Global Economic News

British-U.S. 'Understanding' Will Not Stop Runaway Speculation

June 18 (EIRNS)—Members of the U.S. Congress are currently barraged with calls and communications from panicked constituents demanding they act against the exploding prices of oil products, as well as food and everything else—except their falling home values. Under that pressure, Congress is repeatedly calling the regulators of U.S. commodity markets on the carpet. But it is the British-centered, "London offshore" futures markets driving that hyperinflation. What the United States needs to do to stop the ruinous and deadly speculative hyperinflation in oil, is to go back to long-term government oil contracts between producing and consuming nations—as in pre-1980s oil marketing—bypassing the London-controlled "offshore" and other futures markets. This is the action uniquely proposed by U.S. economist and statesman Lyndon LaRouche.

Under great Congressional pressure, the U.S. Commodity Futures Trading Commission (CFTC) on June 17 announced a memorandum of understanding with the British Financial Services Agency (FSA). Under it, the FSA is supposed to impose speculative limits on financial firms trading U.S. oil contracts on London-run markets, especially the Intercontinental Commodity Exchange (ICE) which happens to be headquartered in Atlanta.

This "memorandum" does not reestablish U.S. sovereignty and regulation over these markets. It is a very small step, according to experts who have been testifying to Congress on the runaway futures problem—like Mark Cooper of Consumer Federation of America ("too little and too late") and Prof. Michael Greenberger of University of Maryland ("The markets are completely dysfunctional and out of control because of speculative activity.... This is not applying U.S. regulation to the problem."

The oil speculators agreed, driving the price of oil up almost $2.50 the day after the MOU was announced to the Senate by CFTC chairman Walter Lukken.

The CFTC is deferring to what the British call the "Balls Clause" of their Treasury, which forbids giving up control of this "offshore" speculative trading to U.S. regulators.

Royal Bank of Scotland Warns of 'Global Stock and Credit Crash'

June 18 (EIRNS)—The Royal Bank of Scotland has issued an alert that there will be a "global stock and credit crash" over the next three months, according to an article by the London Daily Telegraph's Ambrose Evans Pritchard. The bank's research team forecasts that the S&P 500 index of Wall Street equities will likely fall by more than 300 points to 1050 by September as "all the chickens come home to roost," with "contagion spreading across Europe and emerging markets."

He quotes RBS's Bob Janjuah as saying, "A very nasty period is soon to be upon us so—be prepared." He warned that high grade corporate bond prices will soar, there will be a collapse of lower grade corporate bonds in a "renewed bout of panic on the debt markets."

British Inflation Is Much Higher Than Officially Claimed

June 17 (EIRNS)—While official inflation in Great Britain is 3.2%, the highest in 10 years, the real inflation is closer to double digits. The Daily Telegraph reports that the so-called Real Cost of Living Index—an index based on real everyday expenses—is 9.5%.

A partial breakdown reveals that household bills have gone up an average of 10%. This includes Council Tax (up 4%); mortgage payments (up 11%); gas (up 18%); electricity (up 19%); water (up 4%); home insurance (up 1%); and car insurance (up 3%). Transport costs, in terms of gasoline and diesel, increased by 26%, and the grocery bill has increased 23%. It should be noted that despite the Bank of England's rate cut, the cost of borrowing for the consumer and mortgage holder has increased. Mortgage costs have increased by 11%.

Furthermore, a British subject who earns £40,000 (about $78,000), pays 5% more in income tax (about 31% of his total income), and 8.5% more in National Insurance contributions.