New Currency Requires To Obsecurity Of Financial Market

A paper written ahead of the recent G20 summit by Zhou Xiaochuan, governor of the Chinese central bank, caused quite a stir. Zhou called for the establishment of a global reserve currency, a step which would firmly tip the balance of economic power in the direction of emerging economies like China and India, but would also bring benefits to poorer nations in the developing world.

The dollars role in international trade should be reduced by establishing a new currency to protect emerging markets from the confidence game of financial speculation, the United Nations
said.

Two very obvious changes have prompted this reaction: First, there is a growing recognition that
the course towards the current crisis was plotted when President Nixon severed the link between the dollar and gold in 1971. Second, the fact that, quite unlike any president before him, not only does Barack Obama believe in a more just and inclusive world, he also seems to recognise that creating such a world requires some levelling of the global economic playing field. The creation of a global reserve currency would be an essential first step in that process.

UN countries should agree on the creation of a global reserve bank to issue the currency and to
monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade and Development said on Tuesday in a report.

China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency after the financial crisis sparked by the collapse of the US mortgage market led
to the worst global recession since World War II. China, the world's largest holder of dollar reserves, said a supranational currency such as IMF's special drawing rights, or SDRs, may add
stability.

There's a much better chance of achieving a stable pattern of exchange rates in a multilaterally-agreed framework for exchange-rate management, Heiner Flassbeck, co-author of the report and a UNCTAD director, said. An initiative equivalent to Bretton Woods or the European Monetary System is needed. The 1944 Bretton Woods agreement created the modern global economic system and World Bank and IMF.

While it would be desirable to strengthen SDRs, a unit of account based on a basket of currencies,
it wouldn't be enough to aid emerging markets most in need of liquidity, said Flassbeck, a former
German deputy finance minister who worked in 1997-1998 with then US Deputy Treasury Secretary Lawrence Summers to contain the Asian financial crisis.

Emerging-market countries are underrepresented at the IMF, hindering the effectiveness of enhanced SDR allocation. An organization should be created to manage real exchange rates between countries measured by purchasing power and adjusted to inflation differentials and development levels, UN said. The most important lesson of the global crisis is financial markets
don't get prices right, Flassbeck said.

US Jobless Rate Jumps To 9.7 Percent !!

The unemployment rate jumped to 9.7 percent in August, the highest since June 1983, as employers eliminated a net total of 216,000 jobs.

The level of job cuts is less than July's upwardly revised total of 276,000 and is the lowest in a year. Analysts expected the unemployment rate to rise to 9.5 percent from July's 9.4 percent, and job reductions to total 225,000.

If laid-off workers who have settled for part-time work or have given up looking for new jobs are included, the so-called underemployment rate reached 16.8 percent, the highest on records dating from 1994.

The economy is showing consistent signs of improvement, but probably not enough to stop employers from cutting jobs or to keep the unemployment rate from rising.

The Labor Department is expected to report Friday that the jobless rate increased to 9.5 percent in August, from 9.4 percent in July, as employers cut 225,000 jobs.

The employment report will follow other recent data that shows the economy is pulling out of the worst recession since World War II. A trade group reported Tuesday that the manufacturing sector grew in August for the first time in 19 months, while home sales have increased for several months.

But the economy isn't expected to grow strongly enough this year to persuade companies to ramp up hiring. Most economists expect the unemployment rate to top 10 percent by early next year.

"We have a very long, painful healing process ahead," said Bruce Kasman, chief economist at JPMorgan Chase & Co. "The good news is we're starting it, the bad news is we need much faster growth" to bring the employment rate down.

A loss of 225,000 jobs would be the smallest monthly decline since last year, a sign that layoffs are easing. Employers cut 247,000 jobs in July, compared with an average of 691,000 per month in the first quarter.

Still, the job cuts are holding down wages and salaries, while credit remains tight and home prices and stock portfolios have fallen. All those trends are restraining consumer spending, which makes up 70 percent of the U.S. economy, and could weaken the recovery.

Most retailers posted sales declines last month as shoppers limited back-to-school purchases to focus on necessities. Discounters did better than upscale chains, but the results Thursday raised further concern about the upcoming holiday season.

Other economic news on Thursday was mixed. The Institute for Supply Management, a trade group, said the service sector inched closer to growth in August, but still contracted for the 11th straight month.

The ISM's services index, which covers hospitals, retailers, financial services companies and more, rose to 48.4, up from 46.4 in July. Still, readings below 50 indicate the sector is shrinking.

In a separate report, the Labor Department said the number of laid-off workers applying for benefits dipped to 570,000 last week from an upwardly revised 574,000. That was a weaker performance than the drop to 560,000 claims that economists projected.

The number of people receiving jobless benefits totaled 6.23 million, up 92,000 from the previous week, which had been the lowest level since April.

Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies' willingness to hire new workers.

First-time claims have trended down in recent months and are below the recession's high of 674,000, reached in the first week in April. But even with the improvement, they are running at levels well above the 325,000 mark considered a sign of a healthy economy.

Federal Reserve policymakers said in minutes from an August meeting, released Wednesday, that they expect the economy to recover in the second half of this year. But labor market conditions are still "poor," the Fed minutes said, and many companies are likely to be "cautious in hiring" even as the economy picks up.

Many economists credit the Obama administration's $787 billion economic stimulus package of tax cuts and spending increases, along with the Cash for Clunkers program, with helping spur the recovery. But they worry about what will happen when the impact of the stimulus efforts fades next year.

Vice President Joe Biden issued an upbeat report card on the economy Thursday, saying that the massive stimulus program had been more effective "than we had hoped."

Still, consumers are not spending enough to boost retailers' bottom lines. Discounter Target Corp. and warehouse club operators Costco Wholesale Corp. and BJ's Wholesale Club Inc. said Thursday that sales at established stores dropped.

A 5 percent jump at TJX Cos., which operates discount chains TJMaxx and Marshall's, topped expectations. But upscale retailers, including Saks Inc. and Nordstrom Inc., reported a weak month.

On Wall Street, stock indexes rose. The Dow Jones industrial average added about 64 points, as broader indexes also edged up.

More job cuts were announced this week. Washington-based manufacturer Danaher Corp. said it will lay off about 3,300 of its roughly 50,000 employees, an increase from the 1,700 cuts it announced in the spring. American Airlines said it is cutting 921 flight attendant jobs as it deals with an ongoing downturn in traffic and lower revenue.

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Intel's Pain Party !

The worse the economy gets, the faster the chip giant plans to move.

BURLINGAME, Calif. -- The economy is in the tank. PC sales are in a funk. And Intel shares have lost more than a third of their value over the past year. So why is Stacy Smith, the chip giant's chief financial officer, smiling?

Hey, you would too if you had $3.5 billion in cash, $4.2 billion in short-term securities, a business with a gross margin of 46% after getting hammered by a recession and a plan to spend billions to upgrade your factories to crank out better products. Sales, meanwhile, are better than they were. "The best sign is what's happening on our order desk," Smith says.

In short, we've now reached the moment the dudes at Intel live for : an opportunity to push forward as competitors are struggling to catch their breath.

Intel's management team will get a little bit of vindication, too, when they invite investors to Santa Clara, Calif., for the company's analyst day next month. Last year, Intel was selling skeptics on the need to begin selling radically cheaper processors. 

Twelve months and one stock-market collapse later, Intel's plan looks smart. Sales of PCs have nosedived, but consumers are snapping up the cheap, Web-friendly notebooks ASUS, Hewlett-Packard and Dell are building around Intel's Atom. "The netbook phenomenon even caught us a little by surprise," Smith says.

Still, after Intel successfully called its shot last year, investors will be paying close attention as Smith outlines this year's big bet--and it's a doozy. Intel plans to spend roughly $7 billion to upgrade its fabs this year, allowing it to crank out processors with features 32 nanometers wide. 

If demand is strong, that could allow Intel to command a premium price for chips built using a process technology its competitors can't match. If demand fades, Intel will take more fabs offline so they can upgrade them to the new process technology more quickly.

In other words: The tougher the economy gets, the tougher Intel gets. "We're going to move as fast as possible to get as much of our capacity as possible on 32 nanometers."

And that will only help Intel move more quickly to its next big opportunity. The plan: shrink the x86 processor design now powering servers and desktop computers enough to assault the market for mobile phones, unlocking a market for Intel many times the size of the netbook market it has conquered.

To be sure, Smith says Intel's push into the smart-phone market will look very different than its drive into netbooks. Intel was able to swallow most of the netbook market in a single gulp, since its Atom processor was able to deliver, almost immediately, the power and energy efficiency needed to run the scaled-down notebook computers.

With smart phones, by contrast, Intel's processors won't play in the entire market at the same time. Intel's strategy hinges on using its process technology to shrink its powerful chips down to a smaller size, making them cheaper and more energy efficient.

So while Intel will begin nibbling at the high end of that market by year-end, it will have to wait two years until it begins cranking out processors with features just 22 nanometers wide for more mainstream phones.

That will give Intel's competitors time. Shares of rival Advanced Micro Devices, for example, have rebounded sharply this year after it shed its capital-sucking chip fabs. Samsung, Texas Instruments and the pack of companies building processors for mobile phones based on ARM's mobile processor designs, meanwhile, are poking into the market for netbook computers.

The worse the economy gets, however, the faster Intel will shrink its processors, and the less money competitors will have to keep up. "Making those investments into the downturn is a huge competitive advantage, and it's one our competitors can't make," Smith says.

So, what can Intel's competitors do? Hope the economy gets better. Fast.

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Google's Top Expectations

The rotten economy may have broken Google's string of sequential sales gains, but the search giant's shares surged more than 5% in after-hours trading Thursday thanks to stronger than expected first quarter earnings and year-over-year sales gains.

Google ( GOOG - news - people ) also announced that its longtime sales chief, Omid Kordestani, will be moving to the position of senior advisor to the office of the chief executive and founder. Kordestani will be replaced by Nikesh Arora, now president of international operations, as president of global sales operations and business development.

The moves come after Tim Armstrong, Google's North America sales chief, jumped ship to take the CEO slot at struggling portal AOL in March. Since then Google has laid off 200 employees in its sales and marketing group.

Nevertheless, Google's advertising-driven results stand in stark contrast to those reported by sagging print media titles. The company's net income rose 8.4% in its first quarter to $1.42 billion, or $4.49 cents a share, from $1.31 billion, or $4.12, in the corresponding period a year earlier.

Excluding special items, Google reported earnings of $5.16 per share, beating the consensus estimate of $4.93 reported by Thomson Reuters. After subtracting traffic-acquisition costs, sales rose 10% to $4.07 billion from $3.70 billlion.

However, the results do mark the first sequential sales drop for the online powerhouse, with sales, when not adjusted for traffic-acquisition costs, down 3% from the previous quarter.

Google shares surged $19.52, or 5.02%, to $409.25 in after-hours trading.

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Barack Obama's Economic Optimism Falls On Deaf Ears

President Barack Obama spoke of seeing "glimmers of hope" in the economic outlook for the first time since the current downturn began, while Federal Reserve chairman Ben Bernanke said he was witnessing "tentative signs that the sharp decline in economic activity may be slowing".
But the pair's comments, coming on the same day as worse-than-expected retail sales and inflation figures, did little to revive investors. The Dow Jones Industrial Average index traded down 137.63 points at 7920.18 on Wall Street.

Barack Obama's words failed to boost Wall Street as the Dow Jones Industrial Average index traded down

The speeches came days after Larry Summers, the President's most senior economic adviser, suggested that America's economic "free-fall" is coming to an end.

Although the Fed remains independent of the Obama administration, the three speeches, coming in such quick succession, appear to be part of an orchestrated campaign by the White House to forge a positive attitude among the population.

Coming in a month when tens of millions of Americans will begin to receive several thousand dollars in tax rebate cheques, it appears that the White House is trying to kick-start the economy by encouraging consumers to return to spending, rather than continuing to hoard savings.

The need for such a strategy was highlighted in March's retail sales figures, which showed a 1.1pc decrease in total sales, a surprise to economists who had been forecasting a 0.3pc increase.

Goldman Sachs' chief US economist Jan Hatzius said the report puts "consumption on a weak path into the second quarter", noting that electronics sales were down by 5.9pc.

Retail sales are key as consumers account for two-thirds of the US economy.

Headline producer prices also fell, by 1.2pc month-on-month. The decline was concentrated in energy and food prices, due to weakening demand and, for energy, pipeline pressures.

But the negative economic data did not stop Mr Obama from appearing positive during a speech on the efforts taken to revive the American economy.

"There is no doubt that times are still tough" he said. "By no means are we out of the woods just yet. . . But from where we stand, for the very first time, we are beginning to see glimmers of hope."

Mr Bernanke based his assessment of the economy on recent positive data from the housing and other markets, but stressed that this is still the worst financial crisis since the Great Depression.

"A levelling out of economic activity is the first step toward recovery," Mr Bernanke said, adding that he is "fundamentally optimistic" about the US economy, the foundations of which he believes remain "strong".

But not everyone agrees. With reference to Mr Bernanke's comments last month about the "green shoots" of recovery, Ethan Harris, Barclays Capital's co-head of US economic research, said: "The green shoots are looking a little brown."

Source : http://www.telegraph.co.uk

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Global Economy Set To Shrink, India Loses Half A Million Jobs

With over half a million jobs lost in India alone in recent months, the World Bank predicts the global economy and global trade would both shrink this year for the first time since World War II.

While the global economy is likely to grow at least 5 percentage points below potential in 2009, world trade is on track to record its largest decline in 80 years - with the sharpest losses in East Asia.

World Bank forecasts show that global industrial production by the middle of 2009 could be as much as 15 percent lower than levels in 2008, it said in a paper for next Saturday's meeting of the Group of 20 finance ministers and central bank governors.

Developing countries face a financing shortfall of $270-700 billion this year, as private sector creditors shun emerging markets, and only one quarter of the most vulnerable countries have the resources to prevent a rise in poverty.

The paper said that 94 out of 116 developing countries have experienced a slowdown in economic growth. Of these countries, 43 have high levels of poverty.

To date, the most affected sectors are those that were the most dynamic, typically urban-based exporters, construction, mining, and manufacturing.

For example, 'more than half a million jobs have been lost in the last three months of 2008 in India, including in gems and jewellery, autos and textiles,' the paper noted.

Many of the world's poorest countries are becoming ever more dependent on development assistance as their exports and fiscal revenues decline because of the crisis.

Noting that donors are already behind by around $39 billion on their commitments to increase aid made at the Gleneagles Summit in 2005, the bank said: 'the concern now is that aid flows will become more volatile as some countries cut their aid budgets while others reaffirm aid commitments, at least for this year.'

The World Bank said that international financial institutions cannot by themselves currently cover the shortfall-that includes public and private debt and trade deficits-for these 129 countries, even at the lower end of the range.

A solution will require governments, multilateral institutions, and the private sector. Only one quarter of vulnerable developing countries have the ability to finance measures to blunt the economic downturn, such as job-creation or safety net programs.

'We need to react in real time to a growing crisis that is hurting people in developing countries,' said World Bank Group President Robert B. Zoellick.

'This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis.

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Economic Depression Directly Proportional To Unsold Cars

The title is significant due to collapse in global sales and Economic depression the number og unsold cars increases day by day .. Check out the list of companies with the number of unsold cars by scrolling down .

Nissan has announced plans to cut its Sunderland workforce by 1,200. Thousands of unsold cars are stored around the factory's test track.

Honda is halting production at its Swindon plant in April and May, extending the two-month closure announced before Christmas to four months. Honda and Japanese rival Toyota are both cutting production in Japan and elsewhere. Pictured, Hondas await export at a pier in Tokyo .

Earlier this week Jaguar Land Rover said 450 British jobs would go .

The open car storage areas in Corby , Northamptonshire, are reaching full capacity.

mported cars stored at Sheerness open storage area awaiting delivery to dealers .

Newly imported cars fill the 150-acre site at the Toyota distribution centre in Long Beach , California .

The build-up of imported cars at the port of Newark , New Jersey

Stocks of Ford trucks in Detroit , Michigan .

New cars jam the dockside in the port of Valencia in Spain .

Peugeot cars await shipment to Italian dealers at the port of Civitavecchia.

Unsold cars at Avonmouth Docks near Bristol .

With many manufacturers on extended Christmas shutdown, the number of cars rolling off production lines in December fell 47.5% to just 53,823 .

Thousands of new cars are stored on the runway at the disused Upper Heyford airbase near Bicester, Oxfordshire, on December 18, 2008.

Sales of new cars in the UK have slumped to a 12-year-low and production of cars at Honda in Swindon has been halted for a unprecedented four-month period because of the collapse in global sales and represents the longest continuous halt in production at any UK car plant. The announcement comes on a day when the EU's Industry Commissioner Guenter Verheugen warned the outlook for the European car industry was 'brutal' and predicted not all European manufacturers would survive the crisis.

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