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Thursday 14 May 2009
Volatility Too High to Signal Bull Market, Bank of America Says
The two-month rally in global equities does not herald the start of a bull market because price swings are too violent, according to Bank of America Corp.
Volatility Too High to Signal Bull Market, Bank of America Says
By Sarah Jones 13 May 2009
(Bloomberg) -- The two-month rally in global equities does not herald the start of a bull market because price swings are too violent, according to Bank of America Corp.
So-called realized volatility on the Standard & Poor’s 500 Index over the past month is about 31, compared with readings of about 20 during eight prior bull-to-bear market transitions since 1928, according to the brokerage. Thirty-day realized volatility peaked at 82 in November, according to data compiled by Bloomberg.
“Going back to the Great Depression, we have never seen a long-term bull market begin with volatility as high as current levels.” Benjamin Bowler, London-based head of global equity derivative research, wrote in a report dated yesterday. “History shows market risk needs to dissipate before the market can recover.”
Although bigger than average compared with prior periods, stock-market swings are too low given volatility in earnings and dividends at companies, Bowler said.
“This represents the largest disconnect between fundamental and asset volatility ever recorded,” Bowler wrote in the note. “Equity volatility should generally reflect the underlying uncertainty in the value of equity.”
Stockmarkets slide on news that American consumers spent even less than expected in April
Andrew Clark in New York 13 May 2009
Cash-strapped US consumers avoided splashing out in April, causing an unexpectedly poor 0.4% drop in retail sales as soaring unemployment, a loss of housing wealth, and tight credit took their toll.
The second consecutive monthly fall disappointed economists, who expected broadly flat high-street sales. The figures sent stockmarkets sharply lower and reinforced suggestions that the "green shoots" of economic recovery were wilting.
"People have overplayed the green shoots," said Steve Ricchiuto, chief economist at Mizuho Securities in New York. "This is a very, very clear reminder that the world isn't suddenly changing gear."
On Wall Street, the Dow Jones Industrial Average fell 2.18%, closing 184.22 points down at 8284.89, indicating that a two-month rally in stocks may be petering out.
In addition to the worse-than-expected April number, the US commerce department revised March retail sales downwards to a decline of 1.3%, compared with a previous estimate of a 1.1% drop.
In a sign of the challenges facing retailers, the department stores operator Macy's revealed a quarterly loss of $88m (£58m), from $59m a year ago. The deficit included restructuring charges of $138m. Macy's, which says it runs the world's largest store, said earlier this year that it was shutting 11 stores and cutting 7,000 jobs.
Analysts believe US unemployment, which has hit a 26-year high of 8.9%, is contributing to a deterioration on the high street as those out of work and others worried about their job security cut back.
Nigel Gault, economist at IHS Global Insight, said millions felt poorer because of a slump in the value of their homes and investments. Furthermore, troubled banks have raised interest rates on credit cards and are reluctant to provide loans. "It may be that people got too excited … we've clearly had a relapse," he said, but added: "The economy is contracting less severely than it was. We're seeing rough stabilisation rather than headlong declines."
U.S. Will Pay $2.6 Million to Train Chinese Prostitutes to Drink Responsibly on the Job
By Edwin Mora May 12, 2009
(CNSNews.com) -- The National Institute of Alcohol Abuse and Alcoholism (NIAA), a part of the National Institutes of Health (NIH), will pay $2.6 million in U.S. tax dollars to train Chinese prostitutes to drink responsibly on the job.
Dr. Xiaoming Li, the researcher conducting the program, is director of the Prevention Research Center at Wayne State University School of Medicine in Detroit.
The grant, made last November, refers to prostitutes as "female sex workers"--or FSW--and their handlers as "gatekeepers."
"Previous studies in Asia and Africa and our own data from FSWs [female sex workers] in China suggest that the social norms and institutional policy within commercial sex venues as well as agents overseeing the FSWs (i.e., the 'gatekeepers', defined as persons who manage the establishments and/or sex workers) are potentially of great importance in influencing alcohol use and sexual behavior among establishment-based FSWs," says the NIH grant abstract submitted by Dr. Li.
"Therefore, in this application, we propose to develop, implement, and evaluate a venue-based alcohol use and HIV risk reduction intervention focusing on both environmental and individual factors among venue-based FSWs in China," says the abstract.
The research will take place in the southern Chinese province of Guangxi.
Guangxi is ranked third in HIV rate among Chna's provinces--and is a place where the sex business is pervasive, Li said.
“The purpose of the project is to try and develop an intervention program targeting HIV risk and alcohol use,” Li told CNSNews.com. “So basically, it’s an alcohol and HIV risk reduction intervention project."
The researcher outlined three components of the intervention program in the abstract for the project:
“(1) gatekeeper training with a focus on changing or enhancing the protective social norms and policy/practice at the establishment level; (2) FSW (female sex workers) training with a focus on the acquisition of communication skills (negotiating, limit setting) and behavioral skills (e.g., condom use skills, consistent condom use); and (3) semi-annual boosters to reinforce both social norms within establishments and individual skills,” wrote Li.
The doctor said the heart of the study involves “a community-based cluster randomized controlled trial among 100 commercial sex venues in Beihai, a costal tourist city in Guangxi.”
"We anticipate that the venue-based intervention program will be culturally appropriate, feasible, effective and sustainable in alcohol use and sexual risk reduction among FSWs," says the NIH grant abstract.
Li said his study is being done in China rather than the U.S. because prostitution occurs with alcohol use in the United States like it does in China, Americans will be able to benefit from the project’s findings.
“We want to get some understanding of the fundamental role of alcohol use and HIV risk,” he said. “We use the population in China as our targeted population to look at the basic issues. I think the findings will benefit the American people, too.”
Li said minimal research has been conducted on the link between alcohol use and prostitution as it relates to HIV.
“Alcohol has been a part of the commerce of sex for many, many years. Unfortunately, both global-wise (and) in the United States, very few researchers are looking at the complex issue of the inter play between alcohol and the commerce of sex,” he told CNSNews.com.
The grant is one of several “international initiatives” sponsored by the National Institutes of Health.
Ralph Hingson, director of epidemiology and prevention research at NIAA, told CNSNews.com, “There are many Americans who travel to China each year and they should be made aware of the HIV problem.”
Hingson said that Americans will be able to apply the studies findings to the American situation because 1.2 million Americans are currently living with HIV.
Li’s research includes exploration, development, implementation and evaluation. Currently, the project stands at the exploration stage, which the doctor expects to last 18 months.
“The first phase is kind of an exploratory study just trying to get a good understanding of the phenomena in the population of female sex workers in China. The second phase is the program development,” the professor told CNSNews.com.
Phase two will be based on the first year of the study and on “field observations,” he added. The third phase will be the implementation and evaluation of the program.
“Prostitution is illegal in China but it exists in China," Li told CNSNews.com, “but the Chinese government and the society’s attitude towards prostitution is complicated.”
According to Li, there may be as many as 10 million female prostitutes in China with the majority raging from teenagers to those in their 20s.
“We see a lot of governmental initiatives in China, like 100 percent condom distribution promotion programs, so they deliver condoms in those (prostitution) venues," he added.
“The global literature indicates an important role of alcohol use in facilitating HIV/AIDS transmission risk in commercial sex venues where elevated alcohol use/abuse and sexual risk behaviors frequently co-occur,” Li wrote when introducing the project last November.
"We expect that the intervention will improve protective normative beliefs and institutional support regarding alcohol use and HIV protection,” he added.
The NIH proposal hypothesizes that the program will decrease "problem drinking and alcohol-related sexual risk" among prostitutes that participate.
"We hypothesize that the venue-based intervention will change and enhance the protective social norms and institutional policies at the establishment level and such enhancement, accompanied by individual skill training among FSWs, will demonstrate a sustainable effect within commercial sex establishments in decreasing problem drinking and alcohol-related sexual risk, increasing consistent and correct condom use, and reducing rates of HIV/STD infection among FSWs," says the NIH abstract.
The IMF's conditions on financial aid to poor countries are unnecessary. It can afford to be more generous
Mark Weisbrot 13 May 2009
"You don't have to do this." Those are the near-last words of several victims in the Coen brothers' classic film No Country for Old Men, as they try to convince the movie's unrelenting assassin that he should spare them. The assassin, played by Javier Bardem, finds this annoying, because in his mind these murders are pre-determined.
So it is with the IMF's continuing confrontations with its borrowers, with one government after another pleading: "You don't have to do this." Turkey and Latvia were in the news last week, having joined the roster of governments whose IMF disbursements are being withheld because they find it politically impossible to impose the required punishments on their citizens.
The IMF sees these measures as necessary and pre-determined – in most cases by the borrowing countries' having run-up unsustainable external or budget imbalances. But in fact the IMF has a long track record – dating back decades – of imposing unnecessary and often harmful conditions on borrowing countries.
Latvia missed a 200 million euro disbursement from the IMF in March for not cutting its budget enough. According to press reports, the government wants to run a budget deficit of 7% of GDP for this year, and the IMF wants 5%. Latvia is already cutting its budget by 40%, and is planning to close some public hospitals and schools in order to make the IMF's targets, prompting street protests.
Latvia's GDP crashed by 18% in the first quarter of this year, after a 10.3% drop in the preceding quarter. These are among the worst declines in the world. This indicates that the IMF's prescription is serious overkill. The purpose of IMF aid is supposedly to make any necessary adjustment easier, not worse.
In Pakistan, it would be surprising if the US Treasury, which is the principal overseer of the IMF, did not see a need to ease up on the contractionary IMF conditions there. The government of nuclear-armed Pakistan is facing serious political problems right now, having recently launched a major offensive against a growing Taliban insurgency. Slowing Pakistan's economy at a time when the global economic crisis is already doing that may not be the best policy from the point of view of political stability. The IMF has negotiated an increase in Pakistan's fiscal deficit from 3.4% to 4.6% of GDP, but is holding the line against lowering interest rates.
In almost all of its standby arrangements negotiated over the last year, the IMF has included conditions that will reduce output and employment in situations where economies are already shrinking.
Yet here in Washington there is a rush to get the IMF more money without any congressional hearings or debate. We are told that poor countries will suffer if the IMF does not get a $108bn appropriation from Congress immediately. But this is nonsense.
If we add up all of the IMF's commitments under the 16 standby arrangements negotiated since the crisis intensified last year, the total is less than $46bn. The poorest countries will not be allowed to borrow anywhere near that amount.
The IMF already has $215bn on hand, plus more than $100bn in gold reserves. It plans to create another $250bn in SDR's, ie the IMF's currency. Even if we include the $67.5bn that Mexico ($47bn) and Poland ($20.5bn) together can tap under the IMF's flexible credit line, it is clear the IMF is trying to get hundreds of billions of dollars more than it is likely to need. And it has at least ten times the money that the poor countries – whose needs are pocket change compared to IMF resources – will ever be allowed to borrow.
Yet the Obama administration, in a surprise move out of nowhere on Tuesday, decided to try and attach the $108bn for the IMF to another spending bill in order to circumvent the normal legislative process. The reason for this stealth maneuver is that they might run into trouble in the House, where legislators are wary of voting for multi-billion blank cheques after the backlash against the Tarp financial bailout. They will try to convince Congress to approve this money without hearings or debate with the idea that it must be done in order to save poor people in poor countries.
Congress should be met with a chorus of opposition: "You don't have to do this."
Despite mounting Congressional pressure, US Treasury Secretary Timothy Geithner might play down the currency issue during his upcoming visit to China as he seeks help to fight the financial crisis, experts said.
Geithner will make his first official visit June 1-2 as the two economic powerhouses prepare for the new China-US Strategic and Economic Dialogue scheduled for this summer in Washington.
The visit comes days after US lawmakers proposed anti-dumping and countervailing duties to retaliate against countries, including China, that allegedly depress the value of their currencies to boost exports.
"The Chinese government has never engaged in so-called manipulation of currency exchange rates to obtain international trade benefits," Foreign Ministry spokesman Ma Zhaoxu told a regular news conference yesterday.
Under mounting domestic pressure, many Western media bet Geithner might press China again on the currency issue during his visit.
But he is unlikely to take a tough position, as the US needs China to buy more US treasuries to help bail it out of the recession, said Ding Yifan, deputy director of the Institute of World Development, Development Research Center of the State Council.
The US Treasury may have to issue as much as $3 trillion in new debt in the next couple of years.
"Actually, the appreciation of the renminbi won't do the US any good," Ding said. Many economists believe a stronger yuan would contribute to Chinese deflation and slower growth, which would mean a deeper world recession.
The US trade deficit with China widened to a record $266.3 billion in 2008.
Global demand for oil is continuing to slide as the economy contracts, the Opec producers’ cartel said yesterday. The Organisation of Petroleum Exporting Countries, which pumps about a third of the world’s crude oil, said that it expected consumption to fall by 1.57 million barrels a day this year to an average of 84.03 million barrels.
Its previous forecast had been for demand to shrink by 1.37 million barrels. Virtually all the decline – about 95 per cent – is expected to come from reduced demand in the 30 developed countries of the Organisation for Economic Cooperation and Development, which includes Britain, the United States, Japan, Germany and France.
However, the global economic slowdown has also acted as a brake on demand in developing countries, such as China and India.
The price of oil has plummeted over the past year but has been edging higher again in recent weeks. Last July the price hit a record high of $147 a barrel, but by December had fallen to less than $35 amid an intensifying global recession.
On Tuesday the price touched a six-month high above $60 a barrel amid rising global stock markets and other signs that the world economy was beginning to recover.
However, despite Opec’s forecast of lower demand this year, the cartel also said that it had increased its own level of production to 25.8 million barrels last month, up from 25.6 million in March. The increase suggests that higher prices have encouraged some Opec members to act independently to lift their output to boost revenues.
At its meeting in March, Opec officially decided to hold its production steady. The cartel is scheduled to meet in Vienna on May 28 to discuss the state of the market.
Separately, Tullow, the Africa-focused oil explorer, announced plans this week to increase spending by 25 per cent on its projects in Uganda and Ghana. Tullow is planning to lift its spending in both countries from £600 million to £750 million. Tullow said that its Jubilee development in Ghana was on track for first oil in the second half of next year.
Dubai was emblematic of the excesses of the boom. Yet at a time when people in the West are talking about the "green shoots" of recovery, the once glossy playground of the United Arab Emirates remains barren of clear turnaround signs.
By Una Galani 13 May 2009
Humbled Dubai is still resolving its gargantuan debt issues. The resource-scarce emirate publicly began to confront its financial problems only last November, when it revealed that its sovereign debt and that of government-affiliated companies amounted to $80bn. Of this, roughly $19bn requires refinancing by 2010, according to various rating agencies.
Significant progress has been made. Dubai launched a $20bn bond programme in February. Half of this was fully subscribed to by the UAE central bank. The move was effectively a partial bail-out by the UAE's federal government, based in the neighbouring resource-rich emirate of Abu Dhabi. The central bank also agreed to underwrite the remaining $10bn.
Fears about the refinancing of Dubai's most prestigious corporations, such as Borse Dubai and island developer Nakheel, have eased. But Nakheel, which has a $3.5bn Islamic bond maturing in December, may still need more money. It is rumoured that Dubai World, Nakheel's parent, might plough the proceeds from a partial sale of ports operator DP World into the company.
Meanwhile, Dubai's key real-estate market shows no signs of recovery. If anything, the property slump is getting worse. Office rents fell 18pc in the first quarter of 2009, according to consultancy CB Richard Ellis.
House prices are roughly 25pc down from their peak - but could fall as much as 70pc, according to UBS.
It's hard to evaluate what's actually happening on the ground, particularly in a place renowned for opacity. Authorities claim Dubai's economy grew "at around 1-2pc" during the first quarter, but the Dubai stock market barely moved during the same period. There are few statistical or anecdotal stories suggesting anything like a turn.
7 comments:
Volatility Too High to Signal Bull Market, Bank of America Says
By Sarah Jones
13 May 2009
(Bloomberg) -- The two-month rally in global equities does not herald the start of a bull market because price swings are too violent, according to Bank of America Corp.
So-called realized volatility on the Standard & Poor’s 500 Index over the past month is about 31, compared with readings of about 20 during eight prior bull-to-bear market transitions since 1928, according to the brokerage. Thirty-day realized volatility peaked at 82 in November, according to data compiled by Bloomberg.
“Going back to the Great Depression, we have never seen a long-term bull market begin with volatility as high as current levels.” Benjamin Bowler, London-based head of global equity derivative research, wrote in a report dated yesterday. “History shows market risk needs to dissipate before the market can recover.”
Although bigger than average compared with prior periods, stock-market swings are too low given volatility in earnings and dividends at companies, Bowler said.
“This represents the largest disconnect between fundamental and asset volatility ever recorded,” Bowler wrote in the note. “Equity volatility should generally reflect the underlying uncertainty in the value of equity.”
Green shoots wither on poor US retail figures
Stockmarkets slide on news that American consumers spent even less than expected in April
Andrew Clark in New York
13 May 2009
Cash-strapped US consumers avoided splashing out in April, causing an unexpectedly poor 0.4% drop in retail sales as soaring unemployment, a loss of housing wealth, and tight credit took their toll.
The second consecutive monthly fall disappointed economists, who expected broadly flat high-street sales. The figures sent stockmarkets sharply lower and reinforced suggestions that the "green shoots" of economic recovery were wilting.
"People have overplayed the green shoots," said Steve Ricchiuto, chief economist at Mizuho Securities in New York. "This is a very, very clear reminder that the world isn't suddenly changing gear."
On Wall Street, the Dow Jones Industrial Average fell 2.18%, closing 184.22 points down at 8284.89, indicating that a two-month rally in stocks may be petering out.
In addition to the worse-than-expected April number, the US commerce department revised March retail sales downwards to a decline of 1.3%, compared with a previous estimate of a 1.1% drop.
In a sign of the challenges facing retailers, the department stores operator Macy's revealed a quarterly loss of $88m (£58m), from $59m a year ago. The deficit included restructuring charges of $138m. Macy's, which says it runs the world's largest store, said earlier this year that it was shutting 11 stores and cutting 7,000 jobs.
Analysts believe US unemployment, which has hit a 26-year high of 8.9%, is contributing to a deterioration on the high street as those out of work and others worried about their job security cut back.
Nigel Gault, economist at IHS Global Insight, said millions felt poorer because of a slump in the value of their homes and investments. Furthermore, troubled banks have raised interest rates on credit cards and are reluctant to provide loans. "It may be that people got too excited … we've clearly had a relapse," he said, but added: "The economy is contracting less severely than it was. We're seeing rough stabilisation rather than headlong declines."
U.S. Will Pay $2.6 Million to Train Chinese Prostitutes to Drink Responsibly on the Job
By Edwin Mora
May 12, 2009
(CNSNews.com) -- The National Institute of Alcohol Abuse and Alcoholism (NIAA), a part of the National Institutes of Health (NIH), will pay $2.6 million in U.S. tax dollars to train Chinese prostitutes to drink responsibly on the job.
Dr. Xiaoming Li, the researcher conducting the program, is director of the Prevention Research Center at Wayne State University School of Medicine in Detroit.
The grant, made last November, refers to prostitutes as "female sex workers"--or FSW--and their handlers as "gatekeepers."
"Previous studies in Asia and Africa and our own data from FSWs [female sex workers] in China suggest that the social norms and institutional policy within commercial sex venues as well as agents overseeing the FSWs (i.e., the 'gatekeepers', defined as persons who manage the establishments and/or sex workers) are potentially of great importance in influencing alcohol use and sexual behavior among establishment-based FSWs," says the NIH grant abstract submitted by Dr. Li.
"Therefore, in this application, we propose to develop, implement, and evaluate a venue-based alcohol use and HIV risk reduction intervention focusing on both environmental and individual factors among venue-based FSWs in China," says the abstract.
The research will take place in the southern Chinese province of Guangxi.
Guangxi is ranked third in HIV rate among Chna's provinces--and is a place where the sex business is pervasive, Li said.
“The purpose of the project is to try and develop an intervention program targeting HIV risk and alcohol use,” Li told CNSNews.com. “So basically, it’s an alcohol and HIV risk reduction intervention project."
The researcher outlined three components of the intervention program in the abstract for the project:
“(1) gatekeeper training with a focus on changing or enhancing the protective social norms and policy/practice at the establishment level; (2) FSW (female sex workers) training with a focus on the acquisition of communication skills (negotiating, limit setting) and behavioral skills (e.g., condom use skills, consistent condom use); and (3) semi-annual boosters to reinforce both social norms within establishments and individual skills,” wrote Li.
The doctor said the heart of the study involves “a community-based cluster randomized controlled trial among 100 commercial sex venues in Beihai, a costal tourist city in Guangxi.”
"We anticipate that the venue-based intervention program will be culturally appropriate, feasible, effective and sustainable in alcohol use and sexual risk reduction among FSWs," says the NIH grant abstract.
Li said his study is being done in China rather than the U.S. because prostitution occurs with alcohol use in the United States like it does in China, Americans will be able to benefit from the project’s findings.
“We want to get some understanding of the fundamental role of alcohol use and HIV risk,” he said. “We use the population in China as our targeted population to look at the basic issues. I think the findings will benefit the American people, too.”
Li said minimal research has been conducted on the link between alcohol use and prostitution as it relates to HIV.
“Alcohol has been a part of the commerce of sex for many, many years. Unfortunately, both global-wise (and) in the United States, very few researchers are looking at the complex issue of the inter play between alcohol and the commerce of sex,” he told CNSNews.com.
The grant is one of several “international initiatives” sponsored by the National Institutes of Health.
Ralph Hingson, director of epidemiology and prevention research at NIAA, told CNSNews.com, “There are many Americans who travel to China each year and they should be made aware of the HIV problem.”
Hingson said that Americans will be able to apply the studies findings to the American situation because 1.2 million Americans are currently living with HIV.
Li’s research includes exploration, development, implementation and evaluation. Currently, the project stands at the exploration stage, which the doctor expects to last 18 months.
“The first phase is kind of an exploratory study just trying to get a good understanding of the phenomena in the population of female sex workers in China. The second phase is the program development,” the professor told CNSNews.com.
Phase two will be based on the first year of the study and on “field observations,” he added. The third phase will be the implementation and evaluation of the program.
“Prostitution is illegal in China but it exists in China," Li told CNSNews.com, “but the Chinese government and the society’s attitude towards prostitution is complicated.”
According to Li, there may be as many as 10 million female prostitutes in China with the majority raging from teenagers to those in their 20s.
“We see a lot of governmental initiatives in China, like 100 percent condom distribution promotion programs, so they deliver condoms in those (prostitution) venues," he added.
“The global literature indicates an important role of alcohol use in facilitating HIV/AIDS transmission risk in commercial sex venues where elevated alcohol use/abuse and sexual risk behaviors frequently co-occur,” Li wrote when introducing the project last November.
"We expect that the intervention will improve protective normative beliefs and institutional support regarding alcohol use and HIV protection,” he added.
The NIH proposal hypothesizes that the program will decrease "problem drinking and alcohol-related sexual risk" among prostitutes that participate.
"We hypothesize that the venue-based intervention will change and enhance the protective social norms and institutional policies at the establishment level and such enhancement, accompanied by individual skill training among FSWs, will demonstrate a sustainable effect within commercial sex establishments in decreasing problem drinking and alcohol-related sexual risk, increasing consistent and correct condom use, and reducing rates of HIV/STD infection among FSWs," says the NIH abstract.
The IMF is hurting poor countries
The IMF's conditions on financial aid to poor countries are unnecessary. It can afford to be more generous
Mark Weisbrot
13 May 2009
"You don't have to do this." Those are the near-last words of several victims in the Coen brothers' classic film No Country for Old Men, as they try to convince the movie's unrelenting assassin that he should spare them. The assassin, played by Javier Bardem, finds this annoying, because in his mind these murders are pre-determined.
So it is with the IMF's continuing confrontations with its borrowers, with one government after another pleading: "You don't have to do this." Turkey and Latvia were in the news last week, having joined the roster of governments whose IMF disbursements are being withheld because they find it politically impossible to impose the required punishments on their citizens.
The IMF sees these measures as necessary and pre-determined – in most cases by the borrowing countries' having run-up unsustainable external or budget imbalances. But in fact the IMF has a long track record – dating back decades – of imposing unnecessary and often harmful conditions on borrowing countries.
Latvia missed a 200 million euro disbursement from the IMF in March for not cutting its budget enough. According to press reports, the government wants to run a budget deficit of 7% of GDP for this year, and the IMF wants 5%. Latvia is already cutting its budget by 40%, and is planning to close some public hospitals and schools in order to make the IMF's targets, prompting street protests.
Latvia's GDP crashed by 18% in the first quarter of this year, after a 10.3% drop in the preceding quarter. These are among the worst declines in the world. This indicates that the IMF's prescription is serious overkill. The purpose of IMF aid is supposedly to make any necessary adjustment easier, not worse.
In Pakistan, it would be surprising if the US Treasury, which is the principal overseer of the IMF, did not see a need to ease up on the contractionary IMF conditions there. The government of nuclear-armed Pakistan is facing serious political problems right now, having recently launched a major offensive against a growing Taliban insurgency. Slowing Pakistan's economy at a time when the global economic crisis is already doing that may not be the best policy from the point of view of political stability. The IMF has negotiated an increase in Pakistan's fiscal deficit from 3.4% to 4.6% of GDP, but is holding the line against lowering interest rates.
In almost all of its standby arrangements negotiated over the last year, the IMF has included conditions that will reduce output and employment in situations where economies are already shrinking.
Yet here in Washington there is a rush to get the IMF more money without any congressional hearings or debate. We are told that poor countries will suffer if the IMF does not get a $108bn appropriation from Congress immediately. But this is nonsense.
If we add up all of the IMF's commitments under the 16 standby arrangements negotiated since the crisis intensified last year, the total is less than $46bn. The poorest countries will not be allowed to borrow anywhere near that amount.
The IMF already has $215bn on hand, plus more than $100bn in gold reserves. It plans to create another $250bn in SDR's, ie the IMF's currency. Even if we include the $67.5bn that Mexico ($47bn) and Poland ($20.5bn) together can tap under the IMF's flexible credit line, it is clear the IMF is trying to get hundreds of billions of dollars more than it is likely to need. And it has at least ten times the money that the poor countries – whose needs are pocket change compared to IMF resources – will ever be allowed to borrow.
Yet the Obama administration, in a surprise move out of nowhere on Tuesday, decided to try and attach the $108bn for the IMF to another spending bill in order to circumvent the normal legislative process. The reason for this stealth maneuver is that they might run into trouble in the House, where legislators are wary of voting for multi-billion blank cheques after the backlash against the Tarp financial bailout. They will try to convince Congress to approve this money without hearings or debate with the idea that it must be done in order to save poor people in poor countries.
Congress should be met with a chorus of opposition: "You don't have to do this."
Currency may take back seat in US talks
By Li Xiaokun and Si Tingting
2009-05-15
Despite mounting Congressional pressure, US Treasury Secretary Timothy Geithner might play down the currency issue during his upcoming visit to China as he seeks help to fight the financial crisis, experts said.
Geithner will make his first official visit June 1-2 as the two economic powerhouses prepare for the new China-US Strategic and Economic Dialogue scheduled for this summer in Washington.
The visit comes days after US lawmakers proposed anti-dumping and countervailing duties to retaliate against countries, including China, that allegedly depress the value of their currencies to boost exports.
"The Chinese government has never engaged in so-called manipulation of currency exchange rates to obtain international trade benefits," Foreign Ministry spokesman Ma Zhaoxu told a regular news conference yesterday.
Under mounting domestic pressure, many Western media bet Geithner might press China again on the currency issue during his visit.
But he is unlikely to take a tough position, as the US needs China to buy more US treasuries to help bail it out of the recession, said Ding Yifan, deputy director of the Institute of World Development, Development Research Center of the State Council.
The US Treasury may have to issue as much as $3 trillion in new debt in the next couple of years.
"Actually, the appreciation of the renminbi won't do the US any good," Ding said. Many economists believe a stronger yuan would contribute to Chinese deflation and slower growth, which would mean a deeper world recession.
The US trade deficit with China widened to a record $266.3 billion in 2008.
Oil demand still declining, says Opec
Robin Pagnamenta
May 14, 2009
Global demand for oil is continuing to slide as the economy contracts, the Opec producers’ cartel said yesterday. The Organisation of Petroleum Exporting Countries, which pumps about a third of the world’s crude oil, said that it expected consumption to fall by 1.57 million barrels a day this year to an average of 84.03 million barrels.
Its previous forecast had been for demand to shrink by 1.37 million barrels. Virtually all the decline – about 95 per cent – is expected to come from reduced demand in the 30 developed countries of the Organisation for Economic Cooperation and Development, which includes Britain, the United States, Japan, Germany and France.
However, the global economic slowdown has also acted as a brake on demand in developing countries, such as China and India.
The price of oil has plummeted over the past year but has been edging higher again in recent weeks. Last July the price hit a record high of $147 a barrel, but by December had fallen to less than $35 amid an intensifying global recession.
On Tuesday the price touched a six-month high above $60 a barrel amid rising global stock markets and other signs that the world economy was beginning to recover.
However, despite Opec’s forecast of lower demand this year, the cartel also said that it had increased its own level of production to 25.8 million barrels last month, up from 25.6 million in March. The increase suggests that higher prices have encouraged some Opec members to act independently to lift their output to boost revenues.
At its meeting in March, Opec officially decided to hold its production steady. The cartel is scheduled to meet in Vienna on May 28 to discuss the state of the market.
Separately, Tullow, the Africa-focused oil explorer, announced plans this week to increase spending by 25 per cent on its projects in Uganda and Ghana. Tullow is planning to lift its spending in both countries from £600 million to £750 million. Tullow said that its Jubilee development in Ghana was on track for first oil in the second half of next year.
Dubai: no green shoots in the desert
Dubai was emblematic of the excesses of the boom. Yet at a time when people in the West are talking about the "green shoots" of recovery, the once glossy playground of the United Arab Emirates remains barren of clear turnaround signs.
By Una Galani
13 May 2009
Humbled Dubai is still resolving its gargantuan debt issues. The resource-scarce emirate publicly began to confront its financial problems only last November, when it revealed that its sovereign debt and that of government-affiliated companies amounted to $80bn. Of this, roughly $19bn requires refinancing by 2010, according to various rating agencies.
Significant progress has been made. Dubai launched a $20bn bond programme in February. Half of this was fully subscribed to by the UAE central bank. The move was effectively a partial bail-out by the UAE's federal government, based in the neighbouring resource-rich emirate of Abu Dhabi. The central bank also agreed to underwrite the remaining $10bn.
Fears about the refinancing of Dubai's most prestigious corporations, such as Borse Dubai and island developer Nakheel, have eased. But Nakheel, which has a $3.5bn Islamic bond maturing in December, may still need more money. It is rumoured that Dubai World, Nakheel's parent, might plough the proceeds from a partial sale of ports operator DP World into the company.
Meanwhile, Dubai's key real-estate market shows no signs of recovery. If anything, the property slump is getting worse. Office rents fell 18pc in the first quarter of 2009, according to consultancy CB Richard Ellis.
House prices are roughly 25pc down from their peak - but could fall as much as 70pc, according to UBS.
It's hard to evaluate what's actually happening on the ground, particularly in a place renowned for opacity. Authorities claim Dubai's economy grew "at around 1-2pc" during the first quarter, but the Dubai stock market barely moved during the same period. There are few statistical or anecdotal stories suggesting anything like a turn.
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