This week, the World Trade Organization (WTO) issued its much anticipated ruling on whether China’s export policies for critical metals violated the agreement it first entered in 2001 to be part of the WTO. The highest court within the WTO, known as the Appellate Body, found China was in violation of WTO requirements and had breached its original agreement. The decision marks a huge victory for the many automotive, high tech and alternative energy manufacturers globally that rely on China’s rare earth metal deposits to produce their goods.

As stated in a piece I published at Big Government in November, China has a complete monopoly on the 14 critical rare earth metals producing 97% of current world production. Products as fundamental to America’s industrial future as mobile phones, automobiles, televisions, fluorescent lighting, fiber optics and most of our advanced military hardware require rare earths. This monopoly has the potential to allow China to control production within all these trillion dollar industries by simply selling rare earths in China for far less than they sell them outside of China.

The situation had reached a critical state in 2011. Prices for metals such as neodymium have increased 20 fold in just the last 2 years making their use outside of China prohibitively expensive. The system of export quotas, tariffs and minimum export prices made the cost of rare earths nearly half within China then what they are outside China giving Chinese producers and companies China allows to build plants within China, an overwhelming cost advantage over other global producers; an advantage the WTO now says is illegal. The decision is also a major victory for our military which relies on Chinese rare earths to produce everything from Bradley Tanks and F-22 Fighter Jets to Body Armor and Night Vision Goggles.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech and Francis Cianfrocca are joined by Newt Gingrich to discuss his plans for entitlement reform, how he would change the Federal Reserve, the Eurozone crisis and more.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss Jon Corzine’s testimony before Congress on MF Global, the proposed Robin Hood Tax and how it would hurt the little guy not big banks as intended.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss Europe’s potential political merger, the ten year anniversary of Enron’s collapse, and evidence the American private sector has been dying since the 1960’s.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss a new German push to politically unite Europe to save the Eurozone, Obama’s decision to kill 20,000 jobs, and we respond to a question from a listener.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

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From the Associated Press:

Europe failed to get the leaders of the world’s wealthiest economies to help out with its debt troubles, but everyone left a G-20 summit Friday relieved that at least they forced the Greek prime minister not to hold the world hostage with a bailout vote.

It took a public berating of Greek Prime Minister George Papandreou, and Greece’s politics are in upheaval as a result, but the shaky bailout plan appears back on track for now.

Investors had been hoping the Group of 20 nations would lend the struggling eurozone a helping hand—but the G-20 leaders said Europe needs to help itself first. They said the International Monetary Fund could be beefed up to help more, but not for at least three more months.

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It turns out minding other people’s business is a worldwide affliction. In this very special edition of Nanny of the Month, we explore nannyism across the pond. Fat taxes are all the rage in Europe. After the skinny Danes slapped a tax on foods high in saturated fats, other European pols—including British Prime Minister David Cameron—have considered following suit. In Australia’s Northern Territory, they’re bringing alcohol prohibition back—incrementally, that is—by barring problem drinkers from buying grog. What could possibly go wrong?

But in the first-ever Nanny of the Month Global Edition, top dishonors go to the European Union’s control freaks who have cracked down on free-range kids, slapping regulations on everything from baby rattlers (which have brand-new noise restrictions) to blowing up balloons (not to be done by tots under age eight!). (more…)

It is not necessarily true that as goes the Euro, so goes the Dollar, but as goes the EU, so goes the US is as certain as the rising (or setting) sun. At least, if American fiscal policy continues to emulate that of the European spendthrifts.  The EU heads of state had marathon, round-the-clock meetings in Brussels last week, and inked a plan to finesse a Greek default (which is an eventual certainty) in a way that doesn’t immediately plunge the rest of Europe into a financial hell, and quite possibly drag America along with it.  Under the best of circumstances, the picture remains bleak.  Market analysts who focus on short-term stock market movements responded with sighs of relief.

The Germans, understandably, wanted those who have loaned Greece money (primarily, the European banks) to take a loss of about half of the value of their loans in order to ease the extremis in which Greece finds herself.  France, whose banks are holding a lot of Greece’s debt, preferred to rely more heavily on a pumped up bailout fund to ease the burden on Athens.  Given that the German taxpayer is certain to be the biggest funder of the proposed additional bailout, it is not hard to understand the rising tensions on the continent.

One can’t blame the banks for their reluctance to dance at this party.  Based on commitments the EU countries made, to keep their debt to no more than 60% of GDP and their deficits to no more than 3% over the prior year, Europe’s banks became major financiers of the new Euro countries.  But many of the European countries that were financially irresponsible prior to the advent of the Euro had no intention of changing their ways subsequent to exchanging their old currencies for the new Euro.  Greece flat out misrepresented its financial condition when it applied to become a member of the Euro Zone.

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“EU Carbon Trading Rocked By Mass Killings”, “Armed Troops Burn Down Homes, Kill Children To Evict Ugandans In Name Of Global Warming”

These two headlines from today’s Global Warming Policy Foundation update ought to finally shake some sense into any of the many US companies pushing for our involvement in the Kyoto debacle. That’s a demand invented by Enron (greenies, I was in the room, don’t bother), and I particularly recall DuPont’s rep whining like a child to the US representative about their being denied the right to cash in, at a State Department briefing at one global confab I attended in 2002.

This is particularly true on the heels of the experience of Coca Cola and Unocal with the 1789 Alien Tort Claims Act, under which they were sued to pay for the actions of a government in whose country they operated.

Specifically, news reports indicate that:

“Armed troops acting on behalf of a British carbon trading company backed by the World Bank burned houses to the ground and killed children to evict Ugandans from their homes in the name of seizing land to protect against ‘global warming,’ a shocking illustration of how the climate change con is a barbarian form of neo-colonialism.

The evictions were ordered by New Forests Company, an outfit that seizes land in Africa to grow trees then sells the ‘carbon credits’ on to transnational corporations. The company is backed by the World Bank and HSBC. Its Board of Directors includes HSBC Managing Director Sajjad Sabur, as well as other former Goldman Sachs investment bankers…

Villagers told of how armed ‘security forces’ stormed their village and torched houses, burning an eight-year-child to death as they threatened to murder anyone who resisted while beating others.

‘We were in church,’ recalled Jean-Marie Tushabe, 26, a father of two. ‘I heard bullets being shot into the air.’

‘Cars were coming with police,’ Mr. Tushabe said, sitting among the ruins of his old home. ‘They headed straight to the houses. They took our plates, cups, mattresses, bed, pillows. Then we saw them getting a matchbox out of their pockets.’

‘But in this case, the government and the company said the settlers were illegal and evicted for a good cause: to protect the environment and help fight global warming,’ reports the New York Times.”

To beat some too-typical greens to their punch, no, this is not what happens when one introduces “market mechanisms” into environmental schemes.

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The concept that seventeen independent rich and poor European countries could come together in a monetary union and perpetuate the “euro” currency has always been a fraud. The real story behind the formation of the euro was the “Grand Bargain”. The governments of the PIGS (Portugal, Italy, Greece, and Spain) receive colossal bribes in the form of the ability to borrow unlimited amounts of money at the same low interest rates the Germans pay; for agreeing to buy enormous amounts of German goods. The PIGS generously performed their side of the bargain. It is the Germans that after running-up vast surpluses are now economically destroying the PIGS by terminating the bargain.

The European sovereign debt crisis did not start 18 months ago when Greek borrowing costs began rising from 3% to the current 75%. The crisis began in 2009 when German politicians passed a constitutional balanced-budget “Golden Rule” at the height of the global credit crisis. The Golden Rule prohibits German politicians from passing a budget with a deficit of more than 0.35% of Gross Domestic Product (GDP). This was a radical departure from the unenforceable “Stability and Growth Pact” of the seventeen nation euro that limits deficits to 3% of budgets.

For a monetary union to be sustainable, it must be operated on the basis of ‘symmetrical obligations’ among the members. Germany’s decision to cut-off spending of its trade surpluses to finance the PIGS trade deficits has created a deflationary spiral in Europe. Over the last two years there have been numerous incremental European bail-out programs aimed at stopping the Greek debt crisis from spreading to the other PIGS. Each successive program forced deeper “reform” cuts to PIGS spending. “No reforms, no bond purchases” has been the message of the German controlled European Central Bank (ECB) and the German controlled European Financial Stability Fund (EFSF).

Following periods of short term relief, each program failed.

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From the Associated Press:

Greece is relying on rescue loans to remain solvent. But lagging efforts to tame a bloated budget deficit and enforce reforms are threatening that lifeline, which is conditional on fiscal progress.

Athens is trying to convince international creditors that it deserves to get the next, sixth tranche of money due from a bailout fund. Government spokesman Elias Mossialos said late Monday that Greece will get the bailout money.

Despite over 20 months of austerity and two international bailouts each worth about euro110 billion ($150 billion), Greece’s finances remain in a parlous state.

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I’ve made some uncannily accurate predictions in the past 3 years.

Back in 2008, as I ran for Vice President of the United States on the Libertarian Presidential ticket, I made a prediction I’m very proud of today. I said, “Voting for McCain is voting for four more years of Bush. But voting for Obama is voting for four years of Karl Marx.” How’s that working for you?

I also predicted that Obama’s entire Presidency would be devoted to saving the union- the teachers union, government employees union, and auto union. Sure enough, the White House now comes adorned with a union label. If you look closely at Obama’s forehead, you’ll find it’s stamped SEIU. Obama’s signature initiative Obamacare affects every American citizen, except union members. Real life under Obama is more shocking than fiction.

A year ago, while economists and Obama administration lackeys talked of a recovery, I publicly stated we’d never left the last recession and the worst was yet to come. I predicted that “Obama’s Axis of Evil” policies of taxation, regulation, government strangulation, unionization, litigation and illegal immigration would turn a serious economic crisis into The Greatest Depression Ever. It’s all unfolding before our very eyes on a daily basis.

As conditions got progressively worse during 2010, I predicted the Tea Parties would pull off one of the great landslide victories in U.S. political history that November.

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From AFP:

US debt shot up $238 billion to reach 100 percent of gross domestic project after the government’s debt ceiling was lifted, Treasury figures showed Wednesday.

Treasury borrowing jumped Tuesday, the data showed, immediately after President Barack Obama signed into law an increase in the debt ceiling as the country’s spending commitments reached a breaking point and it threatened to default on its debt.

The new borrowing took total public debt to $14.58 trillion, over end-2010 GDP of $14.53 trillion, and putting it in a league with highly indebted countries like Italy and Belgium.

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From the Associated Press:

Riot police fired tear gas at youths hurling rocks near the Greek finance ministry Tuesday, trying to quell the anger unleashed by a general strike as parliament debated new cost-cutting measures.

The latest austerity measures must pass in two parliamentary votes Wednesday and Thursday if Greece is to receive bailout funds from the EU and the IMF to stave off a possible default in July. If the votes don’t pass, Greece could become the first eurozone nation to default on its debts, sending shock waves through the global economy.

The clashes with police came at the start of a two-day strike called by unions furious that the new euro28 billion ($40 billion) austerity program will slap taxes on minimum wage earners and other struggling Greeks. The measures come on top of other spending cuts and tax hikes that have sent Greek unemployment soaring to over 16 percent.

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It all seems so remote, not just in geography, but as a unique economic issue affecting only Greece and, perhaps, the rest of the EU.  But it isn’t.  The world is very interconnected.  Many Americans directly or indirectly (through their banks or money market funds) hold Greek debt instruments, which are probably never going to be repaid, or, in some cases, Americans may be invested in funds that hold debt instruments that are, in turn, insured by European banks that have sizeable exposure to a Greek default or restructuring.

A default, restructuring or further downgrading of Greek debt or of the banks that have Greek debt exposure can ricochet through American financial institutions.  European finance ministers and the European Central Bank (ECB) have been wrangling over whether or when to release the final installment of the $157 million bailout loan granted last year when certain austerity measures were imposed on Greece.  Keep in mind that this final disbursement will only carry Greece into mid‑September.  The bigger issue is a fresh bailout loan of $100+ billion Euros, almost the same as the first loan.  In other words, this, in gambling terms, is a double down bet.  Few financial analysts, if any, believe Greece is going to escape an eventual default. So what is going on here? This is Extend and Pretend writ large.

Last year’s package depended on Greece enacting major spending cuts, and cracking down on tax evaders.  Instead the public took to the streets.  Prime Minister Papandreou has based his political future on ramming through a new and more draconian austerity budget, but he has only a five seat parliamentary majority and some members of his party have been on the fence.  Greek debt is now at a staggering 150% of its GNP.

As The Wall Street Journal notes, this is not a liquidity problem but a solvency crisis and that is not a difference without a distinction. Greece isn’t merely having cash flow problems.  Greece is insolvent, i.e., it currently has no prospect of meeting its obligations.

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From the UK’s Daily Mail:

Brussels is pouring nearly £20million a year from its human rights budget on lecturing the Americans on left-wing causes.

The EU Human Rights Fund is intended to help promote Western values in the developing world. But a shock report has found at least £17million of cash – around £2million from British taxpayers’ – has been ploughed into promoting the pet causes of Eurocrats in the U.S.

It is being spent on promoting abolition of the death penalty, discussion of climate change, green energy, and the International Criminal Court – all controversial subjects in the U.S.

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As the IMF gets ready to choose a successor to Dominique Strauss-Kahn, who resigned following his arrest on charges that he sexually assaulted and raped a hotel housekeeper, it would be a good thing to step back for a moment and ask: What should the IMF do?

More specifically, can the IMF possibly morph itself into a worldwide force for economic growth instead of Bailout Nation?

Yes, it’s a powerful global economic agency. It’s also one with a very checkered past. Usually opting for austerity policies, such as currency devaluation and tax increases, the IMF has bungled a lot of rescue missions down through the years.

There was Turkey, Mexico, and the Asian Tigers. More recently, there was the Greece bailout plan, which has not succeeded. Neither have the Portugal and Ireland plans. Though the EU’s involvement in these European states has been larger than the IMF’s, the IMF was supposed to be the tough cop for budget cuts that have not materialized. The necessary debt restructuring also hasn’t occurred.

Socialist Strauss-Kahn restored IMF prestige with his political-economic activism. But he didn’t restore prosperity to the southern-tier European countries.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Roger Bate to discuss the need to criminalize the trade of counterfeit drugs in international law, then Pejman Yousefzadeh talks about Mike Huckabee.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

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Why and How to Make an International Crime of Medicine Counterfeiting
Establishing a Convention against Fake Drugs
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Study: Drugs from Emerging Markets Have High Failure Rates
Huckabee Questions Obama Birth Certificate
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The reaction to the Food and Drug Administration (FDA) rationing scheme for late-stage cancer drugs has been met with a swift reaction from both sides of the political aisle. Even liberal Democrats who voted to implement ObamaCare have voiced critical objections to the FDA’s denial of Avastin for breast cancer patients. Even the Susan Komen Foundation for a Cure raised concerns.

But one of the more interesting aspects of the FDA’s scheme is the specious claim that Avastin does not work. But on the same day of the ill-advised decision, the FDA’s European counterpart — representing the government-run health care systems in the European Union – issued a statement approving Avastin for metastatic breast cancer concluding that the “benefits continue to outweigh the risks, because the available data have convincingly shown to prolong progression-free survival of breast cancer patients without a negative effect on the overall survival.”

This evidence certainly undercuts the FDA’s claims. Europe’s government-run health care systems openly ration drugs based on cost concerns. The British, for example, have rationed Avastin and admitted the decision was based solely on cost considerations. With a “push-button” rationing system, the fact that the Europeans recognize the benefit of the drug raises further questions about the true reasons for the FDA’s decision to deny patients and doctors access to the drug.

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From the Associated Press:

Federal health authorities are recommending the blockbuster drug Avastin no longer be used to treat breast cancer, saying recent studies failed to show the drug’s original promise to help slow the disease.

The Food and Drug Administration’s decision is supported by many cancer experts but is sure to draw resistance from cancer patients and some doctors who fiercely defend the drug and say it should remain available.

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