A-O Weekly News Round Up 11-23-9
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The Alpha-Omeag Report's
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Weekly News Round Up
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For 11-23-9
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EU Has New Permanent President
It's Not Tony Blair
The EU last week selected Belgium's Prime Minister Herman van Rompuy to be the first permanent president of the EU. Until now, the presidency was a rotated between member nations with each nation's top leader sitting as EU president for six months.
For more on the President here's a BBC bio backgrounder - LINK HERE.
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New EU President Raises
Concerns in Turkey About
Becoming an EU Member
Herman Van Rompuy's appointment as the first European Union president provoked fears in Turkey that he might hinder Ankara's hopes of joining the bloc, with some media declaring outright that he is anti-Turkish. For the full story on this issue, LINK HERE.
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Tony Blair, Too Big
For EU Presidency Job
SIghts Set on World President?
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100 Companies Pushing
1-World Global Gov't
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On Heels of China Summit
Obama Warns On Public Debt
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Warns of Double-Dip Recession
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Dr. Doom Says:
The Worst Is Yet To Come
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US China At Odds on
Currency Trading
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Top Eurobank Prepares
For Global Economic Collapse
In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.
Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.
"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.
Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.
Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.
(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).
The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.
Inflating debt away might be seen by some governments as a lesser of evils.
If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.
The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.
SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.
Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.
SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.
Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said.
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US Gov't Faces Wave
of Debt Payments
The US Government's profligate spending is about to come back to haunt the U.S. Treasury in 2010. The Treasury is facing a mountain of new debt added by the Obama Administration in 2009, plus a balloon of short-term borrowings that come due in 2010 plus the extra whammy of climbing interest rates with rising inflation.
The Treasury is trying to exchange short-term borrowings for long-term bonds at very low rates before interest rates skyrocket with the dollar's devaluation and an inflationary spiral that is expected to kick in for borrowing money in the international arena.
Even now, the Feds are facing "payment shock" much like home buyers facing default and foreclosure from skyrocketing ARM mortagage payments. US Government spending debt has almost doubled in the past two years.The U.S. government is financing its borrowing with 'teaser' rates much like those ARM's (adjustable rate mortgages) that are initially low but skyrocket with inflation after the ARM period expires.
The national debt is now estimated to be around $12 Trillion dollars and the payments on that debt are expected to reach $700 billion a year in the next ten years. For 2009, the payments are $202 billion dollars. Some experts believe the annual service payments on the debt will exceed $1 trillion dollars, expecially if Congress passes the currently proposed healthcare reform package in the Senate.
Surging interest payments is only one of many problems facing the U.S. Government. record government deficits have arrived just as the long-feared explosion begins in spending on benefits under Medicare and Social Security. The nation’s oldest baby boomers are approaching 65, setting off what experts have warned for years will be a fiscal nightmare for the government.
For more details on the nation's teetering debt financing problems, LINK HERE.
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Feds Under Fire As
Public Anger Mounts
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U.S. Senate Passes Key
Hurdle on Healthcare Reform
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Gallup Poll Shows Obama's
Popularity Sliping Below 50%
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USDA Report:
Hunger Now A Growing Problem
In the USA
The nation's economic crisis has catapulted the number of Americans who lack enough food to the highest level since the government has been keeping track, according to a new federal report, which shows that nearly 50 million people -- including almost one child in four -- struggled last year to get enough to eat.
Read the full story, LINK HERE.
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Global Famine?
World on the Brink?
Not Enough Food in 2010
The United Nations Food and Agriculture Organization has announced that severe drought and brutal civil wars in east Africa have left more than 20 million people in desperate need of emergency food assistance. In its announcement, the FAO was quite blunt in assessing what is happening in the region: "The situation is very worrying due to expected crop and pasture failures from poor rains in several areas, the increase in conflicts, trade disruptions and continuing high food prices." The truth is that most people in the western world have no concept what is going on over in east Africa. The picture at the top of this article is of a bulldozer pushing a pile of cows that have died due to the severe drought in the region. There are severe shortages of both food and water. Survival is a daily question for millions. It really does seem like the end of the world. But the reality is that serious food shortages are about to become a problem for the rest of the globe as well.
Devastating droughts in India, China, Argentina, Australia, Texas and California are crippling harvests across the globe, and the prospect of an unprecedented food crisis is very real. The truth is that the world food supply was just barely able to feed the world during good harvest years. Now that the world has been hit by a serious of unprecedented droughts, it is becoming clearer by the day that there is simply not going to be enough food for everyone in 2010.
Read the full story for more shocking details, LINK HERE.
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Price of Rice Skyrocketing
On Weather-related Shortages
The price for rice may double to more than $1,000 per metric ton as dry El Nino weather shrinks output as India and the Philippines scramble to import rice.
The problem for rice harvests have included not only drought but also devasting typhoons that have struck throughout Asia this year. Experts warn that prices are expected to double again by the middle of next year to $2000 per metric ton.
On the Chicago Board of Trade, home to futures for long- grain rough rice, prices jumped about 35 percent from this year’s low of $11.195 per 100 pounds on March 16. Rice for January delivery rose 1.5 percent to $15.08 per 100 pounds in electronic trading on the Chicago Board of Trade on Monday (11/16).
For more details, LINK HERE.
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Scientists Baffled By
Global Warming Time-Out
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India Puts Nuke Plants
on High Alert For Terrorists
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Plague Outbreak in Ukraine
Could Sweep The World
1 Million Already Infected
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Swine Flu Mutating
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6.6 Quake Rocks Canada
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China Could Use Microchips
To Penetrate US Weapons
And Disarm Them
This is a story that A-O's Intelligence Digest first reported on nearly two years ago. Chinese-made computer chips have a special access loophole that allows China to 'hack" into computer-controlled weapons systems, guidance systems, communications systems and shut down those systems on command. Much of American military defense and weapons systems that use computer technology and that were built in the past 10 years contain microchips designed and built by Red China.
The World Tribune is one of the first major news outlets to bring this subject into the public spotlight. Read their article - LINK HERE.
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Evangelical Lutheran Churches USA
Splitting Up On Issue of
Accepting Homosexuality
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