“Usually it’s the rich country lending to the poor. This time, it’s the poor country lending to the rich.” — Niall Ferguson
Over the past 30 years, there has been a significant redirection of global capital flows. One of these capital flows has been the flows out of the wealthy but mostly energy resource poor OECD countries towards the energy producing states largely in the Middle East but also in Latin America and more recently Africa. The other major new capital flow is from the OECD in general but significantly more from the United States towards China. The Chinese, it turns out, have also been on a shopping spree. They have been buying, well, us. This year China surpassed Japan as our largest lender. China now holds over 10% of the US dollar denominated debt, a little more than a trillion dollars.
From the New York Times comes a must read article on China’s rise and our fall:
In March 2005, a low-key Princeton economist who had become a Federal Reserve governor coined a novel theory to explain the growing tendency of Americans to borrow from foreigners, particularly the Chinese, to finance their heavy spending.
The problem, he said, was not that Americans spend too much, but that foreigners save too much. The Chinese have piled up so much excess savings that they lend money to the United States at low rates, underwriting American consumption.
This colossal credit cycle could not last forever, he said. But in a global economy, the transfer of Chinese money to America was a market phenomenon that would take years, even a decade, to work itself out. For now, he said, “we probably have little choice except to be patient.”
Today, the dependence of the United States on Chinese money looks less benign. And the economist who proposed the theory, Ben S. Bernanke, is dealing with the consequences, having been promoted to chairman of the Fed in 2006, as these cross-border money flows were reaching stratospheric levels.
In the past decade, China has invested upward of $1 trillion, mostly earnings from manufacturing exports, into American government bonds and government-backed mortgage debt. That has lowered interest rates and helped fuel a historic consumption binge and housing bubble in the United States.
China, some economists say, lulled American consumers, and their leaders, into complacency about their spendthrift ways.
Bucking the trend in the collapse of world commodity prices, cocoa prices, the key ingredient in chocolate, have risen 70% in British pound denominated trade this year. It’s a supply problem it seems. The Côte d’Ivoire produces 40% of the world’s supply and its production has been disrupted by a series of factors from bad weather to political instability. More from Financial Times:
The International Cocoa Organisation said in its latest monthly report that cocoa bean arrivals until the end of November at ports in Ivory Coast, which provides almost 40 per cent of the world’s supplies, were the lowest in years.
“Only 251,000 tonnes of beans are estimated to have reached the local ports during the first two months of the current season, a level around 40 per cent below average for the four preceding seasons,” it said.
The problem has continued in December – the traditional peak of the harvesting season – because of the impact of cold weather and heavy rains earlier this year, the so-called black pod disease, reduced use of fertiliser because of high prices and a spate of strikes among farmers and customs personnel, traders said. They added that cocoa supplies from Ivory Coast’s west African neighbour Ghana, the second largest producer, were also lower than last season.
As a result, Fortis bank warned that the market faces its third seasonal deficit in a row, further depleting global stocks, which are already at a 20-year low. Inventories are at 39 per cent of global consumption, down from 54 per cent in 2005-06.
In London, Euronext.Liffe cocoa for delivery in May, the market benchmark, on Tuesday jumped to £1,820 a tonne, the highest since October 1985, and 4 per cent higher on the day. New York cocoa futures, denominated in dollars, have risen almost 30 per cent in the past year.
Fortis, nevertheless, said the market was overbought, warning that traders were “fully discounting that, on the production side, everything that can go wrong . . .will indeed go wrong”, without paying attention to lower demand because of the impact of the economic crisis.
Although cocoa consumption has been in the past resilient to economic downturns, traders forecast a drop next year, particularly in the US and Europe.
The military coup by junior officers in the West African nation of Guinea has succeeded with politicians of the old regime of Lansana Conté, who died earlier this week at age 74, surrendering to coup leaders. President Lansana Conté ruled Guinea for 24 years in an authoritarian manner though he held elections in recent years, these elections are not considered by the international community to have be free and credible.
Though the new leaders originally promised free and fair elections in sixty days, they have backed off that promise now speaking more of a prolonged period of national reconstruction. The junior officers have named Moussa Dadis Camara, an Army Capitan previously in charge of Guinea’s food supply the new President. The population, at least in Conakry, is calling Capitan Camara “Obama Junior”.
Christians from all over the world flock to what is believed to be the birthplace of Jesus, in Bethlehem in the West Bank. But with all the Gaza crossings shut by Israel, Christian families there have to apply for permission to leave first.
Al Jazeera’s Sherine Tadros visited one of the many families not allowed to make the pilgrimage.
Holman W. Jenkins Jr. is a member of the editorial board of The Wall Street Journal and yesterday he tried to spread some holiday cheer amongst his readership by pronouncing the coming decade a “lost” one arguing that bad times don’t produce good policy.
Policy is always bad to a degree, but long periods of prosperity tend to be self-reinforcing since powerful interests are born with the means and motive to preserve the status quo. That status quo may really be a contributor to prosperity, such as regulatory restraint and moderate tax rates. That status quo may in some respects be ill-advised, such as excessive subsidy to housing debt.
But once prosperity blows up, the quasi-virtuous policy circle becomes an unvirtuous one as new interest groups come to the fore to exploit an appetite, previously weak, to impose their costly or vindictive wish lists. And even well-meaning policy gets twisted and rendered incoherent.
The first sentence tells you all you need to know about Holman Jenkins and conservative ideolgoues, policy is always bad to a degree. Government is inherently evil or at best inept in the conservative world view. Well, it is when you staff it with sycophants that profess to hate government and yet run up the size of government and its obligations in the trillions of dollars. (more…)
In addition to food and medical aid shortages, Somalia’s lepers also face abuse and stigmatisation. Mohammed Adow reports from the village of Faragurow, home to Somalia’s leper community.
Leprosy, also known as Hansen’s disease, is a chronic bacterial disease of the skin and nerves in the hands and feet and, in some cases, the lining of the nose. The disease once common is considered rare even in the developing world. In the United States, there are about 3,000 people with leprosy with about 150 new cases per year mostly among a poor and migrant community.
Although researchers do not clearly understand how leprosy is transmitted, they do know that it is a slow, chronic disease that attacks the peripheral nervous system and motor skills often leading to disability and disfigurement. According to the Health Resources Service Administration’s National Hansen’s Disease Program, the onset of infection and symptoms can take three to 10 years, making it difficult for researchers to find the origin of where or how people acquire the disease. As the disease progresses, patients lose their sense of touch in their fingers and toes leaving them open to repeated burns and cuts which then get infected. The effects of repeated damage will initiate bone absorption and motor nerve deterioration causing fingers to shorten and curve, resulting in a claw-like appearance. Although leprosy can be fully treated with medicine when diagnosed in early stages, once the disease has advanced nerve damage cannot be reversed.
I am a descedent on my maternal grandfather’s side of Jean de Matheron, a French doctor who in the 1760s left the comforts of his native Alps for the wilds of Nueva Granada to found a leper colony.
2008 will remembered for many things in Colombia, the successes against the FARC, the rescue of Ingrid Betancourt and other hostages, the DMG ponzi scheme, and not least the rise of a national indigenous movement for the first time in country’s history. While President Uribe has made great strides in pacifying the nation, the areas where Colombia’s indigenous people live remain greatly troubled and marginalized. It is also not clear to me as a Colombia that the military has not exceeded its authoriity in quelling disturbances.
As much I have supported President Uribe, I will not under any conditions support a third term for Alvaro Uribe for the Constitutional period 2010-2014. It is time for someone else to have a go at running Colombia.
Monica Villamizar has more on the Nasa indigenous group that’s mobilized thousands.
These four presentations taped at the ASPO-USA 2008 conference. Morey Wolfson shows a stunning Google Earth presentation of oil’s planetary transportation Choke Points, primarily in the Middle East.
Jeff Vail discusses how our energy future is not controlled solely by what’s possible economically, technologically and geologically but, equally importantly, geopolitically. He notes we will increasingly produce less because of geopolitical problems–as in Nigeria, Iraq, and elsewhere.
Editor Tom Whipple discusses two significant publications available free on the ASPO-USA.com website and through email subscription: daily Peak Oil News and the weekly Peak Oil Review. He describes how oil scarcity is already being felt in island nations and other less-developed countries.
Connecticut State Legislator Terry Backer provides sound advice on how to get a peak oil resolution through a legislative body: through someone experienced in getting legislation introduced, and by speaking the language of legislators. He succeeded in his state by framing peak oil within economic issues and government’s responsibilities to the people of his state.
DVDs of the entire conference can be ordered through ASPO-USA at ASPO 2008 Conference.