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| October 04, 2008 | Saturday | Shawwal 04, 1429 |
Updated round-the-clock, with major updates after 10:00 PST (05:00 GMT)
Hyderabad prisoners protest against jail administration Saturday, 04 Oct, HYDERABAD: On the request of the administration of Central Prison, the police personnel have encircled the Hyderabad central prison in order to control the situation, which erupted as a result of the prisoners here on Saturday. According to official sources, the prisoners started protest when jail administration snatched a mobile phone from a prisoner. On the directives of the jail administration, tear gas shells were fired besides aerial firing in order to maintain law and order situation, however, the action created more resentment among the prisoners and they torched old clothes and bed sheets and pelted stone on jail staffers. After receiving this information Sindh Minister for Fisheries Zahid Bhurgari along with DIG Prison Nawaz Arain, Jail Superintendent Abdul Majeed Siddiqui and Acting District President PPP Amanullah Sial reached the jail and tried to negotiate with the prisoners, however, they demanded to call Advisor to Sindh Chief Minister on Prison for negotiations. (Posted @ 23:18 PST)
Tribal lashkar kills three militants Saturday, 04 Oct, KHAR: Three militants were killed during clashes between an armed lashkar and pro-Taliban elements in the Salarzai area of Pakistan's northwestern Bajaur tribal region while another major tribe announced to take up arms against insurgents. Sources said volunteers of the Salarzai tribe clashed with the militants in Ghundai area on Saturday. They said three militants were killed in the gun fight and the tribal lashkar also set on fire eight houses of pro-Taliban elements in the area. These sources said militants were still holding positions in some pockets of Salarzai, but that the state's writ had been restored in major parts of the area. Clashes erupted when militants attacked volunteers who were destroying houses of the suspected militants. (Posted @ 23:12 PST)
US court overturns terror convictions of two Yemenis Saturday, 04 Oct, NEW YORK: A US federal appeals court in New York overturned the convictions of two Yemenis who were tried on charges of supporting al-Qaeda, officials said Saturday. The second US circuit court of appeals overturned the convictions of Sheik Mohmmed Ali al Moayad and Mohammed Zayed, who had been sentenced to 75 and 45 years in jail respectively, on Thursday. Following the ruling, the two men — who were arrested in Germany in 2003 and extradited to the United States — were put under the jurisdiction of another judge and could be retried. (Posted @ 23:04 PST)
Zardari seeks $100 billion for Pakistan's survival Saturday, 04 Oct, NEW YORK: Citing the threats by the militants on Pakistan’s border and the imminent economic meltdown, President Asif Ali Zardari, has asked the international community to give Pakistan $ 100 billion in grant to stave off the dual threats which undermine the very survival of the country. 'I need your help, if we fall, if we can't do it, you can't do it,' Zardari repeatedly said in an interview with Wall Street Journal’s columnist Brent Stephens, published Saturday. In the interview Zardari also called for a broader free trade agreement with India saying 'India has never been a threat to Pakistan,' adding that 'I, for one, and our democratic government is not scared of Indian influence abroad.' Stephens said in his column that Zardari spoke of the militant groups operating in occpied Kashmir as 'terrorists' and said he had no objection to the India-US nuclear cooperation pact, so long as Pakistan was treated 'at par.' (Posted @ 22:36 PST)
Rice wants India, Pakistan to be friends Saturday, 04 Oct, New Delhi: US Secretary of State Condoleezza Rice urged India on Saturday to become good friends with Pakistan and said Washington had a stake in Islamabad's civilian government to succeed in the war against terrorism. 'We have stakes in a successful civilian government in Pakistan,' Ms Rice told a joint news conference here with Indian Foreign Minister Pranab Mukherjee. 'We all have an interest in controlling terrorism in the region.' She said the United States had encouraged cooperation between India and Pakistan. 'A good relationship between India and Pakistan is going to help' in combating cross border terrorism. (Posted @ 21:55 PST)
Pakistanis should unite against 'infidels:' Qaeda Saturday, 04 Oct, CAIRO: A prominent American member of al-Qaeda called on Pakistanis in an English-language video message to put aside their differences and unite to establish an Islamic state. Adam Gadahn said the current Pakistani government is responsible for the deaths of more Muslims than the American 'crusaders.' In a clip of the video distributed Saturday by the SITE Intelligence Group, a Washington-based monitor of militant websites, Gadahn pointed to the US economic crisis as proof that Muslims are on the verge of a historic victory. (Posted @ 21:36 PST)
Wheat prices to surge further Saturday, 04 Oct, ISLAMABAD: Wheat flour price is witnessing a phenomenal surge across NWFP and Sindh by reaching Rs620-650 per 20 kg, as the federal food ministry expects it to cross Rs700 in the coming days following the announcement of the new wheat support price by the government. In Punjab on Saturday, Atta price went up again to Rs420 per 20 kg after the concluding of provincial government’s Ramazan package during which such quantity of flour was provided to urban areas of the province at subsidised rate of Rs300. (Posted @ 21:08 PST)
Elimination of death penalty likely Saturday, 04 Oct, ISLAMABAD: Inmates rotting on death row for the last many years may hear a good news soon as the government is actively involved in finalizing a summary seeking a final nod from the cabinet within this month to pardon or commute their death sentence into life term, Dawn learnt here Saturday. ‘The Law Ministry is doing a thorough research on the subject to come up with a final draft and fulfill government’s promise of commuting death sentence into life term,’ sources privy to the development said adding the summary would be ready by second or third instant of this month. Prisoners on tenterhooks are pinning hopes on the PPP led coalition government of taking a bold step by amending laws regarding death penalty and improving jail condition. (Posted @ 21:02 PST)
Labour leaders protest in Jacobabad Saturday, 04 Oct, JACOBABAD: A protest rally was taken out by the Mazdoor Shehri Ittehad against the issuance of a cheque of Rs30.576 million by roads department Jacobabad to a labour leader on Saturday. The rally started from Quaid-e-Azam road and after passing through different streets, reached outside the press club. The protesters were carrying banners, placards and raised slogans against DCO and DO roads Jacobabad. They also observed token hunger strike for two hours. About 200 labourers observed token hunger strike. They were led by president Mazdoor Ittehad, Haji Ghulam Nabi, Shaban Majhoo, Abdul Karim, Roshan Mundrani, Ghulam Rasool Soomro. (Posted @ 20:30 PST)
Pakistan behind increased Afghan insurgency: UN Saturday, 04 Oct, RAWALPINDI: The United Nations has accused Pakistan of increased incidents of insurgency inside Afghanistan and said the security situation in that country has deteriorated markedly. In his report on the ‘situation in Afghanistan and its implications for international peace and security’, submitted to the current session of UN General Assembly, UN Secretary-General Ban Ki-moon stated that incidents stemming from cross border activities from Pakistan have increased significantly in terms of numbers and sophistication. The insurgency’s dependence on asymmetric tactics has also led to a sharp rise in the number of civilian casualties, he said. The report says relations between Afghanistan and Pakistan have been dominated by discussions on the increase in cross-border insurgency activities, an issue that had in the past appeared to be fuelling a climate of suspension and recrimination, with each government blaming the other on different occasions for insufficient efforts against terrorism and for interfering in each other’s domestic affairs. (Posted @ 20:26 PST)
Zardari stresses Pak-China relations Saturday, 04 Oct, ISLAMABAD: President Asif Ali Zardari on Wednesday said Pakistan-China friendship is rooted in the ethos of the people and will continue to gain strength in the days to come. The President was talking to Vice Foreign Minister and Special Envoy of the Chinese government, Wu Dawei, who called on him here at the Aiwan-e-Sadr. Wu Dawei is visiting Pakistan to hold discussions with Pakistan side on promoting bilateral cooperation and to discuss regional and global issues. (Posted @ 19:50 PST)
Afghan operations kill 16 militants Saturday, 04 Oct, KABUL: Afghan, US and NATO troops killed 16 militants in four operations in Afghanistan, officials said Saturday. US coalition forces killed five militants in two operations targeting al-Qaeda and Taliban insurgents in eastern Afghanistan, the coalition said. An operation in Ghazni on Friday that targeted a roadside bomb maker killed two militants, it said. (Posted @ 19:44 PST)
Protest ban imposed in occupied Kashmir Saturday, 04 Oct, SRINAGAR: Authorities have imposed a one-month ban Saturday on public gatherings, the occupied Kashmir government said, in a move interpreted as a bid to scupper a planned rally by pro-independence activists. The order applied to gatherings of five or more in public spaces, a government statement said. A committee spearheading recent protests against Indian rule had planned to hold a mass rally at Lal Chowk on Monday in the main city of Srinagar. (Posted @ 19:26 PST)
Sindh govt's plans to increase law and order Saturday, 04 Oct, HYDERABAD: Sindh government has prepared a comprehensive plan in order to maintain law and order and root out the crimes by arresting criminals in an efficient manner. The disturbing law and order situation is the result of the policies of the previous government and the present government is striving hard to protect the life and property of the common people. (Posted @ 18:55 PST)
Taiwan welcomes 6.5 billion dollar US arms package Saturday, 04 Oct, TAIPEI: Taiwan's president on Saturday welcomed a US decision to sell the island up to 6.5 billion dollars in advanced weaponry, while China said it strongly opposed the move. The US government announced the package, which includes Apache helicopters and Patriot III missiles, in a notification to Congress on Friday. The State Department said the deal would proceed if no lawmaker voices any objection within 30 days. The United States is required by law to provide Taiwan with defensive weapons against a possible invasion by China. It remains Taiwan's most important ally and largest arms supplier, even after Washington switched its diplomatic recognition from Taipei to Beijing in 1979. (Posted @ 18:34 PST)
State Bank receives 500 million dollars from ADB Saturday, 04 Oct, KARACHI: Pakistan's central bank says it has received a 500 million dollars loan from the Asian Development Bank to help shore up the country's ailing economy. State Bank of Pakistan spokesman Syed Wasimuddin said Saturday the money is the first installment of a US$1.5 billion loan designed to support economic development in Pakistan. (Posted @ 18:10 PST)
Mastermind of Baghdad bombings killed: US military Saturday, 04 Oct, BAGHDAD: The US military said on Saturday it has killed an al Qaeda leader in Iraq suspected of masterminding one of the deadliest attacks in Baghdad as well as recent bombings and the 2006 videotaped execution of a Russian official. American troops also killed the man's wife after a firefight as they tried to capture him Friday in the northern neighborhood of Azamiyah in Baghdad, the military said. Mahir Ahmad Mahmud al-Zubaydi, also known as Abu Assad or Abu Rami, allegedly directed the insurgent cell believed to be responsible for nearly simultaneous car bomb and suicide attacks on Thursday, according to the statement. (Posted @ 18:06 PST)
Artists band together to fight for rights Saturday, 04 Oct, LONDON: More than 60 artists, including Radiohead, Robbie Williams and the Kaiser Chiefs announced Saturday they had banded together to seek more rights over their music and break free of record labels. The Featured Artists' Coalition (FAC) aims to 'give artists the voice they need to argue for greater control over their music,' amid new opportunities provided by Internet, the group said in a statement. 'It is time for artists to have a strong collective voice to stand up for their interests,' said Brian Message, co-manager of Radiohead and Kate Nash. (Posted @ 17:56 PST)
Pak-Afghan border sealed completely Saturday, 04 Oct, QUETTA: All the ways leading to Afghanistan from Pak-Afghan Chaman border have been sealed due to security reason. While talking to media men on Saturday, Inspector General Frontier Corps Balochistan Maj. Gen. Saleem Nawaz said that Pak-Afghan border had been sealed keeping in view threat of terrorism. Entry of any person to Afghanistan from villages adjacent to Chaman including Kali Luqman, Kali Abdul Karim and Kali Faizabad has been banned, he said, adding that, all the passes has also been cancelled so that illegal trespassing could be stopped. (Posted @ 17:40 PST)
Rice in India amid hitches with nuclear pact Saturday, 04 Oct, NEW DELHI: US Secretary of State Condoleezza Rice arrived in India Saturday to showcase a landmark civilian nuclear cooperation deal, although the triumph of her trip was tempered by last-minute hitches. Rice, who had lobbied Congress to pass a deal despite fears it could undercut international efforts to curb the spread of nuclear weapons, raised doubts over whether she and the Indians would sign the deal this weekend. A delay would be another bump in a three-year rollercoaster for an agreement aimed at lifting a ban on US-Indian civilian nuclear trade imposed after India's first nuclear test in 1974. (Posted @ 17:36 PST)
Hospital in Bajaur without basic facilities Saturday, 04 Oct, PESHAWAR: A major health facility in Bajaur Agency, a portion of which is occupied by the paramilitary forces, is lacking medical staff and other basic healthcare facilities, adding to the miseries of the patients of the area. The hospital’s main operation theatre has been closed due to the absence of orthopaedic surgeon and two surgical specialists as the local population is facing great difficulties in shifting wounded to other areas due to the closure of the main roads and ambulance service. (Posted @ 17:22 PST)
Poland ends Iraq mission, recalls 900 troops Saturday, 04 Oct, DIWANIYAH, Iraq: Poland ended its Iraq mission at a formal ceremony in Diwaniyah province on Saturday and said it would pull out its 900 troops out of the country by the end of the month. ‘We feel responsible for the future of Iraq. The completion of our mission does not mean end of an engagement,’ Warsaw's Defence Minister Bogdan Klich said in an address during the ceremony. ‘We hope to cooperate in Iraq's economic and financial areas,’ Klich said. (Posted @ 17:00 PST)
Not much to celebrate for displaced families Saturday, 04 Oct, PESHAWAR: The displaced families of Bajaur Agency at a relief camp in the provincial capital seemed oblivious of the festivities of Eid as most of them cited the indiscriminate shelling and bombing in the troubled tribal region. While 332 families having 1,962 individuals were registered till Friday afternoon with the management of the camp, set up at the site of the abandoned Kacha Garhi Afghan refugees’ camp, scores of other families have been awaiting their registration. Dozens of women and children were taking shelter in the shadow of trees on roadsides near the camp entrance whereas their male family members were striving hard to convince officials of the United Nations High Commissioner for Refugees (UNHCR), supervising the registration process, that they deserved aid. (Posted @ 16:52 PST)
IAEA assembly urges North Korea to uphold pledge Saturday, 04 Oct, VIENNA: The 145-nation assembly of the U.N. nuclear watchdog passed a resolution on Saturday urging North Korea not to renege on a nuclear disarmament pact. The motion was adopted by consensus a day after a U.S. envoy ended a trip to Pyongyang meant to salvage the collapsing deal, calling the talks substantive but declining to say if he swayed North Korea to give up plans to restart its nuclear complex. The resolution passed at the annual General Conference of the International Atomic Energy Agency underlined the need for a diplomatic solution that achieves denuclearization of the Korean peninsula verifiable by IAEA inspectors. (Posted @ 16:45 PST)
American Qaeda figure says US still runs Pakistan Saturday, 04 Oct, DUBAI: American al Qaeda militant Adam Gadahn described Pakistan's new leaders as US puppets in a war against militants, in an Internet video posted on Saturday. ‘The Pakistan Army ... and the professional spreaders of lies at their service are trying to make us believe that the state of Pakistan has turned a new leaf (after US-allied former President Pervez Musharraf left power),’ Gadahn said in the video posted on websites. ‘These are not the leaders Pakistan wants and deserves. They are the leaders America wants and preserves in order to reach its policy objectives, hinder the jihad against the Crusaders in Afghanistan ... and ensure that nuclear-capable Pakistan remains docile, contained and sharia-free,’ Gadahn said. (Posted @ 16:34 PST)
Zardari meets with Kayani, Asfandyar Saturday, 04 Oct, ISLAMABAD: President Asif Ali Zardari on Saturday said terrorism can be defeated if nation further fosters unity and strength in its ranks. He was talking to Prime Minister Yousaf Raza Gilani, ANP Chief Asfandyar Wali and Chief of the Army Staff General Ashfaq Pervaiz Kayani, who jointly called on him at Aiwan-e-Sadr. The meeting focused on country's law and order situation especially in the tribal areas and the strategy required to fight terrorism and extremism. (Posted @ 16:10 PST)
Del Potro beats Gasquet to reach Japan Open final Saturday, 04 Oct, TOKYO: Argentina's Juan Martin Del Potro continued his stunning run of form Saturday to set up a final showdown against Tomas Berdych in the Japan Open. The Argentinian fifth seed, fresh from upsetting defending champion David Ferrer of Spain in the quarter-finals, beat Richard Gasquet 6-3, 4-6, 7-5 to claim his 29th win in his past 30 matches. Berdych, the ninth seed from the Czech Republic, staged a great comeback from 0-3 down in the final set to beat second seed Andy Roddick of the United States 6-7 (3/7), 7-5, 7-6 (7/3). (Posted @ 16:08 PST)
More nations pull suspect China milk products SEOUL: South Korea, Australia and Japan Saturday pulled melamine-contaminated sweets and drinks from supermarket shelves amid a widening scandal over Chinese milk products tainted with the toxic chemical. Authorities in Seoul ordered Mars and Nestle to pull three products after melamine, which is usually used for making plastics, was detected in snacks made in China by the multinationals. (Posted 13:13 PST)
Jury finds O.J. Simpson guilty on all charges LAS VEGAS: Simpson, who went from American sports idol to celebrity-in-exile after he was acquitted of murder in 1995, was found guilty Friday of robbing two sports-memorabilia dealers at gunpoint in a Las Vegas hotel room. Simpson, could go to prison for life. A weary and somber Simpson released a heavy sigh as the charges were read by the clerk in Clark County District Court. He was immediately taken into custody. (Posted 12:58 PST)
Tribesmen's role against militancy lauded WASHINGTON: Tribesmen rising up against militants operating on the Pakistani side of the Afghan border is a welcome development in efforts towards enforcing border security, according to International Security Assistance Force's new commander. 'We have seen some reports of local tribal leaders and tribes acting against some of the militant sanctuaries in the tribal areas in Pakistan, and we think that's an encouraging development,' said Commander, International Security Assistance Force, Afghanistan, General David McKiernan. (Posted 11:38 PST)
'Military rule root cause of Pakistan’s problems' LONDON, Oct 3: British Foreign Secretary David Miliband believes that military rule spanning over 30 out of 60 years of its existence was the root cause of Pakistan’s problems. 'My own view is that 30 out of 60 years of military rule is an important part of explaining the Pakistani problem,' observed Mr Miliband in an interview organised by the Council on Foreign Affairs during his recent visit to New York. (Posted 10:51 PST)
Russia challenges US with hockey league MOSCOW: Intent on challenging the pre-eminence of America's National Hockey League (NHL), hockey powerhouse Russia has established a rival organisation - the Continental Hockey League (KHL) - uniting 24 clubs from four countries. The question now, say devotees of the sport, is whether the upstart will give the august NHL a run for its money. (Posted 10:24 PST)
High-flying stars in turbulent times PARIS: Planes struck by lighting, paying for fuel in cash, delays, vandalism and players refusing to take to the skies are just some of the wacky stories which have emerged from air travel by footballers in recent times. In the last week, PSV Eindhoven had their plane struck by lightning as they landed following defeat by Liverpool in Champions League action, and Marseille players had to have a whip round to buy 3,000-euros worth of fuel before they could take off from Madrid. (Posted 10:16 PST)
Pakistan trounce Belgium 6-3 in Hamburg KARACHI: The Pakistani rookies made an encouraging start in the 4-nation Hamburg Masters Hockey Tournament in Hamburg thrashing Belgium 6-3 on Friday. The Pakistan Hockey Federation decision to select five uncapped players for the tournament in Germany seemed justified with the yougsters dominating the Belgian team throughout the game. Forward Haseem Khan and penalty corner striker Kashif Ali starred in Pakistans triumph with two goals apiece. (Posted 08:44 PST)
45% Pakistanis say US a threat WASHINGTON: Pakistanis were leery of their government's anti-terror cooperation with the United States even before President George W. Bush authorized U.S. military action inside Pakistan without their government's approval, according to a poll out on Friday. The poll by the Gallup organization, taken in June, found that almost half the Pakistanis, or 45 percent, thought the U.S. military presence across the border in Afghanistan posed a threat to Pakistan. Only 17 percent said it was not a threat and more than one-third, 38 percent of respondents, had no opinion or would not answer. (Posted 08:07 PST)
Technology elite use Internet to fight TB SAN FRANCISCO: Acclaimed photojournalist James Nachtwey's dream of using images to marshal arms in the battle against tuberculosis is coming true with the help of technology titans. Nachtwey's photos portraying victims of the increasingly drug-resistant deadly disease and dire conditions in Africa and elsewhere are spreading on the Internet with help from tech firms including YouTube and Akamai. (Posted 06:16 PST)
Obama takes campaign to the iPhone WASHINGTON: The campaign of Democratic presidential candidate Barack Obama, in its latest bid to use Internet Age technology to trounce Republican rival John McCain and connect with supporters, has released free software that turns Apple iPhones into political rallying tools. “Obama '08: The Official iPhone Application,” available at Apple's online App Store on Friday, gives users “the tools you need to make an impact and stay in the know,” according to the campaign. (Posted 06:07 PST)
General Kayani visits Malakand ISLAMABAD: Chief of Army Staff General Ashfaq Parvez Kayani visited Malakand on Friday. According to a press release issued by the Inter Services Public Relations, General Kayani met troops and appreciated their 'high morale'. (Posted 05:42 PST)
Pilgrims suffer 18 hour PIA flight delay ISLAMABAD: Over 400 Umra pilgrims traveling in the national flag carrier Pakistan International Airlines (PIA) returned to Karachi on Friday night after remaining stranded at the Jeddah airport for close to 18 hours. The ordeal of the passengers, who were to fly back home on the special Umra flight PK-7644 began with a snag in the aircraft. (Posted 04:53 PST)
Pakistan can strike Israel, US allies: Biden WASHINGTON/NEW YORK: For Democrate vice presidential candidate Joseph Biden, Pakistan is the most dangerous country in the world with nuclear weapons that can hit Israel and the Mediterranean. Her Republican rival Sarah Palin also considers Pakistan dangerous but sees Iran as the greatest threat to world peace. (Posted 04:24 PST)
Seven Russian troops die in Ossetia car bomb attack MOSCOW: Seven Russian soldiers were killed on Friday in an apparent car bomb attack in the Georgian separatist region of South Ossetia condemned by Moscow as an attempt to undermine the EU-Russia peace accord. ‘The ministry of defence sees the accident as a terrorist attack aimed at undermining the application’ of the peace agreement, said a Russian defence ministry statement. (Posted 03:10 PST)
Bush swiftly signs rescue bill after House approval WASHINGTON: US President George W Bush Friday signed an economic rescue bill just hours after the US House of Representatives reversed course and approved the historic 700-billion-dollar Wall Street bailout. The House, which sparked market and political turmoil by rejecting an earlier version of the bailout on Monday by 228 votes to 205, voted 263 to 171 to pass the largest US government economic intervention since the 1930s. (Posted 01:33 PST)
Loss of confidence By Joseph Stiglitz
THE Bush administration has lost the confidence of the American people, and so has Wall Street. Those who created the problem are now the doctors offering the prescriptions. A little while ago we were told everything was fine. Then, less than six months ago, we were told that the economy was on the mend.
Now we are told the patient needs a massive transfusion; but everyone can see that the patient is suffering from internal bleeding — in California, the number of foreclosures may already be outpacing voluntary sales. Yet nothing is being done to stem the haemorrhaging.
While the president says the economy faces the risk of economic meltdown, he threatens to veto a stimulus package that would create jobs — and he seems particularly adamant about a stimulus package that includes improved unemployment benefits. Traditionally, this is done when there is a threat of an economic downturn; if the downturn doesn’t materialise, it doesn’t cost anything. And while the administration and Wall Street promise this is just a temporary loan, not a bail-out, there was strong opposition to making the financial industry pay for any losses. Why would that be, if they are so sure that there won’t be losses?
The rescue bill left enormous discretion to an administration on the wane, an administration that has shown unparalleled incompetence, an administration which even tried to politicise the attorney general’s office. Americans worry that there will be political favourites among the recipients of the hundreds of billions of dollars. That treasury secretary Hank Paulson seemed tough on Lehman but reversed course when his old firm Goldman Sachs was at risk is hardly reassuring.
If the administration really thought the problems were as severe as claimed, shouldn’t they have put forward a bill that was less outrageous? Did they really think that Americans would swallow giving them authority to spend $700bn, without oversight or judicial review, in a bill of a few pages? Normally, if you think there is a crisis, you try to forge a compromise with those who see the world differently — workers who worry about the loss of jobs, and homeowners who worry about the risk of foreclosure.
Americans have lost faith not only in the administration, but in its economic philosophy: a new corporate welfarism masquerading behind free-market ideology; another version of trickle-down economics, where the hundreds of billions to Wall Street that caused the problem were supposed to somehow trickle down to help ordinary Americans. Trickle-down hasn’t been working well in America over the past eight years.
The very assumption that the rescue plan has to help is suspect. After all, the IMF and US treasury bail-outs for Wall Street 10 years ago in South Korea, Thailand, Indonesia, Brazil, Russia and Argentina didn’t work for those countries, although it did enable Wall Street to get back most of its money. The taxpayers in these other poor countries picked up the tab for the financial markets’ mistakes. This time, it is American taxpayers who are being asked to pick up the tab. And that’s the difference.
There is, in fact, a widespread consensus among economists about what should be done. The economy is weak, and would remain so even with a good rescue plan. That is why there is a need for a strong stimulus. The February stimulus package was badly designed, and its anaemic effects offset by soaring oil and food prices. Given the enormous increase in the deficit during the past seven years (from $5.7bn to over $9 trillion — and that doesn’t include the bills yet to be paid for the Iraq and Afghanistan wars) we have to be sure that we get the biggest bang for the buck. We need increased unemployment benefits, and aid to states and localities, which otherwise will be forced to cut back on spending, depressing the economy further. We need more investment in both the public and private sectors.
The fundamental problem with the financial system is that there have been large losses. Loans were made to people who couldn’t repay. They were made on the basis of collateral whose value was inflated by a bubble. That bubble has burst, and the collateral is now worth less than the loan. The experts believe real estate prices have still a way to fall. This is not a matter of market confidence. This is a matter of market reality. Paulson would have us believe otherwise, but the American people know better. The fact that he and Federal Reserve chairman Ben Bernanke don’t seem to grasp these realities undermines confidence that they know what they are doing.
In environmental economics, there is a basic concept called the polluter pays principle. It is a matter of fairness, but also of efficiency. Wall Street has polluted our economy with toxic mortgages. It should now pay for the cleanup.
What is so sad about this whole debacle is that it was predictable. Predicatable and avoidable. Perhaps Paulson and the administration believed that they could bamboozle Americans into doing whatever they asked. But Americans had been bamboozled before — into signing a blank cheque for the Iraq war.
—The Guardian, London
The writer is a Nobel laureate economist.
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