LOS ALTOS, Calif. — No need for tears, but the well-off are losing their master suites and saying goodbye to their wine cellars.
The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.
Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.
More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.
By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.
Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.
“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.
Five properties here in Los Altos were scheduled for foreclosure auctions in a recent issue of The Los Altos Town Crier, the weekly newspaper where local legal notices are posted. Four have unpaid mortgage debt of more than $1 million, with the highest amount $2.8 million.
Not so long ago, said Chris Redden, the paper’s advertising services director, “it was a surprise if we had one foreclosure a month.”
The sheriff in Cook County, Ill., is increasingly in demand to evict foreclosed owners in the upscale suburbs to the north and west of Chicago — like Wilmette, La Grange and Glencoe. The occupants are always gone by the time a deputy gets there, a spokesman said, but just barely.
In Las Vegas, Ken Lowman, a longtime agent for luxury properties, said four of the 11 sales he brokered in June were distressed properties.
“I’ve never seen the wealthy hit like this before,” Mr. Lowman said. “They made their plans based on the best of all possible scenarios — that their incomes would continue to grow, that real estate would never drop. Not many had a plan B.”
The defaulting owners, he said, often remain as long as they can. “They’re in denial,” he said.
Here in Los Altos, where the median home price of $1.5 million makes it one of the most exclusive towns in the country, several houses scheduled for auction were still occupied this week. The people who answered the door were reluctant to explain their circumstances in any detail.
At one house, where the lender was owed $1.3 million, there was a couch out front wrapped in plastic. A woman said she and her husband had lost their jobs and were moving in with relatives. At another house, the family said they were renters. A third family, whose mortgage is $1.6 million, said they would be moving this weekend.
At a vacant house with a pool, where the lender was seeking $1.27 million, a raft and a water gun lay abandoned on the entryway floor.
Lenders are fearful that many of the 11 million or so homeowners who owe more than their house is worth will walk away from them, especially if the real estate market begins to weaken again. The so-called strategic defaults have become a matter of intense debate in recent months.
Fannie Mae and Freddie Mac, the two quasi-governmental mortgage finance companies that own most of the mortgages in America with a value of less than $500,000, are alternately pleading with distressed homeowners not to be bad citizens and brandishing a stick at them.
In a recent column on Freddie Mac’s Web site, the company’s executive vice president, Don Bisenius, acknowledged that walking away “might well be a good decision for certain borrowers” but argues that those who do it are trashing their communities.
The CoreLogic data suggest that the rich do not seem to have concerns about the civic good uppermost in their mind, especially when it comes to investment and second homes. Nor do they appear to be particularly worried about being sued by their lender or frozen out of future loans by Fannie Mae, possible consequences of default.
The delinquency rate on investment homes where the original mortgage was more than $1 million is now 23 percent. For cheaper investment homes, it is about 10 percent.
With second homes, the delinquency rate for both types of owners was rising in concert until the stock market crashed in September 2008. That sent the percentage of troubled million-dollar loans spiraling up much faster than the smaller loans.
“Those with high net worth have other resources to lean on if they get in trouble,” said Mr. Khater, the analyst. “If they’re going delinquent faster than anyone else, that tells me they are doing so willingly.”
Willingly, but not necessarily publicly. The rapper Chamillionaire is a plain-talking exception. He recently walked away from a $2 million house he bought in Houston in 2006.
“I just decided to let it go, give it back to the bank,” he told the celebrity gossip TV show “TMZ.” “I just didn’t feel like it was a good investment.”
The rich and successful often come naturally to this sort of attitude, said Brent T. White, a law professor at the University of Arizona who has studied strategic defaults.
“They may be less susceptible to the shame and fear-mongering used by the government and the mortgage banking industry to keep underwater homeowners from acting in their financial best interest,” Mr. White said.
The CoreLogic data measures serious delinquencies, which means the borrower has missed at least three payments in a row. At that point, lenders traditionally file a notice of default and the house enters the official foreclosure process.
In the current environment, however, notices of default are down for all types of loans as lenders work with owners in various modification programs. Even so, owners in some of the more expensive neighborhoods in and around San Francisco are beginning to head for the exit, according to data compiled by MDA DataQuick.
In Los Altos, Los Altos Hills and the most expensive neighborhood in adjoining Mountain View, defaults in the first five months of this year edged up to 16, from 15 in the same period in 2009 and four in 2008.
The East Bay suburb of Orinda had eight notices of default for million-dollar properties, up from five in the same period last year. On Nob Hill in San Francisco, there were four, up from one. The Marina neighborhood had four, up from two.
The vast majority of owners in these upscale communities are still paying the mortgage, of course. But they appear to be cutting back in other ways. The once-thriving Los Altos downtown is pocked with more than a dozen empty storefronts in a six-block stretch.
But this is still Silicon Valley, where failure can always be considered a prelude to success.
In the middle of a workday, one troubled homeowner here leaned over his laptop at the kitchen table, trying to maneuver his way out from under his debt and figure out the next big thing.
His five-bedroom house, drained of hundreds of thousands of dollars of equity over the last 13 years, is scheduled for auction July 20. Nine months ago, after his latest business (he has had several) failed in what he called “the global meltdown,” the man, a technology entrepreneur, said he quit making his $9,000 monthly payments.
“I’m going to be downsizing,” he said.
The man spoke on the condition of anonymity because, he said, he did not want his current problems to interfere with his coming reinvention. “I’m a businessman,” he explained. “I have to be upbeat.”
Friday, July 9, 2010
Tuesday, July 6, 2010
Supply Chain for iPhone Highlights Costs in China
SHENZHEN, China — Last month, while enthusiastic consumers were playing with their new Apple iPhone 4, researchers in Silicon Valley were engaged in something more serious.
The iPhone 4 after a so-called teardown by iFixit. Teardown reports can offer a glimpse into a company’s manufacturing.
They cracked open the phone’s shell and started analyzing the new model’s components, trying to unmask the identity of Apple’s main suppliers. These “teardown reports” provide a glimpse into a company’s manufacturing.
What the latest analysis shows is that the smallest part of Apple’s costs are here in Shenzhen, where assembly-line workers snap together things like microchips from Germany and Korea, American-made chips that pull in Wi-Fi or cellphone signals, a touch-screen module from Taiwan and more than 100 other components.
But what it does not reveal is that manufacturing in China is about to get far more expensive. Soaring labor costs caused by worker shortages and unrest, a strengthening Chinese currency that makes exports more expensive, and inflation and rising housing costs are all threatening to sharply increase the cost of making devices like notebook computers, digital cameras and smartphones.
Desperate factory owners are already shifting production away from this country’s dominant electronics manufacturing center in Shenzhen toward lower-cost regions far west of here, even deep in China’s mountainous interior.
At the end of June, a manager at Foxconn Technology — one of Apple’s major contract manufacturers — said the company planned to reduce costs by moving hundreds of thousands of workers to other parts of China, including the impoverished Henan Province.
While the labor involved in the final assembly of an iPhone accounts for a small part of the overall cost — about 7 percent by some estimates — analysts say most companies in Apple’s supply chain — the chip makers and battery suppliers and those making plastic moldings and printed circuit boards — depend on Chinese factories to hold down prices. And those factories now seem likely to pass along their cost increases.
“Electronics companies are trying to figure out how to deal with the higher costs,” says Jenny Lai, a technology analyst at CLSA, an investment bank based in Hong Kong. “They’re already squeezed, so squeezing more costs out of the system won’t be easy.”
Apple can cope better than most companies because it has fat profit margins of as much as 60 percent and pricing power to absorb some of those costs. But makers of personal computers, cellphones and other electronics — including Dell, Hewlett-Packard and LG — deal with much slimmer profit margins according to several analysts. “The challenges are going to be much bigger for them,” Ms. Lai said. Most other industries, from textiles and toys to furniture, are under considerably more pressure.
One way to understand the changes taking shape in southern China is to follow the supply chain of the iPhone 4, which was designed by Apple engineers in the United States, sourced with high-tech components from around the world and assembled in China. Shipped back to the United States, the iPhone is priced at $600, though the cost to consumers is less, subsidized by AT&T in exchange for service contracts.
“China makes very little money on these things,” said Jason Dedrick, a professor at Syracuse University and an author of several studies of Apple’s supply chain. Much of the value in high-end products is captured at the beginning and end of the process, by the brand and the distributors and retailers.
According to the latest teardown report compiled by iSuppli, a market research firm in El Segundo, Calif., the bulk of what Apple pays for the iPhone 4’s parts goes to its chip suppliers, like Samsung and Broadcom, which supply crucial components, like processors and the device’s flash-memory chip.
In the iPhone 4, more than a dozen integrated circuit chips account for about two-thirds of the cost of producing a single device, according to iSuppli.
Apple, for instance, pays Samsung about $27 for flash memory and $10.75 to make its (Apple-designed) applications processor; and a German chip maker called Infineon gets $14.05 a phone for chips that send and receive phone calls and data. Most of the electronics cost much less. The gyroscope, new to the iPhone 4, was made by STMicroelectronics, based in Geneva, and added $2.60 to the cost.
The total bill of materials on a $600 iPhone — the supplies that go into final assembly — is $187.51, according to iSuppli.
The least expensive part of the process is manufacturing and assembly. And that often takes place here in southern China, where workers are paid less than a dollar an hour to solder, assemble and package products for the world’s best-known brands.
No company does more of it than Foxconn, a division of the Hon Hai Group of Taiwan, the world’s largest contract electronics manufacturer.
With 800,000 workers in China alone and contracts to supply Apple, Dell and H.P., Foxconn is an electronics goliath that also sources supplies, designs parts and uses its enormous size and military-style efficiency to assemble and speed a wide range of products to market.
“They’re like Wal-Mart stores,” Professor Dedrick said. “They’re low-margin, high-volume. They survive by being efficient.”
The world of contract manufacturers is invisible to consumers. But it’s a $250 billion industry, with just a handful of companies like Foxconn, Flextronics and Jabil Circuit manufacturing and assembling for all the global electronics brands.
They compete fiercely on price to earn small profit margins, analysts say. And they seek to benefit from tiny operational changes.
When a company is operating on the slimmest of profit margins as contract manufacturers are, soaring labor costs pose a serious problem. Wages in China have risen by more than 50 percent since 2005, analysts say, and this year many factories, under pressure from local governments and workers who feel they have been underpaid for too long, have raised wages by an extra 20 to 30 percent.
China’s currency has also appreciated sharply against the United States dollar since 2005, and after a two-year pause by Beijing, economists expect the renminbi to rise about 3 to 5 percent a year for the next several years.
“It takes 3,000 procedures to assemble an H.P. computer,” says Isaac Wang, an iSuppli analyst based in China. “If a contract manufacturer can find a way to save 10 percent of the procedures, then it gets a real good deal.”
Contract manufacturers like Foxconn are now searching for ways to reduce costs. Foxconn is considering moving inland, where wages are 20 to 30 percent lower. The company is also spending heavily on manufacturing many of the parts, molds and metals that are used in computers and handsets, even trying to find larger and cheaper sources of raw material.
“We either outsource the components manufacturing to other suppliers, or we can research and manufacture our own components,” says Arthur Huang, a Foxconn spokesman. “We even have contracts with mines which are located near our factories.”
Many analysts are optimistic the big brands will find new innovations to improve profitability. But within the crowd, there is growing skepticism about China’s manufacturing model after years of pressing workers to toil six or seven days a week, 10 to 12 hours a day.
“We’ve concluded Hon Hai’s labor-intensive model is not sustainable,” says Mr. Wang at iSuppli Research. “Though it can keep hiring 800,000 to one million workers, the problem is these workers can’t keep working like screws in an inhuman system.”
This type of low-end assembly work is also no longer favored in China, analysts say, because it does not produce big returns for the companies or the country. “China doesn’t want to be the workshop of the world anymore,” says Pietra Rivoli, a professor of international business at Georgetown University and author of “The Travels of a T-Shirt in the Global Economy.”
“The value goes to where the knowledge is.”
The iPhone 4 after a so-called teardown by iFixit. Teardown reports can offer a glimpse into a company’s manufacturing.
They cracked open the phone’s shell and started analyzing the new model’s components, trying to unmask the identity of Apple’s main suppliers. These “teardown reports” provide a glimpse into a company’s manufacturing.
What the latest analysis shows is that the smallest part of Apple’s costs are here in Shenzhen, where assembly-line workers snap together things like microchips from Germany and Korea, American-made chips that pull in Wi-Fi or cellphone signals, a touch-screen module from Taiwan and more than 100 other components.
But what it does not reveal is that manufacturing in China is about to get far more expensive. Soaring labor costs caused by worker shortages and unrest, a strengthening Chinese currency that makes exports more expensive, and inflation and rising housing costs are all threatening to sharply increase the cost of making devices like notebook computers, digital cameras and smartphones.
Desperate factory owners are already shifting production away from this country’s dominant electronics manufacturing center in Shenzhen toward lower-cost regions far west of here, even deep in China’s mountainous interior.
At the end of June, a manager at Foxconn Technology — one of Apple’s major contract manufacturers — said the company planned to reduce costs by moving hundreds of thousands of workers to other parts of China, including the impoverished Henan Province.
While the labor involved in the final assembly of an iPhone accounts for a small part of the overall cost — about 7 percent by some estimates — analysts say most companies in Apple’s supply chain — the chip makers and battery suppliers and those making plastic moldings and printed circuit boards — depend on Chinese factories to hold down prices. And those factories now seem likely to pass along their cost increases.
“Electronics companies are trying to figure out how to deal with the higher costs,” says Jenny Lai, a technology analyst at CLSA, an investment bank based in Hong Kong. “They’re already squeezed, so squeezing more costs out of the system won’t be easy.”
Apple can cope better than most companies because it has fat profit margins of as much as 60 percent and pricing power to absorb some of those costs. But makers of personal computers, cellphones and other electronics — including Dell, Hewlett-Packard and LG — deal with much slimmer profit margins according to several analysts. “The challenges are going to be much bigger for them,” Ms. Lai said. Most other industries, from textiles and toys to furniture, are under considerably more pressure.
One way to understand the changes taking shape in southern China is to follow the supply chain of the iPhone 4, which was designed by Apple engineers in the United States, sourced with high-tech components from around the world and assembled in China. Shipped back to the United States, the iPhone is priced at $600, though the cost to consumers is less, subsidized by AT&T in exchange for service contracts.
“China makes very little money on these things,” said Jason Dedrick, a professor at Syracuse University and an author of several studies of Apple’s supply chain. Much of the value in high-end products is captured at the beginning and end of the process, by the brand and the distributors and retailers.
According to the latest teardown report compiled by iSuppli, a market research firm in El Segundo, Calif., the bulk of what Apple pays for the iPhone 4’s parts goes to its chip suppliers, like Samsung and Broadcom, which supply crucial components, like processors and the device’s flash-memory chip.
In the iPhone 4, more than a dozen integrated circuit chips account for about two-thirds of the cost of producing a single device, according to iSuppli.
Apple, for instance, pays Samsung about $27 for flash memory and $10.75 to make its (Apple-designed) applications processor; and a German chip maker called Infineon gets $14.05 a phone for chips that send and receive phone calls and data. Most of the electronics cost much less. The gyroscope, new to the iPhone 4, was made by STMicroelectronics, based in Geneva, and added $2.60 to the cost.
The total bill of materials on a $600 iPhone — the supplies that go into final assembly — is $187.51, according to iSuppli.
The least expensive part of the process is manufacturing and assembly. And that often takes place here in southern China, where workers are paid less than a dollar an hour to solder, assemble and package products for the world’s best-known brands.
No company does more of it than Foxconn, a division of the Hon Hai Group of Taiwan, the world’s largest contract electronics manufacturer.
With 800,000 workers in China alone and contracts to supply Apple, Dell and H.P., Foxconn is an electronics goliath that also sources supplies, designs parts and uses its enormous size and military-style efficiency to assemble and speed a wide range of products to market.
“They’re like Wal-Mart stores,” Professor Dedrick said. “They’re low-margin, high-volume. They survive by being efficient.”
The world of contract manufacturers is invisible to consumers. But it’s a $250 billion industry, with just a handful of companies like Foxconn, Flextronics and Jabil Circuit manufacturing and assembling for all the global electronics brands.
They compete fiercely on price to earn small profit margins, analysts say. And they seek to benefit from tiny operational changes.
When a company is operating on the slimmest of profit margins as contract manufacturers are, soaring labor costs pose a serious problem. Wages in China have risen by more than 50 percent since 2005, analysts say, and this year many factories, under pressure from local governments and workers who feel they have been underpaid for too long, have raised wages by an extra 20 to 30 percent.
China’s currency has also appreciated sharply against the United States dollar since 2005, and after a two-year pause by Beijing, economists expect the renminbi to rise about 3 to 5 percent a year for the next several years.
“It takes 3,000 procedures to assemble an H.P. computer,” says Isaac Wang, an iSuppli analyst based in China. “If a contract manufacturer can find a way to save 10 percent of the procedures, then it gets a real good deal.”
Contract manufacturers like Foxconn are now searching for ways to reduce costs. Foxconn is considering moving inland, where wages are 20 to 30 percent lower. The company is also spending heavily on manufacturing many of the parts, molds and metals that are used in computers and handsets, even trying to find larger and cheaper sources of raw material.
“We either outsource the components manufacturing to other suppliers, or we can research and manufacture our own components,” says Arthur Huang, a Foxconn spokesman. “We even have contracts with mines which are located near our factories.”
Many analysts are optimistic the big brands will find new innovations to improve profitability. But within the crowd, there is growing skepticism about China’s manufacturing model after years of pressing workers to toil six or seven days a week, 10 to 12 hours a day.
“We’ve concluded Hon Hai’s labor-intensive model is not sustainable,” says Mr. Wang at iSuppli Research. “Though it can keep hiring 800,000 to one million workers, the problem is these workers can’t keep working like screws in an inhuman system.”
This type of low-end assembly work is also no longer favored in China, analysts say, because it does not produce big returns for the companies or the country. “China doesn’t want to be the workshop of the world anymore,” says Pietra Rivoli, a professor of international business at Georgetown University and author of “The Travels of a T-Shirt in the Global Economy.”
“The value goes to where the knowledge is.”
Monday, July 5, 2010
NASA Chief: Next Frontier Better Relations With Muslim World
NASA Administrator Charles Bolden said in a recent interview that his "foremost" mission as the head of America's space exploration agency is to improve relations with the Muslim world.
Though international diplomacy would seem well outside NASA's orbit, Bolden said in an interview with Al Jazeera that strengthening those ties was among the top tasks President Obama assigned him. He said better interaction with the Muslim world would ultimately advance space travel.
"When I became the NASA administrator -- or before I became the NASA administrator -- he charged me with three things. One was he wanted me to help re-inspire children to want to get into science and math, he wanted me to expand our international relationships, and third, and perhaps foremost, he wanted me to find a way to reach out to the Muslim world and engage much more with dominantly Muslim nations to help them feel good about their historic contribution to science ... and math and engineering," Bolden said in the interview.
The NASA administrator was in the Middle East last month marking the one-year anniversary since Obama delivered an address to Muslim nations in Cairo. Bolden spoke in June at the American University in Cairo -- in his interview with Al Jazeera, he described space travel as an international collaboration of which Muslim nations must be a part.
"It is a matter of trying to reach out and get the best of all worlds, if you will, and there is much to be gained by drawing in the contributions that are possible from the Muslim (nations)," he said. He held up the International Space Station as a model, praising the contributions there from the Russians and the Chinese.
However, Bolden denied the suggestion that he was on a diplomatic mission -- in a distinctly non-diplomatic role.
"Not at all. It's not a diplomatic anything," he said.
He said the United States is not going to travel beyond low-Earth orbit on its own and that no country is going to make it to Mars without international help.
Bolden has faced criticism this year for overseeing the cancellation of the agency's Constellation program, which was building new rockets and spaceships capable of returning astronauts to the moon. Stressing the importance of international cooperation in future missions, Bolden told Al Jazeera that the moon, Mars and asteroids are still planned destinations for NASA.
Though international diplomacy would seem well outside NASA's orbit, Bolden said in an interview with Al Jazeera that strengthening those ties was among the top tasks President Obama assigned him. He said better interaction with the Muslim world would ultimately advance space travel.
"When I became the NASA administrator -- or before I became the NASA administrator -- he charged me with three things. One was he wanted me to help re-inspire children to want to get into science and math, he wanted me to expand our international relationships, and third, and perhaps foremost, he wanted me to find a way to reach out to the Muslim world and engage much more with dominantly Muslim nations to help them feel good about their historic contribution to science ... and math and engineering," Bolden said in the interview.
The NASA administrator was in the Middle East last month marking the one-year anniversary since Obama delivered an address to Muslim nations in Cairo. Bolden spoke in June at the American University in Cairo -- in his interview with Al Jazeera, he described space travel as an international collaboration of which Muslim nations must be a part.
"It is a matter of trying to reach out and get the best of all worlds, if you will, and there is much to be gained by drawing in the contributions that are possible from the Muslim (nations)," he said. He held up the International Space Station as a model, praising the contributions there from the Russians and the Chinese.
However, Bolden denied the suggestion that he was on a diplomatic mission -- in a distinctly non-diplomatic role.
"Not at all. It's not a diplomatic anything," he said.
He said the United States is not going to travel beyond low-Earth orbit on its own and that no country is going to make it to Mars without international help.
Bolden has faced criticism this year for overseeing the cancellation of the agency's Constellation program, which was building new rockets and spaceships capable of returning astronauts to the moon. Stressing the importance of international cooperation in future missions, Bolden told Al Jazeera that the moon, Mars and asteroids are still planned destinations for NASA.
Retailers Launch Their Own Stimulus Packages
Tired of waiting for spending to rebound on its own, retailers are taking matters into their own hands. Stores like Sam’s Club, Target, Toys “R” Us, Staples and Office Depot are offering unconventional promotions meant not only to attract visitors to stores, but also to get them feeling profligate.
Wal-Mart's Sam’s Club is introducing a program in which it facilitates loans for shoppers of up to $25,000, backed by the Small Business Administration.
Target will give its credit card holders 5 percent discounts. Toys “R” Us is instituting a holiday fund program where it adds to shoppers’ savings, and Staples and Office Depot are giving away office products for a penny or at no cost.
“A lot of the government programs have come to an end,” said David Bassuk, a managing director in the global retail practice at AlixPartners, a financial consultancy. “So retailers are taking it upon themselves to do everything they can to get the consumer to spend, even opening up their own wallets to give money back to the consumer.”
Persistent unemployment nationwide is threatening to inhibit consumer spending. The latest figures from the government on Friday underscored the depth of the problem, with the economy adding only 83,000 private sector jobs.
There was no relief in sight from Washington, either. Congress left on recess Friday having failed to pass legislation that would have extended unemployment benefits for hundreds of thousands of Americans.
On the small-business side, credit concerns are keeping some companies from spending. And on the consumer side, while spending and confidence numbers continue to be weak, personal income has risen for three months straight and savings rates are relatively high. That suggests people now have cash but are just sitting on it.
Against this backdrop of uncertainty, retailers are taking bold steps. Of the over-the-counter stimulus plans, the one at Sam’s Club is the most unusual.
Sam’s began testing the program in May and will soon start marketing S.B.A. loans of $5,000 to $25,000 for its members nationwide. Superior Financial Group, which is managing the loans, gives Sam’s members a $100 discount on the application fee, and lower interest rates, because of how much business it expects through the arrangement.
The company says it does not expect the program to be a big moneymaker, though it earns $50 for each financed loan. The point is to get customers spending more freely — and, it hopes, spending at Sam’s Club.
Michael Golata had been watching his spending carefully. As a contractor in Louisville, Ky., for United Parcel Service, he drives emergency medical equipment to hospitals when M.R.I. or CT scan machines break down.
When he asked U.P.S. if more routes were available, the company told him there was so much work that he should bring on as many drivers as he could afford. There was just one problem: Mr. Golata owned one truck, and he was driving it all the time. Online, he had found a used white Dodge Sprinter for $12,500.
With just a few thousand dollars in cash, he tried to get a bank loan but was denied by two local banks because the truck was too old and had too much mileage. He decided an S.B.A. loan would be too much trouble, and he rejected as absurd a loan from a commercial finance company with a 21 percent interest rate and payments of $450 a month.
About a month ago, Mr. Golata, a Sam’s Club member, clicked through the retailer’s Web site and found a page describing S.B.A. loans offered by the retailer. He filled out an online application, and, by the next day, got a phone call from Superior Financial telling him he was approved for a $10,000 loan, with an interest rate of 7.25 percent over 10 years.
“It made the payment, like, $118 a month. I thought I was dreaming,” Mr. Golata said. Mr. Golata immediately bought the Dodge, and hired three drivers. He went from billing U.P.S. $3,000 a week to $8,000, he said.
A little under half of Sam’s members are small-business customers, and they account for a little more than half of the revenue at the retailer. As its net sales began to slip last fall, Sam’s surveyed small-business customers and found that tight credit was partly to blame.
In the survey, said Catherine Corley, vice president for member services at Sam’s, a division of Wal-Mart, “fully one-third said ‘I didn’t buy what I needed to buy at Sam’s Club because I didn’t have the money.’ It really motivated us to say, ‘We’ve got to find some solutions.’ ”
Sam’s has done only a small test of the S.B.A. loans, and so far about 200 people have applied, with about 45 percent being approved, said Tim Jochner, chief executive and founder of Superior Financial. Sam’s is considering offering other financial products through third parties to help ease customers’ finances, like working-capital loans or peer-to-peer loans, said Hiren Patel, director for financial services at Sam’s.
“We’re not necessarily trying to be a bank, we’re just trying to bring to them, much as we do with products, the things they need,” Ms. Corley said.
Other retailers are taking slightly different routes to economic recovery. Beginning in the fall, Target will offer its holders of its Target-branded credit and debit cards 5 percent off every purchase. Target expects that it will add a percentage point to comparable-store sales in the fourth quarter.
Toys “R” Us is asking consumers to create a sort of grown-up piggy bank, and put money into a holiday fund that can be spent only at the toy store. Toys “R” Us will add 3 percent to the account’s balance in mid-October.
And Office Depot is giving away products. Trying to lure back-to-school shoppers, it will soon sell some supplies, like glue sticks and scissors, for less than $1. It also will give away other items, like markers, free, even without a purchase.
Staples, meanwhile, is offering several products for a nickel or a penny, and when shoppers buy a backpack during the back-to-school period, Staples will give them a gift card equal to the cost of the backpack.
“On that particular one we probably don’t make money, but in general what we’re hoping to do is get customers into our stores,” said Demos Parneros, president of United States stores for Staples, “and then buy everything else that they need.”
Of course, smart shoppers can take advantage of these programs without necessarily improving the stores’ revenues.
Mr. Golata, the truck driver, said he was delighted with the loan program. But if the point of it was to free up his cash at Sam’s, it didn’t quite work.
He is saving again — so he can get another Sam’s Club loan in six months and buy another delivery vehicle. “It’s not like it made me spend more than I normally would,” he said.
This story originally appeared in the The New York Times
Wal-Mart's Sam’s Club is introducing a program in which it facilitates loans for shoppers of up to $25,000, backed by the Small Business Administration.
Target will give its credit card holders 5 percent discounts. Toys “R” Us is instituting a holiday fund program where it adds to shoppers’ savings, and Staples and Office Depot are giving away office products for a penny or at no cost.
“A lot of the government programs have come to an end,” said David Bassuk, a managing director in the global retail practice at AlixPartners, a financial consultancy. “So retailers are taking it upon themselves to do everything they can to get the consumer to spend, even opening up their own wallets to give money back to the consumer.”
Persistent unemployment nationwide is threatening to inhibit consumer spending. The latest figures from the government on Friday underscored the depth of the problem, with the economy adding only 83,000 private sector jobs.
There was no relief in sight from Washington, either. Congress left on recess Friday having failed to pass legislation that would have extended unemployment benefits for hundreds of thousands of Americans.
On the small-business side, credit concerns are keeping some companies from spending. And on the consumer side, while spending and confidence numbers continue to be weak, personal income has risen for three months straight and savings rates are relatively high. That suggests people now have cash but are just sitting on it.
Against this backdrop of uncertainty, retailers are taking bold steps. Of the over-the-counter stimulus plans, the one at Sam’s Club is the most unusual.
Sam’s began testing the program in May and will soon start marketing S.B.A. loans of $5,000 to $25,000 for its members nationwide. Superior Financial Group, which is managing the loans, gives Sam’s members a $100 discount on the application fee, and lower interest rates, because of how much business it expects through the arrangement.
The company says it does not expect the program to be a big moneymaker, though it earns $50 for each financed loan. The point is to get customers spending more freely — and, it hopes, spending at Sam’s Club.
Michael Golata had been watching his spending carefully. As a contractor in Louisville, Ky., for United Parcel Service, he drives emergency medical equipment to hospitals when M.R.I. or CT scan machines break down.
When he asked U.P.S. if more routes were available, the company told him there was so much work that he should bring on as many drivers as he could afford. There was just one problem: Mr. Golata owned one truck, and he was driving it all the time. Online, he had found a used white Dodge Sprinter for $12,500.
With just a few thousand dollars in cash, he tried to get a bank loan but was denied by two local banks because the truck was too old and had too much mileage. He decided an S.B.A. loan would be too much trouble, and he rejected as absurd a loan from a commercial finance company with a 21 percent interest rate and payments of $450 a month.
About a month ago, Mr. Golata, a Sam’s Club member, clicked through the retailer’s Web site and found a page describing S.B.A. loans offered by the retailer. He filled out an online application, and, by the next day, got a phone call from Superior Financial telling him he was approved for a $10,000 loan, with an interest rate of 7.25 percent over 10 years.
“It made the payment, like, $118 a month. I thought I was dreaming,” Mr. Golata said. Mr. Golata immediately bought the Dodge, and hired three drivers. He went from billing U.P.S. $3,000 a week to $8,000, he said.
A little under half of Sam’s members are small-business customers, and they account for a little more than half of the revenue at the retailer. As its net sales began to slip last fall, Sam’s surveyed small-business customers and found that tight credit was partly to blame.
In the survey, said Catherine Corley, vice president for member services at Sam’s, a division of Wal-Mart, “fully one-third said ‘I didn’t buy what I needed to buy at Sam’s Club because I didn’t have the money.’ It really motivated us to say, ‘We’ve got to find some solutions.’ ”
Sam’s has done only a small test of the S.B.A. loans, and so far about 200 people have applied, with about 45 percent being approved, said Tim Jochner, chief executive and founder of Superior Financial. Sam’s is considering offering other financial products through third parties to help ease customers’ finances, like working-capital loans or peer-to-peer loans, said Hiren Patel, director for financial services at Sam’s.
“We’re not necessarily trying to be a bank, we’re just trying to bring to them, much as we do with products, the things they need,” Ms. Corley said.
Other retailers are taking slightly different routes to economic recovery. Beginning in the fall, Target will offer its holders of its Target-branded credit and debit cards 5 percent off every purchase. Target expects that it will add a percentage point to comparable-store sales in the fourth quarter.
Toys “R” Us is asking consumers to create a sort of grown-up piggy bank, and put money into a holiday fund that can be spent only at the toy store. Toys “R” Us will add 3 percent to the account’s balance in mid-October.
And Office Depot is giving away products. Trying to lure back-to-school shoppers, it will soon sell some supplies, like glue sticks and scissors, for less than $1. It also will give away other items, like markers, free, even without a purchase.
Staples, meanwhile, is offering several products for a nickel or a penny, and when shoppers buy a backpack during the back-to-school period, Staples will give them a gift card equal to the cost of the backpack.
“On that particular one we probably don’t make money, but in general what we’re hoping to do is get customers into our stores,” said Demos Parneros, president of United States stores for Staples, “and then buy everything else that they need.”
Of course, smart shoppers can take advantage of these programs without necessarily improving the stores’ revenues.
Mr. Golata, the truck driver, said he was delighted with the loan program. But if the point of it was to free up his cash at Sam’s, it didn’t quite work.
He is saving again — so he can get another Sam’s Club loan in six months and buy another delivery vehicle. “It’s not like it made me spend more than I normally would,” he said.
This story originally appeared in the The New York Times
With the US trapped in depression, this really is starting to feel like 1932
The US workforce shrank by 652,000 in June, one of the sharpest contractions ever. The rate of"The economy is still in the gravitational pull of the Great Recession," said Robert Reich, former US labour secretary. "All the booster rockets for getting us beyond it are failing."
"Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year. So what are we doing about it? Less than nothing," he said.
California is tightening faster than Greece. State workers have seen a 14pc fall in earnings this year due to forced furloughs. Governor Arnold Schwarzenegger is cutting pay for 200,000 state workers to the minimum wage of $7.25 an hour to cover his $19bn (£15bn) deficit.
Can Illinois be far behind? The state has a deficit of $12bn and is $5bn in arrears to schools, nursing homes, child care centres, and prisons. "It is getting worse every single day," said state comptroller Daniel Hynes. "We are not paying bills for absolutely essential services. That is obscene."
Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high.
Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.
The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc. This is the real stress indicator. The ratio was 63pc three years ago. Eight million jobs have been lost.
The average time needed to find a job has risen to a record 35.2 weeks. Nothing like this has been seen before in the post-war era. Jeff Weninger, of Harris Private Bank, said this compares with a peak of 21.2 weeks in the Volcker recession of the early 1980s.
"Legions of individuals have been left with stale skills, and little prospect of finding meaningful work, and benefits that are being exhausted. By our math the crop of people who are unemployed but not receiving a check amounts to 9.2m."
Republicans on Capitol Hill are filibustering a bill to extend the dole for up to 1.2m jobless facing an imminent cut-off. Dean Heller from Vermont called them "hobos". This really is starting to feel like 1932.
Washington's fiscal stimulus is draining away. It peaked in the first quarter, yet even then the economy eked out a growth rate of just 2.7pc. This compares with 5.1pc, 9.3pc, 8.1pc and 8.5pc in the four quarters coming off recession in the early 1980s.
The housing market is already crumbling as government props are pulled away. The expiry of homebuyers' tax credit led to a 30pc fall in the number of buyers signing contracts in May. "It is cataclysmic," said David Bloom from HSBC.
Federal tax rises are automatically baked into the pie. The Congressional Budget Office said fiscal policy will swing from
a net +2pc of GDP to -2pc by late 2011. The states and counties may have to cut as much as $180bn.
Investors are starting to chew over the awful possibility that America's recovery will stall just as Asia hits the buffers. China's manufacturing index has been falling since January, with a downward lurch in June to 50.4, just above the break-even line of 50. Momentum seems to be flagging everywhere, whether in Australian building permits, Turkish exports, or Japanese industrial output.
On Friday, Jacques Cailloux from RBS put out a "double-dip alert" for Europe. "The risk is rising fast. Absent an effective policy intervention to tackle the debt crisis on the periphery over coming months, the European economy will double dip in 2011," he said.
It is obvious what that policy should be for Europe, America, and Japan. If budgets are to shrink in an orderly fashion over several years – as they must, to avoid sovereign debt spirals – then central banks will have to cushion the blow keeping monetary policy ultra-loose for as long it takes.
The Fed is already eyeing the printing press again. "It's appropriate to think about what we would do under a deflationary scenario," said Dennis Lockhart for the Atlanta Fed. His colleague Kevin Warsh said the pros and cons of purchasing more bonds should be subject to "strict scrutiny", a comment I took as confirmation that the Fed Board is arguing internally about QE2.
Perhaps naively, I still think central banks have the tools to head off disaster. The question is whether they will do so fast enough, or even whether they wish to resist the chorus of 1930s liquidation taking charge of the debate. Last week the Bank for International Settlements called for combined fiscal and monetary tightening, lending its great authority to the forces of debt-deflation and mass unemployment. If even the BIS has lost the plot, God help us.
hourly earnings fell 0.1pc. Wages are flirting with deflation
"Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year. So what are we doing about it? Less than nothing," he said.
California is tightening faster than Greece. State workers have seen a 14pc fall in earnings this year due to forced furloughs. Governor Arnold Schwarzenegger is cutting pay for 200,000 state workers to the minimum wage of $7.25 an hour to cover his $19bn (£15bn) deficit.
Can Illinois be far behind? The state has a deficit of $12bn and is $5bn in arrears to schools, nursing homes, child care centres, and prisons. "It is getting worse every single day," said state comptroller Daniel Hynes. "We are not paying bills for absolutely essential services. That is obscene."
Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high.
Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.
The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc. This is the real stress indicator. The ratio was 63pc three years ago. Eight million jobs have been lost.
The average time needed to find a job has risen to a record 35.2 weeks. Nothing like this has been seen before in the post-war era. Jeff Weninger, of Harris Private Bank, said this compares with a peak of 21.2 weeks in the Volcker recession of the early 1980s.
"Legions of individuals have been left with stale skills, and little prospect of finding meaningful work, and benefits that are being exhausted. By our math the crop of people who are unemployed but not receiving a check amounts to 9.2m."
Republicans on Capitol Hill are filibustering a bill to extend the dole for up to 1.2m jobless facing an imminent cut-off. Dean Heller from Vermont called them "hobos". This really is starting to feel like 1932.
Washington's fiscal stimulus is draining away. It peaked in the first quarter, yet even then the economy eked out a growth rate of just 2.7pc. This compares with 5.1pc, 9.3pc, 8.1pc and 8.5pc in the four quarters coming off recession in the early 1980s.
The housing market is already crumbling as government props are pulled away. The expiry of homebuyers' tax credit led to a 30pc fall in the number of buyers signing contracts in May. "It is cataclysmic," said David Bloom from HSBC.
Federal tax rises are automatically baked into the pie. The Congressional Budget Office said fiscal policy will swing from
a net +2pc of GDP to -2pc by late 2011. The states and counties may have to cut as much as $180bn.
Investors are starting to chew over the awful possibility that America's recovery will stall just as Asia hits the buffers. China's manufacturing index has been falling since January, with a downward lurch in June to 50.4, just above the break-even line of 50. Momentum seems to be flagging everywhere, whether in Australian building permits, Turkish exports, or Japanese industrial output.
On Friday, Jacques Cailloux from RBS put out a "double-dip alert" for Europe. "The risk is rising fast. Absent an effective policy intervention to tackle the debt crisis on the periphery over coming months, the European economy will double dip in 2011," he said.
It is obvious what that policy should be for Europe, America, and Japan. If budgets are to shrink in an orderly fashion over several years – as they must, to avoid sovereign debt spirals – then central banks will have to cushion the blow keeping monetary policy ultra-loose for as long it takes.
The Fed is already eyeing the printing press again. "It's appropriate to think about what we would do under a deflationary scenario," said Dennis Lockhart for the Atlanta Fed. His colleague Kevin Warsh said the pros and cons of purchasing more bonds should be subject to "strict scrutiny", a comment I took as confirmation that the Fed Board is arguing internally about QE2.
Perhaps naively, I still think central banks have the tools to head off disaster. The question is whether they will do so fast enough, or even whether they wish to resist the chorus of 1930s liquidation taking charge of the debate. Last week the Bank for International Settlements called for combined fiscal and monetary tightening, lending its great authority to the forces of debt-deflation and mass unemployment. If even the BIS has lost the plot, God help us.
hourly earnings fell 0.1pc. Wages are flirting with deflation
Barack Obama: The great jobs killer
As former President Ronald Reagan might have said, "Obama, there you go again."
The current occupant of the White House claims to know how to create jobs. He claims jobs have been created. But so far the score is Great Obama Depression 2.2 million lost jobs, Obama 0 -- a blowout.
Obama is as hopeless, helpless, clueless and bankrupt of good ideas as the manager of the Chicago Cubs in late September. This "community organizer" knows as much about private-sector jobs as Pamela Anderson knows about nuclear physics.
It's time to call Obama what he is: The Great Jobs Killer. With his massive spending and tax hikes -- rewarding big government and big unions, while punishing taxpayers and business owners -- Obama has killed jobs, he has killed motivation to create new jobs, he has killed the motivation to invest in new businesses, or expand old ones. With all this killing, Obama should be given the top spot on the FBI's Most Wanted List.
Meanwhile, he has kept the union workers of GM and Chrysler employed (with taxpayer money). He has made sure that most government employee union members got their annual raises for sleeping on the job (with taxpayer money). He made sure that his voters got handouts mislabeled as "tax cuts" even though they never paid taxes (with taxpayer money). And he made sure that major campaign contributors collected billions off government stimulus (with taxpayer money).
As far as the taxpayers -- the people who actually take risks with our own money to create small businesses and jobs and pay most of the taxes -- we require protection under the Endangered Species Act.
You won't find proof of the damage Obama is doing on Wall Street, but rather on Main Street. My friends are all part of the economic engine of America: Small business. Small business creates 75 percent of new jobs (and a majority of all jobs). I called one friend who was a wealthy restaurant owner. He says business is off by 60 percent. He's drowning in debt. He won't last much longer. His wealth is gone.
I called another friend in the business of home improvement. He says business is off 90 percent from two years ago. My contractor just filed personal bankruptcy. She won't be building any more homes. The hair salon where I've had my hair cut for years closed earlier this year. Bankrupt. But here's the clincher -- ESPN Zone just closed all their restaurants across the country. If they can't make it selling cheap food and overpriced beer with 100 big screens blaring every sporting event on the planet to a sports-crazed society, we are all in deep, deep trouble.
I've polled all my friends who own small businesses -- many of them in the Internet and high-tech fields. They all agree that in this new Obama world of high business taxes, income taxes, payroll taxes, capital gains taxes, and workers compensation taxes, the key to success is to avoid employees. The only way to survive as a business owner today is by keeping the payroll very low and by hiring only independent contractors or part-time employees provided by temp agencies.
The days of jobs in the private sector with big salaries, full benefits, and pensions are over. We've all seen where those kinds of jobs get you as a business owner -- in Bankruptcy Court or surviving on government welfare like GM and Chrysler. Or in the case of government itself -- completely insolvent, but surviving by ripping off taxpayers and fraudulently running printing presses at the Fed all day and night to print money by the trillions.
Unfortunately, small businesses don't have the power to impose taxes or print money. So unlike government, we'll just have to cut employees and run lean and mean.
It has now become clear that, outside of the burgeoning field of Census takers, there will be no major increase in new jobs for years to come. Outside government, Obama has created a wasteland of economic ruin and depression that looks much like the landscape of Mel Gibson's first movie "Mad Max." Without a printing press in Obama's world, you're just plain out of luck.
The days of believing the Obama propaganda about a jobs recovery are over. The trillion-dollar corporate handouts (neatly named "stimulus") may have kept big business in the money for the past 18 months, and artificially propped up the stock market, but small business is the real canary in the coal mine.
My small business-owning friends aren't creating one job. Not one. They are shedding jobs. They are learning to do more with fewer employees. They are creating high-tech businesses that don't need employees. And many business owners are making plans to leave the country. In a high-tech world where businesses can be run from anywhere, Obama has a problem. His one-trick pony -- raise taxes, raise taxes, raising taxes -- is chasing away the business owners he desperately needs to pay his bills.
So who is going to pay Obama's taxes? Not his voters. They want government to pay them. Who is going to create Obama's jobs? Not his voters -- they've never created a job in their lives.
So what is Obama going to do? Maybe he can get Pamela Anderson on the line.
Wayne Allyn Root, a former vice presidential nominee for the Libertarian Party, writes from Henderson. His column appears every other week.
The current occupant of the White House claims to know how to create jobs. He claims jobs have been created. But so far the score is Great Obama Depression 2.2 million lost jobs, Obama 0 -- a blowout.
Obama is as hopeless, helpless, clueless and bankrupt of good ideas as the manager of the Chicago Cubs in late September. This "community organizer" knows as much about private-sector jobs as Pamela Anderson knows about nuclear physics.
It's time to call Obama what he is: The Great Jobs Killer. With his massive spending and tax hikes -- rewarding big government and big unions, while punishing taxpayers and business owners -- Obama has killed jobs, he has killed motivation to create new jobs, he has killed the motivation to invest in new businesses, or expand old ones. With all this killing, Obama should be given the top spot on the FBI's Most Wanted List.
Meanwhile, he has kept the union workers of GM and Chrysler employed (with taxpayer money). He has made sure that most government employee union members got their annual raises for sleeping on the job (with taxpayer money). He made sure that his voters got handouts mislabeled as "tax cuts" even though they never paid taxes (with taxpayer money). And he made sure that major campaign contributors collected billions off government stimulus (with taxpayer money).
As far as the taxpayers -- the people who actually take risks with our own money to create small businesses and jobs and pay most of the taxes -- we require protection under the Endangered Species Act.
You won't find proof of the damage Obama is doing on Wall Street, but rather on Main Street. My friends are all part of the economic engine of America: Small business. Small business creates 75 percent of new jobs (and a majority of all jobs). I called one friend who was a wealthy restaurant owner. He says business is off by 60 percent. He's drowning in debt. He won't last much longer. His wealth is gone.
I called another friend in the business of home improvement. He says business is off 90 percent from two years ago. My contractor just filed personal bankruptcy. She won't be building any more homes. The hair salon where I've had my hair cut for years closed earlier this year. Bankrupt. But here's the clincher -- ESPN Zone just closed all their restaurants across the country. If they can't make it selling cheap food and overpriced beer with 100 big screens blaring every sporting event on the planet to a sports-crazed society, we are all in deep, deep trouble.
I've polled all my friends who own small businesses -- many of them in the Internet and high-tech fields. They all agree that in this new Obama world of high business taxes, income taxes, payroll taxes, capital gains taxes, and workers compensation taxes, the key to success is to avoid employees. The only way to survive as a business owner today is by keeping the payroll very low and by hiring only independent contractors or part-time employees provided by temp agencies.
The days of jobs in the private sector with big salaries, full benefits, and pensions are over. We've all seen where those kinds of jobs get you as a business owner -- in Bankruptcy Court or surviving on government welfare like GM and Chrysler. Or in the case of government itself -- completely insolvent, but surviving by ripping off taxpayers and fraudulently running printing presses at the Fed all day and night to print money by the trillions.
Unfortunately, small businesses don't have the power to impose taxes or print money. So unlike government, we'll just have to cut employees and run lean and mean.
It has now become clear that, outside of the burgeoning field of Census takers, there will be no major increase in new jobs for years to come. Outside government, Obama has created a wasteland of economic ruin and depression that looks much like the landscape of Mel Gibson's first movie "Mad Max." Without a printing press in Obama's world, you're just plain out of luck.
The days of believing the Obama propaganda about a jobs recovery are over. The trillion-dollar corporate handouts (neatly named "stimulus") may have kept big business in the money for the past 18 months, and artificially propped up the stock market, but small business is the real canary in the coal mine.
My small business-owning friends aren't creating one job. Not one. They are shedding jobs. They are learning to do more with fewer employees. They are creating high-tech businesses that don't need employees. And many business owners are making plans to leave the country. In a high-tech world where businesses can be run from anywhere, Obama has a problem. His one-trick pony -- raise taxes, raise taxes, raising taxes -- is chasing away the business owners he desperately needs to pay his bills.
So who is going to pay Obama's taxes? Not his voters. They want government to pay them. Who is going to create Obama's jobs? Not his voters -- they've never created a job in their lives.
So what is Obama going to do? Maybe he can get Pamela Anderson on the line.
Wayne Allyn Root, a former vice presidential nominee for the Libertarian Party, writes from Henderson. His column appears every other week.
Sunday, July 4, 2010
Israel loses Turkey, gains Greece as strategic partner
Israel has finally moved on from its fractured relationship with Turkey - notwithstanding the impression conveyed by some US and Israeli circles that the damage is not beyond repair. This week, the Israeli Minister of Trade and Labor Minister, Binyamin Ben-Eliezer made last-ditch bid to save the relationship by initiating a meeting in Zurich with Turkish Foreign Minister Ahmet Davutolu. It went badly and was hotly debated at the Israeli cabinet meeting Sunday, July 4. Prime Minister Binyamin Netanyahu said he thought it was worth a try, but most ministers said that given Ankara's harsh hostility, it should never have taken place.
Meanwhile, as Western and Turkish media outlets harped on Israel's loss of its only Muslim ally in the Middle East, Jerusalem was busy acquiring a new strategic partner: Greece, a NATO member like Turkey with plenty of Middle East interests, has shown interest in stepping into Turkey's shoes and investing in stronger military and intelligence ties.
DEBKA-Net-Weekly 450 reported on June 25 from sources in Athens and Jerusalem that this development was not so much planned in Jerusalem as initiated by Greek Prime Minister George Papandreou, who boasts many Jewish and Israeli friends and business contacts, some of whom hold high political and intelligence positions in Israel. He saw Athens' chance to slot into Ankara's place in Jerusalem and transform their present diplomatic, economic, military and intelligence ties into a thriving strategic alliance, that would carry the same advantages to both sides as did Israel's former relations with Turkey.
According to some sources, Papandreou also hopes this alliance will help ease some of his country's financial woes. But most of all, he is looking to Israel for help in speeding the upgrade of his armed forces and helping transform them into the Christian mainstay of NATO in the Balkans and southern Europe - in place of the Muslim Turkish army.
This notion was not the direct outcome of Israel's break with Turkey or the clash aboard the Turkish Mavi Marmara on May 31 between Israeli commandos and pro-Palestinian Turkish activists. It has been evolving for some time, first broached in the summer of 2008 when Papandreou allowed 100 Israeli F-15 and F-16 fighter-bombers to pass through Greek Mediterranean air space for practicing long flights and in-flight fueling.
The distance between Israel and Greece there and back is 1,900 kilometers, identical to the distance between Israel and Iran.
The Greek prime minister went out of his way to be of assistance, making available to the Israeli Air Force the crews and advanced S-300 PMU1interceptor missile batteries Athens purchased from Russia back in 2000. They were allowed to practice bombing sorties against these batteries, in case Moscow decided to sell them to Iran and Syria.
The severe financial crisis besetting Greece this year enhanced the friendly ties between Athens and Jerusalem. While European Union countries spent long months discussing whether to bail Greece out and save it from collapse (eventually granting a €110 billion package), Papandreou turned to Jewish financial titans in Europe and the United States for help to keep the Greek economy afloat.
Meanwhile, as Western and Turkish media outlets harped on Israel's loss of its only Muslim ally in the Middle East, Jerusalem was busy acquiring a new strategic partner: Greece, a NATO member like Turkey with plenty of Middle East interests, has shown interest in stepping into Turkey's shoes and investing in stronger military and intelligence ties.
DEBKA-Net-Weekly 450 reported on June 25 from sources in Athens and Jerusalem that this development was not so much planned in Jerusalem as initiated by Greek Prime Minister George Papandreou, who boasts many Jewish and Israeli friends and business contacts, some of whom hold high political and intelligence positions in Israel. He saw Athens' chance to slot into Ankara's place in Jerusalem and transform their present diplomatic, economic, military and intelligence ties into a thriving strategic alliance, that would carry the same advantages to both sides as did Israel's former relations with Turkey.
According to some sources, Papandreou also hopes this alliance will help ease some of his country's financial woes. But most of all, he is looking to Israel for help in speeding the upgrade of his armed forces and helping transform them into the Christian mainstay of NATO in the Balkans and southern Europe - in place of the Muslim Turkish army.
This notion was not the direct outcome of Israel's break with Turkey or the clash aboard the Turkish Mavi Marmara on May 31 between Israeli commandos and pro-Palestinian Turkish activists. It has been evolving for some time, first broached in the summer of 2008 when Papandreou allowed 100 Israeli F-15 and F-16 fighter-bombers to pass through Greek Mediterranean air space for practicing long flights and in-flight fueling.
The distance between Israel and Greece there and back is 1,900 kilometers, identical to the distance between Israel and Iran.
The Greek prime minister went out of his way to be of assistance, making available to the Israeli Air Force the crews and advanced S-300 PMU1interceptor missile batteries Athens purchased from Russia back in 2000. They were allowed to practice bombing sorties against these batteries, in case Moscow decided to sell them to Iran and Syria.
The severe financial crisis besetting Greece this year enhanced the friendly ties between Athens and Jerusalem. While European Union countries spent long months discussing whether to bail Greece out and save it from collapse (eventually granting a €110 billion package), Papandreou turned to Jewish financial titans in Europe and the United States for help to keep the Greek economy afloat.
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