Friday, November 28, 2008

Daily Sources 11/28

1. Somini Sengupta and Keith Bradsher report on the efforts of the security forces in Mumbai to put an end to the terrorist attack there instigated on Thursday, with over a hundred dead and as many as 300 wounded. Salman Masood at the New York Times reports that the chief of Pakistan's Inter-Services Intelligence will visit New Delhi shortly in an effort to allay suspicions that elements in Islamabad were behind the attack on Mumbai.

2. Sudarsan Raghavan at the Washington Post reports that the Iraqi Parliament approved the status of forces agreement with the US. 149 members endorsed the security agreement, 35 opposed it, 14 abstained, and 77 were not present. Juan Cole at Informed Comment carries the text of a translation by the Open Source Center of a radio broadcast of the Voice of the Islamic Republic of Iran which endorses the agreement. Tehran seems to especially welcome the notion of a referendum on the matter, which appears to have been the compromise the pact required for passage.

3. Oleg Shchedrov at Reuters reports that Moscow today welcomed the news that the US has abandoned their effort to suspend the traditional application process for NATO membership for the Ukraine and Georgia on Wednesday. Conor Sweeney, also of Reuters, writes that Colonel-General Nikolai Solovtsov, Commander of Russia's Strategic Missile Forces, told the media that Russia has intensified its efforts to develop a new missile system given the plans for a US missile shield in eastern Europe which Moscow believes it will need by 2020.

4. Galrahn at Information Dissemination takes a look at the Russian Navy's shipbuilding plan through 2015 and concludes that their naval strategy in the short term will be underwater strength and nuclear capability. Moscow plans no new aircraft carriers through 2015.

5. Nadia Rodova at Platts reports that Moscow has cut its export tariff on crude again to $192.10/mt ($26.31/barrel) from December 1, 33.1% down from the current $287.30/mt.

6. Ralph Atkins at the Financial Times reports that analysts expect the European Central Bank to cut rates by at least 50 basis points (0.5%) next week.

7. Eurointelligence reports that the German Finance Minister, Peer Steinbruck, has rejected the pan-European stimulus package proposed by the European Commission earlier this week, saying that Berlin wants to see how the current programs play out before committing more funds.

8. Jim O’Neill, chief economist at Goldman Sachs, has an opinion piece at the Financial Times which argues that China, India, and Germany must increase domestic consumption growth in order to make up for the decline in US imports and thus avoid a serious global downturn.

9. Polly Yam at Reuters reports that the Chinese State Reserve Bureau is considering purchasing as much as 20-30 billion yuan ($2.93 billion-$4.39 billion) in base metals. Apparently Beijing wants to help the metals industry in an effort to restrain job losses. Such a move would be very welcome by emerging nations with commodities based currencies in what is beginning to look like a strategic stance in Beijing.

10. Li Yanping at Bloomberg reports that Zhang Ping, chairman of the National Development and Reform Commission, told the media yesterday that several economic indicators in China showed that the economy was rapidly weakening in November. He told reporters, "Employment is being impacted by factory closures and many migrant workers are returning to their home towns."

11. Michiyo Nakamoto at the Financial Times writes that Japan is facing a serious downturn as Chinese imports are not making up for the fall in demand for products in the United States. The Japanese demographic situation--where the size of the population is shrinking and the share of the elderly is getting larger--is leading to a decline in consumption as a percentage of GDP. It now stands at 57%. Growth has to come, therefore from exports. Exports have grown from 11.4% of GDP in 2002 to 17.6% in 2007. China has recently edged out the US as the largest destination for Japanese exports, but slackening demand overseas looks like it will result in a very weak economic picture. Well-worth reading in full. Toru Fujioka and Jason Clenfield at Bloomberg report that factory output fell 3.1% in October from September and that household spending fell 3.8% in its eighth consecutive decline.

12. The JoonYang Daily reports that Seoul has delayed a plan to send ships to help police the waters off Somalia, citing the costs of the effort in the current economic crisis and the need for more talks with the United States. I suspect that the naval traffic passing the Gulf of Aden important to Seoul is their trade with Europe, which may not represent a particularly large share of the export-import market. Their energy security is not threatened as their imports do not pass by it.

13. The AP reports that Venezuela is reconsidering several foreign refinery projects, including ones in Nicaragua and Ecuador, due to the fall in oil prices. Caracas is looking for other ways to finance the projects.

14. Daniel Denvir at reports that a special debt audit commission in Ecuador released a report that argued that much of the country's foreign debt was illegitimate or illegal. The commission recommended that Quito default on $3.9 billion in foreign commercial debts. It doesn't look like Quito will follow-through on the recommendations, but that it will use the report as leverage in its renegotiation of debt going forward. (h/t Jesse's Café Américain.)

15. Platts reports that Nigerian crude production has fallen to 2.14 mb/d after the sabotage seen in the last few weeks. "The head of crude marketing at state oil company NNPC, Aminu Baba-Kusa, said that around 1.2 million b/d of the country's crude production was currently shut in."

16. Andrew Martin at the New York Times reports that food prices are expected to continue rising in the United States despite the fall in energy prices.

17. Daniel C. Vock at reports that several US states have either already passed their own stimulus programs or are in the process of doing so, as opposed to waiting for the Federal government to act. Florida, Ohio and Vermont have already passed programs and California, New Jersey, Washington, and Wisconsin are considering them. Worth reading in full. (h/t Real Time Economics.)


LFC said...

Re #8: Isn't it too late to "avoid a serious global downturn"? (I guess I should read O'Neill's column, but based on this summary I'm not inclined to.)

freude bud said...

I think it is clear that we've entered a "serious global downturn," but that O'Neill is suggesting what he thinks would be the most effective policy response.

It could be worse ... the DOW dropped by 89% from 1929-1932. see:

That said, the predictive value of Goldman Sach's analyses seem low.