From Volume 8, Issue 23 of EIR Online, Published June 9, 2009

Global Economic News

French Press: The Cancer Is Growing Again!

June 3 (EIRNS)—As the Obama Administration and others crow that the economy has turned the corner, a couple of significant French publications recently made the relevant point: It's the cancer, not the economy, that's begun to grow again.

The editor-in-chief of Le Monde, Frederic Lemaître, wrote in the May 30 edition, that speculation is taking off again. The price of oil has risen from $32/barrel to over $60 in the last six months, a surge which can't be explained by rising demand, but only by speculation.

A similar point was made in an article in this month's L'Expansion by economist Jean Luc: "The recent upswing in the stock markets ... resembled a collective bet by financial operators," he writes. He points to the fact that U.S. pension funds are forced by law to "play the game of a rising stock market," which leads to "the market being bid up with nothing but hot air."

Japanese, South Korean Economic Crash Accelerates

June 1 (EIRNS)—The pace of collapse of the physical economy and employment in Japan and South Korea accelerated in April and May, feeding social crises in both Asian nations. Korean exports fell 28.3% in May, while imports crashed by an astounding 40.4% over the previous year. Both figures were far worse than expected. As the first trade figures to be released in Asia, they indicate that the talk of a slowing rate of decline in Asia was pure fantasy.

In Japan, where the April export collapse of 39.1% was incredibly reported last week as a "sign of recovery," because it was slightly less than the March rate, the unemployment figures released today are staggering. The 5% unemployment rate for April, low by U.S. standards, but huge—and politically volatile—in Japan, was made worse by the fact that the ratio of full-time job offerings to applicants was at an all-time low. This reflects the "Koizumi reforms" from earlier this decade, which allowed a massive increase in part-time and temporary hiring, finishing for good the tradition of life-time employment in Japan.

The Japanese government fears that unemployment will soon surpass 6%, while the previous worst rate 5.5%.

China Bank Head: No Way To Replace Dollar Now

June 2 (EIRNS)—There is no alternative to the U.S. dollar as a world reserve currency on the horizon, China Construction Bank chairman Guo Shuqing told the Financial Times in an interview published June 2. "In the short term I don't think we can find another currency to replace the U.S. dollar," said Guo, the former deputy chairman of the People's Bank of China (PBOC) and head of the State Administration of Foreign Exchange.

"The U.S. dollar is the main currency, because their economy is number one in terms of competitiveness, in terms of innovation," Guo said. He also downplayed the potential for using IMF special drawing rights to generate a "supra-sovereign reserve currency," as has been proposed by current PBOC governor Zhou Xiaochuan.

"We've had SDRs for many years but everybody knows they don't work so well," Guo told the Financial Times. "People worry about U.S. dollars very much because of the imbalances in the current account, but that has been the case for many years—they have had a deficit in the current account since the very beginning of the 1970s."

On June 2 in Moscow, President Dmitri Medvedev said in an interview with CNBC that "our Chinese colleagues" are supporting his proposal to use a "larger number of reserve currencies," so that the world will become "not so dependent upon the health of the dollar." Medvedev discussed Russia's severe economic problems, including unemployment, which he said was worse than official figures indicate, and the danger of inflation. The issue of a "supranational" currency could be discussed among the leaders of Brazil, Russia, India, and China (known as BRIC) when they meet June 16, Kremlin spokesperson Natalia Timakova told the press today. "There is a varying vision among BRIC participants," she said, "but if someone raises this issue it will be discussed."

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