Global Economic News
Bankers: U.S. Government Should Bail Out the System!
April 7 (EIRNS)Dominique Strauss-Kahn, managing director of the International Monetary Fund, repeated his call for a public bailout of the bankrupt financial system, on the eve of the IMF Spring gathering in Washington, indicating that the United States government is meant. "I really think that the need for public intervention is becoming more evident," Strauss-Kahn told the Financial Times. "Effort has to be made on loan restructuring. With respect to the banks, if capital buffers cannot be repaired quickly enough by the private sector, use of public money can be examined."
Although not using the word "hyperinflation," Strauss-Kahn alluded to that danger, because liquidity injections from central banks are feeding speculation on commodities, and he called on governments to replace central banks with taxpayers' money, in order to avoid that.
Such a "solution" requires fascist regimes to be enforced, and would not solve the problem at all, as the lessons of history show.
Apparently, the bankers' call is addressed to the United States, in conformity with the British strategy to sink the U.S. economy and U.S. power in the world. "IMF analysts suggest that the U.S. and other countries that account for an additional 20-25% of the world economy are in strong enough financial positions to provide additional fiscal stimulus if required. But the IMF estimates that other countries, including most in Europe, are not in such a position," the FT writes.
European Governments Caught in the ECB 'No Man's Land'
April 7 (EIRNS)Efforts by European governments to set up a supranational safety net without a lender of last resort, are producing impotent bureaucratic monsters. At the same time, the European Central Bank (ECB) is targetting Germany, among other countries, to have its banks disclose balance sheets, with the possible intention of bankrupting those banks.
At their meeting at the end of last week in Brdo, Slovenia, the finance ministers of the 15 eurozone countriescountries whose currency is the euroagreed to establish "stability groups" for about 20 leading banks and insurance companies with a presence in several European countries. Among them would be Deutsche Bank and Société Générale. These groups would be formed on a national level, each involving officials of the respective finance ministry, central bank, and financial regulatory agency, for the time being. The question is, what channels of information are created also to the European Central Bank (ECB)? So far, banks have not been voluntarily willing to give information about their risk exposures even to their own national institutions. Therefore, the call by some for an ECB-centered oversight is not likely to meet much support among private bankers.
The ECB is putting pressure on Germany to remove obstacles to ECB access to banks' balance sheets. Lorenzo Bini Smaghi, a member of the ECB executive board, said on April 4 in New York, that some eurozone countries should remove legislative obstacles that prevent full ECB access to banks' balance sheets, in order for the ECB to obtain "any necessary information concerning the liquidity and solvency problems of the markets and institutions." Bini Smaghi did not name countries, "but Germany might have been one he had in mind," the Financial Times writes.
Any bank in the world that provided such information, would instantly reveal its bankruptcy. Does the ECB want to pull the plug on some German banks, on behalf of the British Empire?
Barcelona To Import Waterby Water!
April 10 (EIRNS)Citing an 18-month drought, the Mediterranean port city of Barcelona, Spain will spend Eu22 million a month using tankers to ship water from France and desalination plants in southern Spain. Transporting water in tankers is insanely expensive, both from a physical-economic standpoint and a financial standpoint, and the irony of shipping water over water to a port city should not be overlooked. Barcelona sits atop a huge aquifer, and the city is already pumping out millions of gallons of (undrinkable) ground water to keep its subway system from flooding.
The real issue here is lack of water management and technology in Spain. There have been calls by José Montilla, the regional president of Catalonia, to divert water from the River Segre into the Barcelona reservoir, which is 80% below capacity; and a second proposal, from University of Zaragoza water management specialist Pedro Arrojo, is to use desalination to purify water from the aquifer.
China Takes Warning from Financial Crisis
April 11 (EIRNS)China's central bank is clearly concerned about the ever-widening effects of the international credit crisis, but is still referring to the crash as a "subprime crisis," an underestimation of what has happened to the world financial system. In the summary of its 2007 China Financial Market Development Report published on April 10, the People's Bank of China (PBOC) wrote that the subprime crisis got ever worse under conditions of far too much liquidity and far too few market controls. "This is a very good warning for the speeding up of our country's financial markets development," the report said. Since none of the Western bank bailouts have stemmed the crash, the "unclear future of the subprime crisis will have a certain impact on China's financial markets," the PBOC report acknowledged.
The continuing crisis will hit China's exports, and its trade surplus, which was down over 10% in the first quarter. Exports fell and import costs rose sharply, forcing China to "import" international inflationary commodity and energy prices into the Chinese economy.
The PBOC also took a swipe at the policy of U.S. Treasury Secretary Henry Paulson, commenting that "Some countries are trying to intervene in other countries' exchange-rate policies for their own interests." The Chinese yuan has risen to over seven to the U.S. dollar, an increase of 18% since mid-2005.
Overall, China, with its huge population and widespread poverty, is walking a very slippery economic tightrope. In March, crashing exports shot up again, leaving China with still-exploding foreign exchange reserves. The rising yuana direct result of the crashing dollar"has begun to squeeze Chinese exporters hard," the China Daily warned on April 11. A better trade balance would be good, but China had better be careful: "A too precipitous rise of the yuan could pose a grave challenge to the export sector that is under increasing pressure from surging costs for labor, energy, and materials," the China Daily warned.