U.S. Economic/Financial News
Dollar's Agony at Center of Economists' Meeting in Venice
Four Nobel Prize winnersMichael Spence, Betty Williams, Robert Merton (of LTCM fame), and Robert Mundellwere featured speakers at a one-day meeting in Venice, Dec. 2, sponsored by Telecom Italia, La Repubblica reported Dec. 7. The dollar crisis was at the center of discussions. Cardinal Poupard was also a featured speaker.
Robert Mundell pushed his usual idea of world monetary union, adding an urgent call for an "emergency committee" to dictate policy to the European Central Bank. Mundell said he shares Paul Volcker's view that there is "a 75% probability that the dollar crisis will turn into a financial crisis for the USA." "We must acknowledge that we are in an emergency moment and undertake emergency measures ... creating an emergency committee with very few members, technicians coming from the three main Euroland economies, France, Germany, and Italyand possibly, Spain. Such a committee must be established in an emergency meeting, after which it must very quickly elaborate a defense strategy, substantially a series of direct interventions on the markets to counter the apparent strength of the euro. And, above all, it must establish national political authorities, so that they accept the idea of real and decisive active measures.... If the United States intends to go ahead with this policy of unlimited credit, it must realize that such an enormous deficit is a growing threat to the entire planet. And it is no longer a fiction to speak about global recession."
Garten Wants New Plaza Accord To Head Off Dollar Crisis
Former U.S. Commerce Dept. official Jeffrey Garten (whose career spans the Nixon, Ford, Carter, and Clinton Administrations), says the Administration's plan to just let the dollar keep falling, on the supposition that this will boost U.S. exports, won't work, and that the falling dollar is "a one-way bet for speculators." Rumors are rampant that several central banks will diversify into other currencies; hedge funds and speculators may be moving in. "If the momentum to sell dollars gathers steam, it could lead to a dollar plunge, a global financial crisis, and deep worldwide recession."
Garten's proposed solution, however, will only make the situation worse: It is that the U.S. should negotiate a new Plaza Accord with Japan, China, and Europe. China and Japan should revalue and commit themselves to support the new currency levels. Europeans should deregulate to open up their economies to more imports. And the U.S. should take such measures as postponing tax cuts, and only privatize Social Security after finding a way to finance the $1-2 trillion transition costs "without deepening the deficit." The insanity in the White House seems to be contagious.
Shorting U.S. Dollar Reaches Record High
The Commodities Futures Trading Commission reported that "non-commercial traders," meaning primarily hedge-fund speculators, have placed a record number of short contracts, betting on the dollar's continued fall, the Wall Street Journal reported Dec. 6.
Ford Extending Furloughs at St. Paul Truck Plant
As part of the automaker's production cuts, due to falling sales, Ford will close the plant for the weeks of Dec. 13 and Dec. 20, bringing the total weeks of furlough to six since Oct. 1, according to the Detroit News Dec. 6. The president of UAW Local 879 said that the temporary closure, which affects about 1,600 workers, is the most significant shutdown since about 1992.
Delphi To Cut 8,500 Jobs Next Year
Delphi, the world's biggest auto-parts supplier, said it will cut 8,500 jobs worldwide, next year, because of falling production by GM and Ford, as well as rising costs of raw materials. The layoffs, announced Dec. 10, will hit about 3,000 U.S. hourly employees and 5,500 overseas workers. Already in the first three quarters of 2004, Delphi has eliminated more than 9,100 jobs.
Urban Gridlock Costs Billions in Lost Productivity
A study produced by the Texas Transportation Institute (TTI) dramatically shows the effects over time of a lack of infrastructure investment and an aging highway system, USA Today reported Dec. 6. Using a complex formula that took into account vehicle occupancy, time/distance travelled during peak conditions, fuel costs, and hourly wages, the TTI has put into dollar terms the cost of traffic gridlock to our economy. The figures tell the story: In 1982, the first year studied, the loss in productivity was estimated at $14.2 billion on an annual basis. By 2002, that figure had more than quadrupled, to a whopping $63.2 billion. That's more than a billion dollars a week in lost time. During the same time, the total hours of congestion-related delay went from 0.7 in 1982, to 3.5 in 2002, and the total amount of wasted fuel grew from 1.2 to 5.7 billion gallons.
USA Today notes that this is a significant factor in changing the work habits for a growing number of people, who now commute to work as early as 4 or 5 a.m., in order to avoid the congestion. In case you're wondering, the at the top of the list of gridlocked cities, in almost every category, was Los Angeles. To find how your city ranked, go to http://mobility.tamu.edu/ums/.
U.S. Doctors Told Avian Flu Is 'High-Threat' Situation
Outgoing Health and Human Services Secretary Tommy Thompson announced Dec. 7 that the government will purchase 1.2 million doses of flu vaccine out of the 5.2 million which had been found over six weeks ago for importation. The 1.2 million doses will be distributed via the Centers for Disease Control's determination of communities most in need to serve high-risk citizens. The special arrangement made between Bush's FDA and manufacturer GlaxoSmithKline to import the vaccine, is that it will be allowed into the U.S. as an "investigational new drug," since the FDA did not have enough time for full licensure procedures. (The vaccine is, however, currently in use in 30 countries, an FDA spokesman noted.) This will mean that users of the Fluarix vaccine must read and sign lengthy consent forms prior to receiving the shot. GSK has another 2.8 million doses available, but the Bush Administration hasn't moved to purchase them as yet.
Meanwhile, CDC head Dr. Julie Gerberding, speaking in Atlanta before the American Medical Association's delegates, forewarned them, "Flu is getting off to a slower start than it did last year," but, "is unpredictable. A slow start doesn't necessarily predict a slow season," and she recalled that in nine out of the last 21 years, February has been the peak month for flu. "We are a long way from February today."
Even more ominous, however, was Gerberding's urging of physicians to be watchful of the still-expanding avian influenza epidemic in Asia. She said, "We would characterize the situation with avian influenza as a high-threat situation."
Lawsuits Force IBM To Drop Pension Scam
IBM has been forced to stop its "cash balance pensions" scam, as a result of expensive lawsuits brought against it, the Wall Street Journal reported Dec. 9. As EIR has reported, cash balance pensions were a method of looting pension funds, by putting no money at all in any fund for the employee, while writing an IOU, and giving a lump sum upon retirement. IBM adopted this approach five years ago, thus boosting "profits" (i.e., unpaid pensions) over those five years by $4 billion. However, older workers and retirees soon learned that the new process reduced their pensions by 20%-50%, due to the change in accounting methods, and filed suits, winning judgments of about $300 million, with more pending.
So IBM has dumped the "cash balance pensions" for all new workersreverting to 401(k)s, a (perhaps) less efficient form of looting. As EIR has pointed out, these various schemes to avoid funding pensions were warm-ups for the privatization of social security.
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