Global Economic News
Swedish 'Pinochet' Social Security Plan Crashes
Feb. 11 (EIRNS)Swedish citizens have received the yearly red envelope with the status of "their" savings for social security. In Sweden 2.5% of one's salary is set aside in a personal account that is invested in market funds. This is the same plan which, thanks to the efforts of Lyndon LaRouche, was defeated when George W. Bush tried to implement Social Security privatization in the U.S.
The plan is modelled on the privatization of social security under Gen. Agusto Pinochet in Chile. Because of the collapse on the stock markets last year, the state-managed funds reported negative 36% of the savingsi.e., a loss of a third of the pensions set aside. Among the other 770 funds available for individuals to choose from, all stock funds went into the red significantly, but some fell by as much as 75%, wiping out three-quarters of this part of social security savings.
German Economy Shrinking at Record Pace
Feb. 13 (EIRNS)In the worst collapse since German reunification, the gross domestic product in the last quarter of 2008 collapsed by 2.1%, compared to the third quarter of 2008. In France, it was 1.2% for the same period. In both the third and second quarter of 2008, GDP went down in Germany by 0.5%. In 1993, GDP had collapsed by 1.2%.
This is nothing compared to what's coming. Prof. Sinn of Munich Ifo-Institute expects 500,000 to 700,000 additional unemployed compared to a year ago. At the HH Club of economic journalists on Feb. 12, Sinn declared that all those who predict that it will get better by Summer, are talking "nonsense."
The steel industry is in free-fall. Since September 2008, some 3,000 jobs have been cut, and new layoffs are to come at Thyssen Krupp. This was announced yesterday, along with a 36% drop in steel, and a 55% fall in high-grade steel (Edelstahl) orders.
Siemens has announced massive expansion of short work in Germany, for more than 7,000 employed, until April. Siemens plans to cut all contracts with outside consultants, and announced a further reduction of involvement in Russia, with some projects to be postponed. However, collaboration between Siemens and the Russian nuclear power company Rosastom is not affected, as the German firm announced that it wants to become "active again" in the area of nuclear energy. Also, Siemens will try to place a EU2 billion bond, to refinance short-term debt. As for who is expected to buy such bonds, there has been no comment.
Chinese Industry Is Contracting
Feb. 13 (EIRNS)Power generation kept falling in China in January, for the fourth month in a row. This is just one demonstration of what is happening to China's biggest industries, since these industries, such as steel and chemicals, are all big power consumers. All sectors of the economy, including exports of processed goods, were affected by the first week of the New Year holiday, which usually falls in February. This made the year-on-year economic figures, which China generally uses, more extreme, since many industries stopped production beginning Jan. 26.
Power generation was down 13% year-on-year in January, China Daily reported Feb.12, citing an official of the China Electricity Council. The CEC reported that thermal power generation in October, November, and December 2008 had fallen 5.3%, 16.6%, and 12.4% from the year before.
In a Feb. 4 report, the CEC warned that power demand will continue to fall in the first half of 2009, although things will "get better" by the third quarter.
Steel exports were down 40% year-on-year, in January, to 1.91 million tons, the General Administration of Customs said yesterday. In 2008 as a whole, steel exports fell 5.5% year-on-year, after 10 years of growth, to 59.23 million tons. Monthly steel exports had peaked at 7.68 million tons in August, but crashed to 2.95 million tons by November.
Customs warned that new orders are shrinking. Demand in South Korea is estimated to be down by 9.5% from a year ago; in the United States down by 11%; and in Japan down by over 30%, China Daily reported. As one result, in January, China's iron ore imports were down 5% from December.
Water, Infrastructure Shortages Threaten Crops
Feb. 10 (EIRNS)The current drought in China and California marks the fact that harvests are threatened internationally by bad weather and lack of water infrastructure. This was not so over the past 18 months, when production in the Northern Hemisphere grain beltsChina, Russia, France, the U.S. and Canadasomewhat "made up for" the drought losses in Australia, Argentina, and Brazil
This year's world grain production (all types, for July 2008 to June 2009) is forecast by the U.S. Department of Agriculture at 2,223 million metric tons, which it considers being on a "neutral" path, rising somewhat from 2,122 mmt in 2007-08, and up from 2,005 mmt in 2006-07. This is the worse-than-typical buncombe, released today in the USDA's monthly World Supply and Demand Estimate Report. First, world grain output needs to be doubled to be sufficient for consumption and reserves. Second, the persisting lack of water, and other problems in agriculture, mean that losses on the level of famine are in the works. The International Grains Council forecasts a 5% drop in wheat in the next crop year, 2009-10, compared to this year.