Jane Hamsher: What Obama Fights For: Giving $9.55 Billion to North Korea to Spend on Nukes

From FireDogLake:

Yesterday the White House took the last step to owning all three leftover Bush NAFTA-expansion deals with Korea, Colombia and Panama by announcing that they would send them to Congress imminently. The Economic Policy Institute estimates that we’ll lose 159,000 jobs with the Korea deal alone.

At a time of high unemployment, it’s difficult to fathom why the President would be fighting to increase our trade deficit and ship tens of thousands of jobs overseas.

Even more stunning, however, is the loophole in the Obama deal that will hand billions over to North Korea to spend on their nuclear weapons program (PDF).

Under the terms of NAFTA, goods have to have 50% domestic-made content in order to qualify for inclusion. However under KORUS, goods with up to 65% non-South-Korean content qualify, as long as final assembly off goods happens in South Korea. That means 65% of all parts can be made China, Vietnam, wherever — giving rise to fears that the South Korea deal will be a back-door extension of NAFTA for China.

But surely, somebody thought to exclude North Korean content from the deal, right? I mean, with all the huffing and puffing about the need for increased sanctions against North Korea to keep them from funding their nuclear program. At the very least, somebody must have included language in KORUS that makes an exception for US sanctions against North Korea, which would otherwise violate NAFTA’s ban on import licenses.

Well if that’s what you thought, you would be wrong.

Every day, 44,000 North Koreans are marched into a North Korea border sweat shop zone called Kaesong to work for 28 center per hour — of which the Kim regime keeps 55%. In 2007 Ambassador Jay Lefkowitz, the U.S. Special Envoy for Human Rights in North Korea, wrote that Kaesong was one of the only sources of cold hard currency North Korea had to fund its nuclear program:

Because the North Korean government takes a major portion of workers’ salaries, these arrangements provide material support for a rogue government, its nuclear ambitions, and its human rights atrocities.

According to research done by Public Citizen, Obama’s NAFTA-Korea deal not only fails to exclude North Korean content, it allows for a massive expansion of the Kaesong district — and the profits that North Korea will reap (PDF):

The U.S. government estimates that the North Korean government currently collects $3 million to $4 million a month from the Kaesong operations now, prior to a massive planned expansion of the border sweatshop zone. South Korea cut off most trade with North Korea after attacks last year, but left Kaesong trade open. There was $1.9 billion in total trade between the two Koreas in 2009, about half of which was through production by South Korean firms in Kaesong. While $1.9 billion is not a lot of money relative to the U.S. or South Korean economy, it constitutes more than a third of North Korea’s total external trade. Given the Department of Defense estimates that North Korea’s nuclear program cost the regime as little as $200 million to develop, the hard currency generated by North Korean trade flows is sufficient to finance the North’s nuclear proliferation regime several times over.

The North Korean government is projected to receive $9.55 billion in economic gains from Kaesong over nine years under a planned major expansion. This is equivalent to 36 percent of North Korea’s estimated national income. Hyundai and the Korea Land Corporation, the principal developers of Kaesong, plan to enlarge the complex from its current 800 acres to a more than 6,000-acre complex (or nine square miles), where 1,500 South Korean and other foreign firms will employ 350,000 North Korean workers. This would make the complex more than half the size of Alexandria, Virginia.

http://fdlaction.firedoglake.com/2011/06/29/what-obama-fights-for-giving-9-55-billion-to-north-korea-to-spend-on-nukes/

China Buying Billions of Euros, Yet For How Long?

From the Wall Street Journal:

China's deep pockets are momentarily keeping the euro supported.

But with Greece's financial future still uncertain even after lawmakers passed an austerity package on Wednesday, and the single currency's long-term prospects far from assured, Beijing risks learning a lesson about trying to fight a market more inclined to sell than buy.

For months, whispers of "Asian official buying" have permeated markets when the euro fell below certain levels. That talk has kept euro/dollar hemmed into a tight seven-cent range since late May, even as fears of a Greek default make traders disinclined to hold the single currency.

China, the world's biggest holder of foreign-exchange reserves, has pledged financial support to the distressed euro-zone periphery while touting its economic links to Europe.

http://online.wsj.com/article/BT-CO-20110629-715034.html

Charles Hugh Smith: The U.S. Is A Kleptocracy Too

From Of Two Minds:

Yesterday, I noted that Greece Is a Kleptocracy; the U.S. is a kleptocracy, too. Before you object with a florid speech about the Bill of Rights and free enterprise, please consider the following evidence that the U.S. is now a kleptocracy worthy of comparison to Greece:

1. Neither party has any interest in limiting the banking/financial cartel.

2. Our stock markets are dominated by insiders.

3. The rule of law in the U.S. has been divided into two branches: one in name only for the financial Elites and corporate cartels, and one for the rest of us mere citizens.

4. Just as in Greece, taxes are optional for the nation's financial Elites.

http://www.oftwominds.com/blogjune11/US-kleptocracy6-11.html

Charles Hugh Smith: Greece Is A Kleptocracy

From Of Two Minds:

Despite a veritable flood of financial and political analysis about Greece, nobody seems to have noticed the obvious: Greece is a kleptocracy.

Here's the real dynamic in Greece: The Kleptocracy--broadly, the political and financial Elites of the nation--saw a stupendous opportunity to embezzle hundreds of billions of euros from greed-blinded European banks at super-low rates of interest.

Being kleptocrats, they sniffed out the basics of the bezzle right away, and have been playing it ever since: we're not paying any of these loans back, so go get the money from the European Central Bank (ECB) and the German taxpayers, or declare bankruptcy. Your choice.

The Greek kleptocrats knew all along that the German, Dutch, French and Finnish taxpayers were easy marks, just as they knew the European Union Power Elites would fall all over themselves to "save the euro" which was the centerpiece of their "one Europe" strategy of domination.

Only the Greek kleptocrats just beat them at their own game. The entire game plan of the "one Europe" Elites depends on nation-states actually complying with non-enforceable codes of conduct and on European banks making prudent loans.

Neither condition held: Greece's Elites reckoned they could game the system and string along the Eurocrats, if not forever, then certainly long enough to engorge their Swiss accounts with euros skimmed from the banks, and they've played that hand to perfection.

Their performance is truly a thing of beauty, a masterful display of the Big Con.

http://www.oftwominds.com/blogjune11/Greece-kleptocracy6-11.html

Greek Government Austerity Measures

Korea had to accept austerity measures during the 1997 financial crisis. One has to understand the root causes of the Greek crisis and the role of the IMF beneath the surface.

From BBC:

The Greek parliament is debating the latest set of austerity measures, which it needs to pass to qualify for another payment under the bail-out from the European Union and the International Monetary Fund.

The five-year plan was changed last week to allow for more money to be raised through tax increases and less money to be saved through spending cuts.

The plan involves cutting 14.32bn euros ($20.50bn; £12.82bn) of public spending, while raising 14.09bn euros in taxes over five years.

These are some of the austerity measures planned.

TAXATION
• Taxes will increase by 2.32bn euros this year, with additional taxes of 3.38bn euros in 2012, 152m euros in 2013 and 699m euros in 2014.
• A solidarity levy of between 1% and 5% of income will be levied on households to raise 1.38bn euros.
• The tax-free threshold for income tax will be lowered from 12,000 to 8,000 euros.
• There will be higher property taxes
• VAT rates are to rise: the 19% rate will increase to 23%, 11% becomes 13%, and 5.5% will increase to 6.5%.
• The VAT rate for restaurants and bars will rise to 23% from 13%.
• Luxury levies will be introduced on yachts, pools and cars.
• Some tax exemptions will be scrapped
• Excise taxes on fuel, cigarettes and alcohol will rise by one third.
• Special levies on profitable firms, high-value properties and people with high incomes will be introduced.

PUBLIC SECTOR CUTS
• The public sector wage bill will be cut by 770m euros in 2011, 600m euros in 2012, 448m euros in 2013, 300m euros in 2014 and 71m euros in 2015.
• Nominal public sector wages will be cut by 15%.
• Wages of employees of state-owned enterprises will be cut by 30% and there will be a cap on wages and bonuses.
• All temporary contracts for public sector workers will be terminated.
• Only one in 10 civil servants retiring this year will be replaced and only one in 5 in coming years.

SPENDING CUTS
• Defence spending will be cut by 200m euros in 2012, and by 333m euros each year from 2013 to 2015.
• Health spending will be cut by 310m euros this year and a further 1.81bn euros in 2012-2015, mainly by lowering regulated prices for drugs.
• Public investment will be cut by 850m euros this year.
• Subsidies for local government will be reduced.
• Education spending will be cut by closing or merging 1,976 schools.

CUTTING BENEFITS
• Social security will be cut by 1.09bn euros this year, 1.28bn euros in 2012, 1.03bn euros in 2013, 1.01bn euros in 2014 and 700m euros in 2015.
• There will be more means-testing and some benefits will be cut.
• The government hopes to collect more social security contributions by cracking down on evasion and undeclared work.
• The statutory retirement age will be raised to 65, 40 years of work will be needed for a full pension and benefits will be linked more closely to lifetime contributions.

PRIVATISATION
• The government aims to raise 50bn euros from privatisations by 2015, including:
• Selling stakes this year in the betting monopoly OPAP, the lender Hellenic Postbank, port operators Piraeus Port and Thessaloniki Port as well as Thessaloniki Water.
• It has agreed to sell 10% of Hellenic Telecom to Deutsche Telekom for about 400m euros.
• Next year, the government plans to sell stakes in Athens Water, refiner Hellenic Petroleum, electricity utility PPC, lender ATEbank as well as ports, airports, motorway concessions, state land and mining rights.
• It plans further sales to raise 7bn euros in 2013, 13bn euros in 2014 and 15bn euros in 2015.

http://www.bbc.co.uk/news/business-13940431?print=true

China’s Local Governments Run Up Huge Debts, Risk Defaulting

As mentioned on more than a few occasions, China’s bubble burst would have significant ramifications for the global economy.

From China Daily:

Local governments had an overall debt of 10.7 trillion yuan ($1.65 trillion) by the end of 2010, said China's top auditor on Monday in a report to the National People's Congress.

He warned that some were at risk of defaulting on payments.

It was the first time the world's second-largest economy publicly announced the size of its local governments' debts. The scale amounts to more than one-quarter of its GDP in 2010, which stood at 39.8 trillion yuan.

Concerns are rising that the problem of local government debt could destabilize the financial system of the country if it is not managed properly, especially after the central government's tightening of the housing market, which could affect local fiscal revenue that is highly dependent on land sales and make debt repayment more difficult.

In addition, China's ambitious plan to construct 36 million affordable homes during the coming five years, including 10 million in 2011 and 10 million in 2012, added to worries about increasing capital tension and rising non-performing loans in commercial banks.

About 79 percent of the local government loans were made by banks across the country, according to the NAO.

Lu Zhengwei, chief economist at the Industrial Bank, said the figures released were moderate compared with previous estimates, and risks lying in these loans are quite limited.

"Overdue loans take up only a small proportion of the total lending and local governments didn't pay them in a timely way mainly because deadlines were too concentrated, not because of deteriorated ability to repay."

http://usa.chinadaily.com.cn/epaper/2011-06/28/content_12793025.htm

China Will Bail Out Insolvent European Countries

From Zero Hedge:

As expected, China is the new IMF. No surprise there.

• CHINESE PREMIER WEN TELLS BBC WILL LEND TO EUROPEAN COUNTRIES HAVING TROUBLE BORROWING

All this means is that China will do everything in its power to prevent the ECB from launching an outright unsterilized monetization episode, which will double the amount of importable inflation (plunging EUR) to hit the Chinese domestic economy, and destabilize the already shaky stability, so critical for the Chinese communist party. And since the USD and the CNY are pegged, this has the added benefit of devaluaing the CNY instead even more if not against the USD, then against the CNY, which is now importing European sovereign risk and will continue to do so, until China finds itself in the same lock out as half of Europe currently.

As for the IMF popularity contest, better known as "who is thst most feminine", it has just been relegated into complete historic obscurity and irrelevance. Which is sad because Lagarde may have actually had something worthwhile to contribute. Too bad her organization was just been rendered obsolete.

More empty rhetoric from Wen, courtesy of Reuters (http://www.reuters.com/article/2011/06/26/britain-china-wen-idUSL6E7HQ04I20110626):

Chinese Premier Wen Jiabao said on Sunday he had no intention of pursuing a trade surplus and that he wanted balanced, sustainable trade growth for his country.

He was speaking during a tour of MG Motor's Longbridge factory in Birmingham, central England, during a three-day trade and political mission to Britain.

"China has no intention to pursue a trade surplus. What we want is to have balanced and sustainable growth of trade," he told the BBC through an interpreter.

He also said China would lend European countries experiencing trouble borrowing, just as it announced it would do for Hungary earlier this week.

We get it: China will not pursue a trade surplus... It will just happen purely accidentally for the next decade.

http://www.zerohedge.com/article/china-says-it-will-bailout-insolvent-european-countries