'Jolting' the Economy
Barack Obama says that we have to "jolt" the economy. That certainly makes sense, if you take the media's account of the economy seriously -- but should the media be taken seriously?
Amid all the political and media hysteria, national output has declined by less than one-half of one percent. In fact, it may not have declined even that much -- or at all -- when the statistics are revised later, as they very often are.
We are not talking about the Great Depression, when output dropped by one-third and unemployment soared to 25 percent. What we are talking about is a golden political opportunity for politicians to use the current financial crisis to fundamentally change an economy that has been successful for more than two centuries, so that politicians can henceforth micro-manage all sorts of businesses and play Robin Hood, taking from those who are not likely to vote for them and transferring part of their earnings to those who will vote for them.
For that, the politicians need lots of hype, and that is being generously supplied by the media. Whatever the merits of trying to shore up some financial institutions, in order to prevent a major disruption of the credit flows that keep the whole economy going, what has in fact been done has been to create a huge pot of money -- hundreds of billions of dollars -- that politicians can use to give out goodies hither and yon to whomever they please, for whatever reason they please.
No doubt we could all use a few billion dollars every now and then. But the question of who actually gets it will be strictly in the hands of Barack Obama, Nancy Pelosi, and Harry Reid. It is one of the few parts of the legacy of the Bush administration that the Democrats are not likely to criticize. Much as we may deplore partisanship in Washington, bipartisan disasters are often twice as bad as partisan disasters -- and this is a bipartisan disaster in the making.
Too many people who argue that there is a beneficial role for the government to play in the economy glide swiftly from that to the conclusion that the government will, in fact, confine itself to playing such a role. In the light of history, this is a faith which passeth all understanding. Even in the case of the Great Depression of the 1930s, increasing numbers of economists and historians who have looked back at that era have concluded that, on net balance, government intervention prolonged the Great Depression.
Many of those who have, over the years, praised the fact that this was the first time that the federal government took responsibility for trying to get the country out of a depression do not ask what seems like the logical follow-up question: Did this depression, therefore, end faster than other depressions where the government stood by and did nothing?
The Great Depression of the 1930s was, in fact, the longest-lasting of all our depressions. Government policy in the 1930s was another bipartisan disaster. Despite a myth that Herbert Hoover was a "do nothing" president, he was the first President of the United States to step in to try to put the economy back on track.
With the passing years, it has increasingly been recognized that what FDR did was largely a further extension of what Hoover had done. Where Hoover made things worse, FDR made them much worse. Herbert Hoover did what Barack Obama is proposing to do. Hoover raised taxes on high-income people and put restrictions on international trade, in order to try to save American jobs. It didn't work then, and it is not likely to work now.
Perhaps the most disastrous of all the counterproductive policies of the federal government was the National Industrial Recovery Act under FDR, which set out to do exactly what the politicians today want to do -- micro-manage businesses. Fortunately, the Supreme Court declared that Act unconstitutional, sparing the country an even bigger disaster.
Today, it is unlikely that the courts will let anything as old-fashioned as the Constitution stand in the way of "change." In short, the economy today has some serious problems, but things are not desperate, though they can be made desperate by politicians.
http://www.onenewsnow.com/Perspectives/ ... ?id=333206
RBS to be taken over by British government
Friday November 28, 12:51 pm ET
By Emily Flynn Vencat, AP Business Writer
Royal Bank of Scotland says British government will buy majority stake in bank LONDON (AP) -- The British government will take over Royal Bank of Scotland Group PLC with a majority stake of almost 60 percent after the shareholders of the nation's second-largest bank shunned an emergency share issue.
The 20 billion pound ($31 billion) rescue takeover, the result of a plan announced last month, means that dividends on common shares will be scrapped and top executives' bonuses will be canceled. Chief Executive Fred Goodwin has resigned and Chairman Tom McKillop, who last week personally apologized to shareholders for the 85 percent fall in the bank's share value, has said he will retire next year.RBS's 1.8 trillion pounds in assets are topped among U.K. banks only by those of HSBC. Its operations around the world include Citizens Financial Group, a commercial bank holding company headquartered in Providence, R.I., and Greenwich Capital Markets, based in Greenwich, Conn.Fears about the solvency of RBS intensified this year as the global credit crisis contributed to it writing off 5.9 billion pounds ($9.2 billion) in bad loans. A third of that was due to last year's ill-timed euro14 billion acquisition of part of Dutch bank ABN Amro.The government's shares will be held by a company called UK Financial Investments LTD. Its charge is to maximize value for taxpayers and prevent politicians from making business decisions about the bank."The investment will be managed at an arm's length from government," the Treasury spokesman said.The bank, which has indicated it could post its first ever annual loss this year, was forced to resort last month to the British government's bailout plan, which offered as much as 37 billion pounds to prop up RBS and two other U.K.-based banks, Lloyds TSB Group PLC and HBOS PLC. In all three cases, the government guaranteed to buy any shares not purchased by investors.At the government's request, RBS announced a share issue a month ago at 65.5 pence a share. But because its share price has fallen by almost a quarter since then, investors knew the government, in its role as guarantor of the issue, would end up having to shoulder the full amount when the deadline expired Friday. The result is an immediate $5 billion pound paper loss for taxpayers.Only 0.2 percent of the shares were taken up by investors, leaving the state with the balance and boosting its ownership stake to 57.9 percent. Three-quarters of Friday's 20 billion-pound government investment was in ordinary shares and the remainder was preference shares.Shares in RBS fell 2.4 percent to 53.7 pence on the London Stock Exchange Friday as investors braced for dividend payments to be cut.As long as the government owns preferential shares, its restrictions on dividends and bonuses will be enforced. The bank had already scrapped a cash dividend for the first half of the fiscal year 2008, paying instead a dividend in shares.A Treasury spokesman, who declined to be named because of government policy, called the government's imminent purchase of the stake in RBS "the next step" in "a process that supports financial stability, protects ordinary savers, depositors, businesses and borrowers; while safeguarding the interests of the taxpayer."The drastic fundraising plan comes on top of a 12 billion pounds rights issue by RBS earlier this year -- at the time the biggest ever rights issue in Europe.RBS shares were above 380 pence last December, and above 200 pence as recently as Sept. http://biz.yahoo.com/ap/081128/eu_britain_rbs.html
Saudi king says oil should be $75 per barrel
Saturday November 29, 7:28 am ET
By Tarek El-Tablawy and Adam Schreck, AP Business Writers
Saudi king says oil should be $75 per barrel as OPEC gathers for emergency meeting CAIRO, Egypt (AP) -- Saudi Arabia's king says the price of oil should be $75 a barrel, much higher than it is now, but his oil minister indicated Saturday that no measures will likely be taken until OPEC meets again next month.
Saudi Oil Minister Ali Naimi said that the Organization of Petroleum Exporting Countries will "do what needs to be done" to shore up falling oil prices when the cartel meets Dec. 17 in Algeria.Naimi did not entirely rule out the chance that the cartel would slash output at a hastily convened meeting of OPEC members in Cairo Saturday, but he said the bloc needs to wait until the Algeria meeting to assess the impact of earlier production cuts.His comments came after Saudi King Abdullah told the Kuwaiti newspaper Al-Seyassah in an interview published Saturday that oil should be priced at $75 a barrel."We believe the fair price for oil is $75 a barrel," he said, without saying how the price could be raised.The price of crude stood at about $147 a barrel in mid-July. On Friday, the U.S. benchmark West Texas Intermediate crude for January delivery was trading at about $54 per barrel.The king was echoed by Qatar's Oil Minister Abdullah Bin Hamad al-Attiya, who told the Arab news channel Al-Arabiya that prices needed to rise to guarantee investment into the oil sector."The price between 70 to 80 (dollars a barrel) is the one encouraging in investment and developing new or current oil fields," he said. "It falls below 70 (dollars), the investment would freeze, which will lead to a crisis in supply in the future."The cartel has already held an emergency meeting in Vienna on Oct. 24 to announce a production cut of 1.5 million barrels per day.The cut failed to stop the price drop, and the cartel hastily convened the Cairo gathering on the sidelines of the Organization of Arab Petroleum Exporting Countries' meeting."There is total confusion" among OPEC's 13 members, said Fadel Gheit, managing director of oil and gas research at Oppenheimer & Co. in New York. "These people ... really have no business model. They basically thrive when oil prices go up, and now they are crying uncle when prices go down."And down they have gone, in an avalanche sped along by a world financial meltdown that also threatens to cut deeply into OPEC member states' government budgets.Kuwait's oil minister, Mohammed al-Aleem, said he believes there is no need for OPEC to make a decision in Cairo on cutting output. But he warned the market is oversupplied, and didn't rule out the need for OPEC to cut production further."We believe a decision could be taken ... but I think it will happen in Algeria," he said.Al-Aleem said current prices could undercut investment in future projects and were not good for either producers or consumers.The recent price drop has left OPEC price hawks Venezuela and Iran clamoring for further reductions of at least 1 million barrels a day. Both countries need crude at about $90 per barrel to meet spending needs aimed in part at propping up domestically unpopular regimes.Other OPEC members, such as Nigeria and Ecuador, face budget problems too, making them reluctant to implement more cuts that might shrink revenues further.The Saudis are better positioned to cope with the drop in prices. The International Monetary Fund estimates Riyadh needs crude in the range of about $50 per barrel for 2008 fiscal accounts to break even.OPEC itself, along with the International Energy Agency, has significantly revised down its projections for demand growth in 2009.Meanwhile, global crude inventories are growing, as evidenced by a U.S. government report showing a surprisingly large 7 million barrel build in stocks last week in the world's largest energy consumer.OPEC's last round of cuts would put its total production at about 30.5 million barrels per day, according to the IEA. That is about 500,000 barrels per day higher than the forecast call on OPEC crude in much of 2009.A Nov. 24 Oppenheimer research report says that for oil to rebound to $65 a barrel, OPEC would need to cut crude production by more than 3 million barrels per day from its September levels -- a move it called highly unlikely.http://biz.yahoo.com/ap/081129/ml_opec_meeting.html
Spain injects €11bn into struggling economy It is hoped the two-year package, the majority of which will be pumped into local public works, will help create 300,000 jobs
ose Luis Rodriguez Zapatero, Spanish Prime Minister, has unveiled an €11billion two-year package to boost the country’s flagging economy and cut unemployment. The Spanish premier said the plan would boost public works programmes and offer some state help for the car industry which has been badly hit by the global financial crisis. “We hope this will generate 300,000 jobs within a year,” he told parliament. “These are urgent measures to generate jobs.” Mr Zapatero said the package would help innovation, productivity, infrastructure and education in 2009 and 2010. Councils should use the cash for construction projects, infrastructure works, repairing buildings and social programmes. Mr Zapatero also handed €800 to Spain’s ailing car industry which accounts for 20 per cent of exports. Car industry bosses, including Jean Pierre Laurent, chief executive of Renault Espana, had criticised Mr Zapatero for failing to do enough for car firms which are laying off thousands of workers s demand plummets. “This is a sector with a future and we are backing it,” Mr Zapatero said. The regional government of Aragon in eastern Spain announced a €200 million loan to General Motors Europe so the US car giant can start production of its new Opel Meriva at its factory in Zaragoza. General Motors said it needed €595 million to keep its European factories running. Spain has already put in place stimulus measures totalling about €40 billion as the economy contracted in the third quarter by 0.2 per cent, the first time this has happened in 15 years. But the country’s scope for more fiscal stimulus is “reduced,” said Pedro Solbes, Spain’s Economy Minister. “I’ve always said that the margin for fiscal measures is reduced and I’m still saying that,” Mr Solbes said. He welcomed the European Commission’s proposed 200 billion euro stimulus plan for the EU economy unveiled on Tuesday. “What’s new is the commission’s communiqué from yesterday calling on European countries to make a certain effort. We wanted to show solidarity with that effort,” he said. The package, to which individual countries will contribute €170 billion, equals about 1.5 per cent of the 27-nation EU’s economic output. Mr Solbes said the EU new stimulus plan will not reduce the Spanish budget deficit, which is likely to be above the EU limit of 3 per cent of GDP for the time since the adoption of the euro.
http://business.timesonline.co.uk/tol/business/economics/article5246706.ece
First credit crunch traced back to Roman republic
Security chiefs fear revamped version of 70s-style violence
Head-on attacks on soft targets by small, well-trained gangs will be harder to detect and to stop, say intelligence officials
Western intelligence officials yesterday expressed concern about the security implications of the Mumbai attacks for their own cities as they confronted the prospect of new tactics being adopted by highly trained and motivated terrorists. They contrasted the Mumbai attacks with suicide and car bombers who have plotted outrages in London. The latter have been mainly self-radicalised, self-selected groups of individuals, slowly gathering bomb-making equipment and vulnerable to surveillance by the security services, counter-terrorist officials said. In contrast, they said, the group who attacked Mumbai were armed with rifles and grenades and stormed their targets in the city head-on. "It is a mode of attack that has fallen out of fashion," one source said, referring to the violent radical European and Palestinian groups active in the 1970s. "If you are going to be martyrs anyway, why not go in firing AK-47s?" But there the similarity with former radical groups ended, counter-terrorist officials said. Intelligence sources pointed to the meticulous training the Mumbai attackers must have had - possibly in Kashmir - as well as the planning such an operation would have involved. Their concerns were reflected yesterday by Bruce Hoffman, a terrorism expert and professor at Washington's Georgetown University. "The Mumbai operation was planned and premeditated and executed by terrorist teams functioning under a command and control apparatus that orchestrated their deployment and coordinated their assaults," he said. The attacks demonstrated how a small number of well-trained terrorists could paralyse a city and stymie the local security forces. Hotels popular with foreign visitors were emerging as a favourite target, he added, referring to recent attacks in Islamabad, Kabul, Amman, in Jordan, and Sharm el-Sheikh, in Egypt. Hoffman, who recently visited the disputed region bordering northern India and Pakistan, described the Mumbai assault as a "standard Kashmir jihadi attack". Indian marine commandos yesterday said the attackers were extremely well prepared, carrying large supplies of ammunition and fruit and nuts to maintain their energy. One backpack they found had 400 rounds of ammunition inside. Peter Neumann, director of the International Centre for the Study of Radicalisation and Political Violence, at King's College London, said the attack might have appeared to have been simply a commando-style assault, but that did not mean that it was a leaderless, grassroots plot. "It was not as sophisticated as 9/11 but it needed planning [and] training camps." Counter-terrorist officials with knowledge of the intelligence supplied by the most sophisticated US and British listening stations say the attack came out of the blue, a tribute to the attackers' tradecraft or a reminder that hi-tech equipment is often not as effective as human and political intelligence. Paul Cornish, head of the international security programme at the Chatham House thinktank, offered a different perspective last night. "Perhaps it wasn't so difficult after all to plan and execute this attack: small arms and hand grenades are not hard to find; boats are scarcely specialised equipment; and Mumbai is a vast, open city with more than enough soft targets. Perhaps we don't know enough about where the perpetrators are from, because they could have come from almost anywhere." These were among the many questions causing concern among British security and intelligence agencies last night.
http://www.guardian.co.uk/world/2008/nov/29/mumbai-terror-attacks1
Indian forces kill last gunmen in Mumbai
November 29, 2008 - 9:07am
MUMBAI, India (AP) - A 60-hour terror rampage that killed at least 195 people across India's financial capital ended Saturday when commandos killed the last three gunmen inside a luxury hotel while it was engulfed in flames.
Authorities searched for any remaining captives hiding in their rooms and began to shift their focus to who was behind the attacks, which killed 18 foreigners including six Americans.
A previously unknown Muslim group with a name suggesting origins inside India claimed responsibility for the attack, but Indian officials said the sole surviving gunman was from Pakistan and pointed a finger of blame at their neighbor and rival.
Islamabad denied involvement and promised to help in the investigation. A team of FBI agents also was on its way to India to lend assistance.
Some 295 people also were wounded in the violence that started when heavily armed assailants attacked 10 sites across Mumbai on Wednesday night. At least 20 soldiers and police were among the dead.
Orange flames and black smoke engulfed the landmark 565-room Taj Mahal hotel after dawn Saturday as Indian forces ended the siege there in a hail of gunfire, just hours after elite commandos stormed a Jewish center and found at least eight hostages dead.
"There were three terrorists, we have killed them," said J.K. Dutt, director general of India's elite National Security Guard commando unit.
Later, adoring crowds surrounded six buses carrying weary, unshaven commandos, shaking their hands and giving them flowers. The commandos, dressed in black fatigues, said they had been ordered not to talk about the operation, but said they had not slept since the ordeal began. One sat sipping a bottle of water and holding a pink rose.
With the end of one of the most brazen terror attacks in India's history, attention turned from the military operation to questions of who was behind the attack and the heavy toll on human life.
The bodies of New York Rabbi Gavriel Noach Holtzberg and his wife, Rivkah, were found at the Jewish center. Their son, Moshe, who turned 2 on Saturday, was scooped up by an employee Thursday as she fled the building. Two Israelis and another American were also killed in the house, said Rabbi Zalman Schmotkin, a spokesman for the Chabad Lubavitch movement, which ran the center.
In Jerusalem, Israeli Foreign Ministry spokesman Yigal Palmor said eight bodies had been discovered in the Jewish center and that officials were investigating the possibility of there being a ninth.
Among the foreigners killed in the attacks were six Americans, according to the U.S. Embassy. The dead also included Germans, Canadians, Israelis and nationals from Britain, Italy, Japan, China, Thailand, Australia and Singapore.
By Saturday morning the death toll was at 195, the deadliest attack in India since 1993 serial bombings in Mumbai killed 257 people. But officials said the toll from the three days of carnage was likely to rise as more bodies were brought out of the hotels.
"There is a limit a city can take. This is a very, very different kind of fear. It will be some time before things get back to normal," said Ayesha Dar, a 33-year-old homemaker.
Indians began cremating their dead, many of them security force members killed fighting the gunmen. In the southern city of Bangalore, black clad commandos formed an honor guard for the flag-draped coffin of Maj. Sandeep Unnikrishnan, who was killed in the fighting at the Taj Mahal hotel.
"He gave up his own life to save the others," Dutt said from Mumbai.
A group called Deccan Mujahideen, which alludes to a region in southern India traditionally ruled by Muslim kings, claimed responsibility for the attack, but Indian officials pointed the finger at neighboring Pakistan.
On Saturday, officials said they believed that just 10 gunmen had taken part in the attack. "Nine were killed and one was captured," Maharshta state Chief Minister Vilasrao Deshmukh told reporters. "We are interrogating him."
Deshmukh's deputy, R.R. Patil, identified the gunman as a Pakistani national, Mohammad Ajmal Qasam.
The gunmen had sophisticated equipment and used "GPS, mobile and satellite phones to communicate," Patil said. "They were constantly in touch with a foreign country," he said, refusing to give further details.
On Friday, India's foreign minister, Pranab Mukherjee, told reporters that evidence indicated "some elements in Pakistan are responsible for the Mumbai terror attacks."
Pakistani Prime Minister Yousuf Raza Gilani insisted his country was not involved. His government was sending an intelligence official to assist in the probe.
Deshmukh said the attackers arrived by sea.
On Saturday the Indian navy said it was investigating whether a trawler found drifting off the coast of Mumbai, with a bound corpse on board, was used in the attack.
Navy spokesman Capt. Manohar Nambiar said the trawler, named Kuber, had been found Thursday and was brought to Mumbai. Officials said they believe the boat had sailed from a port in the neighboring state of Gujarat.
Indian security officers believe many of the gunmen may have reached the city using a black and yellow rubber dinghy found near the site of the attacks.
In the U.S., President-elect Barack Obama said he was closely monitoring the situation. "These terrorists who targeted innocent civilians will not defeat India's great democracy, nor shake the will of a global coalition to defeat them," he said in a statement.
On Friday, commandos killed the last two gunmen inside the luxury Oberoi hotel, where 24 bodies had been found, authorities said.
But in the most dramatic of the counterstrikes Friday, masked Indian commandos rappelled from a helicopter to the rooftop of the Chabad Lubavitch Jewish center.
For nearly 12 hours, explosions and gunfire erupted from the five-story building as the commandos fought their way downward, while thousands of people gathered behind barricades in the streets to watch. At one point, Indian forces fired a rocket at the building.
Israeli Defense Minister Ehud Barak told Israel's Channel 1 TV that some of the victims found at the center had been bound.
The attackers were well-prepared, carrying large bags of almonds to keep up their energy during a long siege. One backpack found contained 400 rounds of ammunition.
India has been shaken repeatedly by terror attacks blamed on Muslim militants in recent years, but most were bombings striking crowded places: markets, street corners, parks. Mumbai _ one of the most highly populated cities in the world with some 18 million people _ was hit by a series of bombings in July 2006 that killed 187 people.
The latest attacks began Wednesday at about 9:20 p.m. with shooters spraying gunfire across the Chhatrapati Shivaji railroad station. For the next two hours, there was an attack roughly every 15 minutes _ the Jewish center, a tourist restaurant, one hotel, then another, and two attacks on hospitals.
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