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

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

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’

I have written earlier, in What’s wrong with American banks about the lack of efficiency, the continued use of checks and their outrageous fees. However, it seems I was much too kind. Some American banks seem to do much worse than even that. Now, according to New York Times,

Wachovia has agreed to pay as much as $144 million to end an investigation that accuses the bank of allowing telemarketers to use its accounts to steal millions of dollars.

So instead of trying to build customer confidence, sharpening up the service, improving efficiency, and building business by producing customer satisfaction, a huge American bank gets involved in a rather petty scam against its own customers for a few million dollars in profit! Elderly customers, at that! Wild! What a great way to destroy a brand name! What a great way to destroy customer confidence - just when they need it the most!

The bank’s actions were “part of a pattern of misconduct” that resulted in Wachovia’s collecting millions of dollars in fees, regulators wrote.

Wachovia has agreed to pay a $10 million fine, contribute $8.9 million to consumer education programs and make restitution to victims that could top $125 million. In a statement, the bank said this “situation was unacceptable and we regret it happened.”

How silly is it possible to behave? When is the American banking industry going to stop treating its customers as uneducated, stupid fools, and instead try to focus on building trust, satisfaction and loyalty by means of excellent service? Or building highly efficient transaction systems using the best available technology and software? In a country that, technologically speaking, is ahead of the rest of the world, but that nevertheless, from an implementation point of view – especially as far as the banking sector is concerned – is 10 years behind Scandinavian and German banks in the use of modern technology? They should improve transaction efficiency and lower costs – not run scams!

And if the high paid executives of the huge American bank are unwilling to or unable to improve their banks and customer service, then why hasn’t there been any regulatory action to just force them to increase efficiency and performance? Do American regulators not know how bad American banking is? Do they not go abroad and study how it’s done elsewhere? Do they think America is still in the forefront – and don’t want to be confused with facts?

The Bureau of Labor Statistics today reported that 80.000 jobs had been cut in the US in March. While officials and even newspapers in the US seem reluctant to use the word “recession”, more and more indicators show that the US is in a recession, or extremely close to being in one.

In an article in the New York Times, Andrew Stettner called for an increased focus on the job market in the US:

“People have been focused on the housing crisis, and rightly so,” said Andrew Stettner, a policy analyst at the National Employment Law Project, “but now the deterioration in the job market should be demanding much more attention from policy makers.”

The job cuts so far in the US seem to be fairly consistent with the early stages of a period with a reversal of the wealth effect. According to Washington Post the distribution of job cuts was:

The numbers are far worse than economists were forecasting, and they solidify the case that a serious economic downturn is underway.
….

The report shows clearly how the problems in the housing and financial markets are rippling through different sectors, showing the deep interconnections between seemingly separate parts of the economy.

The number of construction jobs, which has been falling steadily for 18 months, continued its rout. That sector shed 51,000 positions, as fewer residences are being built.

Fewer houses mean less construction and building materials; the number of manufacturing jobs fell by 48,000, with some of the steepest losses among makers of lumber, drywall and other materials. Automakers also shed jobs. With their homes less valuable, Americans seem to be holding off on big-ticket purchases.

Consumers pulling back means stores need fewer workers; the number of retail jobs fell by 12,400. The steepest losses were in sellers of building materials and appliances, both of which are highly tied to the housing business.

The branches of the economy, of course, are not seemingly separate. They are visibly interconnected. Job cuts are most severe in construction and associated industries. Then there are wealth effect consequences in the auto industry and consumer retailing. Its logical and as expected.

As to the depth and duration of this crisis, this is what Ian Shepherdson had to say in NYT today:

Many forecasters argue that the economy will rebound by the fourth quarter, a view rejected by Ian Shepherdson, chief domestic economist for High Frequency Economics.

“We are in for a much longer recession than Wall Street thinks,” he said. “This particular downturn is driven by a rare contraction in consumer spending, and that is starting to hurt a broader range of people than those hurt by the mortgage crisis.”

Something is seriously wrong in a country when a vast majority of its population say that the country is headed in the wrong direction:

81% in Poll Say Nation Is Headed on the Wrong Track

Americans are more dissatisfied with the country’s direction than at any time since the New York Times/CBS News poll began asking about the subject in the early 1990s, according to the latest poll.

In the poll, 81 percent of respondents said they believed “things have pretty seriously gotten off on the wrong track,” up from 69 percent a year ago and 35 percent in early 2002.

This poll was reported by the New York Times. These are numbers, frankly, that would not have surprised me if they had been from a poll conducted in the Soviet Union before glasnost and democratization. But numbers like this, in a democracy, is astonishing, to say the least!

A majority of nearly every demographic and political group — Democrats and Republicans, men and women, residents of cities and rural areas, college graduates and those who finished only high school — say the United States is headed in the wrong direction. Seventy-eight percent of respondents said the country was worse off than five years ago; just 4 percent said it was better off.

There is still considerable uncertainty concerning the results from the election in Zimbabwe. To my knowledge, official resultats have still not been released.

However, the Danish newspaper Politiken cites two prominent members of Mugabe’s ruling party (names withheld), who give the following results:

Tsvangirai’s MDC: 48.3%
Mugabe’s ZANU-PF: 43%

According to Politiken, there will be a new election within three weeks. However, New York Times writes that there are negotiations about Mugabe’s retirement under way:

Negotiations May Lead to Mugabe’s Exit in Zimbabwe

By THE NEW YORK TIMES

HARARE, Zimbabwe — The opposition leader Morgan Tsvangirai is in talks with advisers to President Robert G. Mugabe of Zimbabwe, amid signs that some of those close to Mr. Mugabe may encourage him to resign, a Western diplomat and a prominent Zimbabwe political analyst said Tuesday. The negotiations about a possible transfer of power away from Mr. Mugabe began after he apparently concluded that a runoff election would be demeaning, a diplomat said.

The Times, BBC-News, and Dagbladet also bring reports about negotiations. This is what Times writes:

Intensive diplomatic efforts were under way tonight to secure a face-saving exit for Robert Mugabe after 28 years as President of Zimbabwe.

His closest cohorts informed him last night that he had failed to win an outright victory in the country’s weekend presidential poll.

Despite tampering with the results from the countrywide elections, the Zimbabwean Electoral Commission was set to announce that the main opposition leader, Morgan Tsvangirai, had taken 48 per cent of the vote, against 42 per cent for the 84-year-old incumbent.

So, in conclusion, there is considerable uncertainty, but strong indications that Mugabe has lost. Whether he will retire in a peaceful manner or not is still not clear. According to BBC-News a deal is “close”.