Tag Archives: financial crisis

FDIC Funds Drained – Asking Banks for Money

Banks Bailing Out FDIC

FDIC weighs extraordinary steps to shore up fund

The Federal Deposit Insurance Corp. is weighing several costly – and never-before-used – options as it struggles to shore up the dwindling fund that insures bank deposits. The agency is considering borrowing billions from healthy banks. Alternatively, it may impose a special fee on the banking industry. A third option – borrowing from the Treasury – is politically unpalatable, since it would resemble another bailout. A fourth option would be to have banks pay their regular insurance premiums early. But that wouldn’t solve the fund’s long-term cash needs. The FDIC is expected to propose a solution at a board meeting next week. Bank failures since the financial crisis struck have drained the fund, which insures bank deposit accounts of up to $250,000, to its lowest level since 1992.

The Demise of the Dollar

UN dollar to replace US dollar?

UN Says New Currency Is Needed to Fix Broken ‘Confidence Game’

The dollar’s role in international trade should be reduced by establishing a new currency to protect emerging markets from the “confidence game” of financial speculation, the United Nations said.

UN countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade and Development said today in a report.

China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency after the financial crisis sparked by the collapse of the U.S. mortgage market led to the worst global recession since World War II. China, the world’s largest holder of dollar reserves, said a supranational currency such as the International Monetary Fund’s special drawing rights, or SDRs, may add stability.

“There’s a much better chance of achieving a stable pattern of exchange rates in a multilaterally-agreed framework for exchange-rate management,” Heiner Flassbeck, co-author of the report and a UNCTAD director, said in an interview from Geneva. “An initiative equivalent to Bretton Woods or the European Monetary System is needed.”

The 1944 Bretton Woods agreement created the modern global economic system and institutions including the IMF and World Bank.

Enhanced SDRs

While it would be desirable to strengthen SDRs, a unit of account based on a basket of currencies, it wouldn’t be enough to aid emerging markets most in need of liquidity, said Flassbeck, a former German deputy finance minister who worked in 1997-1998 with then U.S. Deputy Treasury Secretary Lawrence Summers to contain the Asian financial crisis.

Emerging-market countries are underrepresented at the IMF, hindering the effectiveness of enhanced SDR allocations, the UN said. An organization should be created to manage real exchange rates between countries measured by purchasing power and adjusted to inflation differentials and development levels, it said.

“The most important lesson of the global crisis is that financial markets don’t get prices right,” Flassbeck said. “Governments are being tempted by the resulting confidence game catering to financial-market participants who have shown they’re inept at assessing risk.”

The 45-year-old UN group, run by former World Trade Organization chief Supachai Panitchpakdi, “promotes integration of developing countries in the world economy,” according to its Web site. Emerging-market nations should consider restricting capital mobility until a new system is in place, the group said.

The world body began issuing warnings in 2006 about financial imbalances leading to a global recession.

The Dollar Collapses

Max Keiser: Goldman Sachs More Dangerous than bin Laden

Part One
Max Keiser takes offense to Goldman Sachs story

Part Two
Max Keiser takes offense to Goldman Sachs oligarchy

Hastening the Bankruptcy of the US Financial-Military World Order

Washington is unable to call all the shots

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Keen observers of America, if not effective managers of their own economies, these countries argue that the root of the global financial crisis is that the US makes too little and spends too much.

Challenging the American empire will be the focus of meetings in Yekaterinburg, Russia, today and tomorrow for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other leaders of the six-nation Shanghai Co-operation Organisation. The alliance comprises Russia, China, Kazakhstan, Tajiki-stan, Kyrgyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia.

The attendees (who will be joined on Tuesday by Brazil for trade discussions) have assured American diplomats that dismantling the US financial and military hegemony is not their aim. They simply want to discuss mutual aid – but in a way that has no role for the US or for the dollar as a vehicle for trade among these countries.

The meeting is an opportunity for China, Russia and India to “build an increasingly multipolar world order”, as Mr Medvedev put it in a St Petersburg speech this month. What he meant was this: we have reached our limit in subsidising the US military encirclement of Eurasia while also allowing the US to appropriate our exports, companies and real estate in exchange for paper money of questionable worth.

An “artificially maintained unipolar system”, Mr Medvedev said, was based on “one big centre of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks”. Full Story

Over One Billion Starving People – Who Are the Culprits?

U.N. warns of catastrophe as hungry people top one billion

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High food prices have pushed another 105 million people into hunger in the first half of 2009, the head of the U.N. World Food Programme said on Friday, raising the total number of hungry people to over 1 billion.

Urging rich nations at a meeting of G8 development ministers not to cut back on aid, Josette Sheeran said the world faced a human catastrophe as more people struggle to eat a decent meal.

“This year we are clocking in on average four million new hungry people a week, urgently hungry,” Sheeran told Reuters.

“For the first six months of this year, 105 million people have been added,” she said, citing figures to be released by the U.N. Food and Agriculture Organization next week that will raise the total number of undernourished people to over 1 billion.

In 2008, FAO said the world’s hungry numbered 963 million.

The WFP needs $6.4 billion this year for food aid, but donors’ contributions have fallen way behind that level — it had around $1.5 billion at the end of last week.

The agency says it has had to cut food aid rations and shut some operations in eastern Africa and North Korea because of the credit crunch.

“I know it seems a big figure, but if you compare it with the global stimulus package, it means that for less than 1 percent of that we could help meet the urgent human crisis that is unfolding, and that is just as essential to the stability of the world,” Sheeran said.

She said despite a decline in most food prices from record peaks last year, they remained high in developing countries, while global food aid was at a 20-year low.

The financial crisis has made things worse, and in terms of staple food, people in poorer countries today can only afford about a third of what they could afford three years ago. Full Story

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HungerSite.com

HungerSite.com

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Experts: Obama biofuel policy boosts world hunger

The Obama administration’s policy of producing ethanol as a renewable fuel substitute for gasoline will add to the number of people in Third World countries who are chronically hungry, according to energy experts.

The administration’s mandates for the use of ethanol are “immoral,” asserts Robert Bryce, managing editor of the monthly industry magazine Energy Tribune.

“We are burning food to make motor fuel at a time when there’s a growing global shortage of food and no shortage of motor fuel,” Bryce told WND.

“The corn ethanol scam is not an energy program,” he continued. “It is a massive farm subsidy program masquerading as an energy program.”

The U.S. Department of Energy did not respond to a WND request for comment on this story.

A controversial report released earlier this month by the Congressional Budget Office, or CBO, said the increasing demand for corn to produce ethanol contributed between 10 to 15 percent of the overall 5.1 percent increase in the price of food from April 2007 to April 2008, as measured by the Consumer Price Index. Full Story

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How the World Bank, IMF and WTO destroyed African agriculture

Biofuel production is certainly one of the culprits in the current global food crisis. But while the diversion of corn from food to biofuel feedstock has been a factor in food prices shooting up, the more primordial problem has been the conversion of economies that are largely food-self-sufficient into chronic food importers. Here the World Bank, International Monetary Fund (IMF), and the World Trade Organization (WTO) figure as much more important villains.

Whether in Latin America, Asia, or Africa, the story has been the same: the destabilization of peasant producers by a one-two punch of IMF-World Bank structural adjustment programs that gutted government investment in the countryside followed by the massive influx of subsidized U.S. and European Union agricultural imports after the WTO’s Agreement on Agriculture pried open markets. .

African agriculture is a case study of how doctrinaire economics serving corporate interests can destroy a whole continent’s productive base. Full Story

Bulldozing U.S. Cities Back to Nature

US cities may have to be bulldozed in order to survive

Dozens of US cities may have entire neighbourhoods bulldozed as part of drastic “shrink to survive” proposals being considered by the Obama administration to tackle economic decline.

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The government looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature.

Local politicians believe the city must contract by as much as 40 per cent, concentrating the dwindling population and local services into a more viable area.

The radical experiment is the brainchild of Dan Kildee, treasurer of Genesee County, which includes Flint.

Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government and a group of charities who want him to apply what he has learnt to the rest of the country.

Mr Kildee said he will concentrate on 50 cities, identified in a recent study by the Brookings Institution, an influential Washington think-tank, as potentially needing to shrink substantially to cope with their declining fortunes.

Most are former industrial cities in the “rust belt” of America’s Mid-West and North East. They include Detroit, Philadelphia, Pittsburgh, Baltimore and Memphis.

In Detroit, shattered by the woes of the US car industry, there are already plans to split it into a collection of small urban centres separated from each other by countryside.

“The real question is not whether these cities shrink – we’re all shrinking – but whether we let it happen in a destructive or sustainable way,” said Mr Kildee. “Decline is a fact of life in Flint. Resisting it is like resisting gravity.” Full Story

U.S. Children Sinking into Poverty

ECONOMY-US: One in Five Children Sinking Into Poverty

U.S. children’s quality of life is expected to decline through 2010 due to the impacts of the financial crisis, said a new report by the Foundation for Child Development (FDC), released on Wednesday.

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According to the report, progress in U.S. children’s quality of life has fluctuated since 2002, and began a decline in 2008 as a result of the recession.

The Child Well-Being Index (CWI) is an annual evidence-based composite measure of trends over time in the quality of life for U.S. children from birth to age 18 conducted by Duke University’s Foundation for Child Development Child and Youth Well-Being Index Project. It tracks changes as compared to 1975 base year values.

This year, the Project also produced a Special Focus Report that offers projections of the impact the recession is likely to have on children’s well-being through 2010, based on analysis of past recessions.

“America is doing a really bad job relative to other countries,” said Reihan Salam, a fellow at the New America Foundation, referring to the well-being of U.S. children.

According to the CWI, although the recession is predicted to end in 2010, the well-being of children is not expected to improve during that time period.

The percentage of children in poverty is expected to peak at 21 percent and more than eight million children, or 27 percent, are expected to have at least one parent working full-time year-round in 2010. Full Story