OBAMA :
‘DRAMATIC ACTION’ URGENT (CanWest, Sheldon Alberts)
∙ On January 7th
the Congressional Budget office (CBO) said the deficit for the year
to September 30th will be US$1.2TR (triple last year’s
& 8% of GDP) before the cost of any further bailout package.
The next day Obama told a George Mason University audience the nation
is headed for years of recession unless a stimulus package is approved
pronto & defended its size by saying “there is no doubt that the
cost will be considerable. It will certainly add to the budget deficit
in the short term. But equally certain are the consequences of doing
little or nothing at all, for that will lead to an even greater deficit
of jobs, incomes and confidence in our economy.” And he pledged a
“sweeping effort” to halt the foreclosure crisis & to use a
“full arsenal of tools to get credit flowing again.”
His Director-designate
of the Office of Management and Budget (OMB) subsequently told
the Senate Budget Committee to expect budget deficits in the 5% of GDP
range for five to ten years but that the incoming administration’s
long-term goal remained fiscal restraint. But while John Maynard Keynes
is being quoted ad nauseam, he also said
“In the long term, we’re all dead.”
OBAMA : $350 BILLION
BAILOUT MUST HELP PEOPLE (AP)
∙ He wants to improve
the monitoring of the second $350BN installment of the financial bailout
& says home owners, small businesses & consumers
should get some help.
He is reading the
tea leaves : Congress is being told too much of the first $350BN went
to the banks who created this mess (& who have started to campaign
for still more bailout money).
OBAMA FIGHTS TO
KEEP HIS BLACKBERRY (Volkskrant)
∙ On Inauguration
Day he is supposed to turn it in but he told journalists that “I am
going to try & keep it, they’ll have to tear it out of my hands,
but I don’t know if I can win this one.”
The official reason
is that it can be used to locate and/or target him. He knows he no
longer could use it to send messages since all Presidential communications
by law must be available to members of Congress & others but wants
to keep it to stay in touch with the world outside the
“bubble” (the very reason some people want him
not to have it).
GEITHNER SLOWED,
NOT STOPPED BY TAX PROBLEMS (AP)
- Before becoming the New York
fed President, Obama’s choice for Treasury Secretary worked
for the IMF. In 2006 the IRS found that he hadn’t paid self-employment
taxes for 2003 & 2004; so he paid them. Then the transition team
found he had made the same mistake for 2001 & 2002 which he corrected
before Obama announced his choice as a key member of his Cabinet. And
Senators in both parties seem to think this won’t impede his
confirmation with the most negative comment coming from Sen. Charles
Grassley (Rep.-Ia) who called it “disconcerting”’ but not
necessarily “disqualifying.”
There was also a matter
that he had employed a housekeeper whose immigration work status had
briefly lapsed while in his employ, but that seems to gone away.
DEMOCRATS CALL
FOR $825BN STIMULUS (AP)
∙ On January 15th
the House Democrats introduced a stimulus bill calling for US$550BN
in federal spending & US$275BN tax cuts (over two years). And its
size is likely to grow if only since it provides no relief from a minimum
tax that, while intended to ensure the super rich pay tax, has since
ensnared 20+MM middle- to upper income tax filers.
Going through the
list of programs, most seem of a ‘replacement-’ rather that
‘additive’ nature.
DESPITE BILLIONS
IN AID, U.S. BANKS NEED MORE HELP (IHT, Edmund L. Andrews)
∙ They may need
a lot more. Obama seems to know that & Bernanke certainly does;
for on January 13th he warned that the very financial institutions
that created the credit crisis would need a lot more money from the
unpopular US$700BN TARP (Troubled Assets Relief Program) program (on
top of the US$200+BN they had already received).
This could be a hard
sell. For Congress is annoyed to no end at how little of the US$350BN
spent so far has benefitted ‘little people’ (in recognition of which
Obama has assured it that a sizable chunk of the remaining US$350BN
would be used to help distressed home owners).
CONGRESS TAKES
UP FORECLOSURE RELIEF PLANS (MSNBC, John W. Schoen)
- Both Congress & Obama
have identified foreclosure relief as a top priority & after a year
of going nowhere are considering more aggressive measures. So far 3+MM
homes have been foreclosed on, one in ten homeowners with mortgages
are either in foreclosure or over 30 days behind in their payments,
and according to Credit Suisse total foreclosures could hit 10MM over
the next four years, i.e. one in six households with a mortgage. Part
of the problem is that the convoluted way in which the housing boom
was funded has hopelessly complicated once fairly simple negotiations
between lenders & home owners. The most controversial foreclosure
relief idea is the “cram-down” that envisages courts modifying the
terms of first mortgages on primary residences by adjusting the loan
balance to fair market value, cutting the interest rate & extending
the term of the loan.
Risk could only
be moved around, not made to disappear,
& neither can losses : saving home owners means
dumping more losses onto lenders & creating
a need for still more bailouts.
US RETAIL SALES
SLUMPED IN DECEMBER (AP)
- In December they were down
2.7% MoM, vs. a 1.2% forecast. The sixth straight month of lower retail
sales brought the year’s decline to minus 0.1%, vs. a 4.1% gain
in 2007.
In the face of this,
business is running down inventories, further undermining economic growth.
GRIM JOB OUTLOOK
TURNS BLEAKER (MSNBC, John W. Schoen)
∙ The January 9th
employment report showed another half million plus jobs lost.
Analysts now say that even with a new US$775BN stimulus package the
job market probably won’t pick up until early 2010 & the fact
that job losses have now spread to the service sector tells them that
“the recession is now rippling out into all parts of the economy.”
As more jobs are lost,
confidence sags further.
NEW JOBLESS CLAIMS
UP MORE THAN EXPECTED (AP)
- 500,000 new claims for unemployment
benefits had been forecast for the week to January 10th.
But there were 524,000, 15% more than the week before.
One analyst thinks
they could hit 750,000 later this year (almost 2½
the year-ago level). And according to Washington-based Economic Policy
Institute the labour market took four years to recover from the 2001
recession & three years from the 1990m slump (with
‘recovery’ defined as ‘the time it takes to regain the number
of jobs lost earlier’).
BIG THREE MAKE
THEIR CASE AT DETROIT SHOW (AP)
- They sought to tell consumers
& taxpayers, ‘we’re different & our new stuff is really
good’ as Chrysler sought to assure people their company is viable,
GM organized a pep rally of employees to cheer on its parade of 17 new
& upcoming models & Ford extolled its plans for electric vehicles.
But analysts are still forecasting new car sales of 10.5MM, down 6MM
from 2007, as consumers delay purchases due to the economic uncertainty
(as a result of which GM & Ford in the Third Quarter each outspent
their revenues by US$1BN per month).
And
its COO told reporters that GM may need more than the US$13.4BN it was
allocated by the Treasury but wouldn’t
say if it would need more than originally asked-for US$18BN.
Meanwhile, several major automakers, incl. Nissan, Japan’s No. 2,
were conspicuous by their absence from what
is been the marquee event of the auto world.
ELECTIONS C’TEE
BANS UAL, BALAD LISTS (Jerusalem Post)
- Israel’s Central Elections
Committee decided on January 12th, by a vote of 21 to 3 with
eight abstentions, to ban the United Arab List- & the Balal parties
from next month’s General Election since Section 7A of the Basic Law
states that “ ‘a candidates’ list shall not participate in elections
to the Knesset if “its objectives or actions ... include ... support
of ...an enemy state or a terrorist organization.”
They each had three
seats. Their exclusion will enhance the importance of the other fringe
parties in any post-election coalition building (at dissolution there
were nine parties in the 120 seat Knesset with the latest polls giving
Likud & Kadima 28 each, the Labour Party 16, and the other six the
rest). This decision was since appealed to the High Court of
Justice which has promised a decision by January 22nd
(in 2003, at the height of the second intifada it overturned a similar
ban against Balal).
PM : RICE LEFT
EMBARRASSED BY UN VOTE (Jerusalem Post)
- He bragged on January 12th
that when he heard she was thinking of supporting a Security Council
cease-fire resolution, “I [called the White House and] said, ‘Get
President Bush on the phone.’ They ... told me he was in the middle
of a lecture in Philadelphia. I said ... ‘I need to speak to him now.’
He got down from the podium ... took the phone call ... immediately
called the secretary of state and told her not to vote for it. She was
left quite embarrassed.”
Soon we will be shot
of the pair of them (although, if Netanyahu were to be the next
Prime Minister, as everyone glibly assumes, we may soon wish Olmert
was there).
TOP HAMAS REPORTEDLY
KILLED (MSNBC)
∙ An Israeli air
strike in Gaza City killed Interior Minister Said Siam (the head of
the security forces), his brother & his brother’s family. And
Israeli artillery shelled the UN headquarters (causing the Secretary-General
to express ‘outrage’), purportedly after coming under fire from
anti-tank weapons & machine guns. Shells also struck a hospital,
five high rises & a building housing (Palestinian) journalists
working for foreign news services.
The IDF has been using
155 mm artillery shells, an inappropriate calibre to use in close combat
& purportedly also phosphorus shells. When the latter are used in
an anti-personnel role they are about the nastiest ordnance ever devised;
for when phosphorus comes in contact with air, it
bursts into flames that cannot be extinguished (the Allies used it for
that purpose on occasion during WW II & have been criticized ever
since for doing so since it was ‘inhumane’ if it
found its way onto human skin).
GAZA CRISIS IMPERILS
2-STATE PLAN (IHT, Michael Slackman)
- Egypt worries it may be pressured
to re-absorb Gaza (which was part of Egypt until Israel annexed it after
the 1967 War), Jordan (half the population of which is Palestinian)
that Israel will try & push Palestinians from the West Bank onto
its territory, & both that they may be dragged into policing the
conflict. Abdel Raoud el-Reedy, once Ambassador to the US
& now Chairman of the Egyptian Council for Foreign Affairs, says
“Gaza is no longer Egypt’s responsibility, and Egypt is determined
not to take it back”. And Israel’s attack on Gaza has exacerbated
a region-wide battle for influence among the Muslims in the region that
has reversed a trend towards normalizing diplomatic relations between
Egypt & Iran that seemed underway a few months ago.
In the first nineteen
days an estimated twenty or so Israelis & over 2,000 Palestinians
(half of them women & children) have been killed, about 2,300 airstrikes
targeted at Palestinian targets and nearly
600 missiles & several hundred mortar rounds fired by Hamas into
Israel. And in a seeming echo of the lead-in to the invasion of Iraq,
Haaretz suggested the nature of the fighting to date has
proven false earlier IDF claims Hamas had acquired shoulder-fired surface-to-air
missiles & sophisticated anti-tank weapons.
FADLALLAH CALS
FOR ‘THREE ISLAMIC POLES’ TO OFFSET ISRAEL’S POWER (AF-P)
- The leading Lebanese
Shiite cleric, Mohammad Hussein Fadlallah, said on January 11th
that “to correct the military & political imbalance in the region
that has the [Israeli] enemy waving its military & and security
machinery in the face of the Arabs, Islamic cooperation will be required
between three essential poles in the region ... Iran, Turkey and Egypt.”
They would make strange
bedfellows indeed : Turkey is a secular Muslim state flirting with Islamism
& a NATO member that nevertheless
wouldn’t let the US use its territory as the
‘jumping-off point’ for a second front in the invasion of Iraq,
Egypt is the birthplace of, & is
now having growing problems with, the Islamic Brotherhood, and
is getting billions in US foreign aid, and Iran is Shiite, Persian &
part of Bush’s “Axis of Evil”
HIZBULLAH WARNS
ISRAEL AGAINST USING ROCKETS AS A PRETEXT TO ATTACK LEBANON (Daily
Star, Mohammed Zaatari)
∙ On January 8th
three rockets were fired from Southern Lebanon into Israel with the
latter responding by shelling the area from which they were launched.
Hizbullah denied any responsibility but warned Israel not to use this
as an excuse to attack Lebanon, with MP Mohammed Raad telling a crowd
in the Southern town of Nabatijeh “if Israel decides to attack, it
will be faced by a stronger resistance than it has ever faced, or imagined.”
On January 14th
several more were fired. While they
did no damage, they fueled fears in Israel that militants in Lebanon
might try & open a ‘second front’.
DEBT AND EQUITY
PUMMEL DEUTSCHE BANK (Bloomberg)
- On January 14th
it reported a 4.8BN Euro loss for the Fourth Quarter (vs a 1BN Euro
profit in the year earlier period). It said this was due to “exceptional
market conditions, which severely impacted results in the sales and
trading businesses, most notably in credit trading including proprietary
trading business, equity derivatives and equities proprietary trading.”
Apart from bond & equity trading losses, it was due in part also
to higher provisions for losses on debt backed by bond insurers
& to “other exceptional gains and charges”.
And this is a bank
that supposedly had avoided direct exposure to the sub-prime market!
MEDVEDEV TAKES
APPARENT SWIPE AT PUTIN (FT, Isabel Girst)
- On January 11th
the Russian President publicly rebuked Prime Minister Putin for moving
too slowly to alleviate the country’s economic crisis.
But Putin has been
telling the Russian people all along that there is no crisis.
CHINA CAN BE FIRST
TO ‘RECOVER’ FROM CRISIS (China Daily)
- Premier Wen Jiabao said over
the January 9th weekend ‘Our aim is to be the first to
recover from the financial crisis. We must have faith and determination”
& Bank of China Vice-Governor Yi Gang predicted that economic growth
will pick up between the Second & Third Quarters since local enterprises
by then will have reduced inventories to the point where they have to
start replenishing them
- On November 9th
Beijing announced a US$586BN stimulus package (that as a % of GDP
far exceeds that of the US) & now expects to add thereto before
the session of the National People’s Congress on March 5th.
And while in October electricity use (deemed a barometer of economic
activity) dropped for the first time in a decade (by 4% YoY), in December
it was up 6.8% MoM.
A recent 17 country
poll indicated that almost 60% of those interviewed in China believe
their country’s economic situation in three months would be better
or the same, compared to just over 40% in the US (and
almost 80% in India & Brazil, 30% in Canada & Germany &
< 20% in Britain). And confidence is what’s it all about.
