The new military spending bill bans Chinese-made solar panels on the eve of an official trade visit by China's president Hu Jintao. Image: CC swanksalot/Flickr

China is the top producer of solar panels in the world. The U.S. military is increasingly relying on solar energy as it operates in remote areas of Afghanistan where shipping fuel for energy is difficult. A military spending bill barring the Defense Department from buying Chinese solar panels was signed by President Obama a week before China’s president Hu Jintao makes an official visit to the U.S.

China’s clean energy racket

Solar panels may be a contentious issue in China/U.S. trade talks next week. Chinese solar panel manufacturers, heavily subsidized by the Beijing government, have captured more than half of the $29 billion international market. As the U.S. tries to narrow China’s lead in clean energy industries, members of Congress have accused China of violating free trade rules laid out by the World Trade Organization. Clean energy subsidies in the U.S. go to solar panel buyers, while China subsidizes solar panel manufacturers. Chinese solar power manufacturers then double-dip, dumping most of their product in the U.S. to benefit from its government subsidies.

Clean energy dispute clouds China/U.S. trade talks

Requiring the U.S. military to buy only American-made solar panels is bound to generate criticism from Chinese officials on the eve of Hu’s visit. A few years ago, China raised strong objections when the 900 billion economic stimulus package included a “buy American” provision for government procurement of steel and other construction materials. However, in 2009, China required that its entire $600 billion economic stimulus package be spent in-country. The Obama administration is preparing a case against Chinese clean energy subsidies it plans to bring before the WTO. At issue are allegedly illegal government subsidies for Chinese solar and wind energy exports that put U.S. and European companies at a competitive disadvantage.

China buys major European solar energy company

While the U.S. imposes trade restrictions on solar panels, China continues to aggressively pursue world domination in clean energy industries. State-owned China National BlueStar Corp. announced the purchase of Norwegian solar panel manufacturer Elkem for $2 billion. China’s acquisition of Elkem gives it cutting edge solar energy technology made by a company entrenched in the European market.

Sources

New York Times

UPI

Christian Science Monitor

A China interest rate hike caught the world off-guard and shows the government is more worried about inflation than it is willing to admit. Image: CC peruisay/Flickr

The first China interest rate hike since 2007 caught analysts by surprise and knocked  world markets off-kilter. The Chinese government offered no explanation, but consensus among experts is China has recognized the need to stem inflation in its economy. Fears that the China rate hike could drag on global recovery sent stock markets in Europe and the U.S. downward Tuesday, but some analysts think China will avoid any significant economic slowdown as it prepares for a 2012 leadership transition in the communist party.

The China interest rate hike

The China interest rate hike raises benchmark one-year lending and deposit rates by 0.25 percentage points. The New York Times reports that the China rate hike is proof that the Chinese government is struggling to control inflation, skyrocketing housing prices and an economy overly dependent on exports and excess investment. Many economists stress that China should raise the value of its currency, the renminbi, to fight inflation and increase imports. But the Chinese government fears that allowing the renminbi to rise will kill tens of millions of export jobs. Instead, it hopes the China rate hike will slow growth, get lending under control and encourage saving.

China’s overheating economy

A huge economic stimulus package and aggressive lending by state-run banks pushed China out of the global financial crisis in 2008. CNN reports that since then, the Chinese economy has expanded rapidly while western economies remain sluggish. China’s gross domestic product grew at a 10.3 percent annual rate in the second quarter. U.S. GDP rose 1.7 percent. China’s exploding GDP has lead to soaring wages, food prices and real estate values. Consumer prices in China rose 3.5 percent in August spurred by a 7.5 percent increase in food prices. Real estate prices rose 9.1 percent compared to a year ago in China’s largest cities.

Why China’s rate hike won’t work

Michael Pettis at Business Insider said that the China rate hike is too little to offset its inflation rate. China’s economy is so dependent on artificially low interest rates, the smallest increase will cause financial distress. Pettis writes that more China rate hikes in the near future may put a dent in the country’s over-reliance on excess investment. But with a communist leadership change looming in 2012, that is unlikely, no matter how badly China needs it.

The White House stimulus report outlines a program that worked far better than the public has been led to believe. Image: Thinkstock

The economic stimulus package is a  success, according to a White House stimulus report submitted Friday. Yet it has failed politically. Most economists agree that the American Recovery and Reinvestment Act has been well managed, well executed and prevented the economy from getting worse. But the slow recovery and high unemployment have disillusioned the public and given Republicans the talking point of a “failed stimulus.”

Recovery Act meets original deadline

The economic stimulus package was instituted in Feburary 2009. The Washington Post reports that at the time an average of 750,000 jobs a month were disappearing. The administration promised to deploy 70 percent of the stimulus in 18 months. The White House stimulus report shows that deadline has been met. Of $787 billion, $551 billion has been allocated to tax breaks for families and businesses and payments to states, unemployed workers and others victimized by the recession. An additional $127 billion has been committed. Republican predictions of massive stimulus fraud proved unfounded. Criminal investigations involve just 0.2 percent of all contracts.

Stimulus fraud kept to bare minimum

The economic stimulus package has been overseen by the Recovery Accountability and Transparency Board. TIME reports that the board uses computer algorithms to track suspicious spending patterns. Earl Devaney, leader of the board, told TIME “you’d be crazy to steal from the Recovery Act; it’s way too transparent, with every dollar traceable at www.recovery.gov, and there are way too many eyes on it.” But TIME said transparency has had a political cost. Republican senators have branded projects as wasteful, such as $18,500 to paint a mural in Montana.

Stimulus politics ignore reality

The stimulus created 3.5 million jobs and kept unemployment about 1 to 2 percent lower than it would have been, according to the Congressional Budget Office. Keven Drum at Mother Jones said the results are an example of  good policy taken seriously. Yet Drum writes that the stimulus also shows how little most people care about good policy and competent execution. Today nearly two-thirds of Americans believe the Recovery Act was a bust. This is because the administration predicted the stimulus would reduce unemployment to 8 percent. If it had predicted more accurately unemployment at 11.5 percent without the stimulus and less than 10 percent with it, political talking points about a “failed stimulus” probably wouldn’t exist.

At Solyndra, Obama used the solar panel company as an example of clean technology to be promoted in the Senate climate and energy bill. Flickr photo.

Solyndra is a clean technology company in northern California where President Obama chose to deliver an address promoting the climate and energy bill Wednesday. Obama cited the oil spill in the Gulf of Mexico 2010 to emphasize the need for alternative energy and to highlight clean technology jobs created by the $787 billion economic stimulus package 2009  known as the American Recovery and Reinvestment Act. The president also had a private meeting with Gov. Arnold Schwarzenegger before he gave his speech at the Solyndra plant.

Solyndra: Obama’s clean technology example

Solyndra was the first U.S. company to receive an Energy Department money loan. Mercurynews.com reports that after the $535 million loan guarantee, the 5-year-old company has become a government case study for the benefits of the economic stimulus package and the ripple effects the federal stimulus spending has had on the nation’s economy. The president, promoting the climate and energy bill,  sought to give the struggling company a lift. Speaking on Solyndra’s factory floor, Obama said “A year ago, this was an empty lot. Through the federal Recovery Act, this company received loans to build this facility. And more than 3,000 construction workers have been employed building it.” He also said that the company will hire 1,000 permanent workers when the factory is completed.

Solyndra IPO jinxed by Energy Dept. audit

Solyndra solar panels are part of the solar powered energy systems the company makes for the commercial market from a 300,000 square foot manufacturing facility in Fremont, Calif. Obama was there to show his support for Solyndra, which has been having trouble arranging a $300 million public sale. VentureBeat.com reports that Solyndra solar panels were an up and coming leader in solar energy after the company secured a $535 million economic stimulus package loan guarantee from the Energy Department last fall. Seeking to ride that momentum, Solyndra filed an IPO in late December. But Solyndra’s IPO hopes were dimmed after a Department of Energy audit pointed out massive losses and negative cash flow, along with mounting debt that could bury the company within a year.

Schwartzenegger at Solyndra Obama event

During the Solyndra Obama event, California governor Arnold Schwartzenegger announced a $20 million program to train works for clean technology industries. The San Jose/Silicon Valley Business Journal reports that Schwartzenegger’s  Green Innovation Challenge Grant program will provide as many as five challenge grants at up to $4 million each to encourage business partnerships to develop new training for jobs in a broad range of clean technologies.

Obama to address offshore drilling

After his brief remarks at Solyndra, Obama was on his way back to Washington. The Wall Street Journal reports that Thursday the president will announce a series of changes to the process used for issuing offshore drilling permits. The changes will require additional safety and environmental protection measures along with stepped-up inspections to ensure regulations are enforced. He is scheduled to to release the findings of a three-day review of the oil spill in the Gulf of Mexico 2010 disaster by the Department of Interior.

Europe's debt crisis is proving harder to solve than originally thought and threatens to slow U.S. economic recovery. Flickr photo.

Europe’s debt crisis is endangering U.S. economic recovery in the era of globalization. The Euro hit a new four-year low against the dollar Monday. Greece, Spain, Portugal, Italy and Ireland are dragging down the European Union faster than a recent pledge of nearly $1 trillion dollars in bailout money can prop the alliance up. Britain’s pound also dropped Monday to its lowest rate against the dollar since 2009. Some economists believe a stronger dollar, weak Euro and depressed E.U. demand for U.S. exports could morph the E.U. financial crisis into a worsening global economic crisis.

Is E.U. financial crisis contagious?

While the U.S. economic stimulus package seems to have staved off disaster for now, the Wall Street Journal reports that Europe’s $1 trillion rescue plan won’t solve the debt problems of its weaker economies, which could weaken the U.S. economic recovery. Economists warn that the severe government spending cutbacks in store for some countries will only make things worse. The Euro’s slide already has the British Pound in need of a small personal loan. After rising to nearly the $1.50 mark after Britain installed its new coalition government, the Pound dropped to its lowest level against the dollar since March 2009, falling as low as $1.4256 Monday.

Euro falls against dollar

The E.U. financial crisis has dragged the euro down to about 14 percent on the dollar this year. CNNMoney.com reports that the Euro has slipped so far and so fast that some experts are now predicting what used to be unthinkable: The euro could actually trade at equal value with the dollar sometime in the not-so-distant future. The euro tumbled to a four-year low against the dollar in Asian trading, slumping to $1.2234 compared with $1.2359 in New York Friday. The European currency later stabilized during London’s trading day and was posting a small gain in late New York trading.

U.S. economy has a stake in Europe

The E.U. financial crisis has already had a profound effect on the U.S. economy. The stock market was battered earlier this month by fears that Europe has done too little too late to contain the European debt crisis. Two separate bailout packages announced in the past few weeks for Europe have failed to ease Wall Street’s nerves. But the U.S. economy as a whole has a stake in crisis Europe.

Europe’s U.S. imports falling

The E.U. financial crisis is already having an effect on European governments and consumers, who are cutting back on spending. CNNMoney.com reports that the European Union was the largest destination for U.S. exports in 2009. But through the first three months of 2010, the EU had slipped behind Canada. Europe’s imports of U.S. goods were still up slightly from the first quarter of 2009. But the growth was much slower than the increase in U.S. exports to Canada as well as other large trading partners such as Japan and Latin American nations such as Mexico and Brazil.

Crisis Europe feeds on itself

While nothing good for the U.S. can be expected from the E.U. financial crisis, the Wall Street Journal reports that a weak Euro and U.K. Pound should help British and European firms sell more products to U.S. consumers and those in countries that value their currencies to the dollar. But even this debt relief comes with a catch: Britain and the continent sell most of their goods to each other, and they’re all broke.