China Finds Child Labor

nytimes.com — China says that it has broken up a child labor ring that provided children from poor, inland areas with work in booming coastal cities, acknowledging that severe labor abuses extended into the heart of its export economy. The abuses reflect the combined pressures of worker shortages, high inflation and a rising currency that have reduced profit margins of some Chinese factories and forced them to scramble for an edge — even an illegal one — to stay competitive.

The Regime Hasn't a Clue What to Do

The Housing Crisis and the Plague of Potomac Fever

As states move to crack down on predatory lending and abusive mortgage fees, Washington lawmakers tell reporters "it's irrelevant" how many — if any — homeowners are helped. As state legislators to demand serious aid to borrowers, Washington constructs a bailout for financial firms. This is the contrast between minimally healthy (though certainly imperfect) democratic systems in the states, and a federal government ravaged by Potomac Fever — the illness whereby professional politicians forget who they were elected to serve.

David Sirota, TomPaine.com

Surplus U.S. Food Supplies Dry Up

usatoday.com

U.S. government food surpluses — which had previously fed the poor at home and abroad — have evaporated because, with record high prices, farmers are selling their crops on the open market, not handing them over to the government through traditional price-support programs that make up for deficiencies in market price. The upshot: USDA has almost no extra food to supplement the billions in cash payments it spends to combat hunger at home and in developing nations.

Panic Time at the Fed

The pathos of a losing war and a deep recession provide a wonderful back drop for comedy. We see a drunken passenger who mixes martinis as his ship sinks.

Panic Time at the Fed

Steve H Hanke, Forbes

U.S. Treasury Secretary Henry Paulson's blundering is becoming more breathtaking with each passing week. At the end of March he rolled out a grand plan to crown the Federal Reserve as the nation's new financial stabilizer. The Fed a stabilizer? That's who created the financial mess we're in.

If this wasn't bad enough, Secretary Paulson then donned his cheerleader's uniform and encouraged Beijing to let the Chinese yuan appreciate against the greenback. All the while favoring in this fashion a debasement of the U.S. currency, Paulson proclaimed that we should remain calm and confident because the economic fundamentals are sound. He reminds me of the stockbroker who performed a valuable service to his partners by always being wrong.

The current U.S. financial crisis follows the classic Fed pattern. In 2002 then governor Bernanke set off a warning siren that deflation was threatening the U.S. economy. He convinced his Fed colleagues of the danger. As former chairman Greenspan put it, "We face new challenges in maintaining price stability, specifically to prevent inflation from falling too low." (Given the U.S. economy's productivity boom, the Austrians viewed the prospects of some deflation as just what the doctor ordered.)

In the face of possible deflation, the Fed panicked. By July 2003 the Fed funds rate was at a record low of 1%, where it stayed for a year. This set off the mother of all modern liquidity cycles, and, as members of the Austrian school anticipated, the credit boom ended badly.

True to form, the Fed has panicked again, pushing interest rates down and flooding the economy with liquidity. A broad measure of the money supply (MZM) reported by the Federal Reserve Bank of St. Louis increased at an astounding annual rate of 37.7% from the end of January until Mar. 24. With this money supply surge and February's price gains (from February 2007) of 4% for consumer goods, 6.4% for producer goods and 13.6% for imported goods, it's no surprise that inflation expectations have risen.

It's also no surprise that the dollar remains debilitated, which makes Secretary Paulson's Beijing weak-dollar message so bizarre, particularly since it is based on an incorrect premise propagated by many prominent economists. Harvard professor Martin Feldstein, for example, argues that the bilateral trade balance between the U.S. and China is determined by the yuan-dollar exchange rate. Accordingly, to reduce China's trade surplus with the U.S., he advocates an appreciating yuan.

This advice is nonsense. Trade balances are determined by national savings propensities, not exchange rates. China's savings surplus and America's savings deficiency largely determine our trade imbalance with China. The U.S. Treasury should have learned this lesson after years of forcing the Japanese to adopt an ever appreciating yen, which destabilized Japan's economy without doing a lick of good for trade balances.

Until the Fed dumps inflation targeting and the U.S. abandons its weak-dollar policy, inflation will rule the day. Retain (and add to) your gold hedges.

Skyrocketing Food Prices

'Haiti, Congo, and the politics of hunger'

by Jennifer Brea

Skyrocketing food prices have already sparked riots in Haiti, Egypt and Mozambique this month as a worsening crisis not only threatens to leave thousands vulnerable to starvation, but will test weak and ineffective governments in poor countries around the world.

Two francophone bloggers, one Haitian, one Congolese, respond, but rather than blame the proximate cause--subsidies for biofuels in rich countries--they criticize the politics and the politicians who left their countries this vulnerable to begin with. They write that the riots of these last few weeks and the riots to come, like the crisis itself, are symptomatic of deeper problems that cannot be solved by the simple magic of foreign aid.

Haitian blogger Natifnatal wrote an angry, heartbreaking post as she watched events in Haiti unfolding from thousands of miles away, in Abu Dhabi, which she suggests is a sort of self-imposed exile. It's called "When politicians serve hunger to score points."

These last few weeks, Haiti has returned to the front pages. As far away as you are, the news pulls you in, the images shake you, your throat chokes with embarrassment, and you burn with anger. You are, in effect, angry at the way in which your country is reduced in the press: to , destroying the few shops operating in a country that has not functioned in a long time. You are angry because it is impossible to respond to the reactions of foreigners who are watching like you and who understand nothing. Should I begin with 1492, talking about discovery, slavery, and the prosperity of the ex-Pearl of the Antilles, of the struggle for independence, of Toussaint Louverture? Or should I tell about the degradation that has punctuated our daily lives since 1804: occupation, dictatorship, massacres, the allure of democracy with Aristide that gave way to demogoguery, and then end with the kidnappings, coups d'etat, poverty, indigence, and the hopelessness that haunts us daily. For
those who don't even know the basics can present the equation: hunger + poverty + rising prices=demonstrations + the Prime Minister's resignation + violence, and argue that an increase in food aid would suffice to reduce hunger.

But those of you who know Haiti, who still breathe her air in spite of the distance between you, who still cry silently when you have a parent on the telephone, you know that the situation is far from that simple. You know that these demonstrations are not innocent, that there is an invisible hand behind these acts of violence, that these so-called demands are not the result of accident, that the dismissal of the Prime Minister or cash payments won't change much, and that the rioters are nothing more than pawns in the skilled hands of the maniacs in power.

Because you know the cold truth, and you are sick of it. You have run away from the political machinations, you have broken your ties with Haiti, you have resigned yourself to you condition of being "stateless," these moments are enough to make your pulse race, your heartbeat go irregular, to make you want to pull out your hair, to curse destiny, and prove to you, for the umpteenth time, that you were right to leave.

In the Democratic Republic of Congo, Musengeshi Katata at Forum Realisance, watching events in Haiti and Egypt, writes a post called, "Today, Haiti. Tomorrow, the world."

Katata touches on the relationship between the current food crisis, the ecological devastation of the planet, energy demand, biofuels, and how India and China, developing rapidly and without the latest in energy-saving technologies, are coming to Africa in search of natural resources.

He asks "Why is Africa so slow to understand that it's only going to get more difficult [to develop] in the future?" and predicts that "the next few years will be bad, so bad that we will ask ourselves if Hell is African" because "rich countries will, as they always have, place the heavy weight of this intensifying crisis on the shoulders of poor countries" [Fr]

But in the end, Katata puts most of the responsibility on African elites themselves, predicting that "many incapable governments and puppet regimes are going to implode" in the coming years unless they recognize their own self-interest lies with protecting the interests of their people.

...the Tsunami, as one of our Internet brothers wrote, will soon reach Africa with, as the World Bank has predicted, the inevitable revolts and famines. How can we present things to our black and African elites so that they will understand that they are asleep at the helm, that their view of things is disastrous and detrimental to their own well-being and future? Must Africans and their descendants continue to let themselves be run by the West, and to fail to see what threatens to happen, after decades and decades of the vicissitudes of chronic need and poverty? It's enough to ask, do blacks refuse to think and draw useful conclusions or are they just incapable?

All of those countries who live off foreign aid, all those under the aid and false promises of the industrialized countries who have not developed their own domestic agriculture will come to know, in the years that follow, hard years of bitterness. The economic crisis that we have known since what will soon be 30 years will intensify and eat away at the meager means of all the poor countries. And those who hope or believe that foreign aid can help ease the situation are fooling themselves yet again: this help, although a salve, is at the same time actually a poison, and in spite of the misery and the poverty, a stepped-up effort cannot make up for this type of shortfall in the future. Because, let's be honest, aid corrupts and enables deceptive appearances; that's what often stops people, as we know, from seeing [the forest for the trees], from seeing the problem as it is and remedying it as wisely as possible...

You may view the latest post at

http://www.globalvoicesonline.org/2008/04/18/haiti-congo-and-the-politics-of-hunger/

Buying Toilet Paper in Zimbabwe

Comrade Fatso, Global Voices

Comrade Fatso on the situation in Zimbabwe: "The parallel realities we live in
have become the only reality now. The other one is paralyzed. So bread is now
hustled on street corners for two US dollars. Like an illegal drug. Milk has
also joined the list of 'goods' that are sold in our parallel economy. Not in
the shops but on the streets. And if you're looking for toilet paper then just
drive to the nearest 'Give Way' sign, a Zimbabwean 'Stop' sign."

Links:
[1] http://comradefatso.vox.com/library/post/bread-milk-and-toilet-paper.html