As the pace of the world economic crisis heats up, we bring you developments starting close to home, then take a trip to China before heading to Europe for the latest round of the Continental Debacle, then come back home through Asia.
Child poverty rates skyrocket in Oakland
The folks of Occupy Oakland are clearly on the right track. As wealth works its way up the class ladder, those at the bottom are being left ever-further behind.
From Aaron Glantz of the Bay Citizen:
Nearly three of every ten children in Oakland is living in poverty, a more than 50 percent increase from just three years ago, according to data the U.S. Census Bureau released Tuesday.
In the Bay Area, the city has the highest percentage of children living in poverty.
The Census found Oakland’s school-aged children were particularly hard-hit by the recession, a development that educators say could have long-term impacts on their academic success.
The rise in the percentage of children in poverty comes as more middle class families flee Oakland for better schools and safer neighborhoods on the other side of the Caldecott Tunnel.
The number of school-aged children living in Oakland declined significantly over the past decade, the census shows — from approximately 80,000 a decade ago to fewer than 60,000 in 2010, with 46,000 attending Oakland’s public schools.
Crisis sends children to the free school lunch line
The rising child poverty in Oakland is part of a larger trend, with growing numbers of America’s young being forced to resort to public assistance at a time when governments are drastically scaling back on social support.
From Sam Dillon of the New York Times:
Millions of American schoolchildren are receiving free or low-cost meals for the first time as their parents, many once solidly middle class, have lost jobs or homes during the economic crisis, qualifying their families for the decades-old safety-net program.
The number of students receiving subsidized lunches rose to 21 million last school year from 18 million in 2006-7, a 17 percent increase, according to an analysis by The New York Times of data from the Department of Agriculture, which administers the meals program. Eleven states, including Florida, Nevada, New Jersey and Tennessee, had four-year increases of 25 percent or more, huge shifts in a vast program long characterized by incremental growth.
The Agriculture Department has not yet released data for September and October.
“These are very large increases and a direct reflection of the hardships American families are facing,” said Benjamin Senauer, a University of Minnesota economist who studies the meals program, adding that the surge had happened so quickly “that people like myself who do research are struggling to keep up with it.”
More tax hikes proposed for California
Gov Jerry Brown once compared his political style to paddling a canoe: First you wow on the left, then on the right.
And his ;latest proposal for new tax increases is a classic example, including both an income tax for the rich as well as a boost in that most regressive of levies, the sales tax.
From Michael J. Mishak and Nicholas Riccardi of the Los Angeles Times:
In the latest proposed fix for California’s fiscal crisis, Gov. Jerry Brown is expected to announce a multibillion-dollar tax initiative in the coming days, asking voters to raise levies on upper-income earners and increase the state’s sales tax by half a cent.
The levies would expire at the end of 2016, said sources with direct knowledge of the plan. The governor’s office has been fine-tuning the tax measure for weeks with its labor allies. It hopes to file language with the attorney general’s office as early as Friday so it can start gathering the signatures needed to place the measure on the November 2012 ballot.
After the state enacted an austere state budget this year, the nonpartisan Legislative Analyst’s Office said California is likely to be $3.7 billion short of balancing its books in the current fiscal year. That probably will trigger a new round of reductions that could mean a shorter school year in some districts and millions of dollars slashed from public universities, child-care programs and services for the disabled. Even then, California could face a $13-billion shortfall in the next fiscal year, the analyst said.
Brown’s plan, developed in a series of closed-door meetings between his senior staff, labor leaders and representatives of Democratic legislative leaders, would add an extra 1% tax on individual income above $250,000 a year. Individuals making between $300,000 and $500,000 would be taxed an additional 1.5% for that income. And those making more than $500,000 would see an additional 2% hike.
Those hikes, coupled with the sales tax increase, could raise about $7 billion.
And while we’re on the topic of wealth
Consider these sobering facts, stated with precision by Floyd Norris of the New York Times:
In the eight decades before the recent recession, there was never a period when as much as 9 percent of American gross domestic product went to companies in the form of after-tax profits. Now the figure is over 10 percent.
During the same period, there never was a quarter when wage and salary income amounted to less than 45 percent of the economy. Now the figure is below 44 percent.
For companies, these are boom times. For workers, the opposite is true.
The government’s first estimate of corporate profits in the third quarter was released two days before Thanksgiving, at the same time it revised the rate of G.D.P. growth in the quarter down to an annual rate of 2.0 percent.
The report showed that effective tax rates, both corporate and personal, are well below where they were during most of the post-World War II era.
Another warning sign from China
There’s no contesting the act that China has staged a remarkable rise into the ranks of the world’s industrial nations, and could reach the top spot in three years.
But much of the output of those Chinese factories requires spending-ready consumers in the West, and with Western economies in the crapper, there’s less demand for Chinese products, and the overheated Chinese economy has been cooling off, with the government keeping tight reins on the money supply.
But that’s about to change.
From Keith Bradsher of the New York Times:
Faced with an economy that appears to be slowing faster than economists expected even a month ago, the Chinese government on Wednesday evening unexpectedly reversed its year-long move toward tighter monetary policy and took an important step to encourage banks to resume lending.
The central bank said Wednesday that commercial banks would be allowed to keep a slightly lower percentage of their deposits as reserves at the central bank. The change, which will take effect on Monday, means that commercial banks will have more money available to lend, which could help to rekindle economic growth and a slumping real estate market.
Real estate developers, small businesses and other borrowers have been complaining strenuously in recent weeks of weakening sales and scarce credit. Prices have dropped up to 28 percent for new apartments in some Chinese cities this autumn, real estate brokers have been laying off thousands of agents as transactions have dried up, and export orders have slumped.
The Chinese announcement came after the Shanghai stock market had slumped 3.3 percent on Wednesday, its worst one-day loss in four months, on worries that the government might not act.
More from Marc Faber, the investment analyst known as “Dr. Doom,” who offers this take on China at his blog:
In China, if the economy slows down meaningfully or if there is a crash, it will have a huge impact on the demand from China for raw materials, for commodities. It will impact Australia, Africa, the Middle-East and Latin America…
I’m sure the (Chinese) economy is softer than official statistics would suggest and probably the government will start to print money at some point. So maybe stocks will rebound here because of money printing, but again, it won’t help the economy….
There’s a huge capital flight [from China], there’s no question about this.
Major moves afoot in European governance
Having staged bankster coups in both Greece and Italy, the structure of the European Union itself is the next target of the monied class. That’s the price demanded for more money, which inevitably is to be tied to more of those job-killing, public commons-stripping austerity programs.
From Dagmar Breitenbach of Deutsche Welle:
Mario Draghi, the new head of the European Central Bank (ECB), said Thursday that the bank was ready to take stronger action to help resolve Europe’s debt crisis, if political leaders agree next week on tighter budget controls in the 17-nation eurozone.
“What I believe our economic and monetary union needs is a new fiscal compact – a fundamental restatement of the fiscal rules together with the mutual fiscal commitments that euro area governments have made,” Draghi told the European Parliament in Brussels.
“A new fiscal compact is definitely the most important element to start restoring credibility. Other elements might follow, but the sequencing matters,” he added.
Jack Ewing and David Jolly of the New York Times add more:
Mr. Draghi stopped well short of offering a European version of the huge securities purchases that the Federal Reserve has used to try to stimulate the U.S. economy.
But he seemed to be saying that the E.C.B. would use its virtually unlimited financial resources to keep financial markets at bay, if government leaders did their part by addressing the structural flaws that allowed the debt problems of Greece to mutate into a threat to the global economy.
“What I believe our economic and monetary union needs is a new fiscal compact,” Mr. Draghi told the European Parliament in Brussels. “It is time to adapt the euro area design with a set of institutions, rules and processes that is commensurate with the requirements of monetary union.”
And Sarkozy calls for a new EU treaty
While Draghi’s the money man, the French President was to be architect of a restructured European Union.
This comes, of course, after he just finished restructuring the African Union by murderously deposing the Libyan leader who had played an instrumental role in creating the union.
From Ian Traynor and Nicholas Watt of The Guardian:
President Nicolas Sarkozy has called for a new European treaty to save the single currency and to revive a European Union from fragmenting in its worst ever crisis.
While conceding that Europe’s debt crisis and the collapse of confidence in the currency meant France had to surrender some of its sovereignty under a new punitive regime of fiscal discipline, Sarkozy’s focus appeared to be on a new deal enabling the leaders of the 17 eurozone countries to strike political bargains among themselves.
Eurozone governments would need to forfeit their rights of veto in policy-making, he said, under a new system of eurogroup qualified majority voting.
Sarkozy failed to flesh out his ideas but his initiative appeared to run counter to Berlin’s plans for a much more rigorous monetary union in which participating governments would surrender ultimate control of tax and spending policies to a centralised EU body armed with intrusive powers of scrutiny and dealing out automatic penalties to fiscal sinners.
“The reform of Europe is not a march towards supra-nationality,” Sarkozy said in a swipe at handing powers to Brussels. “The integration of Europe will go the inter-governmental way because Europe needs to make strategic political choices.”
And the reason they’re all worried. . .
The world’s financial markets have been swinging wildly of late, up hundreds on some vaguely good news one day, down hundreds the next when bad news abounds.
Sometimes good news and bound surface on the same day.
From Anthony Faiola and Neil Irwin of the Washington Post:
Euphoria over a move by the world’s major central banks to keep Europe’s debt crisis from choking off global lending was tempered Thursday amid renewed signs of the region’s slowing growth and reminders that European woes have no easy fix.
New data showed manufacturing activity in the 17 nations that share the euro was weaker than expected, falling to a 28-month low in November and fueling fears that the region “is in clear danger of sliding back into recession,” said Howard Archer, economic analyst with IHS Global Insight.
Separately, manufacturing data in China, the world’s second largest economy, showed its worst performance since 2009.
Markets in Europe were also weighted down by rumors floating on trading floors that before Wednesday’s move, a major European bank was on the verge of collapse. There was speculation that the unnamed bank’s possible failure prompted the aggressive measure by central banks.
One major Euro economy is still flying
That would be Germany, which has just set a new financial record, topping the one trillion export sales mark for the first time ever.
From Sabine Kinkartz of Deutsche Welle:
Even in the boom year of 2008, exports didn’t reach this year’s highs of 1.07 trillion euros ($1.43 billion). In return, some 919 billion euros of goods were imported into the country. That may be more than in recent years, but the bottom line is an export surplus of some 156 billion euros. Foreign countries regularly criticize this excess.
Many say Germany won its advantage at the cost of its European neighbors. Anton Börner is president of the BGA, the Federation of German Wholesale, Foreign Trade and Services, a leading organization for the sector in Germany. He thinks such reproaches are ridiculous.
“Such surpluses were never and are not a German policy aim,” Börner told Deutsche Welle. He added it was important to make European partners understand this was not a “German” way of doing things. “Market laws apply in all countries and were not made up by Germany.”
It’s the European Union countries which remain the most important trading partners for German businesses. Around 60 percent of German exports are sold to neighboring European countries.
It’s therefore no surprise that the current eurozone debt crisis is of major concern to the Federation of German Wholesale, Foreign Trade and Services. If European state finances get out of control, then most of the economic predictions for the coming year would be rendered worthless, Börner warns.
“However, the fact that we profit hugely from the euro does not mean that we should let ourselves into any political horse-trading simply to save the single currency,” he said.
And some bad news for France
While the France and Germany have been the dominant mainland European economies, and their leaders referred to jointly as Merkozy, the French economy looks ever creakier.
From Radio France Internationale:
The French construction industry is set to be hard hit in 2012 with the expected loss of 35,000 jobs because of the European economic crisis and government austerity measures, the French Building Federation, FFB, has warned.
The job losses will reverse gains made this year as the industry recovered with 9,000 jobs created after shedding 20,000 jobs in 2010, said FFB head Didier Ridoret.
“The eurozone public debt crisis and budgetary readjustment policies have shattered the economic recovery movement that had brought… a bright spell to our markets,” added Ridoret.
The federation expects overall activity in the construction sector to fall 1.9 per cent in 2012, after forecast growth of 1.2 per cent this year.
New residential construction is expected to drop by 2.8 per cent, new non-residential building is to fall by 1.0 per cent and maintenance and renovation works are to drop 1.7 percent.
Portugese socialist abstain from austerity vote
But it didn’t keep Parliament from passing the bankster-mandated austerity package that is the country’s 2012 budget,
[T]he final reading was marked by the main opposition Socialist party’s abstention – a move aimed at showing political unity behind the bill’s sweeping austerity measures, even as it promises the deepest recession in decades.
Outside parliament, there was widespread agreement too, but demonstrators felt that the poor will be hit most hard by planned cuts.
Under the terms of the EU/IMF 78-billion euro bailout Portugal must drastically reduce its deficit. That means tax hikes and a suspension of holiday and end of year bonuses for civil servants, among other deeply unpopular measures.
The Turks set to benefit for European weakness
A fascinating instance of one region’s weakness creating opportunities in another region comes from Gökhan Kurtaran of Istanbul’s Hürriyet Daily News:
The ongoing European economic crisis has paved the way for a significant decline in oil products in debt-hit European countries. Turkey is likely to attract more investments both in refinery and storage facilities as European plants close, the executive of a global energy company said.
“Many refineries will close in Europe due to a slow in demand for oil products,” said Mark Lewis, managing director of London FACTS Global Energy Group. The slowdown in European economic growth is causing a decline in demand in oil products and if the trend continues, eastern countries — including Turkey — are likely to divert the route of the oil products from west to the east.
Meanwhile back in January, Shell announced plans to close its German Harburg refinery and convert it into a storage site after failing to find a buyer, while United States oil major ConocoPhillips is considering either selling its Wilhelmshaven refinery or turning it into a terminal, according to Reuters.
This year France has shut both its 105,000 barrel per day Berre refinery owned by Lyondell Basell Industries, and the Total Dunkirk Refinery, due to a collapse in demand. A number of refineries in Germany, Sweden, the U.K., Italy and Romania have either closed down or have recently gone up for sale.
And elsewhere is Asia, Indians mine Afghanistan
One of the first acts of imperial conquest in Afghanistan was a major American survey of Afghanistan’s mineral wealth. In the years since, Chinese and other nations have plunged into mining ventures, and now an Indian cartel is joining the Great Economic Game.
From Agence France-Presse:
A consortium of Indian companies has won the rights to develop Afghanistan’s largest iron ore deposits, a mining ministry official said yesterday, underscoring growing ties between the two countries.
Seven Indian companies, led by the state-owned Steel Authority of India (SAI), won a $10.3 billion deal to exploit three of four blocks at the Hajigak mine in Bamiyan, central Afghanistan, said ministry official Abdul Jalil Jumrani.
A fourth block was awarded to Canada’s Kilo Goldmines, he said, with contracts due to be signed in February or March and exploitation of the mine’s estimated two billion tons of iron ore deposits expected to begin by 2015.