from the hip

First we learned that the recession was deeper in the US than had previously been told. Now we learn the same about the UK. It is somewhat strange that the bias of these numbers seem to consistently be in the same direction?

Anyway, here is what Times writes about this issue today:

OFFICIAL figures this week will confirm that the economy has been sliding into recession for months and could show that the downturn is deeper and started earlier than first thought.

Revised figures for gross domestic product (GDP) in the third quarter are set to show a fall of at least 0.5%. Several analysts believe that subsequent information, particularly on the dire performance of manufacturing, will see a sharper quarterly fall of 0.6%.

Whitehall officials are also braced for a revision of earlier data, which could change the timing of the recession.

Economists are getting gloomier about the outlook. The Centre for Economics and Business Research, a consultancy, predicts that Britain will contract by 3% in 2009 and a further 0.7% in 2010, implying a long, deep recession.

Capital Economics, another consultancy, now predicts a fall of 2.5% in GDP next year, with a further drop of 1% during 2010.

This compares with the Treasury’s prediction of a decline in GDP of between 0.7% and 1.25% next year, followed by a recovery in 2010, when it expects to see the economy grow by between 1.5% and 2%.

As you can see, the new figures, as well as the updated outlooks, point in the direction of a recession that is both deeper and of longer duration than has so far been indicated by official sources.

Citibank (or Citigroup Inc.) is in trouble. Over the last year, its stock price has dropped from above 30 dollars to less than 4 dollars (3.77 at the close of NYSE today). Its value has been in free fall the the whole week, despite attempts by the bank to shore up it stock prices by asserting its value. Times writes:

Citigroup was the world’s biggest bank until February, when it was overtaken by the Industrial and Commercial Bank of China. Citigroup is now only the fifth-biggest in America, after falling behind US Bancorp, a Midwestern commercial bank, this week. Bank of America is the largest bank in the United States.

By now, this kind of rapid decline in value is a story we have seen before. We saw it with Lehman Brothers. We’re seeing it with GM and Chrysler. And others. in fact, in quite a few other cases.

And now the question is: Should government bail out Citibank or let it slide? The proponents of a rescue operation say that Citibank it too big, one can not let it fall. And they point out that if Citibank goes, the banking system will fall. And we have heard all those arguments before. We have, in fact, heard them every time there is a government bailout. As well, we have heard them repeated over and over by lobbyists for all those industries allegedly needing a bailout. (Just so that it is said, I have nothing against Citigroup, nor do I own or have traded its stock. And the argument I am trying to make is more general and applied to a large number of corporations, and not only to Citibank.)

But does that make the statement true? I think not. First, there is a difference between a bank and a system of banks. Letting a bank fail (Citibank has a positive cash flow, so it may not fall, but that’s not the point here) may actually strengthen the system of banks, as the bankruptcy process will weed out the gold from the dirt and clean the system of debris. As well, three Detroit car manufacturers, unable to cope with competition and having lost marked shares for 20 years, do not constitute the car industry – not in the world, not in America.

All those attempts to equate individual members of industries with the industries themselves are seeking to establish false identities between entities that simply are not identical.

The real question, to my mind is: If this depression is as deep as or deeper than the crisis in 1929, does the American government – or any government for that matter – really have the resources it takes to bail out every business deemed to be strategically important over the duration of this crisis? I think not. Not if government is also to continue to attend to its (their) core business – to provide regulation, defense, social services, health care, and all those other businesses.

This, I think, is likely to be the right perspective in which to view government intervention at this stage. And, if I am right, shelling out huge sums on failing businesses may reduce the ability to act in the future, possibly for greater benefits and facing even tougher challenges. And maybe, just maybe, the crisis is as much a political crisis – involving politicians and regulators in panic, deepening the crisis with every move they make – as a financial and banking crisis.

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

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 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…)

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”.

Among the few very certain things in this world, is the fact that Mugabe has been a disaster for Zimbabwe. Fraud, corrupsion and poltical terror have been a fact of live for people in Zimbabwe for many years.

A land rich on resources and fairly well off at the time of independence have been reduced to one of the poorest countries in the world. Its GDP per capita have fallen with more than 80% since independence.

Now there may be a light in the tunnel, despite the fact that the desperate Robert Mugabe recruited dead voters (The Times) to rig the election.

According to The Guardian, the opposition claims that they have won the election in the country:

Zimbabwe’s opposition party claimed an overwhelming victory against President Robert Mugabe in yesterday’s presidential election, saying that the flow of results showed its candidate, Morgan Tsvangirai, had ‘massacred’ the ruling Zanu-PF party.

The Movement for Democratic Change (MDC) defied a government ban on pre-empting the official announcement of the election results and released the count from polling stations that showed Tsvangirai beating the man who has ruled Zimbabwe for 28 years, even in the president’s home territory of Mashonaland.

‘We’ve won this election,’ said Tendai Biti, the MDC’s secretary-general. ‘The results coming in show that in our traditional strongholds we are massacring them. In Mugabe’s traditional strongholds they are doing very badly. There is no way Mugabe can claim victory unless it is through fraud. He has lost this election.’

The government’s electoral commission has yet to release the counts formally. But the MDC said that declarations posted at polling stations across Zimbabwe last night, and gathered from its agents observing the counts, showed Tsvangirai ahead of Mugabe in every province where results were available. The most dramatic gap was in Mashonaland West, where the MDC candidate had 88 per cent of the vote to the president’s 12 per cent.

However, it is still too early to say. And even if the opposition should win, the likelihood of a peaceful transition of power is probably very, very small. The most likely outcome is that Mugabe will cling to power and a civil war will ensue.

In my opinion, that is.

PS: The election results are not forthcoming. Election observers now fears that this means that Mugabe is yet again doctoring the results. Journalists have not so far been able to ascertain when the results will be made public.
PS2: Read about some of the local election results from The Independent.

Some good readings about the election in Zimbabwe:

The Independent – Mugabe: the writing’s on the wall, Opposition leaders go into hiding as poll result is delayed
New York Times: Zimbabwe Opposition Insists Mugabe Lost
The Guardian: Zimbabwe opposition fears vote-rigging, Secret Mugabe meeting ponders military move or fixed result
Information (Danmark – in Danish): Dødt løb efter valg i Zimbabwe