In this issue:

City of London Hit With Big Job Losses

UK Consumer Borrowing Rises to All-Time High

Harvard's Man Takenaka Backs Down on Austerity Plan, But Crisis Unabated

Singapore Sees Sharp Rise in Joblessness

Gold Demand Soaring in Saudi Arabia and Gulf

S&P Cuts Israel's Currency Ratings


From the Vol.1 No.35 issue of Electronic Intelligence Weekly, Published November 4, 2002

WORLD ECONOMIC NEWS

City of London Hit With Big Job Losses

By the end of this year, the City of London will have lost about 30,000 banking jobs since the start of 2000, according to the Centre of Economics and Business Research. Credit Suisse First Boston was to cut up to 80 staff at its London headquarters the last week in October, as part of its plan to eliminate an additional 1,750 jobs in order to save $500 million. The Swiss-owned investment bank over the past year has slashed 6,500 jobs, including cutting nearly 20% of its equities research staff in the United States the previous week.

UK Consumer Borrowing Rises to All-Time High

New figures put out by the Bank of England on Oct. 29 again underline the incredible dynamic of the British consumer debt bubble, which could easily implode in the coming weeks. In September, British consumers went on another record-breaking borrowing binge, putting total consumer debt above the level of 800 billion pounds ($1.2 trillion) for the first time. Both the volume of total new loans (20.7 billion pounds) and of net lending (8.9 billion pounds) reached new historic highs. The growth rate of new consumer lending (13.1% on an annual basis) is at a record high as well. In an article headlined "Record borrowing triggers debt alarm," the Oct. 30 Daily Telegraph noted that the new figures have "alarmed consumer groups as they are already dealing with record numbers of individuals seriously in debt, even though interest rates are at their lowest level for nearly 40 years." The proportion of consumer spending financed through borrowing has doubled from 5% to 10% within the last two years.

Harvard's Man Takenaka Backs Down on Austerity Plan, But Crisis Unabated

Japan's Harvard-trained Financial Services Minister Heizo Takenaka was forced to back down Oct. 30, and issue a greatly watered-down version of his "emergency" bank-policy package, having been threatened with a personal lawsuit by the chairmen of Japan's top four multitrillion-dollar megabanks, for his threats to throw 4 million people out of work by foreclosing on over $400 billion in bank loans, in a "hard landing." Some LDP leaders even compared him to Robespierre, the Jacobin Terrorist who wielded the guillotine in the French Revolution.

While Takenaka's capitulation ensured that half of Japan's industrial companies will not be shut down immediately by government fiat, the compromise solves nothing. It does not address the real cause of Japan's banking crisis, which is the bankruptcy of the dollar-based, global financial system; it does not address the need for a New Bretton Woods system; it does not even do anything about bad loans at Japanese banks.

Highlights of the measures adopted by Japan's Koizumi government Oct. 30 "to accelerate the cleanup of bad loans in the banking sector and contain deflation," include:

*"The government and the Bank of Japan will work together to put an end to the bad loans problem during fiscal 2004" (i.e., by March 2005!);

*"Public funds will be injected into banks under the existing law if their capital is depleted. A new system will be studied for prompt infusion of public funds" (translation: no "crisis" has been declared, and since under the "existing law" there can be no public funds used without a declaration of crisis, therefore, precisely nothing is being done on this count);

*"Responsibility of top management of undercapitalized banks will be clarified. Assets at such banks will be divided into a 'new' account holding healthy assets and an 'old' account serving as a bucket for bad assets" (this is the beginning of a toothless attempt to separate good and bad debt);

*"The government will promptly consider adopting the 'discounted cash flow' method that will require banks to set aside more loan-loss reserves for claims on loans to heavily indebted companies" (meaning: the government will "think about" forcing the banks to take big write-offs, i.e., the guillotine has been mothballed for the moment);

*"A new organ will be created to help viable companies" (the new fund proposed by the Bank of Japan to take up the "good" debt and keep those companies in business will go ahead);

*"The government will push ahead with measures to enhance job security and support for small and mid-size companies" (translation— we decided not to throw everyone out of work deliberately, but we also have no particular policy to stop that from happening).

Singapore Sees Sharp Rise in Joblessness

Singapore's Senior Minister of State Tharman Shanmugaratnam has reported that 84,300 people could not find jobs in October, and the economy overall is slowing down. This comes on top of a sharp rise in unemployment over the previous three months, up to 4.8%, from 4.1% in June. This is even higher than the 4.3% experienced in the last Asian crisis, in 1997.

More jobs were lost than created in the months from July to the end of September. Employment contracted by 15,000, hitting first-time job seekers, including this year's crop of school graduates.

The words "weak," "uncertain," and "slow growth" peppered Shanmugaratnam's speech: "The outlook for next year is uncertain. But there is more downside than upside on the horizon in the world economy— at least for the first half of 2003. We therefore do not expect robust growth in the Singapore economy."

Gold Demand Soaring in Saudi Arabia and Gulf

"The demand for gold in the [Saudi] Kingdom is expected to increase by more than 20% during the last quarter of this year," market analysts told the Nov. 1 Arab News. "They attributed the increase to a growing trend to invest in gold amid fears of an imminent U.S. attack on Iraq," the Jeddah daily said.

Arab News cited Osama Al-Wazir, director of World Gold Council (WGC) for the Gulf countries, as saying that he expected an increase in gold sales over the coming months as a result of new developments in the region. Muhammad ibn Saeed of Al-Amoudi Currency Exchange Center said there was big demand for gold coins and biscuits in recent months as many people, especially expatriates, wanted to preserve their money in the form of gold as a safe investment. The WGC reported recently that there was a 16% increase in gold sales in the Kingdom and other Gulf states during the first half of this year.

S&P Cuts Israel's Currency Ratings

The international rating agency Standard and Poor's cut Israel's long-term local currency rating from AA- to A+, the Israeli daily Ha'aretz said Oct. 31. The move reflects doubts that Israel can implement necessary economic policies, especially now that the Sharon unity government has collapsed. The agency also cut its short-term local currency rating from A+ to A-.

"The local currency downgrade and negative outlook reflect growing concerns over Israel's ability to implement and sustain much-needed tightening of fiscal policies and structural reforms, following the collapse," said S&P.

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