Australia and Japan offer new stimulus plans

HONG KONG:Australia announced a $26.5 billion stimulus plan and a deep interest rate cut on Tuesday as the Japanese central bank said it would start buying shares held by financial institutions to try to ease the burden on lenders in efforts to shield their economies from the worsening downturn.

The announcements followed a flurry of economic data, job cuts and profit warnings in recent weeks that have shown the region is slowing faster than had been expected as demand in the United States and Europe withers.

Related article: Australia launches massive stimulus package (AFP):
Prime Minister Kevin Rudd said the massive stimulus package was aimed at nation building and supporting up to 90,000 jobs “in the face of the unfolding national and international economic emergency.”

“The weight of the global recession is now bearing down on the Australian economy,” said Wayne Swan, Australia’s treasurer, in a statement accompanying the stimulus announcement. “In the midst of this global recession it would be irresponsible not to act swiftly and decisively to support jobs.”

Read moreAustralia and Japan offer new stimulus plans

Treasury rethink hits defence budget

Britain’s deepening financial crisis has prompted the Treasury to pull back from funding any unexpected costs from fighting in Iraq and Afghanistan, putting further pressure on the core defence equipment budget.

Gordon Brown, as chancellor, set up the Treasury reserve to pay for any equipment urgently needed for operations and half of any unforeseen costs. But Treasury officials have recently told the Ministry of Defence to cover the entire cost of any overruns itself.

The Treasury sees the move as increasing the incentive for the MoD accurately to estimate the costs of operations. But it was attacked as a cost-cutting measure that would put further pressure on the strained military budget and have a negative impact on troops in the field.

Read moreTreasury rethink hits defence budget

Glenn Beck: Economic Apocalypse

Glenn Beck on the coming devaluation of the dollar.

“We have pumped all of this money in (see chart) and devalued our money.”

“How is it not going to be worthless?”

“This has never ever been done by anybody ever before.”

“This is real trouble, not in a thousand years, perhaps the next year.”

Source: YouTube

Dissent beginning to spread across Russia as crisis bites

Thousands protest at Putin’s handling of economy while rift with Medvedev grows

Supporters of the banned National Bolshevik party protest against Moscow’s rulers

The Kremlin’s rule is beginning to look much shakier than at any time since Vladimir Putin came to power, after a series of protests in cities across its vast landmass this weekend by Russians disgruntled about the economy. And as the country starts to feel the effects of the global credit crunch, there are also signs of a growing rift between Prime Minister Putin, and his hand-picked successor as President, Dmitry Medvedev.

In Vladivostok, 2,000 protesters took to the streets, with some carrying banners reading “Kremlin, we are against you”, and other people chanting directly for the removal of Mr Putin. The Pacific port city, seven time zones away from Moscow, has become a focal point for dissent after riot police broke up a march last year over car imports and detained 100 people. Saturday’s demonstration, under the watchful eye of the police, passed off peacefully.

Nearly every major city had a street rally, and though most were low key, the unusual scale of dissatisfaction is likely to worry the authorities. The Russian economy has been hit hard by falling oil prices, many oligarchs have seen billions of pounds wiped off the value of their shares, and ordinary Russians are feeling the pinch as factories struggle to stay afloat and companies lay off employees.

In Moscow, a motley band of communists, anarchists and liberals gathered at several points across the city to protest against Kremlin rule. At one spot, a dozen protesters taped over their mouths with white tape, held up white placards with no slogans, and handed blank white flyers to passers-by. Bemused by such a conceptual approach to protest, the police rounded them up and arrested them anyway, and the organiser got five days in prison.

Read moreDissent beginning to spread across Russia as crisis bites

Unpaid taxes return to haunt Obama cabinet

Tom Daschle: Nominated as Health Secretary despite $140,000 tax debt

The high ethical standards which Barack Obama set for his administration have hit a bump on the road, after revelations that his choice for Health Secretary, Thomas Daschle, waited nearly a month after being nominated before revealing to the President that he was a tax delinquent.

Mr Daschle, one of Mr Obama’s earliest backers, only paid the back taxes totalling $140,000 (£97,000) on 2 January and told the White House about it two days later. The money covered tax owed on additional income from consulting work, undertaken for a wealthy New York investor, as well as the exclusive use of a Cadillac limousine complete with driver.

The Senate finance committee meets today to discuss Mr Daschle’s nomination. He is the second of Mr Obama’s cabinet picks to have found themselves scrambling to smooth out their financial records. Tim Geithner’s confirmation as Treasury Secretary was delayed after it was discovered he had failed to pay $34,000 in taxes.

Read moreUnpaid taxes return to haunt Obama cabinet

Barack Obama to allow anti-terror rendition to continue

The highly controversial anti-terror practice of rendition will continue under Barack Obama, it has emerged.

Barack Obama is to allow the highly controversial anti-terror practice of rendition to continue Photo: AP

Despite ordering the closure of Guantanamo and an end to harsh interrogation techniques, the new president has failed to call an end to secret abductions and questioning.

In his first few days in office, Mr Obama was lauded for rejecting policies of the George W Bush era, but it has emerged the CIA still has the authority to carry out renditions in which suspects are picked up and often sent to a third country for questioning.

The practice caused outrage at the EU, after it was revealed the CIA had used secret prisons in Romania and Poland and airports such as Prestwick in Scotland to conduct up to 1,200 rendition flights. The European Parliament called renditions “an illegal instrument used by the United States”.

According to a detailed reading of the executive orders signed by Mr Obama on Jan 22, renditions have not been outlawed, with the new administration deciding it needs to retain some devices in Mr Bush’s anti-terror arsenal amid continued threats to US national security.

Read moreBarack Obama to allow anti-terror rendition to continue

Sir Jock Stirrup: Even a US surge won’t beat the Taliban

Sir Jock Stirrup, Britain’s chief of the defence staff, tells Carey Schofield only politics can bring peace to Afghanistan

Fighter reconnaissance pilots possess steely resolve. Having served his time flying Strikemasters during Britain’s “secret war” in Oman in the 1970s and a Jaguar reconnaissance aircraft during the cold war, Air Chief Marshal Sir Jock Stirrup, now chief of the defence staff, knows something about steering a difficult course into hostile territory. Indeed, he’s still doing it today. He is described by many in the services as “Gordon’s favourite defence chief” – and it is not meant as a compliment.

At a time when the armed forces are stuck in two unpopular wars, Stirrup has come under heavy fire for his willingness to work with his political masters. Typically, he brushes aside suggestions that the defence budget is in trouble. There is “serious pressure” he admits, but “we have to adjust our programme so that we can live within the available resources”. It is not hard to see why this frustrates troops waiting on the ground in Afghanistan for a helicopter that may or may not arrive to deliver supplies.

Read moreSir Jock Stirrup: Even a US surge won’t beat the Taliban

Violent unrest rocks China as crisis hits

The collapse of the export trade has left millions without work and set off a wave of social instability, writes

China’s new year of the ox portends calm but there is little sign of it as workers in Shezhen protest over unpaid wages as factories shut

Bankruptcies, unemployment and social unrest are spreading more widely in China than officially reported, according to independent research that paints an ominous picture for the world economy.

The research was conducted for The Sunday Times over the last two months in three provinces vital to Chinese trade – Guangdong, Zhejiang and Jiangsu. It found that the global economic crisis has scythed through exports and set off dozens of protests that are never mentioned by the state media.

Related article:
40 Million Chinese Set to Lose Their Job as New Year Celebrations End
(The Telegraph)

While troubling for the Chinese government, this should strengthen the argument of Premier Wen Jiabao, who will say on a visit to London this week that his country faces enormous problems and cannot let its currency rise in response to American demands.

The new US Treasury secretary, Timothy Geithner, has alarmed Beijing and raised fears of a trade war by stating that China manipulates the yuan to promote exports.

Read moreViolent unrest rocks China as crisis hits

Hyperinflation is a possibility, say Morgan Stanley

That’s not in Zimbabwe by the way.

Morgan Stanley’s Jocahcim Fels and Spyros Andreopoulos look at the possibility of hyperinflation hitting the western shores of the UK, Europe and the US in their latest note. Their conclusion is a little scary (our emphasis).

One stark lesson from the ongoing financial and economic crisis is that so-called black swans – large-impact, hard-to-predict and seemingly rare events – can occur more frequently than generally believed.

With policymakers around the world throwing massive conventional and unconventional monetary and fiscal stimuli at their economies, we think that it is worth exploring the black swan event of very high inflation or even hyperinflation.

While such an outcome is clearly not our main case, the risk of hyperinflation cannot be dismissed very easily any longer, in our view. We discuss the historical evidence, the conditions that can lead to very high or hyperinflation, and whether and how it might happen again.

Read moreHyperinflation is a possibility, say Morgan Stanley

Treasury Real Yields at 16-Month High as Deflation Bets Die

“Investors in 30-year bonds lost 14.6 percent last month, according to Merrill Lynch & Co. index data. January was the worst month for government securities since Merrill Lynch began tracking returns on the securities in 1988.”

The bond bubble is bursting (this year).

The dollar will be destroyed through hyperinflation and the “Greatest Depression” is about to happen (this year).

Feb. 2 (Bloomberg) — For the first time since 2007, Treasury investors are betting that inflation will accelerate.

The yield on 10-year notes exceeds the consumer price index by 2.74 percentage points, the most since December 2006. The gap between two- and 10-year rates widened at the fastest pace in a year last month as traders demanded more compensation for longer-term debt. Treasury Inflation Protected Securities that signaled falling prices as recently as Nov. 20 show they will increase in the U.S. this year.

Deflation was the growing concern for investors in 2008 as government bond yields fell to historic lows in December, the Reuters/Jefferies CRB Index of commodities tumbled 53 percent since July and home prices plunged 18 percent amid a deepening recession.

Now, the bond market is saying Federal Reserve interest rates at zero percent, President Barack Obama’s $819 billion planned stimulus package and $8.5 trillion of U.S. initiatives to revive credit markets will reignite inflation.

“When the Fed gets finished here they will have an inflation nightmare on their hands,” said Mark MacQueen, who helps oversee $7 billion as co-founder of Sage Advisor Services Ltd. in Austin, Texas. “There is a lot of downside in conservative government bonds.”

MacQueen is selling 30-year Treasuries, which are more sensitive to inflation expectations than shorter-maturity debt.

Read moreTreasury Real Yields at 16-Month High as Deflation Bets Die