India Blackouts leave 670 Million in the Dark
Half of India was left in the dark today as blackouts went on for a second day and spread to 22 of the country’s 28 states. This represents around 670 million people, or almost 10 percent of the Earth’s population. The worst power failure in a decade affected hospitals, transport systems, and mines, and embarrassed the government who hasn’t kept its promise to build a full grid for the nation’s growing demand. Power Minister Sushilkumar Shinde said some states were taking more than their fair share of electricity. The incident forced India to buy power from its tiny neighboring country, Bhutan. Also today, India’s central bank cut its growth forecast for the fiscal year ending in March to 6.5 percent from 7.3 percent. Economists think power outages may hamper sentiment and economic activity.
Boehner, Reid Reach Early Deal on Spending
Republican House Speaker John Boehner and Democratic Senate Majority Leader Harry Reid reached a short-term deal on spending today to get the government through the November elections. If approved, Congress will continue to fund the government at current levels for another six months, putting off the fiscal battle to the end of the year and setting agency spending to $1.047 trillion for the year. This is a clear indication that neither party wants this issue to weigh on the electoral debate.
IMF Warns Brazil Against Bubble
The International Monetary Fund said Brazil should keep its banking system under control to prevent a bubble as interest rates fall and credit grows. Credit doubled in the past 10 years, contributing to economic expansion. Still, the real estate market in cities like São Paulo and Rio de Janeiro rose as much as 30 percent a year in recent year, and this could start weighing on households, the IMF said. The country’s central bank also cut interest rates to a record low this year, which could cause the economy to overheat. When the financial crisis began in the U.S. and Europe, the fear was that it would drag down developing countries like Brazil. Instead, many of them “decoupled,” meaning their economic structure shifted so as not to depend as much on the developed world. Today, thanks to reforms and consistent policies, Brazil is on its way to becoming the world’s fifth largest economy by nominal Gross Domestic Product, but according to the IMF, it must stay vigilant if it wants to prevent a crisis of the kind that brought down Europe and North America.
LIBOR: Serious Fraud Office Close to Filing Criminal Charges
Britain’s Serious Fraud Office, who opened an investigation into Libor-rigging on July 6, says it is coming closer to charging individuals at several banks who were involved in manipulating the benchmark rate. So far, only Barclays was fined, although the Royal Bank of Scotland said it is trying to work out a settlement with the authorities. Germany’s largest bank Deutsche Bank also admitted to being a part of the scandal, and said it had already taken action against the “limited number” of individuals concerned.
Facebook Investors Worried about Growth
Facebook’s shares fell to their lowest level ever today, dropping to $21.61, less than half the high it reached the day it began trading publicly. The social network’s decline has been continuous since it said last week sales grew 32 percent in the second quarter, down from 45 percent in the first quarter. The drop could extend as lockup periods expire, analysts say (lockup periods bar investors from selling the shares immediately after an initial public offering). Switzerland’s largest bank, UBS AG, said today Facebook’s performance hurt its earnings, too: it placed multiple orders for the network’s shares with Nasdaq on the day of the IPO, without receiving confirmation “for several hours.” The bank says it will sue Nasdaq.