O Blake Jr at Beijing on Monday for the first meeting of the newly-formed “US-China Sub-dialogue on South Asia“, what seemed far-fetched moves into the realm of geopolitical reality.

The summit meetings of the South Asian Association for Regional Cooperation (SAARC) are better known as occasions for India-Pakistan diplomatic pageantry. The 16th SAARC summit at the Bhutanese capital of Thimpu on April 28-29 was no exception. The regional media, at least, thought so.

Yet another India-Pakistan prime ministerial meeting did take place on the sidelines of the regional forum in a new attempt to breed a fresh format of dialogue as the two South Asian adversaries try to tackle their intractable differences.

The new India-Pakistan process may or may not prove enduring. However, the Thimpu summit will be seen in retrospect as a watershed event where something fundamentally changed in the alchemy of regional cooperation in South Asia. (SAARC comprises Afghanistan, Bangladesh, Bhutan, India, Pakistan, Nepal, the Maldives and Sri Lanka.)

Plainly put, cooperation – or the lack of it in comparison with most other regions on the planet – is henceforth going to be an international spectacle with the “great powers” present to take the pulse of the gyrating actors.

Equally, what emerges is that a region that withstood Cold War infections for decades may not be so lucky this time as it gears up for what Ian Brummer, president of the Eurasia Group, recently called “the fight of the century” between China and the US.

To be sure, the backdrop is unprecedented and rather intimidating. The US has become a long-term military presence in the region for the first time in history. And China, also for the first time in its history, is casting aside its millennia-old reclusiveness in Middle Asia and seems set to pole-vault over the Himalayas and become an active participant on the South Asian arena.

From ”observer’ to participant
It is interesting that the US-China sparring in South Asia is beginning with a gingerly round of mutual consultation to figure out each other’s hardcore perspectives and unspoken intentions. Which side took the initiative to hold the two-day consultation that begins on Monday remains unclear, but since the venue is Beijing, it appears China did.

The SAARC has seven other “observers” – Iran, the European Union, Japan, South Korea, Mauritius, Australia and Myanmar – but the sub-regional meet at Beijing will keep them out. Evidently, China and the US do not have a high estimation of them (including the Europeans and the Japanese) as capable of carrying the burden of global responsibility to oversee the South Asian region’s acute problems of security and stability.

All the same, the US and Chinese statements on the occasion of the SAARC summit present a study in contrast. Blake was perfunctory to the point of being protocol-minded. For the record, he congratulated the SAARC on its 25th anniversary this year and “welcomed” its “vision for greater South Asian regional cooperation”. In all probability, he spent his time fruitfully elsewhere in bilateral meetings.

The US State Department spokesman in Washington awkwardly suggested that the SAARC summit was nothing terribly earthshaking: “One of a number of important structures that you have across the broader Asia region. We think they’re important. We encourage them … the secretary [Hillary Clinton] is committed to strengthen the United States’ ties to other structures like ASEAN [Association of Southeast Asian Nations]. This is an indication of our ongoing and deepening commitment to the region.”

When his turn came, on the other hand, Vice Foreign Minister Wang manifestly warmed up. He stressed Beijing’s desire to “elevate friendly ties” with the SAARC to “a new level”. He viewed SAARC in ideological terms, as a forum where “China stands together with developing countries”.

Wang responded to the SAARC summit’s focus on climate change by calling on developed countries to provide financial, technical and capacity-building assistance to enhance the ability of developing countries to cope with climate change.

“China is ready to strengthen practical cooperation with South Asian countries on climate change through bilateral channels and within the framework of South-South cooperation,” he said.

Wang further assured that “on the basis and in a spirit of equality and mutual benefit, China is ready to conduct dialogue and exchanges and expand practical cooperation with SAARC”. He announced a contribution of US$300,000 by China to the SAARC Development Fund and invited the body’s senior officials [heads of foreign ministries] to a meeting in Beijing.

Evidently, China takes its “observer” status – which it secured in 2005 – seriously. There have been reports that China aspires to seek full membership of SAARC, but India thinks that the regional body had better remain as it is with eight member countries belonging to the geographically definable region, and the bloc’s charter stipulates that all decisions need to be unanimous.

The challenge for Delhi …
India faces an existential dilemma somewhat similar to what Russia is gradually coming across in Central Asia (and the US may face in the Middle East, Africa and Latin America or in Southeast Asia): the appearance of a red star over the slice of firmament they somehow regarded as their own sphere of influence where they claimed to have uncontestable special interests in determining the shape of the constellation.

No analogy is quite complete. Unlike Russia in Central Asia, India never ruled the South Asian region but then the enveloping cultural ambience and the shared history and geographical space and bindings of a common civilizational that flow through millennia are perhaps far more profound.

Both Russia and India have a troubled history of relations with China in modern times and have fought bloody border conflicts, but Russia has been far more successful in coming to terms with the past.

One main difference is that the Central Asian region comprises autocratic regimes for whom Russia stands between them and the deluge, whereas the South Asian countries are all democracies of one kind or the another that do not necessarily depend on India for their political survival.

Besides, South Asian countries have an altogether different perception of China than that harbored by India – China as a benefactor.

Even India’s close neighbors like Nepal and Sri Lanka are eager to cultivate deeper Chinese involvement in their countries. And in the more recent past, China has been responding with noticeable alacrity, which of course causes uneasiness in the Indian mind although there is no evidence that China obstructs the expansion of India’s cooperation with its regional partners.

The hard reality is that the potentials of India’s economic cooperation with its neighbors – except Nepal and Bhutan which are recipients of Indian aid – remain far from explored and the emerging possibility is that China may come from behind and overtake India.

… to get its act together
Unlike India, China places primacy on its immediate neighborhood in its foreign policy and as Wang displayed, Beijing has a definite action plan with regard to carrying forward the impetus of cooperation with its South Asian neighbors.

The clock has begun ticking for India to watch out for a point when China overtakes India in terms of substantive volume of cooperation with the SAARC partners. China did a similar act on Japan (and the US) in Southeast Asia.

For India itself, China currently figures as the number one trade partner. The bilateral trade target for 2010 is US$60 billion, and Chinese Vice Foreign Minister Zhang Zhijun said last week, “I believe if we make the right efforts, we can even exceed the target.”

China is developing all-round cooperation with India’s SAARC partners in a structured way in the economic, political and even military spheres. Curiously, China has been quite effective in the use of ”soft power” too.

Chinese diplomacy is placing its accent on people-to-people contacts, including with India. The attempt is to repeat the phenomenal success China scored in the Asia-Pacific and Southeast Asian region by placing ”soft power” as a cutting edge of its diplomacy.

India has annual tourist traffic of 1 million people with China, whereas the figure for South Korea stands at 5 million. The tiny island group of the Maldives hugs India’s coast, yet receives more Chinese tourists than Indians.

There is no evidence that Indian diplomacy is geared for what lies ahead as China makes its presence felt as the SAARC region’s key partner.

Already there is immense frustration among the SAARC countries like Nepal, Bangladesh, Sri Lanka and Maldives that the stasis of the regional body is rooted in the adversarial character of India-Pakistan ties. In an extraordinary outburst at Thimpu, Maldives President Mohamed Nasheed bluntly demanded that India and Pakistan should “compartmentalize” their mutual animosities and allow regional cooperation to gain traction.

China’s profile as the South Asia’s leading interlocutor highlights India’s inability to lead its own sub-region and erodes its credibility as a regional power. This is the stark message that the Indian foreign policy establishment needs to cull from the Thimpu summit once the dust settles after the alluring India-Pakistan diplomatic road show there.

In hard terms, there is no escaping the fact that Delhi needs to evaluate the damage caused by the “militarization” of the Indian foreign policy mindset in the past few years. India may end up holding the wrong end of the stick through its obsession with the “string of pearls” thesis – that Beijing is encircling India. What is actually taking place is far more perilous – Chinese diplomacy may make India look ineffectual as a regional power.

The fact that Blake ( United States Assistant Secretary of State) headed for Beijing fresh from the Thimpu summit of SAARC testifies to a geopolitical reality.

Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.

“जीवन चलने का नाम, चलते रहो सुबहो शाम”

()New Fed Homeowner Initiative: The Good, the Bad and the Ugly

ajduggal — Sat, 27 Mar 2010 22:08:42 +0000

By BRUCE KENNEDY

If the Obama Administration’s new housing-aid plan were a movie, you’d have to say it was getting mixed reviews.

The initiative the Treasury announced Friday expands the housing-aid program by offering temporarily reduced payments for more struggling homeowners, including those who are unemployed, financial incentives for lenders that reduce loan balances for these homeowners and improved refinancing terms for Federal Housing Administration-backed loans.

But it’s met with skepticism from observers and experts in the real estate and banking industries. “Nobody believes this is going to solve the problem,” says Charles Roberts, principal at Your Castle Real Estate in Denver and a member of the city’s Board of Realtors. “What they’re all doing is preparing for about two to three years of massive short sales.”

Roberts thinks the plan will help some 5% to 10% of affected borrowers, but he’s also concerned by its unforeseen consequences. “Where did that money come from and what about the family across the street, who are basically in the same circumstances and didn’t get help?” he asks. “And wait a second, what about renters who were smart enough not to buy houses? Why [are] their tax dollars going to actually save a homeowner?”

A ‘Feel-Good’ Plan May Not Be Enough

At best, Roberts says, the initiative is a feel-good plan that shows the government is working to help homeowners and families in trouble. But that might not be enough. “I’m very dubious that this is the right thing to do,” Roberts says. “The market is going to have to bottom out and come back up.”

Robert acknowledges the Obama administration had made real attempts to help the market, such as by propping up Fannie Mae and Freddie Mac, offering a $8,000 tax break for first-time home buyers and committing to buy as much as $1.25 trillion in home-loan bonds. “But there’s literally a cost to that, in terms of money,” he warns.

Others believe the plan’s success hinges on unemployment. In Georgia, for example, “the fact of the matter is we’ve got to get jobs,” says Scott Trubey, a staff writer at the Atlanta Business Chronicle.

Trade groups and bankers in the state have told him they hope the proposed changes will help stem the tide of foreclosures and take some pressure off borrowers. “Foreclosures wreck communities, hurt property values and decrease tax collections,” he said. “A six-month forbearance would help borrowers pay down other debt, too.”

Trubey has been covering what he calls the housing market “train wreck” in Georgia, where one in every 331 households received a foreclosure filling last month and where 35 banks — the most in any U.S. state — have failed since August of 2008. His sources are pleased the incentives are focusing on equity, such as on home values, instead of just on payments. “Until these people get employment, they’re not going to pay in any case,” he says.

Defaulting as a Business Proposition

Roberts, meanwhile, is concerned the initiative could actually hurt the higher end of the real-estate market, where borrowers might find it to their financial advantage to opt for a “strategic default,” or to walk away from their mortgages even if they can afford their payments.

Two years ago, this option was almost never discussed, Robert says, but now, the stigma of walking away from a property is evaporating. “What we’re talking about now are people who are saying, ‘Why don’t I make a smart financial decision? I can make my payments, but why should I?,’” he says.

And Roberts predicts that the growing social acceptability of defaulting could further damage the economy. “Within months, if not a year, you’re going to be at a cocktail party and someone is going to brag about it,” he said. “Someone is going to say, ‘Yeah, screw Bank of America, I walked away and I saved a quarter-million dollars.’ But this would make a terrible precedent in the market and undermine our whole financial system. At the end of the day, [the housing initiative] hurts the very people it’s trying to help.”

(103) The Japanese don’t make friends easily

ajduggal — Mon, 28 Dec 2009 22:35:05 +0000

The Japanese don’t make friends easily

The ambitious Delhi-Mumbai Industrial Corridor (DMIC) has received major boost with India and Japan inking an agreement to set up a project development fund.

The initial size of the Fund will be Rs 1,000 Crore (about $212 milion). Both the Japanese and Indian governments contribute equally.

The fund will initially finance the preparation of overall development and feasibility studies for the 1483 km DMIC.

The corridor would include six mega investment regions of 200 square kilometers each and will run through seven states – Delhi, Uttar Pradesh, Haryana, Rajasthan, Gujarat, Maharashtra and Madhya Pradesh.

Each investment region would have a combination of production units, public utilities, logistics, environmental protection facilities, residential areas, social infrastructure and administrative services.

The first phase of the project is likely to be completed by 2012 with an estimated $90 billion ( Rs 4,23,000 crore) to be invested to develop infrastructure in the investment regions.

An official said the government would invite bids soon.

“This is the right time to invite bids. The sentiment is positive domestically as well as internationally,” said the official.

“The project is almost mapped on paper. Perspective plans are being firmed up.”

The six specifically delineated investment regions planned for manufacturing facilities for domestic and export led production along with associated services and infrastructure.

The minimum processing area in these regions will be about 40 per cent of the total designated area, which may or may not be contiguous.

In addition to the investment regions, the DMIC will also have six industrial areas of 100 square km each. A steering authority, headed by the Finance Minister, is overseeing the project.

A corporate entity, Delhi Mumbai Industrial Corridor Development Corporation has been set up to undertake planning of the project, development of its various components, coordinating with all stakeholders, monitoring of implementation and raising all finances.

The corridor will have a 4,000 mw power plant, three greenfield ports and six airports. It will also link 10 cities with population of more than 1 million. It will built along a dedicated rail freight corridor, and once commissioned, will reduce the Delhi-Mumbai transit time from 60 hours to 36 hours.

The corridor, spread across 2,700 km.India and Japan waltzed closer to one another over a carefully choreographed but hectic 24 hours across Delhi and Mumbai.

With China poised to surpass Japan as Asia’s largest — and world’s second largest — economy as early as 2010, Japanese Prime Minister Yukio Hatoyama turned his attention to India despite battling a political scandal and falling popularity at home, diplomatic sources and economic experts said.

Hatoyama’s 36-hour trip began with a closed-door morning meeting on Monday morning at the Taj Mahal hotel with CEOs of India’s largest companies, the first-ever visit by a Japanese PM to Mumbai.

The same afternoon, Hatoyama flew to Delhi for a similar CEOs’ meeting and was later hosted to a dinner by Prime Minister Manmohan Singh.

The two countries signed on a Rs 1,000 crore project development fund that will finance feasibility studies for the DMIC master plan.

Ajay Dua, a global adviser to Japanese consumer giant Panasonic and former industry secretary, told Hindustan Times. “This visit signifies that they have come to the conclusion that Asia cannot mean China alone.”

With an ageing population and an economy that is showing the first green shoots of recovery after two years, Japan is hoping for a GDP growth rate of 2 per cent next year. Compare that to the prediction for China (10 per cent) and India (8 per cent) and Japan’s investments into India show a strong economic diplomacy on Hatoyama’s part.

“A lot of work has gone into this visit,” a highly placed Japanese diplomatic source told HT, requesting anonymity because he is not authorised to make a public statement. “It (the visit) is a win-win situation for both India and Japan.”

The industrial corridor to be build on both sides of the 1,480 km of rail track between Delhi and Mumbai across seven states — exemplifies this “win-win”.

But the returns to India will go beyond DMIC, with more Japanese investment expected to flow in as India pushes bilateral deals and moves away from third-world multilateral agreements.

Riding the political tailcoats, Japanese companies, traditionally reluctant to enter India, are mulling big investments in India, primarily in telecom, auto, pharma and power.

Toyota Motor Corp managing director Hiroshi Nakagawa, for instance, told HT that he wants DMIC to go all the way to Chennai, through Bengaluru, with the first phase being the Chennai-Bengaluru arm.

The payoff for Japan, which will also provide soft loans for the Delhi-Mumbai dedicated rail freight corridor: a third of the value of contracts will go to Japanese companies.

“The Japanese don’t make friends easily, and no decision is taken overnight,” said Dua, who advised India on the industrial-corridor deal.

The guest list for the Mumbai meeting with Hatoyama, carefully vetted by the Japanese embassy, included Tata Group Chairman Ratan Tata, Reliance

Industries Chairman Mukesh Ambani, Godrej Group Chairman Adi Godrej, ICICI Bank Managing Director Chanda Kochhar and Bajaj Auto Chairman Rahul Baja. “Both India and Japan have strong potential (to grow investments),” said Godrej. “We discussed how to take this potential forward.”

(With Rachit Vats in Mumbai & Sumant Banerji in New Delhi)

The ambitious Delhi-Mumbai Industrial Corridor (DMIC) has received major boost with India and Japan inking an agreement to set up a project development fund.

The initial size of the Fund will be Rs 1,000 Crore (about $212 milion). Both the Japanese and Indian governments contribute equally.

The fund will initially finance the preparation of overall development and feasibility studies for the 1483 km DMIC.

The corridor would include six mega investment regions of 200 square kilometers each and will run through seven states – Delhi, Uttar Pradesh, Haryana, Rajasthan, Gujarat, Maharashtra and Madhya Pradesh.

The first phase of the project is likely to be completed by 2012 with an estimated $90 billion ( Rs 4,23,000 crore) to be invested to develop infrastructure in the investment regions.

An official said the government would invite bids soon.

“This is the right time to invite bids. The sentiment is positive domestically as well as internationally,” said the official.

“The project is almost mapped on paper. Perspective plans are being firmed up.”

The six specifically delineated investment regions planned for manufacturing facilities for domestic and export led production along with associated services and infrastructure.

The minimum processing area in these regions will be about 40 per cent of the total designated area, which may or may not be contiguous.

In addition to the investment regions, the DMIC will also have six industrial areas of 100 square km each. A steering authority, headed by the Finance Minister, is overseeing the project.

The corridor will have a 4,000 mw power plant, three greenfield ports and six airports. It will also link 10 cities with population of more than 1 million. It will built along a dedicated rail freight corridor, and once commissioned, will reduce the Delhi-Mumbai transit time from 60 hours to 36 hours.

The corridor, spread across 2,700 km with an additional 5,000 km of feeder lines connecting Mumbai to West Bengal.

ALSO:

Japan asks India to sign CTBT
Tokyo non-committal on civil nuclear cooperation

As the Prime Ministers of India and Japan held informal talks this evening on bilateral ties, Tokyo expressed the hope that India would sign the comprehensive test ban treaty (CTBT) while it remained non-committal on cooperating with New Delhi in the civil nuclear energy field.

Talking to reporters here, Kazuo Kodama, official spokesman for the visiting leader, said the two Prime Ministers would tomorrow hold official-level talks and issue a joint statement. The joint statement would emphasise the fact that India and Japan shared fundamental values, like democracy, rule of law and human rights. It would reiterate their commitment to strengthen and deepen strategic and global partnership between the two countries.

The joint statement will also announce the setting up of a new ‘Two plus Two’ framework between the two countries to develop security cooperation to combat sea piracy. The framework will have representatives from the Foreign and Defence ministries of the two countries.

India and Japan have strengthened defence ties in recent years with a security cooperation agreement inked in 2008. India is the only country besides the United States with which Japan has signed such a pact.

Asked if the emerging India-Japan axis could be aimed at countering China, the Japanese official retorted: ‘’Let me emphasise that the promotion of India-Japan relations would not be at the cost of any third country… I know India’s position is also the same.’’

On whether there was any possibility of Japan cooperating with India in the civil nuclear energy area, the Japanese spokesman said the issue would be discussed by the two Prime Ministers. He, however, noted that the Japanese Prime Minister has welcomed India’s unilateral moratorium on further nuclear testing. “At the same time, Japan hopes India will sign the CTBT and we would also like to see the early commencement of negotiations on FMCT (fissile material cut off treaty).”

(104) Compulsory Private Health Insurance

ajduggal — Fri, 25 Dec 2009 23:42:33 +0000

Compulsory Private Health Insurance: Just Another Bailout for Financial Sector?

By Ellen Brown

Dr. Benjamin Rush, a signer of the Declaration of Independence, is quoted as warning two centuries ago:

“Unless we put medical freedom into the Constitution, the time will come when medicine will organize into an underground dictatorship… The Constitution of this republic should make special privilege for medical freedom as well as religious freedom.”

That time seems to have come, but the dictatorship we are facing is not the sort that Dr. Rush was apparently envisioning. It is not a dictatorship by medical doctors, who are as distressed by the proposed legislation as the squeezed middle class is. The new dictatorship is not by doctors but by Wall Street — the FIRE (finance, insurance, and real estate) sector that now claims 40% of corporate profits.

Economist L. Randall Wray observes that ever since Congress threw out the Glass-Steagall Act separating commercial banking from investment banking, insurance and Wall Street finance have been “two peas in a pod.” He writes:

“[T] here is a huge untapped market of some 50 million people who are not paying insurance premiums—and the number grows every year because employers drop coverage and people can’t afford premiums. Solution? Health insurance ‘reform’ that requires everyone to turn over their pay to Wall Street. . . . This is just another bailout of the financial system, because the tens of trillions of dollars already committed are not nearly enough.”

The health reform bills now coming through Congress are not focused on how to make health care cheaper or more effective, how to eliminate waste and fraud, or how to cut out expensive middlemen. As originally envisioned, the public option would have pursued those goals. But the public option has been dropped from the Senate bill and radically watered down in the House bill.

Rather than focusing on making health care affordable, the bills focus on how to force people either to buy health insurance if they don’t have it, or to pay more for it if they do. If you don’t have insurance and don’t purchase it, you will be subject to a hefty fine. And if you do purchase it, premiums, co-pays, co-insurance payments and deductibles are liable to keep health care cripplingly expensive. Most of the people who don’t have health care can’t afford to pay the deductibles, so they will never use the plans they are forced to buy.

To subsidize those who can’t pay, the Senate bill would make families earning two to four times the poverty level who don’t have employer-sponsored insurance surrender 8% to 12% of their income to insurance payments, or pay a fine. In another effort to make the insurance payments “affordable,” the Senate bill calls for the lowest cost plan to cover only sixty percent of health care costs.

“In other words,” writes Dr. Andrew Coates in a November 23 article, “a guarantee of insurance industry dominance and the continued privatization of health care in every arena.”

Compulsory health insurance is like compulsory selective military service (the draft), except that all of our numbers have come up. The argument has been made that auto insurance is compulsory, so why not health insurance? But the obvious response is that you can choose to drive a car. The only way to escape the vehicle we call a body is to give up the ghost. !!!

The Right to Sovereignty Over Our Own Bodies

And that brings up another issue alluded to by Dr. Rush: the matter of freedom of choice in health care. Some people would equate it with freedom of religion. Not everyone believes in Modern Medicine. If we the people have a right to choose what we believe about life after death, we should have the right to choose what we believe about life before death, by choosing how to maintain our own bodies.

The conventional treatment promoted by the medical/pharmaceutical complex is an aggressive approach that can wind up killing the patient as collateral damage in its war on the disease. Among other researchers questioning the wisdom of this approach is Gary Null, who reported the results of an exhaustive independent review by the Nutrition Institute of America in 2004. The reviewers concluded that the number one killer is not heart disease or cancer but conventional medicine itself. Conventional medicine was found to be responsible for an estimated 783,936 deaths annually, including 106,000 deaths from adverse drug reactions, 98,000 from medical errors, and 88,000 from infection; and those figures were conservative, since no more than 20 percent of iatrogenic (doctor- or drug-caused) mishaps are ever reported.

There are more natural, less invasive alternatives, but most are not covered by insurance; and even such simple remedies as healthy organic food may be too expensive for people forced to use a major portion of their incomes for medical insurance. A true public option of the Medicare-for-all variety could have solved the problem by keeping health care affordable. If other industrialized countries can find the money for a national health service, we could too. For a model, we could follow the lead of Canada, which originally obtained the funds for its national health service from its own publicly-owned central bank. But that will be the subject of another article. Stay tuned.

Cap-and-trade will boost our economy and help control temptations–!

ajduggal — Fri, 25 Dec 2009 22:05:15 +0000

Cap-and-trade will boost our economy ? and control temptations———! sorry temperatures !

Ambrose: The coming debt crisis

This past year has been one of runaway, crazed political recklessness, we now face extraordinary dangers as a country, and President Obama gives no sign of planning to apply the brakes. Sooner or later, get ready for a crash if he doesn’t.

Not that Obama is wholly responsible for the truly frightening rise in federal debt that we see — all kinds of factors are at work, from a welfare state going awry to a recession more devastating than some predicted.

But instead of addressing this debt crisis, he has exacerbated it, giving us an ineffectual, politically instructed stimulus package costing as much as the war in Iraq, for example, and working to ram a multi-trillion-dollar health plan down our throats.

Despite applause from the left, this extravagance is worse than irresponsible. Considering that its chief objectives could have been achieved at virtually no additional costs and how it worsens our plight, it is insane.

The latest warning about our peril comes from the Peterson-Pew Commission on Budget Reform, composed of 34 former government officials of both parties, people respected on both sides of the aisle. Here is their conclusion: With a total debt now at $11.9 trillion, the worst could happen over time or immediately, such as buyers of Treasury securities demanding higher interest rates, a declining standard of living, lower wages and fewer safety nets.

The authors of the commission report agree that steep spending reductions before the recession has lifted might not be advisable, but do want a series of stabilizing steps to begin right away and to continue over the years to come. Tax increases alone won’t do the job — you can only go so high, they realize, and others of us would insist that high taxes can be as economically destructive as deficits. What’s crucial are spending controls of the kind wholly anathema to our leftist leaders.

Obama and congressional Democrats talk as if they want to control health costs, for instance, but that’s all it is — talk. There is absolutely no way the planned extension of health insurance through the various techniques they favor will decrease government health expenditures that are already a foremost cause of our budgetary mess. What we’re likely going to see by the time the dust has settled is a new health entitlement — this is a right, say Democrats wholly baffled about the concept of rights and who don’t get it that they are about to make life far worse for millions and millions.

The leftist pretense has been that ours has been a nation neglectful of people’s needs and just out to make the rich richer, all of which is utter, total nonsense. We already have a welfare state that is at the heart of what’s leading us to the cliff’s edge.

Look at a pie chart of the federal budget and you’ll notice that when you add up the expenditures on Social Security, Medicare, Medicaid, unemployment, welfare, food stamps, housing subsidies and more, the total for entitlements goes well over 50 percent of the whole.

That’s a whopping amount of money, but there’s more, the so-called hidden welfare state, identified by some economists as all the ways in which the tax code is used to help buy insurance policies, provide cash outright to low-income earners and much more. It has been estimated, I read in an Internet article, that the budgetary cost is at least half of what shows up in the pie chart.

Obama wants more of the same while also subscribing to the notion that cap-and-trade will boost our economy and help control temperatures when, in fact, it could cost us a fortune and do next to nothing to control temperatures. There’s at least this — 2010 is an election year, a chance to reverse policies.

(Jay Ambrose, formerly Washington director of editorial policy for Scripps Howard newspapers and the editor of dailies in El Paso, Texas, and Denver, is a columnist living in Colorado. He can be reached at SpeaktoJay(at)aol.com.)

(102) UP AND DOWN WALL STREET

ajduggal — Wed, 23 Dec 2009 00:30:23 +0000

Specter of Twin Deficits Returns, With a Twist

By RANDALL W. FORSYTH | MORE ARTICLES BY AUTHOR

The current-account isn’t too small; the real risk is monster budget gaps for years to come.

HERE’S A FRIGHTENING THOUGHT: there aren’t enough dollars floating around the globe to buy all the Treasury securities Uncle Sam’s government is going to have to peddle.

That’s the specter conjured by a senior Chinese official. Because of America’s shrinking current-account deficit, the rest of the world has fewer dollars to buy more U.S. Treasuries, Zhu Min, deputy governor of the People’s Bank of China told an academic audience, ShanghaiDaily.com reported Monday.

Because of the U.S. fiscal deficit, Zhu contended the dollar would keep declining in value because of continued issuance of Treasury to finance the budget gap.

Zhu’s comments should be heard given China is the world’s largest foreign holder of U.S. government debt. And also because China has been on something of a buyer’s strike since midyear. Indeed, Treasuries sold off sharply Monday following Zhu’s remarks, though no market commentator I ran across took note of them or tied them to the market’s decline.

But the prospect the U.S. current-account deficit is too small to facilitate funding the budget is surely puzzling to anybody who has followed the debate over the so-called twin deficits over the years. The two are supposed to move together; an expanding fiscal gap supposedly leads to widening current-account deficit.

The basic arithmetic goes like this:

The current account is the broadest measure of international transactions, consisting of trade and financial flows. As such, it represents the difference between what the nation produces and earns and what it consumes. A current-account deficit means a nation consumes more than it produces and borrows the difference, just as a household would.

That also means that domestic savings are less than investments (in the real sense, such as spending on business plant and equipment and residential housing.) A budget deficit represents negative savings since the government is spending more than it’s taking in.

Thus, in that way does a budget deficit contribute to a current-account deficit; that is, if, as economists are fond of saying, all else is equal. Which it isn’t.

The fiscal deficit has soared to over 10% of gross domestic product while the current-account deficit has fallen about in half from its peak to around 4% of GDP. How could that happen? The Great Recession explains the anomaly.

Even without all the spending on the Troubled Asset Relief Fund, the budget deficit has soared past $1 trillion because of the collapse of tax receipts. But with Americans curbing their spending, the current-account gap has shrunk, reducing the inflow of capital to cover it. (The current account and the capital account have to balance each other; that’s why it’s called the balance of payments.)

The surfeit of dollars received by exporting nations — notably China and the oil-exporting countries — has been recycled largely into U.S. Treasury securities. China’s purpose in purchasing U.S. assets is to prevent the rise in the value of its currency, the renminbi. In the process, the dollar is supported and U.S. interest rates are held down.

China clearly has become restive about this arrangement. Earlier this year, officials called for a super-national currency that would at least supplement and eventually supplant the dollar as the world’s main reserve and transaction currency.

And the Chinese have acted in accordance with their widely voiced misgivings about the dollar and Treasuries by virtually calling a halt to their purchases and diversifying their reserves into other currencies.

While China purchased $115 billion in Treasuries in the 12 months to October, virtually all of that was from last October through May. Ed Yardeni, the head of the eponymous Yardeni Research noted in a recent research briefing. (Actually, the Chinese did purchase $49 billion since May, only they resided in Hong Kong rather than the Mainland, he adds.)

Even so, Treasury auctions have all attracted ample bids despite the absence of demand from China. That’s because U.S. investors have stepped up their buying of Treasury debt.

Banks aren’t lending but are accumulating government securities, reaping a handsome profit margin between what they earn in interest and what they pay on their deposits and other liabilities. A 200 basis point (two percentage point) spread between the cost of borrowing (or carry) and what intermediate notes yield can be multiplied many times over with leverage. And regulators are pleased by the improvement in bank asset quality (although the White House is miffed by the lack of lending by “fat cat” bankers.)

Similarly, consumers are saving instead of spending, and are plowing a portion of those savings into Treasuries, either directly or through bond funds. Or if they’re paying off borrowings, the banks are plowing the payments into government securities.

So, cross a shrinking U.S. current-account deficit off your worry list. But Zhu and everybody else have reason to be concerned about federal budget deficits that are projected to run at $1 trillion a year through the end of the next decade.

Comments: randall.forsyth@barrons.com

(102) Why Strong US Dollar Foreshadows Economic D— in 2010

ajduggal — Wed, 23 Dec 2009 00:25:07 +0000

Why Strong US Dollar Foreshadows Economic Doom in 2010

Normally, in what passes for Orthodox economics, a strong currency for a consumer nation is a good thing, a positive development. And America is the biggest consumer, and one of the smallest producers, in human history.

However, in these turbulent times, this economic train wreck that has been on an acceleration course since mid 2007, a strong currency or rather, specifically, a strong dollar is an absolute disaster. Allow me to explain.

Nothing has actually changed in the US economy since the absolute collapse and nationalization of the US banking firms, and along with it the British banking houses, of 2008. Indeed, in America, the exact same games that brought down the private banks are still being played by the now government owned (or, is it that they own the government…that is for another thesis) entities and this is called now called recovery. Case in point: several major banks are paying back their TARP funds and the US press is screaming to the high heavens about the wisdom of the Marxists running America. True, many of the fools that are still the majority, though shrinking, of the electorate, buy into this, but let us look closer. The TARP fund is being paid back in one of two ways: 1. unspent TARP monies are being given back to the government (note I do not say owners, since the tax serfs will never ever see this cash again) and this is called recovery or 2. The banks are selling new stock through new IPOs to pay back the debt, which in turn dilutes the value of the old stock which is held by the government, thus giving with one hand and mugging with the other, again, this is called recovery. None of the other US economic indicators have improved, especially when DC’s fluff and out right lies are removed.

Now having established the continued progression of the US financial collapse, why than has the USD grown in strength so much in the past 2 weeks and continues to do so? For that we must look a the world wide picture and to the foundation of the next tidal wave that is about to sink us all.

The great Anglo Heist, the out right con job and mugging of the entire world by the Anglo Saxons (US/UK) has kicked out the supports of a lot of other nations, many of whom were dancing on supports of smaller EU and Gulf Arab con jobs. These have spent all of 2009 trying to balance themselves on a single stilt that itself is rotten through and through and again, the Western press has called this recovery or at least survival.

That all is about to change and the first dropping shoe, in what is about to be a shoe storm, was Dubai. Simply, it defaulted on most of its debt and told its debt owners that it was their fault, which it was also, for giving it money and not its fault, is the heroine junky ever at fault for his addiction — well yes, for spending it on failed indoor winter wonder lands, artificial islands and hundreds of near empty sky scrappers.

Following this came the news of Greece’s down grading and eminent demise. Greece is part of the PIGS (Portugal, Ireland, Greece, Spain) all of whom are on the edge. But in Europe, they are not alone, they are in a club that also includes Ukraine, Belarus, Lithuania, Latvia, Estonia, Hungary, Iceland and possibly Denmark, Poland is also well on its way with massive government deficits for a “recovery”. Healthy or recovering EU economies are faced with massive losses and bailing out nations who, like drowning men, will pull the healthier economies into the Abyss with them.

Behind these stand other nations, such as Georgia, Turkey, Venezuela, Mexico, Columbia, Nicaragua, Argentina, as well as much of Africa.

Than there is China, who has taken bubble blowing to unprecedented levels. It has masked over capacity by doing something incredibly stupid, increasing that capacity further and further, and using the extra capacity in the creation of yet more capacity. Sure, this puts off judgment day by a few years, but it is coming and 2010 will be that day. World demand has not only not returned to the levels of 2007, and Chinese production capacity is well above what it was in 2007, but what demand has remained, is now being guarded by every economy to make sure its means of satisfying that demand, and thus providing jobs, stays at home. China, reacting like a blind sided, and spoiled brat who is used to everyone pandering to it, has swung out at the world and wound up in trade wars with the EU, US and Russia. Of course, this only further cuts demand for that ever expanding capacity. Judgment day is indeed here, as the majority of China’s citizens, who make up the shoeless peasants and the near slave laborers in the plants, will never be able to afford what they produce.

So, with all this happening, nations are running to buy the USD in a false hope of its stability. This in turn strengthens the USD, killing further any recovering local industries, while giving government the means to further indebt the whole of the nation. With moves like their new socialist health care and Cap and Trade, the Americans will smother their own industry, creating millions more unemployed and raising anger to a boil, all ahead of the November 2010 parliamentary elections. The temptation to spend with abandon, to ease the anger, at least until the elections are over, will be impossible to resist.

The hangover that will be felt, first by the Americans, than by anyone who owns their debt, pretty much everyone, on January 2011, will make every other year of the past 1,000 seem like a warm spring day

(99)Euro ‘Diktats’ risk t– response across Southern Europe

ajduggal — Mon, 21 Dec 2009 16:11:40 +0000

Euro ‘Diktats’ risk terrorist response across Southern Europe

It is becoming dangerous to associate with economic and ideological power in Southern Europe, or what Europol calls the “Mediterranean triangle” of anarchist violence.

By Ambrose Evans-Pritchard,

Greece’s Revolutionary Struggle detonated a car bomb at the Athens Stock Exchange in September. Citigroup’s branches have been targeted twice this year.

Hooded extremists attacked the rector of Athens University in his office this month, sending him to hospital with head injuries.

In Milan, the Informal Anarchist Federation (FAI) planted 2kg of dynamite last week at Bocconi University, the symbol of the free market in Italy.

The FAI left a note threatening a “bloodbath” for capitalists. Security forces have issued alerts for the Milan bourse, Unicredit, and Barclays. Italians have begun to ask whether their country is returning to the 1970s, the “years of lead” when the Red Brigades murdered ex-premier Aldo Moro.

The FAI is no friend of Europe either. It sent letter bombs earlier this decade to the heads of the Commission and the European Central Bank and to the European Parliament.

In Spain, Barcelona’s anarchists have been conducting a low-level campaign against bank cash machines, supermarkets, and firms such as Manpower. Valencia and Galicia have seen a wave of attacks.

“Activities by left-wing and anarchist terrorists and extremists are increasing in quantity and geographical spread in the EU,” said Europol.

Portugal has its own twist. The Trotskyist-Maoist Bloco emerged as third party with 11pc of the vote in the June elections. Premier Jose Socrates is attempting to impose austerity by minority government. Good luck.

The hard-Left resurgence cannot be blamed on monetary union as such, yet the two are linked. EMU has always been viewed as a capitalist conspiracy – a “bankers’ ramp” – in Left-wing circles. While their view may seem odd to us, they are entirely right to think that poor people in certain countries are victims of the experiment.

Unemployment is 19pc in Spain (43pc for youth) on Eurostat data. Greece is catching up fast. Labour minister Andreas Loverdos said Greek joblessness has jumped above 18pc over the last two months as EU-funded workfare schemes expire.

This will get worse. Southern Europe is being ordered to carry out IMF-style austerity, without the IMF-style devaluation required to rectify the massive imbalances that have built up between North and South under the euro. The victims are caught like France and Germany under the Gold Standard of the early 1930s, when society was broken on a wheel of deflation decrees.

The EMU system has condemned Club Med to structural depression, with no way out. The logical – yet politically absurd – response of German Chancellor Angela Merkel is to talk of overriding national democracies in order to save the euro. “The question arises over what authority Europe has to tell national parliaments what to do, in order to avoid damage to Europe itself? National parliaments don’t like to be dictated to about such things, but we need to address the problem,” she said.

I do not wish to paint this is as German bullying, let alone a conspiracy by Berlin. Germany is being swept along by events like every other country that entered EMU blindly. Yet here is a German Chancellor talking about “dictating” to the Hellenic Parliament, within living memory of the Axis occupation, the Swastika flag on the Acropolis, and the hated Security Battalions. Neither Greece’s Communist unions, nor Greek army officers, will react well to such diktats. That goes double for Epanastatikos Agonas and fellow terrorists.

Matters will be tested over the next two to three years. Standard & Poor’s said Greece’s public debt will reach 138pc of GDP by 2012 (from 99pc last year) as it downgraded Greek bonds to BBB+.

The IMF expects Spain to contract by a further 0.7pc next year, even assuming a global recovery. Moody’s delivered its axe-blow last week, downgrading a third of all Spanish mortgage bonds and a string of regions.

Italy will bounce along in perma-slump, as it has for a decade. The country has lost 30pc in labour competitiveness against Germany since the late 1990s.

Across Southern Europe there is a mood of national powerlessness, a feeling that events have moved beyond their control – as indeed they have.

Eurosceptics argued from the start that EMU would prove unworkable over time without a debt-union; that the inevitable euro crisis would be used (consciously or not) to create an EU central government; that weak states on the edges would be reduced to colonies and that far from binding Europe together, EMU would lead to acrimony and perhaps reopen Europe’s can of historical worms. Were the critics wrong?

P Notes:

I don’t think so. People speak English, read Wall street journal, listen to CNN via BBC ! in British English !!

Europeans need cheap goods and stability. So French can have good sex lives !!!

Horror movies are only shown on Saturday, when every body is drunk and enjoying.

Have a good EU union and peaceful as well !!!!!

if you can’t escape a r—, Enjoy it !

Guess, which one is EU and second one is what ! ? !

Doomsday Senator in Australia

ajduggal — Sat, 19 Dec 2009 18:09:51 +0000

Australian Senator Speaks of US Economic Armageddon

COGwriter

Earlier this week, an Australian senator was chastised for telling the truth about the USA:

Joyce’s US Armageddon talk ‘irresponsible’

Australia Broadcasting Corporation – Dec 11, 2009

by Sabra Lane for The World Today

The Federal Government has accused the Opposition’s new finance spokesman, Barnaby Joyce, of being economically irresponsible and making policy on the run over his pronouncements on banks, Chinese investment and the ability of the United States to meet its debt obligations.

Senator Joyce, who has never been shy in saying exactly what he thinks on anything, believes Australia should have contingency plans in place in case the US fails to meet its debt obligations and has described that scenario as an “economic Armageddon”…

Senator Joyce told the Sydney Morning Herald that some Australian states had debt issues too, specifically he doubts Queensland’s capacity to meet its debt obligations.

He also wants a ban on Chinese sovereign investment in the Australian resources sector. http://www.abc.net.au/news/stories/2009/12/11/2769518.htm

Joyce’s Armageddon warning

The Age, Australia – Dec 11, 2009

TONY Abbott’s new finance spokesman, Barnaby Joyce, believes the American Government may default on its debt, triggering an ”economic Armageddon” that will make the recent global financial crisis pale into insignificance..

In an interview with The Age, Senator Joyce said he did not want to alarm the public, but there needed to be a debate about Australia’s ”contingency plan” for a sovereign debt default by the US or even by an Australian state government…

He said the chances of a US debt default were distant but real, and politicians were not doing the electorate a favour by refusing to acknowledge the risk. http://www.theage.com.au/national/joyces-armageddon-warning-20091210-km90.html

Newsweek has also reported some of the truth about what is happening in the USA:

An Empire at Risk

We won the cold war and weathered 9/11. But now economic weakness is endangering our global power.

Newsweek - From the magazine issue dated Dec 7, 2009 By Niall Ferguson…

Call it the fractal geometry of fiscal crisis…if the United States succumbs to a fiscal crisis, as an increasing number of economic experts fear it may, then the entire balance of global economic power could shift. Military experts talk as if the president’s decision about whether to send an additional 40,000 troops to Afghanistan is a make-or-break moment. In reality, his indecision about the deficit could matter much more for the country’s long-term national security…

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force. Which is why voters are right to worry about America’s debt crisis. According to a recent Rasmussen report, 42 percent of Americans now say that cutting the deficit in half by the end of the president’s first term should be the administration’s most important task—significantly more than the 24 percent who see health-care reform as the No. 1 priority. But cutting the deficit in half is simply not enough. If the United States doesn’t come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power…

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next. http://www.newsweek.com/id/224694

Without national repentance, the USA is doomed. Period. And so is Australia.

Many do not wish to accept that, either here or in Australia, but it is the truth.