Tuesday, December 9, 2008

Roundup: December 9


The Bank of Canada has cut rates by 75bp. Friday saw disastrous employment data; the Canadian parliament is suspended until January as PM Stephen Harper tries to assemble a new budget that will allow him to avoid a vote of no confidence. Hungary has also cut rates, by 50bp.

The Senate has confirmed Neil Barofsky as the special inspector general of the TARP program; the Washington Post looks at the Administration's delay in nominating an inspector general, the anonymous opposition of a single Republican senator to his confirmation, and the uncertainty over the reach of his powers as the TARP funds are used for purposes other than those specified in the initial legislation. Neil Kashkari, Czar of All the Markets, gave a mealymouthed speech on oversight and measuring the results of the TARP program. As the global financial system has not collapsed, he judges the program a success. Robert Reich warns of a "populist backlash."

The US auctioned 4-week T-bills at 0.000% with 4.2 times as many bids as bills were sold today, revealing a market in which yields are nothing and there is a massive flight to safety and liquidity. In other words, the velocity of money is zero. CDS on five-year US sovereign debt are bid at 60bps, well over the advanced industrial nations and the strongest corporates. The IMF's Public Financial Management Blog takes a look at the extent of governments' obligations to recapitalize their central banks.

The press reports that the Bush administration and congressional Democrats have come to an agreement in principle on $15bn for US carmakers, to include a "czar" for automakers and warrants to be issued to the government for at least 20% of the loan value. The WSJ has the draft terms. Steven Davidoff looks at the draft bill and asks: is it even possible for someone to be good enough to be auto czar? The coverage at Angry Bear is, well, angry, but worth reading. Among the questions not being asked much elsewhere: Is it really plausible that the failures of every American car company are because their execs are fools -- or is there a larger, structural explanation for their inability to compete?

The Bank of International Settlements says worldwide cross-border loans fell by $1.1tr in H1 of 2008, with foreign lending by UK banks down $884bn.

Credit Suisse are forecasting 8.1mn US houses in foreclosure by the end of 2012, or 16% of all households with mortgages. 53% of modified US mortgages go back into delinquency within six months. Krugman is warning of a "lost decade" for the world. (His Nobel lecture is up.)

UK manufacturing production was down 1.4% MoM and 4.9% YoY, much worse than expected and raising fears Q4 GDP will contract even more sharply. Housing sales in the UK were at a 30-year low, said the Royal Institute of Chartered Surveyors. Japan revised its Q3 GDP numbers down to -0.5% QoQ (from the preliminary reading of -0.1%).
Sony is to cut 16k jobs, including 8k full-time workers, cut capex, and close factories; Dow Chemical is to lay off 5k. Fan Gang of the People's Bank of China said export growth in November will be negative and industrial growth will read only about 5%.

S&P has downgraded Russia's credit rating from BBB+ to BBB, with negative outlook, after "rapid depletion" of the country's forex reserves and in expectation that a low oil price will force the nation to run a current account deficit and deplete its reserves further to shore up the banking system.

Edward Glaeser says unemployment is overwhelmingly concentrated among the low-educated and suggests education vouchers be part of an Obama bailout.

The Chicago Tribune has filed for bankruptcy, it reports.

Merrill Lynch and Morgan Stanley will not be paying bonuses to their top executives this year.


Eid Mubarak.

Today's must read: Asif Ali Zardari writes in the NYT, saying terrorist strikes are directed not only at India, but at Pakistan's government and the possibility of peace on the subcontinent. Pakistani officials have said they will not hand the eight militants they have arrested over to India. Still, Congress had a good showing in state elections in Delhi, Rajasthan, and Mizoram, giving some pause to those who thought the Bombay attacks would herald a sharp swing to the right, and towards the Hindu nationalist BJP, in Indian politics. Judah Grunstein points out more people were probably killed by car accidents in India on the day of the attacks than by the attacks themselves, and suggests that restraint is going to need to become a key part of a rational strategy of response to terrorist attacks: this kind of thing can't be allowed to start nuclear wars. The Dawn points out US complicity -- above all, unquestioning support for Pervez Musharraf -- in building the conditions under which Jaish-e-Mohammad and Lashkar-e-Taiba were able to build up to the capacity to launch attacks like these.

Presidents Bush and Sarkozy have called for the ouster of Zimbabwe President Robert Mugabe. Zimbabwe's Information Minister responded with the following: "After squeezing and strangling the country with sanctions and contaminating it with cholera and anthrax, the West is seeking to use the window of opportunity provided by the disaster to justify military intervention." A ranting fool at the Washington Post is doing his best to build rational grounds for Zanu-PF paranoia and lies. Inkatha Freedom's Mangosuthu Buthelezi says it is high time pontificating about "African solutions to African problems" come to an end and for African political parties to call a spade a spade. Meanwhile, the coming rains may lead to more sewage running into open wells and exacerbate the cholera epidemic.

A spat over an image of an old Scorpions album cover on Wikipedia -- alleged by some to be child pornography -- has exposed what one might call "Hadrian's Firewall," the British government's filtering of most internet traffic through a transparent proxy.

Illinois Gov. Rod Blagojevich threw his weight behind the Chicago workers currently occupying the Republic Windows and Doors factory in protest over $1.5mn in wages they are owed by the bankrupt company, denied short-term financing by its bank -- Bank of America. Blagojevich told state agencies to stop doing business with Bank of America until it offers credit to Republic. Unfortunately for the Governor, he was arrested today on federal corruption charges of shocking, novelistic proportions: the District Attorney alleges, inter alia, that Blagojevich attempted to sell or trade Obama's vacant Senate seat for favors (perhaps an ambassadorship, or cushy sinecures). (And there is speculation Tribune was offered state funds in exchange for firing editorial writers critical of Blagojevich.) Obama has denied knowledge of the horsetrading.

Global Guerillas asks apropos of the rioting in Greece how fast a government's legitimacy can evaporate.

Falling metals and minerals prices are eliminating hundreds of thousands of jobs in the DRC. The relations between mining companies, the countless tragedies of the Congo, and the developed world have always been murky and often evil, and the links between the three can destabilize this major sector of the economy extremely quickly.

James Fallows writes for the Atlantic on Gao Xiqing, president of the China Investment Coporation, who says: "Be nice to the countries that lend you money."

General Eric Shinseki is likely to lead the Department of Veterans' Affairs under Obama: "karmic justice" for the way he was mistreated by Donald Rumsfeld.

Five of the 9/11 plotters have withdrawn their offer to plead guilty after a military judge suggested the plea might make it difficult for them to be sentenced to death, as they desire.

Five Blackwater contractors have been charged with 14 counts of manslaughter for the 2007 shooting of unarmed Iraqi civilians.

The LA Times continues its superlative coverage of the Mexican drug war.

Likud has nominated a hard-line slate for the Israeli parliamentary elections in February, perhaps overplaying its hand and setting Netanyahu back in his campaign against Kadima's Tzipi Livni.

Delays in negotiations between Washington and Pyongyang are putting the World Food Program's operations in North Korea at risk. More than a third of the population of that country may need food aid next year.

New American troops deployed in Afghanistan next year will mostly be stationed near Kabul, pointing to the increasingly difficult position of the NATO beachhead in that country.

Alexy II, Patriarch of the Russian Orthodox Church, died yesterday of heart failure.


A major infrastructure project that would increase the amount of water brought to Beijing from the Northern Plain originally scheduled to be completed by 2008 has had its completion date put off indefinitely. The causes, a combination of cost, pollution, and shortage, are common throughout China and support a growing thesis that Chinese industrial growth is unsustainable without improved ecological practices regardless of the world economic environment.

Chevron's economic liability for environmental damage in Ecuador amounts to about $27bn, after using an area of the Amazon River basin the size of Rhode Island as a toxic waste dump.

Dioxin has been found in Irish cattle as well as pork, threatening a second round of massive recalls and the destabilization of the entire agricultural sector in Ireland.

U.S. sales of hybrid cars fell by 50% in November, as the recession reduced the accesibility of the premium-priced cars and plummeting gas prices reduced the economic incentive to to save fuel.

Environmental Defense published a report claiming to show that 11 million liters of toxic water leaks out every day from tailings ponds in the Canadian tar sands. For more background, please see our Building Blocks: Tar Sands post.

A new EU report calls for the phasing out of incandescent bulbs within the Union by 2012, saving about 12 million tons of CO2 annually by the end of the transition period and around $12bn in consumer energy costs.

Andrew Revkin at DotEarth has a post about green jobs worth reading only for some fantastic graphs showing the distribution of federal R&D spending over time.

A federal court has temporarily blocked a plan to auction a portion of the landing slots at NYC-area airports; the auctions would reduce air pollution, delays, and congestion while increasing ticket prices marginally.

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