I must say, this is kinda metal:
The agriculture minister of Latvia has been forced to resign in the wake of growing protests by farmers, while the government faces a no-confidence vote.
Minister Martins Roze announced his resignation even as the cabinet agreed a big rescue package for farmers.
On Tuesday they picketed the agriculture ministry and delivered cows' heads in a coffin.
I'd probably resign after that too. Totally gross, probably NSFW picture here.
On a more serious note, Latvia's government faces a no-confidence vote today over its handling of the economy. Will it be the first government on our "next Iceland" list to fall? Stay tuned.
Italy has taken its fair share of losses in the current economic downturn. However, the damage hasn't been severe enough to elevate it to one of the top five countries that we fear could become the next Iceland. In scanning the reddit comments on our list, I noted one Italian with a hilarious explanation for why Italy hasn't been more affected:
We (Italy) are somewhat not in this mess because our banks did not understand the last 5 years of finance and did not pretend to understand it, so they stayed out. We are now in the spot where stupidity and luck meet.
Photo: AFP PHOTO / JOHN THYS
I pity the poor soul who came up with this headline combo:
"The Magic Mountain: Can Talks in Davos Help Solve the Economic Crisis?"
FABRICE COFFRINI/AFP/Getty Images
Development ideologues beware. NYU economist, aid skeptic, top intellectual, and FP contributor William Easterly has entered the blogosphere. His new blog, Aid Watch, aims to "be brutally honest when aid is not helping the poor, but also praising it when it is." His first post takes on World Bank President Robert Zoellick's call for $6 billion in addtional U.S. foreign aid.
This is troubling:
PARTS of the United Kingdom have become so heavily dependent on government spending that the private sector is generating less than a third of the regional economy, a new analysis has found.
The study of “Soviet Britain” has found the government’s share of output and expenditure has now surged to more than 60% in some areas of England and over 70% elsewhere. [...]
Across the whole of the UK, 49% of the economy will consist of state spending, while in Wales, the figure will be 71.6% – up from 59% in 2004-5. Nowhere in mainland Britain, however, comes close to Northern Ireland, where the state is responsible for 77.6% of spending, despite the supposed resurgence of the economy after the end of the Troubles.
The government now looms larger in the British economy than it did in Hungary and Slovakia in the immediate post-Communist period in the early 1990s.
Back in the U.S.S.R. indeed.
Unfortunately, Saletan's piece should have been called "How not to close the Gaza tunnels." It's really terrible advice -- almost a parody of the worst sort of technocentric thinking that military reformers like H.R. McMaster have been fighting against for decades.
Saletan examines the following nine options:
Seriously, I was waiting for the twist at the end where Saletan says, "See, none of this BS will work, which is why..." But instead, he concludes:
If Israel can't get a deal to block the tunnels with sensors or a barrier, it might have to resort to "statistical" bombing again. That could mean a bombing campaign along the border every three to six months—the length of time it takes diggers to complete new tunnels. An ugly prospect, to be sure. But not as ugly as what's going on right now in Gaza.
What ever happened to basic economics? If people want stuff, and people are willing to supply it at the demanded price -- whether it's illegal drugs, weapons, or televisions -- they will find a way to supply it, and they will take extreme risks if the expected payoff exceeds their expected costs. Full stop. (There's even a book about this phenomenon.)
The super-smart Michael Slackman looked into the smuggling issue in 2007, and he concluded (after actual reporting!) that "to stanch the flow of weapons, Egypt will ultimately have to address the economic and social concerns of the region, and not rely solely on its security forces":
In more than a dozen interviews shortly after Hamas solidified its grip on Gaza, locals said the Palestinian territory was a primary market for goods in a region short of jobs and other economic opportunities. They said, almost without exception, that the business of ferrying weapons was more about profit than ideology. [...]
In the last two years, since Israel withdrew its forces and settlers from Gaza, Egyptian officials said they had increased their policing of the border area, blowing up tunnels and arresting people connected with smuggling.
Israeli officials say that when they still had a presence in Gaza, they tried to foil the tunneling by installing a concrete or iron wall along the border that extended 3 meters, or 10 feet, underground. But the tunnels are typically 6 to 20 meters below ground.
Israel also used sonar and other sensors to hunt for the tunnels, occasionally setting off charges to cause undiscovered tunnels to collapse. They also urged the Egyptians to do more - which they did.
But no matter how much the authorities here tried to crack down on smuggling, people here said, the outlaw culture could never be overcome without economic development. Unemployment in the region is among the highest in Egypt.
While a percentage of the weapons smuggling is a function of solidarity with the Palestinians, people here said, weapons were also just one product that brought income. Many of the Bedouins said they also worked to smuggle people into Israel, often women from Eastern Europe looking to work in the sex industry. They talked of smuggling marijuana and cigarettes, too.
There's a sad history of people who don't understand -- or, for political reasons, pretend not to understand -- why technology won't solve their political, economic, and social problems. Take Robert McNamara, who in 1967 announced plans for a massive, ill-conceived "electronic anti-infiltration barrier" to stop inflitration of men and materiel from North Vietnam. Or take the moronic "virtual fence" that some in the U.S. government concoted to address illegal immigration because they didn't grasp what BusinessWeek's Keith Epstein, with more patience than I can muster, explains here:
The allure of a technology fix is understandable, given what federal agents are up against. Along nearly 2,000 miles of scorching desert, steep canyons, winding rivers, and urban mazes, they routinely strive for the unattainable—to stop the flow of people so desperate for better lives that they will climb, run, swim, tunnel, bribe, and even hide in car undercarriages to get into the U.S. The number of Border Patrol agents has almost doubled since 2000, to 14,900, supplemented now by up to 3,000 National Guard troops. Still, migrants continue to cross. And they'll continue to come, as long as Mexico's per capita income remains one-fifth that of the U.S. and employers in El Norte continue to welcome them.
So, wise guy, you ask, how do you shut down the Gaza tunnels?
My answer: You don't. Or, at least, not until you permit free trade in and out of Gaza, end the Israeli-Palestinian conflict, raise income levels in northern Sinai, and pay Egyptian officials high enough wages such that they don't feel the need to take bribes.
There is no technological solution, so best of luck with the rest of it.
Photo: Abid Katib/Getty Images
For the last several years, two things have helped keep the world informed of goings on inside Zimbabwe: the Internet, and mobile phones. Reports of protests, violence, and cholera have leaked over the borders through text messages and conversations with relatives abroad -- especially in South Africa.
Now, mobile phone companies will start charging customers in dollars in hopes of avoiding the burn from 231 million percent inflation (the country just intoduced a $50 billion note). That means the 94 percent of Zimbabweans who aren't employed will struggle to pay.
And reports will stop leaking out.
The world already struggles to find out what's really going on inside Robert Mugabe's police state. The local media has it rough. As Reporters without Borders put it in their 2008 report, "Since 2002, the daily lot of Zimbabwean journalists has consisted of permanent surveillance, police brutality and injustice." Foreign journalists rarely brave it (or are allowed) inside.
Not helping matters, on Jan. 9, Zimbabwe imposed new fees on all journalists -- between $1,000 and $3,000 for accreditation of local journalists, and $30,000 for foreigners. A temporary foreigner can get in for the bargain price of $1,500. Quite simply, "What it means is that they will no longer be able to report," Human Rights Watch analyst Tiseke Kasambala told me.
Perversly enough in both cases, it is Mugabe who is yet again cashing in. Journalist fees will go straight to the government And the country's reserve bank, says Kasambala, has been buying dollars on the black market. "They're making huge killings on the exchange rate." Add the press to the casualty list.
DESMOND KWANDE/AFP/Getty Images
Subprime lenders, reckless traders and lax regulators have all been blamed for the current financial mess. Then again, maybe it's all Beyoncé's fault.
According to findings by Phil Maymin, professor of finance and risk engineering at New York University, the more regular the beat on Billboard's top singles, the more volatile the American markets. After studying decades of Billboard's Hot 100 hits, Maymin found that songs with low "beat variance" had an inverse correlation with market turbulence. Which is to say, the more regular the song, the crazier the stock market.
And Single Ladies is very regular
I wonder what Maymin's NYU colleague Nouriel Roubini thinks of this. Personally I think that if the predictive power of pop songs were really this strong, Nickelback would have heralded a nuclear apocalypse years ago.
(Belated hat tip: Carolyn)
Photo: Scott Gries/Getty Images
The Year of the Ox starts Jan. 26. An "ox," according to Webster's New World College Dictionary (4th edition), is "esp., a castrated, domesticated bull (Bos taurus), used as a draft animal."
The year of the castrated bull seems appropriate given our expectations for 2009.
But some are still hoping for a virily bullish year in the stock markets. South Korea's Financial Services Commission chairman, Jun Kwang-Woo, second right, adorns a bull with a crown of flowers to celebrate the 2009 opening of the stock market at the Korea Exchange (KRX) in Seoul on Jan. 2.
Meanwhile, the folks at the Tokyo Stock Exchange seem to have the ox theme down. Kimono-clad women and a cuddly, cartoon-like ox celebrate the first day of 2009 trading today, Jan. 5.
For much of late 2007, Belgium looked like it was on the verge of being split in two as Flemish and Wallonian politicians struggled to form a government that would preserve national unity. At one point, erstwhile Prime Minister Yves Leterme even said that there was nothing holding the country together but "the king, the football team, some beers."
Now, Leterme has been forced to step down, along with his entire government, not because of nationalist sentiment, but because of an old-fashioned banking scandal. Leterme and his ministers are accused of applying undue pressure to push through a bargain-basement sale of Belgium's partially-nationalized bank Fortis to the French bank BNP Paribas, at the expense of Belgian workers and shareholders. King Albert is now struggling to find a prime minister who is both untainted by "Fortisgate" and capable of keeping the fragile Flemish-Walloon coalition intact. No easy task.
The financial crisis and government responses seem to be having interesting effects on nationalist sentiment in Europe. In Scotland, nationalist parties saw their cause set way back by the UK government's massive bailouts of Scottish banks, which made the idea of Scottish self-sufficiency look patently ridiculous. In Belgium, it seems like Flemish nationalists could be emboldened by the central government's failure and will likely continue to make the case that the poorer French-speaking Wallonia is a drag on the national economy. This could make keeping the place intact all the more challenging.
Via Japan Probe, a Hilton in Osaka is offering guests a chance to use the yen's rise against the dollar to their advantage. The price in yen "$80 party" package fluctuates daily based on exchange rates. So if you reserve a party, expecting the value of the dollar to stay low, you can get a pretty good deal.
Here's what you get for your money (in Japanese):
This month marks the 30-year anniversary of economic reforms launched by late Chinese leader Deng Xiaoping that have turned China today into one of the most powerful countries in the world. In late 1991, the New York Times reported that Deng told China's Economic Daily:
In the end, convincing those who do not believe in socialism will depend on our nation's development. If we can reach a comfortable standard of living by the end of this century [the 20th], then that will wake them up a bit. And in the next century [the 21th], when we as a socialist country join the middle ranks of the developed nations, that will help to convince them. Most of these people will genuinely see that they were mistaken.
Fast-forward to 2008: China has been doing astoundingly well, but people in developed countries aren't exactly admitting to being mistaken about socialism. Rather, "communist" China has learned how to play the capitalist game -- well.
To see a timeline of China's economic advances during the past three decades, check out FP's latest photo essay, "China's 30 Years of Economic Overdrive."
AFP/Getty Images, China Photos/Getty Images
Ecuador, surely the first of many countries to do so in the months ahead, is defaulting on its debt. And who does President Rafael Correa blame for this parlous state of affairs? The lenders, whom he calls "monsters" whose loans are "obviously immoral and illegitimate."
In any case, here's a possible side effect of Ecuador's default: prices of bananas may go up. Seriously -- Ecuador is literally a banana republic, and agriculture is a business fueled by credit. And after this move by Correa, it's going to be awfully expensive to borrow money in Quito.
UPDATE: Felix Salmon says the default is "idiotic":
In the annals of idiotic political decisions, today's default by Ecuador has to rank pretty high. [...] This debt has already been restructured twice, and there's zero chance that bondholders will agree to it being restructured a third time. They know that Ecuador has the ability to pay, and they don't like being bullied.
Photo: AFP/Getty Images
Political scientist Gustavo Coronel, an oil expert and former member of the Venezuelan congress, believes the plummeting petroleum payouts will seal the fate of Hugo Chávez's Bolivarian dreams, thanks to the Venezuelan leader's habitual failure to invest in any form of state infrastructure.
Speaking at the Andes colloquium organized by the George Washington University and the Strategic Studies Insitute, Coronel explained just how deep mismanagement runs within the state-run oil sector. This threw me for a bit of a loop:
"Under Chávez the company [PDVSA] has lost about 500,000 barrels per day of production capacity, which amounts to a loss of income of about $30 to $50 million a day, depending on the price."Ouch. Today, a barrel of crude petroleum is at a mere $39 on the Venezuelan market, down from soaring highs of roughly $145 earlier in 2008. To Coronel, this reality merely exacerbates the "termites" that have been eating the regime from within.
Having taken these steps, Coronel predicts Chávez
will not only lose a constitutional referendum that would permit indefinite
reelection -- similar to the failed attempt to ratify the country's constitution by popular vote in December 2007 -- but also fizzle well before his current term runs out in 2012.
Whenever he's suffered setbacks in the past, Chávez has always promised to accept the situation 'Por ahora' (For now). Save a petro rally, por ahora might be a while.
Photo: JUAN BARRETO/AFP/Getty Images
A very sad story from the Washington Post's Philip Pan:
[W]hen he heard radio ads two years ago encouraging citizens to invest in the initial public offerings of state-owned companies, Sisoyev lined up to buy shares, first in the oil-and-gas giant Rosneft and a year later in the nation's second-largest bank, VTB.
Sisoyev had suffered in Russia's rocky transition to capitalism, but the "people's IPOs," as they were billed by the Kremlin, seemed different. Then-President Vladimir Putin endorsed the stock offerings, presenting them as a chance for ordinary Russians -- and not just the wealthy -- to own a piece of the booming economy.
Now, as Russia confronts its worst economic crisis in a decade, the value of Sisoyev's shares has plummeted, wiping out most of his life savings. At 65, he is working as a part-time security guard because food prices are climbing faster than his meager pension.[...] "I believed in the state, especially under Putin, so I bought shares," said Sisoyev, a soft-spoken man with white hair and a soldier's posture. "Now I don't believe in anything."
As predicted, Russia's financial crisis is starting to hit main street and it's going to take more than emergency loans to oligarchs to keep the public's trust.
Looking for a safe harbor to park your cash? Invest in Korean ramen. Bloomberg:
[South Korea's] economic woes are helping sales of instant noodles called "ramyeon," which typically cost about 68 cents a pot. Sales rose 38 percent in October compared with the same period last year, according to the 24-hour convenience store chain FamilyMart. Shares of Nong Shim, which makes the nation's best-selling brand of ramyeon, gained 17 percent in the past month.
Sales of cigarettes and condoms are up, too.
Over at Slate, CFR's Michael Levi explains one big reason why the UN climate talks currently under way in Poznan, Poland have hit the skids. The UN climate change regime apportions different levels of responsibility to rich and poor countries, but the way it makes that distinction if very odd:
The United Nations first divvied up the developed and developing world for climate talks in 1992, with the goal of using that split to apportion responsibilities for cutting emissions. But distinctions that once made sense are no longer tenable. Ukraine, for example, is considered rich. In 1992, it was reflexively lumped together with the countries that once comprised the powerful Soviet Union; by 2007, its citizens had fallen to 97th richest in the world by GDP per person. (All wealth figures cited here are from The CIA World Factbook.) At the same time, Singapore (now the sixth-richest nation in the world) was designated as poor. Unless the climate regime overhauls its wealth labels, a country like Singapore could reap the benefits of financial aid, while Ukraine would be burdened with emissions caps. Needless to say, that kind of nonsensical setup won't get you very far in international talks. [...]
The resulting deal had its flaws then. It makes absolutely no sense today. Belarus, for example, is lumped together with the rich countries, despite a GDP per person of about $10,000. As a result, it has an emissions cap like those in place for Europe and Japan. Kuwait, meanwhile, is considered poor. That means the oil-rich emirate is spared any obligations, despite the fact that its residents are about five times wealthier than the Belarussia.
Not surprisingly, the "poor" countries aren't in much of a hurry to change this set-up. Any regulatory system that has Singapore crying poverty is probably in need of reform.
"Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90? All this will do is raise Britain’s debt to a level that will take a whole generation to work off.
"The same people who would never touch deficit spending are now tossing around billions. The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking."
Steinbrück may be forced to hold his nose when German bankers, ministers, and economists meet next week to discuss their own stimulus measures. Chancellor Angela Merkel is said to be moving closer to the British position.
When we put together our list of the worst predictions of 2008, one strong contender was the Economist's assertion from last March that "decoupling is no myth. Indeed, it may yet save the world economy." (It was eventually edged out by the same magazine's early enthusiastic praise for Kenya's election.) Paul Krugman's already skewered the decoupling editorial, which argued that developing economies had become self-sufficient enough that they would be able to weather the decrease in demand for imports from the developed world.
Import demand is projected to decline by 3.4 percent in high-income countries during 2009, while net private debt and equity flows to developing countries are projected to decline from $1 trillion in 2007 to about $530 billion in 2009, or from 7.7 to 3 percent of developing-country GDP.
As a result, investment growth in developing countries is projected to slow dramatically, rising only 3.5 percent in middle-income countries, compared with a 13.2 percent increase in 2007.
I'm hoping I'll be able to dust this report off for next year's worst predictions list but I kind of doubt it. Plus, Daniel Drezner thinks the World Bank is being way too optimistic.
NPR has an interesting piece on China's recent moves to prop up small coastal export businesses who are hurting with the slowdown in demand from the United States this holiday season:
Official statistics show that thousands of factories in Guangdong province have gone bankrupt this year. In the latest flare-up of unrest, laid off toy factory workers protested in Dongguan on Nov. 25, flipping police cars and smashing company offices.
This has Beijing worried. It has decided to protect exports by increasing export tax rebates and halting the three-year-long appreciation of China's currency against the dollar. And local governments in the delta have used billions of dollars to bail out small and medium enterprises.
China's top economic planner, National Development and Reform Commission Director Zhang Ping, defended the bailouts at a recent press conference.
"Helping these companies get through their current difficulties is entirely necessary and appropriate," Zhang said. "Otherwise, if too many factories go bankrupt, it will lead to many workers losing their jobs, and could increase social tensions and unrest."
On the other hand, Marketwatch reports that the country's growing golf sector was not so lucky:
Mission Hills, the self-proclaimed biggest golf club on Earth and recent host of the World Cup of Golf event, is sacking 2,000 employees, or 20% of its staff, according to a recent Bloomberg news report.
Yes, that's right. A golf course had 10,000 employees. At what point could a golf course be "too big to fail"?
(Hat tip: China Digital Times)
Decisions concerning which securities to buy or sell on Russian markets are, for the most part, made abroad. Moreover, the criteria by which these decisions are made have very little connection to the actual state of our economy or Russian companies... This is some kind of ugly thing, absolutely unfair."
Putin went on to say that Russia is in no way planning to "limit the activities of foreign capital in the Russian stock market" but was working on a "comprehensive plan" to build a Russian investor class and make the country less vulnerable to economic downturns.
Yes, Vladimir Vladimirovich, attracting international investment without any risk from international markets certainly would be nice.
Bloomberg reports that the latest prophecy from Jim O'Neill, the Goldman Sachs economist who coined the term "BRIC countries" (Brazil, Russia, India, and China), is that "the BRIC consumer is going to rescue the world." He believes that emerging economies are well-positioned to pick up the slack in consumer demand during this downturn, citing, for instance, the spending power of the Chinese consumer and recent economic stimulus measures by the Chinese government.
This is a pretty bold thing to say. While it's encouraging to see that Chinese retail sales were up 22 percent in October, we've yet to see how China's economic slowdown will flow through to the wallets of Chinese consumer. As I discussed a few weeks ago, it doesn't seem clear that China's economic stimulus plan even seeks to boost consumer demand. Over in Russia, we don't yet have a sense of how plummeting oil prices will affect economic growth as a whole, and, as a consequence, we don't know how consumers will fare. The same uncertainty holds for consumers in Brazil and India, as investors have fled emerging markets for safe havens like the dollar and, in doing so, weakening those economies.
In the long run, the conventional wisdom may hold that two billion-plus people in China and India alone means more than four billion socks to sell, but consumer spending could grow more muted in those parts of the world too in coming months.
Simone Wallmeyer, the face of the global financial crisis, looks like she's in a slightly better mood today:
Stock brokers go about their business at the stock exchange in the central German city of Frankfurt/M. on November 24, 2008. The DAX reacted positively to the US government's promise to guarantee hundreds of billions of dollars of the banking giant Citigroup's debt in a massive new bailout ahead of new global moves to lift the world economy.
Last time we checked in with the reliably buffoonish Russian ultra-nationalist leader Vladimir Zhirinovsky, he was engaging in fisticuffs with his political rivals on live TV. But despite his surly temperment, corruption, and overt racism, Zhirinovsky's might still mean well after all. Check out the personal finance advice he gave in an interview with RIA-Novosti (via Johnson's Russia List):
"I have been thrifty. I am not having my hair cut. My hair has already grown longer than ever. I only shave every other day. I eat very little. I never go out. I never invite anyone over to my place. I don't buy presents for anyone and I am asking people not to buy anything for me. I am not travelling anywhere," he said.
Zhirinovskiy recommended "saving reasonably" and said that this would result in reduced spending. He made several suggestions: "There is no need to buy new clothes. They can be swapped with others. I am prepared to give a couple of suits to someone, several pairs of shoes, a wristwatch. Why go shopping? Turn to each other to get what you would otherwise have to get from a shop."
Zhirinovskiy also said there was no need to spend money on personal hygiene products because "all these are chemical and hazardous". Fewer newspapers should be bought because the same newspaper can be shared "by all next-door neighbours" or perhaps "the entire block", he continued.
"As for Christmas celebrations, there is no need to travel abroad or to go to a restaurant. Stay in Moscow, stay at home or invite yourself over to someone else's place."
Something tells me Zhirinovsky's friends might not be so welcoming when he shows up uninvited to their Christmas party without having used personal hygiene products for several weeks.
Photo: Epsilon/Getty Images
Barack Obama, unfortunately, has a lousy record on ethanol subsidies. But now that he is no longer representing a corn state, perhaps he will listen to his new economic advisor, Larry Summers:
Appropriate steps include reform of misguided ethanol subsidies that distort grain markets to minimal environmental benefit, allowing farm land now being conserved to be planted[.]"
Curious about what's going on in the photograph above? To find out, check out FP's latest photo essay, "Gaza's (Literal) Underground Economy."
Photo: Abid Katib/Getty Images
Bloomberg does the math on what the U.S. federal government has committed so far for various bailout/rescue efforts:
The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago. [...]
The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages.
UPDATE: Bloomberg now saying the correct figure is $7.7 trillion.
The Wall Street Journal has a banner reporting that Tim Geithner will be Barack Obama's Treasury Secretary. And CNN says, "Wall Street rallies on reports that Obama will tap NY Fed President Timothy Geithner as Treasury Secretary. Dow jumps 260 points."
I'll update as the news comes in.
New York Federal Reserve Bank President Timothy J. Geithner is to be nominated as President-elect Barack Obama's Treasury secretary, according to a person close to the transition process.
The Federal Bureau of Investigation began calling Geithner confidants this week, starting a vetting process of getting the economist and Fed veteran in place almost as soon as Mr. Obama is inaugurated the 44th president.
Mr. Obama plans to introduce his entire economic team early next week, hoping to sooth the roiling financial markets and answer rising pressure on the president-elect to become more involved.
Here's more from the WSJ:
Good news for those of you who answered "China" on question 7 of the current FP Quiz: Your instincts are now correct. At the time of publication, U.S. Treasury data still showed that Japan held the most U.S. treasuries of any country. But new figures reveal that China has now taken the top spot. China increased its holdings to $585 billion in September, compared with $541.4 billion in August. Meanwhile, Japan shaved its holdings from a high of $600.7 billion in March of this year down to $571.4 billion in September.
The October figures will be even more interesting, though. Aside from the $585 billion, China was holding some $400 billion in Fannie Mae and Freddie Mac debt. With the acquisition of the two mortgage lenders by Hank Paulson, American Taxpayers, et al., China announced it would decrease its dollar holdings to diversify its foreign reserve portfolio. How much did China help fund the $700 billion TARP program? We'll know soon.
China Photos/Getty Images
It's become a cliché, but I think we can now officially say that the financial crisis has been worse than 9/11 for the United States:
The Commerce Department said Friday that retail sales fell by 2.8 percent last month, surpassing the old mark of a 2.65 percent drop in November 2001 in the wake of the terrorist attacks that year.
Back in October, al Qaeda-linked groups were taking credit for getting the United States into a quagmire that had "exhausted its resources and bankrupted its economy." That's rank economic illiteracy -- America's current woes have a lot more to do with subprime mortgages than overextension abroad. If anything, credit default swaps and collateralized debt obligations have proven to be the true weapons of mass destruction of our age.
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