Friday, November 7, 2008

Roundup: November 7


GM and Ford released abysmal Q3 earnings, with GM suspending its merger talks with Chrysler. Chrysler may be broken up and sold off brand by brand if a deal isn't struck soon. GM's press release speaks adequately to the gravity of the automakers' situation: "Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business. Looking into the first two quarters of 2009, even with its planned actions, the company's estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve, it receives substantial proceeds from asset sales, takes more aggressive working capital initiatives, gains access to capital markets and other private sources of funding, receives government funding under one or more current or future programs, or some combination of the foregoing."

US nonfarm payrolls were down 240k in October, with September payrolls revised to -284k from -159k and the unemployment rate at 6.5%. EconomPic has great visualization both of the core data and drilling down a little.

London Banker speculates on recent Fed moves and the expansion of the Fed's balance sheet -- saying that the apparently counterproductive policy of paying interest on reserves equal to the Fed Funds target rate (which other commentators have pointed out destroys the incentive for interbank lending by making it more attractive to hold reserves at the Fed than lend them to other banks -- and which some have said is just another surreptitious recapitalization of the banks without taxpayer upside) may be designed to lure reserves into the dollar "in contemplation of future insolvencies" or as a strategy of "pre-emptively combating dollar capital flight."

China has injected $19bn of capital into the Agricultural Bank of China in preparation for a floatation of its shares. Chinese bank recapitalization has so far gone on mostly sub rosa -- because of the byzantine complexity of the state-run banking system, because there is little public accountability for its functioning, but also because of China's vast foreign reserves and room to maneuver -- but it has not been insubstantial.

Alistair Darling is demanding that UK banks pass on the 1.5% BOE rate cut to consumers and has summoned bank heads to a meeting at which he presumably shook his fist and used harsh language.

Bloomberg says the DTCC data on CDS outstanding obscures the actual risk posed by CDS exposure, saying over the counter contracts written on CDOs are excluded from the aggregates.

The Rogue Economist looks at calls for Euro-margin countries to join EMU and a working paper from Marcel Fratzscher and Livio Stracca at the ECB highlights the political economy effects of EMU on "EMU-periphery" nations.

Obama has convened an economic advisory board, including Warren Buffett, Robert Rubin, Lawrence Summers, Paul Volcker, and Eric Schmidt. The first press conference was anodyne -- except for hard-hitting questions about the kids' promised dog. A $100bn stimulus plan is reportedly in the works -- the president-elect said if it does not pass in the lame duck session it will be his first priority once in office.


Obama's victory may be shifting the tenor of Iraqi politics. All of sudden, the SOFA looks more likely to pass.

Sokwanele runs a must-read summary of violations of the power-sharing agreement between Zanu-PF and the MDC over the last month and a half. Increases in the cash withdrawal limit will not solve Zimbabwe's currency crises; only political reform will bring an end to hyperinflation. Mines in the country are liquidating equipment to pay operational expenses and wages, as the Zimbabwe Central Bank cannot provide foreign exchange in exchange for their gold. Mining accounts for 40% of Zimbabwe's foreign revenues. Zanu-PF have accused the MDC of plotting the downfall of the country and encouraging "banditry," an unencouraging sign for this weekend's power-sharing talks -- in which Jacob Zuma said the SADC must "force" the two parties to agreement. There are reports of MDC activists being detained by Zanu-PF, perhaps because the ruling party is preparing claims that there is a coup in the works. MDC has released a statement on Zanu-PF attacks on MDC supporters, alleging that a Zanu-PF cadre, Amos Midzi, has set up torture bases in Harare. They say the Zanu-PF is "bankrupt of any genuine solution for Zimbabwe other than hunger and violence." The Zimbabwe Independent comments on the history of political agreements in the country.

Oleg Kozlovsky discusses the constitutional amendment proposed yesterday by President Medvedev. Garry Kasparov and Boris Nemtsov have announced a movement to be called "Solidarity" that will try to stop the amendment, which would extend the Russian presidential term to 6 years. President-elect Obama seems not to have responded to Medvedev's telegram of congratulations on his election; Obama wants to seem strong, and being gracious after Medvedev's Kaliningrad address is difficult. Information Dissemination says that the Russian presidential term discussion and the threats to put missiles in Kaliningrad are sideshows: Russia is issuing passports to Ukrainian citizens in the Crimea.

Mark Newman, who teaches on networks at UMich, has updated his famous population cartograms of the 2004 election to show the 2008 electoral results. Other map evidence is being deployed to suggest that the "Poverty Belt" voted for McCain. Newsweek's series on the Obama and McCain campaigns is full of dramatic details.

The NYT has finally figured out that Georgia's claims about the war with Russia are likely fabricated.

Foreign Policy discusses Chief of Staff Rahm Emanuel's potential influence on negotiations with Israel and Palestine.

Venezuela offered its congratulations to President-elect Obama. It also nationalized its largest gold mine.

Obama is playing well in the French banlieues.


Wen Jiabao called for rich nations to commit to spending at least 1% of GDP to fight global warming and its effects on the Third World. This is a strong and unprecedented statement from the Chinese government, perhaps a sign that the new administration in the U.S. will open conversation about climate change.

Speculation on the future head of the EPA is rampant, with the current chair of the California Air Resources Board the favorite. In a letter sent last month, President-elect Obama vowed to protect the scientific integrity of the EPA, which has been under attack from the current administration over climate change, major air pollutants, endangered species, the Clean Water Act, and elsewhere.

Stephen Harper is calling for a joint US-Canada pact over climate change which would exempt the oil sands from any new rules on carbon emissions -- Harper has already spoken with Obama and is said to be pursuing a closer relationship. Alberta wants in on any climate negotiations.

BP has halted plans for development of wind power in Europe and Asia, intending to shift its attention (some $8bn) to U.S.-based projects. This is a great sign of the increased investment and commitment to renewables that may follow the exit of Bush and Stephen Johnson from power. Vestas, the major wind turbine producer, is also rubbing its proverbial hands at the prospect of a major U.S. market for renewables.

GM may cut the Chevy Volt program, the first PHEV (Plug-in Hybrid Electric Vehicle) available to consumers, in cost-cutting moves to be announced tomorrow. This would undercut the supposed rationale for last month's $25bn loan from the Federal government, which was to enable Detroit to modernize its plants and switch its lineup to more fuel-efficient cars. It's a sign of exactly how badly managed this company is; generations of short-sighted moves, forsaking development for short-term gain, combined with consistent mendacity and infinite greed, have brought GM to where it is. There is little prospect it will change: let it die.

This major paper in Science details the history of the monsoon for the past two hundred years, arriving at crucial conclusions for the linkage of the monsoon, on which billions of people survive, to climatic variations.

Al Gore's green group is urging Obama to work for the creation of a unified US power grid.

NYC Mayor Mike Bloomberg proposed a $0.06 plastic bag tax in the city.

China Dialogue looks at the ecological and economic consequences of farming shrimp in Vietnam.

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