GLOBAL ECONOMY – Factories hit worldwide as commodity prices soar

LONDON/TOKYO (Reuters) – Soaring commodity costs are denting manufacturing activity in Asia and Europe and the outlook looks bleak as new orders drop off in the face of rising prices, surveys showed on Tuesday.

Manufacturing activity in the euro zone contracted in June for the first time in three years while business confidence in Asia’s largest export markets is buckling and output has likely contracted further in the United States.

Purchasing managers indices showed manufacturing activity in the euro zone fell to 49.2 in June, China saw its index fall to a near three-year low of 52.0 while in Britain it contracted at its sharpest rate since December 2001.

The 50.0 mark separates growth from contraction. Factories worldwide have struggled in the face of soaring raw material and energy costs — oil hit over $143 a barrel on Monday.

Meanwhile, the Bank of Japan’s tankan corporate index of big manufacturers’ sentiment dropped to plus 5, from 11 in March, showing their mood has not been darker since 2003.

Read moreGLOBAL ECONOMY – Factories hit worldwide as commodity prices soar

A Declaration of U.S. Independence from Israel

This is a talk given at the Nassau Club in Princeton by Chris Hedges, former New York Times Middle East bureau chief:

Israel, without the United States, would probably not exist. The country came perilously close to extinction during the October 1973 war when Egypt, trained and backed by the Soviet Union, crossed the Suez Canal and the Syrians poured in over the Golan Heights. Huge American military transport planes came to the rescue.

They began landing every half-hour to refit the battered Israeli army, which had lost most of its heavy armor. By the time the war as over, the United States had given Israel $2.2 billion in emergency military aid. The intervention, which enraged the Arab world, triggered the OPEC oil embargo that for a time wreaked havoc on Western economies. This was perhaps the most dramatic example of the sustained life-support system the United States has provided to the Jewish state.

Israel was born at midnight May 14, 1948. The U.S. Recognized the new state 11 minutes later. The two countries have been locked in a deadly embrace ever since.Washington, at the beginning of the relationship, was able to be a moderating influence. An incensed President Eisenhower demanded and got Israel’s withdrawal after the Israelis occupied Gaza in 1956.

During the Six-Day War in 1967, Israeli warplanes bombed the USS Liberty. The ship, flying the U.S. Flag and stationed 15 miles off the Israeli coast, was intercepting tactical and strategic communications from both sides. The Israeli strikes killed 34 U.S. Sailors and wounded 171.

The deliberate attack froze, for a while, Washington’s enthusiasm for Israel. But ruptures like this one proved to be only bumps, soon smoothed out by an increasingly sophisticated and well-financed Israel lobby that set out to merge Israel and American foreign policy in the Middle East.

Israel has reaped tremendous rewards from this alliance. It has been given more than $140 billion in U.S. Direct economic and military assistance. It receives about $3 billion in direct assistance annually, roughly one-fifth of the U.S. Foreign aid budget. Although most American foreign aid packages stipulate that related military purchases have to be made in the United States, Israel is allowed to use about 25 percent of the money to subsidize its own growing and profitable defense industry. It is exempt, unlike other nations, from accounting for how it spends the aid money.

Read moreA Declaration of U.S. Independence from Israel

Jim Rogers: Avoid The Dollar At All Costs

Related articles and videos:

Jim Rogers: Global Economic Outlook

Jim Rogers: China’s Economic Advance is All But Unstoppable

Jim Rogers: Bernanke should be fired 2008.03.19

Jim Rogers says “Abolish the FED” on CNBC 2008.03.12

June 30 (Bloomberg) — Jim Rogers, who in April 2006 correctly predicted oil would reach $100 a barrel and gold $1,000 an ounce, said investors should steer clear of the dollar as the U.S. economy slows and favor commodities this year.

The dollar has slipped 7.7 percent against the euro and 5.9 percent versus the yen in 2008 as the Federal Reserve cut interest rates to stave off a U.S. recession. Oil prices have doubled in the past 12 months, while gold is up 44 percent.

Avoid the dollar “at all costs,” Rogers, chairman of Rogers Holdings, said in a speech in Shanghai today. “The best investments in 2008 are commodities and natural resources. Agricultural prices have much higher to go over the next decade. We have a shortage of everything, including seeds.”

Oil and metal prices in New York have surged as a slumping U.S. currency made them cheaper for non-dollar investors to buy as a hedge against inflation in a slowing global economy. The dollar has stabilized in recent weeks, with currency volatility falling by the most since 1999 this quarter.

The comments from Rogers, 65, come two days after he told investors at a conference in Nanjing not to “give up” on Chinese shares, which have made China the world’s second worst performers this year. Rogers, who first started buying Chinese stocks in 1999, said he hadn’t sold any of his holdings.

Commodity Bull

Read moreJim Rogers: Avoid The Dollar At All Costs

The Dow-Crash, The Dollar, Gold, and WAR!

The June 2008 Dow Crash
and the coming first strike attack on Iran
herald the end of dollar hegemony.

BREAK-DOW!

They say that pictures speak a thousand words, so let’s start this with a picture:

Today, the Dow crashed through its eight-year support level at 11,750. There isn’t much below now to keep it from dropping all the way back down to the 7,500-range. What that will do to American investor psychology and worse, consumer confidence, and therefore spending, and therefore the economy, is only too apparent.

The gold-attack on Monday obviously didn’t take. Gold recovered the following day and powered up by $26 the very next day to close in NY at $911. On Friday, gold confirmed its breakout, which means there will be little holding it back – just like there is now very little that’s holding the Dow up.

Unsurprisingly, the US war machinery is in full swing at this time. Troop and military asset movements into the Iranian theater are nearly complete, the Israelis have flown their practice-attack of 100-plus fighter jets over the Mediterranean, and Congress has again prostrated itself before its banking-guild rulers who want total government (and therefore banking) of all economic activity.

Congress did this by passing the FISA Amendments Act of 2008 to give retroactive immunity to telcoms spying for the government, and by proposing a resolution (the already infamous H. Con. Res. 362) by which Congress demands that Bush completely blockade Iran in order to force it to stop enriching uranium. This, naturally, is a perfect setup for unleashing the long-planned bombing campaign on Iran. Congressmen know that Iran will not accede to these international demands.

End result: We will probably get another war because of all this, just like we got one back in 2002-03 when the Dow plunged into the chasm this recently broken support level has bridged for these past eight years (see chart above).

The problem is that this time, it is a bipartisan gang of US war mongers in our Congress who all appear hell-bent on forcing Bush to attack Iran with a preemptive strike, possibly even an unprovoked nuclear first strike – something that human history so far has not had to deal with.

It is also something that will cause the US to forfeit any legitimate claims of world leadership for the remainder of that history.

The War Currency

Wars are rarely fought over national security issues, as political leaders often claim. At rock bottom, they are mostly fought over economic issues.

Iraq and Iran (if Congress and the administration get their way) are the only two countries the US has ever attacked preemptively. They are also the only two oil-producing countries that ever went off the petrodollar. The alleged nuclear ambitions of a terrorist-sponsoring country cannot be the real reason for the planned attack – because terrorist-sponsor North Korea was not only allowed to develop nuclear weapons unmolested, it was even allowed to test-launch a potentially nuclear-tipped ICBM at the US without any military repercussions whatsoever.

There goes the “national security” rationalization for this planned attack.

This fact exposes the attacks for what they really are. tools of US monetary policy. The dollar has no real value internationally, save for the fact that the now militarily enforced necessity for countries to buy dollars in order to buy oil creates artificial demand.

The euro’s existence threatens all of this, now. Oil countries have a dollar-alternative in the euro, and so does the rest of the world. The euro is designed to not be quite as inflationary as the dollar is and has been. This is done by virtue of the ECB’s exclusive mandate of “price stability”, another word for inflation fighting.

Yet Another War Currency

Read moreThe Dow-Crash, The Dollar, Gold, and WAR!

America Is the Rogue Nation

One gets the impression that there are some people in Washington who believe that Israel or the U.S. can bomb Iran’s nuclear reactors, fly home, and it will be mission complete.

It makes you wonder if perhaps there is a virus going around that is gradually making people stupid. If we or Israel attack Iran, we will have a new war on our hands. The Iranians are not going to shrug off an attack and say, “You naughty boys, you.”

Consider how much trouble Iraq has given us. Some 4,000 dead and 29,000 wounded, a half a trillion dollars in cost and still climbing, and five years later, we cannot say that the country is pacified.

Iraq is a small country compared with Iran. Iran has about 70 million people. Its western mountains border the Persian Gulf. In other words, its missiles and guns look down on the U.S. ships below it. And it has lots of missiles, from short-range to intermediate-range (around 2,200 kilometers).

More to the point, it has been equipped by Russia with the fastest anti-ship missile on the planet. The SS-N-22 Sunburn can travel at Mach 3 at high altitude and at Mach 2.2 at low altitude. That is faster than anything in our arsenal.

Iran’s conventional forces include an army of 540,000 men and 300,000 reserves, including 120,000 Iranian Guards especially trained in unconventional warfare. It has more than 1,600 main battle tanks and 21,000 other armored combat vehicles. It has 3,200 artillery pieces, three submarines, 59 surface warships and 10 amphibious ships.

It’s been receiving help in arming itself from China, North Korea and Russia. Unlike Iraq, Iran’s forces have not been worn down with bombing, wars and sanctions. It also has a new anti-aircraft defense system from Russia that I’ve heard is pretty snazzy.

So, if you think we or Israel can attack Iran and not expect retaliation, I’d have to say with regret that you are a moron. If you think we could easily handle Iran in an all-out war, I’d have to promote you to idiot.

Attacking Iran would be folly, but we seem to be living in the Age of Folly. Morons and idiots took us into an unjustified war against Iraq before we had finished the job in Afghanistan. Now we have troops tied down in both countries.

For some years now, I’ve worried that we seem to be more and more like Colonial England – arrogant, racist, overestimating our own capacity and underestimating that of our enemies. As the fate of the British Empire demonstrates, that is a fatal flaw.

The British never dreamed that the “little yellow people” could come ashore by land and take Singapore from the rear or that they would sink the pride of the British fleet, but they did both.

I suppose no one in Washington can imagine the Iranians sinking one of our carriers in the Persian Gulf. How’d you like to be the president who has to tell the American people that we’ve lost a carrier for the first time since World War II?

Exactly how the Iranians will respond to an attack, I don’t know, but they will respond.

In keeping with our present policy, our attack on Iran would be illegal, since under the Nuclear Non-Proliferation Treaty, Iran has the right to enrich uranium for peaceful purposes.

Who would have thought that we would become the rogue nation committing acts of aggression around the globe?

Read moreAmerica Is the Rogue Nation

This Recession, It’s Just Beginning


Vincent Quinones works on the floor of the New York Stock Exchange Wednesday after the Federal Reserve issued a mixed assessment of the economy. Yesterday, the Dow Jones industrial average closed down 358 points. (By Andrew Harrer — Bloomberg News)

So much for that second-half rebound.

Truth be told, that was always more of a wish than a serious forecast, happy talk from the Fed and Wall Street desperate to get things back to normal.

It ain’t gonna happen. Not this summer. Not this fall. Not even next winter.

This thing’s going down, fast and hard. Corporate bankruptcies, bond defaults, bank failures, hedge fund meltdowns and 6 percent unemployment. We’re caught in one of those vicious, downward spirals that, once it gets going, is very hard to pull out of.

Only this will be a different kind of recession — a recession with an overlay of inflation. That combo puts the Federal Reserve in a Catch-22 — whatever it does to solve one problem only makes the other worse. Emerging from a two-day meeting this week, Fed officials signaled that further recession-fighting rate cuts are unlikely and that their next move will be to raise rates to contain inflationary expectations.

Since last June, we’ve seen a fairly consistent pattern to the economic mood swings. Every three months or so, there’s a round of bad news about housing, followed by warnings of more bank write-offs and then a string of disappointing corporate earnings reports. Eventually, things stabilize and there are hints that the worst may be behind us. Stocks regain some of their lost ground, bonds fall and then — bam — the whole cycle starts again.

It was only in November that the Dow had recovered from the panicked summer sell-off and hit a record, just above 14,000. By March, it had fallen below 12,000. By May, it climbed above 13,000. Now it’s heading for a new floor at 11,000. Officially, that’s bear market territory. We’ll be lucky if that’s the floor.

In explaining why that second-half rebound never occurred, the Fed and the Treasury and the Wall Street machers will say that nobody could have foreseen $140 a barrel oil. As excuses go, blaming it on an oil shock is a hardy perennial. That’s what Jimmy Carter and Fed Chairman Arthur Burns did in the late ’70s, and what George H.W. Bush and Alan Greenspan did in the early ’90s. Don’t believe it.

Truth is, there are always price or supply shocks of one sort or another. The real problem is that the underlying fundamentals had gotten badly out of whack, making the economy susceptible to a shock. The only way to make things better is to get those fundamentals back in balance. In this case, that means bringing what we consume in line with what we produce, letting the dollar fall to its natural level, wringing the excess capacity out of industries that overexpanded during the credit bubble and allowing real estate prices to fall in line with incomes.

The last hope for a second-half rebound began to fade earlier this month when Lehman Brothers reported that it wasn’t as immune to the credit-market downturn as it had led everyone to believe. Lehman scrambled to restore confidence by firing two top executives and raising billions in additional capital, but even that wasn’t enough to quiet speculation that it could be the next Bear Stearns.

Since then, there has been a steady drumbeat of worrisome news from nearly every sector of the economy.

American Express and Discover warn that customers are falling further behind on their debts. UPS and Federal Express report a noticeable slowdown in shipments, while fuel costs are soaring. According to the Case-Shiller index, home prices in the top 20 markets fell 15 percent in April from the year before, and Fannie Mae and Freddie Mac report that mortgage delinquency rates doubled over the same period — and that’s for conventional home loans, not subprime. United Airlines accelerates the race to cut costs and capacity by laying off 950 pilots — 15 percent of its total — as a number of airlines retire planes and hint that they may delay delivery or cancel orders of new jets from Boeing and Airbus. Goldman Sachs, which has already had to withdraw its rosy forecast for stocks, now admits it was also too optimistic about junk bond defaults, and analysts warn that Citigroup and Merrill Lynch will also be forced to take additional big write-downs on their mortgage portfolios.

Read moreThis Recession, It’s Just Beginning

Jailed and Tortured Fighting for Free Speech


A re-enactment of torture in Canberra similar to that experienced by The Epoch Times journalists. (The Epoch Times)

Somewhere in the world, the warm fire crackles as giggling children, adorn their Christmas tree with the colourful lights that William Huang made in jail. A United States living room is coloured with the ornamental flowers he put together, glitter sticking to the sweat on his body, bursting calluses on his hands. Others, somewhere in Europe, chat and munch on the pistachio nuts that he pried open with pliers, or clambered over to use the open toilet, in the bedroom-sized production room that was home to over 20 prisoners.

Surely greater things awaited William when he graduated from China’s prestigious Tsinghua University in July 1999, than slaving seven days a week, for more than 16 hours per day, producing cheap Chinese goods in a Chinese “re-education through labour” center. At least he can choose his destiny now, living and studying in the United States. But memories of electric batons, brainwashing sessions and sleep deprivation don’t easily fade. Nor do the memories of his colleagues who are still in jail.

William Huang, whose Chinese name is Huang Kui, came to America in March this year, with fresh memories of what had happened to the first group of The Epoch Times workers in China, who suddenly disappeared on December 16, 2000. He and around ten others, mostly Falun Gong practitioners, had rented a flat in Zhuhai city, in Guangdong province, which became the underground office for the fledgling online publication. There were people in other cities helping as well, pitching in with time, or money, or both. His job was researching and writing international news articles, while others focussed on weighty domestic issues, especially the state’s full-scale persecution of the Falun Gong meditation practice.

He has no idea how the police found them, but one day without warning more than ten policemen burst in, arresting everyone and seizing all equipment. 48 hours of sleep deprivation and interrogation followed. He and the others were charged with “subverting the political power of the state” because they had published articles exposing the Chinese Communist Party’s (CCP) human rights crimes.

William was moved to the 2nd detention centre in Zhuhai whilst awaiting sentence, and he was interrogated almost every day for half a year, sometimes until 2am. He was then put to work, laboring at least 16 hours each day making ornamental flowers, Christmas lights, pearl decorations, and prying open pistachio nuts. At first they used pork oil for part of the flower-making process, but the guards soon ordered them to stop, as it would attract bugs that would damage the goods while in transit to the United States. He remembers the cold November days of 2001, when large, painful cracks formed on his hands.

After three months he had still not been sentenced. Lacking any formal appeal mechanism, he refused to eat. After five days without food or water, the guards chained him to a cross made of wooden planks. They pried his teeth open with metal pliers, pinched his nose, held his throat open with chopsticks and threw lumps of rice porridge into his stomach.

Tiger bench torture

From time to time he caught glances of other The Epoch Times workers in prison, and he once had a chance to talk to Zhang Yuhui, who was chief editor when the arrests took place, and who is still in jail. Zhang told him that he had spent 7 days and 7 nights on the “Tiger Bench” torture implement, for refusing to inform on others. While Zhang did not elaborate, this method is known to involve forcing a person to sit with legs extended on a long, thin bench, with ropes tying the knees to the bench. Objects are then forced under the legs to bend the knees the wrong way, causing extreme agony. Zhang had also spent three days tied on a cross, in a contorted position.

Read moreJailed and Tortured Fighting for Free Speech

Big Brother law stirs outrage in Sweden

Sweeping new powers under which the Swedish security services can monitor private phone calls, e-mails and text messages are expected to come into force this week under legislation that has prompted outrage in the country.

Politicians, businesses, privacy campaigners and individual citizens have lined up to criticise the proposed law, which the Swedish Parliament will vote on tomorrow.

The Bill would grant the country’s intelligence agencies access to cross-border e-mails, phone calls, text messages and faxes, and empower them to monitor websites visited by Swedish citizens.

Since Scandinavia’s telephone network often routes local phone calls through exchanges in neighbouring countries, internet data and calls passing through Sweden on its way between two other countries would also fall within the jurisdiction of the new law.

Press freedom and individual privacy have traditionally been sacrosanct in Sweden, but fears about international crime and terrorism have prompted the country’s centre-right Government to extend the powers of the security services.

Previously, the state could apply for permission to monitor communications if illegal activity was suspected. Under the new law, government agents will be allowed to monitor messages by default.

Thousands of voters have contacted their MPs, urging them to vote against the proposals, but the law is expected to pass.

Dagens Nyheter, Sweden’s leading quality newspaper, compared it with the powers of the Stasi secret police in the former East Germany, and Google said that it would stay out of Sweden if the law is passed.

“We have made it clear to the Swedish authorities that we will never place any Google servers in Sweden if this proposition becomes reality,” Peter Fleischer, a Google spokesman, said. “This proposal seems like something invented by Saudi Arabia and China. It has no place in a Western democracy.”

Journalists have also complained that the law would damage their ability to protect sources.

Tomorrow’s vote comes a month after The Times revealed plans to establish a database containing details of phone calls and e-mails in the UK. The information would be held for at least a year and the police and security services would be able to access it if given permission from the courts.

June 16, 2008
Marcus Oscarsson, Stockholm

Source: The Times

Emerging markets face inflation meltdown


Downward spiral: Chinese stocks have slumped by almost 50pc since October while Mumbai’s BSE index has lost 27pc of its value

Central banks across much of Asia, Latin America, and Eastern Europe will soon have to jam on the breaks or risk a serious crisis as inflation spirals into the danger zone. As the stark reality becomes ever clearer, this year’s correction in emerging market bourses and bond markets has now accelerted into a full-fledged rout.

Shanghai’s composite index touched a fourteen-month low of 2,900 yesterday. It follows moves this week by the central bank raised reserve requirement yet again, draining a further $60bn from the banking system. Chinese stocks have now slumped by almost 50pc since peaking in October.

In India, Mumbai’s BSE index has lost 27pc of its value as the exodus of foreign funds accelerates. The central bank has raised rates to 8pc to curb inflation and halt a run on the rupee, but critics still say the country waited too long to tackle overheating. The current account deficit has shot up to near 3.5pc of GDP. A plethora of subsidies has pushed the budget deficit to 9pc of GDP.

Russia, Brazil, India, Vietnam, South Africa, Indonesia, Nigeria, and Chile – among others – have all had to raise interest rates or tighten monetary policy in recent days. Most are still behind the curve.

“The inflation genie is out of the bottle: easy money is the culprit,” said Joachim Fels, chief economist at Morgan Stanley.

“Weighted global interest rates are 4.3pc, while global inflation is above 5pc. The real policy rate in the world is negative,” he said
advertisement

The currencies of Korea, Thailand, the Philippines, and Malaysia have come under pressure this week as investors scramble for dollars in moves that echo the East Asia crisis in 1997-1998. Several countries have had to intervene to slow the currency slide.

The sudden shift in sentiment appears to follow comments by Ben Bernanke and Tim Geithner, the heads of the US Federal Reserve and the New York Fed, leaving no doubt that Washington has lost patience with the crumbling dollar.

It is almost unprecedented for Fed officials to take a public stand on the Greenback. The orchestrated move is clearly aimed at halting the vicious circle in the oil markets, where crude prices are feeding off dollar weakness – with multiples of leverage.

The “strong dollar” campaign has switched into high gear. US Treasury Secretary Hank Paulson has conducted an aggressive lobbying drive behind the scenes in the Middle East and Asia. America’s friends and foes have been left in no doubt that the enormous strategic might of the United States is now firmly behind the currency. From now on, they cross Washington at their peril.

The markets are now pricing in two rate rises by the Fed this year. Investors no longer doubt that the US – and Europe – will do what is needed to restore credibility. This display of resolve has suddenly switched the focus to the very different universe of emerging markets, where a host of countries have repeated the errors of the 1970s.

Richard Cookson, a strategist at HSBC, advises clients to slash their holdings in these regions.

“Inflation looks like a very real problem in Asia, and the risk is that investors will lose faith in the region’s currencies. Although markets have fallen savagely from their peaks, they’re still looking pricey. We’ re lopping exposure even further, to zero,” he said.

“Where to put the money? We think corporate debt is stunningly cheap compared with equities. Seven-year to ten-year ‘BBB’ [rated] corporate bonds in the US haven’t been this cheap since the Autumn of 2002,” he said.

“Until and unless policy makers in the emerging world – especially those in China – tighten policy dramatically, the inflation rates are unlikely to fall much. Our guess is that most don’t have much will to tighten pre-emptively,” he said.

Russia’s inflation is 15.1pc, yet interest rates are 10.75pc. Vietnam’s inflation is 25pc; rates are 12pc. Fitch Ratings has put the country on negative watch and warns of brewing trouble in the Ukraine, Kazakhstan, the Balkans, and the Baltic states. The long-held assumption that emerging markets are strong enough to shrug off US troubles is now facing a serious test. The World Bank has slashed its global growth forecast to 2.7pc this year. The IMF and the World Bank define growth below 3pc a “global recession”.

There is a dawning realization that China is facing a major storm as inflation (7.7pc), the rising yuan (up 5pc this year), soaring oil prices, and an economic downturn in the key export markets of North America and Europe all combine to crush profit margins. China uses five times as much energy as the US to produce a unit of GDP. It is acutely vulnerable to the energy crisis.

A quarter of the 800 shoe factories in the Guangdong region have shut down in recent months, and several thousand textile workshops are battling to stay afloat. Hong Kong’s industry federation has warned that 10,000 firms operating in the South of China may soon go out of business.

By Ambrose Evans-Pritchard
Last Updated: 13/06/2008

Source: Telegraph