Congress votes 263-171 to approve revised $700 billion bailout plan

To the relief of stock markets around the world, the controversial $700 billion bailout bill has been passed by the House of Representatives. The bill, which was rejected by the House when it was first presented on Monday [29 Sep 2008], was passed by the Senate on Wednesday. Monday's rejection of the bill in the House triggered a dramatic plunge on stock markets, costing investors $1 trillion in stock values. Several Democratic and Republican lawmakers who voted against the earlier version of the plan on Monday have now approved the measure. The final vote was 263 votes in favour, and 171 against.

The plan includes amendments designed to attract the support of the reluctant lawmakers. It limits compensation for the heads of failed financial institutions, and increases the size of bank accounts protected by government insurance against bank failure. There also are tax breaks for alternative energy companies. The 263-171 vote by the House sends the Senate-passed version to the White House for President Bush's signature. Among many features, the measure would allow the Treasury Department to buy up bad debt from various lending institutions. Announcement of the vote was greeted by applause.

- Okay, so Paulson's simple 3-page plan didn't work, and they had to add in a bunch of "interesting" features to drum up support. And of course, the 777-point drop in the Dow really must have helped to change a lot of people's minds. Some say it's blackmail. I think it's a great application of psychology - whether intentional or not, we may never know.

This may sound odd, but somehow at this point I am reminded of a particular line from Star Wars : "This is how liberty dies - to thunderous applause". The world has changed - and I'm not sure it's for the better.

(2008-10-04 01:53:24 SGT) [Biz] Permalink Comments [1]

Killer inflation leads to China milk scandal affecting 53,000 children amidst Beijing Olympics cover-up

news.yahoo.com, reuters.com :

The head of China's food safety watchdog, Li Changjiang, resigned Monday [22 Sep 2008] for failing to stop the widespread contamination of baby formula as the number of children sickened in the scandal soared to nearly 53,000, including 4 infants who died. Investigators revealed that Sanlu, China's biggest producer of powdered milk, had received complaints as early as December 2007 linking its infant formula to illnesses in babies. Tests revealed the milk was tainted with melamine, used to make plastics and fertilizer, which causes kidney stones and can lead to kidney failure. Suppliers trying to cut costs are believed to have added it to watered-down milk because its high nitrogen content masks the resulting protein deficiency.

Baby formula and other Chinese milk products have been pulled from stores, and have been recalled or banned in Japan, Singapore, Malaysia, Brunei, Hong Kong, and other countries around the world. Reporters Without Borders said Beijing had ordered news of the scandal hushed up ahead of the Olympics. Shijiazhuang city government spokesman Wang Jianguo said the Sanlu Group had asked for government help to cover up the extent of the problem, on 2 Aug 2008, 6 days before the opening of the 2008 Beijing Olympics.

- It is now official : inflation is a killer. In between rising input prices of everything, and consumer expectations of low "Made in China" prices, something had to give. That something has been food safety, and to make matters worse, it is now known that this has been going on for months and it was covered up for the Olympics.

Inflation, economics, and "matters of the face" make for a lethal combination. Who is going to trust "Made in China" now? For years, China has been absorbing global inflationary pressures and for a while, they had a good thing going, and even got themselves labelled as the "exporter of deflation" around the world. Something has snapped in the system - Chinese suppliers will no longer be able to meet expectations of ever-lower prices. The resulting price snapback is going to ripple through the supply chain. Global inflationary pressure meets global deflationary credit crisis. It's going to be a historical battle, one for the ages.

(2008-10-04 01:00:55 SGT) [Biz] Permalink

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