From Volume 37, Issue 7 of EIR Online, Updated Feb. 25, 2010

Global Economic News

The Takedown of Japan Continues, as Oil Refineries Close

Feb. 18 (EIRNS)—Japanese oil companies are cutting their domestic refinery capacity due to declining oil demand, as industry refuses to "come back." Domestic oil demand is expected to keep declining by 3.6% annually until FY2013, according to projections.

Domestic oil refineries, whose daily maximum production totals about 4.83 million barrels per day (bpd), only ran at about 75% capacity in 2009. Even idle plants cost money to maintain and keep in shape for potential operation. Yet, that cost is minimal compared to that of constructing a new plant; so, a decision to reduce facilities is a very serious one, indicating a severe long-term discouragement with prospects of revival.

Showa Shell Sekiyu K.K. announced Feb. 16 that it would close a Kawasaki oil refinery belonging to its affiliated company Toa Oil Co. after Autumn 2011. Nippon Oil Corp. and Nippon Mining Holdings Inc. will cut their refining capacity by about 20%, equivalent to 400,000 bpd, by shutting down some equipment at the Mizushima refinery in Okayama Prefecture and others, after they merge in April. Cosmo Oil Co. plans to reduce its oil-refining capacity by about 10% or 80,000 bpd, by cutting production at three refineries. Idemitsu Kosan Co. also is considering a production cutback.

British Housing Collapse on the Way

Feb. 16 (EIRNS)—The Daily Telegraph reports that, by next January, mortgage lenders will have to start paying £319 billion borrowed from the government during the crisis of 2007—a quarter of the U.K.'s entire £1.3 trillion stock of mortgages. This, at a time when mortgage lending and the raising of funds by mortgage lenders has collapsed. Mortgage approvals have fallen from an average of £3.4 million annually during the reckless years 2005-07, to £1.3 million. While lenders were able to raise £130 billion in the 12 months prior to the credit crunch, they raised just £11.5 billion in the last two years!

Mortgage lenders do not have access to the almost free money the Bank of England gives to British banks, so this most likely will have to come from the government, again, which has obvious consequences for the budget deficit.

8 Million British Subjects Are 'Economically Inactive'

Feb. 18 (EIRNS)—Great Britain is following Spain into the economic trough. The Daily Telegraph reports that the number of people who are neither working nor seeking employment reached 8.08 million in the last three months of 2009, the highest on record. This is out of a population of 61 million, and comprises 21.3% of working-age adults.

The Office of National Statistics reports that those seeking unemployment benefits increased by 23,500 to 1.64 million in January, the highest since April 1997. Official unemployment is 2.46 million. This has shocked the talking-head economists who forecast a fall of 10,000 from the unemployment rolls. All of which is pointing in the direction of a so-called "double-dip" recession. The Independent reported that underemployment has increased by 700,000, to 2.8 million, which they say masks the poor employment situation in the U.K. It is worse if youth unemployment is taken into consideration.

Meanwhile, the Bank of England announced a 3.5% inflation rate for January, up from an average 2.9% for the previous 12 months. The BOE blamed the increase in VAT and rising oil prices, claiming that inflation will come down again in a few months. The Daily Telegraph was not so sure, writing, "inflationary pressures may continue to prove surprisingly persistent. Easy money globally has been boosting prices and favoring commodity price inflation. And the pound's continuing frailty brings inflation into the U.K. economy...."

Spain's Economy Continues into the Tank

Feb. 15 (EIRNS)—Spain's official National Statistical Institute (INE) reported yesterday that 2009 was a disastrous year for businesses. In 2009, 25% fewer companies were created than in 2008 (which itself suffered a 28% collapse); their average capitalization was down 21% from a year earlier; and business closings (mainly due to bankruptcy) rose by 7.2%.

Non-performing loans rose from 5.0% in 2008 to 5.1% in 2009, and the figure wasn't much higher only because total loans and letters of credit fell by 19% over this time period. Spain has an official unemployment rate of 19%, with youth unemployment in the range of 45%.

This is a dead physical economy, with a huge debt and derivatives speculative bubble sucking what little blood remains—with London's Banco Santander being Vampire in Chief.

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