US and China cannot avoid each other
US had been the dominant trade partner who used to call the shots till few years back, be it Japan or China or Europe or India. But in the last few years, the US has been recklessly living on borrowed money, while other countries, especially China, started becoming more prosperous by generating trade surplus year after year.
And today, China is the largest investor for US in the US treasury bonds. In other words, but for China, there could be a big shortfall in loan funds for US to keep living in the lavish manner.
Also, today for China, US accounts for nearly 30% of it’s total exports and over 40% of all hi-tech imports. So, China can in no way afford to get into a tussle with US. So if there is a recession in US, then it can also pull down the Chinese economy along with it.
Other than that, the massive prosperity of China over the last ten years, has helped it to increase it’s clout over many countries across the globe including North Korea, South Korea, Japan , Russia, Iran and North Korea.
So if US needs to get anything done with any of these countries, it seeks the intervention or the help of China as needed. Today, China is the biggest market for most of the US majors across industries, outside US and Europe. For example, for GM and FORD and also for Apple , China is the second or third largest market in the world.
BP says the oil spill is now over 5000 barrels per day
The British Petroleum company controlled oil rig in the Gulf of caught fire on April 20th and resulted in the drowning of the entire rig deep into the sea bed. By then , the British Petroleum company indicated that there were three points of oil leakage in the pipe which was dug over 1000 meters into the sea bed and those would be plugged off in one or two weeks.
The company also indicated that the overall crude oil leakage is only 2000 barrels per day, which it revised upwards to 3000 barrels after two weeks. After another week, the company revised the estimates to nearly 5000 barrels per day.
Now the company is in the process of capturing part of this oil spill by inserting a small floating pipe into the hole, which in turn would be linked to a floating carrier ship on the sea.
This could at best capture 2000 to 2500 barrels of oil , say experts. Also after so much of pressure from the US senate, the company has released videos of the oil leakage, which is being interpreted by various oil and gas industry experts.
Most of them are now indicating that the oil spill could be well in excess of 5000 barrels per day, and there are no proven methods to plug the leakage. Even the cementing method which the company is planning to try out sometime next week, has been proven only in shallow waters and not under 1000 meters depth.
Crude oil dives down to 70 dollars
Crude oil prices clearly reflect the state of the global economy both in economic terms and political terms. When there is smooth and steady growth of the global economy, then the crude oil prices keep marching ahead. And whenever there are major political upheavals in any part of the world, the crude oil prices start marching ahead in the immediate term.
And when the political upheaval starts hitting the global growth, then over the longer term the crude oil prices keep going down.
And this week, the crude oil prices are near the 70 dollars mark, thanks to the Greece financial crisis. The Greece financial problem is now snowballing into a big European Union tussle, which can easily pull down the entire European region growth for many quarters to come.
And the naked short sales ban by Germany unilaterally has also forced many speculators to get out of crude oil forward positions. So there are many analysts who are expecting the crude oil prices to remain in the 60 dollars to 80 dollars band for the rest of the year 2010.
Subsequent price movement of crude oil will obviously depend on the overall global recovery.
Is Greece heading for a financial collapse
Greece is one of the four weakest countries in the European zone which seems to be ripe for a financial collapse. In the last few weeks, the cost of borrowing for Greece government has gone up over two times the cost for Germany and France.
And in the last few days, none of the global banks have been forthcoming to lend further loans to Greece government. So it has been forced to go in for an IMF loan support along with European Union loan support.
But the Greece government has been forced to accept these loans only after major austerity plans. But the Greece public are up against the government austerity measures already, and the Greek history does not give any hope for lenders either.
So there are enough chances for the Greece country to go for loan default over the coming months, once the domestic pressure shoots up. And if that happens, that could also spell the end of the common Euro currency.
We can then expect Germany and France forcing the other weaker countries like Spain, Portugal and Ireland out of the Euro group. That could in turn create a wider gap in the European union which can pull down the economic recovery in that region badly.
That in turn could well pull down the entire global recovery badly. That is the reason why the US is getting into advising Germany and the EU leaders on further handling of the European debt crisis effectively.
Whether US will be successful or not in the efforts, only time will tell.