81 Japan's new government aims at regional Currency - Gavan McCormack

(1) Big risk of a double-dip Recession - Nouriel Roubini
(2) Deglobalization: "re-embedding" the economy in society - Walden Bello
(3) BIS forces banks to raise more capital
(4) Eurotunnel suffers as traffic tumbles
(5) Goldman funds take 21% stake in Eurotunnel
(6) Japan's new government aims at regional Currency - Gavan McCormack
(7) Indian Farmers forced to sell their Wives after crops fail

(1) Big risk of a double-dip Recession - Nouriel Roubini

From: John Craig <john.cpds@gmail.com> Date: 10.09.2009 11:06 AM

http://www.rgemonitor.com/roubini-monitor/257556/the_risk_of_a_double-dip_recession_is_rising

The Risk of a Double-Dip Recession is Rising

Nouriel Roubini | Aug 24, 2009

From the Financial Times:

http://www.ft.com/cms/s/0/90227fdc-900d-11de-bc59-00144feabdc0.html

The global economy is starting to bottom out from the worst recession and financial crisis since the Great Depression. In the fourth quarter of 2008 and first quarter of 2009 the rate at which most advanced economies were contracting was similar to the gross domestic product free-fall in the early stage of the Depression. Then, late last year, policymakers who had been behind the curve finally started to use most of the weapons in their arsenal.

That effort worked and the free-fall of economic activity eased. There are three open questions now on the outlook. When will the global recession be over? What will be the shape of the economic recovery? Are there risks of a relapse?

On the first question it looks like the global economy will bottom out in the second half of 2009. In many advanced economies (the US, UK, Spain, Italy and other eurozone members) and some emerging market economies (mostly in Europe) the recession will not be formally over before the end of the year, as green shoots are still mixed with weeds. In some other advanced economies (Australia, Germany, France and Japan) and most emerging markets (China, India, Brazil and other parts of Asia and Latin America) the recovery has already started.

On the second issue the debate is between those – most of the economic consensus – who expect a V-shaped recovery with a rapid return to growth and those – like myself – who believe it will be U-shaped, anaemic and below trend for at least a couple of years, after a couple of quarters of rapid growth driven by the restocking of inventories and a recovery of production from near Depression levels.

There are several arguments for a weak U-shaped recovery. Employment is still falling sharply in the US and elsewhere – in advanced economies, unemployment will be above 10 per cent by 2010. This is bad news for demand and bank losses, but also for workers’ skills, a key factor behind long-term labour productivity growth.

Second, this is a crisis of solvency, not just liquidity, but true deleveraging has not begun yet because the losses of financial institutions have been socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest.

Third, in countries running current account deficits, consumers need to cut spending and save much more, yet debt-burdened consumers face a wealth shock from falling home prices and stock markets and shrinking incomes and employment.

Fourth, the financial system – despite the policy support – is still severely damaged. Most of the shadow banking system has disappeared, and traditional banks are saddled with trillions of dollars in expected losses on loans and securities while still being seriously undercapitalised.

Fifth, weak profitability – owing to high debts and default risks, low growth and persistent deflationary pressures on corporate margins – will constrain companies’ willingness to produce, hire workers and invest.

Sixth, the releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending. The effects of the policy stimulus, moreover, will fizzle out by early next year, requiring greater private demand to support continued growth.

Seventh, the reduction of global imbalances implies that the current account deficits of profligate economies, such as the US, will narrow the surpluses of countries that over-save (China and other emerging markets, Germany and Japan). But if domestic demand does not grow fast enough in surplus countries, this will lead to a weaker recovery in global growth.

There are also now two reasons why there is a rising risk of a double-dip W-shaped recession. For a start, there are risks associated with exit strategies from the massive monetary and fiscal easing: policymakers are damned if they do and damned if they don’t. If they take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into stag-deflation (recession and deflation).

But if they maintain large budget deficits, bond market vigilantes will punish policymakers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation.

Another reason to fear a double-dip recession is that oil, energy and food prices are now rising faster than economic fundamentals warrant, and could be driven higher by excessive liquidity chasing assets and by speculative demand. Last year, oil at $145 a barrel was a tipping point for the global economy, as it created negative terms of trade and a disposable income shock for oil importing economies. The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly towards $100 a barrel.

In summary, the recovery is likely to be anaemic and below trend in advanced economies and there is a big risk of a double-dip recession.

The writer is professor of economics at the Stern School of Business, NYU

31/08/2009  Nouriel Roubini (Financial Times)

(2) Deglobalization: "re-embedding" the economy in society - Walden Bello

From: ERA <hermann@picknowl.com.au> Date: 10.09.2009 04:37 AM

http://www.commondreams.org/view/2009/09/04-4>

Published:  on Friday, September 4, 2009 by Foreign Policy in Focus (FPIF)

... deglobalization is about "re-embedding" the economy in society, instead of having society driven by the economy

The Virtues of Deglobalization

by Walden Bello

The current global downturn, the worst since the Great Depression 70 years ago, pounded the last nail into the coffin of globalization. Already beleaguered by evidence that showed global poverty and inequality increasing, even as most poor countries experienced little or no economic growth, globalization has been terminally discredited in the last two years. As the much-heralded process of financial and trade interdependence went into reverse, it became the transmission belt not of prosperity but of economic crisis and collapse.

End of an Era

In their responses to the current economic crisis, governments paid lip service to global coordination but propelled separate stimulus programs meant to rev up national markets. In so doing, governments quietly shelved export-oriented growth, long the driver of many economies, though paid the usual nostrums to advancing trade liberalization as a means of countering the global downturn by completing the Doha Round of trade negotiations under the World Trade Organization. There is increasing acknowledgment that there will be no returning to a world centrally dependent on free-spending American consumers, since many are bankrupt and nobody has taken their place.

Moreover, whether agreed on internationally or unilaterally set up by national governments, a whole raft of restrictions will almost certainly be imposed on finance capital, the untrammeled mobility of which has been the cutting edge of the current crisis.

Intellectual discourse, however, hasn't yet shown many signs of this break with orthodoxy. Neoliberalism, with its emphasis on free trade, the primacy of private enterprise, and a minimalist role for the state, continues to be the default language among policymakers. Establishment critics of market fundamentalism, including Joseph Stiglitz and Paul Krugman, have become entangled in endless debates over how large stimulus programs should be, and whether or not the state should retain an interventionist presence or, once stabilized, return the companies and banks to the private sector. Moreover some, such as Stiglitz, continue to believe in what they perceive to be the economic benefits of globalization while bemoaning its social costs.

But trends are fast outpacing both ideologues and critics of neoliberal globalization, and developments thought impossible a few years ago are gaining steam. "The integration of the world economy is in retreat on almost every front," writes [1] the Economist.   While the magazine says that corporations continue to believe in the efficiency of global supply chains, "like any chain, these are only as strong as their weakest link. A danger point will come if firms decide that this way of organizing production has had its day."

"Deglobalization," a term that the Economist attributes to me, is a development that the magazine, the world's prime avatar of free market ideology, views as negative. I believe, however, that deglobalization is an opportunity. Indeed, my colleagues and I at Focus on the Global South first forwarded deglobalization as a comprehensive paradigm to replace neoliberal globalization almost a decade ago, when the stresses, strains, and contradictions brought about by the latter had become painfully evident. Elaborated as an alternative mainly for developing countries, the deglobalization paradigm is not without relevance to the central capitalist economies.

11 Pillars of the Alternative

There are 11 key prongs of the deglobalization paradigm:

1.      Production for the domestic market must again become the center of gravity of the economy rather than production for export markets.

2.      The principle of subsidiarity should be enshrined in economic life by encouraging production of goods at the level of the community and at the national level if this can be done at reasonable cost in order to preserve community.

3.      Trade policy - that is, quotas and tariffs - should be used to protect the local economy from destruction by corporate- subsidized commodities with artificially low prices.

4.      Industrial policy - including subsidies, tariffs, and trade - should be used to revitalize and strengthen the manufacturing sector.

5.     Long-postponed measures of equitable income redistribution and land redistribution (including urban land reform) can create a vibrant internal market that would serve as the anchor of the economy and produce local financial resources for investment.

6.     De-emphasizing growth, emphasizing upgrading the quality of life, and maximizing equity will reduce environmental disequilibrium.

7.      The development and diffusion of environmentally congenial technology in both agriculture and industry should be encouraged.

8.      Strategic economic decisions cannot be left to the market or to technocrats. Instead, the scope of democratic decision- making in the economy should be expanded so that all vital questions - such as which industries to develop or phase out, what proportion of the government budget to devote to agriculture, etc. - become subject to democratic discussion and choice (to mind comes participatory democracy. vg)

9.      Civil society must constantly monitor and supervise the private sector and the state, a process that should be institutionalized.

10.     The property complex should be transformed into a "mixed economy" that includes community cooperatives, private enterprises, and state enterprises, and excludes transnational corporations.

11.     Centralized global institutions like the IMF and the World Bank should be replaced with regional institutions built not on free trade and capital mobility but on principles of cooperation that, to use the words of Hugo Chavez in describing the Bolivarian Alternative for the Americas (ALBA), "transcend the logic of capitalism."

From the Cult of Efficiency to Effective Economics

The aim of the deglobalization paradigm is to move beyond the economics of narrow efficiency, in which the key criterion is the reduction of unit cost, never mind the social and ecological destabilization this process brings about. It is to move beyond a system of economic calculation that, in the words of John Maynard Keynes, made "the whole conduct of life...into a paradox of an accountant's nightmare." An effective economics, rather, strengthens social solidarity by subordinating the operations of the market to the values of equity, justice, and community by enlarging the sphere of democratic decision making. To use the language of the great Hungarian thinker Karl Polanyi in his book The Great Transformation, deglobalization is about "re-embedding" the economy in society, instead of having society driven by the economy.

The deglobalization paradigm also asserts that a "one size fits all" model like neoliberalism or centralized bureaucratic socialism is dysfunctional and destabilizing. Instead, diversity should be expected and encouraged, as it is in nature. Shared principles of alternative economics do exist, and they have already substantially emerged in the struggle against and critical reflection over the failure of centralized socialism and capitalism. However, how these principles - the most important of which have been sketched out above - are concretely articulated will depend on the values, rhythms, and strategic choices of each society.

Deglobalization's Pedigree

Though it may sound radical, deglobalization isn't really new. Its pedigree includes the writings of the towering British economist Keynes who, at the height of the Depression, bluntly stated: "We do not wish...to be at the mercy of world forces working out, or trying to work out, some uniform equilibrium, according to the principles of laissez faire capitalism."

Indeed, he continued, over "an increasingly wide range of industrial products, and perhaps agricultural products also, I become doubtful whether the economic cost of self-sufficiency is great enough to outweigh the other advantages of gradually bringing the producer and the consumer within the ambit of the same national, economic and financial organization. Experience accumulates to prove that most modern mass- production processes can be performed in most countries and climates with almost equal efficiency."

And with words that have a very contemporary ring, Keynes concluded, "I sympathize...with those who would minimize rather than with those who would maximize economic entanglement between nations. Ideas, knowledge, art, hospitality, travel - these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible; and, above all, let finance be primarily national."

© 2009 Foreign Policy in Focus       Walden Bello, a Foreign Policy In Focus columnist, is professor of sociology at the University of the Philippines and senior analyst at the Bangkok-based research and advocacy institute Focus on the Global South. He is the author of, among other books, Dilemmas of Domination: The Unmaking of the American Empire (New York: Henry Holt, 2005).

(3) BIS forces banks to raise more capital

Regulators agree tough rules on bank capital

http://www.ft.com/cms/s/0/cb938b36-9bd1-11de-b214-00144feabdc0.html

By Norma Cohen and Patrick Jenkins in London and James Wilson in Frankfurt

Published: September 7 2009 18:24 | Last updated: September 7 2009 23:12

Regulators have agreed tough new rules for banks that flesh out proposals agreed by the G20 group of nations over the weekend that would force many in Europe to raise tens of billions of euros in capital in coming months.

The rules will force banks to substantially improve the quality and extent of the capital buffers they hold to absorb shocks.

At least half of the capital cushion of banks must comprise common equity and retained earnings under measures agreed by the powerful Basel committee of central bank governors and bank regulators, according to people familiar with the discussions.

The committee also agreed to put “hard” limits how much banks can borrow. It is likely to set a ceiling on borrowings of no more than 25 times assets. There will be no exceptions for less risky assets.

Moreover, it also agreed that bank supervisors should be able to limit the ability of banks to make payouts to shareholders through dividends or buy-backs when times are good, enabling them to build “counter-cyclical” buffers against bad times.

The Basel committee is expected to put out concrete proposals by the end of the year and adjust them by the end of 2010 after carrying out an impact assessment.

European banks are expected to be hardest hit by the Basel committee moves as complex securities constitute a large part of their capital cushions than their US peers. The securities, a mixture of debt and equity, are known as hybrid capital.

The list of banks that need to raise common equity could include Germany’s Commerzbank and Lloyds Banking Group in the UK, as well as French and Italian banks, assuming the Italians participate in the coming weeks in the planned issue of so-called Tremonti bonds. Analysts forecast rights issues from early 2010.

Kian Abouhossein, analyst at JPMorgan, said: “I think the first banks to be forced to raise equity will be those that have hybrid capital from governments.”

Hybrid capital covers a variety of instruments, such as preference shares, that are not pure equity but have traditionally been deemed close enough to it to count towards a bank’s tier one capital ratio – the key measure of financial strength.

Some European banks have traditionally held a lot of their capital in hybrid form in an effort to minimise the dilution to equity investors from having to raise fresh funds. Regulators in Europe have allowed banks to hold more hybrid capital than their US counterparts – up to a third of total tier one capital in some jurisdictions. But that has proved problematic in the financial crisis, since hybrid capital does not have the same loss-bearing capacity as true shareholders’ equity.

Some banks – from Royal Bank of Scotland to Switzerland’s UBS – have been buying back their own hybrid debt at knock-down prices in recent months in a tactic aimed at boosting core tier one ratios with the profit on the transactions.

But many German banks, in particular, still have very high levels of “hybrid” capital and, in contrast to other countries, there has been little or no fresh equity issuance to offset it.

(4) Eurotunnel suffers as traffic tumbles
By Robert Wright, Transport Correspondent

Published: July 24 2009 11:57 | Last updated: July 24 2009 11:57

http://www.ft.com/cms/s/0/113faf96-7839-11de-bb06-00144feabdc0.html

The head of the company that runs the Channel Tunnel has insisted traffic trends continue to run in the company’s favour, in spite of a near-halving in revenue from the company’s core cross-Channel shuttles in the first half.

Jacques Gounon, Groupe Eurotunnel’s executive chairman, said the first-half falls resulted from a combination of the effects of the September 2008 tunnel fire which restricted capacity until February and a sharp decline in cross-Channel truck traffic. They pushed the company into a first-half net loss of ?8m ($11.3m) on ?302m revenue, against ?26m net profit on ?386m revenue for the first half of 2008.

(5) Goldman funds take 21% stake in Eurotunnel
By Robert Wright in London

Published: September 7 2009 21:30 | Last updated: September 7 2009 21:30

http://www.ft.com/cms/s/.../264d4a5a-9bda-11de-b214-00144feabdc0.html

The company that runs the undersea tunnel between England and France is to have a large institutional shareholder for the first time in two decades after two funds managed by Goldman Sachs opted to convert their bonds in Groupe Eurotunnel into shares.

The two funds, together known as Goldman Sachs Infrastructure Partners, would hold about 21.2 per cent of Groupe Eurotunnel immediately after the conversion took place, Eurotunnel said on Monday. The shareholding is likely to fall to about 15.2 per cent over the next few years as instruments created during the company’s 2007 conversion turn into shares.

(6) Japan's new government aims at regional Currency - Gavan McCormack

Kyunghyang Sinmun essay, published in Seoul two days ago (Tuesday 8 September).

http://news.khan.co.kr/kh_news/art_print.html?artid=200909071751165

Hatoyama, Hope of Japan (original English title: "The Elephant on the Tatami").

The Elephant on the Tatami

Gavan McCormack

2009-09-07 17:51:16

A new government comes to power at last in Japan. Not since 1947 has a governing party been rejected by the electorate, and save only for a brief interlude in the 1990s the Liberal Democratic Party (LDP) has held power since its founding in 1955, so the events of 30 August were indeed historic. The Japanese people have decided they would tolerate no longer its collusion, corruption, arrogance, incompetence and lying.

In any other country, the end of such prolonged one-party rule would have occasioned outbursts of joy, perhaps dancing in the streets, but Tokyo's mood was dour. Surveys found that though people wanted change, and above all wanted to get rid of the LDP, but most did not really expect the new government to be able to accomplish fundamental change, and were skeptical about some its policies, such as subsidies for farmers and children and abolition of freeway fees. More than half wished they had more of a choice than that offered by the current two party system. But most were pleased, and, at least for the time being, welcomed the new regime.

The new ruling party, the Democratic Party of Japan (DPJ), is a weak vessel for the kinds of reform the country needs. Headed by the grandson of a founder of the LDP, it comprises a loosely knit coalition of former LDP conservatives and former Japan Socialist Party members. Years of opposition has nevertheless attuned it to the concerns and values of civil society. In his policy statement issued shortly before the election, Hatoyama adopted the French revolutionary slogan of "fraternite." The era of "US-led globalism" and "market fundamentalism" in a "unipolar world," he said, was ending. He promised a more inclusive and caring society, the regeneration of communities and attention to restoring the ravages of nature. While the Japan-US Security Pact would remain "the cornerstone of Japan's diplomatic policy," the "East Asian region … must be recognized as Japan's basic sphere of being," and his government would pursue the goal of a regional community, with its own currency. As well, he made a somewhat remarkable promise: to seize power from the bureaucracy. 62 years after democratic government began, it was telling that such a pledge should have to be made, and that many commentators thought this might be his biggest challenge.

Hatoyama's predecessor and mentor, Ozawa Ichiro, was more explicit about what the renegotiation of the US alliance might mean, saying that the construction of a new marine base in Northern Okinawa - core component to the "Reorganization of US forces in Japan" under the US-Japan agreements of 2005-6, would not go ahead and that the US should be satisfied with the presence of the 7th Fleet in East Asia and therefore not need its chain of bases in Japan and Korea. Ozawa was ousted as party leader shortly after he made that statement, and a drumbeat of "warnings" have been issued from Washington ever since as to the consequences of any attempt to renegotiate deals done between the US and LDP governments. Since the Hatoyama victory, Washington is reported to be deeply "concerned," fearful, it seems, that Japan might be about to declare independence.

Two basic facts are impossible to gainsay. First, economics, as Marx observed, determines politics. The economic shifts of the 21st century are so momentous that sheer realism demands adjustment. Just since this century began, Japan's trade with the US has halved (to 13.5 per cent) while that with China has doubled (to 20.3 per cent), and that with Asia as a whole has grown steadily (to 48.5 per cent).

Second, closely related, the US decline is not just economic but comprehensive, in political, military, and above all moral terms. While the Asian region has grown increasingly inter-dependent and even grown a measure of cultural coherence, US-led military ventures around the world have proved ineffectual or counter-productive, driving whole countries and regions into chaos and the US economy itself into crisis. Following the Wall Street-induced global economic crisis, the once globally hegemonic Washington consensus on economic and social policies is also in tatters. Under such circumstances, the self abasement of the world's No 2 power as a US dependency has become increasingly incongruous.

The LDP's 21st century governments have promoted agendas for which there was minimal public support: on the one hand neo-liberal economic and social policies designed to "Americanize" Japan and on the other diplomatic and security measures to lock it into the American embrace. The electorate has now rejected the former for the social costs it has entailed, and has awakened to the fact that the latter has amounted to the LDP selling out the Japanese national interest, turning Japan into a "client state." Despite the stress by LDP figures on national pride, beauty, and uniqueness, they lament Japan's lost sovereignty and lack of independent diplomatic initiatives or global voice, especially in its own region. They are especially angry at the LDP over recent revelations that the "alliance" to a large extent rested on lies. Successive Japanese governments combined a public pose of non-nuclear principles with a secret assurance to the US to ignore them, preferring to deceive the Japanese public rather than disappoint their American ally.

Hatoyama's desk must already be stacked with files. Apart from the huge domestic policy issues he faces, should his government maintain the Self Defense Force's Indian Ocean mission? Should it continue with the merger of intelligence and command of US and Japanese forces and with the subsidizing of global US military interventions? Should it allow the relatively pristine environment of Northern Okinawa to be sacrificed for the construction of a new base and port for the US Marine Corps? Should it authorize the payment of $6 billion to build houses, schools, shopping malls and sewerage systems for the US on US territory (Guam)? Should it, in short, "honor" the deals shamelessly pushed through the Diet by LDP governments with minimal debate while they enjoyed the two-thirds majority in the Diet won by Koizumi's promises of "reform?" Should Japan continue to treat with deference the annual lists of reforms desired by the US government? Hatoyama's intellectual and moral fibre will be tested as he grapples with such matters.

One file on his desk will cause him special difficulty: should Japan continue with the bankrupt North Korea policies of its predecessor governments and rely exclusively on sanctions to force North Korean submission, or should it return to the spirit of the Pyongyang Declaration of 2002 and make every effort to normalize this most abnormal of all relationships? If he can solve that problem, it will become so much easier to renegotiate the US alliance and the bases, scrap Japan's nuclear weapon-based defense policies, and advance the cause of an Asian regional community.

For the last half century, the US government has continued to dictate basic Japanese security and other policies, squatting like a large elephant on Japan's tatami, while government and media and academic pundits pretended Japan was a sovereign and independent state. The bribes, threats and promises by which the US had its way in the early Cold War years gave way to "softer" means as LDP learned how to internalize, anticipate, and serve Washington, but in the 21st century the dependence deepened and its debilitating effects spread.

It is too early to predict that a fundamental realignment of the structural plates under the region might be underway, but the chances are better than they have ever been. Hatoyama does not look like a revolutionary, but Japan needs one to reverse course away from its half century of submission and he is its best hope.

(7) Indian Farmers forced to sell their Wives after crops fail

From: ummyakoub <ummyakoub@yahoo.com> Date: 10.09.2009 09:28 AM

North Indian farmers are selling their wives to survive, it has been revealed.

Farmers sell wives after crops fail
By Dielle D'Souza
Monday, 7 September 2009
http://www.independent.co.uk/news/world/asia/farmers-sell-wives-after-crops-fail-1783221.html

North Indian farmers are selling their wives to survive, it has been revealed.

Left without money due to failing crops, debt-ridden farmers in Bundelkhand, Uttar Pradesh, have reportedly been selling their wives to money lenders for Rs 4,000 - 12,000 (£50-150).

The more beautiful the woman, the higher the price that she fetches, it was claimed.

The deals are allegedly being settled on a legal stamp paper under the heading "Vivaha Anubandh" meaning Marriage Contract. Once the new "husband" is tired of the woman, she is allegedly sold to another man.

The National Commission for Women (NCW) is now sending a team to investigate the reports.

Girija Vyas, chief of the NCW, said: "It is awful and unbelievable that it still happens in the country, and that too in Uttar Pradesh where the chief minister is a woman.

"We are sending a team to find out the details and have asked for the report within 24 hours."

She added that the commission had also written a letter to the state's chief minister.

One of the victims said: "My husband sold me to another man for Rs 8,000 (£100) only. My buyer took me to the court to make our wedding look legal. During the trip I got the chance to escape."

In most cases, the women are illiterate and cannot read what is written in the "contract".

A farmer who helped expose the situation to the Indian media said he is now being harassed.

"I was summoned to the police station and questioned," the man who is known only as Kalicharan said.

"I told them I had spoken to the media because no one was listening to us. But they threatened me and said I was lying. My wife was also called to the police station."

With reports suggesting that thousands of farmers in the region are involved, the situation has spiralled into a major political crisis.

Opposition parties are blaming the Bahujan Samaj Party (BSP) government led by chief minister Mayawati for the problem.

The state Congress president Rita Bahuguna Joshi said: "It is a painful situation. I am sending a team of Congress workers to help these women."

A spokesman for leading opposition, the Bharatiya Janata Party, said: "Both the BSP-led state government and the Congress at the centre are responsible for this.

"The centre has been talking of creating a separate authority for Bundelkhand while some factions want a state. Nobody is helping these farmers."

Erratic rainfall in the region this year is one of the main causes of failing crops.