cryptogon.com

But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.

That’s the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won’t be able to afford.

The government, which has told global PC makers of the requirement but has yet to announce it to the public, says the effort is aimed at protecting young people from “harmful” content. The primary target is pornography, says the main developer of the software, a company that has ties to China’s security ministry and military.

China’s Ministry of Industry and Information Technology didn’t respond to requests for comment.

The Chinese government has a history of censoring a broad range of Web content. The new requirement could force PC manufacturers to choose between refusing a government order in a major market or opening themselves to charges of abetting censorship.

The software needn’t be preinstalled on each new PC — it may instead be shipped on a compact disc — giving users some choice. But if installed, foreign industry officials who have examined the software say, it could transmit personal information, cause PCs to malfunction, and make them more vulnerable to hacking. It also makes it difficult for users to tell what exactly is being blocked, officials say.

Plus, in joining Intel and Hewlett-Packard on the list, Cisco is sure to get a boost in prestige.

But more than anything, experts say, the decision to replace General Motors with Cisco is recognition that technology is a primary innovator and spark plug of the nation’s economy. And that trend is turning heads everywhere from Wall Street to Washington.

“It signals the ascendancy of Silicon Valley and high tech,” said Stephen Levy of the Center for Continuing Study of the California Economy. “We’re seeing older industries and companies be replaced by a sector that has substantial long-term growth prospects.”

Technology already has the attention of President Barack Obama, who is actively promoting such ideas as smarter electricity grids and computerized health records. And now, with Cisco, HP and Intel on the fabled stock index, along with IBM and Microsoft, elected officials may listen even more closely to the needs of Bay Area businesses, said Jim Wunderman, CEO of the Bay Area Council.

“It certainly cements the tech industry in Silicon Valley as an integral part of the American economy,” he said. “From a public policy basis, it has some impact. I think it makes a stronger case in Washington and maybe in the state capitals.”

Since its debut in 1896, the Dow Jones industrial average has predominately featured so-called smokestack industries, from U.S. Rubber and Bethlehem Steel to Standard Oil and American Smelting. However, reflecting a major shift in the nation’s economy, those types of businesses have gradually given ground to firms offering products centered on computers, software and communications technology.

Officials with the federal Bureau of Economic Analysis say it’s hard to say how much of the gross domestic product is represented by sales of such technology to consumers and the government. But business purchases alone of such goods represented about 3 percent of the GDP in 2008, compared with less than 1 percent in 1968. And one of the biggest up-and-comers in the tech field is Cisco, which was founded in 1984 and earned $8 billion on sales of nearly $40 billion during its most recent fiscal year.

Since the June 1 announcement that Cisco will replace GM, a part of the index for 83 years, the Internet-networking equipment maker’s stock price has risen more? than 7 percent, closing Friday at $19.87.

That kind of increase is common after companies are first selected for the list, in part because some big institutions invest heavily in firms that are on such indexes, said Sybille Reitz, a Dow Jones spokeswoman.

“It certainly does increase your visibility in the market,” she said. “You’re included among the bluest of the blue-chip companies in the United States.”

Obama is ramping up his stimulus program this week even as his advisers are ramping down expectations about when the spending plan will affect a continuing rise in the nation’s unemployment.

Many of the stimulus plans that Obama announced Monday already were in the works, including hundreds of maintenance projects at military bases, about 1,600 state road and airport improvements, and federal money states budgeted for 135,000 teachers, principals and school support staff.

The administration had always viewed the summer as a peak for stimulus spending, as better weather permitted more public works construction and federal agencies had processed requests from states and others.

But Obama now promises an accelerated pace of federal spending over the next few months to boost the economy and produce jobs.

In contrast with civilian aerospace and airlines, the defence industry remains healthy.

“The global financial crisis has yet to have an impact on major arms companies’ revenues, profits and order backlogs,” Sipri said.

Peace-keeping operations – which also benefit defence firms – rose 11%.

Missions were launched in trouble spots such as Darfur and the Democratic Republic of the Congo.

“Another record was set, with the total of international peace operation personnel reaching 187,586,” said Sipri, or Stockholm International Peace Research Institute.

Growth industry

As the world’s aerospace and defence industry prepares for next week’s Paris air show centenary, it seems much of the focus is set to shift away from troubled civilian aircraft makers, which are struggling with reduced orders from recession-hit airlines, towards the companies that make fighter jets and other military hardware.

In total, the 100 leading defence manufacturers sold arms worth $347bn during 2007, the most recent year for which reliable data are available.

Almost all the companies were American or European. Some 61% of the total was accounted for by 44 US companies, with 32 West European companies accounting for a further 31%. Other companies were Russian, Japanese, Israeli and Indian.

“Since 2002, the value of the top 100 arms sales has increased by 37% in real terms,” Sipri said. “The US presidency of George W Bush… was a period of continuity in the arms industry. This followed a period of consolidation in the 1990s and early 2000s.”

The US aerospace and defence giant Boeing remains the world’s largest, with arms sales of $30.5bn during 2007. The UK’s BAE Systems ranked a close second, with arms sales of $29.9bn, while Lockheed Martin was third with $29.4bn in sales.

The US remains the biggest spender, accounting for 58% of the total global spending increase during the decade, though China and Russia have reduced the gap.

It’s a terrible mistake to confuse the momentary solvency of the financial sector and the long-term health of our economy.

AMID THE media frenzy and speculation over the disappearance of Air France’s ill-fated Flight 447, the loss of two of the world’s most prominent figures in the war on the illegal arms trade and international drug trafficking has been virtually overlooked.

Pablo Dreyfus, a 39-year-old Argentine who was travelling with his wife Ana Carolina Rodrigues aboard the doomed flight from Rio de Janeiro to Paris, had worked tirelessly with the Brazilian authorities to stem the flow of arms and ammunition that for years has fuelled the bloody turf wars waged by drug gangs in Rio’s sprawling favelas.

Also travelling with Dreyfus on the doomed flight was his friend and colleague Ronald Dreyer, a Swiss diplomat and co-ordinator of the Geneva Declaration on Armed Violence who had worked with UN missions in El Salvador, Mozambique, Azerbaijan, Kosovo and Angola. Both men were consultants at the Small Arms Survey, an independent think tank based at Geneva’s Graduate Institute of International Studies. The Survey said on its website that Dryer had helped mobilise the support of more than 100 countries to the cause of disarmament and development.
advertisement

Buenos Aires-born Dreyfus had been living in Rio since 2002, where he and his sociologist wife worked with the Brazilian NGO Viva Rio.

“Pablo will be remembered as a gentle and sensitive man with an upbeat sense of humour,” said the Small Arms Survey. “He displayed an intellectual curiosity and a determined work ethic that excited and enthused all who worked with him.”

According to the International Action Network on Small Arms Control (IANSA), Dreyfus’s work was instrumental in the introduction of landmark small arms legislation in Brazil in 2003. Under this legislation, an online link was created between army and police databases listing production, imports and exports of arms and ammunition in Brazil.

Dreyfus was an advocate of the stringent labelling of ammunition by weapons firms, arguing that by clearly identifying ammunition not only by its producer but also its purchaser, the likelihood of weapons being sourced by criminals from corrupt police or armed forces personnel is greatly reduced.

Though a Brazilian referendum on the right to bear arms was rejected in 2005, Viva Rio says the campaign should be considered a success because half a million weapons were voluntarily handed in to the authorities. Anti-gun activists put the referendum defeat down to fears criminals would circumvent the law and continue to gain access to small arms the usual way – through Paraguay and other bordering countries. This was not an irrational fear: until 2004, when Paraguay bowed to Brazilian pressure, even foreign tourists were allowed to purchase small arms simply by presenting a photocopy of their identity card. Dreyfus knew that many of the weapons from the so-called tri-border area between Brazil, Paraguay and Argentina were reaching Rio drug gangs.

When unidentified gunmen made off with a stash of hand grenades from an Argentine military garrison in 2006, Dreyfus deplored what he said was lax security at military depots across the world. “If a supermarket can keep control of the amount of peas it has in stock, surely a military organisation could and should be able to do the same with equal if not greater efficiency with its weapons,” he said. “The key words are logisitics, control, security.”

When Rio agents smashed a cell of drug traffickers who had sourced their weapons from the tri-border area, Dreyfus noted its leaders were prominent businessmen living in apartments in the plush Rio suburbs of Ipanema and São Corrado, “not in the favelas”.

In a recent report posted on the Brazilian website Comunidade Segura (Safe Community), Dreyfus noted that the Brazilian arms firm CBC (Companhia Brasileira de Cartuchos) had become one of the world’s biggest ammunition producers by purchasing Germany’s Metallwerk Elisenhutte Nassau (MEN) in 2007, and Sellier & Bellot (S&B) of the Czech Republic in March. This would not be particularly noteworthy but for the fact that CBC’s exports had tapered off in recent years due to legislation restricting exports to Paraguay, arms that often found their way back into Brazil and on to the Rio drug gangs – the “boomerang effect”, as Dreyfus called it. “The commercial export of weapons and ammunition from Brazil to the bordering countries stopped in 2001,” wrote Dreyfus. “CBC lost commercial markets in Latin America, but Brazil won in public security.”

However, manufacturers from other countries had moved in to fill the void, and before its purchase by CBC, S&B was already “one of the marks most currently apprehended” by Brazilian police. Dreyfus said that, in view of the fact the Czech Republic was bound by the EU Code of Conduct on weapons exports – which states that EU countries must “evaluate the existence of the risk that the armament can be diverted to undesirable final destinations”, CBC should “consider the risk that some of these exports end up, via diversions, feeding violence in Brazil”.

Though his focus was on Latin America, Dreyfus also advised the government of Mozambique and at the time of his death was preparing to do the same for the government of Angola, where stockpiles of weapons left over from the civil war continue to pose a security problem.

Rotavirus causes more than 500,000 diarrhoeal deaths and two million hospitalisations a year among children.

Over 85% of deaths occur in developing countries in Africa and Asia.

The economy shrank by 5.4% on an annualised basis during the quarter after the economy shrank by 3.7% in the last quarter of 2008.

Despite being the worst result for 18 years, it was better than expected.

Canada has been hard hit by the global slowdown, with both its exports and imports falling.

“Lower spending in Canada and the United States, particularly business investment in plant and equipment, led to a sharp decline in Canada’s exports and imports,” said Statistics Canada, which issued the latest economic data.

Analysts had predicted a 6.6% drop in economic output.

“The only good news is that it will probably be the worst quarter in the cycle,” said Don Drummond, chief economist at Toronto-Dominion Bank.

Shares in Swedbank, the biggest lender to Latvia, dived 15.9%, to 38 Swedish Kronor ($4.92) after the Latvian government failed to sell any of its government debt securities on Wednesday. Skandinaviska Enskilda Banken–better known as SEB–fell 11.0%, to 30 Swedish kronor ($3.88). The Swedish kronor meanwhile fell to 10.91 against the euro, from 10.71.

The failed auction has raised fears that Latvia may have to devalue its currency. That could have a major impact on Scandinavian lenders who had flooded the Latvian market with euro-dominated loans that let borrowers take advantage of better interest rates. A devaluation of the kroon essentially makes it harder for them to repay their debts, sending the number of bad loans higher.