British banks were teetering on the brink of a fresh meltdown today after it emerged they had invested heavily in crisis-hit Dubai.An $80billion debt default in the emirate has already reawakened the spectre of a global ‘double dip’ – that the first shoots of recovery could be wiped out by a second wave of recession.  But the level of exposure that the crippled British banking sector faces is now under renewed scrutiny.  The crisis was prompted by Dubai World, the development company behind three palm shaped islands as well as an off-shore replica of the globe, defaulting on its debt.

Today it emerged that:

* Royal Bank of Scotland (RBS) was Dubai World’s biggest loan arranger since January 2007, according to JP Morgan

* HSBC has an estimated £9.6billion in loans and advances to UAE customers

* Barclays has an exposure of around £3billion

The figures are particularly alarming as the sector has had to be bailed-out by the tax payer on a number of occasions over the last year-and-a-half.     Earlier this month, RBS and Lloyds Banking group received another £50billion to keep them afloat.  RBS – which has received the biggest state rescue anywhere in the world – is now effectively owned by the taxpayer.  As the money markets continued to falter, Gordon Brown moved to dispel investors’ panic, claiming that he believed British banks were ‘well-capitalised’.  Speaking at the Commonwealth summit in Trinidad, Mr Brown said: ‘I think we will find this is not on the scale of the previous problems we have dealt with.’  Asked if the Dubai situation could spark a ‘double-dip’ recession, he said: ‘You are obviously going to have setbacks with a bank here or an organisation there which has had problems, but I do believe the world has a better way of monitoring what is happening, so we can be sure that – despite setbacks – we will continue to go forward.’  Stock markets around the world have endured another turbulent 24 hours.  Wall Street plummeted 2 per cent when it opened at 2.30pm GMT this afternoon.  In London, the FTSE fell around 1.5 per cent first thing after a 3 per cent fall yesterday wiped almost £44 billion from blue-chip stocks.  This just goes to show that we are anything but out of the woods yet in the global economic recession.  Article by Liz Hazelton. (link:  http://www.lewrockwell.com/spl/double-dip-depression.html)

During President Obama’s high profile visit to China this week, the most frequently discussed, yet least understood, topic was how currency valuations are affecting the economic relationship between the United States and China. The focal problem is the Chinese government’s policy of fixing the value of the renminbi against the U.S. dollar. While many correctly perceive that this ‘peg’ has contributed greatly to the current global imbalances, few fully comprehend the ramifications should that peg be discarded.  The common understanding is both incomplete and naive. Most analysts simply see the peg as China’s principal weapon in an economic struggle for global ascendancy. The peg, they argue, offers China a competitive advantage by making its products cheaper in U.S. markets, thus allowing Chinese firms to gobble up market share and steal jobs from U.S. manufacturers. The thought is that were China to allow its currency to rise, American manufactures would regain their lost edge, and both manufacturing firms and the jobs formerly associated with them would return. In this narrative, the struggle centers on the United States’ diminishing leverage in persuading the Chinese to lay down their unfair weaponry. It’s a sympathetic picture, but it tells the wrong story.   While the peg certainly is responsible for much of the world’s problems, its abandonment would cause severe hardship in the United States. In fact, for the U.S., de-pegging would cause the economic equivalent of cardiac arrest. Our economy is currently on life support provided by an endless flow of debt financing from China. These purchases are the means by which China maintains the relative value of its currency against the dollar. As the dollar comes under even more downward pressure, China’s purchases must increase to keep the renminbi from rising. By maintaining the peg, China enables our politicians and citizens to continue spending more than they have and avoiding the hard choices necessary to restore our long-term economic health.  Article by Peter Schiff (link:  http://www.campaignforliberty.com/article.php?view=378)

As the unemployment rate crossed the double digit barrier for the first time since Michael Jackson learned to moonwalk, President Obama announced that he will convene a “jobs summit” to finally bring the problem under control. Using all the analytic skill that his administration can muster, the President is determined to figure out why so many people are losing their jobs and then formulate a solution. That’s a relief; for a while there, I thought we were in real trouble! In fact, the absolute last thing our economy needs is more federal government interference. If Obama really wants to know what’s behind entrenched joblessness, he should start by looking at the man in the mirror.  Obama is pursuing, with unprecedented vigor, the same policies that have for decades undermined our industrial base and yoked us to an unsustainable consumer/credit driven economy. This doubling down on Washington’s past failures is destroying jobs at an alarming rate. Today we learned that the September trade deficit surged by 18.2%, the largest gain in ten years. Much of the deficit resulted from Americans spending Cash-for-Clunkers stimulus money on imported cars – or “American” cars loaded to the sunroof with imported parts. In exchange for more domestic debt, we have succeeded only in creating foreign jobs.  As our economy becomes less competitive due to higher taxes, burdensome and uncertain regulations, and capital flight, more manufacturing and services will be outsourced to foreign firms. However, the flaw in GDP calculation allows the output of those foreign workers to be included in our domestic tally. Since we count the output but not the worker responsible for it, government statisticians attribute the gains to rising labor productivity. To them, it looks like companies are producing more goods with fewer workers.  The reality is that we are producing less with fewer workers. The added “productivity” comes from higher unemployment and larger trade deficits. This is a toxic formula that will have lethal economic consequences.  Article by Peter Schiff.  (link:  http://www.lewrockwell.com/schiff/schiff57.1.html)

While normal everyday oblivious Americans were preparing their beds to sleep Saturday night their elected officials quietly passed H.R. 3962, the Affordable Health Care for America Act. Indeed, the passage of this act deals one of the final death blows to the Constitution and with it our liberties.
As I ponder upon this momentously horrid occurrence it is as if I have just woken up from a nightmare and been thrown directly into the plot of George Orwell’s 1984, with no hope of escape. As this thought grabs hold I am lead to ponder more and more about America and I ask myself a few questions.
Since when did the Constitution provide for a health care guarantee? Since when did the Constitution grant the Congress the power to force Americans into a health care dystopia? What good is a Constitution if we choose to ignore it? What good is a Constitution if the Congress simply chooses to create a new one in their own graven socialist image?  It is the everyday middle class American that will suffer the consequences of this travesty. Indeed, while the economy is reeling and unemployment pushes depression-era levels the arrogant Congress has decided to pass the biggest expansion of government in the history of the United States. It will create a new tax that will primarily be felt by the middle class, the ones most likely affected by the current depression. This is because as Americans are forced to purchase health insurance, the wealthy will have no problem paying for escalating costs. Nor will the poor feel the burden as they will receive government health insurance subsidies. Yet, the forgotten man will be the middle class working American who now already struggling against the burden of economic ruin will be forced to pay fines or even face possible jail time for not complying with our government’s takeover of his/her health care. As this tax sinks in, the middle class will be forced downward into the ranks of the working poor and therefore into the ranks of government rationed medical care. Inevitably, government healthcare will swallow the whole of the medical insurance world and there will be no escape.  Article by Adam Murdock, MD (link: http://www.campaignforliberty.com/article.php?view=343)

Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.  A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.  Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate. We have seen the results of Alan Greenspan’s excessively low interest rates: the housing bubble, the explosion of subprime loans and the subsequent collapse of the bubble, which took down numerous financial institutions. Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers.  The only remaining option is to have the Fed create new money out of thin air. This is inflation. Higher prices lead to a devalued dollar and a lower standard of living for Americans. The Fed has already overseen a 95% loss in the dollar’s purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year. (source:  http://www.forbes.com/forbes/2009/1116/opinions-great-depression-economy-on-my-mind.html)