While the Chinese were guzzling beer that costs a little more than a dollar a litre, a lot more was brewing in a seemingly calm world last week. Obama and Hu Jintao were signing billion dollar checks furiously, like there is no tomorrow. The ‘Buy American’ provision in the US stimulus package evokes emotion but contractors say there are no US-made bolts and manhole covers available. Except for Coke, pizzas, burgers and Boeing airplanes, the US produces very little at home now. A legitimate question will be, if imports have plunged over 30%, why have retail sales declined only 5-6%?

Despite oil being still above 70, a steady euro, a weakening yen, and a jittery dollar, the St has started realizing that the bizarre equation between oil price and stability cannot last very long. Three more banks shut shop in the US last week and somebody said Citi and Stanley have started playing second fiddle to Sachs and Chase, signalling the need for looking at the finance ‘industry’ differently. One example of flawed outlooks is America’s obsession with insurance; from healthcare to loan repayments to hurricanes to rains, they want to insure everything. Would AIG have quoted, had Hillary wanted to insure against her losing Democratic nomination? Perhaps the policy covenants would have barred her from being Secretary of State.

Obama wants the Congress to raise borrowing limits and wants to issue more TIPS (inflation indexed treasuries) that have the potential to convert Alaska into Iceland. Yields on treasuries have started rising, leaving one wondering where is all the money going. It looks like the world economy is like a huge rock being held by two powerful human hands.

Net wealth of US households is down by over $12 tn, household debt has declined marginally (200 bn to $14 tn), personal incomes in the US are rolling down an endless slope, retail sales have been falling for almost a year now, and equity indices are perking up because desperate investment bankers are buying junk stock; real performers in retail and food sectors have moved very little. Toxic loans guaranteed by Fannie Mae are close to $150 bn now and the govt is seriously considering winding it down, along with twin Freddie Mac; the duo own or have guaranteed $5.3 tn out of total housing loans of $12 tn.

Worries about China are being voiced more worriedly than before. Overvalued equities, rapidly expanding money supply, amazingly high real estate prices and even the high inventories of key commodities are among key concerns of analysts. Hu Shuli of Caijing fame felt compelled to call Chinese policy-makers intoxicated and her ace columnist Andy Xie called Chinese assets markets a giant Ponzi scheme. Is China a bubble about to burst? One thing the developed have failed to grasp is the legendary ability of the developing to live with less. Unlike the developed, they don’t gasp with pain if denied a dessert after dinner. In Asia, more wounds heal naturally than are treated at pricey hospitals.

Clinton got N Korea to free two US journalists but Swiss banks are offering candy against the demand for a chocolate bar, it costs less to insure debt to Russia than borrowings of California, China has replaced the US as Africa’s largest trading partner and after having scolded Europeans for years for their willingness to buy gas from Russia, it has started looking hungrily at cheaper LNG reports from across the Atlantic.

Italy is allowing a one year moratorium on loans to SMEs, India’s exports declined for 9th consecutive month, retail sales in Germany dropped again in June, Brazil is worried about its currency appreciating alarmingly, house prices in Dubai are down by a half from a year ago, and wages in Japan have declined for nearly a year now.

Trade deficit of France expanded to $5.8 bn in June and watches exports of Switzerland were down 26% in H1. While a third of Russia’s upmarket clothing retailers are likely to down shutters by year end, office sales in central and eastern Europe plunged 89% in H1.

Is nothing positive happening? Well, ABC fell slower in June than in May and XYZ appears to have bottomed out since demand looked up 0.2% after having plunged 10% last month. One German politico is actually promising eradication of unemployment by 2020.

Global energy scenario is changing fast and furious. Investments in wind are being planned at scales hitherto considered weird, photovoltaic cells prices are down over 40%, nuclear power plants are getting off from the drawing board stage, and even the US has started moving towards an efficient public transport system.

While scientists are studying the likely effects of millions of tons of plastic garbage lying below the sea, off the Hawaiian Islands, wine producers are planning to pack in plastics, hoping to offer a litre, instead of the customary 750ml, at the same price. While British army has raised the upper limit of body mass beyond what is defined as obese by WHO, in the US, which kind of restaurants should state calorie counts on their menus has become a key concern.

The Swiss want the Pope to do something to slow the melting of glaciers, and medicos say some witnesses of 9/11 began experiencing trauma six years later. While Putin doesn’t know how to stop brides from being a major item exported by Russia, Berkeley International of London is organizing even dates for a fee. Madonna has had to cancel two concerts because tickets didn’t sell but Michael Jackson is probably smiling up above in the heaven since investors have suddenly discovered that music rights offer some decent returns.

Don’t scramble after the pricey swine flu vaccines. Instead, listen to the Russians and increase your intake of whisky to keep it away. “The Sun is still shining” and no flu is going to obliterate humanity tomorrow. In two days, tomorrow will be yesterday.

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