A Stimulus Won't Save Us Now

There is grim news from the World Bank this morning. According to the Wall Street Journal, the combined GDP of developing nations will barely grow this year, a stark decline from the past two years. The World Bank report confirms what some had already feared—there is "little hope that the [developing world] countries will provide the spark for the global economic engine," the newspaper writes. How bad is the overall economic picture? The World Bank says global GDP will fall this year by 2.9 percent, pulled down by the world's largest economies, which are expected to sink by 4.5 percent. Reuters quotes the World Bank report as saying that "the prospects for the global economy remain 'unusually uncertain.' " Even more worrying is that some top economists are saying we are fresh out of bullets to jump-start the global economy. "There is a moment where you can't spend anymore and you can't accumulate any more debt. I think we are at that moment," European Central Bank President Jean-Claude Trichet said on Sunday, warning that governments will have to now start paying down the massive deficits they've created rather than look to stimulus spending.

Is there another mega-merger on the cards in the mining industry? The global business press is abuzz this morning with speculation that Switzerland-based Xstrata will merge with rival Anglo American. The BBC, doing a back-of-the-envelope calculation, says the deal would create a £41 billion global mining giant with operations in Australia and South Africa. The New York Times, reporting from Paris, says both Anglo American and Xtstrata have confirmed that they have conducted merger talks, though they stressed they are at a preliminary stage. It's anything but a "done deal." The NYT writes, "[A]s Anglo had been initially reluctant to enter into the talks, analysts say, Xstrata might need to pay a premium to bring it on board." Merger talk in the mining industry (and this one had been rumored for weeks) is being driven by a slowing global economy that is forcing giants to mull joining forces to cut down on massive operating costs. Earlier this month, BHP Billiton (BHP), the world’s biggest mining company, forged a 50-50 joint partnership with Rio Tinto, "a deal they said would save them more than $10 billion by reducing overlap," the NYT adds.

Staying on the M&A beat, Dow Jones Newswire in Beijing is reporting this morning that two of China's struggling state-run airlines, China Eastern Airlines Corp. and Shanghai Airlines Co., are close to a deal. To acquire Shanghai Airlines, China Eastern will raise $1.02 billion via a private placement in both Shanghai and Hong Kong, the newswire said, citing a source. Back home, struggling airlines are looking at much smaller transactions—what USA Today refers to as airlines' "a la carte fees"—to boost revenues as passenger numbers continue to decline. "Even Southwest Airlines, a longtime opponent of extra charges, announced new ones last month," the newspaper writes.

Twenty-three of the 30 largest states (accounting for 88 percent of the nation's total population) have seen their welfare rolls swell in recent months, the WSJ reports this morning, citing a survey conducted by the paper and the National Conference of State Legislatures. The biggest increases are in states with some of the worst jobless rates, including Oregon, South Carolina, and California—"a sign that the welfare system is expanding at a time of added need, assuaging fears of some critics of [former President Bill] Clinton's welfare overhaul who said the truly needy would be turned away," writes the WSJ. Indeed, the fallout from the current recession is the first real test of Clinton's 1996 radical welfare overhaul. What remains to be seen is how already-stretched state budgets will be able to allocate funds to cope with this new surge in registered welfare recipients.

The smartphone smorgasbord just got a new addition in the form of T-Mobile's myTouch 3G, the second phone based on the Android operating system, developed by a Google-led consortium, Business Week reports. The myTouch is a refined and yet more mass-market version of the G1, which has sold more than 1 million units since last December. T-Mobile wants to beat that figure and is making myTouch the "centerpiece [of our marketing] for the second half of our year," Cole Brodman, chief technology and innovation officer at T-Mobile USA, tells Business Week. Sticking with a Google (GOOG) theme: The search/technology giant has started including entries from user-generated encyclopedia Wikipedia as content on its Google News site, the NYT writes. The NYT notes that many of the news-related entries on Wikipedia are meticulously sourced, offering another way of news aggregation for readers. News orgs, meanwhile, will likely see this as yet another example of Google making money off their second-hand content.

And, finally, it sounds so 1999: Former General Electric (GE) CEO Jack Welch is investing $2 million of his own money into the creation of an online MBA program that will bear his name, the WSJ reports. "Mr. Welch says the MBA program will integrate his philosophy of leadership and human resources into a 12-course curriculum designed for mid-career workers," the newspaper writes. Welch himself will not teach the courses, but he plans to record a stimulating weekly video for the students.