Brazil faces forecasts of slow growth

UPI
November 1, 2011

Brazilian government economic planners have been served the first warning this year that the Latin American country’s commodities-fueled economy may be slowing.

Data released by the state development bank BNDES indicated the sluggish growth wasn’t only a reality but one that had gained momentum in recent months.

Reports of the continent’s largest economy slowing contrast with projections that continue to indicate healthy activity in most sectors of Brazilian economy. The slowdown prognosis is based on lower lending figures, which indicate momentum in economic activity, the data showed.

The bank said its loan disbursements in 2011 will miss their initial target for the year, reflecting a shortfall of $2.95 billion-$4.14 billion. The estimated total loan disbursements for the year are likely to be no more than $83 billion against estimates of up to $87 billion.

The drop is partly the result of corporate borrowers changing their minds about making new credit requests but it represents the first annual decline in the figure since 2008, when Brazil was battling the global economic downturn.

The financing slump comes amid forecasts that Brazil’s economic growth this year may be less than half that in 2010. Last year’s economic growth, recorded at 7.5 percent, was the fastest in 24 years of economic activity in Brazil and attracted investors from all over the world.

At least part of the drop in borrowing from BNDES stems from conservatism among Brazilian corporate entities that have been buffeted by investor speculation and worries over the possible ramifications of the eurozone crisis.

Talks on building new business bridges with the European Union have been stalled for more than a year and discussions on reaching a free trade deal with Europe within the framework of Latin America’s Mercosur trade bloc have been inconclusive.

Officials say the eurozone crisis may encourage European negotiators to drop their objections to Mercosur, which is seen by the EU agriculture sector as a potential threat. EU analysts have said a deal with Mercosur will help EU to forge new trade links and find new sources of revenue at a time of adversity.

Several Mercosur member countries are doing well and Brazil in particular has a vast surplus that promises EU exporters a potential bonanza if a trade deal is realized.

Mercosur member countries are Argentina, Brazil, Paraguay and Uruguay as full members, Venezuela as a full member awaiting confirmation and Bolivia, Chile, Colombia, Ecuador and Peru as associates.

Analysts said the news of a potential economic slowdown in Brazil will likely cause a ripple effect in the rest of the Mercosur region, which has a gross domestic product of $2.895 trillion.

46 Million Americans Live Below Poverty Line

The poverty rate for children rose from 20.7 percent in 2009 to 22 percent last year.

by David Morgan
Reuters
September 13, 2011

The number of Americans living below the poverty line rose to a record 46 million last year, the government said on Tuesday, underscoring the challenges facing President Barack Obama and Congress as they try to tackle high unemployment and a moribund economy.

The Census Bureau’s annual report on income, poverty and health insurance coverage said the national poverty rate climbed for a third consecutive year to 15.1 percent in 2010 as the economy struggled to recover from the recession that began in December 2007 and ended in June 2009.

That marked a 0.8 percent increase from 2009, when there were 43.6 million Americans living in poverty.

The number of poor Americans in 2010 was the largest in the 52 years that the Census Bureau has been publishing poverty estimates, the report said, while the poverty rate was the highest since 1993.

The specter of economic deterioration also afflicted working Americans who saw their median income decline 2.3 percent to an annual $49,445.

About 1.5 million fewer Americans were covered by employer-sponsored health insurance plans, while the number of people covered by government health insurance increased by nearly 2 million.

All told, the number of Americans with no health insurance hovered at 49.9 million, up slightly from 49 million in 2010.

The economic deterioration depicted by the figures is likely to have continued into 2011 as economic growth diminished, unemployment remained stuck above 9 percent and fears grew of a possible double-dip recession.

The report of rising poverty coincides with Obama’s push for a $450 billion job creation package, and deliberations by a congressional “super committee” tasked with cutting at least $1.2 trillion from the budget deficit over 10 years.

Faced with deteriorating job approval ratings, the president is trying to convince Republicans in Congress to support his package.

Analysts said poverty-related issues have relatively little hold on politicians in Washington but hoped the new figures would encourage the bipartisan super committee to avoid deficit cuts that would hurt the poor.

The United States has long had one of the highest poverty rates in the developed world. Among 34 countries tracked by the Paris-based Organization for Economic Cooperation and Development, only Chile, Israel and Mexico have higher rates of poverty.

Decline of the United States of America: The Moral, Political and Economic Causes

by Rodrigue Tremblay
Global Research
September 7, 2011

“The deterioration of every government begins with the decay of the principles on which it was founded.” Montesquieu, (Charles Louis de Secondat)  (1689-1755)

“I am convinced that I am acting as the agent of our Creator. By fighting off the Jews, I am doing the Lord’s work.” Adolf Hitler (1889-1945), German politician and future German Chancellor, Mein Kampf, chap. 2, 1925

I believe that God wants me to be president.”George W. Bush, American 43rd president, speech in Washington D.C., June 1, 2004

“This economy of ours is on a solid foundation.” George W. Bush, American 43rd president, January 4, 2008 (N.B.: the U.S. economy was about to enter into recession.)

“I believe that the Iraqi people will greet us as liberators.” Sen. John McCain, March 20, 2003

“We used to hustle over the border for health care we received in Canada. And I think now, isn’t that ironic?” Sarah Palin, American politician and former governor of Alaska, (admitting that her family used to get treatment in Canada’s single-payer health care system, despite having demonized such government-run programs as socialized medicine that will lead to death-panel-like rationing, March 6, 2010)

“The Lord says be submissive. Wives, you are to be submissive to your husbands.” Michele Bachmann, Rep. of Minnesota and 2012 Republican presidential candidate, (on the question of submitting to the authority of her husband, 2006). Rep. Bachmann is also a graduate of Oral Roberts University.

“Let the woman learn in silence with all subjection. But I suffer not a woman to teach, nor to usurp authority over the man, but to be in silence.”
The Bible (New Testament), 1 Timothy 2:11-12

Think of the American economy as a large apartment block. A century ago—even 30 years ago—it was the object of envy. But in the last generation its character has changed. The penthouses at the top keep getting larger and larger. The apartments in the middle are feeling more and more squeezed and the basement has flooded. To round it off, the elevator is no longer working. That broken elevator is what gets people down the most.” Lawrence Katz, Harvard University economist, 2010

The American economy is in the Doldrums, the American Political System is Dysfunctional and Paralyzed

Around the world, many are baffled by what’s happening to the United States. It seems that all at once the wheels are going off the cart. The American economy is in the doldrums, the American political system is dysfunctional and paralyzed, and a series of elective, far away foreign wars is ruining the country.

The U.S. economy used to be an engine of economic growth and the American political system used to be a well-oiled checks-and-balances machine that was geared toward progress and that could accommodate both leadership and compromise. Moreover, Americans can be proud that their constitution, at least on paper, is one of the best in the world, having been crafted by enlightened founders who believed in individual and democratic freedom.

In this short article, I will identify what I think to be the two major causes of America’s current decline. (I welcome comments.)

-The first cause is a moral one: it is related to the widespread corruption that permeates many institutions and sectors of the U.S. society, the most corrupt of them all being the political system and the corporate system. It is no accident that the epicenter where these two corrupt systems meet is at the Pentagon, an agency that reports upon reports picture as a cesspool of corruption.

The result of that widespread corruption is that the United States is now generating a sub-standard class of politicians to administer its affairs who are not the servants of the common good, but who rather serve happily the narrow money interests that finance them. The U.S. corporate elite, for the most part, has abandoned all loyalty to its country while it roams the world in order to make short-term profits at all costs and avoid paying taxes in its country of origin.

The result: wacky politicians and greedy business people are in charge.

The same can be said about the biased corporate media who have also abandoned all pretenses of neutrality and objectivity in informing the people and who have rather donned the mantle of unadulterated propaganda in order to cynically manipulate information and public opinion, to the delight of their money masters.

Things were never perfect in the past, but I would argue that the current level and scope of corruption in the U.S. society is unprecedented and is a root cause of the decline of the United States.

The second cause of American decline is more structural and more economic in nature. It is related to a widespread ignorance of the practical consequences of economic and financial globalization that began under the Nixon Republican administration (1969-1973) and which accelerated under the Republican administrations of Ronald Reagan (1981-1989) and of George H. Bush (1989-1993).

I shall tackle each of these causes separately.

I-  The U. S. has abandoned its Democratic Ideals and the Quality of its Politicians is Sub-Standard

Let’s talk first about the moral and political causes of American decline.

British Prime Minister Winston Churchill (1874-1965) once quipped that “democracy is the worst form of government, except for all the others.”! Indeed, democracy is a very fragile political system that can sometimes fail the very people it is designed to serve. American president Abraham Lincoln (1809-1865) defined it as “a government of the people, by the people, and for the people.”

But democracy is at its worst when an oligarchy takes control of a country’s institutions and imposes its agenda. Such is the case with today’s United States. Money interests, not the sovereign people, control the political system today; they control the corporate media system, they control the U.S. Supreme Court and much of the judicial system and, I would argue, they control a large chunk of the academic system.

The results are everywhere to be seen. The United States has reached levels of inequality in wealth and income that used to be seen only in some backyard third-world countries.

Another form of political corruption and of intellectual decay is the widespread refusal nowadays to abide by article VI of the U.S. Constitution. Indeed, article VI expressly stipulates that “no religious Test  shall ever be required as a Qualification to any Office or public Trust under the United States.” This would seem to me to be clear enough.

Some fifty years ago, in 1960, Sen. John F. Kennedy was elected president of the United States, stating that his religious beliefs were his own personal affair and that, as an elected official for all the people, he was going to use his best judgment in his public decisions, and not be obligated to follow the diktats of any established religion, not even of his own, the Roman Catholic Church, nor its foreign Pope.

As an indication of how much the United States has regressed on the question of separation of Church and State, consider that a presidential candidate of the quality of Sen. John F. Kennedy would most likely not be elected to office today with such a stand of intellectual independence. Mind you, most of the Fathers of the U.S. Constitution could not be elected either, a clear indication that the United States has strayed away from its founding principles.

Consider what President James Madison (1751-1836) had to say about religion in politics: “The number, the industry, and the morality of the priesthood, and the devotion of the people have been manifestly increased by the total separation of the Church from the State.” Do you really believe that President Madison could be elected today? Nowadays, in fact, religious zealots dominate the Republican party while some half of democrats think that a presidential candidate must have “strong religious beliefs” to be considered for public office. The only problem is that such a view is in direct conflict to what the U.S. Constitution says!

Mixing personal and official religion with democratic politics is a form of intellectual corruption. —It’s dynamite. If the United States continues in the same destructive direction that many theocratic Muslim countries have followed for centuries, with disastrous results, I would not hesitate to predict that the U. S. will self-destruct.

II- The Widespread Confusion Between What Works in an Open Economy as Compared with a Closed Economy

Let’s talk economics.

The U. S. economy, like most industrial economies, is an open economy. This means that goods and services can be exported and imported while facing a minimum of border taxes and other barriers to international trade. For a quarter of a century now, it has also meant that the U. S. economy is part of the economic globalization model. The latter goes much further than free trade: it means that corporations and banks can move their capital, technology and production plants around the world in search of the greatest profit and the best investment environment. I happen to believe that this globalization model has been pushed too far and has become a major cause of economic stagnation in the industrial economies.

When it comes to economic policies, what can work in a closed economy does not necessarily work in an open economy. Consider macroeconomic policies to stimulate a stagnant economy. In an open economy, keynesian-type stimulus policies of deficit government spending or of tax reduction do not work properly, essentially because stimulus policies of this type are the equivalent of heating a house in winter with the windows and doors wide open. The new deficit spending may help the world economy, since much of the new spending ends up abroad, but the domestic multiplier effect of such spending can be very low. This means that such an economic stimulus in an open economy may not be as effective in stimulating economic activity as hoped and, in some circumstances, it can do more harm than good.

Nevertheless, many politicians (and some economists!) cling to the old idea that lowering taxes for the rich when the government is in deficit or new non-infrastructure government deficit spending can stimulate the economy. This obviously does not work, at least not if the new deficit spending is not focused domestically. Spending deficit money in Afghanistan or in Iraq doesn’t much stimulate the U.S. economy!

What works in an open economy are policies geared toward changing relative prices in order to encourage domestic production and employment. First of all, a lowering of the real exchange rate can encourage net exports and stimulate domestic production and employment, provided the government does not sustain excessive domestic absorption through unproductive large deficits.

Another approach to skew relative prices in favor of domestic production and employment is to use the tax system accordingly. Presently, many American corporations are hardly taxed at all on their profits when they operate abroad. Some appropriate taxation of these profits can encourage repatriation of capital and support additional domestic investments. It may be argued that the American political system is not flexible enough to allow for the use of tax policies to encourage domestic production and employment. If so, this would be another indication that the current state of the political system in the U. S. is inimical to economic progress.

These are only a few examples of public policies that can have a positive impact on the functioning of the economy.

In general, and that will be my conclusion, I would say that it is in the interest of any country to avoid giving power to idiots, ignoramuses, incompetents, devious and delusional characters or to demagogues. If not, watch out. —More countries are destroyed by their own politicians than by foreign armies.

Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at rodrigue.tremblay@yahoo.com. He is the author of the book “The Code for Global Ethics” at: www.TheCodeForGlobalEthics.com/

An Empire of Lies: The CIA and the Western Media

By Jonathan Cook
Global Research
February 28, 2011

Last week the Guardian, Britain’s main liberal newspaper, ran an exclusive report on the belated confessions of an Iraqi exile, Rafeed al-Janabi, codenamed “Curveball” by the CIA. Eight years ago, Janabi played a key behind-the-scenes role — if an inadvertent one — in making possible the US invasion of Iraq. His testimony bolstered claims by the Bush administration that Iraq’s president, Saddam Hussein, had developed an advanced programme producing weapons of mass destruction.

Curveball’s account included the details of mobile biological weapons trucks presented by Colin Powell, the US Secretary of State, to the United Nations in early 2003. Powell’s apparently compelling case on WMD was used to justify the US attack on Iraq a few weeks later.

Eight years on, Curveball revealed to the Guardian that he had fabricated the story of Saddam’s WMD back in 2000, shortly after his arrival in Germany seeking asylum. He told the paper he had lied to German intelligence in the hope his testimony might help topple Saddam, though it seems more likely he simply wanted to ensure his asylum case was taken more seriously.

For the careful reader — and I stress the word careful — several disturbing facts emerged from the report.

One was that the German authorities had quickly proven his account of Iraq’s WMD to be false. Both German and British intelligence had travelled to Dubai to meet Bassil Latif, his former boss at Iraq’s Military Industries Commission. Dr Latif had proven that Curveball’s claims could not be true. The German authorities quickly lost interest in Janabi and he was not interviewed again until late 2002, when it became more pressing for the US to make a convincing case for an attack on Iraq.

Another interesting disclosure was that, despite the vital need to get straight all the facts about Curveball’s testimony — given the stakes involved in launching a pre-emptive strike against another sovereign state — the Americans never bothered to interview Curveball themselves.

A third revelation was that the CIA’s head of operations in Europe, Tyler Drumheller, passed on warnings from German intelligence that they considered Curveball’s testimony to be highly dubious. The head of the CIA, George Tenet, simply ignored the advice.

With Curveball’s admission in mind, as well as these other facts from the story, we can draw some obvious conclusions — conclusions confirmed by subsequent developments.

Lacking both grounds in international law and the backing of major allies, the Bush administration desperately needed Janabi’s story about WMD, however discredited it was, to justify its military plans for Iraq. The White House did not interview Curveball because they knew his account of Saddam’s WMD programme was made up. His story would unravel under scrutiny; better to leave Washington with the option of “plausible deniability”.

Nonetheless, Janabi’s falsified account was vitally useful: for much of the American public, it added a veneer of credibility to the implausible case that Saddam was a danger to the world; it helped fortify wavering allies facing their own doubting publics; and it brought on board Colin Powell, a former general seen as the main voice of reason in the administration.

In other words, Bush’s White House used Curveball to breathe life into its mythological story about Saddam’s threat to world peace.

So how did the Guardian, a bastion of liberal journalism, present its exclusive on the most controversial episode in recent American foreign policy?

Here is its headline: “How US was duped by Iraqi fantasist looking to topple Saddam”.

Did the headline-writer misunderstand the story as written by the paper’s reporters? No, the headline neatly encapsulated its message. In the text, we are told Powell’s presentation to the UN “revealed that the Bush administration’s hawkish decisionmakers had swallowed” Curveball’s account. At another point, we are told Janabi “pulled off one of the greatest confidence tricks in the history of modern intelligence”. And that: “His critics — who are many and powerful — say the cost of his deception is too difficult to estimate.”

In other words, the Guardian assumed, despite all the evidence uncovered in its own research, that Curveball misled the Bush administration into making a disastrous miscalculation. On this view, the White House was the real victim of Curveball’s lies, not the Iraqi people — more than a million of whom are dead as a result of the invasion, according to the best available figures, and four million of whom have been forced into exile.

There is nothing exceptional about this example. I chose it because it relates to an event of continuing and momentous significance.

Unfortunately, there is something depressingly familiar about this kind of reporting, even in the West’s main liberal publications. Contrary to its avowed aim, mainstream journalism invariably diminishes the impact of new events when they threaten powerful elites.

We will examine why in a minute. But first let us consider what, or who, constitutes “empire” today? Certainly, in its most symbolic form, it can be identified as the US government and its army, comprising the world’s sole superpower.

Traditionally, empires have been defined narrowly, in terms of a strong nation-state that successfully expands its sphere of influence and power to other territories. Empire’s aim is to make those territories dependent, and then either exploit their resources in the case of poorly developed countries, or, with more developed countries, turn them into new markets for its surplus goods. It is in this latter sense that the American empire has often been able to claim that it is a force for global good, helping to spread freedom and the benefits of consumer culture.

Empire achieves its aims in different ways: through force, such as conquest, when dealing with populations resistant to the theft of their resources; and more subtly through political and economic interference, persuasion and mind-control when it wants to create new markets. However it works, the aim is to create a sense in the dependent territories that their interests and fates are bound to those of empire.

In our globalised world, the question of who is at the centre of empire is much less clear than it once was. The US government is today less the heart of empire than its enabler. What were until recently the arms of empire, especially the financial and military industries, have become a transnational imperial elite whose interests are not bound by borders and whose powers largely evade legislative and moral controls.

Israel’s leadership, we should note, as well its elite supporters around the world — including the Zionist lobbies, the arms manufacturers and Western militaries, and to a degree even the crumbling Arab tyrannies of the Middle East — are an integral element in that transnational elite.

The imperial elites’ success depends to a large extent on a shared belief among the western public both that “we” need them to secure our livelihoods and security and that at the same time we are really their masters. Some of the necessary illusions perpetuated by the transnational elites include:

That we elect governments whose job is to restrain the corporations;

– That we, in particular, and the global workforce in general are the chief beneficiaries of the corporations’ wealth creation;

– That the corporations and the ideology that underpins them, global capitalism, are the only hope for freedom;

– That consumption is not only an expression of our freedom but also a major source of our happiness;

– That economic growth can be maintained indefinitely and at no long-term cost to the health of the planet;

– And that there are groups, called terrorists, who want to destroy this benevolent system of wealth creation and personal improvement.

These assumptions, however fanciful they may appear when subjected to scrutiny, are the ideological bedrock on which the narratives of our societies in the West are constructed and from which ultimately our sense of identity derives. This ideological system appears to us — and I am using “we” and “us” to refer to western publics only — to describe the natural order.

The job of sanctifying these assumptions — and ensuring they are not scrutinised — falls to our mainstream media. Western corporations own the media, and their advertising makes the industry profitable. In this sense, the media cannot fulfil the function of watchdog of power, because in fact it is power. It is the power of the globalised elite to control and limit the ideological and imaginative horizons of the media’s readers and viewers. It does so to ensure that imperial interests, which are synonymous with those of the corporations, are not threatened.

The Curveball story neatly illustrates the media’s role.

His confession has come too late — eight years too late, to be precise — to have any impact on the events that matter. As happens so often with important stories that challenge elite interests, the facts vitally needed to allow western publics to reach informed conclusions were not available when they were needed. In this case, Bush, Cheney and Rumsfeld are gone, as are their neoconservative advisers. Curveball’s story is now chiefly of interest to historians.

That last point is quite literally true. The Guardian’s revelations were of almost no concern to the US media, the supposed watchdog at the heart of the US empire. A search of the Lexis Nexis media database shows that Curveball’s admissions featured only in the New York Times, in a brief report on page 7, as well as in a news round-up in the Washington Times. The dozens of other major US newspapers, including the Washington Post, made no mention of it at all.

Instead, the main audience for the story outside the UK was the readers of India’s Hindu newspaper and the Khaleej Times.

But even the Guardian, often regarded as fearless in taking on powerful interests, packaged its report in such a way as to deprive Curveball’s confession of its true value. The facts were bled of their real significance. The presentation ensured that only the most aware readers would have understood that the US had not been duped by Curveball, but rather that the White House had exploited a “fantasist” — or desperate exile from a brutal regime, depending on how one looks at it — for its own illegal and immoral ends.

Why did the Guardian miss the main point in its own exclusive? The reason is that all our mainstream media, however liberal, take as their starting point the idea both that the West’s political culture is inherently benevolent and that it is morally superior to all existing, or conceivable, alternative systems.

In reporting and commentary, this is demonstrated most clearly in the idea that “our” leaders always act in good faith, whereas “their” leaders — those opposed to empire or its interests — are driven by base or evil motives.

It is in this way that official enemies, such as Saddam Hussein or Slobodan Milosevic, can be singled out as personifying the crazed or evil dictator — while other equally rogue regimes such as Saudi Arabia’s are described as “moderate” — opening the way for their countries to become targets of our own imperial strategies.

States selected for the “embrace” of empire are left with a stark choice: accept our terms of surrender and become an ally; or defy empire and face our wrath.

When the corporate elites trample on other peoples and states to advance their own selfish interests, such as in the invasion of Iraq to control its resources, our dominant media cannot allow its reporting to frame the events honestly. The continuing assumption in liberal commentary about the US attack on Iraq, for example, is that, once no WMD were found, the Bush administration remained to pursue a misguided effort to root out the terrorists, restore law and order, and spread democracy.

For the western media, our leaders make mistakes, they are naïve or even stupid, but they are never bad or evil. Our media do not call for Bush or Blair to be tried at the Hague as war criminals.

This, of course, does not mean that the western media is Pravda, the propaganda mouthpiece of the old Soviet empire. There are differences. Dissent is possible, though it must remain within the relatively narrow confines of “reasonable” debate, a spectrum of possible thought that accepts unreservedly the presumption that we are better, more moral, than them.

Similarly, journalists are rarely told — at least, not directly — what to write. The media have developed careful selection processes and hierarchies among their editorial staff — termed “filters” by media critics Ed Herman and Noam Chomsky — to ensure that dissenting or truly independent journalists do not reach positions of real influence.

There is, in other words, no simple party line. There are competing elites and corporations, and their voices are reflected in the narrow range of what we term commentary and opinion. Rather than being dictated to by party officials, as happened under the Soviet system, our journalists scramble for access, to be admitted into the ante-chambers of power. These privileges make careers but they come at a huge cost to the reporters’ independence.

Nonetheless, the range of what is permissible is slowly expanding — over the opposition of the elites and our mainstream TV and press. The reason is to be found in the new media, which is gradually eroding the monopoly long enjoyed by the corporate media to control the spread of information and popular ideas. Wikileaks is so far the most obvious, and impressive, outcome of that trend.

The consequences are already tangible across the Middle East, which has suffered disproportionately under the oppressive rule of empire. The upheavals as Arab publics struggle to shake off their tyrants are also stripping bare some of the illusions the western media have peddled to us. Empire, we have been told, wants democracy and freedom around the globe. And yet it is caught mute and impassive as the henchmen of empire unleash US-made weapons against their peoples who are demanding western-style freedoms.

An important question is: how will our media respond to this exposure, not just of our politicians’ hypocrisy but also of their own? They are already trying to co-opt the new media, including Wikileaks, but without real success. They are also starting to allow a wider range of debate, though still heavily constrained, than had been possible before.

The West’s version of glasnost is particularly obvious in the coverage of the problem closest to our hearts here in Palestine. What Israel terms a delegitimisation campaign is really the opening up — slightly — of the media landscape, to allow a little light where until recently darkness reigned.

This is an opportunity and one that we must nurture. We must demand of the corporate media more honesty; we must shame them by being better-informed than the hacks who recycle official press releases and clamour for access; and we must desert them, as is already happening, for better sources of information.

We have a window. And we must force it open before the elites of empire try to slam it shut.

This is the text of a talk entitled “Media as a Tool of Empire” delivered to Sabeel, the Ecumenical Liberation Theology Centre, at its eighth international conference in Bethlehem on Friday February 25.

Jonathan Cook is a writer and journalist based in Nazareth, Israel. His latest books are “Israel and the Clash of Civilisations: Iraq, Iran and the Plan to Remake the Middle East” (Pluto Press) and “Disappearing Palestine: Israel’s Experiments in Human Despair” (Zed Books). His website is www.jkcook.net.

G20 Nations Slam Quantitative Easing

Emerging nations also take measures to avoid currency valuation against the purposely concocted fall of the dollar.

Reuters

U.S. President Barack Obama defended the Federal Reserve’s policy of printing dollars on Monday after China and Russia stepped up criticism ahead of this week’s Group of 20 meeting.

The G20 summit has been pitched as a chance for leaders of the countries that account for 85 percent of world output to prevent a currency row escalating into a rush to protectionism that could imperil the global recovery.

But there is little sign of consensus.

The summit has been overshadowed by disagreements over the U.S. Federal Reserve’s quantitative easing (QE) policy under which it will print money to buy $600 billion of government bonds, a move that could depress the dollar and cause a potentially destabilising flow of money into emerging economies.

“I will say that the Fed’s mandate, my mandate, is to grow our economy. And that’s not just good for the United States, that’s good for the world as a whole,” Obama said during a trip to India.

“And the worst thing that could happen to the world economy, not just ours, is if we end up being stuck with no growth or very limited growth,” he said.

European Central Bank President Jean-Claude Trichet said all participants at a meeting of the world’s central bankers in Basel, Switzerland had insisted they were not pursuing weak currency policies.

“We’re attached to avoiding excessive volatility. It’s very counterproductive for global growth and global stability,” he told a news conference.

Washington has frequently criticised China, saying it deliberately undervalues its currency to boost exports.

China says the United States, via the Fed, is engaged in the same thing that it stands accused of, and some emerging nations have already acted to curb their currencies’ rise.

Resentment abroad stems from worry that Fed pump-priming will hasten the U.S. dollar’s slide and cause their currencies to shoot up in value, setting the stage for asset bubbles and making a future burst of inflation more likely.

“As a major reserve currency issuer, for the United States to launch a second round of quantitative easing at this time, we feel that it did not recognise its responsibility to stabilise global markets and did not think about the impact of excessive liquidity on emerging markets,”  Chinese Finance Vice Minister Zhu Guangyao said on Monday.

The Fed’s quantitative easing policy was unveiled last week to jeers from emerging market powerhouses from Latin America to Asia. Russia renewed its assault on Monday.

“Russia’s president will insist …. that such actions are taken with preliminary consultations with other members of the global economy,” said Arkady Dvorkovich, a Russian official who is preparing the country’s position in Seoul.

Bank of Japan Deputy Governor Hirohide Yamaguchi said on Monday that it too was ready to boost its asset-buying scheme if it saw clear signs of a downturn. Worth 5 trillion yen ($62 billion), it is so far just a tenth the size of the Fed’s.

U.S. DROPS KEY DEMAND

India is Obama’s first stop in a 10-day trip to Asia that will include Indonesia and Japan.

He will arrive in Seoul for the Nov. 11-12 summit weakened by a crushing congressional election defeat for his Democratic Party and under fire from all sides. Germany described U.S. economic policy as “clueless” last week.

The U.S. has already all but dropped its centrepiece proposal for the G20 — a measure that would cap current account balances at 4 percent of gross domestic product, something economists said was clearly aimed at China.

At the weekend, U.S. Treasury Secretary Timothy Geithner backed away from the numerical target that had been rejected by China, Germany, Japan and others in a sign that global financial power had slipped from U.S. hands.

On Monday, he was putting on a brave face, saying China was supportive of the G20′s framework for rebalancing the global economy, and that he expected broad consensus on it at the summit.

The risk of a negative outcome in Seoul appears to be increasing, or at the very least, an agreement that merely papers over the huge gaps and allows countries to pursue their own economic policies whether it be intervening in currency markets like South Korea and Japan or printing dollars.

“Judging by the critical response of emerging market governments to QE, the likelihood of a ceasefire in the currency war is slim,” RBC Capital markets said in a report published on Monday.

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