Mariano Rajoy expected to win Andalucia regional elections, then order further austerity measures.

Spain's prime minister, Mariano Rajoy, faces the toughest week of his three months in office as he is forced to announce up to €40bn (£33.45bn) in spending cuts and taxes in a budget on 30 March, the day after a general strike.

As Rajoy's conservative People's party looked set for victory in key regional elections in southern Andalucia on Sunday, other European leaders and the markets were signalling Spain as now being the biggest single threat to the stability of the eurozone.

A win in Andalucia would give Rajoy unprecedented control over troublesome regional governments whose inability to reduce deficits has helped to put Spain centre-stage in the eurozone crisis. Asturias, a much smaller northern region, was also voting. Read More

Your editor's fingers are a little rusty after a full week away from the keyboard. But our hands were not idle! We rediscovered the pleasure of discovering information the old fashioned way last week, analogue style! More on the benefits to your brain of reading books in a moment.

But first, this whole "Asian Century" thing is getting quite complicated, isn't it? We took a week off following the "After America" conference to ponder what it all meant. Is America done for? Can China liberalise its currency without destroying its banking system? And will former Treasury Secretary Ken Henry include a copy of our DVD in his forthcoming report, "Australia in the Asian Century"?

To be honest, the fact the Australian government has commissioned a white paper on the whole subject makes us nervous. Nothing says "stale and uninteresting idea" like a government white paper. In fact, it leads us to one of the ideas voiced at our conference that there won't be an Asian century at all. The whole premise might be flawed. Read More

Today legendary trader and investor Jim Sinclair told King World News that gold has taken a major step towards becoming the currency of choice when it comes to international trade.

Sinclair also said the US has launched an economic war against key Asian countries and it is having an immediate impact on the gold market. Here is what Sinclair had to say about the situation: “Wall Street goes to war and the weapon is money. There was a day when we went to war and the weapon was an armada of ships. It was landing on Iwo Jima, mano y mano, it was bravery and honor. Today it’s dollars.”

Jim Sinclair continues:

“We go to war, challenging the other side to do the same because whatever you use as a weapon, the other side is going to tend to use as a weapon. The weapon that’s being used is the interbank transfer system, the way money is sent from bank to bank.

We’ve already seen that Iran has been basically shut out of the SWIFT system and the SWIFT system is what this is all about. The SWIFT system doesn’t take any money for the money that goes through it. The SWIFT system is like the old telephone company. What it does is charge for the use of its communication. Read More

New Delhi: The country’s new energy companies were being “crushed” due to the dramatic slashing of prices of solar equipment by Chinese industry and the government will have to adopt regulatory measures to safeguard Indian interests, Union Minister Farooq Abdullah said in New Delhi today.

Addressing a meeting on new energy, the Union Minister for New and Renewable Energy said, “The price of these panels has come down basically from China. Our own industry is suffering because these Chinese are bringing the prices of their panels down so dramatically to crush our industry.”

Abdullah admitted that the slashing of prices has helped in bringing down the cost of one unit of solar power from Rs 18 to Rs 7 in recent times but the country will have to safeguard its interests to help the local producers. Read More

Every quarter the Office of the Currency Comptroller releases its report on Bank Derivative Activities, and every quarter we find that the Too Big To Fail get Too Bigger To Fail. To wit: in Q4 2011, of the total $230.8 trillion in US outstanding derivatives, the Top 5 banks (JPM, BofA, Morgan Stanley, Goldman and HSBC) accounted for 95.7% of all Derivatives.

In some respects this is good news: in Q2, the Top 5 banks held 95.9% of the $250 trillion in derivatives. Unfortunately it is also bad news, because $220 trillion is more than enough for the world to collapse in a daisy chained failure of bilateral netting (which not even all the central banks in the world can offset).

What is the worst news, is that the just released report indicates that in addition to everything else, we have now hit peak delusion, as banks now report to the OCC that a record high 92.2% of gross credit exposure is "bilaterally netted." Read More

WASHINGTON — US trade authorities on Thursday announced an investigation into yet another Chinese export product, this time the veritable kitchen sink.

The US Commerce Department said it is examining whether China is selling steel sinks below fair value and if Chinese sink manufacturers are getting unfair subsidies.

Trade disputes between China and the United States are legion. The two economic powers have already sparred over the import and export of solar panels to tires to chickens.

Now that list includes "imports of drawn stainless steel sinks" -- or kitchen sinks.

The business -- while a fraction of the US-China's half a trillion dollar a year trade -- is not something to let slip down the drain. Read More

What is the place of the Federal Reserve System in the American financial and economic structure?

Prior to the Federal Reserve’s founding in 1913, U.S. monetary policy was conducted by the Treasury. Like the Fed, it had district sub-treasuries that performed nearly all the financial functions that the Fed later took over: providing credit to move the crops in autumn, managing government debt, and so forth.

But after the severe 1907 financial crisis, a National Monetary Commission was reformed. Under the then-Republican administration, it recognized a need for more active government intervention to prevent future financial crises. It also recognized the desirability of moving away from the Anglo-Dutch-American system of “merchant banking” based on short-term lending against collateral in place, or for shipping of goods already produced. The National Monetary Commission’s longest volumes were on the great German industrial banks, and Republican policy aimed at bringing banking into the industrial era, to provide long-term funding after the model of German and other Central European banks.

However, the leading bankers sought to use the crisis as an opportunity to grab power for Wall Street, away from the Treasury. In this sense, the Fed was founded in large part to take monetary control away from Washington’s elected officials and appointees, and privatize the supply of money and credit.

So its place in the U.S. financial and economic structure is to allocate credit, primarily to serve Wall Street financial interests. That explains the insistence on the financial class here and abroad in insisting on an “independent” central bank. It means that instead of serving the public interest, it serves the interests of the banking class. The hoped-for transformation of commercial banking into long-term industrial banking was not achieved. Read More

With central banks around the world printing money to pump into their financial systems to prevent them from seizing up, the argument for a return to the gold standard has become popular again.

The gold standard was a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold.

The idea, in theory at least, was that you could convert your currency into gold at the fixed price.

The view from investment banker Jim Rickards is that something is needed to stop governments from printing money in order to deal with their debt - that hurts savers by making money worth less.

"The worst case scenario is hyperinflation, which hurts everyone. Sticking to gold makes such a policy impossible, and therefore stops governments and central banks from abusing their power," he says. Read More

Easy money and bad decisions tanked our economy, and we're not out of the woods yet. The fix applied so far: more easy money. Will it work, or are we going to create a new asset bubble without solving the problems caused by the last one?

The use of credit has been building in the United States economy over the last 50 or so years. Credit is self-reinforcing on the way up. As credit expands, financial asset prices rise, which creates a wealth effect for all involved. Households, corporations and the government are able to consume at levels not possible previously. However, expanded levels of credit can't last forever unless incomes rise at a comparable pace.

If so much credit is created that it can't be serviced, or eventually paid back, you end up with a bubble, which must burst at some point or, at the very least, a long de-leveraging process results. Just ask Japan. So do we have too much credit in the U.S.? Read More

Beijing: In the thick of maritime disputes with several of its neighbours, China said on Tuesday it is mapping South China Sea (SCS) with an aim to step up exploration for oil and gas and to reinforce its territorial claims.

China may step up its exploration of South China Sea to reinforce its territorial claims following announcement that geographical surveys of the area are underway, state-run Global Times reported.

"The majority of the disputed waters used to be beyond our reach because we seldom put our claims into action," Zhang Yunling, director of the Institute for International Studies under the Chinese Academy of Social Sciences, told the daily.

"By drawing a map, the country can reinforce its jurisdiction claim in the South China Sea, and further actions may follow, such as exploiting resources near the Nansha Islands," Zhang said. Read More

The U.S. dollar has probably been the closest thing to a true global currency that the world has ever seen. For decades, the use of the U.S. dollar has been absolutely dominant in international trade. This has had tremendous benefits for the U.S. financial system and for U.S. consumers, and it has given the U.S. government tremendous power and influence around the globe.

Today, more than 60 percent of all foreign currency reserves in the world are in U.S. dollars. But there are big changes on the horizon. The mainstream media in the United States has been strangely silent about this, but some of the biggest economies on earth have been making agreements with each other to move away from using the U.S. dollar in international trade. There are also some oil-producing nations which have begun selling oil in currencies other than the U.S. dollar, which is a major threat to the petrodollar system which has been in place for nearly four decades. And big international institutions such as the UN and the IMF have even been issuing official reports about the need to move away form the U.S. dollar and toward a new global reserve currency. So the reign of the U.S. dollar as the world reserve currency is definitely being threatened, and the coming shift in international trade is going to have massive implications for the U.S. economy.

A lot of this is being fueled by China. China has the second largest economy on the face of the earth, and the size of the Chinese economy is projected to pass the size of the U.S. economy by 2016. In fact, one economist is even projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040.

So China is sitting there and wondering why the U.S. dollar should continue to be so preeminent if the Chinese economy is about to become the number one economy on the planet.

Over the past few years, China and other emerging powers such as Russia have been been quietly making agreements to move away from the U.S. dollar in international trade. The supremacy of the U.S. dollar is not nearly as solid as most Americans believe that it is.

As the U.S. economy continues to fade, it is going to be really hard to argue that the U.S. dollar should continue to function as the primary reserve currency of the world. Things are rapidly changing, and most Americans have no idea where these trends are taking us.

The following are 10 reasons why the reign of the dollar as the world reserve currency is about to come to an end....

#1 China And Japan Are Dumping the U.S. Dollar In Bilateral Trade

A few months ago, the second largest economy on earth (China) and the third largest economy on earth (Japan) struck a deal which will promote the use of their own currencies (rather than the U.S. dollar) when trading with each other. This was an incredibly important agreement that was virtually totally ignored by the U.S. media. The following is from a BBC report about that agreement.... Read More

Despite the US economy's wallowing debt problem, we probably shouldn’t count America out just yet. A new report from Citigroup says that North America has the potential to become the next "Middle East". We're assuming that's in terms of oil and energy production...and not in terms of social instability and revolution, although either is possible at this point. If America can lower its national energy costs, it will also lower its national security costs. This might not please the military industrial complex. But it could be good news for everyone else.

Let's not be too naive though. WE borrowed the "After America" name from Brisbane-based John Birmingham, who wrote a book of the same name a few years ago. It turns out it's a popular theme. Current affairs commentator Mark Steyn has an After America book out as well. And in a recent article, he shows the ugly math behind America's debt problem:

A second-term Obama would roar full throttle to the cliff edge, while a President Romney would be unlikely to do much more than ease off to third gear. At this point, it's traditional for pundits to warn that if we don't change course we're going to wind up like Greece. Presumably they mean that, right now, our national debt, which crossed the Rubicon of 100 percent of GDP just before Christmas, is not as bad as that of Athens, although it's worse than Britain, Canada, Australia, Sweden, Denmark, and every other European nation except Portugal, Ireland, and Italy. Or perhaps they mean that America's current deficit-to-GDP ratio is not quite as bad as Greece's, although it's worse than that of Britain, Canada, France, Germany, Italy, Spain, Belgium, and every other European nation except Ireland.

But these comparisons tend to understate the insolvency of America, failing as they do to take into account state and municipal debts and public pension liabilities. When Morgan Stanley ran those numbers in 2009, the debt-to-revenue ratio in Greece was 312 percent; in the United States it was 358 percent. Read More

Axton Betz had just rented her first off-campus apartment in West Lafayette, Ind. when the power company told her she needed to pay a $100 deposit to turn on the electricity. Betz, who was 19 at the time, assumed they required the large deposit because she had no credit history.

But, for safe measure, she requested a copy of her credit report. “I thought it would be just one page on student loans,” Betz says. Instead, she found 10 pages of defaulted credit cards – showing someone had been using her identity since she was 11 years old.

Stealing social security numbers to buy cars, apply for credit and obtain driver’s licenses has now shifted to a new demographic: those under the age of 18. Credit companies and other firms are responding offering monthly services promising identity-theft protection for children. According to the Federal Trade Commission, there is a market for this: 19,000 child identity theft complaints were reported in 2009, the most recent data available, up 217 percent since 2003. What’s more, a study done by the Carnegie Mellon CyLab showed children are 51 times more likely to have their identity stolen than adults. Read More