Two Years Later - China's empty city of Ordos

Despite high inflation levels, China's economy is the world's second largest.
And as it continues to grow, so too do the building projects.
Investors see them as a safe bet to place their money.

Al Jazeera's Melissa Chan has this report from Ordos, a wealthy coal-mining town in Inner Mongolia, originally designed to house one million people, yet hardly anyone lives there.

China's empty city of Ordos

EGYPT REVOLT - Protest of Thousands in Cairo Turns Violent

CAIRO — A demonstration that brought tens of thousands to this city’s central Tahrir Square turned violent on Friday, when thousands of people — led by a heavy contingent of soccer fans — tore down a protective wall around the Israeli Embassy, while others defaced the headquarters of the Egyptian Interior Ministry.

About 200 people were injured in clashes with the police at the Israeli Embassy and 31 were injured near the Interior Ministry, the Ministry of Health said late Friday night. Protesters scaled the walls of the Israeli Embassy to tear down its flag, broke into offices and tossed binders of documents into the streets.

Mustafa el Sayed, 28, said he had been among about 20 protesters who broke into the embassy. He showed a reporter video from a cellphone, of protesters rummaging through papers and ransacking an office, and he said they had briefly beaten up an Israeli employee they found inside, before Egyptian soldiers stopped them. The soldiers removed the protesters from the building, he said, but let them go free.

By 11:30 p.m., about 50 trucks had arrived with Egyptian riot police officers, who filled the surrounding streets with tear gas. Witnesses said that protesters had set a kiosk on fire in front of a security building near the embassy, and that the police had fired rubber bullets to disperse the crowd from both buildings. But at 3 a.m. Saturday, thousands of protesters were still battling thousands of riot police officers. Demonstrators threw rocks and gasoline bombs at the officers, sometimes forcing them to retreat, and the police fired back with tear gas. To celebrate an advance, protesters set off the flares that they typically use to cheer at soccer matches.

Egyptian airport officials said early Saturday that the Israeli ambassador was waiting for a military plane to leave the country, The Associated Press reported.

United States officials said Defense Minister Ehud Barak of Israel had called Defense Secretary Leon Panetta, who in turn asked the Egyptian military to try to restore order at the embassy.

In addition, a fire broke out in the basement of the Interior Ministry, but it appeared to have been started from the inside and not by the protesters surrounding the building. The fire was in a room believed to store criminal records.

The scale of the protests and the damage inflicted represented a departure from the previously peaceful character of the demonstrations staged periodically in Tahrir Square since the revolution in January and February.

Organizers of Friday’s demonstrations had said they would call for a list of familiar liberal goals, like retribution against former President Hosni Mubarak and an end to military trials of civilians. But thousands of people marched off from the square to express their anger over disparate recent events, including a recent dispute along the border with Israel and a brawl between soccer fans and the police at a match on Tuesday.

Thousands of hard-core soccer fans — known here as ultras — were for the first time a conspicuous presence in the protests and a dominant force in the violence. They led the attacks on the Interior Ministry and the security building near the Israeli Embassy, and they kept up the fight outside the embassy long after others had gone home. At the Interior Ministry, political activists tried to form human barriers to protect the building, urging protesters to retreat to the square and chanting, “Peacefully, peacefully.”

“Those who love Egypt should not destroy it!” they chanted.

The embassy, which has been the site of several previous demonstrations after the Israeli armed forces accidentally killed at least three Egyptian officers while chasing Palestinian militants near the border last month, was an early target on Friday. In response to almost daily protests since the shootings, the Egyptian authorities had built a concrete wall surrounding the embassy, and by early afternoon thousands of protesters, some equipped with hammers, were marching toward the building to try to tear down the wall.

Continue reading - NY Times - Protest of Thousands in Cairo Turns Violent

Lagarde Says Policy Makers Should ‘Act Boldly’ to Support Global Recovery

International Monetary Fund Managing Director Christine Lagarde said governments and policy makers in developed economies must take action to support the recovery as the risk of recession outweighs the threat from inflation.

“Countries must act now and act boldly to steer their economies through this dangerous new phase of the recovery,” Lagarde said in a speech at the Chatham House foreign-affairs research group in London today. Monetary policy in advanced economies “should remain highly accommodative,” she said.

Central bankers and finance ministers from the Group of Seven nations convene in Marseille, France, today as they face calls to boost growth amid growing threats from Europe’s debt crisis and a slowing global recovery. G-7 members are fighting on multiple fronts to prevent the slowdown from turning into a slump, with many benchmark interest rates at or near record lows and government debt levels at unprecedented highs.

While “policy makers do still have options to support the recovery,” the scope for action “is considerably narrower than when the crisis first erupted,” Lagarde said. “Policy makers should stand ready, as needed, to take more action to support the recovery -- including through unconventional measures.”

Growth Concerns

The Organization for Economic Cooperation and Development slashed its growth forecasts for the U.S. and Japan yesterday and said central banks around the world should be ready to ease monetary policy if economies weaken further. Underscoring growth concerns, the European Central Bank and Bank of England held their key interest rates the same day, and Federal Reserve Chairman Ben S. Bernanke said U.S. policy makers will discuss tools they could use to boost the recovery this month.

“Downside risks have increased” and “the global rebalancing of demand needed for sustainable global growth has stalled,” Lagarde said. “Weak growth and weak balance sheets of governments, financial institutions and households are feeding negatively on each other. If growth continues to lose momentum, balance-sheet problems will worsen, fiscal sustainability will be threatened, and the scope for policies to salvage the recovery will disappear.”

A measure of banks’ reluctance to lend to each other in Europe this week rose to the highest in almost 2 1/2 years and about $5 trillion has been wiped off global equity markets since the start of July as debt fears rippled around the world.

‘Liquidity Crisis’

“We must not underestimate the risks of a further spread of economic weakness or even a debilitating liquidity crisis,” Lagarde said. “That is why action is needed urgently so banks can return to the business of financing economic activity.”

The IMF head said U.S. President Barack Obama’s proposed $447 billion employment plan announced yesterday was “welcome” as it will “focus on supporting growth and job creation in the short term.” Still, “it remains critical for the U.S. to clarify its medium-term plan to put public debt on a more sustainable path.”

Lagarde said many of the countries that share the euro “need more fiscal action and more clarity about the availability of sovereign financing.” It is “essential” that euro-region leaders implement an agreement reached on July 21 to try to resolve their sovereign-debt crisis “as soon as possible,” she said.

While “strong fiscal consolidation is essential” to restoring sustainability in the U.K. government’s finances and the policy stance is “appropriate,” the Bank of England has “room for additional easing if the outlook does not improve soon,” the IMF head said.

Continue reading - Bloomberg - Lagarde Says Policy Makers Should ‘Act Boldly’ to Support Global Recovery

On the Verge of a Double Dip Recession

If history is a guide, the odds that the American economy is falling into a double-dip recession have risen sharply in recent weeks and may even have reached 50 percent.

Economies have a strong self-reinforcing nature. When people are optimistic, they spend, which begets hiring and then more spending. When people are anxious, they pull back, which leads to a cycle of hiring freezes and further anxiety that often lasts for months.

The United States appears to have entered some version of the vicious cycle. Most ominously, job growth has slowed to a pace that typically signals the start of a recession.

Over the last 50 years, every time that job growth has been as meager as it has been over the last four months, the economy has been headed toward recession, in a recession or in the immediate aftermath of one. From early 2010 through this spring, by contrast, employment was growing fast enough to make the economy look as if it were in a recovery, albeit a modest one.

“The chances that we are in something that is going to feel like a recession are close to 100 percent,” said Joshua Shapiro of MFR Inc. in New York, who has diagnosed the economy more accurately than many other forecasters lately. “Whether we reach the technical definition” — which is determined by a committee of academic economists and based on gross domestic product, employment and other factors — “I think is probably close to 50-50.”

A double dip would present obvious political problems for President Obama, whose approval ratings have already fallen below 50 percent and who is scheduled to give a speech to Congress on Thursday outlining a new jobs plan. A weak economy also could threaten incumbents of both parties in Congress, whose approval rating has hovered around 15 percent in recent polls.

More immediately, the main significance of the recent slowdown is that the economy may not merely be going through a weak phase that will soon pass, as many policy makers hope. Instead, history seems to suggest that the situation will probably get worse before it gets better.

In a recent research paper, Jeremy J. Nalewaik, a Federal Reserve economist, described this concept as “stall speed”: once the economy slows markedly, it often continues to do so. (He did not make a forecast.) In the other two severe downturns of the last 80 years — in the 1930s and the early 1980s — the economy suffered just such a stall and fell into a second recession not long after the first.

Today, Europe’s troubles continue to weigh on banks and financial markets. Consumers remain indebted, and the housing market remains depressed. State and local governments continue to cut jobs, aggravating the problems in the private sector. Congress is unlikely to pass a major jobs bill.

Continue reading - NY Times - On the Verge of a Double Dip Recession

BREAKING: Rick Perry and Ron Paul get intense during Republican presidential debate

Rick Perry makes a finger-wagging point to Ron Paul during an ad break in the Republican presidential debate

There appears to be little love lost between the governor of Texas, Rick Perry, and the longtime Texas representative Ron Paul.

As these photos show, during an ad break in the middle of the Republican presidential debate, Perry appears to have given Paul a piece of his mind, with the Texas governor above making a forcible gesture to Paul while gripping his wrist.



Before Wednesday night's debate, Paul's campaign launched a series of attacks on Perry's political career, including a hard-hitting TV ad, and followed with some snippy comments by Paul during the debate itself.



Several photographers captured the scene on stage at the Ronald Reagan Library – and of course there's no way of knowing what was being discussed. But given Paul's recent attacks, I'm guessing it wasn't about the chances of the Texas A&M football team this season.



What's strange about of all of this is that in previous debates, Ron Paul has been content to do his own thing, extolling his brand of libertarianism and staying out of the dogfight. That included a savage attack by Rudy Guiliani in 2007. But something has changed that has drawn Paul's ire by Perry compared with the obviously more moderate Mitt Romney.

Continue reading - Rick Perry and Ron Paul get intense during Republican presidential debate

R.Perry v. R. Paul - Simi Valley Debate 9-7-11

GOP Presidential Debate

Ron Paul Highlights in 9/7/2011 Presidential Debate


Full GOP Debate, Reagan Library 09/07/2011


POLL: Who do you think won the Republican debate at the Reagan library?

Bonus:

Ron Paul Supporters at the Reagan Library GOP Debate

Stop dithering. Only full integration can save Europe

After many months of muddling through – but not getting at the systemic roots of the economic, fiscal and financial crisis – Europe is at the tipping point. If it continues any longer with the status quo of dithering instead of decisiveness, the eurozone will break up and its national economies will weaken. Only by moving forward towards full integration – now – can Europe save itself.

So far, as the former Spanish prime minister Felipe González has put it, Europe's leaders have been "acting as fireman", putting out one fire after the next but not putting in place a system to prevent the next outbreak. Extend and pretend; pray and delay; kick the can down the street. These are not real and stable solutions but futile Band-Aids. Along with persistent partisan gridlock and the clear slippage of the recovery in the US, Europe's crisis of governance is dragging down the entire global economy. Stall speed is yielding to contraction and double-dip risk.

It is by now clear that short-term financial stability in Europe can only be purchased with a credible long-term strategy to complete a political and fiscal union. The incoming head of the European Central Bank, Mario Draghi, has rightly argued that Europe urgently needs to "make a quantum step up in economic and political integration". How do we get from here to there?

Clear steps, some outlined this week by the Council for the Future of Europe, include the following.

In the short-term further market contagion needs to be avoided. Rapid implementation of July's decision to allow the established stabilisation mechanisms to intervene is of critical importance. In addition, the size of these mechanisms must be expanded to avoid a self-fulfilling run on Italian and Spanish debt while their economic policies take time to restore market confidence. Thus, by 2012 – not 2013, as previously planned – these mechanisms should be transformed into a permanent, fully fledged European fund.

Moreover, the eurozone must practically ensure banks are properly capitalised, including through private sector participation. The markets, rightly or wrongly, believe that the capital needs of some banks are larger than the stress tests suggested. Action to restore credibility is necessary.

It is now clear that a monetary union without some form of fiscal federalism and co-ordinated economic policy will not work. Nation-states will need to share certain aspects of sovereignty with a central European entity that would have the capacity to source revenue at the federal level in order to provide European-wide public goods. Furthermore, eurobonds should be created with control mechanisms to avoid large fiscal deficits in any given country.

The stability and growth pact has proven insufficient. Not only Greece, but the central powers of Europe – Germany and France – have ignored its limits in the past. To protect the public from irresponsible policies by any government, and to give comfort to Germany and other core countries that a fiscal union won't turn out to be a transfer union that puts at risk their own credit rating, the eurozone requires an effective control system. While standards must be strict, the diversity of conditions across the eurozone requires flexibility.

Liquidity support via a fund is sometimes warranted, but situations of clear insolvency should not be addressed with bailouts. Mechanisms for orderly debt resolution must be established for both public and private liabilities if lasting and unmanageable insolvencies arise. Greece, which is clearly insolvent, will soon engage in an orderly restructure of its debt via an exchange offer. The same mechanism can be applied to other nations.

Additionally, in pursuing the necessary fiscal austerity and structural reforms, we must be careful not to undermine any fragile recovery in the short run. We can't wait years to restore growth, because debt sustainability depends on growth, and because the social and political backlash against austerity may undermine reforms if stagnation persists. Adequate macro-economic policies must be employed to avoid this, including monetary easing by the European Central Bank, a weaker euro to restore competitiveness, and fiscal stimulus in the core countries to compensate for the fiscal drag deriving from austerity in the periphery.

We should also recognise that austerity is necessary but not sufficient to restore growth. To compete in the globalised world, Europe needs to implement an ambitious agenda for growth and employment to boost competitiveness and long-term productivity. Such a growth strategy should include use of existing EU funds to finance infrastructure spending and stimulate job creation in the periphery, as well as programmes to enhance research and development, professional skills and higher education. Without growth, the temptation for economic nationalism will arise.

One of Europe's key challenges will be a readjustment of the social compact. A social safety net is necessary to allow for labour flexibility when workers need to change jobs and industries over their working lives. But it must face the reality of a fiscal squeeze brought on by the demographic shift to ageing societies.

Finally, beyond these more technical steps, the greatest stumbling block to the assured success of Europe is the lack of legitimacy of its institutions. Only stronger institutions can save Europe, but their strength can be enhanced only through greater popular support. Yet that support is being undermined daily by their present ineffectiveness.

In this sense, the crisis in Europe today is above all political. Further political integration and union can only be built hand in hand, step by step, through a broad and deep engagement of the public. The democratic deficit deriving from the perception that important decisions are taken by unelected Eurocrats in Brussels needs to be filled by political reforms that empower further the European parliament, and by appropriate forms of democratic oversight of legislative and executive decisions.

In short, the greatest task of European leadership today is to re-sell the European idea. They need to remind the public that the absence of war, the freedom of mobility and the rising prosperity they have taken for granted since the end of the cold war has been due to the path toward unity and away from the nationalist demons of the past. To change course now is to put all of that at risk. That is why more European integration, not less, is the only solution.

Continue reading - Roubini: Stop dithering. Only full integration can save Europe

Trichet: Threats to Euro Region Have Worsened

European Central Bank President Jean-Claude Trichet said threats to the euro region have worsened and inflation risks have eased, giving officials the option to take further action should the debt crisis worsen.

The economy faces “particularly high uncertainty and intensified downside risks,” Trichet said at a press conference in Frankfurt today after the ECB left its benchmark rate at 1.5 percent. While monetary policy is still “accommodative,” financing conditions have worsened in parts of the euro region and the ECB stands ready to pump more cash into markets should that be required, he said.

The yield on German 10-year bunds fell to a record as some investors speculate the ECB could cut interest rates or open up more emergency credit lines for banks. The spreading debt crisis is sapping confidence in Europe’s financial institutions, driving up market borrowing costs and forced the ECB to widen its bond purchase program to Italy and Spain.

The ECB also cut its growth forecasts for this year and next and abandoned its warning about looming inflation threats.

“The situation has deteriorated so much that they should throw the kitchen sink at it,” said Julian Callow, chief European economist at Barclays Capital in London. The ECB could cut rates, offer banks unlimited liquidity for up at a year or deploy a combination of those measures, he said. Today’s comments “went further in a ‘dovish’ direction that we had expected.”

Spreading Crisis

Since the July rate increase, the debt crisis has spread to Italy and Spain, the region’s third and fourth-largest economies. Fears of a renewed global recession also caused stocks to tumble around the world and forced Japan and Switzerland to intervene to stop their currencies appreciating as investors seek havens.

Other central banks are refocusing on supporting growth. Yesterday the Bank of Canada said there is a “diminished” need for it to raise interest rates, Sweden’s Riksbank abandoned a planned increase and the Reserve Bank of Australia signaled it is prepared to keep rates on hold.

Bank of England

The Bank of England will be forced to add stimulus within months, Citigroup Inc. and Goldman Sachs Group Inc. say. The U.K. central bank today kept its key rate at a record low of 0.5 percent and left its bond-purchase program at 200 million pounds ($320 billion).

With Deutsche Bank AG Chief Executive Officer Josef Ackermann saying conditions are reminiscent of those at the depths of the global credit crisis in 2008, Trichet signaled the ECB is prepared to deploy more measures to help cash-strapped banks.

“We stand ready to provide liquidity as we have done in the past, taking into account the need for the banking sector,” he said.

Continue reading - Bloomberg - Trichet: Threats to Euro Region Have Worsened

A world without borders makes economic sense

Allowing workers to change location significantly enriches the world economy. So why do we erect barriers to human mobility?

What is the biggest single drag on the beleaguered global economy? Opponents of globalisation might point to the current crisis, which shrank the world economy by about 5%. Proponents of globalisation might point to the remaining barriers to international flows of goods and capital, which also serve to shrink the world economy by approximately 5%. That sounds like a lot.

But the truly big fish are swimming elsewhere. The world impoverishes itself much more through blocking international migration than any other single class of international policy. A modest relaxation of barriers to human mobility between countries would bring more global economic prosperity than the total elimination of all remaining policy barriers to goods trade - every tariff, every quota - plus the elimination of every last restriction on the free movement of capital.

I document that remarkable fact in a new research paper. Large numbers of people wish to move permanently to another country – more than 40% of adults in the poorest quarter of nations. But most of them are either ineligible for any form of legal movement or face waiting lists of a decade or more. Those giant walls are a human creation, but cause more than just human harm: they hobble the global economy, costing the world roughly half its potential economic product.

The reason migration packs such economic punch is both simple and mysterious: a worker's economic productivity depends much more on location than skill. A taxi driver in Ethiopia's capital, no matter how talented and industrious, cannot earn more than a few thousand dollars a year. The same person doing the same job in New York City can easily earn $35,000 a year. The reason people will pay him that much is that his driving adds more than $35,000 of value to the New York economy, more value than his actions can add to the Ethiopian economy.

This has puzzled economists since Adam Smith in the 18th century. It is related to international differences in legal systems and geographic traits, and to pure proximity to other high-productivity workers. But regardless of the reason, the fact remains that simply changing a worker's location can massively enrich the world economy. And stopping such movement massively impoverishes it.

Stopping movement particularly impoverishes people born, through no choice of their own, in countries with little economic opportunity. The large majority of Haitians to emerge from destitution did so by leaving Haiti, not by anything they or any development agency did within the country. A low-skill male Cambodian can earn a living standard six times higher in the US than in Cambodia, for similar work. No act within Cambodia can reliably and quickly create so much opportunity for the industrious poor. And the benefits need not be limited to a tiny handful. In the late 19th century, roughly one third of Sweden's labour force permanently emigrated to opportunity; today, about half of Guyana has left Guyana.

How can the benefits of this - the world's greatest arbitrage opportunity - be reaped? There are numerous clear and sound proposals for more economically sensible migration policy. These include Lant Pritchett's proposals for bilateral guest-worker agreements, the ideas of Pia Orrenius and Madeline Zavodny for raising permanent economic visa allocations, and the proposal by Jesús Fernández-Huertas and Hillel Rapoport for tradable immigration quotas. I suggest using migration policy as one tool to assist people in poor countries struck by natural disaster. Each approach has advantages and disadvantages, but they have in common a drive to generate triple-wins for migrants, destination countries and origin countries, taking advantage of what Pritchett calls "the cliff at the border".

Many people fear that even a minor increase in international migration will wreck their own economies and societies. Those fears deserve a hearing. They are old fears, of the kind that filled US newspapers a century ago. The US population subsequently quadrupled, largely through immigration to already-settled areas. Today, even in crisis, America is the richest country in the world. History, too, deserves a hearing.

Of course, history is often the brooding and ignored stepchild of policy debate. Political constraints may make it impossible in the short-term to realise the gains from greater geographic worker mobility, just as political constraints blocked other forms of worker mobility in the past. But that can change. All the economic and social arguments against immigrant entry to the workforce could be - and were - deployed decades ago against female entry to the workforce. ("But men built those companies! Why should we allow women to work when there are qualified, unemployed men? Why should a man pay taxes for a woman's unemployment insurance? Will female employees assimilate and act just like men as we all wish? And what harm will be wrought in the homes they abandon?")

Now these arguments sound worse than ridiculous. Society decides who is or is not a member of the relevant club and, beyond the short-term, that decision can change massively. Though our fears will likely continue to impoverish us for some time, they need not do so forever.

Continue reading - A world without borders makes economic sense

Keynesian vs Austrian Debate: Government Spending Can Play an Important Role in Boosting Economic Growth

The great debate between Keynesians and Austrians enters the digital age with the Mises Academy's first ever online formal debate, between economists Karl Smith (Assistant Professor of Public Economics and Government at the University of North Carolina at Chapel Hill) and Robert P. Murphy (Adjunct Scholar at the Ludwig von Mises Institute).

Debate: Government Spending Can Play an Important Role in Boosting Economic Growth

The Zeitgeist Movement: LA Townhall August 2011

The Zeitgeist Movement: LA Townhall | Aug 28th '11 Part 1 of 3


The Zeitgeist Movement: LA Townhall | Aug 28th '11 Part 2 of 3


Bonus:

Peter Joseph on LifeBoat Hour w/ Michael C Ruppert | 9/4/11

In Euro Zone, Banking Fear Feeds on Itself

Remember the collapse of Lehman Brothers? Europeans certainly do.

As Europe struggles to contain its government debt crisis, the greatest fear is that one of the Continent’s major banks may fail, setting off a financial panic like the one sparked by Lehman’s bankruptcy in September 2008.

European policy makers, determined to avoid such a catastrophe, are prepared to use hundreds of billions of euros of bailout money to prevent any major bank from failing.

But questions continue to mount about the ability of Europe’s banks to ride out the crisis, as some are having a harder time securing loans needed for daily operations.

American financial institutions, seeking to inoculate themselves from the growing risks, are increasingly wary of making new short-term loans in some cases and are pulling back from doing business with their European counterparts — moves that could exacerbate the funding problems of European banks.

Similar withdrawals, on a much larger scale, forced Lehman into bankruptcy, as banks, hedge funds and others took steps to shield their own interests even though it helped set in motion the broader market crisis.

Turmoil in Europe could quickly spread across the Atlantic because of the intertwined nature of the global financial system. In addition, it could further damage the already struggling economies elsewhere.

“This crisis has the potential to be a lot worse than Lehman Brothers,” said George Soros, the hedge fund investor, citing the lack of an authoritative pan-European body to handle a banking crisis of this severity. “That is why the problem is so serious. You need a crisis to create the political will for Europe to create such an authority, but there is still no understanding as to what the authority will do.”

The growing nervousness was reflected in financial markets Tuesday, with stocks in the United States and Europe falling 1 percent and European bank stocks falling 5 percent or more after steep drops in recent weeks.

European bank shares are now at their lowest point since March 2009, when the global banking system was still shaky following Lehman’s collapse.

Continue reading - NY Times - In Euro Zone, Banking Fear Feeds on Itself

Roubini: Slowdown Brings Forward New Crisis

Nouriel Roubini, co-founder and chairman of Roubini Global Economics LLC, said the current slowdown in the world economy has brought forward the timing of a new financial crisis.

“I thought a few months ago that the perfect storm would be 2013,” Roubini said in an interview in London today. “But now, the economic weakness in the U.S., euro zone and the U.K. is front loaded. So we’re going to double dip earlier. The climax of it could be 2013, or it could be already earlier. It depends on what policy tools are available.”

Three years after the collapse of Lehman Brothers Holdings Inc., financial shares in Europe are under assault and the cost of insuring bank debt is at records as the global recovery falters and the euro-region crisis weighs on the economy. There’s a 60 percent probability that most advanced economies will fall into a recession, while authorities are running out of options to provide emergency support, said Roubini, also a professor at New York University’s Stern School of Business.

“You need to restore economic growth, not five years from now, you need to restore it today,” Roubini said. “In the short term, we need to do massive stimulus, otherwise there’s going to be another Great Depression. Things are getting worse and the big difference between now and a few years ago is that this time around we’re running out of policy bullets.”

The economist said another financial crisis “is already manifesting itself” in developed economies.

Cash Holdings

Roubini said if he had large amounts of money to invest, he would “mostly keep it in cash,” especially in dollars, as the U.S. currency tends to strengthen during financial crises. He said he would also favor government bonds of countries with small budget deficits and low public debt, such as Canada and Australia, and avoid stocks and commodities.

“If we see a nasty global recession, then risky assets, starting with equities, are going to hurt and going to hurt big time,” Roubini said.

Roubini predicted a bubble in U.S. housing prices before the market peaked in 2006. His forecasts haven’t all been accurate. When the Standard & Poor’s 500 Index fell to a 12-year low on March 9, 2009, he said it probably would drop to 600 or lower by the end of that year. Instead, the U.S. equity benchmark gained 65 percent for the rest of 2009.

Continue reading - Bloomberg - Roubini: Slowdown Brings Forward New Crisis

ITALY REVOLT - Italian Workers Strike Against Austerity Measures

ROME — Thousands of workers took to the streets in Italy on Tuesday in a general strike to protest a package of ever-changing austerity measures required by the European Central Bank and now up for debate in the Italian Senate.

The eight-hour strike shut down transport and businesses nationwide. It was called by the C.G.I.L. union, which represents 2 million public and private sector workers, in opposition to a 45.5 billion-euro austerity package of tax hikes and spending cuts proposed by the Italian government last month to reduce Italy’s budget deficit by 2013.

The measures were required by the European Central Bank in exchange for buying Italian debt to help keep the country’s borrowing costs from rising out of control. But the measures have come under near-daily revision, as Prime Minister Silvio Berlusconi struggles to satisfy objections from within his governing coalition and from the center-left opposition.

The latest incarnation, which comes up for a vote in the Senate later this week, would change Italian labor law to permit Italian to bypass national labor contracts, making it easier to hire and fire workers.

In a statement on Tuesday, Mr. Berlusconi’s office said the bill would also raise VAT tax to 21 percent from 20 percent; adding an additional “solidarity tax” of 3 percent on Italians who earn more than 500,000 euros annually; and increasing the retirement age for women in the private sector starting in 2014.

The Northern League, the most powerful party in Mr. Berlusconi’s coalition, had been vehemently opposed to raising the retirement age for women, since in Italy public day care is scarce and grandmothers routinely serve as child care providers.

On Tuesday, the government said it planned to call a confidence vote on the measures in the Senate, where Mr. Berlusconi has a significant majority.

Addressing a crowd of an estimated 70,000 people in Rome on Tuesday, Susanna Camusso, the leader of C.G.I.L., called the change to the labor law “unjust” and threatened more strike actions if it weren’t removed.

“If Parliament doesn’t strike this from the bill, they have to know that we will use every path and initiative possible so that this shameful measure is removed,” she told an estimated 70,000 supporters outside the Colosseum on Tuesday.

Pierluigi Bersani, the leader of the center-left opposition, criticized the measures. “This package should be strengthened and made more equitable,” he said. “It’s useless to pass it quickly if it’s not done well. Otherwise we will end up having a new austerity package every week.”

After dropping a proposed 1.8 billion euros in cuts to regional governments, the new austerity bill proposes stepping up efforts to crack down on tax evasion, which Finance Minister Giulio Tremonti estimates will bring in billions in evaded taxes.

In recent days, Mr. Berlusconi has come under intense European pressure to pass the measures, which are seen as vital to the strength of the euro.

On Monday, Mario Draghi, the outgoing Bank of Italy president and incoming president of the European Central Bank, became the latest European leader to pressure Mr. Berlusconi to approve the measures swiftly.

He said that Italy should “not take it for granted” that the European Central Bank would continue buying Italian debt.

But the measures are not popular with many Italians, who are feeling increasingly squeezed. As he walked around Rome’s Piazza Navona, Pasquale Nappo, 47, a public employee in the Rome Province, wore a butcher’s apron covered in fake blood to protest what he called the “social butchery” of the austerity measures.

“The politicians don’t seem to understand and haven’t for years that they need to give people answers,” said Mr. Nappo, who said that three of his four children were unemployed. “They don’t understand that if I earn 1,300 euros a month, I can’t pay a rent of 1,200 euros, which is what it costs to live in Rome.”

Continue reading - NY Times - Italian Workers Strike Against Austerity Measures

Italians march against austerity measures

Ron Paul: Unwavering Consistency, Unparalleled Foresight

Ron Paul: Unwavering Consistency, Unparalleled Foresight