In this issue:

Offshore Activities By Leading Western Banks Sharply Rising

German Unemployment Is Highest in Six Years


From Volume 3, Issue Number 2 of Electronic Intelligence Weekly, Published Jan. 13, 2004

World Economic News

Offshore Activities By Leading Western Banks Sharply Rising

A senior European financial insider, briefed on Lyndon LaRouche's release of Jan. 3, entitled, "Parmalat: Pricking the big, big, big bubble," pointed to the huge number of deals by top international banks running through offshore centers like the Cayman Islands, in a discussion on Jan. 7. These deals are often used to finance political, illegal, or high-risk speculative efforts, unnoticed by any government supervision. The source in particular mentioned Bank of America, Citicorp, J.P. Morgan, and Morgan Stanley in this respect. The Parmalat collapse could potentially expose and threaten this dirty substructure of the global financial system, with unforeseeable financial as well as political consequences.

In its latest quarterly review, released in late December, the Bank for International Settlements (BIS) devoted a special chapter to the theme "Offshore centres, the U.S. dollar and the yen." What the BIS knows about these activities is at least the volume of cross-border transactions which the banks report to their respective central banks and the central banks report to the BIS on a country-by-country basis.

The BIS notes: "Following a two-year period of sluggish claim growth after the LTCM crisis in 1998, claims on offshore centres have rebounded in recent quarters. Banks in the United States accounted for much of the rise. Total claims on offshore centres by BIS reporting banks totalled $1.8 trillion in the second quarter of 2003, more than double the stock in 1990.

"Three consecutive quarters of relatively large increases in claims on offshore centres by banks in the United States, primarily vis-a-vis the Cayman Islands and Jersey, have been largely responsible for the overall rise in offshore centre activity. These recent moves have further established the US banking sector as the biggest user of offshore centres, a position it has held since the fourth quarter of 2000. Total claims of banks in the United States on offshore centres totalled $601 billion in the second quarter of 2003, accounting for roughly one third of all claims on offshore centres." In the second quarter of 2003, 42% of all lendings by US banks to banks abroad passed through offshore centers, the highest percentage of all BIS reporting countries and sharply up from the 34% level of one year earlier.

The bigger part of offshore activities by banks is taking place with banks, often direct affiliates of the same bank, in the offshore center. However, as the BIS emphasizes: "An increasingly large portion of offshore business is vis-a-vis non-bank counterparties such as hedge funds, insurance companies, and securities firms." One quarter of these worldwide cross-border lendings to non-bank entities ($101 billion) ended up in offshore centres.

The capital which arrives in the offshore centers is then being re-channeled throughout the globe. In the BIS list of outstanding amounts of cross-border lendings (June 2003), the Cayman Islands ($1.02 trillion) ranks No. 5, just behind Britain ($2.86 trillion), Germany ($1.64 trillion), the US (1.45 trillion), and Japan ($1.27 trillion). The Cayman Islands cross-border lendings are higher than those of France ($943 billion) and Switzerland ($832 billion), and are almost four times as large as those of Italy ($273 billion).

German Unemployment Is Highest in Six Years

Unemployment in Germany is the highest in six years; and the rate of new jobless has soared to a 12-year height. According to the report of the national unemployment office issued Jan. 8, joblessness reached a six-year high, with 4.316 million in December, or 10.4 percent.

An independent survey published by the econometric staff at the Berlin-based DIW, reviewing the development of the labor market in the years 2002 and 2003, reports that with 392,000 jobs eliminated from the total workforce in 2003, Germany had the highest net loss of jobs since 1991. With the jobs lost in 2002, the national employed workforce shrunk by 630,000, to 38.3 million citizens.

The shrinkage of productive jobs is continuing unabated: in 2003, 70% of Germans employed worked in the service sector, but only 21.2% in the productive sector. In 1991, the comparison was 59.2%, against 29.3%. By that time, most of the shock wave of eliminating almost 3 million industrial jobs in former East Germany through German reunification and "marketization," had already occurred.

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