World bank nominee faces resistance.

There's an Asia Times article by Sanjay Suri on the reaction of the other World Bank members to the nomination of Paul Wolfowitz as its new head. The article is about the possible European reaction to the nomination, and whether they will have the guts to stand up to the Americans about having someone so clearly unsuitable run such an important international legislation.

What's really disgusting is that while the US and Europe combined represent only 46% of the votes, they're the only ones discussed. And actually, it's just Britain, France and Germany that are mentioned. The other EU countries apparently don't even exist, not to mention the rest of the world.

This article at least briefly mentions other countries, who make up the majority, but it's clear that any so-called "democracy" is a justification for legitimizing white rule. Especially nauseating given that the overwhelming bulk of the World Bank's activities take place outside either the US or Europe.


Notice that the non-white nations are only briefly referred to as "developing countries." Not a single one of them is named, despite the fact that they are the majority, and not a single representative of them is quoted. But they talk about a vote on "ratifying" the American choice as being "democratic." It's not, they just use it to justify their elitism and contempt for true democracy. There's no way an American would be approved in this office if the organization ran on anything even vaguely resembling democratic processes.

It's so repulsive. Both the IMF and the World Bank at this point are just loan-sharking organizations which strong-arm helpless people into taking on debt they can't afford and then, once they get over their head, moving in to steal their collateral. The World Bank isn't a "bank"; it's a organized crime syndicate.

The World Bank is supposed to be about helping to end poverty. But it's not. It's about using the poverty of others as a way of making the rich richer. That's all it is. It's been in operation for fifty or so years now, and it's record is very, very clear on that.

But I wonder if the appointment of Wolfowitz, the main architect of the war in Iraq and of American militarism in general, may be just the straw that breaks the camel's back, and gets the rest of the world to say "enough." Maybe so. In any case, it's another brick in the wall around America.

Slowly but surely Bush and his cabal are pushing people too far. And this really is going rather far. Wolfowitz is not just a major international war criminal, he's also a known thief, who has actively participated in the theft of billions of dollars from both the Iraqis and from American funds allocated for the war and the reconstuction. He has a proven contempt for the law. Having someone like that in charge of a _bank_ could be a bit much to swallow.

I think it would also make it much more unlikely that people would choose to do business with the World Bank. Regardless of whether or not Wolfowitz is confirmed.

Add: also see Paul Krugman's comments on the World Bank and Wolfowitz in The Ugly American Bank. And Smedley Butler, Meet John Perkins, a review of Perkins book "Confessions of an Economic Hit Man", which tells the very ugly story of how the international financial institutions that are supposed to be "helping" people really operate.

Smedley Butler, by the way, was the very highly decorated American Marine general in the early part of the century who later turned into an anti-war activist and wrote War Is A Racket. Essential reading for anyone interested in American history, once and future.






Social security debate.

The New York Times has a special section on the social security debate, with a number of articles and reports. It's turning into quite a battle, considering that there still isn't a formal bill presented to Congress with the specifics laid out.






Chinese inflation rate continues to decline.

The Chinese seem to be doing a pretty good job of managing their rapidly growing and changing economy, according to this article via Yahoo News. Inflation is down for the fifth straight month, an indication that something is going well. Briefly, harvests were good and food is cheap.


The entire article gives a nice overview of the current state of China's domestic economy, something you don't hear too much about. The article also says that wages are beginning to rise, which may come as a surprise to those who claim China's growing prosperity is due entirely to its cheap labor.

Note that food costs are included in the inflation figure. In the US, the standard inflatioin figures you hear typically exclude food and energy, altho I've never been able to understand why. Well, they claim they're too "volatile", which doesn't make sense to me. I would think that would make it even more important to include them. But I'm not an economist, so what do I know?

Well, there is one thing I do know. And that is that in corporate America, "inflation" is a code word for "wage increases". It doesn't really represent the prices of most goods or services. At least, that's how Alan Greenspan thinks of it. Because of his depression-era economics and his corporate perspective, he thinks of wage increases as a "problem", something that damages or at least threatens the economy. When in fact, they represent increased purchasing power and are generally the sign of a growing and prosperous economy. The failure of corporate America to increase wages as profits and costs go up is the major reason that the American economy has become so stagnant in recent years. People can't spend more money if they don't have more. It's as simple as that, but the great minds in the business community can't see it.






Republican budget represents class war.

Paul Krugman's latest column, Bush's Class-War Budget, shows how the proposed budget systematically takes from the poor and gives to the rich. It literally takes food out of the mouth of babies and gives cash to billionaires.


It's a good analysis. I have to disagree a bit with the emphasis on making it "Bush's budget". It's not "Bush's budget" at all. It's AMERICA'S budget. It represents the views of nearly all of the Republicans in Congress as well as those of the majority of the Democrats. This is not Bush's individual initiative; it's a group agenda, which clearly and indisputably represents the views and goals of the millions of America's upper class. For upper class multimillionaires such as Kennedy, Kerry, Clinton, Pelosi, and many others to suggest otherwise is rank hypocrisy. They could stop it if they really wanted to. But they won't since they're going to profit from it big time.

I also emphasize this to get it across that eliminating Bush won't change anything. They'll just get someone else, and the juggernaut will continue rolling. Clinton may have come up with a budget surplus during the boom, but the gap between rich and poor accelerated during his administration. Drastically so. And that would have continued if Kerry had won. Krugman wants to believe that the Democrats are part of the solution, not part of the problem, and that this gives them an opportunity. But the truth is most of the them, at least nearly all in the leadership, are part of the problem. But maybe Howard Dean will take them on. It'd have to be the first step if he really wants to accomplish anything.

Those Democrats who do think that this ridiculous excuse for an economic plan gives them an opportunity, might begin by rebranding it as the REPUBLICAN BUDGET, not Bush's. It's the REPUBLICAN'S WAR, not Bush's. And so on.






Chinese begin to invest heavily in Japan.

From the Asia Times, The Dragon invests in Japan. J. Sean Curtin reports that the Chinese are beginning to invest heavily in Japan, a development with potentially enormous significance for the global economy, especially America.


I suspect that Japanese technology is very high on the Chinese shopping list. They certainly are expanding from cheaper, basic goods to more expensive high-tech type stuff, and being able to rapidly tap into Japanese expertise in a big way would really speed things up. It certainly is much easier and faster to just license technology than it is to develop it from the ground up.

And more and more people are seeing China's momentum as unstoppable.








The risks of a housing bubble.

The Nation has a good overview of the potential housing bubble in this article, Bush's House of Cards, by Dean Baker. As you probably know, real estate prices are just about the only bright spot in a rapidly melting down economy, buoyed primarily by Alan Greenspan's cheap money policies rather than by any solid economics. The article reviews all this and analyses what could happen if the bubble burst.


One of the curious things about this unprecedented rise in home prices is that, unlike in the past, rents are not keeping pace, and in fact in some markets are going down. Which would indicate that this rise is not being created by a greater demand for housing, but just economic manipulation. And the Bush administration is pushing real estate prices even more by eliminating Section 8 and other programs that help poor folks pay their rent, but increasing programs that help them saddle themselves with real estate loans.


A side note on one issue that isn't covered in the article. I live in Southern California, one of the areas that has seen the greatest rise in home prices, nearly 30% in the last year alone. (Which is enormous given how expensive they were to begin with.) And I've noticed that because people are making so much money off of real estate, and because it's so easy to get equity loans to provide virtually free and tax-deductible money for regular living expenses, people don't seem interested in working very hard, and especially in investing in new businesses. Why bother? There's no real need for the extra profits from businesses, which are long term anyway, and in any case the potential profits are dwarfed by those to be made in real estate. So people are just sitting on their asses, living the good life, and neglecting anything long term. Everyone's become selfish and spoiled, encouraged by the fact that the President himself is telling them that it's better to borrow than work. So much for traditional Republican values. Calvin Coolidge is surely rolling over in his grave.






Dollar key issue at G7 meeting.

The Guardian reviews the international status of the rapidly changing dollar in light of the upcoming meeting of the G7 meeting. It's not that an encouraging analysis. What's especially interesting is that China, the key player in the international currency markets now, is not even a member of the G7.


Well, if anything above $1.25 is "cause for concern" there is concern since it's holding steady above that now. And it came close to crossing the $1.30 barrier this week, hitting $1.29 briefly, before retreating. But it will hit that level soon, and I think will start closing in on $1.40. So far this is working in America's interests, but that is just short-term. Long-term it's disastrous. Basically Bush is keeping the economy up by selling America short. The Chinese and Japanese alone now hold over $2.5 trillion in American bonds.

But nobody is really addressing the implications of major further changes. The article points out that the Japanese are intervening very heavily in order to keep their exports to the US going, but that they have no "Plan B" in the event things get out of hand.


Underlying the Japanese actions is the fact that their one-party state still has not really dealt with the serious problems in their economy, especially their enormous bad debts. And that they are simply relying on the US to bail them out, which can't work forever.

The article doesn't even mention Canada, but the rising loonie is also creating problems there. The Bank of Canada this week raised interest rates in order to slow down its rise, but they too can't fight history very long.






China lead topic at Davos.

Business Week reports that the booming Chinese economy is the lead topic at the World Economic Forum at Davos.

It's the usual biased type of reporng you'd expect from them. What's really curious is that in their limited world view the test of success of the Chinese economy is whether or not American and European investors can make money there. But was it necessary for Chinese investors to make money for the American economy to succeed? Of course not.

So why should it be the other way around? They don't need outside investment. It would be useful, certainly, but it's ludicrous to suggest it's essential. But they still have this archaic notion of China as a "third world" economy, that couldn't possibly have the resources or expertise to successfully manage its own affairs. Overseas Chinese have the largest pool of capital in the world now, and, along with the domestic investors, are more than able and willing to provide the money necessary. In fact though BW does acknowledge this, but then goes on to ignore it.


Actually, it's the other way around. Corporate America and corporate Europe _need_ to be able to invest in China, since their companies are losing money in their own countries. They are desperate for new markets.

Another point that they seem to miss is this assumption that capital is still what's necessary to create business and to drive an economy. Which is an obsolete idea. There's no shortage of capital in the world anymore. If anything, there's an overabundance of it. What's needed now is creativity and hard work, which the Chinese have in abundance.

But they can't shake this view that unless the Americans, Europeans and Japanese are making money there, an economy is in bad shape. In the end, though, they acknowledge that the potential is greater than the problems.


The real problem, especially for Americans, is the almost complete lack of education about China in American schools, especially the language. The Chinese avidly study English, but very, very few Americans study Chinese. (Consider if you will how many of the people at Business Week actually know Chinese, and can even read their economic reports?) And it extends to the rest of the culture as well. The Chinese know almost all there is to know now about Euro-American medicine and science, but not vice-versa. And China has a long and sophisticated history of culture and science and technology. They're more than a match for any other culture. The same goes for India.

Anyway, if you're looking to invest in China, or the rest of Asia for that matter, I'd go to the Asia Times rather than Business Week. The intellectual level is much higher, and they are so much more objective it is not even funny. Especially the works of Henry C. Liu, an Asian-American New York-based investment manager who writes for the Asian Times, and who has an absolutely superb grasp of the history and culture, and how it relates to the economy.



America's increasingly poor middle class.

The NY Times Magazine has a very lengthy article this week by David K. Shipler entitled, A Poor Cousin of the Middle Class, about the declining incomes and lifestyle of American workers. Well worth a read. Very long, seven pages, so just one quick quote about one of the people discussed.


Yep, we're going backwards. I came upon via Rebecca's Pocket, an excellent and perceptive weblog by Rebecca Blood. Her comments on the article and poverty in general are also well worth a read. She refers to a photograph in the magazine.


Yep, that's it exactly. In America now, it's almost always those who work the hardest who make the least. Rebecca has a great weblog by the way. I've noticed more and more that it's only the female bloggers who seem to be really addressing what's going on in the world. The alpha males seem to be just focused on technology, and linking to each other. With exceptions of course. I guess a lot of it may have something to do with the fact that the fastest growing group of Americans in poverty are women, especially single mothers.

And the saddest thing, the stupidest thing really, is that American business can't seem to get it through their heads that their workers are their _customers_. And if they don't pay them enough, then they can't purchase their products. Henry Ford understood this perfectly well when he began the middle class consumer revolution by regularly lowering the prices of cars and increasing the wages of his workers. But they've entirely forgotten this. And that's why today Ford Motor Company, and its corporate brethren, are losing money, not making it. They're cutting their own throats, and the rest of ours along with them.



Dollar continues slides, Chinese ready to cut it loose.

The Financial Times reports that the dollar had another bad week, falling against the euro, pound and yen. It didn't do that much against the euro, only up 4 cents at the peak, but the pound moved sharply up, reaching $1.85/pound before slowing down. It's becoming increasingly clear that the national banks are not going to be able to do much, and that not much is expected of the coming G7 meeting either.


More significantly, Guy de Jonquiéres in Davos reports that it looks more and more like the Chinese will let the renmimbi float by the end of the year, if not before.


If you're interested in what's happening at the Davos World Economic Forum, the Financial Times has a special report on it. This is where many of the world's economic big-wigs get together and decide the most efficient and politic way in which to rip the rest of us off. (Pardon my cynicism, but like I said before, it's virtually all rich white men. :)






Italian police search S&P's offices.

According to a report in the Financial Times, Italian police investigating the collapse of Parmalat, the Italian conglomerate, searched the offices of Standard and Poor's yesterday. Apparently wondering why they continued to issue high investment grade ratings to the company until the moment that it collapsed. Morgan Stanley is another American firm also under investigation, along with Deutsche Bank, Bank of America and Citicorp. So far though only the accounting firms have been formally charged.


The Financial Times also has a page which is tracking the latest Parmalat developments. It's turning out to be an interesting story, illustrating how the world's various financial firms are increasingly tied together, and how their ever-growing web of corruption works.



Euro continues its climb.

The latest report from the Financial Times says that the Euro continued its rise against the dollar. Curiously, I think that this is the first time the headline reads that the "Euro is climbing" rather than the "Dollar is falling." Which is an interesting switch, and which says a great deal about the psychological change in global perceptions.


The perception seems to be that the Euro will continue to rise, and the dollar fall, unless the large national banks (of Europe, China and Japan) intervene. But they seem to have reached their limits. They will attempt to manage the change, so that it won't be too sudden, but not to fight it. Perhaps President Bush's State of the Union speech, in which he indicated no real attempt to reel in runaway American spending, made it clear that there's not much they can do about it.

But meanwhile, the US stock markets continue to go and go. The Dow seems to be about to hit 11,000 again. But even this doesn't help the dollar. Very strange. I wonder if my prediction that it will hit $1.30/euro by the end of January will come true. Looks like it.



Conservative Republicans push for spending slowdown.

The NY Times reports that some conservative Republicans are pushing to rein in federal spending a bit. Even though fiscal restraint is supposedly a hallmark of Republican thought, Bush's spending has become so out of hand that this is newsworthy.


Ooh, sarcasm from conservatives. Well, more power to them. Anything that reins in this breakaway train is good. Unfortunately the major reason Bush is spending so much is that it's the only way he can keep in power, and because he needs to finance his out-of-control war machine. Does this mean that they're calling for cuts in the defense budget, which is by far the largest part of the federal budget?

It also appears that this is becoming a major election issue. But there's a curious poll quoted in the article.


33 and 31 add up to 64. In other words, most people don't think either party does a very good job. So what do the other 36 percent think? That a third party would be the best choice?



Scottish business signs all positive.

The Scotsman reports that all of the economic indicators are up and that it looks to be a very good year for Scottish business.


"Upskill." I'm familiar with the concept, but it's a new word to me. Sure is nice to hear such a positive economic note. Curious though they don't even mention the contributions of the arts, even though J.K. Rowling is the highest earner there. And the Edinburgh Arts Festival, the world's largest, brings in quite a bit of money. They call it tourism, but a large part of it is really the arts. But the economists just can't see this. Strange.






AFL-CIO steps into LA market strike.

The LA Times reports that the AFL-CIO is moving to shore up support for the faltering grocery workers' strike in LA. Apparently they want to make a national issue of what has been primarily a local one.


This strike is specifically about health care benefits, but in a larger sense really represents the strength of labor against corporate power. The fact that the UFCW has opposed AFL-CIO involvement also indicates that infighting among labor officials is damaging workers' causes. They need to pull together.


Yep, "war" is exactly what it is. And it's one that the Democrats should get involved in if they want to have any hope at all of defeating Bush. As this union leader points out, the grocery chains have national support, and without the same on the workers' side, it's hopeless.





Dollar sinks against Euro, Loonie, rises against yen.

The Financial Times article that after a couple days of rising and stabilizing, the dollar resumed its downward trajectory, going down two cents, from $1.238 to $1.2539 as trading resumed following the American holiday weekend.


A meeting of Eurozone ministers didn't seem to make any difference.


The dollar rose against the yen a bit though, as the Japanese appeared to back off a bit on their struggle to continue to intervene. Read more about the Bank of Japan's actions.


Meanwhile in Canada, the Globe and Mail reports that the loonie, the Canadian dollar, rose a bit as the Bank of Canada cut interest rates.


I think it's a bad idea for the bankers to continue to interfere with the evolution of a new global financial order, and continue to claim that the falling US dollar is bad for their countries' interests. And obviously the markets agree. Unfortunately, the so-called "experts" seem to continue to think that the American economy continues to "drive" the global economy, and continue to make their judgments based on that. They should let the markets work. They also seem to really believe that the American economy is recovering based entirely on the stock markets rise, which really isn't true. As I said before this is essentially a co-dependent relationship, and one that's going to come to an end, one way or another.






Euro and Canadian dollar drop, then steady.

The Financial Times reports that the dollar has risen a bit against the Euro over the past few days, and is apparently holding steady while the markets wait for both a meeting of Eurozone finance ministers, as well as the international February G7 meeting. The Canadian dollar steadied a bit as well.


So the national banks are keeping the dollar up. Whether the reasons are more political than economic is not at all clear. But the underlying problems remain. I still predict further problems with the dollar this year. But we shall see.

Meanwhile the Japanese are continuing to invest billions in maintaining the value of the yen, but last week issued a warning to the US that it's growing deficits represent a serious and growing problem. And the Chinese are getting closer to deal with the problem of the yuan being tied to the dollar, which is causing increasing problems there.






Tax withholding proposed for independent contractors.

The NY Times reports that the IRS' "taxpayers advocate", Nina E. Olson, has proposed tax withholding for American's independent, self-employed workers. Which makes a major change. She also proposes changing or even eliminating the Alternative Minimum Tax, which is supposed to make sure high earners pay at least some tax.


I have to challenge the assumption that by 2010, 33 million Americans will be making more than a million a year. That's quite a bit. How do they know that? Let's focus on what people are earning today, and worry about 2010 in 2010. In any case, the AMT was set up to deal with the many loopholes in the tax code, most of which benefit the rich. If they do repeal it they should first eliminate the loopholes which made it necessary in the first place.

I find it strange that she suggests that the AMT hurts "middle-class" taxpayers, when it only applies to those who make one million dollars or more. It's the rich who will really benefit from this, not the middle-class, who will end up paying more taxes to make up for what the rich don't pay. But ever since the boom there's been a lot of pressure to repeal this, and I guess they're going to get their way. Same as the inheritance tax. All of which increases the growing gap between the rich and the poor.

Anyway, I feel it's "good policy", not "bad policy." If it needs to be adjusted for the growing incomes since 1969, that makes sense. Raise the threshold to two or five or ten million. But let's not pretend repealing it is aimed at "helping" the "middle-class." That's nonsense.

I've long felt that tax withholding ought to be voluntary. The argument is that taxpayers need help in managing their finances. At the very least, the government ought to pay interest on this money, which amounts to an interest-free loan to the government. In any case, it's another extension over the growing federal control of people's lives.



Concerns over slowing US consumer spending.

Casting more doubts over the so-called economic "recovery" is this other article from the FT which expresses "concern" over consumer spending.


Wow, people "may" be spending less because they're not working. I guess you'd need a degree in economics to figure that out. And why do they strip out "volatile food and energy prices" from the inflation figures? Those are the two biggest expenses of your average family. How convenient. That's a blatant lie, the worst kind of spin. They should at least report what the inflation figures are when you include those. And notice that they strip out auto sales, also "volatile", whatever that means, from the retail sales figures.

Of course, including auto sales figures may itself make the figures even more inaccurate. GM, for instance, recently gave away 1,000 cars as part of a sales promotion. But they include those in their sales figures. See this NY Times article on the American auto industry, Big Three Hope Rising Economy Will Lift All Vehicle Sales. It certainly doesn't indicate that the US economy is improving.


"Expecting a slight profit for 2003..." More spin. They said the same thing last year, and the year before. And if they do show a "profit" it will be by manipulating the accounting, especially by conveniently writing the $6.4 billion losses off their taxes (and onto yours.) Read between the lines of the NY Times article to see what bad shape American business is really in. And note that they continue to refer to Chrysler as one of the American "Big Three" automakers, when in fact it is now owned by the Germans. Don't be surprised if you wake up soon and read that GM and Ford have also been taken over by the Japanese and the Europeans.

[I also note that the NY Times includes Financial Times headlines on its business page. Which leads me to think that their (FT's) figures and reporting can't be trusted that much either. Are they part of the same media conglomerate now?]

For another viewpoint, the LA Times reports that Assorted Signs Paint Rosy Economic Picture. I notice that they _do_ include auto sales in their retail sales figures, which is interesting.


That's the great thing about the web. It allows you to compare the various reports. It's amazing what that shows up too.



Dollar edges higher.

The dollar edged slightly higher today, reports the Financial Times.


I think the focus on the decline in unemployment claims is a bit misguided. People only claim unemployment if they've been working during the past year or so. Since there are many people who have now been out of work for a year, or two or three, then they can't claim unemployment. And the Congress last December refused to further extend benefits, as they have been doing the past two years. This doesn't mean more people are working, it means they've given up looking for work, and have exhausted their benefits. Classic spin going on here.

And it's the weaker dollar that is primarily responsible for the slightly slower American trade deficit, as well as the increase in the stock markets. Along with the war profiteering, of course. See this other Financial Times article which notes that IBM reports higher sales due primarily to the weaker dollar.


I didn't realize that financial services is now IBM's biggest business, not computers. That follows the trend in American business. Ford, for instance, is losing money selling cars, but staying alive by profits from its financial services. And notice that what growth IBM has is in Europe and Asia, not the US.

Note that they are reporting that revenues grew from $23.7bn last year to $25.9bn this year. But that's not taking into account the lower value of the dollar. After calculating that, they've actually declined. I think. They manipulate the figures so much, taking "charges" and such so that you really don't know what's going on.

I wonder if PriceWaterhouseCoopers's accounting practices are any more honest than the now-defunct Arthur Anderson's were. Given the collapse of the major Italian conglomerate Parmalat, due primarily to accounting regularities, I have to seriously doubt it. I don't know who did their accounting. But given that Parmalat operated in something like 140 countries, that American firms such as MorganStanley were heavily involved, and that PWC is one of the world's big four accounting firms, it would seem that it's unlikely that IBM/PWC could have been entirely unaware of what was going on. They're all in it together.






Moon and Mars costs don't include ongoing maintenance.

There's been a lot of discussion about Bush's proposal to establish colonies on the moon and Mars. One thing that hasn't been pointed out is that the initial estimates of the costs involved don't include the costs of keeping the bases going once they're established. The initial estimates of the total costs are something like $500 billion, but given the history of overruns in the space program, it will almost certainly end up being in the trillions.

Which itself is an almost inconceivable amount, and even more when you consider that since America is broke, it will have to borrow the money. I shudder to think what the interest charges on a one trillion dollar loan will be.

But this is just the costs of establishing the programs and planting the initial colonies. Once they're there they will have to be maintained, and presumably gradually expanded. That means at least tens or hundreds of billions of dollars a year, if not more. And those costs will never end since the suggestion is for permanent bases. I repeat that: the proposal is for permanent bases that will have to be supported for decades at least. And given Murphy's law ("whatever can go wrong will go wrong") there will almost certainly be enormous unforeseen expenses. If something does go wrong, and it will, we'll have to rescue those folks, no matter what the costs.

These are enormous projects, maybe even the biggest in human history. I'm a big fan of space exploration, and an even bigger fan of colonizing it, but I can see what it will cost. I think eventually it will not only pay for itself, but make a profit. From tourism if nothing else, along with unexpected scientific advances. (I can see the skeptics shaking their heads about that as I write. :)) But in the meantime we're talking potentially many trillions over the next few decades.

If we're going to do this we need to plan very, very carefully, and go very, very slowly. And if at all possible do it on an international basis so that Americans alone don't bear the entire burden. The Chinese are already planning on a permanent base on the moon. I'm sure they don't want to pay all of the costs.



Dollar retreats a bit.

The dollar retreated from its recent lows a bit reports the Financial Times. The main reason seems to be comments by the head of the ECB that it wanted to slow down the rise of the Euro a bit, and the monthly decline in the US trade deficit.


I personally wouldn't consider not falling for two days to exactly constitute a "rebound." But the bankers, especially British and American ones, desperately want to convince themselves, and everyone else, that the dollar's decline is just temporary. And a decline in the dollar is certainly going to favor American trade, so it's not surprising that the deficit should be reduced a bit. But it was $38 billion. That's still a whopping amount of money, close to half a trillion at an annual rate.

Certainly if the European and Asian banks continue to pour money into propping up they can slow down the decline. But that takes a lot of money. The dollar holdings of Chinese and Japanese banks now total more than $2.4 trillion, which is a lot. They can prop it up, but it will take trillions. They can't do that forever.

And certainly its decline will not be a one way street. Like all markets it will go up and down. But the trend is down. And it appears that currency traders are hedging their bets while waiting to see what happens at the G7 meeting in February.

Also, Paul O'Neill's recent revelations about how the folks in the White House view everything in political terms, and in terms of how it benefits them, wouldn't seem to convince anyone that their policies will be aimed at stabilizing the global economy. But rather at how they can profit from them, even at the expense of everyone else.

One issue that I don't understand at all, and which no one seems to ever discuss, is how works in regard to American companies that are owned by the Europeans. Chrysler for instance, which is now owned by the Germans. They keep talking about the "European", "American", "Japanese" and other economies. But the fact is that they're all mixed up now, and it simply isn't cut and dried like that.






OPEC gets closer to pricing in Euros.

Writing in the Globe and Mail, and based on Reuters reports, Patrick Brethour reports that OPEC is moving closer to making the transition to pricing oil in euros, rather than dollars. This has been predicted, and it increasingly looks like it's going to happen.


One thing in the article that may not be quite accurate is that the impetus is coming primarily from Persian Gulf states. Russia, which may now have the world's largest oil reserves, and which does much more trade with Europe than it does with the US, has also suggested it would like to see the change. And Venezuela, where the US is steadfastly trying to overthrow its democratically-elected government in order to regain control over its oil, also doesn't have much interest in sticking with the dollar. Mexico is another country which could well benefit from it. The peso is one of the few world currencies that hasn't risen against the dollar, and the switch to euros could change things a lot there. (I really don't know much about the peso or the Mexican oil industry, but that makes some sense to me.) It would make political sense though for the Venezuelan oil minister to focus on the Persian Gulf states, at least publicly.

I also note that the article is datelined Calgary, center of Canadian's oil industry. The Canadian dollar is rising against the US dollar, but I'm not sure how it's doing against the Euro. Currencies are so complicated, you can go crazy trying to figure out all of the implications of these changes. But George Bush's Texas, and the Bush families extensive oil interests, on the other hand, would probably not benefit.

This is an extremely complex economic development. And would affect countries all over the world in many different ways, ways that would be very difficult to foresee and plan for. (Norway, for instance, makes lots of money on North Sea oil, and the fact that it's priced in dollars is probably the major reason they haven't adopted the euro. Great Britain also counts a great deal on North Sea oil.)

So the folks at OPEC would likely proceed slowly and cautiously. But if it happens it would certainly constitute a somewhat significant event in the global economic history. Especially for America. Oil has now replaced gold as the world's economic standard, and the US has benefited enormously from having it priced in dollars. And everyone in the world is terrified of American dominance, and there are few things that would alter that more than this. It would be a big step in global efforts to draw a noose around the US, the so-called "redlining of America."

Americans really need to wake up to the degree and extent by which American economic policies (both Clinton's and Bush's, this isn't a partisan thing at all) are damaging their long-term economic interests. Believe me, the American stock markets wouldn't like this at all. The ones in other countries I think would though.



US economy is not "humming."

I keep reading these articles that state that the US economy is "humming" now, apparently based entirely on the recent rise in the stock markets. I agree that it's doing a bit better than it has been during the past three years, which is not surprising since it couldn't possible be doing worse. And since the federal government and federal reserve have been pumping hundreds of billions of dollars of cheap money into it, which is bound to have some effect.

But the stock market alone is NOT the "economy." The economy consists of many more things that just the markets, which mostly represent the interests of the wealthiest ten percent of the population. It's also measured by jobs, by the rate of personal bankruptcies, by the strength of the dollar, by whether there is money to keep schools and police stations open, by the trade and budget deficits, by whether people can afford to go to the doctor when they are sick, and many other measures. And all of those are not doing well at all. It's convenient and easy and simplistic to just judge it by the Dow Jones average, but it's not realistic.

My personal economy is certainly not "humming" by any measure. I'm 51, and I have never in my life had such a hard time coming up with steady sources of income. And I have a very good college education, plenty of high-tech skills and such. I shudder to think how the folks with just high school educations are doing.

In my state of Oregon schools, police and other public institutions are on the rocks like they haven't been since the Depression, and far from getting better, they are by all indications things are getting worse. Significantly so.

And it's much worse among the African-American and Hispanic populations. Even during the height (depth?) of the Depression, 90% of black folks could find at least some work. Now the unemployment rate among them is around 30%, and rising. (At least as far as I can tell, they do a great job of hiding these statistics, so you never really know.)

And the single mothers I know are almost all rather desperate. This is almost an entirely "white male" recovery. And as a white male myself, I can assure you it's not even most of them.

And I don't see any of the Democratic candidates offering any thing other than platitudes, and what amounts to a kinder, gentler "business as usual." Dr. Dean sends me email asking me to read Thomas Paine's "Common Sense." I've read it, Doctor. What I want to know if you have any?






Dollar falls, then rises on ECB comments.

The Financial Times reports that the dollar fell to nearly $1.29/euro, then rose after a meeting of the European Central Bank (ECB) expressed concerns about the euro's rapid rise. Which was in contrast to last week's statements that it was not that concerned.


Belief that the Japanese government would also continue to prop up the dollar also slowed its fall. So the governments are trying to keep up its value rather than let market forces work. But private traders continue to see weakness.

Rapid change, either up or down, is bad for economic markets since it creates uncertainty. So in that sense it's probably good that various governments are trying to control things. But simply trying to hide the many serious long-term problems in American finances could only serve to set the stage for a more sudden plummet. Perhaps letting the dollar gradually fall as the markets want would be better.

I also feel that the bankers in Europe and Japan have significant private investments in American securities and investments of all types. And that, to a certain degree, they're trying to protect their own wealth, and reputations, at the expense of the interests of their supposed constituencies.

The fact is that their economies are highly co-dependent on the American one, and co-dependency is no better in economic relationships than in personal ones. Sooner or later you have to confront your problems and deal with them. They just don't go away.

The Bush administration is being very successful at using the dollar's fall to hide problems in the American economy. And they're going to keep trying to do that during the election year. And maybe they'll get away with it. As the old saying goes: "No one's ever gone broke underestimating the stupidity of the American public."

I still think it will at least break the $1.30/euro level this week. We shall see.






New US visa requirements damage tourist industry.

While you would hardly know it from reading the world's financial publications, which still focus almost exclusively on the 19th and 20th century standards of manufacturing and retail sales, the tourist and travel industries are now the largest in the world, especially in the amount of jobs they create. I read somewhere that something like 1 in 10 jobs in the world are in these industries. A lot of these jobs are fairly low-wage service jobs, but they still pay real money and are essential to any modern economy.

Tourism is, in fact, the number one industry in more countries than any other industry. This would include a lot of so-called "third world" (isn't it about time we dropped that archaic term?) countries, but it does represent something quite significant in modern economics. And it is quite new, something that only developed during the 20th century, part of the amazing growth of leisure time and money of recent times.

You don't, for instance, even find the word "vacation" listed in most 19th century dictionaries. If you had asked most people a a bit over a hundred years ago if they were planning a "vacation" they would be quite puzzled. Wouldn't know what you were talking about. Most likely they would say that, well, sometimes on Saturday we only work eight hours, and have time for a bath. Is that what you mean?

Which is why the many post-9/11 actions to harass, restrict and limit travel here, are having a devastating effect on the American tourist industry. Something that will accelerate due to the new regulations that will require most foreign visitors to get visas before they can come, at least until they are able to get a new biometric passport, which will take a while. An article in the Scotsman, We don't want you without a US visa, discusses how concerned the travel industry is about this, both here and there.


Note the $529 billion figure for the US tourist industry. That's huge. Comparable to what Wal-Mart takes in. Also note that they mention the SARS virus as a problem, even though, so far, the US hasn't had a case of SARS. I guess they're referring to the Canadian problems during 2003. I didn't realize though, that when many people come to America, they also plan on visiting Canada. Or at least they appear to think of North America as a single destination.

I also didn't realize that Florida has become such a major international destination.


I'm also just starting to realize just how restrictive the new regulations are. People in the UK, for instance, will have to travel to London or Belfast first for a face-to-face interview, and pay $100 in order to get a visa. The Scots are particularly worried, since apparently the US closed its visa facility in Scotland a while ago in order to save money. And it would appear that frequent Scottish visitors simply won't bother.


What's particularly sad about this, is that with the declining dollar, travel to the US has never been cheaper. One of the few good things about it. And it will cost the British government millions of pounds to issue the new passports, something that will increase already growing anti-American sentiment.



Canadian economy strong and growing.

While the US economy continues to melt down (the rising stock markets notwithstanding), the Globe and Mail reports that the Canadian economy had a great year in 2003, and continues to grow. Stock markets are up, the loonie (the Canadian dollar is up), employment is growing. Growth, in fact, far exceeded even the most optimistic forecasts. Fifty times more jobs were created in Canada during December than in the US.


What's particularly relevant to Americans about this is that Canada is dealing with so many of the same problems that afflict the US, (rising Euro, Chinese trade, mad cow disease, etc.), and is tied in many ways to many troubled US corporations. Yet despite all of this it manages to grow. Which would suggest that the problems in the US are of its own making, not some imagined problems in the global economy.

It's not all good news. Manufacturing jobs declined, but were more than made up by gains in health care, social services, finance, insurance, and, especially, the booming real estate industry. On the other hand, over 40,000 of the new jobs created in December were full-time permanent ones, whereas it would appear that the measly 1,000 jobs in the US were most likely temporary seasonal ones.

The continually rising loonie leads me to suggest/predict that the Canadian dollar may well achieve parity with the US dollar by the end of 2004. Which would be absolutely amazing. It's very likely though that the Canadian bankers may take measures, raising interest rates, to slow this down, although I don't think even that will make much difference at this point.






O'Neill says Bush won't discuss economics with others.

The Guardian reports that former Treasury Secretary Paul O'Neill has said that President Bush won't even discuss the economy with treasury officials and other economic advisors.


As has been said before, the majority isn't silent, the government is deaf.






LA Times comments on US deficits.

In a new editorial, Rising Deficit, Rising Fears, the LA Times adds to the growing concern raised by the out-of-control American deficits. [Registration req'd.]


Rest assured that savvy, well-to-do baby boomers aren't going to take the hit. They're already moving their funds out of the country, buying up property here and there, and planning on comfortable retirements while the country that gave them everything goes down the tubes.



Dollar has a very bad week.

The Financial Times reports on the dollar's very bad week. I noted the other day that it was going down at a rate of a penny a day. But it seems to be picking up. A penny an hour? Wow.


It's about to crack the $1.30/euro barrier too, which should have a major psychological effect. It also appears that it would be going down even faster if it were not for massive intervention by the Japanese. But that even that seems to be having only a temporary effect, also apparently lasting only minutes. It would seem that the Japanese are reaching the limits of what they can do, and that like the European Central Bank, will just let it go.


I said before that I think it will hit the $2/euro level by the end of the year. Now I think it might just do that by the end of summer, if not before. At the current rate it could cross $1.40 just by the end of January. It just seems unavoidable. The renewed attacks in Iraq, a jobs report that only 1,000 jobs were created in the US during December rather than the 150,000 that economists had predicted, which is really bad news given that it was during the holiday shopping season, the fact that the US government clearly thinks that rising stock markets are a reason to avoid making any major economic changes, accelerating American deficits, an election year which makes it impossible for either party to prescribe any harsh medicine, and many other developments all suggest that there is no reason to expect the trend to reverse. On the contrary, they indicate that it will accelerate.

The Guardian business section has an overview on the reactions of various media around the world to the dollar's change, Markets wonder where the buck will stop. It would seem that only fairly conservative publications in the US and the UK think it's not that serious. Everyone else predicts more of the same. One side is here.


And the other side is here.


Gotta love that "money is just paper" part. That's absolutely priceless. Does everybody else in DC know that? :) I'll have to keep that in mind when it comes time to pay my taxes. Will they accept toilet paper? And that it's all about "trust, outlook and confidence in the government which has issued the money." Actually, to a certainly degree that'sexactly it. It's not just the dollar that's falling, it's global confidence in the US government. But it's not just perception. The American deficits are very, very real, and growing. And sooner or later the bills come due. And to the folks at Newsday, is a penny a day "gentle?"

And where they say it's only against the yen, pound and euro. Only?. Aren't these the three most important ones in the world, the currencies that most other countries use as a yardstick? In any case, that's a blatant lie, or at least a very severe distortion of the facts. It's affecting the Australian and Canadian dollars as well, and it's beginning to hit many others as well. The only major nation that seems to be going the other way is, sadly, Mexico.






IMF projects potential $47 trillion US shortfall.

A new IMF study, reported in the NY Times, suggests that US deficits threaten the stability of the entire world economy. It's a story that's getting told more and more, especially as the deficits get worse and worse, but for the IMF to state it so bluntly is especially worrisome. And rather surprising given the influence Americans have in the organization. They also project a potential shortfall of a whopping $47 trillion over the next few decades.


But even this is not enough to get the attention of Bush and company. Somehow I don't think that they're the ones that are going to lack food and health care.


Especially note this statement about the size of the projected shortfalls. $47 trillion. (Yes, that's trillion, not billion.) Wow. And five times the entire American GDP. That's an almost inconceivable amount of money.


As someone who is 51, I have to assume at this point that all of the money I've deposited in Social Security is pretty much gone, or devalued to the point of irrelevance, and that I'm going to have to do some awfully fancy financial finagling in the next decade if I want to avoid ending up on the streets in my old age. Damn, damn, damn. Oh well, it's only money. It's only life. It's only ... catastrophic.

But from now on it's cash only, and I think it might be wise to avoid American banks as well. For the first time I see the possibility of large numbers of American banks going under, or at least having their funds confiscated by the government one way or another. The devaluing of the dollar to finance the deficit is actually a variation on that. I know that there's FDIC (Federal Deposit Insurance), which is supposed to back the banks in the event of a collapse, but that's only on paper, and that isn't any good if there isn't any actual cash to cough up.






China studies yuan peg changes.

The Asia Times, in an article on the recent currency changes, Dollar slide t