Global Economic News
Euro Crisis: Anglo-Irish Bank Doubles Losses
Sept. 1 (EIRNS)The nationalized Anglo-Irish Bank posted record losses of EU8.2 billion, and revealed that the Irish government was forced to inject a further EU8.58 billion into the bank to prop it up. Total state support to Anglo-Irish is now EU22.9 billion. This is a giant volume for Ireland, which has a GDP of EU179 billion. Last week, S&P forecast a total bill of EU35 billion.
An Irish journalist source told EIR that the government wished to liquidate Anglo-Irish, but that this would involve costs and, above all, "systemic risks." Thus, the government is now thinking about a "good bank/bad bank" solution which, they estimate, could limit costs to EU25 billion. Ireland already has a deficit that is 20% of GDP, and even such a "limited" cost would increase the deficit markedly. The source agreed with EIR that a real solution would be a Glass-Steagall regulation. Even though Anglo-Irish is a commercial bank, its mortgage loan activity has been financed by the securitized ABS market, which is not a Glass-Steagall standard; therefore, a Glass-Steagall reform would establish what part of its debt fits to a commercial standard and which not.
Leading Chinese Economist: Forget GDP; China Must Develop
Aug. 30 (EIRNS)China should stop obsessing about GDP growth and should not be taken in by international claims that China has now surpassed Japan to become the world's "second-largest" economy in GDP terms, economist Liu Fuyuan was quoted saying by People's Daily on Aug. 30. The real question is economic development, he said. Liu Fuyuan, former deputy director of the Academy of Macroeconomic Research under the National Development and Reform Commission, has focussed his work on long-term development strategy for China, especially the interior regions.
China previously took GDP as a core indicator, Liu told People's Daily. The relationship between economic growth and economic development has not been dealt with well, he warned. "We should prevent a few people from grasping at the interests of GDP growth that belong to the entire country," he said.
China should spare no effort to improve the quality of GDP, Liu Fuyuan said. The country should stay calm, despite claiming "second place," because a large GDP does not mean a powerful country or wealthy population. China's per-capita GDP is still below 100th in the world, at about $3,500 a year.
Current GDP growth in China is still largely driven by foreign businessmen, investments and foreign trade, he said, with the share produced by the Chinese people rather low. A lot of profits are being taken away by foreigners, Liu said. "The surplus value always flows from weak countries to strong countries. Overall, China is still a developing country in spite of its large GDP." China must adopt a people-oriented development pattern, raising living standards for the whole nation, Liu said. "We should promote the growth of investments and GDP through stimulating consumption, thereby accelerating industrial restructuring and raising the quality of GDP. In order to fulfill the important role of consumption, China's distribution system must be improved," Liu said. China has one of the most extreme income gaps in the world, a severe and growing economic and social problem.