From Volume 38, Issue 12 of EIR Online, Published Mar. 25, 2011

Global Economic News

European Financial and Political Meltdown

March 17 (EIRNS)—The financial and political meltdown of the European Union continues centered on the trigger points of Portugal, Spain, and Ireland, whose debt bomb could explode at any moment. In Portugal, following his groveling before last week's European Union summit, where he announced a series of further budget cuts, Portuguese Prime Minister José Socrates, now has to deliver, by getting them passed in the parliament. Since he has a minority government he needs the support of the Social Democratic Party (PSD), but PSD head Pedro Passos Coelho has already announced his party will not support the cuts. In fact, he has met with Portuguese President Anibal Cavaco Silva, whom he told that he was not prepared to support the cuts as they stand.

Socrates, himself, has announced that he will resign, if the cuts are not approved. So, it is pretty clear that the government could fall on this vote, which will mean early elections. While the City of London's Financial Times writes that such an outcome would lead to a bailout, no caretaker government could make such a decision.

Across the border in Spain, the government managed to raise EU4.5 billion in 10- and 30-year treasury bills today, but the interest rate declined only a tiny fraction—10-year bonds from 5.2% and 30-year bonds from 5.96%; both are still very high. Bloomberg reports the real fear of the banks, which have to roll over EU22 billion of debt in the first four months of this year, in addition to the increased capital they will have to raise.

To the north, in Ireland, the IMF and European Commission had people in Dublin yesterday to review the bailout-budget cuts program. Finance Minister Michael Noonan is claiming "progress" after he said the IMF and EC delegation agreed with the government's plan to make the huge cuts "their way." These vulturous institutions said they did not care where the cuts came from as long as they were made.

G-7 Sells $25 Billion Worth of Yen To Try To Save Carry Trade

March 19 (EIRNS)—While the British-controlled media lie about nuclear meltdowns in Japan, following the mega-quake and tsunami March 11, the only meltdown taking place is the financial system. In a coordinated intervention, the G-7 central banks of the sold $25 billion worth of yen to drive down the prices of the currency. While they blame the repatriation of funds by companies for reconstruction, this is an obvious lie, and the Japanese insurance companies have denied it. The other reason given is "speculators," which is closer to the truth but not the whole truth. The major reason is the collapse of one of the key props of the Inter-Alpha Group's system: the "carry trade."

Britain's Guardian reports that the "carry trade," where speculators take advantage of low interest rates in Japan, by borrowing in yen and reinvesting Brazilian reals, New Zealand dollars, and so on, has been unwinding at a dramatic pace. They warn that if the carry trade abruptly unwound, it could cause what economists call a "sudden stop," draining capital from riskier markets around the world, with real consequences which could cause "panic."

Speculation Guarantees World Hunger; China Acts to Save Wheat Crop

March 14 (EIRNS)—In China, timely rainfall and a government water mobilization have for the present time, saved prospects for the Winter wheat crop, otherwise threatened by drought. In contrast to this welcome news, the continuation of the globalist policies of speculation and monetarism foretell ever-worsening food shortages and hunger. It is urgent to impose price controls.

Chinese government officials recently announced that this year's wheat harvest could reach 114 million metric tons, or thereabouts, which would be a million tons lower than last year, but not the wipeout otherwise feared if the severe dryness had not been relieved by snow and rain late last month. China alone accounts for about 18% of world wheat production, which amount is consumed domestically. However, world wheat production overall is far under what is required, given the cumulative impact of lack of agriculture improvements and depletion of existing water and soil resources.

While world wheat output in 2009 and 2010 was in the range of 682 mmt., this current year it is expected to be down to only 650 mmt., according to the International Grains Council.

This decline in production, and the fact that output levels were already running below what is required for decent diets for all, is the result of the continuation of the globalist "markets" policy of commodity speculation, agro-cartel domination, and the absence of a Glass-Steagall credit system for building up farming activities in the national interests on all continents. Instead, we are seeing terrible import-dependence, a rush to buy grains, various other fall-back measures, and just desperation and suffering.

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