Archive for the ‘Britain’ Category

Endless Obama deficits threaten dollar’s power

May 24, 2009

The bad news is that President Barack Obama is keeping his campaign promises to raise taxes on upper-income families, borrow and spend, bail out car firms and take control of healthcare.

The good news is that President Obama is not keeping all his campaign promises. There has been no precipitous withdrawal from Iraq, Guantanamo is likely to remain the home of terrorists for some time, the promised “trans- parency” is not so all-encompassing as to include pictures of the treatment accorded the bad guys we captured, and we have not lurched into protectionism.

By Irwin Stelzer
The Times, London

Recall that during his run for the White House, Obama opposed the trade agreements with South Korea and Colombia, accused the Bush administration of failing to deal with China’s “manipulation” of its currency and threatened to use “the hammer of a potential opt-out” to force Mexico and Canada to renegotiate the North American Free Trade Agreement (Nafta).

Campaigning is one thing; governing is another. “Obama is subject to the same geopolitical imperatives as was President Bush,” said Rod Hunter, who served as Bush’s senior director of the National Security Council and is now a colleague of mine at the Hudson Institute, a Washington think tank. It is one thing to throw raw meat to the trade-union lions during a campaign but quite another to antagonise Canada, which has troops in Afghanistan alongside our own; Mexico, an ally in the war on drugs and potential source of oil; South Korea, important to our efforts to contain its northern neighbour; and other countries.

So we have the new Obama. Nafta stays as it is; Treasury secretary Tim Geithner has retreated from his charge that China manipulates its currency; and the president has announced “a plan of action” to obtain congressional approval for pending free-trade agreements with Panama and South Korea, and is in discussions with Colombia’s Alvaro Uribe about getting the agreement with his country through a reluctant Congress. Obama has found he also favours “a strong market-opening agreement for agriculture, industrial goods and services through the Doha round \ and through other negotiations”.

Add to that the repeated statements by the president’s US trade representative Ron Kirk, who has been telling relieved business audiences that trade plays “an important role . . . in creating and sustaining better-paying jobs here at home”. Specifically, Kirk wants to expand trade with the Asia-Pacific region because “there is an extraordinary upside to us” in doing so.

“It is reassuring that Obama’s trade agenda appears to be aligning with those of presidents Bush and Clinton — and to their nine predecessors — rather than to the protectionist positions he took on the campaign trail,” commented Theodore Kassinger, former deputy commerce secretary and now a lawyer with O’Melveny & Myers in Washington.

But before awarding the president the Adam Smith Award For Combating Protectionism, consider this. Obama’s first priority is his domestic agenda: “reform” healthcare, restructure the energy industries, involve the federal government more deeply in education, fight the recession, save the carmakers, control bankers’ bonuses, revise the rules that govern the financial sector, and win what is now his war in Afghanistan. Trade is lower down on the list.

Worse still, there are signs that the president is willing to allow the state politicians in charge of disbursing stimulus funds to adopt “buy American” practices, even though his stimulus bill restricts such practices to those that do not violate our trade agreements or World Trade Organisation (WTO) rules. Local politicians know that WTO bureaucrats don’t vote in their states.

There are also subtle indications that the president will not fight to prevent protectionist measures from creeping into unrelated legislation. Banks receiving bailout money are chafing under rules that prevent them from hiring talented foreign workers. Jamie Dimon, chief executive of JP Morgan Chase, used the company’s annual meeting to denounce these restrictions as a “complete and utter disgrace” that will inevitably invite retaliation against Americans hoping to work abroad.

And Toyota and other foreign firms that make cars here — American jobs for American workers — are in effect discriminated against by the government’s decision to keep GM and Chrysler from meeting the fate to which a free market would consign them.

Nothing Obama will do on trade, either to free up the flow of goods and services, or to tip the scales in favour of American firms, will in the end matter as much as his reckless fiscal policy.

His budgets project deficits close to $10 trillion by 2019 — and that assumes his healthcare plan will cost only the $635 billion “down-payment” he has put in his budget, rather than the $1.2 trillion experts predict, and that he will succeed in almost freezing defence spending.

That means the US Treasury will be peddling billions of IOUs to investors such as China that already have trillions of this paper in their vaults. So far, so good: the recession-induced flight from risk has led overseas investors to seek a haven in dollar assets. But as the printing presses keep running, and the recession eases, investors will find the risk of being paid in dollars that have shrivelled in value too much to bear.

Which is why the dollar hit its lowest level of the year last week and why for a while it cost less to buy insurance against a default by hamburger-seller McDonald’s than against a default by the world’s only superpower. More important, it is why China and Brazil are trying to cobble together a trade deal that will allow them to bypass the dollar completely and pay in their own currencies. This might well be the first step in China’s announced intention to develop a currency to compete with the dollar as the world’s reserve currency.

So, only two cheers for Obama, less of a protectionist than expected, but nevertheless a serious threat to the dominance of the dollar in world trade.

Dollar hits new multimonth low vs euro, pound, yen; U.S., Brit long-term credit rating cuts loom?

May 22, 2009

The dollar kept falling Friday, notching fresh multimonth lows against the euro, pound and yen as a warning that Britain’s debt level may result in its credit rating being cut ricocheted into worries about the massive U.S. deficit.

The 16-nation euro rose to $1.4015 in morning trading from $1.3889 in New York late Thursday—its first time above $1.40 since Jan. 2.

The British pound rose to $1.5916 from $1.5890, peaking at $1.5945 earlier in the session, its highest point since Nov. 6.

Read the rest from the Associated Press:

U.S., Britain Both face Lower Debt Credit Ratings

Brits Welcome Obama’s Moral Stand on Gitmo; Just Distracted By Mega-Scandal in Parliament

May 21, 2009

Much has been made of the moral condemnation of the United States over Gitmo and the supoposed “torture.”  We just thought we might note that moral authority comes from, well, not Europe…..

Don’t forget: only three guys were waterboarded….


President Obama declared today that opening Guantánamo Bay was a mistake that encouraged terrorism and compromised America’s moral standing in the world as he reaffirmed his commitment to close it down despite setbacks in Congress.

The President said that keeping the military camp open was more dangerous than shutting it down and transferring the prisoners. “Let me be blunt there are no easy or neat answers here,” he said. “As President I refuse to allow this problem to fester, I refuse to pass it on to someone else.”

Yesterday, the Senate refused to finance the Obama Administration’s plan to close the military camp and transfer the suspects to American prisons.

From the Times, London
Read the rest:


From a reader of the ECONOMIST:

Regardless of which side of the political spectrum you fall, it is disheartening to see that the mother of all parliaments has so egregiously shameed itself and by extension the people. No more can the UK stand with any moral authrority and lecture the developing world of transperency and good governance, when it has turned its back on the very principles it took such delight in naming and shaming others to follow. The parliamnet’s on recourse was to oust and make a scapegoat of the Speaker and we they should all follow his example.

Michelle Malkin:

File:Palace of Westminster, London - Feb 2007.jpg

China ready to join US as world power

May 18, 2009

David Miliband today described China as the 21st century’s “indispensable power” with a decisive say on the future of the global economy, climate change and world trade.

The foreign secretary predicted that over the next few decades China would become one of the two “powers that count”, along with the US, and Europe could emerge as a third only if it learned to speak with one voice.

The remarks, in a Guardian interview, represented the most direct acknowledgement to date from a senior minister, or arguably from any western leader, of China’s ascendant position in the global pecking order.

Miliband said a pivotal moment in China’s rise came at the G20 summit last month in London. Hu Jintao, China’s president, arrived as the head of the only major power still enjoying strong growth (expected to be 8% this year), backed by substantial financial reserves.

“The G20 was a very significant coming of economic age in an international forum for China. If you looked around the 20 ­people sitting at the table … what was striking was that when China spoke everybody listened,” Miliband said.

From The Guardian (UK)
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Bank of England: Recovery will be slow, starting next year

May 13, 2009

The Bank of England warned on Wednesday that the UK’s recovery from its worst recession in decades is likely to be slow.

By Angela Monaghan
Telegraph (UK)

Mervyn King, the Bank’s governor, played down evidence that “green shoots” are starting to appear in some areas of the economy, and said it was impossible to say when recovery would come, or how sustainable it would be.

“The economy will eventually heal, but the process may be slow,” he said at a press conference as the Bank published its latest quarterly Inflation Report.

In its central projection, the Bank’s Monetary Policy Committee (MPC) predicts the economy will start to grow again next year, in contrast to the Chancellor’s forecast that the economy will start growing by the end of this year.

Read the rest:

U.S. Banks Whisper “Recovery” But Key Brit Bank Doesn’t See it….

May 8, 2009

Stephen Hester, chief executive of Royal Bank of Scotland, dampened hopes that the economy is bouncing back, declaring that he did not see any signs of “green shoots” of recovery.

By Katherine Griffiths, Financial Services Editor
Telegraph (UK)

It is also “unknowable” when RBS will return to profit and 2009 and 2010 will be “very difficult”, Mr Hester said.

Mr Hester, who replaced Sir Fred Goodwin as chief executive in November with a brief to rescue the bombed-out bank, stressed that the process would take time.

Muslims and Hindus Complained So Now Britain’s Honor “Trinity Cross” Is Unlawful

May 8, 2009

An honour established by the Queen has been declared unlawful after Muslims and Hindus complained that its Christian name and cross insignia were offensive.

The Trinity Cross of the Order of Trinity was established by the Queen 40 years ago to recognise distinguished service and gallantry in the former colony of Trinidad and Tobago. It has been received by 62 people including the cricketers Garfield Sobers and Brian Lara, the novelist V. S. Naipaul and many of the islands’ leading politicians and diplomats.

The Privy Council in London has ruled that the decoration is unconstitutional because it discriminates against non-Christians. Five British law lords said that the creation of the honour breached the right to equality and the right to freedom of conscience and belief. The implications of the ruling on British decorations are being studied by lawyers at the Cabinet Office, which oversees the honours system. A spokesman said: “We have noted the judgment and are monitoring the situation.”

A parliamentary review of British honours has already recommended streamlining the system with new titles that have no reference to Christian saints or symbols.

From The Times (UK)

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Reactions To Recession: Isreal Wants Huge Spending Cuts; Brits Mulling Huge Taxes; Obama Wants To Totally Fund Health Care, Education, Re-engineered Energy System

May 7, 2009

Fund education, health care, and environmental projects.  We’ve heard it over and over.

And the debt is already skyrocketing.

We are well past the stuff Barack Obama “inheritied” here: this is all of his own making.

The Obama plan sneaks out of the shade a bit more each day and guess what: it is an offer without a plan.  Speech text on the teleprompter without details or a reliable budget.

It is talk of transparency without real verifiable transparency.

It is we’ll be out of Gitmo — with no plan to make that happen.

The Obama plan is listen to your government on the flu: wash your hands.  Oh, and don’t listen to Joe Biden.

In Israel, the government is considering huge spending cuts to live in this uncertain recession era.
To Balance The Budget: Cutting Health Care, Education, Unemployment Benefits, Defense, and More
In Britain, taxes could top 61% of income.
Some of Britain’s Top Taxpayers Could Owe 61.5%
But in the USA we are expected to fund everything and trust our government.  We won.

Defying Logic: Obama Wants Congress To Give Him Money Without Plans (And The Money Is Borrowed)

Some of Britain’s Top Taxpayers Could Owe 61.5%

May 7, 2009

JEAN-BAPTISTE COLBERT, Louis XIV’s finance minister, famously said that the art of taxation was like plucking a goose; the aim was to get the most feathers with the least hissing. But tax policy should aim to do more than smother protest: it should also seek to raise the most money with the least distortion to economic activity.

By this measure, Britain’s attempts to fill the fiscal gulf created by recession are a dismal failure and a lesson to cash-strapped governments everywhere. Take marginal income tax rates, announced in the British budget of April 22nd. Once national insurance is added in, effective marginal rates will climb from 31.5% to 41.5% through to 61.5% on those earning just over £100,000 ($147,000), thanks to the withdrawal of the personal tax allowance. After that, the rate will fall back to 41.5%, before rising again to 51.5% on incomes over £150,000.

The Economist (UK):

California, Britain as Obama’s Canaries in the Mineshaft of Taxes, Spending

May 4, 2009

President Barack Obama has promised that government can solve all social and economic woes and his spending far outweighs his anticipated revenues as far as the eye can see.

Others have tried this before.

Britain has prided itself in its social welfare network and government medical care — but the cost have always  exceeded what Britain had to spend.  Now the government of Gordon Brown is discussing an income tax of 50% on top earners and those same top earners are discussing making their homes elsewhere.

In California, voters burdened by higher taxes are voting with their feet and leaving California and those that stay are not voting for legislature mandated tax increases.

President Obama’s mantra of health care, environment and education spending, while not resisted by a liberal Democrat majority in the House and the Senate may not be as widely embraced in the American countryside as President Obama has always hoped.  People are starting to doubt that more spending, more debt  and more taxation is a good thing — and the tea party gatherings though small are unprecedentated in American politcs and need to be watched.

Obama’s tinkering turned intrusion in industry, banks, and even Wall Street may have far reaching and unexpected repurcussion for the Democrat Party and Mr. Obama himself.