VENEZUELA: Chavez Exits Andean Trade Pact After 38 Years; Hikes Windfall Oil Tax To 95%.

AP/ WaPost /

   Venezuela announced that it will leave the Andean Community of Nations/CAN trade pact after 38 years.
   In 2006, President Hugo Chavez announced that Venezuela would exit the five-nation group after fellow members Peru and Colombia approved free trade deals with the USA.
   Venezuela's five years notice expires today.

ALSO:   President Hugo Chavez has hiked the 2008 oil windfall tax to take advantage of rapidly rising prices...and use the extra income for social spending...ahead of next year's election.
   Under the new rules, the government can take as much as 95%.  Previously the tax was 60% ... and only when prices reached the $100 bbl. level.
http://af.reuters.com/article/energyOilNews/idAFN2212275020110422?pageNumber=2&virtualBrandChannel=0&sp=true

MONETARY POLICY: Stiglitz Blames Fed For Worldwide Currency/ Asset Bubbles.

BLOOMBERG/ By Alex Kowalski :     "Nobel Prize-winning economist Joseph Stiglitz said the Federal Reserve’s policy of cutting interest rates to a record low has had repercussions worldwide, including currency misalignments and the risk of asset price bubbles.
“Fed policy was supposed to reignite the American economy, but it’s not doing that,” Stiglitz, a professor at Columbia University in New York since 2001, said in a Bloomberg Television interview today. “The flood of liquidity is going abroad and causing problems all over the world.”
“The worry is that the flood of liquidity is going to cause what is sometimes being referred to as an emerging-market bubble,” Stiglitz said. “Money is going in, and the worry is it will cause a real estate bubble in one developing country or another.”

EUROZONE: Is The Euro Entering A Death Spiral?

GUARDIAN.UK/ OPINION/ "... leading economists such as the Nobel prizewinner Joseph Stiglitz and Nouriel Roubini, who accurately predicted the credit crunch, have expressed doubts over the survival of the euro in the light of the ECB's rigid interpretation of its remit to maintain low inflation, regardless of the consequences of low growth and rising unemployment in countries forced to take deep cuts in public spending." And..."Professor David Blanchflower, the former Bank of England monetary policy committee member, said it was "crazy" for highly indebted countries such as Greece, Spain, Portugal and Britain to enter a "death spiral" of spending cuts that would lead to lower growth and more cuts. "All anyone is talking about is austerity, but all you get is more unemployment and low growth. Then you find yourself in a spiral of debt as low growth forces you to cut spending further," he said."

THE E.U.: Greece's Debt, Inability To Say No To Strikers, Is Threatening The Euro.

NYTIMES/ Bond watchers fear that Greece's new government led by socialist Prime Minister George Papandreou may not cut public wages and pension payments that make up 51 percent of its budget and contribute to its surprizingly scary 12.7% deficit. And those fears are now spreading to Portugal and Spain's fundamentals. Greece set-up this crisis by severly underestimating deficits for several years, testing its credibility.

Deflation Threatens US Economy And Interest Rate Rise.

BLOOMBERG/
"The U.S. faces the possibility of deflation for the first time since the Eisenhower administration, a threat that may prompt the Federal Reserve to keep interest rates near zero through next year."
“Disinflationary winds are blowing with gale-force effect,” said Chicago Reserve Bank President Charles Evans in a Sept. 9 speech in New York.

Economist Stiglitz Says U.S. Recession Over... By 2012.

DAILY FINANCE/
Stiglitz says Americans must prepare for the recession to continue until 2012 -- practically, if not technically -- he said this week in an interview with DailyFinance.
With President Obama's stimulus program ending in 2011, the U.S. faces continuing turmoil, says Stiglitz. "There is likely to be weakness again in the economy in 2011," Stiglitz says. "2012 is an optimistic view of when we could be over the travails."

Nobel-Winning Economist Stiglitz Urges End To GDP "Fetish."

BLOOMBERG.COM/
“So many things that are important to individuals are not included in GDP,” said Stiglitz, a Columbia University professor. “There needs to be an array of numbers but we need to understand the role of each number. We may not be able to aggregate everything together.”
While Stiglitz doesn’t recommend dropping GDP altogether, he wants governments to consider such matters, along with issues of environmental sustainability, in policy making.
“Most governments make a fetish out of it. If you take one message out of our report, make it avoid GDP fetishism,” he said. “The message is to encourage political leaders away from that.”