Obama warns China against 'skirting the rules'

WASHINGTON (AP) -- President Barack Obama warned China Tuesday that it would not be allowed to gain a competitive advantage in world trade by "skirting the rules."

Making an election-year pitch to American workers, and businesses as well, Obama announced Washington has brought a new trade case against Beijing. The goal is to pressure China, a rising Asian economic power, to end its restrictions on exports of key materials used to manufacture hybrid car batteries, flat screen televisions and other high tech-goods.

"If China would simply let the market work on its own, we'd have no objection," Obama said during remarks at the White House. "But their policies currently are preventing that from happening. And they go against the very rules that China agreed to follow."

The U.S., working in conjunction with the European Union and Japan, asked the World Trade Organization Tuesday to facilitate talks with China over its curtailment of exports of what's known as rare earth minerals. Obama cast the fresh action against China as part of a broader push to level the playing field for U.S. companies. Read More

Goldman Sachs exec exposes bank's 'toxic' greed in scathing public resignation letter

A Goldman Sachs exec has dealt a deeply embarrassing blow to the firm by quitting in an open letter in which he lambasts the working environment as 'toxic and destructive'.

Greg Smith, an executive director who has worked at the New York-based investment bank for 12 years, claimed it is more interested in making money for itself than its clients.

In a scathing resignation letter published in the New York Times on Wednesday, he reveals staff have so little respect for clients, they call them 'muppets' and talk of 'ripping eyeballs out'.

'I can honestly say that the environment now is as toxic and destructive as I have ever seen it,' writes Smith, who headed the firm's U.S. equity derivatives business in Europe, the Middle East and Africa.

'To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money.' Read More

Greece: crisis hits tourism, 1,000 hotels put on sale

(ANSAmed) - ATHENS - At one of the most difficult stages yet of the economic crisis engulfing Greece, which is now in its fifth year of recession, the country's hotel sector, once of the world's most flourishing, is weighed down by bleak forecasts, particularly amid negative expectations for next summer.

Around 10% of hoteliers have stated their intention to sell their shares through estate agencies, specialised web sites and investment channels, as Giorgios Tsakiris, the head of the Greek Chamber of Hotels, has explained to the Kathimerini newspaper. This means that around 1,000 hotels in the country, both big and small, are expected to be put up for sale in the near future. Tsakiris also says that the economic crisis and reduced liquidity on the market have aggravated the phenomenon of hoteliers choosing to close rather than to continue the fight for survival, though these factors have made it increasingly difficult to find buyers, even though the average asking price has fallen by 10% in the meantime.

In the central Greek region of Attica, the owners of at least 50 hotels have said that they are looking for a buyer. One of the country's biggest property companies, meanwhile, already has a portfolio of 22 hotels in Attica, of which Athens is the capital, with the total value reaching 290.6 million euros. Read More

Former CIA Officer Michael Scheuer on the Economics of War with Iran

China: Tehran’s Reprieve?

Summary

The latest chapter in the Iranian nuclear saga contains some signs that coordinated unilateral sanctions from the United States and the European Union are actually working. But, will China’s reluctance to jump on board provide the Iranian regime with the trapdoor that it needs to escape the noose and hang onto power?

Analysis

While the latest round of sanctions has still fallen short of its intended goal of forcing Iran to renounce its uranium enrichment activities, it has succeeded in applying tangible economic pressure on the beleaguered regime in Tehran. The rial has lost 60 percent of its value against the dollar since the US and EU implemented their extraordinary sanctions against Iran’s financial industry. Iran’s oil output has also fallen by around 500,000 barrels in the past few months. Yet, Iran can still find buyers for its unrefined petroleum products, and it will continue to do so thanks in large part to the actions of the Chinese government.

Beijing doesn’t support the turning of the economic screw on Iran, and this lack of support is the very reason why sanctions are of the creative unilateral sort and not those that are imposed by the UN Security Council; a body that carries the legitimizing weight of international consensus. Beijing’s rejection of Western-led international pressure on Iran stems from the simple fact that it needs Iranian energy exports. Indeed, China is Iran’s biggest customer. Read More

Income Inequality: It's Hard Out There For the Rich (But Not the Very Rich)

Last week I highlighted a Chicago Fed report that, counterintuitively, found that in the wake of the Great Recession, people in higher income brackets are actually more pessimistic than anyone else about their expected future incomes.

I've been thinking about some logical reasons for this, and one basic one leaps to mind: bonus compensation. If a substantial part of your potential annual income is wrapped up in bonuses, it can vary substantially, particularly in the event of market shocks or contractions.

The same goes for investment income or stock options. In short, the incomes of the wealthy, in particular industries at least, are a lot more variable than that of the merely salaried. They still make a lot more money, but that income can fall by a substantial percentage, which normally isn't the case for salaried employees.

Today I came across a 2009 paper by Northwestern economist Robert Gordon, "Has the Rise in American Inequality Been Exaggerated?" (PDF), and it offers some other possibilities for the pessimism of the wealthy. (Though the very wealthy should come away from it with no reason to worry.)

One journalistic genre that's emerged in the New Gilded Age is profiles of the plaintively wealthy, brief looks into the economically stretched lives of high earners. One that got a lot of attention recently was "Wall Street Bonus Withdrawal Means Trading Aspen for Cheap Chex," a Bloomberg piece by Max Abelson:

Schiff, 46, is facing another kind of jam this year: Paid a lower bonus, he said the $350,000 he earns, enough to put him in the country’s top 1 percent by income, doesn’t cover his family’s private-school tuition, a Kent, Connecticut, summer rental and the upgrade they would like from their 1,200-square- foot Brooklyn duplex.

“I feel stuck,” Schiff said. “The New York that I wanted to have is still just beyond my reach.” Read More

Determined but Delusional Eurocrats Carry On Up The Khyber - Nigel Farage

BRICS members mull future of the US dollar

Russian experts have hailed the decision by BRICS countries to replace the US dollar by own currencies in mutual credit lines.

An agreement to this effect is expected to be signed during a BRICS summit which is due to be held in New Delhi on March 29. Experts say that this agreement will mark an important stage in the development of the organisation which brings together Brazil, Russia, India, China and South Africa.

The proposal to move away from the use of the dollar had come from China, which is currently the world’s largest holder of dollar-denominated assets. Beijing has repeatedly declared its desire to reduce the risks associated with the current economic woes in the United States. With the US’ state debt already exceeding 15 trillion dollars, Beijing’s stance on the matter is understandable and consistent, Moscow-based economics expert Alexander Osin said in an interview with the Voice of Russia aired on Tuesday. Read More

Shanghai Cooperation Organization Trapped in Identity Searches

It is not surprising that these days – as tectonic shifts materialize within the system of international relations, formerly uncontested global authorities like the UN and the OSCE are sinking into serious crises, and the whole architecture of the international law is crumbling - the Shanghai Cooperation Organization (SCO), a regional group whose potential is seldom called into question, is passing through a phase of protracted identity searches that threatens to turn chronic.

While China and Russia, the two SCO heavyweights with their original foreign-policy programs, largely define the organization's integral agenda, the group continues to lack an overarching concept, and divisions persist among the SCO members over the objectives behind their alliance. The multilateral part of the SCO internal mechanics appears particularly fragile, plus the interactions between SCO and other global actors obviously await a series of bold adjustments.

It is clear at the moment that many of the unbridged gaps between SCO members are actually widening as the post-Soviet Central Asia is being ripped apart under conflicting external influences. Neither the political and military, nor the economic potentials of the cooperation in the SCO framework have been fully unlocked so far, and the assessment is fair that bilateral activities such as massive Chinese investments in Tajikistan's infrastructures or the energy cooperation between Russia and Kazakhstan actually constitute the prevalent form of transactions under the nominally multilateral SCO umbrella. Read More

Why The US Needs a Major War

At the moment, we find ourselves in the middle of a turbulent phase of the global evolutionary cycle which commenced in the 1980ies and is projected to end by the middle of the XXI century. In the process, the US is clearly loosing its hyperpower status…

Estimates offered by experts from the Russian Academy of Science show that the current period of severe instabilities should end roughly in 2017-2019 with a crisis. The crisis will not be as deep as those of 2008-2009 or 2011-2012 and will mark the transition to an economy built on a novel technological basis. The economic revival will, in 2016-2020, likely entail serious shifts in the global power balance and serious military-political conflicts involving both the global heavyweights and the developing countries. The epicenters of the conflicts will supposedly be located in the Middle East and the post-Soviet Central Asia.

The century of the US global military-political dominance and economic primacy appears to be nearing completion. The US failed the unipolarity test and, bled by permanent Middle Eastern conflicts, currently lacks the resources retaining the global leadership would take.

Multipolarity implies a much fairer distribution of wealth across the world and a profound transformation of the international institutions such as the UN, the IMF, the World Bank, etc. At the moment the Washington consensus seems irreversibly dead and the global agenda should be topped by the task of building an economy with much lower uncertainty levels, tighter financial regulations, and greater justice in the allocation of revenues and economic benefits. Read More

Joe Biden at $10,000-a-plate dinner: "GOP doesn't get the average person"

Vice President Joe Biden addressed 87 wealthy Democrats last night attending a fundraiser at the home of Sen. John Kerry in Georgetown. As they dined on grass-fed New York strip steaks and white truffle mashed potatos underneath a outdoor tent, Biden criticized Republicans for being out of touch.

“These guys don’t have a sense of the average folks out there,” Biden said according to the pool report, “They don’t know what it means to be middle class.”

87 guests paid a minimum of $10,000-per-couple to attend the dinner. Source

Alderman: Mayor May Be Looking To Install 1,800 Speed Cameras Across City

CHICAGO (CBS) — Armed with the go-ahead from the governor and Illinois General Assembly, Mayor Emanuel plans to move a step closer to installing speed cameras in Chicago – maybe a whole lot of them.

But some aldermen briefed on legislation expected to be introduced this week are demanding more details, CBS 2 Chief Correspondent Jay Levine reports.

Some of the aldermen are worried about where school and park safety stops and where a financial windfall for the city begins – to say nothing about what the speed cameras will be doing “after hours.” Read More

Parking Tickets Issued During Fallen Marine’s Procession Now Voided

CHICAGO (WBBM) - City Hall is apologizing. Parking tickets issued during Friday’s funeral procession for a Marine from Beverly have been voided.

People started expressing their outrage on Facebook soon after the funeral procession. One wrote, “Cash grabbing Chicago at its best.” Another post said, “Talk about disrespect.” Read More

Rage grows over mortgage deal

NEW YORK (CNNMoney) -- As more details emerge about the massive $26 billion foreclosure settlement between the five biggest mortgage lenders and the states' attorneys general, a growing number of borrowers are realizing that the deal will do little, if anything, to help them out.

Proponents of the settlement deal tout that roughly 1 million homeowners who owe more on their homes than their homes are worth are expected to have their mortgage balances lowered through principal reductions and another 750,000 would be able to refinance into loans with lower interest rates.

However, that's only a fraction of the 11 million homeowners who are currently underwater on their homes, according to CoreLogic. And it's also a mere sliver of the 3.5 million people who lost their homes to foreclosure over the past four years. Read More

Venezuelan oil a risky investment for China

BUENOS AIRES — China has poured billions of dollars into Venezuela’s oil sector to expand its claim over the country’s massive oil reserves.

But Beijing is getting relatively little for its investments, and Chinese officials are increasingly frustrated with Venezuelan President Hugo Chavez, according to energy analysts and former managers of the state oil company, Petroleum of Venezuela, or PDVSA as it’s known by its Spanish acronym.

Mr. Chavez, who is battling a life-threatening recurrence of cancer, said his goal is to send 1 million barrels of oil a day to China, which has given Venezuela more than $30 billion in loans and promised billions of dollars more in energy investments by 2016.

PDVSA claims to send 410,000 barrels a day to Chinese markets, the bulk of which is used to pay back the loans. Read More

Germany proposes taxing news aggregates like the Coming Crisis in the latest attempt to control information

European politicians are on the hunt for new sources of revenue as the continent’s fiscal situation worsens. The level of desperation is clear in the latest move from German Chancellor Angela Merkel’s coalition government to tap into the cash reserves of Internet search engine giant Google to bolster that country’s ailing publishing industry.

The second item on the coalition’s list of priorities released last week was a proposal to slap online news aggregators with a tax. “Online commercial vendors, such as search engines and news aggregators, should in the future pay a fee to publishers for the distribution of press products (such as news articles) on the Internet,” the document explains. Any business that links to a news article with a brief excerpt is subject to the scheme.

This action has far more to do with protectionism than protecting intellectual property rights. Websites such as the indispensable Drudge Report, Times 24/7, Real Clear Politics, Digg, Fark and Reddit collect news from sources spread across the Web. These sites are wildly popular because they draw the important stories together in one convenient place, fulfilling a very specific need among a news-hungry public. Read More

This Is The Fed's Worst-Case Doom Scenario For The US Economy

The Fed just announced that the latest round of bank stress tests will come out Thursday at 4:30 PM ET.

As a reminder, this is the doom scenario banks will be stress tested against:

The supervisory stress scenario for CCAR 2012, which was designed in November 2011, depicts a severe recession in the United States, including a peak unemployment rate of 13 percent, a 50 percent drop in equity prices, and a 21 percent decline in housing prices. The supervisory stress scenario is not the Federal Reserve's forecast for the economy, but was designed to represent an outcome that, while unlikely, may occur if the U.S economy were to experience a deep recession at the same time that economic activity in other major economies contracted significantly.

More from the Fed announcement:

The Federal Reserve evaluates institutions' capital plans across a range of criteria, including a stress test that examines whether a firm could make all the capital distributions included in its plan--such as dividends and stock repurchases--while still maintaining capital above the Federal Reserve's standards in a hypothetical supervisory stress scenario. Other considerations for capital distributions include an evaluation of the firms' capital planning processes and plans to meet international capital agreements as new requirements are phased in beginning in 2013. The stress-test results, including projected capital ratios, revenues, and losses in the supervisory stress scenario, will be disclosed for the 19 large bank holding companies that participated. Read More

Should China’s capital be renamed 'Bling-jing'?

Hong Kong, China (CNN) - If you look at China’s annual National People’s Congress, now in session, you might think this country is one of the richest in the world.

The NPC's 75 richest legislators - from a total of 3,000 - had a net worth of more than $90 billion in 2011. To put that in perspective, that’s more than half of Greece’s latest bailout of some $170 billion.

Zong Qinghou is the NPC’s richest member and China’s second-richest man, with a net worth of nearly $10.8 billion in cash and assets. If you’ve been to China, you’ve likely eaten or drunk something his company, Wahaha Group, manufactures.

The firm’s red-and-white distilled water bottles are ubiquitous - sold on the grounds of the Forbidden City in Beijing to the altitudes of the Chinese Himalayas in Tibet.

Along with food and drink, the five richest NPC legislators have shown that China’s automobile and real estate industries are the sectors in which to make billions.

For more perspective on their wealth, compare NPC’s six dozen richest members to U.S. politicians. This group earned more than the net worth of the six hundred top politicians and lawmakers of the United States. Read More

America Is Using Tricks To Hide A Debt Crisis Worse Than Greece

When the federal government guarantees a student loan, that loan is subject to accounting treatment that was established by the 1990 Fair Credit and Reporting Act (FCRA). It should come as no surprise that the FCRA methodology is not “fair” at all.

The Congressional Budget Office (CBO) succinctly described the problem in a new report. (Link):

FCRA Treatment Does Not Give a Comprehensive Accounting of Federal Costs.

In CBO’s view, FCRA-based cost estimates do not provide a full accounting of what federal credit programs actually cost the government because they do not incorporate the full cost of the risk associated with the loans.

A few questions come to mind:

How extensive is this problem?

Is there an alternative to FCRA?

How large is the understatement of risk at the federal level from the loan guaranty programs?

The answer to A is that the problem is enormous. CBO has provided some details: Read More

Bank of America Smacked with Foreclosure Fraud Lawsuits

Although Bank of America (BoA), along with other big banks like Wells Fargo, Citibank, Ally/GMAC and JPMorgan Chase, recently reached a very favorable settlement of potential criminal fraud charges related to their mortgage lending practices, two recently unsealed civil fraud lawsuits against BoA reveal they may not be out of the woods just yet. Such whistleblower suits allow individuals, usually former employees, with knowledge of fraud committed against the federal government to bring suit on its behalf and collect a portion of any damages awarded.

The federal government has until March 16 to decide whether to intervene in these suits on the side of the plaintiffs.

Two such fraud suits filed against Bank of America shine a bright light on abuses in the mortgage industry that led to the 2007 housing crash and continued as late as 2011. In a case filed in July 2011 and unsealed March 7, former BoA subcontractor employee Gregory Mackler alleges that BoA misled borrowers to keep them from participating in the taxpayer subsidized Home Affordable Modification Program (HAMP), because mortgage modifications cost BoA money.

Among the tactics allegedly used were stalling the review of applications by assigning them to employees who were on vacation or who had actually already been fired. Concerned borrowers were also told that their complaints were still being reviewed when in fact they had secretly been labeled as “incomplete. Read More