Posts tagged crisis
The world is facing the worst financial crisis since at least the 1930s “if not ever”, the Governor of the Bank of England said last night.
Sir Mervyn King was speaking after the decision by the Bank’s Monetary Policy Committee to put £75billion of newly created money into the economy in a desperate effort to stave off a new credit crisis and a UK recession.
Economists said the Bank’s decision to resume its quantitative easing [QE], or asset purchase programme, showed it was increasingly fearful for the economy, and predicted more such moves ahead.
Sir Mervyn said the Bank had been driven by growing signs of a global economic disaster.
“This is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever. We’re having to deal with very unusual circumstances, but to act calmly to this and to do the right thing.”
Announcing its decision, the Bank said that the eurozone debt crisis was creating “severe strains in bank funding markets and financial markets”.
The Monetary Policy Committee [MPC] also said that the inflation-driven “squeeze on households’ real incomes” and the Government’s programme of spending cuts will “continue to weigh on domestic spending” for some time to come.
The “deterioration in the outlook” meant more QE was justified, the Bank said. source – Telegraph UK
Is the EU at the end of the road?
AFP – The eurozone crisis could wreck the European Union, top EU officials warned on Wednesday as the leaders of Germany and France held talks with Greece to avoid a default and widespread chaos.
The pressure rose on all fronts with United States again expressing great concern, with Treasury Secretary Timothy Geithner saying European states “now recognise they are going to have to do more” to resolve to the crisis.
Highlighting the threat to the global economy, Geithner is to exceptionally attend talks between European Union finance ministers and central bankers in Poland on Friday.
French President Nicolas Sarkozy, German Chancellor Angela Merkel and Greek Prime Minister George Papandreou were to hold a teleconference late Wednesday as markets price in a default by the government in Athens, and credit rating giant Moody’s downgraded two major French banks given their exposure to Greek debt.
“Europe is in danger,” Polish Finance Minister Jacek Rostowski, whose country currently chairs EU meetings, told the European Parliament in Strasbourg.
At his most dramatic, Rostowski even warned that “war” could return to Europe if the crisis fatally weakens the EU, founded amid the rubble of World War II. His underlying message was backed up by European Commission president Jose Manuel Barroso, who described the crisis as “the most serious challenge of a generation.”
Barroso stressed: “This is a fight… for the economic and political future of Europe.”
“If the eurozone breaks up, the European Union will not be able to survive,” he added.
EU economic affairs commissioner Olli Rehn warned that “a default or exit of Greece from the eurozone would carry dramatic social, economic and political costs. “Not only for Greece, but also for euro area member states, other EU states, as well as global partners.”
He said what Europe needed was a moment of clarity leading towards a federal future, “and that moment must start today.” source – France 24
A hard rains gonna fall
An air of crisis descended on the world Tuesday, Aug. 9 as markets continued to tumble steeply and in London, large parts of the city succumbed to uncontrolled violence joined by three major British cities. Far East stocks leveled out at 3 percent, Europe fell 3.5-5 percent Tuesday after Wall Street slid 5-7 percent Monday. More than $70 billion were wiped out in global trading Monday hours after US President Barack Obama said America will always be a Triple A country no matter what some agency may say.
The Bank of America took the worst punishment with a 23 percent decline in its stock. Investors did not miss the warning by a Standard & Poor executive that the US credit rating may be lowered again after its landmark downgrade from AAA to AA+.
Heads of the European Union and national leaders, with no solutions for the debt crises plaguing two major members Italy and Spain, are in a panic over the threat to the Eurozone and euro currency. Their fears are driving droves of investors across the world out of the markets in the hope of safe landings in gold (which shot up to $1.721 the ounce), the Japanese yen and the Swiss franc.
Some government spokesmen and pundits are blaming speculators for the crash, praising investors who take the long view and hold tight. Others lay the blame squarely at the door of various governments for mishandling the 2008 economic crisis and its social fallout – witness the consequences of tight austerity measures in Greece and now the United Kingdom.
Thanks to deft footwork by its economic managers, Israel has so far escaped the worst of the backlash, but may not remain unscathed for much longer. Three alarm bells rang this week:
1. Standard & Poor applied its downgrade of America’s credit rating to Israel’s $6billion worth of US-backed bonds, lowing their rating from AAA to AA+.
2. The big demonstrations protesting soaring prices for housing and other essentials and demanding economic reforms to bridge the social gap – are now in their third week. Prime Minister Binyamin Netanyahu is skating on thin ice between expenditure for satisfying their demands and defusing a movement jeopardizing his government and keeping the economy on an even, stable keel.
Meeting even some of those demands could quickly tip Israel over into the abyss of economically-distressed countries, with attendant mass unemployment and a declining currency.
3. Even in the unlikely event of the government keeping the national purse sealed against social demands, Israel is short of the reserves for weathering the fallout to its economic and export industries from the crises in the US and Europe.
Britain is now facing the sharpest edge of this dilemma with far less options.
The street violence, looting, burning, attacks on police – which erupted in the North London borough of Tottenham Saturday, Aug. 6, when a protest against the shooting by police of a local man got out of hand – has spread since with lightning speed into one London borough after another and, Monday night, to three major cities, Liverpool, Birmingham and Bristol.
Inadequate police and fire services are helpless to halt the looting and torching rampages of hooded teenagers in ethnically mixed and disadvantaged communities – even after 450 arrests. Owners of businesses and homes are forced to watch their properties burn down with no police or firemen in sight. Petrol bombs and knives are out against the police. Tuesday morning, armored vehicles appeared on the streets of Ealing Broadway and Clapham Junction after every second shop was looted. Police drafted in from other places are untrained and unequal to the mob tactics of abruptly moving on to their next target which may be an upend neighborhood.
The crisis caught most of the heads of the UK government away on holiday. As the situation degenerated by the hour, Prime Minister David Cameron flew home Tuesday and called an emergency Cobra committee meeting that day. Official government and police statements until then that the violence “is unacceptable” “pure criminality” and “lawbreakers will face the consequences “have made matters worse.
British authorities are criticized widely for being too soft with the mobs of mostly teenagers. Cameron faces demands to bring in the army because the police are clearly unequal to the situation. He does not have the option of loosening up on the austerity measures which have reduced the average living standards by 25 percent and responding to real hardship in order to defuse the disturbances. The UK is in the verge of bankruptcy, financial institutions are in flight from the City of London, further deepening the crisis. Riots across the country will further deter investors.
Standard & Poor indicated Monday that some European countries may be headed for debt downgrades after the United States – with Britain in line. source – DEBKA
Tea Party Downgrade
In the wake of a bruising battle over the debt ceiling and now a first-ever credit downgrade, Democrats have launched a salvo of rhetorical attacks on the Tea Party and appear determined to blame the movement for everything from the debt crisis to the sputtering economy.
“I think they’re totally unreasonable and doctrinaire and not founded in reality. I think they’ve been smoking some of that tea, not just drinking it,” former Democratic presidential candidate and Democratic National Committee Chairman Howard Dean said.
Vice President Biden met last week with House Democrats who described Tea Party lawmakers as terrorists.
The term “Tea Party downgrade” gained currency over the weekend as Democratic leaders took to the airwaves to cast Standard & Poor’s decision to downgrade U.S. credit as a Tea Party-triggered event.
They argue that because the rating agency cited the toxic political environment in its decision, the Tea Party is culpable.
Republicans counter that Standard and Poor’s also cited the country’s failure to tackle its debt problem — something the Tea Party has urged Washington to do. They accuse Treasury Secretary Tim Geithner of lacking a plan to grow the economy, and suggested he resign over his role in the latest turn of events.
“When you open that refrigerator door, the lights don’t come on,” Rep. Allen West, R-Fla., told Fox News. “I don’t think that Timothy Geithner really has a handle on the fiscal situation here.”
The anti-Tea Party talking points didn’t start with the downgrade decision Friday. Senate Democratic Leader Harry Reid and others have been hammering the Tea Party throughout and since the debt-ceiling debate, casting the movement as public enemy No. 1 as Washington enters the next phase of deficit-reduction talks and the 2012 campaign season gets underway.
As Reid told reporters last week, he and his colleagues are worried about the “Tea Party direction of this Congress.” And despite repeated calls for civility, lawmakers are using some heated rhetoric to try and neutralize the Tea Party’s influence.
In a fundraising email last week, Iowa Democratic Sen. Tom Harkin condemned what he described as an effort to “appease the hostage-takers,” saying most Americans “have no use for the Tea Party extremists.” source – Fox News
Workers flee after smoke billows from two units; radiation taints vegetables, water
FUKUSHIMA, Japan — Gray smoke rose from two reactor units Monday, temporarily stalling critical work to reconnect power lines and restore cooling systems to stabilize Japan’s radiation-leaking nuclear complex.
Workers are racing to bring the nuclear plant under control, but the process is proceeding in fits and starts, stalled by incidents like the smoke and by the need to work methodically to make sure wiring, pumps and other machinery can be safely switched on.
“Our crisis is still going on. Our crisis is with the nuclear plants. We are doing everything we can to bring this to an end,” Gov. Yuhei Sato of Fukushima prefecture, where the plant is located, told the more than 1,000 people moved away from the plant into a gymnasium. “Don’t give up. We know you are suffering.”
“Please get us out of here,” yelled Harunobu Suzuki, a 63-year-old truck driver.” source – MSNBC
People warned to stay inside
SOMA, Japan — The nuclear accident at an earthquake-damaged nuclear plant in Japan can now be classed as level six out of an international scale of one to seven, experts said Tuesday. France’s ASN nuclear safety authority’s assessment came after Japanese Prime Minister Naoto Kan said radiation had spread from the four stricken reactors of the Fukushima Dai-ichi nuclear plant along Japan’s northeastern coast.
Two reactors exploded on Tuesday at the plant after days of frantic efforts to cool them. Level seven was used only once, for Chernobyl in Ukraine in 1986. The 1979 accident at the Three Mile Island nuclear power plant in Pennsylvania was rated a level five.
“It is very clear that we are at a level six, which is an intermediate level between what happened at Three Mile Island and Chernobyl,” ASN president Andre-Claude Lacoste told a news conference in Paris. “We are clearly in a catastrophe.”
On Three Mile Island, the radiation leak was held inside the containment shell — thick concrete armor around the reactor. The Chernobyl reactor had no shell and was also operational when the disaster struck. The Japanese reactors automatically shut down when the quake hit. The International Atomic Energy Agency (IAEA) imposed a 30-km (18-mile) no-fly zone around the Fukushima site Tuesday.” source – MSNBC