from the hip

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

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

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

The Austrain Incest Case

Father Confesses to Horrific Crime. He held his daughter prisoner and abused her for decades. In the most spectacular kidnapping and incest case in Austrian history, a man has confessed to having held his daughter hostage for 24 years and siring seven children with her. (Der Spiegel)

Austria Stunned by Case of Imprisoned Woman. With his Mercedes-Benz and his fine clothes, Josef Fritzl looked every inch a property owner, neighbors in this tidy Austrian town said Monday. Even when running errands, they said, he wore a natty jacket, crisp shirt and tie. (New York Times)

The Family Man of Amstetten: Double life of a pillar of Austrian society. How did the perpetrator of one of modern Europe’s most horrific crimes convince his neighbours he was a respectable man? (The Independent)

Josef Fritzl: a shrewd liar and an obsessive tyrant. Casual acquaintances knew Josef Fritzl as a jovial fellow who liked to drink beer and enjoyed a bawdy joke.

But former neighbors say the man accused of imprisoning his daughter and fathering her seven children ran his household like a dictator. Piece by piece, a picture is emerging of a shrewd liar and an obsessive tyrant. (International Herald Tribune/AP)
(more…)

The case about Josef Fritzl, the Austrian that kidnapped his own daughter and kept her in a small underground apartment, behind seven locked doors, for 24 years while he abused her both sexually and in other ways, represents, to me, evil in a pure, undiluted form. Not only bad, evil acts, but systematic, organized evil.

As the full extent of his actions has been revealed - the torment to which he exposed his daughter for almost a quarter of a century, raping her and fathering her seven children in that little cave - I have become more and more perplexed. How can this be? How is such behavior possible in our time and age? How can a man become such a monster? And at a more practical level - how could a thing like this go on in a civilized, well-regulated society for 24 years?

A man claiming to be protecting his family, but obviously also a man who knew this his style of protection was more than a little at odds with socially accepted forms of protection. While his lawyer may be able to see good things in Fitzl, I really do not.

We are starting to learn a little bit about his past. It sheds considerable light on the question of how he became the monster. It offers, possibly, at least the beginnings of a seemingly plausible psychological explanation for his monstrous crimes. The Independent writes:

In an interview, the sister of Fritzl’s wife, Rosemarie, a woman identified as 56-year-old Christine R said that Fritzl had been brought up by a single mother with an explosive temper who resorted to violence to control her child.

“Josef grew up without a father. His mother raised him with her fists,” Mrs R said. “She used to beat him black and blue almost every day. Something must have been broken in him because of that. He was unable to feel any kind of sympathy for other people. He humiliated my sister for most of her life.”

He grew up being systematically subjected to and controlled by violence. But even so, the case still makes me perplex. The reason is that Josef F. at the same time was so much more than a monster, in other settings, with other people. He was evil incarnate, but also a smiling, respected, and somewhat successful businessman who amassed a fortune of 4 million dollars or so.

Over the years, more than 100 people have rented rooms and apartments from him. Seemingly without having much of a clue as to what went on. Apart from one person, that is, who has admitted to knowing about sexual abuse. But he was scared of Josef F. and did not dare to report it to anyone. Also, it has become known that Josef’s brother had a key to the basement.

Lately, after the case has become public, we have also seen a number of old, unsolved crimes resurfacing. An unsolved murder, several unsolved rapes. So far, the ties to Josef F. are speculative. But it would not, I guess, be very surprising if they turned out to be real. According to Der Spiegel, he raped his own daughter in front of her his and her children. So why should anything be a surprise?

So there was Josef F. the beast, and there was Josef F. the family man, and Josef F. the businessman. Possibly Josef F. the murderer and rapist. The multiple faces of Josef F. And the smiling face with the evil behind.

The little we know about his background, so far, may perhaps begin to explain, partly at least, the monster. However, explaining how the monster could coexist, seemingly with easy, with the other faces of Josef Fritzl, is a bigger challenge.

More about this case:

The Independent: The Making of a Monster

No need to be surprised when a house of horrors turns up on a quiet provincial street

Josef Fritz in the news

New York Times: Austria Stunned by Case of Imprisoned Woman

Painting a portait of Austrian incest suspect Josef Fritzl

Guardian (UK): How many more of our missing are stuck in some underground prison? (Expert view)

‘Every little thing she did, her father would hit her’

The American subprime crisis has consequences in a large numner of countries around the world. The German newspaper Der Spiegel recently reported that German banks could lose as much as 70 billion Euros (about 110 billion US dollars):

German Banks Could Hemorrhage 70 Billion Euros

The fallout in Germany from exposure to America’s subprime crisis may turn out to be far bigger than previously feared. One major newspaper is putting estimated losses at a whopping 70 billion euros, while a prominent politician warns that the US recession has already arrived in Germany.

German banking executives fear the current financial crisis (more…) is quickly shaping up to be the worst since 1929. In its Friday edition, mass-circulation daily Bild newspaper cites banking insiders who predict that total losses at German banks from the American subprime mortgage loan crisis could hit the €70-billion ($111 billion) mark.

A number of large German banks, Deutche Bank, UBS, WestLB, Bayern LB are writing down billions of euros. Several of the banks have received government injections of money to keep them floating. The German banking system is shaky and losing customer confidence.