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WNDI 2008 1Spending DA Aff

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Spending DA Aff .............................................................................................................................1

Non-Unique.................................................................................................................................................................2

Non-Unique .....................................................................................................................................2

Non-Unique A2: GDP..............................................................................................................................................3

Non-Unique A2: GDP .................................................................................................................3

Non-Unique Consumer Confidence.........................................................................................................................4

Non-Unique Consumer Confidence ...........................................................................................4

No Link President....................................................................................................................................................5

No Link President .......................................................................................................................5

Link Turn (Competitiveness)......................................................................................................................................6

Link Turn (Competitiveness) ........................................................................................................6

Link Turn (Oil)............................................................................................................................................................7

Link Turn (Oil) ...............................................................................................................................7

Link Turn (Oil) 1/2......................................................................................................................................................8

Link Turn (Oil) 1/2 .........................................................................................................................8

Link Turn (Oil) 2/2......................................................................................................................................................9

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Link Turn (Ethanol)..................................................................................................................................................10

Link Turn (Ethanol) .....................................................................................................................10

No Impact Resilience.............................................................................................................................................11

No Impact Resilience .................................................................................................................11

No Impact Resilience.............................................................................................................................................12

No Impact Resilience ................................................................................................................12

No Impact China....................................................................................................................................................13

No Impact China .......................................................................................................................13

No Impact Competitiveness...................................................................................................................................14

No Impact Competitiveness .....................................................................................................14 No Impact Competitiveness...................................................................................................................................15

No Impact Competitiveness .....................................................................................................15


2/15


Non-Unique

Recession is inevitable credit crisis, auto industry, consumer confidence, employment

Joseph Brusuelas, Chief Economist, Merk Investments, July 11, 2008, An Economy in TroubleOver the past few weeks many notable analysts have made the case that the economy is in the process ofrecovery.

The market has celebrated the wonder of the resilient consumer. Given the still fragile state of the economy we thinkthat this is a

bit overblown. A cold-eyed, hard-nosed analysis of the true condition of all things financial provides us

with a very different assessment of the economy. But, with a major week of fundamental data and the onset of earnings

season for financials upon us we thought it pertinent to put a few ideas to rest. First, the credit crisis has yet to run its

course. A genuine credit crisis is comprised of two components: a liquidity crisis and insolvency crises. With already $400.00 billionin global write offs within the financial sector alone one might be tempted to declare the credit crises over. Yet, the problems on the

balance sheets of financials will continue. Write-downs and the process of de-leveraging have yet to be finalized. We believe that thereare $75-$100 billion in write downs left in the US alone before we reach a conclusion to the liquidity portion of the crises. This willcontinue to depress whatever appetite for risk taking in equity and credit markets remains. The Fed did not extend its primary dealer

credit facility well into 2009 by accident. Moreover, we have only begun to embark on the insolvency portion of the

economic tragedy unfolding before our eyes. Too many market players are operating on the unspoken assumption that thefall of Bear Stearns and the near miss at Lehman have signaled that the end of the troubles are at hand. Unfortunately, this is not the

case. The crisis that has primarily engulfed Wall Street is beginning to spillover onto Main Street. Ford and GM will both be

candidates for mergers, bankruptcies or bailouts in 2009. It is quite clear to anyone that care to look that Fannie Maeand Freddie Mac will have to be bailed out by the Federal Government. Pending legislation in Congress regarding the end of private fee

for service, if it is enacted, will put at least one major player in the healthcare sector and one minor actor at serious risk of insolvencyearly next year. And do not forget the 200-250 small and regional banks that the Fed has warned us will eventually fail. Even suchstalwarts as the gaming sector, which has been traditionally impervious to systemic economic slowdowns is going to see a spree ofconsolidations and perhaps a few insolvencies on the back of too much debt and a sharp reduction in demand from consumers who have

seen their discretionary income evaporate. Second, the consumer is no longer resilient but in fairly significant

trouble.A well -timed and quickly implemented fiscal stimulus program is masking the true condition of the

consumer. Pre-fiscal stimulus, the trend in real personal consumption was absolutely flat. Once the positive aspects of the stimuluswithers away the prevailing trend in real consumption will reassert itself and we shall be back to where we were in the first quarter of the

year. The market has observed six consecutive months of contraction in non-farm payrolls. Growth in the once

vibrant service sector has collapsed to near zero growth over the past three months. The major factors keeping the labor sectorfrom collapsing appears to be the very questionable birth-death model at the Bureau of Labor Statistics and the aforementionedhealthcare and hospitality sectors. Over the next few months the modeling at the BLS will catch up with reality and the

healthcare/leisure sector will experience outsized contraction based on current economic conditions and trends. The decline in real

income will put additional pressure on an already stressed consumer and set the stage for the final

capitulation . Finally, we will see a series of revisions to recent economic data, including GDP that may change current perceptions

of the economy. We expect that the downward revisions will confirm that we are in a mild recession. More

importantly, we anticipate that when we get to the final quarter of 2008 will see another downturn in economic

activity. Since 2007 my forecast for the economy has been W (no pun intended) shaped recession. We saw the first trough in lateFebruary and early March of 2008. We are currently at the middle apex of the W and expect to see growth begin to decline during the

early portion of Q408. The final trough in our double dip scenario should occur in the second quarter of next year.The sub trend 2.1% rate of growth that we expect to see in Q208 is a function of Washington priming the pump and the a vibrantexternal sector. Once the stimulus from the Federal government begins to fade and the impact of the searing increase in the cost of

energy and commodities can be assessed on a domestic and global basis, the last vestige of support for the economy, net

exports will fade to away and the US economy will see its first major recession since the early 1980s.

Recession is either inevitable or impossible

CNN interview with Fareed Zakaria, world affairs analyst, July 11, 2008, Zakaria: Perfect storm hitting U.S.economy

NEW YORK (CNN) -- Between the mortgage crisis, record high oil prices and a lackluster stock market,Americans are not exactly confident about the economy. CNN spoke with world affairs analyst and author Fareed

Zakaria about his view of the situation. CNN: How bad is the U.S. economy right now? Zakaria: It almost looks like a perfect

storm. We have a collapsing housing market, weakconsumerspending and a credit crisis that has kept

banks reluctant to extend credit easily. Plus, food and fuel prices are soaring. It's actually a sign of the

strength of the American and global economy that we're not in a big global recession given all of this. But it's

not going to get better fast. CNN: So, we're not past the worst yet? Zakaria: Look I'm not a trained economist but I had three of the

best on the show this week -- Larry Summers (Treasury Secretary for Bill Clinton) Jeff Sachs (Director of UN Millennium Project),

and Paul Krugman (op-ed columnist on economy for The New York Times). And they all agreed that it was unlikely that we

had worked through most ofthe problems in the economy. They felt we seemed to have avoided the worst of the

financial crisis but that now the real economy was beginning to show the signs of pain -- housing was going to

keep declining, the consumer would scale back and companies would cut their workforces.


3/15


Non-Unique A2: GDP

Recession is inevitable the best data proves that GDP growth will collapse

Caroline Baum, Bloomberg News Columnist, July 13, 2008, APP.com, Caroline Baum: Its all over but the datingfor U.S. recession

With no prospect for a near-term turnaround in the labor market, the real question becomes, at what point dothe employment declines gain the critical mass to warrant the official recession designation? "Depthlevel" I posed the question to Robert Hall, chairman of the BCDC, in an e-mail this week. After emphasizingthat he was "speaking as an individual member of the committee and not as chair," he said the committee"may reach the question of what depth level constitutes a recession, but we are not there yet." Thecommittee may not be there yet, but the economy most likely is. All four of the BCDC's coincidentindicators peaked late last year or early this year. The trends in the components aren't likely to reverseanytime soon. So as Hall said, it's only a matter of determining what "depth level" will suffice to make therecession official. What about real gross domestic product, which is still growing? The BCDC uses fourmonthly indicators because they are a) more timely than quarterly GDP and b) a proxy for it. Real GDProse 0.6 percent in the fourth quarter and 1 percent in the first. The meager fourth-quarterincrease couldturn to mush as early as July 31, when the Bureau of Economic Analysis releases its annual benchmarkrevisions to the National Income and Product Accounts for the last three years. A decline in GDP in thefourth quarter wouldn't be the depth charge the BCDC needs to designate an official cycle peak. That comes

with a long lag, sometimes after the recession has ended. It would just be a confirmation for those of uswho, to paraphrase economist Robert Solow, see a recession everywhere except in the GDP data.


4/15


Non-Unique Consumer Confidence

Consumer confidence going from bad to worse prefer predictive evidence

PeterCharalambous, Investment Markets UK, July 14,2008, US consumer sentiment at a 28-year low,http://www.investmentmarkets.co.uk/20080714-2260.html

US consumer confidence is at the lowest level in 28 years as spending has slowed in a period where

credit availability and the affects of the federal tax rebates are reducing. Consumers are stillconcerned about rising energy and food prices as well as job layoffs and the future of the economy stillremains bleak. The pessimism in the economy has continued to threaten consumer spending and thedomestic market, which is the largest part of the US economy. With record high petrol prices and the labourmarket weakened by continued cutbacks, as well as a troubled housing market, inflation is now teetering at3.4 percent. Future consumer confidence is likely to continue to be weak as consumers polled byReuters/University of Michigan said they expect an inflation rate of 5.3 percent over the next 12 months,which is a 0.2 percent increase from the previous month.

Consumer confidence will continue to fall

Bloomberg News, July 11, 2008, U.S. consumers still skeptical about economyConfidence among Americans remained close to the lowest level since 1980 this month, threatening tocut consumer spending and send the economy into a deeper slump. The Reuters/University of Michigan

preliminary index of consumer sentiment registered 56.6, higher than forecast and little changed from a Junereading of 56.4 that was the lowest since May 1980. Government reports showed the U.S. trade deficitunexpectedly narrowed in May and prices of imported goods rose more than forecast in June. Theconfidence reading lends support to forecasts that consumer spending and the U.S. economic expansion willslow after the impact of federal tax rebates fades. Consumer spending will increase just 0.2 percent nextquarter, the smallest gain since 1991, according to a Bloomberg News survey of economists completed thisweek. "The fundamental pressures are still building on the consumer," Scott Anderson, senior economistat Wells Fargo & Co. in Minneapolis, said in an interview with Bloomberg Television. "We expect muchweaker spending and confidence as we move into the fourth quarter of this year."


5/15


No Link President

Presidential policy-decisions dont effect the economy

Daniel Gross, Moneybox columnist for Slate and the business columnist for Newsweek, July 13, 2008, NeitherObama nor McCain can cure ailing economy

Does the president really have any effect on the short-term direction and performance of the economy?

The answer is no,but with two important "buts ." Over the past 219 years, the U.S. economy has expanded under all typesof presidents, Democratic and Republican, activist and somnolent. But there have certainly been notable policies that inflicted short-termdamage, such as Thomas Jefferson's ill-conceived embargo on trade with Britain in 1807 and Ulysses S. Grant's decision to place theUnited States back on the gold standard, which contributed to a banking panic that in turn led to a recession that lasted for nearly all ofGrant's second term. Between 1929 and 1933, as a stock-market crash and credit crunch metastasized into the Depression, Herbert

Hoover adopted a hands-off approach that exiled his party from the White House for a generation. But today, while the presidentof the United States may be the most powerful person in the world, "his influence on the short-term macro-economy is

generally overestimated by voters," says Thomas E. Mann, senior fellow at the Brookings Institution. Partisans might think theeconomy got off the mat the minute Ronald Reagan was inaugurated in 1981 or when Bill Clinton took the oath in January 1993. But thefactors that influence the business cycle are so myriad, powerful and unpredictable that not even an executive as muscular as CaliforniaGov. Arnold Schwarzenegger could bend them to his will. The megatrends that made the 1990s a long summer of economic love theend of the cold war, the deflationary influence of an emerging China, the Internet would have happened with or without Rubinomics.And most of the factors now making life miserable commodity inflation, a housing bubble and a weak dollar engineered by the FederalReserve's promiscuous policies, the demand-driven surge in oil would likely have materialized had John Kerry won in 2004. Thematuration of the Federal Reserve into a powerful, independent agency has further stolen the thunder from the presidency in short-term

economic affairs. By cutting interest rates and offering banks access to liquidity, Federal Reserve Chairman Ben Bernanke hasdone more to stimulate the economy in the past yearthan Mr. Bush or Congress. There's a third reason the

identity of the next president won't matter all that much to the economy in 2009. The past 16 years of experience not to mention this year's campaign platforms prove that Democrats and Republicans diverge sharply on fiscal and economic policy.

But on some of the big-picture items that matter most to short-term performance, a consensus has emerged over the years.Modern Republicans have learned their lesson from Hoover and have embraced the necessity for short-term fiscal stimulus when theeconomy slows. "We're all Keynesians now," as Richard Nixon said. Modern Democrats have also learned their lesson from Hoover,who signed the disastrous Smoot-Hawley Tariff into effect in 1930. Twenty-first-century Democrats generally embrace the utility of freetrade, even during economic downturns. This isn't to say that the identity of the president in 2009 won't matter. Presidents tend to havethe most success enacting new policies in the first year in office. And the next president will appoint a Federal Reserve chairman early in

his term. But and this is the first but the macroeconomic impacts of early-term policies are often evident only

after several years. Harvard economist Benjamin Friedman notes that Nixon's imposition of wage and price controls in August1971 helped smooth his re-election in 1972. "But these controls became a substitute for serious anti-inflationary policy, and were the

beginning of a set of policies that led to really severe inflation." So here's some straight talk about change we can believe in. Most of the

promises that Mr. Obama and Mr. McCain are making about the economy will founder on the shoals of a Congress

unwilling to be a rubber stamp, organized industry opposition, unanticipated events, budget realities andchanges in the macroeconomic climate.


6/15


Link Turn (Competitiveness)

Competitiveness is shot unless the US develops alternative energy

Lloyd V. Stover, Environmental Scienctist, July 12, 2008, A New Kind of Recession, Waldo County OpinionsWe are witnessing a dramatic shift in world influence. The energy-producing nations the MiddleEast, Nigeria, Russia and Venezuela, may choose to hold oil and other commodities, instead of thedeclining U.S. dollar. America needs to dramatically improve energy efficiency and develop renewable

sources. The price of oil will stay up forever because it goes into making so many things the modern worlddepends on: Petroleum, food, plastics, fabrics. And food prices affect everyone around the world. Alternativeenergies are an increasing part of the worlds energy future, and America is not a world leader.


7/15


Link Turn (Oil)

Alternative energy solves oil shocks, which kill the economy

Amy Jaffe, Baker Institute, congressional testimony on the roots of high oil prices, July 10, 2008, Cherry CreekNews

Alternative energy supplies provide ready substitutes if the price of oil rises too extremely and can

shield the economy from the negative impact from disruption of any one fuel source. It has been shownthat the lower a countrys energy consumption to gross domestic product (GDP) ratio or the shorter theperiod that oil prices will remain higher, the lower the cost of the tradeoff between inflation and GDP loss.New technologies exist on the horizon that could allow more gains in energy efficiency. Examples includemicro-turbines for distributed power markets, improved vehicle technologies, including plug-in hybridautomobile technology, household solar technologies, among others. Electricity in the United States isgenerated without recourse to oil-based fuels, providing a unique opportunity for creative avenues foralternative energy policy that would promote the use of electricity in the transportation sector.


8/15


Link Turn (Oil) 1/2

Oil shocks mean economic collapse is inevitable we must develop alternatives now

Ian Sample, Science correspondent for The Guardian, June 27, 2008, Final WarningExpensive fuel at the pumps is just the start. These battles over the price of oil could be the harbinger of something even scarier. There is

a growing realisation that we are teetering on the edge of an economic catastrophe which could be triggered

next time there is a glitch in the world's oil supply. A number of converging forces are making such anevent more likely than ever before. First, there is the spectacular rise in global oil consumption, which,according to the International Energy Agency (IEA) now stands at 87 million barrels of crude (about 10 billion litres) a day. Mostgeologists now accept we have reached, or will imminently reach, peak oil. Some fields in the US and the North Sea have been pumpeddry and production is becoming increasingly concentrated within fewer countries. Add a boost from speculators betting that things willget even worse, chicanery by the Organisation of Petroleum Exporting Countries (OPEC) cartel which over the past two years has addedAngola and Ecuador to its ranks to mask the decline in production of its existing members, and it's not hard to see why prices have beenforced ever upwards. But price conceals the much more complex mess we're in. In the past, it has usually been possible to ride out anydisruption to world oil flows - whether from accidents or hostile acts - by pumping more oil from the ground. That spare capacity hasnow all but vanished, as oil producers cash in on soaring prices by extracting as much of the stuff as they can. "There is absolutely noslack in the system any more," says Gal Luft, executive director of the Institute for the Analysis of Global Security, a Washington DC-

based think tank specialising in energy security. It is this lack of wriggle-room that has brought us to the brink. In the days when oilproducers had more leeway, they could make up for a disruption somewhere in the system by quickly raising production by around 3million barrels a day, says Nick Butler, head of the Cambridge Centre for Energy Studies, part of the University of Cambridge's Judge

Business School. That crucial reserve capacity has now fallen below the daily output of some producers - meaning that if the

taps were turned off in any one of a number of unstable oil-supplying nations, such as Nigeria, Iraq, Iran or Angola, t he impact

would be felt almost immediately. This has left the oil market so fragile that a few well-placed explosives, an

energy-sapping cold winter or an unusually intense hurricane season could send shock waves across the globe. Thepotential consequences are so serious that governments are drawing up emergency plans to cope should the worst happen. According to

one analyst who took part in a simulation of just such a crisis, the situation most experts fear is what they call a "psychological

avalanche". Here's what happens. A small, distant country one day finds it can no longer import enough oil because of a spike inprices or problems with local supply. The news media whip this up into a story suggesting an oil shock is on the way, and the resultingpanic buying by the public degenerates into a global grab for oil. Most industrialised countries keep an emergency reserve as a first lineof defence, but in the face of worldwide panic buying this may not be enough. Countries in which the oil runs out face transportmeltdown, wreaking havoc with international trade and domestic necessities such as food distribution, emergency services and dailycommerce. Without oil everything stops. The roots of our oil addiction can be traced back to the end of the 19th century, when

petroleum began to be pumped from wells across America. It wasn't long before it become obvious what a great transport fuel it couldprovide. Oil-based fuels paved the way for intensive farming and extensive road networks; they drove the influx of populations intocities, drove growth in shipping and eventually made mass air travel possible. "Oil has shaped our civilisation. Without crude oil you'dhave no cars, no shipping, no planes," says Gideon Samid, head of the Innovation Appraisal Group (IAG) at Case Western ReserveUniversity in Ohio. And it's not just about fuels. A giant chemical industry relies on oil as its feedstock, and without it many of the

products we now take for granted would vanish. "You'd see no plastics, no bags, no toys, no cases on TVs, computers or radios. It'sabsolutely everywhere," says Samid. "Much of the economic expansion and growth of the human population in

the 20th century is directly tied to the availability of large amounts of cheap oil ," says Cutler Cleveland,director of the Center for Energy and Environmental Studies at Boston University. "There isn't a single good or service consumed on the

planet, except in rural economies, that doesn't have oil embedded in it. Oil is the lifeblood of the global economy." The secret of oil'ssuccess is its portability and extraordinarily high energy density. One barrel of oil contains the energy equivalent of 46 US gallons ofgasoline; burn it and it will release more than 6 billion joules of heat energy, equivalent to the amount of energy expended by fiveagricultural labourers working 12-hour days non-stop for a year. The vast majority of oil is consumed by transport. In the US, that sectoraccounts for nearly 70 per cent of the 20.7 million barrels the country gets through each day. . More than half of the world's oil comesfrom seven countries, the leading supplier being Saudi Arabia, which produces more than 10 million barrels a day. Then come Russia,the US, Iran, China, Mexico and Canada. Twenty years ago, there were 15 oilfields able to supply 1 million barrels a day. Now, there areonly four. The largest is the Ghawar field in Saudi Arabia. The IEA, which advises 27 countries on oil emergencies, requires itsmembers to hold at least 90 days' worth of fuel, which can be pooled and released onto the market if a crisis looms. The system lastswung into action in 2005 when hurricane Katrina caused the shutdown of more than 23 per cent of the US's oil production capacity. Afew days after Katrina struck, the IEA ordered the release of 2 million barrels a day from reserve stocks for a month, the first timereserves had been released since the Gulf war in 1991. About half the world's oil is distributed by tankers mainly plying a handful of

key routes across the oceans. The rest goes through an extensive network of pipelines that can carry different grades of crude andsynthetic compounds, such as lubricants. The bewildering complex of pipelines - extending 90,000 kilometres in the US alone - crossescontinents and dips under oceans. The pipelines are often above ground and vulnerable to accidental damage or attacks by saboteurs.When working, however, they provide an extremely efficient way of transporting oil. A pipeline that pumps a relatively modest 150,000

barrels per day delivers the equivalent of 750 oil tanker truck loads or one delivery every 2 minutes, day and night. Even if a pipeline isdamaged, it can usually be quickly repaired. Valves at intervals along the pipe can isolate the leak while the damaged section is replaced.Disruption can still be costly. A report in 2005 by a US House of Representatives subcommittee on terrorism reported that sabotage to

oil pipelines in Iraq had cost the country more than $10 billion in lost revenues, even though protection had been a high priority for thecoalition troops since they invaded two years before. The report suggested that groups hostile to the US and its allies were becoming

increasingly expert at mounting these attacks. Choke points Even outside a conflict zone, accidents can cause serious

disruption. Last year, the IEA was on standby to release reserves after an explosion in Minnesota shut down part of the 5000-kilometre Enbridge pipeline, which pumps 1.9 million barrels of crude a day from Canada to the US Midwest. This single incident


9/15


Link Turn (Oil) 2/2

halted one-fifth of US oil imports for days. Oil deliveries by sea arevulnerable too. A fleet of 4000 tankers plying six mainroutes delivers more than 43 million barrels of oil every day. Many of these routes pass through narrow "choke points", and if any ofthese were to become impassable, even temporarily, the effect on oil supplies could be dramatic. For instance, more than 16 million

barrels of oil a day are shipped through the Strait of Hormuz, at the mouth of the Persian Gulf, taking oil from Saudi Arabia, Iran, Iraq,Kuwait, Qatar and the United Arab Emirates to the US, western Europe and Asia. At its narrowest point, the strait is only 33 kilometreswide. If necessary, some of Saudi Arabia's exports could be diverted through the 1200-kilometre East-West pipeline to the Red Sea, butits maximum capacity is only 5 million barrels a day, half of which is already taken up. Between 1984 and 1987, during the Iran-Iraqwar, both countries attacked tankers in the Strait of Hormuz, causing shipping to drop by 25 per cent. In 2003, the Bush administrationclaimed it had prevented further attacks on shipping in the strait. Another pinch point occurs in the Strait of Malacca, which narrows to

just 2.7 kilometres between Sumatra and Singapore. Tankers from the Persian Gulf and west Africa transport some 15 million barrels aday through the strait en route to Japan, China and other Pacific destinations. A report by Luft claims that some tankers have beenhijacked here by would-be terrorists whose initial aim has been simply to learn how to operate them. In 2003 a small chemical tankercalled Dewi Madrim was taken over by 10 armed men, who sailed it through the strait before leaving with equipment and technicaldocuments. One scenario being suggested is that hijackers might commandeer a liquid natural gas tanker plying one of these shippingroutes, load it with explosives and use it to ram an oil tanker. If this floating bomb produced a burning oil slick, it could render the

passage impassable for months, tipping the global economy into crisis as alternative routes would fail to make up the lost supplies.Another key element in the global oil infrastructure is Abqaiq, an enormous processing facility in Saudi Arabia, which removes sulphurfrom two-thirds of the country's crude. The CIA estimates that seven months after a large-scale attack, output would still be only 40 percent of its full capacity. More than half the oil from Abqaiq is pumped to the largest offshore oil terminal in the world, Ras Tanura onthe Persian Gulf, which handles one-tenth of the world's oil. This makes it a prime target for attack, and the site is as heavily defended as

a military base. "If you have a facility like this and a plane crashed into it, or terrorists get in and somehow succeed in blowing it up,then you have a very, very significant disruption on your hands. That is what analysts see as a doomsday scenario," Lufts says. Reutersreported that one planned attack on the terminal was thwarted in 2006. Saudi oil production is particularly vulnerable because it isconcentrated in a few massive production and distribution sites. "If one or two of these facilities goes down, then the entire system goesdown," says Luft. So what would the impact be if oil supplies choked? In 2005, a group of current and former US government andnational security officials were asked to address this in a live role-play exercise. Playing the part of the national security adviser wasRobert Gates, who the following year became Secretary of Defense. The scenarios that unfolded were developed with officials from theShell oil company in the Netherlands, a former US presidential counter-terrorism adviser and industry analysts. The simulation kickedoff with an upsurge of political violence in Nigeria, the fifth-largest supplier of oil to the US. In the ensuing turmoil 600,000 barrels ofoil production a day were lost from the Niger delta. The violence coincided with the start of a cold winter in the northern hemisphere,which increased demand by 700,000 barrels a day. Together, these events boosted the price of a barrel of oil from $58 to $82; a

proportional rise today would push the price beyond $195. Events began to gather pace when, a month later, the simulation threw in anattack on the Haradh natural-gas processing plant in Saudi Arabia, which forced the country to cut 250,000 barrels per day from itsexports - equivalent to the oil consumed every day in Switzerland - to meet domestic needs. Next, news arrived of an attempt to ram ahijacked supertanker into another vessel moored at a jetty at Ras Tanura. This was closely followed by a similar attack at the oil port ofValdez in Alaska, as well as a ground attack which set fuel depots alight. With the world oil shortfall now at 3.4 million barrels per day,the price per barrel had shot up to $123. Against the recent peak price of $139, that rise would take the cost per barrel to $295. Theturmoil leads to an aggressive crackdown on anti-western groups and their sympathisers, which temporarily quells further attacks. Then,six months into the simulation, a terrorist campaign is launched against foreign workers in Saudi Arabia, killing 200 and wounding 250within 48 hours. Evacuation of foreign workers follows. Though oil production continues unchecked, this loss of expertise leaves SaudiArabia unable to meet future demand and with no spare capacity. Fears that this could lead to shortages in the future bring speculatorsinto the market, and the price per barrel rises to $161. At the end of the simulation, global production has fallen by 3.5 million barrels aday, or 4 per cent of world oil supplies. One of the participants, Jim Woolsey, a former head of the CIA, described the scenarios as"relatively mild compared to what is possible", yet this proved enough to almost triple the price of a barrel of crude. The key conclusion

being drawn from this scenario is how reliant the global oil market is on Saudi Arabia's ability to ramp up production on demand. If thisextra oil is not available, the price rockets. Saudi Arabia's recent reluctance to increase production and the ensuing price rises in today'sreal-life oil market amply bear out this prediction. So where does this leave us at a time when global oil production is approaching the

point when it stops growing and starts to decline? Most industry experts, including geoscientists and economists, who were polled by

Samid in 2007 said that peak production will occur by 2010. This contrasted with a similar survey conducted two yearsearlier, in which respondents were split, with many of the economists opting for a later date. "Now, a real consensus is emerging," says

Samid. This tells us that we will have to start making serious attempts to wean ourselves off oil, and fast. It willbe no easy task. "It's hardly conceivable that the world could function without oil," says Didier Houssin, director of oil markets and

emergency preparedness at the IEA. Finding a replacement fuel for transport is the biggest challenge. So far all thealternatives have hit the skids. For example, hydrogen, which could potentially replace oil as a green fuel if made using renewablesources of energy, has storage and distribution problems. While biofuels, which could be an easier replacement for fossil fuels, requirefeedstocks that compete with food crops for water and agricultural land. "To get these alternatives close to what oil can do, you have toinvest a lot of money," says Cleveland, something most governments and energy companies have done reluctantly, and at patheticallylow levels. "These aren't insurmountable problems, but they suggest the transition has some formidable challenges," he adds. One wayor another oil will become more scarce, even more costly and will always have the disadvantage of generating carbon dioxide when it's

burned. However hard it may be, the sooner we make the break, the better.


10/15


Link Turn (Ethanol)

Ethanol is key to the economy because it saves billions a year

Robert Dinneen, President Renewable Fuels Association, July 16, 2002, Federal Document Clearing HouseCongressional Testimony

Responding to the need for increased domestic energy resources, reduced air pollution from motor vehiclesand rural economic stimulus, the Congress has consistently supported tax incentives to encourage theincreased production and use of fuel ethanol. Today, refiners and gasoline marketers using 10% ethanolblends pay 13 per gallon in excise taxes, a 5.3 per gallon reduction from the tax paid on straight gasoline. Thetax incentive is reduced to 5.2 per gallon in 2003 and 5.1 per gallon in 2005. The federal ethanol programhas been an unmitigated success. From just 175 million gallons in 1980, the industry has increased morethan ten-fold to more than 2 billion gallons today. As a result, farmers across the country have receivedhigher prices for their commodities, more than 200,000 jobs have been created in rural America, theU.S. has reduced its oil imports, and most importantly, Americans are breathing cleaner air. Taxpayersalso benefit because reduced farm program costs and increased income tax revenue attributable to thefederal ethanol program provide a net savings to the U.S. Treasury of $3.6 billion a year. Indeed, forevery dollar invested by the federal government to stimulate ethanol production and use,

approximately $6 is returned to the treasury in tax revenue and savings from reduced government outlays.

Ethanol adds millions of dollars and thousands of jobs to the economyRobert Dinneen, President Renewable Fuels Association, July 16, 2002, Federal Document Clearing HouseCongressional Testimony

Economic Benefits: The processing of grains for ethanol production provides an important value addedmarket for farmers, helping to raise the value of commodities they produce . As the third largest use ofcorn behind feed and exports, ethanol production utilizes nearly seven percent of the U.S. corn crop, orover 700 million bushels of corn, adding $4.5 billion in farm revenue annually. The U.S. Department ofAgriculture (USDA) has determined that ethanol production adds 25 - 30 to every bushel of corn. Theproduction of ethanol has sparked new capital investment and economic development in rural

communities across America. There has not been an oil refinery built in this country in 25 years. Butduring that time 63 ethanol refineries have been built, stimulating rural economies and creating jobs.USDA estimates that a 100 million gallon ethanol production facility will create 2,250 local jobs for a singlecommunity. Industry growth offers enormous potential for overall economic growth and additional

employment in local communities throughout the country. According to a Midwestern Governors'Conference report, the economic impact of the demand for ethanol: Adds $4.5 billion to farm revenueannually . Boosts total employment by 195,200 jobs . Increases state tax receipts by $450 million -

Improves the U-S- balance of trade by $2 billion - Results in $3-6 billion in net savings to the federal

Treasury.


11/15


No Impact Resilience

The capital market system and global economy is resilient

Gerd Husler, October 7, 2005, Counsellor and Director of the IMF's International Capital Markets Department,El Financiero (Mexico), Why the Global Financial System Is More Resilient

There are a number of reasons why we should be optimistic about continued international financialstability. First, capital inflows into the United Statesmost of them privatecontinue to finance the U.S.current account, and to support the U.S. dollar. These flows carry on unabated because of the country'sfavorable growth and interest rates, as well as its deep and liquid capital markets. They are unlikely tochange direction abruptly since no other country or region enjoys the combination of robust growth anddeep financial markets that the U.S. offers. Second, through countervailing forces, financial markets have away of self-correcting. Institutional investors are unlikely to sit on the fence for long and will become lessrisk-averse. They cannot afford to stay in risk-free but low-yielding cash positions, and need to remainfully invested by searching for "undervalued" assets. There are additional market forces that make panicand contagion less likely. One is the growing importance ofstrategic institutional investors, like pensionfunds and life insurance companies, who take the long view, and are less likely to succumb to herdbehavior. Another, is the increasing sophistication ofinstitutional investors, who are able to differentiatebetween country- orcompany-specific versus systemic concerns. All in all, theirdiversity has increasedover the years and so has their investment behavior. We should welcome this contribution to financial

stability. All those factors that have strengthened the financial system over the past few years nowprovide a welcome cushion if the global financial system were to come under stress . They would allowmarket participants and policy makers time to adjust and, therefore, to avoid full-blown crises. Themuch-strengthened balance sheets ofthe financial, corporate and household sectorscan serve as one suchshock absorber for financial systems against severe market corrections. The wide dispersal of financialrisk from the banking to nonbanking sectors, improved risk management, and the enhancedtransparency and disclosure in financial markets also workin the same direction. As for emergingmarkets, fundamentals have strengthened as many countries have shown solid economic performance.They have also been building cushions against possible adverse developments, by accumulating reserves,undertaking early financing of external needs, and improving debt structures. Institutional investors likepension funds are increasingly making strategic allocations to emerging bond markets, and internationalinvestors are taking an interest in local currency bonds. This should help deepen national markets andreduce emerging market vulnerability to currency risk.

( ) Economic decline doesnt cause war

Morris Miller, Winter2000, Interdisciplinary Science Reviews, Poverty as a cause of wars? V. 25, Iss. 4, p pqThe question may be reformulated. Do wars spring from a popular reaction to a sudden economic crisisthatexacerbates poverty and growing disparities in wealth and incomes? Perhaps one could argue, as some scholars do, that it is some dramatic event orsequence of such events leading to the exacerbation of poverty that, in turn, leads to this deplorable denouement. This exogenous factor might act as acatalyst for a violent reaction on the part of the people or on the part of the political leadership who would then possibly be tempted to seek a diversion by

finding or, if need be, fabricating an enemy and setting in train the process leading to war.According to a study undertaken byMinxin Pei and Ariel Adesnik of the Carnegie Endowment for International Peace, there would not appearto be any merit in this hypothesis. After studying ninety-three episodes of economic crisis in twenty-twocountries in Latin America and Asia in the years since the Second World War they concluded that:19 Muchof the conventional wisdom about the political impact of economic crises may be wrong ... The severityof economic crisis - as measured in terms of inflation and negative growth - bore no relationship to thecollapse of regimes ... (or, in democratic states, rarely) to an outbreak of violence ... In the cases of

dictatorships and semidemocracies, the ruling elites responded to crises by increasing repression (therebyusing one form of violence to abort another).


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No Impact Resilience

Theres no impact to recessionthe US economy will bounce back

W. Michael Cox, senior vice president and chief economist at the Federal Reserve Bank of Dallas, Investor's

Business Daily, 1-9-02Since 1960, the average recession lasted 11 months, with declines of 2.1 percentage points in total output and 1.7% in employment. The previous downturn,

an eight-month pause from August 1990 to March 1991, saw just a 1.5% slump in economic activity and a 1.1% drop in the number of jobs. Before 1940,only one in seven recessions was over by 11 months. A third of them hung on for at least 23 months. Between 1887 and 1950, recessions meant an averagedecline of 13% in industrial production. Since 1960, the toll has been reduced to 7%. Shorter, milder recessions arise from a shift away from the

dominance of boom-to-bust industries, such as farming and manufacturing. The economy has diversified, with volatile sectorsnot only being smaller slices of the pie, but also offset by more stable pieces, such as trade and services.Recessions are part of the system. Periods of economic slowdown serve a purpose in a capitalist economy.The pauses allow for time to correct excesses - rising inflation, bloated inventories, excess capacity, supplybottlenecks and misallocation of resources. Boom times hide the excesses, and they're wrung out duringthe down months. In recession an economy reorganizes itself, reallocating resources to emerge moreefficient and productive. Layoffs are traumatic, but labor and other resources are freed for eventual use inthe next wave of enterprises. Thousands of dot-com companies may have gone belly up, but we didn't losetheir know-how. The technology and human resources are still here. Recession doesn't equal regression.We can reuse what we learned. Recessions are to some extent self-correcting . Now that a slump is here, theeconomy won't continue to spiral downward. Once down, it won't stay down. In an economy where markets provide continual

feedback, behavior and expectations can change quickly. As demand falters, companies cut costs and reduce inventories. Prices adjust downward.Consumers react by buying more, reviving demand . Policy responses are part of the cure. The Federal Reserve moved aggressively in 2001 to lowerinterest rates. Credit is now cheaper than any time in the past 40 years. Looking ahead, the economy maintains considerable strength. Inflation remains tameat less than 2%. Real personal income continued to grow in 2001, so consumers have more money to spend. America still sits on a mother lode of newtechnologies - from electronics to medicine. The spirit of enterprise never lies dormant, not even in recession. Thus, the U.S. economy already has themakings of the next boom.

US Econ is resilient-9/11, Katrina, oil prices, and tech balloon prove

Christian Science Monitor US economy chugs ahead despite auto and housing slumps 12/11/2006The economy's resilience has been a theme of several years' standing - one that predates the 9/11

attacks. The US output of goods and services has survived the damage of hurricanes Katrina and Rita,

a run-up in oil prices, and the bursting of the high-tech balloon in early 2001. One reason for its

capacity to take hits is its growing diversity. Indeed, last month's new jobs came in health and financialservices, travel, government hiring, and professional services - all helping to offset a strugglingmanufacturing sector. Even in manufacturing, the picture is not as bleak as it could be, in part becausevigorous economies abroad are buying American-made goods. "It takes a lot to get the economy down,"says Ethan Harris, chief economist at Lehman Brothers in New York. "It does have some natural resiliencein the face of shocks."

The economy empirically recovers without impact

PeterLynch, Vice Chairman, Fidelity Management & Research, ABC News, Good Morning America, 9-18-01Well we--you may not and it may take a little while. It is going to be choppy. I mean, people aren't going to decide when they're seeing news like this to go out and buy a sofa, go buya refrigerator. It's just very discouraging. So that tends to slow consumer confidence. The confidence of the consumer has been very high. We have record housing sales, housingprices have gone up the last few years. As much as the stock market has gone down, housing prices--the average house has gone up more. So there's a lot of good things out there. The

banking system is in very good shape. We have a lot of positives. We've had nine recessions since World War II--this might benumber 10--but we've got out of every one of them. And the stock market usually looks forward . Itdoesn't look backward. So for a little while look to this uncertainty, but then I'll say, 'What are we goingto earn in 2003, 2004, 2005.' The market looks out, it doesn't look backwards.


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No Impact China

Economic ties prevent US-China trade war

The Vancouver Sun, July 14, 2008, Money ties China, U.S. togetherThe economic ties between China and the U.S. run deep. China relies on the U.S. as their largestexport market, just as the Americans rely on China to fuel its outrageous consumption with cheap

imports. "It's kind of like the relationship between a junky and a dealer," explains economics expertNicholas R. Lardy of the Peterson Institute. "The junky needs the dealer so he can get his fix, but the dealeralso needs the junky to buy his drugs." Trade between the two nations is rising at a dizzying pace. In 1980their trade totalled $5 billion; last year it was $387 billion. It is also heavily lopsided. The U.S. imports farmore from China than it exports, resulting in a trade deficit of over $250 billion. This enormous consumptionis rapidly pushing America's debt towards $10 trillion. The numbers can get overwhelming and the questionbecomes: How does America stay afloat? The U.S. economy is buoyed by foreign investment into itstreasury securities. Japan still possesses the largest holdings, but China is catching up. Since 2000,China's ownership of U.S. securities has grown from about $50 billion to over $500 billion. Some politicalpundits are concerned that by becoming America's banker, China could exercise significant influence

over the U.S. But that's not really the case. There's an old adage that says, if you owe the bank $100, that'syour problem. If you owe the bank $100 million, that's the bank's problem. China is now so deeply investedin U.S. securities, any disruption to the value of the dollar would be a serious blow to its own reserves.

And since the Chinese rely on the U.S. market for their exports, they're forced to buy up new securitiesas soon as they're issued to prevent the yuan from appreciating against the dollar. Neither country holds asignificant advantage over the other. Despite the enormity of the U.S. economy, the two nations havebuilt a system of co-dependency. Or as Catherine Mann, professor of economics at Brandeis Universityand former adviser to the chief economist at the World Bank, puts it -- a system of Mutually AssuredDestruction. I think you can characterize it a lot like nuclear weapons," she says. "Whoever uses theweapon, invariably gets hurt too." Each country has the means to significantly disrupt the other'seconomy, but the collateral damage within their own country could be just as severe .

China is rising peacefully and is working cooperatively with other nations.

David Shambaugh, Director of the China Policy Program @ George Washington University. International

Security, Volume 29, Issue 3, Winter2005. China Engages Asia.http://www.brookings.org/dybdocroot/views/articles/shambaugh/20050506.pdf

Chinas growing economic and military power, expanding political influence, distinctive diplomatic voice,and increasing involvement in regional multilateral institutions are key developments in Asian affairs.Chinas new proactive regional posture is reflected in virtually all policy sphereseconomic,diplomatic, and militaryand this parallels Chinas increased activism on the global stage.1 Bilaterally andmultilaterally, Beijings diplomacy has been remarkably adept and nuanced, earning praise around theregion. As a result, most nations in the region now see China as a good neighbor, a constructive partner,a careful listener, and a nonthreatening regional power. This regional perspective is striking, given that justa few years ago, many of Chinas neighbors voiced growing concerns about the possibility of Chinabecoming a domineering regional hegemon and powerful military threat. Today these views are muted.Chinas new confidence is also reflected in how it perceives itself, as it gradually sheds its dual identity ofhistorical victim and object of great power manipulation. These phenomena have begun to attract growingattention in diplomatic, journalistic, and scholarly circles, both regionally and internationally.2
http://www.brookings.org/dybdocroot/views/articles/shambaugh/20050506.pdfhttp://www.brookings.org/dybdocroot/views/articles/shambaugh/20050506.pdf


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No Impact Competitiveness

The US will inevitably lose competitiveness across numerous economic sectors

The Washington Times, 5-4-04, http://washingtontimes.com/upi-breaking/20040504-050045-2289r.htmGeneva, May. 4 (UPI) -- The United States, Singapore, and Canada have been ranked as the world'sleading economies on competitiveness in 2004, according to a global survey published Tuesday. But thestudy concludes the strong emergence of the larger Asian nations spearheaded by China, and India, andsoon Russia and central Europe "will generate a major shift in world competitiveness." The new breedof emerging competitors, it says, "don't only provide manufacturing or services to western companies; theycompete in their own right with their own brands. They will assail markets, just as Japan did before, buton a much wider scale." Globalization of the world economy, the study notes, has "quickly spread theproductivity revolution and techniques" to poordeveloping countries and underscores they now benefitfrom both "lower labor costs and higher efficiency output ." The report by the Lausanne-basedInternational Institute for Management Development (IMD) warns this combination "could be lethal fortraditional industrial countries and their workforce. Jobs will be lost, and companies activities will moveabroad." It adds the trends begun in the manufacturing sector now also affects the services industry.

Economic competitiveness is conceptually flawed: failure to compete doesnt matter

Paul Krugman, Professor of Economics at the Massachusetts Institute of Technology,

March/April 1994,Foreign Affairs, http://www.pkarchive.org/global/pop.htmlIt was a disappointing evasion, but not a surprising one. After all, the rhetoric of competitiveness -- the viewthat, in the words of President Clinton, each nation is "like a big corporation competing in the globalmarketplace" -- has become pervasive among opinion leaders throughout the world. People who believethemselves to be sophisticated about the subject take it for granted that the economic problem facing anymodern nation is essentially one of competing on world markets -- that the United States and Japan arecompetitors in the same sense that Coca-Cola competes with Pepsi -- and are unaware that anyone mightseriously question that proposition. Every few months a new best-seller warns the American public of thedire consequences of losing the "race" for the 21st century.ffi A whole industry of councils oncompetitiveness, "geo-economists" and managed trade theorists has sprung up in Washington. Many of thesepeople, having diagnosed America's economic problems in much the same terms as Delors did Europe's, arenow in the highest reaches of the Clinton administration formulating economic and trade policy for theUnited States. So Delors was using a language that was not only convenient but comfortable for him and awide audience on both sides of the Atlantic. Unfortunately, his diagnosis was deeply misleading as a guide towhat ails Europe, and similar diagnoses in the United States are equally misleading. The idea that acountry's economic fortunes are largely determined by its success on world markets is a hypothesis, nota necessary truth; and as apractical, empirical matter, that hypothesis is flatly wrong. That is, it is simplynot the case that the world's leading nations are to any important degree in economic competition with

each other, or that any of their major economic problems can be attributed to failures to compete on

world markets. The growing obsession in most advanced nations with international competitiveness shouldbe seen, not as a well-founded concern, but as a view held in the face of overwhelming contrary evidence.And yet it is clearly a view that people very much want to hold -- a desire to believe that is reflected in aremarkable tendency of those who preach the doctrine of competitiveness to support their case with careless,flawed arithmetic. This article makes three points. First, it argues that concerns about competitiveness are, asan empirical matter, almost completely unfounded. Second, it tries to explain why defining the economicproblem as one of international competition is nonetheless so attractive to so many people. Finally, it argues

that the obsession with competitiveness is not only wrong but dangerous, skewing domestic policies andthreatening the international economic system. This last issue is, of course, the most consequential fromthe standpoint of public policy. Thinking in terms of competitiveness leads, directly and indirectly, to badeconomic policies on a wide range of issues, domestic and foreign, whether it be in health care or trade.


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No Impact Competitiveness

Monetary policy has the biggest impact on US competitiveness and foreign nations and the

US will always manipulate it to undermine US competitiveness

Pat Choate, director of the Manufacturing Policy Project and professor in Advanced Issues Management at George

Washington University, and Charles McMillon, 1997,http://www.cooperativeindividualism.org/choate_trade_deficit.htmlChanges in exchange rates alter the price competitiveness of goods and services virtually overnight.When the dollar is strong, the competitiveness of US exports is reduced and that of foreign imports is

increased. The reverse is also true. Many other governments explicitly use their exchange rate as abalance wheel to set the level of their trade balance . The Chilean government, for example, is currentlymanipulating their Peso, which does not float freely. They have recently re-weighted the basket of currenciesto which the Peso is pegged. Much like the recent experience in Mexico, the Chilean Government's goal is tomaintain a US trade surplus with Chile during the time Congress considers Chile's accession into NAFTA.US policy makers have never developed an exchange rate policy and rarely consider the exchange rateconsequences of economic policy. The Plaza Accord of 1985 in which the U.S. joined with other industrialcountries to weakened the dollar and to improve the US trade position was a rare exception. The value of thedollar to the Yen fell from 256 Yen per dollar in 1985 to 82 per dollar in the mid-1990s. This currencymanipulation provided temporary trade relief. Nevertheless, other nations increased their competitiveness tooffset the US move and again the US trade deficit soared. Japanese auto makers, for instance, are competitiveat an exchange rate of 90 Yen per dollar. Virtually every other time that the U.S. Treasury has engagedsignificantly in exchange rate measures has been to assist other countries or global financial interests. In1995 -- as the U.S. faced record trade deficits -- the US Treasury increased the value of the dollar

against the Yen to assist Japan's Government and banking sector deal with a recession and financialpressures. The result of US actions was to reduce the cost-competitiveness of US products in the Japanesemarket and increase that of Japanese manufacturers here. It worked. Japanese auto makers are nowflooding the US market with their exports. The U.S. trade deficit soared to a new record in 1996 and seemsassured of setting another record in 1997. In short, the price competitiveness of goods in many nations is asmuch a function of the Government exchange rate policy -- theirs and ours -- as of producers'competitiveness. The net effect of all this is fewer US export receipts and more foreign import bills.

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