US decline leaves China tipped as next economic superpower while pressure on US bonds is set to affect eurozone crisis When India joined China in criticising America’s chaotic handling of its hefty debts this weekend, describing the challenges facing the White House as “grave”, it was the clearest indicator yet that the old order had been swept away. Until recently the United States was the unassailable economic superpower, and the prospect of the White House being bossed about by the bond markets – let alone by Beijing or New Delhi – was unthinkable. But following a week when an estimated $3tn (£1.8tn) was wiped off the value of world shares, Friday’s downgrade of America’s cherished AAA rating to AA+ by Standard & Poor’s is set to cause more turmoil on global markets and potentially jeopardise Europe’s attempts to solve its own financial crisis. With currency markets, particularly the dollar, expected to come under pressure, and US bond yields almost certain to rise, this could have the knock-on effect of raising borrowing costs in the eurozone at a time when Spanish and Italian bonds in particular have seen yields soar. This could prove to be a tipping point for the transfer of global power from the US to its great rival China, even though the fortunes of Asia and the west are inextricably linked. The boom of the past two decades in the US, the UK and much of Europe came at the expense of an extraordinary growth in borrowing, much of it from the Chinese and other fast-growing Asian economies, which were happy to keep piling up Treasury bills and buying blue-chip companies, so long as the billions of dollars they spent were recycled into cheap consumer goods. At the height of the credit crunch, it seemed that both lenders and borrowers were finally getting their comeuppance, but as the Bank of England governor, Mervyn King, has repeatedly pointed out in the past 12 months, the “global imbalances” that led to the crisis – the vast trade deficits and eye-watering debts – never went away. Gerard Lyons, chief economist at Standard Chartered, blames the turmoil of recent days on a combination of “ineffective policymakers, excitable markets – and a realisation that the recovery is going to be very slow in the west”. David Blanchflower, a former member of the Bank of England’s monetary policy committee, went further: “What we’ve seen is a once-in-100-years financial crisis that will take 20 years to adjust to.” As for the US itself, Alan Greenspan, the former Federal Reserve chairman, said on NBC that the downgrade was having a salutary effect on the public as well as on policymakers. “It gave the sense there is something basically bad going on. And it’s hit the self-esteem of the United States, the psyche.” But there is little glee in China about the west’s travails. Beijing has repeatedly expressed concern about the mounting US debt burden and the reliance of the global economy on the mighty dollar. Now, the gloves are finally off. The official news agency has accused the US of “debt addiction” and insisted that, as its largest creditor, China now “has every right to demand the United States address its structural debt problem and ensure the safety of China’s dollar assets”. The Chinese economist Sun Lijian, in a commentary for the People’s Daily, said: “The biggest victims [of the downgrade] may not be the United States itself, but other countries that have depended on external demand to amass national wealth – be they Asian nations that depend on exporting goods, or nations in Latin America and the Middle East, as well as Russia, that depend on exporting resources.” For decades, the interest rate on American debt has been known as the “risk-free rate”, because a US default was as close to impossible as anyone in financial markets could imagine, and all other bonds were priced relative to America’s. Now that the markets have been forced to think the unthinkable, it is not at all clear what happens next. Erik Britton, of the City consultancy Fathom, says one possibility is that borrowing costs everywhere will rise. “It’s the cascade effect – it’s the chain reaction that we’re concerned about. Do other countries retain the same risk premium relative to the US? If that’s the case, then all bond yields will go up. Everybody’s borrowing costs will go up, and that includes Italy and Spain, where it won’t take much to make their situation unsustainable.” And while the Standard & Poor’s verdict on the US is a humiliating blow, it merely raises the distant fear of a future default, while for Italy and Spain that risk is much more immediate. When the crisis reached Rome, it finally became impossible for Europe’s leaders to write off the turmoil in bond markets as a problem of the “periphery” – little Greece, Ireland and Portugal. As German officials told Der Spiegel this weekend, Italy’s economy simply looks too big to rescue, certainly by the current bailout fund, the European Financial Stability Facility (EFSF). Jean-Claude Trichet, president of the European Central Bank (ECB), has reluctantly ridden to the rescue many times during the crisis; on Monday, bond investors are hoping to see large-scale buying of Italian bonds by the ECB. The eurozone has repeatedly drawn back from the brink over the past three years, but a default by Italy or Spain would pose a threat to the single currency’s existence. Sony Kapoor, of the Brussels-based consultancy Re-Define, said an ECB decision to buy bonds would not be enough; eurozone politicians also needed to revisit their plans for beefing up the EFSF. No one knows what will happen this week, but no one believes it can ever be back to business as usual for the global economy. Financial crisis Global economy US domestic policy Market turmoil China European debt crisis US economy Economic policy US economic growth and recession Heather Stewart Tania Branigan Dominic Rushe guardian.co.uk
Continue reading …With the United States having run out of scorpion anti-venom nearly 10 years ago, the FDA has just approved a Mexican-made treatment for scorpion stings, reports NPR . Although there are about 250 severe scorpion stings a year in the United States—mainly in the “Venom Belt” in the southwest—US…
Continue reading …Standard & Poor’s downgrade of America’s credit rating represents a new factor in America’s creditworthiness—”political insanity,” writes Edmund Andrews in the National Journal . Indeed, Andrews notes that S&P explicitly cited politics in its downgrade: “The political brinksmanship of recent months highlights what we see as America’s governance and policymaking…
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African Union peacekeepers and soldiers hold famine-hit capital, but insurgents insist withdrawal is just a change in tactics Somali government soldiers and African Union (AU) peacekeepers have moved tentatively to secure former rebel-held areas in Mogadishu, a day after al-Shabaab insurgents announced a retreat from the city. Supported by armoured vehicles and tanks, the troops encountered sporadic resistance, and at least once soldier was killed in a gun battle. But reports from Mogadishu suggested that the vast majority of the Islamist fighters had left the city – or gone underground. The retreat by the rebels, who still control most of famine-struck southern Somalia, took many people by surprise. An al-Shabaab spokesman, Sheikh Ali Mohamed Rage, told local radio on Saturday that the move was “a change in tactics” . But analysts have suggested it is a sign of the increased weakness and divisions in the Islamist ranks that stem from rebels’ handling of the famine gripping the country, as well as a shortage of cash. Some hardline leaders have tried to play down the humanitarian crisis in Somalia and refused to admit lifesaving aid organisations, including the World Food Programme. Tens of thousands of Somalis have died this year of hunger-related causes, according to the UN, and 3.7 million people need urgent food aid. Most are in rebel-held areas. The transitional federal government, which has little credibility among Somalis and little to celebrate in recent years, called the insurgents’ withdrawal “a tremendous step forward”. The rebels have controlled most of Mogadishu for several years after emerging from the ashes of a moderate Islamist group that was destroyed by the invading Ethiopian army in late 2006. Following the Ethiopian pullout two years later, only 9,000 AU peacekeepers prevented al-Shabaab from taking over the entire capital – and perhaps the country. The retreat from Mogadishu followed a strong AU offensive over the past fortnight that saw the rebels lose significant ground, including control of Bakara market, a key source of “tax” revenue. But while it is a boost for the government, it does not equal victory over the rebels. The al-Shabaab insurgents proved extremely adept at guerilla warfare during the Ethiopian occupation, and have carried out countless roadside bomb attacks, suicide missions and assassinations. The rebel leaders may have decided to return to this style of conflict, rather than trying to hold ground against the better-armed peacekeepers. Somalia’s prime minister, Abdiweli Mohamed Ali, said the government’s priority was to secure areas abandoned by the rebels in Mogadishu, and assess the needs of the population. Parts of the capital hosting large numbers of people who fled hunger in the countryside were declared famine zones last week. Four other areas in southern Somalia – two of them entire regions – are also experiencing famine conditions, the UN says. Ali said the al-Shabaab pullout would give the international community “the necessary confidence and assurance” to increase the aid effort in Mogadishu. But humanitarian workers are likely to be cautious owing to the weakness of the government as well as the insurgents’ brutally effective track record. The rebel cause has attracted global jihadists who were invited in by some of the top al-Shabaab leaders who hail from the breakaway northern region of Somaliland, rather than southern Somalia where the group is based. It is these al-Qaida-linked leaders that have opposed the international aid effort. But another section of al-Shabaab’s leadership is from southern Somalia, and is much closer to the local people. The rift between the two groups is believed to have widened as the drought turned into a famine. Somalia African Union Famine Xan Rice guardian.co.uk
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Campaigners vow ‘more pressure and more people’ after 300,000-strong demonstration across country Activists behind spiralling protests in Israel plan to build on one of the biggest marches ever seen in the country by piling on “more pressure, more people, more tents and more protests” culminating in a million-strong march in 50 cities next month. An estimated 300,000 people took to the streets on Saturday to press their demands for social justice and lower living costs in the largest demonstrations over social issues ever seen in the country. Despite scepticism that turnout could surpass previous events, almost twice as many people joined marches in Tel Aviv, Jerusalem and other towns and cities. Binyamin Netanyahu, Israel’s prime minister, was forced to respond to the spiralling protests with the establishment of a committee to “listen to the distress” and recommend action. The protests, which began with a handful of tents erected in Tel Aviv, have unleashed a national fury at the government’s failure to respond to the needs and complaints of middle-income Israelis. Tent cities have mushroomed in more than 40 locations across the country as well as daily demonstrations and roadblocks over the cost of housing, childcare, fuel, food and electricity. Despite Israel’s relatively healthy economic growth and low unemployment, wage disparities are big, wealth and corporate power are highly concentrated, food prices have increased almost 13% since 2005 and many people spend 50% of their incomes on rent or mortgages. Up to 250,000 people marched through Tel Aviv to Israel’s military headquarters on Saturday, causing major traffic diversions until the early hours. One sign, in Hebrew and Arabic, read “Egypt is here”. In Jerusalem, up to 30,000 people marched to Netanyahu’s residence, chanting the rallying cry of the past three weeks: “The people demand social justice.” Smaller protests were also held in Kiryat Shmona, Modi’in, Hod HaSharon, Ashkelon, Eilat and Dimona, according to media reports. Stav Shaffir, 26, one of the original tent protesters in Tel Aviv, told the Guardian that “more pressure, more people, more tents and more protests” would follow. “Right now we’re coming together to think about our next steps. There will be more protests – definitely more protests.” A loose alliance of activists behind the protests called for a million-strong march on 3 September. The committee set up by Netanyahu was ordered to report within a month. “It is impossible to ignore the voices coming from the public,” the prime minister said in a lengthy statement. Israel’s economy was strong, but “we know that we must make the internal corrections … social corrections, with sensitivity”. He added: “We will listen to everyone. We will speak with everyone.” However, Netanyahu has so far refused to meet a delegation from the tent protesters. “This is definitely not enough,” said Shaffir. “We have been on the street for almost a month, and there has been no contact at all from Netanyahu. The public thinks the government is out of touch with the people, and people are angry and want to see change.”Shimon Peres, Israel’s president, said the protests were a “testament to the nation’s maturity”. In contrast, the extreme right foreign minister, Avigdor Lieberman, said that cafes in Tel Aviv were “packed to capacity” adding that there was no reason “to be depressed”. The social protests have become the most pressing issue for the Israeli government, with the potential, according to some commentators, to topple Netanyahu’s coalition. Opinion polls have put public support for the protests at around 90%. Protest leaders have insisted that bringing the government down is not their aim. The organisers have striven to keep the movement as inclusive as possible, incorporating left and right, secular and religious, Jews and Arabs. They have avoided publicly making connections between the amount spent on settlements and the military for fear of being branded anti-occupation activists. “It is certainly one of the largest street protests we have experienced in Israel,” said Tamar Hermann, of the Israel Democracy Institute. “But what really makes it different is its heterogeneous nature. Normally protest is homogeneous. Diversity is as important as size.” She said Israel’s economic health was “one of the reasons people feel able to protest. When you are at rock bottom you invest everything in survival. People here are not devastated but discontented.” Avraham Burg, a former speaker of the Israeli parliament, said the protests would define Israeli society as “a collective based either on social solidarity or national territorialism”. Indications that the former was outgunning the latter were “why all the settlers are so upset”, he added. Some observers believe Netanyahu will try to ride out the protests until September, when the Palestinian bid for statehood at the United Nations is likely to dominate the political agenda. The Palestinians, they say, are a familiar foe that Netanyahu feels he can outmanoeuvre whereas the Israeli social justice protesters are an unknown force. Analogies drawn between the Arab spring and the Israeli summer were not completely misplaced, according to Hermann. “Israelis generally want to disassociate themselves from the Middle East, culturally, politically and economically. But obviously they have watched Tahrir Square as well as events in Spain and Athens. “Protest is a phenomenon which often spills over national borders. This fits into a new wave of street protests that we are now seeing all over the world, including the Middle East.” Palestinian demands As Israelis take to the streets to demand social justice, Palestinians are also gearing up to protest next month over their demands for recognition of a Palestinian state by the United Nations. President Mahmoud Abbas has urged “popular resistance” as well as diplomatic moves. “In this coming period, we want mass action, organised and co-ordinated in every place,” he said last month. “This is a chance to raise our voices in front of the world and say we want our rights.” Marwan Barghouti, an iconic figure for Palestinians who is serving five life sentences in an Israeli jail, also called for mass action. “I call on our people in the homeland and in the diaspora to go out in a peaceful, million-man march during the week of voting in the United Nations in September,” he said. Palestinian leaders, backed by the Arab League, intend to ask the UN general assembly to back a Palestinian state when it meets in September. However, full recognition requires the backing of the UN security council, which the US has vowed to veto. The Israeli protests are being given scant attention in the Palestinian media. But, said Mustafa Barghouti, a member of the Palestinian parliament, “we feel sympathetic because they are also demanding social rights. At the same time we hope that they will see that one of the reasons for this crisis is the Israeli occupation policy and military spending. “We hope that this social movement becomes a political movement which demands peace and end to occupation.” Harriet Sherwood Israel Middle East Protest Harriet Sherwood guardian.co.uk
Continue reading …Notorious hacker collectives AntiSec and Anonymous have hacked into 70-some law enforcement websites from around the United States, in what they say is retaliation for last month’s arrests of hackers around the world , reports the AP . The groups managed to snare “a massive amount of confidential information that is sure…
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French minister for overseas territories holds urgent talks in Paris after demonstrations outside Maré airport turn violent The French government has tried to calm tensions on the south Pacific archipelago of New Caledonia after four people died and 23 were injured in clashes during a protest at the high cost of local air travel. Two armed groups clashed on Saturday night outside the airport on Maré, a small island of 6,000 people, one of several that make up France’s exotic “overseas collectivity”. For more than 10 days, several local airports on the islands had been blockaded as protesters complained that the price of local flights had become extortionate. The protest was part of a wider anger at the growing divide between rich and poor. The local airline, Air Caledonie, warned that it was facing bankruptcy because of the demonstrations and that the tourist industry would be badly damaged. A “passengers’ collective” had barricaded Maré airport and blocked entry to a local village. On Saturday night, 300 people from the Ghuama district, whose chief, Nidoish Naisseline, is the airline’s chairman, tried to break up the protest. Violence ensued between the two groups of about 300 people each. Stones were thrown, then shots were fired and four young men were killed. The Agence France-Presse correspondent described people armed with hunting rifles and machetes, on roads lined with burnt-out cars. France’s high commissioner, Albert Dupuy, called it “a nightmare day”. The French Socialist party warned that with endemic unemployment for indigenous locals and a big divide between the rich and poor, New Caledonia was about to tip into an “explosion” of social unrest. The French minister for overseas territories, Marie-Luce Penchard, rushed back from holiday to hold urgent talks in Paris, announcing mediation by religious groups. She said the dispute was not just about air tickets, but also about land ownership on the island. Gendarmes were flown to Maré by helicopter to clear the airport barricades. The French president, Nicolas Sarkozy, is expected to go ahead with his planned visit to New Caledonia in three weeks. His presidency has seen unrest in France’s overseas outposts. In 2009, after a six-week general strike over high prices and social inequality rocked Guadeloupe – the Caribbean island and French “overseas department” – Sarkozy promised a vast programme of aid measures but many feel they have yet to benefit. New Caledonia is an overseas “collectivity” rather than a fully-fledged part of France. A rise in pro-independence feeling among indigenous locals and resistance by some of the locally-born people of European descent has led to political tension. Earlier this year, there were four months of political instability and vacuum as the archipelago struggled to form a government. In the 1980s, violent unrest led France to send in paratroopers. A referendum on independence is expected to be held between 2014 and 2019. South Pacific Airline industry Air transport France Nicolas Sarkozy Angelique Chrisafis guardian.co.uk
Continue reading …Riots rocked London last night and into this morning leaving eight police officers injured as crowds threw rocks, burned buildings and cars, and looted area shops over a police shooting Thursday, reports the BBC . The violence followed peaceful protests around 5pm, when 300 people gathered at a Tottenham police station…
Continue reading …About 45,000 Verizon workers from the landline side of the telecom’s mid-Atlantic and northeast regions went on strike today, the first such walkout in 11 years, reports the Wall Street Journal . Verizon is seeking concessions from its two major unions in the face of declining landline revenues, thanks to…
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Report in the Journal of the Royal Society of Medicine finds health service second only to Ireland for cost-effectiveness The NHS is one of the most cost-effective health systems in the developed world, according to a study (pdf) published in the Journal of the Royal Society of Medicine. The “surprising” findings show the NHS saving more lives for each pound spent as a proportion of national wealth than any other country apart from Ireland over 25 years. Among the 17 countries considered, the United States healthcare system was among the least efficient and effective. Researchers said that this contradicted assertions by the health secretary, Andrew Lansley, that the NHS needed competition and choice to become more efficient. “The government proposals to change the NHS are largely based on the idea that the NHS is less efficient and effective than other countries, especially the US,” said Professor Colin Pritchard, of Bournemouth University, who analysed a quarter of a century’s data from 1980. “The results question why we need a big set of health reform proposals … The system works well. Look at the US and you can see where choice and competition gets you. Pretty dismal results.” The study will be a blow for Lansley, who argues that patients should choose between competing hospital services and GPs. Pritchard’s last academic paper, which argued that surgeons were being distracted from frontline work by “unfunded” targets in the NHS, was used by Lansley to justify government reforms. Using the latest data from the World Health Organisation, the paper shows that although Labour’s tax-and-spend strategy for the NHS saw health spending rise to a record 9.3% of GDP, this was less than Germany with 10.7% or the US with 15%. Not only was the UK cheaper, says the paper, it saved more lives. The NHS reduced the number of adult deaths a million of the population by 3,951 a year – far better than the nearest comparable European countries. France managed 2,779 lives a year and Germany 2,395. This means, the paper says, that dramatic NHS improvements have led to a situation where that there are now 162,000 fewer deaths every year compared with 1980. The paper says the US suffers from a “relatively huge bureaucratic burden needed to monitor the costs, behaviour and risks of customers, as well as the immense legal costs required to control payment”. Looking at elderly patients, the difference was even more stark with the best performers – Ireland, the UK and New Zealand – having health systems that were three times more effective and efficient than the worst – Switzerland, Portugal and the US. Pritchard said that only Ireland’s position today would be significantly different – because its economy has shrunk. “I think Ireland would have slipped back today.” The paper also takes Lansley to task over his claims that “if UK cancer survival rates were at the European average, we know we would save 5,000 extra lives a year.” It says: “In terms of actual cancer mortality rates, rather than the more ambiguous ‘survival’ rates, the UK had better results … which appears to be linked to major additional funds going to cancer care.” Pritchard points out that even Adam Smith, the Scottish economist and father of market-based ideology, thought the state was “probably better” at health and education. “It’s naive to think that Lansley does not want more privatised health service. But there’s no evidence why it be better. There’s a lot to suggest it would be worse.” A Department of Health spokesman said that the paper was “mistaken to think that competition is an end in itself, or will necessarily increase the independent sector’s role in the NHS”. He added: “Under our modernisation plans we are improving choice for patients to drive up the quality of care and improve patient experience … We are investing an extra £12.5bn in the NHS to improve the quality of services and safeguard the NHS for future generations.” ENDS NHS Health policy Liberal-Conservative coalition Health Andrew Lansley Conservatives Randeep Ramesh guardian.co.uk
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