A deal to raise the federal debt ceiling is in the works. If it goes through, many commentators will declare that disaster was avoided. But they will be wrong.
For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.
Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.
The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.
Indeed, slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker.
And then there are the reported terms of the deal, which amount to an abject surrender on the part of the president. First, there will be big spending cuts, with no increase in revenue. Then a panel will make recommendations for further deficit reduction — and if these recommendations aren’t accepted, there will be more spending cuts.
Republicans will supposedly have an incentive to make concessions the next time around, because defense spending will be among the areas cut. But the G.O.P. has just demonstrated its willingness to risk financial collapse unless it gets everything its most extreme members want. Why expect it to be more reasonable in the next round?
In fact, Republicans will surely be emboldened by the way Mr. Obama keeps folding in the face of their threats. He surrendered last December, extending all the Bush tax cuts; he surrendered in the spring when they threatened to shut down the government; and he has now surrendered on a grand scale to raw extortion over the debt ceiling. Maybe it’s just me, but I see a pattern here.
Did the president have any alternative this time around? Yes.
First of all, he could and should have demanded an increase in the debt ceiling back in December. When asked why he didn’t, he replied that he was sure that Republicans would act responsibly. Great call.
And even now, the Obama administration could have resorted to legal maneuvering to sidestep the debt ceiling, using any of several options. In ordinary circumstances, this might have been an extreme step. But faced with the reality of what is happening, namely raw extortion on the part of a party that, after all, only controls one house of Congress, it would have been totally justifiable.
At the very least, Mr. Obama could have used the possibility of a legal end run to strengthen his bargaining position. Instead, however, he ruled all such options out from the beginning.
But wouldn’t taking a tough stance have worried markets? Probably not. In fact, if I were an investor I would be reassured, not dismayed, by a demonstration that the president is willing and able to stand up to blackmail on the part of right-wing extremists. Instead, he has chosen to demonstrate the opposite.
Make no mistake about it, what we’re witnessing here is a catastrophe on multiple levels.
It is, of course, a political catastrophe for Democrats, who just a few weeks ago seemed to have Republicans on the run over their plan to dismantle Medicare; now Mr. Obama has thrown all that away. And the damage isn’t over: there will be more choke points where Republicans can threaten to create a crisis unless the president surrenders, and they can now act with the confident expectation that he will.
In the long run, however, Democrats won’t be the only losers. What Republicans have just gotten away with calls our whole system of government into question. After all, how can American democracy work if whichever party is most prepared to be ruthless, to threaten the nation’s economic security, gets to dictate policy? And the answer is, maybe it can’t.
Tuesday, August 9, 2011
Asian Shares Plummet as Fear Spreads
HONG KONG — The turmoil in the world’s financial markets showed no sign of abating on Tuesday, with relentless selling once again sending stock markets in Asia sharply lower as investors dumped equities in favor of traditional havens like gold and U.S. Treasury securities.
Some of the steepest decreases were seen in South Korea and Hong Kong, where the main market indexes slumped 5.2 percent and 6 percent, respectively, by midafternoon. The Nikkei 225 index in Japan sagged 2.7 percent, Australia and Taiwan retreated about 0.5 percent, and the main market gauge in Indonesia gave up 3.1 percent.
Once again, investors shrugged off the fact that Asian economies — with the exception of Japan — remain in fundamentally good shape, with growth rates far above those in the West and debt levels well below those in many developed nations.
“When you get declines of this sort, it is technical factors and emotion that drive markets — the fundamentals are largely irrelevant,” said Stephen Davies, chief executive of Javelin Wealth Management in Singapore, referring to Wall Street’s plunge on Monday. The stock market there saw its worst day since December 2008, in the midst of the global financial crisis.
The Dow Jones industrial average fell 5.6 percent, and the Standard & Poor’s 500-stock index dropped 6.7 percent, accelerating a sell-off that began a couple of weeks ago.
Futures on the S.&P. 500 were down 1.7 percent during the Asian day on Tuesday, signaling that U.S. markets could sag again Tuesday.
Mr. Davies of Javelin Wealth Management characterized sentiment in Asia as “weary resignation” rather than outright panic, but he said that the markets in general had been caught in a “negative feedback loop” — where declining markets fuel worries about the economic fallout of the turmoil, which in turn undermines sentiment further.
The fear is that the upheaval could ultimately weaken the wider economy by constraining the ability and willingness of banks to extend credit to businesses and making it harder for companies to raise money from the capital markets.
On Tuesday in the United States, a few obscure but important parts of the credit market also showed signs of stress. For example, the market for commercial paper, short-term loans that companies use to finance themselves, became less favorable. This was not nearly as bad as during the financial crisis, but people will be keeping an eye on it to see if conditions deteriorate.
Friday’s decision by Standard & Poor’s to downgrade the United States’ credit rating — once deemed bulletproof — deepened the uncertainty but was not in itself the only cause of the current sell-off, many analysts and market strategists believe.
Rather, the downgrade, combined with the widening of the debt worries in Europe, highlighted the fact that governments in many parts of the developed world are having to rein in spending at a time when private-sector spending is still anemic.
“The fear is that when you remove that prop, the chances of recession go up,” Mr. Davies said. “Chances of a double-dip recession have increased markedly in the last few weeks.”
Analysts at Royal Bank of Scotland echoed that assessment, noting in a research report that although they did not believe that a renewed recession was the most likely outcome, the odds of a double dip in the United States had increased “given the risk of negative psychology feeding on itself, and with the economy already looking more fragile.”
These concerns have helped send equity markets around the world sharply lower in recent weeks, while pushing “safe haven” assets like gold, the yen and the Swiss franc to record levels.
The S.& P. 500 is now down 18 percent from its April 29 peak and is nearing official bear market territory, defined as a fall of 20 percent.
Gold, by contrast, has soared from $1,485 per ounce at the start of July, vaulting the $1,700 mark on Monday and rocketing to just under $1,770 at one point on Tuesday.
Officials in Asia tried to soothe markets on Tuesday by stressing that they were closely monitoring the situation.
“I will pay close attention to market movements with a sense of urgency today,” Japan’s finance minister, Yoshihiko Noda, was quoted by Reuters as saying.
Australia’s prime minister, Julia Gillard, told reporters, “We will continue to see economic growth,” according to Reuters.
“We should also get a degree of confidence from the strong fundamentals of our economy,” she said. Australia has been booming recently thanks to the strength of the Chinese economy, which imports massive amounts of iron ore, copper and other commodities to fuel its growth.
Graham Bowley contributed reporting from New York.
Some of the steepest decreases were seen in South Korea and Hong Kong, where the main market indexes slumped 5.2 percent and 6 percent, respectively, by midafternoon. The Nikkei 225 index in Japan sagged 2.7 percent, Australia and Taiwan retreated about 0.5 percent, and the main market gauge in Indonesia gave up 3.1 percent.
Once again, investors shrugged off the fact that Asian economies — with the exception of Japan — remain in fundamentally good shape, with growth rates far above those in the West and debt levels well below those in many developed nations.
“When you get declines of this sort, it is technical factors and emotion that drive markets — the fundamentals are largely irrelevant,” said Stephen Davies, chief executive of Javelin Wealth Management in Singapore, referring to Wall Street’s plunge on Monday. The stock market there saw its worst day since December 2008, in the midst of the global financial crisis.
The Dow Jones industrial average fell 5.6 percent, and the Standard & Poor’s 500-stock index dropped 6.7 percent, accelerating a sell-off that began a couple of weeks ago.
Futures on the S.&P. 500 were down 1.7 percent during the Asian day on Tuesday, signaling that U.S. markets could sag again Tuesday.
Mr. Davies of Javelin Wealth Management characterized sentiment in Asia as “weary resignation” rather than outright panic, but he said that the markets in general had been caught in a “negative feedback loop” — where declining markets fuel worries about the economic fallout of the turmoil, which in turn undermines sentiment further.
The fear is that the upheaval could ultimately weaken the wider economy by constraining the ability and willingness of banks to extend credit to businesses and making it harder for companies to raise money from the capital markets.
On Tuesday in the United States, a few obscure but important parts of the credit market also showed signs of stress. For example, the market for commercial paper, short-term loans that companies use to finance themselves, became less favorable. This was not nearly as bad as during the financial crisis, but people will be keeping an eye on it to see if conditions deteriorate.
Friday’s decision by Standard & Poor’s to downgrade the United States’ credit rating — once deemed bulletproof — deepened the uncertainty but was not in itself the only cause of the current sell-off, many analysts and market strategists believe.
Rather, the downgrade, combined with the widening of the debt worries in Europe, highlighted the fact that governments in many parts of the developed world are having to rein in spending at a time when private-sector spending is still anemic.
“The fear is that when you remove that prop, the chances of recession go up,” Mr. Davies said. “Chances of a double-dip recession have increased markedly in the last few weeks.”
Analysts at Royal Bank of Scotland echoed that assessment, noting in a research report that although they did not believe that a renewed recession was the most likely outcome, the odds of a double dip in the United States had increased “given the risk of negative psychology feeding on itself, and with the economy already looking more fragile.”
These concerns have helped send equity markets around the world sharply lower in recent weeks, while pushing “safe haven” assets like gold, the yen and the Swiss franc to record levels.
The S.& P. 500 is now down 18 percent from its April 29 peak and is nearing official bear market territory, defined as a fall of 20 percent.
Gold, by contrast, has soared from $1,485 per ounce at the start of July, vaulting the $1,700 mark on Monday and rocketing to just under $1,770 at one point on Tuesday.
Officials in Asia tried to soothe markets on Tuesday by stressing that they were closely monitoring the situation.
“I will pay close attention to market movements with a sense of urgency today,” Japan’s finance minister, Yoshihiko Noda, was quoted by Reuters as saying.
Australia’s prime minister, Julia Gillard, told reporters, “We will continue to see economic growth,” according to Reuters.
“We should also get a degree of confidence from the strong fundamentals of our economy,” she said. Australia has been booming recently thanks to the strength of the Chinese economy, which imports massive amounts of iron ore, copper and other commodities to fuel its growth.
Graham Bowley contributed reporting from New York.
Monday, August 1, 2011
China: How to Steal $3 Billion
In no way, shape or form am I advocating stealing $3 billion from anyone. But if you were so inclined, apparently all you have to do work on the railroad.
According to CCTV, the state-owned television broadcaster in China, Zhang Shuguang, the former deputy chief engineer at the Ministry of Railways, is accused of having deposits abroad of $2.8 billion, reports Tom Lasseter from McClatchy Newspapers. Zhang’s former boss, Liu Zhijun, the Railways minister, is accused of walking off with $155 million.
Both officials were suspended in February on graft charges. The figures had been circulating previously on China’s rumor mill, but the report by CCTV appeared to be an official confirmation, writes Malcolm Moore of The Telegraph. At least five former senior officials at the Railways ministry are now under investigation for corruption.
According to CCTV, the state-owned television broadcaster in China, Zhang Shuguang, the former deputy chief engineer at the Ministry of Railways, is accused of having deposits abroad of $2.8 billion, reports Tom Lasseter from McClatchy Newspapers. Zhang’s former boss, Liu Zhijun, the Railways minister, is accused of walking off with $155 million.
Both officials were suspended in February on graft charges. The figures had been circulating previously on China’s rumor mill, but the report by CCTV appeared to be an official confirmation, writes Malcolm Moore of The Telegraph. At least five former senior officials at the Railways ministry are now under investigation for corruption.
Zhang is regarded as the “father of China’s high-speed railways,” according to Asia Times. He supported Liu’s plans for “leapfrog development” by building a $300 billion high-speed rail network covering nearly 10,000 miles by 2015.
Zhang reportedly has his $2.8 billion stashed away in Swiss and US bank accounts, and owns three luxury homes in Los Angeles, despite his status as a prefecture-level official, with a monthly salary of just $1,240 (8,000 yuan). His wife and daughter live in the U.S.
Last weekend, two high speed trains collided off a bridge in Zhejiang province, killing 40 and injuring nearly 200.
Chinese Premier Wen Jiabao vowed to punish any corrupt person found responsible for the crash, wrote Gillian Wong from AP. “If corruption was found behind this, we must handle it according to law and will not be soft. Only in this way can we be fair to those who have died,” Wen said.
China’s Dollar Problem
China is the biggest holder of US debt outside of US fixed income investors. It’s been diversifying away from buying US Treasurys all year, and instead has been buying gold and other developing market investment grade bonds. In fact, China demand for euro debt is one of the reasons why the euro — despite the budget problems in Greece and Portugal — has managed to hold steady against the dollar.
In this regard, China’s dollar problem has been good for the euro. Yu Yongding, a former adviser to the People’s Bank of China, has called on the government to reduce its demand of US debt and to buy bonds from other countries instead. China cannot really short US bonds on any meaningful level, because if it induced a sell-off of US bonds, it would be shorting its own portfolio.
“China will probably seek to calm markets rather than risk startling them with a policy change,” said Mark Williams, an economist at Capital Economics in a research note.
Chinese officials said buying euro zone debt was its best alternative, but there is no doubt that wherever the dollar goes from here, China will continue to buy a lot of Treasuries.
President Barack Obama announced Sunday that Congress finally agreed to raise the $14.26 trillion debt ceiling by $2.4 trillion in a best case scenario, and to cut an initial $12.4 trillion from federal government over the next 10 years. But the agreement is still subject to more voting. There are still some unknowns about the debt ceiling. At least $500 million is subject to more voting.
Once the market fully digests the debt deal (if Congress ever puts it to bed), then the dollar will make its move. If the market views the deal as long term positive, the dollar will stabilize or gain against the euro. If the market views the deal as long-term weak, then the dollar will continue its downward trend against all currencies and commodities, which is problematic for China.
The weak dollar means higher commodity prices, and China is the leading importer of raw materials. China’s appetite for iron ore, soybeans and crude oil lends support to those higher prices, as well. As a result of this combination — weak dollar/China demand — China ends up importing its own inflation problems.
China’s consumer price index hit a three-year high of 6.4% in June. Expectations are that July could be even higher. Zhu Baoliang, chief economist at the State Information Center, a top government think tank, told China Daily on Monday that the country’s core inflation for July would be similar to June.
“Once the alarm of debt default is removed, China will not suffer an immediate effect. Instead, the effect…will eventually be seen in the long term,” Zhu said, adding that cuts over the next 10 years wouldn’t be enough to lower US debt to GDP going forward.
Under Standard & Poor’s baseline macroeconomic scenario, net general government debt will reach 84% of GDP in two years, based on 3% GDP growth over the same period and the end of the Bush tax cuts in 2012. The high debt-to-GDP percentage indicates what Standard & Poor’s credit analysts called “a relatively weak government debt trajectory compared with those of the US’s closest ‘AAA’ rated peers – France, Germany, the U.K., and Canada.”
Lu Zhengwei, chief economist with Industrial Bank Co Ltd, told China Daily that a third round of quantitative easing could be in the works if the economy slows further in the second half. The second quarter growth was barely over 1%. Another round of quantitative easing, whatever it may be called, would cause the dollar to weaken as investors turn to hard assets like commodities to hedge.
“If the unemployment rate continues to rise, it will further damage investor confidence and force them to move away from US Treasury securities, leaving the US government no choice but to print money and depreciate its currency,” Lu told China Daily.
China maybe be down on US debt, but its purchases of US Treasurys have risen steadily for the last five years, going from $527 billion in 2005 to $1.6 trillion in 2010. This year, China has made $1.2 trillion in US government bond purchases as of May 31, according to the Federal Reserve Board. That’s around $250 billion worth of US Treasurys purchased by China each month. At that pace, China will likely purchase more government debt in 2011 than it did in 2010.
China investment bank, China International Capital Corp, said in a report on Monday that the US economy remains a cause for concern even with the debt debate finally “over”.
China Daily got its hands on the report and quoted an analyst who wrote that “The debt crisis may have a negative impact on the fiscal spending of the US government, which may drag down the US economy for the rest of the year,” writes Hou Zhenhai of China International Capital. In that case, QE3 is a possibility. In the US, the market is not expecting another round of easing. But moods on Wall Street can change fast.
Come and get it...
“The dollar and the euro are fighting in an ugly contest,” said Martin Schulz, managing director of international equity at PNC Capital in Cleveland. “The Chinese government, in fact, is being forced to go through a process of ‘worsification’. There’s not a lot of quality out there in the developed world,” he said.In this regard, China’s dollar problem has been good for the euro. Yu Yongding, a former adviser to the People’s Bank of China, has called on the government to reduce its demand of US debt and to buy bonds from other countries instead. China cannot really short US bonds on any meaningful level, because if it induced a sell-off of US bonds, it would be shorting its own portfolio.
“China will probably seek to calm markets rather than risk startling them with a policy change,” said Mark Williams, an economist at Capital Economics in a research note.
Chinese officials said buying euro zone debt was its best alternative, but there is no doubt that wherever the dollar goes from here, China will continue to buy a lot of Treasuries.
President Barack Obama announced Sunday that Congress finally agreed to raise the $14.26 trillion debt ceiling by $2.4 trillion in a best case scenario, and to cut an initial $12.4 trillion from federal government over the next 10 years. But the agreement is still subject to more voting. There are still some unknowns about the debt ceiling. At least $500 million is subject to more voting.
Once the market fully digests the debt deal (if Congress ever puts it to bed), then the dollar will make its move. If the market views the deal as long term positive, the dollar will stabilize or gain against the euro. If the market views the deal as long-term weak, then the dollar will continue its downward trend against all currencies and commodities, which is problematic for China.
The weak dollar means higher commodity prices, and China is the leading importer of raw materials. China’s appetite for iron ore, soybeans and crude oil lends support to those higher prices, as well. As a result of this combination — weak dollar/China demand — China ends up importing its own inflation problems.
China’s consumer price index hit a three-year high of 6.4% in June. Expectations are that July could be even higher. Zhu Baoliang, chief economist at the State Information Center, a top government think tank, told China Daily on Monday that the country’s core inflation for July would be similar to June.
“Once the alarm of debt default is removed, China will not suffer an immediate effect. Instead, the effect…will eventually be seen in the long term,” Zhu said, adding that cuts over the next 10 years wouldn’t be enough to lower US debt to GDP going forward.
Under Standard & Poor’s baseline macroeconomic scenario, net general government debt will reach 84% of GDP in two years, based on 3% GDP growth over the same period and the end of the Bush tax cuts in 2012. The high debt-to-GDP percentage indicates what Standard & Poor’s credit analysts called “a relatively weak government debt trajectory compared with those of the US’s closest ‘AAA’ rated peers – France, Germany, the U.K., and Canada.”
Lu Zhengwei, chief economist with Industrial Bank Co Ltd, told China Daily that a third round of quantitative easing could be in the works if the economy slows further in the second half. The second quarter growth was barely over 1%. Another round of quantitative easing, whatever it may be called, would cause the dollar to weaken as investors turn to hard assets like commodities to hedge.
“If the unemployment rate continues to rise, it will further damage investor confidence and force them to move away from US Treasury securities, leaving the US government no choice but to print money and depreciate its currency,” Lu told China Daily.
China maybe be down on US debt, but its purchases of US Treasurys have risen steadily for the last five years, going from $527 billion in 2005 to $1.6 trillion in 2010. This year, China has made $1.2 trillion in US government bond purchases as of May 31, according to the Federal Reserve Board. That’s around $250 billion worth of US Treasurys purchased by China each month. At that pace, China will likely purchase more government debt in 2011 than it did in 2010.
China investment bank, China International Capital Corp, said in a report on Monday that the US economy remains a cause for concern even with the debt debate finally “over”.
China Daily got its hands on the report and quoted an analyst who wrote that “The debt crisis may have a negative impact on the fiscal spending of the US government, which may drag down the US economy for the rest of the year,” writes Hou Zhenhai of China International Capital. In that case, QE3 is a possibility. In the US, the market is not expecting another round of easing. But moods on Wall Street can change fast.
Does this weekend’s agreement provide any relief to China’s dollar problem? Not really. Under the plan, a bipartisan congressional panel would seek $2.4 trillion in spending cuts or tax increases over the next 10 years. The only immediate cut is around $917 billion. If the remainder of the package fails because Congress or the president rejects its spending cut recommendations, then the rest of the spending cuts would be implemented automatically, the USA Today explained: “It’s called a ‘trigger’ and it has been used in the past, but with mixed results at best. In the 1980s and ’90s, triggers passed by Congress under Presidents Reagan, George H.W. Bush and Clinton eventually were evaded. Veterans of past budget deals say the same thing could happen this time.”
Hong Kong fund manager Agnes Deng told Forbes last week that should the debt problem lead to a credit rating downgrade by Standard & Poor’s – which called for $4 trillion in cuts on July 18– Chinese equity markets will suffer.
“A downgrade will hit this market hard,” she said in a phone interview from her office in Hong Kong. “China’s market is perceived as a higher beta market and when investors become risk averse, they don’t want to hold high beta assets so there will be a lot of selling in Hong Kong and Shanghai,” she said.
The World’s Highest-Paid Soccer Players
David Beckham arrived to play for the Los Angeles Galaxy four years ago amid much hoopla of turning the U.S. into a soccer-loving country. His American summer debut was a media circus with stars like Tom Cruise, Eva Longoria, Mary-Kate Olsen and Arnold Schwarzenegger turning out to catch a glimpse of Becks on the field.
Alas the soccer explosion in the U.S. didn’t happen. Major League Soccer has had success, but it continues to appeal to a niche audience with games averaging 249,000 viewers on ESPN2 last season. The Galaxy failed to make the playoffs during Beckham’s first two seasons and he scored only nine goals in his first four years with the Galaxy as injuries slowed his game.
Yet the move to the U.S. was a huge success financially for Beckham. Despite being in the twilight of his career (he turns 36 next month), Beckham continues to be the highest-paid soccer player in the world with total earnings of $40 million last year (click below for the full list).
Beckham added Electronic Arts and Diet Pepsi to his endorsement stable over the past year (he also inked a short-term agreement with Yahoo). His Adidas contract is the biggest in the sport thanks to royalties from soccer apparel and cleats as well as lifestyle lines like ObyO. He also has a cologne deal with Coty and pitches Go3’s Omega-3 line of products.
The Beckham marketing juggernaut shows no sign of slowing down. Later this year Beckham plans to launch his own underwear label and line of grooming products. He will also be a sought after partner for companies looking to advertise in the run-up to the 2012 London Olympic Games, where he’ll serve as an unofficial “host” for his hometown Games (Beckham was a bid ambassador when London won the rights to the Games).
Alas the soccer explosion in the U.S. didn’t happen. Major League Soccer has had success, but it continues to appeal to a niche audience with games averaging 249,000 viewers on ESPN2 last season. The Galaxy failed to make the playoffs during Beckham’s first two seasons and he scored only nine goals in his first four years with the Galaxy as injuries slowed his game.
Yet the move to the U.S. was a huge success financially for Beckham. Despite being in the twilight of his career (he turns 36 next month), Beckham continues to be the highest-paid soccer player in the world with total earnings of $40 million last year (click below for the full list).
In Pictures: Soccer’s Highest-Paid Players
“Beckham is more analogous to a Hollywood star than a footballer,” says Michael Stirling, CEO of Global Sponsors, which manages sponsorship properties worldwide. His appeal as a player has diminished as he enters the final season of his Galaxy contract (he intends to keep playing after this year), but he is a global celebrity that everyone knows.Beckham added Electronic Arts and Diet Pepsi to his endorsement stable over the past year (he also inked a short-term agreement with Yahoo). His Adidas contract is the biggest in the sport thanks to royalties from soccer apparel and cleats as well as lifestyle lines like ObyO. He also has a cologne deal with Coty and pitches Go3’s Omega-3 line of products.
The Beckham marketing juggernaut shows no sign of slowing down. Later this year Beckham plans to launch his own underwear label and line of grooming products. He will also be a sought after partner for companies looking to advertise in the run-up to the 2012 London Olympic Games, where he’ll serve as an unofficial “host” for his hometown Games (Beckham was a bid ambassador when London won the rights to the Games).
The economic downturn had companies around the world scrutinizing expenses the past few years and athlete endorsements were no different. Gillette let deals with Thierry Henry, Ricardo Kaka and Lionel Messi expire. Coca-Cola did not re-sign Manchester United striker Wayne Rooney when their agreement ran out at the end of 2010.
While a few deals have expired, the sponsorship market is still strong for the top players according to Stirling. Sponsors are seeking bigger time commitments from athletes in some cases or flexibility in the deal terms, but deals are still getting done.Ranking No. 2 on our list of the highest-paid soccer players is Cristiano Ronaldo who made $38 million in 2010 (our earnings figures include salaries, bonuses and endorsement income). Ronaldo’s earnings are split evenly between his Real Madrid salary and endorsement income from Nike, Armani, Castrol and others.
Ronaldo is able to reach a massive audience through social media. His 24 million Facebook fans are twice as many as any other athlete (Michael Jordan is second with 10 million fans). His Facebook audience is split evenly between men and women, which makes Ronaldo attractive to a wide range of companies as a pitchman. His 2.4 million Twitter followers are topped only by Shaquille O’Neal, Kaka and Lance Armstrong amongst athletes.
Another athlete looking to social media is Messi who ranks No. 3 on our list with earnings of $32 million in 2010. Messi launched a Facebook account this month and quickly signed up more than seven million fans. The two-time Player of the Year has beefed up his endorsement portfolio in recent years. Current sponsors like Adidas, Lay’s, Konami, Audemars Piguet, Chery and Air Europa net Messi $16 million annually on top of the $16 million he earned last year from Barcelona in salary and bonuses.
The World’s 50 Most Valuable Sports Teams
The NFL has grown explosively over the past 25 years as TV revenue jumped 700%. The league’s 32 teams now divide $3.8 billion annually under the current round of broadcast deals, which expire after the 2013 season. With ratings at record levels, the next TV contracts are bound to be even more lucrative. Teams that were selling for $70 million in the mid-1980s are now worth $1 billion on average.
NFL owners claim they are not getting a big enough share of the league’s $9 billion in revenue, but a look at the world’s 50 most valuable sports teams shows how valuable NFL teams already are. The list is littered with NFL franchises–all 32 teams make the cut, led by the Dallas Cowboys, worth $1.81 billion. Yet the top franchise plays a different kind of football. English Premier League power Manchester United is the world’s most valuable sports team, worth $1.86 billion.
The Glazer family, which also owns the NFL’s Tampa Bay Buccaneers (No. 18 at $1.03 billion), bought United in 2005 for $1.5 billion, but quickly drew the wrath of fans after the purchase saddled the team with a massive debt load. Fans feared the team would not have the resources to pay top players. In November the Glazers paid off $330 million of the debt which now stands at $756 million, or 41% of the team’s value (the average debt-to-value ratio of the top 50 franchises is 26%). Even better for fans of the Red Devils, the team captured its record 19th English Premier League title this year and made the finals of the UEFA Champions League before falling to Barcelona (No. 26 on our list, worth $975 million).
The finances of Manchester United continue to look up. This season marked the first year of its new shirt sponsorship with Aon, worth $32 million annually over four years. It represents a 50% bump from its prior deal with AIG. The team is reportedly in line to get a similar increase for its merchandise deal with Nike, which already pays United nearly $40 million per year. The current 13-year contract is set to expire in 2015, but a new deal is expected to be done by next year that could be worth as much as $70 million a year. Reports surfaced last month that United is considering selling shares on the Hong Kong Stock Exchange at a price that would value the club at $2.7 billion.
The Cowboys are the sports world’s second most valuable team with a worth of $1.81 billion. Jerry Jones‘ $1.25 billion stadium, which opened in 2010, features more than just a 152-foot-wide HD TV screen. Cowboys Stadium has 320 luxury suites and 15,000 club seats that generate more than $100 million annually in premium seat revenue for Jones. America’s Team has also signed a host of lucrative sponsorship deals with the likes of AT&T, Bank of America, Ford Motor and PepsiCo.
NFL owners claim they are not getting a big enough share of the league’s $9 billion in revenue, but a look at the world’s 50 most valuable sports teams shows how valuable NFL teams already are. The list is littered with NFL franchises–all 32 teams make the cut, led by the Dallas Cowboys, worth $1.81 billion. Yet the top franchise plays a different kind of football. English Premier League power Manchester United is the world’s most valuable sports team, worth $1.86 billion.
The Glazer family, which also owns the NFL’s Tampa Bay Buccaneers (No. 18 at $1.03 billion), bought United in 2005 for $1.5 billion, but quickly drew the wrath of fans after the purchase saddled the team with a massive debt load. Fans feared the team would not have the resources to pay top players. In November the Glazers paid off $330 million of the debt which now stands at $756 million, or 41% of the team’s value (the average debt-to-value ratio of the top 50 franchises is 26%). Even better for fans of the Red Devils, the team captured its record 19th English Premier League title this year and made the finals of the UEFA Champions League before falling to Barcelona (No. 26 on our list, worth $975 million).
The finances of Manchester United continue to look up. This season marked the first year of its new shirt sponsorship with Aon, worth $32 million annually over four years. It represents a 50% bump from its prior deal with AIG. The team is reportedly in line to get a similar increase for its merchandise deal with Nike, which already pays United nearly $40 million per year. The current 13-year contract is set to expire in 2015, but a new deal is expected to be done by next year that could be worth as much as $70 million a year. Reports surfaced last month that United is considering selling shares on the Hong Kong Stock Exchange at a price that would value the club at $2.7 billion.
The Cowboys are the sports world’s second most valuable team with a worth of $1.81 billion. Jerry Jones‘ $1.25 billion stadium, which opened in 2010, features more than just a 152-foot-wide HD TV screen. Cowboys Stadium has 320 luxury suites and 15,000 club seats that generate more than $100 million annually in premium seat revenue for Jones. America’s Team has also signed a host of lucrative sponsorship deals with the likes of AT&T, Bank of America, Ford Motor and PepsiCo.
The NFL’s Highest-Paid Players
SI’s Peter King reported at halftime of the Vikings-Saints game that Tom Brady and the New England Patriots had reached terms on a new four-year contract that will make Brady the highest-paid player in the game in terms of average salary. The deal is expected to be worth around $18 million annually. The previous highest average annual salary was Eli Manning at $16.3 million per year.
Brady’s title as the NFL’s top-paid player will likely be short-lived as Colts’ owner Jim Irsay has vowed that Peyton Manning’s next contract will make him the league’s financial alpha dog (Manning’s current average salary of $14 million doesn’t rank among the five highest-paid QBs). Manning is already the league’s top earner off-the-field with annual endorsement income of $10 million annually thanks to deals with Reebok, MasterCard, Gatorade, DirecTV, Sony and others.
#1 Eli Manning $39.9 million
#2 Terrell Suggs $38.3 million
#3 Julius Peppers $36 million
#4 Philip Rivers $32.1 million
#5 Albert Haynesworth $27.3 million
#6 Demarcus Ware $26.7 million
#7 Peyton Manning $24.8 million
#8 Jake Delhomme $22.4 million
#9 Matthew Stafford $21.4 million
#10 DeAngelo Hall $20.8 million
#11 Vince Wilfork $$20.6 million
#12 Nnamdi Asomugha $20.5 million
#13 Kurt Warner $20.3 million
#14 Jason Smith $19.4 million
#15 Brett Favre $18.9 million
*Incomes include salary and bonuses paid between June 2009 and June 2010 as well as endorsement and licensing income.
Image by Getty Images via @daylife
There are several ways to slice who the NFL’s highest-paid players are as the NFL system of non-guaranteed contracts is unlike any of the other three major U.S. sports leagues. You can look at average salary, total contract values or one-year payouts. The biggest deals usually include significant signing and/or roster bonuses paid out in the first year.The list below looks at cash paid out over a 12-month period to gauge the money players. Our list of the world’s 50 highest-paid athletes in July looked at earnings between June 2009 and June 2010 and nine NFL players made the final cut. The players below were the 15 highest-paid when you include salaries and endorsement income over that same time period (only the Manning brothers and Favre made big cash off-the-field and the rest relied on their playing contracts for almost their entire income).
Tom Brady was not among the top paid guys as he made $8 million from his Pats deal over that time and another $5 million from licensing, memorabalia and endorsements with the likes of Smartwater (owned by Coca-Cola), Stetson, Movado and Audi (his current deal with the Pats pays him $6.5 million this season). He’ll be on our highest-paid athletes list next year though as his contract is sure to include significant upfront money. It was important for Brady to get this deal done before the season started as it was only two years ago that his season ended with a knee injury in the first quarter of the first game of the year.Brady’s title as the NFL’s top-paid player will likely be short-lived as Colts’ owner Jim Irsay has vowed that Peyton Manning’s next contract will make him the league’s financial alpha dog (Manning’s current average salary of $14 million doesn’t rank among the five highest-paid QBs). Manning is already the league’s top earner off-the-field with annual endorsement income of $10 million annually thanks to deals with Reebok, MasterCard, Gatorade, DirecTV, Sony and others.
#1 Eli Manning $39.9 million
#2 Terrell Suggs $38.3 million
#3 Julius Peppers $36 million
#4 Philip Rivers $32.1 million
#5 Albert Haynesworth $27.3 million
#6 Demarcus Ware $26.7 million
#7 Peyton Manning $24.8 million
#8 Jake Delhomme $22.4 million
#9 Matthew Stafford $21.4 million
#10 DeAngelo Hall $20.8 million
#11 Vince Wilfork $$20.6 million
#12 Nnamdi Asomugha $20.5 million
#13 Kurt Warner $20.3 million
#14 Jason Smith $19.4 million
#15 Brett Favre $18.9 million
*Incomes include salary and bonuses paid between June 2009 and June 2010 as well as endorsement and licensing income.
The Highest-Paid Female Athletes
Maria Sharapova struggled in recent years with injuries and inconsistent play on the tennis court. Her worldwide ranking plummeted to a low of No. 126 in 2009 and she was rarely a factor in Grand Slam events. But this year Sharapova has rebounded and won 80% of her matches. She is now ranked No. 5 in the world and reached the Wimbledon finals in July; her first Grand Slam final in more than three years.
While Sharapova has bounced back on the court, off the court she never left. Sharapova is the world’s highest-paid female athlete for the seventh straight year and this year it is not even close. Sharapova earned $25 million over the last 12-months, double the amount of any other female athlete in the world.
Sharapova maintains an impressive endorsement portfolio that includes Nike, Head, Evian, Clear Shampoo, Sony Ericsson, Tiffany and Tag Heuer. Sharapova has 5.2 million Facebook fans and her partners are constantly doing things on her Facebook page to reach them. Cole-Haan (a Nike subsidiary) ran a promotion for her 24th birthday where her fans got 24% off that day.
Li is set to see her earnings soar as she has been busy signing new seven-figure deals with companies like Mercedes-Benz maker Daimler and others which joined Nike, Haagen-Dazs and Rolex in her endorsement portfolio. Before her French Open title in June, she was making $2.5 million annually off the court, but her newfound celebrity could see that figure jump by more than $10 million. We estimate Li earned $8 million (ranked eighth) in the 12-months through June, which is before most of her new deals kicked in.
While Sharapova has bounced back on the court, off the court she never left. Sharapova is the world’s highest-paid female athlete for the seventh straight year and this year it is not even close. Sharapova earned $25 million over the last 12-months, double the amount of any other female athlete in the world.
Sharapova maintains an impressive endorsement portfolio that includes Nike, Head, Evian, Clear Shampoo, Sony Ericsson, Tiffany and Tag Heuer. Sharapova has 5.2 million Facebook fans and her partners are constantly doing things on her Facebook page to reach them. Cole-Haan (a Nike subsidiary) ran a promotion for her 24th birthday where her fans got 24% off that day.
Click for full photo gallery: The 10 Highest-Paid Female Athletes
Sharapova extended her Nike agreement in 2010 for eight years that could net her as much as $70 million. Sales of her Nike line of tennis apparel were up 26% in 2010 and she now has five other Tour pros wearing the collection. Her ballet flat was the top selling shoe in 2010 at Cole Haan. She receives royalties on both her Nike and Cole Haan lines.In Pictures: World’s Highest-Paid Athletes
Our earnings estimates are for the 12-months ending July 1, 2011. We factor in prize money, salaries, appearance fees, licensing income and endorsements in our totals. Tennis players dominate the list with seven of the ten spots. The ten highest paid women made $113 million over the past 12-months, up 1% from last year. By comparison the 10 highest-paid men earned a collective $449 million.
The second highest-paid female athlete over the past year is the world’s No. 1 ranked tennis player, Caroline Wozniacki at $12.5 million. She banked $6 million in prize money and another $6.5 million from sponsors and appearances. Companies are lining up behind the 21-year old Dane hoping to catch tennis’ next big star. She added deals this year with Yonex, Compeed and Oriflame, but her biggest partner is Adidas which paid out lucrative bonuses in 2010 thanks to her No. 1 year-end ranking.Racing’s Danica Patrick ranked No. 3 at $12 million. Patrick continues to split her time between IndyCar and Nascar’s Nationwide Series. Her fourth place finish in the Sam’s Town 300 in March was the highest finish ever by a woman in a Nascar race. Rumors are swirling that Patrick will race full-time in Nascar in 2011. A permanent move to Nascar would certainly boost Patrick’s income.
In the future Sharapova’s stiffest competition as the top-paid female athlete should come from another breakout tennis star, Li Na. Li turned pro 12 years ago, but the 29-year-old’s big moment came at this year’s French Open where she became the first Chinese player to win a singles Grand Slam event. Her win was seen by 116 million people in China according to the WTA Tour.Li is set to see her earnings soar as she has been busy signing new seven-figure deals with companies like Mercedes-Benz maker Daimler and others which joined Nike, Haagen-Dazs and Rolex in her endorsement portfolio. Before her French Open title in June, she was making $2.5 million annually off the court, but her newfound celebrity could see that figure jump by more than $10 million. We estimate Li earned $8 million (ranked eighth) in the 12-months through June, which is before most of her new deals kicked in.
China’s Low Roaming Fees Won’t Be Matched Soon
BERLIN — When Su Xiaoqin, a Chinese translator living in Düsseldorf, calls family and friends back in Shanghai, she does not use the mobile network of her German operator, O2. She pops in the SIM card for China Mobile.
As a result, Ms. Su’s calls home cost as little as 2.86 renminbi, or 44 cents, a minute, a small fraction of what a call using the German SIM card would run. That is because China Mobile, the world’s largest operator, with 617 million customers, recently cut its international roaming rates, following similar cuts by its domestic rivals, China Unicom and China Telecom.
“The word has gotten around that the Chinese operators now have the best rates to China,” Ms. Su said.
While Europeans and Americans traveling abroad still face steep roaming charges, travelers from mainland China can call home for as little as it costs to make a local call in that market.
In part, that reflects the growing global clout of the Chinese mobile phone industry, where the three big operators, with a combined 889 million customers, are able to negotiate less expensive roaming deals for their users with international operators.
As a result, one should not expect the lower roaming prices paid by travelers from the mainland to come soon to consumers in Europe, the United States or other parts of the world. In part, that is because European and U.S. operators do not compete directly with their counterparts in China for mobile customers, so they have little financial incentive to match the lower prices.
David Dyson, the chief executive of Three U.K., a British mobile phone operator owned by Hutchison Whampoa, the Hong Kong company, cited another reason. He said that high roaming prices in Europe, especially for downloading data, reflected the operators’ profit expectations, not the true costs of service.
Mr. Dyson said that smaller operators, especially, could not lower roaming rates because of what it costs them to connect calls using the networks of larger operators, whose rates are driven by those profit demands.
In 2007, the European Union stepped in to limit the price of mobile roaming charges in the 27-nation bloc, but those retail price caps — 35 euro cents, or 50 U.S. cents, a minute for making a call — are higher than those paid by consumers from mainland China. In the United States, the level of roaming charges is not regulated by the government but set by American and international operators through private agreements on the costs of using each other’s networks to connect calls.
For travelers from the United States, the roaming charges can still be startlingly high.
In May, Paul O’Brien, the general legal counsel of an international maker of industrial sealants based near Philadelphia, returned home after a business trip to Milan and Rome to a $2,300 roaming bill, which he had incurred in two days of normal calling and surfing.
Mr. O’Brien described his iPhone activity during his Italy trip as moderate — making and receiving calls to the United States through Telecom Italia, and downloading and reading e-mail.
Just two days into what was a four-day trip, his U.S. operator, which he declined to name, shut off his service, citing his company’s policy.
“I was blindsided,” Mr. O’Brien said, adding that he did not know what the limit was that he had exceeded.
Local operators — in Mr. O’Brien’s case, Telecom Italia — tend to reap the most profit from roaming charges, said Deep Basu, the vice president for product strategies and consumer products at Roamware, a software maker in San Jose, California, that helps operators manage roaming traffic. But the U.S. operator, which has more customers than Telecom Italia and thus more clout in negotiating deals on roaming rates, would have received a sizable slice as well.
Customers of China Unicom, the country’s No.2 operator after China Mobile, with 182 million mobile users, pay about 2.8 renminbi, or 44 cents, a minute to call China from most countries in Europe, and as little as 1.5 renminbi from the United States.
The operator makes its low rates possible by running a huge phone callback program, called **100 Program, which assigns local land line phone numbers to its mobile customers while they are abroad and then has a company computer in China call them back over less-expensive land lines to complete their long-distance calls.
China Unicom introduced the service in May, effectively cutting its roaming rates as much as 90 percent. Sophia Tso, a spokeswoman for China Unicom in Hong Kong, said the decision to reduce roaming prices drastically had been made to serve the company’s customers, who are among the 100 million Chinese citizens who travel abroad each year.
As a result, Ms. Su’s calls home cost as little as 2.86 renminbi, or 44 cents, a minute, a small fraction of what a call using the German SIM card would run. That is because China Mobile, the world’s largest operator, with 617 million customers, recently cut its international roaming rates, following similar cuts by its domestic rivals, China Unicom and China Telecom.
“The word has gotten around that the Chinese operators now have the best rates to China,” Ms. Su said.
While Europeans and Americans traveling abroad still face steep roaming charges, travelers from mainland China can call home for as little as it costs to make a local call in that market.
In part, that reflects the growing global clout of the Chinese mobile phone industry, where the three big operators, with a combined 889 million customers, are able to negotiate less expensive roaming deals for their users with international operators.
As a result, one should not expect the lower roaming prices paid by travelers from the mainland to come soon to consumers in Europe, the United States or other parts of the world. In part, that is because European and U.S. operators do not compete directly with their counterparts in China for mobile customers, so they have little financial incentive to match the lower prices.
David Dyson, the chief executive of Three U.K., a British mobile phone operator owned by Hutchison Whampoa, the Hong Kong company, cited another reason. He said that high roaming prices in Europe, especially for downloading data, reflected the operators’ profit expectations, not the true costs of service.
Mr. Dyson said that smaller operators, especially, could not lower roaming rates because of what it costs them to connect calls using the networks of larger operators, whose rates are driven by those profit demands.
In 2007, the European Union stepped in to limit the price of mobile roaming charges in the 27-nation bloc, but those retail price caps — 35 euro cents, or 50 U.S. cents, a minute for making a call — are higher than those paid by consumers from mainland China. In the United States, the level of roaming charges is not regulated by the government but set by American and international operators through private agreements on the costs of using each other’s networks to connect calls.
For travelers from the United States, the roaming charges can still be startlingly high.
In May, Paul O’Brien, the general legal counsel of an international maker of industrial sealants based near Philadelphia, returned home after a business trip to Milan and Rome to a $2,300 roaming bill, which he had incurred in two days of normal calling and surfing.
Mr. O’Brien described his iPhone activity during his Italy trip as moderate — making and receiving calls to the United States through Telecom Italia, and downloading and reading e-mail.
Just two days into what was a four-day trip, his U.S. operator, which he declined to name, shut off his service, citing his company’s policy.
“I was blindsided,” Mr. O’Brien said, adding that he did not know what the limit was that he had exceeded.
Local operators — in Mr. O’Brien’s case, Telecom Italia — tend to reap the most profit from roaming charges, said Deep Basu, the vice president for product strategies and consumer products at Roamware, a software maker in San Jose, California, that helps operators manage roaming traffic. But the U.S. operator, which has more customers than Telecom Italia and thus more clout in negotiating deals on roaming rates, would have received a sizable slice as well.
Customers of China Unicom, the country’s No.2 operator after China Mobile, with 182 million mobile users, pay about 2.8 renminbi, or 44 cents, a minute to call China from most countries in Europe, and as little as 1.5 renminbi from the United States.
The operator makes its low rates possible by running a huge phone callback program, called **100 Program, which assigns local land line phone numbers to its mobile customers while they are abroad and then has a company computer in China call them back over less-expensive land lines to complete their long-distance calls.
China Unicom introduced the service in May, effectively cutting its roaming rates as much as 90 percent. Sophia Tso, a spokeswoman for China Unicom in Hong Kong, said the decision to reduce roaming prices drastically had been made to serve the company’s customers, who are among the 100 million Chinese citizens who travel abroad each year.
Obama and Leaders Reach Debt Deal
WASHINGTON — President Obama and Congressional leaders of both parties said late Sunday that they had agreed to a framework for a budget deal that would cut trillions of dollars in federal spending over the next decade and clear the way for an increase in the government’s borrowing limit.
With the health of the fragile economy hanging in the balance and financial markets watching closely, the leaders said they would present the compromise to their caucuses on Monday in hopes of enacting it before a Tuesday deadline to avert default.
Even as the president was speaking from the White House on Sunday night, Speaker John A. Boehner was on a conference call with House Republicans, trying to sell them on the proposal he had signed off on only minutes before.
Since he is likely to lose the most conservative elements of his rank and file, Mr. Boehner faces the task of framing the pact as friendly enough to Republican principles to win over a significant group of House Republicans without alienating Democrats he will need to push it over the top.
President Obama, in a hastily called appearance with reporters that ended a day of uncertainty, said that the compromise would “allow us to avoid default and end the crisis that Washington imposed on the rest of America.”
“It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months,” he said. “And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.”
Just before Mr. Obama spoke on television, the two Senate leaders, Harry Reid and Mitch McConnell, took the floor to endorse the pact as well.
“I am relieved to say that leaders from both parties have come together for the sake of our economy to reach a historic, bipartisan compromise that ends this dangerous standoff,” said Mr. Reid, the majority leader.
The tentative agreement calls for at least $2.4 trillion in spending cuts over 10 years, a new Congressional committee to recommend a deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt ceiling.
The announcement concluded a tumultuous 24 hours that saw hopes rise Saturday night over the prospect of a deal that might have concluded the budget stalemate. By Sunday, worry set in again as lawmakers and White House officials struggled to hammer out the fine points of an agreement that must clear a Senate controlled by Democrats as well as the Republican House.
If the deal is approved, establishing a special joint committee to explore deficit reduction, it will ensure that the size and scope of the federal government and the tension between spending and taxes will remain front and center in the Washington debate headed into the 2012 election.
Markets reacted favorably to the announcement, with Asian markets jumping on news of the deal. The Nikkei was up nearly 2 percent in late-morning trading; the dollar rose against the Japanese yen.
President Obama tempered his comments by noting that “there are still some very important votes to be taken” and that winning House approval would be a particular challenge.
On the conference call, Mr. Boehner sought to portray the new agreement as one heavily tilted toward the Republican call for no new revenue, and he said it met the goal of instituting cuts greater than the amount of the debt limit increase. In a presentation, he said the pact would prevent a “job-killing default” — a warning to lawmakers that failure to raise the limit could add to the bleak employment picture.
“Our framework is now on the table that will end this crisis in a manner that meets our principles of smaller government,” said Mr. Boehner, who said he hoped to get the legislation onto the House floor as quickly as possible. Participants on the call, which lasted about an hour, said that the tone was cordial and that lawmakers expressed less resistance than had been anticipated.
At the same time, Representative Nancy Pelosi of California, the former speaker and current Democratic leader, was noncommittal about the plan, suggesting that Democrats might not rally behind it. “I look forward to reviewing the legislation with my caucus to see what level of support we can provide,” she said in a written statement.
With the health of the fragile economy hanging in the balance and financial markets watching closely, the leaders said they would present the compromise to their caucuses on Monday in hopes of enacting it before a Tuesday deadline to avert default.
Even as the president was speaking from the White House on Sunday night, Speaker John A. Boehner was on a conference call with House Republicans, trying to sell them on the proposal he had signed off on only minutes before.
Since he is likely to lose the most conservative elements of his rank and file, Mr. Boehner faces the task of framing the pact as friendly enough to Republican principles to win over a significant group of House Republicans without alienating Democrats he will need to push it over the top.
President Obama, in a hastily called appearance with reporters that ended a day of uncertainty, said that the compromise would “allow us to avoid default and end the crisis that Washington imposed on the rest of America.”
“It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months,” he said. “And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.”
Just before Mr. Obama spoke on television, the two Senate leaders, Harry Reid and Mitch McConnell, took the floor to endorse the pact as well.
“I am relieved to say that leaders from both parties have come together for the sake of our economy to reach a historic, bipartisan compromise that ends this dangerous standoff,” said Mr. Reid, the majority leader.
The tentative agreement calls for at least $2.4 trillion in spending cuts over 10 years, a new Congressional committee to recommend a deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt ceiling.
The announcement concluded a tumultuous 24 hours that saw hopes rise Saturday night over the prospect of a deal that might have concluded the budget stalemate. By Sunday, worry set in again as lawmakers and White House officials struggled to hammer out the fine points of an agreement that must clear a Senate controlled by Democrats as well as the Republican House.
If the deal is approved, establishing a special joint committee to explore deficit reduction, it will ensure that the size and scope of the federal government and the tension between spending and taxes will remain front and center in the Washington debate headed into the 2012 election.
Markets reacted favorably to the announcement, with Asian markets jumping on news of the deal. The Nikkei was up nearly 2 percent in late-morning trading; the dollar rose against the Japanese yen.
President Obama tempered his comments by noting that “there are still some very important votes to be taken” and that winning House approval would be a particular challenge.
On the conference call, Mr. Boehner sought to portray the new agreement as one heavily tilted toward the Republican call for no new revenue, and he said it met the goal of instituting cuts greater than the amount of the debt limit increase. In a presentation, he said the pact would prevent a “job-killing default” — a warning to lawmakers that failure to raise the limit could add to the bleak employment picture.
“Our framework is now on the table that will end this crisis in a manner that meets our principles of smaller government,” said Mr. Boehner, who said he hoped to get the legislation onto the House floor as quickly as possible. Participants on the call, which lasted about an hour, said that the tone was cordial and that lawmakers expressed less resistance than had been anticipated.
At the same time, Representative Nancy Pelosi of California, the former speaker and current Democratic leader, was noncommittal about the plan, suggesting that Democrats might not rally behind it. “I look forward to reviewing the legislation with my caucus to see what level of support we can provide,” she said in a written statement.
China 'orders shutdown' of fake Apple stores
 |
| China's law prohibits firms from copying the 'look and feel' of other companies' stores, but enforcement is patchy [AFP] |
Chinese officials have ordered the shut down of two fake Apple stores in Kunming in Yunnan province, in apparent reaction to media publicity over unauthorised stores in the country, a local newspaper has reported.
A total of five self-branded 'Apple stores' were found to be operating without authorisation from Apple according to the Metropolitan Times report, posted on the Kunming government website on Monday.
Two stores were told to shut down because they did not have an official business licence, the paper said, rather than concerns over copyright or piracy.
Inspections of around 300 shops in Kunming were carried out after a blog post by an American living in this southwestern town exposed a near flawless fake Apple store where even the staff were said to be convinced they were working for the iPhone and iPad maker.
That store, one of three found by the "BirdAbroad" blogger in the city, was not one of the stores closed.
Countless unauthorised resellers of Apple and other brands' electronic products throughout China sell the real thing but buy their goods overseas and smuggle them into the country to skip taxes.
All five unauthorised Apple shops in Kunming were selling genuine Apple products, the newspaper said.
Most valuable company
Apple has just four genuine Apple stores in China, all in Beijing and Shanghai.
The company, which has 13 authorised resellers in Kunming, could not be reached for comment.
Apple's brand is the world's most valuable, worth some $153bn, according to a report earlier this year.
In addition to protecting trademarks, Chinese law prohibits companies from copying the "look and feel" of other companies' stores, but enforcement is patchy.
The US and other Western countries have often complained that China is woefully behind in its effort to stamp out intellectual property theft.
In May, China was listed for the seventh year by the US Trade Representative's office as a country with one of the worst records for preventing copyright theft.
Piracy and counterfeiting of US software and a wide range of other intellectual property in China cost US businesses alone an estimated $48bn and 2.1 million jobs in 2009, the US International Trade Commission has said.
China dives deeper in resource race
Submersible conducts country's deepest manned dive that points to its fast-growing technical capabilities.
Chinese submersible has conducted the country's deepest manned dive in the latest technological milestone for China, which theoretically puts most of the ocean floor's vast resources within its reach.
The Jiaolong undersea craft - named after a mythical sea dragon - reached 5,057 metres below sea level in a test dive on Tuesday in the northeastern Pacific, China's oceanic administration said.
Though less than half as deep as a record dive by the US Navy in 1960, the achievement highlights China's push to catch up with advanced nations in space, sea, and polar exploration, and points to its fast-growing technical capabilities.
Chinese scientists aim to complete the world's deepest dive in a manned submersible in 2012 by going to 7,000 metres, state news agency Xinhua reported on Tuesday.
"Such a depth means the Jiaolong is capable of reaching over 70 per cent of the seabeds in the world," Xinhua quoted head of the diving operation Wang Fei as saying.
Undersea resource race
The current depth record holder is Japan's Shinkai 6500, which dived to 6,527 meters in August 1989.
"At a depth of 5,000 meters, the Jiaolong withstood great pressure amounting to 5,000 tonnes per square meter," Wang said.
China has pushed hard in recent years to obtain oil, minerals and other resources needed to fuel its growth, and has said its submersible programme is aimed at scientific research and the peaceful exploration and use of natural resources.
Scientists say the oceans' floors contain rich deposits of potentially valuable minerals, but the extreme depths pose technical difficulties in harvesting them on a wide scale.
But it may not take China long to begin reaching these riches, Jian Zhimin, director of the marine geology laboratory at Shanghai's Tongji university, told the AFP news agency.
"I don't think it will be a very long time before China can perform deep-sea ocean-floor mining," he said, noting that many of the most valuable oceanic mineral resources are located around the Jiaolong's maximum designed depth of 7,000 metres.
Regional rivalries
During a Jiaolong dive to the bottom of the disputed South China Sea last year, it planted a Chinese flag in the seabed in what some saw as a provocative act.
The South China Sea, believed to be rich in oil and gas, is claimed in whole or in part by China and several other nations.
Some concerns also have been raised that deep-sea vessels could have military applications such as tapping into or severing communications cables.
China's successful dive comes after Japanese media earlier this year said Japan planned to step up its search for undersea mineral reserves, setting up a potential race for seabed resources.
Japanese researchers earlier this month said they had detected vast reserves of rare earths - substances used in many high-tech electronics - on the Pacific seabed.
Chinese state news agency Xinhua quoted the submersible's chief designer, Xu Qinan, as touting its "state-of-the-art" systems but noting that some components had been imported from abroad, such as the high-definition video and transmission equipment.
Chinese submersible has conducted the country's deepest manned dive in the latest technological milestone for China, which theoretically puts most of the ocean floor's vast resources within its reach.
The Jiaolong undersea craft - named after a mythical sea dragon - reached 5,057 metres below sea level in a test dive on Tuesday in the northeastern Pacific, China's oceanic administration said.
Though less than half as deep as a record dive by the US Navy in 1960, the achievement highlights China's push to catch up with advanced nations in space, sea, and polar exploration, and points to its fast-growing technical capabilities.
Chinese scientists aim to complete the world's deepest dive in a manned submersible in 2012 by going to 7,000 metres, state news agency Xinhua reported on Tuesday.
"Such a depth means the Jiaolong is capable of reaching over 70 per cent of the seabeds in the world," Xinhua quoted head of the diving operation Wang Fei as saying.
Undersea resource race
The current depth record holder is Japan's Shinkai 6500, which dived to 6,527 meters in August 1989.
"At a depth of 5,000 meters, the Jiaolong withstood great pressure amounting to 5,000 tonnes per square meter," Wang said.
China has pushed hard in recent years to obtain oil, minerals and other resources needed to fuel its growth, and has said its submersible programme is aimed at scientific research and the peaceful exploration and use of natural resources.
Scientists say the oceans' floors contain rich deposits of potentially valuable minerals, but the extreme depths pose technical difficulties in harvesting them on a wide scale.
But it may not take China long to begin reaching these riches, Jian Zhimin, director of the marine geology laboratory at Shanghai's Tongji university, told the AFP news agency.
"I don't think it will be a very long time before China can perform deep-sea ocean-floor mining," he said, noting that many of the most valuable oceanic mineral resources are located around the Jiaolong's maximum designed depth of 7,000 metres.
Regional rivalries
During a Jiaolong dive to the bottom of the disputed South China Sea last year, it planted a Chinese flag in the seabed in what some saw as a provocative act.
The South China Sea, believed to be rich in oil and gas, is claimed in whole or in part by China and several other nations.
Some concerns also have been raised that deep-sea vessels could have military applications such as tapping into or severing communications cables.
China's successful dive comes after Japanese media earlier this year said Japan planned to step up its search for undersea mineral reserves, setting up a potential race for seabed resources.
Japanese researchers earlier this month said they had detected vast reserves of rare earths - substances used in many high-tech electronics - on the Pacific seabed.
Chinese state news agency Xinhua quoted the submersible's chief designer, Xu Qinan, as touting its "state-of-the-art" systems but noting that some components had been imported from abroad, such as the high-definition video and transmission equipment.
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