Saturday, August 13, 2011
Friday, August 12, 2011
How did the world get so fixated on GDP?
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GDP growth remains central to economic policy, yet life in flatlining Japan remains rather better than it does elsewhere
By James Meadway guardian.co.uk,
The economic news grows daily more grim. Across the developed world, once-optimistic forecasts for growth are being revised downwards. Financial markets, sensing trouble ahead, are in a tailspin. Debates over the future centre on a single metric – that of GDP.
Gross domestic product was not always with us. Created in the 1930s, and despite the warnings of its pioneer, it rapidly assumed centre stage in economic policymaking.
Growth could now be measured targeted through policy. For the right, it would be a simple gauge of national economic virility. For the left, it offered the more subtle appeal of an end to disputes over the distribution of wealth.
By focusing not on the size of the slices, but on the size of the pie, an interminable conflict between capital and labour could seemingly be resolved. The case was put most forcefully in the Labour politician Anthony Crosland's influential book The Future of Socialism. Growth would deliver the public goods – secure employment and a functioning welfare state.
That consensus has now held for 50 years or more. Yet mounting evidence suggests that GDP growth does not register many of the things people actually care about. It is a record of some aspects of economic life, but it fails to capture wider social needs and demands. Health, quality of life and inequality play no part in its measurement.
Rising, falling GDP
There is a growing consensus that rising GDP since the mid-1970s in the US and the UK has become disconnected from reported measures of wellbeing. We know that falling GDP produces misery, as unemployment rises and incomes collapse. But the reverse does not apply. Higher output does not necessarily mean happier people.
Even growth's blunt promise of material prosperity is failing. GDP in the UK increased by 11% from 2003 to 2008. Over the same period, median real incomes stagnated. The economy boomed, but few shared in its rewards. Living standards were maintained through unsustainable debt. As we crawl back into recession, the majority will find those rewards still harder to come by – even if a minority continue to grow fat.
And environmental damage has no impact on GDP's progress. A few years of apparent prosperity can be bought at immense future cost. The tiny Pacific island of Nauru once enjoyed the highest per capita living standards of anywhere in the world. Its plentiful supplies of phosphate rock, in demand for fertiliser, had been strip-mined since the 1900s. But as the phosphate dwindled, so did incomes. Nauru has been reduced to providing a detention centre in return for Australian aid money.
Environmental limits can and will bite. From declining fish stocks to the overwhelming threat of climate change, there are physical limits to our economic activities. GDP registers none of this.
Lessons from Japan
We need to change how we think about the economy. Japan has now laboured through nearly two decades of flatlining GDP. A miracle of growth transformed it from defeated power in 1945 to the world's second-largest economy. Then, in the 1990s, the growth stopped, never to convincingly return. Yet living standards in Japan are among the highest in the world. Unemployment is half that of the US; life expectancy five years longer. Average real incomes are the same as Germany's, and inequality lower. Japan's environmental impact, particularly through the import of raw materials, remains high. But it is not simply the economic basket case it is often presented as.
The old consensus needs breaking. We need to fixate less on growth alone.
The government recognises this much, aiming to create a national measure of wellbeing. But this accounting exercise is completely disconnected from economic practice. The coalition has a near-mystical belief in the power of the free market to deliver growth. It believes the national debt should be run down, clearing the way for a return to prosperity as the economy "rebalances". Purposeful government intervention is not needed.
The coalition's lack of success is a tribute to its lack of strategy. Rebalancing the economy away from debt-fuelled consumption and bloated financial services is a fine aim. It needs policies to match. Austerity does not just blight individual lives – Ireland has shown how it cripples whole economies as demand drains out of the system. So public spending, the bedrock of an economy in recession, must be held steady.
A genuine rebalancing, however, cannot come from maintaining status quo. The thinktank New Economics Foundation has begun an ambitious modelling exercise that seeks to show how a low-carbon economy can also deliver social justice.
Action, though, is needed now. Economic policy must be broadened towards meaningful goals – creating secure, well-paid jobs; minimising environmental damage. Where private investment is failing, with business expenditure sliding again last quarter, government should be prepared to step in.
A new industrial strategy could match social objectives with credible interventions, supporting the industries of the future. Or we will be left to chase a statistical chimera.
By James Meadway guardian.co.uk,
Mining on the Pacific island of Nauru shows how 'a few years of apparent prosperity can be bought at immense future cost'. Photograph: Torsten Blackwood/AFP/Getty Images
The economic news grows daily more grim. Across the developed world, once-optimistic forecasts for growth are being revised downwards. Financial markets, sensing trouble ahead, are in a tailspin. Debates over the future centre on a single metric – that of GDP.
Gross domestic product was not always with us. Created in the 1930s, and despite the warnings of its pioneer, it rapidly assumed centre stage in economic policymaking.
Growth could now be measured targeted through policy. For the right, it would be a simple gauge of national economic virility. For the left, it offered the more subtle appeal of an end to disputes over the distribution of wealth.
By focusing not on the size of the slices, but on the size of the pie, an interminable conflict between capital and labour could seemingly be resolved. The case was put most forcefully in the Labour politician Anthony Crosland's influential book The Future of Socialism. Growth would deliver the public goods – secure employment and a functioning welfare state.
That consensus has now held for 50 years or more. Yet mounting evidence suggests that GDP growth does not register many of the things people actually care about. It is a record of some aspects of economic life, but it fails to capture wider social needs and demands. Health, quality of life and inequality play no part in its measurement.
Rising, falling GDP
There is a growing consensus that rising GDP since the mid-1970s in the US and the UK has become disconnected from reported measures of wellbeing. We know that falling GDP produces misery, as unemployment rises and incomes collapse. But the reverse does not apply. Higher output does not necessarily mean happier people.
Even growth's blunt promise of material prosperity is failing. GDP in the UK increased by 11% from 2003 to 2008. Over the same period, median real incomes stagnated. The economy boomed, but few shared in its rewards. Living standards were maintained through unsustainable debt. As we crawl back into recession, the majority will find those rewards still harder to come by – even if a minority continue to grow fat.
And environmental damage has no impact on GDP's progress. A few years of apparent prosperity can be bought at immense future cost. The tiny Pacific island of Nauru once enjoyed the highest per capita living standards of anywhere in the world. Its plentiful supplies of phosphate rock, in demand for fertiliser, had been strip-mined since the 1900s. But as the phosphate dwindled, so did incomes. Nauru has been reduced to providing a detention centre in return for Australian aid money.
Environmental limits can and will bite. From declining fish stocks to the overwhelming threat of climate change, there are physical limits to our economic activities. GDP registers none of this.
Lessons from Japan
We need to change how we think about the economy. Japan has now laboured through nearly two decades of flatlining GDP. A miracle of growth transformed it from defeated power in 1945 to the world's second-largest economy. Then, in the 1990s, the growth stopped, never to convincingly return. Yet living standards in Japan are among the highest in the world. Unemployment is half that of the US; life expectancy five years longer. Average real incomes are the same as Germany's, and inequality lower. Japan's environmental impact, particularly through the import of raw materials, remains high. But it is not simply the economic basket case it is often presented as.
The old consensus needs breaking. We need to fixate less on growth alone.
The government recognises this much, aiming to create a national measure of wellbeing. But this accounting exercise is completely disconnected from economic practice. The coalition has a near-mystical belief in the power of the free market to deliver growth. It believes the national debt should be run down, clearing the way for a return to prosperity as the economy "rebalances". Purposeful government intervention is not needed.
The coalition's lack of success is a tribute to its lack of strategy. Rebalancing the economy away from debt-fuelled consumption and bloated financial services is a fine aim. It needs policies to match. Austerity does not just blight individual lives – Ireland has shown how it cripples whole economies as demand drains out of the system. So public spending, the bedrock of an economy in recession, must be held steady.
A genuine rebalancing, however, cannot come from maintaining status quo. The thinktank New Economics Foundation has begun an ambitious modelling exercise that seeks to show how a low-carbon economy can also deliver social justice.
Action, though, is needed now. Economic policy must be broadened towards meaningful goals – creating secure, well-paid jobs; minimising environmental damage. Where private investment is failing, with business expenditure sliding again last quarter, government should be prepared to step in.
A new industrial strategy could match social objectives with credible interventions, supporting the industries of the future. Or we will be left to chase a statistical chimera.
Anarchy in UK - London Riots: Malaysian student mugged...
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Malaysian student mugged during riots to stay in UK
Ashraf Haziq, the Malaysian accountancy student who was filmed being mugged by rioters while sitting on the ground injured, says he wants to stay in the UK to finish his studies.
Haziq, 20, from Kuala Lumpur, said he felt sorry for his attackers. He was left with a broken jaw in a now notorious attack in Barking, east London on Monday - but said he still felt 'great' about Britain
Go to http://www.guardian.co.uk/uk/
Haziq, 20, from Kuala Lumpur, said he felt sorry for his attackers. He was left with a broken jaw in a now notorious attack in Barking, east London on Monday - but said he still felt 'great' about Britain
Go to http://www.guardian.co.uk/uk/
British riots: Millions feel for Asyraf
By RAHIMY RAHIM rahimyr@thestar.com.my
PETALING JAYA: The scene of rioters in London assaulting and robbing Malaysian student Mohd Asyraf Haziq Rossli has touched the hearts of millions around the world after a video clip of it went viral on the Internet.The clip has become an iconic symbol of the senseless violence in Britain, with even its Prime Minister David Cameron singling out the incident.
The video titled “London Riots-scum steal from injured boy” was ranked seventh most viewed video on YouTube this week with more than 2.9 million viewers worldwide.
Facebook fan pages were also created with “Support for student Mohd Asyraf Haziq, robbed while bleeding heavily,” given 249 likes while “Get Well Soon Asyraf Haziq,” got 990 likes until yesterday.
Mugged in London: Umno Information chief Datuk Ahmad Maslan pointing out the still images of Mohd Asyraf being robbed while the latter’s mother, father and younger brother look on yesterday. Jamie Cowen, a former worker of Britain-based Save the Children, has launched an Internet campaign to help Mohd Asyraf.
Based on Cowen's Twitter account, the campaign has so far raised some 4,000 (about RM19,350) with contributions still pouring in.
“Over 1,200 people have donated,” he said, adding that among the donors was a British bicycle firm pledging Mohd Asyraf a new one since his was stolen.
Among other donations were two first-class tickets by a British railway company for Mohd Asyraf to travel anywhere and free dental service from dentist Martin Nakisa in Britain.
The website “Let's Do Something Nice For Ashraf” (www.somethingniceforashraf.tumblr.com) also received thousands of supporters within hours of its launch on Wednesday.
In a video shot by his friend, Mohd Asyraf said from his bed in the Royal London Hospital that he was cycling with another student to visit a friend when a gang of about 20 headed towards him.
“I think some had knives. The youngest looked like he was of primary school age. They came in a group, they didn't attack at first. They wanted the bicycle.
“And then there was someone who put a hand in my pocket to take my phone. He pulled the bicycle and I don't know what happened. I fell and my mouth was bleeding. So, maybe I got hit,” Mohd Asyraf said in Malay.
“The people fled the scene. Others then approached me and said they wanted to help, but instead those behind me just took stuff from my backpack,” he added.
Asyraf’s parents leaving for England today
KUALA LUMPUR: The parents of the Malaysian student attacked and robbed by rioters in London will fly to England today.Umno Information chief Datuk Ahmad Maslan said it would sponsor three flight tickets worth about RM20,000 for Mohd Asyraf Haziq Rossli’s parents and his younger brother.
“The London Umno Club will meet them at the airport and will arrange accommodation and food expenses during the stay,” he said after meeting the family at Putra World Trade Centre yesterday.
Mohd Asyraf’s mother Maznah Abu Mansoor, 47, said she was relieved that Umno had stepped forward to help.
“Before this, we were on our own, asking for help from friends and family,” said the teacher.
She added that Wisma Putra had contacted her at 5am yesterday to say that her son’s jaw corrective surgery had been successful and that he was doing well.
He left the hospital yesterday.
Maznah said she had also accepted Mohd Asyraf’s wish to continue studying there although she was shocked by the assault.
“We were stunned when we watched the YouTube video and saw him bleeding,” said Maznah, who will be in London with her husband, ex-army officer Rossli Harun, 49, and her youngest son Muhammad Fitri, eight, for at least a week.
In Kota Kinabalu, Foreign Minister Datuk Anifah Aman said Kaplan University, where Mohd Asyraf is studying, had also offered to fly his parents to London, adding that the offer was made when its officials met Malaysian officials on Wednesday.
In Kajang, Home Minister Datuk Seri Hishammuddin Hussein said there were lessons to be learnt from the riots, adding that Malaysians should be grateful.
He said it was important to ensure there were no such riots due to the country’s multi-racial and multi-religious society.
“It is an issue which we should not take lightly,” Hishammuddin said, adding that it was up to the public to decide if their perception of the police, who came under fire for Bersih 2.0, had changed due to events in Britain.
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Anarchy in the UK - London Riots Sparked by Police Beating, Poverty, Ethnic differences...
Thursday, August 11, 2011
China Needs Urgent Review of U.S. Debt, Financial News Says
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By Bloomberg News (Updates with central bank governor’s comment in third paragraph.)
Aug. 11 (Bloomberg) -- China should urgently assess risks from being the main foreign investor in U.S. debt and diversify its foreign-currency reserves more quickly, the Financial News reported today, citing Xia Bin, a central bank adviser.
Image via Wikipedia In the short term, China can adjust the structure of the reserves, the central bank publication cited Xia as saying. Longer-term, the key is to keep foreign-exchange holdings at a “reasonable” level, according to Xia, an academic member of the monetary policy committee of the People’s Bank of China.
Central bank Governor Zhou Xiaochuan pledged this month to “closely” monitor U.S. efforts to tackle its debt burden. The global stock market rout that saw Tokyo shares sliding this morning follows Standard & Poor’s downgrade of the U.S. debt rating from AAA and a widening of Europe’s sovereign-debt crisis.
China is the biggest foreign owner of U.S. Treasuries, with more than $1 trillion of the securities, and its foreign- exchange reserves are the world’s largest at more than $3 trillion.
The U.S. economy has entered a long cycle of economic weakening that will put pressure on China’s holdings of dollar assets, Xia wrote in a microblog on Aug. 6. He is the director of the Finance Research Institute at the Development Research Center of the State Council, China’s cabinet.
China should buy more non-financial assets with its reserves to diversify risks, Xia wrote, adding that the country should also pursue national strategic interests, and seek to globalize the yuan. He previously said that China should use its reserves to increase holdings of gold and some other precious metals.
To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at +86-10-6649-7560 or lzheng32@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net --Zheng Lifei. Editors: Paul Panckhurst, Nerys Avery.
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Wednesday, August 10, 2011
Anarchy in the UK - London Riots Sparked by Police Beating, Poverty, Ethnic differences...
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British riots: Malaysian student injured in London
By RAHIMY RAHIM and QISHIN TARIQ newsdesk@thestar.com.my
PETALING JAYA: A 20-year-old Malaysian student who was on his way to buy food to break his fast was attacked by rioters in Barking East, London.Wounded and bleeding on the street, he was later robbed by another gang.
The robbery on Mohd Asyraf Raziq Rosli which took place at 7pm London time (3am Malaysian time) yesterday was recorded by someone and later uploaded on YouTube.
Height of danger: A woman jumping from a burning building in Surrey Street in London in this image taken from Twitter. Riots spread to new areas of London in the city’s worst unrest in decades. — ReutersThe 75-second video showed the first-year Kaplan University student, who was bleeding in the mouth, being robbed by a group of men who had initially pretended to help him.
The Sun described the incident as “riot yob mug injured child” while Internet users have branded the group of men seen in the video as scums.
The Telegraph described the clip as being filmed from “somewhere above and looks down onto an unknown street apparently in London where gangs are roaming the streets”.
Mobbed and robbed: Video grab pictures showing an injured Mohd Asyraf (right) being robbed by a mob who had earlier pretended to help him. He is being treated at Royal London Hospital for a broken jaw.“His friends managed to escape but he was attacked.
“He is now being treated at Royal London Hospital for a broken jaw and disjointed teeth,” he said when contacted yesterday.
The victim lost his mobile phone and wallet during the incident.
Dzuhair said efforts were being taken by the Malaysian Student Department and London Umno Club to evacuate students from the affected area.
Unfriendly message: A council worker removing a destroyed vehicle, spray painted with the words ‘Welcome to Hackney’ in Hackney, North London, yesterday. — ReutersMohd Asyraf's mother Maznah Abu Mansor, 47, said she was informed by Mara officers about her son's attack.
“I was initially very worried but I'm glad that he is all right. However, I am not able to talk to him because of his injuries,” she said.
She added that she would appeal to Mara for financial support to visit her son who is to be operated on today.
“I also hope Mara can bring home the remaining students,” said Maznah.
Malaysian High Commissioner to Britain Datuk Zakaria Sulong said an officer has been dispatched to help the victim.
“We will know what we can do to help the victim after meeting him,” he said.
Avoid hot spots in Britain, urges Anifah
KOTA KINABALU: Foreign Minister Datuk Seri Anifah Aman said his ministry is very concerned over the development in London as the rioting spreads to other parts of the city.“We are worried as rioting has spread to places like Queensway and Oxford Street where there are a large number of Malaysians, including our High Commission staff,” he said.
He added that the riots were also spreading to places outside London like Bristol, Nottingham and Leeds.
“We have advised Malaysians, especially students to avoid areas where the riots are taking place,” he said last night.
Young thieves: Rioters looting a shop in Hackney, North London. — EPA“We are also trying to get in touch with any Malaysians who may have travelled to London.
“I hope they will be able to report their whereabouts to the Malaysian High Commission there,” he said.
He urged Malaysians to contact Wisma Putra or the Malaysian High Commission if they needed assistance or clarification.
The contact persons at Wisma Putra are Zul Kesli Abdullah at 03-8887 4353 or Faisal Abdul Hamid at 03-8887 4353, while the contact persons at the Malaysian High Commission are the deputy high commissioner Wan Zaidi Wan Abdullah at +44-020-79190242 or wzaidi@kln.gov.my.
Malaysian High Commissioner to Britain Datuk Zakaria Sulong said although it had not received any distress call from Malaysians, it had taken the move to advise citizens to look after their safety.
“The High Commission has also posted similar advice on our website,” he said.
Rural and Regional Development Minister Datuk Seri Mohd Shafie Apdal said Mara had taken precautionary measures to relocate its students from high-risk areas to Leicester Square to ensure their safety.
Violence causing jitters among Malaysians
PETALING JAYA: The violent unrest that spread to several parts of London and Britain is causing jitters among Malaysians.
Many Malaysian students were worried for their safety, particularly Muslims, who have to travel to London’s Malaysia Hall at Queensway to break fast and for terawih pra-yers.
Recalling Monday’s rioting, London Umno Club president Dzuhair Hanafiah, 30, said shops about 600m from Malaysia Hall were looted.
“We heard loud noises but police came moments later to take control of the situation, but it still created fear among the students,” he told The Star yesterday.
He said rioting had spread to other places including Birmingham, Bristol and Liverpool.
“Each area has different local issues like high unemployment rate, government policy issues and gangsterism,” he said.
He urged Malaysians who were injured to contact the club or the Malaysian Students Department (MSD) for help.
“We advise Malaysians to be careful and anyone affected by the riots must immediately contact the MSD or London Umno Club at info@umnolondon.com or call +44-743-564-4040,” he said.
Student, Basir Radzali, 21, said many Malaysian students chose to stay indoors as universities were on summer break.
“Many of us try to avoid going out since the riots started, especially to areas like Hackney, Croydon and Peckham,” he said.
He said the Malaysian High Commission had sent out SMSes to students to be vigilant.
Tan Chang Jin, 24, who lives in Tower Bridge, central London, said the riots had not yet reached his neighbourhood, although it was on high alert.
“Hopefully, the riots will not spread. For now I’m in close contact with my friends and family,” said Tan.
Owner of the Rasa Sayang restaurant chain Teddy Chen said the situation in central London was getting worse.
“It is waiting to explode. Some of them have bad intentions and will take any opportunity to riot,” he said.
Poverty, ethnic differences fuel chaos
By Zhang Haizhou (China Daily)
A list of causes, including high unemployment, spending cuts amid Britain's sluggish economic recovery, cultural or ethnical differences and a poor relationship between youth and police, have been picked up by local media and analysts.
Take Haringey, the borough in which Tottenham is situated. With a population of 225,500, it is listed as the fourth-most-deprived borough in London and the 13th-most in the country.
About 55 percent of Haringey residents are among some of the most economically deprived in Britain, according to the borough's official statistics.
Lambeth, home borough of Brixton, has a similar situation. The 2007 Indices of Multiple Deprivation places it as the fifth-most-deprived borough in London and 19th in England.
In Tottenham, the core of the borough of Haringey, more than 10,000 people claim Jobseeker's Allowance, an unemployment benefit. Recent government statistics show each registered job opening in Tottenham draws 54 applicants.
Despite a small decline in reported crime in the year to June 2011, compared with the previous 12 months, Haringey saw more burglaries and an alarming rise in robberies of individuals - an increase from 884 offenses to 1,204.
Eight of Haringey's 13 youth clubs were closed because of spending cuts, and reductions in community police officers are soon to come, the Guardian reported.
Edmonton, just across the borough border in Enfield, has become grimly associated with fatal stabbings of teenagers in recent years.
"There is every indication, as unemployment climbs and as cuts are made in youth clubs and other services, that the sense of alienation will burgeon. Crime figures have been climbing again," the Guardian said.
But economic conditions alone cannot explain what has been happening in London the past two nights.
"The Tottenham riot has rekindled memories of the wave of unrest which swept through Britain's cities in the 1980s," the Telegraph wrote.
In addition to a recession and spending cuts, the newspaper cited "poor relations between the black community and police" as part of the backdrop against which violence erupted in Bristol, Birmingham, Manchester, Liverpool as well as Brixton and Broadwater Farm in London in the 1980s.
Haringey and Lambeth are highly multicultural and multi-ethnical.
Roughly 48.7 percent of Haringey residents belong to non-white British ethnic groups, a higher percentage than in both London as a whole (40.2 percent) and England and Wales (13 percent), according to official statistics.
Thirty-eight percent of Lambeth's 272,000 residents have ethnic minority backgrounds, and 50 percent are white British. Over 130 languages are spoken in the borough.
The police were accused of "institutional racism" for their handling of the 1980s riots and calls were made for sweeping changes in how the police department was run, including a rapid increase in the number of black and Asian recruits.
In recent years, it has been assumed that "the mutual antipathy between police and the black community was a relic of the 1980s".
"Events in Tottenham may suggest that such optimism may yet prove to be premature," the Telegraph reported.
But residents say that the weekend's riots in Tottenham have little to do with cultural or ethnical anxieties.
"Race may have a little part to play, but there are other issues in there as well ... It's young people and the police, but not a black and white thing at all," Norma Jones, 48, who works in human resources in Tottenham, said on Sunday.
While the police have condemned the rioters, most of whom are young people, many residents blame the police for their mishandling of ties with youth in these areas.
"There are still areas in Britain where people or communities have a very difficult relationship with the police," said Max Wind-Cowie, head of the progressive conservatism project at London-based research institute Demos.
"There are a small number of people who want no constraints on their behavior, and this isn't about social or economic disempowerment. This is a section of the community that resents the police policing them," he said.
Riots spread from London to England's northern, midlands cities
(Xinhua)
 |
| Police officers ask questions near a burnt building in Croydon, south London, Britain, Aug. 9, 2011. British authorities have largely reinforced the police force on London streets following the riots happening three consecutive nights from Saturday. Some 16,000 police officers, five times the usual number, will be on duty on London streets for three days. (Xinhua/Zeng Yi) |
Police had posted 16,000 officers on the streets of London to prevent a repeat of Monday night's scene of arson, looting, muggings and assaults that took place as hundreds of rioters clashed with police in many parts of the city.
In Manchester city center police were engaged in running battles through the early and mid-evening with a crowd which eyewitnesses said was about 2,000 strong. Shop windows were smashed and a women's clothes shop was petrol-bombed, and several businesses -- including a jeweler's and clothes shops -- were looted.
Earlier police had clashed with a much smaller group of youths in the neighboring city of Salford, where a community building was set on fire and several businesses attacked.
Police in the West Midlands reported trouble in Birmingham city center, where there had been trouble on Monday night, and also in the town of West Bromwich and the nearby city of Wolverhampton, which had both been spared violence on earlier nights.
In Birmingham, a 200-strong gang of youths with sticks was confronted by riot police amid reports of attacks on shops and a car being set on fire.
Police in Wolverhampton had made 20 arrests by mid-evening. In West Bromwich hooded youths blocked a road and set fire to dustbins but later dispersed after burning two vehicles.
In the east London area of Canning Town, some youths were reported to have built barricades and stoned passing vehicles.
Also in London, theaters in riot-hit areas such as the Battersea Arts Center, the Dalston Arcola and the Greenwich Playhouse, cancelled their evening's performances, and shops in many parts of London closed earlier than usual. Many office workers left earlier to avoid being in the city if rioting began again.
Riot police seal off a street in Croydon, south London, Britain, Aug. 9, 2011. (Xinhua/Zeng Yi)
Police officers seal off a street in Croydon, south London, Britain, Aug. 9, 2011. (Xinhua/Zeng Yi)
Police officers seal off a street in Croydon, south London, Britain, Aug. 9, 2011. (Xinhua/Zeng Yi)
A police officer is seen near a burnt building in Croydon, south London, Britain, Aug. 9, 2011. (Xinhua/Zeng Yi)
Police officers are seen on a vandalized street in Croydon, south London, Britain, Aug. 9, 2011. (Xinhua/Zeng Yi)
Police officers are seen near a burnt car in Woolwich, southeast London, Britain, Aug. 9, 2011. (Xinhua/Bimal Gautam)
A police officer investigates on a street in Woolwich, southeast London, Britain, Aug. 9, 2011. (Xinhua/Bimal Gautam)
Police officers secure a burnt building in Woolwich, southeast London, Britain, Aug. 9, 2011. (Xinhua/Bimal Gautam)Police officers secure a burnt building in Woolwich, southeast London, Britain, Aug. 9, 2011. (Xinhua/Bimal Gautam)Tuesday, August 9, 2011
Al-Qaeda makes US Debt Downgrade?
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What al-Qaeda Has to Do With Debt Downgrade
By Gary WeissBOSTON -- With every day of market decline and economic pain, we need to face a terribly unpalatable question, and it's not whether Standard & Poor's is credible or if the downgrades will send the economy into a tailspin (or, perhaps, if we are already in a tailspin).
Sure, the downgrade of U.S. long-term debt by Standard & Poor's appears to be a cynical ploy by this tarnished credit-rating agency, perhaps trying to burnish its reputation at a time when parent McGraw-Hill is in play. But there's no question that the content of its downgrade report is correct, even if its initial arithmetic was off. The fact is that our political processes are a mess. We don't deserve a top credit rating.
But there is, I think, a deeper reason for the misery we're experiencing. I'll put it in the form of a question: Is al-Qaeda winning the economic struggle?
Image via WikipediaI know, bin Laden's dead, al-Qaeda is on the run, etc. etc. And I don't mean that al-Qaeda has won militarily, though even that is debatable -- can anyone say with confidence what will happen to Afghanistan and, of course, Iraq after a U.S. withdrawal? But I think that a strong case can be made that al-Qaeda has gone a long way toward achieving one of its primary war aims, which was to sabotage the U.S. economy. Bin Laden may be fish food, but his strategy seems to have worked. We are being bled white, thanks in large part by the war that he forced us to fight -- and we have our representatives in Washington, and their ideologically driven refusal to increase taxes, to blame for this mess.
First, let's go back to the bin Laden "we'll bleed you" tape. This is not an urban legend, but was widely publicized at the time. In October 2004, al-Qaeda distributed a bin Laden video that contained a departure from his usual invective. Instead of inveighing against U.S. Imperialists, Jews and so on, he spent nearly 20 minutes talking not like a terrorist chieftain in a cave but the former corporate executive that he used to be, analyzing with satisfaction an objective that al-Qaeda was clearly achieving.
http://townipproject09.wikispaces.com/file/view/al-qaeda-osama-bin-laden-ayman-al-zawahiri.jpg/70861019/al-qaeda-osama-bin-laden-ayman-al-zawahiri.jpg
For every dollar al-Qaeda spent, he said, the U.S. was coughing up $1 million in war spending and economic misery. "As for the size of the economic deficit, it has reached record astronomical numbers" -- over $1 trillion, bin Laden said. Actually bin Laden's math was off -- the deficit in 2004 was just over $400 billion, but his general point was correct. The deficit had reached astronomical numbers, and much of that was because of the war that he started and Congress' stubborn refusal to pay for it by asking for sacrifice from the nation's fat cats.
We had to fight the war in Afghanistan, but we didn't have to mismanage the way it was financed.
Since October 2001, the war in Afghanistan has cost more than $443 billion. This year, taxpayers will pour another $118 billion into that quagmire, which is continuing to sap far too many U.S. lives, and with far too little assistance from our NATO allies. Factoring in the cost of the unnecessary war in Iraq, and the price tag of these two wars, paid for by the federal equivalent of a line of credit, has exceeded $1 trillion since 2001.
It was easy for bin Laden to ruin our economy. All he had to do was to exploit the natural tendency of the Bush administration to be incompetent. His primary Fifth Columnists are red-state congressional representatives, rock-ribbed Republicans who believe that you can fight two wars without paying for them.
Rather than raise taxes on the rich and cut loopholes to finance the war, the Bush administration let its 2001 tax cuts remain unchanged. The total cost of the tax cuts roughly approximates the cost of the Iraq and Afghanistan wars, and by some estimates is even higher -- as much as $1.3 trillion.
If that estimate is correct, then simply repealing those tax cuts would have paid for the Iraq and Afghanistan wars, and we might even have had a few billion left over.
The war to destroy the economy has continued, with impressive results. Now there's talk of cutting long-established social programs, the so-called "entitlements," because President Obama acquiesced to a deficit-reduction program without revenue increases -- and because he refused to invoke the 14th Amendment, which holds that the national debt is not to be questioned.
The result was a deal to cut spending in the middle of a looming recession and two wars. It's nothing short of crazy. Nobody could have done a better job of mismanaging the economy -- not even bin Laden himself if he had been the leader of the Congressional Tea Party Caucus, holding America hostage on behalf of an extremist ideology. Sen. John Kerry has correctly described the S&P downgrade as a product of the Tea Party movement and its allies in Congress. Do you really think that S&P would have piled on with its downgrade if Washington hadn't gone haywire? I have a lot of respect for S&P's integrity -- I worked for another McGraw Hill subsidiary for 18 years -- but I doubt it very much.
One can question the appropriateness of a credit-rating agency -- any credit-rating agency -- having the gall to take an action so disruptive to the markets, when one considers their squalid role in the subprime scandals. But there is no question that the U.S. government deserved the downgrade. Our legislative branch just isn't working, that affects the creditworthiness of the nation, much as private companies run with weak corporate governance would be hard-pressed to win an AAA rating.
The events of the past few weeks have demonstrated what we've known for decades: that you don't negotiate with terrorists, whether they are al-Qaeda thugs or extremist Congressmen who utilized the phony, artificial, unconstitutional "debt limit" to force their ideological agenda on an unwilling American people.
It's sad, but true: The terrorists are winning.
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Stronger Malaysian ringgit seen
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Stronger ringgit seen
BY DALJIT DHESI daljit@thestar.com.my
Economists expect the ringgit to strengthen further against the US dollarPETALING JAYA: Economists expect the ringgit to further strengthen against the greenback and attract extensive capital inflow into the region. It will also lead to possible further hikes in statutory reserve requirement (SRR) to stem excess liquidity if the global financial volatility worsens following the US credit rating downgrade.
Standard and Poor's (S&P's) had last Friday downgraded the world's largest economy a notch lower to AA+ from a triple A rating since the credit rating was issued to the US in 1917.
MIDF Research chief economist Anthony Dass said he expected the ringgit to strengthen against the US dollar at an average 2.97 for the year supported by a combination of healthy economic fundamentals and strong inflow of liquidity.
Stronger ringgit: Dass expects the ringgit to trade at an average 2.97 to the greenback for the year.“We have now placed a 30% odd for the OPR to stay at 3% for the rest of the year and expect the central bank to raise it by another 25 basis points (bps) in the second half of this year,” Dass said.
Much depends on the direction of the ringgit, the global commodity and food prices, liquidity and whether there will be further relaxation of subsidies.
Underpinned by healthy economic fundamentals and benefiting from the regional net inflow of funds, liquidity inflow into Malaysia has been strong, forcing the central bank to raise the SRR by 300 bps to 4% between April-June 2011. SRR are non-interest deposits kept at the central bank to mop up excess liquidity in the financial system.
With lingering uncertainties on the global front, Dass said he expected Malaysia, like other Asian ex-Japan economies, to continue to see inflow of funds. While this would strengthen the ringgit, he said ample liquidity would add pressure on inflation, adding that he was not ruling out the possibility of further hikes in SRR by another 50 bps to 100 bps should the inflow of liquidity pose a problem.
RAM Holdings economist Jason Fong, in response to a query from Starbiz, said if the financial volatility in the US turned out to be very significant and persistent, the impact on its external markets, including Malaysia, could be substantial.
One of the worst case scenarios would entail extensive capital flight from US-centric assets, he said. In this scenario, he added that there would be considerable decline in the value of the US dollar, causing an appreciation of US-denominated assets, particularly commodities.
The US financial volatility might also cause investors to put their money into safe haven assets such as precious metals, like gold, Fong noted.
Furthermore, he said if there were further US debt rating downgrade within the next two years as pointed out by S&P, then banks (depending on its portfolio weightings in US Treasuries) might slow down lending activities to meet international banking guidelines and this could slow domestic lending and cause consumption and investment to decline.
Fong said a larger-than-usual capital inflow would likely put upward pressure on the ringgit, causing Malaysia's exports to be more uncompetitive.
He said the rating agency maintained its economic growth forecast of 5.6% for Malaysia this year but acknowledged that the downside risk to growth had risen in the last few months.
This included a prolonged US slowdown coupled with a deteriorating external economic environment, he noted.
AmResearch Sdn Bhd director of economic research Manokaran Mottain reckons that the impact on Malaysia from the US credit rating downgrade will be minimal as the local economy is more domestic-oriented.
Countries more exposed to US Treasuries, including Japan and China, would face the brunt in the near term. China would be pressured to ease the grip on a weaker yuan policy, he added.
For Malaysia, the biggest impact will be in the currency market, with the ringgit rallying again towards RM2.93 per dollar again. The ringgit was traded at RM3.019 to a US$1 yesterday.
In the medium term, a possible quantitative easing (QE3) in the US would lead to the appreciation of the regional currencies, including the ringgit - which is expected to rally towards RM2.90 per dollar before settling between the RM2.80-RM2.90 range for this year.
Manokaran, who is maintaining the country's gross domestic product forecast at 5% this year, said the Government had trimmed its exposure to the G3 and plans to boost domestic demand. Apart from the US, the G3 also include Japan and the European Union.
Monday, August 8, 2011
US downgrade spells more chaos; QE3 in the making; Time for US to stop blames, take responsibility!
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Downgrade spells more chaos
Global Trends By MARTIN KHOR
The US credit downgrade – coming after a weak solution to its debt ceiling crisis and signs of a new recession – is signalling greater turmoil ahead in the global economy.LAST week was a tumultuous time for the global economy as stock markets plummeted on a series of bad news in the United States and Europe. But this may only be the start.
This week is likely to usher in even more turmoil as the prospects for recovery have suddenly turned negative.
After several other dramatic events, last week ended with the US’ credit rating losing its AAA status to AA+.
It was only one notch down, this downgrade was by only one (Standard and Poor’s) out of three rating agencies, and it had been half expected.
Nevertheless, it marks the end of an era. For the first time since 1917, the US does not enjoy an AAA rating.
It has long been assumed that the US dollar and its Treasury bills are the safest of havens.
There may be some practical effects of the downgrade as some funds which prefer or are allowed to only invest in AAA investments may have to find alternatives.
The US dollar is also expected to depreciate further, thus raising fresh questions about the role of the dollar in global trade and as the world’s reserve currency.
Manufacturers and traders are asking whether they should trade their goods in currencies other than the US dollar to avoid making losses.
This was shown in yesterday’s Sunday Star report on the reactions of Malaysian businessmen to the news of the downgrade.
The Federation of Malaysian Manufacturers’ president Tan Sri Mustafa Mansur urged Malaysians to consider trading in Chinese renminbi (as China is poised to be the world’s largest economy and a lot of Malaysia’s trade is with China) and in other currencies to avoid losses in export earnings from the continuing use of the US dollar.
Besides the use of the dollar as the main medium of exchange (the currency for global trade), it is also, by far, the world’s most important reserve currency, thus making it the global store of value.
Since almost all countries hold a major portion of their foreign reserves in US dollar assets (especially US Treasury bills), there has been increasing fears worldwide over the safety and value of their US investments.
First, there was the scare of possible default by the US Government in debt servicing, because of the White House-Democrats-Republican wrangling on the government’s debt ceiling.
On Aug 1, just a day before the deadline, a deal was struck in which the debt ceiling would be raised by US$2.1 trillion (RM6.32 trillion), provided the government slashes the same amount in its budget deficit over 10 years, with the bulk of how to do so to be decided by a bipartisan committee later.
This gives temporary respite, and the world will likely witness a repeat of the messy Washington budget conflict when the committee starts work.
As a caustic commentary in Xinhua news agency put it, the higher debt ceiling “failed to defuse Washington’s debt bomb for good, only delaying an immediate detonation by making the fuse an inch longer”.
Second, the S&P’s credit downgrade has articulated the fears of the investment and policy-making circles.
The confused and confusing atmosphere surrounding Washington politics has seriously eroded confidence in the ability of the US to handle its budget, debt, fiscal, financial and economic policy issues.
Only political analysts who specialise in US politics can fully explain and anticipate the intricacies and implications of the views and tendencies of the various branches of the Republican Party (especially its Tea Party component and its effects on the Party’s congressional positions), the Democratic Party and the Administration.
But even non-specialists comprehend that there is a serious governance problem in the US which is affecting the rest of the world.
Its political system is experiencing a gridlock which will affect the US dollar, the US economy and the world economy’s prospects for what seems to be a long time to come.
Third, the US economy shows increasing signs of stalling leading to a new recession.
Last week’s indicators for consumer spending, manufacturing and services output were negative, and some prominent economists gave a 50:50 chance of a double dip recession.
Recession is made more likely by the inability of the Obama administration to take effective recession-busting measures.
Congress will block any new significant fiscal stimulus (as the debt ceiling crisis and solution show), while a new round of printing and injecting money through quantitative easing, which is being considered, may only have limited positive effects.
All these point to a further weakening of the US economy and the US currency, at least in the short term.
These three developments, all in one week, have galvanised those in business, trade, finance and policy making to re-think the role of the dollar and the US economy in the global economy.
In the short run, it is difficult to find alternatives to the dollar as a unit of exchange or as a store of value, mainly because the euro is in a crisis of its own, the Japanese economy faces its own difficulties and the Chinese currency is not convertible enough.
But many agree that in the long run, a solution or solutions must be found. Otherwise, the global trading and monetary systems could be in a disarray.
There is nothing like a crisis or an emergency to collapse a long run into a short run.
If the US and European crises continue to unfold without respite, the world is in for financial and economic turmoil similar to or even worse than the recent 2008-2009 great recession.
Solutions will therefore have to be urgently sought.
Smaller QE3 may be necessary to prevent US double dip recession
By YAP LENG KUEN lengkuen@thestar.com.my
PETALING JAYA: With the US economy possibly sliding into a double dip recession soon, there are expectations of a third round of quantitative easing (QE3), which may involve smaller amounts.“It is not a popular decision but may be the only reaction from the US Fed to keep the economy going,'' said Pong Teng Siew, head of research at Jupiter Securities.
“The Fed has limited options especially with no more government spending to stimulate the economy. Fiscal policy that involves government spending is out in the wake of arguments related to the US debt ceiling where the only acceptable solution to the Republicans is to cut spending, and not raise revenue.
“QE3 may involve smaller purchases of Treasury instruments at the longer end of the yield curve. This may help to drive down the yield where the medium term rates may also move down in tandem. In this way, interest costs may also be reduced.
There may be a resultant boost to the stock markets on a smaller scale. However, the European debt problem especially in Italy represents a situation that is likened to an elephant in a room.''
“As long as there are upward pressures in the Italian government bond yields, there will be downward pressure on the stock markets in Europe,'' said Pong, adding that investors should stay light on selected plantation, oil and gas and consumer-related companies.
Bloomberg reported on Friday that the difference in yield, or spread, between Italy's 10-year bond and German bunds widened to 389 basis points on Thursday, after closing at 368 basis points the previous day.
Lee: ‘This time round, headline and core inflation have been creeping up.’It said Spain's 10-year spread also rose six basis points to 398, as European Central Bank debt purchases failed to reassure investors that officials in the region would solve the sovereign crisis.
QE refers to the Fed's decision to buy US Treasury bonds in an attempt to inject liquidity into the market.
The previous rounds of QE1 and QE2 had not produced a lasting impact on the US economy which is holding the weight of inflation and higher debt levels.
CIMB Investment Bank head of economics Lee Heng Guie said full-year growth estimate for the US economy had been revised from 2%-3% to 1.5%-2%, raising the odds of a double dip recession by 30%.
Moreover, the cut in the US credit rating by Standard & Poor's would have a double whammy impact on the lethargic economic recovery in the US, Lee added.
In a recent update, Lee noted that the US second quarter real gross domestic product growth came in at a tepid annualised rate of 1.3%, short of the 1.8% consensus forecast.
Consumer spending in the United States, hurt by higher gasoline prices and auto chain supply disruptions, rose by only 0.1% (2.1% in Q1), the slowest in two years.
“We expect the Fed to take more actions, such as buying of bonds, if the economy appears in danger of stalling,'' said Lee.
However, he does not think that inflation and inflation expectations are heading towards the point which would prompt the Fed to consider further large asset purchases.
Lee recalled that before the second phase of quantitative easing (QE2) was implemented, the trend of disinflation and deflationary risk formed a strong case for the Fed to pump in extra liquidity.
“This time round, headline and core inflation have been creeping up,'' he said. “With inflation and unemployment rising at the same time, the Fed will find it difficult to justify yet another cash injection.''
Should the Fed detect firmer signs that the US economy is faltering, it may:
- Adjust forward guidance to push back timing expectations on the first rate hike.
- Shift back market expectations on when it will shrink its balance sheet. (In April, Fed chairman Ben Bernanke had signalled that the Fed may reinvest the proceeds from its bond purchase when they mature).
- Intervene in the credit market through direct loans or adjust interest rates payable on bank reserves to spur bank lending.
A banker told StarBiz that banks in general were adopting a cautious stance in view of the world and eurozone economic conditions.
“The US leaders have mainly taken temporary measures but the real issues like debt are not addressed,'' he said. “The debt problem remains while their agreements have to be bipartisan.
“From their behaviour, there seems to be a lot of politicking in the US especially on the economy. As a world leader, that does not give a good picture to the whole world.
Their decision to cut US$2.4 trillion or more in spending in ten years will have an impact on the world economy. Hopefully, for Malaysia, the economic transformation projects and its own economic growth will provide the momentum forward.
“The business is there but banks have turned cautious on lending and are diversifying into services, fee-based income, niche areas and wealth management,'' said the banker.
Commentary: It's time for U.S. to stop blames, take responsibility
(Xinhua)
The White House on Saturday challenged the ruling by Standard & Poor's to downgrade U.S. long- term credit rating form top rank of AAA to AA+, citing the agency' s decision relied on faulty math and in haste.
Disappointingly, instead of reflecting on themselves and sitting down to fix problems in a cooperated way, the Democrats and Republicans in Washington are questioning the creditability of the downgrade ruling and blaming each other for the ever-first shame of slipping out top credit rating club.
During the angry finger-pointing, the U.S. politicians seemed to have forgotten Wall Street's severest losses in almost three years last week, forgotten mounting concerns about double-dip recession, and forgotten the criticism over their irresponsibility showed during the debt arm-twisting from all over the world.
The world has seen enough useless bipartisan debate. The bond- holders are losing confidence. The investors have started to escape markets to stay in cash, showing their fears of uncertainty.
S&P managing director John Chambers said "The political gridlock in Washington leads us to conclude that policymakers don' t have the ability to put the public finances of the U.S. on a sustainable footing ".
The alarm has rung. It is time for the naughty boys in Washington to stop chicken games before they cause more damages. It is time for the policy-makers in Washington to settle down, to show some sense of responsibility and fix their fiscal problems.
The United States is not only the biggest debtor, who must pay its large amount of obligations, but also the printer of international reserve currency, which has the responsibility to assure the value of other countries' foreign reserve assets.
If the country's governors kept wrangling for their own interest, ignoring the voices from domestic and aboard, how can their people trust them and where will the confidence for a better economic scenario come from?
If the world's largest debtor kept eating May's grain in April and kept robbing Peter to pay Paul without fiscal discipline, eagerness to balance budget or effective efforts to boost sluggish economy, how can the creditors keep lending without doubts?
According to analysts, risk of dollar devaluation increased after this downgrade, not to speak of the possibility to see more cuts in the next two years with a negative credit rating outlook.
Whether admitted or not, the U.S. central bank tended to maintain a cheap dollar for the export's sake aftermath the financial crisis, which already squeezed world foreign reserves.
Currently, the U.S. is facing a high unemployment rate of 9.1 percent and almost stalled economic growth. But the Federal Reserve's "silver bullets" have run out after two round of quantitative easing. For fiscal stimulus, there is only little room considering the excessive debt and austerity agreement. For the desperate policymakers, to boost export seems to be the last way to kick the U.S. economy. From this point, the U.S. has every motive to maintain a weak dollar.
Before the U.S. makes any move, please remind it: don't forget your responsibility as the issuer of reserve currency to maintain the stable value of the dollar. Don't become blind to the great risks that a fluctuated exchange rate could pose to international financial markets and a weak greenback could pose to the world fragile economic recovery by lifting dollar-denominated commodities prices.
The history is a guide. What we should learn from the financial crisis is to be selfish could only hurt yourself and drag others into water.
It is time for the U.S. to tighten belts and solve structural problems, in order to resume reputation and restore world confidence.
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