5.1. ERMUSR 12-09-2008 - Laserfiche WebLink

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~ ~ ~ The global food crisis is deepening. Tighter credit is crippling farmers, ' ~ ' especially in developing nations; making it hard. for them to purchase seed, fertilizer and fuel or invest to boost production. The dollar's appreciation also hurts, making greenback-denominated age icultural products expensive to import. That more than offsets the falling price of oil, which lowers transportation costs. The shock will hit in the s rin ,with weak Southern Hemisphere harvests. And industrialized nations won't be able to provide much in the way of fresh relief. The risk of political instability will increase. Expect food riots in some parts of the Middle East, Africa, Latin America and Asia...including even China. The changes at American Express will hurt its small business customers. Trie firm is cutting staff by 10% after profits fell by 23% in the third quarter compared with the same period last year. The company is also transforming itself into a bank holding company so it can qualify for government rescue programs.. Smalls face higher charges and less service as a result of the cutbacks. Fees and interest rates will rise 2 to 3 percentage oints in coming months. At the same time, smalls can look for a slew of new products as American Express moves to build up banking services as part of its new look. Expect the company to invest in online banking for small businesses, which make up 20% of customers. With lending to smalls fallir~g~ off a cliff the government is moving to help. But that will mean higher interest. The Small Business Administration is now letting lenders in its 7(a) guaranty program offer loans at 300 basis points above the one-month LIBOR, the global bank lending rate, in addition to the prime. That will mean 4.4% instead of 4% at today's rate, making the loans to smalls more profitable, an incentive to thaw frozen credit spigots. In the first six weeks of fiscal 2009, the number of loans in the program dropped 55% over last year. Small U.S. exporters may soon get an assist from the Export-Import Bank. The bank will make more loans to foreign buyers to help finance purchases from U.S. exporters. Also available: Lower premiums on export credit insurance and relaxed rules on credit lines for indirect exports, goods used to make exports. A surge of violence in Afghanistan will likely greet the Obama team. ' ' ' A presidential election is due to take place sometime in 2009. The Taliban and antigovernment warlords are expected to use the occasion to stir up trouble. President Hamid Karzai is weak and unpopular, but there is no viable alternative. Obama wants to send additional U.S. troops and more from NATO too. But Germany, Italy and other leading members of NATO will go only so far to accommodate the new president, no matter how much they want good U.S. ties. U.S.-Pakistani cooperation against the Taliban and al Oaeda is improving. Pakistani President Asif Ali Zardari and Army Chief of Staff General Ashfaq Kayani are rapidly revamping the military to fight militants along the Afghan border. But further progress will require d plomacy and economic assistance. Pakistanis still distrust the U.S. for its support of ex-President Pervez Musharraf. Islamabad is also in bad financial shape because of the credit crunch and recession. Your very t , ~. Nov. 26, 2008 THE LINGE W ING N EDITORS P.S. Need a holiday gift? A subscription to The Kiplinger Letter costs $49 a year. Order at kiplinger.com/holiday/letter or call 800-544-0155, operator 0026. Copyright 2008. The Kiplinger Washington Editors, Inc. Quotation for political or commercial use is not permitted. Duplicating an entire issue for sharing with others, by any means, is illegal. Photocopying of individual items for internal use is permitted for registrants with the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923. For details, call 978-750-8400 or visit www.copyright.com.