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"We're in the Money": Sid Harth

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chhotemianinshallah

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Mar 5, 2010, 10:44:30 AM3/5/10

Gold Diggers of 1933 - "We're in the Money"

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Gold Diggers of 1933 (1933) Directed by Mervyn LeRoy. Dick Powell,
Ruby Keeler, Joan Blondell, Aline MacMahon, Ginger Rogers, Warren
William (98 min.) plus: notes on 2 early musical shorts, Sissle and
Blake's Snappy Songs (1923) and The Opry House (1929).

Sex, money, power. What could be clearer than the opening shot of the
movie, with chorus girls scantily clad in coins? What does a girl have
to do to get a decent meal? And, how far can a good girl go before she
becomes a bad girl?

The Gold Diggers was a hit play in 1919, running a year and a half on
Broadway. A silent version was made in 1923 and the first talking
"Gold Diggers" movie was made in the crash year of 1929. The Vitaphone
discs with the soundtrack exist, including the hit song, "Tiptoe
Through the Tulips," but only the last reel of film. There are still
modern gold diggers of course. But, they were more common when casual
sex was less common. In one of her memoirs, Anita Loos, the author of
Gentlemen Prefer Blondes, told of a conversation she had with a young
friend during the so-called Sexual Revolution of the 1970s. "You mean,
you could get a diamond bracelet just for doing that?" said a young
woman who did what an earlier generation might have called, "giving it
away."

Gold Diggers of 1933 had two directors, Mervyn LeRoy for the plot and
Busby Berkeley for the musical numbers. The backstage "putting on a
show" story was not integrated into the action, and the songs could
have been cut out completely without harming the continuity, although
the film would have been a lot poorer for it. At RKO, the Astaire-
Rogers musicals would soon change the landscape, but not yet. While
Berkeley's dance extravaganzas of the early 1930s would seem to be
impossible anywhere but on the movie screen, they in fact did have
origins dating back to 19th century stage spectacles. They evolved
from the revues that had been popular on Broadway in the teens and
twenties. Revues were not a series of completely unrelated acts, like
in a vaudeville show, but a series of musical and comedy specialties
structured around a loosely defining theme. This theme, in many cases,
may only have been the decorative display of the female body. There
were intimations of his movie style in chorus numbers Berkeley did on
stage, where showgirls became factory assembly lines or airplanes.
There were no overhead views, but he used stairs and platforms to
alter the space on stage, and in Earl Carroll Vanities of 1928 he used
an optical device called the "Vanities Votaphonevitotone" to project
enlargements of one chorus girl's face at a time on a screen.

Busby Berkeley and Dancers

Berkeley's giddy, girly kaleidoscopes in his great early Warner
Brothers period, from 42nd Street in 1933 to The Gold Diggers of 1935
had an art deco geometry that other dance numbers simply didn't. There
was a tension between innocence and vulgarity, a fragmenting of the
female body that only he could imagine on the screen. He made the
camera a participant in his dance routines, not just a spectator, from
the earliest work he did in Hollywood for Eddie Cantor in Whoopee.
Berkeley had a unique advantage at Warner Brothers, in that he was not
required to showcase a particular musical star, but worked with an
ensemble, since it was the chorus that seemed particularly to inspire
him. He loved shiny black floors and dancers in white, he loved girls'
faces and other parts of their bodies, too. These numbers were
rehearsed and rehearsed until they were perfect. If you have any doubt
how hard it is to do these numbers, rent Kenneth Branaugh's Love's
Labour's Lost. Shakespeare aside, he tried to recreate 1930s musical
numbers and failed dismally, partly because of a lack of rehearsal
time. Their sloppiness evokes a high school play rather than a multi-
million dollar film.

I promised to solve the mystery of Ruby Keeler's tap dancing. She came
from a tradition where, rather than having taps on the toe and heel of
your shoes, the whole sole of the shoe was wooden, so you had to stomp
on the flat of your foot to make the tap sound. This is why her clunky
technique is the opposite of Fred Astaire's suavity. (I must add, that
at the NCMA screening, I was chastised after the show by several
audience members for criticizing Ruby's dancing!) She came to
Hollywood as Al Jolson's wife, he of course the great Broadway star
who sang and spoke in the film that started the talkie revolution, The
Jazz Singer. Then, in best Star is Born fashion, as his celebrity
dimmed she became more and more famous. She once told an interviewer
after their divorce, "Al Jolson was the greatest entertainer who ever
lived. He told me so every day."

A proud and happy man is Al Jolson. When he is interviewed he can talk
of nothing but Ruby, his brilliant wife

Warner Brothers was, according to J. Hoberman, "the purveyor of brash,
racy, cynical, up-to-date movies populated by fast-talking wise guys;"
this goes for musicals and gangster films alike. Mike Mashon, the
Curator at the Library of Congress who helped me arrange this series,
and I both have a weakness for Pre-code WB pictures: there's nothing
like 'em. You'll see some of my favorite members of the stock company
here, actors whose images were so defined, the script department just
wrote in "Guy Kibbee" or "Ned Sparks" instead of the character names.

Back in the harness of Hollywood, Joan's vaude-vacation is over. Her
clipping bureau, if she has one, must have flooded her with "Gold
Digger" compliments, and now "Goodbye Again" is also a wow. As a
steno, Joan teaches Warren William a system that Isaac Pitman never
dreamed of, but it will be recognized in some of our best offices.
Joan's "Forgotten Man" is becoming the catch phrase of the season.

Dress like a movie star (if you can sew). But, I doubt this is an Orry-
Kelly design.

Warren William and Aline MacMahon are always great. William is
uncharacteristically benign here, he usually plays heartless seducers.
Aline MacMahon's tart delivery enlivens many 30s WB films. She's
fabulous as a retired gangster's moll, dressed in overalls and running
a desert service station in Heat Lightning. Orry Kelly designed the
costumes for this film. He may not be as famous as Adrian or Edith
Head, but the gorgeous gowns here have been an inspiration to me since
I first saw this movie on tv as a teenager.

(Note: framed on the wall is a famous Harrison Fisher suite of
paintings, dating from about 1910, depicting courtship and marriage)

Warner Brothers publicity made a big deal of the complexity and
expense of the grandiose musical numbers. Berkeley was famous for an
overhead shot that was a wow on-screen, but of course, impossible in a
theater. James Sanders notes in Celluloid Skyline, "One story has
(Darryl) Zanuck coming onto the stage during the production (of 42nd
Street) and finding the director in the rafters, looking at the stage
floor. 'What the hell are you doing up there?' Zanuck shouted. 'You
can't take the audience up there!' 'I know,' Berkeley replied, 'but
I'd like to. It's awful pretty up here.'" For Gold Diggers of 1933, he
designed a crane that ran on dual tracks; it went both up and down as
well as gliding back and forth. Sixty feet off the ground seemed not
quite high enough,and he had holes cut in the studio roof to take his
camera still higher.

Mervyn LeRoy, the great director of "Gold Diggers of 1933" with Doris
Warner--the boss's daughter!

Fifty-four girls sang "We're in the Money," their costumes consisted
of 54,000 "silver" coins, which were replicated in chocolate and foil
for advertising give-aways. Ginger Rogers, supposedly goofing around
during the interminable rehearsals, sang a chorus in pig-latin, and
director LeRoy incorporated it into the final version.

"The Shadow Waltz" was one of Berkeley's signature extravaganzas
featuring swirling chorines sawing away on neon violins. They wore
hoop skirts incorporating 2000 yards of lightweight china silk,
"Seventy-five women worked eight days to make these costumes and at
the last minute, two milliners sat up all night to create 54 silver
wigs of metallic cloth with little sequin tendrils in front giving the
appearance of curls." One of the dancers said in an interview that the
interaction between the neon violins and the metallic wigs caused a
constant crackling of little electric shocks around their heads. This
number almost became a disaster when an earthquake occurred during the
filming, the ramp swayed and some of the dancers were nearly
electrocuted. The filming was as intense as rehearsal, in one instance
a 7:30 am call ended 24 hours later. Watch for Busby Berkeley himself
a small part as a secondary backstage callboy.

Rehearsal photo taken on the "Shadow Waltz" set. Art Director Anton
Grot points to his model with a pencil, as director LeRoy and Berkeley
look on.

A neon violin from an exhibition at the Smithsonian

Gold Diggers of 1933 was filmed during the lowest economic point in
American history, and was a film that reflected Depression reality.
These gold diggers care less about jewelry than where their next meal
was coming from. "Remember My Forgotten Man" evokes general dispair,
but also specifically the Bonus Army. These were WWI Veterans who came
to Washington to ask for the veterans' bonuses they were owed, and
when Congress voted down the request they were forcibly dispersed by
the troops ordered out by President Hoover, an action that doomed his
presidency. The Gold Diggers of 1933 embraces newly elected FDR's New
Deal, and in the pairing of innocents Dick Powell and Ruby Keeler
looks forward to economic and spiritual rebirth.

Shown with: A De Forest Phonofilm (1923) Sissle and Blake's Snappy
Songs (7 min.) starring Eubie Blake and Noble Sissle. Engineers
tinkered with sound starting almost from the beginning of cinema; Lee
De Forest was one of the most successful.. His sound on film technique
had trouble with perfect synchronization and the quality was variable,
but with improvements would eventually become the industry standard.
In 1923, De Forest gathered 9 of vaudeville's top headliners,
including Sissle and Blake, Weber and Fields and Eddie Cantor to stand
in front of his cutting edge technology and record their specialties
for posterity. All the shorts were shown as a single program on April
15, 1923. He continued recording vaudeville stars, operas, minstrel
shows, and political speeches in the 1920s. The tuxedo clad Sissle and
Blake sing three songs, including one of their signature tunes,
"Affectionate Dan" and "All God's Chillun' Got Shoes." The sound on
the print we showed was very rough, but appropriately conveyed the
experimental nature of the Phonofilm technique.

Eubie Blake and Noble Sissle wrote the first all-Black show on
Broadway, Shuffle Along (1921). They wrote many standards, including
"I'm Just Wild About Harry." Blake, who died a few days after his self-
proclaimed 100th birthday in 1983 (he was actually born in 1887)
reminisced for author Al Rose's biography, "Now, this was the first
time we worked in front of a camera, and in those days they couldn't
move the camera around on wheels, or turn it every way, so naturally,
it couldn't follow you. That didn't bother me too much because I'm
sittin' at the piano anyway, I ain't goin' nowhere. But Sissle, he's
all over the stage, see. If he has to stand still and sing, it's just
real hard for him to do that. He's an actor and that cramps his style.
So when you see the film--and if you know how he is the rest of the
time-- you can see he's not up to his best. Another thing, If you play
to a theater audience, you have to learn to do a stage smile. Now that
means you show your teeth. The audience is too far away to see if
you're laughin' or cryin' or if you really look sad. But if those
people out there see teeth, they're satisfied. Now, if you do the
stage smile and the camera is eight feet away, then when the films
come out your stage smile looks like a Halloween mask. The audience
can see you're not happy at all if you're not. You can't hide nothin'
from that camera. So me and Sissle don't look natural in that film. We
sound real good. There ain't nothin' fake about the sound. At the time
I didn't think too much about the whole thing, but then as time went
on, I realized that we made show-business history that day. The first
Negro act in talking pictures! The first film music!"

And, The Opry House (9 min) (1929) with Lew Hearn, Doris Walker and
the Mound City Blue Blowers, including Red McKenzie and Eddie Lang.
Vitaphone was the trademark of the Warner Brothers sound system. The
sound was recorded on 78s that were synchronized with the film; a
record player was attached with a belt to the projectors. The Gold
Diggers of 1933 still says "Vitaphone" but the sound is recorded on
the film, the disc system scrapped as unwieldy.

I love the low tech of these early talkies. This one showcases many of
these qualities. One take, and keep the camera rolling, even if
somebody fluffs their lines. Don't move off your mark, or the mikes
won't be able to record you. But, best of all, real music, sweet and
hot, no playbacks and lipsyncing, for a real taste of 1929. The Mound
City Blue Blowers were formed in 1924, and had lots of different
personnel over the years. This incarnation has guitarist Eddie Lang,
who virtually invented the guitar as a jazz instrument. Lang was a
boyhood friend of violinist Joe Venuti, and they often played
together. Lang died just 4 years after this film, aged 31, the victim
of a botched tonsillectomy. He was in a couple of features, and
another Vitaphone short; but this could be his longest time on camera,
although he just plays rhythm with no solos. The audience loved Red
McKenzie's comb-tissue and tin can playing, and the goofy guy who
plays a suitcase with a pair of whisk brooms.

This short has been restored by the Library of Congress and the
Vitaphone Project at UCLA. LOC has the film, and UCLA the discs for
many early shorts, and the Vitaphone Project is slowly reuniting them.
They are searching for missing elements, so, if you have those big,
16" Vitaphone discs in your collection, the Vitaphone Project wants to
hear from you. One of my correspondents, Bill Edwards of http://ragpiano.com
notes that they are not 78 RPM as I always thought: "Vitaphone discs
were not 78 RPM (the common format of the day) as even a 12" or 16"
disc would not have the necessary 11 minute capacity for a reel. They
were actually among the earliest 33 1/3 RPM discs, although acetate or
shellac, and not polyvinyl chloride (PVC or vinyl), as that would not
come until the late 1940s. Indeed, if you listen to any of the
Vitaphone shorts on disc three of The Jazz Singer set, you can hear
the timing of the whoosh at a single point on some of them, which will
further confirm that speed. They simply used a wider groove for better
dynamic range than the average 78 RPM record of the time...It makes
sense that even a larger record would not have the 11 minute capacity
at 78 and maintain the horizontal bandwidth necessary in the groove to
send loud enough tones to the amplifier to make for better
reproduction and go that long. A 10" record at 78 has perhaps 4:30
practical length, but 2:50 at Vitaphone groove sizes, and a 12" about
5:30, but only 4:00 at Vitaphone size. Even increasing to 16" would
not give enough time.

(Photo of Ned Sparks and Joan Blondell from moviediva's collection.
Aline MacMahon, Ginger Rogers and Ruby Keeler from the December 1965
Films in Review, and Berkeley and his chorines from the October, 1973
Films in Review. "Shadow Waltz" photo from John Springer's All
Talking, All Singing, All Dancing. Ruby and Al, Joan and Warren,
Mervyn and Doris from September, 1933 Silver Screen, neon violin from
exhibition catalogue, Hollywood: Legend and Reality edited by Michael
Webb, "Shadow Waltz" rehearsal photo from the Museum of Modern Art
Stills Department.)

c.moviediva2001(RevisedMay2003, January2008)

http://www.moviediva.com/MD_root/reviewpages/MDGoldDiggers1933.htm

Full Synopsis Cast & Crew Awards Related Movies

The second talkie version of the Avery Hopwood's theatrical war-horse
The Golddiggers of Broadway, Gold Diggers of 1933 was the second of
three back-to-back 1933 Warner Bros. musicals benefiting from the
genius of Busby Berkeley. The basic plot is retained from the Hopwood
play: Showgirls Joan Blondell, Ruby Keeler and Aline McMahon attempt
to find financial backing for the new show planned by producer Ned
Sparks. Songwriter Dick Powell, an incognito man of wealth, offers to
put up the money, a fact that brings down the wrath of his older
brother Warren William, who despises show folk. Attempting to buy off
the three girls, William is placed in a compromising position by the
crafty Blondell and is compelled to bankroll the musical himself. The
oddest aspect of Gold Diggers of 1933 is the fact that the mood of the
songs is wildly at variance with the plot. The film begins with dozens
of chorus girls (led by Ginger Rogers) happily chirping "We're In the
Money", a rehearsal number interrupted when the finance men burst in
to claim the sets and props from the impoverished troupe. At the end,
when everyone is genuinely in the money, the troupe stages a downbeat
"Brother Can You Spare A Dime"-style production number, "Remember My
Forgotten Man"--and it is on this doleful indictment of the Depression
that the film fades out! Other Berkeley-staged musical highlights
include "Pettin' in the Park" (yes, that salacious little baby really
is Billy Barty) and the neon-dominated "Shadow Waltz", all written by
the prolific Harry Warren and Al Dubin. As spectacular as Gold Diggers
of 1933 was, it would be topped by the last of Berkeley's 1933
trilogy, Footlight Parade. ~ Hal Erickson, All Movie Guide

Award Source Year Recipient Best Sound

Nominated
Academy of Motion Picture Arts and Sciences0 Nathan Levinson

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http://www.fandango.com/golddiggersof1933_v20140/summary

Gold Diggers of 1933
From Wikipedia, the free encyclopedia

Gold Diggers of 1933

theatrical poster

Directed by Mervyn LeRoy
Produced by Robert Lord
Jack L. Warner
Written by Play:
Avery Hopwood
Screenplay:
Erwin S. Gelsey
James Seymour
Dialogue:
Ben Markson
David Boehm
Starring Ruby Keeler
Dick Powell
Joan Blondell
Ginger Rogers
Music by Harry Warren
(music)
Al Dubin
(lyrics)
Cinematography Sol Polito
Editing by George Amy
Distributed by Warner Bros.
Release date(s) May 27, 1933 (US)
Running time 96 minutes
Country United States
Language English
Budget $433,000 (est.)

Gold Diggers of 1933 is a pre-code Warner Bros. musical film directed
by Mervyn LeRoy with songs by Harry Warren (music) and Al Dubin
(lyrics), staged and choreographed by Busby Berkeley. It stars Ruby
Keeler, Dick Powell, Joan Blondell and Ginger Rogers and features
Warren William, Guy Kibbee, Ned Sparks and Aline MacMahon.

The story is based on the play The Gold Diggers by Avery Hopwood,
which ran for 282 performances on Broadway in 1919 and 1920.[1] The
play was made into a silent film in 1923 by David Belasco, the
producer of the Broadway play, as The Gold Diggers, starring Hope
Hampton and Wyndham Standing, and again as a talkie in 1929, directed
by Roy Del Ruth. That film, Gold Diggers of Broadway, which starred
Nancy Welford and Conway Tearle, was the biggest box office hit of
that year, and Gold Diggers of 1933 was one of the top grossing films
of 1933.[2] This version of Hopwood's play was written by James
Seymour and Erwin S. Gelsey, with additional dialogue by David Boehm
and Ben Markson.

In 2003, Gold Diggers of 1933 was selected for preservation in the
United States National Film Registry by the Library of Congress as
being "culturally, historically, or aesthetically significant".

Plot

The "gold diggers" are four aspiring actresses: Polly the ingenue,
Carol the torch singer, Trixie the comedienne and Fay the glamourpuss.

The film was made in 1933 at the nadir of the Great Depression and
contains numerous direct references to it. In fact, it begins with a
rehearsal for a stage show, which is interrupted by the producer's
creditors who close down the show because of unpaid bills.

At the unglamorous apartment shared by three of the four actresses
(Polly, Carol, and Trixie), the producer, Barney Hopkins (Ned Sparks),
is in despair because he has everything he needs to put on a show,
except money. Then he accidentally hears Brad Roberts (Dick Powell),
the girls' neighbor and Polly's boyfriend, playing the piano. Brad is
a brilliant songwriter and singer who not only has written the music
for a show, but also offers Hopkins $15,000 in cash to back the
production. Of course, they all think he's pulling their legs, but he
insists that he's serious – he'll back the show, but he refuses to
perform in it, despite his talent and voice.

Brad comes through with the money and the show goes into production,
but the girls are suspicious that he must be a criminal since he is
cagey about his past, and will not appear in the show, even though he
is clearly more talented than the aging juvenile lead they have hired.
It turns out, however, that Brad is in fact a millionaire's son whose
family does not want him associating with the theatre. On opening
night, in order to save the show when the juvenile can't perform (due
to his lumbago acting up), Brad is forced to play the lead role.

With the resulting publicity, Brad's brother, J. Lawrence Bradford and
the family lawyer, Fanuel H. Peabody discover what he is doing, and
arrive in New York to prevent him from being seduced by "gold
diggers." Their goal is to break up the romance between Brad and
Polly.

Lawrence mistakes Carol for Polly, and his heavy-handed effort to
dissuade the "cheap and vulgar" showgirl from marrying Brad by buying
her off annoys her so much that she goes along with the gag in order
to eventually pull the rug out from under him. Trixie meanwhile
targets "Fanny" the lawyer as the perfect rich sap ripe for
exploitation. But what starts as gold-digging turns into something
else, and when the dust settles, Carol and Lawrence are in love and
Trixie marries Fanuel, while Brad is free to marry Polly after all.
All the "gold diggers" (except Fay) end up married to wealthy men.

Cast

Ruby Keeler as Polly Parker, the ingenue
Dick Powell as Brad Roberts, the songwriter and singer (aka Robert
Treat Bradford)
Joan Blondell as Carol King, the torch singer
Ginger Rogers as Fay Fortune, the glamourpuss
Warren William as Lawrence Bradford, Brad's brother
Guy Kibbee as Faneul H. Peabody, the Bradford family lawyer
Ned Sparks as Barney Hopkins, the producer
Aline MacMahon as Trixie Lorraine, the comedienne
Etta Moten as soloist in "Remember My Forgotten Man" (uncredited)
Billy Barty as The Baby in "Pettin' in the Park" (uncredited)

Cast notes

Character actors Sterling Holloway and Hobart Cavanaugh appear in
small roles, as does choreographer Busby Berkeley (as a backstage call
boy who yells "Everybody on stage for the 'Forgotten Man' number").
[3]

Other uncredited cast members include Robert Agnew, Joan Barclay,
Ferdinand Gottschalk, Ann Hovey, Fred Kelsey, Charles Lane, Wallace
MacDonald, Wilbur Mack, Dennis O'Keefe, Fred Toones, Dorothy Wellman,
Renee Whitney, Jane Wyman and Tammany Young.[4]

Production

Gold Diggers of 1933 was originally to be called "High Life", and
George Brent was an early casting idea for the role played by Warren
William. It was made for an estimated $433,000,[5] at Warner Bros.
studios in Burbank, and went into general release on May 27, 1933.

In 1934, the film was nominated for an Oscar for Best Sound Recording
for Nathan Levinson, the film's sound director.

[edit] Musical numbers

Busby Berkeley's "We're in the Money" production number from Gold
Diggers of 1933The film contains four song and dance sequences
designed, staged and choreographed by Busby Berkeley. All the songs
were written by Harry Warren and Al Dubin.[6] (In the film, when
producer Barney Hopkins hears Brad's music he picks up the phone and
says: "Cancel my contract with Warren and Dubin!")

"We're in the Money" is sung by Ginger Rogers accompanied by scantily-
clad showgirls dancing with giant coins. Rogers sings one verse in Pig
Latin.

"Pettin' in the Park" is sung by Ruby Keeler and Dick Powell. It
includes a tap dance from Keeler and a surreal sequence featuring
dwarf actor Billy Barty as a baby who escapes from his stroller.
During the number, the women get caught in a rainstorm and go behind a
backlit screen to remove their wet clothes in silhouette. They emerge
in metal garments, which thwart the men's attempts to get them off,
until Billy Barty gives Dick Powell a can opener. This number was
originally planned to end the film.[3]

"The Shadow Waltz" is sung by Powell and Keeler. It features a dance
by Keeler, Rogers, and many female violinists with neon-tubed violins
that glow in the dark. Berkeley got the idea for this number from a
vaudeville act he once saw - the neon on the violins was an
afterthought. An earthquake hit Burbank while this number was being
filmed:

[it] caused a blackout and short-circuited some of the dancing
violins. Berkeley was almost thrown from the camera boom, dangling by
one hand until he could pull himself back up. He yelled for the girls,
many of whom were on a 30-foot (9.1 m)-high platform, to sit down
until technicians could get the soundstage doors open and let in some
light.[3]

"Remember My Forgotten Man" is sung by Joan Blondell and Etta Moten
and features sets influenced by German Expressionism and a gritty
evocation of Depression-era poverty. Berkeley was inspired by the May
1932 war veterans march on Washington, D.C. When the number was
finished, Jack Warner and Darryl F. Zanuck (the studio production
head) were so impressed that they ordered it moved to the end of the
film, displacing "Pettin' in the Park".[3]

An additional production number was filmed, but cut before release:
"I've Got to Sing a Torch Song" was to have been sung by Ginger
Rogers, but instead appears in the film sung by Dick Powell near the
beginning.[3][7]

Circumventing censorship with alternate footage

According to the book Sin in Soft Focus: Pre-Code Hollywood by Mark A.
Vieira, this was one of the first American films made and distributed
with alternate footage in order to circumvent state censorship
problems. Busby Berkeley used lavish production numbers as a showcase
of the female anatomy that were both "lyrical and lewd".[8] In this
film, "Pettin' in the Park" and "We're in the Money" are prime
examples. The state censorship boards had become so troublesome that a
number of studios began filming slightly different versions of
censorable scenes. In this way, when a film was edited, the "toned
down" reels were labeled according to district. One version could be
sent to New York, another to the South, and another to the United
Kingdom,[8] etc. According to Vieira, this film had two different
endings — in one, the rocky romance between William Warren and Joan
Blondell (whom he calls "cheap and vulgar") is resolved backstage
after the "Forgotten Man" number; in an alternate ending, the film
ends with the number.[8]

chhotemianinshallah

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Mar 5, 2010, 11:07:25 AM3/5/10

Market summary10:47AM EST

World markets

Shanghai 3,031.06 +7.69 (0.25%)
Nikkei 225 10,368.96 +223.24 (2.20%)
Hang Seng Index 20,787.97 +212.19 (1.03%)
TSEC 7,666.26 +96.46 (1.27%)
FTSE 100 5,601.22 +74.06 (1.34%)

CAC 40 3,901.16 +72.75 (1.90%)
S&P TSX 11,964.09 +139.12 (1.18%)
S&P/ASX 200 4,767.20 +16.70 (0.35%)
BSE Sensex 16,994.49 +22.79 (0.13%)

Currencies

Euro - USD 1.3588 +0.0004 (0.03%)
USD - JPY 89.2900 +0.2100 (0.24%)
GBP - USD 1.5032 -0.0001 (-0.01%)
CAD - USD 0.9693 -0.0003 (-0.03%)
USD - HKD 7.7629 -0.0001 (0.00%)
USD - CNY 6.8264 +0.0006 (0.01%)
AUD - USD 0.9027 +0.0037 (0.41%)

Bonds

3 Month 0.12% 0.00 (0.00%)
6 Month 0.18% -0.01 (-5.26%)

2 Year 0.91% +0.01 (1.11%)
5 Year 2.35% +0.01 (0.43%)
10 Year 3.68% +0.02 (0.55%)
30 Year 4.63% +0.03 (0.65%)

Feb. unemployment rate remains unchanged at 9.7 percent

Washington Post - 40 minutes ago

By Neil Irwin Job losses were mild in February despite extreme
snowstorms in much of the country, according to a government report
released Friday, suggesting that while the labor market remains weak
it is no longer getting worse.

Jobless Rate Holds Steady, Raising Hopes of Recovery
New York Times

Payrolls in US Fell 36000; Unemployment at 9.7%
BusinessWeek

Dow 10,530.45 +86.31 (0.83%)
S&P 500 1,133.77 +10.80 (0.96%)
Nasdaq 2,315.69 +23.38 (1.02%)

chhotemianinshallah

unread,

Mar 5, 2010, 11:33:50 AM3/5/10

Sid Harth

unread,

Mar 5, 2010, 3:11:45 PM3/5/10

Dollar Gains Versus Yen as U.S. Loses Fewer Jobs Than Forecast
By Ben Levisohn and Inyoung Hwang

March 5 (Bloomberg) -- The dollar strengthened against the yen as
fewer Americans lost jobs last month than economists forecast,
spurring speculation the Federal Reserve may move closer to interest-
rate increases as the economy strengthens.

The euro rose against the dollar after Luxembourg Prime Minister Jean-
Claude Juncker said Greece’s plans to reduce its budget deficit are
“solid.” The yen fell versus South Africa’s rand and Canada’s dollar
after the U.S. employment report spurred demand for riskier assets.

“The labor market in the U.S. is stabilizing,” said John Doyle, a
strategist at currency-trading firm Tempus Consulting Inc. in
Washington. “That helps future interest rate expectations and buoys
the dollar versus the yen.”

The dollar rose 1.6 percent to 90.44 yen at 2:01 p.m. in New York,
from 89.02 yesterday. The euro rose 0.2 percent to $1.3612, compared
with $1.3581. The yen fell 1.2 percent to 123.10 per euro, from
120.91.

The yen fell 2.2 percent to 12.18 per rand, from 11.9131. Japan’s
currency dropped 1.8 percent to 87.92 per Canadian dollar, from
86.29.

Futures trading on the CME Group exchange showed a 59 percent chance
that the Fed will raise its target rate for overnight bank lending by
at least a quarter-percentage point by its November meeting, up from
53 percent yesterday.

Canada’s dollar was headed for its biggest weekly gain in three months
versus the yen as U.S. payrolls fell by 36,000 in February, below the
68,000 median forecast in a Bloomberg News survey.

Canada, South Africa

“Canada ought to benefit from this because it’s closely tied to the
U.S. economy,” said Brian Kim, a currency strategist at UBS AG in
Stamford, Connecticut. “We see stronger Canadian dollar, but prefer to
play it against non-dollar crosses.”

The South African rand extended its biggest weekly rally in almost a
year against the yen after a report showed the central bank hasn’t
been buying foreign reserves to weaken the currency, easing concern of
intervention to stem rand gains.

Gross gold and foreign currency reserves declined to $39.4 billion
last month from $39.5 billion in January, the Pretoria- based South
African Reserve Bank said on its Web site today. Net reserves dropped
to $38.3 billion from $38.6 billion.

The currency gained 5.6 percent on the week against the yen, the most
since the five days ended April 3.

‘Stops Irrational Movements’

“The jobs number is taking the flight-to-quality out of the market,”
said Frank Pavilonis, senior market strategist in Chicago at futures
broker MF Global Ltd.’s Lind-Waldock unit. “It’s putting assets back
into risk currencies.”

Europe’s currency rose against the dollar after Juncker, who heads the
group of euro-area finance ministers, said Greece’s “consolidation
program is credible enough.”

“I can only hope that financial markets also take into consideration”
the plan and that it “stops all irrational movements,” Juncker told
reporters in Luxembourg today after a meeting with Greek Prime
Minister George Papandreou.

If markets don’t acknowledge the Greek steps, euro-area governments
“stand ready to take all measures that would be necessary to guarantee
the financial stability” of the region, Juncker said.

The Greek parliament today passed 4.8 billion euros ($6.5 billion) in
budget cuts, including wage reductions and an increase in the value-
added tax rate.

‘Concerns Fade’

“The last several days have seen some concerns over Greece fade,” said
Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New
York. “The non-negative news prevents slippage in the euro.”

Chile’s peso headed for the biggest weekly advance in two months
against the dollar as the country’s worst earthquake since 1960 fueled
speculation the government will tap its overseas savings fund to
finance reconstruction.

The peso climbed 1.2 percent to 508.82 per dollar, extending its
weekly advance to 3 percent, more than all other emerging-market
currencies except the South African rand. The peso earlier touched
508.75, the strongest level in almost six weeks.

‘Big Bluff’

The greenback gained as much as 1.76 percent against the yen, the
biggest intraday move since Dec. 11, as the U.S. jobless rate held at
9.7 percent last month.

Economists had forecast job losses may have accelerated last month,
partly because of blizzards on the East Coast and winter storms in the
South that closed some businesses and prompted temporary shutdowns.

The lower-than-forecast job loss “implies that absent the bad weather,
there’s a positive growth trend developing in payrolls,” said Aroop
Chatterjee, a currency strategist at Barclays Plc in New York. “That’s
certainly good news for the U.S. economy and the U.S. dollar,
particularly versus the yen.”

The euro may fall “massively” should investors test the European
Union’s strategy to support Greece, BNP Paribas SA said in an investor
note today. EU nations are working on a contingency rescue plan for
Greece, according to two people briefed yesterday in Berlin by an EU
official.

“Europe is playing a type of poker game with a potentially big bluff,”
analysts led by Hans-Guenter Redeker, the London- based global head of
foreign-exchange strategy at BNP, said today in a research note. “The
real problem would arise in the case of spreads rewidening, activating
Europe’s ‘Plan B’ to provide financial aid to Greece. In this case the
plan to ring fence Greece would collapse, sending the euro massively
lower.”

To contact the reporter on this story: Inyoung Hwang in New York at
ihw...@bloomberg.net; Ben Levisohn in New York at
blev...@bloomberg.net.

Last Updated: March 5, 2010 14:11 EST

http://www.bloomberg.com/apps/news?pid=20601100&sid=aPUOVAlcHRXk

Payrolls data buoy job creation hopes

By Lucia Mutikani
Reuters
Friday, March 5, 2010; 1:27 PM

WASHINGTON (Reuters) - U.S. employers cut fewer jobs than expected
during snow-battered February and the unemployment rate held steady at
9.7 percent, bolstering views the economy was on the brink of creating
jobs.

President Barack Obama, whose approval ratings have dropped partly
because of high unemployment, said the figures showed measures his
administration took to boost the economy were working but that
unemployment was still too high.

Nonfarm payrolls fell 36,000, the Labor Department said on Friday,
adding it was unclear how the severe snowstorms that hit much of the
country last month had affected employment.

Financial markets had expected payrolls to drop 50,000 in February and
the unemployment rate to edge up to 9.8 percent.

"If we did not have bad weather, then this number would have been
solidly positive. It tells me the economy and the jobs market have
evolved to the point where we are now ready to produce jobs," said
Phil Orlando, chief equity market strategist at Federated Investors in
New York.

Not only were February's job losses lighter than had been expected,
layoffs in the prior two months were 35,000 less than previously
reported.

U.S. stocks rose as the report allayed fears of a labor market setback
that had been fanned by a string of reports showing an increase in new
claims for jobless benefits. Prices for U.S. government debt fell,
while the dollar rose broadly.

In the wake of the report, U.S. short-term interest rates showed
investors thought the Federal Reserve, which has vowed to keep
borrowing costs ultra low for an "extended period," could raise its
benchmark rate from its current zero to 0.25 percent range by
November.

"The emergency interest rate level is no longer warranted either for
the markets or the economy," said Chris Rupkey, an economist at Bank
of Tokyo-Mitsubishi in New York. He said he expects the Fed to drop
its low-rate promise at its next meeting on March 16.

BAD WEATHER A FACTOR

Since the economy fell into recession in December 2007, 8.36 million
jobs have been lost. Job growth is crucial to sustain the economic
recovery, which started in the second half of last year.

Obama and fellow Democrats worry voter anger could cost them in
November congressional elections if progress is not made in putting
Americans back to work.

"I'm not going to rest, and my administration is not going to rest, in
our efforts to help people who are looking to find a job," Obama said
on Friday.

According to the Labor Department, bad weather kept about 1.03 million
workers home at some point last month compared to only 259,000 in
January. This was the highest since January 1996, when the country was
also slammed by blizzards.

While the winter storms might have affected its employment count, it
was difficult to quantify the impact, the Labor Department said.

Not every business closure or temporary worker absence causes a drop
in employment, because workers are counted as employed if they
received any pay during the survey period for the department's job
count, even if for just an hour.

Moreover, it was unclear how many workers may have been added to
payrolls in February for snow removal or repairs related to the
storms, it said.

Still, economists drawing parallels with the events in 1996 expect a
big jump in March payrolls. Payrolls in January 1996 fell by 19,000
and rebounded by 434,000 in February.

The weather effects last month were likely felt in the construction
sector, where employment fell by 64,000 jobs after declining by 77,000
in January. Manufacturing jobs increased 1,000, less than the 20,000
gained in January.

Temporary hiring, seen as a precursor to increases in payroll
employment, increased 48,000 last month. Employers have added
temporary help for five straight months after nearly two years of
monthly declines.

Half of the job losses last month came from government workers, but
that category is expected to see huge gains in the coming months as
more workers are hired for the once-a-decade U.S. census. In February,
15,000 temporary census workers were hired.

While the labor market is gradually improving, obstacles still
remain.

A broad measure of unemployment that includes the number of workers
marginally attached to the labor force and those working part time for
economic reasons rose to 16.8 percent from January's 16.5 percent.

About four in 10 unemployed workers in February had been out of a job
for 27 weeks or more.

"It is entirely probable that the unemployment rate will move higher
later this year as confidence in a modest recovery takes hold and
individuals look to find employment," said Joseph Brusuelas, head of
Brusuelas Analytics in Stamford, Connecticut.

(Additional reporting by Jeff Mason in Arlington, Virginia, and Ellen
Freilich in New York; Editing by Neil Stempleman)

http://www.washingtonpost.com/wp-dyn/content/article/2010/03/05/AR2010030501232.html

White House extends refinancing program for troubled homeowners

By Renae Merle
Washington Post Staff Writer
Tuesday, March 2, 2010

The Obama administration announced Monday that borrowers with little
or no equity in their homes will have another year to take advantage
of a refinancing program that so far has made little progress.

The Home Affordable Refinance Program was set to expire in June, but
so far it has reached fewer than 200,000 of the up to 5 million
borrowers federal regulators hoped it would help.

Market conditions have not changed significantly since the program was
launched last year, Edward DeMarco, acting director of the Federal
Housing Finance Agency, said in a statement. So to give lenders more
time to implement the plan and to "support and promote market
stability," the initiative will be extended to June 2011, he said.

The program is aimed at the millions of borrowers whose home values
have been diminished by a weak housing market, or who owe more than
their houses are worth, making it impossible for them to take
advantage of historically low mortgage rates. Originally, the program
targeted borrowers whose loan balances were slightly higher than their
property values. The program was later expanded to include those who
owe up to 25 percent more than their homes are worth.

These underwater borrowers are at greater risk of foreclosure, and the
administration hoped that lowering their payments would decrease their
chances of falling behind.

But the program ran into several problems. Many borrowers were too
deep in debt to qualify, and the program was limited to loans backed
by Fannie Mae or Freddie Mac, the federal mortgage financing
companies. The initiative was also dogged by delays as lenders
struggled to update their computer systems to accommodate the program.
Another obstacle was that many homeowners have second mortgages or
private mortgage insurance, which can get in the way of refinancing a
primary loan.

And for some borrowers, closing costs and other refinancing expenses
were not worth the lower interest rates, especially for homeowners
worried that they might lose their jobs or might hit another financial
crunch later.

"The overall volume last year was an embarrassingly small amount. I
don't think it will make a big difference" to have the program
extended, said Thomas Lawler, a housing consultant in Vienna.

http://www.washingtonpost.com/wp-dyn/content/article/2010/03/01/AR2010030102143_Comments.html

http://www.washingtonpost.com/wp-dyn/content/article/2010/03/01/AR2010030102143.html

Pulling Money-Market Funds Into Proper Regulation
By Jane Bryant Quinn
Sunday, August 2, 2009

I'm among the last people standing who think that Paul Volcker is
right about money-market mutual funds. They pose a systemic risk to
the financial system and need a radical fix.

That's not going to happen, at least not now. The Securities and
Exchange Commission proposes to tighten the regulations governing
money funds, but only by a little bit. The new rules won't force much
of a change in the way that money funds operate.

The danger posed by these funds was exposed last September, when
Lehman Brothers failed and the $62.5 billion Reserve Primary Fund got
stuck with its commercial paper. Money funds are expected to maintain
their net asset value, or NAV, at $1 a share to keep their customers'
savings safe.

Reserve Primary's net asset value dropped to 97 cents -- known in the
industry as "breaking the buck." That set off a run, not only on the
Reserve Primary but also on the other funds that invest in commercial
paper. Billions of dollars fled into Treasury funds, and the
commercial-paper market froze. To prevent a meltdown in corporate
finance, the government had to ride to the rescue with temporary
federal insurance and a backup lending facility.

Enter the Group of Thirty, a private organization that studies
international finance issues and risks. In January it issued proposals
for reform, after a study that Volcker led.

The G-30 nailed the weaknesses in money-market funds, describing them
as institutions with "no capital, no supervision and no safety net,"
yet offering checking-account and cash-management services like those
of regulated commercial banks.

Higher Interest Rates

There's a difference here: Banks have to hold reserves against demand
deposits and pay for Federal Deposit Insurance Corp. protection. Money
funds offer similar transaction accounts without being burdened by
these costs. That's why they usually offer higher interest rates than
banks.

In most cases, money-fund sponsors have come to their funds' rescue if
any question arose about the $1 value of their shares. Peter Crane,
president and founder of Crane Data in Westboro, Mass., says as many
as one-third of the funds will have needed support by the time this
global financial squeeze abates.

But you cannot be sure that sponsors will always be willing or able to
bail out shareholders, says Jack Winters of Hingham, Mass., an expert
who worked in the industry from 1976 to 2008 and commented on the SEC
proposals.

"Dealers supported auction-rate securities for 25 years until their
financial situation precluded it," he says.

SEC Proposals

Under the new regulations proposed by the SEC, money funds will be
required to invest in shorter-term securities, stick to the highest
quality, hold a modest amount of liquid capital to satisfy sudden
withdrawal demands, and post their holdings on their Web site once a
month. All of that pretty much follows the industry's own suggestions,
as outlined in a March report issued by the Investment Company
Institute, the mutual fund trade association in Washington.

None of these rules would prevent or mitigate a run if investors lost
confidence in money funds again. The government would have to step
back in.

Money Is Safe?

As the G-30 sees it, money funds that want to offer bank-like
services, such as checking accounts and withdrawals at $1 a share,
should reorganize as a type of bank, with appropriate supervision and
government insurance. Funds that don't want to operate that way should
not maintain the implicit promise that investors' money is always
safe. Instead, their share values should be allowed to rise and fall
like those of any other mutual fund. They could manage their
portfolios to stick closely to $1 a share.

The industry unanimously shouted "no."

"Money-market funds as we know them simply disappear," says Paul
Schott Stevens, president of the Investment Company Institute.
Investors seeking guaranteed safety and soundness would migrate back
to banks or the new bank-like funds. The remaining funds would become
less attractive because of their fluctuating price.

To Volcker, bringing investor money back to the banks would be just
fine.

"Why let another business develop without the responsibilities of a
bank and that ends up making banks weaker, when banks are the ones we
want to protect?" he said in an interview last week.

Hot-Money Dangers

Retail money funds, conservatively invested, aren't as vulnerable to
runs as institutional funds and may be safe in their present form. The
danger lies with the hot-money institutions that can pull billions of
dollars out of a fund in a millisecond. Of course, big investors could
also start a run on money funds that fluctuate too much in price. But
they would be less likely to sell if they'd lose money on the trade,
Winters says.

The SEC didn't propose a floating NAV. It merely asked for comments on
the idea.

"It's off the table," Crane says. "The crisis is over. The need for
radical surgery has lost its impetus."

That is, until the next time. Will money funds be the only
institutions "too big to fail" to escape the costs?

Jane Bryant Quinn, author of "Smart and Simple Financial Strategies
for Busy People," is a Bloomberg News columnist.

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/31/AR2009073104185_Comments.html

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/31/AR2009073104185.html

Hedging With Commodities Requires Just the Right Mix

(By Kirsty Wigglesworth -- Associated Press)
By Jane Bryant Quinn
Sunday, July 19, 2009

If you want to hold commodities in your investment portfolio, what's
the best way?

The simplest commodities investments follow various indexes. You'll
find a wide choice of exchange-traded funds (ETFs), exchange-traded
notes (ETNs) and traditional mutual funds. There's no standard index
that all the funds follow. Some tilt toward energy, others toward gold
or grains. Yet others treat all commodities equally.

The fund you choose isn't only a bet on the commodities; it's also a
bet on a particular asset mix.

Commodities have just come off a five-year boom. From 2003 to
mid-2008, energy prices soared 320 percent in dollar terms, metals and
minerals gained 296 percent, and foodstuffs rose 138 percent,
according to the World Bank. They crashed last year, along with
everything else, rebounded from March through May this year and then
eased off again.

The World Bank says the boom is over because of slower global
population and income growth. But commodities still attract dollar
bears -- often such assets rise in price when the dollar declines and
vice versa. They also appeal to inflation pessimists, even though
commodities aren't a reliable hedge against rising prices.

Inflation Concern

Michael Crook, an investment strategist for Barclays Wealth in New
York, says inflation is unlikely to surge anytime soon.

He says that there's plenty of spare capacity in the system, that
unemployment will probably stay high and that central banks are
discussing when to pull back the money they have thrown at the global
credit crisis.

But the huge budget deficits are still creating expectations of
inflation, with "hyperinflation" on some lips. That concern alone
might be enough to drive up commodity prices, Crook says, for a while,
at least. Price pressure will also arise from the growth of developing
countries, where goods production still trumps services and the
population is increasing its consumption of protein.

Diversification is the best argument for holding some small percentage
of your money in commodities -- say, 5 percent. Their prices generally
move up when stocks move down and vice versa. Over time, commodities
are no more volatile than equities and yield a slightly lower return,
Crook says.

ETNs vs. ETFs

If you buy, do you want an ETF or an ETN?

Commodity ETFs invest directly in commodity futures. They are usually
structured as interests in a limited partnership, so at tax time in
the United States, they generate a Schedule K-1. Any annual income and
profit are taxed.

Precious-metals ETFs are trusts that hold the metal itself. When you
sell, you are taxed at a maximum rate of 28 percent on long-term
gains.

An ETN is a promissory note. It tracks an index but is backed only by
the credit of the issuer. When Lehman Brothers failed, so did its
ETNs. You aren't taxed on any profit until you sell.

This brings me to the various investment possibilities. In the short
run, some commodities indexes do better than others, depending on
what's hot.

If you like energy, you'll love the iShares S&P GSCI Commodity-Indexed
Trust. This ETF follows the Goldman Sachs index, a production-weighted
benchmark that reflects each commodity's relative importance in the
global economy. Currently, it's 69 percent in energy, mostly oil.

The ETN for this index is iPath's S&P GSCI Total Return Index, backed
by Barclays Bank.

Which Product?

The largest trading volume occurs in the PowerShares DB Commodity
Index Tracking Fund ETF. It follows a Deutsche Bank index and can run
50 to 60 percent in oil.

Other indexes avoid overweighting energy. The iPath Dow Jones-UBS
Commodity Index Total Return ETN groups commodities into three baskets
-- energy, agriculture and metals -- none of which is allowed to
exceed one-third of the index.

The Greenhaven Continuous Commodity Index Fund ETF, a continuation of
the old Commodity Research Bureau index, invests in 17 commodities
equally. That underweights the most popular commodities that are
gaining value and overweights those that have been declining. In
theory, you are buying low and selling high.

Although these indexes diverge in the short run, they trade in the
same general direction in the long run. Crook advises a fund that's
well diversified, without emphasizing energy.

For a different type of product, consider the new S&P CTI Elements
ETN, based on S&P's Commodity Trends Indicator. It tracks price
changes in 17 contracts -- going long on contracts that show upward
price momentum and shorting those whose price is moving down.
(Exception: It never shorts energy because of the risk of extreme
upward movement.)

Off a Cliff

The fund rallied late last year when the other commodity funds fell
off a cliff. This year it's underperforming, tugged down by the short
sales it tracked during the spring rally.

Paul Justice, ETF analyst for Morningstar in Chicago, thinks the fund
will outperform long-only funds. "The research on the long/short
strategy is pretty convincing," he says.

Mark Willoughby, a principal in Modera Wealth Management in Old
Tappan, N.J., buys commodities for diversification. He prefers the
mutual funds. Fund expenses are higher than for ETFs, but he likes to
avoid the K-1 forms. They are more complicated than 1099s and
typically don't arrive until late March, he says.

To Brad Zigler of HardAssetsInvestor.com, gold is a better
diversification than any broad-based commodities index. He likes SPDR
Gold Shares ETF, the most widely traded gold fund, or iShares Comex
Gold Trust ETF. Gold hasn't been a great inflation hedge --
historically, oil is better, he says. But when stocks collapse, gold
is more likely to give your portfolio support.

Jane Bryant Quinn, author of "Smart and Simple Financial Strategies
for Busy People," is a Bloomberg News columnist.

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/17/AR2009071703820.html

Gold firms as price dip prompts buying, euro steadies
Jan Harvey
LONDON
Fri Mar 5, 2010 9:55am EST

Credit: Reuters/Arko Datta
LONDON (Reuters) - Gold swung back into positive territory on Thursday
as investors took advantage of the metal's fall below $1,130 an ounce,
buying at lower prices after U.S. jobs data and as the euro recovered
from lows.

The metal hit a session low of $1,126.60 an ounce as better than
expected payrolls data lifted the dollar, but quickly bounced back as
bargain hunting emerged and the euro recovered its initial losses.
Rising oil prices also helped gold.

Spot gold was bid at $1,134.15 an ounce at 1426 GMT, against $1,131.45
late in New York on Thursday. U.S. gold futures for April delivery on
the COMEX division of the New York Mercantile Exchange rose $1.80 to
$1,134.70 an ounce.

"The better-than-expected non-farm payrolls initially took (gold)
lower as the market moved in tandem with the stronger dollar," said
Saxo Bank senior manager Ole Hansen.

"The lows from yesterday held and it looks like the upside momentum is
still intact," he added. "The view among many is still that they worry
about missing the boat and there has been buying into the break
through $1,131."

The hotly-anticipated payrolls report showed U.S. employers cut a
smaller-than-expected 36,000 jobs in February, leaving investors
hopeful that the labor market was on the brink of creating jobs. The
unemployment rate was steady at 9.7 percent

The dollar initially rallied on the news as optimism over the
prospects for an economic recovery was boosted, but the euro quickly
bounced off its session low of $1.3529 to steady.

Analysts are optimistic that gold will stay firm in the medium term,
boosted by instability in the currency markets, concern over sovereign
debt, persistently low interest rates and prospects for inflation
later this year and into 2011.

Appetite for physical gold in key markets such as India and Turkey is
also showing signs of recovery after coming under pressure in 2009 as
prices rose to record levels.

OIL HITS 7-WEEK HIGH

Among other commodities, crude oil climbed more than 1 percent to a
seven-week high above $81 a barrel after the U.S. jobs data and on
signals China will maintain its economic stimulus measures.

Gold tends to track crude prices, as the metal can be bought as a
hedge against oil-led inflation.

Among other precious metals, silver was bid at $17.24 an ounce against
$17.10, tracking gains in gold.

Record demand drove the U.S. Mint's silver coin sales 40.2 percent
higher in the first two months of the year to 5.643 million ounces
from 4.025 million ounces, data released on the mint's website showed.

The world's largest silver-backed exchange-traded fund, the iShares
Silver Trust, said its holdings fell 61.02 tons from a day before to
9,412.43 tons on March 4.

Platinum was at $1,573.50 an ounce against $1,576.50, while palladium
was at $464 against $458.50.

Palladium has outperformed other precious metals this year, rising 14
percent compared to a 7.3 percent rise for platinum, 3.5 percent for
gold and 2.4 percent for silver.

"Palladium prices were notably strong, supported by spread trading
between platinum and palladium," said HSBC in a note.

"This is based in part on recent auto sales improvement regions that
are more reliant on gasoline engines -- i.e. North America and China
-- as compared to diesel engines, which are predominantly sold in
Europe."

Gasoline-powered vehicles use a greater percentage of palladium and
less platinum than diesel engines, which require more platinum and
less palladium.

(Editing by Keiron Henderson)

India seen as potential buyer for IMF gold
Feb 25, 2010
http://www.reuters.com/article/idUSTRE61O5L720100225?loomia_ow=t0:s0:a49:g43:r2:c0.089552:b31348706:z0
Dollar rises vs yen as US jobs data boosts optimism
Mar 4, 2010
http://www.reuters.com/article/idUSTRE5BF27F20100305?loomia_ow=t0:s0:a49:g43:r4:c0.074627:b31348706:z0

http://www.reuters.com/article/idUSTRE61L3UQ20100305

World stocks rise ahead of US jobs data
By JEREMIAH MARQUEZ (AP) – 11 hours ago

HONG KONG — Global stock markets rose Friday amid hopes a key U.S.
jobs report would show the world's largest economy was on track toward
a sustainable rebound.

European stocks opened higher after every major Asian market bounced
back from declines the day before. Oil prices extended gains above $80
a barrel, while the dollar strengthened against the yen and weakened
versus the euro.

Investors were awaiting the U.S. government's February jobs figures —
the monthly employment snapshot that is among the market's most
important reports_ for clues to whether the recovery under way in the
world's largest economy is sustainable.

Thursday brought cause for optimism the monthly report wouldn't
disappoint. The number of people filing jobless claims for the first
time fell last week and major retailers posted February sales numbers
that topped expectations — suggesting hard-hit Americans whose
spending is critical for Asian export companies were healing
financially.

In Asia, speculation that Japan was mulling extra measures to shore up
its recovery added to the upbeat mood. According to a media report,
the Bank of Japan might ease monetary policies to keep money flowing
through the economy as soon as this month.

Europe followed on Asia's heels, with Britain's FTSE 100 up 0.5
percent, Germany's DAX 0.3 percent higher and France's CAC 40 climbing
0.4 percent. News that Greece sold billions in bonds to pay for its
debt helped allay worries about its crumbling finances for now.
Futures pointed to gains Friday on Wall Street with S&P futures up 2.1
points, or 0.2 percent, to 1,124.40.

In Asia, Japan's Nikkei 225 stock average jumped 223.24 points, or 2.2
percent, to 10,368.96.

"Investors welcomed the (Bank of Japan) report," said Kazuhiro
Takahashi, equity strategist at Daiwa SMBC Securities Co. Ltd.
"Investors were speculating that further easing could help the yen
weaken."

A soft yen helps Japanese exporters by boosting the value of their
repatriated profits and making their goods more competitively priced
abroad.

In greater China, Hong Kong's market rose 1 percent to 20,787.97 and
Shanghai's market gained 0.3 percent to 3,031.06 as investors focused
on Chinese Premier Wen Jiabao's annual policy address.

Wen promised strong growth this year, 8 percent, and said the
government will combat inflation and risks to banks to maintain the
economy's recovery. While the annual hike in spending increase would
be halved, the government would ensure stimulus and easy credit
continue because the basis of renewed global growth is still weak, he
said.

Elsewhere, South Korea's Kospi was up 1 percent at 1,634.57. Markets
in India, Taiwan and Singapore gained, as well.

Friday's U.S. jobs report is likely to show unemployment continued to
rise, to 9.8 percent in February from 9.7 percent from the month
before, as employers cut 50,000 jobs. But economists say there could
be a silver lining if, as expected, both average hourly earnings and
average hours worked climbed last month. Such increases often precede
more hiring.

In currencies, the dollar rose to 89.27 yen from 89.13 yen. The euro
rose to $1.3595 from $1.3580.

Oil prices rose in Asia with benchmark crude for April delivery up 51
cents at $80.72.

In the U.S. Thursday, the Dow rose 47.38, or 0.5 percent, to
10,444.14, its highest close since Jan. 20. The Dow is now up 16
points, or 0.2 percent, for 2010.

The Standard & Poor's 500 index rose 4.18, or 0.4 percent, to
1,122.97. It is up 0.7 percent for the year.

AP reporter Shino Yuasa in Tokyo contributed to this report.

A man walks in front of the electric stock board of a securities firm
in Tokyo Friday, March 5, 2010. The benchmark Nikkei 225 stock average
rose 209.91 points, to end morning session at 10,355.63. (AP Photo/
Itsuo Inouye)

http://www.google.com/hostednews/ap/article/ALeqM5h3kgMAkbLwyfxBdjzw8Pc4KZ7DhQD9E8CC4O0

HK, China stocks up; Li & Fung hits high on US hopes
Fri Mar 5, 2010 12:51am EST
By Donny Kwok and Claire Zhang

HONG KONG/SHANGHAI, March 5 (Reuters) - Hong Kong shares rose at
midday on Friday with exporter Li & Fung (0494.HK) leading gains on
hopes of a recovery in the U.S. economy, while Premier Wen Jiabao
reaffirmed China's monetary and fiscal policies which aided a recovery
in Chinese banks and lifted China stocks.

Consumer goods exporter Li & Fung, which in January forged a sourcing
agreement with Wal-Mart (WMT.N), surged 4.2 percent on Friday to an
all-time high of HK$40 on hopes that it will benefit from a recovery
in the U.S. economy after better-than-expected retails sales which
pointed to a stablisation in the economy.

"There are not many options available in the market for Li & Fung
types of businesses. Anticipation that it will benefit from a recovery
in the U.S. fuelled demand for the stock," said Alex Wong, a director
at Ample Finance Group.

Chinese banks recovered from a sell-off in the previous session, after
China reaffirmed its loose monetary policy.

China will stick to an appropriately easy monetary stance and a
proactive fiscal policy as it seeks to counter the lingering impact of
the international credit crunch, Premier Wen Jiabao said on Friday.
[ID:nTOE62308M]

China's second-largest lender China Construction Bank (0939.HK) was up
0.50 percent at HK$5.99 by the lunch break.

Top lender ICBC (1398.HK) (601398.SS) was up 0.35 percent at HK$5.77
after rising 1.4 percent in the early session. ICBC said on Friday
that it was not facing pressure to raise new capital, even as many of
its peers announced fundraising plans to bolster their balance sheets.
[ID:nBJB003710]

The benchmark Hang Seng Index .HSI had trimmed gains and advanced 0.87
percent or 178.52 points to 20,754.30 at midday, poised to snap three
straight sessions of losses. The China Enterprises Index .HSCE of top
locally listed mainland Chinese stocks was up 0.72 percent at
11,860.09.

Brokers said investors switching away from disappointed index
heavyweights such as China Mobile (0941.HK) slowed the rise with
shares of the China mobile carrier edging down 0.07 percent to HK
$72.80 at midday. The stock fell 2.4 percent on Thursday after news
that it was in talks to buy a stake in Shanghai Pudong Development
Bank (600000.SS). [ID:nTOE62207B]

"It's hard to regain investors' confidence in the short run. As a fund
manager (point of view), I would delete the stock," Wong said.

Turnover fell to HK$32.75 billion ($4.2 billion) against midday
Thursday's HK$34.35 billion.

PetroChina (0857.HK) rose 2.7 percent to HK$9.01 after its Chairman
Jiang Jiemin said the company expected profit to improve this year
compared with 2009. [ID:nTOE624034]

Selling pressure on Hong Kong Exchanges & Clearing (HKEx) (0388.HK)
remained after the world's second-largest exchange operator by market
value posted lower-than-expected quarterly earnings. [ID:nTOE620077].
The stocks, which fell 2.03 percent on Thursday, lost a further 0.54
percent by the lunch break.

SHANGHAI UP AFTER MONETARY POLICY

China's key stock index edged up 0.07 percent on Friday, with
brokerages boosted by news of an imminent start to stock index futures
trade, while the index stabilised after Premier Wen Jiabao reaffirmed
China's monetary and fiscal policies.

The Shanghai Composite Index .SSEC ended the morning at 3,025.530
points, regaining its footing after a 2.38 percent fall on Thursday,
its biggest one-day fall in five weeks spurred in part by worries over
the possibility of more policy tightening.

"We need to continue to implement a proactive fiscal policy and
moderately easy monetary policy," Wen said in his government work
report delivered on Friday at the annual session of the National
People's Congress, China's parliament. [ID:nTOE62308M] [ID:nTOE6230AE]

Losing Shanghai stocks outnumbered gainers by 438 to 421, while
turnover dropped to 58 billion yuan ($8.5 billion) from Thursday
morning's 74 billion yuan.

"The tone of Wen's speech is generally in line with expectations,"
said Chen Huiqin, senior analyst at Huatai Securities in Nanjing.

"Investors should not be optimistic about a strong rebound given
lingering worries over more share supplies and liquidity."

The brokerage sector was strong, following news of the imminent start
of stock index futures trade and other reforms that will bring new
business opportunities.

Haitong Securities (600837.SS) rose 1.80 percent to 16.97 yuan while
Everbright Securities (601788.SS) advanced 3.69 percent to 27.25 yuan
and CITIC Securities (600030.SS) was up 1.99 percent at 27.16 yuan.

China's top securities regulator said the long-awaited launch of stock
index futures trade was likely in mid-April and a planned pilot
programme for margin trading and short selling of shares would start
before that. [ID:nTOE6230AC]

The index is heading for a 0.9 percent fall for the week, with last
week's 1.12 percent gain not seen supported by improvements in
fundamentals such as the balance of share supply and demand, with
regulators continuing to approve a steady stream of share offerings to
the market, traders said.

The market has also been pressured by policy moves to tighten
liquidity, including two increases in banks' reserve requirements
since the beginning of the year.

They added that the market was expected to remain in a narrow range in
the short term but was likely to test a key psychological support
level at 3,000 points.

FAW Car (000800.SZ), a subsidiary of major Chinese automaker FAW
Group, jumped 5.53 percent to 23.29 yuan after saying its net profit
rose 49.8 percent last year to 1.6 billion yuan.

The property sector was soft, with China Vanke (000002.SZ), the
country's largest listed property developer, falling 0.53 percent to
9.34 yuan after saying its turnover from housing sales in February
fell 35.4 percent on year to 2.51 billion yuan.

http://www.reuters.com/article/idUSTOE62404320100305

US, India set to launch economic partnership
(AFP) – 20 hours ago

WASHINGTON — The United States and India will launch an economic and
financial partnership next month, with a permanent cabinet-level
bilateral dialogue a key feature, the US Treasury said Thursday.

US Treasury Secretary Timothy Geithner will travel to India on April
6-7 to launch the US-India Economic and Financial Partnership in New
Delhi with Indian Finance Minister Pranab Mukherjee.

The partnership, to focus on macroeconomic policy, the financial
sector and infrastructure financing, will meet at the cabinet level,
alternately in the United States and India, led by Geithner and
Mukherjee, a Treasury statement said.

Working group meetings will be held throughout the year to advance
discussions on specific economic areas, it said.

The partnership was first announced in November when President Barack
Obama hosted Indian Prime Minister Manmohan Singh on the first state
visit since he entered the White House in January.

The United States already has a standing dialogue with fellow emerging
Asian giant China.

Officials said that unlike the dialogue with China, which is multi-
ministerial, the forum with India was focused purely on economic and
financial regulatory policy, led by the US Treasury and the Indian
finance ministry.

"We are still working through how frequently the ministers will meet,"
one official told AFP.

Former US President George W. Bush conceived of the US dialogue with
China to focus on the economy, but Obama expanded it to cover
strategic issues as well. Geithner and Secretary of State Hillary
Clinton led the dialogue with China in July in Washington.

The US-India partnership "will serve as a platform for greater
cooperation on economic issues of importance to both nations," the
Treasury statement said.

"Both countries recognize the importance of expanding bilateral
economic engagement, noting the rapid growth of US-India economic ties
and the increasing range of global macroeconomic and financial issues
on which the United States and India cooperate," it said.

During the trip, Geithner will also visit Mumbai, India?s financial
center, to meet with Indian and US business leaders.

The United States and India signed a landmark nuclear deal in 2008
which allows New Delhi to enter civilian nuclear energy markets for
the first time in decades despite its nuclear weapons arsenal.

The nuclear agreement was a milestone in relations between the world's
two largest democracies, which had inconsistent ties during the Cold
War when India was non-aligned and sometimes tilted toward the Soviet
Union.

http://www.google.com/hostednews/afp/article/ALeqM5j186Z7huU1EfJ9vdE5hspOfR3zjg

US Treasury's Geithner to travel to India April 6-7
5 Mar 2010, 1013 hrs IST, REUTERS

WASHINGTON: US Treasury Secretary Timothy Geithner will travel to
India next month to launch a new initiative aimed at boosting economic
and
financial ties between the two nations.

Geithner will meet with Indian Finance Minister Pranab Mukherjee in
New Delhi on April 6 for the first meeting of the U.S-India Economic
and Financial Partnership. The partnership is aimed at strengthening
"bilateral engagement and understanding on macroeconomic, financial
sector and infrastructure related issues," the Treasury said.

Geithner is also scheduled to meet with US and Indian business leaders
in Mumbai on April 7 before returning to Washington.

The White House announced the partnership last November after a
meeting between US President Barack Obama and Indian Prime Minister
Manmohan Singh.

SENSEX 16994.49 22.79
NIFTY 5088.70 8.45
NASDAQ 2292.31 11.63
DJIA 10444.14 47.38
RS/$ 45.82 0.01

Nifty may face resistance at 5100-5200: Anand Rathi
Duration: 00:38
Posted: 4 Mar, 2010, 0908 hrs IST
http://economictimes.indiatimes.com/tv/expert-views/Nifty-may-face-resistance-at-5100-5200-Anand-Rathi/videoshow/5639503.cms

Bullish on India growth: Sonal Varma, Nomura
Duration: 03:09
Posted: 2 Mar, 2010, 1714 hrs IST
http://economictimes.indiatimes.com/tv/expert-views/Bullish-on-India-growth-Sonal-Varma-Nomura/videoshow/5633668.cms
Hot on Dalal Street: Sesa Goa, Suzlon
Duration: 02:20
Posted: 5 Mar, 2010, 1314 hrs IST
http://economictimes.indiatimes.com/tv/hot-stocks/Hot-on-Dalal-Street-Sesa-Goa-Suzlon/videoshow/5646359.cms
Nifty ends below 5100; Hero Honda, DLF, Suzlon up
Duration: 01:27
Posted: 5 Mar, 2010, 1536 hrs IST
http://economictimes.indiatimes.com/tv/markets/Nifty-ends-below-5100-Hero-Honda-DLF-Suzlon-up/videoshow/5646873.cms

http://economictimes.indiatimes.com/news/politics/nation/US-Treasurys-Geithner-to-travel-to-India-April-6-7/articleshow/5645463.cms

Sid Harth

unread,

Mar 5, 2010, 4:52:37 PM3/5/10

Bloomberg

Kan Says BOJ Hasn’t Told Him of Monetary Easing Plans (Update1)
March 04, 2010, 8:31 PM EST

(Adds Kan quote in the second paragraph.)

By Keiko Ujikane

March 5 (Bloomberg) -- Japanese Finance Minister Naoto Kan said he is
aware of media reports that the central bank may consider further
monetary easing, though he hasn’t heard anything directly from the
bank.

“I haven’t received any message directly from the BOJ,” Kan said at a
news conference in Tokyo today, after the Nikkei newspaper reported
that the Bank of Japan may discuss easing policy this month or in
April.

Kan repeated a request for the bank to fight deflation and said it’s
too early for the government to withdraw fiscal stimulus because the
economic recovery remains fragile. He has been leading calls for
Governor Masaaki Shirakawa and his colleagues to stem price declines,
given that a swelling public debt burden limits the government’s
ability to expand spending.

The central bank will begin discussing expansion of a 10 trillion yen
($112 billion) lending facility for commercial banks at its March
16-17 meeting, the Nikkei reported today, without saying where it got
the information. The debate may extend into April, when two policy
meetings are scheduled, the newspaper said.

Kan said the central bank may be considering further steps in light of
his requests made in parliament for it to work with the government to
fight deflation.

Yen Falls

The yen fell against 15 major currencies on speculation the Bank of
Japan will keep its policy accommodative for longer than other central
banks. Kan said Japan’s currency may weaken “a bit” against the euro,
having surged 10 percent this year as concerns mounted about Greece’s
fiscal woes.

“One factor behind the recent yen gains was that the Greece problem
has weakened the euro,” he said. “As for today’s market conditions,
the euro is rising a bit. I’m not sure what’s going to happen but I
think the yen’s gains may ease a bit.”

The yen weakened to 121.21 per euro at 10:25 a.m. in Tokyo from 120.91
late yesterday in New York. Japan’s currency was 89.25 against the
dollar from 89.02.

Japan’s economy isn’t ready for the withdrawal of fiscal stimulus, the
finance minister said.

Prime Minister Yukio Hatoyama won the lower house’s approval this week
for a record 92.3 trillion yen budget for the year starting April 1.
His popularity is declining ahead of upper-house elections due in
July.

“Given the economic conditions, we’re not in the situation where Japan
can embark on an exit strategy,” Kan said. “There are some bright
indicators, however the economic situation, such as employment,
signals we still need to rely on fiscal spending somewhat.”

--With assistance from Kyoko Shimodoi and Aki Ito in Tokyo. Editors:
Russell Ward, Lily Nonomiya

%JPY %EUR %USD

To contact the reporter on this story: Keiko Ujikane in Tokyo at
kuji...@bloomberg.net

To contact the editor responsible for this story: Chris Anstey at
can...@bloomberg.net

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Market Update :

Business Investments in Japan Drop Again

Author: Darlington Musarurwa
123jump.com
Last Update: 6:29 PM ET March 04 2010

The benchmark index in Tokyo closed lower 1.1% on the worries that
lower economic growth in China will slow exports. Business investments
in Japan declined for the eleventh quarter in a row at the end of last
year. Higher yen dragged exporters and automakers lower.

5:00 AM New York, 7:00 PM Tokyo – The benchmark index in Tokyo closed
lower 1.1% on the worries that lower economic growth in China will
slow exports. Business investments in Japan declined for the eleventh
quarter in a row at the end of last year. Higher yen dragged exporters
and automakers lower.

Japan’s stock indexes fell after a government report noted a decline
in business investments in the three months to December.

Preliminary estimates forecast that the economy rose 4.6% in the
December quarter and the estimate is scheduled to be revised on March
11.

In Tokyo trading Nikkei 225 Stock Average decreased 1.1% or 107.42 to
10,145.72, and the broader Topix Index fell 0.9% to 897.64.

In the first section of the Tokyo Stock Exchange 17.2 billion shares
worth 1.2 trillion yen were traded and in the second section 279
million shares valued at 3.8 billion yen changed hands.

Of the Nikkei 225 index stocks, 38 gained, 176 dropped, and 11 were
unchanged. J Front Retailing led gainers in the index shares with a
rise of 5.1% followed by Fuji Electric House jumped 4.7%.

Corporate Investment Drops 17.3%

Japan’s Ministry of Finance reported today that business capital
expenditure declined 17.3% in the three months to December from the
same period a year earlier. The decline was an eleventh quarterly
drops in business investment and prompted fears of lowered GDP
estimate on March 11.

Corporate investments in the previous quarter ending in September
decreased 24.8%.

Ordinary profits in the period rose 102.2% from a year ago compared
with a decline of 32.4% in the September quarter.

Sales fell 3.1% after decreasing 15.7% in the previous quarter.

Canon’s Stake Rises 71.3% in Oce NV

Canon Inc said today it has increased its stake in Dutch printer maker
Oce NV to 71.3% from 28.3% after the tender offer for 8.6 euros a
share that started on January 29 and ended March 1.

The company had earlier targeted 85% stake as it intends to make Oce a
wholly owned unit. Canon will launch an additional offer between March
5 and March 19 at 8.6 euros a share.

Nikkei Movers

Mitsubishi Motors Corp led the decliners in the Nikkei 225 Stock
Average with a loss of 10.6% followed by losses in Panasonic Electric
Works Co., Ltd of 4.3%, in JGC Corp of 2.9%, in TDK Corp 2.9% and in
JFE Holdings, Inc 2.9%.

J Front Retailing Co Ltd led gainers in the Nikkei 225 Stock Average
with a rise of 5.0% followed by gains in Fuji Electric Holdings Co.,
Ltd 4.6%, in Mitsubishi Chemical Holdings Corp of 3.1% and in Sumco
Corp 2.7%.

Other Movers

Higher yen in New York and Tokyo trading dragged stocks of exporters.
Sony declined 1.1% to 3,100 yen, Nissan Motor Co dropped 1.1% to
694.00 yen, Olympus Corp declined 2.7% to 2,704 yen and Bridgestone
Corp edged 1.6% lower to 1,515 yen.

Komatsu Ltd, the earth moving equipment maker decreased 1.4% to
1,805.00 yen and Hitachi Construction Machinery Co. declined 1.4% to
1,914 yen.

Mitsubishi Motors Corp plunged 10.6% to 118.00 yen after the car maker
failed to agree on a joint venture with French car maker PSA Peugeot
Citroen.

Sources: Data collected by 123jump.com and Ticker.com from company
press releases, filings and corporate websites.
Market data: BATS Exchange. Inc.

http://www.123jump.com/market-update/Business-Investments-in-Japan-Drop-Again/36903/

China tightens belt but keeps eye on social rifts
Simon Rabinovitch and Zhou Xin
BEIJING

Fri Mar 5, 2010 5:35am EST

China's President Hu Jintao (2nd L) and Premier Wen Jiabao (2nd R)
attend the preparatory meeting for the National People's Congress
(NPC) at the Great Hall of the People in Beijing March 4, 2010.
Credit: Reuters/China Daily

BEIJING (Reuters) - China will seek to heal social rifts and spur home-
driven growth with more public welfare and rural spending even as the
government tightens its belt after a burst of feverish spending,

Premier Wen Jiabao said on Friday.

China

Wen told the country's parliament that China's economy faced a clouded
international outlook in 2010 and would stick to a steady policy
course this year, shifting tack if needed to counter the lingering
impact of the global credit crunch.

China would maintain an appropriately easy monetary stance and an
active fiscal policy, he added, showing no sign of a break from
current settings.

"We must not interpret the economic turnaround as a fundamental
improvement in the economic situation," Wen said in his annual "State
of the Union"-style report to the National People's Congress.

Financial markets showed little reaction to the widely anticipated
message. Despite the lack of change in any of the key wording,
analysts noted that Wen's increased emphasis on controlling inflation
showed the government was trying to mop up excess cash in the economy
after last year's extraordinary credit boom.

He also signaled continued caution toward the yuan, reiterating
standard language that Beijing would seek to keep the currency steady
as it has done since the financial crisis struck in mid-2008, to the
chagrin of its trade partners.

Speaking to the nearly 3,000 legislative delegates gathered in the
cavernous Great Hall of the People, Wen unveiled increases in spending
for China's poorer citizens and 700-million strong farming population
that outstripped the planned rise in military outlays.

Still, the projected growth in welfare and agriculture spending was
much slower than in 2009 when the financial crisis was raging.

SLOWER SPENDING, LENDING

China wants to slow spending and bank lending after pumping out cash
to counter the global downturn, but Wen said improvements in social
welfare, healthcare and rural services were needed to secure the
nation's economic health and the ruling Communist Party's hold over an
increasingly fractured society.

China escaped the worst of the global slump by ramping up credit,
slashing interest rates and launching a 4 trillion yuan ($585 billion)
infrastructure program in late 2008.

The economy grew 8.7 percent last year as a result, by far the fastest
pace of any major country, but Wen played down the achievement.

More domestically-driven growth, fueled by consumers increasingly
confident about their health, incomes and welfare protection, was
needed to keep the world's third-biggest economy growing at a solid
pace, he said.

"There are insufficient internal drivers of economic growth," he
added, reading aloud the 36-page report in a practiced, steady voice,
occasionally pausing for effect and applause.

Wen said China was targeting 8 percent growth in gross domestic
product -- the goal it traditionally sets every year -- and an
inflation rate of about 3 percent, a relatively low number given the
build-up of price pressures.

"Beijing wants to send a clear message to the local governments that
the policy focus for this year has already been shifting away from
supporting growth at all costs to balancing the need to maintain
steady growth while managing inflation," Qu Hongbin, chief China
economist at HSBC, said in a note.

GROWING DOUBTS

Wen announced increases of 8.8 percent on social spending and 12.8
percent on rural outlays -- more than the rise of 7.5 percent in the
military budget -- to narrow the yawning wealth gap that economists
blame for dampening domestic consumption.

China's parliament is a Communist Party-run spectacle that affirms
policy, rather than making or challenging it.

But the gathering offers an opportunity for the leadership to sell
their policies, which face growing doubts from wealthier taxpayers and
from local officials who see little wrong with the country's
traditional recipe of industrial growth.

"We will continue to give preference to agriculture, farmers and rural
areas, and to improving people's well-being and developing social
programs," said Wen, whose second and final five-year term running the
Chinese government ends in 2013.

Wen has staked much of his legacy on spreading wealth to those left
behind by China's booming economy, especially rural citizens, but
income disparities have grown wider on his watch, a worry for leaders
bent on maintaining social peace.

Reflecting the conservatism of China's financial planners, the budget
deficit will again be kept below 3 percent of national income, Wen
said. The U.S. deficit, by contrast, will hit 10.6 percent of gross
domestic product this year, according to White House projections.

Last year China's deficit was just 2.2 percent of GDP despite massive
government spending on infrastructure and job creation.

To the dismay of Washington and Brussels, China has frozen the yuan's
exchange rate at around 6.83 per dollar since mid-2008 to help its
exporters stay competitive.

Many economists think China will resume yuan appreciation in the
coming months as inflation climbs. It would have been unrealistic to
expect Wen to flag any such move, said Tom Orlik, a Stone & McCarthy
analyst in Beijing.

"If you send the signal to the markets that you are going to
appreciate the yuan, then you are going to attract hot money inflows,
so signaling does not make any sense," he said.

(Additional reporting by Eadie Chen and Ben Blanchard; Writing by Alan
Wheatley and Chris Buckley; Editing by Ken Wills and Tomasz Janowski)

After reading this article, people also read:Tibetans fear China's
hand in Dalai Lama succession
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China tensions with West over yuan seen growing -paper
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Payrolls data buoy job creation hopes

Mar 4, 2010
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China eyes 11 percent industrial output growth this year
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http://www.reuters.com/article/idUSTRE62405Q20100305

Bloomberg

Fed Presidents Say Rates Need to Be Low Early in U.S. Recovery
March 04, 2010, 7:10 PM EST

By Steve Matthews

March 4 (Bloomberg) -- Two regional Federal Reserve Bank presidents,
speaking a day before the release of a February report on U.S. jobs,
said they believe the central bank should keep rates low until the
recovery picks up.

Chicago Fed President Charles Evans told reporters in Chicago today he
needs to see signs of “highly sustainable” growth before supporting
steps toward tighter monetary policy. St. Louis Fed President James
Bullard said after a speech in St. Cloud, Minnesota that, with the
economy at an early stage of renewal, policy makers want to remain
“very accommodative.”

The district bank chiefs’ views echo the Federal Open Market Committee
pledge to keep interest rates near zero for an “extended period.”
Chairman Ben S. Bernanke said last week the U.S. economy is in a
“nascent” recovery that still requires low interest rates to spur
demand by consumers and businesses once federal stimulus wanes.

Snowstorms in the Eastern U.S. last month may have contributed to the
decline in payrolls, Bullard said.

“Employment hasn’t really turned around yet,” he said in response to
reporters’ questions. “When you are just starting to recover, you are
in the first six to nine months, or even the first year, you are
susceptible to new shocks that could hit.”

Start of Recession

The U.S. has lost 8.4 million jobs since the start of the recession in
December 2007, the most of any slowdown in the post-World War II era.

“Right now, we want to stay very accommodative because the economy is
in the early stages of recovery,” Bullard said in response to an
audience question.

An index of agreements to buy previously owned homes unexpectedly
dropped 7.6 percent in January, the National Association of Realtors
said in Washington today. The drop adds to evidence the housing market
is struggling to rebound after reports last week showed unexpected
declines in purchases of new and existing homes.

The economy expanded at a 5.9 percent pace in the fourth quarter, the
fastest rate in six years, the government reported last month.
Inventories added 3.88 percentage points to gross domestic product.

‘Normal’ Conditions

“I will be looking for improvement in the economy that is highly
sustainable,” while being “mindful of any inflationary warning signs,”
Evans told reporters after a speech. At the same time, policy makers
will need to decide to move toward more restrictive policies before
the economy returns to “average, normal type of business conditions.”

The recession appears to be over in a “narrow, technical sense,” with
the recovery likely to be hampered by restrained bank lending and wary
businesses and consumers, Evans said.

His remarks buttress the Fed’s Beige Book business survey released
yesterday, which found the U.S. economy improving in nine of the
central bank’s 12 regions in January and February.

The Chicago Fed expects growth to average between 3 percent and 3.5
percent this year, above the estimate of the economy’s potential,
while unemployment declines “only modestly” and inflation remains
“relatively stable,” Evans said.

“Leaving the current highly accommodative monetary policy in place for
too long would eventually fuel inflationary pressures,” Evans said in
a speech. “Monetary policy cannot be passive.”

The central bank is likely to start raising the benchmark federal
funds rate from a record low of zero to 0.25 percent during the fourth
quarter of this year, according to the forecast of economists. The
rate for overnight loans among banks will probably be raised to 0.75
percent by the end of the year, the survey shows.

--With assistance from Timothy R. Homan and Bob Willis in Washington.
Editors: James Tyson, Christopher Wellisz

To contact the reporter on this story: Vivien Lou Chen in Chicago at
vch...@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz
at cwel...@bloomberg.net

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BRUSSELS BEATMARCH 5, 2010, 4:05 A.M. ET.For the Euro's Laggards,
Would a Devaluation Help? By STEPHEN FIDLER

A transatlantic divide has opened up over whether the troubled
economies of the euro zone would be able to solve their problems by
leaving the common currency and devaluing.

The question centers on how countries such as Greece, Portugal, Spain,
Italy and even Ireland can lower wages and other production costs to
live alongside the euro zone's most competitive economy, Germany.

Pre-euro, the usual response would have been to devalue. Now, the
costs of devaluing appear prohibitively high.

Devaluation would, at a stroke, produce a wave of defaults in euro-
denominated contracts. Even the prospect of pulling out of the euro
zone would set in a train a financial stampede from that country. It
would likely create what Barry Eichengreen of the University of
California, Berkeley, has described as "the mother of all financial
crises."

Let us for now, like good economists, assume the financial crisis
away. Would it work then?

On the American side of the pond, some notable economists think it
would. Paul Krugman at Princeton has said it would make "macroeconomic
sense" while Martin Feldstein of Harvard thinks that Greece could take
"a temporary leave of absence from the euro zone" and rejoin later at
a more competitive exchange rate.

Desmond Lachman of the American Enterprise Institute thinks that
devaluation is not something that Spain and others in the euro zone
will turn to quickly. But after years of low or no growth, a sharp
currency depreciation could be a last resort to kick start the
economy.

But in Europe, even euro-pessimists think that currency depreciation
wouldn't provide the answer. And the chief economist of Citigroup,
Willem Buiter, has come up with a possible reason for the difference.
It comes down to where you're from.

It is no coincidence, says Mr. Buiter, once a member of the Monetary
Policy Committee of the Bank of England, that the euro-devaluationists
are predominantly in the U.S.

He argues they are familiar with the U.S. economy, where foreign trade
makes up a small proportion of economic output and where there are
what he calls "long-lasting nominal rigidities".

In other words, devaluations work in the U.S. because imports
represent a small part of the economy so price rises induced by
devaluation don't have a big impact on pocketbooks. Nominal rigidities
mean that it's also difficult for dollar salaries to be increased as a
response to falling living standards.

They are less familiar, he says in new research, with the euro-area
and its "fiscally-challenged and competitiveness-impaired" member
states. These, he says, are "small open economies with enduring real
rigidities and very limited nominal rigidities." To translate: In open
economies, imports have a bigger impact on the domestic price level
than in closed economies. The "real rigidities" mean that workers
resist declines in their real incomes through collective bargaining,
for example. The limited nominal rigidities implies they are usually
successful in negotiating higher wages.

(Actually, the openness of the euro economies varies a lot. Greece is
one of the least open economies with trade in goods and service of
around 28% of gross domestic product, compared with Ireland's 75%,
according to figures from the Organization for Economic Co-operation
and Development. But that compares with just 14% in the U.S.)

As a result of the structure of these economies, Mr. Buiter argues:
"For Greece and these other countries, a sharp fall in the external
value of their new, post-euro exit currencies would be followed
promptly by an equally sharp fall in its internal value. There would
be no material effect on competitiveness and it would create havoc for
the euro-denominated balance sheets of the state, banks, corporates
and households."

Any benefits of devaluation would be quickly offset by rising wage and
other costs, leaving the country more or less back where it started,
at the cost of extreme financial turmoil.

The implicit conclusion for Greece, Spain and others is that, to
compete with Germany, they have to have a flexible labor market and
should introduce other changes to boost the supply side of their
economies.

Their alternative is slow growth that would turn whole countries into
the national equivalents of West Virginia within the euro zone. Or
they could wait in hope for the European Central Bank to decide
inflation is not so bad after all; or for the Germans to resile from
their economic puritanism and become free-spending idlers.

That last might not be the best approach, judging from figures
released this week by Germany's Federal Statistics Office. Average
wages in Germany fell 0.4% last year while wages in manufacturing fell
by 3.6%. The falls are partly due to short-term working, but the
figures suggest that during 2009, Germany became even more competitive
against its euro-zone partners rather than less so.

In his research, Mr. Buiter returned to a theme that this column
raised a week ago. The country most likely to leave the euro zone is
not Greece, Spain or Portugal—but Germany.

He says German politics has changed. The "umbilical attachment" to the
European Union and its institutions characteristic of the German
political class for nearly five decades "is a thing of the past and
unlikely to return," he argues.

Write to Stephen Fidler at stephen...@wsj.com

http://online.wsj.com/article/SB10001424052748704187204575101720946648924.html?mod=googlenews_wsj

UPDATE 3-BOJ examining easing monetary policy again-Nikkei
Thu Mar 4, 2010 7:43pm EST

By Linda Sieg and Leika Kihara

TOKYO, March 5 (Reuters) - The Bank of Japan has begun examining a
further easing of its ultra-loose monetary policy and may decide on
such a move this month, the Nikkei newspaper reported, pushing
government bond futures to a two-month high.

Finance Minister Naoto Kan told reporters that he would welcome any
further BOJ measures to help beat deflation but that he hadn't heard
directly from the central bank about what it was considering.

The government, with its fiscal options limited by a ballooning fiscal
debt, has been pressuring the BOJ to do more to beat deflation even as
most other major central banks mull rolling back stimulus steps put in
place during the global crisis.

Another easing move may raise questions about the BOJ's independence
after it buckled in December in the face of government pressure and
expanded its supply of funds to financial markets.

The BOJ board will debate whether to expand the fund-supply operation
it put in place in December, at which the BOJ extends loans to
commercial banks at the policy rate of 0.1 percent, the paper said.

March JGB futures rose as high as 140.20 after the report, the highest
since December and up 0.19 on the day. [JP/]

The central bank will either boost the amount of funds it supplies in
the operation from the current 10 trillion yen (fx conversion) or
extend the duration of the loans to six months from the present three
months, the Nikkei said without citing sources.

Such a move would be aimed at pushing down longer-term money market
rates, such as six-month to one-year borrowing costs, to encourage
spending by households and companies.

Lower yen borrowing costs will also help prevent sharp yen rises from
hurting exports, a key driving force behind Japan's fragile recovery,
the Nikkei said.

But some board members are cautious about loosening policy further
with the economy now in relatively good shape, so a decision may be
delayed until April, it said.

The finance minister has been escalating pressure on the BOJ,
expressing his desire to target inflation and urging the bank to help
government efforts to drag the economy out of grinding deflation.

His remarks are likely driven by the need for the Democratic Party-led
government to look proactive ahead of an upper house election expected
in July, especially since his ratings are dropping due to funding
scandals and doubts about his leadership.

The BOJ has said it is committed to fighting deflation but has offered
few clues on what it could do in the future beyond keeping interest
rates near zero for as long as necessary.

An expansion to the bank's fund-supply operation has been cited by
markets as the most likely next option for the BOJ.

The central bank is unlikely to opt for increasing its long-term
government bond purchases, a move favoured by some within the
government, for fear such a move could be interpreted by markets as
monetising debt and trigger sharp bond yield gains, the paper said.

The BOJ's next rate review will be held on March 16-17. It will then
meet twice in April. (Editing by Hugh Lawson)

http://www.reuters.com/article/idUSTOE6230A720100305

Nikkei 225 Posts Biggest Weekly Gain This Year on Yen, BOJ Hope
By Masaki Kondo

March 5 (Bloomberg) -- Japanese stocks rose, sending the Nikkei 225
Stock Average to its biggest weekly gain this year, as the yen
weakened on speculation the central bank will further ease monetary
policies.

Canon Inc., which gets 28 percent of its sales from the Americas, and
Sony Corp. climbed more than 3 percent as U.S. jobless claims dropped.
Sumitomo Realty & Development Co., a property developer with more debt
than equity, jumped 4.6 percent on speculation looser monetary policy
will cut borrowing costs. Nippon Yusen K.K. led shipping lines higher
after a gauge of cargo-transport fees surged the most in almost eight
months.

The Nikkei 225 rose 2.2 percent to close at 10,368.96 in Tokyo. The
broader Topix climbed 1.5 percent to 910.81, with 10 times as many
shares gaining as falling. The gauges advanced the most among
benchmark indexes in the Asia-Pacific region. The yen weakened to as
much as 89.35 per dollar from 88.39 at the close of stock trading in
Tokyo yesterday.

“The BOJ’s measures would have a big impact on the currency market,”
said Yoji Takeda, who manages the equivalent of $1 billion at RBC
Investment (Asia) Ltd. in Hong Kong. “With the yen hovering around 88
per dollar, the government and the central bank may be getting jittery
and feeling the urge to take action.”

The Nikkei 225 increased 2.4 percent this week, its biggest weekly
advance since the holiday-shortened week ended Dec. 25, as optimism
grew that Greece can curb its budget deficit and after a U.S.
government report showed a bigger-than-estimated increase in consumer
spending.

BOJ Measures

Canon, the world’s largest camera maker, climbed 3.3 percent to 3,890
yen. A move of 1 yen per dollar alters Canon’s operating profit by 8.2
billion yen ($92 million), the company said in January. Sony advanced
3.4 percent to 3,205 yen. They were the biggest contributors to the
Topix’s advance.

The Bank of Japan will probably discuss more monetary- easing measures
aimed to lower short-term rates at its two-day meeting starting March
16, the Nikkei newspaper reported, without citing anyone. Finance
Minister Naoto Kan said today he hasn’t heard anything directly from
the bank.

“If implemented, the BOJ’s measures may widen a gap in the U.S.’s and
Japan’s borrowing costs and halt a further appreciation of the yen,”
said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings
Inc.

The Topix had the lowest return among the world’s biggest markets in
2009, as the yen averaged the strongest annual level against the
dollar since currencies began trading freely in 1971, according to
data compiled by Bloomberg.

Jobs, Cargo Rates

In New York, the Standard & Poor’s 500 Index advanced 0.4 percent
yesterday after a Labor Department report showed claims for jobless
benefits dropped in the week ended Feb. 27. Retail Metrics Inc., a
Massachusetts-based research company, said total comparable-store
sales climbed 4.1 percent in February, the biggest gain in 27 months.

Sumitomo Realty surged 4.6 percent to 1,632 yen. The company’s debt
was 5 times its equity as of Dec. 31, according to Bloomberg data.
Mitsui Fudosan Co., Japan’s largest property developer, gained 2.7
percent to 1,493 yen.

“A decline in short-term rates would be positive for businesses with
lots of interest-bearing debt, such as real- estate companies,” said
Yutaka Yoshii, a strategist at Tokyo- based Mito Securities Co.

Nippon Yusen, Japan’s largest shipping line, gained 2.8 percent to 336
yen, and closest rival Mitsui O.S.K. Lines Ltd. rose 4 percent to 605
yen. Kawasaki Kisen Kaisha Ltd. climbed 4.9 percent to 343 yen after
Mitsubishi UFJ Securities Co. lifted its rating on the stock to
“outperform” from “market perform.”

Shipping companies gained the most among the Topix’s 33 industry
groups. The Baltic Dry Index, a measure of shipping costs for
commodities, rose 7.2 percent in London yesterday, the most since July
15.

To contact the reporter for this story: Masaki Kondo in Tokyo at
mko...@bloomberg.net.

Last Updated: March 5, 2010 01:59 EST

http://www.bloomberg.com/apps/news?pid=20601087&sid=aEPAbERpa2E8&pos=4

A look at global economic developments
By The Associated Press (AP) – 1 day ago

A look at economic developments and activity in major stock markets
around the world Thursday:

___

ATHENS, Greece — Greece says it has raised badly needed cash with a
new bond issue, passing a key test of its ability to avoid a
disastrous debt default and dig out of a financial crisis that has
shaken the European Union.

___

FRANKFURT — The European Central Bank left its benchmark interest rate
unchanged at 1 percent for the tenth month running and confirmed that
it will keep scaling back crisis lending measures even though the
economy in the 16 countries that use the euro is barely growing.

European shares slipped. The FTSE 100 index of leading British shares
closed down 0.1 percent, Germany's DAX fell 0.4 percent and the CAC-40
in France ended 0.4 percent.

___

TOKYO — Asian shares were also lower. Japan's Nikkei 225 stock average
fell 1.1 percent, Hong Kong's Hang Seng dropped 1.4 percent, South
Korea's index was down 0.3 percent and Shanghai's market dove 2.4
percent as investors took profits ahead of Friday's opening of the
national legislature. Uncertainty surrounding new policies expected to
be announced during the National People's Congress fostered caution.

___

BEIJING — China announced its smallest increase in defense spending in
more than two decades, a likely result of both financial constraints
and growing concern over perceptions of Beijing as a regional military
threat.

The planned 7.5 percent boost in defense spending in 2010 follows at
least 20 years of double-digit increases in the budget for the
People's Liberation Army.

___

BERLIN — Germany's market regulator is imposing new rules that will
oblige investors to report short-selling positions in major financial-
sector stocks.

___

BERLIN — A senior Greek official says his country needs a strong
expression of solidarity from Germany and other European nations but
stresses that Athens isn't seeking direct financial aid.

Deputy Foreign Minister Dimitris Droutsas insisted on German
television that Greece believes it can "master this crisis alone."

___

FRANKFURT — An industry group says German machinery orders were down 3
percent on the year in January but foreign demand is improving.

___

PARIS — France's unemployment rate jumped to 10 percent in the fourth
quarter, the highest level in a decade.

___

LONDON — The Bank of England took a "wait and see" stance on the
country's hesitant economic recovery, holding interest rates at a
record low of 0.5 percent and keeping its asset-purchase program to
boost the money supply on ice.

___

MARIGNANE, France — French Finance Minister Christine Lagarde says
that a Franco-German aid plan for Greece is not on the agenda at the
moment.

___

LISBON, Portugal — Portugal's government refused to back down from its
austerity plan despite a national strike by civil servants.

The strike over a planned pay freeze was supposed to be the biggest in
four years but turnout was reported to be limited around the country.
No demonstrations were planned.

It was the latest test of the minority Socialist government's
commitment to reducing Portugal's debt burden which — like government
debts in Greece and Spain — has made financial markets uneasy.

___

KUALA LUMPUR, Malaysia — Malaysia's central bank raised its key
lending rate by a quarter percentage point to 2.25 percent. It is the
first central bank in the region to hike rates since the onset of the
financial crisis.

Bank Negara warned that record-low borrowing costs could create
financial imbalances that undermine economic recovery.

___

ABU DHABI, United Arab Emirates — A leading credit rating agency cut
its ratings Thursday on seven state-linked companies in Abu Dhabi,
rekindling concerns about Gulf states' debt following Dubai's
financial crisis.

___

JAKARTA, Indonesia — Indonesian President Susilo Bambang Yudhoyono on
Thursday defended two senior ministers deeply involved in a $715
million government bank bailout that Parliament decided warrants
criminal investigation.

REYKJAVIK, Iceland _ Iceland is bracing for a public backlash against
the use of taxpayer money to pay its international debts _ the latest
stumbling block in the tiny island's difficult struggle out of a deep
recession.

http://www.google.com/hostednews/ap/article/ALeqM5hfp1EtmOyKExnSRQ_Z2VXICsKnigD9E80T380

..and I am Sid Harth

bademiyansubhanallah

unread,

Mar 6, 2010, 4:43:32 AM3/6/10

U.S. Two-Year Notes Drop on Outlook in Longest Slump of Year

By Daniel Kruger

March 6 (Bloomberg) -- U.S. two-year notes posted their longest losing
streak this year as reports showing fewer job losses than forecast and
productivity gains prompted investors to bet the U.S. economic
recovery is gaining traction.

Two-year yields climbed yesterday for a third day, narrowing the yield
gap with 10-year securities for a third week as traders increased
wagers the Federal Reserve will raise interest rates. The Treasury
will auction $74 billion in notes and bonds next week.

“We’re getting close to the tipping point,” said Sean Simko, who
oversees $8 billion at SEI Investments Co. in Oaks, Pennsylvania. “The
near-term move will be higher in yields. Once there’s more confidence
from the consumer, that will help continue the growth of the
economy.”

The yield on the two-year note climbed eight basis points, or 0.08
percentage point, to 0.89 percent, from 0.81 percent on Feb. 26,
according to BGCantor Market Data. It touched 0.93 percent, the
highest level since Feb. 19. The price of the 0.875 percent security
maturing in February 2012 fell 5/32, or $1.56 per $1,000 face amount,
to 99 31/32.

Ten-year yields increased seven basis points to 3.68 percent. They
touched 3.70 percent, the highest since Feb. 24.

The difference in yields between 2- and 10-year notes, known as the
yield curve, narrowed to 2.79 percentage points from 2.80 on Feb. 26.
It touched a record high of 2.94 percentage points on Feb. 18.

Payrolls, Productivity

Nonfarm payrolls dropped by 36,000 in February, compared with the
median forecast in a Bloomberg News survey of economists for a
reduction of 68,000, a Labor Department report showed yesterday. The
unemployment rate held at 9.7 percent, compared with a forecast rise
to 9.8 percent.

The productivity of U.S. workers kept surging in the fourth quarter, a
report showed March 4. A measure of employee output per hour rose at a
6.9 percent annual rate, capping the biggest one-year gain since 2002,
according to Labor Department data. The Institute for Supply
Management’s index of non-manufacturing businesses, released March 3,
increased to 53 in February, the highest since October 2007. The
measure covers almost 90 percent of the economy.

“There’s a lot more talk today than in previous days about an eventual
tightening,” James Collins, an interest-rate strategist in the futures
group in Chicago at Citigroup Inc., said yesterday. The firm is one of
18 primary dealers that trade with the Fed. “The thought is that the
recovery is well- entrenched.”

‘Zero Is Ridiculous’

Futures contracts on the CME Group exchange after the payrolls report
showed a 44 percent probability policy makers will raise the target
rate for overnight loans between banks by September, up from 38
percent before the report. The odds were 43 percent a month ago. The
rate has been at a range of zero to 0.25 percent since December 2008.

The Fed’s next policy meeting is March 16.

“Being at zero is ridiculous because the risk of a depression is off
the table now,” said William Larkin, a fixed- income portfolio manager
in Salem, Massachusetts, at Cabot Money Management, which manages $500
million.

The difference between yields on 10-year notes and comparable Treasury
Inflation Protected Securities, a measure of traders’ expectations for
inflation, rose to 2.23 percentage points, compared with 2.16
percentage points a week earlier.

The U.S. economy improved in nine of the Fed’s 12 regions in January
and February while being hampered by snowstorms in the eastern U.S.,
the central bank said March 3 in its Beige Book business survey. Most
of the increases “were modest,” it said. Consumer spending increased
in many regions, while commercial real estate and loan demand were
“weak” and labor markets “soft,” the Fed said.

Auction Schedule

The Treasury Department will sell $74 billion in notes and bonds next
week: $40 billion in 3-year notes on March 9, $21 billion in 10-year
debt the next day and $13 billion in 30-year bonds on March 11. The 3-
year sale ties a record.

“The market is under pressure,” said Richard Bryant, senior vice
president in fixed income at MF Global Inc. in New York, a broker of
exchange-traded futures. “The rate was what a lot of guys were focused
on. The market will start to focus on supply next week.”

Overnight lending rates began trading yesterday at the highest level
since August amid an influx of government securities after the
Treasury expanded a program that sells bills on the behalf of the Fed.
Fed funds opened at 0.20 percent, the closest to the top of the
central bank’s target range for overnight funds of zero to 0.25
percent in seven months, according to ICAP Plc, the world’s largest
inter-dealer broker.

Supplementary Program

The Treasury last month expanded to $200 billion from $5 billion the
Supplementary Financing Program, in which the department sells bills
and places the proceeds in a Fed account. It is part of the Fed’s
strategy for rolling back its assistance to financial markets.

The Greek parliament gave final approval to the government’s 4.8
billion euros ($6.5 billion) of additional cuts to the European
Union’s biggest budget deficit.

Greece sold 5 billion euros of 10-year bonds this week and received
bids for three times that amount, easing concern that investors would
shun the debt.

To contact the reporter on this story: Daniel Kruger in New York at
dkru...@bloomberg.net.

Last Updated: March 6, 2010 00:00 EST

http://www.bloomberg.com/apps/news?pid=20601087&sid=af0bDbF7TCS4&pos=3

chhotemianinshallah

unread,

Mar 6, 2010, 8:47:05 AM3/6/10

Market Summary

US
Europe
Asia
Dow

10,566.20 +122.06 +1.17%

Nasdaq 2,326.35 +34.04 +1.48%

S&P 500 1,138.69 +15.72 +1.40%

10 Yr Bond(%) 3.6820% +0.7600

Oil 81.50 +1.58 +1.97%

Gold 1,134.80 +2.20 +0.19%

FTSE 100 5,599.76 +72.60 +1.31%

DAX 5,877.36 +82.04 +1.42%

CAC 40 0.00 0.00 0.00%

Nikkei 225 10,368.96 +223.24 +2.20%

Hang Seng 20,787.97 +212.19 +1.03%

Straits Times 0.00 0.00 0.00%

{"s" : "","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" :
"CLJ10.NYM,GCH10.CMX,^DJI,^FCHI,^FTSE,^GDAXI,^GSPC,^HSI,^IXIC,^N225,^STI,^TNX","j" :
"c10,l10,p20,t10"}

Currency Pair Price Change

EUR/USD 1.3623 + 0.0043
USD/JPY 90.2250 + 1.1100
GBP/USD 1.5149 + 0.0121

TradingMarkets 7 ETFs You Need to Know for Monday- TradingMarkets.com
TradingMarkets 7 Stocks You Need to Know for Monday-
TradingMarkets.com

Unemployment holds, 36,000 jobs lost in February jobs report-
CNNMoney.com
Dollar firms against rivals- CNNMoney.com

Determined based on increased frequency of appearance in news

CAT 59.23 +0.78 +1.33% Caterpillar, Inc. Common Stock

1d5d3m6m1y2y5ymaxNewsProfileKey StatsAdd to PortfoliosSet Alert

AXP 40.20 +1.31 +3.37% American Express Company Common

1d5d3m6m1y2y5ymaxNewsProfileKey StatsAdd to PortfoliosSet Alert

F 13.00 +0.21 +1.64% Ford Motor Company Common Stock

1d5d3m6m1y2y5ymaxNewsProfileKey StatsAdd to PortfoliosSet Alert

C 3.50 +0.07 +2.04% Citigroup, Inc. Common Stock

1d5d3m6m1y2y5ymaxNewsProfileKey StatsAdd to PortfoliosSet Alert

AAPL 218.95 +8.24 +3.91% Apple Inc.

1d5d3m6m1y2y5ymaxNewsProfileKey StatsAdd to PortfoliosSet Alert

Unusual Trading Volume

{"s" : "aapl,axp,c,cat,f","k" :
"a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" : "SFD","j" :
"c10,l10,p20,t10"}

Bullish

InterMune Inc. (ITMN)
NeoMedia Technologies Inc. (NEOM.OB)
Nuance Communications, Inc. (NUAN)

Bearish

Healthways Inc. (HWAY)
Zanett Inc. (ZANE)
Capital One Financial Corp. (COF)

Market Summary

10,566.20 +122.06 +1.17%

Nasdaq 2,326.35 +34.04 +1.48%

S&P 500 1,138.69 +15.72 +1.40%

10 Yr Bond(%) 3.6820% +0.7600

Oil 81.50 +1.58 +1.97%

Gold 1,134.80 +2.20 +0.19%

FTSE 100 5,599.76 +72.60 +1.31%

DAX 5,877.36 +82.04 +1.42%

CAC 40 0.00 0.00 0.00%

» View more indicesNikkei 225 10,368.96 +223.24 +2.20%

Hang Seng 20,787.97 +212.19 +1.03%

Straits Times 0.00 0.00 0.00%

{"s" : "","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" :
"CLJ10.NYM,GCH10.CMX,^DJI,^FCHI,^FTSE,^GDAXI,^GSPC,^HSI,^IXIC,^N225,^STI,^TNX","j" :
"c10,l10,p20,t10"}

Currency Pair Price Change

EUR/USD 1.3623 + 0.0043
USD/JPY 90.2250 + 1.1100
GBP/USD 1.5149 + 0.0121

Market Summary

US
Europe
Asia
Dow

10,566.20 +122.06 +1.17%

Nasdaq 2,326.35 +34.04 +1.48%

S&P 500 1,138.69 +15.72 +1.40%

10 Yr Bond(%) 3.6820% +0.7600

Oil 81.50 +1.58 +1.97%

Gold 1,134.80 +2.20 +0.19%

FTSE 100 5,599.76 +72.60 +1.31%

DAX 5,877.36 +82.04 +1.42%

CAC 40 0.00 0.00 0.00%

Nikkei 225 10,368.96 +223.24 +2.20%

Hang Seng 20,787.97 +212.19 +1.03%

Straits Times 0.00 0.00 0.00%

{"s" : "","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" :
"CLJ10.NYM,GCH10.CMX,^DJI,^FCHI,^FTSE,^GDAXI,^GSPC,^HSI,^IXIC,^N225,^STI,^TNX","j" :
"c10,l10,p20,t10"}

Fri 4:30pm ET- Briefing.com

A smaller-than-expected decline in February nonfarm payrolls provided
participants with a reason to bid stocks broadly higher, but
financials booked the best...

Brokers: TD AMERITRADEE*TRADE SCOTTRADE Currencies Investing

Currency Pair Price Change

EUR/USD 1.3623 + 0.0043
USD/JPY 90.2250 + 1.1100
GBP/USD 1.5149 + 0.0121

Investing Ideas

TradingMarkets 7 ETFs You Need to Know for Monday- TradingMarkets.com
TradingMarkets 7 Stocks You Need to Know for Monday-
TradingMarkets.com

Unemployment holds, 36,000 jobs lost in February jobs report-
CNNMoney.com
Dollar firms against rivals- CNNMoney.com

Market Summary

US
Europe
Asia
Dow

10,566.20 +122.06 +1.17%

Nasdaq 2,326.35 +34.04 +1.48%

S&P 500 1,138.69 +15.72 +1.40%

10 Yr Bond(%) 3.6820% +0.7600

Oil 81.50 +1.58 +1.97%

Gold 1,134.80 +2.20 +0.19%

FTSE 100 5,599.76 +72.60 +1.31%

DAX 5,877.36 +82.04 +1.42%

CAC 40 0.00 0.00 0.00%

Nikkei 225 10,368.96 +223.24 +2.20%

Hang Seng 20,787.97 +212.19 +1.03%

Straits Times 0.00 0.00 0.00%

{"s" : "","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" :
"CLJ10.NYM,GCH10.CMX,^DJI,^FCHI,^FTSE,^GDAXI,^GSPC,^HSI,^IXIC,^N225,^STI,^TNX","j" :
"c10,l10,p20,t10"}

Fri 4:30pm ET- Briefing.com

A smaller-than-expected decline in February nonfarm payrolls provided
participants with a reason to bid stocks broadly higher, but
financials booked the best...

Brokers: TD AMERITRADEE*TRADE SCOTTRADE Currencies Investing

Currency Pair Price Change

EUR/USD 1.3623 + 0.0043
USD/JPY 90.2250 + 1.1100
GBP/USD 1.5149 + 0.0121

$1 U.S. Dollar (USD) = Japanese Yen 90.2250 ¥
Euro 0.7341 €

Investing Ideas

TradingMarkets 7 ETFs You Need to Know for Monday- TradingMarkets.com
TradingMarkets 7 Stocks You Need to Know for Monday-
TradingMarkets.com

Unemployment holds, 36,000 jobs lost in February jobs report-
CNNMoney.com
Dollar firms against rivals- CNNMoney.com

Determined based on increased frequency of appearance in news

CAT 59.23 +0.78 +1.33% Caterpillar, Inc. Common Stock

1d5d3m6m1y2y5ymaxNewsProfileKey StatsAdd to PortfoliosSet Alert

AXP 40.20 +1.31 +3.37% American Express Company Common

1d5d3m6m1y2y5ymaxNewsProfileKey StatsAdd to PortfoliosSet Alert

F 13.00 +0.21 +1.64% Ford Motor Company Common Stock

1d5d3m6m1y2y5ymaxNewsProfileKey StatsAdd to PortfoliosSet Alert

C 3.50 +0.07 +2.04% Citigroup, Inc. Common Stock

1d5d3m6m1y2y5ymaxNewsProfileKey StatsAdd to PortfoliosSet Alert

AAPL 218.95 +8.24 +3.91% Apple Inc.

1d5d3m6m1y2y5ymaxNewsProfileKey StatsAdd to PortfoliosSet Alert

Unusual Trading Volume

{"s" : "aapl,axp,c,cat,f","k" :
"a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" : "SFD","j" :
"c10,l10,p20,t10"}

Bullish

InterMune Inc. (ITMN)
NeoMedia Technologies Inc. (NEOM.OB)
Nuance Communications, Inc. (NUAN)

Bearish

Healthways Inc. (HWAY)
Zanett Inc. (ZANE)
Capital One Financial Corp. (COF)

7 New Tax Laws to Know
by Kay Bell
Tuesday, February 2, 2010
provided by

Facing a struggling economy, lawmakers in Washington, D.C., turned to
the tax code to help get it, and us consumers, moving again. Most of
the tax changes were part of the stimulus package enacted last
February, the American Recovery and Reinvestment Act of 2009. There
are seven new tax laws you should know, and some old tax laws with new
amounts adjusted for inflation.

Tax breaks were created, or in some cases expanded, for autos and home
purchases, as well as for certain residential improvements. Uncle Sam
now pays more of some educational costs. Some workers get bigger tax
benefits to offset their commute to work. Folks who no longer have
jobs at least get some tax relief. Even how you pay your IRS bill
could turn into a deduction.

Here's a look at some popular tax laws that could come in handy as you
work on your 2009 tax return.

1. More Homebuyer Credits

In February 2009, the popular first-time homebuyer credit became a
true credit, meaning that it can directly reduce dollar-for-dollar any
tax you owe. Even better, the amount of the credit was increased; it's
now up to 10 percent of the cost of the house up to a maximum $8,000.
Best of all, it's a refundable credit so if your tax bill is zero, any
credit for which you qualify will be sent to you as a refund.

A few months later, Congress extended the credit for the rest of the
year (as well as into 2010). At that time, lawmakers added a new
credit for "long-time" homeowners who've owned and lived in their
residences for at least five consecutive years of the eight years
before they buy a new house. Those folks now might qualify for a
$6,500 credit.

While the first-time home purchase credit is generally a good thing
for taxpayers, it will require some care in claiming it. Because of
the various law changes, different income eligibility limits apply
depending on when you bought the house and which type of buyer, first-
time or move-up, you are.

The new law also requires stricter proof of purchase. This safeguard
against fraud requires you to send in a copy of settlement sheet, so
you won't be able to file your 2009 return electronically. And that
could slow down your refund.

2. New-Car Sales Tax Deductions

If you bought a new vehicle -- that includes a car, light truck,
motorcycle or even a motor home -- on or after Feb. 16, 2009, and by
Dec. 31, 2009, any sales or excise tax you paid could be a deduction.

This isn't a new option for taxpayers who itemize. But now even
taxpayers who claim the standard deduction can take advantage of the
tax break. Standard deduction filers will have to fill out a new form,
Schedule L, to claim the automotive sales tax. Itemizers still will
have the choice of claiming the deduction for the sales tax on
Schedule A.

Just don't count on writing off the sales taxes on a luxury vehicle.
The deduction is limited to the tax paid on up to $49,500 of a
vehicle's purchase price. You can, however, claim the tax deduction
for each new vehicle you bought last year.

And your deduction might be limited by your income. You'll get a
partial deduction if your income as a single taxpayer is between
$125,000 and $135,000; between $250,000 and $260,000 for joint filers.
If you make more than those top amounts for your filing status, you
can't claim any amount.

3. Expanded Education Credit

For 2009 (and 2010, too) the Hope Education credit is replaced by the
American Opportunity Credit. The new credit is worth $2,500 per
student, based on the first $4,000 of qualifying educational expenses.
The Hope Credit only allowed for an $1,800 tax break.

In addition to upping the credit amount, the American Opportunity
Credit can be claimed for expenses for the first four years of post-
secondary education, versus the first two years of expenses allowed
under the Hope Credit.

More expenses can be counted in calculating the new credit. Its income
limits are larger, meaning more folks making more money -- up to
$90,000, or twice that for joint filers -- can claim at least a
partial credit.

And if you claim the American Opportunity Credit but don't owe the
IRS, you still might still get a refund. Forty percent of the credit
if refundable, which means you could receive up to $1,000 even if you
owe no taxes.

4. Enhanced Home Energy Credits

Credit for homeowners who make their homes more energy efficient
reappeared in 2009 and in a much more generous incarnation.

Homeowners who make energy-efficient improvements to their existing
homes now can claim a credit of 30 percent of the cost of all
qualifying upgrades, up to a maximum credit of $1,500. This covers
such relatively simple things as adding insulation, energy-efficient
exterior windows and energy-efficient heating and air conditioning
systems.

If you really want to take the extra energy-efficiency step, more-
costly and complex upgrades, such as various solar, wind and
geothermal systems, offer a credit of 30 percent of the purchase price
with no maximum credit cap. In these cases, the cost of installation
also can be used in the credit calculation.

Improvements must meet Energy Star standards and must have been put
into service at your home during the tax year.

5. Jobless Benefits Less Taxing

Last year was a tough one for many workers. Layoffs hit record levels.
Unfortunately, unemployment compensation is considered taxable income.
Now, however, the first $2,400 of such benefits are excluded from
income.

6. Biking Tax Break

Last year bicycling commuters were included in the tax code section
that allows for employer reimbursement of workplace transportation
costs. Thanks to the Bicycle Commuter Act, cyclists now get some of
the same type of tax-free fringe benefits as do their motoring co-
workers. If a company provides the benefit, which is $20 per month, a
worker can put into a special tax-favored account, bicycle commuters
can use that money to help defray such costs as the purchase of a
bicycle, bike lock, helmet, bike parking fees, shower facilities and
general bike maintenance.

7. Deduction for Credit Card Fees

If you pay your income tax (including estimated tax payments) by
credit or debit card, you can deduct the convenience fee you are
charged for the transaction. You include the fee amount as a
miscellaneous itemized deduction on line 23 of Schedule A. This means
that the card fee, along with any other IRS approved miscellaneous
deductions, must exceed 2 percent of your adjusted gross income before
they count. That will limit the value of this break for many filers,
but if you do have substantial expenses to claim in this category and
charge any tax payments, be sure to add the card fee to the mix.

Tax Forms

Federal Tax Forms
http://finance.yahoo.com/taxes/article/102206/federal_tax_forms

State Tax Forms
http://finance.yahoo.com/taxes/article/102215/individual_tax_forms_by_state

Tax Resources

Tax How-to Guides
http://finance.yahoo.com/how-to-guide/index#taxes

Tax Calculators
http://finance.yahoo.com/calculator/index#taxes

1040 Central
http://www.irs.gov/individuals/article/0,,id=118506,00.html

IRS E-file
http://www.irs.gov/efile/article/0,,id=118574,00.html

Where's My Refund?
http://www.irs.gov/individuals/article/0,,id=96596,00.html

Filing

Who Has to File a Tax Return?
http://finance.yahoo.com/how-to-guide/taxes/137366

10 Must-Know Tax Terms
http://finance.yahoo.com/taxes/article/101896/must_know_tax_terms

2008 Tax Brackets
http://finance.yahoo.com/how-to-guide/taxes/137352

4 Credits That Can Help Boost Your Refund
http://finance.yahoo.com/taxes/article/106497/Tax-Credits-Worth-Pursuing-This-Year

10 Common Tax-Filing Mistakes to Avoid
http://finance.yahoo.com/taxes/article/104171/Ten-Common-Tax-Filing-Mistakes-to-Avoid

Alternative Minimum Tax (AMT) - Part I
http://finance.yahoo.com/how-to-guide/taxes/136786

Alternative Minimum Tax (AMT) - Part II
http://finance.yahoo.com/how-to-guide/taxes/136779

Second Chance at a Rebate
http://finance.yahoo.com/taxes/article/106481/Second-Chance-at-a-Rebate
Filing Tax Returns for the Recently Deceased
http://finance.yahoo.com/taxes/article/102500/Death_in_the_Family

How to File for an Extension
http://finance.yahoo.com/how-to-guide/taxes/136770

Advice and Strategy

Should You Do Your Own Taxes or Hire a Pro?
Ways to Pay Off a Big Tax Bill
http://finance.yahoo.com/taxes/article/104172/Ways-to-Pay-Off-a-Big-Tax-Bill

Working on Your Taxes? Get Organized
http://finance.yahoo.com/taxes/article/104173/Working-on-Your-Taxes-Get-Organized

How Major Life Changes Affect Your Taxes
http://finance.yahoo.com/taxes/article/104192/Life-and-Tax-Changes

Surviving an IRS Audit
http://finance.yahoo.com/taxes/article/104191/Surviving-an-IRS-Audit

Adjust the Tax Withheld From Your Paycheck
http://finance.yahoo.com/taxes/article/104181/Adjust-the-Tax-Withheld-From-Your-Paycheck

Don't Get Scammed at Tax Time
http://finance.yahoo.com/taxes/article/102834/How-to-Not-Get-Scammed-at-Tax-Time

Check Out Your Tax Preparer
http://finance.yahoo.com/taxes/article/101899/check_with_tax_preparer_so_your_return_checks_out_ok

Moving? Save Money on Taxes
http://finance.yahoo.com/taxes/article/101955/taking_it_with_you

Tax Benefits of Donating Stocks
http://finance.yahoo.com/taxes/article/101963/share_the_wealth

Lessening the Gift Tax Blow in a Down Market
http://finance.yahoo.com/taxes/article/106420/Estate-Planning-in-a-Down-Market

Keep Your Nest Egg Safe From Uncle Sam
http://finance.yahoo.com/taxes/article/106530/Keep-Your-Nest-Egg-Safe-From-Uncle-Sam

Finding a Tax-Friendly State to Retire
http://finance.yahoo.com/taxes/article/106285/Finding-a-Retirement-Friendly-State

Taxes

7 New Tax Laws You Should Know AboutHere's a look at some popular new
tax laws that could come in handy as you work on your 2009 tax
return... read more
Little-Known Tax Breaks for Your Return
http://finance.yahoo.com/taxes/article/108830/little-known-tax-breaks-for-your-2009-return?mod=taxes-advice_strategy

Wackiest Tax Deductions for 2010
http://finance.yahoo.com/taxes/article/108803/wackiest-tax-deductions-for-2010??mod=taxes-advice_strategy

10 Smart Tax Moves to Make in 2010
http://finance.yahoo.com/taxes/article/108547/10-astute-tax-moves-in-2010&mod=taxes

A Bizarre Year for the Estate Tax
http://finance.yahoo.com/taxes/article/108562/a-bizarre-year-for-the-estate-tax-will-require-extra-planning

IRS: Refunds in 10 Days for Online Filers
http://finance.yahoo.com/taxes/article/108601/irs-online-tax-filers-can-get-refunds-in-10-days?mod=taxes-filing

The Most-Overlooked Tax Deductions
http://finance.yahoo.com/taxes/article/108262/the-most-overlooked-tax-deductions

7 States With No Income Tax
http://finance.yahoo.com/taxes/article/108831/7-states-with-no-income-tax?mod=taxes-advice_strategy

How Falling Home Values Can Lower Your Taxes
http://finance.yahoo.com/taxes/article/107349/using-the-rout-in-housing-to-lower-taxes.html?mod=taxes-advice_strategy

10 Harsh Truths the IRS Will Never Tell You
http://finance.yahoo.com/taxes/article/106781/ten-things-the-internal-revenue-service-will-not-tell-you.html?mod=taxes-advice_strategy

Top 10 Tax-Friendly Cities
http://finance.yahoo.com/taxes/article/106691/top-ten-tax-friendly-cities.html?mod=taxes-filing

View Taxes basics

Commentary and Analysis

You Can Save the Smart Way
by Laura Rowley
Friday, March 5, 2010

The annual "America Saves Week," an event organized by more than a
hundred organizations to encourage consumers to sock money away,
wrapped up at the end of February. It's not having a huge effect, at
least according to the latest numbers -- the January personal savings
rate fell to 3.3 percent from 4.2 percent in December, the lowest rate
in 15 months, the Commerce Department reported this week.

If savings behavior isn't changing, consumer attitudes may be. A
recent Gallup poll found 62 percent of Americans say they enjoy saving
more than spending, while 35 percent reported the reverse. Back in
2006, respondents were split about 50-50 on the question. Moreover, 57
percent say they are spending less money in recent months than they
used to, up from 50 percent last July. Among the newly frugal, 38
percent say this spending pattern is the "new normal," while 19
percent say the budget cuts are temporary

The poll didn't examine how people are saving, but the latte-by-latte
route is being challenged by some. "If you look at the things you
spend the most money on, that's where you can save the most money,"
says Elisabeth Leamy, author of the new book "Save Big" and a "Good
Morning America" consumer correspondent.

Leamy offers a hundred ways to save thousands of dollars on five top
costs -- homes, cars, credit, food and health care. She argues that
it's easier to squeeze money out of the big stuff than to pinch
pennies. "I would rather focus ferociously on getting rid of junk
closing costs when I buy a house or do the research every few years
when I need to buy a car, than scrimping and struggling to save every
day," she says.

The book offers step-by-step instructions to minimize closing costs on
a house, negotiate the price of uncovered medical procedures and save
on auto insurance, among other tips. Some suggestions are
straightforward. You can save $9 a month by keeping your tires
properly inflated, or save tens of thousands by buying a used car and
paying cash rather than financing. (Been there, done that, it works;
the only exception was the Kia we bought during the Cash for Clunkers
program.)

Wiser Use

For consumers whose finances aren't particularly complicated, Leamy is
a big advocate of pre-paying your mortgage. For example, suppose you
take out a $200,000 mortgage for 30 years at 6.5 percent interest. The
monthly payment is $1,264.14. Let's say you can afford to round up
your monthly payment to $1,300, paying an extra $35.86 a month. You'll
save $23,900 over the life of the loan.

But for me, this is the trickiest part of personal finance. There are
multiple goals crying out for that extra $35.86 -- a fund for
emergencies, college, retirement and those little expenses that make
life worthwhile right now (like a vacation to Florida, especially if
you lived on the East Coast this winter).

If you carry credit card debt, the best use of that $35.86 is paying
down those cards as quickly as possible, because the high interest
rate is dismantling your road to riches brick by brick. Three simple
steps: 1) Take five minutes to call each card company and see if
they'll lower your interest rate. 2) Make all your minimum payments on
time and in full and shovel the extra $35.86 toward the highest
interest-rate card. 3) When it's paid off, shift that minimum payment
plus the extra $35.86 to the next card, and keep rolling until you are
free of credit card debt. (Watch out for debt pay-down scams that
charge you for that same advice.)

Next, I would allocate that $35.86 toward an emergency fund equal to
three month's living expenses in a savings account. Personally, I keep
my emergency fund in my checking account, because I get 3.5 percent
interest on deposits up to $30,000 if I use my debit card 10 times a
month. I know I can only spend the amount above my emergency fund
"base." This works remarkably well if you're disciplined. (Rule of
thumb: If you've had more than one overdraft charge this year, don't
try this, because you don't have enough control of your finances to
make it work.) First get a budget.

Now, let's assume you're free of revolving debt and have managed to
save three month's living expenses. The next place I'd put the $35.86
is in a retirement account. If it grows at 5 percent for 40 years,
you're looking at $32,864 (assuming a 2 percent rate of inflation).
Click here for a method to compare the value of an extra mortgage
payment to a 401(k) contribution.

Can We Have It All?

Frankly, I think you could make a good argument for splitting the
$35.86 between a retirement fund and a vacation fund, because the days
are long, life is short and all you take with you are memories.

Unless, of course, you have kids; then maybe you put one-third of the
$35.86 to retirement, one-third to vacations and one-third to college.
For instance, I used to make an extra mortgage payment but eventually
allocated the money to my kids' 529 college savings plans. Why?
Inflation on college tuition is running 7 percent. My returns over the
last three years averaged 3 percent. The only way to reach our goal is
to save more (and practice jump shots, on the outside chance the kids
could ride a sports scholarship through college like their dad.)

Old-fashioned American optimism (and clever advertising) suggests we
can have it all. Doing the math often demonstrates otherwise. At a
certain point it comes down to making choices about the big things we
want in life and setting goals to reach them, and then, as Leamy puts
it, "buckle down and do the work."

It would be wonderful if America Saves Week inspires someone to skip a
$3 latte and save the cash -- but even better if it gets people to
think about what they really value, and use their money accordingly.

http://finance.yahoo.com/banking-budgeting/article/108977/you-can-save-the-smart-way

Finding a better use for an extra $35.86 a month might do more for
your finances than you think.

.Bring Back the Robber Barons- Daniel Henninger, WSJ
http://finance.yahoo.com/taxes/article/108963/bring-back-the-robber-barons

Nuclear Options to Protect Yourself- Jim Lowell, MarketWatch
http://finance.yahoo.com/banking-budgeting/article/108944/nuclear-options

The Real Problem in Politics? It's Us- Charles Wheelan, Ph.D.
http://finance.yahoo.com/expert/article/economist/225007

Special Features

Beaten by Buffett
by Sam Mamudi
Monday, March 8, 2010
provided by

Mutual funds dramatically lag Berkshire stock during chairman's tenure

Many investors can only look on with envy when Warren Buffett says his
shareholders have seen 20% annualized gains over the past 45 years --
even the best mutual funds pale by comparison.

Only two funds are even on the horizon: Fidelity Magellan Fund
(FMAGX), which has returned 16.3% a year during Buffett's chairmanship
of Berkshire Hathaway Inc. (BRK-A), and Templeton Growth Fund (TEPLX),
up 13.4% a year on average, according to investment researcher
Morningstar Inc.

Berkshire's Class-A shares have delivered returns of 22% a year since
1965, based on market price, though Buffett prefers to judge gains
according to book value, which stand at 20.3%.

bademiyansubhanallah

unread,

Mar 10, 2010, 5:46:01 AM3/10/10

WRAPUP 2-Japan finmin wary of any formal policy accord with BOJ

(Adds more comments)
By Hideyuki Sano TOKYO,
March 10 (Reuters) -

Japanese Finance Minister Naoto Kan shot down the idea of a formal
policy pact with the Bank of
Japan as the government aims to strike a delicate balance
between pushing the central bank to ease policy further and
respecting its independence. The idea of a formal policy accord has
been floated in the
past by critics of the central bank who feel it could be doing
more to combat grinding deflation that has plagued the world's
second-largest economy for most of the past 15 years. But Kan, who has
also been calling on the BOJ to take
bolder action, said he saw no immediate need for such a pact,
echoing the view held by a majority of policy makers and
politicians wary of threatening the central bank's
independence. "I gather advocates of such a policy want an arrangement
where the government increases the deficits and the BOJ
cooperates by buying more government debt," said Izuru Kato,
chief economist at Totan Research. "They must be thinking central bank
independence allows the
BOJ to be too hesitant about buying government bonds and
therefore they should strip the BOJ of its independence," Kato
said. Kan steered clear of saying exactly what he wants the
central bank to do at its policy meeting next week, where
further easing is likely to be discussed. [ID:nTOE6230A7] BOJ board
member Miyako Suda, seen as hawkish on monetary
policy, said on Wednesday that the central bank will maintain a
very accommodative stance, but she added that the BOJ had
implemented an appropriate policy on prices. "Suda did not sound so
positive about taking more steps
blindly. It's not clear how strong the measures the BOJ takes
next week will be," said Naomi Hasegawa, senior strategist at
Mitsubishi UFJ Securities. With the government's room for further
fiscal stimulus
limited by a public debt that is already close to 200 percent
of GDP, the six-month old administration has put pressure on
the central bank to stem deflation. But the BOJ's options are limited
as long as the economic
outlook remains weak. Expectations of further price declines in future
could
persuade consumers and companies to delay spending and
investment even longer, adding more pressure on the economy.
Until demand picks up and more money flows into the system,
prices will struggle to recover. The BOJ has said prices will rise
eventually as the economy
mends. TOO MUCH INDEPENDENCE? Japan's central bank law guarantees the
BOJ independence in
its policy decisions, but it also requires the bank to
communicate with the government to ensure its policy is in line
with the government's economic policy. Few in the top circle of
Japanese policymakers see the need
for a change in those stipulations. "I am cautious about the framework
of an accord," Kan, also
deputy prime minister, told a parliamentary committee on
Wednesday in response to an opposition lawmaker's question. But some
politicians, mostly from the opposition, have said
the BOJ needs to be more accountable for its decisions, blaming
it for putting Japan in deflation for much of the past 15
years. The BOJ is likely to debate easing again at its March 16-17
board meeting, after introducing a new funding operation in
December amid a wave of government pressure as the yen climbed
versus the dollar. [ID:nTOE6230A7] "If they increase the cheap funding
operation to replace
the corporate support scheme that expires in March, that's
probably already priced in," said Hasegawa of Mitsubishi UFJ
Securities. The Bank of Japan's Suda dropped few hints, repeating the
BOJ's view that easy policy alone is no panacea for deflation.
"Although maintaining easy monetary policy is the top
priority, it is important for the Japanese economy to undergo
bold structural reform as much as it needs a recovery," she
said, referring to the need to fix Japan's pension system and
get public finances in order to reduce concerns about the
future. "If structural reform is delayed, it would undermine the
stimulative effect of monetary policy," she said. Japan's core
machinery orders fell slightly less than
expected in January from the previous month, data showed on
Wednesday, offering more evidence that capital expenditure will
keep growing slowly this year as manufacturers raise spending. Core
private-sector machinery orders, a highly volatile
series regarded as an indicator of capital spending, fell 3.7
percent in January, less than a median market forecast for a
4.1 percent decline, after a 20.1 percent jump in December.

[JPMORD=ECI] ECONJP But the data also showed non-manufacturers remain
wary on
capital spending, highlighting the weakness in domestic demand. Annual
wholesale price deflation eased to 1.5 percent in
February on a recent rise in commodity prices. But economists say
deflationary pressure is likely to
continue due to the big gap between supply and demand. Japan pulled
out of recession in April-June last year,
helped by a rebound in exports and industrial output as well as
a rise in consumption due to government subsidies. But
economists expect growth to slow early this year as the
government cuts public works and the impact of subsidies
fades.

(Additional reporting by Rie Ishiguro, Stanley White, Leika
Kihara and Tetsushi Kajimoto; Editing by Kim Coghill)

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Yen holds firm, Aussie supported before China data
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Euro gives up gains, yen steadies after fall
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http://www.reuters.com/article/idUSTOE62901R20100310

March 10, 2010, 12:52 a.m.

WORLD FOREX: Euro Ticks Up Vs Yen On Japan Importer Buying
By Miho Nakauchi

TOKYO (MarketWatch) -- The euro ticked up against the yen in Asia
Wednesday, as Japanese importers buying the single currency on a
regular settlement day set the tone of the market amid a lack of other
trading cues.

But further gains are far from certain, dealers said, with the euro's
near-term direction resting on developments in the euro-zone's fiscal
problem and upcoming economic data.

As of 0450 GMT, the euro stood at Y122.44, slightly up from Y122.36 in
New York late Tuesday. Against the dollar, the unit traded at $1.3602
from $1.3601.

"Overall currency moves were very limited" with share markets almost
unchanged and a lack of major economic data, meaning that Japanese
importers' buying flows became more dominant and set the trend, said
Yuzo Sakai, a foreign-exchange manager at Tokyo Forex & Ueda Harlow.

Japanese importers tend to buy the currency on regular settlement
days, which fall on the 5th, 10th, 15th, 20th and 25th of each month.

At 0450 GMT, the Nikkei 225 Stock Average index was down 0.08%.

Dealers said the European single currency could fall toward $1.3300
and Y119.00 over the next few weeks if any negative news emerges on
Europe's fiscal issues, adding to concerns over its economic outlook,
dealers said.

The focus is on European countries' huge levels of debt, said Hideaki
Inoue, a chief foreign-exchange manager at Mitsubishi UFJ Trust and
Banking Corp. "Growing expectations for sovereign debt default could
prompt mid- and long-term players to sell" the euro, he said.

Although most players are bearish toward the euro, better-than-
expected economic data could help restore investor confidence,
possibly buoying the risk-sensitive euro toward $1.3700 and Y123.50,
some dealers said. Investors will monitor U.S. retail sales for
February and Reuters/University Of Michigan Consumer Sentiment Survey
for March, both due Friday, for any hints on the health of the global
economy.

Elsewhere, the dollar stood at Y90.00 as of 0450 GMT, almost unchanged
from its New York level of Y89.97 Tuesday. The ICE U.S. Dollar Index,
which tracks the greenback against a trade-weighted basket of
currencies, was at 80.576 from 80.580.

The U.S. unit may fall toward Y89.50 in coming weeks, traders said.
Japanese exporters may repatriate overseas assets as we move toward
Japan's fiscal year-end on Mar. 31, which could weigh on the U.S.
unit, dealers said.

1.China's trade surplus shrinks further in February
http://www.marketwatch.com/story/chinas-trade-surplus-shrinks-further-in-february-2010-03-09

2.The rise and certain fall of the American Empire
http://www.marketwatch.com/story/the-rise-and-certain-fall-of-the-american-empire-2010-03-09

http://www.marketwatch.com/story/world-forex-euro-ticks-up-vs-yen-on-japan-importer-buying-2010-03-10

Currencies
March 10, 2010, 3:46 a.m. EST · Recommend · Post:

Dollar rises vs. euro as German trade data disappointView all
Currencies ›
By MarketWatch

TOKYO (MarketWatch) -- The dollar got a lift against the euro
Wednesday when trade data from Germany, a key euro-zone economy, came
in worse than expected.

News Hub: Economist Warns of More Volatility AheadAnirvan Banerji,
director of research at Economic Cycle Research, joins the News Hub to
discuss why he believes the U.S. economy will experience more frequent
recessions ahead.
Germany's exports increased by 0.2% and imports dropped by 1.4% in
January 2010 compared to the same month a year ago, the Federal
Statistical Office reported on Wednesday. Compared to December 2009,
exports fell by 6.3% in January and imports rose by 6.0%. Germany's
seasonally-adjusted foreign trade balance recorded a surplus of 8.7
billion euros in January, official data showed.

"This was the weakest reading since the March of 2009 when the global
economy was in the throes of its worst contraction in [the] post-war
period. The news was especially surprising given the decline in the
euro/U.S. dollar over the past several months," said Boris
Schlossberg, director of currency research at GFT.

He added that the trade balance data were "not helpful to the single
currency which has been battered by concerns over sovereign debt
problems of Greece, Portugal and Spain."

The euro slipped to $1.3551, from $1.3598 in late North American
trading Tuesday, and the British pound skidded to $1.4898, from
$1.4991.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 80.67, +0.08,
+0.10%) , which measures the U.S. unit against a trade-weighted basket
of six major currencies, rose to 80.851, from 80.580 late Tuesday.

The greenback bought 89.96 yen, compared with 89.98 yen late Tuesday.

But the Australian dollar was up 0.1% against its U.S. counterpart, to
91.43 U.S. cents.

The Aussie "outperformed, with better than expected Chinese trade data
underpinning global recovery hopes in the region," said analysts at
Action Economics.

China's trade surplus narrowed further in February to $7.6 billion
from $14.2 billion in January. When compared with the same month last
year, both exports and imports grew at a higher-than-expected rate,
with the value of imports climbing 44.7%, reflecting growing domestic
consumption in mainland China. The value of outbound goods and
services surged 45.7% from February 2009 on a recovery in demand for
Chinese goods. Read more on China trade data.

On Tuesday, the U.S. dollar advanced versus the euro and British
pound, finding support amid ongoing worries about debt problems in the
euro zone after warnings of downgrades from Fitch Ratings and Moody's
Investors Service. See Tuesday's Currencies report.

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Raymond Richman - Jesse Richman - Howard
Richman

Richmans' Trade and Taxes Blog

The Obama Administration's Agenda to Balance Trade
Raymond Richman, 3/9/2010

On March 1, 2010, Ambassador Ron Kirk, United States Trade
Representative, disclosed “The President's 2010 Trade Policy Agenda”,
a suicide pill for the U.S. economy. For three decades, every
administration had more or less the same agenda. Ignore the trade
deficits or just accept them as the inevitable result of competitive
forces, which they are not. If China, Japan, Germany, and others want
to exchange their valuable goods for our money, why should we
complain? We can print more. It is hard to believe that that was and
continues to be the attitude of the vast majority of economists.
They’ve been brain-washed into believing that market forces must
inevitably restore a balance of trade. We pointed out in our book,
Trading Away Our Future (Ideal Taxes Assn, Jan., 2008) that free trade
was not justified by economic theory, that China, like Japan before
it, was deliberately pursuing the mercantilist policy of promoting a
surplus of exports over imports by erecting all sorts of barriers to
imports while subsidizing exports, keeping its currency artificially
undervalued to make its imports expensive and its exports cheap, by
buying U.S. financial assets to keep U.S.interest rates low to
American consumers, to discourage savings and encourage consumption.
Not until recently did an eminent economist like Prof. Paul Krugman
condemn China’s mercantilist practices and suggest U.S. counteraction.
Until then, he believed no country would find it in its interest to
accumulate financial assets rather than goods.

The slow-acting suicide pill suddenly accelerated in the mid-1990s.
The result was the loss of millions of U.S. industrial jobs. How many?
To balance trade at the level of imports in 2008, we would have to
create eight million industrial jobs. The defenders of U.S. trade
policy point to our achievement of full employment in 2007, neglecting
to mention that the competition of factory workers who lost their well-
paying jobs lowered workers’ earnings of all workers. As a result,
wages have stagnated over the past three decades, fewer workers enjoy
middle class incomes, income distribution has worsened, and the U.S.
is on the verge of becoming a second-rate industrial power if it has
not already achieved that distinction. ...

In an incredible display of sycophancy, the document asserts that the
administration’s goal is “Making Trade Work for America’s Working
Families.” America’s Working Families? They have been the big losers
as a result of our tolerance of our huge chronic trade deficits. The
document asserts that “President Obama’s economic strategy halted the
slide into a deep economic crisis and laid the foundation for renewed
American prosperity that is more sustainable, fairer for more of our
citizens, and more competitive globally.” That remains to be seen.
Since the President took office, the unemployment rate, including
those who lost their factory jobs as a result of the trade deficits,
has continued to grow and grow.

The Trade Representative gives lip service to the lip-service of the
G-20 nations who pledged in 2009 to work toward balancing trade. It
displays the same Pollyanna-ish reliance on market forces. All we have
to do is increase our exports by $800 billion. His report states that
the U.S. has reacted to unfair trade practices by imposing
countervailing duties on countries committing infractions of trade
rules like dumping (Chinese tires) and even getting China to further
open its market to “American wind energy products.” Just the other
day, there were protests in the Congress against imported wind
turbines, which, to add injury to injury, are heavily subsidized by
the U.S. government. The President has set a goal “of doubling U.S.
exports in the next five years” to create 2 million jobs. He created a
new bureaucracy called the Export Promotion Cabinet which will fund
export promotion programs, tools for small- and medium-sized
businesses, reduction in barriers to trade, and open new markets. It
joins hundred of federal agencies designed to do-good but end up doing-
nothing.

The report recites: “Effective trade policy helps increase exports
that yield well-paying jobs for Americans … studies show that firms
engaged in trade usually grow faster, hire more, and on average pay
better wages than those that do not. In recent years, exports of
manufactured goods have become an important source of employment,
supporting almost one in five of all manufacturing jobs.” No mention,
not a single mention of the jobs lost to imports, the amount of the
trade deficite, and the declining number of employees in industry,
month after month after month! There is this acknowledgment, “We have
to be frank in recognizing that some Americans lose jobs as markets
shift in response to trade.” So we have enacted a Trade Adjustment
Assistance Act to assist those who lose their jobs to adjust to their
new status. No new export jobs are created by the Act.

That is about all the response the loss of millions of American jobs
has occasioned. Nothing to balance trade except statements that we
need to be more competitive and the international community (the
G-20?) should increase their domestic consumption and imports as part
of a more balanced growth strategy! Don’t hold your breath.

It announces to the world that the United States is committed to the
multilateral trade rules of the WTO system, to trade liberalization
“through negotiation and a defense against protectionism”, the
strongest country in the world announcing that we will not take
unilateral action against the mercantilist practices of such “weak”
countries like China, Japan, Germany, and OPEC. They can continue
their practices, impose barriers to our exports, grant subsidies to
their exports until we petition the WTO for a remedy. The WTO rules
already authorize countries experiencing chronic trade deficits to
take unilateral action including the imposition of tariffs and other
barriers to imports. Why haven’t we done anything to protect our
industry and industrial workers from such destructive trade practices?
La-de-da, it would be so unbecoming a great nation. Our elitists want
to be loved by the world’s elite, who are by-and-large antii-American.

Attempting to counter the impression that it is doing nothing, the
report points to its action responding to “a harmful surge of Chinese
tire imports”, challenging restrictions on U.S. exports of
agricultural products, and filing suit over Chinese export quotas and
duties on raw materials needed by core U.S. industrial sectors from
steel and aluminum to chemicals. Good, those are useful actions but
the number of jobs created relative to the number of jobs lost to the
trade deficits is infinitesimal.

What the U.S. has been engaged in is talk, talk, talk. It needs to
concentrate on jobs, jobs, jobs. The government has engaged in
discussions, just talk, with China, India, Brazil, Russia. It
sponsored and entered into negotiations for a regional, Asia-Pacific
trade agreement, known as the Trans-Pacific Partnership (TPP)
Agreement, with Australia, Brunei, Chile, NewZealand, Peru, Singapore,
and Vietnam. Not one industrial job has been created or ever will be.

Another initiative is the Asia Pacific Economic Cooperation (APEC)
forum. The U.S. will host APEC in 2011. The report writes, “To this
end, we are coordinating with the 2010 host nation, Japan, on an
ambitious agenda that engages APEC’s broad membership on crucial trade
and investment topics for the region’s future. Initiatives in APEC are
a successfully demonstrated way of building a stronger and
constructive American role in the Asia-Pacific market.” Aside from
costing a lot of money and providing a free vacation to a lot of anti-
Americans, how many jobs producing goods for export will it create?
Not a single job.

The report recites that “Bilateral relationships are crucial. But as
we know, multi-faceted regional economic relationships are of major,
and even growing, importance for United States and for the world.”
Where is the evidence that it is important, let alone of increasing
importance, to the U.S. The administration is doing and plans to do a
lot of talking. In place of jobs, jobs, jobs, it is placing emphasis
on talk, talk, talk.

http://www.idealtaxes.com/post3074.shtml

UPDATE 1-Japan finmin wary of policy accord with BOJ

TOKYO, March 10 (Reuters) - Japanese Finance Minister Naoto Kan said
he saw no immediate need to have a more formal policy pact with the
Bank of Japan as the government and the central bank already share a
common goal of beating deflation.

Kan, who took over at the Finance Ministry in January, has been
calling on the central bank to do more to end deflation, but has
steered clear of saying exactly what he wants the central bank to do.

Asked by an opposition lawmaker if he thought a formal agreement with
the central bank would help, Kan said: "It's questionable whether it's
good to have an explicit policy accord. The BOJ governor has already
said in public that the bank wants inflation from plus zero to plus 2
percent ...

"I am cautious about the framework of an accord," Kan, also deputy
prime minister, told a parliamentary committee.

With the government's room for further fiscal stimulus limited by a
public debt that is already close to 200 percent of GDP, the six-month
old administration has put pressure on the central bank to stem
deflation.

Japan's central bank law guarantees the BOJ independence in its policy
decisions, but it also requires the bank to communicate with the
government to ensure its policy is in line with the government's
economic policy.

The central bank is likely to debate easing its ultra-loose monetary
policy again at its board meeting on March 16-17, after introducing a
new funding operation in December under a previous wave of government
pressure as the yen climbed versus the dollar. [ID:nTOE6230A7]

One member of the bank's policy board, Miyako Suda, said on Wednesday
that the central bank will maintain a very accommodative monetary
policy stance to help the country escape deflation.

"The BOJ intends to continue making its contribution to help the
Japanese economy escape deflation and return to a sustained growth
path with price stability," Suda said at a roundtable conference
hosted by the Economist Group.

But Suda also repeated the BOJ's view that easy policy alone will not
be a panacea for deflation.

"Although maintaining easy monetary policy is the top priority, it is
important for the Japanese economy to undergo bold structural reform
as much as it needs recovery... If structural reform is delayed, it
would undermine the stimulative effect of monetary policy," she said.

BOJ officials have said further monetary policy easing will have
little impact on boosting prices, with interest rates already near
zero.

Suda added that the BOJ had taken appropriate steps on monetary policy
and that she didn't think aiming for a high inflation rate would
resolve the shock of the financial crisis. (Reporting by Hideyuki
Sano, Stanley White and Rie Ishiguro; Editing by Hugh Lawson)

http://www.reuters.com/article/idUSTOE62900K20100310?type=marketsNews

FOREX-Yen rises on Japan exporters; sterling falters

By Masayuki Kitano TOKYO, March 9 (Reuters) - The yen rose broadly on
Tuesday on
dollar and euro selling by Japanese exporters, while sterling
faltered on weak data and after Moody's said Britain faces a
dilemma over its support for the banking sector. The yen also climbed
with short-term traders taking cues from
a dip in Nikkei share average .N225 and U.S. stock index
futures SPc1, as demand for riskier assets ebbed. "Japanese exporters
are in the market and selling pretty
actively, including the euro against the yen," said Yuji
Matsuura, joint general manager at Aozora Bank's forex and
derivatives trading group. There could be more yen-buying by Japanese
exporters during
the week, and there might also be some flows in the last week of
March, just before they close their books at the end of Japan's
fiscal year, Matsuura said. Market players said, however, that gains
in the yen have been
limited by speculation that the Bank of Japan may take further
steps to ease monetary policy. The euro fell 0.4 percent to 122.59 yen
EURJPY=R, off a
two-week high of 123.90 yen struck on EBS on Monday. The euro also
dropped against the dollar, dipping 0.1 percent
to $1.3615 EUR= but was still well off last week's $1.3433, its
lowest in more than nine months. The euro struggled after Greek Prime
Minister George
Papandreou warned on Monday that if the Greek crisis worsened it
could lead to a new global financial meltdown. [ID:nLDE6271WD].
Sterling fell 0.3 percent to $1.5014 GBP=D4 and shed 0.7
percent to 135.08 yen GBPJPY=R. Data showing that British house prices
grew last month at
their slowest pace since August weighed on sterling.

[ID:nLAG006161] Another negative factor for sterling was a Moody's
Investors
Service report saying Britain faces a difficult balancing act in
deciding how and when to reduce support for the banking sector,
given growth in the UK's public debt burden. [ID:nLDE6271OB]

EYES ON BOJ MEETING The dollar fell 0.3 percent to 90.01 yen JPY=. The
greenback had rallied on the yen to a two-week high of
90.69 yen on EBS on Monday, after a better-than-expected U.S.
jobs report backed views that the U.S. Federal Reserve will lift
rates faster than the Bank of Japan. The report had also bolstered
demand for higher-yielding
currencies and riskier assets like stocks and commodities, on
improved economic prospects. The Australian dollar fell 0.3 percent
against the yen
AUDJPY=R and the New Zealand dollar shed 0.6 percent
NZDJPY=R. The dollar is likely to be supported at levels around 89.50
yen on speculation about more monetary easing steps from the BOJ,
possibly at its policy meeting next week, said a trader for a
Japanese trust bank. The BOJ meeting is in the spotlight after the
Nikkei
newspaper reported on Friday that the BOJ was examining easing
again and may decide on such a move when it meets on March 16-17.
Sources familiar with the matter said the BOJ is likely to
debate this month easing its ultra-loose monetary policy again.

[ID:nTOE6230A7] The most likely next step for the BOJ is to expand the
fund-supply operation it put in place in December, under which it
lends to banks at 0.1 percent, either by increasing the size from
10 trillion yen ($110.7 billion) or extending the duration of
loans from the current three months. Even if such steps are taken, the
market impact could be
limited given how low yen money market rates are already, said a
trader for a European bank. "Basically, the aim may be to achieve an
announcement effect
and the market has factored in a lot of that," the trader said,
adding that the dollar could fall against the yen if the BOJ
stands pat and unveils no new measures.

(Additional reporting by Anirban Nag in Sydney, Satomi Noguchi
and Kaori Kaneko in Tokyo; Editing by Edwina Gibbs)

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Analysis: Greece's crisis could presage America's
By TOM RAUM (AP) – 10 hours ago

WASHINGTON — Greece is a financial basket case, begging for
international help. Is America heading down that same road?

Many of the same risky financial practices that now imperil the Greeks
were at the center of the all-too-recent U.S. meltdown.

As with Greece, America's national debt has been growing by leaps and
bounds over the past decade, to the point where it threatens to swamp
overall economic output. And in the U.S., as in Greece, a large
portion of that debt is owed to foreign investors.

Not good, if these debt holders begin to wonder if they'll be paid
back. A foreign flight from U.S. Treasury securities could sow
financial chaos in the United States, as happened when many investors
lost faith in Greek bonds.

It's something that could affect all Americans. The U.S. has never
defaulted on a debt, and even the hint of such a possibility could
send interest rates soaring and choke off a fragile recovery.

How long can the United States remain the world's largest economy as
well as the world's largest debtor?

"Not indefinitely," suggests former Federal Reserve Chairman Alan
Greenspan. "History tells us that great powers when they've gotten
into very significant fiscal problems have ceased to be great powers."

After all, Spain dominated the 16th century world, France the 17th
century and Great Britain much of the 18th and 19th before the United
States rose to supremacy in the 20th century.

"Unless we do things dramatically different, including strengthening
our investments in research and education, the 21st century will
belong to China and India," suggests Norman Augustine, the former CEO
of Lockheed Martin who chaired a 2009 bipartisan commission studying
the nation's top challenges.

The Greek government has taken stiff austerity steps in an effort to
get a lifeline from the European Union, sparking strikes and violent
demonstrations.

Some of the same risky strategies used by U.S. hedge funds and other
professional investors in a failed effort to profit from subprime
mortgages in this country — and which led to the 2008 financial near-
collapse — are now being employed by those betting that Greece will
default on its debt.

Greek Prime Minister George Papandreou, who met with President Barack
Obama at the White House on Tuesday, is calling for "decisive and
collective action" here and in Europe to crack down on such rampant
speculation and unregulated bets. He is also seeking more favorable
European interest rates for loans.

Speaking outside the White House, Papandreou welcomed support from
Obama and some European leaders for such efforts and for the austerity
measures taken by his own government. He said it shows the "labor and
sacrifices are not wasted. Of course, our struggle is not ended, it
continues."

Many economists say it's a stretch to compare the U.S. economy, by far
the world's largest, to Greece and other distressed small economies of
southern Europe. They say many of Greece's problems are unique to that
nation and aggravated by a monetary system that rigidly binds 16
nations to the same currency, the euro.

But others argue it may only be a matter of time before the U.S. faces
a similar, and potentially graver, crisis.

"Someday it will happen if we don't get our act together on spending,
our debt under control and our economy to grow faster," said Allen
Sinai, chief global economist for New York-based Decision Economics
Inc., which provides financial advice to corporations and governments.

With signs pointing to a weaker recovery than after other post-World
War II recessions, U.S. consumer spending is likely to remain
unimpressive and the jobless rate high for some time. Sinai said that
suggests there won't be enough growth to push down federal deficits by
much. "It's a political keg of dynamite," he said.

Greece's national debt now equals more than 100 percent of its gross
domestic product, the broadest measure of economic activity. U.S. debt
— now $12.5 trillion — is fast closing in on the same dubious
milestone.

Nearly all of Greek's debt is held by foreign governments and
investors. In the United States, roughly half is owned by global
investors, with China holding the largest stake.

By contrast, Japan's debt is proportionately even bigger — about twice
its GDP — but the impact is cushioned by the fact that most is held by
Japanese households.

"The more open you are to the rest of the world, the more likely
you're going to have a problem if you start running large deficits and
large debt loads," said Mark Zandi, founder of Moody's Economy.com,
and a frequent adviser to lawmakers of both parties.

Zandi does not see any major fallout from the Greek fiscal crisis in
the United States for now, other than a possible temporary hit on
potential European export markets.

However, he said, "global investors at some point are going to start
demanding a higher interest rate. And that's our moment of truth. If
we don't address it by cutting spending and raising taxes, some
combination of the two, then we're going to have a problem."

Polls show growing public anger over deficits and government spending.
The issue is a potent one for the upcoming midterm elections, and a
particular liability for majority-party Democrats.

Calls have sounded from both sides of the political aisle for deficit
reduction. And Obama last month set up a bipartisan deficit commission
to find ways to get the country's budget deficit, now adding more than
$1 trillion a year to the national debt, under control.

But the panel is a weak substitute for what Obama really wanted — a
commission created by Congress that could force lawmakers to vote on
remedies to reduce the debt.

EDITOR'S NOTE _ Tom Raum covers economics and politics for The
Associated Press.

Greek Prime Minister George Papandreou walks away after talking to the
media in front of the West Wing of the White House in Washington,
Tuesday, March 9, 2010, following a meeting with President Barack
Obama. (AP Photo/Alex Brandon)

http://www.google.com/hostednews/ap/article/ALeqM5i8fvUrHUOkJVfaq5UBxHCYV85s3wD9EBDPRO2

Fears of a Greek bank run
By Dody Tsiantar, contributorMarch 9, 2010: 3:33 PM ET

(Fortune) -- In the middle of the 2001 debt crisis, Argentines stormed
their nation's banks to get their money out. To stop the stampede, the
government imposed controls that allowed them to take out only $250 at
a time and limited withdrawals for overseas trips to $1,000.

Greece, in the middle of its own financial crisis, is teetering on the
brink of a default. Many of its wealthier citizens are also uneasy
about what lies ahead for their cash. According to estimates from
private bankers in Greece and Cyprus, as much as 10 billion euros have
left the country for Greek-owned bank subsidiaries in Switzerland and
Cyprus in the last couple of months.

Facebook Digg Twitter Buzz Up! Email Print Comment on this story

"Customers are coming...from Greece on a daily basis," says one
private banker who works for a Greek bank in Cyprus. "They fly here in
the morning, bring us a check and fly back to Athens in the
afternoon."

One banker in Athens reports that many of his clients have sent funds
out of the country in recent weeks, fearing that the government will
take a bigger bite of their money. "They're afraid they'll have to pay
tax on their cash," he says.

Countries in economic turmoil historically look for unpopular ways to
raise revenue, according to economists. So when things start to go
sour, "everyone becomes convinced that the stage is being set for
higher taxes," says former IMF economist Dev Kar, the lead economist
for Global Financial Integrity, an international policy research
center. "People with wealth then ship their money out, so government
does not come and get it when it all comes crashing down."

But growing concerns that Greece's financial crisis will spill over to
its banking system appear to be driving most of the outflow. The fear
isn't totally unfounded: Late last month, Fitch Ratings downgraded the
country's four major private-sector banks to two notches above junk
status on fears that demand for loans may plunge, denting their
potential profitability .

"I'm scared," says one 40-year-old Athenian woman, who's considering
taking her nest egg to Cyprus. "I want to take my money out of the
country before the banks run out of cash."

Not as bad as it seems

A run on the bank, a la Argentina, is not imminent, say banking and
government officials. They acknowledge that money is leaving the
country, but say that reports of massive capital outflows are "grossly
overstated."

"There is a trickle, but nothing like a real flight that would put the
system under pressure," says Anthimos Thomopoulos, chief financial
officer of the National Bank of Greece, which holds a third of
Greece's 250 billion euro total deposit pool.

The situation isn't overly worrisome right now, bank and government
officials say, because most of the money has flowed to those Greek-
owned banks abroad and should, in theory, be easier to repatriate.
What's happening, says Nikolaos Karamouzis, deputy CEO of Eurobank
EFG, a private bank in Greece with 84 billion euro in assets, is "not
materially significant, despite the fact that there is widespread
concern among our clients."

Exactly how much cash has left the country since the crisis exploded
in mid-December is hard to determine, however. According to the most
recent quarterly statistics available, the national deposit pool at
the end of December dropped by less than a half a percent. But
analysts point out those numbers do not reflect the full impact of the
crisis, which picked up momentum in January and February after the
government announced its belt-tightening measures.

A pesos to drachmas comparison

Unlike Greece today, Argentina's government had an arsenal of
financial tools in 2001 to deal with its crisis. It devalued the peso
and imposed capital controls. But as a member of the European Union,
Greece does not have those options; it can't devalue, and because the
Union has rules that call for a free movement of capital within its
boundaries, it can't stop citizens or businesses from moving cash from
one partner country to another.

"The only way Greece could impose capital controls would be to leave
the EU," says Michael Melvin, head of currency and fixed income
research at global asset management firm BlackRock. "And there's close
to zero probability of that."

A return to the drachma isn't likely any time soon either, but Greek
citizens do have good reason to believe that taxes are going to go up.
The socialist government of Prime Minister George Papandreou has
already announced a slew of tax hikes, including increases in the
value-added tax, new excise taxes on luxury goods, such as yachts and
cars, and up to a 20% tax on cigarettes, alcohol and fuel.

0:00 /1:24Greece: Another crisis looms

In addition, a key tenet of the socialist government's plan is to go
after tax cheats aggressively -- economists figure that nearly 30% of
the country's gross domestic product goes unreported to authorities.
For decades, Greece's shadow economy has thrived because many Greeks
-- doctors, plumbers, electricians and lawyers among them -- conduct
business entirely in cash. Much of that money has ended up in bank
accounts in other countries, say economists -- and a lot of it is not
reflected in national statistics.

"The outflow of cash from Greece is not a new phenomenon. If you could
calculate the outflow of the last 50 years, you'd get an astronomical
figure," says University of Maryland economics professor Theodore
Kariotis. "Greeks are a very sneaky people."

The government's new rules intend to change that. Last week it
announced new measures to encourage those who have transferred money
out of Greece to bring it back within six months, no questions asked.
They'll be taxed 5% on the total, however. Another option offered:
declare the money, leave it in foreign accounts -- and be subject to
an 8% tax. After that, foreign governments will cooperate with Greek
tax authorities to pursue lawbreakers, says a source in the finance
ministry.

Greek Finance Minister George Papaconstantinou hopes the government's
new measures will produce results. "As the reform program unfolds, a
lot of this lost, or quasi-lost, liquidity will come back to the
system," he said in a mid-January interview. "It is an immediate
concern, of course, but it is reversible."

Maybe it is, but according to economists, money that leaves a country
rarely returns. "I'm not holding my breath," says Global Financial
Integrity's Kar. "Once [cash] leaves, it's hard to get it back."

The snag in Greece's salary solution
http://money.cnn.com/2010/03/04/news/international/greece_pay.fortune/index.htm?postversion=2010030403

Is your country the next Greece?
http://money.cnn.com/2010/03/08/news/international/next_greece.fortune/index.htm?postversion=2010030815

Greeks try to remember how to cut back
http://money.cnn.com/2010/02/26/news/international/greece_debt_crisis.fortune/index.htm?postversion=2010030109

http://money.cnn.com/2010/03/09/news/international/greece_money.fortune/?section=magazines_fortune

Tax hikes may still fail to fix Athen's debts crisis
Wednesday March 10 2010

GREEK tax increases, which have sparked widespread protests, may fail
to generate as much additional revenue as the government in Athens
estimates, a draft EU report says.

While the €4.8bn of additional austerity measures enacted by the Greek
parliament last week "appear sufficient to safeguard the 2010
budgetary targets", risks remain that increases in value-added tax and
fuel taxes may generate less than is projected, the report says.

The Greek government plans to cut the deficit to 8.7pc of gross
domestic product (GDP) this year from 12.7pc in 2009. The draft report
will be discussed by EU finance ministers in Brussels next week.

Demand

An increase in the main VAT rate by 2pc from 19pc will bring in €1.3bn
in added revenue this year, while higher excise duties on petrol and
diesel are expected to generate €450m more, according to the finance
ministry in Athens.

But "the implications on tax revenue of a contraction in demand should
not be underestimated", according to the European Commission.

On VAT, it said "changes in the tax base -- in relation to the
contraction of internal demand -- and tax evasion may result to lower-
than-expected gains".

Greece's overall government debt "remains on a steep upward path",
according to the commission. Greek debt is projected to swell to 125pc
of GDP this year, the highest in the 27-nation EU, it forecasts.

EU Economic and Monetary Affairs Commissioner Olli Rehn said yesterday
that the latest measures put Greece on "the path of fiscal adjustment
for 2012" -- the deadline to meet the EU's 3pc deficit limit.
(Bloomberg)

Irish Independent

http://www.independent.ie/business/european/tax-hikes-may-still-fail-to-fix-athens-debts-crisis-2093413.html

S&P expert: Integrated eurozone fiscal policy key to sovereign debt
crisis

English.news.cn 2010-03-09 18:32:11

by Xinhua writer Wang Zongkai

BEIJING, March 9 (Xinhua) -- Integrated fiscal policy was essential
for the euro zone to get out of the consequences of Greek sovereign
debt crisis, according to an expert from Standard and Poor's (S&P).

"The Greek debt crisis can be the strongest challenge that the euro
zone has faced in the past 11 years, and the key to solve the problem
is whether eurozone-16 can sacrifice some of their fiscal
sovereignty," said David Beers, managing director of S&P sovereign and
international public finance ratings group, on Monday.

On Dec. 8, 2009, Fitch Ratings downgraded its rating on Greece
sovereign credit from A- to BBB+, and revised its outlook to negative,
which signaled the commence of Greece sovereign credit crisis.

Moreover, other eurozone members, including Portugal, Ireland, Italy
and Spain, also reported deficit problem recently. In a context of
weak recovery in European economies, some analysts said that the Greek
debt crisis might contaminate the whole Europe.

However, Beers believes that the Greek debt crisis will not cause a
new round of global crisis.

On the one hand, other eurozone members welcomed Greece's 4.8-billion-
euro (6.53-billion-U.S. dollar) austerity package, which has shown the
Greek government's willingness to submit some fiscal sovereignty to
the union for underpinning euros, he said.

On the other hand, the creditworthiness of all eurozone sovereign
states was currently at least adequate to meet their financial
commitments, and S&P did not assume any sovereign state leaving the
euro zone in the medium term, Beers added.

So far, the Greek debt crisis had been contained within the euro zone.
Meanwhile, the Greek government had actively taken measures, while the
euro zone was considering institutional reform such as the
establishment of a European Monetary Fund, which will function like
the International Monetary Fund.

Regarding Britain's estimates of its deficit in 2010 fiscal year to
amount 1.78 trillion pounds (2.67 trillion dollars), nearly 13 percent
of its gross domestic product, Beers said Britain's current fiscal
policy is sustainable.

"If party in office changed, S&P would keep a close look at deficit-
cutting measures of the new administration," he added.

Meanwhile, the other two largest economies in the world are also
facing the deficit problem. U.S. federal deficit in 2009 had amounted
to 1.41 trillion dollars, almost 10 percent of the GDP while Japan's
outstanding public debt reached a record high of 817.5 trillion yen (9
trillion dollars), and 6.83 million yen (7,560 dollars) per capita.

Nevertheless, Beers was more optimistic on U.S. and Japan thanks to
more flexibility and time in dealing with debt problem given that the
dollar and the yen are the two strongest reserve currencies right now.

Beers estimated that it would take one or two years to solve the Greek
debt crisis.

People in Greece and other eurozone countries need to have confidence
while their governments need action.

Editor: Xiong Tong

bademiyansubhanallah

unread,

Mar 13, 2010, 8:58:04 AM3/13/10

Top Story
Saturday March 13 , 2010 10:49 GMT

The end of a week full of fundamentals showed signs of recovery in the
Asian region

Last week witnessed a number of major fundamentals from the Asian
region which helped provide a clearer picture for the current
situation across Asian economies. Asian stocks consolidated this week
and gained slightly, but the sure thing is that shares moved according
to investors' confidence not on fundamentals.

Major fundamentals started with Japan; January’s current account
surplus shrunk to 899.8 billion from the previous reported 900.8
billion yen. The trade surplus was also down to 197.2 billion yen from
631.2 billion yen.

Japan's overseas shipments rose 8.8% in January to 5,835.0 billion yen
from 4,925.2 billion yen in December. On a yearly basis, export
climbed 40.2%, the highest since 1986, as demand from China, Japan's
main trade partner, rose to the highest since 1985, while shipments to
the U.S inclined for the first time in two years.

On the other hand, machine orders in Japan declined 3.7% in February,
and slipped 1.1% on the year; worth mentioning that machine orders is
one of the main indices that measures capital spending. Analysts
expect capital spending to take sometime to recover, while they
explained the decline in machine orders as a correction after orders
incline by the end of last year.

The Japanese economy ended this week's fundamentals with the final GDP
reading for the fourth quarter of 2009 showing the world's second
largest economy grew 0.9% easing from the preliminary reading of 1.1%.
On the year, the economy expanded 3.8% revised lower from the
preliminary 4.6%.

Moreover, companies are still concerned about the recovery, especially
after global stimulus measures waned and some major economies began to
exit the nonstandard measures to avoid bubbles formation and
inflationary pressures. Adding to that, the surging yen is affecting
Japanese exports harshly as they lose their competitive advantage.
Companies are still cautious about capital spending amid unstable and
uncertain outlook which affected economic growth.

As for central banks, they had their share last week starting with the
Reserve Bank of New Zealand (RBNZ) which kept interest rates steady at
2.5% meeting market forecasts. Governor Allan Bollard said the bank
will maintain its policy till mid-2010, before it starts raising
interest rates.

Weak capital spending alongside declining house prices, might affect
recovery in New Zealand; forcing the RBNZ to keep rates steady at
their lowest to support the economy, in addition to encouraging
households to increase spending.

The Bank of Korea also kept the overnight cash target steady at 2.00%,
ensuring that the bank will focus on supporting economic growth and
stimulating internal investments to guarantee a solid recovery.

The Korean economy provided mixed data, growth slowed in the fourth
quarter of last year, while unemployment rose in January. Exports are
still recovering as they gained for the fourth straight month, and
business confidence rose to a seven-year high. All this pressured the
central bank to maintain its monetary policy till the economy
determines its direction.

Ending our tour with China, retail sales rose 22.1% in February, while
manufacturing output gained 12.8%, and consumer prices climbed 2.7%
from 1.5%. Accelerating inflation may pressure monetary policy makers
to withdraw stimulus measures to support recovery in the world's third
largest economy and pursue further monetary tightening.

The MSCI Asia Pacific Index ended Friday’s trading by rising 0.3%.
Nikkei 225 ended Friday’s trading by rising 0.81% to close at 10751.26
points. The S&P/ASX 200 closed on Friday at 4818.10 after rising
0.08%. Hang Seng ended Friday’s trading down 0.09% to close at
21209.74 points.

A Calm Week Provided Investors with a Chance to reassess their
Outlook for the World’s Largest Economy!
13 Mar 2010 10:58
http://www.ecpulse.com/en/topstory/2010/03/13/us-weekly/

A quiet European week as optimism buildup over Greece ahead of EC
meeting
13 Mar 2010 10:53
http://www.ecpulse.com/en/topstory/2010/03/13/europe-weekly/

The end of a week full of fundamentals showed signs of recovery in
the Asian region
13 Mar 2010 10:49
http://www.ecpulse.com/en/topstory/2010/03/13/asia-weekly/

The US about to become a “minority-majority country”
12 Mar 2010 15:51
http://www.ecpulse.com/en/topstory/2010/03/12/minority-in-the-us/

Retail Sales rise in February as Spending continues to support
economic growth
12 Mar 2010 13:59
http://www.ecpulse.com/en/topstory/2010/03/12/retail-sales-rise-support-economic-outlook-us/

U.S. Ahead, Stock futures trade higher ahead of opening bell
12 Mar 2010 12:35
http://www.ecpulse.com/en/topstory/2010/03/12/stock-future-trade-higher-ahead-of-bell/

Euro zone industrial production climbed to its highest in two
decades
12 Mar 2010 10:37
http://www.ecpulse.com/en/topstory/2010/03/12/euro-zone-industrial-production/

Europe Ahead: Industrial Production to Show Improvement amid Debt
Concerns in Euro Zone
12 Mar 2010 05:19
http://www.ecpulse.com/en/topstory/2010/03/12/europe-ahead/

Retail sales in New Zealand rose more than forecasts in January
12 Mar 2010 02:08
http://www.ecpulse.com/en/topstory/2010/03/12/retail-sales-new-zealand/

Bill Gates is no longer the richest man on the planet
11 Mar 2010 15:28
http://www.ecpulse.com/en/topstory/2010/03/11/richest-people-in-the-world/

The labor sector seeking stability while Trade Balance improves
11 Mar 2010 14:11
http://www.ecpulse.com/en/topstory/2010/03/11/labor-sector-seeking-stability-trade-balance-improves/

Swiss National Bank leaves interest rate at 0.25%
11 Mar 2010 13:35
http://www.ecpulse.com/en/topstory/2010/03/11/swiss-national-bank/

U.S Stock futures drop as trade balance expectations shows widened
deficit
11 Mar 2010 12:06
http://www.ecpulse.com/en/topstory/2010/03/11/stock-futures-drop-trade-balance-expectations-widen-deficit/

Euro zone March Monthly Report while France Non-Farm Payrolls better
than expectations
11 Mar 2010 11:22
http://www.ecpulse.com/en/topstory/2010/03/11/euro-zone-monthly-report/

Europe Ahead: Tranquil Day in Europe, but Debt Woes are Predominant
11 Mar 2010 06:06
http://www.ecpulse.com/en/topstory/2010/03/11/europe-ahead/

http://www.ecpulse.com/en/topstory/2010/03/13/asia-weekly/

Western media’s new ‘losing Japan’ narrative
March 13th, 2010

Author: Tobias Harris, MIT

In different ways, two articles published in Western media outlets
this week suggest the emergence of a new narrative concerning Japan in
elite circles in the United States. One might call that narrative the
‘losing Japan’ narrative, reminiscent of the idea — propagated by
newsman Henry Luce — that the United States, or rather, the Democratic
Party ‘lost’ China when the Communists won the Chinese Civil War. This
narrative suggests that the United States is ‘losing’ Japan to China,
raising a call to arms that unless the US government acts
expeditiously it could let the DPJ-led government lead Japan into
China’s embrace.

The first is the now infamous editorial in the Washington Post on
Fujita Yukihisa, the DPJ upper house member best known for his doubts
about the 9/11 terrorist attacks. (Michael Cucek and Paul Wilson have
the controversy well-covered.) However egregious Fujita’s views,
Washington Post’s editorial is revealing of the ‘losing Japan’
narrative in a number of ways. Start with the editorial’s treatment of
the subject. Despite his impressive-sounding titles, Fujita has little
or no role in Japanese foreign policymaking under the Hatoyama
government. The international department is not a policy shop, and
Diet committees are meaningless. Either the Post was ignorant of these
facts — in which case the editorial writer, Lee Hockstader according
to Fujita, did a poor job — or the Post was aware but wrote a
misleading editorial anyway in which Fujita is ludicrously described
as a ‘Brahmin in the foreign policy establishment.’

It is possible that the Washington Post made an honest mistake, but
then one gets to the inferences Hockstader draws from Fujita’s
thoughts about 9/11:

The only thing novel about Mr. Fujita is that a man so susceptible to
the imaginings of the lunatic fringe happens to occupy a notable
position in the governing apparatus of a nation that boasts the
world’s second-largest economy.

We have no reason to believe that Mr. Fujita’s views are widely shared
in Japan; we suspect that they are not and that many Japanese would be
embarrassed by them. His proposal two years ago that Tokyo undertake
an independent investigation into the Sept. 11 attacks, in which 24
Japanese citizens died, went nowhere. Nonetheless, his views, rooted
as they are in profound distrust of the United States, seem to reflect
a strain of anti-American thought that runs through the DPJ and the
government of Prime Minister Yukio Hatoyama.

Mr. Hatoyama, elected last summer, has called for a more ‘mature’
relationship with Washington and closer ties between Japan and China.
Although he has reaffirmed longstanding doctrine that Japan’s alliance
with the United States remains the cornerstone of its security, his
actions and those of the DPJ-led government, raise questions about
that commitment. It’s a cliché but nonetheless true that the U.S.-
Japan alliance has been a critical force for stability in East Asia
for decades. That relationship, and its benefits for the region, will
be severely tested if Mr. Hatoyama tolerates elements of his own party
as reckless and fact-averse as Mr. Fujita.

Again, one can debate whether Fujita can be properly described as
having a ‘notable position in the governing apparatus,’ but the leaps
Hockstader takes from Fujita’s position are unjustifiable, leaps that
can be detected in the slippery language Hockstader uses – ‘Fujita’s
views seem to reflect a strain of anti-American thought that runs
through the DPJ and the government of Prime Minister Yukio Hatoyama.’

Hockstader makes this outrageous charge without providing a shred of
evidence beyond Fujita’s views. Meanwhile, in the subsequent paragraph
he casually dismisses the Hatoyama government’s rhetorical commitment
to the alliance (and, for that matter, its sizable financial
commitment to the reconstruction of Afghanistan) to speak of ‘actions’
that ‘raise questions.’ I assume here he means Futenma, although who
knows. This phrasing is precisely the kind of attitude that has
produced the DPJ’s approach to the alliance in the first place, the
idea that there is only one way to be in favor of the alliance.
Finally, Hockstader basically threatens the Hatoyama government,
suggesting that if Fujita is not dispensed with, his government will
suffer accordingly in the eyes of official Washington.

Note, finally, that while Hockstader questions the sincerity of the
Hatoyama government’s commitment to the alliance, he says nothing more
about the Hatoyama government’s approach to China. The silence is
deafening. Note also the scare quotes around mature, as if the DPJ’s
position that the alliance as it was conducted under the LDP is in
need of changes is an absurd idea. The DPJ, he seems to be saying, has
a critical approach to the alliance and an uncritical approach to the
Sino-Japanese relationship. (This comparison is hardly valid: the US-
Japan relationship is complex and has the thorny question of US forces
in Japan at the heart of it, while the Sino-Japanese relationship is
not nearly as complex and is still progressing by baby steps from the
deep freeze it experienced under Koizumi.)

As I read it, the editorial can be summarised as ‘Hatoyama’s party
harbors a 9/11 denier, clearly does not take the relationship with the
US seriously, and is moving Japan closer to China.’

A more serious version of this argument can be found in the Financial
Times, where columnist Gideon Rachman argues that the DPJ gives the
impression of drifting in China’s direction.

He writes:

When Mr Hatoyama’s Democratic Party of Japan took power last August,
it broke more than 50 years of almost continuous administration by the
Liberal Democratic Party. The DPJ is keen to differentiate itself from
the LDP in almost every respect, and foreign policy is no exception.
In an interview last week, Katsuya Okada, Japan’s foreign minister,
said that the LDP followed US foreign policy ‘too closely’. ‘From now
onwards,’ says Mr Okada, ‘this will be the age of Asia.’ The foreign
minister adds that talk of Japan choosing between China and the US is
meaningless, and that Japan’s friendship with America will remain
‘qualitatively different’ from its relations with China. But some DPJ
party members have called for a policy of ‘equidistance’ between China
and the US.

Several things are notable about this paragraph. First, is the DPJ
really acting out of a desire to differentiate itself from the LDP?
Given that foreign policy plays so little a role in the calculus of
voters, I have a hard time believing that the DPJ-led government’s
foreign policy initiatives are driven by electoral considerations.
Second, why do unnamed DPJ party members get equal billing in this
paragraph with Okada, who seems to be firmly in control of foreign
policy making? Okada provides a decent summary of the government’s
foreign policy approach, suggesting that the DPJ is not drifting from
America, but instead shifting the emphasis of Japan’s foreign policy,
from a foreign policy in which Asia policy was tailored around the
alliance to a foreign policy in which the alliance is tailored to fit
Japan’s Asia policy. And yet the paragraph ends with unnamed
backbenchers and their unspecified equidistant ‘policy.’

Rachman continues by citing Hatoyama’s controversial essay in the
International Herald Tribune, and Ozawa’s grand tour in Beijing and
intervention to arrange an audience with the Emperor for Xi Jinping.
Rachman is at least careful to admit that ‘it is probably overdoing it
to suggest that Japan is definitively shifting away from its postwar
special relationship with the US.’ But the article conveys the
impression that Japan is a prize in the struggle for influence between
the US and China — and that the battle for Japan has begun.

There are several problems with this narrative, in both its
belligerent Washington Post form and its more circumspect Rachmanite
form. The fallacy both articles share is the idea that Asia is sure to
be zero-sum, that a country like Japan can only be in the US camp or
the China camp. Joining the former camp, Rachman concludes, would
entail ‘[cultivating] warmer relations with other democratic nations
in the region, such as India and Australia, in what would be an
undeclared policy of ’soft containment’ of Chinese power.’ And yet
that is precisely what the Hatoyama government wants to do. Rachman
might respond that the time for choosing has not yet arrived, which is
true, but it also raises the possibility that another future is
possible in which countries like Japan, Australia, and India maintain
security ties with the US in order to keep the US engaged even while
maintaining constructive political and economic relationships with
China, navigating between the two superpowers in order to avoid
unmitigated dependence on either one.

The Washington Post is even more unabashed in its embrace of an
approach to Asia that does not allow for nuance, which it aired in
another editorial on Japan published earlier this year.

The problem with this approach to the region and Japan on the op-ed
pages of newspapers well read by policymakers in Washington is that
this way of thinking could easily become self-fulfilling prophecy.
Rachman may be warning of a possible future, but many in positions of
power — with the help of the Washington Post — could come to take what
he describes as a given.

A major flaw with the ‘losing Japan’ narrative is that there is
remarkably little data upon which to reach firm conclusions, a point
acknowledged by Rachman. Think of how little we know about the
Hatoyama government’s approach to China. Interestingly, both the
examples he cites as cases confirming the tilt towards China involve
the activities of Ozawa Ichiro, i.e. a figure outside of the
government who may not be long for politics. What data points do we
have concerning Hatoyama and members of his cabinet? Not many.
Hatoyama has made clear that he will not provoke China on historical
issues. Beyond that? Unmentioned in both articles is that the Hatoyama
government is building upon the ‘strategic, constructive partnership’
concept developed by the Abe government, right down to the continued
use of the term. That doesn’t sound like a government doing whatever
it can do differentiate itself from the LDP.

I’m willing to cut Rachman some slack, because his piece contains
numerous caveats and notes of caution. But the Washington Post
editorial is another story entirely. By picking a DPJ member whose
views would obviously draw opprobrium in the US and then implying that
his views represent a ‘strain’ in the DPJ, this editorial is little
more than a hatchet job against Japan’s ruling party. How this
editorial will help reverse what the Post believes is Japan’s drift
towards China is beyond.

After all, the last time Japan was a political battleground for a cold
war in Asia, the US had considerably more invasive means at its
disposal than sharply worded editorials. Accordingly, this narrative
may in fact be a product of insecurity about declining US influence,
much as insecure Japanese elites fretted that the transition from Bush
to Obama would mean the return of Japan passing. The reality, however,
is that in the unlikely event that Japan were to reorient itself from
the US to China, there would be little the US could do to stop it.

1.Media shifts make Japan harder to read
http://www.eastasiaforum.org/2010/01/14/media-shifts-make-japan-harder-to-read/
2.For the western press, Japan is always rising
http://www.eastasiaforum.org/2009/03/24/for-the-western-press-japan-is-always-rising/
3.Japan: Two-party politics and the role of the media
http://www.eastasiaforum.org/2009/09/14/japan-two-party-politics-and-the-role-of-the-media/
4.China’s new media charm offensive
http://www.eastasiaforum.org/2010/01/26/chinas-new-media-charm-offensive/

What other people are reading:

1.Services negotiations in the WTO are stuck: What is the circuit
breaker?
http://www.eastasiaforum.org/2008/06/17/services-negotiations-in-the-wto-are-stuck-what-is-the-circuit-breaker/
2.Aso’s missed opportunity
http://www.eastasiaforum.org/2009/02/24/asos-missed-opportunity/
3.India and the Copenhagen summit
http://www.eastasiaforum.org/2009/09/04/india-and-the-copenhagen-summit/

http://www.eastasiaforum.org/2010/03/13/western-medias-new-losing-japan-narrative/

Japan faces rocky path to emissions trading system
Chisa Fujioka, Reuters 12 Mar 10;

(Reuters) - Japan faces a rocky path to launching an emissions trading
system after the government approved legislation on Friday that was
vague on how the scheme would set limits on emissions.

The proposed climate bill, set to be enacted in parliament by mid-
June, set a one-year deadline for the world's fifth-largest greenhouse
gas emitter to draft legislation outlining details for a mandatory
trading scheme.

A national scheme setting emissions targets could be a major boost for
carbon trading in Japan, which only has a voluntary carbon market at
the national level based on companies' pledged goals.

But designing the new market risks becoming complicated as the climate
bill leaves room for the trading system to set caps on emissions per
unit of production, which would allow rises in emissions when output
grows.

While an early draft of the bill by the Environment Ministry proposed
a "cap-and-trade" scheme that sets absolute volume caps on emissions,
the bill was watered down after complaints from businesses that volume
caps would stifle growth.

Environment Minister Sakihito Ozawa tried to play down worries on
Friday that the bill risked doing little to lower emissions.

"The important thing is that we achieve the 25 percent target and that
we boost economic growth with environment (policies)," he said,
referring to Japan's target to cut greenhouse gas emissions by 25
percent by 2020 from 1990 levels on condition a global climate deal is
reached.

Ozawa hinted on Thursday that he still envisioned a system based on
volume caps, saying the government was likely to adopt a methodology
that used industries' carbon efficiency to set absolute emission
limits.

He added, however, that nothing had been decided and that details of
the scheme would be worked out over the next year.

INDUSTRY PRESSURE

Cap-and-trade, which sets limits on emissions that becomes tougher
over time, would force companies to invest in steps to cut their
carbon pollution or face having to buy permits for every metric ton of
emissions that they are over their target.

Businesses, struggling with a fragile economic recovery and deflation,
have instead favored carbon intensity goals, which would encourage
them to boost energy efficiency but still allow them to increase
output.

Industry groups have put pressure on the Ministry of Economy, Trade
and Industry (METI) in protest at volume caps, posing a dilemma for
the government as it struggles with declining support ahead of an
election for the upper house expected in July.

METI denied on Friday that the climate bill, which calls for the
government to set volume caps in principle but to also "consider
carbon intensity," restricted debate simply to using carbon intensity
as a tool to determine volume caps.

"We have checked and that is not the interpretation of the wording," a
METI official told reporters.

The vagueness of the climate bill, along with uncertainties over the
fate of climate legislation in the United States, could lead to a
drawn-out process in designing the trading scheme, an analyst said.

"Designing the emissions trading scheme will be complicated, because
debate from now won't just involve cabinet ministers but other
officials from various ministries," said Yasushi Setoguchi, deputy
general manager of environment, natural resources and energy at Mizuho
Information and Research Institute.

"In the meantime, companies will find it harder to plan their
strategies ahead."

(Editing by Alex Richardson)

posted by ria at 3/13/2010 07:00:00 AM

http://wildsingaporenews.blogspot.com/2010/03/japan-faces-rocky-path-to-emissions.html

Japan economy improving, but not self-sustaining yet: Kan+
Mar 11 07:33 PM US/Eastern

Comments (0)Email to a friend Share on Facebook Tweet this

TOKYO, March 12 (AP) - (Kyodo)—Finance Minister Naoto Kan said Friday
the Japanese economy has been improving further in recent weeks, but
is not self-sustaining yet.
The economy has not realized "a sustainable recovery. But compared
with before it is taking one step toward" better conditions, Kan told
a regular news conference, when asked about the latest gross domestic
product figures.

The government said Thursday that Japan's economy grew an annualized
3.8 percent in real terms in the October-December quarter, slower than
the initially reported 4.6 percent growth, as private-sector capital
investment turned out to have improved less than previously expected.

http://www.breitbart.com/article.php?id=D9ECONHG2&show_article=1

Bloomberg

Japanese Bonds Decline as Recovery Optimism Sparks Stock Rally
March 12, 2010, 10:45 PM EST

By Theresa Barraclough

March 13 (Bloomberg) -- Japan’s 10-year bonds fell, completing a
second weekly decline, as Asian stocks joined a rally in global
equities, damping demand for the safety of debt.

Benchmark yields climbed to the highest in more than a week as the
Nikkei 225 Stock Average completed a fourth week of gains. Bond
futures dropped by for a second day after the contracts rolled over
from March to June deliveries earlier this week. Declines in bonds
were limited after Bank of Japan Governor Masaaki Shirakawa told
lawmakers in Tokyo yesterday the central bank will keep interest rates
low.

“Yields were pushed higher as futures dropped amid a rally in global
stocks,” said Satoshi Yamada, manager of fixed-income trading at
Okasan Asset Management Co. in Tokyo. Futures tend to drop after a
contract change over, he said.

The yield on the 1.4 percent bond due March 2020 rose 3.5 basis
points, or 0.035 percentage point, this week to 1.34 percent at Japan
Bond Trading Co., the nation’s largest interdealer debt broker. The
rate earlier touched 1.345 percent, the highest since Feb. 22. The
price dropped 0.311 yen to 100.528 yen.

Ten-year bond futures for June delivery dropped 0.47 to 138.85 on the
Tokyo Stock Exchange. Futures dropped for three consecutive days the
last time contracts rolled over from December to March deliveries.

“Technical trades by speculators were a big driving force behind bond
future weakness,” said Kazuhiko Sano, chief strategist in Tokyo at
Citigroup Global Markets Japan Inc., a unit of New York-based
Citigroup Inc.

Stock Gains

The Nikkei 225 gained 0.8 percent yesterday after the Standard &
Poor’s 500 Index reached the highest since October 2008 the prior day.

Japan’s 10-year yields had a correlation of 0.72 with the Nikkei 225
over the past week, compared with a relationship of 0.45 last month,
according to Bloomberg data. A value of 1 would mean the two moved in
lockstep.

“The stronger Nikkei 225 Stock Average on the back of firm U.S. stocks
weighs on the market,” said Shuji Tonouchi, a senior bond strategist
in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest
bank by assets.

BOJ Policy

Bond declines were tempered yesterday on speculation the Bank of Japan
will expand liquidity in markets. The central bank’s options include
expanding a 10 trillion yen ($111 billion) fund providing loans to
banks, according to two central bank officials who spoke on condition
of anonymity.

“If we can confirm that the BOJ is moving toward easing policy, it
will be a plus for the bond market,” said Kenro Kawano, a debt
strategist at Credit Suisse Group AG in Tokyo.

The central bank has kept the key overnight lending at 0.1 percent
since December 2008, and is purchasing 1.8 trillion yen of government
bonds each month. It has lent 9.6 trillion yen under the three-month
bank loan program that was introduced in December, close to the
current limit.

In the unlimited lending facility set to expire this month, there was
5.9 trillion yen outstanding as of Feb. 28. Both facilities offer
three-month credit at 0.1 percent.

Japanese Deputy Finance Minister Yoshihiko Noda said on March 11 that
the Bank of Japan understands the risk falling prices pose to the
nation’s economy.

Investors expect consumer prices to drop an average 1.1 percent per
year over the next five years, according to Japanese breakeven rates,
or the yield differential between conventional and inflation-protected
securities.

The costs companies pay for energy and unfinished goods declined 1.5
percent from a year earlier in February, after sliding 2.1 percent in
January, the BOJ said on March 10.

Deflation, or a general drop in prices, enhances the value of the
fixed interest of debt.

Improving Economy

Bonds also fell after Finance Minister Naoto Kan said yesterday
revised gross domestic product figures showed the economy is
improving. Gross domestic product expanded at an annual 3.8 percent
rate last quarter. While that was lower than the 4.6 percent reported
initially, it was better than the economy’s performance in the third
quarter, when it shrank at a 0.6 percent pace.

The data showed that “overall, the economy has taken a step forward,
although I can’t say we’re in a self-sustained recovery,” Kan said at
a press conference in Tokyo.

--Editors: Nate Hosoda, Nicholas Reynolds

To contact the reporter on this story: Theresa Barraclough in Tokyo at
tbarra...@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at
rsw...@bloomberg.net.

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Friday, March 12, 2010
European Central Bank President Japan US and UK are not better off
than Greece

European Central Bank President Jean-Claude Trichet argues European
governments stand united to aid Greece.

All industrialized countries are in the same fiscal problems says
Jean- Claude Trichet head of the ECB European Central Bank

Watch Video

http://economycollapse.blogspot.com/2010/03/european-central-bank-president-japan.html

Asian Stocks End Mixed; Japan Hits 7-Week High
By Nazim Khan | 03-12-10 | 04:18 AM

Most Asian stocks were sluggish on Friday with the exception of the
Japanese market, which closed on a seven-week high. Shares in Japan
were bolstered by speculation the country’s central bank was mulling
inducing more liquidity into the economy.

About the AuthorNazim Khan is an assistant site editor for
Morningstar.com based in Mumbai, India.Contact Author | Meet other
investing specialistsAt close, the Nikkei gained 0.8% while, in
contrast, China’s Shanghai Composite slipped 1.2% on fears its central
bank would tighten monetary policy to tame inflation and cool down the
economy. Hong Kong’s Hang Seng closed marginally down 0.1% while
India’s BSE Sensex ended flat. Across the region in Australia, the
benchmark ASX closed up 0.1%.

Exporter stocks in Japan surged after the yen dropped against most of
its peers on expectation of the central bank’s policy moves.

On Friday, media reports, quoting two Bank of Japan officials on
condition of anonymity, said the central bank may undertake a $110
billion fund expansion to provide loans to banks in its policy meeting
on March 16-17.

The Japanese economy, the second-largest in the world, has been mired
in deflation and negative growth for many parts of the last two
decades. Since the global financial crisis of 2008, the government and
central bank cut interest rates to near zero and induced liquidity
into the system to stimulate growth.

The yen fell 0.01% against the U.S. dollar to 90.53 and 0.33% against
the euro to 124.21, its lowest level since February 22.

Investor sentiment was helped by Wall Street, which gained on
Thursday, shrugging off weak jobs and other economic data.

However, the Chinese market slipped late in trade, fresh from
Thursday’s higher-than-expected inflation data, which had sparked
fears the government may clamp down on high asset prices by tightening
its monetary policy.

Stocks on the Move

On the Nikkei, companies that derive substantial revenues from outside
of Japan rose on expectations the weakening yen would boost their
incomes. Honda Motor gained 0.9%, Nissan surged 2.4% while Suzuki was
up 0.5%.

Among technology companies with sales outside the country, Canon
gained 0.3% while Ricoh jumped 1.5%.

Hitachi gained 1.9% after its new president said the company’s focus
was to break even in the next fiscal year.

Property stocks struggled in China, bogged down by concerns any policy
move would first be used to cool down property prices.

China’s property prices have been the subject of debate globally after
they rose spectacularly in the last one year. Recently, renowned short-
seller Jim Chanos said the country’s real estate was in a bubble.

Air China surged 11% after is said it is to raise $950 million via a
share sale.

In Hong Kong, however, property stocks led the gain after its biggest
developer, Sun Hung Kai, reported a 44% jump in its net profit in the
second half last calendar year. The stock gained 1.5%.

In India, stocks were little changed but shares in the country’s
biggest consumer company, Hindustan Unilever, fell 4% in expectation
of lower profits thanks to a rise in commodity prices and a cut-throat
pricing war with competitors. The stock has slumped about 10% in the
past four trading sessions.

Sugar stocks in India have been under-performing the market with
shares in leading sugar companies dropping over 10% in the past few
trading sessions after prices of the commodity cooled off a bit.
Analysts were cautious on the sector and said sugar prices have topped
off on the commodity cycle and may start to recede now. Sugar futures
have more than doubled in the last year, due to an acute production
shortage on account of floods and drought in sugar-producing Brazil
and India, respectively.

In Australia, banks out-performed the benchmark index, mirroring a
rally in financial stocks on Wall Street overnight. The country’s big
banks, National Australia Bank, ANZ Banking Group and AXA Pacific
Holdings, were up between 0.6% and 1.5%.

Investors would now eye more macro-economic data from the U.S. in the
form of retails sales due later Friday.

http://news.morningstar.com/articlenet/article.aspx?id=329318&pgid=rss

At Large
Year of the Tiger
By George H. Wittman on 3.12.10 @ 6:07AM

In the Chinese zodiac this is the Year of the Tiger. The previous
years of the same appellation are said to have been fraught with
controversy and even conflict. Tradition says calm and balance is
certainly not to be expected.

Contrary to earlier reports, China remained ahead of Japan in holdings
of U.S. Treasury securities at the end of 2009. The exact figure (not
including private purchases through intermediaries) was $894.8 billion
for China and $765.7 billion for Japan of a total amount of
international holdings of $3,689 billion. The more important figure,
though, is the considerable drop in the Chinese position in Treasury
paper of $63.5 billion since June '09. The Chinese government bankers
may have been trying to lower their exposure to the falling dollar.

The state of the Chinese currency, the renminbi, however, is a source
of consternation for foreign observers. Pressure from the West,
especially the United States, for an official readjustment of the
value of the renminbi has been vigorously countered by Beijing.
China's financial authorities took particular umbrage at an estimate
by the Peterson Institute of International Economics that the Chinese
economy was undervalued by 41%. Beijing's obvious aim in keeping its
currency undervalued is to make the price of its exports attractive.
Doing so also reduces the potential of competitive Chinese imports of
Western products.

While the instinct is to view the undervaluing of the renminbi as
strictly a financial matter, it obscures the speed and extent with
which China is approaching its cherished aim of eventual economic and
even military equality with the United States. Published Chinese
official figures showing investment in civilian and military budgets
and specific programs are concomitantly undervalued. Adding forty
percent on the top of all official statistics gives a better idea of
China's current global status and places it ahead of Japan's economy
in dollar terms.

Of course Beijing's rulers are well aware of this reality and what it
means when it comes to competition with the United States on the world
scene. The Chinese have been particularly adept at using their wealth
for combined political and economic purposes globally. Nowhere has
this leverage been used more effectively than in Africa. Chinese
investment in extractive industries is buttressed by aid in
infrastructure development. The end result is not only good business
but increasing regional political influence.

One of the best examples of the growing power of the Chinese "brand"
is the Egyptian government's active effort to lure investment by a
major development instrument in China to apply its successful model in
Tianjin to the planned Suez Economic Zone, which is to be located on
the southern end of the Suez Canal. The Chinese development
corporation, TEDA, would provide 49% of the financing of what Cairo
hopes will be a major new manufacturing and trading region in exchange
for Chinese access to numerous preferential trade agreements with
Egypt.

With such projects focusing on the developing world, China's political
power among the poorer nations grows exponentially, even among even
traditionally pro-Western governments. In international conferences
the Chinese delegations are now treated like rock stars -- or rather
the premier Asian tiger that China now is. This is a situation that
President Obama ran into at the Copenhagen climate conference. There,
according to the journalist Geoff Dyer, "a senior Chinese official
wagged his finger and shouted at Mr. Obama" when the U.S. president
decided to intervene uninvited in a meeting among Chinese and Third
World nations.

Beijing has consistently refused to respond to Washington's criticism
of Chinese human rights issues and actions. China has countered
Washington's latest efforts to bring human rights matters to Beijing's
attention by vociferously attacking U.S. approval of $64 billion in
arms sales to Taiwan. The Chinese insist the Americans are purposely
endangering peace in Asia. This "apples and oranges" exchange
redounded to China's propaganda advantage, especially as Beijing
ignored its own announcement of a 50% in rate of growth of its defense
budget for this year.

Meanwhile Google continues to threaten to pull out of its highly
publicized participation in the Chinese Internet. Unlike the kowtowing
manner of many of the other Western companies in China, Google has
stood up against Chinese official and unofficial attacks in cyberspace
and print.

Beijing's intransigence regarding American and European desires for
tougher United Nations sanctions on Iran over its nuclear weapons
development is perhaps the most strategically crucial issue currently
extant between the U.S. and China. While the philosophical aspect of
China's policy is not much discussed, its Communist leadership has
been consistent over the years in holding the line against UN
interference in the internal affairs of member governments.

Beijing does not fear Iran's growth as a nuclear power. China can play
its political intellectual card on Iran even though its real worry is
potential blockage of its oil imports from the Middle East. Unlike
Washington, which seemingly becomes flustered by complicated foreign
policy issues, China's leaders appear to be at the top of their game
in that environment. And this Year of the Tiger seems made for the
Chinese style of international politics.

Comments
Ken (Old Texican)| 3.12.10 @ 10:30AM
Something everyone seems to overlook:

We Americans can decide to quit buying gee gaws and widgets and teddy
bears from China any time we choose to.
Hmmmmm, now that might be a good campaign plank. Just ask all
Americans to buy Japanese or Korean or where ever else our
manufacturing base may be driven.
On the other hand...

Naw! Never happen! .....but how about a five year moratorium on taxes
to any American manufacturer...with only shop unions.

Cris Worth| 3.12.10 @ 11:14AM
I yearn for the good ol' days when in 1958 Mao bombarded Quemoy &
Matsu and Ike blasted the Reds with Uncle Sam's Navy.

Pingback| 3.12.10 @ 12:02PM
The American Spectator : Year of the Tiger | China Today links to this
page. Here’s an excerpt:

…power among the poorer nations grows exponentially, even among even
traditionally pro-Western governments. In international conferences
the Chinese delegations are … Original post: The American Spectator :
Year of the Tiger Tags: annual, nations-grows Politics Leave a Reply
Name (required) Mail (will not be published) (required) Website
(Transliteration options! What is this? Find out here) Business…

Alan Brooks| 3.12.10 @ 12:20PM
Here's something I had trouble believing at first: John Naisbitt
thinks China has the best system.

But for what? polluting rivers?

Naisbitt is elderly now, so he must be getting a little, well, you
know.

Scot| 3.12.10 @ 12:47PM
Buying American only sounds good in theory but is much more
complicated. You buy American you pay more. Pay more and you can
afford to buy less. Over all economy suffers. What we should really do
is lower corporate tax rates to near zero, freeze govt spending to
stop the flood of US companies running over seas. We need to make it
profitable to manufacture in the US again. Add to that the opening of
oil production, nuclear power production and oil refinement in the US
and we can become a large oil exporter again. Those two things alone
would turn this country around in zero flat.

Keep in mind the higher taxes and welfare goes in western countries
the wealthier China will get. We chase business way with our tax
structures and china welcomes them with open arms and cheap labor.

But none of the above will never happen with Dems in power. Repubs
will need strong arming as well to get off their noodle spines to do
the right thing.

Chas Morgan| 3.12.10 @ 1:06PM
It seems like it was a Nixon-era idea to prop up the Chinese to try to
counter the USSR. In the end, that probably did little, if anything,
to bring down the USSR.

It did, however, start a repressive third world country down a path
towards towards being a repressive super power. America could out
spend the USSR--how is America going to out spend China once all
industry is given away?

Opening up China was the worst mistake America ever made. Giving them
riches, hoping they would rise to the occasion, was stupid. A gamble
that has no upside for us, but a whole of trouble for future
generations if it continues on.

axbucxdu| 3.12.10 @ 1:09PM
If Uncle Sam still had any sense he'd chase the Chinese government off
the USG balance sheet and transfer them to his income statement using
good 'ol tariffs.

Of course none of this would result in any slack for existing
taxpaying serfs...

Pingback| 3.12.10 @ 4:55PM
LA Kings Jonathan Quick Out, Jonathan Bernier to Start | Box Score … |
Manchester Mon links to this page. Here’s an excerpt:

…with eight shutouts, a 2.08 goals against average and a .937 save
percentage. Continued here: LA Kings Jonathan Quick Out, Jonathan
Bernier to Start | Box Score … Related Blogs on Year The American
Spectator : Year of the Tiger 3/12: 9/12 Project One Year Later – “The
Truth Has No Agenda … Related Posts LA Kings Jonathan Quick Out,
Jonathan Bernier to Start | Box Score … Manchester's Jonathan…

mlb| 3.12.10 @ 8:39PM
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davelnaf| 3.12.10 @ 8:46PM
If not for Washington’s need to borrow back the money we give in
exchange for undervalued Chinese goods there might be an open debate
about whether China is next to useless as a reliable ‘partner’ in
maintaining global security. With the application of just a little
realistic thinking almost anyone could see the current situation
coming, that is, unless you are part of or work for the US
government.

ed hardy sunglasses| 3.12.10 @ 10:27PM
i don not think so.ed hardy belts

sf| 3.13.10 @ 12:19AM
oilpaiting Happy new year!

Pingback| 3.13.10 @ 12:27AM
Arabic or Urdu transliteration of the word random? | Calligraphy
Letters links to this page. Here’s an excerpt:

…« Vincent Laforet's Blog Airman Mom: My Daughter's Random Thought… «
Trending News Feed Related posts on transliteration Digital Quran
EL1000 How Do I Write Mei Zi Tang In Chinese? The dweller Spectator :
Year of the Tiger Other Related Posts: 7 Comments so far Silky on
March 13th, 2010 راندوم Smutty on March 13th, 2010 Silky did it. Yes,
Urdu is written in Arabic script. لولو...* on March 13th, 2010 Silky
did…

Yosemeti Sam| 3.13.10 @ 12:31AM
Hey, kiosk posters - sell your stuff over in Communist China!

http://spectator.org/archives/2010/03/12/year-of-the-tiger

Dollar firms in Asia ahead of US retail sales
Friday, 12 Mar, 2010 9:36 am

TOKYO : The dollar firmed in Asian trade on Friday as investors
anticipated US retail sales data later in the day to confirm a
sustainable recovery in the world's top economy is taking root.

The dollar firmed to 90.58 yen in Tokyo late morning trade from 90.48
in New York late Thursday. The euro fell slightly to 1.3673 dollars
from 1.3678 but was higher at 123.84 yen from 123.77.

Investors also eyed rare comments by Japan's Prime Minister Yukio
Hatoyama who called Friday for take action to stem the yen's recent
advance, which is hurting exporters.

The currency's recent strength does not reflect "the fact that Japan's
economy and industries aren't necessarily strong", he said in a
parliamentary session, according to Dow Jones Newswires.

"I think we need to take firm steps against such yen strength," he
said, adding that there is a need to "politically cooperate on the
world stage". The prime minister rarely steps forward to comment on
foreign exchange, and the move seemed to be an about-face from his
position in January that the government should not in principle
discuss currency movements.

The yen edged lower after the remarks, which came as the government is
adding pressure on the Bank of Japan to take more action to shore up
the economy and combat deflation ahead of its policy meeting next
week.

There is speculation that when it meets next week the BoJ will extend
its loan facility programme started in December to ensure the flow of
credit through the economy.

The Nikkei business daily on Friday reported that the bank will inject
up to 20 trillion yen (220 billion dollars) into markets.

The market was also bracing for February US retail sales data due
later in the day, a key gauge of consumer sentiment and the health of
the US economy. While the outcome will be clouded by the effects of
heavy snowstorms during the month, "the market is likely to brush off
a surprisingly weak reading by attributing it to one-off weather
factors", Barclays Capital said in a note. Lower auto and gasoline
sales are also expected to have curtailed the headline figure.

It will come a day after markets digested a fall in jobless claims as
a positive sign for the US labour market, even if it was smaller than
expected, dealers said.

SBP buys 60.05bn rupees of govt paper
The State Bank of Pakistan (SBP) bought back 60.05 billion rupees
($712.5 million) of trea.. http://www.aajtv.com/news/Business/160154_detail.html

KSE crosses 10,000 barrier on bullish activity
Hectic buying pushed up prices of leading scrips at Karachi Stock
Exchange (KSE) Friday as.. http://www.aajtv.com/news/Business/160148_detail.html

OGDCL convertible bonds soon: Waqar
The government is working on the launching of convertible bonds at
about 7.7 percent for O.. http://www.aajtv.com/news/Business/160141_detail.html

Asia stocks mixed as China tightening fears linger
Japanese Prime Minister Yukio Hatoyama's call Friday for a weaker
yen boosted sentiment bu.. http://www.aajtv.com/news/Business/160134_detail.html

Oil prices rises above 82 dollars a barrel
Crude oil prices rose on Friday, lifted by signs of firming demand
as the world economy re.. http://www.aajtv.com/news/Business/160104_detail.html

Inflation up by 11.08 percent in eight months
http://www.aajtv.com/news/Business/160099_detail.html

Forex slips to $ 14.726bn
http://www.aajtv.com/news/Business/160098_detail.html

Tarin assures support in restructuring of corporations
http://www.aajtv.com/news/Business/160093_detail.html

China inflation pushes most Asian markets lower
http://www.aajtv.com/news/Business/160084_detail.html

Oil slips under 82 dollars on profit taking
http://www.aajtv.com/news/Business/160055_2detail.html

Greece braces for another general strike
http://www.aajtv.com/news/Business/160073_2detail.html

Feb inflation up 13.04pc yr/yr
http://www.aajtv.com/news/Business/160072_2detail.html

Euro gets lift from Chinese data
http://www.aajtv.com/news/Business/160056_2detail.html

Time has come for China's yuan to rise: experts
http://www.aajtv.com/news/Business/160058_2detail.html

TCP floats another covering sugar tender
http://www.aajtv.com/news/Business/160048_2detail.html

FFCEL signs MoU with German firm for installation of wind energy
plant
http://www.aajtv.com/news/Business/160041_2detail.html

Asian markets mixed despite China exports data
http://www.aajtv.com/news/Business/160038_2detail.html

Cabinet approves restructuring of eight major PSEs
http://www.aajtv.com/news/Business/160032_2detail.html

Wheat procurement from April 15
http://www.aajtv.com/news/Business/160030_2detail.html

http://www.aajtv.com/news/Business/160106_detail.html

Friday, 12 Mar 2010 11:14 EST at 11:14 by David Song

■Japan’s Industrial Production Rises for 11th Straight Month
■Hong Kong Producer Prices Extend Three Month Decline

Stocks in Asia/Pacific were mixed on Friday amid speculation that
Japan’s central bank will add additional funds to the financial
system, while the Hang Seng tipped lower on speculation China’s
government will tighten policy later this year. Taking a look at the
economic docket, industrial production in Japan soared 18.5% in
January, with the reading rising for the eleventh consecutive month,
while Prime Minister Hatoyama stated that the government must take
“firm measures” to keep the rising yen from hurting the economy. In
addition producer prices in Hong Kong retreated 0.3% in the fourth-
quarter after contracting 2.0% during the previous three-month period,
while industrial outputs slipped at an annual pace of 4.9% during the
same period after weakening 8.6% in the third quarter.

Nikkei 225 10,751.26

Stocks in Japan extended yesterday’s advance, leading the Nikkei 225
to advance 86.31 points (0.81%) on Friday and close at 10,751.26. Nine
out of the ten components pushed higher on the day, with basic
materials leading the way, climbing 1.42%, while oil & gas slid 0.18%.
Shares of Fuji Heavy Industries added 4.08% as Mitsubishi UFJ rated
the company’s stock “strong outperform,” while Isuzu Motors surged
3.96% as the truck makers was rated “outer perform” by Mitsubishi. In
addition, Kobe Steel pushed 2.81% higher on the back of higher metal
prices, while Mitsui Chemicals retreated 1.47% as the company looks to
shut down an ethylene plant in Chiba on February 28th, which may have
cost the company about 3 billion yen.

Hang Seng 21,209.74

The Hong Kong equity market halted its five-day advance, with the
benchmark equity index shedding 18.46 points (0.09%) and closing at
21,209.74. Six out of the nine components tumbled on the day, with
consumer goods falling1.74%, which was followed by a 1.15% decline in
technology. Shares of Henderson Land Development pushed 2.72% higher
as Sun Hung Kai Chairwoman expects the expansion in the housing market
to continue for another year, while CNOOC increased 0.78% as the
company, along with Total SA are expected to split a two-third stake
in Tullow Oil Plc’s. Moreover, PetroChina rose 0.54% on the back of
higher energy prices, while Bank of China climbed 0.25% as the
nation’s best-performing primary-market debt fund stated that China’s
Yuan bonds will return as much as 6% this year.

S&P/ASX 200 Index 4,818.10

Shares in Australia pared yesterday’s decline, leading the S&P/ASX 200
to rise 3.90 points (0.08%) and close at 4,818.10. Three out of the
ten components rose on the day, with oil & gas leading the way,
climbing 0.71%, while technology slid 1.08% to taper the advance.
Shares of Woodside Petroleum added 0.31% as crude-oil futures in New
York rose 0.1%, while CuDeco soared 5.80% as the company is in “wide-
ranging” talks with Xiangguang Copper and Sinosteel Group over its
Rocklands project. At the same time, Alesco soared 3.29% as the
company was raised from “sell” to “hold,” while Newcrest Mining gained
0.91% on the back of higher commodity prices.

Notable Asian Session Event Risk / Economic Releases

http://www.cfdtrading.com/2010/03/12/stocks-in-asiapacific-mix-japan-prime-minister-hatoyama-wants-firm-measures-against-yen-strength/

USD/JPY Looks To FOMC Meeting To Determine Next Trend Friday, 12 March
2010 19:12 GMT | Written by John Rivera

The USD/JPY reversed earlier gains as it looks to continue the
current bullish trend. Last week we pointed out a divergence between
the pair and equity markets as an opportunity. We finally saw the
expected yen weakness as the pair caught up with rising equity markets
soaring over 200 pips. Dollar/yen has seen its correlation with risk
jump to 48% from 34% a month ago as the pair continues to see its
traditional relationship re-established. U.S. interest rate
expectations have dimmed from a month ago when we saw the Fed raise
the discount rate which has also seen its influence on price action
diminish.

BoJ Interest Rate Expectations The BoJ will convene to determine
future monetary policy next Wednesday and until then there is little
in the way of fundamental release that could impact the outlook for
the Japanese economy. There is little chance that the central bank
will alter interest rates with markets pricing in a 1 bps hike over
the next twelve months. To discuss this and trading ideas join the
USD/JPY forum. FOMC Interest Rate Expectations Fed funds futures
continue to point toward rates remaining on hold for an extended
period of time with a zero percent chance for a hike at the FOMC’s
upcoming meeting. Looking out to June, markets are still leaning
toward the central bank leaving monetary policy unchanged with only an
18.0% chance of a rate hike. An unexpected gain in February’s advance
retail sales gave a small boost to yield expectations but markets will
likely hold judgment until the policy decision. Industrial production
and housing starts releases will cross the wires before hand and will
provide insights into the strength of the recover. Risk A drop in U.S.
consumer confidence offset n unexpected rise in retail sales leaving
stocks virtually unchanged on the day. Equity markets have trended
higher as there has been enough positive data to promote the notion
that the current pace of growth is sustainable. However, signs of
tightening from the Fed could limit the outlook for future profits and
lead to a sharp reversal. The current triangle formation warns of a
potential breakout which should put USD/JPY’s traders on alert.
Discuss this and other fundamental data join the Economics Forum. To
discuss this report or be added to the email list contact John Rivera,
Currency Analyst: jri...@fxcm.com DailyFX provides forex news on the
economic reports and political events that influence the currency
market.

Pound Directionless As Monetary Policy Remains Uncertain
http://www.dailyfx.com/forex/fundamental/article/drivers_of_price_action/2010-03-09-2107-Pound_Directionless_As_Monetary_Policy.html

Euro Looks For Direction as Concerns Over Greece Wane
http://www.dailyfx.com/forex/fundamental/article/drivers_of_price_action/2010-03-08-2003-Euro_Looks_For_Direction_as.html

New Zealand Dollar Takes Direction From Commodity Prices As Yield
Outlook Fades
http://www.dailyfx.com/forex/fundamental/article/drivers_of_price_action/2010-03-05-2053-New_Zealand_Dollar_Takes_Direction.html

Yen’s Divergence with Risk Appetite Could Present Opportunity for
Traders

http://www.dailyfx.com/forex/fundamental/article/drivers_of_price_action/2010-03-03-2216-Yen_s_Divergence_with_Risk_Appetite.html

http://www.dailyfx.com/forex/fundamental/article/drivers_of_price_action/2010-03-12-1912-USD_JPY_Looks_To_FOMC_Meeting.html

Currencies
March 12, 2010, 3:46 p.m. EST

Dollar heads for loss after confidence, retail sales
By Deborah Levine & William L. Watts, MarketWatch

NEW YORK (MarketWatch) -- The U.S. dollar declined versus the euro on
Friday and was headed toward a sizable weekly drop versus major
counterparts after better-than-expected retail-sales data and a
surprise decline in consumer confidence added up to a better boost to
U.S. equities than the dollar.

The euro also gained support from strong economic data in Europe and
more confidence that Greece will recover.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 79.77, -0.49,
-0.61%) , which measures the U.S. unit against a trade-weighted basket
of six major currencies, traded at 79.830, down from 80.542 in late
North American trading on Thursday.

The index is headed for its biggest weekly drop since November, from
80.432 last Friday.

The euro rose to $1.3760, paring an earlier gain though still above
$1.3680 late Thursday. The shared currency is headed for its highest
weekly close in seven weeks.

Greece on the brink

As Greece embarks on deep cuts to appease a whip-cracking euro zone,
workers in its famously bloated and inefficient public sector fear
balancing the books will fall strictly on their backs, shattering any
dreams of the good life politicians pushing the euro had promised.
The dollar traded at 90.51 Japanese yen, up from 90.50 yen Thursday.
Get live yen quotes and currency charts.

The dollar and the yen remain vulnerable to sales from investors who
had bought the currencies in a flight to safety throughout the last
year or so. More willingness to buy riskier assets, including stocks
and high-yielding currencies, will weigh on the dollar and yen.

"Risk is ongoing into the weekend," said Michael Woolfolk, senior
currency strategist at BNY Mellon. "The bullish mood is likely to
prevail as Greek debt crisis concerns continue to subside. Look for
the yen and U.S. dollar to weaken at the expense of the dollar-bloc
and emerging markets."

The Reuters/University of Michigan index on consumer sentiment
declined to 72.5 in March from 73.6 in February. Red more about UMich
sentiment.

The U.S. Commerce Department said retail sales unexpectedly rose last
month by 0.3%. Excluding autos, sales jumped 0.8%. See story on retail
sales.

"The February retail sales data was impressive, and suggests the U.S.
recovery is gathering steam," said Alan Ruskin, head of currency
strategy at RBS. "The data is a mixed bag for the dollar, with the
rate implications clearly U.S. dollar positive, but the risk
implications seen as dollar negative."

Eyes turn to Fed

Analysts said the data should prompt more optimism from the Federal
Reserve when officials meet next week. Any indication that policy
makers may be closer to raising interest rates should support the U.S.
currency.

In other Fed news, analysts noted reports that San Francisco Fed
President Janet Yellen may be nominated by President Barack Obama as
vice chairwoman, lending more influence to her opinions that the
economy is far from able to withstand rising interest rates. See more
on Fed's Yellen.

"President Yellen is among the biggest 'doves' at the Fed," said Dan
Greenhuas, chief economic strategist at Miller Tabak. Her "elevation
puts her in a position to affect monetary policy in a more direct way
and it is our opinion that this clearly reduces the already moderate
chances of a fed rate hike in 2010."

That's weighing on the dollar, he said.

In European activity, the euro traded as high as $1.3796, taking out
resistance at the $1.3770 to hit its highest level versus the dollar
since mid-February. The single currency got a boost from data showing
industrial production in the 16-nation euro zone posted a record 1.7%
monthly jump in January. Read about the euro-zone industrial
production data.

ongoing strikes in Greece, ideas that the Greek government's austerity
measures and vague commitments by European leaders to provide support
for Athens have soothed worries over the country's ability to meet its
debt obligations, said Michael Hewson, analyst at CMC Markets.

Canada, Asia news

The Canadian dollar strengthened to its highest level in more than a
year versus its U.S. counterpart after data showed Canada's jobless
rate fell to its lowest level since April 2009. See more on Canadian
dollar.

The Japanese yen initially lost ground in Asian hours after Japanese
Prime Minister Yukio Hatoyama told parliament the yen was too strong.

Hatoyama said, "I think we need to take firm steps against such yen
strength," but didn't specify any steps. Explicit references by top
leaders to the currency's strength are uncommon. Analysts said the yen
may gain in coming weeks as Japanese companies begin repatriating
overseas earnings. Read about potential encore for yen's glory days.

Also Friday, a report in Japanese business daily Nikkei said the Bank
of Japan's meeting next week may focus on a proposal to increase
lending. See full story on BOJ easing report.

Deborah Levine is a MarketWatch reporter, based in New York.

William L. Watts is a reporter for MarketWatch in London.

More Currencies

March 11, 2010 Dollar gives up gains after U.S., Chinese data
http://www.marketwatch.com/story/yen-gains-vs-euro-and-dollar-after-china-data-2010-03-11

March 10, 2010 Dollar falls vs. euro but gains on other rivals
http://www.marketwatch.com/story/dollar-rises-as-german-trade-data-disappoint-2010-03-10

March 9, 2010 Dollar up; rating agencies revive debt worries
http://www.marketwatch.com/story/aussie-gets-lift-against-us-dollar-from-data-2010-03-09

March 8, 2010 Dollar turns up as U.S. stocks give up gains
http://www.marketwatch.com/story/dollar-slips-vs-rivals-in-asian-trading-2010-03-08

March 5, 2010 Dollar falls vs. euro as Greece fears subside
http://www.marketwatch.com/story/dollar-gains-on-yen-on-boj-easing-report-2010-03-05

http://www.marketwatch.com/story/dollar-rises-vs-yen-on-hatoyama-comments-2010-03-12/comments?dist=beforebell

http://www.marketwatch.com/story/dollar-rises-vs-yen-on-hatoyama-comments-2010-03-12?dist=beforebell

bademiyansubhanallah

unread,

Mar 14, 2010, 8:57:14 AM3/14/10

Three high-yielding European stocks to buy
By Associate Editor David Stevenson
Mar 11, 2010

Head to the continent for better returns

With the pound falling so far, Britain is fast becoming poor value for
money, for its inhabitants at least.

If you live here, you're probably fed up with it. Overseas holidays
are more expensive. Imported goods are more costly. You're seeing
prices being pushed up both in the shops and at the petrol pump.

Even the people who should be cashing in, the exporters, aren't. The
UK's last trade figures were rubbish, as we note below.

So, everyone's a loser? No, not at all - you could gain from the
plunging pound. Not only would you protect your money – you can also
collect a decent income stream while you're doing it.

We spotlighted one way of doing this last week by investing in the US.
Here's another – this time in Europe...

The current outlook for sterling is grim

You won't need reminding that we're not too keen on our nation's
currency right now. We don't want to see the pound drop – we just
reckon that under current government policy (if that's the right word
for it), it will. For our spendthrift politicians it's just a case of
spend and overspend – then getting the Bank of England to print plenty
more money to fuel their habit.

The trouble is that the plunging pound doesn't seem to be doing anyone
in Britain much good. With a few notable exceptions, the country's
exporters – the ones who are meant to save us from perpetual
stagnation – aren't benefiting. Although their goods are now much
cheaper for global customers to buy, they're selling fewer of them.
January export goods volumes dropped by 8%. Excluding some data
distortions three years ago, that was the worst monthly drop since
2002.

Sterling fell yet further on this news. Even against the much-maligned
euro, it's now dropped below €1.10 to its lowest level since last
November. Maybe that's no great surprise.

The countries that have dragged the euro down, such as Ireland, Greece
and Portugal, are now starting to plug the holes in their public
finances. They may well fail to do so, but at least they're showing
the right attitude.

Not so in the UK. Electioneering and austerity don't go well together.
And the longer our government delays before cutting – or being forced
by the markets to slash – our budget deficit, the grimmer the outlook
gets for sterling.

In the meantime, the UK's bank base rate remains at just 0.5%. So
while the pound is falling, the interest rates paid on savings
accounts, which are broadly linked to the base rate, are still
desperately poor.

How to beat the falling pound

However, as long as you're content to take some risk with your capital
– and do understand that investing in the stock market is risky – then
you can beat both negligible interest rates and the falling pound.

That's because there are still some high-yielding shares around that
provide a decent income. Even better, there are four reasons why
buying such shares – in Europe – could, over time, make you good
capital profits as well.

First, if sterling falls further, you could make money on the currency
front as well as in the stock market. Although the reverse is clearly
true, too, so you need more reason to like these stocks than simply
because they trade in euros or another European currency.

Second, a healthy dividend yield means that a share price is low
compared with the level of its payouts to shareholders. That suggests
it's also good value relative to the underlying company's profits and
assets. And in the long run, you'll make more money buying cheap
shares than expensive ones.

Why UK property prices are going to fall 50%
When it will be time to get back in and buy up half price property

Third, and this is a very long-term view, increasing numbers of 'baby
boomers' – those born within 20 years of WWII – will be retiring over
the next two decades. This will mean steadily more investors looking
for better income returns than the bank is currently paying. In turn,
as they buy high-yielding shares, they'll push up prices.

Fourth, as the European equity strategy team at Morgan Stanley points
out, when stock markets are roaring ahead, they don't worry too much
about dividends. Traders are more excited in 'churning and burning' –
buying and then selling out fast for quick profits. But when those
markets become more 'range-bound', i.e. there's much less scope for
big share price rises overall, income becomes a much larger part of
investors' thinking.

Indeed – and this statistic is fascinating – since 1926, European
shares have risen in real, i.e. inflation-adjusted, terms by just 1.3%
a year. But add in dividends which are reinvested in more shares, and
the annual total real return jumps up to 5.6% over that same period.

Three top European stocks to buy now
So what are the top dividend paying stocks in Europe right now?

Well, if you've been reading Money Morning regularly over the last few
months, you'll have seen quite a few high-yield tips appearing. So
I'll stick to three of those we haven't yet mentioned.

Top of Morgan Stanley's list of stocks "with a high and secure
dividend yield" is Italian utility A2A (IM: A2A). It produces and
distributes electricity, sells gas and collects rubbish in the North
of Italy. It's on a p/e of 12 and prospective yield of 7.4%. If
there's a slight caveat for me, it's that the payout is only covered
1.1 times by earnings. But that's probably being picky, as the
company's cash flow is 2.5 times the dividend – so there's plenty of
cash coming in to cover it.

Dividend cover is certainly not an issue at Zurich Financial Services
(VX: ZURN), where the payment is almost twice covered. Yet Zurich is
on a forecast multiple for this year of just 8.6, with a prospective
6% yield. Meanwhile, across the border in Germany, energy supplier RWE
(GY: RWE) looks just as solid. A 2010 forecast p/e of 9.2, and a
prospective yield of 5.8%, mark this stock down as very good value.

We wouldn't advise putting all of your investment money into any one
currency, be it sterling, euros, dollars or yen. But at times like
these in particular, it's not a bad idea to be diversified. And more
to the point, these are solid stocks – so even if the currency moves
against you, you know the underlying asset remains solid. And look on
the bright side. If you buy shares like these, the next time you hear
about another slide in sterling, you'll know at least someone who's
managed to get on to a winner.

• If you're interested in high-yielding, blue-chip stocks, you should
take a look at Stephen Bland's Dividend Letter. Stephen aims to
produce a solid, steadily growing income by investing in large
companies – you can learn more about his strategy here .

Our recommended article for today

Three signals to watch for safer investing

When you've been investing for a while, you come to notice certain
signals that the stock market throws up, says Tom Bulford. Here, he
outlines three that should keep you one step ahead of the market's
movements.

Profit from Canada's cheap telcos
By David Stevenson, Mar 12, 2010
http://www.moneyweek.com/investment-advice/share-tips-canada-telecoms-47725.aspx

Profit from the global water shortage
By Tim Bennett, Mar 12, 2010
http://www.moneyweek.com/investment-advice/profit-from-the-global-water-shortage-47709.aspx

Share tip of the week: bargain medical giant
By Paul Hill, Mar 12, 2010
http://www.moneyweek.com/investment-advice/paul-hill-share-tip-of-the-week-bargain-medical-giant-47710.aspx

Gamble of the week: world leader in electronic security
Mar 12, 2010
http://www.moneyweek.com/investment-advice/paul-hill-share-tips-gamble-electronic-security-47712.aspx

http://www.moneyweek.com/investment-advice.aspx

Comments

1. Neil
(11 March 2010, 10:53AM)

Although these shares have a nice yeild attached the article doesn't
point out that you can lose some of this yield to foreign withholding
tax which seems to be a minefield to navigate! I'd appreciate this
topic being covered in a future moneyweek article.

2. Harish Karia
(11 March 2010, 05:14PM)

Every now & than you refer to stocks which are listed somewhere else,
BUT how do I buy them? and what about the tax implications?
I have all of my stocks & shares in self selct ISA, I am not sure if I
will be allowed to buy the recomanded stocks? I am with Alliance &
Trust Savings

3. Roger
(11 March 2010, 06:04PM)

Neil,

The new tax rules on foreign dividends mean that you can claim at
least some UK tax relief on foreign withholding tax. You have to fill
out the foreign section of a UK self assessment return. I just let
taxcalc calculate it for me, and it isn't really a problem.

4. Jeff
(11 March 2010, 09:14PM)

TW Waterhouse offers low cost overseas dealing on a number of
exchanges.

Taxation of dividends does seem to be a complex issue with 20%
witholding taxes & hopeless guidance on how to enter this in tax
returns from the UK tax authorities.

5. Neil
(12 March 2010, 12:37PM)

Thanks Roger, however due to various salary sacrifice schemes I am not
required to complete a self assessement return, like the other posters
I find the rules utterly confusing, and I stick with the mantra of not
investing in something I don't understand (which is very unfortunate
as I would like to invest in single shares outside of the LSE).

6. Neil
(12 March 2010, 12:39PM)

I should add of course investing in US listed shares are easy as I
have completed a W8-BEN form and just renew this every 3 years. It's
the European shares that seem to present the most difficulty

http://www.moneyweek.com/investment-advice/share-tips-high-yielding-eurozone-stocks-01010.aspx

MoneyWeek Roundup: How mad scientists will save the economy By
MoneyWeek Editor John Stepek Mar 13, 2010

This is where we highlight some of the best bits from our free emails,
newsletters, blog and MoneyWeek magazine that we've published in the
past week.

● The markets have had a good week this week. Greece is becoming a
distant memory, the Eurocrats are threatening to exterminate
speculators, and investors even took a surge in Chinese inflation in
their stride.

Sterling is still being battered of course. And as my colleague David
Stevenson pointed out this week, our ever-expanding trade deficit
shows it's still not doing us any good.

Despite the weak pound, "the country's exporters – the ones who are
meant to save us from perpetual stagnation – aren't benefiting.
Although their goods are now much cheaper for global customers to buy,
they're selling fewer of them. January export goods volumes dropped by
8%. Excluding some data distortions three years ago, that was the
worst monthly drop since 2002."

● That puts the whole debate about 'rebalancing' the British economy
into perspective. We've relied too much on financial services, and
unfortunately, we've thrown away what little money we had left on
bailing out the banks. The good news is, the world's more
entrepreneurial scientists aren't waiting for governments to get
behind them.

"Craig Venter said he was going to change medicine – everyone thought
he was a maniac," points out Dr Mike Tubbs in his Research Investments
newsletter.

"But seven years ago the former Vietnam veteran beat an army of
government scientists to the biggest medical advance in decades –
decoding the human genome.

"The state sponsored Human Genome Project had been busy sequencing the
three billion biochemical blocks in our DNA for years... and running
up a $3bn bill in the process.

"But Dr Venter beat them to it. And in an instant, a colossal new
medical sector came of age. By deconstructing the human body cell by
cell, scientists believe they will uncover the genetic roots of the
most complex diseases – from cancer to Alzheimer's.

"That heralds a new age of personalised medicine – allowing doctors to
gauge our risk for conditions such as cancer and diabetes and taking
pre-emptive action.

"And so today a vast industry has sprung up – using the techniques
developed by the likes of Craig Venter in a race to decode these
diseases and use this knowledge to find new treatments. The market for
personalised medicine will reach $42bn by 2015, according to
PriceWaterhouseCoopers."

Mike's Research Investments newsletter is based around buying
companies that put serious investment into research and development in
areas like these. And he's not the only one who believes that
scientific developments provide a ripe hunting ground for investors.

● "Last month I met a man who has been in the business of making money
from science for the last 25 years. Phil Atkin has watched successive
governments downplay the efforts of his kind while applauding the
relentless rise of the financial sector," says Tom Bulford in his
Penny Sleuth free email.

"Finally we have woken up to the realisation that the latter does not
produce any real wealth at all. And this means Atkin's time may
finally have come – especially after a special announcement made last
week…"

Atkins heads up Scientific Digital Imaging (LSE: SDI). As with most
science companies, explaining what it does is complicated, so you can
read Tom's piece if you want to know the details. But basically it
makes various measurement and imaging devices for laboratories.

"SDI is certainly one to keep an eye on," says Tom. "Chairman Harry
Tee was the driving force behind Roxboro, which made plenty of money
for investors in the 1990s. He is also chairman of another fast
growing company, Dialight (DIA).

"Better than our politicians he understands what is required to build
a science-based business. This one is definitely on the Red Hot Penny
Shares radar screen."

● Last week's debate on ethical investing attracted quite a few
thoughtful responses. Most agreed with our view that we should be
presenting readers with money-making opportunities and leaving the
ethical decisions to them.

But I just had to share this reader's take on the ethics of investing
in tobacco firms… "Until a couple of years ago, I too avoided owning
any tobacco company shares, figuring that it would be unethical to
profit from a company that depends for its continued growth on getting
more people addicted to a substance known to directly cause several
serious health issues.

"However, I changed my mind when we returned from a family holiday in
France. Sitting at a table on the ferry (in an open area) two people
sat down at the same table with us and, without asking if it would be
ok and ignoring the fact that we had our young son sitting with us,
proceeded to light up and blow smoke around. The problem was that the
wind blew it straight to us on the other side of the table.

"This inconsiderate behaviour so incensed me that I vowed as soon as
we got home that I would buy some BAT shares, so that I felt I could
at least get my own back in some way by part funding my retirement
thanks to the behaviour of people that ignore all the warnings and
inflict their brand of poison on those around them as well.

"If you can't beat them, profit from them!"

● Riccardo Marzi, the ex-City trader behind the Events Trader
newsletter, knows how to draw a reader's attention. Here's the
headline from his latest issue: "How you could profit from a deadly
virus outbreak in Chile".

I winced as I thought of the complaints that would flood in. Then I
read the piece. The "deadly virus" in question is killing off salmon,
not people. Phew. Still, it's a pretty miserable experience for
Chile's salmon farmers. The country is the world's second-largest
producer of the fish. And with its annual production down about 70%
year-on-year, salmon prices are going up.

And you can guess what that means for the rest of the world's salmon
farmers. A profit bonanza. "Norway is the world's biggest exporter of
salmon. It will take at least 18 months for the Chilean salmon
industry to raise fish to maturity – if they manage to get the disease
under control. In that time Norwegian salmon groups will enjoy a major
boost to their earnings," says Riccardo.

● We're sceptical on China's growth 'miracle'. But that's no reason to
write off the whole of Asia. Cris Sholto Heaton, the man behind the
MoneyWeek Asia free email (if you don't already get it, I advise you
to sign up for it right now) is currently testing out a newsletter in
which he tips individual stocks. The second edition came out earlier
this week. If you'd like to be kept informed of when it goes live,
just give us your email here.

In Cris's latest piece, he looks at one vital piece of infrastructure
that many parts of Asia are entirely lacking right now, and will need
a lot of in the future. It's not roads, or sewage systems, or railways
- it's software. I'll let Cris explain.

"In the West, banks have used computers for processing data and
transactions since the sixties. But these were huge, complex and
costly systems dedicated to specific functions. Picture a huge humming
room of densely packed computers running a bank's data – the kind you
would see in Cold War movies. If you had two different systems
working on a similar task, they couldn't talk to each other and share
data.

"But over that last decade or so, things have become much more
sophisticated. State-of-the-art banking systems are tightly
integrated, with all the key software running in the same framework
and sharing information. And as a result of this, they've become much
more powerful and useful.

"Computers no longer simply store data, but can monitor accounts for
fraud, improve risk management by credit-scoring potential borrowers,
and on top of that, they run schemes such as airmiles and loyalty
cards to gather information about customers and increase usage.

"Systems like this are standard in Europe and North America. But in
the emerging world, it's obviously much more variable. Some countries
and banks are pretty advanced. Others make what a British bank was
using twenty years ago seem sophisticated.

"So most emerging market banks are going to have to invest billions in
better IT over the next couple of decades. Not only do many have a
long way to go to bring their existing systems up to modern standards,
but they're also going to need to expand to cope with hundreds of
millions of new potential customers.

And this means that emerging markets should offer very good growth
prospects for the firms that develop and maintain these highly
specialised systems."

● Last week I wrote a piece about what people could learn from the
plight of the 'king and queen of buy-to-let'. Fergus and Judith Wilson
are two ex-maths teachers who built a portfolio of hundreds of houses
in Kent during the boom times. They ran into some difficulties in the
crunch, but when the Bank of England slashed interest rates, it had
the knock-on effect of cutting their costs.

The piece drew a lot of comment – as most of our property pieces do,
which is as strong an indicator as any that we're still in bubble
territory. But I also got an email from Fergus himself. He described
the piece as a "very fair article", so I gave him a call to get his
take on the market.

The way Fergus sees it, the real problem is with flats, rather than
the houses that he predominately lets out. "These blocks of flats in
northern cities have been a complete disaster. I have 30 flats which I
regret having. They've fallen in value, whereas the houses have seen a
reasonable increase in the last two years."

Now, on the one hand, I'd agree that the epicentre of the housing
market collapse was always going to be in the market for dodgy flats.
And with the bank rate as low as it is, at 0.5%, Fergus is in a sweet
spot – he reckons the typical £180,000 house, with a £140,000
mortgage, is costing him about £300 a month on the mortgage. If it's
let for £700 a month, with £100 going to the letting agent, then he
clears £300.

But with the market stagnant, it can't be easy to offload all those
properties to first-time buyers – they can't afford it. And what
happens if interest rates rise?

Fergus, who's nearly 62, reckons we'll be lucky to see a 2.5% bank
rate again in his lifetime. "The government won't be that stupid.
Every time rates go up, more people will become homeless."

I can't say I'm convinced. The Bank of England needs to take far more
into account when it sets the bank rate than just its impact on the
property market. The only way that interest rates can remain that low
for that long, is if Britain goes the way of Japan. And in Japan,
house prices are still 60% lower than they were at the start of the
bust.

I certainly don't wish the Wilsons any ill. But our chat just
confirmed in my mind that the current rebound is a temporary blip
before the market starts heading down again.

● And it's not just the property market that's set for harder times
ahead. Tim Price of PFP Wealth Management tells readers of The Price
Report to watch out. "Last week I was invited to present at the
Private Wealth Management Conference in Smithfield. There I listened
to a lot of people I've known and respected for most of my career. And
there were two very clear concerns coming through.

"First, how do I avoid getting burned by stocks again? After the
gyrations in the market over the last two years, there was a lot of
talk of not placing too much faith in equities – because it's
unwarranted. The question everyone wanted to ask was – how long could
this bear market in stocks go on for?

"The second real concern among private wealth managers is inflation.
I'm not the only one worried about governments printing their way out
of this crisis, as it turns out. If there is a dangerous bout of
inflation on the way, how do we protect our wealth?"

I'm running out of space to go into the details here, but suffice to
say, Tim reckons that there's another down-leg to come in the bear
market. As for inflation, he doesn't see it taking off just yet, but
there are some assets you should be holding for when it does. Find out
more about The Price Report here.

Recovery hopes fade as trade gap widens
Mar 12, 2010
http://www.moneyweek.com/news-and-charts/economics/recovery-hopes-fade-as-trade-gap-widens-47702.aspx

The crisis isn't over yet
http://www.moneyweek.com/news-and-charts/economics/merryn-somerset-webb-the-crisis-isnt-over-yet-47701.aspx
By Merryn Somerset Webb, Mar 12, 2010

Money is pouring out of the UK - here's how to protect yourself
http://www.moneyweek.com/investments/money-morning-sterling-crisis-bank-liabilities-01002.aspx
By David Stevenson, Mar 08, 2010

MoneyWeek Roundup: Profit from sterling's woes
By John Stepek, Mar 06, 2010
http://www.moneyweek.com/news-and-charts/economics/moneyweek-roundup-sat-06-march-00913.aspx

Useful links

• Tom Bulford's newsletter Red Hot Penny Shares
http://www.fsponline-recommends.co.uk/page.aspx?u=rhpoil2010fn&tc=MRHPL308&PromotionID=2147066760&

• Riccardo Marzi's newsletter Events Trader

http://www.fsponline-recommends.co.uk/page.aspx?u=evtsignup+&tc=WEVTK901&PromotionID=2147066676&

• Tim Price's newsletter, The Price Report

http://www.fsponline-recommends.co.uk/page.aspx?u=tprsell&tc=WTPRL301&PromotionID=2147066781

• Dr Mike Tubbs' Research Investments newsletter - enquiries for this
exclusive service are by phone only, call 020 7633 3600

http://www.moneyweek.com/investment-advice/how-to-invest/three-signals-to-watch-for-safer-investing-01009.aspx

Get a double-digit income on blue-chips
By Theo Casey, Mar 12, 2010
http://www.moneyweek.com/investment-advice/how-to-invest/investment-strategy-get-a-double-digit-income-on-blue-chips-47713.aspx

Don't dodge tax only to walk into losses
By Tim Bennett, Mar 05, 2010
http://www.moneyweek.com/investment-advice/how-to-invest/dont-dodge-tax-only-to-walk-into-losses-47616.aspx

How to spot bubbles before they blow
By Tim Bennett, Feb 26, 2010

http://www.moneyweek.com/investment-advice/how-to-invest/how-to-spot-bubbles-before-they-blow-47516.aspx

The party's over for corporate bonds
By Tim Bennett, Feb 19, 2010
http://www.moneyweek.com/investments/the-partys-over-for-corporate-bonds-47499.aspx

http://www.moneyweek.com/investment-advice/how-to-invest/three-signals-to-watch-for-safer-investing-01009.aspx

Economics

Asian economy

A slump in China is inevitable - here's how to protect yourself (12
March 10)
http://www.moneyweek.com/news-and-charts/economics/money-morning-china-economy-01011.aspx

Australia's luck is running out (12 March 10)
http://www.moneyweek.com/news-and-charts/economics/australia-economy-47706.aspx

Will China float its currency? (12 March 10)
http://www.moneyweek.com/investments/currencies-china-renminbi-dollar-peg-47718.aspx

European economy

Iceland votes 'no' on debt repayment (12 March 10)
http://www.moneyweek.com/news-and-charts/economics/iceland-votes-no-on-debt-repayment-47703.aspx

Governments seek scapegoats for euro woes (12 March 10)
http://www.moneyweek.com/news-and-charts/economics/euro-collapse-hedge-funds-47708.aspx

Spain: a 'real test case' for the euro (05 March 10)
http://www.moneyweek.com/investments/spain-a-real-test-case-for-the-euro-47699.aspx

Global economy

A slump in China is inevitable - here's how to protect yourself (12
March 10)
http://www.moneyweek.com/news-and-charts/economics/money-morning-china-economy-01011.aspx

Will China float its currency? (12 March 10)
http://www.moneyweek.com/investments/currencies-china-renminbi-dollar-peg-47718.aspx

Australia's luck is running out (12 March 10)
http://www.moneyweek.com/news-and-charts/economics/australia-economy-47706.aspx

Japanese economy

The story of Japan's 20-year slump (05 February 10)
http://www.moneyweek.com/news-and-charts/economics/bill-bonner-japans-20-year-slump-47241.aspx

Japan leads the way...through a minefield (28 January 10)
http://www.moneyweek.com/news-and-charts/economics/ecomony-credit-japan-leads-the-way-through-a-minefield-47146.aspx

We've learnt all the wrong lessons from Japan (08 January 10)
http://www.moneyweek.com/news-and-charts/economics/weve-learnt-all-the-wrong-lessons-from-japan-46817.aspx

UK economy

MoneyWeek Roundup: How mad scientists will save the economy (13 March
10)
http://www.moneyweek.com/news-and-charts/economics/moneyweek-roundup-saturday-13-march-01012.aspx

Recovery hopes fade as trade gap widens (12 March 10)
http://www.moneyweek.com/news-and-charts/economics/recovery-hopes-fade-as-trade-gap-widens-47702.aspx

US economy

Interest rates are rising in the US (19 February 10)
http://www.moneyweek.com/news-and-charts/economics/interest-rates-are-rising-in-the-us-00714.aspx

Stocks will suffer as baby boomers grow old (19 February 10)
http://www.moneyweek.com/news-and-charts/economics/baby-boomers-blow-bubbles-47408.aspx

Can farming save Detroit? (12 February 10)
http://www.moneyweek.com/news-and-charts/economics/can-farming-save-detroit-47302.aspx

http://www.moneyweek.com/news-and-charts/economics.aspx

End of Keynesian Blood Sucking Parasitic Economic System
Economics / Economic Theory
Mar 13, 2010 - 06:04 AM

By: Gary_North

On March 11, I spoke at the annual Austrian Scholars Conference,
sponsored by the Ludwig von Mises Institute. It was gratifying to see
so many attendees that they could not fit into one room.

The Mises Institute is a high-tech outfit. They set up a video camera,
and the speech appeared on monitors in other rooms. It will also go on-
line within a few days. This will be free. Anyone in the world with
Web access can see it from now on. This is a great model for
communication and education.

My topic was "Keynes and His Influence." My goal is to recruit half a
dozen bright young scholars to begin a joint project in refuting
Keynes' General Theory of Employment, Interest, and Money (1936) line
by line. I have set up a department on my Website to this end.

I tried to make four main points in my speech.

1. Keynes' influence has been indirect (mediated).
2. His legacy will soon be uniquely vulnerable.
3. Only the Austrians called the 2008 recession.
4. It is time for a comprehensive refutation of Keynes

THE MOST INFLUENTIAL MODERN ECONOMIST

There is no question that John Maynard Keynes was the most influential
economist in the 20th century. Yet his influence has been different
from what economists and the intelligentsia have believed.

In a filmed interview of Keynes' main rival in 1935, but not in 1965,
F. A. Hayek, an Austrian School economist, made an important point.
Keynes was influential in 1946, the year of his death, but his
influence was not yet overwhelming. That came later. Hayek did not say
how much later. It came within five years. You can see the video here.

The key to Keynes' influence was the 1948 textbook written by Paul
Samuelson, Economics. It became the most widely assigned college
textbook in economics. It had no major competition for at least three
decades, and its competitors were also Keynesian in outlook.

Samuelson promoted Keynes' ideas, but he used a very different format.
He did not quote Keynes at length. He presented what has since been
called the neo-Keynesian synthesis. He applied Keynes' fundamental
principle of deficit spending in the Great Depression to the overall
economy in a post-depression world. He really did try to make general
the General Theory, which the book had not been.

The General Theory was highly specific. It was a program designed to
counteract falling spending and a falling money supply in an era in
which there was no government insurance for failed banks or their
depositors. It was a program to offset widespread hoarding of
currency. From the day that the FDIC was created in 1934, American
banks stopped failing, and the money supply started to rise. Keynes
wrote his book after this transition in the United States. The book
was a theoretical defense of policies that had already been adopted in
the United States and Western Europe, and which World War II would
escalate: deficit spending, mass inflation, and a vast expansion of
the government's share of the economy. This is not how the Keynesians
have told the story. It is how the story ought to be told. I am trying
to recruit economists and historians who will commit several years of
research to telling it.

Keynes' "General Theory" has long been an unread book that sits on the
shelves of economics graduate students and professors. No one actually
has read it except specialists in the history of economic thought. The
book is close to unreadable. Compared to his earlier books and essays,
it is uniquely unreadable. We do not see its formulas quoted as proof
of contemporary policies or recommended policies. The literature cited
in economists' footnotes is what we can legitimately call Keynesian,
but this literature is an extension of Keynes' work, not Keynes'
actual work.

Whether Keynes would approve of what is recommended in his name is
moot. Hayek spoke to Keynes a few weeks before he died. According to
Hayek, Keynes was not happy with developments being offered in his
name.

Keynes had always been an opponent of inflation. His earlier works
repeatedly warned against the threat of inflation. Yet, by 1945,
inflation was a way of life in the West.

We should compare The General Theory to Charles Darwin's Origin of
Species. Darwinists rarely quote Darwin to support their latest
papers. They cite him as the originator of the idea of evolution
through natural selection. Attacks on Darwin's actual exposition are
shrugged off by his followers as irrelevant. We find an entire school
of Darwinists who preach an idea that is opposed to what Darwin
taught: the "punctuated evolutionism." Darwin believed in tiny changes
over long periods of time. They believe in huge changes in brief
periods of time. Still, they call themselves Darwinists. Why? Because
they believe in his Big Idea: purposeless, random causation prior to
man.

The same is true of Keynes' General Theory. It was Keynes' primary
idea that dominates the thinking of economists: government budget
deficits as the means of overcoming economic slumps. As to simple
formulas and concepts in the book, modern economists rarely cite them
in professional journals. If one or more specifics of the book are
refuted, his supporters shrug it off. Keynes' influence relates to the
one big idea, just as Darwin's influence does.

The specifics in the book are forgotten today, such as his statement
that the government could plant bottles full of money, bury them, and
let workers dig them up for a living. He also said that building the
equivalent of Egypt's pyramids would help restore prosperity. He
really believed this. His disciples do not refer to these passages.
When pressured by critics, they dismiss them as merely rhetorical.
They were rhetorical, but not merely rhetorical.

A VULNERABLE LEGACY

Today, Keynesians insist that their man was right. They take credit
for the recovery since late 2009, such as it is. This assertion is
widely accepted. It is so widely accepted that Wikipedia has an
article on it: "Keynesian Resurgence."

Yet the reality is far different from the perception. Keynes' solution
in 1936 was a program of fiscal deficits, coupled with mild monetary
expansion in a time of monetary contraction. These government deficits
were supposed to stimulate consumer spending.

Yet the heart of the U.S. government's program in 2008 was not the
$787 billion spending program. Rather, it was the prior doubling of
the Federal Reserve's monetary base, the FED's face-value swaps of its
marketable Treasury debt for unmarketable toxic assets owned by the
biggest banks, the AIG bailout, and the subsequent $1.25 trillion
pumped into Fannie Mae and Freddie Mac, after their nationalization by
Henry Paulson in September 2008. None of this was Keynesian. All of it
was ad hoc monetary inflation and central bank subsidies to large
banks.

Keynes recommended government spending and employment by government.
He did not recommend central bank bailouts of large banks. He focused
on fiscal policy, not monetary policy.

The biggest banks were saved by these interventions. Small banks
continue to go under, Friday afternoon after Friday afternoon. The
banking industry as a whole has contracted its loans to commercial and
industrial firms. Banks have added over $1 trillion to their excess
reserves at the FED, thereby sterilizing money. This is anti-
Keynesian: a restriction of spending, meaning a reduction in aggregate
demand compared to what would otherwise have been the case.

Keynesianism as an idea has received a shot in the arm – mainly with
fiat money, not Federal deficits. Yes, the deficits have been
enormous, just not by comparison to central banks' money creation. The
deficits are unprecedented, all over the world. Yet the economic
recovery is universally criticized as weak.

If enormous deficits are not serving as stimuli for widespread
recovery, then what credit should Keynes get? Keynesians are saying
that government policies kept the world economy from collapse. But
this is not the same as saying that the policies have restored
prosperity. They haven't.

There have been some protests by economists. Several hundred academic
economists, mostly in obscure universities, publicly protested the
stimulus package.

But no group of economists, other than the Austrians, said in 2008
that the FED should do nothing, that Fannie and Freddie should be
allowed to go under, and that the stimulus bill should be voted down.
With only this exception, the entire academic community of economists
became cheerleaders for the FED's bailouts of 2008. They sold their
non-Keynesian birthrights for a mess of Federal Reserve pottage.

The silence of the profession in 2008 and after has boxed them in.
They are defenders of moral hazard, despite their timid warnings to
the contrary.

If one person has summarized the alternative economic scenarios facing
us, it is Merle Hazard. Merle is not his real name. He is a financial
planner in Nashville. He began performing on YouTube in 2009. He and
his partner, Bretton Wood, sang the question: "Will it be Zimbabwe or
Japan?" So far, it's Japan.

The governments of the West have made one thing inescapably clear.
They do not intend to enforce high bank capital ratios established by
the Bank for International Settlements. The European Union and the
European Central Bank have also made it clear that they will not
enforce EU rules on the deficit-to-GDP ratio. There is only one rule
today: "Tax and tax, spend and spend, inflate and inflate."

The looming bankruptcies of Western governments and Japan are now
becoming clearer to the literate public. Observers are becoming more
Austrian in their perception. Investors do not accept this scenario
emotionally, but the numbers are clear. There will have to be a
cutting back of Medicare, Social Security, and unemployment benefits,
either sooner or later.

It is also clear that unemployment will not be significantly reduced
by the present recovery. The Keynesian tools are not working. They
have not worked in Europe for a generation, where life on the dole is
permanent for 10% of the work force.

When the bust comes, the Keynesians will take the blame. They have
demanded credit for the recovery, and they have received it. They are
consuming public favor today. They will pay for it later.

"WE TOLD THEM SO!"

The Austrian School's representatives predicted the recession. The
defining moment was Peter Schiff's debate with Art Laffer in 2006.
Schiff said a crash was coming. Laffer ridiculed him. Because of
YouTube, this story will not go away.

It never does any good to go to the losers and say, "I told you so."
It does a great deal of good to go to the general public, which is
always in search of leadership, and say, "We told them so." You don't
convert true believers and spokesmen very often, but you can undermine
their leadership.

The Austrian theory of the business cycle was the tool that enabled
Schiff and others, such as me, to predict in 2006 that a recession
would hit in 2007. It did – in December 2007. We told them so. This
establishes our credentials, but more to the point, it establishes
Ludwig von Mises' credentials. He thought that economic logic alone
was necessary to defend a position. But in political debate, having
the numbers demonstrate that you were right is also necessary.

When the USSR went bust economically in 1988, then lost the Afghan war
in 1989, and finally committed suicide in 1991, Marxism died. All the
footnotes in the Marxist books no longer mattered in academia. All the
post-1991 wailing by Marxists that the Soviet Union really had never
been truly Marxist has been ignored. Why? Because the Marxists took
credit for the USSR for 74 years. They praised the Soviet Union's
central planning. So, in 1991, they could not get off the sinking
Soviet ship in time to justify the Marxist system.

By 1991, China's economy was booming because of Deng's abandonment of
Marxist economics in 1978. That left only Albania, Cuba, and North
Korea. The Marxists had nowhere to turn to that offered evidence of
economic success. Overnight, they became a laughing stock on campus.

This will be the fate of Keynesians when the governments of the West
finally go bust or else abandon the deficits and the fiat money.

Who will still be standing to pick up the intellectual pieces? The
Chicago School economists did not predict 2008. They did not defiantly
protest the FED's bailouts of September and October. Neither did
public choice economists, rational expectations economists, or
behavioral economists. They all climbed aboard the Good Ship Keynes,
which was in fact the Good Ship Bernanke. The Austrians did not.

The Austrians, few in number, are the last men standing to challenge
the Keynesians. This is their great opportunity. They have waited a
long time.

GOING ON THE OFFENSIVE OFFENSIVELY

As W. C. Fields said so long ago, "Never give a sucker an even break."
This also applies to bloodsuckers. The Keynesians are apologists for
the bloodsucking class: tax collectors, deficit-expanders, and
boondogglers of all shapes and sizes.

I have set up www.KeynesProject.com to help mobilize the guerrilla
troops in a comprehensive assault on Fort Keynes. This is a supplement
to the vast collection of free books and materials found on www.Mises.org,
especially the books in the Literature section of the home page.

There has to be a full-scale assault on the General Theory that shows
how it is illogical, line by line. This has been done sporadically in
the past, but not systematically. To oppose Keynes' overall system was
to commit academic suicide.

When the decks are cleared, then there must be a systematic critique
of the post-Keynes literature. But this is too large a job for a
handful of scholars. It will take at least a decade to produce the
basic critique of Keynes. My hope is that this project will be
complete in time for the crisis produced by today's policies.

To persuade the next generation of economists and talking heads that
Keynes was wrong, and therefore his apologists are wrong and have been
wrong, we need two things: (1) a body of material in all the media
that shows that The General Theory was a con job from day one; (2) an
economy universally suffering from the effects of the policies that
have been justified in the name of Keynes. Since we are going to get
the second, why not work on the first?

CONCLUSION

We have lived in the shadow of Keynes since 1936. That shadow has
darkened academia for over 70 years. Keynes justified what politicians
and salaried academic bureaucrats always wanted: more power for
politicians and tenured bureaucrats.

Keynes justified this system of parasitic bloodsucking. The bills are
now coming due. The voters are going to join a tax revolt against
these bills. They will seek justification. Austrian School economics
is best positioned today to offer that justification. To become even
better positioned, a younger generation of Austrian School economists
must publicly gut The General Theory.

Gary North [send him mail ] is the author of Mises on Money . Visit
http://www.garynorth.com . He is also the author of a free 20-volume
series, An Economic Commentary on the Bible .

http://www.lewrockwell.com

Disclaimer: The above is a matter of opinion provided for general
information purposes only and is not intended as investment advice.
Information and analysis above are derived from sources and utilising
methods believed to be reliable, but we cannot accept responsibility
for any losses you may incur as a result of this analysis. Individuals
should consult with their personal financial advisors.

© 2005-2010 http://www.MarketOracle.co.uk - The Market Oracle is a
FREE Daily Financial Markets Analysis & Forecasting online publication

http://www.marketoracle.co.uk/Article17857.html

Video: Hayek Explains Why He Did Not Challenge Keynes After 1935 -- A
Catastrophic Decision
Gary North

March 9, 2010

In this interview, Hayek recounts the events leading to The General
Theory. He spent a year going through Keynes' Treatise on Money.
Although he did not mention this, he published a critique on the
Economic Journal. Keynes replied in print. Then, just before the
second volume appeared, Keynes dismissed the debate. He told Hayek
that he no longer believed all that.

Hayek said he decided not to challenge The General Theory. The problem
was that he was widely regarded as Keynes' #1 opponent. When he
remained mute, he surrendered the field to Keynes.

Hayek also said that Keynes' theory did not receive universal acclaim
until after his death in 1946. This is no doubt true, but irrelevant.
The book persuaded a generation of young economists before the War
ended. Then Sanuelson's 1948 textbook conquered the academic
discipline in the name of Keynes.

For more information, come here:

www.KeynesProject.com

http://www.garynorth.com/public/6198.cfm

Economics (Hardcover)
~ Paul Samuelson (Author), William Nordhaus (Author)

http://www.amazon.com/gp/product/images/0073511293/ref=dp_image_0?ie=UTF8&n=283155&s=books

Customer Reviews
Economics

2 Reviews
5 star: (1)
4 star: (0)
3 star: (1)
2 star: (0)
1 star: (0)

4 of 8 people found the following review helpful:
EXCELLENT A++
One of the greatest books of its era. Very easy to understand and
study with. Great choice!!

Published 3 months ago by George and Marcus Retail Group

7 of 14 people found the following review helpful:
Extraordinary price????

How can this book possibly cost $169.90?? It's been in print for
decades and has sold well. My old college copy has a price of $7.95
stamped in it! What is going on???

Published 3 months ago by Little Teacher on the Prarie

4 of 8 people found the following review helpful:
EXCELLENT A++, November 30, 2009
By George and Marcus Retail Group (N. Florida, USA) -

One of the greatest books of its era. Very easy to understand and
study with. Great choice!!

7 of 14 people found the following review helpful:
Extraordinary price????, December 13, 2009
By Little Teacher on the Prarie (Iowa) -

How can this book possibly cost $169.90?? It's been in print for
decades and has sold well. My old college copy has a price of $7.95
stamped in it! What is going on???

Comments (3)

Comments

Initial post: Dec. 24, 2009 12:52 PM PST

E. P. O'shaughnessy says:
Free market forces, supply and demand perhaps? :)

In reply to an earlier post on Jan. 14, 2010 2:24 PM PST
Stevan Radanovic says:
More probably because it's 19th edition, from 2009. :)

Posted on Mar. 13, 2010 10:54 AM PST
From_Plano_TX says:
You are right. The price is scandalous. College students are being
robbed! The colleges should not permit this to go on.

http://www.amazon.com/review/R1RUMX54711VIY/ref=cm_cr_pr_cmt?ie=UTF8&ASIN=0073511293&nodeID=#wasThisHelpful

http://www.amazon.com/Economics-Paul-Samuelson/product-reviews/0073511293/ref=dp_top_cm_cr_acr_txt?ie=UTF8&showViewpoints=1

Data Analysis and Decision Making with Microsoft Excel, Revised (with
CD-ROM and Decision Tools and Statistic Tools Suite) (Hardcover)
~ S. Christian Albright
S. Christian Albright (Author)

(Author), Wayne Winston (Author), Christopher Zappe (Author)

http://www.amazon.com/Analysis-Decision-Microsoft-Revised-Statistic/dp/0324662440/ref=pd_sim_b_2#reader_0324662440

Customer Reviews
Data Analysis and Decision Making with Microsoft Excel, Revised (with
CD-ROM and Decision Tools and Statistic Tools Suite)

18 Reviews
5 star: (10)
4 star: (5)
3 star: (1)
2 star: (1)
1 star: (1)

18 of 19 people found the following review helpful:
Strong Software Addition:

40 of 41 people found the following review helpful:

Better Title: Intro to Statistics using Excel Add-ins
On the positive side, this book has many excellent case studies and
examples. It is well written and interesting. However, I was
disappointed, as I was expecting use of Excel to rigorously solve
decision making and data analysis problems. The focus of the book is
mostly traditional statistics solved using a group of commercial add-
ins for Excel. If this is what you want,...

Published on June 3, 2001 by char...@aol.com

40 of 41 people found the following review helpful:
Better Title: Intro to Statistics using Excel Add-ins, June 3, 2001
By char...@aol.com (Gainesveille, FL) -

This review is from: Data Analysis and Decision Making With Microsoft
Excel (Hardcover)

On the positive side, this book has many excellent case studies and
examples. It is well written and interesting. However, I was
disappointed, as I was expecting use of Excel to rigorously solve
decision making and data analysis problems. The focus of the book is
mostly traditional statistics solved using a group of commercial add-
ins for Excel. If this is what you want, then the book would get five
stars. However, for data analysis and decision making, I think a more
thorough treatment using Excel without relying so much on the add-ins
would have been appropriate.

18 of 19 people found the following review helpful:
Strong Software Addition:, August 20, 1999
By Kirk S. Johnson (Batavia, IL USA) -

This review is from: Data Analysis and Decision Making With Microsoft
Excel (Hardcover)

This book was put together in the same 'spirit' as previous other
Winston books; good examples, well thought out attack approaches; as
well as a good summary of all the types of problems encountered in the
text! I have several other of Winston books, so I'm reasonably happy
with his work! I am growing a little frustrated with winston et al.
over the fact that they offer no solutions or answers to the many
exercise problems contained throughout the text. I don't think Winston
realizes that professionals outside of the classroom are buying these
books and don't have the luxury of a professor sharing answers to the
problems. This is where I think he can improve. The software addition,
from palisades was an excellent addition to the text! I had already
owned many of the commercial versions but have found that the suite,
provided with the text, was just as robust as my retail versions.

18 of 20 people found the following review helpful:
Excellent MBA - level textbook and software., September 2, 1999
By Serguei Netessine (Wynnewood, PA United States) -

This review is from: Data Analysis and Decision Making With Microsoft
Excel (Hardcover)

Finally MBA probability/statistics course and MS Excel have been
unified in one textbook. The accompanying software is great,
especially Decision Tree (probably the only Excel-based software for
decision making). Students like business-oriented excersises in the
book. Highly recommended.

11 of 11 people found the following review helpful:
Very good book but software is a source of troubles, July 20, 1999
By A Customer

This review is from: Data Analysis and Decision Making With Microsoft
Excel (Hardcover)

The book itself is an exteremely good source of theory and problems.
However, accompanying software is a reason for many disappointments.
There are undocumented bugs and compatibility issues. Some supporting
material for the book is still not available and customer support
could have been better.

14 of 16 people found the following review helpful:
MS Office 2000 compatability problems!!, August 11, 2000
By Courtney Turner (Chicago, IL USA) -

This review is from: Data Analysis and Decision Making With Microsoft
Excel (Hardcover)

Just purchased the book as a tool for MBA classes. However, after
installing the accompanying CD ROM add-ons I had problems accessing MS
Office programs. A critical .DLL file was modified by the program
during my installation. I think the program was made to run with MS
Excel 97. Another suggestion for the author is to include an answers
CD ROM for the problems contained in the text so that students and
professionals can check their work.

8 of 9 people found the following review helpful:
Serious Excel 2000 Problem, April 11, 2001
By Jal Singh "junkmail_12345" (NYC) -

This review is from: Data Analysis and Decision Making With Microsoft
Excel (Hardcover)

The text book is great. I have many of Winston's other books and they
are all great. The Palisade stuff works just fine. However, the
StatPro Addin that accompanies this text does not work with MS Excel
2000. I contacted the IT guy that the authors directed me to--he was
stumped. He just gave up and suggested I return my book for a refund
because he could not figure out it out. Again, the book is great but
the StatPro Addin sucks!

2 of 2 people found the following review helpful:
Great Buy, February 3, 2009
By Samantha J. Foster "Student4Life" (Cincinnati) -

I was required to buy this text for a class but it has actually been
very helpful. Some textbooks are diffucult to follow but this one has
great examples. If I don't understand something in class, I just have
to read over the chapter and it usually helps.

Amazon is THE place to buy, October 11, 2009
By Venkata V. Sagar Sambata (College Park, MD, USA) -

Amazon Verified Purchase(What's this?)
I had an extremely positive experience with Amazon and would recommend
you buy from them even with your eyes closed.

Impossible to decipher, but useful computer tools, October 7,
2009
By Robin Weber -

I have totally given up on doing reading assigned in this textbook.
It's dense, hard to understand, and takes more time than I have just
to understand a fraction of it. The only reason I'm giving 2 stars
instead of 1 is that the Excel add-on tools included on the CD with
the book are somewhat useful.

Missing Password and Key, September 20, 2009
By Tomaz V. Silva Neto "Thothmez" (CANADA) -

This review is from: Data Analysis and Decision Making With Microsoft
Excel (Hardcover)

I am a Reliability Engineer trying to learn more about Risk analysis.

The written part of the book seems fantastic, a lot of practical
examples that we can use in real world, sure we all know that excel is
limited and the use of Add-ins seems to be a very good way to manage
that.

I bought a used copy of the book which came with 2 Cds but without the
password and key to install the DecisionTools.
Does anybody know who should I contact to get that information ? Any
help is very much appreciated...

Regards,
to All.

4 of 7 people found the following review helpful:
No trouble with Excel, January 31, 2001
By steve_from_spokane (Everett, Wa United States) -

This review is from: Data Analysis and Decision Making With Microsoft
Excel (Hardcover)

I find the text and software a useful set of tools. It assumes
familiarity with basic statistics and Excel, and builds on them to
develop a powerfull ability to analize data and make decisions from
it. I experienced no trouble with the software install or operation.

0 of 1 people found the following review helpful:
Statistical Purchase, October 8, 2009
By Student -

I purchased this product with the description stating it included the
Stats Tools CD. When I received the product the CD was not included,
which made the text useless to me. I did receive a prompt refund from
Amazon and the Seller. I think that transparency is key to buying
online. . .

0 of 1 people found the following review helpful:
Thank you!, October 2, 2009
By AL "AL" (US) -

This review is from: Data Analysis and Decision Making with Microsoft
Excel (with CD-ROM, InfoTrac , and Decision Tools and Statistic Tools
Suite) (Hardcover)
Thank you! The book was in the perfect condition and shipping was in
time. The seller was very responsive with emails/questions.
Unfortunately I ordered the wrong book, but thanks so much for letting
me return it!!!!

0 of 2 people found the following review helpful:
Great used book, February 6, 2009
By Ohannes Mangoyan -

The book and cd's were in great shape as described (like new)! I will
buy used books again in the future.

0 of 3 people found the following review helpful:
Perfect condition - good deal., September 30, 2008
By K. Nash "research girl" (Cincinnati, OH USA) -

The textbook was brand new and I saved about $40. I received it on
time and the transaction was easy.

0 of 5 people found the following review helpful:
Sanjay Chheda, October 5, 2006
By Sanjay Chheda -

This review is from: Data Analysis and Decision Making with Microsoft
Excel (with CD-ROM, InfoTrac , and Decision Tools and Statistic Tools
Suite) (Hardcover)
The book is very good with really good explanations and examples on
descriptive analysis and inferential analysis.

0 of 11 people found the following review helpful:
Managerial Statistics Text book, November 3, 2006
By Sang Woo Kim (Gainesville, FL) -

This review is from: Data Analysis and Decision Making with Microsoft
Excel (with CD-ROM, InfoTrac , and Decision Tools and Statistic Tools
Suite) (Hardcover)
It was the text book the professor wanted me to buy.
It was good.

6 of 28 people found the following review helpful:
Weighs more than the one we used in Grad School, July 16, 1999
By A Customer

This review is from: Data Analysis and Decision Making With Microsoft
Excel (Hardcover)

As a past student of Dr. Zappe's at the University of Florida who used
a Dr. Winston book in 1992, I would have to say that it weighs more
thus increasing the strenths and size of my left bicep and foreman
forcing poor alignment of my spine.

http://www.amazon.com/Analysis-Decision-Microsoft-Revised-Statistic/product-reviews/0324662440/ref=dp_top_cm_cr_acr_txt?ie=UTF8&showViewpoints=1

http://www.amazon.com/Analysis-Decision-Microsoft-Revised-Statistic/dp/0324662440/ref=pd_sim_b_2#noop

International Economics: Theory and Policy (Paperback)
~ Paul R. Krugman (Author), Maurice Obstfeld
Maurice Obstfeld (Author)
› Visit Amazon's Maurice Obstfeld Page
Find all the books, read about the author, and more.
See search results for this author
Are you an author? Learn about Author Central
(Author), Addison Wesley (Author)

http://www.amazon.com/International-Economics-Paul-R-Krugman/dp/1408208075/ref=pd_sim_b_3#reader_1408208075

Customer Reviews
International Economics: Theory and Policy

19 Reviews
5 star: (8)
4 star: (5)
3 star: (1)
2 star: (2)
1 star: (3)

The most helpful favorable review The most helpful critical review

44 of 50 people found the following review helpful:
The book to start with in International Economics

For anybody - but especially students - interested in exploring the
subject of international economics, this is the book to start with. It
is illuminating (as it is always the case with Krugman's writings) on
otherwise technical concepts as comparative advantage, trade policy
and exchange rate determinants, but it is also entertaining, with its
"reality...

Published on May 4, 1999 by L. Battaglini

61 of 68 people found the following review helpful:

Not What I've Come to Expect from Krugman

First off, even if you totally discount the rest of my review, buy the
low price international version of this book. On the March 10, 2005
episode of the daily show Krugman elucidated his feelings quite
clearly. "The real money is in textbooks. With other books, people
need to decide whether to buy them or not. Students have to buy
textbooks." Thanks Paul. I think I'm...

Published on April 3, 2005 by TitaniumDreads

61 of 68 people found the following review helpful:
Not What I've Come to Expect from Krugman, April 3, 2005
By TitaniumDreads "http://blog.titaniumdreads.com" (Cambridge, MA
United States) -

This review is from: International Economics: Theory and Policy (6th
Edition) (Hardcover)

Anyway, on to the actual content of the book. I have to say that I was
excited when I found out that my International economics course at
Stanford was going to be using Paul Krugman's book. I've enjoyed his
articles for the New York Times because they manage to cut right to
the core of issues with an unusual amount of punch. Yet, time and time
again I was disappointed with the frequently inpenatrable language and
obtuse, unrealistic examples in this book. Unfortunately, the only
part of Krugman's characteristic writing style that came through was a
feeling of overwrought vitriol, which makes sense in an op-ed but has
little place in a textbook. Furthermore, this book occupies a strange
niche in the world of econ texts, it is not mathematically rigorous,
nor is it well written. Usually we see one or the other but rarely
both. Initially, I thought these observations were mine alone, but
other students began openly voicing pointed criticisms of the book
during class (and I am perhaps being too kind here in not repeating
them). I've been in school nearly as long as I can remember and I have
never seen such discontent with a text.

During the second half of the course even my econ prof became fed up
and abandoned the book altogether. Given that, I find all of the
positive reviews for this book rather astounding. My suspicion is that
there might have been open rebellion amongst my classmates had not the
professor decided to leave this text by the wayside. I also found that
it is brimming with misplaced, one-sided arguments that come across as
Krugman blatantly strawmanning arguments opposed to his own. One of
many examples of this comes out of nowhere near the end of chapter 2.
Krugman implies that anyone who doesn't believe in unmitigated free
trade is intellectually irresponsible!?! This book pushes for
unrestrained market fundamentalism throughout, primarily by
misrepresenting any arguments that would effectively challenge it's
simplistic and seemingly outdated dogma. This book, in particular,
feeds into the same system of self serving scientism so prevalent in
economics for the last 60 years.

Please don't mistake this review as the bile of a jilted student, I
did quite well in the course. However, this is almost certainly the
result of looking for alternative explanations of virtually every
topic covered. The reason this book gets one star instead of two is
because it lacks a lot of the modern learning tools prevalent in
almost every other textbook. Things like quality questions, keywords,
vocabulary and historical context all get short shrift in this this
volume. If you're into learning about incomplete models that only
represent a theoretical version of the world, this book is for you.
Unfortunately, just like Krugman said on The Daily Show, if you are a
student there is probably little chance that you have a choice on the
matter. Buy the cheap international edition for 20 bucks. I would
recommend that you use to the difference to buy William Easterly's
Elusive Quest for Growth...and a beer.

44 of 50 people found the following review helpful:
The book to start with in International Economics, May 4, 1999
By L. Battaglini "mauouo" (IT) -

This review is from: International Economics: Theory and Policy
(Hardcover)
For anybody - but especially students - interested in exploring the
subject of international economics, this is the book to start with. It
is illuminating (as it is always the case with Krugman's writings) on
otherwise technical concepts as comparative advantage, trade policy
and exchange rate determinants, but it is also entertaining, with its
"reality checks". The first part of the book deals with the "real"
economy, the second part with monetary international economics. It
will save you a lot of time to begin your study of the field with this
book. If you have had previous experiences with international
economics but either forgot most about it or had trouble making sense
of the whole thing you will probably get a good grasp of the subject
after reading this manual. The bibliography is accurate and rich, the
exercises won't give you an headache. Readers with some background in
economics are most likely to take full advantage from the book. For
the others, well, some introductory economics will be necessary. Once
you've read this book, you can continue more safely your studies/
readings on international economics.

16 of 18 people found the following review helpful:
international economics, January 16, 2000
By Soeren Puerschel (Tuebingen, Germany) - See all my reviews

This review is from: International Economics: Theory and Policy
(Hardcover)
This book describes in a very detailed way all the general theories of
economics concerning trade. It is very well done as there are many
examples and it is optically inspiring. Your eyes won't get tired too
quickly, as the layout is done fine. The content of the book is fine,
a good book for students of economics, even though it is advisable to
read more down the line. But for the overview of a topic it serves
allright.

13 of 15 people found the following review helpful:
An important and useful text for understanding trade theory, April
12, 1998
By A Customer

This review is from: International Economics: Theory and Policy
(Hardcover)
Krugman and Obstfeld provide a full detailed analysis and examples for
the basis of trade among nations. It is relatively straightforward to
comprehend for both economists and noneconomists.

International trade is an important component of economic policy for
the growth and development of countries. This book examines various
theoretical trade models and provides real world examples of policy
formulation and their impact. The authors do not take any political
positions, thus making their analysis a purely objective, or positive
study.

I would highly recommend this book to students interested in doing
research in international trade and development. It is a must read for
prospective international economists. Noneconomists might also find it
as a useful reference.

7 of 8 people found the following review helpful:
An important and useful text for understanding trade theory.,
December 31, 1999
By A Customer

This review is from: International Economics: Theory and Policy (5th
Edition) (Hardcover)

Krugman and Obstfeld provide a full detailed analysis and examples for
the basis of trade among nations. It is relatively straightforward to
comprehend for both economists and noneconomists. International trade
is an important component of economic policy for the growth and
development of countries. This book examines various theoretical trade
models and provides real world examples of policy formulation and
their impact. The authors do not take any political positions, thus
making their analysis a purely objective, or positive study.(p)

12 of 16 people found the following review helpful:
Not a bad book.... Too bad its a bit baby, June 12, 2004
By A Customer

This review is from: International Economics: Theory and Policy (6th
Edition) (Hardcover)

Having taken a class on Commodity Flow Theory (Micro) and a seperate
class on Int'l Finances (Macro), I can say that I enjoyed the former
much more then the latter. I used Krugman's latest edition for the
former and thought it was adequatly written for the scope of the
class.

I really wish they would make undergraduate Economics more rigirous as
I believe many undergrads who have taken 2 or 3 university math
courses (up to the linear algebra level) could easily understand most
of the mathematics found in "high brow" Economics theory.

Seeing I've only had the pleasure of reading two textbooks on the
subject (and different sections of each respective book), I am not in
a position where I can make a relative judgment on the quality of the
material.

I felt Krugman's writing (I am assuming the majority of the micro
section is his writing) was mostly neutral. I found, from my reading,
the only section that could have been biased was the section on
political economy, but since I am unfamiliar with that field in
general I cannot make a more descriptive comment.
Overall, I liked the fact that their was some mathematical indexes at
the end of the chapter (something my other int'l economics textbook
lacked). I've come to expect the option of a more quantiative
treatment in most modern textbooks (both my intermediate macro/micro
and econometrics text were layed out in this fashion).
So in conclusion, the text was easy to understand, well organized, and
perhaps abit biased.... However, if you are just being introduced to
the matter, I doubt you will notice much of the bias since the
majority of what he covers in the book are well established models and
theories.

7 of 9 people found the following review helpful:
A clear introduction into trade theory and macroeconomics, July 31,
1999
By A Customer

This review is from: International Economics: Theory and Policy
(Hardcover)
A clear book which gives a good introduction into trade theory. While
the authors sometimes take their time (space) or engage in a
conversation with the reader, it gives a good account of trade theory.
Slightly more advanced and requiring a bit more background is the
other half about open macroeconomics. But this too is quite clear and
gives a good acocunt of the field.

2 of 2 people found the following review helpful:
Best econ book I've ever used, May 6, 2009
By D. J. Nardi "TurtleDom" (Washington, DC) -

This is easily the best economics textbook I have ever used (and after
getting an MA in economics, I've used several). It has clear, colorful
graphs with notes right next to the graphs explaining the movements.
The main text is very accessible for the lay reader, but each chapter
also includes boxes and appendices going into greater depth. It also
addresses the policy challenges and political economy, both of which
are crucial to understanding international economics. Highly
recommended!

1 of 1 people found the following review helpful:
Your first lesson in International Economics, December 28, 2009
By another opinion - See all my reviews

This review is from: International Economics: Theory and Policy (8th
Edition) (Hardcover)

Your first lesson in International Economics is to get the
international version of this book. It will be softcover, also the 8th
edition, and half the price. It will be the same, page for page.

Then take the person of your choice out for a nice dinner. You'll be
glad you did.

16 of 24 people found the following review helpful:
international economics, June 4, 2000
By K. KATO "in...@phnx-jp.com" (Tokyo, Japan) -

This review is from: International Economics: Theory and Policy (5th
Edition) (Hardcover)

Have those reviewers really read the book? As I started reading, I
found that Figure 2-3 in Part ONE is misprinted, that the definitions
of the key terms are not clearly mentioned where they are indicated,
and that it is hard to find the key point in each section with too
long verbal explanations on mathematical points. The authors are
famous, I know. BUT do they really try to let us understand the
subject?

10 of 16 people found the following review helpful:
New Approaches for the Theories of International Economics, April 1,
2001
By Dong-Ho Rhee, "dhr...@uoscc.uos.ac.kr" (the University of Seoul,
Seoul Korea) -

This review is from: International Economics: Theory and Policy (5th
Edition) (Hardcover)

This textbook is unique and special in many respects. it explores new
front line for the international economics. The author may be the
first economist who asserts the Recardian model is a specific factor
model. He also explaines how trade occurs in the monopolistic
competition markets by applying the Salop's equation. His theories on
trade policies under monoplistic competition also expanded the
boundary of the traditional trade theories. His criticism on Brander-
Spencer is remarkable. His model on the international finace is
creative, and his explanation on AA-DD plane make us understood all
the main features in the international financial markets, for which
even IS-LM model (Hicks-Hansen paradigm) could not explain well. Some
minor printing mistakes may be negligible. He made really great
contributions for the relevant theories of international economics. I
appreciate this book as it opend us a new and creative frontline of
international economics. Dong-Ho Rhee University of Seoul, Korea

9 of 16 people found the following review helpful:
A challenge you won't regret, May 9, 2002
By Arlen Hodinh (Austin, TX : Go Longhorns!) -

This review is from: International Economics: Theory and Policy (5th
Edition) (Hardcover)

Krugman's book is not perfect, I know, but if you stick with the
reading the book will prove a valuable resource. One thing I like is
that the authors don't baby their audience. They present difficult
material as simple as it will let them, which is not simple enough for
stupid people. But, in the end the text is great, you will learn about
probably the most important subject in economics today from one if not
two of the most important economists alive.

0 of 2 people found the following review helpful:
Received Wrong Edition of Book, February 19, 2009
By Willis Chipango "Willis" (Williamstown, MA) -

This review is from: International Economics: Theory and Policy
(Hardcover)
I ordered and paid for a 6th edition of this book (recommeded by my
professor). I received a 3rd edition, which I already own. Big
disappointment!

0 of 2 people found the following review helpful:
An important and useful text for understanding trade theory, February
27, 2006
By Srinidhi Anantharamiah (Melbourne, Florida) -

This review is from: International Economics: Theory and Policy (6th
Edition) (Hardcover)

Krugman and Obstfeld, two world renowned international economists,
provide a full detailed analysis and examples for the basis of trade
among nations. It is relatively straightforward to comprehend for both
economists and noneconomists. International trade is an important
component of economic policy for the growth and development of
countries. This book examines various theoretical trade models and
provides real world examples of policy formulation and their impact.
The authors do not take any political positions, thus making their
analysis a purely objective, or positive study.

2 of 6 people found the following review helpful:
Krugman, February 24, 2006
By Alberto Ruiz Ortiz "Alberto" (Puerto Rico) -

This review is from: International Economics: Theory and Policy (6th
Edition) (Hardcover)

Some complicated theories explained in a way that can be understood.

Esay flow from a concept to the next.

0 of 4 people found the following review helpful:
The Undergraduate International Economics Standard, June 28, 2004
By thisismyname "myname" (nowheresville, USA) -

This review is from: International Economics: Theory and Policy (6th
Edition) (Hardcover)

Well, I will start off by saying that the book really probably only
deserves somewhere between 4-4.5 stars, but I'll give it 5 to offset
some of the questionable reviews below.

No, the book is not perfect. However, it is an academic standard at
pretty much any major college or university for teaching undergraduate
International Econ/Trade theory, and for good reason. The book makes a
clear a concise presentation of basic theory and policy, perhaps in
points it is a little too simple. As pointed out, while I'm not sure
about the 6th edition, there were some diagrammatical mistakes in the
5th...I bet, however, these were done by a graduate student. A quick
bit of reasoning and a second of thought should yield the appropriate
picture, however. And yes, I think a bit of Krugman's bias comes
through, though its not terribly off-putting.

The book could use a bit more math I think. The real equations and
difficult problems are few and far between, and are, for the most
part, pretty straight forward. At the very most it would take a basic
understanding of calculus, but the majority of the problems and
equations can be explained and done without it. I have read a number
of undergraduate economics books with far more intensive math. Despite
this lack, however, the intentions come across pretty well.

No, this book is not for beginners to economics. At least an
undergraduate course or reading in both micro and macro are needed,
and really and truly, an intermediate level in each is probably better
if one wants to get the most out of the book.

If you find the subject matter within to be terribly math intensive
and you cannot get motivated to read the subject matter because it
doesn't use "pizza and beer" (and um...I don't think I'd want an
imported pizza anyway, but thanks), well I guess the subject and this
book are not for you. However, if you are trying to enrich your
understanding of economics at a very basic level, this book provides a
good way to do so.

And, if you want graduate level book, and like Obstfeld, I recommend
he and Rogoff's book.

10 of 33 people found the following review helpful:
Save your Money--Get the Caves, Jones, et al World Trade..., January
28, 2004
By Sunil Khanna (Cambridge, MA) -

This review is from: International Economics: Theory and Policy (6th
Edition) (Hardcover)

Krugman et al constantly contradicts earlier statements throughout the
text in the international trade section, it will give you a headache.
The finance side is better. If you really want to learn international
trade and finance (for undergrad), get the Caves, Jones, Frankel
text.... I learned the hard way and had to pay restocking fees (etc)
when I wanted to exhange it for Caves et al. Krugman should stick to
writing editorials for the NY Times b/c this text needs some serious
help!!!

1 of 15 people found the following review helpful:
Excellent theory and plausible assertations., October 21, 1998
By A Customer

This review is from: International Economics: Theory and Policy
(Hardcover)
Extremely interesting book.

7 of 37 people found the following review helpful:
Worst economic book, October 17, 2001
By "khonsu7" (RSM, CA USA) -

This review is from: International Economics: Theory and Policy (5th
Edition) (Hardcover)

It is true that the authors of this book know what they are talking
about. It is not true, however, that they can relay that information
to others in an easy to understand manner. Important terms and
concepts are lost in numerous mathematical functions. The functions
themselves would be somewhat self-explanatory if they had included
numerical examples;however, they did not include enough to make the
concepts crystal clear. Besides, how many college students can really
get into products such as wine and cheese which the author's uses to
illustrate a concept in the second chapter. They could have
illustrated it much better with the use of beer and pizza. Agreeably,
this has to be one of the worst economic textbooks I have read.

http://www.amazon.com/International-Economics-Paul-R-Krugman/product-reviews/1408208075/ref=dp_top_cm_cr_acr_txt?ie=UTF8&showViewpoints=1

http://www.amazon.com/International-Economics-Paul-R-Krugman/dp/1408208075/ref=pd_sim_b_3

Macroeconomics (6th Edition) (Hardcover)
~ Andrew B. Abel
Andrew B. Abel (Author)

(Author), Ben S. Bernanke (Author), Dean Croushore (Author)

http://www.amazon.com/gp/product/images/032141554X/ref=dp_image_0?ie=UTF8&n=283155&s=books

Customer Reviews
Macroeconomics (6th Edition)

2 Reviews
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Average Customer Review
(2 customer reviews)

The most helpful favorable review The most helpful critical review

1 of 1 people found the following review helpful:

Excellent

I bought this text for self study. This book is clearly written so
that a self-learner can learn intermediate macroeconomics. I
particularly like the appendix that follows the chapter on IS-LM. The
problems in both the workbook and the textbook allow me to think
deeply about the concepts.

The text does not have any answers at the back of the text...
Published 1 month ago by Michael C. Fladlien

1 of 4 people found the following review helpful:

too many highlihgs

Book was not in a good shape as described on Amazon when I bough it.
For that price it was not a good deal. Too expensive.
Published 5 months ago by Diana C. Hernandez

1 of 1 people found the following review helpful:
Excellent, February 10, 2010

By Michael C. Fladlien "dogbreath" (muscatine, ia United States) -
See all my reviews

The text does not have any answers at the back of the text.

Every morning for the past semester, I have worked my way through this
text. I find the text easy reading and enjoyable.

1 of 4 people found the following review helpful:
too many highlihgs, October 9, 2009
By Diana C. Hernandez -

Amazon Verified Purchase(What's this?)
Book was not in a good shape as described on Amazon when I bough it.
For that price it was not a good deal. Too expensive.

http://www.amazon.com/Macroeconomics-6th-Andrew-B-Abel/product-reviews/032141554X/ref=dp_top_cm_cr_acr_txt?ie=UTF8&showViewpoints=1

http://www.amazon.com/Macroeconomics-6th-Andrew-B-Abel/dp/032141554X/ref=pd_sim_b_4

Sid Harth

unread,

Mar 14, 2010, 7:21:19 PM3/14/10

5 Reasons Why Russia Isn’t China
15 March 2010
By Yevgeny Bazhanov

Ever since Mikhail Gorbachev became general secretary 25 years ago
last week, the world has compared China’s successful economic reforms,
which were first set into motion in late 1978 under the leadership of
Deng Xiaoping, with the Soviet Union’s and then Russia’s largely
unsuccessful attempts to overhaul its economy. The conventional
version is that Moscow somehow took the wrong path toward reform and
things would have been a lot better had Russia copied the Chinese
model. But this is an oversimplified analysis. The two countries are
far too different for Russia to have copied China’s reform program in
a cookie-cutter fashion.

First, consider the domestic situations in each country. China was
embroiled in chaos after the Great Cultural Revolution, which lasted
from 1966 to 1976. By 1978, the overwhelming majority of Chinese
officials and citizens understood the need to institute fundamental
reforms. The situation was quite different in the Soviet Union in
1985. Most Soviets viewed the country in 1985 as a superpower with a
relatively functioning economy, social stability and order —
particularly when compared with the stagnation years under Leonid
Brezhnev and in comparison with the widespread poverty and hunger in
China before Deng started economic reforms.

Second, the state apparatus in both countries differed considerably.
The authority, power and unity of the Chinese leadership had been
severely set back by the Cultural Revolution that the more
conservative members could not put up any organized resistance to
those who called for fundamental reforms. It was clear to all that
something drastic had to be done to revive the country. By contrast,
Gorbachev’s reforms was heavily resisted by the Politburo’s
conservative members and among the military top brass.

Third, two very different individuals headed the reform movements in
both countries. China’s reforms were led by the highly experienced,
former revolutionary figure Deng. He enjoyed enormous authority and
had the liberty to take bold steps toward reform. In the Soviet Union,
the burden of reform fell on the shoulders of a less experienced,
provincial party functionary who was only capable of experimenting
within a very limited political and economic framework that was
defined by the old guard.

In the end, Deng was able to institute deep and far-reaching reforms,
while Gorbachev had to settle for only insignificant economic reforms
that were frequently pointless or even detrimental. It is notable that
in one of the few cases in which Gorbachev was able to institute a
radical economic reform — the introduction of private business
cooperatives in 1988, the first time since Lenin that Soviets were
given the right to own private businesses — he was forced to retract
it a year later.

The fourth factor was the social and economic conditions that
prevailed in both countries. China remained an agrarian country.
Eighty percent of the people were peasants who hungered for the right
to work their own land, and Deng gave them this right. As a result,
the situation in the villages quickly improved, and even inveterate
skeptics were forced to admit that the reforms were successful. From
agriculture, Deng set out to reform to the industrial and other
sectors of the economy as well.

Gorbachev was faced with a completely different situation. Unlike in
China, the military-industrial complex was the backbone of the Soviet
economy. To stimulate and diversify the economy, it was necessary to
make drastic cuts and reforms to the military-industrial manufacturing
sector, which permeated virtually all sectors — from producing
intercontinental missiles to manufacturing women’s shoes. But this was
fiercely opposed by the top military brass for obvious reasons, and
they had an ideological and military basis for resisting such reforms
— that the United States and NATO were a direct threat to the
country’s national security.

Further, Gorbachev’s attempted agricultural reforms were stifled by 50
years of backwardness in the country’s collective farms, fierce
opposition from Communist Party apparatchiks to any type of change and
— very much in contrast to what happened in China — the lack of desire
among Soviet farmers to work harder even under more liberal economic
conditions to improve their well-being. On the whole, it was far more
difficult to reorganize the more military-based, industrialized Soviet
economy than it was China’s more agricultural-based, primitive
economy.

Fifth, the foreign policies of the two countries differed
significantly. China had close military and political ties with the
West based on a common opposition to what was perceived as the
Kremlin’s expansionist foreign policy. As a result, the United States
and its allies enthusiastically participated in Chinese reforms both
on a governmental and private-sector basis. Chinese nationals living
overseas also played a key role in the process.

The Soviet Union could not even dream of receiving such assistance
from abroad. Gorbachev’s first priority was curbing the arms race that
had been bleeding the country dry. And that goal could only have been
achieved had the conservative elements within the Politburo been
willing to downsize and restructure the massive military-industrial
complex.

After his first two years in office, Gorbachev realized that his
economic reform plans had reached a dead end. In 1987, in an attempt
to jump-start the process and overcome the conservative resistance,
Gorbachev focused on political reforms, hoping to rally the people
behind his reforms. But this backfired on him. Democratization and
pluralism eroded the very foundation of the Soviet regime and weakened
the glue that had been holding the Soviet republics and Russian
society together. As a result, the Soviet Union was crippled by an
intense struggle between liberals and conservatives within the
Politburo, between Moscow and the provinces and among nationalities in
the republics. This type of “shock democratization” has almost always
led to chaos in totalitarian regimes.

Thus, the Soviet Union was caught in a vicious circle of political and
economic instability. Gorbachev’s political reforms led to a
debilitating political conflict between liberals and conservatives
within the Kremlin, which made it impossible to institute economic
reforms. Both of these factors this took the Soviet Union down a
slippery slope toward a severe political and economic crisis. Unlike
China in 1978, the Kremlin in the mid- and late 1980s could not
develop a unified strategy for economic reform — much less to put such
a strategy into practice. Ensnared in a deep political deadlock amid
deteriorating economic conditions, the Communist regime collapsed in
1991.

Russia has been struggling to implement its economic reforms ever
since, while China is celebrating nearly 32 years of economic success.

Yevgeny Bazhanov is vice chancellor of research and international
relations at the Foreign Ministry’s Diplomatic Academy in Moscow.

Also in Opinion

A Country Without Icons
http://www.themoscowtimes.com/opinion/article/a-country-without-icons/401598.html
Reviving the UN Charter
http://www.themoscowtimes.com/opinion/article/reviving-the-un-charter/401599.html
Long Road to Zero Tolerance Of Corruption
http://www.themoscowtimes.com/opinion/article/long-road-to-zero-tolerance-of-corruption/401440.html
All for Nought
http://www.themoscowtimes.com/opinion/article/all-for-nought/401441.html
Un-Soviet Sports
http://www.themoscowtimes.com/opinion/article/un-soviet-sports/401360.html

http://www.themoscowtimes.com/opinion/article/5-reasons-why-russia-isnt-china/401597.html

China bidding on yet more American Infrastructure - this time High
Speed Rail
Submitted by Robert Oak on Sun, 03/14/2010 - 12:47

Ya know how new, emerging technologies were supposed to rebuild the
U.S. Economy? Instead we find the DOE has awarded billions to foreign
companies and created jobs in foreign countries under the hype of
green jobs? Remember those, the hyped out and touted jobs of the
future, even promoted as something to boost U.S. domestic minorities
job opportunities?

Well, we're at it again. This time it's High Speed Rail. Even worse,
the Obama administration is claiming to cooperate with China. There
are currently $8 billion dollars in grants up for bid.

China plans to bid for contracts to build U.S. high-speed train lines
and is stepping up exports of rail technology to Europe and Latin
America, a government official said Saturday.

China has built 4,000 miles (6,500 kilometers) of high-speed rail for
its own train system and President Barack Obama issued a pledge in
November with his Chinese counterpart, Hu Jintao, to cooperate in
developing the technology.

"We are organizing relevant companies to participate in bidding for
U.S. high-speed railways," Wang Zhiguo, a deputy railways minister,
told a news conference.

Wang gave no details of where China's railway builders might seek
contracts, but systems are planned in California, Florida and
Illinois. He said state-owned Chinese companies already are building
high-speed lines in Turkey and Venezuela.
Beijing plans to construct a 16,000-mile (25,000-kilometer) high-speed
rail network by 2020 in a 2 trillion yuan ($300 billion) project it
hopes will spur economic and technology development. A new line
linking the central city of Wuhan with Guangzhou near Hong Kong on
China's southern coast is billed as the world's fastest at 237 miles
(380 kilometers) per hour.

China produces high-speed trains using French, German and Japanese
technology. Its manufacturers have developed a homegrown version but
have yet to produce a commercial model.

Chinese rail authorities have signed cooperation memos with California
and Russia and state companies plan to bid on a line in Brazil linking
Rio de Janeiro with Sao Paulo, Wang said. He said Saudi Arabia and
Poland also have expressed interest.Aren't you glad those funds are
being given to U.S. companies to start our own advanced technology and
manufacturing in high speed rail? (sic)

Think this post is whining Populism? To back up the whine, a report
shows the U.S. is running a green trade deficit, and this report is
now 9 months old:

Green investment is a major pillar of the president's economic
recovery plan. Yet, America's dependence on foreign countries to
produce green technologies may undermine this recovery strategy.
Using a list of green goods derived from the Organization of Economic
Cooperation and Development (OECD) and the Asia-Pacific Economic
Cooperation (APEC), we have determined that the United States ran an
overall green trade deficit of -$8.9 billion in 2008, including a
deficit of -$6.4 billion in the critical category of renewable energy,
one of the main targets of the Obama administration's green agenda.
The U.S. economy also suffered a significant deficit in the pollution
management category. On the positive side, the United States ran
modest surpluses in two categories--energy efficiency and a grouping
of other environmental goods related to water purification and
sustainable agriculture.

If current trends continue, the green trade deficit can be expected to
widen further as the administration's agenda increases domestic demand
but without sufficient measures to increase domestic production. If
the deficit continues to grow, the United States will forego the
creation of millions of high-wage, high-skill green manufacturing jobs
and lose its potential to be a global producer as well as a consumer
of green technologies.

http://www.economicpopulist.org/content/china-bidding-yet-more-american-infrastructure-time-high-speed-rail

Sunday, March 14, 2010
*****Inflation Accelerating In China*****
by Eric deCarbonnel

China Daily reports that CPI rise stokes inflation fears in China.
(emphasis mine) [my comment]
CPI rise stokes inflation fears
By Wang Xiaotian and Xin Zhiming (China Daily)
Updated: 2010-03-12 06:49

As real interest rate turns negative, analysts divided on whether
tightening policies needed

BEIJING: A key gauge of inflation rose by a stronger-than-expected 2.7
percent year-on-year in February from 1.5 percent in January - the
fastest clip in 15 months - adding pressure on the government to
tighten policies.

Given the 2.25 percent one-year interest rate on deposits, the
consumer price index (CPI) growth means the real interest rate has
returned to negative for the first time since 2008, raising the
possibility of an interest rate hike.

The CPI rise was mainly caused by food price increases during Spring
Festival. Prices rose by 6.2 percent, compared to 1 percent for non-
food prices, the National Bureau of Statistics (NBS) said on Thursday.

Severe weather conditions also drove up food prices, said Sheng
Laiyun, NBS spokesman.

Analysts said that given the Spring Festival effect, policymakers
should not hasten to tighten policies.

"Only after key figures for March come out should we discuss about a
possible rate hike," said Dong Xian'an, chief macroeconomic analyst of
Industrial Securities.

…
Industrial output increased 20.7 percent year-on-year in the first two
months, 16.9 percentage points higher than a year ago. Fixed-asset
investment rose 26.6 percent, slightly higher than the same period
last year. Retail sales increased by 17.9 percent year-on-year in the
first two months, and the producer price index, which measures factory-
gate prices, went up by 5.4 percent in February.

"Most of these data are stronger than expected and this trend should
likely make policymakers tighten monetary, fiscal, exchange rate and
real estate policies, as well as restrict financing options for local
government-sponsored investments," Ma said.

Businessweek reports that Inflation Eroding China Deposits Feeds Asset
Pressure.
Inflation Eroding China Deposits Feeds Asset Pressure
March 12, 2010, 1:54 AM EST

March 12 (Bloomberg) -- China's accelerating inflation has started to
erode household savings, threatening to spur purchases of property and
stocks and fuel asset-price pressures.

Consumer prices rose a more-than-forecast 2.7 percent in February, the
most in 16 months, the statistics bureau said in Beijing yesterday.
The increase means the rate exceeds the one- year deposit rate of 2.25
percent.

So-called negative real rates skew incentives to spending just as
China's economy is already accelerating -- reports this week showed
exports rose, industrial production accelerated and new loans exceeded
forecasts. The central bank may raise interest rates within the next
three weeks, Standard Chartered Bank Plc, Nomura Holdings Inc. and
Royal Bank of Canada said.

"A growing number of households will now realize that their deposits
in the banking system are losing purchasing power," said Ma Jun, chief
China economist at Deutsche Bank AG in Hong Kong. The jump in the
inflation rate last month "will increase the social and political
pressure for a rate hike in the near term."

'Fear of Inflation'

Since October, the government has highlighted the importance of
managing inflation expectations as the nation rebounds from the global
financial crisis and commodity costs rise. Eleven of 15 economists
surveyed yesterday said that interest rates may rise in March or
April.

Barclays Capital yesterday increased its projection for China's
inflation rate this year to 3.5 percent from a previous estimate of 3
percent.

"Fear of inflation" will help to drive property purchases in China
because people want "hard assets," Zhang Xin, the chief executive of
Soho China Ltd., the biggest developer in Beijing's central business
district, said in an interview on Bloomberg Television today.

The company reported yesterday that 2009 profit surged more than
eightfold.

Premier Wen Jiabao aims to hold full-year inflation around 3 percent
after banks flooded the financial system with money to drive an
economic rebound.

Crisis Policies

Gross domestic product grew 10.7 percent last quarter and People's
Bank of China Governor Zhou Xiaochuan said March 6 that anti-crisis
policies, including the yuan's peg to the dollar, must end "sooner or
later."

A surge in one gauge of money supply included in this week's figures
also signals spending will quicken. Last month's 35 percent gain in
M1, the measure of money supply that includes demand deposits, signals
households' intentions to buy "big- ticket items," property or stocks,
said Brian Jackson, an emerging-markets strategist at Royal Bank of
Canada in Hong Kong.
China's exploding money supply driving up prices

China's increasing supply of Yuan means that a lot more money is
chasing its domestic supply of commodities. As a result, the prices of
commodities in China are higher than the rest of the world, and this
price imbalance is leading to record commodity imports (Chinese
producers are buying commodities abroad rather than pay higher
domestic prices).

Newsweek explains that It's China's World We're Just Living in It.
It's China's World We're Just Living in It

The middle kingdom is rewriting the rules on trade, technology,
currency, climate—you name it.

By Rana Foroohar and Melinda Liu NEWSWEEK
Published Mar 12, 2010
From the magazine issue dated Mar 22, 2010

Back when President Obama lived in Indonesia, in the late 1960s, China
loomed as a malign force to the north, where communist cadres plotted
to export their revolution to the rest of Asia. The Jakarta he'll
visit later this month has an entirely different attitude toward the
People's Republic. Local companies are doing deals in yuan, the
Chinese currency, rather than dollars. If Jakarta gets in financial
trouble, as it did back in 1997, it will be able to call on a $120
billion regional reserve fund, an Asia-only version of the
International Monetary Fund due to be launched this month, bankrolled
in part by China's massive foreign-exchange reserves. Asia's key
economic and political issues are no longer being hashed out on trips
like Obama's—between individual nations and the United States—but at
summits that include only China, Japan, South Korea, and the Southeast
Asian countries. "China has been instrumental in this shift in focus
from 'Asia-Pacific,' which was largely about the U.S. and Japan, to
'East Asia,' which has China at the center," says Martin Jacques,
author of When China Rules the World.

Fair enough: everyone understands that China deserves a big say in
what goes on in its neighborhood. But what most people haven't noticed
yet is that Beijing also wants to write—or, at least, help write—new
rules of the road for the world. "China now wants a seat at the head
of the table," says Cheng Li, director of research at the John L.
Thornton China Center at the Brookings Institution. "Its leaders
expect to be among the key architects of global institutions."

It's easy to forget that big international bodies like the IMF and the
World Bank were created by just a few nations, led by the United
States. These economic organizations have global reach, but that globe
used to be dominated by the American superpower, and their policies
were suffused with U.S. values. When Beijing was a small-stakes player
its leaders didn't always like the setup, but they lived with it, even
facing down fierce grassroots opposition to join the World Trade
Organization.

But now China has more worldwide clout, and public opinion at home has
taken on a combative (and sometimes downright jingoistic) tone. So
with one eye on China's national interests and the other on domestic
critics accusing the regime of "coddling" the West, Beijing has begun
to push harder to reshape international systems to make them more
China-friendly (and, in the process, to raise the regime's chances of
survival).

Ironically, U.S. officials often complain that Beijing isn't more
involved in running the world—declining to help security efforts in
Afghanistan, for instance. But in most such cases, China is being
asked to take part in a system it didn't set up—one it views as
inherently biased in favor of the West. The Chinese are far more eager
to participate in groups they've had a hand in building, like the
Shanghai Cooperation Organization, a sort of Central Asian NATO in
which China (as might be guessed from the name) plays the leading
role. While that alliance started out as something of a joke in 1996,
it's grown into a pillar of regional security.

Similarly, Beijing's efforts to push the yuan as a rival to the dollar
are now making tentative progress. In the last few months, China has
inked $100 billion in currency-swap agreements with six countries,
including Argentina, Indonesia, and South Korea. The yuan has become
an official trading currency between Southeast Asia and two Chinese
provinces along its periphery. "The yuan will next be used as a
trading currency with India, Pakistan, Russia, Japan, and Korea," says
Gu Xiaosong, director of the Institute of Southeast Asian Studies in
Nanning.

Those countries will eventually be able to use the Chinese currency
for deals between each other. And in an-other low-profile but
important step toward making the yuan a freely convertible,
international currency, Beijing issued its first international bond
offering in Hong Kong late last year.

Equally quietly, Beijing is helping re-design the Web. Recent
headlines have focused on China's spat with Google, which announced it
would refuse to abide by local censorship rules anymore after the
company's networks were hacked from Chinese computers. But separately,
the Chinese have been working hard on the next generation of Internet
standards—what's called IPv6, for Internet Protocol version 6. The
current version, IPv4, is expected to run out of usable IP addresses
as soon as next year. That day can't come soon enough for Beijing,
since the vast majority of addresses—some 1.4 billion as of August 2007
—have gone to American businesses and individuals, versus a measly 125
million to China. That's fewer than one IP address per 100 people,
compared with five per person in the United States.

IPv6 will provide trillions of new addresses for everything from Web
sites to intelligent home appliances and military applications—and
Beijing intends to get its share of them. China may also get a new
opportunity for cyber-spying: unlike the previous architecture, IPv6
allows addresses to be attached to specific computers or mobile
devices, which would give the regime greater ability to police its
Netizens.

All these efforts are motivated by an odd mix of confidence, pride,
and insecurity. On the one hand, China knows its technological
capabilities are dramatically improving and sees a chance to move
beyond the West in certain fields. "There's always been this feeling
in China and a number of other developing nations that the West was
the place to be—and now suddenly it's not," says Ruchir Sharma, head
of emerging markets for Morgan Stanley Investment Management. Chinese
scientists and researchers are flocking home to conduct original
research at well-funded labs.

On the other hand, the Chinese worry that if they're not involved in
writing the new standards, those could be manipulated by their
enemies. The regime has tried to bar government computers from running
Microsoft software, for example, largely because it's assumed that
such software might include a "back door" that would allow the U.S.
government to launch cyberattacks against China.

Indeed, while China isn't necessarily looking to take over the world,
its actions all put Chinese interests foremost. Beijing's space
programs are highly secret, but they've been ramped up in recent years
with the first successful test of an antisatellite weapon in 2007,
followed this year by the launch of an exo-atmospheric surface-to-air
missile (which some Western security experts think may actually be a
new satellite-killer weapon). Earlier this month China confirmed plans
for its second unmanned lunar probe in October and the 2011 launch of
a space module for the country's first docking exercise, all leading
up to a 2013 moon landing. With NASA's budgetary rollback, China is
now the only country making major investments in space exploration.

Why the big push to reach the moon? Beijing clearly expects more
material gain from its celestial adventures than the Americans have
gotten. Some Chinese scientists are sure that space is the place to
find potential new energy sources like helium-3, as well as fresh
lodes of rare minerals that are being gobbled up by industrial
production on earth; Ye Zili of China's Space Science Society has been
quoted as saying that when the Chinese reach the moon, they won't
"just pick up a piece of rock"—a clear dig at past U.S. missions. The
rules governing the exploitation of extraterrestrial resources have
yet to be written. When they are, China wants its stake to be well
represented.

The same principle explains the country's overall drive to move ahead
of the rest of the world: to make sure it gets a real say in setting
its future rules and standards. It knows it can climb the economic
ladder more easily in new and developing technologies than in
traditional industries, and that's why China, the world's biggest
polluter, has also become the single biggest state supporter of green
technology. Thanks to massive government subsidies, it's now a world
leader in solar- and wind-energy hardware and is moving fast to set
the standard in the next generation of clean-energy vehicles.
Batteries made by the Chinese firm BYD are already used in at least a
quarter of the world's mobile-phone market; now the battery maker is
leading the global race to adapt these batteries for cars, the biggest
remaining hurdle in creating a viable market for electric and hybrid
automobiles.

Thanks to state mandates, China already has the largest fleet of clean-
energy vehicles in the world. As the technology improves, you can bet
Beijing will push clean cars throughout the Chinese consumer market
(which last year overtook the United States in sheer numbers of
vehicles sold). And should the Chinese succeed in developing not only
the automotive field's gold-standard technology but also a market of
that size, they can expect to control the future of the global car
business.

If and when that day comes, it will be interesting to see whether the
Chinese—and the world—continue to support the current rules of free
trade and open global competition that helped provide their current
level of peace and prosperity [the current "peace and prosperity" are
founded on a lie (the "might" of US ponzi economic)]. Already one can
see worrisome changes in the way China deals with foreign firms. Ten
years ago Beijing did everything possible to woo investors from
abroad. Today the rules have changed. The country's $800 billion
fiscal-stimulus package channeled much more clout to state-run firms
and away from the private sector. New merger laws are making it
tougher for foreign firms to acquire Chinese companies.

In December, the U.S. Chamber of Commerce and 33 other business
organizations from around the world sent a letter to Beijing
protesting legislation that they claimed would effectively bar foreign
firms from China's lucrative government-procurement markets. Beijing
is even taking control of the venture-capital business. One of the
world's top private-equity firms, the Carlyle Group, was recently
obliged to join forces with the Beijing city government in order to be
allowed to invest in more deals in China.

The idea that as China got rich it would simply become more like
America, or at least more sympathetic to the U.S. agenda, is turning
out to be wrong [the US doesn't HAVE an agenda. That is the whole
problem with the US: zero long term planning (ie: lack of action on
social security and the chronic budget/trade deficits]. China has
never been transformed from without, and it's unlikely to be now.
Among ordinary Chinese, pride in their nation's prospects is matched
by a nagging feeling that it's all still too new and precarious. The
dizzying pace of change is having a particularly dramatic effect on
younger Chinese, turning them inward and making them more nationalistic
—a trend that experts like Hudson Institute fellow John Lee believe to
be a factor in China's new and more aggressive policies on security,
trade, and foreign affairs. That aggressiveness is only likely to
increase between now and 2012, when the top leadership of the
Communist Party will be changed. Officials jockeying for positions
between now and then will "lose points if they are perceived as being
too soft in any sort of negotiation with the U.S.," says Li of
Brookings.

… It's nowhere near clear what our world will look like when China has
done its part to reshape it. But the journey toward that world
promises to be a bumpy one.
CSmonitor asks how long will China support the US dollar?
How long will China support the US dollar?
China is continuing to buy US bonds, but it doesn't really a choice –
for now, at least.

An employee counts Chinese yuan banknotes at a Bank of China branch in
Hefei, Anhui province March 10. Chinese banks extended about 700
billion yuan ($102.5 billion) in new loans in February, half that of
January, as the government clampdown on lending took hold, state media
said on Wednesday.

By Bill Bonner Guest blogger / March 12, 2010

China says it is continuing to buy US bonds "every day." It doesn't
have much choice. It earns money by selling things abroad. In fact,
exports in February were up more than 40% over February '09. This
leaves it with a lot of foreign money – most of it in dollars. What
can it do with so much money?

China has quietly bought stakes in America's leading companies…and in
various businesses all over the world. But the only way large amounts
of US dollar cash can be readily and safely deployed is in US bonds.

That said, China could also cause one helluva problem for the US if it
ever chose to do anything else. [get ready for one "helluva problem"]

No worries on that score, said the Chinese official in charge of its
$2.4 trillion worth of foreign reserves. He says China's holdings of
US debt are normal and that there is no intention of reducing them or
playing politics with them.

He surely means it. And when the dollar goes down…and when the market
turns, and China feels compelled to get rid of its US bonds, he'll be
totally sincere when he explains that to the international financial
press too.

Markets make opinions, as they say on Wall Street. The market in bonds
and the dollar has been very good for a very long time – since 1983,
to be exact [when banks started security lending…]. As a result nearly
everyone – including the Chinese – are of the opinion that US bonds
are a safe place to be. When the market changes, so will opinions.

So far, no problem. But there's no telling how long the foreigners
will continue to support the dollar [until the 2010 Food Crisis really
gets rolling (2-3 months)]. Then what? Well…it leaves quantitative
easing…in which the US central bank lends the money itself. Where does
it get the money? It just invents it.

Which is why you can't trust paper money. You have a dollar. You have
it. You hold it. And you expect to keep it 'til death do you part. But
then, along comes another dollar that looks just like it…fresh…young…
full of vim and vigor. So why not? Everybody does it.

Pretty soon, there are a lot more dollars running around. And they
change hands fast. In economists' lingo, the velocity of money goes up…
and the value of the dollar – like a faithless lover – goes down.
China's new dollar peg

My reaction: It is only matter of a few months before accelerating
inflation forces Chinese authorities to break the country's dollar
peg. When it does, the dollar will drop like a rock.

Posted by Eric deCarbonnel at 3:41 AM Delicious email Print this
post

1 Comments:

Curtis said...
Yes, I must agree with you. The dollar is going to drop like a rock.

But if the market starts to sink first, it could hold off the dollar
from sinking as investors go for safety. Then after the market sinks,
then the dollar will sink.
March 14, 2010 3:08 PM

http://www.marketskeptics.com/2010/03/inflation-accelerating-in-china.html

China's Yuan/Dollar Peg: Untenable, Unsustainable, Indefensible,
Unsound
36 comments
by: Annaly Salvos March 14, 2010

We don’t much trust statistics that come from China, just like we
didn’t trust information that came from behind the Iron Curtain back
in the Cold War days. But there’s been a lot of news from China in the
past few weeks, and it has painted a picture of economic recovery and
strength. At 8.7%, GDP growth was faster than expected in 2009.
Production, exports and fixed-asset investment in urban areas are up
20.7%, 31.4% and 26.6%, respectively, in the first two months of 2010
versus the same year-ago period. M2 money supply grew at a 25.5% clip
and consumer prices rose 2.7% in February.

Believe those numbers at your peril, haircut them as you see fit, but
there is one number with regard to China that is unassailable and that
makes their growth miracle possible: 6.83. The pegging of the yuan at
this artificially low exchange rate is the cornerstone of the Chinese
economic miracle. It is the modern-day mercantilist tool, a
replacement for tariffs and taxes. In so doing, it allows the country
to run an export-driven economy that competes on price, depends on
foreigners’ propensity to consume, and builds up huge structural
surpluses with which to keep its currency peg. It’s the Walmart of
countries, the big box store and category killer that no local
shopkeeper wants in his neighborhood. It is the other side of the coin
from the United States and Europe at this stage in the global economic
cycle - - consumer-based societies that are running huge structural
deficits. Despite the obvious economic wisdom of letting the currency
float, and the ample cover for doing so that the latest data provide,
it is unlikely that China will significantly alter its dollar-peg
policy any time soon.

This is a global macroeconomic issue, but for China it is a domestic
issue: There is a labor shortage in China, and those workers want to
be paid. “Migrant workers are a lot more fussy than before,” He Suwei,
chairman of Hangzhou Weibang Airflow Spinning Co in Zhejiang province,
told China Daily. “They don’t just talk money; they talk about working
environments, holidays and other fringe benefits we have not even
heard of before. Workers have more say than us now because they have a
wider choice.” Workers at the factory are now being paid about $270
per month, up 40% from the beginning of the global recession. At a
nearby textile mill, the owner came back from the Lunar New Year
holidays to find that many of his skilled workers didn’t return to
work. He reluctantly had to raise wages. “I had no choice but to raise
the salaries of my less experienced workers from 750 yuan a month to
960 yuan,” said the owner, Cao Yakun. “Also, to make sure the workers
who did return stayed, I boosted my skilled workers’ pay by 10 to 15
percent.”

The irony here about the exploited proletariat wanting better
treatment from the bourgeoisie factory owners is historically
mindboggling. All we can say to the Communist Party bureaucrats is
‘Welcome to capitalism.’ The genie is out of the bottle and you can’t
put it back. You can’t raise salaries on your working class because
margins are too low, you can’t raise prices to raise margins because
you’ll be less competitive and you can’t let your currency float
because your exports will decline and slow economic growth.

The other irony: the modern Chinese miracle would never have occurred
without the US dollar as a reserve currency. As Hugh Hendry has
pointed out, for the Chinese, US dollars were nothing less than the
modern-day equivalent of the relief from a too constrictive gold
standard that William Jennings Bryan decried in 1896. Imagine if back
then the supply of gold had been as unlimited as dollars. The fact is,
in modern economies either all trading partners of more or less equal
size should be linked to a similar standard, like gold, or they should
all be free floating and competing. A hybrid situation like we have
now just leads to hazardous imbalances.

If history is a guide, however, economic growth and a free floating
currency are not incompatible. The graph below (click to enlarge)
shows the exchange rate of the Japanese yen; Japan eventually let it
float and they recovered from World War II to become the second
largest economy in the world. It’s only when the Bank of Japan began
to sizably intervene to manage their currency that the country ended
up with a lost generation of productivity. China, take note.

About the author: Annaly Salvos Management at Annaly will
occasionally express their thoughts and opinions on specific issues
and events in the financial markets through monthly commentaries and
white papers. Annaly Salvos is a venue for expressing occasional
thoughts and opinions on issues and events in the financial
markets.... More Blog: Annaly Salvos

• Discouraging Undertone in Non-Farm Payrolls
http://seekingalpha.com/article/192849-discouraging-undertone-in-non-farm-payrolls?source=article_lb_author

• Monetary Growth and Home Price Inflation
http://seekingalpha.com/article/192258-monetary-growth-and-home-price-inflation?source=article_lb_author

• Inflation Chartbook: Follow the Money Supply
http://seekingalpha.com/article/191602-inflation-chartbook-follow-the-money-supply?source=article_lb_author

http://seekingalpha.com/article/193461-china-s-yuan-dollar-peg-untenable-unsustainable-indefensible-unsound?source=feed

MARCH 14, 2010, 5:54 P.M. ET.China Takes Aim at U.S. on Economy
By ANDREW BATSON, IAN JOHNSON And ANDREW BROWNE

BEIJING—Premier Wen Jiabao aimed sharp words at Washington on Sunday,
ceding little ground on China's currency policy and suggesting that
U.S. efforts to boost its exports by weakening the dollar amounted to
"a kind of trade protectionism."

In his once-yearly news conference, Mr. Wen blamed U.S. weapons sales
to Taiwan and President Barack Obama's meeting with Tibet's spiritual
leader, the Dalai Lama, for causing a recent deterioration in what he
called China's most important foreign relationship.

"These moves have violated China's territorial integrity," Mr. Wen
said. "The responsibility does not lie with the Chinese side but with
the United States." Mr. Wen said a good China-U.S. relationship "makes
both sides winners while a confrontational one makes both sides
losers."

Associated Press

China's Premier Wen Jiabao before leaving his annual news conference
following the closing session of the National People's Congress in
Beijing's Great Hall of the People, China on Sunday

.Mr. Wen went into detail about his personal role at the Copenhagen
climate talks late last year, showing flashes of emotion as he sought
to correct a widespread belief that he snubbed Mr. Obama by sending a
lower-ranking official to a meeting. "My conscience is clear despite
the slander of others," he said, quoting an ancient Chinese proverb.
Instead, he argued, it was China that felt insulted.

Mr. Wen's forthright comments reflect a new dynamic in what is
arguably the most important bilateral relationship in the world. As
the only major economy still growing strongly, and the largest
creditor to the U.S., China is behaving with new assertiveness.
Beijing has emerged from the global recession with a fresh confidence
about its state-led economy, which has delivered stimulus projects—
everything from high-speed railways to highways and bridges—with
remarkable efficiency. At the same time, it makes no secret of its
disdain for U.S. economic management, and is in no mood to be lectured
by Washington about how to support the world economy.

The Taiwan arms sales in January effectively froze relations between
the U.S. and China, and Mr. Wen's remarks made clear that a deep chill
still exists, though both sides appear anxious not to let the
situation spiral out of control.

The first question Mr. Wen fielded was on China's currency policies,
which have kept the yuan effectively pegged to the dollar since the
government halted the Chinese currency's gradual appreciation in
mid-2008. The U.S. and Europe, and increasingly China's Asian
neighbors, argue that this policy has kept the yuan seriously
undervalued and given China an unfair advantage in trade at a time
when many other economies are struggling.

"First of all, I do not think the renminbi is undervalued," Mr. Wen
said, using the Chinese currency's official name. "We are opposed to
countries pointing fingers at each other or taking strong measures to
force other countries to appreciate their currencies. To do this is
not beneficial to reform of the renminbi exchange-rate regime."

Mr. Wen didn't repeat the language used this month by central bank
Gov. Zhou Xiaochuan, who had said the yuan's current de facto peg to
the U.S. dollar is a "special" measure that will eventually end. But
Mr. Wen repeated previous statements that reforms to the currency
system will continue. While he didn't rule out the possibility that
the yuan could rise against the dollar, he argued that it doesn't need
to.

Mr. Obama, in a speech last week about his goal to double U.S. exports
over five years, urged China to move to a "market-oriented" exchange
rate. The U.S. Department of the Treasury in April also must make its
semiannual determination of whether to formally label China a
"currency manipulator."

"I can understand that some countries want to increase their share of
exports," Mr. Wen said, in an apparent reference to the Obama
administration's goal. "What I don't understand is the practice of
depreciating one's own currency and attempting to press other
countries to appreciate their own currencies solely for the purpose of
increasing one's own exports," Mr. Wen said. "This kind of practice I
think is a kind of trade protectionism."

The U.S. dollar, which fell during much of last year, has gained
against major currencies in recent months. Premier Wen has previously
taken a similarly uncompromising line on the currency issue. In
November, he disappointed European Union officials visiting China by
rejecting as "unfair" their complaints about the Chinese currency
while they maintained their own trade barriers. Earlier that month,
Mr. Obama was rebuffed on the currency issue by Chinese leaders during
his first visit to China.

Mr. Wen dodged a question about Google Inc.'s threat to leave China,
taking issue with the questioner, who suggested that the climate for
foreign investors was deteriorating. However, the premier promised to
spend more time reaching out to the foreign business community.

Mr. Wen defended his decision to send a relatively low-ranking
official to a meeting on the sidelines of the Copenhagen talks that
included Mr. Obama. At the time, U.S. officials had said Mr. Wen had
skipped the meeting as part of efforts to block progress towards a
binding agreement.

He said that at a banquet hosted by the Danish queen on Dec. 17, he
learned from an unnamed European leader of a meeting among a small
group of countries later that night. "Why was China not notified of
this meeting? So far no one has given us any explanation of this,and
it is still a mystery to me," he said.

His comments didn't directly address his own absence at a Dec. 18
morning meeting, which included Mr. Obama as well as U.K. Prime
Minister Gordon Brown. Deputy Foreign Minister He Yafei took part as
China's representative in that meeting, according to participants.

In a series of public comments in recent months, Mr. Wen has
repeatedly rejected pressure from China's trading partners to alter
exchange-rate policy. Their complaints have grown more vocal as the
gap widens between China's strong recovery and the still-weak growth
in most developed nations.

China is taking measures to promote imports and reduce its sizable
trade surplus, Mr. Wen said. He played down China's new status as the
world's largest merchandise exporter—it overtook Germany in 2009—,
noting that 60% of its exports are produced by foreign companies that
have invested in China. Limiting China's trade would hurt these
foreign companies, he said.

Mr. Wen also countered complaints over the currency by noting that
China is an important export market for countries including Germany,
the U.S., Japan and South Korea. China runs a sizable trade surplus,
meaning that it exports more overall than it imports.

Mr. Wen also mentioned another reason China pays close attention to
its exchange rate with the U.S. dollar: the nation's enormous foreign-
exchange reserves, most of which are believed to be held in U.S.
government bonds.

"Since the U.S. is the issuer of the main international currency, any
instability in its currency causes us great concern. Last year I said
I am worried, and this year I also say I am worried," Mr. Wen said.

He continued to take a cautious view on prospects for the world
economy, saying there is a risk of a "double dip" global recession
given continued risks in financial systems and high jobless rates in
many countries.

Known colloquially in China as "Grandpa Wen" and the "People's
Premier," 67-year-old Mr. Wen has cultivated an image as an
approachable everyman that is rare among China's top leadership. Asked
about his personal well-being by a Hong Kong reporter, he responded
with a touch of humor. "Even though I'm a person who basically doesn't
have holidays, I still like to exercise, whether it's taking a walk or
going for a swim. It helps me to relax so that I can maintain my
vigorous energy to deal with the weighty work," he said.

On relations with Taiwan, Mr. Wen reiterated China's willingness to
sacrifice some of China's interests in an economic cooperation pact
between the two sides, saying Taiwan and China are "brothers."

"Differences between brothers cannot sever their blood ties and I
believe that problems will eventually be solved," Mr. Wen said, citing
an ancient Chinese text. "Even though there are some small disputes,
we are still family."

—Ting-I Tsai and Sky Canaves contributed to this article.

http://online.wsj.com/article/SB10001424052748703457104575121213043099350.html?mod=googlenews_wsj#articleTabs%3Dcomments

http://online.wsj.com/article/SB10001424052748703457104575121213043099350.html?mod=googlenews_wsj

Google '99.9% Certain' to Close Chinese Search Engine: Report
By SAM GUSTIN
Posted 3:15 PM 03/13/10

Tech giant Google (GOOG) appears ready to make good on its threat to
shut its Chinese-language search engine, two months after challenging
China over Web censorship. In light of the Chinese government's
refusal to relax its Web filtering, which a top government official
reiterated Friday, Google is now "99.9%" certain" to shutter
Google.cn, according to the Financial Times.

Google's apparent readiness to close Google.cn comes one day after the
Chinese government issued Google a stern rebuke, calling the U.S. Web
titan "unfriendly and irresponsible," and indicating that it's
unwilling to soften its Web censorship policies. The actual closure
could take "some time to follow through with the plan as it seeks an
orderly closure and takes steps to protect local employees from
retaliation by the authorities," the FT reported.

"This is not a surprise," Ian Bremmer, president of the geopolitical
research firm Eurasia Group, told DailyFinance Saturday. "The Chinese
were never going to cave to what they saw as unilateral demands from
Google."

The latest developments suggest that the conflict between Google and
China, which has gripped the tech world and drawn the interest of key
U.S. and Chinese diplomatic and trade officials, is nearing a climax.
In January, Google declared its intention to stop censoring its
Google.cn after disclosing it was the victim of a massive, China-based
cyber-attack. U.S. officials have backed Google in the dispute.

China: U.S. Companies Must Follow Our Censorship Laws

After weeks of fitful negotiations, China forcefully reiterated its
position Friday that companies operating in China must follow national
laws. "I hope Google can respect Chinese rules and regulations," Li
Yizhong, Minister of Industry and Information Technology, said Friday.
"If you insist on taking this action that violates Chinese laws, I
repeat: You are unfriendly and irresponsible, and you yourself will
have to bear the consequences."

Google may very well leave China, but Bremmer says the bigger question
is what this means for U.S. firms doing business in China in the
future, given the country's information restrictions and a state-
dominated economy that controls the major industries.

"What Google said publicly, a great many U.S. corporations in the tech
sector are saying to U.S. government officials privately," Bremmer
said. "The competitive environment [in China] -- in a context without
an independent judiciary or clear rule of law -- is going to get much
more challenging."

Endgame: Sergey Brin's Moral Stand

Google's business operations in China constitute only about 2% of its
annual revenue of $23.2 billion, and the company is getting whipped by
Baidu.com, which controls 60% of the Chinese Web search market to
Google's 30%. This has led some pundits to suggest that Google doesn't
have a lot to lose by backing out -- but a lot to gain in terms of
moral capital and public goodwill for its seemingly principled stand.

But Google's threat to quit China could indeed have major financial
consequences for the company, as UBS analyst Brian Pitz recently
observed. China continues its rapid economic growth, and Internet
access is exploding there. "If Google were to exit China, we believe
this represents a significant lost growth opportunity in the long
term," Pitz said after Google's announcement. "China is the world's
largest Internet market with roughly 298 million users, with only 22%
of the population penetrated."

In truth, most business observers simply aren't used to major American
companies taking very public moral stands on human rights issues in
the face of the Red Giant. It's basically unprecedented, so jaundiced
pundits reflexively assume that Google must have an ulterior motive.
Like Apple CEO Steve Jobs is reported to have said, many observers
believe Google's "Don't be evil" motto is "bullshit."

For years, Google has chafed at China's Web filtering policies, which
force the search company to remove politically controversial material
-- like images of the Tiananmen Square massacre -- from its Chinese
language search engine. But for top Google executives, particularly co-
founder Sergey Brin, who as a child fled the Soviet Union for the
U.S., the China-based attack on human rights advocates was simply more
than they could tolerate.

Revelations that Chinese-based hackers had attacked Google's systems
in an effort to infiltrate the Gmail accounts of Chinese dissidents
and human rights workers were apparently the final straw. After years
of accepting Google CEO Eric Schmidt's argument that working with
China -- even under conditions of censorship -- would help open the
country, Brin finally put his foot down. (The Wall Street Journal has
more details on Brin's role in the Google-China dispute here.)

China Unicom Still Will Use Google's Android

Still, Li encouraged Google to keep Google.cn in the country, but
after Google officials reaffirmed their commitment to ending
censorship, that looks very unlikely. Even if Google does shut down
Google.cn, it will likely keep other aspects of its business
operations in China, including the closely watched development of its
Android smartphone operating system.

Both China Mobile, the world's largest wireless provider with over 500
million subscribers, and China Unicom, which boasts nearly 200 million
customers, are developing products based on Android. Both firms are
state-controlled.

"We recognize that Android is a mainstream system," Unicom Chairman
Chang Xiaobing told Reuters earlier this month. "We will definitely
use Google's Android in our mobile handsets."

http://www.dailyfinance.com/story/company-news/google-99-9-certain-to-close-chinese-search-engine-report/19397907/

China’s budding identity dilemma
Author: Gustaaf Geeraerts
14 March 2010 - Issue : 877

China’s weight in global affairs seems to be mounting by the day. Not
only is China about to become the second most important single economy
in the world, it recently also took over Germany as the world’s
leading exporting country. But China is not only growing economically.
Its military clout is equally on the rise and the People’s Republic
has now become the world’s second highest military spender. On these
accounts China is increasingly perceived as the only country emerging
both as a military and economic rival of the US and thus generating a
fundamental shift in the global distribution of power and influence.

Yet, as the leaders in Beijing keep on repeating, China still shows
many characteristics of a developing country and faces many weaknesses
and challenges. Yang Jiechi, Minister of Foreign Affairs of the
People’s Republic of China, recently pointed out: “China’s per capita
GDP has just exceeded 3,000 US dollars, ranking the 104th in the
world. Uneven development remains a prominent problem. Big cities like
Beijing and Shanghai can in no way represent the whole of China, and
many rural and remote areas are still very poor. One hundred and
thirty-five million people are living on less than one dollar a day
and 10 million have no access to electricity”. With its legitimacy all
the time more deriving from performance, the current regime can only
maintain its position if it manages to resolve the many problems China
faces within a reasonable timeframe.
On closer examination, China has a double identity. On the one hand,
it considers itself a developing country that was wronged by the
imperialists and is therefore entitled to a great degree of
consideration and support. On the other hand, it sees itself as an
emerging power that is well on its way to restoring the glory of the
ancient dynasties and wants to be treated on an equal footing and
warrants esteem. That is why Beijing is so sensitive to being
respected and be treated as a peer. At the same time however, the
Chinese still count on consideration from the other side, some
exceptional treatment. China although growing fast is at a different
stage of development and has to overcome a great number of internal
problems as a result of which it cannot as yet take up the full scale
of its international responsibilities.

Increasingly however, Beijing is facing an ever-harder quandary
between its identity as a developing country and its identity as an
emerging power. As China’s economic success continues the developed
countries in particular expect it to take up greater responsibilities
in supporting a sustainable global economy. As a result Beijing is
pressured to strike a precarious balance between domestic economic
development, which it sees as the most pressing challenge, and the
evolution of China into a responsible great power, which it sees as
the longer-term ambition.
While at present there is a marked propensity in Beijing’s foreign
policy towards the notion of ‘China as a responsible global power’,
there are some notable exceptions to this tendency. A prime example of
this is China’s hunger for oil and strategic resources. Sustainable
economic development is undoubtedly the final goal, but it cannot be
realised without the necessary energy and raw materials supplies.
Should these not be sufficient, the nation’s wholesale development
will be compromised, and consequently the outright survival of the
regime would be at stake. This is indeed a tight corner to be in. It
is very tempting to put one’s own pressing interests first whenever
possible in such circumstances. Those are the moments when sovereignty
and the immediate national self-interest get to play first fiddle.

And that in turn is exactly why China’s international behaviour
seemingly comes across as erratic. It dutifully adapts to whichever
circumstances it finds itself in so as to safeguard the interests of
the Chinese heartland. Multilateral negotiations about regional
stability and the further direction of global governance are, after
all, very different from bilateral talks aimed at securing highly
desired economic benefits or guaranteeing access to crucial strategic
raw materials. In the case of the former, Beijing has time on its side
and the rhetoric of peaceful evolution, civilized renaissance and a
harmonious world comes in handy; in the case of the latter,
negotiations more often than not come down to serving the immediate
national interest and driving home the best bargain.

Gustaaf Geeraerts, director of the Brussels Institute of Contemporary
China Studies (BICCS)

http://www.neurope.eu/articles/99634.php

A word on China, ‘no-el’ and Harbour Centre
Opinion
Written by J.A. de la Cruz / Coast-to-Coast
Monday, 15 March 2010 21:39

I am writing this column with every good wish that our boxing icon
Manny “Pacman” Pacquiao will survive Joshua Clottey’s dreaded head
butts and knock out the Ghanaian toward the middle of the fight.

Not the first two or three rounds, please, so that those who got
hooked on those pricey tickets—whether at the $1.4-billion Dallas
Cowboys stadium or on pay-per-view—or us, lowly mortals, on delayed
telecast with all those political ads, will at least get some bang for
their money (and time). I have yet to hear the shrieks from those
gathered around but pretty soon it should be tension time for most.
Meantime, please enjoy the snacks at some hotel, cinema or sports
lounge, and for those who are taking a peep at this historic fight in
the middle of Sunday work, do take a break. It is good for the
health.

A word on China

Which is what we also recommend to those naysayers and China cynics
who have been hogging the headlines lately predicting the bursting of
the “China bubble.” One such cynic, a known fund manager, has actually
put up a fund meant solely to “short” China and encouraged investors
to get into the “gravy train before all seats gets taken.” Noting that
at the start of the 2008 global financial crisis, China has injected
billions of dollars into the economy as part of its almost a trillion-
dollar stimulus package to stave off the ill effects of that
devastation, the fund manager pontificated that those dollars were
actually misallocated, misused and even siphoned off to destinations
offshore and did nothing to improve China’s economy and
competitiveness. Citing bits and pieces of “work slowdown” and even
complaints from a growing army of the urban “underclass” (unemployed,
underemployed and struggling) who have flocked to such centers as
Beijing and Shanghai in search of a “better life,” the rise of
uninhabited “luxury condos and communities” using cheap money from
Chinese banks and, yes, overexpansion of key industries and industrial
groups in China’s heartland, the manager proceeded to conclude that
this was an unsustainable “bubble” which is just waiting to burst.
Well, the guy may have taken resiliency out of his vocabulary and
relied too heavily on anecdotal renditions of the problems assaulting
China’s road to growth, for as things stand China is being hailed even
by some of its fiercest critics as having had the best results among
the Group of 20 countries in the use of its “stimulus package.”

True, a part of that stimulus package may have gone to some “un-
economic” projects like that reported multimillion-dollar “park” in
the middle of nowhere in some Chinese province. That is certainly a
waste, an investment likely to go down the drain. Then, there are
reports of real-estate “bubbles” cropping up as property prices reach
astronomic heights due to “cheap money” being spread around, thanks to
Chinese banks’ “reckless” lending. Of course, we have heard of high-
profile corporate fights such as the one which China’s biggest metals
and mining company had with Rio Tinto, which tended to support the
cynical view that China was bullying its way around and will likely be
an “irresponsible giant” if the world allows it. In fact, we will
never run out with stories about the “Chinese rush to perdition” and
its leaders’ inability to tame the “beast,” so to speak.

Getting back on track

Well, the opposite may well be true. As China ends the annual meeting
of its legislature—the National People’s Congress—the indications are
such that, indeed, China is first among the world’s leading economies
in getting back on track without as much as the ills and injuries
conjured up by the critics. Despite badgering from almost all sectors,
including most of the Group of 20 countries, for it to revalue its
currency to improve its trading position and ensure continued access
to the global marketplace, and fears of inflationary “bubbles,” China
has cautiously staved off the rush and steered its economy into a
sustainable future. Said Andy Rothman of brokerage firm CLSA: “Beijing
has continued to successfully use incremental tightening measures to
slow the pace of economic growth back to a more sustainable level from
last year’s hyperstimulated rate.” CitiGroup economist Shen Minggao
shared the same view, noting that “last year’s fast credit growth and
the export rebound have tempered the impact of policy changes.”

A key indicator of the sustainability of China’s approach to the 2008
financial crisis may not even be those which are now transforming the
mainland’s economic landscape into what some observers see as the
“globally competitive machine” which may eventually catapult the
world’s third-largest economy into No.2, exceeding a lethargic Japan
sooner than the experts’ predict in the growth in the luxury-property
market in, of all places, Taiwan. That observation may be off to some,
but to many keen investors, this new development may just re-ignite
the rush to Chinese (and of course Taiwanese) stocks, not a retreat as
the “shorties” would like people to do. Here’s what the analysts say
on this expected rebound: “Like most real-estate markets worldwide,
Taiwan’s took a beating in the global recession. But now a strong
recovery, tax cuts, stable political relations with China and
expectations of a flood of mainland Chinese investments have combined
to drive prices to record highs.” Indeed, all eyes are keenly awaiting
the firming up of the Economic Cooperation Framework Agreement between
the mainland and Taiwan which is seen as the foundation for a longer-
term and ultimately mutually beneficial arrangement between the two
export powers in this part of the world. Already, tens of thousands of
Taiwanese firms have put up manufacturing plants in the mainland to
the benefit of both. This fresh surge in luxury housing should be
proof positive of additional breakthroughs in the years ahead. Just
one caveat. With this firmer interlink comes new concerns from the
other countries in the region of the diversion of foreign investments
from their territories into the two interlinked power-
houses. This is one challenge which China should seriously look into,
quite apart from those being presented by the rush of rural Chinese
into the urban centers.

And now on ‘no-el’ and

Harbour Centre

“No-el” is not the old line about a “no-election” scenario this coming
May, partner. Although that may well happen if our power plants conk
out due to the prolonged El Niño and we don’t get to add more
generating capacity in all the islands, especially Mindanao. Yes, sir.
If we go by the latest reports, generating capacity in Luzon may soon
be inadequate to the point that rotating brownouts may well come into
play just before the elections. We are told that Magat dam in Isabela
is about to be closed due to a rapid decline in the water level.
Pretty soon, Ambuklao, Binga and San Roque dams in Northern Luzon may
follow suit, which will immediately get us into severe shortage as
these three provide more than 750 megaWatts of power into the Luzon
grid. Then, if the much-needed rains do not fall anytime soon, even
Angat which generates 240 megaWatts may well be taken off the grid as
well. That will be near a disaster situation in Luzon already, if and
when that happens. Is the energy department doing anything about it?
Well, we are informed that meetings between the department and the
private sector have been taking place endlessly over the past few
days, and if talks are to be translated into energy, we may well have
what it takes to avert such a disaster from happening. But that is
like dreaming the crisis away if you ask me. In any event, we are not
remiss in reminding one and all to prepare and to shout out loud that
our concerns are real, not imaginary. Unlike the carping crowd, we do
believe we are in for a long, hot summer. Prudence dictates we prepare—
even overprepare if need be—if only to ensure that we don’t get
blackouts at the worst of times.

Speaking of “no-el,” Agusan del Sur Rep. Ompong Plaza has just
suggested that we actually delay the elections—well, not the one this
May but those for the barangays in October—to save money (close to P3
billion is expected to be spent by the Commission on Elections for
this exercise) and give time for the poll body to close out on the all-
too-important May polls and prepare for the next undertakings. That
money saved, Plaza advises, can then be used for our drought-stricken
farmlands and also to augment our quest for more and better energy
sources. Actually, it may not be a bad idea to postpone the barangay
elections, if only to spare us from even more heated fights, this time
at the grassroots all across the land. It will also lighten the load,
so to speak, on these barangays which, this early, are already heavily
engaged with their respective candidates in the May elections. It will
ease the tension and save money. Not a bad operation, if we may say
so.

And what about Harbour Centre? Well, this multibillion-peso port-cum-
real-estate operation is back in the news as criticisms mount over the
rush, as they now call it, by which its original funder—Home Guaranty
Corp. (HGC)—pushed the sale of shares and stocks at bargain prices. We
are informed that shares worth at least P700 million were sold at P300
million for no reason at all. Worse, we are told that the proceeds of
this “fire sale” did not even get to be returned to the original
owners, i.e., the overseas workers fund, Overseas Workers Welfare
Administration and those other pension and state-guaranteed buyers in
good faith way, way back but diverted to some “black hole.” If these
reports are true and we urge the Office of the President, Housing and
Urban Development Coordinating Council under Vice President Noli de
Castro and even the Ombudsman to take a serious look at this
transaction, then heads have to roll. We cannot afford to have these
kinds of “fire sales” conducted at the end of terms of people to the
disadvantage of government and the detriment of our people. Di ba
lang?

http://businessmirror.com.ph/index.php?option=com_content&view=article&id=22986:a-word-on-china-no-el-and-harbour-centre&catid=28:opinion&Itemid=64

Lanka should learn from Japan’s experiences By Mario AndreeSri Lanka
has the potential in leading the global economy, said Japanese
AmbassadorKunio Takahshi.
"Proper policies, methods and systems should be adopted, and
professionals should lead the way in developing the country. The
global economy is driven by China and India, and these two countries
are expected to lead the world out of the global financial crisis,"
Takashi said.

He made these comments at the inauguration ceremony of the Auditorium
and Media Room of the Colombo University.

"The early prediction by many economists in the late 1980s was that
Japan would lead the global economy with its unique enterprise
systems, but it failed with the crisis ruining the Japanese economy.

"Sri Lanka as a developing country should learn from Japan and other
developed nations," Takahshi said.

He stressed that Sri Lanka should take advantage of the lessons
learned from Japanese development. This would assist Sri Lanka in
strengthening its national economy.

"Creativity is needed to develop the economy and Sri Lanka has great
potential together with learning and developing the experiences of
other countries," he said.

"Sri Lankan development goals would remain only a potential for many
years to come if the country fails adopt more creative methods of
marketing. Enterprises should understand and develop their businesses
for the long term."

"Though risks are minimum in the short term, development would be slow
as long as potential remains uncovered" he added.

Colombo University Vice-Chancellor Kshanika Hirimburegama said that
there is great potential for the educational sector of Sri Lanka to
grow.

"Professionals in the country should assist in the development
activities by developing methods and systems more suitable to the
country. Graduates and post graduates should focus on developing the
country by developing enterprises in the SME sector," she said.

http://www.island.lk/2010/03/15/business3.html

MARCH 14, 2010.For Now, U.S. Stocks May Be the Best Bargains
By TOM LAURICELLA

Problems abroad -- from the meltdown in Greece to a Japanese economy
that seems stuck in permanent recession -- are making U.S. stocks look
better and better, at least in the short run.

In recent months the massive rally that lifted the Dow Jones
Industrial Average 60% off bear-market lows hit one year ago has
largely stalled out. The widely watched market indicator has been
stuck in a relatively narrow range since November.

Lisa Haney
.Last week, the Dow rose just 0.6% and is up 1.9% for the year.

At the same time, the U.S. economy has continued to improve, albeit
unevenly. Corporate earnings, a key driver of stock returns, are
rebounding faster than expected. And stock prices, when compared to
those earnings, are on the cheaper side of historical levels.

Investors, however, have been favoring non-U.S. stocks in big
developed economies and emerging markets, such as China.

"The U.S. is a pretty popular place to hate in most global
portfolios," says Robert Doll, chief investment officer of global
equities at BlackRock. However, "if economic growth [in the U.S.] is
going to be stronger, then earnings growth is going to be stronger and
that means the equity market is going to be stronger."

Bad News Abroad
Even as the U.S. climbs out of recession, there's been a drumbeat of
negative news abroad, such as the debt crisis in Europe. In emerging
markets, where many economies have been growing much faster than
developed markets, some slowing of their expansion could lie ahead as
central banks raise interest rates to battle inflation. Many of those
markets also are trading at pricey levels, making them more vulnerable
to selloffs.

For many investors, it's understandably tough to feel good about
investing in U.S. stocks. After all, the job market remains bleak,
home prices are still down sharply, and there's considerable
uncertainty about events in Washington.

But most economists believe the U.S. economy is slowly mending at a
pace faster than other major developed economies. "We've done a better
job on growth and will continue to do better on growth relative to
Western Europe and Japan," says Bruce Kasman, head of economic
research for J.P. Morgan Chase.

U.S. gross domestic product should rise by 3.4% this year, and 3.1% in
2011, according to J.P. Morgan's estimates. Meanwhile, Japan's economy
is expected to grow 2.3% this year and 1.9% next year.

The developed economies in Europe will grow by just 1.6% this year and
2.1% next year. Even Germany, whose economy is often seen as
relatively healthy, is forecast by J.P. Morgan to only expand at a
1.7% rate.

U.S. Deficit Could Be Worse

Lisa Haney
.Many investors worry about the massive U.S. budget deficit. While
it's an issue most analysts believe needs addressing, many countries
in Europe, such as France and the U.K., have similar, if not more
serious, deficit woes. "It's hard to argue that the U.S. is in the
worst shape," says J.P. Morgan's Mr. Kasman.

Perhaps the most compelling argument in favor of U.S. stocks is
earnings growth. Thanks, in part, to the same aggressive cost cutting
that has crippled the job market, 72% of companies in the Standard &
Poor's 500-stock index beat earnings forecasts for the fourth quarter,
according to Thomson Reuters. That's the third-highest percentage
since the firm started tracking that statistic in 1994.

When looking at valuations, U.S. stocks look good compared with many
other markets, especially emerging economies. Based on the last 12
months of earnings, the S&P 500 is at a price/earnings ratio of 16.8,
below it's long-term average of 18.3, according to data compiled by
Barclays Capital. In contrast, stocks in the economically struggling
U.K. are trading at a P/E ratio of 16.6, above their long-term average
of 16.

China, India, South Korea and Brazil are all trading well above
historical average valuations.

"In the last few months, we've had less success in finding undervalued
stocks in the emerging markets because they're run so strongly," says
Gary Motyl, chief investment officer at Templeton Global Equity Group.
"We like the long-term fundamentals...but some of that good news is
baked into the stock prices."

It's a tougher call for European stocks, where valuations are
generally slightly lower than U.S. stocks. However, Horacio Valeiras,
chief investment officer at Allianz Global Investors, says analysts
are revising earnings estimates higher at a stronger pace in the U.S.
than in Europe.

Meanwhile, economic growth is potentially leveling off in Asia.
Against that backdrop, "it has led us to move money from outside the
U.S. back in," says Mr. Valeiras.

Many analysts say that playing a revival in U.S. stocks should center
around higher-quality, large companies, such as those in the S&P 500.
That can be accomplished either through an index fund or actively
managed portfolio.

Many of the biggest, blue-chip stocks didn't rally as much as others
during 2009 and their valuations are more likely to be reasonable. In
addition, these companies tend to have substantial non-U.S.
businesses, which provides continued exposure to emerging markets and
a hedge against economic activity picking up elsewhere.

Plenty of Uncertainty
Of course, there remain many wild cards in the U.S.

The economy could tip back into recession or there could be an
unfriendly surprise from Washington on the legislative or regulatory
front. U.S. stocks could take a hit whenever the Federal Reserve
decides to raise interest rates. But Barry Knapp, head of U.S. equity
strategy at Barclays, expects many of these clouds to clear by the
second half of the year.

Should there be a selloff in response to the Fed readying a rate
increase, he says strong earnings could make U.S. stock valuations
"pretty compelling." And as uncertainty on health care and financial
regulation gets cleared up, "the forward outlook is pretty good."

Write to Tom Lauricella at tom.lau...@wsj.com

http://online.wsj.com/article/SB126851573867961861.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsForth#articleTabs%3Dcomments

http://online.wsj.com/article/SB126851573867961861.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsForth

The Four Stages Of The Prospective Dollar Bull Market
By: Money and Markets Saturday, March 13, 2010 1:29 PM

Since last November, the dollar has climbed steadily against a basket
of currencies — most notably against the euro. And based on my
analysis, I think it's just the early stages of this trend.

In fact, for many of the reasons I've discussed in past Money and
Markets columns, the weight of evidence suggests that we've likely
seen the bottom in the dollar, with a multi-year bull market ahead.

That's a high level view. But how are things shaping up on a shorter
term outlook for the buck?

Let's take a look at the four stages of this prospective dollar bull
market and the immediate catalysts that should underpin its continued
strength …

Stage 1:
Marking the Bottom

My analysis of the seven-year cycles in the dollar index suggests a
cyclical bottom was marked when the dollar rallied sharply off of its
all-time lows in 2008 driven by the uncertainty surrounding a growing
financial and economic crisis.

Back then, capital fled all areas of the world in search of safety.
And the dollar represented a safe parking place.

Stage 2:
Retracement Period

Then we had the deep retracement of 2009. The global economy was
showing signs of stabilization that encouraged global investors to
start dipping their toes back in the water … i.e. taking risk again.
That's when capital was reversed out of the dollar in search of higher
risk, higher return assets.

And just when sentiment was about as negative toward the dollar as it
could possibly get, we were introduced to the first sign of collateral
damage from the financial/economic crisis and the unprecedented
government responses: Crumbling government finances.

The first wobbling sovereign nation, Dubai, quickly splashed water on
the face of an increasingly optimistic global investment community.
All of the sudden the theories of a V-shaped recovery became fractured
by the realization that the widespread economic crisis could run
deeper — a scenario that many had conveniently and complacently
dismissed.

Stage 3:
More Fear; More Risk Aversion

The dollar has benefited from weakness in the pound.

In recent months much of the dollar strength has been driven by fears
of a sovereign debt crisis. And much of that strength has come at the
expense of the euro and the British pound.

We've seen the dominos of a potential sovereign debt crisis line up,
as I detailed in last week's column. The tremors that started in
Dubai, quickly turned scrutiny toward Greece and the other weak spots
in the euro zone (Portugal, Italy, Ireland and Spain). And it appears
increasingly likely to soon weigh on the UK economy and the British
pound.

As we know, currencies don't operate in a vacuum. They're valued
relative to the value of another currency. So, given the recent
concerns about the future of the euro and the increasing spotlight on
the next sovereign debt domino, the UK, the dollar is benefiting
primarily because of the weakness of other major currencies.

And there's another developing situation that should offer more fuel
for the dollar …

Stage 4:
A Falling Yen

The euro, the British pound and the Japanese yen make up 83 percent of
the dollar index, the often quoted proxy for the economic firepower of
the U.S. dollar on a global level.

Japan's deflation has taken a toll on the yen.

While the pound and the euro have been under assault in recent weeks,
the yen has been pushed and pulled in a tug of war: Strengthening as
capital flows out of risky euro/yen and pound/yen positions, and
weakening on the basis of fundamental divergences between the
recovering U.S. economy and the deflation-burdened Japanese economy.

But the fundamental evidence has been clearly favoring the dollar
relative to the yen for some time. What's been lacking is a catalyst
to send it higher.

Well, over the past two weeks we've finally gotten a clear catalyst to
sell the yen against the dollar.

Catalyst for Yen Weakness

Back in August 2009, it became cheaper to borrow dollars (compared to
borrowing yen) for the first time in sixteen years. In the chart
below, you can see when the short-term interbank borrowing rate for
dollars (Dollar Libor, the blue line) crossed below the equivalent
interbank borrowing rate for yen (Yen Libor, the red line).

Source: Bloomberg

What looks like a minor rate differential can have a major impact on
market perception. Since that cross occurred, the dollar lost as much
as 13 percent against the yen as global investors began favoring
dollars, as opposed to yen, to fund carry trades … i.e. selling
dollars to fund the purchase of high yielding currencies.

But as of last week, this differential has crossed back, once again
making the Japanese yen the cheapest currency in the world to borrow.
And based on the diverging policy paths of the U.S. and Japanese
central banks, this differential should continue to widen in favor of
U.S. rates and dollar strength relative to the yen.

So given the ongoing crisis surrounding the euro, the vulnerability of
the British pound from a continued spread of sovereign debt concerns
AND the catalyst for a weakening yen, I'm expecting the dollar to
continue its upward path against major currencies both in the short-
term and longer-term.

Regards,

Bryan

This investment news is brought to you by Money and Markets. Money and
Markets is a free daily investment newsletter from Martin D. Weiss and
Weiss Research analysts offering the latest investing news and
financial insights for the stock market, including tips and advice on
investing in gold, energy and oil. Dr. Weiss is a leader in the fields
of investing, interest rates, financial safety and economic
forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

http://www.istockanalyst.com/article/viewarticle/articleid/3945235

The Associated Press March 12, 2010, 5:37AM ET
Japan's Nikkei index hits seven-week high
TOKYO

Japanese stocks advanced Friday, with the benchmark Nikkei index
hitting a seven-week high on hopes for further monetary easing by the
central bank.

The Nikkei 225 stock average rose 86.31 points, or 0.8 percent, to
10,751.26 -- its best finish since Jan. 21 The broader Topix index
added 0.6 percent to 936.38.

Bolstering sentiment was speculation about the Bank of Japan's policy
board meeting next week. Faced with mounting pressure to fight
deflation, the central bank is expected to ease policy, possibly by
expanding a low-interest loan program it introduced in December,
analysts and media reports said.

"The BOJ appears not to be convinced of the solidness of the economic
recovery in the next several months, on the heel of ongoing
uncertainties of the global economy," said Masaaki Kanno, chief
economist at JPMorgan Securities Japan.

Financial names benefited from the broad-based gains.

Sumitomo Mitsui Financial Group Inc. rose 1.7 percent to 2,930 yen,
and Mitsubishi UFJ Financial Group Inc. closed up 1.3 percent at 467
yen. Nomura Holdings Inc., Japan's biggest securities house, rose 1.7
percent to 668 yen.

Automakers also advanced as the dollar held up against the yen. Nissan
Motor Co. jumped 2.4 percent to 764 yen, while Honda Motor Co. rose
0.9 percent to 3,300 yen, and Toyota Motor Corp. finisher 0.4 percent
higher at 3,475 yen.

In currencies, the dollar fell to 90.29 yen from 90.50 yen late
Thursday. The euro rose to $1.3718 from $1.3678.

http://www.businessweek.com/ap/financialnews/D9ED1IPO0.htm

12 March 2010 - 13H09

Dollar mixed before US data

Bundles of one dollar bills pictured at the Bureau of Engraving and
Printing in Washington, DC. The dollar traded mixed on Friday before
the publication of official US economic data, while the yen was also
in focus after Japan's leader called for "firm steps" against the
currency's recent rise. AFP - The dollar traded mixed on Friday before
the publication of official US economic data, while the yen was also
in focus after Japan's leader called for "firm steps" against the
currency's recent rise.

In late morning deals here, the European single currency rose to
1.3778 dollars from 1.3678 dollars late in New York on Thursday.

Against the Japanese currency, the dollar fell to 90.36 yen from 90.48
yen on Thursday.

Market were braced for February US retail sales data due Friday, a key
gauge of consumer sentiment and the health of the world's biggest
economy.

While the outcome will be clouded by the effects of heavy snowstorms
during the month, "the market is likely to brush off a surprisingly
weak reading by attributing it to one-off weather factors", Barclays
Capital said in a note.

Lower auto and gasoline sales are also expected to have curtailed the
headline figure.

The data will come one day after markets digested a fall in jobless

claims as a positive sign for the US labour market, even if it was
smaller than expected, dealers said.

Ahead of Friday's US numbers, traders digested news of strong eurozone
industrial output data, which helped to support the euro.

Factory output across continental Europe's core euro currency zone
surged ahead in January, rising by 1.7 percent compared to output in
the previous month.

Official statistics released by the European Union on Friday showed
that industrial production in the 16 countries which share the euro
was also up by 1.4 percent compared to 12 months earlier.

The respective figures for the full 27-nation bloc, which also
includes eastern industrial powerhouse Poland, gave a 1.8-percent
monthly rise and a 1.5 percent annual fall.

"A much stronger than expected January industrial production report
from the eurozone injected enthusiasm into the euro and European stock
markets this morning," said Jane Foley, an analyst for online trading
group Forex.com.

Elsewhere on Friday, markets reacted to rare remarks by Japanese Prime
Minister Yukio Hatoyama who called for "firm steps" against the yen's
recent rise, which is hurting Japan's exporters.

Hatoyama told a morning parliamentary session that the yen had risen
despite "the fact that Japan's economy and industries aren't
necessarily strong".

"I think we need to take firm steps against such yen strength," he
said, adding that there is a need to "politically cooperate on the
world stage".

The prime minister rarely steps forward to comment on foreign
exchange, and the move seemed to be an about-face from his position in
January that the government should not in principle discuss currency
movements.

In London on Friday, the euro was changing hands at 1.3778 dollars
against 1.3678 dollars on Thursday, at 124.43 yen (123.77), 0.9084
pounds (0.9080) and 1.4593 Swiss francs (1.4614).

The dollar stood at 90.36 yen (90.48) and 1.0598 Swiss francs
(1.0682).

The pound was at 1.5163 dollars (1.5058).

On the London Bullion Market, the price of gold climbed to 1,117.68
dollars an ounce from 1,104 dollars an ounce on Thursday.

http://www.france24.com/en/20100312-dollar-mixed-before-us-data

Bloomberg

Krugman Says China Yuan Policy Depresses Global Economic Growth
March 12, 2010, 1:09 PM EST
By Rebecca Christie

March 12 (Bloomberg) -- Nobel Prize-winning economist Paul Krugman
said global economic growth would be about 1.5 percentage points
higher if China stopped restraining the value of its currency and
running trade surpluses.

Krugman said China’s currency policy has a “depressing effect” on
economic growth in the U.S., Europe and Japan, as measured by gross
domestic product. If China’s currency, the yuan, were not undervalued,
it would have a “significant” impact on the global recovery, he said.

“If we could get some change in China’s currency policy, it would help
the world,” Krugman said today at an Economic Policy Institute event
in Washington.

The U.S. has refrained from calling China a currency manipulator,
while also criticizing its lack of flexibility in foreign exchange
policy. The Chinese central bank has kept the yuan at about 6.8 per
dollar since July 2008, as part of stimulus efforts to help China
weather the global recession.

The International Monetary Fund predicted in January the world economy
will expand 3.9 percent this year after a contraction of 0.8 percent
last year. China’s economy was forecast to grow 10 percent this year
and 9.7 percent next, the IMF said.

Krugman said the world economy wouldn’t be hurt, and could benefit, if
China were to sell off a large portion of its dollar-denominated
assets. He said that if China were to sell all of its U.S.
investments, it would help the economy by acting as a form of
quantitative easing and fighting a “liquidity trap” that has recently
been affecting the U.S. economy.

China’s Response

“We should not be afraid of what the Chinese might do if we pressure
them to stop this currency manipulation,” Krugman said.

At the end of 2009, China was the top foreign investor U.S. government
debt, with holdings of $898.4 billion in Treasury securities.

Krugman said the U.S. may need to get more aggressive in its
negotiations with China, perhaps by treating the exchange- rate issue
as a countervailing duty or other export subsidy.

“Without a credible threat, we’re not going to get anywhere,” he said.
“The chance that we would trigger a trade war is very small and it’s
hard to see any alternative.”

The U.S. Treasury Department is due to issue its semiannual report on
foreign exchange markets next month.

--Editors: Brendan Murray, Paul Badertscher

To contact the reporter on this story: Rebecca Christie in Washington
at rchri...@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz
at cwel...@bloomberg.net

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Currencies
March 12, 2010, 3:46 p.m. EST

NEW YORK (MarketWatch) -- The U.S. dollar declined versus the euro on

Friday and was headed toward a sizable weekly drop versus major
counterparts after better-than-expected retail-sales data and a
surprise decline in consumer confidence added up to a better boost to
U.S. equities than the dollar.

The euro also gained support from strong economic data in Europe and
more confidence that Greece will recover.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 79.82, +0.06,
+0.07%) , which measures the U.S. unit against a trade-weighted basket

of six major currencies, traded at 79.830, down from 80.542 in late
North American trading on Thursday.

The index is headed for its biggest weekly drop since November, from
80.432 last Friday.

The euro rose to $1.3760, paring an earlier gain though still above
$1.3680 late Thursday. The shared currency is headed for its highest
weekly close in seven weeks.

Greece on the brinkAs Greece embarks on deep cuts to appease a whip-
cracking euro zone, workers in its famously bloated and inefficient

Despite ongoing strikes in Greece, ideas that the Greek government's

austerity measures and vague commitments by European leaders to
provide support for Athens have soothed worries over the country's
ability to meet its debt obligations, said Michael Hewson, analyst at
CMC Markets.

Canada, Asia news

The Japanese yen initially lost ground in Asian hours after Japanese
Prime Minister Yukio Hatoyama told parliament the yen was too strong.

Also Friday, a report in Japanese business daily Nikkei said the Bank
of Japan's meeting next week may focus on a proposal to increase
lending. See full story on BOJ easing report.

Deborah Levine is a MarketWatch reporter, based in New York.

William L. Watts is a reporter for MarketWatch in London.

http://www.marketwatch.com/story/dollar-rises-vs-yen-on-hatoyama-comments-2010-03-12?dist=beforebell

Mission far from accomplished
Jeremy Gaunt, European Investment Correspondent
LONDON
Fri Mar 12, 2010 10:56am EST

An investor uses a pair of binoculars as he looks at an electronic
board with stock information at the Iraq Stock Exchange in Baghdad
March 10, 2010.
Credit: Reuters/Mohammed Ameen
LONDON (Reuters) - Another week, another set of central bank meetings
and more to digest for investors on monetary policy and the withdrawal
of crisis liquidity.

The U.S. Federal Reserve and Bank of Japan both meet in the coming
week, but far from unwinding the easy money policies embedded over the
past few years to ignite economic growth both are likely to admit
implicitly that the job is far from done.

That in itself should give investors pause for thought.

Does the extension of loose money allow for current investment
patterns to continue, with money pouring out of cash into higher-
yielding assets?

Or does it mean, as some are beginning to believe, that markets have
been floating on artificial liquidity and that the underlying global
economy is not in true recovery mode after all?

Wednesday's Fed meeting, for example, is not only seen as holding
interest rates near zero, it is also seen repeating a vow to have an
"extended period" of "exceptionally low" rates.

It is likely to stick to its plan to end purchases of around $1.7
trillion in assets. But it could well leave the door open for a
renewal of purchases at a later date should economic expansion fall
back.

The Bank of Japan, meanwhile, is under pressure to loosen policy at
its meeting on Tuesday and Wednesday, most likely in the form of
increasing funds offered under its lending operation.

Japan's economy grew less than initially estimated in the fourth
quarter and a broad gauge of price trends posted the biggest negative
reading on record.

So while there may be expressions of optimism from policymakers that
the global economic recovery is taking shape, there is little sign
that they reckon it is anything like fully formed.

BEARS COME OUT TO PLAY

The fragility of the economic recovery has divided investors, with
many mainstream firms persuaded that factors are in place to allow for
gains from riskier assets such as equities to continue, albeit
modestly.

Eric Siegloff, head of ING Investment Management's strategy and
tactical asset allocation group, said in a note, for example, that his
portfolios were overweight equities and underweight fixed income.

"Macro supports are clear from still accommodative policy settings,
improved financial conditions and the inventory cycle," he said.

But more bearish noises have been heard, some even suggesting that
there could be a reversal to lows experienced a year ago in March
2009.

Once such is Colin McLean, managing director of alternative investment
house SVM Management.

"Rallies within bear markets can be quite large and quite sharp. The
best indicator is from financials.... They're still a concern," he
told a group of Reuters journalists recently

A similar picture can also be drawn from some technicals. Peter
Beuttell, director of advisers MTS Research, follows Elliott Wave
theory, which tracks patterns on markets to glean their next
direction.

"We could be approaching a junction," he said. "Markets are about to
roll over in the next few months."

ABC - ANYTHING BUT CASH

Whether this gloomy scenario comes to pass remains to be seen,
presumably depending on economic data showing that the recovery has
not, in fact, taken hold.

But for the moment, at least, investment patterns are reflecting a
general environment of restrained growth.

MSCI's all-country world stock index -- up nearly 78 percent from its
year-ago low -- was heading toward its fourth week of gains out of the
past five and is now in positive territory for 2010.

Fund flows, meanwhile, show ultra-low interest rates are continuing to
drive money out of cash and into other assets. EPFR Global says a net
$194.8 billion has come out of money market funds so far this year.

Bond of various risk levels have been among the beneficiaries.

During the week ending March 10, U.S. and global bond funds extended
inflow streaks to 62 and 47 straight weeks, respectively. High yield
bond funds took in more than $1 billion and emerging market bond funds
moved beyond $5 billion for the year to date with their biggest weekly
inflow in over a decade.

Flows into emerging market equities hit an eight-week high.

European stocks, still wobbling over the sovereign debt crisis in
Greece and potentially other countries, were the only major developed
market category to see net outflows.

(Editing by John Stonestreet)

http://www.reuters.com/article/idUSTRE62B2LR20100312

WRAPUP 1-Pressure mounts on BOJ for policy loosening next week
Fri Mar 12, 2010 2:33am EST

* Pressure mounts on BOJ to ease policy next week

Currencies

* PM, finance minister say ready to act if yen moves sharp

* But they emphasise markets should set FX rates

* BOJ to double 3-mth funding in policy review - report

* Yen may be real target of BOJ easing - analysts

By Leika Kihara

TOKYO, March 12 (Reuters) - Japan's prime minister said the government
and the Bank of Japan should work together to beat deflation as he
fended off mounting political pressure for action on the economy and
the yen, raising expectations that the central bank will ease monetary
policy next week.

The prime minister, finance minister and central bank governor were
grilled by lawmakers on Friday on what they intend to do to defeat
deflation and prevent yen strength from harming an economy struggling
to recover from the global downturn.

Although the economy is growing slowly, weak domestic demand is
contributing to deflation, which many policymakers fear could push
Japan back into a damaging downturn ahead of upper house elections
expected in July.

The yen rose last week to a three-month high against the dollar and
speculators are gearing up for a yen rally, raising concerns that
exports could take a hit and deflation deepen.

Both Prime Minister Yukio Hatoyama and Finance Minister Naoto Kan said
the government was ready to act if the yen moved excessively.

But their comments were seen as adding pressure on the central bank to
ease policy further, rather than as a call for currency intervention
that would set the government up for a potentially costly fight with
financial markets and put Japan at odds with G7 efforts to promote
market-based exchange rates.

"The comments from the government and the central bank governor lift
market expectations that there will be some kind of easing steps by
the BOJ next week," said Hideki Hayashi, global economist at Mizuho
Securities in Tokyo.

"It is the market consensus that Japan interventing solo in the market
won't be effective, so the government will have to depend on the BOJ's
further easing policy," said Hayashi.

"The BOJ's expected loosening of policy will push down yen interest
rates further, thereby supporting dollar/yen at the 90 yen level," he
said.

Sources told Reuters this week that the central bank was considering
expanding a three-month lending facility it introduced in December
following an emergency meeting, either by extending the period or
increasing the pool of funds available.

But they also said board members were split, with some worried a
further easing in policy was not economically justified, especially as
the economy was developing along the lines of the central bank's
official expectations.

"The decision will be made based on discussions among the seven board
members," BOJ Governor Masaaki Shirakawa told the upper house budget
committee, referring to those on the central bank's policy setting
board.

"We hope to discuss what we can do in light of the goals stipulated in
the BOJ Law," he said.

The Nikkei newspaper said the BOJ would double its 10 trillion yen
($110.4 billion) in funds offered under the lending operation at a
policy review on Tuesday and Wednesday. [ID:nSGE62A0J4]

IS YEN REAL TARGET OF POLICY TIGHTENING?

Neither the BOJ nor the government have made an explicit link between
central bank efforts to loosen policy and the foreign exchange market.

But the strength of the yen against the dollar during the global
downturn prompted complaints from industry that the currency's level
was harming their export prospects.

With the government's ability to support the economy shackled by a
debt load approaching 200 percent of GDP and the central bank's
interest rates already at rock-bottom levels, some analysts argue that
reducing the yen's strength may be the real target of policy
loosening.

The December policy easing helped pull the yen JPY= back from a 14-
year high of 84.82 per dollar, raising market speculation that the
currency could be a factor in BOJ thinking now.

The yen rose last week to a three-month high and market data shows
speculators are building long positions in the currency. It was
trading around 90 per dollar on Friday.

In answer to lawmaker concerns over the currency, Finance Minister
Naoto Kan underlined that sharp yen moves were not desirable by saying
that authorities could use currency intervention if foreign exchange
movements were excessive.

However, he emphasised that markets should set currency rates.

"Basically it's desirable for currency rates to move stably," Kan
said. "I'm aware that the government has the option of intervention
when currency moves are rapid. But as long as currency moves are
stable, it's basically up to the market to determine (levels)."

Shirakawa said the central bank's loose policy was helping to curb the
yen's strength, while Prime Minister Yukio Hatoyama also said steps
could be taken.

"Foreign exchange should basically be determined appropriately by the
market," he said.

"But there was the sovereign debt risk, the Dubai shock and the Lehman
shock ... There seem to be yen rises that don't reflect the strength
of the Japanese economy and industry," he said.

"Against such yen rises, we need to take resolute action ... Although
we can't return to a fixed rate system, there needs to be global
cooperation on this front."

Analysts said his comments didn't suggest any action was planned or
imminent, but rather that he was playing to his domestic political
audience.

Japan authorities have not intervened in markets since spending 35
trillion yen over a 15 month period up to March 2004. ($1=90.59 Yen)
(Additional reporting by Tetsushi Kajimoto; Writing by Neil Fullick;
Editing by Hugh Lawson)

http://www.reuters.com/article/idUSTOE62B06520100312?type=usDollarRpt

March 12, 2010, 1:35 a.m. EST
WORLD FOREX: Yen Down Vs Dollar On Hatoyama Remarks
By Megumi Fujikawa

TOKYO (MarketWatch) -- The yen fell against the dollar and euro in
Asia Friday as Japanese Prime Minister Yukio Hatoyama's comments
favoring a weaker yen prompted non-Japanese players to sell the
currency.

Growing expectations for further monetary easing by the Bank of Japan
also weighed on the Japanese currency, dealers said.

During the Asian morning session Friday, Hatoyama's surprise comments
caught the market off guard.

Overseas financial crises "have brought about a strong yen that we
don't believe reflects the fact that Japan's economic and industrial
conditions aren't strong enough," Hatoyama said during a session of
the Upper House budget committee. "I think we need to take firm steps
against such yen strength."

He also said the yen's recent strength is out of line with the
country's fragile economy, requiring the government to take "firm
steps" including international corporation to deal with the currency.

While many market players didn't interpret his remarks as a signal of
imminent dollar-buying intervention, the comment sparked yen-selling
by non-Japanese players, helping push the dollar up versus by a tenth
of a yen, dealers said.

"I don't think the prime minister meant to say he can't tolerate the
current yen levels and is ready to act right away," said Yuji Kameoka,
senior economist in Tokyo at the Daiwa Institute of Research. "But he
made it clear that there could be a market intervention if the yen
gains more ground."

Such a view eventually prevailed in the market and the dollar later
shed some of its gains against the yen. As of 0450 GMT, the dollar
stood at Y90.62, up from Y90.56 in New York late Thursday. The euro
changed hands at Y124.05 from Y123.86.

The greenback also gained support from speculation in financial
markets that Japanese central bank may take further easing steps by
ratcheting up money provision measures at its two-day policy meeting
that ends next Wednesday.

"If the BOJ clearly shows its accommodative policy stance (next week),
foreign players--who are especially focused on monetary policy
matters--may become feeling more comfortable selling" the yen, said
Mitsuru Sahara, a senior dealer at the Bank of Tokyo Mitsubishi UFJ.
Thus, "the yen will likely be sold gradually."

Bank of Japan Gov. Masaaki Shirakawa said in a parliament session "the
policy steps will be decided by discussion of the currently seven
board members. We will debate what's best (for the economy) in the
meeting," when asked if he deems it necessary to take additional
easing steps to beat deflation at an upcoming policy board meeting
next week.

Dealers are skeptical that the yen will continue falling in the near
future because there are orders from exporters to sell the dollar
above Y91.00. Also, the euro is unlikely to climb above Y124.50 as
players are focused more on whether uncertainty over Greece's fiscal
problem may dent investors' confidence, dealers said.

Against the dollar, the euro edged higher to $1.3694 compared with
$1.3679 in New York overnight. The ICE Dollar Index, which tracks the
greenback against a trade-weighted basket of currencies, was at 90.237
compared with 80.282.

(Takashi Nakamichi contributed to the story.)

http://www.marketwatch.com/story/world-forex-yen-down-vs-dollar-on-hatoyama-remarks-2010-03-12

Sid Harth

unread,

Mar 22, 2010, 2:35:36 PM3/22/10

Bloomberg

Krugman Versus Roach Is Right Fight for Don King: William Pesek
March 21, 2010, 4:20 PM EDT
by William Pesek

March 22 (Bloomberg) -- Don King, hop on a plane to China for the
fight of the year.

The world of economic forecasting just became more exciting, with even
a threat of violence. The legendary boxing promoter King can put Nobel
laureate Paul Krugman in one corner. In the other, Stephen Roach,
Morgan Stanley’s Asia chairman.

Location: Beijing, the focus of their spat.

Format: Steel cage, of course.

Prize: Bragging rights in world’s most heated debate.

Roach says a “baseball bat” should be taken to Krugman over his call
for a stronger yuan. Krugman is miffed that Roach is criticizing his
view that “China is adding to the problems of the rest of world.”

It hardly matters who wins the “Battle of Beijing.” The real story is
that this matchup is even necessary. It shows we are still only
debating the global imbalances we have been obsessing over for years
now -- not addressing them. The blame game continues.

Roach versus Krugman echoes the verbal clash between the U.S. and
Chinese governments. As this epic finger-pointing contest unfolds, we
are all losers. That goes for the richest investors, the savviest
corporate executives and the most unassuming of households from New
York to New Delhi.

Roach Versus Krugman

The trouble with Roach’s spat with Krugman is that both men are a bit
right, and both are a bit wrong. I am not taking the middle road here
or offering an ambiguous on-the-one-hand-on- the-other-hand analysis.
The truth really does lie somewhere in between, and that’s just the
point.

The Group of Two nations needs to get into a room and negotiate a
rebalancing of the world’s most important economies. Not take cheap
shots, not assign blame, but agree to do X, Y and Z over the next 12
to 24 months.

Yes, China needs to let the yuan appreciate (as Krugman argues). It
would reduce the pressure on China’s economy and trim a trade gap that
may eventually lead to a U.S. credit downgrade. The U.S. drastically
needs to increase savings (as Roach says). It must begin exporting
something other than debt to return the biggest economy to health.

One nation acting isn’t enough to fix the other’s problems. Nor is
unilateral action a panacea for global markets. These steps must be
taken in tandem and telegraphed transparently to both nations’
populations and markets.

Looking in Mirror

The opposite is happening. If only U.S. Senators Charles Schumer of
New York and Lindsey Graham of South Carolina, who are introducing
legislation to make it easier to punish China, looked in the mirror.
Spend less time beating up on China and more telling Americans to stop
living beyond their means.

If only U.S. lawmakers were more focused on financial reforms needed
to avoid another crisis. If only they would tell Americans that shared
responsibility is what’s needed to restore the U.S. brand. Tell
Americans that tax cuts aren’t always the answer. Why bother, when
China is assuming the scapegoat role that Japan played in the 1980s
and early 1990s?

And then there’s Chinese Premier Wen Jiabao. If only he would admit
how many of China’s problems are wrapped up in the currency peg.
Forget the ill will it generates. Focus, instead, on inflation risks,
hot money flows and those $2.4 trillion of currency reserves with
which China is stuck.

Hypocrisy Reigns

China’s embryonic financial system won’t grow up until it can do more
borrowing in yuan and investors have a real bond market in which to
hedge stock holdings. Things won’t cool down until Chinese have
something to buy other than overpriced property. China is like an
Airbus A380 super-jumbo flying with a broken engine. It’s huge, it can
go a long way yet it’s operating unsteadily.

As hypocrisy reigns, think of the global economy as a game of musical
chairs. Everyone is tiptoeing around the dwindling number of chairs,
hoping to have one when the music stops. That might be fine if we had
more growth engines on which to rely.

The U.S. is still sputtering, Europe isn’t much better amid Greece’s
crisis, and Asia is still developing, but not without risks.
Politicians in Washington and Beijing seem to think that as long as
they find a chair when the game is over, all’s well.

Not so in this G-2 world. A Chinese crisis would reverberate
everywhere, including the U.S. as it’s beginning to stand again.
Another U.S. crisis could be even more devastating for China. Rapid
growth aside, it’s a developing economy that will find it harder to
generate domestic growth.

It would be fun to be a fly on the wall the next time Roach and
Krugman bump into each other. It would be highly entertaining if King,
who staged bouts for fighters such as Mohammad Ali and Mike Tyson,
could match the two economists.

If we can’t stop debating who is to blame for the sorry state of
global affairs, let’s get ready to rumble.

Click on “Send Comment” in the sidebar display to send a letter to the
editor.

--Editors: David Henry, James Greiff.

To contact the writer of this column: William Pesek in Bangkok at
wpe...@bloomberg.net

To contact the editor responsible for this column: James Greiff at
jgr...@bloomberg.net

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Monday March 22, 2010
Promoting economic recovery
GLOBAL TRENDS
By MARTIN KHOR

A new report on the global economy suggests the US should solve its
over-consumption while Germany, Japan and China should boost their
domestic consumption.

FOR the past few weeks, there has been a shrill attack on Chinese
economic policy emanating from US Congress members and economists.

According to them, China’s policy of linking its currency to the US
dollar has undervalued the yuan, led to China’s large trade surplus
and is a major reason for America’s economic problems.

Some economists even try to blame this for the imbalances in the world
economy.

This blame game is now going beyond the rhetorical or the academic
realm.

If the US Treasury labels China as a country practising currency
manipulation in a report on April 15, it could trigger actions in
Congress to slap on an import surcharge on Chinese goods.

Economist Paul Krugman, one of those urging actions to “take on
China”, is suggesting a hefty 25% surcharge.

Such a drastic measure could trigger a trade war, which nobody needs
today when the global economy is trying to find its feet following the
worst recession in 60 years.

A recent report of the South Centre by its Special Economic Adviser
Yilmaz Akyuz (formerly chief economist of Unctad) throws interesting
light on the global economic imbalances, the situation in the major
countries, and what needs to be done.

The report, Global economic prospects: The recession may be over but
where next?, recognises that the US economy (that has high household
debt and trade deficit) has to adjust, and its over-consumption
problem has to be tackled.

But this adjustment will cause its own problems for many developing
countries as it may result in increased interest rates (which is bad
for indebted countries) and a higher dollar (exerting downward
pressure on currencies in developing countries in deficit, and on
commodity prices).

So far, the United States and China have adopted the strongest policy
response to the crisis with big fiscal stimulus packages and
aggressive easing of monetary policy.

In China, there has been high growth in exports, and this in turn
accounted for one third of Chinese GDP growth in the years before the
crisis.

But in the debate on the global economy, attention has focused on US-
China relations, to the neglect of the role of Germany and Japan,
according to the report.

These countries, like China, have been having large current account
surpluses (7.5% of GDP in Germany and 4.8% in Japan, before the
crisis).

They also have large trade surpluses with the United States (US$50bil
for Germany and US$75bil for Japan).

The overall trade surplus of China (11% of GDP) and its trade surplus
with the United States (US$270bil) is higher.

“However the contribution of Japan and Germany to global demand and
growth is much smaller than China’s, and their reliance on exports is
much greater,” says the report.

Firstly, the real domestic value of China’s trade surplus with the
United States is actually lower than the gross figure because there
are a lot of imported components in Chinese exports.

Thus in 2005, the trade surplus of China with the United States was US
$172bil in conventional terms, but it was only US$40bil in value-added
terms (the amount after deducting the import content of the exports of
both counties).

In the same year, Japan’s surplus with the United States was US$85bil.
Since the foreign content of Japan’s exports is lower than the foreign
content of US exports, in value added terms Japan’s surplus with the
United States turns out to be higher than China’s surplus.

Secondly, and more importantly, “Japan and, particularly, Germany have
been siphoning global demand without adding much to global growth,”
says Akyuz.

During 2002-07, exports grew 25 times faster than domestic demand in
Germany and 8.5 times in Japan, while the figure is less than three
for China.

While exports contributed 34% to GDP growth in China, they contributed
50% to Japan’s GDP growth and 143% to Germany’s growth in 2002-07.

In other words, even if there had been no export growth in China, the
GDP would still have enjoyed high growth; but without export growth,
Germany’s GDP would have fallen by about 1% a year during 2002-07.

The paper cites under-consumption as a major problem in Germany and
Japan. In Germany, there has been high unemployment and stagnant wages
because of an over-focus on price stability. In both countries, the
share of wages has fallen, thus suppressing consumption.

These two advanced countries need to increase their contribution to
global demand (and thus to the global recovery) by expanding their
domestic consumption through faster wage growth. Their increased
domestic demand and higher growth is needed to spur more imports and
reduce their trade surplus, which would contribute to other countries’
exports and GDP growth.

China, through its high growth and its reliance on both its own
domestic demand and exports, has contributed relatively more than the
two industrial countries to global growth, the report implies.

However, China obviously also needs to adjust. It cannot rely as much
as previously on exports due to the expected adjustment in the United
States and the slowdown in Europe, and it thus has to generate
domestic demand through significantly increasing its consumption,
whose share of GNP fell from 55% in the late 1990s to 36% at present.

Under-consumption is thus a major problem. Consumption has to grow
faster than both national income and investment in China in the
future. The significant fall in the share of wages would need to be
reversed.

Akyuz suggests a combination of policies promoting higher wages,
elimination of the gap between wage and productivity growth, incre
ased budgetary transfers especially to rural households, and increased
public spending on health, education and housing in order to reduce
household precautionary savings.

However, even if China maintains its high GDP growth by switching from
exports to domestic demand, it cannot be expected to become the
locomotive for global growth. This is because there is a lot of
imported inputs going into China’s exports, whereas imports make up
only 8% of China’s domestic consumption.

“Consequently, a US$100 shift in the composition of aggregate demand
from exports to domestic consumption would reduce Chinese imports by
some US$40,” says the report. This has serious implications especially
for South-East Asian countries which supply a lot of the parts and
components to China for its exports.

As for exchange rates, the paper says that it is an important issue in
the adjusting of global trade imbalances, but currency movements do
not create additional demand for the global economy. Thus, they alter
relative growth rates rather than raising the overall global growth.

“Briefly, currency movements cannot address the problem of global
under-consumption associated with sluggish wages,” says Akyuz.

A depreciation of the dollar against the Chinese currency could reduce
Chinese exports and its trade surplus with the United States but would
not solve the under-consumption in China nor bring an increase in
domestic demand to offset the decline in exports.

It could even aggravate the under-consumption problem. Thus, the
exchange rate is not an appropriate instrument to address the under-
consumption problem and excessive reliance on exports in China.

The paper adds it is not clear how dollar depreciation against the
Chinese currency would address the root cause of the US problem of
over-consumption. It is unlikely to produce significantly faster
growth of exports to China.

Even if it reduces China’s exports to the United States, this may be
replaced by imports from other developing countries as long as US
consumers continue to live beyond their means.

Akyuz notes that the United States has run current account deficits in
the past four decades regardless of the strength of the dollar against
the currencies of its main trading partners, blaming Germany in the
1970s, Japan in the 1980s and now China. The yen has been rising
against the dollar during this period but this had no impact on the
surplus of Japan with the United States.

Thus, concludes the paper: “The solution should be sought primarily in
national policies designed to address problems of over-consumption in
the US and under-consumption in surplus countries.”

http://thestar.com.my/columnists/story.asp?col=globaltrends&file=/2010/3/22/columnists/globaltrends/5908821&sec=Global%20Trends

Greek Crisis, Europe And New Risks For Economic Recovery
Source: By Uri Dadush, Carnegie Endowment for International Peace
Posted on: 21st March 2010
The global recovery is strengthening, with GDP growth estimates being
revised upward, emerging markets returning to long-term trend output
levels, and world trade, industrial production, and services
expanding.

Though still relatively mild by historical recovery standards, growth
in 2010 is likely to be modestly higher than consensus estimates, as
pointed out in the January Bulletin.

A rebalancing of demand in favor of emerging markets, especially
China, and confirmation that policy makers are resisting an early exit
from stimulus policies have buttressed prospects for the recovery to
continue into next year.

However, the Greek crisis and its possible spread to other
uncompetitive and fiscally vulnerable Euro area countries that
together account for 7.5 percent of world GDP has emerged as a
significant risk.

Global Recovery Strengthening

Upward revisions of GDP growth estimates for the fourth quarter of
2009 in the United States and the UK are signs of strength in the
global recovery. The Asian Development Bank is revising its 2010
economic growth forecast for developing Asia to around 7 percent, up
from 6.6 percent last December.

Several emerging markets are returning to trend growth, including
China, India, Indonesia, and Argentina.

World trade remains below its pre-crisis peak but is expanding very
rapidly. World trade rose at a record monthly pace of 4.8 percent in
December, following a 1.1 percent increase in November. Imports in
emerging economies grew 7.8 percent (m/m) in December while import
growth in advanced economies rose 2.7 percent that month.

The manufacturing sector has continued to expand as well. The United
States, Japan, and Germany all exhibited strong industrial production
(IP) growth in January. Surveys point to continued expansion: the Euro
area’s manufacturing PMI rose to 54.2 in February, up from 52.4 in
January (a reading above 50 represents expansion).

Importantly, growth also appears to be extending into services. The
U.S. Institute for Supply Management (ISM) Non-Manufacturing Index
rose from 50.5 in January to 53.0 in February. While the UK’s
corresponding index grew at a faster pace, the Euro area’s expansion
slowed.

Despite these improvements, however, private sector demand growth in
the advanced countries remains fragile and overly dependent on
government stimulus amid high unemployment, weak housing markets, and
hesitant consumers.

Rebalancing is Happening

Declining external deficits and surpluses represent another
encouraging development that enhances the sustainability of the
recovery. Total current account imbalances, the sum of current account
balances across deficit and surplus countries in absolute value terms,
narrowed to 3.6 percent of world GDP in 2009, down from 5.7 percent in
2008. Imbalances are expected to expand only marginally in 2010.

The U.S. current account deficit, the world’s largest, declined from
5.2 percent of GDP in 2007 to 3 percent in 2009. Given the relative
strength of the recovery, however, the U.S. deficit is projected to
widen to 3.4 percent in 2010. The euro’s weakness will also delay
rebalancing in the United States by bolstering the dollar. The U.S.
Dollar Index, which tracks the dollar against a trade-weighted basket
of currencies, has risen by about 8 percent since November. On the
other hand, China’s current account surplus declined from 9.6 percent
of GDP in 2008 to about 6 percent in 2009 and, helped by strong
domestic demand and import growth, is projected to fall further to 4.7
percent in 2010.

Emerging Market Growth Sustained—So Far

Capital flows to emerging markets have regained strength, with the IIF
predicting that net private inflows will rise to over $700 billion in
2010, up two-thirds from 2009, but still down 45 percent from their
peak in 2007. Returns in equity and bond markets there have also been
spectacular, with the MSCI Emerging Markets Index doubling over the
last year, though there has been little change since December 2009.
Strong growth and balance sheet fundamentals appear to justify these
advances.

At the same time, according to JP Morgan, the MSCI Emerging Market
Index’s price-to-book-value ratio was 2.45 in February, above its
average of 2.1 since 2000, and there are other indications that some
markets may be overreaching. The Brazilian Bovespa and Mexican Bolsa,
for example, are only 6.3 percent and 1.2 percent below 2008 and 2007
peaks, respectively. In China, property prices in 70 cities rose 10.5
percent (y/y) in February, the fastest pace in 23 months, while
consumer prices rose a higher than expected 2.7 percent (y/y), the
most in sixteen months.

Though it is too early to speak of a speculative bubble in emerging
markets, prospects for very low interest rates in the advanced
countries continuing well into 2011 and the wide growth gap favoring
emerging markets suggest that the classic conditions for a bubble may
be starting to build.

Greek Crisis a Major Source of Risk

Greece is a small economy, but its problems—a massive secular loss of
competitiveness and rapidly rising public debt—are shared to different
degrees by at least four other Euro area members (Portugal, Ireland,
Italy, and Spain), whose combined GDP is 30 percent larger than
Germany’s. A sovereign debt crisis affecting all or a subset of these
countries will slow European growth, depress the euro, and could
eventually spill over into a global confidence crisis that would
affect some vulnerable emerging markets (Turkey is one example) and
other advanced countries. Japan, whose public debt/GDP burden—though
held domestically—is on track to be almost twice that of Greece, could
also come into the markets’ crosshairs.

Europe Under Stress

Greece is likely to be rescued by the IMF or its European partners, or
at least supported in an orderly restructuring of its debt, but its
competitiveness problem will persist for years to come. Even if its
structural adjustment measures succeed, they will take years to
complete and Greek growth will remain depressed. The same will apply—
though to a lesser degree—in the other vulnerable European countries.
These problems will severely test the political support for the
European project in the vulnerable countries as well as in Germany and
the other countries that will have to come to the rescue. One or more
countries leaving the Euro area, though still a low probability
scenario, can no longer be ruled out.

Exit Strategies Will Remain Cautious

Though countries are already paving the path to exit from stimulus,
and some, like Australia, have taken steps along it, the larger
advanced economies are maintaining expansionary monetary and fiscal
policies and are likely to continue to do so at least into 2011,
reflecting the weakness of private sector demand. Although the Fed may
raise U.S. interest rates later this year from their record low
levels, the still-low rate will continue to powerfully stimulate
activity. Given the serious risk of prolonged stagnation in the
European periphery, there are worthy arguments for Germany, and other
countries that can afford it, to increase fiscal stimulus in the
coming years, and for the European Central Bank to maintain its
expansionary stance for the foreseeable future. Monetary policy will
remain expansionary in Japan as well.

In emerging Asia, where the recovery began, policy makers have already
begun to wind down stimulus efforts. Over the past two months, China
has increased reserve requirements several times and repeatedly urged
banks to curb lending. India has also outlined plans to unwind its
$162 trillion fiscal stimulus package.

As economies continue to recover at different speeds and international
interest rates remain low, the coming years will be marked by
increased carry trades and exchange rate fluctuations, implying a
heightened risk of bubbles and speculative attacks. Sovereign debt
problems, which had disappeared from sight in the pre-crisis years,
have again become a central source of risk—underscoring the need for
policy makers to develop credible, long-term fiscal consolidation
frameworks and to build the political consensus necessary to execute
them once the global recovery is on firmer footing.

Uri Dadush is a senior associate in and the director of Carnegie’s
International Economics Program.

http://thegovmonitor.com/world_news/united_states/greek-crisis-europe-and-new-risks-for-economic-recovery-26423.html

m the Mano Economic Intelligence Forum, Japan, looking at COP 16 of
the UNFCCC in Cancun, history shows that tendencies by countries to go
it alone, including on environment, lead to worldwide economic
decline.

Posted on Sustainabilitank.info on March 21st, 2010
by Pincas Jawetz (P...@SustainabiliTank.com)

JAPANESE PERSPECTIVES

Climate change battle demands cooperation, not new appliances
By TERUHIKO MANO
Special to The Japan Times, Monday, March 22, 2010.
The Japanese economy posted growth in the last quarter, but I would
like to make a few observations about the components of the growth.

The revised figures for gross domestic product in October-December
2009, announced on March 11, showed that economic activity grew 0.9
percent on the previous quarter for an annualized rate of 3.8 percent.
While faster than anticipated progress in inventory adjustment was one
of the factors that contributed to the downward revision of the
preliminary quarterly GDP figure of 1.1 percent (4.6 percent
annualized), capital investment managed to rise 0.9 percent for the
first growth in seven quarters.

Based on the revised data, the government last Monday reported the
first improvement in the Japanese economy since July 2009, describing
its as “picking up steadily,” even though its sustainability is weak
and unemployment remains high.

But closer examination of the data behind the rosy results raises some
questions.

First, it should be noted that the 0.9 percent growth can be broken
down to 0.4 point for internal demand and 0.5 point for external
demand. Personal consumption — the largest component of GDP — expanded
a robust 0.7 percent, an uptick that could be attributable to the Eco-
point and subsidy programs launched by the government to promote
replacement demand for energy-efficient appliances and fuel-efficient
cars.

However, we need to be aware that these programs are eating into
future demand. Consumers are believed to be pushing up purchases of
new cars and TVs to beat the deadline for the popular programs whether
their older products are still usable or not.

Naturally, these programs cannot be continued indefinitely. Similar
campaigns in other advanced economies show that spending can drop off
rapidly once the incentive programs end.

In the past, Japan was in the habit of declaring an “economic
recovery” whenever GDP grew for three consecutive quarters. This time
the optimism was muted — perhaps because officials are well-aware of
the risk of a fallback in consumer demand.

A second point is that governments are pushing for these incentive
programs not just as environmental campaigns, but also as a way to
shore up consumer spending battered by recession.

The global financial crisis jacked up unemployment in many advanced
economies as competition against emerging economies climbed and much
of the world entered recession.

The slump is deep and eating into consumers’ disposable income,
including overtime pay and bonuses. As the effects of globalization
sink in, wages are decoupling from earnings in many advanced
economies.

Third, the amount of energy supposedly saved by “eco-friendly”
products needs to be weighed against the energy expended to make them
and to dispose of the old ones being replaced.

A household may be able to halve its electricity bill by buying a new,
energy-efficient air conditioner, but if the savings are canceled out
by the cost of the energy needed to make the new appliance and get rid
of the old one, can you say the process is really environment-
friendly?

The mass production and mass consumption Japan embraced after the war
contributed to its “miracle” economic growth, but it also caused
rampant pollution and the loss of the traditional Japanese belief of
the value of making good use of things.

Of course we need to save energy. But we should also take a look at
the additional burden being placed on the global environment by the
introduction of energy-saving products.

These are not Japan’s problems alone. Countries around the world need
to cooperate to assess the overall burden on the environment and deal
with the problem. When the economy goes bad, each country tends to put
priority on its own interests. History shows such tendencies lead to
worldwide economic decline.

Progress eluded the COP15 climate change conference in Copenhagen in
December as national interests trumped international cooperation on a
global issue. The author hopes that both the advanced and developing
economies can overcome these issues and seek a more cooperative path
toward progress at the COP16 conference in Mexico in November.

Teruhiko Mano is chairman of the Mano Economic Intelligence Forum.

http://www.sustainabilitank.info/2010/03/21/from-the-mano-economic-intelligence-forum-japan-looking-at-cop-16-of-the-unfccc-in-cancun-history-shows-that-tendencies-by-countries-to-go-it-alone-including-on-environment-lead-to-worldwide-econ/

Bloomberg

Yen Near Week High Against Euro; Central Banks May Raise Rates
March 21, 2010, 11:01 PM EDT
By Ron Harui

March 22 (Bloomberg) -- The yen reached a one-week high against the
euro on speculation more central banks will follow India in raising
interest rates, damping demand for higher- yielding assets.

Japan’s currency strengthened versus all of its 16 major counterparts
after the Reserve Bank of India unexpectedly raised borrowing costs on
March 19, fueling expectations policy makers in nations such as China
will do the same. The euro was near a two-week low against the dollar
on concern the European Union will fail to agree on financial aid for
Greece, reducing the appeal of assets in the 16-nation region.

“We’ve had India, and we’re assuming China is not too far away from a
formal rate hike,” said Sean Callow, a senior currency strategist at
Westpac Banking Corp. in Sydney. “It’s something the market is going
to have to deal with, and it may unnerve markets a little bit. The yen
and dollar might be supported.”

The yen traded at 122.26 per euro as of 11:57 a.m. in Tokyo from
122.51 in New York last week, after rising to 122.20, the strongest
level since March 10. Japan’s currency was at 90.44 per dollar from
90.54. The dollar bought $1.3518 per euro from $1.3530 on March 19,
when it climbed to $1.3503, the highest since March 2.

Japan’s financial markets are closed today for a holiday.

Increase ‘Imperative’

The yen and the dollar extended gained versus most higher- yielding
currencies after India’s central bank said controlling price gains
became “imperative” after inflation accelerated to a 16-month high.
Policy makers raised the benchmark reverse repurchase rate to 3.5
percent from 3.25 percent and the repurchase rate to 5 percent from
4.75 percent. The decision came a month before the bank’s scheduled
policy meeting.

Central banks in Australia and Malaysia already raised borrowing costs
this month and China boosted its reserve- requirement ratio by half a
percentage point on Jan. 18 and Feb. 25. India’s Reserve Bank will
probably raise its benchmark again next month as the first increase in
two years is only the initial step in its fight against inflation,
according to BNP Paribas SA and Standard Chartered Plc.

“The surprise factor in the RBI’s action was not that they hiked
rates, but that it took place ahead of the next policy meeting, a fact
that reflects the urgency to tackle inflation pressures,” Mitul
Kotecha, head of global currency strategy at Credit Agricole CIB in
Hong Kong, wrote today in a research note. “Further rate hikes are
likely over coming months as the bank moves further to contain
inflation.”

Ringgit, Won

Malaysia’s ringgit and South Korea’s won led Asian currencies lower as
Asian stocks declined following India’s interest-rate increase.

The ringgit extended last week’s decline, falling 0.4 percent to
3.3125 per dollar and the won slid 0.4 percent to 1,137.30. The MSCI
Asia-Pacific Index of regional shares dropped 0.6 percent.

The euro fell for a fourth day versus the yen after German Chancellor
Angela Merkel told investors they shouldn’t expect this week’s EU
summit to agree on any aid package for Greece.

EU leaders must not create “illusions” for markets by building
expectations for Greek aid, she said in an interview with
Deutschlandfunk that aired yesterday. Her remarks came after Greek
Prime Minister George Papandreou and European Commission President
Jose Barroso said the EU should spell out its rescue plan at the March
25-26 summit in Brussels.

‘Weigh on the Euro’

“Ahead of the EU summit, concerns about Greece’s funding difficulties
are expected to weigh on the euro,” said Danica Hampton, a senior
markets strategist at Bank of New Zealand Ltd. in Wellington.
“Meantime, the dollar will likely remain firm as investors fret about
how the global economy will cope with further stimulus removal.”

Advanced economies face “acute” challenges in tackling high public
debt, and unwinding existing stimulus measures will not come close to
bringing deficits back to prudent levels, said John Lipsky, first
deputy managing director of the International Monetary Fund, in a
speech yesterday at the China Development Forum in Beijing.

The Dollar Index, which tracks the U.S. currency against those of six
major U.S. trading partners including the euro, rose 0.1 percent to
80.810.

Australia’s dollar fell for a third day after gold, the nation’s third-
most valuable commodity export, slumped the most in six weeks on March
19.

Gold futures for April delivery dropped 0.1 percent today after
sliding 1.8 percent on March 19, the biggest loss for a most-active
contract since Feb. 4. Crude oil, Australia’s fourth most valuable
commodity export, declined for a third day.

“There’s a little bearishness creeping into the market with gold
falling and a lack of confidence on the Greek rescue package,” said
Ian Fowler, senior corporate foreign exchange dealer at OzForex Ltd.
in Sydney. “The first sniff of negative news over Greece and the
resulting sell-off in commodity prices and the Aussie comes down.”

--With assistance from Patrick Donahue in Berlin, Joyce Koh in
Singapore and Candice Zachariahs in Sydney. Editors: Nicholas
Reynolds, Garfield Reynolds

To contact the reporter on this story: Ron Harui in Singapore at
rha...@bloomberg.net.

To contact the editor responsible for this story: Nicholas Reynolds at
nreyn...@bloomberg.net.

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Bloomberg

China Bubble Anxiety Doesn’t Mean Shun Stocks: John Dorfman
March 21, 2010, 9:16 PM EDT
by John Dorfman

March 22 (Bloomberg) -- In the 1980s, a crucial question for portfolio
managers was what to do about Japan. Today, the parallel question is
what to do about China.

From 1978 through 1989, Japan gave the U.S. heavy competition for
world leadership in business and finance. Japanese stocks rose 12
years in a row, gaining a cumulative 700 percent, or almost 19 percent
a year, compounded.

Since then, the Nikkei-225 Stock Average has fallen 73 percent, or 6.3
percent a year, with 11 down years in the past 20. Clearly, those
managers who were overweight Japan in the 1980s did great, while those
who have favored Japan in more recent years did poorly.

Today it is China that challenges the U.S. for world economic
leadership. Since the end of 1990 the Shanghai Stock Exchange
Composite Index has risen more than 2,400 percent, for an annual
return of -- you guessed it -- almost 19 percent a year.

Is China an echo of Japan, destined to flash and then flame out? No
one knows for sure. Personally, I doubt it.

There are powerful reasons to invest in China, and also some strong
reasons not to. Let’s start with the negatives.

China’s big cities, notably Shanghai and Beijing, have been overbuilt,
a situation that might hurt both real-estate owners and banks. The
country’s one-child policy means the population is shrinking. The
Chinese government doesn’t embrace free speech or property rights as
understood in the U.S.

Some people fear that the rapid growth in China’s economy and stock
market is a bubble, soon to be pricked.

In China’s Favor

Now, let’s turn to the positives. China’s budget deficit is mild
compared with that of the U.S. Its population is younger. And its
economy is growing faster.

China’s gross domestic product growth exceeded 7 percent in eight of
the past 10 years. During that time the best the U.S. did was 3.8
percent in 2003. In eight of the past 10 years the U.S. has achieved
less than 3 percent growth.

China’s education system is pretty good, and so is its infrastructure
(roads, bridges, railroads, communications). Its people have a strong
work ethic, and its government is determined to make China a world-
class competitor in most industries.

In the worldwide economic crisis of the past three years, China held
up better than most countries. In 2009, for example, China’s GDP
increased 10.7 percent. That compares with growth of 0.1 percent in
the U.S., shrinkage of 3.9 percent in Japan, and shrinkage of 2.4
percent in Germany.

Is China fudging its growth figures? Intelligent people have raised
the question, but on the whole it seems to me that independent
variables such as imports of steel and copper are consistent with the
picture the Chinese government paints.

Five Picks

On balance, I believe it is reasonable for U.S. investors to put a
portion of their assets in China. I suggest 5 percent for most
investors and 10 percent for those with high risk tolerance.

More than 200 Chinese companies trade in the U.S., and more than 100
of them have a market value of $100 million or more. Here are five
Chinese stocks that I think deserve consideration.

China Marine Food Group Ltd., based in Fujian, processes, distributes
and markets fresh fish and seafood. I like its profit margins (pretax
margin of 26 percent in 2008) and low debt (less than 8 percent of
equity). The stock sells for 12 times earnings.

Tianyin Pharmaceutical Co., with headquarters in Chengdu, makes
medicines based on traditional Chinese herbal remedies. Its debt is
low (less than 3 percent of equity) and it earned an admirable 21
percent return on equity in the fiscal year ended June 2009. The stock
sells for 11 times earnings.

Going Mobile

Sutor Technology Group Ltd., based in Changsha, makes galvanized
steel, steel pipe and steel sheet for appliances and cars. Its stock
is selling well below book value (assets minus liabilities) per share.

Universal Travel Group, located in Shenzhen, is a travel agency that
has grown to $98 million in revenue last year from $10 million in
2006. Since the company started trading publicly in 2005, earnings
have risen each year except for 2009. The company is debt-free and the
stock sells for eight times earnings.

One can also get exposure to China by buying stock in companies that
have their headquarters in Hong Kong but do most of their business in
mainland China. One that I like is China Mobile Ltd., the world’s
largest phone operator by market value.

China Mobile’s revenue is running at an annualized pace of about $64
billion, up from about $30 billion in 2005. Analysts estimate that it
earned 83 cents a share (in U.S. currency) in 2009, up from about 80
cents the year before. The company has increased its earnings each
year since 1999. The stock sells for about 12 times earnings and has a
dividend yield of 3.7 percent.

Disclosure note: For clients and personally, I own shares of China
Mobile. I have no long or short positions in the other stocks
discussed in this week’s column.

Click on “Send Comment” in the sidebar display to send a letter to the
editor.

--Editors: James Greiff, Laurence Arnold.

For Related Company News: CMFO US <Equity> CN TPI US <Equity> CN SUTR
US <Equity> CN UTA US <Equity> CN CHL US <Equity> CN 941 HK <Equity>
CN

To contact the writer of this column: John Dorfman at
jdor...@thunderstormcapital.com

To contact the editor responsible for this column: James Greiff at
jgr...@bloomberg.net

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Bloomberg

Asian Stocks Fall the Most in a Month on Concern Over Stimulus
March 21, 2010, 11:50 PM EDT
By Shani Raja

March 22 (Bloomberg) -- Asian stocks fell the most in a month after an
International Monetary Fund official said advanced economies will
struggle to tackle public debt and on concern central banks will boost
efforts to curb inflation.

BHP Billiton Ltd., the world’s largest mining company, lost 1.7
percent in Sydney as commodity prices slumped after India’s central
bank unexpectedly raised interest rates last week. PetroChina Co., the
nation’s biggest energy producer, slumped 2.7 percent in Hong Kong
after agreeing to a takeover of Australia’s Arrow Energy Ltd. Posco,
Asia’s biggest maker of stainless steel, sank 2.9 percent in Seoul on
speculation global demand will slow.

“Investors are increasingly jittery about the inflationary outlook and
high levels of sovereign debt,” said Tim Schroeders, who helps manage
about $1.1 billion at Pengana Capital Ltd. in Melbourne. “The IMF’s
comments switch the spotlight to a medium-term limitation of the
global economy.”

The MSCI Asia Pacific ex Japan Index fell 1.2 percent to 416.23 as of
12:30 p.m. in Tokyo, with four times as many stocks declining as
advancing. The gauge gained 1.3 percent last week after the U.S.
Federal Reserve pledged to keep borrowing costs near zero for an
“extended period” and as the Bank of Japan expanded a bank-loan
program.

Japan’s markets are closed today for a holiday. Hong Kong’s Hang Seng
Index dropped 2 percent, the biggest decline among Asia-Pacific equity
benchmarks. South Korea’s Kospi Index lost 1.2 percent, Australia’s
S&P/ASX 200 Index retreated 0.8 percent, and China’s Shanghai
Composite Index was little changed.

Rate Surprise

Futures on the Standard & Poor’s 500 Index fell 0.7 percent. The gauge
declined 0.5 percent on March 19 as India’s surprise rate decision
that day spurred speculation that withdrawal of economic stimulus
policies will curtail global growth. India’s central bank raised
interest rates for the first time in almost two years, saying that
controlling price-gains was imperative after inflation accelerated to
a 16-month high.

“India raising rates is seen as a precursor to other big- spending
economies tightening fiscal measures, and we know how traders will
react to that,” said Chris Weston, a Melbourne- based research analyst
at IG Markets. “The narrative from the IMF shows it’s going to be a
bumpy ride for 2010, but the potential pullback should also entice
some fresh investment opportunities.”

‘Acute’ Challenges

Advanced economies face “acute” challenges in tackling high public
debt, and unwinding existing stimulus measures won’t come close to
bringing deficits back to prudent levels, John Lipsky, first deputy
managing director of the International Monetary Fund, said in a speech
yesterday at the China Development Forum in Beijing.

Materials- and energy-related companies fell the most among the 10
industry groups in the MSCI Asia Pacific ex Japan Index. BHP Billiton
dropped 1.7 percent to A$42.45, and Rio Tinto Group, the world’s third-
biggest mining company, lost 1.5 percent.

Crude oil retreated the most in three weeks in New York on March 19,
slumping 1.9 percent to settle at $80.68 a barrel, while copper
futures for May delivery dropped 0.7 percent to $3.3725 a pound.

Cnooc Ltd., China’s biggest offshore oil explorer, sank 2.5 percent in
Hong Kong, while in Sydney, Santos Ltd., Australia’s third-biggest oil
and gas producer, dipped 0.8 percent to A$14.13. PT Bumi Resources,
Asia’s largest exporter of power- station coal, fell 2.9 percent to
2,500 rupiah in Jakarta trading.

Commodities, Valuations

PetroChina slumped 2.7 percent to HK$8.97. The company, along with
Royal Dutch Shell Plc, agreed to buy Australian coal- seam gas
producer Arrow Energy after raising their offer to A$3.5 billion ($3.2
billion). Arrow shares fell 3 percent to A$5.13 in Sydney.

Today’s decline in the MSCI Asia Pacific ex Japan Index wiped out its
increase this year. Concern that governments will withdraw policies
that have fueled economic growth, and that Greece will struggle to
curb its deficit, has offset optimism from reports showing improving
U.S. manufacturing and employment.

Shares in the Asian gauge trade at 14.4 times estimated earnings,
compared with 15.1 times for the MSCI World Index. The world index has
risen 1.8 percent this year.

“There is still cause for optimism,” said Pengana’s Schroeders.
“Valuations overall remain attractive, bolstered by increasing levels
of merger-and-acquisition activity as consolidation amongst companies
in certain sectors continues.”

Posco sank 2.9 percent to 531,000 won in Seoul, while in Hong Kong,
Aluminum Corp. of China Ltd. lost 3.2 percent to HK$8.13. Baoshan Iron
& Steel Co., China’s largest publicly traded steelmaker, declined 1.9
percent to 8.12 yuan in Shanghai. BlueScope Steel Ltd., Australia’s
biggest steelmaker, retreated 1.4 percent to A$2.78 in Sydney.

--Editors: Nicolas Johnson, John McCluskey.

To contact the reporter for this story: Shani Raja in Sydney at
sra...@bloomberg.net.

To contact the editor responsible for this story: Nicolas Johnson in
Tokyo at nicoj...@bloomberg.net.

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China’s Shanghai Composite Index Fluctuates, Gains 0.2 Percent
http://www.businessweek.com/news/2010-03-22/china-s-stocks-enter-bullish-triangle-wang-says-update1-.html

http://www.businessweek.com/news/2010-03-21/asian-stocks-drop-on-concern-over-stimulus-bhp-posco-decline.html

Bloomberg

Euro Trades Near Three-Week Low Amid Signs Greek Aid in Doubt
March 22, 2010, 11:28 AM EDT
Ben Levisohn

March 22 (Bloomberg) -- The euro traded near the lowest level in
almost three weeks versus the dollar as European leaders debated what
measures may be needed to aid Greece in tackling its budget deficit.

The yen rose against all of its major counterparts. Ulrich Wilhelm, a
German government spokesman, said European Union leaders may decline
to make a decision on financial aid for Greece at a summit this week
because the country hasn’t asked for help. Australia’s dollar and the
South African rand fell versus the greenback on concern global
sovereign debt burdens will stifle the economic recovery.

“The euro has been pretty volatile,” said Camilla Sutton, a Bank of
Nova Scotia currency strategist in Toronto. “It’s just ongoing
uneasiness about what will transpire in terms of support for weaker
euro members.”

The euro touched $1.3464, the weakest level since March 2, before
trading little changed at 1.3522 at 11:25 a.m. in New York, compared
with $1.3530 on March 19. The yen rose 0.6 percent to 121.79 per euro,
from 122.51 on March 19. It gained 0.5 percent to 90.06 per dollar,
from 90.54.

The euro may fail if European leaders don’t decide quickly on helping
Greece in financing the region’s biggest budget deficit, Reuters
reported that Deputy Prime Minister Theodoros Pangalos said. Without a
speedy decision, the euro will make no sense and it will take decades
to recover, Pangalos said in Athens, Reuters reported.

EU leaders must not create “illusions” for markets by building
expectations for Greek aid, German Chancellor Angela Merkel said in an
interview with Deutschlandfunk radio that aired yesterday. Her remarks
came after Greek Prime Minister George Papandreou and European
Commission President Jose Barroso said the bloc should spell out its
rescue plan at the March 25- 26 summit in Brussels.

--With assistance from Keith Jenkins in London. Editors: Greg Storey,
Dave Liedtka

To contact the reporter on this story: Ben Levisohn in New York at
blev...@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at
dlie...@bloomberg.net

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The safest stockmarket in the world today Mar 22, 2010

The loss of momentum that most of the world's stock markets suffered
since last October has been followed by potential top formations which
could result in a return to equity markets travelling south.

For the time being, on low volume, stock markets continue to
consolidate; like the Sirens of Greek mythology they offer
considerable but potentially fatal temptations. It is evident that the
"Big Story" is not sufficiently imposing itself upon the minds of
investors, although volume is light and, as Michael Kahn said in
Barron's on 17th March: "Ignore the market's low volume at your
peril."

He also quoted from the bible of technical analysis, Edwards & Magee's
Technical Analysis of Stock Trends, which says "Volume is of the
utmost importance in all technical phenomena." Volume tells us of the
conviction of the marketplace. We recently identified that the high
volume days since October were mostly associated with selling. Such a
situation is indicative of distribution; investors moving out of the
market. Hence the loss of momentum.

Mohamed El-Erian of PIMCO recently wrote an article in the Financial
Times headlined "How to Handle the Sovereign Debt Explosion". He
opened with the following statement: "Every once in a while the world
is faced with a major economic development that is ill-understood at
first and dismissed as of limited relevance, and which then catches
governments, companies and households unawares." PIMCO runs the
world's biggest bond fund and bond investors are very savvy. PIMCO's
top guns quite clearly see the gorilla in the room (the "Big Story")
which other investors conveniently ignore but which, when it is ready,
will manifest itself.

Low interest rates continue: both the UK and US have yet again held
them unchanged. A signal of economic fragility, not economic recovery.

In spite of the Federal Reserve over the last year expanding the
monetary base by 35%, M2 grew by only 2.1% as commercial and personal
loans contracted an unprecedented 20%. Moreover, the key indicator M3,
which the US government chooses no longer to calculate but which is
calculated by John Williams of Shadow Government Statistics, shrank
3%. Historically every time M3 has contracted, the economy has turned
lower. The approaching double dip is like a performer in the wings
waiting to go on for an encore. For effect he keeps the audience
waiting longer than seems comfortable, timing his entry to gain the
maximum impact. Likewise the double dip but, when it happens, it will
overwhelm.

There has been a distinct weakening of the housing market on both
sides of the Atlantic. These last two weeks in the US it was reported
that pending house sales had fallen in January by 7.6% and in February
housing starts fell 5.9%, although the weather might have had
something to do with that.

The US market for new houses remains plagued by the large inventory of
distressed properties for sale with prices less than construction
costs - and more foreclosures to come. If there was one key indicator
for both the US and the UK economies it would be the house market,
which was until 2007 the lynchpin for households' finances.

Most stock markets today are like houses without foundations built in
a flood area; whilst the weather remains OK, the risk is invisible but
it will, in due course, have its way, and that moment is getting
nearer.

Might Japan be different? David Rosenberg, of Gluskin Sheff &
Associates, recently wrote, "By the way, the Japanese economy is
turning into the 'sleeper' of the year – very quietly turning in some
very impressive data of late and it has been the best performing
economy in the industrialized world since the bottom a year ago and
few realise this – there are press reports out of the Nikkei that the
government is about to lift its assessment of the economy. Investors
take note that the Japanese equity market is one of the few in Asia
that is in the green column year-to-date".

Unquestionably, Japan is different. The Nikkei today is just below
11,000 - almost 75% below its high of 20 years ago. On scanning the
history books for any kind of comparison we come up with America in
1929. In 1929 the Dow fell 90% and did not regain its 1929 level until
1954 – 25 years later. When the Nikkei Dow regains its old high of
almost 40,000 it will have climbed almost 300% on its current levels.

Above is the long term chart for the Nikkei, showing the huge support
level. Two arrows indicate a possible long-term double bottom. If ever
this market is to recover, it would at first look a bit like that.

The five year weekly price chart (above) shows that the downtrend from
2007 has been overcome and is followed by a period of consolidation. A
breakout above 11,000 would be a positive signal.

• This article was written by Full Circle Asset Management , and was
published in the threesixty Newsletter on 19 March 2010.

http://www.moneyweek.com/investments/stock-markets/ditch-the-stockmarkets-fading-rally-01201.aspx

Google and China's Future
Posted by Michael Schuman Monday, March 22, 2010 at 5:59 am

Google's dispute with the Chinese government has taught us a lot about
modern China. The disagreement was sparked by the company's January
decision to stop filtering Internet searches by its Chinese users and
could lead to the closure of Google's Chinese search engine, or
perhaps an even more drastic withdrawal from China. (An announcement
from Google could come this week.) The case has exposed the myth that
China is a great place to do business for foreign companies. Google's
step also moves China closer to having a “different” Internet than the
rest of the world, one dominated by Chinese companies and policed by
the Chinese government.

China's leadership doesn't appear to care much about the impact of
Google's possible departure. But should they? The Google case begs a
fundamental question about China's future:

Is there a connection between human rights and economic progress?

Americans like me were brought up to believe that free enterprise and
free societies are inseparable, that you can't have one without the
other. The demands of a successful market-based economy, we've always
believed, require the open flow of information in order for investors,
businessmen and bankers to make proper decisions. Civil liberties are
the basis for the innovation and inspiration that make capitalist
economies thrive. Curtailing personal freedoms – such as restricting
people's access to the world wide web – would eventually come back to
haunt a country's economic development, by disconnecting the economy
from the rest of the world, stifling crucial information and hampering
creativity. In other words, the traditional thinking on the
relationship between politics and economics tells us that China's
stand on human rights could cause it to miss out on crucial
opportunities necessary for its future growth.

China sees things very differently. Its leadership believes democracy
is not a requirement for a market-oriented economy; instead, you can
have economic success without political openness. That's what the 1989
massacre on Tiananmen Square was all about. Deng Xiaoping, China's
most influential leader back then, believed political reform would
undermine his efforts to develop the economy. Not much has changed in
China's thinking over the past 20 years on this issue. President Hu
Jintao and Premier Wen Jiabao simply won't believe that allowing
Chinese citizens to surf freely on the Internet about sensitive topics
-- Falun Gong, Tibet, the Tiananmen Square massacre itself -- will in
any way enhance its economic prospects.

So far, it's easy to say that China's leadership is correct. After
all, China's economy has been the world's fastest-growing for the past
forever, and is likely to become the second largest economy next year
(surpassing Japan, a democracy, no less). Meanwhile, the free
democracies of the West weren't saved from financial catastrophe by
their free Internet policies; in fact, some would argue, the recent
economic crisis was caused by too much freedom, and not enough
government regulation and control.

At the same time, it's notable that there are hardly any countries
around the world that have regimes that severely restrict civil
liberties and also have thriving economies. It is true that out here
in Asia, most of the region's rapid-growth economies were governed by
dictatorships or something akin to one-party systems in their early
years of development. (India is the glaring exception.) But that's no
longer the case. Just about everywhere, they've either become vibrant
democracies (South Korea, Taiwan, Indonesia) or more politically open
over time (Malaysia). The question to ask is: Are these economies
better off because of democratization and the improvement of human
rights? The only way to know for certain is to hop into a time
machine, zip back to the late 1980s, engineer continued autocratic
rule and see what happens. But it is intriguing that in the more
advanced economies (I'm thinking South Korea and Taiwan here) there
has been a tremendous improvement in recent years in product
development and design, innovation, branding and marketing, and that
these trends have coincided with the advancement of civil society and
the arts – and the use of the Internet – under liberal political
systems.

I'm not going to venture a guess as to whether China will or will not
require political reform to keep its growth story going. Yet we'll
find out soon enough. The real test of China's political and social
policies will come as it attempts to shift from an economy that makes
cheap stuff to one that innovates and invents advanced products and
technologies. Only then will we find out if the government's control
of information and personal freedoms will hamper its efforts to catch
up with the United States, Japan and South Korea. Perhaps then China
will realize the importance of having Google in its economy rather
than outside of it.

http://curiouscapitalist.blogs.time.com/2010/03/22/google-and-china%E2%80%99s-future/

Page last updated at 06:52 GMT, Wednesday, 17 March 2010
Japan's central bank seeks to boost lending

Deflation tends to make consumers delay purchases as prices fall
Japan's central bank has increased a stimulus measure aimed at
encouraging financial institutions to lend more.

It has doubled to 20 trillion yen (£145bn; $220bn) the amount of cheap
short-term loans it is offering banks.

The scheme, which lends money at a rate of 0.1%, was introduced in
December to try to tackle the deflation which is threatening Japan's
economic recovery.

The Bank also voted to hold interest rates at 0.1% - the level at
which they have been since December 2008.

Bank pressure

Data released last week showed that Japan's economy grew by less than
first estimated in the final quarter of 2009.

The Cabinet Office said the economy expanded by 0.9% between October
and December of last year, down from its initial estimate of 1.1%.

That downward revision increased pressure on the Bank of Japan to ease
monetary policy.

However, with interest rates already down to 0.1%, it does not have
much room to move.

The continuing problem of deflation is bad for an economy as it tends
to make consumers and businesses delay major purchases in the
expectation that prices will fall further in the future.

Japan has a history of struggling with deflation. The 1990s are often
referred to as Japan's "lost decade" because of its 10-year struggle
with falling prices.

The period followed a collapse in prices in the housing market and the
stock market at the end of the 1980s.

http://news.bbc.co.uk/2/hi/business/8571624.stm

Labor reforms? Japan limits on part-timers please no one.

In Japan, labor reforms approved last Friday to protect temporary
workers – now about one-third of the workforce – were met with
criticism on both sides. Firms say they need a flexible workforce,
while laborers say too many loopholes remain.

A man and cars are reflected on windows in Tokyo March 11. In Japan,
labor reforms were approved last Friday to protect temporary workers.

Toru Hanai/Reuters

.By Jonathan Adams, Correspondent / March 22, 2010

Nagoya, Japan
Japan's center-left government approved a bill limiting the hiring of
temporary workers Friday, in a bid to reverse years of labor
deregulation that it says went too far in favoring big business at the
expense of workers.

.But the proposals have drawn fire from all sides. Businesses and some
economists say firms need flexible labor to remain lean amid fierce
global competition. Meanwhile, some workers and small unions argue
that the reforms don’t go far enough.

The cool reception reflects growing disillusionment with the
Democratic Party of Japan (DPJ), which took power last year with lofty
ambitions but is now being dealt a reality check on some of its pet
policies.

It's been forced to retreat on several issues – scaling back a
populist pledge to slash highway tolls, for example, and cutting in
half its proposed child-rearing subsidy, from 26,000 to 13,000 yen
($145), at least in the first year of implementation.

Meanwhile, the DPJ cabinet's approval ratings have plunged to 34
percent, from around 70 percent when it took power, according to the
latest poll from the Japanese daily Asahi Shimbun.

The labor bill is just the latest example of the DPJ's struggle to
balance competing priorities while playing complex coalition politics.

"People are getting more and more frustrated about increasing
inequality, and the DPJ has to take care of this national
frustration," says Koji Murata, a professor at Doshisha University in
Kyoto, about the labor bill.

"But this type of regulation may decrease Japanese companies'
competitiveness. That's a catch-22 for the Japanese economy."

Promises, promises
The measure fulfills a campaign pledge made by the DPJ during last
summer's election campaign.

The bill approved by the cabinet Friday will ban "dispatch" work, or
short-term contract work arranged through a third company, in the
manufacturing sector. That rolls back liberalization measures in 2004
under the more business-friendly Liberal Democratic Party (LDP)
government.

The new measures would also ban one-or two-day dispatch work
contracts.

The bill now goes to the Diet, or parliament, where it is expected to
pass within weeks.

Such measures are a response to widespread indignation over the mass
firing of dispatch laborers when the recession hit in 2008.

Dispatch workers, along with part-time, subcontract, and other
nonpermanent labor, now make up about one-third of Japan's 56 million-
strong workforce.

The labor reforms are supported by Rengo, Japan's largest trade union
confederation and a pillar of DPJ support. Most of its nearly 7
million members are permanent, full-time workers at big-name firms
like Toyota and Panasonic.

But former dispatch workers, activists, and smaller unions
representing temp workers say the changes won't take effect for three
to five years, and that firms will easily find ways to sidestep the
new measures.

‘Just in time’ workforce
As recently as the 1980s, Japan was famous for its social bargain.
Salarymen gave firms long hours and unquestioned loyalty, and in
return, companies took care of them for life.

Firms began relying on temporary labor in the late 1990s, with the
help of LDP-led deregulation, says Yasushi Iguchi, a labor expert at
Kwansei Gakuin University. Prime Minister Junichiro Koizumi's policies
accelerated that trend.

Firms took on more part-time workers, dispatch labor, migrant labor
from depressed regions like the northern island of Hokkaido, and
foreign labor, especially Brazilians of Japanese descent and low-paid
Chinese "trainees."

.In 1999, 26 specialized sectors were allowed to hire dispatch labor,
he said, and in 2004, dispatch work was allowed in manufacturing
firms. Dispatch labor boomed, peaking at 2.2 million in 2007, only to
plunge during the global recession as firms shed workers.

Japan’s economic downturn pushes more onto streets
How Japan views Toyota recall woes

.Iguchi called such dispatch labor a "just-in-time" workforce,
complementing the famous "just-in-time" manufacturing model of Japan's
corporate titans like Toyota. Workers are hired only when needed, and
cut when orders are slack.

Such an arrangement has helped Japanese firms control costs. But it
provides little security for workers, who are paid less and receive
fewer benefits than permanent, directly-hired employees.

Skeptical workers
At a union office in Japan's manufacturing heartland, one tousle-
haired former dispatch worker, who did not want his name used, told a
typical tale.

He worked for 6-1/2 years as a dispatch worker for Mistubishi
Electronics in Aichi Prefecture. He clocked 60-hour weeks and had the
same responsibilities as permanent workers. But he earned less than
half of what they made, only 1,120 yen (about $12.40) per hour.

Mitsubishi sometimes gave two or three dispatch workers permanent
jobs, giving hope to the rest. "Me and my coworkers thought, maybe one
day we'll be taken on, too," he says.

Instead, in December 2008 he and 40 other dispatch workers in his unit
were summoned by Mitsubishi bosses and fired, with a week's notice.
The recession had hit with full force and they were no longer needed;
the unit's 20 permanent employees would stay on.

Now, he's supporting his wife and child with a job training allowance
provided by the government, which he can receive for six months.

He and two other former dispatch workers have taken legal action
against Mitsubishi. They're asking for 6 million yen ($66,000) each in
compensation. They argue that under labor regulations, Mitsubishi was
required to offer permanent employment after three years of work.
Mitsubishi Electric declined comment, saying the case was still in
litigation.

The worker says the DPJ's reforms don't go far enough. "They're no
good," he says flatly. "People will still be able to be fired easily,
and in practice nothing will change for workers like me."

The wrong solution?
Chie Matsumoto, a Tokyo-based labor rights activist, agrees. "There
are other temporary employment systems in Japan that would still leave
working conditions unstable," she says.

Iguchi, the labor economist, says firms will simply turn to other
avenues of hiring non-permanent workers. He says that improving
unemployment benefits would have more impact.

The government should also enforce equal pay for equal work, he says,
to close the wage gap between regular and "irregular" workers. He
cites research showing that a full-time male worker in Japan typically
makes more than three times what a part-time female worker makes for
the same work.

"The idea that if you ban dispatch labor you'll have no 'working poor'
– it's an illusion," he says.

Saichi Kurematsu, chairperson of the Aichi Prefectural Federation of
Trade Unions, says some of the new measures were welcome, such as
banning one-day contracts.

But he says 70 percent of the dispatch workers fired during the recent
recession were on monthly contracts, not daily ones. He called for
better unemployment benefits, and said companies should be required to
offer permanent employment to any temps who work for them for longer
than a year.

"During the Koizumi government, the liberalization of labor rules
created a very difficult situation for workers," says Kurematsu. "We
were very happy to see that administration thrown out. But after six
months [of DPJ-led government], we're less happy."

"We think the reforms are insufficient," he says. "They don't deal
with the real problems."

http://www.csmonitor.com/World/Asia-Pacific/2010/0322/Labor-reforms-Japan-limits-on-part-timers-please-no-one

Why The Yuan Will Replace The Dollar As The World’s Largest Reserve
Currency
Published on: Monday, March 22, 2010 Written by: William Patalon
III

China owns world's largest consumer population, and their economy is
projected to become as large as the United States within the next ten
years. With that in mind, many believe that China's growing status as
an economic superpower will create a global market where the yuan, US
dollar and euro will become the core of the world's currency markets.
Some analysts are even going so far as to say that the yuan will
eventually surpass the US dollar as the world's chief reserve
currency. See the following article from Money Morning for more on
this.

Back in May, just after he'd completed his latest investing tour of
China, Money Morning Chief Investment Strategist Keith Fitz-Gerald
made a bold prediction: China's currency, the yuan, is destined to
dethrone the U.S. dollar as the world's chief reserve currency.

Earlier this week, Fitz-Gerald's prediction acquired a powerful new
disciple: Goldman Sachs Group Inc. (NYSE: GS) Chief Economist Jim
O'Neill.

In an essay that's part of a report published Friday for Chatham
House, a London-based foreign-affairs researcher, O'Neill wrote that
China's yuan is destined to become a global reserve currency on par
with the U.S. dollar or European euro.

China's emergence as an economic superpower will escalate the demand
for the Asian giant's currency, which is also known as the renminbi,
or "people's money." Beijing will "eventually" permit the yuan to
trade freely on foreign-exchange markets, discarding the current
system under which the government controls the currency's value, wrote
O'Neill, whose essay was part of the Chatham House report titled,
"Beyond the Dollar: Rethinking the International Monetary System."

"As China moves in this direction, other large emerging economies will
presumably gradually move in the same direction and the end result
will be something approximating to today's Western monetary system,"
O'Neill wrote. "Under such a system, the renminbi, dollar and euro
would all form the linchpin of the world's currency markets."

Back in May, in a news-analysis piece titled "China Seeks to Dethrone
the Dollar, Transforming the Yuan into the Dominant Global Currency,"
Money Morning's Fitz-Gerald outlined a series of high-level currency
swap agreements worth more than $95 billion (650 billion yuan) that
China had reached with an array of nations - a core piece of a
strategy Beijing is deploying to elevate the yuan's global status.

Fitz-Gerald was actually among the group of investing gurus who years
ago predicted that China would ascend to a position of world
leadership. As part of that thesis, Fitz-Gerald also said that China’s
currency would move up in importance and would one day become a key
reserve currency.

When China initiated the currency-swap strategy last May, he issued a
formal prediction that underscored those beliefs. "The Chinese yuan is
already well on its way to becoming that globally accepted standard
unit of exchange," Fitz-Gerald wrote in the Money Morning essay. "In
fact, I'd even go so far as to say the dollar's days of dominance are
numbered and with each new round of bailout chicanery, the clock is
winding down ever faster."

By subscribing to this viewpoint, Goldman Sachs Group's O'Neill has
given Fitz-Gerald's prediction even greater credibility. Back in 2001,
in a research paper titled "The World Needs Better Economic BRICs," it
was O'Neill who coined the term "The BRICs" to refer to the emerging
economies of Brazil, Russia, India and China. That term has become so
universal - having moved beyond specialty investing circles - that
it's even used in mainstream conversations today.

Of the four BRIC countries, China is likely to have the biggest impact
in the near term. Sometime this year, in fact, the Asian giant is
likely to leapfrog Japan to become the world's No. 2 economy behind
the United States. In the next 10 years, China is likely to approach
the U.S. economy is size, O'Neill wrote.

Referring to O’Neill’s statements about the yuan’s potential to serve
as a global-reserve currency, Money Morning’s Fitz-Gerald said that “I
think a statement like this is a solid endorsement of what we’ve been
saying for a number of years, now.” The Chatham House "Beyond the
Dollar" report makes several recommendations, including the creation
of a multi-currency-reserve system, and increased use of "Special
Drawing Rights," or SDRs, as a supranational currency, Bloomberg News
reported. SDRs are a unit of account, based on a basket of currencies,
used in International Monetary Fund transactions.

Created by the IMF in 1969 to support the Bretton Woods [Agreement]
fixed-exchange-rate system, the SDR was redefined in 1973 as a basket
of currencies. Today the SDR consists of the euro, Japanese yen, pound
sterling, and U.S. dollar.

The Chatham House report stated that "the dollar-based monetary system
is no longer adequate for a larger and more integrated world economy.
Prominent developing economies are increasingly demanding to be
included in any multilateral dialogue that aims to shape the new
economic order."

This is all a very logical progression, Fitz-Gerald says. “For 18 of
last 20 centuries, China has had the world’s largest GDP,” Fitz-Gerald
said. “Therefore it’s only logical that this country would eventually
have the world’s largest reserve currency. If anything, the notion
that America – with a mere 300 million people – can have a bigger
economy than China, with 1.3 billion people, is the anomaly.” This
transition will take years play out. And U.S. investors needn’t fear
that it will serve as the death knell for the U.S. economy. “Contrary
to what some people are going to say, I don’t think this spells the
end of the dollar and I don’t think that this spells the end of the
American economy,” Fitz-Gerald says. “But I do believe it will prompt
a complete realignment of what we know to be the currency markets of
today.”

This article has been republished from Money Morning. You can also
view this article at Money Morning, an investment news and analysis
site.

Like what you read? Subscribe to our free weekly newsletter:

http://www.nuwireinvestor.com/articles/why-the-yuan-will-replace-the-dollar-as-the-worlds-54895.aspx

Sid Harth

unread,

Mar 24, 2010, 5:47:20 PM3/24/10

How to trade forex cross pairs
Marek D. Chelkowski
Published 4/1/2010

The U.S. dollar is the reserve currency of the world and as such, its
fundamentals and technicals are paramount in any trade involving it.
There are times when some news out of the Fed creates a market spike
that takes you out of a trade.

In the last 20 years, the world that was divided politically between
the ideologies of democracy and communism has become one, with a few
small exceptions. The global financial players have responded to that
transformation by sharing one stage and having access to equities,
bonds and commodities the world over almost equally and
instantaneously.

This brings us to a central place in today’s financial world: currency
markets. The spot currency markets are not only central within the
global financial system, but they also have become an asset class.
They offer great opportunities to traders and asset allocators alike
with uninterrupted trading from 5 p.m. EST on Sunday in New York until
the same time on the following Friday. The inter-bank currency
markets, long a domain of large banks, hedge funds and professional
speculators, in 2001 welcomed small investors.

Many banks and futures commission merchants (FCMs) made it possible
for investors with a few thousand dollars to trade their accounts by
offering electronic trading platforms with multiple currency crosses.
The currency markets are not linear. Crosses of the U.S. dollar vs.
major currencies are certainly an intricate, most liquid, very
important component of the forex markets, but many other pairs offer
great opportunities, if one understands their response, and their
behavior in relation to different multiple events taking place
continuously within the global financial markets. There has never been
a time in recent financial history when equities, bonds, commodities
and currencies have been so intertwined and accessible with the
Internet, allowing the traders to react to markets with one click of a
mouse.

Many traders exclusively trade U.S. dollar versus G-7 currencies, and
by this not only give up many opportunities in other crosses, but
limit their playing field.

The currencies at their core are driven by interest rates, local
economies and flow of funds in or out of that individual currency
zone. There are a few basic differences between trading major crosses
and crosses of other currencies also called exotic crosses. The
liquidity in exotic currencies is certainly lower, which translates to
wider spreads.

For example: while EUR/USD or USD/JPY may have spreads between bid and
offer from choice (no spread) to one to two pips, traders should
expect spreads in exotic currency crosses from three to 10 pips,
depending on the time of the day, which is directly linked to
liquidity and depends on the spreads the dealer offers. However, the
major cross pairs like EUR/JPY are quite liquid.

That also means that the costs of the trade are much higher when one
has to buy/sell with seven-pip spreads. Traders based in different
time zones have to be cognizant of the liquidity in the markets and
upcoming economic numbers in that currency zone and be prepared for
significant volatility during that time.

By trading a wide range of currency crosses, traders may be able not
only to diversify within forex markets but also have an opportunity to
establish positions that to some extent can offset each other.
However, trading multiple crosses resulting in many open positions
creates other problems if one is not versed in the markets and should
only be done by experienced traders.

The pound sterling has an interesting relationship with the dollar and
euro and its own unique fundamentals. There are a couple of instances
in the last six months when a bullish position in the pound vs. the
dollar would have been a loser, but a major winner against the euro.
While the fundamentals of the dollar and euro probably were the major
drivers, if the only way you could play the pound was vs. the dollar,
you had no chance to take advantage of the pound’s outperformance of
the euro (see “Pounding the euro”).

There are a number of crosses that are quite popular with traders and
do not involve the greenback. One of the most popular, very widely
traded is Japanese yen vs. G-7 currencies.

In so-called carry trades, Japanese yen vs. higher yielding currencies
(Australian, Canadian and New Zealand dollar or the euro), traders are
selling short yen and buying other currencies for a positive spread in
interest rates. For example, in 2004, Japanese interest rates were
close to zero and the Australian dollar was at 7.25%. Essentially, the
trader was being paid handsomely by borrowing in Japan and depositing
his funds in Australia.

Carry trades are not only a way to capture interest rate
differentials, but also a vote for or against risk as it was
quantified in the financial world. During the height of the financial
mania in 2008, with the risk being priced in relation to U.S.
Treasuries at negligible levels, EUR/JPY was trading close to 170 yen,
and the Australian dollar vs. yen was at 105 yen.

The traders not only got paid with higher interest rates, but also
through capital appreciation. Carry trade crosses reversed violently
when the financial crisis hit in September 2008 and AUD/JPY went from
105 to 55 EUR/JPY from 170 to 114, GBP/JPY from 251 to 118 (see
“Carrying charges,”).

In addition to interest spreads that ballooned between Treasuries and
junk bonds, nothing reflected extreme fear in the markets better than
the carry trades collapse. Another very interesting group of
currencies is commodity currencies: Australian, Canadian and New
Zealand dollars, Brazilian real, South African rand and Russian ruble.
These countries are major exporters of commodities and their
currencies respond to strength or weakness of global economies
accordingly.

While yen crosses are mainly speculative plays based on risk aversion
or lack of it within the financial markets, commodity currencies offer
a look not only at rate differential, but also capture fundamental
differences in their economies and global economic zones that they are
part of. Euro vs. Aussie dollar offers a trade in a cross that
represents Europe, an “old world” very much ingrained in Western
culture, and Australia, which is located in close proximity to China,
India, Indonesia and Japan and benefits from the insatiable appetite
of those countries for commodities. Prior to the implosion of global
equity markets in September/October 2008, EUR/AUD was trading above
2.10, which means it took more than two Australian dollars to buy one
euro. In spite of 350 basis points in interest rates in favor of
Aussie, the emergence of Asia as an economic behemoth, and the less
complicated political structure, demographic and economic advantages
of Australia over the quite fragmented, complicated Eurozone’s bloc of
countries, the market was pricing that cross at least 20% higher than
it deserved. As the crisis hit Europe and the United States greatly,
its influence on Asia and Australia was much tamer, and short-term
interest rates that eventually went to zero in the U.S. and 1% in
Europe stopped at 3.5% in Australia.

The Reserve Bank of Australia was the first major central bank to
raise interest rates. That is why EUR/AUD was trading at 1.60 at the
beginning of 2010, and with the Greece/Portugal/Spain/Ireland
sovereign crisis in full bloom, the same cross is presently priced at
1.49 (see “Sliding euro,”).

These examples show that diversification and the ability to trade many
other crosses in addition to majors can offer tremendous opportunities
for profit. However, one has to understand that trading risks may be
higher, costs of transactions may be greater and there may be somewhat
different volatility, which translates into wider daily trading
bands.Every trader needs to work these factors into their model. If
you are trading a short-term strategy that assumes you can get in and
out of the market with a one or two pip spread, you can’t simply go
from trading the EUR/USD to the EUR/AUD.

From a trader’s perspective, it may mean establishing smaller
positions, wider stops and a more patient approach, because of all of
the above. Trading all of the currencies requires complete
understanding of the risks involved and the fundamental and technical
factors driving forex markets. But there are benefits from widening
your horizons, especially in currencies, where the fundamentals of the
dollar can overwhelm the fundamentals of the specific currency you are
looking at.

Marek D. Chelkowski is a CTA based in Meridian, Idaho. He is a
discretionary trader who exclusively trades spot currency markets.

http://www.futuresmag.com/Issues/2010/April-2010/Pages/How-to-trade-forex-cross-pairs.aspx

US-China currency debacle continues Source: Global Times [01:03 March
25 2010] Comments By Liu Dong

With the US economy still in mild recovery and the unemployment rate
still high, the country's easy monetary policy is expected to be
continuously operational for an extended period, a US high-ranking
official noted Wednesday.

"The US economy is emerging from a very deep recession," but the
"underlying tendencies for growth would likely to be much more
modest," which necessitates a maintenance of the easy policy for at
least six months, Charles Evans, president and chief executive of the
Federal Reserve Bank of Chicago, said at a press conference in Beijing
talking about current American monetary policy.

"Such an accommodative policy is currently appropriate," San Francisco
Federal Reserve President Janet Yellen noted Tuesday, confirming the
Fed's pledge not to tighten monetary policy, Reuters reported.

"The US' easy monetary policy would negatively affect China's economic
and financial and macroeconomic policies," He Maochun, director of the
Research Center of Economy and Diplomacy at Tsinghua University, said.

"The loose monetary policy weakens the dollar and undermines dollar-
denominated assets to attract short-term international capital, which
drove enormous volumes of ‘hot money' into China," said Ding Dou, an
economics expert at Peking University.
"The dollar devaluation, compounded by excess liquidity, heightened
pressure to appreciate the yuan," Ding said.

"Nevertheless, a sharp rise of the yuan would wreak devastating blows
on export-oriented enterprises and cause massive layoffs, and
subsequently cause incalculable damage to the overall operation of
China's economy,"He Maochun said.
"It is also hard to find an equilibrium exchange rate point and to
define an appropriate level concerning the appreciation margin," He
added.

The Chinese authorities' denial of currency undervaluation has fueled
an ongoing spat between Beijing and Washington.

The irreconcilable interests of both sides ignited spiraling
contention, and "important negotiations" would be initiated in the
coming weeks, US Ambassador to China Jon Huntsman said in an address
at Tsinghua University last Thursday.
Evans was commissioned, at this critical moment, to conduct an
"assessment of how the two economies interact," and devise policies
that "accommodate" the situation.

In a cavalcade of governmental interaction, Zhong Shan, vice commerce
minister, was scheduled to depart today on a visit to the US, and Vice
Premier Wang Qishan, who is in charge of China-US Strategic Economic
Dialogue, met with former US Secretary of State Condoleezza Rice on
March 22.
Premier Wen Jiabao highlighted Monday the significance of the May
dialogue at the China Development Forum. "The mechanism constitutes a
vital opportunity to resolve the friction and problem, and China
prioritizes its vital role."
Huntsman noted that "this year we are putting the relationship to the
test in trying to take it to a new level," and disputes would enable
the two "concentrated … on getting to know one another better and
defining our priorities together."
"The US and China, two heavyweights vital in shaping the world order,
should not be antagonizing rivals, but instead endeavor to forge a
pivot to tackle global issues," He Maochun said.

http://business.globaltimes.cn/world/2010-03/515770.html

Leadership

Why The Yuan Can't Become The World's Reserve Currency
Ignacio de la Torre, 03.24.10, 01:25 PM EDT

Far too many things would have to go right in China and wrong in the
U.S.

When the country emerged as the world's superpower, after a protracted
confrontation, it paid a high price. It had formerly exported capital
and had its public spending well under control; now it ran extremely
dangerous trade deficits and could sustain its funding only by
massively selling bonds to its neighbor across an ocean to the west.
That neighbor built up large trade surpluses as it accumulated those
bonds. No one thought it could ever topple the superpower from its
place as world leader. They certainly didn't imagine that the bond-
buying nation would go on to make its money the world's reserve
currency. But that is exactly what happened.

The U.S. and China today? No. Great Britain and the U.S. in 1918. The
pound went into an inexorable decline after World War I that ended
with the dollar taking over when the Bretton Woods agreements were
worked out after World War II.

The consulting firm McKinsey recently published a study titled, "Will
China's Currency Replace the Dollar as the World Reserve Currency?"
It's a question many people have been asking.

There are several strong-sounding arguments in favor of the
proposition. (1) America's trade deficit has been beginning to seem
unsustainable, and shifting demographics mean it's only going to get
worse. (2) The U.S. has incurred trade deficits repeatedly for far
longer than can be explained by its having the world reserve currency,
and the Chinese Central Bank has long been accumulating reserves,
thanks to its trade surpluses. (3) The Federal Reserve's lax monetary
policy is further weakening the dollar and threatening to trigger
inflation. (4) The U.S.'s enormous and growing foreign debt might
encourage the use of inflation to devalue that debt. (5) Furthermore
the subprime crisis has profoundly harmed American financial systems
and consumers.

But there are at least nine even stronger counterarguments. (1) The
Chinese capital markets would need to have far more liquidity and
transparency before investors would consider using the renminbi
(China's official currency, whose unit of denomination is the yuan) as
a world reserve currency, and there's no sign of that coming about.
(2) The U.S. has never, in its 234 years, missed a payment on its
debt. Right at the dawn of the republic, during the War for
Independence, Congress concluded that nonpayment of debt would be
national humiliation and must never happen. (Argentina's congress took
the opposite route when it approved the nonpayment of debts in 2002,
to the applause of all the legislators present.) (3) Because China is
still a communist dictatorship, its fiscal and monetary policies won't
respond to market forces the way a democracy's do, and that creates a
strong element of uncertainty. (4) China is facing its own demographic
time bomb as a result of laws introduced in the 1980s that limit the
number of births. (5) China's economic growth is based on the export
of low-added-value products and a controlled rate of exchange, which
give it an unbalanced economy with a low level of consumerism. (6)
China is effectively two countries, one urban and developed the other
rural and undeveloped, and the divide between them could lead to
social instability that could threaten the country's economy and
currency. (7) The Chinese economy depends too heavily on exports to
one nation, the U.S., and (8) has structural weaknesses because of a
lack of supply of raw materials. (9) The U.S. economy relies on
innovation and competition to generate productivity; without those
free-market forces China's medium-term competitiveness is more
uncertain.

The pound didn't stop being the world reserve currency overnight. The
process started around 1870 and was completed in 1945. For the yuan to
take over from the dollar, the Chinese would have to do a great many
things extremely well, and the Americans would have to do a great many
things very badly. It just does not make sense to bet on that
happening. The dollar will continue to be the world reserve currency
because, among other reasons, there is no valid alternative,
especially now that the euro has been rocked by Greece's crisis.