Importance of emerging economies in global trade

Source: news-press.com
John Waggoner • January 16, 2011
Investing: From gold to corn, emerging nations drive commodities prices
Investors can look to natural resources funds. The price of raw materials - everything from oil to gold to corn - has been soaring, and, to find out why, you have to dig all the way to China. You don't have to go quite as far to take advantage of rising commodity prices.


If it comes from the ground, its price has probably been increasing the past 12 months: cotton, up 104 percent; silver, up 57 percent; oil, up 13.7 percent.

Typically, commodity prices rise at the end of a recovery, not the beginning. At the bottom of an idealized economic cycle, companies have lots of excess materials on hand, because demand has plunged. As the economy picks up steam, companies work off inventories, and mining companies have enough slack capacity to meet increased demand. At end of cycle, demand overwhelms mining companies' ability to produce raw materials, and prices rise. At that stage, too, the inflation rate rises, and the Federal Reserve starts raising interest rates to get the economy to simmer down.

At least theoretically, however, the U.S. is in the early stages of a recovery. The nation's factories were running at 75.2 percent of capacity, below their average 80.6 percent from 1972-2009. But mining companies are at above average shares of capacity.

The reason: China and other emerging markets. "China is the country moving the needle the most," says Alec Young, equity strategist at Standard & Poor's. China's GDP is growing at 9.6 percent; it's 2.6 percent for the U.S. As more people in China (and India and Vietnam and elsewhere in the world) become more prosperous, they consume more energy, eat better food and build nicer houses. "Everyone who has tried electricity has really, really liked it," says John Dowd, portfolio manager of Fidelity Natural Resources fund.

People like driving cars, too. The average person in the U.S. uses about 22 barrels of oil each year, according to Ned Davis Research. In China, it's 2.3 barrels, and in India, it's 1. "They are in the early stages of achieving maturity of consumption," says Alberto Jimenez Crespo, co-manager of the Nuveen Tradewinds Global Resources fund.

They also like nice food, which is why food prices are rising.

China and India aren't the only reason commodity prices are rising. When demand rises, supply doesn't miraculously rise to support it. It takes years to open a new mine. Ivanhoe Mines, for example, has started the massive Oyu Tolgoi copper mine in Mongolia. Initial production should start next year, says Frederick Fromm, portfolio manager of Franklin Natural Resources fund. "They won't be at full production until 2020," he says.

In many existing mines, increasing production is getting harder. "Ore grades are declining," says Leo Larkin, equity analyst for Standard & Poor's.

In the best-case scenario for commodities, U.S. demand picks up again, driving prices higher for a few more years until production starts to catch up.

What could possibly go wrong? Plenty. In the case of food prices, one above-average harvest could smack down prices quickly, which is one reason many money managers avoid the sector. "You have to predict the weather," Fromm says.

In the case of basic materials, there's China. Economies don't grow at 9.6 percent forever, and the longer they grow at that rate, the greater the risk inflation will get out of control.

In many emerging markets, where food takes up a third or more of people's budget, soaring food prices results in a slowing economy and civil unrest. "When gold goes up in price, no one gets hurt," says Crespo. "If food goes up 60 percent in a few weeks, it hurts a lot of people."

A swift decline in China's economy could mean a sudden stall in commodity prices. Soaring oil prices also could put a swift hurt on the U.S. economy.

If you're going to invest in a natural resources fund, avoid the insanely narrow funds, such as the Global X Lithium ETF. Use a more broadly diversified fund. ETF fans might consider SPDR S&P International Materials fund (ticker: IRV) or WisdomTree International Basic Materials (DBN). If you get too specialized, your fund's share price could fall all the way to China.

Morgan Stanley reviewing its arsenal for a strong comeback

Source: Business Week
Wall Street January 13, 2011, 5:00PM EST
It's Showtime for Morgan Stanley
The company failed to live up to expectations last year; CEO James Gorman doesn't want the losing streak to continue
By Michael J. Moore
Morgan Stanley (MS), which shifted strategy last year to rely more on its 18,000 brokers and less on debt-fueled risk taking, is still struggling to prove the new model works. The company failed to ride a surge in equity and bond markets in 2010, and its stock underperformed its industry average.

Shortly after taking the top job last January, Chief Executive Officer James P. Gorman said 2009 was a "year of transition" and that 2010 would be the "year of execution." Things didn't play out that way: Last October, Gorman, 52, said Morgan Stanley, the sixth-largest U.S. bank by assets, was still in a "transition period" and "remains a work in progress."


While Gorman declined to comment for this story, his October remarks didn't go unnoticed. "When a CEO says that, it means he knows he still has some near-term challenges and that he's very conscious of not trying to encourage unrealistic expectations," says Chris Kotowski, an analyst at Oppenheimer (OPY) in New York. "To me, that's better than saying reassuring things and then not delivering."

Morgan Stanley, which reports fourth-quarter results on Jan. 20, posted $3.59 billion in net income in the first nine months of 2010. Analysts now expect it to close out the year with $4.47 billion, 14 percent short of what they forecast last January. Morgan Stanley's stock fell 8.1 percent in 2010, ending the year down 63 percent from its 2007 high. That compares with an 11 percent gain for the Standard & Poor's 500 Financials Index last year, along with a 13 percent advance for the Standard & Poor's 500-stock index. The shares have risen 3 percent so far this year as of Jan. 11. "You can't take a lot of positives out of only being down 8 percent," says Douglas G. Ciocca, managing director at Renaissance Financial in Leawood, Kan., which manages $2 billion, including Morgan Stanley shares. "There may be some steak at Morgan Stanley, but there's not much sizzle."

Gorman spent much of the year steering the company away from the risk-taking model embraced by Chairman and former CEO John J. Mack, and rivals including Goldman Sachs (GS). Gorman relinquished control of hedge fund FrontPoint Partners and indicated he may dispose of more hedge fund stakes. The company's fortunes are now tied more closely to the success of Morgan Stanley Smith Barney, the largest brokerage in the world by number of advisers and client assets. In the first nine months of 2010, Morgan Stanley got 39 percent of its revenue and 15 percent of its pretax profit from the brokerage unit, which includes Morgan Stanley Smith Barney and a private bank started last year to offer loans to brokerage clients. The brokerage unit provided 16 percent of revenue and 5 percent of profit in 2006.

Morgan Stanley bought a controlling stake in Morgan Stanley Smith Barney from Citigroup (C) in 2009. Last year it faced continuing costs from unifying computer systems at the brokerage. It also had to deal with skittish investors. The unit pulled in $8.8 billion from clients through September, which meant it was likely to miss Gorman's target of more than $20 billion for 2010. In July the company cited the May 6 market crash that briefly wiped out $862 billion in equity market value for scaring away retail investors. For the first nine months of the year, the brokerage unit had a pretax profit margin of 8 percent, below Gorman's target of 15 percent.

Gorman said in December that retail investors' confidence has returned and trading has picked up. "This business will see improving margins and revenue growth as individual investors get reengaged, which is in fact what we are seeing," he wrote in a memo to employees that was obtained by Bloomberg.

Another weak spot is revenue from fixed-income trading, which was 30 percent lower than that of any of its largest U.S. competitors in the first nine months of 2010. Morgan Stanley reduced headcount in the department and committed less capital to fixed-income and equity trading as part of its shift away from risk taking.

Poor trading results masked strength in investment banking, Morgan Stanley's oldest business, which accounts for 12 percent of revenue. In 2010 the company was both the top global underwriter of equity offerings and the top global adviser on announced mergers and acquisitions for the first time since Bloomberg began compiling data in 1999.

"I believe that our stock is meaningfully undervalued, and that there will be a huge inflection point as we demonstrate to investors that our client-focused strategy is working," Gorman wrote in the December memo. Now he will have to deliver. "There's nothing you can say that's going to convince people," says Oppenheimer's Kotowski, who has a buy rating on Morgan Stanley. "It's got to be the numbers. Gorman understands that. He's a very thoughtful and realistic guy, and I don't think he's under any illusions about what he has to do."

The bottom line: In 2011 Gorman must demonstrate that his decision to lean more heavily on retail investors and less on risk taking was a smart move.

Moore is a reporter for Bloomberg News.

Refurbishing your skills in the new jobs market may be the best idea

Source: clarionledger.com
Jeff Ayres • January 16, 2011
Jobs market forcing many to retrain
Long workdays holding down two jobs were wearing on Schevalian Short's health and costing him time with his children.

The 35-year-old Florence man said his thoughts increasingly turned to his time hanging out at his brother's auto repair shop and watching him fix an array of car problems.


"Working an 18-hour day wasn't doing anything for me," Short said while he and fellow students huddled around a car undergoing repairs as part of Hinds Community College's automotive technician certification program.

Short, who began classes last week, and many others are learning new skills in an economy that has forced people to re-evaluate their careers.

"If you can't find employment, you've got to get a skill," says Chad Stocks, Hinds Community College's associate dean of career and technical education.

Finding a job in Mississippi remains thorny, with the state posting a 9.8 percent unemployment rate in November, above the national rate that month of 9.3 percent.

Stocks says Hinds has seen a 10 percent increase in the past year in enrollment in its job-training programs as the two-year college's overall enrollment has climbed even more, driven greatly, he says, by the economic downturn.

Short said those economic woes convinced him to pursue a career where he could be his own boss.

The two-year program teaches the ins and outs of diagnosing and repairing cars, trucks and SUVs to try to ensure years of steady performance.

Those who work their way up to supervisor-level jobs overseeing mechanics, installers or repairers can earn a starting salary of $33,219 and make as much, on average, as $51,471 annually in Mississippi, according to the state Department of Employment Security.

Pearl resident Corey Lee lost his job as a trucking company dispatcher in Memphis in 2008.

Like Short, he often did his own car repairs, and he learned the basics while helping out at his grandfather's used-car lot.

He moved to the area to be closer to his parents and enrolled in Hinds' auto-tech program last August.

One month later, he found work repairing cars at an area dealership.

"I might do something at work, and we'll go over it here in class, and vice versa," Lee said.

Many of the people taking in new skills have years of working experience.

Hinds CC auto-tech instructor Steve Miller said 15 of the 50 students are over 25 years old.

"A lot of college graduates come in here," he said. "They make great students. They know how to study and they realize they don't have a lot of time to make a (career) decision."

Jayne Hust said people of all ages are returning to school or otherwise trying to improve themselves by learning the technology skills essential in today's business world.

"You've got to have these kinds of skills just to live in the world," said Hust, who teaches computer programs at Holmes Community College's Ridgeland campus.

Linda Gordon, a student in Hust's class, says she last took an Excel course 10 years ago - practically a lifetime in the technology world.

So the 33-year-old Nissan employee decided to learn the program's inner workings anew.

"You want to enhance your skills, learn what's changed," she said last week during a break from assembling spreadsheets.

A key in providing work force training in Mississippi in recent years has been a steady funding source, no small accomplishment in a state that has had to eliminate or scale back many programs amid budget cuts.

For the last five years, the state Workforce Investment Board has been able to allocate an average of $21 million per year toward work force training, says board member Jay Moon.

The U.S. Department of Labor allowed the state to divert the money toward jobs training. It otherwise would have had to be used for other purposes, said Moon, who also heads the Mississippi Manufacturers Association.

The funds are split among the state's various community colleges, who assess their respective areas' biggest skill needs and engage professionals to help train students.

"It's been absolutely critical," Moon says. "Before we were able to do that, community colleges had to go before the Legislature" individually to request training dollars, with varying results.

But Mississippi's high poverty and unemployment rates can make even the most basic computer skills needed to get jobs hard to come by.

The Mississippi Department of Employment Security and Canadian technology nonprofit Digital Opportunity Trust have joined to implement the nonprofit's TeachUp! program, in which paid interns help job-seekers prepare electronic job applications and resumes as well as other computer skills.

Digital Opportunity Trust has worked extensively along the Gulf Coast after Hurricane Katrina, mainly at schools and community centers.

"We needed to reach the work force as well," said Nuria Arias, the trust's executive director. "What we need are the opportunities."

MDES also offers language software that enables work-seekers to learn Spanish and English. It also has "individual training accounts," scholarships that allow recipients to learn new skills.

Stocks says job prospects are picking up as the economy thaws.

He said many of the auto program's graduates find positions with area dealerships and repair shops.

Other skills in high demand, include electrical technology, small-engine repair and welding, he said.

In Mississippi, entry-level electricians can earn about $29,000 per year, while starting welders can make about $25,800, according to MDES.

While schools and other institutions offer training in specific fields, Sara Jane Hope wants to develop "the people skills" essential in finding success and becoming a leader in any type of work.

After 11 years specializing in work force training and development for a local food-service company, the area resident has launched Positive Dimensions, which seeks to sharpen people's leadership, teamwork and attitude skills.

She hosted a session at a local WIN Job Center last week and has similar events scheduled with several community colleges. She also plans to work with clients one-on-one.

Hope said she wants to get a sense of what clients enjoyed and didn't enjoy about their most recent jobs, saying that will help point them in a more fruitful direction.

Schwarzenegger says governorship cost him $200 million

Fri Jan 14, 5:06 pm ET

VIENNA (Reuters) – Serving as California governor cost Arnold Schwarzenegger at least $200 million, the bodybuilding star turned actor and politician told a newspaper in his native Austria, insisting 'it was more than worth it."

Counting expenses and lost income from acting in Hollywood films, "in all it is probably more than $200 million," he told Krone when asked how much his two terms in Sacramento had cost.

"But I'm not sorry. It was more than worth it," he said.

"What was much worse was the damage my time as governor did to the family. There is a lot there that needs to be repaired," he said, recalling the many Sunday evenings when his wife, Maria, and children broke out in tears at his heavy work schedule.

"We hate your job," Schwarzenegger quoted family members as saying during his early years as governor when he would leave his Los Angeles home every Monday morning for the capital, Sacramento, and not return until the end of the week.

"It was heartbreaking every time," said Schwarzenegger, a Republican who served as governor from 2003 until early this month. "In my second term of office, I did better. I tried to fly home every evening."

(Reporting by Michael Shields; Editing by Peter Cooney)

The reasons behind Washington's lavish State banquet in honor of China

US pomp meant to improve tone of China relations
By CHRISTOPHER BODEEN, Associated Press
Sunday January 16, 2011
BEIJING – Chinese leader Hu Jintao is being feted in Washington this week with a lavish state banquet at the White House and other pomp usually reserved for close friends and allies — all intended to improve the tone of relations between a risen, more assertive and prosperous China and the U.S. superpower in a tenuous economic recovery.

The shaky trust between the United States and China has been eroding recently because of an array of issues — currency policies and trade barriers, nuclear proliferation and North Korea, and both sides seem to recognize the need to recalibrate relations.

The U.S. is one of China's biggest markets, with $380 billion in annual trade largely in Beijing's favor. Washington increasingly needs Beijing's help in managing world troubles, from piracy off Africa to Iran's nuclear program and reinvigorating the world economy.

"It is absolutely critical for the two sides to be setting a tone that says 'hang on a second, we are committed to an effective, positive relationship,'" said Center for Strategic and International Studies scholar Charles Freeman, a former trade negotiator in the George W. Bush administration.

The state banquet President Barack Obama is hosting will be Hu's first. In the days before his visit, senior officials from both countries have spoken publicly in favor of better ties.

Secretary of State Hillary Rodham Clinton said in a speech Friday that the countries needed to manage their conflicts but their shared interests were so entwined as to constitute entanglement.

"History teaches us that the rise of new powers often ushers in periods of conflict and uncertainty," Clinton said. "Indeed, on both sides of the Pacific, we do see trepidation about the rise of China and the future of the U.S.-China relationship. We both have much more to gain from cooperation than from conflict."

Chinese officials have emphasized what they see as common concerns while acknowledging the complexity of the relationship.

"When the relationship is strained we need to bear in mind the larger picture and not allow any individual issue to disrupt our overall cooperation," Vice Foreign Minister Cui Tiankai said in a speech Friday.

Such maxims, however, don't apply to issues China defines as its "core interests," including Taiwan, Tibet, and the overarching authority of the Communist Party. That's a condition Hu's visit won't change.

Hu, whose four-day trip starts Tuesday, is expected to talk up China's intended peaceful rise in a speech to business leaders and opinion-makers in Washington on Thursday and to highlight the benefits of China's market and investment when visiting Chicago.

Aware of China's plummeting image in American opinion, Chinese Foreign Ministry functionaries have in recent weeks been looking for ways to make the usually stiff Hu, and China as a country, appear more human, something akin to reformist patriarch Deng Xiaoping's donning a 10-gallon hat in Houston in 1979 just after the opening of diplomatic relations.

For the protocol-obsessed Chinese leadership, a highlight of the visit will be Wednesday's state banquet — an honor denied Hu on his last trip to the White House in 2006. President George W. Bush thought state banquets should be reserved for allies and like-minded powers and instead gave Hu a lunch. Even worse, a member of Falun Gong, the spiritual movement banned by China, disrupted Hu and Bush's joint appearance, and an announcer incorrectly called China "The Republic of China," the formal name of democratically ruled Taiwan.

In this visit, no major agreements are expected. Talks over a joint statement ran aground until last-minute negotiations in Beijing last week. But the shared recognition to put things right and the bumpy relations of the last year augur for a better outcome.

The recent disputes make the summit more necessary than ever, said Shi Yinhong, professor of international relations at Beijing's Renmin University.

"If you look back to relations over the last year, any progress is significant," he said.

A successful visit also stands to raise Hu's standing domestically as he heads toward retirement late next year and seeks to place his political proteges in positions of influence. "A demonstration that Hu can handle the U.S. well and show that China is now well respected by Washington should help Hu to consolidate his legacy," said Oxford University China scholar Steve Tsang.

Still more difficult will be stopping the larger drift in relations amid the countries' changing fortunes. Beijing feels its economic, military and diplomatic strength entitles it to more deference while Washington tries to shore up its superpower authority, forging alliances and ties with other countries amid the changing global order.

While the U.S. is weighted down by high unemployment, massive budget deficits and sluggish growth, China has roared ahead, with the economy expanding 9.6 percent in the third quarter of last year.

China now holds the world's largest foreign currency reserves at $2.85 trillion and a major chunk of U.S. government debt. At current rates, economists estimate China will overtake the U.S. as the world's largest economy within 20 years, possibly by the end of this decade. That transition could be bumpy, with China's authoritarian one-party communist political system and sense of historical grievance setting it at odds with the democratic West.

Feeling its oats, Beijing has largely rebuffed U.S. appeals for help in reining in bellicose North Korea, curbing Iran's nuclear program and faster appreciation of China's currency and dismantling of trade barriers. Chinese officials and the nationalistic state-run media have criticized Washington's renewed attention to Japan, South Korea and Southeast Asia, its arms sales to Taiwan and its continued naval patrols in the Yellow and South China seas as attempts to constrain China's influence in its backyard.

Chinese officials have accused the U.S. of orchestrating the awarding of the Nobel Peace Prize to imprisoned Chinese dissident Liu Xiaobo. And just last week, Chinese military commanders greeted U.S. Defense Secretary Robert Gates' offer for closer military dialogue by sending a prototype for a new stealth fighter on its first test-flight.

In recent months, about the only thing the two seem to have agreed on is that the U.S. and China did not have enough common ground to form a Group of 2, or "G-2", to solve the world's troubles.

The U.S.-China relationship "is as important as any bilateral relationship in the world," Clinton said Friday. "But there is no such thing as a G-2. Both of our countries reject that concept."

The United States' debt just passed a record $14 trillion. How much does each of us owe ?

Record $14 trillion-plus debt weighs on Congress

By TOM RAUM, Associated Press Tom Raum, Associated Press – Sat Jan 15, 6:15 pm ET

WASHINGTON – The United States just passed a dubious milestone: Government debt surged to an all-time high, topping $14 trillion — $45,300 for each and everyone in the country.

That means Congress soon will have to lift the legal debt limit to give the nearly maxed-out government an even higher credit limit or dramatically cut spending to stay within the current cap. Either way, a fight is ahead on Capitol Hill, inflamed by the passions of tea party activists and deficit hawks.

Already, both sides are blaming each other for an approaching economic train wreck as Washington wrestles over how to keep the government in business and avoid default on global financial obligations.

Bills increasing the debt limit are among the most unpopular to come before Congress, serving as pawns for decades in high-stakes bargaining games. Every time until now, the ending has been the same: We go to the brink before raising the ceiling.

All bets may be off, however, in this charged political environment, despite some signs the partisan rhetoric is softening after the Arizona shootings.

Treasury Secretary Timothy Geithner says failure to increase borrowing authority would be "a catastrophe," perhaps rivaling the financial meltdown of 2008-2009.

Congressional Republicans, flexing muscle after November's victories, say the election results show that people are weary of big government and deficit spending, and that it's time to draw the line against more borrowing.

Defeating a new debt limit increase has become a priority for the tea party movement and other small-government conservatives.

So far, the new GOP majority has proved accommodating. Republicans are moving to make good on their promise to cut $100 billion from domestic spending this year. They adopted a rules change by House Speaker John Boehner that should make it easier to block a debt-limit increase.

The national debt is the accumulation of years of deficit spending going back to the days of George Washington. The debt usually advances in times of war and retreats in peace.

Remarkably, nearly half of today's national debt was run up in just the past six years. It soared from $7.6 trillion in January 2005 as President George W. Bush began his second term to $10.6 trillion the day Obama was inaugurated and to $14.02 trillion now. The period has seen two major wars and the deepest economic downturn since the 1930s.

With a $1.7 trillion deficit in budget year 2010 alone, and the government on track to spend $1.3 trillion more this year than it takes in, annual budget deficits are adding roughly $4 billion a day to the national debt. Put another way, the government is borrowing 41 cents for every dollar it spends.

In a letter to Congress, Geithner said the current statutory debt ceiling of $14.3 trillion, set just last year, may be reached by the end of March — and hit no later than May 16. He warned that holding it hostage to skirmishes over spending could lead the country to default on its obligations, "an event that has no precedent in American history."

Debt-level brinkmanship doesn't wear a party label.

Here's what then-Sen. Barack Obama said on the Senate floor in 2006: "The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance the government's reckless fiscal policies."

It was a blast by the freshman lawmaker against a Bush request to raise the debt limit to $8.96 trillion.

Bush won on a 52-48 party-line vote. Not a single Senate Democrat voted to raise the limit, opposition that's now complicating White House efforts to rally bipartisan support for a higher ceiling.

Democrats have use doomsday rhetoric about a looming government shutdown and comparing the U.S. plight to financial crises in Greece and Portugal. It's all a bit of a stretch.

"We can't do as the Gingrich crowd did a few years ago, close the government," said Senate Majority Leader Harry Reid, D-Nev., referring to government shutdowns in 1995 when Georgia Republican Newt Gingrich was House speaker.

But those shutdowns had nothing to do with the debt limit. They were caused by failure of Congress to appropriate funds to keep federal agencies running.

And there are many temporary ways around the debt limit.

Hitting it does not automatically mean a default on existing debt. It only stops the government from new borrowing, forcing it to rely on other ways to finance its activities.

In a 1995 debt-limit crisis, Treasury Secretary Robert Rubin borrowed $60 billion from federal pension funds to keep the government going. It wasn't popular, but it helped get the job done. A decade earlier, James Baker, President Ronald Reagan's treasury secretary, delayed payments to the Civil Service and Social Security trust funds and used other bookkeeping tricks to keep money in the federal till.

Baker and Rubin "found money in pockets no one knew existed before," said former congressional budget analyst Stanley Collender.

Collender, author of "Guide to the Federal Budget," cites a slew of other things the government can do to delay a crisis. They include leasing out government-owned properties, "the federal equivalent of renting out a room in your home," or slowing down payments to government contractors.

Now partner-director of Qorvis Communications, a Washington consulting firm, Collender said such stopgap measures buy the White House time to resist GOP pressure for concessions.

"My guess is they can go months after the debt ceiling is not raised and still be able to come up with the cash they need. But at some point, it will catch up," and raising the debt limit will become an imperative, he suggested.

Republican leaders seem to acknowledge as much, but first want to force big concessions. "Do I want to see this nation default? No. But I want to make sure we get substantial spending cuts and controls in exchange for raising the debt ceiling," said the chairman of the House Budget Committee, Rep. Paul Ryan, R-Wis.

Clearly, the tea party types in Congress will be given an up-and-down vote on raising the debt limit before any final deal is struck, even if the measure ultimately passes.

"At some point you run out of accounting gimmicks and resources. Eventually the government is going to have to start shutting down certain operations," said Mark Zandi, chief economist for Moody's Analytics.

"If we get into a heated, protracted debate over the debt ceiling, global investors are going to grow nervous, and start driving up interest rates. It will all become negatively self-re-enforcing," said Zandi. "No good will come of it."

The overall national debt rose above $14 trillion for the first time the last week in December. The part subject to the debt limit stood at $13.95 trillion on Friday and was expected to break above $14 trillion within days.

The Arizona shooting described by the paramedics

By GILLIAN FLACCUS, Associated Press – Sat Jan 15, 2011 7:56 pm ET

Paramedics describe hellish Ariz. shooting scene
TUCSON, Ariz. – Veteran paramedic Tony Compagno stepped off Engine 30 and into hell: Panicked people rushed his crew, trying to pull them toward the injured, while three men desperately gave chest compressions to a 9-year-old girl.

AP – First responders from Northwest Fire District Engine 30 paramedic Tony Compagno, right, who was first …

Others cried out "Giffords! Giffords!" and pointed to a woman lying unconscious with a gunshot wound to the head. Several other bodies were already covered with sheets.

Compagno and other paramedics on the first three engine trucks to respond to the mass shooting at Rep. Gabrielle Giffords' Jan. 8 meet-and-greet event recounted Saturday the scene that unfolded a week earlier as they rushed to count and triage the victims.

At the same time, the Safeway where the shooting happened reopened and a memorial of flowers quickly grew outside.

Randy Larson, 57, came by to shop but instead found himself sitting quietly on the curb choking back tears.

"I wanted to come here now and see it now and not two weeks later when it's just a grocery store. I honestly kind of thought, 'Well, I'll come and patronize them and shop' but it's really hard to, because by doing that it's going about your day as usual," said Larson, who runs a sandwich shop in the same shopping center.

"I can't come here and go about my day as usual," he said. "Why should it be usual for me when it's not for the victims?"

Still listed in critical conditions, Giffords was reported as continuing to progress Saturday, with doctors replacing the breathing tube that connected her to a ventilator with a tracheotomy tube in her windpipe. They could soon know if she can speak, but they didn't offer a timeframe. Doctors also installed a feeding tube.

Elsewhere in town, an organization called Crossroads of the West held a gun show, one of many it hosts in several Western states. An estimated crowd of 4,000 showed up on the balmy Saturday, though the mood was less upbeat than past shows, organizer Bob Templeton said. Gun enthusiasts mingled in the county fairgrounds building, discussing Second Amendment rights and buying handguns, rifles and other weapons.

The group considered canceling the event, but decided Tuesday it would go on, said Templeton, adding that the shooting was not about gun rights, but rather "a deranged person who was able to carry out whatever his agenda was."

Tensions were still high, though. One of the shooting victims, James Eric Fuller, was arrested after he threatened a tea party leader during a town hall meeting for an ABC News special, authorities said.

Fuller, 63, who was shot in the knee and the back, objected to something Trent Humphries said. Fuller took a picture of Humphries and yelled "you're dead," authorities said.

Fuller was arrested on disorderly conduct and threat charges, Pima County sheriff's spokesman Jason Ogan said. As he was being escorted out, deputies decided he needed a mental health evaluation and he was taken to a hospital.

Also, Pima Community College released a video — first to a Los Angeles Times public records request and then to The Associated Press — that shows suspected shooter Jared Loughner, 22, giving an improvised nighttime campus tour and rambling about free speech and the Constitution.

Loughner's voice provides an angry narration that includes statements such as, "I'm gonna be homeless because of this school," and calling Pima "a genocide school." College officials confirmed that the video, discovered on YouTube, led them to suspend Loughner from school Sept. 29.

On Saturday, as Compagno and fellow paramedics focused on their memories of the carnage, images from the rampage were sketched anew.

Compagno said he first came upon a woman lying unconscious on the ground in a pool of blood — he still doesn't know who she was — and immediately realized the established system of triaging patients with color-coded tags would take too long.

As his colleague directed all the walking wounded and uninjured to leave, Compagno and his engineer, Kyle Canty, identified Giffords and 9-year-old Christina Taylor Green as the most critical victims still alive.

"I started counting and my mind, it was hard to remember what I was counting because of the chaos there was. I counted, I forgot what I was counting, I went back really quick and counted again," Compagno said. "I have no idea of the time that went by, I have no idea how long it took me."

By the time he'd decided who was the most critical, other paramedics were pouring in and Compagno began shouting instructions. Two doctors and a nurse, and several other bystanders, had done some basic care already, staunching the blood from one victim's wound with a tourniquet made from a belt, administering CPR to the little girl and comforting those who were still conscious.

Compagno said only one person could speak to him, a woman at the end of the line who'd been shot multiple times.

"I asked her where she was shot, she told me and I said, 'You're speaking to me, we'll be with you in a minute' and turned back around," he recalled. "She understood. She was awesome."

Compagno's engine mate, paramedic Colt Jackson, began work on Giffords, checking her breathing and stabilizing her neck as Engine 31 took over from the three men who were doing CPR on Christina.

Even at the scene, Jackson said, replied to his voice by squeezing his hand.

Emergency responders said that within 25 minutes, the seven most critical patients had been taken from the scene by ambulance and helicopter.

All five members of Engine 31 rode to the hospital with Christina because she was so critical and Jackson rode with Giffords, who was the first to leave the scene. Christina was pronounced dead at the hospital.

It wasn't until later that the first responders realized the magnitude of what had happened and the story it would become, or even learned the identities of the people they'd treated, said Canty, the engineer.

"We knew that it was multiple people shot, but it wasn't until later on that we realized it was a congresswoman holding a meet-and-greet," he said. "It was just chaos and blood."

The Pima County Sheriff's Department confirmed Saturday that the FBI taken into evidence a Safeway surveillance video that may show the shooting.

In the days since, the paramedics have been offered counseling and many have accepted, including Compagno and Canty. The hardest part, they said, has been reliving the trauma every day because of the avalanche of media interest.

"You turn on the TV just to even see something that you normally watch and they're talking about it and now you can't watch that," Compagno said. "You have family and friends that love you and want to make sure you're OK and you have to keep repeating the stories over and over and over. That's the hardest part."

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Associated Press writer Alicia Chang in Tucson and Bob Christie in Phoenix contributed to this report.