From Volume 7, Issue 9 of EIR Online, Published Feb. 26, 2008

Global Economic News

Nuclear Issue Pushed to the Forefront in Chile

Feb. 18 (EIRNS)—Facing a dire energy crisis, the Chilean government is going to have to look seriously at the nuclear energy option, according to Public Works Minister Sergio Bitar. "I don't see how we can escape considering nuclear energy," Bitar told Chile's Diario Financiero, Feb. 15.

Prior to taking office following a cabinet shakeup last November, Bitar had frequently spoken out in favor of nuclear energy. But now the situation is critical.

Much of the country is in a drought, with 50 municipalities in central Chile having been declared in an "agricultural emergency." Low rainfall, due to the La Niña phenomenon—which has left the country's major hydroelectric plants with a 40% water deficit, and forced the large Nehuenco hydroelectric plant to be taken out of operation until mid-2008—has exacerbated the situation. In addition, reduced natural gas shipments from Argentina have forced electricity generators to use diesel oil, causing a 50% increase in utility bills over the last year.

While the government has taken several steps to reduce energy consumption, the expectation is that it will be forced to announce some form of rationing, possibly by March. The memory of the severe rationing in 1998-99 is still fresh in people's minds, and with municipal elections coming up this year, and general elections the following year, the Bachelet government doesn't relish this option.

Northern Rock Bank Nationalized

Feb. 18 (EIRNS)—The British government has nationalized Northern Rock bank, which was hit last year with huge losses on mortage-related securities, and suffered runs by depositors. The move, which occurred Feb. 17, was announced by Chancellor of the Exchequer Alistair Darling, and represents the first British bank nationalization since the 1970s. The bank has over £100 billion (nearly $200 billion) in questionable assets, including undisclosed billions in worthless subprime mortgage securities. Over the past six months, the Bank of England has extended £25 billion in emergency loans to the bank.

Northern Rock, which was Britain's fifth-largest mortgage bank, ran into trouble last August, as depositors withdrew at least £20 billion of its £24 billion of deposits, according to some reports. Now that the bank is nationalized, the government is responsible for all of its liabilities, costs which could increase the government's budget deficit from the current £44 billion to as much as £144 billion.

The bank, which once had a market value of more than £5 billion, had seen its stock plunge to the point that it had a value of just £380 million as of its closing on Feb. 15, and its shareholders—including a large contingent of hedge funds—will take a bath.

Regional Maglev Train Line for Seoul Proposed

Feb. 18 (EIRNS)—A magnetic levitation train line linking a futuristic international business district in downtown Seoul with a new urban development project in the city's outskirts has been proposed, according to Asia Pulse on Feb. 17. Samsung Corp., the head of the consortium that is moving to rebuild part of Seoul's Yongsan district by injecting 28 trillion won ($29.6 billion) into the area, said the proposal has been submitted to the Seoul Metropolitan government for approval. Samsung said that building the maglev trains could greatly ease traffic congestion in Seoul and open new horizons for urban transportation.

Under the plan, the maglev track will be laid from the Songpa district in the city's southeast, where a large residential area is being developed, to the Gangnam district and then Yongsan, just north of the Han River. Samsung said construction on the rail line could begin in 2010, for completion in 2013. The cost is estimated at 840 billion won, with a Samsung consortium funding 60% of the expense. The remainder, the company said, could be paid by Seoul and the central government.

In addition, Gyeonggi Province, South Korea, has begun feasibility studies on building a mammoth undersea tunnel connecting South Korea to China, a province official was quoted as saying by Yonhap News Agency. This would be a 375-km tunnel connecting a new port city being built near Seoul with the Shandung Peninsula in China.

India Announces It Will Build Thorium Reactors

Feb. 18 (EIRNS)—India's Atomic Energy Commission Chairman Anil Kakodkar, while inaugurating a training program on Energy Security and Development today, announced that "the Advance Heavy Water (AHWR) design is complete." Pre-licensing has been done. "Now, they are working on details in terms of foundations and other things." He said the construction of these 300-MW thorium-fueled reactors would start by the end of this year, or early next year.

Lyndon LaRouche has long advocated India's development of thorium-fueled nuclear reactors as a top priority.

Power potential from thorium reactors is very large, and the availability of Accelerator Driven System (ADS) can enable early accommodation of thorium in a large scale, said Kakodkar. "There is a need to sustain the tempo of domestic research and development without any external safeguard hindrance."

Interestingly, Chinese Vice Premier Zeng Peiyan, while meeting contractors today for the start of construction on the Ningdo nuclear power station, said that endeavors should be exerted to strengthen the absorption of imported nuclear power technologies and achieve independent design, manufacturing, and operating of pressurized water reactors. Unlike India, which has little uranium, but much thorium, and uses heavy water reactors, China uses pressurized water reactors that use 5% enriched uranium.

France's Rocard: Financial Crisis Will Be 'Deep and Long'

Feb. 19 (EIRNS)—The global financial system is infected with toxic paper, the banks have stopped lending to each other, and this will lead us into a new depression, former French Prime Minister Michel Rocard writes in a syndicated article to be published this month in newspapers throughout the world.

The financial crisis will be "deep and long," Rocard forecasts.

The huge volume of overvalued liquidity is not explained just by recent monetary creation, but resulted from the pressure by shareholders to channel capital away from wages and productive investment into the financial sphere, he argues. This went together with a rising immorality of the system.

This is all leading to a chain reaction towards a social and economic crisis, Rocard concludes in his article, titled "Financial Crisis, or Economic Crisis?"

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