World Business and Economic News Snapshot for February for 2010
Vietnam seeks $12 billion for infrastructure projects
HANOI, Vietnam — The Vietnamese Ministry of Planning and Investment has announced a list of more than 60 urban infrastructure projects, calling on an estimated 12 billion U.S. dollars of investment in the period of 2009 and 2016, the local newspaper The Youth reported Thursday.
The projects involve the construction and upgrade of traffic system, infrastructure, sewage plants and water supply and drainage systems in 15 provinces and cities nationwide, said Truong Van Doan, Deputy Minister of Planning and Investment.
Thirty percent of the projects are expected to be funded by official development assistance from French and Spanish governments, the German Reconstruction and Development Bank, the Japan International Cooperation Agency and the Asian Development Bank, said the newspaper. – More here.
The Vietmanese government is evil, known for heavily persecuting Christians:
Because of the severe damage to Vietnam from the Vietnam War however, I think they should be given at least this one last loan, or gift, but with the warning to stop persecuting Christians, and to turn to God.
Bank of Thailand worst forecast 1.4 [million] unemployed this year
BANGKOK, Thailand — The Bank of Thailand (BOT) on Thursday said in the worst case scenario, if the gross domestic product stop to grow, the unemployment rate would rise to 3.7 percent or around 1.4 million people, including newly graduates and farmers after cultivating, would be jobless.
Amara Sriphayak, Domestic Economic Department’s senior director of BOT, said unemployment is likely to be more severe than the previous year because the economy in 2009 has difficulty to grow, due to world economic recession.
Meanwhile, this year government targets 2.5 percent on economic growth and has economic stimulus measures to assist about 1 million unemployed nationwide.
Amara said the Monetary Policy Committee’s sharp interest rate cut to 2 percent will spur the economy by devaluing money, encouraging people to spend, and enabling financial institutions to issue credits at less cost.
Amara believed that people will spend more when they have more confidence in the economic and political situation. – Source.
FM: Thai new government ready to rebuild its world image
BANGKOK, Thailand — As part of PR efforts for Thailand’ s new government led by Abhisit Vejjajiva, Thailand’s Foreign Minister Kasit Piromya said on Thursday that he is confident the government is ready to rebuild the country’s image in the world stage.
Kasit made the remarks in a speech “Thailand’s Image in the World” as part of the Post Forum 2009, organized by Bangkok Post, Post Today and Business Radio 98.0 at a Bangkok hotel on Thursday.
Kasit emphasized that the transition between the previous government and the Abhisit-led government is democratic, peaceful and stable.
“This is the selling point,” said Kasit, adding that this government has listened to all sections in the society.
Kasit said that the government will continue to follow the rule of law in order to rebuild the country’s creditability in the international community.
Also, Thailand hopes that holding the forthcoming Association of Southeast Asian Nations’ (ASEAN summit will provide an opportunity to rebuild the international confidence on the country.
The ASEAN summit is planned to be held in the central resort town in Hua Hin of Prachuab Khirikhan province from Feb. 27 to March 1.
As the ASEAN chairmanship, Thailand will work to enhance the role of ASEAN in the United Nations (UN) and World Trade organization (WTO), such as to contribute to the solution of the pirate issue under the UN charter and humanitarian projects, Kasit said.
Meanwhile, Kasit believes that the government’s economic measures will also contribute to restoration of the international confidence on the country, amid the challenges of global economic crisis. – Source.
I wonder if the government’s idea of improving Thailand’s image also includes ceasing it’s discrimination against non-Thais:
Ireland returns to an old love: the potato
by Conor O’Clery
DUBLIN — Ireland is renewing an old affair with the British Queen, the Duke of York and King Edward — not the royals who in bygone days ruled over the island, but varieties of potato. The humble tuber on which the Irish once relied for vitamins, minerals, protein, fiber and carbohydrates is making its way back into gardens and onto plates. It is part of a back-to-the-land trend, as the needs of the recession coincide with a growing passion for organic food. Where dinner parties were once dominated by conversation about property values and how everyone was getting rich, now the topic is more likely to be about the economic crisis and the best methods for growing fruit and vegetables.
The week of St. Patrick’s Day is the traditional time of year for planting potatoes and many lawns in Irish backyards have been cut back of late to make way for vegetable plots. Apartment dwellers get in on the act by renting allotments on municipal land, which come at a nominal fee. Demand for council allotments has been so heavy this year that there are long waiting lists, and farmers are renting out vegetable patches to city folk for up to $400 a year. – More here, including a video.
For Ireland, the party is over
by Conor O’Clery
DUBLIN — The Lonely Planet Guide to Dublin lists Reynards nightclub on South Frederick Street as Colin Farrell’s “favorite den of iniquity.” The movie star and other prominent Irish personalities, such as Bono, have been known to enjoy the “difficult access” upstairs bar in this posh establishment.
Night-clubbers turned away by the Reynards bouncers could always try Pal Joey in Temple Bar, which according to http://www.dublintourist.com “indulges the hedonist in us all,” or Tram Co. in the upscale suburb of Rathmines, which promises a “cool experience over three floors.”
These trendy night spots, which epitomized the “roaring naughties” in Dublin, have one thing in common: They have all just closed. The doors have been padlocked, the rope lines taken away and the bouncers paid off.
For Ireland the party is over. The glitzy playgrounds of the Celtic Tiger are deserted. The recession has forced a number of the most expensive clubs and restaurants out of business. (Late-night joints have also been hit by new licensing restrictions.)
This time last year Dublin was a top destination for Irish and European celebrities, and was enjoying a newly secured international reputation for the quality of its cuisine. High-end diners had to brush up on their French as coq au vin and blanquette de veau replaced the traditional meat and two veg on restaurant menus.
Some 25 of the 550 restaurants belonging to the Restaurants Association of Ireland have now shut down because of the recession, according to the body’s chief executive, Adrian Cummins.
“The corporate market has shrunk and we will see more contraction, unfortunately,” said Cummins, who also blames steep value added tax (VAT) rates and minimum wages that are higher than in other European countries, as well as high rents, and the excessive cost of importing foodstuffs.
Most catering businesses are operating on a knife edge because cash and credit in Ireland are in historically short supply. The country has been in recession since the second quarter of 2008 and Ireland’s Economic and Social Research Institute predicts the economy will contract by 14 percent by the end of 2009. – More here.
“Rip-off Ireland” gets cheaper
by Conor O’Clery
DUBLIN — Long classified as one of the more expensive countries in the world, Ireland is steadily becoming a cheaper place to live and visit.
As recently as 2008, “rip-off Ireland” — as the country has often been dubbed by Irish people themselves — was the second most expensive country in the European Union, according to the Irish Central Statistics Office (CSO) in its just published annual report. Shoppers could expect to pay a quarter more on average than their European counterparts. The cost of living was higher only in Denmark and exceeded even that of Finland, which has long had a reputation as the most expensive place in Europe.
This year, things have changed. With disposable income drying up in the face of a deep recession, price wars have broken out among grocery chains, furniture stores, car dealers, hotels and restaurants. In July, the trend to cheaper living in Ireland was confirmed by the Mercer 2009 Cost of Living city index. It graded Dublin the 25th-most expensive of 143 world cities, nine places below the previous year (and almost on a par with Los Angeles, which was ranked 23rd).
But the summer vacationer from the United States will still find Ireland expensive, especially as the dollar has weakened in recent weeks. A Big Mac — that international indicator of cost of living — costs $5.42 in Dublin at current exchange rates, compared to $3.57 in the U.S. But travelers will also find that hotel prices have been slashed by as much as two-thirds, and once over-priced restaurants are offering “early-bird specials” right through the evening.
For people living here, it is more important that long-overpriced items in supermarkets are costing less. The big grocery retailer Tesco boasted last month to have made 12,500 price cuts in its Irish stores. Services have become cheaper and easier to get. It was difficult during the construction craze to find plumbers, electricians or repair workers to do a domestic job at short notice. Today they are delivering leaflets door-to-door imploring householders to give them work, at reduced rates.
Since there is less money circulating, however, a new and unpleasant business culture has emerged that is crippling individuals and small firms. The collapse of the construction bubble has left many sub-contracted workers seeking back payments in court from near-bankrupt building contractors.
Greg Renwick, a self-employed electrician in south Dublin, tells me that one construction company he works for is five months behind in payments due to him, and he fears that if he walks away from it he will never get anything. My daughter Emer O’Clery, director of a television production company in central Dublin, says she has been waiting since October 2008 for payment from a major communications provider — and another small firm that owes her money complains that it too is waiting for payment from a bigger company. The Dublin Chamber of Commerce reported on Aug. 17 that the average time to settle business bills is 90 days, three times longer than last year.
The CSO’s report, called “Measuring Ireland’s Progress 2008” (“Measuring Ireland’s Decline” might be a more apt title), details how, from being one of the richest countries in the E.U., Ireland has become one of the most financially-strapped, with the largest deficit of any of the 27 member states. Ireland is facing negative growth of 8 percent in 2009, according to the International Monetary Fund in April.
The CSO report tells us that unemployment remained low in 2008 at just over 5 percent (statistically almost full employment) but that too has changed drastically. The number of people claiming unemployment benefits has soared in mid-August to over 12 percent of the workforce and is predicted to rise to 17 percent before the year is out. Half a million people are now out of work in a country of just four and a half million.
And thus, net migration, the curse of Irish history, has returned, with a government think tank predicting this week that 40,000 Irish people will this year pack their bags and seek their fortunes elsewhere. – Source
by Suzanne Lynch
Ireland’s economic woes exaggerated, believes Canadian research team
PESSIMISM ABOUT Ireland’s economic prospects has been overplayed and the economy will rebound much more sharply than consensus opinion believes, according to a new report.
A special report on Ireland by BCA Research, a Canadian-based investment research company which advises international investors on investing in Europe, found that the Irish economy is “much more flexible than its euro area counterparts”.
It predicts that although economic activity will contract by 4 per cent next year, the Irish economy will rebound by 2011.
The report compares Ireland’s present economic situation to that of Hong Kong in the late 1990s. It argues that Ireland’s decision to adopt the euro currency mirrors Hong Kong’s creation of a peg system to the dollar in 1983, which left both with an interest rate structure well below levels dictated by its potential growth rate. This in turn led to rapid economic expansion, an explosion of the property market, and a loss of competitiveness. In a case analogous with Ireland currently, Hong Kong was highly exposed when the Asia financial crisis hit in 1997. But, by 2004, Hong Kong’s economy had begun to recover vigorously.
The report argues that Ireland can mirror Hong Kong’s recovery, but “policymakers must rein in government spending and get the banking system working again”.
Although the report welcomes the creation of a “bad bank”, it believes the current banking crisis in Ireland is worse than the Swedish banking crisis of the early 1990s.
It points out that Ireland has one of the highest private sector debt/GDP ratios ever experienced in the industrialised world; the banks have higher property exposure; and participation in the European single currency precludes the use of a “currency relief valve”. –
Makeover scheme enhances Belfast shop fronts
Many Belfast shop fronts have been enhanced as part of a scheme which has made the city’s retail stores even more attractive.
Belfast City Council’s Renewing the Routes programme has seen more than 200 properties along Falls Road have their shop fronts upgraded or replaced in order to attract more customers.
Work on the final 32 shops at the Donegall Road junction is now underway, with other improvements including updated and new tourism signage, helping visitors to the city find their way around the many attractions in Northern Ireland’s capital.
Councillor Breige Brownlee, who represents the Lower Falls area, commented: “The change and its impact has been quite simply amazing. All of the shops which have had improvements carried out are much brighter and more attractive; more welcoming to customers.”
Meanwhile, a trial for a new exchange scheme between Belfast and Madrid has seen Spanish visitors express their delight at Northern Ireland’s capital city and the people who live and work there. – Source
Ireland in firing line as Obama targets overseas tax breaks
by Michael Hennigan, Founder and Editor of Finfacts
Ireland is again in the firing line as Obama targets overseas tax breaks available to US multinationals.
The Budget for fiscal year 2011, beginning on Oct 1st this year, which President Obama sent to Congress on Monday, proposes to impose a surcharge on the excess returns on assets such as brands and patents which are transferred to foreign affiliates that pay little tax. The administration is also proposing to deny companies that borrow money to invest overseas the ability to take immediate tax deductions on the interest payments.
The administration is targeting additional tax revenues of $122 billion over the next 10 years. The proposals are more modest than ones which were made by the President last year.
The Budget document states: “The American corporate tax code is riddled with inefficiencies and loopholes, including the fact that it allows companies to indefinitely defer the payment of US taxes on foreign income while immediately benefiting from the tax deductions associated with these activities. It also allows many companies to take advantage of transfer pricing to shift income earned in the United States to lower-tax countries. The Budget will reform and end these practices.”
The patent tax exemption has been very attractive for multinational operations in Ireland as there is no requirement that the patent royalty be payable in respect of an invention used for an activity located in Ireland.
Patented inventions are a large source of revenue in the pharmaceutical industry. Ireland’s tax exemption in respect of certain patent royalties, has been one of the driving factors behind investment by pharmaceutical multinationals, principally from the US, in the Irish economy.
The US Bureau of Economic Analysis said in 2008: “the large affiliate share of value-added for Ireland may be related to US MNCs’ geographic allocation of their income from intellectual property rights (such as patents). A sizable share of the investment in Ireland is in industries, such as pharmaceuticals and software engineering, where intellectual property plays a major role. Affiliates in Ireland conduct substantial R&D work, but it appears that a significant portion of the intellectual property held by these affiliates originated as a result of parent-company activity in the United States, and the property rights were subsequently relocated to Ireland where the tax regime for patent royalties is favorable. The royalty income, much of which is for use of the patents in other countries, is treated as arising from sales of services and is counted as part of the value added of the affiliates that hold them.”
The Wall Street Journal in a Nov 2005 article on Microsoft said: “A law firm’s office on a quiet downtown street here houses an obscure subsidiary of Microsoft Corp. that helps the computer giant
shave at least $500 million from its annual tax bill.
The four-year-old subsidiary, Round Island One Ltd., has a thin roster of employees but controls more than $16 billion in Microsoft assets.
Virtually unknown in Ireland, on paper it has quickly become one of the country’s biggest companies, with gross profits of nearly $9 billion in 2004.”
The companies were subsequently converted to unlimited status to prevent access to the data.
from associatedcontent.com (which discriminates against Christians):
How Thailand Discriminates Against Westerners: Discrimination is Alive and Well in Thailand
by Cassandra James
… In Thailand, Westerners (known as ‘farangs’) are discriminated against. Thais move to the USA and are given the same rights and opportunities as everyone else living in America. Unfortunately, in Thailand, the same is not true for Westerners. In jobs, in work permits, in obtaining mortgages and car loans, in buying houses, in buying apartments – Westerners are discriminated against. The Thai government maintains this happens to ‘protect Thais’. What they don’t seem to understand, however, is that all it actually does is persuade Westerners they’re not really wanted in Thailand. So Westerners usually move on to other countries, taking their Thailand-earned money with them. This, in itself, harms Thailand and its’ economy. If you’re a Westerner (farang) planning on coming to Thailand long-term, be aware you will be discriminated against in the following areas:
Jobs in Thailand – Most jobs in Thailand are blocked to Westerners (farangs) and to most other nationalities too. Westerners are not allowed to work in offices (unless they were hired as an expat worker), they’re not allowed to work in coffee shops (or any other shop for that matter), they’re not allowed to be receptionists, nurses, civil servants, drive a bus, or do any of the hundreds of thousands of jobs a Thai person could do in the US. Westerners are allowed to be English teachers, and they are allowed to operate their own business if they jump through the hundreds of hoops the Thai government demands of them. Overall, if you’re looking for a job with financial security, promotion opportunities, or the ability to do any job you want, then Thailand is not the country to come to.
Buying a House in Thailand – Westerners (farangs) are discriminated against when it comes to purchasing houses. Westerners, in fact, are not allowed to purchase houses. They can buy a house if they own a Thai company, but the house will be in the name of the company and this option comes with much more expenses than just a straight house purchase would. …
Buying a Condo in Thailand – If you do decide to buy a condo in Thailand, for a Westerner the condo has to be paid for in cash and the cash has to come from outside the country. This means that any of the money you have earned in Thailand, even if you’ve lived here for years, cannot be used to purchase a condominium. Not unless you send it out of the country and then bring it back again. In the 21st century, it makes a lot of sense, right?
Work Permits in Thailand – Unlike in the US where, if a Thai gets a green card they can work anywhere, in Thailand each work permit is job-specific. What that means is, if you can even get a work permit (and they are becoming increasingly difficult to get lately), you can only work at the job the work permit was given for. Should you want to work a part-time job you legally cannot (although many Westerners do). Should you want to change your job, you have to cancel the first work permit, leave Thailand within 7 days, then come back and apply for another work permit. It’s possible to get one work permit transferred into a second work permit, but very few people have managed it due to the time constraints. If you want a country where getting a work permit is easy, Japan usually offers 3-year work permits and you can work at almost any company with them. Work permits in Thailand are also only valid for one year so you spent a lot of time every year down at the immigration office signing paper work in order to renew your work permit. – More here.
Greece: The Farmers’ Strike
by Scott Lucas
A week-long blockade by Greek farmers, protesting the Government’s austerity measures in agriculture and demanding greater support for agricultural products, ended early Sunday.
The farmers had blocked the border with Bulgaria with tractors and reapers, refusing passage of vehicles except those with only passengers. “Cars and trucks carrying goods to destinations ranging from Poland to Italy were stranded on both sides of the border.”
During the protests, diplomatic tension rose with Bulgarian officials accused Greek authorities of not doing enough to stop the blockade. Bulgarian Prime Minister Boyko Borisov’s visit to the border was criticised by Greek media of acting “undiplomatic”. – More here.
Greek farmers scale back protest
by Elena Becatoros
Prime Minister George Papandreou got a measure of relief Friday in his fight to curb Greece’s runaway deficit, as protesting farmers scaled back highway blockades in opposition to the government’s austerity measures.
The prospect of strikes and protests have raised fears Papandreou won’t be able to push through an austerity plan aimed at dousing the country’s financial crisis, which has undermined the euro because markets fear Greece may default on its debts.
The worries have spread to other countries such as Portugal, where there is also resistance to cutbacks aimed at dousing a spreading European government debt crisis. Stock markets across Europe have sagged as a result.
Papandreou reportedly told Greek journalists traveling with him on a visit to India, where he is attending a sustainable development conference, that the euro had come under a sustained speculative attack that was targeting Greece, Spain and Portugal. He said speculators would have focused on another weak link in the 16-nation eurozone if it weren’t for Greece, Greek media traveling with him reported.
“The problem is European and international and we must take coordinated action with solidarity on this issue,” Greek media quoted Papandreou as saying Friday. – <a href="http://articles.sfgate.com/2010-02-03/business/17852729_1_prime-minister-george-papandreou-greece-greek-media"More here.
Greek MPs lash out at Germany over debt crisis
ATHENS, Feb 18 (Reuters) – Greek opposition lawmakers said on Thursday that Germans should pay reparations for their World War Two occupation of Greece before criticising the country over its yawning fiscal deficits.
“How does Germany have the cheek to denounce us over our finances when it has still not paid compensation for Greece’s war victims?” Margaritis Tzimas, of the main opposition New Democracy party, told parliament.
“There are still Greeks weeping for their lost brothers,” the conservative lawmaker said during a debate on a bill to clean up the country’s discredited statistical service.
Chancellor Angela Merkel’s government has so far deflected appeals to promise aid to heavily indebted Greece, despite fears that failure to help Athens could threaten the euro.
Merkel’s stance is backed by opinion polls showing that a vast majority of Germans oppose a bailout, and Germany’s biggest selling daily Bild has lambasted Greece as a nation of lazy cheats who should be “thrown out of the euro on their ear”. – More here.
Germans say euro zone may have to expel Greece: poll
BERLIN (Reuters) – A majority of Germans want debt-ridden Greece to be thrown out of the euro zone if necessary and more than two-thirds oppose handing Athens billions of euros in credit, a poll published on Sunday showed.
Vocal opposition to aid for Greece from members of Chancellor Angela Merkel’s coalition also grew at the weekend with several senior politicians expressing skepticism, especially as Germany’s own recovery is fragile.
The Emnid poll for Bild am Sonntag newspaper showed 53 percent of Germans asked said the European Union should, if necessary, expel Greece from the euro zone.
Athens has struggled to convince investors it is tackling its debt crisis and markets are nervous about a default.
EU leaders discussed the issue last week and offered words of support but failed to outline concrete steps, further unsettling markets. Euro zone finance ministers are expected to discuss Greece again on Monday and Tuesday.
Merkel has adopted a cautious stance on support, saying while Greece will not be left on its own, it is up to Athens to sort out its own problems.
The poll also showed 67 percent of Germans did not want Germany and other EU states to give billions of euros in credit to Greece.
“If we start now, where do we stop?” Michael Fuchs, deputy head of Merkel’s conservatives in parliament, told Welt am Sonntag newspaper. – More here.
Greek Farmers Strike Deal with Govt, Unblock Bulgarian Border/strong>
The Greek farmers are going to lift the blockade of the major Bulgaria-Greece border crossing, Kulata-Promahonas, after they reached an agreement with the government.
Representatives of the farmers in the Seres District in Northern Greece have stricken a deal with the Deputy Ministers of Agrarian Development and Economy during a meeting in the Greek city of Thessaloniki, the Bulgarian National Radio reported.
The Greek government has committed to developing a special program on the problems of agriculture in the Seres District.
The farmers expect to have monthly meetings with government representatives and give the cabinet time until November 2010 to realize its promises. If it fails, they plan to resume their protests.
Thus, about a month after they started blockading the crossings on the Bulgarian border with demands for higher agriculture prices, the Greek farmers are opening the major crossing point at Kulata-Promahonas.
The blockades of the other three border crossings between Bulgaria and Greece were lifted earlier as the farmers in the respective Greek districts reached agreements with the government.
The blockage of the Bulgarian-Greek border incurred severe losses to Bulgarian businesses including transport and tourism companies, and manufacturers. According to some estimates the Bulgarian economy was losing about EUR 3 M daily from the border blockade. – Source
Russia’s Gazprom starts making gas from coal
2/12/2010/2:29 P.M. IST
Russian energy giant Gazprom (GAZP.MM: Quote, Profile, Research) on Friday launched its first-ever project to extract gas from coal, making a foray into the nascent industry. The recently emerged technology of gas production from coal and shale is seen as a major threat for traditional gas suppliers such as Gazprom which lose customers in the biggest markets, including North America. The state-controlled company said it commissioned Taldinskoye field in the West Siberian region of Kemerovo with the blessing of Russian President Dmitry Medvedev and Gazprom’s Chief Executive Officer Alexei Miller. “Today, we made an important step towards creation of new sub-industry in the fuel-and-energy complex of Russia, which is methane extraction from the layers of coal,” Gazprom’s statement quoted Miller as saying. – More here.
Converting coal to gas is nothing new – the Nazis converted coal to gas and before they did it, Bostonites were doing so in the 1800’s and modern companies have done so before this Russian one: dakotagas.com | <a href=nd before they did it, Bostonites were doing so in the 1800’s and modern companies have done so before this Russian one: dakotagas.com | sasol.com | sasol.com | peabodyenergy.com | ze-gen.com More info here.
from afp.com via youtube.com:
James Bond-style bus makes splash in Scotland
A Dutch-built amphibious bus is being trialled near Glasgow as the answer to the city’s future transport needs.Video here.
China sells $34.2bn of US treasury bonds
Analysts fear Chinese government may be signalling a loss of faith in the American government’s economic policy
China sold $34bn (£21.5bn) worth of US government bonds in December, raising fears that Beijing is using its financial muscle to signal that it has lost confidence in American economic policy.
US treasury figures for the period ending in December 2009 show that, following the sale, China is no longer the largest overseas holder of US treasury bonds. Beijing ended the year sitting on $755.4bn worth of US government debt, compared to Japan’s $768.8bn.
Since the sub-prime crisis that began on Main Street USA grew to engulf the global economy, China’s leaders have repeatedly expressed concerns about US policy. December’s $34bn sell-off made only a tiny dent in Beijing’s total holdings of US assets, which amount to well over $1tn when stakes in American companies, as well as treasury bills, are taken into account.
But the news intensified concerns about China’s appetite for bankrolling ever-widening American deficits. Premier Wen Jiabao told reporters last year: “We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I’m a little bit worried.”
When Timothy Geithner, the US treasury secretary, visited China last summer, he sought to reassure his hosts, using a speech to promise that “the United States is committed to a strong and stable international financial system. The Obama administration fully recognises that the United States has a special responsibility to play in this regard, and we fully appreciate that exercising this special responsibility begins at home.”
But Allan Meltzer, an economics professor at Carnegie Mellon University, said China’s bond sales should be a wake-up call for Washington. “The Chinese are worried that we have unsustainable debt levels, and we do not have a policy for dealing with it,” he said.
China’s sales contributed to a record drop in foreign holdings of short-term treasury bills in December: in all, net overseas holdings of short-term bills fell by $53bn. The previous record was $44.5bn in April last year.
However, there was little sign that world investors as a whole have lost their confidence in the dollar as the safe-haven currency of choice: overall, the US saw a net inflow of $60.9bn, as investors more than offset sales of short-term debt by buying longer-term securities and shares.
Japan, Britain, Luxembourg and Hong Kong made sizeable purchases, with the UK buying $24.9bn of US government debt.
Some analysts warned that it would be a mistake to read too much into one month’s data, particularly since the current crisis in the eurozone makes investors’ main alternative to the dollar look particularly unattractive. – More here .
China diminishes US Treasury holdings
by Robert M Cutler
MONTREAL – Headline stories have announced that China is no longer the largest holder of United States Treasury holdings. As Bloomberg News noted, for example, “China’s Treasury holdings peaked at $801.5 billion in May, and net sales in November and December were the first consecutive months of reductions since late 2007.”
However, Chinese concern over US Treasury holdings is hardly new. Nine months ago, Premier Wen Jiabao publicly expressed worry over the safety of the country’s China’s Treasury holdings, and other officials have continued to air concerns about the increasing US fiscal deficit.
It was known some time ago that China had at least temporarily stopped buying. Chinese financial officials are now pointing out the difficulty of any foreign purchaser buying US debt obligations in view of the insufficient number of dollars circulating outside the US itself. While this is not a real problem at present, it may become one.
The governor of China’s central bank had last year endorsed the idea of a new global currency to reduce reliance on the dollar. Yet Chinese officials have made it quite clear that they would not wish for the yuan to be a reserve currency, even if were convertible and freely floating, neither of which it is at present.
As a tactic against an arch-competitor, this suggestion somewhat resembles a superficially rather different situation in 1950s. At that time, Mao Zedong (already in ideological conflict with the Soviet Union) insisted to Soviet Communist Party chief Nikita Khruschchev, who was inclined towards “polycentrism” within the “world communist movement”, that the Soviet Union should remain officially at its doctrinal head: leading the latter acerbically to retort, “What do you want a head for, to cut it off?” But of course China was not holding Soviet foreign debt obligations at the time.
Yet it is by now clear, or should be, that the euro is not really as good a contender for reserve currency status as might have been thought even rather recently. Indeed, recent events have all but eliminated its candidacy to replace the dollar as a reserve currency. The euro has even been called the “fiat currency” par excellence in that there is not even a government to backstop it.
European finance ministers do not appear to foresee, or they are shading their eyes from, further tests of confidence in the debt market that are certain to come, starting with Greece’s need to refinance over $22 billion in April and May. Luxembourg’s Prime Minister Jean-Claude Juncker publicly states that the lack of confidence in the euro by the markets is “irrational”. But if that is so, then how is their confidence in the euro any less so? – More here
US new home sales tumbled 11.2% in January to the lowest since at least 1963
by Finfacts Team
Sales of new single-family houses in January 2010 were at a seasonally adjusted annual rate of 309,000, according to estimates released jointly today by the US Census Bureau and the Department of Housing and Urban Development. This is 11.2% below the revised December rate of 348,000 and is 6.1 percent below the January 2009 estimate of 329,000 – – the lowest since records in the current series began in 1963.
Year over year, sales were 6.1% down from January 2009 and January’s fall was the the third drop in a row. Sales in December dipped 3.9%, revised from an originally reported 7.6% decline. Three of the four US regions showed drops in sales led by a 35% plunge in the Northeast. Purchases dipped 12% the West and 9.5% the South. They rose 2.1% in the Midwest.
The median sales price of new houses sold in January 2010 was $203,500; the average sales price was $254,500. The seasonally adjusted estimate of new houses for sale at the end of January was 234,000. This represents a supply of 9.1 months at the current sales rate.
In July 2005, purchases of new homes were at an all-time high of 1.39 million.
The New York Times recently reported that after three years of plunging real estate values, after the bailouts of the bankers and the revival of their million-dollar bonuses, after the Obama administration’s loan modification plan raised the expectations of many but satisfied only a few, a large group of distressed homeowners is wondering the same thing.
New research suggests that when a home’s value falls below 75% of the amount owed on the mortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying.
In a situation without precedent in the modern era, millions of Americans are in this bleak position. Whether, or how, to help them is one of the biggest questions the Obama administration confronts as it seeks a housing policy that would contribute to the economic recovery.
Most US mortgages only have recourse to the security of the property. – Source.
by James MacPherson
American Indian reservation reaping oil benefits
NEW TOWN, N.D. – An oil boom on American Indian land has brought jobs, millions of dollars and hope to long-impoverished tribal members who have struggled for more than a century on the million-acre Fort Berthold Indian Reservation.
In little more than a year, oil companies have put dozens of money-producing rigs on remote rolling prairie and sprawling badlands that are home to small cattle ranches and scattered settlements of modular housing. Although other tribes around the nation have oil interests, industry officials said none has likely experienced a recent windfall of this scale.
The reservation is occupied by the Mandan, Hidatsa and Arikara tribes, known as the Three Affiliated Tribes, who were placed in west-central North Dakota by the federal government in the 1800s — long before anyone knew of the oil.
“If they knew there was billions of barrels of oil here, they would never have put us here,” said Spencer Wilkinson Jr., general manager of the Four Bears Casino on the reservation.
“There is probably more opportunity here than people have had in their lifetimes,” said Marcus Levings, chairman of the Three Affiliated Tribes. Roads are now sometimes clogged with traffic, including Hummers and expensive pickup trucks. The local casino is buzzing with free-spending locals. And tribal members who had moved away to find work are now moving back for the abundant good-paying jobs.
Tribal officials say the oil has helped right a wrong done to the tribes in the 1950s, when more than a tenth of the reservation was flooded by the federal government to create Lake Sakakawea, a 180-mile-long reservoir.
Oil companies are now drilling beneath the big lake, using an advanced horizontal drill technique. Recently completed regulatory paperwork removed the last obstacle.
Since the boom began, lease payments of more than $179 million have been paid to the tribe and its members on about half of the reservation land, tribal record show. Millions of dollars more in royalties and tax revenue are also rolling in.
Levings said the tribe will use its money to pay off debt, and bankroll such things as roads, health care and law enforcement.
The reservation contains portions of six counties, covering more than 1,500 square miles. It lies atop a portion the oil-rich Bakken shale formation, which the U.S. Geological Survey estimates holds 4.3 billion barrels of oil that can be recovered using current technology. The agency said the Bakken was the largest oil deposit it has ever assessed.
In addition to the oil money, the tribes get $60 million to $70 million in federal aid annually from the federal government.
“This is an opportunity for us to help ourselves as much as we get help,” Levings said. About 4,500 of the approximately 12,000 tribal members live on the reservation, one of about 300 in the United States.
State demographer Richard Rathge said 28 percent of people on the reservation were living in poverty in 2000, the latest figures available. More than 40 percent did not have a job at that time.
The opening of the casino in the 1990s added about 200 jobs. But oil’s impact has been huge. “Anybody who wants to work can work,” said Levings, with jobs available on rigs and in support industries such as oil supplies and trucking.
The reservation was the last area to be targeted by companies in the state’s oil patch because of onerous federal requirements. But a 2008 tax agreement standardized the rules for oil drilling.
Dozens of wells have been drilled and more than 500 could be operating within five years.
Lovina Fox hopes at least one winds up on her land near Mandaree, a town of about 500 on the reservation. – More here.
I hope the oil drilling doesn’t wreck the environment of the reservations, but if it does hopefully the Natives will find better places to live.
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