2/9/08 News Radar

by JASON | 10:50 AM in |

Feb. 9 (Bloomberg) -- First, Superintendent Don Iglesias canceled plans to update science laboratories in public schools in San Jose, the center of the U.S. technology industry. Now he’s preparing to fire hundreds of teachers.

The 31,000-student district is a victim of the California budget crisis, an annual event in the most populous state and the biggest ever with a $42 billion shortfall expected over the next 17 months. “We’ve been pushed to the wall,” Iglesias said.

Revenue is so depleted that Controller John Chiang delayed $1.9 billion in tax refunds and Schwarzenegger ordered state employees to take two days of unpaid leave every month. The governor and lawmakers met yesterday without announcing a plan.

Citing politicians’ failure to act, Standard & Poor’s on Feb. 2 cut $46 billion of California’s full-faith-and-credit debt to A from A+, making the largest tax-exempt borrower the lowest rated state, behind Louisiana. California’s 10-year general obligation bonds are already paying a record 1.23 percentage points in yield above benchmark municipal debt, according to Bloomberg indexes.

California 5 percent bonds due in 2023 traded at a price to yield 4.72 percent last week, almost a half-percentage point more than the 4.27 percent when they were sold in October 2007, according to Municipal Securities Rulemaking Board trade data.

‘Nervous Breakdown’

“It’s a major nervous breakdown,” said Jim Wunderman, president of San Francisco-based Bay Area Council, a business group whose members include Yahoo! Inc. and Shell Oil Co.

That the government of the world’s eighth largest economy can’t pay all its bills isn’t surprising, Wunderman said. A patchwork of voter-approved ballot initiatives since 1978 left California heavily dependent on income taxes and ill equipped for what may become the longest recession since World War II, he said.

The state has taken steps to stem that, including temporarily canceling $3.8 billion in spending on public works, affecting workers around the state. In the current year, about 51 percent of general fund revenue will come from income taxes, up from about 34 percent in 1978, according to the legislative analyst’s office. In California, income tax collections on capital gains, which last year totaled $11 billion, are expected to plunge 55 percent this year, Schwarzenegger’s office has forecasted.

State Treasurer Bill Lockyer has halted debt sales, saying Wall Street won’t lend the money at affordable rates until the deficit and cash crisis are solved. The state last sold general obligation bonds in June.

What a joke...they would be borrowing the money if someone would lend it to them...

Feb. 9 (Bloomberg) -- Orders for Japanese machinery fell for a third month in December as businesses scrapped investment plans amid a collapse in exports and deteriorating earnings. Bookings slid 1.7 percent from November, when they fell 16.2 percent, the sharpest drop since the survey started in 1987, the Cabinet Office said today in Tokyo.

TOKYO, Feb 9 – Japan’s corporate bankruptcies rose 15.8 percent in January from a year earlier to 1,360 cases, a six-year high for the month, hit by a deeper economic crisis and the effects of the credit squeeze on smaller firms, a research firm said on Monday.

The number of bankruptcies among listed companies has hit a record high for any financial year since World War Two, having climbed to 35 so far for the year to March 31, including real estate fund operator Creed and three others in January, Tokyo Shoko Research said.

The number of bankruptcy cases in January rose for the eighth straight month, while total debt involved expanded 44.3 per cent to 838.99 billion yen ($9.14 billion), up for the fifth straight month, it said.

It said increased bank borrowing by large companies, which are faced with growing short-term financing needs and unfavourable capital market conditions, have eaten into banks’ ability to lend to smaller companies.

Notice a trend there....banks only lend to the big boys who eat up the little guys...

BERLIN (AFP) – The global economic crisis could trigger political unrest equal to that seen during the 1930s, the head of the World Trade Organization (WTO) said in a German newspaper interview Saturday.

"The crisis today is spreading even faster (than the Great Depression) and affects more countries at the same time," Pascal Lamy told the Die Welt newspaper.

Questioned about the risks of political instability, Lamy -- who wraps up his four-year term as WTO director-general in September -- responded that that was "the main danger".

President Obama plans to order a sweeping overhaul of the National Security Council, expanding its membership and increasing its authority to set strategy across a wide spectrum of international and domestic issues.

The result will be a "dramatically different" NSC from that of the Bush administration or any of its predecessors since the forum was established after World War II to advise the president on diplomatic and military matters, according to national security adviser James L. Jones, who described the changes in an interview. "The world that we live in has changed so dramatically in this decade that organizations that were created to meet a certain set of criteria no longer are terribly useful," he said.

The new structure, to be outlined in a presidential directive and a detailed implementation document by Jones, will expand the NSC's reach far beyond the range of traditional foreign policy issues and turn it into a much more elastic body, with Cabinet and departmental seats at the table -- historically occupied only by the secretaries of defense and state -- determined on an issue-by-issue basis. Jones said the directive will probably be completed this week.

MUNICH – In an effort to strike at a key income source for Taliban militants, the top NATO commander said Sunday that operations to attack drug lords and labs in Afghanistan will begin within the "next several days."

Gen. John Craddock, who also heads the U.S. European Command, also said that the U.S. and its allies are making progress in their efforts to fill the need for more troops, equipment and intelligence gathering in Afghanistan. He, however, would not disclose any specific commitments he got this weekend as world leaders met at a security conference here.

NATO defense ministers, during a meeting last fall in Hungary, authorized troops in Afghanistan to launch the drug attacks, but there had been questions about whether allies would be willing to follow through. Money from Afghanistan's booming illicit drug trade has been blamed for pumping up to $100 million a year into the coffers of resurgent Taliban fighters.

What a joke! Drug production has gone up 500% since the US pushed the Taliban out of control. How in the world would the Taliban bump up the drug trade over previous levels (when they had complete control) when they are now hiding out in remote areas and the US controls the two major trade routes? More spin to get more soldiers in so the US can expand drug operations of its own!

Feb. 9 (Bloomberg) -- General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.

U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.

Ironic since most of the key government people are former Citigroup, JPMorgan, and GS folks!

Henry Kissinger, the pioneer of Cold War detente during the Nixon era, has made a return to frontline politics after President Barack Obama reportedly sent him to Moscow to win backing from Vladimir Putin's government for a nuclear disarmament initiative.

The Daily Telegraph has learned that the 85-year-old former US secretary of state met President Dmitry Medvedev for secret negotiations in December. According to Western diplomats, during two days of talks the octogenarian courted Russian officials to win their support for Mr Obama's initiative, which could see Russia and the United States each slashing their nuclear warheads to 1,000 warheads.

The decision to send Mr Kissinger to Moscow, taken by Mr Obama when he was still president-elect, is part of a plan to overcome probable Republican objections in Congress.

Mr Kissinger is believed to have won a verbal rather than written undertaking for the deal. Tom Graham, a senior associate at Kissinger Associates and a former member of the national security council in the White House, on Thursday confirmed that Mr Kissinger had met Mr Medvedev but denied that any negotiations had taken place and said he had not met with Mr Putin.

However, a diplomatic source said that Mr Kissinger held two days of talks with Mr Putin at his country house near Moscow. Mr Obama apparently chose Mr Kissinger for his consummate diplomatic skills and his popularity in Moscow, an affection earned by his open acknowledgment of Russia's international resurgence.

Despite his pariah status with many Left-wingers in Mr Obama's Democratic Party, the president forged relations with Mr Kissinger during his campaign.

The compliment was returned when the 85-year-old veteran of the Nixon and Ford administrations said last month that the young president was in a position to create a "new world order" by shifting US foreign policy away from the hostile stance of the Bush administration.

Further demonstrating his willingness to work with his opponents on foreign policy issues, Mr Obama turned to two veteran Republicans steeped in Cold War experience to press home his plans.

Shortly after Mr Kissinger's trip, Richard Lugar, a Republican senator from Indiana who has worked on nuclear disarmament issues for 30 years, also visited Moscow. George Schultz, another former secretary of state, has also played a vital role.

Observers say signs of progress towards a new treaty could come as early as this weekend, when senior government officials meet at a security conference in Munich.

Joe Biden, the US vice president, is expected to address the conference and diplomats hinted he could announce the suspension of plans to erect a missile defence shield in central Europe, a project that has been frequently denounced in Moscow.

This is some heavy crap to cut through but let's take a stab at it...

First of all who's working for who? Henry Kissinger working for Obama or the other way around?

"The decision to send Mr Kissinger to Moscow, taken by Mr Obama when he was still president-elect, is part of a plan to overcome probable Republican objections in Congress."

So this president-elect was already making plans with key NWO people prior to the election?

Have you read the communist manifesto recently?


Politicians from Beijing to Berlin to Brasília see the current crisis as the product of a messed-up global financial infrastructure dominated by the U.S., and they will soon be pushing for big changes--whether Americans like them or not.

All this will begin to gel on April 2, when the newish international organization known as the G-20--the leaders of 19 of the world's biggest national economies, plus the European Union--meets in London. An unofficial meeting has already taken place, at the World Economic Forum in Davos, Switzerland, where G-20 officials (with the conspicuous exception of those from the U.S.) made speeches, conversed in the halls and gave a sense of the direction in which the world outside the U.S. wants to head.

What's more, a consensus seems to have emerged among the world's finance ministers and central-bank bosses that the chief underlying cause of the crisis was an unbalanced and out-of-control system of global capital flows in which some big-spender countries (namely the U.S.) ran up huge debts while big savers (China and India, for example) hoarded surpluses.

On the regulatory front, the path to a new global approach is pretty clear. Last spring the leaders of the G-7, a club of wealthy nations, agreed to create a "college of supervisors" to more closely coordinate regulation of multinational banks. The Group of Thirty, an influential organization of current and former central bankers and financial regulators, recommended in January that "systematically significant" financial institutions (those that are too big to fail) be identified in advance and subjected to higher capital requirements and tougher regulation.

Bretton Woods is the mountain resort in New Hampshire where in 1944 the Allied nations met--with the U.S. calling almost all the shots--to plan a postwar financial system. The Bretton Woods creations included the International Monetary Fund (IMF), the World Bank and a quarter-century of fixed exchange rates built around a U.S. dollar that was linked to gold. The fixed exchange rates and gold standard unraveled in the 1970s, and ever since we've had a system in which the IMF occasionally steps in to help countries in currency crises (usually imposing harsh terms in the process) but exercises no real control over the global financial system.

In the view of many outside the U.S. (and some within), the only way to limit such excesses is through a bigger, more powerful IMF that can act as a central bank to the world--and knock heads when needed. While everybody agrees that this new IMF needs to be less dominated by the U.S. and Western Europe, things get controversial as soon as you go past voting rights. Should capital flows be restricted? Should there be limits on trade deficits and surpluses? Should the IMF be able to order around even the U.S.? If the answer to any of these questions is yes, global capitalism will have entered a new and dramatically less freewheeling era.

Say hello to my worldly little friend called communism!

Ask just about anyone in Washington involved in the $800-billion-plus economic stimulus legislation churning its way through Congress, and they will tell you it is a milestone - but without question the less expensive, and politically and technically less chancy, part of the Great National Bailout of 2009.

This week, President Barack Obama and his Treasury secretary, Timothy Geithner, will prepare the United States for the next, and far more difficult, step: another attempt to fill the huge hole blown in the center of the nation's financial system.

No one has yet put a price tag on that effort. But the administration's diagnosis of what went wrong with the first attempt to right the financial system - that it was too small, and that the problem has ballooned in recent months - suggests that the next effort will almost certainly entail a far bigger commitment of taxpayer dollars than the $350 billion left from the $700 billion effort last year to right the system, and probably far more than the stimulus package.

And the final part, which Obama is not expected to announce for several days, involves spending billions of dollars more to prevent home foreclosures, for fear that the displacement and anger created by throwing people out of their homes, and putting more properties onto a glutted market, will create a psychological and financial death spiral.

"Today, we have three interrelated problems: a collapse of the real economy, a collapse of the banking system, and rapidly shrinking world trade," he added. "If you treat one without treating the others, you are doomed. And right now, to the naked eye, nothing seems to be working."

"The fact is," Meyer said, "there are a lot fewer creditworthy borrowers now than there were a year ago," thanks to job losses and the erosion of assets.

Meyer and other economists, however, say they are encouraged by the Obama administration's exploration of ways to draw private investors back into the market for "toxic assets." If the price of those assets drops low enough, and the government is willing to guarantee investors against losses, "I think there is a lot of money on the sidelines that may come in to buy these up," Meyer said. "There's a great profit opportunity here."

To get to that point, however, the moment when the government can leverage private money to supplement taxpayers' investments, will require a change in the national psychology. That, in the end, will be the administration's greatest challenge.

Great National Bailout of 2009 - remember that! Bailout....who's getting bailed out? who's doing the bailing? who's interests are at stake?

Problem (1) - a collapse of the real economy. Why? We reached the point where more debt is no longer productive or in other words, unsustainable.

Problem (2) - a collapse of the banking system. Why? Since the debt is no longer sustainable defaults are occurring on a massive scale.

Problem (3) - rapidly shrinking world trade. Why? Consumption is declining as spending contracts. Why is spending contracting? Tomorrow has finally arrived and we have to pay for all that borrowing.

What's the solution? "Government is willing to guarantee investors against losses." How are they going to do that?

"To get to that point (which is?), however, the moment when the government can leverage private money (who's private money?)to supplement taxpayers' investments (since when did the taxpayers become investors?), will require a change in the national psychology. That, in the end, will be the administration's greatest challenge."

Why does it require a change in psychology? I think it goes back to the government guarantee. How are they going to guarantee it? How does the government control anything? Force!

WASHINGTON - A STRONG 6.1-magnitude earthquake struck just off the coast of northern Peru Monday, the US Geological Survey reported.

JAKARTA - A 5.5-MAGNITUDE earthquake struck Indonesia's Sulawesi island on Monday but there were no immediate reports of damage or injuries, the geophysics agency said.

The worst drought in decades is still going on in northern China. There has been no rainfall in the Beijing area for over one hundred days, which is a very rare phenomenon for this time of year since 1972. Since Oct. 24, 2008, the precipitation recorded by the Beijing Southern Observatory was only .004 inches (on December 21, 2008), and there has been no additional measurable rainfall for over 100 days. Since autumn 2008, the precipitation in the Beijing area has continued to decline, and is even lower than that during the same period of the previous year.

Studies have shown that the area affected by the drought continues to expand, and that the drought of last autumn and winter is very likely to continue well into this spring, and the situation is considered so serious that on Feb. 3, the Ministry of Agriculture launched a first-level contingency plan to combat the drought.

The Beijing News reported on Feb. 4, that according to the Ministry of Agriculture, since wheat seeds sown last winter have started to sprout, there has been no measurable precipitation in the past three months in northern China, northwestern China, the area between the Huanghe River and the Huaihe River and the area between the Huaihe River and the Yangtse River. The average rainfall has dropped to 70 to 90 percent below normal for this time of year. The wheat-growing regions in northern China have suffered a severe drought for two seasons in a row, which was very rare in past years.

Wheat accounts for over 20 percent of China’s yearly grain output, with the winter wheat crop making up about 90 percent of its national wheat harvest each year, but there has not been any rainfall at all this season (2008 – 2009) in some parts of Henan province, one of the major wheat-growing regions in China, since farmers planted their wheat last year.

As of Feb. 2, the total area affected by the drought in Henan, Anhui, Shandong, Hebei, Shanxi, Gansu and Sha’anxi Provinces adds up to over 141,000,000 mu (about 23 million acres)—132,000,000 mu (about 21 million acres) more than last year—indicating that about 43 percent of the winter wheat is being affected.

Let's see....massive manufacturing under-utilization & massive numbers of starving unemployed people....sounds like its time for war...

Let's be very clear about all this. The Obama Administration is going to court to uphold -- to uphold -- the president's "prerogative" to arbitrarily declare any U.S. citizen an "enemy combatant" -- even if the citizen is arrested on U.S. soil -- and have that citizen held for years on end, without charges, in federal brigs where he can be isolated, broken and subjected to "harsh interrogation techniques." The Obama Administration is going to court to uphold -- to uphold -- the "prerogative" of government lawyers to proffer blatantly illegal memos concocted solely to justify an already existing system of crimes that are punishable by death under American law. The Obama Administration is continuing the Bush Administration's blatant blackmail against the nation's closest ally in order to keep evidence of torture -- evidence which involves no "sensitive" national security information whatsoever -- from being made public.

Is this clear enough for you? Is this what you voted for? And more importantly for all you savvy progressives out there who never want to commit the heinous sin of "making the perfect the enemy of the good" -- is this what you are willing to countenance and defend, with increasingly strained and painful moral contortions (like the ones that have greeted Obama's rendition policy), for the next four to eight years? Did you oppose the depredations of the Bush Regime out of principle -- or out of partisanship?

Iran leads international efforts in fighting illicit drug trafficking and is second to Pakistan in opiate seizures, according to the United Nations Office on Drugs and Crime. With 3,500 law enforcement officers killed in two decades of drug busts, the UN credits Iran for the seizure of 80 per cent of the opium netted around the world in 2007. Ali Larijani, the speaker of Iran's parliament, on Sunday accused the North Atlantic Treaty Organization (NATO) of trafficking narcotics produced in Afghanistan to Europe.

"It is strange that the bulk of these illegal drugs goes to Western countries through NATO-controlled airports," Larijani told Iranians residing in Munich.

The Afghan counter-narcotics minister on Sunday urged NATO troops operating in the country to treat drug traffickers like Taliban militants.