From Volume 6, Issue 22 of EIR Online, Published May 29, 2007

World Economic News

Peru Goes Big with Uranium Mining

May 25 (EIRNS)—Uranium-rich Peru is now ready to go big with the mining of its uranium resources to feed the growing hunger for nuclear power across the world, Industrial Info Resources of Texas of May 25 reports.

A joint venture formed by the Canadian Vena Resources and Comeco Corporation has concessions mainly in the southeast region of the country, the Macusani, where uranium reserves are estimated at 66 million pounds. Comeco is to invest $10 million in exploration; if the results are successful, the firm will perform a feasibility study for the construction of a $500 million plant to produce dressed uranium. Other companies such as Cardero Resources, Solex Resources, Frontier Pacific Mining, Strathmore Minerals, and Wealth Minerals are currently exploring Peru's central and northern areas.

The price of each pound of uranium has increased four times in one year, due to the intensified demand for the construction of new nuclear power plants. At present there exist 442 nuclear reactors in the world; 251 new ones are being planned or under construction. This increase in the demand for nuclear plants coincides with the world need to generate electricity.

Lower Oil Prices Would Burst Financial Bubble

May 25 (EIRNS)—A European financial source warned today that the most effective way to burst the financial bubble would be lower oil prices. which would cause massive movements of capital that would lead to a huge financial crisis. This situation has grown out of the Iraq War, during which huge funds have invested in high war-risk premiums, such as the high oil prices. Thus, if peace breaks out, and the price of oil goes down, the bubble could burst.

Yen Carry Trade on the Brink: OECD Warns Japan Not To Raise Rates

May 24 (EIRNS)—With Japanese financial institutions threatening to end the hedge funds behind the yen carry trade (Japan Daily, May 24) the Organization for Economic Cooperations and Development (OECD) issued a report saying: "The Bank of Japan should not raise the short-term policy interest rate further, until inflation is firmly positive and the risk of renewed deflation becomes negligible." The OECD worry is clearly not inflation, but the deadly threat to the hedge funds if Japan carries through with threats to end the speculation in cheap yen.

Lyndon LaRouche warned in February that the yen carry trade was in big trouble, and that "the multiplier effect of the blowout of the carry trade is going to mean that the crisis hits with a magnitude far beyond any individual nation or currency. This will bring down the whole post-Bretton Woods floating-exchange-rate system." But LaRouche added, "Let it happen. The system is doomed under any circumstances, and we know what must be done to create a new, stable financial system, based on the principles of Franklin Roosevelt's original Bretton Woods System. I am ready with a recipe for precisely how to solve this crisis. Are you?"

Japan Financial Daily: Hedge Funds Greater Threat Than Terrorism

May 22 (EIRNS)—The failure of a large hedge fund could plunge the global financial system into a crisis, Japan's Asahi Shimbun newspaper warned in an editorial May 21. "The case for close scrutiny of hedge fund activities is strong," the paper said, noting that "many corporate pension funds and investment trusts are putting their money into hedge funds. This means that hedge funds are no longer affecting only the shady world of high-rolling speculators and that they have nothing to do with ordinary citizens. We want to know more about how these hedge funds are operated." What investments in which markets are the hedge funds making with their $1.5 trillion; how much money are they borrowing from financial institutions; and how much of the yen carry-trade borrowing are the hedge funds doing?

"If hedge funds are linked to the operations of financial institutions to the extent that the risks hedge funds are taking on pose a serious threat to the health of those financial institutions, then the financial regulators of major countries should instruct such financial institutions to ensure their relations with the funds are safe and sound. If the yen carry trade is generating excessive liquidity worldwide, thereby increasing risks in financial markets, the Japanese fiscal authorities need to consider policy responses to the problem," the editorial said.

The Asahi Shimbun endorsed the continued discussion of hedge fund regulation at the G-8 summit in Heiligendamm, Germany June 6-8, saying "it is essential for nations to join together to grapple with the policy challenges posed by hedge funds from the viewpoint of protecting the health of crucial markets."

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