Daily Sources 2/6

1. The OECD released their latest set of economic indicators for the developed world and BRIC countries. This set of graphs top the report:



The report indicates a "strong slowdown" in Canada, France, Japan, Germany, Italy, UK, India, and Russia as well. It further indicates a slowdown in Brazil. (h/t Paul Hannon at Real Time Economics.)

2. In a series of posts Edward Hugh at Fistful of Euros is now referring to the financial crisis as the "Second Great Depression," and says that it has spread West from Ukraine to Hungary, where industrial production fell 23.3% from a year earlier in December. December was the seventh consecutive month to decline, after a contraction of 9.9% in November, and the country's manufacturing purchasing manager index (or PMI) has fallen to 38.6 in January from 40.8 in December. (For PMI surveys a reading above 50 indicates expansion; readings below 50 indicate contraction.) Spanish industrial production fell 19.6% in December, following a contraction of 15.3% (revised downward) in November. The Spanish PMI, however, was slightly up from November when it read 28.2 to 31.8 in January. And industrial production in Germany fell by 4.6% in December, following a contraction of 3.7% in November. German PMI fell to 32.0 in January from 32.7 in December.

3. The Associated Press reports that Gazprom has indicated to Polskie Gornictwo Naftowe i Gazownictwo (the main natural gas company in Poland, PGNiG) that it is ready to supply additional gas to the country. Poland is only receiving 76% of its contracted for gas, as following the Russo-Ukrainian gas dispute a key intermediary--RosUkrEnergo--half-owned by Gazprom, has not resumed deliveries. "PGNiG has covered the shortfall so far by drawing from strategic reserves, which currently stand at around 50% of capacity."

4. Yuriy Humber and Archana Chaudhary at Bloomberg report that Russia will become the first supplier of nuclear fuel to India after the nuclear suppliers group decided to lift their ban on supplying India under the NPT.

"A unit of Rosatom Corp., Russia’s holding company for all nuclear assets, will sign a contract with Indian atomic energy monopoly Nuclear Power Corp. on Feb. 11 in Mumbai to deliver 2,000 metric tons of uranium pellets, both companies said.

India will pay $780 million for the fuel, Rosatom spokesman Sergei Novikov said by phone from Moscow today."

5. Nirmala Menon at Real Time Economics reports that Statistics Canada announced labor data as well today, showing unemployment numbers growing from 6.6% to 7.2%. Net 129,000 jobs were lost in January.

6. Laura Santini at China Journal reports that China's decision to make swap arrangements under the Chiang Mai Initiative in renminbi--as opposed to the dollar--as well as in the three year $29.3 billion swap line extended to Hong Kong has sparked speculation that Beijing wants to establish China's currency as a trading currency internationally.

"Still, the swap lines are a step toward making the yuan more available outside China, particularly to policy makers navigating the eddies of the world-wide currency markets. Indonesia, for example, would typically buy back its own currency using its stash of U.S. dollars if the rupiah suddenly dropped in order to keep the currency steady. Under the swap agreement, Jakarta could instead turn to yuan.

Chinese officials may be simply playing good politics with its neighbors, or acknowledging the yuan’s use outside its borders rather than actively promoting its currency. To some extent, China’s moves serve to rubber stamp activity that is already underway outside the mainland, where gray-market yuan trade briskly in Southeast Asia. Some Asians are warming to alternatives after borrowing in U.S. dollars, then seeing their debt loads swell when the dollar rose sharply amid volatility late last year."

If the volatility in the dollar increases the risk of borrowing in it, then the relative stability of more managed currencies might present an attractive alternative. Would that stability apply if the renminbi became the international currency of account? (For more on the Chiang Mai Initiative, see Daily Sources 2/5 #5 and 1/30 #4)

7. The State Department announced Secretary of State Clinton's first scheduled international trip yesterday,

"departing Washington, DC, on February 15. She will visit Japan, February 16 through 18; Indonesia, February 18 through 19; the Republic of Korea, February 19 through 20; and China, February 20 through 22. In all capitals, the Secretary will be discussing common approaches to the challenges facing the international community, including the financial markets’ turmoil, humanitarian issues, security, and climate change."

As a reporter present was sure to ask, Pyongyang is nowhere on the list. Gordon Fairclough at the China Journal posts that the Federation of American Scientists reported Tuesday that US Intelligence counted 12 "patrols" by Chinese submarines in 2008, double the number seen in 2007. "It is unclear what constitutes a patrol, but it is thought to mean an extended voyage." Apparently military to military dialogue between the US and China have been frozen since DC approved an arms sale to Taiwan last year, prompting Admiral Timothy Keating to tell Reuters yesterday, "We would much prefer it to be a more formal, a more regular and a more frequent dialogue than it is right now."

8. Jim Lowe's Iraq Oil Report has confirmed that there will be a conference on federalism and oil and gas management in Iraq, organized by the European Union and United Nations.

9. Shinhye Kang at Bloomberg reports that KNOC and Ecopetrol have agreed to purchase Petro-Tech Peruana SA of Peru for $900 million with each taking a 50% stake. Petro-Tech produces about 12 kb/d and holds the deeds to concessions holding estimated reserves of 100 million barrels. Seoul's energy policy has over the last few years been modified to target overseas oil field acquisitions, and

"South Korean companies will increase spending on overseas oil fields and mines by 23 percent this year to more than $7 billion as falling crude prices make commodity assets cheaper, Lee Jae Hoon, a vice minister for the Knowledge Economy, said in January."

KNOC wants to begin drilling off shore Peru to bring up production from the acquisition to 45 kb/d by 2015.

10. Brian Blackstone at the Wall Street Journal reports that the Bureau of Labor Statistics released data showing that 598,000 non farm jobs were lost in January, bring the official unemployment rate to 7.6%. The New York Times published a good illustration of the news:



The rate including marginally attached and involuntary part time workers rose by nearly 5% to 13.9% in January. The Wall Street Journal has a publicly available interactive graphic which you can use to chart the job losses by state.

11. Clarisse of Les Carnets de Clarisse has pointed out that the House of Representatives of the State of Washington has a memorial in committee which would petition the Federal Government to consider whether it has overstretched its authority vis-a-vis the State's rights. (The text of the memorial is here.) This comes on top of the recent bill introduced in the House Assembly of New Hampshire--and predictions by Russian US analysts that the US faces imminent disintegration into a variety of states. (see Daily Sources 2/3 #7.)My off the cuff response to the head's up:

"This is slightly different from the bill presented to the NH House, because the Washington State legislative instrument would be, if passed, a petition as opposed to a resolution which is what is being considered in the New Hampshire Assembly, ie a bill that would go into law.

The right of petition is a First Amendment right in the US Constitution. It is not given much note these days, generally, though historically it has had a very important role. For example, the abolitionist movement in the US was radicalized after 1835 when the House agreed to simply not consider any petitions to abolish slavery.

(Many northerners--mostly from more radical Protestant congregations--were constantly sending in petitions to abolish slavery. It was taking a lot of time out of the business of the House to consider the petitions, so a compromise was reached by which all such petitions would be automatically put aside. This triggered the wrath of John Quincy Adams, who had formerly been President and at that time Congressman representing his district from Massachusetts, who began a campaign to force the House to address the petitions--even if to deny them--as it was a Constitutional right. His efforts did not go anywhere for over a decade, but over time he slowly built a coalition to hear the petitions, and eventually the Gag Rule was overturned. But most importantly, over time the news that the rights of Northerners under the Constitution were being violated to protect the sentiments of Southerners who wished to continue their practice of slavery angered, and radicalized, the Northern population, turning many into serious abolitionists.)

So the power of petition isn't much more than a right to be heard ... it doesn't necessarily translate into other action. A resolution is law.

All of the sponsors of this bill are also members of the Republican party.

(Lincoln, of course, is the President who emancipates the slaves. It is also argued that he strengthened the Federal Government at the expense of the Tenth Amendment, which is what both of these bills refer to. The Tenth Amendment reserves to the states all the rights not given to the Federal Government.)

So, that said, I do not think that these bills are likely to be passed. (I am not that familiar with the local politics of either of these states ... but I still doubt it.)

But it looks like it is probably being coordinated by the US Republican Party. They are in a process of reinventing themselves after Bush. I suspect they want to publicize the nature of state rights and become identified with them more in the general public's mind, especially given that now there is more and more anger with Washington DC. They are probably trying to exploit the provincial divisions of the country--which are many--as part of a move to try and catapult themselves to power (in DC ironically) as people become more and more unhappy with the economic fall out of the financial crisis."

Clarisse asks whether this heralds a new turn towards regional nationalism, like that which we are currently seeing in the EU in response to the financial crisis. Well, no, in part because nationalism in the US is nationalism for the US, not a state. And by adopting such a stance, the GOP exposes itself to accusations of being unpatriotic. On the other hand, it is not new, in the sense that the GOP has for a long time now been wrapping itself in the mantle of being "outside the Beltway" and appealing to the regional chauvinism of its constituents everywhere. They really ought to rein in the outside the beltway nonsense, but, if not, I expect they will be hoisted on their own "we're the biggest patriots" petards.