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Friday, January 28, 2011

Berny Madoff University

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China devalues US buying power by 30%, Protects US Treasury Holdings

The trade imbalance between the US and China, a hot button between the nations for the last decade or so, is finally going to start to stabilize in the summer of 2011.  However, it is doing so with a de facto devaluation of the US dollar and its buying power.  The average American will see a spike in the price of everything from their favorite jeans and T-shirts, to the cost of some electronics.
The Chinese have decided to devalue the US dollar’s buying power, without devaluing the US Treasury holdings they hold.  It is an elegant solution to their issues.  It will be interesting to see if they can pull it off, while they try to prop up the European Sovereign debt markets at the same time.
The Chinese are attempting, successfully so far, to introduce the Yuan as a global currency in which to settle international trade.  China is pumping into its own internal currency markets so much liquidity, they need an export market to develop for the Yuan or their own internal markets will overheat.
So China is going to start offering Yuan based savings accounts, to westerners as a vehicle in which to park capital.  While this is a test case only, one might expect Yuan based accounts to be offered around the world sooner rather than later.
If western investors take to Yuan based cash accounts as a way to try and gain an increase in value, the transition will drive the western banks to be more proactive in adding convertibility into their systems.  To start, they are offering these Yuan accounts at three US based branches.
The US Dollar devaluation will come in the form of an increase in the prices of all products.  In reality it will represent the uniform cost push effects of inflation.  The US can expect it on all Chinese based products of one form or another.  The timing of the change is set to arrive with the products on the US shores in the summer of 2011.
“They’re going to go home with 35 percent less product than for the same dollars as last year,” particularly for fur coats and cotton sportswear, said Bennett Model, chief executive of Cassin, a Manhattan-based line of designer clothing. “The consumer will definitely see the price rise.”
China has no choice at this stage, but to pass on the cost of raw inflation to its customers.  The era of cheap Chinese imports is over.  The real impacts of higher commodity costs are going to push into the economy at different levels.
The weather impact on Australia has not hit the Chinese manufacturing capacity yet, but you can expect that diesel will increase significantly in the coming weeks, as China draws upon the world’s spare capacity to fuel their economy this spring.
The US had warned China to adjust its currency peg with the US, or suffer the consequences.  Those consequences are now being going to be return to the US shores as expensive imports of dubious quality.
However, not all nations or economist agree with the stance the US is taking.  Robert Mundell, Nobel Prize winning economist, and the proverbial father of the Euro, feels that the US is pushing China too hard in this regard.
Robert Mundell, Professor of Economics, Columbia University, said: “It’s a mistake to have China change the exchange rate. This is a bad way of changing something.
“A big appreciation in China would create deflation, aggravate poverty in the western part of the country, in the rural areas. It would be something that would in the long run come back to haunt China.”

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Without Egypt, Israel will be left with no friends in Mideast

Egypt protest - AP - Jan 26, 2011
THe fading power of Egyptian President Hosni Mubarak's government leaves Israel in a state of strategic distress. Without Mubarak, Israel is left with almost no friends in the Middle East; last year, Israel saw its alliance with Turkey collapse.

From now on, it will be hard for Israel to trust an Egyptian government torn apart by internal strife. Israel's increasing isolation in the region, coupled with a weakening United States, will force the government to court new potential allies.
Israel's foreign policy has depended on regional alliances which have provided the country with strategic depth since the 1950s. The country's first partner was France, which at the time ruled over northern Africa and provided Israel with advanced weaponry and nuclear capabilities.


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Thousands protest in Jordan


Thousands of people in Jordan have taken to the streets in protests, demanding the country's prime minister step down, and the government curb rising prices, inflation and unemployment.

In the third consecutive Friday of protests, about 3,500 opposition activists from Jordan's main Islamist opposition group, trade unions and leftist organisations gathered in the capital, waving colourful banners reading: "Send the corrupt guys to court".

The crowd denounced Samir Rifai's, the prime minister, and his unpopular policies.

Many shouted: "Rifai go away, prices are on fire and so are the Jordanians.''

Another 2,500 people also took to the streets in six other cities across the country after the noon prayers. Those protests also called for Rifai's ouster.

Members of the Islamic Action Front, the political wing of the Muslim Brotherhood and Jordan's largest opposition party, swelled the ranks of the demonstrators, massing outside the al-Husseini mosque in Amman and filling the downtown streets with their prayer lines.

King Abdullah has promised some reforms, particularly on a controversial election law. But many believe it is unlikely he will bow to demands for the election of the prime minister and Cabinet officials, traditionally appointed by the king.

Rifai also announced a $550 million package of new subsidies in the last two weeks for fuel and staple products like rice, sugar, livestock and liquefied gas used for heating and cooking. It also includes a raise for civil servants and security personnel.

Record deficit
However, Jordan's economy continues to struggle, weighed down by a record deficit of $2bn this year.

Inflation has also risen by 1.5 per cent to 6.1 per cent just last month, unemployment and poverty are rampant - estimated at 12 and 25 per cent respectively.

Ibrahim Alloush, a university professor, told the Associated Press that it was not a question of changing faces or replacing one prime minister with another. 

"We're demanding changes on how the country is now run," he said.

He also accused the government of impoverishing the working class with regressive tax codes which forced the poor to pay a higher proportion of their income as tax.

He also accused parliament as serving as a "rubber stamp'' to the executive branch.

"This is what has led people to protest in the streets because they don't have venues for venting how they feel through legal means," Alloush said.

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U.S. 2011 deficit to hit $1.48T

WASHINGTON — The U.S. budget deficit this year will jump nearly 40% over prior forecasts, mostly due to the mammoth tax-cut package brokered by President Barack Obama and lawmakers last month, the Congressional Budget Office said Wednesday.
The CBO said the fiscal 2011 deficit will hit US$1.48-trillion, up from last August’s US$1.07-trillion estimate, which was crafted before Bush-era tax rates were extended at a cost of US$858-billion over 10 years.
The CBO “estimates that the act (renewing tax cuts) will increase the deficit by US$390-billion in 2011, by US$407-billion in 2012 and by US$120-billion in 2013,” according to the report.
While a deficit of nearly US$1.5-trillion in the fiscal year that ends Sept. 30 would be an all-time record in dollar terms, as a percentage of the overall economy it would be slightly below the US$1.41-trillion deficit in the 2009 fiscal year.
The US$1.48-trillion deficit, CBO said, would be about 9.8% of GDP, higher than the 8.9% of GDP in 2010, but below the 10% in 2009.
The new forecast is part of a semi-annual economic review by the CBO, the nonpartisan budget analyst for Congress.
The latest CBO estimates could exacerbate a deeply partisan debate in Congress and with Obama over the best way to tackle the US$14-trillion federal debt.
Some Republicans looked at the CBO report as further evidence of the need to cut federal spending, ignoring the impact of the tax-cut extension.
“Today’s CBO projections underscore what Republicans have been telling the Obama administration and its allies in Congress: The pursuit of a big government agenda is reckless, irresponsible and unsustainable,” said Representative Tom Price.



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European Council Union....Debt Union

It´s GREAT when you listen a thinking man in the middle of this mess!!!!!
Nigel Farage you have MY RESPECT.

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PM's Address to the Knesset Marking the International Holocaust Remembrance Day

Have the lessons of the Holocaust been learned?

For us, the Jewish people, the answer is yes.
For the rest of the world, the answer is no.

The lesson that we have learned is evident in our standing here, in our sovereign state, in our capital city.

The most crucial lesson we learned from the Holocaust is that we needed to restore our people to our own state, with an army and the capacity for self-defense.

This lesson was understood by Herzl even before the great atrocity, which he foresaw, took place.  And we implemented it.

But there is another lesson. At the end of the Holocaust, there were 11 million Jews left in the world.  Before it, there were 18 million.  Even at a very slow rate of natural increase of the population, there should have been almost 30 million Jews in the world today, but in fact, there are only 13.5 million; millions fewer than expected.  This deficit is not the result of physical loss, but of loss of identity and assimilation.

The only place where the Jewish people has enjoyed substantial, welcome growth is here, in the State of Israel.  There is no nation that could live on a demographic pin head.  Therefore, alongside cultivating our country, we must continue to bring Jewish people to Israel, as well as preventing their assimilation abroad.  The projects that we operate – Birthright, MASA and Moreshet – are aimed at young Jewish adults in Israel and abroad, and this is an essential element in assuring our future.


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