From Volume 6, Issue 25 of EIR Online, Published June 19, 2007

World Economic News

Warnings of 40% Collapse in Global Housing Prices

June 15 (EIRNS)—The Danish financial daily Borsen today reports warnings of a global housing collapse made by Yale Prof. Robert Shiller to the website According to Shiller, the global housing market could collapse by 40% or more in Europe.

"People have a strange idea, that it cannot happen, but it is not only in the U.S. where the prices can fall 20-40%," Shiller warns, pointing to interest rates that in just six weeks have gone up three-quarter percentage points. "The interest rate rise comes at a bad time. A lot of housing loans get higher interest rates and the creditors are tightening loan conditions. A higher long term interest rate will lead to an even greater fall in housing prices," Shiller adds.

Vultures OK'd for Takeover of Auto-Parts Supplier Lear

June 12 (EIRNS)—European Commission regulators gave approval on June 11 for a group affiliated with billionaire "investor," aka vulture-fund looter Carl Icahn, to take over U.S. auto-parts supplier Lear Corp. for $2.8 billion. The EU regulators found no anti-trust issues and had received no complaints from rivals within the 25-day challenge period, so the approval was automatic, according to AP's Brussels bureau.

Icahn, who was already Lear's largest shareholder, is but another vulture picking on the dying carcass of Lear; billionaire Wilbur Ross had picked off Lear's interiors unit in a joint venture acquisition earlier this year. Icahn's American Real Estate Partners LP, under the terms of the deal, will pay $36 a share, and assume about $2.5 billion of Lear's debt.

Icahn's pick-up of Lear adds to his portfolio of distressed American auto industry companies which were left to die due to Congress's decision to list to Felix Rohatyn, and thus decline to save the U.S. auto sector.

Former German Chancellor Hits Offshore Hedge Funds

June 13 (EIRNS)—It's not the banks but the hedge funds that control financial flows, former German Chancellor Helmut Schmidt charged June 12 on the popular Maschberger talk show on German television. When the moderator referred to the excessive earnings of Blackstone's CEO, at 300 million euros, Schmidt commented that these excesses are to be seen especially in New York and London. There are 9,000 hedge funds, and they have their juridical locations in places like the Caribbean, and the Mediterranean, where there are no controls. This is not acceptable, Schmidt said.

We need an agreement among the major states for world control over financial instruments. He cited Finance Minister Peer Steinbrück and Chancellor Angela Merkel as thinking in this direction. Former German President Richard von Weizsaecker, also on the program, added that the issue of hedge funds had been discussed at the G-8 Summit, but nothing came out afterwards about it.

Indian Financial Analyst Warns of Dollar Crash

June 12 (EIRNS)—Writing for, Indian financial analyst, M.R. Venkatesh, said today that for some time now, economists have been engaged in the "mother of all debates: whether the U.S. dollar would collapse by as much as 40% when compared to other currencies (some are even betting on the U.S. dollar going belly-up) or whether there would be an orderly devaluation—that is, a gradual revaluation of other currencies vis-à-vis the U.S. dollar." In effect, the question that is confronting us is not "whether," but "when," and by "how much," Venkatesh concluded.

On March 28, 2006, the Asian Development Bank was reported to have issued a memo, advising members to be ready for a collapse of the U.S. dollar. Since then, the U.S. Federal Reserve has stopped publishing the quantum of broad money—the aggregate of U.S. dollars circulating in the world (technically called "M3") in the U.S. economy. This is the worst possible signal that the U.S. Federal Reserve could have sent to the world, Venkatesh said.

Venkatesh said the U.S. dollar is akin to the promissory note of a defunct finance company. It is common knowledge that a currency, when not backed by anything precious, is just a piece of paper. "When the U.S. abandoned the gold standard in the early 70s, countries habituated by then to the U.S. dollar under the Bretton Woods arrangement continued to accept the U.S. dollar as an international currency without demur as the world was not prepared for any other alternative. Else, the global economy would have collapsed by 1971."

Danes Choose General Welfare Over Tax Cuts

June 13 (EIRNS)—Danish citizens have delivered a slap in the face to the neoliberals: A study done by Ramboll Management, published in the daily Jyllands-Posten today, shows that 74% of the Danish population prefer increased public spending on infrastructure, health care, education, etc., over tax cuts. That figure has increased from 67% one year ago.

The Conservative Party leadership, which has been pushing for the government to offset the current budget surplus with tax cuts, is outnumbered two-to-one among its own voters.

Thailand Investing $6 Billion for Cluster of Nuclear Power Plants

June 13 (EIRNS)—Like many other nations, Thailand has decided to go for nuclear power. The governor of the Electricity Generating Authority of Thailand (EGAT), Kraisi Kanasuta, told Agence France Press that Thailand plans to build nuclear plants to produce 4,000 mw of electricity, as part of the nation's long-term plan to cope with a looming power shortage. The first of these nuclear power plants is expected to start operations in 2020. "Building a nuclear power plant is unavoidable for Thailand, given the current pace of rising electricity demand," said Kanasuta.

Thailand currently relies on natural gas for 70% of its electricity, with the rest coming from oil, coal, and hydropower. One-third of the natural gas consumed in Thailand is imported, mainly from neighboring Myanmar. Thailand spent 912 billion baht ($26 billion) on energy imports last year, up 16%, according to the Energy Ministry.

To finance the investment, EGAT, a state enterprise under the Energy Ministry, said it will consider issuing bonds and seek offshore loans. It will also recruit Thai engineers to study nuclear technology in the United States, Europe, and Japan. Japan's Toshiba, Westinghouse of the United States, now owned by the Japanese company, and the French firm Areva, are offering to build the power plant.

Indian Pharma Blows Off Gore, Forges Ahead with Generics

June 15 (EIRNS)—India's pharmaceutical and biotechnology sectors are poised to take advantage of market conditions with breakthroughs in lower-cost generic pharmaceuticals, industry researchers and consultants said in a report by Industrial Info Resources of Texas. The gain of generic drugs is a challenge to Al Gore, who, as Vice President of the United States in 1998, fought hard to deny poor African countries the right to purchase low-cost generic drugs for the treatment of HIV and AIDS. As the American head of the U.S.-South Africa Bi-National Commission, Gore used every threat possible under his doctrine of globalism, to force South Africa to abandon its plans for purchasing generic drugs for the treatment and prevention of AIDS.

Sarah Frew, the author of a study from the McLaughlin-Rotman Center for Global Health in Toronto, says that the 21 Indian biotechnology companies were ideally suited to make generic versions of brand products from "big pharma." The study noted that in 1997, the launch of the hepatitis B vaccine Shanvac-B from Varaprasad Reddy-Shantha Biotechnics of India had led to a dramatic lowering of vaccine prices to about $0.50 per dose, from $15 for a comparable imported product. The Hyderabad company's vaccine now makes up almost 40% of hepatitis B vaccines for the UN Children's Fund (UNICEF) distributed throughout the developing world.

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