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Global Markets

Blunder From Down Under: Australia's Mining 'Super Tax' Will Squeeze the Global Recovery

Australia just this week unveiled a mining "super tax" that the country plans to levy against its natural-resources sector starting in 2012.

This is bad news.

It's not just because mining is Australia's most important economic sector: Australia is also an enormously important supplier of resources to the fast-growing economies of East Asia, where so many of the world's products are now manufactured. The mining super tax will cause prices to rise on the raw materials that are the key ingredients in so many of those products. And that means the levy from "down under" truly is bad news for the overall global economy.

With the newly announced mining super tax, Australia has shot itself in the foot. In doing so, unfortunately, it may also have peppered the rest of us with buckshot.

To find out which countries - and companies - may be most affected by the "super tax," please read on...

Despite Spiraling Contagion Fears, Spain Debt Worries Are Overblown

It had a huge housing boom, and is now dealing with the fallout. It has a left-of-center government and a big budget deficit, but relatively low debt in relation to its gross domestic product (GDP). And it has a worrisome current account deficit.

I'm talking, of course, about Spain, which investors clearly fear will be the next domino to fall as a result of the Greek debt contagion.

I disagree.

To see why Spain will shrug off the Greek contagion, please read on...

The Greek Debt Crisis Will Slow the Yuan's Advance

Poor Tim Geithner.

Pushed by angry U.S. legislators anxious to brand China as a "currency manipulator," the U.S. Treasury secretary tried to strong-arm China into revaluing the yuan – all because of an assumption that the Asian giant wasn't allowing its currency to appreciate.

Unfortunately for Geithner, those efforts were stymied by a flood of data that actually demonstrates that China's currency has significantly appreciated against the already-wheezing greenback.

To find why China should not revalue the yuan, please read on...

Taipan Daily: Could Continent-Wide Bank Runs Collapse the Eurozone?

The eurozone's woes are giving us a preview of what could eventually happen in the United States (but not before Europe is engulfed first). As fears of sovereign debt crisis mount, the debt "contagion" spreads. It is not just Greece that has investors afraid, but Portugal. And Spain… and Italy… and so on.

The problem is classic, and long ago highlighted by Austrian economics. Building up a lot of debt, to make a slightly crass analogy, is like putting on a bunch of weight. It's hard work getting the debt off – the same as it is taking weight off.

The way to lose weight is to eat right and exercise. The way to get out of debt is to cut back on spending and increase productivity.

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$147 Billion Bailout Package for Greece Won't End European Debt Crisis

In an effort to stabilize the widening European debt crisis, the International Monetary Fund (IMF), together with Eurozone countries, agreed to extend an unprecedented $147 billion (110 billion euro) bailout package to Greece in return for deep cuts to the country's budget.

Under the three-year agreement reached late Sunday, Greece would receive $105 billion (80 billion euros) in loans from other Eurozone members and $40 billion (30 billion euros) from the IMF. The planned rescue is the largest ever attempted by the IMF and a first for the 16-member Eurozone. It still requires final approval from national governments.

Also, the European Central Bank (ECB) said on Monday it would indefinitely accept the country's debt as collateral regardless of its credit rating. The ECB didn't release figures, but the value of Greek assets used as collateral in its liquidity-providing operations is thought to be worth tens of billions of euros.

Many observers felt the huge bailout was designed not only to support Greece, but to shore up confidence in the euro, which has come under fire by currency traders. Just a few weeks ago, EU countries offered only $40 billion (30 billion euros) to help Greece.

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British General Election: Even the Winners Will be Losers

The British general election campaign reaches its climax on Thursday, and at this point appears to be anybody's game. The most likely outcome is a "hung parliament" in which no party has a majority and a government is formed through backroom haggling.

However, after looking yet again at the state of the economy in my native Britain, I'm forced to ask a simple question: Why would anybody want the job?

To find out just what the future holds for the British economy, read on...

Debt Contagion Fear Spreads in Europe as S&P Lowers Eurozone Credit Ratings

Standard & Poor's yesterday (Wednesday) lowered Spain's credit rating – just one day after downgrading the ratings of Greece and Portugal. The downgrades have prompted Germany to promise a quick release of Greece bailout funds as fears of a debt contagion spread rapidly across Europe.

"It is probably fair to say that Tuesday, 27 April was the day that the situation in the euro area took a dramatic and rather frightening turn for the worse," credit analysts at Credit Suisse (NYSE ADR: CS) in London said in a research note. "The concern is the extent and speed of the spreading of the crisis in an environment of too many financial obligations, not all of which will be serviced, in our view, and in a crisis which in our view is about far more than Greece."

S&P downgraded Spain's long-term credit rating one notch to AA from AA+ with a negative outlook, citing an extended period of low economic growth and high borrowing costs.

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The Winners and Losers in the 'Commodities New World Order'

In the "commodities new world order," commodity producers will be king.

Investors who need proof need only consider recent events. Iron ore prices are at record levels, and the annual-price-setting arrangement has broken down. Venezuela President Hugo Chávez has signed "dark side" agreements with Russian Prime Minister Vladimir Putin for Russian companies to develop Venezuela's oil-and-mineral resources. China may have invested $1 trillion or so in U.S. Treasuries, but the Asian giant's only truly successful investment so far has been the 17% stake it took in Canadian-resources player Teck Resources Ltd. (NYSE: TCK).

Welcome to the commodities new world order. These events serve notice that – as we put the global financial crisis behind us – the commodity "haves" will set the agenda … while the commodity "have nots" will fall farther and farther behind.

To discover the identities of the new-world-order winners – and losers – please read on...

As Scary as it Seems, Greek Debt Crisis Won't Spawn Second Global Meltdown

The Greek debt crisis is starting to display an uncanny resemblance to the subprime crisis that sank the U.S. housing market, sent the global economy into a tailspin and touched off the worst financial crisis since the Great Depression.

Indeed, Greece has behaved very much like a subprime country:

  • It has borrowed more money than it can possibly repay – all the while lying to everybody about its true state of affairs.
  • "Liar loans" have been made, in Greece's case, to enable the country to "cook the books" with regard to its budget deficits.
  • New problems continue to emerge – apart from the liar loans – making it impossible to be sure all the troubles have been unveiled.
  • And as was the case with the subprime-mortgage crisis, embattled Wall Street investment-banking-giant Goldman Sachs Group Inc. (NYSE: GS) appears to have been intimately involved in the business.

And the similarities don't end there.

To understand why the Greek debt crisis won't spawn another global financial crisis, please read on...

Eyjafjallajokull's Economic Impact Goes Beyond Flight Delays

I've been looking for an excuse to get the name Eyjafjallajokull into an article, and now I finally have something special to say about the mighty Icelandic volcano that has wreaked havoc with European air traffic.

It's mostly science and history, which appeals to my finely honed annotation instinct, but there is most definitely an investment point, which you will have to wait to the end to see.

First, I learned today from some hedge-fund sources that scientists believe the real threat from the relatively small Eyjafjallajokull volcano is that it could trigger an eruption in its much larger neighbor, which is called Katla. I was told there's a better than even chance that this would happen.

This would be troublesome. University of Iceland geologist Andy Hooper told Reuters that an eruption of Katla would make the ash cloud from Eyjafjallajokull look trivial. Hooper further declared that increased volcano action in Iceland might be inevitable if our planet continues to warm.

"At the end of the last ice age, the rate of eruption in Iceland was some 30 times higher than historic rates. This is because the reduction in the ice load reduced the pressure in the mantle, leading to decompression melting there," he said. "Since the late 19th century the ice caps in Iceland have been shrinking yet further, due to changing climate. This will lead to additional magma generation, so we should expect more frequent and more voluminous eruptions in the future."

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