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RBS tells clients to prepare for 'monster' money-printing by the Federal Reserve
As recovery starts to stall in the US and Europe with echoes of mid-1931, bond experts are once again dusting off a speech by Ben Bernanke given eight years ago as a freshman governor at the Federal Reserve.

Ambrose Evans Pritchard, International Business Editor
The Telegraph

Entitled "Deflation: Making Sure It Doesn’t Happen Here", it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.

The speech is best known for its irreverent one-liner: "The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost."

Bernanke began putting the script into action after the credit system seized up in 2008, purchasing $1.75 trillion of Treasuries, mortgage securities, and agency bonds to shore up the US credit system. He stopped far short of the $5 trillion balance sheet quietly pencilled in by the Fed Board as the upper limit for quantitative easing (QE).

Investors basking in Wall Street's V-shaped rally had assumed that this bizarre episode was over. So did the Fed, which has been shutting liquidity spigots one by one. But the latest batch of data is disturbing.

The ECRI leading indicator produced by the Economic Cycle Research Institute plummeted yet again last week to -6.9, pointing to contraction in the US by the end of the year. It is dropping faster that at any time in the post-War era.

The latest data from the CPB Netherlands Bureau shows that world trade slid 1.7pc in May, with the biggest fall in Asia. The Baltic Dry Index measuring freight rates on bulk goods has dropped 40pc in a month. This is a volatile index that can be distorted by the supply of new ships, but those who watch it as an early warning signal for China and commodities are nervous.

Andrew Roberts, credit chief at RBS, is advising clients to read the Bernanke text very closely because the Fed is soon going to have to the pull the lever on "monster" quantitative easing (QE)".

"We cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable," he said in a note to investors.

Roberts said the Fed will shift tack, resorting to the 1940s strategy of capping bond yields around 2pc by force majeure said this is the option "which I personally prefer".

A recent paper by the San Francisco Fed argues that interest rates should now be minus 5pc under the bank's "rule of thumb" measure of capacity use and unemployment. The rate is currently minus 2pc when QE is factored in. You could conclude, very crudely, that the Fed must therefore buy another $2 trillion of bonds, and even more if Europe's EMU debacle goes from bad to worse. I suspect that this hints at the Bernanke view, but it is anathema to hardliners at the Kansas, Richmond, Philadephia, and Dallas Feds.

Societe Generale's uber-bear Albert Edwards said the Fed and other central banks will be forced to print more money whatever they now say, given the "stinking fiscal mess" across the developed world. "The response to the coming deflationary maelstrom will be additional money printing that will make the recent QE seem insignificant," he said.

Despite the apparent rift with Europe, the US is arguably tightening fiscal policy just as hard. Congress has cut off benefits for those unemployed beyond six months, leaving 1.3m without support. California has to slash $19bn in spending this year, as much as Greece, Portugal, Ireland, Hungary, and Romania combined. The states together must cut $112bn to comply with state laws.

The Congressional Budget Office said federal stimulus from the Obama package peaked in the first quarter. The effect will turn sharply negative by next year as tax rises automatically kick in, a net swing of 4pc of GDP. This is happening as the US housing market tips into a double-dip. New homes sales crashed 33pc to a record low of 300,000 in May after subsidies expired.

It is sobering that zero rates, QE a l'outrance, and an $800bn fiscal blitz should have delivered so little. Just as it is sobering that Club Med bond purchases by the European Central Bank and the creation of the EU's €750bn rescue "shield" have failed to stabilize Europe's debt markets. Greek default contracts reached an all-time high of 1,125 on Friday even though the €110bn EU-IMF rescue is up and running. Are investors questioning EU solvency itself, or making a judgment on German willingness to back pledges with real money?

Clearly we are nearing the end of the "Phoney War", that phase of the global crisis when it seemed as if governments could conjure away the Great Debt. The trauma has merely been displaced from banks, auto makers, and homeowners onto the taxpayer, lifting public debt in the OECD bloc from 70pc of GDP to 100pc by next year. As the Bank for International Settlements warns, sovereign debt crises are nearing "boiling point" in half the world economy.

Fiscal largesse had its place last year. It arrested the downward spiral at a crucial moment, but that moment has passed. There is a time to love and a time to hate, a time for war and a time for peace. The Krugman doctrine of perma-deficits is ruinous - and has in fact ruined Japan. The only plausible escape route for the West is a decade of fiscal austerity offset by helicopter drops of printed money, for as long as it takes.

Some say that the Fed's QE policies have failed. I profoundly disagree. The US property market - and therefore the banks - would have imploded if the Fed had not pulled down mortgage rates so aggressively, but you can never prove a counter-factual.

The case for fresh QE is not to inflate away the debt or default on Chinese creditors by stealth devaluation. It is to prevent deflation.

Bernanke warned in that speech eight years ago that "sustained deflation can be highly destructive to a modern economy" because it leads to slow death from a rising real burden of debt.

At the time, the broad money supply war growing at 6pc and the Dallas Fed's `trimmed mean' index of core inflation was 2.2pc.

We are much nearer the tipping today. The M3 money supply has contracted by 5.5pc over the last year, and the pace is accelerating: the 'trimmed mean' index is now 0.6pc on a six-month basis, the lowest ever. America is one twist shy of a debt-deflation trap.

There is no doubt that the Fed has the tools to stop this. "Sufficient injections of money will ultimately always reverse a deflation," said Bernanke. The question is whether he can muster support for such action in the face of massive popular disgust, a Republican Fronde in Congress, and resistance from the liquidationsists at the Kansas, Philadelphia, and Richmond Feds. If he cannot, we are in grave trouble.

And These Guys Are In Charge

This is probably the worst economic news to come out in a long time, but it is not surprising to any rational person.

Yet on every question the left did much worse. On the monopoly question, the portion of progressive/very liberals answering incorrectly (31%) was more than twice that of conservatives (13%) and more than four times that of libertarians (7%). On the question about living standards, the portion of progressive/very liberals answering incorrectly (61%) was more than four times that of conservatives (13%) and almost three times that of libertarians (21%).

The survey also asked about party affiliation. Those responding Democratic averaged 4.59 incorrect answers. Republicans averaged 1.61 incorrect, and Libertarians 1.26 incorrect.

That is the results of a recent Zogby poll on economic policies. What it found is that liberals, that's Democrats for those in doubt, know absolutely diddly squat about economics.

They know good buzz words and catch phrases and catchy slogans that can fit on a bumper sticker, but basically couldn't tell a monopoly from market share. These are the people dictating our current economic policy in this country. Just when you think things couldn't get much worse. They have laid the groundwork for crippling our economy for years after they are evicted from office. A lot of the legislation they will leave behind is going to be more devastating then an IED in an outside market. And will have the same effect.

With the pending collapse of the health insurance industry in this country, which will add millions more to the unemployed roles, to the unsustainable debt that is continuing to be racked by the government in their continued efforts to keep Fannie Mae and Freddie Mac afloat along with their becoming the sole provider of student loans, you couldn't get a Las Vegas bookie to give you odds on how long before the economy completely collapses.

If you see a light at the end of the tunnel be assured that just like a Roadrunner cartoon, it is only a freight train headed your way.

Barry "Nostradamus" Obama Promises 95K Jobs a Month

Well not "The One" himself but his Council of Economic Advisers.

The United States is likely to average 95,000 more jobs each month this year, while personal savings will remain high as credit remains tight, according to a White House report released Thursday.

The Council of Economic Advisers also trumpeted the $787 billion economic stimulus package, which it said has saved or created about 2 million jobs.

Man that is a lot of new federal employees because I don't see jobs getting added anywhere else. Maybe they will all go to work removing the snow from D.C, and lord knows they have been doing one hell of a snow job on this country.

Of course he also took time to remind congress that he inherited his problems.

In a message to Congress, President Barack Obama pointed out that the economy he inherited was losing 700,000 jobs each month.

Seems that in the land of denial that Obama lives in he never creates or saves problems, he just inherits them. I would hope by this time he would realize that this shtick is getting a little old and tiresome.

The report is full of unicorns and fluffy bunnies and extols the awesomeness of the TOTUS, while continuing to demonize the previous administration.

This is the same group of economic advisers who have practically no private business sector experience and all came from the halls of academia and public life.



Meanwhile here in the real world the average citizen will continue to struggle and add many unnecessary years to their lives worrying about keeping their job or finding the next one.

I may be wrong, but after the attacks of 9/11, while the blogs were full of condemnation of the Clinton policies regarding intelligence and homeland security, I don't remember a string of Bush administration officials coming out on a daily basis and blaming the attack on the previous administration, and they certainly didn't spend endless hours lamenting the fact that they inherited the problem. Yes President Bush inherited the Islamic terrorism problem, as did all previous administrations going back to it's genesis under Obama's apparent idol and maybe mentor Jimmy Carter.

The same person he will replace in the history books as the worst president evah.

Soros Heaps Praise On Obama's Banking Plans

This is a case of which came first, Soros' praise for Barry O's plans to attack big banks or his whispering in the ear of the TOTUS, and now taking a victory lap because the schmuck was actually stupid enough to try and carry through on the idea.

Analyzing attempts to overcome the crisis, Mr Soros had plenty of praise for Mr Obama's plan to split big banks - separating their commercial banking bits and their investment arms.

Even after the break-up proposed by Mr Obama, most investment banks would "still be too big to fail," Mr Soros told the lunch guests.

To contain these banks, he said all major economies would have to agree on a common set of financial regulation that set strict limits for leverage - how much money the banks can borrow to invest.

Without a global agreement, capital would simply move to the least regulated country.

However, if all major economies participated, they could exercise the necessary controls over money flow to prevent rogue states from circumventing the system - or stop "Goldman Sachs from setting up shop in Somalia," as one of the participants called it.

Look, I'm no economic genius, but while I would like to blame the banks for being the cause of our current woes, the truth is the blame goes to half a dozen parties. From government legislators who turned a blind eye to the practices at Fannie Mae and Freddie Mac and passed laws and issued opinions that lending institutions should do more to put everybody in a house, to individuals who never faced the reality that they were buying more home then they could afford.

Long before the real estate collapse occurred, me and my friends and neighbors would talk about how high the price of housing had gotten in our area. The conversation normally ended with somebody asking the rhetorical question of just who the hell do they think lives out here and how can they afford the price of a house.

Well, the truth is they couldn't, but the housing market was superheated and many of the parties involved were driven by visions of making a quick buck and nobody wanted the gravy train to stop. Well it did, and while it is easy to try to make banks out to be the bad guys, the truth is Freddie and Fannie not only pushed banks to make the loans, they backed them up.

Since Fannie and Freddie had friends in Congress, not a lot of attention has been given to them, and Congressmen eager to not have their enabling of this crash known have been quick to point fingers at bankers too.

So I got off track, but my real point is if you have George Soros out promoting your economic policies, the investment who was to blame for the collapse of the British banking system and the Japanese markets, then you had better look hard and try to find out what his motivation is.

Just like Warren Buffett, Soros does nothing without looking at how he can profit from it while supporting and financing groups that wish to stop anybody else from doing the same. This appears to be nothing more then one more way to achieve some sort of global ruling class. If countries aren't allowed to regulate business within their own borders, then it is just more piece of their sovereignty that they are giving away. Weak leaders are happy to have somebody else to blame for their inability to make the tough choices. Like our current president, they quite often blame inanimate objects or credit non living entities with being the cause of bad news.

Ever notice that bad news out of our government normally comes with the phrase of "The White House" or administration officials.

No, having a big socialists like George Soros trumpeting your economic policies should be enough to concern all Americans who do not ascribe to the Socialist viewpoint.

Information on the Bretton Woods plan mentioned in the article can be found here.

Unprecedented Access

You just never know which story will peak your interest or where the story will lead. Such is the case when I saw this simple wedding announcement between Peter Orszag, the president's budget director, and ABC financial reporter, Bianna Golodryga. So of course I wanted to find out a little bit about the couple. What I was most interested in was the angle that we finally had some proof of the administration literally being in bed with the media.

What I found was a little more eye opening then that. Not many people pay attention to folks who crunch numbers for a living and speak on financial and economic matters. In fact most of us turn it to the business channel when we are suffering insomnia to help put us to sleep.

Well, I am awake now.

Mr Orszag worked for former President Clinton and is now Barry O's budget director, but he is also a socialist leaning economist.

Witness this exchange from 2001, when Orszag was working at the Hoover Institute. Peter Robinson is the host of the show this interview was on.

Peter Robinson: Why don't you just soak the rich? If you're concerned that these rich are getting richer too quickly…

Peter Orszag: There is a tradeoff that one has to find a balance between…

Peter Robinson: Ahh, okay, all right.

Peter Orszag: …in--in, uh, equality versus incentives. And at some point, one--one leans too hard and the disincentive effects are too large. The question is finding a balance between the--the incentives provided to produce, supply labor, take risks, and fairness.

Peter Robinson: So this would be difficult statistically, but the rule of thumb would be, we engage in redistribution, we cream off the top quintile and put it one the bottom qui--quintile, to the extent that we can without killing the economic engine--without smothering growth. Would that be about the rule of thumb that'd you go for?

Peter Orszag: I think that's about the rule of thumb, yes.

Peter Robinson: So…

Peter Orszag: It's all a matter of degree. How much reduction in--in economic activity are you willing to…

Peter Robinson: Right, and it could be difficult to find that balance…

Peter Orszag: Right.

Peter Robinson: …but that would be the aim.

Peter Orszag: That should be the aim, yes.

Peter apparently is a big hit with the folks over at HuffNPuff.

Bianna Golodryga bio

She also is believer in redistributing the wealth, evidenced by the tone of the interviews she does with the wealthy people whose social circles she inhabits.

Well, Jim Cramer was certainly right on target with his analysis...not!

And Bianna, what do you think of the unemployment rate now that it is above 10%?

All of these wealth redistribution believers in our current administration are certainly getting very troubling.

Come For The News, Stay For The Accents

This clip has it all. A world renowned physicists, a financial expert, dinosaurs, and how the White House's jobs numbers are unable to be quantified by any method known to man.

Michio Kaku is one of my favorite people because he can take some of the most complex scientific principles and make it understandable to the average person. So whether he is explaining the inside workings of the Hadron collider and the associated quantum physics behind it or in this case trying to help explain how the extinction of the dinosaurs as Stuart Varney proposes never happened relates to the economic news coming off of Capitol Hill he manages to make it entertaining.

Curious Choices For Nobel Prize in Economics

Well I guess these two folks are Tea Partiers.

Ostrom, 76, and Williamson, 77, shared the $1.4 million economics prize for work that "advanced economic governance research from the fringe to the forefront of scientific attention," the Royal Swedish Academy of Sciences said.

Ostrom, a political scientist at Indiana University, showed how common resources — forests, fisheries, oil fields or grazing lands — can be managed successfully by the people who use them, rather than by governments or private companies.

Even more puzzling is that one of the receptients, Williamson, works at University of California at Berkeley.

Still somehow the writer of the article spins this as somehow an endorsement of government regulations.

The academy did not specifically cite the global financial crisis, but many of the problems at the heart of the current upheaval — bonuses, executive compensation, risky and poorly understood securities — involve a perceived lack of regulatory oversight by government officials or by corporate boards. The Nobel awards on Monday were clearly a nod to the role of rules, institutions and regulations in making markets work.

You see it is all about the eeeevil corporations. Do these people even read what they write? I guess he took it upon himself to say what the academy didn't. Kind of like giving an award to somebody for giving a good pep talk but not actually accomplishing anything.

These economists stated that the individual or the lowest level at which the resource is being used is best suited to manage that resource and doesn't say anything about corporate bonuses, compensation, or monetary risks.

For those keeping count that makes 11 out of the 13 Nobel prizes awarded that have gone to the most evil, war mongering, and racist Americans. And only one of them has been awarded for nothing more then winning an election. In fact most of them have been awarded to folks who have spent a lifetime working in the field for which they won the award.

Obama Clueless About Basic Economics

If there was ever a doubt that this White House does not understand basic economics, let alone accounting, President Obama removed all doubt with his speech last night. While pushing for the public option during his speech he came up with this gem:

"I have insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects. But by avoiding some of the overhead that gets eaten up at private companies by profits, excessive administrative costs and executive salaries."

What did he just say???

President Obama and his speech writers actually confuse "profits" with "administrative costs" and "executive salaries," let alone completely misunderstanding what "overhead" is all about. Do you get the feeling that President Obama does not understand what the word "profits" actually means?

Now, we've been told by the MSM over and over again how brilliant the president is. If President Bush had made this gaffe you know it would have been pounced upon by the media for days afterward. But I bet no "mainstream" media outlets will point this out. Plus, you have to take into account that this speech was pored over by staffers and writers time and time again and they still could not get this correct. My thinking is these are words that tested out well for their purposes in some focus groups so they just threw them in, regardless of what the words actually mean.

So President Obama has a problem correctly using the word profits. If I recall correctly, he has a problem with the word
victory too. But according to the media, Bush was dumb as a box of rocks but Obama is brilliant sand sends tingles up their legs.

It's getting scary, folks.

More On England's Economic Problems

I know it sounds like we are jumping on Great Britain today, but the economic principles that they are applying are the exact same policies that the Democrats and their messiah Barry Obama wish to implement here. Now it would seem that if I had all of this empirical data of just what those policies would mean for us I might want to rethink my strategy, but liberals are never one to let facts and past poor performance stand in the way of hoping for change. Is this the change we can survive?

The news that WPP is considering fleeing UK shores to escape ever increasing taxes resulting from Gordon's prolifigacy must signal that business has had enough of Gordon's tax and spend policies. Every week a major business seems to make the move, Ireland is continually welcoming companies keen to halve their tax bill.

And they have even noticed this over at Pajamas Media.

Despite talk of recession in the U.S., even though it has perhaps not occurred yet, most of these individuals are either aiming to move to the U.S., looking into it, or would like to. Because of the favorable exchange rates with the dollar in contrast to weakening economies on the continent, there seems to be little interest in a move to Spain or to France. Of course, Australia gets a look from many.

I look forward to this new British invasion.

Hugo's Dream Becoming a Nightmare

Looks like Hugo Chavez's communist dream is turning into an economic nightmare.

The radical economic policy agenda of the government, which is centred on expanding the state-led development model, will exacerbate deficiencies in the business environment, and Venezuela will remain a challenging place in which to invest. Investment in most sectors is unlikely to thrive against a background of distortionary macroeconomic policy (characterised by price and exchange controls), threats to property and contract rights, unpredictable state intervention and a growing bureaucratic burden. Even in the dominant energy sector, foreign investment will be below potential. The burden of oil investment will fall increasingly on the public sector, but here there are questions over efficiency and technical capacity.

That is all The Economist's fancy way of saying that when a government starts confiscating private property, investment capital scrams because investors move their wealth elsewhere. Inevitably, productivity plummets and then the government has to just print money to make ends meet, resulting in high inflation and economic implosion. Notice in the chart in the link the forecast of 28.2% inflation for 2008 and 29.5% for 2009 with double digits for years to come, and prime rates in the same range.

The implosion of Venezuela's economy due to Chavez's insane policies is not in doubt. It's just a matter of when.

Connecting the Zimbabwe Dots

Zimbabwe's economy is imploding and the socialists running the BBC are finally allowing as how there might be some minor difficulties encountered in repairing the damage done by the communist leadership there. But they still don't quit connect the dots.
The BBC starts out bemoaning the election confusion, then gets to the point:

Meanwhile Africa's worst basket-case economy continues to flounder, without a leader to take stock of what needs to be done.

In terms of statistics, Zimbabwe's plight is pretty much immeasurable.

Figures such as a rate of inflation of more than 100,000% and an unemployment rate said to be in excess of 80% are startling, but also largely meaningless.

Meaningless?

To socialists maybe, but to those who understand economics, they are very important statistics. Then the article continues:

After 28 years under Robert Mugabe, emotive terminology such as utter despair and desperate destitution describe the situation in Zimbabwe better than any maths and statistics can ever do.

This is certainly the case for the 700,000 people who have been robbed of everything, even their homes in urban slums that were razed by Mr Mugabe who had deemed them an embarrassment.

The cause, as well as the solution to all this is actually quite simple. The foundation of any prospering, growing economy is the fundamental right to hold, own and protect private property. The takeover and confiscation by the communist Mugabe to enrich his political friends destroyed any incentive by the productive people in his country to take a risk and produce anything.

Imagine for a minute that I impose a 100% income tax on you today (I can just feel Hillary and Obama supporters drooling at the very thought). I instead confiscate all your assets, income and production and dole it out to my buddies as I see fit. What possible motivation would you have to get up the next day and go to work? Of course, there is no such motivation. In fact, you have every motivation to either leave the country or just sit back and hold your hand out for your share of the largesse like everyone else. Since everybody does this, nobody is producing, and then the government has to just print money to pay for all the handouts. Foreign capital leaves the country to avoid being confiscated. And presto-chango! You have destroyed your economy.

The solution is to reinstitute the right to own private property. Then you can have a free market system and capitalism, with the resulting growth and prosperity.

Even with all this damage to the Zimbabwe economy, the editors at the BBC just can't quite let go of their love for communism/socialism. Get a load of this knee slapper buried in the end of the article:

Yet the underlying fundamentals of Zimbabwe's economy, resource base and even parts of the corporate sector remain reasonably robust.

Excuse me!? Zimbabwe's economy is the extract of a heroin addict's nightmare, including 100,000% inflation, 80% unemployment (and they can't even blame Bush for it), life expectancy of 37 years, and the BBC editors think the underlying fundamentals of their economy is robust. But yet they think the U.S. economy is crumbling.

The BBC, documenting their worship of socialism and communism every day.

Clueless Beeb Laments Record Fees

This is almost too easy. In this item about investment banks making a lot of fee revenue last year, the BBC editors continue to document their own lack of knowledge about basic finance/economics.

They showcase their stupidity in the very first line.

Fees earned by investment banks worldwide hit a record in 2007 for the fifth year running, despite the losses caused by the credit crisis.

Actually, fees generated by originating a credit has no connection to whether or not the loan is subsequently performing or non-performing. Just as the commission a car salesman earns on a sale is not contingent on whether the car turns out later to be a good car or a bad car.

Then they top themselves in the last paragraph.

The credit squeeze has also made it harder for companies to borrow, which could lead to a decline in corporate takeovers and the fees they generate for investment banks.

Actually, with the easing of interest rates and expansion of the money supply by the Federal Reserve and a dropping of interest rates by the Bank of England, it has recently become easier for companies to borrow, not harder. Whether or not companies take advantage of the lower rates is another question, dependent mainly on profitability.

I suggest that the BBC editors stop reading Karl Marx and start reading Adam Smith and Milton Friedman.

TRACTOR PRODUCTION IN UKRAINE UPDATE!

Do you remember the good old days when the rotten Soviet Union was crumbling from within? There used to be regular Pravda communication hailing the latest record-breaking run of factor production! Wheat production regularly exceeded all known targets. Nobody believed it, of course, but the Soviets felt obliged to pretend all was well, even as their people starved and their factories melted down.

Now comes the announcement from EU leaders that their

economies are strong and that the fundamentals are secure. Does ANYONE believe this drivel? The EU economies are a mess, and the underlying problem is that none of them can afford to run the welfare statism that characterises their economic infrastructure. Check out the unemployment rates in France or Germany if you want to assess just how solid those fundamentals really are. Britain is as bad, though, and government manipulation of statistics, just like Soviet manipulation of the statistics, does not alter this reality.

Cross posted on A Tangled Web

Reality Confronts European Union

The al-Goracle cult, otherwise known as the Religion of Environmentalism, has many devotees within the corridors of the European Commission and European Parliament.

That is, until a known eeeeevil – reality – jumped up and bit 'em on the ass.

EU Members Lobby against 'Harmful' Climate Plan
European countries and businesses have criticized a climate change action plan that COMINTERN the European Commission is scheduled to unveil next week. Their concerns about competition and carbon trading could undermine the EU's commitment to confront climate change.

As the European Commission puts the finishing touches on a sweeping climate change policy package to be unveiled on Jan. 23, politicians and business leaders from the EU's richest member states are lobbying to revamp draft policies that they believe could harm them in Europe and abroad.

Among the critics of the bill are France, which wants to protect its nuclear investments, Germany, which is worried about its renewable energy sector, and major European auto and steelmakers, who are concerned that Europe could lose its competitive edge.

But the Commission says it will not be bullied into diluting the climate change package. To back down, Commission President José Manuel Barroso told Reuters, would be an international embarrassment after the EU worked to promote itself as the international leader in addressing climate change. "We knew from the very beginning that transforming Europe into a low-carbon economy is not an easy task," said Barroso. "But this is the moment to be serious, responsible and coherent with our commitment."

In other words, Barroso believes that saving face is more important than the economic health and well-being of European Union member states. Nice to see that the consummate tax tick has his priorities straight.

Barroso was responding to complaints that include a letter from French President Nicolas Sarkozy, in which Sarkozy objected to a policy that would raise the share of energy that Europe derives from renewable sources from 8.5 percent currently to 20 percent by 2020. He said the policy "unnecessarily penalizes the prospects of growth." France wants to have its huge nuclear energy program counted in the mandatory contribution it will be asked to make toward the EU goal, but atomic power, which produces toxic waste, is not considered a form of renewable energy.

Germany and Spain are protesting another proposed policy. Ministers in Berlin and Madrid sent a letter this week to the Commission criticizing a system [that] would encourage companies in Europe to trade renewable energy across borders. They are worried that an EU-wide system would undermine their existing national systems. "This will put a very successful development of renewables at risk, which is not acceptable to our governments," read the letter in part. It was the second time this week that German officials criticized the forthcoming policies, after Bavarian politicians condemned (more...) a proposal to cap the amount of carbon dioxide that new automobiles produce per kilometer they are driven.

In an interview with the German magazine Capital published Tuesday, the EU environment commissioner, Stavros Dimas, denied that a new renewable energy trading system would infringe upon existing "feed-in" systems in Germany and Spain. "Don't worry," said Dimas. "We will ensure that Germany can keep its system without restrictions in (the) future and ... we will construct it in such a way that it doesn't hinder national promotion systems in Germany and other countries -- that's a promise."

A politician making a promise. ROTFLMAO .

Private sector leaders also criticized the forthcoming policy package, saying strict limits on greenhouse gas emissions will hit major industrial polluters unfairly and encourage them to relocate outside of Europe. BusinessEurope, a lobby group that represents most of the Continent's largest companies, said it had learned that the Commission will require industrial polluters to cut emissions to 21 percent below 2005 carbon emission levels by 2020.

EU officials explained that 2005 was chosen because it is the first year in which data includes the impact of the EU's Emissions Trading Scheme; BusinessEurope says it is unfair because it does not take into account efforts to reduce emissions that companies made between 1990 and 2005. In a letter to Commission President Barroso, the group also objected to broader plans to strengthen the continent's carbon trading scheme.

Many of the permits that a company must hold to emit carbon are currently distributed for free, but the Commission is proposing to auction those permits to the highest bidder by 2020. To offset the impact that might have on the competitiveness of a European business, the Commission is considering a carbon tariff (more...) on imports from outside the EU that were not produced within a carbon trading market. Still, BusinessEurope calls the prospect of an auction-based trading scheme "extremely worrying."

The lobbying in Brussels this week is in sharp contrast to the proud tones in which European leaders announced last March their joint agreement to cut carbon dioxide emissions to 20 percent below 1990 levels by 2020 and make major investments in renewable energy and biofuels. As the Commission drafts policies that will make those goals a reality, Europe's richer countries are frustrated that they will be asked to bear the brunt of the collective goal.

EU officials told Reuters this week that the Commission wants to allow the EU's poorest member states to actually increase their emissions, by up to 20 percent above 2005 levels. That would help poor states like Romania and Bulgaria grow their economies -- but could spell trouble for the strong European countries charged with making up the difference.

Via der Spiegel Online

See also Moonbats and Economics.

Also at A Tangled Web.

Joys of the Communist Economic Model

I get some of my heartiest laughs watching Communists trying to manage economies. It now looks like China is going the wishful thinking route on dealing with their inflation problem.

China steps in to curb inflation

China's cabinet says it will temporarily intervene in the market to curb rampant food and fuel price rises.

Retailers and producers will face heavy fines if they increase the price of basic necessities, the government says.

Food prices climbed more than 18% in November, while the price of pork jumped by more than 50%.

*Sigh*

Okay, here's the drill:

Inflation is too many units of currency chasing too few goods; in other words, not enough supply for the demand. So price then escalates to push some demand out of the market and bring things back into equilibrium.

So what you have here is a demand/supply problem, not a "price" problem.

Thinking you can fix this problem by making price increases illegal is just as silly as thinking you can get rid of a fever by making thermometer readings of higher than 98.6 illegal.

What will happen here is supply will drop to near nothing as nobody will want to get fined, and a black market will flourish out the back door.

Go look at Zimbabwe if you don't believe me. Unfortunately, all that will happen here is the Chinese grocery store shelves will soon be barren and prices will skyrocket.

The way to fix this problem is allow price to drive the market, the higher prices will encourage more production, so supply will expand and price will then moderate.

We need to send a copy of Adam Smith's Wealth of Nations to China.

Try and Keep a Straight Face

The geniuses at the BBC love to put their outright stupidity on parade. They're now touting China as coming to save the day for the worldwide economy.

Try to keep a straight face as you read this:

China boom 'cushions world slump'

Global economic growth will slow in 2008 as the credit crunch hits the richest nations, the World Bank says.

But the "resilience" of developing countries will cushion the slowdown, with China still booming, it adds.

Overall, the Bank projects annual world economic growth to slow to 3.3% in 2008, compared with 3.6% in 2007.

Yet it warns that developing country growth, projected at 7.1% this year, could still be derailed by further financial turmoil or over-heating.

I could go on all day about the flaws in logic and grasp of economics in this article, but for the sake of brevity I'll go with the following.

1) Beware of economic data provided by Communist/totalitarian regimes. It tends to be inaccurate to say the least.

2) All we are talking about is a likely slowing of growth around the world. This is not exactly "Buddy can you spare a dime?" time yet.

3) China's economy is much smaller than the U.S. Their GDP is approximately $2.527 trillion or $7,800 per capita. The U.S GDP is $13.675 trillion or $43,444 per capita. This becomes relevant when you read this spin job later in the article.

It expects US growth to slow sharply to 1% in the first half of 2008, but recover quickly by 2009. Overall, the industrialised countries are expected to grow by 2.2% this year, down around 0.5% compared with the previous year.

In contrast, China is expected to grow by more than 10% over the next two years, with India not far behind.

OK, so even taking their numbers at face value, if the U.S. will grow by about 1% in 2008 and China by 5%, run the numbers and you realize that in real dollar terms the U.S. and the worldwide economy will still be better off from the U.S. growth.

China's GDP expanded by 5% is approximately $2.653 trillion or $8,190 per capita. The U.S. GDP expanded by only 1% is still $13.811 trillion or $43,878 per capita. It's like saying that a penny stock going up 5% on the day means more than a $200 stock going up 1%.

Nice to know that the BBC editors are still as dumb as always.

When It Comes to Economics, The BBC Is Even Dumber Than The New York Times

You would think the BBC editors would eventually get tired of advertising their outright stupidity about economics. Their flavor of the moment is to blame everything including bad weather on the U.S. mortgage industry shakeout.

Get a load of this piece on Japan's economy.

Japan downgrades economic growth

Japan's economy grew by less than previously thought in the third quarter, due to slower investment by firms in new factories and equipment.

So, the Japanese economy grew by less than some people had previously thought it would.

Big deal, I know some people who think Elvis is still alive and kicking. But the BBC can't wait to blame the U.S. for this. They get right to the U.S. bashing in the second paragraph.

The official downgrade added to worries that the world's second largest economy could be hurt by a slowdown in the US.

Then just to make sure you did not miss the finger pointed at the U.S., they do it again a few paragraphs later.

With the crisis in the US housing market casting a shadow over the global economy, Japan's exports are at risk of being hit by a slowdown in growth at its major trading partners.

You see, the idiots running the BBC would have you believe that Japan's entire economy is dependent upon the U.S. The fallacy of this of course is they are totally ignoring the domestic economy in Japan itself.

The BBC editors then come dangerously close to sniffing the truth a little later in the story.

Lacklustre growth and lingering deflationary pressures mean that the Bank of Japan is likely to hold off on raising its key interest rate from the current 0.5% until the latter half of 2008.

Your eyes are not tricking you--the Japan "discount rate" is 0.50% and has been for some time. You see, Japan allows its central banking system, their equivalent of the U.S. Federal Reserve Bank system, to be run by politicians rather than non-political experts.

So, the Japanese politicians set the interest rates at outrageously low levels to look like heroes to the public. The problem with this is it sets interest rates so artificially low that money loses it's time value and you screw up your economy.

In economic circles it's called the "liquidity trap" because people don't even bother to put their cash in banks since the interest rate incentive to do so is not there.

Therefore, their monetary policy is pretty much useless and that causes much more damage to the Japanese economy than anything the U.S. mortgage industry is doing.

So the BBC editors either do not understand basic economics or they do and they are not being honest with you.

Shocker: BBC Makes Economic Sense

Here's a flying pig moment. The BBC publishes an article on economics that makes sense and does not blame the United States and George W. Bush for everything.

Bank 'signals' interest rate fall

The Bank of England has warned of a number of risks to the UK economy next year, in comments that analysts have said point to lower interest rates.

In its quarterly Inflation Report, the Bank forecast the economy would slow in 2008 and inflation would accelerate.

However, it added that even if interest rates fell by half a percentage point, it would still hit inflation targets.

Analysts said that this signals that interest rates should dip next year from their current level of 5.75%.

For comparative purposes, the U.S. Fed discount rate was recently lowered to 4.50% and this disparity between the low rates has contributed to the devaluation of the dollar relative to the pound.

Well, that cheaper dollar has made it very hard for the UK to sell goods and services to the U.S. Inflation is also starting to be come a concern in the UK.

But the Bank also expects inflation to rise in the short-term as higher energy prices begin to bite.

As much as I rip the BBC, in all fairness, I must say this is an amazingly well-written article on economics. They must have an editor who put down Das Kapital for a few months and took an extension Econ 101 class.

BBC Blames United States for Slow EU Growth

The BBC shows their economic ignorance and blames the U.S. for projected slower growth in Europe.

Europe 'set for slower growth'

Economic growth across the EU will slow in 2008 because of a weaker US economy and problems in global financial markets, the European Commission says.

Brussels is now forecasting 2.4% growth in the 27-member union in both 2008 and 2009, compared to 2.7% this year.

Later, they focus their ire on the US housing market:

European banks have not been immune to the global credit crisis triggered by the slump in the US housing market.

First, growth of over 2% is a good thing. You need a 2% growth just to keep up with general population growth around the world.

Second, parts of Europe have no population growth or are actually decreasing, so that contributes to the lower growth expectations, which has absolutely nothing to do with the US.

Third, I don't recall the BBC ever giving the US any credit when things are pointing up.

Fourth, European banks were making a lot of their own bad loans too. The United States does not have a monopoly on that score.

Then comes this comment:

In its twice-yearly economic forecast, Brussels said it now expected inflation in the eurozone to remain at about 2% this year, rising slightly to 2.1% next year.

It is forecasting the average oil price will rise from $70.60 a barrel this year to $78.80 in 2008.

With crude trading in the mid $90's as we speak, they must be expecting a 15% to 20% drop in crude oil prices. That would accelerate the economy, not slow it down.

This article is a great example of what little grasp the BBC editors and writers have on economics.

Al-Reuters Rooting for Recession

Here we go with the liberal media trying to create a recession out of the blue.

Just look at this non-story from al-Reuters:

Voters cooling on economic outlook: Reuters poll

WASHINGTON (Reuters) - Most U.S. voters think the economy is in fair shape, at best, and will grow at a slow pace over the next six months, according to a Reuters/Zogby poll released on Wednesday.

Troubles in the housing and subprime mortgage sector have somewhat eroded voter confidence in the economy and this spans across most income groups and political affiliations, according to the national survey of 1,020 likely voters.

So, based on the opinions of 1020 people who may or may not know a thing about economics, Reuters runs a story saying "most U.S. voters think the economy is in fair shape," with a headling saying the economy is cooling.

Hey al-Reuters, "expectations" of a handful of people called over the phone are meaningless in economic analysis.

Morons.