From Volume 6, Issue 20 of EIR Online, Published May 15, 2007

World Economic News

Uttar Pradesh Votes Down Economic Globalizers

May 11 (EIRNS)—When the results of the state assembly elections of India's largest state, Uttar Pradesh (UP) with a population close to 135 millions, came out on May 11, it became evident that New Delhi's United Progressive Alliance (UPA)-led economic liberalizers and globalizers had suffered a massive defeat. Of the 403 seats in the state assembly, the leading party of the UPA, the Congress Party, has garnered a paltry 26 seats.

The UP state assembly election will not have any immediate effect in the power structure that holds the UPA together. However, the UPA, which was engaged in implementing a variety of the "China Model" (emphasis on a higher GDP growth rate and utilization of a small percentage of the workforce to bring about that higher growth rate, without making eradication of poverty of hundreds of millions of Indians its main platform) has been told in no uncertain terms that its economic policies have been rejected. Higher prices, caused by increase in money supply without providing for an adequate increase in production, has further endangered the poor people's lives.

German Communications Workers Begin Nationwide Strike

May 11 (EIRNS)—This morning, 10,000 Deutsche Telekom workers began strikes, involving protest rallies in five states of Germany: North Rhine-Westphalia, Bremen, Lower Saxony, Hesse, and Bavaria. Strike leaders charge the Blackstone locust fund with pulling the strings behind CEO René Obermann's drive to brutally cut expenses and increase revenues for shareholders. The Blackstone-Obermann line is suicidal, as the excessive expansion of the mobile phone branch generally has caused the loss of 588,000 Telekom clients during the first quarter of this year alone, leading to financial losses which Obermann wants to compensate by the outsourcing of 50,000 jobs to firms of the telecommunications conglomerate that pay less and force employees to work even longer.

Claiming his policy is the only "reasonable" one, Obermann responded to the strike with the warning that strikers will ruin the outsourcing option and "force" the management to an emergency selloff of sections of the conglomerate, which would eliminate many jobs. The union responded with a warning that the strike could be continue into the Summer, if necessary.

Swiss Industry, Insurance Under Hostile Takeover Attack

May 11 (EIRNS)—As prominently reported in today's European press (International Herald Tribune, Financial Times, etc.) the case of Converium, a large European re-insurer based in Zurich, which dropped opposition to a hostile takeover bid from Scor, a French rival, has once again sounded the alarm over locust fund attacks. This is just one of many cases that have recently stirred up the public and parliament in Switzerland, intensifying the campaign for regulation. The Tagesanzeiger, a leading Swiss news daily, wrote May 9 that "speculators have just started to take over," that enormous capital is flowing into Switzerland, and that once the speculators' "industrial fantasies burst, thousands of employees would become victims." Rumors this week also had it that Zurich Financial, one of the largest insurers in the country, could be the next company to go; and none other than billionaire Warren Buffett told the Swiss financial journal Finanz Wirtschaft that insurers and re-insurers were prominent on his radar screen.

German CEO: 'We Can't Fill All of Germany with Windmills'

May 7 (EIRNS)—Wulf Bernotat, the CEO of Germany's energy firm E.ON, today denounced the nonsensical anti-nuclear policy of Germany, and the misplaced emphasis on climate rather than energy policy, which policies are responsible for the fact that the so-called "national energy summits" have all failed to answer the question of where energy is to come from in the future. Even if Germany wants to meet climate protection targets, he told Die Welt today, it is an illusion to believe that coal and nuclear power can be replaced by so-called renewables: "We cannot fill all of Germany with windmills." Bernotat accused politicians of capitulating to public opinion. In private, he said, the politicians tell him that Germany's exit from nuclear power was "nonsense," but they would never tell their own constituents that. Under such conditions, the issue of energy is left hostage to emotions and sober arguments are not possible in the public debate.

Bernotat also attacked the supranational EU Commission in Brussels for its deregulation strategy for energy prices and power grids, as creating obstacles for investments.

Asked why E.ON is not repatriating its profits from its stake in Gazprom in Russia, to invest in Germany, Bernotat said that its profits made in Russia will remain in Russia for investment there. On May 4, Burnotat had announced that E.ON intended to invest in building nuclear power plants in Eastern Europe and Turkey, and was looking for a partner in Russia.

As in the case of maglev, nuclear power plants can be built abroad by German companies, but not in Germany itself, as long as the genocidal, Green ideology of Al Gore continues to be tolerated.

South Korean, Thai Finance Ministers Warn of Dollar Shock

May 6 (EIRNS)—Further falls of the U.S. dollar due to the U.S. trade deficit could blow out the world financial system, South Korean Finance Minister Kwon O-kyu warned today at the annual meeting of the Asian Development Bank in Kyoto, Japan. Reuters quoted Kwon warning about trade and other imbalances in the economy: "Any abrupt and disorderly unwinding of these imbalances may send a tremendous shock through the global financial markets."

Thai Finance Minister Chalongphob Sussangkarn is also worried: "Should the financial markets lose confidence in the U.S. dollar, huge capital outflows from the U.S. could lead to a rapid depreciation of the U.S. dollar, and thus dramatic appreciation of other currencies," Chalongphob said in his speech.

Bank of Japan: Yen Carry Trade Has Gone on Too Long

May 10 (EIRNS)—Bank of Japan governor Fukui Toshihiko has warned that the continued low interest rates are a threat to the Japanese economy. Bloomberg reported today that Fukui told the Diet (Japan's parliament): "If the expectation takes hold that low interest rates will continue regardless of the situation of both prices and the economy, then that could invite inefficient allocation of capital, including real estate and the yen carry trade." He also said, "Low interest rates are supportive, but will hurt the economy if they are maintained [for] too long."

Lyndon LaRouche noted that when Japan finally raises its interest rates, hedge funds will be blowing out around the world.

InvestmentNews ran an article May 1 entitled "Japan to eye hedge funds," reporting that Japan has shown growing concern over hedge funds that operate within its borders, managing up to $36 billion in assets. Japan announced that it will begin periodic reviews of the hedge funds this Fall.

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