27 July 2007

It's official... this blog has moved

Okay, it's official. This blog has moved to http://ecoecon.wordpress.com/

If you've been coming by here regularly it's time to update your bookmarks. I made a few edits to the default CSS template over at word press and I believe I'm committed to the change. There are a number of features that are definitely improvements on blogspot including easy integration of content pages outside the post and comment blogging format and better post editing tools. I do like the way the archives widget works better here on blogspot, but I think the choice is made.

For the next week or so I'll check back in here and move any random comments that turn up over to the new site. But, if you are looking for new posts they'll be posted over there, or rather here: the visible hand

26 July 2007

Possible move to wordpress...

For those of you who come by here regularly:

I've been checking out Wordpress blog hosting. Though I actually like the way this blogspot version looks, there are several features over at Wordpress that are improvements. I'm toying with the idea of signing up for the style sheet editing feature to make a few changes to the formatting.

There are a couple of new posts on the Wordpress version that aren't posted here. If you're interested, check out the visible hand on Wordpress at http://ecoecon.wordpress.com/

I'd be interested in any comments on the new format if you are so moved. For now I'll keep looking in on both blogs...


24 July 2007

Hypocrisy Reigns in Anti-Takeover Defenses

Bloomberg.com: Opinion
Hypocrisy Reigns in Anti-Takeover Defenses
By Michael R. Sesit
July 20 (Bloomberg) -- How's this for disingenuous?

For years, China, Japan, Russia, Saudi Arabia, Singapore, Norway and other countries have lent billions to Americans and Europeans. The money helped pay for the burgeoning U.S. trade deficit, funded consumers living beyond their means and financed budget shortfalls in the U.S., Germany, France and Italy.

Bloated with currency reserves totaling hundreds of billions of dollars -- in China's case $1.3 trillion -- many of these reserve-rich countries want to break open their piggy banks and invest the cash more profitably than just parking their funds in low-yielding U.S. and European government bonds.

Suspecting that this expanded appetite includes the acquisition of entire companies, Western countries, led by the U.S. and European Union, are already raising hackles -- signaling that the direct or indirect takeover of key companies or financial institutions is a no-go. And this is happening without anyone having made any offers recently.

Carbon Trading Is the New Big Thing

In London, Carbon Trading Is the New Big Thing -
Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times
July 6, 2007, 8:04 am

Seeking to match a desire to make money with his environmental instincts, Louis Redshaw, a former electricity trader, met with five investment banks in 2004 to propose the trading of carbon dioxide. Only one, Barclays Capital, was interested.

Three years later, the situation has turned, and carbon specialists like Mr. Redshaw are among the rising stars in the London financial district.

Managing emissions has become one of the fastest-growing specialties in financial services, and companies are scrambling to find workers, The New York Times’ James Kanter writes. Their goal is a slice of a market now worth about $30 billion and that could grow to $1 trillion within a decade.

“Carbon will be the world’s biggest commodity market, and it could become the world’s biggest market over all,” said Mr. Redshaw, the head of environmental markets at Barclays Capital.

21 July 2007

market climbs a wall of worry, bounces off glass ceiling

The Dow broke 14k this week, yet another new record.

WTF. The dollar is in decline, prices on food, fuel and commodities are going up, the housing market isn't due to rebound till at least 2009 and the willingness of foreign central banks to purchase US debt is weakening.

The Dow also fell over 150 points from peak to trough twice prompting an increase in sightings of the rumored Plunge Protection Team in the comments sections of blogs that follow such things.

It appears that most local folks don't care much about the market unless they have money invested. While I'm sympathetic with this point of view there are a number of local issues impacted by national and global trends -- in particular county land use policy and low income housing. Bucking these trends will be hard, we might want to plan ahead.

For those of you who might be interested in points of view on the current record setting stock market and the underlying economy itself that aren't directly funded by it's beneficiaries or housing market info that isn't specifically aimed at rebuilding lost confidence and minimizing downsides here are a couple of blogs worth reviewing. Don't forget to read the comments sections... very informative. If you want the consensus view, just watch TV.

Nouriel Roubini's Blog

Roubini is an economist and doesn't slow down to explain his terms. You may find it useful to use Firefox so you can select unfamiliar terms, right click and google them on the spot.

Calculated Risk

The Calculated Risk blog is definitely irreverent... even funny. It's focuses on the mortgage market with many comments from traders and industry pros that range far beyond straight up mortgage/investment instrument analyses. If you don't want to start with the nerdly details you might try this link first.

Check it out...

11 July 2007

By 2012 Oil Production Is Expected to Fall Short Of Global Demand

IEA Forecast Underlines Oil, Gas Supply Worries - WSJ.com
By 2012, Production Is Expected to Fall Short Of Global Demand

July 10, 2007; Page A12

The industrialized world's energy watchdog added to rising concerns in some quarters that oil and natural gas production won't keep up with the world's growing thirst for energy in coming years, highlighting worries over supplies and prices.

The Paris-based International Energy Agency, which monitors energy markets on behalf of the world's 26 most-advanced economies, yesterday released its annual medium-term forecast, projecting conditions through 2012. The agency expects oil supply to be tighter in coming years than it had forecast, with little prospect of relief unless world economic growth falters.
• Growing Tight: The IEA said the world could face an oil- and gas-supply crunch in coming years amid rising demand.
• Thin Cushion: Economic growth is expected to spur demand, but the IEA sees OPEC's spare capacity narrowing and expects growth from non-OPEC sources to dwindle after 2009.
• Price Pressure: The forecast adds to concerns over world oil supplies and implies continued upward pressure on petroleum prices.

The IEA doesn't forecast oil prices, but its conclusions imply that consumers should expect continued upward pressure on the cost of energy.

"Oil and gas price pressures look set to remain in the coming years," the IEA report said. "Slower-than-expected [gross-domestic-product] growth may provide a breathing space, but it is abundantly clear that if the path of demand doesn't change on its own, it may well be driven to change by higher prices," the report said.

Senators unveil anti-pollution proposal

Lawmakers unveil anti-pollution proposal
By H. JOSEF HEBERT Associated Press Writer
Article Launched: 07/11/2007 01:32:00 PM PDT

WASHINGTON—The nation can begin to address the risks of climate change while avoiding harm to the economy, senators said Wednesday in unveiling anti-pollution legislation.

The bill would establish a mandatory cap on carbon dioxide emissions from power plants, refineries and industrial plants but allow companies to trade emission credits and avoid making emissions cuts if the costs become too high.

Sen. Jeff Bingaman, D-N.M., one of the bill's chief sponsors, called it a "strong and balanced approach ... while protecting the American economy." It also includes incentives aimed at spurring other nations such as China to address climate change.

Economics Departments Growing Will to Debate Assumptions

In Economics Departments, a Growing Will to Debate Fundamental Assumptions - New York Times

Published: July 11, 2007

For many economists, questioning free-market orthodoxy is akin to expressing a belief in intelligent design at a Darwin convention: Those who doubt the naturally beneficial workings of the market are considered either deluded or crazy.

But in recent months, economists have engaged in an impassioned debate over the way their specialty is taught in universities around the country, and practiced in Washington, questioning the profession’s most cherished ideas about not interfering in the economy.

“There is much too much ideology,” said Alan S. Blinder, a professor at Princeton and a former vice chairman of the Federal Reserve Board. Economics, he added, is “often a triumph of theory over fact.” Mr. Blinder helped kindle the discussion by publicly warning in speeches and articles this year that as many as 30 million to 40 million Americans could lose their jobs to lower-paid workers abroad. Just by raising doubts about the unmitigated benefits of free trade, he made headlines and had colleagues rubbing their eyes in astonishment.

“What I’ve learned is anyone who says anything even obliquely that sounds hostile to free trade is treated as an apostate,” Mr. Blinder said....

Criticizing the approach that currently dominates the field, Mr. Blinder said economists must look more closely at the real world instead of modeling it in the lab. “Economics is insufficiently scientific,” he said. “Mathematics may be useful, but mathematics is not scientific. It doesn’t generate refutable hypotheses.”...

Max B. Sawicky at the Economic Policy Institute in Washington, a nonprofit research organization that is a bulwark of heterodoxy, wrote in a discussion on tpmcafe.com that, “The duty of orthodoxy is clear: deny departmental positions and resources to inferior research programs and purify the top journals of incorrect thinking, all understood as maintaining high standards.”

This is the point where Mr. Rodrik, who has written extensively on the downside of globalization, departs from both Mr. Sawicky and Mr. Blinder.... he acknowledged that inflexible rules about how one makes an argument and what counts as evidence can create blind spots, but insisted that once those rules were accepted, there was tremendous openness inside the academy.

The problem is outside, where economists are expected to “regurgitate ideas” about the glories of the free market. Most mainstream economists think that voicing any skepticism or doubt provides “ammunition to the barbarians,” he said, and allows narrow-minded people to “hijack any argument to suit their purpose.”

Mr. Rodrik said he used to worry about this until he realized that “on any issue, there are barbarians on both sides,” so there was no point in shading an argument to “suit one set of barbarians over the other.”

“And I’ve slept a lot better since.”

Golly, we didn't mean... you know... don't they have prisons?

Growing complaints of shoddy and unsafe products coming out of China led to a quick response by Beijing leaders... It appears that Chinese leadership concerns regarding protectionist US policy are dead serious.

More quality control of China food imports needed in both U.S., China
by Jing Zhou
Jun 27, 2007

Among some of Chicago’s food markets, there are complaints of inadequate U.S. governmental and technical support to secure the quality of food imported from China.

“The U.S. Food and Drug Administration wouldn’t care about our warehouse unless there’s a customer complaint,” said Judy Yu, accountant for Richwell Market, a food market in Chicago’s Chinatown. Otherwise, she said inspections occur about every two months.

Yu and other retailers say safeguards are important because they are the last links in the international food chain between potentially dangerous products and consumers.

Whole Grain Fresh Market in Westmont, Ill. said they depend solely on licensed food importers from New York for quality control.

Both markets said the recent food scandals caused a slight sales drop, mostly from non-Asian customers.

China Quick to Execute Drug Official
Published: July 11, 2007

BEIJING, July 10 — China executed its former top food and drug regulator on Tuesday for taking bribes to approve untested medicine, as the Beijing leadership scrambled to show that it was serious about improving the safety of Chinese products.

The Beijing No. 1 Intermediate People’s Court carried out the death sentence against Zheng Xiaoyu, 62, the former head of the State Food and Drug Administration, shortly after the country’s Supreme Court rejected his final appeal.

Mr. Zheng, who had appealed his May 29 sentence on the grounds that it was too severe and that he had confessed to the bribery charges against him, became the first ministerial-level official put to death since 2000 and the fourth since China opened its doors to the outside world nearly 30 years ago.

10 July 2007

The breeze's big brother finally matures...

The Wind

At least the rich are doing well...

Can’t Sell Your Home? Maybe It’s Priced Too Low - New York Times

Published: July 11, 2007

Given that the real estate market is supposed to be in free fall, some strange things have been happening recently in Mill Valley.

It is one of the expensive suburbs of San Francisco just over the Golden Gate Bridge, and much of the housing market there seems to be doing just fine. One three-bedroom house sold for $1.4 million last month without ever being officially put on the market. The seller accepted a pre-emptive bid — $20,000 above the asking price — from somebody who had heard that the house was about to be listed for sale.

“The homes that are having a hard time selling are the average-priced homes,” said Vanessa Justice, a real estate agent with Pacific Union GMAC in the Bay Area, where the median house price is about $750,000. For upper-end homes, she said, “it’s actually pretty crazy right now.”

Ratings Cuts By S&P, Moody's Rattle Investors

I'll try not to link through to pay/subscription sights too often, but today the WSJ webiste is free.

Ratings Cuts By S&P, Moody's Rattle Investors - WSJ.com
Critics Say Companies Are Reacting Too Late To Subprime Debt Woes
July 11, 2007

The widening meltdown in the subprime-mortgage market caught up with the nation's two big debt-rating companies yesterday, with Standard & Poor's and Moody's announcing plans to downgrade hundreds of bonds backed by the risky home loans.

The moves jolted jittery financial markets as investors adjusted to the idea that the downturn in the nation's housing market is worsening and that a rebound might be months away, at best. The Dow Jones Industrial Average tumbled 148.27 points , or 1.1% , to close at 13501.70 as investors fled stocks and low-quality bonds , and some of them criticized the ratings giants for being too slow to act.

In an acknowledgment that it severely misjudged the risk of bonds tied to subprime mortgages, Standard & Poor's Ratings Service said it is looking to slash credit ratings on as many as 612 such bonds, with a value of $12 billion, because of mounting delinquencies on the underlying mortgages. Subprime mortgages are made to borrowers with shaky credit profiles."

D.R. Horton to Report Net Loss After Orders Plunge

Bloomberg.com: Worldwide
D.R. Horton to Report Net Loss After Orders Plunge (Update6)
By Brian Louis

A D.R. Horton home under construction

July 10 (Bloomberg) -- D.R. Horton Inc., the second-largest U.S. homebuilder, will report a third-quarter loss after orders plunged 40 percent, and said it sees no sign of a housing rebound.

``We expect the housing environment to remain challenging,'' Chairman Donald Horton said today in a statement. The Fort Worth, Texas-based company is planning a ``significant'' writedown in the value of its real estate, and the shares fell to a three-year low.

D.R. Horton said orders dropped in every region, with the steepest declines in California and the northeast. The average price for its houses slid 12 percent to $233,672. Ryland Group Inc., a Calabasas, California-based homebuilder, said today it will report a second-quarter loss of as much as $1.35 a share. Lennar Corp., the biggest homebuilder by revenue, last month reported a loss along with falling revenue.

``All these companies face a lot of pressure,'' said Thomas Smith, an equity analyst at Standard & Poor's in New York. ``It's a tidal wave of trouble.''

09 July 2007

Chinese company signs deal with Daimler Chrysler: targets annual output of 1million vehicles by 2010

Chery targets annual output of 1million vehicles by 2010: report - MarketWatch
By China Bureau
Last Update: 12:46 AM ET Jul 9, 2007

BEIJING (MarketWatch) -- Chinese carmaker Chery Automobile Co. plans to raise its annual output to 1 million vehicles by 2010, the Xinhua News Agency reported over the weekend, citing unnamed company sources.

The company plans to increase its production capacity by 200,000 vehicles to 700,000 this year, Xinhua said. Chery expects sales in North America and Europe to reach 300,000 to 500,000 vehicles in 2019, the report said.

Chery signed a deal with DaimlerChrysler AG's (DCX.XE) Chrysler Group last week through which Chery will build cars for export under Chrysler brand names.

China city to tighten internet controls

FT.com / China city to tighten internet controls
Mure Dickie in Beijing

Published: July 8 2007 22:14

A Chinese city where residents recently held mass protests against a planned chemicals plant is preparing to tighten controls on the internet and force users to use their real names when posting messages on local websites.

The decision by the south-eastern city of Xiamen appears to be a response to the role played by the internet in the organisation of demonstrations last month that forced suspension of plans to build a Rmb11bn ($1.4bn) plant to produce paraxylene (PX), a chemical feedstock, in the city.

07 July 2007

China blames growing social unrest on anger over pollution

Interesting. US consumption of Chinese goods allows rapid growth in Chinese manufacturing... growth aided and abetted by US expertise and investment drawn to China by low cost labor and lax environmental standards. Guess what happens next... you'll never guess... surprise! Air quality in China declines, carbon emissions go up, acid rain follows the trade winds into Japan and South Korea.

So. We export US jobs, capital and manufacturing capacity, leave the pollution in China, and import cheap products for US consumers and corporate profits for US shareholders. Now we find that China has passed us in sheer volume of carbon emissions.

As an added bonus we get to act all shocked an' all about how China has a pollution problem... just as if we had nothing to do with it and derive no benefit from it. Now the Bush administration says: If China doesn't curb their carbon emissions why should we have to...? Oh, well. Maybe Bush didn't want to sign the Kyoto protocols anyway.

Serious bait and switch here.

Meanwhile China is coping with the results of being the low-rent industrial district of the world:

China blames growing social unrest on anger over pollution
Special reports | Guardian Unlimited

The head of China's environmental agency has blamed the rising number of riots, demonstrations and petitions across the country on public anger at pollution.

Echoing the language of the Cultural Revolution, Zhou Shengxian called for a "struggle" against polluters, and said the public refused to accept the increasing degradation of the environment.

His unusually outspoken comments underscore the frustration of state mandarins at local government officials who ignore environmental standards in order to attract investment, jobs and bribes.

Breakneck growth has turned China into a huge environmental disaster area. A soon-to-be-published World Bank report says some 500,000 people die each year as a result of pollution.

Beijing is trying to shift the economy on to a more sustainable development track. The state council - China's cabinet - tightened the water pollution law to require more testing, licensing and stiffer penalties, the state-run Xinhua news agency reported yesterday.

04 July 2007

Global Exodus from US$ in Motion -- Local impacts?

Here's the latest heads up on the willingness of the rest of the world to continue to finance US debt. While most of the posts on this blog reference macro economic policy/events well beyond the jurisdiction of local players, these events do and will have significant impacts on how local events play out.
It's difficult to bring the implications of these macro level issues back down to earth in terms of local impacts and local policy responses. I'm not an expert and I hesitate to make any firm predictions, either bearish or bullish, but hopefully some local leaders will look beyond acrimonious ideological debates to think strategically. Here's a couple scenarios where it may be useful to monitor macro level trends which will support or undermine our ability to reach local goals. See what you think...

For starters, the balance between development value and timber value on forested parcels is shifting.

If interest rates rise it could have a significant impact on PL's debt restructuring. If the housing market continues to weaken, and developers continue to take a beating, and access to mortgage credit continues to tighten, then effort's to include development/fragmentation value in any valuation of PL assets will also be weakened.

At the same time the declining dollar could weaken access to US lumber markets for foreign exports, strengthening the position of remaining US producers in the long run even as lumber production in the northwest is off 13.9% on a year over year basis. Production cutbacks have managed to bring lumber prices off the floor although the Random Lengths Framing Index is still off 24% from two years ago and 33% from June 2004.

In addition some of these same variables belie the idea that county planning is the primary variable impacting housing affordability.

Rising or falling home prices ("affordability") should certainly be reviewed in the light of statewide and national trends. With subprime mortgage credit continuing to unwind it's no wonder that there's local pressure on the HumCo general plan to include development potential for higher value homes (the only ones that are selling) in pursuit of "affordability" across all income levels.

In the current housing market context groups like Housing for All would do well to consider the possibility that tax exempt bonds coupled with higher density infill and falling home prices could actually increase the housing availability for low-income residents. It could be time to start planning to implement a low-income housing project at the bottom of the housing recession in 2008 or 2009.

Global Exodus from US$ in Motion - July 3, 2007
By Gary Dorsch

Trading in the arcane world of foreign exchange is often akin to judging a reverse beauty contest. The trick to profitable trading is to pick the least ugly currency. Nearly all fiat or paper currencies are ugly, because the 18 of the world’s top-20 central banks are inflating the money supply at double digit rates. At the moment, the world’s two ugliest currencies are the Japanese yen and the US dollar.

The Bank of Japan pegs its overnight loan rate at just 0.50%, in a brazen effort to devalue the yen, to boost exports abroad, and prevent an abrupt unwinding of the mushrooming “yen carry” trade. Meanwhile the Federal Reserve is inflating its M3 money supply at a 13.7% annualized clip, according to private economists, which if correct, would be the fastest rate of expansion in more than 30-years.

US Treasury chief Henry Paulson, and former chairman of Goldman Sachs, GS.N, “monitors the financial markets closely,” and has reinvigorated the infamous “Plunge Protection Team,” which comes to the rescue of the US stock market whenever nasty revelations come to the surface. At the moment, Paulson’s grand strategy is to offset losses in the US housing sector with big gains in the stock market, to prevent the US economy from sliding into recession.

A key player in the “Plunge Protection Team” (PPT) is none other than Federal Reserve chief Ben “helicopter” Bernanke. Since the Bernanke Fed discontinued the decades-old reporting of the broad M3 money supply in March of 2006, the growth rate of M3 has accelerated from an 8% rate to a sizzling 13.7% clip, its fastest in more than three decades. The Bernanke Fed is preventing borrowing rates from rising at a time of explosive loan demand for US corporate mergers and takeovers, by rapidly increasing the US money supply....

The Fed has obscured its money printing operations by discontinuing the reporting of M3, in order to limit the damage to the fixed income markets. But word of the explosive growth of the M3 money supply is slowly leaking out, and taking its toll on the US Treasury Note market, which briefly tumbled to its lowest level in five years in June, lifting 10-year yields as high as 5.30%, before receding back to 5.00%, on a “flight to safety” from the riskiest of the sub-prime home loan market.

Because the US credit markets are swimming in a tidal wave of rising liquidity, there will always be bargain hunters who are happy to park excess cash into the bond market whenever yields surge higher. Asian central banks and Arab Oil kingdoms in particular, have been big buyers of US T-bonds over the past four years, and hold roughly $1.3 trillion of the IOU’s, but even this massive intervention couldn’t turn the tide of the four-year bear market.

But now there are indications that China’s insatiable appetite for US T-bonds is waning. Beijing was a net seller of $5.8 billion of US T-bonds in April, the first drop in Chinese holdings since October 2005, and sparking the recent slide that lifted 10-year yields by 70 basis points, at its high mark. Since Beijing unhinged the dollar from a fixed peg of 8.27 yuan in July 2005, the value of the US 10-year T-note, when converted into yuan, has declined by 15 percent. Earlier today, the dollar slipped to 7.59 yuan, or 8.9% lower since the yuan was freed from the dollar peg.

02 July 2007

The Fed's Role in the Bear Stearns Meltdown

Here's an article from Mike Whitney at Counterpunch. Many of the issues he raises have been covered by articles referenced on this blog. While you may draw different conclusions, this summary of bearish arguments is worth reading...

Mike Whitney: The Fed's Role in the Bear Stearns Meltdown
A Subprime Chernobyl

The Bank for International Settlements issued a warning last week that the Federal Reserve's monetary policies have created an enormous equity bubble which could lead to another "Great Depression". The UK Telegraph says that, "The BIS--the ultimate bank of central bankers--pointed to a confluence a worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system."

The IMF and the UN have issued similar warnings, but they've all been ignored by the Bush administration. Neither Bush nor the Federal Reserve is interested in "course correction". They plan to stick with the same harebrained policies until the end.

The "easy credit" which created the subprime crisis in mortgage lending has now spread to the hedge fund industry. The troubles at Bear Stearns prove that Secretary of the Treasury Henry Paulson's assurance that the problem is "contained" is pure baloney. The contagion is swiftly moving through the entire system taking down home owners, mortgage lenders, banks, rating agencies, and hedge funds. We are just at the beginning of a system-wide breakdown.

22 June 2007

The worst is yet to come for the U.S. housing market

Fortunately the following hyperbole is not mine. We are actually spilling bits and bytes of data denominated in dollars. Not that there's no pain involved, just not much blood.

Rate Rise Pushes Housing, Economy to `Blood Bath' (Update2) - Bloomberg.com
By Kathleen M. Howley

June 20 (Bloomberg) -- The worst is yet to come for the U.S. housing market.

The jump in 30-year mortgage rates by more than a half a percentage point to 6.74 percent in the past five weeks is putting a crimp on borrowers with the best credit just as a crackdown in subprime lending standards limits the pool of qualified buyers. The national median home price is poised for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million, the National Association of Realtors reported.

``It's a blood bath,'' said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. ``We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit.''

Fed sees "significant risks'' in the leveraged-buyout boom

In my youth when the Fed issued a statement denying the likelihood of a given condition or event I assumed that it was likely. Now that Bernanke is outlining significant risks in the leveraged buy out boom, I can only agree. Fortunately he's going to crack down on sub prime lending abuse later this summer, unfortunately the horse is not only out of the barn but he's been trampling the corn field since last year.

The argument here is not so much about curbing lending abuse -- declining home prices, imploding mortgage lenders, and rising/resetting mortgage interest rates are already enforcing some discipline there. The question is whose going to take the blame, and the losses. Suddenly the leveraged private equity investors who profited from the collateralized debt markets that financed the housing bubble believe that fault lies with inadequate oversight and regulation, a lack of due diligence, by credit rating agencies. Imagine that.

The short CNBC video on this page "Avoiding a Falling Knife in the U.S. Mortgage Market" will give you some sense of the issues that lie behind Ben's comments below.

Bernanke Says Subprime Curbs to Hurt Housing Market (Update6)

May 17 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke issued a double-barreled warning on the U.S. economy, saying the housing market will continue to struggle and the Fed sees ``significant risks'' in the leveraged-buyout boom.

Bernanke, speaking at a conference in Chicago today, said curbs on subprime lending ``are expected to be a source of some restraint on home purchases and residential investment in coming quarters.'' And he said the Fed is ``beginning to look at'' what he called ``the risks that are associated with working with private-equity firms.''

The Fed chief's comments suggest the central bank has raised its guard against a second credit bubble emerging in the form of leveraged buyouts at a time when the U.S. economy is dealing with the mortgage bust. Lawmakers and consumer advocates have blamed the Fed and other regulators for lax enforcement while lenders wrote a record $2.8 trillion in mortgages from 2004 to 2006."

Democratic Senator Charles Schumer of New York said in a statement today that ``it's good news that Chairman Bernanke and the Fed may finally be cracking down on abusive lending in the housing market later this summer.''

China says: Pollution complaints unfair

China: Pollution complaints unfair -- Shanghai Daily | -- English Window to China News

CHINA said yesterday that it is unfair for rich countries to buy its cheap goods and then condemn its greenhouse gas pollution, a day after one study suggested the nation was already the world's biggest carbon dioxide emitter.

Foreign Ministry spokesman Qin Gang said other countries need to consider China's role as a low-cost export powerhouse that in effect helps rich Western consumers avoid emissions at home.

"China is now the factory of the world," Qin told a regular news briefing in Beijing. "The developed countries have moved a lot of manufacturing to China. What many Western consumers wear, live in, even eat is made in China."

The Netherlands Environmental Assessment Agency said on Tuesday that China's carbon dioxide emissions - the main greenhouse gas responsible for global warming - surpassed those of the United States by 7.5 percent in 2006.

But Qin pointed out that per-capita emission of greenhouse gases in the Netherlands was 11.4 tons per year, while the figure for China was just 3.66 tons.

Surging Oil Demand Fuels Higher Prices

Surging Oil Demand Fuels Higher Prices, Volatility - WSJ.com
Global Growth Adds To Strain on Industry Operating Near Edge [not to say peak]

June 21, 2007 2:13 p.m.

World oil demand is growing twice as fast as a year ago, straining the petroleum industry's ability to keep up with global needs and likely resulting in higher and more-volatile prices for some time to come.

On a short-term basis, many industry specialists see prices rising in the second half of the year unless the Organization of Petroleum Exporting Countries relents from its recent tough stance and starts pumping more crude oil very soon, and unless refiners can churn out more products such as gasoline and diesel. Longer term, the trends suggest the growing global economy has adapted to the doubling of oil prices over the past three years, bolstering demand and paving the way for higher prices in coming years.

"I wouldn't be surprised to see prices at new highs" this year, says Roger Diwan, an analyst at PFC Energy, a Washington-based industry consulting group. "It just needs a trigger to go to $79 a barrel." The trigger could be anything that threatens to reduce the flow of oil, he said, ranging from a Gulf of Mexico hurricane to turmoil in the Middle East to an industrial accident at producing or refining facilities.

19 June 2007

Trust issues at Whole Foods Market

Plus ça change, plus c’est la même chose...
Organic food grows up: attempts to adopt dominant paradigm...

FTC Says Whole Foods, Wild Oats Merger Unhealthy - Forbes.com
Ruthie Ackerman, 06.05.07, 5:31 PM ET

Whole Foods Market, one of the leading retailers of organic and natural foods, and Wild Oats announced Tuesday that the Federal Trade Commission will file a lawsuit barring Whole Foods from buying its rival because of concern that the acquisition will squash competition in the natural and organic food store market.

The FTC’s position is that the organic food store is its own business and that Whole Foods (nasdaq: WFMI - news - people ) would create a monopoly by buying its competitor. John Mackey, chairman and chief executive officer of Whole Foods Market, said both companies will challenge the FTC’s decision because Whole Foods and Wild Oats (nasdaq: oats - news - people ) are by definition supermarkets. “The FTC has failed to recognize the robust competition in the supermarket industry, which has grown more intense as competitors increase their offerings of natural, organic, and fresh products,” said Mackey.

Home Depot sells US wholesale supply division, buys 12-store Chinese retail chain

Hit hard by the US housing market downturn Home Depot posted a 30% decline in profits last month. This month they are cashing out their wholesale supply division and buying a 12-store retail chain in China. Guess you gotta go where the money is...

Home Depot agrees to sell supply division - U.S. Business - MSNBC.com
Report: Unit sale to three private equity firms is worth $10 billion

Reuters: NEW YORK - Home Depot Inc. has agreed to sell its supply division to three private equity firms, sources said on Tuesday, in a roughly $10 billion deal that unloads a business the home-improvement retailer’s former chief executive worked to expand.

Bain Capital, Carlyle Group and Clayton, Dubilier & Rice won the auction and were finalizing the deal early on Tuesday, sources close to the process told Reuters.

HD Supply, which sells building materials, waste water and utility products to municipalities and contractors, was put up for sale earlier this year, with investment bank Lehman Brothers overseeing the auction....

The sale price of about $10 billion was somewhat lower than investors and analysts had expected, said Keith Davis, an analyst with Farr Miller Washington.

With the sale of the supply business done, Davis said Home Depot would be free to take steps to improve retail sales that have slumped amid the housing weakness and aggressive competition from smaller rival Lowe’s Cos Inc.

Davis said Home Depot, which is boosting capital spending by 29 percent this year to improve stores and win back market share, can improve shareholder returns by raising its dividend as it matures.

“Over the long term, I don’t think (Home Depot’s) growth is going to be anywhere near where it was historically,” Davis said.

Home Depot and the other firms declined to comment.

Nova Scotia News - TheChronicleHerald.ca
Home Depot boss: We’ll reinvent for Chinese
By BILL POWER Business Reporter

You cannot sell lawn mowers in China — not yet, at any rate.

That’s why Home Depot will totally reinvent itself in the world’s biggest emerging consumer marketplace, Annette Verschuren, president of the home renovation chain for Canada and China, said Friday in Halifax.

"In 10 years we will be the biggest home renovation retailer in China, but entering one of our stores there will be nothing like entering one of our stores in Canada or in the United States," the North Sydney-raised corporate chief said.

"When people obtain a home in China, they obtain just the shell. All the interior work is up to them."

Ms. Verschuren, whose Dutch family moved to Nova Scotia when she was a child, said Home Depot will modify its operations in China to meet the demands of the marketplace, as it has in Canada with such tremendous success.

The next few years will be crucial for Home Depot in China, she said.

She said the potential of a customer pool of over $1.3 billion is "phenomenal" and the competition will be fierce.

With the recent acquisition of a 12-store retail chain in China, Home Depot in Canada gained immediate access to a marketplace larger than Canada and Mexico combined.

"The biggest challenge will be to keep up with this growing market," she said.

16 June 2007

China Sells Treasuries, Signaling Diversification

Or is China actually signaling their irritation with our posturing protectionist senators?

Bloomberg.com: Worldwide
China Sells Treasuries, Signaling Diversification (Update1)
By Kevin Carmichael and Ye Xie

June 15 (Bloomberg) -- Chinese investors sold more U.S. Treasury securities in April than any time in at least seven years, a signal the nation may be diversifying the world's largest foreign-exchange reserves.

China, which owns more U.S. debt than any foreign nation except Japan, sold a net $5.8 billion of Treasuries, the first drop in holdings since October 2005, according to Treasury Department figures that go back to 2000. The nation held $414 billion of the $4.4 trillion of marketable Treasuries in April, according to today's report.

China, whose reserves reached $1.2 trillion in March, and other Asian and oil-exporting nations are seeking to lift returns on their investments. That may push up yields on Treasuries, traditionally among the top investments for reserves, and erode demand for the dollar.

13 June 2007

Interest rates beyond the Fed's control?

A Brave New World

This note (below) from the RGE Monitor email teaser/newletter acknowledges an important point that is often glossed over:

Discussions of US currency depreciation note the relationships between trade balances, deficit spending, global liquidity, bond yields and dollar denominated foreign reserves held by the rest of the world's Central Banks. Yet, discussions of whether or not the Federal Reserve is going to raise target interest rates focus on the US Consumer Price Index or other measures of US inflation / or economic performance making little or no reference to global dynamics.

As global economic growth continues to out perform current US economic weaknesses there will be less and less need for foreign Central Banks to buy weakening US dollars. Global factors may then begin to dominate real US interest rates regardless of US economic performance or internal rates of inflation and regardless of the policies of the Federal Reserve.

Last week, U.S. yields on the 10-year notes shot above 5%. Explanations for the sudden move abound: Bill Gross, mortgage convexity hedging, a shift in Asian demand toward the short-end of the curve, stronger global growth, concerns about rising global inflation and monetary tightening by central banks, capitulation by long-standing U.S. economy bears/bond bulls. Check out “Recasting the Outlook for U.S. Bonds: 10yr Note Exceeds 5%.”

Certainly expectations for stronger U.S. growth and the possibility of a mild acceleration of inflation – still the Fed’s “predominant” concern – played a role. Talk has shifted from a future Fed cut to a persistent Fed pause or even a possible year-end rate hike. But it is also possible that U.S. rates – not just rates in the formerly capital-importing emerging world – are increasingly shaped as much by global as by local developments. Are U.S. long-term yields being pushed up by changing expectations about the U.S., or by stronger growth, rising inflation and expectations of higher rates globally?

(This note originally had several links to more in depth articles, unfortunately they were all within the subscribers only sections of the RGE Monitor site. You'll have to settle for the teaser...)

U.S. Sets New China Duties

While these measures intend to protect US companies the impact on US companies busy moving manufacturing capacity overseas may be quite different. New duties could significantly impact IP's cost/benefits analysis of "downsizing" domestic mills coupled with "ambitious expansion plans into Russia, China and Brazil."

I googled Printing Industries of America (PIA) to find out which companies are members, but the main website has no public listing...

US places tariffs on Chinese paper imports to rescue local industry | printweek.com
Matt Whipp, printweek.com, 08 June 2007

The US Commerce Department has said it will impose tariffs on paper imports from China to help save its struggling paper industry...

The planned tariffs will also affect paper imported from South Korea and Indonesia, although these will be lower than those imposed on imports from China.

Nearly 100 paper and paperboard mills have closed in the US over the past six years.

However, industry body Printing Industries of America (PIA) reacted negatively to the news, which will result in higher paper prices for printers...

"PIA is a strong supporter of free and fair trade both at home and globally. As such, we believe that striking an appropriate balance between protecting the domestic producer and the end-user of an internationally traded product is critical. We hope that the full anti-dumping and countervailing duty investigations weigh seriously the impact of the printing industry as it considers the economic ramifications of imposing tariffs on foreign sources of CFS paper, and that it determines such penalties are unwarranted."


US giant International Paper has closed four US mills in the past two years and laid off 25,000 staff – more than a fifth of the its total workforce...
The other side of the equation has been rising timber prices, eating into paper margins, especially with the news that Russia is to impose export duties on timber in order to bolster its domestic paper industry...
It's something International Paper is well aware of. At the same time as its domestic downsizing, it is funding ambitious expansion plans into Russia, China and Brazil with £1bn ($2bn)."


The paper industry in Canada is also troubled, this time by the dynamics of currency more than competition... UPM-Kymmene executive vice president, magazine division, Jyrki Ovaska told printweek.com: “The combination of weak rates between the US dollar and Canadian dollar and between the Euro and US dollar have meant operation is not profitable.”

And, globally, paper is under pressure from overproduction, he added. “There is still overcapacity in the magazine paper production industry (not just UPM but all businesses operating in this area).

“In addition, the continued decreasing prices for magazine papers means the combination of poor exchange rates, operating costs and unprofitability means the company has taken the decision for a minimum nine-month shutdown.”

Over the past year, UPM-Kymmene permanently ceased production of 530,000 tonnes of coated magazine paper to reduce overcapacity and improve profitability...

U.S. Sets New China Duties - WSJ.com
Move Opens Door For a Wide Array Of Trade Complaints
March 31, 2007; Page A3
WASHINGTON -- The Bush administration imposed new economic sanctions against China, a vivid reflection of the increasingly tough climate in the U.S. toward free trade -- particularly with Beijing.

The new duties apply narrowly to complaints that Chinese producers of glossy, high-quality paper used in books and magazines are unfairly subsidized by their government -- just $224 million of annual imports, or less than 1% of the total goods and services Americans buy each year from China.

But the action is likely to have much wider ramifications. It opens the door to a potential rush of similar complaints by American manufacturers, from steel to plastics producers, that face stiff competition from the Chinese. And it signals, more broadly, an increasingly harder line on trade emerging both at the White House and in Congress.

John Engler, president of the National Association of Manufacturers, has long called on the Bush administration to take a tougher stance on trade and praised the decision for giving U.S. companies new "recourse" to blunt "China's distortions of trade."

The dollar slipped in the foreign-exchange market following the late-morning announcement, as currency traders showed nervousness about rising trade tensions -- particularly since China happens to hold a large quantity of U.S. currency, stocks and bonds.

12 June 2007

Bush administration calls for cutting spotted owl habitat

Might as well call for cuts in log and lumber prices.

The housing (read framing lumber) market is in the tank, interest rates are on the rise and lumber mills have cut production all over the northwest and beyond. The last two weeks Random Lengths' Framing Lumber Composite Price made some incremental moves off the bottom after first quarter production levels were down 17% relative to the same period last year. In this context mandating increased logging on federal lands only ensures that western framing lumber prices, and log prices, will stay low for private landowners as well as federal forest managers. Of course below cost log sales could subsidize struggling lumber mills, but as free market advocates will tell you, such subsidies will only distort the market (and create windfall profits) and delay a rational drop in production.

It will offer little protection to struggling rural communities as mill efficiencies rise and markets fall.

Humboldt forest managers should take note that green Doug fir managed to fall an additional couple of bucks to $240 a thousand board feet in spite of the general uptick off the bottom.

Bush administration calls for cutting spotted owl habitat
June 12, 2007

GRANTS PASS, Oregon -- The Bush administration Tuesday proposed cutting 1.5 million acres (610,000 hectares) from Northwest forests considered critical to the survival of the northern spotted owl, reopening the 1990s battle between timber production and wildlife habitat on public lands...

Recent research has noted that while old growth forests suitable for owl habitat have increased, owl numbers have continued to decline, and that the owl faces a new threat from a cousin, the barred owl, that has been invading its territory.

The proposal by the U.S. Fish and Wildlife Service was published in the Federal Register. It calls for cutting critical habitat for the owl from the 6.9 million acres (2.79 million hectares) designated in 1992 to 5.4 million acres (2.19 million hectares)...

Under court order, timber production on national forests in Washington, Oregon and Northern California was cut by more than 80 percent in 1994 to protect owl habitat, contributing to mill closures and job losses that were particularly painful in rural areas with no other industry. Since then, the Northwest economy has turned to other industries, particularly high-tech, retirement and tourism, but some rural areas continue to struggle.

Since taking office in 2000, the Bush administration has been working to change the Northwest Forest Plan to allow more timber production, but has been largely stymied by court rulings, including several that tossed out plans to log in critical habitat for the owl.

Senate bill aims to press Beijing on currency

The recent (and continuing) rise in bond yields halted, at least temporarily, the stock market's ability to "climb a wall of worry". There is speculation that rising yields are the result of Asian Central banks holding back on purchases of US debt, sending a signal to US policy makers that unpegging China's currency from the dollar could have repercussions for the US economy perhaps not fully understood by US lawmakers. But this isn't necessarily punitive retaliation for aggressive US policy. In the ROTW (rest of the world) the global economy is heating up. As global markets gain strength, there is less reason for China and other exporters with a positive current accounts balance to continue to invest in subsidizing US markets.

In any case the implications for the US housing market are dire. With many adjustable rate mortgages originated in 2005-2006 due to reset these rising rates kick the housing market while it's down.

FT.com / World
Senate bill aims to press Beijing on currency
By Eoin Callan in Washington
Published: June 11 2007 03:00

A bill will be introduced in the US Senate this week that intends to increase pressure on China to float its currency but avoid action that would violate international trade rules, according topeople close to the process.

The legislation is viewed by the Bush administration as the best chance for Congress to let off some steam without blowing a hole in relations with Beijing.

The Senate bill is more moderate than alternatives being floated on Capitol Hill, but will still create headaches for the administration and could become a dividing issue in the next election.

"We don't have any tools to forestall the potential legislation coming down the tracks," said James Baker, former US secretary of state, in a speech on US-China relations.

Lawmakers argue China's weak currency unfairly subsidises the country's exports and contributes to a record annual bilateral US trade deficit of $233bn (€174bn; £118bn). Beijing says it wants to shift the economy towards consumer-driven growth, but fears instability if it moves too quickly.

The Senate bill will serve to step up the pressure after unsuccessful attempts by Hank Paulson, US Treasury secretary, to persuade Beijing to accelerate reform."

07 June 2007

Stocks fall as bond yields climb

Stocks Fall As Yields Climb - washingtonpost.com

The Associated Press
Thursday, June 7, 2007; 11:17 AM

NEW YORK -- Stocks fell for a third straight session Thursday after rising bond yields stoked concerns that an interest rate cut later in the year is less likely.

The 10-year Treasury note's yield surpassed 5 percent in overnight trading.

With rates rising in the market, the Federal Reserve is expected to be less inclined to cut short-term interest rates. And a dip in applications for unemployment benefits last week, which indicates a healthy labor market, also made a rate cut seem less likely.

Additionally, mixed May sales reports from major retailers indicated that consumer spending remains uncertain, particularly as gas prices rise and perhaps cut into consumers' spending money. While the array of fresh economic data didn't appear overly downbeat, stock market investors continued to pull back.

10-Year Treasury Yield Passes 5 Percent - washingtonpost.com

The Associated Press
Thursday, June 7, 2007; 10:45 AM

NEW YORK -- The yield on the Treasury's 10-year note passed 5 percent Thursday, hitting a 10-month high as investors see their hopes for an interest rate cut evaporating.

The 10-year yield broke through 5 percent mark overnight and rose as high as 5.07 percent in mid-morning trading in New York, reaching its highest point since late July. U.S. bond markets were following a trend toward lower prices and higher yields in trading abroad.

Some market experts say the 10-year yield is likely to climb higher as bond prices weaken _ making it even harder for consumers to finance home puchases, and also for companies to borrow money.

Fixed mortgage rates, closely linked to the 10-year yield, have been advancing recently, adding to worries about sluggish home sales and faltering home prices. The average U.S. 30-year fixed mortgage rate was at 6.12 percent Thursday, up from 5.98 percent a week ago, according to Bankrate.com.

Ron Paul is Bill Maher's New Hero

Okay, one more on Ron Paul. I'm not giving my endorsement. But, this is an interesting development. Democrats: take notes.

Ron Paul is Bill Maher's New Hero

06 June 2007

Ron Paul on easy money and the true cost of petrodollars

I'm not a republican, nor am I a libertarian. But, there's something about the willingness of Ron Paul to say clearly what he believes to be true, in conflict with republican party doctrine, that has caused me to look a little closer. His analysis of the 35 year bi-partisan attack on the integrity of the dollar is worth a read. After reading this I went back and read Williams Jennings Bryan's Cross of Gold speech just to remind myself of the justifications for inflationary monetary policy. Yet current monetary policy is creating easy money for the heavily leveraged investment gambles that have been driving the stock market through the roof -- not necessarily protecting the American citizen whose paycheck's global purchasing power is taking the hit.

Check out this graph of the growth in US money supply (M3)since the '70's. Then read Ron Paul.

The End of Dollar Hegemony (excerpt)
Ron Paul: Republican presidential hopeful...
February 15, 2006

The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the preeminent reserve currency. This has created a universal demand for the dollar, and soaks up the huge number of new dollars generated each year. Last year alone M3 increased over $700 billion.

The artificial demand for our dollar, along with our military might, places us in the unique position to “rule” the world without productive work or savings, and without limits on consumer spending or deficits. The problem is, it can’t last.

Price inflation is raising its ugly head, and the NASDAQ bubble-- generated by easy money-- has burst. The housing bubble likewise created is deflating. Gold prices have doubled, and federal spending is out of sight with zero political will to rein it in. The trade deficit last year was over $728 billion. A $2 trillion war is raging, and plans are being laid to expand the war into Iran and possibly Syria. The only restraining force will be the world’s rejection of the dollar. It’s bound to come and create conditions worse than 1979-1980, which required 21% interest rates to correct. But everything possible will be done to protect the dollar in the meantime. We have a shared interest with those who hold our dollars to keep the whole charade going.

Greenspan, in his first speech after leaving the Fed, said that gold prices were up because of concern about terrorism, and not because of monetary concerns or because he created too many dollars during his tenure. Gold has to be discredited and the dollar propped up. Even when the dollar comes under serious attack by market forces, the central banks and the IMF surely will do everything conceivable to soak up the dollars in hope of restoring stability. Eventually they will fail.

Most importantly, the dollar/oil relationship has to be maintained to keep the dollar as a preeminent currency. Any attack on this relationship will be forcefully challenged—as it already has been.

In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O’Neill, the major topic was how we would get rid of Saddam Hussein-- though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O’Neill.

It now is common knowledge that the immediate reaction of the administration after 9/11 revolved around how they could connect Saddam Hussein to the attacks, to justify an invasion and overthrow of his government. Even with no evidence of any connection to 9/11, or evidence of weapons of mass destruction, public and congressional support was generated through distortions and flat out misrepresentation of the facts to justify overthrowing Saddam Hussein.

There was no public talk of removing Saddam Hussein because of his attack on the integrity of the dollar as a reserve currency by selling oil in Euros. Many believe this was the real reason for our obsession with Iraq. I doubt it was the only reason, but it may well have played a significant role in our motivation to wage war. Within a very short period after the military victory, all Iraqi oil sales were carried out in dollars. The Euro was abandoned.

In 2001, Venezuela’s ambassador to Russia spoke of Venezuela switching to the Euro for all their oil sales. Within a year there was a coup attempt against Chavez, reportedly with assistance from our CIA.

After these attempts to nudge the Euro toward replacing the dollar as the world’s reserve currency were met with resistance, the sharp fall of the dollar against the Euro was reversed. These events may well have played a significant role in maintaining dollar dominance.

It’s become clear the U.S. administration was sympathetic to those who plotted the overthrow of Chavez, and was embarrassed by its failure. The fact that Chavez was democratically elected had little influence on which side we supported.

Now, a new attempt is being made against the petrodollar system. Iran, another member of the “axis of evil,” has announced her plans to initiate an oil bourse in March of this year. Guess what, the oil sales will be priced Euros, not dollars.

Most Americans forget how our policies have systematically and needlessly antagonized the Iranians over the years. In 1953 the CIA helped overthrow a democratically elected president, Mohammed Mossadeqh, and install the authoritarian Shah, who was friendly to the U.S. The Iranians were still fuming over this when the hostages were seized in 1979. Our alliance with Saddam Hussein in his invasion of Iran in the early 1980s did not help matters, and obviously did not do much for our relationship with Saddam Hussein. The administration announcement in 2001 that Iran was part of the axis of evil didn’t do much to improve the diplomatic relationship between our two countries. Recent threats over nuclear power, while ignoring the fact that they are surrounded by countries with nuclear weapons, doesn’t seem to register with those who continue to provoke Iran. With what most Muslims perceive as our war against Islam, and this recent history, there’s little wonder why Iran might choose to harm America by undermining the dollar. Iran, like Iraq, has zero capability to attack us. But that didn’t stop us from turning Saddam Hussein into a modern day Hitler ready to take over the world. Now Iran, especially since she’s made plans for pricing oil in Euros, has been on the receiving end of a propaganda war not unlike that waged against Iraq before our invasion.

It’s not likely that maintaining dollar supremacy was the only motivating factor for the war against Iraq, nor for agitating against Iran. Though the real reasons for going to war are complex, we now know the reasons given before the war started, like the presence of weapons of mass destruction and Saddam Hussein’s connection to 9/11, were false. The dollar’s importance is obvious, but this does not diminish the influence of the distinct plans laid out years ago by the neo-conservatives to remake the Middle East. Israel’s influence, as well as that of the Christian Zionists, likewise played a role in prosecuting this war. Protecting “our” oil supplies has influenced our Middle East policy for decades.

But the truth is that paying the bills for this aggressive intervention is impossible the old fashioned way, with more taxes, more savings, and more production by the American people. Much of the expense of the Persian Gulf War in 1991 was shouldered by many of our willing allies. That’s not so today. Now, more than ever, the dollar hegemony-- it’s dominance as the world reserve currency-- is required to finance our huge war expenditures. This $2 trillion never-ending war must be paid for, one way or another. Dollar hegemony provides the vehicle to do just that.

For the most part the true victims aren’t aware of how they pay the bills. The license to create money out of thin air allows the bills to be paid through price inflation. American citizens, as well as average citizens of Japan, China, and other countries suffer from price inflation, which represents the “tax” that pays the bills for our military adventures. That is until the fraud is discovered, and the foreign producers decide not to take dollars nor hold them very long in payment for their goods. Everything possible is done to prevent the fraud of the monetary system from being exposed to the masses who suffer from it. If oil markets replace dollars with Euros, it would in time curtail our ability to continue to print, without restraint, the world’s reserve currency.

Brazil and India 'to boost trade'

BBC NEWS | Business
Brazil and India 'to boost trade'
Brazil and India plan to strengthen their trade ties significantly, after meetings between political leaders.

The two developing nations aim to increase bilateral trade three-fold, to reach $10bn (£5bn) by 2010, from $2.4bn in 2006, reports the Associated Press.

Brazilian President Luiz Inacio Lula da Silva also called for co-operation on defence, nuclear energy and oil.

Both nations have been strong voices in trying to boost the role of developing nations in international trade.

05 June 2007

Syria to end dollar peg

I don't know if they read Peter Schiff in Syria, but they do think a declining currency leads to internal inflation. Therefore they want to uncouple the Syrian pound from the US dollar and peg it to a stronger currency. If it's true that following the dollar down leads to internal inflation, then as various central banks begin to move to the euro rising import costs (raw materials and finished product) will have an effect in the US as well. This inflation won't be a sign of an overheating economy, rising wages, etc. that needs to be slowed by increasing interest rates. It will instead contribute to the burden on US consumer spending which, at 70+% of GDP, is the mainstay of the US economy. Yet increasing rates will be necessary to stabilize the dollar's fall and refinance the US national debt.

Could Peter be right? Do they dare to cut us off?

Syria to End Dollar Peg, 2nd Arab Country in 2 Weeks (Update3)
By Zainab Fattah and Matthew Brown
Bloomberg.com: Worldwide

June 4 (Bloomberg) -- Syria became the second Middle Eastern nation in two weeks to say it will dump its currency's peg to the dollar to curb rising import costs and inflation.

The country will link the Syrian pound to a broader range of currencies starting in the middle of July, central bank Governor Adib Mayaleh said.

``The decision is final,'' he said in a phone interview from Abu Dhabi. ``This will help stabilize the Syrian pound and bring down inflation.''

The shift away from the dollar among Middle East countries is a sign of the waning attraction of the currency for central banks around the world. The dollar made up 64.7 percent of global foreign-exchange reserves in the fourth quarter, down from 65.8 percent in the prior three months, International Monetary Fund data show. The euro's share was 25.8 percent, the highest since its 1999 debut.

Syria is broadening its peg after the country's currency was dragged lower against the euro by a 10 percent slide in the dollar last year, pushing up the cost of imports from Europe. Kuwait switched to a basket of currencies on May 20 because of gains in consumer prices, which are also accelerating in the United Arab Emirates and Qatar.

``The weaker dollar is fueling inflation,'' said Dorothee Gasser, an analyst at ING Bank in London. ``We see the U.A.E. as the next possible shifter.''

Bear baiting: Peter Schiff on CNBC

As CNBC's pet bear Peter Schiff is convinced the end is near. It's true he's trying to sell his book, (Crash Proof: How to Profit from the Coming Economic Collapse) but some of his arguments are pretty compelling. Peter thinks American consumers have been "borrowing money like drunken sailors and blowing it." But he's really talking about all the dollar reserves piling up in foreign central banks. He expects the rest of the world to cut us off with significant impacts on the value of the dollar and interest rates leading to a serious recession.

The discussion, ok staged argument with CNBC bulls, in the video interview below is pretty interesting. Here's an excerpt from his latest commentary followed by the CNBC video:

When will all this bad news sink in?
Peter Schiff -- June 1st 2007

Yesterday we learned that 1st quarter GDP “grew” at an annualized rate of only .6% (of course if the government used honest inflation numbers, real GDP is already contracting). Slower growth means fewer jobs and declining incomes, which will further pressure the housing market as homeowners have less income to confront rising adjustable rate mortgages. For potential home buyers the situation is even worse. Not only do they face higher mortgage payments but they must now come up with actual down-payments (which they do not have) and meet far stricter lending standards, including documenting their inadequate incomes.

Today we received further evidence that our imbalanced economy is moving further off kilter as another 19,000 manufacturing jobs were lost and the personal savings rate fell to minus 1.3%. Fewer goods being produced means even larger future trade deficits, which will be made more difficult to finance as a result of rising interest rates. Tighter credit and inadequate income growth will also make record personal indebtedness that much more costly to service.

My guess is that Wall Street's blissful slumber may be ended by the shrilling wake-up call of the collapsing dollar. In the last ten weeks the Canadian dollar has risen by over 10% against the greenback. That’s about one percent per week - incredible! With the weakness in the U.S. economy becoming increasingly apparent overseas, and global interest rates continuing their ascent, it will not be much longer before foreigners pull the plug on the dollar. When they do, it’s the American economy, and Wall Street's phony rally, that will go down the drain.

If you'd like to hear Peter argue with the CNBC bulls check the video out.

Euro Pacific Capital | Video Interviews
CNBC Kudlow & Company 6/1/07

bioenergy may save BC forest industry

The Canadian forest products industry provides 30+% of the US lumber supply. Admittedly much of this additional supply is not needed in the near term given current closures and curtailments in the industry due to the housing market freefall.

It will be interesting to see how industry on both sides of the border responds to rising energy costs. Four or five years from now when housing recovers we may be looking at a significantly restructured industry.

Will the declining US dollar and increasing transportation costs create de facto protections for US industry? Or will the AF&PA call for a tarrif on imported megawatt hours...

Forest industry faces major changes:
Much of B.C.'s wood supply will be used for bioenergy instead of pulp and lumber, expert says
Gordon Hamilton, Vancouver Sun
Published: Friday, May 11, 2007

Natural Resources: The B.C. forest industry turned in one of the world's worst performances in 2006, but a transformation of historic proportions is just over the horizon, one of the province's leading industry consultants said Thursday.

PricewaterhouseCoopers partner Craig Campbell said traditional pulp and lumber production, particularly in the pine beetle-ravaged Interior, is going to give way to bioenergy, smoothing over the boom-and-bust cycles that characterize the industry today.

Campbell's forecast of a prosperous future comes at a time when the industry is the world's basket case. He said mountains of logs are piling up alongside forest roads today because companies cannot economically convert them to lumber.

The industry tumbled from the world's top performing region two years ago, when it had $1.5 billion in profits, to the bottom of the heap in 2006, losing $500 million, according to findings released Thursday by PricewaterhouseCoopers.

03 June 2007

Life among the Econ tribe

Perhaps this helps to explain why local sustainable development strategies are continually sideswiped by economic reality....

Economist's View: Axel Leijonhufvud: Life Among the Econ

The Econ tribe occupies a vast territory in the far North. Their land appears bleak and dismal to the outsider, and travelling through it makes for rough sledding; but the Econ, through a long period of adaptation, have learned to wrest a living of sorts from it. They are not without some genuine and sometimes even fierce attachment to their ancestral grounds, and their young are brought up to feel contempt for the softer living in the warmer lands of their neighbours such as the Polscis and the Sociogs. [Not to mention the Ecologs...] Despite a common genetical heritage, relations with these tribes are strained-the distrust and contempt that the average Econ feels for these neighbours being heartily reciprocated by the latter-and social intercourse with them is inhibited by numerous taboos. The extreme clannishness, not to say xenophobia, of the Econ makes life among them difficult and perhaps even somewhat dangerous for the outsider. This probably accounts for the fact that the Econ have so far-not been systematically studied. Information about their social structure and ways of life is fragmentary and not well validated. More research on this interesting tribe is badly needed.

02 June 2007

Chinese eco-protest takes high-tech path

Chinese eco-protest takes high-tech path

Mitchell Landsberg, Los Angeles Times
Saturday, June 2, 2007

(06-02) 04:00 PDT Beijing -- In the cat-and-mouse game that characterizes political protest in China, the mice won a round this week. They did it by finding a new way to use a familiar form of technology.

Opponents of a chemical plant being built in the coastal city of Xiamen used cell phone text messaging to broadcast their warning of dire consequences if the factory opened.

"Once this extremely poisonous chemical is produced, it means an atomic bomb will have been placed in Xiamen," the text message said in Chinese characters. "The people of Xiamen will have to live with leukemia and deformed babies. We want our lives and health!"

Spreading like a virus, the message was repeated more than a million times, environmentalists said, until it had reached practically everyone in Xiamen, a southeastern city of 1.5 million known for its clean air and scenic views. It also spread beyond cell phones, splashed on walls in the form of graffiti and posted in blogs and other Web sites throughout China.

On Wednesday, in a move that caught almost everyone by surprise, municipal authorities announced that they were suspending construction of the plant.

31 May 2007

Canadian lumber mills threatened by stronger loonie

[Canadian] Forest Products Industry Calls for Swift Government Response to Dollar's Rise -- CNW Telbec

OTTAWA, May 28 /CNW Telbec/ - The head of the Forest Products Association of Canada (FPAC) today called on the Government and Bank of Canada to take swift action to mitigate the damage that the rapid appreciation of the Canadian dollar is doing to Canada's forest products industry. Over the past 5 years, the Canadian dollar has appreciated by 42% against its U. S. counterpart. This has placed enormous pressure on Canada's forest products industry and the more than 300 communities from Newfoundland to British Columbia that depend on the industry for their economic well-being...

"The unprecedented appreciation in the value of the Canadian dollar has served to exacerbate other challenges facing the sector, including the entry of low-cost, overseas rivals into global markets and the sharp downturn in the U. S. housing market," said Avrim Lazar, President and CEO of FPAC. "In realizing its long track record of success in global markets, Canada's forest products industry has proven time and again that it can overcome tough challenges. While the industry can adjust to a stronger currency, the unprecedented rate of appreciation in the dollar is causing severe dislocations in the industry and many of our host communities, particularly when combined with the other headwinds facing the forest sector."

FPAC recently released, Industry at a Crossroads: Choosing the Path to Renewal, the report of the Forest Products Industry Competitiveness Task Force. The Task Force, ...concluded that a changing global marketplace offers unprecedented opportunities as well as challenges to Canada's forest products industry and that the industry can- and should-remain a vital part of Canada's social and economic fabric for decades to come. Key to realizing the sector's future potential is attracting the capital investment needed to renew Canadian production facilities, a process that the appreciation in the dollar is inhibiting. "Canada's forest products industry has a strong productivity record, relative both to our U. S. competitors and the Canadian economy as a whole," added Lazar. "But we need to attract more capital so we can do even better in the future. Not only does the uncontrolled appreciation of the dollar undermine our cost competitiveness, it also diminishes the attractiveness of investing in Canada." While recognizing that many factors beyond Canadian control influence currency values, FPAC calls on Canadian monetary authorities to use what discretion they have to manage the appreciation of our currency and the impact it is having on large regions of the country. In addition, rapid action by governments in such areas as tax reform, mergers policy and a more competitive rail transport sector can also play an important role in enabling industry renewal and in assisting the forest sector to adapt to a higher Canadian dollar.

The full copy of the Report, Industry at a Crossroads: Choosing the Path to Renewal, is available from the FPAC website at www.fpac.ca.

30 May 2007

Kudos to Hank Sims

Kudos to Hank Sims for recognizing that the forces driving real estate prices outside of Humboldt County may actually impact local affordable housing...

North Coast Journal May 10, 2007 : THE TOWN DANDY
Hank Sims

The Humboldt County housing market is part of an immensely complicated national and international economy, affected by all sorts of factors -- for example, the desirability of real estate as an investment vehicle as opposed to the stock market. Someone's buying those unaffordable houses. And if Humboldt County officials are to blame for rising home prices here, why have home prices boomed out of control all across the country?

U.S. Home Construction Bust May Last Until 2011

The latest upswing in housing sales encouraged some to think we've reached the bottom of the housing downturn. Others indicated that the surge in sales was based on major developers offering deep discounts to reduce inventories. Meanwhile national inventories of homes for sale reached record highs.

U.S. Home Construction Bust May Last Until 2011 - Bloomberg.com
By Bob Ivry and Brian Louis

May 29 (Bloomberg) -- New home construction in the U.S. may take until 2011 to return to last year's level, said David Seiders, chief economist for the National Association of Home Builders in Washington.

Monthly construction starts would need to jump by 21 percent to reach Seiders's benchmark for full recovery, which is 1.85 million. There were 1.53 million in April, the Commerce Department said. At the height of the five-year housing boom in January 2006, construction began on 2.29 million homes.

``We've fallen way below trend because we soared way above trend during boom times,'' Seiders said in an interview. ``The upswing will be relatively slow, unlike earlier cycles.''

The inventory of unsold homes is the largest since the Chicago-based National Association of Realtors started counting them in 1999 and house prices have suffered the steepest drop since the Great Depression, according to the realtors' group. Defaults and foreclosures also may rise as about $650 billion of loans to subprime borrowers, those with poor or limited credit histories, reset at higher interest rates by 2009.

``We're still being hit pretty hard by the subprime-related mortgage market problem,'' Seiders said. ``One of the biggest unknowns right now is how serious the change on the mortgages side will be on home sales.''

Sales of new homes rose 16 percent in April, the highest increase since 1993, the Commerce Department said last week... The biggest gain in new-home sales in 14 years was made possible by homebuilders who cut prices more in April than in any month since 1970. The median new-home price fell 11 percent to $229,100 from $257,600 a year earlier, the reported showed.

24 May 2007

Environmental Idols

Curtis White gives an interesting perspective on the nexus of environmental activism, Cartesian logic and corporate malfeasance. He points to inconsistencies, at the philosophical level, that leave environmental advocates unable to change the "very fabric" driving the continued degradation of ecosystems world wide. He's right. Perhaps in a few years he will write an equally articulate article describing how fundamental critiques are professionally marginalized, excluded from the political process and of negligible impact on how capital motivates corporate resource allocation. What to do?

The Idols of Environmentalism | Curtis White | Orion magazine

"The problem for even the best-intentioned environmental activism is that it imagines that it can confront a problem external to itself. Confront the bulldozers. Confront the chainsaws. Confront Monsanto. Fight the power. What the environmental movement is not very good at is acknowledging that something in the very fabric of our daily life is deeply anti-nature as well as anti-human. It inhabits not just bad-guy CEOs at Monsanto and Weyerhaeuser but nearly every working American, environmentalists included.

It is true that there are CEO-types, few in number, who are indifferent to everything except money, who are cruel and greedy, and so the North Atlantic gets stripped of cod and any number of other species taken incidentally in what is the factory trawler’s wet version of a scorched-earth policy. Or some junk bond maven buys up a section of old-growth redwoods and “harvests” it without hesitation when his fund is in sudden need of “liquidity.” Nevertheless, all that we perceive to be the destructiveness of corporate culture in relation to nature is not the consequence of its power, or its capacity for dominating nature ("taming," as it was once put, as if what we were dealing with was the lion act at the circus). Believing in powerful corporate evildoers as the primary source of our problems forces us to think in cartoons."

23 May 2007

Global carbon emissions in overdrive

Global carbon emissions in overdrive | csmonitor.com
Global emissions of carbon dioxide are growing at a faster clip than the highest rates used in recent key UN reports.

CO2 emissions from cars, factories, and power plants grew at an annual rate of 1.1 percent during the 1990s, according to the Global Carbon Project, which is a data clearinghouse set up in 2001 as a cooperative effort among UN-related groups and other scientific organizations. But from 2000 to 2004, CO2 emissions rates almost tripled to 3 percent a year – higher than any rate used in emissions scenarios for the reports by the Intergovernmental Panel on Climate Change (IPCC).

If the higher rate represents more than a blip, stabilizing emissions by 2100 will be more difficult than the latest UN reports indicate, some analysts say. And to avoid the most serious effects of global warming, significant cuts in CO2 emissions must begin sooner than the IPCC reports suggest. At the moment, no region of the world is "decarbonizing its energy supply," the analysis says.

The Poverty Business

The Poverty Business - Business Week

In recent years, a range of businesses have made financing more readily available to even the riskiest of borrowers. Greater access to credit has put cars, computers, credit cards, and even homes within reach for many more of the working poor. But this remaking of the marketplace for low-income consumers has a dark side: Innovative and zealous firms have lured unsophisticated shoppers by the hundreds of thousands into a thicket of debt from which many never emerge.

Federal Reserve data show that in relative terms, that debt is getting more expensive. In 1989 households earning $30,000 or less a year paid an average annual interest rate on auto loans that was 16.8% higher than what households earning more than $90,000 a year paid. By 2004 the discrepancy had soared to 56.1%. Roughly the same thing happened with mortgage loans: a leap from a 6.4% gap to one of 25.5%. "It's not only that the poor are paying more; the poor are paying a lot more," says Sheila C. Bair, chairman of the Federal Deposit Insurance Corp.

Once, substantial businesses had little interest in chasing customers of the sort who frequent the storefronts surrounding the Byrider dealership in Albuquerque. Why bother grabbing for the few dollars in a broke man's pocket? Now there's a reason.

Armed with the latest technology for assessing credit risks—some of it so fine-tuned it picks up spending on cigarettes—ambitious corporations like Byrider see profits in those thin wallets. The liquidity lapping over all parts of the financial world also has enabled the dramatic expansion of lending to the working poor. Byrider, with financing from Bank of America Corp. (BAC ) and others, boasts 130 dealerships in 30 states. At company headquarters in Carmel, Ind., a profusion of colored pins decorates wall maps, marking the 372 additional franchises it aims to open from California to Florida. CompuCredit Corp., based in Atlanta, aggressively promotes credit cards to low-wage earners with a history of not paying their bills on time. And BlueHippo Funding, a self-described "direct response merchandise lender," has retooled the rent-to-own model to sell PCs and plasma TVs.

21 May 2007

California Provides Cautionary Tale to Eco-Elite

The Unbearable Whiteness of the Green Movement
By Van Jones, Grist Magazine

California Provides Cautionary Tale to Eco-Elite

The idea for Prop 87 was brilliant in its simplicity: California would start taxing the oil and gas that we extract from our soil and shores. And those dollars would go into a huge, "clean-energy" research and technology fund.

Many states and nations have similar excise taxes. But California would have been alone in dedicating the revenues to inventing alternatives to carbon-based energy sources. Had it passed, money from oil would have been used to find a replacement for oil.

It was a brilliant idea. And at first, the measure was polling off the charts.

But in the end, Californians voted the measure down. Why? Because big oil convinced ordinary Californians that the price tag for them would be too high for them to bear.

17 May 2007

Agrarian reform Venezuela style...

Clash of Hope and Fear as Venezuela Seizes Land - New York Times

For centuries, much of Venezuela’s rich farmland has been in the hands of a small elite. After coming to power in 1998, and especially after his re-election in December, President Hugo Chávez vowed to end that inequality, and has been keeping his promise in a process that is both brutal and legal.

Mr. Chávez is carrying out what may become the largest forced land redistribution in Venezuela’s history, building utopian farming villages for squatters, lavishing money on new cooperatives and sending army commando units to supervise seized estates in six states.

The violence has gone both ways in the struggle, with more than 160 peasants killed by hired gunmen in Venezuela, including several here in northwestern Yaracuy State, an epicenter of the land reform project, in recent years. Eight landowners have also been killed here.

16 May 2007

U.S. Sets New China Duties

U.S. Sets New China Duties - WSJ.com
Move Opens Door For a Wide Array Of Trade Complaints
March 31, 2007; Page A3

WASHINGTON -- The Bush administration imposed new economic sanctions against China, a vivid reflection of the increasingly tough climate in the U.S. toward free trade -- particularly with Beijing.

The new duties apply narrowly to complaints that Chinese producers of glossy, high-quality paper used in books and magazines are unfairly subsidized by their government -- just $224 million of annual imports, or less than 1% of the total goods and services Americans buy each year from China.

But the action is likely to have much wider ramifications. It opens the door to a potential rush of similar complaints by American manufacturers, from steel to plastics producers, that face stiff competition from the Chinese. And it signals, more broadly, an increasingly harder line on trade emerging both at the White House and in Congress.

Home Depot down 30% in first quarter

Housing market is a wreck for Home Depot profit - MarketWatch
Expect more of the same, CEO warns; hirings still continue
By Jennifer Waters & Angela Moore, MarketWatch
Last Update: 4:41 PM ET May 15, 2007

CHICAGO (MarketWatch) -- Home Depot Inc., still smarting from the faltering U.S. housing market and a host of operational issues, on Tuesday posted a 30% drop in quarterly profit and warned that earnings for the year will fall to the low end of projections.

"This was a difficult first quarter for us," Chief Executive Frank Blake conceded on a conference call with analysts. It was his first quarter as CEO, after assuming the position in January. "While we expected a tough quarter, this was worse than we anticipated."

15 May 2007

US vows to punish China and others for undervaluing their currencies

While the US prepares to punish China for pegging the Yuan to the dollar and China telegraphs a response regarding the risks that would pose to their economy it might be worth reading an outside of consensus perspective . I'd take the last article, the outside perspective, with a grain of salt. Seems like gold dealers see a percentage in increasing fears of US economic weakness, but absent hyperbole there are a few comments there that seem worth reviewing...

A few excerpts:

Congress to press China over its undervalued currency - Los Angeles Times

Legislators target nations that manipulate their money. Critics say it's the wrong approach.
By Molly Hennessy-Fiske, Times Staff Writer
May 10, 2007

WASHINGTON — Democrats in Congress have been pushing an ambitious trade agenda, promising to assist displaced American workers and reduce the trade deficit. Now they're taking on the global currency market — vowing to pass legislation to punish China and other Asian countries for undervaluing their currencies.

China: No Currency Change Ahead of Talks
Tuesday May 15, 10:25 am ET
By Joe Mcdonald, AP Business Writer

China Rules Out Major Currency Moves Ahead of Washington Talks

BEIJING (AP) -- Chinese officials on Tuesday ruled out major changes demanded by U.S. lawmakers in Beijing's currency controls ahead of a high-level meeting and called on critics in Congress not to politicize trade disputes.

Beijing is making progress in allowing its currency to trade more freely, but acting on U.S. appeals to move more quickly could disrupt the economy, said the officials. They briefed reporters on next week's meeting in Washington on condition they not be identified by name.

A senior Finance Ministry official said China wouldn't permit a backlash against financial markets and its "harmonious society," using Beijing's term for efforts to spread China's new prosperity to its poor majority.

The Russian Bear, Chinease Dragon, and US Dollar :: The Market Oracle :
By Jim Willie CB
Editor of the “HAT TRICK LETTER”

Russia and China have become a major problem. Everywhere one turns, there is Russia & China at odds with the United States . We have the Great Bear in a conflict over energy, Iran , military installations, and central bank policy. We have the Great Dragon in a conflict over currency reform, banking reform, copyright enforcement, trade matters, human rights, and central bank policy.

Armed with a combined account of almost $1600 billion, these two giants are in a Battle of Titans with the United States for geopolitical control. With the financial shift to developing nations comes a natural push toward geopolitical control. The USEconomy and USDollar have never been in a weaker position. The bear and dragon know it well, and have taken steps to wrest more power and influence.


In 2000, all changed. Russia and China hit the scene. The ill-fated decision during the Clinton Administration to grant Most Favored Nation status to China opened the door to a labor arbitrage. The result was over three million US manufacturing jobs sent to China . US corporations justify their abandonment of US workers, shedding fringe benefit costs at the same time, by claiming the low-cost solutions benefit both their financial structure and the USEconomy. The trade gap would next grow even while the USDollar would be devalued by 25% to 30% in the next few years...

China captured a large slice of that exported US-based inflation. Moronic economists actually claimed that the USEconomy was exploiting the Asian lower labor costs, as we sold them our high-grade debt. China began to accumulate its MOUNTAIN OF US $-BASED DEBT in its FOREX account. Foreign reserves held in the land of the Great Dragon enjoyed a head start, measured at $160 billion in the year 2000, having grown to $1202 billion by early 2007. Now the sleep walkers running US policy regard the Chinese yuan and gigantic FOREX mountainous reserves account as a problem...

The cooperation identified by constructive contracts between US corporations to build Chinese factories took a respite in 2002 and 2003, but clearly resumed to surpass $15 billion annually in 2004 and 2005 each year. If one needs to point fingers at the new problems with China, look no further than US corporate executives who plowed tens of billion$ into China, killed off US jobs, and have fed the dragon. However, the end of the rigid yuan currency regime was removed in July 2005 with little progress to show in a yuan upward revaluation. A relatively small 7% rise in the yuan since then pales by comparison to the 55% rise in the euro currency (versus US$) since 2001, and 15% rise in the euro in roughly the same time frame as the yuan has been relaxed, but not freed. The ineptitude of USGovt leaders has been exposed, when dealing on the economic and financial chessboard with patient and crafty Beijing leaders.