From Volume 7, Issue 15 of EIR Online, Published Apr. 8, 2008

Global Economic News

IMF Joins the Bank Bailout Brigade

April 3 (EIRNS)—International Monetary Fund general director Dominique Strauss-Kahn has joined the British empire's campaign to force national governments to bail out the bankrupt banking system. In an interview with France's Le Figaro Economie on April 2, Strauss-Kahn invoked the bailout of Crédit Lyonnais in the early 1990s as the model for today. Crédit Lyonnais, the largest bank in France at the time, had been bankrupted by its own speculative activities, and rather than let it fail, the government decided to bail it out with taxpayer money. All its bad debts and problem financial instruments were dumped into a state-owned company, and new capital was injected into Crédit Lyonnais to allow it to continue operation. Strauss Kahn said that "banks will have to be allowed to keep going to unblock a system which is totally frozen."

Following on the heels of the President's Working Group/Federal Reserve bailout/takeover of Bear Stearns, the central bankers—through the BIS's Financial Stability Forum—lobbied for similar government bailouts, and now the IMF has joined the fray. The Fed and the European central banks have already made more than $3 trillion in loans to financial institutions since the system began to disintegrate in early 2007, an amount which has clearly been insufficient, as shown by the new calls for even bigger bailouts.

Nigeria: China Puts Its Money Where Its Mouth Is

April 3 (EIRNS)—China has offered Nigeria $40-50 billion to overcome its huge infrastructure gap, reported March 31. Nigerian Minister of Finance Dr. Shamsuddeen Usman announced the Chinese support on March 30 in Abuja. Usman said that the memorandum of understanding "was signed between the AFC [the African Financing Corporation] and the SINOSURE [the Chinese Export Credit Guarantee Agency] on behalf of other Nigerian financial institutions, where the SINOSURE is committing an amount of $40-50 billion for the financing of Nigeria infrastructural projects....

"This is the money that they will make available to any private sector or public sector arrangement. The way we want it utilized is that [it] is not likely to be money that the government will borrow, so that Nigerians will not be afraid that we have gone to bring back the debts that have been repaid."

Funds will be made available through Nigerian companies, so that they would be able to participate in the funding of infrastructure in Nigeria. "We have agreed with the officials of SINOSURE, and they have written, that they will be coming to Nigeria to explore this new opportunities and contacts in the last week of March or first week of April," Usman said.

In addition, Nigeria renegotiated a total of $2.5 billion in loans which had been secured by former President Olusegun Obasanjo. Usman said that now that Nigeria has left the Paris Club of creditors; it has "not been taking commercial loans. We insisted that any loan that Nigeria takes, must be extremely concessionary" in terms of interest rates and long repayment periods. Nigeria was "able to engage the Chinese authorities and really renegotiate these loans," to a concessionary level fully acceptable to Nigeria. "That was a very important achievement," he said.

In addition, a delegation of the China National Oil Corporation is due to arrive in Nigeria in a few weeks, to discuss investment in refinery, petrochemical, agricultural and training projects in Nigeria. "It is something that will be in the interest of both countries," Usman said. "Their interest is in our oil, but they also have interest in putting their money where their mouth is."

Unless It's Stopped Now, Famine Is on the Way

April 5 (EIRNS)—New records were set for grain futures speculation in Chicago this week (see above), at the same time that nations resort to export restrictions, consumption cuts, and diet substitutes, in the absence of a concerted international effort to mobilize to produce more food. In seven of the last ten years, grain production globally has been less than consumption, so "the food isn't there"—even if you happen to have money. Beyond mere "food shocks," famine is in the works. Indicative is the situation with rice, on which three billion people depend as their daily staple.

Only 30 million metric tons of rice are available for world trade at the moment, while the need and "demand" is far above that. Among major rice exporters, India has banned exports indefinitely (except for high-priced basmati) in order to protect domestic consumption; Vietnam has imposed export quotas; China has limited exports. Only the U.S.A. has not done so. Rice-importing countries are desperate. The Philippines, the world's biggest rice buyer, said yesterday that it would double the import quota allowed to private rice dealers. Earlier in the week, the Philippines fortunately concluded a government-to-government deal for rice from Vietnam. But where is the rest to come from?

This past week, the United Arab Emirates declared a rice "emergency," because, even though it has the money to pay soaring rice import prices, India has cut off its supplies. Most severely hit are, of course, poor countries, especially those of West Africa. Liberia, Nigeria, Senegal, and Ivory Coast are among the world's top ten rice importers.

Speculation on the grain exchanges is going wild. In particular, hedge and index funds dove in deeper, after a temporary credit squeeze at the end of March. On April 3, rice futures on the Chicago Board of Trade hit a record of $20.35 per 100 pounds. Likewise, corn futures (July delivery) hit a record of $6.215 per bushel the same day. Wheat prices are likewise climbing, and supplies are limited. The Chicago Mercantile Exchange reported that the number of trade transactions for wheat rose by 53% in the first quarter of 2008, over Q1 in 2007. For the month of March, soybean trades were 161% higher this year than in March 2007.

In the U.S. grain belt, the few remaining independent grain storage and shipping elevators are faced with bankruptcy and sellout to cartel companies Cargill and ADM, or even to hedge funds, now on the prowl to get in on gaming grain physically as well as gambling on "paper bushels." This is because the smaller elevators, which deal in real grain, and buy futures contracts to offset risk that the price will fall, get hit by margin calls they can't meet when the prices spike. There is a potential wave of defaults ahead. One small Illinois elevator near St. Louis went under recently. Another closed in Louisiana.

A process like the hyperinflation of 1923 Weimar Germany, as depicted in the "Firewall" video on, is driving toward near-term world famine. Without an international drive for a food production mobilization—breaking with decades of "markets" brainwashing—famine is assured.

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