Swedish furniture giant IKEA has begun work on a 26-acre self-contained neighborhood in Stratford, East London - just in time for the 2012 Olympics.

The town will be called Strand East and will contain 1,200 new homes, 480,000 square feet of office space, and a 350 bedroom hotel. The development's canal side location -- nicknamed "mini Venice" -- will feature a water-taxi service and floating cocktail bar. It is the first major development for LandProp, which owns the intellectual assets of the furniture company. The development group already operates in Holland, Lithuania, Poland, and Latvia, according to the Daily Globe and Mail.

The announcement comes shortly after the British government's agreement last month to slim down urban planning laws in order to encourage more sustainable projects, like this one. In what was a bitter dispute with countryside campaigners, the reforms represent a huge step along the way to reviving Britain's struggling rural economy.

Andrew Cobden, a spokesman for the project, also described a 40-meter illuminated tower that will be visible across the East London skyline - meant to emulate the Olympic torch. Like all things IKEA, the tower will be made from relatively "simple" materials, a wooden lattice of 72 diagonal laths, 16 horizontal steel rings, and held together by 32,000 trusty steel bolts.

The development will accommodate residents at a range of income levels. IKEA's first pre-fabricated home debuted last month in Portland, at an all-inclusive price of just $86,000. You might need more than a tiny Allen wrench to build this one.

Due to a combination of high unemployment levels that have decreased U.S. wages and increased salaries in India's outsourcing sector, the head of India's largest business process outsourcing company told the Financial Times that American call center workers are becoming just as cheap their Indian counterparts: 

Pramod Bhasin, the chief executive of Genpact, said his company expected to treble its workforce in the US over the next two years, from about 1,500 employees now.

"We need to be very aware [of what's available] as people [in the US] are open to working at home and working at lower salaries than they were used to," said Mr Bhasin. "We can hire some seasoned executives with experience in the US for less money."

So does that mean that when I talk to "Jason" about my broken hard-drive, his name will actually be Jason?  Not necessarily.  FT goes on to say that another Indian IT outsourcing company has begun recruiting workers in Europe, the Middle East, and Africa and has plans to make half of their 110,000 workers non-Indians. 

Businesses just can't win this holiday season. In the US, if part of your sales pitch doesn't include mention of the birth of Jesus, onto Bill O'Reilly's blacklist you will go. This never made a lot of sense to me, as I struggle to see the logical link between a purported virgin birth and throwing down 35 big ones for a Screature. However with or without logic, the "War on Christmas" is going international.

One group in Israel is getting in on the action, where simply making mention of the Christian holiday could get you boycotted. The group behind the Israeli movement "Lobby for Jewish Values" sent out several fliers that say:

The people of Israel have given their soul over the years in order to maintain the values of the Torah of Israel and the Jewish identity.

You should also continue to follow this path of the Jewish people's tradition and not give in to the clownish atmosphere of the end of the civil year. And certainly not help those businesses that sell or put up the foolish symbols of Christianity.

Looks like someone's getting coal, or worse a visit from Krampus.

Either way, this could potentially be confusing to multinational corporations trying to rake in whatever money is still left in the global economy, so for those retailers taking notes: when in the country of Jesus' birth, make no mention of said birth. When on the other side of the Atlantic Ocean, gush about frankincense and myrrh.

(Hat tip: Matthew Yglesias)

Johannes Simon/Getty Images

At the opening session of the U.S.-China Strategic and Economic Dialogue yesterday, President Obama made a point of referring to one of China's most impressive exports:

“President Hu [Jintao] and I both felt that it was important to get our relationship off to a good start,” Obama said. “Of course, as a new president and also as a basketball fan, I have learned from the words of Yao Ming, who said, ‘No matter whether you are new or an old team member, you need time to adjust to one another.’”

The ties among our people have deepened, as well, and more and more Americans of Turkish origin live and work and succeed within our borders. And as a basketball fan, I've even noticed that Hedo Turkoglu and Mehmet Okur have got some pretty good basketball games.

And as a resident of Washington, D.C., I continue to benefit from the contributions of Russians -- specifically, from Alexander Ovechkin. We're very pleased to have him in Washington, D.C.

Maybe it's just a rhetorical pleasantry, but what if this indicates a new foreign policy doctrine for the Obama era, namely: No matter a country's regime type, economic system, or foreign policy goals, as long as they are represented (well) in U.S. professional sports leagues, there is at least the basis of a productive bilateral relationship with the United States.

This augurs well for a rapproachement with Hugo Chavez's Venezuela, which has made substantial contributions to Major League Baseball -- including the manager of Obama's White Sox. Cuba could be a bit problematic, since Cuban baseball players tend to be defectors, but the country's potential baseball contribution is vast, so diplomatic progress will likely be slow but deliberate.

The U.S.-China relationship will remain at least as strong as Yao's knee, but Taiwan can at least count on Chien-Ming Wang in their bid for U.S. support.

Zaza Pachulia's new contract with the Atlanta Hawks should reassure Georgians worried about being abandoned in the Obama administration's Russian reset. Israelis worried about Obama's hard line on settlements should take heart in the recent signing of Omri Casspi by the Sacramento Kings. They may want to keep an eye on the Iranian Hamed Haddadi of the Memphis Grizzlies though, not to mention the NFL's half-Iranian T.J. Houshmanzadeh.

Kim Jong Il as well as his son and probably successor Kim Jong Un are both known to be big basketball fans. If they really want to get the U.S. to the negotiating table, perhaps what they need is not their own nuke, but their own Yao Ming. 

SAUL LOEB/AFP/Getty Images

New U.S. employment numbers out this morning indicate things are getting worse at a less-breakneck pace. A mere 345,000 Americans lost their jobs in the month of May.

The New York Times sunnily reports that the numbers are "a welcome sign that the decline in the job market would not continue forever."

People will say this means the recession is bottoming out. They will call it a green shoot. They will glass-half-full it. Pollyannaism is Pollyannaism. 

But the report is dismal: that graph on the front web page of the New York Times shows change, not the absolute unemployment. The employment-to-population ratio is under 60 percent, the underemployment number is 16.4 percent, and unemployment is worse than the provisional numbers used the stress tests. 

Plus, a Deutsche Bank report notes, "the length of the workweek declined by 0.1 hour to 33.1 hours, which is the aggregate hour equivalent of an additional loss of about 350k jobs" -- making May look much more like April.  

Still, there are signs that even if the employment numbers in the U.S. are really bad, things worse elsewhere. Here's a fascinating graph from Stratfor:

The chart is missing a few key countries, most notably China. (Stratfor says it did not include China because its economy is too different to compare. Fair point.) Stratfor argues the recession is hitting the U.S. much more softly because "the American system is far more stable, durable and flexible than most of the other global economies, in large part thanks to the country’s geography."

It makes some sense: each country's economy grows to take advantage of its geography. Russia, with its massive oil and gas reserves, benefited from the massive surge in commodity prices through 2008; it has been hit hard since because the economy is highly dependent on that one industry. The U.S. economy is much more resource- and industry-diverse.

I wonder what Robert D. Kaplan would have to say about all of this...which countries' have advantageous geographies for downturns? Is this why Australia seems to be doing relatively well?

(h/t The Monkey Cage and Ezra Klein)

Want to get a sense of just how bad things are? Take a spin on Google Earth.

The latest issue of International Economy, edited by FP contributor David Smick, has a clever graphic showing the depth of the economic crisis, so I thought I'd share.

The above image, pulled today from Vesseltracker.com's Google Earth file, shows container ships languishing off the Singapore coast. Welcome to the  largest parking lot on Earth. International Economy explains:

The world's busiest port for container traffic, Singapore saw its year-over-year volume drop by 19.6 percent in January 2009, followed by a 19.8 percent drop in February. As of mid-March 2009, 11.3 percent of the world's shipping capacity, sat idle, a record.

It's a rough time to be an Asian tiger, or to be in the shipping business. The IMF projects that Singapore's economy will shrink significantly in 2009. Globally, bulk shipping rates have dropped more than 80 percent in the past year on weak demand, and orders for new shipping vessels are cratering. In Busan, South Korea, the fifth-largest port in the world, empty shipping containers are piling up faster than officials can manage.

"Things have really started to get bad -- laborers spend their entire day waiting for a call from the docks that they have a job," Kim Sang Cheul, a dockworker at Busan, told Bloomberg. "People spend all day staring at their phone as if staring at it can make it ring. You’re lucky if you get a call."

Green shoots? Not so much.

(For another view of Singapore's port, you can check out Vesseltracker's Microsoft Virtual Earth mashup map.)

Felix Salmon writes up a World Bank report on the returns a vulture fund made off of Liberia:

Liberia, with the aid of the World Bank, has been negotiating with vulture funds holding $1.2 billion of its debt. You know what vulture funds are, right? They’re evil hedge-fund types who buy up debt at pennies on the dollar, and then sue for repayment in full, with interest and penalties and everything.

Just look at the deal they drove in this case! Liberia, one of the poorest countries in the world, is going to have to pay them, er, nothing at all. The World Bank is kicking in $19 million, a few rich countries are matching that sum, and the vultures are walking away with a not-very-princely-at-all $38 million, or just 3 cents on the dollar. Which probably barely covers their legal fees, let alone the amount they paid for the debt in the first place.

Let's read that again: the World Bank and Liberian government negotiated a deal so that vulture funds holding $1.2 billion in debt ended up with a check for $38 million -- three percent!

It's distressing that Liberia got in such a bad fix. It needed to raise funds and banked on future growth to make the payments -- but a bloody civil war meant it couldn't. The original lenders decided to sell the loans off to vulture and hedge funds who drove a hard bargain. Which meant that at one point, Liberia owed seven times its national income to creditors. 

So, the balance sheet -- in redux:

• The vulture funds (name makes it hard to feel bad for them, doesn't it?) lost $1.26 billion on paper. (I doubt they paid the full $1.3 billion for the loans, the World Bank doesn't say.) For better or worse, it means they likely aren't lending anymore. 
• Liberia, struggling with a crushing debt burden, found forgiveness. This is a good thing -- if Liberia's government has put in place measures to ensure security, stability, and economic growth. Johnson Sirleaf's at least making an effort. 
• Liberia's rich friends (the United States included) stepped in with a bit of cash to help a very ailing economy. A good thing.
• The World Bank negotiated what seems to be an amicable settlement. (Though the vulture funds might beg to differ.) A good thing for them.

Ultimately, though, Liberia isn't the story here. Emerging market and developing economies, like Liberia, will be among the hardest-hit in the Great Recession. Unlike OECD countries, they won't be able to issue debt or raise funds easily. They'll need the help of the international community -- and especially international organizations -- to ensure that their loans come with advisement and affordable repayment options. 

The hero here's the World Bank. Suddenly, it and the IMF -- especially the IMF, perhaps -- have become the world's most important international organizations. 

Dan Kitwood/Getty Images

My question yesterday about which countries might be next to come forward for IMF loans has been amply answered!

Today, the IMF announced Poland would seek a $20.5 billion flexible credit line, to insure against any future problems and help it meet its financial commitments. 

Now, the New York Times has a story up about how Britain may require IMF assistance. It faces a deficit likely to reach 11 percent of its gross domestic product and rising unemployment. Worryingly, it failed to sell its full offering of government bonds at an auction last month. The NYT article reads:

...Britain’s deteriorating public finances might require the government to seek aid from the International Monetary Fund, just as it did back in 1976 when the country’s economy was on its knees.

As remote as that possibility might be, it underscores the financial bind Britain is in and represents another humbling comedown for a country that once had ambitions to overtake New York as the world’s financial capital.

The IMF has tried to alleviate the stigma attached with seeking a loan, usually provided to truly failed economies. And Poland's received plaudits for seeking aid from the IMF; the finance minister said, "This is the reflection of our cautious and responsible economic policy."

Thus, the question becomes: if the IMF offered a loan that cost less than borrowing in other ways, would once-strong and still-responsible governments still turn them down? That is, would politics stand in the way of economics? 

The current Great Recession is a global one, with even the most buoyant economies struggling. Reports today suggest that Japan may follow Georgia, Ireland, Switzerland, and Spain in suffering from deflation. Economic woes  caused the collapse of the government of the Czech Republic. And dozens of other countries face similar specters. 

All of which means the IMF, the international lender of last resort, has become very, very, very important. In the past, the IMF provided loans to countries out of ways to solve their own economic problems. In return for the loan, the IMF imposed strict conditionalities, requiring governments to clean up their act, sell assets, change tax policies, etc.

But the realities of the global recession mean that even countries with responsible policies may need IMF loans -- and may not want to accept them, for fear of the conditionalities and the optics. (See: Brown, Gordon.)

And the IMF, with its new $1 trillion budget, figured that out quickly. So, they changed the rules:

The IMF’s intention is to do away with procedures that have hampered dialogue with some countries, and prevented other countries from seeking financial assistance because of the perceived stigma in some regions of the world of being involved with the Fund. 

To this end, the IMF announced the creation of a "flexible credit line" policy. 

[It is an] insurance policy for strong performers, mainly emerging market countries. Access to the FCL is restricted to countries that meet strict qualification criteria. But once a credit line has been approved, a country can draw on it without having to meet specified policy goals, as is normally the case for IMF loans. 

Mexico has already applied for the FCL loan, a $47 billion "precautionary credit line," last month. Question is, with new scary data emerging, which countries will be next to approach the IMF?

The Private Sector Development blog at the World Bank has a cool post on the effect of labor laws on computer use. Social scientists have theorized that the stricter the regulations on hiring and firing workers, the more companies turn to computers and technology.

Turns out that conventional wisdom is correct, a World Bank study shows:

Amin (2009) tests this hypothesis on 1,948 retail stores in India using data from Enterprise Surveys, a regular World Bank survey on firm performance, firm characteristics and the business climate....The study finds that the percentage of retail stores that use computers rises by 6.2 percentage points as we move from the state with the least to the median level of rigid labor laws. This is a large effect given than only 19% of the stores in the sample use computers.

The PSD blog cautions against reading too much into the results, though: 

That is, to properly understand the computers/productivity relationship one needs to distinguish between the motive of saving labor because of labor regulations and the motive of enhancing efficiency through computer usage. To what extent these effects hold remains to be empirically ascertained - an important task given that the use of computers and other modern devices is fast spreading across the globe.

But there's a nice synergy there. And I wonder whether the same scientists have studied the corollary between India as an outsourcing hub and an IT giant. 

On his New York Times blog, Nobel-prize winning economist Paul Krugman has reponded to a VoxEU post showing that the current Great Recession might be accelerating deeper and faster than the Great Depression. Krugman writes: 

What hasn’t happened — at least not yet — is any counterpart to the catastrophes of 1931: the wave of bank runs in the US, the failure of Credit Anstalt in Austria, and the great perverse response of central banks that was triggered by the death spasms of the gold standard.

What Eichengreen-O’Rourke show, it seems to me, is that knowledge is the only thing standing between us and Great Depression 2.0. It’s only to the extent that we understand these things a bit better than our grandfathers — and that we act on that knowledge — that we have any real reason to think this time will be better.

Eichengreen and O'Rourke convincingly argue that two indicators, trade volume and stock values (they don't take on other indicators, like global GDP or unemployment), are plummeting. But they also show the alacrity and force of governmental responses -- the only option for staunching the bleeding and returning the world economy to health.

Amid the financial crisis, U.S. media outlets have paid extra attention to the two nations worst-hit in western Europe: Iceland and Ireland. Publications from The New Yorker to the A.P., and everything in between, have parsed the deflationary risks, excess housing, and fiscal problems. They've talked about the strains on social welfare safety-nets and rising unemployment.

And they've done so with lots of bloated and condescending scrim on how Ireland and Iceland are the magically quaint fairy-lands of leprechauns, vikings, alcohol, and the in-bred!

For instance, in Vanity Fair, top financial reporter Michael Lewis came out with these brilliant insights into the denizens of Reykjavik: those "mousy-haired and lumpy" people, one of whom he calls a "bearded troll," love to "drink themselves into oblivion and wander the streets until what should be sunrise." He describes "orc shrieks" emanating from a hotel room. Zany laws mean citizens have to "write to the government and quit" to "stop being Lutherans." And Icelanders, "sincerely" believing in elves, made an industrial conglomerate "pay hard cash to declare the site" of a smelter "elf-free."

Today, in the New York Times, veteran reporter Timothy Egan makes an equally enlightened assessment of Irish culture in his article about, erm, housing stock.

"Every village that had seen nary a rock wall or a cottage window unchanged suddenly had a cul de sac of insta-homes and a half-dozen O’Mansions," he writes. "Anyone with a mortgage could get rich in little more time than it took for a head of Guinness to settle."

Needless to say, the Irish and the Icelandic are, well, unhappy. 

A online commenter on the NYT piece writes:

Yet more condescending, starry-eyed tosh from the New York Times regarding Ireland...Oh and, is it mandated by the New York Times editorial board, that every article about Ireland contain boilerplate about flowing pints of guinness and gap toothed peasantry? Perhaps the Irish media will take to writing colourpieces about New York in which the sky is compared to a swirling tankard of Budweiser.

New York magazine ran a take-down of Lewis' reportage from a more bemused resident of Iceland:

"His is a wild account of a backwards Nordic island populated by 'lumpy' and 'inbred' people who might force you to shower in scalding water or, worse, blow up a Range Rover. If you didn’t know any better, you’d think we were a sitcom waiting to happen. Unfortunately, none of this is exactly true."

At CounterPunch, Gregory Burris likewise takes Lewis down a notch:

"As I masochistically forced myself to continue reading Lewis’ article, I could not help but wonder: how did such a dimwitted diatribe ever make it through Vanity Fair’s editorial process? Did the editors really find it fit to print? Yes, unfortunately for us, they really did."

The G-20 just released its final communique, summarizing the agreements made during the one-day conference. And, it's a doozy.

The agreements we have reached today, to treble resources available to the IMF to $750 billion, to support a new SDR allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs, to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries, constitute an additional $1.1 trillion programme of support to restore credit, growth and jobs in the world economy. Together with the measures we have each taken nationally, this constitutes a global plan for recovery on an unprecedented scale.

It's certainly on an "unprecedented scale." Plus, it's the first global action plan to really emerge from a G-20 conference -- note the sale of gold to shore up developing economies. See more detailed analysis from FP bloggers throughout the day. 

In the upcoming issue of The Atlantic, Simon Johnson -- M.I.T. professor, awesome financial-collapse blogger, and former chief economist for the I.M.F. -- has a must-read. The nutgraf(s):

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Johnson shows how financial firms became more and more profitable, and a bigger and bigger part of the U.S. economy. More capital meant more political capital, he argues, which eventually meant nobody prevented the melt-down. The same political entrenchment makes fixing the banks difficult. 

The obvious solution to the financial crisis, Johnson says -- informed by his time at the I.M.F. -- is simple. The United States should determine which banks can't survive and temporarily nationalize them, instead of simply recapitalizing them, he says. But the relationship between top financiers and the government means this won't happen -- at least not unless things get much worse.

Still, his article includes a list of the policies (or lack thereof) which most contributed to the bubble and burst. It's a great crib sheet of what Capitol Hill and the G-20 Summit will tackle, piece by piece, to reform the system. 

• insistence on free movement of capital across borders;

• the repeal of Depression-era regulations separating commercial and investment banking;

• a congressional ban on the regulation of credit-default swaps;

• major increases in the amount of leverage allowed to investment banks;

• a light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement;

• an international agreement to allow banks to measure their own riskiness;

• and an intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation.

It's fascinating, scary reading.