Global Economic News
Clinical Signs of the Accelerating Collapse
Feb. 29 (EIRNS)Visible signs of the financial collapse that began mid-2007, are accelerating day-by-day. Some recent examples:
* Sprint Nextel reported a $29.45 billion fourth-quarter loss, saying that subscribers are leaving the company in droves1.2 million expected in the current quarterwith many leaving because they can't pay their bills.
* AIG, the world's largest insurance company, wrote off $11.1 billion on derivatives losses, causing their worst quarterly loss on record, and announced that the head of its financial products unit, Joseph Cassano, is stepping down. AIG guarantees $61.4 billion in CDOs.
* Ghost towns are appearing across America, with 200,000 newly constructed homes sitting empty, and 216,000 under construction. New communities in California have few if any residents, and the promised schools and social facilities never materialized.
* Gold hit $977 per ounce, on its way to $1,000; oil hit $103 per barrel with gas at the pump projected to go to $4 within weeks; the dollar fell to a three-year low against the yen and a record low against the euro; the U.S. stock indices were all down about 2.5%.
* The National Association of Purchasing Management-Chicago reported that its index of business activity fell to 44.5 in February. Readings below 50 signal a contraction.
* Toll Brothers Inc., the largest U.S. luxury homebuilder, reported its biggest quarterly loss in 22 years.
* Peloton Partners LLP, a London-based hedge-fund manager, liquidated a $1.8 billion asset-backed fund, blaming the cut-off of credit from the U.S. banks.
Global Blowout Heats Things Up in 'Cool Britannia'
Feb. 25 (EIRNS)Great Britain has gotten a lot of mileage out of its "Cool Britannia" marketing campaign over the years, but that image is about to take a big hit as a result of the financial blowout. Financial Times columnist Wolfgang Münchau warned today that the British economy is destined to suffer even more than the U.S.A.'s, because of its reliance on the financial sector.
"In the next few years, I expect the U.K. economic miracle to be exposed for what it was: an overlong joyride on the back of an overlong asset price bubble. The U.K. economy is about to undergo a downturn at least as large as that of the U.S.maybe even worse, because of an even more inflated housing market and because the financial sector constitutes a larger share of gross domestic product," wrote Münchau.
He argued that housing prices in Britain might fall 40% peak-to-trough, as many of the foreign buyers "that cool Britannia has attracted" might leave just as quickly as they came, and that "the U.K. financial sector is in no less trouble," in particular because London is the center of the European credit derivatives market. "Perhaps the worst thing will be that working in finance will no longer be regarded as cool, as it has been for the last 15 years. Finance will be once again what economic theory always told us what finance should be: a necessary activity, requiring some technical skills, but rather dull in the absence of bubbles."
Inflation, Food Speculation, Causing Famine, Riots
Feb. 25 (EIRNS)Inflation is mounting globally, starting with the two major factors of the economy, energy and food, and hitting first the most vulnerable areas of the world, and within those areas, hitting everybody alike. The United Nations World Food Program (UNWFP), as reported Feb. 25 in the Financial Times, is presently drawing up plans to ration food aid in response to the spiralling prices of food commodities. The UNWFP reports on the emergence of a "new area of hunger" in the developing sector where even the urban middle class is being "priced out of the food markets." Until now, the main focus of the WFP was to provide aid to areas which had no food, but it now finds itself having to aid countries where the price of food, not shortages, are the problem, as in Indonesia, Mexico, and Yemen.
All over Africa and Southwest Asia, inflation is causing unrest. In Cameroon's economic capital, Douala, at least four people were killed today when protesters, angry over the high cost of living, barricaded streets in that port city, looted shops, and clashed with riot police. Violence erupted after taxi drivers launched a strike to protest against fuel hikes which have pushed up prices of basic products.
Zimbabwe is already stricken with 100,000% hyperinflation, where the currency traded at Z$15 million to US$1. In the second-largest city, Bulawayo, service delivery has collapsed after local authorities announced that the municipality was insolvent and unable to cater to the needs of its almost 2 million residents. Many services, including provision medicines for council clinics, have come to a halt since the council could not pay salaries in January.
In Jordan, the government removed all subsidies due to rising fuel costs, which are up 76%, and the doubling the cost of basic foods like eggs and potatoes. In Saudi Arabia, there have been public protests and boycotts over rising prices, and demonstrations and riots in Yemen, where prices for bread and other staples have nearly doubled in the past four months. In Morocco, 34 people were sentenced to prison last week for rioting over food prices. (See InDepth for more on global food and fuel price inflation.)