vietnam

Does Oakland’s Police Chief Think Occupy Activists Are Anarchists?

by on November 21, 2011

Huffington Post…

WASHINGTON — Last week, civil rights attorneys in Oakland filed a motion for a temporary restraining order and a civil suit against the Oakland Police Department, alleging officers had used excessive force against Occupy Oakland activists. With the recent pepper spray incidents at UC Davis , Seattle and Portland , and the continued police clashes in New York City and elsewhere, civil litigation is inevitable. And the Oakland Police Department has exhibited some of the most brutal responses to Occupy activists. At issue is the decision by the Oakland Police Department — and its various support agencies — to use rubber bullets, bean bag pellets and tear gas on the Occupy Oakland encampment in late October and the subsequent protest march. Their responses have produced images of a wheelchair-bound protester caught in a fog of tear gas and critical injuries to two military veterans. Interim Oakland Police Department Chief Howard Jordan has promised to investigate any allegations of excessive force. Mayor Jean Quan has vowed to monitor the investigations closely. But is there an explanation for the Oakland cops’ dramatic display of force? Did Jordan look out at that sea of activism and see anarchy? He shared such sentiments in a April 2005 deposition in which he stated that he considered anti-war groups to be anarchists. The deposition was taken as part of an excessive force case in which the police department had fired non-lethal weapons on activists at the Oakland port in April 2003. Plaintiff attorney James Chanin asked Jordan about his views, noting that the police official had labeled three anti-war groups — Not In Our Name, International ANSWER and Direct Action To Stop the War — as anarchist groups in a report. As Chanin began interrogating Jordan, it became clear that the officer had done little research on the subject. “What led you to conclude that these groups were anarchist groups?” Chanin asked. “From some of the stuff I saw on the Internet and watching TV,” Jordan answered. “There had been a number of demonstrations in San Francisco where I’d seen those slogans portrayed on TV.” After a little back and forth, Chanin asked: “What did you see on the Internet that made you think that these groups were anarchist groups?” Jordan answered: “Some of the things that they were saying. Stop the war, and the government slogans, some of the things that they had — anti-government things they had spoke about doing at port, which was to shut down the port.” Chanin asked what Jordan meant by “anarchist group.” Jordan responded by stating, “To me, an anarchist is someone who is opposed to any kind of government action, someone that takes action against things being done by the government. For example, paying taxes.” Chanin followed up by asking if he noticed whether the anti-war groups called for non-violent demonstrations. Jordan admitted he did not notice. Jordan later highlighted one of the goals of the group Direct Action to Stop the War as proof that they were anti-government. The group had wanted to “to transform our cities and towns from profits, oil and war, to resistance and life.” Jordan explained: “I think this is a statement against the government, against the government entity. That’s my interpretation of it.” But there was more of Direct Action’s rhetoric that set off Jordan’s alarm bells. He answered that he believed the following statement was that of an anarchist group: “Uproot the system behind the war (and behind the war at home; racism, poverty, corporate globalization); help catalyze mass movements to challenge corporate and government power and create socially just, directly democratic ecological, peaceful alternatives.” “It’s a statement against the government,” Jordan stated. “It’s something that would promote anti-government behavior.”

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Does Oakland’s Police Chief Think Occupy Activists Are Anarchists?

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What Will Happen To Markets If The U.S. Defaults?

by AP on July 17, 2011

Huffington Post…

NEW YORK — Time is running out for Washington to raise the country’s borrowing limit and avoid a default. Wall Street isn’t panicking yet. But if the unthinkable happens, a default could strike financial markets like an earthquake. “If we just get higher longer-term interest rates, we’d be lucky,” said John Briggs, Treasury strategist at the Royal Bank of Scotland. What might markets look like after a default? The tremors from even a short-lived default could take unpredictable paths. Stocks, bonds and the dollar would likely plummet in the immediate aftermath. There’s wide agreement among economists that a default would drive up borrowing costs for everybody. U.S. Treasury yields act like a floor for other lending rates, so raising them makes it more expensive for Americans to take out mortgages, for corporations to finance new spending and for local governments to borrow. But analysts say predicting exactly how a default would play out in stocks, bonds and currency in the hours and days following the Aug. 2. debt ceiling deadline is practically impossible. “If I were to draw a flow chart, it becomes so complex it’s impossible to analyze the impact of a default,” said Guy LaBas, chief fixed income strategist at Janney Montgomery Scott. When pressed, investors say the immediate aftermath could look like the financial crisis in September 2008. Stocks would lead the way down. In the month following Lehman Brothers’ bankruptcy, for instance, the Standard & Poor’s 500 index lost 28 percent. Gold may offer some refuge. Fear has driven traders into precious metals in droves in recent years, but gold is at a record $1,594 an ounce, without taking inflation into account. But two places where traders usually hide — the dollar and U.S. Treasurys — are likely to sink as the world’s investors flee the U.S. There would be few places to hide. A deeper fear is that a default could freeze the short-term lending markets that keep money moving throughout the global financial system. Treasurys and other government-backed debt are widely as used collateral for loans in these markets. A default and a downgrade of U.S. debt by rating agencies would shake the trust in that collateral, Briggs said. Lenders could respond by demanding borrowers to post more collateral, forcing them to sell other investments to meet those demands. A similar selling cycle spread turmoil across markets when Lehman Brothers collapsed in 2008. But the fallout from a U.S. default could be much worse. “I don’t even want to think of the ripple effects,” Briggs said. Indeed, most analysts agree that if the world’s largest economy reneges on its debts, the consequences would be catastrophic. That’s why so far they’ve trusted Congressional Republicans and President Barack Obama to reach a deal. Federal Reserve Chairman Ben Bernanke certainly drew a dire picture in testimony before the Senate Banking Committee on Thursday. He said a default would be a “calamitous outcome” and “create a severe financial shock.” The global financial system relies on Treasurys, backed by the world’s largest economy and long considered one of the world’s safest bets. “A default on those securities would throw the financial system potentially into chaos,” Bernanke said. The widespread selloff that might trigger could have one benefit, Briggs and others say. Panic-selling might force Washington to quickly agree to raise the debt limit. Think back to September 2008 for some historical perspective. After the House of Representatives voted down the bailout bill to create the Troubled Asset Relief Program on Sept. 29, the Dow Jones industrial average nosedived 777 points. Congress made an about face and four days later passed the TARP bill. President George W. Bush quickly signed it into law. “We’re setting up for a TARP-like moment,” said Neil Dutta, U.S. economist at Bank of America-Merrill Lynch. “The politicians don’t come to a resolution, but the market forces a resolution.” Traders are still banking on a deal to increase the borrowing limit before the Aug. 2 deadline. That’s one reason stocks and bond yields have remained relatively stable thus far, even after Moody’s and Standard & Poor’s warned they may soon take away the country’s top credit rating. “What would shock is if Washington failed to beat the deadline,” said Tony Crescenzi, market strategist at Pimco. Crescenzi and other investors believe the negotiations could drag on until the last minute. Markets would likely greet a deal with a “relief rally,” analysts say. The effect would be the reverse of a default: Stocks, corporate bonds and the dollar all jump. “The market will react well to it,” said David Kelly, chief market strategist at J.P. Morgan Funds. Kelly said a deal would lift the uncertainty hanging over investors, especially those too worried to buy stocks now. After President Bush signed the TARP into law in 2008, for instance, the Dow made large jumps, adding as many as 946 points in a week. When Washington finally agrees to raise the debt ceiling, Treasurys could drop because investors would be more willing to take risks in other investments, Kelly said. That’s how they normally trade: Good economic news pushes Treasury prices down and yields up. The relief may not last long. If the agreement leads to deep spending cuts, Wall Street economists say it will likely drag down economic growth. Similarly, in late 2008, the wild gains evaporated as the financial crisis took hold. The S&P bottomed out in March 2009. Federal spending makes up 8 percent of gross domestic product, a broad measure of the economy. Goldman Sachs economists estimate that a deal to cut $2 trillion in spending could take 0.8 percentage points off economic growth next year. The bank already predicts modest real GDP growth of 3.1 percent in 2012. Knock off a quarter of that and the economy won’t look much better than it does now.

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What Will Happen To Markets If The U.S. Defaults?

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Harlan Green: Jobs Decline… Fed QE3 in the Works?

July 12, 2011

It should be obvious from the horrid Bureau of Labor Statistics unemployment report for June — just 18,000 net nonfarm payroll jobs added and the unemployment rate up to 9.2 percent — that we are still in some sort of a disinflationary spiral. Yes, I said disinflation, which means the rate of inflation is falling, not rising as the holders of debt would have us believe. And because employers find it difficult to raise their prices, they won’t create more jobs. And that is the Federal Reserve’s greatest fear. So we will probably see a “QE3″ round of Fed stimulus this fall. There is just not enough demand, folks, to create any sustained hiring, and the Fed is now the only entity willing to provide more stimulus, with Obama and Congress locked into downsizing government further. What is the Fed so fearful of? A Japanese-style deflation that has plagued Japan since its twin real estate and stock bubbles burst in 2000. What the Fed stimulus may look like is still up in the air. It can, of course, buy more Treasury bonds, but interest rates are already at record lows . Bernanke has hinted that the Fed can begin to reinvest the monies from maturing securities back into the market. It can also buy more mortgage-backed securities in a bid to boost the housing market, where prices are still at rock bottom. Nobelist Paul Krugman noted this in his latest blog , “Let me emphasize that last point. My bottom line on the inflation-deflation issue has always been to look at wages; you can’t have a wage-price spiral if wages ain’t spiraling. And they aren’t, to say the least.” We are in fact facing the opposite problem of the 1970s: a wage-price disinflationary spiral, at the moment, although most economists won’t call it such. Wages and salary earners that make up 80 percent of our workforce haven’t seen a real wage increase since the 1970s . The last wage-price inflationary spiral occurred in the 1970s, with inflation spiking at some 14 percent . We saw a brief spike of the Consumer Price Index to slightly above 3 percent earlier this year , though it was above 5 percent at the height of the bubble . Still, to most wage and salary earners it feels like inflation, because their real incomes have stagnated since the 1970s, which means they have not risen in relation to inflation. Real stagnant wages plus rising energy and food prices smells like inflation to those who with limited incomes. At last, we are seeing the effects of the supply-side revolution of the 1980s to date: the “reverse Robin Hood” effect mentioned by Reagan Budget Director David Stockman in a past blog . It was a revolution that said “government is the problem,” when it wasn’t governments that caused inflation in the 1970s. Its major causes were rising oil prices from the formation of the OPEC oil cartel and two oil embargos as the Vietnam War was winding down. Another sign that we are fighting falling prices are the rock-bottom interest rates. Interest rates rise in tandem with inflation, and conversely fall with declining prices. The 10-year Treasury bond just dropped below 3 percent again . This St. Louis Fed graph highlighted by Krugman charts the relationship of interest rates with jobs. “It’s important to realize, by the way, that stagnant wages are NOT good for recovery; all they do is ensure that the burden of debt relative to income remains high, keeping demand and employment down,” wrote Krugman . “The situation cries out for aggressively expansionary monetary and fiscal policy. Instead, however, all the political push is in the opposite direction.” The supply-side revolution was, and still is, a cover for cutting taxes. So-called Reaganomics didn’t cut government spending, yet they sought to suppress the wages and salaries of the middle class in a number of ways. Tax exemptions allow U.S. corporations to shelter their overseas profits from U.S. taxes until repatriated, for starters, thus encouraging them to export jobs overseas. And now Republicans are attempting to take away the collective bargaining rights of government unionized employees, such as teachers, just as they did for private industry in the 1980s and 90s. All of this suppresses household incomes without lessening household debt. So we are approaching a level of income inequality close to that of Mexico and other so-called Third World countries. Any long-term solution to our budget deficit has to recognize that fact. Unless real incomes begin to rise again, there is no chance of paying off our debts — neither our private nor public debts. © Harlan Green, 2011

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Gates Downplays Troop Cuts in Afghanistan

June 19, 2011

WASHINGTON — Outgoing Defense Secretary Robert Gates acknowledged on Sunday that the U.S. State Department is in direct talks with the Taliban in Afghanistan, but cautioned that troop drawdowns in the decade-long war will be modest at most in 2011. Speaking on CNN’s “State of the Union,” Gates said U.S. negotiations with the Taliban are unlikely to yield significant results before December. “The drawdown must be politically credible here at home,” Gates said, and implied that a call from Sen. Carl Levin (D-Mich.) to reduce troop levels by 15,000 by the year’s end may not be feasible. “We can do anything the president tells us to do, the question is whether it is wise,” Gates said. On ABC’s This Week, Sen. John McCain (R-Ariz.), one of the foremost Congressional boosters of the war in Afghanistan, said that he would support a “modest” reduction in troops of 5,000 to 10,000 this year. McCain said that Gates’ previous support for a “modest” drawdown informed his position. On “Fox News Sunday,” Gates also warned against making aggressive cuts to defense spending, saying the military is not a source of deficit trouble. “The base defense budget is not part of the deficit problem,” Gates told Chris Wallace. “The base defense budget, not counting the wars, is about 3 percent of GDP [gross domestic product].” But an examination of the full scope of military spending — not just the base defense budget — yields a higher number: In 2010, 20 percent of the U.S. budget was devoted to “defense and security-related” operations, according to the Center on Budget and Policy Priorities , a liberal-leaning think tank. This article was updated to include Sen. McCain’s comments.

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Jeffrey Rubin: Will Export Restrictions on Energy Echo Those on Food?

May 18, 2011

Higher prices are supposed to encourage more world supply. It’s standard textbook economics. But what happens when instead of export-oriented global firms, it’s governments that control supply. They may not respond to price signals the same way as profit maximizing companies. In fact, they may respond in the exact opposite way. Instead of soaring food and energy prices encouraging food and energy producers to export more, they may export less and divert more of their output to domestic markets. The reason is simple: to keep domestic prices from matching soaring world prices. When it is luxury consumer good prices, governments aren’t compelled to intervene. But when it is food and energy prices, the political pressures become immense. They are so immense you can toss your economics textbook out the window. During the food crisis of 2007 and 2008, record grain prices should have pulled food supplies out of world granaries like never before. Instead, no less than 29 food-exporting countries responding by banning food exports and kept their crop production for a hungry domestic market. As a result of that diversion from export markets, food price increases in those countries lagged well behind the ascent in world prices. Economists may not have approved but the populace did. Of course, the loss of supply from those countries made world food prices climb that much higher. And food-importing countries that secured supplies, quickly started to hoard them in anticipation that more food exporters would decide to keep their crops at home. Now we are starting to see the same pattern of export restrictions emerge in the energy industry. Growing fuel shortages in Russia have prompted the world’s largest oil producer to effectively ban gasoline exports, imposing a prohibitive 44% export tariff on them. Meanwhile, Beijing has suspended exports of diesel fuel indefinitely in anticipation of surging domestic fuel demand during the coming peak summer season. That means places like Singapore and Vietnam have to look elsewhere for their fuel. In April, China’s largest refiner, state-owned Sinopec, halted all exports of refined oil products. This month, China’s state planning agency, the National Development and Reform Commission, told all state oil companies to stop exporting diesel. The official reason was “to maintain social stability and promote economic development.” Apparently refinery margins aren’t part of the equation. The export restrictions in both countries are designed to prevent domestic refineries from taking advantage of much more attractive refinery spreads for gasoline and diesel elsewhere in the world. So far, these restrictions have only affected refined products such as gasoline or diesel. But it leaves you wondering where this is heading as energy supplies becomes scarcer. Will triple digit prices soon halt the free flow of crude oil the same way soaring crop prices halted the free flow of food?

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Dan Collins: Donald Trump’s Legacy: Would You Buy a Used Apartment From This Man?

May 16, 2011

Donald Trump is out, but the memory of the Trump-for-President era will, I hope, live on. We’ve learned a lot. The public, for instance, has been educated to understand that you can’t trust a thing the guy says. “I maintain the strong conviction that if I were to run, I would be able to win the primary and ultimately, the general election,” Trump said in a statement. Is it possible he really believes that? If so, would you buy a used apartment building from this man? The Trump presidential campaign should go down in history as a huge warning sign for other rich, high-profile jerks who think they can notch their name recognition up to even more astronomic levels by pretending to be presidential timber and making outrageous, headline-grabbing allegations about whoever’s running the country. Doesn’t work. Much more important to the egomaniacs who might be tempted to consider this kind of activity, It’s Bad For The Brand. A guy like Trump, who’s basically a reality show celebrity, can skate below the surface of real press scrutiny for a long time. For instance, he continually bragged about his academic background. “I’m a really smart guy. I was a really good student at the best school in the country,” he said on The View . Who ever bothered to check the facts – until Trump the alleged candidate started trashing Obama’s education, claiming he had “heard” that the president got terrible grades and demanding to know how he made it into Columbia and Harvard. Now – since he brought it up – we’ve learned that Trump spent two unremarkable years at Fordham (where he was on the squash team), after which he made a sudden leap to the University of Pennsylvania’s Wharton School. (The undergraduate version, not the one that gives you an MBA.) We also know that his path to that amazing leap in academic status began with an interview with an admissions officer at the University of Pennsylvania who was a high school classmate of Trump’s older brother. Also that after he got to Penn, Trump continued his pattern of never distinguishing himself academically in any way. But the real heart of the Trump Brand is his reputation as a great business guy and real estate developer. Now, thanks to a recent front-page story in the New York Times , we know that a lot of the glitzy Donald Trump housing developments are actually somebody else’s projects, which leased the Trump name and sometimes purchased an appearance by The Man himself at a meet-and-greet for prospective buyers. When the projects go bankrupt, do not expect the fact that Trump put his name on the building meant he put any money on the line. Ditto for the now apparently defunct Trump University, which, reporter Michael Barbaro noted, got a D minus from the Better Business Bureau. If we wanted to keep at it, we could go on to Trump’s military record. He recently told Fox’s Channel 5 news in New York about the “amazing” experience of being in college and watching the draft lottery during the Vietnam War and discovering that he had a “very, very high” number. The problem here is that warrior Trump got out of the Vietnam War by receiving a medical deferment. He was classified 1-Y by the Selective Service in 1968, according to Wayne Barrett’s biography of Trump. [Disclosure: Barrett and I are old friends and we have co-authored a book on Rudy Giuliani.] And the first draft lottery wasn’t held until more than a year after Trump left Penn. So again, the moral. Here was a long-running celebrity who made an extremely good living by marketing himself to the world as a colorful but (supposedly) canny blowhard businessman. Then he decides to pretend to run for president on a platform that revolved around whether the current occupant of the White House was there illegally. Now, Barack Obama is doing fine but Donald Trump has been exposed as a guy who will, for a fee, put his name on anything from a troubled real estate development to a grade D for-profit school. Who brags about a high-achieving Ivy League academic career he doesn’t really seem to have had, and who can’t even get the story of how he stayed out of Vietnam straight. He tried playing in the big leagues and came to disaster. Stick with what you do well, Donald. Go fire Gary Busey again.

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Donald Trump’s Vietnam Draft Claim Called Into Question

April 29, 2011

Earlier this week, Donald Trump said during an interview that he avoided being called to serve in the Vietnam War because he “got lucky” and “had a very high draft number.” The Smoking Gun reports , however, that appears not to have been the case. According to the website , Selective Service records tell a different story: By the time his number (356) was drawn during the December 1, 1969 draft lottery, Trump had already received four student deferments and a medical deferment, according to military records on file with the National Archives and Records Administration. An extract of Trump’s Selective Classification record, seen here, was provided in response to a TSG records request. ( Click here to view the records obtained by The Smoking Gun.) National Review Online relays what Trump initially told New York-based station WNYW about the matter earlier this week. “I was sitting at college, watching,” he said to the local outlet, “I was going to the Wharton School of Finance. And I was watching as they did the draft numbers and I got a very, very high number and those numbers [they] never got up to.” The Smoking Gun reports , however, that the draft lottery that took place in December of 1969 came eighteen months after Trump graduated from the Wharton School at the University of Pennsylvania. National Review Online questioned the claims made by Trump to WNYW on Thursday. Brian Bolduc wrote : But in her biography of Trump, Donald Trump: Master Apprentice , journalist Gwenda Blair attributes the Donald’s escape of the draft to another factor: “Donald’s military career ended with NYMA graduation; despite his athletic prowess, in 1968 he received a medical deferment from the military draft.” Trump has yet to announce whether he plans to run for president in the next election cycle. During a stop in Las Vegas on Thursday night he said he could be expected to make his plans known by June 1. When one woman at the event shouted “run for president,” the billionaire reportedly responded, “I think I am going to make you very happy on that.”

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Environmental Clean Technologies Limited (ASX:ESI) Signed Joint Venture Agreement With Vietnam For Victoria Coldry Project

April 3, 2011

Environmental Clean Technologies Limited (ASX:ESI) Signed Joint Venture Agreement With Vietnam For Victoria Coldry Project

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Paul R. Epstein, M.D., M.P.H.: Taxing Financial Speculation, Raising Funds for Critical Needs

February 15, 2011

Levying a tiny tax on financial transactions could help build a healthier and more stable future. Political discontent simmered for decades in Egypt, but soaring food prices helped push public frustration past the boiling point. As the political drama there continues to unfold, it’s critical to address the complex financial and environmental dynamics that have driven global food prices to record levels . Rising oil prices and the shift from food crops to biofuels are part of the problem. But two other factors deserve increased attention — climate change and financial speculation. Extreme weather events — like the heat wave that sparked fires across Russia’s breadbasket last summer — are tightening supplies. The impacts of severe weather in one area on distant nations (witness the food riots in Mozambique last summer as Russia cooked) emphasize the limits of adaptation. And changing weather patterns, with more droughts, floods, severe hurricanes, and winter weather anomalies, are predicted to increase in a warming world. Lester Brown, president of the Earth Policy Institute, warns that for each degree of temperature increase, crop yields are anticipated to drop by 10 percent . He notes that, with climate change and altered weather patterns, come growing water scarcity, desertification of once-arable land, and the inundation of globally important farmland — such as the Mekong and Red River deltas, which produce most of Vietnam’s rice. Experts also blame an explosion of speculation in food commodity markets for food price volatility. The original purpose of these markets was to help farmers and food processors lock in predictable prices so they could make smart business decisions. The financial speculators that now dominate the markets don’t intend to buy or sell grain or meat. Their interest lies in capitalizing on food shortages and price volatility. Thanks in part to deregulation , the speed of this global gambling can lead to boom and bust cycles that are detached from the actual value of food. The G20 finance ministers, who will meet this week in Paris, have an opportunity to take bold steps toward tackling both of these underlying causes of the food price crisis. French president Nicolas Sarkozy, currently the G20 chair, is pushing for an international agreement to adopt taxes on financial speculation that could generate massive revenues for urgent needs, including climate programs in developing countries. Here’s how this would work. A tiny levy would be charged on each financial trade, including every sale of stocks, bonds, foreign currency, credit default swaps, commodity futures, or other derivatives. Because trillions of dollars worth of transactions occur every day, even a small tax of 0.05 percent could raise more than $600 billion annually . Directing a portion of this revenue to programs to combat climate change and support global health programs would dwarf current public contributions. Speaking at the World Economic Forum in Davos, financier and philanthropist George Soros backed the idea of using some of the revenues from such a financial transactions tax (which supporters often refer to as an FTT) to fight climate change. German Chancellor Angela Merkel is another strong proponent and is exploring the possibility of moving ahead with a “coalition of the willing” rather than waiting for all G20 countries to get on board. Other financiers and governments would do well to follow the path of enlightened self-interest. The UK showed how shifting funds from finance to industry could be good for business when it took actions in the early 1990s to reduce high interest rates that were stagnating money in bank savings. Soon after, its economy took off. In a recent study, the International Monetary Fund found that taxes on financial speculation are not only technically feasible but that most G20 countries (and many others) have already implemented some form of an FTT. For example, the London Stock Exchange has long levied a 0.5 percent stamp tax on all stock trades. Though the Obama administration hasn’t yet endorsed the idea of taxing financial speculation, there is support in the U.S. Congress. In the last session, members introduced several bills to create various types of financial transactions taxes. Rep. Pete Stark (D-CA) is poised to re-introduce legislation that would put a levy on foreign currency transactions to generate revenue for deficit reduction and for global public goods, like the clean energy transformation. As the G20 meets, advocates in 20 nations around the world, including the United States, will carry out a variety of actions to send a message to G20 leaders to support levying a FTT. No one regulatory mechanism will solve all of the problems of food insecurity, climate change, and financial instability. But, with national budgets strapped and the financial sector benefitting handsomely from the global economy, it becomes even more important for speculators to do their fair share. A tax on financial speculation could be the first of many innovative mechanisms to link the economy with the environment and help build a healthier, more stable, and more secure future.

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Nicholas Carroll: The Broken Covenant Between Rich and Middle Class

February 15, 2011

Henry Ford did not invent the middle class; it had been around a long time in the form of artisans and shop-keepers. Nor did Ford single-handedly drive the expansion of the American middle class; the Industrial Revolution was already doing that. What Ford did accomplish on January 5th, 1914 — when he unilaterally raised workers’ salaries from a minimum of $2.34 a day to $5 a day — was to hugely undermine the tradition of industrial worker exploitation embraced by the robber barons of the late 1800s. He had several reasons, reducing employee turnover being one of them, but the Earth-shaker was, “So they can afford to buy my cars.” Ford wanted more customers, and to get them he needed a bigger pool of Americans with discretionary income: that group called “the middle class.” To get that — in a leap of thought — he was willing to reduce worker exploitation to sell more cars. Coming from a noted union-hater, Ford’s action and reasoning crystallized a new concept in the distribution of wealth, a concept that would have lacked the same credibility coming from workers or unions. In fact it was so radical that one commentator observed even the Wobblies were momentarily stunned into silence. It wouldn’t last long. In 1929, the combination of financial fraud and folly knocked the workers back into the mud, putting a temporary end to the growth of the middle class. Whether Federal intervention or World War II (or neither) ended the Great Depression is a moot point; what WWII did do, we are assured by people who lived through it, was “pull the country together” in a way that had not been seen before or since. Out of that heady atmosphere of cooperation and technical advance came streamlined cars, air conditioning, television, a housing boom, and the GI Bill sending blue-collar workers off to college in unprecedented numbers. By the mid-1950s, Ford’s personal dream was realized, because there were a hell of a lot of Americans who could afford to buy a car. The radical idea Ford articulated had become a covenant — and there was so much new wealth that the rich hardly seemed to object that much of it was going to the growing middle class. Where the slide started is arguable. If it didn’t start with the war in Vietnam, it unquestionably did by the early 1980s, when big business received both tacit and blatant messages from Washington that they could flout Federal regulations with relative impunity. At the same time there were increases in manufacturing and wholesaling efficiency, more outsourcing of work offshore (now called “globalization”), and the probably-unexpected bonus that women entering the workforce would allow businesses to pay everyone less. The covenant was eroding, and by the mid-1980s the middle class was beginning to need two incomes per family to stay middle class. So one could point the finger at the manufacturing sector for beginning to chew away at the gains of the middle class. But it would be Big Finance that was destined to bring us to the Great Recession, leading off with the 1980s Wall Street “bonfire of the vanities,” hitting the news with the fall of Drexel Burnham , and creating the first widespread bank crisis since the Great Depression in the form of the late 1980s savings and loan crisis. With too few executives going to jail in the S&L crisis, the financial sector retained its chutzpah, and opened the road to ruin in 1999 by lobbying through the gutting of the 1933 Glass-Steagall Act — a law that among other things limited the relationship between Big Finance and local banking. It is worth a brief detour here to consider the fundamental difference between producers and financial people. Producers need customers who buy goods and services. Financial people don’t, exactly; they live on taking a slice of transactions between producers and customers. One might call a mortgage a real product, but it’s not — it’s an enabler to the real transaction, the real transaction being where the producer (home builder) sells a home to the customer. Psychologically this means there is a huge gulf between producer and financier. The first produces or delivers a more-or-less real thing for real people. The latter takes a slice of the financial pie as it flies by; the psychology is all “take” and no “make.” (And local banking stands somewhere in between — not exactly producing, but providing some services of actual value such as checking accounts.) This is not to suggest that producers are without sin. A day never passes without news of tainted food, poisoned water, phony shortages, exploding cars, or carcinogenic drugs. Likewise there is no hard-and-fast line between business models. Automakers have become hugely dependent on financing. Major telephone companies and cable networks seem to focus more on selling contracts than providing service. But at the end of the day, good or bad product, sterling or shoddy service, the producer has to sell their product or service, or they go bankrupt. Further, they have a limited market to sell it to. Shoe companies with $100 sports shoes cannot sell them in the Third World; they need customers with $100 in discretionary income. Producers are also more accountable. Ford Motor Co. is by most reckoning on track towards a level of reliability that rivals Honda — but they have to sell those cars to an audience where some are old enough to remember Ford Pintos exploding into flames when rear-ended. Telcos stand tall in their arrogance towards customers, yet AT&T has become known for inferior cellular connections, and they are paying the price as customers ranging from individual consumers to Apple Computer vote with their feet. Big Finance is more fluid than producers in its “product packaging,” as Wall Street demonstrated by selling the worthless dregs of subprime mortgages (ersatz goods) not only to Deutsche Bank, but to the investment funds of small Norwegian towns. Big Finance is also more nimble. While Wall Street financiers don’t have the physical mobility of boiler-room online fraud operations, they don’t have factories tying them down either. The executive who can no longer find buyers for CDOs can freely move into selling bison ranching shares or tulip bulb futures to buyers from Kansas to Kenya. The bottom line is that by any sane person’s reckoning, the question “Who caused the Great Recession?” leads to the financial sector — and the certainty that, left to themselves, the financial sector will “do it again” — and again and again, leaving nothing of the covenant that “the rich shall allow the middle class a passably decent lifestyle.” So regardless of their individual politics, middle class Americans who want to remain middle class should make note of the fundamental difference between producers and big finance, and accept — or insist — that Big Finance once again be closely regulated at the Federal level. Because no matter how it is packaged, the combination of deregulation and lax regulation means “no rules” for Big Finance — and that doesn’t bode well for the remnants of the middle class.

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Nicholas Carroll: The Broken Covenant Between Rich and Middle Class

February 15, 2011

Henry Ford did not invent the middle class; it had been around a long time in the form of artisans and shop-keepers. Nor did Ford single-handedly drive the expansion of the American middle class; the Industrial Revolution was already doing that. What Ford did accomplish on January 5th, 1914 — when he unilaterally raised workers’ salaries from a minimum of $2.34 a day to $5 a day — was to hugely undermine the tradition of industrial worker exploitation embraced by the robber barons of the late 1800s. He had several reasons, reducing employee turnover being one of them, but the Earth-shaker was, “So they can afford to buy my cars.” Ford wanted more customers, and to get them he needed a bigger pool of Americans with discretionary income: that group called “the middle class.” To get that — in a leap of thought — he was willing to reduce worker exploitation to sell more cars. Coming from a noted union-hater, Ford’s action and reasoning crystallized a new concept in the distribution of wealth, a concept that would have lacked the same credibility coming from workers or unions. In fact it was so radical that one commentator observed even the Wobblies were momentarily stunned into silence. It wouldn’t last long. In 1929, the combination of financial fraud and folly knocked the workers back into the mud, putting a temporary end to the growth of the middle class. Whether Federal intervention or World War II (or neither) ended the Great Depression is a moot point; what WWII did do, we are assured by people who lived through it, was “pull the country together” in a way that had not been seen before or since. Out of that heady atmosphere of cooperation and technical advance came streamlined cars, air conditioning, television, a housing boom, and the GI Bill sending blue-collar workers off to college in unprecedented numbers. By the mid-1950s, Ford’s personal dream was realized, because there were a hell of a lot of Americans who could afford to buy a car. The radical idea Ford articulated had become a covenant — and there was so much new wealth that the rich hardly seemed to object that much of it was going to the growing middle class. Where the slide started is arguable. If it didn’t start with the war in Vietnam, it unquestionably did by the early 1980s, when big business received both tacit and blatant messages from Washington that they could flout Federal regulations with relative impunity. At the same time there were increases in manufacturing and wholesaling efficiency, more outsourcing of work offshore (now called “globalization”), and the probably-unexpected bonus that women entering the workforce would allow businesses to pay everyone less. The covenant was eroding, and by the mid-1980s the middle class was beginning to need two incomes per family to stay middle class. So one could point the finger at the manufacturing sector for beginning to chew away at the gains of the middle class. But it would be Big Finance that was destined to bring us to the Great Recession, leading off with the 1980s Wall Street “bonfire of the vanities,” hitting the news with the fall of Drexel Burnham , and creating the first widespread bank crisis since the Great Depression in the form of the late 1980s savings and loan crisis. With too few executives going to jail in the S&L crisis, the financial sector retained its chutzpah, and opened the road to ruin in 1999 by lobbying through the gutting of the 1933 Glass-Steagall Act — a law that among other things limited the relationship between Big Finance and local banking. It is worth a brief detour here to consider the fundamental difference between producers and financial people. Producers need customers who buy goods and services. Financial people don’t, exactly; they live on taking a slice of transactions between producers and customers. One might call a mortgage a real product, but it’s not — it’s an enabler to the real transaction, the real transaction being where the producer (home builder) sells a home to the customer. Psychologically this means there is a huge gulf between producer and financier. The first produces or delivers a more-or-less real thing for real people. The latter takes a slice of the financial pie as it flies by; the psychology is all “take” and no “make.” (And local banking stands somewhere in between — not exactly producing, but providing some services of actual value such as checking accounts.) This is not to suggest that producers are without sin. A day never passes without news of tainted food, poisoned water, phony shortages, exploding cars, or carcinogenic drugs. Likewise there is no hard-and-fast line between business models. Automakers have become hugely dependent on financing. Major telephone companies and cable networks seem to focus more on selling contracts than providing service. But at the end of the day, good or bad product, sterling or shoddy service, the producer has to sell their product or service, or they go bankrupt. Further, they have a limited market to sell it to. Shoe companies with $100 sports shoes cannot sell them in the Third World; they need customers with $100 in discretionary income. Producers are also more accountable. Ford Motor Co. is by most reckoning on track towards a level of reliability that rivals Honda — but they have to sell those cars to an audience where some are old enough to remember Ford Pintos exploding into flames when rear-ended. Telcos stand tall in their arrogance towards customers, yet AT&T has become known for inferior cellular connections, and they are paying the price as customers ranging from individual consumers to Apple Computer vote with their feet. Big Finance is more fluid than producers in its “product packaging,” as Wall Street demonstrated by selling the worthless dregs of subprime mortgages (ersatz goods) not only to Deutsche Bank, but to the investment funds of small Norwegian towns. Big Finance is also more nimble. While Wall Street financiers don’t have the physical mobility of boiler-room online fraud operations, they don’t have factories tying them down either. The executive who can no longer find buyers for CDOs can freely move into selling bison ranching shares or tulip bulb futures to buyers from Kansas to Kenya. The bottom line is that by any sane person’s reckoning, the question “Who caused the Great Recession?” leads to the financial sector — and the certainty that, left to themselves, the financial sector will “do it again” — and again and again, leaving nothing of the covenant that “the rich shall allow the middle class a passably decent lifestyle.” So regardless of their individual politics, middle class Americans who want to remain middle class should make note of the fundamental difference between producers and big finance, and accept — or insist — that Big Finance once again be closely regulated at the Federal level. Because no matter how it is packaged, the combination of deregulation and lax regulation means “no rules” for Big Finance — and that doesn’t bode well for the remnants of the middle class.

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Joe Jackson Invests In Vietnam ‘Happyland’ Park

February 14, 2011

HANOI, Vietnam — Joe Jackson, father of late king of pop Michael Jackson, was in Vietnam to attend Monday’s groundbreaking ceremony for a five-star hotel and amusement park called “Happyland.” Online newspaper VietnamNet said Jackson, 82, was at the groundbreaking as one of the investors in the $2 billion, five-star 1,000-room hotel and amusement park in southern Long An province, located about 20 minutes outside Ho Chi Minh City. It is scheduled to be finished in 2014, and is designed to attract up to 14 million visitors annually. “I like discovering different cultures in the world,” VietnamNet quoted Jackson as saying. “I like this project the most because it is located in a beautiful cultural and natural space.” Vietnam has promoted the project – which includes a water park, theaters and restaurants – as the region’s largest entertainment complex. Pop icon Michael Jackson, 50, died in 2009 from an overdose of the powerful anesthetic propofol and other sedatives. His doctor has pleaded not guilty to charges of involuntary manslaughter. Michael Jackson was known for his creation of Neverland Ranch, a huge complex complete with an amusement park, in California where he lived.

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The Day The Music Died

February 10, 2011

NEW YORK — These days, guns are more popular than guitars, at least when it comes to video games. The company behind “Guitar Hero” said Wednesday that it is pulling the plug on one of the most influential video game titles of the new century. Activision Blizzard Inc., which also produces the “Call of Duty” series, is ending the “Guitar Hero” franchise after a run of more than five years. The move follows Viacom Inc.’s decision in November to sell its money-losing unit behind the “Rock Band” video games. Harmonix was sold to an investment firm for an undisclosed sum. Harmonix, incidentally, was behind the first “Guitar Hero” game. Game industry analysts have long lamented the “weakness in the music genre,” as they call it – that is, the inability of game makers to drum up demand for the products after an initial surge in popularity in the mid-2000s. Music games are often more expensive than your typical shoot-’em-up game because they require guitars, microphones and other musical equipment. While extra songs can be purchased for download, this hasn’t been enough to keep the games profitable. Activision’s shares tumbled after the announcement, but investors appear more concerned with the company’s disappointing revenue forecast than the demise of the rocker game. As far as investors go, discontinuing an unprofitable product isn’t the end of the world, even if “Guitar Hero” fans disagree. “In retrospect it was a $3 billion or more business that everybody needed to buy, so they did, but they only needed to buy it once,” said Wedbush Morgan analyst Michael Pachter. “It’s much like ‘Wii Fit.’ Once you have it, you don’t need to buy another one.” “Guitar Hero” was iconic and often praised for getting a generation weaned on video games into music. But its end after a mere half a decade is a big contrast to other influential video game franchises, such as the 25-year-old Mario series from Nintendo. “Call of Duty” first launched in 2003, two years before “Guitar Hero.” In a conference call, Activision said its restructuring will mean the loss of about 500 jobs in its Activision Publishing business, which has about 7,000 employees. But the company’s overall work force numbers are not going to change much because it is hiring people elsewhere. Activision did better than expected in the fourth quarter, which ended in December, but that already was anticipated. After all, it launched “Call of Duty: Black Ops” in November. That game, which is mostly set during the Vietnam War, made $1 billion after just six weeks in stores. Its latest “World of Warcraft” game has also been doing well. Bobby Kotick, Activision’s CEO, said the company’s big franchises “have larger audience bases than ever before and we continue to see significantly enhanced user activity and engagement for our expanding online communities.” Revenue from so-called “digital channels” – that is, downloads, subscriptions and extra game content sold online – now accounts for 30 percent of the company’s total revenue. Activision said Wednesday it lost $233 million, or 20 cents per share, in the latest quarter, compared with a loss of $286 million, or 23 cents per share, in the same period a year earlier. Net revenue fell to $1.43 billion from $1.56 billion. Its adjusted earnings of 53 cents per share were better than last year’s 49 cents and beat analysts’ expectations of 51 cents, according to FactSet. Revenue that’s been adjusted to account for games with online components was $2.55 billion, up slightly from $2.50 billion a year earlier and above analysts’ $2.25 billion forecast. For the current quarter, which ends in March, Activision forecast adjusted earnings of 7 cents per share, and adjusted revenue of $640 million. Analysts are looking for earnings of 10 cents per share on higher revenue of $771 million. Activision Blizzard also said its board authorized a new $1.5 billion stock buyback plan. And it declared an annual dividend of 16.5 cents, an increase of 10 percent from the dividend it issued in February 2010, its first ever. Shares of the Santa Monica, Calif.-based company, which is majority-owned by France’s Vivendi SA, tumbled 87 cents, or 7.4 percent, to $10.82 in after-hours trading. The stock had closed the regular session down 19 cents at $11.69.

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Tea Party-Backed Lawmakers: Defense In Mix For Budget Cuts

January 23, 2011

WASHINGTON — Back home, tea partiers clamoring for the debt-ridden government to slash spending say nothing should be off limits. Tea party-backed lawmakers echo that argument, and they’re not exempting the military’s multibillion-dollar budget in a time of war. That demand is creating hard choices for the newest members of Congress, especially Republicans who owe their elections and solid House majority to the influential grass-roots movement. Cutting defense and canceling weapons could mean deep spending reductions and high marks from tea partiers as the nation wrestles with a $1.3 trillion deficit. Yet it also could jeopardize thousands of jobs when unemployment is running high. Proponents of the cuts could face criticism that they’re trying to weaken national security in a post-Sept. 11 world. House Republican leaders specifically exempted defense, homeland security and veterans’ programs from spending cuts in their party’s “Pledge to America” campaign manifesto last fall. But the House’s new majority leader, Rep. Eric Cantor, R-Va., has said defense programs could join others on the cutting board. The defense budget is about $700 billion annually. Few in Congress have been willing to make cuts as U.S. troops fight in Afghanistan and finish the operation in Iraq. Defense Secretary Robert Gates, in a recent pre-emptive move, proposed $78 billion in spending cuts and an additional $100 billion in cost-saving moves. While that amounts to $13 billion less than the Pentagon wanted to spend in the coming year, it still stands as 3 percent growth after inflation is taken into account. That’s why tea party groups say if the government is going to cut spending, the military’s budget needs to be part of the mix. “The widely held sentiment among Tea Party Patriot members is that every item in the budget, including military spending and foreign aid, must be on the table,” said Mark Meckler, co-founder of the Tea Party Patriots. “It is time to get serious about preserving the country for our posterity. The mentality that certain programs are ‘off the table’ must be taken off the table.” Former House Majority Leader Dick Armey and Matt Kibbe, leaders of the group FreedomWorks, recently wrote in a Wall Street Journal editorial that “defense spending should not be exempt from scrutiny.” On Gates’ proposed savings of $145 billion over five years, they said, “That’s a start.” Just about all Republicans – and plenty of Democrats, too – favor paring back spending. But when it comes to specific cuts – eliminating money for schools, parks, hospitals, highways and everything else – the decisions get difficult. Every government expenditure has its advocate and no one wants his or her program cut. Fault lines have emerged within the Republican ranks over how deep to cut and where to whittle. In the coming weeks, lawmakers will feel the pressure from constituents and colleagues. “Everything is ultimately on the table,” said Rep. Jon Runyan of New Jersey, a freshman Republican and a tea party favorite. That view could produce a rough tenure for the 6-foot-7 former football player, who just earned a coveted spot on the House Armed Services Committee, a fierce protector of military interests. The congressman’s district is home to Fort Dix, which merged with neighboring McGuire Air Force Base and Lakehurst Naval Air Engineering Station to make the military’s first three-branch base. Runyan expects a committee fight over Gates’ proposal to cancel a $14 billion program to develop the Expeditionary Fighting Vehicle for the Marines and use that money to buy additional ships, F-18 jets and new electronic jammers. Already, several members of the panel, including the chairman, Rep. Buck McKeon, R-Calif., have signaled they will challenge Gates’ move. Runyan says he will decide after he’s heard arguments from both sides. No matter how much defense spending is trimmed, none of the cuts is likely to reduce the money that’s available to the military to spend on the war fronts. “We want to make sure men and women put in harm’s way have the resources they need,” said Sen. Pat Toomey, R-Pa., who recently traveled to Afghanistan and Pakistan with several of his GOP colleagues, including a number of other freshmen. “That doesn’t mean the entire defense budget has to be taken off the table,” he added. Kentucky Sen. Mitch McConnell, the top Republican in the Senate, said he didn’t think “anything ought to be off-limits for the effort to reduce spending.” He told “Fox News Sunday” that “I don’t think we ought to start out with the notion that a whole lot of areas in the budget are exempt from reducing spending, which is what we really need to do and do it quickly.” Rep. Kevin Brady, R-Texas, has proposed cutting total government spending by $153 billion, including deep reductions in defense and elimination of several weapons programs. Brady called it a “down payment” on getting the country’s finances in order. In an unusual political pairing, liberal Rep. Barney Frank, D-Mass., and Rep. Ron Paul of Texas, a libertarian and former Republican presidential candidate, have joined forces in pushing for substantial reductions in the defense budget, including closing some of the 600-plus military bases overseas. “I’ll work with anybody,” Frank said of the effort, which could attract other liberal Democrats who have tried for years to reduce post-Cold War military spending and tea party-backed Republicans. The schism within the GOP is philosophical as well as generational. Paul’s son, Sen. Rand Paul of Kentucky, 48, a tea party favorite, says all spending should come under scrutiny, from food stamps to foreign aid to money for wars. Sen. John McCain, R-Ariz., 74, a decorated Vietnam War veteran, worries about the rise of protectionism and isolationism in the Republican Party. For all the talk, one tea party group is willing to give lawmakers some leeway, provided that they adhere to the movement’s values. Sal Russo, chief strategist of the Tea Party Express, said the defense budget should be part of the calculation and his organization expects lawmakers to “responsibly bring spending down.” He added that his group will give them “flexibility to do their job.” Tea party-backed Rep. Tim Scott, R-S.C., said lawmakers “at the end of the day, will take a look at all the fat in the budget.” But he said it was premature with two wars to say how Congress will make the cuts. Scott has two brothers in the military – one in the Air Force, the other in the Army. ___ Online: Pledge to America: http://pledge.gop.gov Tea Party Patriots: http://www.teapartypatriots.org Tea Party Express: http://www.teapartyexpress.org FreedomWorks: http://www.freedomworks.org

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BP Survives? Oil Spill Won’t Impact ‘Ability To Do Business’

December 29, 2010

NEW YORK — As the Gulf oil spill gushed out of control, BP’s financial liabilities seemed big enough to sink the company. No more. Cleanup, government fines, lawsuits, legal fees and damage claims will likely exceed the $40 billion that BP has publicly estimated, according to an Associated Press analysis. But they’ll be far below the highest estimates made over the summer by legal experts and prominent Wall Street banks, such as Goldman Sachs, which said costs could near $200 billion. BP will survive the worst oil spill in U.S. history for several key reasons: it has little debt; its global businesses are forecast to generate $26 billion next year in cash flow from operations; the environmental impact of the spill isn’t as bad as feared; and the government seems unlikely to ban BP from Gulf drilling. To bolster its finances, BP has cut its dividend, issued debt and sold more than $21 billion in assets. “It could have been a lot worse,” says Tyler Priest, a University of Houston petroleum historian who serves on President Obama’s oil spill investigation committee. “BP is going to come back from this.” Many influential investors appear to agree. According to Thomson Reuters, 23 firms with $1 billion or more invested in the stock market, including BlackRock Investment Management, Managed Account Advisors and Rydex Security Global Investors, more than doubled their holdings of BP stock from July through September. At $44.11, BP’s stock price has risen 63 percent from its low of $27.02 on June 25. It’s still down 27 percent from its close of $60.48 on April 20, the day of the spill. The well was capped on July 15. The AP analysis shows the company is likely to face $38 billion to $60 billion in spill-related costs. A settlement with the federal government could reduce that amount, while a successful class-action lawsuit could add billions more. The analysis includes: _The $10.7 billion that BP already has paid to plug its well, clean up the spilled oil and pay damage claims and other costs. _A $20 billion fund that BP set up in August for individuals and private businesses that were affected by the spill. The fund, known as the Gulf Coast Claims Facility, pays for environmental damage, personal injury, cleanup and lost earnings. The fund so far has paid $2.7 billion to address nearly 168,000 claims. Nearly half a million individuals and businesses have filed claims, and those that settle with the fund give up their right to sue the company. If any of the $20 billion is left over, it goes back to BP. _Fines: The Justice Department is suing BP for violating the Clean Water Act. Fines are based on how much oil was spilled. The government’s estimate of 4.9 million barrels means BP faces between $5.4 billion and $21.1 billion in fines. The upper limit applies if investigators conclude BP acted with gross negligence. The government has a history of settling with companies for as little as 50 cents on the dollar in order to avoid lengthy disputes, says Eric Schaeffer, former head of the Environmental Protection Agency’s enforcement division. _Legal fees: BP has hired lawyers, engineers and geologists to defend the company. These experts could cost as much as $2 billion, according to Mitratech Inc., a consulting firm that handles legal and trial logistics for Fortune 500 companies. _Lawsuits: The toughest costs to estimate are future settlements and judgments from the hundreds of lawsuits filed against BP, including any class actions. Shrimpers, oystermen, charter-boat operators, restaurant workers and real-estate developers are suing BP for lost business. Oil rig workers and cleanup crews are making personal injury claims. And Gulf states and local governments are expected to sue for lost tax revenue and environmental damages. Alabama is seeking an initial $148 million from BP. Analysts at Citigroup say settlements, judgments and punitive damages from these suits will total as much as $6 billion. Legal experts caution that the unpredictability of juries makes it difficult to estimate the cost of losing a class-action lawsuit. A successful class-action could easily double the Citigroup estimate for total legal liabilities, says Alexandra Lahav, a University of Connecticut professor who studies such lawsuits. BP may be able to spread the spill’s costs around. Minority partners Anadarko Petroleum Corp. and MOEX 2007 LLC own 35 percent of the operation, and rig owner Transocean Ltd. also may be asked to pay. “Companies have the incentive to settle with BP to put the matter behind them,” FBR analyst Robert MacKenzie says. He expects BP to get as much as $2 billion from Transocean and as much as $4 billion from Anadarko. “We’ve set aside what we think is the right amount to pay for the relevant costs” from the spill, BP spokeswoman Sheila Williams says. Since the spill, BP has moved aggressively to shore up its finances. The company suspended its quarterly dividend of 84 cents a share, which cost it $10.5 billion last year. It also raised $21 billion in asset sales that include: $7 billion for its stake in Pan American Energy; $7 billion for oil fields in the U.S., Canada and Egypt; $1.9 billion for its Colombian exploration business; and $1.8 billion for assets in Vietnam and Venezuela. BP also raised $3.5 billion in an Oct. 1. bond sale. From April through June, when BP’s stock was tanking, Fred Fromm, who manages a natural resources fund for Franklin Templeton Investments, scooped up 170,000 shares. Their value climbed by more than $2 million in the third quarter. A few weeks after the Deepwater Horizon rig exploded and sank, scientists worried the oil slick would reach the Gulf’s Loop Current, which sweeps around Florida and up the East Coast. Beaches would be damaged along the way. But BP got lucky. Gulf winds kept shifting, which kept the oil concentrated in the waters south of Louisiana, said David Hollander, a University of South Florida chemical oceanographer. And hurricanes mostly avoided the region. Scientists disagree about how much oil remains in the Gulf, but already the streaky sheens of oil on the surface are mostly gone. The more oil that remains, the greater the potential for environmental lawsuits. Whatever remains, “it won’t impact their long-term ability to do business,” says Citigroup oil analyst Mark Fletcher. Exxon dealt with lawsuits for decades after its Valdez supertanker ran aground and spilled 11 million gallons of crude into Alaska’s Prince William Sound in 1989. The spill cost Exxon $4.5 billion – nearly half of which went to clean up the oil. The rest was spent on payments to residents and businesses, punitive damages and settlements with the government. Exxon never lost its perch among industry leaders, and BP won’t either, says Citigroup’s Fletcher. BP remains among the top oil drillers in a world that runs on petroleum, and that may be the best way to judge the company’s lasting power. “Did (Valdez) stop anyone from buying Exxon gasoline? No. Exxon’s results are better than anyone’s on a multiyear basis,” Fletcher said.

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Gold-Dispensing ATM Machine Makes Its Debut In America

December 17, 2010

BOCA RATON, Fla. — Shoppers who are looking for something sparkly to put under the Christmas tree can skip the jewelry and go straight to the source: an ATM that dispenses shiny 24-carat gold bars and coins. A German company installed the machine Friday at an upscale mall in Boca Raton, a South Florida paradise of palm trees, pink buildings and wealthy retirees. Thomas Geissler, CEO of Ex Oriente Lux and inventor of the Gold To Go machines, says the majority of buyers will be walk-ups enamored by the novelty. But he says they’re also convenient for more serious investors looking to bypass the hassle of buying gold at pawn shops and over the Internet. “Instead of buying flowers or chocolates, which is gone after two or three minutes, this will stay for the next few hundreds years,” Geissler told The Associated Press in a telephone interview. The company installed its first machine at Abu Dhabi’s Emirates Palace hotel in May and followed up with gold ATMs in Germany, Spain and Italy. Geissler said they plan to unroll a few hundred machines worldwide in 2011. He said the Abu Dhabi machine has been so popular it has to be restocked every two days. A bank in Vietnam installed its own brand of the machines in a country with a much poorer population but one that values gold more than paper money. The gold-leaf-covered machine at Boca Raton’s Town Center Mall sits outside a gourmet chocolate store and works much like the cash ATM beside it. Shoppers insert cash or credit cards and use a computer touch-screen to choose the weight and style they want. The machine spits out the gold in a classy black box with a tamperproof seal. Each machine, manufactured in Germany, carries about 320 pieces of different-sized bars and coins. Prices are refigured automatically every 10 minutes to reflect market fluctuations. On Friday, a two-gram piece cost about $122, including packaging, certification and a 5 percent markup. An ounce cost about $1,442. Buyer beware: A gram of the heavy metal is much smaller than you think, about the size of a fingernail. An ounce is a little larger than a quarter. Florence Schneider, who checked out the machine Friday, said she might use it, but only if she needed a unique gift. “I can’t see it being successful. Maybe for Christmas as a gimmick,” said the 78-year-old Boca Raton resident. “If I knew someone was having a big birthday coming up I’d buy it for something different.” Owners said the machine, which will hold around $150,000 in cash and gold, will be flanked by an armed bodyguard for now. Several live security cameras are fixed inside and outside the machine. The popularity of gold is cyclical, but it’s riding high these days in part because of fears stoked by financial troubles. Geissler, who plans to open a machine in Las Vegas by the year’s end, said the collapse of the Lehman Brothers investment firm was the impetus for the flashy ATMs. His customers refused to buy bonds, stocks and other funds from the financial industry, so they focused on precious metals. As some investors continued to lose faith in global finance markets, the company worked on the gold-leaf finished ATM, banking that the protection of purchasing power found in gold would lure market leery customers. “Gold always comes back to its real value,” Geissler said. “It’s not diamonds, it’s not silver, it’s not real estate. It’s just gold.” Dave Jones, who brokered the deal to bring the machines to the U.S., predicts gold will become a parallel currency in the next five years. He said they plan to install about 40 more machines at upscale malls and hotels around the U.S. “Gold has a place in everyone’s portfolio,” said Jones, of Boca Raton-based PMX Gold. “It’s a good hedge against inflation and it’s a good comfort level.” ___ Associated Press writer Suzette Laboy contributed to this report. ___ Online: Gold To Go: http://www.gold-to-go.com/en/

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Gold-Dispensing ATM Machine Makes Its Debut In America

December 17, 2010

BOCA RATON, Fla. — Shoppers who are looking for something sparkly to put under the Christmas tree can skip the jewelry and go straight to the source: an ATM that dispenses shiny 24-carat gold bars and coins. A German company installed the machine Friday at an upscale mall in Boca Raton, a South Florida paradise of palm trees, pink buildings and wealthy retirees. Thomas Geissler, CEO of Ex Oriente Lux and inventor of the Gold To Go machines, says the majority of buyers will be walk-ups enamored by the novelty. But he says they’re also convenient for more serious investors looking to bypass the hassle of buying gold at pawn shops and over the Internet. “Instead of buying flowers or chocolates, which is gone after two or three minutes, this will stay for the next few hundreds years,” Geissler told The Associated Press in a telephone interview. The company installed its first machine at Abu Dhabi’s Emirates Palace hotel in May and followed up with gold ATMs in Germany, Spain and Italy. Geissler said they plan to unroll a few hundred machines worldwide in 2011. He said the Abu Dhabi machine has been so popular it has to be restocked every two days. A bank in Vietnam installed its own brand of the machines in a country with a much poorer population but one that values gold more than paper money. The gold-leaf-covered machine at Boca Raton’s Town Center Mall sits outside a gourmet chocolate store and works much like the cash ATM beside it. Shoppers insert cash or credit cards and use a computer touch-screen to choose the weight and style they want. The machine spits out the gold in a classy black box with a tamperproof seal. Each machine, manufactured in Germany, carries about 320 pieces of different-sized bars and coins. Prices are refigured automatically every 10 minutes to reflect market fluctuations. On Friday, a two-gram piece cost about $122, including packaging, certification and a 5 percent markup. An ounce cost about $1,442. Buyer beware: A gram of the heavy metal is much smaller than you think, about the size of a fingernail. An ounce is a little larger than a quarter. Florence Schneider, who checked out the machine Friday, said she might use it, but only if she needed a unique gift. “I can’t see it being successful. Maybe for Christmas as a gimmick,” said the 78-year-old Boca Raton resident. “If I knew someone was having a big birthday coming up I’d buy it for something different.” Owners said the machine, which will hold around $150,000 in cash and gold, will be flanked by an armed bodyguard for now. Several live security cameras are fixed inside and outside the machine. The popularity of gold is cyclical, but it’s riding high these days in part because of fears stoked by financial troubles. Geissler, who plans to open a machine in Las Vegas by the year’s end, said the collapse of the Lehman Brothers investment firm was the impetus for the flashy ATMs. His customers refused to buy bonds, stocks and other funds from the financial industry, so they focused on precious metals. As some investors continued to lose faith in global finance markets, the company worked on the gold-leaf finished ATM, banking that the protection of purchasing power found in gold would lure market leery customers. “Gold always comes back to its real value,” Geissler said. “It’s not diamonds, it’s not silver, it’s not real estate. It’s just gold.” Dave Jones, who brokered the deal to bring the machines to the U.S., predicts gold will become a parallel currency in the next five years. He said they plan to install about 40 more machines at upscale malls and hotels around the U.S. “Gold has a place in everyone’s portfolio,” said Jones, of Boca Raton-based PMX Gold. “It’s a good hedge against inflation and it’s a good comfort level.” ___ Associated Press writer Suzette Laboy contributed to this report. ___ Online: Gold To Go: http://www.gold-to-go.com/en/

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Steve Clemons: The Impact Today and Tomorrow of Chalmers Johnson

November 21, 2010

Next week, Foreign Policy magazine and its editor-in-chief Susan Glasser will be releasing its 2nd annual roster of the world’s greatest thinkers and doers in foreign policy. I have seen the list — and it’s impressively creative and eclectic. There is one name that is not on the FP100 who should be — and that is Chalmers Johnson , who from my perspective rivals Henry Kissinger as the most significant intellectual force who has shaped and defined the fundamental boundaries and goal posts of US foreign policy in the modern era. Johnson, who passed away Saturday afternoon at 79 years, invented and was the acknowledged godfather of the conceptualization of the ” developmental state “. For the uninitiated, this means that Chalmers Johnson led the way in understanding the dynamics of how states manipulated their policy conditions and environments to speed up economic growth. In the neoliberal hive at the University of Chicago, Chalmers Johnson was an apostate and heretic in the field of political economy. Johnson challenged conventional wisdom with he and his many star students — including E.B. Keehn, David Arase, Marie Anchordoguy, Mark Tilton and others — writing the significant treatises documenting the growing prevalence of state-led industrial and trade and finance policy abroad, particularly in Asia. Today, the notion of “State Capitalism” has become practically commonplace in discussing the newest and most significant features of the global economy. Chalmers Johnson invented this field and planted the intellectual roots of understanding that other nation states were not trying to converge with and follow the so-called American model. Johnson for his seminal work on Japanese political economy, MITI and the Japanese Miracle was dubbed by Newsweek ‘s Robert Neff as “godfather of the revisionists” on Japan. Neff also tagged Clyde Prestowitz, James Fallows, Karel van Wolferen and others like R. Taggart Murphy and Pat Choate as the leaders of a new movement that argued that Japan was organizing its political economy in different ways than the U.S. This was a huge deal in its day — and these writers and thinkers led by the implacable Johnson were attacked from all corners of American academia and among the crowd of American Japan-hands who wanted to deflect rather than focus a spotlight on the fact that Japan’s economic mandarins were really the national security elite of the Pacific powerhouse nation. In the 1980s when Johnson was arguing that Japan’s state directed capitalism was succeeding at not only propelling Japan’s wealth upwards but was creating “power” for Japan in the eyes of the rest of the world, Kissinger and the geostrategic crowd could not see beyond the global currency and power realities of nuclear warheads and throw-weight. The revisionists were responsible for injecting the economic dynamics of power and national interest in the equation of a nation’s global status. To understand China’s rise today, the fact that China has become the Google of nations and America the General Motors of countries — the US being seen by others as a very well branded, large, underperforming country — one must go back to Chalmers Johnson’s work on the developmental state. Scratch beneath these Johnson breakthroughs though and go back another decade and a half and one finds that Chalmers Johnson, a one time hard-right national security hawk, deconstructed the Chinese Communist revolution and showed that the dynamic that drive the revolutionary furor had less to do with class warfare and the appeal of communism but rather high octane “nationalism.” Johnson saw earlier than most that the same dynamic was true in Vietnam. His work which was published as Peasant Nationalism and Communist Power while a UC Berkeley doctoral student launched him as a formidable force in Asia-focused intellectual circles in the U.S. Johnson’s ability to launch an instant, debilitating broadside against the intellectual vacuousness of friends or foes made him controversial. He chafed under the UC Berkeley Asia Program leadership of Robert Scalapino whom Johnson viewed as one of the primary dynastic chiefs of what became known as the “Chrysanthemum Club”, those whose Japan-hugging meant overlooking and/or ignoring the characteristics of Japan’s state-led form of capitalism. Johnson was provocatively challenged graduate students in the field to choose sides — to work either on the side where they acquiesced to a corrupt culture of US-Japan apologists who wanted the quaint big brother-little brother frame for the relationship to remain the dominant portal through which Japan was viewed or alternatively on the side of those who saw Japan and America’s forfeiture of its own economic interests as empirical facts. When Robert Scalapino refused to budge despite Johnson’s agitation, Johnson who then headed UC Berkeley’s important China Studies program abandoned the university and became the star intellectual of UC San Diego’s School of International Relations and Pacific Studies . There is no doubt that Johnson but UCSD’s IRPS on the map and gave it an instant, global boost. But as usual, Johnson — incorruptible and passionate about policy, theory, and their practice — eventually went to war with the bureaucrats running that institution. Those who had come in to head it were devotees of “rational choice theory” — which was spreading through the fields of political science and other social sciences as the so-called softer sciences were trying to absorb and apply the harder-edged econometrics-driven models of behavior that the neoliberal trends in economics were using. Johnson and one of his proteges, E.B. “Barry” Keehn, wrote a powerful indictment of rational choice theory that helped trigger a long-running and still important intellectual divide that showed that rational choice theory was one of the great ideological delusions of the era. I too joined this battle and wrote extensively about the limits of rational choice theory which I myself saw dislodging university language programs, cultural studies, and more importantly — the institutional/structural approaches to understanding other political systems. Johnson once told me when I was visiting him and his long-term, constant intellectual partner and wife, Sheila Johnson, that the UCSD School of International Relations and Pacific Studies no longer either really taught international relations or pacific studies — and that a student’s entire first year was focused on acultural skill set development in economics and statistics. To Johnson, this tendency to elevate econometric formulas over the actual study of a nation’s language, history, culture and political system was part of America’s growing cultural imperialism. Studying “them” is really about “us” — as “they” will converge to be like “us” or will fall to the way side and be insignificant. It was that night that Chalmers Johnson, Sheila Johnson and I agreed to form an idea on had been developing called the Japan Policy Research Institute . Chalmers became President and I the Director. We maintained this working relationship at the helm of JPRI together for more than 12 years and spoke nearly every week if not every other day as we tried to acquire and publish the leading thinking on Japan, US-Japan relations and Asia more broadly. We became conveners, published works on Asia that the official journals of record of US-Asia policy viewed as too risky, and emerged as key players in the media on all matters of America’s economic, political, and military engagement in the Pacific. Today, JPRI is headed by Chiho Sawada and is based at the University of San Francisco. However, this base of JPRI gave Chalmers Johnson the launch pad that led to the largest contribution of his career to America’s national discourse. From his granular understanding of political economy of competing nations, his understanding of the national security infrastructure of both sides of the Cold War, he saw better than most that the US had organized its global assets — particularly its vassals Japan and Germany — in a manner similar to the Soviet Union. Both sides looked like the other. Both were empires. The Soviets collapsed, Chalmers told me and wrote. The U.S. did not — yet. The rape of a 12 year-old girl by three American servicemen in Okinawa, Japan in September 1995 and the statement by a US military commander that they should have just picked up a prostitute became the pivot moving Johnson who had once been a supporter of the Vietnam War and railed against UC Berkeley’s anti-Vietnam protesters into a powerful critic of US foreign policy and US empire. Johnson argued that there was no logic that existed any longer for the US to maintain a global network of bases and to continue the occupation of other countries like Japan. Johnson noted that there were over 39 US military installations on Okinawa alone. The military industrial complex that Eisenhower had warned against had become a fixed reality in Johnson’s mind and essays after the Cold War ended. In four powerful books, all written not in the corridors of power in New York or Washington — but in his small home office at Cardiff-by-the-Sea in California, Johnson became one of the most successful chroniclers and critics of America’s foreign policy designs around the world. Before 9/11, Johnson wrote the book Blowback: The Costs and Consequences of American Empire . After the terrorist attacks in 2001 in New York and Washington, Blowback became the hottest book in the market. The publishers could not keep up with demand and it became the most difficult to get, most wanted book among those in national security topics. He then wrote Sorrows of Empire: Militarism, Secrecy and the End of the Republic , Nemesis: The Last Days of the American Republic , and most recently Dismantling the Empire: America’s Last Best Hope . Johnson, who used to be a net assessments adviser to the CIA’s Allen Dulles, had become such a critic of Washington and the national security establishment that this hard-right conservative had become adopted as one of the political left’s greatest icons. Johnson measured himself to som e degree against the likes of Noam Chomsky and Gore Vidal — but in my mind, Johnson was the more serious, the most empirical, the most informed about the nooks and crannies of every political position as he had journeyed the length of the spectrum. Chalmers Johnson served on my board when I worked at the Japan America Society of Southern California. He and I, along with Sheila Johnson — along with Tom Engelhardt one of the world’s great editors — created the Japan Policy Research Institute. Johnson served on the Advisory Board of the Nixon Center when I served as the Center’s founding executive director. We had a long, constructive, feisty relationship. He helped propel my career and thinking. In recent years, we were more distant — mostly because I was not ready, as he was, to completely disown Washington. Many of Johnson’s followers and Chal himself think that American democracy is lost, that the republic has been destroyed by an embrace of empire and that the American public is unaware and unconscious of the fix. He may be right — but I took a course trying to use blogs, new media, and a DC based think tank called the New America Foundation to challenge conventional foreign policy trends in other ways. Ultimately, I think Chalmers was content with what I was doing but probably knew that in the end, I’d catch up with him in his profound frustration with what America was doing in the world. Chalmers and Sheila Johnson saw me lead the battle against John Bolton’s confirmation vote in the Senate as US Ambassador to the United Nations — but given the scale of his ambitions to dislodge America’s embrace of empire, Bolton was too small a target in his eyes. He was probably right. Saying Chalmers Johnson is dead sounds like a lie. I can’t fathom him being gone — and with all of the amazing times I’ve had with him as well as the bouts of political debate and even yelling as we were pounding out JPRI materials on deadline, I just can’t imagine that this blustery, irreverent, completely brilliant force won’t be there to challenge Washington and academia. Few intellectuals attain what might have been called many centuries ago the rank of “wizard” — an almost other worldly force who defied society’s and life’s rules and commanded an enormous following of acolytes and enemies. Wizards don’t die — and I hope that those who read this, who knew him, or go on reading his works in the decades ahead provoke, inspire, jab, rebuke, applaud, and condemn in the way he did. In one of my fondest memories of Chalmers and Sheila Johnson at their home with their then Russian blue cats, MITI and MOF, named after the two engines of Japan’s political economy — Chal railed against the journal, Foreign Affairs , which he saw as a clap trap of statist conventionalism. He decided he had had enough of the journal and of the organization that published it, the Council on Foreign Relations . So, Chalmers called the CFR and told the young lady on the phone to cancel his membership. The lady said, “Professor Johnson, I’m sorry sir. No one cancels their membership in the Council in Foreign Relations. Membership is for life. People are canceled when they die.” Chalmers Johnson, not missing a beat, said “Consider me dead.” I never will. He is and was the intellectual giant of our times. Chalmers Johnson centuries from now will be seen, I think, as the intellectual titan of this past era, surpassing Kissinger in the breadth of seminal works that define what America was and could have been. My sincere condolences to Sheila, to others in his extended family — particularly among all of his students and colleagues who were part of the Johnson dynasty — and to his friends in San Diego who were a vital part of the texture of the Johnson household. — Steve Clemons publishes the popular political blog, The Washington Note . Clemons can be followed on Twitter @SCClemons

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Russia to build Vietnam�s first nuclear plant

October 31, 2010

Russia to build Vietnam�s first nuclear plant

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Dean Baker: The U.K. Swallows Austerity So We Don’t Have To

October 25, 2010

Little brothers exist to be abused by their older siblings. The United Kingdom has willingly played the role of abused sibling for the United States for decades. When our president wanted to launch a harebrained invasion of Iraq, no one was more outspoken in his support than Prime Minister Tony Blair. Who is our closest ally in our Vietnam-style occupation of Afghanistan? Yep, it’s the Brits again. And now the new Conservative-Liberal government is taking the lead in trying to use government austerity to restore prosperity. Those of us who oppose austerity in the United States are delighted. The U.K. is jumping out front to lay off public sector workers, raise taxes, and cut government programs and supports across the board. It is doing this at a time when the economy has nearly 8 percent unemployment and considerably excess capacity in almost every sector of its economy. This drive to austerity comes at a time when the short-term rate set by the Bank of England is 0.5 percent and the rate on 10-year bonds is just 3.0 percent. The timing is also perfectly wrong in that most of the U.K.’s major trading partners are also suffering from weak economies and therefore unlikely to provide strong export markets. Nor are they likely to tolerate a substantial devaluation of the pound against their currency. It is really difficult to come up with an economic theory as to how the U.K. austerity drive even could work in principle. The U.K., like the U.S., had enormous overbuilding of residential housing as a result of its housing bubble. Does anyone think that the drive to austerity will lead to a new round of building? (The bubble in the U.K. does not appear to have fully deflated, but this is another story.) Households in the U.K. are hugely over-extended as they borrowed based on their housing-bubble-generated wealth. Will government austerity cause heavily indebted households to go on a consumption binge? That one does not seem terribly likely, and probably not desirable even if it were to take place. Households will need to accumulate some savings to support themselves in retirement. Another boom based on consumer debt is certainly not a good long-run story for most of the population. Turning to the business side of the story, demand growth is generally the most important determinant of investment. Demand growth is almost certain to slow precipitously in the context of the sharp cuts being put forward by the government. If firms are not investing now, it is hard to believe that they will invest more when the economy weakens, no matter how excited they might be over the prospect of lower budget deficits. Finally, it is not clear the government is expecting much of a boost on the trade side, but if they are it would come about through a marked depreciation in the pound, which would raise the price of imports, thereby encouraging the consumption of domestically produced goods. This would also have the effect of raising the inflation rate in the U.K., the comparatively high level of which has been a cause of concern to the Bank of England. If the Bank of England (foolishly) responds to higher inflation by raising rates, it is very hard to see what possible route to growth the deficit hawks would have left to turn to. There are not many instances of countries adopting the sort of polices that the British government is now embracing, but the examples we have are not encouraging. For example, we have Herbert Hoover’s efforts to balance the budget in 1932 and Franklin Roosevelt’s drive in 1937. Both resulted in a considerable worsening of the economy. Of course, the U.K. had its own experiments with austerity in the middle of the Great Depression, which also did not turn out well for fans of economic growth and full employment. But, these episodes took place in the distant past and memories in politics are short. However many of us in the United States may feel sorry for the ordinary workers in the U.K. who will be the victims of their bankers and hare-brained elites, it is hard to avoid the feeling that it is better them than us. Hopefully our little brother will be able to remind every one in the United States of the foolishness of pursuing austerity in the middle of sharp downturn. The Brits will have our gratitude and our sympathy. This piece originally appeared in the Guardian.

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Japan, Vietnam sign nuclear cooperation deal

October 24, 2010

Japan, Vietnam sign nuclear cooperation deal

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TNK-BP buys assets in Venezuela, Vietnam

October 18, 2010

TNK-BP buys assets in Venezuela, Vietnam

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Video: Indonesia’s Natalegawa Discusses South China Sea Dispute: Video

September 21, 2010

Sept. 22 (Bloomberg) — Indonesian Foreign Minister Marty Natalegawa talks about territorial disputes in the South China Sea. China signaled for the U.S. to stay out of disputes over the sea, three days before President Barack Obama is due to meet with regional leaders concerned over China’s territorial claims in the oil-and gas-rich waters. Portions of the South China Sea are claimed by Vietnam, the Philippines, Malaysia, Brunei and Indonesia. China claims almost the entire sea. Separately, China and Japan are locked in a diplomatic dispute centering on conflicting territorial claims in the East China Sea. (Source: Bloomberg)

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Robert Reich: Why Getting Tough With China Won’t Solve Our Jobs Problem

September 16, 2010

With unemployment in the stratosphere and the midterm elections weeks away, politicians naturally want to show voters they’re committed to getting jobs back. So now they’re getting tough on China. But it’s a dangerous ploy based on wishful thinking. Treasury Secretary Tim Geithner told the Senate Banking Committee Thursday the Administration is “examining the important question of what mix of tools, those available to the United States and multilateral approaches, might help encourage the Chinese authorities to move more quickly.” Translated: We’re on the verge of threatening them with trade sanctions. Even this didn’t satisfy the Senators. Charles Schumer (D-New York) charged that trade with China “diminishes America, our standard of living here in America, and America as a world power.” Richard Shelby (R-Ala) demanded to know why “the administration protecting China by refusing to designate it as a currency manipulator” — a designation that could lead to trade sanctions. On Wednesday the U.S. filed a pair of complaints against China with the World Trade Organization, alleging China was unfairly denying American companies access to its market. Meanwhile, several Democrats facing elections in November are introducing measures that would allow companies to pursue sanctions against China for manipulating its currency. It’s true China has kept the value of its currency artificially low relative to the dollar. If China allowed its currency to rise, Chinese exports would become more expensive to us and our exports would be relatively cheaper to them. This would help shrink the trade imbalance. It’s also true China has dragged its feet. In June, the U.S. stopped short of branding China a currency manipulator after China promised to reform its ways. But since then China’s currency has risen just 1 percent relative to the dollar. America’s trade imbalance with China is growing. In the first half of this year, China exported $119 billion more goods and services to us than we did to them — putting the two nations on course to exceed last year’s $227 billion trade gap. But it’s naive to assume all we have to do to get Chinese to do what we want is to threaten them with tariffs. First, they might retaliate. Remember, China is the biggest foreign investor in U.S. Treasury securities, with holdings of more than $843 billion. If China were to start selling off large amounts, America’s borrowing costs would soar — and we’d end up worse off. Second, it’s already costly to China to keep its currency artificially low — requiring that China buy loads of dollars. So why would anyone suppose that making it more expensive for them would bring China around? China has been willing to bear this huge cost because its export policy doubles as a social policy, designed to maintain order. Each year, tens of millions of poor Chinese stream into China’s large cities from the countryside in pursuit of better-paying work. If they don’t find it, China risks riots and other upheaval. Massive disorder is one of the greatest risks facing China’s governing elite. That elite would much rather create jobs than allow its currency to rise substantially and thereby risk job shortages at home. Third, even if China did allow its currency to rise against the dollar, there’s no reason to think this would automatically generate lots more American jobs. American exports would become cheaper to Chinese consumers. But Japan, Germany, and other major exporters would also demand a piece of the action. Unemployment is high in all developed nations, and every government is under pressure to create more jobs. Meanwhile, Chinese manufacturers — whose goods would suddenly become more expensive to American consumers — could simply shift their production to other nations with lower currencies. Indeed, as Chinese wages have begun to rise, Chinese manufacturers have already started to shift production to Vietnam, Indonesia, and other low-wage outposts of Southeast Asia. What worries me most about all this tough talk about China is it diverts attention from the real problem. American isn’t suffering high unemployment because we’re buying too much from China and not selling them enough. Trade with China is a small portion of the U.S. economy. Twenty million Americans lack jobs because American consumers — especially America’s vast middle class — can no longer spend what’s necessary to keep nearly everyone employed. After three decades of stagnant middle-class wages, during which almost all the economic gains have gone to the top, we’ve finally reached a day of reckoning. The middle class can no longer borrow vast sums by using their homes as ATMs. They can’t squeeze more working hours out of two wage earners. And they have to start saving for retirement. The central challenge we face isn’t to re-balance trade with China. It’s to re-balance the American economy so its benefits are more widely shared. This post originally appeared at RobertReich.org .

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Robert Reich: Why Getting Tough With China Won’t Solve Our Jobs Problem

September 16, 2010

With unemployment in the stratosphere and the midterm elections weeks away, politicians naturally want to show voters they’re committed to getting jobs back. So now they’re getting tough on China. But it’s a dangerous ploy based on wishful thinking. Treasury Secretary Tim Geithner told the Senate Banking Committee Thursday the Administration is “examining the important question of what mix of tools, those available to the United States and multilateral approaches, might help encourage the Chinese authorities to move more quickly.” Translated: We’re on the verge of threatening them with trade sanctions. Even this didn’t satisfy the Senators. Charles Schumer (D-New York) charged that trade with China “diminishes America, our standard of living here in America, and America as a world power.” Richard Shelby (R-Ala) demanded to know why “the administration protecting China by refusing to designate it as a currency manipulator” — a designation that could lead to trade sanctions. On Wednesday the U.S. filed a pair of complaints against China with the World Trade Organization, alleging China was unfairly denying American companies access to its market. Meanwhile, several Democrats facing elections in November are introducing measures that would allow companies to pursue sanctions against China for manipulating its currency. It’s true China has kept the value of its currency artificially low relative to the dollar. If China allowed its currency to rise, Chinese exports would become more expensive to us and our exports would be relatively cheaper to them. This would help shrink the trade imbalance. It’s also true China has dragged its feet. In June, the U.S. stopped short of branding China a currency manipulator after China promised to reform its ways. But since then China’s currency has risen just 1 percent relative to the dollar. America’s trade imbalance with China is growing. In the first half of this year, China exported $119 billion more goods and services to us than we did to them — putting the two nations on course to exceed last year’s $227 billion trade gap. But it’s naive to assume all we have to do to get Chinese to do what we want is to threaten them with tariffs. First, they might retaliate. Remember, China is the biggest foreign investor in U.S. Treasury securities, with holdings of more than $843 billion. If China were to start selling off large amounts, America’s borrowing costs would soar — and we’d end up worse off. Second, it’s already costly to China to keep its currency artificially low — requiring that China buy loads of dollars. So why would anyone suppose that making it more expensive for them would bring China around? China has been willing to bear this huge cost because its export policy doubles as a social policy, designed to maintain order. Each year, tens of millions of poor Chinese stream into China’s large cities from the countryside in pursuit of better-paying work. If they don’t find it, China risks riots and other upheaval. Massive disorder is one of the greatest risks facing China’s governing elite. That elite would much rather create jobs than allow its currency to rise substantially and thereby risk job shortages at home. Third, even if China did allow its currency to rise against the dollar, there’s no reason to think this would automatically generate lots more American jobs. American exports would become cheaper to Chinese consumers. But Japan, Germany, and other major exporters would also demand a piece of the action. Unemployment is high in all developed nations, and every government is under pressure to create more jobs. Meanwhile, Chinese manufacturers — whose goods would suddenly become more expensive to American consumers — could simply shift their production to other nations with lower currencies. Indeed, as Chinese wages have begun to rise, Chinese manufacturers have already started to shift production to Vietnam, Indonesia, and other low-wage outposts of Southeast Asia. What worries me most about all this tough talk about China is it diverts attention from the real problem. American isn’t suffering high unemployment because we’re buying too much from China and not selling them enough. Trade with China is a small portion of the U.S. economy. Twenty million Americans lack jobs because American consumers — especially America’s vast middle class — can no longer spend what’s necessary to keep nearly everyone employed. After three decades of stagnant middle-class wages, during which almost all the economic gains have gone to the top, we’ve finally reached a day of reckoning. The middle class can no longer borrow vast sums by using their homes as ATMs. They can’t squeeze more working hours out of two wage earners. And they have to start saving for retirement. The central challenge we face isn’t to re-balance trade with China. It’s to re-balance the American economy so its benefits are more widely shared. This post originally appeared at RobertReich.org .

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Dan Dorfman: The Answer Is Blowin’ in the Wind

September 10, 2010

Hey, where are Sherlock and Lt. Columbo when we really need them? No, it’s not to set us straight on the Hound of the Baskervilles or figure out who stole what or who murdered whom, but rather to zero in on a more perplexing mystery that impacts all of us — the direction of the flip-flop economy. The myriad of views on the subject — which will have a major voice in determining the outcome of the fall elections — is enough to drive anyone nuts. For confirmation, just look at the financial pages of your local newspapers and leading business magazines. Or click on TV’s financial networks. Or scan the research commentaries of the major brokerages and investment advisers. It’s all the same. You’re bombarded with a slew of wildly conflicting economic scenarios that will have you shaking your head. For example, here’s what the experts are saying, kicking off with those who insist a double-dip recession is inescapable. Some of their key reasons: the government’s inability to effectively address the three most serious and critical economic ills — the housing depression, high unemployment and the refusal of banks to lend on a broad scale. In contrast, other economists vehemently disagree, insisting there will be no double-dip, certainly, they believe, not in an election year. The president’s new stimulus initiatives to bolster the economy by creating jobs, notably tax incentives and infrastucture spending, should help speed up the recovery, they argue. At worst, they say, we’ll see slow growth. Then again, some economists argue that the recession, which started in late 2007, has yet to say goodbye and importantly is apt to worsen because of diminishing stimulus and excessive debt at the consumer and business levels. That means, they point out, consumption will weaken as consumers, especially the retiring baby boomers, opt more for saving then spending, and business will be reluctant to expand. Meanwhile, a number of economists say the president’s new economic-boosting proposals won’t fly and are highly suspect because Republicans have no vested interest in seeing the economy improve before the November elections. Accordingly, Obama’s economic ideas, it’s thought, if not D.O.A. (dead on arrival), are almost certain to run into a Congressional stone wall and nothing will get done. On top of this, two of the country’s widely tracked economists, the New York Times ‘ Paul Krugman and Merrill Lynch’s former North American economic chief David Rosenberg, have recently told us we’re depression bound. Confused? Who wouldn’t be? So who should we believe? The answer, of course, is that it’s all guesswork, that no one can be cocksure of what’s ahead because of all the bumps on the economic road. For some thoughts, I rang up a voice of reason in this economic wilderness — Standard & Poor’s well regarded, astute senior economist David Wyss, a fella not prone to flamboyant and irrational comments. For starters, he belittles the president’s job-boosting proposals, noting they’re not particularly good because they’re only temporary. At best, he sees little more than a short term lift. The infrastructure spending should have been in his first bill, he says. As for fears of a double-dip, Wyss doesn’t see it. The recovery is fragile, but there’s nothing to push the economy down more, he says. “We’re having a half-speed recovery, nothing to get excited about, but it’s better than none.” On the plus side, he points to a pickup in consumer spending. “Consumers are starting to stick their heads out of the shell,” he says. Yet another plus is pretty good equipment spending, up 15% year over year. Underscoring the slow growth nature of the economy, Wyss looks for uninspiring GDP growth of 1.6% in the current quarter, 2% in the final quarter and 2.4% for all of 2011. What about those depression forecasts making the rounds? “No way, a gross exaggeration,” Wyss says. Our economic worry-wart also has his concerns, among them the threat of a major default, especially in Europe, and another freeze in the financial markets, with banks afraid to lend, an event that would further push home prices down and unemployment up. Likewise, he points to the danger of a Japanese deflationary scenario, a formula for weak growth and declining prices. As a result, home prices in Japan are down 35% from where they were 15 years ago, while its stock market is off 75% from where it was 20 years ago. All that aside, we’re plagued by a number of serious economic ailments that suggest any economic bull at this point is likely full of bull. Among those that come to mind: One in every six Americans is now getting some form of government assistance. A total of 40.8 million of us — expected to rise to 43.3 million next year — are collecting food stamps. About 78 million baby boomers, one eighth of the population, are headed for retirement with an average nest egg of just around $50,000. About 25% of all mortgages are under water (meaning the homeowners owe more on their homes than they’re worth). In addition, 4.2 million vacant homes (8.9 months supply) are looking for buyers, 7.3 million homeowners are at least 30 days delinquent on their mortgage payments, and another 4 million homes are in the foreclosure process. Around 14.9 million people are unemployed, a figure that jumps to 25.7 million if you include part-timers who can’t get full time employment and discouraged workers who’ve left the work force because of their inability to obtain a job. On top of this, my wife, Harriet, who walks several miles a day, tells me the number of New York City panhandlers and homeless people sleeping on the sidewalks is appreciably on the rise. “You see them everywhere,” she says I don’t know how you see all of this, but to me this is not what economic recoveries and bull markets are all about. It all reminds me of a catchy song, “Blowin’ in the wind”, written by Bob Dylan in the sixties, a period when the nation was caught up in the Vietnam War and people were looking for answers. Alas, we’re now once again looking for answers. What do you think? E-mail me at Dandordan@aol.com

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Crown Holdings, Inc. to acquire partner’s interest in China, Vietnam JTVs

September 8, 2010

Crown Holdings, Inc. to acquire partner’s interest in China, Vietnam JTVs

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John Perkins: Mr. CEO, Can You Spare a Job or a Free Lunch

September 3, 2010

“An economic policy which does not consider the well-being of all will not serve the purposes of peace and the growth of well-being among the people of all nations.”( Eleanor Roosevelt) In case you are tempted to feel sorry during these troubled times for the corporatocracy… this just in: The CEOs who fired the most workers during the current economic recession also rewarded themselves with the highest pay. Top managers at the fifty corporations with the greatest number of layoffs were paid an average of $12 million in salary, bonuses and other perks — 42 percent more than the average for the Standard & Poor’s 500. To make matters worst, at most of these companies — a whopping 72 percent in fact — layoffs were announced at a time when earnings were increasing. This according to a study by the Institute for Policy Studies that covered the period from November 2008 to April 2010. Isn’t it comforting to know that while you and I are experiencing the worst economy we’ve seen in our life-times, with jobless claims rising to 500,000, the CEOs are thriving? They are purchasing luxury cars, yachts, new homes, and even buying off foreclosed properties at fire-sale prices. Perhaps we should sleep better at night knowing that they are working so hard to offset their ruthless firings of employees by trying to revive the Rolls Royce dealerships and mortgage companies! Not only are some of the world’s richest CEOs getting richer off the backs of laid off employees, but they’re doing it at the same time profits rise and shareholder cigars are lit with martinis in hand celebrating the companies continued reign of predatory capitalism. These same 50 top layoff leaders’ companies also enjoyed a 44% average profit increase in 2009. And many of them paid little or no taxes (e.g. Exxon, with over $45 billion in profits, recorded no U.S. income taxes and GE generated $10 billion in pretax income and took a tax BENEFIT of $1.1 billion). I have to admit that I was never terribly enamored with Karl Marx. When I was a young man, many of my peers called on his writings to justify taking to the streets against the Vietnam war, but I — a business student — saw that war more as an excuse for the military-industrial complex to get rich than as a class struggle. Now, however, I have to suspect that Marx was wiser than I used to believe. In fact, the Institute for Policy Studies report estimates that CEOs in the U.S.’s largest publicly traded corporations earn an average compensation 263 times higher than the typical American production worker. Sounds like the exact situation Marx warned us about! The study cites some very telling specific examples. Among them: – Wal-Mart’s CEO Michael Duke laid off 13,350 workers and earned almost 20 million for his trouble; – The now disgraced Mark Hurd of HP managed to reduce his work force by 6400 and still earn $24.2 million; – AMEX’s Kenneth Chenault earned $16.8 million while American Express laid off 4,000 employees accepted $3.39 billion in TARP funding; – Intel Corp’s Paul Otellini trimmed about 5,000 jobs and received $14.4 million in compensation. The report notes, “The $598 million combined compensation of the top 50 CEOs in our layoff leader survey could provide average unemployment benefits to 37,579 workers for an entire year — or nearly a month of benefits for each of the 531,363 workers their companies laid off.” As I wrote in Hoodwinked , “When we examine the state of our economy — the shortage of businesses that produce real things that people need, the huge gap between rich and poor, the current national debt, and the exploitation of the many by a very few — we see a profile similar to that in the Third World.” Our overall standards may be higher than in the Third Word; however, in relative terms the similarities are shocking. And each year, in fact each quarter, with every new report, the situation grows worse. The sad fact is that the rich get richer and the middle class is disappearing. Some of the most shocking statistics that highlight the discrepancies are those around hunger. While the CEOs feast on caviar, nearly 17 million, or almost 1 in 4, American children are at risk of hunger. Those hungry children are the victims of bloated, unregulated, corporate Robber Barons who lay off workers (parents) for bottom line greed. WHAT YOU CAN DO You and I can change the future for the better by taking action now. Demanding accountability and regulations that protect workers and stop the excessive payouts, golden parachutes and layoffs. A list of the companies is available at Please send emails to every company on this list that you patronize or are tempted to patronize and tell them the you will NOT buy from them until they change their ways, until their executives are willing to reduce their compensation and hire back those fired workers. Only through expressing our discontent will we make a difference! We must demand a completely new economic policy that benefits all not just the wealthiest in our country. It is up to you and me!

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Shawna Vercher: Under Secretary Francisco Sanchez Briefs FL Leaders On Exports

August 24, 2010

TAMPA, FL – Under Secretary of Commerce for International Trade Francisco Sanchez made his first trip home to Tampa with a message for Florida leaders: make exporting a top priority. “Our future is based, in large part, on trade,” said Sanchez as he addressed a crowd of approximately 250 heads of business, agriculture, aerospace and economic development. Sanchez’ trip comes just months after President Obama signed the Executive Order for the National Export Initiative . During his January State of the Union Address Obama stated his goal to double economic exports in the next five years. Doing so, Obama said, will support nearly two million higher-paying jobs. As the man tasked with ensuring that the NEI goal is met, Sanchez is currently traveling the country to show businesses and government entities exactly what needs to happen in order for exports to increase. Sanchez emphasized that small and medium-sized businesses would be the key to reaching the NEI goal. Currently most of the trading from those businesses is targeted to Mexico and Canada, but Sanchez advises business owners to consider emerging markets, such as China, Brazil and India, and what he calls “Next Tier” markets, including Vietnam, Saudi Arabia and Indonesia. The newly-formed Export Initiative Cabinet has also partnered with shipping providers including FedEx, UPS and the U.S. Postal Service to target those businesses already exporting at some level. Those businesses that show export activity are then proactively contacted and invited to participate in a training program to see how they can increase their capacity or get “export ready” for additional markets. While the NEI has already demonstrated some success – resulting in approximately $11.5 billion of commercial contracts in the last seven months – there are many hurdles that will have to be overcome. First, Sanchez and his team will need to ensure that trade laws are vigorously enforced while still “leveling the playing field” for American companies to compete for contracts. Sanchez emphasized that he feels that one of the biggest barriers to exports is corruption and stated that the Export Initiative Cabinet is already deploying a strategy of commercial diplomacy so that other countries are following suit in the crack-down of illegal trade practices. The other major dilemma for many businesses looking to export is a lack of credit in the marketplace. While the SBA is lending to some export-ready businesses, Sanchez is calling on private banks to open their doors to those wishing to begin or increase trade. Specifically, Sanchez cited Sun Trust as a national leader in export lending and encouraged other banks to follow their lead and, “…Seize the moment of economic rebuilding.” “Tampa’s roots in trade are the blue print for the future,” Sanchez said. “If you are not exporting then you do so at your own ill.” Shawna Vercher is an online news correspondent and president of The Society of Successful Women, a national advocacy group that champions the success of women globally. To learn more about Shawna or how you can attend the 2010 SSW Leadership Summit on October 8th, visit www.thessw.com or reach out to her on Facebook .

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Howard Steven Friedman: Is China Poised for Implosion? What Would the Communist Manifesto Predict?

August 23, 2010

Deng Xiaoping probably would never have anticipated how quickly parts of China have fulfilled his words of “To be rich is glorious” yet he would be extremely concerned to see that the Chinese population policies and practices as well as the engine of capitalism appears to be creating a Marxian nightmare of bourgeois and proletariat. How can the incredible economic growth in China also lead to concerns about its political instability? In the last three decades, China has raced to become the world’s second largest economy yet questions about its political stability have arisen due to population trends and the high degree of inequality. The path to stability or instability is heavily paved with questions about China’s ability to maintain economic growth in light of wage pressures, unemployment/ underemployment of its exploding college graduate population, increasing social and health needs of its aging population and China’s projected declining support ratio. An economy that continues to grow at its current pace with minimal inflationary pressure would likely remain stable while slowdowns in economic growth or major increases in inflation would likely add gasoline to a smoldering fire of discontent. Concerning income inequality, Westerners often ask questions like “How is it possible for there to be such a high degree of inequality in China, which, until recently, fully embraced Communism?” and “Why should a country be concerned about having a high degree of inequality if the overall economy is growing?” History has answered the first question for us. Unadulterated communism, which consists of a classless society, has failed to thrive. Countries such as North Korea, which profess to be Communist while actually being authoritarian, create an upper class consisting of party leaders and party-connected individuals while ordinary citizens suffer. Now, for the second question, “Why should China be concerned about having a high degree of income inequality if its overall economy is growing?” When Deng Xiaoping famously said, “Let some people get rich first”, he probably didn’t anticipate that China would soon have the second largest economy in the world as well as the second highest income inequality of the world’s top 15 economies, behind Brazil. In fact, of China’s 10 neighboring countries where the UN estimates income inequality, China has the ninth highest level of inequality. High degrees of inequality are correlated with many issues in society and can ultimately lead to political instability as evidenced countless times in history. As Ole Schell, director of “Win in China” pointed out, “Mao’s revolution was born out of this same inequity and the Chinese government is trying to modernize the countryside in an effort to quell discontent.” While correlation does not mean causation, cross country data analysis such as that in The Spirit Level strongly suggests that unequal societies are more likely to have higher rates of murder and incarceration and lower levels of trust and social mobility. China’s wealth inequality reflects the fact that while a small percent of the population are benefitting greatly from the economic growth, that privileged population is largely confined to the educated and/or politically connected residents of major cities. Much attention has been focused recently at the fortunes made by the “princelings”, well-connected children of senior Communist Party officials who are benefiting financially from their political connections including Wen Yunsong (son of Chinese Premier Wen Jiabao) who co-founded New Horizon Capital and Jeffrey Li, the son of former Politburo standing committee member Li Ruihuan. While the princelings use their “royal” connections, a significant amount of China’s population is trapped in rural poverty or toilsome factory labor with minimal chances of social mobility. As Chinese workers clamor for greater pay and increased rights, factory owners pursue profits by seeking out areas with lower wage pressures (i.e. other parts of China, Vietnam, Bangladesh and other Asian countries). Safe and humane working standards, which laborers fought so hard for in the West, are often absent in developing countries like China, leaving workers susceptible to conditions which Western countries haven’t seen on a large scale in generations. Inequalities also exist within the workplace, where migrants often experience lower status, less job stability and lower wages than locals. This struggle between the working class and management/owners is a classic refrain of capitalist societies documented by Marx and Engels. Rural parents often see their children moving to urban areas to find factory employment where the income and opportunities usually exceed those available in their hometowns, but many question whether the quality of life is superior. Food and housing price inflation are reducing the purchasing power of factory worker’s compensation, making it more difficult to send savings to their families. In other circumstances, parents (and often grandparents) support their child’s college education only to later see that the graduate either can’t find work or the work didn’t require a college degree. From 1982 to 2005, the percent of the population with a higher education rose from 1% to 7% while the percent of white collar jobs rose from about 7% to less than 13%. Evidence of the job squeeze appears not only regularly on Chinese television but in the civil service exams where one million people recently competed for 15,000 openings. China’s income inequality and opportunity inequality will be driven to a sharp focus in the world of marriage and relationships. Due to a combination of sex selection and the natural tendency of more boys being born than girls, there are currently around 25 million more Chinese males less than 20 years old than Chinese women of the same age range. In the next few decades, this lack of female counterparts may result in more men emigrating, more women from neighboring countries immigrating to China and, will likely lead to many frustrated and angry Chinese males (where the unmatched men are more likely to be poor according to Professor Wang Feng, an expert in Chinese population demographics). For China to continue its growth rate, it will need to address inequality systematically and aggressively. The Chinese government is well aware of the upcoming financial pressures of the aging society with a declining support ratio. It is also attuned to the potentially explosive combination of having large number of men with limited social mobility and few job or family prospects. Maintaining the economic growth while addressing the population and inequality issues will be critical to whether China continues to drive a large part of the world’s economy or whether it becomes a textbook example of the destruction caused by class struggles.

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Jonathan Tasini: A Worldwide Revolt Against Poverty Wages

August 19, 2010

Yesterday, I wrote about how the decline of U.S. wages has made workers here cheaper to hire than workers in India, at least in the call center industry. Today, the news hails from Asia where workers are rising up against poverty-level wages. From the Financial Times (and, as a side observation, the FT gives far better insight on a regular basis on these trends than anything you can read in the U.S. traditional press): Bangladeshi garment workers, who make clothes for western brands such as H&M, Gap and Marks & Spencer, greeted a recent 80 per cent pay rise by rampaging angrily through the capital Dhaka burning cars and looting shops. For the world’s lowest- paid garment workers, the increase in the minimum wage, effective from November, takes their pay from $23 to $43 (€33, £27.50) a month. It was their first pay rise for four years, a period of soaring food and fuel prices. However, the workers were enraged that Dhaka had not agreed to the $75 a month they had demanded. “This is not enough for the survival of workers and their families,” said Amirul Haque Amin, president of Bangladesh’s National Garment Workers’ Federation, which has about 23,000 members. “Living costs – including food, clothes, shelter and medical care – are going higher and higher.” ….Demands for better pay across Asia reflect improving job opportunities in economies that are growing faster than their western markets. …. In Cambodia, Phnom Penh recently raised the minimum wage by 21 per cent – from $50 a month to $61. That was below what the more activist of Cambodia’s 273 unions demanded, although a three-day, industry-wide strike did not materialise. Vietnam recorded 200 strikes last year by workers hit by inflation of 9 per cent. In April, for example, nearly 10,000 workers walked out of a Taiwan-owned shoe factory, demanding better pay. In Indonesia – where powerful trade unions with millions of members play a crucial role in negotiating with employers – minimum wages, set by regional authorities, have been increasing. In 2008, Jakarta raised the local minimum wage by 10 per cent to nearly $100 a month, although wages in the country’s remoter regions are half that. …. “There are no industrial relations,” says Mr Alam. “The whole attitude is arrogant and feudal. Owners and government think they are helping the workers. The workers are not treated like workers – they are treated like beggars. “[emphasis added] What is going on here? There is a thread that connects the anger coursing throughout the globe about the entire failed economic model foisted upon the world’s workers for decades. Here, people have had it with working hard for decades and seeing all that hard work–productivity has been rising for 30 years–turn into a steady stream of money into the pockets of CEOs and the richest one percent. Republicans and Democrats have supported a bankrupt economic system based on the “free market” and “free trade”, leveraged buyouts that obliterate middle-class jobs and a campaign finance system that greases a knee-jerk granting of tax cuts for business before making sure that regular people can form unions to act as a counter-weight to the rapacious nature of the market. And what of those jobs flowing abroad? Well, the FT article shows the reality: slave labor. No surprise. Those stories have been surfacing for years–yet, despite the growing poverty around the world, we still have a bi-partisan support (including from our president) for the very so-called “free trade” policies that have bred substandard wages. Where this leads is not easy to tell. It is easy to talk about worldwide solidarity–and a whole lot harder to make it happen, because of cultural and language differences, the massive physical distances between one slave-wage haven and another, the inability of the poorest to have enough resources to organize on a daily basis…a whole host of reasons. But, it is clear–the people have had it. They cannot, and should not, put up with the siphoning of the world’s wealth and resources into the hands of a few.

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Howard Steven Friedman: How Long Will China’s Economy Be the Second Largest?

August 16, 2010

Many probably saw the headline today stating that China’s economy is now the second largest in the world and may soon eclipse the United States’ economy. The growth in China’s economy has been tremendous, an engine that began taking off with the loosening of restrictions during the Deng Xiaoping era and has accelerated ever since. Some interpret the growth in China’s economy as a validation of its embracing capitalism but there is also a major factor of government planning involved. Yes, government planning and economic growth can go together in spite of many people’s mantra to the contrary (see Singapore for another example). While China’s manufacturing dominates much of the world’s consumer products, this will not likely last forever. Importers are looking to diversify their production since companies know they should never rely on a single supplier. Investments in Vietnam, Indonesia and other countries which have low wage costs will continue in the future. China will feel pressure externally from other countries producing competing products and will need to migrate up the value chain to drive higher margins while mitigating wage pressures. China is making huge investments in higher education to help them design and manufacture higher end products in the future but internal pressures will be significant. As more and more Chinese enjoy Western style lifestyles in Shanghai, Beijing, Hong Kong and other major cities, factory workers will be less likely to continue accepting low wages and long hours in monotonous toil. The days of motivating Chinese workers by encouraging support for the good of the party are long over. China has an astoundingly high level of inequality and this inequality will be one of the most critical issues that the Chinese government will need to address over the coming years in order to maintain strong growth. While many reading about China’s overall economy immediately think that China is a developed country, they need to remember that China has an enormous population with many living in poverty. There are hundreds of millions of rural Chinese living slightly above subsistence and factory workers struggling month to month while a small percent of the population enjoy what we, in the West, would term comfortable lives. As China’s economy continues to grow, it remains to be seen if the percent of people living these comfortable lives continues to grow or if the wealthy in China end up owning more and more of the country while the factory workers and rural poor continue to struggle. So what do I think of projections of when China will eclipse the United State’s economy? As I have stated in previous articles, economic projections 20 or 30 years out tend to be little more than guesswork. There is no question that if China and the United States both continue their current pace of economic growth, then China’s economy will be larger than that of the United States in the next few decades. Of course, there was a huge “if” in that sentence. Japan’s economy grew at a tremendous pace for much of the post World War II period, based on an export economy supported by an undervalued currency. Over time, other countries began competing with Japan for its export products and internal wage pressures developed. Not coincidentally, Japan’s economy has been relatively stagnant for about 2 decades. Calculating growth curves is easy on paper, growing an economy is much tougher. It is much easier for an economy to grow at 10% per year when an economy is smaller. Just as the life cycle of a company often has a rapid expansion phase until they become a large company and then the growth slows down, China will find that maintaining such a rapid growth rate will be a huge challenge, one that can’t be solved by simply dropping a different growth assumption into someone’s economic forecast.

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David Isenberg: When Just Following Orders is Good Enough

July 27, 2010

In my last post, while discussing a law journal article on how to prosecute a PMC should one commit an act of torture, I touched on the Nuremberg defense, i.e., I was just following orders. I said it would be the subject of another post but I did not expect to discuss it so soon. But thanks to the magic of online searching I came across another current law journal article on just that subject. Really, honest, cross my heart and hope to die. Specifically it is an article in the Western New England Law Review ( 32 W. New Eng. L. Rev. 373) titled “I’m Just Following Orders: A Fair Standard of Immunity for Military Service Contractors,” by Thomas Gray Gray’s take is different, though not necessarily opposite, the view I detailed in my last post. Gray asks whether private military service contractors should be afforded any level of immunity because of their contractual relationship with the United States military and the United States government. He concludes that contractors are entitled to some immunity. The critical question is just how much immunity should be granted, the situations in which such immunity would apply, and the basis for such immunity in relation to existing legal concepts and policy considerations. As the saying goes, the devil is in the details. As everyone should know by now contractors are steadily replacing enlisted, uniformed soldiers in many aspects of the military’s various missions. Despite the decreased use of its own personnel, the military still has an active hand in dictating flight patterns, passenger lists, maintenance schedules, security protocols, and the job specifications for hosts of contractor jobs. This division of labor raises an important legal issue: a soldier cannot sue the United States for injuries he suffers incident to his service, but the soldier can sue a private contractor for such injuries. For example, during the Vietnam War, a soldier transported in a military plane flown by military pilots had no cause of action against the United States if his plane crashed. Today, however, a soldier in Iraq who suffers injury in the crash of a civilian military contractor plane has a cause of action against the airline. According to Gray, while a plane crash might be a rare event it is an unfortunate fact of war that things often go wrong and many people are hurt. Even outside of direct combat, any endeavor as large and complicated as the civilian contractor operation in Iraq is bound to produce tragedy. In some of these cases, the genesis of the incident is not in the negligent execution of a task by a civilian contractor. Perhaps not that rate, actually. I should note that, it was a Presidential Airways (former Blackwater subsidiary) plane that crashed on November 27, 2004 in Afghanistan. All aboard, three soldiers and three civilian crew members, were killed. A 60 Minutes investigation reported that the crash was caused by pilot error but that the company tried to avoid responsibility. Anyway, Gray argues that military service contractors should be entitled to immunity in much the same way that contractors are afforded immunity in the products liability context. This Note proposes that a version of the Boyle v. United Technology Corp. test, logically modified to suit the services industry, would fairly determine the applicability of this immunity. This test would shield contractors from liability when (1) the injury in question resulted from an order, plan, or directive from the United States military, (2) the plan or order was executed without negligence by the contractor, and (3) the contractor had disclosed to the United States any concerns or potential risks. In his view this test presents a workable solution that honors the rationales that have supported military immunity and military products-liability immunity for more than fifty years while at the same time fairly leaving liability to the contractors when their negligent execution of a contractual duty has caused an injury. Not being a lawyer let me try to summarize some of his main points. Forgive me for going long but it is necessary to do justice to his argument. Gray notes the doctrine of sovereign immunity far predates the founding of the United States. It is based on the notion that the King, as the “font of the law,” is not bound by the law; and that the King, as the “font of justice,” cannot be sued in his own courts. To me that sounds like an earlier version of Dick Cheney’s unitary executive theory. Who knew Dick was such an Anglophile! In practical and modern terms, sovereign immunity shields the United States from civil suit and criminal prosecution. In the United States, the federal government was immune from tort actions for more than a century before Congress passed legislation that waived the immunity for certain torts and established jurisdiction in the federal courts over certain types of claims made against the government. This legislation came in the form of the Federal Tort Claims Act (FTCA), which authorized suit against the government for torts which would have been in violation of the local law had they been committed by an individual. Four years after the passage of the FTCA, the United States Supreme Court decided Feres v. United States. In Feres, the Court held that the United States military was not liable for soldiers’ injuries suffered incident to service. The original Feres complaint alleged that the military’s negligence in housing Feres in barracks with a defective heating plant and failure to maintain adequate fire-prevention measures resulted in his death. In barring Feres’s claim, the Court gave broad immunity to the military for injuries arising in the course of a soldier’s duties, whether those duties were performed in peacetime or wartime and whether the duties were pedestrian or high risk. The Supreme Court added a third factor four years later in United States v. Brown. There, the Court expressed concern about the dangers posed to military discipline by the litigation of claims brought by servicemen and servicewomen. In Brown, a discharged soldier alleged medical negligence at a Veterans’ Administration Hospital during his surgery to correct an injury incurred during military service. The Court read into the Feres decision a recognition of both the special nature of military discipline and the potential untoward results of litigating allegedly negligent command decisions or orders. The Court found that the Feres Court had read the FTCA to exclude claims that involved the “peculiar and special relationship of the soldier to his superior.” The Brown Court ultimately decided that Feres did not control in that case and thus provided little analysis of what eventually became the predominant Feres factor: military discipline. Outside of the military realm, there is an extensive history of derivative sovereign immunity for those acting at the will of the government. In Yearsley v. W.A. Ross Construction Co., the Supreme Court held that an agent of the government was not amenable to suit when carrying out the will of Congress. In such cases, the Court held, the only way for the agent to be liable would be if he acted outside the bounds of his authority or if there was no legitimate power to give that authority. The Supreme Court would take up the issue of military-contractor immunity in Boyle v. United Technologies Corp. where it recognized and established the test for military-contractor immunity for products liability. Boyle centered on the death of a United States Marine helicopter pilot and the subsequent suit the pilot’s father filed against the helicopter manufacturer. A primary focus of the Court’s decision was the tension between the wholly federal role of military contractors and the fundamental concepts of state tort law. Boyle held that federal law can supersede state tort law, even without statutory authorization, in cases that represent a “uniquely federal interest[].”Two uniquely federal interests were presented in Boyle: “obligations to and rights of the United States under its contracts” and “the civil liability of federal officials for actions taken in the course of their duty.” Despite the fact that the suit was nominally against the contractor, it was sufficiently related to a contract involving the United States to be considered within the first interest. As well, the policy ] goals of the second interest are maintained whether a federal official is involved directly or not. Though the Court acknowledged that suits between private parties unrelated to the United States are left to state tort law, it distinguished Boyle, pointing out that because “the imposition of liability on Government contractors will directly affect the terms of Government contracts … the interests of the United States will be directly affected.” A test ultimately emerged from Boyle that allows for immunity from suit for contractors in situations in which (1) the United States approved design specifications, (2) the materials produced by a civilian contractor met those specifications, and (3) the contractor warned the United States about any dangers in the use of the materials of which it was aware but the United States was not. The third element of the test, the Court stated, was necessary to create disincentives for contractors to withhold information from the military about potential dangers. The various issues of contractor immunity discussed above converged in McMahon v. Presidential Airways, Inc., in which the Eleventh Circuit Court of Appeals heard a claim for derivative Feres immunity in a case involving a service contract. As noted above Presidential Airways had contracted with the United States to fly military officers and personnel to and from various locations in the Middle East. One of its trips unfortunately ended in a crash that proved fatal to three United States servicemen. The survivors brought suit against Presidential Airways on behalf of the deceased soldiers in Florida state court, alleging that it had caused the wrongful death of the soldiers. Presidential Airways argued that it should be immune under the Feres doctrine, but the Eleventh Circuit disagreed. The court did not base its decision on the notion that Feres could not apply to suits against nongovernment entities. Instead, the Eleventh Circuit engaged the concept of derivative Feres immunity presented by Presidential Airways. First the court analyzed Presidential Airways’s claim that, as a common law agent, it was entitled to the government’s sovereign immunity. The court never decided whether Presidential Airways was a common law agent, but it did disagree with Presidential Airways’s position that, if it was, it would be entitled to derivative sovereign immunity. The court then considered the Feres doctrine and found that it was simultaneously too broad and too narrow to be applied in the claim against Presidential Airways. The doctrine was too broad, the court held, because it allowed immunity for any injury “incident to service,” which would protect contractors from things well outside the policy aims supported by Feres., the doctrine was held to be too narrow in that it only provided immunity from suits by soldiers, not by civilians. This paradoxical set of weaknesses of the Feres doctrine as applied to the McMahon facts would produce absurd results – such as having the claims on behalf of the soldiers completely barred regardless of merit – yet would allow for claims against Presidential Airways by any nonmilitary personnel on board the crashed flight. Because of these faults in the Feres argument, the court rejected its application. The court did recognize the fact that the third Feres factor, a fear of interference and evaluation of sensitive military decisions, was applicable to the McMahon facts. Despite finding the other two factors inapplicable and ultimately rejecting Presidential Airways’s derivative Feres claims, the court found that the value of the all-important third factor could merit some level of immunity for Presidential Airways. The court went on to suggest that this standard for immunity would be somewhere between “incident to service” and the political-question doctrine. It would need to be less than “incident to service” for the same reason that the “incident to service” standard of Feres made that doctrine too broad, namely that it would protect contractors from liability in virtually all of their actions, regardless of negligence. The questions then posed by the court were whether the political-question doctrine was too narrow and whether there were instances in which Presidential Airways could merit immunity while at the same time not requiring the court to directly consider a political question. Ultimately, the court did not answer these questions and instead left them merely as suggestions. Gray argues that the Boyle test should be applied to service contractors. Civilian companies who contract to provide services to the United States military should receive immunity from civil liability in cases where they have acted in compliance with specific directions of the United States military. This immunity is necessary for two reasons. First, it is necessary to protect the discretion of the United States in its military contracts, discretion that would be threatened by contract liability for actions performed by a contractor under the direction of the United States. Second, a service-contractor immunity is necessary to maintain the internal discipline of the United States military, which could be threatened if regular tort analysis was applied to the orders and directions given to military contractors. The test used in Boyle provides the most effective and fair standard to use for military contractors. It shields contractors from liability in cases where the principle cause of the injury is not any individualized negligence but instead springs from some larger decision made by the United States military. A modification of this three-part test represents the best route to an immunity standard for service contractors. The first prong of the test is that the contractor had a reasonably specific outline of its contractual duties. This flows from the first prong of Boyle’s test, which requires that “the United States approve[] reasonably precise specifications.” This factor guarantees that the military has actually been involved in the decision-making process by giving the contractor a reasonably precise set of requirements and parameters for its contractual duties. Within each individual type of service, the nature of these specifications would be different. For contracted airlines, it could be military control over flight plans, passenger lists, and other things that lead to very specific parameters within which to conduct each flight. For a maintenance contractor, it could be the protocols the military had established for the frequency and thoroughness of inspection and repair. For a private security contractor, it could be protocols covering the use of force or a host of other details. While the requirement might not be satisfied in exactly the same way for any two contractors, this standard is flexible enough to only provide immunity for contractors whose duties were discretionally decided by the United States military. The key in any type of service contract would be that the guidelines provided by the government “constituted a comprehensive regime that [the contractor] was not expected to supplement through any procedures other than those specifically set forth.” Each attempt to establish this immunity would thus require contractors to show that the course of their actions was determined by a “comprehensive regime.” Contractors who were not given specific parameters for their actions and who were given broader discretion in determining how their duties would be carried out would not be protected in this immunity standard. Without the existence of specified protocols mandated by the military, there are no pertinent discretionary decisions made by the government which the court must protect. An example of this came in the application of Boyle in Chapman, where the court did not find evidence of any precise specifications and thus found the Boyle test inapplicable. The second prong of the test requires that the contractor completed its duties according to the standard required by the specific governmental regime or protocol. This prong comes from the Boyle test’s requirement that the final product met government specifications. This requirement is necessary to definitively connect the injury at issue to a discretionary decision made by the military and would preclude immunity in situations in which the contractor either did not complete its duties or did so negligently. Contractors who negligently perform their obligations should not be protected from liability simply because they have a contract with the government. Furthermore, because the military’s discretionary decision would be too far removed from claims involving contractor negligence, such claims would not be covered by the policy rationales underlying the discretionary-function exemption. In attempting to establish the immunity, the contractor would have to show that its performance complied with its government instructions. The third prong of the test requires that the contractor disclose to the United States any knowledge of risks or dangers that it knew of within the government’s plans. This flows directly from the final part of the Boyle test, which requires that “the supplier warned the United States about the dangers in the use of the equipment that were known to the supplier but not the United States.” The third factor, as in Boyle, is necessary to prevent contractors from protecting themselves merely by not disclosing their own awareness of risks.

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China’s Cheap Labor Era Is Ending — And These Products Are About To Get More Expensive

July 19, 2010

The end of the cheap, “Made-in China” era is near — and it’s going to affect your bottom line. Soaring labor costs fueled by worker shortages and social unrest , an appreciating currency and rapid increases in the price of raw materials and energy are all making it more expensive for manufacturers to operate in China. As China’s rising labor costs ripple through the global economy, consumers should expect to pay higher prices for a broad array of goods. “A lot depends on the labor content of what you’re importing,” says James Angel, a professor of economics at Georgetown University. “When you buy that iPhone, how much of the cost is actually reflected in the final assembly?” For higher-end items like electronics, assembly accounts for a small part of the overall cost. “Skilled labor content — that is, the research and development, the packaging, the marketing — is the largest component of the total cost,” says Angel. Even cheaper goods like clothing could be impacted. Labor and assembly expenses make up a much larger share of the overall cost of production for these less expensive goods, and small changes are likely to have a disproportionate effect. The Hong Kong Trade Development Council (HKTDC) estimates that rising wages and the appreciation of the renminbi will cause production costs in China’s factories to jump five to nine percent. And, if you think prices won’t increase because manufacturing in China will shift to cheaper labor markets like Vietnam and Bangladesh, think again. Analysts say China’s competitiveness as a locus for manufacturing is not based on price alone, but rather on a number of factors including the quality of the output, delivery lead time and the country’s flexibility in meeting different order requirements. We’ve compiled a list of goods likely to become more expensive for U.S. consumers as production costs in China continue to rise:

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Video: McGuire Says BP May Change Company Name, Top Management: Video

July 6, 2010

July 6 (Bloomberg) — Peter McGuire, managing director at CWA Global Markets Pty, talks with Bloomberg’s Linzie Janis about the outlook for BP Plc as the company seeks cash to meet the costs of the worst oil spill in U.S. history. BP is considering selling fields in Colombia, Venezuela and Vietnam, a person with knowledge of the matter said. BP shares have dropped 49 percent since the April 20 blowout that sank the Deepwater Horizon rig, killing 11 workers. McGuire, speaking from Sydney, also discusses his forecast for crude oil prices. (Source: Bloomberg)

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Ian Fletcher: Much Needed Currency Reform Bill Is Only a Small First Step Towards Dealing with China

July 2, 2010

It’s nice to see the long-stewing Chinese currency manipulation pot bubbling a bit again, thanks to China’s latest blatantly disingenuous move to allow a token fluctuation or two of the yuan. And it’s great that Sen. Debbie Stabenow’s currency bill is inching towards the floor of the Senate. (The underlying idea, giving American industries formal trade remedies against currency manipulation by foreign governments, was actually thought up several years ago by Kevin Kearns, president of my organization, the U.S. Business & Industry Council.) Passing this bill would be a very useful and encouraging step. Currency manipulation and related trade chicanery have gone on long enough. It’s especially encouraging that the bill’s sponsors grasp — as the trade-clueless Obama administration doesn’t — that trying to change China’s behavior is a losing game. So this measure wisely dispenses with preaching reform to Beijing and simply authorizes the use of sanctions in particular cases to provide trade relief to victimized American industries. Preaching reform to China is a complete waste of time for a number of reasons. First, China is making such enormous profits off of what it’s doing that its government would have to consist of saints for them to change anything because of some idea of what’s “right” or good for the rest of the world economy. If Beijing cared about any of this, it would not be manipulating its exchange rate in the first place. Among other legal strictures, the Articles of Agreement of the IMF (Article IV, revised, which went into effect in 1978) prohibit members from manipulating their exchange rates. Second, with the U.S. having just survived one economic crisis and quite likely drifting paralyzed towards another, we’re not especially credible right now giving anyone else economic advice. If we’re so smart, and free trade is so good, then why are we the ones in crisis while some of our adversaries enjoying double-digit economic growth rates? That’s not a question most Americans want to face, but make no mistake, everybody’s asking it, behind closed doors, all around the world. Third, if the Chinese leadership knows any economic history–and they seem to–then they know that the policies China is pursuing today are, in essence if not in detail, precisely the policies the US itself pursued in the 19th century to wrest economic leadership from the then-dominant economic power, Great Britain. So from Beijing’s point of view, we necessarily look like a bunch of decadent hypocritical whiners. (This doesn’t make them right, but it certainly helps explain their lack of interest in our complaints.) The strange thing in all of this is that the US, which has no difficulty playing hardball when it comes to its military relations with the rest of the world, remains stuck in a dreamily idealistic Wilsonianism when it comes to international trade. In our government’s free-trade fantasy world, everything is going to be fine because the sheer truth of the free trade ideal will persuade everyone else in the world to embrace it. Any hardball we do engage in is confined to helpless Third World nations and is done only because they don’t know what a big favor we’re doing in imposing free trade on them. The fundamental premise here is that the whole world will embrace free trade, and fairly soon. But the reality is that the world is not embracing free trade. It is embracing a construct called FreeTradeTM, which amounts to 99 percent free trade on America’s part plus completely different policies elsewhere. Among these are: Mercantilism on the part of shrewd governments from Berlin to Taipei. Imitations of American-style free trade among those dumb enough to believe in it (like the UK) or bullied into it by the economic gunboat diplomacy of the IMF in the Third World. A charade called the WTO which enforces free trade on nations in category #2 and props open export markets for nations in category #1. Would the Stabenow currency-reform bill get us out of this trap, if it passed? As noted, it’s definitely a positive move, but it’s still just a start. Its key limitation is that its approach is gradualist and, above all, reactive, because it depends on victimized industries filing lawsuits under the trade laws. So it will ultimately need to be supplemented with a much more comprehensive strategy. What America really needs to do is impose an across-the-board tariff on Chinese goods sufficient to offset not only the effects of currency manipulation, but also all the other tricks Beijing has pulled in the past and will continue trying to pull in the future. What kind of tricks? Not only obvious policies like tariffs and quotas, but also local content laws, import licensing requirements, and subtler measures–some of them covert, hard to detect, or infinitely disputable–such as deliberately quirky national technical standards and discriminatory tax practices. Then there are policies that involve outright skullduggery, such as deliberate port delays, inflated customs valuations, selective enforcement of safety standards, and systematic demands for bribes. It follows that any American response to all this must be broad-based and agile enough to prevent these various forms of circumvention. Some Americans are still dreaming that a boom in American exports to China will save the day. The reality is that the dream of selling to the Chinese functions primarily as bait to lure in American companies–which are then forced by the government to hand over their key technological know-how as the price of entry. So the China market remains the mythical wonderland it has been since the 19th-century era of clipper ships and opium wars. Beijing didn’t invent any of this mischief, by the way. It is operating from the standard 400-year-old mercantilist playbook, albeit implemented with the exceptional cynicism of a Leninist one-party state running a capitalist economy. Similar tactics are used–in less aggressive, less disingenuous, and less illegal ways–by governments all around the world. The two regions where this is most clear are Germanic-Scandinavian Europe and “Confucian” Asia (China, Japan, Korea, Taiwan, Vietnam, Singapore). Nevertheless, even most trade critics in Congress still shy away from the sweeping measures America needs to blunt this strategy. A large part of their reluctance to deal with the problems posed is due to special-interest pressures: many of the largest American companies are now so dependent on their overseas operations, and thus so vulnerable to pressures by foreign governments, that they have become outright Trojan horses with respect to American trade policy. As former congressman Duncan Hunter (R-CA), for years one of the outstanding critics of trade giveaways in Congress, once put it, “For practical purposes, many of the multinational corporations have become Chinese corporations.” Over time, this will probably change, as Beijing repeatedly disillusions those who hope for it to change. China right now is doing what the Soviet Union did over the decades after WWII, as its repeatedly obnoxious international behavior relentlessly chipped away at the not-inconsiderable sympathy it had once enjoyed. Eventually, one simply must assume, America will lose patience. One hopes that by then it is not too late to solve America’s trade problem without an economic debacle of some kind. Ian Fletcher is the author of the Free Trade Doesn’t Work: What Should Replace It and Why (USBIC, $24.95) An Adjunct Fellow at the San Francisco office of the U.S. Business and Industry Council , a Washington think tank founded in 1933, he was previously an economist in private practice, mostly serving hedge funds and private equity firms. He may be contacted at ian.fletcher@usbic.net.

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Hilda Solis: BP Needs To Stop ‘Killing Your Employees’

June 25, 2010

DENVER — Labor Secretary Hilda Solis on Friday lambasted BP PLC and coal mining company Massey Energy for their recent disasters, saying they need to enact better safety measures and not make a profit “at the expense of killing” their employees. “We are not saying go out of business. Do your job better. Make an investment in your employees. We want you to make a profit but not at the expense of killing your employees,” Solis said at a conference of the National Association of Latino Elected and Appointed Officials. She said workers cleaning up BP’s oil spill on the beaches of the Gulf of Mexico include minorities who often don’t have the interpretation services they need to understand how to handle contaminants. Solis said the workers, some of whom she visited recently, are a “vulnerable population” that needs to be protected and that her office is directing BP to give them proper training in their spoken languages. “What I heard overwhelmingly was that there were no interpreters that could provide them with information on how they could go about understanding what safety measures that OSHA (the Occupational Safety and Health Administration) is requiring them to take so they could be certified to be part of the cleanup,” Solis said. She said the workers are often minorities, including African-Americans, Asians, Mexicans and Central Americans who work in 109-degree weather while wearing plastic coveralls. “I don’t want to get into a point-counterpoint with the labor secretary,” said John Curry, a BP spokesman. “We are all saddened by the situation and we’re trying to do everything we can to learn from the situation so we can improve and so we can be as safe as possible.” Curry said BP has translators from various languages at offices where people affected by the spill can make compensation claims. He said translators for other languages, including Vietnamese, have been brought in for hazardous materials training. Officials at the Mary Queen of Vietnam Community Development Corp., a nonprofit set up in eastern New Orleans to help that area’s Vietnamese community recover from Hurricane Katrina, say language barriers have been a problem as this latest crisis develops. The corporation has at times brought in interpreters for fishermen attending classes on how to clean up the oil. It also is seeking bilingual psychologists and psychiatrists who can counsel Vietnamese suffering from mental health problems since the spill. Eleven workers were killed when BP’s Deepwater Horizon drilling rig exploded April 20 and started pouring crude oil into the Gulf. An explosion 15 days earlier at a Massey Energy Co. mine in West Virginia killed 29 men. “Massey has not put profits over safety and will not,” said Massey spokesman Jeff Gillenwater, responding to Solis’ remarks. “Safety is our first priority. Massey constantly works to improve the safety of coal miners and willingly invests millions of dollars in doing so.” ___ Associated Press Writer Tim Huber contributed to this report from Charleston, W.Va.

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Obama Says BP Agrees on $20 Billion Escrow Fund for Gulf Oil-Spill Damages

June 16, 2010

By Roger Runningen and Nicholas Johnston June 16 (Bloomberg) — President Barack Obama said BP Plc will put $20 billion into an oil spill compensation fund over four years that will be independently administered by lawyer Kenneth Feinberg . The fund won’t cap BP’s liability for cleanup costs and economic damage, Obama said after he and some of his top advisers met with BP executives at the White House. It also won’t supersede the rights of individuals or states to sue the company, he said. In addition, BP will contribute $100 million to support oil workers who lost jobs because of the spill from a BP well in the Gulf of Mexico, the biggest in U.S. history. “I am absolutely confident BP will be able to meet its obligations,” Obama said. “BP is a strong and viable company, and it is in all of our interests that it remain so.” BP Chairman Carl-Henric Svanberg said after emerging from the meeting that the London-based company is suspending dividend payments for the rest of the year. He also issued an apology to the American public for the disaster. “We made it clear to the president that words are not enough,” Svanberg said outside the White House. “We understand that we will and we should be judged by our actions.” Shares Rise BP’s American depositary receipts were up $1.04, or 3.3 percent, to $32.44 at 2:54 p.m. in New York trading. The shares are down 46 percent since the April 20 explosion aboard the Deepwater Horizon drilling rig that killed 11 workers and triggered the oil spill. The agreement was announced after the more than three-hour meeting between administration officials and company representatives, who also included Chief Executive Officer Tony Hayward , Lamar McKay , president of BP America Inc., Robert Dudley , BP managing director, and company lawyers. Feinberg will act as an independent third party to judge claims and authorize payments to Gulf Coast residents affected by the oil spill. Obama also named Feinberg in June 2009 to oversee executive pay at companies that received aid from the Treasury Department’s $700 billion Troubled Asset Relief Program. Congressional Pressure He is managing partner of law firm Feinberg Rozen LLP in Washington. Feinberg, 64, has spent his career resolving legal claims, including settlements for those affected by the defoliant Agent Orange in Vietnam, the Dalkon Shield birth- control device, and the 2007 Virginia Tech shootings that killed 32 people. The amount for the fund is in line with what Senate Majority Leader Harry Reid , a Nevada Democrat, had suggested that BP set aside to compensate residents and businesses affected by the spill, which is threatening the shorelines and economies of four states. The government yesterday increased its estimate of the amount of oil gushing from a damaged BP well to 35,000 to 60,000 barrels a day. Based on the low end of the estimate, BP well may have leaked 1.99 million barrels so far. That exceeds the 262,000 barrels spilled by the Exxon Valdez in 1989 and the U.S. record 300,000-barrel spill by a tanker off the Oregon coast in 1968, according to statistics from the American Petroleum Institute. ‘Worst Environmental Disaster’ Obama has called the BP leak “the worst environmental disaster America has ever faced.” BP has spent about $1.6 billion on containing and cleaning up the spill so far. The company’s spending for cleanup and liabilities may reach $40 billion, Standard Chartered Plc estimated last week. BP’s payments accounted for about 14 percent of all dividends in the U.K.’s benchmark FTSE 100 stock index last year. Fitch Ratings yesterday lowered BP’s credit score by six grades to BBB, two levels above junk, on concern costs will escalate. To contact the reporters on this story: Roger Runningen in Washington at rruningen@bloomberg.net ; Nicholas Johnston in Washington at njohnston3@bloomberg.net

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Singapore, Thailand, Vietnam Added to Human-Trafficking Watchlist by U.S.

June 14, 2010

By Daniel Ten Kate and Nicole Gaouette June 15 (Bloomberg) — Singapore, Thailand and Vietnam all regressed last year in their efforts to battle trafficking of men, women and children for labor or commercial sex, according to the U.S. State Department . The three Southeast Asian countries were placed on a watch list of middle-tier countries, placing them one level above the worst offenders such as North Korea, Myanmar and Saudi Arabia, the report said. Malaysia was upgraded from the worst ranking, while Cambodia and Pakistan were removed from the watch list. The department’s 10th annual report grades 175 nations on their efforts to fight this modern form of slavery. The U.S. is listed for the first time, placed among those countries that are doing their best to comply with the Trafficking Victims Protection Act, the American law against human trade. Singapore’s government showed an “inadequate response” to sex trafficking in the city-state with only two convictions last year, the report said. Thailand and Vietnam similarly made little progress in prosecuting trafficking offenders, it said. Malaysia moved out of the worst tier with increased criminal charges against offenders, the report said. Cambodian authorities made a “significant increase” in convictions over the past year, including a public official, and Pakistan boosted efforts to combat bonded labor, the U.S. said. The U.S. is a source as well as a transit and destination country for people forced into labor, debt bondage and prostitution, the report said. The work is predominantly in manufacturing, janitorial services, agriculture, hotel services, construction, nail salons, elder care, strip-club dancing and domestic servitude, the U.S. said. ‘Tears of Families’ “Behind these statistics on the pages are the struggles of real human beings, the tears of families who may never see their children, the despair and indignity of those suffering under the worst forms of exploitation,” Secretary of State Hillary Clinton said at a State Department event to mark the release of the report yesterday in Washington. The International Labor Organization estimated there were 12.3 million victims of forced labor, sex trafficking, debt bondage and recruitment of child soldiers worldwide in 2009. In the same year, there were 4,166 successful prosecutions for trafficking, the State Department report said. The U.S. report lists three tiers of nations. Among those in the bottom section — nations that don’t comply with the law and make no effort to do so — are Zimbabwe, Cuba, Mauritania and Sudan. Japan, Israel and Oman are listed in the middle tier — nations that don’t fully meet the law’s minimum standards yet are making “significant” efforts to do so. Oil-rich Qatar is listed in between the middle and lowest tier on a watch list of countries that don’t meet minimum standards and whose progress is less certain. More Prosecutions Needed The trafficking report calls for better law enforcement, improved laws and more prosecutions for trafficking. The report changes each year, and countries can move from tier one, where the U.S. and others are, to the bottom tier. This year, 22 countries were upgraded, including Djibouti, which moved from the second tier to the first, while 19 lost ground, such as the Dominican Republic, which slipped from tier two to tier three. Sixty-two countries on the list have never prosecuted trafficking, according to the report. “Most countries that deny the existence of victims of modern slavery within their borders are not looking, trying or living up to the mandates” of a United Nations protocol mandate against trafficking, the report said. To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net ; Nicole Gaouette in Washington at ngaouette@bloomberg.net .

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Singapore, Thailand, Vietnam Added to Human-Trafficking Watchlist by U.S.

June 14, 2010

By Daniel Ten Kate and Nicole Gaouette June 15 (Bloomberg) — Singapore, Thailand and Vietnam all regressed last year in their efforts to battle trafficking of men, women and children for labor or commercial sex, according to the U.S. State Department . The three Southeast Asian countries were placed on a watch list of middle-tier countries, placing them one level above the worst offenders such as North Korea, Myanmar and Saudi Arabia, the report said. Malaysia was upgraded from the worst ranking, while Cambodia and Pakistan were removed from the watch list. The department’s 10th annual report grades 175 nations on their efforts to fight this modern form of slavery. The U.S. is listed for the first time, placed among those countries that are doing their best to comply with the Trafficking Victims Protection Act, the American law against human trade. Singapore’s government showed an “inadequate response” to sex trafficking in the city-state with only two convictions last year, the report said. Thailand and Vietnam similarly made little progress in prosecuting trafficking offenders, it said. Malaysia moved out of the worst tier with increased criminal charges against offenders, the report said. Cambodian authorities made a “significant increase” in convictions over the past year, including a public official, and Pakistan boosted efforts to combat bonded labor, the U.S. said. The U.S. is a source as well as a transit and destination country for people forced into labor, debt bondage and prostitution, the report said. The work is predominantly in manufacturing, janitorial services, agriculture, hotel services, construction, nail salons, elder care, strip-club dancing and domestic servitude, the U.S. said. ‘Tears of Families’ “Behind these statistics on the pages are the struggles of real human beings, the tears of families who may never see their children, the despair and indignity of those suffering under the worst forms of exploitation,” Secretary of State Hillary Clinton said at a State Department event to mark the release of the report yesterday in Washington. The International Labor Organization estimated there were 12.3 million victims of forced labor, sex trafficking, debt bondage and recruitment of child soldiers worldwide in 2009. In the same year, there were 4,166 successful prosecutions for trafficking, the State Department report said. The U.S. report lists three tiers of nations. Among those in the bottom section — nations that don’t comply with the law and make no effort to do so — are Zimbabwe, Cuba, Mauritania and Sudan. Japan, Israel and Oman are listed in the middle tier — nations that don’t fully meet the law’s minimum standards yet are making “significant” efforts to do so. Oil-rich Qatar is listed in between the middle and lowest tier on a watch list of countries that don’t meet minimum standards and whose progress is less certain. More Prosecutions Needed The trafficking report calls for better law enforcement, improved laws and more prosecutions for trafficking. The report changes each year, and countries can move from tier one, where the U.S. and others are, to the bottom tier. This year, 22 countries were upgraded, including Djibouti, which moved from the second tier to the first, while 19 lost ground, such as the Dominican Republic, which slipped from tier two to tier three. Sixty-two countries on the list have never prosecuted trafficking, according to the report. “Most countries that deny the existence of victims of modern slavery within their borders are not looking, trying or living up to the mandates” of a United Nations protocol mandate against trafficking, the report said. To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net ; Nicole Gaouette in Washington at ngaouette@bloomberg.net .

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Taiwan, China Hold Third-Round Trade Talks Amid Optimism of June Agreement

June 12, 2010

By Bloomberg News June 13 (Bloomberg) — Taiwan and China started a third round of talks today aimed at strengthening economic and trade ties, amid rising speculation that they may sign an agreement this month. Huang Chih-peng , director-general of Taiwan’s Bureau of Foreign Trade met Tang Wei, head of Taiwan, Hong Kong and Macao affairs at China’s Ministry of Commerce, in a Beijing hotel to discuss the Economic Cooperation Framework Agreement, or ECFA. A pact will likely be agreed by the end of June, Taiwan’s Commercial Times reported today, citing a business group. Taiwan President Ma Ying-jeou has been pushing for an accord to bolster export-dependent Taiwan’s economy after a Chinese trade agreement with the Association of Southeast Asian Nations began this year. The two sides have agreed to include goods and services, as well as a so-called early-harvest list of industries that will be the first to enjoy lower tariffs. Ma’s administration has also said an accord may be signed this month. “The preferred-tariff treatment won’t happen at least for the next one to two years,” Tony Phoo , an economist at Standard Chartered Plc, said by phone in Taipei today. Still, any agreement “will boost market sentiment and confidence overall,” said Phoo. Cross-strait ties improved after President Ma took office in May 2008 and abandoned his predecessor’s pro-independence stance. Ma is seeking better ties with the island’s biggest trading partner and No. 1 overseas investment destination. ‘Very Rich Resources’ “We can make use of each other’s advantages,” China’s Tang said in opening remarks today. “Taiwan has abundant capital, advanced production technology, rich enterprise- management experience and international sales channels. On the other hand, the mainland has very rich resources and a lot of labor and huge potential markets.” Taiwan and China may sign the agreement by the end of this month, the Commercial Times reported today, citing Kuo Shan-huei, chairman of the Association of Taiwan Investment Enterprises on the mainland. Wang Yi, director of China’s Taiwan Affairs Office, told Taiwan businessmen last night that the two sides will probably agree to the accord, the newspaper said, citing Kuo. Banking, Insurance Taiwan and China agreed in December to boost cooperation in fishing, agriculture and industrial goods at the fourth cross-strait talks as ties reached their warmest in 60 years. In November, they signed three memoranda of understanding to ease access to each other’s banking, securities and insurance industries. Trade between the mainland and Taiwan increased 68 percent in the first four months of 2010 compared with same period last year, and Taiwan investment rose 44.7 percent, China’s Tang said today. An agreement would be in “both parties’ interests, so we have better resource allocation and cooperation,” Tang said. An agreement with China is “vital to Taiwan’s economy,” Chiang Pin-kung , chairman of the Taipei-based Straits Exchange Foundation, said in February. An agreement would help to ensure Taiwan can compete with regional rivals and may prompt other nations to agree to similar pacts with the island, Chiang said. North Korea and Taiwan are the only two economies in the region that haven’t signed trade accords with China and Asean, which groups Singapore, Thailand, Indonesia, Malaysia, Vietnam, Myanmar, Laos, Cambodia, the Philippines and Brunei. Taiwan has been unable to join the wave of bilateral and multilateral free- trade agreements in recent years because China regards the island as a rebellious province. Taiwan’s Democratic Progressive Party opposes the trade accord and on Dec. 20 rallied 100,000 people in Taichung city to protest against Ma’s China policies. — Henry Sanderson in Beijing and Weiyi Lim in Taipei. Editors: Jake Lloyd-Smith , Jim McDonald To contact Bloomberg News staff on this story: Henry Sanderson in Beijing at 86-10-6649-7548 or hsanderson@bloomberg.net

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BP May Sell Prudhoe Bay Stake as Spill Costs Mount

June 3, 2010

By Joe Carroll June 3 (Bloomberg) — BP Plc may have to sell some of its most-valued assets, including a stake in the biggest U.S. oil field, to pay cleanup costs, fines and legal damages from the largest offshore spill in U.S. history. The 26 percent stake in Prudhoe Bay on Alaska’s North Slope and other BP assets could attract suitors such as China National Petroleum Corp., Occidental Petroleum Corp. and Hess Corp., said Douglas Ober , chief executive officer at Petroleum & Resources Corp. in Baltimore, the oldest U.S. oil fund. “BP is going to have to look to other assets to pay for this mess they’re creating,” said Ober, who oversees a combined $1.6 billion at the fund and Adams Express Co. “They won’t be able to use any of that cash flow to expand production or add to reserves, and that’s really going to put them in a bind.” BP lost 31 percent of its market value since an April 20 fire in the Gulf of Mexico killed 11 workers, sank a $365 million rig and triggered subsea leaks that have spewed millions of gallons of crude into the Gulf. The company has spent more than $1 billion trying to stanch the leaks and remove oil from the ocean. Ober sold all of his BP stock after 15 refinery workers perished in a 2005 explosion at the company’s Texas City, Texas, plant. Asset sales by BP are more likely than a takeover of the company because it’s too soon to estimate how much the spill and its aftermath will end up costing, said Gianna Bern , founder of Brookshire Advisory & Research Inc. in Flossmoor, Illinois, and a former BP crude trader. ‘Think Twice’ “A potential investor would think twice because this is unprecedented and it would take a decade to sort out liability and any potential litigation,” Bern said. BP, the largest oil and natural-gas producer in the U.S. region of the Gulf of Mexico, is facing criminal and regulatory probes into the causes of the disaster at its deep-sea Macondo well drilled with Transocean Ltd.’s Deepwater Horizon rig. U.S. senators Ron Wyden of Oregon and Charles Schumer of New York said the company should suspend dividend payments until cleanup and liability costs are determined. A payout would be “unfathomable” until the obligations are tallied, they said. The company paid $10.5 billion in dividends last year, according to its annual report. BP’s latest attempt to contain the leaks stalled yesterday when a saw blade attached to a subsea robot snagged while cutting the pipe from the well. BP wants to sever the pipe to install a device that will divert the crude to a ship on the surface. The plunge in BP shares since the disaster wiped out 42.2 billion pounds ($61.8 billion) in market value, or more than the economic output of Nigeria, Vietnam or the Czech Republic. The stock climbed as much as 20.3 pence, or 4.7 percent, to 450.05 pence, and traded at 444.05 pence at 10:34 a.m. in London. The company’s long-term issuer default rating and senior unsecured rating was cut to AA from AA+ at Fitch Ratings today, with a ratings watch negative. The downgrade reflects “concern that BP is still facing substantial additional risks in relation to the oil spill,” the ratings agency said in a statement. Biggest Crude Source Prudhoe Bay and other Alaskan fields were BP’s largest source of crude in the Western Hemisphere in 2009 after the Gulf of Mexico, according to a public filing. Alaskan fields provided one in every 14 barrels of oil BP pumped worldwide last year. BP operates or own stakes in 20 other fields on the North Slope, as well as four pipelines. In addition to Prudhoe Bay, rival companies may target the company’s holdings in oil-rich nations such as Azerbaijan and Angola, analysts said. China National’s PetroChina Co. and other Chinese state oil companies, backed by $2.4 trillion of foreign currency reserves, have embarked on a string of overseas purchases to feed oil to the world’s fastest-growing major economy. State-run Chinese companies spent a record $32 billion last year acquiring energy and resources assets overseas. China’s appetite for crude this year is expected to grow at 15 times the rate of demand in the U.S., the world’s largest energy market, the International Energy Agency in Paris said in a May 12 report. For the first time, China is expected to burn one in every nine barrels of oil produced in the world this year, IEA figures showed. China’s Financial Strength “China is always sniffing around for reserves,” said Ober, whose biggest holdings in the petroleum fund are Chevron Corp., Exxon Mobil Corp. and Occidental. “It wouldn’t necessarily have to be one of the western supermajors because there are other companies who could muster the financial strength to make a deal for these assets.” Richard Kline , a spokesman for Los Angeles-based Occidental, said neither Chief Executive Officer Ray Irani nor President and Chief Financial Officer Stephen I. Chazen were available to comment. Jon Pepper , a spokesman for New York-based Hess, declined to comment. BP spokesman Mark Salt said Chief Executive Officer Tony Hayward will hold a call with investors tomorrow to address concerns about the dividend and the plunging share price. Credit Suisse analysts yesterday said cleanup costs and legal settlements and claims ultimately may reach $37 billion, or almost nine times the costs incurred by Exxon when its Valdez tanker ran aground in Alaska’s Prince William Sound in 1989. Ober said he has steered clear of BP shares for the last five years because of concern the safety lapses that led to the Texas City refinery disaster remained unresolved. “That was a pretty nasty thing that happened and it demonstrated that they needed to get their safety record in order,” Ober said. “Clearly, they still have some work to do on that front.” To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net .

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BP’s Alaskan Crown Jewel May Be Sold to Finance Cleanup of Gulf Oil Spill

June 3, 2010

By Joe Carroll June 3 (Bloomberg) — BP Plc may have to sell some of its most-valued assets, including a stake in the biggest U.S. oil field, to pay cleanup costs, fines and legal damages from the largest offshore spill in U.S. history. The 26 percent stake in Prudhoe Bay on Alaska’s North Slope and other BP assets could attract suitors such as China National Petroleum Corp., Occidental Petroleum Corp. and Hess Corp., said Douglas Ober , chief executive officer at Petroleum & Resources Corp. in Baltimore, the oldest U.S. oil fund. “BP is going to have to look to other assets to pay for this mess they’re creating,” said Ober, who oversees a combined $1.6 billion at the fund and Adams Express Co. “They won’t be able to use any of that cash flow to expand production or add to reserves, and that’s really going to put them in a bind.” BP lost 34 percent of its market value since an April 20 fire in the Gulf of Mexico killed 11 workers, sank a $365 million rig and triggered subsea leaks that have spewed millions of gallons of crude into the Gulf. The company has spent more than $1 billion trying to stanch the leaks and remove oil from the ocean. Ober sold all of his BP stock after 15 refinery workers perished in a 2005 explosion at the company’s Texas City, Texas, plant. Asset sales by BP are more likely than a takeover of the company because it’s too soon to estimate how much the spill and its aftermath will end up costing, said Gianna Bern , founder of Brookshire Advisory & Research Inc. in Flossmoor, Illinois, and a former BP crude trader. ‘Think Twice’ “A potential investor would think twice because this is unprecedented and it would take a decade to sort out liability and any potential litigation,” Bern said. BP, the largest oil and natural-gas producer in the U.S. region of the Gulf of Mexico, is facing criminal and regulatory probes into the causes of the disaster at its deep-sea Macondo well drilled with Transocean Ltd.’s Deepwater Horizon rig. BP’s latest attempt to contain the leaks stalled yesterday when a saw blade attached to a subsea robot snagged while cutting the pipe leading from the well. BP wants to sever the pipe to install a device that will divert the crude to a ship on the surface. The plunge in BP shares since the disaster wiped out 42.2 billion pounds ($61.8 billion) in market value, or more than the economic output of Nigeria, Vietnam or the Czech Republic. Biggest Crude Source Prudhoe Bay and other Alaskan fields were BP’s largest source of crude in the Western Hemisphere in 2009 after the Gulf of Mexico, according to a public filing. Alaskan fields provided one in every 14 barrels of oil BP pumped worldwide last year. BP operates or own stakes in 20 other fields on the North Slope, as well as four pipelines. In addition to Prudhoe Bay, rival companies may target the company’s holdings in oil-rich nations such as Azerbaijan and Angola, analysts said. China National’s PetroChina Co. and other Chinese state oil companies, backed by $2.4 trillion of foreign currency reserves, have embarked on a string of overseas purchases to feed oil to the world’s fastest-growing major economy. State-run Chinese companies spent a record $32 billion last year acquiring energy and resources assets overseas. China’s appetite for crude this year is expected to grow at 15 times the rate of demand in the U.S., the world’s largest energy market, the International Energy Agency in Paris said in a May 12 report. For the first time, China is expected to burn one in every nine barrels of oil produced in the world this year, IEA figures showed. China’s Financial Strength “China is always sniffing around for reserves,” said Ober, whose biggest holdings in the petroleum fund are Chevron Corp., Exxon Mobil Corp. and Occidental. “It wouldn’t necessarily have to be one of the western supermajors because there are other companies who could muster the financial strength to make a deal for these assets.” Richard Kline , a spokesman for Los Angeles-based Occidental, said neither Chief Executive Officer Ray Irani nor President and Chief Financial Officer Stephen I. Chazen were available to comment. Jon Pepper , a spokesman for New York-based Hess, declined to comment. BP spokeswoman Sheila Williams declined to comment for this story. Credit Suisse analysts yesterday said cleanup costs and legal settlements and claims ultimately may reach $37 billion, or almost nine times the costs incurred by Exxon when its Valdez tanker ran aground in Alaska’s Prince William Sound in 1989. Ober said he has steered clear of BP shares for the last five years because of concern the safety lapses that led to the Texas City refinery disaster remained unresolved. “That was a pretty nasty thing that happened and it demonstrated that they needed to get their safety record in order,” Ober said. “Clearly, they still have some work to do on that front.” To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net .

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Thai AirAsia Plans IPO as Parent Mulls Dual Listing

May 31, 2010

By Suttinee Yuvejwattana and Susan Li May 31 (Bloomberg) — AirAsia Bhd. , Southeast Asia’s biggest budget airline, is considering an initial public offering of its unit in Thailand next year amid a surge in leisure travel in the region. Sepang, Malaysia-based AirAsia, whose shares are now traded in Kuala Lumpur, is separately considering a dual listing in Thailand, Thai AirAsia Chief Executive Officer Tassapon Bijleveld , said in an interview in Bangkok. He didn’t elaborate. Budget airlines in Asia-Pacific are expanding as travel within the region overtook intra-North America as the world’s biggest aviation market last year. Tiger Airways Holdings Ltd., a discount carrier part-owned by Singapore Airlines Ltd., raised S$233 million ($166 million) in an IPO in January as carriers in Vietnam and Indonesia also consider fund-raising plans. AirAsia rose 4.3 percent to close at 1.22 ringgit in Kuala Lumpur. The shares have fallen 12 percent so far this year. The Malaysian airline’s first-quarter profit increased 10 percent to 224.1 million ringgit ($68.7 million) because of rising passenger numbers, according to its filing to the stock exchange today. To contact the reporters on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net ; Susan Li in Hong Kong at sli31@bloomberg.net

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Japanese firms to invest in Vietnam oil sector

May 26, 2010

Japanese firms to invest in Vietnam oil sector

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China Software Piracy Makes India a Better Bet, Microsoft’s Ballmer Says

May 24, 2010

By Mark Lee and Bruce Einhorn May 25 (Bloomberg) — Microsoft Corp. is less optimistic about China than India or Indonesia because of the country’s lack of progress in stamping out software piracy, Chief Executive Officer Steve Ballmer said. “India is not perfect but the intellectual property protection in India is far, far better than it would be in China,” the head of the world’s largest software maker said in an interview in Hanoi, Vietnam, yesterday. “China is a less interesting market to us than India, than Indonesia.” Ballmer’s concerns underscore growing dismay among U.S. companies toward operating in the world’s third-largest economy. Google Inc. in March moved its Chinese service out of the mainland to avoid censorship rules, and the American Chamber of Commerce in Beijing said last month its members face an increasingly difficult regulatory environment. China has implemented more than 1,000 measures related to the protection of intellectual property and the government will continue such efforts, said Chen Rongkai , a media officer at the nation’s Ministry of Commerce in Beijing. “China’s effort at strengthening protection of intellectual property is universally recognized,” Chen said. Lack of progress in protecting intellectual property has led China, which may overtake the U.S. as the world’s biggest personal-computer market in a year, to generate less revenue for Microsoft than India and South Korea, Ballmer said. China’s gross domestic product is twice the two economies combined. Software Piracy The value of pirated software in China almost doubled to $7.58 billion from 2005 to 2009, the highest increase in the world, Washington-based Business Software Alliance and market researcher IDC said in a report in May. While the piracy rate in the country fell to 79 percent last year, it’s higher than in India, the Philippines and Thailand, according to the report. “Ballmer is right,” said Sandeep Aggarwal , an analyst at Caris & Co. in San Francisco. “It is not easy to control piracy in China.” He estimates that as much as 95 percent of the copies of Microsoft’s Office software and 80 percent of its Windows operating systems are pirated in China. For Microsoft, based in Redmond, Washington, the billions of dollars in lost revenue from piracy in China outweigh the possible benefits of expanding in the country through acquisitions, Ballmer said. For example, owning Baidu Inc. , China’s biggest Internet search-engine operator, would only boost Microsoft’s revenue by about 1 percent, he said. Microsoft gets about 3 percent of its sales from Asia, excluding Japan and Australia, Ballmer said. U.S. Corporate Concerns “There are two things that make a country interesting. One is it buys a lot of PCs, the other is they pay for the software that gets used on those PCs,” Ballmer said. In China, “there is no software market to speak of.” The American Chamber of Commerce in Beijing said in an annual report last month that it expects an increase in trade tension between the U.S. and China. While China should move toward a more flexible currency, the U.S. should focus more on pressing the Chinese government to better enforce laws safeguarding intellectual property, change rules that limit foreign ownership and reduce tariffs. Ballmer’s comments coincide with trade talks between U.S. officials, including Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton and their counterparts in Beijing. China should strengthen efforts to improve intellectual property protection, Geithner said last week. China should let its currency reflect market forces, Geithner said yesterday in Beijing as he and Clinton led a U.S. delegation for the two-day Strategic and Economic Dialogue with Chinese officials. China’s trade surplus with the U.S. widened in March, fuelling concern the yuan has been kept undervalued to support Chinese exports. Better Enforcement Better enforcement of intellectual property rules could save U.S. firms tens of thousands of jobs, Ballmer said. “If the U.S. is going to export to Asia, it’s going to export IP, whether it’s in pharmaceuticals, technology,” Ballmer said. “Otherwise the U.S. will have nothing to export.” Ballmer said he sees signs of improvement. Microsoft last month won a decision from a Shanghai court against a Chinese insurance company. The victory followed a court ruling in the eastern city of Suzhou last year sentencing four people to prison for distributing pirated Microsoft software. “It’s a good start,” Ballmer said. “I am not trying to be pessimistic, I want to be optimistic about China.” To contact the reporter on this story: Mark Lee in Hanoi at wlee37@bloomberg.net .

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Stocks Drop, Euro Pares Gain, Treasuries Rise on Global Economic Concern

May 21, 2010

By Michael Patterson May 21 (Bloomberg) — Stocks fell for a seventh day, with Standard & Poor’s 500 Index futures falling beneath their low during the May 6 rout, and 30-year Treasury yields dropped to their lowest of the year on concern that Europe’s debt crisis will slow global economic expansion. The euro pared gains. The MSCI World Index of developed-nation shares retreated 0.4 percent at 7:59 a.m. in New York, heading for an almost eight-month low. Futures on the S&P 500 expiring in June slid as much as 1.2 percent to 1,057.6, following a 3.9 percent plunge in the U.S. benchmark index yesterday, and Dow Jones Industrial Average futures retreated below 10,000. The euro rose 0.4 percent to $1.2540, after climbing to $1.2672. The 30-year Treasury yield dropped to as low as 4.05 percent. The plunge in global equities this month wiped out $5.3 trillion of market value as Germany’s crackdown on speculation, plans for spending cuts by Europe’s most indebted nations and proposals to tighten U.S. finance industry regulation shook investor confidence. The German lower house of parliament approved the country’s share of a $1 trillion lending package to ease Europe’s debt woes, which Federal Reserve Governor Daniel Tarullo said yesterday may pose a threat to the global economy. “It’s a material risk that the problem is continuing to get bigger and to get worse,” Arnab Das , the head of global market research and strategy at Roubini Global Economics in London, said in an interview with Bloomberg Television. “As these budget cuts come through, the economies are potentially going to go sharply downward. The general tendency is going to be downward” for the euro, he said. Casualty Insurer The Stoxx 600 extended its slide this week to 6.2 percent. TrygVesta A/S, the Nordic region’s second-largest property and casualty insurer, tumbled 8.4 percent today in Copenhagen after reporting an unexpected first-quarter loss. Lanxess AG slipped 3 percent in Frankfurt after BofA Merrill Lynch Global Research downgraded the shares. The MSCI Asia Pacific Index slumped 1.2 percent. Honda Motor Co., which gets about 81 percent of its sales from overseas, declined 2.5 percent in Tokyo. Sonic Healthcare Ltd. , which provides medical tests, tumbled 20 percent in Sydney after saying earnings will be less than forecast. The retreat in U.S. futures indicated the S&P 500 may extend yesterday’s plunge, the worst since April 2009. The gauge fell to within 6 points of its low on May, when panic selling prompted calls for reform. The S&P 500 is now trading at about 15.5 times the reported earnings of its companies, the lowest level since July, according to Bloomberg data. Investors withdrew some $12 billion from U.S. and European equity funds in the week to May 19, according to research firm EPFR Global. Emerging Markets Fall The euro gained as much as 1.5 percent earlier today amid speculation investors betting on a decline were forced to buy the currency to cover their short positions. European Union President Herman Van Rompuy hosts a meeting of finance ministers in Brussels today to discuss reforms to economic governance. The yen declined 0.4 percent against the dollar after Japanese Finance Minister Naoto Kan said it’s undesirable for currencies to stray from “stable” levels. South Korea’s won forwards weakened for a third day, with three-month contracts falling 0.9 percent. President Lee Myung Bak convened a National Security Council meeting as North Korea threatened to sever all ties and reiterated its war threat after being accused of sinking one of the South’s warships. South Korea’s financial markets were closed today for a holiday. The MSCI Emerging Markets declined 0.5 percent. Benchmark indexes in Taiwan, Indonesia and Vietnam extended declines to more than 10 percent below recent highs after U.S. reports yesterday showed jobless claims unexpectedly rose and a gauge of leading economic indicators posted a surprise drop. Corporate Bonds The German 10-year bund yield slipped three basis points to 2.65 percent after business confidence in the nation unexpectedly fell this month. The extra yield investors demand to hold global corporate bonds rather than benchmark government debt widened 7 basis points to 184, the biggest difference since Dec. 14, according to Bank of America Merrill Lynch index data. Yields on 30-year Treasury bonds decline to the lowest level this year, dropped to 4.05 percent in New York. Crude oil for July delivery fell to $69.49 a barrel on the New York Mercantile Exchange. Nickel dropped 0.8 percent to $21,039 a metric ton on the London Metal Exchange. To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net .

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Stocks Drop, Euro Pares Gain, Treasuries Rise on Global Economic Concern

May 21, 2010

By Michael Patterson May 21 (Bloomberg) — Stocks fell for a seventh day, with Standard & Poor’s 500 Index futures falling beneath their low during the May 6 rout, and 30-year Treasury yields dropped to their lowest of the year on concern that Europe’s debt crisis will slow global economic expansion. The euro pared gains. The MSCI World Index of developed-nation shares retreated 0.4 percent at 7:59 a.m. in New York, heading for an almost eight-month low. Futures on the S&P 500 expiring in June slid as much as 1.2 percent to 1,057.6, following a 3.9 percent plunge in the U.S. benchmark index yesterday, and Dow Jones Industrial Average futures retreated below 10,000. The euro rose 0.4 percent to $1.2540, after climbing to $1.2672. The 30-year Treasury yield dropped to as low as 4.05 percent. The plunge in global equities this month wiped out $5.3 trillion of market value as Germany’s crackdown on speculation, plans for spending cuts by Europe’s most indebted nations and proposals to tighten U.S. finance industry regulation shook investor confidence. The German lower house of parliament approved the country’s share of a $1 trillion lending package to ease Europe’s debt woes, which Federal Reserve Governor Daniel Tarullo said yesterday may pose a threat to the global economy. “It’s a material risk that the problem is continuing to get bigger and to get worse,” Arnab Das , the head of global market research and strategy at Roubini Global Economics in London, said in an interview with Bloomberg Television. “As these budget cuts come through, the economies are potentially going to go sharply downward. The general tendency is going to be downward” for the euro, he said. Casualty Insurer The Stoxx 600 extended its slide this week to 6.2 percent. TrygVesta A/S, the Nordic region’s second-largest property and casualty insurer, tumbled 8.4 percent today in Copenhagen after reporting an unexpected first-quarter loss. Lanxess AG slipped 3 percent in Frankfurt after BofA Merrill Lynch Global Research downgraded the shares. The MSCI Asia Pacific Index slumped 1.2 percent. Honda Motor Co., which gets about 81 percent of its sales from overseas, declined 2.5 percent in Tokyo. Sonic Healthcare Ltd. , which provides medical tests, tumbled 20 percent in Sydney after saying earnings will be less than forecast. The retreat in U.S. futures indicated the S&P 500 may extend yesterday’s plunge, the worst since April 2009. The gauge fell to within 6 points of its low on May, when panic selling prompted calls for reform. The S&P 500 is now trading at about 15.5 times the reported earnings of its companies, the lowest level since July, according to Bloomberg data. Investors withdrew some $12 billion from U.S. and European equity funds in the week to May 19, according to research firm EPFR Global. Emerging Markets Fall The euro gained as much as 1.5 percent earlier today amid speculation investors betting on a decline were forced to buy the currency to cover their short positions. European Union President Herman Van Rompuy hosts a meeting of finance ministers in Brussels today to discuss reforms to economic governance. The yen declined 0.4 percent against the dollar after Japanese Finance Minister Naoto Kan said it’s undesirable for currencies to stray from “stable” levels. South Korea’s won forwards weakened for a third day, with three-month contracts falling 0.9 percent. President Lee Myung Bak convened a National Security Council meeting as North Korea threatened to sever all ties and reiterated its war threat after being accused of sinking one of the South’s warships. South Korea’s financial markets were closed today for a holiday. The MSCI Emerging Markets declined 0.5 percent. Benchmark indexes in Taiwan, Indonesia and Vietnam extended declines to more than 10 percent below recent highs after U.S. reports yesterday showed jobless claims unexpectedly rose and a gauge of leading economic indicators posted a surprise drop. Corporate Bonds The German 10-year bund yield slipped three basis points to 2.65 percent after business confidence in the nation unexpectedly fell this month. The extra yield investors demand to hold global corporate bonds rather than benchmark government debt widened 7 basis points to 184, the biggest difference since Dec. 14, according to Bank of America Merrill Lynch index data. Yields on 30-year Treasury bonds decline to the lowest level this year, dropped to 4.05 percent in New York. Crude oil for July delivery fell to $69.49 a barrel on the New York Mercantile Exchange. Nickel dropped 0.8 percent to $21,039 a metric ton on the London Metal Exchange. To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net .

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Blumenthal to Remain in Connecticut Senate Race Amid Questions on Vietnam

May 18, 2010

By Jonathan D. Salant and Peter S. Green May 18 (Bloomberg) — Connecticut Attorney General Richard Blumenthal will stay in the race for U.S. Senate, a Democratic Party spokeswoman said, amid a controversy over a New York Times report that he misrepresented his military service record during the Vietnam War. “He is 100 percent staying in the race,” said Kate Hansen, a spokeswoman for the Connecticut Democratic Party. “It’s not even a question.” Blumenthal, 64, scheduled a 2 p.m. press conference today at a Veterans of Foreign Wars post in West Hartford, Connecticut. The Times reported that Blumenthal claimed in public appearances to have served in Vietnam though he obtained deferments and then served in a Marine Corps reserve unit stationed in the U.S. Blumenthal’s campaign biography mentions his service in the reserves without referring to Vietnam. One of his Republican opponents, Linda McMahon , the former chief executive officer of World Wrestling Entertainment, posted an article on her campaign website claiming credit for leaking the story to the Times. Blumenthal, who entered the race after Democratic Senator Christopher Dodd announced his retirement, was favored to win the November election by the three Washington-based publications that rate congressional contests: Congressional Quarterly, the Cook Political Report and the Rothenberg Political Report. Military Service Democratic consultant Glenn Totten said misrepresenting his military service could cripple Blumenthal’s campaign. “It could be fatal if Blumenthal’s opponent is able to use that as a wedge to open a real question of character,” said Totten , who works on congressional races. “It’s one thing to say you did more in Vietnam than you actually did. It’s another to say you served there when in fact you went directly out of your way to avoid service.” “My intention was to be always clear and straightforward about what my service was,” Blumenthal said in an interview with Hearst Connecticut newspapers. “I’ve always said that I’ve served in the Marine Corps Reserve during the Vietnam era. If I said anything otherwise on very rare occasions, I may have misspoken.” A ‘Smear’ Attack Eric Schultz, a spokesman for the Democratic Senatorial Campaign Committee, said it was “no surprise Republicans would want to smear Dick Blumenthal .” The Times report said Blumenthal referred to his Vietnam service on the campaign trail, even though he didn’t go overseas. “Mr. Blumenthal owes the people of Connecticut, and particularly its veterans, a thorough explanation for the very serious questions that have been raised over what appears to be a long history of dishonest statements,” said Brian Walsh , a spokesman for the National Republican Senatorial Committee. Blumenthal led McMahon and former Republican Representative Rob Simmons by more than 30 points each in a March poll by Quinnipiac University of Hamden, Connecticut. “The one thing about it is it’s May and the election isn’t until November,” said Maurice Carroll , director of the Quinnipiac Polling Institute. “If it had happened in October, good Lord.” Five Deferments The Times, citing records, reported that Blumenthal got at least five military deferments from 1965-70 and took steps to avoid going to war. In 1970, he took a post in a Marine Reserve Washington unit that worked on local projects, the newspaper said. Simmons said in a statement that he was “deeply troubled” by allegations that Blumenthal misrepresented his service record. “Too many have sacrificed too much to have their valor stolen in this way,” he said. Blumenthal built a career pursuing financial crime. Last month, he sued Westport National Bank for allegedly aiding Bernard Madoff ’s Ponzi scheme, seeking $16.2 million for defrauded investors. He investigated insurer American International Group Inc. for possible misuse of taxpayer bailout funds and persuaded the company to turn over information on executives who received bonuses after the bailout. In 2008, he sued Countrywide Financial Corp., the mortgage company bought by Bank of America Corp., for allegedly duping borrowers into taking loans they couldn’t afford. Blumenthal is helped by his big lead in the polls in a Democratic state, said John C. Fortier , a research fellow at the American Enterprise Institute in Washington. “It seems as if he did not directly lie in writing, but in his live speeches he got carried away,” he said. Still, Fortier said, “if there are particularly egregious videos, they are campaign ad fodder for candidates to go viral on the web, both of which could be more damaging than the reports we read about in the Times.” To contact the reporters on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net ; Peter S. Green in New York at psgreen@bloomberg.net .

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Asia-Pacific Bond Risk Drops Most in a Year on EU Package to Stop Crisis

May 9, 2010

By Sarah McDonald May 10 (Bloomberg) — The cost of protecting Asia-Pacific bonds from default fell the most in a year after the European Union unveiled a plan worth almost $1 trillion aimed at halting a sovereign-debt crisis. The Markit iTraxx Asia index of credit-default swaps on 50 regional borrowers fell 22 basis points to 115 basis points as of 8:33 a.m. in Singapore, its biggest drop since May 7, 2009, according to Deutsche Bank AG and CMA DataVision in New York. The iTraxx bond risk benchmark for Australia also plunged the most in 12 months, while Japan’s dropped the most in five months. European policy makers announced an unprecedented loan package for debt-swamped governments and a program of securities purchases today after the euro slid to a 14-month low last week amid a global market rout. The Federal Reserve said it authorized temporary currency swaps with other central banks “in response to the re-emergence of strains” in Europe. “The strong package plus coordinated efforts with the Fed are providing major support to the market,” said Jason Watts , head of credit trading at National Australia Bank Ltd. in Sydney. “Credit-default swap indexes are snapping right back in as investors unwind the short positions they put on last week when markets blew out.” The Markit iTraxx Australia index plummeted 30 basis points to 101.5 as of 10:28 a.m. in Sydney, the most since May 7 last year, prices from Nomura Holdings Inc. and CMA show. It climbed 44 basis points in the week beginning May 3 as investor concerns about Greece’s fiscal woes mounted, according to CMA. The Markit iTraxx Japan index fell 16 basis points to 114 as of 9:39 a.m. in Tokyo, the most since Dec. 1, according to Morgan Stanley and CMA. Sovereign Risk The Markit iTraxx SOVX Asia-Pacific index dropped 31 basis points to 120.5 as of 9:55 a.m. in Hong Kong, according to Deutsche Bank. The index tracks swaps on the debt of China, Malaysia, Thailand, South Korea, Vietnam, the Philippines, Indonesia, Japan, Australia and New Zealand. The 16 euro governments pledged to make 440 billion euros ($569 billion) available, with 60 billion euros more from the EU’s budget, Spanish Economy Minister Elena Salgado said at a news conference in Brussels today. The International Monetary Fund may provide a further 250 billion euros, she said. The European Central Bank will also embark on “very significant operations,” according to EU Economic and Monetary Commissioner Olli Rehn . “The ECB has taken a decision to intervene in the secondary markets of government securities,” he said. Credit-default swap indexes are benchmarks for protecting debt against default and traders use them to speculate on credit quality. An increase suggests deteriorating perceptions of creditworthiness and a drop shows improvement. The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements. A basis point is 0.01 percentage point. To contact the reporter on this story: Sarah McDonald in Sydney at smcdonald23@bloomberg.net .

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