October 2008 – Infinite Unknown

Volkswagen May Face DAX Ouster as Deutsche Boerse Changes Rules

October 31, 2008 by Infinite

Oct. 31 (Bloomberg) — Volkswagen AG’s common shares may face removal from Germany’s DAX Index as early as next week after the benchmark’s compiler changed inclusion rules to stem disruptions spurred by gyrations in the automaker’s stock.

Deutsche Boerse AG, operator of the Frankfurt stock exchange, said in a statement today that from Nov. 3 it may at any time remove a DAX stock whose weighting exceeds 10 percent and whose share price over the preceding 30 trading days had annualized volatility of more than 250 percent.

“The exchange wants to guard that indexes are reliable and not exposed to these unusual swings,” said Carlos Sanchez, a sales trader at Interdin Bolsa SVB SA in Madrid. “It would seem like Volkswagen common shares are on the way out.”

Volkswagen’s weighting will be cut to 10 percent at the end of trading today and may increase next week if the shares outperform the benchmark. The stock’s volatility has climbed to about 395 percent in the past 30 days, Bloomberg data show.

US Economy: Consumers Throw in the Towel as Spending Falls

October 31, 2008 by Infinite

Oct. 31 (Bloomberg) — U.S. consumer spending tumbled in September and a purchasing managers’ survey showed the biggest deterioration since 1968, foreshadowing a deepening economic slump.

“Consumers have thrown in the towel,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts, who correctly forecast the drop in purchases. “They have no choice but to cut back on spending in a very big way. This is going to be a fairly deep, long recession.”

The Bush gang’s parting gift: a final, frantic looting of public wealth

October 31, 2008 by Infinite

The US bail-out amounts to a strings-free, public-funded windfall for big business. Welcome to no-risk capitalism

In the final days of the election many Republicans seem to have given up the fight for power. But don’t be fooled: that doesn’t mean they are relaxing. If you want to see real Republican elbow grease, check out the energy going into chucking great chunks of the $700bn bail-out out the door. At a recent Senate banking committee hearing, the Republican Bob Corker was fixated on this task, and with a clear deadline in mind: inauguration. “How much of it do you think may be actually spent by January 20 or so?” Corker asked Neel Kashkari, the 35-year-old former banker in charge of the bail-out.

When European colonialists realised that they had no choice but to hand over power to the indigenous citizens, they would often turn their attention to stripping the local treasury of its gold and grabbing valuable livestock. If they were really nasty, like the Portuguese in Mozambique in the mid-1970s, they poured concrete down the elevator shafts.

Nothing so barbaric for the Bush gang. Rather than open plunder, it prefers bureaucratic instruments, such as “distressed asset” auctions and the “equity purchase program”. But make no mistake: the goal is the same as it was for the defeated Portuguese – a final, frantic looting of the public wealth before they hand over the keys to the safe.

How else to make sense of the bizarre decisions that have governed the allocation of the bail-out money? When the Bush administration announced it would be injecting $250bn into US banks in exchange for equity, the plan was widely referred to as “partial nationalisation” – a radical measure required to get banks lending again. Henry Paulson, the treasury secretary, had seen the light, we were told, and was following the lead of Gordon Brown.

In fact, there has been no nationalisation, partial or otherwise. American taxpayers have gained no meaningful control over the banks, which is why the banks are free to spend the new money as they wish. At Morgan Stanley, it looks as if much of the windfall will cover this year’s bonuses. Citigroup has been hinting it will use its $25bn buying other banks, while John Thain, the chief executive of Merrill Lynch, told analysts: “At least for the next quarter, it’s just going to be a cushion.” The US government, meanwhile, is reduced to pleading with the banks that they at least spend a portion of the taxpayer windfall for loans – officially, the reason for the entire programme.

What, then, is the real purpose of the bail-out? My fear is this rush of dealmaking is something much more ambitious than a one-off gift to big business: that the Bush version of “partial nationalisation” is rigged to turn the US treasury into a bottomless cash machine for the banks for years to come. Remember, the main concern among the big market players, particularly banks, is not the lack of credit but their battered share prices. Investors have lost confidence in the honesty of the big financial players, and with good reason.

Hank Paulson’s $125 Billion Mistake

November 23, 2008October 31, 2008 by Infinite

It was only a few weeks ago that most right-thinking economists and left-leaning bloggers were jumping on Treasury Secretary Hank Paulson for his plan to jump-start the markets in asset-backed securities by having the government buy them up at auction. Much better, they argued, to use the $700 billion to “recapitalize” the banking system, just as Gordon Brown was doing in Britain. Even the Federal Reserve thought that a better idea.

So Paulson changed course, called in the nine biggest banks and “forced” them as a group to accept $125 billon in new capital. The critics patted themselves on the back for having been right all along.

Now, many of the same people are shocked — shocked! — to discover that the banks aren’t using the money to make new loans to households and businesses, as they had assumed, but are using it to maintain dividend payments to shareholders, pay this year’s bonuses to executives and traders, or squirrel it away for future acquisitions.

I hate to say it, but I told you so. Sprinkling money around a highly fragmented banking system when markets were panicked and everyone was scrambling to reduce leverage was always akin to shoveling sand against the tide.

Air Force: Nuke missile silo fire went undetected

October 31, 2008 by Infinite

Air Force: Wyo. nuclear missile silo fire caused $1M of damage, went undetected for 5 days

A fire caused $1 million worth of damage at an unmanned underground nuclear launch site last spring, but the Air Force didn’t find out about it until five days later, an Air Force official said Thursday.

The May 23 fire burned itself out after an hour or two, and multiple safety systems prevented any threat of an accidental launch of the Minuteman III missile, Maj. Laurie Arellano said. She said she was not allowed to say whether the missile was armed with a nuclear warhead at the time of the fire.

Arellano said the Air Force didn’t know a fire had occurred until May 28, when a repair crew went to the launch site – about 40 miles east of Cheyenne, Wyo., and 100 miles northeast of Denver – because a trouble signal indicated a wiring problem.

Panic Strikes East Europe Borrowers as Banks Cut Franc Loans

October 31, 2008 by Infinite

The Hungarian National Bank stands in Budapest, Hungary, on Oct. 16, 2008. Photographer: Balint Porneczi/Bloomberg News

Oct. 31 (Bloomberg) — Imre Apostagi says the hospital upgrade he’s overseeing has stalled because his employer in Budapest can’t get a foreign-currency loan.

The company borrows in foreign currencies to avoid domestic interest rates as much as double those linked to dollars, euros and Swiss francs. Now banks are curtailing the loans as investors pull money out of eastern Europe’s developing markets and local currencies plunge.

“There’s no money out there,” said Apostagi, a project manager who asked that the medical-equipment seller he works for not be identified to avoid alarming international backers. “We won’t collapse, but everything’s slowing to a crawl. The whole world is scared and everyone’s going a bit mad.”

Foreign-denominated loans helped fuel eastern European economies including Poland, Romania and Ukraine, funding home purchases and entrepreneurship after the region emerged from communism. The elimination of such lending is magnifying the global credit crunch and threatening to stall the expansion of some of Europe’s fastest-growing economies.

FDR’s Response to the Plot to Overthrow Him

October 31, 2008 by Infinite

Perhaps the most alarming slice of twentieth-century U.S. political history is virtually unknown to the general public, including most scholars of American history.

In 1934 a special Congressional committee was appointed to conduct an investigation of a possible planned coup intended to topple the administration of President Franklin D. Roosevelt and replace it with a government modelled on the policies of Adolf Hitler and Benito Mussolini. The shocking results of the investigation were promptly scotched and stashed in the National Archives. While the coup attempt was reported at the time in a few newspapers, including The New York Times, the story disappeared from public memory shortly after the Congressional findings were made available to president Roosevelt. It was the recent release from the Archives of the Congressional report that prompted the BBC and Horton commentaries.

The Congressional committee had discovered that some of the foremost members of the economic elite, many of them household names at the time, had indeed hatched a meticulously detailed and massively funded plot to effect a fascist coup in America. The plotters represented prominent families – Rockefeller, Mellon, Pew, enterprises like Morgan, Dupont, Pew, Remington, Anaconda, Bethlehem and Goodyear, along with the owners of Bird’s Eye, Maxwell House and Heinz. Totaling about twenty four major businessmen and Wall Street financiers, they planned to assemble a private army of half a million men, composed largely of unemployed veterans. These troops would both constitute the armed force behind the coup and defeat any resistance this in-house revolution might generate. The economic elite would provide the material resources required to sustain the new government.

Chinese melamine scandal widens

October 31, 2008 by Infinite

There are fears contamination could be widespread throughout the food chain

The toxic chemical melamine is probably being routinely added to Chinese animal feed, state media has reported.

Correspondents say the unusually frank reports in several news outlets are an admission that contamination could be widespread throughout the food chain.

The melamine scandal began early in September, when at least four Chinese babies were killed by contaminated milk, and thousands more became ill.

The news led firms across Asia to recall products made from Chinese milk.

The problem widened last weekend when the authorities in Hong Kong reported that melamine had also been detected in Chinese eggs.

Four brands of eggs have since been found to be contaminated, and agriculture officials speculate that the cause was probably melamine-laced feed given to hens.

Melamine is high in nitrogen, and the chemical is added to food products to make them appear to have a higher protein content.

‘Open secret’

Several state newspapers carried reports on Thursday suggesting that the addition of melamine to animal feed was widespread.

California to cut water deliveries to cities, farms

October 31, 2008 by Infinite

SACRAMENTO, Calif. – California said Thursday that it plans to cut water deliveries to their second-lowest level ever next year, raising the prospect of rationing for cities and less planting by farmers.

The Department of Water Resources projects that it will deliver just 15 percent of the amount that local water agencies throughout California request every year.

Since the first State Water Project deliveries were made in 1962, the only time less water was promised was in 1993, but heavy precipitation that year ultimately allowed agencies to receive their full requests.

The reservoirs that are most crucial to the state’s water delivery system are at their lowest levels since 1977, after two years of dry weather and court-ordered restrictions on water pumping out of the Sacramento-San Joaquin Delta. This year, water agencies received just 35 percent of the water they requested.

Farmers in the Central Valley say they’ll be forced to fallow fields, while cities from the San Francisco Bay area to San Diego might have to require residents to ration water.

CIA allowed concealing torture documents

October 30, 2008 by Infinite

The CIA can hide statements made by the terror suspects that the spy agency has tortured in its secret prisons, a federal judge has ruled.

Chief Judge Royce Lamberth of the Washington D.C. Circuit Court declined to review torture allegations from men held in the CIA’s prisons-because it could put the nation at risk of grave danger if allowed to be made public.

The American Civil Liberties Union said it filed in March, a Freedom of Information Act request for the documents from the Combatant Status Review Tribunals, which decide if prisoners at the US naval base in Guantanamo Bay, Cuba, qualify as “enemy combatants.”

Darling: tax may rise in downturn

October 30, 2008 by Infinite

The Chancellor signalled last night that taxes might have to rise if the economic downturn is prolonged.

Alistair Darling warned that Government revenue has collapsed because of the recession. He said that ministers would attempt to stimulate the economy by accelerating spending projects even if it meant a sharp increase in Government borrowing.

He is expected to announce plans today for a £4bn loan package designed to help small businesses cope with tough trading conditions ahead.

Australia to implement mandatory internet censorship

October 30, 2008 by Infinite

AUSTRALIA will join China in implementing mandatory censoring of the internet under plans put forward by the Federal Government.

The revelations emerge as US tech giants Google, Microsoft and Yahoo, and a coalition of human rights and other groups unveiled a code of conduct aimed at safeguarding online freedom of speech and privacy.

The government has declared it will not let internet users opt out of the proposed national internet filter.

The plan was first created as a way to combat child pronography and adult content, but could be extended to include controversial websites on euthanasia or anorexia.

Communications minister Stephen Conroy revealed the mandatory censorship to the Senate estimates committee as the Global Network Initiative, bringing together leading companies, human rights organisations, academics and investors, committed the technology firms to “protect the freedom of expression and privacy rights of their users”.

World is facing a natural resources crisis worse than financial crunch

October 30, 2008 by Infinite

• Two planets need by 2030 at this rate, warns report
• Humans using 30% more resources than sustainable

The world is heading for an “ecological credit crunch” far worse than the current financial crisis because humans are over-using the natural resources of the planet, an international study warns today.

The Living Planet report calculates that humans are using 30% more resources than the Earth can replenish each year, which is leading to deforestation, degraded soils, polluted air and water, and dramatic declines in numbers of fish and other species. As a result, we are running up an ecological debt of $4tr (£2.5tr) to $4.5tr every year – double the estimated losses made by the world’s financial institutions as a result of the credit crisis – say the report’s authors, led by the conservation group WWF, formerly the World Wildlife Fund. The figure is based on a UN report which calculated the economic value of services provided by ecosystems destroyed annually, such as diminished rainfall for crops or reduced flood protection.

Fed interest rate cut may end up making matters worse

October 30, 2008 by Infinite

The Federal Open Market Committee’s half-point cut in its Federal Funds target does not address the leverage and credit issues in the banking system.

Indeed, by penalizing savers it worsens the economy’s supply/demand imbalance for funding. The cut doesn’t solve short-term problems and worsens long-term inflation worries.

The banking crisis was not caused by over-high interest rates. Its two main causes were large and unknown housing-related and other credit losses and an urgent need for banks to reduce their leverage.

House prices fall 14.6pc in a year

October 30, 2008 by Infinite

House prices have fallen for the twelfth month in a row and are now 14.6pc lower than last year, the latest figures from Nationwide show.

Houses for sale: house prices are falling by almost £80 a day, according to Nationwide
The average house price has dropped by £27,000 in the past year, says Nationwide Photo: PA

Prices fell 1.4pc in October and the average house has seen £27,000 wiped off its value in the past twelve months.

The number of completed housing sales has now fallen to its lowest level since the Nationwide series began in 1974, the building society added in its lastest House Price Survey, driving the decline in prices.

The crisis in the financial sector and the latest Government data suggesting a recession is imminent is likely to worsen the housing market slump and has “uncomfortable implications”, Nationwide said.

“A looming recession and continued financial market instability have uncomfortable implications for the housing and mortgage markets, and will undoubtedly affect the pace of recovery in house prices,” Fionnuala Earley, the Nationwide’s chief economist, said.

Goldman Sachs ready to hand out £7bn salary and bonus package… after its £6bn bail-out

October 30, 2008 by Infinite

U.S. investment bank Goldman Sachs HQ which has set aside £7bn for bonuses and salaries this year

Goldman Sachs is on course to pay its top City bankers multimillion-pound bonuses – despite asking the U.S. government for an emergency bail-out.

The struggling Wall Street bank has set aside £7billion for salaries and 2008 year-end bonuses, it emerged yesterday.

Each of the firm’s 443 partners is on course to pocket an average Christmas bonus of more than £3million.

The size of the pay pool comfortably dwarfs the £6.1billion lifeline which the U.S. government is throwing to Goldman as part of its £430billion bail-out.

As Washington pours money into the bank, the cash will immediately be channelled to Goldman’s already well-heeled employees.

News of the firm’s largesse will revive the anger over the ‘rewards for failure’ culture endemic in the world of high finance.

The same bankers who have brought the global economy to its knees seem to pocketing the same kind of rewards they got during the boom years.

US motor industry: The great breakdown

October 30, 2008 by Infinite

Such is the severity of the downturn in the global car industry that US manufacturers are now pushing for their own state bailout.

Why stop at the banks? Now governments around the world are pouring taxpayer money in to bail out loss-making financial institutions, it is getting harder to argue against subsidies, loans, guarantees and other forms of government assistance for other industries, too – particularly since the economic pain is now being felt far from Wall Street.

Which is why Rick Wagoner, chief executive of General Motors, the largest US carmaker, packed his suitcase for Washington and headed to the capital again this week. He is leading a lobbying push aimed at tapping taxpayers and staving off the bankruptcy of the loss-making company. GM’s coffers are being depleted at a rate of $1bn a month, and will run dry by the end of next summer. Little wonder its shares have touched levels not seen since it emerged from the Great Depression.

GM – owner of the Vauxhall brand and Chevrolet, amongst others – is in the throes of merger talks with its smaller rival Chrysler, which is also haemorrhaging cash. The hope is a merger will save money, allowing them to close more factories and cut more jobs. The trouble is, things are so desperate they don’t have the cash to write the redundancy cheques. They are asking for up to $10bn in low-cost loans to tide them over.

So here we are, on the brink of Bail-out II: Detroit.

Toshiba drops 99 percent on weak chips, outlook hazy

October 29, 2008 by Infinite

A man looks at laptop computers at an electronics retailer in Tokyo October 29, 2008

TOKYO (Reuters) – Japan’s Toshiba Corp (6502.T) posted a 99 percent plunge in quarterly operating profit on Wednesday, dragged down by weakness in its mainstay chip operations, but stuck to its recently revised outlook above expectations.

Thousands Still Without Power in Upstate New York After Snow Storm

October 29, 2008 by Infinite

Oct. 28: A snow plow clears a highway in Westerlo, N.Y.

ALBANY, N.Y. – Nearly 40,000 utility customers remain without power in eastern New York a day after more than a foot of snow fell on some areas.

National Grid has about 25,000 customers without power Wednesday morning, most in the Mohawk Valley and Adirondacks.

New York State Electric & Gas reports about 13,300 outages, most in the Catskills. Power is expected to be restored to most customers on Wednesday.

The storm dumped wet, heavy snow on trees still covered in leaves, bringing limbs down on power lines.

The National Weather Service reports snowfall totals ranging from 13 inches in northern New York to 15 inches along the northwestern edge of the Catskill Mountains.

London suffered its first October snowfall in 74 years as a winter chill set in across England

October 29, 2008October 29, 2008 by Infinite

Snow covers parts of England as winter weather sets in

A blizzard hit Stevenage as temperatures fell across the country Photo: Gary Dowson

Thousands of homes in Bedfordshire, Hertfordshire and Buckinghamshire were left without power after the cold weather damaged high voltage cables.

Supplier EDF Energy said the bad weather has prevented engineers from fixing the problem.

Luton Airport was forced to divert a number of its flights on Tuesday evening while airport workers cleared snow from the runway.

Paul Craig Roberts: American Hegemony Bites The Dust

October 29, 2008 by Infinite

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions. He can be reached at: [email protected]
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The Defanging of America: Reality-Based Community Overthrows History’s Actors

“We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality – judiciously, as you will – we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors . . . and you, all of you, will be left to just study what we do.” Bush White House aide explaining the New Reality

The New American Century lasted a decade. Financial crisis and defeated objectives in Iraq, Afghanistan, and Georgia brought the neoconservative project for American world hegemony crashing to a close in the autumn of 2008.

The American neoconservatives are the heirs of Leon Trotsky. Their dream of American “Full Spectrum Dominance”–US military and economic superiority over any possible combination of states–is matched in ambition only by the early 20th century Trotskyite dream of world Communist revolution.

The neocons used September 11, 2001, as a “new Pearl Harbor” to give power precedence over law domestically and internationally. The executive branch no longer had to obey federal statutes, such as the Foreign Intelligence Surveillance Act or honor international treaties, such as the Geneva Conventions. An asserted “terrorist threat” to national security became the cloak which hid US imperial interests as the Bush Regime set about dismantling US civil liberties and the existing order of international law constructed by previous governments during the post-war era.

Perhaps the neoconservative project for world hegemony would have lasted a bit longer had the neocons possessed intellectual competence.

On the war front, the incompetent neocons predicted that the Iraq war would be a six-week cakewalk, whose $70 billion cost would be paid out of Iraqi oil revenues. President Bush fired White House economist Larry Lindsey for estimating that the war would cost $200 billion. The current estimate by experts is that the Iraq war has cost American taxpayers between two and three trillion dollars. And the six-week war is now the six-year war.

Federal Reserve Cuts Rate to 1% to Avert Prolonged Recession

October 29, 2008 by Infinite

Oct. 29 (Bloomberg) — The Federal Reserve cut its benchmark interest rate by half a percentage point to 1 percent, matching a half-century low, in an effort to avert the worst U.S. economic downturn in the postwar era.

“Downside risks to growth remain,” the Federal Open Market Committee said today in a statement in Washington. “Recent policy actions, including today’s rate reduction, coordinated interest-rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth.”

Central bankers worldwide are trying to revive credit and stop a self-reinforcing downturn in consumer spending and bank lending from triggering a global recession. Today’s decision follows the half-point reduction the Fed coordinated with the European Central Bank and four other central banks on Oct. 8. Borrowing costs were pared today in Norway and China.

China vows penalties as melamine eggs scare spreads

October 29, 2008 by Infinite

Eggs from mainland China are seen at a wholesale market in Hong Kong Monday. Wal-Mart pulled all the eggs from its store shelves Tuesday across the country over melamine fears.
Bobby Yip/Reuters

BEIJING (Reuters) – Authorities in a northeastern Chinese city on Wednesday vowed severe punishment for those responsible for melamine-tainted eggs turning up in Hong Kong, as the health scare spread to another city in eastern China.

At least four children have died and tens of thousands were made ill amid the melamine scandal, the latest in a series of health scares to sully the “made in China” label.

Chinese products ranging from chocolate to milk powder have been recalled throughout the world due to contamination fears. Melamine, used in making plastic chairs among other things, is often added to cheat nutrition tests.

Chinese eggs have now come under the spotlight, after Hong Kong food safety authorities over the weekend found melamine-tainted eggs produced by Hanwei Group in the northeastern port city of Dalian on local shelves.

Problem eggs have now been found in Hangzhou, capital of the eastern province of Zhejiang, the official Xinhua news agency said on Wednesday, citing quality authorities there who had ordered a city-wide recall of all “Ciyunxiang”-brand eggs.

Chaos in Congo as Rebels Draw Near

October 29, 2008 by Infinite

Congolese refugees fled from the city of Kibati towards Goma on Wednesday.

GOMA, Congo – The exodus has begun.

Women with babies on their backs. Families crammed into cars with coolers and suitcases stuffed to the windows. United Nations trucks. Aid workers. Businessmen. Congolese government troops literally running for their lives.

On Wednesday afternoon, countless people of all kinds poured out of Goma, a strategic Congolese city on the border of Rwanda, fleeing the advancing rebel forces massing on the outskirts of town.

This was a place that was supposed to be safe, a town full of war-weary, displaced people who had come here for shelter, a town that the United Nations peacekeepers had defended against the very same rebels before.

But this time may be different.

“The Congolese army has abandoned most of their positions,” said United Nations spokesman Madnodje Mounoubai. “The road to Goma is now open to the rebels.”

Eastern Congo has been torn by conflict for more than a decade. But if Goma falls, it will be the first time in years that rebels have snatched a major city – and a particularly important one because it is a staging ground for United Nations aid efforts that help keep millions alive.

Volkswagen shares halve as funds lose billions

October 29, 2008 by Infinite

Volkswagen (VW) shares continued their rollercoaster ride today when they nearly halved in value after the German authorities took action to prevent the volatility in the carmaker’s stock from destabilising the German market.

VW briefly became the world’s most valuable company yesterday, worth £238 billion, following panic share buying by hedge fund chiefs.

The hedge funds were trying to cover potential losses after placing huge bets that Volkswagen shares would fall.

But Porsche, the sports car giant, had been secretly building a 74 per cent stake in its rival, the world’s third-largest carmaker. Porsche said this morning that it would take steps to smooth VW’s soaring share price by settling hedging transactions, equivalent to 5 per cent of the company’s stock, but the move has come too late for some of the world’s most aggressive hedge funds, which are facing losses that could amount to between €20 billion (£15.9 billion) and €30 billion.

Today the shares fell €416.9 to €528.09 in morning trade.

Hedge fund experts believe the losses could even bring down some smaller funds, which have been caught out by the sudden price move.

Two days of frantic trading have led to what is thought to be one of the heaviest losses on a single company’s shares taken by hedge funds.

“This is without question the biggest single loss on a single stock in the history of hedge funds. It’s a bloodbath,” Laurie Pinto, a broker at North Square Capital, said.

Other shareholders in VW rounded on Porsche, saying that it had manipulated VW shares in an irresponsible manner. Porsche vehemently rejected the accusation of share-price manipulation.