From Volume 38, Issue 25 of EIR Online, Published June 24, 2011

Global Economic News

Will Japan Reopen Nuclear Power Reactors This Summer?

June 20 (EIRNS)—Japanese Prime Minister Naoto Kan says his administration will seek the understanding of local governments to resume the operation of nuclear power plants nationwide, once their safety is guaranteed. Thirty-five of Japan's 54 nuclear are shut, only 4 at Fukushima. Most of the others were brought down, either automatically during the quake or for normal maintenance, and were not restarted.

Kan, holding an online meeting on Sunday to exchange views on green energy resources with people in four prefectures, said he absolutely agrees with the request made by Economy and Industry Minister Banri Kaieda the day before, that local governments should restart nuclear plants after implementing measures to avert any serious accidents.

Kan said the Chubu Electric Power Company's shutdown of the Hamaoka nuclear plants was an exceptional case. Kan had forced the shutdown of those two plants over potential earthquake dangers. Kan has expressed enthusiasm for various unworkable green energy schemes and has indicated he was working towards a non-nuclear future for Japan.

Warnings have been coming from various industry and public sources, besides Industry Minister Kaieda, that Japanese industry just cannot prosper without the power from nuclear sources. Even the strongly anti-nuclear Asahi Shinbum editorialized over the weekend that Japan was not like Germany, and could not import power to make up for domestic shortfalls.

Local approval for the restart of the reactors is not legally required, but is considered politically required in Japan. But local administrations are expected to follow national direction, if strongly expressed.

Chinese Ratings Agency Downgrades Bernanke's Helicopter to Junk

June 12 (EIRNS)—China's largest ratings agency, Dagong Global Credit Rating Co. Ltd., announced on June 9 that it considers the debasing of the U.S. currency to be essentially a default event. "In our opinion, the United States has already been defaulting," by making its Treasury debt worth less through the devaluation of the dollar, Guan Jianzhong, president of Dagong, was quoted.

China's agency is directing its "default" declaration at Ben Bernanke's Federal Reserve. It is not U.S. Federal spending or its debt/GDP ratio which is debasing the dollar, but the money-printing bailout policy of Bernanke's Fed. Dollar depreciation was not a hidden objective of the Fed's QEII policy, but one openly, if informally, discussed by Fed board members.

AFP, in its coverage today of the Dagong statement, adds that China has reduced its Treasury holdings slightly for the past five consecutive months.

Brutish Empire to World's Poor: High Food Prices Will Kill You

June 18 (EIRNS)—The joint annual OECD-FAO Agricultural Outlook 2010-2019 report, issued June 15, proclaims that "higher agricultural commodity prices are here to stay," noting that food costs "will undermine food security, especially for the poor who spend a significant share of their budgets on food." It admits that at least 1 billion people are now estimated to be undernourished, a gross underestimate.

According to the report, average wheat and course grain prices will be 15-40% higher over the next 10 years (adjusted for inflation) than they were during the 1997-2006 period. Real prices for vegetable oils are expected to be more than 40% higher, and dairy products 16-45% higher. A senior economist for the UN Food and Agriculture Organization (FAO) said that over the next 10 years, meat prices will be 30% higher than in the last decade. These estimates make the dubious assumption of a large increase in food production in Russia, Ukraine, Brazil, China, and India.

The report attempts to place the blame for what they see as a prolonged period of high food prices on objective factors, such as higher energy costs that raise the price of production, demand for biofuels, and the rapid growth in Asia and South America, which is creating more demand for food and feed.

The report rules out speculation as a causative factor in the sky-rocketing prices: There is "no convincing evidence that positions held by index traders or swap dealers impact market returns. The Task Force on Commodity Futures Markets, established by the International Organization of Security Commissions to look into these matters, reviewed the available research and came to the conclusion that they 'do not support the proposition that the activity of speculators has systematically driven commodity market cash or futures prices up or down on a sustained basis.' " The report also cited the October 2008 IMF World Economic Outlook, which concluded "that there was no evidence of a long term systemic effect due to speculation on commodity prices...."

The report concluded that production will have to be increased, and "a well functioning, rules-based trading system will be crucial to fair competition and to ensure that food can move from surplus to deficit production areas"—i.e. no protectionism for purposes of developing local food production to create food security, is to be allowed.

All rights reserved © 2011 EIRNS