The Bank of Korea's credibility dilemma

(Reuters) - Unlike most central banks, the Bank of Korea has the pursuit of "harmony" written into its statutes.

But when it comes to harmonizing with the government, South Korea's central bank may have gone too far, undermining its credibility as an effective counterweight in managing Asia's fourth-biggest economy, interviews with current and former Korean policymakers say.

Indeed, those sympathies may draw even closer to those of the government. Almost the entire slate of the central bank's seven-person monetary policy committee is due to be replaced this month, including two who are known for their inflation-fighting bias.

The country's president, Lee Myung-bak, will select the replacements.

Central bank independence is prized as a check and balance to governments and presidents who naturally favor economic growth, especially when elections are coming up, as they are in South Korea.

"The Bank of Korea has much to do to regain its credentials as an independent policymaking organization," said one of the central bank's current board members, who declined to be identified because of the sensitivity of the issue. Read More

'Pink slime' company files for bankruptcy amid controversy over the ammonia treated filler

A company that makes ‘pink slime’ products has filed for bankruptcy as the backlash against the controversial beef filler continues.

AFA Foods has announced that it is filing for Chapter 11 bankruptcy protection and selling its assets after the public outcry over the beef substance derailed its efforts to save its already struggling business.

The Pennsylvania-based company processes more than 500 million pounds of ground beef products a year and distribute to retailers including Wal-Mart and Safeways – both supermarkets that no longer sell beef containing ‘pink slime.’

AFA Foods, which also sells products under the brand names Moran's, Stone River Ranch and Miller Quality Meats, provide beef to customers including Burger King, Wendy's and Jack in the Box.

The bankruptcy comes a week after Beef Products Inc, another company which sells ‘pink slime’, announced they were suspending operations at three of four plants where the beef ingredient is made.

Beef Products Inc. have stopped operations at its plants in Texas, Kansas, and Iowa - a move that will affect 650 jobs. Read More

Eurozone turmoil deepens as unemployment reaches record high but UK dodges double-dip as economy grows by 0.3%

Britain has dodged a double-dip recession but the crisis in the eurozone is deepening with unemployment at a record high, according to the latest figures.

The UK economy grew by 0.3 per cent in the first three months of the year, having shrunk by the same amount at the end of 2011, the British Chambers of Commerce said.

The return to growth – which means Britain has avoided a new recession, defined as two consecutive quarters of decline – came as factory output rose at its fastest pace for ten months in March.

The BCC’s quarterly economic survey, published today, predicts growth of just 0.6 per cent in Britain this year – compared to the 0.8 per cent expected by the Treasury.

It warned that high oil and food prices are hitting family budgets and added that ‘the unresolved problems in the eurozone may trigger new upheavals later this year’. Read More

Suppliers cash in on panic as petrol hits £1.50... and half of our forecourts are running dry

Motorists face paying £1.50 a litre for petrol as shortages continue to hit half the nation’s forecourts.

Fuel companies, which have been accused of profiteering with 10p increases, say the supply problems caused by panic-buying will continue until Friday.

Petrol prices are ‘going crazy’, according to Brian Madderson of the Retail Motor Industry federation.

‘Motorists are paying a significant premium because the wholesalers know they are on to a good thing. It’s the law of supply and demand,’ he said.

‘The withdrawal of fuel in such a frenzy in the mid part of last week means some members won’t be getting any fuel until later this week.’

Ministers, who are accused of sparking the panic by advising motorists to top up before a possible strike by fuel tanker drivers, are now urging them to save fuel by driving more slowly. Read More

China will extend renminbi loans to BRICS

On 29 March, China intends to sign a memorandum in New Delhi with its Brazilian, Russian, Indian and South African BRICS counterparts to make national currency loans available within the bloc. This will reduce the influence exerted by the U.S. dollar in BRICS, while promoting use of the national currencies, primarily the yuan. Yet, for India and Russia, settlements with China in national currencies will only have political advantages in a few years time.

The Financial Times has reported that the China Development Bank (CDB) intended to sign a memorandum of understanding with the BRICS partners India, Russia, Brazil and South Africa at the next BRICS summit, slated for 28-29 March. The document is expected to be signed on the final day of the event.

The document will enable the CDB to extend loans to its partners in renminbi, China’s national currency. The development banks of the other member states that sign the document will be able to lend to other BRICS economies in their own national currencies – these include Russia’s Vnesheconombank, the Export-Import Bank of India, Brazil’s BNDES and the Development Bank of South Africa.

The Financial Times believes that the Chinese initiative is a result of the country’s intention to promote use of the yuan internationally and compete with the U.S. dollar for leading positions globally. Read More

Will 'Chindia' rule the world in 2050, or America after all?

With a small tweak in assumptions and the inexorable force of compound arithmetic, Citigroup and HSBC have come up with radically different pictures of what the world will look like in 2050.

Which of the two is closer to the mark will determine whether the West hangs on, or disappears as a relevant voice in global affairs.

For neo-Spenglerites - who believe the West is finished - Citigroup’s Willem Buiter offers some astonishing projections. The Muslim powerhouse of Indonesia will alone match the combined GDP of Germany, France, Italy, and Britain by mid-century.

The economies of China and India will together be four times as large as the United States, restoring the historic order of Asian dominance before Europe’s navies burst on the scene in the 16th Century. Panta Rei, says Dr Buiter: all is in flux; nothing will remain the same.

Africa will at last emerge from its long string of disappointments to take the baton as the fastest growing region, clocking 7.5pc a year over the next two decades.

It does not require miracles of performance for this to occur. Catch-up countries merely need to keep reforms on track, open markets, “don’t be unlucky, and don’t blow it”, and let convergence theory do the work for them. Read More

Threat of global trade war over airline emission charges

The threat of an aerospace trade war between Europe and the rest of the world has escalated after India joined China in threatening retaliation over the European Commission's carbon emissions charges.

Chinese airlines have cancelled $14bn (£8.8bn) of orders with European aircraft manufacturer Airbus following the introduction of the charges and a senior Indian official has now warned there are "lots of measures" that India could take if the EC does not back down.

"The question is, are you [the European Union] provoking the world into a trade war?'," the official told Reuters.

The EU Emissions Trading Scheme (ETS) requires airlines flying to or from Europe to buy carbon permits to offset their emissions from January 1 this year. However, non-European governments are furious that the charges cover the entire flight and not just European aerospace. Read More

BRIC Countries: The Imaginary Alliance

The BRIC acronym has served to add a dramatic flair to shifting global power structures by envisioning a club of up-and-coming BRIC countries challenging a world order built on the bedrock of imperialism. But this isn’t accurate. The accord that is assumed in the BRIC grouping is imaginary. It doesn’t exist.

Of course, that’s not to say that the sum economic power of the BRIC countries is not impressive. Quite the contrary, combined GDP growth in BRIC countries since 2001 is tantamount to the appearance of one new Japan plus a new Germany in the global economy [1]. But that’s just a development success story, not an international organization. The combined economic clout of the BRIC countries does not engender any kind of sustained foreign policy coordination, whether in political, military, or even economic affairs. And this shouldn’t come as too much of a surprise. After all, this is a bloc borne not of diplomatic negotiation, shared ideology, or overlapping interests, but rather the turn of phrase of a Goldman Sachs analyst back in 2001; an analyst who, at the time, hadn’t even visited three of the four countries in question [2].

Consider the case of China and Brazil. Both are developing countries with the same presumed end-point: a highly-developed and diversified economy that is globally competitive. But, is it possible for both these countries to achieve this goal when they’re essentially following the same track and competing for the same markets, or will one of them be left behind? It’s quite possible that the truth lies in the latter. Read More

Infographic: The secret life of drinking water

Water scarcity will be one of the defining features of the 21st century. The U.N. predicts that by 2025 two thirds of the world's population will suffer water shortages. Here CNN takes a look at what we do with the water we can drink. More

Asia is world's top weapon importer: SIPRI

Asia leads the world when it comes to weapon imports, according to a study released Monday by the Stockholm International Peace Research Institute (SIPRI).

Globally the volume of international transfers of major conventional weapons was 24 percent higher in the period 2007-11 compared to the 2002-06 period, the report said.

Over the past five years, Asia and Oceania accounted for 44 percent in volume of conventional arms imports, the institute said.

That compared with 19 percent for Europe, 17 percent for the Middle East, 11 percent for North and South America, and 9 percent for Africa, said the report.

India was the biggest arms importer in the period covered, 2007-11, accounting for 10 percent in weapons volume. Read More

IMF sees $160 oil risk despite Libyan boost

Libya's oil exports have rebounded much faster than expected and will exceed pre-Arab Spring levels as soon as April, plugging a crucial gap in world crude supply as the Iranian crisis comes to the boil.

The Libyan state oil company NOC said it will export almost 1.4m barrels a day (b/d) next month as key oil fields come back on stream.

The announcement came after Saudi Arabia said it had boosted output to a near record level of 9.87m b/d in January and stood ready to cover any shortfall as European sanctions against Iran bite deeper.

"I want to assure you that there is no shortage of supply in the market," said Saudi oil minister Ali al-Naimi. "Oil prices today are unjustifiable on a supply and demand basis. We really don’t understand why the prices are behaving the way they are."

Brent crude for April slipped more than a dollar to $123.55 a barrel in London, as traders discounted an immediate supply crunch.

It recovered later to almost $126 after France and Germany said they opposed tapping strategic petroleum reserves for now. Read More

Obama has blown more money in 3 years than Bush did in 8

(CBS News) The National Debt has now increased more during President Obama's three years and two months in office than it did during 8 years of the George W. Bush presidency.

The Debt rose $4.899 trillion during the two terms of the Bush presidency. It has now gone up $4.939 trillion since President Obama took office.

The latest posting from the Bureau of Public Debt at the Treasury Department shows the National Debt now stands at $15.566 trillion. It was $10.626 trillion on President Bush's last day in office, which coincided with President Obama's first day.

The National Debt also now exceeds 100% of the nation's Gross Domestic Product, the total value of goods and services.

Mr. Obama has been quick to blame his predecessor for the soaring Debt, saying Mr. Bush paid for two wars and a Medicare prescription drug program with borrowed funds.

The federal budget sent to Congress last month by Mr. Obama, projects the National Debt will continue to rise as far as the eye can see. The budget shows the Debt hitting $16.3 trillion in 2012, $17.5 trillion in 2013 and $25.9 trillion in 2022. Read More

The rise of China-centric hotel brands

International hoteliers are building dedicated brands in China to lure Chinese business travelers.

China is expected to become the world’s largest hotel market by 2025 and the second-largest business travel market, after the United States, by the end of 2020.

International hoteliers are doing what it takes to secure a foothold in China’s business travel market, and an obvious trend has emerged: building dedicated brands to cater to Chinese business travelers. Read More

Budget 2012: Matt's money cartoons

Source

Pentagon spending heavily on propaganda ops

The Pentagon has spent hundreds of millions of taxpayer dollars on marketing and propaganda campaigns dubbed “information operations” to win over local populations in Iraq and Afghanistan, USA Today reports. The funds dedicated to information operations grew from $9 million annually in 2005 to $580 million annually in 2009, according to USA Today. Last year the funding level dropped to $202 million because of the recent withdrawal from Iraq.

The Pentagon defines information operations as “psychological operations, deception, protecting vital data, electronic warfare, and computer network defense and attack.” On average, the Pentagon spends $96 million annually, peaking in 2009 at $580 million. Spending dropped to $355 million in 2011 and $202 million in 2012 as troops withdrew from Iraq.

These operations involve a combination of radio, TV broadcasts, leaflets, newspapers and entertainment to deliver the Pentagon’s message. In Iraq and Afghanistan, the Pentagon tried to promote the virtues of government to locals, report roadside bombs, and inform insurgents about how they could switch sides. Read More

Financial collapse: The cunning plan revealed?

DYLAN Grice of Societe Generale recently highlighted an intriguing quote from Sir Mervyn King, governor of the Bank of England, about the central bank's accumulated pile of gilts. Last month, Sir Mervyn said that

I have absolutely no doubt that when the time comes for us to reduce the size of the balance sheet that we'll find that a whole lot easier than we did when expanding it.

The nature of this cunning plan was not revealed. But there was an intriguing suggestion in yesterday's FT from Jo Owen, a former partner of Accenture. the Bank of England should simply retire (i.e. cancel) the debt. As the author writes

"After buying £325 billion of debt from the market, the public sector (the Treasury) is paying interest to itself (the BofE) on debt that it owes to itself. It makes no sense for the public sector to owe itself money." Read More

Arms Sales By the Top 100 Companies Worldwide Exceed $411 Billion

STOCKHOLM — Sales of arms and military services by the largest arms-producing companies—the SIPRI Top 100—continued to increase in 2010 to reach $411.1 billion, according to new data on international arms production released today by Stockholm International Peace Research Institute (SIPRI).

The total arms sales (including sales of military services) of the SIPRI Top 100 maintained their upward trend in 2010, although at 1 per cent in real terms, the increase was much slower than in 2009. Over the period since 2002, the increase has been 60 per cent in real terms.

Arms-producing and military services companies from North America and Western Europe once again dominated the list (which however does not include China-based companies). Sales by the 44 US-based companies accounted for over 60 per cent of all arms sales by the Top 100 arms-producing companies in 2010. The 29 companies based in Western Europe, accounted for another 30 per cent.

The global arms industry continues to be highly concentrated, with the top 10 arms-producing companies, accounting for 56 per cent, or $230 billion, of total Top 100 arms sales. Read More

Is the era of a 'cheap China' coming to an end?

China has long been known as a teeming source of inexpensive labor, but many businesses say that's no longer true.

China's massive cheap labor force helped fuel its economic boom by enabling the country to undersell its more industrialized competitors in the global marketplace. But the "pace of change in China has been so startling that it is hard to keep up," says The Economist, and the "old stereotypes about low-wage sweatshops are as out-of-date as Mao suits." The cost of labor is rising, and rapidly.

China is even importing more than it exports, posting its largest trade deficit in 12 years in February — and some are saying that's a good thing. Here, a guide to the worker's evolution in China:

How much more are Chinese workers earning?

Quite a bit. Wages for companies on the Pearl River Delta, one of the country's manufacturing hubs, have risen by 10 percent since January, according to a new report. The minimum wage across China rose 22 percent in 2011, says Britain's Financial Times. By one measure, rising wages could double — or possibly triple — the cost of manufacturing in China by 2020. "The era of cheap China may be drawing to a close," says The Economist. Read More

Is China heading toward an economic crisis?

A new World Bank report warns that China must drastically overhaul the way it does business — or risk financial catastrophe.

With the U.S. still limping its way out of the Great Recession, and Europe mired in a seemingly endless debt crisis, China has emerged from the turmoil of recent years as the engine of the global economy. China's extraordinary rise — built on three straight decades of 10 percent annual growth — is the envy of emerging economies. And China blazed to the top in its own way, deploying a heavy-handed, state-driven model that shattered assumptions about the supremacy of free-market economics.

Yet in a new report, the World Bank warns that China must essentially overhaul its entire economic structure if it wants to avoid a "crisis" — and some leaders in China seem to agree. Here, a guide to China at the crossroads:

How did China get this far?
Largely by following the examples of Japan and South Korea, both of which relied on cheap labor to make cheap goods for export. At the same time, the countries industrialized rapidly by directing banks to make huge loans to government-connected conglomerates. Read More

Why We Have to Go Back to a 40-Hour Work Week to Keep Our Sanity

One hundred fifty years of research proves that shorter work hours actually raise productivity and profits -- and overtime destroys them. So why do we still do this?

If you’re lucky enough to have a job right now, you’re probably doing everything possible to hold onto it. If the boss asks you to work 50 hours, you work 55. If she asks for 60, you give up weeknights and Saturdays, and work 65.

Odds are that you’ve been doing this for months, if not years, probably at the expense of your family life, your exercise routine, your diet, your stress levels, and your sanity. You’re burned out, tired, achy, and utterly forgotten by your spouse, kids and dog. But you push on anyway, because everybody knows that working crazy hours is what it takes to prove that you’re “passionate” and “productive” and “a team player” — the kind of person who might just have a chance to survive the next round of layoffs. Read More