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Showing posts from March, 2009

Missing in action on the trade front

Business Times - 31 Mar 2009




Suffering 'hegemonic fatigue', Washington seems unwilling to pay the economic and political costs of promoting free trade

By LEON HADAR
WASHINGTON CORRESPONDENT

THE leaders of the 20 economies who met in Washington last November made a commitment to resist taking protectionist measures that could end up devastating an already ailing global economy.

But according to the recent World Bank report, most of these governments, including the US and China, have violated that promise by imposing direct and indirect restrictions on imports, raising the spectre of a costly trade war.

As it is, global trade has suffered the sharpest decline in 80 years. Indeed, not a day goes by without new reports about governments around the world making subtle moves (subsidies and bailouts for failing industries) and taking not-so-subtle steps (direct tariffs and taxes on imports) to 'protect' their frail domestic industries from foreign competition.

Hence, the US and…

The buck stops here - or does it?

Business Times - 27 Mar 2009

NEWS ANALYSIS
The buck stops here - or does it?

By LEON HADAR
IN WASHINGTON

AGAINST the backdrop of next week's G-20 summit in London, several emerging economies led by China and Russia have been promoting the idea of halting the use of the US dollar as the main global reserve currency and replacing it with a new one.

This could pose huge economic problems for the Obama administration which is planing to continue paying for the financial bailout and the economic stimulus by printing more dollars and by selling more Treasury bills to foreign private investors and central banks.

In China which is the largest holder of US dollar assets, with American greenbacks making up more than half of its US$2 trillion in foreign reserves, including US Treasury bonds worth about US$750 billion, there is concern over US deficits that could erode the greenback and the value of China's foreign reserves.

China's central bank governor, Zhou Xiaochuan raised the possib…

Is the plan enough to save his job?

Business Times - 25 Mar 2009

NEWS ANALYSIS
Is the plan enough to save his job?

Treasury chief under pressure; his future rests on new plan's success

By LEON HADAR
IN WASHINGTON

AMERICAN and global markets have responded positively to US Treasury Secretary Tim Geithner's much anticipated programme aimed at buying up hundreds of billions of dollars worth of 'toxic' assets currently on the books of US banks.

But will it be enough to save Mr Geithner's own neck? When he first mooted the plan, his wooden delivery and the lack of specifics caused the Dow to fall about 300 points on Feb 10.

The Obama administration's leading economic policymaker has come under more pressure since then over the bonuses that were granted to American International Group (AIG) executives. There have been calls for him to step down.

And although President Barack Obama has reiterated his confidence in Mr Geithner, the threat of a rising populist fury undermining his efforts to resuscitate Wall…

Populist backlash may wreck Wall St rescue

Business Times - 20 Mar 2009

NEWS ANALYSIS
Populist backlash may wreck Wall St rescue

By LEON HADAR
IN WASHINGTON

TRADITIONALLY, Americans have admired the rich too much to resent them. But public anger at the way that Washington has handled the bailout of insurance giant American International Group (AIG) now threatens to smash the ambitious and expensive strategy of the Obama administration to revitalise the ailing financial system.

Bonuses of about US$165 million paid out to executives of AIG, which already received more than US$170 billion in emergency federal aid, have seen lawmakers lining up to score populist points.

'We will take this money back by taxing virtually all of it,' said New York Democratic Senator Charles Schumer who took to the floor on Tuesday. 'So let the recipients of these large and unseemly bonuses be warned: If you don't return it on your own, we'll do it for you.'

And Iowa Republican Senator Charles Grassley who proposed on Monday that A…

The great free-trade debate

Business Times - 17 Mar 2009


The great free-trade debate

A consensus is unravelling in Washington amid a Democratic clash over policy

By LEON HADAR
WASHINGTON CORRESPONDENT

PUNDITS tend to describe the debate over trade policy in the Democratic Party of the United States as an ideological clash between the left-oriented protectionist wing of the party (labour unions; environmentalists; anti-globalisation activists) and its more centrist and reformist pro-free trade forces.

But, in fact, whether a Democrat politician is in favour or against an activist global trade liberalisation agenda has less to do with ideology and more to do with class. It is a classic contest between the party's yuppies and its blue collars.

The yuppies represent the economically mobile and college-educated members of the party: Professionals from the large cities, especially in the East and West Coasts, who in addition to being more liberal on socio-cultural issues, such as abortion and gay rights, were also m…

When will Obama's political bubble burst?

Business Times - 11 Mar 2009


When will Obama's political bubble burst?

New US leader unable to mobilise the Congressional support he needs to bail out Wall St

By LEON HADAR
WASHINGTON CORRESPONDENT

ON the same day that the US government announced the February unemployment rate of 8.1 per cent - the highest in more than 25 years - President Barack Obama was insisting that his US$787 billion economic stimulus plan would help reverse the depressing economic downturn.

On Friday, a few hours after the Labor Department released figures showing the economy shedding 651,000 jobs last month, Mr Obama was addressing a graduation ceremony in Columbus, Ohio for 25 police recruits who had their jobs saved with the help of US$1.2 million from the stimulus package.

'For those who still doubt the wisdom of our recovery plan, I ask them to talk to the teachers who are still able to teach our children because we passed this plan,' Mr Obama said, challenging those on Capitol Hill and Wall Str…

Not all economists are Keynesians

Business Times - 05 Mar 2009


Not all economists are Keynesians

Many economists, including Nobel laureates, disagree with the Obama administration's economic recovery strategy

By LEON HADAR
WASHINGTON CORRESPONDENT

PRESIDENT Barack Obama has insisted that the majority of mainstream American economists support the general premises underlying his economic policy and, in particular, the notion that the federal government should have a central role in stimulating the economy and helping end the recession.

'There is not disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy,' Mr Obama said on the eve of his inauguration in January.

Indeed, the conventional wisdom these days is that, frightened by the recession and the credit crunch that produced it, 'most economists' are now embracing public spending to repair the damage, including many of those economists who have long resisted a significant government role in a market…

Is Obama alienating Wall Street?

Business Times - 05 Mar 2009

NEWS ANALYSIS
Is Obama alienating Wall Street?

And is Wall Street sabotaging the president's policies?

By LEON HADAR
IN WASHINGTON

WALL Street has not given a welcome shout to US President Barack Obama. The Dow Jones Average has dropped almost 1,500 points since Mr Obama's inauguration a little more than a month ago, and nearly 3,000 points since his election on Nov 4.

But Mr Obama seemed to be shrugging off the bearish mood in the markets on Tuesday, urging Americans to look past the decline on Wall Street. 'The stock market is sort of like a tracking poll in politics,' he said. 'You know, it bobs up and down day to day,' he insisted. 'And if you spend all your time worrying about that, then you're probably going to get the long-term strategy wrong.'

Playing the role of the nation's chief investment analyst, the president suggested that Americans should consider buying some bargain stocks. 'Profit-and-earning ratio…

Change that will cost a fortune

Business Times - 03 Mar 2009
Obama will face huge political and legislative obstacles in garnering support for his three dramatic policy proposals

By LEON HADAR
WASHINGTON CORRESPONDENT

A FEW days after the historic 2008 presidential election and in the midst of the worst economic downturn in American history since the Great Depression of the 1930s, Rahm Emanuel was selected by then President-elect Barack Obama as his chief of staff. He explained what would turn out to be the guiding principle of the new Democratic administration: 'You never want a serious crisis to go to waste.'

'What I mean by that is that it's an opportunity to do things you could not do before,' he said.

Mr Emanuel's advice may have sounded a bit Machiavellian. But Mr Obama's top White House aide demonstrated that he was a brilliant student of the history of the American presidency. Indeed, two of the great US presidents in the 20th century - Democrat Franklin Delano Roosevelt (FDR) and …