Monthly Archives: July 2011

Troops ask amid debt crisis: Will we get paid?

‘I honestly can’t answer that question,’ Admiral Mike Mullen says in Afghanistan


CAMP LEATHERNECK, Afghanistan — A half a world away from the Capitol Hill deadlock, the economy and debt crisis are weighing heavily on U.S. troops in Afghanistan.

And the top question on their minds Saturday even as bombings rocked the city around them, was one the top U.S. military officer couldn’t answer.

Will we get paid?

“I honestly can’t answer that question,” Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, told troops at Kandahar air base in southern Afghanistan, as several expressed anxiety over budget wrangling in Washington.

Mullen also told them they would continue to go to work each day.

But he offered a bit more optimism than defense officials have acknowledged when those questions have come up in recent weeks. He said he believed that troops would be paid eventually, regardless of what happens.

“I have confidence that at some point in time, whatever compensation you are owed, you will be given,” said Mullen, who is making his 15th trip to Afghanistan, just two months before he retires. But, he noted, “There are plenty of you living paycheck to paycheck so if paychecks were stopped it would have a devastating impact very quickly.”

“I’d like to give you a better answer than that right now, I just honestly don’t know,” he said.



Brown:State Bond Rating May Be Lowered With Or Without Debt Ceiling Deal


Lt. Governor Anthony Brown talks to WBAL’s Robert Lang Sunday at the WBAL studios. (WBAL photo)

Sunday, July 31, 2011
Robert Lang

Lt. Governor Anthony Brown  says Maryland’s Triple-A  bond rating may be lowered by  Wall Street, even if a deal is reached in Washington between Congress and the White House to raise the debt ceiling and cut federal spending.

Maryland is one of five states with Triple-A bond ratings that are having their rating reviewed by Moody’s, one of Wall Street’s three bond rating agencies.

“There are indications from Wall Street that even with a deal to raise the debt ceiling , we still maybe in jeopardy because of the difficulty the leadership in Washington  in reaching a deal in raising the debt ceiling,” Brown told WBAL News Sunday.

Brown says a lower bond rating would mean the state would pay higher interest rates when it borrows money for various construction projects and that would make those projects more costly to taxpayers.

Brown says the higher rating gives the state the ability to pay for new schools, roads and other infrastructure projects.

Brown, a colonel in the U.S. Army Reserves, who served a tour of duty in Iraq, is also worried about the impact on military personnel stationed around the world who may not get paid after Tuesday night, if the debt ceiling is not raised.


World warns of disaster if no debt deal done

31 July 2011

LONDON/TOKYO, Jul – Governments and policy makers around the world warned of the risk of financial disaster if Washington fails to raise the U.S. debt ceiling.

As Congress haggled over a deal to stave off the risk of an unprecedented U.S. default, British and Japanese officials on Sunday said failure could hurt households across the globe.

“The world is watching the United States with trepidation, with anxiety, with concern, but also with hope,” International Monetary Fund Managing Director Christine Lagarde told CNN.

“Instability is never a good idea, never a good idea. And this level of uncertainty, the trepidation arising from August 2, is bringing about a lot of instability,” she added.

U.S. Democrats and Republicans face a Tuesday deadline to reach agreement. The U.S. Treasury has said it will run out of borrowing room on that day although analysts say it may have enough cash to keep servicing its debt and paying its bills through the middle of this month.

The German central bank expressed confidence the United States would avert a debt default.

The key role of the U.S. dollar in global banking and trading means financial markets face the risk of major instability without an 11th-hour agreement.

Senate Leader Harry Reid said he hoped to hold a Senate vote later on Sunday on an emerging deal to raise the debt ceiling, raising hopes the impasse could be broken.

As financial markets opened up for the week in Asia, investors took some relief from the signs of progress and the U.S. dollar strengthened against the Japanese yen, after falling to a four month low on Friday.

“If they get this one wrong and there’s a default — we don’t expect that, we think that they will sort this out — but if that were to happen, it has consequences for every family and every business in this country and all across the world,” said Danny Alexander, Chief Secretary to the British Treasury.

“I think in the end the politicians on Capitol Hill can see that the precipice they are looking over is one that they are going to step back from,” he told BBC television.

In Tokyo, sources familiar with Japan’s international and monetary affairs, also speaking earlier on Sunday, said they were increasingly concerned that markets might be too hopeful about prospects for a lasting solution to the crisis.

Japanese officials still hope Washington can strike a deal and if that proves impossible, will give priority to interest payments to international holders of U.S. Treasury debt to limit the immediate market impact, the sources said.

But Tokyo’s concern is that if the crisis drags on without a clear and long-term solution, markets may be thrown into turmoil in the same way that they suffered when U.S. investment bank Lehman Brothers collapsed in September 2008.

“If there is a default, the impact on global markets will be huge,” said one of the sources, who declined to be named because of the sensitivity of the matter.

Another Japanese source said, “Nobody thought Washington would let Lehman collapse. But look what happened.”

The German central bank said it was monitoring the situation. “Should there really not be a solution, the question arises: what happens then,” a German central bank spokesman said. “But I expect … there will be a solution in the United States either today or in the coming days.”


China, which owns well over $1 trillion in U.S. Treasury bonds, has expressed alarm. On Saturday the official People’s Daily newspaper, the mouthpiece of the Chinese Communist Party, castigated the U.S. handling of the debt crisis as “irresponsible” and “immoral.”

It said the U.S. democratic system was to blame for the “farce,” claiming that “not a single representative has considered the world, and even U.S. national interests are being banished from the mind.

On Friday a senior economic policymaker in the euro zone, who declined to be named, expressed surprise and anger that U.S. politicians were “playing chicken” with an issue of such importance for the global economy.

Euro zone leaders are struggling to control sovereign debt crises in several countries in their region, a task complicated by the U.S. debt problem which has added to upward pressure on the yields of government bonds in those weak states.

Central banks around the world are expected to stand ready to provide emergency supplies of money to commercial banks in case the banks become too nervous to lend to each other.

Japan’s first defense will be to ensure that Japanese financial institutions have a sufficient supply of dollars, the sources in Tokyo indicated.

The Bank of Japan believes Japanese commercial banks have sufficient dollar cushions but will use its dollar swap arrangement with other central banks to prevent a dollar squeeze in case of market turmoil.

In June, the U.S. Federal Reserve extended liquidity swap arrangement with other big central banks until August 1, 2012.

The Japanese central bank is also prepared to flood markets with yen through its open market operations in case interbank borrowing costs spike, BOJ officials say.

In Europe, there were minor signs of strain in the money markets last week with some banks becoming unable to take out longer-term dollar loans, but the effect was small since banks still expected Washington would reach a deal.

The European Central Bank already offers unlimited euro loans to banks in some of its money market operations as part of its response to past crises, and it could use that policy to cope with any market problems this week.

A spokesman for the Swiss central bank said, “The Swiss National Bank is ready to react appropriately at any time to market disruptions.”

The Obama Deception HQ Full length version

Mobius: US Dollar, Treasurys No Longer Safe Havens

By: Deepanshu Bagchee
Supervising Digital Editor, CNBC Asia

The U.S. dollar and Treasurys, which proved to be safe havens during the global financial crisis, can no longer be viewed as such because of the on-going debt impasse, renowned investor Mark Mobius told CNBC on Friday.

Instead, Mobius, who oversees about $50 billion as executive chairman at Templeton Emerging Markets Group said emerging markets were now a much safer bet.

“The debt crisis in the U.S. and Western Europe puts emerging markets in a very strong position because their debt to GDP ratios are much lower than the developed countries and their foreign reserves are greater than the developed countries,” Mobius said.

Mobius believes a shift is under way towards emerging market stocks and said that he was bullish on commodities and gold [XAU=  1626.59    3.10  (+0.19%)   ] .

“Commodities are a very big part of our portfolio because we believe in dollar terms that commodity prices will continue to trend upwards,” Mobius said.

Despite the debt crisis and a pullback in purchasing managers indexes in the U.S., India and China, Mobius said investors shouldn’t be worried about another global recession.

“The consumer is alive and well and kicking both in the U.S. and in emerging markets, so I’m not too frightened. The consumer has lots of cash to spend and they want to spend, because they don’t want to hold currencies,” Mobius said.

Within emerging markets, Templeton has been focusing on equities in China, India and Russia, where benchmark indexes had so far lagged behind the broader group.

“If you’re talking about slower growth in China and India, for example, you’ve gone from 9 to 8 to 7 percent, even 7 is tremendous growth,” he added.

Mobius admitted that some emerging market stocks had gotten expensive, but he said he was most bullish on the retail sector, where he expected to see some consolidation, and on packaging companies, which were further upstream.

He added that Templeton was continuing to make a big push into frontier markets, in which the firm now has about $1 billion invested.

“We’re big in Nigeria, we are big in Vietnam, we’re big in Ukraine and many of these frontier markets are doing quite well and the good news, of course, is that they’re still quite cheap,” he said.

Mobius accepted that some frontier markets suffered from low levels of liquidity, but he said Templeton hasn’t had any major problems because the markets were very different, and so, extremely uncorrelated.


It’s Time to Change




Mexican ‘Knights Templar’ drug gang distributes good conduct guide

‘Life requires chivalry and humility’: the Knights Templar are a Mexican crime group accused of murder, extortion and drug trafficking

An organised Mexican crime group calling itself the Knights Templar is distributing booklets – claiming to fight a war against poverty, tyranny and injustice.

The group, blamed for murders, extortion, drug trafficking and attacks on police, are appealing to citizens in a part of the country where the government claims to have largely taken down major drug traffickers.

Analysts say the propaganda is trying to transform a drug cartel into a social movement, like what right-wing paramilitary groups did in Colombia in the 1990s against leftist rebels — a fight in which both sides used the drug trade to finance their causes.

‘I think the main intent is to create a social base in Michoacán … and that way they are different from other criminal organisations,’ said Jorge Chabat, a veteran analyst of the drug trade in Mexico.

‘They say they are defending the people against attacks. In the case of Colombia it was the guerrillas; here it is against who knows what.’

A copy of the 22-page ‘The Code of the Knights Templar of Michoacán,’ handbook shows illustrated knights on horseback bearing lances and crosses. It says the group ‘will begin a challenging ideological battle to defend the values of a society based on ethics.’

The Knights Templar was founded in March, according to the booklet, whose illustrations were lifted from an artist, a website of a company that sells swords and another promoting the 2007 Swedish film ‘Arn: The Knight Templar’.

Named for a medieval Roman Catholic order of religious warriors who fought Muslim armies for control of Jerusalem, Knights Templar is a splinter group of La Familia, another cult-like cartel whose leader, Nazario Moreno Gonzalez, published a motivational pamphlet called ‘The Sayings of the Craziest One.’

La Familia claimed strict codes of conduct among its members, including prohibiting using or selling drugs within Mexican territory, it didn’t distribute its booklets publicly.

The contents of its ‘bible,’ reportedly based on the teachings of U.S. evangelist John Eldredge, have never been revealed by authorities. The cartel became one of Mexico’s major sources of methamphetamine.


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At least 14 killed after weekend riots in restive northwest China

31 July 2011

XINJIANG, CHINA (BNO NEWS) — Chinese police on Sunday shot dead four suspects after 10 people were killed in weekend violence in the restive northwest Chinese region of Xinjiang.

The state-run Xinhua news agency reported that police killed four suspects and arrested four more in the city of Kashi on Sunday afternoon. Police are hunting for four other suspects after violence broke out in the troubled ethnic region.

Local sources had earlier said three people died from a blast at the scene, but witnesses said the victims were hacked to death by the rioters, Xinhua said. More than 10 pedestrians and police officers were injured during the mob attack.

Sunday’s violence came after at least seven people were killed by rioters on Saturday night in the same city. Two suspects hijacked a truck, stabbed the driver to death and drove the vehicle into pedestrians before jumping out and attacking bystanders.

At least six people were killed on the spot and 28 others were injured, according to Xinhua. One of the rioters died when fighting with local people, and the other was arrested. Before the incident two blasts were heard — one from a minivan and the other from a street food stall where the attackers hijacked the truck.

The province of Xinjiang, home to China’s Uygur minority and other ethnic groups, has seen violent ethnic riots in the past. On July 18, police shot 14 “rioters” who attacked a police station and killed four people in Xinjiang’s Hotan city.

This was the worst violence since 2009 when rock-flinging and knife-wielding rioters looted shops, torched vehicles and killed nearly 200 people.


And Now, Get Ready For The Real “Asian Markets” Day


Jul. 31, 2011

Joe Weisenthal

Last weekend, politicians made a big point about wanting to get a debt ceiling agreement before the opening of Asian markets on Sunday night (in the US).That was dramatic, but not only was there no deal, the markets didn’t really care at all.

Well here we are again, another Sunday, and actually this time it might matter.

The latest word is that a deal is actually within reach.

The broad framework exists, supposedly.

If this blows up it means: A) there’s probably no hope of anything being reached by August 2 and B) there may be no hope of anything being reached at any point.

Markets might be advised to panic.

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