The outlook for the US grade is now negative, Moody's said in a statement yesterday after President Barack Obama signed into law a plan to lift the nation's borrowing limit and cut spending following months of wrangling between Democratic leaders and Republican lawmakers.

The compromise "is a positive step toward reducing the future path of the deficit and the debt levels," Steven Hess, senior credit officer at Moody's in New York, said in a telephone interview yesterday. "We do think more needs to be done to ensure a reduction in the debt to GDP ratio, for example, going forward."

JPMorgan Chase & Co estimated that a downgrade would raise US borrowing costs by $100 billion a year, while Obama said it could hurt the broader economy by increasing consumer borrowing costs tied to Treasury rates. The ratio of general government debt, including state and local governments, to gross domestic product is projected to climb to 100 percent in 2012, the most of any AAA-ranked country, Fitch said in April. "A downgrade is a sign that Congress is failing to address a real fiscal issue," Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in an interview before the announcements.

China's central bank will "closely" monitor US efforts to tackle its debt, Governor Zhou Xiaochuan said in a statement today, reaffirming that his nation will diversify its foreign exchange reserves. China's Dagong Global Credit Rating Co cut its credit rating for the US to A from A+ with a negative outlook, it said in an emailed statement today.

It raises the debt limit by up to $2.4 trillion (1.5 trillion pounds) from $14.3 trillion, and makes savings of at least $2.1 trillion in 10 years. But the bill's passage failed to lift financial markets. On Wall Street stocks ended Tuesday down by more than 2%, amid poor consumer spending data for June. Japan's Nikkei index followed suit, finishing Wednesday morning down by about the same amount.

Moody's rating agency reacted to the bill by placing Washington's AAA credit score under a "negative outlook". Chinese credit agency Dagong downgraded its rating of the US from A+ to A, Xinhua news agency reported. The president said more action was needed, saying it was impossible for the US to "close the deficit with just spending cuts". He urged Congress to now look to boost the economy through measures to create jobs and increase consumer confidence. "We can't balance the budget on the backs of the very people who have borne the biggest brunt of this recession," President Obama said, reprising one of his key themes of recent weeks.

The compromise package deeply angered both right-wing Republicans and left-wing Democrats. Liberals have been unhappy that the bill relies on spending cuts only and does not include tax rises for the wealthy, although Mr Obama could still let Bush-era tax cuts for the top brackets expire in January 2013. House Republicans were displeased that the bill did not include more savings.

In a key point for President Obama, the bill raises the debt ceiling into 2013 - meaning he will not face another congressional showdown on spending in the middle of his re-election campaign next year. The deal will enact more than $900 billion in cuts over the next 10 years. It will also establish a 12-member, bipartisan House-Senate committee charged with producing up to $1.5 trillion of additional deficit cuts over a decade. Analysts have said the cuts will probably come from programmes like federal retirement benefits, farm subsidies, Medicare and Medicaid.

Friedrich August Hayek - The economy is "like a drunk throwing up the morning after the night before" Unlike Keynes, Hayek believed that genuine recovery from a post-boom crash called not just for adequate spending, but for a return to sustainable production - production purged of boom-era distortions caused by easy money. Hayek was dismissed as someone who wanted to "liquidate labour, liquidate stocks, liquidate the farmers," and so on.

But an unsustainable boom is one after which some things really do need liquidating. The straightforward recipe for the revival of healthy investment following the 2008 crisis was to liquidate. Liquidate Bear Stearns! Liquidate Fannie Mae and Freddie Mac! Liquidate, in short, the whole sub-prime bubble-blowing apparatus that was nurtured by easy monetary policy.

That would have meant letting insolvent banks that lent or invested unwisely go bust. But instead our governments chose to keep bad banks going and that is why quantitative easing has proven a failure. Quantitative easing failed because almost all the new money the government created has gone to shore up the balance sheets of irresponsible bankers. The global Great Depression was the backdrop against which Hayek formulated many of his theories - especially those which were opposed to Keynes. After the British depression of the 1920s, Hayek promoted the idea that private investment, rather than government spending, would promote sustainable growth.

Now those banks sit on piles of idle cash while other businesses starve or cannot get started for want of credit. The economy is like a drunk throwing up the morning after the night before. It is disgorging itself - or trying to disgorge itself - of bad investments it was tempted to undertake largely because of easy money.

Giving it still more money will not prevent the inevitable suffering. It might mask or delay it somewhat, but only at the cost of more suffering later. This is not the sort of advice that governments welcome. THEY WANT A PAINLESS, EASY CURE LIKE THE ONE KEYNESIANS OFFER. But, as Hayekians warned again and again, there is no painless recovery from an unsustainable boom. The only way to have no pain is to avoid the boom itself.

Full article - http://www.bbc.co.uk/news/business-14366054?print=true

The Islamic Emirates Project, launched by the Muslims Against the Crusades group, names the British cities of Birmingham, Bradford, Derby, Dewsbury, Leeds, Leicester, Liverpool, Luton, Manchester, Sheffield, as well as Waltham Forest in northeast London and Tower Hamlets in East London as territories to be targeted for blanket Sharia rule.

The project, which uses the motto "The end of man-made law, and the start of Sharia law," was launched exactly six years after Muslim suicide bombers killed 52 people and injured 800 others in London. A July 7, 2011 announcement posted on the Muslims Against the Crusades website, states:

"In the last 50 years, the United Kingdom has transformed beyond recognition. What was once a predominantly Christian country has now been overwhelmed by a rising Muslim population, which seeks to preserve its Islamic identity, and protect itself from the satanic values of the tyrannical British government.

"There are now over 2.8 million Muslims living in the United Kingdom - which is a staggering 5% of the population - but in truth, it is more than just numbers, indeed the entire infrastructure of Britain is changing; Mosques, Islamic Schools, Shari'ah Courts and Muslim owned businesses, have now become an integral part of the British landscape.

"In light of this glaring fact, Muslims Against Crusades have decided to launch 'The Islamic Emirates Project,' that will see high profile campaigns launch in Muslim enclaves all over Britain, with the objective to gradually transform Muslim communities into Islamic Emirates operating under Shari'ah law.

"With several Islamic emirates already well established across Asia, Africa and the Middle East, including Iraq and Afghanistan, WE SEE THIS AS A RADICAL, BUT VERY REALISTIC STEP IN THE HEART OF WESTERN EUROPE, THAT WILL INSHAA'ALLAH (GOD WILLING), PAVE THE WAY FOR THE WORLDWIDE DOMINATION OF ISLAM."

In July, factories in Asia and Europe grew at the weakest rate since mid-2009, according to business surveys of manufacturing activity out today. The purchasing managers index for China, the engine of global growth, dropped to its lowest level in more than two years. Europe, still embroiled in its own debt debacle, reported its worst manufacturing numbers since September 2009. And to top it off, US manufacturing, which had been a rare bright spot for the US recovery, grew at it slowest pace in two years.

Those grim figures, coupled with meager growth in US GDP in this year's second quarter, are a humbling reminder of the many problems - aside from the much-hyped US debt ceiling showdown - still plaguing the global economy. After its initial bout of euphoria, Wall Street fell 1% upon mulling the remaining uncertainties surrounding the debt deal and the bad manufacturing news. So what caused the global manufacturing slump, and will the doldrums continue?

The tsunami in Japan is partly to blame for glum readings in the US. The pullback in auto parts supplied by Japan has been slowing production lines for US automakers, which had been helping to drive the US recovery. Debt ceiling jitters may also have contributed, as some businesses in the US manufacturing survey said they were worried about government contracts being scrapped or delayed. And of course, American consumers are nervous about spending, which is perhaps the most troublesome part, since it's not just the US economy that relies on the trusty American spender. The rest of the world does, too.

If there's one saving grace for the US, it's that, for at least the next decade, it will continue to hold the world's reserve currency, which will make US borrowing and investing relatively cheap. That is, unless the countries holding that currency - especially big holders like China and Japan - lose confidence in our economy more quickly than we imagine.

"They are living beyond their means and shifting a part of the weight of their problems to the world economy," Putin told the pro-Kremlin youth group Nashi while touring its lakeside summer camp some five hours drive north of Moscow. "They are living like parasites off the global economy and their monopoly of the dollar," Putin said at the open-air meeting with admiring young Russians in what looked like early campaigning before parliamentary and presidential polls.

US President Barack Obama earlier announced a last-ditch deal to cut about $2.4 trillion from the US deficit over a decade, avoid a crushing debt default and stave off the risk that the nation's AAA credit rating would be downgraded. The deal initially soothed anxieties and led Russian stocks to jump to three-month highs, but jitters remained over the possibility of a credit downgrade.

"Thank god," Putin said, "that they had enough common sense and responsibility to make a balanced decision." But Putin, who has often criticized the United States' foreign exchange policy, noted that Russia holds a large amount of US bonds and treasuries. "If over there (in America) there is a systemic malfunction, this will affect everyone," Putin told the young Russians. "Countries like Russia and China hold a significant part of their reserves in American securities... There should be other reserve currencies."

Included in the losses are payments to investors and insurers, and charges for future claims over home loans. The bank's revenues for the quarter were $13.2 billion, down 55% from a year ago. On 29 June, BoA announced it would take a series of one-off charges after private investors demanded the bank repurchase toxic home loans held in mortgage-backed securities.

The investors claimed BoA's home loans division used misleading information when it sold mortgage-backed securities that later defaulted during the global financial crisis. The bank has (also) had to pay investors who claimed they had used misleading information.

Its results were hurt by a strong currency and a drop in trading. Earlier this week, fellow Swiss bank UBS hinted at job cuts after announcing plans to reduce costs by up to $2.5 billion. Credit Suisse's results were worse than analysts had expected. Revenues fell 25% to 6.3 billion Swiss francs in the quarter, with revenues from trading down 69%.

"We have to recognise the likelihood that the current headwinds in the economic and market environment may be more persistent than we would have hoped," said chief executive Brady Dougan and chairman Urs Rohner. "We expect interest rates to remain low for an extended period of time and the strong Swiss franc to continue to have an impact on our results. We may also continue to see lower levels of client activity and a volatile trading environment." The job cuts are part of a programme designed to make savings of 1 billion Swiss francs in 2012.

And while HSBC is hiring more in some markets, it is making swingeing cuts in others such as the US and Europe. The bank is refocusing its business on Asia and Latin America where growth is outstripping many of its more developed markets. Growth in the US and Europe is likely to remain sluggish as long as the impact of high debt levels and government budget cuts weigh on economic activity," the bank said in its earnings report.

While developed economies are facing tough times in the wake of a slowdown in growth and the ongoing debt issues, emerging economies have been growing robustly. Profits at HSBC's Asia-Pacific operations surged more than 25% in the six months to the end of June, from a year earlier, while earnings in Latin America rose 10%, the bank said. HSBC said the robust numbers will underpin its hiring strategy as emerging economies are likely to be the key drivers of global economic growth.

The announcement came as the bank reported pre-tax profits for the first six months of the year of $11.5 billion (7 billion pounds), up 3% on the $11.1 billion the bank made a year earlier. HSBC said it did not expect any of the new job cuts to fall in the UK. As well as the job cuts, bank said it is closing its retail banking operations in Russia and Poland and selling three insurance businesses as part of pre-announced plans to save $2.5 billion-$3.5 billion by 2013.

On Sunday, it announced the sale of 195 US retail branches, primarily in New York, to First Niagara Bank for about $1 billion. Following the better-than-expected results and job cuts announcement, HSBC shares rose 3.4% in early London trading. "HSBC has set the bar high for those that follow, beating market expectations and planning to streamline its business further," said Richard Hunter at Hargreaves Lansdown Stockbrokers.

The bank is in the early stages of a surprisingly radical rethink of its original strategy of planting its flag in almost every country of the world. In future, the focus will be on growing its business in the world's faster-growing economies, notably in the Asia-Pacific and Latin America.

The city has been largely controlled by opponents of President Bashar al-Assad since June. Fresh violence is also being reported in the capital Damascus. The UN Security Council discussed the Syrian crisis late on Monday. The US and Europe are pushing for strong condemnation of the violence, with US Secretary of State Hillary Clinton saying the international community should "come together behind the people of Syria in this critical time".

The BBC's Jim Muir, in neighbouring Lebanon, says tanks and troops returned to the streets of Hama on Monday, after pulling out following Sunday's violence. Witnesses said the tanks and troops opened fire in the streets as people took part in evening prayers on the first night of Ramadan, when Muslims fast in daylight hours. "The shells are falling once every 10 seconds," one witness told Reuters by telephone. Another activist in the city told AFP news agency that 10 tanks were "indiscriminately" shelling the suburb of Dawar Bilal.

The Syrian government has promised reforms but says its troops are being attacked by "armed gangs" who are backed by unspecified foreign powers. On Monday, Mr Assad praised the military for "foiling the enemies" of the state, the official news agency reported.

This is a deal that has to be sold to both Democrats and Republicans in the context of a political and economic debate that could hardly be more polarised. The cuts come in two parts. First, as soon as the package becomes law procedures step in to cut government spending by around $900 billion dollars. Second, a congressional committee that includes both Republicans and Democrats will agree by the end of November further cuts of $1.5 trillion.

Those cuts must be approved by Congress by the end of December. If that does not happen, an automatic mechanism applies that reduces spending by $1.2 trillion. Powerful incentives are built in to persuade the legislature to cut a deal. Under the automatic mechanism, half the mandated cuts would hit the defence budget - something few Republicans want to happen. The other half would include reductions in benefit entitlements for the poor, sick and elderly - payments dear to Democratic hearts.

But while the government may be trimming its budget plans, this does not necessarily mean it will actually cut spending. The cuts are calculated from a base scenario of projected spending in future years as envisaged in March of this year. Essentially that means the government will slow the growth of spending that would otherwise have taken place if the austerity package had not been agreed.

In any one year up to 2021, once the programme gets going, the government will actually spend in the order of $100 billion less than projected in March of this year. That may not seem like a lot of money in the context of total current US federal spending of around $3.5 trillion a year. That is why some conservative Republicans still don't like the deal. But it is widely seen as a start, a psychological turning point, the moment after years of running up debts that the US government at last started to get its budget house in order. One important issue, naturally, is where the axe will fall.

After months of bitterly partisan deadlock, House Republican and Democratic leaders swung behind the bill on Monday, ratifying a deal sealed the night before with a phone call from House Speaker John Boehner to President Obama. House Democrats were evenly split on the legislation - 95 for and 95 against - while 174 Republicans voted for the measure and 66 opposed it.

That vote will take place barely 12 hours before Washington is due - according to the US treasury department - to become unable to meet all its bills. The vote in the Republican-controlled House was considered the biggest obstacle to the legislation; its approval by the Democratic-controlled Senate is viewed as all but certain. In a key point for President Obama, the bill would raise the debt ceiling into 2013 - meaning he would not face another congressional showdown on spending in the middle of his re-election campaign next year.

The compromise deal deeply angered both right-wing Republicans and left-wing Democrats. Liberals have been unhappy that the plan relies on spending cuts only and does not include tax rises, although Mr Obama could still let Bush-era tax cuts for the top brackets expire in January 2013. House Republicans were displeased that the bill did not include more savings.

The bill was the focus of criticism, some of it anguished, from both sides of the House. "I did not come to Washington to force more people into poverty," said Democratic congressman Jim McGovern. His colleague, Emanuel Cleaver, described the deal as "a sugar-coated Satan sandwich" on his Twitter feed.

Republican Representative Mark Mulvaney said: "At the end of the day, Washington's spending still has us sprinting toward a fiscal cliff. And this bill barely slows us down." The deal would enact more than $900 billion in cuts over the next 10 years. It would also establish a 12-member House-Senate committee charged with producing up to $1.5 triilion of additional deficit cuts over a decade.

Yields on Italian government bonds, it seems, aren't the only things rising in the country this summer as investors begin to ask if Italy will be the next domino to fall in Europe. Currently, more bets on credit defaults - so-called credit default swaps (CDS) - are being taken out on Italy than any other country.

With a gross CDS volume of almost $306 billion (212.69 billion euros), the country is currently in the lead, ahead of Brazil ($179 billion) and Spain ($176 billion). Indeed, the desire among investors to bet on a default in Italy and Spain appears to be growing. Since mid-June, the bets against Italy have risen by $23 billion and those against Spain by $18 billion.

Still, if a country does default, it doesn't automatically mean that the entire value of a CDS would be paid out. This is because betting partners often hedge the bet through offsetting transactions. So the maximum amount that would have to be paid out if Italy were to default would be about $25 billion. For Spain, that figure would be $18 billion.

But even at these amounts, experts have expressed doubt over whether the participants would actually be able to come up with their share of the bet. If some of these betting partners were unable to pay, it could rattle the markets even further. The reason is that a CDS works like insurance: Creditors purchase them in order to provide protection in case their debtor defaults. But the CDS market is also unregulated, and the derivatives played a role in the global financial meltdown in 2008 after the subprime mortgage market collapsed.

UK fishing crews have thrown away stocks of cod worth about 1 billion pounds since 1963 due to the practice of discarding catches which exceed or fall outside quotas, according to a thinktank report. Across all EU fleets, stocks of cod worth 2.7 billion pounds were discarded in the North Sea, the Channel and Skagerrak, the strait adjoining Norway, Sweden and the north of Denmark between 1963 and 2008, the New Economics Foundation (NEF) study, Money Overboard, calculated.

Using discard data compiled by the International Council for the Exploration of the Sea and focusing just on cod, one of the best-documented stocks, the NEF calculated that just over 2.1 million tonnes of the fish was thrown overboard during the period. The report adds fuel to the bitter debate over the longstanding fisheries practice, particularly prevalent in heavy-regulated EU waters, of throwing overboard a significant proportion of any catch - up to two thirds in some areas - most of which is by this time dead or dying.