from the hip

New York Times just reported the oil prices has dropped to under 50 dollars a barrel for the first time in 22 months. NYT writes:

The drop in prices comes as stock and bond markets fell because of fears about the health of the financial system, and a flurry of new indicators showed how badly the economy was faring.

Just as a booming global economy had steadily driven up commodity prices for six years, the current meltdown means the world needs less oil, and is sharply driving down prices.

It is a stunning — and sudden — reversal that has taken aback many experts. Oil futures on the New York Mercantile Exchange fell $3.04 to $50.58 a barrel in morning trading. At one point, crude oil was down $3.71, to $49.91 a barrel. Oil futures have lost more than two-thirds of their value after settling at a peak of about $145 a barrel in July.

Some analysts predict oil could fall to $30 to 40 a barrel as the world economy worsens.

Also, the dollar is for the moment strengthening in international markets.
Another sign of the strength of the oncoming depression?

See also: Times: Shares fall as US jobless adds another 542,000

It goes on and on - the financial crisis. Now Bank of England slashes interest rates to a 53-year low. The Independent writes:

Interest rates were today slashed to a 53-year low to fight off recession - but fears were growing that hard-pressed homeowners would fail to reap the benefit.

The shock 1.5 per cent cut by the Bank of England’s Monetary Policy Committee (MPC) is the biggest move since March 1981 and brings rates to 3 per cent - last seen in 1955.

Stock markets were stunned by the size of the cut and experts predicted rates could reach an all-time low of 1.5 per cent by mid-2009 as the Bank desperately bids to ward off a prolonged slump.

Also, the European Central Bank cut interest rates by 50 basis points today and signaled another reduction was possible later this year. In Germany the no. 2 bank has decided to tap into the government rescue plan, and the government will propose tax breaks on car purchases to stimulate spending!

The bottom still seems distant.

See also:

• New York Times: European Banks Reduce Rates, Some Sharply
• Guardian: Shock as Bank of England slashes rates to 3%
• New York Times: Bleak Reports Keep Markets in Free Fall
• Guardian: Wall Street and London shares plunge

The little, otherwise relatively liberal country of Denmark, known perhaps especially for its liberal attitudes towards pornography,  may well be one of the most control-oriented states  in the world as far as the Internet is concerned.

Since 2005, the Danish state has monitored everything everybody has been doing on the Internet. The Danish newspaper Politiken writes:

According to metroxpress, the state is monitoring everyone’s behaviour on the internet as a result of legislation that requires all user names and passwords to be lodged with the State and University Library and the Royal Library. The libraries file everything from children’s scribblings on Arto.dk to love letters and profile pictures on Dating.dk.
The technology is known as Internet Harvesting and the Net Archive currently harvests all Danish sites four times per year.
However, some news, dating and other social network sites are harvested daily, according to Eva Fønns-Jørgensen of the Net Archive at the State and University Library in Århus.

Code release
“Danish sites have a legal duty to provide access codes and we have been harvesting text, pictures and audio since 2005,” she says.
At the moment, researchers are the only ones allowed to see the extensive personal material grabbed through Internet Harvesting. But 70 years after the death of, for example, a person with a dating profile, all information comes into the public domain.

The thinking behind this is that people themselves have chosen to place materials on the Internet, and that once it is one the net it is publicly available.

So there we go. Public nudity and liberal rules about pornography. But Big Brother is watching. And letting others watch as well!

1984 has come and gone.

See also: Inventor of the Internet warns against ‘Big Brother’ systems that track the sites you visit

The international credit crisis is bad news, of course. And bad for a lot of people. Still, there are some amusing things taking place as well. Like the story about the HUGE bank robbery that took place on Monday in the US, in Washington DC. Quite possibly the biggest bank robbery ever!!

When I first read the story of exactly how the US injected 250 billion dollars into the biggest American banks, I was stunned. Then, when I reread the story I started to laugh. I found it hilarious! What a move by the government. From one perspective a much needed infusion of capital, yet from another a highway robbery!

So here is the story, simply to good not to be distributed, courtesy of The New York Times:

Drama Behind a $250 Billion Banking Deal

The chief executives of the nine largest banks in the United States trooped into a gilded conference room at the Treasury Department at 3 p.m. Monday. To their astonishment, they were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Henry M. Paulson Jr. said they must sign it before they left.

The chairman of JPMorgan Chase, Jamie Dimon, was receptive, saying he thought the deal looked pretty good once he ran the numbers through his head. The chairman of Wells Fargo, Richard M. Kovacevich, protested strongly that, unlike his New York rivals, his bank was not in trouble because of investments in exotic mortgages, and did not need a bailout, according to people briefed on the meeting.

But by 6:30, all nine chief executives had signed — setting in motion the largest government intervention in the American banking system since the Depression and retreating from the rescue plan Mr. Paulson had fought so hard to get through Congress only two weeks earlier.

What happened during those three and a half hours is a story of high drama and brief conflict, followed by acquiescence by the bankers, who felt they had little choice but to go along with the Treasury plan to inject $250 billion of capital into thousands of banks — starting with theirs.

What a story! Has anything like this ever happened before? This must be the biggest tale in the modern history of banking!

While the economic downswing is still making itself felt in the US, it is now also hitting several European countries hard. And inflation is soaring, and hit a record high of 4.1 percent last month.

“There’s no obvious trigger for strong economic growth in Europe until the end of 2009,” says David Owen, chief European economist at Dresdner Kleinwort in London. “Massive [financial] imbalances need to be worked out, and the corporate sectors in many countries remain in a substantial deficit.”

Consumer confidence for the euro area has fallen to negative 29.7, the lowest it has been since 1993. And the news about the plunge in factory orders in Germany, led to the following comment, reported in the New York Times:

“It now looks likely that the euro zone will be the first major economy to fall into recession,” Jonathan Loynes, the chief European economist for Capital Economics, wrote after the report of sagging orders in Germany.

Great Britain

Royal Bank of Scotland, Britain’s second-largest bank, recently posted its first loss in 40 years after taking a £5.9bn hit from the credit crunch. And Barclays, the third-biggest bank, took a fresh £2.8bn write-down. Also, the price of houses are dropping rapidly, according to Guardian

the Halifax said house prices last month were 11% down on a year earlier - the first double-digit decline since its monthly healthcheck of the market was first published 25 years ago.

House prices back to 2006 and still falling, says Times. And new housing orders are down 33%. And, of course, home repossessions surge.

Business groups and City analysts warned that deep and rapid cuts in the cost of borrowing would be needed next year to pull Britain out of its first recession in more than 15 years. House prices are falling more rapidly than they were in the property crash of the late 1980s and early 1990s

It would seem a possible recovery in Britain will not be aided by increased consumer spending in the short term!

Recession in Germany?

Spiegel online writes that the German economy may have shrunk in the second quarter, according to early reports, and that the outlook for industrial production isn’t lively. Germany could slide into recession, and the German economy may have shrunk by around one percent. They also note that:

German factory orders were down by 2.9 percent in June from May, and orders from abroad for German goods plunged by 5.1 percent. Production at German factories rose by 0.2 percent in June — less than expected

Spain in deep trouble

Portugal, Italy, Greece, and Spain all face severe challenges. In Spain, the imploding domestic housing market has pushed the unemployment rate to 10.7 percent. The number of bankruptcies in the building sector is exploding, and one third of the job losses stems from the construction sector. As well, the housing market is stalling. The inflation is about 5 per cent.

The US

The credit cruch is still being felt, and so is the reversal of the wealth effect and high oil prices. In addition to bad news from the banking sector, Fannie Mae, Freddie Mac, Indy Mac, and so, in the latest sign of the deepening troubles, G.M. recently reported a second-quarter loss of $15.5 billionfollowing a loss of $8.7 billion reported earlier by Ford. Car sales are dropping, especially sales of American cars.

Guardian notes that:

The US mortgage finance empire Freddie Mac yesterday predicted the worst housing slump since the Great Depression as it set aside $2.5bn (£1.28bn) to cover credit liabilities caused by delinquent loans and foreclosures.

And in New York Times, Peter S. Goodman recently wrote (August 1) that “More Arrows Seen Pointing to a Recession”.

Overall

Pretty gloomy still. The most positive piece of news is the slight drop in oil prices. But still serious signals of a slowdown of growth and possibly recession both in Europe and the US.

There has been inrest between the two “independent” republics in Georgia - Abkhazia and South Ossetia - for some time.  The conflict, says New York Times, has tensed considerably recently:

The recent violence has been the worst in the region since June 2004, shortly after President Mikheil Saakashvili of Georgia came to power vowing to reassert the country’s control over South Ossetia and another rebel region, Abkhazia.

Also a part of the bigger context of this conflict is that Georgia has expressed a wish to become a part of NATO. A move that is not very popular in Russia and it’s premier, Putin.

Now Russia has sent troops and dozens of tanks and armoured vehicles into the breakaway Georgian province of South Ossetia. Also, Russian fighter jets have been shot down by Georgia. Russia is claiming that it is protecting its citizens. However, Tbilisi’s pro-Western Government describes it as an act of war.

More than 1.000 people have so far been killed. This is a very serious conflict. The US is currently sending an envoy to the area. Der Spiegel writes:

European diplomats have been trying to maintain peace in Georgia with financial incentives and promises of partnership. But now that bombs have started to fall, no one in Brussels, Berlin or Paris quite knows what to do.

The Georigian President calls it a perfectly timed attack, and refers to the fact that the eyes of the world are on Beijing and the Olympic Games.

I have a bad taste in my mouth about this. To some extent it reminds me of Hitler’s Germany attacking Poland and excusing the attack with reference to unrest in the border area and transgressions by Poland. I guess we will shortly learn more about what exactly Putin’s reorientation of Russia entails.

I hope the continuation will not be the case as it was in the case of the Germany-Poland conflict!

See also:

• Der Spiegel: Is this the First War between Russia and a Former Soviet State?
• Times (London): Georgia says Russian tanks mean ‘war’ in South Ossetia
• Guardian: Georgia accuses Russia after jets bomb South Ossetia border area
• Der Spiegel: How the Caucasus Erupted
• Politiken (Danmark): En frossen konflikt

Paris Hilton is in Copenhagen today and for a few more days. She is apparently promoting her line of products (bags produced in her name by PH Europe, to be sold in more than 80 countries worldwide) at some fashion event in Copenhagen. She is together with Benji Madden, her rocker boyfriend.

And Copenhagen seems to love her. She creates chaos, says the Norwegian newspaper Dagbladet. Especially the media are wild. They are all full of pictures and articles about Paris Hilton, and the TV-stations have shows going where Paris Hilton says “I love Copenhagen” (I think that is about all she has said, so far), and where spectators are interviewed about why and how much they love Paris Hilton.

It is all slightly insane. I mean, so far she hasn’t done anything, and hardly said anything?

I wonder: Will the city remain standing if she shows up tomorrow without her undies?

Biofuels have been hailed as a major solution to the challenge posed by high and rising oil prices. However, lately there have been more and more indications that this may not be the case.

Rising food prices (and rising futures prices on food as well) is one such indication. A rise in demand for food, resulting from among other economic growth in some rising economies, such as China, is another.

Now a World Bank report has been leaked (to the Guardian) that indicates that

biofuels have driven up global food prices by 75 percent, according to the Guardian report, accounting for more than half of the 140 percent jump in price since 2002 of the food examined by the study. The paper claims that the report, completed in April, was not made public in order to avoid embarrassing US President George W. Bush.

This is somewhat at odds with an US analysis recently that came to the conclusion that just 3 percent of the food price increases could be attributed to biofuels. The World Bank numbers seem high, but even so I have more confidence in them.

No doubt we will much more on this issue in the coming month. To me, however, it seems pretty clear that using land that could have been used for food to instead grow biofuels must be wrong. Thus, only to the extent that biofuels can be grown elsewhere, do I think they should be permitted. Also, seems to me, we need new types of plants that are much more effective than the ones currently used.

To me, this is a field that requires much more pondering as well as more research. Far too many politicians around the world have jumped on this train much too fast!

See also: Secret report: biofuel caused food crisis and
Poverty: 260m driven into hunger by push for biofuel

Some time ago, after the election in Zimbabwe, I wrote that anything could happen there. And a lot has happened. Terror with beatings, arrests, and police raids of the oppositions’ headquarters, and so on. And alongside that, everything is slowed down and postponed. Elected results took ages to make official, then recounts took even more time, and so on.

Robert Mugabe has turned into a despot. He is very bad for the country, as we all know. But he is also very, very smart. He ignores the UN. He knows he can use the forces of government to slowly wear the opposition down. He knows he can terrorize voters and make many of them either vote for him or at least not vote. He knows guns are stronger than pens, and that he controls the guns.

By conducting the coup d’état in slow motion and surrounding parts of what he is doing with clouds of legalese, he also know that he is making it difficult for the rest of the world to react in the only way that matters to him – by military intervention. There have already been boycotts. I don’t think he cares too much, one way or the other, about a new one. Protests? Sure, and so what?

It is hard to see how a military intervention can be justified. And it is hard to see who would want to do it and finance it. But at the same time, seeing the Western world sitting there, watching, doing nothing, taking the role of the voyeur, also feels wrong. Human rights are being ignored, people’s votes are being ignored, freedom of speech is suppressed, ordinary people in Zimbabwe suffer and the sea of poverty widens.

It is an ugly picture for the moment. It may get even worse.

See also:

• Zimbabwe’s opposition leader to leave Dutch protection
• Mugabes dager er talte
• Zimbabwe: More beatings, more abductions
• Zimbabwe: Military intervention could be justified
• FN ber Mugabe avlyse valget
• Mandela: Vil ikke kritisere Mugabe

The price of oil has now reached a new record high (in US dollar): 129.31.

Some experts think that a continued belief in even higher oil prices among some American investment banks and hedge funds is a major factor in driving the oil price higher and higher.

Also, the new record high for oil has been cited as a major reason for the drops in the major European stock markets Tuesday.

msnbc/AP writes that:

The June contract for light, sweet crude traded as high as $129.60 on the New York Mercantile Exchange before settling at $129.07, up $2.02 from Monday’s record high. The imminent expiration of that contract, which ended with the close of Tuesday’s trading, created additional volatility in the market.

They see no reason why oil should not hit 140 dollars a barrel.

See also (for a little fun): The Coming Oil Crash (LOL)
An Overview of Oil Prices from DOE
The Oil Price Conspiracy

PS: For the record - I share the view expressed in the first of these postings - about the oil crash - that oil prices will crash. But not in the very near future, I think. And only when the dollar starts to rise against other currencies, and then as a function of the strengthening of the dollar!