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1. Barack Hussein Obama took power as the first black US President – Hope for a Change – Yes we can -
Barack Hussein Obama was sworn in as the 44th President of the United States, calling on Americans to join him to confront the economic crisis and wars, warning that there are many and serious problems caused through past mistakes, needing time to be met in a changed world, but making hope that they can and will be solved, appealing for unity. Government initiatives of Democratic President Obama should obtain a more comfortable support in a Congress, where the Democratic Party has strengthened its majorities in the House reaching 257 seats remaining 178 seats for the Republican Party and in the Senate reaching a supermajority with 60 seats leaving 40 seats to the Republican Party, after the Minnesota Supreme Court ruled that the Democrat Al Franken had won the race, ending Republican Norm Coleman the battle over the Minnesota Senate seat after fighting 8 months and including Senator Arlen Specter, who switched from the Republican to the Democratic party. But Democrats can’t rely consistently on two ailing veteran Senators, Robert C. Byrd of West Virginia and Edward M. Kennedy of Massachusetts, counting also with the willingness of individual members to defend regional interests breaking with the party on critical issues and will have to consolidate in 2010 its control in Senate obtaining at least the magic 60+ seat majority required to avoid a GOP filibuster. Picking the Republicans their ‘Obama’, the party named former Maryland Lieutenant Governor Michael Steele, an African-American, as its first black chairman, to rebuild the party after continued devasting defeats. The President nominated Timothy F. Geithner, experienced in handling the financial crisis, as his Treasury Secretary, also naming former Treasury Secretary Lawrence Summers to head his Economic Council and Peter R. Orszog as Director of the Office of Management and Budget to review and downsize Federal budget, appointing former Federal Reserve Chairman Paul Volcker as Chairman of the new White House Economic Recovery Advisory Board, Shaun Donovan to be his Secretary of Housing and Urban Development/HUD, an increasingly important role as the economic crisis began with the mortgage problems, Mary Schapiro, with more than two decades of experience as regulator, as chairman of the Securities and Exchange Commission/SEC, and Gary Gensler, a former Tresury Department official, as chairman of the Commodity and Futures Trading Commission/CFTC. He nominated former Washington Governor Gary Locke as Secretary of Commerce and asked Robert Gates, a moderate Republican, to remain at least one more year as his Defence Secretary, naming his former rival Hillary Clinton as Secretary of State. The Democrats had shaped a party platform declaring itself united behind important commitments, such as that every American man, woman and child be guaranteed to have affordable, comprehensive health care, the expectation to complete withdrawal of US combat troops from Iraq within 16 months, promises of energy rebates to struggling families, pension subsidies, higher taxes for families earning over $250.000, for others tax brakes, Billions for economic stimulus, direct high-level diplomacy, without preconditions, in the case of Iran and eventual negotiations to amend the North American Free Trade Agreements/ NAFTA with Canada and Mexico. Energy independence, the war on terror and federal spending are all important issues to deal with immediately, surging the federal budget deficit to $454,81 Billion for the fiscal year ending September 30,2008/ 3,2% of GDP up from $161,53 Billion in 2007/ 1,2% of GDP and soaring the projected deficit for the current fiscal year. President Obama, sharing worries as budget deficit and size of US debt rise faster, alarming credit rating agencies, increasing estimated budget deficit for the current fiscal year to $1,841 Trillion/12,9% of GDP and for the fiscal year starting in October to $1,258 Trillion/8,5% of GDP, while a country’s annual deficit should not exceed 3% of GDP, is redefining budget priorities, aiming to reduce deficit by fiscal year 2013 to $533 Billion, presenting to Congress a budget blueprint of $3,6 Billion for fiscal year 2010, setting aside another $250 Billion to buy illiquid assets from banks within possibly required additional bailout funds of $750 Billion, and addressing for the first time a joint session of Congress, prepared Americans for a deep recession, but saying ‘we will rebuild, we will recover and the United States of America will emerge stronger than before’. The actual Federal debt limit is $12,1 Trillion, while the US gross national debt reached already more than 11,263 Trillion and is expected to rise to 82,5% of GDP in 2010 (the US economy produces about $14,2 Trillion worth of goods and services a year). The House and the Senate approved both budget plans 2010 of up to $3,55 Trillion, already reconciled by Congress and including a provision to fight tax avoidance practices using offshore tax heavens to reduce budget deficit and the Obama administration unveiled program details of a $3,4 Trillion budget for fiscal year starting in October, including some substantial increases as well as plans to eliminate projects saving $17 Billion. Obama’s economic team prepared an ambitious and significant economic recovery plan, called ‘American Recovery and Reinvestment Bill of 2009′, including permanent middle-class tax cuts, tax cuts for individuals and businesses could reach with about $275 Billion an important proportion of the new stimulus package, getting relief about 95% of taxpayers, while the creation and preservation of 3 Million and up to 4 Million jobs during the next two years through large infrastructure investments, school and hospital modernisation, an energy savings program for public buildings and investing also money in some high-tech areas, will cost up to $544 Billion, totalling tax breaks and spending about $819 Billion, 5% to 6% of the US gross domestic product. The Congress approved Obama’s stimulus plan agreeing finally on $787,2 Billion, with 246 votes and without any Republican support in the House and the votes of 57 Democrats and 3 moderate Republicans in the Senate, signing President Obama the bill into law, marking hopefully the beginning of the end to the US economic problems, accounting tax credits for about 35% and Federal Government spending for about 65%. Completing Obama administration’s previous pay limits and a last minute provision included in the economic stimulus bill restricting bonuses for bankers at firms receiving or that already have received federal aid, the Government appointed Kenneth R. Feinberg as official to oversee pay systems and executive compensations in companies on Federal assistence. The new economic stimulus legislation is including a ‘Buy American’ clause, which rose worldwide concerns about increasing protectionism, always rejected by the United States, however is also full of exceptions, like imports from 38 countries with which the United States has trade agreements, quieting for the moment the strongest critics of that provision. But there are already complains and retaliations from Canada, as US states and local authorities are not party to the trade agreements of the Federal Government ignoring and infringing upon the U.S.-Canada trade agreement, having the Obama administration the task to resist protectionist pressures ensuring domestic job opportunities and respecting trade obligations. Former President Bush allowed to use the $700 Billion bailout fund to help Detroit and announced a rescue package of $17,4 Billion, requiring that Chrysler and GM present a recovery plan and prove their long term viability to the Congress, remaining only two alternatives for lawmakers, to commit more bailout money or provide financial backing as part of a bankruptcy filing, deciding President Obama to delegate fixing of Chrysler and General Motors to an auto panel integrated by his most senior economic advisors, expecting concessions from bondholders and the United Automobile Workers Union/UAW. General Motors reported it lost $9,6 Billion in the fourth quarter, totalling losses for 2008 of $30,9 Billion and auditors raise doubts about the viability of the company as concern. Ford appears to be in a better financial position declining to use Government emergency loans, pulling Kirk Kerkorian, the billionaire investor out of the company, selling his remaining shares, and reporting the carmaker a fourth quarter loss of $5,9 Billion, posting a total loss of $14,6 Billion in 2008 and a less than expected loss of $1,4 Billion for the first quarter of 2009, intending to cut debt by about 38% or $9,9 Billion repurchasing outstanding bonds and debt obligations below their face value, improving the automaker’s long-term viability. The Government said it will guarantee warranties on new GM and Chrysler cars to avoid any drop in sales, while restructuring efforts take effect. GM outlined a new survival plan becoming much smaller closing plants and eliminating factory jobs, reporting that a key group of bondholders agreed to an improved debt for equity swap offer accepting a 10% stake with warrants to buy an additional 15% in exchange for accepting bankruptcy plan, obtaining the United Automobile Workers Union, which approved a new cost-cutting labor agreement with GM, 17,5% and warrants to increase stake up to 20%, considering the US Government to provide at least $30 Billion more in addition to the $19,4 Billion already invested to get the company through chapter 11, while Canada will lend about $9 Billion, leaving the US Government and Canada initially with a majority stake which could reach about 72,5% of the new GM to be reduced to about 55% as soon as bondholders and UAW raise their stakes. Chrysler filed for bankruptcy protection after not reaching an agreement with private debt holders, closing a partnership deal with Fiat obtaining the Italian carmaker initially a stake of 20% which could rise to 35%, providing the US and Canada financing during the bankruptcy proceeding receiving the US a stake of 9,85% and Canada a stake of 2,46%, while the United Automobile Workers Union will have an initial stake of 67,69%. Clearing the United Supreme Court the sale of Chrysler’s key assets to a group led by Fiat, the Chrysler-Fiat alliance emerged out of the bankruptcy protection faster than expected, hoping the new Chrysler Group managed by Fiat to become a competitive and viable automaker. Fiat showed also interest to purchase GM’s Opel unit in Germany, while GM favoured an offer including a larger cash component of Magna International, a global supplier of automotive systems, with Russian carmaker Gorky Automobile Factory/Gaz and in partnership with Russia’s Sberbank, and there existed a third bidder Ripplewood Holdings through its European subsidiary RHJ International, a private equity company and China’s Beijing Automotive Industry Corp/BAIC was expected to present an offer. Fiat, one of the leading contenders, withdrew from talks with the German Government, reaching GM a tentative agreement with Magna International signing a letter of intent, while the German Government, GM and the Obama administration agreed on a memorandum of understanding which includes: Magna International will take over parts of the new European Opel activities from parent GM; Germany will provide €4,5 Billion in loan guarantees up to 5 years, including a bridge loan worth a maximum of €1,5 Billion from state banks; Magna International will loan Opel €300 Milliones to cover short-term liquidity; there will be a trustee scheme to protect the parts of Opel in Europe that can survive from any turbulence over GM. Magna is offering €500 Million to €700 Million alongside Sberbank for a 55% stake in Opel, giving Magna 20%, Sberbank 35%, Opel’s employees 10% and the restructured GM 35%, while Russian carmaker GAZ will become an industrial partner of Opel, expecting Magna International to complete transaction and take over the new Opel operation until August, maintaining also talks with the UK Government over the future of the Britain’s GM unit Vauxhall. Having secured deals with the majority of bondholders, the United Automobile Workers Union and Magna International to buy control of its European operations, GM, excluding Opel and Vauxhall, filed Chapter 11 bankruptcy protection to produce a court-supervised restructuring and will have to complete the process of selling its best assets, approved by a Federal judge of the United States Bankruptcy Court in Manhattan, to a new Government- financed and -run company by July 10, allowing it to emerge from bankruptcy protection, signing GM preliminary agreements with Chinese Sichuan Tengzhong Heavy Industrial Machinery Company to sell its Hummer operation, which will remain in the United States and with the Swedish sports car company Koenigsegg to sell its Saab unit. GM and Magna International set as target July 15 for agreeing on the sale of a majority stake in Opel, 65% of the company are controlled temporarily by an independent trust managed by 5 trustees while GM owns 35%, and Chinese BAIC which builds Mercedes-Benz and Hyundai cars in China submitted a late-offer of €660 Million for an equity stake in Opel, presenting RHJ International also a non-binding offer, while Italian’s Fiat continues to show interest to compete for Opel but pledging no cash. US tensions with Moscow over Georgia produced a more hostile Russia, although there exists the desire of its economic elite, with close ties to Prime Minister Putin, to integrate with the rest of the world, being Russia also member of the Group of 8 major powers/G8 and existing the NATO-Russian permanent Joint Council. As both houses of Russia’s parliament voted to recognise the independence of Georgia’s two separatist regions South Ossetia and Abkhazia, wanting to join the Russian Federation, and establishing Russia diplomatic relations with both, the conflict moved from a military one to a political one, putting new pressure on Georgia and adding tensions with the US and the EU. Due to the conflict with Georgia, to become jointly with Ukraine member states of NATO, and the global financial crisis foreigners have pulled out assets coming stock markets in Russia under unprecedented pressure, falling its foreign currency reserves to less than $400 Billion, as authorities were spending about $200 Billion to support the ruble, the stock markets and the banking system to avoid a collapse of its economy, also hurt as oil prices dropped producing a budget deficit, remaining volatility and sistemic risks in Russia’s financial markets, lowering Standard and Poor’s the country’s foreign currency credit rating, contracting Russia’s economy. Due to rising energy prices investors are returning to Russia, although its stock market continues volatile and the struggling economy might contract more than 6% in 2009. US-Russian relations are fragile and lack the necessary mutual trust, expecting President Medvedev, who has launched a constitutional amendment to extend the presidential term from actually 4 to 6 years, they will improve with the Obama administration striking ahead of President Obama’s upcoming visit to Russia a cooperative and friendly tone. Focussing the attention on military issues, the US and Russia reached a preliminary agreement to reduce nuclear arsenals, and businessmen, who will sign some $1,5 Billion worth of deals during the American President’s visit to Moscu, hope the meetings between Presidents Medvedev y Obama will help to reset the relationship, create a new atmosphere improving American investments and trade ties. The $700 Billion rescue initiative of the former Bush administration for the financial sector created the Troubled Asset Relief Program/TARP which includes basic principles, such as protection of taxpayers obtaining warrants on equity from participating companies regardsless of whether the Government is purchasing mortgage related and other troubled assets directly or buying them through an auction process, helping to ensure that taxpayers benefit in the future if share prices of the firms increase; requiring the US Treasury Department to establish a mandatory financial industry-funded program to guarantee the distressed assets it acquires through the recue plan; enabling participating firms to unload bad assets via US-Government acquisition or by participating in a financial industry-funded insurance program, paying participating firms in that fund premiums to insure those assets; helping homeowners facing foreclosure and limits on the compensation of executives whose firms take bailout money; splitting the amount of $700 Billion in three parts, starting with $250 Billion following another $100 Billion if needed, giving the Congress 15 days to object the final $350 Billion to be disbursed. The Senate approved a revised version of the financial rescue plan, also passed by a comfortable margin in the House, including a proposal to raise the federal insurance limit for consumers’ bank deposits from $100.000 to $250.000 to restore public confidence, allowing the bill the Federal Deposit Insurance Corporation to borrow unlimited amounts of money from the US Treasury Department in connection with this larger coverage that would extend until the end of 2009, backing up the decision of the Securities and Exchange Commission to loosen rules to figure out the value of assets for which there are no buyers, adding also $100 Billion in tax breaks for households as well as business and individual tax reductions, and an extension of unemployment pay. The legislation constitutes one of the largest-ever government intervention in the economy, formally known as the Emergency Economic Stabilization Act/EESA, into law, hoping it will help to restore a more freely flow of money through the global financial system and of credit to the economy to limit the extent of recession. Creating the Money Market Investor Funding Facility/MMIFF to stimulate further credit markets the Federal Reserve planned to lend up to $540 Billion to a group of five specially created funds administered by J.P.Morgan Chase, that will buy up to $600 Billion of three-months unsecured and asset-backed commercial papers to provide liquidity to the money market mutual funds, taking the first 10% of losses, supplementing an earlier program under which the Federal Reserve planned to by commercial paper directly from issuers. The Bank of New York Mellon was named under a contract lasting three years as master custodian firm overseeing the $700 Billion bailout fund, while the primary focus of the rescue package was changed spending the Government and thought as a short-time intervention, up to the amount of the first installment of $250 Billion buying preferred equity stakes in major US banks, saying the fresh capital is not to hoard it but to deploy it, having lost valuable time to act on the worsening credit crisis, which translated into the actual international crisis after US-authorities decided not to save Lehman Brothers. Federal regulators announced they will guarantee for a fee new bank debt up to three years and extend insurance for non-interest-bearing accounts through 2009. Banks that were invited to join the US Treasury Department´s capital purchase program with the respective amounts proposed, encouraged to expand and look for mergers taking over competitors: $10 Billion each Goldman Sachs and Morgan Stanley, $25 Billion each Bank of America (including the soon to be acquired Merrill Lynch) and Citigroup, $20 Billion to $25 Billion Wells Fargo, $3 Billion Bank of New York Mellon, $2 Billion State Street Corp, another $125 Billion for smaller banks. The Federal Reserve, planning the way to use part of the $700 Billion rescue fund to buy and renegotiate mortgages, as to address the underlying fundamentals of the crisis, is working closely with the Federal Deposit Insurance Corporation/FDIC which released a new plan to refinance mortgage loans of 1,6 Million households costing the Government an estimated $24,4 Billion. Also considered widening financial rescue to insurance companies buying equity stakes to improve their balance sheets and to help troubled US car sector through their financing arm. GMAC, the financial arm of General Motors, became a bank-holding company after the Federal Reserve granted a respective request, getting access to capital from the $700 Billion bailout fund and to the Federal Reserve’s low interest short term emergency loans, announcing the Federal Reserve it will take a stake of $5 Billion in GMAC against preferred shares paying a dividend of 8%, lending another $1 Billion to GM to help GMAC to reorganize itself as bank holding company, enabling GMAC to improve its financing offers to vehicle buyers, revealing the recent bank ’stress test’ that GMAC needs $11,5 Billion to strengthen its capital reserves. GMAC will continue to make loans to customers of General Motors and begin to assist Chrysler car buyers and dealers, receiving a second bailout of $7,5 Billion. Calming markets the Treasury Department using its Exchange Stabilization Fund, offered, at least temporary, to protect the nation’s eligible publicly offered money market funds for up to $50 Billion from outflows, insuring their holdings against a fee the fund has to pay to participate in the program. There are roughly $3,4 Trillion resting in such funds which hold about $230 Billion in asset-backed commercial papers, accepting the Federal Reserve to lend money through banks against these short-term obligations in an effort to stabilize the $1,7 Trillion commercial paper market, a vital funding source for US business. Putting the original plan to buy troubled mortgage assets on hold, facing fresh criticism from Congressional leaders over its handling of the bailout package, and giving priority to reactivate credit markets helping consumers, not accomplished with the capital injections into banks, as consumer spending is dropping causing recession, the Treasury Department said it wanted to focuse on banks, non-bank financial institutions and consumer lenders, eventually requesting to raise private capital to qualify, to increase availability of credit to people and stimulate consumer purchase, reducing foreclosures and providing credit card loans, student loans, car loans and small business loans. The idea was to commit up to $1 Trillion starting early March to unfreeze the consumer debt market helping households and small businesses to borrow money, providing the Federal Reserve under a new Term Asset Backed-Securities Loan Facility/TALF initially up to $200 Billion in low cost loans and guarantees at rates ranging actually from 1,5% to 3% to hedge funds and private equity firms that buy securities backed by consumer and business loans, of small employers, student loan providers, credit card issuers and auto lenders, funding the Treasury Department through the Troubled Asset Relief Program/TARP $20 Billion, which could be increased to $100 Billion, to absorbe losses under the new program up to this amount. Investors would be able to borrow between 84% and 95% of the face value of triple-A rated bonds, without being liable for any potential losses beyond the 5% to 16% equity they share in the investment. The Obama administration planned as well to inject $15 Billion to unfreeze credit for small businesses as from the end of March beginning the Treasury Department to purchase directly securities backed by loans guaranted by the ‘Small Business Administration’, including provisions to increase loan guarantees for small businesses to 90% of the loan value to encourage banks and other lenders to extend credit, waiving the loan fees of the ‘Small Business Administration’. In an effort to revive economy the Federal Reserve said it will buy up to $200 Billion instead of the original $100 Billion in mortgages held by Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Banks to improve their cash-flow and lower mortgage rates, purchasing another $500 Billion adding $750 Billion increasing substantially the amount to up to $1.250 Billion in mortgage-backed securities issued by these agencies, and planning also the adquisition of $300 Billion in long-term Treasury Bonds, helping to reduce long-term interest rates for the Government. The Treasury Department disclosed guidelines for Systemically Significant Failing Institutions/SSFI program, it uses to justify emergency aid under the Emergency Economic Stabilization Act/EESA out of the $700 Billion bailout fund, preventing disruption of financial markets to limit impact on the economy, protecting American jobs, savings and retirement security. The Senate approved release of the remaining $350 Billion of the $700 Billion bailout fund and the Obama administration announced a financial stability initiative for as much as $2,5 Trillion, including the remaining $350 Billion out of the bailout fund, projecting - the creation of public private investment funds with financing jointly by the Government and private investors, reaching eventually $1 Trillion, to buy up illiquid assets from banks, – direct capital injections into banks subject to strict examinations to establish their lending capacity, making available additional information about their lending practices, revealing also more about their mortgage holdings and in general increasing tranparency of financial institutions, and confirming to commit as much as $1 Trillion increasing the originally $200 Billion planned under the TALF program to unfreeze credit markets for consumer, student, small business, auto and commercial loans, needing the Treasury Department eventually more bailout funds, and finally providing $75 Billion of the remaining $350 Billion bailout fund/TARP program to help avoiding foreclosures. The plan includes to leverage resources amounting to $75 Billion and up to $100 Billion of the Treasury Department’s bailout program/TARP with money from the private sector to buy initially $500 Billion expanding to as much as $1 Trillion in troubled loans and toxic assets creating the ‘Public-Private Investment Partnership plan/PPIP’, combining efforts of the Federal Deposit Insurance Corporation/FDIC, the Federal Reserve and private investors, setting up the FDIC a partnership program lending about 85% of the money the partnerships need to purchase troubled assets, expanding the Treasury Department its TALF program and hiring the Treasury Department at least five investment management firms, expected to help price toxic assets, pooling private money with Government funds. The Government explained three basic principles: 1. Mix of FDIC, Federal Reserve and private money to optimise taxpayers resources, 2. Private investors, like equity firms, hedge funds and sovereign wealth funds, enabling also smaller and women or minority-owned firms to participate, share risk and potential profits and 3. Purchase through competitive auctions to obtain appropriate asset pricing, needing the price setting process to be transparent. The 5 or probably more selected investment manager firms will establish ‘Public- Private Investment Funds’ raising equity capital matching the Government every dollar of equity that private capital providers invest; besides helping with a 100% equity co-investment the Treasury Department will also provide a ‘nonrecourse loan’ to the ‘Public-Private Investment Fund’ up to 50% of the total equity capital of the fund, considering eventually an additional loan request up to 100% of its total equity capital, obtaining the fund as well access to the already operational expanded TALF program which could make additional $1 Trillion available, to commence a purchase program of targeted mortgage and asset backed securities originated before 2009, enabling the fund to follow under its own discretion a long-term buy and hold strategy. Problem loans will be treated separately offering banks pools of loans for sale, awaiting the determination of the FDIC if it accepts to leverage any pool up to six times the equity, auctioning the FDIC the approved pool winning the highest bidder, who has to form a ‘Public- Private Investment Fund’ to purchase the pool of residential mortgages, guaranteeing the FDIC up to six times the equity and providing the Treasury Department 50% of the equity funding in ‘nonrecourse loans’, contributing the private investor with his investment to complete financing, remaining the ‘Public-Private Investment Fund’ subject to the FDIC’s oversight. Major banks found regulators scrutinizing their books to establish their viability under worsening conditions, a hypotetical scenario reaching unemployment rate 10,3%, falling home prices another 22% and contracting the economy 3,3% this year with zero growth in 2010, insisting the Obama administration it had no intention to nationalize banks, easing terms of its investments in more than 350 financial institutions, testing regulators the health of the country’s 19 biggest banks, starting with Goldman Sachs, Morgan Stanley, Bank of New York Mellon, American Express and JP Morgan Chase, considered relatively healthy, and Citigroup, Bank of America and Wells Fargo, seen as more vulnerable, to check how much more money those banks need to overcome crisis and to ensure they have the capital and the liquidity to provide credits necessary to restore economic growth, as lending of major banks keeps dropping despite receiving Government loans. After the test the Obama administration asked big banks to increase capital reserves, some having negotiated with regulators a reduction of capital requirements, needing BofA $33,9 Billion selling close to 6% of its CCB stake for about $7,3 Billion to Asian investors, Citigroup about $5,5 Billion, Wells Fargo $13,7 Billion raising already $7,5 Billion in equity, and Morgan Stanley $1,8 Billion having raised already $8 Billion selling $4Billion in common stock and $4 Billion in bonds, leading new aid probably the Government to acquire common stock of financial institutions obtaining in some cases a controlling ownership stake and to study removing chief executives, considering that banks may raise capital from private investors as non-Government backed debt, or converting, as needed, the Government’s existing loans granted to them into common equity, turning the Federal aid into available capital for a bank. The ’stress test’, might help regulators to push reluctant banks to sell illiquid assets under the Government program, accepting prices investors are willing to pay, preparing themselves for further writedowns. Under political pressure the Financial Accounting Standards Board/FASB changed the actual ‘fair value’ rules, admitting banks to use their own valuation models to value toxic assets, relaxing the reality based ‘mark-to-market’ accounting, removing also the pressure to get those assets off the books. Although this decision seemed to be one of the few options to save banks by improving their balance sheets, critics said it will further damage credibility of financial institutions by allowing banks to report higher profits avoiding to recognize losses on their investments in toxic assets, removing the necessity to sell those assets, assuming the risk of potential losses to be realized later. But eventually it will make it easier for the Treasury Department under the ‘PPIP’ to underbit the value set by banks of those illiquid assets preventing overpricing and overpaying, which would be more difficult under ‘mark-to-market’ accounting standards.
http://www.WhiteHouse.gov/news/
“Organizing for America” http://my.barackobama.com/neworganization/
American Recovery and Reinvestment Act – Transparency and Participation – President Obama: track every dollar spent and every job created -
http://my.barackobma.com/budgetaction/
http://whitehouse.gov/OpenForQuestions/
Government web site tells you if eligible to refinance mortgage, taking advantage of record low average rate on 30-year-fixed mortgages of actually 4,86%.
http://makinghomeaffordable.gov/
See the progress made!
http://my.barackobama.com/100days/
President Obama’s call: Ask Congress to pass real health care reform in 2009!
http://my.barackobama.com/HealthCareOrganizing/
Please RSVP for a Health Care Organizing Kickoff near you:
http://my.barckobama.com/HCkickoffAttend/
President Obama’s nominee for the next Justice of the United States Supreme Court: Hispanic Judge Sonia Sotomayor
http://my.barackobama.com/SupremeCourt/
http://my.barackobama.com/Sotomayorstand/
President Obama is calling on all of us – United We Serve
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2. Economic Outlook – Excesses & Consequences = Insolvency & Lack of Trust & Excessively Indebted Government & Overindebted Households & Undercapitalized Banks & Oversized Financial Sector& Underregulated Markets & Speculations & Contracting Economy Wordwide in 2008 & Deepening Global Recession in 2009 & 2010 Recovery - Market Adjustment – Surging BRIC countries as new Economic Powers and Global Players – New Opportunities
The prestigious independent National Bureau of Economic Research declared that the Nation has been in recession since December 2007, dropping economic growth in the last three months of 2007 as the credit crunch took effect, producing severe financial market problems in the United States and progressively a global financial crisis. To calm financial markets and help desesperate homeowners, former President Bush signed a two year bipartisan $168 Billion economic stimulus plan with tax rebates for consumers and tax relief for business, putting the Federal Reserve into force liquidity measures with repeated interest rate cuts, reducing its key interest rate to a historic low, dropping target range for federal funds rate to between zero and 0,25%, level where it probably will stay unchanged for the moment, and lowering the federal discount rate to 0,5%, coordinating emergency measures with the world’s most important central banks also reducing main and direct lending rates, expanding currency swap agreements with the European Central Bank, the Bank of Japan, Bank of England and Swiss National Bank to secure access to foreign currency for US banks, authorizing at the same time these central banks unlimited amounts of dollars to cover dollar needs of their local banks. Consumer spending, which accounts for about 70% of the US gross domestic product, fell at an annualized rate of 3,7% in the third quarter and 3,5% in the fourth quarter of 2008. Consumer confidence dropped to a record low of 37.7 in January 2009 (1985 = 100) as job prospects worsened and problems in the home sector continued, and there was growing evidence that people are struggling to meet their payments, declining housing prices and business investment, along with spreading unemployment hitting 7,6% in January 2009 losing another 598.000 Americans their job, jumping to 8,1% in February with 651.000 jobs lost and climbing to 8,5% in March, the 15th consecutive month of job losses with 663.000 revised to 699.000 jobs lost, and to 8,9% in April despite slowing job losses to 539.000, increasing to 9,4% in May with 345.000 jobs lost and to a 26 year high of 9,5% in June with 467.000 job losses, however jumping unemployment rate in some states much higher, reaching in Michigan 14,1%, Oregon 12,4%, South Carolina 12,1% and California 11,5%. Taking into account the first signs of a possible economic recovery consumer confidence improved in April 2009 rising the index to a revised 40,8 jumping in May to a revised 54,8, the highest level since September 2008, however dropping to 49,3 in June after two months of optimism. Consumer spending improved in January 2009 by 0,6% after six months of record declines, rising 0,4% in February, but fell 0,3% in March followed by a revised flat read in April and increased modestly by 0,3% in May, surging personal income 1,4% against April’s income gain of a revised 0,7%, mainly due to benefit payments out of the massive economic stimulus package, increasing the household savings rate to 6,9% in May reaching a 15-year high. After rising at an annual rate of $8,1 Billion in January 2009, consumer credit dropped at an annual rate of $7,48 Billion or 3,5% in February against the previous month, led by a record decline in borrowing on credit and charge cards, falling at an annual rate of $7,8 Billion or 9,7% in February compared with one month earlier. The US consumer price index/CPI rose a seasonally adjusted 0,3% in January 2009, 0,4% in February, but falling 0,1% in March remaining unchanged in April and rising again 0,1% in May, increasing the core index excluding volatile food and energy prices in the first three months of the current year 0,2%, in April 0,3% and in May 0,1%. Eroding consumer spending power and a continued price decline, turning inflation negative, could produce a deflationary spiral. Manufacturing activity suffered fast declines worldwide, dropping in the United States in December 2008 to its lowest level in 28 years and continued to contract for a 13th month in February 2009, dropping in Europe 12% from a year earlier, in Brazil 15% and in Taiwan a high 43%. The IMF warned financial markets are fragile, facing financial institutions total losses from 2007 to 2010 of $4,05 Trillion on loans and other assets, $2,7 Trillion originated in the US and $1,35 in Europe and Japan, needing US banks $275 Billion, Eurozone banks $375 Billion and UK banks $125 Billion in fresh equity to recapitalize to a level similar to the pre-crisis years to maintain an at least modest credit growth. US car sales of Ford, General Motors and Toyota fell more than 31% and of Chrysler 53% in December 2008 in comparision with one year earlier, and continued to show sharp declines in January 2009, February, March and April, dropping for the 18th consecutive month, but outselling Ford for the first time in at least a year Toyota in April, declining vehicle sales further in May and June, falling sales of Ford 11%, Toyota 32%, GM 33%, and Chrysler 42%, but posting all carmakers higher sales, while the annualized selling rate for cars in the US in January 2009 reached 9,8 Million, down from 10,3 Million in December 2008, and for the first time below China’s estimated annualized selling rate of 10,7 Million in the first month of this year, increasing concerns about the prospects for survival of US automakers. The car industry battles to survive the worst slump in decades, facing sales problems worldwide, posting Toyota a group net loss of $4,41 Billion for the fiscal year 2008 ending in March 2009, the worst result in its history, compared with a record high profit of $17,37 Billion a year earlier, lowering also its global vehicle sales forecast for this year to 8,97 Million, down 4% from one year ago, having projected sales of 9,5 Million vehicles. With a drop of 11% against 2007 General Motors sold 8,35 Million vehicles in 2008 losing its position as the world’s largest automaker for the first time in 77 years to Toyota. German premium carmakers are making big announcements in Shanghai, instead of Detroit or Geneva, reporting companies like Daimler record sales in China. US industrial production fell for the fourth consecutive month dropping a worst than expected 1,4% in February 2009 after declining a revised 1,9% in January 2009. US retail-sales declined another 2,7% in December 2008 and dropped 10,5% compared with one year earlier, a record fall since 1992, however rose 1,8% in January 2009 attracting deep discounts consumers and a revised 0,3% in February thanks to a sales increase of 5,1% by Wal-Mart against a 2,7% sales increase by the company in the same period a year ago, looking more shoppers for bargains, dropped a revised 1,3% in March, increasing a revised 0,2% in April and 0,5% in May, however decreasing nominal retail sales by 10,8% year-over-year. The US annual inflation rate 2008 was 3,8%, declining the monthly inflation in April 2009 to -0,74% and in May to -1,28%, the largest drop since 1950. US-GDP grew 0,9% in the first quarter of 2008, a seasonally adjusted healthy 2,8% in the second quarter, as exports were even stronger, far above expectations a few months ago, but economy contracted 0,5% in the third quarter and a seasonally adjusted 6,3% in the fourth quarter of 2008 as recession deepened, reaching a weak annual growth of 1,3% in 2008. US growth 2009 is expected to decrease up to 2,8% this year, lasting recession probably until the fourth quarter and US real gross domestic product contracted at an annual rate of 5,5% from January through March 2009 easing recession. The IMF lowered its estimate for world growth 2008 to 3,7%, down from 5% in 2007, revising global growth outlook for 2009 again considering the severe global financial crisis with falling confidence of consumers and companies, afraid of a fast dropping demand and a shrinking global trade falling according to predictions 9% this year, declining exports of the world’s leading exporters, Germany, China, Japan and the United States sharply, dropping also their imports, saying that the industrialised countries will face a full year contraction and the world GDP could shrink at least 1,3% in 2009, while according to the latest prediction of the World Bank the global economy might contract close to 3% this year. The economic growth 2008 for the 27-nation European Union has been revised downwards to 1,4% after decreasing a seasonally adjusted 1,1% in the fourth quarter of last year and for the 16-nation Eurozone to 1,2% after contracting 1,6% in the final three months of 2008 against the previous quarter, the worst drop in 50 years. The EU GDP decreased sharply at an annual rate of 4,4%, quarterly 2,5%, in the first three months of 2009, making EU up about 30% of the world economy, predicting the IMF a contraction of up to 4% in 2009, worser than in the US and also a slower recovery than in the US, and the economy shrinked at an annual rate of 4,6%, quarterly 2,5% in the first three months of 2009 in the Eurozone, suffering the German economy its steepest decline since at least 1970, projecting the IMF a contraction of up to 4,2% for 2009 in the Eurozone, where business climate is improving in the second quarter. The annual inflation rate in the EU declined to 1,3% in March 2009 and dropped for the first time since 1991 in June 2009 below zero in the Eurozone, decreasing consumer prices 0,1% compared with the same month a year ago, while unemployment rate is expected to increase to 8,75% in the EU and in the Eurozone to 9,9% in 2009 and 11,5% in 2010. The European Central Bank/ECB alarmed about the worsening recession in the Eurozone and taking into account the falling inflation, lowered its key rate in small steps from 4,25% in September of last year to actually 1%, which could be the floor of ECB, and to fight credit crunch in the Eurozone, revealed it will lend banks unlimited 1 year funds, up from actually 6 months, pumping a record amount of €442 Billion into the Eurozone’s financial markets, pledging also to purchase €60 Billion in covered bonds issued by Eurozone companies, projecting for the Eurozone for the current year a record low inflation of about 0,4% well below the ECB’s target of 2%, not ruling out the possibility of a deflation scenario. However pumping central banks unlimited liquidity into the markets along with an expansive stimulus policy that leaves Governments heavily in debt with climbing interest rates, there are doubts how all that money can be re-absorbed by the monetary authorities to avoid a huge long-term inflationary potential. EU leaders reached agreement on an economic stimulus package of €200 Billion, the equivalent of about 1,5% of the EU’s gross domestic product, coming €30 Billion from the European Investment Bank to increase lending to small businesses and for projects supporting renewable energy and cleaner transport, including €4 Billion in soft loans for the car industry, to strengthen recovery avoiding a deeper and longer recession in Europe, planning also to spend €5 Billion to finance energy projects and expanding the broadband connection in the EU, increasing its emergency fund available for EU nations facing financial trouble and that have not yet introduced the Euro from €25 Billion to €50 Billion. Economies of the 30 member advanced OECD nations are expected to contract by 4,3% in 2009, reaching the jobless rate 10% in 2010! Developing countries are not immune from a general slowdown of economic growth and recession among wealthier nations and BRIC countries Brazil and Russia, commodity producers and beneficiaries of higher commodity prices, had with 5,1% and 5,6% respectively lower growth rates in 2008, reducing Brazil its growth target for 2009 to 0,59% existing some predictions GDP might decline up to 1,5% and announcing Russia that its gross domestic product growth could fall to zero or lower in 2009, projecting the World Bank the Russian economy will contract by 4,5%, while the somewhat frenetic growth in India and China, both commodity consumers, will also slow down from estimated 6,8% and 9% respectively in 2008, reaching India’s growth forecast for 2009 only 5% and projecting China a growth target of 8% for 2009 against a World Bank forecast of a revised 7,2%. The 4 BRIC countries, the fastest growing emerging market economies, account for 42% of the world’s population, 14,6% of the global Gross Domestic Product/GDP of about $60,7 Trillion, 12,8% of the global trade volume and more or less 40% of the world’s foreign exchange reserves. A weaker global economic growth has produced a decreasing demand of commodities and lower commodity prices, easing pressure on inflation, remaining the interest differential between the Euro and the Dollar in favor of the US currency. Since the subprime mortgage crisis cash rich Sovereign Wealth Funds (SWF) injected more than $80 Billion to recapitalize and rescue some of the world’s biggest financial institutions like Citigroup, Merrill Lynch, UBS, Morgan Stanley, Barclays, Standard Chartered, HSBC, and in an emergency deal, authorized by the Treasury Department and the Federal Reserve, JPMorgan Chase bought the troubled fifth largest US investment bank Bear Stearns reaching worth of revised deal about $1,2 Billion. Lehman Brothers announced a net loss of $2,87 Billion for the second quarter 2008, expecting a new record loss of $3,9 Billion for the third quarter after writedowns of $5,6 Billion, and after failing to reach an agreement with foreign investors and unable to complete a rescue plan faced liquidation after filing for Chapter 11 bankruptcy protection, owing more than $613 Billion to creditors in the US, Europe and Asia. Barclays Bank, which walked away from a possible rescue of the investment bank because it did not obtain government guarantees, bought Lehman’s core US-broker-dealer-operations in a $1,75 Billion deal, turning itself into a universal bank, and Japan’s largest brokerage Nomura acquired Lehman’s flagship operations in Asia including its equities operations and investment banking in Europe and the Middle East. Ten of the world’s biggest private banks agreed to pool $70 Billion into a liquidity fund to support liquidity and reduce financial market volatility and the S.E.C. took emergency actions to stop abusive short-selling of stocks in financial institutions in difficulties, banning temporary short-selling of 799 financial stocks and considers general restrictions on short-selling of declining Wall Street stocks. In an admirable demonstration of much needed confidence Billionaire Warren Buffett/Berkshire Hathaway confirmed to invest $5 Billion in form of perpetual preferred shares in Goldman Sachs, getting also warrants to buy another $5 Billion in common stock, raising the bank additional $2,5 Billion in common equity in a public offer. Goldman Sachs reported first quarter earnings 2009 of $1,66 Billion and raised $5 Billion in common stock from the public, considering this money would help to return the $10 Billion Government aid received. Morgan Stanley revealed after three quarters of profitable results a $2,3 Billion fourth quarter 2008 loss due to the difficult market conditions which impacted profoundly and announced a net loss of $177 Million for the first quarter of 2009, showing also interest to return the TARP money as soon as possible. Facing a deep crisis of confidence the two last remaining US investment banks Goldman Sachs and Morgan Stanley changed their investment banking model transforming themselves, with the approval of the Federal Reserve, into traditional bank holding companies, getting under stricter regulations as commercial banks protected by the federal safety net, requiring them to hold more capital in relation to their portfolio of investments. Morgan Stanley suspended merger talks with Wachovia and discussions about increasing the participation of the China Investment Corp/CIC, already a shareholder with a 9,9% stake, as Mitsubishi UFJ Financial Group paid $9 Billion for a 21% stake in the US bank and $3,5 Billion to take over 100% of the Union Bank of California, merging the Japanese bank its security subsidiary with Morgan Stanley’s Japanese securities operations. Posting Citigroup deepening losses declining Citi shares to its lowest level in nearly 6 years, the bank’s largest individual shareholder Saudi billionaire Prince Al-Waleed Bin Talal announced he will increase his stake from actually 4,3% to 5% considering the shares actually dramatically undervalued. According to a rescue plan for Citigroup, negotiated by worried regulators tightening control of the bank giant, the Government granted loan guarantees of up to $306 Billion backed by residential and commercial real estate, agreeing to cover up to 90% of the losses on those securities in exchange for $7 Billion worth of preferred stock earning a dividend of 8%, also providing another $20 Billion against preferred shares, in addition to the $25 Billion already injected out of the $700 Billion bailout fund. Citigroup has to absorbe $8 Billion already reserved to cover assets and $29 Billion of the first losses as well as 10% of the remaining amount of potential losses and after the rescue announcement Citi shares went up 66%. Reshaping its organization the financial giant integrated its brokerage operation Smith Barney into a joint venture with Morgan Stanley, receiving Citigroup about $2,7 Billion, leaving Morgan Stanley with a controlling 51% stake and the right to purchase all of the new unit over a period of up to 5 years. Citigroup reported for the fourth quarter of 2008 a loss of $8,29 Billion, the fifth consecutive quarter loss, and for the full year 2008 a loss of $18,72 Billion, putting new pressure on the company to dismantle its money losing operations, isolating them into the new unit called Citi Holdings, keeping its healthy key businesses in a unit called Citicorp. The bank reported for the first quarter of 2009 a net income of $1,6 Billion compared with a loss of $5,11 Billion during the first quarter a year ago, informing that it is selling its Japanese domestic securities operation for about $7,8 Billion to Sumitomo Mitsui Financial Group/SMFG obtaining a vital capital injection and launched a delayed $58 Billion swap offer converting preferred shares and trust-preferred securities into new common stock, including $33 Billion from private holders and $25 Billion out of the $45 Billion invested by the Government, leaving the US with the largest ownership stake of about 36%, helping Citigroup to bolster its balance sheet making it eventually to one of the world’s best capitalized financial institutions. Wells Fargo announced it closed a $15,8 Billion stock deal, approved by directors of each company, to buy all of Wachovia Corpration, keeping the bank intact preserving the value of an integrated company without government support, providing a superior value for its shareholders to a transaction offered by Citigroup. Wells Fargo, the biggest bank of the West Coast, struggling with the acquisition of Wachovia posted a fourth quarter 2008 loss of $2,55 Billion against a profit of $1,36 Billion a year ago, obtaining a profit of $2,84 Billion for the full year 2008 and said it earned $3,05 Billion in the first quarter of 2009 showing after paying preferred dividends a net income of $2,38 Billion, against $2 Billion for the same period of 2008. Financial difficulties forced Merrill Lynch, encouraged by the Federal Reserve approving officially a merger, to agree to be bought by Bank of America in a rescue take over for about $50 Billion, making BofA the second largest financial institution in the world. BoFA said it made a fourth quarter 2008 loss of $1,79 Billion plus a $15,31 Billion loss at troubled Merrill Lynch, but showed still a profit of about $4 Billion for 2008, receiving a fresh Government capital injection of $20 Billion, after having obtained already $25 Billion out of the bailout fund, making the Government with a 6% stake the bank’s largest shareholder, absorbing also against an additional $4 Billion stake in preferred stock with a yield of 8% up to $98,2 Billion in losses on illiquid assets of $118 Billion, 75% of those are from Merrill Lynch. BofA, which also purchased the troubled mortgage giant Countrywide, announced a first quarter earning 2009 of $4,2 Billion up from $1,2 Billion for the same period of 2008, plans to return bailout money before the end of 2009, replacing shareholders Kenneth Lewis as chairman, who remains president and chief executive officer, disapproving his role in the bank’s merger with Merrill Lynch, appointing instead long-term director Walter Massey. JPMorgan Chase, having bought already the troubled investment bank Bear Stearns, acquired in another emergency deal brokered by the Government for $1,9 Billion almost all of Washington Mutual/WAMU, with $307 Billion in assets the nation’s largest savings and loan and among the worst hit by the housing crisis. WAMU account holders are guaranteed by the Federal Deposit Insurance Corporation up to $100.000 and additional deposits will be backed by JPMorgan Chase, having to absorb at least $31 Billion in losses from this take over, creating a nationwide retail franchise rivalled only by Bank of America. JP Morgan Chase showed a modest profit for the fourth quarter 2008 of $702 Million and for the full year of 2008 a net income of $5,6 Billion, 64% lower than in 2007, revealing a better than expected first quarter 2009 net income of $2,14 Billion, against a $2,9 Billion profit for the same period a year ago, hoping to be able to repay as soon as possible the US Government’s direct capital investment in the bank of $25 Billion, which might be possible after demonstrating that it can issue debt without a Government guarantee according to TARP repay rules. Ten large banks, among them Goldman Sachs, JP Morgan Chase, American Express, Bank of New York Mellon and also Morgan Stanley, were identified by regulators to be strong enough to leave the TARP program and returned a total of $68,3 Billion to the Treasury Department, which not granted such permission to Citibank, Bank of America and Wells Fargo, intending American Express, Bank of New York Mellon and JP Morgan Chase also to buy back warrants for their common stock from the Treasury Department at a fair market value. Part of the profit US banks revealed for the first quarter of 2009 came from accounting adjustments or one time gains and not from quality earnings, but helped the financial sector to raise $89 Billion in equity and debt issuance through 92 deals in the second quarter to offset losses on toxic assets. After EU regulators insisted in the necessity to increase transparency in the over-the-counter/OTC markets linked to the global credit crisis, banks agreed to an European clearing mechanism for European Union-based credit default swap/CDS contracts, acting as buyer to every seller and as seller to every buyer, absorbing losses in the event of default. The Obama administration plans to overhaul financial regulations to protect consumers and avoid risky practices preventing a future financial crisis, giving the Federal Reserve new oversight powers, introducing also more control and restrictions for OTC derivatives, actually largely excluded from regulation, to be negotiated in the future through exchanges or central clearing houses regulated by the SEC and the CFTC, estimating their total amount to reach about $450 Trillion, of which the value of interest-rate swaps is put at $403,1 Trillion, the value of credit default swaps at $38,6 Trillion and the value of equity derivatives that caused a near collapse of AIG at $8,7 Trillion. Investors withdraw about $150 Billion in December from hedge funds, which had borrowed also heavily money, and as hedge fund outflows increase they have to sell assets, estimating analists that the hedge fund industry managing at its peak beginning 2007 about $2,2 Trillion in assets, is going to shrink according to estimates by more or less 45%/$1 Trillion due to withdrawals and investment losses, introducing the European Union and the United States stricter hedge fund regulations. The credit crisis conduced to a tightening in lending standards of credit card issuers with consumers to lower risk profile, declining revolving credit card debt to $932 Billion or 6,8% at the end of March 2009 from $992 Billion in December 2008, reporting American Express that its net charge offs climbed from 8,1% in January 2009 to 8,6% in February growing to 8,8% in March, increasing credit defaults of 30 days and more from January 2009 to February 0,6% to 5,3%, but decreased to 5,1% in March and credit card issuers are increasingly accepting on a case-by-case basis to receive less than the full balance. The Federal Reserve approved the transformation of American Express, the nation’s last big independent credit card company, into a bank company, getting greater access to the bailout package for banks, requesting about $3,5 Billion in assistance out of this fund. In a difficult operating environment American Express posted a better than expected fourth quarter 2008 net income of $172 Million, down 79% from $831 Million a year ago. US banking regulators and the Federal Reserve, worried about financial markets, worked on stricter rules for credit card issuers prohibiting unfair practices and calling on the industry to be more user-friendly, considering borrowers troubles to make their payments in the midst of a deep recession. The Senate passed overwhelmingly and with the full support of the Obama administration a relief bill for holder of credit cards with exorbitant interest rates, legislation which has been already approved by the House, prohibiting, in accordance with the Federal Reserve’s rule, raising interest rates on existing balances unless consumer’s payment is 30 days late, rejecting the Senate a limit on credit card interest rates but extends that late period to 60 days, saying the interest rate would have to be restored to its previous level if payments were on time for six months. Under the Senate version rates can’t be increased the first year and any rate increase has to be notified 45 days in advance, while statements must be mailed 21 days before a payment is due, approving the House the final bill which was signed by President Obama into law, becoming effective 9 months after signing as the new Fed’s rule will get only into force until July 2010. AIG/American International Group, the world’s largest insurance company with an overexposure in real estate and in the credit default swap market, two problem segments suffering an overall decline in asset prices, was seeking $40 Billion in emergency loans, request initially rebuffed by the Federal Reserve, but to avoid that after Lehman Brothers also AIG was forced to file for bankruptcy protection, producing additional unpredictable consecuences for the world financial system, the Federal Reserve agreed on an emergency support taking a 79,9% equity stake and an effective control of the troubled insurance company, replacing its chief executive, granting a $85 Billion two-year bridge loan, to be repaid with proceeds of the sale of AIG’s assets, downsizing the firm, serving all of AIG’s assests as collateral. Getting a new commitment of the Treasury Department of $30 Billion, bringing total bailout to about $170 Billion, AIG reported a loss of $61,7 Billion for the fourth quarter of 2008, the largest quarterly loss in US corporate history, totalling losses $99,3 Billion for the whole year of 2008, converting the Government $38 Billion of debt into equity in two better performing Asian subsidiaries of AIG, allowing AIG to exchange $40 Billion in preferred non-voting shares paying a dividend of 10% for new preferred shares not requiring a dividend, helping the company to save $4 Billion a year. European leaders negotiated a new model for financial supervision, creating a European Systemic Risk Board monitoring potential threats to financial stability and a European System of Financial Supervisors checking quality and consistency of national regulatory authorities. Due to the financial crisis Germany started to guarantee all private savings accounts, worth at least €500 Billion/$700 Billion in the country, to reinforce confidence in its financial system, measure followed in different terms by other EU countries, agreeing the Eurozone to raise guarantee on bank deposits to €50.000/$68.000 for one year, acknowledging that many member states may increase their minimum to €100.000. Eurozone banks, blamed for tithening of credit to the corporate sector, especially in Germany with a chronically undercapitalized banking system above all of the troubled Landesbanken, hitting Germany’s export structure, may face besides write-downs related to asset backed securities and derivatives additional risks of more than $283 Billion this year and next, mainly due to likely losses on corporate debt and other loans as the economic slowdown continues, existing also potential threats considering difficulties of central and eastern European economies, where many western European banks are exposed. The German Government and financial regulators agreed on a second bailout package, increasing aid to €87 Billion in addition €15 Billion from the private banking sector for the Hypo Real Estate, one of Europe’s biggest commercial property lenders, taking an inititial stake of 9,94% increased to 47,31% to avoid that the crisis in one local financial company endangers the country’s financial system, preparing a complete takeover approving a 73,95% majority of shareholders at the bank’s extraordinary general meeting a capital increase of €2,96 Billion ensuring that the Government after suscribing the new shares will hold a 90% stake of the firm, initiating a squeeze-out of the minority shareholders, insisting the US investment firm JC Flowers holding still a stake of about 14% to continue as shareholder and might take legal action. Germany passed through parliament the Hypo Real Estate Nationalization Bill, allowing the state through the German bank rescue fund, SoFFIN, the control of the troubled mortgage lender, measure supported by the European Commission, and the before mentioned contingency initiative called Special Fund for Financial Market Stabilization/SoFFIN for an amount of up to €500 Billion to safeguard the overall German banking system that includes: Up to €70 Billion which could be increased if necessary by another €10 Billion, available until 12/31/09, for direct injections of capital into banks to restore weakened balance sheets, including German subsidiaries of foreign banks, and insurance companies against interest-bearing shares or assets, giving the Government the last word in important management decisions, like limits on executive pay and ban on dividend payments; up to €10 Billion of this part can be used to buy illiquid assets directly from banks and the Government is allowed to issue a state guarantee of up to 20 years for such assets which can be parked in special purpose vehicles/SPVs – so called bad banks, financial institutions would have to set up individually, making risk provisions to be covered by shareholders’ dividends to cover potential future losses, approving the German lower house the bad bank plan, which enables banks to place toxic assets, such as asset backed securities and collateralized debt, to be held up to 20 years, acquired until December 30, 2008 discounting 10% of their value on June 30, 2008 and once a book value has been calculated by a third party, in exchange for state-guaranteed bonds, for which banks will be charged a fee, and if these assets are at their maturities worth less than the initital value banks will have to pay the difference to account for the state-backed bonds they issued, estimating the Government that German banks may have as much as €230 Billion worth of toxic assets in their books; a provision of up to €20 Billion to cover a calculated 5% risk of potential credit guarantee losses, as the main purpose of this rescue package is to unfreeze credit markets, offering on commercial terms up to €400 Billion in state guarantees to underwrite until the end of 2009 new Interbank loans up to 36 months and the Government will be able to attach conditions, like assurances to provide credits to companies and households. Germany entered into a tecnical recession, contracting economy in the fourth quarter 2,2%, reaching growth 1,3% in 2008, down from 2,5% in 2007, shrinking due to Germany’s export dependency, a shocking vulnerability of the German economy to international demand, a worser than expected 3,8% in the first quarter of 2009, down 6,7% in 12 month-period, with exports falling 20,9% and economic growth outlook for 2009 remains negative as GDP might shrink according to the IMF up to 6,2%, reaching the jobless rate 10,8% in 2010. As recession deepened the German Government approved an €50 Billion economic stimulus package, which includes tax reduction programs, low interest rate loans and infrastructure investments, announcing a second economic rescue plan for 2009/2010 worth € 49,25 Billion with long-term stimulus measures, like tax cuts, special infrastructure spending, and modernising schools and universities, setting up also a €100 Billion ‘German Fund’ managed by the KfW, the Public Sector Development Bank, to help businesses to overcome credit crunch, providing companies with loans and credit guarantees, approving the German Parliament additional tax reliefs to stimulate the economy. Deutsche Bank, the biggest bank in Germany, acquiring Postbank, a big consumer banking operation from the Deutsche Post, reported a loss of €4,8 Billion for the fourth quarter and of €3,9 Billion for the full year of 2008, its largest loss in 50 years, after earning €6,5 Billion in 2007, but announced a strong net profit of €1,2 Billion for the first quarter of 2009 compared with €131 Million a year earlier, insisting it has no need to receive Government funds. Meanwhile French BNP Paribas took control of troubled Fortis operations in Belgium and Luxembourg in a €14,5 Billion deal, after a suprise nationalisation of Fortis Dutch business and the French Government said it will guarantee up to €320 Billion of new Interbank loans and offers €40 Billion for direct capital injections into banks in exchange for equity stakes. The French Government also revealed its economic stimulus package for €26 Billion principally oriented towards investment efforts, but includes support for construction and small businesses. Both German and French carmakers are also eligible to use through their financing arms the state guarantees for new lending offered by the two Governments. The British Government announced a partial nationalisation of its banking system, including the package Pstg.50 Billion to buy preference shares or other interest bearing shares in 7 big UK banks, Pstg.250 Billion of loan guarantees for up to three years and another Pstg.100 Billion in short-term liquidity, demanding that banks increase Tier 1 capital ratio actually in some cases lower than 5% to about 7,5% until the end of this year (core equity capital to total risk-weighted assets plus ability to sustain future losses), and limit executive compensation and dividends, while lending activities have to satisfy Government, expressing some of these banks, more urged to be recapitalized, like the Royal Bank of Scotland/RBS, the Halifax Bank of Scotland/HBOS and Lloyds TSB they will participate in the program, creating the British Government the UK Financial Investments Ltd/UKFI to control its stakes in financial institutions, while other banks like Barclays and HSBC said they prefer to intend to raise capital from private investors to avoid conditioned Government support. The Royal Bank of Scotland/RBS, 70% owned by British taxpayers, posted with $34,4 Billion the largest annual loss in British corporate history, while Lloyds Banking Group, 43% owned by British taxpayers, reported a 2008 loss of about $15,3 Billion and UK Government agreed to insure more than $353 Billion in Llloyds assets increasing its stake in the bank up to about 75%. Barclays announced it will rise capital by $12,02 Billion, participating mainly Persian Gulf investors from Qatar/$3,8 Billion and Abu Dhabi/$5,8 Billion to control jointly more than 30% of the British bank once the operation is settled, selling Barclays its asset management business Barclays Global Investors/BGI for $13,5 Billion to US money manager BlackRock obtaining a 19,9% stake in the US company now transformed into the world’s biggest investment firm, including financing of the transaction loans of $2 Billion from Barclays and the sale of equity for about $2,8 Billion to institutional investors, apparently to three Sovereign Wealth Funds KIA, GIC and CIC. Increasing rescue package by another Pstg.100 Billion and to make it more effective, the British Government added new measures, such as an insurance against a fee to protect financial institutions against future defaults on mortgage and other loans, urging participants in this program to increase lending to borrowers! But soaring budget deficits in the United Kingdom and the United States are alarming credit rating agencies, cutting Standard and Poor’s Britain’s sovereign rating from stable to negative and may downgrade the country’s key credit ratings due to deteriorating public finances as debt burden could reach 100% of GDP by 2013. UK showed a worst than expected 2,4% quarter on quarter GDP decline for the first three months of 2009. Swiss authorities agreed against a 9% stake to take $60 Billion in mortgage related and other assets off the book of UBS, underwriting the bank giant up to $6 Billion of this transaction, putting them into a special Government – backed fund, cleaning the balance sheet of troubled assets, helping the US Federal Reserve to finance initially the deal. UBS, Europe’s biggest casualty of the US subprime crisis, which so far has written off about $44 Billion of investments linked to the US home market, confirmed further write downs of up to $7,5 Billion, reporting a loss for the fourth quarter 2008 of $6,9 Billion and for all the year 2008 of $16,8 Billion, revealing also a loss of about $2,6 Billion for the first quarter of 2009. Credit Suisse did not want to participate in a Government rescue effort and increased its capital base with new investments of about $8,8 Billion from a group of private investors, informing that the largest participant is a subsidiary of the Qatar Investment Authority, a Sovereign Wealth Fund controlled by the Government of Qatar, already a major shareholder of Credit Suisse, posting a higher than expected loss for 2008 of $7,1 Billion, however reporting net profits of $2,6 Billion for the first quarter of 2009. And Russia supported its banking system with another $36 Billion in five-year loans via its biggest states banks VTB and Sberbank, providing much needed longer-term liquidity, and $40 Billion more in new help to strengthen top banks, setting aside $6,7 Billion to support its dropping stock markets, announcing a new recovery plan offering $90 Billion in stimulus spending through tax cuts and social welfare benefits to stimulate domestic consumer demand. Japan has already approved large economic stimulus packages worth about $765 Billion and is planning fresh fiscal stimulus measures with spending of $154,4 Billion around 3% of the nation’s GDP, offering also $100 Billion in financial assistance to Asian countries, approving parliament a record $904,7 Billion budget for the fiscal year starting in April 2009, to fight the worst economic crisis in decades, declining the country’s gross domestic product 3,3% in the fourth quarter of 2008 and a record 4% in the first three months of 2009 with exports falling 26%, expecting Japan an economic contraction of as much as 3,1% for 2009. China announced a massive stimulus initiative of $585 Billion, including heavy infrastructure investments, tax cuts and low interest rate loans, hoping that record government spending helps to reach economic growth target of 8%, contribuiting also to the region’s stabilization and the Government is reporting that Chinese economy is showing some positive changes, improving investment, consumption and trade figures. China introduced a ‘Buy China’ policy as part of its economic stimulus programme in response to the ‘Buy American’ clause, a move that will increase tensions with trade partners and trade protectionism. Existing home sales increased by 6,5% from November to December 2008, reaching an annual rate of 4,74 Million, dropping home prices 18,5% the year ending December 2008, falling existing home inventories 11,7% to 3,68 Million. Resales declined to a 12 year low in January 2009 falling by 5,3%, rising 5,1% in February to a revised level of 4,71 Million from 4,49 Million in January, dropping again 3% in March to a seasonally adjusted annual rate of 4,57 Million units, increasing a modest 2,9% in April to an annual rate of 4,68 Million, representing about 45% of the market foreclosures, jumping existing home inventories 8,8% to 3,97 Million at the end of April, declining the median price to $170.200 down 15,4% from a year ago, while new home sales dropped by nearly 15% from November to December 2008, declining 44,8% compared with the same period a year ago, showing a record year over year fall of 48,24% in January 2009, but rose 4,7% in February to a seasonally adjusted annual rate of 337.000, dropping a revised 3% in March but climbed again 3% in April. New home starts dropped a record 33% in 2008 against a decline of 25% a year earlier when the subprime mortgage crisis started, but rose a not expected 22,2% in February 2009 from a month earlier, renewing hopes that the home market might be approaching a bottom, however fell 12,8% in April to a seasonally adjusted annual rate of 454.000 units, but jumping by 17,2% in May rising to an annual rate of 532.000. US homebuilder confidence climbed to an eight month- high rising the index from 14 to 16 in May, but is still far away from the 72 peak reached in June 2005, reflecting a reading below 50 poor conditions. Foreclosures surged by 81% in 2008 from 2007 with about 3 Million foreclosure filings, repossesing banks more than 850.000 properties, deapening threat to the US economy. Roughly 12 Million households owe today more on their mortgage than their homes are worth, as housing slump has pushed values down as much as 30% in some areas and US authorities are calling on the Nation’s largest subprime-mortgage-servicing companies to follow Bank of America’s lead to adopt a comprehensive, streamlined and effective broad based loan modification program as soon as possible! JP Morgan Chase also initiated a rescue plan for stressed homeowners to improve terms of $70 Billion in mortgages, to avoid default and reduce foreclosures, which could benefit as many as 400.000 borrowers, especially by replacing adjustable rate-mortgages with fixed-rate loans, putting more pressure on other mortgage lenders to start loan modification programs. Citigroup is said to support a new housing legislation allowing bankruptcy judges to modify terms of troubled mortgages for a borrower’s primary residence, which however was rejected by the Senate, accepting the bank that more help for homeowners is essential as foreclosure crisis is worsening and the nation’s recession is deepening. JP Morgan Chase, Citigroup and Bank of America agreed to a foreclosure moratorium, joining also Fannie Mae and Freddie Mac, while President Obama announced ‘The Homeowner Affordability and Stability Plan’ a mortgage loan-modification program, within an aggressive foreclosure strategy to reach nine Million homeowners, pledging up to $75 Billion aimed at helping three to four Million people at risk of foreclosure providing incentives to lenders to change terms of loans to make them more affordable to struggling homeowners, reducing interest rates to as low as 2% with payments reaching 31% of their income, and allowing four to five Million homeowners to refinance their mortgages into loans with cheaper payments through Fannie Mae and Freddie Mac, increasing also the guarantee against losses on the mortgage investments of the two Government controlled mortgage giants to $200 Billion each from actually $100 Billion each, rising also the size of their portfolio limits from $850 Billion to $900 Billion. Qualify for the program mortgage loans with a principle balance of up to $729.750,- , originated before January 1 of 2009, ending the program in 2012, permitting a loan modification only once, and expanding the foreclosure prevention plan mortgage lenders signing up for the program will have to agree in advance to reduce substantially monthly payments on the second mortgage, millions of homebuyers took out to cover additional costs, as soon as the first mortgage has been modified. Nationwide 8.428 homes fall into foreclosure every day, losing borrowers their homes in 50-60 percent of these cases. Under the former Bush administration the Senate passed a bipartisan package of tax breaks for homeowners and businesses hurt by the faltering economy – a step in the right direction, which offered little aid to nearly 8000 families suffering foreclosure each day. The following Federal Mortgage Plan to refinance homeowners who had fallen behind their mortgage payments, with stable, government-insured loans, failed to really ease foreclosure crisis. Than a broader housing aid bill passed through Congress, including a program, aimed at rescuing more than 400.000 qualified homeowners in danger of foreclosure and seeking to remain in their primary home, eligible if troubled loan or loans were originated on or before January 1, 2008, allowing the government to guarantee up to $300 Billion in mortgages refinanced into more affordable 30-year fixed-rate loans with lower monthly payments at more affordable rates through the Federal Housing Administration, if lenders agree to forgive a portion of the debt and write new loan/s worth no more than 90% of the home’s current, diminished value – depending largely on bankers’ willingness to take a partial loss on loan/s, an overhaul of the Federal Housing Administration, stronger regulations of mortgage giants Fannie Mae and Freddie Mac, giving them a permanent authority to increase home loans from $417.000 to $625.000, $15 Billion in housing-related tax incentives, including a refundable tax credit of up to $7.500 or 10% of the purchase price for first home owners on purchase of unoccupied housing to slow the fall of plunging home prices, an amount of $150 Million to expand counseling for borrowers to prevent foreclosure, establishing stricter disclosure rules and payment requirements for lenders, a Housing Trust Fund of $5 Billion to cover expenses related to the foreclosure rescue plan for three years to be used to create affordable rental housing, financial councelling and mortgage restructuring, and a $3,9 Billion emergency aid to stabilize hard-hit communities by purchasing vacant and foreclosed properties. And the long-sought housing relief legislation, the Housing and Economic Recovery Act of 2008, raised the national debt ceiling to $10,6 Trillion to accomodate the rescue plan for the two mortgage companies, intending to stabilize troubled housing companies Fannie Mae and Freddie Mac with a combined capital structure of about $83 Billion, debts of more than $1,6 Trillion, exposures of about $5,3 Trillion and unprecedented losses of $11 Billion in the last nine months, expecting heavy new quarterly losses as foreclosures continues, increasing the amount they can borrow from the Government which can directly invest in the firms if conditions get worse, suggesting the creation of a new regulatory agency the Federal Housing Finance Agency, authorizing the Federal Reserve separately to direct lending to the two companies if necessary. Worsening troubles of the two mortgage giants finally forced the Treasury Department to seize, at least temorary, Fannie Mae and Freddie Mac, announcing a plan that provides as much as $200 Billion of fresh capital plus new credit lines, putting the two companies into a government conservatorship that will be run by their regulator the Federal Housing Finance Agency, injecting capital on a probably quarter to quarter basis if the mortgage companies can’t fund themselves, changing top-level management, and calling the rescue plan to shrink the role of both firms, reducing their investment portfolios of actually more than $1,4 Trillion to a total of $500 Billion, or $250 Billion each company. Home loan rates dropped from a national average rate of as much as 6,75 on a 30-year fixed-rate mortgage to 4,86%, a record low since 1971, using the Teasury Department Fannie Mae and Freddie Mac to eventually bring mortgage rates down as low as 4,5% to revitalize housing market. The Federal Deposit Insurance Corporation, which guarantees savings and checking deposits, warned that the problem of home loans is proving to be worse than initially feared, raising the numer of banks on its list of problem lenders from 117 to 171 in the third quarter of 2008. The Basel Committee on Banking Supervision, which sets global standards for regulation, is outlining future plans that would require banks to hold greater capital reserves, limit amount they can borrow and make provisions for bad debt throughout the economic cycle. Recession panics global stock markets, suffering one of its worst annual declines in 2008, dropping in the United States, Europe and Japan between 33% and 47%, US-financial sector down 57%, wiping out gains of many years, falling even further in January, and stocks and commodities, declining commodity markets just under 40% in 2008. The crisis is expected to produce market adjustments, opening new opportunities, and might contribute to change global economic order and powers, emerging the BRIC countries Brazil, Russia, India and China as major players. Facing the worsening crisis G7 countries issued a joint statement announcing a plan to fight global finance crisis including the use of all available tools to support key financial institutions and prevent their failure, ensuring broad access to liquidity and funding and that they can rise capital from public as well as private sources in sufficent amounts to re-establish confidence, permitting them to continue lending to households and businesses, enabling them to restart the secondary market for mortgages and other securitized assets, implementing accurate validation and transparent disclosure of assets according to high quality accounting standards, also recommending to ensure that the respective national deposit insurance and guarantee programs are sufficent. Joining the IMF the coordinated bailout action it announced to be ready to answer any demand by countries affected by the global credit crisis, activating its emergency financing mechanism, having immediately available about $200 Billion to lend, while IADB is proyecting financial help out of regional rescue funds seeking an important capital increase, and announcing the World Bank to be prepared to provide up to $100 Billion in new aid to developing nations, giving priority to middle-income and poorer states. To give a unified answer to crisis the 16 Eurozone Governments agreed on a broad rescue plan, involving to guarantee new bank debt until the end of 2009, allowing Governments to support banks by buying preferred shares and to rescue systemic important failing banks through emergency recapitalization, revising eventually accounting rules loosening norms for European banks to obtain the same advantage as their US counterpart did already, leaving it up to member countries to implement measures according to their market conditions. The Eurozone Governments proposed the United States to prepare a world summit to refound the international finance system, reforming financial and monetary system, guaranteeing more transparency and establishing international regulations and controls – without speculators -, inviting former President Bush leaders of developed and developing countries/G20 Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Corea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United States, European Union and IMF, World Bank and United Nations to such a meeting. The annual session in Sao Paulo of the G20 finance ministers and central bank governors ended with pledges to take joint and coordinated action to regain financial stability, agreeing in the necessity for countries to stimulate their economies with tax cuts and increased government spending, also considering that lower interest rates are convenient. On a two-day Asia-Europe summit in Beijing, assuming China a leadership in the crisis expected to help lead the world recovery, Asian and European leaders endorsed the recommendation for a reform of the global monetary and financial system and the necessity for the IMF to assume a more active role to help troubled countries and to guard the stability of the world’s financial system, approving the G20 summit in Washington to reinforce international cooperation to boost growth policies according to domestic conditions, requesting developing countries that developed nations fix their economies and return to growth. Gulf Cooperation Council/GCC finance ministers met in Rijadh to propose a joint response as the global financial crisis reaches the Persian Gulf, leaving the sharp decline in oil prices their economies vulnerable, threatening their financial sector and above all government and privately funded projects across the region. The United Arab Emirates/UAE, the world third largest investor in property, is exposed to see UAE property prices fall due to the credit crisis. At the 20th Asian-Pacific Economic Corporation/APEC forum meeting foreign and trade ministers announced, ahead of APEC’s 16th leaders’ summit, they will strengthen regional cooperation, promoting trade and investment liberalization to address the challenging financial and economic outlook. The 21 APEC member economies, including the United States, Canada, Australia, Japan, China, Russia, Chile, Peru and Mexico, account for 49% of world trade and represent 55% of the global gross domestic product. China with the world’s largest foreign exchange reserves of over $2 Trillion regarded as the most important investor in US Government debt, holding about $585 Billion in Treasury Bonds and more than $370 Billion in Fannie Mae and Freddie Mac debt, is worried about the outlook of its investment as Washington increases debt to fight economic crisis and although the White House answered there is no safer investment in the world than in the United States, proposed to replace the dollar as international reserve currency expanding the role of the ‘Special Drawing Rights’ of the IMF based on a basket of currencies -US$, Yen, Euro and Pound Sterling- creating a new reserve currency disconnected from individual nations, position reitirated by China’s central bank and supported by some Latinamerican nations and Russia, increasing Chinese efforts also to promote the use of their local currency internationally offering renminbi-denominated trade finance credits. Previous to the G20 summit in London G7 countries pledged to agree on a strong commitment to use all possible options for a collective and robust response to the global recession, avoiding financial isolationism and protectionism to uphold free trade. And as the global recession deepens the US said the IMF’s available funds of currently about $250 Billion should not only be doubled to $500 Billion, as suggested by the EU, deciding ahead of the forthcoming G20 summit a new contribution of €75 Billion/$102,55 Billion along with Japan offering $100 Billion, but increased by $500 Billion, to bailout struggling nations introducing more flexible lending terms, using the ‘New Arrangements to Borrow’/NAB, a set of credit arrangements enabling the fund to borrow supplementary resources from its richer members, agreeing with the IMF that G20 nations fiscal stimulus plans need to increase from an average of actually 1,4% to 2% of their GDP as long as global recession lasts, rejected by EU leaders to avoid overspending. After promising Governments huge monetary and fiscal stimulus of already $5 Trillion to fight economic recession in their countries, G20 nations pledged another $1,1 Trillion to combat global crisis, tripling available IMF funds immediately to $500 Billion and later to $750 Billion, creating the IMF additional $250 Billion in ’Special Drawing Rights’, providing $100 Billion to the World Bank and other multilateral development banks and increasing world trade financing available for cross-border trade by $250 Billion through export credit agencies in each country, refraining from protectionism to be monitored by the World Trade Organization. G20 leaders showing increased international cooperation announced that the ‘Financial Stability Forum/FSF’ will be replaced by the new ‘Financial Stability Board/FSB’, including as members all the G20 countries, Spain and the European Commission, to collaborate with the IMF avoiding through early warnings future macroeconomic and financial risks, creating stricter capital requirements for banks revamping risk management and accounting systems, strengthening regulations of financial sector and control of systemically important financial institutions, including hedge funds and credit rating agencies, taking action against tax havens, implementing limits on bank pay and bonuses and call on accounting standard setters to work urgently on a common international approach to dealing with toxic assets on the balance sheet. During his first Europe trip as President, attending G20, NATO and European Union summits and meetings with political leaders of many nations, Obama transmitted confidence and unity, reaching unprecedented coming together on important issues and on his Middle East trip he pledged in Cairo for a new start urging Americans and Muslims to drop suspicions of one another, referring and pushing publicly to a two-state solution, Israel and Palestine, to achieve Middle East peace, endorsed in principle by Israel’s Prime Minister Benjamin Netanyahu.
Finance services and banking should set the very highest standards for ethical behaviour – Sir Evelyn de Rothschild. This is something that has deteriorated in the past few years?
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ECB – Euro exchange rate 07/06/09 USD/EUR 1,3897
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Gold $925,15 07/06/09 -> Commodity of choice favoring long term fundamentals an upwards tendency above $1000 in 2009, although IMF gold sales may push down prices temporarely.
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2.a) Gold
Global gold mining in 2008 decreased 4% to 2.356 t (t=metric tonnes)compared with the output of about 2.444 t in 2007, falling gold production for the fourth consecutive year. The world’s largest producing nation with 288 t, 4,26 % more than a year ago, was again China, leaving behind South Africa which mined 232 t in 2008, 13,6% less than in 2007, the lowest level since 1922, falling in 2008 to the third place after the United States with 234 t in gold output. Other important gold producing countries in 2008 were Australia/225 t, Peru 175 t, Russia/163,9 t, Canada/100 t, Indonesia/90 t, Uzbekistan/85 t, Ghana/81 t. The largest proven and probable ore reserves are in South Africa, the United States (Nevada, Alaska, California, Colorado, New Mexico, Utah), Russia, Canada, Brazil, Ghana and Simbabwe; total reserves are estimated at 60.000 t. Of the 161.000 t ever mined, about 15% is thought to have been lost, and of the remaining 137.000 t central banks and supranational institutions hold around 32.000 t, while 105.000 t are in private hands in coin and bullion – around 22.000 t and in jewellery – around 83.000 t. The 5 largest official gold holders are: United States/8.133,5 t, Germany/3.413,1 t, IMF/3.217,3 t, France/2.540,9 t, Italy 2.451,8 t, having the Group of Seven rich Nations (G7) approved the sale of 403,3 t of gold by the IMF as part of a broad reform of its budget, raising its resources. China with the world’s largest foreign exchange reserves reaching 2 Trillion increased its gold holdings from 600 t in 2003 to actually 1.954 t. The IMF said the gold sale is pending and planned for the coming months in a way avoiding to disrupt the market, urging also the G20 nations to go ahead with this operation to help with the money from the sale the poorest countries. Gold demand rose 38% to 1.016 t in the first quarter of 2009 from last year, representing a 36% increase in value to $29,7 Billion. The largest share of final demand at around 70%/$44 Billion in 2008 came from jewellery, slipping due to high gold prices 24% in the first quarter of 2009 from a year ago, accounting India, the world’s largest gold jewellery market by volume, for around 402 t in 2008, recording a 83% drop in demand in the first three months of 2009 against a year earlier, followed in terms of consumption demand by the United States, China, the Middle East (Saudi Arabia, Dubai), Turkey and Italy. Gold trade is a chief driver of economic diversification in the Gulf region, having Dubai imported 674 t in 2008 and re-exported 371 t above all into the vigorous Arab markets. The industrial, electonic and dental uses accounted for around 12% of gold demand in 2008, decreasing due to recession 31% in the first quarter of 2009 compared with the same period a year earlier, while gold investment demand in gold-backed exchange traded funds/ETFS, gold coins and bars, estimated at 18% or around $11,3 Billion in 2008, rose 248% to 596 t in the first three months of 2009 year over year with a record investment in ETFS up 540% to 465 t. The sharp fall in South African gold output, the forthcoming sale of IMF gold and the global financial crisis trigger at this time more buying interest, especially from anxious investors and private householders to defend and preserve their wealth, as well as from the big sovereign buyers – the big central banks outside the G7 -, who want to build up their gold reserves. Gold has reinstated its age old position as the best hedge against inflationary times and increasing wealth in Brazil, India and China is contributing to leave demand outstripping mine supply. Gold output is falling and gold mining will not going to be easier, it gets deeper and more expensive! It looks as if the general fundamental outlooks for gold continue to be quite positive!
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Crude oil $64,29 per barrel - 07/06/09 - There is a high potential for price increases strengthening expectations of economic recovery and higher energy demand, rising oil futures over supply uncertainties as the army battles militants in the Niger Delta escalating fighting in Nigeria, an important producer.
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2.b) Oil
OPEC oil producers, satisfying about 40% of the world’s oil needs, decided to reduce output from actually about 28,8 Million barrels per day by about 1,7 Million barrels a day taking effect on November 1 and decided a new production cut of 2,2 Million barrels a day effective from January 1, the biggest cut in the cartel’s history, joining non OPEC countries Russia and Azerbaijan with an additional cut of 600.000 barrels a day, trying to restore balance between oil supply and demand, as oil prices have fallen more than 70%% since July’s record of $147,27, standing oil demand actually just under 86 million barrels a day. OPEC countries like Venezuela are seeking to protect a price level of at least $100 per barrel, but considering that global economy is moving closer to recession and oil consumption is slowing, expected to drop 50.000 barrels a day in 2008 and up to 450.000 barrels a day in 2009, may accept oil prices not falling below their crude cost at around $75 – $90 a barrel, expressing some cartel members they would be more comfortable with a price range between $80 and $100 a barrel. The International Energy Agency/IEA alerts that new investments to increase oil output, which shows a natural annual decline of 9,1%, are necessary to meet future oil demand of China, India and other developing countries, and are delayed or discouraged by actual lower prices, reassessing oil producers viability of existing and planned investments. As the IEA revised non-OPEC oil production 2009 down by 380.000 barrels a day to 50,6 Million barrels a day, OPEC ministers met again to discuss additional output cuts for 2009, estimating that demand for OPEC oil will drop this year to 29,1 Million barrels a day, down 1,8 Million barrels a day against 2008, needing developing countries less crude, facing the cartel the difficult task to avoid further big supply reductions which are draining existing market inventories, conducing to an abrupt oil price increase, deteriorating still more already struggling nations and delaying any possible global economic recovery, opting OPEC for the moment against new cuts, insisting instead that members still producing in excess of their cuotas comply with existing output cuts, expecting to remove this way another 800.000 barrels a day from the markets. As oil prices rose close to $60 a barrel, the highest level in six months but still below the at least $75 a barrel price that Saudi Arabia is targeting, OPEC increased output by 270.000 barrels a day. Total world oil consumption in 2008 reached 85,76 Million barrels a day, while total world oil production for last year is reported with 85,49 Million barrels a day, coming 35,75 Million barrels a day from OPEC and 49,74 Million barrels a day from NON-OPEC countries. Due to the global economic recession oil consumption is expected to fall in 2009 to 83,3 Million barrels a day contracting demand by 2,46 Million barrels a day, decreasing oil output of OPEC nations to estimated 29,1 Million barrels per day and of non-OPEC countries to about 50,6 Million barrels per day, covering also the still very high market inventories crude oil needs, remaining the OECD commercial inventories with about 2,7 Billion barrels at a level of about 52 days. Consumption of nations belonging to the Organization for Economic Cooperation and Development/OECD, like the United States, Japan, Germany and Britain is expected to further decline in 2009, rising however projections for oil demand in China from 7,98 Million barrels a day in 2008 to 8,23 Million barrels a day in 2009 and in India from 2,97 Million barrels a day in 2008 to 3,04 Million barrels a day in 2009. OPEC nations earned thanks to record oil prices and record oil production between January and June of this year $645 Billion, just below of $671 Billion they earned during 2007, and will spend up to $160 Billion over the next four years to increase oil production capacity, although they are increasingly worried that due to the severe global financial crisis and recession fears future oil demand might not be strong enough to justify huge investments to rise further output, increasing production cost, insisting that availability is not an issue but the real issue is deliverabilty of the required oil.
(Million Barrels per Day)
Of the 13 countries that produced more than 2 Million barrels a day in 2008, six were OPEC members – Saudi Arabia/9,26, Iran/3,83, United Arab Emirates/2,57, Kuwait/2,57, Venezuela/2,35, Iraq/2,35. The remaining 7 NON OPEC members, including United States/8,51, were Russia/9,79, China/3,98, Canada/3,35, Mexico/3,19, Norway/2,46 and Brazil/2,42. Russia, Norway, Mexico and Kazakhstan are the world’s largest NON OPEC net oil exporters. The United States/-10,97 is the world’s largest net oil importer; China/-4,- is also net oil importer, while Canada/+0,99 is a smaller net oil exporter. Canada has over 170 Billion barrels of recoverable bitumen from oil sands with today’s tecnology and Alberta oil sands with an estimated total bitumen reserve between 1,7 Trillion and 2,5 Trillion barrels, more than the total OPEC oil reserves of about 900 Billion barrels, are for decades not considered part of the world’s oil reserves because the oil there wasn’t economically extractable at prevailing prices but could become the most important source of new oil in the world in coming years. There are also expectations Arctic may hold as much as 90 Billion barrels or 13% of the world’s undiscovered oil and 30% of the world’s undiscovered gas reserves. NON OPEC oil production is expected to rise; the greatest increases were expected from Russia and Brazil, however Russia, the world’s second biggest oil producer, shows actually a declining oil production, and some believe that the period of intense oil production in the oil reach western Siberia is over. However Brazil’s newly discovered ‘pre-salt’ oilfields, located in an area of 800 sq km offshore 16400 feet below sea level, which may contain between 50 Billion and more than 100 Billion barrels, could transform the country in the future into one of the major oil-producing and -exporting countries, announcing the state owned Petrobras it will invest $174,4 Billion over the next 5 years to increase oil output, turning to China, Brazil’s biggest trade partner, for cash, signing a loan agreement of $10 Billion with the China Development Bank and a 10 year pact for delivery of up to 200.000 barrels a day of crude oil to Chinese companies. Oil output in Mexico is also slowing down, facing the state owned oil company PEMEX a cronical lack of cash and of technical capacity for deepwater exploration and production. Proven oil reserves worldwide rose slightly in 2007 to 1.237,9 Billion barrels to reach, considering the actual world consumption, for about 43 years and lasting in the Middle East at current production levels up to 93,4 years. There are increased hopes in Nigeria’s offshore oil to replace disminishing worldwide reserves, while Saudi Arabia, the only OPEC member with the potential to expand oil production, put on hold any further capacity expansion plans. The world is not running out of oil! The biggest threat to the future of supplies is the lack of spare production capacity worldwide, warned Saudi Arabia’s oil minister, and Libya’s National Oil Corporation admitted that there was little more oil the OPEC could pump in case of a shortfall, confirming that there is not enough spare capacity to help. Shortfalls are caused by oil rich countries such as Nigeria, Kuwait, Venezuela, Iran and Iraq, where politics has stymied production growth. Oil rich Nigeria, where rebels are attacking oil wells and pipelines, and Iran, because of its nuclear program and concerns to stop the country from producing bomb-grade uranium, are the lingering hotspots the markets are actually focusing on, worried also about Iraqui’s oil exports through the north of the country hit by renewed crossborder raids by Turkish forces against Kurdish insurgents. Saudi Arabia suggested that the United States, where no new oil refineries have been built in 30 years, should expand refining capacity, as additional expansion of oil refining capacity is needed worldwide, and could go more aggressively for domestic exploration. Former President Bush lifted presidential ban on offshore oil drilling to ease dependence on crude imports, what would not guarantee any additional oil for as much as seven years, and in any case there is no immediate practical effect as Congress enacted its own prohibition on offshore drilling in 1981. It seems that today’s oil prices are influenced more by opinions and predictions from brokers and investment banks, focusing on perceived risks to future oil supplies and the growth in oil demand from emerging economies, having moved away from the nearly unchanged market fundamentals, and stock exchange oil tradings exceed 17 times the real world crude demand! However the key problem remains the same: the inability of global oil supply to catch up with rising demand; global demand, led by China hitting in June a consumption of 8,3 Million barrels a day and criticised for its fuel subsidies, but raising now cost of gasoline and diesel by 17%/18% respectively, is expanding strongly, accounting China for almost a third of the world’s annual demand increase, and world supply not. Saudi Arabia, the world’s biggest oil exporter, is completing development of its giant Khursaniyah field soon, increasing its output capacity by up to 500.000 barrels a day and is willing to bring production and supplies from actually 9.450.000 barrels a day, already 300.00 barrels a day higher since last month, to a total of 9,7 Million barrels a day in July, or more if the market requires it! The kingdom, complying with a huge expansion program in its oil industry to increase its spare oil production capacity to up to 12,5 Million barrels a day by the end of 2009, said at a meeting with important producers and consumers on Sunday in Jeddah, it is capable to boost this level another 2,5 Million barrels a day to 15 Million barrels a day if needed. Saudi Arabia wants oil price stability in the global market, a fair oil price not hurting producers neither consumers, and is worried about harmony between buyers and sellers, asking consumer countries to take measures to control and stop speculations in the futures markets. Iraq, with the world’s third largest oil reserves, is opening its giant key producing oilfields to Britsh and US companies to restore its oil infrastructure and to raise output from the actual level of 2,5 Million barrels per day by a combined 1,5 Million barrels per day.
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2.c) Sovereign Wealth Funds/SWF
SWF, government-backed investment vehicles, have proliferated in recent years thanks to high oil prices and surging Asian Exports, to a total worth of about $3 Trillion, but growing fast while amassing enormeous currency reserves. There is concern about investments compromising financial stability and sensitive sectors, such as energy or defense. However host countries and SWF see that their interest lies in building confidence and the behavior of Sovereign Wealth Funds has been so far without fail! China and Russia have established important SWF, while Japan, with the world’s second largest foreign exchange reserves reaching about $1,01 Trillion, has not yet a SWF. The IMF will exercise its own judgement as to whether a country is in breach of the requirement not to undertake currency manipulation for trade advantage, and is creating a code of ‘best practices’ guiding SWF to ensure transparency and good governance, – expecting SWF from the countries that are getting the funds money to accept the same rules and avoiding over-regulations! The US launched an ‘Invest in America’ programme and wants that the Group of Eight rich countries (G8) leads by example, saying to review a transaction on other grounds than national security is unhelpful and unproductive! US GDP is about $14,2 Trillion, the total value of traded securities (debt and equity) denominated in Dollar is estimated to be more than $53 Trillion, and the global value of traded securities is about $165 Trillion. Total assets under management by private hedge funds, a broad category of private investments funds that seek high returns, and as consequence often take on considerable risks, posing also a certain risk to the global financial system, were estimated at the beginning of 2007 to be around $2,2 Trillion, however may have shrinked due to the financial crisis by more than 45%. Combined the top 50 hedge fund managers in 2007 earned $29 Billion, John Paulson of Paulson & Company earned $3,7 Billion, followed by the hedge fund managers James H.Simons and George Soros each earning almost $3 Billion. In that context $3 Trillion and more worth of SWF is quite significant but not so huge. Important sovereign wealth generator are China, Russia and Kuwait, and over the past 5 years the fastest growers have been Nigeria, Oman, Kazakhstan, Angola, Russia and Brazil. Abu Dhabi, the oil-rich Emirate of the Gulf region, has actually the largest Sovereign Wealth Fund, the Abu Dhabi Investment Authority/ADIA with around $900 Billion and Abu Dhabi is today the world’s richest city! A number of Middle East investors is not interested to invest outside the region, as local real estate investments and infrastructure investments are giving higher returns than foreign investments and Middle Eastern investors have been repatriating their assets, reinvesting especially into the Gulf region’s spectacular mega projects. The Middle East is booming and Gulf states invest Billions of Dollars in tourism, culture and infrastructure. Due to high oil prices the fundamentals of Gulf economies are strong and they are set for a period of sustained economic growth in the short and medium term; there is a rise in foreign investments into regional markets, leaving volatile western markets hit by the subprime mortgage crisis, to benefit from local outperforming price/earning ratios. Singapore’s GIC, one of the largest SWF, warned that the world could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years and considers its investments in UBS and Citibank as long-term investments with good returns when markets stabilize again. SWF have suffered due to the financial crisis according to estimates declines in their assets of at least 18% to 25% and given the persistent market turbulence have refrained from new investments in financial institutions and major transactions in recent months , helping to shore up their home economies. However especially the Gulf SWF are reviewing their investment strategy, finding a growing interest from emerging countries and considering the historic decline in share prices started to buy stakes in Central European and German companies, having Abu Dhabi already purchased a major stake of the automaker Daimler and of MAN Ferrostaal.
Sovereign Wealth Funds/SWF – Listing & Updates & Deals & Related Investors: http://swfmoney.blogspot.com/
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3. Globalization
Can globalization help to reduce effects of recession? Sure, however there are social and economic costs to globalization. Trade liberalisation rewards competitive industries and penalizes uncompetitive ones, and foments greater movement of people, goods, capital and ideas due to increased economic integration, which in turn is propelled by increased trade and investment. Global income is more than $31 trillion/year, but 1,2 billion people of the world’s population earn less than $1,- a day and 80% of the global population earn only 20% of this global income, existing in many countries a large gap between rich and poor. The 3 billion people living in 24 developing countries that increased their integration into the world economy enjoyed an average 5% growth rate in income per capita, longer live expectancy and better schooling. The digital and information revolution has changed the world’s learns, communicates, doing business and treats illnesses. Globalization has helped reduce poverty in a large number of developing countries, but too many nations and people have been left out. Important reasons for this exclusion are weak governance and policies in the non-integrating countries, tariffs and other barriers that poor countries and poor people face in accessing rich country markets and declining development assistance! But that does not justify a retreat to nationalism and protectionism, which leads to deaper poverty and is fundamentally hostile to the well-being of people in the developing nations! The challenge is to make globalization work for all, including the poor people of the world! Pope Benedict XVI called for globalization of social and economic justice! Globalization today is increasingly both flowing business from developed to emerging economies and from one developing country to another, competing everyone from everywhere for everything. Companies from emerging markets, mostly from the so-called BRIC economies Brazil, Russia, India and China are rising fast to rank between the world’s biggest firms, creating huge opportunities to raise living standards around the world, as well as threats if less well-run competitors enjoy subsidised capital, help from political cronies or privileged access to resource supplies. Rising consumption in the BRIC countries might offset to a large extend the slowdown in the United States and their share of global demand is starting to move towards that of all G7 nations. China, the largest foreign investor in US Government bonds, holding about half of its foreign exchange reserves of over $2 Trillion in Treasury notes and mortgage backed securities from Fannie Mae and Freddie Mac, followed by Japan with foreign exchange reserves of more than $1,01 Trillion and owning about $860 Billion of the US national debt, is feeling the impact of the global financial crisis, slowing for the first time in 5 years its growth. But China does not favor the regionalisation tendencies of Latinamerican nations and continues to support globalization, which has helped to develop the country, expecting that an economic decline of the United States will not yet occur, trusting in a recovery of the US financial system.
Can globalization, an increasingly interconnected world, the international marketplace, with a greater transparency produce more global stability, reducing vulnerability to crisis?
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4. Global Warming
As interdependence increases worldwide economically and politically taking effect globalization, humankind is called to deal with priority issues, such as the greenhouse effect. The greenhouse gases that have already been put into atmosphere threaten the survival of many ecosystems and wildlife species. The dramatic change in West Antarctic Ice could produce a significant rise in global sea levels; Antarctic ice sheet is melting rapidly, as much as 36 cubic miles of ice a year. The continued greenhouse effect is an effect caused by greenhouse gases, such as carbon dioxide, nitrogen oxide and methane, that cause infrared radiation to be hindered when escaping the earth’s atmosphere. Sea level rise, warming temperatures, uncertain effect on forest and agricultural systems, and increased variability and volatility in weather patterns are expected to have a significant and disproportional impact in the developing world, where the world’s poor remain susceptible to potential damages and uncertainties inherent to a changing climate. Going oil and gas prices up, reliance on coal is rising especially in China, India and the United Sates, meaning that global emissions of carbon dioxide will increase and there is little hope of averting the worst effects on climate change! Wasting many years denying the real threat of global climate change, the former Bush administration, obliged by court order, released a report about global warming and it’s harmful impact in the United States! The Kyoto protocol, ratified by over 166 countries, but not by the former Bush administration, entered into force in February 2005 and is due to end in 2012, and the US, mayor developing countries and big polluters like Brazil, China and India become fully engaged in signing up to a post-2012 agreement, centred on the United Nations Framework Convention on Climate Change/UNFCCC, which is scheduled to finish in late 2009, having G8 leaders agreed to consider and adopt the goal of achieving at least 50% reduction of global emission by 2050, but not yet assuming any short term commitments. British Prime Minister Gordon Brown listed climate change to the greatest threats to Britain’s peace, as are war, terrorism, disease and poverty. Lights were switched off across Australia last night at 8pm for Earth Hour, drawing mixed results and reviews. Earth Hour aims to raise environmental awareness – of global warming – by encouraging homes and businesses to turn off their lights for one hour. San Francisco and Phoenix and Canada’s Vancouver will switch off at 2pm today, while other cities in 35 nations are following. Earth hour 2009 symbolized working together in the fight against climate change and had the goal of 1 Billion people in 1000 cities around the world switching off their lights as part of the global vote for earth! The poorer countries are calling on industrialized nations to guarantee financial help to adapt to the impact of climate change. Only up to $300 Million annually will be available through a U.N. adaption fund with a maximum of $1,5 Billion a year, which is much less than the $86 Billion the U.N. Development Program estimates is needed annually by 2015. The US, Japan and Britain said they will contribute to a clean technology fund, administered by the World Bank, that will dole out $5 to 10 Billion over three to five years, starting operations in July 2008. Pope Benedict XVI said the world needed to care for the environment, but not to the point where the welfare of animals and plants was given a greater priority than that of mankind, attacking climate change prophets of doom, warning that any solution to global warming must be based on firm evidence and on an agreement of sustainable development capable of ensuring the well-being of all while respecting environmental balances. According to the International Energy Agency/IEA the world needs to invest about $45 Trillion in energy in coming decades, build some 1.400 nuclear power plants and vastly expand wind power in order to halve greenhouse gas emissions by 2050 and prevent energy shortages, within a new global energy revolution, transforming the way we produce and use energy. President Obama has committed himself to play a constructive role in the international UN negotiations”Global Green New Deal” for the post-Kyoto treaty and to reduce greenhouse gas emissions in the United States by 80% – below 1990 levels – by 2050, proposing Government spending of $150 Billion over the next 10 years in clean energy infrastructure creating as many as 5 Million jobs, asking for action of developing countries like China and India to do their part. He announced that his administration is ready to lead the world on climate change, announcing a first US wide regulation proposing tough standards to limit the release of greenhouse gases by cars and trucks raising also fuel efficiency standards by 2016, approving the House a climate bill, formally known as ‘American Clean Energy and Security Act’, establishing first national limits on greenhouse gas emissions. EU leaders agreed on a historic deal to cut by 20% greenhouse gas emissions within the European Union by 2020, inviting other countries to follow their lead, dropping EU greenhouse gas emissions 6% in 2008 as global economic crisis slowed industrial activity.
It’s too late to avoid climate change entirely, however it seems to be still possible to take care of global warming to stay within certain limits?
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5. His Holiness Pope Benedict XVI Joseph Ratzinger
Faith is Hope. Holy Mary, mother of God, our Mother, teach us to belief, to hope, to love with you. I invoke God’s blessing of joy and peace. One can only be a Christian in the Church, not beside the Church! I invite you to observe how the Holy Spirit is the highest gift of God to humankind, and therefore is the supreme testimony of his love for us. I invite you to give time to prayer and to your spiritual formation. Lead others to love Jesus more and more and that you may follow him faithfully. Everything collapses if truth is missing. These are just some prayers, blessings and statements by Pope Benedict, who has developed an intense scientific activity. Many publications constitute a point of reference for many people, specially for those interested in entering deeper into the study of theology. In his usual clarity he made notable contributions to Church and to the Christian Society. He is the teacher, the thinker and the ponderer of deepest meanings. People came to see Pope Paul II and they come to hear Pope Benedict XVI. Pope Benedict met with Muslim religious leaders and scholars at a Catholic-Muslim forum in Rome, who showed themselves satisfied with the result of the meeting, especially with the creation of a permanent interreligious committee to prevent and resolve conflict, which is considered vital to put into practice principles both religions have in common, sharing the same fundamental values of religious freedom and respect for the physical and intellectual dignity of the individual. Followers of Islam increased in such an extraordinary way that today 19,2% of the world population is Muslim, while 17,4% is catholic, representing until now the most important religion. King Abdullah of Saudi Arabia said we have lost sincerity, morals, fidelity and attachment to our religions and to humanity, deploring the desintegration of the family and the rise of atheism in the world, a frightening phenomenon that all religions must confront and vanquish, and calls for dialogue among monotheistic religions, project which the King discussed with Pope Benedict XVI during his landmark visit to the Vatican late last year. Pope Benedict XVI visits US, as he views the United States as essential ‘battleground’ in what he considers the ‘war’ of today’s era – proving that modernity doesn’t have to stamp out religious faith! Faith and work of the Church in our society is important to us all! US President George W. Bush sees the Pope as a powerful moral figure and received him as head of state and friend. Pope Benedict XVI spoke of his affection for America, a land of hope and opportunity for millions across the world, and offered his support to strengthen the United Nations, where he has promoted human rights as basis for ending war and poverty! Without referring to crackdown on illegal immigrants in Italy the Pope expressed worries about displays of racism in some countries, saying that social and economic problems could never justify contempt or racial discrimination! During his difficult Mideast tour including Israel, described as one of reconciliation and as pilgrimage of peace, the Pope expressed deep respect for Islam, making no secret of his support for the Palestinian people, calling for the creation of a Palestinian state as a solution to the conflict with Israel, saying that Christians, Palestinians and Jews should live in peace, having made a forceful condemnation of anti-Semitism, blaming the Holocaust that never should be forgotten or denied on a ‘godless regime’, and acknowledged the Vatican has committed mistakes, after revoking the excommunication of an ultraconservative bishop who denies the Holocaust.
Is the Catholic Church getting more involved in world affairs as to achieve a better understanding with other important religions helping to ease political tensions?
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