Soon to be World War III

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IMF's Lipsky says moderate world recovery underway

John Lipsky, the International Monetary Fund's first deputy managing director, answers a reporter's question after the meeting of G20 finance and central bank deputies in Gwangju, south of Seoul, September 5, 2010

The world economy is recovering moderately but still faces challenges such as the need for medium-term fiscal consolidation, the IMF's First Managing Director, John Lipsky, said on Sunday.

"They are mainly confident that there is a moderate recovery underway globally," he told reporters, referring to delegates at the G20 meeting of deputy finance and central bank chiefs in South Korea.

"Obviously there are risks and challenges, but things seem to be moving more or less in line with our forecast," he said, listing well-designed exit strategies and medium-term fiscal consolidation as challenges.

He said some good progress has been made in discussing changes to the IMFs executive board, but did not elaborate. G20 members have pledged to reach an agreement on the issue by the time leaders meet in Seoul in November.

The United States, frustrated at Europe's refusal to share more IMF power with emerging economies, took unprecedented action last month to block plans that would have kept Europe's long-running dominance over the 24-member board.

Emerging economies have called for a bigger say in international institutions such as the IMF in line with their increasing contribution to the global economy and the resultant importance in global economic policy coordination.

A senior Indonesian official told Reuters separately that emerging economies want more voting powers as well as a readjustment in the way the global economic policy is made.

"For emerging markets, the important thing is not only the size of the increase of the quota, but the general idea of the relationship between the quota and governance of the IMF -- and that needs to come in one package," Hartadi Sarwono, deputy governor of the Indonesian central bank, said in an interview.

One senior official from a member country, who attended the whole of the meetings, told Reuters there was no discussion about specific currencies or currency issues, although issues related to reducing the global imbalances were a key topic.

"Delegates did not talk about any specific currencies or about a specific level of a currency, but of course they discussed global rebalancing," said the official, who did not want to be identified.

Japan is grappling with the yen's soaring to 15-year highs against the dollar and policymakers have repeatedly said they could take decisive action on the yen -- normally a code phrase for currency intervention.

South Korea will host the November 11-12 summit of G20 leaders in Seoul, with key issues also including reforming the global financial regulatory framework and drawing up plans to put the world economy on a balanced and sustainable growth path.

Reuters

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Obama says his economic policies halted "bleeding"

President Barack Obama (L) delivers remarks on the latest employment statistics released on Friday, alongside Treasury Secretary Tim Geithner in the Rose Garden of the White House, September 3, 2010.
Credit: Reuters/Jason Reed

President Barack Obama, previewing a big push on the U.S. economy next week, on Saturday defended policies that he said "have stopped the bleeding" and put the middle class on the road to recovery.

Obama, struggling to bring down the 9.6 percent jobless rate, is to spend next week talking up proposals on improving the economy.

He hopes to gain some traction with impatient voters as they ponder whether to toss out his Democrats in the November 2 congressional elections.

In his weekly radio and Web address, Obama pointed to measures funded by the Democrats' $814 billion economic stimulus as responsible for halting the economic slide he faced when taking office in January 2009.

This includes spending on roads and bridges and money given to local governments to avert layoffs of teachers, firefighters and police officers.

"The steps we have taken to date have stopped the bleeding," Obama said. "But strengthening our economy means more than that."

Other steps, he said, were aimed at helping the middle class, citing a portion of his U.S. healthcare overhaul that stopped insurance companies from refusing to cover people with pre-existing health conditions.

Obama is trying to convince Americans that Democratic policies offer the best economic future for them as he seeks to turn back a strong challenge from Republicans for control of the U.S. House of Representatives and possibly the Senate.

Obama is to visit a labor rally in Milwaukee on Monday, the Labor Day holiday, and then is to lay out targeted proposals to boost job growth when he visits Cleveland on Wednesday. A presidential news conference is planned on Friday at the White House.

A number of options are likely, such as extending middle class tax cuts, investing in clean energy, spending more on infrastructure, and delivering more tax cuts to businesses to encourage hiring.

RESEARCH TAX CREDIT

The New York Times reported late Saturday that Obama will ask Congress to increase and permanently extend a tax credit for business research expenses and pay for the program, which would cost up to $100 billion over 10 years, by closing other corporate tax breaks.

Citing unnamed administration officials, the newspaper said Obama will outline the proposal in a speech in Cleveland. The White House chose the venue in part to draw a contrast with a recent economic address there by Ohio Representative John Boehner, the House Republican leader.

The research credit, which has existed in some form since 1981, would be expanded under the Obama plan, the Times said. The simpler of two credit options available to business would be increased to 17 percent from 14 percent, it said.

The Wall Street Journal reported on Saturday that the Obama administration was moving toward using revenue that would be generated after the expiration of existing tax cuts for upper-income people to finance about $35 billion of tax cuts targeted at small businesses and lower-income workers.

A White House spokeswoman, Amy Brundage, declined to comment on the Journal report.

The White House is careful to say these proposals do not add up to a second stimulus package, given voters' anxiety about the country's record budget deficit.

Democrats are to kick off their autumn effort to hang on to Congress on Wednesday when Democratic Party Chairman Tim Kaine delivers a speech in Philadelphia that the party said will frame the choice for voters.

Kaine will "explain the choice the American people have in front of them -- a choice between Democrats, who are moving America forward and Republicans, who want to take us back to the failed policies of the past that brought our economy to the brink of collapse," a party statement said.

Republicans said Democratic policies are responsible for the sagging economy.

"This administration claimed its economic policies would keep unemployment under 8 percent, cut the deficit and turn our economy around. Instead, the unemployment rate is nearing 10 percent, the debt is exploding and we've lost hundreds of thousands of jobs over the summer months," said Senate Republican leader Mitch McConnell.

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World shares climb, following US, as fears of double-dip recession ease
By: Alex Kennedy

SINGAPORE - World stocks advanced Monday following solid gains in the U.S. as fears eased that the global economy could slip back into recession.

Most investors took heart after the U.S. Labor Department on Friday said private employers added 67,000 jobs in August, more than analysts expected. However, the jobless rate rose to 9.6 per cent from 9.5 per cent in July.

The private job gains bolstered optimism that the U.S. will maintain a slow but steady recovery from last year's recession and avoid another economic contraction later this year.

"The renewed flight to safety we have witnessed over the past month is overdone and risks an equally large reversal when the worries over a double dip subside," Rabobank said in a report.

"As the unexciting, steady and below-trend global recovery continues, it's important not to confuse it with a double dip recession."

In early trading in Europe, the FTSE 100 index of leading British shares was up 0.3 per cent and Germany's DAX gained 0.2 per cent. The CAC-40 in France was 0.2 per cent higher. Wall Street was set to tread water with Dow futures ahead by 2 points, or less than 0.1 per cent, at 10,438.00.

Japan's benchmark Nikkei 225 stock index climbed 2.1 per cent, or 187.19, to 9,301.32 and South Korea's Kospi rose 0.7 per cent to 1,792.42.

Hong Kong's Hang Seng index added 1.8 per cent to 21,355.77. Australia's S&P/ASX 200 gained 0.8 per cent at 4,575.50. Markets in mainland China, Taiwan, India, Indonesia and Singapore were also higher.

The Dow Jones industrial average jumped 1.2 per cent, or 127.83 points, to close at 10,447.93 on Friday. The broader Standard & Poor's 500 Index rose 1.3 per cent, or 14.41 points, to 1,104.51.

Shares in the U.S. ended the week in the positive, the first time that has happened in a month. The early gains in September mark a stark turnaround from August trade, when shares fell on doubts about the global economic recovery.

In currencies, the dollar fell to 84.13 yen versus 84.27 yen on Friday. The euro was slightly higher at $1.2906 from $1.2895.

Benchmark oil for October delivery was down 28 cents at $74.32 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 42 cents to settle at $74.60 on Friday.

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Taiwan Missile Shield to be Completed in 2011

Taiwan anticipates its long-awaited missile shield will be completed in 2011 following the acquisition of roughly $9.4 billion in high-tech weaponry, Agence France-Presse reported yesterday.

Six batteries of U.S.-made Patriot Advanced Capability 3 interceptors would make up about half the cost of the missile shield. A long-range radar system costing about $1.3 billion would enable the island nation to identify and monitor enemy ballistic and cruise missiles, the China Times reported.

Taiwan's missile defenses are also expected to include domestically manufactured tactical ballistic missiles that are based on the Tienkung missile, the newspaper reported.

Various estimates indicate China has no less than 1,000 missiles directed at Taiwan, which Beijing claims as its territory.

In January, Washington approved the sale of some $6.4 billion in weapons to Taipei. The sale included Patriot missiles, helicopters and components for Taiwan's F-16 fighter planes. China was aggravated by the deal and broke off high-profile military exchanges with the United States (Agence France-Presse/Spacewar.com, Sept. 6).

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Senior US diplomat confident American base on Japanese island of Okinawa will stay

GENEVA - U.S. Deputy Secretary of State James Steinberg says Washington would prefer to keep its military base on the southern Japanese island of Okinawa despite local opposition.

Steinberg says he is confident the day-to-day political debate on moving the base won't trump an overriding commitment in Japan to host the U.S. military.

He told an international security conference in Geneva on Saturday that serious security issues remain in East Asia and the U.S. would "rather stay where we are."

Under a 2006 agreement, Washington will move 8,000 Marines from Okinawa to the U.S. territory of Guam and relocate an air base from the middle of a city to a less crowded part of the island by 2014.