Thinking About November

By PAUL KRUGMAN

Published: May 9, 2008

The fight for the Democratic nomination seems to be winding down. It’s not completely over, but the odds now overwhelmingly favor Barack Obama.

Paul Krugman

Go to Columnist Page » Blog: The Conscience of a Liberal

Assuming that Mr. Obama is the nominee, he’ll lead a party that, judging by the usual indicators, should be poised for an easy victory — perhaps even a landslide.

Yet Democrats are worried. Are those worries justified?

Before I try to answer that question, let’s talk about those indicators.

Political scientists, by and large, believe that what happens on the campaign trail, while it gives talking heads something to talk about, is more or less irrelevant to what happens on Election Day. Instead, they place their faith in statistical analyses that identify three main determinants of presidential voting.

First, votes are affected by the state of the economy — mainly economic performance in the year or so preceding the election.

Second, the approval rating of the current president strongly affects his party’s ability to hold power.

Third, the electorate seems to suffer from an eight-year itch: parties rarely manage to hold the White House for more than two terms in a row.

This year, all of these factors strongly favor the Democrats. Indeed, the Democratic Party hasn’t enjoyed this favorable a political environment since 1964. Robert Erikson, a political scientist at Columbia, tells me: “It would be difficult to find any serious indicator that does not point to a Democratic victory in 2008.”

What about polls that still seem to give John McCain a good chance of winning? Pay no attention, say the experts: general election polls this early tell you almost nothing about what will happen in November. Remember 1992: as late as June, Gallup put Ross Perot in first place, Bill Clinton in third.

There’s just one thing that should give Democrats pause — but it’s a big one: the fight for the nomination has divided the party along class and race lines in a way that I believe is unprecedented, at least in modern times.

Ironically, much of Mr. Obama’s initial appeal was the hope that he could transcend these divisions. At first, voting patterns seemed consistent with this hope. In February, for example, he received the support of half of Virginia’s white voters as well as that of a huge majority of African-Americans.

But this week, Mr. Obama, while continuing to win huge African-American majorities, lost North Carolina whites by 23 points, Indiana whites by 22 points. Mr. Obama’s white support continues to be concentrated among the highly educated; there was little in Tuesday’s results to suggest that his problems with working-class whites have significantly diminished.

Discussions of how and why Mr. Obama’s support narrowed over time have a Rashomon-like quality: different observers see very different truths. But at this point it doesn’t matter whose fault it was. What does matter is that Mr. Obama appears to have won the nomination with a deep but narrow base consisting of African-Americans and highly educated whites. And now he needs to bring Democrats who opposed him back into the fold.

It’s possible that this will happen automatically — that bad feelings from the nomination fight will fade away of their own accord. In recent decades, Democrats have had little trouble unifying after hard-fought primary campaigns.

But this time the division seems to go deeper than ordinary political rivalry. The closest parallel I can think of is the bitter intraparty struggles of the 1920s, which pitted urban, often Catholic Democrats against Protestant farmers.

So what can be done to heal the party’s current divisions?

More tirades from Obama supporters against Mrs. Clinton are not the answer — they will only further alienate her grass-roots supporters, many of whom feel that she received a raw deal.

Nor is it helpful to insult the groups that supported Mrs. Clinton, either by suggesting that racism was their only motivation or by minimizing their importance.

After the Pennsylvania primary, David Axelrod, Mr. Obama’s campaign manager, airily dismissed concerns about working-class whites, saying that they have “gone to the Republican nominee for many elections.” On Tuesday night, Donna Brazile, the Democratic strategist, declared that “we don’t have to just rely on white blue-collar voters and Hispanics.” That sort of thing has to stop.

One thing the Democrats definitely need to do is give delegates from Florida and Michigan — representatives of citizens who voted in good faith, and whose support the party may well need this November — seats at the convention.

And to the extent that campaigning matters, Mr. Obama should center his campaign on economic issues that matter to working-class families, whatever their race.

The point is that Mr. Obama has an extraordinary opportunity in this year’s election. He should do everything possible to avoid squandering it.

Thinking About November, Krugman

Op-Ed Columnist

Thinking About November

By PAUL KRUGMAN

Published: May 9, 2008

The fight for the Democratic nomination seems to be winding down. It’s not completely over, but the odds now overwhelmingly favor Barack Obama.

Paul Krugman

Assuming that Mr. Obama is the nominee, he’ll lead a party that, judging by the usual indicators, should be poised for an easy victory — perhaps even a landslide.

Yet Democrats are worried. Are those worries justified?

Before I try to answer that question, let’s talk about those indicators.

Political scientists, by and large, believe that what happens on the campaign trail, while it gives talking heads something to talk about, is more or less irrelevant to what happens on Election Day. Instead, they place their faith in statistical analyses that identify three main determinants of presidential voting.

First, votes are affected by the state of the economy — mainly economic performance in the year or so preceding the election.

Second, the approval rating of the current president strongly affects his party’s ability to hold power.

Third, the electorate seems to suffer from an eight-year itch: parties rarely manage to hold the White House for more than two terms in a row.

This year, all of these factors strongly favor the Democrats. Indeed, the Democratic Party hasn’t enjoyed this favorable a political environment since 1964. Robert Erikson, a political scientist at Columbia, tells me: “It would be difficult to find any serious indicator that does not point to a Democratic victory in 2008.”

What about polls that still seem to give John McCain a good chance of winning? Pay no attention, say the experts: general election polls this early tell you almost nothing about what will happen in November. Remember 1992: as late as June, Gallup put Ross Perot in first place, Bill Clinton in third.

There’s just one thing that should give Democrats pause — but it’s a big one: the fight for the nomination has divided the party along class and race lines in a way that I believe is unprecedented, at least in modern times.

Ironically, much of Mr. Obama’s initial appeal was the hope that he could transcend these divisions. At first, voting patterns seemed consistent with this hope. In February, for example, he received the support of half of Virginia’s white voters as well as that of a huge majority of African-Americans.

But this week, Mr. Obama, while continuing to win huge African-American majorities, lost North Carolina whites by 23 points, Indiana whites by 22 points. Mr. Obama’s white support continues to be concentrated among the highly educated; there was little in Tuesday’s results to suggest that his problems with working-class whites have significantly diminished.

Discussions of how and why Mr. Obama’s support narrowed over time have a Rashomon-like quality: different observers see very different truths. But at this point it doesn’t matter whose fault it was. What does matter is that Mr. Obama appears to have won the nomination with a deep but narrow base consisting of African-Americans and highly educated whites. And now he needs to bring Democrats who opposed him back into the fold.

It’s possible that this will happen automatically — that bad feelings from the nomination fight will fade away of their own accord. In recent decades, Democrats have had little trouble unifying after hard-fought primary campaigns.

But this time the division seems to go deeper than ordinary political rivalry. The closest parallel I can think of is the bitter intraparty struggles of the 1920s, which pitted urban, often Catholic Democrats against Protestant farmers.

So what can be done to heal the party’s current divisions?

More tirades from Obama supporters against Mrs. Clinton are not the answer — they will only further alienate her grass-roots supporters, many of whom feel that she received a raw deal.

Nor is it helpful to insult the groups that supported Mrs. Clinton, either by suggesting that racism was their only motivation or by minimizing their importance.

After the Pennsylvania primary, David Axelrod, Mr. Obama’s campaign manager, airily dismissed concerns about working-class whites, saying that they have “gone to the Republican nominee for many elections.” On Tuesday night, Donna Brazile, the Democratic strategist, declared that “we don’t have to just rely on white blue-collar voters and Hispanics.” That sort of thing has to stop.

One thing the Democrats definitely need to do is give delegates from Florida and Michigan — representatives of citizens who voted in good faith, and whose support the party may well need this November — seats at the convention.

And to the extent that campaigning matters, Mr. Obama should center his campaign on economic issues that matter to working-class families, whatever their race.

The point is that Mr. Obama has an extraordinary opportunity in this year’s election. He should do everything possible to avoid squandering it.

RICHES, Le Monde

Une étude britannique évalue les fortunes dans le monde
LE MONDE | 08.05.08

©

CHINA, Bloomberg

China's Export Growth Slows, Easing Pressure on Yuan (Update4)

By Nipa Piboontanasawat and Li Yanping

May 9 (Bloomberg) -- China's export growth cooled in April and the trade surplus was little changed as economies around the world weakened, giving the government room to maintain a slower pace of yuan gains.

Overseas sales rose about 21.8 percent from a year earlier, after gaining 30.6 percent in March, according to figures derived from Ministry of Commerce data. The trade surplus was about $16.8 billion compared with $16.7 billion a year earlier.

Central bank Governor Zhou Xiaochuan said on May 4 that weaker export growth has been a factor in the yuan's failure to appreciate versus the dollar after a 4.2 percent jump in the first quarter. Smaller gains in shipments reduce the risk that inflows of cash from overseas sales will fuel 11-year high inflation and overheat the world's fastest-growing major economy.

``Exports will slow further in the second half as the weaker demand in the U.S. and other markets becomes more pronounced,'' said Liao Qun, chief economist at Citic Ka Wah Bank in Hong Kong. ``China won't want the yuan to appreciate too fast for this reason.''

The trade surplus was more than the $15.5 billion median forecast of 19 economists in a Bloomberg News survey. Economists expected exports to rise 20.3 percent. The gain in overseas shipments compares with the 21.4 percent pace in the first quarter and the 26 percent increase for all of last year.

Import Growth

Imports grew about 26.1 percent in April from a year earlier after gaining 24.6 in March, the calculations showed. The increase partly reflects rising commodity prices.

The yuan gained 0.2 percent to 6.9918 as of the 5:30 p.m. close of trading in Shanghai.

The world's fourth-biggest economy expanded 10.6 percent in the first quarter from a year earlier and inflation accelerated to 8 percent, the fastest pace since 1996. The yuan had its biggest gain since a fixed-exchange rate ended in 2005.

China's currency has climbed 18 percent versus the dollar since the peg to the U.S. currency was scrapped, making the nation's products more expensive in overseas markets and cutting import costs. Since April, it has gained only 0.3 percent.

U.S. Treasury Undersecretary David McCormick urged China to maintain an ``accelerated'' pace of yuan appreciation in a speech today in Shanghai.

Global Slowdown

Growth in shipments from China to the U.S. has cooled this year as a housing slump threatens to trigger a recession in the world's biggest economy. A weaker global expansion has dimmed the outlook for the rest of the year.

Export growth ``will continue to trend down in months to come as the global economic downturn unfolds,'' said Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong. ``It could even fall below 10 percent in the fourth quarter.''

Inflation, driven by food costs, climbed to an 11-year high of 8.7 percent in February, more than the central bank's target for the year of 4.8 percent. Consumer prices rose 8.2 percent in April, according to a Bloomberg News survey of economists. That number will be released on May 12.

Producer prices rose 8.1 percent in April, the fastest pace in more than three years, the statistics bureau said today.

China will maintain a tight monetary policy to prevent economic overheating, Vice Premier Wang Qishan told a financial conference in Shanghai today.

`Facing Challenges'

``China's economy is still facing challenges this year including high inflation, investment growth that hasn't yet come down to a normal level and the global economic slowdown,'' Wang said.

The Ministry of Commerce released data for shipments of mechanical and electrical products for the first four months on a ministry Web site today. It gave the value of exports of those products, $251.3 billion, and said they represented 59.2 percent of total exports. It also gave the value for imports, $173.3 billion, said they were 47.3 percent of total imports.

The April trade figures were derived by calculating the total export and import figures for the first four months and subtracting the amounts previously announced for the first quarter.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

Last Updated: May 9, 2008 06:52 EDT

CHINA, Bloomberg

China's Export Growth Slows, Easing Pressure on Yuan (Update4)

By Nipa Piboontanasawat and Li Yanping

May 9 (Bloomberg) -- China's export growth cooled in April and the trade surplus was little changed as economies around the world weakened, giving the government room to maintain a slower pace of yuan gains.

Overseas sales rose about 21.8 percent from a year earlier, after gaining 30.6 percent in March, according to figures derived from Ministry of Commerce data. The trade surplus was about $16.8 billion compared with $16.7 billion a year earlier.

Central bank Governor Zhou Xiaochuan said on May 4 that weaker export growth has been a factor in the yuan's failure to appreciate versus the dollar after a 4.2 percent jump in the first quarter. Smaller gains in shipments reduce the risk that inflows of cash from overseas sales will fuel 11-year high inflation and overheat the world's fastest-growing major economy.

``Exports will slow further in the second half as the weaker demand in the U.S. and other markets becomes more pronounced,'' said Liao Qun, chief economist at Citic Ka Wah Bank in Hong Kong. ``China won't want the yuan to appreciate too fast for this reason.''

The trade surplus was more than the $15.5 billion median forecast of 19 economists in a Bloomberg News survey. Economists expected exports to rise 20.3 percent. The gain in overseas shipments compares with the 21.4 percent pace in the first quarter and the 26 percent increase for all of last year.

Import Growth

Imports grew about 26.1 percent in April from a year earlier after gaining 24.6 in March, the calculations showed. The increase partly reflects rising commodity prices.

The yuan gained 0.2 percent to 6.9918 as of the 5:30 p.m. close of trading in Shanghai.

The world's fourth-biggest economy expanded 10.6 percent in the first quarter from a year earlier and inflation accelerated to 8 percent, the fastest pace since 1996. The yuan had its biggest gain since a fixed-exchange rate ended in 2005.

China's currency has climbed 18 percent versus the dollar since the peg to the U.S. currency was scrapped, making the nation's products more expensive in overseas markets and cutting import costs. Since April, it has gained only 0.3 percent.

U.S. Treasury Undersecretary David McCormick urged China to maintain an ``accelerated'' pace of yuan appreciation in a speech today in Shanghai.

Global Slowdown

Growth in shipments from China to the U.S. has cooled this year as a housing slump threatens to trigger a recession in the world's biggest economy. A weaker global expansion has dimmed the outlook for the rest of the year.

Export growth ``will continue to trend down in months to come as the global economic downturn unfolds,'' said Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong. ``It could even fall below 10 percent in the fourth quarter.''

Inflation, driven by food costs, climbed to an 11-year high of 8.7 percent in February, more than the central bank's target for the year of 4.8 percent. Consumer prices rose 8.2 percent in April, according to a Bloomberg News survey of economists. That number will be released on May 12.

Producer prices rose 8.1 percent in April, the fastest pace in more than three years, the statistics bureau said today.

China will maintain a tight monetary policy to prevent economic overheating, Vice Premier Wang Qishan told a financial conference in Shanghai today.

`Facing Challenges'

``China's economy is still facing challenges this year including high inflation, investment growth that hasn't yet come down to a normal level and the global economic slowdown,'' Wang said.

The Ministry of Commerce released data for shipments of mechanical and electrical products for the first four months on a ministry Web site today. It gave the value of exports of those products, $251.3 billion, and said they represented 59.2 percent of total exports. It also gave the value for imports, $173.3 billion, said they were 47.3 percent of total imports.

The April trade figures were derived by calculating the total export and import figures for the first four months and subtracting the amounts previously announced for the first quarter.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

OIL 126 DOLLARS, BLOOMBERG

Oil Climbs Above $126 to Record as Dollar Weakens Against Euro

By Mark Shenk

May 9 (Bloomberg) -- Crude oil rose above $126 a barrel in New York to a record as the dollar weakened against the euro and yen, prompting investors to buy commodities as a hedge against the currency's decline.

Oil climbed to all-time highs for a fifth day as the euro strengthened on signs the European Central Bank will keep rates at a six-year high to cut inflation. Nigerian output fell to the lowest this decade in April because of a strike and attacks on oil installations.

``Oil is a safe haven because of the weak dollar and how badly the financial sector has been doing,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``There are also geopolitical concerns about places like Nigeria and Venezuela that are propping prices up.''

Crude oil for June delivery rose $1.28, or 1 percent, to $124.97 a barrel at 12:02 p.m. on the New York Mercantile Exchange. The contract surged to a record $126.20 today. Prices are up 7.4 percent this week, the biggest weekly gain in more than a year. Futures are more than double from a year ago.

Brent crude oil for June settlement climbed $1.81, or 1.5 percent, to $124.65 a barrel on London's ICE Futures Europe exchange. The contract touched $125.90 today, the highest since trading began in 1988.

Oil at $200 is ``possible if we have a continuing devaluation of the dollar with respect to other currencies,'' OPEC President Chakib Khelil said yesterday at a press conference in Washington.

The dollar dropped 10 percent since Sept. 18, when the Federal Reserve began cutting rates to ease financial-market strains and stave off a recession. The U.S. central bank cut rates seven times while the ECB has left rates unchanged.

Fed Policy

``Fed policy is accommodating the rise in energy prices,'' said Bill O'Grady, director of fundamental futures research at Wachovia Securities in St. Louis. ``The Fed and federal government are putting more liquidity in people's pockets, which is being spent on expensive oil.''

The U.S. government started sending $117 billion in tax rebate checks last week as part of its fiscal stimulus plan.

Goldman Sachs analyst Arjun N. Murti wrote in a report on May 6 that ``the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.'' Murti first wrote of a ``super spike'' in March 2005, predicting crude may trade between $50 and $105 a barrel through 2009.

``There's been a paradox, prices have surged over the last week while we've had bearish headlines,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Clearly there's been a lot of fund buying on the back of Goldman's super-spike repot. They were right on the nose last time.''

OPEC Meeting

The Organization of Petroleum Exporting Countries, the producer of more than 40 percent of the world's oil, may meet before September to consider increasing output in an attempt to rein in record crude-oil prices, Libya's Shokri Ghanem said.

``We would consider among other options the possibility of increasing output as a way to ensure market stability,'' Ghanem, who is the chairman of Libya's National Oil Corp., said in a telephone interview today from Tripoli.

Nigerian Petroleum Minister of State H. Odein Ajumogobia said today that there are no plans for an additional OPEC meeting because oil supplies are adequate.

OPEC kept its production target unchanged at its past three meetings, in March, February and December. It increased its production target by 500,000 barrels a day on Nov. 1.

``OPEC loves high oil prices, but they also value an orderly market,'' said Adam Sieminski, Deutsche Bank's chief energy economist, in Washington. ``It would not surprise me if they meet soon to discuss these issues.''

Lebanese Unrest

Gun battles raged across western and southern Beirut, leaving 10 people dead, as fighters from the Shiite group Hezbollah pressed their party's challenge to Lebanon's pro- Western government. Oil surged to a record $78.40 a barrel on July 14, 2006, on concern fighting in Lebanon between Israel and Hezbollah would spread through the Middle East.

``The unrest in Lebanon could be very important,'' O'Grady said. ``This could be an early indication of further violence in coming months.''

Gasoline and heating oil also touched records in New York on forecasts for increased fuel demand.

Heating oil for June delivery climbed 7.15 cents, or 2 percent, to $3.5813 a gallon in New York. The contract reached $3.6125 today, a record intraday price. Some traders use heating- oil futures to hedge their diesel and jet-fuel purchases.

Gasoline futures for June delivery rose 3.8 cents, or 1.2 percent, to $3.1758 a gallon in New York after reaching a record of $3.2011 a gallon.

U.S. pump prices are following futures higher. Regular gasoline, averaged nationwide, rose 2.6 cents to a record $3.671 a gallon, AAA, the nation's largest motorist organization, said today on its Web site.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: May 9, 2008 12:42 EDT

BCE: 4% TAUX DIRECTEUR. NE BOUGE PAS,Figaro

Trichet reste ferme
sur la politique monétaire

Alexandrine Bouilhet
09/05/2008 | Mise à jour : 07:06 |

.

Crédits photo : (photo Soriano/Le Figaro)

La Banque centrale européenne (BCE) a laissé ses taux inchangés, jeudi. L'inflation reste sa priorité.

Sans surprise, le conseil des gouverneurs de la BCE a décidé de laisser son principal taux d'intérêt inchangé, à 4 %. Malgré la crise financière, qui se traduit par un ralentissement de la croissance aux États-Unis comme sur le Vieux Continent, le coût de l'argent dans la zone euro n'a pas baissé depuis le mois de juin 2007, alors qu'aux États-Unis, les taux ont chuté de 3,25 % à 2 %. En Grande-Bretagne, ils ont baissé à deux reprises pour s'établir à 5 %, un taux que la Banque d'Angleterre a malgré tout décidé de ne pas toucher jeudi.

Lors d'une conférence de presse à Athènes, jeudi après-midi, Jean-Claude Trichet, le président de la Banque centrale européenne, a justifié son statu quo par le niveau élevé de l'inflation dans la zone euro : 3,6 % prévus en 2008 après 2,4 % en 2007. La BCE a pour mandat de contenir la hausse des prix sous la barre des 2 %, un chiffre largement dépassé depuis six mois. «Nos 320 millions de citoyens sont très attachés à la stabilité des prix à moyen terme», a rappelé Jean-Claude Trichet. Entretenue par la flambée des prix du pétrole et des produits alimentaires, l'inflation explique, en partie, la chute inattendue des ventes de détail dans la zone euro en mars. Les consommateurs de la zone euro restreignent leurs achats. «Les risques à la hausse pour l'inflation des prix vont prévaloir à moyen terme», a indiqué le président de la BCE. «Dans le même temps, les fondamentaux économiques de la zone euro sont sains», a-t-il ajouté. «Même si elle ralentit, la croissance de l'économie mondiale devrait résister, bénéficiant en particulier de la forte croissance des pays émergents. Cela devrait continuer de soutenir la demande extérieure de la zone euro.»

Optimiste, malgré de récents indicateurs économiques plutôt maussades, la BCE s'appuie sur les bons chiffres dans les services, et sur la solidité de l'industrie allemande face à la crise.

L'économie allemande résiste

Malgré l'envolée de l'euro face au dollar depuis janvier, les exportations allemandes restent solides. Les bonnes performances de la première économie de la zone euro expliquent la fermeté de la politique monétaire européenne, laissant dans l'ombre une Italie au bord de la récession, et la crise immobilière espagnole. «Les chiffres du premier trimestre donneront raison à la BCE : ils ne seront pas mauvais, avec une croissance attendue entre 0,4 % et 0,5 %, c'est-à-dire conforme au potentiel», note Éric Vergnaud, économiste chez BNP Paribas. Élément clé pour la BCE, la production industrielle allemande aura connu une croissance de 2,6 % au premier trimestre, malgré une contraction de 0,5 % en mars.

D'après les derniers indicateurs, la zone euro devrait souffrir davantage au deuxième trimestre, ce qui pourrait amener la banque centrale à infléchir sa politique monétaire dès la fin de l'été. Les économistes s'attendent à un changement de discours mi-août, lorsque seront connus les chiffres du deuxième trimestre, avec une baisse des taux possible en septembre. En attendant, l'euro marquait le pas, hier, face au billet vert, s'échangeant à 1,53 dollar. La remontée récente du dollar face à l'euro est accueillie avec soulagement de part et d'autre de l'Atlantique. Cette correction des marchés des changes devrait permettre de contenir la hausse du prix du baril de pétrole.