EoW July 2009

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Transat lant ic Cable
EuroWire – January 2006 24 EuroWire – J ly 2009
The economy
Some reasons for optimism that the US
could begin to pull out of recession
before the year is out
“The nancial system, frozen solid for the past nine months,
is in a spring thaw,” Washington Post sta writers Neil Irwin and
David Cho wrote on 21st May. They added, “And it’s happening
even though many of the Obama administration’s major rescue
programs have yet to get o the ground.” The title of the article
– “Wider Con dence Lifts Economy from Winter’s Deep, Dark
Freeze” – takes note of the long wait for a word of cheer on the
US economy. But now, according to the Post, some encouraging
news has arrived. To wit:
❈ [Since early May], major banks have raised or said they
would raise $56 billion in private capital – the type of surge
that Federal Reserve Chairman Ben S Bernanke said in March
would signal that the nancial system is recovering
❈ The premium that banks charge to lend to one another –
another indicator of the system’s health – is at its lowest
[ie best] level since the nancial crisis began in 2007
❈ The Standard & Poor’s 500-stock index was up 34% since
9 th March, and a measure of stock market volatility [in the
week of 18th May] hit its lowest level since the nancial crisis
deepened in September, “indicating that investors think the
market’s wild gyrations will be more subdued”
❈ Stabilisation of the broader economy has helped the nancial
sector right itself. Best of all, in minutes released from their
April policymaking meeting, Federal Reserve leaders said the
American economy could begin to pull out of the recession
later this year
Messrs Irwin and Cho acknowledge that private economists
still have a number of concerns; among them, that the
unemployment rate is likely to remain elevated through at least
2011; that consumers could continue to rein in spending as they
save more and borrow less; and that businesses face a glut of
investments from the boom years. Even so, the case for optimism
was bolstered by the 21st May report of the Conference Board
that its forecast of economic activity rose more than expected
in April, the rst gain in seven months and fresh evidence that
the recession could end later this year. Strengths among the
components of the report exceeded weaknesses for the rst
time in more than a year. The New York-based organisation,
which conducts business management research, said seven
of its leading economic indicators had risen, including stock
prices, consumer con dence, average length of the work week,
manufacturers’ new orders for consumer goods, and deliveries
by vendors. Initial jobless claims dropped, another positive.
Telecom
Notable feature of the big increase in long haul
bandwidthworldwide: less costly undersea cables
The latest edition of TeleGeography’s global submarine cable
map, published in May, shows 93 major cable systems now in
service, plus 28 systems due to enter service by 2011. Of these,
up to 16 new cables will be activated this year, which would
make 2009 the busiest year in the last decade for undersea cable
launches. According to new data from the research rm’s Global
Bandwidth Research Service, international bandwidth usage
grew 64% in 2008, and the new subsea activity is an indicator
of a resurgent telecom networks business. It was pointed out
that the cables now at the planning stage outnumber those
laid in 2001, at the peak of the submarine cable investment
bubble. TeleGeography, which specialises in analysis of the
long-haul network and submarine cable industry, also noted a
cost-consciousness that was absent at the start of the decade.
Total spending on submarine cable construction is projected at
$2.6 billion this year, with $3 billion more to come in 2010. While
this marks a sharp increase from recent years (cable investment
over the period 2004-2007 totalled less than $2 billion), it is
well below the $13.5 billion invested in new systems during the
2001 building frenzy. “While the number of cables being laid
is impressive, this current batch of new cables won’t break the
bank,” said TeleGeography analyst Alan Mauldin. “Most of these
new cables cover shorter distances and employ simpler designs
than their predecessors, helping to keep costs in check.”
Automotive
Washington, major US car makers,
and the state of California come together
on auto emissions
California, outsize and outré, does not spring to mind as
a moderating in uence. But the state – both under- and
overpopulated at various points along its 840-mile length, and
with a vast network of freeways – is heavily dependent on the
motor car and uncommonly vulnerable to the vicissitudes
of nature. Thus it was that California became a champion of
earth-friendly motoring habits; and has now become, in the
view of the Los Angeles Times, “the model for compromise with
US car makers and the federal government to curb greenhouse
gases.” Reporting from Washington, Times writers Jim Tankersley
and Richard Simon declared that President Barack Obama’s
announcement of tough new rules on fuel economy and
rigorous curbs on vehicle greenhouse gas emissions marks “a
potentially pivotal shift in the battle over global warming – and
a vindication of California’s long battle to toughen standards.”
(“Auto Emissions Deal a Win for California,” 19th May). A single
nationwide standard will impose, by 2016, a 30% reduction in
carbon dioxide and other emissions from new cars and trucks
sold in the US Full compliance is projected to reduce annual
oil consumption nationwide (currently at 7.1 billion barrels) by
about 5%.
California will essentially adopt the national standard in
place of its own tough emissions requirements, but will lose
nothing thereby except its earlier deadline for compliance.
The Obama standard, designed to achieve the same level of
emissions cutbacks as the California rule, gives auto makers
more time to adapt. The auto makers will pledge to drop their
e ort to block the California rules through legal challenges. In
2002, California passed a law to reduce vehicle emissions, but
auto industry lawsuits held up its enforcement. “Everybody
wins,” David Doniger, policy director of the Natural Resources